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#122

sent to press October 23, 2009

Oh, so put-upon
INSIDE
The investment community feels very put-upon. They feel there is no reason why they
Pity suffering Wall Street! shouldn’t earn $1 million to $200 million a year, and they don’t want to be held responsible
for the global financial meltdown.
Florida: felons can’t vote, but —radiation oncologist Daniel E. Fass of Greenwich, Conn., on the propensities of his
neighbors, quoted in The New York Times
could sell mortgages
It’s all too much to bear, contemplating the suffering of the investment community, isn’t
2008: a year of less money it? So far, they’ve gotten $12.5 trillion in support from the U.S. government. Without that, they
and more poverty would have collapsed into a heap of debris, and taken us with them. With it, though, they
just want to go back to paying themselves massively while devising the next financial crisis.
MONEY More carnage as It is cheering to see the Obama administration and the Fed now talking about limiting
banker pay—though the lawyers are already scrutinizing the proposed compensation limits
lunatics demand exit strategy for loopholes, which are, by some strange coincidence, always lurking between the lines.
Aside from that bit of posturing, the government has asked for almost nothing in return
MISCELLANY Declining for its fourteen-figure largesse. And the bankers are themselves offering a cold shoulder in
employment share; why the return, having largely shunned a Democratic fundraiser in New York at which the prez was
Senate sucks the leading attraction. He timidly addressed the audience: “If there are members of the finan-
cial industry in the audience today, I would ask that you join us in passing what are neces-
sary reforms. Don't fight them.” One is tempted to scream: “You’re the president! Tell them
what you’re going to do, don’t beg for their approval!!” But that scream is stifled once one
disemployment realizes that they’re really his absent bosses.
change in empl/pop ratio, 12/06–9/09 It’s hardly news that our government is a creature of the monied classes. What’s a little
white men shocking is just how dominant a small subset of that elite has become. The mood of Wall
white women Street, so ably described by Dr. Fass, has largely quashed even modest efforts to re-regulate
black men finance and tax away some of the sector’s incomprehensible wealth.
black women On October 20, Mervyn King, the governor of the Bank of England, gave a tough speech
Hispanic men in which he said: “To paraphrase a great wartime leader, never in the field of financial
Hispanic women endeavour has so much money been owed by so few to so many. And, one might add, so far
with little real reform.” (The argument is compelling enough that we can overlook the allu-
less than HS sion to the execrable Churchill.) The City of London is hardly a weak force in Britain. Still,
high school it is impossible to imagine Obama, or Fed chair Ben Bernanke, or anyone else occupying
some college high office in the U.S., saying something like this. Even Paul Volcker, the once-revered and
college or more thoroughly orthodox former chair of the Fed, who (like King) wants to see routine banking
-10 -8 -6 -4 -2 0 activities separated from the crazy speculative stuff in order to prevent future crises, can’t get
taken seriously in Washington. He might as well be advocating socializing the means of pro-
Change in the share of the adult popula-
duction (which he isn’t, of course).
tion that is employed, from the recent
We can talk about economic indicators like debt ratios and financial flows. And we
peak through September 2009, by demo-
should. But there’s also a deep, if unquantifiable, social rot at work in this crisis. Wall Street
graphic group. More on p. 8.
wants the world, and it wants it now. It’s got Washington on its side—and we’re paying. ❏
2 Left Business Observer

Welcome to the swamp of the real by Che Biscayne


Oh, yes, you can get stucco. Boy, can architects, lawyers, lawyers, and more we drop—shopping centers from horizon
you get stucco. lawyers, general contractors, real estate to horizon!
Groucho Marx, from the 1929 film The sales force, mortgage lenders, construction Mill workers. The real sugar daddy
Cocoanuts, a satire of Florida’s 1920s real lenders, mortgage brokers, the list is almostthough, was Wall Street’s securitization
estate bubble, its first endless. Oh, how they wished it were mill. Like guys running a hot car chop
when it wasn’t. shop, these guys sliced and diced Julio and
It’s always helpful to start with a quote The initial flood of debt and equity Juliette from Hialeah’s mortgage, wrapped
from Marx when discussing an absurdly capital into development resulted in a it in mathematical mumbo jumbo; covered
repetitive socio-historical phenomenon. “virtuous cycle” (thanks Fed P.G. Al !) as it with a dubious derivative, purchased
The other Marx’s comment about tragedy the multiplier employment effects turbo- an investment grade rating and voila, Mr.
and farce doesn’t work for conjunctures charged the state’s economy. In combina- Euro/Chinese/Pension Investor, it’s as
that start as farce and end as trag- good as U.S. Treasuries! (Which,
edy—at least for the victims, not 12% ironically, it turned out to be,
unemployment rate
so much for the perps. 11% Florida and U.S. provided you picked the right
Did you ever notice how over 10% issuer, since the Treasury ended
the past five or so decades many 9%
up making good on all those bad
things that go horribly awry have promises.) The same process was
8%
a strong Florida connection? Bay scaled up using commercial real
7%
of Pigs—check! Watergate bur- estate as the grist for the mill. You
6% U.S.
glars—check! Iran/Contra/coke see, Wall Street said, the com-
Connection—check! Fixed Presi- 5% mercial real estate and residential
dential election—check! Real 4% cycles operate independently, so
Florida
estate bust—check! 3% there was no danger of doubling
Unreal estate. The party 2% risk by taking a plunge in both at
began in earnest in the aftermath once. Oops!—see previous para-
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
of 9/11. Fed Pimpmaster General, graph.
Alan Greenspan, demonstrating During the good times, the Florida job market was very Wall Street’s insatiable appe-
his august judgment with respect good. Since then, it’s been very bad. Between 2000 and tite for home loans to securitize
to these matters, embarked on a 2003, total employment in the U.S. was stagnant to resulted in frauds that would
plan of making free money avail- down—but in Florida it was up. Not much, but up. And be- make Madoff blush (although he
able to a select few, with the only tween the 2003 job market trough and its late-2007 peak, did an admirable job of fleecing
requirement that the few charge employment grew at twice the national rate. Consequent- Palm Beach). In one subdivision
the many for the use of it. Florida, ly, the unemployment rate fell much more in Florida than in suburban Palm Beach County,
like Las Vegas and California, has it did in the rest of the country, bottoming out at 3.3% in The Versailles, over $11.8 million
always been like the rest of the mid-2006. It started rising almost a year ahead of the na- in mortgages was provided by
country, only more so. While the tion, and has risen far more. As of September, it was American Home Mortgage Corp
Greenspan liquidity tide lifted 11.0%, three times its 2006 low (and a record high since and JP Morgan Chase to borrow-
all boats, for Florida it was a real the numbers began in 1976). The national rate, 9.8%, is ers among whom included the
gusher. The place has always just a little over twice its recent low. following sterling credit: a guy
been about extracting rentier with two personal bankruptcy
profits by selling the weather via tion with relaxed credit standards for home filings, one foreclosure and a
real estate—be that hotels for tourists, or mortgage loans—if you could fog a mirror, misdemeanor bad check charge when he
tract homes and condos for retirees and here’s $400,000—resulted in a boom of was approved for a $1.05 million mortgage.
winter-averse dreamers. Throwing cheap mythic scale. Think about it. All of the Twenty-five buyers in this subdivision
credit at such a contraption is a really dan- scriveners, lawyers, title guys, mortgage hailed from Opa-Locka, a Miami neighbor-
gerous business. lenders and brokers, etc., needed office hood with a household income of $24,000,
Like the state’s second-ranked value space—let’s build some! Hey, all those half the state average. Other borrowers
added product, crack cocaine, real estate American Standard toilets, countertops, now in foreclosure include a licensed cos-
requires a lot of capital and a lot of lives. It PVC pipe for all those houses need stor- metologist from Opa-Locka and a 31-year-
requires land acquisition, planning, greas- age—let’s build some warehouses! With all old single mother from Brooklyn.
ing the local development “authorities”: this dough sloshing around, let’s shop ‘til This not to say these people don’t
Left Business Observer • 242 Greene Ave #1C • Brooklyn NY 11238 • 347-599-2211
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Doug Henwood, editor/publisher, author of unsigned articles. Liza Featherstone, counseling editrix. Kathleen Massara, reporter/researcher.
Monthly except August. 11 issues: $22 individual, $55 institutional/high income. E-subs available; see p. 7 for rates.
Indexed in the Alternative Press Index. © Copyright 2009 Left Business Observer (ISSN 1042-0134). All rights reserved.
Number 122 3

deserve to live in million dollar homes, ment. While it started with the noble efforts sector. What was once a defined benefit
but they don’t deserve being saddled with of Take Back the Land in working class plan providing a stipulated monthly benefit
debts far beyond their ability to pay. One neighborhoods like Opa-Locka, Liberty based on tenure is now a casino crap shoot
doubts they came up with the idea of bor- City and Overtown, squatters have recently called a 401(k) or a defined contribution
rowing over a million dollars on their own. been taking up residence in tony Brickell plan which the sponsoring employer stuffs
Augmented talent. This being Flor- Avenue condos and even in the city’s bas- with worthless assets as the sponsor shit-
ida, the whole thing had more than enough tion of old wealth, Coral Gables. Unsold slides into Chapter 11. Given the savaging
of its sleazy, salacious and criminal ele- and abandoned houses throughout the of the stock and bond markets from their
ments. Where else do a woman’s surgical state are routinely looted, stripped of 2007 peaks, even if you were long blue
enhancements, originally being amortized appliances, plumbing, and anything else chips and investment grade paper, you will
by dollar bills discreetly (and singly) depos- of value. Even if the political scene looks still have taken a mighty hit. Hard to see
ited, qualify for her to sell condominiums quiescent, there’s plenty of informal redis- how betting what’s left on a Florida retire-
to the hormonal and credulous? ment home could make sense.
Where else are convicted felons yearly growth in personal income Not to mention, with a Democrat
12%
denied the right to vote, yet at U.S. and Florida in the White House and a Demo-
the boom’s peak 10,000 of those 10% cratic majority in Congress, bid a
former guests of the state were 8% fond farewell to the Social Secu-
licensed mortgage brokers? 6% rity System as the pension enclo-
As a proxy for Florida’s hyster- 4% U.S.
sure movement experiences its
ical over building, let’s just look at 2% ultimate triumph.
Miami’s condominium develop- The second nail in the immi-
0%
ment pattern in recent decades. gration coffin is also a manifes-
In the 1980’s Miami added -2% Florida tation of capital’s return of the
311,313 new residents and 10,841 -4% “primitive”—primitive accumula-
new condominium units, a ratio -6% tion, that is. Once again, capital’s
of 30 residents per each new unit. 2002 2003 2004 2005 2006 2007 2008 2009 insatiable need to penetrate every
In the decade of the 1990’s it was aspect of existence (biopower
Personal income includes income from all sources—
316,268 residents and 13,279 new anyone?) in its parasitic accumu-
employment, investments, pensions, Social Security, etc.
units, or 24 per unit. From 2000 to lation quest fixed its bloodsuck-
As with the job market, Florida barely saw a recession in
2009, population growth fell by ing tentacles (apologies to Matt
the early 2000s, grew much faster than the U.S. during
more than one-half, to 133,808 Taibbi) on the balance sheet of
the expansion, and has since fallen much harder.
new residents, while new units the household via mortgages of
grew by 58,137 units, a 323% various stripes and especially
increase, to just over two newcomers per tribution going on. home equity loans. After inflating home
unit. Something had to give and it did. One can aver that Florida has always values to phantasmic levels, the same loans
The vast oversupply of both condo- had real estate boom and busts—the land act like leeches on the only asset work-
minium units and single-family homes frauds of the 1920’s that ended with the ers have, their labor power, as this has
depressed prices, and as values fell, buyers 1927 hurricane, South Florida’s over build- been presold to capital given catastrophic
fled. Simultaneously, in the summer of ing in the late 1950’s, the 1970’s mortgage declines in the value of the asset secur-
2007, with the collapse of two leveraged REIT construction loan bust, the 1980’s S&L ing the loan. If rising house values can’t
mortgage-backed securities hedge funds, bust, etc. If history proves anything, now’s service a loan, then big chunks of a dwin-
investors realized “subprime” in front of the time to buy. Doesn’t boom follow bust dling supply of paychecks will have to do
mortgage translated to “won’t be paid as surely as day follows night? Well, not so the work. Retirement—it’s a fantasy while
back,” and the rout was on. The “virtuous fast, Mr. Sam Zell wannabe! you amortize that vacation taken in 2005,
cycle” positive feedback loop reversed Death nails. The secular boom that monthly for the next 30 years. Sell the place
with a vengeance. Florida’s unemployment has been Florida since World War II has and use the realized gain to buy that dream
is now 11%; home values have dropped come undone. The transfer of wealth inter- home under the palm trees? Not gonna
by 40% (think of all the mortgage backed regionally and intergenerationally that work! Besides, your buyer no longer quali-
bonds and banks that that evaporates); turned Florida into an idyll of golf and fies for a mortgage.
foreclosure rates two and three times previ- sun for the aristocracy of labor, spawning Florida’s a wrap, boys and girls. But that
ous highs; a state which once boasted 1,000 service industries attending to the superan- doesn’t mean you can’t play the home ver-
new residents a day had a population drop nuated, is over. An economic and historical sion of the game! Using Florida’s unique
of over 58,000—more than 1,000 a week— confluence of currents has conspired to geographic silhouette, see how many anal-
from April 1, 2008 to April 1, 2009. finish off the state’s heretofore enviable ogies and metaphors you can come up with
Day after. Manifestations of the posta- growth rate. for some state-specific “stimulus plans.”
pocalyptic abound. Miami Dade County, First, the Reagan-midwifed neoliberal
which has had 44,000 foreclosures this enclosure movement with respect to retire- Che Biscayne once lived and worked in this
year, now has a vibrant squatters move- ment incomes has succeeded in the private world, but he’s since gone straight.
4 Left Business Observer

Less income, more poverty


Economically speaking, 2008 was not a good year for the Ameri- the 2001–7 expansion weren’t enough to reverse the declines of
can masses. Incomes were down and poverty up—and that was the previous recession years—the first time that’s ever happened.
before the worst of the recession hit. So before this recession is over—not in the formal sense, but in the
So says the Census Bureau’s annual income and poverty report, sense of how average people experience the economy, measured
which is released by the state of the job market and move-
every September. 325,000 real annual incomes, ments in household income—average
Based on a survey 300,000 poor, middle class, and incomes are likely to be 10% below where
of 54,100 house- 275,000 rich households, they were in 1999.
2008 dollars, 1967–2008
holds across the 250,000 But not for the rich. A technical note
225,000
country, it does before proceeding: as was noted above,
200,000
have some short- 175,000
these Census figures suffer from severe
comings—mainly 1973–2008 2000–2008 undercoverage of the overprivileged.
150,000 richest 5% poor +6.0% poor –8.2%
a serious under- 125,000 middle +10.5% middle –5.1% Because rich people don’t answer such sur-
coverage of rich 100,000 rich +63.9% rich –6.6% veys, and because there are so few of them
people. But it still 75,000 that it’d be hard to find enough of them to
middle 20%
50,000
offers a detailed poorest 20%
take a meaningful sample, these annual
25,000
biopsy of the mon- reports miss things at the very high end. But
etary well-being of 1967 1971 1975 1979 1983 1987 1991 1995 1999 2003 2007 you can get that from tax return data, which
U.S. households. is available only with a delay of several
That well-being years. As LBO reported in our last issue, the
has had better years than 2008. economists Thomas Piketty and Emmanuel Saez do just that, and
Less money. Most households saw a decline in their real their 2007 numbers were recently published. So while the bottom
(inflation-adjusted) income last year. Median income—the income 90% of the population saw its income decline between 1999 and
right at the middle of the income distribution, with 2007, the richest 1%,
half of all households having higher incomes, and 70,000 real median incomes those with incomes
half lower—fell by 3.6%, the biggest yearly decline (2008 dollars) above $400,000,
60,000
since these figures begin in 1967. (Data on families, a gained about 7%.
narrower concept covering a better-off subset of the 50,000 The richest 0.01%,
population, goes back to 1947; 2008 was their worst household the 30,000 Americans
40,000 family
year as well.) All racial and ethnic groups took a hit: with incomes over
non-Hispanic white households were off 2.6%; blacks, 30,000 $11.5 million, saw
off 2.8%; Asians, 4.4%; and so-called Hispanics, by their income rise 25%.
20,000
5.6%. Households of all ages lost income in 2008, with Even the limited
the exception of the over-65 set, who are protected by 10,000 coverage of the
1947 1957 1967 1977 1987 1997 2007
the cost of living increases in Social Security. rich provided by
Large dot is 2009 projection (see text).
The one-year hit to household incomes in 2008 is the Census Bureau
on a par with the multiyear hits taken in earlier reces- reveals just how
sions. For example, the 3.6% decline last year is larger than that much better they’ve done over the last few decades than everyone
experienced during the recession and weak recovery years of 1999 else. As the graph shows, incomes of the top 5% are up at some-
to 2002—three years of damage back then more than condensed thing like a 45° angle while everyone else is just flatlining. Since
into one year of damage last year. And 2008 was only the beginning 1973, the real income of the poorest fifth of Americans (average
of the recession. Job losses didn’t accelerate, and unemployment income: $11,656) is up 6%—in total, not an annual average—and
didn’t really spike, until the fall that of the middle fifth (average: $50,132), 11%. But
.525 income inequality
of last year. The Economic Policy Gini index, 1913–2007
the richest 5% (average: $294,709) are up 64%—ten
Institute (EPI) estimates that this .500 times as much as the poor, and six times as much as the
year’s decline is likely to be larger, middle ranks. Things have gone pretty flat for every-
.475 more unequal
in the 4.5–5.0% range. (That esti- one since 2000, even the Census Bureau’s version of
mate is depicted by the large dot .450 less unequal
the rich. But the previous quarter-century was a real
in the graph at the middle of this gusher for the six-figure set.
page.) If anything like that hap- .425 The history since 2000 shows the drawbacks of
pens, the total decline of over 8% .400 excluding the very rich from the picture. As the Piketty
will be the biggest recession hit to and Saez figures show, that’s where the real action has
income since these figures began .375 been since 1999—anything but flat. While the profes-
1913 1928 1943 1958 1973 1988 2003
in 1947. sional class has held its own over the last decade, this
That likely cumulative decline has been an economy mainly for CEOs and hedge fund
comes after the weakest expansion in modern history. Gains during hotshots. (For more detail, see LBO #120.)
Number 122 5

More inequality. With incomes down across the board, sources of income as well as income from work—but the number
you might think that American society became less unequal in of men working fell 0.5% while the number of women working
2008—a new fellowship of the universally déclassé. But you (for pay, of course, part- or full-time) rose by 0.3%.
would be wrong. The Over the longer term, the gender gap has
90% women’s incomes as percent of men’s
gini index, a measure been narrowing—less rapidly if you look just at
of inequality graphed 80% year-round, full-time workers, but more rapidly
nearby, rose slightly in if you look at all women, because more and
2008, and is just a hair 70% more women are working full-time (or were,
year-round, full-
below its all-time high. time workers until last year). The narrowing in the gender
60%
If we take things back gap has come from declines in men’s earnings,
to the days before the 50% all persons
as well as increase’s in women’s. Between 2000
Census Bureau’s annual with income and 2008, men’s real earnings from part- and
reports, as the graph 40% full-time work fell by 5.5%; women’s rose 1.2%.
does (drawing on a For full-time workers over the same period,
30%
1992 paper by Eugene 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 men’s pay fell by 0.4%, and women’s rose 4.1%.
Smolensky and Robert Black/white and Hispanic/white income
Plotnick), we can see gaps have stayed fairly flat in the 2000s. So
that the only period in the last century that’s more lopsided than far this decade, white incomes are down 3%; black, 8%; and
the present is the late 1920s and 1930s. The late Hispanic, 9%, with
19th century was probably similar, but we don’t 80% household incomes as percent of most of the damage
have good numbers to make the point rigorously. non-Hispanic whites coming early in the
(The Gini index is a number between 0, rep- 75% decade. This is a
resenting perfect equality, and 1, representing Hispanic stark contrast with
70%
perfect inequality—meaning one person has all a the 1990s, when
society’s income. It doesn’t really mean much in 65% black incomes rose
itself; its real use is in comparing societies across 26%; Hispanic, by
space and time. For example, Gini numbers 60% 18%; and white by a
black
allow us to say that Sweden is more egalitarian 55%
mere 14%. Given the
than the U.S., or that the U.S. of 2008 is more behavior of unem-
unequal than the U.S. of 1973.) 50% ployment rates, how-
More intuitive measures of inequality tell the 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 ever, it’s likely that
same story. The richest fifth of Americans have the racial gaps are
incomes about fifteen times those of the poorest fifth; in 1974, the widening in 2009. Tune in next year for an update.
ratio was ten to one. The richest 5% have an income more than More penury. With average incomes down, it’s no surprise
twenty-five times that of the poorest fifth; in 1974, it was about fif- that the poverty rate rose to 13.2% in 2008, from 12.7% in 2007.
teen times. The gap between top and middle has widened as well. That’s the highest level since 1997; EPI estimates that it will rise
In 1974, the richest fifth had an average income about 2.5 times another 1.5 points this year to 14.7%, which would be the highest
as high as the middle since 1992. (See dot on nearby graph.)
fifth; in 2008, it was 60% poverty rates by race, 1959–2008 For whites, the poverty rate was 11.2%; for blacks,
3.4 times. The richest 50% 24.7%, more than twice as high. Among Latinos, it was
5% had incomes not 23.2%. A third of the poor are children; their poverty
quite four times those 40% black rate is 19.0%. The gender gap is what you might expect:
of the middle fifth 30% 14.4% of women are poor, vs. 12.0% of men, a difference
then; now, it’s almost all Hispanic that’s pretty constant over time.
20%
six times. And, again, But some definitions are in order. Official poverty is
these figures under- 10% defined as a pretax income under a specified amount
white
state just how much that varies by family size; for a family of four, the line is
0%
the top end has been 1960 1970 1980 1990 2000 just about $22,000 a year. This is a very undemanding
raking in. Large dot is 2009 projection (see text). standard. Many independent researchers use a poverty
One moderately line set at half the household median, which would be
bright spot: at least about $25,000 (and polls show that that’s pretty much
gender and racial income gaps are behaving reasonably well (see where the non-expert public would put the line). Moving the offi-
graphs). The gender gap widened slightly in 2008 both for all cial definition of penury towards that neighborhood would pro-
duce a poverty rate of around 25%.
sources of historical data And these figures are just snapshots of a given year. According
income <http://www.census.gov/hhes/www/income/histinc/histinctb.html> to the Census Bureau, over the four year period ending in 2007,
poverty <http://www.census.gov/hhes/www/poverty/histpov/ almost a third—31%—of Americans had at least one period in offi-
histpovtb.html>
(cont. on p. 7)
6 Left Business Observer

MONEY
federal funds [%] money supply growth
5 20%
4 15% M1
3
10%
2
5% M2
1
0 0%
Oct Dec Feb Apr Jun Aug Oct Oct Dec Feb Apr Jun Aug Oct
2008 2009 2008 2009

Just as orthodox types are screaming at the Fed to think about an “exit strategy” from its long period of indulgence (see below), many of the same frightened
ideologues are worrying about the decline in the U.S. dollar’s value. But as the graph shows, the recent decline has only undone part of the 2008 rally, which was
prompted by money seeking safe haven amidst financial crisis. For a country with serious financial problems, the U.S. dollar is still holding up rather well.

As this page has been pointing out, it two. Not this year. Official figures won’t be ment support—aggressive pumping by
looks more and more like the U.S. reces- released until early 2010, but it’s likely that the Federal Reserve and massive deficit
sion is drawing to a close, but prosperity the BLS’s estimate of employment earlier spending by the federal government—to
has yet to break out. Most of the major this year was 824,000 too high. That means get us here. Just to take one nonrandom
indicators are looking considerably less that nearly a million more jobs have been example, the stabilization in housing, a
bad than they did in early 2009—but few lost since the December 2007 peak than sector with a strong propensity to lead the
are actually looking good. we even knew. economy up and down, is almost entirely
Take an indicator that matters both to All those figures come from a survey of made in Washington. Almost 70% of all
Wall Street and to civilians—employment. employers. The BLS also does a monthly new house buyers are using government-
About the only good thing you can say survey of 60,000 households, the source backed loans to make their purchases.
about September’s employment report of the familiar unemploy- Though you could make a
was that it wasn’t as bad as January’s. ment figures as well as an 110 US dollar indexes long list of ways in which the
There was hardly a cheering detail buried alternative set of employ- 100 government and the Fed have
in the data release’s 2,940 lines. Employers ment numbers. That 90 broad botched their rescue opera-
shed 263,000 jobs, with hardly any major survey was, if anything, 80 tions, without them, every-
major
sectors exempt from the trend. September worse than the employer 70 thing would probably have
1973=100
marked the 21st consecutive month of survey. The unemploy- 60 fallen completely apart.
Oct 07 Oct 08 Oxr 09
decline in employment, the worst since ment rate rose another Despite that, though, some
monthly numbers began in 1939. Total job 0.1 point to 9.8%—and orthodox types—pundits,
losses so far in the recession—and they’re the share of the adult population that’s bond traders, presidents of the regional
not over yet—are easily the worst since the employed fell to its lowest level since branches of the Federal Reserve—are talk-
harsh recession that came with the post- December 1983. (For more, see p. 8.) ing urgently about the need to withdraw
World War II demobilization. “Hidden” unemployment—people drop- the government’s support. The Fed, say
And that’s before the regular annual ping out of the labor force in despair of these nervous nellies, must think about
revision of history. The monthly employ- ever finding a job, people who want full- tightening soon, lest the inflationary genie
ment figures come from a very large time work but can only find part-time— escape. And the gov needs to think about
sample of employers, about 300,000 of also rose. The Bureau’s broadest measure balancing the budget. God help us if they
them. Turning the survey’s results into of unemployment, which includes such get their way.
national estimates requires some assump- “covert” joblessness along with the overt This page focuses mainly on the U.S.
tions about business births and deaths: kind, rose to a painful 17.0%. economy, because we live here and it’s
firms are born and die all the time, and Looking ahead. Indicators of future what we know best. But it’s looking like
the statisticians can’t catch up quickly trends, however, are slightly encourag- many foreign economies are in much
enough. So the Bureau of Labor Statistics ing. First-time claims for unemployment better shape than ours. China in particu-
(BLS) does its best to estimate the gains insurance, filed by people who’ve just lost lar, which many feared might collapse
and losses it can’t directly measure. Every their jobs, are declining rather steadily, as because the American consumers who’ve
year, though, their estimates are compared is the count of people continuing to draw been buying its exports have run out of
with the near-100% coverage of the job benefits. Looking beyond the job market, money, is defying those gloomy predic-
market provided by the unemployment leading indicators, designed to forecast tions and growing strongly. It’s looking
insurance system’s records. Most of the changes in the broad economy three to six like the days when America could mount
time, the adjustments derived from that months out, are looking up. a podium and lecture the rest of the world
exercise are small, a tenth of a percent or It’s taken massive amounts of govern- on how to run an economy are over. ❏
Number 122 7

income & poverty (cont. from p. 5) miscellany (cont. from p. 8)


cial poverty lasting two months or more. Less coverage. The annual income Why should representatives of these
For a very rich country, we have a lot of and poverty report also includes informa- small, mostly conservative states domi-
poor people, and they are often very poor. tion on the population without health nate national politics? Well one answer is
In fact, 42% of the officially poor have insurance. Last year, the uncovered rose that that’s the way the Founding Fathers
incomes under half the poverty line. last year by about 600,000 to 46.3 million. wanted it. The whole point of the Senate
While the officially poor are numer- Measured as a share of the population, is to act as an elite check on popular senti-
ous and quite impoverished, it wouldn’t however, the uninsured remained at a ments.
cost all that much to bring their incomes constant 15.4%. But the Census definition Don’t take LBO’s word for it. Here it is,
up to the line. The income of the average of uninsured means without coverage for from the horse’s mouth—the Senate’s offi-
poor family is about the entire year; many cial history, on its website:
$9,000 below the all poverty rates by more had shorter bouts “In selecting an appropriate visual
poverty line; the aver- household types, symbol of the Senate in its founding
2008
of uninsurance. And
families
age poor individual, again, since the econ- period, one might consider an anchor, a
female-
about $6,000. If you headed omy of 2009 was worse fence, or a saucer. Writing to Thomas Jef-
work out the math, the unrelated than 2008’s, the current ferson, who had been out of the country
total so-called “pov- individuals levels are probably a during the Constitutional Convention,
erty gap,” the amount 0% 10% 20% 30% lot higher, given the six James Madison explained that the Con-
of money necessary million jobs that disap- stitution’s framers considered the Senate
to bring everyone out of official poverty, peared during the year ending in Septem- to be the great ‘anchor’ of the govern-
would have been about $138 billion last ber 2009. EPI estimates that the ranks of ment. To the framers themselves, Madison
year, less than 1% of GDP. That’s just over the uninsured have probably swelled by 5 explained that the Senate would be a ‘nec-
3% of the total income of the richest 20% million this year. essary fence’ against the ‘fickleness and
of Americans; 8% of the income of the So we’ve got downward mobility for passion’ that tended to influence the atti-
richest 5%. (And, as the Piketty and Saez over 90% of the population, a level of tudes of the general public and members
numbers show, there’s a lot more money inequality unseen in a century, scores of of the House of Representatives. George
up top than is accounted for by the Census millions without health insurance—and Washington is said to have told Jefferson
Bureau’s reckoning.) little prospect for any of this improving that the framers had created the Senate to
In other words, we could end official in the conceivable future. Yet we have a ‘cool’ House legislation just as a saucer was
poverty in the USA for about what we’ve president who seems more interested in used to cool hot tea.”
spent bailing out AIG. But, you see, AIG courting Republicans and subsidizing Wall If you’re an insurance exec fearful of
really needed the money. Street than in doing anything serious about expropriation, or a Fortune 500 CEO loath
social rot, and a polity that seems pretty to create a new entitlement among the
Chart details, facing page: Fed funds, money supply, much OK with that. In fact, about the only always-dangerous (at least in potential)
and debt: year-to-year change, from Fed data. The fed
funds rate is the interest rate banks charge each other for people in the streets are out to protest a masses, then you have to be pleased with
overnight loans; it is the most sensitive indicator of Fed creeping socialism that exists only in their how things are working out. Nice to know
policy. Dollar indexes are two of the Fed’s indexes of the
dollar’s value;”broad” is composed of 26 currencies, and peculiar minds. What a country. ❏ that Madison et al. had your back. ❏
the “major,” of seven. Data through 10/24/09.

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Country 122
MISCELLANY
Sent home. As everyone knows—or 1930s, but we don’t have easy access to while the female rate is 5 points higher.
at least the subset of “everyone” that that sort of data. Alas, the Millennial Edi- That overall near-5-point decline in
reads this newsletter—employment has tion of Historical Statistics of the United the recession is the steepest on record, by
taken a tremendous hit in this recession. States skips from 1920 to 1940. a comfy margin. It’s more than twice the
In fact, it’s not hyperbole to argue that Women’s employment rate, by con- long-term average, and almost half again
the contraction in paid work is of his- trast, rose steadily until around 2000, as high as the previous record (set in 1953).
toric proportions 90 when it The job market is very sick—sickest for
employment/population ratio
Over the long started men, but it’s not in the pink of health when
sweep of history, 80 moving it comes to women either.
the tendency of men sideways-to- (For a further demographic breakdown,
capitalism has 70 down. This see graph on p. 1. As it shows, the reces-
been to draw 60
prompted sion has hit blacks and Hispanics harder
more and more speculation than whites.)
people into paid 50 all women that women
work. Farmers were giving Anchor/fence/saucer. As almost
became factory 40 up on paid everyone knows, the Senate Finance Com-
workers, house- work. While mittee, led by a conservative Democrat
30
wives became 1948 1958 1968 1978 1988 1998 2008 there may from Montana named Max Baucus, has had
data entry clerks. be some an outsized influence in shaping health
This was true of the “advanced” coun- small bit of truth to this at the very high care reform. Baucus and five of his commit-
tries in the 19th and 20th centuries; it’s end—during the bubble, a few Ivy-edu- tee colleagues have been dominating the
been true of what we used to call the cated wives of hedge fund hotshots chose process—though now it’s being opened up
Third World more recently. But the to become stay-at-home moms instead of somewhat as the bill exits the committee
U.S., hailed as recently as the 1990s as partners at the law firm—it’s more likely and proceeds to that abomination known
a miraculous job machine, has now that paid work was giving up on them. as the full Senate.
thrown history into reverse. There was a mild pickup in women’s EPR Those five—Jeff Bingaman of New
Graphed nearby is what’s called the from 2004–2006, as there was with men’s, Mexico, Kent Conrad of North Dakota,
employment/population ratio (EPR)— but it’s since fallen pretty hard. After Mike Enzi of Wyoming, Charles Grassley of
the share of the adult population that’s peaking at 58% in 2000, it’s now down to Iowa, and the vastly overexposed Olympia
working. In 1948, it stood at 57%—84% 54%, which is where it was in 1993. That Snowe of Maine—along with Super Max
for men, and 31% for women. The male 4-point decline is half as large as that for himself, represent states with less than 3%
EPR declined steadily into the early men. of the U.S. population. Their combined
1980s, and then stabilized around either Overall, the EPR is just under 59%, populations are only a little larger than
side of 70%. But since the EPR’s cycli- down almost 5 points so far in the reces- New York City’s, and less than a quarter of
cal peak in late 2006, it’s fallen hard, to sion, to a level not seen since 1983. But California’s. Three of the six states—Wyo-
64%. It’s never been so low since the under the surface of the average, much ming, North Dakota, and Montana—
Bureau of Labor Statistics started count- has changed since 1983: the male EPR is together have fewer people than Brooklyn.
ing in 1948. No doubt it was lower in the now 6 points below where it was then, (cont. on p. 7)
122

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