The Crisis in the Developed World

By: Inoljt, 

I recently had a conversation with a college student hailing from the great country Spain. After talking about my summer activities, I asked him about the internships and jobs he had available in Spain.

He said that there was nothing. No jobs, no internships for anybody his age in Spain. No work at all. It was a crisis that had become normality. A global crisis.

It’s true. The developed world is facing an unprecedented period of weakness. All the titans of the First World are trembling. America is in the throes of high unemployment and a stagnant economy. Even so, it is better off than the other pillars of the developed world.

Japan has been stagnant for decades. The tsunami and the nuclear meltdown have intertwined with political weakness to further damage the nation.

Then there is Europe. Europe’s periphery is in danger of going bankrupt (or already bankrupt). Countries with enormous economies, such as Spain or Italy, are being sucked in this very moment.

So the developed world is in an unprecedented crisis. There are pockets of strength. Canada’s economy is strong. Germany’s economy is too strong. Australia and South Korea are benefiting from China’s economic coattails.

While the First World languishes, the Third World is booming. Brazil and Peru are leading the charge in Latin America; Africa is experiencing its best decade for a long time. And then there are the titans of India and China.

The result is that global inequality is on the decline. People have said for decades that the Third World is catching up to the First World. Sometimes this has been true; more often it has been not.

But now the Third World really is catching up, and catching up fast. It’s not pretty for the First World.


Weekly Audit: Tax Cuts for the Rich Extended

By Lindsay Beyerstein,  Media Consortium Blogger

Congressional Republicans and the White House  struck an agreement in principle on Monday night to extend all the Bush tax cuts for 2 more years in exchange for extending unemployment benefits. The GOP agreed to the so-called “Lincoln-Kyl compromise” a partial 2-year extension of the Bush estate tax cuts on estates worth over $5 million. If the deal had not been struck, estate taxes on estates over $5 million would have gone back up from 0% to the pre-cut rate of 55%. Instead, the rate will be 35% for the next 2 years.

The GOP also agreed to a short-term “stimulative” 2 percentage-point cut off the 6.2% payroll tax we all pay on income up to $106,800. The good news is that a payroll tax holiday will provide the most noticeable tax relief to low- and middle-income Americans. The bad news is that payroll taxes fund Social Security, so cutting the tax means starving a program that most directly benefits average people. Social Security is not in crisis yet, but steps like these could push the program into worse financial straights where significant benefit cuts become inevitable. It’s almost as if the GOP, having failed to spark panic about an as-yet non-existent Social Security crisis, is determined to engineer one.

All these gimmes for the rich were the price of a partial extension of unemployment benefits. The stakes couldn’t have been higher. If Congress had failed to act, 2 million people stood to lose their benefits this month and another 7 million would have run out before the end of next year, reports Andy Kroll of Mother Jones.

Meanwhile, unemployment continues to rise. The economy only added 39,000 jobs in November when analysts were expecting about 150,000. “At the beginning, some people just thought it was a printing error,” said reporter Motoko Rich on the New York Times‘ weekly business podcast. The overall unemployment rate climbed to 9.8%.

At ColorLines, Kai Wright argues that the time has come for President Obama to seize the opportunity to debunk conservatives’ bad faith arguments for tax cuts above all else:

At the same time, the anti-government crowd’s political hand—if forced—has never been weaker. A depressingly large number of middle-class and working-class Americans now know all too well what economists have long understood: You get a great deal more economic bang out of keeping lots of people from becoming destitute than you do by helping a few people horde wealth. People remain enraged about the no-strings-attached bank bailout, for instance, because they intuitively understand its ramifications. Wall Street is now enjoying a narrow, taxpayer-financed recovery while unemployment, hunger and poverty all continue climbing through the former middle class.

Extending UI makes sense

Tim Fernholtz of TAPPED tackles some of the bad arguments against extending unemployment insurance. Economist Greg Mankiw claims that extending unemployment insurance is just a surreptitious ploy to redistribute income to the poor from the wealthy. Actually, as Fernholtz points out, the point of a UI safety net is to prevent people, 3 million of them in 2009, from becoming poor in the first place. Poverty is very expensive for society at large. If we can keep the unemployed in their homes, spending their benefits in their communities, we can keep the socially corrosive effects of poverty at bay until the economy improves. The social costs of child poverty alone have been estimated at $500 billion a year, Fernholtz notes. The deeper we allow people to sink into poverty, the more difficult it will be for the economy to rebound. On this view, UI is a shared investment in a well-ordered society, not just a lifeline for jobless families.

Why corporate tax cuts won’t create jobs

Jack Rasmus of Working In These Times explains why tax cuts will not create jobs. Simply put, banks and big companies are sitting on over a trillion dollars. Among the nation’s biggest banks, lending to small and medium size businesses, the engines of job creation, has dwindled over 2009 and 2010. America’s biggest companies are sitting on a hoard of $1.84 trillion dollars, which they are not investing in job-creating projects. The Deficit Commission recommended slashing corporate taxes, ostensibly to spur investment and job creation, which would ultimately generate taxable income to help balance the budget. As Rasmus points out, this wishful thinking is predicated upon the assumption that if only corporations had more money, they would invest it to create jobs. The fact that companies are already sitting on huge piles of cash suggests that shoveling more moolah on the pile won’t change the basic dynamic. Perhaps companies are waiting to invest because they know that consumers aren’t keen to buy goods and services when they are unemployed or fearing job loss.

Economic disobedience

At In These Times, Andrew Oxford interviews sociologist Lisa Dodson about her new book on getting by in the low-wage economy. Her research shows that as economic instability mounts, many Americans are quietly taking matters into their own hands:

To understand how fair-minded people survive in an unfair economy, Dodson interviewed hundreds of low-wage workers and their employers across the country, examining what she terms the “economic disobedience” now pervasive in the low-wage sector. From a supervisor padding paychecks to a grocer sending food home with his employees, these acts of disobedience form the subject of her latest book, The Moral Underground: How Ordinary Americans Subvert an Unfair Economy.

Winner-take all economy

In an interview with Democracy Now!, Yale political science profesor and  Jacob Hacker explains why the Deficit Commission has it all wrong when it comes to tax cuts vs. unemployment benefits.

Hacker studies inequality. He has written a book on how the richest Americans cornered an unprecedented share of the country’s wealth for themselves over the past three decades. The richest Americans have never been in a better position to help the country grapple with the deficit. Yet, as Hacker points out, the Deficit Commission wants to balance the budget on the backs of middle- and lower-income Americans by cutting spending on programs that disproportionately benefit working people and readjusting the tax code to make it even more favorable to the rich.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.



Two Recessions, Two Americas

Although official unemployment in New York City is 10.1 percent, a closer looks reveals an underlying complexity to the story. Rates of unemployment vary greatly across the city. Last month, the Fiscal Policy Institute released a report, New York City in the Great Recession: Divergent Fates by Neighborhood and Race and Ethnicity (PDF), investigating further.

Here are some numbers, first by neighborhood. Unemployment in Manhattan's Upper East and West Sides is 5.1 percent. Brooklyn's East New York stands at 19.2 percent. The South and Central Bronx have unemployment levels at 15.7 percent.

Now turning to unemployment rates by ethnicity, white non-Hispanics are experiencing an unemployment rate of 7.3 percent. 15.7 percent for black, non-Hispanic, and 11.8 percent for Hispanics. The Fiscal Policy Institute reports that unemployment is 6.1 percent for their Asian and other category.

There's more...

Hunger in the North and South

You can view this post and others at the Worldwatch Institute's Nourishing the Planet blog.  

As a North American traveling and doing research on hunger in sub-Saharan Africa, I'm often struck by the contrasts between the United States and whichever country I happen to be in. The abundance and cheapness of food in the U.S. is something, I have to admit, I miss.

In Ethiopia, Kenya, Uganda, and Tanzania, where I've spent the last month, drought has exacerbated already high food prices, millions of livestock have starved to death, and 23 million people in the horn of Africa are at risk for starvation. But when I opened the paper on Monday, I was struck by the irony of just how similar Africans and Americans can be.

According to the U.S. Department of Agriculture, food insecurity in the United States, the richest country in the world, is at a 14-year high. Forty-nine million people in the U.S. lack what the USDA calls consistent access to adequate food. This increase of 13 million over the last year, according to the New York Times, was more dire than even the most pessimistic predictions about how the economy was impacting peoples' daily lives.

While Americans aren't starving because of lack of access to food, it's troubling that poor families are cutting back on food purchases, which can have a whole range of impacts on child health. Single family homes headed by women, says USDA, are the worst off--another reminder that, just as here in Africa, women and children tend to suffer the most from poverty and food insecurity.

Meanwhile the World Food Summit is wrapping up in Rome this week and very little has been said, so far, about environmentally sustainable ways of alleviating hunger and poverty in rich and poor countries alike. As the effects of climate change become more and more evident and the global economic crisis continues, the world needs better ways of producing food that nourish both people and the planet.

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Passing the Buck

As someone who was always a big 'saver' in the past, although I'm sure I've purchased my fair share of worthless crap, I find myself now in a position where I'm helping the economy.  It's about bang for the buck.

I have been remodeling a home, that makes my house a better investment cause it's less likely to fall down or get shaken off its moorings, so I've been investing in my own future. But, I'm also getting bang for my bucks on the local scene.

I hire contractors, some of whom employ helpers who need the money and spend it right away.  

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