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May 18, 2015

Economist: The Economy Might Stink For a Long Time to Come

Rush Limbaugh was just talking about this article, which had been published in the New York Times. His take was that as it had been excerpted at Yahoo News, Low Information Voters and Millennials (but I repeat myself) would actually see it when they came to Yahoo to read about "Jay-Z, Beyonce, and Jennifer Lopez and her butt."

The economy might stink for a while.

Writing in the New York Times this weekend, economist, author, and blogger Tyler Cowen says that we might need to get used to the idea that the economy will continue to underperform our expectations.

Cowen says that right now there are two core outlooks on the economy, both of which are inherently optimistic.

One says that things like low wage growth and low interest rates are phases that will pass, and the other is that we merely didn't appreciate how long it would take to recover from the financial crisis.

But is it a foregone conclusion that things will just get back to "normal"?

Tyler Cowen writes in the New York times that we may be experiencing a "Great Reset," in which the economy is shifting for a permanent reduction in output and wealth.

Let's consider an analogy to see how this might work in practice.

Well before the recent recession, many colleges and universities realized that they could not afford so many full-time tenured and tenure-track faculty members, and they began to increase their reliance on lower-paid adjuncts. Few institutions fired large numbers of full-timers suddenly, because that could have left them understaffed if trends reversed. Longstanding protections of tenure were also a constraint. Instead, many administrators added modestly to the number of adjunct faculty members, sometimes over decades, relying on retirement and attrition to manage the shift in a relatively smooth manner.

That evolution reflects a more general principle: Institutional rigidities don't permit adjustments to occur all at once, but by studying continuing changes we may be able to peer around a corner and see where a sector is headed.

Such processes are scary because we may be watching the slow unfolding of a hand that, in its fundamentals, has already been dealt.

There are signs that a comparable story may apply to the American economy more broadly.

In manufacturing, for example, Ford, Chrysler, General Motors, Caterpillar and Navistar (formerly International Harvester) all pay many of their new workers much less. In some of these two-tier structures, the new wage may be as little as half the old one. In addition to this rapid change, the companies also seem to be reducing the ranks of highly paid workers through slow attrition.

...

All of these factors could indicate that our economy is evolving into one that will offer far less favorable long-run wage prospects....

In short, are these economic problems transitory, or are we glimpsing the beginnings of a grimmer future?

Cowen notes that the negative effects -- reduced wages, chiefly -- fall disproportionately on the young, aka The Obama Generation, so the next generation is being taught to accept lower wages, both now and in their futures.

Limbaugh's take -- apart from the fact that the ignorant would finally see some news about the Obama economy -- is that this article is still making excuses for Obama, still suggesting that this is entirely due to tectonic structural forces that Obama couldn't possibly have anything to do with, and obviously, then, he should not be blamed.

It is astonishing to see how our economy has essentially been downsized to Italy West, and yet the elites are so heavily invested in Obama they 1, try to ignore this fact, and 2, when forced to confront it, claim that policy is entirely irrelevant when dealing with such large-sized structural forces.

Obama wanted to transform America into a European country.

Well, he got his wish.

Why don't the elites celebrate this, instead of trying to cover it up?



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posted by Ace at 03:43 PM

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