Coming around to new economic realities

Sometimes, I think I give too much traffic to Time magazine's economics blog. But every once in a while I catch a nugget like this one:

Perhaps the most disturbing thing about the jobs report is that it is clear we are no longer in an economy where a rising tide lifts all boats.

I've saying for a while that this whole economic crash was about much more than just a depression. It was an overdue correction towards a new reality. Throughout the 2008 news year, press people pushed on about "when does the economy recover?", "when do things go back to normal?", as if somehow 2006 was "normal".

I said then and continue to stand by the fact that we're in a new economic reality. The quote above really summarizes this problem.

Policy makers and economists and much of the populace have been operating under the assumption that the US is simply suffering from a demand crisis. If big companies just spend more money and hire more people, unemployment will drop, profits will rise and everyone will be happy again.

But this is not what's happening. Companies took a brief dip in 2008, laid off a bunch of people and now profits are rising again. But US corps are holding on to that money, they're not hiring.

Let's take a look at one current example of this problem. Here's NPR's broadcast on "The Economic Realities of Tough Immigration Laws".

As with most stories there are two sides to this coin and the Senator backing the bill argues his point and his side impeccably. This isn't just blind jingoism, he clearly understands the economic risks and implications.

"There may have to be some differences in pay scale ... but Alabamians and Americans will do those jobs," he says.

The flip side is far less encouraging though, especially from the farmer:

"Since this law went in to effect, I've had a total 11 people that were Americans come and ask for work," Boatwright says. "A total of one of those actually came back the next day."

And that guy didn't make it through day two.

And this is where the shift comes in. Picking tomatoes is not only a very difficult job, it really doesn't pay very well. We can definitely force documented Americans to do this job, but it's going to be a struggle to make this change and for many workers it may be the single worst job they've ever had.

And this is not just the new reality for immigration laws, I think this is the new reality for the US as a whole. Stagnant wages for most and a stagnant quality of life for most. But hey, this is what they voted for.

Obama's Plan, American Reality

So first, a link to the very good Vanity Fair article, "California and Bust".

I think the real key is his last paragraph that really sums up the current debt problem.

When people pile up debts they will find difficult and perhaps even impossible to repay, they are saying several things at once. They are obviously saying that they want more than they can immediately afford. They are saying, less obviously, that their pres­ent wants are so important that, to satisfy them, it is worth some future difficulty. But in making that bargain they are implying that, when the future difficulty arrives, they’ll figure it out. They don’t always do that... 

Lots of future promises have been made, but there's really no way to pay for them all.

So Obama has come out with a plan hoping to tackle both the unemployment crisis and the debt crisis. On the surface, this is really a "give up nothing" plan. And the problem here, as evidenced in the Vanity Fair article, is that something has to be given up somewhere.

Politicians are in the process of playing this shell game of needing to cut while pretending that everything is important. They're doing this in an attempt to keep their jobs and submarine fiscal change without forcing cultural change. But the problem here is cultural that is driving the fiscal. Until the culture starts driving fiscal change, all of these proposals are unlikely to work.