Rethinking the 'Strong Jobs Recovery' Scenario
By Barry Ritholtz
12/21/2005
RealMoney.com

Job creation is crucial to any economic expansion. It directly affects consumer spending, and it's one of two key factors determining the health of real estate (the other being interest rates). One cannot overstate the importance of job creation to the economy.

Lately, the White House and Treasury Secretary John Snow have been trumpeting the fact that the economy has created 4.4 million new jobs since May 2003.

Inquiring minds want to know: How legit is that number? How was it derived? How does this job-creation data compare to prior cyclical recoveries?

Let's zoom in on the actual employment numbers and see what's there:

First question: How did the White House come up with that 4.4 million new-jobs number? Is it accurate?

The answer is simple math: Measured trough to peak, there were actually almost 4.5 million new jobs created. In May 2003, there were 129,827,000 people employed, according to the Bureau of Labor Statistics. As of November 2005, there were 134,289,000. That reflects 4,462,000 new jobs. So the "over 4.4 million jobs created" statement is numerically accurate.

So if that number is mathematically accurate, what's the problem?
As those of us who work on Wall Street know, you typically don't get to pick your time periods when measuring performance. You especially don't get to base it on trough-to-peak numbers. In most any series, there are more natural time periods, e.g., year to date, one, three and five years.

As opposed to cherry-picking the most favorable-looking time periods, job creation historically has been measured from the end of the recession, which the National Bureau of Economic Research puts at March 2001. Another commonly used period is from the start of the president's term (Jan. 20, 2001).

When we plug those time frames into the BLS data, we derive a significantly less rosy picture: Those calendar periods generate job-creation numbers of about 1,835,000. Also, the 4.4 million-job number conveniently ignores the 2.6 million jobs lost from 2001 to 2003.

Over the course of four years, those numbers fail to keep up with population growth. The U.S., with about 275 million people, needs more than 1 million new jobs per year -- between 125,000-150,000 per month -- just to maintain the same percentage of employed relative to the labor force.

As with any data series, you can make the numbers better or worse depending upon when you mark the beginning of your time period, as the chart below of nonfarm payroll data since January 2000 shows.

So the answer to our second question is that the 4.4 million number significantly overstates the true jobs picture since the end of the recession. Indeed, if this were a mutual fund, the Securities and Exchange Commission would not allow such an advantageously selective timeline to be used in the advertising.

Third question: We know the BLS model is a bit quirky and has some warts on it. How "real" are these numbers, and how much is theoretical conjecture?
That's a complex question, but let's take a stab at it. In 2001, the BLS started a new numerical projection called the birth/death adjustment. This replaced a prior adjustment known as the "bias factor." This new adjustment has been gradually phased in since 2001, and became fully implemented in 2003. That's convenient for our analysis, as it was fully integrated at about the same time that Treasury and the White House have used to reach their 4.4 million new-jobs number.

The birth/death adjustment was created, according to the BLS, to capture job creation of new firms that is missed by bureau methodology "due to an unavoidable lag between an establishment opening for business, and its non-sampling methods must be used to estimate this growth."

What the BLS does is estimate the number of new businesses coming into existence. It then projects how many new jobs these new firms create.

There is some debate on how accurate the birth/death adjustment is. Morgan Stanley's analysts have found it to be (mostly) reliable; John Williams of Shadow Government Statistics thinks it significantly overstates job creation.

I fall somewhere between the two. Given all the effort that goes into actually counting establishment jobs vs. merely estimating them, one would expect that this projection would be a relatively small number of the total new-job count. A modest estimate of new jobs created would be acceptable as a reasonable adjustment to the true data collection.

But that's not what we see when we take a look at the data closely: Of the 4.4 million new jobs from the March 2003 low until present, the birth/death estimate accounts for 1,639,000. That is an extremely significant 36.7% of new jobs.

By any measure, that's a hefty estimated adjustment to an actual data-based number. It is not particularly credible to me to have a statistical projection be more than a third of a measured data series. To be blunt, it is a game-changing "adjustment."

To get an idea of how big this is, imagine how your performance might be enhanced by goosing it more than a third: This would raise the output from so-so to spectacular. A mediocre baseball hitter (.250) becomes an MVP (.392); an average bowler (200) rolls a perfect game; meanwhile, a weekend duffer who shoots an 88 becomes club champ with a 56.

Nice statistical work, if you can get it.

Our last measure is not quantitative, as the prior three issues have been. It is qualitative:

As I've noted previously, the jobs recovery compares rather poorly with prior post-World War II recessions and their aftermaths. We've seen that the jobs created are unusually dependent upon the real estate complex. We also know that the private sector jobs created have, on average, paid less and have had weaker benefits than the jobs they've replaced. And we also see there has been an unusually large number of government jobs created. Overall, the jobs quality during this recovery is mediocre.

Not Up to Snuff
Job growth in the current recovery is weak by post-World War II standards

After all this data-crunching, one query remains: How does this jobs-recovery era compare to prior ones?

The answer, it turns out, is not particularly well. In fact, this is the eighth-worst jobs recovery of the prior 10 recessions, according to The New York Times.

What made this cycle somewhat unique was that the job count fell for another year and a half after the recession ended.

The reason for this is quite simple: Most economists have been looking at the post-recession period incorrectly. Instead of viewing this as a post-bubble economy, with the 2000 crash a rare event, they are looking at it as if it's just another postwar recession-recovery cycle. That misses the bigger issues.

By nearly any honest measure, this has been a lackluster jobs recovery. That is not widely believed among the investing population -- though consumer sentiment shows plenty of hesitancy.

Base of the Bear
This is another in our occasional series of data analyses, looking beneath the headlines at the actual numbers to discern what's truly going on in the economy (see prior commentary on home sales data; Black Friday, and inflation).

This variant perception -- that the macro environment is far worse than most people believe -- forms the basis of my bearish expectations for 2006, which I'll explore in more detail in a forthcoming column.

1984, George Orwell, Chapter 4.

With the deep, unconscious sigh which not even the nearness of the telescreen could prevent him from uttering when his day's work started, Winston pulled the speakwrite towards him, blew the dust from its mouthpiece, and put on his spectacles. Then he unrolled and clipped together four small cylinders of paper which had already flopped out of the pneumatic tube on the right-hand side of his desk.

In the walls of the cubicle there were three orifices. To the right of the speakwrite, a small pneumatic tube for written messages, to the left, a larger one for newspapers; and in the side wall, within easy reach of Winston's arm, a large oblong slit protected by a wire grating. This last was for the disposal of waste paper. Similar slits existed in thousands or tens of thousands throughout the building, not only in every room but at short intervals in every corridor. For some reason they were nicknamed memory holes. When one knew that any document was due for destruction, or even when one saw a scrap of waste paper lying about, it was an automatic action to lift the flap of the nearest memory hole and drop it in, whereupon it would be whirled away on a current of warm air to the enormous furnaces which were hidden somewhere in the recesses of the building.

Winston examined the four slips of paper which he had unrolled. Each contained a message of only one or two lines, in the abbreviated jargon -- not actually Newspeak, but consisting largely of Newspeak words -- which was used in the Ministry for internal purposes. They ran:

times 17.3.84 bb speech malreported africa rectify

times 19.12.83 forecasts 3 yp 4th quarter 83 misprints verify current issue

times 14.2.84 miniplenty malquoted chocolate rectify

times 3.12.83 reporting bb dayorder doubleplusungood refs unpersons rewrite fullwise upsub antefiling

With a faint feeling of satisfaction Winston laid the fourth message aside. It was an intricate and responsible job and had better be dealt with last. The other three were routine matters, though the second one would probably mean some tedious wading through lists of figures.

Winston dialled 'back numbers' on the telescreen and called for the appropriate issues of The Times, which slid out of the pneumatic tube after only a few minutes' delay. The messages he had received referred to articles or news items which for one reason or another it was thought necessary to alter, or, as the official phrase had it, to rectify. For example, it appeared from The Times of the seventeenth of March that Big Brother, in his speech of the previous day, had predicted that the South Indian front would remain quiet but that a Eurasian offensive would shortly be launched in North Africa. As it happened, the Eurasian Higher Command had launched its offensive in South India and left North Africa alone. It was therefore necessary to rewrite a paragraph of Big Brother's speech, in such a way as to make him predict the thing that had actually happened. Or again, The Times of the nineteenth of December had published the official forecasts of the output of various classes of consumption goods in the fourth quarter of 1983, which was also the sixth quarter of the Ninth Three-Year Plan. Today's issue contained a statement of the actual output, from which it appeared that the forecasts were in every instance grossly wrong. Winston's job was to rectify the original figures by making them agree with the later ones. As for the third message, it referred to a very simple error which could be set right in a couple of minutes. As short a time ago as February, the Ministry of Plenty had issued a promise (a 'categorical pledge' were the official words) that there would be no reduction of the chocolate ration during 1984. Actually, as Winston was aware, the chocolate ration was to be reduced from thirty grammes to twenty at the end of the present week. All that was needed was to substitute for the original promise a warning that it would probably be necessary to reduce the ration at some time in April.

As soon as Winston had dealt with each of the messages, he clipped his speakwritten corrections to the appropriate copy of The Times and pushed them into the pneumatic tube. Then, with a movement which was as nearly as possible unconscious, he crumpled up the original message and any notes that he himself had made, and dropped them into the memory hole to be devoured by the flames.

What happened in the unseen labyrinth to which the pneumatic tubes led, he did not know in detail, but he did know in general terms. As soon as all the corrections which happened to be necessary in any particular number of The Times had been assembled and collated, that number would be reprinted, the original copy destroyed, and the corrected copy placed on the files in its stead. This process of continuous alteration was applied not only to newspapers, but to books, periodicals, pamphlets, posters, leaflets, films, sound-tracks, cartoons, photographs -- to every kind of literature or documentation which might conceivably hold any political or ideological significance. Day by day and almost minute by minute the past was brought up to date. In this way every prediction made by the Party could be shown by documentary evidence to have been correct, nor was any item of news, or any expression of opinion, which conflicted with the needs of the moment, ever allowed to remain on record. All history was a palimpsest, scraped clean and reinscribed exactly as often as was necessary. In no case would it have been possible, once the deed was done, to prove that any falsification had taken place. The largest section of the Records Department, far larger than the one on which Winston worked, consisted simply of persons whose duty it was to track down and collect all copies of books, newspapers, and other documents which had been superseded and were due for destruction. A number of The Times which might, because of changes in political alignment, or mistaken prophecies uttered by Big Brother, have been rewritten a dozen times still stood on the files bearing its original date, and no other copy existed to contradict it. Books, also, were recalled and rewritten again and again, and were invariably reissued without any admission that any alteration had been made. Even the written instructions which Winston received, and which he invariably got rid of as soon as he had dealt with them, never stated or implied that an act of forgery was to be committed: always the reference was to slips, errors, misprints, or misquotations which it was necessary to put right in the interests of accuracy.

But actually, he thought as he re-adjusted the Ministry of Plenty's figures, it was not even forgery. It was merely the substitution of one piece of nonsense for another. Most of the material that you were dealing with had no connection with anything in the real world, not even the kind of connection that is contained in a direct lie. Statistics were just as much a fantasy in their original version as in their rectified version. A great deal of the time you were expected to make them up out of your head. For example, the Ministry of Plenty's forecast had estimated the output of boots for the quarter at one-hundred-and-forty-five million pairs. The actual output was given as sixty-two millions. Winston, however, in rewriting the forecast, marked the figure down to fifty-seven millions, so as to allow for the usual claim that the quota had been overfulfilled. In any case, sixty-two millions was no nearer the truth than fifty-seven millions, or than one-hundred-and-forty-five millions. Very likely no boots had been produced at all. Likelier still, nobody knew how many had been produced, much less cared. All one knew was that every quarter astronomical numbers of boots were produced on paper, while perhaps half the population of Oceania went barefoot. And so it was with every class of recorded fact, great or small. Everything faded away into a shadow-world in which, finally, even the date of the year had become uncertain.

When Americans No Longer Own America
by Thom Hartmann
February 27, 2006
CommonDreams.org


The Dubai Ports World deal is waking Americans up to a painful reality: So-called "conservatives" and "flat world" globalists have bankrupted our nation for their own bag of silver, and in the process are selling off America.

Through a combination of the "Fast Track" authority pushed for by Reagan and GHW Bush, sweetheart trade deals involving "most favored nation status" for dictatorships like China, and Clinton pushing us into NAFTA and the WTO (via GATT), we've abandoned the principles of tariff-based trade that built American industry and kept us strong for over 200 years.

The old concept was that if there was a dollar's worth of labor in a pair of shoes made in the USA, and somebody wanted to import shoes from China where there may only be ten cents worth of labor in those shoes, we'd level the playing field for labor by putting a 90-cent import tariff on each pair of shoes. Companies could choose to make their products here or overseas, but the ultimate cost of labor would be the same.

Then came the flat-worlders, led by misguided true believers and promoted by multinational corporations. Do away with those tariffs, they said, because they "restrain trade." Let everything in, and tax nothing. The result has been an explosion of cheap goods coming into our nation, and the loss of millions of good manufacturing jobs and thousands of manufacturing companies. Entire industry sectors have been wiped out.

These policies have kneecapped the American middle class. Our nation's largest employer has gone from being the unionized General Motors to the poverty-wages Wal-Mart. Americans have gone from having a net savings rate around 10 percent in the 1970s to a minus .5 percent in 2005 - meaning that they're going into debt or selling off their assets just to maintain their lifestyle.

At the same time, federal policy has been to do the same thing at a national level. Because our so-called "free trade" policies have left us with an over $700 billion annual trade deficit, other countries are sitting on huge piles of the dollars we gave them to buy their stuff (via Wal-Mart and other "low cost" retailers). But we no longer manufacture anything they want to buy with those dollars.

So instead of buying our manufactured goods, they are doing what we used to do with Third World nations - they are buying us, the USA, chunk by chunk. In particular, they want to buy things in America that will continue to produce profits, and then to take those profits overseas where they're invested to make other nations strong. The "things" they're buying are, by and large, corporations, utilities, and natural resources.

Back in the pre-Reagan days, American companies made profits that were distributed among Americans. They used their profits to build more factories, or diversify into other businesses. The profits stayed in America.

Today, foreigners awash with our consumer dollars are on a two-decades-long buying spree. The UK's BP bought Amoco for $48 billion - now Amoco's profits go to England. Deutsche Telekom bought VoiceStream Wireless, so their profits go to Germany, which is where most of the profits from Random House, Allied Signal, Chrysler, Doubleday, Cyprus Amax's US Coal Mining Operations, GTE/Sylvania, and Westinghouse's Power Generation profits go as well. Ralston Purina's profits go to Switzerland, along with Gerber's; TransAmerica's profits go to The Netherlands, while John Hancock Insurance's profits go to Canada. Even American Bankers Insurance Group is owned now by Fortis AG in Belgium.

Foreign companies are buying up our water systems, our power generating systems, our mines, and our few remaining factories. All because "flat world" so-called "free trade" policies have turned us from a nation of wealthy producers into a nation of indebted consumers, leaving the world awash in dollars that are most easily used to buy off big chunks of America. As www.economyincrisis.com notes, US Government statistics indicate the following percentages of foreign ownership of American industry:

· Sound recording industries - 97%
· Commodity contracts dealing and brokerage - 79%
· Motion picture and sound recording industries - 75%
· Metal ore mining - 65%
· Motion picture and video industries - 64%
· Wineries and distilleries - 64%
· Database, directory, and other publishers - 63%
· Book publishers - 63%
· Cement, concrete, lime, and gypsum product - 62%
· Engine, turbine and power transmission equipment - 57%
· Rubber product - 53%
· Nonmetallic mineral product manufacturing - 53%
· Plastics and rubber products manufacturing - 52%
· Plastics product - 51%
· Other insurance related activities - 51%
· Boiler, tank, and shipping container - 50%
· Glass and glass product - 48%
· Coal mining - 48%
· Sugar and confectionery product - 48%
· Nonmetallic mineral mining and quarrying - 47%
· Advertising and related services - 41%
· Pharmaceutical and medicine - 40%
· Clay, refractory, and other nonmetallic mineral products - 40%
· Securities brokerage - 38%
· Other general purpose machinery - 37%
· Audio and video equipment mfg and reproducing magnetic and optical media - 36%
· Support activities for mining - 36%
· Soap, cleaning compound, and toilet preparation - 32%
· Chemical manufacturing - 30%
· Industrial machinery - 30%
· Securities, commodity contracts, and other financial investments and related activities - 30%
· Other food - 29%
· Motor vehicles and parts - 29%
· Machinery manufacturing - 28%
· Other electrical equipment and component - 28%
· Securities and commodity exchanges and other financial investment activities - 27%
· Architectural, engineering, and related services - 26%
· Credit card issuing and other consumer credit - 26%
· Petroleum refineries (including integrated) - 25%
· Navigational, measuring, electromedical, and control instruments - 25%
· Petroleum and coal products manufacturing - 25%
· Transportation equipment manufacturing - 25%
· Commercial and service industry machinery - 25%
· Basic chemical - 24%
· Investment banking and securities dealing - 24%
· Semiconductor and other electronic component - 23%
· Paint, coating, and adhesive - 22%
· Printing and related support activities - 21%
· Chemical product and preparation - 20%
· Iron, steel mills, and steel products - 20%
· Agriculture, construction, and mining machinery - 20%
· Publishing industries - 20%
· Medical equipment and supplies - 20%
Thus it shouldn't surprise us that the cons have sold off our ports as well, and will defend it to the bitter end. They truly believe that a "New World Order" with multinational corporations in charge instead of sovereign governments will be the answer to the problem of world instability. And therefore they must do away with quaint things like unions, a healthy middle class, and, ultimately, democracy.

The "security" implications of turning our ports over to the UAE are just the latest nail in what the cons hope will be the coffin of American democracy and the American middle class. Today's conservatives believe in rule by inherited wealth and an internationalist corporate elite, and things like a politically aroused citizenry and a healthy democracy are pesky distractions.

Everything today is driven by profits for multinationals, supported by the lawmaking power of the WTO. Thus, parts for our missiles are now made in China, a country that last year threatened us with nuclear weapons. Our oil comes from a country that birthed a Wahabist movement that ultimately led to 14 Saudi citizens flying jetliners into the World Trade buildings and the Pentagon. Germans now own the Chrysler auto assembly lines that turned out tanks to use against Germany in WWII. And the price of labor in America is being held down by over ten million illegal workers, a situation that was impossible twenty-five years ago when unions were the first bulwark against dilution of the American labor force.

When Thomas Jefferson wrote of King George III in the Declaration of Independence, "He has combined with others to subject us to a jurisdiction foreign to our constitutions and unacknowledged by our laws, giving his assent to their acts of pretended legislation…" he just as easily could have been writing of the World Trade Organization, which now has the legal authority to force the United States to overturn laws passed at both local, state, and federal levels with dictates devised by tribunals made up of representatives of multinational corporations. If Dubai loses in the American Congress, their next stop will almost certainly be the WTO.

As Simon Romero and Heather Timmons noted in The New York Times on 24 February 2006, "the international shipping business has evolved in recent years to include many more containers with consumer goods, in addition to old-fashioned bulk commodities, and that has helped lift profit margins to 30 percent, from the single digits. These smartly managed foreign operators now manage about 80 percent of port terminals in the United States."

And those 30 percent profits from American port operations now going to Great Britain will probably soon go to the United Arab Emirates, a nation with tight interconnections to both the Bush administration and the Bush family.

Ultimately, it's not about security -- it's about money. In the multinational corporatocracy's "flat world," money trumps the national good, community concerns, labor interests, and the environment. NAFTA, CAFTA, and WTO tribunals can - and regularly do - strike down local and national laws. Thomas Paine's "Rights of Man" are replaced by Antonin Scalia's "Rights of Corporate Persons."

Profits even trump the desire for good enough port security to avoid disasters that may lead to war. After all, as Judith Miller wrote in The New York Times on January 30, 1991, quoting a local in Saudi Arabia: "War is good for business."

When You Can't Obscure the News, Buy It
How the Economic News is Spun
By PAUL CRAIG ROBERTS
Counterpunch

Readers ask me to reconcile the jobs and debt data that I report to them with the positive economic outlook and good news that comes to them from regular news sources. Some readers are being snide, but most are sincere.

I am pleased to provide the explanation. First, let me give my reassurances that the numbers I report to you come straight from official US government statistics. I do not massage the numbers or rework them in any way. I cannot assure you that the numbers are perfectly reported to, and collected by, the government, but they are the only numbers we have.

Here is how to reconcile my reports with the good news you get from the mainstream media:

(1) When the US Department of Labor, for example, releases the monthly payroll jobs data, the press release will put the best spin on the data. The focus is on the aggregate number of new jobs created the previous month, for example, 150,000 new jobs. That sounds good. News reporters report the press release. They do not look into the data to see what kinds of jobs have been created and what kinds are being lost. They do not look back in time and provide a net job creation number over a longer period of time.

This is why the American public is unaware that higher paid jobs in export and import-competitive industries are being phased out along with engineering and other professional "knowledge jobs" and replaced with lower paid jobs in domestic services. The replacement of higher paid jobs with lower paid jobs is one reason for the decline in median household income over the past five years. It is not a large decline, but it is a decline. How can it be possible for the economy to be doing well when median household income is not growing and when economic growth is based on increased consumer indebtedness?

Many economists mistake offshore outsourcing with free trade based on comparative advantage. As a result of this mistake, ideology speaks instead of economic analysis. For example, Matthew J. Slaughter, an economics professor at Dartmouth, commits a huge error when he writes: "for every one job that US multinationals created abroad in their foreign affiliates they created nearly two US jobs in their parent operations." If Slaughter had consulted the BLS payroll jobs data, he would have realized that his claim could not possibly be true. Slaughter did not come to his conclusion by examining aggregate job creation. Instead, he measured the growth of US multinational employment and failed to take into account the two reasons for an increase in multinational employment: (1) multinationals acquired many existing smaller firms, thus raising multinational employment but not overall employment, and (2) many firms established foreign operations for the first time and thereby became multinationals, thus adding their existing employment to Slaughter's number for multinational employment.

ABC News' John Stossel, a libertarian hero, recently made a similar error. In debunking Lou Dobbs' concern with US jobs lost to offshore outsourcing, Stossel invokes the California-based company, Collabnet. He quotes the CEO's claim that outsourcing saves his company money and lets him hire more Americans. Turning to Collabnet's web page, it is very interesting to see the employment opportunities that the company posts for the US and for India.

In India, Collabnet has openings for 8 engineers, a sales engineer, a technical writer, and a tele-marketing representative. In the US, Collabnet has openings for one engineer, a receptionist/office assistant, and positions in marketing, sales, services, and operations. Collabnet is a perfect example of what Lou Dobbs and I report: the engineering and design jobs move abroad, and Americans are employed to sell and market the foreign made products.

(2) Wall Street economists are salesmen. The companies that employ them want to sell stocks and bonds. They don't want bad news. A bear market is not good for business. Similarly, business associations have the agenda of their members. Offshore outsourcing reduces their labor costs and boosts their profits and performance-based bonuses. Therefore, it is natural that their association reports put a positive spin on outsourcing. The same organizations benefit from work visas that allow them to bring foreign workers in as indentured servants to replace their more fractious and higher paid American employees. Thus, the myth of a US shortage of engineers and scientists. This myth is used to wheedle more subsidies in the form of more H-1B visas out of Congress.

(3) Official US government reports are written to obfuscate serious problems for which the government has no solution. For example, "The Economic Report of the President," written by the Council of Economic Advisers, blames the huge US trade deficit on the low rate of domestic savings. The report claims that if only Americans would save more of their incomes, they would not spend so much on imports, and the $726 billion trade gap would close.

This analysis is nonsensical on its face. Offshore outsourcing has turned US production into imports. Americans are now dependent on offshore production for their clothes, manufactured goods and advanced technology products. There are simply no longer domestic suppliers of many of the products on which Americans depend.

Moreover, many Americans are struggling to make ends meet, having lost their jobs to offshore outsourcing. They are living on credit cards and struggling to make minimum payments. Median household real incomes are falling as higher paid jobs are outsourced while Americans are relegated to lower paying jobs in domestic services.

They haven't a dollar to save. As Charles McMillion points out, the February 28 report from the Bureau of Economic Analysis shows that all GDP growth in the fourth quarter of 2005 was due to the accumulation of unsold inventory and that consumers continued to outspend their incomes.

Matthew Spiegleman, a Confeence Board economist, claims that manufacturing jobs are only slightly higher paid than domestic service jobs. He reaches this conclusion by comparing only hourly pay and by leaving out the longer manufacturing work week and the associated benefits, such as health care and pensions.

Stossel simply does not know enough economics to be aware that he is being used. The bought-and-paid-for-economists are simply earning their living and their grants by serving the interests of corporate outsourcers.

(4) Policy reports from think tanks reflect what the donors want to hear. Truth can be "negative" and taken as a reflection on the favored administration in power. Consider, for example, the conservative, Bruce Bartlett, who was recently fired by the National Center for Policy Analysis for writing a truthful book about George Bush's economic policies. Donors to NCPA saw Bartlett's truthful book as an attack on George Bush, their hero, and withheld $165,000 in donations. There were not enough Bartlett supporters to step in and fill the gap, so he was fired in order to save donations.

When I held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies, I saw internal memos describing the grants CSIS could receive from the George H.W. Bush administration in exchange for removing me from the Simon chair.

In America "truth" has long been for sale. We see it in expert witness testimony, in the corrupt reports from forensic labs that send innocent people to prison, and even in policy disputes among scientists themselves. In scholarship, ideas that are too challenging to prevailing opinion have a rough row to hoe and often cannot get a hearing.

Even the president of Harvard University, Larry Summers, an academic economist of some note and a former Secretary of the Treasury, was forced to resign because he offered a politically incorrect hypothesis about the relative scarcity of women in science.


The few reporters and columnists who are brave or naive enough to speak out are constrained by editors who are constrained by owners and advertisers. For example, it is impermissible to examine the gaping holes in the 9/11 Commission Report. Publications and editors are intimidated by the charge of "conspiracy theory," just as criticism of Israel is muted for fear of being labeled "anti-semitic."

All of these reasons and others make truth a scarce commodity.
Censorship exists everywhere and is especially heavy in the US mainstream media.

A Nation Polarized Between Rich and Poor
America's Bleak Jobs Future
By PAUL CRAIG ROBERTS
Counterpoint
March 6, 2006

On February 20 Forbes.com told its readers with a straight face that "the American job-generation machine rolls on. The economy will create 19 million new payroll jobs in the decade to 2014." Forbes took its information from the 10-year jobs projections from the Bureau of Labor Statistics, US Department of Labor, released last December.

If the job growth of the past half-decade is a guide, the forecast of 19 million new jobs is optimistic, to say the least. According to the Bureau of Labor Statistics payroll jobs data, from January 2001 - January 2006 the US economy created 1,054,000 net new private sector jobs and 1,039,000 net new government jobs for a total five-year figure of 2,093,000. How does the US Department of Labor get from 2 million jobs in five years to 19 million in ten years?

I cannot answer that question.

However, the jobs record for the past five years tells a clear story. The BLS payroll jobs data contradict the hype from business organizations, such as the US Chamber of Commerce, and from "studies" financed by outsourcing corporations that offshore jobs outsourcing is good for America. Large corporations, which have individually dismissed thousands of their US employees and replaced them with foreigners, claim that jobs outsourcing allows them to save money that can be used to hire more Americans. The corporations and the business organizations are very successful in placing this disinformation in the media. The lie is repeated everywhere and has become a mantra among no-think economists and politicians. However, no sign of these jobs can be found in the payroll jobs data. But there is abundant evidence of the lost American jobs.

Information technology workers and computer software engineers have been especially heavily hit by offshore jobs outsourcing. During the past five years (Jan 01 - Jan 06), the information sector of the US economy lost 645,000 jobs or 17.4% of its work force. Computer systems design and related lost 116,000 jobs or 8.7% of its work force. Clearly, jobs outsourcing is not creating jobs in computer engineering and information technology. Indeed, jobs outsourcing is not even creating jobs in related fields.

For the past five years US job growth was limited to these four areas: education and health services, state and local government, leisure and hospitality, financial services. There was no US job growth outside these four areas of domestic nontradable services.

Oracle, for example, which has been handing out thousands of pink slips, has recently announced two thousand more jobs being moved to India. How is Oracle's move of US jobs to India creating jobs in the US for waitresses and bartenders, hospital orderlies, state and local government and credit agencies, the only areas of job growth?

Engineering jobs in general are in decline, because the manufacturing sectors that employ engineers are in decline. During the last five years, the US work force lost 1.2 million jobs in the manufacture of machinery, computers, electronics, semiconductors, communication equipment, electrical equipment, motor vehicles and transportation equipment. The BLS payroll job numbers show a total of 70,000 jobs created in all fields of architecture and engineering, including clerical personal, over the past five years. That comes to a mere 14,000 jobs per year (including clerical workers). What is the annual graduating class in engineering and architecture? How is there a shortage of engineers when more graduate than can be employed?

Of course, many new graduates take jobs opened by retirements. We would have to know the retirement rates to get a solid handle on the fate of new graduates. But it cannot be very pleasant, with declining employment in the manufacturing sectors that employ engineers and a minimum of 65,000 H-1B visas annually for foreigners plus an indeterminate number of L-1 visas.

It is not only the Bush regime that bases its policies on lies. Not content with outsourcing Americans' jobs, corporations want to fill the remaining jobs in America with foreigners on work visas. Business organizations lie about a shortage of engineers, scientists and even nurses. Business organizations have successfully used pubic relations firms and bought-and-paid-for "economic studies" to convince policymakers that American business cannot function without H-1B visas that permit the importation of indentured employees from abroad who are paid less than the going US salaries. The so-called shortage is, in fact, a replacement of American employees with foreign employees, with the soon-to-be-discharged American employee first required to train his replacement.

It is amazing to see free-market economists rush to the defense of H-1B visas. The visas are nothing but a subsidy to US companies at the expense of US citizens.

Keep in mind this subsidy to US corporations for employing foreign workers in place of Americans as we examine the Labor Department's projections of the ten fastest growing US occupations over the 2004-2014 decade.

All of the occupations with the largest projected employment growth (in terms of the number of jobs) over the next decade are in nontradable domestic services. The top ten sources of the most jobs in "superpower" America are: retail salespersons, registered nurses, postsecondary teachers, customer service representatives, janitors and cleaners, waiters and waitresses, food preparation (includes fast food), home health aides, nursing aides, orderlies and attendants, general and operations managers. Note than none of this projected employment growth will contribute one nickel toward producing goods and services that could be exported to help close the massive US trade deficit. Note, also, that few of these jobs classifications require a college education.

Among the fastest growing occupations (in terms of rate of growth), seven of the ten are in health care and social assistance. The three remaining fields are: network systems and data analysis with 126,000 jobs projected or 12,600 per year; computer software engineering applications with 222,000 jobs projected or 22,200 per year, and computer software engineering systems software with 146,000 jobs projected or 14,600 per year.

Assuming these projections are realized, how many of the computer engineering and network systems jobs will go to Americans? Not many, considering the 65,000 H-1B visas each year (650,000 over the decade) and the loss during the past five years of 761,000 jobs in the information sector and computer systems design and related.

Judging from its ten-year jobs projections, the US Department of Labor does not expect to see any significant high-tech job growth in the US. The knowledge jobs are being outsourced even more rapidly than the manufacturing jobs were. The so-called "new economy" was just another hoax perpetrated on the American people.

If offshore jobs outsourcing is good for US employment, why won't the US Department of Commerce release the 200-page, $335,000 study of the impact of the offshoring of US high-tech jobs? Republican political appointees reduced the 200-page report to 12 pages of public relations hype and refuse to allow the Technology Administration experts who wrote the report to testify before Congress. Democrats on the House Science Committee are unable to pry the study out of the hands of Commerce Secretary Carlos Gutierrez. Obviously, the facts don't fit the Bush regime's globalization hype.

The only thing America has left is finance, and now that is moving abroad. On February 22 CNNMoney.com reported that America's large financial institutions are moving "large portions of their investment banking operations abroad." No longer limited to back-office work, offshoring is now killing American jobs in research and analytic operations, foreign exchange trades and highly complicated credit derivatives contracts. Deal-making responsibility itself may eventually move abroad. Deloitte Touche says that the financial services industry will move 20 percent of its total costs base offshore by the end of 2010. As the costs are lower in India, that will represent more than 20 percent of the business. A job on Wall St is a declining option for bright young persons with high stress tolerance.

The BLS payroll data that we have been examining tracks employment by industry classification. This is not the same thing as occupational classification. For example, companies in almost every industry and area of business employ people in computer-related occupations. A recent study from the Association for Computing Machinery claims:
"Despite all the publicity in the United States about jobs being lost to India and China, the size of the IT employment market in the United States today is higher than it was at the height of the dot.com boom. Information technology appears as though it will be a
growth area at least for the coming decade."

We can check this claim by turning to the BLS Occupational Employment Statistics. We will look at "computer and mathematical employment" and "architecture and engineering employment."

Computer and mathematical employment includes such fields as "software engineers applications," "software engineers systems software," "computer programers," "network systems and data communications," and "mathematicians." Has this occupation been a source of job growth?

In November of 2000 this occupation employed 2,932,810 people. In November of 2004 (the latest data available), this occupation employed 2,932,790, or 20 people fewer. Employment in this field has been stagnant for the past four years.

During these four years, there have been employment shifts within the various fields of this occupation. For example, employment of computer programmers declined by 134,630, while employment of software engineers applications rose by 65,080, and employment of software engineers systems software rose by 59,600. (These shifts might merely reflect change in job or occupation title from programmer to software engineer.)

These figures do not tell us whether any gain in software engineering jobs went to Americans. According to Professor Norm Matloff, in 2002 there were 463,000 computer-related H-1B visa holders in the US.
Similarly, the 134,630 lost computer programming jobs (if not merely a job title change) may have been outsourced offshore to foreign affiliates.

Architecture and engineering employment includes all the architecture and engineering fields except software engineering. The total employment of architects and engineers in the US declined by 120,700 between November 1999 and November 2004. Employment declined by 189,940 between November 2000 and November 2004, and by 103,390 between November 2001 and November 2004.

There are variations among fields. Between November 2000 and November 2004, for example, US employment of electrical engineers fell by 15,280. Employment of computer hardware engineers rose by 15,990 (possibly these are job title reclassifications). Overall, however, over 100,000 engineering jobs were lost. We do not know how many of the lost jobs were outsourced offshore to foreign affiliates or how many of any increase in computer hardware jobs went to foreign holders of H-1B or L-1 visas.

Clearly, engineering and computer-related employment in the US has not been growing, whether measured by industry or by occupation.
Moreover, with a half million or more foreigners in the US on work visas, the overall employment numbers do not represent employment of Americans. Perhaps what corporations and "studies" mean when they claim offshore outsourcing increases US employment is that the contacts companies make abroad allow them to bring in more foreigners on work visas to displace their American employees.

American employees have been abandoned by American corporations and by their representatives in Congress. America remains a land of opportunity--but for foreigners--not for the native born. A country whose work force is concentrated in domestic nontradable services has no need for scientists and engineers and no need for universities.
Even the projected jobs in nursing and school teachers can be filled by foreigners on H-1B visas.

In the US the myth has been firmly established that the jobs that the US is outsourcing offshore are being replaced with better jobs.
There is no sign of these jobs in the payroll jobs data or in the occupational statistics. Myself and others have pointed out that when a country loses entry level jobs, it has no one to promote to senior level jobs. We have also pointed out that when manufacturing leaves, so does engineering, design, research and development, and innovation itself.

On February 16 the New York Times reported on a new study presented to the National Academies that concludes that outsourcing is climbing the skills ladder. A survey of 200 multinational corporations representing 15 industries in the US and Europe found that 38 percent planned to change substantially the worldwide distribution of their research and development work, sending it to India and China. According to the New York Times, "More companies in the survey said they planned to decrease research and development employment in the United States and Europe than planned to increase employment."

The study and discussion it provoked came to untenable remedies. Many believe that a primary reason for the shift of R&D to India and China is the erosion of scientific prowess in the US due to lack of math and science proficiency of American students and their reluctance to pursue careers in science and engineering. This belief begs the question why students would chase after careers that are being outsourced abroad.

The main author of the study, Georgia Tech professor Marie Thursby, believes that American science and engineering depend on having "an environment that fosters the development of a high-quality work force and productive collaboration between corporations and universities."
The Dean of Engineering at the University of California, Berkeley, thinks the answer is to recruit the top people in China and India and bring them to Berkeley. No one seems to understand that research, development, design, and innovation take place in countries where things are made. The loss of manufacturing means ultimately the loss of engineering and science. The newest plants embody the latest technology. If these plants are abroad, that is where the cutting edge resides.

The United States is the first country in history to destroy the prospects and living standards of its labor force. It is amazing to watch freedom-loving libertarians and free-market economists serve as full time apologists for the dismantling of the ladders of upward mobility that made the America of old an opportunity society.

America has begun a polarization into rich and poor. The resulting political instability and social strife will be terrible.

Jobs Update, Feb. 2006
Paul Craig Roberts
Counterpunch.org

The Bureau of Labor Statistics' payroll jobs report released on March 10 lists 205,000 new private sector jobs for February. As has been the case for a number of years, the new jobs are in domestic nontradable services. The sources of February's new jobs are:

* construction (primarily specially trade contractors) 41,000 jobs;

* wholesale and retail trade, transportation and warehousing, 15,000 jobs;

* financial activities (includes insurance and real estate) 22,000 jobs;

* professional and business services, 39,000 jobs (roughly half of which are in administrative and waste services);

* education and health services, 47,000 jobs;

* waitresses and bartenders, 21,000 jobs.

During the past year, the economy has lost 60,000 private supervisory jobs, 48,000 manufacturing jobs, 65,000 jobs in nondurable goods (mainly textiles, apparel, paper and paper products), and 25,000 jobs in air transportation. Over the last year, the economy has gained 203,000 jobs for waitresses and bartenders.

New York Times reporter Vikas Bajaj again misreported the BLS release. He attributed 38,000 state and local government jobs to businesses.

Charles McMillion of MBG Information Services reports that hours worked in manufacturing have fallen 7.1 percent during the 51-month old current recovery and that growth in total private sector hours worked in non-supervisory jobs is the weakest of any recovery on record. This suggests that many new jobs are for less than a full 40-hour work week, which could account for the lack of growth in median household real income.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review.

Good News! The Rich Get Richer
Lack of applause for falling wages is media mystery
By Janine Jackson
FAIR.ORG

The Bush administration made a concerted effort to trumpet a “booming” U.S. economy in early December, widely understood as an attempt to reverse what polls indicate to be the public’s largely negative views on the matter.

There are, of course, obvious reasons the majority of Americans dissent from the White House’s rosy presentation of the economy: Most American households are not, in fact, seeing their economic fortunes improve. GDP is up, but virtually all the growth has gone into corporate profits and the incomes of the highest economic brackets. Wages and incomes for average workers, adjusted for inflation, are down in recent years; the median income for non-elderly households is down 4.8 percent since 2000 (Economic Policy Institute, 8/31/05). The poverty rate is rising, as is the number of people in debt.

But rather than confront these realities, and explore the implications of the White House’s efforts to deny them, most mainstream media instead assisted the Bush team’s PR by themselves feigning confusion over the gap between the official view and the public mood.

As the New York Times put it (12/6/05), the economy “has improved in the past two years, though polls show that most people think it has gotten worse.” USA Today (12/5/05) had it that “despite positive economic numbers, polls show that many Americans believe the economy remains weak.” And the Los Angeles Times (12/6/05) referred matter-of-factly to economic “good news,” noting Bush’s concern that “voters give him little credit for the improving economy.”

Again and again, the majority of Americans’ understanding of their own economic situation was presented as somehow disconnected from reality, ascribed to “pessimism,” ignorance or irrationality. The Wall Street Journal (12/6/05), among others, suggested poll respondents’ negative assessments might be “spillover from concerns about the Iraq War,” as if the war rendered people incapable of noting whether or not they can pay their bills.

Conservative pundit George Will (ABC’s This Week, 12/4/05) blamed media coverage for the public’s failure to understand that “the economy is booming,” attributing this misapprehension to “Will’s two laws of economic journalism,” which mandate that “there’s no such thing as good news.” On Fox (Special Report, 12/2/05), Charles Krauthammer likewise cited the press, which “emphasizes the negative,” for the fact that the public didn’t appreciate the “incredible resilience of this economy,” which he called “a tribute to the tax cuts which kept our economy strong.”

Even the inclusion of significant countervailing data, like sluggish wage growth or escalating healthcare costs—data that demonstrate that Bush’s vision of an economic horizon “as bright as it’s been in a long time” (UPI, 12/2/05) is simply not the reality for most people—was insufficient to shift the story from one of essentially “good news.” The most outlets could manage was to say that such factors suggest “that recent gains in the economy do not apply across the board” (L.A. Times, 12/6/05), that many workers are not “fully participating in the economy’s gains” (Wall Street Journal, 12/6/05), or that “many economic benefits are not making their way to ordinary workers” (Washington Post, 12/6/05). But why these ordinary workers, representing the majority of households, should not be considered the arbiters of whether or not “the economy” is good is never explained.

There were a couple of high-profile exceptions to this upside-down framing, in which the existence of an “upswing” was taken as a given and journalists sought only to account for the public’s failure to “get” it, or to sufficiently credit the White House. Former Labor Secretary Robert Reich (ABC’s This Week, 12/4/05) pointed out that the much-cited report of 215,000 new jobs created in November, which Bush held a Rose Garden ceremony to crow about, was “nothing to celebrate,” noting that it was less than the average per month growth in the Clinton administration, and that 150,000 new jobs are required just to keep up with population growth. Reich urged consideration of job instability along with health care and energy costs.

The New York Times’ Paul Krugman was likewise direct. “Americans don’t feel good about the economy because it hasn’t been good for them,” he wrote (12/5/05). While “GDP growth has been reasonably good, and corporate profits have soared” in recent years, Krugman explained, “most families actually lost economic ground,” with real median household income falling for the fifth year in a row.

But in their hardly radical suggestion that discussion of the economy ought to reflect the concerns of average salaried workers at least as much as those of the investor class, the likes of Krugman and Reich are not just a tiny minority in media opinion forums; they are effectively shouted down by a daily litany of stories that privilege the views of economic elites—with the most significant biases often lurking in the unspoken premises and parameters of supposedly neutral, “straight” reporting.

Media’s tendency to tacitly promote the official storyline came through in the decision by a number of outlets (ABC’s Good Morning America, NBC’s Today, CBS’s Early Show, CNN’s American Morning, 12/5/05) to “cover” Bush’s economic stumping with solo interviews of White House counsel Dan Bartlett; and in the ubiquitous tactic of bracketing straightforward information that might undermine the White House view as the detractions of “Democrats.”

Thus for the L.A. Times (12/6/05) it was only “Democrats” who were “not persuaded by Bush’s upbeat rhetoric, arguing that his policies, especially the across-the-board tax cuts, have disproportionately benefited the wealthiest segments of society.” Having devoted the first 15 of 17 paragraphs to unchallenged stenography of Bush and his advisers, AP’s account (12/5/05) offered a comment from Senate Minority Leader Harry Reid, prefaced with the line, “Democrats were quick to criticize the president’s speech.”

Ingenuous reporting of Bush rhetoric was pervasive, as with his exhortation of corporate America to “keep your promises” to workers. That phrase made headlines, but reporters merely wrote it down, rather than take the somewhat obvious step of researching Bush’s record on the issue. As David Sirota noted (Huffington Post, 12/6/05), a quick Google search would’ve shown Bush’s “major concrete action” in this arena to be his push to legalize controversial “cash balance pensions” schemes, though government auditors have said these reduce the pensions promised to longtime workers (New York Times, 3/9/03).

Finally, there is the gaggle of unabashedly pro-business shows like CNBC’s Kudlow and Company, where Treasury Secretary John Snow was invited (12/5/05) to exult, “There’s just so much good news,” and to explain that that’s due to Bush and “his leadership in lower taxes that created the condition under which this economy could take off.” Kudlow also gave Snow a chance to respond to Paul Krugman (described by the host as a “Princeton economist and so forth and so on”) with a supply-side primer about how “high returns to capital” lead directly to “better wages and better compensation.”

Nowhere in mainstream media do such shows have an opposite number, in which progressive economists regularly lay out their worldview at length and in hospitable company. Or even a show where labor, poverty or consumer rights organizations get to respond directly to the selective numbers and analysis put forward by the administration.

Such a program couldn’t balance the slant of a press corps that headlines economic “good news” when most families fall behind; but it would be a start.

Another Grim Jobs Report
How Safe is Your Job?
By PAUL CRAIG ROBERTS
counterpunch.com
April 18 , 2006

Is your job safe? Not if it can be done abroad. The only safe jobs are in domestic services that require a “hands-on” presence, such as barbers, hospital orderlies, and waitresses.
For a number of years the Bureau of Labor Statistics’ monthly payroll jobs reports have been sending US policymakers dire warnings, only to be ignored. The March report repeats the message. Ninety-five percent of the new jobs created are in domestic services. The US economy no longer creates jobs in export or export-competitive sectors.

Wholesale and retail trade, waitresses and bartenders account for 46% of the new jobs. Education and health services, administrative and waste services, and financial activities account for another 46%. (Wholesale and retail trade jobs for March were 40,000. These jobs would be sales clerks ringing up sales on registers, people stocking the aisles at Wal-Mart, Home Depot, etc.

Leisure and hospitality (primarily waitresses and bartenders) accounted for 42,000 March jobs.) In contrast, computer system services accounted for 3,600 jobs.

The biggest item (half) in education and health services is "ambulatory health care services."

This has been the profile of US employment growth for a number of years, along with some construction jobs filled by legal and illegal immigrants. It is the job profile of a third world economy.

From January 2001 to January 2006 the US economy lost 2.9 million manufacturing jobs. The promised replacement jobs--“new economy” high-tech knowledge jobs--have failed to materialize.

High-tech knowledge jobs are also being outsourced abroad. According to the Bureau of Labor Statistics, US employment of engineers and architects declined by 189,940 between November 2000 and November 2004 (latest data available).

Economist Alan Blinder estimates that as many as 56 million American jobs are susceptible to offshore outsourcing. That would be about half of the US work force.

Offshoring has contributed to the explosion of the US trade/current account deficit over the past decade to $800 billion annually and rising. The US has a trade deficit in manufactured products, including advanced technology products, of more than a half trillion dollars annually, a sum far larger than the oil import bill.

To cover the trade deficit, the US has to turn over to foreigners ownership of its accumulated wealth. This worsens the current account deficit as the income streams on the US based assets now accrue to foreigners.

Many economists pretend that the whopping US trade/current account deficit is evidence that the rest of the world has great confidence in America. They pretend that it is foreign investment in the US that causes the trade deficit, whereas the simple fact is that it is the US trade deficit that gives foreigners the dollars with which to purchase our existing assets.

Traditionally, a trade deficit might indicate that a country’s industries were not competitive against imports from abroad, resulting in a decline in the exchange value of the country’s currency. This would make foreign goods more expensive for that country and its goods cheaper for foreigners, thus restoring a balance.

This does not work for the US for three reasons:

(1) The US dollar is the world’s reserve currency. The dollar can be used to settle all international accounts. Therefore, there is a world demand for dollars. This demand absorbs what would be an excess supply for any other country running such large deficits.

(2) China pegs its currency to the dollar, thus preventing an adjustment in the price of the two countries goods and services. Other countries, such as Japan, intervene in currency markets by purchasing dollars in order to support the dollar and prevent its currency from rising in dollar value.

(3) Offshoring turns US production into imports. Much of the US trade deficit results from offshoring, not from traditional trade competition. The collapse of world socialism and the advent of the high speed Internet made cheap foreign labor available to US companies. US firms use foreign labor to produce offshore the goods and services that they market to Americans. For example, more than half of the large US trade deficit with China is comprised of goods and services produced by US companies in China for American markets.

How can the US reduce its trade deficit when it deprives itself of exports and fills itself with imports by offshoring its production of goods and services, and when the devaluation of the dollar is limited by the dollar’s reserve role and by other countries pegging their currency to the dollar or by intervening to support the dollar? Obviously, when balance returns to US trade, it will not come through traditional means.

One way balance can return is by the US oversupplying the world with dollars to the point at which the dollar is abandoned as the reserve currency.

Another way is through the limit placed on Americans’ ability to consume that results from replacing manufacturing and engineering jobs with waitress, bartender and hospital orderly jobs. A country that loses high value-added jobs and gains low value-added jobs is in danger of losing its prosperity. Offshoring raises corporate profits in the short-run at the expense of destroying the domestic consumer market in the long-run.

Most economists are confused about offshoring. They mistakenly think offshoring is an example of free trade bringing mutual benefit through the principle of comparative advantage. It is not. Offshoring is an example of companies obtaining absolute advantage by combining high-tech capital with low-cost labor. The gains from absolute advantage are asymmetrical or one-sided. The cheap labor country gains, and the expensive labor country loses.

As Morgan Stanley economist Stephen Roach pointed out on April 7, “average hourly compensation of Chinese manufacturing workers is only 3-4 per cent of levels in the US, 10% of the pay rate of Asia’s newly industrialized economies, and 25 per cent of levels in Mexico and Brazil.” Roach also notes that with a rural population of 745 million (about two and one-half times the total US population) and headcount reductions of more than 60 million workers from state-owned enterprises, China will not experience a labor shortage any time soon.

This means that it will be a long time before Chinese wages rise enough to offset the benefits of offshoring. The same can be said about India. Consequently, a large percentage of US jobs is vulnerable to being moved abroad.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration.

The Flight of the American Dream
by Jerry Landay
mediatransparency.com
April 24, 2006

You can't stuff the real world into a cramped ideology. It took the Radicalized Republicans 30 years to put their master plan into operation, underwritten by millions of dollars of patronage by far-right foundations and large injections of private wealth. It's only taken less than two years for the plan to catch fire and burn.

Narrow ideology is no substitute for ideas coupled to action, for minds coupled to heart. George Bush had neither. He knew what he wanted to do on taxes -- cut them for the privileged; on government -- turn it into a piggy bank for his cronies; on Social Security and Medicare -- "reform" them into submission; on what to do with kids -- test them into cookie-cutter conformists. But he just sat there when Al Qaeda slammed airplanes into the World Trade Center. He just sat there when his buddies in the Congress sent the deficit plunging into the depths. He just sat there when Hurricane Katrina destroyed a major American city. He just sat there while his bureaucrats rubber-stamped the Dubai ports deal. His ideology couldn't serve up the ready answers to those crises. Nor could his neocon ideologues. They sit there while Iraq spins into hemorrhage of lives, squandered money, and lost opportunities.

Columnist Paul Krugman exults prematurely that this is promising to be a Democrat/liberal Springtime, and concludes that "the high-water mark of a conservative tide...is now receding." But the flood wreckage the Democrats will have to deal with is catastrophic, incalculable. It includes a war without end, a foreign policy and our global repute in ruins, America's petroleum economy confronting chaos, religious division that continues to polarize the nation, and the public in a daze of confusion and anger. For Americans must confront another devastating loss: the End of the American Dream.

If they didn't quite know what that oft-invoked myth stood for, they are learning what they are losing when it goes. We assumed The American Dream was our birthright, whatever it meant. We now realize it was founded on endless plenty and a bottomless cup. And we realize now that it is beginning to fade for more and more of us. The components of The Dream were realized in the form of steady jobs, inexpensive home mortgages, cheap credit, gasoline at bargain-basement prices to propel our late-model cars, secure pensions, and flag-waving confidence in imperial America, a global power that could do no wrong. The neocons tipped America into decline. And visions of the American lifestyle are going with it.

The Dream -- powerful, pervasive, energizing, and defining -- has been holy writ for the middle class. But today, ask the 20,000 union workers at bankrupt Delphi who face permanent layoffs to define The American Dream , while thousands of others confront the prospect of having their own pay cut in half. Or, the thousands more union and salaried workers at General Motors and Ford, once the world's auto-and-truck leaders, now in retreat as their home market is dominated by gas-saving foreign cars. Or the retired guys who've just been told by the company they served for decades that they're being stripped of their pension security and health benefits.

Or young homeowners lured by cash-free mortgages to buy homes an hour away by car from their work who are being forced to confront corrosive debt and the threat of foreclosure. Or the home-owning wannabes who find themselves priced out of the housing market altogether. Adding insult to injury, the redistribution of our dwindling wealth under the Bush reign widens the gulf between the wealth aristocracy and the rest of us. The American consumer economy is operating on two tiers. On top is the relative handful of the privileged, awash in cash and securities, filling airplane seats on expensive holidays, still madly building McMansions and second homes. A study by the New York Times tells us the Republicans' gratuitous tax cuts for investment income have significantly lowered the tax burden on the richest Americans, reducing tax burdens on incomes of more than $10 million by an average of about $500,000. Unfazed by any of this, Mr. Bush continues to press Congress to make cuts permanent for the privileged while the national deficit goes through the roof. The rest of us are in a squeeze as interest rates slowly rise, and inflation with it, battling higher prices driven upward by climbing energy costs, ever-costlier medical care and drugs. Home foreclosure rates across the country are beginning to grow. They jumped an average 13 percent per month nationally at the end of 2005, with highs of 61 percent in Texas, 70 percent in Arkansas, 45 percent in New Mexico, 210 percent in W. Virginia, and 36 percent in Indiana and Ohio.

As for America's standing in the world at large, the fog of the endless Iraqi War has cost us friends it took two world wars to win. We discover yet again what we should have learned in Vietnam -- aggressive war is not glorious. American citizens who took pride in our previous triumphs see the reputation of this nation squandered in the world court of public opinion, reduced from a beacon of hope to a saber-rattling thug. We face a formless "war against terror" that Bush failed to deal with and can't be won. The result is the erosion of American power in the ruthless game of nations. Our ebbing might inspires reckless challenges from rogue leaders. Kim Jong-il of North Korea blithely ignores Washington's threats and proceeds to move his country into the nuclear club; Iran's theocrats follow with their nuclear plans ignoring Washington's bluster, and, together with Venezuela's Hugo Chavez, make threats against our petroleum supplies. Globally, competition by Asian industrial powers for shrinking oil reserves makes Americans' free access to interstate highways and air lanes ever more expensive, threatening the assumed right of this high-octane NASCAR nation to cruise free and easy. Spicing the sea of trouble is the encroaching reality of climate change. All this converges into the making of a "perfect storm."

We high-consumption Americans, who haven't been asked to sacrifice much of anything since World War II, aren't used to belt-tightening or living with exponential uncertainties. The ultimate question, though unaddressed by politicians, pundits, sociologists, anthropologists, Democratic politicians, and all the rest of us, is how we will behave when it dawns that we are being forsaken by The American Dream. Will we find a healthy outlet in a constructive search for strong, visionary leaders within the democratic process who will redefine The Dream to fit our reduced circumstances? When dreams and expectations fall apart, some often respond with rage, hopelessness, or fear.

Is that how we will react? How many will flock furiously to follow dangerous demagogues who will preach certitude, offering false comfort in exchange for our freedom? How many will seek solace in radical religious frenzy and make a wrathful judgment on America, giving themselves over to witch hunts to root out "the infidels and the godless?" We have done that sort of thing before. In short, will the great ideas that created this land of the free and the home of the brave survive the departure of the good life that came to define The American Dream, and will we recover from what the Radicalized Republicans have inflicted on us?

Obliterating the Dollar ... and the Middle Class?
Preparing for the Economic Typhoon
By MIKE WHITNEY
counterpunch.org
April 25, 2006

Gold traders love George Bush. They know that his blundering mismanagement of the economy will keep gold soaring well into the future. In the last year alone gold increased nearly $200 an ounce capping off a 5 year run that has taken it from $274 per ounce to $635 at Friday's close.

These are serious numbers and they reflect the uneasiness with the global political situation (Iran, Nigeria) as well as concern about the oceans of debt generated by our Oval Office numbskull.

Is it really possible for one man to single-handedly obliterate the world's most robust economy?

Guess so.

After 6 years of looting the public till, the cupboard is just about bare. Bush has chalked up another $3 trillion of public debt which sounds the death-knell for Social Security, public education, and the social safety net.

Think I'm kidding? Consider what new Fed-master Ben Bernacke said just yesterday, "If the dollar declined sharply, it would not necessarily disrupt markets".

That's right; the Fed is conspiring to reduce its debt payments by driving a wooden stake into the heart of the greenback. In three to six months the dollar will probably be valued at 1.40 to 1.50 per euro. That is, if the bottom doesn't fall out completely. After all, allies and enemies alike are pretty sick of the good old USA, so it wouldn't be out of the question for someone (perhaps, China) to start a sell-off that would end in disaster.

The dollar is now recognized as the empire's Achilles heel and the primary target for any asymmetrical warfare directed at America. If that means regime change at home, count me in. I'll worry about the wheelbarrow-loads of greenbacks for a loaf of bread some other time.

The Group of Seven industrialized nations (G-7) took a few swipes at Washington's profligate spending this weekend; warning that they wanted "more flexibility" in the Asian currencies. This is a clear sign that the path is being paved for a freefalling dollar while the other currencies gain ground.

How do you like the idea that half of your savings will be erased through executive fiat?

Since Bush took office the dollar has plummeted 30% against the euro. The only thing that has kept it from joining the peso is the skyrocketing oil prices which have allowed the Fed to keep the printing presses going at full tilt. That's because oil is denominated exclusively in dollars, so while the price per barrel continued upward, the Fed was able to circulate another $2.5 trillion of funny money. The high cost of oil has kept the dollar reasonably stable even though the twin-deficits have eroded its true value. Maintaining the monopoly on the sale of oil (which forces foreign central banks to hold billions of greenbacks in reserve) is critical to US prosperity. A switch to euros would weaken demand for the dollar and send the American economy into a tailspin.

Unfortunately, other countries are frustrated with the recklessness of the Bush team and are threatening to destabilize the system. First there was the danger of Iran opening an oil bourse that would compete head-on with the dollar; increasing the number of euros stockpiled in the central banks. Now, the Russian Finance Minister, Alexei Kudrin has fired a broadside at his American counterparts saying, "The US dollar is NOT the world's absolute reserve currency". He noted that the unsustainable' US trade deficit is "causing concern" and that "the international community can hardly be satisfied with this instability."

Kudrin's remarks were greeted with the shock one would expect from a dirty bomb on a crowded subway. America's global dominance requires that it maintain the dollar as the world's reserve currency; if that changes then the US will be unable to trade its painted-script for valuable resources. It would also mean that America would have to start paying back its $9 trillion national debt.

Kudrin's comments were interpreted to mean that Russia might ease away from the dollar in its oil transactions; a change that might spread to other countries that are equally skeptical of Uncle Sam's recklessness.

The eroding value of the dollar is just one of the economic crises facing the American people. A 6 month downturn in housing starts signals that the housing bubble, the largest equity bubble in history, is quickly losing steam. With long term interest rates steadily rising (along with energy prices) the shaky loans that were blessed by former Fed-chief, Greenspan, are beginning to unravel. "No down payment", ARMs (Adjustable Rate Mortgages) and easy financing have the over-extended American public teetering towards insolvency. Foreclosures are up, mortgages balances are at unprecedented levels, and inventories are larger than they've been since the early 90s. Last month produced the biggest slowdown in sales in a decade and the real pain hasn't even begun. At least $3 trillion of the $9 trillion equity bubble is built entirely on the cheap money pumped into the system by the Federal Reserve to keep the economy percolating while Bush and Co. stole every last farthing in the US Treasury. Greenspan's low interest rates were nothing more than a carnival-hucksters' scam to shift the vast wealth of America's middle class into the pockets of well-heeled constituents.

Thanks, Alan.

Last year Americans used their homes as a personal ATM; withdrawing over $600 billion to pay off credit card debt and for personal spending. That "presto-equity" is quickly evaporating as home prices flatten out and wages continue to stagnate. Personal debt is currently in the stratosphere and there are some gloomy signs that the American consumer, that great engine of global economic power, is finally tapped out. Consumer spending represents 70% of US GDP (Gross Domestic Product) so, as housing prices retreat and energy prices increase; Americans will face the greatest economic challenge since the Great Depression.

One thing is absolutely certain; Bush will stick by his constituents to the bitter end. It is physically impossible for him to act in the interests of the American people. He won't be deterred by the falling dollar, the deflating housing market, or the skyrocketing energy prices. He'll make his budget-busting tax cuts permanent and plunge the country into a sea of red ink.

Betting that George Bush will do the wrong thing for the nation is not a matter of conjecture; it is a mathematical certainty. He is deliberately destroying the middle class, the prospects for upward mobility, and the currency. The economic underpinnings of American democracy have been demolished in just 6 short years. Smart people will prepare themselves for the typhoon ahead.

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Senate Stalls Debt-Ceiling Decision
By Joel Havemann, Times Staff Writer
Latimes.com
March 15, 2006

WASHINGTON — In his first speech as president to Congress in 2001, George W. Bush challenged lawmakers "to pay down $2 trillion in debt during the next 10 years." But five years later, Congress is now struggling with a bill not to reduce the debt but to increase it — for the fourth time since Bush spoke those words.

If the bill is not passed by the end of the week, the government might have to renege on promised payments to bondholders or beneficiaries of federal programs, including Social Security.

The need to increase the ceiling on government debt is a particular political problem for Republicans. They control the White House and Congress, and a large and vocal segment of the party has long called for debt reduction and fiscal austerity.

Bush lays responsibility for the explosion of debt on his watch on the 2001 recession and the costs of the war on terrorism. Democrats blame Bush's tax cuts.

No matter the reason, the numbers show that the congressionally set limit on the total national debt — $5.95 trillion when Bush addressed Congress in 2001 — has grown by $2.2 trillion since and all but breached the current ceiling of $8.184 trillion. That is more than $28,000 of debt for every man, woman and child in the United States.

The government has remained below the debt limit because of financial maneuvers by Treasury Secretary John W. Snow. But Snow, who postponed a trip to Africa at week's end to deal with the debt issue, said there was nothing more he could do.

The House took action on the debt ceiling last year, approving a $781-billion increase in the government's borrowing authority. But the Senate is delaying until the last minute in hopes that no one will be watching when it acts at the end of a long week of debating and amending its version of the 2007 budget.

"It's embarrassing, and the party in power doesn't want to have to vote on it," said Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan group that lobbies for balanced budgets. "But if they really wanted to avoid embarrassment, they might try running a more responsible fiscal policy.

"My assumption all along has been that the Republicans would wait until the last minute and then dare the Democrats to block them."

By delaying, the Senate will have little choice than to accept the $781-billion increase in the debt ceiling that the House has approved.

When the Senate gets around to voting on the debt increase, probably late Thursday or Friday, the House will probably have adjourned for its weeklong St. Patrick's Day recess.

If the version the Senate approves differs from the House increase, the House would have to act again. But it will not be in session again until March 30 — too late, Snow said, to stave off financial chaos.

"The 'full faith and credit' of the United States is a unique and precious asset," Snow told a bankers' trade association Tuesday. "It would be unthinkable for [Congress] not to take action."

Snow has used a variety of strategies since mid-February to stave off default on federal obligations. To reduce the government's obligations to bondholders, the Treasury has stopped investing civil-service retirement funds in government securities.

No one would be hurt, Snow reassured Congress; when an increased debt ceiling is passed, the Treasury will reimburse the pension funds for lost interest income.

"The effect on the … beneficiaries will be the same as if this temporary action had never taken place," Snow said in a Feb. 16 letter to congressional leaders.

But that strategy was not enough to keep the debt from breaching the legal limit, so Snow resorted to other, even more obscure financial sleights-of-hand. Now, he said, he has no more tricks up his sleeve.

"Members of Congress … should vote to raise the ceiling this week," he said Tuesday.

The budget that the Senate intends to complete before turning to the debt ceiling would add an additional $684 billion to the government's debt in fiscal year 2007, which begins Oct. 1. About $300 billion of the debt would be bought by the Social Security trust fund, which is temporarily running surpluses pending the retirement of the baby boom generation.

In the next two years the debt's rate of increase is expected to decline somewhat. But the budget excludes the full impact of two items that have proved expensive in recent years: the costs of the war on terrorism and the revenue lost to shortening the reach of the alternative minimum tax.

Even without them, the total debt would reach $11.5 trillion at the end of 2011 — about double the $5.8-trillion debt when Bush took office.

Obliterating the Dollar ... and the Middle Class?
Preparing for the Economic Typhoon
By MIKE WHITNEY
counterpunch.org
April 25, 2006

Gold traders love George Bush. They know that his blundering mismanagement of the economy will keep gold soaring well into the future. In the last year alone gold increased nearly $200 an ounce capping off a 5 year run that has taken it from $274 per ounce to $635 at Friday's close.

These are serious numbers and they reflect the uneasiness with the global political situation (Iran, Nigeria) as well as concern about the oceans of debt generated by our Oval Office numbskull.

Is it really possible for one man to single-handedly obliterate the world's most robust economy?

Guess so.

After 6 years of looting the public till, the cupboard is just about bare. Bush has chalked up another $3 trillion of public debt which sounds the death-knell for Social Security, public education, and the social safety net.

Think I'm kidding? Consider what new Fed-master Ben Bernacke said just yesterday, "If the dollar declined sharply, it would not necessarily disrupt markets".

That's right; the Fed is conspiring to reduce its debt payments by driving a wooden stake into the heart of the greenback. In three to six months the dollar will probably be valued at 1.40 to 1.50 per euro. That is, if the bottom doesn't fall out completely. After all, allies and enemies alike are pretty sick of the good old USA, so it wouldn't be out of the question for someone (perhaps, China) to start a sell-off that would end in disaster.

The dollar is now recognized as the empire's Achilles heel and the primary target for any asymmetrical warfare directed at America. If that means regime change at home, count me in. I'll worry about the wheelbarrow-loads of greenbacks for a loaf of bread some other time.

The Group of Seven industrialized nations (G-7) took a few swipes at Washington's profligate spending this weekend; warning that they wanted "more flexibility" in the Asian currencies. This is a clear sign that the path is being paved for a freefalling dollar while the other currencies gain ground.

How do you like the idea that half of your savings will be erased through executive fiat?

Since Bush took office the dollar has plummeted 30% against the euro. The only thing that has kept it from joining the peso is the skyrocketing oil prices which have allowed the Fed to keep the printing presses going at full tilt. That's because oil is denominated exclusively in dollars, so while the price per barrel continued upward, the Fed was able to circulate another $2.5 trillion of funny money. The high cost of oil has kept the dollar reasonably stable even though the twin-deficits have eroded its true value. Maintaining the monopoly on the sale of oil (which forces foreign central banks to hold billions of greenbacks in reserve) is critical to US prosperity. A switch to euros would weaken demand for the dollar and send the American economy into a tailspin.

Unfortunately, other countries are frustrated with the recklessness of the Bush team and are threatening to destabilize the system. First there was the danger of Iran opening an oil bourse that would compete head-on with the dollar; increasing the number of euros stockpiled in the central banks. Now, the Russian Finance Minister, Alexei Kudrin has fired a broadside at his American counterparts saying, "The US dollar is NOT the world's absolute reserve currency". He noted that the unsustainable' US trade deficit is "causing concern" and that "the international community can hardly be satisfied with this instability."

Kudrin's remarks were greeted with the shock one would expect from a dirty bomb on a crowded subway. America's global dominance requires that it maintain the dollar as the world's reserve currency; if that changes then the US will be unable to trade its painted-script for valuable resources. It would also mean that America would have to start paying back its $9 trillion national debt.

Kudrin's comments were interpreted to mean that Russia might ease away from the dollar in its oil transactions; a change that might spread to other countries that are equally skeptical of Uncle Sam's recklessness.

The eroding value of the dollar is just one of the economic crises facing the American people. A 6 month downturn in housing starts signals that the housing bubble, the largest equity bubble in history, is quickly losing steam. With long term interest rates steadily rising (along with energy prices) the shaky loans that were blessed by former Fed-chief, Greenspan, are beginning to unravel. "No down payment", ARMs (Adjustable Rate Mortgages) and easy financing have the over-extended American public teetering towards insolvency. Foreclosures are up, mortgages balances are at unprecedented levels, and inventories are larger than they've been since the early 90s. Last month produced the biggest slowdown in sales in a decade and the real pain hasn't even begun. At least $3 trillion of the $9 trillion equity bubble is built entirely on the cheap money pumped into the system by the Federal Reserve to keep the economy percolating while Bush and Co. stole every last farthing in the US Treasury. Greenspan's low interest rates were nothing more than a carnival-hucksters' scam to shift the vast wealth of America's middle class into the pockets of well-heeled constituents.

Thanks, Alan.

Last year Americans used their homes as a personal ATM; withdrawing over $600 billion to pay off credit card debt and for personal spending. That "presto-equity" is quickly evaporating as home prices flatten out and wages continue to stagnate. Personal debt is currently in the stratosphere and there are some gloomy signs that the American consumer, that great engine of global economic power, is finally tapped out. Consumer spending represents 70% of US GDP (Gross Domestic Product) so, as housing prices retreat and energy prices increase; Americans will face the greatest economic challenge since the Great Depression.

One thing is absolutely certain; Bush will stick by his constituents to the bitter end. It is physically impossible for him to act in the interests of the American people. He won't be deterred by the falling dollar, the deflating housing market, or the skyrocketing energy prices. He'll make his budget-busting tax cuts permanent and plunge the country into a sea of red ink.

Betting that George Bush will do the wrong thing for the nation is not a matter of conjecture; it is a mathematical certainty. He is deliberately destroying the middle class, the prospects for upward mobility, and the currency. The economic underpinnings of American democracy have been demolished in just 6 short years. Smart people will prepare themselves for the typhoon ahead.

Mike Whitney lives in Washington state. He can be reached at: fergiewhitney@msn.com

Gas prices around the world
money.cnn.com

In a few Latin America and Middle-East nations, such as Venezuela and Saudi Arabia, oil is produced by a government-owned company and local gasoline prices are kept low as a benefit to the nation's citizens, he said. All prices updated March, 2005.

Nation City Price in USD Regular/Gallon
Netherlands Amsterdam $6.48
Norway Oslo $6.27
Italy Milan $5.96
Denmark Copenhagen $5.93
Belgium Brussels $5.91
Sweden Stockholm $5.80
United Kingdom London $5.79
Germany Frankfurt $5.57
France Paris $5.54
Portugal Lisbon $5.35
Hungary Budapest $4.94
Luxembourg $4.82
Croatia Zagreb $4.81
Ireland Dublin $4.78
Switzerland Geneva $4.74
Spain Madrid $4.55
Japan Tokyo $4.24
Czech Republic Prague $4.19
Romania Bucharest $4.09
Andorra $4.08
Estonia Tallinn $3.62
Bulgaria Sofia $3.52
Brazil Brasilia $3.12
Cuba Havana $3.03
Taiwan Taipei $2.84
Lebanon Beirut $2.63
South Africa Johannesburg $2.62
Nicaragua Managua $2.61
Panama Panama City $2.19
Russia Moscow $2.10
Puerto Rico San Juan $1.74
Saudi Arabia Riyadh $0.91
Kuwait Kuwait City $0.78
Egypt Cairo $0.65
Nigeria Lagos $0.38
Venezuela Caracas $0.12

Home foreclosures increase 72%
Chicagotribune.com
Monday, May 01 2006 @ 02:34 PM PDT

IRVINE, Calif. -- Mortgages entering foreclosure jumped 72 percent during the first quarter from a year earlier, as higher interest rates increased monthly payments and strained the budgets of homeowners with adjustable-rate loans.

Home foreclosures increase 72%

Bloomberg News
Published April 25, 2006

IRVINE, Calif. -- Mortgages entering foreclosure jumped 72 percent during the first quarter from a year earlier, as higher interest rates increased monthly payments and strained the budgets of homeowners with adjustable-rate loans.

Lenders began foreclosing on 323,102 mortgages, a ratio of one in 358 U.S. households, according to a report issued Monday by RealtyTrac Inc. Banks typically start foreclosing on mortgages after payments are 90 days late.

"When you couple the higher bills that people with adjustable loans saw with the higher-than-expected energy costs, you see a lot of homeowners stretched beyond the point where they could make their payments," said Rick Sharga, a RealtyTrac vice president.

Homeowners who would otherwise sell their houses to pay off their loans face a weaker market, he said.

Sales of existing homes fell to 6.71 million at an annualized rate in the first quarter from 6.94 million in the last three months of 2005, according to Fannie Mae, the nation's largest mortgage buyer.

'Good economy' remains an illusion
By Ernest F. Hollings
Charleston.net

With the Iraq debacle, the Washington establishment campaigns for the elections in November on: "The economy is good, the economy is good." As in the old movies, let's have a "preview of coming attractions."

First, Washington hasn't paid a bill in five years. Inheriting a budget "with surpluses as far as the eye can see," the president and Congress have been spending. In five years they have added $2.5 trillion to the national debt. Beginning in 1789, we paid for all the costs of wars and government before this nation reached a trillion dollar debt in 1982. The $300 billion Iraq war didn't cost $2.5 trillion. The Congressional Budget Office now projects that interest costs on the national debt next year will exceed $1 billion a day ? $399 billion. Spending $1 billion a day for nothing. We have just paid personal income taxes to the government ? amounting last year to $927 billion. This means that with interest rates rising the government will spend almost half of its personal income tax take for nothing. To keep the government going we have to borrow about $2 billion a day.

How have we gotten by with this scandalous conduct? The answer is by China and Japan financing our deficits. Japan now directly holds $673 billion of our Treasuries and China $265 billion. China could stop financing our deficits and we would be in trouble.

To observe a good economy, everyone cites that the GDP (Gross Domestic Product) grew last year by 3.6 percent and today's unemployment is low at 4.7 percent. No influence in finance is more corrosive or less recognized than the systematic distortion of U.S. economic reality by government agencies. The government's greatest deception is quoting a deficit less than it is. For example, rather than subtracting spending from revenues, the government credits Social Security surpluses to Social Security and then spends the surplus, reporting a less than actual deficit. I authored the law forbidding the president and Congress from citing a deficit figure that includes Social Security money.

Ignoring the law, President Bush states on page 4 of the U.S. Government Budget for FY 2007: "We now project that the 2006 deficit will come in at 3.2 percent of GDP, or $423 billion ?"

But turn to page 334 of the same budget where it shows the gross federal debt from FY 2005 to FY 2006 increasing $706 billion ? a deficit of $706 billion instead of $423 billion.

The same monkeyshines are employed by the government in reporting the GDP, the CPI (Consumer Price Index), and unemployment. After World War II, the government measured GDP with consumption as 70 percent of the measure. At the time, all we consumed we produced. But today, half of the goods that we consume are produced abroad, and the reported GDP is flawed. For example, the official government GDP figure for the fourth quarter of last year is 1.7 percent. But according to John Williams, a respected conservative Republican economist, the figure "should be close to 2 percent contraction." Alan Greenspan and the Boskin Commission appointed by Congress jimmied the CPI to lessen Social Security payments. Rather than about 3.4 percent, Williams reports that "real CPI right now is running at about 8 percent."

The Clinton administration jimmied employment figures by reducing the number of people surveyed in the inner cities. Now with proper labor force growth, Charles McMillion, a noted Washington economist, reports an unemployment rate at 7.6 percent instead of 4.7 percent.

In the last five years we have lost 2.9 million manufacturing jobs. To keep us going, the government has cut taxes and goosed the economy with $2.5 trillion in "hot" checks to create jobs. Paul Craig Roberts, Ronald Reagan's economist, states: "No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy."

With 17 percent of our manufacturing work force lost, economic support of the government diminishes.

When the economy is good, that's the time to start paying down the debt. But Congress doesn't really believe the economy is good. It is set to cut taxes to make sure the economy gets it by the election.

Ernest F. Hollings served as a U.S. senator from South Carolina from 1966-2004.

Life in the Bush Economy: Fat, Drunk and Broke
A Nation of Waitresses and Bartenders
By PAUL CRAIG ROBERTS
counterpunch.com

The Bureau of Labor Statistics payroll jobs report released May 5 says the economy created 131,000 private sector jobs in April. Construction added 10,000 jobs, natural resources, mining and logging added 8,000 jobs, and manufacturing added 19,000. Despite this unusual gain, the economy has 10,000 fewer manufacturing jobs than a year ago.

Most of the April job gain --72%--is in domestic services, with education and health services (primarily health care and social assistance) and waitresses and bartenders accounting for 55,000 jobs or 42% of the total job gain. Financial activities added 26,000 jobs and professional and business services added 28,000. Retail trade lost 36,000 jobs.

During 2001 and 2002 the US economy lost 2,298,000 jobs. These lost jobs were not regained until early in February 2005. From February 2005 through April 2006, the economy has gained 2,584 jobs (mainly in domestic services).

The total job gain for the 64 month period from January 2001 through April 2006 is 7,000,000 jobs less than the 9,600,000 jobs necessary to stay even with population growth during that period. The unemployment rate is low because millions of discouraged workers have dropped out of the work force and are not counted as unemployed.

In 2005 the US had a current account deficit in excess of $800 billion. That means Americans consumed $800 billion more goods and services than they produced. A significant percentage of this figure is offshore production by US companies for American markets.

The US current account deficit as a percent of Gross Domestic Product is unprecedented. As more jobs and manufacturing are moved offshore, Americans become more dependent on foreign made goods. This year the deficit could reach $1 trillion.

The US pays its current account deficit by giving up ownership of its existing assets or wealth. Foreigners don't simply hold the $800 billion in cash. They use it to acquire US equities, real estate, bonds, and entire companies.

The federal budget is also in the red to the tune of about $400 billion. As Americans have ceased to save, the federal government is dependent on foreigners to lend it the money to operate and to wage war in the Middle East.

American consumers are heavily indebted. The growth of consumer debt is what has been fueling the economy. Social Security and Medicare are in financial trouble, as are many company pension plans. Decide for yourself--is this the economic picture of a superpower that can dictate to the world, or is it the picture of a second-rate country dependent on foreigners to finance its consumption and the operation of its government?

No-think economists make rhetorical arguments that the decline of US manufacturing employment reflects higher productivity from technological improvements and not a decline in US manufacturing per se. George Mason University economist Walter Williams recently ridiculed the claim that US manufacturing jobs are moving to China. Williams asks how the US could be losing manufacturing jobs to China when the Chinese are losing jobs faster than the US: "Since, 2000, China has lost 4.5 million manufacturing jobs, compared with the loss of 3.1 million in the U.S."

The 4.5 million figure comes from a Conference Board report that is misleading. The report that counts was written by Judith Banister under contract to the U.S. Department of Labor, Bureau of Labor Statistics, and published in November 2005 (www.bls.gov/fls/chinareport.pdf). Banister's report was peer reviewed both within the BLS and externally by persons with expert knowledge of China.

Chinese manufacturing employment has been growing strongly since the 1980s except for a short period in the late 1990s when layoffs resulted from the restructuring and privatization of inefficient state owned and collective owned factories. To equate temporary layoffs from a massive restructuring within manufacturing with US long-term manufacturing job loss indicates extreme carelessness or incompetence.

Banister concludes: "In recent decades, China has become a manufacturing powerhouse. The country's official data showed 83 million manufacturing employees in 2002, but that figure is likely to be understated; the actual number was probably closer to 109 million. By contrast, in 2002, the Group of Seven (G7) major industrialized countries had a total of 53 million manufacturing workers."

The G7 is the US and Europe. In contrast to China's 109,000,000 manufacturing workers, the US has 14,000,000.

When I was Assistant Secretary of the Treasury in the Reagan administration, the US did not have a trade deficit in manufactured goods. Today the US has a $500 billion annual deficit in manufactured goods. If the US is doing as well in manufacturing as no-think economists claim, where did an annual trade deficit in manufactured goods of one-half trillion dollars come from?

If the US is the high-tech leader of the world, why does the US have a trade deficit in advanced technology products with China?

There was a time when American economists were empirical and paid attention to facts. Today American economists are merely the handmaidens of offshore producers. Apparently, they follow President Bush's lead and do not read newspapers--thus, their ignorance of countless stories of US manufacturers moving entire plants and many thousands of US engineering jobs to China.

Chinese firms, including state owned firms, have numerous reasons, tax and otherwise, to understate their employment. Banister's report gives the details.

Banister points out that the excess supply of labor in China is about five to six times the size of the total US work force. As a result, there is no shortage of workers in China, nor will there be in the foreseeable future.

The huge excess supply of labor means extremely low Chinese wages. The average Chinese wage is $0.57 per hour, a mere 3% of the average US manufacturing worker's wage. With first world technology, capital, and business knowhow crowding into China, virtually free Chinese labor is as productive as US labor. This should make it obvious to anyone who claims to be an economist that offshore production of goods and services is an example of capital seeking absolute advantage in lowest factor cost, not a case of free trade based on comparative advantage.

American economists have failed their country as badly as have the Republican and Democratic parties. The sad fact is that there is no leader in sight capable of reversing the rapid decline of the United States of America.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review.

College Graduates Face Weakest Job Market in Two Decades
College seniors graduating this Spring face a double whammy of high college loan debts and the slowest job market in two decades.
by James Parks

The labor market for young college graduates, ages 25 to 35, is slowly improving but remains much weaker than before the last recession in 2001. It has been 20 years since young college graduates have experienced employment rates as low as those of the past five years, according to the Economic Policy Institute.

At the same time, the College Board reports the average college graduate leaves school with $15,000 to $25,000 in student loan debt. Credit card debt and going to graduate school can add significantly to that debt load.

Graduates who earn at least a bachelor’s degree, and in some cases an advanced degree, would be expected to fare better than those without college degrees because demand for their skills should insulate them from labor market fluctuations, EPI economist Elise Gould says. But real hourly wages of young college graduates have picked up only slightly over the past year after declines for three years in a row. Their hourly wages in 2005 averaged $23.10, up from $23.03 in 2004 but still below the 2001 level of $23.77.

The failure of wages to recover is part of the slow employment growth in the recovery from the recession, which ended in 2001, Gould says. Compared with the last “jobless recovery” of the early 1990s, employment rates of young college graduates have fallen farther and failed to bounce back.

Unless employment rates climb steadily, picking up the slack in the labor market, these young workers will lack the power to bid up their wages very much, Gould says.

Sun Microsystems to cut up to 5,000 jobs this year
Silicon Valley/San Jose Business Journal
June 1, 2006

Sun Microsystems Inc. said Wednesday it will cut 11 to 13 percent of its work force -- some 4,000 to 5,000 jobs -- over the next six months.

Sun's (NASDAQ:SUNW) restructuring plan also calls for selling its leased facilities in Sunnyvale along with its Newark campus, which was reported earlier. The company will continue operation of its two major Bay Area campuses, Menlo Park and Santa Clara...

Report shows slowing job growth
June 2, 2006
epi.org

For the second month in a row, the nation's employers added fewer workers than expected, according to today's report from the Bureau of Labor Statistics (BLS). Payrolls were up 75,000 in May, while analysts expected gains of around 175,000. As the figure below shows, employment growth has slowed consistently since February.

Ignoring months affected by the Gulf Coast hurricanes, May's gain is the smallest since July of 2004. Prior to the recent deceleration, payrolls were on a trend of about 200,000 jobs per month. Thus far this year, the average monthly addition is just below 150,000, generally considered an adequate level of job growth in that it is strong enough to prevent the unemployment rate from rising (unemployment ticked down insignificantly in May, from 4.7% to 4.6%).

However, the clear deceleration in job growth, in tandem with other weak indicators in today's report (both average weekly hours and total hours over the whole economy fell in May), point towards a possible downward shift in net job creation.

As noted, unemployment ticked down in May to 4.6%, the lowest rate since July of 2001. Though statistically indistinguishable from last month's rate, the jobless rate fell due in part to much stronger job growth recorded by the BLS's household survey, from which unemployment is derived. But the monthly employment changes from the household survey are based on a much smaller sample than the payroll survey, are far more volatile, and are widely considered less reliable indicators of monthly growth.

The main industries to shed jobs on net last month were manufacturing, retail trade, and information. Factory employment was down 14,000, reversing most of April's addition of 19,000 jobs. Over the year, manufacturing employment is unchanged, which is actually an improvement over the long-term slide in the sector beginning in the late 1990s.

Retail trade, down 27,000 last month, continues to be a somewhat surprisingly weak sector for job growth. Both overall consumption and retail sales have been at least moderately robust of late, yet retail employment is down 71,000 over the past two months. Wholesale trade, conversely, is up 26,000 over the past two months and 49,000 over the year. As we've noted in past reports, these relations may be indicative of a shift in retail point-of-purchase from stores to internet sources.

Health services continued to be a reliable growth sector, adding 19,000 jobs last month. Since the payroll employment trough of August 2003, education and health services together account for 21% of job growth, although they were 13% of total employment at that time.

Construction employment, another major contributor to job growth over the recovery, was flat last month, and appears to be slowing somewhat as the housing market shows some signs of cooling (employment in residential construction has been flat this year). At an annualized rate, job growth in overall construction this year is running 25% below last year's rate.

Though the unemployment rate was essentially unchanged last month, long-term unemployment ticked up slightly and remains uncharacteristically high. In May, 18.8% of the unemployed had been jobless for at least half a year, suggesting a higher share of persons is stuck in unemployment than might be expected given the low and declining jobless rate. Since January of last year, unemployment is down 0.6 percentage points, while the long-term jobless share is down 2.2 points. Over an identical period in the last recovery, the decline in unemployment was similar, but the fall in the long-term share was twice that of this recovery (-4.4 points). The implication is that it will take more robust job creation to ameliorate this serious problem of extended joblessness.

Average hourly wages were up only $0.01 last month, contributing, along with the slowdown in average weekly hours, to a loss of $1.32 in weekly earnings. Last month, however, hourly wages were up strongly, by $0.10, or 0.6%, and averaging over the two months, the monthly change of 0.3% is in line with recent growth rates of wages.

A more salient concern is the decline in both weekly hours—down 0.1 of an hour—and aggregate (economy-wide) hours—down 0.2%. On a three-month annualized basis, aggregate hours, which tend to correlate with the overall growth of the economy, are up by a weak rate of 1.5%. Both of these measures, along with the slowing of job growth, suggest weakening labor demand.

Turning points are always hard to pick out of monthly reports, but the slower monthly job growth shown in the figure has persisted now for the past few months. The economy is now facing headwinds that were not evident in prior months, including higher interest rates, less stimulus from the housing sector, and higher energy prices.

Putting these facts together, policy makers need to be mindful of a weakened job market and the negative impact this could have on working families, many of whom are already feeling the squeeze of higher gas prices and weak real wage trends. From the perspective of the Federal Reserve, this would suggest holding interest rates stead