It’s the dog days of summer. Yep, in the summer, Sirius – that’s the “dog star” – rises and sets with the sun. The loopy astrology lady down on the corner will tell you that, in late July, Sirius is in conjunction with the sun, which may or may not mean something really startling. You have to pay her to find out. But folks used to believe something much simpler, that this one star’s heat added to the heat of the sun, creating a stretch of hot and just nasty, uncomfortable weather. That was the problem. That star had to be the problem. Yes, it was nonsense, but it stuck. This particular period of time, from twenty days before the conjunction to twenty days after, became the “dog days” – named after that damned Dog Star. Everyone is hot, miserable and unhappy. People are at each other’s throats, if they have the energy for it. But they don’t. Mostly you want to sit quietly in whatever shade you can find, and wait. It’s a bad time.
Want proof? Try Friday, August 5 – the day after the big market crash – the biggest one-day crash since the massive crash of late 2008 and previously explored in excruciating detail – the July employment figures were released. Hey – unemployment fell from 9.2 percent to 9.1 percent. That was no big deal. That’s not much of a change at all – the figure is still too damned high. But the economy added 117,000 jobs – far better than expected. But that is not even enough to keep up with population growth. That’s still negative progress, a slow edging up toward actual job growth, which we may never reach at this rate. The number of new jobs added in the private sector was much higher of course, but you had to subtract the tens of thousands of jobs lost in the public sector – teachers and cops and firefighters laid off as states and cities had to shed jobs as their economies continue their massive collapse. Still the net number of new jobs wasn’t all that bad, and the Tea Party crowd and its Republican handlers could rejoice that all those additional public sector employees had now lost their jobs and now might lose everything they own. That means the government is shrinking. These continual massive layoffs of public sector employees are a wonderful thing, depending on your perspective. If you’re a public school teacher you might feel differently.
And how did the market react? The Dow opened up 171 points, and within an hour had dropped below the line, 170 or so points, and then jumped above the line more than a hundred points, and the below the line more than a hundred points, then up again, then down, finishing up sixty points. The day’s trading range was over four hundred points – not a day for the faint of heart. No one knew what to make of anything, but to be fair, in the middle of this Europe was approaching disaster, and Italy was nearing full default, then it wasn’t, then it was. See this market recap – the flaky Italians screwed up our semi-good news days.
The Republicans were all over this, of course. Ignoring the Italians – save in the matter of fast cars and opera always a good idea – House Majority Leader Eric Cantor argued now it was time for some fundamental change – stop paying folks unemployment benefits, cut off their food stamps and all aid of any kind, and they’ll be forced to find work – and we’ll be back at full employment in a week or two. It’s simple really. It’s a matter of incentives. There’s no point in spoiling these people, even if they have paid into unemployment insurance. If they have to find work, what choice do they have? They’ll find work.
That is pretty standard conservative fare, and the standard fare from the other side came earlier from Paul Krugman:
When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming – again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work – but they can’t take jobs that aren’t there.
Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly – while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.
These two will never agree. And curiously, John Boehner was outraged by the new job numbers – calling the relatively good news “disappointing news” and adding that this unexpected jump in job creation was “a harsh reminder that families and small businesses continue to ask ‘where are the jobs?'”
What? But later Boehner added this:
Today’s unemployment report is more proof that all of the Washington spending, taxing, and regulating is devastating our economy. While the American people are asking “where are the jobs?” the Democrats running Washington are determined to punish small businesses with higher taxes and more red tape….
He was adamant, and Steve Benen comments:
Does the Speaker actually expect anyone to take this seriously? Or did his press flacks, who assume the public will fall for anything, write this yesterday?
The new jobs report shows the private sector continuing to grow, but the public sector continues to shed tens of thousands of jobs every month. “Washington spending … is devastating our economy”? Government spending cuts have led to massive layoffs, serving as an anti-stimulus dragging down the larger economy. How in the world could a sane person believe more spending is undermining the economy when we’re spending less and losing jobs as a consequence?
Here are a few questions some enterprising reporter might want to ask the House Speaker at his next press availability: “You said Washington spending is ‘devastating our economy.’ What does that even mean? And where is this Washington spending you keep referencing? And if spending cuts had led to fewer jobs, by what reasoning would more spending cuts lead to more jobs?”
But Boehner has his story and he’s sticking to it. It’s the Republican line. None of this would have happened if we had really and truly ended government itself in this part of the world. That’s their story and they’re sticking to it. Nothing will change that. They will run on that. How many people believe them? Enough do, perhaps. And they have Fox News and talk radio to spread the word.
But then there was Bush’s former speechwriter, the very conservative David Frum, with this odd observation:
Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?
Ah well. Frum was driven out of the conservative American Enterprise Institute (AEI) and is now considered, by those in the right, a useless crank. And these are the dog days of summer.
And then, on that hot and miserable first Friday in August there was this:
Standard & Poor’s removed the United States government from its list of risk-free borrowers for the first time on Friday night, a downgrade that is freighted with symbolic significance but carries few clear financial implications.
The company, one of three major agencies that offer advice to investors in debt securities, said it was cutting its rating of long-term federal debt to AA+, one notch below the top grade of AAA. It described the decision as a judgment about the nation’s leaders, writing that “the gulf between the political parties” had reduced its confidence in the government’s ability to manage its finances.
“The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenge,” the company said in a statement.
That’s the first time this has ever happened, and this item mentions that the administration reacted with indignation – these guys had made a significant mathematical mistake, overstating the federal debt by about two trillion dollars. And Standard & Poor’s say well, yes, it seems we have – sorry about that. But they’re not changing their minds – “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics.” They were siding with the Republicans. This was a political decision, to force Obama out of office in 2012, so Michele Bachmann or Sarah Palin could set things right. Or it wasn’t – it was a statement that the Republicans, by forcing the debt-limit issue and being assholes about it, had proved that the Republican Party had made the American government a sad joke – it was a statement about foolish political gridlock. Take your pick. That argument will continue for the next decade, and the markets will be sure to drop a thousand points or more on Monday morning, as the downgrade was announced Friday evening, long after the markets closed.
Or they won’t. No one is sure what comes next:
The downgrade could lead investors to demand higher interest rates from the federal government and other borrowers, raising costs for governments, businesses and home buyers. But many analysts say the impact could be modest, in part because the other ratings agencies, Moody’s and Fitch, have decided not to downgrade the government at this time. … A spokesman for the Federal Reserve said the decision would not affect the ability of banks to borrow money by pledging government debt as collateral, a statement that could set the tone for the reaction of the broader market. …
However, because Treasury bonds have always been considered perfectly safe, many rules prohibiting institutions from investing in riskier securities are written as if there were no possibility that the credit rating of Treasuries would be less than stellar.
Banking regulations, for example, accord Treasuries a special status that is not contingent on their rating. The Fed affirmed that status in guidance issued to banks on Friday night. Some investment funds, too, often treat Treasuries as a separate asset category, so that there is no need to sell Treasuries simply because they are no longer rated AAA. In addition, downgrade of long-term Treasury bonds does not affect the short-term federal debt widely held by money market mutual funds.
In other words, almost no one would be precluded from investing in federal debt, and even the ratings agencies have concluded that few investors would walk away voluntarily.
So that was that. There’s more to argue about.
And these guys, these rating agencies, were the ones who rated all the obviously worthless mortgage-backed securities as super-safe AAA investments. Ah well. They were paid to do that. But the federal government makes about two hundred fifty billion dollars in interest payments a year, so if this forces even a small increase in the rates demanded by investors that could add tens of billions of dollars to those payments. And of course Standard and Poor’s may now move to downgrade other entities backed by the government, like Fannie Mae and Freddie Mac, the government-controlled mortgage companies, raising rates on home mortgage loans for borrowers. And on it goes. Obama ruined our credit rating and our economy. The Republicans ruined our credit rating and our economy. Mostly you want to sit quietly in whatever shade you can find, and wait. It’s a bad time.
But Salon’s Joan Walsh has a few things to say about all this:
We’re supposed to be relieved that the jobs picture brightened a bit in July. Yes, the private sector created 117,000 jobs, and that’s a good thing. The unemployment rate went down too – but that may be a bad thing. The decline very likely reflects more people giving up on having a job. …
President Obama took to the airwaves to acknowledge that trouble persists, but to reassure Americans “things will get better.” Will Americans believe him? I doubt it. Obama staked his presidency on a debt-ceiling deal that would stave off the disaster of default, and after an epic battle, Democrats compromised almost completely with Tea Party crazies who held the economy hostage. That should have restored confidence that the economy wasn’t going to collapse, right? Instead the Dow plummeted, finishing up slightly higher Friday after a day-long roller-coaster ride. Meanwhile Standard and Poor’s, one of the ratings agencies that looked away from Wall Street’s bad behavior in 2007 and 2008, has downgraded the rating of U.S. debt, in large measure because of the insanity of the debt-ceiling battle.
But if there’s a confidence crisis here, it’s not what you think:
The real confidence crisis doesn’t lie with corporate America. It belongs to the Democrats. They are the party of government, and they should face it, and boldly advocate to use government to solve our problems. Instead, ever since the chaos of the ’60s and ’70s they’ve tried to insist they don’t like government any more than the Republicans do – and no one believes them. Maybe the dishonesty about their core values contributes to Americans’ lack of trust.
But there is no avoiding history:
Democrats have helped Americans live in a dream world where their success is their own: Real Americans don’t get government help. This is a lie. The activities of government, going back to the days when it “purchased” North American land from other European powers and/or cleared it of its original inhabitants, created the conditions for American prosperity. In our own time, the invisible hand of government created the great middle class. The government has made all kinds of things possible through the tax code: the home mortgage deduction, for instance, isn’t in the Constitution, and only two other countries have it. Our supposedly “private” system of healthcare, pensions and 401Ks was likewise created by government, again allowing companies and individuals to avoid paying taxes on those employer “benefits.”
The great middle class of the 1950s and ’60s grew thanks to government. The GI bill helped soldiers go to school and buy homes. Our system of public universities exploded, making college affordable to millions more Americans. On top of the mortgage deduction, the federal government made home-ownership more possible by insuring mortgages and making bankers and real-estate magnates richer. It built roads to the suburbs and extended electricity to rural and exurban areas where people couldn’t have afforded to live. Not coincidentally, many of those programs excluded African-Americans or at least tolerated discrimination, leaving too many black people out of that great American dream.
And there were the sixties, where Walsh says Democrats did the right thing and finished the work the Civil War began:
Lyndon Johnson presided over not just the Civil Rights and Voting Rights Act, but the greatest expansion of government in history with Medicare, extended Social Security and the comparatively minuscule “War on Poverty.” And at the very same time we expanded government, the cities and campuses exploded, and we’re still coping with the trauma. Johnson’s war, not his civil rights stands, produced the most disorder and violence, but in the scariness of the ’60s the two were conflated – and Democrats became the party not only of government, but disorder.
And now it’s Obama’s turn, and he’s forgetting his history:
Obama is not the first Democrat to seem afraid, rather than proud, of his party’s legacy. Even the most successful Democratic president of my lifetime, Bill Clinton, felt he had to declare the era of big government over. He proved Democrats could be responsible: He balanced the budget, he conducted his social policy through the tax codes with a bigger Earned Income Tax Credit as well as a big college tuition tax credit. He even ended welfare as we knew it, trying to sever the tie between his party and the undeserving poor. It didn’t work. Now, in the eyes of some skeptical voters, the Democrats are not only the party of the undeserving poor, but the undeserving rich – the friend of Wall Street and the wealthy.
Obama has tried to run away from these old problems by compromising with Republicans, by being the guy who loaded his stimulus with tax cuts even before Republicans asked for them in January 2009, and who wanted to cut more than House GOP Speaker John Boehner did in this last crisis. The only thing the president hasn’t tried, to solve our nation’s escalating problems, is governing like a Democrat. The president has to lay out a jobs-agenda, and fight for it, even if he loses. The House GOP is forcing votes on all kinds of things that will never pass, from Paul Ryan’s crackpot budget to undoing environmental regulations established under Richard Nixon, to prove their members stand for something. If the president and Democratic leaders are afraid of mounting a full-throated defense of government intervention when the private sector is failing, they shouldn’t be Democrats.
And it’s just nutty now:
Right now I’m watching CNBC’s Jim Cramer, who savaged Obama as a near-socialist when he took office in 2009, screaming for the government to do something to solve the jobs crisis. Will these people ever take responsibility for creating the mess we’re in? Likewise, the notion that Standard and Poor’s, which enabled the banking and real estate disaster, has standing to destroy the economy a second time is absolutely surreal to me. Late Friday the firm admitted a math error at least partly led to its dire take on the economy, but it still went ahead with a downgrade to AA+. Will the president even point to the outrage of the rating agency that looked away from Wall Street wrongdoing now having such power over the economy? I hope so.
Obama and the Democrats should immediately push a jobs agenda – extending unemployment insurance, creating an infrastructure bank, putting the unemployed to work where possible.
And there is her plea:
Wouldn’t it be better to fight and lose than not to fight at all?
But no one wants to do that in the dog days of summer. You really do want to sit quietly in whatever shade you can find, and wait. It’s a bad time.