Monthly Archives: February 2010

Pollin: 18 million jobs would reduce unemployment to 4% by 2012

Umass Econ Professor Robert PollinRobert Pollin, UMass economics professor and founding co-director of  PERI (Political Economy Research Institute), claims that we can reduce the unemployment rate to 4% by 2012, if we can create 18 million jobs.  He says that even though 18 million jobs sounds overwhelming, it’s not unrealistic. In fact, 4% unemployment is similar to the rate we had coming out of the recession in 1975 with President Gerald Ford and in 1977-78 with President Carter.  One way of reaching this goal, claims Pollin, is by “firming up the economy’s floor” and then “building and injecting roughly $700 billion in new private credit into productive job creating investments.”

18 Million Jobs by 2012
by Robert Pollin

February 18, 2010

The job-creation proposals coming from the Obama administration, in the president’s January 27 State of the Union address and elsewhere, generally point in the right direction, with more spending for clean energy, infrastructure and support for small businesses. These proposals follow from Obama’s February 2009 economic recovery program, which injected $787 billion in new spending or tax relief into the economy over two years. However, just as last February’s stimulus program was too small to counteract the evaporation of $16 trillion in household wealth resulting from the financial collapse, the scope of Obama’s current proposals is nowhere near large enough for the situation today.

For example, Obama has proposed $33 billion in new tax credits for small businesses. By contrast, private borrowing by businesses over the previous six months was down by $1.5 trillion relative to 2007, with the largest proportional cutbacks coming from small businesses. What’s more, Obama’s call to freeze discretionary federal spending in nonmilitary areas is dangerously misguided. The fiscal deficits of 2009 and 2010–at between $1.4 trillion and $1.6 trillion, or around 10 percent of GDP–are indeed very large. But the freeze obscures what Obama and his advisers clearly know–that deficit spending is part of the solution to our economic predicament and will remain so until we see millions of people getting hired into decent jobs.

To read the article in full, click here.

Pollin comments on job creation costs in USA Today article

Robert Pollin, UMass Amherst Economics Professor & Co-Director of PERI

Robert Pollin, UMass Amherst economics professor and co-director of the Political Economy Research Institute (PERI), says jobs in education and research have much lower start-up costs than those in fields such as construction. His comments come as part of the debate over whether the $15 billion federal jobs bill moving through Congress will create enough jobs to offset adding to the national debt. (USA Today, 2/25/10)

Epstein argues that the Volcker policy on big banks is unlikely to be implemented

Prof. Gerald Epstein, Umass Amherst EconomicsGerald Epstein, UMass economics professor and co-director of the Political Economy Research Institute (PERI), is a member of the group SAFER, an organization that supports the Volcker policy. This policy was brought forth by the Obama administration for the purpose of reducing financial recklessness among big banks. With this new policy, large banks would be prevented from conducting their own proprietary trading and owning hedge funds. However,  Epstein remains skeptical that the policy will not have a tangible impact on the way large banks operate.  He claims that it would require political magic or “a big push from the Obama administration” to actually implement.

Maybe Jamie Dimon and his colleagues at JPMorgan Chase (JPM: 40.87, 0.85, 2.12%) didn’t get the memo: the Obama administration wants to prevent another financial crisis by reining in Wall Street risk and putting an end to banks that are “too big to fail.”

The administration hopes to achieve this through the so-called Volcker rule, which seeks to limit risk by barring banks that accept government-backed deposits from conducting their own proprietary trading and from owning hedge funds.

Named for former Federal Reserve chairman and current top Obama economic advisor Paul Volcker, the proposal was unveiled last month, and the White House is pushing for its inclusion in the broad financial reform legislation slowly winding its way through Congress.

Almost immediately, key members of Congress expressed skepticism for the rule, notably Senator Chris Dodd, D-Conn., chairman of the banking committee that is overseeing financial reform.

European leaders earlier this week publicly denounced the proposal, saying it ran counter to Europe’s fiscal interests and that it doesn’t reduce risk, just moves it somewhere else.

Then on Tuesday JPMorgan, the second biggest U.S. bank, got a little bigger by slapping down $1.7 billion for – naturally – a proprietary commodities trading business owned jointly by Sempra Energy and Royal Bank of Scotland (RBS: 11.13, 0.41, 3.82%).

Speculation quickly arose as to whether Dimon, JPMorgan’s CEO, was sending a not-very-subtle message to the president.

“Is it possible that JPMorgan Chase does not see these proposed rules and laws going into effect for any sustained period or perhaps not at all,” asked influential banking analyst Richard Bove of Rochdale Securities.

Bove went on to praise Dimon for a “courage sorely lacking elsewhere among other leaders of American banks.”

To read more, please go to http://www.foxbusiness.com/story/markets/widespread-skepticism-volcker-rule/

Folbre explores “Gender Trade-Offs” in Economix Blog

Prof. Nancy Folbre, Umass Amherst EconomicsNancy Folbre, UMass  economics professor and contributor the NY Times Blog, Economix, examines gender inequality and trade-offs in a recent post.  Although women’s income, relative to men’s, has improved over the last forty years, increasing from 62 cents to the dollar in 1970 to 80 cents in 2008, Folbre argues that it has not come without trade-offs.  For instance, women are less likely to get full-time job because they are typically the family caretakers.  And although unmarried women, who don’t have as many responsibilities, earn almost equal pay as men, Folbre points out that “going without a family seems a rather steep price to pay for equality.”

February 22, 2010
Gender Trade-Offs
By NANCY FOLBRE

It’s pretty hard to get something for nothing. That’s one reason why economists like to analyze trade-offs.

Changing gender roles in our society have created some rather complicated trade-offs, and that helps explain why it’s hard to assess progress toward gender equality.

Women on nonfarm payrolls — a measure that includes part-time workers — now slightly outnumber men.  Employers find women attractive to hire in part because women typically earn less than men with the same education.

A recent comparative analysisof 21 countries by two sociologists at the University of Washington, Becky Pettit and Jennifer Hook, reports that women’s labor-force participation tends to be lower in countries where their earnings relative to men are higher.

For instance, in Germany and Italy, a smaller percentage of women work for pay than in the United States, but those who are employed earn more, on average, relative to men.  Women who overcome the obstacles to employment there tend to be high earners.

Across all countries, overall inequalities in wage income influence average differences in men’s and women’s earnings. So do public policies such as child care provisions that help adults cope with trade-offs between paid and unpaid work — and, more broadly, between economic independence and family commitment.

These trade-offs remain sharply significant in the United States.

Pollin argues that restriction on oil drilling won’t significantly affect the GDP

Robert Pollin, UMass Economics Prof. & Co-Director of PERI

Robert Pollin, UMass economics professor and co-director of the Political Economy Research Institute (PERI), argues that maintaining the moratoria on drilling in the U.S. oil and gas reserves won’t significantly affect the GDP.  According to Pollin the most important factor is the price of oil.  If the price of oil goes up, the GDP will be influenced by how effective we are at energy conservation.  “The more we invest now in energy efficiency and building retrofits and public transportation, that is going to reduce the impact of any kind of a price shock on GDP,” states Pollin.
(Daily Climate News and Analysis, 2/18/2010)

Folbre blogs, “College Students, the New Cash Cows”

Nancy Folbre, UMass Amherst Economics Professor

In her most recent NY Times Economix blog, UMass Amherst professor Nancy Folbre analyzes the strategy of state universities to attract higher paying, out-of-state students.  According to Folbre, emphasizing recruitment rather than retention can backfire for several reasons and result in efforts that do little to increase the quality of education.

February 15, 2010
College Students, the New Cash Cows
By Nancy Folbre

Intensified marketing campaigns are aimed at out-of-state students, who typically pay higher tuition and fees. This well-meaning strategy can backfire for several reasons.

Administrators can feel pressure to invest in new facilities that look good on the glossy brochures — like a new recreation center — rather than improving student advising or course availability.

If many institutions ramp up their marketing and recruitment at the same time, their efforts can cancel one another out. They all spend more money but none of them gains a competitive edge.   In a period of economic downturn, fewer students can afford out-of-state tuition.

If more students are added without increasing the number of faculty and staff, students get less individual attention and can’t get into the courses they need to graduate. Some students thrive despite these problems; others get demoralized.

Folbre in BusinessWeek article: Budget cuts feel “apocalyptic”

Nancy Folbre, UMass Amherst Economics Professor

Nancy Folbre, UMass Amherst economics professor, was recently quoted in a BusinessWeek article about budget cuts to state universities.  Folbre is worried because officials in Massachusetts have been offsetting budget shortfalls with federal stimulus funding, money that will disappear next year, possibly leading to rounds of drastic cuts. (Business Week, 2/11/10)

“We’ve already been subject to very disruptive budget cuts before and then gradual recovery, but this one feels apocalyptic,” says Nancy Folbre, author of a new book “Saving State U” and an economics professor at University of Massachusetts. “I’m in a real panic about what will happen next year when the federal stimulus funds are not going to be there to break our fall.”

Wolff outlines Greece’s role in the global capitalist crisis

Rick Wolff, UMass Amherst Economics Professor Emeritus

In an article for Monthly Review, UMass Amherst economics professor emeritus, Rick Wolff, outlines Greece’s role in the global capitalist crisis.  According to Wolff, although Greece’s role is minor in relation to the central causes of the crisis, Greece faced an economic downturn as a result of the crisis and, like so many other nations, borrowed a lot.  Now, lenders are requiring them to pay much higher interest rates on their current debt obligations and are also threatening to stop lending unless poorer countries, like Greece, lower the ratio between their debt and their GDP.

The Stakes in “Punishing” Greece
by Rick Wolff
February 11, 2010

The global capitalist crisis first brought an economic downturn to Greece, and now the “recovery” seeks to impose on the Greek people an indefinite period of economic suffering as global lenders provide funds to the richer, larger capitalist economies elsewhere so that they can avoid what is demanded of the Greeks.  The same leaders of business and government who produced the crisis are managing the “recovery” in just this way.

Saunders appointed to CSMGEP

Lisa Saunders, UMass Amherst Economics Professor

Lisa Saunders, UMass Amherst economics professor, was recently appointed to the American Economic Association’s Committee on the Status of Minority Groups in the Economics Profession.  CSMGEP was established by the American Economic Association (AEA) in 1968 to increase the representation of minorities in the economics profession, primarily by broadening opportunities for the training of underrepresented minorities.

CSMGEP, which is comprised of economists from all areas of the profession, also works to ensure that issues related to the representation of minorities are considered in the work of the AEA, makes an annual report to the AEA on the activities of the committee as well as on the status of minorities in the economics profession, and engages in other efforts to promote the advancement of minorities in the economics profession.

Wolff comments on global capitalism crisis in Greek daily paper

Richard Wolff, UMass Amherst Economics Professor Emeritus

Richard Wolff, UMass Amherst economics professor emeritus, commented recently in a story published in Elefterotypia, Athens, Greece’s daily paper.  The English translation, published on Wolff’s website, is below:

2010 marks year #3 of this crisis in global capitalism. This is a systemic crisis with extreme symptoms in different places at different times: now Icelandic banks, then US homeowners being foreclosed, now Mexico losing emigrants’ remittances, then Greece’s government bonds, and so on. Capitalist hegemony cannot admit or deal with the disease of capitalism as a system. Instead, the focus shifts from symptom to symptom to press local institutions to shift the costs of crisis onto workers.

Capitalism’s systemic crisis is no mystery. For 30 years, wages were restrained (by incorporating vast new supplies of labor power) relative to enhanced productivity (via computerization and telecommunications). Exploding surplus and profits produced another capitalist speculation frenzy built on excessive risk. Workers in Europe and especially the US reacted to stagnant real wages by borrowing too much. By 2007, the crisis emerged from: a financially overextended working class, employers with excess productive capacity, wealthy individuals with too many risky investments, and an international economy with severe trade and capital flow imbalances among nations.

Instead of moving beyond a capitalist system that endlessly reproduces such crises, servants of the status quo prefer to blame and squeeze some local workers: this time Greeks.