The article by L. Randall Wray, Should Growth Drive Jobs, or Jobs Drive Growth?, is largely made up of a long quote from the article Jobsworth by Edward Hadas.  I give you links to both articles because I think each one adds something worthwhile reading.

Here is part of the quote that originates with Hadas.

Politicians and other leaders have watched the job destruction with something like horror. They shouldn’t have been surprised. The unending fight against inefficiency leads to a natural employment asymmetry. As technology advances, businesses and governments usually find it easier to cut than to add jobs. Some businesses can progressively expand headcount, but in tough times there are more employers looking for ways to use less labour.

Most politicians and economists believe that GDP growth is the cure. It is considered not only the highest economic good but also the best way to create jobs. In search of higher output, governments run huge deficits, while central banks pass out money for free. The policymakers often invoke the name of John Maynard Keynes. But they twist the great economist’s ideas. As Pavlina Tcherneva points out in a recent article in the Review of Social Economy, Keynes thought “the real problem” governments should address during the Great Depression was “to provide employment for everyone”. In Keynes’s view, output follows jobs, not the other way around.

Keynes’s own preferred solution was for governments to organise projects with a high “elasticity of employment”. “There are things to be done; there are men to do them,” he said. “Why not put the two together? Why not put the men to work?” The best way for governments to create jobs quickly is still to hire people directly. A look at the dilapidated infrastructure of the United States suggests that Keynes’ prescription is still relevant.

Enthusiasts for small government might want to privatise such programmes, but they should still agree with the true Keynesian principle: it is better to pay people to work than to pay them not to. Programmes which protect the unemployed and disabled serve a valuable social purpose and payments for early retirement may be defensible, but programmes which create jobs are far preferable to either.

The concept of “natural employment asymmetry” is a nice encapsulation of an idea that is kind of obvious when you are forced to think about it.  However, the encapsulation into a simple ideas allows us isolate the phenomenon so that we can focus on the causes and possible cures.  I am sure this isn’t news to many experts in the field, but it is eye opening for me.

The article is also a reminder of what John Maynard Keynes really thought was the most direct solution and exactly why he would think that way.  This is also eye opening to me who has a very minor undergraduate level understanding of  what Keynesian economics is all about.  In another 40 years of reading a bit here and a bit there, I might be able to get to a Ph.D. level understanding.  That doesn’t stop me from trying to explain things to people who are varying numbers of years behind me in understanding.

Oh, by the way, now that I have explained to you exactly what my opinion is worth, I can give you my  answer to the question, “Should Growth Drive Jobs, or Jobs Drive Growth?” I do not think it should be an either/or proposition.  I think the lesson learned should be that we ought to attack the problem from both directions.  The value of the article is to remind us of one of the directions that we seem to have left out of what we are trying.

Romney Has Public And Private Morality Upside Down is another great little video from Robert Reich.

He’s got private and public morality upside down. He doesn’t want to regulate where regulation is necessary — at the highest reaches of the economy, where public immorality has cost us dearly, and will cost even more unless boardroom behavior is constrained. Yet he wants to regulate where regulation is least appropriate — at the level of the individual, in bedrooms and other intimate spaces, where private morality should govern.

The way I have always put it is “Republicans don’t want the government to touch their money, but their sex life is fair game. Democrats feel ok with the government touching their money, but they want their private parts left alone.”

Well here is the video I promised in my previous post, Why Obama Should Be Attacking Casino Capitalism — Both Romney’s Bain and JPMorgan. It’s not quite what I had in mind, but it is darned close.

In the post How Did Mitt Make So Much Money And Pay So Little in Taxes?, Robert Reich says:

Because the magic of private equity reveals a lot about how and why our economic system has become so distorted and lopsided – why all the gains are going to the very top while the rest of us aren’t going anywhere.

The magic of private equity isn’t really magic at all. It’s a magic trick – and it’s played on you and me.

Here is the note I sent to Robert Reich about this video, and how it compares to the video I’d like to see.

I liked the video “How Did Mitt Make So Much Money And Pay So Little in Taxes? “, but I was hoping for a video with just a slightly different emphasis.

This video would show how Mitt Romney takes over failing or nearly failing companies, strips out their assets, and then lets them go bankrupt. It is the same point you made, but I would show a bully forcing his way to the head of the line. He gets in front of the legitimate creditors and steals all the assets. He leaves them nothing when the bankruptcy judge gets to them.

You might even show how this theft from the legitimate creditors forces some of them into bankruptcy, so Romney can ride to the rescue and strip them bare too, the big bully.

I was thinking that Robert Reich would be the perfect person to come up with a demonstration animation to describe vulture capitalism.  I went to his web site to make the suggestion, and came across the interesting post, Why Obama Should Be Attacking Casino Capitalism — Both Romney’s Bain and JPMorgan.

I wish President Obama would draw the obvious connection between Bain Capital and JPMorgan Chase.

That way his so-called “attack” on private equity is neither a personal attack on Mitt Romney nor a generalized attack on American business.

It’s an attack on a particular kind of capitalism that Romney and JPMorgan both practice: Using other peoples’ money to make big bets which, if they go wrong, can wreak havoc on the economy.

It’s the substitution of casino capitalism for real capitalism, the dominance of the betting parlor over the real business of America, financial innovation rather than product innovation.

It’s been terrible for the American economy and for our democracy.

It is nice to know that he is on the same wavelength that I am, or vice-versa.  Independently, I have been writing furiously over the past few days on this very topic, trying to explain these very ideas.

There are hints on his blog that he might even have already made the animation, I seek.  Well, off to check those out.

The Boston Globe has the article, Obama campaign got donations from Bain employees.  This time, I am not going to take The Boston Globe to task for the article.  My complaint is with the Obama administration.

Once again the Obama campaign misses its own point in attacking Romney’s business practices.

“We’re not challenging the virtues of the private equity business, or Romney’s right to run his business as he saw fit, or even his right to run other businesses into the ground while turning a profit for himself and his investors,” Obama campaign spokesman Michael Czin said.

It is not an attack on the virtues of private equity that the ad attacks. It is the particular crimes that Bain has perpetrated in some well documented cases. They buy failing companies to strip out all the assets, such as pension funds, health care funds, and any hard assets that they can sell, and turn these assets into cash which they then pay to themselves. In other words they bully their way to the head of the line in front of the legitimate creditors in order to take the assets and leave only the liabilities.

The legitimate creditors who would receive 50 to 90 cents on the dollar in an ordinary bankruptcy proceeding get nothing after Bain Capital’s interference. Bain Capital walks off with the money that should have gone to the legitimate creditors. Bain Capital drives many of those creditors into bankruptcy, but probably not before Bain strips some of them bare, too.

Talking about all the crimes Bain did not commit does not absolve it of criminal responsibility for the ones it did commit. Even one serious crime in a life full of virtue, which is not Bain’s situation, is enough to land ordinary folk in jail.

It is too bad that the Obama campaign can’t make a straightforward explanation of this important point. I wonder if The Boston Globe can take any notice of what I point out above.

I have posted the above as a comment to the article on The Boston Globe’s web site.

I think that this act of the Obama campaign deserves the following merit badge:

The Daily Ticker on Yahoo his another segment with William Black.  This one is headlined JPMorgan’s “Wild, Crazy Insane Gamble” Puts Global Economy at Risk: Bill Black.

More importantly, Black notes JPMorgan is betting on “derivatives of derivatives” and is by far the largest player in the market for the CDX Investment Grade 9 and CDX High Yield 11, the derivatives underlying the trade that earned Bruno Michel Iksil the nickname ‘the London Whale.’

“They didn’t just gamble, this was a wild, crazy insane gamble,” says Black, who calls JPMorgan “the world’s largest gambling operation in financial derivatives” in his latest blog at New Economic Perspectives.

To be sure, a $2 billion loss is just 0.1% of JPMorgan’s assets, as of March 31. JPMorgan has suspended its share buyback program and would appear to have ample resources to cover the losses, even if they were to double or triple or even quadruple.

But that’s not the point, according to Black.

“We don’t want any federal insured entity…to be speculating in financial derivatives. That’s just nuts,” he says. “It’s really disastrous when you’re talking about an institution like JPMorgan. It will sooner or later have a really bad year…when it has the really bad year, we will all end up having to bail them out or having another global crisis.”

Given its size and outsized bets on credit derivatives, “JPMorgan poses a clear and present danger to the global economy,” according to Black.

I don’t suppose William Black could have put it in any more stark terms than that last sentence above, emphasis added by me.

The Daily Ticker on Yahoo has the story and interview headlined Greece Is Tearing Europe Apart Politically, Socially and Economically: William Black.

I think the headline is slightly off in that it might give you the impression that William Black thinks Greece is at fault here.  More to his point is the remark:

“Austerity…is an inconceivably awful policy,” Black says. The European periphery nations are suffering great depressions — not recessions – he notes, and the region’s best and brightest are emigrating from Europe because of high unemployment and economic uncertainty.

One thing about William Black, a former senior financial regulator and author of the book The Best Way to Rob a Bank is to Own One, he doesn’t mince words.

Perhaps trying to run a country more like a successful business sounds like an appealing prospect.  Well you are off on the wrong track already.  I tricked you by inserting the word “successful” in there.  It all depends on what the meaning of success is.

Perhaps in your utopian world, a successful business makes a product or sells a service that people want and need.  It finds out how to sell the product or service at a low enough price that the customers are willing to pay it and yet at a high enough price for the business to make a profit and fund its growth.  The business keeps its debt within bounds so that it can continue in business for a long time and it can weather the ups and downs of its markets and the economy.  It also pays a dividend to its shareholders, and it pays its managers and other employees well.  It even manages to pay its fair share of taxes.

Wouldn’t it be great to live in a country run that way?  Maybe it would, but there is another way to define a successful business.  This can be called the Reagan/Bush/Bush/Romney plan.

In the RBBR plan, you form a Vulture Capital firm.  It finds well run companies that are fiscally sound, but are currently undervalued by the stock market.  Of course this works just as well finding companies that are not so well run, but the stock market undervalues them even taking into account their poor management.  (In a non-RBBR world, this would be sort of like buying a fixer-upper house that costs less than its intrinsic value to you.  In the RBBR world, this is like buying a building whose copper plumbing is worth more than the cost of the building to you even if the plumber is still owed money for those pipes.)

Companies usually have liabilities and assets that are of roughly the same magnitude in size.  This means that their net worth, whether positive or negative, is much smaller than the size of their assets alone.  In other words, some, or all, or more than all of their assets are offset by liabilities.

In the RBBR plan, you turn all the companies assets into cash and pay them out to the RBBR owners and or managers.  Never mind that there are creditors and employees that have prior claims on these assets.  What they can’t get their hands on will never hurt you as owner/manager.  The RBBRers get stinking rich and the rest are left to ask, “What happened to my life savings and income?”  By the RBBR definition, the RBBRers have run a successful company.  Just look at how rich they are.  Isn’t that the very definition of success?

When they have piled up enough money so that they and their descendants can live in the lap of luxury for generations, they philanthropically turn  from their business success to turn their attention to politics and running a country according to this prescription.  Maybe they can do for the country what they have done for their business.

They may find the following politico/economic situation from which to rescue us. The previous administration has left the country with nearly balanced liability payments and income.  The income comes from taxes and also from payments into pension benefit and health care benefit plans.  Let’s call these Social Security and Medicare.  On the payments and debt side, there is the cost of providing infrastructure such as roads, bridges, education, police, and fire protection that any ongoing business, er government, needs to pay for.  Then there are the payments to the people who are now ready to collect on their Social Security and Medicare benefits that they paid for.

However, these clever RBBR politicians, who learned their business from Harvard Business School (what snobs), see all those assets going to waste, when they could be used to weigh down their own pockets.  So they convince the people that they (and supposedly you) know how to spend these assets better than the government does.  Who cares if other people have prior claims to these assets.  If they can strip them from the government and pay them out mostly to themselves with a few crumbs to you, what are the people with the prior claims going to do?  Are they going to go to the police (called the SEC, the Justice Department, and other regulatory agencies)?  Even if those agencies are now run by honest politicians when the voters wake up that their bank has been robbed, what are these agencies going to do?  The money is already gone.

The job creators (called robbers in any normal use of the language) are too big to fail even if you could claw some of their ill gotten gains back.  Better to take your lumps, call it a lesson you won’t soon forget (well at least not for 50 years), and try to repair the damage these people did using whatever resources they may have left you.  Asking the RBBRers to contribute anything to help would just be unfair.

I am just applying the principles described in Vulture Capitalism Explained to running a government.

Maybe the title of this post should have been “How A Bully Would Run a Country Like His Business”.  Almost reminds you of Teddy Roosevelt and his “bully pulpit”, but I don’t think that is what Roosevelt had in mind.  Or maybe I am wrong about Teddy Roosevelt of the “Speak softly, but carry a big stick.”

Market Watch has an article Obama spending binge never happened based on data from the Office of Management and Budget (OMB), the Congressional Budget office (CBO) and Haver Analytics.

As would-be president Mitt Romney tells it: “I will lead us out of this debt and spending inferno.”

Almost everyone believes that Obama has presided over a massive increase in federal spending, an “inferno” of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.

But it didn’t happen. Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.

Thanks to Tangelia Sinclair-Moore for posting the link to this article on her Facebook page. As she pointed out Market Watch is an outlet of The Wall Street Journal.

I made the following comment on her post:

It is funny how stuff like this can appear in the news sections of Wall Street Journal outlets, and yet on the editorial page they will still say the things that have been debunked by their own news.

One might consider it to be quite damaging news that Obama who claimed to want to rescue the economy did not manage to increase spending enough to do the job. The only thing I can think of in his defense is to say that despite all the pressure from the wrong-headed Republicans and blue dog Democarats, he at least managed to prevent a decline in spending. That would have been a disaster on Herbert Hooverian dimensions.