It's Still The Economy, Stupid

Saturday, April 12, 2003  

Is it about the oil?

Max Sawicky on what to do with Iraq's oil revenues:

LET THE PLUNDER BEGIN. My anti-war avocation has not much complemented my work, and vice versa. But that could change. One of my research areas is public sector efficiency, which means the analysis of diverse methods of providing public services, such as by contracting out, vouchers, public enterprise, etc. The new Iraq is now one giant Federal government program, the new libertarian nightmare. Much of it will be under the purview of contractors. They will be paid by some combination of U.S. taxpayers, cooperating nations involved in reconstruction, the United Nations, and Iraqi oil revenues.

As I noted here recently, it would be a crime to divert Iraqi oil revenues to reconstruction. Like party-goers who split before the host starts cleaning up the mess, that is the responsibility of the "coalition of the imminently unwilling." By rights, the Iraqi people deserve to be made whole since a major justification for this war was to enhance U.S. security (WMDs, Al Queda, etc.). The entire proceeds of oil exploitation is theirs by any notion of right.

One device for plunder will lie in the arcane details of oil development deals. The fact that the new Iraq will own the mineral rights leaves to the imagination the extent to which they sign over some share of this wealth to companies that in principle are doing nothing more than supplying capital. The only just reward for the companies is some competitive rental rate on their capital. Of course, there is no fun in that. The companies will be aiming for what economists call the economic rents, or "extra-normal returns." (In bygone days in the U.S., we used to tax "excess profits" of oil companies. Now we're moving to apply negative tax rates to capital.) [more]

posted by MB | 4:57 AM |

Friday, April 11, 2003  

Unemployment numbers: Not what they seem?

Wampum on the jobless rate:

The unemployment rate predictions this week were pretty glum, as they rightfully should have been. For four out of the last five weeks, new unemployment claims were above the orange-alert benchmark of 420,000. Long-trusted surveys had found manufacturing was contracting not expanding as it has, albeit weakly, the month previous, and high energy prices and general economic anxiety had led consumers to tighten their purse strings.

Optimistic analysts expected a tenth of a percent increase in the March unemployment rate, to 5.9%; doomsayers predicted a higher jumps, to 6, or possibly 6.1 percent.

Imagine the glee, from the Oval Office down to Wall Street when the number released this morning by the BLS held firm at 5.8%, even with a loss of 108,000 jobs during the month.

I too, should have been happy, as perhaps it meant the economy was holding its ground, and not in fact slipping into that feared double dip. But instead I was depressed. And pissed.

Since January I've been watching the BLS unemployment summaries closely, after I first noted what seemed to be an unlikely three-tenths of a percent drop in the unemployment rate in January, particularly when employment only increased by 143,000. After some digging, I noticed that the the BLS had instituted a whole series of changes, which the bureau admitted would "affect the comparability of the January 2003 estimates with those for earlier months". They also shifted 200,000 worker off the books by declaring that they were not actively seeking work. The total of these "adjustments" made a somewhat bleak economic picture look much rosier than expected, even as other worrisome news was rolling off the presses.


Previous posts on the subject here and here.

posted by MB | 12:14 PM |

New recession fears?

From See The Forest:

SOMEthing is just around the corner, but maybe it isn't prosperity.
WASHINGTON - Confronting new fears of recession, the Federal Reserve is refining an emergency economic rescue plan that includes further interest rate cuts and billions of dollars in extra cash for the banking system.

The Fed's effort would be aimed at pulling the country out of a nosedive that has seen 465,000 jobs evaporate in just the past two months, raising fears among economists that the weak recovery from the 2001 recession is in danger of stalling out altogether.


Because of this, some economists believe the Fed will not wait until its May 6 meeting to put its plan into effect, opting to cut the federal funds rate through an emergency conference call, possibly as soon as this week.

However, other analysts argue that the Fed will likely wait, hoping that the favorable tide of the war will bolster markets in coming weeks and restore confidence.

"I think they will hold off cutting rates again to see if an early, successful conclusion to the war has the desired effect everybody is hoping it will have," said Zandi.

Right, the war will end "early" and everything will be roses. Never mind record levels of public, corporate and private debt. Never mind record low saving rates. Never mind record concentration of wealth. Never mind that all the new jobs are exported to other countries.

Tax cuts for the rich, program cuts for the rest of us, and wars -- all laying on a bed of propaganda to keep the sheep in the corral so they can be sheared. Yep, that's a real prescription for prosperity, all right.

posted by MB | 12:06 PM |

PPI numbers out

From Wampum:

This BLS alert just arrived in my box this morning (you can sign up for BLS press release via email here):

The Producer Price Index for Finished Goods advanced 1.5 percent in March, seasonally adjusted, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. This increase followed a 1.0-percent gain in February and a 1.6-percent rise in January. At the earlier stages of processing, prices for intermediate goods moved up 2.0 percent, after increasing 2.1 percent in the prior month. The crude goods index jumped 13.3 percent, following a 4.8-percent gain in February.

posted by MB | 12:02 PM |

Bush and union busting

From Nathan Newman:

Bush Airline Union Busting Goals Achieved
A year and a half after 911 devastated air travel and sent the airline industry into a tailspin, Republicans in Congress are only now agreeing to financial aid for the industry.

Why the wait?

Because as I noted months ago, the Bush administration deliberately allowed the companies to plunge into bankruptcy so they could gut union contracts and demand concessions from their unions. And now that some carriers have done so, the pressure on the remaining healthy airlines to slash wages for their union workers will be unstoppable.


posted by MB | 11:38 AM |