Business "Confidence" And Obama

By Big Tent Democrat, Section Economy
Posted on Sun Jun 05, 2011 at 12:29:58 PM EST
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Apparently Paul Krugman faced some Chamber of Commerce hack this morning on TV repeating the missing confidence fairy argument about the economy:

So I didn’t have much time to take down the Chamber of Commerce guy on This Week today [--] you’ll see a lot of businesses complaining about the political climate — hey, a lot of them watch Fox — but very few actually saying that this climate is deterring expansion[. . .] It’s the weak economy that’s deterring growth, not the atheist Socialist secret Muslim Kenyan Hawaiian in the White House.

It reminds of me what former Bush Treasury Secretary Paul O' Neill said last August:

I must say I'm kind of amused by some of the conversation about companies hoarding $1.5 trillion worth of cash, or something, because I had a rule when I was in the private sector for 25 years, including 13 running Alcoa, and that is, don't hire people unless you have somebody demanding goods that you can't produce with the people you already have. Right? So it seems patently unrealistic to me to urge people to spend money unless there's a demand that they're not able to satisfy with their existing resources. [. . .] Why would you? I mean, it's crazy. It's not a charitable function if you're running a business to say oh, my goodness, we have so many millions of people unemployed, I should rush out and spend my cash and hire more people if there's no demand for the goods. It's crazy to me. [. . . More]

[W]hen I was in big enterprises, I kept a wary eye on Washington, but my decisions were not guided by research and development tax credits and whatever mischief they happened to be up to at any particular moment. I paid attention to customers and potential customers, and getting more people to use our product around the world [. . .] So I think an awful lot of this conversation about as though Wall Street's upset with Obama, it's all -- it's because people don't have something sensible to talk about, I suppose. I don't think there's much merit to that conversation.

(Emphasis supplied.) What he said.

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Business "Confidence" And Obama | 43 comments (43 topical)

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We were told that we were giving the (5.00 / 2) (#10)
by inclusiveheart on Sun Jun 05, 2011 at 05:20:17 PM EST

Too Big To Fail institutions bailout monies so that they would continue to lend, but there were no such requirements attached to the loan deals that were brokered. Small businesses which account for the large majority of employment in this country got the shaft and so in turn did the American worker.

It was doubly troubling that $350 billion of the stimulus was allocated to tax beaks and tax credits which only large businesses with tons of access to capital would ever be able to use - a small business with a waning demand for their goods or services isn't going to be able to take advantage of a tax credit for hiring because they are not going to be making the money on which they might be taxed.

So WalMart and others might have hired for those credits, but not the mom and pop shop on Main Street who is having a hard time finding customers with money to come through their doors. Now even WalMart is complaining that the pressures of rising gas prices among other things on their average customers is creating a situation where their customers are "running out of money" before they can get to their Super Stores. Given how they pay, their own employees are more than likely finding it difficult to patronize the stores. Now what do we do? Surely people understand that falling wages really is going to mean that falling prices are no longer going to be just a marketing gimmick to get people into stores. Same with houses, rentals, cars, appliances, electronics, etc.

Did anyone in the Obama Administration ever even run a lemonade stand? One wonders. If they did, they must have lost big if they tried. It is probably why they went into politics or government. No clue how commerce and money actually gets made. Stunning.

More pain for the lower 98% (5.00 / 1) (#17)
by MO Blue on Mon Jun 06, 2011 at 07:23:03 AM EST

State, local layoffs to hit record levels
State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.
"We're on a downward path," said Greg Daco, principal U.S. economist at IHS. "It's not looking good."

: Just sitting here gritting my teeth (none / 0) (#20)
by Militarytracy on Mon Jun 06, 2011 at 08:39:59 AM EST

These jobs going away indicate that we have lost so much weight our spine is showing and now we are consuming that too. More contraction of the economy, how do they think they can stave off BIG deflation now that they've turned the damned stock market into a huge bubble too? I don't care how much quantitative easing they throw at this, if people can't afford the prices the prices come down. All that crap about emerging markets fueling the markets too was mostly crap. Our economy defines the world's economy for the most part, when the economic contraction is over though we probably won't hold that position ever again. Maybe we shouldn't. We can't seem to regulate criminals at all when they have white collars. Our leaders should be so ashamed of themselves.

Out of the mouths ... (5.00 / 1) (#15)
by cal1942 on Sun Jun 05, 2011 at 08:13:49 PM EST

I mean, it's crazy. It's not a charitable function if you're running a business to say oh, my goodness, we have so many millions of people unemployed, I should rush out and spend my cash and hire more people if there's no demand for the goods. It's crazy to me.

of capitalists.

Saying, in effect, that demand drives the economy; that low tax rates on the wealthy do not create jobs; that demand creates jobs. That supply side is bullsh!t.

I don't work in the business sector (none / 0) (#1)
by desmoinesdem on Sun Jun 05, 2011 at 02:00:27 PM EST

but even I know that businesses hire when they expect more demand for goods and services than they can handle with their current employees. This is just basic information that gets lost in media discussion of tax cuts and business incentives as a way to create jobs.

Get more money into the hands of people who spend every last dollar of their disposable income. Then those people will buy more goods and services, which will prompt businesses serving those people to hire more employees.

: The Chamber hack (5.00 / 1) (#2)
by Warren Terrer on Sun Jun 05, 2011 at 02:15:42 PM EST

doesn't really believe what he's saying. His job is to repeat whatever specious argument his employers think will take down Obama. The public good is of no concern to them. They don't even believe there is such a thing.

The real world (none / 0) (#3)
by loveed on Sun Jun 05, 2011 at 02:47:25 PM EST

My spouse was laid off for 2yrs. my salaries was used for retirement saving,helping our children,vacation. I worked and average of 60hr. a week,trying to make ends meet.We made it through, never missed a house note,with the grace of god.
He got a job through a temp agency.he was making $38.00 hr. great benefits (health insurance $120.00 a month. I now carry the health insurance $280.00.
The temp. job pays 14.50hr.no benefits,or vacation time. Since the earthquake in japan,he has been on mandatory overtime (mon.-fri.4pm-330am, saturday 12:00pm-9:30pm). This particular job starting pay is $32.00hr..Another temp that do same job has been there five yrs. If he misses a day, he no longer have a job.(he miss one of our grandchildren graduation).
So in the real world we know that corporate greed is taking over our country.

Yes (none / 0) (#4)
by Ga6thDem on Sun Jun 05, 2011 at 02:56:12 PM EST

our family is back to 1999 wages with 2011 costs. I don't know how much longer we are going to be able to afford our house.

Sooner or later this is all going to have to end and it's not going to end well.


So sorry (none / 0) (#18)
by Nemi on Mon Jun 06, 2011 at 07:39:24 AM EST

to hear all of that. And not to "grade" the pain or make any of it worse than the rest but the grandfather not getting to be at his grandchild's graduation part especially saddens me. It really shouldn't be like that. :(


Thank you (none / 0) (#21)
by loveed on Mon Jun 06, 2011 at 08:47:40 AM EST

We made it through for now. But so many did not.
The sad part is we did it right,live with in our means. Everyone do not want to be rich,we just want to be happy. Every summer we try to have as many grandchildren as possible for the summer.Once we took 9 of 12 at that time on a 2wk.vacation. No one knew where we were going. We told them what to pack.We took them to Ky.,penn.,virginia,d.c,niagra falls,it was wonderful.
No vacation this yr. There coming to help take care of there 91 yr old great grandmother(affectionately known as GG). I'm so proud of each one.


You seem like (none / 0) (#33)
by Nemi on Mon Jun 06, 2011 at 12:03:55 PM EST

an awesome grandparent. :) And that trip sounds absolutely fantastic. But having 9 kids along! Phew [whiping sweat off forehead], lol.

You know - I'm sure the kids will enjoy to stay "put" with their GG, just as much, as it seems you have the kind of grandparent-grandchild relationship, I would wish for all children to be able to experience.

And when I think back on my own childhood, the holidays we weren't going anywhere, and instead my parents arranged "being tourists in our own city" were just as eventful and memorable as those when we went traveling. I bet your grandchildren will feel the same. :)


Just want to add (none / 0) (#34)
by Nemi on Mon Jun 06, 2011 at 12:07:48 PM EST

that the kind of relationship you seem to have with your grandchildren I would also wish for all grandparents to be able to experience.


I never had grandparents (none / 0) (#40)
by loveed on Mon Jun 06, 2011 at 03:59:23 PM EST

I was adopted by alot of my friend's grandparent.
They were deceased by the time i was 9yrs.old.
Two of things I prayed for all my life is to see my 2 daughters grow up,and to know my grandchildren.I wanted to have a hand in the way they were raised.
I guess you wonder how so many grandchildren from 2 children. Second marriage,2 stepchildren,3came with my wonderful son-in law. total 16. All born within the marriage.ages 20yrs-8 months.
I love them all equally.

: Ahh ... (none / 0) (#43)
by Nemi on Tue Jun 07, 2011 at 06:02:40 AM EST

... so you had bonusgrandparents and now you even have bonusgrandchildren. Lucky you. :)
(And yes the number of kids did puzzle me a bit at first, lol.)

I did something similar (none / 0) (#6)
by gyrfalcon on Sun Jun 05, 2011 at 04:37:21 PM EST

bought a house with cash from an inheritance just at what turned out to be the beginning of the Great Unraveling and the consequent downturn, against a whole lot of advice. But the old intuition said I'd feel a lot more secure not having to find money to pay the mortgage if my income took a hit for some reason. Which, of course, it did big-time a year or so later.

It aint this simple (none / 0) (#7)
by jimakaPPJ on Sun Jun 05, 2011 at 04:39:35 PM EST

and that is, don't hire people unless you have somebody demanding goods that you can't produce with the people you already have

A few of the other questions...

What are the incremental costs associated with adding people and will the increased volume cover these costs?

Are these costs fixed or variable and can you forecast the costs?

What extra capital investments will I need to make and will the demand be there long enough to pay for them?

If the answer is, "I don't know" the business plan becomes mostly fantasy and the reasonable thing to do is to do nothing. One of the hardest things to explain is declining profits on increased volume. People look at that as a failure by management.

So anything that makes a business manager insecure stops hiring. Health care costs is one that has to be bothering managers. Taxes are another. As someone said, "By business plans are 5 years, not two."

No one gets fired for not hiring.

Sorry but errm BS (none / 0) (#9)
by Militarytracy on Sun Jun 05, 2011 at 05:12:06 PM EST

Aggregate demand leads all business decisions where competent business people are concerned. Just ask the video game industry. It rules the world of capitalism and all those faux concerns you put up don't bother anyone when we have demand for goods. Everyone is broke, unemployed, and QE is causing commodities to soar while also decoupling the markets from the actual economy. And the banksters are deciding where that fresh influx of liquidity goes, and the only thing they are using it for is to buy something that they hope ends in a yield of some kind....any kind. The little people can't afford to buy anything anymore. The only game left in town is to try to find a way to phuck the little people now. That's the only yield out there.


No MT (none / 0) (#11)
by jimakaPPJ on Sun Jun 05, 2011 at 05:23:01 PM EST

Aggregate demand leads all business decisions where competent business people are concerned.

Demand is an important part of it, but there are many other parts.

And I see no connection to my comments in the rest of your comment.


Jim, (5.00 / 3) (#13)
by NYShooter on Sun Jun 05, 2011 at 06:11:09 PM EST

please point to period in history where the future was certain.

And, if it was so, why were we paying CEO's gazillion dollars to make decisions?

Keep'm coming


The fact that we are paying CEOs way too (none / 0) (#14)
by jimakaPPJ on Sun Jun 05, 2011 at 06:32:03 PM EST

much has nothing to with the subject.

And "Senior Managers" don't make decisions in a vacuum. They rely largely on advice and plans from below.

And while the future is never certain, all things are subject to "degree."

90% confidence is one thing.

70% is something else.

50% is pure gambling.

So to repeat myself, demand is just one of the factors involved. And yes, you can go broke on volume.


Aggregate demand rules everything (none / 0) (#16)
by Militarytracy on Mon Jun 06, 2011 at 06:36:15 AM EST

MT, that is just flat out wrong (2.00 / 1) (#19)
by jimakaPPJ on Mon Jun 06, 2011 at 08:37:22 AM EST

Demand is important, in fact it leads.

But. (Watch my lips.) You can, and companies have, go broke on volume.

i.e. If cost exceeds what you can sell the product for then volume hurts.

Why would you sell like that? To increase market share with the view of selling product later at a higher price. IF you don't get the "later" you're dead.

And...

All increases in production carry incremental costs. Will the new volume pay for the new costs?

etc., etc.

Study some of the tech companies and what happened during the Internet bubble.


I don't know what it takes (none / 0) (#22)
by Militarytracy on Mon Jun 06, 2011 at 08:49:58 AM EST

for you to finally understand that supply side economics is voodoo. I guess you won't understand it, and I don't really care much either Jim. People that agree with you are busy destroying the country and once it has been destroyed you will all cry and blame someone else :) American businesses have so few restraints on them it is pitiful. They have actually at this point been incentivized to prey on human beings vs. serving them. Other businesses in other countries operating under the burden of meeting much larger social demands are doing just as well as our predatory, cannibalistic, zombified companies, CEOs, and boards.


We should someday soon (5.00 / 2) (#23)
by Raymond Bell on Mon Jun 06, 2011 at 08:57:21 AM EST

remove the "American businessman" as an object of veneration, it's been the collective judgement of such folk that has gotten us to the economic times we have in the first place.


I have a cousin with this exact same name (none / 0) (#24)
by Militarytracy on Mon Jun 06, 2011 at 09:03:04 AM EST

He's a huge Republican though, but we still love each other very much. We just fight like hell :) He is very sick now. But when I first saw your screen name here I was startled, thought maybe he had had a come to Jesus moment :)


You're 1/3 right (none / 0) (#26)
by Slado on Mon Jun 06, 2011 at 09:21:41 AM EST

It has been the collective policies of government, the fed and the american businessman that led to this.

The one thing to point out is the buisnessman is predictable.

As Peter Schiff says. "If you lock teenagers in a room with alchohal don't be suprised when you come back and find most of them drunk".


: The policies of the government, (none / 0) (#29)
by Militarytracy on Mon Jun 06, 2011 at 09:30:18 AM EST

the Fed, and the American businessman, and how that affects Aggregate Demand is what rules. Aggregate Demand rules our economy, without it you've got just about nothing other than Hope. This is the hopium President though. President Obama refuses to acknowledge as do apparently many other people out there, the exact importance of Aggregate Demand.

I never said anything about supply side anything (none / 0) (#31)
by jimakaPPJ on Mon Jun 06, 2011 at 11:51:50 AM EST

Where did you get that?

My point related to why businesses aren't hiring and it was, is and will remain..... Volume is important but it is not everything....

As for all those other countries.... I think the unemployment rate in Europe hovers around 10% as a base. So please don't hold up Greece as an example.

And the trigger or the double dipper we're now entering is the price of oil.

And Obama thought that if the run up was slow, high prices wouldn't matter.

This from 2008


All of the things you argue for (5.00 / 1) (#32)
by Militarytracy on Mon Jun 06, 2011 at 12:01:58 PM EST

are supply side arguments and they affect very very very little. If there is demand, the markets and businesses move to meet that demand.


: No and no and no again (none / 0) (#41)
by jimakaPPJ on Mon Jun 06, 2011 at 04:14:22 PM EST

Demand by itself will not move a business to hire people.
There are always other considerations.

Heh ... a link ... (none / 0) (#42)
by Yman on Mon Jun 06, 2011 at 04:51:55 PM EST

... that doesn't say what Jim says it does.

Shocker ...


: This Jim (none / 0) (#44)
by Raymond Bell on Tue Jun 07, 2011 at 08:17:52 AM EST

reminds me of this fellow:

The narrator of the story is Peter Proffit, a "methodical" businessman by his own admission. He says a nurse swung him around when he was a young boy, and he bumped himself on the head against a bedpost. That single event determined his fate: the resulting bump was in the area dedicated to system and regularity, according to phrenology.
Proffit goes on to say that he despises geniuses and that they are all asses -- "the greater the genius the greater the ass." Geniuses can not, he says, be turned into men of business.
The Business Man
Shocker ...
Yes, a Youtube video, that really proves his point, doesn't it?

No there isn't (none / 0) (#12)
by Militarytracy on Sun Jun 05, 2011 at 05:24:14 PM EST

All we did was sell at the peak and then not buy (none / 0) (#8)
by Dadler on Sun Jun 05, 2011 at 04:55:49 PM EST

But it's turned out pretty well. Had we bought right after we sold in 2004, yowza, we'd be up sh*t creek with no canoe much less a paddle. And everyone thought we were crazy not to buy then. Never been happier to stand pat in my life.

People have no money (none / 0) (#25)
by Slado on Mon Jun 06, 2011 at 09:17:36 AM EST

They are in debt up to their eyeballs.

That's why there is no demand.

How many TV's or Cars or Ipods can someone carrying $20K worth of personal debt and a mortgage they're upside down on possibly buy.

BTD you constantly talk of demand but unless the government just sent everyone $100K to pay off their mortgage and their credit card and use the rest to spend as they wish there is no way to generate demand until all this debt is paid off.

What O'Neal is saying is there is no way for companies to produce more when there is no money out there for people to buy their products.

Why build a luxury hotel when no one will book a room? Why build a shopping mall when there are already (2) half empty ones in your town? Why start a restaurant where three have already failed at the same location? Why build an electric car when no one can afford it?

There is no demand because there are no savings and wealth laying around to purchase new products. We are all collectively getting by and we have to accept that our economy is retracting to realistic levels.

Not the inflated bubble levels we all got used too.

The credit bubble enable all of us as a society to live beyond our means and we collectively created an economy that is unsustainable. Together as a group we maxed our our credit card. We produced products, houses and lifestyles of consumption that our true wealth and productivity could not support.

Until we accept this reality we're in for a long haul.

government can create demand (5.00 / 1) (#27)
by CST on Mon Jun 06, 2011 at 09:26:07 AM EST

by hiring people. If you don't have a job, it's a lot harder to get out of debt or have disposable income. There are millions of people out of work. That's billions of dollars out of the economy.


True, but (none / 0) (#35)
by jbindc on Mon Jun 06, 2011 at 01:58:18 PM EST

Depends on the job. As someone who is constantly looking for a federal government job, I come across some every day that I think, "What the heck do we need X number of these for? (Especially when you can hire a consultant on an ad hoc basis)" or many times, "I don't even understand what this job does!"


not sure I follow (none / 0) (#36)
by CST on Mon Jun 06, 2011 at 02:08:57 PM EST

There are many different types of federal work. I wouldn't expect one person to be qualified or even understand every single one of them.

Regardless though, if the government hires someone - no matter what the job is, they are paying them, thus helping with the "demand" question.


Yes (none / 0) (#37)
by jbindc on Mon Jun 06, 2011 at 02:25:03 PM EST

But hiring 5 or 6 people for permanent positions at OPM doing things like "time studies" doesn't seem like the best use of tax $$. Or the overlap -like every agency having their own police / security force. Why not have a centralized force that could deploy people to guard the DoJ OR the National Archives (which is right across the street)?

And the job descriptions I'm talking about are for jobs that may possibly fit my background and education - and I still don't understand what they want (I have 2 degrees in human resources - a job description should be able to be understood and not so vague that an average person can't tell you what the job entails). I mean - I'm not looking at jobs for Wildlife Biologists and seeing if I can qualify.

I'm all for the government hiring more people to give people jobs - but they need to be smart about it. Many of the jobs I see posted are clearly not for efficiency, but to spend dollars for agencies to keep their budget dollars.


honestly (none / 0) (#38)
by CST on Mon Jun 06, 2011 at 02:35:18 PM EST

even wasted tax payer $$ that goes into someone's pocket, is beneficial in helping the demand issue.

I recognize it's infuriating, but it could be going to bombs or something too.

On a purely selfish (and IMO, practical) note, they should be putting gobloads of money into infrastructure. If you think our roads and levies are in bad shape, the stuff hiding under the road is even worse off.

But in the absence of that, I would rather have an employed useless person than an unemployed useless person. I'm much more concerned with the practical results of government spending than I am with the principal.


: I agree (none / 0) (#39)
by jbindc on Mon Jun 06, 2011 at 03:06:39 PM EST

But those who talk about "wasting taxpayer dollars" aren't completely wrong.
We need to hire more people where it will do the most good - not create more paperwork (and, for those around here who don't like pesky things like "more rules").

Demand is down because the people who (5.00 / 3) (#30)
by Anne on Mon Jun 06, 2011 at 10:16:51 AM EST

don't have jobs don't have money to spend; if they are collecting unemployment, that's probably not making much of a dent in their monthly expenses. If they have savings, they are using them to make up the difference. Some are cashing out IRAs and 401(k)s. Costs have continued to rise and things like food are pretty hard to do without.

Many who do have jobs have not seen their wages rise; they are working harder for less. They are not spending because they don't know when they might be among the jobless - and they pay enough attention to know that way too many people who have lost jobs have either been unable to get new ones, or it has taken a long, long time to get back to work - and usually at less pay. The employed-but-fearful ARE paying down their debt as much as they can, but that's getting harder to do.

Sure, a lot of people have been using credit as supplemental income, and I think we can all agree that that doesn't usually lead anywhere good. But, guess what? Those people aren't spending, either; I can't tell you how many people I know who are just paying their credit cards off, one by one, and learning the difference between "want" and "need."

The government does not operate like a household, and implementing policy that tries to make it do that is more irresponsible than I have words to express: it drives the downward spiral. When the private sector won't spend, the government must step in and create the conditions that lead to increased demand, and they do that by spending, by creating programs and projects that put people back to work. Infrastructure projects don't just require day laborers, but engineers and project managers and supervisors and carpenters and electricians and office staff. Where is the government on the creation of all those green jobs? ::crickets::

This is part of the power of government; to fail to use it for the greater good is inexcusable.


I saw that round table, and I thought (none / 0) (#28)
by ruffian on Mon Jun 06, 2011 at 09:28:18 AM EST

Krugman and the other panelist did fine against the Chamber of Commerce flack. I thought they shot down all his points quite well.