December Jobs Report

There is a frontpage story today by Catherine Rampell detailing yesterday's job report.  One-hundred-fifty-five-thousand jobs were added in December which kept the unemployment rate steady at 7.8%. "But it was not enough to reduce the backlog of 12.2 million jobless workers, underscoring the challenge facing Washington politicians as they continue to wrestle over how to address the budget deficit."

It has been over four years since the bankruptcy of Lehman Brothers pushed the Dow into freefall, and still high unemployment persists. I'm a reader of the Monthly Review, a small socialist magazine, and to me their perspective is persuasive. Advanced capitalist economies like the United States, Western Europe and Japan have difficulty posting high annual GDP growth.  This leads to financialization or casino capitalism -- the resort to legerdemain in the form of complex investment devices like derivatives to juke the growth numbers.  This paradigm is bust and another bubble has yet to come along to replace it.  The class war raging in D.C. between Republicans and Democrats is in many ways about the nature of the next bubble. Democrats like Obama are meekly, tepidly pointing the way to a green economy. Republicans are energetically -- look at all the money super PACs raised during the election -- attempting to re-inflate the go-go days of the Wall Street through the repeal of Dodd-Frank, slashing the top tax brackets, voucherizing Medicare, privatizing Social Security. What is so bizarre about the Republican point of view is how anti-majoritarian it is; it clearly benefits only a tiny elite -- the 1% -- yet it dominates one (if not both) of the major political parties.  It speaks to the power of capital and the electronic forms of communication at its command.

One-hundred-fifty-five-thousand jobs for the month absorbs those entering the work force due to population increase but not much more.  At the current rate of job creation it will take, according to Rampell, "seven years to reduce the unemployment rate to its prerecession level."

Given the uncertainty over what Congress will do, estimates of the unemployment rate’s path this year vary wildly. The more optimistic forecasts for the end of 2013 predict that unemployment will fall to just above 7 percent, which would be considerably below its most recent peak of 10 percent in October 2009, but still higher than its prerecession level of 5 percent.

Rampell, who from watching her on New York Times webcasts has a slightly arrogant manner, ends her story with a description of what the extension of emergency unemployment benefits (as part of the fiscal cliff deal) actually means for laid off workers.  It's compelling.

Class Warfare

Boehner wins re-election as speaker of the House and in doing so he talks tough about deficit reduction.  This from today's Jonathan Weissman story:

The agenda laid out by both Mr. Boehner and Senator Mitch McConnell, the Republican leader in the Senate, jibed well with the demands of small-government conservatives who have complained that neither leader has been sufficiently confrontational with Mr. Obama.

Both said cutting spending would be front and center, putting them on a collision course with the president and Democratic leaders. And neither was taking seriously the president’s pledge not to bargain over raising the government’s statutory borrowing ceiling.

Krugman's column takes in the big picture about the current conflict consuming our national politics.  He calls it a class war.  Republicans want to undo the New Deal and Great Society to lock in low taxes for the wealthy.  The identity of the Democratic Party is predicated on Social Security, Medicare, Medicaid and now Obamacare.  Since the GOP doesn't have the power to pass any legislation all it can do is extort cuts by means of threat -- of default (by refusing to vote for an increase in the debt ceiling) or government shutdown (by refusing to approve a continuing resolution at the end of March).  The class war will be fought in budgetary battles.  As Krugman says:

[T]he G.O.P. retains the power to destroy, in particular by refusing to raise the debt limit — which could cause a financial crisis. And Republicans have made it clear that they plan to use their destructive power to extract major policy concessions.

Now, the president has said that he won’t negotiate on that basis, and rightly so. Threatening to hurt tens of millions of innocent victims unless you get your way — which is what the G.O.P. strategy boils down to — shouldn’t be treated as a legitimate political tactic.

But will Mr. Obama stick to his anti-blackmail position as the moment of truth approaches? He blinked during the 2011 debt limit confrontation. And the last few days of the fiscal cliff negotiations were also marked by a clear unwillingness on his part to let the deadline expire. Since the consequences of a missed deadline on the debt limit would potentially be much worse, this bodes ill for administration resolve in the clinch.

So, as I said, in a tactical sense the fiscal cliff ended in a modest victory for the White House. But that victory could all too easily turn into defeat in just a few weeks.

Rationality is the ability to recognize a pattern and act on it.  The clear pattern at work here is that Obama says one thing to appeal to his base -- those voters who put him in office -- and then ends up acting differently.  Now that the election is over what leverage do voters have to alter this pattern?