Wednesday, February 10, 2021

Yellen's LaLa Land Prediction Of Full Employment

Biden And Yellen Serve Destructive Recursion
While the trend of automating jobs is moving along full speed U.S. Treasury Secretary, Janet Yellen recently said that the U.S. could achieve full employment recovery if President Joe Biden's COVID-19 stimulus package is passed. "I would expect that if this package is passed, we would get back to full employment next year," Yellen told host Jake Tapper on CNN's State of the Union. This is a clear signal Biden's need to urgently pass a COVID-19 relief package is being ramped higher. 

Yellen said, "We will get people back to work much sooner with this package." She went on to claim,  "There's absolutely no reason we should suffer through a long slow recovery." According to the  Treasury Secretary, the President's $1.9 trillion COVID-19 relief package could help the U.S. employment numbers recover at a faster pace. Yellen cited a report from the Congressional Budget Office (CBO), which found that the unemployment rate would reach pre-pandemic levels in 2025 without the level stimulus proposed in Biden's American Rescue Plan.

Some economists have voiced fear this relief plan will spur inflation. Even former Treasury Secretary Larry Summers has raised concern Biden's package would "flood the economy" and lead to high inflation. Yellen, however, as the former Federal Reserve chair brushed aside this issue saying she spent many years "worrying" about inflation and, "I can tell you we have the tools to deal with that risk" if it were to occur. Yellen pointed to the huge economic challenge and tremendous suffering facing the country, then indicated, "That's the biggest risk." Yellen's words indicate we have clearly entered the area of "Destructive Recursion," a term coined to refer to a system that keeps feeding power back into itself and is controlled by those who are destroying it.

Under Biden's aggressive package, which includes provisions such as a third $1,400 stimulus check; rental assistance; funding to accelerate COVID-19 vaccination efforts; and $400 additional unemployment benefits. Still, the big question before us is, how will that money be spent by those getting checks. The ugly reality is that countries like China have benefited greatly as Americans used the covid-19 money from our government to purchase foreign-made goods instead of buying food and paying rent. This dovetails with a previous article on this blog that pointed out that where and how people spend the money given to them by the American government matters and will continue to impact our economy over time. 

The package Biden laid out only came in at 1.9 trillion dollars disappointing some of his followers. This is because it does not include a great deal of what he has promised. Missing were things like spending on infrastructure and forgiving student loans. Unfortunately, it is most likely this is only the first of many packages that will be rolling through congress in an effort to halt the economy from unraveling. To be perfectly clear, the problem we face is that poorly spending even trillions of dollars does not necessarily create a strong economy. When it comes to government spending more often than not much of the money is simply squandered.

This sets in play the feel-good issuance of what is herald as free money being gifted by those in charge. The truth is more "bridges to nowhere" and wasted spending exists than the taxpayer could ever imagine. Often infrastructure spending falls short of creating real wealth for our country but merely feeds cronyism and ends up lining the pockets of those in power and their friends. In the long run, a country's economic policies and its system of taxation are far more important to the economy than government spending. Sadly, little of this type of legislation is in the pipeline and appears to be a low priority.

A major issue is those small businesses that have closed their doors forever represent jobs that won't be coming back. When we couple this with the idea the minimum wage is likely to soon increase the forces of automation we should expect a huge drop in future job opportunities. This translates into far higher government deficits going forward as many more Americans exit the workforce. It could be argued the government leaping into the role of our primary supporter and making people dependent on government programs tends to reduce our incentive to work. Considering the level of support many Americans seek it is difficult to imagine the deficit coming under-control anytime soon.  

This increases the possibility of stagflation and that we are about to slide into a multi-year economic downturn. An example of this is evident in the prediction that New York city's recovery could take two years longer than the rest of the country as the virus-induced downturn has severely damaged five key industries - restaurants, hotels, the arts, transportation, and building services, all of these rely heavily rely on travel and tourism. The focus of Washington should be getting America back to work.

The idea we are in a false economy while many Americans  remain out of work is highlighted by a fact still largely unrealized by many Americans. We are living in an economy driven by government spending. We should not forget Yellen is as responsible as any of the other recent heads of the Federal Reserve for shaping the economy in a way that drove inequality. It is difficult to ignore how wealth has rapidly flowed to the super-wealthy at the top of the economic pyramid. 

I contend that Yellen is dead wrong when she promotes this so-called relief package as capable of making a huge difference in the job market. The ranks of the unemployed are about to explode along with the deficit as the unemployed become "wards of the state." This problem will go global as robots replace human workers. Our situation in America may become much worse as people flee poor countries and enter our borders. The call for higher wages will only hasten the move to replace human workers with robots and other forms of machines designed to automate work processes.

Yellen and those in Washington better note the drop in the unemployment reflected in the recent January job numbers was due to a decline in the labor force. It shrank from 160.57 million to 160.16 million workers. This resulted in a decline in the participation rate from 61.5% to 61.4%. This indicates, workers are leaving the workforce in droves as they became discouraged about the lack of opportunities, simply fell back on government handouts, or simply gave up looking for a job. "We need a package that's big enough to address this full range of needs," Yellen said. "I believe the American Rescue Plan is up to the job." To this I reply, Janet, you don't understand the problem.

No comments:

Post a Comment