It’s the Economy
It’s the Economy
by
Ken Melvin
Ask any group of people who have successfully started a small business and to a person, they will tell you that there had been at least once when it could have gone either way. Eight out of ten fail in those perilous first two years. No doubt some of the 80% made fatal mistakes, but how many of them did everything right and still failed? Some of the 20% made what could have been fatal mistakes yet came out smelling like a rose. One struggles for five years to get a business going while another one makes $200,000 their first, the other’s fifth, year.
In America today, the outstanding student loan debt is more than $1.6 Trillion; some $200 Billion of which is in arrears. Maybe the student loan was taken out for a career change after losing their job due to globalization, automation, the 2008 crash, … or for a college degree to better their prospects of getting a better paying job, or for Law School and the prospect of a $300k/yr. salary, or for Medical School, … Turns out that after graduation there weren’t enough jobs, or positions; at least enough of any that paid enough.
Maybe they took out a student loan in order to become a research chemist. They make it to grad school only to find out that most chemical research is now being farmed out to Uzbekistan for $40,000/yr.
Graduated college a couple years back, now works as a barista and Uber driver until the job market opens up. Shares in SF.
Turns out that one’s chances for success depend on what year it was that one graduated from college. In a year when the job market is good, the chances of achieving success are quite good. Graduate in a year when there are few jobs and your career may never take off.
The family business closed after 50 years because it lost its market. The third generation, opened by grandparents in 1940. If the family business had to do with: serving or supplying the industrials with tool and die, precision grinding, machining, sheet metal, steel fabrication, foundry, ship repair, …; or selling building supplies, hardware, groceries, shoes, clothing, … to consumers; or if it was a restaurant that catered to working-class families — too bad.
A young family of four, husband and wife lost their jobs due to the financial crisis of 2008, a few months later lost their home because they couldn’t make the mortgage payments, wound up filing for bankruptcy, …. All proved to be too much for their marriage; they got divorced. Two years later, both had found jobs that paid less. By the end of 2019, both had kind of gotten back on their feet.
Graduated High School in 2010. Low paying job, can’t afford the rent increase, gets evicted. Couch surfs while looking for a place. Can’t find anything they can afford. Becomes homeless, then loses the low paying job.
A lot of homelessness is caused by rent increases.
They were just barely squeaking by, then lost their job, then their house/apartment; then became homeless.
Or, it’s the weather.
In the 2012 PBS documentary ‘The Dust Bowl’, the Oklahoma farmer pondered aloud if there was something he had done wrong, something he should have done but didn’t; as if somehow it was a failure on his part. The farmer had worked hard, did the right things, and played by the rules. Maybe his family, along with many another family from Oklahoma who had also failed, could find work picking peaches in California.
Oh, all those other folks in this list also worked hard, and did the right thing, and played by the rules.
Meanwhile: those who invested in offshore manufacturing did well, and those who caused the 2008 financial crisis suffered little, if at all. And, let it be, as has been, noted, the very rich have done quite well during this Corona Virus pandemic.
Offshore manufacturing??? That is barely a blip. The problem with college isn’t student loans, it’s why are they going to college at all. It’s a major point of class warfare and connected to the corporate elite and debt based ponz I finance. Especially business schools that need abolished.
Nicely written, as usual.
“they will tell you that there had been at least once when it could have gone either way.”
Little mention of pure luck there, but it is what happened to me and my business more than 30 years ago.. I was doing indirect loans and leases through vendors. Business was good and I was making a substantial amount of profit and my 3 sales reps were doing great.
Problems started, as I knew they would, when my funding sources became unreliable. You quickly lose vendors in cases like that, as I denied many deals due to the simple fact I could not get anyone to buy the paper.
I spent two days on Wall Street trying to solve the problem. No takers. Discouraged I took a taxi to JFK to catch a flight home to Florida. Per usual the traffic was brutal and I ended up missing my flight. Next flight was in four hours so I of course found a bar to spend the time and also try to figure out who I was going to try to go to work for. As the day to day stress of the business, combined with the inconsistent funding sources, was making my life miserable.
Ended up watching a Yankees game next to a Yankee fan. As it turned out he was not the stereotype obnoxious Yankee fan, and we were enjoying the game. Turns out he had missed the same flight as me. Eventually he asked what I was doing in the city. I told him, expecting him to just nod and move on. He suddenly asked me a string of questions regarding my loan matrix; performance; aging; etc.
When I mentioned he seemed to know a lot about the business, he handed me his card. He was a VP for a large investment bank. Long(er) story short, I ended up with the funding source that kept me in business.
And solely because I missed a flight and wandered into the right bar.
How about we add in a sort of econ-political power+private safety net to America, Ken — let’s call it German level labor union power. How would that factor filter through all the levels you cite above?
This is not such a far out possibility. All it would take is labor law insuring union elections at every private (non-gov) workplace — we could have Germany here overnight.
EMichael: this is not the Republican proposal for recert/decert elections only ta workplaces where there is a union already — attempting to fend off your usual withering whose-on-first attack, trying to misunderstand me thus. Repub bill here:
https://www.congress.gov/bill/115th-congress/house-bill/2723/text
Give States Billions, and You Help the Entire Country
Congress must act decisively to avoid repeating mistakes of the recovery from the Great Recession.
NY Times – Ben Bernanke – July 15
The coronavirus pandemic has set loose a recession of shocking speed and severity. In the coming months, the actions taken by both the public and the private sectors will have economic and public health repercussions that will reverberate for years.
As a member of Gov. Phil Murphy’s Restart and Recovery Commission in New Jersey, I have worked to help put together an effective reopening strategy, one that not only will allow the state’s economy to move forward but also will address the glaring inequalities the pandemic has revealed.
The experience has been eye-opening. It’s become abundantly clear that the responsibility for responding to the pandemic cannot lie only with local and state governments. Congress must act decisively — and it must act in ways that don’t repeat mistakes of the recent past, during the Great Recession.
Our state governments serve a dual role as providers of critical services — health care, public safety, education and mass transit — as well as large employers. Many states, including New Jersey, are responsible for tens of thousands of jobs and the paychecks that go with them.
Since a raging outbreak in March, New Jersey has successfully flattened the curve of new Covid-19 cases and hospitalizations. But since the state had to virtually shut down in order to control the spread, that success has come with a staggering price tag: The state faces a revenue shortfall in the billions of dollars.
Many other states face ominous budgetary outlooks, too, implying the need for draconian reductions in essential services to state residents and large potential job cuts. Furloughs have already begun in New Jersey. Since February, state and local governments collectively have laid off close to 1.5 million workers.
We have been here before. I was the chairman of the Federal Reserve during the global financial crisis and the subsequent Great Recession. As part of the recovery effort, Congress responded with a stimulus package of nearly $800 billion.
But that package was partly offset by cuts in spending and employment by state and local governments. Like today, with sharp declines in tax revenue as the economy slowed, states and localities were constrained by balanced-budget requirements to make matching cuts in employment and spending. This fiscal headwind contributed to the high unemployment of the Great Recession, which peaked at 10 percent in late 2009.
Together with a subsequent turn to austerity at the federal level, state and local budget cuts meaningfully slowed the recovery.
In the current recession, unemployment rates have been much higher than 10 percent, and even with recent job gains the Congressional Budget Office estimates that, without further action from Congress, the unemployment rate at the end of 2020 will most likely be close to 11 percent.
Those numbers are particularly dire for people of color. Black, Latinx and Native American communities not only face a far greater health risk from Covid-19; they also face higher rates of unemployment than white families.
States and localities are in desperate need of additional federal intervention before the bulk of the CARES Act funding expires this summer. Budget gaps like the one in New Jersey cannot be closed by austerity alone. Multiply New Jersey’s problems to reflect the experiences of 50 state governments and thousands of local governments and the result, without more help from Congress, could be a significantly worse and protracted recession.
The CARES Act allocated $150 billion to state and local governments. This new aid package must be significantly larger and provide not only assistance for state and local governments but also continued support for the unemployed, investments in public health and aid as needed to stabilize aggregate demand and restore full employment.
I know that states such as New Jersey are grateful for the aid they have received so far — without it, their fiscal reality would be much more grim. But much of the aid already provided has come with tight restrictions, which means that it cannot be used to offset budgetary shortfalls resulting from the recession and pandemic-related shutdowns.
To continue to provide services that its citizens need and to avoid severe budget and employment cuts that will drag down the economy, states and localities need more federal help. Providing that help is in everyone’s interest.
The White House Called a News Conference
Trump Turned It Into a Meandering Monologue.
NY Times – July 14
WASHINGTON — In theory, President Trump summoned television cameras to the heat-baked Rose Garden early Tuesday evening to announce new measures against China to punish it for its oppression of Hong Kong. But that did not last long.
What followed instead was an hour of presidential stream of consciousness as Mr. Trump drifted seemingly at random from one topic to another, often in the same run-on sentence. Even for a president who rarely sticks to the script and wanders from thought to thought, it was one of the most rambling performances of his presidency.
He weighed in on China and the coronavirus and the Paris climate change accord and crumbling highways. And then China again and military spending and then China again and then the coronavirus again. And the economy and energy taxes and trade with Europe and illegal immigration and his friendship with Mexico’s president. And the coronavirus again and then immigration again and crime in Chicago and the death penalty and back to climate change and education and historical statues. And more.
“We could go on for days,” he said at one point, and it sounded plausible.
At times, it was hard to understand what he meant. He seemed to suggest that his presumptive Democratic challenger, former Vice President Joseph R. Biden Jr., would get rid of windows if elected and later said that Mr. Biden would “abolish the suburbs.” He complained that Mr. Biden had “gone so far right.” (He meant left.) …