Tim Geithner's New York Times op-ed this morning was infuriating. To say that an economy with 9% unemployment is in recovery is a tough sell but Geithner seems to be blaming the wrong people for our financial circumstances and even when trying to write diplomatically he betrays a lack of empathy with working Americans.
As Atrios points out this morning, Geithner doesn't mention foreclosures once in his Times piece. He's ignoring the government's failure to do anything about the problem of well-meaning (and reasponsible) people losing their homes. He doesn't realize, as Atrios does, how this contributes to lasting unemployment by destroying the mobility of the work force (another concept I've never liked, actually -- "if you can't find work, move" is not exactly the kind of idea that leads to increased quality of life for people who may well pick where they want to live for reasons other than available jobs). Foreclosures also choke off the construction industry by causing house values to fall and they hurt state and local budgets by blighting neighborhoods and killing the tax base. A lot of ills could be cured by a successful foreclosure prevention program, but the government has so far done nothing and Geithner doesn't even think it's important enought to mention.
In his piece, Geithner bullets up some economic progress. I, um... have comments.
• Exports are booming because American companies are very competitive and lead the world in many high-tech industries.
Yay. Too bad so many of our high tech jobs are outsourced. iPads aren't made in America, you know. It's also true that a lot of our high tech capabilities that really are created here and exported are going towards creating jobs overseas and strengthening our economic competitors. A lot of American tech firms are making money because they're wiring the emerging markets. That's ultimately good for them and good for us but at the moment, realize that our high tech industry is probably creating more jobs elsewhere than here.
• Private job growth has returned -- not as fast as we would like, but at an earlier stage of this recovery than in the last two recoveries. Manufacturing has generated 136,000 new jobs in the past six months.
Call me when we're keeping pace with the population and when the unemployment rate isn't falling because people have gotten kicked off the rolls. Yes, this is progress but are they really good jobs and how are the wages? These jobs are not replacing what people have lost.
• Businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow.
Non-financial businesses entered the recession with some fo the strongest balance sheets in history. Non-banks had tons of cash. They hoarded it throughout the credit crisis and are hoarding it now. What will they do with the money? I bet they buy competitors. That doesn't create jobs, it kills them.
• American families are saving more, paying down their debt and borrowing more responsibly. This has been a necessary adjustment because the borrow-and-spend path we were on wasn't sustainable.
American families didn't borrow irresponsibly on a wide scale and Geithner owes the nation an apology for implying otherwise. For the most part they borrowed what they had to borrow in order to keep up with the rising costs of necessities (like medical treatment) in the face of stagnant wages caused by outsourcing.
• The auto industry is coming back, and the Big Three -- Chrysler, Ford and General Motors -- are now leaner, generating profits despite lower annual sales.
As Robert Reich likes to say, "didn't we save these industries in order to save jobs? Leaner, more profitable companies means fewer workers doing more for less. The auto industry might be "coming back" according to the P&L but it is not creating jobs.
• Major banks, forced by the stress tests to raise capital and open their books, are stronger and more competitive. Now, as businesses expand again, our banks are better positioned to finance growth.
This is laughably dishonest. Major banks are stronger and more competitive because we financed them through the roughest times, enabling the biggest of them to buy up competitors or take market share from smaller banks that failed, and because we've let them enjoy the easiest carry trade in history (borrow short-term from the Fed for nothing, buy long Treasuries with a yield, profit).
• The government's investment in banks has already earned more than $20 billion in profits for taxpayers, and the TARP program will be out of business earlier than expected -- and costing nearly a quarter of a trillion dollars less than projected last year.
Conspicuous absence of AIG here. I know it's not TARP proper but to separate these issues obscures the truth -- we lost money on the bailouts. Can't stress this enough because you know the next time an industry needs bailing somebody's going to say "What could go wrong, we made money on TARP!" Also, don't forget the opportunity costs of TARP. How many foreclosures could we have stopped with that money? How many jobs could we have created?
Later in the piece, Geithner blames the victims of unemployment for their circumstances. He writes, "The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy."
People are not now unemployed because they lacked skill. They are unemployed because companies shrunk to the sizes they thought appropriate for an era of lower demand and because our liberal policies on outsourcing and mergers have helped companies demand more output from smaller labor pools making less money per hour. That's where out economy's mammoth productivity gains come from. The hardworking America, logging more hours and taking fewer vacation days than most any worker in the world, has put itself out of a job with its own productivity.
Geithner's thesis is that it's a tough recovery but it's a recovery. He's probably right that we've emerged from the recession and there might even be robust growth ahead (current projections are tempered by the sentiment of the moment) but where will the spoils of that growth wind up? When banks are truly ready to lend again, what will they do with their money? Probably give it to LBO funds so they can buy struggling companies. When corporations loosen their purse strings where will they spend their money? On factories here ot factories abroad? Starting a new division or buying a competitor?
Near the end, Geithner includes a line about how we have to invest strategically but still take care of our deficits. He's setting the stage for the end of 2010 debate over the recommendations of the administration's deficit reduction commission. By declaring the recovery in the here and now, Geithner is introducing us to the next phase -- big cuts and sacrifices that will affect ordinary people unless the president ultimately says no.