Our financial system is crumbling this week.

[Hungary Jack]

To some degree IL is forced into austerity by stagnating tax revenues. The recent increase in the state income tax from 3% to 5% has generated about $8B in revenue, but most of this goes to public pensions, and thus does not really have an impact in terms of going into state payroll, contracts to state providers, infrastructure, etc. It has taken 2% out of consumer income without any immediate multiplier effect.

I remarked about a professional acquaintance who runs a non profit that does some work for the state, and it is about 6 months in arrears to the tune of $4,000. Not a big number, but the number has also fallen as referrals from the state's human services department has fallen dramatically due to budget cuts.

It's not only how much you collect from private citizens and enterprise, but how you spend it that matters. The state' fiscal policy is hurting the economy on both ends of this equation.

[longhornbaseball]

Question; has austerity ever worked?

It worked for Germany at the start of the century. Of course, that was primarily due to a flawed currency arrangement that is now blowing up in their face.



Government austerity when the private sector is deleveraging (reducing debt) has never worked.

Has the world ever seen this level of debt and conditions to bring austerity into the conversation? I honestly don't know the answer to that. I really think we have to do a whole boat load of taxing and cutting to get us out of this.

Currently, the problem is, and always has been, a private debt problem. Tax increases and spending cuts will reduce the net financial assets of the private sector, which may cause deflation, which would increase the real burden of debt. What we call government debt is not a problem.

[planet planet]

What to make of this jobs report? I still can't believe we've gained less than half of the jobs lost after the crash.

http://money.cnn.com/2012/08/03/news/ec ... ?hpt=hp_t1

[heyzeus]

What to make of this jobs report? I still can't believe we've gained less than half of the jobs lost after the crash.

http://money.cnn.com/2012/08/03/news/ec ... ?hpt=hp_t1

It's not entirely clear what's happening. GDP has been growing steadily since early '09 - not spectacularly, but steadily. Hiring has lagged. I think the explanatory factor is worker productivity, which is very high - both because of technology advances, and because we're working longer hours and each employee is doing work that previously was done by more than one person.

In the labor supply/demand equation, both employers and employees in most fields know that any job is tenuous and others are out there to step in. If you're a company, why hire 500 or even 5 new employees, when you can assign those tasks to your existing employees and not have to even give them a raise? What are they gonna do, jump ship to someplace different that offers higher pay and benefits?

[AWvsCBsteeeerike3]

Zeus sums it up very well.

[planet planet]

I also think it's odd that UK is experiencing the opposite. They were surprised by the degree of GDP drop while in the meantime their unemployment has dropped to 8.1% (which would lead one to think they're paying more people to do less work). Their situation is a head scratcher as well.

[Radbird]

Zeus sums it up very well.

I agree. The job I'm doing now was being done by a department of 4 people 5 years ago. Granted, technology advances have streamlined the process, but 60-80 hour weeks are not unusual.

And I'm too close to retirement to do anything about it. Plus we've already got one unemployed family member (Mrs Rad).

[pioneer98]

Yeah, and that is another thing that is happening - we have a ton of Baby Boomers that are putting off retirement because their retirement savings took a hit with the stock market in recent years. The market has rebounded some, and so I am seeing some people start to retire, and create job openings. But there are still lots of people that need a few more years of work to have enough money saved up to retire.

[Hungary Jack]

I do the work of like 4,285 people. So those productivity numbers are really inflated by me.

[cards2468]

I do the work of like 4,285 people. So those productivity numbers are really inflated by me.

makes up for gummit workers like me