Republicans rooting for more economic misery

The Thinker by Rodin

For most Americans, particularly the unemployed ones, the 2012 elections cannot come too soon. Sadly, most Americans who could vote did not bother to vote in the 2010 midterms, particularly the unemployed ones who were having trouble keeping a fixed address. This allowed the crazies (a.k.a. Tea Party Republicans) to get control of one house of Congress. Many of those who did vote for the Tea Party though did so on the assumption that they would do something tangible to create jobs.

Silly voters. Of course everything Republicans say they are doing is to help facilitate job creation. Yet despite all the tax cuts, spending cuts, and regulatory changes our unemployment rate remains basically unchanged at 9.1 percent. In fact, the unemployment rate has gone up since January, when Republicans came into power in the House. (It was 9.0% in January 2011.) Cutting the deficit is somehow supposed to create jobs, but it has also added hundreds of thousands of public sector workers to the unemployment roles as governments everywhere pare spending. Other tactics to reign in spending, like the brouhaha over extending the federal debt ceiling, only served to make our creditors more nervous, adding more uncertainty into the economy, possibly triggering a double dip recession. The stimulus, which at least succeeded in priming the economy a bit and reducing the unemployment rate a percentage or so, is all gone. Meanwhile, businesses are sitting on record amounts of capital, but don’t want to use it to do any hiring because of all the uncertainty in the economy.

Next week President Obama plans to deliver a speech on unemployment to a joint session of Congress. He is expected to say Congress must act to create jobs, but the initiative is almost doomed to go nowhere. Which means if you are unemployed you have to hope against hope that despite all these negative signs employment will pick up, or saner heads will prevail after the 2012 election. If you are getting by on food stamps, you may want to start your own vegetable garden because so many Americans are on food stamps that the program is running out of money, so it is likely to get chopped back. And if you are one of the long-term unemployed that have depended on extended unemployment benefits for at least some income, those benefits will stop arriving soon. So the prognosis for an economic recovery before the election is not great, and made even worse by cutting food stamps and unemployment payments. That’s even less money that will go into the economy.

Republicans take as a matter of faith that if the government stops interfering with the private sector, then free from these constraints the private sector will pick up the slack by investing and hiring people. So far the evidence is just the opposite. The truth is of all the agents that can cause economic growth to occur, in the short term the government is the only that could truly change the dynamic. This is because through intelligent policy, government can inject money into the economy that buys goods and services, and helps employ more people. When people are employed, they have income that they spend, which puts more income in other people’s pockets, which causes growth and begins a virtuous cycle. Moreover, our ability to do so has arguably never been cheaper. Interest on U.S. treasury bills are less than inflation, which effectively means not only that we can borrow money interest free, but also that others are actually paying us money to give us money.

The evidence suggests that if the U.S. were to borrow money now and put it to use to grow the economy, through projects we already need like infrastructure improvements, we would stimulate the economy, effectively pay no interest to do so, and begin a virtuous cycle that would increase employment and growth. Moreover, as people acquire income again, they also contribute taxes again at all levels, which give governments more income than they would have otherwise. Intelligent short term deficit spending now seems very likely to reduce long term deficits through economic growth, which comes back to the treasury in the form of increased tax revenues.

It’s clear to me that Republicans really have no desire to grow the economy or bring down unemployment, at least not until Obama is out of office. And they are willing to keep Americans unemployed to be faithful to an ideology that is proving not to work. Indeed, they seem intent to throw sand into the engine of our economy. The hope seems to be that Americans will blame Obama instead of their party in 2012, although polls suggest Republicans and Tea Party Republicans in particular will shoulder most of the blame.

The only thing we can say for sure is that there is at least a year more of misery ahead, and it will be borne principally by the unemployed and the disenfranchised because Republicans will put ideology ahead of the needs of the American people.

Bum deal in Chicago

The Thinker by Rodin

The city of Chicago provides my other story epitomizing what is wrong with today’s America. Unlike the death of a Wal-Mart employee by stampeding customers, which largely got lost in the news, this story at least got some attention. It deserves more.

More than half a million Americans lost their jobs in November alone. So perhaps the plight of just two hundred employees at Republic Windows & Doors in Chicago does not matter. Unlike most of America, which is not unionized, Republic Windows & Doors is a union shop. Its workers belong to the United Electrical, Radio and Machine Workers of America. Supposedly, in the event their employer goes under, the Worker Adjustment and Retraining Notification Act makes their job losses less painful. This law requires that covered employees, in most situations, must get sixty days of notice before a layoff or sixty days of salary.

They got only three days because Republic Windows assumed it would get credit that it did not receive. They requested credit from their creditor, The Bank of America. Ironically, Bank of America recently received $25 billion courtesy of the American taxpayer because it was having a financial crisis of its own from foolishly investing in sub-prime mortgages. However, Bank of America summarily refused to extend any of that credit to Republic Windows. With no money to draw from, Republic Windows felt it had little choice but to shut down promptly. It provided its workers just three days notice before closing the factory. Employees received no severance pay.

Probably because its workforce is unionized, the uppity employees of Republic Windows decided that, gosh darn it, they were entitled to the benefits due them under law! They occupied the plant (with the grudging approval of management, who said they could only do so if they kept the equipment in good order) while others protested outside the factory and tried to draw media attention.

It is unlikely that these employees would have fought their situation if they were not unionized. Only 12% of the American workforce today is unionized. With a union behind it, employees had a ready structure in place to stand up for what was lawfully due them. Chicago is also a heavily Democratic area and one of the more unionized areas of the country. (Indeed, Chicago features prominently in the union movement, which makes the location of this incident particularly appropriate.) It took a few days but their cause drew some media attention. Recently indicted Illinois Governor Rod Blagojevich was among a small number of politicians who rallied for the union workers. Even President-Elect Obama came out in support of these union workers. (Unsurprisingly, there was no similar statement from President Bush.)

All this publicity is beginning to show some results. Bank of America reluctantly joined talks with Republic Windows and the union. Talks are still underway and if press reports are to be believed, Bank of America reluctantly suggested it could lend Republic Windows enough money so it could pay its employees’ claims. Another bank, JP Morgan Chase reportedly is also offering a loan of $400,000. It is even possible, with the heat it is under and with the inconvenient fact that it took $25 billion in tax dollars, Bank of America may extend all the credit needed so that Republic Windows can stay in business. I hope that in this situation its employees retain their jobs that seemed certainly lost. If so, it will only be due to their backbone to protest loudly and vigorously.

Bank of America, like many troubled lenders, eagerly took taxpayer money. Unbelievably, it was never required by the government to use the money to issue loans. That’s right, our government was so incompetent (or devious) that it issued hundreds of billions of dollars to lenders with no requirements that they use the money to address the credit needs of the employees and businesses that were fueling the recession. Bank of America, like most banks taking the handout, seems more concerned with its own profitability and solvency than in lending money.

As this situation proves, lack of money can triumph over rule of law. If a company has no money to live up to its requirements under law, apparently it feels it can walk away from them. That seems to be the case with Republic Windows, although it is a fair question to ask how they could pay severance if they did not have the money to do so.

In today’s America, labor is simply not valued. It has been this way for decades, but the problem now has becomes more obvious with our major economic downturn. Good, decent and hardworking Americans get to take it on the chin with nary a thought for their financial plight. Rather, employees are routinely treated like a drunk tossed out on the street. One day management smiles at you and then next you are as valuable as used toilet paper. However, because they are unionized, workers at Republic Windows could fight back.

The Republic Windows protest may be (I hope) the catalyst for real labor reform. Our new president is sympathetic to unions. In addition, it appears that a larger Democratic congress will enable passage of the Employee Free Choice Act into law. This urgently needed law will go a long way to leveling the playing field, that has given management the upper hand in labor negotiations.

In the long term, expanded workers’ rights are probably in business’s interest too. We cannot sustain the economy forever with an American middle class that continually shrinks and loses income every year. Generally, workers are more productive when they feel vested in their jobs. Employees who have to continually worry they can be thrown out on the street at any moment are likely to be skittish and disloyal to those they work for.

In any event, it is nice for a change to see workers stand up aggressively for their rights and get some results, even if it still means they lose their jobs. At least they should get the severance lawfully due them. Our nation is a country of laws. This case demonstrates that it is important that the law should be not just respected but also actually followed. I hope workers everywhere are watching and learning. Workers deserve a fair deal again. We deserve better treatment than the shabby way we are often treated by employers today. What happened in Chicago is Dickensian. We are human beings, not rubbish to be discarded the moment it becomes convenient for an employer.

Better Living through Unemployment

The Thinker by Rodin

My wife has been out of a job since the end of October 2004. When she was fully employed she worked on a help desk, solved mysterious Windows problems and made around $50K a year. Then her employer decided to outsource her department. She got a very nice severance check and was let go.

Fortunately there was my income to fall back on. Since I made about twice what she was making there was no looming financial catastrophe. The last six months have proven that our lifestyle has not changed much. We’ve avoided a regular trip to New York City and we also eat out a bit less. But otherwise our lifestyle seems largely unchanged. Still, it seems counterintuitive to me that our income could be cut by a third and we’d not notice it that much.

It helps to be fairly liquid. We have never been people to live beyond our means. Our house is modest. We have two cars, one paid for, the other half paid for. Our only other real debt is our mortgage. Since our house was purchased twelve years ago for less than half what it is now worth, and the principle is about $130,000 or so, our mortgage payment is easily doable. It’s about what most people pay for decent two bedroom apartments in our zip code today.

And technically my wife is not unemployed. She is now “self employed”. She is very self employed. This is to say she picks up a few greenbacks here and there fixing and building computers for friends and for clients. She does not market herself. She will also teach a class at a local community college starting next month. Adjunct teaching pays slave wages. From the 12-week course she will likely bring home about $1300. I expect that by the end of the year she will have earned at most one tenth of what she made in 2004.

Whatever time she has left over is hers to use as she wishes. She is having no problem keeping busy. She loves writing and now has the time to immerse herself into it. She has submitted one story and will be submitting others. She also critiques others stories in an online writer’s workshop. She occasionally meets friends for lunch. She has projects around the house she can pick up or leave as whim dictates. And she can sleep in late most mornings. She is not a morning person, so she now usually crawls into bed sometime after midnight when I have been asleep for a few hours. Her unemployment seems ideally timed. For example she was able to transport my father for some outpatient surgery while I worked a full day. She can also transport our daughter to her various activities without me leaving early from work to do it, which was often the case in the past.

While I am still a bit skittish about how this loss of income will work out in the long run, I am a lot less skittish than I was. One reason is that I’ve discovered that living on one income can pay a dividend. Last year with our dual incomes, even after healthy deductions and credits, we paid close to $19,000 in federal income taxes. This year I project we’ll pay about $8300 in federal income taxes. The change in our job situations caused me to look at my withholding. At my old withholding rate (Married – 0 dependents) I was withholding about $13,800 annually from my wages. Now I need to withhold $5500 less. Since I am paid biweekly this effectively means I can take home $211 more every two weeks. This can pay a few bills. But we’re already paying all the bills, still going out to dinner regularly and not going in the hole. So in a way this money feels like a windfall.

I realize that most families in this situation would not be as fortunate. My job also comes with good benefits, like health insurance. I also realize that there are some other costs to my wife’s unemployment. She is not racking up social security credits, and must pay the employer’s portion of her Social Security and Medicare taxes for her meager self-employment earnings. She is not putting money into a 401-K, so those potential earnings will not be accruing in the future. Since we are doing fine perhaps the best use of the extra $211 a pay period be to put the money into an IRA.

Still, our situation seems counterintuitive to me. Until recently living on one income was out of the question. It seems odd that we can reduce our income by a third and feel so little pain. This was simply not an option before. Unemployment for any sustained period of time would have meant major changes in our lifestyle. We would have been looking for the next job the day we knew our job was ending. My steadily advancing career explains part of our good fortune. Part of it is also explained by not living beyond our means. But part of it is also due to our progressive income tax system.

Our tax system is often maligned but now it is a blessing. The flat rate tax favored by some people would have worked to our disadvantage. Instead we paid proportionately more as we made more income. The flip side is we pay proportionately less when we earn less. If you ask me this is a very sweet system. Each according to his means may strike some as socialism, but to me it seems eminently fair. I didn’t begrudge the $19,000 we paid in income tax last year. I felt fortunate that we were in a position where we could contribute so bountifully to the commonwealth and still live so expansively. Of course since we were doing so well we should be asked to contribute more toward the cost of society’s upkeep.

At 45 my wife is probably too young to retire permanently. But it seems like if she wanted to take the rest of her life off from the grind of a 9-5 job she could. I just hope that I don’t find myself on the receiving end of a pink slip before I retire.

The End of Struggle

The Thinker by Rodin

My wife Terri has been unemployed since the end of October 2004. Since the last two months of 2004 we’ve been living our regular lifestyle, thanks to her generous severance pay. So there were no worries about having a nice Christmas. Terri occasionally looked at the employment ads but for the most part didn’t bother to apply for any jobs. She didn’t want to have a job right away anyhow, since she had to purge the stress and bad karma of her last job from her system. She also figured, rightly I think, that it didn’t make much sense to look for a job in her field (information technology) that time of year anyhow. The want ads, even for tech jobs in our area awash with them, were thin.

Even if she had gotten no severance pay there was still no compelling reason for her to rush out and get another job. My income can now carry us through. Clearly our lifestyle would’t be quite as lavish. We’d eventually cut out some things, like our lavish vacations these last few years. I’d probably cut my own lawn again. We might slow or stop some charitable contributions. We’d eat out less. We’d be more likely to rent DVDs than go to the theater. But we’d get by. We would not starve. The bills would get paid. We’d still live comfortably in our house.

For me work is necessary. I am the breadwinner. But for the first time in my wife’s life working for money is wholly optional. And this seems to be freaking her out. She grew up in a single parent household that could only charitably be called a lower middle class. Her existence has always been defined by need. To get things she wanted she has had to work, and work hard. But no longer.

So she’s lost. And she’s been slacking off a lot. It’s what she has always done at the end of a hard day of work. It’s her form of recreation and her response to working hard the rest of the day. The work is gone but the slacking off isn’t. Now it is almost a 24/7 occupation. She is sort of lost in this new surreal world. She is like a boat in the middle of the ocean with a set of oars but no compass. She has no idea where to go. Rather than pick up her oars and head off in a random direction instead she doesn’t pick up the oars at all. Maybe she paddles a bit. For example she fixes a computer for a friend or a family member. She cleans house when she can summon the energy, which is not often because I don’t get on her case about it. She meets friends for lunch on occasion. But mostly vegetating has become her new lifestyle. She sleeps in late and goes to bed after midnight. Her days are largely spent listlessly online or playing the same games over and over again on her computer.

Oh the things she could do. She could volunteer at the school. They always need volunteers. She could give blood. The blood bank is always sending her cards because she’s O- and in big demand. She could do volunteer work. But she doesn’t want to do any of these things. She’s into doing not much of anything.

I’d like to lie and tell her that she needs to get a job immediately. She’d actually like me to tell her this. Then she would have a mission. I’d be pushing her motivation button. Out would go the resumes. She’d be calling recruiters and visiting employment agencies. But I don’t push her. I guess if I had my druthers she might have a part time job. Maybe she’d work twenty hours a week. This would give us most of the luxuries we took for granted before she lost her job, such as vacations in Hawaii. I’d encourage her to use the rest of the time to do those things she’s said she always wanted to do. I know she wants to be published professionally. She still writes but there are long periods of writer’s block. She feels too intimated at the moment submit her work to a publisher.

How odd this seems to me. The world could be her oyster. She has more options than she has ever had in her whole life. She could use this time to launch a computer repair business, something she’s discussed. She could perhaps take up teaching. She could write that first novel and market it. These are all things she has said she wanted to do. What is missing is the ignition switch. She can’t turn on that part of her brain that turns these things into a reality. She only knows this pattern that when she is not on the job that she does her regular chores and gets to goof off. So that’s largely what she does. It’s not really comfortable to her. In fact she seems to hate this new place she is in. But at least it is familiar.

She hasn’t been a total slacker though. She took care of Christmas this year. This was really nice and the best present she could give me. In past years I have done most of this legwork. I had a part time teaching job (which I don’t need and do because I enjoy it) and that kept me fully engaged until a week before Christmas. I was glad she could pick up the slack.

And for about a week there she got on a cleaning spree. She made wonderful meals for Thanksgiving and Christmas Eve. Since my parents now live 35 miles away instead of 600 miles away she is often visiting them. While there she talks a lot with my Mom and helps my Dad with his latest computer problems. In a way I’m jealous that she has more time to spend with them than I do.

But that was then. Now the holidays are over. The obligations are behind her. And she still doesn’t know what she wants to do. Structure is what she has always known. But someone or something else has dictated her structure. That was the familiar pattern of her life. No longer.

She is getting advice to get a job, not because we require the money, but simply because having structure in her life keeps her happy. With structure she will get up in the morning and tackle each day again. Or will she? I wonder. I think she probably would be happier, at least initially, in a 9-5 job again. She could gripe about her coworkers and dysfunctional bosses again. I could get these evening calls from her at work again saying she had to stay late to reboot a server or to finish troubleshooting a computer repair problem. But I suspect on some level she would not get quite the same joy from work again simply because work is now optional.

We seem to have arrived at the end of struggle. And yet struggle is the only pattern she has known. It seems so very odd that she is at this phase in her life that should be nirvana, and it feels nerve wracking and she feels so dysfunctional.

Yes, I wish she would get a job. It’s not because we desperately need the money but so that I could have her back to “normal” again. Too much freedom and too much choice is apparently is not necessarily a good thing.