On April 2, 2013, Peter Orzag, former director of President Obama's Office of
Management and Budget, debated David A. Stockman, former director of President
Reagan's Office of Management and Budget. Stockman is the author of The Great
Deformation: The Corruption of Capitalism in America, a book that doses out
unwelcome prescriptions for mending America. (Also a book that Amazon
pledges to deliver within 3 weeks, a testament to the book's resonance with the
reading public or publisher short-sightedness, the latter condition being
practically redundant.) Orzag, who wanted to bury this uncomfortable debate,
told Stockman and the TV audience: "The discussion has to happen within
the bounds of what's, from a political economy perspective, remotely feasible.
It does no good to be so far off from what's practical in terms of what could
actually happen that it's a completely academic exercise."
It is Orzag who both ardently and
fearfully attempted to lasso the debate within faculty parameters. Orzag is now
a vice chairman of Citigroup. His attempt to live in the past resembled
Citicorp Chairman Walter Wriston's (circa 1982) declaration that sovereign
nations never default.
Chapter 31 of The Great Deformation ("No Recovery on Main
Street") shows how far the United States has wandered from a functioning
economy. To those who are perplexed at the state of the union, this chapter is
illuminating. What follows is a quick etching of how this
trillion-dollar-a-year, deficit-financed economy has departed from sustainable
reality despite the protestations of such establishment figures as Peter Orzag.
One strand is the 21st century swing towards HES jobs: health,
education, and social services. They do not produce high-paying salaries.
Stockman isolates these from "breadwinner" jobs, which, "on
average paid about $50,000 per year - just enough to support a family."
There were 72 million breadwinner jobs in the American economy in 2000. By
September 2012, there were 66.4 million. Such jobs fell by an average of 35,000
each-and-every month over those 12 years.
From the time the recent recession bottomed in December 2007 (not to be
mistaken with the long-running ever-worsening Silent Depression), 5.6 million
breadwinner jobs have been lost. Only 200,000 had been recovered by September
2012.
Since the official recession ended in June 2009, three million jobs, of all
types, have been recovered. More than half of those have been in what is often
called the "part-time economy" including "retail, hotel,
restaurants, shoe-shine stands, and temporary help agency" positions. The
"part-time" shoe-shine boys and dish washers were positions
restored after layoffs during the recession.
About 40% of the three million are HES
positions. These are new jobs. Daunting is the recognition these
positions have been deficit- and debt-fueled. Jarring is the recognition they
could vanish if U.S. government spending is constrained.
HES jobs serve the economy. They are made
possible by production. The current U.S. economy does not fit this mold. It is
an economy boosted by rising debt rather than increased production. Stockman
writes that HES job growth "was possible only so long as government and
health plans could keep spending at rates far higher than the growth rate of
the national economy."
From the turn of the century until 2007
(end of the housing-boom era), nominal GDP grew by $4 trillion. Total debt rose
$20 trillion: $5 of new debt for every dollar of growth. More to the point, federal
spending on Medicare rose from $300 billion in 2000 to $800 billion by 2012.
Stockman writes: "Having gone from a modest surplus (the federal budget
was in surplus in 2000 - FJS) to a $1.2 trillion deficit (annual - FJS) during
the same 12-year time frame, it was evident the robust growth of federal health
spending and the consequent bonanza of new jobs, on the margin, had been
deficit financed."
Of education, from 2000 to 2012, student
debt rose from $150 billion to $1 trillion. "The job count in nonpublic
higher education had risen nearly 45 percent during the same twelve-year time
frame..."
The reader may be forming a parallel
picture to bulging mortgage credit, a building bonanza, and the associated
growth in construction jobs.
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