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Top Ten Economic Stories: December 12, 2008


1. Senate Seat for Sale
Seeing that this is Young Money, I’m supposed to reel off the Top Ten stories about money—or, in these doleful days, the lack thereof. (Ten is an arbitrary number, so please don’t take it personally if I don’t choose your favorite news.)

Since Tuesday, the media has been feasting on Illinois Governor Rod Blagojevich’s scheme to auction off Obama’s vacant Senate seat and trumpeting Blagojevich’s lofty sentiments: a Senate seat, states the governor, “is a f**king valuable thing, you don’t just give it away for nothing,” and Obama is a “motherf**ker,” because the president-elect and his team are “not willing to give me anything except appreciation” in return for offering the seat to their ally. Old-style machine politics live on, in case we had any doubts.

As one of the millions who campaigned for Obama and teared up over his victory, I hope this nastiness doesn’t besmirch his good name. So far, the president-elect isn’t implicated, and he asserted on Thursday that he and his aides have zilch to do with Blagojevich’s wheelings and dealings. But the scandal’s tentacles brush such a broad pantheon of Illinois politicos that the FBI could be prowling the White House interviewing the First Puppy for years to come.

2. Economic Innuendoes
“With all the talk about how to stimulate it, you’d think that the economy is a giant sex organ,” writes Barbara Ehrenreich in her latest essay collection, This Land Is Their Land. If so, the economy may be in for a hot date next year. On Saturday, Obama promised to devise the largest public works program since Eisenhower instigated the construction of the interstate highway system. 

The president-elect’s stimulus package includes investing in infrastructure to repair roads and bridges, improving broadband access, and introducing more green jobs that cut carbon emissions.

Fiscal conservatives caution against vast expenditures that will balloon the federal deficit to over one trillion dollars. But according to economist James K. Galbraith, a higher deficit is inevitable. The government has two choices: it can take action and spend money to create jobs and stabilize the economy, or it can let unemployment soar—in which case taxpayers will earn less and pay less in taxes, and the government will still have to borrow. Luckily, Uncle Sam has excellent credit. Since everyone covets U.S. Treasury bonds, our government can borrow for 20 years at 4.3 %—the same rate at which it could borrow for 20 years at the tail end of the Eisenhower administration.

Galbraith believes the U.S. is better equipped than the EU to weather the current crisis because the institutions of the New Deal—such as a central bank and social security—are still in place. Europe never had a New Deal and lacks a central bank. 


3. Unemployed and Paycheck Challenged
By the way, does anyone have a job for me? This weekly column doesn’t pay the rent, you know. I can do most things except operate large farm machinery. Don’t put me behind the wheel of a tractor trailer, and I’ll be OK.

Unfortunately, I’m not alone in the quest for gainful employment (or in lack of motor coordination). On the morning of December 5, the U.S. Department of Labor announced that unemployment climbed from 6.5 to 6.7 % in November, as a whopping 533,000 people lost their jobs. The jobless rate hasn’t risen so sharply in a single month since 1974.

The unemployment rate doesn’t count those who have stopped job-hunting or those working fewer hours than they’d like. (You’re considered employed even if you only work one hour a week.) If you add the discouraged and underemployed, the rate rockets to 12.5 %.

The Department of Labor posts the previous month’s employment statistics on the first Friday of the month—after I’ve already turned in my weekly column. (I’ve tried to get them to tell me on Thursday, but they say I’m not important enough—due to my measly income.) You can check the most recent stats at http://www.bls.gov/cps/. While you’re at it, drop them an email. Ask if they have any job openings, and tell them I mentioned them in my column.

4. Big Three Make Better Impression in Hybrid Cars
On Wednesday night, the House passed a $14 billion rescue package for G.M., Chrysler, and Ford, after the Big Three CEOs poo-pooed their private jets and made a second trip to Washington in hybrid cars. The Big Three bailout would be a cost-effective stimulus, because it often costs less to save jobs that already exist than to create new ones. As of Thursday, it looked as if Senate Republicans had doomed the bill.

5. Workers Not to Blame for Big Three Bankruptcy
The media has recently been broadcasting $73 per hour (or $150,000) per year as the average pay of a Big Three autoworker. On Wednesday, the New York Times corrected this figure: unionized workers at G.M., Ford and Chrysler earn an average of $40 an hour in cash payments and $15 an hour in fringe benefits. The total of $55 an hour is a little more than double the average U.S. worker’s wages and benefits. Honda’s and Toyota’s non-unionized workers earn roughly $45 an hour in cash payments and benefits—mostly because they receive less generous benefits than the Big Three workers.
In sum, unionized workers aren’t to blame for bankrupting the Big Three. As the Times reports, “If we had wanted to preserve the Big Three, we would have bought more of their cars.”



6. Armageddon? Not.
On Tuesday, the World Bank forecast that global economic growth will shrink from 2.5% this year to 0.9% in 2009. While emerging economies’ growth may slow from 7.9% in 2007 to 4.5%, China’s will drop from 11.9% in 2007 to 7.5% in 2009, and India’s from 9% to 5.8%. “We know that the financial crisis now is likely to be the worst since the 1930s,” said the World Bank’s chief economist, Justin Lin.

Despite this bleak picture, developing nations still have excellent long-term growth prospects. The Bank also predicts that world poverty will decline from 25% living on less than $1.25 per day in 2005 to 15% in 2015. Sub-Saharan Africa’s poverty rates will fall more slowly: 37% will still survive on $1.25 per day in 2015.

7. Carbon Bigfoot Threatens World
To avert hazardous climate change, the Malaysia-based Third World Network warns that the developing world must cut greenhouse gas emissions by 60% per capita—even if rich nations downsize their carbon footprint. Meanwhile the Global Climate Network cautions that the EU and U.S. President-elect Obama haven’t promised enough to halve emissions by 2050.

"The figures are very grim,” said Third World Network director Martin Khor, “They’re grim if we go for a 50% [global] cut by 2050, and we may need more—I think we only went for a 50% figure so as not to scare politicians."

8. Billion Dollar Handouts Worldwide
On Sunday, India’s prime minister announced a $4.1 billion stimulus package to boost the nation’s ailing economy.

“It’s an important move in a nation where millions live below the poverty line. Hundreds of millions in the subcontinent and throughout Asia live on less than a $1.25 a day. A U.N. official warns that if their economic problems are ignored, the risk of widespread social unrest will increase.”

9. Factory to the World Faces Closure
Over the past 25 years Chinese factories have been exporting products and American consumers have been buying them. This relationship has been one of the lynchpins of economic globalization. According to NPR, the current worldwide economic crisis might change China’s role as “factory to the world.” Right now China is trying to boost its economic sector to avoid unemployment and social unrest.

10. Inflation in the Time of Cholera
As Zimbabwe’s ruthless dictator Robert Mugabe clings to power the country is suffering a deadly cholera outbreak due to the meltdown on infrastructure and the public health system. The government has declared a state of national emergency and the United Nations has reported 13,000 Cholera infections and 600 deaths. Meanwhile, Zimbabwe is about to set the world record in hyperinflation. Grocery stores are only accepting U.S. dollars because the national currency is losing value faster than businesses can spend it. 

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