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Archive for October, 2013

The Tea Party in America:

Political Lunatic Fringe or New Face of the Republican Party?

 

Introduction

Historians will one day write about one of the greatest crises to face the United States Government. That crisis occurred within just a few days ago when the country was on a catastrophic train wreck to oblivion. What happened was this: the government began to go into a tailspin with a partial shutdown of the U.S. government which included a catastrophic threat of financial default and ruin of the country’s credit status. In addition, there was a threat that the nation’s debt limit was not going to be extended beyond October 17, 2013.  This chaos, in turn, would directly prevent the U.S. government from paying its bills and meeting its financial obligations.

The following is an edited version of an Associated Press article:

“Standard & Poor’s estimated the shutdown has taken $24 billion out of the economy, and the Fitch credit rating agency had warned that it was reviewing its AAA rating on U.S. government debt for a possible downgrade.

President Obama and his Democratic allies on Capitol Hill were the decisive victors in the fight, which was sparked by Tea Party Republicans including Sen. Ted Cruz of Texas. They prevailed upon skeptical GOP leaders to use a normally routine short-term funding bill in an attempt to “defund” the 2010 Affordable Health Care Law known as ‘Obama care.’

‘We fought the good fight. We just didn’t win,’ House Speaker John Boehner, R-Ohio, conceded. He was given positive reviews from Republicans for his handling of the crisis, though it again exposed the tenuous grasp he holds over the fractious House GOP conference. Republican Sen. John McCain of Arizona said the American people disapproved of how Republicans, and also Democrats and the president, handled the budget gridlock.

‘Hopefully, the lesson is to stop this foolish childishness,’ McCain said Thursday on CNN. The shutdown sent approval of the GOP plummeting in opinion polls and exasperated veteran lawmakers who saw it as folly. ‘It’s time to restore some sanity to this place,’ House Appropriations Committee Chairman Harold Rogers, R-Ky., said before the vote.’[i]

Who Created the Economic Crisis?

The instigators of this crisis were a minority of congressmen in the House of Representatives representing just one political faction of the Republican Party. This political faction is known as the Tea Party.

Public polls during the crisis overwhelmingly condemned the Republican Party in general for holding the country hostage. But the Tea Party, as instigators, was blamed even more for their reckless, irresponsible, failed and ill-conceived plan, that in15 days into the shutdown had already hurt a million+ people nationwide.

Initially, it was their plan to use the shutdown as a bargaining chip in their desire to force concessions on the Affordable Care Act, and to cut federal spending. And this misguided extremism via extortion was attempted as a strategy in lieu of the normal legislative process. Such a deleterious plan, approved and executed by the Tea Party, gives the distinct impression that Tea Party members are “not-too-bright.”

It’s fair to say that Tea Party ultraconservatives are, as a result of their failure to implement a destructive financial meltdown and default of the United States government, earned the scorn of the American people, but are now the laughing stock of the nation. Because of Tea Party actions, the United States, at the very least, was embarrassed before the international community and our allies.

Now that the dust has settled (at least for a while in Washington D.C.) it’s important to learn more about what the Tea Party is really all about. Are they dangerous individuals who need to be tried for treason? Are they right-wing ideologues representing the values of the most extremist conservative viewpoints giving a great portrayal of a lunatic fringe? Do they actually represent a threat to the American people?

And finally, should people who cavalierly took the nation to the near brink of financial ruin, harming millions of people in their wake, be held accountable and charged with criminal acts and eventually punished accordingly? These questions should now be asked by people in government, the FBI, and the United States Department of Justice.

But first it is important to ask a set of less dire questions to get a correct picture of who these people are, including those currently (but perhaps temporarily) holding office in the House of Representatives. Ultimately, one needs to assess the facts by asking a set of simple questions:

 

  • What is the Tea Party?
  • What do they want?
  • What are their Demographics?
  • What’s Public Opinion of the Tea Party?
  • Who is Funding the Tea Party?

 

What is the Tea Party?

The Tea Party movement is an American decentralized political movement that is primarily known for advocating a reduction in the U.S. National debt and federal budget deficit by reducing U.S. government spending and taxes. The movement has been called partly conservative, partly libertarian, and partly populist. It has sponsored protests and supported political candidates since 2009.

The name is derived from the Boston Tea Party of 1773, an iconic event in American history.  Anti-tax protesters in the United States have often referred to the original Boston Tea Party for inspiration.  References to the Boston Tea Party were part of Tax Day protests held throughout the 1990s and earlier. By 2001, a custom had developed among some conservative activists of mailing tea bags to legislators and other officials as a symbolic act.

 

What do they want?

 

The Tea Party does not have a single uniform agenda. The Tea Party generally focuses on government reform. Among its goals are limiting the size of the federal government, reducing government spending, lowering the national debt and opposing tax increases. To this end, Tea Party groups have protested the Troubled Asset Relief Program (TARP), stimulus programs such as the American Recovery and Reinvestment Act of 2009 (ARRA, commonly referred to as the Stimulus or The Recovery Act), cap and trade, health care reform such as the Patient Protection and Affordable Care Act (PPACA, also known simply as the Affordable Care Act or “Obama care”) and perceived attacks by the federal government on their 1st, 2nd, 4th and 10th Amendment rights.

The decentralized character of the Tea Party, with its lack of formal structure or hierarchy, allows each autonomous group to set its own priorities and goals. Goals may conflict, and priorities will often differ between groups. Many Tea Party organizers see this as strength rather than a weakness, as decentralization has helped to immunize the Tea Party against co-opting by outside entities and corruption from within.

The Tea Party has generally sought to avoid placing too much emphasis on traditional conservative social issues. National Tea Party organizations, such as the Tea Party Patriots and Freedom Works, have expressed concern that engaging in social issues would be divisive. Instead, they have sought to have activists focus their efforts away from social issues and focus on economic and limited government issues. Still, many groups like Glenn Beck’s 9/12 Tea Parties, TeaParty.org, the Iowa Tea Party and Delaware Patriot Organizations do act on social issues such as abortion, gun control, prayer in schools, and illegal immigration.

Tea Party groups have also voiced support for right to work legislation as well as tighter border security, and opposed amnesty for illegal immigrants. After the Republican Party lost seats in Congress and the Presidency in the 2012 elections, they began to work at the state level to nullify the healthcare reform law.

They have also protested the IRS for controversial treatment of groups with “tea party” in their names. They have formed Super Pac’s to support candidates sympathetic to their goals, and have opposed what they call the “Republican establishment” candidates.

Even though the groups have a wide range of goals, the Tea Party places the Constitution at the center of its reform agenda. It urges the return of government as intended by the Founding Fathers.

It also seeks to teach its view of the Constitution and other founding documents. Scholars have described its interpretation variously as originalist, popular, or a unique combination of the two. However, their reliance on the Constitution is selective and inconsistent. Adherents cite it, yet do so more as a cultural reference rather than out of commitment to the text, which they seek to alter.

Several constitutional amendments have been targeted by some in the movement for full or partial repeal, including the 14th, 16th, and 17th. There has also been support for a proposed Repeal Amendment, which would enable a two-thirds majority of the states to repeal federal laws, and a Balanced Budget Amendment, which would limit deficit spending. Had the United States had such an amendment during World War II, the U.S. would have lost that war.

One attempt at forming a list of what Tea Partiers wanted Congress to do was the basis of the Contract from America. It was a legislative agenda created by conservative activist Ryan Hecker with the assistance of Dick Armey of Freedom Works. Armey had co-written the previous Contract with America released by the Republican Party during the 1994 midterm elections.

One thousand agenda ideas that had been submitted were narrowed down to twenty-one non-social issues. Participants then voted in an online campaign in which they were asked to select their favorite policy planks. The results were released as a ten-point Tea Party platform. The Contract from America was met with some support within the Republican Party, but it was not broadly embraced by GOP leadership, which released its own ‘Pledge to America.’

 

What Are Their Demographics?

The vast majority of the Tea Party Caucus comes from the West and the South. Whether by accident or design, the public faces of the Tea Party in the House of Representatives are Midwesterners.

But while there may be Tea Party sympathizers throughout the country in the House of Representatives, the Tea Party faction alone used the debt ceiling issue to plunge the nation into crisis. Overwhelmingly this faction is Southern in its origins.

Sam Stein of the Washington Post wrote an interesting article called: Tea Party Survey: Old, Conservative, Hate Obama, and Like Fox News.

According to Sam Stein:

“The individuals who make up the Tea Party movement are largely conservative and get their news from Fox; they’re generally old and of moderate to low income; and they’re fairly convinced that their taxes are going to rise in the next few years, even though they likely won’t.

Those conclusions are part of a new study put together by The Winston Group, a conservative-leaning polling and strategy firm run by the former director of planning for former Speaker of the House Newt Gingrich. And they provide a telling new window on the political force that has revamped the Republican Party and altered the landscape of the 2010 elections.

In the course of conducting three national surveys of 1,000 registered voters, Winston was able to peg the percentage of the public that identifies itself with the Tea Party at roughly 17 percent. The group pledges that it is independent of any particular party (indeed 28 percent of Tea Party respondents in the Winston survey labeled their affiliation as such). But on pretty much every defining political or demographic issue, the movement lines up with the GOP or conservative alternatives.

Sixty-five percent of Tea Party respondents called themselves ‘conservative’ compared to the 33 percent of all respondents who did the same. Just eight percent of Tea Party respondents said they were ‘liberal.’”

Forty-seven percent of Tea Party respondents said that Fox News was either the top or second source of news they turn to, compared with 19 percent of the overall public who said the same thing.

More than 80 percent (81 percent) of Tea Party respondents expressed very little approval of Barack Obama’s job as President, which exceeded disapproval levels held even by Republicans (77%) and conservatives (79%).

All these data points suggest that the Tea Party crowd is comprised predominantly of conservatives. And, not surprisingly, the demographics of the movement seemingly align with those who traditionally vote for the conservative candidate as well. Fifty-six percent of Tea Party respondents are male; 22 percent are over the age of 65 (compared with just 14 percent who are between the ages of 18 and 34); and 23 percent fall in the income range of $50,000 and $75,000.

In another survey, Tea Party supporters are likely to be older, white and male. Forty percent are age 55 and over, compared with 32 percent of all poll respondents; just 22 percent are under the age of 35, 79 percent are white, and 61 percent are men. Many are also Christian fundamentalists, with 44 percent identifying themselves as “born-again,” compared with 33 percent of all respondents.”

The Tea Party Members in Congress

     Fiery Republicans known as the Tea Party Caucus are at the center of the debate over which version of a plan – if any   – to cut spending and raise the debt limit should be adopted in Congress.These conservatives, many of whom were swept into office during the 2010 midterm elections, have made it their mission to rein in spending and shrink the size of government, even if it meant taking the country to the edge of default.

Here is the full list of the official Tea Party Caucus in the House of Representatives, with the freshman representatives in BOLD:

Sandy Adams (FL-24)
Robert Aderholt (AL-04)
Todd Akin (MO-02)
Rodney Alexander (LA-05)
Michele Bachmann (MN-06)
Roscoe Bartlett (MD-06)
Joe Barton (TX-06)
Rob Bishop (UT-01)
Gus Bilirakis (FL-09)
Diane Black (TN-06)
Paul Broun (GA-10)
Michael Burgess (TX-26)
Dan Burton (IN-05)
John Carter (TX-31)
Bill Cassidy (LA-06)
Howard Coble (NC-06)
Mike Coffman (CO-06)
Ander Crenshaw (FL-04)
John Culberson (TX-07)
Jeff Duncan (SC-03)
Blake Farenthold (TX-27)
Stephen Lee Fincher (TN-08)
John Fleming (LA-04)
Trent Franks (AZ-02)
Phil Gingrey (GA-11)
Louie Gohmert (TX-01)
Vicky Hartzler (MO-04)
Wally Herger (CA-02)
Tim Huelskamp (KS-01)
Lynn Jenkins (KS-02)
Steve King (IA-05)
Doug Lamborn (CO-05)
Jeff Landry (LA-03)
Blaine Luetkemeyer (MO-09)
Kenny Marchant (TX-24)
Tom McClintock (CA-04)
David McKinley (WV-01)
Gary Miller (CA-42)
Mick Mulvaney (SC-05)
Randy Neugebauer (TX-19)
Rich Nugent (FL-05)
Steven Palazzo (MS-04)
Steve Pearce (NM-02)
Mike Pence (IN-06)
Ted Poe (TX-02)
Tom Price (GA-06)
Denny Rehberg (MT-At large)
David Roe (TN-01)
Dennis Ross (FL-12)
Edward Royce (CA-40)
Steve Scalise (LA-01)
Pete Sessions (TX-32)
Adrian Smith (NE-03)
Lamar Smith (TX-21)
Cliff Stearns (FL-06)
Tim Walberg (MI-07)
Joe Walsh (IL-08)
Allen West (FL-22)
Lynn Westmoreland (GA-03)
Joe Wilson (SC-02)

What’s Public Opinion of the Tea Party?

The Tea Party is more unpopular than ever before, according to a Rasmussen poll recently released, with just three in 10 voters holding favorable views of the movement. Half of respondents said they view the party unfavorably. The Rasmussen survey used automated phone calls to survey 1,000 likely voters back in January..

The numbers obtained in the survey represented a considerable dive in support since the Tea Party’s heyday in 2009, when a majority of voters rated it favorably.

Many of the Senate challengers with Tea Party backing were defeated in 2012, and the movement suffered another PR blow after a falling out among the leadership of the Tea Party group, Freedom Works.

Although most members of the House’s Tea Party Caucus were reelected in November, the group had some high-profile losses, including the defeats of former Reps. Joe Walsh and Allen West. Rep. Michele Bachmann (R-Minn.), the chairwoman of the House Tea Party Caucus, barely retained her seat.

The movement is now widely seen by the public as declining, according to the Rasmussen poll — 56 percent of voters said the Tea Party became less influential over the past year, and just 8 percent said they identified as part of the Tea Party movement.

Other polling conducted since the election has found similar results when looking at the Tea Party’s popularity, but with a larger number of people saying they agreed with or were part of the movement. A CNN/ORC poll conducted in November last year found that half of Americans viewed the Tea Party unfavorably, actually a modest improvement from the movement’s standing in late 2011.

A December poll from Politico/GWU found that 21 percent of likely voters identified with or considered themselves part of the Tea Party movement. Polls from CNBC in November both found that about 20 percent of adults were supporters of the movement.

In an article by Carol Forsloff titled, “Tea Party Demographics: White, Republican, Older Male with Money” reported,

“Several polls are now out, assessing the demographics of the Tea Party Movement that largely agree the majority of its members are Republican, largely white, above the mean in age and income and voted for John McCain.

So do Tea Party people reflect the average American as they represent themselves? Not usually if you are a middle-aged woman of Hispanic background, an African-American male or a union member in New England just scraping by, according to the polls.”

A conservative blogger examined this analysis of Tea Party members, citing CNN statistics declaring they are predominantly male, more college educated and higher earners than the general population at large, but not necessarily older or just from the South. A progressive blogger on ThinkProgress looked at the CNN statistics and relayed the same information as the conservative fellow, stating the following:

“Turns out that the ‘tea party’ movement sweeping the nation is disproportionately composed of individuals who have higher-than-average incomes. It’s also disproportionately composed of men. And disproportionately composed of white people. And disproportionately composed of self-identified conservatives. And disproportionately composed of self-identified Republicans.

In other words, well-to-do conservative white men don’t much care for Barack Obama’s policies. Which, of course, is something we already knew from the exit polls back in November 2008.”

Who is Funding the Tea Party?

In an August 30, 2010, article in The New Yorker, Jane Mayer said that the billionaire brothers David H. Koch and Charles G. Koch and Koch Industries are providing financial and organizational support to the Tea Party movement through Americans for Prosperity, which David founded. The AFP’s “Hot Air Tour” was organized to fight against taxes on carbon use and the activation of a cap and trade program.

In 1984, David Koch also founded Citizens for a Sound Economy, part of which became Freedom Works in a 2004 split, another group that organized and supports the movement.

Koch Industries issued a press release stating that the Kochs have “no ties to and have never given money to Freedom Works”. Former ambassador Christopher Meyer wrote in the Daily Mail that the Tea Party movement is a mix of “grassroots populism, professional conservative politics, and big money”, the last supplied in part by the Kochs. Mayer says that the Koch brothers’ political involvement with the Tea Party has been so secretive that she labels it “covert”.

Post Script

     Many organizations in society, including political organizations, engage in what is called sub-optimizing behavior. That’s when stated goals are not the real goals; they are simply stated goals.

The real goals of organizations, political groups, or individuals are often hidden and not stated publicly. Words from politicians often disguise their real motives. Beliefs and values dominate all our lives. And the Tea Party is no exception, especially when backed by Big Business and the Billionaire Koch Brothers and Koch Industries.

Based on the behavior of Tea Party members in Congress, my assumption these last few weeks is that the Tea Party in America is a lunatic fringe and is the new face of the Republican Party.

     Currently only 8% of Americans identify themselves as Tea Party members. And, it appears the Tea Party in Congress has a stranglehold on other Republicans. It’s okay for people to cling to their values and beliefs. But when such values and beliefs threaten the United States with financial disaster and ruin, then it’s time for other stronger forces to counter such attacks on the integrity of the United States and its people.

     As much as I’d like to see it, it’s unlikely these congressional reprobates will ever be tried for treason or brought up on criminal charges by the U.S. Department of Justice. The best thing the people can do is toss the Tea Party members out of Congress in the next election. Another option is to petition their immediate recall from office.

  

The Ongoing Problem of Gridlock     

The vast majority of Americans are moderate “Middle-of-the-Road” Independents, Democrats and Republicans. When one has different values from their fellow citizens, it naturally creates tension, suspicion, distrust, and polarization. Since 2008 we’ve witnessed the worst of these political differences acting out as irreconcilable gridlock when it comes to carrying out the various duties of the government (passing a budget on time, passing legislation to help our citizens, properly defending the country, etc.). For several years now gridlock  has created and prevented very little from being accomplished.

          Politics has always been called, “the Art of Compromise.” This is an old saying that no longer appears applicable in modern day politics.

The primary function of politicians should be to honestly represent their constituency. But at the same time politicians need to make prudent, critical choices in the handling of scarce resources (taxpayer dollars). That latter function is an awesome responsibility that needs careful attention to detail. But the overriding responsibility of those in Congress today should be to help their fellow citizens live better, more prosperous lives.

Unfortunately, the legacy of conservatism or radical conservatism has never aligned itself with helping people. During the last 160 years, conservatives were opposed to the abolition of slavery, fought against giving women the right to vote, fought against integration, desegregation and later busing, opposed the New Deal during the Depression of the 1930s, opposed the Social Security Act in 1935 and later, minimum wage laws. They were a major voice against the Civil Rights Movement of the 1960s, and were responsible for promoting racism and Jim Crow, particularly in the old South. During the 1970s conservatives also opposed affirmative action.

In more recent years, conservatives have opposed amnesty for illegal aliens. They also want to cut entitlement programs like Social Security and Medicare, and now their strident attitude is to oppose the President’s Affordable Care Act that promotes universal healthcare. One way of characterizing all this political history is that, if legislation was going to help a lot people and improve their lives, conservatives were “hell-bent” to oppose it.

At this point in history the Tea Party has been at the center of Washington’s gridlock. The only real option for Americans in the 2014 and 2016 national elections is to terminate Tea Party conservatives and most Republicans from holding office in the United States Congress.

This doesn’t mean that creating jobs, cutting spending or raising or lowering taxes aren’t important issues; they certainly are. But Tea Party members who take a simplistic ideological viewpoint of how the economy works lack insight into the complexities of the economy and its business cycles.

     Just remember these statistics from my last Blog:

“Since Democrat John F. Kennedy took office in January 1961, non-government payrolls in the U.S. swelled by almost 42 million jobs under Democrats, compared with 24 million for Republican presidents, according to Labor Department figures. Democrats hold the edge though they occupied the Oval Office for 23 years since Kennedy’s inauguration, compared with 28 for the Republicans. In addition, over the past 50 years, Republican administrations oversaw the largest decline in wages as measured as a percentage of the U.S. Gross Domestic Product (GDP).

If you really care about data and facts (not just value judgments), then it should be very clear to you who to vote for during the 2014 and 2016 elections.”


1 Associated Press Writers:  Alan Fram, Jessica Gresko, and Connie Cass. “Government open again, Obama bemoans Damage”, October 17, 2013

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Under the Microscope: Understanding Economics and the Unemployment Rate   

“She Sat like Patience on a Monument, Smiling at Grief.”

Twelfth Night, William Shakespeare

Introduction

     The unemployment rate is but one factor or variable in our economy. There are many others including:

  • Inflation
  •  consumer aggregate demand for goods and services
  •  governmental fiscal policy (spending and taxes)
  •  monetary policy (policies around the expansion or contraction of the money supply)
  •  private sector business practices including business contraction or expansion
  •  population expansion or contraction
  •  different industries
  •  technological development
  •  national and global politics
  •  Entrepreneurship
  •  skill sets and educational level of Americans today.

Then there is one important “juice of the economy” that affects everyone, and is known as Credit Availability. All these factors or variables affect each other to one degree or another.

A Sense of Bewilderment and Frustration

     Understanding the unemployment rate has never been a simple task. Complex interactive variables and a constantly changing economy sometimes seem to conspire to give the public a sense of bewilderment when trying to understand or figure out what is going on. It’s sad and disappointing when your close friends and/or family members just can’t seem to find a job. The Unemployment Rate is more than a statistic; it’s about real people, their lives, and their livelihood.

This bewilderment and frustration does cause anger creating a kind of collective social consciousness where everybody agrees on only one thing, namely: Let’s point a finger and play the “Blame Game.”

People want to blame the Congress, the President, or Democrats and Republicans in general, the Federal Reserve or its chairman, or the global economy when jobs are viewed as leaving the United States.

Economists aren’t too helpful sometimes because they cannot always agree on what is the best course of action for creating jobs or achieving full employment in the United States. Others prefer to blame labor unions, illegal immigration, Wall Street, or big business and/or small business.

As a blogger I can’t extricate the public from their frustrations, lack of knowledge, or prejudices.  However, one way I can help is to provide a more factual and theoretical basis for understanding what unemployment really is, and how it fits within the overall framework of what we call the economy. Under the microscope, here is some background which should help with understanding the economy.

Background

       Generally, astute observers might suggest that the problem of unemployment is somehow tied to the economy or business cycles such as (Expansion and Growth, Prosperity, Recession [or contraction], and finally Recovery). Other economists prefer the following descriptive terms: (Prosperity, Recession, Depression, and Recovery). The guy on the street might suggest that our economy simply involves only three cycles (The Good, The Bad, and the Ugly). All of this will become clearer later in this Blog.

Economic cycles, however described, do account for the lion’s share of the explanation of how the economy works, including how the Unemployment Rate fits in. Economic forces seem to have a life of their own. Nevertheless, other forces besides economic cycles are important.

The other explanation for the economy and unemployment rate relates to politics and government actions to deal with the economy and unemployment.

Current Economic Environment

     In the current economy the country does seem to be in a very long recovery cycle. Although business cycles always occur in the same order, the length of each cycle cannot easily be predicted.

Since much unemployment or underemployment occurs among the poor and the working poor, some people feel the replacement of lower skilled jobs with better technology and more jobs requiring higher skill sets has left the poor and working poor holding the bag. However, given that almost every profession experiences unemployment during a recession (engineers, scientists, teachers, highly skilled technicians, etc.) a reasonable person might conclude that unemployment affects everyone, not just the poor and the working poor.

Other targets for blame include: the rich and wealthy in society, poor planning of the job-seeker himself, and finally—the consumer for not spending enough money that would support and stimulate business. When business suffers as consumer demand ebbs, it creates the conditions that allows  a higher than normal unemployment rate.

How best can one unravel the various complexities of understanding the economy and begin to shed light on the unemployment rate? In an ideal world we all want full employment for our citizens. Unfortunately, no society ever lives in an ideal world.

     So what is the best course to understanding the complexities of the economy and the unemployment rate?

In a cosmic sense every variable affects every other variable to some degree. But in a down-to-earth way we have to remember the famous words of Jack Webb’s character Joe Friday in the hugely popular television series, Dragnet. “Just give me the facts, mame!”So, what are the facts?

     First we need to start with a few facts on the unemployment rate in America followed by an explanation of the various phases of the business cycle.

 

Unemployment Rate Data

 

The Unemployment Rate in the United States (January and December 2003-2013)

 

                               January                 December

2003                            5.8                            5.7

2004                            5.7                            5.4

2005                            5.3                            4.9

2006                            4.7                            4.4

2007                            4.6                            5.0

2008                            5.0                            7.3

2009                            7.8                            9.9

2010                            9.8                            9.3

2011                            9.1                            8.5

2012                            8.3                            7.8

2013                            7.9*

*As of August 2013 the unemployment rate in the United States was 7.3%, a level not seen since December, 2008. It went from a high of 9.9% in December 2009 to a low of 7.3% in August, 2013. This 2.6% drop in the unemployment rate occurred during the administration of President Barack Obama, who said “Yes We Can” while Republicans blamed him for the high unemployment. This was despite the fact they created the conditions that caused the unemployment rate to jump from 5.0% to 7.3% during the catastrophic economic collapse of 2008 which occurred during the last year of the Bush Administration.

Definitions and Concepts

    

 

Unemployment

 

There are four types of unemployment:

 

Structural Unemployment

     Structural unemployment is caused by the types of production and laws of an economy that govern whose skills are valuable in the marketplace.

Frictional Unemployment

     Frictional unemployment is associated with changing jobs, often because workers are searching for better opportunities or moving to new locations.

Cyclical Unemployment

     Cyclical unemployment is caused by changes in real GDP that are associated with the business cycle.

Seasonal Unemployment

     Lastly, seasonal unemployment is caused by changes in employment associated with changes in the seasons.

 

The Basic Business Cycle

The four phases of a business cycle are briefly explained as follows:

1. Prosperity Phase

When there is an expansion of output, income, employment, prices and profits, there is also a rise in the standard of living. This period is termed as Prosperity phase.

The features of prosperity are:

  1. High level of output and trade.
  2. High level of effective demand.
  3. High level of income and employment.
  4. Rising interest rates.
  5. Inflation.
  6. Large expansion of bank credit.
  7. Overall business optimism.
  8. A high level of MEC (Marginal efficiency of capital) and investment.

Due to full employment of resources, the level of production is Maximum and there is a rise in GNP (Gross National Product). Due to a high level of economic activity (buying and selling goods and services), it causes a rise in prices and profits. There is an upswing in the economic activity and economy reaches its Peak. This is also called as a Boom Period.

2. Recession Phase

The turning point from prosperity to depression is termed as the Recession Phase.

During a recession period, economic activities slow down. When demand starts falling, the overproduction and future investment plans are also given up. There is a steady decline in the output, income, employment, prices and profits.

The businessmen lose confidence and become pessimistic (Negative). It reduces investment. The banks and the people try to get greater liquidity, so credit also contracts. Expansion of business stops, stock market falls. Orders are cancelled and people start losing their jobs. An increase in unemployment occurs with or following a sharp decline in income and aggregate demand. Generally, recession lasts for a short period.

Many people talk about a “mild recession” and even “severe recession.” These are all matters of degree and economists can endlessly debate which is which. However, almost no one wants to consider or talk about the more devastating type of decline called a Depression.

3. Depression Phase

When there is a continuous decrease of output, income, employment, prices and profits, there is a fall in the standard of living and depression sets in.

The features of depression are:

  1. Fall in volume of output and trade.
  2. Fall in income and rise in unemployment.
  3. Decline in consumption and demand.
  4. Fall in interest rate.
  5. Deflation.
  6. Contraction of bank credit.
  7. Overall business pessimism.
  8. Fall in MEC (Marginal efficiency of capital) and investment.

In depression, there is under-utilization of resources and fall in GNP (Gross National Product). The aggregate economic activity is at the lowest, causing a decline in prices and profits until the economy reaches its Trough (low point).

4. Recovery Phase

The turning point from depression to expansion is termed as Recovery or Revival Phase.

During the period of revival or recovery, there are expansions and rise in economic activities. When demand starts rising (many economists assert that consumers are the driving force of any economy), production increases and this causes an increase in investment. There is a steady rise in output, income, employment, prices and profits. The businessmen gain confidence and become optimistic (Positive). This further increases investments.

The stimulation of investment brings about the revival or recovery of the economy. The banks expand credit, business expansion takes place and stock markets are activated. There is an increase in employment, production, income and aggregate demand, prices and profits start rising, and business expands. Revival slowly emerges into prosperity, and the business cycle is repeated.

Thus we see that, during the expansionary or prosperity phase, there is inflation and during the contraction or depression phase, there is deflation.

Economics and Employment in a Nutshell

     As our population increases there is more consumer demand. And, there are those that say that the driving force behind any economy is the consumer. This aggregate demand for goods and services causes businesses to have to keep up with consumer demand. Business does this by expanding or creating more products (inventory) and needed services.

This creates more money for businesses through profits and may require credit and acquiring loans to expand a business as well. In turn, business must hire more people.

Hiring people involves more money for salaries, insurance, office space, vehicles, etc. But here is the rub: In order for business to pay for all this expansion, they must raise the prices on goods and services. This, as everyone knows, is Inflation.

 As prices go higher consumer demand begins to lessen, and people get laid off when consumer demand begins to really tank. The sad truth is—as prices come down (deflation), the unemployment rate goes up. When the economy heats up again, then the expansionary business cycle causes businesses to once again hire more people. Near full employment (not real full employment) is achieved during the economic cycle known as “Prosperity.” The variability one finds in the unemployment rate is a direct result collectively of the four business cycles, and political factors as well.       

Political Influences on the Economy

     In the final analysis, a high unemployment rate is due to both political factors and the recessionary/depression economic business cycles. Economic business cycles are inevitable, but very difficult to predict how long each cycle will last. However, political factors make their own contribution to a high unemployment rate. And, everyone should be aware,  the order of economic cycles cannot be altered. Although timing of economic cycles can’t be predicted, they can be influenced by political factors. Such timing is heavily influenced by which political party dominates fiscal and monetary policies. These policies can be narrowed down to party-related tax policies, spending policies, monetary policies, and policies dealing with the availability of credit. All of these factors affect the unemployment rate.

Explanations for all these governmental actions can be found in a seven part series I blogged called, “Election Year Politics and the Economy,” back in 2012.

The Current Political Environment

     One question the public needs to think about is whether Republicans or democrats are better at tinkering with the economy and the unemployment problem?

At the present time that question is difficult to answer because the U.S. Government is in a state of crisis where efforts to help the unemployed or improve the economy have taken a back seat to politics and the shutting down of the government.

A hand full of Republican Tea Party members in Congress wanted and decided to hold the American people, and its government, hostage. It was a strategy created in lieu of the normal legislative process. As a result this caused a government shutdown. They did so primarily over just one issue—The Affordable Care Act. Until the government shutdown is really over, plans and resources to stimulate the economy and lower the unemployment rate—are evidently on hold.

So the public needs to start asking questions of Tea Party members now, long before the public goes to the polls in 2014. They might take this approach. Like Inspector Harry Callahan (played by Clint Eastwood) in the 1971 movie Dirty Harry, they might ask Tea Party members something like this: “So, you have to ask yourself this question. Do you feel lucky? Well, do you punk? The serial killer thought he was lucky. He reached for his gun and Inspector Harry Callahan blew him away.

Tea Party members, like Dirty Harry’s serial killer, may think they just might get lucky by holding the country hostage. Unfortunately, with recalcitrant Tea Party members controlling The House of Representative like domestic terrorists, they just might succeed. Polls indicate the Republican Party is going to get the most blame for the failed ill-conceived strategy to shut down the government and government services. The country is really pissed over the government shutdown!

Metaphorically speaking, the public after having been raped in 2013 by Tea Party members is going to get the last word, and perhaps poetic justice and revenge. It is my fondest hope that during the upcoming 2014 elections, the public, like the Terminator or Dirty Harry, is going to end the political careers of all Tea Party members who shouldn’t have been elected to Congress in the first place. However, the public has a very short memory. So, we’ll see what happens in 2014.

But a bigger question remains. How should sensible moderate Republicans or Democrats in general be viewed as to their ability to help improve the economy or help to lower the unemployment rate via job creation? In the upcoming congressional and senatorial elections in 2014 how should you vote if unemployment and a thriving economy is your uppermost concern?

To understand and answer the question, one needs only to look at past behavior of either political party. Again, who best can tinker effectively with the economy and the unemployment problem, Democrats or Republicans?

 

The Answer

     Since Democrat John F. Kennedy took office in January 1961, non-government payrolls in the U.S. swelled by almost 42 million jobs under Democrats, compared with 24 million for Republican presidents, according to Labor Department figures. Democrats hold the edge though they occupied the Oval Office for 23 years since Kennedy’s inauguration, compared with 28 for the Republicans. In addition, over the past 50 years, Republican administrations oversaw the largest decline in wages as measured as a percentage of the U.S. Gross Domestic Product (GDP).

If you really care about data and facts (not just value judgments), then it should be very clear to you who to vote for during the 2014 and 2016 elections.

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