“Labor Day” should be renamed “Corporation Day” or “War Day”

by Dr Paul Craig Roberts for Infowars

It is Labor Day weekend, 2011, but labor has nothing to celebrate. The jobs that once gave American workers a stake in capitalism have left and gone away. Corporations in pursuit of near-term profits have moved labor’s jobs to China, India, Indonesia, Taiwan, South Korea and Eastern Europe.

Labor arbitrage, that is, the substitution of foreign labor that is paid less than its productivity for American labor, has enriched Wall Street, shareholders and corporate CEOs, but it has devastated American employment, household incomes, tax base, and the outlook for the US economy.

This Labor Day week-end’s job report, announced by the Bureau of Labor Statistics (BLS) on Friday, September 2, says zero net new jobs were created in August, a number 250,000 less than the amount of monthly job creation necessary to make progress in reducing America’s high rate of unemployment.

The zero figure is actually an optimistic number. As John Williams (shadowstats.com) has made clear, problems with the BLS’s seasonal adjustments and “birth-death” model during the prolonged downturn that began in December 2007 result in the BLS over-estimating new jobs and underestimating lost jobs.

Seasonal adjustments and the “birth-death” model were designed with a growing economy in mind and result in miscounts during downturns. For example, the “birth-death” model estimates new jobs that are created from new start-up companies that are not yet reporting, and it estimates the job losses from companies that have gone out of business. In a growing economy, start-ups exceed jobs losses, but the situation reverses during downturns or during periods of sub-normal job growth. For the past forty-four months, the “birth-death” model has overestimated the number of new jobs created. When the annual revisions are made to the job reports, the excess jobs are taken out, but it is seldom headline news.

The reason that nearly four years of economic stimulus, consisting of large federal budget deficits and near zero interest rates, hasn’t revived the economy is that the jobs that Americans once had have been moved offshore. Stimulus cannot put Americans back to work in jobs that have been given to foreign countries.

Post-World War II Keynesian economists, such as Paul Krugman and Robert Reich, think that if the federal government would add more stimulus by enlarging the already massive federal deficit, new jobs would somehow be created to take the place of those that have left. This is a delusion. Not only have the supply chains necessary to support US economic activity been disrupted and broken by offshoring, but also the same incentive–excess supplies of foreign labor that produces more value than it is paid–that sent jobs abroad is still operative.

In a word, the US economy has been de-industrializing, moving from a developed to an underdeveloped economy, for the past two decades. It has been the case for many years that when the US economy manages to eke out new jobs, they are in non-tradable domestic services, such as health care and social assistance, waitresses and bar tenders, retail clerks. Non-tradable employment consists of jobs that do not produce goods and services that could be exported to reduce the large US trade deficit.

The long-term deterioration in the US economy has been covered up by “reforming” the official measures of unemployment and inflation. The U3 measure of unemployment, the current 9.1% unemployment rate, only measures unemployment among those who are actively seeking a job. Those who have become discouraged by the inability to find a job and have ceased looking are not counted as being among the unemployed, and the U3 measure makes no adjustment for those who are forced into part-time jobs because there is no full-time employment.

The government knows that the U3 “headline” unemployment rate is seriously understated and provides a broader measure known as U6. This measure, which is seldom reported by the financial media, includes short-term discouraged workers (those who have not looked for jobs for six months or less) and an adjustment for those who wish full time employment but can only find part time work. Currently, this measure of unemployment stands at 16.2%.

In 1994 the Clinton “progressive” administration defined long-term discouraged workers out of existence. Consequently, no official unemployment rate includes long-term (more than six months) discouraged workers as unemployed. John Williams estimates this number and adds it to the U6 measure to produce a current rate of US unemployment of 22.7%, an unemployment rate 2.5 times higher than the official rate.

Similar understatement exists in the measure of inflation known as the Consumer Price Index. In order to reduce cost-of-living adjustments to Social Security checks and to hold down other inflation adjustments, the “progressive” Clinton administration accepted the Boskin Commission’s recommendation to introduce substitution into what had been a fixed, weighted, basket of goods used to measure the cost of a constant standard of living. In the new “reformed” measure, if the price of an item increases, say New York strip steak, the index assumes that consumers switch to a less expensive cut, such as round steak. Thus, the price increase doesn’t show up in the CPI.

Consumers, or a number of them, do tend to behave in this way. However, since the basket of goods comprising the CPI is no longer constant, but changes with price changes, the CPI has become a variable measure of the cost of living that reduces the inflation rate by measuring a lower standard of living.

John Williams estimates the CPI according to the previous official methodology that used a fixed basket of goods. He finds the rate of inflation to be much higher than is reported by the substitution-based methodology. http://www.shadowstats.com/alternate_data/inflation-charts

The understatement of inflation serves to boost real Gross Domestic Product growth. In order to compare how much larger (or smaller) the economy is this year compared to last year, the GDP figure has to be adjusted for inflation. If the economy grew 5% in nominal terms and inflation was 3%, then GDP grew 2% in real terms, that is, real goods and services, as opposed to mere price rises, increased 2% over the year.

When John Williams adjusts US GDP with the former or traditional measure of inflation, he finds that there has been no growth in real GDP for several years. In other words, during the period of “economic recovery” the economy has actually been declining.

American economic decline began with offshoring during the Clinton administration. Instead of addressing this threat, the Clinton administration launched the neoconservative program of American Empire with American and NATO naked aggression against Serbia, sending the Serbian leader off to be tried as a war criminal for resisting the dissolution of his country.

The Bush/Cheney regime elevated the pursuit of American Empire under cover of “the war on terror.” Based entirely on lies and falsified intelligence, Bush/Cheney launched wars against the Taliban, who were unifying Afghanistan, and against Saddam Hussein in Iraq.

In the 1980s Hussein was used by Washington to launch a war against the revolutionary government in Iran that had overthrown the American puppet government, headed by the Shah of Iran. Ever since Washington lost its puppet rule over the Iranians, Washington has refused diplomatic relations with Iran. In the place of diplomatic relations, Washington demonizes Iran in order to set the country up for another attack a la Serbia, Afghanistan, Iraq, Libya, Somalia, Pakistan, and Yemen. Syria is next.

Saddam Hussein’s service to Washington was overlooked when it became more important to eliminate support for Hamas and Hezbollah, two barriers to Israel’s expansion in the Middle East, than to maintain Washington’s gratitude to an Iraqi pawn.

Despite unequivocal reports from arms inspectors that Iraq had no weapons of mass destruction and most certainly had nothing whatsoever to do with 9/11, top Bush/Cheney regime officials demonized Iraq as the greatest threat to America. The imagery of mushroom clouds from nuclear weapons was evoked, A war was launched entirely on false pretexts that destroyed a country and left over one million Iraqis dead and four million displaced. What Washington did to Iraq is what the Nazis were tried and executed for at the Nuremberg Trials.

Obama was elected in order to stop the illegal and senseless wars. Instead, Obama both continued the wars in Iraq and Afghanistan and expanded the wars into Libya, Pakistan, and Yemen. Since the deregulation of the financial system under the Bush/Cheney regime and the “war on terror,” the entire economy of the US has been sacrificed for the benefit of the financial sector and the military/security complex.

Labor Day is an anachronism. It should be renamed Corporation Day or War Day to celebrate the success of Bush/Obama in eliminating labor unions as a countervailing power to corporate power and the elevation of War as the highest goal of the American state.

Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously an editor for the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

Spinning Unemployment Figures in a Collapsing Empire

by Dr. Paul Craig Roberts for Global Research

The Bureau of Labor Statistics (BLS) reported Friday that the economy gained only 103,000 new jobs in December--not enough to keep up with population growth--but the rate of unemployment (U.3) fell from 9.8% to 9.4%. If you are confused by the report, you are among the many.

In truth, what fell was not the number of unemployed people but the number of unemployed people who are actively looking for work. Those who have become discouraged and have ceased looking for work are not considered to be in the work force and are not counted as unemployed in the U.3 measure. The unemployment rate fell because discouraged workers increased, not because employment rose.

The BLS counts short-term discouraged workers (less than one year) in its U.6 measure of unemployment. That unemployment rate is 16.7%. When statistician John Williams (shadowstats.com) adds the long-term discouraged, the US unemployment rate as of December 2010 was 22.4%.

The question to ask yourself is: why does the media focus on the unemployment measure that does not count any discouraged workers? The answer is that the U.3 measurement only counts 42% of the unemployed and makes the situation appear to be a lot better than it is.

Where are the 103,000 new jobs? As I have reported for years, the jobs are in non-tradable domestic services: waitresses and bar tenders, health care and social assistance (primarily ambulatory health care services), and retail and wholesale trade.

Today the United States has only 11,670,000 manufacturing jobs, less than 9% of total jobs. Yet, despite America’s heavy dependence on foreign manufactures and foreign creditors, the idiots in Washington think that they are a superpower standing astride the world like a colossus.

John Williams reports that “the level of payroll employment still stands below where it was a decade ago, despite the U.S.population growing by more than 10% in the same period. The structural impairments to U.S. economic activity continue to constrain normal commercial activity, preventing any meaningful recovery in business activity.”

Another way of saying this is that American corporations have taken American jobs offshore and given them to the Chinese. So much for big business patriotism.

Williams also reports that, unless it is finagled, next month’s BLS benchmark revision of payroll employment data will lower the level of previously reported employment by more than 500,000.

Federal Reserve chairman Ben Bernanke used his testimony before the Senate Budget Committee last Friday to warn that the U.S. government must get its budget deficit under control or “the economic and financial effects would be severe.” Here Bernanke is acknowledging that the Federal Reserve cannot indefinitely print money in order to finance wars and bailouts of the mega-rich.

But how is the government to get its budget under control? The U.S. government, regardless of political party or president, is committed to American hegemony over the world. The Congress has just passed the largest military budget in history, and there is no indication that any of America’s wars and military occupations are near an end.

The financial crisis is not over, with more foreclosures and more losses for the financial sector that will result in more taxpayer bailouts for those “too big to fail.” John Williams says that the double-dip is already happening, just disguised by faulty statistics, and that the deficit implications are horrendous and are likely to result in hyperinflation as the Federal Reserve will have to monetize the otherwise un-financeable deficits.

The dollar is also in danger, its role as reserve currency undermined by the Federal Reserve’s creation of more and more dollars.  Temporarily, the dollar is buttressed by the grief that Wall Street’s sale of fraudulent derivative financial instruments to Europe has caused the euro.

The Republicans will try to destroy Social Security and Medicare in order to pay for wars and bailouts. If Americans are capable of realizing that they are threatened on a much greater level by the Republicans’ evisceration of the social safety net than they are by terrorists, the Republican assault on what they call “the welfare state” will fail.

The fallback target will be private pensions, assuming any survive plunder by the Wall Street investment banks. Pension funds could be required to invest in Treasury debt or they could face a levy. In the Clinton administration, Assistant Secretary of the Treasury Alicia Munnell proposed confiscating 15% of all pension assets on the grounds that they had accumulated tax free. Certainly Washington will steal Americans’ pensions, just as Washington has stolen Americans’ civil liberties, in order to continue the empire’s wars of hegemony.

Increasingly, the rest of the world views America as the single source of its financial and political woes. While the superpower massacres Muslims in the Middle East and Central Asia, people in the rest of the world have learned from WikiLeaks that the U.S. government manipulates, bribes, threatens, and deceives other governments in order to have those governments serve the U.S. government’s interest at the expense of the interests of their own peoples.

The American Imperial Empire rests on puppet governments that are increasingly distrusted and hated by the peoples under their rule. Like the Soviet Union’s Eastern European empire, the American Empire is ruled not directly but through puppet states.

Puppet governments are caught between the empire’s power and the power of the local population. To the extent that Europeans have a moral conscience, they will find America’s foreign policy increasingly repugnant. To the extent that Muslim solidarity grows, the Muslim puppet governments that support America’s and Israel’s massacres of Muslims will find themselves threatened from within.

The American Empire is on the rocks, despite its vast arsenal of nuclear weapons and its control over the foreign and domestic policies of its subservient puppet states in Western and Eastern Europe, the United Kingdom, Canada, Australia, parts of Africa, the Middle East, Japan, Thailand, Indonesia, the Baltic states, Georgia, Kosovo, Mexico, Central America, Columbia, and, no doubt, others.

A country that is the font of war and oppression, whose dominance rests on the weak reed of puppet states, and whose economy is collapsing will not long remain dominant.