Job Losses v. Job Gains

by Rich Dunn, NVRDC 2nd Vice Chair

The big news last Thursday was that almost 300,000 jobs were added in the month of June. But a closer look reveals that in reality 500,000 good paying full time jobs were lost and 800,000 low wage part time jobs were created. There was actually a decrease in net employment, which is consistent with all the terrible GDP numbers. The US remains firmly in a job recession, which begets less consumer spending, which begets lower corporate earnings and outlooks, which begets protracted economic recession. The stock market only sees what it wants to see and catapults ever higher, but it’s only a matter of time before the market’s irrational exuberance runs its course and we’ll have a correction. This is exactly what you could expect given the economic illiteracy of the tea party Republicans in control of the national purse strings. The economy needs restructuring, instead we get disasterous sequester spending cuts, proving yet again that elections have consequences.

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Bob Dylan’s America

— by Rich Dunn, NVRDC 2nd Vice Chair

This morning I was listening to Bob Dylan’s song “Like a Rolling Stone” on the radio, and was struck by the line, “When you ain’t got nothin’, you got nothin’ to lose.” That no doubt resonates with the growing number of Americans who have nothing to lose.

Exhibit A: While short term unemployment is back near its historical norm, the number out of work for 27 weeks or longer remains near historic highs. That’s why extended benefits have been renewed no less than 11 times.

That problem remains unresolved, yet extended unemployment benefits are not being renewed for a 12th time. They will expire on December 28th, leaving 1.3 million breadwinners without any bread. The effects will ripple through 2014, leaving 4.9 million job seekers without a lifeline by the end of the year.

The economic effects of those cuts will include 240,000 fewer jobs and a 0.4 percent loss of GDP, which will lower tax revenues and grow the deficit. How ironic is that? And here’s something else that’s ironic: John Boehner’s government shutdown cost the treasury $24 billion, which is exactly what renewing extended unemployment benefits for a year would have cost.

There’s more. On November 1st, SNAP benefits were cut 15% for families with not enough money for food, and in January the House will approve a farm bill with another $40 billion in SNAP cuts. That won’t just hurt food producers, processers, retailers and hungry kids, it will further reduce final demand in the economy, and yes, increase the deficit.

Now the Ryan-Murray budget deal makes permanent the sequester cuts to Head Start, Meals on Wheels, Section 8 housing assistance and shelters for the homeless. And with yet another debt limit showdown looming at the end of February, anti-government zealots in congress will have more leverage to force cuts to programs which the most vulnerable among us depend on to survive.

I can’t help but wonder what’s going to happen when all these people who have nothin’ to lose decide to do something about it. Like vote.

2014 will be an interesting year.

Measuring Progress

Maryland’s government is embracing an alternative way to monitor the state’s well-being called the Genuine Progress Indicator, which brings depth to the analysis of the state’s economic growth.

By Daphne Wysham

Daphne Wysham

Tent cities and shacks sprung up on empty lots across the country. Food lines at soup kitchens wrapped around city blocks. Unemployment soared to 25 percent. Farmers watched helplessly as crop prices plummeted, then lost their land. The evidence was clear, yet at the height of the Great Depression, Congress lacked the tools to accurately measure just how the economy as a whole was faring. With no commonly accepted national income data, they had no guideposts upon which to base sound economic policy.

And so Congress turned to a young and promising Russian-American economist. U.S. lawmakers asked Professor Simon Kuznets of the National Bureau of Economic Research, who would go on to win the Nobel Prize in economics, to develop a data set to assess the state of the national economy. In 1937, Kuznets presented a vast volume of data on income to Congress. It became the Gross National Product (GNP).

global-progress-indicator-maryland

With remarkable foresight and humility, Kuznets warned that his newly minted GNP shouldn’t be used as an instrument of social policy. It could never adequately measure the things we value, he said, such as housework or caring for elderly parents. Nor, he warned, could the GNP distinguish between the growth of good and bad jobs. The data would be the same if workers earned their pay from employers who endangered their lives or guarded their health and safety. “Goals for more growth should be more growth of what and for what,” Kuznets said.

Alas, Kuznets’ warnings on the GNP — later renamed the Gross Domestic Product (GDP) — went unheeded. Instead, the GDP became the barometer of health not only for the U.S. economy, but for the entire global economy.

More than 70 years later, the desirability of GDP growth is so entrenched in our national and international discourse that it’s hard to imagine it any other way. The revered indicator’s expansion or contraction can swing national elections. Conversely, talk of GDP declines can drive a country to war.

During tough economic times such as these, it’s particularly surprising to have a leader bucking the tide. Yet Martin O’Malley is doing just that. Maryland’s governor is the first in the United States to embrace a set of alternative indicators that bring depth to the analysis of his state’s economic growth. Under O’Malley’s leadership, the state’s officials are now gathering and annually updating economic, social, and environmental data that help measure the overall wellbeing of Maryland’s citizens.

The 26 underlying indicators, which collectively comprise the “Genuine Progress Indicator,” are a more meaningful gauge of the overall economic health and wellbeing of Maryland residents than standard economic measuring sticks. For example, the state tracks things like volunteerism, time spent with family and loved ones, and air quality in its quest to gauge its real progress. These indicators may lack concrete economic value, but studies show they help make a society more healthy and vibrant.

GPI assesses what’s left behind when the “gross product” expands. Is the landscape more or less toxic than before? Is the air and water cleaner or dirtier? How well-educated is the populace? Is public transportation decent? Is crime more common? Are too many people spending more time commuting to jobs than at home with their kids?

Maryland leads the nation in measuring overall societal wellbeing through the GPI, but there are similar efforts underway elsewhere in the United States, as well as in Canada, France, and even Bhutan. Yes, Bhutan, a tiny country nestled in the Himalayan mountains. There, “gross domestic happiness” carries more weight than the gross domestic product.

It’s time to recall Kuznets’ warnings about the limitations of the GDP and to pick up where he left off by embracing a new set of tools that will help shape good social, environmental, and economic policy — not just for Maryland, but for our entire country and the world.


Daphne Wysham is a fellow at the Institute for Policy Studies, where she’s conducting research around ways in which alternative metrics to the GDP, such as Maryland’s "Genuine Progress Indicator," can be used to build a more sustainable society. www.ips-dc.org   Distributed via OtherWords (OtherWords.org)

How Sandy Reveals the GDP’s Twisted Logic

Extreme weather doesn’t boost the economy.

— By John Talberth and Daphne Wysham

As he waded knee-deep in an Atlantic City street, pummeled by Superstorm Sandy’s winds, CNN’s Chief Business Correspondent Ali Velshi declared that it was too early to tell whether Sandy would be a plus or a minus for the U.S. economy.

The authorities are starting to tabulate the stupendous toll in Sandy’s wake — in lost lives, homes, businesses, infrastructure, and water pollution. While they crunch numbers, Velshi’s callous viewpoint is flowing naturally from the twisted logic of using the gross domestic product (GDP) as the economy’s most ubiquitous measure of economic well-being. GDP counts everything we spend money on as a plus. So it follows that the $50 billion (and counting) we’ll spend burying the dead, and replacing lost homes and businesses will make us “better off.”

Take University of Maryland Economist Peter Morici. Back when the cleanup estimates stood at $20 billion, he was already predicting that the multiplier effect of that money being spent on post-Sandy construction would yield a positive economic impact of as much as $36 billion. Morici also predicted an additional $10 billion in benefits from replacing hurricane-damaged structures, and another $12 billion in “delayed spending” that will come in once those countless uprooted people get settled again.

Doesn’t your gut tell you that this arithmetic is suspect? Yet we continue to be seduced by what mainstream economists and the media tell us: Whenever the GDP grows, we’re better off. Well, listen to your gut. The GDP doesn’t reflect our well-being. It doesn’t count the things we value most, such as having enough family time or good health. It merely tabulates the cost of things we buy. The GDP is like a giant calorie counter that tabulates how many calories are in that plate of French fries. It doesn’t tell us if we’re better or worse off as a result of eating those greasy fries or an apple.

In fact, so much of what is counted in the GDP are so-called “defensive expenditures” that merely keep us treading water rather than moving forward or getting back to where we were. Consider the not-so-hypothetical act of cleaning up after the latest extreme weather event. No matter how much cleaning up after the storm costs, much of what we’ve lost is irreplaceable. That’s something GDP entirely overlooks.

New Jersey Governor Chris Christie gets this point. That’s why he said: “We will rebuild it…But for those of us who are my age, it won’t be the same…because many of the iconic things that made it what it was are now gone and washed into the ocean.”

Fortunately, great headway has been made on new metrics that are far more sophisticated than GDP. One such metric, the Genuine Progress Indicator (GPI) assesses whether our economy is really growing or not. It takes into account spending that doesn’t make us better off, along with growth or contraction of the amount of built, human, social, and natural capital on which all economic activity ultimately depends.

Maryland Governor Martin O’Malley was the first state leader to implement the GPI. Vermont has embraced this yardstick as well, and the roster of state and international initiatives is growing daily.

The contrast between the two metrics is striking. While GDP has grown significantly over the past 25 years — over 60 percent in our own nation — GPI growth studies in multiple countries all show a similar trend: Genuine progress has stagnated as the negative costs of air and water pollution, lost leisure time, commuting, highway accidents, loss of forests and wetlands, climate disasters, unemployment and underemployment are canceling out gains associated with increased economic activity.

In his last annual economic report, President Barack Obama concluded that the nation must move beyond GDP and develop “new indicators of societal well-being.” Ben Bernanke agrees. In August, the Bush-appointed Fed Chairman called for “better and more-direct measurements of economic well-being, the ultimate objective of our policy decisions.”

But as long as the GDP remains enshrined as our standard indicator, its twisted logic will continue to affirm that we’re better off with more frequent and deadly disasters like Sandy.


John Talberth, PhD is The Center for Sustainable Economy‘s president and senior economist. Daphne Wysham is an Institute for Policy Studies fellow.
Distributed via OtherWords (OtherWords.org