A Lost Generation
By John Mauldin
July 27, 2013


An Ugly Secular Trend in Part-Time Work
The Emergence of a US Underclass
A Lost Generation
Maine, Montana, and San Antonio


It is pretty well established that a tax increase, especially an income tax increase, will have an immediate negative effect on the economy, with a multiplier of between 1 and 3 depending upon whose research you accept. As far as I am aware, no peer-reviewed study exists that concludes there will be no negative effects. The US economy is soft; employment growth is weak – and yet we are about to see a significant middle-class tax increase, albeit a stealth one, passed by the current administration. I will acknowledge that dealing a blow to the economy was not the actual plan, but that is what is happening in the real world where you and I live. This week we will briefly look at why weak consumer spending is going to become an even greater problem in the coming years, and we will continue to look at some disturbing trends in employment.

Last week, I noted at the beginning of the letter that an unintended consequence of Obamacare is a rather dramatic rise in the number of temporary versus full-time jobs. This trend results from employers having to pay for the health insurance of employees who work more than 29 hours a week.

I quoted Mort Zuckerman, who wrote in the Wall Street Journal:

The jobless nature of the recovery is particularly unsettling. In June, the government’s Household Survey reported that since the start of the year, the number of people with jobs increased by 753,000 – but there are jobs and then there are “jobs.” No fewer than 557,000 of these positions were only part-time. The June survey reported that in June full-time jobs declined by 240,000, while part-time jobs soared 360,000 and have now reached an all-time high of 28,059,000 – three million more part-time positions than when the recession began at the end of 2007.

That’s just for starters. The survey includes part-time workers who want full-time work but can’t get it, as well as those who want to work but have stopped looking. That puts the real unemployment rate for June at 14.3%, up from 13.8% in May.

As it turns out, the unintended consequences of Obamacare are not the only problem. Charles Gave wrote a withering indictment of quantitative easing this week (which we will look at in a few pages) and included the following chart, which caught my eye. Note that the relative increase in part-time jobs began prior to Obama’s even assuming office. The redefinition of part-time as less than 29 hours a week and the new costs associated with full-time employment due to Obamacare simply accelerated a trend already set into motion.

An Ugly Secular Trend in Part-Time Work

Look closely at this graph. It turns out the trend toward part-time employment started in the recession of the early 2000s, paused only briefly, and then really took off in the recent Great Recession. This is clearly a secular trend that was in place well before 2008.



This development is very troubling, especially because it primarily affects young people and those with fewer skills. As I documented in letters last year, workers 55 and older are actually taking “market share” from younger workers. I went back tonight to see if that trend is still in place. The first graph below (the next few graphs are from the St. Louis Fed’s FRED database) is one we are familiar with: the actual employment level over the last ten years. We are still two million jobs down since the onset of the last recession, some six years later. The only reason the unemployment rate has fallen at all is that several million people have simply left the labor force for one reason or another.



The next graph is the number of employed 25-54-year-olds. What you will notice is that the above graph shows about 7 million new jobs since the very bottom of the employment cycle, yet employment in the 25-54 age cohort has barely risen. Who got all the jobs?



That mystery is solved courtesy of the next chart, which shows the number of employed in the 55+ age group. Even acknowledging that there is a growing Boomer population does not account for the rather spectacular increase in employment in the 55+ age group. Can you find the recession in this chart? If the St. Louis Fed hadn’t shaded the recession in gray, you certainly couldn’t find it in the data. Not only did Boomers see a rise in employment, they took jobs from younger groups. If you dig down deeper, you find that the younger you are, the higher the unemployment level of your age-mates. I will spare you that exercise, as this is already depressing enough, unless you are 55+.



Note that I am not arguing that those of us over 55 should be put out to pasture. Many can’t afford to quit working (especially when their kids are living with them!). I am just reporting on the facts. The only way to solve this is to grow our way out of it, yet whatever we are doing is not working.

The Emergence of a US Underclass

Let’s turn back to my good friend Charles Gave’s analysis, picking up in the middle of his work. He has divined a rather interesting reason for our current employment malaise. I am going to quote at length because this is just so good and deserves a wide audience in the current debate over monetary policy.

This chart [below] shows a steady increase in part time employment since the early 2000s back toward levels that persisted through the 1976-2001 period. The big change is the precipitous decline in full time jobs which started in 2002 and accelerated after 2008. It can be seen that the number of part time jobs has risen by 3mn, while full time jobs have decreased by a similar amount. This compositional shift is unprecedented.



The next step is to measure the difference in job growth for part time and full time workers. This is done by comparing the rolling seven year series for each classification of jobs and noting the differential. As this gap widens in favor of part time employment, we would expect a greater share of the US labor force to be earning lower wages. To test this proposition we compare this seven year differential measure with the median income level for US households.

The results are quite striking. The correlation between our differential measure for the kinds of jobs being created and the real median income was 0.82 between 1974 and 2013; from 1997 to 2013 it moved up to 0.95. This matters because periods when individuals have stable full time jobs are associated with rising median income, while incomes tend to decline in an unstable job market.



Put simply, median income has slumped because a very large share of Americans can no longer find proper jobs.

Behind this economic, political and social disaster, stand many factors such as technological change which has undermined traditional low-skilled employment and the rise of China as a fierce industrial competitor.

What is less well understood is the pernicious impact that US monetary policy has had on the US labor market.

A collapse in the US median income level has historically coincided with the Fed running a policy of negative real interest rates. The reason why unemployment tends to be lower during periods when capital has a real cost attached was explained in some detail in a piece written in early 2011. This dour relationship has been maintained over the last two years and median income has, as I suspected, continued to fall. Make no mistake, if monetary policy is not substantially changed, then median incomes will continue to fall.



When poor people cannot earn a return on their savings or on their labor they remain trapped in poverty. The effect is to subsidize what are effectively overpaid financial jobs and undermine employment prospects within traditional sectors.

As a result, periods of negative real rates tend to be accompanied by the Gini coefficient rocketing higher. Today, this policy is effectively leading to the emergence of a poorly paid and chronically insecure “lumpen proletariat”. At least half of the US population may be moving deeper into a poverty trap, which, over the long-run, must negatively impact consumption. Moreover, I never saw a structural bull market in equities take place against a backdrop of falling median income.

So why is Bernanke doing it? It would seem for the same reasons that the Japanese did 20 years ago. He is protecting not so much the banks as the bankers. To cut a long story short and to paraphrase a famous quote: What is good for the US Investment Banks is bad for America.

Bernanke’s policies are aimed at guaranteeing the prosperity of this elite, and as such he has been wildly successful. Paul Volcker, arguably the best ever central banker, cared for the interests of ordinary people over those of investment bankers. By contrast, Bernanke has helped create his own “lumpen proletariat” and a parallel class of the “super-rich.” This will have many consequences, not all of them pretty.

  • Marx is back! Class struggle will be the main political theme in the years to come. This is what happens when you entrust a common good such as money to an over educated technocrat who believes he is smarter than the markets.
  • In a democracy it is bad politics to follow a monetary policy which favors the rich and condemns the majority to an ever more difficult life (witness damages caused by the euro). This is the “Road to Serfdom” towards socialism or technocracy rather than a sustainable capitalist economy.
  • This system will become increasingly unstable: socially, financially, economically. Such unfairness breeds the conditions for political instability. Under similar circumstances, Theodore Roosevelt and the US Congress went after the “Robber Barons.” Franklin Roosevelt acted 20 years later during the depression to separate commercial banks from investment banks. The obvious parallel in the crisis of our times is that President Obama is no Roosevelt.
  • I have no idea how this problem is going to be addressed, but addressed it will be. My hope is that a normal monetary policy will resume in the near future lest we end up dealing with a vengeful demagogue some way down the line.

For this reason, I saw the potential for so called tapering as the first step towards a return to economic sanity (see Volcker’s Return). Alas, I seem to have been wrong. Bernanke has the fortitude of a cheese cake, and once again, I misjudged him. The implications for job creation, fair income distribution and indeed the future prosperity of the US may be far reaching. I am worried.

A Lost Generation

We are watching the Fed employ a trickle-down monetary policy. They hope that if they pump up the banks and stock market, increased wealth will lead to more investment and higher consumption, which will in turn translate into more jobs and higher incomes as the stimulus trickles down the economic ladder. The kindred policy of trickle-down economics was thoroughly trashed by the same people who now support a trickle-down monetary policy and quantitative easing. It is not working.

We have a younger generation that is having trouble finding full-time work and developing the skills needed for the transition to more stable, higher-paying employment. The longer the situation persists, the more difficult making up lost ground and lost time becomes for them. As Charles wrote, we may be seeing a new underclass develop, which has disastrous implications for the country. This week President Obama gave a speech on the economy that sounded like a campaign speech except that he should not be running any longer. He blamed the rise of technology for the loss of jobs, the decimation of the power of unions for flat incomes, and the policies of his predecessor for the current malaise. The speech was a wish list of new programs and promises, yet nothing is getting done. He fails to engage with the most pressing problems of our time and doubles down on a healthcare plan that is a train wreck even his most ardent supporters are walking away from. Did you see the recent letter from multiple union leaders asking for a course correction on healthcare?

The Congressional Budget Office now estimates that 7 million people will lose their employer-provided health insurance at the end of the year. One would assume that those are almost all full-time workers. So instead of getting health insurance in some form as a benefit, they will likely soon be paying $1400 a year (minimum) in mandated taxes (the level set by the Supreme Court), and those costs will rise dramatically over the next few years, according to the current schedule. That is a HUGE tax increase for those people.

Young people who have no insurance and are making more than $10 an hour will be paying about $1300 a year, or close to 10% of their after-tax income. That blows a monster hole in their disposable income at those levels. There is no other way to look at this: it’s a huge lower-middle-class tax increase. Yes, they get a benefit (health insurance) that someone somewhere in society was already paying for, but they personally did not have these costs before.

The unintended consequences of the healthcare bill are going to be vicious. Not only is there a tax increase on the rich and on small employers, there is a tax increase on young people and the middle class. And it’s a tax increase that comes in the middle of the slowest recovery on record. It is possible that we grew at less than 1% this last quarter. And the burden piles on top of a secular shift in employment practices that is making life more difficult for the younger generations.

We are getting close to the point where not only are there no good choices left, but the difficult choices are starting to look pretty bad indeed. And no one in DC is talking about the budgetary choices we are going to be forced to make. The recent drop in the deficit is temporary, fueled by people taking income in 2012 and paying taxes at a lower rate. That “tax dividend” is just about done. Deficits are going to be the number one topic in 2016, with jobs a close number two. Hide and watch.

Maine, Montana, and San Antonio

I have been in Newport, Rhode Island, at the Naval War College, where I attended a small Summer Study Group for the Office of Net Assessment for the Department of Defense. My mind is on overload trying to absorb all I heard and learned and to fit all that into my limited understanding of how the world works. It is a very complex world that the US military finds itself in. Shrinking budgets and an expanded menu of options and demands mean difficult choices. Factor in rapidly changing geopolitical and technology environments, and the challenges become even more complex. When I think of the limits our budget process is going to force on our set of choices, the situation does not make me comfortable.

The one thing that did make me feel good was the caliber of the people I met. They were most impressive. Admittedly, those in the room were among the best and brightest in the military; nevertheless, it was comforting to see the quality of thought and training going into the decision-making process. These are scholars with wide-ranging educational backgrounds as well as warriors proud of their service. I have to tell you, I do not get that same level of comfort when I am in a roomful of political leaders. There are some good ones but not enough of them.

I am in New York for a few meetings before I head on to Maine. My partners in Mauldin Economics, David Galland and Olivier Garret, will be here Wednesday; and as a special treat I get to have dinner with Jack Rivkin on Tuesday. I may even try to attend a meeting of the Friends of Fermentation if they allow teetotalers to show up. My youngest son, Trey, will fly up to meet me here, and we’ll head north on Thursday morning. It will be good to be with friends and talk about the issues of the day at Leen’s Lodge, amidst the beauty of Grand Lake Stream . Then I’ll be home for a week before heading out to join Darrell Cain at his summer home in Montana. My fall schedule looks to be light on travel for some odd reason, and that’s ok with me. I need some catch-up time.

And speaking of Mauldin Economics, I continue to be impressed by Grant Williams’ ability to see through the smoke in the market today and pinpoint where it’s headed. This skill lets him spot investment opportunities that others tend to overlook. You get his Things That Make You Go Hmmm… for free as a subscriber to my letters, but if you haven’t yet subscribed to his excellent monthly advisory, Bull’s Eye Investor, I recommend you do so. You can sign up now at a 50% discount by clicking this link: http://www.mauldineconomics.com/go/bwXwl/MEC

It is time to hit the send button. Have a good week and enjoy your summer. I intend to.

Your worried about the kids analyst,

John Mauldin


Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

30 Responses to “A Lost Generation”

  1. Willy2 says:

    - I find the term “Part time jobs” extremely misleading. When someone’s working hours is reduced from 40 to 39 hours a week then this already turns that worker into a “part time” worker. I know that in other countries this term is reserved for workers who work 20 hours a week or less.
    - I consider Obamacare to be a reward for the Healthcare lobby group for the financial help they gave Obama. But I fear that the Healthcare lobby has overplayed its hand. They seem to have killed the goose that laid the golden eggs.
    - I don’t buy into the assumption that the FED’s policy is responsible for a decline in median household income. From 1989 up to say 1994/1995 REAL interest rates were positive and yet real median income went lower. A partial explanation is the fall in interest rates from 1990 (~ 10%) down to ~ 6% in 1995. And that drop in rates was dictated by Mr. Market, not the FED.

    Sure, the gov’t & the FED must be blamed for everything, right ?

  2. MikeNY says:

    I find a lot to agree with in this piece. And, as much as people hate Summers, he at least acknowledges that the solution to our economic problems is fiscal policy, not monetary policy — and he sounds prepared TO ACT on that knowledge. I’m afraid Yellen might prove more interminably “dovish” than Bernanke. I suspect this is one reason why Yellen is not a slam dunk with Obama, who seems intent on making economic inequality a major political issue in his second term.

    • BennyProfane says:

      How is it possible for the Fed chairman to “act” on fiscal policy. Where are his/her tools? Bernanke has said more than once with microphones in his face that this is a problem. He’s pretty powerless beyond words to do anything.

      • MikeNY says:

        The Fed doesn’t act on fiscal policy. By stopping QE, at the very least, the Fed could communicate to Congress by its ACTIONS that it has done all it can wrt monetary policy. The jobs problem would be passed officially to Congress — where it should reside.

        I may be giving Obama too much credit in suspecting he has this endgame in mind; or not. I do believe that the Fed’s actions are exacerbating noxious underlying trends in the economy (such as inequality and resource mis-allocation) and giving an excuse to Congress shirk its responsibility.

      • BennyProfane says:

        Congress does a fine job of shirking their responsibilities in all matters. It doesn’t need the Fed to change it’s mind. What’s in it for them?

      • MikeNY says:

        I may be wrong, I again admit. But if Obama’s endgame is to call Congress out to face the pitchforks, I support that strategy.

        To me, the status quo is not acceptable; Congress’s dereliction of duty is not acceptable.

  3. chartist says:

    Reports from the St. Louis Fed will be revealing because the Japanese are building & expanding auto plants in this region. If folks are willing to leave the crowded east coast and come to the Midwest, they’ll get jobs. I think young people in the crowded areas of NJ/NY don’t want to leave their familiar surroundings and build new lives in rural Indiana or Kentucky. In Indiana, we see employees who got fired at one Japanese plant only to be hired by another right down the road. We have employees driving an hour to get to our plants because they’re aren’t enough local folks to bring on board. And these jobs start at $12 an hour with plenty of overtime. Add two hours of travel and it’s a 12+ hour day. Is the video game generation willing to do that type of job?

    • Robert M says:

      Are you serious? The video game generation is not the working class stiff you describe but the uber educated nomenklature class’s children. There are plenty of poor Philadelphian’s whom would jump at the opportunity to move to the Midwest but there are no schools, housing or child care for them. The same is true for the population of Rockford IL, formerly working class rural Republican town w/ employers like Sundstrand and others whom moved everything overseas thus destroying the tax base thus making it impossible to to build a base for workers

    • Iamthe50percent says:

      You said it yourself, $12 an hour crap non-union jobs. Did you ever try to live on $12 an hour? I mean since the 1970′s.

    • BillG says:

      This has to be the first time I’ve heard anyone suggest to anyone to leave the coasts and go to the midwest for jobs. In my experience in the last decade that’s akin to swimming upstream. The movement has generally been in the opposite direction amongst the people I know. But then again almost all of the people I know are college graduates and the positions you’re talking about sound like general manufacturing.

      With that said, we’re talking about $12/hr with two hours of commuting for manufacturing jobs in the middle of nowhere. Your cost of living is generally as low as you’re going to find it in this country and the job prerequisites are probably minimal. If you’re working for anything less than $17/hr or so on the coasts then you’d probably come out ahead (depending on your relo costs). Of course these are manufacturing jobs so you can count on them disappearing the next time the economy goes into recession (probably another 1-3 years). If you don’t have anything holding you back then go for it but I’d make sure you’re sufficiently desperate before uprooting yourself and your family for a $12/hr job.

  4. BenE says:

    no no no no no! I’m part of that millennial lost generation and that kind of thinking about the fed is frustrating to no end. It is clear using the simplest macroeconomic mathematics that we need more aggressive monetary stimulus to solve the unemployment crisis.

    The output gap in the US is huge (http://www.lostoutputclock.com/) and disproportionately affecting us millennials. Although I blamed our problems on corrupt private banks for a few years after the 2008, you can no longer do that. The problem is now 90% central banks under-stimulating.

    If you do the math, if you take a piece of paper and you draw down the large sectors of the economy, draw arrows representing flows of money between them, attach numbers to them and try to simulate in your head what happens to the economy under conditions of aggregate behaviors, relying on simple arithmetics makes it very clear that central banks need to do much more. People don’t realize it because people don’t like to do math, but central bankers refusing to stimulate enough to get people out of unemployment because they are wimps, scared of the big inflation monster is the main problem our generation is facing.

    The amount of forever lost production and wealth is staggering. Central bankers around the world are participating in a very unfunny joke. No one has anything to gain from choking the economy like that. This is what they are doing to value: http://www.youtube.com/watch?v=2TJ3Yv_vgUc&t=1m14s

    If central banks don’t get the resolve to do what they have to do to solve unemployment quickly, we will end up like Japan. Over there, the central bank under-stimulated, letting government debt rise, idle cash accumulate on the sidelines and labor markets stay distorted and causing trade imbalances, for so long that now that they actually have the guts to try to fix things properly, it might well be too late. It might well cause the savings of Japan’s huge retired population to simply evaporate.

    You can not stay in a situation where the value of a fiat currency prices real safe investments out of the market. Money should always lose value faster than safe investments and right now the natural rate of real safe investments returns is smaller than -2%. Therefore inflation should be (temporarily) higher than 2%.

    Otherwise people stockpile cash, precious metals and bitcoins instead of investing in assets with real intrinsic economic value. When people stockpiling cash on the aggregate, it becomes an illusory form of saving that is not back by anything real. Investments should be supported by people somewhere working and producing real things. Right now people are getting paper promises backed on the aggregate by the output of an idle population!

    Maintaining 3% or 4% inflation for a few years would cost much less than what would be gained from putting people back to work. Promoting tapering right now is an affront to the unemployed, underemployed all over the world and it ignores the most basic macroeconomic mathematics.

  5. PrahaPartizan says:

    Chartist, I hate to tell you this, but many folks in the East Coast conurbation travel TWO hours EACH way to an from a job because of the nature of travel in the area, so wipe that smug conservative smile off your face before you break your arm. Many people can’t move because they can’t afford the move or can’t afford the hit they might take on their homes if they were to move. Try telling someone they will need to take a $50K hit on the sale of their house so they can make less money at their new job and have zilch support in their community. Thanks for confirming just how low-value those jobs are by bragging about how they pay $12 per hour too. You folks in the Ohio River valley Indiana and Ohio
    areas are just so welcoming to outsiders with different accents and customs too, which makes building new lives very difficult. That’s especially true if the newcomers don’t agree with every last bit of idiocy which leaks out of your brains.

  6. PrahaPartizan says:

    OK, we get it. Mauldin, as a conservative booster doesn’t like Obamacare. He hasn’t proposed on valid program which is supposed to replace it, other than give more money to rich folks like me and trust us. We as a nation have done that at least twice in the last forty years and we have all seen where that’s taken us. The corporations are sitting on a mountain of cash, which they refuse to spend. If they have viable projects, then their shareholdes should be asking them why they’re not proceeding despite any tax regime. If they don’t have viable projects, then the push to reduce taxes is just a scam to benefit the plutocrats. In the first case, the only plausible reason for not proceedingis that demand doesn’t exist because of the relatively high unemployment and low wages business has managed to craft in the US. In the second case, entire C-level suites need to be cleaned out because it means those overpaid execs haven’t been doing their job. That incompetence is what is hurting the US far more than any Obamacare issue.

  7. jtuck004 says:

    Some of the things above are helpful to know, but it’s almost funny as Mauldin, proving himself to be yet just another muffinhead with a grudge, blames Obamacare for the increase in part-time jobs, and then presents a chart that shows it happened before OC even became legislation, years before it even comes into effect. It weakens his case. Some will say that business, which has nearly always been re-active, saw far into the future and thus…bullshit. Far more likely is that it is the result of policies that moved jobs offshore without leaving a sufficient investment in people to replace it, the end of easily exploitable people and natural resources in the U.S., and the criminal enterprise called the finance industry that Ben Bernanke has been underwriting for years, as they suck progress out of the system to line their own pockets.

    He deserves kudos for acknowledging his own limitations with a “limited understanding of how the world works”, but it’s too bad he can’t add anything except carping to the absolute flood of people who can tell us what they see wrong without providing any solutions, and who think themselves right simply because their hate-fest is fed by others who try to bend the facts to fit the grotesque picture iin their heads.

    I would like to have seen as much thought and digital ink put into suggesting how we might invigorate and re-tool our human capital which is the only investment that has ever made this country better. IT would have made for a better “letter”.

    • catclub says:

      I agree. Mauldin may be insightful, but his cranky old conservative bloodlines are showing.
      He presents health insurance as if it is not a nearly zero sum game – insurance payments replace direct medical care payments, but simply a tax. Plus, there is a much better chance that one hospital visit == bankruptcy is no longer the case.

      It seems that he objects to Bernanke holding interest rates down. Is he suggesting that raising interest rates will somehow increase economic activity and reduce unemployment? Looks more like confusing cause and effect – unemployment is never low when interest rates are held low because interest rates are held low when economic activity is low.

      As far as I can tell, the interest rates paid on bank reserves have influenced the non-inflation that we have seen, as velocity of money has slowed down. It also seems that when the Fed starts hoping to restrain that velocity [some unknown time in the future], all that money will come out of reserves in spite of the fed’s desires.

  8. gstream says:

    Why would an increase in part-time workers be an unintended consequence? Wouldn’t that speed the move to a single payer system?

    Sounds like a good way to force Congress in that direction and maybe it was intended that way all along…

  9. Joe Friday says:


    To test this proposition we compare this seven year differential measure with the median income level for US households.

    Hate to break this to ya, but “Household Income” (median or otherwise) is not a measure of anything, and worse is completely inaccurate and backwards from reality.

    It is not just an unreliable metric, it is a useless metric, which therefore undermines your entire presentation.

    The recent drop in the deficit is temporary, fueled by people taking income in 2012 and paying taxes at a lower rate.

    That’s just goofy.

  10. RW says:

    It helps to remember that Mauldin is in sales.

  11. DeDude says:

    “It is pretty well established that a tax increase, especially an income tax increase, will have an immediate negative effect on the economy, with a multiplier of between 1 and 3”

    That may be “well established” in the right wing circles you live in, but not at all true in the real world. You are confusing the effects of a tax used to reduce the deficit (austerity) with a tax to fund spending. If you take $ 1 billion away from the investor class and use those proceeds to build/repair roads, that act will have a substantial positive effect on the economy. You do not need any studies to prove that, just simple basic understanding of the economy and what the GDP is, sprinkled with knowledge of how inactive money is when held by the investor class in a demand contrained economy. Obamacare to the extent it takes money from consumer class individuals, is simply a forced spending on something else than imported chinese nick-nacks. At worst it will have no impact on the economy (moving one kind of spending into another with equal multipliers) at best it may dislodge some money from inactive storage to spending – and help grow the economy.

    “an unintended consequence of Obamacare is a rather dramatic rise in the number of temporary versus full-time jobs”

    You are beginning to sound like a religious fanatic – “this bad thing happened so it must be because of Obamacare”. If it was true that Obamacare actually made a substantial number of companies cut full time jobs into two half-time jobs (which so far has only been suggested by anecdotal evidence, and is just one of many potential explanations of the cited data), that actually would be a good thing for society as a whole. We just don’t have enough work for all those people who want full time jobs. So what is best: 8 million full time unemployed and 8 million with a half time job or 12 million full time unemployed (and none on half time jobs). Think about it for a minute and consider that people with no attachment to the job market quickly lose their skills and “employability”. Did you actually “note that the relative increase in part-time jobs began prior to Obama’s even assuming office” or are you just so blinded by your own narrative that you fail to understand that this data completely sinks your above postulate.

    “A collapse in the US median income level has historically coincided with the Fed running a policy of negative real interest rates” —- “if monetary policy is not substantially changed, then median incomes will continue to fall”

    Oh my God, is this fifth grade? do I have to go over that correlation does not prove causation?

  12. Mbuna says:

    Let’s deal with the facts- those lost middle class jobs are not coming back for a long long time, if ever, and there is one simple reason why- they are no longer cost effective. Too many people are under the illusion that the Fed has some responsibility to the general public. That idea is and always has been propaganda- The Fed is a PRIVATE organization. It is a fact that the Fed was created by rich people for rich people. I won’t even get into Obama’s Orwellian speech about the Fed and the middle class.
    As good as Mauldin’s article is, he is still stuck in 20th century thinking. We do not live in a democracy and the average person has no effective say in his or her governance. Mauldin’s ideas about class struggle belong to a time before the merging of corporate and political powers that now exert effective control in the USA. At the national and international level it is no longer possible to separate business and politics. This is why Mauldin misses where we are heading. Any sane person can see that our individual rights have been eroding and this erosion is being helped along by every branch of government at the behest of largely corporate power.
    What Mauldin fails to see (along with just about everyone else) is the connection between the erosion of individual rights and the bottom line. That’s right- we are losing are rights because it is no longer cost effective for us to have them. It’s not personal- it’s just “good” business.
    http://www.huffingtonpost.com/2012/12/10/prison-labor_n_2272036.html Prison labor and prison factories are all the rage and the labor force that makes $4 a day is going to grow exponentially. Why? Because it is cost effective (not cost effective overall mind you, just cost effective to those who will reap the profits-dont worry you will get taxed to make up for the actual loss on such ventures). Let me give you a simple example of how this will work -
    http://host.madison.com/news/local/writers/jessica_vanegeren/solidarity-sing-along-crowd-grows-as-arrests-continue-at-wisconsin/article_cbd3dc63-c23f-5cc3-8901-2166614f10b5.html So Walker creates a scenario where people can be arrested. The connection that will be made, more and more, will be for those arrested to spend time in a prison factory making stuff for Walmart. You don’t have to look the laws or logistics that make this seem unlikely as those can be changed. All you have to look at is the bottom line. This is where we are headed because it is cost effective for those with the means to make it happen. It’s not personal, it’s just business.

    • Joe Friday says:


      Too many people are under the illusion that the Fed has some responsibility to the general public. That idea is and always has been propaganda- The Fed is a PRIVATE organization.

      You must be conflating the Federal Reserve (Bennie & The Jets) with the regional Federal Reserve Banks. The regional banks are private. The Fed is a quasi-governmental agency that is part of the Executive Branch of the federal government.

      How would the POTUS get to appoint the Chairman of the Federal Reserve if it were a “private organization” ?

  13. bear_in_mind says:

    Mr. Mauldin is absolutely correct! The problem is President Obama. It started with him creating America’s largest housing bubble in a century, then watching it collapse without lifting a finger. Then he created the worst recession in our lifetimes because he didn’t understand economics and permanently ruined free market Capitalism by saving Wall Street banks. He couldn’t stop there, though could he? He then rescued Detroit, AIG, Fannie & Freddie, and topped it all off with a “Stimulus Plan” that Mr. Mauldin’s great-great-grandchildren will be paying off in 2080. Worst of all, the President turned his back on American citizens by raising taxes on the 1% and passing Obamacare against the wishes of Big Pharma and Healthcare (read: insurance) industry, forcing everyone to have HEALTH INSURANCE. We can all see how that’s created wage repression, exploding higher-education debts and increased likelihood of severe hurricanes in the Atlantic seaboard. Pathetic and inexcusable. Sure signs we’re going to hell in a hand-basket, friends.

    • DeDude says:

      But you got to admire his evil genius – half of that he did even before he was elected president. I always suspected him of having performed a mind-melt with Bush II (the side-effects of which we liberals have been suffering ever since).

  14. kaleberg says:

    This article does not start well: “It is pretty well established that a tax increase, especially an income tax increase, will have an immediate negative effect on the economy, with a multiplier of between 1 and 3 depending upon whose research you accept.” That’s completely bogus. Income tax increases on the wealthy, assuming the government spends the additional money, will lead to an immediate positive effect on the economy with a multiplier between 1 and 3. This has been demonstrated in the real world, back in the 1930s and 1940s. Yes, a middle class tax increase would not have as much positive effect as an increase on the wealthy as middle class people already spend most of their income while rich people only spend a small fraction. Even better, big infrastructure investments pay dividends for decades, even centuries.

  15. sistah says:

    Let’s go single-payer, and take the monkey off the employer back altogether. Obamacare basically doubles down on what we already had–which has resulted in a high-cost/low-performance health delivery system which exists for the benefit of insurance companies and hospital chains (not doctors particularly).

    • rj chicago says:

      By what logic do you say that we ought to go single payer. I really am tired of reading and listening go big govt. sychophants judge something to be worth implementing without the underlying data to support said claim.
      I will acceed to the fact that the Med. system in the US is a mess but made worse by an untenable and truly destructive piece of law without any means of really funding or implementing said law effectively except to extract yet another pound of flesh from its nation’s citizens.

      • F. Horne says:

        The data consist of the published results of US health care costs vs. other developed countries. Not only the overall costs, but the costs of particular procedures–US costs are generally in the range of double those of, say, France.

        If you want to play the data game, look up comparative costs and outcomes of US vs. France, where every citizen can take their health care business to any doctor or hospital they wish. It works. Unlike ours. And for less money taken out of GDP by the health industry sector.

        Big pharma, big hospital chains, big insurance–these are the people who get their way with the US Congress. Our health care system is for their benefit, not for the benefit of the citizenry.

        What’s your ‘little government’ solution?

  16. Willy2 says:

    Not a word about the fact that corporations have kept a lid on wage growth (i.e. < inflation) since 1981. It has systematically hollowed out the purchasing power of the middle class. The difference between wage income and expenses was made up by going deeper into debt. But since early 2009 wage earners are very reluctant to take on more debt. And it was this growth of debt that has fueled the economy since 1981.

  17. Livermore Shimervore says:

    Too much emphasis on politics and the central bank. Neither make or break an economy of this size.
    Perhaps Iceland, but not ours.

    Today there is far too much discussion about what this guy (appointed) should be doing or what that guy (elected) should be saying, etc. We need more discussion of the role of the consumer and the impact that a decade of their choices have had on wage growth and the decades-in-the-making drop in job creation. Once all mandatory expenses have been covered, the average middle-income consumer shovels nearly all of their pay to non-local corporations who outsource nearly all of their productive labor. Their dollars are sucked right out of their local economy to expand off-shore interests. Rinse and repeat the prioritization of spending in this manner, for a decade, and see what macro-economic consequences quickly begin to emerge. How about all the smart guys who have their articles published in this newspaper or that blog spend a bit more time having a frank discussion on why there has not been an effort to focus discretionary spending towards supporting domestic labor? Rather than buying a third flat screen, a fifth Iphone, an SUV full of crap from Target and Wal-Mart,etc., instead ask the following simple question of the average American:

    why don’t we use a majority of our discretionary income to support local business and hire the under/unemployed, take a domestic vacation trip, support a local eatery, etc.?

    Re-orienting the direction of consumer spending of middle income Americans could produce a tectonic shift in demmand for domestic labor. No policy by a Democrat or Rebulican is going to manage such a thing, and that’s if they all agreed to do something significant in the first place. We are fixating on the people with the least amount of influence while ignoring a discussion of those with the most.