Christie N.J. Budget Proposal: I’ll Have One of What He’s Having

Gov. Chris Christie budget speech full text | NJ.com.

This a proposed budget; not the final budget. An over-optimistic proposal is not a capital sin but the main problem is that if this become the budget and the revenue does not meet the glossy expectations, of course the governor will rather sacrifice something else  than his pet-tax-cut experiment – not for any economical reason but for purely political and propagandistic purposes. And here are two further points:

First: The question if the governor is throwing this in to influence the VP selection in the event that Romney becomes the republican candidate in 2012. That would be the most unconscionable act but nothing surprises me. And anyway, I still believe it would be a futile sacrifice of New Jersey’s interests: I think that Romney – if he wins the nomination at all – most likely will choose a more conservative VP from the South or Midwest. A Northeastern ticket may not do very well in November considering that the bulk of the republican base is not in the Northeast.

Second: Every imponderable is against the prospect of a fast recovery: High consumer leverage, possible conflict with Iran, possible U.S. intervention in Syria (Obama may turn more hawkish if he sees re-election in doubt), China’s economy slowing down, political gridlock in Washington, more problems with the EU crisis  (Greece is not out of the woods and Portugal is beginning to show signs of distress again), New Jersey’s highest unemployment in the Northeast, wage stagnation, and the list goes on – all on the negative side.

The Straits of America – Nouriel Roubini – Project Syndicate.

I frankly can’t imagine how the administration arrived at this rosy forecast. As in “When Harry Met Sally”
I’ll have one of what he’s having.

Then, for the sake of argument, we must arrive at the best scenario – that everything goes well – and thus face the question: What does this tax cut accomplish – from the economic point of view? My answer is: Nothing, and the same goes for the democratic alternative. Both proposals are political; not economical measures. They are too small, would be applied in lieu of drastic structural reforms, and as they have been proposed are spread out – because the fat State of New Jersey is unable to do any better – so the input of cash in the economy is diluted to insignificance.

But we will see what comes out as final product at the end of June. By then, the French presidential election will be over and we may have a socialist government in France which may close the chapter of euro rescue. Or all hell may have broken lose in the Persian Gulf. And even if neither happens, we should be addressing our outstanding obligations before they compound beyond reach.

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Re-surging Manufacturing Will Face Shortage of Skilled Workers

U.S. manufacturing sees shortage of skilled factory workers – The Washington Post.

This is a third and last of an education series.  First of all, I must clarify that there is no measurable manufacturing re-surgence in New Jersey but it appears to be happening in other states. Second, I must also emphasize that numerous employers prefer to entice experienced workers already employed to join their shops rather than train new, inexperienced workers – a very myopic policy in my opinion. Third comes the fact that automation has changed the nature of many manufacturing operations and the new employees must be computer literate and  must meet higher academic standards overall.

This is what has happened: As the manufacturing sector moved overseas, the actual industries were liquidated, and their old manual lathes and metal presses sold out. As labor and fuel costs entice some manufacturers to return to the United States, they equip their new shops with state of the art machinery which, more often than not, is computer controlled.

This is called is some disciplines “The Hamburg Factor” – from Hamburg when it was razed by allied bombing in WWII. When the city and its factories were rebuilt after the war, they installed state of the art machinery while the victors, in this case the United States and Britain, both of which had not seen such degree of destruction – the U.S. saw none – had their factories equipped with older, less efficient machinery. That effect was particularly damaging to Britain’s economy because it lacked the resources to modernize.

That effect will be playing here and the new industrial workers will have to know more. Dedicated schooling is needed.  And here enters the possibility of preparing some students – those less inclined to pursue an academic college-bound path – to follow this alternative.

It is unlikely that we will see any revival of manufacturing in New Jersey under the current political system. Some structural changes must happen first. But if elected and all the reforms I propose pass, there is a substantial likelihood that manufacturing will return to New Jersey. However that will only happen if the prospective employers see a readily available, qualified work force.

Thereof the importance of setting up a linkage between schools and current N.J. employers in order to create apprenticeships and enhance the scope and number of trade schools in the state.

Unfortunately, although I would like to expand and give more details on this plan, it is impossible because we can not foresee what the prevailing economic conditions will be in 2014 and 2015 . There could be a massive return of manufacturing to the U.S. or not. But the policy of New Jersey should be to plan ahead for an eventual return of significance and competing with other states for those businesses. To compete effectively, a number of conditions must be met and one very important is offering high quality workers.

News from Europe, U.S. economy re-assure markets

No Recession for U.S. as Forecasts Improve – Bloomberg.

Still there is a disconnect between Wall Street and Main Street and that is at the core of the nation’s problems.

There may be a so called “recovery” but it is not touching the immense majority of Americans.

France and Germany have agreed to support European banks but there is new tension as the write-downs from a Greek default appear to be larger than anticipated.

Market rises on lower unemployment numbers. Exports drop

http://www.bloomberg.com/news/2011-08-11/first-time-jobless-claims-in-u-s-unexpectedly-decrease-to-four-month-low.html

Although the drop in new unemployment filings is minuscule – around 1% – the July data has fallen below the 400,000 mark for the first time since April.

On the other hand, the trade deficit has increased due to slowing demand for American products in both Europe and Asia.

http://www.bbc.co.uk/news/business-14493421

I believe that there must be more significantly positive signals from the economy to sustain this rally into days and weeks. It would be preferable to have small gains daily than the big jumps alternating with sudden drops.

Many small investors lose with the volatile market and become unable to react when the market up-swings.

Charles Geisst wrote an eye-opening piece yesterday. If investors lose faith in the market and retreat from it, we will get to miss these “recession” days as the good times.

http://www.cnn.com/2011/OPINION/08/10/geisst.market.history/index.html?hpt=hp_t2

Percentage of Americans working the lowest since 1983

http://money.cnn.com/2011/08/08/news/economy/unemployment_jobs/index.htm?iid=HP_Highlight

Only 58.1% of Americans work; the lowest figure since 1983. Figures about sub-standard employment and part-time jobs were not available in the article.

The reduction of the American work force has ominous implications for the future.

U.S. Anemic growth in 2nd. quarter

http://www.nytimes.com/2011/07/30/business/economy/us-economy-worse-than-expected-in-second-quarter.html

Consumers are the same people unemployed, underemployed, underpaid, and otherwise deeply in debt. How can anybody expect that we will pull ahead? Economy grew at an annual rate of 1.3%. Do not be surprised if this figure is revised downward later.

As stated in the article, a series of revisions of previous data also show that almost every piece of economic information put out in the past erred by excess. For instance, the growth of the 1st. quarter this year was not 1.7% as previously said but a mere 0.3%

In my opinion, there are structural deficiencies not so much in our economic system but in our political one. Additionally, the tax code is tailored to favor outsourcing of American jobs. Outsourcing is one the most important culprits in the current situation. People do not make enough money to spend and we do not manufacture enough to get out of the recession by exporting goods (yes, I believe this is still a recession; not a recovery, regardless of what the criteria is. It feels like a recession.)