As an outsider, US Presidential campaigns are very curious events. But that is not my topic today. Well it sort of is my topic. The US President has recently visited Virginia – a place where defense spending appears to be highly concentrated. Various senior Republicans decided to give the President a lesson in economics. The only problem is that the lesson seems to run counter to what their main hope – Mitt Romney – is trying to say. In fact, they all got themselves tangled up in a logical mess. But the truth that emerges is that – whatever else they say – everyone of them knows that public spending cuts will damage the economy. They also all know – whatever else they say – that at this present time – with private spending so weak – that such a slowdown will be disastrous. They also know that the American people are pretty easily duped by conservative talk and religious invocation. And that is the way they plan to get power. What happens to the unemployed is just a side-issue it seems. Makes you wonder what went wrong with public education in America (that these characters can be taken seriously)!

I read an article in the UK Guardian over the weekend (July 14, 2012) – Scranton, Pennsylvania: where even the mayor is on minimum wage – which told a sorry tale of municipal bankruptcy in the US. There was an earlier story in the UK Daily Mail (June 26, 2012) – Camden, city of ruins: Depressing images of once-thriving metropolis reduced to decaying, crime-ridden rubble – that traversed similar terrain, except carried a number of graphic shorts of urban decay in the face of persistent recession. What these articles tell me is that the US Federal system has failed its people. The rigid balanced budget rules at the State level and the ideologically-driven unwillingness of the Federal government to use its currency powers to redress the damage caused by the application of those rules at the State level have combined to create wastelands across the urban landscape in the US. The damage that is being caused each day will haunt that nation for years to come. Meanwhile, the ideologues are trumpeting a new book about 4 per cent solutions that claim large-scale government cutbacks are needed to re-create the US as a great nation. From afar, one can only conclude that the US glory days (whatever they were) are passing – probably more quickly than they care to acknowledge.

Last week (June 6, 2012), the US Bureau of Labor Statistics released the Employment Situation Summary – for June 2012, which revealed that the US economy had added 80,000 net jobs in the last month, well below the quantity that economists had been estimating. The US national unemployment rate was unchanged at 8.2 percent. The BLS said that the “Nonfarm payroll employment continued to edge up” but the commentators labelled the result “soft”. The US policy makers continues to ignore the plight of the unemployed. The data shows that June 2012 is the 41st consecutive month that the national unemployment rate has exceeded 8 per cent, which is the longest period of above 8 per cent unemployment in the history of the data series (from January 1948). The danger now is that the economy will fall prey to the political debate leading up to the November election and resulting policy responses will truly push the economy over the cliff into recession. The US economy is precariously poised at present and some fiscal commitment to supporting growth is urgently needed.

I have not much time to write a blog today but the latest US labour market data provides fertile ground for some analysis. The latest Employment Situation Release from the US Bureau of Labor Statistics (published June 1, 2012) covering May 2012 has been called a “bleak jobs report” ((Source) by commentators. I expect a few Op Ed columns from the likes of Robert Barro and John Taylor to name a few who will be saying “see, there have been no gains from fiscal policy stimulus” – ad nauseum. The reality is that the data tells us how effective fiscal policy was in staving of a depression and also that the US government has been pressured into a premature withdrawal of fiscal support and the government contribution to real GDP growth is now negative – hence a slowing economy and poor labour market outcome. While the neo-liberals are hanging onto the notion that governments can do little about the crisis but reduce their net spending the reality is completely the opposite – sovereign, currency-issuing governments such as the US government have total control over domestic policy and the only thing missing is the willingness to use that capacity.

I have been studying the Great Depression intensely lately to gauge the similarities in conservative narratives at that time in relation to what we have to put up with now. Several so-called conservative historians have in the recent crisis endeavoured to reinvent history. The problem for conservatives is that the lessons of history are firmly supportive of the view that when non-government spending growth lapses, growth can be engendered with an increased contribution from government net spending. It is a proposition that is glaringly obvious in concept and stands the test of time. The conservatives hate that reality. So instead, they have only one recourse to attempting to match the facts with their erroneous theories about fiscal policy. They have to reconstruct the facts – a process that includes leaving important facts out and focusing on irrelevant correlations; fabricating facts; using definitions that no-one else would consider reasonable and then blurring the definition – and more. It is really quite pitiful.