We Need to Talk About Production

While reading a piece on Reuters.com concerning last Friday’s jobs numbers, it jumped at me that there was no discussion on production. The emphasis of the piece was on the increased unemployment rate and the political impact the rate may have on the fall elections. I think the emphasis is misplaced.

America is producing at just over 79% of its capacity according to the Federal Reserve. Job growth depends on a growing gross domestic product, which is advancing at a paltry 1.9%. We need to get back on the production possibilities curve by producing more with the capacity we have, and then focus on innovative technologies that can allow us to increase capacity when we have hit our limits.

Have the Obama Administration’s community coordinating Keynesian policies hit their limit? If so, is it now time for some Ronald Reagan supply-side economics?

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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One Response to We Need to Talk About Production

  1. Ken Ciszewski says:

    The Bush tax cuts are still in effect. If I understand it correctly, this should be considered Ronald Reagan supply side economics on steroids.

    There was information published last year that business was sitting on a trillion dollars that is uninvested, and that banks had a similar sum not lent out. Of course, business and banks must have some reserve cash, but even so, it appears there is plenty of money pent up that could be used to expand business. Despite all this, business is still tentative about expanding business and hiring in the USA. There are indications that business is expanding and hiring overseas. That suggests that some of that “expansion” is taking place, just not in the United States.

    There was a piece on the World Wide Web yesterday that disclosed the results of interview with various small business leaders. The piece may have been biased, or not, but the result was that most of these interviewed related fears about uncertainty–will the economy pull back, will foreign debt cause a major disruption, what is going to happen with Obamacare, issues like those were brought up.

    What we have here is a “psychological problem” that creates the following chain of events: there is a lack of confidence, which inhibits investment, which inhibits job growth, which inhibits demand, which inhibits spending, which inhibits economic growth.

    Or, it can be argued that business is hoping that a change of President will get them a better deal, and they’re just waiting it out for now. This is reasonable behavior, it just doesn’t help the economy. And of course, anything that doesn’t help the economy might increase the chances that we get a different President as a result of the coming election.

    There may be another factor involved in the lack f demand, besides the lack of enough jobs and the fact that many people get paid less than they used to. As more people retire, their income is more limited, which reduces their ability to consume (this decreases demand).

    As far innovation, we already have all kinds of factory automation (there are all kinds of robots and other automated machinery involved in building cars and computer boards, for instance, that reduces the number of real people needed to make things. This has been going on for many years. This kind of innovation creates jobs a different kinds, but not as many.

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