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Economics and commerce, all built from scratch.

New Boss, Same as Old Boss

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Janet Yellen completed her first day of testimony on Capitol Hill as Chair of the Federal Reserve. While the event was historic, it was remarkable mainly for how unremarkable the actual testimony was. There is a great deal of continuity in the Fed from Bernanke to Yellen, who both have very similar approaches to both policy and communication.

What was left unsaid was probably more important, however. We live in a time with a very active Fed which is taking a bigger role in the economy than any central bank in US history. But congress appears to be very comfortable with that role and very willing to let Yellen do what she does best – place a firm hand on the tiller and guide the economy as close to full speed ahead as it can chug along.

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More Games, More Work

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The Congressional Budget Office (CBO) report has a simple title, “The Budget and Economic Outlook: 2014 to 2024”. If the whole thing sounds about as cut and dried as possible, you’d be completely wrong. After all, the is the US in 2014, a place where absolutely anything can become a political football. A nonpartisan report from a respected institution which is full of detail and hard to read makes a perfect game ball.

The last week has been nothing but back and forth on the topic of how many jobs are destroyed, er, left behind with glee because of the Affordable Care Act (aka Obamacare). Nevermind that the bulk of the report was indeed a warning about what will happen if we don’t straighten the budget out in the next decade. That’s hard work, however, and no one will look good on teevee talking about that. So let’s get to the garbage that filled the airwaves instead.

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Back to the Future

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If you want to know the future, ask the kids. It’s going to be their world one day and you can expect that it will be made in their image. Their attitudes, values, and goals will become what drives the economy once they kids of today become the parents and leaders tomorrow.

That’s why UBS asked Millenials (born 1982-1999, or currently 15-32 years old) about their financial and life goals. This is the generation that has been described as narcissistic, broke spenders among other things. If you believe that line, think again. The young people today are one of the most conservative generations yet financially, valuing happiness and security far more than a big pile of cash.

This describes our future, certainly, but more importantly it fits perfectly into the main reason why there are economic and business cycles in the first place.

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Something Like a Warning

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The Congressional Budget Office (CBO) has released their projections for the next 10 years and you can tell they were written by economists. There is plenty of good news and bad news in the report, and the details become very hard to read. Deficits will go down, and the economy will grow – but interest on the debt already incurred is going to turn into a very large and crippling bill.

To make these projections, they start with current policy and trends and simply extrapolate forward. None of it is written in stone, and some of it is clearly a warning to create new policies. Let’s run down what we have in front of us and what has to be done.

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Head Count or Overhead?

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What are you worth as an employee? A good check for anyone working is to add up what it takes to keep them employed and what their net value is to the company. A strong positive value means job security, something pretty valuable these days. But to do it right, what you cost the company is a lot more than just your salary. There are benefits, like health care and retirement plans, yes. The total cost is far more than even that and it can roughly be called the “overhead per employee”.

By the simplest calculation that’s more than 42% above what you take home, and it could be much more than that. And this overhead is one of the biggest barriers to increasing employment, reducing hours, and generally creating a better quality of life for working people in the US. Not to mention it puts us at a competitive disadvantage when it comes to creating high quality jobs.

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