I'm not an Economist, but....

I'm not an economist but I've been watching the economy like everyone else and I'm starting to see something happen that I predicted a while back. Only, no one was really listening. So I'll talk a little bit about it here. It has to do with the nasty loss of jobs coming in the public sector.

Here's a few baseline beliefs that I hold. The housing bubble and sloppy banking had a lot to do with the recession. And no, it's not even close to over. It may never be over. But I suspect that a bigger problem is the two high tech wars that we're fighting. It's just not a very good idea to spend a lot of money making very expensive things and then blowing them up when you could be making other things and selling them. So the convergence of those things got us going downhill.

Unfortunately, to avoid a complete free fall and it's resulting catastrophic crash, the government stepped in and softened the blow with a bunch of money. The problem is that we were spending money like we were getting it before the crash. And now it's coming in a lot slower since fewer are working and they're working for less and the rich are paying less in taxes (Thanks, George). The people working in the private sector took the brunt of the job loss for the first two years. I think that's stabilizing. My prediction some time ago was that the public sector, which was largely spared from job loss early in the recession, is now gonna get whacked big time. I think we're seeing it now, especially in education. We'll probably downsize the postal service soon and a host of other federal, state and local services will start to lose employees. This will stretch out the recession for a few more years.

OK, here's the good news, maybe. I think that as we wind down the two wars and try to avoid getting into any more (think Libya and the like), the economy will slowly improve. I think services will deteriorate to the point that we realize that we're not taxing the rich people appropriately and the tax structure will slowly change back to something reasonable as Warren Buffet suggests. The wholesale destruction of the public sector will allow it to be rebuilt with better efficiency and a lot of useless agencies will disappear or at least get more efficient and do useful things. Maybe we'll actually see the benefit of and be forced to implement universal health care.

Overall, I think that bailing out the country was the best thing to do. It kept us out of a depression but substantially extended the time for recovery. Maybe it spread the pain out a bit more but lessened it's intensity for many. I think the wholesale exit of the manufacturing sector and it's associated support (like R & D) will stop and will return to America, though it will be through a nasty global wage normalization (nasty for us, good for the poorer countries). No more predictions for now. Should be an interesting ride.