Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, The Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:
Thing One: We Have Always Been At War With Government Spending: The consistent fear of all of our recent stupid federal-budget crises has been that the U.S. economy is about to get slapped by a wave of sudden austerity. The little-remembered truth is that austerity is already with us. Has been for years.
Government spending as a percentage of GDP has been shrinking for the past two years at the fastest pace since the government shut down the Vietnam war, Binyamin Appelbaum of the New York Times writes today. Outrageously, government sector employment has shrunk by more than 2 percent since the Great Recession. In contrast, government hiring has surged after every other recession since World War II, the NYT points out. That's sort of the standard remedy for recessions -- the government spends until the private sector can get back to spending.
Our latest fiscal panic, the $85 billion in harsh budget cuts known as the "sequester," due to take effect on Friday, is just an austerity dessert after a long austerity meal. Most economists doubt it will cause another recession, Appelbaum notes. But the sequester, along with other effects of the "fiscal cliff" we only halfway dodged at the start of the year, will sap about 1.5 percent from already weak GDP growth. That could slow growth down so much that the economy could be vulnerable to a shock. It would certainly keep growth too slow to bring down unemployment very quickly, which is one reason the Federal Reserve has no intention of stopping its extraordinary stimulus efforts any time soon, as Chairman Ben Bernanke reminded everybody yesterday -- while also scolding lawmakers, not for the first time, for not doing their part to help.
Bernanke's pleas likely fell on deaf ears in Congress. President Obama, too, is making a lot of noise about the sequester, trying to goad Republicans in Congress to do something to avoid the hit. But Obama bears blame for at least partially humoring Washington's unnecessary, cynical and destructive deficit nattering over the past four years. Obama was the one who in 2010, with the economy still struggling out of recession, created the National Committee on Fiscal Responsibility and Reform, which brought us the Simpson-Bowles deficit-slashing plan. The economy could have been much stronger -- and the deficit probably lower -- if Obama had focused his energies more exclusively on seeing to the recovery first.
Thing Two: Medicare, Not MediSCARE: If anything gets the deficit scolds' boxers in a bunch, it is Medicare, which is indeed something of a long-term fiscal worry. But The New York Times' Eduardo Porter points out that Medicare is not a problem that needs to be solved right away. In fact, it may already be solving itself a little bit, with the pace of health-care spending growth slowing recently.
Thing Three: Crazy, Dimon: JPMorgan Chase CEO Jamie Dimon may say he loves his bank big and beautiful, but he is making it smaller nonetheless. JPMorgan plans to lay off 17,000 workers around the world in the next couple of years, primarily in consumer banking and mortgage lending, the Wall Street Journal writes. The banking industry generally is shrinking, faced with slower economic growth, fewer money-making opportunities and tighter regulations.
But not to worry, JPMorgan is "anti-fragile," Dimon told investors yesterday. In fact, the bank thrives in the sort of downturns that hurt mere mortals like you or me. That was just one of the many awkward things Dimon said yesterday, in what was clearly an effort to troll the Huffington Post.
Thing Four: Raises For Anybody Still Around: So if you work in banking there's a good chance you might not have a job any more. But if you still do have a job, then, congratulations, you've probably gotten a raise, reports the New York Times' Susanne Craig. The New York State Comptroller yesterday announced that the bonus pool for bank workers in New York City rose 8 percent to $20 billion last year.
Thing Five: Italian Jobs: Italian politics remain in turmoil following a messy election that shoved former comedian Beppe Grillo and wig model Silvio Berlusconi scrambling for power, along with Democratic Party leader Pier Luigi Bersani. The risk is that Italy's next government, whoever runs it, will turn away from the austerity measures that are necessary to get bailout money from the European Central Bank. That uncertainty has left European financial markets on edge, and Italy's borrowing costs surged at a bond auction this morning.
Thing Six: Shadow Boxing: More than five years after the shadow banking system of off-balance sheet assets in the U.S. and Europe crashed the global economy, China now has an enormous shadow banking system of its own, swelling to some $3.2 trillion in size, the Financial Times notes. China is about to crack down on it, the FT writes -- hopefully not too late.
Thing Seven: Bair Baiting: In a New York Times op-ed piece, former FDIC Chairwoman Sheila Bair announces that she is that rare Republican advocating for closing the income gap. "I fear that government actions, not merit, have fueled these extremes in income distribution through taxpayer bailouts, central-bank-engineered financial asset bubbles and unjustified tax breaks that favor the rich," she writes. "This is not a situation that any freethinking Republican should accept. "
Thing Seven And One Half: So Long, Swimming, Nice Knowing You: Next time you're swimming in a murky river somewhere, please try not to imagine that THIS IS THE THING THAT JUST BRUSHED YOUR LEG, OH MY GOD.
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Calendar Du Jour:
8:30 a.m. ET: Durable Goods Orders for January
10:00 a.m. ET: Ben Bernanke Speaks
10:00 a.m. ET: Pending Home Sales for January
Heard On The Tweets:
What Kills the system makes Dimon stronger.
— Nassim N. Taleb (@nntaleb) February 26, 2013
-- Calendar and Tweets rounded up by Alexis Kleinman