Daily Archives: August 5, 2010
Yup, as Tim Geithner would say – “welcome to the recovery”. And, given the trends, I would guess this isn’t the last of the “unexpectedly” high unemployment report we’ll see. Again, ad nauseam, there’s been no incentive provided by government, but plenty of disincentives that are keeping businesses on the sidelines and consumers from spending:
Initial jobless claims climbed by 19,000 to 479,000 in the week ended July 31, the most since April and exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people receiving unemployment benefits dropped, while those getting extended payments rose.
A cooling economy means employers will resist taking on more staff in coming months, raising the risk consumer spending will weaken further. The jobless rate rose last month as payroll increases weren’t large enough to keep up with gains in the labor force, economists forecast a government report tomorrow will show.
As if anyone has to be told, this is not good. And it wouldn’t surprise me to see the U6 unemployment rate tick up over 10% again in the next few months:
“There really is no upside momentum in the labor market, and that’s a critical long-term determinant of where the economy is going,” said Steven Ricchiuto, chief economist at Mizuho Securities USA Inc. in New York. “People just aren’t getting jobs.”
That’s because jobs aren’t being created and offered. Name the incentive, at this point, to do so? Tax increases are in the offing, health care laws, 1099 requirements, Democrats still pushing for cap-and-trade, new financial regulations that impact the market and economic policies which give the impression the administration is at war with business.
Why would any sane business owner invest in his business in times as unsettled as these?
Answer: he or she wouldn’t. And that’s the biggest reason unemployment continues to “unexpectedly” rise. Headcount is the easiest thing to add when times are good. It’s also the easiest thing to reduce when times are bad. And if they stay bad – as we’re seeing now – few if any are going to be adding jobs.
Economics 101 – provide incentives to get the behavior you want. Provide disincentives to discourage the behavior you don’t want. The administration’s economic policies have, to this point, provided business with all manner of disincentives to hiring. And then the “experts” are surprised when jobless rates are “unexpectedly” higher than estimated.
That’s primarily because the current administration has been in power 18 months, it has spent like there’s no tomorrow with borrowed funds and the economy is still in the tank. Most adults consider that more than enough time to do address the "inherited" problems and if not fix them, be on the road to doing so. But blaming the previous administration is no longer a viable option.
Forty-eight percent of likely voters blame Obama’s policies for the nation’s economic condition, compared to 47 percent who fault former President George W. Bush, according to Rasmussen Reports.
Although the difference is small and within the margin of error, the poll marks the first time in Obama’s presidency that more people blame him than Bush for the economy.
Obama’s 48 percent also shows a three percentage point increase over the past month, according to Rasmussen. As noted, the margin is small and within the margin of error but is, for the first time, against the Obama administration. More importantly, that’s the way it has been trending in past polls.
So essentially what you should expect to see, as the months pass and the unemployment rate remains high, GDP growth sluggish, consumer confidence down and businesses sitting on the side lines is more and more Americans coming to consider this mess the "Obama economy".
The White House has repeatedly tried to inoculate the president from economic blame with the message that Obama inherited a bad economy from Bush, and has made difficult, unpopular decisions to turn it around.
In a speech to the AFL-CIO, Obama made the case that the problems he faces are the result of Bush economic policies.
"We’re not going to go back to digging the hole," he said. "We’re not going to go back to the policies that took Bill Clinton’s surplus and in eight years turned it into record deficits."
That’s obviously not how the American people are seeing those policies and their effect. There’s nothing in the Bush years that even approach the record deficits being piled (and projected) by this administration.
So that old song and dance seem to finally be getting old. And it is surprising the White House is still trying to push it. You’d think they’d understand that it was a perishable excuse and it has long since passed its expiration date. And, as the poll indicates, people have grown tired of it and just don’t accept it as a reasonable excuse anymore.
Not that it will stop the "Blameshifter-in-Chief” and his henchmen from continuing to trot it out there at every opportunity. Their problem is it just isn’t viable anymore.
James Pethokoukis is hearing the rumors of something which might put a number of you in the situation where you’re paying down your neighbor’s mortgage – all in the name of politics. I’ll let him explain:
Main Street may be about to get its own gigantic bailout. Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to Fannie and Freddie, pledging unlimited help. The actual vehicle for the bailout could be the Bush-era Home Affordable Refinance Program, or HARP, a sister program to Obama’s loan modification effort. HARP was just extended through June 30, 2011.
Essentially Fannie Mae and Freddie Mac would be the vehicles for this $800 billion bailout. As mentioned above, the “$400 billion limit” for financial assistance to the two institutions was waived by Congress. And, HARP has been extended. The ability to do what Pethokoukis is hearing certainly exists.
As I mentioned in the previous post, the election this November isn’t shaping up well for Democrats. And the administration knows that without the majority in the House and Senate, its agenda is dead. As Pethokoukis points out, the midterms are expected to be a blood bath for Democrats and this sort of a move may be seen as a last hour way to change that outcome. The GSEs (Freddie and Fannie) are about the only “levers” left for the White House to pull. And with the economy slowing and the President’s approval ratings tanking, those levers are looking mighty tempting:
The mortgage Hail Mary would be a last-gasp effort to prevent this [loss of House and working majority in Senate] from happening and to save the Obama agenda. The political calculation is that the number of grateful Americans would be greater than those offended that they — and their children and their grandchildren — would be paying for someone else’s mortgage woes.
And, of course, it would be a backdoor “stimulus” that many on the left think is needed.
It may not happen, but as pointed out, the rumors are pretty darn strong with Wall Street firms privately warning their clients it is a distinct possibility. It would be an incredible move that, given the mood of the country, could backfire spectacularly if done. But the political calculation may be that if Democrats are supposed to lose badly in November anyway, why not try.
The financial consequence? Bah … we’re talking politics here, the “religion of the left”. They’re likely to do whatever they think is necessary, consequences be damned. And we’ll be left, as usual, holding the bag.
When asked what the Missouri vote on health care meant, White House spokesman Robert Gibbs said, "nothing".
And that may end up being true – at least temporarily. However, what Michigan and Missouri did demonstrate is how deep the water is for the Democrats this November.
Both had hot primary races for governor to draw voters and both states also have open primaries, where voters don’t have to vote in a particular party’s primary.
As it turns out, the GOP carried the day. In, Michigan, which Obama carried by 16 points, the turn out was 2 to 1 for the GOP candidates. 66% voted in the Republican primary in the state. In Missouri, where John McCain won by 0.2%, 65% voted in the Republican primary.
The pattern also held for Congressional primaries in the two states as Michael Barone reports. These sorts of actual results seem to confirm the polls that have warning about this for months. Enthusiasm is definitely on the side of the GOP.
Democrats, as they analyze these results, are going to find it a bit more difficult to whistle past the graveyard as they’ve tended to do with the polls. It is obvious, even in deeply blue states such as MI, that the natives are restless and not at all happy with the Dems.
If you’re unfamiliar with the broken window fallacy, here’s a great short video to explain it and why things like a trillion dollar “stimulus” and most of what Paul Krugman whines about concerning what the federal government should be doing right now are nonsense: