Free Markets, Free People

Daily Archives: September 8, 2011

Quote of the day–Warm up act edition

Say what you will about Karl Rove, but he knows politics.  He has an article in the WSJ today in which he talks about the president’s mistaken belief that he had the power to schedule an address before a joint session of Congress and how he was reminded what “co-equal branches of government” meant.

He then discusses why Obama had to move the speech and how it now ends up in non-primetime before the opening NFL game of the season.  Which brings us to our quote of the day:

The great danger facing Mr. Obama tonight is that the public simply tunes him out, viewing his pronouncements as either irrelevant or annoying.

It’s been a dramatic fall for a man who was, his supporters assured us in 2008, America’s best orator since Abraham Lincoln. Now he’s reduced to a warm-up act for a football game.

Amazing how that works, no?  Talk, talk, talk and no action and pretty soon, well, people begin ignoring you.  Imagine that.

Oh, and on the leadership issue?  Rove discusses some recent polling, compares it with some previous polling and then tells a simple truth:

There was one other telling number, buried in this week’s NBC/Wall Street Journal Poll: When he was inaugurated, 70% felt that Mr. Obama had "strong leadership qualities." Today, only 42% feel that way. And when voters stop seeing a president as a strong leader, they generally stop seeing him as president.

Call it our second quote of the day.

~McQ

Twitter: @McQandO

Economic Releases for 8 Sep 11

Today’s economic statistics releases:

Exports increased and imports decreased, resulting in a smaller than expected trade deficit of $44.8 billion. The trade gap in all three components—petroleum, non-petroleum, and services—declined.

Initial Jobless claims continue held steady in the last week, up 2,000 to 414,000. The four-week moving average rose 3,750 to 414,750 which is nearly 9,000 higher than last month.

U.S. consumer confidence last week fell to -49.3, the second-lowest reading this year.

UPDATE: Speaking of joblessness and jobs, as we await the president’s big jobs speech tonight, Darryl Issa’s House Oversight Committee reports on the depth of the employment problem. It doesn’t look good. The key takeaways:

Two and a half years after its implementation, at a cost of $825 billion, the economy has lost 2.3 million jobs

In the months following the stimulus, unemployment rose well above the ceiling of 8 percent promised by President Obama and Administration officials to over 10.1 percent

Less than 55 percent of Americans have full time jobs—the lowest percentage in modern times. Some 25 million people are unemployed or unable to find full time jobs

A study by Ohio State University in May found that instead of creating jobs, the stimulus "destroyed/forestalled one million private sector jobs" but did create 450,000 jobs in the government sector

8.1 million workers are employed part time because they are unable to find full-time jobs or their hours have been cut

An additional 1.1 million discouraged workers have stopped looking for jobs because they do not believe there were any available—taken together, true unemployment tops 16 percent

So, when you hear the president talk about jobs "saved or created" by the stimulus tonight, remember that the true phrase should be "destroyed or forestalled". Because the president seems to be wanting a Stimulus II, to add to the awesome economic power of Stimulus I. And TARP. And Quantitative Easing I. And Quantitative Easing II.

~
Dale Franks
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Is the economy headed toward a double dip?

There seems to be more and more evidence and economic consensus that a double dip recession may be about to occur, something we’ve been warning about for some time.

The outlook for economic growth in developed countries has got much worse in the last three months, the OECD said on Thursday and urged central banks to keep rates low and be ready to pursue other forms of easing.

The latest estimates marked a sharp slowdown from the Paris-based organization’s last forecasts in May but used different methodology so were hard to compare precisely.

The Organization for Economic Cooperation and Development forecast growth across the G7 group of major industrialized economies would average 1.6 percent on an annualized basis in the third quarter before slowing to just 0.2 percent in the final three months of the year.

"With respect to three months back the growth scenario looks much worse, one would say that growth is stagnating," said OECD chief economist Pier Carlo Padoan.

"We are witnessing a growth slowdown across OECD countries."

Not good.  To put it in graphic form, check out this projection from OECD:

slide-71

Those are not good numbers for growth.   Now check out this particular graphic.  One of the obvious keys to economic growth is consumers since they make up about 70% of the GDP numbers.   What you’ll see is not something which inspires feelings of well being:

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The title is an understatement.  Consumer confidence, especially in the US, has tanked.  In fact, if you look closely, it is slightly less than at the depth of the recession in 2009.

Again, not good. 

The New York Times now puts the possibility of a double dip recession at 50%.  I think they are optimistic.  But here’s the reason this particular graph is so important:

Economies have a strong self-reinforcing nature. When people are optimistic, they spend, which begets hiring and then more spending. When people are anxious, they pull back, which leads to a cycle of hiring freezes and further anxiety that often lasts for months.

And history tells us:

The United States appears to have entered some version of the vicious cycle. Most ominously, job growth has slowed to a pace that typically signals the start of a recession .

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months,the economy has been headed toward recession, in a recession or in the immediate aftermath of one. From early 2010 through this spring, by contrast, employment was growing fast enough to make the economy look as if it were in a recovery, albeit a modest one.

That’s not the case now. 

More immediately, the main significance of the recent slowdown is that the economy may not merely be going through a weak phase that will soon pass, as many policy makers hope. Instead, history seems to suggest that the situation will probably get worse before it gets better.

In a recent research paper, Jeremy J. Nalewaik, a Federal Reserve economist, described this concept as “stall speed”: once the economy slows markedly, it often continues to do so. (He did not make a forecast.) In the other two severe downturns of the last 80 years—in the 1930s and the early 1980s—the economy suffered just such a stall and fell into a second recession not long after the first.

So the consensus opinion forming is we’re in big trouble economically:

“For the U.S, we now expect GDP growth in the second half of 2011 to average just 1.3 percent at an annual rate, down from 2.8 percent,” said HSBC Chief US Economist Kevin Logan in a research note.

“Don’t be fooled by an autos recovery in the third quarter,” said Logan Jonathan Loynes, the chief European economist at Capital Economics, feels similarly about Europe.

“The latest activity indicators suggest that the euro-zone economy might soon slip back into recession.

In the second quarter, the economy expanded by just 0.2 percent, compared to 0.8 percent in the first quarter of 2011,” said Loynes.

“Growth this weak means the economy will likely remain on recession watch throughout the remainder of this year,” Logan said of the U.S. He believes the key risk is stagnating consumer spending.

On the economic side of things, this is not something anyone wants to see, but the metrics are lining up to indicate that a double dip is what we’re going to see.   On the political side of things, if that’s the case, it spells big trouble for the incumbent president.

There’s your economic setting for the big Presidential jobs speech tonight.

~McQ

Twitter: @McQandO

The Republican Debate–then there were two

If nothing else last night, the Republican debate did one thing – it narrowed the present GOP field to two.  Oh the others will be around for a while and they’ll press their case, but in the absence of a miracle (or the entry of a better or more appealing candidate) it seems the fight will be between Mitt Romney and Rick Perry as the two battle it out for the GOP nomination.  Again, that’s assuming no other candidate enters the fray.

Why am I saying this – because of the targets each of the two drew a bead on.  Each other.  Romney, who had been considered the consensus front runner went after Perry and Perry did the same with Romney.

It left the rest sort of twisting in the wind.   The New York Times gives you the blow by blow:

A series of spirited exchanges between the two men, which revealed differences in substance and style, offered the first extensive look into the months-long contest ahead. They traded attacks on each other’s job creation records and qualifications to be president, overshadowing their opponents in the crowded Republican field.

Mr. Perry doubled down on his view of Social Security, assailing it as a “monstrous lie,” and he questioned scientists’ assertions that climate change has been caused by human activity. Mr. Romney said that Social Security should be protected and suggested that Mr. Perry’s positions would make it difficult for the Republican Party to appeal to a broad base of voters needed to win the White House.

“Maybe it’s time to have some provocative language in this country,” said Mr. Perry, who spent much of his time in his first presidential debate defending his Texas record and a litany of positions in his book, “Fed Up!”

[…]

Mr. Perry attacked Mr. Romney’s record of creating jobs in Massachusetts and his championing of health care legislation when he was governor. Mr. Romney, in turn, cast Mr. Perry as a career politician.

“Michael Dukakis created jobs three times faster than you did, Mitt,” Mr. Perry said, referring to the former Democratic governor who ran for president in 1988.

“Well, as a matter of fact,” Mr. Romney replied, “George Bush and his predecessor created jobs at a faster rate than you did, Governor.”

One of the political dangers of these sorts of "spirited debates" is the candidates do the opposition research for the other team. But this was typical of the exchanges last night, made ironically in the library of a president who believed strongly in the political 11th commandment.

However, some blunt talk about the situation we’re in would be refreshing and provide for some actual debate about solutions for a change.

Stanley Kurtz lays out his assessment of the debate in a very succinct one paragraph summary:

This was a very successful debate debut for Rick Perry. It confirms his position as the leader of the field. As of now, this race is a Perry-Romney duel, but Perry’s the one to beat. Romney and Perry were well matched tonight, but Perry’s appeal to the base means he’s got a leg up over Romney just by fighting to a draw, which he did at least, if not better.

Of course the Romney camp is claiming debate victory.  No surprise there.  That press release was written before the candidates stepped on the stage.  But there wasn’t a clear cut winner in most minds I don’t believe.  However you’d have to be deaf and blind to the debate not to have realized the field has really narrowed itself to two:

There are no guarantees here, of course, which is one reason it’s nice to have a continuing Romney-Perry duel.  This next month-or-so of debates is going to help both Romney and Perry with their greatest weaknesses. Romney is going to get a second look from conservatives, which he deserves. Romneycare is a problem that will never entirely fade. Yet it increasingly it looks as though it won’t be prohibitive, should Perry falter. Meanwhile, Perry is going to have a chance to get his message through to the public on the entitlement crisis, and it just might work.

So Rick Perry survived his first debate and will probably learn from the experience and do even better the next time.  Apparently he lived up to most expectations.  Romney, well he’s Romney, the seemingly perpetual second place candidate (even when he is the supposed front runner).  As Kurtz says, these two can spend the next few months sharpening each other up in debates.   What’s interesting though is both of them have better records than the man they would face in any presidential debate.

We’re 15 months out and it takes a lot of money to fund a presidential campaign.  When you are not in the limelight, a hot candidate or a frontrunner, those funds necessary to continue become harder and harder to raise.  It think last night may have signaled the end of many of the lesser candidates chances for the nomination and I expect some to withdraw in the next month or two.

In the meantime, it’s Perry and Romney, slugging it out.  But Jen Rubin issues the Perry camp a warning that they should heed:

The pace of a presidential campaign in the early going is leisurely, but right about now, things pick up. Perry is a good pol, but he better be ready to show he’s got some policy chops as well, and before his opponents start characterizing his views.

Agreed.  Better the candidate frame his positions than let the opposition do it for him.  Perry’s bunch better be able to put some details and specifics on their one-over-the-world policy pronouncements, it will end up an one man race and Perry won’t be the “one”.

~McQ

Twitter: @McQandO