Monthly Archives: November 2011
I‘ve mentioned before about the seemingly unbridgeable ideological divide confronting our federal representatives in Washington, DC. This seems to be a generational version of the same thing (my emphasis):
Young folks today appear to have the same dreams and ambitions that my generation had at the same age. We wanted an education, a good career, a home of our own and a happy life. The main difference between today’s youthful opinion is that most of us expected to stay in school, work hard and earn a good life instead of having it given to us at someone else’s expense — a point of view expressed by many young adults today.
Proof of the pudding showed up this fall in a survey conducted by Professor Jack W. Chambless at Valencia College in Florida. He asked his students to write a short essay expressing their view of The American Dream.
Most of the students responded with the familiar notions of youth expressed by my generation with one important and notable exception. Instead of taking personal responsibility for their future, they noted that the government should, “Pay my tuition, provide me with a job, give me money for a house, make sure I get free health care and pay for my retirement.” If necessary, “… raise taxes on rich people so that I can have more money …”
What else would you expect from young Americans, who, after several generations, have grown accustomed to a “Nanny State” in which the Federal Government has taken more and more license with the lives of individual Americans? This entire process has resulted in a citizenry in which one-half of wage earners pay no income tax at all and, indeed, in some cases even get a “refund” even though that refund comes from one of the other half of Americans who have paid income tax. If this is not a prime Marxist example of government, “From each according to his ability; to each according to his need,” I don’t know what is.
In fact, according to clip below, 80% of the students opined that health care, tuition, down payments and jobs should all be provided by the government at no cost to themselves. And, while this certainly isn’t a scientific poll or anything even approaching the sort, it should be noted that this was from a class of 200 college kids. So, at least 160 of them thought this way. Which is more than just pathetic and sad. It’s a harbinger of terrible things to come.
I truly pray that Valencia College has cornered the market on freeloaders, thus making this a terribly skewed sample. Or maybe the students surveyed are just a bunch of smart-asses having fun with their professor. Indeed, I’m sure that something far less than 8 in 10 college students believes that government should just provide for their every want and desire, paying for out of the pockets of the “rich” if need be (one wonders where they think all these goodies originate?).
But the number doesn’t really need to be all that high before serious issues arise. If, instead, the number is only 20% (or 1 in 5), that would be better, but still alarming. Consider that if 20% of the electorate feels this way, and that the remaining 80% are diametrically opposed on almost every issue, then pleasing that smaller cohort becomes the key to political victory. In short, giving free stuff to the 20% in exchange for their votes. Which is not at all unlike what we have now.
Of course if that number is higher that 1 in 5, the problem becomes much worse. At least, until they run out of other people’s money.
You can see a video of an interview with the professor who conducted the survey here.
Today’s economic statistical releases:
The Mortgage Bankers Association reports that mortgage applications were down by -11.7%, but the short Thanksgiving week clouds the significance of this week’s results. Delving deeper into the report shows new purchase applications were down -0.8% while refinance apps fell -15.3%.
The Challenger Job-Cut Report shows layoff announcements are fairly steady this month at 42,474 compared to 42,759 in October and 48,711 last year.
ADP, the country’s largest third-party payroll processor, estimates private payrolls rose 206,000 in November. We’ll see if Friday’s Employment Situation confirms that.
3Q productivity and costs were revised downward slightly, with productivity increasing at 2.3% annually, while labor costs fell -2.5%. This is pretty much in line with the GDP revision for 3Q.
The Chicago PMI indicates a pickup in business activity for the Chicago area, with the index rising to 62.6 from 58.4. This report is widely seen as a predictor of the national PMI, which will be released tomorrow.
The National Association of Realtors reports their pending home sales index rose to 93.3 from 84.5.
Or maybe a better analogy is Nero and Rome. Politicians and hard decisions just don’t seem to mix very well do they? It is much better to be Santa Clause than the Grinch. Especially if you want politics to be your career.
Maybe that’s the problem. If you remember correctly, at least in the US, politics was supposed to be a part-time job. But here as in Europe, it has developed into a full-time job that requires excessive pandering to special interest groups using taxpayer money and borrowing as the means.
And here we are.
In Europe, it has, as predicted for decades, finally reached a tipping point. And the political elite? They really have no idea how to handle the problem (and the same sort of problem is becoming evident here). So they resort to the usual reaction of politicians caught in an uncomfortable situation. Defer a decision:
Under pressure to deliver shock treatment to the ailing euro, European finance ministers failed to come up with a plan for European countries to spend within their means. Such a plan is needed before Europe’s central bank and the International Monetary Fund consider stepping in to stem an escalating threat to the global economy.
The ministers delayed action on major financial issues – such as the concept of a closer fiscal union that would guarantee more budgetary discipline – until their bosses meet next week in Brussels.
If their finance ministers can’t put together a plan of action, what in the world are the ministers going to do next week? Megan McArdle notices the can kicking as well and also recognizes that they’re doing that in a cul de sac:
Keeping the euro together requires much more than fiscal integration–all fiscal integration does is turn the peripheral countries into something like those Algerian ghettos ringing Paris. Actually correcting these imbalances is going to require a lot of people in the periphery to get up and move. That’s a really tall order. Despite the fabled European multi-lingualism, in my experience, the majority of workers speak English about like I spoke high-school French and college Spanish; well enough to go on vacation, but not well enough to enjoy living in another country. I’m told that this is about standard. And that’s just one of the many barriers to movement between countries.
It’s not just the Germans who have to ask themselves whether the PIIGS won’t eventually say "Enough!" and renege. The bond buyers have to ask the same thing. At this point, it’s not entirely clear to me that any solution is credible enough to kick the can more than a very short distance down the road.
McArdle’s question in the title of the piece is “How can Europe possibly save itself?” You could read the question two ways. The first is wondering out loud what Europe could do to fix the problem and solve the dilemma they’re in. The second is rhetorical and reflecting a belief that it can’t.
Given this latest deferral, I’m beginning to see the question as rhetorical and the result as catastrophic. If you want to see a real “Domino Effect”, let Europe collapse.
Oh, and by the way, they just downgraded the third quarter GDP estimate from 3.1% to 2.3%.
And that sound you hear? The can clinking along as politicians the world over do what they do best.
MICHAEL ADDS: You could actually read the question a third way: Who will step in to save Europe from itself? Why, none other than good ole Uncle Sam (aka we the taxpayers):
The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.
U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.
This is essentially a back-door bailout of the Euro. The Fed fixes the interest rate for these loans (the currency swaps) at today’s rate, sends a bunch of US dollars to European central banks (and elsewhere), which then loan out those dollars to European banks facing a “liquidity crisis” — i.e. running out of money and holding diminishing assets (one of which may have almost crashed last night). Nominally, the European central banks are on the hook for any losses suffered, but we all know how that works.
You can read more about how these swaps work here.
What they have to say is what we face if the sequestrations cuts go through:
And remember also, as President Reagan says, defense is the highest national priority of government. If you think the world is a dangerous place now, let the sequestration cuts happen.
Professor Cornel West, who most likely wouldn’t have a job if he an others weren’t able to keep race baiting going, has emphatically stated that entitlements need to be increased, not decreased. And he’s also made the point that if they aren’t, well, those seeking to have them increased may have to take to the streets:
"I think the problem is that the poor children, keep in mind it’s 42% of poor children who live at or near poverty, it’s 25% in poverty. Our audience needs to keep that in mind." Cornel West said on MSNBC this afternoon.
"Poor children need more than just a $1,000 for their family, they need a war against poverty to make it a major priority in the way which we have a priority for Afghanistan, and a priority to bail out banks, and a priority to defend corporate interests when it comes to environmental issues," West said about more and new entitlements for the poor.
Professor West didn’t just call for another war on poverty (the first war was fought by Lyndon B. Johnson), but went on to say that the push for more entitlements "is going to be fought in the streets." West showered the Occupy movement with praise for making people aware of the issue.
"It’s a major question of priorities here. That’s why the Occupy movement is so important because some of this is going to be fought in the streets. Civil disobedience does make a difference," he said.
A few points. Poverty in the US is unlike poverty anywhere else. If you’ve ever traveled outside the US to a third world country you know what real poverty looks like. The Heritage Foundation gives us a little reminder of what those who are deemed “poor” in the US are likely to have (from the Census Bureau):
- 80 percent of poor households have air conditioning
- Nearly three-fourths have a car or truck, and 31 percent have two or more cars or trucks
- Nearly two-thirds have cable or satellite television
- Two-thirds have at least one DVD player and 70 percent have a VCR
- Half have a personal computer, and one in seven have two or more computers
- More than half of poor families with children have a video game system, such as an Xbox or PlayStation
- 43 percent have Internet access
- One-third have a wide-screen plasma or LCD television
- One-fourth have a digital video recorder system, such as a TiVo
As for the claims about hunger and homelessness:
As for hunger and homelessness, Rector and Sheffield point to 2009 statistics from the U.S. Department of Agriculture showing that 96 percent of poor parents stated that their children were never hungry at any time during the year because they could not afford food, 83 percent of poor families reported having enough food to eat, and over the course of a year, only 4 percent of poor persons become temporarily homeless, with 42 percent of poor households actually owning their own homes.
In fact, in the US, poverty is more of a definition than a condition. And that definition is key, because if you fit it, then you are “entitled” to taxpayer largess. So painting a bleak picture of poverty in the US in general terms is important to any argument for increased entitlements, even when everyone should know that we can’t afford them.
Those who’s power is based in their advocacy for the poor see that as a threat. So they’re left with either accepting the fact that their power will be diminished or threatening to resort to “civil disobedience”. The reason West likes OWS is because that’s the sort of action he wants to see. Tantrums in the street designed to get what they want.
And that brings me to point two – civil disobedience in today’s parlance isn’t the same as it was in Dr. King’s day. OWS makes that clear. Any demonstration today, even if the intent is non-violence, always attracts a violent faction. West’s praise of the OWS isn’t just focused on awareness. The methods they’ve used are fine with him too. Provocation which eventually turns to violence.
Finally … it is also about holding corporations hostage. This was a technique refined by Jesse Jackson. Make the villain evil and greedy corporations. Threaten them with direct action. Make ‘em pay.
So what you see West setting up here is part Jesse Jackson sting operation and part poverty pimping. As we know from the previous “war on poverty” which wasted trillions and never moved the poverty percentage down a single percentage point, government intervention has been a failure. So unwilling to be solely dependent on government (taxpayer) largess which, given the sad state of government finances, is unlikely to be increased, West is setting up the next patsy.
The Jesse Jackson model will meet OWS and instead of taxpayers paying the price this time, it will be consumers who will foot the bill while a new generation of poverty pimps use those defined as “poor” as their means of holding up corporations.
But first, the demonization must proceed. And if you’ve been paying attention, you know that is well underway via OWS and the Democrats.
Today’s economic statistical releases:
The Conference Board’s consumer confidence index jumped sharply upwards, from 39.8 to 56, mainly on employment optimism.
Distress sales and foreclosures seem to be pushing the housing sector deeper into contraction. The S&P Case-Shiller home price index fell again, -0.6% for the month, and -3.6% for the year. On the other hand, the FHFA reports housing prices rose 0.9% last month, though they’re still down -2.2% on a year over year basis. But, the FHFA only reports on conventional loans or those bundled by government agencies—which often has price caps. Case-Schiller is far more broad, and the FHFA picture is probably missing a lot of trouble in the housing sector.
The State Street Investor Confidence Index rose 2 points to 97.2 from a revised 95.2 last month, as institutional investors became a bit more jaunty.
Finally in retail sales, Redbook reports a year-over-year jump of 5.4% in sales last week. ICSC-Goldman is also strong, with sales up 1.7% for the week, and up 4% over last year.
The valuable James Pethakoukis weighs in with some new numbers to again shatter one of the myths that surround the “income inequality” nonsense that OWS and its ilk (*cough* Democrats *cough*) are pushing. One of those myths is that middle class income has “stagnated” in the last 40 years. And that’s because, per the OWS crowd, the rich have basically
stolen taken ended up with the money generated. Those pushing that premise are citing economists Thomas Piketty and Emanuel Saez study which claims the taxable income of the bottom 99 percent increased by just 12 percent from 1970 to 2008.
That premise and those claims are under serious assault. In fact, the University of Chicago’s Tino Sanandaji finds that there has been pretty significant growth in middle class income. His summary of what he found:
My simple method is combining the best income-distribution estimate (from Pickety&Saez) with the best income-growth estimates (from GDP numbers). This method shows that that between 1970-2008 the real per capita income of the “Bottom 99 Percent” grew by 80%, and the income of the “Bottom 90 Percent” grew by 60%.
80%? Last time I looked that was a bit higher than 12%. Oh, and plenty of charts, etc., to explain the difference at Pethakoukis’ site.
And there is statistical backup for Sanandaji’s findings:
From 1975-2009, real per capita GDP increased by 90 percent vs. 17 percent growth in real median household income, as measured by the Census Bureau.
On top of that:
These calculations are in line with new research from University of Chicago’s Bruce Meyer and Notre Dame’s James Sullivan, who find that “median income and consumption both rose by more than 50 percent in real terms between 1980 and 2009.”
Conclusion? If the premise is that one of the reasons that upper income increased in that period is because middle class income stagnated, the premise just isn’t supported by reality. Income is not a zero-sum game. And one of the points on the pro side of capitalism is it lifts all boats – as demonstrated here.
Yes, Paul Krugman has a novel idea that no one has previously thought of … we can get out of this mess we’ve spent ourselves into by taxing the rich.
And by the way, income inequality now makes that both feasible and acceptable:
About those high incomes: In my last column I suggested that the very rich, who have had huge income gains over the last 30 years, should pay more in taxes. I got many responses from readers, with a common theme being that this was silly, that even confiscatory taxes on the wealthy couldn’t possibly raise enough money to matter.
Folks, you’re living in the past. Once upon a time America was a middle-class nation, in which the super-elite’s income was no big deal. But that was another country.
The I.R.S. reports that in 2007, that is, before the economic crisis, the top 0.1 percent of taxpayers — roughly speaking, people with annual incomes over $2 million — had a combined income of more than a trillion dollars. That’s a lot of money, and it wouldn’t be hard to devise taxes that would raise a significant amount of revenue from those super-high-income individuals.
Because you know, “super-high-income individuals” don’t deserve to keep the money they earned, because, well, we’ve gotten ourselves in this awful mess and we need someone to bail us out.
And they have a lot of money, by gosh. A lot of money. So “it wouldn’t be hard to devise taxes” that would take most of it on the marginal side. Because again, we should have first claim when we get ourselves in trouble. Besides, they have more than enough money and they should pay their “fair share”.
A couple of reminders. Despite what Krugman says, taxing the top 0.1% isn’t going to make a significant difference. And even if it did, it would only make that sort of difference once. The next year, that money would be much less available. Which would probably mean what?
Well “rich” would have to be redefined, wouldn’t it? Maybe then it would be the top 1%, because we all know they have more money than they need and they should pay their fair share, right?
As a reminder, the Adjusted Gross Income necessary to be considered a one-percenter is a ‘rich’ $343,927. And this particular percentage of tax payers are indeed shirking their fair share. After all, they only pay 36.73% of all income tax collected now. Surely we can kick that up to, oh I don’t know, at least 50%. And, of course “we” can, certainly. For a short time, that will indeed bring in more revenue. But, again, once the marginal rate goes up those being stuck with the tax bill will go to work finding ways to minimize that hit. And, they will.
Which means those top 5% suddenly become vulnerable, etc.
A short version of the Krugman solution can be found working so well in Europe right now. And E21 does a good job of reminding us of Krugman’s unadulterated enthusiasm for the social welfare states to be found there. E21 also does a great job of eviscerating Krugman’s arguments concerning Europe’s problems:
Paul Krugman insists that the European debt crisis has nothing to do with excessive government spending. The problem, to him, is a failed monetary experiment that deprives nations like Greece and Italy of the ability to print money to inflate away excessive debts. The need to create an alternative understanding for the origins of the debt crisis is only natural given the extent to which the current crisis has tarnished the statist ideology that Krugman generally follows. But his basic claims are nonsensical, as is Krugman’s citation of Sweden and Germany as economic role models. While these economies have performed relatively well through the crisis, it was because they abandoned Krugman’s preferred economics and moved in a more market-oriented direction long-ago.
He was wrong about Europe and he’s wrong about taxes. He’s become an economic joke but just doesn’t know it yet. He’s a one-trick pony who, much like the global warming alarmists, ignores the fact that what he continues to claim is viable and necessary is constantly and consistently being trashed by reality.
The only good news is he remains a source of entertainment. It’s sort of like a game. You wonder how long he can go before reality actually grabs him by the scruff of the neck and makes him recognize the error of his ways (my bet? Never happens). And, as a bit of side fun, you wonder how long the NY Times will continue to let Krugman push his reality challenged agenda forward before they finally (and, of course “reluctantly”) can him (see first bet – they haven’t a clue).
It’s a heavy week for economic statistics, culminating in the Employment Situation on Friday, but we start the week off light:
New home sales rose 1.3% in October. That’s a solid gain, but the total of 307,000 was a bit below expectations.
The Dallas Fed general business activity index rose to 2.3 from -14.4., its first positive reading in six months.
Why? Because there’s a UN meeting beginning in Durbin, South Africa on “climate change” and the propaganda will be freely flowing.
A new round of United Nations climate talks is getting under way in Durban, South Africa, Monday. And domestic struggles here in the United States are hampering the global talks.
The United States is second only to China in emitting gases that cause global warming. Despite a presidential pledge to reduce emissions two years ago, we’re spewing more carbon dioxide than ever into the atmosphere.
That’s putting a crimp on the 20-year-long struggle to develop a meaningful climate treaty.
Really? That’s what’s putting a crimp on it? Or is the unquestioned acceptance of the premise “emitting gases” causes “global warming” perhaps the problem when it appears the “science” is falling apart?
What is interesting to me is to watch those who unquestionably accept this premise ignore the profound problems the “science” that supports this nonsense has shown.
Christopher Booker does a good job of distilling the problem, here speaking of the UK government:
To grasp the almost suicidal state of unreality our Government has been driven into by the obsession with global warming, it is necessary to put together the two sides to an overall picture – each vividly highlighted by events of recent days.
On one hand there is the utterly lamentable state of the science which underpins it all, illuminated yet again by “Climategate 2.0”, the latest release of emails between the leading scientists who for years have been at the heart of the warming scare (which I return to below). On the other hand, we see the damage done by the political consequences of this scare, which will directly impinge, in various ways, on all our lives.
Like driving up energy costs to a point that energy poverty will be a common problem. Booker has another nice body slam to the “premise” later on in his article:
While our Government remains trapped in its green dreamworld, similar horror stories pile up on every side, from that UBS report on the astronomically costly fiasco of the EU’s carbon-trading scheme, to our own Government’s “carbon floor price”, in effect a tax on CO2 emissions rising yearly from 2013. This alone will eventually be enough to double the cost of our electricity, and drive a further swathe of what remains of UK industry abroad, because we are the only country in the world to have devised something so idiotic.
All this madness ultimately rests on a blind faith in the threat of man-made global warming, which no one has done more to promote than the scientists whose private emails were again last week leaked onto the internet.
It is still not generally appreciated that the significance of these Climategate emails is that their authors, such as Michael Mann, are no ordinary scientists: they are a little group of fanatical insiders who have, for years, done more than anyone else to drive the warming scare, through their influence at the heart of the UN’s Intergovernmental Panel on Climate Change. And what is most striking about the picture that emerges from these emails is just how questionable the work of these men appears.
That’s entirely true if you actually read through the released emails. What you read isn’t science, it is “scientists” tailoring their “science” to fit a political agenda in order to keep the grant gravy train rolling. The deniers, in this particular horror show, are the true believers who have, on faith, accepted the “premise” and refuse to question it or examine the evidence which argues strongly against it.
To be clear, the whole debate revolves around “climate sensitivity” to CO2. Those on the side of man-made global warming claim the environment is highly sensitive to CO2. The so-called “deniers” claim it isn’t at all. And for those who’ve followed the debate, the real science seems to support the so-called “deniers”.
The climate may be less sensitive to carbon dioxide than we thought – and temperature rises this century could be smaller than expected. That’s the surprise result of a new analysis of the last ice age. However, the finding comes from considering just one climate model, and unless it can be replicated using other models, researchers are dubious that it is genuine.
As more greenhouse gases enter the atmosphere, more heat is trapped and temperatures go up – but by how much? The best estimates say that if the amount of carbon dioxide in the atmosphere doubles, temperatures will rise by 3 °C. This is the "climate sensitivity".
But the 3 °C figure is only an estimate. In 2007, the Intergovernmental Panel on Climate Change (IPCC) said the climate sensitivity could be anywhere between 2 and 4.5 °C. That means the temperature rise from a given release of carbon dioxide is still uncertain.
But you wouldn’t know that by listening to the alarmists (and much of the press) who continue to claim the science is settled. And that’s in the face of this:
The global output of heat-trapping carbon dioxide jumped by the biggest amount on record, the U.S.Department of Energy calculated, a sign of how feeble the world’s efforts are at slowing man-made global warming.
The new figures for 2010 mean that levels of greenhouse gases are higher than the worst case scenario outlined by climate experts just four years ago.
… Prof Curry said, the project’s research data show there has been no increase in world temperatures since the end of the Nineties – a fact confirmed by a new analysis that The Mail on Sunday has obtained.
‘There is no scientific basis for saying that warming hasn’t stopped,’ she said. ‘To say that there is detracts from the credibility of the data, which is very unfortunate.’
… [S]he added, in the wake of the unexpected global warming standstill, many climate scientists who had previously rejected sceptics’ arguments were now taking them much more seriously.
They were finally addressing questions such as the influence of clouds, natural temperature cycles and solar radiation – as they should have done, she said, a long time ago.
But the true believers gathering in Durbin SA? Still reject the fact that the so-called “science” of global warming is under fierce and sustained attack and is being found to be increasingly wanting in both substance and fact.
And I don’t know about you but it seems incredible to me that, as Prof. Curry notes, scientists are “finally addressing” the influence of “clouds, natural temperature cycles and solar radiation”.
Finally!? How in the world could “science” not have included those originally? How could they have somehow been factored out?
That’s actually an easy question to answer.
Because including them wouldn’t have given the “scientists” in question the results necessary to support the “premise” cooked up by those pushing the man-made global warming agenda. And that, of course, meant an end to the grant money of multi billions of dollars.
Meanwhile in Durbin this week, the real deniers are going to be busily trying to trade away your ability to purchase cheap and plentiful energy through various schemes which will advance their agenda and put the rest of humanity in an unrecoverable energy deficit.
Delegates at the conference will also be hammering out the details of a plan to administer the Green Climate Fund, money that is to help poor countries deal with climate change.
The fund is expected to grow over the next eight years to eventually distribute about $100 billion a year. However, it is still unclear where all of that money will come from and how it will be distributed.
In addition to the usual international development funds from the West, proposals include a carbon surcharge on international shipping and on air tickets, as well as a levy on international financial transactions.
This is what junk science tied to a political agenda brings. And, as usual, you’ll be levied to pay the bill they agree on with your money and your way of life.