Free Markets, Free People

Daily Archives: March 1, 2010


“Unexpectedly” Bad Employment Statistics

The Employment Situation statistics are due out later this week.  They will be bad.  I know this, because Larry Summers is already spinning them.

White House economic adviser Larry Summers said on Monday winter blizzards were likely to distort U.S. February jobless figures, which are due to be released on Friday.

“The blizzards that affected much of the country during the last month are likely to distort the statistics. So it’s going to be very important … to look past whatever the next figures are to gauge the underlying trends,” Summers said in an interview with CNBC, according to a transcript.

So, please, when you see the numbers of Friday, be sure you don’t assume that they have any policy implications.  It’s all about the weather, you see.


Rebellious Province?

So, I’m watching “60 Minutes” last night, as they reported about Chinese espionage against the US.  Then out of the blue, I hear Taiwan described by Scott Pelley as, “the rebellious Chinese island that mainland China wants to reclaim.”

Wow.  Except for the bit about Taiwan being an island, there is almost nothing in that sentence that is factually correct.  It is almost the complete reversal of the truth.

Taiwan is, in fact, the last vestige of the Republic of China–the government that was pushed off the mainland by the communist rebels in 1949.  The communist government in Peking–that’s right, I wrote “Peking”–never occupied it or owned it, so they can’t “reclaim” it.  It isn’t a “rebellious” province.  It is the last outpost of the legitimate–and I use that word very advisedly, considering the Kuomintang’s shaky claim to legitimacy–ROC government that the Chicoms drove out of the mainland.

That really irked me.


Why Lindsey Graham needs a new job

In an interview with Thomas Friedman, Sen. Lindsey Graham (Alarmist – SC) says that the GOP needs to embrace the suck that is AGW.  He says 3 things brought him around to the alarmist point of view – politics, jobs and legacy.  We’ve covered “green jobs” before.  Ask Spain how well that’s working out.  That leaves politics (there’s a surprise) and legacy (he wants to be remembered for saving the earth – no hubris there).

Lets deal with politics first.

The Republican Party today has a major outreach problem with two important constituencies, “Hispanics and young people,” Graham explains:

“I have been to enough college campuses to know if you are 30 or younger this climate issue is not a debate. It’s a value. These young people grew up with recycling and a sensitivity to the environment — and the world will be better off for it. They are not brainwashed. … From a Republican point of view, we should buy into it and embrace it and not belittle them. You can have a genuine debate about the science of climate change, but when you say that those who believe it are buying a hoax and are wacky people you are putting at risk your party’s future with younger people

Just “wow”. Let me ask the Republicans out there – are you against recycling and are you insensitive to the environment? Do you find unacceptable the notion that we should be good stewards? Are you for dirty water and dirty air?

Of course not. That’s what the Lindsey Graham’s of the world ought to be out there making clear. Not allowing the implication that if people, and especially the GOP, don’t buy into this nonsense of global warming they’re against everything to do with the environment. It’s a false premise!

So the fact that those who are 30 or younger consider the climate issue a “value”, he should be asking “what does that mean”? A “value” in which bad and/or unproven science is acceptable as “proof” that man has more of a role than nature? That’s not a value, sir – that’s a religion. The fact that this nonsense has been pumped into their brains for years and years doesn’t make it a fact or a “value”. And Graham can claim those who believe all of that aren’t brainwashed but I’d beg to differ. If they’ve bought into AlGorism, the only reason a thinking person would still believe it, given the recent revelations, would be due to something akin to “brainwashing”.

The solution? Oh, you’ll love this:

So Graham’s approach to bringing around his conservative state has been simple: avoid talking about “climate change,” which many on the right don’t believe.

Yeah, that’s brilliant – cede the field to unproven nonsense. And by the way Mr. Graham – it isn’t that the right doesn’t believe in “climate change”, of course they believe in that. It is a constant of life on earth.  What they’re having trouble believing is the cause is man. Ceding the field to the alarmists is a sure way to see bad legislation based on bad science become a reality.

And sure enough, Graham is right in the middle of trying to accomplish just that:

Instead, frame our energy challenge as a need to “clean up carbon pollution,” to “become energy independent” and to “create more good jobs and new industries for South Carolinians.” He proposes “putting a price on carbon,” starting with a very focused carbon tax, as opposed to an economywide cap-and-trade system, so as to spur both consumers and industries to invest in and buy new clean energy products. He includes nuclear energy, and insists on permitting more offshore drilling for oil and gas to give us more domestic sources, as we bridge to a new clean energy economy.

Of course despite his opposition to cap-and-trade, he buys into the key concept “carbon is pollution” which, once established in law, is but a short run to establishing a future need for full blown cap-and-trade. Those are the politics Mr. I Buy Into The Alarmist Nonsense is backing.

Once the “carbon should be taxed” genie is out of the bottle, it won’t be put back in.  All it can do is get bigger and more powerful.  And that’s precisely what Mr. Graham’s “putting a price on carbon” promises.

“Cap-and-trade as we know it is dead, but the issue of cleaning up the air and energy independence should not die — and you will never have energy independence without pricing carbon,” Graham argues. “The technology doesn’t make sense until you price carbon. Nuclear power is a bet on cleaner air. Wind and solar is a bet on cleaner air. You make those bets assuming that cleaning the air will become more profitable than leaving the air dirty, and the only way it will be so is if the government puts some sticks on the table — not just carrots.

So, despite his claim, putting a price on carbon means zombie cap-and-trade is not only not dead, but lurking in the wings. How Graham doesn’t understand that is mind boggling. Oh, wait, I know why – legacy:

This isn’t just for the next generation, says Graham: “As you talk about the future, if you forget the people who live in the present, you will have no future politically. You have to get the people in the present to buy into the future. I tell my voters: ‘If we try to clean up the air and become energy independent, we will create more jobs than anything I can do as a senator.’

It is visions such as this that usually end up driving thriving economies right off the cliff. We’ll tax what fuels the economy and we’ll hope that the vision comes to be just as we’ve imagined it. Unicorns and rainbows quickly meet real people without jobs because idiots like Graham want to use government’s power to build their legacy.  And how pathetic is this?

“What is our view of carbon as a party? Are we the party of carbon pollution forever in unlimited amounts? Pricing carbon is the key to energy independence, and the byproduct is that young people look at you differently.” Look at how he is received in colleges today. “Instead of being just one more short, white Republican over 50,” says Graham, “I am now semicool. There is an awareness by young people that I am doing something different.”

Thomas Friedman says:

Sure, Graham’s strategy will give many greens heartburn. I don’t agree with every point. But if there is going to be a clean energy bill, greens and Democrats will have to recruit some Republicans. Graham says he’s ready to meet them in the middle. “We’ve got to get started,” he says, “because once we do, every C.E.O. will adopt a carbon strategy, no matter what the law actually requires.”

Bad premise, bad science, hubris and an inclination to use the coercive power of government to change the world.

What in the world could go wrong with that?

~McQ


Yes They Can (And Will) — UPDATED

On last night’s podcast, I argued that Democrats in Congress will indeed pass something called “health care reform” even if the bill doesn’t accomplish almost anything they claimed it would. For close to a century, government-controlled health care has been the holy grail of the statist set, and they aren’t about to pass up the best (and perhaps last) opportunity they have to see that goal through. Andy McCarthy admonished Republicans to keep this in mind when counting unhatched Senate and House seats from this Fall’s elections:

Today’s Democrats are controlled by the radical Left, and it is more important to them to execute the permanent transformation of American society than it is to win the upcoming election cycles. They have already factored in losing in November — even losing big. For them, winning big now outweighs that. I think they’re right.

I hear Republicans getting giddy over the fact that “reconciliation,” if it comes to that, is a huge political loser. That’s the wrong way to look at it. The Democratic leadership has already internalized the inevitablility of taking its political lumps. That makes reconciliation truly scary. Since the Dems know they will have to ram this monstrosity through, they figure it might as well be as monstrous as they can get wavering Democrats to go along with. Clipping the leadership’s statist ambitions in order to peel off a few Republicans is not going to work. I’m glad Republicans have held firm, but let’s not be under any illusions about what that means. In the Democrat leadership, we are not dealing with conventional politicians for whom the goal of being reelected is paramount and will rein in their radicalism. They want socialized medicine and all it entails about government control even more than they want to win elections. After all, if the party of government transforms the relationship between the citizen and the state, its power over our lives will be vast even in those cycles when it is not in the majority. This is about power, and there is more to power than winning elections, especially if you’ve calculated that your opposition does not have the gumption to dismantle your ballooning welfare state.

Bruce thinks McCarthy is being overly generous with respect to the courageousness of congress members, and that in the end the House will not have enough votes to pass the Senate bill, and thus start the reconciliation process (which Keith Hennessey describes quite well). Enmity between the two houses of congress, in particular the House’s distrust of the Senate to pass a new bill “fixing” the first bill, may make passage of the first bill impossible. Making the task of passing a reconciliation bill even more herculean are some procedural quirks that potentially allow an infinite series of amendments to be offered during the vote-a-rama process in the Senate, and the great likelihood that much of the bill will violate the Byrd Rule, which negates provisions that do not deal with the budget (for a great explanation of both, once again, visit Mr. Hennessey). To top it all off, if the reconciliation bill increases the long-term budget (more than ten years out), then the whole thing automatically gets scrapped (again, see Hennessey). That’s quite a lot to overcome.

However, I think the Democrats, and especially President Obama, are bound and determined to pass something regardless of the high hurdles to be faced in the process or the eventual political costs. This is Obama’s legacy, after all, and the only thing he’s really spent any time on during his presidency. If there is any way that Congress can pass something resembling a health care bill, they will do it. The Senate has already done it’s job on this score, and voting weaknesses in the House virtually ensure that Nancy Pelosi can wrangle assurances from Harry Reid that the Senate will pass the reconciliation bill. The final version may be swiss cheese, and the Byrd Rule is likely to knock out several provisions that are necessary to get votes (think “Stupak amendment”), but in the end I believe that the Democrats can cobble something together that will garner majority votes in both houses and be sent to the president for his signature. This issue is simply too important to the left to let go.

Something else to keep in mind, with respect to vote counting, is that any Democrat congress member who has decided to “retire” ahead of this Fall’s elections will have no repercussions from voting for either the Senate bill or the reconciliation bill. The seats of these lame-duck congressmen are viewed by Republicans a potential pick-up’s for the next congress, when they should be worried about how the lame ducks will be voting.

In the end, I think that Reid and Pelosi deliver something in the way of a public option with tax hikes and that Obama will declare victory when he signs the bill into law. There’s certainly no virtue in this process, but then, there’s really no virtue left in Washington, so that should come as no surprise.

UPDATE: “The Biden Situation”

According to Norman Ornstein, of AEI, and Robert Dove, former Senate parliamentarian, the unlimited amendment tactic during vote-a-rama may not be all it’s cracked up to be [HT: AllahPundit]:

Should passing health care reform come down to the use of reconciliation — and all signs point that way — Vice President Joseph Biden could play a hugely influential role in determining not only what’s in the bill but whether or not it passes.

Two experts in the arcane rules of the Senate said on Monday that, as president of the Senate, Biden has the capacity not just to overrule any ruling that the parliamentarian may make but also to cut off efforts by Republicans to offer unlimited amendments.

“Ultimately it’s the Vice President of the United States [who has the power over the reconciliation process],” Robert Dove, who served as Senate parliamentarian on and off from 1981-2001, told MSNBC this morning. “It is the decision of the Vice President whether or not to play a role here… And I have seen Vice Presidents play that role in other very important situations… The parliamentarian can only advise. It is the vice president who rules.”

[...]

“The vice president can rule that amendments are dilatory,” Norm Ornstein, a fellow at the American Enterprise Institute and one of the foremost experts on congressional process, told the Huffington Post. “That they are not serious attempts to amend the bill but are designed without substance to obstruct. He can rule them out of order and he can do that on bloc.”

“There are time limits,” Ornstein added. “It is not that they can keep doing it over and over again.”

How ironic that the same man who famously mangled the VP’s constitutional role in the Senate might possibly wield that very power to foist ObamaCare on us. Well, I guess it’s no more ironic than the “Kennedy seat” busting a filibuster-proof majority that was depended upon to deliver Kennedy’s life-long dream of government-run health care.

Just the same, I wouldn’t count on ObamaCare being dead and gone just yet.


The Economy: Most likely lower GDP growth, higher unemployment, flat spending in 1st quarter

Take all of the forecasts with a grain of salt given the “unexpectedness” of most economic numbers, but this gives a hint as to what to expect and it also explains why the last quarter’s GDP numbers were an illusion of growth, not the beginning of a growth trend:

The US economy continues on a bumpy road to recovery. Weaker data this week on consumer confidence, jobless claims, housing, and durable goods orders have introduced downside risks to our near-term economic outlook. We have made some minor adjustments to our GDP forecast. Fourth quarter GDP was revised up to 5.9%, with the inventory swing now accounting for 3.9 pp of growth, up from 3.4 pp. We think this “steals” some growth from 1Q. In addition, core capital goods orders and shipments were weaker than expected in January, so we are lowering our forecast for 1Q GDP to 1.5% from 2.0% previously.

1.5% growth isn’t a particularly auspicious number for those claiming we’ve “turned the corner” and are out of the recession and on a positive growth trend. It should be remembered that the last positive growth quarter before December was driven mostly by “cash for clunkers” or government spending. The 4th quarter of last year was driven by restocking inventories. Without it, the GDP is at 2%.  Unless there are consumption increases which will work to decrease those inventories, the growth for that quarter is an anomoly much like the GDP increase driven by cash for clunkers.

With consumer confidence down, housing and durable goods orders down and jobless numbers up, it doesn’t speak for an auspicious start to the year.

This next week will see some other numbers come in. If the forecasters are right (big if), then its going to be more bad news on the employment front:

The consensus is for a net loss of 50 to 80 thousand payroll jobs, and the unemployment rate to increase slightly to 9.8% (from 9.7%).

Today’s Personal Income and Outlays report (PCE) is mixed:

Personal income rose $11.4 billion, or 0.1%, less than the 0.4% expected, while personal consumption expenditures rose 0.5%, ahead of the 0.4% increase expected: So income’s rising slowly, but Americans are still spending more than expected.

The PCE index for the month posted a 0.2% increase, most of that because of energy and food; absent those items, the PCE index rose less than 0.1%, the report showed.

So the PCE index saw a slight increase above expectation but that was driven by necessities (food, energy) not the consumption of goods.

The ISM Manufacturing index released today also disappoints:

Activity in the manufacturing sector expanded for the seventh consecutive month in February, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed by more than economists had been anticipating.

The ISM said its index of activity in the manufacturing sector fell to 56.5 in February from 58.4 in January, with a reading above 50 still indicating growth in the sector. Economists had been expecting the index to show a more modest decrease to a reading of 58.0.
Activity in the manufacturing sector expanded for the seventh consecutive month in February, according to a report released by the Institute for Supply Management on Monday, although the pace of growth slowed by more than economists had been anticipating.

The ISM said its index of activity in the manufacturing sector fell to 56.5 in February from 58.4 in January, with a reading above 50 still indicating growth in the sector. Economists had been expecting the index to show a more modest decrease to a reading of 58.0.

While snow is being blamed for some of the decline, but only in its depth, not the fact that there was a decline.

And the final Monday report is the Construction Spending Report for January was released:

Spending on U.S. construction projects fell at a seasonally adjusted rate of 0.6% in January, the third consecutive month of declines, the Commerce Department estimated Monday.

The decline in January was wider than the 0.5% drop that economists surveyed by MarketWatch had been expecting. December’s outlays fell an unrevised 1.2%.

In January, private residential outlays rose 1.3%, while private nonresidential outlays fell 2.1%. Public outlays also fell, off 0.7%.

During the rest of the week, you’ll see the following:

On Tuesday, the various manufacturers will release light vehicle sales for February. The consensus is for a decline to about 10.4 million on a Seasonally Adjusted Annual Rate (SAAR) basis from 10.8 million in January. Sales for Toyota will be closely watched. Also on Tuesday, the Personal Bankruptcy Filings estimate for February will be released.

On Wednesday, the ADP Employment report and ISM Non-Manufacturing index (consensus is for a slight increase to 51% from 50.5%), and the Fed’s beige book will all be released.

On Thursday, the closely watched initial weekly unemployment claims, productivity report, factory orders, and pending home sales will all be released.

And on Friday, the BLS employment report, Consumer Credit (more contraction), and another round of bank failures (I’m thinking Puerto Rico will make an appearance).

The good news, if there is any, is that inflation expectations haven’t really reared their ugly head to this point, meaning right now inflation is under a modicum of control and not rising appreciably. Of course that could literally change in a heartbeat, so other than to note it and be glad for the fact, I have no idea how long those expectations will remain dormant.

Bottom line – we’re bumping along the bottom and hopefully we’ll see a meaningful turnaround sometime this fall. But right now, anyone saying things are going well and we’re fully into recovery doesn’t realize how fragile the economy is right now and certainly doesn’t know what they’re talking about.

~McQ


Network news circling the drain?

The NYT, a member of another news venue with serious problems, carries an article today about the problems network news faces.  Network news is differentiated from cable news as news shows carried by the traditional big 3 networks (at a certain time) as opposed to cable/satellite TV networks (CNN, MSNBC, Fox News) that cover the news 24/7.

As James Joyner says: “So what?”  It’s not like “news” is going away.

There is certainly nothing sacrosanct about network news, and certainly while lamenting the passing of an semi-old tradition, there’s nothing really being lost here in terms of news delivery if they do close up shop.  Things change and evolve.  That’s what is happening with network news.

Look, I’m one of those guys who remember watching Chet Huntley and David Brinkley each night with my dad.  That’s how far back I go.  But you have to remember that those guys supplanted radio news as the primary source for Americans.  And Movietone newsreels shown at movie houses also went down the tubes because of them.  But today, the delivery of news has evolved from appointment TV (you have to be there when they’re ready to present the news) to 24/7 “the news is ready when your are” TV. 

Which do you suppose makes more sense to the viewer?  News when they want it or news when the network wants to present it?

In fact I’m rather surprised to see network news has survived as long as it has.  I can tune into CNN headline news and essentially get the same thing – a half hour round up of the top stories of the day – whenever I choose to do so.  And if I want in-depth coverage, I certainly don’t wait to watch network news or for the newspaper to show up – I google it.

For the networks, reality has finally reared its ugly head:

The economic problems facing ABC News and CBS News in many ways mirror those faced by newspapers, which have been similarly afflicted by a drop in advertising revenue. The reaction — severe cuts in personnel and other costs — also looks to be the same.

But can you shrink your way to prosperity? Andrew Heyward, the former president of CBS News who is now a news media consultant (NBC News is one client), said of the ABC cuts: “The real issue after this is what is going to drive growth? How do you generate more profit? And this doesn’t address that.”

The networks are mostly vehicles of entertainment. And in the past, when there were no alternatives, network news was a profit center. It no longer is a profit center. So what ABC and CBS (NBC has MSNBC and CNBC so they’re not quite in the same boat) have to decide is whether the “tradition” of their news services are worth preserving and paying for with profits from the entertainment side, or whether it is all about profit and non-profitable enterprises have to be dropped.

My guess is they’ll finally decide on the latter. Not because they’re necessarily cheap or don’t want to preserve tradition. No, instead they’re going to realize that even if they do preserve their news operation it won’t bring in any more viewers than it does now. The habit of “appointment TV” is forever broken and people are no longer going to arrange their lives around the time CBS or ABC chooses to present the news when they have so many other more appealing choices available.

Time to pull the plug, boys.

~McQ


The Kamakazi Option: On health care reform, the action is in the House

Forget reconciliation for the moment, if the Senate version of the Health Care Reform bill doesn’t make it out of the House, reconciliation is moot.  As we talked about on last night’s podcast, the action to be watched is in the House where Nancy Peolosi is trying to gather enough votes to pass the bill into law.  If and when that should happen, and that is an extremely iffy prosepect at best, then reconciliation comes into play, with the Senate promising to pass “fixes” to the Senate bill/law to satisfy House Democrats.

So the effort in the House is two-fold: 1) put a legislative package together that will be passed after the Senate bill is signed into law that will satisfy wavering House Democrats and 2) then get enough votes among Democrats (remember they don’t need a single Republican vote to pass this bill in the House) to pass the Senate bill.

As of this writing, Pelosi doesn’t have enough votes to pass the bill. So, in the face of increasing public disapproval and skitish House Democrats, she’s reduced to calling on Democrats to become political kamakazis in order to pass this monstrosity of a bill into law.

“Our members, every one of them, wants health care,” Ms. Pelosi said. “They know that this will take courage. It took courage to pass Social Security. It took courage to pass Medicare. And many of the same forces that were at work decades ago are at work again against this bill.”

“But,” Ms. Pelosi continued, “the American people need it. Why are we here? We’re not here just to self-perpetuate our service in Congress. We’re here to do the job for the American people, to get them results that give them not only health security, but economic security.”

Ms. Pelosi, holding a fairly safe seat from the liberal San Francisco area, is willing to spend the careers of every Democrat in the House to get her way. The question is, are enough of the Democratic members of the House willing to go along?

My sense is the answer is no (if they were, the bill would be law right now, wouldn’t it?) and she’s going to have a very tough time selling her “package” to Democrats – especially those among a group of 40 headed by Bart Stupak who are pro-life Democrats and don’t at all like the abortion language in the Senate bill. Reconciliation can’t fix that. And even if only half the Blue-Dogs go for her package, that leaves more than enough to defeat the bill.

As every day passes and we get closer to the mid-term elections I think it becomes less and less likely that Pelosi will get the votes she needs. There are few “courageous” politicians when it comes to jeopardizing their careers. This is one time that actually works for the people’s best interests. And I’d also guess that once the members of the House understand what reconciliation can and won’t fix, the bill’s fate is sealed.

I’m saying the bill won’t pass. That’s a guess. But it is a guess as valid as any other out there since it factors in the vast differences between the two bills in the first place, the fact that reconcilation is a very poor substitute for a normal congessional markup session and the belief that human nature will win out over party kamakazi politics with the desire to retain their jobs winning out over what Nancy Pelosi wants.

~McQ