Free Markets, Free People

Daily Archives: April 2, 2010


Dan Quayle’s wrong

Not completely, not utterly, just in how he discusses the Tea Party’s origins.

Like many influential causes before it, the “tea party” movement appeared on the scene uninvited by the political establishment. Democrats in the White House and in Congress recognize it for what it is — a spontaneous and pointed response to the Obama agenda — but some Republican leaders still aren’t sure what to make of it, as tea partiers have risen on their own and stirred up trouble in GOP primaries.

The  tea party movement is not exclusively a reaction only to “the Obama agenda”. And if the GOP buys into that, they’re buying trouble.  Quayle even acknowledges that without knowing it when he talks about trouble in Republican primaries.

This grass roots movement didn’t begin when Obama took office or in reaction to his specific agenda, but instead began to form during the Bush administration as government continued to expand. About the time TARP found its way into the political lexicon, it went public.  It was the size of the crisis and response – the trillions of dollars thrown around like confetti – that finally spurred people into the streets and birthed the official “tea party movement”.

If you haven’t already, I’d like you to watch and listen to this interview with Pam Stout, a local tea party movement president from Idaho. She’s on the Dave Letterman show, and, knowing the history of the show, I’m sure you can figure out why he wanted her there. But she blows up the game and in what I’m sure was an unintended outcome, gives lie to almost all the myths, legends and charges being circulated about Tea Partiers. Listen at the 3 minutes mark on the second video where Ms. Stout verifies exactly what I’ve been saying about the movement.

Stout is the perfect example of my point – this isn’t a movement of right wing disgruntled Republicans. This is a movement of small government fiscal conservatives – almost libertarian in leaning. Her discussion of the demonization of business, the necessity of allowing businesses to fail, getting out of the way of the markets and let them take the lead in recovery were on target and well delivered.

But most importantly, the GOP needs to understand that her “hero” is Sen. Jim DeMint, not because DeMint is a Republican, but because DeMint is a small government fiscal conservative who not only talks the talk, but walks the walk. The reason they’re identified with the GOP is because that’s about the only place other than the libertarian side of the house, that you’ll find those type people.

That’s who Tea Partiers are looking for. They’re not looking necessarily for Republicans. They’re looking for principled small government fiscal conservatives who will return sanity to government and scale down its size, scope and cost. Sen. Olympia Snowe would not qualify. Sen. Lindsey Graham most likely wouldn’t qualify either. And I’ll venture to say, neither would Sen. John McCain. These are the type people they’re promising “trouble” for in Republican primaries.

But if the Republicans don’t quite get it, the Democrats definitely do. They understand they are faced with a grass roots group – a real grass roots group which makes them doubly dangerous – that stand for everything Democrats do not. Democrats are absolutely dedicated to using government as a tool to expand the social welfare state come hell or high water. Their concentration is on expanding both the size and scope of government and, by fiat, it’s cost. Their almost single-minded effort of over a year to pass health care reform, while a more critical priority – the economy – went wanting underlines their agenda, and yes, as Quayle says, this group opposes that agenda. That’s why you’ve seen efforts almost since day one to brand the tea parties as extremist, racist, terrorist – you name it – in an effort to discredit it.

But this goes much deeper than just Democrats and a specific agenda and I think Ms. Stout does a great job representing the movement and of making that point clear. The tea party movement certainly has a focus – but it isn’t necessarily that of many in the GOP. If they thought they had a place in the GOP – if they thought the GOP was indeed the party of small government fiscal conservancy – there’d be no need for tea parties, would there?

~McQ


Digging into the March unemployment numbers

Not to make to much of them, but this is important to know when you hear some of what is going to pass for analysis today and this weekend.  Calculated Risk does a good job of drilling down into the numbers and giving them some context.

First, part timers.  The BLS reports:

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) increased to 9.1 million in March.  These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.

Calculated Risk adds:

The all time record of 9.2 million was set in October. This suggests the increase last month was not weather related – and is not a good sign.

Again, while any gross positive number is better than a negative number, other areas of employment don’t necessarily support an outlook that says “the job picture is turning around”. As if to emphasize that point, Gallup’s “underemployment” numbers were released today as well and they increased to 20.3% of the US workforce is underemployed – up from 19.8% in February.

A second number to consider is those who’ve been unemployed for over 26 weeks and would work if a job was available:

According to the BLS, there are a record 6.55 million workers who have been unemployed for more than 26 weeks (and still want a job). This is a record 4.3% of the civilian workforce. (note: records started in 1948)

The number of long term unemployed is one of the key stories of this recession.

It is the highest number ever recorded since records started in 1948. The previous high was 2.5% in 1983.  And, as the cite points out, this is “one of the key stories of this recession” and one that isn’t yet showing signs of improving.

The Wall Street Journal points out:

A survey of private employers shows they shed 23,000 jobs in March in a sign that the labor market remains a mixed bag in an economy that is otherwise growing again.

The private-employer report, which came two days before the Labor Department issues its own, broader job report, was a disappointment to many who were expecting both measures to mark a turning point into positive territory.

Calculated Risk concludes:

Although the headline number of 162,000 payroll jobs was a positive (this is 114,000 after adjusting for Census 2010 hires), the underlying details were mixed. The positives: the unemployment rate was steady, the employment-population ratio ticked up slightly (after plunging sharply), and average hours increased (might have been impacted by the snow in February).

But a near record number of part time workers (for economic reasons), a record number of unemployed for more than 26 weeks, and a decline in average hourly wages are all negatives.

Shorter version: Don’t put too much positive weight on this month’s numbers.

There is a lot that has to change in the markets in general before you’re going to see any significant change in the labor market. So when you hear the talking heads this weekend tell you that it is all turning around and it will be sunshine and roses from now on, take it with a grain of salt.

[Welcome Real Clear Politics readers]

~McQ

:


Corporations sitting on money and not hiring despite better March unemployment numbers

It certainly wouldn’t surprise me given the unsettled business climate.  And, in fact, that’s what the Bureau of Economic Analysis is reporting – a record 1.6 trillion is being held while companies sort out what is happening in the business and financial sectors.  That, of course, means it isn’t being spent on hiring.  But there’s another reason, other than the unsettled business climate that is keeping corporations from hiring:

“Companies slashed their work forces and now find that they could function far more resourcefully than they ever realized possible,” Bianco said. “If anything, we could start to see some of the money being used to expand overseas or to acquire other companies. In either case, that does not bode well for job creation. In fact, mergers lead to job reductions unfortunately.”

A nice way of saying, it may get worse. Companies have become more efficient and productive.  Because of that, most experts I’ve read expect the national unemployment rate – the U3 – to remain in the 9% area throughout the year.  Government efforts to spur hiring haven’t amounted to much:

Alan Krueger, assistant secretary for economic policy at the US Department of the Treasury, points out that President Obama recently signed a jobs creation act known as HIRE which includes a variety of incentives. HIRE, for example, exempts companies from paying social security payroll tax if they hire someone who has been out of work for more than two months, and offers them a $1000 cash bonus if they retain the worker for a full year.

That’s not going to tip the scales and cause a company to hire if solid business reasons don’t dictate such action.  And, as pointed out in the first cite, there’s a very good reason, at least at this point, not to hire – companies have learned to live and, in some cases, prosper without the employees they slashed.

One of the great surprises of the economic downturn that began 27 months ago is this: Businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.

That means high-level gains in productivity — which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment. So long as employers can squeeze dramatically higher output from every worker, they won’t need to hire again despite the growing economy.

And right now, employers are indeed doing more with less and are not going to be inclined to hire more employees until it is clear that demand for their product is up, will continue to grow and requires more employees to produce their product and fulfill the consumer’s demand.

That all brings us to today’s March unemployment numbers:

The Employment report has shown good numbers throughout March today release but not as good as expected by market. NFP data has posted 162.000 new jobs in march, with a revision in the previous data to -14.000 from -36.000 in February. Market expectations were 187.000 new jobs in March. Unemployment rate remains at 9.7% in March, the same February number.

What that report doesn’t break out is the fact that the numbers are most likely inflated by the temporary hiring of census workers (and that will continue through June).  The Bureau of Labor Statistics did note it in its release:

Temporary help services and health care continued to add jobs over the month. Employment in federal government also rose, reflecting the hiring of temporary workers for Census 2010. Employment continued to decline in financial activities and in information.

So while +162,000 is obviously better than -162,000, the numbers aren’t really all that solid.  Also remember that our economy requires about 120,000 to 140,000 new jobs a month just to offset job loses elsewhere and maintain a static unemployment percentage.  And that’s pretty much what this month’s numbers show us and is the reason the unemployment percentage has remained static.  What would give us a truer picture of the rate is to remove the census hiring from the numbers. My guess is we’d still be well below the 120,000 to 140,000 threshold necessary to drop that rate.  But what the last three months may indicate is the labor market is finally bottoming out.

The point, of course, is that corporations are still in a position, driven by increases in productivity and lack of demand as well as an unsettled business environment, not to increase hiring any time soon.  The money corporations are sitting on, as noted, is going to go somewhere – most likely to increased dividends or mergers. And mergers actually mean fewer jobs, not more. Until companies see increased, well-defined and sustainable growth in demand to the point they can’t handle it with their present level of employees, they’re not going to hire no matter how many “jobs” bills Congress passes and Obama signs.

~McQ


Honduras: An update

Unfortunately, it hasn’t gotten any better. The Obama administration continues to let relations worsen in order to demand reinstatement for a man the country clearly doesn’t want and it is become quite vindictive in its action.  Mary Anastasia O’Grady, who has been following the situation from the first provides the update:

Four months after a presidential election, reports from Honduras suggest the Obama administration remains obsessed with repairing its foreign-policy image by regaining the upper hand. The display of raw colonialist hubris is so pronounced that locals now refer to U.S. ambassador Hugo Llorens as “the proconsul.”

Washington’s bullying is two-pronged. First is a maniacal determination to punish those involved in removing Mr. Zelaya. Second is an attempt to force Honduras to allow Mr. Zelaya, who now lives in the Dominican Republic, to return without facing any repercussions for the illegal actions that provoked his removal. Both goals are damaging the bilateral relationship, polarizing the nation and raising the risk of a resurgence of political violence.

The U.S., as represented by Mr. Llorens, has been at the center of the Zelaya crisis all along. People familiar with events leading up to Mr. Zelaya’s arrest on June 28 say that had the U.S. ambassador not worked behind the scenes to block a congressional vote to remove the president a few days earlier, the dramatic deportation would never have happened.
The State Department denies this allegation. But numerous sources maintain that Mr. Llorens’ interference allowed Mr. Zelaya to push ahead with an unconstitutional referendum. Fearing he would use violence—as he had before—to trample the rule of law, the Supreme Court took action. Mr. Zelaya was arrested, shipped off to San José, and removed from power by a vote of Congress the same day.

Honduras had defied Uncle Sam and the U.S., led by Mr. Llorens, decided that it had to be taught a lesson. It took out the brass knuckles and tried hard to unseat interim president Roberto Micheletti in the interest of restoring Mr. Zelaya to the office.

Honduras wouldn’t budge. That’s when Mr. Restrepo traveled to the capital with a U.S. delegation. The agreement reached included U.S. recognition of the November election. For a time it seemed things might return to normal.

But the Americans had scores to settle. The U.S had already yanked dozens of visas from officials and the business community as punishment for noncompliance with its pro-Zelaya policy. Then, just days before President Porfirio Lobo’s inauguration in January, Hondurans estimate it pulled at least 50 more from Micheletti supporters. The visas have not been returned, and locals say Mr. Llorens continues to foster a climate of intimidation with his visa-pulling power.

He hasn’t stopped there. In early March he organized a meeting of Liberal Party Zelaya supporters and the party’s former presidential candidate, Elvin Santos, at the U.S. Embassy. Some 48 hours later the party’s zelayistas and its Santos faction voted to remove Mr. Micheletti as party head. Rigoberto Espinal Irías, a legal adviser to the independent public prosecutor’s office, complained that the “meeting generated much bad feeling in Honduran civil society” because it was “perceived to have the purpose of intervening in Honduran national politics.”

Now more trouble is brewing: Salvadoran President Mauricio Funes, according to press reports, has said that Mr. Lobo made a promise, in front of Secretary of State Hillary Clinton and Mr. Funes, that Mr. Zelaya could return “without fear of political persecution.” Mr. Lobo subsequently announced that Mr. Zelaya is free to enter the country. In exchange, it is expected that foreign aid flows to Honduras will resume. But the minister of security maintains that if Mr. Zelaya returns he will be arrested.

What ever happened to self-determination? What ever happened to “the will of the people”. No one argues that the recent elections were fraudulent or don’t reflect that will. And, as any number have pointed out, Zelaya violated the Honduran constitution with his actions and other than the exile, Zelaya’s removal was perfectly legal under their law. Now we have an activist US ambassador trying to influence internal Honduran politics and going so far as to host opposition party meetings? One wonders if Mr. Obama’s State Department would try that in Venezuela and, if so, how Hugo Chavez would characterize it.

Honduras is an ally. It is a democracy. It actually had a good relationship, until recently. And it was a bulwark against the Bolivarian socialism that Hugo Chavez is trying to spread. Instead of undermining its present government, we should be working hand in hand to strengthen it. Instead, it seems, our new foreign policy is to try and antagonize and alienate as many allies as we can.

~McQ