Because most Americans don’t share your evaluation of yourself. In fact, because of the dismal performance of the Democrats, you’re only slightly more “acceptable” than they are:
Americans are growing more pessimistic about the economy and the war in Afghanistan, and are losing faith that Democrats have better solutions than Republicans, according to a new Wall Street Journal/NBC News poll.
Underpinning the gloom: Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.
The sour national mood appears all-encompassing and is dragging down ratings for the GOP too, suggesting voters above all are disenchanted with the political establishment in Washington.
In fact, just 24% have positive feelings about the GOP, which according to the WSJ, is a new low in the 21 year history of the poll. In fact, the only reason you’re under any sort of consideration at all is because we’re stuck with a two-party system –something you and the Democrats have been careful to manage – and you’re the only other choice.
If you’re thinking “mandate” in November, I’d change my thinking. I think it may be better described as “your last chance” … or maybe your “next to last chance”, the last chance coming on the heels of the 2012 presidential elections.
"The Republicans don’t have a message as to why people should vote for them, but it’s pretty clear why you shouldn’t vote for the Democrats," said poll respondent Tim Krsak, 33, a lawyer from Indianapolis and independent who has been unemployed since January. "So by default, you have to vote for the other guy."
Great reason to vote, isn’t it?
You guys better buy a clue (and if you do, use your own money).
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A good number of voices are beginning to say that technically, if not in fact, the country is bankrupt.
America is a "Mickey Mouse economy" that is technically bankrupt, according to Jochen Wermuth, the Chief Investment Officer (CIO) and managing partner at Wermuth Asset Management.
"America today looks like Russia in 1998. Consumers, companies and the government are all highly indebted. America as a result is a bankrupt Mickey Mouse economy," Wermuth told CNBC.
Wermuth goes on to say that if the same IMF team that managed the 1998 Russian financial crisis in Russia were to walk into the US Treasury today, “they would withdraw support for current US policy”.
And don’t forget Mort Zuckerman who called the present policies our “economic Katrina”.
But as bad as present policies are, they aren’t solely the reason we’re in the awful economic shape we’re in. We have a history of that.
"Even before the (Troubled Asset Relief Program) and the expansion of the Fed’s balance sheet, total US public and private debt as a percentage of GDP in the US stood at 290 percent, that figure is now far higher," Wermuth added.
Laurence Kotlikof explains it in terms of a “fiscal gap”.
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
The IMF pointed out in its last report that the US must close this fiscal gap to “stabilize the debt to GDP ratio”. The IMF estimates ““closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.”
So what does that mean in dollars?
To put 14 percent of gross domestic product in perspective, current federal revenue totals 14.9 percent of GDP. So the IMF is saying that closing the U.S. fiscal gap, from the revenue side, requires, roughly speaking, an immediate and permanent doubling of our personal-income, corporate and federal taxes as well as the payroll levy set down in the Federal Insurance Contribution Act.
Note the two words – “immediate” and “permanent”. In order to pay off the huge debt our “betters” in Washington DC have run up over the years, strictly from the revenue side, our taxes would have to see an “immediate” and “permanent” doubling.
Sounds like bankruptcy to me.
Kotlikof also tells us about the shady book keeping Congress has been engaged in for decades and what the books probably really look like:
Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.
But of course, “official” or “unofficial” it is still debt. Whether Congress will admit to it doesn’t change the fact that it is future debt that Congress has incurred through its profligate policies.
And what’s going to bring this all crashing down, despite the smooth and reassuring words of politicians without a clue? Promises made with no fiscal ability to keep them because, in reality, they’re Ponzi schemes:
We have 78 million baby boomers who, when fully retired, will collect benefits from Social Security, Medicare, and Medicaid that, on average, exceed per-capita GDP. The annual costs of these entitlements will total about $4 trillion in today’s dollars. Yes, our economy will be bigger in 20 years, but not big enough to handle this size load year after year.
Got that – government promised $4 trillion a year that it doesn’t have and never has had. And, thanks to Congressional Democrats, it just expanded that bill under ObamaCare. The system, much like an engine running at hight RPMs with no oil, is going to stop and stop abruptly:
The first possibility is massive benefit cuts visited on the baby boomers in retirement. The second is astronomical tax increases that leave the young with little incentive to work and save. And the third is the government simply printing vast quantities of money to cover its bills.
The result of any of those, of course, would be economically catastrophic. And the results among the citizens of this country would be horrible:
Most likely we will see a combination of all three responses with dramatic increases in poverty, tax, interest rates and consumer prices. This is an awful, downhill road to follow, but it’s the one we are on. And bond traders will kick us miles down our road once they wake up and realize the U.S. is in worse fiscal shape than Greece.
For years and years, politicians have claimed all is well with these programs, that we can afford them and that they’ll always be there for those who need them. None of the above is or has been true since their inception. If any private business operated as these programs have, the CEOs would be under the jail and wouldn’t see daylight until our sun exploded.
For years, the left and Democrats have made war on corporations and businesses all the while it has been government leading us to financial ruin. This debt isn’t debt run up by the private side of the economy. It is purely government’s doing. Now, given the gravity of the situation, we have very few options and the future does not look bright.
Next time you see your Congressional representative or Senator, thank him or her for the mess they’ve had a hand in creating and ask them how they are going to fix it. Don’t be surprised by the blank stare you receive in return. They haven’t a clue.
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That’s the basic message our friend Warren Meyers (of Coyote Blog and now Forbes) makes in an article. His points are not only good, but valid. And if one thinks about how inaccurate the models we’ve seen drive debate and spending are, we’d insist on better data before those decisions are made.
Meyer points out that there are few, if any CEOs in non-financial firms who would invest a penny based solely on computer models. Yet we have this propensity to place much more confidence in models that have done nothing to earn that confidence than they deserve.
Last week the Council of Economic Advisors (CEA) released its congressionally commissioned study on the effects of the 2009 stimulus. The panel concluded that the stimulus had created as many as 3.6 million jobs, an odd result given the economy as a whole actually lost something like 1.5 million jobs in the same period. To reach its conclusions, the panel ran a series of complex macroeconomic models to estimate economic growth assuming the stimulus had not been passed. Their results showed employment falling by over 5 million jobs in this hypothetical scenario, an eyebrow-raising result that is impossible to verify with actual observations.
Not only is it impossible to verify, it was issued as a defacto “truth” and the “stimulus” was declared a “success”. And don’t forget the inclusion, now, of one of the world’s best weasle words to pad the results – jobs “saved”. However the administration goes to great lengths to ignore its previous claim that if the “stimulus” was passed, unemployment wouldn’t rise above 8%. One has to guess, given the results, that the computer model was wrong about that.
Meyer goes on to point out how the modeling which can’t predict the complex world of economics, is somehow considered the “gold-standard” of predictability when it comes to the exponentially more complex climate. So much so that governments everywhere are basing trillions of dollars of taxes (cap-and-trade) on the results of such models in an supposed effort to “save the planet”.
While we have been bombarded with hockey sticks and forlorn polar bears, our focus in climate should really be on the computer models. The primary scientific case for man-made CO2 as the main driver of global temperatures is made in exactly the same way that the stimulus was determined to have created 3.6 million jobs: computer modeling. No one yet has been clever enough to structure a controlled experiment to isolate the effect of rising CO2 levels from other changing variables in the complex global climate. So, just like the CEA did in scoring the stimulus, climate scientists use computer models to run virtual experiments, running the models backward over the last century with varying assumptions for CO2 levels.
This modeling approach yields amazingly circular logic. Like macroeconomic models built by devoted Keynesians, climate models are constructed by academics who passionately believe that a single variable, CO2 concentration, is the dominant driver of the whole complex climate system. When run retrospectively, the models they create unsurprisingly give the result that past temperature increases are mainly attributable to CO2. The problem with these models is that when run forward, as in the case of the Washington Redskins election model, they do a terrible job of predicting the future. None of them, for example, predicted the flattening of global temperatures over the last decade.
Yet policy has been proposed and written based on results that are nonverifiable and questionable at best. That’s insanity. But the purported case for using the results is if we wait for real data it may be too late. But when the real data appears (such as the flattening of global temps for this past decade) the modelers and proponents of the government action want to ignore it and deny its importance.
This all goes back to two themes I’ve been hammering for quite some time – common sense and scientific skepticism. Both are necessary tools of a rational person. And Meyers nails the point:
Our common sense about government stimulus tells us that the government is highly unlikely to invest money more productively than the private entities from whom the government took the money. Unfortunately, we have allowed this common sense to be trumped by computer models. Once our imperfect understanding the economy was laundered through computer models and presented with two-decimal precision, smart people somehow lost their skepticism.
We are now facing what is potentially an even more expensive decision: to regulate CO2 based mainly on computer models that claim to be able to separate the effects of trace concentrations of CO2 from a hundred other major climate variables. If your common sense is whispering to you that this seems crazy, listen to it. Otherwise all we get is garbage in, money out.
The “garbage in” should be obvious. Unfortunately, the “money out” is money coming out of your wallet to pay for unproven science and unfounded economic models.
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I think this entire article entitled “Why I’m Not Hiring” could qualify as the QOTD. It neatly explains why businesses are so reluctant to hire anyone right now.
Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She’s been with us for over 15 years. She’s a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay … When you add it all up, it costs $74,000 to put $44,000 in Sally’s pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally’s job each year.
There is no grand revelation in Mr. Fleischer’s explanatory essay. Just hard cold reality: make the costs of hiring more expensive, and less hiring will happen.
Some may argue that just because Mr. Fleischer’s company isn’t hiring for these reasons, that doesn’t mean that other companies are refraining on the same basis. True, but what are the other possible reasons then? Logan Penza summarizes some of the arguments:
It’s those Evil, Greedy Corporations.
That’s the simple explanation most of the talking heads have for the continuing high unemployment numbers. Those Evil, Greedy Corporations horde their money and refuse to hire anyone. When they do hire someone, they don’t pay them enough, don’t offer them enough benefits, don’t pay enough taxes, pollute the planet, steal candy from babies, kick puppies, and make obscene gestures at your auntie. Evil, Greedy Corporations are offered up as cartoon villains, detestable and vile and without any redeeming value.
The trouble with cartoon villains is that they are fictional.
Well, yeah, but it’s so much easier to blame fictional bogeymen then to address what the real businesses say.
Another argument I’ve seen advanced is that the marketplace is inherently uncertain, and that businesses who can’t cope with changes in the law are simply unfit to survive. There is a certain laissez-faire appeal to this argument, but ultimately it doesn’t make sense.
The fact of the matter is that the types of market risk that businesses can and do adjust to, aside from increased competition, are changes in demand and supply, natural disasters and war. The more savvy, efficient and customer-sensitive businesses do survive these sorts of uncertainties and ultimately enhance the economy when they do.
In contrast, when the government continually raises the costs of doing business in the first place (or threatens to do so), the only ones who really survive are either the politically connected or the very wealthy (yes, they are often the same thing). That doesn’t have anything to do with building a better mousetrap, as it were, or growing the economy. And it certainly doesn’t do anything to raise everyone’s standard of living. Instead, all it does is reward those closest to the rule-makers, thus creating more competition to be closest to the King rather than satisfying the marketplace. It is exactly the sort of crony-capitalism we claim to detest.
As Mr. Fleischer summarizes:
A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government’s message is unmistakable: Creating a new job carries a punishing price.
Perhaps instead of punishing business, the government could get out of the way. Maybe then we could get some of that job growth we’ve all been looking for. Unfortunately, it seems that few in Washington are listening, or worse, that they don’t really care.
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I guess the GOP should thank its lucky stars that weeping George Vionovich is headed for the exit.
Of course, he could still team up with some on the Democratic side to do some damage before January if this is any example:
"Fuel taxes today fund the vast majority of the federal government’s investment in infrastructure projects," Voinovich wrote in the letter. "Due to dwindling fuel tax receipts, Congress has had to transfer billions of dollars from the General Fund to the Highway Trust Fund to maintain our current level of federal involvement."
"The lack of investment in our crumbling bridge, highway, and transit systems is a missed opportunity for the creation of thousands of well paying jobs and long term economic growth for our Nation," said Voinovich.
And the chorus warms up – anyone?
Yes, that’s right, a fuel tax is a regressive tax because it hits hardest those who can least afford it, but who’s jobs depend on them being able to drive to them daily. And who is suggesting such a tax in the middle of a deep recession?
That’s right – a Republican. Even the Obama administration is against a freakin’ increased fuel tax, and there’s hardly a tax they’ve met they don’t like.
“I believe Americans are willing to pay a higher gas tax to create jobs, improve our infrastructure and better our climate," Voinovich said at a business conference in Ohio last month. "And many of my conservative colleagues do not consider that gas tax as a tax, but as a user fee.”
And I believe you’re as full of beans as you usually are, Mr. Voinovich. Americans have made it clear over and over and over again that they’re not willing to pay more taxes for any reason until government can prove it can balance its budget and pay down the debt. On top of that, Americans also don’t give a flip what you and your idiot conservative colleagues consider it, it’s a freakin’ tax.
Now I know that Voinovich doesn’t represent the conservative side of the GOP in the Senate. But there’s still that “R” beside his name and crap like this is why many people don’t trust the GOP any further than they can throw a Democrat.
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Not to beat a dead horse (we here at QandO would never do that – heh), but a picture to go along with Dale’s post below about unemployment to sort of give it a context which should scare the living hell out of you:
Just in case you were wondering.
Have a nice weekend.
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Today’s news of 131,000 jobs lost last month comes as no great surprise. What should also come as no great surprise is that the official unemployment rate of 9.5% continues to seriously underestimate the actual rate of unemployment.
Civilian population: 237,890,000
Historical Average Labor Force Participation Rate: 66.2%
Proper Labor Force Size: 157,483 000
Actually Employed: 138,960,000
Real Unemployment Rate: 13.3%
Using the same method of calculation, the unemployment rate in June 09 was 11.4%. Over the past six months, the rate had varied as follows:
Since April, 495,000 payroll jobs have been lost.
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.
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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.
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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.
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