Free Markets, Free People

Economy

Jobs, Unemployment And “A Deficit Of Trust”

Yesterday we were told the nation’s employers “unexpectedly” shed more jobs last month than forecast.  Today we’re told that despite that, the unemployment rate “surprisingly” decreased to 9.7%.

Unsurprisingly I don’t believe a word of it.  Call me a cynic, call me a skeptic, but I just don’t believe much of anything coming out of the government these days (I know, let’s call it a “deficit of trust”).  Don’t forget that 9.7% number comes on the heels of a report saying the government forgot to count over 800,000 lost jobs last year.

When the government releases Friday’s unemployment report, nearly a million jobs could be erased. The change won’t show up in the monthly report. Rather, the expected job will show up in the government’s revised job losses from April 2008 to March 2009, showing the labor market was in much worse shape than we knew at the time.

So here we are, rampant and exceedingly high unemployment, no relief in sight and the unicorns and rainbows crowd are spinning the numbers and telling us all is well and getting better.

Well, economic well-being, like is said of politics, is all local.  And for the most part, the locals aren’t buying the spin.  Here’s the brutal truth:

An unemployment rate that’s projected to average 10 percent this year will likely weigh on consumer spending, preventing the biggest part of the economy from accelerating. Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits.

“Businesses are simply postponing their hiring for as long as possible,” Richard DeKaser, chief economist at Woodley Park Research in Washington, said before the report. “The willingness to hire is not there.”

Fewer customers, less spending. Less spending, less of a need to make things.  Less demand for products means less demand for more employees.

Key line: “Without additional gains in sales, companies will be forced to keep cutting costs, limiting staff in order to boost profits.”

And that’s precisely what they’re doing.  The Labor Department reports:

Nonfarm business sector labor productivity increased at a 6.2 percent annual rate during the fourth quarter of 2009, the U.S. Bureau of Labor Statistics reported today. This gain in productivity reflects increases of 7.2 percent in output and 1.0 percent in hours worked. (All quarterly percent changes in this release are seasonally adjusted annual rates.) This was the first quarterly increase in hours worked since the second quarter of 2007 (0.9 percent). Productivity increased 5.1 percent over the last four quarters –more than during any similar period since output per hour rose 6.1 percent from the first quarter of 2001 to the first quarter of 2002.

Even the Riddler could puzzle this one out.  Worker productivity has increased 5.1% over the last four quarters.  But unemployment has continued to grow.  What does that mean?  Well it means companies and businesses have found a way to increase production with fewer employees.  And that, as the key line above suggests, boosts profits.

Now that productivity increase can come in many ways.  Simply distributing the same (or even increased) work load to fewer employees.  That’s happening all over the place now.  Then, in certain industries,  automation replaces employees (it doesn’t require health insurance, vacation days, a 401k and isn’t represented by a union).  And in some places it’s a combination of both plus modified business models. 

The bottom line is there’s not likely to be that much hiring if and when the economy actually turns around unless a huge increase in demand is realized.   And even then, employers are likely to try to hold out as long as possible, given their productivity gains, until those productivity gains are neutralized.  I’m sure there’s a tremendous gap between now and that point.  Then add in the market instability brought on by pending legislation like health care reform and cap-and-trade, and you can see high unemployment in the future for quite some time.

But the unicorn and rainbow crowd are going to tell you everything, relatively speaking, is getting better.  The fact that your relatives are all unemployed and your job isn’t looking so hot at the moment either will cause you to doubt their assertions.  Do.  Doubt them I mean.  They’re as full of crap as a Christmas goose.  And that’s becoming more and more obvious each day as we watch this dance of the dodgers continue.  Because, you know, you can’t handle the truth.  No, that’s not true.  If they tell you the truth, they too will be unemployed.

“Deficit of trust?”

A true understatement.

~McQ

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Republicans Prefer Tax Cuts To Balanced Budget?

That’s the buzz going around some liberal blogs about a Rasmussen poll which claims that a plurality of Republicans polled would rather see tax cuts and a deficit than a balanced budget and tax increases (one supposes the increases would be used to balance it.  The history of our government says otherwise).

Of course I’m of the opinion there’s a third choice.  Cut spending commensurate with the tax cuts and reduce the size of government until you’re able to balance the budget.  Then start reducing the debt.  Apparently that wasn’t one of the choices however.

On to the poll.  Here are the results with which the left has decided it can use to deride the right as lying no-good deficit lovers:

Fifty percent (50%) of conservatives are comfortable with a budget deficit if taxes are cut versus 63% of liberals who favor a balanced budget with higher taxes. But then 50% of conservative voters also think the federal budget can be balanced without a tax increase. Sixty-one percent (61%) of liberals say that’s impossible.

Ah, ha! Apparently my choice is in the mix, albeit hidden – what do you supposed those 50% who think the federal budget can be balanced without a tax increase mean?

So let’s recast the findings – 50% of “conservatives” want tax cuts and can live with deficits, 50% of “conservatives” say a blanced budget can be done with spending cuts and 61% of “liberals” believe the only way to balance the budget is to increase taxes (apparently eschewing any spending cuts).

Fair recap?

Now here’s the shocker for you (ok, sarcasm again):

Sixty-two percent (62%) of the Political Class prefer a balanced budget with higher taxes, compared to just 26% of Mainstream voters. Forty-six percent (46%) of Mainstream voters would rather see a budget deficit with tax cuts.

Those in the Political Class are twice as likely as Mainstream voters – 70% to 35% – to believe it is not possible to balance the federal budget without raising taxes.

This is a clever way Rasmussen has of letting us know what our political betters think about those questions vs. what you the mainstream voters think (Proles! When will you wise up?).

So what this portion of the poll tells us is if the “Political Class” ever actually gets serious about debt and deficit reduction, you can throw the “cut spending” mantra right out the window (along with tax cuts) and bend over while grabbing your wallet.  At the rate they’re spending right now though, “serious about the deficit” is lightyears away from being considered.  Lip service, however, will be extravagent, since it’s politically cheap.

But it is, as usual, instructive to see how out of touch the “Political Class” is with it’s voters. 

And speaking of our policial masters and referencing the story about Joe Biden below, here’s the public’s answer to Bidenomics:

Fifty-three percent (53%) of voters believe decreasing the level of government spending will help the U.S. economy. Sixty-one percent (61%) say cutting taxes will boost the economy, the highest level of support since May.

What are the administion’s plans?  Increased government spending and higher taxes, of course.  If you want to see the “deficit of trust” Obama spoke about in the SOTU, read through the entire poll results.  It tells the story of the rise of the Tea Parties with percentages.

And we’re suposed to be the ‘ungovernable’ ones?

~McQ

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Krugman, Peacocks, The Deficit, Health Care And Spending

If you’ve been following Nobel economist and NY Times columnist Paul Krugman over the last few months, you’ve seen him slowly fall out of love with the Obama administration.  The primary reason is the administration has seemingly ignored his advice about the size of the deficit spending  – stimulus – that should be happening.  Krugman feels that the first stimulus was “too small”. I disagree, I feel it was a poorly targeted pork bill that didn’t address stimulus at all (with spending delayed on most of it for future years, it’s hard to fathom how it acts to stimulate the economy now).  But the amount should have been more than adequate to do that which Keynesian’s like Krugman prefer.  In fact, my guess is Krugman knows that, but can’t bring himself to admit it.  Thus he continues to pretend the size of the “stimulus” is the problem.

That said, today he goes after the president’s claim in the SOTU that he’s addressing the deficit.  Krugman essentially comes to the same conclusion most of us have – it’s not at all a serious attempt to do so:

Last week, the Center for American Progress, a think tank with close ties to the Obama administration, published an acerbic essay about the difference between true deficit hawks and showy “deficit peacocks.” You can identify deficit peacocks, readers were told, by the way they pretend that our budget problems can be solved with gimmicks like a temporary freeze in nondefense discretionary spending.

Guess who he identifies as a “deficit peacock?” Anyone who listened to the State of the Union address knows that answer. Krugman goes on to tell us why it is in our best interest to be spending more right now and not worrying about the deficit:

The nature of America’s troubles is easy to state. We’re in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that’s keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.

But that brings us back to the $787 billion dollar “stimulus” bill (which, btw, the CBO now says will cost us $862 billion). That bill was supposed to be focused on bringing unemployment down, wasn’t it? In fact, the explicit claim was if it was passed, unemployment wouldn’t rise above 8%.

Of course one has to wonder if the money had been spent to stimulate job growth instead of monitoring the radioactive feces of rabbits whether or not such spending could have kept that unemployment number down. Only $256 billion of the $787 has been spent with no appreciable effect on unemployment at all. Could it have had an effect if it had been spent on what it should have been? We’ll never know. What we do know, as does Krugman, is that politically a second stimulus is a very unpopular.

That’s not to say we won’t see one. What we will see, however, is any second stimulus introduced to the public as a massive “jobs bill”. The word stimulus won’t be attached to it in any way, shape or form. But that’s why the characterization of Obama as a “deficit peacock” is dead on.

Krugman then gets to the pretzel logic that leaves everyone shaking their head:

In the long run, however, even the U.S. government has to pay its way. And the long-run budget outlook was dire even before the recent surge in the deficit, mainly because of inexorably rising health care costs. Looking ahead, we’re going to have to find a way to run smaller, not larger, deficits.

How can this apparent conflict between short-run needs and long-run responsibilities be resolved? Intellectually, it’s not hard at all. We should combine actions that create jobs now with other actions that will reduce deficits later. And economic officials in the Obama administration understand that logic: for the past year they have been very clear that their vision involves combining fiscal stimulus to help the economy now with health care reform to help the budget later.

First, not everyone agrees that you must “spend” to help the recovery. In fact, credit where credit is due, Obama layed out some tax cuts for small businesses and cap gains tax cuts that may indeed provide the impetus for hiring. The fact that he could have done that a year ago shouldn’t be lost on anyone. But while that means some reduced tax revenue for government, it isn’t a massive spending program. And, in fact, to offset that loss of revenue, government ought to cut spending commensurate with the loss. That’s the way toward fiscal sanity and a balanced budget – or at least one which is closer to being balanced than it is now.

So Krugman’s attempt to claim there’s only one “intellectual” solution to the contradiction he’s posed is poppycock. Note also that he brings up health care reform. The “budget” he’s talking about is that of the US government. The reform he’s talking about in this particular case has to do with the government programs which are out of control. Not the private side which as zip to do with the US budget. Only the Medicare/Medicaid side. Which again begs the question of why taking over much of the private side helps solve the crisis on the government side?

He finally admits it later on in the article:

So if health reform fails, you can forget about any serious effort to rein in rising Medicare costs.

He’s most likely right. And here’s what’s interesting about that sentence. Many of us on the right have been saying for quite some time, “if Medicare and Medicaid are the problem, why not fix those problems first and then, if successful, we can talk about further reform”. Instead we’ve gotten this monstrosity which really doesn’t address those problem areas (despite Krugman’s belief it will) and grabs for even more.

I’d love to see Krugman defend the logic of that.

So we’re paralyzed in the face of mass unemployment and out-of-control health care costs. Don’t blame Mr. Obama. There’s only so much one man can do, even if he sits in the White House. Blame our political culture instead, a culture that rewards hypocrisy and irresponsibility rather than serious efforts to solve America’s problems. And blame the filibuster, under which 41 senators can make the country ungovernable, if they choose — and they have so chosen.

I mostly agree in general with the sentiments expressed here, just not some of the specifics. Our political culture leaves much to be desired. You have to understand that when the best you can hope for is gridlock, something is very wrong with the mechanism that governs the country. It incentivizes behavior that looks short-term and rewards those who bring money to their home districts and states. Until that sort of system is changed, gridlock is about the best we can hope for. Unfortunately those who would have to change the system are presently rewarded by it.

That said, Obama is as much a part of the problem as anyone. He stole into the White House by promising “change” and people like Krugman bought into it. And while some of the scales have slipped from Krugman’s eyes, he still hasn’t accepted the fact that Obama is a double-talker who says all the right things and then acts exactly like a Chicago machine pol in his daily dealings. Obama is as much a part of the problem as anyone else in the system.

Lastly – it seems all the cool kids in DC and NY have discovered a new word for “they won’t go along with what we want to do” – “ungovernable”. Have you noticed that? We weren’t ungovernable when the Democrats wielded the minority filibuster in the Senate. We weren’t ungovernable when the anti-war crowd filled the streets. We weren’t ungovernable when Democrats used every procedural trick in the book to block Social Security reform. Nope, that only happens when Republicans have 41 seats in the Senate, Tea Parties protest and the right fights health care reform.

Krugman, like much of the left, has a very short and selective memory.

~McQ

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The Fannie And Freddy “Secret”

The Obama administration and Democrats have consistently blamed the financial problems that the country has faced on Wall Street, banks and their greed. But it has just as consistently ignored the role and cost of two quasi-governmental agencies which were also in the center of the financial storm – Freddie Mac and Fanny Mae. The Wall Street Journal points out that the cost to the government (and therefore the taxpayer) of these two institutions has been kept “off books” by the fiction that they’re “private institutions”. But, in fact, they’re really not:

As the CBO notes in a recent background paper, the standards for when to include government-sponsored entities in the budget go back to the 1960s, when a Presidential commission laid out a set of questions.

To wit: “Who owns the agency?” (In the case of Fan and Fred, taxpayers.) “Who supplies its capital?” (Taxpayers.) “Who selects its managers?” (The federal government.) And finally, “Do the Congress and the President have control over the agency’s program and budget, or are the agency’s policies the responsibility of the Congress or the President only in some broad ultimate sense?” (The feds have control in every sense.)

The point, of course, is the claim they’re “quasi-governmental” or “private” entities is fiction. They are, in every way, controlled by the federal government and were as involved in the financial melt down as any other institution. In fact, there’s an argument that they were the instututions which made the housing bubble possible and, through their policies, encouraged it.

And if you want to talk about losses and costs to taxpayers, take a gander at these numbers:

Since Hank Paulson placed them in conservatorship in September 2008, Fan and Fred have stopped even pretending to be run for profit. Losses have mounted accordingly: Some $291 billion for taxpayers through 2009, $48 billion for the cost of new business in 2009 alone, and $21 billion more this year. Last August, CBO estimated the 10-year cost to taxpayers of keeping Fannie and Freddie afloat at $389 billion.

And it is now estimated that the two will average losses of 8 billion a year for the next 10 years, assuming the housing market stabalizes soon. Yes, that’s 80 billion over 10 years in addition to the losses above. Why isn’t the president hollering “we want our money back” at them?

The full cost of subsidizing mortgages via Fannie and Freddie, the FHA and Ginnie Mae remains hidden and off the official balance sheet, so there is little political pressure to stop the losses.

As the CBO notes, Fannie and Freddie “purchase mortgages at above-market prices,” driving down interest rates and passing some of the savings to home buyers. That subsidy is felt right away, but the risks in providing it are stored up over time, and their real costs may not be felt for years or even decades—as was the case in the years leading up to their spectacular collapse in 2008.

With the spectacular debt the Obama administration and Congressional Democrats are running up, they’re looking for every creative accounting means available to hide the truth. This is one of those ways. By pretending that Freddie and Fanny are “private” institutions, when it is clear they belong to the government in every conceivable way, they can keep their losses off the second set of government books presented to the public and say “see, it’s really not as bad as you think”.

Of course if a bank or Wall Street institution kept those kind of books, they’d go to jail.

WSJ concludes:

We suspect the real reason the White House wants Fan and Fred off budget is to disguise their real costs to taxpayers. They have become off-the-books subsidy engines for the housing lobby, and it is easier to push off the recognition of their losses to some future Administration and Congress rather than pay for them today. The new age of transparency has once again died aborning.

~McQ

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Warren Buffet – Bank Levy Makes No Sense

Barack Obama was quite fond of quoting Buffet during the campaign. My guess is he’ll not be as willing to quote Buffet about his opposition to the President’s proposed bank tax:

“I don’t see any reason why they should be paying a special tax,” said Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., in an interview on Bloomberg Television today. Supporters of the plan to tax the banks “are trying to punish people,” he said. “I don’t see the rationale for it.”

What he’s talking about, of course, is the tax Obama has proposed ostensibly to recover the losses incurred in the TARP program. Obama has targeted about 50 banks to make this repayment.

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

Look at the damage Fannie and Freddie caused, and they were run by the Congress,” said Buffett. “Should they have a special tax on congressmen because they let this thing happen to Freddie and Fannie? I don’t think so.”

Of course Buffet throws out a point, which I’ve put it bold, that the administration, Democrats in general and the media have studiously avoided. That’s the role that the two quasi-governmental organizations, Freddie Mac and Fannie Mae, played in the financial meltdown (and how much of the TARP money they sucked down). In fact, the tax is as much about recovering the money they required as anything. But pointing that out would be detrimental to the narrative the administration has been building about the “greed of Wall Street” and their unilateral culpability. According to Bloomberg data, Freddie and Fanny owe about $110 billion. Buffet, of course, is not so easily fooled:

The levy would apply to firms with more than $50 billion in assets, including Wells Fargo and Goldman Sachs, two companies that Berkshire has investments in. It would exclude Fannie Mae and Freddie Mac, the government-sponsored mortgage lenders taken over by the U.S.

“Most of the banks didn’t need to be saved,” Buffett said. “Including Wells Fargo.”

The bank tax would raise $90 billion over 10 years and, of course, be paid for by the banks customers. Also note that the sum of $90 billion is very close to the amount owed by Freddie and Fanny.

Obama is correct – “we want out money back”. But we want it back from the institutions which wasted it. Of course that’s impossible since taxing Freddie and Fanny is taxing ourselves. Of course, so is taxing banks. However, it is much more useful to demonize them, play the greed card and pretend the government is blameless than to tell the truth, isn’t it?

I mean, if they told the truth, they’d have to implicate Congressional Democrats like Barney Frank, wouldn’t they – and that would never do.

~McQ

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On The Left: Who Are The Nihilists?

Andrew Sullivan (or one of the Andrew Sullivans), supposed “Republican” – or is it “libertarian”, I forget – has a post today in which he highlights a liberal reader’s lament.  It’s essence, of course, is this is all Bush’s fault and, for heaven sake, how can you expect the grand and wonderful Obama to have fixed his mess in a year?

Well, here’s a suggestion – how about by focusing on the problem instead of wandering off in other directions. The commenter centers his or her comments on the fact that they’re unemployed and their COBRA benefits are fast running out. And, of course, he or she has a preexisting condition. So the priority is to pass health care?

Really? Is it? Or is it to get that person back on a job?

That, of course, is the argument, isn’t it? And all the whining and crying about Bush, etc. won’t change the fact that the majority of all the problems now facing the country are best addressed by getting the economy moving. Tax cuts for business, policies that provide incentives for businesses to expand and hire – that is where the government’s energy should be focused. Not on ancillary issues that cost trillions and don’t even kick in for 4 or 5 years. Sullivan’s commenter acts as though getting this health care bill through will save them when their COBRA runs out in 5 months. Not even close.

Business is sitting on the sidelines afraid to expand or hire because of the unsettled business environment. They have no idea what this health care bill will cost them in marginal taxes, so until that becomes clear, why would they hire? Shelving or killing this health care monstrosity would actually help the employment situation. Immediately. Same with cap-and-trade.

The argument, which so enrages this commenter, is taking place now in a series of special elections. And what further enrages this commenter is his side is losing that argument. The answer then is to characterize those who oppose the direction this country is taking as “nihilists”. Nihilists?

I have to wonder if either Sullivan or the commenter understand the word? I’m more inclined to believe that it is instead used like “fascist” to really mean “anyone who disagrees with me”. But for your edification, here’s how nihilism is defined:

1. One who advocates the doctrine of nihilism; one who believes or teaches that nothing can be known, or asserted to exist.

2. (Politics) A member of a secret association (esp. in Russia), which is devoted to the destruction of the present political, religious, and social institutions.

Those definitions really don’t support the commenter’s premise. In fact, it is the contention of those with whom the commenter is so upset that this administration and the Democrats are engaged in the second definition of “nihilism” with a vengeance. “Libertarian” or “Republican” or whatever he is today Sullivan ends his post with:

For Gods sake, vote for Coakley. Not for Coakley. For the rest of us.

Which brings me to a second blogger who also discusses the Sullivan post and agrees with the lament (and, I would suppose, the characterization of those opposed to the government takeover of health care as “nihilists”). Nothing particularly compelling in his discussion until you get to this part:

It is at moments like this that I wish we had an authoritarian ruler who could take over for a few years, a clear-headed liberal in the classical sense who could ram things through and get them done without giving a thought to the shrieks and cackles of the deranged fringes of either side. It’s at moments like this when I think, “The USA could use a little China, or at least a little Singapore.” A benevolent despot who can engineer solutions and force them to happen.

Holy liberty loving Hannah.

How about a little USSR? A dab of Cuba? Some of Pol Pot’s Cambodia for leavening?

I’ve come to the conclusion that most of the left are closet authoritarians who, at the drop of a hat, would resort to what this blogger describes if they could get away with it, always with the naive belief that this dictator would be “a benevolent despot”. Of course, as pointed out previously, definitions mean little to the left who apparently don’t realize that “benevolent despot” is an oxymoron of the first degree.

The hidden desire in Sullivan’s last line – a fulfillment of the latter bloggers wish – is a vote to maintain the filibuster proof Senate with the authoritarian power to thwart the minority and ram through what the elite think we should have. Who care what the “nihilists” in flyover country want or don’t want. “The USA could use a little Cuba China” afterall.

~McQ

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So Let’s Say Scott Brown Wins …

I’d say, given all I’ve read and heard pertaining to the polls, that a win by Brown in today’s special Senatorial election in Massachusetts is a pretty solid prediction. But polls have been wrong before. With that said, I think he will pull it off even if only by a point or two.

So what can we expect if that’s the case. 364 days after Barack Obama took office and in what Democrats figured was their seat forever given it had belonged to the “Liberal Lion” of the Senate in deep blue and solidly dependable Massachusetts a Republican wins the seat?

What will be the reaction and what are the implications?

According to Politico, President Obama’s reaction to such a win will be to “fight hard”. Nice words for a pep rally.But if Brown wins, fighting hard will be about all that’s left to Obama as the filibuster proof majority in the Senate will have gone up in smoke. And that, of course puts his entire ambitious agenda, to include the pending health care bill, in jeopardy.

A potential casualty: the health care bill that was to be the crowning achievement of the president’s first year in office.

The health care backdrop has given the White House a strong incentive to strike a defiant posture, at least rhetorically, in response to what would be an undeniable embarrassment for the president and his party.

Anyone who continues to pretend this isn’t an election with far reaching implications and a referendum on the agenda pushed by the President and Congressional Democrats needs to again review the place in which this Republican is leading. Those who would like to put it all on an unattractive candidate need to remember that candidate blew away her closest rival in a Democratic primary by 19 points. This isn’t just about Martha Coakley.

An upset by Republican Scott Brown would be covered in many quarters as a repudiation of Obama, especially after Obama’s last-ditch campaign appearance with Coakley 36 hours before the polls opened.

This is about an electorate that is increasingly uneasy about the path the federal government under the Democrats is taking. This is a reaction to the action of the last 364 days. And the timing couldn’t be any better:

A Massachusetts embarrassment would strongly increase the pressure Obama was already facing to retreat or slow down the “big bang” agenda he laid out a year ago.

That includes cap-and-trade, which Congressional Democrats are backing away from as quickly as they can, and immigration. What this should force, if Democrats can swallow the lesson and heed the consequences of a Brown win, is a shelving of those issues and a concentration on the economy like a “laser beam”.

The possibility that Democrats could avoid a blood bath in November is iffy at the moment but salvageable if they do that. If, however, they get combative and attempt to ram through the present agenda (as it appears they will) while continuing to giving lip service to the economy and job creation (shall we have another “job summit”?), then they’ll suffer the consequences in mid-terms 10 months from now.

Today’s election is a game changer. Even if Brown loses, the message should be clear – back off the spending and expansion of government, concentrate on the economy and do what is necessary to get this country moving again economically, or the voters will put people in who will, even in deep blue Massachusetts.

The polls opened 12 minutes ago – this should be a very interesting day.

~McQ

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All your retirement money are belong to us

How’s that 401(k) working out for you?  Well, if the Obama administration has its way, you won’t have to worry about that any more.

Apparently, you’re too stupid and lazy to be trusted with your own retirement planning. So, what you need is for the government to “urge” you to convert your 402(k) plan to a government annuity.

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

TaxProf has a roundup of some useful links concerning this, but here’s the key takeaway:

There literally isn’t enough money in the world to float the T-notes the Treasury must issue in order to prop up our unsustainable spending path.  There are, however, about $3.6 trillion in funds just sitting in 401(k) accounts.  If the government can urge–or force–you to convert your 401(k) into T-note funded annuities, the Treasury can continue to issue those notes to float the government’s deficit.  Essentially, you’ll be converting your retirement funds into an IOU from the government…just like your social security account has already done.

This will allow the Treasury to keep borrowing money–from your retirement–in order to keep issuing more debt that they may or may not be able to pay back to you

funds intu The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

Obama’s Failure Can Be Blamed On Congressional Democrats – “It’s The Economy, Stupid”

There is a lot of analysis going on about Obama’s first year and why, it seems, his job approval numbers are so dismal. And why, given the promise he brought to the White House, at least according to the PR faithfully pushed by his campaign, are Democrats looking at the possibility of large net losses in both houses of Congress?

The first hints of the dissatisfaction of the electorate came in the Virginia and New Jersey gubernatorial races where Republicans won – in VA handily. The Democrats claimed their candidate there ran a lack luster campaign and it wasn’t at all a referendum on the Obama administration and the Democratic agenda. But now, the very same thing is happening in Massachusetts with an unknown GOP state legislator giving the Democratic candidate for the “Ted Kennedy” seat, a run for her money (and, in the latest poll, up by 4 points over the Democrat).

Is this too the result of just a lackluster campaign and a poor candidate? Certainly a case can be made for that – except in this case, it is reliably and overwhelmingly Democratic Massachusetts. It doesn’t work quite as well there as it might in VA. It is beginning to sound like a bit of whistling past the graveyard.

In fact, as with VA, it is a reflection of some deep-seated dissatisfaction with Democrats in Congress and yes, with Obama as well. Charlie Cook nails the problem today in his analysis of why the Democrats are in such deep electoral trouble:

Honorable and intelligent people can disagree over the substance and details of what President Obama and congressional Democrats are trying to do on health care reform and climate change. But nearly a year after Obama’s inauguration, judging by where the Democrats stand today, it’s clear that they have made a colossal miscalculation.

The latest unemployment and housing numbers underscore the folly of their decision to pay so much attention to health care and climate change instead of focusing on the economy “like a laser beam,” as President Clinton pledged to do during his 1992 campaign. Although no one can fairly accuse Obama and his party’s leaders of ignoring the economy, they certainly haven’t focused on it like a laser beam.

Cook is actually minimizing the problem somewhat. In fact, Obama and his party leaders have given little but lip service to the economy, unemployment and job creation while they’ve spent enormous time on agenda items which mean very little to a country suffering the depth of joblessness and economic hardship now prevalent. Add to that their extremely obnoxious handling of what they have focused on, the blatant partisanship in which they’ve conducted their “business” and the total lack of transparency in that process and you have a pretty toxic picture painted of Democrats in general.

Why, then, did Obama’s promise fail to materialize in his administration – at least in the first year? Well there are many reasons. Among them is a rookie politician (Obama) who got rolled by an experienced Democratic leadership that saw a small and closing window of opportunity to pass huge social welfare agenda items that had repeatedly failed in the past and chose to tackle them while ignoring the obvious elephant in the room. My guess is they miscalculated in more than just the way Cook contends. With their majorities, I’m sure they thought they could quickly put these bills together and pass them, leaving plenty of time to work on the economy. But, of course, given the diversity of opinion and interests even among Democrats, that wasn’t the case. It has dragged into the new year while work on the economy has been essentially non-existent (they threw a $787 billion pork bill out there and called it “stimulus”, figuring their usual panacea – throwing money at a problem – would work. Unsurprisingly, it hasn’t).

Voters are mad about that. Rightly or wrongly, they blame the government for what does or doesn’t happen on their watch economically. For the most part, government can best affect the economy by making it easier for markets to expand and create jobs – tax cuts, less regulation, etc. Spending rarely sets up the conditions to do that. But regardless, of what action the government takes, voters expect the economy to be the absolute focus of government in times of economic crisis.

That has not been the case at all with this administration or Congress. And, it appears, they’re going to pay a huge price for that in 2010 and possibly 2012. What was a bright Democratic future less than a year ago has now become a scouting trip for a good place in the “wilderness” for Dems. If, as many economists expect, unemployment remains at 9% through 2012, we may be reading the obligatory columns about the “Death of the Democratic Party”. And while Obama’s personal popularity may remain high (while his job approval numbers tank), that doesn’t mean such perceived economic negligence will be rewarded with a second term.

~McQ

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By George The Stimulus Worked! We Say So!

Don’t you just love non-falsifiable government claims?

Why here’s one now:

The Obama administration, in its latest progress report on the $787 billion stimulus program, said both the overall economy and employment continued to be in better shape at the end of 2009 than they would have been without the government’s help.

Better shape, hmmm? Wasn’t this the same stimulus which promised it would keep unemployment below 8% if passed? Yet here we are at 10% with no real relief in sight. Wasn’t this the stimulus which was promised to create or save millions of jobs? Even the administration has finally given up making such claims, instead quietly changing the way it makes such determinations and including pay raises and anything even remotely job related on which the money was spent. So when further claims, such as this, are made, they should be taken with a large and skeptical grain of salt:

Though unemployment reached 10 percent at year’s end—two percentage points higher than the peak that the council forecast when the administration proposed the stimulus package to Congress nearly a year ago—the number of jobs was between 1.5 million to 2 million greater in the fourth quarter than it would have been without the recovery plan, the council said.

This is the same council that made the 8% claim and changed the rules for counting “saved and created” jobs. If anything, their claims should be completely disregarded.

This is the stimulus which was claimed to be so necessary to the recovery, yet of the $787 billion signed into law, only $263 billion has been spent. How is that a stimulus? The theory is the government pumps money into the economy as quickly as possible to “stimulate” growth and hiring. Yet this particular bill is structured so that less than half the funds are spent within what most would consider the critical first year? That alone tells you two things about this particular bill:

  1. It had little to do with stimulus and a lot to do with pork. In fact, it appears to be a 100% pork bill despite the President’s claims to the contrary. Just because individual earmarks weren’t in the bill doesn’t mean this bill isn’t a compilation of wasteful spending and pet projects. They were simply written up differently than they normally are. There was never any intention of spending this money to jump start the economy as witnessed by the amount spent in the first year and its lack of effect. It can be credibly claimed, in contravention of the administration’s claim, that it hasn’t done anything to stimulate economic growth. Don’t get me wrong, I’m not in favor of the spending that has been done or its continuation, but any objective analysis would make the point that $263 billion in a contracting 14 trillion dollar economy is likely to have little effect if any at all. So far the numbers seem to verify that.
  2. Any claims made about the bill’s effect should be viewed very skeptically. In reality, this bill was a spending bill, not a stimulus bill. It was the bill which allowed Democratic legislators (and a good number of Republicans) to spend money on things they’d been unable to get through the body in the past. Again, its structure and the items upon which the money were spent make the argument pretty handily. Its failure to “stimulate” as advertised is precisely why there is talk of a second stimulus. There never was a first.

Whatever recovery has gone on in the economy has been largely a result of factors other than this bill. That includes the positive 3rd quarter GDP numbers they try to trot out as “proof” of the stimulus’s efficacy. Those numbers were driven by the cash for clunkers program, a program outside the stimulus bill, and were largely illusory. They were illusory because it was “growth” driven strictly by government spending, it was temporary growth because it was simply stealing from future sales, and when all the dust settled, that was quite apparent to those who analyzed the results.

What this present claim is all about is message preparation. These claims, which really don’t stand up to scrutiny at all, are being made now for a reason. The president has a State of the Union address coming up soon and needs some “good news” very badly. That’s why these non-falsifiable claims are being tossed out there now. Establishing these claims and repeating them often enough is done in the hope of having them become “conventional wisdom” by the time the SOTU address rolls around. Then when the President makes these claims, an uncritical press will parrot them, establishing them as “fact” for the administration and a part of the narrative that will be repeated in 2012.

That is how the game is played, folks.

~McQ

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