The “too big to fail” intervention in the financial realm may have put us in an even worse position:
Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
A comforting thought.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
“We aren’t doing anything significant so far, and the banks are pushing back,” he said. “The leaders of the G-20 will make some small steps forward, given the power of the banks” and “any step forward is a move in the right direction.”
Key phrase – “politically difficult”. I.e. it may cost the Democrats and Obama some political capital. Wouldn’t want them to have to make difficult political decisions, would we – so the hope is they can “outsource” it. Make the decision out to be one that a group of leaders came up with and thus a broad consensus that gives the administration some political cover.
“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”
That depends on what that political cost is calculated to be.
“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said. The U.S. will “grow but not enough to offset the increase in the population,” he said, adding that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
“The question then is who is going to finance the U.S. government,” Stiglitz said.
Indeed – and here we are set to spend even more money on a pet domestic issue.
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Nope, not another post about the kiddie speech. Instead the title is from an old protest song from the ’60s (by Buffalo Springfield I believe). The sound is the sound of real, honest to goodness change being driven by government excess – not the veneer of change pushed by a certain candidate in the last election.
Daniel Henninger writes about it today in the WSJ. He sees it happening everywhere (he uses Japan as an example) and he believes it all pretty much boils down to this:
No matter the ideological cast of these governments, they all hold in common one policy: the inexorable upward march of national indebtedness. It has arrived at the edge of the cliff.
It is the point the liberal left in this country still doesn’t understand. The looters have finally been noticed by looted and the looted aren’t at all happy.
That’s it. That’s the problem. And that’s why there’s so much unrest.
As measured by the OECD, the growth in gross debt as a percentage of GDP since the dawn of the new century is stunning. The data isn’t exactly comparable across individual countries, but the trend line is unmistakable.
In the U.S., debt as a percentage of GDP rose to 87% in 2009 from 55% in 2000. In the U.K., to 75% from 45%; Germany, to 78% from 60%; France, 86% from 66%. There are exceptions to this trend, such as Canada, New Zealand and notably Australia, whose debt has fallen to 16% of GDP from 25%. But for all the countries in the OECD’s basket the claim of indebtedness on GDP grew to 92% from 69% the past nine years.
In short, the lumpen electorate works, and the lumpen bureaucratariat spends. They get away with it because they have perfected the illusion that no human hand causes these commitments. The payroll tax just happens. Entitlements are “off-budget,” presumably in the hands of God. This is government without the responsibility of governance.
Unable to identify who or what has put them in hock to the horizon, national electorates are attempting accountability by voting whole parties out of power.
That, among other reasons, is why the Republicans are out of power. And, if the Democrats continue down the path they’ve charted, is why the Republicans may find themselves back it power. And it wouldn’t at all surprise me, given the gawd-awful track record of the Republicans, that they too will misinterpret their reinstatement and be gone again in 2 years.
It is about the size, cost and intrusiveness of government, stupid!
The “lumpen electorate” has finally had enough. They want to keep what they earn. They want less government. But that’s an anathema to politicians who have built whole lives and careers on providing more government. It’s like an addiction – they can’t stop what they’re doing or how they’re doing it.
And, unfortunately, even though the masses seem unhappy with the size and cost of government, they too are addicted to a certain level of government. They too have an addiction to break.
The question, of course, as far as libertarians are concerned, is how these two addictions can be addressed and overcome so that government’s size and cost can be scaled back to a proper and legitimate size? And where are the leaders to do this?
Until they emerge – and there is nothing to say they will – this cycle of unrest which sees the swapping out of political parties will continue. But you have to believe that at some point, the disenchantment with the current political regime (and both parties make up that regime) will come to a flash point. What that flash point will entail – the range of possibilities is vast – is anyone’s guess.
When it is reached, politics and government as we know it now, will change forever. I cautiously believe we’re moving in that direction. When and where are anyone’s to guess, but I’m beginning to believe we’ve moved beyond “if” and have a “when” in our future. Or at least I hope so – because it seems obvious that we need some very drastic changes in direction.
What we’ve got to work toward is a change that emphasizes freedom and enhances liberty. And that isn’t by any means the only possibility such change would bring.
The old Chinese curse seems to be in full bloom right now – “May you live in interesting times”. I can’t think of times, during my life, that have been any more interesting.
At least in the domestic realm. Those are the latest poll results tracking the president’s job performance approval by CNN/Opinion Research Corp.
Obama retains majority support on foreign affairs at this point (although I don’t expect that to remain favorable for long), but a majority of independents, the key to his electoral victory last year, are not at all impressed with this performance domestically:
Fifty-three percent of independents questioned in a CNN/Opinion Research Corporation survey released Tuesday say they disapprove of how Obama’s handling his duties in the White House, with 43 percent in approval. That result marks the first time in a CNN poll that a majority of independents give the president’s performance a thumbs-down.
Here’s the key line in the article:
“Obama won a majority of the vote among independents last year, and that helped put him in the White House,” says CNN Polling Director Keating Holland. “Losing their support makes it more difficult for Obama to govern from the center.”
So that leads the question, “how does Obama recapture this key electoral demographic”? The obvious answer is by moving toward the center. But if he does that he’ll have to scrap the more controversial parts of his health
care insurance reform bill and there’ll be hell to pay with his base.
But it is even more complicated than that.
Is the fight over health care responsible for the downturn in Obama’s numbers?
“Yes, in part, but his standing on some other issues has taken an even bigger tumble,” adds Holland. “Among all Americans, his rating on health care has dropped 13 points since March. Compare that to his 16 point drop on the deficit and 17 point dip on taxes and it looks like there is growing discontent with Obama’s overall domestic agenda — not just his health care policy.”
Again, emphasis on the point the left seems incapable of grasping – independents disapprove of the whole domestic agenda – health
care insurance reform is only the flash point.
So coming up with a new bill aimed at the health care issue, even if more acceptable than what is presently being proposed isn’t going to necessarily change the approval rating or bring independents back into the Obama (and Democratic) fold.
As an aside, this is interesting as well:
The survey also indicates that 37 percent of Americans think the media has treated Obama fairly, down 18 points from February. One in four say the media has been too critical of the president, up seven points from February and 36 percent say the media has not been critical enough, up 10 points.
If you add the 37% who think the media has treated Obama fairly, with the 18% who’ve dropped out of that category you just about have the percentage of the vote which elected Obama. My guess is that 37% that think he been treated fairly are mostly the independents he and the Democrats have been losing over the past few months.
Back to the topic – it is fish or cut bait time for Obama and the health care debate is where he’ll finally have to show his true colors. Is he going to try to woo the independents back by proposing moderate reforms and attempting to move back toward the center? Or will he double down, push the controversial portions of the legislation his base demands and all but declare his liberal colors? He’s not going to be able to please both his base and independents. So he’s going to have to make a decision and make it soon – look for his “major speech” on health care to be that decision point.
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Right about what? Well, in this case, the 10 year budget estimate. Remember this chart first seen in March?
This was the difference between the Obama administration and the CBO estimate based on the Obama administration’s 10 year budget. At the time the CBO said that the budget estimate would raise the debt by 9.1 trillion dollars. The Obama administration said, at the time, that the CBO was wrong.
Quietly, at 7pm this last Friday night, the Obama administration raised its estimate of what their budget would add to the debt by the 2 trillion the CBO had said was always there. What that means for the chart is you can ignore the pastel red bars – the Obama estimate – in favor of the dark red bars.
The administration claims that its change in the estimate is due to things which have apparently changed since March, but of which they were just unaware might happen:
Obama administration officials have concluded the economy was much worse last year — and tax revenues much lower — than they had initially assumed, which means that the estimated budget deficit will increase from $7 trillion to about $9 trillion over the coming decade.
This has to give you all sorts of confidence in other White House cost estimates not to mention their denials of the CBO’s accuracy on things like cap-and-trade and health care in favor of their own.
They didn’t know enough to make an accurate estimate. But the CBO did.
So when the administration says that health care reform will save money and the CBO says it will “bend the cost curve upward”, what should this example lead us to believe?
The cost curve is going to bend upward.
UPDATE: James Pethokoukis thinks this is a prelude to CBO kicking their estimate up a notch:
Expect the CBO to also crank up its forecast, which will be higher than the administration’s. Also, this is further evidence that the common wisdom that people don’t care about budget deficits (no matter what the polls say) is wrong. C’mon, leaking such news on a late Friday afternoon?
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It’s no secret that the recent worldwide economic downturn has seriously affected motorcycle sales, sending them plunging by a third. Now here in the United States, it’s become a common thing to see executives at big firms take huge bonuses, even when the company isn’t doing so hot. The most egregious example of this was when failed insurer AIG took billions of dollars in Federal money for a bailout of the company, then promptly paid off millions and millions in executive bonuses with it.
Apparently, things are different in Italy, where senior executives at Ducati, faced with slumping sales, did the right thing.
Senior executives at Ducati have taken a 10 per cent cut in their pay and will not receive any bonuses because of the decline, while [Ducati CEO] Mr [Gabriele] Del Torchio said he had taken a 20 per cent pay cut.
Let’s leave aside any legalistic or other arguments about whether the executives should be compensated or not. At the end of the day, when you’re cutting production, and laying off staff, it seems only right that the pain should be shared by everyone else in the company, all the way to the top.
Kudos to Ducati for setting an example of shared sacrifice.
Part of the reason is the financial situation and part of it is the new evidence that science is producing which is making Americans more skeptical about the AGW crowd’s claims.
Recent Gallup polls carry the news:
Here’s what Gallup found: The number of Americans who say the media have exaggerated global warming jumped to a record 41 percent in 2009, up from 35 percent a year ago. The most marked increase came among political independents, whose ranks of doubters swelled from 33 percent to 44 percent. Republican doubters grew from 59 percent to 66 percent, while Democratic skeptics stayed at around 20 percent.
What’s more, fewer Americans believe the effects of global warming have started to occur: 53 percent see signs of a hotter planet, down from 61 percent in 2008. Global warming placed last among eight environmental concerns Gallup asked respondents to rank, with water pollution landing the top spot.
Another recent Gallup study found that, for the first time in 25 years of polling, more Americans care about economic growth than the environment. Just 42 percent of people surveyed said the environment takes precedence over growth, while 51 percent asserted expansion carries more weight. That reverses results from 2008, when 49 percent of respondents said the environment was paramount and 42 percent said economic growth came first. In 1985, the poll’s first year, 61 percent placed a bigger priority on the environment, while 28 percent ranked economic growth highest.
Scientists have begun to push back against those who have been claiming “consensus” for so long. And, Americans are simply becoming more informed about the matter. Part of that is the effect of the new media which has broken the monopoly hold of the mass media’s ability to shape public opinion. As the poll points out, Americans increasingly think the media is exaggerating the problem. That skepticism has to be based in something, and the only media carrying the skeptical side of the argument is the new media.
Obviously, since the financial meltdown, priorities have also changed. While AGW was apparently never a high priority among environmental priorities, it is dead last now. That’s again because people are becoming more informed about the economic impact of the draconian legislative measures being touted as a solution. And as time goes by, and there is more of a focus put on cap-and-trade legislation, I expect the numbers in opposition to go up even further.
Naturally the opposition disagrees and cites polls from Pew and the National Wildlife Federation that they claim contradict Gallup (no date for those two polls is given). But as you recall, Rasmussen had a very recent poll which had similar results to the Gallup poll.
The radical agenda is in trouble, folks. Whether that means Democrats will “listen” as they claim they do, is another matter entirely. I fully expect them to attempt to ram both health care and cap-and-trade through. But that doesn’t mean we have to give them a pass if they do. Be your “un-American” best and tell them loudly and strongly that cap-and-trade is not a good thing for the US and is not something that should be passed while the science of AGW is decidedly unproven.
Again, what’s the freakin’ rush?
I have not posted much lately. Busy. Very busy. I don’t see how McQ does it. He’s a machine.
But I have been paying attention, and I must say Obama is as amusing during his first six months as I had hoped, and maybe more. Here’s a brief summary of where he’s at as far as I’m concerned, categorized into various types of success and failures on the political front.
Read this carefully. This is from George Stephanopoulos:
To get the economy back on track, will President Barack Obama have to break his pledge not to raise taxes on 95 percent of Americans? In a “This Week” exclusive, Treasury Secretary Tim Geithner told me, “We’re going to have to do what’s necessary.”
Geithner was clear that he believes a key component of economic recovery is deficit reduction. When I gave him several opportunities to rule out a middle class tax hike, he wouldn’t do it.
“We have to bring these deficits down very dramatically,” Geithner told me. “And that’s going to require some very hard choices.”
“We will not get this economy back on track, recovery will be not strong and sustained, unless we convince the American people that we are going to have the will to bring these deficits down once recovery is firmly established,” he said.
For the gullible who believed their taxes weren’t going to go up “one dime”, Turbo Tax Tim is laying the ground work to prove your gullibility.
For those who never believed the “promise” to begin with, big surprise, right?
But the more important point is found in Geithner’s last sentence in the cite. In there he’s telling the public that they have to bear the cost of this administration’s profligacy. Because, you see, they spent your money (like the porkapalooza they called the “stimulus package”) like drunken sailors on shore leave and it is now up to you – the sober ones in this deal – to bail them out. But watch ‘em – they’re going to claim they saved the economy.
And now they’re ready to save the climate and fix your health care too.
Yes some very hard choices are going to have to be made – some adults are going to have to stand up to Timmy and the boys and say “no”.
If this NPR poll has any validity, it removes, once and for all, the “I inherited this mess” meme from Obama’s rhetorical quiver. Americans see this as his mess now and they’re not particularly happy with how he’s handling it:
In another part of the poll, respondents were asked which of two statements on the economy came closer to expressing their view. The first statement: “President Obama’s economic policies helped avert an even worse crisis and are laying the foundation for our eventual economic recovery.” The second statement: “President Obama’s economic policies have run up a record federal deficit while failing to end the recession or slow the record pace of job losses.” A plurality preferred the second statement, 48 percent to 45 percent.
Another indicator of the point:
Greenberg and Bolger found that 38 percent considered the country to be going in the “right direction,” while 54 percent saw it on the “wrong track.” But that 15-point negative reading was the least negative of any NPR poll in more than year. The portion saying “wrong track” had been nearly 90 percent in the NPR poll done in the fall of 2008.
The principal reason for negativity appeared to be the economy. Asked to assess the current state of the economy, 49 percent called it poor while 42 percent opted for “not so good.” Only 8 percent said it was good and only 1 percent said excellent.
While NPR tries to soften the news, the fact remains that a solid majority think the country is on the wrong track. As mentioned above, there’s a 15 point difference between right and wrong track polling.
The so-called generic ballot question was also very close. Asked whether they would support a Democrat or a Republican for Congress in 2010 if the election were held today, 42 percent said they would choose a Democrat and 43 percent a Republican, a difference well within the poll’s margin of error (plus or minus 3.4 percentage points for each number in each question).
All three areas show a trend that has to be troubling to Democrats and the administration. In political terms, 2010 is right around the corner. And yes, it’s still early in the administration, but after the honeymoon, it appears those polled are not happy, for the most part, with what they’re seeing from either Congress or Obama.
Except when locked in a battle in which it is trying to fool the public into accepting a 1 trillion plus spending program as a “money saver”. Then, apparently, it is quite all right to delay the scheduled release of its revised budget numbers (based on known economic indicators):
The White House is being forced to acknowledge the wide gap between its once-upbeat predictions about the economy and today’s bleak landscape.
The administration’s annual midsummer budget update is sure to show higher deficits and unemployment and slower growth than projected in President Barack Obama’s budget in February and update in May, and that could complicate his efforts to get his signature health care and global-warming proposals through Congress.
The release of the update – usually scheduled for mid-July – has been put off until the middle of next month, giving rise to speculation the White House is delaying the bad news at least until Congress leaves town on its August 7 summer recess.
And, of course, what it hopes to have in its pocket at that time is a health care reform bill passed by Congress. So why delay the budget update? Well, it isn’t going to be kind to the administration’s rosy speculation concerning deficit and growth, that’s why:
“Instead of a dream, this routine report could be a nightmare,” Tony Fratto, a former Treasury Department official and White House spokesman under President George W. Bush, said of the delayed budget update. “There are some things that can’t be escaped.”
The administration earlier this year predicted that unemployment would peak at about 9 percent without a big stimulus package and 8 percent with one. Congress did pass a $787 billion two-year stimulus measure, yet unemployment soared to 9.5 percent in June and appears headed for double digits.
Obama’s current forecast anticipates 3.2 percent growth next year, then 4 percent or higher growth from 2011 to 2013. Private forecasts are less optimistic, especially for next year.
Any downward revision in growth or revenue projections would mean that budget deficits would be far higher than the administration is now suggesting.
And then there’s the debt problem, which is headed to new and dizzying heights:
The nation’s debt – the total of accumulated annual budget deficits – now stands at $11.6 trillion. In the scheme of things, that’s more important than talking about the “deficit,” which only looks at a one-year slice of bookkeeping and totally ignores previous indebtedness that is still outstanding.
Even so, the administration has projected that the annual deficit for the current budget year will hit $1.84 trillion, four times the size of last year’s deficit of $455 billion. Private forecasters suggest that shortfall may actually top $2 trillion.
The administration has projected that the annual deficit for the current budget year will hit $1.84 trillion, four times the size of last year’s deficit of $455 billion. Private forecasters suggest that shortfall may top $2 trillion.
If a higher deficit and lower growth numbers are not part of the administration’s budget update, that will lead to charges that the White House is manipulating its figures to offer too rosy an outlook – the same criticism leveled at previous administrations.
Of course, if it does include the higher deficit and lower growth numbers, as it should, it would also most likely kill the costly push toward health care “reform”. And that is why it is being delayed.
How do I say that with such assurance? Because this is a routine and easily produced report despite what the administration is trying to claim.
White House officials say it is now expected in mid-August. They blame the delay on the fact that this is a transition year between presidencies and note that Obama didn’t release his full budget until early May – instead of the first week in February, when he put out just an outline.
Still, the update mainly involves plugging in changes in economic indicators, not revising program-by-program details. And indicators such as unemployment and gross domestic product changes have been public knowledge for some time.
Consider this: if those budget numbers looked good, would the White House postpone revealing them? Obama could use all the good news he can get at the moment, especially with two big-spending bills stalling in Congress.
Ironically, the White House budget director was making the rounds claiming those trying to delay the vote on health care were trying to kill it, all the while the administration is delaying the budget report with the purpose of depriving law makers the information they need in their consideration of the cost of such legislation.
Meanwhile, we are apparently on course to eat our way into prosperity as the Recovery Act spends your hard earned dollars on … cheese.