The MBA reports that mortgage applications fell -0.6% last week, with purchases up 1.0% and refinancings down -1.0%.
Import and export prices both rose in September, by 0.2% and 0.3%, respectively. Both were down on a year-over year basis, with import prices down -1.0% and export prices down -1.6%.
The FHFA House Price Index rose 0.3% in August, putting it up 8.5% year-over-year.
The shutdown-delayed Employment Situation for September was another bad one. The notional unemployment rate fell a notional -0.1% to a notional 7.2%. That’s all faeries and unicorns. In actuality, only 148,000 net new jobs were created. Average Earnings rose 0.1%, and the average workweek was unchanged at 34.5 hours. An additional 136,000 people left the labor force during the month, helping the labor force participation rate to stay unchanged at a historical low of 63.2%. One slightly more positive note is that the civilian labor force grew by 73,000 persons, while 133,000 more persons were reported as employed in September as compared to August. When the numbers all shake out, nothing much has changed, as my estimate of the real rate of unemployment is 11.45% in September, compared to 11.46% in August.
ICSC-Goldman is reporting some retail sales improvement, with weekly sales growth at 1.4%, and year-over-year growth of 3.2%. Redbook, conversely, is reporting a weaker 2.9% year-over-year growth rate.
Foreign demand for US securities is again showing softness, with the 6th net outflow in 7 months of $-8.9 billion for August. Who is it that finances our deficits by buying US securities again? Oh, right. Foreigners.
Construction spending rose 0.6% in August, with a year-on-year increase of 7.1%. Gains were led by residential outlays, with both multi- and single-family sectors showing strength.
The Richmond Fed Manufacturing Index rose from 0 to 1 in October, as district activity remained flat.
This week, Michael and Dale discuss the government shutdown.
The direct link to the podcast can be found here.
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There’s an interesting little petition at MoveOn.Org. It got some press attention, and apparently MoveOn decided to try and cool it a little bit, and stop promoting it, even though it seems popular, with almost 50,000 signatures. Anybody can set up a petition at MoveOn, and the popular ones show up on the main petitions page. But, Move on has decided that this petition “may not reflect MoveOn members’ progressive values,” so they aren’t promoting it any more. The petition is still there, though, and here is what it says:
I call on the Justice Department of the United States of America to arrest Republican Majority Leader Eric Cantor, Speaker of the House John Boehner, and other decision-making House Republican leaders for the crime of seditious conspiracy against the United States of America.
The House GOP leadership’s use of the Hastert Rule and H. Res 368 to shut down the government and threaten the U.S. economy with default is an attempt to extort the United States government into altering or abolishing the Affordable Care Act, and thus, is self-evidently a seditious conspiracy. Arrest the perpetrators in Congress immediately and bring them to justice.
These people are so sure that they’re right that they see no problem at all with criminalizing politics, and threatening their opponents with prison. Political opposition to their preferred political views is not mistaken, in their view, it’s criminal. They seem serious about it.
You should probably try and think through the implications of that.
Once again, it’s time to look at the state of the Federal budget, and get our heads around how well—or badly—we’re doing as a republic. The short answer is…not well. Let’s take a look at a simple chart of the last full year of federal spending and receipts, which is Fiscal Year 2012. The chart is clickable, so you can see a full-sized version.
We spent $3,795.55 billion, while taking in $2,469 billion in taxes and receipts. That gave us a deficit for the year of $1.326.55 billion.
Much of the spending is required by law. Mandatory spending includes Social Security, Medicare, Medicaid, and retirement benefits for the military and federal workers. In addition, interest on the national debt of $227.73 billion must also be paid, by law. Overall, $2543.51 billion in spending was legally required. That’s 67% of all federal spending.
Keen observers will note that revenues of $2,469 billion do not cover that amount of mandatory spending. So, we missed being able to pay for required spending alone by by $74.51 billion. Essentially, we borrowed money to pay one-third of the interest on the money we’ve already borrowed.
Actually, we’re pretty lucky when it comes to the whole interest payments deal, because the average interest rate on the debt is hovering at around 2%. Every additional percentage point in that interest rate translates to about $115 billion dollars in additional interest charges every year. If interest rates were to rise to the historical average of 6%, that would add about $575 billion per year to cost of servicing the debt. That would raise the annual debt service costs from $228 billion to $803 billion. That’s about $44 billion more than we currently pay for defense. So, let’s hope for a weak, struggling economy, right? Gotta keep those interest rates at historical lows.
Anyway, the remaining spending is all discretionary, so, we chose to spend another $1,252.53 billion in discretionary spending. $759.11 billion was spent on killing foreigners. Everything else the Federal Government does—all of the executive departments, science and medical research, the Judicial branch, and giving money to heathen foreigners to try and make them our friends—cost us $492.42 billion. Giving money to the heathen foreigners—also known as foreign aid—accounted for about $38 billion for the year, or 1% of federal spending.
So, what can we extrapolate about the future? Well, we know that, even if interest rates stay steady, mandatory spending on entitlements will rise as the huge population bolus that is the Baby Boom generation begin retiring. Without either significant new taxes and/or significant entitlement cuts, re. That means that, in the not-too-distant future, revenues will not cover even the cost of mandatory entitlement spending.
We can—and probably will—ameliorate this by slashing defense. It’s what the Europeans have done, after all. There’s this huge chunk of money that goes to defense, and it gives us a defense budget larger than the defense budgets of the next 19 largest nations combined. Obviously, we will be told, we’re acting like a bunch of paranoid maniacs, so we can cut defense by at least half, and still have a huge defense establishment in world terms. So, we got that going for us.
So, that’s the situation for FY 2012. In a couple of months, we’ll get a final accounting of FY 2013, and we’ll see where we stand. Revenues were significantly higher in 2013, and spending growth doesn’t appear to have kept pace, so the deficit probably fell to somewhere in the vicinity of $800 billion.
That’s progress, I guess, though one year does not make a trend. Let’s see how much Obamacare is gonna cost us next year, assuming it isn’t delayed because of all the fail.
Anyway, please feel free to show this spending chart to your ignorant friends.
UPDATE: Here’s a more detailed look at federal spending in 2012 by government function:
|Government Function||Amount (billions)|
|Education, Training, Employment and Social Services||$139.212|
|Veterans Benefits and Services||$129.605|
|Commerce and Housing Credit||$79.624|
|Administration of Justice||$62.016|
|Natural Resources and Environment||$42.829|
|Community and Regional Development||$31.685|
|General Science, Space and Technology||$30.991|
|Undistributed Offsetting Receipts||$-98.897|
These are total spending amounts by function, and include both mandatory and discretionary spending in each line item.
The Housing Starts and Industrial Production reports were delayed due to the government shutdown.
Initial jobless claims fell 16,000 to 358,000. The 4-week average 11,500 to 336,500. Continuing claims fell 43,000 to 2.859 million.
The Bloomberg Consumer Comfort Index fell to a nearly seven-month low of -34.1 last week.
The general business conditions index of the Philadelphia Fed’s Business Outlook Survey fell 2.5 points to 19.8 in October.
The Fed reports that M2 Money Supply increased by $25.7billion last week.
The Fed’s balance sheet rose $54.9 billion last week, with total assets of $3.814 trillion. Reserve Bank credit increased $51.1 billion.
The Consumer Price Index and Treasury International Capital reports were delayed by the government shutdown.
The MBA reports that mortgage applications rose 0.3% last week, with purchases down -5.0% and refinancings up 3.0%.
The Housing Market Index fell 3 points to 55 in October.
The Fed’s Beige Book is still pointing at a slow recovery with economic growth continuing at a "modest to moderate" pace.
So, I got this email from the TEA Party Express people. It starts:
We are saddened to see today that the political establishment in Washington DC continues to do the only thing they seem to know – kick the proverbial can down the road. Instead of repealing, defunding or at least delaying the atrocious Obamacare, the political elites are content to let the "train wreck" happen at the expense of the American people.
Now, look, I’m really sympathetic to the goals of the TEA Party. If it was up to me, the executive departments of the Federal Government would consist of State, Defense, Treasury, Justice, and Interior. We’d have a balanced budget amendment. There would be no federal-level entitlements. Basically, the federal government’s primary responsibility would be sound money and talking to or killing foreigners as required.
But this is just a bit tendentious. It’s not “political elites” that gave us Obamacare, or who are preventing it from being overturned. It’s Democrats. The problem isn’t that Republicans have some secret admiration for Obamacare that prevents them from getting rid of it. The problem is that Republicans control 1/2 of 1/3 of the government. They have no political way to force the repeal of the ACA. They don’t control the senate—or even have a majority in it—and they don’t control the White House. Since we don’t have government by magical pixie dust, but by actual votes in actual legislative bodies and approval by the president, what possible path to ACA repeal was on the table?
The Tea Party and conservatives got short end of the stick on today’s announced budget "compromise." Enough Republicans in the Senate and the House are ready to give the Democrats everything they wanted and rendered the principled stand led by Ted Cruz, Mike Lee, and others a futile effort.
No. It was a futile effort before it began. The principled stands of some Republicans were irrelevant, because they had no power whatsoever to translate their stands into concrete action. Nor, apparently, were the Democrats in the Senate or White House particularly worried enough about negative public opinion to yield. SO, where was this going to go? Partially shutting down the government forever? Stopping Social Security and Medicare payments? I mean, what, precisely, was the end game that got to Obamacre repeal with the current senate and president? Hey, while we’re on the subject, what was the plan that the Republicans had—or that Ted Cruz had—prior to shutting down the government? I mean, other than, you know, hope.
To put it plain and simple: we don’t have enough conservatives in Congress to stop the irresponsible spending in Washington.
Yes. Exactly. Which everyone else knew early in November of 2012, just as they knew the next chance to repeal the ACA, barring its spectacular failure, would be after 2014 at the earliest.
We have seen 5 years of the Obama Administration and no successful negotiations have taken place except the sequester, which was Obama’s idea because he never thought it would actually happen!
So, by what sophistry of reason did anyone assume Obama would negotiate over Obamacare?
This is simply unacceptable. The Republicans have had 5 years to try and make some progress in remedying the financial ills that plague our nation’s future, and have made little to no progress.
I guess that makes you wish you’d had a massive GOTV effort in 2012, huh? But that didn’t happen, and millions of Republican voters stayed home. So we got a Democrat-controlled Senate, and Barack Obama went back to the White House.
The predictable result was that Obamacare was not—and with Democrats controlling the Senate and White House, will not—be repealed in the foreseeable future.
Are there some Republicans who could be described as insufficiently conservative? Yeah. Sure. So what? They aren’t the fundamental problem here. They aren’t the ones who voted for it in the first place, either.
If you want the ACA repealed there’s a simple way to do it: Win elections. Like Cory Booker just did in New Jersey, which sent another Democrat to the Senate.