Monthly Archives: October 2011
James Pethokoukis reminds us that if we’re not watching the European debt crisis, we should. The one thing Tim Geithner apparently got right was how it could effect the US negatively. Geithner said:
Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand.
And that’s the obvious truth. If you need to catch up, here’s an article in the Financial Times to bring you up to date (you may need to sign up or register to read it).
Pethokoukis then points to a report from Barclays Capital that details what Geithner was talking about:
Our baseline forecast assumes that policymakers will prevent the turmoil in Europe from leading to a full-blown financial crisis similar to 2008 and that US policymakers will not impose excessive fiscal tightening starting in 2012. If, by contrast, either of these risks is realized, the potential for another recession will increase substantially. We use the Fed’s stress scenario under the Comprehensive Capital Analysis and Review (CCAR) as an alternative scenario to our baseline, but ratchet up the intensity modestly and analyze its effect on the outlook for house prices.
1) Our modeling suggests that in a recession scenario, house prices, as measured by the CoreLogic headline index, could decline another 7% in 2012 . … The scenario posits declining real GDP for four consecutive quarters, with Q2 12 having the deepest decline at 6% (q/q saar).
2) Real disposable personal income also declines for four consecutive quarters, albeit with a one-quarter lag relative to the decline in GDP, and the unemployment rate moves persistently higher, peaking at 12.1% by the end of our forecast horizon. …
3) Furthermore, the rising unemployment rate suggests that delinquencies would push shadow inventory higher, putting downward pressure on distressed home prices. Together, the two effects send home prices significantly lower in 2012.
Or in simple terms, if Europe goes, so does the US. Housing down another 7% and unemployment up into the 12% area.
Obviously this is all based on modeling and plugging in various numbers. So just as obviously those numbers could be off a bit. However, the basic premise is correct. If Europe can’t solve its debt crisis, the US will also suffer and, as you can see, suffer mightily (check out the chart at the link).
I think the political implications are clear even for the most partisan among us.
Today’s economic statistical releases:
Consumer price inflation remains warm, with the overall CPI up 0.3% for the month, and 3.9% for the year. The core rate—less food and energy, or, stuff you don’t need to buy every day—rose 0.1% for the month and 2% for the year.
Housing starts in September were 658k, up 10.2% on a year-over-year basis. Housing permits, however, fell 5% to 594k, but up 5.7% from last year.
The Mortgage Bankers Association reports a short Columbus Day week saw mortgage applications fall -14.9%.
The Weekly Standard tells us:
In an interview that will be aired tonight on ABC News, President Obama continues to express his commitment to the Occupy Wall Street protesters.
“The most important thing we can do right now is those of us in leadership letting people know that we understand their struggles and we are on their side, and that we want to set up a system in which hard work, responsibility, doing what you’re supposed to do, is rewarded,” Obama tells ABC News. “And that people who are irresponsible, who are reckless, who don’t feel a sense of obligation to their communities and their companies and their workers that those folks aren’t rewarded.”
The president also compares the protesters to the Tea Party. “In some ways, they’re not that different from some of the protests that we saw coming from the Tea Party," Obama says.
Really? Not that different?
In Cleveland they’re investigating a kidnapping and rape at OWS there.
In Atlanta, the OWS protesters stormed a hospital.
An OWS protester in Seattle was arrested for exposing himself to children.
They’re talking about plans to disrupt the World Series.
And thievery is rampant within the OWS camps.
There is evidence of anti-Semitism.
Yup, just like the Tea Party.
You may have noticed that there was no podcast this week, and that there haven’t been any economic statistics reports this week. That’s because I had to travel to Houston, Texas this weekend to attend the funeral of my grandmother, Mildred Davidson. Many years ago, my grandfather bought their funeral plots at Brookside funeral home, and, though the family migrated out to California, we took them back home after their deaths. My grandfather, Paul E. Davidson, died in 2003. Now, he and my grandmother are finally together again.
When I returned for my grandfather’s funeral, I didn’t have a lot of time to do much beyond see some family, and go to his funeral. This time, I spent three days in Houston, and had time to travel back to all the places I remember from my childhood.
I was born in Houston, and grew up there. My parents divorced when I was two, and my father moved back to New Mexico, where he was from. I spent most of the year living with my mother, and summers with my father, mainly in Albuquerque, NM. So, I sort of have two homes, and two sets of people—entirely unrelated to each other—who saw me grow up. It’s kind of weird. But, Houston was the place I identify as home. So, I went back to the places I remember.
Below the fold is a picture-heavy story; part travelogue, part history. If you’re interested in all about finding out about me, or my past, this is it.
Succinctly, it is just another in a long line of Marxist protests which just hasn’t been fully found out yet.
And, it’s useful to a certain political contingent at the moment.
But, as Charles Gasparino notes in his NY Daily Post article, at its core Occupy Wall Street is an anti-capitalist Marxist movement:
The standard portrayal of the Wall Street protesters goes something like this: Ragtag group of unemployed young adults, venting often incoherent but overall legitimate populist outrage about economic inequality. But go down to the movement’s headquarters, as I did this past weekend, and you see something far different.
It’s not just that knowledge of their “oppressors” — the evil bankers — is pretty thin, or that many of them are clearly college kids with nothing better to do than embrace the radical chic of “a cause.” I found a unifying and increasingly coherent ideology emerging among the protesters, which at its core has less to do with the evils of the banking business and more about the evils of capitalism — and the need for a socialist revolution.
Gasparino goes on to detail what he found and it’s as unremarkable and as expected a listing of what you’d find at any A.N.S.W.E.R. protest. You know it is radical when even Richard Trumka is vilified:
That was pretty mild compared to the sentiments offered in the official “Statement of the League for the Revolutionary Party” on the protests. These guys view as the enemy not just Wall Street tycoons, but also liberal labor leaders like Richard Trumka of the AFL-CIO.
The problem with Trumka, according to the Revolutionary Party and its Zuccotti Park contingent: He wants to work with wishy-washy Democratic Party politicians, where the true revolutionaries want to “defend and develop Marxist theory as a guide to action,” which is the protests’ real purpose.
And yet Trumka is one of many Democrats who at least tentatively embraces this mob. Political expediency. They want to use this to validate their class warfare campaign.
Yes friends, the murderous Che is again plastered on everything and the “revolutionary” Marxist spirit permeates everything – which is why this is eventually destined to implode:
Maybe the worse-spent dollar I have ever spent in my life was on a propaganda broadsheet titled “Justice,” which advocates “Struggle, Solidarity, Socialism.” On the front page of the newspaper-like document, beneath the headline “Capitalism: System Failure,” was a tease for a story on the economy and how “influential business economist Nouriel Roubini” recently said how “Karl Marx had it right. At some point, capitalism can destroy itself.”
Yes, the left-leaning Roubini made that fatuous statement, and many similar ones — so many, in fact, that he has lost much of his credibility in financial circles, though that didn’t quite make it into the “Marx Was Right!” story.
Also absent was any notice of how the much-hated banks benefited not from free-market capitalism, which would have let them fail in 2008, but from crony capitalism that bailed them out. The similar cronyism practiced by Trumka and the Obama administration — massive spending on useless but politically connected businesses like Solyndra, paired with class-warfare rhetoric — likewise has very little to do with free markets.
Yeah, this ain’t the ‘60s kids. And the core then was just as radical as the core of OWS is now. When the war in Vietnam ended, so did the ability of the radicals to get their anti-capitalist message out.
Eventually this will be seen by the populace as a whole for what it really is. That’s because at some point, the true nature of that core that Gasparino talks about will shine through in such a way that even slick spin doctors won’t be able to credibly deny it. And when that happens, the entire movement will collapse like a wet paper box.
Don’t forget, the CLASS act was one of the budget gimmicks used to supposedly show that ObamaCare “bent the cost curve downward”. Ezra Klein explains:
“CLASS” stands — or stood — for “Community Living Assistance Services and Supports.” The idea was simple, or seemed to be: a voluntary insurance program that would cover home health-care options for adults who become disabled. It was Sen. Ted Kennedy’s brainchild, but the White House was cool to it in public and hostile in private. “Seems like a recipe for disaster to me,” wrote one aide in a subsequently released e-mail.
The problem with CLASS was well understood. It frontloaded its savings and backloaded its costs. As the Congressional Budget Office wrote (pdf), “the cash flows under the new program would generate budgetary savings (that is, a reduction in net federal outlays) for the 2010-2019 period and for the 10 years following 2019, followed by budgetary costs (an increase in net federal outlays) in subsequent decades.” No mystery there.
Well not exactly. It was never sold as “unsustainable” because had the truth been told when the bill was passed into law, it would have been clear that this was as much a Ponzi scheme as Social Security, because it relied on those currently paying in to the program to pay for those collecting or using benefits and, probably just as serious, it was a voluntary program. Two strikes against sustainability.
Obviously I’m not advocating that it be made mandatory, just explaining why it was destined to fail. And fail it has. The director of the program last week announced that the obvious had finally become obvious even to them. The program was unsustainable and they were closing it down.
The administration announced late Friday it did not see a way to make the long-term care CLASS Act, which was crafted by the late Sen. Edward Kennedy (D-Mass.), pay for itself. But perhaps even more damning is how the White House mishandled the controversy; consumer advocates accused the administration of being disingenuous and gutless.
Republicans are now pushing to have the act repealed and it has reignited the larger hope that repeal of the CLASS act will lead to repeal of ObamaCare in total.
The growing drumbeat for repeal comes after the White House announced that it is against repeal and remains committed to making the program work.
“We do not support repeal,” said White House spokesman Nick Papas. “Repealing the CLASS Act isn’t necessary or productive. What we should be doing is working together to address the long-term care challenges we face in this country.”
Admitting that the CLASS act is unsustainable would naturally open the administration up to questions about the whole of ObamaCare’s sustainability, especially since CLASS was one of its main cost reduction pillars.
CBO had scored the long-term care program for people with disabilities as raising $86 billion, or 40 percent of the health law’s $210 billion in deficit reduction over 10 years.
And it was all a lie. I’m not sure what else you call it. It was a knowing falsehood perpetrated by those who wanted to pass the health care law and were willing to do just about anything and say just about anything to do so.
The failure of the CLASS act calls into question the sustainability of the entire law. So the White House has grimly held the line of the CLASS act while it has become apparent to everyone else that the act has to go. And HHS has announced it is closing down the CLASS office.
On the political side, though, reality and party don’t often meet. But in the case of CLASS some Democrats are seeing the light while others would prefer to keep the all but dead program alive:
Some Democrats on Capitol Hill might vote against repeal because they want to keep CLASS alive and to support the White House. But others who are facing challenging reelection races — including Sens. Claire McCaskill (Mo.), Joe Manchin (W.Va.), Jon Tester (Mont.) and Ben Nelson (Neb.) — might not use political capital to save a costly program that might never be implemented.
Interesting. The question now is does proving that 40% of the cost savings ObamaCare promise was a sham call into question the validity and sustainability of the entire law?
My esteemed colleague George Scoville brought to my attention a post about how Republicans are making a mistake in their responses to the Occupy Wall Street protests/movement. John S. Wilson at Mediaite argues that mocking OWS, tying the unruly protestors to the Democrats, and waiting for the protests to fade is just how Democrats set themselves up for a beating by the surprisingly resilient Tea Party.
Wilson is right: conservatives are underestimating OWS. While individual protestors on camera often have no idea what they’re talking about, that’s typical for a large protest; it doesn’t mean OWS is bound to flop. Unless Republicans think Obama won such a convincing victory in ’08 because the voters knew him so well, they should absolutely take this movement seriously and respond energetically.
That said, a few of Wilson’s points are false. Like:
“The message is as clear as the implications: income inequality has gotten out of control and is untenable.”
- Once they were reminded of how much money Obama got from the financial sector, Democrats were forced to get into the weeds about who’s getting more money from Goldman Sachs et al.
- The anti-war protestors have to contend with the fact that it’s been Democrats running those wars, and getting involved in new ones, for the last 3 years.
- The stimulus and bailout bills had plenty of giveaways to large corporations, many of whom were allies of Democrats who voted for those bills.
- Student loan forgiveness is the worst stimulus policy ever, especially when college grads have a low unemployment rate and the average 2011 college graduate starts at over $50,000 — instantly vaulting them into the top 25% of incomes.
They’ll still think Obama is better than the Republican, but the idea is to make them less energetic supporters.
The college grad thing brings me to another misconception:
“that [tax cuts] message probably isn’t endearing to rural white voters who make less than $40,000 a year. How could it be?”
This is just denial. Those voters voted GOP in 2010 when it was all about fiscal issues and Big Government. What does Wilson think has changed about the GOP message since then?
Democrats keep thinking that if they promise to pick Group A’s pocket to give to Group B, Group B will always love them. But electoral politics is less about policy than signaling loyalties and aspirations. What do the rural white low-to-middle-income voters see on TV and in photos?
- a bunch of urban college kids bleating to have their loans forgiven
- the usual screamers and hippies protesting war (is that endearing to the typical Southern or rural family? and does the anti-Israel contingent appeal to evangelicals?) and fossil fuels (which goes over really well in coal towns and places where families are supported by oil jobs)
- city folk fighting with cops and local businesses and generally trashing their surroundings
- bongo drums and twinkle fingers and “the people’s microphone”
- unions openly organizing at these events
When they see that, they don’t think, “Hey, those are the kind of people who will look out for me. Let’s give them a shot.” They’re thinking, “Those are the unwholesome whiners who call me a hick and want to shutter the local factory when they’ve never worked as hard as I do.”
It doesn’t help the Dems that they’re technically the party in power, and have had the upper hand since early 2009. This would be more fertile ground for Tea Partiers if they hadn’t become so associated with political division and gridlock; they should concentrate more on unifying policies like:
- good government
- opposition to bailouts or any special favors for special interests, especially Big Business
- requiring that military interventions involve a clear national interest, which can be mixed with a message of maintaining support for the troops
Offering conservative/free-market solutions on each of those things takes the wind out of OWS’s sails. Tax reform, more transparency/accountability in government, opposing all energy subsidies instead of just the “green” ones, etc.
That’s how I’d respond to OWS. This is precisely the time for Tea Partiers to go out and remind everyone that they’re better-behaved protestors who are running against Washington and against special interests, and to remind the other side that the small-government folks still have energy of our own, and challenge OWS on just who they think their champions are.
Bryan in fewer than 800 words: Follow Bryan on Twitter.
The Hill just published a poll of likely voters. The findings pretty much reflect what I’ve believed about the so-called “99%” protest.
Voters are unimpressed and the attempt to deflect attention from Washington to corporate America isn’t, at least to this point, working:
The Hill poll found that only one in three likely voters blames Wall Street for the country’s financial troubles, whereas more than half — 56 percent — blame Washington.
Moreover, when it comes to the political consequences of the protest, voters tend to believe that there are more perils than positives for Obama and the Democrats.
Of course that’s the double edged sword and the risk the Obama campaign takes trying to embrace this (while also attempting to keep some distance) supposed grass roots movement.
And, as the more radical groups attempt to join as well (see this photo essay for an example), the folks in flyover country are going to get even more turned off.
Personal observation, but it just seems to me the radical left just hasn’t had much to protest about since Bush left office. The anti-war movement (of which most of these groups showing up for OWS were a part) melted away when Obama took office. He even started a third war and not a peep.
There will obviously be those who try to compare this to the Tea Party movement, but those comparisons will fall flat. This is just the left looking for an excuse for the usual suspects to do what they do best – protest. And, despite all the effort by the media to paint the OWS as something other than that is only going to prove the voters are a bit more sophisticated than the spin artists believe.
This poll points out that while OWS has indeed built notoriety, it may not be the sort of notoriety that a politician would want to embrace. Likely voters in the poll said it may not end up being a positive for those who latch on.
Watch carefully as this develops. Prepare for the old “rats deserting a sinking ship” rush when it starts to go south.
And it will go south.
And big media collusion. Dana Loesch has the story.
Big Journalism has learned that the Occupy Washington DC movement is working with well-known media members to craft its demands and messaging while these media members report on the movement. Someone has made the emails from the Occupy D.C. email distro public and searchable. The names in the list are a veritable who’s who in media.
Journolist 2.0 includes well known names such as MSNBC’s Dylan Ratigan, Rolling Stone’s Matt Tiabbi who both are actively participating; involvement from other listers such as Bill Moyers and Glenn Greenwald plus well-known radicals like Noam Chomsky, remains unclear. The list also includes a number of Occupy organizers, such as one of the Occupy Wall Street main organizers Kevin Zeese.
There is a lot of behind the scenes manipulation going on with this movement on the left as the Obama water carriers swing into coordinated action. Read the whole article and check out the examples.
The Obama campaign and Obama himself is trying very carefully to help craft the message so he can at least tentatively embrace the movement, characterize it as a populist movement and try to use it to give his re-election chances some momentum. Yesterday Obama made the comparison between the OWS movement and the civil rights movement of the ‘60s. Having been around for that, I’ve got to say I’m just not seeing it.
To this point, OWS is a ragbag confederation of the usual A.N.S.W.E.R groups and the movement still hasn’t issued any coherent statement of its purpose except to harass the rich and attempt to lay the blame for – well you name it—at their feet. As you’ll see, OWS now has “professional” help to help them put something together.
Obviously there is a lot of anger out there – we’ve known that for years, actually, as we’ve watched wave election after wave election take place and have witnessed the rise of the Tea Party.
But most of that anger and discontent was aimed at government. And that has put this Administration on the defensive. Where it could once claim outsider credentials, it is the government establishment now. Obama knows that if the focus of discontent stays on government, his re-election chances are not good.
However, this movement offers a perfect opportunity to shift focus and blame.
It comes as no surprise then that media water carriers and spin doctors along with the administration see this as an opportunity to expand on the class warfare meme and shift blame and focus away from government.
Brian Micklethwait, over at Samizdata, posted this picture. It’s a bank note from Zimbabwe. It has a pretty high face value: fifty trillion dollars. If you’d like one, you’ll have to shell out three bucks or so in US dollars to get it.
Currently, that comes out to an exchange rate of about Z$16.67 trilion to the dollar. That’s pretty unreasonable, by any stretch of the imagination, if you’re a Zimbabwean. But you know what would be worse? An exchange ratio of 1:1.
And I’m still not fully convinced it won’t happen.