Monthly Archives: August 2012
The following statistics were released today on the state of the US economy:
2nd Quarter nonfarm productivity rose an annualized 1.6%, primarily on a slowing in hours worked. Unit labor costs rose an annualized 1.6% on slower compensation growth.
The MBA reports mortgage applications fell by -1.8%. Purchase apps fell -1.0%, while re-financing apps fell -2.0%.
Total consumer credit outstanding rose $6.5 billion in June, driven by students who are aggressively—and probably unwisely—taking out loans.
That’s what a former member of the Fed claims. James Pethokoukis has the story:
But a book by Robert Hetzel, a senior economist at Federal Reserve Bank of Richmond, says it wasn’t Bushonomics or greedy bankers or broken markets that caused the Great Recession. In The Great Recession: Market Failure or Policy Failure, Hetzel pins the blame squarely on the Federal Reserve and Team Bernanke.
Oh, the downturn first started with “correction of an excess in the housing stock and a sharp increase in energy prices” — the housing bust and the oil shock. Indeed, those two things were enough, in Hetzel’s view, to cause a “moderate recession” beginning in December 2007.
But only a moderate one. It was the Fed’s monetary policy miscues after the downturn began that turned a run-of-the-mill downturn into a once-in-a century disaster.
A moderate recession became a major recession in summer 2008 when the [Federal Open Market Committee] ceased lowering the federal funds rate while the economy deteriorated. The central empirical fact of the 2008-2009 recession is that the severe declines in output that in appeared in the [second quarter of 2008 and the first quarter of 2009] … had already been locked in by summer 2008.
Anyone. What has been blamed for the “Great Depression”?
The irony here, of course, is that Federal Reserve Chairman Ben Bernanke is a much-noted student of the Great Depression and of the work of the late Milton Friedman whose landmark book, A Monetary History of the United States, pinned the blame for the Great Depression on a too tight Fed. As Bernanke told Friedman and his co-author, Anna Schwartz, on the economist’s 90th birthday a decade ago, ”You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”
But if Hetzel is right, the Fed blew it again.
Irony? Yeah, supreme irony. Unfortunately, the irony impaired left won’t get it (or choose not to) because it isn’t at all as useful politically in “blame the GOP” statements like Obama is fond of:
But I just want to point out that we tried their theory for almost 10 years … and it culminated in a crisis because there weren’t enough regulations on Wall Street and they could make reckless bets with other people’s money that resulted in this financial crisis, and you had to foot the bill. So that’s where their theory turned out.
As an aside, speaking of reckless bets with other people’s money, see “Nevada’s epic “green energy” failure” below. The bets this administration has made in those sorts of areas can be characterized as nothing less that “reckless”.
However, more to the point, if this theory by Hetzel were to be more commonly known, it would destroy the meme that it was 10 years of Republican economic malfeasance, loose regulation and Wall Street greed which caused the downturn. And of course anyone who has taken the time to actually look into the downturn already knows that’s not the case. But putting the blame on the Fed, where it may indeed belong, would remove a key talking point for Obama.
So I look for this theory to be roundly ignored by the left.
Unfortunately these stories are all too common now:
As U.S. Senate Majority Leader Harry Reid prepares to host his fifth annual National Clean Energy Summit on Aug. 7, a Nevada Journal examination of Nevada’s renewable energy sector shows that over $1.3 billion in federal funds funneled into geothermal, solar and wind projects since 2009 has yielded and is projected to yield just 288 permanent, full-time jobs.
That’s an initial cost of over $4.6 million per job.
So as the Senator from Nevada tries today to justify his profligacy in his home state at your expense via this sham “National Clean Energy Summit”, you can be assured of one thing – No one in government will be held accountable for this, at least not legally.
The performance of many of these “sons of cronyism” is as dismal as the cost per job is outrageous.
Auditors for Nevada Geothermal Power, a federally subsidized green-energy firm in Nevada, are raising questions about whether that firm is going to fail.
As of last October, Nevada Geothermal Power had 22 employees in Nevada, and, according to the New York Times, had received $145 million in federal subsidies — composed of a loan guarantee of nearly $79 million for its Blue Mountain geothermal project and at least $66 million in grants to the company itself.
The Times called the company a “politically connected clean energy start-up that has relied heavily on an Obama administration loan guarantee,” and said it “… is now facing financial turmoil.”
Today, three quarters later, the latest company audit again questions the “company’s ability to continue as a going concern.”
The firm’s survival, wrote auditors on March 31, will depend “on its available cash and its ability to continue to raise funds….”
And that’s not the only example:
The most recent “clean energy” company failure in Nevada occurred three weeks ago when Amonix, a North Las Vegas solar manufacturing plant that had received more than $20 million in federal tax credits and grants, closed after only 14 months of operation.
Hailed upon its opening by Sen. Reid, U.S. Rep. Shelley Berkley and Gov. Brian Sandoval, the 214,000-square-foot Amonix facility had, at its height, employed some 700 individuals. In 2010, even President Barack Obama praised the Amonix plant, saying the “stimulus” tax credits it received had made an “extraordinary impact.”
Today, the company is bankrupt.
The result is something out of an Orwellian nightmare and the ultimate victim? The people of Nevada:
In Nevada, consumer energy rates climb higher and higher. According to the Energy Information Administration (EIA), Nevada now has the highest residential electricity rates in the Intermountain West region.
Moreover, so long as present government policies — such as the state’s Renewable Portfolio Standard — remain in place, rates will continue upward.
While Sen. Reid helped Salazar fast-track government-approved renewable projects in 2009, he also used his influence as Senate majority leader to delay and ultimately kill a coal power plant planned for White Pine County.
Coal-powered plants produce electricity at a much lower price than do renewable-powered plants, according to the EIA and NV Energy.
Currently, NV Energy pays 3 to 5 cents per kilowatt-hour for natural gas and coal-fueled power, 8 to 10 cents per kWh for geothermal energy and for wind energy and 11 to 13 cents per kWh for solar photovoltaic energy. Wind and solar photovoltaic energy also require backup power for “intermittency issues.”
The higher costs from renewable-energy production are passed on to Nevada ratepayers in the form of residential electricity rates that are 26 percent higher than those of other Intermountain West states and 7 percent higher than the national average, says the EIA.
Obviously cronyism isn’t just limited to Democrats. It’s just their turn in the barrel because their cronyism has been such a spectacular disaster here lately.
What none of our elected officials who regularly indulge in cronyism seem to understand is that they call certain things economic principles or economic laws for a reason – they aren’t something you can ignore and expect, for some reason, to be successful in ignoring them.
In this case Richard Epstein of the Hoover Institute again states why what is again being attempted, and failing, is a lesson that the government seems never to learn:
These subsidies programs have failed for mundane but compelling reasons. No government has ever succeeded in trying to shape industrial policy with state subsidies, for the simple reason that it has neither the knowledge nor the incentives to pick which fields make sense to invest in or which firms in these fields have latched onto a viable technology.
No government should, of course, ban investments in solar and wind energy, but the prudent strategy is to let these investments be made by venture capitalists and other entrepreneurs who might actually know what they are doing. And currently, the smart money seems to be steering clear of renewable energy technologies.
And yet we continue to see these sorts of attempts by government to do something it is entirely unequipped (and unneeded) to do.
You know, act like it has better information than … markets. It never has, it never will. The results are just about as predictable as sunrise.
Failure. In some cases epic failure.
In the case of Nevada, government intrusion, at the cost of $1.3 billion of your dollars, has created a whopping 288 jobs and managed to quadruple energy costs for the state’s residents.
And yes, I put that in the epic failure column – but then we’re talking Harry Reid here, so one should be used to epic failure when his name is mentioned.
The following statistics were released today on the state of the US economy:
Redbook reports year-on-year same store sales growth at 2.0%, but the 4-week average, at 1.5% is at a recovery low. ICSC-Goldman Store Sales are unchanged from last week, and up only 1.4% from last year, also a recovery low.
The report on Consumer credit is due out this afternoon.
Like in the MN Senate race that put Al Franken in office and provided Senate Democrats with their 60th vote.
Byron York provides the short version of the story and what was found subsequently:
In the ’08 campaign, Republican Sen. Norm Coleman was running for re-election against Democrat Al Franken. It was impossibly close; on the morning after the election, after 2.9 million people had voted, Coleman led Franken by 725 votes.
Franken and his Democratic allies dispatched an army of lawyers to challenge the results. After the first canvass, Coleman’s lead was down to 206 votes. That was followed by months of wrangling and litigation. In the end, Franken was declared the winner by 312 votes. He was sworn into office in July 2009, eight months after the election.
During the controversy a conservative group called Minnesota Majority began to look into claims of voter fraud. Comparing criminal records with voting rolls, the group identified 1,099 felons — all ineligible to vote — who had voted in the Franken-Coleman race.
And what has happened since?
And so far, Fund and von Spakovsky report, 177 people have been convicted — not just accused, but convicted — of voting fraudulently in the Senate race. Another 66 are awaiting trial. "The numbers aren’t greater," the authors say, "because the standard for convicting someone of voter fraud in Minnesota is that they must have been both ineligible, and ‘knowingly’ voted unlawfully." The accused can get off by claiming not to have known they did anything wrong.
Still, that’s a total of 243 people either convicted of voter fraud or awaiting trial in an election that was decided by 312 votes.
And, of course, the probability is these felons absolutely knew they were breaking the law and fraudulently voted anyway.
Obviously making a connection between them and Democrats is likely impossible, but it does point to something that the left consistently denies – the existence of voter fraud.
It exists. Denying it exists, as the left does, only damages their credibility.
Many times it is the system itself which enables fraud to be carried out. Incompetence and inefficiency within government agencies charged with supervising voting are as much the problem as the frauds. For instance:
The Houston-based True the Vote said it has identified 160 counties across 19 states with more registered voters on their rolls than eligible live voters. This chart highlights the 19 states and how they voted in the 2008 election.
Keeping the voter roles current and ensuring all registered voters are eligible would seem to be a primary mission of any state’s voter bureaucracy, wouldn’t it?
Yet what did we recently see – the Obama DoJ go after the state of Florida for doing its job and purging it’s voter roles of the dead and ineligible. You’d think that they’d encourage such an action because it helps guarantee the integrity of the voting system.
But instead, it tried to stop it.
There is all sorts of fraud. That like York points out. That like this case in Miami:
It’s a shady world, as the case of 56-year-old Deisy Cabrera in Hialeah shows.
Cabrera was charged Wednesday with a state felony for allegedly forging an elderly woman’s signature on an absentee ballot, and with two counts of violating a Miami-Dade County ordinance banning the possession of more than two filled-out absentee ballots.
Much of the fraud takes place within the early voting venues. As the above case illustrates, preying on nursing home residents is only one of many ways fraudulent ballots are cast.
However the Democrats contend that voter ID laws are a means of stopping a problem that doesn’t exist. They claim there is very little if any fraud to be found in same day voting. Of course that’s hard to substantiate when voter roles are larger than the pool of eligible voters in many areas and no on is asked to prove who they are.
The other complaint is that voter ID laws “disenfranchise” minorities and the poor. Yet Georgia’s experience directly contradicts that claim with minority and overall voter turnout increasing in the elections following the implementation of a voter ID law.
Bottom line: the integrity of the voting system is paramount to instilling confidence in the citizenry that their voices are being truly heard. If ever there seemed to an issue that should be truly bi-partisan, this would be it. Yet there are very clear battle-lines drawn with one side claiming fraud doesn’t exist (and they’re factually incorrect about that) and the other saying it does and something should be done about it.
Guess which side I come down on?
I know there are some out there that will say, “hey you were whining the other day about taxing the winnings of Olympians”, weren’t you? And now a politician plans to fix it and you bitch?!”
Yes. Yes, I do. Because this is exactly the wrong way to go about it:
Sen. Marco Rubio introduced a bill Wednesday to eliminate the federal government’s tax on Olympic medals, saying the levy amounted to yet another way the government tries to punish those who succeed.
Athletes who win a gold medal also earn a $25,000 honorarium — and with it an $8,986 tax bill to the IRS, according to Americans for Tax Reform, which crunched the numbers. That covers both the honorarium and the tax on the value of the gold in the medal itself.
The silver medal tax comes to $5,385, and the bronze medal tax is $3,502 — including $2 for the value of the bronze medal itself, and the $10,000 honorarium.
That could leave amateur athletes — in many cases still teenagers — facing stiff tax bills when they return to the U.S.
Mr. Rubio said that shouldn’t happen.
Of course you can make special pleadings for all sorts of types of special interest taxpayers, can’t you?
But isn’t taxation supposed to fund the legitimate functions of government and be fairly applied to everyone?
How does exempting special constituencies because of their, well, “specialness”, do that?
Certainly Olympic level (and other) athletes compete in other competitive venues and it wouldn’t be at all unusual for them to win some sort of honorarium there. So why is that taxable and this isn’t?
Quite simply visibility and outrage.
That’s no way to run a government. There’s nothing rational about this exemption. It is as arbitrary as many of the taxes we suffer under.
Important issue? After the economy is up and running again, it is time to push – and push hard – for a total revamping of the tax structure and code in this country.
We suffer one of the least representative and certainly the least fair or equitable tax codes in the world.
Time to take it apart and start over again. And this time, let’s make it impossible for Congress to fiddle with it in terms of rewarding or punishing special constituencies arbitrarily at its whim
That’s the argument Ruchir Sharma makes in the Atlantic this week. It is one of those contextual or perspective arguments that says, “of course it’s bad, but look at the rest of the world”. He also, heaven forbid, makes the American “exceptionalism” argument, saying":
Evidence of an American revival, against both developed and emerging world competition, is mounting, driven by the traditional strengths of the American economy–its ability to innovate and adapt quickly.
But … there’s always a “but”:
America’s worst worries — heavy debt, slow growth, the fall of the dollar and the decline of manufacturing — will look much less troubling when compared to its direct rivals. While US growth has slowed by a full point so has growth in Japan and Europe, leaving the United States on top of the league of rich nations.
Sharma says manufacturing is looking up and slowly growing. As for debt? Well, private debt is being shed in record numbers:
Consider the key challenge of "deleveraging" or digging out from debt. A new study from the McKinsey Global Institute shows that the United States is the only major developed economy that is even loosely following the path of countries that successfully negotiated similar debt-induced recessions, like Sweden and Finland in the 1990s. Total debt as a share of GDP has fallen since 2008 by 16 percent in the United States, while rising in Germany and rising sharply in Japan, the United Kingdom, France, Italy and Spain. As in Sweden during the 90s, the fall in total US debt is due entirely to sharp cuts in the private sector, particularly the finance industry and private households.
Note the emphasized points in the last sentence – “private sector”, “private households.”
So what’s our biggest problem, our biggest worry, in fact our biggest economic drag that is likely keeping us bouncing along the bottom of this recession/depression?
Well Sharma doesn’t hesitate in identifying it:
The weak link in the U.S. response to the debt crisis is the government. The Scandinavian cases show that government needs to start cutting spending and debt roughly four years after the downturn — exactly the stage where the US is today. Washington has so far failed to put in place a plan for long-term debt reduction, in part because some politicians and pundits are still pushing for more borrowing to ward off "depression." The Scandinavian cases suggest this is exactly the wrong worry right now. The public debt is a big reason that long-term US growth is likely to slow, but even then, it is important to keep America’s debt problem in perspective. China is arguably worse off, with total debt equal to 180 percent of GDP. The more wealthy you are, the more debt you can carry, so America’s total debt (350 percent) is actually less of a challenge.
Don’t worry, be happy … our debt problems is less of a challenge? No, that’s not the point. It means, relatively speaking, we’ve been somewhat lucky because the strength of our economy and its size has helped ameliorate the drag increased government debt has placed upon our economic recovery.
Note what Sharma says, given the evidence of the “Scandinavian cases” – we should be cutting spending and debt “four years after the downturn”.
That would mean what? No QE3. No trillion dollar budget deficits as far as the eye can see.
However, that’s the plan right now.
President Obama has a campaign ad out talking about how we don’t need to repeat the “Republican plan” because, in his words, we’ve tried that and it didn’t work.
Well I hate to break it to you but what he has planned for the next four years, if he’s re-elected, is a reprise of his first term. Spend, spend, spend and expand government programs and services (to the tune of $46 trillion over 10 years, much of it debt).
And the Fed? It’s easing its way toward another quantitative easing (QE3), essentially ignoring the fact that the first two pushed about $10 trillion in cash out there which it is going to have too wring out of the economy at some future date. Adding even more doesn’t hit many as a very sound move.
One of those is Mitt Romney:
"I am sure the Fed is watching and will try to encourage the economy. But I don’t think a massive new QE3 will help the economy," Romney said, referring to a program called quantitative easing.
"I can absolutely make the case that now is the time for something dramatic and it is not to grow government,” he said. “It is the time to create the incentives and the opportunities for entrepreneurs – businesses big and small – to hire more people and that is going to happen.
Key takeaway? Romney gets the proper role of government in the economy – “create the incentives and the opportunities for entrepreneurs – businesses big and small – to hire more people…”.
If government did that – became an enabler – then what should follow? You should see employment begin to rise.
We should be seeing 200, 300, 400,000 jobs a month to regain much of what has been lost. That is what normally happens after a recession, but under this president we have not seen that kind of pattern. We have just been bumping along with barely enough jobs to just hold the unemployment rate about the same – above 8% – 42 months like that. You have to have the Steve Jobs of the world beginning businesses, making products that want to be purchased around the world. That gets Americans back to work."
He’s right. Exactly right. And the current president is clueless. It isn’t about pumping more money into the economy and creating more debt and bigger government. If you want to see policies that continue to cripple what Sharma dubs the “traditional strengths of the American economy”, give the guy in charge 4 more years.
Government’s don’t produce wealth. The private sector does. Government spends that wealth.
(Oh, wait, the private sector “is doing fine”. Never mind.)
Romney gets that part and it is indeed the most important issue of this upcoming election. Getting government out of the way and into the enabler role of providing incentives and opportunities for businesses to grow and expand (while curtailing government spending and expansion) is what will get this nation on the road to recovery.
The current administration doesn’t understand that – at all.
And, for all practical purposes, that’s all you need to know to decide who should be sitting in the Oval Office next January 20th.
Hint: In case you somehow missed it, it isn’t the guy in there now.
This week, Bruce, Michael, and Dale talk about the totalitarian mindset of the left, and its consequences.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.
Digby at Hullabaloo is just, well, incensed. It’s about those, those … SuperPacs. It’s about those, those … rich … trying to buy elections.
Digby now wonders “how anyone can call this democracy anymore.”
And the rant, based on a Mother Jones article, has charts and everything.
I certainly feel a new found faith in democracy knowing that this handful of billionaires are finally allowed to have the same influence over our government that I do.
And for all this cash they’re spending, it’s chump change to them.They are that rich.
One of the charts is entitled “The top five-dark money nonprofit groups have spent $53 million on ads. They disclosed just $420,920, or 0.0079%.”
Ye gods, you say. Those rascally Republicans. Trying to buy an election.
Of course Digby tries to sell this, via implication, as some sort of recent GOP innovation. You know something along the line that SuperPacs are, essentially, an invention of the right and best used by the right, and as noted in the Hullabaloo post, being set up for future use. (cue scary music!)
Alarmingly missing from Digby’s hyperventilating about people that are “that rich”, however, is a leftist faction that’s been doing this better and longer for years and years.
That’s right, unions perfected this long ago. And you, and obviously Digby, might be a bit surprised what that means in dollars and cents. Let me just put it this way, it makes $53 million seem like a drop in the bucket:
The usual measure of unions’ clout encompasses chiefly what they spend supporting federal candidates through their political-action committees, which are funded with voluntary contributions, and lobbying Washington, which is a cost borne by the unions’ own coffers.
These kinds of spending, which unions report to the Federal Election Commission and to Congress, totaled $1.1 billion from 2005 through 2011, according to the nonpartisan Center for Responsive Politics.
The unions’ reports to the Labor Department capture an additional $3.3 billion that unions spent over the same period on political activity.
$4.4 billion? $4.4 billion since 2005? Makes those spending $53 million seem like pikers doesn’t it? And, of course, we know that union political activity has been going on well before 2005, don’t we?
But nary a mention, except in passing in an excerpt in the post, of that sort of spending by union or an exclamation about $4.4 billion seeming like “chump change” to them, they’re “that rich”.
But then, doing that would kill the meme in its tracks wouldn’t it?
If you’re not very confident in government competence to begin with, this story should add fuel to that fire:
Investigators say the Internal Revenue Service may have delivered more than $5 billion in refund checks to identity thieves who filed fraudulent tax returns for 2011.
They estimate that another $21 billion could make its way to ID thieves’ pockets over the next five years.
$5 billion. $21 billion in 5 years if the ID thieves can’t be rooted out prior to sending the checks.
Surely they have a way of doing that. There have to be simple checks like, oh, I don’t know, an address getting more than one return hoisting a red flag maybe? Or maybe a single bank account receiving more than one return?
For example, investigators found one single address in Michigan that was used to file 2,137 separate tax returns seeking a total of more $3.3 million in refunds. In other cases, hundreds of refunds were deposited into the same bank account.
Guess not. Guess these new fangled computers and programming security checks are just beyond them (such a system would likely cost much less than $5 billion, huh?).
IRS incompetence costs you $5 billion. Add that to the $60 billion a year in Medicare waste, fraud and abuse, and we’re talking real money. And then just imagine all the other waste, fraud and abuse throughout the rest of the federal government and it isn’t at all difficult to understand why we constantly find ourselves in a deficit situation. Or why government, in the form of the Obama administration is raising taxes on everyone (see ObamaCare and the new Medicare tax) and wanting to raise them on the “rich” segment of the society.
So it can give it away to ID thieves and Medicare fraudsters, among other grifters.
[HT: Jamie Dodge]