Yesterday the CBO director, Douglas Elmendorf, released a synopsis of its analysis of the Stimulus bill’s effect. The findings are listed below:
- Raised the level of real (inflation-adjusted) gross domestic product (GDP) by between 1.7 percent and 4.2 percent,
- Lowered the unemployment rate by between 0.7 percentage points and 1.5 percentage points,
- Increased the number of people employed by between 1.2 million and 2.8 million, and
- Increased the number of full-time-equivalent (FTE) jobs by 1.8 million to 4.1 million compared with what those amounts would have been otherwise. (Increases in FTE jobs include shifts from part-time to full-time work or overtime and are thus generally larger than increases in the number of employed workers.)
The effects of ARRA on output and employment are expected to increase further during calendar year 2010 but then diminish in 2011 and fade away by the end of 2012.
A few points – A) part of GDP calculation is government spending. Since we know how poor the rest of the economy was doing at the time of this analysis, most of the “increase” in GDP is government spending, not productive increases. B) the spread is monstrous and mostly meaningless – which is it 1.7 or 4.2? C) unemployment reductions are a result of spending. Further on in the report, it is claimed that 700,000 jobs were reported to have been created by the money. Whether or not those jobs were permanent or temporary is not mentioned, nor whether they still exist. Over 8 million are out of work. D) also note the final bullet – FTE can be as little as overtime.
So, with all of that understood, let’s go to the bill itself, something I mentioned yesterday via Keith Hennessey – H.R. 4213, The American Jobs and Closing Tax Loopholes Act of 2010. In reality, it is another deficit building “stimulus” bill. It’s main components are:
- increases infrastructure spending by $26 B over ten years;
- extends a raft of expiring tax provisions, mostly for one year
- provides funding relief for certain employer pension plans;
- raises a bunch of taxes, mostly on businesses and a certain kind of partnership income called “carried interest;”
- extends unemployment insurance benefits, increasing federal spending by $47 B over the next two years;
- increases Medicare payments for doctors through the end of 2013 for eighteen months at a $63 B cost;
- increases health insurance subsidies for the unemployed (through “COBRA”) by $8 B over the next two years; and
- increases federal Medicaid spending by $24 B for a six-month policy change.
And, as I mentioned yesterday, CBO scored this as a bill which thoroughly trashes PAYGO to the tune of an increase of $134 billion deficit.
But the CBO report at the top of this post is going to be used as the impetus and reason for going ahead with it because the Democrats are still firmly convinced to two things – you can spend your way out of economic trouble and per the CBO it’s working. Again, note the final paragraph in Elmandorf’s analysis cite. The supposed benefits of what has been spent to this point will “diminish in 2011 and fade away by the end of 2012.”
Enter HR 4213 and more deficit spending.
James Pethokoukis gives us 5 good reasons why “son of stimulus” is a very bad idea. But what caught my eye was a quote by one of the economists on President Obama’s deficit panel said yesterday:
The gross U.S. debt is approaching a level equivalent to 90 percent of the country’s gross domestic product, the level at which growth has historically declined, said Carmen Reinhart, a University of Maryland economist. When gross debt hits 90 percent of GDP, Reinhart told the commission during a hearing in the Capitol, growth “deteriorates markedly.” Median growth rates fall by 1 percent, and average growth rates fall “considerably more,” she said.
Reinhart said the commission shouldn’t wait to put in place a plan to rein in deficits. “I have no positive news to give,” she said. “Fiscal austerity is something nobody wants, but it is a fact.
It may be a fact, but it not a fact that this President or the Democrats want to face.
Meanwhile, other forces are at work in the economy which could very negatively impact all of this:
The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
“It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.
Don’t tell that to the Dems or the administration – in their view, it is because we’re spending our rear ends of that we are recovering:
The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to “grit its teeth” and approve a fresh fiscal boost of $200bn to keep growth on track. “We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on,” he said.
It “grinds on” because of economic stupidity being demonstrated in the continuance of massive deficit spending, its effect on private markets and perpetually extended unemployment benefits that no one can afford.
Remember all the talk about the panic that led to TARP and how the cool, calm and collected Obama played the crisis just right? Yeah, well that was then and this is now:
David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. “You truly cannot make this stuff up. The US government is freaked out about the prospect of a double-dip,” he said.
And a spending panic is in the offing.
We keep hearing the likes of Paul Krugman tell us we’re not Greece. But when debt reaches 97% of GDP next year and 110% in 2015, I hope Krugman’s still around to tell us again why we’re not Greece, don’t you?
I wonder who will be there to bail us out?
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Yesterday I mentioned the deployment of 1,200 National Guard troops to our southern border and Mexico’s reaction to it – i.e. they hoped it was for controlling the (mythical) flow of guns across the border and controlling crime, but not to enforce immigration laws.
I said I just couldn’t wait to see our reply. Well, unsurprisingly, it conforms with Mexico’s desire on the subject:
US National Guard troops being sent to the Mexican border will be used to stem the flow of guns and drugs across the frontier and not to enforce US immigration laws, the State Department said Wednesday.
The clarification came after the Mexican government urged Washington not to use the additional troops to go after illegal immigrants.
President Barack Obama on Tuesday authorized the deployment of up to 1,200 additional troops to border areas but State Department spokesman Philip Crowley told reporters, “It’s not about immigration.”
He said the move was “fully consistent with our efforts to do our part to stem, you know, violence, to interdict the flow of dangerous people and dangerous goods — drugs, guns, people.”
This is absurd. It is malfeasance. It is again a blatant refusal to do what is necessary to secure the border, a task that is solely the responsibility of the Federal government. This is a token move to tamp down criticism. Pure politics and given in conformance with the desires of a foreign government who prefers to see our immigration laws ignored or unenforced. And this all the while criticizing Arizona for trying to do the job the Obama administration refuses to do.
I see a number of pundits and commenters saying immigration is going to hurt the GOP at the ballot box. I’m not reading it that way at all. Americans have no problem with immigration per se. But as poll after poll tell us they have a huge problem with illegal immigration and want it stopped.
This is not going to sit well with that majority and it is not going to reflect well on either Obama or the Democrats.
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Yes, yes, I know the comparison isn’t perfect – loss of life and property, etc. – but I’m speaking of it in a political sense and not making a direct comparison. What the administration essentially ignored and then became reluctantly involved in has now mushroomed into a major political (and environmental) problem for them.
Certainly, just as President Bush wasn’t responsible for the hurricane that hit New Orleans, President Obama isn’t responsible for the oil spill (Bush is – okay, I couldn’t resist). The response to the disasters is what they are both graded upon. Whether true or not, the federal response to Katrina was painted in the press as slow and lacking in urgency. I can’t imagine, given this has been going on for 36 days or so, and the seeming lackadaisical attitude demonstrated until recently that the federal response to this has been much better in that regard. In fact, some may claim it is worse.
People everywhere are really beginning to notice – out in flyover land and among his own party’s politicians.
Right now, all hope is of a quick resolution is centered on this attempted “top kill” procedure which, if it works, will fill the drill hole with mud and finally cement within 12 to 48 hours. I, for one, hope like hell it works. As one of BP’s techs said, we could know it won’t work within a few hours. So the longer we go the better the chances are for success. But that doesn’t end the problem for the administration. It still is faced with a huge cleanup of what has already been pumped out of the well in the preceding days.
However, if the top kill doesn’t work, then we’re probably looking at August before a relief well will be able to take the pressure off this well and allow it to be capped. Contemplating the damage that will do – politically as well as environmentally – is mind boggling.
That brings us to Senator Ben Nelson of Florida, who today suggested that if the top kill fails, Obama needs to just shove BP out of the way and take over the operation:
“If this thing is not fixed today, I think the president doesn’t have any choice and he better go in, completely take over, perhaps with the military in charge, not because the military can do this, but the military has the apparatus, the organization by which it can bring together the civilian agencies of government and to get this thing done,” Nelson said Wednesday morning during an appearance on CNN.
Of course doing that would remove BP as the main fall guy (which they are and should be) and Obama isn’t about to do that. But practically, if Nelson had listened yesterday to a White House press conference in which Coast Guard Commandant Admiral Thad Allen was asked that same question, he’d have known better:
Yesterday may have been a day to remember in the White House Briefing Room on the BP oil leak in the Gulf of Mexico, because of a straightforward answer by the man in charge of the federal spill response, that it’s not time for the feds to take charge from the oil company.
“To push BP out of the way would raise a question; to replace them with what?” said Coast Guard Commandant Thad Allen.
That, basically, is the problem the Obama Administration faces. They have the authority, but neither the equipment or the expertice to “push BP out of the way”. Of course no one expects the Ben Nelson’s of this world to do their homework (or realize that the Coast Guard is an armed service that is running the federal response).
In the meantime, it’s not just Republicans complaining of the poor response. Even James Carville has had his fill.
The “political stupidity is unbelievable,” Democratic strategist James Carville said on “Good Morning America” today. “The president doesn’t get down here in the middle of this. … I have no idea of why they didn’t seize this thing. I have no idea of why their attitude was so hands off …”
Uh, it’s a leadership thing, Mr. Carville. I think Frank J summed that problem up best today:
“Plug the damn hole!” That what Obama told people the other day. Because that’s what a leader does. He yells stuff and then stuff gets done. He’s seen it on TV.
GETTING STUFF DONE PLAN
STEP 1: Yell what you want done.
STEP 2: ???
STEP 3: Things get done.
I’m not sure step 2 is actually important.
I wonder why Obama hasn’t used this power before. Like everyone wants the economy to produce more jobs, so I don’t why Obama hasn’t stared the economy in the eye and said, “Create some damn jobs!” I guess he was do busy working on his damn health care.
Anyway, a lot of people thought Obama should be doing something about the oil leak, so this is him doing something. I don’t really get that though; I thought by now we learned that if we have something really important going on, keep him away from it.
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The future of US medicine under ObamaCare is already on display in Massachusetts.
The top four health insurers there just posted first-quarter losses of more than $150 million. Most of them blamed the state’s decision to keep premiums at last year’s levels for individual and small-business policies, when they’d proposed double-digit hikes to match the soaring costs they’ve seen under the state’s universal-coverage law.
The companies have gone to court to challenge the state’s action — it apparently had no basis for its ruling beyond the political needs of Gov. Deval Patrick. If they win, Bay State health premiums will continue their rapid rise; if they lose, they’ll eventually have to stop doing business in Massachusetts — and the state will be that much closer to a “single payer” system of socialized medicine.
The Massachusetts “health reform” disease means more than just bureaucrats setting prices. It also includes rising government spending and taxes; politicians demonizing doctors, hospitals and insurers — and patients getting lectured that the restrictions of managed care are good medicine.
It’s what’s in store for all of America. The Bay State’s structure provided the base for ObamaCare. “Basically, it’s the same thing,” says MIT economist Jonathan Gruber, who was a health adviser to GOP Gov. Mitt Romney and President Obama.
Of course, speaking of audacity, it was Mitt Romney who signed MassCare into law.
That said, anyone who can’t see the parallels either isn’t playing with a full deck or is being willfully blind. Just analyze what is happening in MA and it becomes obvious what our future holds under ObamaCare:
RomneyCare offered no real means to control and ultimately reduce costs. Its backers made airy promises of redirecting monies from state-sponsored charity care to insurance premiums, claiming that an insured population would be healthier and save money. In fact, the state has begged Washington year after year for money to plug the system’s gaps. In the program’s first three years, the feds will have spent $21.2 billion — $3,000 per Massachusetts resident.
Actually, ObamaCare’s cost-control promises are even more fantastic — from supposed slashing of Medicare payment rates to politically impossible “Cadillac” taxes. The only real cost control in either plan will be the brute force of government.
Speaking of the “supposed slashing of Medicare payment rates”, forget it. Keith Hennessey has caught them red-handed trying to slide the “doc fix” through under the radar. It increases Medicare payments for doctors for 18 months at a cost of $63 billion. It also raises taxes – mostly on businesses and certain kind of partnership income called “carried interest” – and extends unemployment benefits again, at a cost of another $47 billion we don’t have.
The bill is H.R. 4213, The American Jobs and Closing Tax Loopholes Act of 2010. Don’t you just love the Orwellian names they give these things?
CBO gives us the net budgetary effects of the bill over the 11-year period 2010-2020:
* $40 B net tax increase;
* $174 B spending increase;
* $134 B deficit increase.
Health care disaster looms, financial disaster looms, and those presently in Congress still don’t seem to get it, of if they do, they just don’t give a damn.
This is your America today.
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When it comes to illegal immigration, I continue to wonder who is in charge of our policy.
Yesterday, under increased pressure to enforce the federal immigration laws of the United States, President Obama ordered 1,200 National Guard troops to the border.
Then, as now, the troop deployment was fueled by heightened concerns about lawlessness — then it was illegal immigration, now it is drug traffickers — as well as political maneuvering in Washington to lay the groundwork for an effort to change immigration policy. But the issue remains bitterly contentious, with increasing pressure on Obama and lawmakers from both Latino supporters and conservative activists
Of course, this comes after giving Mexico’s hypocrite-in-chief, Filepe Calderon, a platform to defame and denigrate Arizona’s effort to stop the flood of predominantly Mexican illegals from pouring over the border.
In the wake of Obama’s decision concerning the deployment of the troops (which I’m sure, given Obama’s earlier joint comments on the subject, came as a surprise to Calderon), the Mexican Embassy in Washington DC issued a statement which said, in part:
Regarding the Administration’s decision to send 1,200 National Guard servicemen to the US Southern border, the Government of Mexico trusts that this decision will help to channel additional US resources to enhance efforts to prevent the illegal flows of weapons and bulk cash into Mexico, which provide organized crime with its firepower and its ability to corrupt.
Additionally, the Government of Mexico expects that National Guard personnel will strengthen US operations in the fight against transnational organized crime that operates on both sides of our common border and that it will not, in accordance to its legal obligations, conduct activities directly linked to the enforcement of immigration laws.
Because, you know, if it is aimed a the enforcement of immigration laws, and you are successful in securing the border and enforcing your laws, Mexico might actually have to do something to address the problems that see our citizens seeking work in another country.
Can’t wait to hear our reply, can you?
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Read this carefully:
Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year, a USA TODAY analysis of government data finds.
At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high during the first three months of 2010.
What is being said here is not that government provided benefits are now more than private paychecks. Instead it is pointing to a trend brought on by the recession. It gives a bit of lie to those who are claiming that all is well and we’re well on the road to recovery. Those “government provided benefits” include unemployment benefits as well as other emergency benefits.
What does that mean? Well it should be fairly obvious:
The trend is not sustainable, says economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all, he says. “This is really important,” Grimes says.
Yes it really is. It is much like the problems we face with Social Security – we have too few workers paying for too many retirees. Well, this trend faces exactly the same sort of problem. We have too few taxpayers paying for too many unemployed. So that means going more into debt to pay extended benefits.
And that includes the states as well. To this point, 32 states have borrowed $37.8 billion from the federal government (and you know where the fed got the money) to pay unemployment benefits.
Here are the numbers:
• Private wages. A record-low 41.9% of the nation’s personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.
•Government benefits. Individuals got 17.9% of their income from government programs in the first quarter, up from 14.2% when the recession started. Programs for the elderly, the poor and the unemployed all grew in cost and importance. An additional 9.8% of personal income was paid as wages to government employees.
Now, having gone through all of that, what is the next sentence in the USA Today article?
The shift in income shows that the federal government’s stimulus efforts have been effective, says Paul Van de Water, an economist at the liberal Center on Budget and Policy Priorities.
“It’s the system working as it should,” Van de Water says. Government is stimulating growth and helping people in need, he says. As the economy recovers, private wages will rebound, he says.
I’m sorry, but what in the hell is this man talking about? Unless “stimulus” has been redefined since I woke up this morning, the “stimulus” he’s talking about hasn’t “stimulated” anything but unemployment benefit payments. How does one claim, with 9.9% unemployment (U6 at 17.1%) and private wages at their lowest point in “US history”, that the “stimulus” has worked?
I think, instead, this proves you can find an economist somewhere to say pretty much whatever you want, and this one wants to parrot the liberal line. My understanding is the purpose of the “stimulus” was to “stimulate” growth in the private sector. And that simply hasn’t happened.
One economist does seem to understand what this all means:
Economist David Henderson of the conservative Hoover Institution says a shift from private wages to government benefits saps the economy of dynamism. “People are paid for being rather than for producing,” he says.
And we know many of them are riding the payments out as long as they can, now having adapted their lifestyle to the benefits they receive.
Where I come from, that doesn’t count as “stimulus”. That counts as unsustainable economic trouble.
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South Korea has determined it’s ship, the Cheonan, was torpedoed by a North Korean submarine. 46 South Korean sailors died. In most people’s minds, that was an overt act of war.
Yesterday, NoKo severed all ties with South Korea. Of course, technically, they’re still in a state of war, but this is a significant step in the wrong direction. Said NoKo:
“The Committee for the Peaceful Reunification of Korea… formally declares that from now on it will put into force the resolute measures to totally freeze the inter-Korean relations, totally abrogate the agreement on non-aggression between the North and the South and completely halt the inter-Korean cooperation,” KCNA reported.
That certainly ratchets up the tensions between the two countries. It makes you wonder, as if anyone could figure him out, what the Elvis-loving tin pot dictator of NoKo is up too. As mentioned, these are significant steps in the direction of war, and you have to be wondering what is going on internally in NoKo to drive this sort of provocation.
South Korea and the US will be holding some naval exercises off the coast to emphasize their unified position and status as allies, but other than that, there’s not much that can be done but wait and see what Kim Il Jung has up his sleeve. In the meantime, this is about all SoKo has available to it:
South Korea has also said it will drop propaganda leaflets into the North to tell people about the sinking, as well as setting up giant electronic billboards to flash messages.
I’m not sure how it intends to drop leaflets, but the giant electronic billboards will only be seen by those NoKo trucks in every morning to work the model farms that can be observed from the DMZ. South Korea is also resuming propaganda broadcasts to the North and using loudspeakers on the DMZ.
It has also said it will take its case to the UN Security Council where China has a veto. Any action (not that long time observers would expect much more than a strongly worded resolution) therefore is dependent on convincing the Chinese to go along with whatever the rest have planned.
Analysts say China’s attitude is key, because it holds a veto in the Security Council and has in the past been reluctant to impose tough measures on Pyongyang.
So – State Department – you mission is to get China to the table and on the team. Additionally, seeing that NoKo seems to be on a path to some sort of military action, whatever is decided should be aimed at lessening tensions, not heightening them. It would be nice if you remembered we have 28,000 American troops there, and their fondest desire is not to be involved in the third simultaneous US war. And trust me, if NoKo decides “to hell with it” and launches across the South Korean border, we’re not talking about casualty counts trickling in – we’re looking at a flood.
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With the Dow down 200 points at the moment, the 10-year T-note yield is down to 3.1%. But the economy is recovering, right? #
Hey, it got your attention, didn’t it?
And yes a donkey did get blown up in Gaza and no, it wasn’t the doing of the Republicans (well, not that we know of). They’d most likely have blown themselves up.
A small Syrian-backed terrorist group in Gaza said its activists blew up a donkey cart laden with explosives close to the border with Israel on Tuesday, killing the animal but causing no human casualties.
Abu Ghassan, spokesman for the terrorist group, said more than 200 kilograms of dynamite were heaped on the animal-drawn cart. He added that the explosives were detonated 60 meters from the concrete security barrier that separates the territory from Israel.
Is anyone else noticing how inept most of these terror attempts are becoming? The Christmas Day bomber burns his own crotch out but fails to blow up the airplane he’s on. The Times Square bomber fails in his attempt to explode a propane bomb in the city as planned.
And now we have the donkey bombers. 200 kg’s of explosives, laboriously smuggled into Gaza, rigged for explosion and they kill … a donkey.
They ought to stick with what they do best, for heaven sake – like torching UN run summer camps for children. They seem to be quite good at that. Maybe it’s the lack of armed opposition they find invigorating. Or terrifying children. Who knows?
The one thing I do know is threatening and terrifying children and blowing up donkeys will not be a topic of conversation among the useful idiots at the next “Free Palestine” meeting on a campus near you soon.
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