Way to Go Boys and Girls: Countdown to Recession
Posted: August 2, 2011 Filed under: Domestic Policy, Economy, Federal Budget and Budget deficit, U.S. Economy, We are so F'd | Tags: economy killing debt deal, low growth, recession 6 Comments
So, I’m watching the US stock market plummet and laughing to myself in a most unhealthy way. NOW, they’re worried about no growth and jobs. What a buncha marroons! But hey, we maintained that AAA rating so the flight to safety has begun. Gold any one?
“We have a stubbornly slow economy,” Hank Smith, chief investment officer at Haverford Trust Co. in Radnor, Pennsylvania, said in a telephone interview. His firm manages about $6.5 billion. “The economy is stuck in a very slow growth mode, which means that it’s more susceptible to any external shocks.”
Harvard University economics professor Martin Feldstein said he sees a 50 percent chance that the U.S. will relapse into another recession.
“Nothing has given us much growth,” Feldstein said today in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. Feldstein is a member of the committee that dates recessions for the National Bureau of Economic Research.
Today’s retreat brought the S&P 500 to within 1 percentage point of its low for the year on March 16 and trimmed its year- to-date gain to about 0.5 percent. All 10 industry groups fell, led by a 2.4 percent slump in industrial companies. General Electric Co. lost 3.7 percent to lead declines in 29 of 30 stocks in the Dow Jones Industrial Average.
Archer Daniels Midland Co., the world’s largest grain processor, tumbled 2.4 percent as earnings trailed projections after corn and tax expenses rose. MetroPCS Communications Inc., the pay-as-you-go mobile-phone carrier, lost 35 percent for the biggest decline in the S&P 500 as sales fell short of analysts’ forecasts.
What if they gave a recovery and nobody came? So, What’s missing from the debt ceiling debate? Jobs. In an aggregate demand led recession, what gives us growth is healthy government spending, not tax cuts, and certainly not austerity. Welcome to the new anti-growth fiscal policy.
The unemployment rate, currently above 9 percent, is projected to remain high for a long time. For example, the current Blue Chip Economic Indicators consensus forecast puts the average unemployment rate for 2012 at 8.3 percent. The agreement to raise the debt ceiling just announced by policymakers in Washington not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs. The spending cuts in 2012 and the failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012, relative to current budget policy.
The agreement would reduce spending by at least $1 trillion over 10 years through budget caps on non-mandatory programs, with additional reductions under discussion in a second phase. While the bulk of the cuts are back-loaded – coming more in the future – the near-term cuts would still have an immediate impact. Applying conventional multipliers, the reduction of $30.5 billion in calendar year 2012 would reduce GDP by 0.3%, and result in roughly 323,000 fewer jobs (as depicted in the table below).
In addition to the immediate cuts to spending, the debt ceiling agreement fails to continue two major policies which had been part of broad agreements in the past. The payroll tax holiday and extended unemployment insurance were passed last December along with the two-year extension of the Bush-era tax cuts; but are set to expire at the end of 2011. While Congress could still extend these policies between now and the end of the year, that scenario is looking much less likely today. (Any economic support subsequent to this deal would have to be offset by other tax increases or spending cuts in 2012 or a further increase in the debt ceiling, neither of which seems politically viable.)
But wait, didn’t the know-it-all in chief just say jobs were priority one now? Well, let me just laugh. Even Andrea Mitchell knew enough to ask the dmbest person in nearly every room–Valerie Jarrett–with what money are you going to be doing that?
“As we go through the package, and members are beginning to learn what’s in the package, they’re seeing,” the reaction is “better and better,” White House senior adviser Valerie Jarrett said on MSNBC’s “Andrea Mitchell Reports.”
“I’ve been on many of these calls since last evening with a wide variety of people who were initially skeptical,” she said. “But when they see the details of the package, they’re becoming increasingly comfortable.”
The deal reached by the president and congressional leaders is “not perfect,” Jarrett said, and is “not the package that the president would have wanted.”
Even so, she said, “it is a package that stays true to his values and his goals, No. 1, long-term certainty, and No. 2, making sure that the people who can least afford to suffer are protected.”
The Economic Policy Institute, a top nonpartisan think tank, estimates that the deal struck this weekend to raise the nation’s debt limit will end up costing the economy 1.8 million jobs by 2012. Today the Senate is expected to approvethe package passed yesterday by the House and send it to President Obama. But while the unemployment rate remains above 9 percent, the deal does nothing to address chronic joblessness.
The agreement would reduce spending by at least $1 trillion over 10 years, but even the near-term cuts could shrink already sluggish GDP growth by 0.3% in 2012. According to EPI, the plan “not only erodes funding for public investments and safety-net spending, but also misses an important opportunity to address the lack of jobs.” In particular, the immediate spending cuts and the “failure to continue two key supports to the economy (the payroll tax holiday and emergency unemployment benefits for the long term unemployed) could lead to roughly 1.8 million fewer jobs in 2012.”
What we should be worrying about is all the news that Washington has ignored while it was doing the debt ceiling shuffle. Most importantly, the economy has almost stopped growing and unemployment is again on the rise.
On Friday, the commerce department released data showing the economy grew just 1.3% in the second quarter. Even worse, it revised down the first quarter growth number from 1.9% to just 0.3%. This means that the economy was growing at just a 0.8% annual rate over the first half of 2011. This is well below the 2.5% pace that is necessary just to keep unemployment from rising.
Of course, unemployment has been rising, with the June figure hitting 9.2%. That is up from a post-recession low of 8.8% in March. The unemployment rate does not give the whole story, since many of people have lost hope of finding a job and given up looking for work altogether. The employment to population ratio (EPOP) – the percentage of the population with jobs – has fallen back almost to its low point for the downturn. The EPOP for African Americans has hit new lows in each of the last three months.
The revisions also provided other interesting pieces of information. For example, corporate profits were revised sharply higher for both 2009 and 2010. The share of profits in corporate sector output hit a new record high, more than a full percentage point above its previous peak. Finance was the biggest winner within the corporate sector, accounting for 31.7% of corporate profits, also a record high.
In short, we now have an economy that is stuck in the doldrums. It is operating well below its potential level of output. Furthermore, instead of catching up, it appears to be falling further behind. We are seeing a growth rate far below the economy’s potential, when we should be seeing growth that is far above potential. And the Wall Street guys are fat and happy.
Believe me, an economy “stuck in the doldrums” will look good this time next year. If Mitch McConnell wanted to over throw or throw over the country, he sure succeeded. Some one needs to whip his sorry ass.
Tuesday Reads
Posted: August 2, 2011 Filed under: Barack Obama, children, Crime, Federal Budget and Budget deficit, Foreign Affairs, morning reads, Psychopaths in charge, Syria, the villagers, U.S. Economy, U.S. Politics, Violence against women, voodoo economics, We are so F'd | Tags: Amy Ahonen, Barack Obama, Bloomington, Celina Cass, Climate change, D.B. Cooper, FBI, Federal debt ceiling, Indiana, Indiana University, investors, jobs, Lauren Spierer, Leon Trotsky, Louie Gohmert, Mark Warner, Missing people, Social Security, Syria, Travis Forbes, U.S. Stocks, UN Security Council 33 Comments
Good Morning!! I have a few interesting reads for you today, and they aren’t all about the idiotic debt ceiling debate. I’m going to lead off with a few excellent blog posts about that idiocy, and then I’ll move on to something else.
First up, Scarecrow compares the movie Cowboys and Aliens to the events in DC: In Cowboys and Aliens, Humans Win; In Washington’s Zombies Vs. Pods, They Lose. In the movie, Scarecrow writes:
humans of all types realize they have to join together to defeat the rapacious creatures who are looting the planet and turning humans into zombies and pod people. There’s hope for our species!
Back in Washington, D.C. there are no heroes and no upbeat ending. Instead, the looting, muggings and beatings will continue until morale improves.
In our “real” world, there is a radical extremist group driven by zombies and zombie beliefs who successfully blackmail the nation into strangling its own economy. The supposedly “sane” group that is supposed to stop this madness has become cowardly and turned into mindless pod people, who assure the nation that the gutting of American government and essential services and safety nets won’t occur in one step but in several, whose outcome is locked in by an undemocratic Super Congress and the next debt limit blackmail in 2013.
It’s a terrific post.
On a more serious note, Emptywheel asks, Is Mark Warner the Designated Social Security Killer? It’s all about what may happen if the so-called “Super Congress” comes to be. Read it and weep.
At the New Yorker, John Cassidy argues that the debt ceiling bill is all smoke and mirrors.
In removing the immediate threat of a debt default, the agreement…signals that the U.S. government still satisfies the minimum standard of financial functionality: it pays its bills on time. That should be enough to head off an immediate downgrade in the nation’s credit rating, and it explains why Wall Street bounced at Monday’s opening bell.
Beyond that it is hard to see anything very positive about a deal in which President Obama finally persuaded the Republicans to accept a Republican plan. Putting on my ethicist cap, I agree with Bernie Sanders that the deal is wrongheaded and immoral. To be sure, America has a long-term fiscal challenge that needs to be confronted. But at a time when fourteen million Americans are unemployed, and many millions more have been forced to work just part-time, the government should be focussing on job growth rather than cutting the budget….
As I’ve said before, headlines such as “Democrats and Republicans agree on $2.4 trillion in spending cuts over 10 years” are virtually meaningless. The United States, like every other country, budgets on an annual basis. What really matters for the economy, and for the unemployed, is how much cash the federal government will spend in the remaining months of the 2011 fiscal year and in fiscal 2012, which begins October 1st. A pledge to cut spending in 2016, say, is just that: a pledge. Between now and then, we will have another bipartisan spending review (that’s also part of the deal), a Presidential election, and who knows how many budget battles. The actual 2016 spending outcome will almost certainly bear little relation to the figures in this agreement.
Also at the New Yorker, Hendrick Hertzberg has a funny piece about Louie Gohmert, looney Texas Republican Congressman quoting Communist Leon Trotsky. I don’t want to ruin it for you by pulling out a quote. It’s not long, so go read the whole thing.
Susie Madrak has a great post at Crooks and Liars: This Year We’ve Broken Or Tied 2,676 Heat Records – So Far. Think We Could Talk About Climate Change Yet? Be sure to check it out.
Do you realize how many people go missing in the U.S.? A lot. And most of them seem to be women and children. Here is a slide show of 64 people from the FBI’s kidnapped and missing persons list.
The little girl whose photo comes first is 11-year-old Celina Cass, from West Stewartstown, NH. Her body was found today in a river near her family home. Sadly, when a child disappears, a family is often responsible. In this case, I have a feeling her stepfather had something to do with Celina’s death. I hope I’m wrong. At least she was found fairly quickly.
Many missing people aren’t found for years, if at all. Indiana University student Lauren Spierer disappeared from Bloomington, Indiana on June 3. Despite intense searches by hundreds of volunteers and a large reward offered by her parents and IU, she has not been found. It looks like people whom Lauren thought were “friends” may have had something to do with her disappearance, because just about everyone who was with her before she went missing has lawyered up and isn’t talking to police.
A Denver woman, Amy Ahonen, disappeared without a trace a few weeks ago. Her car was found parked unlocked along the highway with her purse, ids, cell phone, and keys inside. What happened to her? No one knows and the police have stopped looking. It so happens that a budding serial killer was on the loose in the area at the time of her disappearance, but the police don’t seem to be making that connection.
There are many more stories like this breaking every day in this country. Why do we accept that women and children will disappear daily and in most cases, they will be found murdered and often raped?
Speaking of missing people, a legendary missing person has resurfaced in the news. From the LA Times: D.B. Cooper hijacking mystery is revived with ‘promising lead’
D.B. Cooper, the infamous airplane hijacker who vaulted into urban mythology by parachuting out of a jetliner over the Pacific Northwest with a $200,000 ransom, is back on the FBI’s radar screen.
Cooper, whose case remains the only unsolved airline hijacking in U.S. history, became the stuff of legend on the night of Nov. 24, 1971, when he jumped from a Boeing 727 into the skies between Portland, Ore., and Seattle. He disappeared with the ransom he extorted — 10,000 $20 bills.
The case has remained open, but the trail has been cold despite hundreds of tips, thousands of theories and dozens of breakthroughs in scientific investigation. Now the FBI, which has previously said that Cooper is likely dead, is looking at fresh evidence, according to weekend reports in the media in Seattle, the epicenter of the story that seemingly can never die.
From the Seattle Post-Intelligencer:
The man investigated as a suspect in the D.B. Cooper case – the nation’s only unsolved commercial airplane hijacking – has been dead for about 10 years, and a forensic check didn’t find fingerprints on an item that belonged him, an FBI spokesman told seattlepi.com Monday.
“There are also other leads we’re pursuing,” agent Fred Gutt said. “Some of the other names have been out in the public, some of the names have not come out.”
The name of a man not previously investigated was given to the FBI nearly a year ago by a law enforcement colleague, and an item that belongs to him was sent for fingerprint work at the agency’s Quantico, Va., forensic lab, agents told seattlepi.com.
“The nature of the material was not good for prints,” Gutt said.
He added agents are obtaining other items that may have the suspect’s fingerprints in hopes of matching them with prints taken from the Northwest Orient plane after Cooper jumped the night of Nov. 24, 1971.
The situation in Syria is escalating. There has been a great deal of violence there for some time, and it is not getting the same attention that Egypt, Iran, and Libya have gotten. But now the UN Security Council plans to take up the issue.
Reacting to new bloodshed in Syria, European powers relaunched a dormant draft U.N. resolution to condemn Damascus for its crackdown on protesters, circulating a revised text to the Security Council at a meeting on Monday.
Following the hour-long closed-door meeting, several diplomats said that after months of deadlock over Syria in the council, the fresh violence appeared to be pushing the divided members towards some form of reaction.
But envoys disagreed over whether the 15-nation body should adopt the Western-backed draft resolution or negotiate a less binding statement.
Germany requested the meeting after human rights groups said Syrian troops killed 80 people on Sunday when they stormed the city of Hama to crush protests amid a five-month-old uprising against President Bashar al-Assad.
More than 1600 people have been killed during the Syrian uprising.
You have to wonder if President Barack Obama ever rereads his speeches.
At the State Department last May, the president spoke at length of democratization in the Middle East. He chose his words carefully, dropping caveats and provisos. But Obama also bluntly declared that, “it will be the policy of the United States to promote reform across the region, and to support transitions to democracy.” He justified the intervention in Libya by recalling that “we saw the prospect of imminent massacre … Had we not acted along with our NATO allies and regional coalition partners, thousands would have been killed.”
Yet precisely such sordid outcomes have come to pass, not in Libya but during the four-month uprising against the regime of President Bashar al-Assad in Syria. Around 1,600 people are believed to have been killed, not mentioning some 3,000 disappeared, many of them presumed dead. Massacres have proliferated, and on Sunday, the eve of the holy month of Ramadan, the Syrian army entered the city of Hama, which had effectively escaped from government writ weeks ago.
Throughout, the White House has painstakingly avoided demanding that Assad step down, saying only that he must lead a transition to democracy or get out of the way. The Syrian dictator has, of course, done neither.
I’ll end with just one more link on the debt deal that Dakinikat sent me.
Reuters analysis – Debt deal unlikely to boost investor confidence
Rather than a relief rally, U.S. stocks ended modestly lower on Monday as ugly economic data and some lingering concerns about whether the deal would get through Congress dominated trading. But even when the House of Representatives voted to pass the plan late in the day there was little reaction from U.S. stock index futures.
The deal agreed to by Republican and Democratic leaders will raise the government’s borrowing ceiling while cutting spending by at least $2.1 trillion over 10 years. All of the burden could fall on spending cuts with no guarantee of steps to lift tax revenues.
Rather than perceiving it as a meaningful effort at tackling the United States’ huge debt problem, investors worried about the impact of austerity on an economy already hit by souring business and consumer confidence.
Plans for such a significant fiscal retrenchment, even though most of the impact will be in the latter years of the program, come at a vulnerable time for the world economy. Recession risks are rising in the United States, the European economy remains entwined in its own debt crisis, and China’s supercharged economy could slow.
“Risk markets may rally temporarily, but until economic growth and job creation is addressed, there can be no sustained rally,” Bill Gross, the co-chief investment officer of PIMCO, which manages more than $1.2 trillion, said in an interview.
Will Washington ever wake up to reality? I’m afraid they (and we) will have to hit bottom first. They are like alcoholics, except they are drunk on greed and power. So on that note, what are you reading and blogging about today?
Late Night: The Perfect Candidate to Challenge Obama
Posted: August 1, 2011 Filed under: 2012 presidential campaign, Barack Obama, Democratic Politics, U.S. Economy, U.S. Politics | Tags: 2012 Democratic Primaries, 2012 presidential election, Barack Obama, economy, Elizabeth Warren, middle class, moral values, Tim Geithner 51 Comments
Lots of liberal groups are calling for Elizabeth Warren to run for the Senate in Massachusetts against Senator Scott Brown. But why not challenge Obama instead? Warren has nothing to lose–Obama already hates her guts and has publicly humiliated her multiple times. What more can he do to her? Running against Obama would give Warren a chance to turn the tables and represent the American people against the top enforcer of the oligarchy.
Today Yves Smith at Naked Capitalism presented a thoughtful, well-argued case for why it would be much better for Warren and for liberals who are disgusted with Obama if she ran for President rather than Senator. It’s a fairly lengthy post and very meaty, so you should read the whole thing.
Yves argues that even though Warren wouldn’t win, she could help elevate the national discourse. If she were running against Obama and debating him, the media would have to cover it, and some of her ideas might make it through the media filter.
And just imagine the debates! Warren would wipe the floor with Obama, exposing his lack of moral values and his pitiful ignorance of basic economics. Obama would be horrified to once again have to compete with a brilliant, competent woman. He might even be forced to sneakily use his middle finger again or pull out his tired sexist remarks. This time more people might notice, now that the koolaid has worn off for so many former Obots.
One quibble I have with Yves is her argument that Warren is “a Reagan-level Great Communicator.” Please. Reagan couldn’t speak off-the-cuff much better than Obama. Did you ever watch one of his press conferences? But Yves is young, and probably grew up under Reagan. I guess I can forgive her for that one. She points out that
unlike Obama, a patrician wannabe who sees Reagan as a role model, she taps into deeply rooted traditional American values, that of a just society. Obama, by contrast, exploited the intense frustration with eight years of misrule by Bush the Second, and his liberal posturing was merely a market positioning exercise, to further differentiate him from Brand Republican.
Her position, which sounds dogmatic leftie to those lacking historical perspective, would have been dead center circa the early to mid 1980s, a Javits/Rockefeller Republican or a pretty tame Democrat of that era.
Hmmm…not quite sure I buy that either, but whatever. She’s right that Warren is no lefty. She’s simply an honest person who has studied what is happening to the American middle class and has the decency to prefer trying to change things to trying to cash in on the greed of bankers.
But here’s the best reason for Warren to run:
Warren also stands for a second set of ideas, that of competence and accountability in government. Not only did she build a major organization in an impressively short period of time, but she understands the importance of what we call in the consulting world “deliverables”, that is, providing tangible evidence of progress. She got various government agencies and banks to agree on a simplified mortgage disclosure form, a “to do” on the banking officialdom’s list that had somehow been too complicated to get done until Warren took it on. And this isn’t just good for consumers, it will also lower costs to banks.
By contrast, not only did Obama make a spectacular set of campaign promises that he failed to honor, he is completely unapologetic about those lies. While there is, sadly, a certain amount of misrepresentation that is considered normal among politicians, Obama’s looks to have set a new standard.
Yes, Warren is competent and efficient–she gets things done. She identifies a problem, and she attacks it doggedly–and she’s tough as nails. She has taken more abuse in the past few years and most people face in a lifetime. And she’s come through unbroken and unbowed.
Yves points out that in comparison to what she might accomplish with a failed primary campaign for President, Warren’s chances of effecting real change in the Senate would be slim to none. As we’ve seen recently, the Senate is utterly dysfunctional and filled with people who are completely out of touch with what is really happening in the country. If Warren tried to actually accomplish something as a freshman Senator, she’d be slapped down in no time flat.
I must say I like this idea. Just to get you thinking about it, here are a couple of videos of Warren making Timmy Geither look like a guilty schoolboy.
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Rep. Gabrielle Giffords Returns to Vote
Posted: August 1, 2011 Filed under: just because | Tags: Gabrielle Giffords 13 CommentsA standing ovation was given to recovering shooting victim Rep. Gabrielle Giffords from Arizona.
Republicans won the vote, but Democrats stole the show when Rep. Gabrielle Giffords, D-Ariz., appeared on the House floor for the first time since a January shooting.
There was no hint of what was about to happen, when suddenly, as the debt-ceiling vote was proceeding, Giffords could be seen being escorted onto the floor by Rep. Debbie Wasserman Schultz, D-Fla., a close personal friend.Giffords, wearing close-cropped brown hair and glasses, walked with a slight limp and wore a glove on her right hand.
Of course, Joe Biden has to make it all about him.
Vice President Joe Biden, with a big smile on his face, walked to the House floor and said, “I came to see Gabby, that’s why I’m here.”
In the hallway just outside, Giffords’ husband Mark Kelly was all smiles as well.
“It feels good,” he said as his wife was casting her first vote since the tragedy. “Great actually.”
Giffords spokesman C.J. Karamargin told Tucson Weekly in an email that “the congresswoman insisted on participating.”
“Congresswoman Giffords has been following this debate closely over the past two weeks,” she said. “Like the vast majority of Americans, she is extremely disappointed at Washington’s inability to confront the debt ceiling issue in a timely and thoughtful manner.”
Escorted by her husband and Rep. Debbie Wasserman Schultz, D-Fla., Giffords exited the House floor slowly, giving a small wave to people as she left. She left the Capitol in an SUV shortly thereafter.
When Biden was asked about what he spoke with Giffords about, he joked, “She’s now a member of the cracked head club like me.”
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