You may remember back in January that I was not happy and very outspoken about the size of the Obama Stimulus plan. I was not impressed by the content or with the mix between tax cuts and direct government spending. You may recall that the Blue Dogs interminable resistance to do anything that might wake their sleeping Republican voters and the desire on the part of POTUS to appease the unappeasable remnants of the Republican party led to a very watered down plan. At the time, all that I could hope was that it might be enough to get the ball rolling. However, I felt that the historical multiplier –especially for taxes– was not going to kick in the way it had in the past.
The release of the miserable unemployment data yesterday (not all that unexpected as you’ll recall) as well as an estimate of our output gap now clearly squares with my earlier view as well as the earlier views of Brad deLong, Paul Krugman, Mark Thoma and Joseph Stiglitz among others. The stimulus was clearly not the blue pill the economy needed. (That last link is from me saying this same thing in July.)
The Washington Monthly says the decision to appease centrists and Republicans looks even worse in retrospect. Now, the media gets it. Color me completely unsurprised because I told you so back then that it wasn’t going to be enough. I even mentioned it recently when it appeared the stimulus plans of German, France, and Japan had already lifted those economies from the worst of it last spring. These countries emphasized direct government spending. We mostly shuffled a few funds as stop gaps and the created a bunch of tax cuts that no one really needs right now.
In February, when the debate over the economic stimulus package was at its height, a handful of “centrist” Senate Republicans said they’d block a vote on recovery efforts unless the majority agreed to slash over $100 billion from the bill.
The group, which didn’t have any specific policy goals in mind and simply liked the idea of a small bill, specifically targeted $40 billion in proposed aid to states. Helping rescue states, Sen. Collins & Co. said, does not stimulate the economy, and as such doesn’t belong in the legislation. Democratic leaders reluctantly went along — they weren’t given a choice since Republicans refused to give the bill an up-or-down vote — and the $40 billion in state aid was eliminated.
In the past, government hiring had managed to somewhat offset losses in the private sector, but government jobs declined by 53,000, with the biggest number of cuts on the local and state levels. Even the Postal Service, which is included in the public-sector job statistics, dropped 5,300 jobs.
“The major surprise came from the public sector, where every level of government cut back,” Naroff said. “The budget crises at the state and local levels have caused an awful lot of belt-tightening.”
I hope you weren’t planning on using any of those savings that you may still have left sitting out there in anything market-related soon. The Dow Jones ( at this writing) is off over 350 points. All of the blue chip components tumbled. The S&P and OTC markets aren’t faring any better. This is how Market Watch sees it right now:
The recent strength shown by U.S. stocks vanished on Tuesday as the government unveiled a new bank-rescue plan and congressional action neared on a fresh round of fiscal stimulus for the wheezing U.S. economy.
That basically amounts to a reaction of last night’s speechification and presser and this morning’s announcement of thunderous boos. Fed Chair Ben Bernanke is speaking right now and that’s not really helping either. The investment/business community doesn’t think any of the largess from either the TARP or the Stimulus Plan are really going to do anything. Treasury Bond prices are dropping also. This additional snippet from Market Watch sums it up well.
“First, we’re going to require banking institutions to go through a carefully designed comprehensive stress test, to use the medical term. We want their balance sheets cleaner, and stronger. And we are going to help this process by providing a new program of capital support for those institutions which need it,” said Geithner.
Despite the forceful words, Geithner noted his office was still exploring options and details for an asset value program, with little answer on what to do about banks’ toxic assets.
That last paragraph is basically at the crux of the problem. The current administration is bringing no plan to the table to actually deal with the problem. Perhaps because Geithner was so instrumental in the original TARP, he’s just sticking with what already didn’t work rather than trying to think outside of the box. The market has lost around 3-4% already and there’s several more hours of trading to go. Hang on to your cookie jars kids, you’re going to need them as a stable replacement for your local bank.
Meanwhile, the senate managed to pass that the stimulus bill 61-37. That’s way shy of the 80 votes that Obama had wanted. The final bill has $838 billion worth of stuff that includes a lot of tax cuts (not likely to stimulate anything but Grover Norquist and The Club for Growth) and money for cash strapped states. I’ve brought up links to the Economic Policy Institute earlier but I really like this graph that even my freshmen could grasp about what works and doesn’t work in stimulus plans.
You can see the difference between the items where you get more bang than a buck and less than a buck’s worth of bang while contributing to the deficit. Notice those tax cuts that wind up costing more than they stimulate and think the last eight years of Dubya of which we seem to be repeating.
Here’s one that I picked up from Brad DeLong’s Grasping Reality with Both Hands that had my Freshman gasping as I was trying to set their hair afire. (I think it worked, btw.) Any one facing this job market should panic. Just anecdotal, but in the market for finance professors, this year universities were taking resumes only at the last two conferences. Last year, the best people had been hired up before either of the conferences were held and only the marginal remained. The hottest academic jobs are definitely on hold. In my years of both public and private sector economisting, I’ve NEVER seen anything like this.
Please notice the incredible level of job losses. If you’ve managed to get through a calculus course, you’ll see that the first, second and third derivatives are negative which is not true on the other series at similar points. Basically, for you nonmath types, this indicates nothing but a downward trend or as I like to put it, straight off a cliff.
So, President Obama rambled an economics lecture last night that made me happy that he was getting all those economics briefings. It was also pretty obvious that most of his advisers must have their hair on fire too, because he did have a sense of edgy panic when he talked about the situation. However, ‘edgy panic’ is not what I want in a president. I want a president to talk about we have nothing to fear but fear itself who then says something to the effect of let’s do what works instead of bargaining away what will with folks that aren’t interested in watching you succeed.
I have to say, last night over Margaritas with my neighbors, I was searching for folks that wanted to diversify their food options with neighborhood gardening. I had a lot of takers. After all, when the army and your police force spend a good amount of time and money flying sleek black helicopters around the skies of your city practicing for food riots, it’s kind of one of those wake up moments. That goes for sleepy freshmen and drunk Cajuns. Is your hair on fire yet? Because if it isn’t, you haven’t been listening.
Meanwhile, I’m adding a page to my own blog for sharing sustainability and survival stories. Feel free to visit and contribute.
As the details of Obamanomics finally roll out to the public, it is increasingly obvious that what we are seeing is some kind of Reaganomics lite. I mentioned this in a post on January 5th trying to answer Paul Krugman’s concerns on how ‘bold and swift’ the Obama plan will be. Today, Krugman answered strongly not bold enough in the Obama Gap.
But Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed.”
Today’s Market Watch outlines the abysmal labor market.
Total hours worked in the economy fell 1.1%, with the average workweek falling to the shortest ever, signaling an annualized decline of 6% in gross domestic product in the fourth quarter, wrote John Silvia, chief economist for Wachovia. Hours worked have declined “at an eye-watering” 7.7% annual pace in the quarter, Shepherdson said.
An alternative measure of unemployment that includes workers too discouraged to look for a job rose to 13.5% from 12.6% in November; it’s the highest in the 13 years since those data have been kept.
These are serious numbers that followed the even MORE serious numbers in manufacturing reported earlier in the week. Rather than repeat what I said earlier, I’d like to show some that I’m not alone out there in the liberal wilderness. Yes, I said LIBERAL wilderness. The Black Agenda Report which has never been in the Obama corner and endorsed Cynthia McKinney outlines Obama’s hostility to both Universal Health Care and what is traditionally the Democratic Party’s approach to the economy.
In a similar vein, “Obamanomics” at best falls short of the bold progressive initiatives and challenges to financial and corporate power required to spark equitable domestic development. As adjusted in response to the banking crisis and deepening recession, moreover, Obama’s economic program could well amount to “something akin to a national austerity program….” Instead of forward movement on jobs, education, retirement, and health care, Jack Rasmus finds, “what me may well get is ‘Let’s all tighten our belts to get through this crisis.”
Turning away from the op-ed pieces, let’s examine this front page headline from the NY Times: Senate Allies Fault Obama on Stimulus.
WASHINGTON — President-elect Barack Obama’s economic recovery plan ran into crossfire from his own party in Congress on Thursday, suggesting that quick passage of spending programs and tax cuts could require more time and negotiation than Democrats once hoped.
Senate Democrats complained that major components of his plan were not bold enough and urged more focus on creating jobs and rebuilding the nation’s energy infrastructure rather than cutting taxes.
So here we have more evidence that many are beginning to see that the Obama plan is not bold and will not be swift. Back on MarketWatch, we once again have the winds of cold, harsh reality hitting the face of any one connected to the U.S. Economy.
WASHINGTON (MarketWatch) — The U.S. recession will last two full years, with gross domestic product falling a cumulative 5%, said Nouriel Roubini, chairman of RGE Monitor. Roubini was one of the first economists to predict the recession and the credit crunch stemming from the housing bubble. For 2009, Roubini predicts GDP will fall 3.4%, with declines in every quarter of the year. The unemployment rate should peak at about 9% in early 2010, he said. Consumer prices will fall about 2% in 2009. Housing prices will probably overshoot, dropping 44% from the peak through mid-2010. “The U.S. economy cannot avoid a severe contraction that has already started and the policy response will have only a limited and delayed effect that will be felt more in 2010 than 2009,”
As we get more and more evidence that Obama’s actions never reach anywhere near the level of his rhetoric, will the koolaide start wearing off even before the President Elect gets to give his first State of the Union Address? I’m waiting to see if it comes any where near even one of FDR’s minor fireside chats.
Meanwhile, Senator Harkin from Iowa, the state where, oddly enough, I attended Herbert Hoover Elementary School had this to say in the Times article today.
“There is only one thing we have got to do in the stimulus, and that is how can we create jobs,” said Senator Tom Harkin, Democrat of Iowa, as he left the meeting. “I am a little concerned by the way that Mr. Summers and others are going at this in that, to me, it still looks like a little more of this trickle-down, if we just put it in at the top, it’s going to trickle down. A number of people in there said, ‘Look, we have got to have programs that actually create jobs and put people to work.’ ”
Okay, did Senator Harkin just call Obamanomics more trickle down economics, voodoo economics, Reaganomics? Can I get a witness? Again, it’s very hard to argue for business tax credits when most businesses are just looking for customers. If you don’t put the money into the hands of customers, a few tax credits here and there aren’t going to accomplish anything. There has to be income first.
Anyway, is it too early for me to buy an ‘I told You So’ bumper sticker for my poor worn-down mustang yet?
NOTE: For those of you into really snarky satire, there’s a post at today’s Daily Beast about Obama’s package being inadequate. Also, other blogs are discussing this same topic. Jane at FDL and even HuffPo have put up threads. The link to FDL is on the right side. I think you can manage to find the other on your own.
Gerald Celente is one of those folks paid to spot trends. He correctly predicted the stock market crash of 1987 and the fall of the Soviet Union. You’ll start a farm and buy a rifle if you watch this video and take his predictions seriously. He says within four years there will be food riots and tax rebellions in the US. His major message is that we are on the path to becoming the world’s biggest undeveloped nation.
He believes that this year will be the year that Americans start seeing Christmas as something less than a shopping mall buy spree because they are tapped out. Celente suggests that homemade gifts will replace the electronic gadgets and that the most pressing concern by Christmas 2012 will be putting food on the table.
“We’re going to see the end of the retail Christmas….we’re going to see a fundamental shift take place….putting food on the table is going to be more important that putting gifts under the Christmas tree,” said Celente, adding that the situation would be “worse than the great depression”.
“America’s going to go through a transition the likes of which no one is prepared for,” said Celente, noting that people’s refusal to acknowledge that America was even in a recession highlights how big a problem denial is in being ready for the true scale of the crisis.
As always, I spend my morning cup of coffee with the NY Times, my favorite blogs, and links that others offer up like the latest on line issue of Newsweek. My end of the day reads include the WSJ and Market Watch and anything new that has popped up on The Economist. I read the NYT’s coverage of the Obama presser with more than passing interest. They lured me over with this description: “answers were purposefully crisp — and, at times, laced with humor”. I had to read through the first dog conversation and the Nancy Reagan gaffe and apology before getting to the supposed purpose of the entire event: What Will an Obama Administration do with the current economic situation? Let me just highlight a few more of those ‘purposefully crisp’ answers which appears to be the Times new metaphor for no comment.
- No NEW specifics, stagecraft
Mr. Obama, who stood a few feet in front of an array of economic advisers as well as Vice President-elect Joseph R. Biden Jr. and Representative Rahm Emanuel, the new White House chief of staff, offered no new specifics about what he intended to do to curb the economic crisis. But the stagecraft of the news conference, held after a closed-door meeting of Mr. Obama’s economic advisers, was intended to show that he was hard at work in search of solutions.
- Little Guidance, Saying only, narrow window of room to adjust
Mr. Obama offered little guidance on how he wanted the Treasury Department to carry out the $700 billion government plan to stabilize the financial markets, saying only that he would review any decisions made by the Bush administration.He suggested that he intended to move ahead with his campaign pledge to take away tax cuts for upper-income Americans, but seemed to leave a narrow window of room to adjust his proposal.
- imprecise campaign pledges have caused some confusion
Mr. Obama’s imprecise campaign pledges have caused some confusion about when he would repeal the Bush tax cuts on Americans making more than $250,000 a year.
- left unclear
He left unclear whether a tax bill signed into law next year would make the repeal effective retroactively for all of 2009 as well as 2010.
- did not claify
Mr. Obama did not clarify his intentions Friday.
One thing was clear. President Elect Obama just loves those Possum Seals.
The session carried the trappings of an official event, with eight American flags lined against blue drapes, and a freshly made seal on the lectern: “The Office of the President Elect.”
The Office of the President Elect is still considering Larry Summers. Let me highlight from that article.
CHICAGO — Former Treasury Secretary Lawrence H. Summers, a member of the new economic advisory board that met with President-elect Barack Obama here on Friday, is also a leading candidate to be the next Treasury chief.
Reaching back farther, other Web sites have resurrected a 1991 memorandum that Mr. Summers signed as an economist at the World Bank that suggested parts of Africa could be repositories for toxic waste.
Mr. Summers, 53, left the meeting on Friday with Mr. Obama without answering a question about the controversies, and Obama advisers declined to discuss them.
That prospect has critics of Mr. Summers, particularly on the Democratic Party’s left, reviving old controversies in hopes of dooming his chances. In the days since Mr. Obama was elected, liberal bloggers have sought to ignite an online opposition by recalling the rocky five years Mr. Summers spent as president of Harvard, where he angered many women and blacks before resigning in 2006.
If any of your Obot friends are suggesting you start celebrating with them, just remind them that there appears to still be a huge bus fleet around the country with a large entourage under the bus. If Prop 8, continual misogyny, FISA reversals, the Easter lecture to black men, or being told you need a committee to decide if you’re just having one of those third term abortions because you’re “blue” didn’t put you there, perhaps the latest set of okie dokes just did. Be sure to check for tire tracks on your back. That’s a purposefully crisp sign. Oh, and I’ve decided to let Former First Lady Nancy Reagan pick out our under the bus China.