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.
After spending four lectures today explaining fiscal policy and why it was important for the President-elect to come up with some specifics to calm the market, I’m not looking forward to Monday. I told them how the last two days have set a record for the few post election slumps and some sense of direction and detailed actions were necessary. A bold move would be to name a Treasury Secretary. At the very least, we could hear some of the components he supports of the democratic stimulus plan and which he feels are give aways or symbolic only.
I’ve decided to put my resume out to the Cayman Islands, the Channel Islands, Bermuda, Luxembourg or perhaps Qatar. I lived in a banana republic here in New Orleans for the last 10 years and I might as well get out before it goes nationwide.
The one industry that might be slightly happier tonight is the auto industry. Maybe that was because of the presence of the governor of Michigan in the room and the newly minted blue states containing auto workers that need to be kept in the fold for the midterm elections. If you’re part of the automobile industry it does look like you might get a bailout. It looks like we might nationalize the big three. So, I guess what’s good for GM really is good for America in Obama’s eyes. The auto industry was the ONLY industry singled out for about two paragraphs worth of speech. Since when did the auto industry get a special place ahead of retail, banking, the energy industry and agriculture?
The speech gave a laundry list of the very bad labor market statistics that came out this week first. I knew those already. Largest jobless claims in 25 years. Looks like we’re in for the largest jump in the unemployment rate since World War 2 ended. The Dallas Fed’s projections include no positive movements in GDP for the entire year of 2009 and unemployment of 8% by the end of the year and 10%+ within six months. That was the interesting part of the speech. The rest of the speech was a blur of talking points straight off the Obama election site. Obama may have just been overwhelmed by a day spent with folks that know what they’re talking about. (Can we say ONE TERM PRESIDENCY?? YES, WE CAN!!!)
One answer to a Candy Crowley question really grabbed me. Our President-elect said bravely “I think I’ll pass on that.”
The news is awash with speculation that Larry “Women don’t have the brain capacity to do math and science” Summers is going to be Treasury Secretary Redux. He has written some seminal papers in finance and economics. (Believe me, the math wasn’t that tough in any of them.) He was once the Secretary of Treasury under Clinton. Let me ask you, if you inserted ‘African Americans’ where the word ‘WOMEN’ is in that sentence, do you think ANYONE would want to be seen in public with this man, let alone appoint him to a cabinet position?
So Obama is studying Economics 101 and 102 now when he should be saying what points need to be pushed as part of a stimulus package. We got some nebulous discussion about extending unemployment compensation and possibly bailing out cash strapped states. But the bottom line is that he spent almost an hour giving no more information than he did during his election. That is probably why he extended the press conference long enough to see the close of the stock market. Maybe the entire set of investors in the US will have very nice weekends and forget the Obama fog-of-war on reality.
As for the press, it seems that the BIG question was the decision over the first dog. Well, at least they can fluff something other than Obama for a change.
Like I said, Cayman Islands, Channel Islands, Bermuda … Qatar? Any one coming with me? If Reagonomics was Voodoo Economics, Obamanomics seems to be O-doodoo Economics and we’re going to be deep in it.
Today I will go into something of which I can speak from authority. As a dismal scientist myself, I’ll try to give you some insight into Obama’s dismal scientists starting with a brief introduction to them on this post. These are the guys that will most likely put together his economic plan. Every time I’ve been pointed to his site for specifics by eager young Obamamites, I’ve found the usual platitudes and no details that are characteristic of his hopie-changie speeches spoke from teleprompters. They typify the specifics-challenged Senator Obama.
From this week’s The Economist ( a great publication from the UK):
“On domestic matters, Mr Obama has assembled a team of sharp academic economists who premise their work on his supposed ability to sell sophisticated policy. Most prominent up until now has been Austan Goolsbee … a University of Chicago professor whom many expect to head a President Obama’s Council of Economic Advisers. Mr Goolsbee’s record suggests neither the hostility towards globalised capitalism nor the desire for large-scale redistribution that conservatives, spooked by tales of Mr Obama’s left-wing voting record, might fear: Mr Goolsbee is a problem-solver who favours such unsexy proposals as altering American tax forms. He got into trouble earlier this year for telling the Canadians not to worry too much about the anti-NAFTA rhetoric the candidate was emitting on the campaign trail.
“From Harvard Mr Obama plucked Jeffrey Liebman, who has produced good research on the earned-income tax credit and its role in moving people from welfare to work, and David Cutler, a health economist who wants doctors’ pay tied to medical outcomes. As of this week, though, Mr Obama’s newly appointed economics director is Jason Furman …. an economist in the Clinton administration and a top aide to John Kerry in 2004. His presence rebuts criticism that Mr Obama’s team has too little policymaking experience. Mr Furman, too, hews to the non-ideological centre, heading Washington’s Hamilton Project, an economic policy group co-founded by Bob Rubin, once Bill Clinton’s treasury secretary. Mr Furman is a staunch free-trader who once praised Wal-Mart and has favoured lowering corporate taxes. With a PhD from Harvard, he also does not lack for academic credentials.”
First, let me say there are degrees from Harvard and then there are DEGREES from Harvard. I think we can all agree that George W. Bush’s Harvard MBA served only as a decoration. I’m getting that same ol’ feeling from the Harvard Law Degree that Obama obtained. There are hard ways of getting in to Harvard and easy ways to get into Harvard. Legacies and diversity quotas stand among the latter. Then, of course, there is the joke that Harvard is the hardest school to flunk out of once you’re in. There are folks that struggle to get into Harvard and do a lot of homework that does eventually lead to credentials worthy of respect. I’m willing to put Goolsbee and Furman in that latter list. Their academic work is compelling and that is what I will focus on.
Goolsbee has had some rather impressive publications and topnotch peer- reviewed journals. This is one way to tell the real deal. You actually have to publish in a prestigious journal; not just manage or edit the journal. Dr. Goolsbee is the real deal and teaches at the University of Chicago. Yes, THAT University of Chicago that is well-known as a hot bed of Milton Friedman type, hands-off that market, monetarists. His focus is primarily on markets and a lot of his research is in the area of the internet as market. His has experience as a policy wonk and has looked at both international trade and tax issues.
He has a lot of tax publications. Now, I don’t think you’re going want to delve into the details, but do look at the titles and abstracts. Here’s his on line vc which includes a lot of his publications.
Dr. Furman is also respected and has great credentials. He appears to have gotten in and out of Harvard the honorable way. This is his vc listed at the Brookings Institute:
I’ve heard that labor unions are fairly upset with his appointment. Furman hasn’t been thrown under the gigantic Obama bus yet. Neither has Goolsbee whose conversation with the Canadians about NAFTA was frequently cited as one of the problems costing Obama elections in Ohio and Pennsylvania.
Both of these dismal scientists are corporation friendly and have published papers criticizing the corporate income tax in the country. Dr. Furman has done a bit of research in the social security arena. I look forward to reading his articles as this is one area of interest to me.
Well, the purpose of this particular post is to introduce you to the players and you’ve got some homework you can do on your own if you you so choose. As for me, I’ll go glean what I can out of their papers. Again, that’s the best place to look for interests and tilts. Given that The Economist didn’t send them directly up a flag post, I’m assuming they are both have a moderate-to-conservative outlook. This would highlight a disconnect to me between those really liberal folks looking for Obama to be the shining beacon for the ultra liberal causes and also, those conservatives looking for Karl Marx in Obama’s closet.
I’ll look into them for the time being. When the Obama campaign comes up with something more than touchy feeling economics positions, look back here, I will be watching.