US Economy

[a_majoor]

Is it even possible to recover now?

http://fabiusmaximus.wordpress.com/2009/01/20/milestone/

America passes a milestone!
Filed under: America — Tags: manufacturing, us government — Fabius Maximus @ 12:00 pm

We now have more poeple employed in government than manufacturing.

Employment in government and manufacturing

—– Graph from Contrary Investor, 9 December 2008 — subscription only.

It’s a milestone.  But to what end does this road lead us?

 

[a_majoor]

Structural changes such as the ones being postulated here will mean a structural weakening of American economic (and later military and political) power throughout the world. Will agressive Authoratarian states move in to exploit the global power vacuum? Even if the Obama Administration is only a one term administration, it will take some really bold moves by the new Administration and Congress to reverse course, and like the "New Deal" and "Great Society" programs, the Obama Administration programs will be social and bureaucratic monoliths that defy efforts to restrain or uproot them.

http://thehill.com/dick-morris/the-obama-presidency--here-comes-socialism-2009-01-20.html

The Obama presidency: Here comes socialism 
By Dick Morris 
Posted: 01/20/09 06:12 PM [ET] 

2009-2010 will rank with 1913-14, 1933-36, 1964-65 and 1981-82 as years that will permanently change our government, politics and lives. Just as the stars were aligned for Wilson, Roosevelt, Johnson and Reagan, they are aligned for Obama. Simply put, we enter his administration as free-enterprise, market-dominated, laissez-faire America. We will shortly become like Germany, France, the United Kingdom, or Sweden — a socialist democracy in which the government dominates the economy, determines private-sector priorities and offers a vastly expanded range of services to many more people at much higher taxes.

Obama will accomplish his agenda of “reform” under the rubric of “recovery.” Using the electoral mandate bestowed on a Democratic Congress by restless voters and the economic power given his administration by terrified Americans, he will change our country fundamentally in the name of lifting the depression. His stimulus packages won’t do much to shorten the downturn — although they will make it less painful — but they will do a great deal to change our nation.

In implementing his agenda, Barack Obama will emulate the example of Franklin D. Roosevelt. (Not the liberal mythology of the New Deal, but the actuality of what it accomplished.) When FDR took office, he was enormously successful in averting a total collapse of the banking system and the economy. But his New Deal measures only succeeded in lowering the unemployment rate from 23 percent in 1933, when he took office, to 13 percent in the summer of 1937. It never went lower. And his policies of over-regulation generated such business uncertainty that they triggered a second-term recession. Unemployment in 1938 rose to 17 percent and, in 1940, on the verge of the war-driven recovery, stood at 15 percent. (These data and the real story of Hoover’s and Roosevelt’s missteps, uncolored by ideology, are available in The Forgotten Man by Amity Shlaes, copyright 2007.)

But in the name of a largely unsuccessful effort to end the Depression, Roosevelt passed crucial and permanent reforms that have dominated our lives ever since, including Social Security, the creation of the Securities and Exchange Commission, unionization under the Wagner Act, the federal minimum wage and a host of other fundamental changes.

Obama’s record will be similar, although less wise and more destructive. He will begin by passing every program for which liberals have lusted for decades, from alternative-energy sources to school renovations, infrastructure repairs and technology enhancements. These are all good programs, but they normally would be stretched out for years. But freed of any constraint on the deficit — indeed, empowered by a mandate to raise it as high as possible — Obama will do them all rather quickly.

But it is not his spending that will transform our political system, it is his tax and welfare policies. In the name of short-term stimulus, he will give every American family (who makes less than $200,000) a welfare check of $1,000 euphemistically called a refundable tax credit. And he will so sharply cut taxes on the middle class and the poor that the number of Americans who pay no federal income tax will rise from the current one-third of all households to more than half. In the process, he will create a permanent electoral majority that does not pay taxes, but counts on ever-expanding welfare checks from the government. The dependency on the dole, formerly limited in pre-Clinton days to 14 million women and children on Aid to Families with Dependent Children, will now grow to a clear majority of the American population.

Will he raise taxes? Why should he? With a congressional mandate to run the deficit up as high as need be, there is no reason to raise taxes now and risk aggravating the depression. Instead, Obama will follow the opposite of the Reagan strategy. Reagan cut taxes and increased the deficit so that liberals could not increase spending. Obama will raise spending and increase the deficit so that conservatives cannot cut taxes. And, when the economy is restored, he will raise taxes with impunity, since the only people who will have to pay them would be rich Republicans.

In the name of stabilizing the banking system, Obama will nationalize it. Using Troubled Asset Relief Program funds to write generous checks to needy financial institutions, his administration will demand preferred stock in exchange. Preferred stock gets dividends before common stockholders do. With the massive debt these companies will owe to the government, they will only be able to afford dividends for preferred stockholders — the government, not private investors. So who will buy common stock? And the government will demand that its bills be paid before any profits that might materialize are reinvested in the financial institution, so how will the value of the stocks ever grow? Devoid of private investors, these institutions will fall ever more under government control.

Obama will begin the process by limiting executive compensation. Then he will urge restructuring and lowering of home mortgages in danger of default (as the feds have already done with Citibank).

Then will come guidance on the loans to make and government instructions on the types of enterprises to favor. God grant that some Blagojevich type is not in charge of the program, using his power to line his pockets. The United States will find itself with an economic system comparable to that of Japan, where the all-powerful bureaucracy at MITI (Ministry of International Trade and Industry) manages the economy, often making mistakes like giving mainframe computers priority over the development of laptops.

But it is the healthcare system that will experience the most dramatic and traumatic of changes. The current debate between erecting a Medicare-like governmental single payer or channeling coverage through private insurance misses the essential point. Without a lot more doctors, nurses, clinics, equipment and hospital beds, health resources will be strained to the breaking point. The people and equipment that now serve 250 million Americans and largely neglect all but the emergency needs of the other 50 million will now have to serve everyone. And, as government imposes ever more Draconian price controls and income limits on doctors, the supply of practitioners and equipment will decline as the demand escalates. Price increases will be out of the question, so the government will impose healthcare rationing, denying the older and sicker among us the care they need and even barring them from paying for it themselves. (Rationing based on income and price will be seen as immoral.)

And Obama will move to change permanently the partisan balance in America. He will move quickly to legalize all those who have been in America for five years, albeit illegally, and to smooth their paths to citizenship and voting. He will weaken border controls in an attempt to hike the Latino vote as high as he can in order to make red states like Texas into blue states like California. By the time he is finished, Latinos and African-Americans will cast a combined 30 percent of the vote. If they go by top-heavy margins for the Democrats, as they did in 2008, it will assure Democratic domination (until they move up the economic ladder and become good Republicans).

And he will enact the check-off card system for determining labor union representation, repealing the secret ballot in union elections. The result will be to raise the proportion of the labor force in unions up to the high teens from the current level of about 12 percent.

Finally, he will use the expansive powers of the Federal Communications Commission to impose “local” control and ownership of radio stations and to impose the “fairness doctrine” on talk radio. The effect will be to drive talk radio to the Internet, fundamentally change its economics, and retard its growth for years hence.

But none of these changes will cure the depression. It will end when the private sector works through the high debt levels that triggered the collapse in the first place. And, then, the large stimulus package deficits will likely lead to rapid inflation, probably necessitating a second recession to cure it.

So Obama’s name will be mud by 2012 and probably by 2010 as well. And the Republican Party will make big gains and regain much of its lost power.

But it will be too late to reverse the socialism of much of the economy, the demographic change in the electorate, the rationing of healthcare by the government, the surge of unionization and the crippling of talk radio.



Morris, a former adviser to Sen. Trent Lott (R-Miss.) and President Bill Clinton, is the author of Outrage. To get all of Dick Morris’s and Eileen McGann’s columns for free by email, go to www.dickmorris.com. To order a signed copy of their new best-selling book, Fleeced, go to dickmorris.com.

 

[a_majoor]

More on the shift to a State managed economy:

http://www.dcexaminer.com/opinion/columns/TimothyCarney/The_question_Obama_doesnt_want_you_to_ask_012309.html

The question Obama doesn't want you to ask

By Timothy P. Carney
Examiner Columnist | 1/23/09 5:39 AM

“Now, there are some who question the scale of our ambitions—who suggest that our system cannot tolerate too many big plans,” President Barack Obama said in his inaugural address on Tuesday.

For these non-believers, the president had scorn: “What the cynics fail to understand is that the ground has shifted beneath them—that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works.”

In practice, we know what this means: Obama wants more federal spending, more federal regulation, more federal mandates, and more federal prohibitions. It means the president—like all presidents—wants more power.

And objecting that the Constitution limits his power, or that more federal or presidential power is inherently corrupting or destructive—that’s out of line. The only legitimate question to ask about the new powers the president wants is “whether it works.”

But that raises another question: Works for whom?

Government action almost always picks winners and losers. “We will build the roads and bridges, the electric grids and digital lines,” Obama promised Tuesday. “We will harness the sun and the winds and the soil to fuel our cars and run our factories.”

These lines caused elation, no doubt, among the well-connected contractors who will get the tax dollars to build the roads, as well as among the developers who bought land cheap waiting for taxpayers to pave their driveway—the same class of businessmen who funded the campaign for tax hikes in Northern Virginia.

Also celebrating these words—confident bigger government “will work” for them—are those like T. Boone Pickens, Goldman Sachs, and Archer Daniels Midland who have invested in ethanol or sun and wind power, counting on added injections of taxpayer cash.

And the guaranteed winner whenever government grows? The lobbyists. “Big government is back,” exclaimed lobbyist Mark Ruge to The Hill newspaper this week. “It’s going to be a very, very active Congress.” That means more lobbying.

Obama called for “a watchful eye” over markets—meaning more regulation—in the context of a correct observation that “a nation cannot prosper long when it favors only the prosperous.” But what “favors the prosperous” more?

A free market in which each businessman needs to convince investors and consumers to willingly part with their own money? Or a centrally managed economy in which the businessman needs only hire the right lobbyist to beg the lawmaker for favors?

A quick glance at this nascent administration helps answer that question:
• President Obama, as was reported in this column last week, has proposed a shift in telecom policy that would profit a company whose vice president for policy was advising Obama’s transition team.
• Secretary of State Hillary Clinton, as a U.S. senator, was the champion of rewarding her donors with earmarks.
• Treasury secretary-designee Timothy Geithner was an author of the $700 billion bailouts that transfer taxpayer dollars to his former Wall Street colleagues.
• Attorney General nominee Eric Holder approved Bill Clinton’s pardon of Marc Rich, a wealthy businessman who fled to the Swiss Alps before facing trial for a slew of charges including “trading with the enemy”—Iran, during the hostage crisis. Rich’s wife contributed over $1 million to the Clintons.

Conflicts of interest, quid-pro-quo dealings, and appearances of impropriety are certainly not unique to Obama’s team or his party. A few Washington Republicans are in jail for just that sort of thing. But increasing government—however good the intentions—always gives an advantage to those who have the most access to government decision-makers.

So, with all due respect, Mr. President, it is still appropriate to ask “is government too big?” And, to be fair, this raises the question, too big for whom?

Certainly, government is not too big for the banks, the Wall Street firms, the insurers, and developers all pocketing bailout money and crowding out competition with new regulation. The government is not too big for the politicians and the bureaucrats gaining more power by the day. Government is not too big for the lobbyists, made more valuable, more influential, and richer by the week.

But for the taxpayer and the entrepreneur, for the consumer who sees his income shrink through taxes, his dreams obstructed by regulatory hurdles, and his choices dwindle and prices rise through government, that inappropriate question seems worth asking.

Examiner columnist Timothy P. Carney is editor of the Evans-Novak Political Report. His Examiner column appears on Fridays.

 

[a_majoor]

From the DC Examiner (via Instapundit), a look at how tax and spend economics is affecting America's internal economy. Now expand that idea to the national level:

http://www.dcexaminer.com/opinion/When_state_taxes_rise_businesses_and_residents_flee_012509.html

When state taxes rise, businesses and residents flee.


Maryland used to be in the middle of the pack of states with business-friendly environments. No more. The Tax Foundation now ranks Maryland as the sixth worst state in the nation in which to do business. Only Rhode Island, Ohio, California, New York, and New Jersey are more hostile to job- and revenue-producing enterprises. Maryland’s “remarkable drop” - from 24th in 2008 to 45th place this year – is attributed to last year’s passage of the largest tax hike in state history, coupled with other major tax policy changes that also put the Free State dead last in the personal income tax category. . . . Decades of empirical research prove that economic growth in high-tax states consistently lags behind states with lower tax burdens. The 10 states with the lowest taxes also attracted almost 10 percent more new residents during the last decade than their high-tax counterparts. Just last year, 144,000 people fled from California’s punishing taxes, the highest state-to-state migration in the U.S. The ramifications of losing revenue-producing businesses and highly-skilled workers to lower-tax states should by now be apparent even to big-spending governors like Maryland’s Martin O’Malley and California’s Arnold Schwarzenegger - long-term economic decline.

Canada's response should be a massive tax cut to attract these revenue producing business and highly skilled workers to our new northern tax haven: Canada as the "Snow Leopard" of the worlds economy (vis the four Asiatic "Tiger" economies)

 

[a_majoor]

Following the timeline of the US "stimulus package" should provide clues to savvy investors to move in and out of economic sectors and when to go to hard assets to protect themselves from the surge in inflation. (A post Obama administration will probably have to administer a Reaganesque fiscal policy to crush inflation: another economic opportunity to buy high interest bearing investments forthe low interest environment to follow):

http://online.wsj.com/article/SB123292987008414041.html

The Stimulus Time Machine
That $355 billion in spending isn't about the economy.Article
 
The stimulus bill currently steaming through Congress looks like a legislative freight train, but given last week's analysis by the Congressional Budget Office, it is more accurate to think of it as a time machine. That may be the only way to explain how spending on public works in 2011 and beyond will help the economy today.

According to Congressional Budget Office estimates, a mere $26 billion of the House stimulus bill's $355 billion in new spending would actually be spent in the current fiscal year, and just $110 billion would be spent by the end of 2010. This is highly embarrassing given that Congress's justification for passing this bill so urgently is to help the economy right now, if not sooner.

And the red Congressional faces must be very red indeed, because CBO's analysis has since vanished into thin air after having been posted early last week on the Appropriations Committee Web site. Officially, the committee says this is because the estimates have been superseded as the legislation has moved through committee. No doubt.

In addition to suppressing the CBO analysis, Democrats have derided it. Appropriations Chairman David Obey (D., Wis.) called it "off the wall," never mind that CBO is now run by Democrats. Mr. Obey also suggested that it would be a mistake to debate the stimulus "until the cows come home." We'd settle for a month or two, so at least the voters can inspect the various Congressional cattle they're buying with that $355 billion.

The stimulus bill is also a time machine in the sense that it's based on an old, and largely discredited, economic theory. As Harvard economist Robert Barro pointed out on these pages last Thursday, the "stimulus" claim is based on something called the Keynesian "multiplier," which is that each $1 of spending the government "injects" into the economy yields 1.5 times that in greater output. There's little evidence to support this theory, but you have to admire its beauty because it assumes the government can create wealth out of thin air. If it were true, the government should spend $10 trillion and we'd all live in paradise.

The problem is that the money for this spending boom has to come from somewhere, which means it is removed from the private sector as higher taxes or borrowing. For every $1 the government "injects," it must take $1 away from someone else -- either in taxes or by issuing a bond. In either case this leaves $1 less available for private investment or consumption. Mr. Barro wrote about this way back in 1974 in his classic article, "Are Government Bonds Net Wealth?", in the Journal of Political Economy. Larry Summers and Paul Krugman must have missed it.

The government spending will be a net stimulus only if its $1 goes to more productive purposes than those to which private investors would have put that same $1. There are some ways we may want the government to spend money -- on national defense, say -- but that doesn't mean it's a stimulus.

A similar analysis applies to the tax cuts that are part of President Obama's proposal. In contrast to the spending, at least the tax cuts will take effect immediately. But the problem is that Mr. Obama wants them to be temporary, which means taxpayers realize they will see no permanent increase in their after-tax incomes. Not being fools, Americans may either save or spend the money but they aren't likely to change their behavior in ways that will spur growth. For Exhibit A, consider the failure of last February's tax rebate stimulus, which was a bipartisan production of George W. Bush and Mr. Summers, who is now advising Mr. Obama.

To be genuinely stimulating, tax cuts need to be immediate, permanent and on the "margin," meaning that they apply to the next dollar of income that an individual or business earns. This was the principle behind the Kennedy tax cuts of 1964, as well as the Reagan tax cuts of 1981, which finally took full effect on January 1, 1983.

If the Obama Democrats can't abide this because it's a "tax cut for the rich," as an alternative they could slash the corporate tax to spur business incentives. The revenue cost of eliminating the corporate tax wouldn't be any more than their proposed $355 billion in new spending, and we guarantee its "multiplier" effects on growth would be far greater. Research by Mr. Obama's own White House chief economist, Christina Romer, has shown that every $1 in tax cuts can increase output by as much as $3

As for all of that new spending, CBO will release an updated analysis this week. And we anticipate that the budget analysts will in the interim have discovered that much more of that $355 billion will somehow find its way to "shovel-ready" projects that the Obama Administration can start building before the crocuses bloom. But in the real world, the CBO's first estimate is likely to prove closer to the truth.

The spending portion of the stimulus, in short, isn't really about the economy. It's about promoting long-time Democratic policy goals, such as subsidizing health care for the middle class and promoting alternative energy. The "stimulus" is merely the mother of all political excuses to pack as much of this spending agenda as possible into a single bill when Mr. Obama is at his political zenith.

Apart from the inevitable waste, the Democrats are taking a big political gamble here. Congress and Mr. Obama are promoting this stimulus as the key to economic revival. Americans who know nothing about multipliers or neo-Keynesians expect it to work. The Federal Reserve is pushing trillions of dollars of monetary stimulus into the economy, and perhaps that along with a better bank rescue strategy will make the difference. But if spring and then summer arrive, and the economy is still in recession, Americans are going to start asking what they bought for that $355 billion.

 

[a_majoor]

The ultimate problem. Until some sort of definitive arrangement is made that demonstrates to the world *how* the debt is going to be dealt with comes down, there will be a huge cloud of uncertainty around the global financial market. (As an incidental, even if the method is defaulting on the debt, at least the problem is solved and markets can operate without the dead weight and uncertainty holding them back)

How do we pay back all this debt?
By TigerHawk at 12/17/2008 09:14:00 AM

My continuing and unshakeable faith in the American system notwithstanding, it is painfully clear that the credit of the United States and therefore our standard of living will suffer if we do not both restart our economy and show a credible plan for paying back all the money that we are borrowing now. The problem, of course, is not the current borrowing but the massive unfunded liabilities for public pensions, healthcare, and now the personal indebtedness, through financial institutions, of tens of millions of Americans who borrowed more money than they could afford to pay back (it matters not whether this happened because those debtors are idiots -- many of them are -- or because they were, in effect deceived by complex financial instruments that were inadequately explained, as many of them were).

The foundation’s grim calculations are based on Sept. 30 consolidated federal statements, which showed that Americans’ total household net worth, diminished by falling stock prices and home equity, is $56.5 trillion. But rising costs for unfunded social programs like Medicare, Medicaid and Social Security increased to $56.4 trillion – and that was before the more recent stock market crash, $700 billion bank bailout, and monster federal deficits chalked up in October and November.

The ugly truth is that our generation -- people born between roughly 1945 and 1970 -- who have made this mess. If we do not fix it, we will crush the standard of living of the people who come behind us. Sadly, the only way for us to fix it is to work longer, which would dramatically shrink the long-tail liabilities of the United States government. As I wrote two weeks ago, we need to extend the date of first eligibility for Social Security along a sliding scale, which would, I believe, massively reduce the total pension liability.

[T]he generation born between 1945 and 1970 has borrowed too much, spent too much, and saved too little, all the while expecting to work for actual money something under half its time on this pale blue ball. The resulting pile of debt incurred, and still to be incurred, will reduce standards of living for decades to come. Our generation must make amends, and there is an obvious way to do it. We should immediately raise the age for first eligibility for Social Security and Medicare according to a sliding scale. For each year a person is under age 62, the ages of first eligibility and full eligibility should be extended by three months. So, for example, if you are 50 today you would not become eligible for any benefits until age 65, and for full benefits until age 69. If you are only 38, your ages of eligibility would be 68 and 72, respectively. I would push the scale back to people who are as young as 32; for those that age and younger, the ages of Social Security eligibility would be 70 and 74.

This change would have a host of advantages. First, it would drastically reduce the government's liability for future Social Security and Medicare payments (somebody out there ought to do the math to come up with the actual amount, but it is bound to be huge). With a stroke of a pen, we would effectively fund the massive borrowings necessary to protect our incomes today off of the pensions of the people responsible for these debts, rather than with future taxes or inflation borne by innocent people who are younger than us. Second, it avoids the philosophical fight between the statists who want to preserve Social Security as a government program and the conservatives, if there are any left, who want to substitute private savings. Third, it aligns Social Security with the reality of easier jobs and longer lifespans. Social Security was never meant to subsidize "golden years"; it was meant to protect people who were essentially unable to do work from poverty. Well, far fewer jobs are physically demanding, and the vast majority of people are actually capable of economically productive work long after age 62 (or 66). Finally, it creates an enormous new incentive to save; if you want to retire before your declining body and faculties mandate it, save your goddamn money!

Further, I believe that it would be politically possible to do this now. People instinctively understand that we are going to have pay back all this debt, and the sliding scale means that the burden will be small for people close to the finish line. If you are 60 today, it is not so terrible to think that you will have to work another six months before you retire. If you are 30, it is easy to persuade yourself that you will personally save enough money in the next 35 years to finance a retirement before the government subsidy kicks in at age 70. Do it now, and watch the massive impact on the value of the United States dollar, which will suck capital in from the rest of the world.

Of course, the biggest long-tail obligation is for health care, which will burden the economy regardless of the payment mechanism. Working longer will not do anything to mitigate that. However, there are enormous savings to be had in reforming our system of paying for and organizing health care, and that will reduce the long-tail liability. Perhaps people will be more willing to support those reforms if they have already absorbed the reality that they will be working longer anyway.

 

[tomahawk6]

China has recently stated that they would no longer be buying US government paper. This will take some of the wind out of the dem's sails unless they intend just to print more paper. The Loonie is looking like a good currency play right now.

 

[a_majoor]

I would not be so quick to rush into Loonies right now. With 82% of our exports going to the US, we will end up importing inflation. Worse, as the American economy contracts under the combined assault of higher taxes, higher regulation and the "John Galt" reaction of investors and skilled workers withdrawing from full participation in the economy, our own industy will be finding paying customers thin on the ground. A rapidly revaluing Loonie will also make our exports much less attractive.....

Mark Styen tells us what he thinks:

http://article.nationalreview.com/?q=ODljYzM3YTc0ODA4MmVmMjI2YzVmNGM3NWU3ODE2NWI=

Where Nations Go to Die
You say “stimulus,” I hear “syphilis.”

By Mark Steyn

Nancy Pelosi, Speaker of the House, is on TV explaining the (at this point the congregation shall fall to its knees and prostrate itself) “stimulus.” “How,” asks the lady from CBS, “does $335 million in STD prevention stimulate the economy?”

“I’ll tell you how,” says Speaker Pelosi. “I’m a big believer in prevention. And we have, er, there is a part of the bill on the House side that is about prevention. It’s about it being less expensive to the states to do these measures.”

Makes a lot of sense. If we have more STD prevention, it will be safer for loose women to go into bars and pick up feckless men, thus stimulating the critical beer and nuts and jukebox industries. To do this, we need trillion-dollar deficits, which our children and grandchildren will have to pay off—but, with sufficient investment in prevention measures, there won’t be any children or grandchildren, so there’s that problem solved.

The more interviews Speaker Pelosi gives explaining how vital the STD industry is to restarting the U.S. economy, the more I find myself hearing “syphilis” every time she says “stimulus.” In late September, America was showing the first signs of “primary stimulus”—a few billion lesions popping up on the rarely glimpsed naughty bits of the economy: the subprime mortgage racket, the leverage kings. Now, the condition has metastasized in a mere four months into the advanced stages of “tertiary stimulus,” with trillions of hideous, ever more inflamed pustules sprouting in every nook and cranny as the central nervous system of the body politic crumbles into total insanity—until it seems entirely normal for the second-in-line of presidential succession to be on TV gibbering away about how vital the federalization of condom distribution is to economic recovery.

The rules in this new “post-partisan” era are pretty simple: If the Democratic party wants it, it’s “stimulus.” If the Republican party opposes it, it’s “politics”—as in headlines like this: “Obama Urges GOP To Keep Politics To A Minimum On Stimulus.” These are serious times: As the president says, it’s the worst economic crisis since the Thirties. So politicians need to put politics behind them and immediately lavish $4.19 billion on his community-organizing pals at the highly inventive “voter registration” group ACORN for “neighborhood stabilization activities.”

“Neighborhood stabilization activities.” That sounds like a line item from the Baath-party budget when Saddam sends the lads in to gas the Kurds. What does it mean in a non-totalitarian sense? Do you need a federally subsidized condom to do it? If so, will a pathetic $4.19 billion be enough?

“Stimulus” comes from the verb stimulare, which is Latin for “transfer massive sums of money from what remains of the dynamic sector of the economy to the special interests of the Democratic party.” No, hang on, my mistake. Stimulare means “to goad.” And, on that front, the Democrats are doing an excellent job. They’ve managed to goad 58 percent of the American people into opposing the “stimulus” package. They’ve managed to goad all 177 Republicans in the House into unpacking their mothballed cojones and voting against the bill. And they’ve managed to goad the rest of the world into ending the Obama honeymoon in nothing flat. Headline from the London Daily Telegraph: “US-EU Trade War Looms As Barack Obama Bill Urges ‘Buy American.’ ”

That would be the provision in the Senate bill prohibiting any foreign-made goods from being used in “stimulus” projects. So, if you own a rubber plantation in Malaysia and you’re hoping for a piece of Nancy Pelosi’s condom action, forget it. The EU trade commissioner is outraged at the swaggering cowboy Obama shooting from the hip and unilaterally banning European goods from American soil. But so are American companies such as General Electric. Bill Lane, an executive honcho with Caterpillar (the tenth biggest U.S. investor in the United Kingdom), says, “We are students of history. A major reason a very deep recession turned into the Great Depression was the fact that countries turned inward.” Ah, yes. The Buy American Act of 1933. How’d that work out?

Even without Speaker Pelosi talking STD on the evening news, there is danger here for the new administration. Setting aside the more messianic effusions (“We needed him. And out of that great need,” gushed Maya Angelou, “Barack Obama came.”) as unbecoming to the freeborn citizens of a constitutional republic, it seems clear that large numbers of people voted for this president because they wanted something different, something other than “politics as usual.” Not just something pseudo-different like the dreary maverickiness of John McCain “reaching across the aisle” (one of those dead phrases no one outside the Beltway gives a hoot about), but something really different. But the “stimulus” package is just politics as usual with a few extra zeroes on the end. Will you notice anything? No. Don’t get your hopes up. If you’re broke now, you’ll be broke in October. The Congressional Budget Office estimates only 25 percent of it will be spent by early next year. The other 75 percent is as stimulating as the gal in the Nancy Pelosi Pussycat Lounge telling you she had such a good time she’s penciled in a second date for spring 2010. A third of all the spending won’t come until after 2011.

In a media age, politics is a battle of language, and “stimulus” is too good a word to cede to porked-up statist hacks. “Stimulus” has to stimulate—i.e., it’s short-term, like, say, an immediate cut in payroll taxes that will put real actual money in your pocket in next month’s paycheck. That way, you don’t need to wait for ACORN: You can start “stabilizing” your own “neighborhood” right now.

But, if this fraudulent “stimulus” does pass, it will, in fact, de-stimulate, and much more than the disastrous protectionist measures of the Thirties did: Back then, America was dealing with a far less globalized economy, and with far fewer competitors. “In the long run, we are all dead,” Lord Keynes, the newly fashionable economist, famously said. But, if this bill passes, in the medium term, we’re all dead. It’s a massive expansion of the state in the same direction that has brought sclerosis to Europe. A report issued last week in London found that government spending now accounts for 49 percent of the U.K. economy—and in the Celtic corners of the kingdom the state’s share of the economy is way higher, from 71.6 percent in Wales to 77.6 percent in Northern Ireland. In the western world, countries that were once the crucible of freedom are slipping remorselessly into a thinly disguised serfdom in which an ever-higher proportion of your assets are annexed by the state as super-landlord. Big government is where nations go to die—not in Keynes’ “long run,” but sooner than you think.

 

[muskrat89]

From this article by Krauthammer at the Washington Post  http://www.washingtonpost.com/wp-dyn/content/article/2009/02/05/AR2009020502766_pf.html:

The Fierce Urgency of Pork

By Charles Krauthammer
Friday, February 6, 2009; A17



"A failure to act, and act now, will turn crisis into a catastrophe."

-- President Obama, Feb. 4.



Catastrophe, mind you. So much for the president who in his inaugural address two weeks earlier declared "we have chosen hope over fear." Until, that is, you need fear to pass a bill.

And so much for the promise to banish the money changers and influence peddlers from the temple. An ostentatious executive order banning lobbyists was immediately followed by the nomination of at least a dozen current or former lobbyists to high position. Followed by a Treasury secretary who allegedly couldn't understand the payroll tax provisions in his 1040. Followed by Tom Daschle, who had to fall on his sword according to the new Washington rule that no Cabinet can have more than one tax delinquent.

The Daschle affair was more serious because his offense involved more than taxes. As Michael Kinsley once observed, in Washington the real scandal isn't what's illegal, but what's legal. Not paying taxes is one thing. But what made this case intolerable was the perfectly legal dealings that amassed Daschle $5.2 million in just two years.

He'd been getting $1 million per year from a law firm. But he's not a lawyer, nor a registered lobbyist. You don't get paid this kind of money to instruct partners on the Senate markup process. You get it for picking up the phone and peddling influence.

At least Tim Geithner, the tax-challenged Treasury secretary, had been working for years as a humble international civil servant earning non-stratospheric wages. Daschle, who had made another cool million a year (plus chauffeur and Caddy) for unspecified services to a pal's private equity firm, represented everything Obama said he'd come to Washington to upend.

And yet more damaging to Obama's image than all the hypocrisies in the appointment process is his signature bill: the stimulus package. He inexplicably delegated the writing to Nancy Pelosi and the barons of the House. The product, which inevitably carries Obama's name, was not just bad, not just flawed, but a legislative abomination.

It's not just pages and pages of special-interest tax breaks, giveaways and protections, one of which would set off a ruinous Smoot-Hawley trade war. It's not just the waste, such as the $88.6 million for new construction for Milwaukee Public Schools, which, reports the Milwaukee Journal Sentinel, have shrinking enrollment, 15 vacant schools and, quite logically, no plans for new construction.

It's the essential fraud of rushing through a bill in which the normal rules (committee hearings, finding revenue to pay for the programs) are suspended on the grounds that a national emergency requires an immediate job-creating stimulus -- and then throwing into it hundreds of billions that have nothing to do with stimulus, that Congress's own budget office says won't be spent until 2011 and beyond, and that are little more than the back-scratching, special-interest, lobby-driven parochialism that Obama came to Washington to abolish. He said.

Not just to abolish but to create something new -- a new politics where the moneyed pork-barreling and corrupt logrolling of the past would give way to a bottom-up, grass-roots participatory democracy. That is what made Obama so dazzling and new. Turns out the "fierce urgency of now" includes $150 million for livestock (and honeybee and farm-raised fish) insurance.

The Age of Obama begins with perhaps the greatest frenzy of old-politics influence peddling ever seen in Washington. By the time the stimulus bill reached the Senate, reports the Wall Street Journal, pharmaceutical and high-tech companies were lobbying furiously for a new plan to repatriate overseas profits that would yield major tax savings. California wine growers and Florida citrus producers were fighting to change a single phrase in one provision. Substituting "planted" for "ready to market" would mean a windfall garnered from a new "bonus depreciation" incentive.

After Obama's miraculous 2008 presidential campaign, it was clear that at some point the magical mystery tour would have to end. The nation would rub its eyes and begin to emerge from its reverie. The hallucinatory Obama would give way to the mere mortal. The great ethical transformations promised would be seen as a fairy tale that all presidents tell -- and that this president told better than anyone.

I thought the awakening would take six months. It took two and a half weeks.

letters@charleskrauthammer.com

 

[Kirkhill]

In keeping with the above and headlines like US Senate Struggling  and Flaherty wants more faster......

Is it just my little corner of the world where everything seems to be moving along pretty much as it was before.  People may have stopped buying but nobody is dying in the streets.  The reason people have stopped buying because they are being told that the guys in charge don't know what they are doing.  This is news?  Not so much.  Except that its some of those guys in charge that are admitting they don't know what they are doing.

If they would just sit down and stop fidgeting we might be able to figure out what the "natural' state of the economy is long enough for the great unwashed to get a sense of how things will be in a couple of months and starting risking some buying decisions again.  As long as this mob of headless chickens continues to run in circles, screaming and shouting, this ship will never steady up long enough to establish a course to correct.  (oooh, luvverly mixed metaphor).

 

[a_majoor]

Ah Kirkhill, if people were to know what a functioning free market economy looked like, then they would not demand State intervention in the economy:

http://jerrypournelle.com/view/2009/Q1/view556.html#Wednesday

The bad news is that the "stimulus" bill, which is the largest appropriations bill in the history of the world, is still on track for passage. It nationalizes a lot of the economy, and once those steps are taken, the Iron Law of Bureaucracy will see to it that the institutions created by it will remain. Forever. I have a few more words on that over in mail.

The tax cut provision of the "stimulus bill" seem aimed at solidifying party control: most of it is transfer payments to people who don't now pay taxes. In the US 40% don't pay federal taxes. If any large number of those are given money as transfer payments they will learn to rely on them. At which point they will be motivated to vote. And community organizers will see that they do vote. Now understand: many of those who get negative income taxes do necessary work and they aren't very well paid. The question becomes, is that a federal problem, and should it be dealt with by transfer payments? Because once this is instituted, it's going to be pretty permanent. Those affected by it will be mobilized to defend it, and it will mean more to them than it does to those opposed. So it goes.

It does look as if we are going to have a sea change, a fundamental change in the relationship between the United States and its people. There was such a change during Roosevelt's time, when Washington went from being a small town in Maryland to the Capital of a Federalized United States. There sill be another, I think, now.

The Daschle story illustrates it nicely. Here is a Senator from a small state, a man of charm and ability. He failed of reelection, went to work for a law firm although he is not a lawyer, and the firm thought enough of his abilities that it put at his disposal a limousine and driver at a cost which we can estimate from the fact that Daschle's taxes on that perk came to some $128,000. He became a multi-millionaire in a short time after leaving the Senate in 1994. (He spent 4 years in the Air Force as an Intelligence Officer, and the rest of his career from 1978 is in the House and Senate.)

His skills, in other words, are in government. Naturally he was hired by a lobbyist firm after he was defeated for Senate; and one notes that his skills as a lobbyist were worth millions, on which he mostly paid taxes except for overlooking the use of his limousine and driver. Why were his skills worth so much money? Because no firm dares not hire someone like Daschle. Bill Gates tried that for a while: at one time the only Washington office Microsoft maintained was a sales force. This continued well into the 1990's when the government began to annoy Gates and try to break up Microsoft. Naturally. Government hates being ignored. Gates was not paying his feudal fees to the Lords of Washington, and had to be punished for it. He learned his lesson, and now Microsoft spends millions on Washington lobbying, with parties for Congressional Staffers, "information trips", and the whole panoply of perks that government employees in all branches -- Legislative, Executive, and Regulatory -- have come to expect.

The flow of money to Washington continues and grows, and always will. No one can escape paying tribute to the Lords of Government. The "stimulus bill" will bring change we can believe in -- change in the same direction as before, under Roosevelt, under Johnson, under Clinton, under Bush: greater growth in government, larger government payrolls, more perks for the Lords of Washington.

And I need to remember to be thankful. I am cancer free. Despair is a sin. I am free to write this essay and you are free to read it. And Moore's Law continues to empower individuals. We each of us have more computing power than the government ever had before the turn of the Millennium. Perhaps we will learn to use that. And some day we will open up a new frontier. Frontiers always have more freedom. There are novels in that. Come to think of it, Charlie Sheffield and I wrote one of them...

Now back to work.

Perhaps we need to host a tea party for our American friends........

 

[a_majoor]

Economics 102: "Stocks" (the underlying wealth) vs "Flows" (the movement of wealth). If the American people actually mobilize their efforts, they have the resources to wrestle the government and the Grasping hand of the State to the ground. Tea, anyone?

http://www.instapunk.com/archives/InstaPunkArchiveV2.php3?a=1648#IP1648

More Simple Arithmetic

PREVIOUS LESSON. Nancy Pelosi's little gaffe yesterday about 500 million Americans losing their jobs every month that the "stimulus" package isn't passed should be a reminder that the numbers being tossed around in Washington, DC, these days have long since crossed over into the Land of Oz.

The truth is that federal government spending, however huge the numbers sound, can't have a very large positive effect on the economy. Why? Arithmetic.

The Gross Domestic Product of the United States in 2008 was approximately $14.3 trillion. Let's look at the actual number:

$14,300,000,000,000

Got that? Okay. The total cost of the stimulus package, so far, is $925 billion. Let's pretend that every dollar of the package will add directly to the GDP.

$14,300,000,000,000
+    925,000,000,000
$15,225,000,000,000

Impressed? Or just drawing a blank? Well, what if we cut these numbers down to a size us ordinary mortals can comprehend?

$14,300,000,000,000
+    925,000,000,000
$15,225,000,000,000

Are you impressed now? The way the Democrats want you to calculate it (in their dreams anyway), the stimulus bill will grow the U.S. economy by about 6.5 percent, which would be a very good year even in times of prosperity. If the $14,300 were your annual income and someone offered you $925, would you take it? Yes?

What if you could only get the $925 if had to spend it all on specific things: installing new rain gutters, planting some bushes in the front yard, adding a wheelchair ramp to your front door, and laying in a year's supply of condoms? Still interested?

What if it turns out that the money is actually not a gift but a loan? You see, the government doesn't actually have the $925. It has to borrow the principal with you as a co-signer, and you have to immediately begin repaying principal plus interest, which on average at the end of 2008 was about 4 percent. In fact, it's a lot like a mortgage. Now your $925 isn't a 6.5 percent increase in this year's income but something considerably less than that.

Still on board? Really? There are are a couple of other strings attached you may want to know about. You're already pretty heavily in debt, and as we've seen, the $925 is kind of a one-time thing because those condoms and the new rain gutter aren't going to earn you any money next year. If you should face some kind of additional emergency later this year or next, it's going to be much harder and more expensive to procure the loan you need then, and you might not be able to get it at all. And please don't forget, that $925 less principal and interest payments isn't money in the bank; it's in the wheelchair ramp.

Are you feeling stimulated?

I know you can make the argument that even if this kind of stimulus doesn't help you much, it might help others and so you should go along with it. The $925 may not be purchasing something you wanted, but it's good news for the rain gutter contractor, the landscaper who put in the bushes, the carpenter who built the ramp, the lumber yard where he got the materials, and the drugstore where you bought the condoms. Except that these are all one-time benefits for them as well. Nobody's power to earn future income has been improved in any way. And you're paying for it.

For how long? It's possible that the $925 you got was a long-term loan, and you'll be paying 4 percent or more on the principal for years, maybe even a generation.

There's yet another potential downside. If the loan papers you signed said anything about "creating jobs" through all this directed spending, it may well be the case that your principal liability is a lot more than $925. It might be that you've actually agreed to long-term contracts with the rain gutter people and the landscaper, that you're now on the hook to pay them every year for more gutters you don't need and more bushes you don't want.

Feeling more prosperous yet? Or would you prefer to have your gross tax rate reduced by 6.5 percent instead? This time, I'll let you do the math.

Now. Are you ready to talk about bailouts?

Our new president is talking all high and mighty about what he will and will not tolerate from the businessmen he's rescuing with government funds. Sounds like he has a lot of power, doesn't it?

How much is he spending on these bailouts anyway? Some estimates run as high as $3 trillion in troubled asset purchases and stock ownership in ailing corporations deemed too big to fail. The total cost of such "bailouts" strikes most economists as a stupendous figure, even a backbreaking figure. Does this mean the president is essentially buying a majority interest in the asset base of the U.S. economy? Is that why he's handing down commandments like Moses on Mt. Sinai?

The total estimated net worth (wealth) of  U.S. households is estimated at $60 trillion. (Have you ever heard that number before?) The government's acquisition of $3 trillion worth is about 5 percent of that. And it's the 5 percent that's most in danger of losing all its value.

Indeed, that's the most relevant fact about the government's power when it intervenes in asset ownership in this way. Almost all its power is negative. It absolutely has the power to reduce the value of  its $3 trillion investment to zero. In so doing, it can also seriously undermine the value of the $57 trillion that remains in private hands. But with a mere five percent stake, it cannot fundamentally change business practices by bullying the institutions under its control. Management of the other 95 percent of the asset base will continue to be ruled by self-interest and the laws of economics. Obama can decree that the executives he owns are limited to $500,000 a year in income (or $1 if he so chooses), but without passing new laws he cannot alter the behavior of the market as a whole one whit. If all the people who know the most about the banking and financial businesses of the United States leave Wall Street for jobs in financial and other companies not owned by the government, Obama will have succeeded only in destroying those assets under his stewardship. Are there better-paying jobs for financial executives in the other 95 percent of the economy? You tell me.

And, again, without compounding the business woes of the nation by driving the bailout companies into dissolution, there can be no excuse for further government acquisitions in the private sector. The market is more powerful than the president. And if Obama should seek more powers of interference after completing the ruin of Wall Street and Detroit, on what basis should we, or would we, trust him to do a better job in his next amateurish round of presidential Monopoly?

$60 trillion. Think about that number. That's the real power of "we, the people." It's the shoulder behind our votes if we will only begin to believe again in our own might more than we do in a feckless, unproductive government that seeks to buy our faith with a piddling $925 billion they'll have to borrow from us before they can get their pictures taken giving it away.

Who's got the real power? Keep asking yourselves that question until you fully understand the answer. And when you do understand, never yield that power without a fight.

 

[a_majoor]

Well the truth is out there and now in the open:

http://pajamasmedia.com/richardfernandez/2009/02/07/mighty_mouse/

Here I come to save the day
Support Pajamas Media; Visit Our Advertisers

Wikipedia defines political risk the effect of government actors on the outcome of a business decision.

    Broadly, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions—or “any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives.”. Political risk faced by firms can be defined as “the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industrial, income, labour, and developmental), or events related to political instability (terrorism, riots, coups, civil war, and insurrection).”

The American Spectator argues that a the economic meltdown of 2008 was in part the result of bad government policy on the economy. From that perspective, the market is simply discounting the bad political decisions of the last 20 years.  It is reflecting the economic cost of accumulated blunders in the market. The Spectator argues that both the Republican and Democratic parties have been to blame. It writes, “neither political party, and no administration, is blameless; the honest answer, as outlined below, is that government policy over many years caused this problem. The regulators, in both the Clinton and Bush administrations, were the enforcers of the reduced lending standards that were essential to the growth in home ownership and the housing bubble.”

Some may disagree about the apportionment of blame, argue which government policies were at the root of the political risk but that doesn’t alter the fact that some government action partially caused our current woes. Without identifying the actual policies which have contributed to the failure, simply calling for more “regulation” is about as empty as calling for “more drinks” in a tavern where some of the liquor has been poisoned. If government is part of the problem, not everything government plans to do will be part of the solution.

Calling for “political reform” rather than for “more regulation” is probably a better way of characterizing what needs to be done to reduce the political risk which has crashed the system. The difference between these two concepts is an important one. But nobody wants to make that distinction when their ideological goal is to disculpate government from the fiasco. The name of the game is to throw the onus upon “evil capitalists” when what you want is simply more power. Tony Abbott(i), a former cabinet member under the Howard government, recently criticized current Australian Prime Minister Kevin Rudd’s proposals to turn the country into a guided economy.  His basic critique is simply this: how can the socialists be against chickens when they live on eggs?

    As Prime Minister of Australia, Kevin Rudd has to be taken seriously even though he doesn’t deserve to be on the strength of this week’s extended essay in The Monthly. His declaration that “the great neo-liberal experiment of the past 30 years has failed” is pretentious and self-serving twaddle. It’s just not true, as Rudd himself must know….

    With its crusading tone and almost total absence of argument from fact, Rudd’s essay is more of a religious sermon than a work of serious political and economic analysis. It involves three articles of faith: first, that the past 30 years has witnessed the triumph of extreme capitalist ideology; second, that this kind of capitalism has comprehensively failed; and third, that only social democratic political parties can be trusted to shape the future. All of these propositions are demonstrably false.

Ultimately it is an argument over whether the current economic crisis justifies the bureaucratic demand for more power over our money. The debate in Australia mirrors, on a smaller scale, the argument in America about the merits of Hope and Change in general and the stimulus package in particular. But the Costello piece also underscores the non-debate. Nobody wants to talk about which government policies got us into this problem in the first place. The conversation seems to be confined to ways in which government can get us out of it. And that is an incomplete analysis. To the extent that “political risk” — bad policies — got the world into this mess it makes sense that government must get us out of it. But it doesn’t automatically follow that anything government does will necessarily contribute to the solution. One of the ways government can “help” is to reform itself. That means an examination of the ways in which it contributed the “political risk” in the first place so that a good faith effort can be made to fix the problems.

Unfortunately, some politicians see the current crisis as an “opportunity” to push an agenda. They haven’t stopped to consider to what extent that agenda may exacerbate the very problems they are trying to solve. The WSJ captured the philosophy of the present administration in White House Chief of Staff Rahm Emmanuel’s remarks that “you never want a serious crisis to go to waste. Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before.” Emmanuel subsequently proceeded to enumerate a list of social spending items some of which arguably sound like new versions of the same community housing spending which may have been one of the original “political risks” to start with. When asked whether the stimulus package had turned into a spending spree, President Obama acknowledged it with pride. “That’s the point. Seriously, that’s the point.”

But that’s not the point; not the point at all. And it’s a shame BHO doesn’t realize it and a greater shame if he does. The real question is whether current government solutions to the crisis contribute to political risk or reduce it. That means knowing what’s broke before applying the screwdriver to the screw.

Who knows what the future brings? But maybe we should look before we leap.

 

[GAP]

I have no clue whether his or anyone else's plan/program is going to rapidly change the economy, but at least he is articulate......a vast improvement

Obama says world waiting for U.S. to take action
Updated Mon. Feb. 9 2009 8:20 PM ET CTV.ca News Staff Article Link

U.S. President Barack Obama said "the citizens of our country and all countries" are waiting for America to take action on the economic crisis, in his first-ever primetime news conference.

"Last month, our economy lost 598,000 jobs, which is nearly the equivalent of losing every single job in the state of Maine," said Obama Monday evening

"If there's anyone out there who still doesn't believe this constitutes a full-blown crisis, I suggest speaking to one of the millions of Americans whose lives have been turned upside down because they don't know where their next paycheque is coming from."
More on link

 

[a_majoor]

Stuff like this makes you wonder how much of the "crisis" was engineered to shift the economy and State power for partisan political purposes. Add raw power grabs like trying to place the US Census under control of the White House combined with the intentional and unintentional effects of the Stimulus package make the crisis seem like more than just an accident:

http://www.newgeography.com/content/00579-stimulus-plan-caters-privileged-public-sector

Stimulus Plan Caters to the Privileged Public Sector
by Joel Kotkin 02/10/2009

Call it the Paulson Principle, Part Deux.

Under the now thankfully-departed Treasury secretary, we got the first bailout for the undeserving – essentially, members of his own Wall Street class.

Now comes the Democratic codicil to the P. Principle. It's a massive bailout and expansion of the public-sector workforce as well as quasi-government workers in fields like health and education. Not so well-rewarded – except for expanded unemployment benefits – will be those suffering the brunt of the downturn, such as construction and manufacturing workers, whose unemployment is now heading north of 10%.

Indeed, a close look at the current stimulus plan shows that as little as 5% of the money is going toward making the country more productive in the longer run – toward such things as new roads, bridges, improved rail and significant new electrical generation. These are things, like the New Deal's many construction projects, that could provide a needed boost to our sagging national morale.

Instead, we are focusing once again on those who have been getting the best deal for doing the least. The Bureau of Labor Statistics reports state and local government workers get paid 33% more than their private sector counterparts. If you add in the pensions and other benefits, the difference is over 40%.In New York alone, public-sector wages and benefits since 2000 have grown twice as fast as those of the average private-sector worker.

Egregious stories of overpaid public workers are legion. In suburban Chicago, for example, some school administrators are making over $400,000 with benefits and incentives. Recent reports out of Boston suggest hundreds of firefighters and police officers make well in excess of $100,000 a year. And of course, there are the California prison guards who can make upwards of $300,000 a year with overtime.

Of course, most public sector employees are not so lucky. But, for the most part, these workers enjoy protections, like health care for life, that most others could only dream about. Many also have pensions that allow them to retire in their 50s, while some of us will be hod-carrying well into our 70s.

This all means that the potential price tag for swelling the public workforce could ultimately run into the trillions, a number Washington and Wall Street now use the way we used to talk about billions. At very least, we should be asking new public workers, or those whose jobs are being bailed out by the stimulus package, to make the kind of sacrifices demanded, say, of those working at General Motors. We could, for example, make them wait 'til age 60 or even 65 to retire.

To no one's surprise, much of this favoritism has to do with party politics. The basic truth is that auto and other industrial workers, like those in construction, have become somewhat expendable in the eyes of some Democrats – in part because they do not always follow the party line. In contrast, public-employee unions are the politically correct rock upon which much of the party now rests.

This oversized influence is relatively recent. Yet as private-sector unions have waned, those in the public sector have waxed. They have been able to extort enormous benefits out of City Halls, counties, states and, of course, Congress.

In the process, they have become – like the Wall Street financiers before them – a kind of privileged class. In the case of some Chicago garbage men, they often don't work anything near 40 hours a week but are paid as if they did. Others engage in elaborate schemes to take advantage of injuries, real or imagined. Who would have thought that punching tickets for the Long Island Rail Road would be so hazardous that many retired employees use these "injuries" to collect disability money – in order to play golf or take another job?

This can all get very expensive, especially given the poor immediate prospects that the stock market can finance these additional pensions. Some day the millennial generation should initiate a class action suit for placing this unconscionable burden on them.

Right now, though, there's little reason to expect President Obama and the majority Democrats will change direction. The public sector unions are often among the largest contributors to Democratic campaigns. They have also cultivated strong ties with the Washington media – some of whom, like The Washington Post's Harold Meyerson, have argued over the years that these public workers are increasingly synonymous with the future middle class.

There's certain logic to this. Insulated from global competition, public employees have the ability to ratchet up their demands almost without serious limit. After all, even the most radical Republicans are not proposing to have the postal system transferred to Vietnam. We certainly don't want to outsource our police services to China or Russia.

So what's not to like? Well, nothing – if the Roman Empire or China's Qing Dynasty is your idea of a historical role model. Those regimes epitomize what happens when most of a nation's wealth goes to support an ever-expanding bureaucracy and associated private-sector rent-seekers at the expense of both private commerce and public infrastructure. Look in the dictionary under the word decline.

We can already see its early signs. Across the country, cities are being forced to choose between maintaining their basic infrastructure and honoring the medical, retirement and other pension obligations owed to retired public workers. The head of the Atlanta Fire Fighters' Pension fund described groups like his as "the 800-pound gorilla in the room." This primate has the power to stomp on the ability of states, cities and counties to put money into improving much of anything or even considering lowering taxes.

Over time, though, one can hope President Obama will adjust his course. At some point, the middle- and working-class stiffs in the private sector – unionized or not – will question a stimulus that neglects their aspirations at the expense of protecting the imagined rights of yet another privileged class. Individually, public employees may not be as noxious as John Thain, but there are more of them. And over time, they could cost us even more.

As a charismatic leader with strong union support, Obama could try to pull a "Nixon in China" and insist on reforming the benefits enjoyed by public workers as a condition of federal help. He wouldn't be the only leader attempting a return to sanity. The idea of challenging public sector privilege has gained some currency in Ireland and France, as well as among the Liberal Democrats in the U.K. (interpolation: good luck with that. The author is suggesting the Democrat Administration and Congress leave the comfortable support of their public sector union allies?)

Such a bold initiative would earn President Obama not only gratitude from private sector workers but also posterity. But it would take courage, too; the mere suggestion of reform could result in a rash of strikes (as in Greece) and ceaseless yammering from union lobbyists and their allies on Capitol Hill.

Of course, public-sector unions and their supporters will argue that they constitute an important part of the nation's middle class and that their benefits are therefore sacrosanct. Yet it's increasingly evident that this strata of middle-class workers live in a different reality than typical private sector shmoes. As George Orwell suggested in Animal Farm, it seems some animals are more equal than others.

This article originally appeared at Forbes.

Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

 

[a_majoor]

The model of how to fix things. For the United States, they have a first chance if the Republican party retakes the Congress in 2010 (and is led by a "Newt Gingrich" equivalent). If that happens, then part of the 2010 porkfest and all of the 2011 porkfest contained in the "stimulus package" can be cancelled. The incoming administration in 2012 will have a huge mess to clean up, but all the next President has to do is apply this model to the circumstances of the day:

http://online.wsj.com/article/SB123431484726570949.html

ganomics vs. Obamanomics
The current president wants higher taxes, more regulation, more spending and loose money.
   
By PETER FERRARA

In his inaugural address, President Barack Obama said, "The question we ask today is not whether our government is too big or too small, but whether it works -- whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified." Or as administration spokeswoman Stephanie Cutter said in January, the touchstone is, "What will have the biggest and most immediate impact on creating private sector jobs and strengthening the middle class? We're guided by what works, not by any ideology or special interests."

Unfortunately, this rhetoric is not true. Mr. Obama's economic policy is following not what has been proven to work but liberal ideology.

The best way to understand this is to compare what's being proposed now with what Ronald Reagan accomplished. In 1980, amid a seriously dysfunctional economy, Reagan campaigned for president on an economic recovery program with four specific components.

The first was across-the-board reductions in tax rates to provide incentives for saving, investment, entrepreneurship and work. The second component was deregulation to remove unnecessary costs on the economy. In today's world, that would especially mean removing the onerous restrictions on energy production -- allowing drilling offshore and onshore for oil and natural gas, revival of the nuclear power industry, and construction of more electric power plants.

Third was the control of government spending. In 1981, Reagan forced through Congress not only his famed, historic tax cuts, but also a package of budget cuts close to 5% of the federal budget -- equivalent to roughly $150 billion today. In constant dollars, nondefense discretionary spending declined by 14.4% from 1981 to 1982, and by 16.8% from 1981 to 1983. Moreover, in constant dollars, this nondefense discretionary spending never returned to its 1981 level for the rest of Reagan's two terms. By 1988, this spending was still down 14.4% from its 1981 level in constant dollars.

Even with the Reagan defense buildup, which helped win the Cold War, total federal spending declined to 21.2% of GDP in 1989 from 23.5% of GDP in 1983. That's a real reduction of 10% in the size of government relative to the economy.

The fourth component of the Reagan recovery plan was tight, anti-inflation monetary policy, which was spectacularly successful. Inflation was cut in half to 6.2% in 1982 from 13.2% in 1980, and cut in half again to 3.2% in 1983.

know such policies work because they turned around in just two years an economy far worse than today's. We were suffering from multiyear, double-digit inflation, double-digit unemployment, double-digit interest rates, declining incomes, and rising poverty.fact, what we suffer with today is not the worst economy since the Great Depression, but the worst economy since Jimmy Carter -- the last time liberals were dominant politically and intellectually.

The Obama administration's economic policies do not include any of the four Reagan components. In fact, the stimulus plan is the greatest increase in government spending in the history of the planet. Meanwhile, the Fed is furiously reinflating, sowing more havoc down the line. Mr. Obama is still promising future increases in tax rates by letting the Bush tax cuts lapse, because for ideological reasons he thinks even current rates are too low. And instead of deregulating for more energy production, he is still promising massive increases in regulatory barriers -- through global warming cap-and-trade legislation -- to increased production from proven energy sources to serve an extreme environmentalist ideology.

This is why America seems so hopeless right now, and so depressed. We are stuck going in exactly the wrong direction on economic policy because of currently dominant ideological fashions.

A natural economic recovery will begin sometime this year, not because of the president's policies, but because soon this will be the longest recession since World War II. However, thanks to the administration's retrograde policies -- cut from the cloth of the 1970s and even the 1930s -- the recovery will not be what it should be. Rather, unemployment will remain too high, and inflation will resurge, recreating the disastrous economic results we suffered the last time Keynesian policies were dominant.

Mr. Ferrara is director of entitlement and budget policy for the Institute for Policy Innovation. He served in the White House Office of Policy Development under President Reagan.

 

[a_majoor]

There are lots of charts, follow the link to see them. Without further comment:

http://pajamasmedia.com/blog/our-recession-began-in-earnest-after-obamas-election/

Democrats Halted Recovery, Derailed Economy Last Summer

Posted By Tom Blumer On February 12, 2009 @ 12:00 am In . Feature 01, . Positioning, Money, Politics, US News | 60 Comments

January’s [1] Employment Situation Report from Uncle Sam’s Bureau of Labor Statistics (BLS) was even worse than expected. Seasonally adjusted employment fell by 598,000 jobs and the unemployment rate rose to 7.6%.

In [2] his Saturday address that followed this news, President Barack Obama was correct in pointing out that 3.6 million jobs have been lost since the recession, at least as “defined” [3] by the National Bureau of Economic Research (NBER), began. The recession, [4] as normal people define it (”a decline in gross domestic product [GDP] for two or more consecutive quarters”), began in the third quarter of 2008 and became official late last month when [5] the fourth quarter came in negative.

What Mr. Obama “somehow” forgot to tell us is that almost 1.8 million of those seasonally adjusted job losses have occurred since his election, when his non-stop economic [6] no-confidence game went into high gear, and that 2.8 million jobs have gone away during the seven months that began in July 2008, the first full month of [7] the POR (Pelosi-Obama-Reid) economy:

[8]

Beyond that, in comparing the raw month-to-month figures, i.e., before seasonal adjustment, it’s clear that conditions on the ground in the real economy are in a worse state of decay than the seasonally adjusted data would indicate. The November 2008 to January 2009 economy underperformed the same months of the previous year by over 2.2 million jobs:

[9]

In the same report, [10] the BLS did something else that virtually everyone ignored: it issued its annual comprehensive revision to previously released jobs numbers.

Let’s compare the last two-plus years before and after the revision:

[11]

The blue boxes show that BLS’s revision added 259,000 seasonally adjusted jobs to the fourth quarter of 2007 (500,000 vs. 241,000).

Yet the NBER claims that the recession started in December 2007, in a month when the economy added 120,000 jobs.

The BLS revision also shows that seasonally adjusted employment fell by 335,000 more jobs in the first half of 2008 than was previously reported. You would think that this might make NBER’s case that the recession was in progress during early 2008 stronger. To an extent, yes; but their case is nowhere near strong enough — at least not yet.

Comparing the first half of 2008 to previous recessionary and non-recessionary periods gives plenty of justification to doubt NBER’s call.

Here is how NBER defined a “recession” [3] in its December 2008 announcement:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. …

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity. …

The committee believes that the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real gross domestic product and the quarterly estimate of real gross domestic income, both produced by the Bureau of Economic Analysis.

Looking at GDP and employment (space prevents reviewing the others), here is how the four most recent six-month periods contained within NBER-defined recessions compare:

[12]

The first half of 2008 sticks out for three reasons:

It’s the only period of the four showing positive annualized GDP growth in both quarters. In fact, the first half of 2008 is the only recessionary period NBER has ever identified beginning with two consecutive quarters of positive growth.
It’s the only period showing positive six-month GDP growth — and at a well-beyond-trifling level to boot.
Even after BLS’s revisions, it has the lowest seasonally adjusted labor force percentage shrinkage of the four. The second half of 1990, the second-lowest period, came in with GDP growth over 3% lower.
Now let’s look at a couple of quarters where job growth contracted that NBER decided were not recessionary:

[13]


Each of the two non-recession quarters in this table has lower GDP growth than the second quarter of 2008, while job losses during the first quarter of 2002 were almost as bad as 2008’s first six months.

Keep in mind that the 1990-1991 and 2001 recessions [14] are considered “among the … mildest on record.” So it’s safe to say that even if NBER’s recession call is somehow ultimately correct, the first half of 2008 in isolation would likely have been, even by their stretched definition, even milder.

But sadly, things got worse. They didn’t have to.

It’s revealing that [3] NBER’s own report acknowledges in at least three different places that the economy was improving during 2008’s second quarter (bolds are mine), but got stopped in its tracks after that:

The income-side estimates (of gross domestic income) reached their peak in 2007Q3, fell slightly in 2007Q4 and 2008Q1, rose slightly in 2008Q2 to a level below its peak in 2007Q3, and fell again in 2008Q3.

Our measure of real personal income less transfers peaked in December 2007, displayed a zig-zag pattern from then until June 2008 at levels slightly below the December 2007 peak, and has generally declined since June.

The Federal Reserve Board’s index of industrial production peaked in January 2008, fell through May 2008, rose slightly in June and July, and then fell substantially from July to September.

Thus, it’s reasonable to believe that if the architects of the POR economy and their party hadn’t done their confidence-shattering “magic” during the second half of 2008, the economy may very well have recovered.

But the terrible triumvirate of Nancy Pelosi, Barack Obama, and Harry Reid insisted on starving the economy of energy, and persisted with proposals for jaw-dropping tax increases on the most productive. Finally, their party’s decades-long romance with lending mortgage money to unqualified borrowers came to a head at the “worst” possible time — for the nation, not for them — with the multibillion-dollar implosions at Fannie Mae and Freddie Mac, followed by the spread of the wreckage to other financial institutions.

Now the president and his party are rushing a “stimulus” package through Congress and trash-talking the economy on a daily basis in an attempt to hold back a rising tide of public opposition. There’s one big problem, as Idaho Democratic Congressman Walt Minnick [15] has pointed out: 80% of the $800-$900 billion or more in spending “doesn’t create jobs in this year and next.”

The mislabeled “stimulus” will, if it passes, almost certainly extend the conditions we saw during the last half of 2008. Much more of this, and regardless of what NBER says, we’ll soon be thinking of 2008’s first half as “the good old days.”


--------------------------------------------------------------------------------

Article printed from Pajamas Media: http://pajamasmedia.com

URL to article: http://pajamasmedia.com/blog/our-recession-began-in-earnest-after-obamas-election/

URLs in this post:
[1] Employment Situation Report: http://www.bls.gov/news.release/archives/empsit_02062009.htm
[2] his Saturday address: http://www.whitehouse.gov/blog_post/compromise1/
[3] by the National Bureau of Economic Research: http://www.nber.org/cycles/dec2008.html
[4] as normal people define it: http://www.investorwords.com/4086/recession.html
[5] the fourth quarter came in negative: http://bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&FirstYear=1990&LastYear=2008&a
mp;Freq=Qtr

[6] no-confidence game: http://pajamasmedia.com../../../../../blog/the-president9s-no-confidence-game/
[7] the POR (Pelosi-Obama-Reid) economy: http://pajamasmedia.com../../../../../blog/the-por-pelosi-obama-reid-economy-tanks-a-lot/
[8] Image: http://pajamasmedia.com/files/2009/02/blsseasonallyadjthru0109.jpg
[9] Image: http://pajamasmedia.com/files/2009/02/blsnotseasonallyadjthru0109.jpg
[10] the BLS did something else: http://www.bls.gov/news.release/empsit.nr0.htm
[11] Image: http://pajamasmedia.com/files/2009/02/blspreandpostrev2006to2008.jpg
[12] Image: http://pajamasmedia.com/files/2009/02/recessionscompared1990to2008.jpg
[13] Image: http://pajamasmedia.com/files/2009/02/recessionsnot2002and2003.jpg
[14] are considered: http://online.wsj.com/article/SB120078173684203245.html
[15] has pointed out: http://www.bizzyblog.com/2009/02/09/all-you-need-to-know-about-the-stimulus-bill/#comment-127470

 

[a_majoor]

Of course, when it dosn't work, everyone will act surprised:

http://www.mcclatchydc.com/227/story/62082.html

Will the stimulus actually stimulate? Economists say no

By Kevin G. Hall | McClatchy Newspapers

WASHINGTON — The compromise economic stimulus plan agreed to by negotiators from the House of Representatives and the Senate is short on incentives to get consumers spending again and long on social goals that won't stimulate economic activity, according to a range of respected economists.

"I think (doing) nothing would have been better," said Ed Yardeni, an investment analyst who's usually an optimist, in an interview with McClatchy. He argued that the plan fails to provide the right incentives to spur spending.

"It's unfocused. That is my problem. It is a lot of money for a lot of nickel-and- dime programs. I would have rather had a lot of money for (promoting purchase of) housing and autos . . . . Most of this plan is really, I think, aimed at stabilizing the situation and helping people get through the recession, rather than getting us out of the recession. They are actually providing less short-term stimulus by cutting back, from what I understand, some of the tax credits."

House and Senate negotiators this week narrowed the differences between their competing stimulus plans. In so doing, they scrapped a large tax credit for buying automobiles that would've caused positive ripple effects across the manufacturing sector. They settled instead on letting purchasers of new vehicles deduct from their federal taxes the state and local sales taxes on the cars they bought.

The exception to this is for buyers of plug-in hybrids, cars that run off a battery that can be charged at home or in the office. Buyers of these vehicles, available in very limited supply, could get a tax credit of up to $9,100.

A Republican-backed proposal that would've provided a $15,000 tax credit to first-time homebuyers also was scaled back dramatically. Instead, the compromise provides first-time homebuyers a tax credit of up to $8,000, and it doesn't have to be repaid over the life of the mortgage. Incentives already in place offer buyers a $7,500 credit that must be repaid, so the bill is an improvement, but short of what many economists think is necessary.

Another reason that some analysts frown on the stimulus is the social spending it includes on things such as the Head Start program for disadvantaged children and aid to NASA for climate-change research. Both may be worthy efforts, but they aren't aimed at delivering short-term boosts to economic activity.

"All this is 25 years of government expansion jammed into one bill and sold as stimulus," said Brian Riedl, the director of budget analysis for the Heritage Foundation, a conservative policy research group.

The view wasn't much more supportive on the other side of the political spectrum. In a brief on the stimulus compromise, William Galston, a senior fellow at the center-left Brookings Institution and a former Clinton White House adviser, warned Thursday that a bank-rescue plan being finalized will make the $789 billion look like "pocket change."

"While the stimulus bill is a necessary condition for economic stabilization and recovery, it is hardly sufficient," Galston wrote. "As the lesson of Japan in the 1990s shows, fiscal stimulus without financial rescue yields stagnation — at best."

" . . . Serious observers believe that recovery cannot begin until we acknowledge that losses in the financial system amount to some trillions of dollars, rendering many institutions insolvent. The temptation will be to muddle along, hoping that these institutions can gradually regain strength without putting massive amounts of taxpayers' money at risk. If we go down that road, we are likely to end up with zombie banks whose balance sheets are riddled with near-worthless investments — banks that cannot lend to credit-worthy customers and who cannot trust one another," Galston wrote.

With the economy in a tailspin, doing nothing isn't an option, however.

"Something is better than nothing, and bigger was better than smaller in terms of the stimulus needed," said Chris Varvares, president of prominent forecaster Macroeconomic Advisers in St. Louis. "The economy needs a fiscal jolt."

Even some proponents of a stimulus are disappointed, however. Harvard University economist Martin Feldstein, a former adviser to President Ronald Reagan, was an early supporter. He said that government is now the only engine left to spark economic activity, but he said that the compromise falls short of what's needed.

"If the choice is between the current bill and an improved bill, I would say wait and improve the bill," Feldstein told CNBC on Wednesday after the compromise was announced. "I am disappointed with the structure of this bill."

Like Yardeni and other analysts, Feldstein wanted more incentives for consumers to make big purchases that have ripple effects across the economy. When a car is purchased, it helps not only the carmaker, but its suppliers, the trucking companies and railroads that transport cars, the states that issue license plates and so on.

Still, could this stimulus get the U.S. economy back on its feet?

By itself, probably not. The stimulus plan, however, is supposed to work in tandem with new efforts by the Treasury and the Federal Reserve to rid banks of distressed assets that are poisoning their balance sheets, and with other federal efforts to halt mortgage delinquencies and foreclosures. Much will depend on the details of both federal attack plans, which the Obama administration promises are coming soon.

There's also the problem of time. Much of the stimulus is to be spread over a two-year period or longer — and 2009 looks increasingly bleak.

A Wall Street Journal survey of 52 mainstream economic forecasters published Thursday found that while most forecasters still think there could be slow growth by the second half of the year, that won't offset steeper-than-projected declines in the first half of 2009.

That means this is essentially a lost year for the economy. Most scenarios envision the economy picking back up again next year.

The president of the U.S. Chamber of Commerce, in a speech in Detroit Thursday, tried to put a brave face on the tough year ahead. Thomas Donohue acknowledged that big business didn't get in the stimulus bill some of the tax-relief measures it most wanted, but promised the Chamber's support.

"The bottom line is that at the end of the day, we're going to support the legislation. Why? Because with the markets functioning so poorly, the government is the only game in town capable of jump-starting the economy," Donohue said.

 

[tomahawk6]

Unfortunately this legislation will not put people to work. The "tax cut" will average $13 a week but will only apply to people with jobs as the cut is a reduction in payroll tax. TARP II will be in the range of $2 trillion and is certain to devalue the dollar and ignite inflation. No one is buying T bills so the treasury will just print the money. I dont expect the economy to rebound in time for the 2010 elections,plenty of time for the dem's to dig themselves a big hole.

 

[KingKikapu]

I wonder how the 2010 games will fare with such an economic fracas happening all around us.