US Economy

[a_majoor]

Not much longer now....

http://online.wsj.com/article/SB10001424052748704888404574547492725871998.html

The Coming Deficit Disaster

The president says he understands the urgency of our fiscal crisis, but his policies are the equivalent of steering the economy toward an iceberg.

By DOUGLAS HOLTZ-EAKIN

President Barack Obama took office promising to lead from the center and solve big problems. He has exerted enormous political energy attempting to reform the nation's health-care system. But the biggest economic problem facing the nation is not health care. It's the deficit. Recently, the White House signaled that it will get serious about reducing the deficit next year—after it locks into place massive new health-care entitlements. This is a recipe for disaster, as it will create a new appetite for increased spending and yet another powerful interest group to oppose deficit-reduction measures.

Our fiscal situation has deteriorated rapidly in just the past few years. The federal government ran a 2009 deficit of $1.4 trillion—the highest since World War II—as spending reached nearly 25% of GDP and total revenues fell below 15% of GDP. Shortfalls like these have not been seen in more than 50 years.

Going forward, there is no relief in sight, as spending far outpaces revenues and the federal budget is projected to be in enormous deficit every year. Our national debt is projected to stand at $17.1 trillion 10 years from now, or over $50,000 per American. By 2019, according to the Congressional Budget Office's (CBO) analysis of the president's budget, the budget deficit will still be roughly $1 trillion, even though the economic situation will have improved and revenues will be above historical norms.

The planned deficits will have destructive consequences for both fairness and economic growth. They will force upon our children and grandchildren the bill for our overconsumption. Federal deficits will crowd out domestic investment in physical capital, human capital, and technologies that increase potential GDP and the standard of living. Financing deficits could crowd out exports and harm our international competitiveness, as we can already see happening with the large borrowing we are doing from competitors like China.

At what point, some financial analysts ask, do rating agencies downgrade the United States? When do lenders price additional risk to federal borrowing, leading to a damaging spike in interest rates? How quickly will international investors flee the dollar for a new reserve currency? And how will the resulting higher interest rates, diminished dollar, higher inflation, and economic distress manifest itself? Given the president's recent reception in China—friendly but fruitless—these answers may come sooner than any of us would like.

Mr. Obama and his advisers say they understand these concerns, but the administration's policy choices are the equivalent of steering the economy toward an iceberg. Perhaps the most vivid example of sending the wrong message to international capital markets are the health-care reform bills—one that passed the House earlier this month and another under consideration in the Senate. Whatever their good intentions, they have too many flaws to be defensible.

First and foremost, neither bends the health-cost curve downward. The CBO found that the House bill fails to reduce the pace of health-care spending growth. An audit of the bill by Richard Foster, chief actuary for the Centers for Medicare and Medicaid Services, found that the pace of national health-care spending will increase by 2.1% over 10 years, or by about $750 billion. Senate Majority Leader Harry Reid's bill grows just as fast as the House version. In this way, the bills betray the basic promise of health-care reform: providing quality care at lower cost.

Second, each bill sets up a new entitlement program that grows at 8% annually as far as the eye can see—faster than the economy will grow, faster than tax revenues will grow, and just as fast as the already-broken Medicare and Medicaid programs. They also create a second new entitlement program, a federally run, long-term-care insurance plan.

Finally, the bills are fiscally dishonest, using every budget gimmick and trick in the book: Leave out inconvenient spending, back-load spending to disguise the true scale, front-load tax revenues, let inflation push up tax revenues, promise spending cuts to doctors and hospitals that have no record of materializing, and so on.

If there really are savings to be found in Medicare, those savings should be directed toward deficit reduction and preserving Medicare, not to financing huge new entitlement programs. Getting long-term budgets under control is hard enough today. The job will be nearly impossible with a slew of new entitlements in place.

In short, any combination of what is moving through Congress is economically dangerous and invites the rapid acceleration of a debt crisis. It is a dramatic statement to financial markets that the federal government does not understand that it must get its fiscal house in order.

What to do? The best option would be for the president to halt Congress's rush to fiscal suicide, and refocus on slowing the dangerous growth in Social Security, Medicare and Medicaid. He should call on Congress to pass a comprehensive reform of our income and payroll tax systems that would generate revenue sufficient to fund its spending desires in a pro-growth and fair fashion.

Reducing entitlement spending and closing tax loopholes to create a fairer tax system with more balanced revenues is politically difficult and requires sacrifice. But we will avert a potentially devastating credit crisis, increase national savings, drive productivity and wage growth, and enhance our international competitiveness.

The time to worry about the deficit is not next year, but now. There is no time to waste.

Mr. Holtz-Eakin is former director of the Congressional Budget Office and a fellow at the Manhattan Institute. This is adapted from testimony he gave before the Senate Committee on the Budget on Nov. 10.

 

[tomahawk6]

With 17m unemployed or under employed recovery is a pipedream of only the true believers. I have long felt that Obama is intentionally destroying the economy to hasten his socialist workers paradise. I also think that any follow administration will be putting Obama and his admistration on trial for corruption.

 

[a_majoor]

More "good news" on the economy as reality leaks out:

http://theblogprof.blogspot.com/2009/11/ap-economys-rebound-not-as-strong-as.html

AP: Economy's rebound not as strong as first thought. 3.5% Q3 GDP revised down to 2.8%

That "robust" 3.5% GDP growth rate in Q3 that the AP heralded as the end of the recession sans actual jobs? That just got reduced. A lot. As in down to 2.8% now. Even that is deceiving as consumer spending, which comprises 70% of the economy, declined 0.5% during the same period (Positive GDP Fraud! Consumer Spending DOWN 0.5%. GDP Up Because Of MASSIVE DEBT!). So how is it that the GDP increased in the 3rd quarter after consumer spending decreased? Well, that's got everything to do with the 'G' in the GDP - gross. That includes consumer spending, government spending, in fact all spending. So if the consumer spending is down, one way to artificially inflate the GDP number is to increase government spending with money that the government doesn't, by the way, have. In essence, the GDP number is positive due to increased debt! It's purchased on a government card that has no credit limit. Yet, the MSM has trumpeted the end of the recession after 4 straight quarters of negative GDP:And that bump in GDP came at the expense of this:And there is much more pain to come. This is unsustainable to the nth degree. From the AP via The Detroit News: Economy's rebound not as strong as first thought.

The economy grew at a 2.8 percent pace last quarter, as the recovery got off to a slower start than first thought.

The Commerce Department's new reading on gross domestic product wasn't as energetic as the 3.5 percent growth rate for the July-September period estimated just a month ago.

The main factors behind the downgrade: consumers didn't spend as much, commercial construction was weaker and the nation's trade deficit was more of a drag on growth. Businesses also trimmed more of their stockpiles, another restraining factor.

The new reading on GDP, which measures the value of all goods and services produced in the United States -- from machinery to manicures -- was a tad weaker than the 2.9 percent growth rate economists surveyed by Thomson Reuters had expected.

Still, the good news is that the economy finally started to grow again, after a record four straight losing quarters. The bad news is that the rebound, now and in the months ahead, probably will be lethargic.

Buried at the end of the piece is this:

Some economists believe the jobless rate could climb as high as 11 percent by the middle of next year before making a slow descent. It could take at least four years for the unemployment rate to drop back down to more normal levels.

It is, after all, all about that 3-letter word:




Today's news has no silver lining. Here is what has been happening with Biden's 3-letter word this year:

January US jobs lost: 598,000 jobs
February US jobs lost: 706,000 jobs
March US jobs lost: 742,000 jobs
April US jobs lost: 545,000 jobs
May US jobs lost: 345,000 jobs
June US jobs lost: 467,000 jobs
July US jobs lost: 247,000 jobs
August US jobs lost: 216,000 jobs
September US jobs lost: 263,000 jobs
October US jobs lost: 190,000 jobs

Total US jobs lost under Obama: 4,319,000 jobs
[/quote]

Remember that the stimulus package was supposed to stop the unemployment rate at 8%! A crisis could become a calamity? Remember that? Here's how that looks (via Moe Lane):



Note that the blue lines are the numbers that Obama's team came up with. So the actual unemployment rate is not only worse that what would happen with porkulus, but even worse than was predicted without it. And yet, with all the above news, Obama and Democrats continue to push for huge taxes via Obamacare and cap-and-trade. Yo Obama! You're going the wrong way!



UPDATE: Linked by Instapundit! Thank you Professor Reynolds! Glenn comments:

Has someone been hiding the decline?

Should have seen that one coming, especially since I've been reading and posting on the CRU email scandal for a few days now:

Leaked CRU computer program proves global warming scientific fraud
AP ignores CRU emails, instead says global warming accelerating! Quotes people in CRU emails!
Video: Climate Historian Dr. Tim Ball on the CRU email scandal
Searchable database of hacked CRU emails proving global warming fraud by scientists
CRU emails prove global warming fraud: GW scientists do "science"
CRU emails prove global warming fraud: GW scientists collude to manipulate data
GW scientists colluded to circumvent FOI requests of data
GW scientists discuss how to destroy journals that publish skeptics
GW scientists can't find actual global warming
GW scientists colluding to delete data 
'Hockey stick' authors hiding/manipulating data
CRU emails prove global warming fraud: GW scientists fantasize about physical violence against skeptics
But, that's why Glenn runs one of the biggest blogs on the planet...
[/quote]

 

[a_majoor]

As Glen Reynolds (Instapundit) says:

Nonstarter. No opportunity for graft

http://www.redstate.com/kevin_holtsberry/2009/12/04/rob-portman-calls-for-payroll-tax-holiday/

Rob Portman calls for payroll tax holiday

Posted by Kevin Holtsberry (Profile)

Friday, December 4th at 10:10PM EST

9 Comments
US Senate Candidate Rob Portman offers a rather bold proposal to stimulate the economy:

The Cincinnati Republican spoke in Cleveland Friday afternoon. Among his proposals was one that he maintains would jump-start both hiring, and spending.

Portman said “to spur immediate investment by employers and encourage consumption by employees; I support a one year payroll tax holiday. Beginning immediately…. for workers and employers on the first $50,000 of income.”

This idea has been debated within the context of the first stimulus package and has been a part of Newt Gingrich’s American Solutions plan since early summer.

I don’t think we can stimulate our way out of all of our economic troubles, and I am not sure how the tax holiday will play out, but it is certainly a lot better idea than what President Obama and Democrat leaders in Congress have come up with so far.

I hope to look into this issue more and offer a more detailed response. If Portman is serious I am sure this will be an issue on the campaign trail.

 

[a_majoor]

More on effective ways to reboot the economy. Many of these ideas have practical applications in Canada as well (or indeed anywhere: Japan could certainly use this). But stepping out of the way makes it difficult to engage in graft:

http://jerrypournelle.com/view/2009/Q4/view599.html#Saturday

I am preparing the column today.

From the Obama Jobs Summit:

Despite the progress we've made, many businesses are still skittish about hiring.  Some are still digging themselves out of the losses they incurred over the past year.  Many have figured out how to squeeze more productivity out of fewer workers.  And that cost-cutting has become embedded in their operations and in their culture.  That may result in good profits, but it's not translating into hiring and so that's the question that we have to ask ourselves today: How do we get businesses to start hiring again?

President Obama

I am not sure what progress has been made, but the rest of the statement is true enough. Many businesses have figured out how to squeeze more productivity out of fewer workers. This was once known as productivity increase or increase in efficiency or better competitiveness, and was usually described in more flattering terms than "squeeze more productivity out of fewer workers," but the effect is the same: until that more efficient business decided to expand, it's not going to be hiring more workers. Moreover, if the business is below 50 employees, it's not likely to in this regulatory environment. It's unlikely to expand if it's under 10 employees, for that matter. We have enough Federal regulations now, but they're contemplating more, particularly with regard to health care.

We don't know what the export environment will be (there's a trade war going on out there); we don't know the domestic market but it's pretty clear that people would rather save than spend; we don't know what the dollar will be worth next spring much less two years from now; we don't know what it will cost to provide health care to workers; we don't know what the minimum health care policies will cost or what fines will have to be paid if we aren't providing health care.

Until the uncertainties are removed, who would dare invest in creating a new business, or expanding an efficient one?

Obama must know that, but he acts as if he doesn't. If the profit-driven businesses don't start creating jobs, whose fault is it? It can't possibly be the uncertain regulatory environment...

If Obama wants to create lots of jobs in a hurry, try the Erhardt model: go on the radio and announce that all regulations are suspended for a period of three years. No minimum wages. No health and safety. No employment security. No mandatory pension plans. If you can think of a reason to hire someone, go do it, and forget the regulations. We have an economy to rebuild. Go rebuild it.  Of course we won't be doing that.

Another model he might study is the John F. Kennedy model. Cut taxes. Combine that with suspension of as many Federal regulations as politically possible.

In other words, as much as possible, get out of the way, and let the engines of capital development work.

 

[tomahawk6]

Forget a recovery. The EPA ruled today that CO2 is dangerous and needs to be regulated. CO2 is what we exhale and what tree's inhale. If this stands up this will kill any recovery as it will make energy,goods and food alot more expensive.

The Environmental Protection Agency has concluded greenhouse gases are endangering people’s health and must be regulated, signaling that the Obama administration is prepared to contain global warming without congressional action if necessary. …
Under a Supreme Court ruling, the so-called endangerment finding is needed before the EPA can regulate carbon dioxide and five other greenhouse gases released from power plants, factories and automobiles under the federal Clean Air Act.
The EPA signaled last April that it was inclined to view heat-trapping pollution as a threat to public health and welfare and began to take public comments under a formal rulemaking. The action marked a reversal from the Bush administration, which had declined to aggressively pursue the issue.
Business groups have strongly argued against tackling global warming through the regulatory process of the Clean Air Act. Any such regulations are likely to spawn lawsuits and lengthy legal fights.

 

[a_majoor]

Economic recovery? We should be paying off as much personal and business debt as possible and battening the hatches for inflation spillover from the United States. Debt charges will overtake most other government spending within a decade....

http://www.washingtonexaminer.com/opinion/columns/OpEd-Contributor/Interest-increases-central-to-looming-debt-crisis-8648650-79004147.html

Ralph Benko: Interest increases central to looming debt crisis
By: Ralph Benko
Op-Ed Contributor

December 11, 2009 There is a brewing crisis, which, if it develops as seems inevitable, has the potential of reducing all of the drama of the early Obama administration to child's play beginning next year. Only this time, it will be the government's crisis, not the nation's.

The New York Times recently noted that the government has gone on what the Concord Coalition's Robert Bixby calls a "teaser rate" borrowing binge, at an interest rate approaching ... zero. Rates will rise, substantially, and soon. (The Treasury Department already is attempting to lock in rates on longer-term borrowing-- already driving its short-term costs up.)

How bad could this be? So glad you asked.

The federal government currently pays, according the article, $202 billion a year in interest. White House estimates that interest payments will rise to $700 billion a year in 2019.

That doesn't count the projected catastrophic increases in entitlement costs in Medicare as the baby boomers retire. And you thought the American people were already shellshocked!

Out of the $3.1 trillion federal budget, $1.89 trillion is considered "mandatory spending." That includes the current debt service, of course.

Leaving $1.2 trillion. If one subtracts the budget of the Defense Department, which is $515 billion (leaving aside the $145 billion separate appropriation for the Global War on Terror which, presumably, we will have won or, respectfully, Mr. President, lost, by then ....) the rest of the government currently spends $686 billion a year.

If (!) the economy grows so will tax receipts. Somewhat. But adding in entitlements, the interest on the debt binge will inevitably crowd out all other federal spending.

Bye-bye, Health and Human Services! Farewell, Department of Education. Au revoir, Veterans Affairs. So long Housing and Urban Development, State Department, Department of Homeland Security, Energy, Agriculture, Justice, NASA, and Treasury. (Wait! We can't lose Treasury! They collect the taxes and borrow the money! Oh wait. So long Treasury!) And all the rest of the federal government, adieu!

There are limited options, mostly unthinkable.

>>Raise taxes: It's politically and economically impossible to raise taxes, certainly not nearly as high as progressives yearn to do.

Even the smoothest lefty of them all, Obama himself, got elected on a promise not to raise taxes on the vast majority of Americans. There aren't enough rich people to tax into penury to stop this runaway spending locomotive.

>>Cut spending: Really think Congress is going to cut out all civilian agencies? What are your putting in your sugar cubes?

>>Hyperinflate: America, despite all attempts to make it otherwise, remains far from banana republic status. Our creditors (hello, Chinese President Hu Jintao!) are not without leverage and it is highly unlikely that the political process will allow inflation to get to the double digits without a political revolt similar to the casting out of Jimmy Carter.

>>Default: Hey, this is Washington, D.C. Not Jonestown.

There is one wild card in the deck. The gold standard demonstrably pushes long-term interest rates -- for the federal government down to the 1 percent range -- without inflation.

President Reagan was very sympathetic to the gold standard. The supply-side economists of his day couldn't, when asked, agree among themselves at what price gold convertibility should be set.

Getting that right is not a simple issue, but ... as economist Paul Romer once said (and Rahm Emanuel reprised): "A crisis is a terrible thing to waste."

Ralph Benko, a principal of Capital City Partners, of Washington DC, is the author of The Websters’ Dictionary: How to Use the Web to Transform the World, the eBook of which may be downloaded without charge from www.thewebstersdictionary.com.

 

[a_majoor]

Well this might go some way to fixing the deficit problem:

http://www.wtop.com/?nid=428&sid=1838232

Feds owe Uncle Sam $3B in unpaid taxes
December 14, 2009 - 10:43am

Mark Segraves, wtop.com

WASHINGTON - At a time when the White House is projecting the largest deficit in the nation's history, Uncle Sam is trying to recover billions of dollars in unpaid taxes from its own employees.

Federal workers owe more than $3 billion in income taxes they failed to pay in 2008. According to Internal Revenue Service documents, 276,300 federal employees and retirees owe $3,042,200,000.

The IRS tracks the voluntary compliance rate of federal employees and retirees each year, and each year feds come up short. The one bright spot in this year's report is that after several years of a steady increase, the amount owed by feds is down from the previous year.

Federal employees and retirees owed $3,586,784,725 in unpaid income taxes in 2007.

The documents show delinquent employees from nearly every federal agency with more than 25 employees. Based on percentages, the Department of The Treasury, which includes the IRS, has the best compliance rate. Fewer than 1 percent of Treasury employees didn't pay their taxes in 2008.

The IRS is the only federal agency where employees can be fired for not paying their taxes. The non-compliance rate for IRS employees in 2008 was 0.76 percent -- down from 0.89 percent in 2007.

The agency with the most tax scofflaws is the U.S. Postal Service, with 28,913 employees who owe $297,933,756. But that is still a dramatic improvement from 2007 when more than 54,000 employees owed more than $407 million.

"We urge our employees to comply with all tax laws and are encouraged that many who have been delinquent have agreed to payment plan with the IRS," USPS spokesperson Mark Saunders tells WTOP in a statement.

"It's important to look at the percentage of postal employees who may be delinquent on their federal taxes, not just the number itself. According to IRS figures, the delinquency rate for Postal Service employees is relatively small."

The Postal Service, the largest employer in the federal government aside from the military, has a non-compliance rate of 3.95 percent compared to the federal average of 2.8 percent.

Retired military personnel make up about 33 percent of the money owed with $1,343,538,055 in unpaid taxes for 2008.

The agency with the highest percentage of delinquent employees is the National Capital Planning Commission, where 10.42 percent of its 48 employees owe $26,947.

"NCPC is committed to working closely with the Department of The Treasury to resolve issues of federal income tax delinquency involving its staff," NCPC spokeswoman Lisa MacSpadden said in a statement.

"The agency takes this matter very seriously and recognizes that federal employees must adhere to the highest ethical standards regarding financial matters.

"We remind our employees of this responsibility as part of our mandatory annual ethics training. Upon receipt of an official notice from the IRS about a specific employee's noncompliance, NCPC will take appropriate administrative action."

Other notable agencies on the list:

Executive Office of the President (includes the White House): 50 employees owe $812,917;

U.S. Senate: 231 employees owe $2,469,026;

U.S. House of Representatives: 447 employees owe $5,809,631;

U.S. Tax Court: 3 employees owe $39,752;

Active Duty Military: 27,111 employees $102,474,672.
While some taxpayers may scratch their heads and ask why the federal government doesn't garnish the wages of these employees, the reality is they can't. According to federal tax laws, employees are treated the same as any other taxpayer who doesn't pay their taxes.

The IRS must go through the same procedures and court process with feds as it does with John Q. Public. Once a court awards the IRS a judgment or if the employees enter a voluntary payment plan, the IRS can garnish wages. However, federal employees do jeopardize any security clearance they may have if they don't pay their income taxes.

As for the general public's voluntary compliance rate, the IRS no longer tracks those numbers, so it is impossible to compare. But an IRS report from 2001 (PDF) showed the total tax gap to be about $345 billion. The tax gap is the difference between what is owed each year and what is paid, and includes income, corporate, employment, estate and excise taxes.

(Copyright 2009 by WTOP. All Rights Reserved.)

Mark Segraves, wtop.com

WASHINGTON - At a time when the White House is projecting the largest deficit in the nation's history, Uncle Sam is trying to recover billions of dollars in unpaid taxes from its own employees.

Federal workers owe more than $3 billion in income taxes they failed to pay in 2008. According to Internal Revenue Service documents, 276,300 federal employees and retirees owe $3,042,200,000.

The IRS tracks the voluntary compliance rate of federal employees and retirees each year, and each year feds come up short. The one bright spot in this year's report is that after several years of a steady increase, the amount owed by feds is down from the previous year.

Federal employees and retirees owed $3,586,784,725 in unpaid income taxes in 2007.

The documents show delinquent employees from nearly every federal agency with more than 25 employees. Based on percentages, the Department of The Treasury, which includes the IRS, has the best compliance rate. Fewer than 1 percent of Treasury employees didn't pay their taxes in 2008.

The IRS is the only federal agency where employees can be fired for not paying their taxes. The non-compliance rate for IRS employees in 2008 was 0.76 percent -- down from 0.89 percent in 2007.

The agency with the most tax scofflaws is the U.S. Postal Service, with 28,913 employees who owe $297,933,756. But that is still a dramatic improvement from 2007 when more than 54,000 employees owed more than $407 million.

"We urge our employees to comply with all tax laws and are encouraged that many who have been delinquent have agreed to payment plan with the IRS," USPS spokesperson Mark Saunders tells WTOP in a statement.

"It's important to look at the percentage of postal employees who may be delinquent on their federal taxes, not just the number itself. According to IRS figures, the delinquency rate for Postal Service employees is relatively small."

The Postal Service, the largest employer in the federal government aside from the military, has a non-compliance rate of 3.95 percent compared to the federal average of 2.8 percent.

Retired military personnel make up about 33 percent of the money owed with $1,343,538,055 in unpaid taxes for 2008.

The agency with the highest percentage of delinquent employees is the National Capital Planning Commission, where 10.42 percent of its 48 employees owe $26,947.

"NCPC is committed to working closely with the Department of The Treasury to resolve issues of federal income tax delinquency involving its staff," NCPC spokeswoman Lisa MacSpadden said in a statement.

"The agency takes this matter very seriously and recognizes that federal employees must adhere to the highest ethical standards regarding financial matters.

"We remind our employees of this responsibility as part of our mandatory annual ethics training. Upon receipt of an official notice from the IRS about a specific employee's noncompliance, NCPC will take appropriate administrative action."

Other notable agencies on the list:

Executive Office of the President (includes the White House): 50 employees owe $812,917;

U.S. Senate: 231 employees owe $2,469,026;

U.S. House of Representatives: 447 employees owe $5,809,631;

U.S. Tax Court: 3 employees owe $39,752;

Active Duty Military: 27,111 employees $102,474,672.
While some taxpayers may scratch their heads and ask why the federal government doesn't garnish the wages of these employees, the reality is they can't. According to federal tax laws, employees are treated the same as any other taxpayer who doesn't pay their taxes.

The IRS must go through the same procedures and court process with feds as it does with John Q. Public. Once a court awards the IRS a judgment or if the employees enter a voluntary payment plan, the IRS can garnish wages. However, federal employees do jeopardize any security clearance they may have if they don't pay their income taxes.

As for the general public's voluntary compliance rate, the IRS no longer tracks those numbers, so it is impossible to compare. But an IRS report from 2001 (PDF) showed the total tax gap to be about $345 billion. The tax gap is the difference between what is owed each year and what is paid, and includes income, corporate, employment, estate and excise taxes.

(Copyright 2009 by WTOP. All Rights Reserved.)

 

[sm1lodon]

My economic recovery plan: This is partly humorous, so if your face busts if you attempt a smile because you had your sense of humor removed at birth, sorry to hear that!

A) Drill for oil wherever it's found in North America. Become energy self-sufficient, thus dropping the price of oil, which deprives terror-worshiping nations of a lot of disposable income to waste on terrorism.

B) Line up the EPA and shoot them all Remove all regulation regarding C02

C) Get all inmates of all prisons in the North America to perform factory and other work that is presently fleeing offshore with all possible haste. That puts 1 person in 133 in the USA back to work, AND keeps capital in the USA instead of it all rushing over the land of our beloved friends and allies, the Chinese. It also gives prisoners something to do other than beat, sodomize, and kill each other.

D) Build a sturdy wall across the entire Southern border to make immigration controllable and predictable. It will cost money, but nowhere NEAR the cost of having Mexico slowly annexing California.

E) Start a continent-wide crackdown on drugs. Start at the bottom. Get the user to tell who sold it to him. Don't do much to the users. Severely punish the traffickers. Then go on up the chain until you hit the kingpins; execute, publicly, on national television, anyone who has moved more than 10 kg (or 1 g of LSD) of any kind of drugs over their entire life. There will be a decline, over time, of people being useless drug thugs and drug whores. They may fall back on alcohol, but alcohol does not turn people into monsters the way some drugs do. There are many alcoholics who are very productive citizens. There aren't many meth users who are.

F) Make it easier, through tax relief, to start and maintain a small business.

G) Make wind power generation an individual-owned proposition by offering government loans so people can own their own generators on their own land and sell to the utilities. Better, to me, than having big conglomerates owning it all.

H) Make it FAR cheaper to patent and defend inventions. Innovation is quashed because many innovators are just too poor to go though all the red tape to get inventions to market, so innovation just languishes. As it stands, if you invent something, you have to have, what, five million dollars in lawyers' fees ready to defend it if some big company just steals it?

I) This is a big one, return to family values. The VAST majority of the crime in the USA is by men who had no father anywhere in sight as a boy. If men quit fertilizing the Queen Termites willy-nilly then running away to spread their seed and STDs everywhere possible, we wouldn't have a lot of the crime that is rampant today. Not all kids who come from one-parent families turn out to be criminals, but most criminals are from single-parent (no dad known to still exist) families. Single moms who make the best of crummy situation are laudable. Men who don't risk creating single-mom situations are laudable also.

AIDS, unwanted pregnancy, and the resultant crime epidemic all have one sure-fire cure: a firmly shut zipper.

J) Moral reconstruction of society. Make it so people are actually taught that lying, cheating, and stealing are NOT cool things that big shot politicians, celebrities, and sports figures get to to do because they be so down, yo. Exalt character over talent. Doing what's right over doing whatever brings in the coin and to heck with every and anyone else. Our society has slid very far down. It can slide right back up. Uganda went from one of the worst places in Africa, therefore the world, with AIDS at 30+% to a place where AIDS is now around 3 percent or so. It may not be a paradise, especially for homosexual pedophiles (death penalty) but it is far better off than it used to be. If they can do it, we can do it, anyone can do it.

 

[a_majoor]

If you read VDH, he says many of the same things, with one caveat:

Moral reconstitution has to come first.

If we live in a society where it seems acceptable to lie, cheat and no moral or legal sanctions are brought to bear (or moral and legal sanctions seem to be based on rule of whim rather than rule of law; which is why HRC's are such an alarming force in Canadian society, showing us what might be in the very near future), then there is no reason for good people to stick to the straight and narrow; indeed, that becomes a sort of trap since they will be forced to pay for the debauchery of the others.

People follow incentives always, and when the incentives to lie and cheat become greater than the incentives to live the good life, then the end of civilized society and descent to barbarism begin. VDH shows this in his studies of Classical Greece, the story of the decline of the Res Publica Roma and then the Empire are the same, and most other declining civilizations share similar stories when the citizens essentially walk away from their duties as citizens either due to the4 corruption of their "elites" or because they themselves become corrupt...

 

[a_majoor]

Reality comes into focus:

Q3 GDP revised sharply downward — again
posted at 9:30 am on December 22, 2009 by Ed Morrissey
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Almost two months ago, the Commerce Department cheered the announcement that the third quarter GDP had grown at an annualized rate of 3.5%.  The Obama administration hailed it as a sign that their economic policies had spurred real growth.  Even when Commerce sharply revised the number downward a month later to 2.8%, the White House continued to argue that the lower number still meant that the US had turned the corner, even after a number of critics asked how Commerce could have missed the number so widely.

    Today, Commerce backtracked even further.  The annualized growth number for Q3 turns out to have been 2.2%, a revision of over a third from its original estimate two months ago:

    The U.S. economy grew at a much slower pace than initially thought in the third quarter, restrained by weak business investment and a slightly more aggressive liquidation of inventories, according to data on Tuesday.

    The Commerce Department’s final estimate showed gross domestic product grew at a 2.2 percent annual rate instead of the 2.8 percent pace it reported last month. Analysts polled by Reuters had forecast the report to show GDP, which measures total goods and services output within U.S. borders, unrevised at a 2.8 percent growth rate in the third quarter. …

    Growth was boosted by government stimulus programs, including the popular cash for clunkers and tax credit for first-time home buyers, and debate continues to rage over the sustainability of the recovery once government support wanes.

No kidding.  The Cash for Clunkers program and the first-time homebuyer tax credit was estimated to have contributed as much as half of the original Commerce estimate of 3.5%.  Assuming that to still have contributed at least 1.5% of the final GDP, that leaves a rather pathetic 0.7% growth in Q3 without it.  It’s barely a recovery at that level.

What changed?  Commerce revised some other base numbers.  Business investment, a key indicator of recovery, fell 5.9% instead of the previously reported 4.1%.  Nonresidential construction was worse than first thought, which shows how much that tax credit impacted the residential construction market.  Even the good news wasn’t quite as good as first thought.  Consumer spending rose 2.8% instead of 2.9%, much of that from the Clunkers program and the tax credit.

The third-quarter growth looks a lot more anemic than advertised by the Obama administration, especially when one considers the gimmicks that temporarily boosted its performance.  Most troubling is Commerce’s poor performance in analyzing economic conditions.  If they’re so incompetent as to miss this figure by 37% (1.3 from 3.5 is slightly over 37%), then clearly they need some fresh talent.  If they got pressured into stating overly cheerful numbers, it’s something else entirely.  That would be something Congress should investigate … if we had an independent Congress at all.

 

[a_majoor]

Thrifty families accused of prolonging the recession - only if you believe in Keynsian economics. Since excessive debt is the actual cause of the economic crisis, then thrifty families are the ultimate solution to the crisis...

http://www.samizdata.net/blog/archives/2009/12/dumb_headline_o.html

Dumb headline of the day
Johnathan Pearce (London)  Globalization/economics • UK affairs

This headline and lead paragraph in the Times (of London) deserves a sort of award:

Thrifty families accused of prolonging the recession -

    Anxious families are repaying debts instead of spending in the shops, amid concern over the uncertain economic outlook. The share of income saved in banks and building societies has risen to its highest level in more than a decade, heightening fears that faltering consumer demand could prolong the recession.

This is a sort of reflexive crude Keynesian message at work; the laziness of the assumption that recessions are ended by people spending more - never mind where the money comes from - continues to hold a grip on the MSM. In fairness, maybe what the writer is trying to say is that saving is a good thing but if everyone saves "too much" (however one can define that), then in the aggregate, it drags everything down. But that does rather ignore the situation that has built up over the years, and the disruption to the economic system caused by excessively cheap credit. People who try to reduce their debt, save more and decide to forgo spending money they haven't got are not "prolonging the recession" beyond some point that can be marked down on a graph. The current economic Snafu was caused - as the author of this newspaper item must be dimly aware - by a country hooked on the drug of cheap credit, beguiled by the idiotic notion that whenever the drug wore off and the hangover kicked in, that that nice Dr Greenspan and friends would administer yet more of the drug, to get yet another high. That way lies the equivalent of liver poisoning.

It may seem a Scrooge-like message for this time of year to point out that you cannot spend money that you don't have; businesses cannot invest money that has not been already saved, and that interest rates must reflect the balance of supply and demand for savings. The "Austrian" economic insight that money is a claim on resources, and that two people cannot hold the same claim on a resource at the same time, needs to be relentlessly rammed home.

The best way to end a recession is to unravel the massive misallocation of resources caused by printing money as soon as possible, to let labour markets clear, to cut public spending and cut taxes, and where necessary, recapitalise banks speedily. (Check out this paper for a good course to steer). Such a process is inevitably painful. In the short run, the pain is worse than the sort of dragged out situation we have now. But ask yourself this question, dear reader: what is the more compassionate policy - a short, sharp recession and closure of failed banks, followed by a rapid 1921-like recovery, or a Japanese-style multi-decade of stagnation?

On that note, this makes a good Christmas present for those interested in economic affairs, if you still have the time to get it shipped.

 

[muskrat89]

For those interested in what is happening at a state level, here is the AZ Governor's speech from the other day:

http://sonoranweeklyreview.com/?p=1710

That’s why you’ve been invited here today. EVERYONE in this room needs to hear the details of the crisis so you can come face to face with the reality that my Administration and I have been living and fighting to change for the past 10 months.

I want you to understand all of it:

The five years of spending that nearly doubled state government.

The economic recession has reduced state revenues by almost 40 percent in just 3 years.

The population growth in school children, university students, health care and welfare populations and inmates in our state prisons that fundamentally rules out simplistic solutions like rolling the state budget back to levels five, six, or more years ago.

Federal and voter mandates that prevent us from touching nearly two thirds of the state budget.

And the procrastination, denial, and lack of will that has allowed these problems to continue to fester.

The heart of our crisis is cash. We needed to borrow $700 million just to get through December.

In January, we plan on borrowing an additional $700 million by financing significant state assets.

That's a snippet. Most of the highway rest areas have closed. There is a pretty good chance most of the state parks will close. They are talking a 5% pay cut for all state employees (not on the high end of pay scales to begin with) in addition to the layoffs and furloughs that have already occurred. So much for the federal "stimulus". lol

 

[a_majoor]

Here's a great idea; punish people on fixed incomes as well. Further destruction of taxpayer wealth, (including stocks, as seniors turn to reverse mortgaging their homes to survive):

http://www.nytimes.com/2009/12/26/your-money/26rates.html?_r=1&partner=rss&emc=rss

At Tiny Rates, Saving Money Costs Investors

By STEPHANIE STROM
Published: December 25, 2009

Millions of Americans are paying a high price for a safe place to put their money: extremely low interest rates on savings accounts and certificates of deposit.

Michael Stravato for The New York Times

Joe Parks, a retired accountant in Houston who sits on the volunteer advisory board of Better Investing, said that with low interest rates and fees, retirees and the elderly could take anywhere from a half to three-quarters of a percent cut in their incomes.

Joe Parks, a retired accountant, said retirees and the elderly would take up to a three-quarters of a percent cut in income.

The elderly and others on fixed incomes have been especially hard hit. Many have seen returns on savings, C.D.’s and government bonds drop to niggling amounts recently, often costing them money once inflation, fees and taxes are considered.

“Open a Savings Plus Account today and get a great rate,” read an advertisement in the Dec. 16 Newsday for Citibank, which was then offering 1.2 percent for an account. (As low as it was, the offer was good only for accounts of $25,000 and up.)

“They’re advertising it in the papers as if they’re actually proud of that,” said Steven Weisman, a title insurance consultant in New York. “It’s a joke.”

The advertised rate for the Savings Plus account has expired, according to the bank’s Web site; as of Friday, the account paid an interest rate of 0.5 percent. The bank’s highest-yield savings account, the Ultimate, was paying 1.01 percent.

The best deal Mr. Weisman has found is 2 percent on a one-year certificate of deposit offered by ING Direct, an online bank that has become a bit of a darling among the fixed-income crowd.

Interest on one- and two-year Treasury notes was just 0.40 percent and 0.89 percent, as of Monday. Bank of America offers 0.35 percent on a standard money market account with $10,000 to $25,000, and Wells Fargo will pay 0.05 percent on a basic savings account.

Indeed, after fees are subtracted, inflation is accounted for and taxes are paid, many investors in C.D.’s, government bonds and savings and money market accounts are losing money. In fact, Northern Trust waived some $8 million in fees on money market accounts because they would have wiped out all interest, and then some.

“The unemployment situation and the general downturn in the economy had an impact, but what’s going to happen now as C.D.’s mature is that retirees and the elderly are going to take anywhere from a half to three-quarters of a percent cut in their incomes,” said Joe Parks, a retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors. “It’s a real problem.”

Experts say risk-averse investors are effectively financing a second bailout of financial institutions, many of which have also raised fees and interest rates on credit cards.

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco. “It’s capitalism, I guess, but it’s not to be applauded.”

Mr. Gross said he read his monthly portfolio statement twice because he could not believe that the line “Yield on cash” was 0.01 percent. At that rate, he said, it would take him 6,932 years to double his money.

Many think the Federal Reserve is fueling a stock market bubble by keeping rates so low that investors decide to bet on stocks instead. Mr. Parks of Better Investing moved more money into the stock market early this year, when C.D.’s he held began maturing and he could not nearly recover the income they had generated by rolling them over.

He began investing some of the money in blue chip stocks with a dividend yield of at least 3 percent and even managed to find an oil-and-gas limited partnership that offered 8 percent.

Mr. Parks said, however, that he would not pursue that strategy as more of his C.D.’s matured. “What worked in the first quarter of this year isn’t as relevant, because the market has come up so much,” he said.

No one is advising a venture into higher-risk investments. Katie Nixon, chief investment officer for the northeast region at Northern Trust, said that, in general, “no one should be taking risks with their pillow money.”

“What people are paying for is safety and security,” she said, “and that’s probably just right.”

People who rely on income from such investments for support, however, are being forced to consider new options.

Eileen Lurie, 75, is taking out a reverse mortgage to help offset the decline in returns on her investments tied to interest rates. Reverse mortgages have a checkered reputation, but Ms. Lurie said her bank was going out of its way to explain the product to her.

“These banks don’t want to be held responsible for thousands of seniors standing in bread lines,” she said.

Such mortgages allow people who are 62 and older to convert equity in their homes into cash tax-free and without any impact on Social Security or Medicare payments. The loans are repaid after death.

“If your assets aren’t appreciating and aren’t producing any income, you’re getting eaten up in this interest rate environment,” said Peter Strauss, a lawyer who advises the elderly. “A reverse mortgage is one way of making a very large asset produce income.”

Eve Wilmore, 93, has watched returns on her C.D.’s drop to between 1 percent and 2 percent from about 5 percent a year or so ago. Yet the Social Security Administration recently raised her Medicare Part B premium based on those higher rates she had been earning. “I’m being hit from both sides,” Mrs. Wilmore said. “There’s some way I can apply for a reconsideration, and I’m going to fight it. I have to.”

She said she was reluctant to redeploy her money into higher-risk investments. “I don’t know what my medical bills will be from here on in, and so I want to keep the money where I can get to it easily if I need it,” she said.

Peter Gomori, who taught a course on money and investing for Dorot, a nonprofit that offers services for the elderly, did not advise his students on investment strategies but said that if he had, he would probably have told them to sit tight.

“I know interest rates are very low for Treasury securities and bank products, but that isn’t going to be forever,” he said.

But investment professionals doubt rates will rise any time soon — or to any level close to those before the crash.

“What the futures market is telling me,” Mr. Gross said, “is that in April 2011, these savers that are currently earning nothing will be earning 1.25 percent.”

 

[a_majoor]

Manipulation of the economy to pay off supporters:

http://www.marginalrevolution.com/marginalrevolution/2009/12/why-hasnt-the-fed-been-targeting-two-or-three-percent-inflation.html

Why hasn't the Fed been targeting two or three percent inflation?

I've been thinking about this question more and I've come up with a speculative possibility.  Right now banks are earning their way back into profitability by playing the spread.  They're paying close to zero on deposits and earning fair sums on long-term loans.  Perhaps this term structure is sustainable because people are expecting little inflation in the short run but moderate inflation in the longer run, plus there is some risk on the loans.  (These inflationary expectations may be changing; if you wish pretend I am writing this six months or a year ago.)

So let's say we move from zero expected short-term inflation to three percent short-term expected inflation.  The nominal short rate rises to three percent and the real short rate remains more or less constant.  Long rates would go up a bit but not much, since beyond the short run there is already an expectation of moderate inflation.  In sum, the spread between short and long rates might narrow.

Here is the key point: from the bank's point of view, what is the correct measure of the real rate of interest?  Is it defined by the nominal rate relative to the expected growth in the CPI?  I doubt it.  When you're near the bankruptcy or nationalization constraint, it's often nominal profits that matter (relative to fixed nominal liabilities, accounting standards, capital standards, etc.), not "real profits" defined relative to the CPI.

In sum, maybe three percent expected inflation conflicts with the desire to rapidly recapitalize banks through maintaining a wide interest rate spread.  Maybe we need that zero nominal short rate or at least the Fed thinks we do.

I don't wish to push too hard on this hypothesis, it is speculative rather than confirmed by evidence.  And propositions about the term structure of interest rates do not always run the way you think they will or should.  I'm aware of other problems.  What kind of zero profit condition is imposed on the banks?  Given the odd objective function of the banks, how exactly does the Fisher effect work in the short run?  Or is it imposed from without by competition from non-bank lenders?  I'm not sure on these questions and they suggest possible holes in the above speculation.

I also regard this as a somewhat gruesome hypothesis.  It means that "Main Street" is paying for "Wall Street" (forgive me the use of those awful terms) in at least two ways: high unemployment and inability to earn much on one's savings.  Risk on the Fed balance sheet is also paying some big part of the bill, since presumably that is helping to maintain the interest rate spread.

The term structure also implies that the market is expecting rising short rates, so if the bank mess isn't cleaned up soon, heaven forbid.  The spread, as a means of restoring bank profitability, won't last forever.

and from comments:

To me the Fed`s attempt to paper over the problems with the banking system (mortgages, commercial real estate and development loans) is just one element of a much larger problem.

The current economic downturn has accelerated the failure of all of the major public `guarantee` programs, retirement, health, deposit and unemployment insurance, and mortgage gurantees. Trying to paper over the problems in these systems leads to the massive deficit and debt problems at all levels of government, Federal, state,
and local.

We aren’t going to get out of this downturn without dealing with these failed guarantees. We need to be talking about solutions rather than hiding the problems.

Failed guarantee programs is really a failure of the welfare state, and the only practical way to deal with this is to unwind these programs and bring them to an end. Given they are designed to have large constituencies (both people receiving benefits and the public service which administers these programs), you can expect a vicious fight to the last taxpayer to preserve these programs instead...

 

[a_majoor]

Cause and effect:

http://www.powerlineblog.com/archives/2009/12/025274.php

Government-Caused Disaster
 
December 30, 2009 Posted by John at 7:50 PM

The Obama administration calls terrorism a "man-caused disaster," but the biggest disasters are government-caused. Only government has the ability to set us back a trillion dollars.

In today's Wall Street Journal, Peter Wallison has explosive, and as far as I know new, disclosures about the role played by Fannie Mae and Freddy Mac in last year's financial crisis:

On Christmas Eve, when most Americans' minds were on other things, the Treasury Department announced that it was removing the $400 billion cap from what the administration believes will be necessary to keep Fannie Mae and Freddie Mac solvent. This action confirms that the decade-long congressional failure to more closely regulate these two government-sponsored enterprises (GSEs) will rank for U.S. taxpayers as one of the worst policy disasters in our history. ...

    The GSEs had begun buying risky loans in 1993 to meet the "affordable housing" requirements established under congressional direction by the Department of Housing and Urban Development (HUD).

    Most of the damage was done from 2005 through 2007, when Fannie and Freddie were binging on risky mortgages. Back then, [Congressman Barney] Frank was the bartender, denying that there was any cause for concern, and claiming that he wanted to "roll the dice" on subsidized housing support. ...

    By the end of 2008, Fannie and Freddie held or guaranteed approximately 10 million subprime and Alt-A mortgages and mortgage-backed securities (MBS)--risky loans with a total principal balance of $1.6 trillion. These are now defaulting at unprecedented rates, accounting for both their 2008 insolvency and their growing losses today. Since 2008, under government control, the two agencies have continued to buy dicey mortgages in order to stabilize housing prices.

    There is more to this ugly situation. New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A. ...

    It is easy to see how this misrepresentation was a principal cause of the financial crisis.

    Market observers, rating agencies and investors were unaware of the number of subprime and Alt-A mortgages infecting the financial system in late 2006 and early 2007. Of the 26 million subprime and Alt-A loans outstanding in 2008, 10 million were held or guaranteed by Fannie and Freddie, 5.2 million by other government agencies, and 1.4 million were on the books of the four largest U.S. banks.

    In addition, about 7.7 million subprime and Alt-A housing loans were in mortgage pools supporting MBS issued by Wall Street banks--which had long before been driven out of the prime market by Fannie and Freddie's government-backed, low-cost funding. The vast majority of these MBS were rated AAA, because the rating agencies' models assumed that the losses that are incurred by subprime and Alt-A loans would be within the historical range for the number of high-risk loans known to be outstanding.

    But because of Fannie and Freddie's mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. ...

    [The roots of the financial crisis] go back to 1993, when Fannie and Freddie began stocking up on subprime and other risky loans while reporting them as prime.

    Why Fannie and Freddie did this is still to be determined. But the leading candidate is certainly HUD's affordable housing regulations, which by 2007 required that 55% of all the loans the agencies acquired had to be made to borrowers at or below the median income, with almost half of these required to be low-income borrowers.

When a private citizen like Bernie Madoff commits fraud, he gets a long jail sentence. But when Barney Frank, Nancy Pelosi, and the well-connected (and now rich) Democrats who headed Freddy Mac and Fannie Mae commit fraud--on a far larger scale--they simply send the bill to the taxpayers. Or, rather, the taxpayers' children.

 

[a_majoor]

2010 isn't shaping up to be a good year. The tottering US economy could end up dragging us all down with it:

http://pajamasmedia.com/blog/economic-rebound-what-economic-rebound/

Economic Rebound? What Economic Rebound?

Posted By Tom Blumer On December 31, 2009 @ 12:00 am In . Column1 03, . Positioning, Media, Money, US News | 34 Comments

Last week, the Associated Press’ Jeannine Aversa announced the top ten business stories [1] of 2009, according to an AP survey of newspaper editors.

Not surprisingly, the top story involved the economy. Incredibly, the editors apparently framed it (or maybe the AP framed the survey question for them) as, “Recovery from Great Recession.” Further, Aversa later described the result as “Economy’s Fall — and Rebound.”

This result brings to mind a scene in Breaking Away [2], a truly underrated movie. In that scene, the story’s lead character Dave (played by Dennis Christopher [3]) begins a brief stint helping out at his father’s (Paul Dooley [4]) used car dealership. It’s brief because when an unhappy buyer returns his vehicle, Dave quickly gives him his money back. Dad’s incredulous response when told is “Refund? REFUND?”

My adverse reaction to Aversa’s description of 2009’s economy is similar to that of Dave’s dad: Rebound? REBOUND?

Her assertion is objectively false. You haven’t “rebounded” until you’re back to where you were. Even if economic growth for the fourth quarter comes in at 4% as some predict [5], the economy won’t even be 40% of the way back [6] from where we were before the recession as normal people define it [7] (“a decline in GDP for two or more consecutive quarters”) began.

More fundamentally, there’s the “little” matter of whether the recession is really over.

As normally defined, the answer of course is simple, which is why we should prefer objective standards for these types of things. The third quarter’s positive annualized growth of 2.2% [8] does indeed mean that the recession ended after four quarters of negative growth that began in July 2008.

But the normal definition is not the one the press has been using. Aversa, AP, and most of the rest of the press have spent the past year telling us that the recession began in December 2007 because the supposedly apolitical academicians at the National Bureau of Economic Research subjectively ignored their own evidence [9] and said so [10]. Now all of a sudden, as seen in this excerpt, Aversa is no longer averse to the normal definition:

After four quarters of decline, the economy returns to growth during the July-to-September period, signaling the end of the deepest and longest recession since the 1930s.

If she were fair, balanced, and consistent, Aversa would be waiting for an NBER determination before concluding that the recession is over. Do you think Jeannine’s shifting definition might have something to do with the fact that it helps Dear Leader?

What’s really offensive about Aversa’s piece is that so many of the other top ten stories reveal how utterly ridiculous her characterization of an economy that is in “rebound” really is.

First, there’s number two, “Auto Industry Collapse.” In November [11], Chrysler was still collapsing, GM’s year-over-year sales were still declining, and Ford was running just about even. The Japanese trio of Toyota, Honda, and Nissan collectively improved, but total industry sales were flat and not rebounding.

Then there’s number three, “Foreclosures Head Higher.” Aversa herself writes that “by the end of the year, a record 14 percent of homeowners with a mortgage are either behind on their payments or in foreclosure.” That situation is getting worse, not better.

Number five, “Small and Mid-Sized Banks Fail,” is notable because Aversa seems to backtrack on her claim that the recession has ended when she writes that “the banks have been undone by real estate, construction, and industrial loans that soured as the recession has deepened.” Uh, what’s with the present tense?

Aversa also betrays a lack of confidence in number eight, “Federal Aid for Economy,” when she writes that “government stimulus programs spur sales of homes and autos but raise doubts about whether the economic recovery can be lasting if federal aid is withdrawn.” What kind of “rebound” is it if it can’t be sustained without Uncle Sam’s not-unlimited largesse?

I deliberately saved number six, “U.S. Spills Red Ink,” for last. While Aversa dutifully notes the record $1.4 trillion deficit [12] Uncle Sam ran during the past fiscal year, she says it occurred because “financial bailout and war costs soar[ed].” Lord have mercy.

First, as I noted earlier this year [13], the government began retroactively accounting for the costs of bank, car company, and other bailouts under the Troubled Asset Relief Program (TARP) on a “net present value” basis, thus treating related outlays as “investments” that are not included in current spending. Two non-TARP exceptions to this are Fannie Mae and Freddie Mac, whose bailout costs thus far have exceeded $100 billion. On Christmas Eve, while much of the rest of the nation was engaged in last-minute holiday preparations and enduring airport weather delays, the Obama administration said it would provide the two government wards relief without limits [14].

Second, “war costs” didn’t “soar.” Total defense spending in fiscal 2009 was only $42 billion higher than it was in fiscal 2008, an increase of just over 7%. Even before determining how much of the increase directly relates to the wars, it accounts for less than 5% of the $962 billion jump in the deficit from the previous year’s $464 billion.

Finally, in addressing the deficit, Aversa missed or ignored an important story the rest of the press neglected, one which deserves its own entry on the list. That story is the catastrophic decline in federal tax and other collections that shows no signs of stopping, let alone “rebounding.”

Tax receipts for calendar 2009 will be about $2.04 trillion. That’s down about $530 billion, or 20%, from calendar 2008 (after adding back that year’s stimulus payments). The steepness of the decline in collections in an economy that contracted less than 4%, and where average employment declined by less than 5%, is proof positive that the “going Galt” phenomenon was very real in 2009.

As long as the administration-fostered atmosphere of uncertainty [15] (yet another missed story) prevails, it will continue.

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

URL to article: http://pajamasmedia.com/blog/economic-rebound-what-economic-rebound/

URLs in this post:

[1] announced the top ten business stories: http://www.sun-sentinel.com/business/fl-top10-business-stories-20091222,0,6086885.story

[2] Breaking Away: http://www.imdb.com/title/tt0078902/

[3] Dennis Christopher: http://www.imdb.com/name/nm0160550/

[4] Paul Dooley: http://www.imdb.com/name/nm0233209/

[5] as some predict: http://www.youtube.com/watch?v=pw0nL4dhrc4

[6] 40% of the way back: http://i739.photobucket.com/albums/xx40/mmatters/EconContractionEstdThruQ409.jpg

[7] as normal people define it: http://www.investorwords.com/4086/recession.html

[8] growth of 2.2%: http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=1&FirstYear=2008&LastYear=2009&Freq=Qtr

[9] ignored their own evidence: http://www.bizzyblog.com/2009/12/28/ap-aversa-change-definition-of-recession/

[10] said so: http://www.nber.org/cycles/dec2008.html

[11] In November: http://online.wsj.com/mdc/public/page/2_3022-autosales.html

[12] $1.4 trillion deficit: http://www.fms.treas.gov/mts/mts0909.txt

[13] earlier this year: http://pajamasmedia.com../../../../../blog/federal-deficit-becomes-nearly-indecipherable/

[14] relief without limits: http://www.bizzyblog.com/2009/12/27/relief-without-limits-fannie-mae-freddie-mac-get-blank-checks-nyt-provides-blank-coverage/

[15] atmosphere of uncertainty: http://online.wsj.com/article/SB10001424052748704779704574556002170312732.html

 

[a_majoor]

Well someone is getting stimulated:

http://newmexico.watchdog.org/2010/01/03/federal-stimulus-funds-reportedly-spent-in-nonexistent-zip-codes/

Stimulus Funds Went to Nonexistent Zip Code Areas [Updated]
By Jim Scarantino on January 3, 2010
Print This Post Print This Post

First it was phantom Congressional districts. Now it’s phantom zip codes.

Last month, we reported on federal stimulus money credited with creating jobs in nonexistent New Mexico Congressional districts. Further examination of the most recent report on the recipients and uses of New Mexico’s share of the $787 billion stimulus shows jobs created and money going to zip codes that do not exist.

New Mexico Watchdog broke what became a national news story, and fodder for Jon Stewart and Steve Colbert. The website launched by the Obama Administration to track the destinations of billions of dollars of stimulus funds under the American Recovery and Reinvestment Act showed billions going to nonexistent Congressional districts. The website, recovery.gov, reported $26.5 million going to ten New Mexico Congressional districts that do not exist. Those millions were credited with creating 61.5 jobs. Spadework by our Watchdog counterparts in other states showed a total of $6.4 billion reported as being allocated to 440 nonexistent, or “phantom,” Congressional districts.

The agency charged with tracking the stimulus funds, the Recovery Accountability and Transparency Board, attempted to eliminate this embarrassment by lumping all the billions reported going to nonexistent Congressional districts into a new category called the “unassigned” Congressional district.

Closer examination of the latest recovery.gov report for New Mexico shows hundreds of thousands of dollars sent to and credited with creating jobs in zip codes that do not exist in New Mexico or anywhere else. Moreover, funds reported as being spent in New Mexico were given zip codes corresponding to areas in Washington and Oregon.

The recovery.gov site reports that $373,874 was spent in zip code 97052. Unfortunately, this expenditure created zip jobs. But $36,218 was credited with creating 5 jobs in zip code 87258. A cool hundred grand went into zip code 86705, but didn’t result in even one person finding work.

None of these zip codes exist in New Mexico, or anywhere else, for that matter.

The recovery.gov report also credits New Mexico with $131,139, though the zip codes receiving these funds (but creating no jobs) are in fact located in DuPont, Washington, Richland, Washington, and Gales Creek, Oregon.

These errors were found by checking the zip codes reported at recovery.gov against the United States Postal Service’s on-line zip code locator. Coming on top of our discovery of millions of dollars reportedly going to ten phantom New Mexico Congressional Districts, this latest discovery confirms that the data released by the Recovery Accountability and Transparency Board, at least for New Mexico, contains serious errors. All told, we have found over $27 million dollars that has been reported as going to either nonexistent Congressional districts or nonexistent zip codes. (interpolation: this is just in New Mexico BTW)

As in the case of the phantom Congressional districts, the dollar magnitude of the errors we found in little New Mexico was eclipsed by the repetition of these glaring reporting errors across the nation. If we can find nonexistent zip codes, we have no doubt that our counterparts in other states, which have received much more money, will again be able to repeat and expand upon our results for the Land of Enchantment.

The next quarterly report tracking stimulus funds, and reporting jobs created or saved by expenditure of those funds, is scheduled to be posted by the Recovery Accountability and Transparency Board on January 30, 2010. The reports are docketed for quarterly releases. The discovery of errors, raising questions about the integrity and accuracy of the data, have occurred with the release of every report.

Update West Virginia Watchdog’s Steve Allen Adams reports $28 million in stimulus funds going to what he has discovered are nonexistent zip codes.

 

[a_majoor]

A populist response to government bailouts of major banking institutions. What makes this so screamingly funny isnt the idea itself (which is actually quite sound), but the source; not the T.E.A. party movement but.... (wait for it):

http://pajamasmedia.com/eddriscoll/2009/12/31/strange-2010-omens

The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster. In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, the Big Four banks — JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo — all of which took billions in taxpayer money, have cut lending to businesses by $100 billion.

    Meanwhile, America’s Main Street community banks — the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of — are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.

    We talked about the outrage of big, bailed-out banks turning around and spending millions of dollars on lobbying to gut or kill financial reform — including “too big to fail” legislation and regulation of the derivatives that played such a huge part in the meltdown. And as we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don’t we take our money out of these big banks and put them into community banks? And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse — what if we used it to make the system better?

    Everyone around the table quickly got excited (granted we are an excitable group), and began tossing out suggestions for how to get this idea circulating.

    Eugene, the filmmaker among us, remarked that the contrast between the big banks and the community banks we were talking about was very much like the story in the classic Frank Capra film It’s a Wonderful Life, where community banker George Bailey helps the people of Bedford Falls escape the grip of the rapacious and predatory banker Mr. Potter.

    It was a lightbulb moment. And, unlike the vast majority of dinner conversations, the excitement over this idea didn’t end with dessert. It actually led to something — thanks in great part to Eugene and his remarkable team, who got to work and, in record time, created a brilliant, powerful, and inspiring video playing off the It’s a Wonderful Life concept. Watch it below.

    Within a few days, the rest of the pieces fell into place, including an agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.

    reduce_govt_footprint_12-09The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it’s meant to be. It’s neither Left nor Right — it’s populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It’s time for Americans to move their money out of these reckless behemoths. And you don’t have to worry, there is zero risk: deposit insurance is just as good at small banks — and unlike the big banks they don’t provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Who is this populist proponent of small government fighting the good fight against the corporatist collusion of government and big business?

Arianna Huffington.

No, really!

 

[a_majoor]

Well if you are running a 1.5 trillion dollar deficit, you can cover the hole for a while by stealing 2 trillion from retirement accounts. One can only wonder how voters will react:

http://pajamasmedia.com/blog/coming-soon-substituting-government-annuities-for-your-401k/

Coming Soon: Substituting Government Annuities for Your 401(k)?

Posted By Will Collier On January 15, 2010 @ 12:02 am In . Column2 03, Money, Politics, US News | 54 Comments

Back around the last Election Day, far-left Congressmen George Miller and Jim McDermott floated the idea [1] of ending the 401(k) tax break in favor of “redirecting those tax breaks to a new system of guaranteed retirement accounts to which all workers would be obliged to contribute.”

The left has always hated private retirement accounts. First of all, they’re, you know, private, meaning the government doesn’t control them, and we can’t have that. Worse still, people with individual accounts aren’t beholden to a union for their retirement — although what good that does anybody who worked for a company that’s gone broke, for instance Pan Am, is a question never really answered by old-fashioned pension advocates.

From the perspective of politicians, a private account also means you can’t scare people by saying, “If you don’t vote for me, those evil Republicans will take away your monthly check.” The power to hold that (empty) threat over the heads of seniors is among the most beloved in the Democratic Party’s bag of electoral tricks, and the prospect of a populace with its own retirement money clearly drove many Democratic politicians nuts.

But above and beyond those issues, the governmental class really hates IRAs and 401(k) accounts because in their eyes such accounts take all that glorious tax money away from the U.S. Treasury. Billions upon billions, deferred for decades — or given up completely in the case of Roth accounts — money that they could be spending to buy votes. It’s unconscionable! Who do all those little people think they are?

Last year’s stock panic must have looked like a golden opportunity to say, “See, we told you rubes what would happen if you tried to take care of yourselves!” That argument fizzled and the plot quieted down as the markets made back most of 2008’s losses, but after a year of madcap spending from the Obama administration and the Democratic congress, it appears to be back.

According to Theo Francis at BusinessWeek [2], “The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.”

It turns out that Obama appointees Phyllis Borzi (assistant secretary of labor) and Mark Iwry (deputy assistant treasury secretary) are floating the idea of “the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams.”

Well.

This raises more than a few questions. Why annuities, for instance? As noted later in the article, “Seven in 10 U.S. households would object to a requirement that retirees convert part of their savings into annuities,” and the “why” of that opinion isn’t that hard to figure out: they’re a bad deal for everybody except the guys selling them. Consumer gurus like Clark Howard [3] have been warning people away from high-commission “guaranteed” annuities for years. I bet everyone reading this knows of somebody who’s been ripped off by an annuity salesman.

But now … now the government would be the annuity salesman — except that if the administration gets its wish, there won’t be any “selling,” you’ll just be forced to take the money you’ve earned and “convert” it to a construct that they’ll allow you to “invest” in. No more of this willy-nilly mutual fund nonsense for you plebeians; we’ll tell you how you’re going to pay for things, so hand over the cash — it’s your patriotic duty!

It would be plenty bad enough if the “guaranteed” government annuities were limited to bailed-out insurers like AIG. But Karl Denninger of The Market Ticker [4] took a deeper look and found an even scarier outcome. Denninger believes this is really a scheme to prop up the market for Treasury bonds by forcing citizens to “invest” in them.

As Denninger points out, “Forcing people into Treasuries as an ‘annuity’ is exactly what Social Security allegedly is. Except that Treasury stole the money that was collected in FICA taxes and spent it!”

And he’s right. The fictitious “Social Security trust fund” is just a pile of Treasury notes. If we’re all forced to buy trillions more of them — because the government has over-borrowed so dramatically that nobody else will — all we’re going to get in return are more IOUs with nothing backing them up but the promises of politicians.

Those politicians will be retired themselves — on rich taxpayer-funded pensions that you and I aren’t eligible for — long before the IOUs come due. But they’ll have taken your money to pay for their games, and if you think you’ll be getting it back, I have some oceanfront property in Atlanta that you might be interested in.
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Article printed from Pajamas Media: http://pajamasmedia.com

URL to article: http://pajamasmedia.com/blog/coming-soon-substituting-government-annuities-for-your-401k/

URLs in this post:

[1] floated the idea: http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081012/REG/310139971

[2] According to Theo Francis at BusinessWeek: http://www.businessweek.com/investor/content/jan2010/pi2010018_130737.htm

[3] Consumer gurus like Clark Howard: http://clarkhoward.com/liveweb/shownotes/2009/10/27/16957/

[4] Karl Denninger of The Market Ticker: http://market-ticker.denninger.net/archives/1830-401kIRA-Screw-Job-Coming.html