Political Economics

[ccp]

Our country may have a problem when we see that government jobs are becoming more attractive than private sector.  This serves to increase the power and limitlessness of government.

I certainly don't want my policemen to be pissed off or feel cheated anymore than I want to go to a doctor  who would feel the same way.

Why are there not more detectives?  There are certainly huge amounts of crime out there that goes unattended to.  At least if we are paying people to they die why cannot they do some work investigating crime till say 60 or 65?



 

[DougMacG]

Deficits and out of control public spending are not caused by police costs.  Real governing and public service functions make up a tiny fraction of the total we pay.  Police forces are cut first to punish us for wanting to cut or even contain costs.

OTOH, real public functions like police work don't have much market discipline to control costs.  Requires wise and responsible management to look for innovation and searches for new efficiencies.  Often their hands are tied with work rules and union contracts.

Our small town contracts with other neighboring towns for police and some other services.  We can negotiate a half of a cop of coverage or we can contract with a different neighboring force for cost sharing so there is in fact some choice and competition.  But we have almost no crime.  Problem here is that in a county larger than several states we are also paying for all the third world behaviors and the welfare-destroyed culture of a major inner city with all its problems spilling over to the inner ring suburbs.

[JDN]

What I hate is when they disguise or deny the money we pay.  Telling us a teacher makes 50 or 60k when we pay out 90k because they aren't counting the deferred money or the benefits as pay. It is all pay. If they want portions of their pay in forced savings, health benefits, pension funds, taxes or anything else, that is their business.

I agree!

No one in private industry that I can think of has a defined benefit plan that begins to pay out after only 20 years of service.  They may/will be vested after 20 years, but they cannot begin collecting the money
until they turn age 65.  And frankly, in private industry defined benefit plans are dying; they are too costly.  The cost in the military and for other public employees plans however don't seem to be subject to cost cutting or controls; rather they just take the money out of our taxes.  It's hidden and it's easy.

Let's look at our healthy Navy Petty Officer First Class, but it could be almost any healthy public employee.  He is age 38 and will begin drawing a pension that is approximately 50% of his final salary. 
Plus, don't forget each year there are 2-3% cost of living adjustments (compounded that is huge).  And free medical care etc. is provided. 

If his pension is $1800.00 a month, and he is only age 38 therefore he has 27 years to go until retirement, the government is going to give him over $600,000+ AND he will continue
to receive this pension like other workers in the private sector from age 65 until he dies of old age.  Most Police, Firemen, and many public employees fall into this category.   And don't forget, if your salary
is higher, than the retirement will be that much higher as well, often times over a million dollars of extra compensation is paid before age 65.  And of course additional money will paid out

after age 65 with cost of living increases, etc.........  All this while the individual can be working at a second job and acquiring a second pension.  Nice huh?

Maybe this form of retirement plan is appropriate, maybe not, but I think deferred compensation should be discussed and counted as "pay".  And this huge number should not be disguised or hidden;
rather when Military, Police or Firemen, or any other government employee's pay is being discussed, the public should be aware.  Let's talk total deferred compensation in the newspapers, let the public
know the full package not just current salary.  I might be sympathetic to a fireman "only" being paid $60,000, but then again maybe not if I knew that after 20 years he might be given a
"bonus" of 1.2 million dollars from age 38 - 65.  Plus medical coverage for life.  And then of course full retirement benefits from age 65 with continuing cost of living adjustments.

[ccp]

JDN,

I agree with you.  While I really don't want to dissect another person's income salary benefits there is another side to the story when public employees are allowed to have unions that negotiate not with taxpayers directly but some sort of small group of representatives of those payers such as councilmen, school boards or state elected officials and the real payers have little say in the process.  Of course taxpayers might be able to be more involved by going to meetings, newspaper editorials, or perhpas by speeches from local politicians.  Indeed I am totally ignorant (my fault) about local politics.  I am ignorant how and who sets pay and benefits for essentially all public officials.

It is easier for some officials to give in to pressure when it is public and not their personal monies involved I would guess.  Then there is the old "if you scratch my back I will scrach yours" that is rapant in local politics.

[G M]

I'm amazed at what some cops get paid in places like California. In my state, outside of the metropolitan areas, the police wages are very low and the benefits are far from impressive. In much of the state, a entry level officer with a wife and 2 kids is eligible for food stamps.

[G M]

http://www.policeone.com/careers/

http://officer.com/jobs/

Let me know how impressive the pay and benefits look.

[JDN]

GM
Yep, you should come to LA! 

Starting salary, mind you just the base starting salary, on day one for a new recruit with only a High School Diploma is over $45K.  A few thousand dollars more if you have two years of college and even more than that if you have a college degree.  And check out the benefits.  Medical, Dental, a superb retirement plan, flexible work schedule, a sick leave and vacation plan unmatched in the private sector, etc.  Note, upon retirement unused sick leave and vacation are paid out in a lump sum.  It's hard to find any starting job in the private sector paying as much.

I'm not saying the LAPD isn't worth every penny, I just want to see the "value" fully disclosed to the public.  "We "only" make $45K is their rallying cry.  But benefits more than double that amount.  And of course the longer you serve salary goes up.  And even more as you are promoted.  And after 20 years of service, well life is good.  You receive a superb "retirement" immediately payable for the rest of your life and you can get a second job.  Only LA loses; they have to train a new recruit; training a new LAPD officer costs a lot of money. 

Again, I am not necessarily disputing the total amount, maybe it is appropriate, I just want full disclosure including their very benefits including their retirement plan.


In summary, per the LAPD.....

California police jobs and LAPD Officers enjoy tremendous benefits, including flexible work schedules and generous vacation pay benefits.

Compressed Work Schedule
A compressed work schedule is available for many patrol and special assignment units. Officers who work on compressed schedules work the same number of hours but can have more consecutive days off, by working longer days. Depending on assignment, available schedules include three 12-hour days and four 10-hour days.

Health and Dental Plans
Excellent health and dental plans are available for Police Officers and their eligible family members/domestic partners. The City contributes to all plans.

Pension Plan
The City has an independent pension system for whom the LAPD is eligible.

Sick Leave and Disability Benefits
Sworn employees receive 12 days of 100 percent paid sick leave, five days at 75 percent, and five days at 50 percent, upon hiring and each year while employed. Employees may accumulate up to 100 days at 100 percent, 75 percent, and 50 percent paid sick leave. Employees are eligible for a service-connected disability retirement from the date of graduation from basic training.

Vacation and Holidays
Sworn employees receive 15 days of vacation per year after one year of service and 23 days per year after ten years. Every sworn employee also receives a total of 13 paid floating holidays per year; one day every four weeks.

[G M]

Most cops in this country work for small agencies with small budgets. The LAPD does better than most, and Cali agencies from cities with deep tax bases have real nice pay and bennies, although for how long as California implodes?

[G M]

Cops, Crime, and the Economy

Economic recovery on a local scale, whether in Los Angeles, Oakland, or St. Louis, is largely dependent on the willingness of citizens to live and spend money there.
August 16, 2010 - by Jack Dunphy

http://pajamasmedia.com/blog/cops-crime-and-the-economy/?singlepage=true

[ccp]

The idea that some police are eligible for food stamps is nothing short of shameful.

Isn't this also true of some military personel?

[Rarick]

Yep, service members who are in the lower 3 ranks with kids can qualify for some welfare programs............

[DougMacG]

"service members who are in the lower 3 ranks with kids can qualify for some welfare programs"
Of course it shouldn't be that way but there are some factors to consider: a) a lot of their compensation is deferred, b) a significant part is not counted as income such as education benefits, housing, food, medical care, etc. c) our social welfare programs are screwed up so qualifying doesn't for sure mean you are poor, and d) there is some market aspect to military recruiting - they have budget constraints but they have to come up with packages sufficient to recruit the numbers needed in the ranks. 

[Rarick]

Some of the lower 3 ranks are from a "welfare" background too.  A case of too many kids and not enough income, and a faulty sense of priority between needs and wants.  One of those challenges that the services have dealt with since.........?  The police are probably in the same boat, depending on their expenses Vs. income balance, also depending on the economics of their jurisdiction.  The large  majority of government employees are enjoying a +30% income above equivalent civilian sector jobs.  Some rebalancing of the budget is in order, like prioritizing between needs and wants............

[DougMacG]

http://www.huffingtonpost.com/robert-reich/mitt-romneys-wetnoodle-ec_b_686662.html
http://www.robertreich.org/

Watch for these liberal pretend economist arguments to slip into the political debate in your own congressional districts and senate races.  As Reich puts it: "supply-side economics won't create jobs. It's pushing on a wet noodle. Businesses create jobs only if consumers are pulling the noodle from the other end."  Corporations are sitting on plenty of cash but won't hire with it.  Tax cuts won't help that he argues.  In reality he means tax rate increases that are coming won't make it that much worse...

First of all, the publicly traded companies of Dow and NASDAQ are not the small businesses of America that will generate the next expansion.

Reich forgets that a good part of our existing demand is used up purchasing foreign made products and services because the climate and cost and regulatory structure are prohibitive.  And too much of the demand elsewhere in the world is directed toward also purchasing non-USA products where we once were the leaders.

Some of our hiring is held up by the uncertainty of future costs and penalties associated with new healthcare requirements, ccap and trade energy restrictions, tax increases, property tax increases, energy cost increases and who knows what else might be coming down the pike between now and when this anti-business, anti-freedom, anti-growth crowd loses their power.  Tax cuts alone do not make up a 'supply side' policy.  The regulatory maze and the flood of public spending competing for resources are big parts of the puzzle also.

You can't tell me that pro-growth policies that would bring unemployment down from 10% back to 5% would not increase consumer demand and business product and services in this country.  You cannot convince me that making it easier and less costly to hire and produce here would not shift some production to here and some consumer purchasing to American goods and away from the foreign competitor.  You cannot even convince me that even if all the sales of new production here went to overseas markets that the money coming back wouldn't provide a burst and a boost to our own economy our own demand and lead to new hiring.  You cannot tell me that lowering corporate tax rates from the highest in the world of western civilization to the median of the OECD countries would not have an affect on keeping and attracting new jobs to our economy.

What Mr. Reich needs to do is first get all the parties in power such as Obama, Pelosi, Valerie Jarret and Van Jones (is he still around?) to at least admit and declare publicly that real economic growth is a public good of value, not something to be attacked, before we can seriously argue out what is the best set of policies to achieve it.

Currently the US Dollar is within about 5% of its all-time historic low.  You cannot convince me that this would not be a perfect time to be selling Made-in-USA goods all around the globe - if only we were still producing anything.

So much for pushing on a wet noodle.

[Body-by-Guinness]

I think Frank's motives are suspect, thought it's good to see this realization percolating in unlikely corners.

Frank Comes Home to the Facts
The Massachusetts congressman acknowledges that market processes work. Can Obama?

Can you teach an old dog new tricks? In politics, the answer is usually no. Most elected officials cling to their ideological biases, despite the real-world facts that disprove their theories time and again. Most have no common sense, and most never acknowledge that they were wrong.

But one huge exception to this rule is Democrat Barney Frank, chairman of the House Financial Services Committee.

For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.

“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”

When I asked Frank about a long-term phase-out plan that would shrink Fannie and Freddie portfolios and mortgage-purchase limits, and merge the agencies into the Federal Housing Administration (FHA) for a separate low-income program that would get government out of middle-income housing subsidies, he replied: “Larry, that, I think, is exactly what we should be doing.”

Frank also said that any federal housing guarantees should be transparently priced and put on budget. But he added that the private sector must be encouraged to re-enter housing finance just as the government gradually withdraws from it.

Some would say Frank’s mea culpa is politically motivated in advance of an election where bailout nation and big government are public enemies number one and two. Of course, poll after poll shows that the $150 billion Fan-Fred bailout, which the Congressional Budget Office estimates could rise to $400 billion, is detested by voters and taxpayers everywhere.

In fact, these failed government agencies are in such bad shape that they can’t even pay Uncle Sam the dividends owed under the conservatorship deal reached two years ago. That’s right. In order to pay a $1.8 billion dividend on Treasury department stock, Fan and Fred had to borrow $1.5 billion from — you guessed it — the Treasury.

Then there’s this head-scratching detail: In an absolutely outrageous move last Christmas Eve, President Obama signed off on $42 million in bonuses for the top twelve Fannie and Freddie executives, including $6 million apiece for the two CEOs. (Hat tip to attorney Stephen B. Meister.)

Voters are on to all this. So politics may indeed be motivating Barney Frank’s turnaround. But I’m going to credit him with more than that.

I think Chairman Frank watched these government behemoths descend into hell and then witnessed the financial catastrophe that ensued. And I think he has come to realize that the whole system of federal affordable-housing mandates that was central to the real-estate collapse — including the mandates on Fannie and Freddie and the myriad bad decisions made by private banks and other lenders in response to the government’s overreach — simply needs to be abolished.

Noteworthy is the fact that Treasury Secretary Tim Geithner has come to a similar conclusion. Geithner told a recent Washington conference on the future of housing finance that the system needs fundamental change. He said, “We will not support a return to the system where private gains are subsidized by taxpayer losses.”

Of course, the withdrawal of housing markets from government programs, and the onset of a reinvigorated private sector for providing mortgages, must be done gradually over a period of years. But it is possible that the federal mortgage madness is coming to an end.

We will have to see if Congress really does say good-bye to Fan and Fred, as Republicans like Jeb Hensarling are advocating. Equally important, we will have to see if the federal affordable-housing mandates created by Congress and implemented by HUD and banking regulators are similarly repealed.

And then we will have to see if reformed federally guaranteed housing insurance includes larger down-payments, stricter underwriting standards, and greater reliance on private capital markets, lenders, and insurers. In other words, we need to see if housing will be restored to a market-based system and removed from the government-backed system that has proved so disastrous.

The broader lesson here is that government planning doesn’t work. And if left to their own devices, market processes will work. I don’t know if President Obama gets this. But my hat goes off to a man who does, Chairman Barney Frank.

— Larry Kudlow, NRO’s Economics Editor, is host of CNBC’s The Kudlow Report and author of the daily web blog, Kudlow’s Money Politic$.

http://www.nationalreview.com/articles/244382/frank-comes-home-facts-larry-kudlow

[G M]

http://hotair.com/greenroom/archives/2010/08/24/the-phantom-priority/

The Phantom Priority
posted at 1:05 am on August 24, 2010 by Doctor Zero


After the passage of his massive health-care plan, President Obama promised a “hard pivot” to dealing with our flagging economy.  Job creation was said to be his new “top priority.”  Politicians make a habit of declaring lots of top priorities.  Mark Knoller of CBS News recently put together an amusing list of thirteen items the President has declared to be his top priority.  The promise to put the economy first was repeated loudly and often.  It will still be ringing in the ears of voters when they clean Democrats out of Congress with an electoral leaf blower this autumn.

In reality, job creation and economic growth are nowhere to be found on this Administration’s list of priorities.  The “hard pivot” was actually the feeble ring of ruby slippers clicking together.

[G M]

http://www.cnbc.com/id/38826988

Strap in.

[G M]

http://www.cnbc.com/id/38831550

[Body-by-Guinness]

See, We Told You So
The Obama administration fesses up to another bank bailout under HAMP.

Can I let you in on something hilarious going around the Internet these days? No, I’m not talking about the Double Rainbow video. I’m talking about the reaction — just as amusing, though not nearly as joyful — of a number of left-wing political bloggers and commentators to the discovery that the administration’s foreclosure-mitigation program was actually a slow-motion bailout for Fannie Mae, Freddie Mac, and the banks, and not really designed to help underwater borrowers at all. Imagine Neo’s reaction when he’s told what the Matrix is, only pretend that the Matrix was something that was obvious all along, and you’ll get why I’m laughing.

The program’s intention was clear from the outset, as the editors of National Review Online noted when it was announced 18 months ago:

So, cui bono? Put simply, this program is designed to benefit Fannie and Freddie shareholders, not the great majority of Americans struggling with their mortgages. The only loans that can be restructured are those held in Fannie/Freddie portfolios or securitized by the twins. Just in time to benefit from a refinancing boom, Fannie and Freddie plan to raise their fees to as high as 3.5 percent on April 1. (Note that date, taxpayers, and ask yourselves who is being played for the fool.) And only a tiny slice of homeowners will be eligible — those who are in relatively weak positions (house payments exceed 31 percent of gross income) but not too weak (house payments do not exceed 38 percent of gross income) and who are, despite their mortgage difficulties, still creditworthy enough to pass bank underwriting standards. Fannie and Freddie get new capital, new income, and better loans in their portfolios. Most homeowners get nothing, and taxpayers get the bill.

At the time, a lot of supporters of the administration argued that only heartless Republicans and conservatives would oppose such a well-intentioned and generous program to keep struggling borrowers in their homes. The plan was the subject of CNBC commentator Rick Santelli’s famous rant, which drew angry condemnation from liberals and kicked off the tea-party movement that continues to drive them insane.

It turns out that conservatives were right: The program was full of bad incentives for borrowers and backdoor bailouts for banks. Neil Barofsky, the special investigator in charge of overseeing TARP spending, recently blasted the Home Affordable Modification Program (HAMP): “The American people are essentially being asked to shoulder an additional $50 billion of national debt without being told . . . how many people Treasury hopes to actually help stay in their homes as a result of these expenditures,” Barofsky’s report stated. The report also noted that HAMP “has not put an appreciable dent in foreclosure filings,” because, among other reasons, “the number of trial and permanent modifications that have been cancelled substantially exceeds the number of homeowners helped through permanent modifications.”

But the real eye-opener for left-wing supporters of the program came when a handful of financial bloggers posted write-ups of their visit to the Treasury Department last week. Treasury Secretary Tim Geithner and Co. had invited these bloggers to a private briefing as part of the department’s outreach efforts leading up to its big seminar on the future of housing finance. One of the subjects the bloggers and the Treasury officials discussed was HAMP. According to blogger Steve Waldman’s write-up, Treasury officials were “surprisingly candid” about the program’s failures:

The program has gotten a lot of bad press in terms of its Kafka-esque qualification process and its limited success in generating mortgage modifications under which families become able and willing to pay their debt. Officials pointed out that what may have been an agonizing process for individuals was a useful palliative for the system as a whole. Even if most HAMP applicants ultimately default, the program prevented an outbreak of foreclosures exactly when the system could have handled it least. There were murmurs among the bloggers of “extend and pretend”, but I don’t think that’s quite right. This was extend-and-don’t-even-bother-to-pretend. The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks.

In a word, duh. It’s not like no one saw this coming. We did (see above). But here’s the funny part: Many left-wing commentators apparently trusted the administration’s good intentions to the point of being “shocked” by these revelations.

Duncan Black, who blogs as Atrios, wrote, “Conning homeowners by announcing a government program designed to help them when in fact it was designed to help the banksters is, in my world, ‘cruel.’”

Mike Konczal at Rortybomb, who attended the briefing, wrote, “The narrative seemed to change from helping homeowners to spacing out the foreclosures. I asked them to repeat it, because the idea that billions of taxpayer dollars are being spent to smooth out foreclosures for banks struck me as new narrative — it’s explicitly extend-and-pretend, and also fairly cynical.”

But my favorite was economist/blogger Brad DeLong, who summed up his blindsided take with the headline: “Department of ‘Huh?!’: HAMP Edition.”

Huh? What? Obama effectuated a “cynical” and “cruel” bailout of Fannie and Freddie under the guise of a compassionate mortgage-modification program? The mind reels! The heart aches! What else has he lied to us about?

It’s actually worse than all that. The administration’s program created an incentive for underwater borrowers who weren’t yet behind on their mortgage payments to fall behind on purpose in order to qualify for a modification under HAMP. An aide to a Republican congressman tells NRO, “People who could have made their mortgage payments end up three months behind, and they can never recover from the penalties and late fees, so they end up in worse shape than if the program had never existed from the outset.”

The aide, who works on constituent issues, says, “I’ve had at least one case where the person gets a letter saying that they qualify for HAMP, and from their point of view, it would really help them out if they were able to qualify for a lower payment, but if they had to make the payment they were making, they could have done it by cutting back on other parts of their life.

“Then at the end of the process, they’re denied the modification, and they’re three months behind on their mortgage,” he says.

Why have so many been denied modifications? According to ProPublica’s Ryan Knutson, it’s because “the Treasury Department . . . encouraged banks to start trials quickly, causing banks to make trial offers to people without fully vetting their eligibility, and ultimately letting in many homeowners who were destined to fail.”

But from the banks’ point of view, even if many of these borrowers end up in foreclosure, at least the program juiced a few trial payments out of those who had stopped making payments altogether. And it eased the crush of foreclosures for awhile, giving Fannie, Freddie, and other financial institutions room to breathe. It was designed, as Treasury officials are now candidly admitting, to help banks, not homeowners. Supporters of the program are shocked by this turn of events. They wouldn’t be, if they had listened to us.

— Stephen Spruiell is a National Review Online staff reporter.

http://www.nationalreview.com/articles/244535/see-we-told-you-so-stephen-spruiell

[Body-by-Guinness]

Government Strangles High-Tech Growth
Published on August 28, 2010 by Ernest Istook

The CEO of Intel has joined the ranks of those labeling big government as the cause of our economic slump, not the solution.
Paul Otellini says it already costs Intel an extra billion dollars to build a microchip plant in the U.S., rather than overseas. In his illustration, it's an extra 25% to create a $4 billion facility.
He told this to an Aspen gathering of the Technology Policy Institute, adding that government is killing America's leadership for jobs of tomorrow. Otellini said, "We seemed a generation ahead of the rest of the world in information technology. That simply is no longer the case."
While promoting education, research, favorable trade policies, and broadband expansion, he made it clear that tax policies are key--policies that are the opposite of what Congress and the Obama Administration are promoting:
As CNET reported on his speech, "Take factories. 'I can tell you definitively that it costs costs1 billion more per factory for me to build, equip, and operate a semiconductor manufacturing facility in the United States,' Otellini said. The rub: Ninety percent of that additional cost of a $4 billion factory is not labor but the cost to comply with taxes and regulations that other nations don't impose."
How do we get companies to expand in America rather than overseas? The Intel CEO explained, "Adjust the U.S. corporate tax rate to a rate that is competitive world-wide. At Intel, we generate 75% of our revenue and much of our profit abroad. The U.S. tax treatment of that income makes it extremely expensive to repatriate that profit and invest here. If our tax rate approached the rest of the world, corporations would have a natural incentive to invest here given many of the natural advantages that exist in this country."
He suggested lowering the rate to 25%. That reduction echoes a Heritage Foundation proposal in its "Solutions for America," which recommends, "The U.S. corporate tax rate should be set at or below the Organisation for Economic Co-operation and Development average of 26% to eliminate the incentive to move businesses and jobs overseas."
Otellini also stressed the need not to penalize companies when they repatriate their foreign earnings and bring them back to the U.S. He's joined by many others in the high-tech community who warn that what some call "closing tax loopholes" actually hurts the ability to create jobs in America. Sybase CEO John Chen has written, "President Barack Obama has proposed to raise taxes on the international operations of U.S. businesses. There is one thing the proposal can effectively achieve: make the United States an even less friendly place to do business, and thus delay the economic recovery. . . . Although intended to keep investments and jobs from leaving our country, in the long run the measures in the proposal will drive investments away, and kill jobs in the U.S."
The high-tech sector's complaints are part of a growing chorus from job creators who describe how Washington is smothering economic growth.
The Business Roundtable sent a 50-page letter to the White House describing how Obama's agenda is stifling growth and killing jobs. A GOP letter complained of 191 intended rules and regulations that EACH would impose $100-million or more of growth-killing cost burdens on businesses.
Worried about what their own government is doing to them, businesses continue to sit on a $1.8-trillion cash stockpile, holding it back for the extra costs they face from more taxes and more regulation.
The White House happy talk of a "Recovery Summer" grates like nails on a blackboard. That rhetoric collapses with news that second quarter growth was at a 1.6% annual rate--less than half the first quarter rate and well below original White House numbers.
To put America back to work, it's time to heed those who create jobs, rather than politicians who create more government. Intel and others should not face a $1-billion hurdle to expanding in the USA instead of overseas.
Former Congressman Ernest Istook is a distinguished fellow at The Heritage Foundation.

http://www.heritage.org/Research/Commentary/2010/08/Government-Strangles-High-Tech-Growth

[G M]

http://hotair.com/archives/2010/09/04/romer-hey-we-gave-it-our-best-shot/

**Reminds me of Blutosky from Animal House. "Hey, you fcuked up, you trusted us".

[G M]

http://www.politico.com/news/stories/0910/41765.html

Whoops! Sorry!

[G M]

http://hotair.com/archives/2010/09/06/obama-to-propose-50-billion-in-infrastructure-spending-for-stimulus/

Insanity: doing the same thing over and over again and expecting different results.

[G M]

http://www.ft.com/cms/s/0/ca09873c-bb6c-11df-a136-00144feab49a.html

Goldman forecasts emerging equities bonanza

By Stefan Wagstyl in London

Published: September 8 2010 18:32 | Last updated: September 8 2010 18:32

China could overtake the US in terms of stock market capitalisation by 2030 as the market value of equities in emerging nations soars, powered by expanding investment and by economic growth, says a report by Goldman Sachs.

[Crafty_Dog]

My prediction:  China is a big bubble which will burst before then.  I might add that GS did not predict the bursting of our bubble (in public at any rate).

[G M]

http://www.realclearpolitics.com/articles/2010/09/10/the_nanny_state_has_blown_the_bank_107091.html

Will the death of the nanny state be the death of us?

[G M]

http://www.breitbart.com/article.php?id=CNG.a64b6fa820c23d9ef2058a22276ce3a1.2c1&show_article=1

 Boston University professor Laurence Kotlikoff,  who warned as far back as the 1980s of the dangers of a public deficit, lent credence to such dark predictions in an International Monetary Fund publication last week.

He unveiled a doomsday scenario -- which many dismiss as pure fantasy -- of an economic clash between superpowers the United States and China, which holds more than 843 billion dollars of US Treasury bonds.

"A minor trade dispute between the United States and China could make some people think that other people are going to sell US treasury bonds," he wrote in the IMF's Finance & Development review.

"That belief, coupled with major concern about inflation, could lead to a sell-off of government bonds that causes the public to withdraw their bank deposits and buy durable goods."

Kotlikoff warned such a move would spark a run on banks and money market funds as well as insurance companies as policy holders cash in their surrender values.

"In a short period of time, the Federal Reserve would have to print trillions of dollars to cover its explicit and implicit guarantees. All that new money could produce strong inflation, perhaps hyperinflation," he said.

[DougMacG]

A George Will piece posted from Sunday was excellent. link follows.

A well intended piecemeal program of targeted leftism that mostly benefited Honda and Toyota with new car sales, got a few people with plenty of cash in their pocket into new wheels with taxpayer help and left ordinary working or poor people with an 11% higher price to pay for the remaining stock of used cars in the government tampered market.

I wonder if even one left-leaning moderate can read a true and recent story of another command economy experiment failing for the people like that and learn something about how freedom to make our own choices, good or bad within reason, is a better way to run the private economy.

Let government focus on core issues of governing, not try to run the private sector for us too.
------------------------
http://www.chron.com/disp/story.mpl/editorial/outlook/7199488.html

The clunker school of economics
By GEORGE F. WILL
WASHINGTON POST
Sept. 13, 2010

Looking back with pride, the British are commemorating the 70th anniversary of the Battle of Britain, when Churchill said of the pilots fighting the Luftwaffe: Never "was so much owed by so many to so few." Looking ahead with trepidation, Americas are thinking: Never have so many of us owed so much.

Actually, they owed slightly more when the recession began, when household consumer debt was $2.6 trillion. The painful but necessary process of deleveraging is proceeding slowly: Such debt has been reduced only to $2.4 trillion. Add to that the facts that the recession has reduced household wealth by $10 trillion, and that only 25 percent of Americans expect their incomes to improve next year. So they are not spending, and companies are worried. Hence, rather than hiring, companies are sitting on cash reserves much larger than the size of last year's $862 billion stimulus.

Democrats who say another stimulus is necessary for job creation, but who dare not utter the word "stimulus," are sending three depressing messages: The $862 billion stimulus did not work; the public so loathes the word that another stimulus will not happen; therefore prosperity is not "just around the corner," as Herbert Hoover supposedly said (but did not). Consumers and businesses are responding to those messages by heeding Polonius' advice in Hamlet: "Neither a borrower nor a lender be."

Hoover — against whom Democrats, those fountains of fresh ideas, have been campaigning for 78 years — is again being invoked as a terrible warning about the wages of sin. Sin is understood by liberals as government austerity, which is understood as existing levels of government spending, whatever they are, whenever. Treasury Secretary Tim Geithner recently said that Germans favoring reduced rather than increased state spending sounded "a little bit like Hoover." Well.

Real per capita federal expenditures almost doubled between 1929, Hoover's first year as president, and 1932, his last. David Kennedy, in Freedom from Fear, writes of Hoover:

"He nearly doubled federal public works expenditures in three years. Thanks to his prodding, the net stimulating effect of federal, state and local fiscal policy was larger in 1931 than in any subsequent year of the decade."

Barack Obama has self-nullifying plans for stimulating the small-business sector that creates most new jobs. He has just endorsed tax relief for such businesses but opposes extension of the Bush tax cuts for high-income filers, who include small businesses with 48 percent of that sector's earnings. The stance of other Democrats seems to be that the Bush cuts were wicked in conception, reckless in execution — and should be largely, and perhaps entirely, extended.

Does this increase anyone's confidence? About as much as noting the one-year anniversary of the end of another of the administration's brainstorms.

The used car market is an important mechanism for redistributing wealth to low-income persons: The price of a car drops when it is driven out of the dealership, but much of its transportation value remains when it enters the used car market. Unfortunately for low-income people, the average price of a three-year-old automobile has increased more than 10 percent since last summer. This is largely because the Car Allowance Rebate System, aka "cash for clunkers," which ended in late August 2009, cut the supply of used cars.

Cash for clunkers provided up to $4,500 to persons who traded in a car in order to purchase a new car with better gas mileage, but stipulated that the used car had to be scrapped. A study by Edmunds.com shows that all but 125,000 of the 700,000 cars sold during the clunkers program would have been bought even if no subsidy had been available. If this is so, each incremental sale cost taxpayers $24,000.

Obama is desperately urging consumers and investors to have confidence in his understanding of economics. They may, however, remember his characteristic certitude that "cash for clunkers" was "successful beyond anybody's imagination."

[Body-by-Guinness]

Why Democrats Can't Win on Taxes
Many Democrats up for re-election do not want to vote for any tax increases, but Obama has drawn a line in the sand against tax cuts "for the rich."
By KIMBERLEY A. STRASSEL

To listen to Senate Majority Leader Harry Reid and Speaker Nancy Pelosi, Democrats are fired up for a tax debate. Republicans are holding "hostage" the "middle class" with their insistence that the Bush tax cuts be extended for all. Democratic leaders claim they can't wait to bring this line to voters this fall.

There comes a point in Washington debates when the losing side has little left but bluff, and here's a good example. What Democrats know, but won't say, is that the party has walked itself into a lose-lose-lose tax fight. Their choices now range from bad to worse to problematic.

They are in this fix because the tax debate they are having is not the tax debate they had planned. By now, the $800 billion "stimulus" was supposed to have the economy roaring back and unemployment well below 8%. The administration was supposed to be resting on its legislative laurels, the public showing growing appreciation for its agenda. The economy and polls firmly in hand, President Obama would then pivot to the deficit to argue that it was now responsible for a once-again-prosperous nation to pay its bills by letting some tax cuts expire.

The majority stuck to this vision despite all evidence it was imploding. At any point Democrats could have pre-emptively embraced the tax question, perhaps intelligently enough to help the economy, and take credit. They didn't. Tax hikes looming, they must now confront this debate on the back of 9.6% employment, a teetering economy, an unpopular agenda, an angry business community, and an emboldened GOP. Which brings us back to options.

View Full Image

David Gothard
Option No. 1 is for congressional leaders to plunge once again into the legislative breach, this time to threaten and bribe their caucus into passing the Obama plan, which extends tax cuts only for those making less than $250,000. This is a heavy lift, partly because it is hard to find a Democrat who likes the Obama plan.

Mrs. Pelosi's liberals are unenthusiastic, since most would prefer to let all the tax cuts expire. Mrs. Pelosi's Blue Dogs are petrified, since a vote to retain only some cuts will be turned by the GOP into ads explaining that what Democrats in fact voted for was a $700 billion tax increase on small businesses and capital at a time of economic difficulty.

For the 75-plus House Democrats whose seats are in danger, having to defend that vote, in addition to health care, stimulus or cap and trade, would be ghastly. As the election approaches and Democrats find themselves with more seats to defend with limited cash, party moneymen also worry such a vote would alienate businesses and further dry up campaign donations. There's also the small problem of the Senate, where Minority Leader Mitch McConnell wields a potential filibuster.

Option No. 2 is to do nothing and kick the issue beyond the election. This approach allows the leadership to avoid the headaches of Option 1, and it may explain why neither Mr. Reid nor Mrs. Pelosi has bothered to introduce a bill.

This option is, however, not so popular among many rank-and-file Democrats. Perhaps the only thing worse than being accused of voting for $700 billion in tax increases is being accused of doing nothing and allowing $4 trillion in tax increases, most of them on average Americans. Democrats will blame Republicans, but that will be hard to do if Democrats don't even go through the vote motions.

Option No. 3 is for the congressional leadership to give in to the growing pressure and allow members to vote with Republicans to extend all the 2001 and 2003 tax cuts. That pressure is already notable: No fewer than 31 House Democrats signed a letter this week demanding that all the cuts continue, and five Senate Democrats now support that position. Democratic leaders are clearly worried those numbers will grow, one reason Mrs. Pelosi yesterday refused to rule out a full extension.

This option would not only help vulnerable Democrats, it'd be great for the economy and taxpayers. The political problem Democrats have is self-created. Rather than embrace the winner of full tax relief, President Obama has chosen to draw an ideological line and to motivate his liberal base with his position against tax cuts "for the rich." Democrats are now fearful that if they cave it will demoralize that base, and further handicap them in midterm races.

And so, the bluff. It's a weak hand, but the GOP shouldn't underestimate it. The Democrats' best shot is procedural, to somehow allow only one vote—on extending rates for just the "middle class"—and dare Republicans to vote against it. Democrats might then peel off GOP support and provide themselves cover this fall. If the majority senses fear—like what emanated from Minority Leader John Boehner this past weekend when he suggested he wouldn't take that dare—it'll take this shot.

Republicans should call and raise. If Mr. Obama has such a winner tax position, it isn't clear why his leaders are ducking tax bills and his members are running for cover. And if the GOP can't run on universal tax relief in this of all years, it's not clear when it ever can.

http://online.wsj.com/article/SB10001424052748703440604575496223092291204.html

[G M]

http://www.bloomberg.com/news/2010-09-24/gold-rises-to-record-on-dollar-hedge-demand-silver-gains-to-30-year-high.html

Gold futures rose to a record $1,300 an ounce in New York as investors sought a protection of wealth and an alternative to a weakening dollar. Bullion traded at an all-time in London and silver reached the highest price since 1980.

The dollar headed for a weekly drop against the euro on concern the Federal Reserve is moving closer to boosting debt purchases, while European equities declined. Gold, which usually moves inversely to the greenback, advanced to a record for the fourth day this week. Silver, which is used in industrial applications, headed for a fifth weekly advance in London.

“Gold is showing there is no confidence in the dollar,” said Bernard Sin, head of currency and metal trading at bullion refiner MKS Finance SA in Geneva. Recent “data has been showing signs of a troubled economy. That’s why we’ve seen this huge buying for investors as a safe haven.”

[Crafty_Dog]

PAAS is my silver play and has been doing very well for me.  I first bought somewhere in the 8s, and recently added at 22.

[Body-by-Guinness]

Un-Stimulating Bureaucracy

Posted by Tad DeHaven

An essay from economist Arnold Kling in the latest Cato Policy Report discusses what Kling calls the “knowledge-discrepancy problem.” This occurs when knowledge is dispersed but power is concentrated, and it is particularly acute in government.

In short, it’s impossible for government “experts” to aggregate the vast amount of knowledge that is dispersed throughout the economy in order to optimally direct economic activity. And as Kling notes, concentrating power over the economy in the hands of experts leads to ever more undesirable government interventions:

As we have seen, the expectations placed on government experts tend to be unrealistically high. This selects for experts with unusual hubris. The authority of the state gives government experts a dangerous level of power. And the absence of market discipline gives any errors that these experts make an opportunity to accumulate and compound almost without limit. In recent decades, this knowledge-power discrepancy has gotten worse. Knowledge has grown more dispersed, while government power has become more concentrated.

The failure of the administration’s stimulus plan illustrates the problem with empowering government experts to “fix” our incredibly diverse $14 trillion economy.

A Wall Street Journal article on the inability of government bureaucracies to utilize stimulus funds demonstrates the inherent inefficiency of government planning. For example, the stimulus provided $5 billion to the states for weatherization projects. But when a local official in Detroit began soliciting applications to weatherize houses, she ran into a buzz saw of federal and state red tape:

But on the same day in March 2009 that Shenetta Coleman picked up applications from 46 companies, she received an email from the Michigan Department of Human Services telling her she couldn’t award work to anyone.

The problem: Ms. Coleman hadn’t met requirements for her advertisement. Those included specifying the precise wages that contractors would have to pay, and posting the advertisement on a specific website. There were other rules—federal, state and local—for grant and contract-award processes, historic preservation and labor standards.

The bureaucratic obstacles Ms. Coleman hit took more than a year to clear. Some were mandated by the stimulus bill, the same legislation that was supposed to rapidly create jobs. For example, there is a union-backed provision that requires that weatherization workers receive the prevailing wages in the area.

The stimulus is also distorting employment by incentivizing workers to obtain job-skills on the basis of government planning. The WSJ article cites the example of an unemployed worker who enrolled in a weatherization training class when she learned that Detroit would be receiving $30 million in weatherization funds:

She studied energy-saving principles, practiced drilling holes into walls and blowing in insulation, and learned how to install windows. She graduated in March, at the top of her class. For the next four months, she couldn’t find work.  “I was hanging on by a thread,” said Ms. Wallisch. In July, she was hired for energy-conservation work funded not by the stimulus plan, but by Michigan’s utility companies.

The recession, and consequent rise in unemployment, led to demands for the government to “create jobs.” However, merely throwing taxpayer money at government job-creating schemes, which was the solution the government’s “experts” came up with, was never a viable solution. The experts simply do not have the requisite knowledge to match millions of workers possessing diverse job-skills with the diverse needs of millions of employers.

From Kling:

What the issue of job creation illustrates is the problem of treating government experts as responsible for a problem that cannot be solved by a single person or a single organization.

Economic activity consists of patterns of trade and specialization. The creation of these patterns is a process too complex and subtle for government experts to be able to manage.

The issue also illustrates the way hubris drives out true expertise. The vast majority of economists would say that we have very little idea how much employment is created by additional government spending. However, the economists who receive the most media attention and who obtain the most powerful positions in Washington are those who claim to have the most precise knowledge of “multipliers.”

As I have previously discussed, the average citizen has become conditioned to reflexively turn to the government to in times of crisis. Government officials are only too happy to oblige as they are naturally inclined to operate on a short-term horizon (i.e., the next election). Fortunately, more and more Americans appear to be realizing that the government and its experts are the problem rather than the solution.

http://www.cato-at-liberty.org/un-stimulating-bureaucracy/

[G M]

http://www.businessinsider.com/mauldin-2010-10

Gas Is Going To $5 A Gallon, Consumer Spending Is Dead, And House Prices Will Fall Another 20%

Read more: http://www.businessinsider.com/mauldin-2010-10#ixzz11KBdIA8y

[DougMacG]

"Gas Is Going To $5 A Gallon, Consumer Spending Is Dead, And House Prices Will Fall Another 20%"

If it were based only on our failed energy supply policies gas wouldn't stop at $5 but would go to $25/gallon and beyond.  But of course it is also based on affordability so the suppliers do not maximize revenues by raising up with no limit.  High energy prices were a contributor to our recent economic downfall, but rising prices are partially a sign of global economic strength.  There is no new pipeline coming in from Alaska or from anywhere else, no new refineries (as well as no new coal plants and no new nuclear plants that need many years of lead time to get going) so short supply is also a cause of the price rise.

Consumer spending was a bubble like housing in this throw away society and a correction is not all bad. When you can't bump up your home equity loan and you are buying down your credit cards, logic starts to compete with emotion. Other than three wise men baring gifts I don't recall anything in scripture about seasonal shopping mall madness.  These are more recent phenomena.  Now I see Goodwill more crowded.

Housing markets are all intertwined but primarily regional.  Maybe they will drop further with still more foreclosures coming on line and most foreclosure buyers are thoroughly exhausted in more than one sense.  I bought another investment property for an amazingly low price last week, while other buyers sit out.  It is a little scary being a contrarian, I just figure in that next 20% drop now and assume that the people who don't jump from their office window will have to live somewhere.  As soon as the income and employment situation rebounds (we probably need a war to change those policies), housing will do just fine.  If not, I'm screwed anyway so who cares.

This is no longer a plunging economy on the brink.  Two years past Sept 2008 this economy is what it is.  We elected anti-growth, anti-production policies.  We vote for trillion and a half dollar deficits and we get stagnation with impending inflation along with energy scarcity and too many regulations for anyone to want to hire or manufacture. Still we rebound slowly because that is what Americans, the half who contribute, do.

It is always surprising to me that economists who strongly oppose PelosiObamanomics like our own Scott Grannis are still rather upbeat about the outlook.  His most recent 4 or 5 posts are fairly positive and based on real data, and that theme there has been consistent for months: http://scottgrannis.blogspot.com/
Auto sales point to ongoing economic recovery
ISM indices continue to point to moderate growth
Unemployment claims situation is slowly improving
Online job demand points to rising employment
Tech and consumer stocks have recovered nicely
The housing market has adjusted to new realities
Household financial obligations have eased considerably
Commodities reach new all-time highs
Capex continues very strong
No shortage of money
Housing market remains weak - oops, mostly positive.

[G M]

I'll state for the record that the economy will be much worse than it is now. Think double dip with an L-shaped bottom. We have a narrow window (The next two elections) to pull out of this death spiral.

[Crafty_Dog]

The market tries to measure the present value of future income and profits.  With BO coming in, it crashed.  With a good chance of the Reps being in a position to stymie BO, the future looks brighter than it did and the market climbs.

[G M]

The market isn't entirely rational, and is still overvalued due to various attempts to keep things overinflated. Home prices are still very overvalued. Most states are deep in the red and would be coming apart at the seams were it not for the federal money infusions. We are still coasting on wishful thinking and illusion as we continue to run up the national credit card and worsen the consequences when the card gets cut up.

[DougMacG]

GM wrote: "I'll state for the record that the economy will be much worse than it is now. Think double dip with an L-shaped bottom. We have a narrow window (The next two elections) to pull out of this death spiral."

I agree with you on the time frame.  It is not the election cycles but the policies that come out of it with a 180 degree change in thinking, and I am pessimistic about it even if elections go nominally well.

I posted a Krauthammer piece a while back called "Decline is a Choice".  The title says it all for where we are now.  People say they voted for Obama because they didn't like Bush, and before that in 2006 for similar reasons, having a Republican congress didn't mean anything positive even in a growing economy.  But they also chose these policies.  As Obama told the activists in the last week, he has accomplished 70% of it so far. Now people allegedly will vote against Pelosi-Reid-Obama because of policies, a vague dislike for the expansion of government and the lack of positive results from it.  I don't buy that people can really change their thinking that radically, that quickly.  Not enough people get it economically, from my point of view, in terms of recognizing a distinction between pro-growth and anti-growth policies and choosing enough economic freedoms and incentives to get things rolling again.  On top of that there is an impending demographic trainwreck headed at us that we are totally unprepared for.

Reminds me of what they said about Japan in about 1990 IIRC, only worse.  The only thing that would avoid the stagnation and deflation coming (in Japan at that time) was bold action, and the one thing their form of government was incapable of was bold action of any kind, so the pessimistic predictions all came true.

A large grass roots movement is ready for change.  Not necessarily a majority.  What really is missing is one leader who can do it, communicate it, get it right, and win. Unfortunately I don't see one and the time frame is running short.

Imagine 1980 with no Reagan.  Reagan was a front runner but barely got himself separated from a crowded field.  People barely understood what he meant by the Kemp-Roth cuts and mostly didn't know if he was serious or if it would work.  Plenty of people still don't know it worked.  Does anyone think a quarter century economic expansion would have begun or the cold war would have ended in 8 years with eastern Europe free and the Soviet Union gone if moderate George H.W. Bush had won then, or Senate Minority Leader Howard Baker, or John Connally, or Illinois Congressmen John Anderson and Phil Crane had won the nomination or if the Incumbent President James Carter had been reelected or if his challenger Teddy Kennedy had won it all?  What were any of them going to do that would have lifted out of that hole?  That is the roughly the question I would ask this crowded field that is developing today and I am skeptical about hearing a convincing answer.

[ccp]

 "I don't buy that people can really change their thinking that radically, that quickly.  Not enough people get it economically, from my point of view"

I agree.  As long as we continue expanding doles like a cancer the slope of the uphill climb steepens.

We are going to have to work our ways out of this - not sit back and let government bail us out.

[G M]

http://hotair.com/archives/2010/10/05/tax-hikes-to-drive-a-second-collapse/

Congress left Washington without addressing the massive tax hikes that will come at the end of the year as the tax-rate reductions of 2001 and 2003 expire.  Absent action on Capitol Hill, those increases will take $4 trillion out of the economy over the next ten years — and even if the lower tax bracket reductions get extended, $700 billion of capital will get redirected from the private sector to Washington.  How will that impact economic growth in the US?  Peter Ferrara argues that it will create not just a double-dip recession, but a second economic collapse — one worse than what we experienced in 2008.

[DougMacG]

"Absent action on Capitol Hill, those increases will take $4 trillion out of the economy over the next ten years"

Worse yet, the higher rates may capture no new revenues as the players in the economy respond to impending doom with a "contractionary" response.

What most liberals, progressives etc. don't get whatsoever is that even if these new increases never happen, the fact that they have been looming and promised really since Nov. 2006 when Pelosi-Reid-Obama-Hillary et al took control of congress has already caused immeasurable carnage to our economy that had 50 consecutive months of job growth when power shifted.  One simple measure is unemployment.  For certain there were other factors (not all other things held equal or constant), but when the party promising extension of tax cuts was in power, the last unemployment figures were: "adult men (3.9 percent), adult women (4.0 percent)", 4.5% overall http://www.bls.gov/opub/ted/2006/dec/wk2/art01.htm, compared with 9.6% overall today with across the board tax increases coming: http://www.bls.gov/news.release/empsit.nr0.htm, the last figures available for the leftist regime leaving power. 

A doubling of unemployment is not a punishment to the rich, as it was intended.  The filthy rich have individually lost millions but are doing fine.  Shrinking the payroll for them is not all bad. Fewer government forms to fill out. Smaller parking lot to seal coat, probably could plant some greenery on the unused employee parking spaces and help the environment as well.

[G M]

The dem's class warfare is boosting investment..... overseas. Anyone notice that Steve Wynn has moved most of his company to asia?

[DougMacG]

"The dem's class warfare is boosting investment..... overseas."

GM, correct! Unfortunately.

The main beneficiaries of cars for clunkers were Honda and Toyota.

Here is a nice explanation of how a stimulus can get away:

"Andy Xie has an interesting angle on why U.S. stimulus won't work this time around...

Essentially, the world is too globalized today, whereby demand remains local but 'supply is global'.

In the past, when a government stimulated demand within a country, such as the U.S., this stimulated an investment expansion within the U.S.. Companies invested in domestic expansion in order to increase their product supply and meet stimulated American demand. This domestic investment expansion adds jobs, which sets off a cycle of economic expansion.

Yet in today's globalized world, companies don't need to expand within the U.S. in order to meet stimulated U.S. demand. They can expand their facilities in other countries, say China, in order to meet stimulated American demand. Thus American stimulus doesn't create a sustainable cycle of economic expansion within the U.S. as it used to -- it creates jobs in places like China rather!"

Read more: http://www.businessinsider.com/american-stimulus-jobs-in-china-andy-xie-2010-8#ixzz11VUfRCNY

[G M]

http://pajamasmedia.com/blog/obama-and-ben-bernanke-have-us-facing-the-abyss/?singlepage=true

If the congressional midterms, gubernatorial races, and various state and local electoral contests result in the large-scale repudiation of the left so many are expecting, it will represent only the barest of beginnings towards a genuine long-term national economic recovery.

Only now is it beginning to dawn on many American just how deep our short-term and long-term holes really are. Many others, including politicians who appear to be on their way to key positions after the elections, still don’t seem to get it. This column will focus on the near-term economy — because if we don’t get a handle on a quickly mushrooming mess, and soon, there may not be a long-term.

This nation’s government just completed its second fiscal year with deficits of well over a trillion dollars, a number that was unthinkable just two years ago. Despite claims to the contrary, true cash flow from federal government operations during fiscal 2010 was more negative than the previous year. It only looks better because of increased receipts from the Federal Reserve (more on that in a bit) and cleverly manipulated non-cash accounting entries that arbitrarily and artificially reduced this year’s reported outlays. Net tax collections are still about 20% below where they were two years ago, and are only showing bare signs of turning upward.

[DougMacG]

From GM's post: "Net tax collections are still about 20% below where they were two years ago"

I never understood why big spenders from the Dem side never latched onto the successes with the big revenue surges from supply side incentives, such as after the JFK rate cuts, the Reagan rate cuts, the Gingrich Clinton capital gains rate cuts or the Bush tax cuts.  I don't think any sane company president ever got away with saying that our revenues are down 20%, let's raise our prices until we make up the shortfall and start growing again.

[Crafty_Dog]

Remember that wonderful moment during the primaries (perhaps it was Conneticutt?) wherein a reporter actually asked BO an intelligent prepared question?  After pointing out the increase in revenues from the Gingrich-Clinton Cap Gains cut (and some other example as well) he aked BO how he could be for increasing the Cap Gains rate when it would lead to less revenues-- and BO's answer was that it was a matter of "equity/fairness".

[DougMacG]

"...asked BO how he could be for increasing the Cap Gains rate when it would lead to less revenues-- and BO's answer was that it was a matter of "equity/fairness". "

The teleprompter was off and the truth slipped out.  Raising that rate was more important to him than raising revenue.  A successful campaign idea - go after the rich - was more important than governing, the best interests of the country, following the constitution or following the ten commandments, like covet, steal or worship other gods. I do remember that and it was pretty much the same as the Joe the Plumber incident.  When caught Obama did not back off of misguided, poorly articulated ideas.  I don't understand why he won't back off of bad ideas now, while governing.  To him, this is still a campaign and that is what he knows.  Everyday was a campaign to Bill Clinton too, but it was a campaign to promote himself and to shift himself when necessary, not a campaign to stick with bad ideas no matter the political cost or the real damage caused to the country or to the economy.

Like a large voice on radio said: I hope he fails [to accomplish what he has set out to do].

[Crafty_Dog]

Friday's unemployment report for September, the last before the election, brought more bad news for the Barack Obama Democrats.

Noteworthy is the fact that stocks rallied a bit on the lackluster and tepid jobs numbers, pushing through the 11,000 mark. But more and more, it seems bad economic news illustrating the failure of Obamanomics becomes good news for stocks on the expectation of a GOP tsunami in November.

The unemployment rate itself held at 9.6 percent. It's been over 9.5 percent for 14 straight months. Meanwhile, the marginally unemployed -- or the so-called impairment rate (U-6) -- jumped to 17.1 percent from 16.7 percent.

These headlines are political poison for Democrats. Voters are going to keep asking, What exactly did we get for a $1 trillion stimulus-spending package that puts us deeper in hock?

Overall, nonfarm payrolls fell 95,000 for September, largely from a drop in census workers and state and local government employees. Private payrolls increased 64,000, only a third of what's necessary to sustainably reduce unemployment.

Average hourly wages were flat, as was the workweek.

Looking back, the jobs story was much stronger in the first four months of the year through April. But job creation has slowed markedly since then, along with the overall economy.

The household survey, which picks up small businesses, is the better story. This report has grown by 1.6 million jobs year-to-date (adjusted for census workers), or 178,000 per month. And in the payroll survey, corporate jobs have increased 863,000 in the private sector, coming to 96,000 per month. Yet both surveys must grow over 200,000 per month in order to truly dent stubbornly high unemployment.

There is no double-dip recession here. The recovery is probably advancing at about a 2 percent to 3 percent rate. But that's a sluggish pace at best. We should be growing at least twice as fast.

Precisely because of the obvious failure of the Obama stimulus-spending program to adequately create jobs, the Federal Reserve is moving toward re-priming the pump. It's the addition of yet another bad policy of dollar destruction to the first mistake of massive spending.

Think of it this way: The Fed is probably going to add another $1 trillion of new cash to the financial system. But as all those new dollars are created, the dollar excess sinks the greenback exchange rate. And that means investors will take the new money the Fed creates and drain it out of the U.S. financial system into more reliable currencies. Go figure Ben Bernanke's logic.

The same thing happened between 2002 and 2006. The Fed was too loose for too long, the dollar fell too far, and all that cash fled the country, thereby undermining the George W. Bush tax cuts.

Meanwhile, with today's rapid rise in gold and commodity prices, a new inflation tax will be imposed on consumers and businesses. Bad for growth. Oil has jumped to $83 a barrel, and gas at the retail pump is heading toward $3 a gallon.

And on top of all this, a world currency and trade war beckons. Treasury Secretary Tim Geithner is rapidly escalating the China-bashing rhetoric, as he blames the Chinese yuan for American economic woes. Shades of the 1930s. Neither the Treasury nor the Fed seems interested in defending the dollar's world-reserve-currency status, or U.S. global economic leadership. And no one in official Washington seems interested in global-currency stability backed by a golden anchor.

But here's the real problem. New numbers from the Congressional Budget Office show a 9 percent increase in federal budget spending for fiscal 2010. That's about six-times the inflation rate. Astronomical.

Federal spending is now 25 percent of gross domestic product, way past the historical norm of 20 percent. And the budget gap is $1.3 trillion. So how can you blame investors or businesses for asking this simple question: How high are my taxes going to go to finance all this?

Until this question is answered to their satisfaction, the job-creating engines will remain dormant. Obamacare is a massive tax and regulatory threat. And so is the spending and deficit problem. The Fed can pour all the new money it wants into the economy, but it cannot change any of this.

Then again, the elections can.

[ccp]

Doug writes:

"I don't understand why he won't back off of bad ideas now, while governing."

Some, including O'Reilly give Obama more credit than her deserves on this point.  That is they would hold he is true to his core beliefs and that he is governing more to take the country in a direction that he believes is right and not governing by polls and "isn't that admirable?"

I believe it is much less noble and more sinnister.  I believe it is because of his personality disorder.  He is clearly a narcisstic personality disorder with  megalomanic proportions.  This is all about him.  Not some beliefs.  This is reflective of his disdain for anyone who disagrees with him.  He is the smartest knowingist person on the planet.  You disagree with him you are therefor inferior.  His self loves knows no bounds.  If things go wrong it is NEVER due to his actions it is externalized and the fault of someone or something else.  He is right and everyone else is wrong.  That is why he will NEVER (in fact he is due his disorder - unable todo so) admit that his policies are wrong headed.  If he is low in the polls it is due to liars like Fox news, like the miserable sick Republicans.  Like the white racists.

I believe this guy is truly incapable of anything else.  That is why we are seeing what is a anger that is reflective of an underlying disorder.  This guy is far from normal.
When he have a President pitting with imagry one American against another in "hand to hand combat", this is a fight about "slavery", et. we have a huge problem

This supports my personal conclusion this guy IS NUTS.

And THAT is what I mean when I say he will fold like a lawn chair when he has to deal with house(s) majorities that have no sypmpathy with him.  He will not give in or acquiece but he will continue to be delusional, he will continue to drag the country down fighting for what in HIS mind is a delusional idea that HE is the ONE, he is the savior of the world. 

I think it is becoming more and more apparent as time goes on this guy IS NUTS.  Remember he said to one Dem legislature - don't worry, "you have me".  "I have a gift". 

[G M]

http://www.nytimes.com/2010/10/08/business/08views.html?_r=1&src=busln

America’s standard of living could turn out to be the main casualty of the debt crisis. For a decade, the middle class made up for stagnant incomes by getting ever deeper into debt. Without housing wealth to tap, a bout of inflation is one of the few alternatives to a decade of austerity.