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July 27-29, 2012 Edition
Last week’s dismal “data dump” has ended all talk of a strong recovery in the US. Retail sales, factory output, jobless claims, consumer confidence, business investment and existing home sales are all down sharply indicating that the US economy is decelerating and may be headed for recession.
The Obama administration was warned repeatedly that activity would slow when the $800 billion fiscal stimulus (ARRA) ran out and net government spending became a drag on growth. But Obama’s chief economics advisor, Lawrence Summers, shrugged off these warnings in order to keep the economy sputtering along at half-speed. Summers figured that bigger deficits and slower growth would create the rationale for slashing entitlement spending and crushing organised labor (particularly, public unions) In other words, the economy is weak, because the policy was designed to make it weak.
Not everyone in the Obama administration played along with this scam. Economist Christina Romer, for example, wanted the stimulus to be $1 trillion more than was eventually approved by Summers. That’s what she figured it would take to kick-start the growth engine and put millions of unemployed Americans back to work. Here’s the story from Huffington Post’s Sam Stein:
“. . . members of the president’s economic team felt that if they were to properly fill the hole caused by the recession, they would need a bill that priced at $1.8 trillion — $600 billion more than was previously believed to be the high-water mark for the White House.The idea that Summers rejected Romer’s plan as “impractical” is pure public relations. Summers had a different agenda altogether.
The $1.8 trillion figure was included in a December 2008 memo authored by Christina Romer (the incoming head of the Council of Economic Advisers) and obtained by Scheiber in the course of researching his book.
“When Romer showed [Larry] Summers her $1.8 trillion figure late in the week before the memo was due, he dismissed it as impractical. So Romer spent the next few days coming up with a reasonable compromise: roughly $1.2 trillion,” Scheiber writes.”
What he wanted was exactly what he got, a slow, underperforming economy with high unemployment and huge deficits. Does anyone really think that an economist with Summers’ impressive education and experience could be $1 trillion off in his calculations? (The American Recovery and Reinvestment Act of 2009 was eventually whittled down to $787 billion.)
It’s ridiculous. Summers wanted a flagging economy so he could torpedo Social Security, Medicare and Medicaid. These were the targets from the very beginning.
As for Obama, well, he probably figured that the $800 billion fiscal package would be enough to carry him over the finish-line in the 2012 elections, but not so big that it would subvert the goals of his chief economics advisor who was beholden to Wall Street and big business. In truth, Obama wanted the same thing as Summers, a justification for attacking the meager programs that keep the elderly and vulnerable from destitution.
Neither Summers nor Obama anticipated the downturn in China or the severity of the crisis in Europe both of which have weighed heavily on growth in the US and around the world. Here’s how Nouriel Roubini summed it up in a recent article on Project Syndicate:
“ . . . the first-half growth rate looks set to come in closer to 1.5% at best, even below 2011’s dismal 1.7%. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of US manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.Global growth is pretty much deteriorating everywhere; China, India, Japan, Brazil, emerging markets. The eurozone is particularly concerning as ongoing bank runs in the south accelerate increasing the likelihood of a full-blown banking system collapse.
The reality is the opposite: for several reasons, growth will slow further in the second half of 2012 and be even lower in 2013 – close to stall speed.”
The uncertainty is reflected in 10-year US Treasuries which have seen yields drop to record-lows in the last week. The flight to safety has intensified as frightened investors try to get their money out of Europe to avoid the deepening crisis and possible breakup of the 17-member monetary union.
On Tuesday, the Wall Street Journal announced that the “Fed Moves Closer to Action”. The news ignited a short rally, but soon faded. Confidence in the Fed is at its nadir. Another round of bond buying (QE3) might give equities a temporary jolt, but no one believes it will change the overall direction of the market or lead to an economic rebound. Interest rates are already at historic lows, so stuffing the banks with more reserves will neither increase lending or reduce unemployment. It is an exercise in futility. The Fed is at the limits of its effectiveness.
The current slowdown could have been avoided or at least mitigated had the Obama team followed Romer’s recommendation and provided the fiscal stimulus that was needed. Now – due to political gridlock in Congress – a second round of stimulus is out of the question which means the economy will continue its downward trend.
So, what should Obama do?
For starters, he should take a page out of FDR’s Depression handbook and hire more public workers. Here’s a clip from an article by economist Marshall Auerback who details some of the programs that Roosevelt implemented:
“[Roosevelt’s] government hired about 60 per cent of the unemployed in public works and conservation projects that planted a billion trees, saved the whooping crane, modernized rural America, and built such diverse projects as the Cathedral of Learning in Pittsburgh, the Montana state capitol, much of the Chicago lakefront, New York’s Lincoln Tunnel and Triborough Bridge complex, the Tennessee Valley Authority and the aircraft carriers Enterprise and Yorktown.
There it is in black and white. Obama is just as committed to gutting Social Security as Romney. The only difference is that he’s a better pitchman. Much better.It also built or renovated 2,500 hospitals, 45,000 schools, 13,000 parks and playgrounds, 7,800 bridges, 700,000 miles of roads, and a thousand airfields. And it employed 50,000 teachers, rebuilt the country’s entire rural school system, and hired 3,000 writers, musicians, sculptors and painters, including Willem de Kooning and Jackson Pollock.”Or Obama could allocate $300 billion per year to rehire the 650,000 teachers and other state and local workers who’ve been laid off since the crash. That would be the easiest thing to do.
Skip all the red-tape connected to infrastructure and gov job’s programs and just rehire the people who got their pink slip after the crash. The money spent on jobs would more than pay for itself by raising state revenues and boosting economic activity by many orders of magnitude.
Have you seen a graph of how many (state and local) jobs have been lost under Obama? It’s shocking! Take a look here.
We need to get these people back to work so they can feed their families and pay the bills. If we can afford $11 trillion to bail out crooked bankers, we can certainly afford a measly $300 mil for hard-working middle class families. It’s just a matter of priorities.
Economist Dean Baker has posted an article on his blog that supports my general thesis that Obama is planning to cut Social Security, etc., following the election. Here’s an excerpt from the post:
“The plan is that we will get the rich folks’ deal regardless of who wins the election….The deal that this gang … is hatching will inevitably include some amount of tax increases and also large budget cuts. At the top of the list… are cuts to Social Security and Medicare. . .
Social Security amounts to 90 percent or more of the income for one-third of seniors. For this group, the proposed cut in benefits would be a considerably larger share of their income than the higher taxes faced by someone earning $300,000 a year as a result of the repeal of the Bush tax cuts on high income earners . . .
(“The One Percent Want Your Social Security and Medicare and Steven Pearlstein Is Trying to Help,” Dean Baker, CEPR)
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion. He can be reached at firstname.lastname@example.org._ _ _ _ _ _ _
Remember this guy? How about that other guy who always appeared with him whenever they refused to testify under oath? They're b-a-c-k-k-k!!!
Amd more than willing to tell us what great statesmen they were/are, and are ready to bring it all b-a-c-k A-G-A-I-N !!!!!! (No matter how much they deny it.)
In a recent interview, George W. Bush fondly recalled his eight-year presidency as “awesome,” but said he wasn’t eager to get back into public life.
“I really don’t want to be in the public eye anymore,” the former president told the Hoover Institute’s Peter Robinson in an interview posted to YouTube on Tuesday.
“Look, eight years was awesome,” Bush explained. “You know, I was famous and I was powerful, but I have no desire for fame and power anymore.”
“I don’t want to undermine our president — whoever is president,” he added. “And a former president can do that. And I think it’s bad for the presidency itself.”
“I have found that life after the presidency is awesome.”
Bush left office in 2009 with a 22 percent approval rate, making him one of history’s least-liked presidents, according to CBS News. In all, 73 percent said they did not approve of the way he ran the country for eight years.
Watch this video from the Hoover Institute, uploaded to YouTube on July 17, 2012.
_ _ _ _ _ _ _
Former Vice President Dick Cheney told House Republicans Tuesday evening that slashing spending at the Pentagon is fine when the world is safe, but it’s not.
“There is no significant change in our strategic stance to justify these cuts,” Cheney told members of the House Republican whip team in the basement of the Capitol, according to a source in attendance. “Actually, things are not better, they’re worse.”
As a final shot across the bow of absurdity, here's Paul Krugman making gentle fun of idiots.
Er, special people, that is. Very Special Political People.
Brad DeLong revisits Tyler Cowen’s remarkable defense of lack of social mobility. I’d written about it at the time — and predicted that this sort of thing would start popping up a decade earlier. But I somehow missed this passage:
For a given level of income, if some are moving up others are moving down. Do you take theories of wage rigidity seriously? If so, you might favor less relative mobility, other things remaining equal. More upward — and thus downward — relative mobility probably means less aggregate happiness, due to habit formation and frame of reference effects.
I believe that this, translated out of economese, is basically the sentiment from All Things Bright and Beautiful:True, Cowen isn’t advocating a complete caste society — but it’s actually not clear why, since he is suggesting that we’ll be happier as a society if people stay comfortably in the class into which they were born.
The rich man in his castle,
The poor man at his gate,
God made them high and lowly,
And ordered their estate.
There was a time when that sort of sentiment would have been considered anti-American. But I guess that was a different country.