Sobering:
Will the Obama reelection campaign take the bait and start running hard on the president’s economic record?
New job numbers out today from the Labor Department show the unemployment dropped to a near three-year low of 8.5 percent in December. What’s more, nonfarm payrolls increased by 200,000 last month, way above economists’ expectations for a 150,000 gain. Those two employment statistics, when added to a likely fourth-quarter GDP number of 3-3.5 percent (which would be the best showing since the second-quarter of 2010) — sure make it tempting for the White House to engage in at least a smidgen of economic triumphalism. Something like: “It’s been a long road and we have a lot further to go, but our plan is working. Four more years.”
Not “Morning in America” exactly, but maybe “Breaking Dawn in America.”
But such a feel-good campaign strategy would be risky. Those headline economic numbers are terribly misleading, hardly reflecting the devastation most Americans still see every day. An 8.5 percent unemployment rate? Please. If the size of the U.S. labor force was as large as it was when Barack Obama took office, the unemployment rate would be 10.9 percent. But since so many people have gotten discouraged and stopped looking for work– and thus disappeared by government statisticians — the jobless number has been artificially depressed. A better gauge of the jobs picture is the broader U-6 rate, which includes part-timers who would rather have full-time jobs. It stands at a whopping 15.2 percent.
The rest is here
Let me ask you a question. Do you want the recovery to grow into a robust recovery, between now and the election, or would you prefer the economy to stay in the tank? This is rhetorical. You don’t actually have to answer “out loud.”
That American Enterprise analysis is a political hatchet job. Look at the graph which had the Obama economic team’s initial projections concerning the impact of the “stimulus.” This is the graph labeled “failed economic policy.” It’s a great gotcha graph, because the Obama projection showed the unemployment numbers peaking at just under 8%, when they really peaked just above 10%. So this makes it a “failed policy.”
Ummm, no. Yes, the Obama team made a mistake, but it wasn’t in their estimate of the impact of “the stimulus” on the unemployment peak. Rather, they made an early mistake in their projections on how bad the economy really was. Shortly after they came out with their projections, revised jobless and GDP numbers came out and they were much worse than the numbers used by the Obama administration to make their economic forecasts.
Before the first dime of stimulus money was spent, unemployment was already ABOVE 8%! This can’t be blamed on the “failure” of the stimulus, obviously. In point of fact, if you use the actual, correct baseline, the impact of the stimulus was close to that projected. In other words, it would have been considerably worse without it.
We were losing 700,000 private sector jobs per month when Obama took office. This is the biggest factor behind the increased deficit — plunging revenues from a sinking economy. Since the stimulus was started, there has been a steady, consistent growth in private sector jobs — without the concurrent slide in public sector jobs — something that conservatives would accelerate to an even faster pace/greater extent — the unemployment picture would be even more improved. In any event, there isn’t anything that President McCain would have/could have done to make things any better. Or President Romney. Or President Gingrich. Romney’s economic plan is forecast to add another $half trillion to the deficit, above that projected for Obama’s plan. Gingrich’s plan would add more than a $trillion.
The economy does determine elections. Both parties are very unpatriotic in wanting to see the economy do poorly when the other party is in power (to answer my rhetorical question, posed in the beginning).
It’s OK to play politics with this stuff, just as long as we adults in the room understand, privately, just what is really going on.
– Larry Weisenthal/Huntington Beach CA
Just thought I’d add the graph created by The Right Sphere that contrasts the projections for unemployment with and without adding to the debt/interest with various stimuli by Congress.
There was never a question that the US economy would have some sort of recovery. The disagreement was whether we should have piled on to the debt and interest merely to stave off the inevitable. So is the nation’s increased debt and interest worth the results? No to me… but then, that’s what this election should be about.
The dwindling labor force is troublesome. I’ve never seen statistics that compare the shrinkage from those who gave up to those who are retiring. But with boomers approaching SS and Medicare ages, and jobs for we ol’ folk less prevalent, the labor force is going to continue to contract. Which will surely play well in perceptions for unemployment numbers.
In reality, it’s not a good harbinger…. being as a smaller labor force creates the predictable problems for entitlement programs that function along the lines of a ponzi scheme.
But, as Bloomberg liked to call the report this morning, they’ve switched from the phrase “cautious optimism” to “creeping optimism”.
Me? I’d call it yet another month of “lowered expectations as the norm”. Problem is, these lowered expectations can’t dig us out of the debt we incurred, trying to keep the expectations where they used to be in order to finance foolhardy entitlement programs created by shortsighted Congresses decades ago.
Hi Mata, Do you see where Q1 2009 unemployment (well before the stimulus and when Obama had barely taken office) was already right at 9%?
As to debt, we have a long term (decades) debt problem and short term economic problem. We knowingly took on a lot of long term debt in the name of national defense (another short term problem). The economic meltdown was, I’d argue, a greater threat to the long term well being of the USA than was the specter of Saddam Hussein. In any event, the proposed GOP approach (tax cuts) also would have added to long term debt, in the name of improving the short term economic situation.
In point of fact, a good portion of the “stimulus” consisted of precisely the tax cuts proposed by the GOP. Additional debt has been accrued by virtue of extending the Bush tax cuts (initially designed to sunset a year ago). The total tax burden is considerably less today than when Obama took office, and this has added a lot to the deficit, in the name of improving the short term economic outlook.
People use Greece as an example of where the USA is allegedly headed. Well, both Greece and Ireland (insolvent for different reasons than Greece), undertook severe austerity regimes, in the name of reversing their debt accumulation, and these efforts appear to have backfired, as their deficits have become worse as a consequence of failure to have any economic growth at all.
You raise THE economic issue of our present time. How to balance what is good for getting the short term economy going again (tax cuts and public sector spending) versus what is bad for long term debt (tax cuts and public sector spending). Probably there is a “sweet spot” in this. The problem is identifying the sweet spot and getting bipartisan support for sweet spot economic policies.
– Larry Weisenthal/Huntington Beach CA
Not all “tax cuts” are good. Not all spending cuts are good. Generic language is vague and misleading. And as far as I’m concerned, both political party representatives in Congress are economic idiots.
The majority of ARRA tax cuts, leveled at individuals and doing very little to stimulate economic job growth, were foolhardy and a waste of cash. As EconMatters over a ZeroHedge pointed out last Sept when the Stimulus the Sequel (aka Jobs Bill) was a hot and heavy subject:
The so called “Jobs bill”… or Stimulus the Sequel.. is another fiscally stupid idea that will yet again prove that Keynesian “efficiency” is highly overrated.
Don’t care about your ever predictable defense of your boy in the WH, or your less than subtle attempts to always “blame Bush” etal. What I do care about is the very body that has ignored all fiscal warning signs for decades, and perpetually repeats the same fiscal mistakes over and over, is reigned in.
In short, without addressing the largest bulk of US spending and debt – which are the entitlements that cannot be funded by the current and upcoming dwindling labor force – there is no “sweet spot”. There is only more can kicking, lowered lifestyles and increased government borrowing/interest to pay for continued economic mistakes. Politicians do not care about 2030-2050. They only care about their next election cycle, and what happens in between to make them look good for a continued cushy career.
I suspect that won’t be during my lifetime, if at all. But I’m quite sure that this path this current economic idiot in the WH intends to pursue will indeed make most of us government welfare dependent as senior citizens.
Larry has a point.
When Obama and Geithner were re-adjusting the numbers on that graph in March 2010 their new line is right on the money with how we are doing right now.
Here is one depiction from Sept. 2011 with the August numbers as the last REAL data points.
http://michaelscomments.files.wordpress.com/2011/09/stimulus-vs-unemployment-aug-2011-large.gif
Notice Timmy’s new projection?
It is in the form of teal green dots.
Now, we should hold our breaths because after the yearly inventory is taken a whole bunch of Christmas hires will get laid off.
January’s numbers might be horrific.
I must know 6 or 8 people in their early 60’s who allowed themselves to be laid off so they could grab (what is it now? 99 WEEKS? MORE?) unemployment money prior to their official retirements.
I would not be surprised if Obama manages to add enough weeks to unemployment to get his non-working constituents through this entire election season.
Here’s the graph Obama will show:
http://www.businessinsider.com/chart-of-the-day-the-good-news-about-unemployment-for-president-obama-2012-1
Notice what is missing?
Hi Mata, Your point about putting the health care bill where it went (right after the “stimulus”) is a perfectly legitimate point for discussion. I personally think that the economic impact of this bill, to the present time, has been entirely negligible and that the economy would pretty much be where it is today, with or without the health care bill. It’s obvious that Obama and the Dems saw that they had a literal once in a lifetime opportunity to get national health care through. This was a goal which had eluded everyone since first proposed by Theodore Roosevelt. So they took the opportunity
Again, I agree that the health care law will have clear economic impacts down the road, but haven’t influenced at all the economic trajectory to the present. Whether it was a good law or a bad law can only be determined if it doesn’t get repealed and a good ten years have passed.
With respect to subliminally blaming Bush — he played a role, but only a secondary role. The biggest villains were the Federal Reserve and Wall Street investment banks.
The combination of the Bush tax cuts and the ultra-low Federal Reserve interest rates created a dual problem: first a capital glut; 2nd no place to put the capital, because T Bill yields were so miserable. This actually created a global capital glut problem. No place to park the world’s currency.
These factors created an opportunity for Wall Street to peddle securitized mortgages on the world market, which created yet another speculative market in insurance (credit default swaps) for the mortgage investments. This created an opportunity for Fannie/Freddie and all the private secondary mortgage markets to serve as commission-collecting middlemen between the loan originators and the tertiary holders of the mortgages (global investors).
All of this gave huge incentives for loan originators to make loans — with all the famous steering otherwise creditworthy borrowers into higher interest subprimes. There was a huge gold rush in loan originations — I was on many days getting 2 or 3 different solicitations to refinance my real estate — and this went on for months and years. Along with many others, I “bit” and got a low interest rate short term loan, with a balloon payment. Fortunately, my credit is good and I was able to convert the loan into a long term fixed, but many others were trapped with loans with short term teaser rates, followed by increased rates. The properties I refinanced were purchased in 1979 and the mid-80s, respectively; so I never ended up under water. But many others were not so fortunate.
Meanwhile, Wall Street was lying through its teeth in reassuring the tertiary mortgage holders that their investments were prudent and safe. This is all still coming out.
All of this is what brought down the economy.
With regard to the choice of what the “stimulus” money was spent on, I mostly agree with you. I’d have spent most of it on infrastructure construction. But I’d argue that the tax cut part of it was even more inefficient, stimulus-wise, than the support given to state and local government agencies and certainly less than the extension of unemployment benefits, which, by the way, enjoyed GOP support for at least the initial extensions (recall Jim Bunning against the entire GOP caucus in his efforts not to extend these benefits).
The long term debt problem is owing to future entitlement obligations. And debt is a function of both spending and revenue. If one thinks it’s so important to address the deficit problem immediately, at the expense of short term economic growth, then one should be equally opposed to extension of tax cuts as to extension of spending programs. The argument for both tax cuts and spending programs is to stimulate consumer spending (the “engine” of the economy), to generate increased economic activity and therefore generate increased tax revenue. As I pointed out in my earlier post, when Greece and Ireland drastically curtailed their spending, in the name of debt control, it backfired by putting their economic recoveries back into reverse.
– Larry Weisenthal/Huntington Beach CA
@Nan G, I’m less concerned about seasonal layoffs than I am about the profitability outlook that is getting a bit of buzz on the financial talking head circuits the last few months. It’s projected to be a slowing on the profit outlook, and that’s been borne out even as recently as a week or so ago when they checked on the top 20 businesses outlooks. S&P polled analysts, and declining industry profitability is the general consensus for the coming year.
Remember that even this lack luster GDP growth was a reflection of good corporate profits this past year and a half…. aided mightily by the Fed’s money policies. Slowing profits will do nothing for employment and GDP growth, and as a byproduct, tax revenues. Then there is always the spectre of Europe than hangs over the US economy as well.
Consumers are still being frugal (as they should…) with the holiday sales season not being all it was cracked up to be. They should have known when the sales fell off after Black Friday. Without consumer demand, manufacturing remains in a rut of slowing growth.
Add to that, the known job slashing coming from Boeing and Bank of America, just to name two. With Obama slashing defense budgets (which was Boeing’s downfall), and bugging out of everywhere, defense contracts that benefit private manufacturers fall by the wayside. Instead he’s busy loading up the federal payroll with the ga’zillion agency jobs that were created in Dodd-Frank. None of those positions are job creators and merely, as all government jobs do, recycle the taxpayers revenue in a money shell game.
While I think every department, including defense, could use some cleaning up of waste, the logic of slashing a needed strong military (most especially in these times) that actually does contribute to private sector growth in favor of increasing government size for non productive positions is asinine. So the ill-thought choices of this POTUS’s idea of cutting spending will also hinder a slowing profit trend, GDP growth, and increase in jobs.
As I said, there are good and bad tax cuts. Payroll tax holidays are insane because of the accounting shuffle, and the double interest that ends up being paid. Tax credits that primarily benefit people that already aren’t paying taxes aren’t a job growth instrument either. And not all spending is bad (i.e. defense contracts).
“Austerity” is another over used and abused word as vague. It’s a much maligned word for Keynesian types to demonize deficit cuts, lower spending, and reforming outrageous public welfare programs. Greece waited too long, their citizenry became dependent on government welfare programs and rebelled when anyone dared take them away. But Greece also raised taxes – both their VAT and their property taxes – which inhibited business growth… something I guess a few proponents of tax increases in bad economic times want to conveniently ignore. Last I knew, their VAT was up to 23%… now there’s a job killer for ya.
With most the nation being professional welfare babies, and the government taxation squashing the business sector, is it any wonder they are on a merry-go-round going nowhere? What should be learned from Greece is what not to do… i.e., don’t wait so long to tackle the problem, don’t kill your business sector with taxes, and start weaning your citizens off welfare/entitlement programs that are unfundable with ponzi style revenue collections.
But do they learn? Hang no… they want to do more of the same, and there’s ample fools out there, as we can see, that cheer them on. Short sighted economics and being misinformed on the founding role of the central government in America will be the downfall of this nation.
As for the rest of the revisionist economic history above, think I’ll skip it. Been there, done that. The record on the player remains the same B side. yada yada yada, and still no more musical that the first time I heard the tune.
Hi Mata,
The $500 billion defense cutback is not Obama’s decision; it is the consequence of the Congressional super committee’s inability to agree on a deficit reduction program. Dodd-Frank was not designed as a job creation program; it was designed to reduce the probability of another financial meltdown caused by an under-regulated mortgage industry, as well a providing consumer protections with regard to borrowing and lending.
e.g.
http://www.mbaa.org/files/…/MIRA/MBASummaryofDoddFrank.pdf
– Larry Weisenthal/Huntington Beach CA
Dodd Frank… how dumb is this 870+ pages…
Only Sect 1401 relates to mortgages, and will severely hinder seller carry notes as well. The bizarre thing is that all those little mortgage rules they put in were exactly what the mortgage world did prior to the GSEs buying up all those lowered criteria mortgages since the early 1990s that they thought was a peachy keen idea. duh wuh…
On the flip side, in addition to reversing regulations that Congress, themselves, put into place, they decided they had to spend more money by the creation of three new agencies. CFPB, Financial Stability Oversight Council (FSOC), and Office of Financial Research (OFR). Of the eleven agencies involved, at least three of them will have to depend upon appropriations from the general funds, and the majority will have recurring costs.
And what will it accomplish? pfffft…. Nothing that would have been prevented if the same idiots hadn’t lowered GSEs criteria to begin with. What a joke.
Oh yes, I would be remiss not to point out that the general consensus of Dodd Frank’s repercussions is highly negative for small business, and strangling lending with a clusterf*#k of regulations. And what still remains missing is the two real free market regulators… profit and loss. Between Congress, several WH admins, and the Federal Reserve with government interference trying to correct the problem they created, those two regulators were thrown out since everyone now is rescued by the taxpayers.
As Americans for Tax Reforms analysis concludes:
It’s just another demonstration of the economic stupidity running amok in the beltway.
Here is another indicator that the economy isn’t exactly booming like some would like us to believe and that we still have a long way to go before claiming everything is just peachy.
http://www.logisticsmgmt.com/article/december_cass_index_report_shows_signs_of_improvement_but_points_to_slow_q4/
Hi Mata, Again, the problem wasn’t the lowering of the GSE’s criteria. That was never a problem before the rise of securitized mortgages, before the capital glut, and before the opportunity to make huge amounts of money by not assuring the qualifications of buyers and by not assuring the veracity of home appraisals and through steering buyers to subprimes which provided a higher yield than the prime mortgages for which so many were qualified.
The primary problem was too much capital and no place to put the capital. The system designed to help first time homebuyers into owner occupied homes worked very well. This was never the problem. The problem was the capital glut, negligible T Bill returns, and sudden opportunity to make huge commissions through originating and selling mortgages bundled into securities.
– larry weisenthal/huntington beach ca
You keep telling yourself that, Larry. And anyone who will listen. You won’t find many here that buy your tired ol’ tune, your tunnel vision of years analyzed, and revisionist economic history.
Funny thing about that, genius… if what you say were true, why the heck did we ever need to bail out the GSEs? After all, according to your revisionist history, none of those bad loans weren’t going to the GSEs.
Done with you. If anyone else wants to do the rerun game with Larry, have at it. I have no patience with this anymore.
Mata, nice job and you are correct to give up on this guy. Liberals have a funny way of taking a lie made by 0-bama and make it look like Bush’s fault. Their good at it and been doing it for years and years. Fact is 0-bama lied and our economy died. He wasted the stimulus money on buying union votes, green garbage, and oh yea shovel ready projects.
Thanks, @Common Sense. Apparently some people live in a three year information bubble, and don’t realize that the GSEs and Ginnie have been securitizing since the early to mid 80s. And I guess the SEC isn’t fooled by the Fannie/Freddie execs playing games with a very narrow definition of “subprime”, which is why they indicted six of them a few weeks ago.
Of course, that bogus “definition of a subprime” is what Larry’s favored economists used to diss Peter Wallison’s more accurate analysis of what has been going on. ooops…..
@MataHarley:
Mata I know you know this, but it bears repeating: leftists need to feel good about themselves and are immune from facts or reality. I have stated many times before, larry is not trying to convince us so much as himself. There is nothing you can say, no proof you can present that will change his mind-ever. People like larry don’t arrive at their conclusions thru logic, but ego and vanity.
@MataHarley: Mata and HardRight: Your insights into the liberal wacho mind are confirmed. I often wonder why they would display their ignorance and defend 0-bama and his lies to America on an adult sight such as this one. My only conclusions are that in some way they have come into contact with reality at some point such as losing a job, seeing a company close their doors, or defaulting on a mortgage they should have never had but yet blame someone else for that. I know to believe the garbage in the first place or go on living the lie for three years seems preposterous to many of us but none the less it sadly happens. I have seen this with other addresses such as Greg, CAS, and now Larry but don’t expect them to accept reasonable conclusions. This would imply they where wrong and liberals can never never admit that because they are to smart for us. Have fun and Happy New Year and let’s hope and pray that November will bring a return to normal in our government!!
@Common Sense:
When reality proves the average person wrong on their beliefs, they change their beliefs. When that happens to a liberal, they try to change reality. (The Constitution is a living document, there is no terrorist threat so we don’t need a strong military, It’s no big deal if Iran gets nukes, etc.)
Larry predicted that obama would govern from the center and pick moderates for his administration. Just try to tell him he hasn’t. He even tried to use David Brooks, phony Conservative to bolster his claims. What does that tell you?
Graphs to indicate what is a very worrisome problem. Again, as I mentioned, some due to the lackluster “recovery”, and some that will be due to increased boomers retiring early.
The civilian labor force participation stats from 2001 to 2011, courtesy of the BLS.
ZeroHedge’s Tyler Durden takes the same stats back to 1984, and in three different views. The chart below is the civilian labor force since 1984.
What’s even more foreboding is the chart of those who want a job now.
Since the entitlement programs are funded by collecting from working non beneficiaries to pay current retired beneficiaries, the inevitable decreasing labor force from retirees requires a robust labor force to offset it. Considering the “new norms” central government is trying to get us used to, hell and a hand basket is the result unless there is a weening off the entitlements and significant reform as to how they are funded and operated.