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Posts Tagged ‘economy’

Republicans on Capitol Hill have been remarkably successful at demonstrating that the current spendulous bill doesn’t stimulate anything.  The popularity of the bill has dropped from 45-34% to 37-43% in two weeks’ time.  Perhaps most troubling for Democrats is that, among independents, the bill is now supported by 27% and opposed by 50%.  Did it really take only three weeks for Obama’s precious center to collapse?

The same Rasmussen poll shows that many voters still want the government to do something, although they fear that it will be the wrong thing:

Forty-six percent (46%) of voters remain concerned that the government will do too much in reacting to the nation’s economic problems. Forty-one percent (41%) are concerned that the government will do too little.

And to bolster all those who confirmed that President Obama still leads a center-right nation, Rasmussen tells us that a rather solid majority would support a stimulus plan consisting entirely of tax cuts:

A stimulus plan that includes only tax cuts is now more popular than the economic recovery plan being considered in Congress. Forty-five percent (45%) favor a tax-cut only plan while 34% are opposed…and voters strongly believe that tax cuts are good for the economy. Most Americans believe that a dollar of tax cuts is better for the economy than a dollar of government spending.

We all know it’s easier to attack than to lead, and the President may be far better at the former than the latter.  But these numbers show that there is an opening for an alternative proposal that will score well with the CBO as stimulative, focus heavily on tax cuts, and eliminate the long-term “transformative” spending that Obama is now selling the country (“This plan is more than a prescription for short-term spending — it’s a strategy for America’s long-term growth and opportunity in areas such as renewable energy, health care and education.”).

Enter Bill Kristol, who outlines this approach in an insightful blog post for the Washington Post:

The Republican position should be: We’ll pass on this emergency timetable a real stripped-down emergency stimulus. But if Obama insists on legislation incorporating an alleged “strategy for America’s long-term growth,” then the country deserves hearings and debate that obviously will take some time. And Republicans should make clear they cannot agree to limiting debate to a couple of days on such momentous long-term legislation.

In other words: If Obama wants a stimulus, Republicans will give it to him tomorrow. It’s the president’s and the Democrats’ insistence on incorporating a huge and problematic policy agenda in this one bill that’s delaying action. Why then, Republicans can ask, is President Obama delaying a necessary, short-term, emergency growth package?

Listen to this man, Mitch McConnell.

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What was that our new president said about ending the politics of fear?

And if nothing is done, this recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

That’s President Obama, explaining why we absolutely must immediately spend $650 million for digital-TV coupons, $350 million for Agriculture Department computers, $87 million for a polar icebreaking ship, $55 million for a Historic Preservation Fund, and $150 million for “producers of livestock, honeybees, and farm-raised fish,” among other urgencies.

The President apparently believes the way he is going to get this spendulous bill passed is to give another campaign speech, although I would argue that now is not the time for that:

Now is the time to protect health insurance for the more than 8 million Americans at risk of losing their coverage and to computerize the health-care records of every American within five years, saving billions of dollars and countless lives in the process.

Now is the time to save billions by making 2 million homes and 75 percent of federal buildings more energy-efficient, and to double our capacity to generate alternative sources of energy within three years.

Now is the time to give our children every advantage they need to compete by upgrading 10,000 schools with state-of-the-art classrooms, libraries and labs; by training our teachers in math and science; and by bringing the dream of a college education within reach for millions of Americans.

And now is the time to create the jobs that remake America for the 21st century by rebuilding aging roads, bridges and levees; designing a smart electrical grid; and connecting every corner of the country to the information superhighway.

I do agree with the President on one thing — that we shouldn’t “let Washington’s bad habits stand in the way of progress.”  Unfortunately, Americans are coming to realize that Washington’s bad habits are what Obama is offering as “hope” and “change.”

Now is not the time for bashing Republicans, Mr. President — they are not your problem.  Now is the time for fixing the mess of a bill Nancy Pelosi wrote for you.  To date, your leadership has been evident on one occasion – to strip out the absurd family planning “stimulus” spending Madame Speaker tried to sell on the Sunday shows.  If that’s the best you have to offer, your prediction of doom for the country may well come true.  But our doom will come because we may have a spineless sophist as our president for the next four years.

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I was going to write a post or posts today about Obama’s missed political opportunities with the stimulus bill, and the growing gap between his words and his deeds, and the fact that our current predicament needs solutions beyond the same old, same old.

But Peggy Noonan said it all already, and better than I ever could.  Read her in the entirety.

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One of the more troubling aspects of the Obama stimulus package is its subtle and flexible rhetoric of infinite excuses.

The President claims that his $825 billion stimulus bill will “create or save 2.5 million jobs.” Sounds great, right? Makes you think that we’re going to get this economy going again by adding jobs to the nation’s payroll.  But even if the economy loses 1 million jobs in the next 12 months, the President’s prediction can STILL be right!  All he has to say is that, without his plan, the nation would have lost 3.5 million jobs. He saved us, you see!  In fact, he may have saved your very job. How do you disprove that? Even the 1 million newly unemployed can’t be all that mad, because their jobs were inevitably going to be lost — it was their brother/mother/neighbor’s job that was saved by the stimulus.

How to fix things for the 1 million who lost their jobs in my scenario? Why, another stimulus, of course! The first one saved (or created) 2.5 million jobs — to get the 1 million guys re-employed, we need to spend hundreds of billions more…and if more people lose their jobs, cut another check, ad infinitum.

There is no way to evaluate success or failure here.  If the “shovel-ready projects” don’t take off like they should, it’s not the stimulus’ fault — it’s the lawsuits/bureaucrats/contractors that stand in the way.  How to fix it?  Authorize some more projects or increase the budget to fight through the obstacles.  If the “tax cuts” (for those who don’t pay taxes) fail to stimulate spending, then we need to cut more checks to allow spending to “trickle up” and help the economy.  If the clean energy spending doesn’t result in cleaner energy, we obviously didn’t invest enough.  When businesses don’t appropriately expand when they are “stimulated” by the bill, punish them with taxes

This rhetoric has been employed for decades when it comes to our public schools.  How many times have we heard education spending justified by saying that if a program helps one more child read, or attend college, or become a musician, then you MUST support the program.  If you aren’t willing to support the program, then you must hate that child.  Child haters, in case you haven’t noticed, don’t win elections.

The analogy works because, like teaching kids, saving and creating jobs in a recession is a goal for which many are willing to spend mindlessly.  If we spend money on green jobs, then people who make green things will have jobs, and they will make green things.  It doesn’t matter if we’re spending three times as much for a job as it actually earns the individual in real wages, or that the green things aren’t in demand by the public — he has a job!  If you oppose a green jobs program, you not only don’t want that guy to have the job, you also support pollution.  It’s a double-evil for those money-grubbing rich Republicans.  But then again, we all knew they didn’t want you to have a job, didn’t we?

For liberals, the principled answer to failed government programs is always more money for that program, or more programs.  Government programs themselves are never the problem — it’s always the selfish, hateful, partisan people who don’t care as much as the liberals do and won’t just hand over the money, already.  Republicans lost the ability to argue back that less spending and more freedom is often the solution when they radically increased the size of the federal budget (and, to some extent, the Code of Federal Regulations) during the past eight years.  It’s time for the party to make a clean break and return to first principles, as well.  Conservatives will never win a debate about how much should be spent — the debate has to be about whether spending is even a good idea in the first place.

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Not long ago, I read an article relating the fact that there were 70% more dollar bills in circulation on January 1, 2009 than on January 1, 2008.  That’s a rather stunning fact, if you know anything about our monetary system.  While the Fed has been busy buying insurance companies, flooding banks with cash, and guaranteeing Fannie and Freddie, it’s been printing money like mad.

The visual, however, is much more striking:

fedmoney

The link takes you to the St. Louis Fed’s explanation of the chart, which is probably a lot better than mine.  But it’s fairly self-explanatory.  The blue line is our money supply – the amount of dollars in circulation.  The grey bars are our recessions since 1910.  If you lose the blue line in the last grey bar, there’s a reason – IT GOES STRAIGHT UP.  That’s where we’re living today, folks.  There are two dollars in circulation today for every dollar you had in your wallet last year.

What does this mean for you and me?  When the federal government abandoned the gold standard in 1971, the dollar essentially became “fiat money.”  In other words, the value of the dollar is not fixed by any background par value, like a certain amount of gold or silver.  Rather, it is worth what another person will pay for it on the international money market.  That value is largely based on the strength of the economy and the government behind that currency, as well as the total amount of that currency in circulation.  The reason is simple – if you think of dollars as “shares” in the nation they represent, if the strength of the nation represented by the currency remains constant and the number of dollars increases, the value of each dollar is diluted and is thus reduced.  Similarly, if the number of dollars remains constant but the government/economy backing them diminishes (the economy goes into recession; the government’s debt increases), the value of each dollar is likewise reduced.

Now, think about the past year.  The amount of dollars circulation has almost doubled.  The economy is in the midst of a deepening recession.  The federal government is rushing headlong into unprecedented trillion dollar annual deficits with total debt in excess of $10.6 trillion.   And don’t forget that the Fed has simultaneously reduced interest rates to basically zero, making the value of you saving that dollar in your wallet virtually nil.

Yikes.

The only thing really going for us is that the rest of the world is in the same boat, so there is no alternate currency or store of value for money investors to rush toward.  Don’t think they aren’t looking for it, though – if another currency emerges from the recession as more stable and less diluted, we may see the end of King Dollar on the international stage.

Oh, and how is Congress reacting to the loosest monetary policy in U.S. history, when the rest of us are tightening our belts?

How stimulating!

How stimulating!

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As so many blogs, periodicals, and other wags have done, so shall I make my predictions for the year to come.  Your own predictions are encouraged in the comments (as are your criticisms of the prognostications below).

  1. The House, but not the Senate, votes on (and passes) the Employee Free Choice Act.   A surprisingly effective P.R. campaign by business and Republican leaders, utterly ignored by the media but well-received by the public, results in extreme political pressure to protect the secret ballot in union elections.  President Obama and the Senate ultimately choose to “postpone” action on the bill in the midst of an economic crisis.  Union leaders do themselves no favors when they threaten to strike at selected businesses in retaliation for their leadership in the pro-election movement.  The bill will never resurface in the 111th Congress.
  2. A significant rise in church attendance and tithing lead to a media blitz on an emerging “faith movement” in the U.S. in response to dreadful economic conditions.  Some on the far left complain that these new contributions aren’t reaching the people “who most need them,” arguing that they should be taxed by the federal Treasury.  California’s legislature takes them up on their suggestion in a desperate move to avoid bankruptcy (and, for some, to punish proponents of Proposition 8).  Gov. Schwarzenegger vetoes the bill, but the backlash causes more legislators (Republicans and Democrats alike) to lose their seats in 2010 than in any election in state history.
  3. Sen. McCain enrages his one-time supporters by backing the Democrats’ $1 trillion stimulus bill.  McCain stands, beaming, next to President Obama as he signs the bill into law, and the President personally thanks his “good friend and former adversary” for his crucial assistance in passing the legislation.  As McCain jettisons his one remaining economic principle in pursuit of popularity, Republicans, making great strides in renewing their brand as opponents of big government, believe they may have dodged a bullet. (update: Rick Santorum agrees with me on this one.)
  4. (more…)

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Recently, I was grousing about gas prices seeming to go down much more slowly than they went up with the price of oil.  Well, boy, was I wrong.  Take a look at this (unfortunately fuzzy) chart, compliments of GasBuddy:

Crude Oil Price over Gasoline Price - Last Five Years

Crude Oil Price over Gasoline Price - Last Five Years

What this shows is that, during the past year and a half, the spread between gas prices and oil prices has increased dramatically.  Five years ago, the price of gas jumped largely side-by-side with the price of crude.  But beginning in 2004, the spread became considerable, and in 2007-08, gas prices moderated to a large extent as crude prices shot sky-high.

What does it all mean?  I’m a lawyer, not a petroleum economist or commodities trader, but it does seem to shoot a lot of holes in the arguments made by Democrats about the price of gas.  Sure, speculators may have been shooting the price of crude oil up to $145 a barrel this year (they’re also driving it down now in response to the recession), but they didn’t really budge the price of gas that much, at least on a comparable percentage basis.  And those gas companies like Exxon and BP?  They could have made us pay a LOT more for gas if they had followed the pricing models of 2004/2005 (or even May 2007, by this chart).  Why didn’t they?  Probably a mix of political pressure and the fact that they were making so much money on other energy goods that they didn’t need to push the price at the pump.

So, if you’re whining (like I was) that oil prices have dropped by half but my gas prices have barely dropped 25%, shut it.  We’re experiencing a return to normalcy in energy, and that’s good for all involved.

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