Monday night I watched President Obama's first prime-time press briefing. I came away from it concerned. I'll make a couple of general observations first, then dig into the details. Sorry this is a bit long-winded, but then, so was he.
First, while President Obama is an excellent speaker, he needs a script to really shine. Chris Matthews' man-crush fawning notwithstanding, the President's answers were rambling, and in one instance (the Iran question), he seemed at a total loss.
Second, is it just me, or does Helen Thomas remind you of Aunt Bethany from "Christmas Vacation?" As she kept trying to ask follow-up questions, I kept waiting for Bill Hickey to shout, "Good grief, Bethany, shuddup already!"
On to the meat. The President started out with an eight-minute speech, then took questions. I'll address highlights of the speech, then dissect each Q&A.
"I took a trip to Elkhart, Indiana today ... In one year, the unemployment rate (there) went from 4.7% to 15.3%. Companies that have sustained this community for years are shedding jobs at an alarming speed."
I'm very familiar with Elkhart; my brother lived in nearby Goshen for 30 years. Elkhart is the RV manufacturing capital of America. Last summer, gas prices went up to more than $4 a gallon. Gee ... could there be some correlation there? Using Elkhart as the poster child for the credit crisis is like using Tim Geithner as the poster child for taxpayer responsibility.
"... the food banks (in Elkhart) don't have enough to meet the demand."
I'd have loved it if the President had taken this opportunity to ask people to pitch in and help, like he said we all should do when he was campaigning - maybe even post the address of the Elkhart food bank. Instead, he wants the good people of Elkhart and the rest of America to become addicted to government largess, like so many crack addicts. I'd be happy to send a check to an Elkhart food bank. In fact, I think I will. You can, too - go to www.feedindiana.org. You can donate online. I wonder if the President left a check before he got back on Air Force One, or if he was content to just use the community as a political prop to sell his agenda.
"... (the spending bill) will save or create up to 4 million jobs."
We've heard this for a while now, and I promise to address the myth in an upcoming post. Though he did say "up to," so it could create one job and he'd be right. This claim is a classic example of being long on goals, and short on the "how."
"... the federal government is the only entity left with the resources to jolt our economy back to life."
Um, excuse me, Mr. President, but America's broke. Our national debt is approaching GDP, our deficit is going to be a record percent of GDP, and our "resources" are going to have to increasingly come from China.
"It is only the government that can break the vicious cycle where lost jobs lead to people spending less money, which leads to even more layoffs."
Really? How? Are you going to repeat President Bush's post-9/11 urge to "do your business, all over the country?" Are you going to send the National Guard to my house to drag me to the mall and MAKE me spend? People spending too much money created this debacle, sir.
And how about the vicious cycle where deficit spending leads to more debt issuance, which leads to higher interest rates and taxes, which reduces spending and borrowing, which leads to more layoffs, which leads to more deficit spending? That's a little more dangerous, methinks.
"These steps will put more money in the pockets of those Americans who are most likely to spend it."
First, sir, you should incent savings, not spending. And second, do you really think the people lower on the economic totem pole are going to spend their money? In many instances, they're the ones most vulnerable to job loss, they lack the savings to cover themselves in a crisis, and they would have the most difficulty paying their bills if something happened to their jobs. They're far more likely to hoard whatever largess they receive than to spend it, and rightly so.
"... tax cuts alone can't solve all of our economic problems ... We have tried that strategy, time and time again. And it's only helped lead us to the crisis we face right now."
Mr. President, while I'll grant you that tax cuts alone won't solve all economic problems, if you truly believe that tax cuts have led us to the crisis we face now, you really don't understand this crisis at all, with all due respect. The Tax Reform Act of 1986 had the greatest impact on this crisis of any tax action, and that was only in an ancillary way, when it created the mortgage-backed bond structure known as the REMIC, which allowed for much greater securitization of mortgages, packaged into much more risky securities. But that wasn't really a tax cut, per se.
"More than 90% of the jobs created by this plan will be in the private sector. They're not going to be make-work jobs but jobs doing the work that America desperately needs done, jobs rebuilding our crumbling roads and bridges, repairing our dangerously deficient dams and levees, so that we don't face another Katrina."
I've been to the Gulf twice to do hurricane relief work, and I saw considerable damage that was totally unrelated to the levees. And I would never use that unfortunate catastrophe in a political sales pitch. I think it's as shameful to do that as to use Elkhart for the same purpose.
But, as for these much-needed jobs - then what? When the roads and bridges and dams and levees are repaired, what happens to those jobs? And I'm wary when you tell us that these are going to be private-sector jobs, because that means the government is going to contract them out. And we all know what spectacular bargains the government gets when it hands out contracts, right? Remember the $600 toilet seats? We'll get millions of dollars worth of good out of billions of dollars of spending.
"They'll be jobs creating ... 21st century classrooms, libraries and labs for millions of children across America."
Like in Milwaukee, which is slated to get some $80 million to build new schools. Never mind that enrollments are down, and the school district there has 15 vacant schools already. Sure, some money could be spent upgrading or rebuilding existing schools there. But $80 million? Again, on government contract?
"What it does not contain, however, is a single pet project, not a single earmark ..."
Riiiight. Like that polar bear exhibit at the zoo in Providence, Rhode Island, whose Senator said it was an absolute necessity.
"I can't tell you for sure that everything in this plan will work exactly as we hope, but I can tell you with complete confidence that a failure to act will only deepen this crisis ..."
Well, sir, "hope" is not a plan. And if you don't know it will work, how do you know the crisis won't deepen anyway? You sure didn't convince the stock market.
"... all countries are watching and waiting for us to lead."
Yes, and if you read the comments from world leaders attending the summit in Davos recently, you know that they are extremely concerned about the massive deficit spending we're undertaking, and about our record debt issuance to fund it crowding out the rest of the world's access to capital.
"It's a responsibility that this generation did not ask for, but one that we must accept for the future of our children and our grandchildren."
Well, by borrowing massive amounts of money to throw at the items in this bill - 90% of which will do little, if anything, to stimulate the economy - we are not taking responsibility at all, and we are mortgaging the future of our children and our grandchildren.
On to the questions, of which I'm just including the salient points.
"Earlier today in Indiana you said something striking. You said that this nation could end up in a crisis, without action, that we would be unable to reverse. Can you talk about what you know or what you're hearing that would lead you to say that our recession might be permanent when others in our history have not?"
This was a great question, as it caught the President red-handed at fear-mongering.
"No, no, no, no. I think that what I've said is what other economists have said ... that if you delay acting on an economy of this severity, then you potentially create a negative spiral that becomes much more difficult for us to get out of."
No, no, no, no, Mr. President, you actually said that without action, we would be unable to reverse the crisis we'd find ourselves in.
"We saw this happen in Japan in the 1990s, where they did not act boldly and swiftly enough, and as a consequence they suffered what was called the "lost decade," where essentially for the entire '90s, they did not see any significant economic growth."
Japan didn't act boldly or swiftly enough? Well, perhaps. They cut their overnight lending rate to zero within 17 months after their housing bubble burst, and they took a cautious, piece-meal approach to bailing out their banks. We cut our rate to zero in December of last year, nearly two years after year-over-year home price appreciation went negative, because our Fed Chairman thought the housing collapsed could be "contained." And our approach to the banks has been cautious and piece-meal, and Mr. Geithner's lack of clarity yesterday indicated that approach is not changing - and again, the market reaction should tell us something.
"... we focus on housing and how are we going to help homeowners ... who are still making their mortgage payments but are seeing their property values decline."
Yes, Mr. President - just how are we going to stop property values from declining further? This one puzzles me every time I hear a politician bang the table and say, "We've got to put a floor under home prices!" How do you legislate an asset value? As a student of economics, I'll be most interested in the answer.
Next question: "What is your strategy for engaging Iran?"
Honestly, as he stammered his way through this one, I kept waiting for him to say "Iran is near the Iraq, or something." He looked like he wanted to use his Phone-A-Friend, and call Joe Biden. I don't think foreign policy is going to prove to be his long suit.
Next was the bipartisanship question, where he was basically asked if he was surprised by the lack of bipartisan support for the spending bill.
"... there have been a lot of bad habits built up here in Washington."
Indeed - habits that you yourself had, as a US Senator. Didn't you make a big deal of how often Sen. McCain voted with President Bush, and how often you voted against him? I'm as sick of partisanship as anyone, but I'm not sure you're the guy to end those bad habits.
He went on to cite the three Republicans he appointed to his cabinet, "something that is unprecedented." Well, let's put an asterisk by that last one: he had originally tipped Bill Richardson for Commerce, but there was this little scandal Gov. Richardson had to deal with. So he appointed a Republican Senator from a state with a Democrat Governor, who will likely appoint another Democrat as the replacement, strengthening the Democrats' majority in the Senate. Crafty move, that. But bipartisan? Not so much. Nor was the infamous "I won" comment, for that matter.
He also noted, "there seems to be a set of folks who ... believe that we should just do nothing." Not in Washington, there aren't. I've said that, but the President doesn't listen to me that I know of. Not one GOP congressperson advocated doing "nothing." They just wanted to do the right thing.
"... what I've been concerned about is some of the language that's been used suggesting that this is full of pork ... when I hear that from folks who presided over a doubling of the national debt ... I just want them not to engage in some revisionist history."
As a US Senator, did you not also preside over a doubling of the national debt, Mr. President? Did you vote against every single appropriation bill during your short tenure in the Senate? Similarly, he said, "I inherited the deficit that we have right now." Well then, sir, perhaps you shouldn't have voted for the TARP, which more than doubled it.
"... although there are some programs in there that I think are good policy, some of them aren't job creators. I think it's perfectly legitimate to say that those programs should be out of this particular recovery package, and we can deal with them later."
Fine, sir. Get out your red pen, then, because there's about $750 billion left in there that meets that definition.
Regarding the $6.7 billion dollars to make federal buildings more energy-efficient: "We're creating jobs immediately by retrofitting these buildings ... and we are saving taxpayers ... potentially $2 billion."
Again, what happens to those jobs once the retrofitting's done? And how is spending $6.7 billion to save $2 billion good fiscal policy?
"... maybe philosophically you just don't think that the federal government should be involved in energy policy. I happen to disagree with that. I think that's the reason why we find ourselves importing more foreign oil right now that we did back in the early '70s."
Or, it could be because we have more people living in this country than we did then, and more cars on the road.
Next up was Chuck Todd of NBC. When President Obama said, "Where's Chuck?" I was reminded of then-Sen. Biden's infamous "Stand up, Chuck!" Chuck asked the $800 billion question:
"In your opening remarks, you talked about that if your plan works the way you want it to work, it's going to increase consumer spending. But isn't consumer spending, or over-spending, how we got into this mess? And if people get money back into their pockets, do you not want them saving it or paying down debt first, before they start spending money?"
The response: "Well, first of all, I don't think it's accurate to say that consumer spending got us into this mess. What got us into this mess initially were banks taking exorbitant, wild risks with other people's monies, based on shaky assets."
I must admit, at this, I was yelling at the TV set. Mr. President, exactly what in the love of Pete do you think collateralized those assets that made them so "shaky," and that caused them to represent such "exorbitant, wild risks?" BAD LOANS, made to people who shouldn't have been borrowing that money to spend when they couldn't afford to pay it back in the first place.
He was either deliberately misleading the American people on this one, or woefully ignorant of the causes of the current crisis and the nature of the challenges facing our banking system. Either way, I am most worried by this response.
He went on: "Now, you are making a legitimate point, Chuck, about the fact that our savings rate has declined. And this economy has been driven by consumer spending for a very long time. And that's not going to be sustainable. You know, if all we're doing is spending ... then over time, other countries are going to get tired of lending us money. And eventually the party's going to be over. Well, in fact, the party now is over."
At this point I'm with him. The party is indeed over, as other countries are indeed tired of lending us money. But then he took an entirely irrational turn:
"And so the sequence of how we're approaching this is as follows. Our immediate job is to stop the downward spiral. And that means putting money into consumers' pockets. It means loosening up credit."
Huh? He seemed to acknowledge that we cannot sustain an economy built on no savings and borrowing to consume more, and that the party is over. Then, he advocates refilling the punch bowl by putting money in CONSUMERS' pockets (note that he made no mention of savers) and loosening up credit, so they can re-leverage. Consumer credit balances have fallen in the US for an unprecedented three consecutive months - a very good trend, given our track record. His solution, apparently, is to reverse that and go back to building the house of cards whose crumbling has led the global economy to the brink of disaster.
Not once did he mention savings. He said that "even if you're a fiscal conservative" - an apparent acknowledgement that he is not - "the biggest problem we're going to have, with our federal budget, is if we continue a situation in which there are no tax revenues, because economic growth is plummeting at the same time as we've got more demands for unemployment insurance; we've got more demands for people who've lost their health care, more demand for food stamps."
Well, why not CUT THE FAT, then, and we'll have ample money for food stamps and health care and unemployment insurance. I'm too lazy to do the research on this, but I'll bet my tax bill that the pork in the federal budget - even before this massive deficit spending bill - is many times the amount we need to spend on those things.
He said that Americans are "not engaging in a lot of long-term financial planning" right now. I disagree. Facing the passage of this monster, I'm planning for double-digit interest rates and crushing tax rates in the not too distant future.
The next question, from a Bloomberg reporter, made me laugh, because she started out with, "Many experts, from Nouriel Roubini to Senator Schumer, have said that it will cost the government more than a trillion dollars to really fix the financial system."
Chuck Schumer is an economic expert on the order of Nouriel Roubini, who predicted this catastrophe? Chuck Schumer is an economic expert, period? To even mention Chuck Schumer in the same sentence as Nouriel Roubini when discussing economic expertise is akin to tossing a Pop Warner League pine-rider in with Walter Payton when discussing football prowess. Please, ma'am - Sen. Schumer's ego doesn't need inflating any more than the next asset bubble.
She went on: "During the campaign, you promised the American people that you won't just tell them what they want to hear, but what they need to hear. Won't the government need far more than the $350 billion that's remaining in the financial rescue fund to really solve the credit crisis?"
"Well, the credit crisis is real. And it's not over. I mean, we averted catastrophe by passing the TARP legislation." Really? How's Citi's stock faring? "... because of a lack of clarity and consistency in how it was applied, a lack of oversight in ... in ... in how the money went out, we didn't get as big of a bang for the buck as we should have."
True that. So again, why did you vote for it? It was rushed through in haste, with no strings attached. I said this a long time ago on this very blog: the simple fact that Hank Paulson insisted on immunity from legal action when he pushed for the TARP's passage should have been the first clue to any thinking person that it wasn't going to be applied prudently.
He went on to say that Mr. Geithner would be "coming up with the best possible plan to use this money wisely, in a way that's transparent ... But my instruction to him has been let's get this right, let's create a template in which we're restoring market confidence. And the reason that's so important is because we don't know yet whether we're going to need additional money or how much additional money we'll need until we've seen how successful we are at restoring a sense of confidence in a marketplace that the federal government and the Federal Reserve Bank and the FDIC, working in concert, know what they're doing."
Well. I'd have to say we're going to need a LOT more money, judging from the no-confidence vote the market handed Mr. Geithner yesterday. He is indeed following in the footsteps of Mr. Paulson, whose speeches launched many a bloodbath in the equity market last year. His plans are certainly transparent, though; you can see right through them, like a sheet of Glad Wrap.
The next - and final - question was a follow-up to that one, asking what metrics the American people should use to gauge the success of the administration's programs (the spending bill and the bank rescue effort). The answer:
"... my initial measure of success is creating or saving 4 million jobs." Dang it, the phonograph needle is stuck again! But that's a pretty safe metric. It will take a long time before we create or save 4 million jobs in this economy, especially since job market recovery typically lags economic recovery, sometimes by years - recall the "jobless recovery" from the '90-91 recession, when we didn't start seeing meaningful job growth until late 1992. So he's effectively saying, "Give me until then to determine whether my schemes worked," laying the groundwork for a second term.
"Step number two, are we seeing the credit markets operate effectively?" Well, again, that will have to happen long before the job market recovers, so it really ought to be step one. "Part of the problem in Elkhart that I heard about today was the fact that this is the RV capital of America. You've got a bunch of RV companies that have customers who want to purchase RVs, but even though their credit is good, they can't get the loan."
Part of THAT problem is that the definition of "good credit" has changed since the loose-credit days of the housing bubble, and that is a move in the right direction. The other part is that banks are more reluctant to make so-called "toy loans" - RVs, ATVs, motorcycles, snowmobiles - in a recession. The collateral is harder to move than a car or a house if it has to be repossessed. If those people truly do have "good credit" - not by the lax standards of 2005, but by today's return to prudent lending practices - they can certainly get a home mortgage or a car loan, assuming they make a reasonable and prudent down payment.
He made one more reference to stabilizing housing values, which again, I'm anxious to see put into practice. House prices will stabilize when we clear the current inventory glut and return to equilibrium, and not before.
I will give him credit for the candor of one of his final comments: "... this year is going to be a difficult year ..." And the passage of his massive deficit spending bill will ensure that the next several years are going to be difficult years, at best.
Tuesday, February 10, 2009
Monday, February 9, 2009
A Brave New World
Or, perhaps more appropriately, a new world for the brave. Only for the brave. You've gotta be brave, to face what's coming.
We seem to be re-defining things in Washington, and it's really confusing. I finally got the math side of things: trillion is the new billion, etc., as noted in a previous post. Now, I'm working on the new lexicon. There seem to be some new etymological equalities and other realities that need to be worked through. I'll do my best to help.
Hope=Fear
"We gather because we have chosen hope over fear." -President Barack Obama, in his inaugural speech.
"Endless delay and paralysis in Washington in the face of this crisis will bring only deepening disaster." -President Barack Obama, in a speech today in Elkhart, Indiana.
Gee, "deepening disaster" doesn't sound like hope to me. It sounds like fear-mongering. I guess it's only fear-mongering when we're talking about the threat of terrorism, not economic cataclysm.
Piecemeal does not equal piecemeal if it's done all at once
Former Treasury Secretary Hank Paulson has been criticized - rightly so - for trying first one thing, then another, then another, to un-freeze credit markets, save the banking system, and halt the recession.
New Treasury Secretary Timothy Geithner is going to roll out his bank-rescue plan to deploy the second tranche of the TARP tomorrow. His plan is widely expected to be a three-pronged approach. Isn't that the same thing Paulson did - throw several things at the wall and hope they work? The only difference is that Paulson waited to see whether the first thing worked before moving on to the next thing. Geithner's going to throw his things at the wall all at once. I guess the definition of "piecemeal" is a matter of timing.
Spending=Stimulus
"So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? (Laughter and applause.) That's the whole point. No, seriously. (Laughter.) That's the point. (Applause.)" -President Barack Obama, speaking to Congress last Thursday.
Really, Mr. President? Spending is stimulus? Okay, thanks for the clarification. I'm going to try this out on my wife: "Honey, I need to buy a new Vox AC30 hand-wired amp to stimulate my guitar playing." I'll let you know how it works out.
How to jump-start a car
Some Democratic Congresswoman - I don't recall which one, but she was from somewhere up north where it gets cold and cars won't start - made the analogy that the economy is like a car that won't start, saying that when that happens, you have to jump-start the car.
Okay, fine. But when the "economic stimulus" component of the spending bill is only 10% of the trillion-dollar total to be spent, the analogy is like hooking the car up to a nuclear power plant. Or, more accurately, to a nuclear bomb, since most of the inherent power is designed to do something quite different than bring a dead battery to life, and risks blowing the car to smithereens.
A 70% chance of success is a good bet
"If we do everything right, if we do it with absolute certainty, there's still a 30% chance we're going to get it wrong." -Vice President Joe Biden, speaking to House Democrats at their spa retreat (more on that below).
My good friend and wealth manager Rick Maner of Aspen Wealth Management put it this way: "Can you imagine what would happen in my business if I told somebody ... "we gotta do something and there's a 30% chance you’ll lose everything ... but trust me."
A spa retreat in the middle of an economic crisis, using taxpayer money, is only wrong when private industry does it
CNN's Campbell Brown, in her "Cutting Through the Bull" piece, recently reported that Congressional Democrats and Republicans both went on retreats at posh DC-area spa resorts - something they do every year, and something that's only partly taxpayer-funded, but still. You can check out the story here: http://www.cnn.com/2009/POLITICS/02/05/campbell.brown.congress/index.html.
What don't these guys get that AIG, Citigroup and Wells Fargo got? Wells Fargo defended their planned Vegas boondoggle by saying it was part of their culture, for which they got slapped around in the media - rightly so. But Congress gets a pass.
Pay caps are only a good idea for private industry
Both Barney Frank and Tim Geithner recently said they want to extend the proposed $500,000 annual pay caps for executives of banks receiving bailout money to all US businesses. Can you say, "totalitarianism?" Yet, Barney recently voted himself a pay raise, even though he and his ilk contributed mightily to the current economic calamity.
Barney, let me make one thing perfectly clear: you work for me, dude. I pay your salary. And even though I don't make anywhere near a half-mil a year, you can cap my pay just as soon as you cap yours. And while you're at it, cancel your next spa retreat.
We seem to be re-defining things in Washington, and it's really confusing. I finally got the math side of things: trillion is the new billion, etc., as noted in a previous post. Now, I'm working on the new lexicon. There seem to be some new etymological equalities and other realities that need to be worked through. I'll do my best to help.
Hope=Fear
"We gather because we have chosen hope over fear." -President Barack Obama, in his inaugural speech.
"Endless delay and paralysis in Washington in the face of this crisis will bring only deepening disaster." -President Barack Obama, in a speech today in Elkhart, Indiana.
Gee, "deepening disaster" doesn't sound like hope to me. It sounds like fear-mongering. I guess it's only fear-mongering when we're talking about the threat of terrorism, not economic cataclysm.
Piecemeal does not equal piecemeal if it's done all at once
Former Treasury Secretary Hank Paulson has been criticized - rightly so - for trying first one thing, then another, then another, to un-freeze credit markets, save the banking system, and halt the recession.
New Treasury Secretary Timothy Geithner is going to roll out his bank-rescue plan to deploy the second tranche of the TARP tomorrow. His plan is widely expected to be a three-pronged approach. Isn't that the same thing Paulson did - throw several things at the wall and hope they work? The only difference is that Paulson waited to see whether the first thing worked before moving on to the next thing. Geithner's going to throw his things at the wall all at once. I guess the definition of "piecemeal" is a matter of timing.
Spending=Stimulus
"So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? (Laughter and applause.) That's the whole point. No, seriously. (Laughter.) That's the point. (Applause.)" -President Barack Obama, speaking to Congress last Thursday.
Really, Mr. President? Spending is stimulus? Okay, thanks for the clarification. I'm going to try this out on my wife: "Honey, I need to buy a new Vox AC30 hand-wired amp to stimulate my guitar playing." I'll let you know how it works out.
How to jump-start a car
Some Democratic Congresswoman - I don't recall which one, but she was from somewhere up north where it gets cold and cars won't start - made the analogy that the economy is like a car that won't start, saying that when that happens, you have to jump-start the car.
Okay, fine. But when the "economic stimulus" component of the spending bill is only 10% of the trillion-dollar total to be spent, the analogy is like hooking the car up to a nuclear power plant. Or, more accurately, to a nuclear bomb, since most of the inherent power is designed to do something quite different than bring a dead battery to life, and risks blowing the car to smithereens.
A 70% chance of success is a good bet
"If we do everything right, if we do it with absolute certainty, there's still a 30% chance we're going to get it wrong." -Vice President Joe Biden, speaking to House Democrats at their spa retreat (more on that below).
My good friend and wealth manager Rick Maner of Aspen Wealth Management put it this way: "Can you imagine what would happen in my business if I told somebody ... "we gotta do something and there's a 30% chance you’ll lose everything ... but trust me."
A spa retreat in the middle of an economic crisis, using taxpayer money, is only wrong when private industry does it
CNN's Campbell Brown, in her "Cutting Through the Bull" piece, recently reported that Congressional Democrats and Republicans both went on retreats at posh DC-area spa resorts - something they do every year, and something that's only partly taxpayer-funded, but still. You can check out the story here: http://www.cnn.com/2009/POLITICS/02/05/campbell.brown.congress/index.html.
What don't these guys get that AIG, Citigroup and Wells Fargo got? Wells Fargo defended their planned Vegas boondoggle by saying it was part of their culture, for which they got slapped around in the media - rightly so. But Congress gets a pass.
Pay caps are only a good idea for private industry
Both Barney Frank and Tim Geithner recently said they want to extend the proposed $500,000 annual pay caps for executives of banks receiving bailout money to all US businesses. Can you say, "totalitarianism?" Yet, Barney recently voted himself a pay raise, even though he and his ilk contributed mightily to the current economic calamity.
Barney, let me make one thing perfectly clear: you work for me, dude. I pay your salary. And even though I don't make anywhere near a half-mil a year, you can cap my pay just as soon as you cap yours. And while you're at it, cancel your next spa retreat.
Saturday, February 7, 2009
Mister, We Could Use a Man Like Herbert Hoover Again
I'm cutting and pasting today's post from a little back-and-forth from my favorite football message board, where, during the boring off-season, we tend to talk about anything and everything and even nothing. (Though I will say that my beloved Gorillas had just a killer recruiting season - gotta love a sophomore 340-lb. DL who originally signed with Miami, reshirted there, then played a year of juco ball - woo hoo!)
Anyway, here's the guy's question, which was in response to my continued assertion that our best course of action is to NOT throw money at this recession, but just let it run its natural course:
"What was the unemployment rate back during the Depression when Hoover kept insisting that everything was okay and didn't do anything? It was at least 30%.
The unemployment rate is on a fast rise now. IF we let everything fail like you say we should...what DO YOU think the unemployment rate would be and how do you help those people?
This is why I see this as one big vicious circle."
And my response, wherein I alluded to an earlier response regarding Hoover by another poster; the original questioner had also asked another proponent of letting free markets correct themselves whether he'd be willing to let those who lost their jobs if we "do nothing" pitch tents on his lawn, hence my final comment:
"First, Jake's right - Hoover did try some things, but he didn't want to throw the New Deal at the situation. He was right, as the New Deal prolonged the Depression for at least 8 years. We'll never know how long it truly could have gone, as WWII saved FDR's bacon (pun intended). We don't want that to happen again, or at least I don't.
Second, unemployment peaked in 1933 at 25%. And yes, it's on the rise now. But it's alarmist to think that it would go anywhere near that rate if we didn't pass the spending bill. We're at 7.6% according to this morning's BLS report. We could hit 9%, maybe 10% if we left things alone. But let's not forget that the labor force has grown by 30% over the last couple of decades, as I noted in another thread. Right now, accounting for that growth, this isn't even as bad as the early 90s recession in terms of the labor market, let alone those of the prior three decades. So to suggest that we're approaching Great Depression conditions is just buying into the fear-mongering coming out of Washington this week in an effort to rush to judgment on a trillion dollars worth of pork, which will not save those jobs we wish to protect.
As I also noted in another thread, it is indeed a vicious circle. IF we pass this bill, the cycle will spiral out of control, and then we are indeed at risk of seeing another Great Depression, with the joblessness associated with that one. A key difference between then and now is that in 1933, FDR's first year in office, the deficit was 4.6% of GDP, thus FDR had some wiggle room to deficit spend without totally killing the US economy (at least, we think - again, we'll never know what would have happened if WWII hadn't saved the day).
The FY09 deficit - even before the spending bill - is going to be a trillion dollars, or about 7.2% of GDP, assuming it only contracts 3% from 4Q08 levels, which is a generous assumption. With the spending bill (which likely isn't the end of the failout mania) you can double that - yes, double it - to about 14.5% of GDP. True, we hit nearly double that in 1943, but 14.2% would be nearly double the highest rate of deficit to GDP in a non-war year. It was 7.1% in 1946, when we were still recovering from the war spending buildup, but by the next year we were running a surplus.
We don't have a world war to bail us out this time - at least, I hope we don't. We don't have the government encouraging US citizens to fund the debt build-up by buying war bonds, etc. And - another real key difference - we were far and away the dominant player, by an order of magnitude, in the global debt game. Now, the field of play is significantly more crowded, and there is much keener competition for a dwindling number of investment dollars. I don't think anyone in Washington has the first bloody clue what will likely happen to interest rates in the current global environment if we go to 14% of GDP for the deficit. And, a final key difference: back then we were on the gold standard. There were tangible assets backing our currency. Now, there is not.
Our national debt is now about $10.7 trillion. The spending bill would take it to more than $12 trillion, with interest (at today's rates - again, they're going higher fast if this thing passes, so the funding costs are underestimated). GDP is going to be less than $14 trillion by year-end, again assuming just a 3% drop from 4Q08. That puts debt-to-GDP at nearly 90%. Add another trillion in spending, or shave another trillion off output, and we are insolvent. We were nowhere near these levels during the depression, so continued spending, while proving ultimately disastrous to the economy, didn't pose the risk to economic sovereignty that it does today.
Let's also take a look at FDR's full response. In 1937, when GDP had risen 63% from FDR's first year in office due to his massive spending (remember that government spending is a component of GDP, so it was purely debt-funded growth), he had to raise taxes to try to bring down some of the deficit he'd built up - it reached $4.3B in 1936, or a then-unmanageable 5% of GDP. But remember, that GDP figure was inflated by government spending, which was a whopping 15.6% of output, so the deficit was really more like 6% of GDP. So raise taxes he did, with catastrophic results: GDP actually fell in '38, and by the next year was only back to '37 levels. So his tax hike created the "Depression within the Depression," choking off growth for two years.
Well, guess what? Today government spending already contributes more than 20% to GDP. That means that a tax hike is already due. With the spending bill, government's share will rise for '09 to about 30% of GDP. So if this bill passes, a massive tax increase is forthcoming, probably within two years. The peak tax rate during the Depression was 79%.
So to answer your original question, yes, anyone who loses their job in this economy, assuming we drop the spending bill, is more than welcome to camp out on my lawn, so long as you are equally willing to pay my interest charges and my tax bill, until the budget is balanced, if it passes. Deal?"
I should have added that while the employment situation is nowhere near Great Depression levels, our debt situation is, possibly even worse. That is precisely why, this time, it's best to let the economy suffer while we reduce the debt burden, rather than increase the debt burden to save the economy. From the starting point at which we find ourselves today, it will have quite the opposite effect.
Finally, regarding my "vicious circle" reference to another thread, here it is:
"Talk about vicious circles:
1. Spend a bunch of money we don't have on stuff that won't solve the credit crisis we're in.
2. Float a couple trillion in Treasury debt in a single year - that would far and away be a record, you know - to fund said spending.
3. Watch long-term interest rates go up when inflation gets factored into the bid, not to mention the crowding out concept since every other country in the world will be doing the same, and the pool of investors is shrinking dramatically since every country is borrowing, none are lending through buying bonds, and the banks that might otherwise buy the debt are broke. And, not to mention the higher risk premium when suddenly the US Treasury is in hock up to its eyeballs and the national debt exceeds GDP.
4. When long-term Treasury yields go up, watch credit card, auto loan and mortgage rates go up.
5. With nobody able to afford a mortgage, watch home prices fall further.
6. Watch foreclosures and auto loan and credit card defaults go higher still.
7. Watch more banks fail.
8. Watch credit get even tighter.
9. Lather, rinse and repeat."
I can't wait until football season.
Anyway, here's the guy's question, which was in response to my continued assertion that our best course of action is to NOT throw money at this recession, but just let it run its natural course:
"What was the unemployment rate back during the Depression when Hoover kept insisting that everything was okay and didn't do anything? It was at least 30%.
The unemployment rate is on a fast rise now. IF we let everything fail like you say we should...what DO YOU think the unemployment rate would be and how do you help those people?
This is why I see this as one big vicious circle."
And my response, wherein I alluded to an earlier response regarding Hoover by another poster; the original questioner had also asked another proponent of letting free markets correct themselves whether he'd be willing to let those who lost their jobs if we "do nothing" pitch tents on his lawn, hence my final comment:
"First, Jake's right - Hoover did try some things, but he didn't want to throw the New Deal at the situation. He was right, as the New Deal prolonged the Depression for at least 8 years. We'll never know how long it truly could have gone, as WWII saved FDR's bacon (pun intended). We don't want that to happen again, or at least I don't.
Second, unemployment peaked in 1933 at 25%. And yes, it's on the rise now. But it's alarmist to think that it would go anywhere near that rate if we didn't pass the spending bill. We're at 7.6% according to this morning's BLS report. We could hit 9%, maybe 10% if we left things alone. But let's not forget that the labor force has grown by 30% over the last couple of decades, as I noted in another thread. Right now, accounting for that growth, this isn't even as bad as the early 90s recession in terms of the labor market, let alone those of the prior three decades. So to suggest that we're approaching Great Depression conditions is just buying into the fear-mongering coming out of Washington this week in an effort to rush to judgment on a trillion dollars worth of pork, which will not save those jobs we wish to protect.
As I also noted in another thread, it is indeed a vicious circle. IF we pass this bill, the cycle will spiral out of control, and then we are indeed at risk of seeing another Great Depression, with the joblessness associated with that one. A key difference between then and now is that in 1933, FDR's first year in office, the deficit was 4.6% of GDP, thus FDR had some wiggle room to deficit spend without totally killing the US economy (at least, we think - again, we'll never know what would have happened if WWII hadn't saved the day).
The FY09 deficit - even before the spending bill - is going to be a trillion dollars, or about 7.2% of GDP, assuming it only contracts 3% from 4Q08 levels, which is a generous assumption. With the spending bill (which likely isn't the end of the failout mania) you can double that - yes, double it - to about 14.5% of GDP. True, we hit nearly double that in 1943, but 14.2% would be nearly double the highest rate of deficit to GDP in a non-war year. It was 7.1% in 1946, when we were still recovering from the war spending buildup, but by the next year we were running a surplus.
We don't have a world war to bail us out this time - at least, I hope we don't. We don't have the government encouraging US citizens to fund the debt build-up by buying war bonds, etc. And - another real key difference - we were far and away the dominant player, by an order of magnitude, in the global debt game. Now, the field of play is significantly more crowded, and there is much keener competition for a dwindling number of investment dollars. I don't think anyone in Washington has the first bloody clue what will likely happen to interest rates in the current global environment if we go to 14% of GDP for the deficit. And, a final key difference: back then we were on the gold standard. There were tangible assets backing our currency. Now, there is not.
Our national debt is now about $10.7 trillion. The spending bill would take it to more than $12 trillion, with interest (at today's rates - again, they're going higher fast if this thing passes, so the funding costs are underestimated). GDP is going to be less than $14 trillion by year-end, again assuming just a 3% drop from 4Q08. That puts debt-to-GDP at nearly 90%. Add another trillion in spending, or shave another trillion off output, and we are insolvent. We were nowhere near these levels during the depression, so continued spending, while proving ultimately disastrous to the economy, didn't pose the risk to economic sovereignty that it does today.
Let's also take a look at FDR's full response. In 1937, when GDP had risen 63% from FDR's first year in office due to his massive spending (remember that government spending is a component of GDP, so it was purely debt-funded growth), he had to raise taxes to try to bring down some of the deficit he'd built up - it reached $4.3B in 1936, or a then-unmanageable 5% of GDP. But remember, that GDP figure was inflated by government spending, which was a whopping 15.6% of output, so the deficit was really more like 6% of GDP. So raise taxes he did, with catastrophic results: GDP actually fell in '38, and by the next year was only back to '37 levels. So his tax hike created the "Depression within the Depression," choking off growth for two years.
Well, guess what? Today government spending already contributes more than 20% to GDP. That means that a tax hike is already due. With the spending bill, government's share will rise for '09 to about 30% of GDP. So if this bill passes, a massive tax increase is forthcoming, probably within two years. The peak tax rate during the Depression was 79%.
So to answer your original question, yes, anyone who loses their job in this economy, assuming we drop the spending bill, is more than welcome to camp out on my lawn, so long as you are equally willing to pay my interest charges and my tax bill, until the budget is balanced, if it passes. Deal?"
I should have added that while the employment situation is nowhere near Great Depression levels, our debt situation is, possibly even worse. That is precisely why, this time, it's best to let the economy suffer while we reduce the debt burden, rather than increase the debt burden to save the economy. From the starting point at which we find ourselves today, it will have quite the opposite effect.
Finally, regarding my "vicious circle" reference to another thread, here it is:
"Talk about vicious circles:
1. Spend a bunch of money we don't have on stuff that won't solve the credit crisis we're in.
2. Float a couple trillion in Treasury debt in a single year - that would far and away be a record, you know - to fund said spending.
3. Watch long-term interest rates go up when inflation gets factored into the bid, not to mention the crowding out concept since every other country in the world will be doing the same, and the pool of investors is shrinking dramatically since every country is borrowing, none are lending through buying bonds, and the banks that might otherwise buy the debt are broke. And, not to mention the higher risk premium when suddenly the US Treasury is in hock up to its eyeballs and the national debt exceeds GDP.
4. When long-term Treasury yields go up, watch credit card, auto loan and mortgage rates go up.
5. With nobody able to afford a mortgage, watch home prices fall further.
6. Watch foreclosures and auto loan and credit card defaults go higher still.
7. Watch more banks fail.
8. Watch credit get even tighter.
9. Lather, rinse and repeat."
I can't wait until football season.
Friday, February 6, 2009
"Spendulus," and Other Rants
I'm going to start and finish nice today.
First - brace yourselves - I'm going to give Nancy Pelosi a free pass on something she said.
Yesterday, she reportedly slipped up when discussing the massive deficit spending bill (let's just start calling it the MDSB, for short), when she said that the US economy is losing 500 million jobs a month.
Now, I'm not for one minute suggesting that there isn't a fairly strong likelihood that the Speaker doesn't have a clue what she's talking about when she weighs in on matters economic. But I'm inclined to give her a pass on her order-of-magnitude error.
See, in Washington, trillion is the new billion, billion is the new million, million is the new thousand. Rep. Pelosi is likely so caught up in the conversion that such an error is understandable.
************
On to the MDSB. A Wall Street Journal piece dated January 28 found a number of items in the bill that just don't seem to have much stimulative impact. To wit:
-$1 billion for Amtrak, "the federal railroad that hasn't turned a profit in 40 years." Maybe they need to upgrade the Acera Express train that carries Vice President Biden from his Delaware home to the capitol.
-$50 million "for that great engine of job creation, the National Endowment for the Arts." Though with my daughter entering college next fall to major in Commercial Art, hey, if it improves her job outlook, I'm all for it - though by its very nature, "commercial" art is more likely to create job opportunities anyway, even without spending millions on the NEA.
-$650 million more to pay for digital TV conversion coupons. Maybe if enough TV screens went blank in this company, the couch taters would go out and do something productive for the economy.
-$6 billion on mass transit. Now, I've heard arguments that this will reduce commuting costs and thereby put more cash in households' pockets, cash they can go out and spend buying more stuff they don't need, thus stimulating the economy and creating jobs making said stuff. Yeah, in China maybe. That's falling back on the old thinking that got us into this mess, that spending is the engine of growth. Plus, the WSJ writer notes that "most urban transit systems are so badly managed that their fares cover less than half of their costs. Howerver, the people who operate these systems belong to public-employee unions that are campaign contributors to ... guess which party?" But I suppose we're to believe that if we throw a huge pile of cash at them, they'll start operating more efficiently.
-$600 million for the federal government to buy new cars. The Journal notes that Washington "already spends $3 billion a year on its fleet of 600,000 vehicles." Maybe this is a subversive way of giving Detroit enough cash to cover its burn rate for another month or two.
-$7 billion to modernize federal buildings and facilities. Didn't John Thain come under fire for spending a million bucks to "modernize" his office?
-$66 billion for education, but with the stipulation that "no recipient ... shall use such funds to provide financial assistance to students to attend private elementary or secondary schools." So the only teachers that would benefit from the increased spending would be ... you guessed it, union members. Two teachers in Alabama filed suit against the NEA when they uncovered a plot that, in violation of union rules, was diverting members' dues into the NEA's PAC, which contributed heavily to the Obama campaign.
The WSJ went on to rightly question whether these increases in non-stimulative spending would "become part of the annual 'budget baseline' that Congress uses as the new floor when calculating how much to increase spending the following year." I concur with the writer that it's highly unlikely lawmakers will seek to cut spending on these programs once the economic ship rights (if it ever does, assuming passing of the MDSB).
The writer did identify some things that are much-needed - the kinds of things President Obama has cited when he talks about the urgent necessity of the MDSB:
-$30 billion for infrastructure repairs, like fixing bridges or improving highways. President Obama did use the tragic Minneapolis bridge collapse to his political advantage the other day in selling the MDSB.
-$40 billion for broadband and electric grid development (which my scientifically-minded friends tell me is a good thing), airports (and anything that will make the unfriendly skies more friendly, I'm all for), and clean water projects.
-$20 billion in tax cuts, which truly are stimulative.
Add it all up, and what do you get? About $90 billion of spending on projects that will actually stimulate the economy, though as the Journal piece points out, "Peter Orszag, the President's new budget director, told Congress a year ago, 'even those [public works] that are "on the shelf" generally cannot be undertaken quickly enough to provide timely stimulus to the economy.'"
That's $90 billion, folks - nine-oh. Just 10% of the $900 billion MDSB. But again, trillion is the new billion in Washington. Guess we should just be thankful it's not $90 trillion. Might as well be.
************
Speaking of the MDSB's size, remember during the transition when the Obama team was said to be looking at $775 billion, because they wanted $800 billion to a trillion, but they thought there'd be resistance to a number that big? Now, after deliberations by Senate Dems, the original $819 billion proposal has swollen to more than $900 billion. Are we surprised?
The reason the Obama camp wanted $800 billion to a trillion is because a bunch of Chicken Little-esque Keynesian economists told them it would take a package that big to provide meaningful stimulus to the US economy. Never mind that some 300 economists recently signed their names to full-page ads in newspapers across the nation, purchased by the Cato Institute, with the headline, "With all due respect, Mr. President, that is not true," in response to the rookie President's claim that there was "no disagreement" that such massive spending was necessary (it would have been 301 had they asked me, but given that the list included several Nobel laureates, it's weighty enough without little old me on the roster).
So apparently they wanted "a really big number," but they could only find about $90 billion that would really stimulate the economy. So they pumped the sucker full of pork until it hit their range.
Remind you of anything? Like the Treasury's justification for the size of the TARP: "The number's not based on anything, we just wanted to throw out a really big number."
************
Another WSJ op-ed piece broke down the targets of the stimulus by industry. Excluding tax cuts, the MDSB - the earlier version that was $825 billion, that is - amounted to $550 billion in spending. Some 39% of that is directed toward state and local governments, where the unemployment rate was just 2.3% in December. Another 17.3% is earmarked for health and education, where unemployment was 3.8%. By comparison, joblessness in manufacturing and construction were 8.3% and 15.2%, respectively.
The support for the MDSB's "stimulus" impact was based largely on calculations made by Washington's new favorite economist, economy.com's Mark Zandi. Astute readers will recall that Mark was the recent topic of a post on this blog, where I referred to him as "Economist Lite - a third less knowledgeable than your regular economist."
That might have been generous on my part.
From the WSJ:
"Mr. Zandi's current estimates have government employment growing by 330,400 over two years as a result of the House bill ... Yet even that updated figure still amounts to only 8.3% of total jobs added, even though state and local governments are to receive 39% of the funds ($214.5 billion). Spending $214.5 billion to create or save 330,400 government jobs implies that taxpayers are being asked to spend $646,214 per job."
Hey, I tried to tell you, Mark's not very adept at number-crunching.
The WSJ goes on:
Simulations with his macroeconomic model, according to Mr. Zandi, reveal that 'every dollar spent on unemployment benefits generates an estimated $1.63 in near-term GDP.' By contrast, such 'multipliers' simulate that tax cuts for business or investors would add only 30-38 cents on the dollar. But econometric models are parables, not facts. The big multipliers for transfer payments and tiny multipliers for capital taxes in Mr. Zandi's model reveal more about the way the model was constructed than about the way the economy works. If model builders make Keynesian assumptions, their model will generate Keynesian results."
So, so true. For the economics-challenged, here's a more real-world explanation of the above, in the form of a question: in the middle of an economic crisis, who's likely to spend more money, thus stimulating demand and creating jobs - people drawing unemployment benefits, or businesses and investors?
Here's a simpler explanation: Mark Zandi is a deficit-loving idiot who finally has Washington's ear, and he's making the most of it. He's certainly stimulating his own bottom line.
But an IMF economist in 2006 noted that "several studies find that reductions in government spending 'can have expansionary effects, since they can contribute to a consumption and investment boom owing to altered expectations regarding future taxation.'"
Translation: if Washington spends a trillion bucks on top of a trillion-dollar deficit, every business and employed individual is going to tighten up the purse strings mightily in preparation for the inevitable massive tax increase.
************
Yesterday I praised President Obama's new casual approach to life in the White House. Today, I read something about it that raised my hackles. Granted, he didn't say it, but it reflects an aspect of the man that came under fire during his campaign, after he made the seemingly elitist "bitter people cling to their guns and their God" remark.
A news article discussing the new President's habitual tardiness compared it to that of President Clinton. The article quoted one Presidential historian as saying such disregard for punctuality means one of two things: "Bad organization that can be corrected, or arrogance. It sounds to me like this is arrogance." Okay, but that's just his opinion.
But a former advisor to President Clinton said, "I would make the opposite observation. I would say that taking time to accommodate your schedule to regular citizens is not an act of arrogance. It's an act of humility."
What??!!
President Obama, sir, I sincerely hope this man does not speak for you. Because I would politely remind you that this "regular citizen" pays your salary. You work for me; you may be the President, but I am a shareholder. And I will hold you accountable. So plan on regularly taking the time to tell me what you're doing with my money.
************
As promised, I'll finish on a nice note. I found another thing that President Obama is doing that I like: he's expanding the role of the White House Office of Faith-Based Initiatives created by President Bush. I'll reserve further judgment until I find out just what he plans to do with it. But it's a positive move, thus far.
First - brace yourselves - I'm going to give Nancy Pelosi a free pass on something she said.
Yesterday, she reportedly slipped up when discussing the massive deficit spending bill (let's just start calling it the MDSB, for short), when she said that the US economy is losing 500 million jobs a month.
Now, I'm not for one minute suggesting that there isn't a fairly strong likelihood that the Speaker doesn't have a clue what she's talking about when she weighs in on matters economic. But I'm inclined to give her a pass on her order-of-magnitude error.
See, in Washington, trillion is the new billion, billion is the new million, million is the new thousand. Rep. Pelosi is likely so caught up in the conversion that such an error is understandable.
************
On to the MDSB. A Wall Street Journal piece dated January 28 found a number of items in the bill that just don't seem to have much stimulative impact. To wit:
-$1 billion for Amtrak, "the federal railroad that hasn't turned a profit in 40 years." Maybe they need to upgrade the Acera Express train that carries Vice President Biden from his Delaware home to the capitol.
-$50 million "for that great engine of job creation, the National Endowment for the Arts." Though with my daughter entering college next fall to major in Commercial Art, hey, if it improves her job outlook, I'm all for it - though by its very nature, "commercial" art is more likely to create job opportunities anyway, even without spending millions on the NEA.
-$650 million more to pay for digital TV conversion coupons. Maybe if enough TV screens went blank in this company, the couch taters would go out and do something productive for the economy.
-$6 billion on mass transit. Now, I've heard arguments that this will reduce commuting costs and thereby put more cash in households' pockets, cash they can go out and spend buying more stuff they don't need, thus stimulating the economy and creating jobs making said stuff. Yeah, in China maybe. That's falling back on the old thinking that got us into this mess, that spending is the engine of growth. Plus, the WSJ writer notes that "most urban transit systems are so badly managed that their fares cover less than half of their costs. Howerver, the people who operate these systems belong to public-employee unions that are campaign contributors to ... guess which party?" But I suppose we're to believe that if we throw a huge pile of cash at them, they'll start operating more efficiently.
-$600 million for the federal government to buy new cars. The Journal notes that Washington "already spends $3 billion a year on its fleet of 600,000 vehicles." Maybe this is a subversive way of giving Detroit enough cash to cover its burn rate for another month or two.
-$7 billion to modernize federal buildings and facilities. Didn't John Thain come under fire for spending a million bucks to "modernize" his office?
-$66 billion for education, but with the stipulation that "no recipient ... shall use such funds to provide financial assistance to students to attend private elementary or secondary schools." So the only teachers that would benefit from the increased spending would be ... you guessed it, union members. Two teachers in Alabama filed suit against the NEA when they uncovered a plot that, in violation of union rules, was diverting members' dues into the NEA's PAC, which contributed heavily to the Obama campaign.
The WSJ went on to rightly question whether these increases in non-stimulative spending would "become part of the annual 'budget baseline' that Congress uses as the new floor when calculating how much to increase spending the following year." I concur with the writer that it's highly unlikely lawmakers will seek to cut spending on these programs once the economic ship rights (if it ever does, assuming passing of the MDSB).
The writer did identify some things that are much-needed - the kinds of things President Obama has cited when he talks about the urgent necessity of the MDSB:
-$30 billion for infrastructure repairs, like fixing bridges or improving highways. President Obama did use the tragic Minneapolis bridge collapse to his political advantage the other day in selling the MDSB.
-$40 billion for broadband and electric grid development (which my scientifically-minded friends tell me is a good thing), airports (and anything that will make the unfriendly skies more friendly, I'm all for), and clean water projects.
-$20 billion in tax cuts, which truly are stimulative.
Add it all up, and what do you get? About $90 billion of spending on projects that will actually stimulate the economy, though as the Journal piece points out, "Peter Orszag, the President's new budget director, told Congress a year ago, 'even those [public works] that are "on the shelf" generally cannot be undertaken quickly enough to provide timely stimulus to the economy.'"
That's $90 billion, folks - nine-oh. Just 10% of the $900 billion MDSB. But again, trillion is the new billion in Washington. Guess we should just be thankful it's not $90 trillion. Might as well be.
************
Speaking of the MDSB's size, remember during the transition when the Obama team was said to be looking at $775 billion, because they wanted $800 billion to a trillion, but they thought there'd be resistance to a number that big? Now, after deliberations by Senate Dems, the original $819 billion proposal has swollen to more than $900 billion. Are we surprised?
The reason the Obama camp wanted $800 billion to a trillion is because a bunch of Chicken Little-esque Keynesian economists told them it would take a package that big to provide meaningful stimulus to the US economy. Never mind that some 300 economists recently signed their names to full-page ads in newspapers across the nation, purchased by the Cato Institute, with the headline, "With all due respect, Mr. President, that is not true," in response to the rookie President's claim that there was "no disagreement" that such massive spending was necessary (it would have been 301 had they asked me, but given that the list included several Nobel laureates, it's weighty enough without little old me on the roster).
So apparently they wanted "a really big number," but they could only find about $90 billion that would really stimulate the economy. So they pumped the sucker full of pork until it hit their range.
Remind you of anything? Like the Treasury's justification for the size of the TARP: "The number's not based on anything, we just wanted to throw out a really big number."
************
Another WSJ op-ed piece broke down the targets of the stimulus by industry. Excluding tax cuts, the MDSB - the earlier version that was $825 billion, that is - amounted to $550 billion in spending. Some 39% of that is directed toward state and local governments, where the unemployment rate was just 2.3% in December. Another 17.3% is earmarked for health and education, where unemployment was 3.8%. By comparison, joblessness in manufacturing and construction were 8.3% and 15.2%, respectively.
The support for the MDSB's "stimulus" impact was based largely on calculations made by Washington's new favorite economist, economy.com's Mark Zandi. Astute readers will recall that Mark was the recent topic of a post on this blog, where I referred to him as "Economist Lite - a third less knowledgeable than your regular economist."
That might have been generous on my part.
From the WSJ:
"Mr. Zandi's current estimates have government employment growing by 330,400 over two years as a result of the House bill ... Yet even that updated figure still amounts to only 8.3% of total jobs added, even though state and local governments are to receive 39% of the funds ($214.5 billion). Spending $214.5 billion to create or save 330,400 government jobs implies that taxpayers are being asked to spend $646,214 per job."
Hey, I tried to tell you, Mark's not very adept at number-crunching.
The WSJ goes on:
Simulations with his macroeconomic model, according to Mr. Zandi, reveal that 'every dollar spent on unemployment benefits generates an estimated $1.63 in near-term GDP.' By contrast, such 'multipliers' simulate that tax cuts for business or investors would add only 30-38 cents on the dollar. But econometric models are parables, not facts. The big multipliers for transfer payments and tiny multipliers for capital taxes in Mr. Zandi's model reveal more about the way the model was constructed than about the way the economy works. If model builders make Keynesian assumptions, their model will generate Keynesian results."
So, so true. For the economics-challenged, here's a more real-world explanation of the above, in the form of a question: in the middle of an economic crisis, who's likely to spend more money, thus stimulating demand and creating jobs - people drawing unemployment benefits, or businesses and investors?
Here's a simpler explanation: Mark Zandi is a deficit-loving idiot who finally has Washington's ear, and he's making the most of it. He's certainly stimulating his own bottom line.
But an IMF economist in 2006 noted that "several studies find that reductions in government spending 'can have expansionary effects, since they can contribute to a consumption and investment boom owing to altered expectations regarding future taxation.'"
Translation: if Washington spends a trillion bucks on top of a trillion-dollar deficit, every business and employed individual is going to tighten up the purse strings mightily in preparation for the inevitable massive tax increase.
************
Yesterday I praised President Obama's new casual approach to life in the White House. Today, I read something about it that raised my hackles. Granted, he didn't say it, but it reflects an aspect of the man that came under fire during his campaign, after he made the seemingly elitist "bitter people cling to their guns and their God" remark.
A news article discussing the new President's habitual tardiness compared it to that of President Clinton. The article quoted one Presidential historian as saying such disregard for punctuality means one of two things: "Bad organization that can be corrected, or arrogance. It sounds to me like this is arrogance." Okay, but that's just his opinion.
But a former advisor to President Clinton said, "I would make the opposite observation. I would say that taking time to accommodate your schedule to regular citizens is not an act of arrogance. It's an act of humility."
What??!!
President Obama, sir, I sincerely hope this man does not speak for you. Because I would politely remind you that this "regular citizen" pays your salary. You work for me; you may be the President, but I am a shareholder. And I will hold you accountable. So plan on regularly taking the time to tell me what you're doing with my money.
************
As promised, I'll finish on a nice note. I found another thing that President Obama is doing that I like: he's expanding the role of the White House Office of Faith-Based Initiatives created by President Bush. I'll reserve further judgment until I find out just what he plans to do with it. But it's a positive move, thus far.
Thursday, February 5, 2009
Short-Changed
Let me begin this post with a paragraph or two that I meant to get around to posting on Inauguration Day - seriously, I did. That was a busy week for me; it was the week I took off work to sort through our old film pictures, and that took up the entire week, so I never got around to posting anything. But here's what I would have said on that historic day:
"Today, Barack Obama became President of the United States, and that makes him my President. As my President, he will have my support. I wish him success - and I mean that. Because we're at a critical point in our nation's history, particular in terms of our economic sovereignty, and the stakes are too high for me to wish otherwise. At the same time, I will be as critical of any mis-steps or misleadings as I was of President Bush, or President Clinton, or presidents past. That should not be construed as a lack of support for the President. It is my right as an American citizen, and I trust that President Obama, charged with upholding our Constitution, supports that right.
As I watched his swearing-in, and saw the throngs of crowds on the National Mall, I couldn't help but be caught up in not only the historical significance of finally breaking the race barrier for the highest office in our land - a long-overdue moment in America's history - but also in the euphoric excitement of ushering in fresh, new leadership to a seat of government that is in desperate need of it. President Obama campaigned on the powerful twin pillars of 'Hope' and 'Change.' And I am as hopeful as any American on this day that he is able to bring change to Washington."
Well, the early returns are in. And they're a mixed bag.
I like some of the things he's done. I'm fine with the idea of closing the detention center at Gitmo. I have concerns over what will be done with the detainees, but if closing the center helps make people feel better, okay. I trust that President Obama recognizes the strategic importance of the base to US security interests, however, and will not close the base altogether.
I like his business casual approach at the White House, being a pretty casual business guy myself. I understand why President Bush was so strict about jackets and ties in the Oval Office, and about meetings starting and ending on time. The White House - especially the Oval Office - had been stripped of all dignity by his predecessor, who used it as a taxpayer-funded Playboy Mansion, sold nights in the Lincoln bedroom to wealthy contributors, allowed his staff to trash it on the way out, then invited the media to his send-off at Andrews AFB in an attempt to upstage the new President.
If nothing else, President Bush restored dignity and grace to the office of the Presidency by not stealing everything in sight out of the White House and off Air Force One, by graciously welcoming the Obamas to the White House before the inauguration to show them around their new digs (though he should have shown Mr. Obama where the Oval Office door handle was), by not allowing the media to the send-off at Andrews, and by even turning to an Obama staffer after the newly sworn-in President blasted him in his inauguration speech and saying, "That was a heck of a speech!"
President Obama was thus able to enter the highest office in the land with the dignity and decorum it deserves. And now, it's his to shape as he will. Again, I like the business casual thing. I've always been a fan of loosening the ties, rolling up the sleeves, and getting to work.
I also liked his pledge to keep lobbyists out of his administration - that is, until he hired a couple of them. That doesn't spell "change" to me, it spells "business as usual in Washington." Similarly, I liked his promise of transparency. He said that he would fully disclose what the administration was doing (unless, I assume, security interests would prevent doing so) to the American people. And he promised, on his "change.gov" transition website, to "not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House Web site for five days."
Well, a Bloomberg News report dated January 28 - barely a week after the inauguration - noted that the Treasury Department had not disclosed what securities it had backstopped in its efforts to prop up B of A and Citigroup. Granted, Bloomberg News had requested the information during the Bush Administration, and the request had been refused. For that, I hold the previous administration, and my old favorite target Hank Paulson, accountable. But President Obama promised change, in this instance in the form of transparency. And he and his Treasury Secretary have not delivered. Again, it's more of the same in Washington.
President Obama also signed the Lilly Ledbetter Fair Pay Act, on January 29 - again, barely more than a week into his term. But, as noted on the website propublica.org, "the first chance Americans got to comment on it on the White House Web site was ... after the President had already signed it into law" - not five days before, as promised. Surely he's not suggesting that this was emergency legislation? And once again, I fully recognize that past Presidents, including Bush, have broken promises. But once again, President Obama promised change. Broken promises are just more of the same from Washington.
Then there are the cabinet appointments. Three of them have been tax cheats. Two have withdrawn their nominations - one immediately, and one only after coming under considerable fire. Tom Daschle withdrew, saying that he didn't believe he could effectively lead the Health and Human Services Department without the full support of Congress and the American people. President Obama at first supported Mr. Daschle, then said he did the right thing after Daschle chose to withdraw. Now, maybe that was actually a closed-door ploy where the rookie POTUS said to Daschle, "Look, Tom, I'm gonna publicly come out and say you just made an honest mistake, and that'll make me look like a stand-up guy, and will save you face. But in return, you gotta pull out and fall on your sword. Then I'll praise you for doing the right thing." If it was - that's business as usual in Washington.
If it wasn't, it was a rookie gaffe. In fact, Obama apologized for the nomination this week, saying he made a mistake in not vetting his nominees well enough. Well, for one thing, Daschle decided in July - right about the time that his friend Sen. Obama had wrapped up the Democratic nomination, right about the time Mr. Daschle could start counting on a plum Cabinet post - that maybe that car service he benefited from was taxable income. So he paid the back taxes then. That left plenty of time for the Obama team to vet the guy.
For another thing, how hard is it to vet a tax cheat anyway? Just hire an accountant to audit your nominees. And finally, if appointing Daschle was a mistake, then why wasn't appointing Tim Geithner? Geithner already had a government job; Daschle didn't anymore (he was a lobbyist, by the way). He should have been vetted all along the way. And unlike Daschle, Geithner waited until he actually was nominated to disclose his taxing problem, which makes his actions even smellier.
Appointing tax cheats to high public office is the pinnacle of audacity - pun intended - for a guy who said that anybody who didn't want to pay more in taxes was "unpatriotic."
As an aside, the rookie Treasury chief has made an early gaffe of his own, openly accusing China - in written testimony to Congress - of manipulating the yuan. So serious was his gaffe (after all, we need China to buy the record amounts of debt the US Treasury, headed by Mr. Geithner, will issue this year) that President Obama had to make a call to China to apologize for his Treasury Secretary's blunder.
It was reminiscent of then-newly appointed Fed Chair Ben Bernanke's loose-lipped comment to Maria Bartiromo at a White House press dinner regarding the future direction of monetary policy. The Money Honey reported his comment the following Monday, which moved the markets. Bernanke seemed honestly shocked that she would disclose an off-the-record comment, which is pretty naive - when a reporter has the inside skinny from the Fed Chair, especially after Alan Greenspan's years of convoluted double-speak, she's going to run with it. Ben was either too focused on Ms. Bartiromo's charms, or too caught up in the giddiness of having the attention of the press, to think about the need for discretion when it comes to Fed policy.
I questioned at the time whether he was ready to be Fed Chairman, and I have the same questions about Mr. Geithner's readiness to head the Treasury. I never did believe he was qualified, having been instrumental in Paulson's ill-conceived and poorly-executed bailouts and rescues. And I have the same questions now. At least Paulson only jaw-boned China to let the yuan float - he didn't come right out and accuse them of currency manipulation. And especially to insult a trading partner and investor as critical to the US as decorum-obsessed China ... well, you'd think a guy with degrees in Asian Studies, and who studied Chinese, would know better. Heck, I do, and I don't even know enough Chinese to order dim sum without getting the yucky stuff.
I will give President Obama props for admitting his mistake in appointing Mr. Daschle. I was as appalled as anyone when President Bush said, in a 2004 press conference, that he couldn't think of a mistake he'd made during his first term. Of course, that was an election year, and he was asked the question by a member of the very media that would have delivered any answer he gave to the Kerry camp as ad campaign fodder, but I was appalled nonetheless. Just as I was appalled when President Clinton infamously said, "I did not have sexual relations with that woman," or when President Nixon said, "I am not a crook." But I'd like to be able to give President Obama even more props, as I would if he'd have admitted that the Geithner appointment was also a mistake.
Of course, he can't. He wants Tim on that wall, he NEEDS Tim on that wall (pardon the Gitmo reference). Or so he thinks. See, he wants Geithner's help in passing this porky pig of a spending bill. My advice to him would be to be careful what he wishes for - after all, Mr. Geithner "helped" craft the TARP.
And that brings me to the biggest rookie mistake of all: the spending proposal. Congress - or more accurately, Congressional Democrats - may have actually written the bill. But President Obama has been all too happy to call it "his." It is ill-conceived, full of pork, too big, misdirected - it's a fiasco. He has promised safeguards against misuse of the funds, but other than executive pay limits, the details of those safeguards have not been forthcoming.
President Obama has been sharply critical of the mis-handling of the TARP, and rightly so. He has blamed the Bush administration for not providing safeguards in the TARP. We've seen the consequences of that lack of provisions: banks aren't lending, Citi tried to buy a $50 million 12-seat corporate jet, AIG planned big boondoggles, only to scrap the plans after public outcry that pressured Washington to pressure them, Wells Fargo has since done the same ... and the beat goes on. Today we learned that the Treasury overpaid for bank assets purchased under the TARP, to the tune of $76 billion, or about 30% above fair value. (Let us not forget, once more, that Timothy Geithner was involved in the process.)
But you know what? Then-Sen. Obama and his then-running mate Sen. Biden voted for the TARP, with no strings attached and immunity for Hank Paulson. Why wasn't he pounding the table then, saying, "Let's slow down here - let's build some parameters into this plan to protect the taxpayer and make sure the TARP does what it's intended to do"?
And that's what scares me. Now, he's pushing for the same haste with the spending bill. He actually said, "We cannot allow the perfect to become the enemy of the necessary." Translation: let's just hurry up and pass this thing, and if it's flawed, we'll work it out later. If he's in such a rush to get it passed, why does he care whether the Republicans are on board? He's got the votes he needs, so just take Larry the Cable Guy's advice and "Git 'r done!"
But the Democrats recognize that this thing has "fail" written all over it, and they don't want to be the only ones with the albatross hanging around their necks.
On February 5, President Obama took his case to the American people in a Washington Post op-ed piece. In it, he wrote:
"In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis - the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change."
President Obama, I, your humble constituent, offer the following observations:
1. All efforts to keep intoning the mantra of "the failed policies of the last eight years" notwithstanding, you really can knock it off now. George W. Bush is back in Texas, and you're the President. Act like it, please.
2. The "failed theories that helped lead us into this crisis include the New Deal, which you're attempting to revive like some Frankenstein's monster; the economically irresponsible theory that homeownership can be expanded beyond natural norms without catastrophic results; and that behemoths like Fannie Mae and Freddie Mac don't need oversight. None of those theories can be laid at the feet of the Bush administration, though the latter two can certainly be blamed on people who are still in Congress, ever-ready to vote "yea" on your spending bill.
3. Regarding those "half-steps and piecemeal measures" of which you are now so critical, may I remind you that you voted for every one of them that came before the Senate? Where was your criticism then?
4. I will grant you that energy independence and the high cost of health care are indeed noble causes, and challenges we must address - just as soon as we have the money to do so. But what the heck do they have to do with economic stimulus? The current calamity is the result of a major asset bubble bursting, and that had nothing to do with energy independence or health care. If you want to fix this thing, come up with a plan to fix it. If you want to just let the economic chips fall where they may, and focus your attention on energy and health care, I'm your biggest fan - again, though, not until we have the money to throw at those issues.
5. I will further grant you that the American people did indeed vote resoundingly for change in November. However, a rush to judgment on a massive, pork-laden, deficit-worsening spending bill is not "change," particulary in the very choppy wake of the TARP.
President Obama has already had to do several embarrassing about-faces over provisions of the spending bill: spending millions on contraceptives, re-sodding the National Mall, etc. (Perhaps if his inauguration hadn't turned into the spectacle it had, the National Mall wouldn't need re-sodding. Millions of pairs of feet will tear up a lawn pretty darn quick.) Those about-faces bear some resemblance to those of Citi, AIG and Wells Fargo when they were faced with public outcry over reckless, wasteful spending of taxpayer largess.
And the public outcry over the spending bill should not be ignored. The American people, by and large, did not want the TARP. Then-Sen. Obama voted for it any way. The American people, by and large, do not want this spending bill, other than the obvious ones with the kool-aid mustaches (I'll get around to them in another post soon). So instead of standing on a perceived mandate to do whatever you want and using the Washington Post to tell the American people what you want to do, Mr. President, how about listening to what THEY want - for a "change"?
No, the early returns don't fill me with "hope." More like dread. I think the worst for me was when a news reporter was being asked by a colleague about his recent interview with the President. He said he asked the leader of the free world (for now, anyway) what surprised him the most about his new job. His answer:
"That every decision would be so big."
Well, I could have told you, Mr. President, that being POTUS would be very, very different from being a community organizer. That's why 46% of the American people didn't think you were up to the task: you'd never run a single thing in your young life.
On that topic, President Obama also recently said that he had sat down with "the people who really know what's going on in America." Who comprised this sage group?
The governors of America's states. Hmmmm ... Is Alaska still a state?
"Today, Barack Obama became President of the United States, and that makes him my President. As my President, he will have my support. I wish him success - and I mean that. Because we're at a critical point in our nation's history, particular in terms of our economic sovereignty, and the stakes are too high for me to wish otherwise. At the same time, I will be as critical of any mis-steps or misleadings as I was of President Bush, or President Clinton, or presidents past. That should not be construed as a lack of support for the President. It is my right as an American citizen, and I trust that President Obama, charged with upholding our Constitution, supports that right.
As I watched his swearing-in, and saw the throngs of crowds on the National Mall, I couldn't help but be caught up in not only the historical significance of finally breaking the race barrier for the highest office in our land - a long-overdue moment in America's history - but also in the euphoric excitement of ushering in fresh, new leadership to a seat of government that is in desperate need of it. President Obama campaigned on the powerful twin pillars of 'Hope' and 'Change.' And I am as hopeful as any American on this day that he is able to bring change to Washington."
Well, the early returns are in. And they're a mixed bag.
I like some of the things he's done. I'm fine with the idea of closing the detention center at Gitmo. I have concerns over what will be done with the detainees, but if closing the center helps make people feel better, okay. I trust that President Obama recognizes the strategic importance of the base to US security interests, however, and will not close the base altogether.
I like his business casual approach at the White House, being a pretty casual business guy myself. I understand why President Bush was so strict about jackets and ties in the Oval Office, and about meetings starting and ending on time. The White House - especially the Oval Office - had been stripped of all dignity by his predecessor, who used it as a taxpayer-funded Playboy Mansion, sold nights in the Lincoln bedroom to wealthy contributors, allowed his staff to trash it on the way out, then invited the media to his send-off at Andrews AFB in an attempt to upstage the new President.
If nothing else, President Bush restored dignity and grace to the office of the Presidency by not stealing everything in sight out of the White House and off Air Force One, by graciously welcoming the Obamas to the White House before the inauguration to show them around their new digs (though he should have shown Mr. Obama where the Oval Office door handle was), by not allowing the media to the send-off at Andrews, and by even turning to an Obama staffer after the newly sworn-in President blasted him in his inauguration speech and saying, "That was a heck of a speech!"
President Obama was thus able to enter the highest office in the land with the dignity and decorum it deserves. And now, it's his to shape as he will. Again, I like the business casual thing. I've always been a fan of loosening the ties, rolling up the sleeves, and getting to work.
I also liked his pledge to keep lobbyists out of his administration - that is, until he hired a couple of them. That doesn't spell "change" to me, it spells "business as usual in Washington." Similarly, I liked his promise of transparency. He said that he would fully disclose what the administration was doing (unless, I assume, security interests would prevent doing so) to the American people. And he promised, on his "change.gov" transition website, to "not sign any non-emergency bill without giving the American public an opportunity to review and comment on the White House Web site for five days."
Well, a Bloomberg News report dated January 28 - barely a week after the inauguration - noted that the Treasury Department had not disclosed what securities it had backstopped in its efforts to prop up B of A and Citigroup. Granted, Bloomberg News had requested the information during the Bush Administration, and the request had been refused. For that, I hold the previous administration, and my old favorite target Hank Paulson, accountable. But President Obama promised change, in this instance in the form of transparency. And he and his Treasury Secretary have not delivered. Again, it's more of the same in Washington.
President Obama also signed the Lilly Ledbetter Fair Pay Act, on January 29 - again, barely more than a week into his term. But, as noted on the website propublica.org, "the first chance Americans got to comment on it on the White House Web site was ... after the President had already signed it into law" - not five days before, as promised. Surely he's not suggesting that this was emergency legislation? And once again, I fully recognize that past Presidents, including Bush, have broken promises. But once again, President Obama promised change. Broken promises are just more of the same from Washington.
Then there are the cabinet appointments. Three of them have been tax cheats. Two have withdrawn their nominations - one immediately, and one only after coming under considerable fire. Tom Daschle withdrew, saying that he didn't believe he could effectively lead the Health and Human Services Department without the full support of Congress and the American people. President Obama at first supported Mr. Daschle, then said he did the right thing after Daschle chose to withdraw. Now, maybe that was actually a closed-door ploy where the rookie POTUS said to Daschle, "Look, Tom, I'm gonna publicly come out and say you just made an honest mistake, and that'll make me look like a stand-up guy, and will save you face. But in return, you gotta pull out and fall on your sword. Then I'll praise you for doing the right thing." If it was - that's business as usual in Washington.
If it wasn't, it was a rookie gaffe. In fact, Obama apologized for the nomination this week, saying he made a mistake in not vetting his nominees well enough. Well, for one thing, Daschle decided in July - right about the time that his friend Sen. Obama had wrapped up the Democratic nomination, right about the time Mr. Daschle could start counting on a plum Cabinet post - that maybe that car service he benefited from was taxable income. So he paid the back taxes then. That left plenty of time for the Obama team to vet the guy.
For another thing, how hard is it to vet a tax cheat anyway? Just hire an accountant to audit your nominees. And finally, if appointing Daschle was a mistake, then why wasn't appointing Tim Geithner? Geithner already had a government job; Daschle didn't anymore (he was a lobbyist, by the way). He should have been vetted all along the way. And unlike Daschle, Geithner waited until he actually was nominated to disclose his taxing problem, which makes his actions even smellier.
Appointing tax cheats to high public office is the pinnacle of audacity - pun intended - for a guy who said that anybody who didn't want to pay more in taxes was "unpatriotic."
As an aside, the rookie Treasury chief has made an early gaffe of his own, openly accusing China - in written testimony to Congress - of manipulating the yuan. So serious was his gaffe (after all, we need China to buy the record amounts of debt the US Treasury, headed by Mr. Geithner, will issue this year) that President Obama had to make a call to China to apologize for his Treasury Secretary's blunder.
It was reminiscent of then-newly appointed Fed Chair Ben Bernanke's loose-lipped comment to Maria Bartiromo at a White House press dinner regarding the future direction of monetary policy. The Money Honey reported his comment the following Monday, which moved the markets. Bernanke seemed honestly shocked that she would disclose an off-the-record comment, which is pretty naive - when a reporter has the inside skinny from the Fed Chair, especially after Alan Greenspan's years of convoluted double-speak, she's going to run with it. Ben was either too focused on Ms. Bartiromo's charms, or too caught up in the giddiness of having the attention of the press, to think about the need for discretion when it comes to Fed policy.
I questioned at the time whether he was ready to be Fed Chairman, and I have the same questions about Mr. Geithner's readiness to head the Treasury. I never did believe he was qualified, having been instrumental in Paulson's ill-conceived and poorly-executed bailouts and rescues. And I have the same questions now. At least Paulson only jaw-boned China to let the yuan float - he didn't come right out and accuse them of currency manipulation. And especially to insult a trading partner and investor as critical to the US as decorum-obsessed China ... well, you'd think a guy with degrees in Asian Studies, and who studied Chinese, would know better. Heck, I do, and I don't even know enough Chinese to order dim sum without getting the yucky stuff.
I will give President Obama props for admitting his mistake in appointing Mr. Daschle. I was as appalled as anyone when President Bush said, in a 2004 press conference, that he couldn't think of a mistake he'd made during his first term. Of course, that was an election year, and he was asked the question by a member of the very media that would have delivered any answer he gave to the Kerry camp as ad campaign fodder, but I was appalled nonetheless. Just as I was appalled when President Clinton infamously said, "I did not have sexual relations with that woman," or when President Nixon said, "I am not a crook." But I'd like to be able to give President Obama even more props, as I would if he'd have admitted that the Geithner appointment was also a mistake.
Of course, he can't. He wants Tim on that wall, he NEEDS Tim on that wall (pardon the Gitmo reference). Or so he thinks. See, he wants Geithner's help in passing this porky pig of a spending bill. My advice to him would be to be careful what he wishes for - after all, Mr. Geithner "helped" craft the TARP.
And that brings me to the biggest rookie mistake of all: the spending proposal. Congress - or more accurately, Congressional Democrats - may have actually written the bill. But President Obama has been all too happy to call it "his." It is ill-conceived, full of pork, too big, misdirected - it's a fiasco. He has promised safeguards against misuse of the funds, but other than executive pay limits, the details of those safeguards have not been forthcoming.
President Obama has been sharply critical of the mis-handling of the TARP, and rightly so. He has blamed the Bush administration for not providing safeguards in the TARP. We've seen the consequences of that lack of provisions: banks aren't lending, Citi tried to buy a $50 million 12-seat corporate jet, AIG planned big boondoggles, only to scrap the plans after public outcry that pressured Washington to pressure them, Wells Fargo has since done the same ... and the beat goes on. Today we learned that the Treasury overpaid for bank assets purchased under the TARP, to the tune of $76 billion, or about 30% above fair value. (Let us not forget, once more, that Timothy Geithner was involved in the process.)
But you know what? Then-Sen. Obama and his then-running mate Sen. Biden voted for the TARP, with no strings attached and immunity for Hank Paulson. Why wasn't he pounding the table then, saying, "Let's slow down here - let's build some parameters into this plan to protect the taxpayer and make sure the TARP does what it's intended to do"?
And that's what scares me. Now, he's pushing for the same haste with the spending bill. He actually said, "We cannot allow the perfect to become the enemy of the necessary." Translation: let's just hurry up and pass this thing, and if it's flawed, we'll work it out later. If he's in such a rush to get it passed, why does he care whether the Republicans are on board? He's got the votes he needs, so just take Larry the Cable Guy's advice and "Git 'r done!"
But the Democrats recognize that this thing has "fail" written all over it, and they don't want to be the only ones with the albatross hanging around their necks.
On February 5, President Obama took his case to the American people in a Washington Post op-ed piece. In it, he wrote:
"In recent days, there have been misguided criticisms of this plan that echo the failed theories that helped lead us into this crisis - the notion that tax cuts alone will solve all our problems; that we can meet our enormous tests with half-steps and piecemeal measures; that we can ignore fundamental challenges such as energy independence and the high cost of health care and still expect our economy and our country to thrive.
I reject these theories, and so did the American people when they went to the polls in November and voted resoundingly for change."
President Obama, I, your humble constituent, offer the following observations:
1. All efforts to keep intoning the mantra of "the failed policies of the last eight years" notwithstanding, you really can knock it off now. George W. Bush is back in Texas, and you're the President. Act like it, please.
2. The "failed theories that helped lead us into this crisis include the New Deal, which you're attempting to revive like some Frankenstein's monster; the economically irresponsible theory that homeownership can be expanded beyond natural norms without catastrophic results; and that behemoths like Fannie Mae and Freddie Mac don't need oversight. None of those theories can be laid at the feet of the Bush administration, though the latter two can certainly be blamed on people who are still in Congress, ever-ready to vote "yea" on your spending bill.
3. Regarding those "half-steps and piecemeal measures" of which you are now so critical, may I remind you that you voted for every one of them that came before the Senate? Where was your criticism then?
4. I will grant you that energy independence and the high cost of health care are indeed noble causes, and challenges we must address - just as soon as we have the money to do so. But what the heck do they have to do with economic stimulus? The current calamity is the result of a major asset bubble bursting, and that had nothing to do with energy independence or health care. If you want to fix this thing, come up with a plan to fix it. If you want to just let the economic chips fall where they may, and focus your attention on energy and health care, I'm your biggest fan - again, though, not until we have the money to throw at those issues.
5. I will further grant you that the American people did indeed vote resoundingly for change in November. However, a rush to judgment on a massive, pork-laden, deficit-worsening spending bill is not "change," particulary in the very choppy wake of the TARP.
President Obama has already had to do several embarrassing about-faces over provisions of the spending bill: spending millions on contraceptives, re-sodding the National Mall, etc. (Perhaps if his inauguration hadn't turned into the spectacle it had, the National Mall wouldn't need re-sodding. Millions of pairs of feet will tear up a lawn pretty darn quick.) Those about-faces bear some resemblance to those of Citi, AIG and Wells Fargo when they were faced with public outcry over reckless, wasteful spending of taxpayer largess.
And the public outcry over the spending bill should not be ignored. The American people, by and large, did not want the TARP. Then-Sen. Obama voted for it any way. The American people, by and large, do not want this spending bill, other than the obvious ones with the kool-aid mustaches (I'll get around to them in another post soon). So instead of standing on a perceived mandate to do whatever you want and using the Washington Post to tell the American people what you want to do, Mr. President, how about listening to what THEY want - for a "change"?
No, the early returns don't fill me with "hope." More like dread. I think the worst for me was when a news reporter was being asked by a colleague about his recent interview with the President. He said he asked the leader of the free world (for now, anyway) what surprised him the most about his new job. His answer:
"That every decision would be so big."
Well, I could have told you, Mr. President, that being POTUS would be very, very different from being a community organizer. That's why 46% of the American people didn't think you were up to the task: you'd never run a single thing in your young life.
On that topic, President Obama also recently said that he had sat down with "the people who really know what's going on in America." Who comprised this sage group?
The governors of America's states. Hmmmm ... Is Alaska still a state?
Sunday, February 1, 2009
The End of An Era
Okay, this is one of the ones I was going to post before I went CRABBY. This is a happier story - maybe a bit bittersweet, but happy.
My daughter is the apple of my eye. I changed majors in college seven times. I didn't really know what I wanted to be for a long time - but I always knew I wanted to be a father.
And, having been 13 when my baby sis was born - and my Dad was 50 at the time - I was the one who taught her to ride a bike, took her all over town in the kiddie seat on the back of Mom's bike (bikes and daughters are key themes in this story), so I was like a surrogate father to her. And as much as my Dad and I butted heads when I was a teenager, I really always wanted a daughter.
On December 9, 1990, I got my wish. And with every passing year she's been more than I bargained for.
Now, I've long been into cycling (bicycles, that is). I was into it when it wasn't cool. I did the first Biking Across Kansas ride in 1975, when I was still in high school, and I raced back then, too - before Lance Armstrong, or even Greg Lemond. Heck, I'm one of the few guys who can tell you that the first American pro to race in Europe was Jock Boyer, and I know who Major Taylor was.
I kept riding from grad school until my daughter was born, then took a ten-year hiatus. At that point, I was serving on the Sports & Rec Committee at my church, and somebody had the idea to start a bike club. Knowing what an effort that can be, I suggested we start with an organized ride, like the MS150. That ride - and they have them all over the country - is a two-day, 150-mile ride to benefit the National Multiple Sclerosis Society.
So I set up the team, but I didn't even have a bike at the time. At that point, I made my first e-Bay purchase - a very cool metallic orange Specialized Allez Pro. I bought it Fathers' Day weekend in 2001, and rode the MS150 the week after Labor Day. Day one was 100 miles; day two, 50. I finished, but I was beat.
I rode the same bike (with some upgrades) the next year, and finished feeling much better - the by-product of having more time in the saddle.
As I prepared to train the next Spring, my daughter - then 13 - started asking me questions, unprovoked, about the ride. I don't know, maybe she missed me; after all, the training did take considerable time. She asked how hard it was, etc., so I asked her if she wanted to get a bike and give it a try. She said she was afraid she might not be able to keep up, and being the over-protective Dad that I am, I too was concerned that we'd lose contact on the road, and knowing how bad the drivers can be on the route - and how squirrely most of the riders - I would have been worried.
So I asked a question that changed both our lives for the better: "Would you want to try it on a tandem with me?"
Her "yes" answer led me once again to e-Bay. By luck - or divine intervention - I found a brand-new, one-year-old Co-Motion Speedster listed by a bike shop in the Seattle area. Co-Motion is an Oregon company that specializes in tandems, and simply makes the best double-bikes for the buck out there. So I bought it without hesitation.
We started training for the 2003 MS150. It was awesome. She took to it right away. As her skills developed, there were times - frequent times - when I'd have to shift UP, not down, while climbing a steep hill when she kicked in the after-burners. Heck, to this day, not having ridden in nearly four years (more on that later), when we go to the gym, she can leg-press nearly 250 lbs. with ease.
But the most cool thing was the one-on-one time with my teenage daughter. If you've had a teenager, you're nodding knowingly. If not, let me prep you: they tend to spend all their time on the phone or the computer, or in their room with the door closed, reading or watching TV. Our training rides lasted anywhere from an hour to four or more, and it was pure Dad and Sydney time. And it was awesome.
If she'd recently seen a movie I hadn't seen, she'd recite me the script, almost line-for-line. Even if at home I couldn't get her to do more than answer yes or no questions, on the bike she just opened up, and couldn't stop talking. We'd hit a steep uphill, and I'd have to interrupt her: "Sydney, pedal!" And she'd power us up the hill, with me up-shifting all the way.
The bond we formed on that bike was worth every penny it cost. And, there was something just doggone cool about approaching our favorite local sharp, steep hill (from the top), shifting into the highest gear, cranking up the rpm's, tucking down into an aero position, then hitting the 13% grade and just hammering down it to see how high we could get the speedometer to go (54 mph was not uncommon).
It was also fun stopping for water re-fills. I'd have some Gatorade and maybe a granola bar, and she'd have ice cream. She'd pluck Gu packets out of my back jersey pockets on a ride. At one MS150 rest stop, they had suckers, and she sat on the back and enjoyed one like a little kid. We had our favorite spots - like Heart Attack Hill, or the BBQ joint we rode by on the return leg of many of our training rides, the aromas from which were nearly enough to do us in - and our little inside jokes. The last year we rode the MS150, we zip-tied a little dog squeaky bone under my saddle, and when we passed other riders (which happened a lot), she'd squeak it at them.
Our computer id's even reflected our riding roles: she was "superstoker," and I was "captaindad."
We rode three MS150s and the Gorilla Century, a 100-mile ride in and around the town of my alma mater, Pittsburg, Kansas - where she will attend college in the Fall. She's ridden 100 miles in a day three times, and 75 or more at least five times. We also rode a local 75-mile club ride called the Summer Breeze, which was anything but. It was 108 degrees that day, and when we finished we both had salt stains on our riding shorts, and I almost suffered heat stroke. When I got home and told my wife, instead of feeling sorry for me, she chewed me out - rightfully so - for not quitting, noting that if I'd crashed from exhaustion, our daughter could have been hurt, and likely wouldn't have know what to do. But "quit" isn't in my nature, and I think she knew that, too.
After our last MS150, in 2005, a bulging disk in my upper back began putting pressure on a nerve, causing extreme back, neck, shoulder and arm pain. It was exacerbated by the fact that I spend my working days behind a computer screen, with lousy posture, and some of my leisure time either on the bike or playing guitar, the positioning of which exacerbate the problem. And, with a tandem, you use much more upper body than with a single bike - especially when your stoker is precious cargo and you are trying to avoid ever crashing, at all costs. (I don't really care if I crash my single bike - it can be exhilarating in fact. I remember coming home one night after doing an endo on my mountain bike and landing flat on my back with the bike on top of me. I didn't have a helmet on. I was covered in mud, and laughing my head off as I walked in the door. My wife was on the phone with her mother, and took one look at me then said, "I've gotta go, Mom - I think Brian has a head injury."
We did a couple of training rides in 2006, but I just couldn't handle the pain. Plus, as a high school student, her schedule was much more demanding, allowing little time to train. Even in the summers, she'd be incredibly busy. Between two vacations, and her church youth orchestra tour, which lasted ten days, there was little time to train. And now, with her working and having a boyfriend and preparing for college, it's even harder.
Quick aside: as Jude Law said in the film "The Holiday," I'm a weeper. And no more so than when it comes to my daughter.
I recently took some time off to go through all of our pictures to put together our daughter's graduation slide show. I'd spend about a half-hour going through pics, then take a five-minute cry break. Ever since she was a toddler, just thinking about her growing up, going to college and getting married made me cry on the spot. When she does get married, I'll probably have to be sedated - heck, when my baby sis got married, I was an usher, and I cried like a baby through that wedding.
So, after three years of watching this really nice tandem (I had also added a fair amount of upgrades, as any bikey would expect) sit in the garage, tires flat, collecting dust - and with my daughter's schedule increasingly busy, and college looming, I put the bike on e-Bay.
It fetched considerable value - reflective of its quality. I could have shipped it, but the cost would have been quite high, so the winning bidder wanted to come pick it up.
Early Saturday morning, the phone rang. I thought it was my daughter; she was at work, and she often calls us when she gets there to let us know she made it okay. Instead, it was the very nice young man who'd bought our tandem, letting me know he was ahead of schedule, and was fifteen minutes away (he'd driven all night from Virginia - 15 hours - to pick up the bike).
I helped him load it into his car before he made the return trip to Virginia. When he was handling the bike, he was giggling like a kid in a candy store, as it was about 15 lbs. lighter than his current tandem, and he could imagine how much faster he'd be zipping up and down the mountains of the Shenandoah on this bike. He has a seven-year-old daughter who also rides a tandem with him, and thinking about his little girl growing up into our tandem, riding with her Daddy, made me smile.
After he drove off, it hit me. I went upstairs. My daughter's room was empty; she was at work - a grown-up responsibility. I thought about sitting down at my computer, and looking through digital pictures of her and me on the bike, but I knew I didn't dare.
Instead, I went into the bedroom, where my wife still lay in bed, and talked to her about the nice young man who bought our bike, and his family, and his joy at the quality and lightness of the bike, and his excitement about the thought of sharing those experiences with his wife and daughter ...
And about how I felt when I saw him driving off with our tandem in his car ...
And I cried anyway.
My daughter is the apple of my eye. I changed majors in college seven times. I didn't really know what I wanted to be for a long time - but I always knew I wanted to be a father.
And, having been 13 when my baby sis was born - and my Dad was 50 at the time - I was the one who taught her to ride a bike, took her all over town in the kiddie seat on the back of Mom's bike (bikes and daughters are key themes in this story), so I was like a surrogate father to her. And as much as my Dad and I butted heads when I was a teenager, I really always wanted a daughter.
On December 9, 1990, I got my wish. And with every passing year she's been more than I bargained for.
Now, I've long been into cycling (bicycles, that is). I was into it when it wasn't cool. I did the first Biking Across Kansas ride in 1975, when I was still in high school, and I raced back then, too - before Lance Armstrong, or even Greg Lemond. Heck, I'm one of the few guys who can tell you that the first American pro to race in Europe was Jock Boyer, and I know who Major Taylor was.
I kept riding from grad school until my daughter was born, then took a ten-year hiatus. At that point, I was serving on the Sports & Rec Committee at my church, and somebody had the idea to start a bike club. Knowing what an effort that can be, I suggested we start with an organized ride, like the MS150. That ride - and they have them all over the country - is a two-day, 150-mile ride to benefit the National Multiple Sclerosis Society.
So I set up the team, but I didn't even have a bike at the time. At that point, I made my first e-Bay purchase - a very cool metallic orange Specialized Allez Pro. I bought it Fathers' Day weekend in 2001, and rode the MS150 the week after Labor Day. Day one was 100 miles; day two, 50. I finished, but I was beat.
I rode the same bike (with some upgrades) the next year, and finished feeling much better - the by-product of having more time in the saddle.
As I prepared to train the next Spring, my daughter - then 13 - started asking me questions, unprovoked, about the ride. I don't know, maybe she missed me; after all, the training did take considerable time. She asked how hard it was, etc., so I asked her if she wanted to get a bike and give it a try. She said she was afraid she might not be able to keep up, and being the over-protective Dad that I am, I too was concerned that we'd lose contact on the road, and knowing how bad the drivers can be on the route - and how squirrely most of the riders - I would have been worried.
So I asked a question that changed both our lives for the better: "Would you want to try it on a tandem with me?"
Her "yes" answer led me once again to e-Bay. By luck - or divine intervention - I found a brand-new, one-year-old Co-Motion Speedster listed by a bike shop in the Seattle area. Co-Motion is an Oregon company that specializes in tandems, and simply makes the best double-bikes for the buck out there. So I bought it without hesitation.
We started training for the 2003 MS150. It was awesome. She took to it right away. As her skills developed, there were times - frequent times - when I'd have to shift UP, not down, while climbing a steep hill when she kicked in the after-burners. Heck, to this day, not having ridden in nearly four years (more on that later), when we go to the gym, she can leg-press nearly 250 lbs. with ease.
But the most cool thing was the one-on-one time with my teenage daughter. If you've had a teenager, you're nodding knowingly. If not, let me prep you: they tend to spend all their time on the phone or the computer, or in their room with the door closed, reading or watching TV. Our training rides lasted anywhere from an hour to four or more, and it was pure Dad and Sydney time. And it was awesome.
If she'd recently seen a movie I hadn't seen, she'd recite me the script, almost line-for-line. Even if at home I couldn't get her to do more than answer yes or no questions, on the bike she just opened up, and couldn't stop talking. We'd hit a steep uphill, and I'd have to interrupt her: "Sydney, pedal!" And she'd power us up the hill, with me up-shifting all the way.
The bond we formed on that bike was worth every penny it cost. And, there was something just doggone cool about approaching our favorite local sharp, steep hill (from the top), shifting into the highest gear, cranking up the rpm's, tucking down into an aero position, then hitting the 13% grade and just hammering down it to see how high we could get the speedometer to go (54 mph was not uncommon).
It was also fun stopping for water re-fills. I'd have some Gatorade and maybe a granola bar, and she'd have ice cream. She'd pluck Gu packets out of my back jersey pockets on a ride. At one MS150 rest stop, they had suckers, and she sat on the back and enjoyed one like a little kid. We had our favorite spots - like Heart Attack Hill, or the BBQ joint we rode by on the return leg of many of our training rides, the aromas from which were nearly enough to do us in - and our little inside jokes. The last year we rode the MS150, we zip-tied a little dog squeaky bone under my saddle, and when we passed other riders (which happened a lot), she'd squeak it at them.
Our computer id's even reflected our riding roles: she was "superstoker," and I was "captaindad."
We rode three MS150s and the Gorilla Century, a 100-mile ride in and around the town of my alma mater, Pittsburg, Kansas - where she will attend college in the Fall. She's ridden 100 miles in a day three times, and 75 or more at least five times. We also rode a local 75-mile club ride called the Summer Breeze, which was anything but. It was 108 degrees that day, and when we finished we both had salt stains on our riding shorts, and I almost suffered heat stroke. When I got home and told my wife, instead of feeling sorry for me, she chewed me out - rightfully so - for not quitting, noting that if I'd crashed from exhaustion, our daughter could have been hurt, and likely wouldn't have know what to do. But "quit" isn't in my nature, and I think she knew that, too.
After our last MS150, in 2005, a bulging disk in my upper back began putting pressure on a nerve, causing extreme back, neck, shoulder and arm pain. It was exacerbated by the fact that I spend my working days behind a computer screen, with lousy posture, and some of my leisure time either on the bike or playing guitar, the positioning of which exacerbate the problem. And, with a tandem, you use much more upper body than with a single bike - especially when your stoker is precious cargo and you are trying to avoid ever crashing, at all costs. (I don't really care if I crash my single bike - it can be exhilarating in fact. I remember coming home one night after doing an endo on my mountain bike and landing flat on my back with the bike on top of me. I didn't have a helmet on. I was covered in mud, and laughing my head off as I walked in the door. My wife was on the phone with her mother, and took one look at me then said, "I've gotta go, Mom - I think Brian has a head injury."
We did a couple of training rides in 2006, but I just couldn't handle the pain. Plus, as a high school student, her schedule was much more demanding, allowing little time to train. Even in the summers, she'd be incredibly busy. Between two vacations, and her church youth orchestra tour, which lasted ten days, there was little time to train. And now, with her working and having a boyfriend and preparing for college, it's even harder.
Quick aside: as Jude Law said in the film "The Holiday," I'm a weeper. And no more so than when it comes to my daughter.
I recently took some time off to go through all of our pictures to put together our daughter's graduation slide show. I'd spend about a half-hour going through pics, then take a five-minute cry break. Ever since she was a toddler, just thinking about her growing up, going to college and getting married made me cry on the spot. When she does get married, I'll probably have to be sedated - heck, when my baby sis got married, I was an usher, and I cried like a baby through that wedding.
So, after three years of watching this really nice tandem (I had also added a fair amount of upgrades, as any bikey would expect) sit in the garage, tires flat, collecting dust - and with my daughter's schedule increasingly busy, and college looming, I put the bike on e-Bay.
It fetched considerable value - reflective of its quality. I could have shipped it, but the cost would have been quite high, so the winning bidder wanted to come pick it up.
Early Saturday morning, the phone rang. I thought it was my daughter; she was at work, and she often calls us when she gets there to let us know she made it okay. Instead, it was the very nice young man who'd bought our tandem, letting me know he was ahead of schedule, and was fifteen minutes away (he'd driven all night from Virginia - 15 hours - to pick up the bike).
I helped him load it into his car before he made the return trip to Virginia. When he was handling the bike, he was giggling like a kid in a candy store, as it was about 15 lbs. lighter than his current tandem, and he could imagine how much faster he'd be zipping up and down the mountains of the Shenandoah on this bike. He has a seven-year-old daughter who also rides a tandem with him, and thinking about his little girl growing up into our tandem, riding with her Daddy, made me smile.
After he drove off, it hit me. I went upstairs. My daughter's room was empty; she was at work - a grown-up responsibility. I thought about sitting down at my computer, and looking through digital pictures of her and me on the bike, but I knew I didn't dare.
Instead, I went into the bedroom, where my wife still lay in bed, and talked to her about the nice young man who bought our bike, and his family, and his joy at the quality and lightness of the bike, and his excitement about the thought of sharing those experiences with his wife and daughter ...
And about how I felt when I saw him driving off with our tandem in his car ...
And I cried anyway.
CRABBY
Yes, I am, but that's not why the title's in all caps. It's an acronym for a new grass-roots group I'm starting: Citizens Raging Against Big-government BureacracY. You in?
There are at least three other topics I wanted to address today, instead of this, but after watching "Meet the Press," I had to take this on while it's still fresh in my mind.
The topic was the economy and the huge deficit spending plan. (I refuse to fall in line with the new-speak Big Brothers in Washington and call it an "economic recovery plan," or even a "stimulus plan." So I'm going to call it what it is.) The panelists: Erin Burnett of Bubblevision, who proves on a regular basis that she does not understand the economy or the markets, and is indeed just another pretty face; Steve Forbes, a mega-rich publisher who inherited his wealth; and Mark Zandi of Moody's Economy.com, who's become America's favorite pop economist - sort of like "economist lite - a third less knowledgeable than your regular economist."
Since Zandi is an economist, I'll skewer him first. Not to be mean, but the guy's a buffoon.
He argued that the deficit could be even worse if we didn't spend the proposed $825 billion (which, with interest, balloons to $1.3 trillion), because the recession would mean tax revenues will be lower.
Guess what, Mark? Tax revenues are going to be lower anyway! See, we're in a recession, and people are losing their jobs, and corporations are losing money. And this porky pig of a spending bill won't reverse this recession.
Guess what else, Mark? Total personal and corporate federal income tax receipts in 2007 - before the recession started, and the latest data available - were $1.76 trillion. The reckless spending bill, with interest, amounts to 74% of that. Are you trying to tell me that without the massive spending proposed, the recession is going to worsen such that tax receipts will fall by 74%? Are you, Mark?
Well, let's say you are. Why, then, when asked how we can afford this pig when the deficit is already such a historically large percentage of GDP, did you say "Oh, but it's been much higher in our history, and we survived just fine"? If the coming recession is the Armageddon scenario you suggest in your tax revenue argument, how can you turn around and say this isn't as bad as the late '80s or mid-'70s? If this recession isn't any worse than those, why throw a trillion bucks at it?
Mark (I can't bring myself to call him Dr. Zandi; it's an insult to truly diligent economists who can research things like tax receipts and back up their assertions with data) also was asked why this spending bill would work.
"Well, first," he said, "it's big."
Huh? Never mind the fact that it's full of pork and paybacks to the special interests who helped buy the last election (and that's not a poke at Obama and the Dems, all US elections are bought and paid for by special interests). Never mind the fact that it's unlikely to stimulate the economy one iota, even with the re-sodding of the National Mall and millions of dollars for condoms stripped out of it. Doesn't matter - it's big. Well, well, Mark has finally answered one of the most time-honored questions on the minds of men - size matters.
But he cautioned that it had to be passed very quickly. See, he said, it's all about confidence - restoring confidence. If we dilly-dally around (he actually did use that term; it must be part of the New Economic Lexicon that I haven't gotten around to buying), people will lose confidence. So let's not spend too much time debating it (yes, he actually said that, too) - let's cram it through quickly.
Gee, that was the approach with the TARP, too. As Dr. Phil would ask, how's that workin' for ya, Mark? Did that shore up the economy? Did that restore confidence?
Nope, and nope. And Mark's a dope.
Erin Burnett didn't say much of substance, which is par for the course. She just looked cute saying it.
As for Forbes, he predictably showed his supply-side stripes and argued for deeper tax cuts, which would flow directly into the economy quickly. I agree with his how, but not his why: I don't think people would spend the extra income, I think they'd save it. But to me, one of the last believers that savings and investment are the true engines of growth, while consumption is a one-way ticket to Marx's utopia of communism, that is a good thing. So I'm fine with tax cuts, like the two-year payroll tax holiday Forbes proposed (which, at 2007's rates, would cost about exactly what the spending bill will). But of course, that'll never happen.
But Forbes lost me when he said that we need to do away with mark-to-market accounting. Apparently Steve's forgotten that the last deep credit-driven recession, in which numerous sudden S&L and bank failures took regulators and the markets by surprise, exposed the fallacy in the then-GAAP practice of recording everything at historical cost: as asset values decline, the erosion isn't stated on the books. So instead of watching a bank's earnings and capital slowly erode, it fails overnight, and shocks the heck out of everybody from the FDIC to stockholders to depositors. Instead of a steady, Bataan-death-march-like progression of the share price to zero - which allows savvy investors to get out before they lose everything - it results in a sudden drop from hunky-dory levels to nada. And then you have 1929 all over again.
So no, Steve-o, we don't need to hide just how truly bad off the US financial sector is behind the emperor's new clothes of historical cost accounting.
And yeah, I'm CRABBY. Are you?
There are at least three other topics I wanted to address today, instead of this, but after watching "Meet the Press," I had to take this on while it's still fresh in my mind.
The topic was the economy and the huge deficit spending plan. (I refuse to fall in line with the new-speak Big Brothers in Washington and call it an "economic recovery plan," or even a "stimulus plan." So I'm going to call it what it is.) The panelists: Erin Burnett of Bubblevision, who proves on a regular basis that she does not understand the economy or the markets, and is indeed just another pretty face; Steve Forbes, a mega-rich publisher who inherited his wealth; and Mark Zandi of Moody's Economy.com, who's become America's favorite pop economist - sort of like "economist lite - a third less knowledgeable than your regular economist."
Since Zandi is an economist, I'll skewer him first. Not to be mean, but the guy's a buffoon.
He argued that the deficit could be even worse if we didn't spend the proposed $825 billion (which, with interest, balloons to $1.3 trillion), because the recession would mean tax revenues will be lower.
Guess what, Mark? Tax revenues are going to be lower anyway! See, we're in a recession, and people are losing their jobs, and corporations are losing money. And this porky pig of a spending bill won't reverse this recession.
Guess what else, Mark? Total personal and corporate federal income tax receipts in 2007 - before the recession started, and the latest data available - were $1.76 trillion. The reckless spending bill, with interest, amounts to 74% of that. Are you trying to tell me that without the massive spending proposed, the recession is going to worsen such that tax receipts will fall by 74%? Are you, Mark?
Well, let's say you are. Why, then, when asked how we can afford this pig when the deficit is already such a historically large percentage of GDP, did you say "Oh, but it's been much higher in our history, and we survived just fine"? If the coming recession is the Armageddon scenario you suggest in your tax revenue argument, how can you turn around and say this isn't as bad as the late '80s or mid-'70s? If this recession isn't any worse than those, why throw a trillion bucks at it?
Mark (I can't bring myself to call him Dr. Zandi; it's an insult to truly diligent economists who can research things like tax receipts and back up their assertions with data) also was asked why this spending bill would work.
"Well, first," he said, "it's big."
Huh? Never mind the fact that it's full of pork and paybacks to the special interests who helped buy the last election (and that's not a poke at Obama and the Dems, all US elections are bought and paid for by special interests). Never mind the fact that it's unlikely to stimulate the economy one iota, even with the re-sodding of the National Mall and millions of dollars for condoms stripped out of it. Doesn't matter - it's big. Well, well, Mark has finally answered one of the most time-honored questions on the minds of men - size matters.
But he cautioned that it had to be passed very quickly. See, he said, it's all about confidence - restoring confidence. If we dilly-dally around (he actually did use that term; it must be part of the New Economic Lexicon that I haven't gotten around to buying), people will lose confidence. So let's not spend too much time debating it (yes, he actually said that, too) - let's cram it through quickly.
Gee, that was the approach with the TARP, too. As Dr. Phil would ask, how's that workin' for ya, Mark? Did that shore up the economy? Did that restore confidence?
Nope, and nope. And Mark's a dope.
Erin Burnett didn't say much of substance, which is par for the course. She just looked cute saying it.
As for Forbes, he predictably showed his supply-side stripes and argued for deeper tax cuts, which would flow directly into the economy quickly. I agree with his how, but not his why: I don't think people would spend the extra income, I think they'd save it. But to me, one of the last believers that savings and investment are the true engines of growth, while consumption is a one-way ticket to Marx's utopia of communism, that is a good thing. So I'm fine with tax cuts, like the two-year payroll tax holiday Forbes proposed (which, at 2007's rates, would cost about exactly what the spending bill will). But of course, that'll never happen.
But Forbes lost me when he said that we need to do away with mark-to-market accounting. Apparently Steve's forgotten that the last deep credit-driven recession, in which numerous sudden S&L and bank failures took regulators and the markets by surprise, exposed the fallacy in the then-GAAP practice of recording everything at historical cost: as asset values decline, the erosion isn't stated on the books. So instead of watching a bank's earnings and capital slowly erode, it fails overnight, and shocks the heck out of everybody from the FDIC to stockholders to depositors. Instead of a steady, Bataan-death-march-like progression of the share price to zero - which allows savvy investors to get out before they lose everything - it results in a sudden drop from hunky-dory levels to nada. And then you have 1929 all over again.
So no, Steve-o, we don't need to hide just how truly bad off the US financial sector is behind the emperor's new clothes of historical cost accounting.
And yeah, I'm CRABBY. Are you?
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