Tag Archives: recession

Confidence

11 Jul

If the federal government doesn’t raise the debt ceiling by August 2nd, it’s feared that the country’s inability to pay its bills and/or debts will plunge the world economy into yet another downward spiral, rivaling the 2008 meltdown. Or possibly something worse than or equal to the Great Depression.  Or perhaps it’s exactly what Dr. Paul ordered.  Consider:

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It’s too early to analyze whether the President’s strategy in “negotiating” with congressional Republicans is yet another awful example of horse-trading in the face of intransigence, or instead some tactical rope-a-dope brilliance.

But in the midst of an economic recovery that isn’t creating any jobs, I get the sense that it’s fundamentally irresponsible for any part of the federal government to further harm everyone’s already shaken confidence – in the economy, in employment, in production or consumption, in government in general. While Eric Cantor stands to personally profit from a federal default, the party to which he belongs is busy yelling about deficit and spending reduction, all of which signifies nothing in the face of President Obama’s proposal for a package that would, in ten years, reduce the deficit by $4 trillion.

Obama has, in fact, infuriated Democrats by proposing cuts to Medicaid, Medicare, and Social Security entitlement benefits. The deal he’s proposed would seem to be exactly what the Republicans say they want – significant spending cuts, reformation of entitlement programs, and deficit reduction. The reason they won’t go along? The proposed rescission of the Bush/Obama tax cuts for the wealthiest Americans. Not for nothing that even the Republican patron saint Reagan raised taxes when necessary, and that tax rates are at historic lows yet doing absolutely nothing to move the economy along, Boehner and his minions are showing that they’re not really about spending cuts and deficit reduction. They’re all about protecting millionaires and billionaires from an incremental rise in their effective income tax rate.

Seriously – they’re willing to plunge the world economy into possible depression in order to ensure that Paris Hilton keeps a bit more of her money. And the recovery? Because the stimulus was weakened in an effort to gain Republican support that never came, it wasn’t enough to do what it should have.

David Frum explains that the Republicans have painted themselves into a corner by invoking the debt ceiling as the “no deal” option. He compares 2011 to 1990, when the Republicans raised the top marginal rate from the high 20s to the low 30s – the act that blew George H.W. Bush’s “no new taxes” lip-reading pledge out of the water.

Had House Republicans succeeded in derailing the 1990 deal, things would have bumped along as before. The deficit would have stayed big, interest rates would have stayed high, growth would probably have remained slow. Unpleasant, but not the end of the world.

But this time there is a hard and dangerous deadline – a deadline imposed by Republicans themselves. By deploying the debt-ceiling weapon, Republicans denied themselves the option of choosing “no deal.” Unlike 1990, this time, there must be a deal, and if Republicans cannot get a deal that their most radical members like, they will have to settle for a deal that their most radical members do not like.

This predicament creates powerful temptations for individual Republicans to defect from the party coalition in hope of gaining for themselves the kind of credit and clout that Newt Gingrich got by defecting in 1990. This time, however, defection carries a heavier price: a real risk of tumbling the country and the world into financial crisis.

Back in January, John Boehner promised it would never come to this. I believed him – and argued vigorously on television against those who predicted that the radicals would carry the day. It looks like I was wrong about that, at least that I have been until now.

Another writer at FrumForum writes:

In fact, a growing faction (and I count a few people I consider friends as members of it) somehow seems to think that a default on the debt would get the nation’s house into order on the basis that it would cut spending. It would cut spending, and cause a worldwide depression at the same time. Republicans need to do a lot more to convince voters that they can govern and a legitimate jobs plan would be a very good start.

The Republican strategy at this point appears to be “destroy the economy so Obama can’t be re-elected”. That may, in fact, happen. And maybe President Bachmann or Romney can fix the economy by further cutting taxes. But it’s doubtful.

If Boehner could get his caucus to back the proposal now before them, it would be historic and may actually help the economy in a palpable way. But the serious Republicans have let the tea party and the idiot Republicans (Bachmannites, Palinists) gain too much influence.

So, Americans wait for Washington to get serious. The world waits for us to get serious. The economy treads water while Washington dithers. The culture in Washington hasn’t changed – with Obama it’s worsened because it takes two to tango, and the Republicans have strategically sidelined themselves.

Mr. Cantor suggests that a more modest $2 trillion in deficit reduction should instead be pursued. Thinking small, this solution would give Republicans everything they want (weakening of the social safety net), with absolutely no pain being felt among the wealthiest Americans. The middle and working class are getting historically shafted in this country while both parties tiptoe around the very wealthy because of the idiotic way in which we fund elections.  When someone calls the GOP on this, they get accused of class warfare; in fact, it’s the Republicans who are engaging in class warfare on behalf of society’s haves.  Calling them out on it is called “truth”, not “class warfare”.

The country is pretty fundamentally broken. One hopes it can be fixed soon, and that serious people begin to treat serious matters seriously. One hopes that Washington can start leading with thoughtful compromise, rather than bumper sticker slogans.  One hopes that the interests of the country and her people someday trump the interests of partisanship or campaign financiers.

The Pledge to Some of America

24 Sep

The Republican establishment has put forth a document entitled the “Pledge to America”. It basically wants to rewind to the times of George W. Bush, and it looks towards a future as devoid of minorities as the Jetsons.

You may go ahead and now consider how much 2010 mirrors 1994.

Unlike the poll-driven “Contract with America” that the Gingrich congress promoted 16 years ago, the Pledge to America isn’t so much a pledge to America as it is a pledge to some of America. Oh, and they’ve abandoned the whole “term limits” thing because maybe someone realized the laughable irony of criticizing, e.g., Ted Kennedy for his congressional longevity alongside upstart newcomer Strom Thurmond.

The signature piece of the Republicans’ proposal is the repeal of health insurance reform. Again, ironic that the pledge is released on the day that some of the most popular parts of that reform were implemented. As of yesterday, you can keep your kids on your insurance to age 26. As of yesterday, there are no more lifetime caps on your coverage – if your cancer treatment hits $1MM you won’t have to sell every one of your belongings to keep receiving coverage for your care. As of yesterday, your insurer can’t punitively or arbitrarily rescind your coverage when you get sick.

It’s earth-shattering that these reforms are so earth-shattering.

But let’s disabuse ourselves of the notion that Republican politicians went back to their people and figured out what to include in the “pledge”. The document was drafted by a staffer on minority leader John Boehner’s payroll who was until recently a lobbyist for a firm that handled clients such as AIG, Exxon, and other big business looking to buy influence.

Ezra Klein describes the document as almost bipolar:

Their policy agenda is detailed and specific — a decision they will almost certainly come to regret. Because when you get past the adjectives and soaring language, the talk of inalienable rights and constitutional guarantees, you’re left with a set of hard promises that will increase the deficit by trillions of dollars, take health-care insurance away from tens of millions of people, create a level of policy uncertainty businesses have never previously known, and suck demand out of an economy that’s already got too little of it…

…Perhaps the two most consequential policies in the proposal are the full extension of the Bush tax cuts and the full repeal of the health-care law. The first would increase the deficit by more than $4 trillion over the next 10 years, and many trillions of dollars more after that. The second would increase the deficit by more than $100 billion over the next 10 years, and many trillions of dollars more after that. Nothing in the document comes close to paying for these two proposals, and the authors know it: The document never says that the policy proposals it offers will ultimately reduce the deficit.

Then there’s the question of policy uncertainty. The health-care law, which is now in the early stages of implementation, would be repealed. In its place, Republicans would write a new health-care bill. They offer some guidance as to what it would look like, but as every business knows, the congressional and regulatory processes are both long and uncertain. That’s joined by three sentences on shrinking and reforming Fannie Mae and Freddie Mac — the policy’s anticipated effects on the housing market, where the two mortgage giants are backing nine out of every 10 new loans, are not mentioned — and a promise to force a separate congressional vote on every regulation with more than $100 million in economic impact, which would force businesses to figure out a new, dual-track regulatory process.

The Republican Party used to mock the liberal Democrats as being “bleeding heart” types whose governance is guided more by feelings than by brains. Now, it’s the Republicans who have eschewed making tough choices in governing a country and instead have absorbed and been subsumed by the touchy-feely, high-on-emotion-low-on-information “tea party”, which is a euphemism for “Bush dead-enders”.

It goes right down to the preamble of the document, which purports to mirror the Declaration of Indepedence, but this line in the Declaration:

That whenever any form of government becomes destructive to these ends, it is the right of the people to alter or to abolish it, and to institute new government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their safety and happiness.

now reads thusly:

Whenever the agenda of government becomes destructive of these ends, it is the right of the people to institute a new governing agenda and set a different course.

The “different course” is simply a reversion to the course that had been set in the minds of the most conservative members of the Republican Party whenever they had been in power in the last couple of generations. Higher spending, lower taxes, militarism, jingoism, missile defense, and selective demonization. The language is clever in that it equates the duly elected Obama Administration and the elected Democratic representatives in Congress with the tyrannical, unelected rule of King George III over a disenfranchised colonial populace.

An unchecked executive, a compliant legislature, and an overreaching judiciary have combined to thwart the will of the people and overturn their votes and their values, striking down long-standing laws and institutions and scorning the deepest beliefs of the American people.

Translation: King George III and his Kenyan Muslim minions have destroyed America and raped your daughters.

The pledge offhandedly mentions a supposed return to constitutional principles, but only cites one portion of the document – the Tenth Amendment. In the end, the Republicans continue to pay lip service to the ideas that kept the South segregated. So, it’s no accident that denying gay Americans the right to marry or otherwise enjoy the rights and privileges of civic life that all Americans enjoy is in literally the second paragraph down from the 10th Amendment entry.

Other points include:

Jobs:

– Stop job-killing tax hikes
– Allow small businesses to take a tax deduction equal to 20 percent of their income
– Require congressional approval for any new federal regulation that would add to the deficit
– Repeal small business mandates in the new health care law.

Cutting Spending:

– Repeal and Replace health care
– Roll back non-discretionary spending to 2008 levels before TARP and stimulus (will save $100 billion in first year alone)
– Establish strict budget caps to limit federal spending going forward
– Cancel all future TARP payments and reform Fannie Mae and Freddie Mac

Reforming Congress:

– Will require that every bill have a citation of constitutional authority
– Give members at least 3 days to read bills before a vote

Defense:

– Provide resources to troops
– Fund missile defense
– Enforce sanctions in Iran

The document is punctuated by large photographs of congressional leaders, soldiers, citizens at town hall meetings, factory workers, businesspeople, etc; photographs of middle America that the Republicans want so badly to return to through the policy proposals contained in the document. Lots of cowboy hats and whatnot.

The only person of color pictured is John Boehner of Orange. It is a pledge to white America, to the people who perceive themselves victimized by the urban community activist minions of the Obama dictatorship, Saul Alinsky, ACORN, and Karl Marx. It’s almost striking in that the only diversity in the Republicans’ America has to do with gender.

It proposes nothing for the middle class or working poor. It proposes nothing to reform immigration – just to expel and repel. It proposes nothing for expanding demand in a beleaguered economy. Meet the new GOP, same as the old GOP. New ideas need not apply.

If you loved the great recession, you’ll love the aftermath of the Pledge to America.

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The Banking Crisis: Not the Fault of Poor Minorities

15 Mar

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But as usual, leave it to the rich and conservative to blame the poor and underprivileged for the problems suffered by the middle class.

Losing the Plot

26 Feb

Yesterday morning I read a piece on Buffalo Rising that was written by a young mother who had recently moved to Buffalo from Los Angeles (or Chicago) with her husband, and they have two adorable kids. Alas, I wasn’t very pleased with the article, but left it alone to think about it. I didn’t want to jump all over it.

I think I’ve gelled the issue into this – what does “connecting with the city” have to do with riding out the recession? I suppose she explains it with the bit about Richard Florida calling suburban sprawl the “downfall of the smaller American cities”. OK, let’s take that as given. Buffalo, however has been in a downfall since what, the 60s? Its downfall, incidentally, has more to do with “Charlotte” than “Amherst”. To blame it on sprawl is to miss the bigger picture altogether. Through annexation or metropolitan government, it wouldn’t even be an issue. We have New York law to thank for that.

Think of ways to link your kids to the city. There are soccer clubs, art lessons, music, all available in the city, and for a heck of a lot cheaper than other areas. Wouldn’t it be nice for your kids to meet other kids from different backgrounds, who go to different schools and have different perspectives?

How is it different for my kids to hang out with upper middle class kids from the city as opposed to upper middle class kids from Clarence? Why is it implied that kids in my area don’t come from “different backgrounds” or have “different perspectives”? The sentiment is fine, but it has nothing to do with the recession and seems like yet another city person tsk-tsking at us suburban folk for being Stepford families. If only we’d expand our horizons! Well, maybe the city kids could expand their horizons and attend music classes at the facility on Transit where we go.

I mean, the rest of the piece is a set of ideas for upper middle class people in Buffalo to spend their money locally or in the city rather than elsewhere. The bit about becoming more politically engaged and involved is good, and true. But we need to stop kidding ourselves that privileged wealthy folk in Buffalo are significantly different in any meaningful way than privileged wealthy folk in Orchard Park, Clarence, or Amherst.

If you want to “connect” with people not like you, doing something for the community or for the less fortunate is going to be more valuable than deciding where to spend your money.

To come back to a theme I haven’t written about in a long time, all of WNY is in this boat together, and what raises up one area will raise up the others. If the city’s doing well, the suburbs will too, and vice-versa. The notion that the suburbs will somehow be abandoned tomorrow in order to fuel a righteous return to the city is as likely as Tony Masiello bringing peace to Gaza.

The gloom and doom we hear about all the time is very real and more fundamental and serious than whether your favorite restaurant closes, your kid plays soccer in the city, or the grocery store is hiking prices – I’ll note that Wegmans, one of the best reasons to live in WNY, has recently lowered prices on loads of stuff.

It’s great that people move to Buffalo from bigger cities and realize that you don’t need to be in a world-class city to enjoy a world-class quality of life here, provided you’re well educated and can find a job, or have the resources or connections to make one for yourself.

It’s not about, “hey how can we spend money in the city”. It’s about “hey how can we make this area better for everyone”. How can we attract businesses and the people who come with them?

I guess I thought the piece was somewhat superficial, although well-intentioned.

(Photo courtesy Jade19721 @ Flickr)

WNY: Doing Recessions Right Since 1991

16 Jan

Outrages & Insights’ Jim Heaney has some fantastic news for us all. According to a couple of local economists, perhaps the whole Buffalo-will-do-ok-because-we-already-kinda-suck-economically meme is a bit overblown. After all, they argue, we still haven’t recovered from the 1991 recession. Yeah, 18 years ago.

Here’s a depressing set of numbers to back up that point:

547,500: non-farm employment in WNY in 1990.
548,000: non-farm employment the first 11 months of 2008.

That’s right, folks. In 18 years, we’ve added a net total of 500 jobs. And since 2000, we’ve dropped more than 10,000 jobs, as employment was close to 560,000 back then.

The bad news doesn’t end there.

When you consider only “goods-producing employment,” that is, good-paying manufacturing jobs, we’re down from about 115,000 jobs in 1990 to some 105,000 in 2000 and about 80,000 in 2006, the latest year that subset of numbers is available. In other words, we’re down some 25,000 jobs this decade alone.

To put that in perspective, when the Bethlehem and Republic Steel plants closed in the 1980s, we lost 9,400 jobs. So, we’ve suffered the equivalent of two or three Bethlehem-Republic shutdowns this decade.

Heaney makes the point that IDAs and handouts and whatever else the business community extracts out of governmental and quasi-governmental entities have clearly failed on a massive, overall economic scale here. Whatever we’re doing, it’s just not working. He’s right.

The larger question, of course, is whether there’s even a smidge of political will anywhere locally or statewide to make the types of changes that might change this. Manufacturing? Banking? Being America’s Bangladesh-replacement of a back office? Insurance? Who knows.

There are a couple of bright spots on the horizon, namely UB 2020 and the medical/biotech work being done downtown. Those are building blocks on which a future, knowledge-based economy can be based, and all of them bring along millions in ancillary economic activity for Buffalo.

But the numbers Heaney cites are simply shocking.

Chrysler Idling All Manufacturing

18 Dec

Chrysler, which Daimler recently sold off to a private investment firm, is shuttering all its manufacturing plants starting Friday, and isn’t really clear on when, if ever, they might re-open. The press release says they will not re-open any sooner than January 19th.

This is astonishing, because although Dodge/Chrysler’s stable has been somewhat lackluster lately (especially the ultra-cheap Matchbox car interiors), this is the company that produces Jeeps, Dodge Charger/Challengers, and Chrysler 300s. The problem is, that’s all they’ve got. Nothing else is lighting the world on fire – especially the minivans.

Think about this. Volkswagen’s Routan minivan is a re-skinned Chrysler Town & Country. Even it pales in comparison to the state-of-the-art Honda Odyssey, but the Routan is miles ahead in terms of exterior but especially interior design & perceived quality than the Chrysler minivan that shares its DNA.

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All I can say, it seems like it’s 1979 all over again – especially for the auto industry.

The Wolf is At the Door

21 Nov

That’s the conclusion of this post by the Albany Project’s Phillip Anderson.

Global economic activity fell off a rather steep cliff about 6 weeks ago and the signs that it will rebound shortly are awfully scarce. This recession could quite easily become another Depression and it will definitely get worse before it gets better.

That’s what makes the situation in DC – where we are essentially rudderless with a numskull ideologue at the wheel – and in Albany, where one could make a compelling case for aggravated legislative malpractice and dereliction of duty, all the worse. In Washington, we are forced to wait for real leadership at east until January 20th. Not much we can do about that, though the fact that we are for all intents and purposes in a holding pattern during the most acute economic crisis of most of our lifetimes has certainly got me worried. The time for big, bold action is right now.

But the folks we send to Albany to do the People’s business have no such excuse. The absolute abdication we witnessed this week should be impeachable. This crisis is real and the state’s budget needs to be adjusted to reflect that. Yeah, there are many hard choices to be made, but that’s no excuse for throwing their hands in the air and punting.

And this is bigger than budget cuts versus revenue increases. I personally think that the Governor’s plan is flawed by it’s reliance solely on cuts on the backs of the poor and middle class. I think a modest increase in taxes on those who can most afford them is perfectly reasonable if not prudent given the nature of the challenges we face. That said, I believe now is the time to take a much more comprehensive look at the way we finance state government here in New York.

Wall St is taking a vicious beating right now, but it will eventually come back. It will never be the Wall St of the last 15 years or so again though. New York was able to avoid hard choices (or even wise ones) for so long because we were able to milk the Wall St cow for so long. Those days are over and most likely are gone forever.

We need to seriously restructure how we pay for government and what it is we pay for. It’s time to put all options on the table and to get serious about how we pay for what we want going forward long term – not just over the next fiscal year.

I’d suggest a radical overhaul of the public authorities to start. But, then again, I don’t make $90K a year to do the People’s work part time. We already elected a bunch of folks to do that for us.

The Failboat hasn’t just set sail, it’s well on its way.

(Cartoon courtesy Marquil @ Empirewire.com)

Prescience

14 Nov

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HT Sully

In the clip, on August 18, 2007, Ben Stein recommends buying Merrill Lynch (MER) at a “bargain” $76. It’s at $13/share today.

Charles Payne recommends buying Bear Stearns, which is now out of business, and he says “the financials are a great place, absolutely.”

Tracy Byrnes recommends Goldman Sachs (GS), which is the “creme de la creme” and like getting “Dolce & Gabbana on sale”. It was at $175/share in the clip, and is now at $69.99.

In early 2008, Payne recommends buying Washington Mutual (WAMUQ) at $13/share. It is now on the OTC at 6 cents per share. He goes on to predict Dow at 16,000 by the end of 2008.

Peter Schiff recommends Street Tracks Gold Shares (GLD), which was at $83/share, and is now at $72.15.

It’s amazing how patently disrespectful they all are to Schiff.