There is a diary currently on the Rec list that has a few typos in it.
I am returning to make a special guest appearance in order to correct the typos so that it reads accurately.
Putting aside the whole issue of (chained-CPI and whether it's a cut or an accurate measure of inflation) how budgets are passed and a forced goevernment shutdown), let's deal in some cold, hard facts.
Cold, hard fact #1:
Republicans control the House of Representatives
Cold, hard fact #2:
Both houses of Congress are required to pass legislation before it can even reach the president's desk
Cold, hard fact #3:
(Sequestration) A federal government shutdown will occur unless legislation is passed, and signed into law, to prevent it from happening or to modify its provisions
The below is a piece I wrote in March 2009, reproduced almost in its entirety, entitled "Did Obama lay bare his agenda to David Brooks?" I have considered republishing it for many months, but withheld doing so because the evidence was not unequivocal. In his press conference yesterday, however, Barack Obama crossed the Rubicon, making it clear that he supports cuts to Social Security and Medicare. Was it abysmally poor negotiation, or did Obama create the political environment to obtain the exact result he always wanted? By the time you finish reading the below, you will understand exactly why I have republished this, because the answer becomes clear.
Here it is: Did Obama lay bare his agenda to David Brooks?
Over at Open Left, diarist Frankly0 appears to have uncovered political dynamite. S/he makes a strong circumstantial case that President Obama himself was one of "4 senior Adminstration officials" who visited David Brooks at the beginning of this month after he had written an article harshly critical of Obama's budget.
If Frankly0 is correct, then the agenda David Brooks relayed in his next column has to be regarded as coming from Obama himself. And that economic agenda is, I submit, explosive.
In the last couple of months, momentum has been building in just about every precursor for stronger job growth. Real retail sales, real GDP, pesonal income and spending, and just this morning a dramatic drop in initial jobless claims to 406,000 - the lowest since July 2008 - all suggest that last month's gain of 169,000 jobs was just the foreshadowing of bigger and more sustained job growth next year.
If you can handle some actual data and not just selected secondhand punditry, I've got graphs and facts galore in support of a positive outlook for the economy generally, and job growth specifically, below.
This is a brief diary. Here is a worthwhile diversion for a Sunday: the New York Times has an interactive graphic with a menu of spending cuts and tax increases from which you can select to "fix the deficit" in both 2015 and 2030. I encourage everybody to go over and spend a few minutes with this interactive graphic.
The interacctive graphic shows that Simply returning to Clinton-era tax rates, including repeal of the Bush tax cuts, reduces the deficit by more than half in 2015 and by about 30% in 2030. Simply choose reining in medical costs and most of both deficits vanishes. Get the US troops out of Iraq and Afghanistan and you are almost home.
In addition to those items, I selected a bank tax, a "millionaire's tax", and reductions in foreign aid, farm subsidies, and earmarks, and I had completely fixed the deficit with room to spare.
In short, reversing all of Bush's decisions, and capping medical benefits is almost all that needs to be done to fix this country's fiscal problems, without a single change to Social Security, and the NY Times interactive graphic shows it. I encourage you to click on the link and see for yourself.
I took a break during the home stretch of the election season -- discussing the economy by that time would only have been divisive and a distraction from the more important work of the election effort. Now that it's over, this Google trends result for the phrase 'double dip recession is the single graphic that shows why the democrats got "shellacked:"
Half a year ago, I wrote that The November elections will turn on Jobs, Income -- and the price of Oil, in which I highlighted an article by James Surowiecki. Surowiecki cited research that refined the maxim, "It's the Economy, Stupid" to a more precise metric -- how were incomes growing in the second and third quarter of the election year? As we will see below, that is the single worst metric by which the economy could have been judged this year, and economic fears were highest at the worst possible time. Last Tuesday the voters held the democrats responsible.
More below the fold.
Back in January 2009, even before President Obama was sworn in, Bonddad and I wrote a four part series on The Great Depression. As the situation continued to deteriorate, in May 2009 we jointly called for a new WPA, a call that just this week was joined by no less an authority than Yale Economics Professor Robert J. Schiller (more on that below).
Sadly, a new WPA is not and has never been a prospect. As I will argue below, while FDR and the New Deal democrats in Congress focused on Relief, Recovery and Reform, the failure to even consider a new WPA is emblematic of the neglect by Obama and the current Congressional democrats of the critical first link -- Relief -- and this is why their prospects this November look so different than those of 1934.
I certainly hope you all had a wonderful Fourth of July recess, and enjoyed the long summer holiday with your family, friends, and wealthy campaign contributors.
If I might, though, I'd like to raise something else. You see, while you were enjoying the financial perquisites of power last week, a couple of other things happened: first, the long-term unemployed ran out of benefits. I'm not sure what you expect them and their children to do. Maybe roll up under a bridge somewhere out of sight and die? I'm not sure.
The second thing is, most states started a new fiscal year. And since the states, unlike you, have balanced budget requirements, and so can't just decide to print money, and many have gotten to the point where they just can't issue new bonds that will be soaked up by willing foreign backers, that means they have to cut. Severely. I gather you don't want to give them any more relief because of concerns about the National Debt.
If that's what you're bound and determined to do, I have a proposal for you: ***LOAN*** them the money.
June nonfarm payrolls declined by (- 125,000). Of that, (- 225,000)
was laid off census workers, meaning that hiring for the month of
June totalled +100,000 workers. This is the sixth straight
month of payroll growth ex-census. Since employment bottomed at the
end of last year, 593,000 private sector jobs have been added
The above number is the "establishment survey" which is obtained by
calling businesses, and is subject to the controversial "birth/death"
adjustment. The separate "household survey" which is obtained by
calling households -- which does NOT included any birth/death
adjustment (and is a much more noisy number) showed a -gain of
191,000 jobs- loss of 301,000 jobs. This year, the household survey shows a gain of 1,300,000 jobs in the economy.
The headline unemployment rate, which is also obtained by the
household survey, declined to 9.5% The more
inclusive U6 rte, which includes the underemployed, also fell to 16.5%.
More details below the fold.
At one level, the global Great Recession has been about the bursting of a tremendous housing bubble that saw a doubling in house prices in only 5 years, and close to 3 million houses being built in 2005 as the market peaked.
Last year, as part of the economic stimulus package, Congress passed an $8000 housing tax credit which had stabilized sales and slowed price declines. With the expiration of that credit, there has been a sudden decline in purchase mortgage applications, housing permits and starts. Prices look primed to resume a sharp decline, and there is talk of a double-dip recession as a result.
So, this seems an appropriate time to step back and take an updated "big picture" look at the state of the housing bust. As we will see, the big surprise is that, compared with historical prices, 4 years into the bust, Housing is STILL too expensive.
In a recent article in the New Yorker, economist James Surowiecki argued that
it doesn’t matter if blame for a poor economy might plausibly be laid on a previous Administration: it’s the party in charge that voters hold responsible. In other words, if the economy is bad on Election Day, blaming George Bush probably won’t work. "The old party gets credit or blame for the first year, and then it’s the new party’s economy," Larry Bartels, a political scientist at Princeton, says. "By November, it will be the Democrats’ economy."
It's a commonplace that elections are referendums on the state of the economy. In fact, research has shown that the saying that "people vote their wallets" is very close to the truth. Although it appears that the economic recovery has hit a rough patch, I will show that measured in both jobs and more importantly income -- with an unlikely backhand assist from the price of gasoline at the pump -- people "voting their wallets" are more likely to vote for Democrats this November than generally expected.
Prof. James Hamilton of Econbrowser notes that:
The curious thing is that [stock and commodity] graphs [for the last month] all look the same. Which suggests ... that recent market moves have a common driving factor.
The natural explanation would seem to be that markets have interpreted developments over the last month as bad news in terms of the quantities of basic raw materials that global customers will want to buy and in terms of the profits that companies around the world can expect to earn.
Such concerns would have to come not just from the fact that the European countries forced into budget austerity measures are going to be buying less... [but] a potential replay of the credit crunch that brought the world economy crashing down in the fall of 2008.
In short, markets are anticipating another deflationary bust. Will this push the US back into recession? That is what I discuss below.
The most acute threat to the economic recovery that has begun is the same as the biggest chronic problem for the middle/working classes for the last 45 years: a lack of real wage growth. Only twice in the last 45 years has there been real wage growth (that is, wages growing faster than inflation) for more than a year or so. In 2009, the bottoming of the Great Recession was helped by the fact that wage growth, although paltry, nevertheless was accompanied by a decrease in gasoline prices that gave consumers (the 85% or 90% who were employed) more disposable income.
That situation reversed in the last 6 months and now poses the most direct threat to the sustainability of the recovery. I explain why, below.