Archive for September 13th, 2011
So that was what we have been waiting for? That was what all the hype was about? With a little over a year until the next election, that was the “best shot” that Obama has for fixing the unemployment crisis in this country? The Obama Jobs Plan (also now known as “the American Jobs Act”) is going to cost $447 billion and it is going to do next to nothing to create more jobs. Many Americans were hoping for something bold and new from Obama, but instead what they got was a bad joke. When Obama stated that there is “nothing radical in this bill”, he was not kidding. Instead of addressing the fundamental issues that are causing job loss, Obama wants us to spend half a trillion dollars on measures that will only create a very small number of jobs. Sadly, much of what Obama is proposing actually consists of huge bribes to middle class voters. Obama is trying to keep his own job, and he appears willing to pile up even more debt in order to make that happen.
During his speech to the nation, Obama instructed Congress to either “pass this jobs bill” or to “pass it right away” 16 different times. Obama obviously feels very strongly about his jobs plan.
But will it work? Let’s take a few moments to break it down. The following are 10 reasons why the Obama jobs plan is a bad joke….
#1 The payroll tax cuts are going to cost more than anything else in the plan, but they will do very little to create jobs.
Just take a look at what is happening right now. Have the current payroll tax cuts done much? No, the unemployment rate is still over 9 percent.
Yes, the new payroll tax cuts would be deeper and they would put some more money into the pockets of American workers.
But if American workers go out and spend it on stuff made in China, how does that create more jobs for American workers?
Businesses would certainly welcome the fact that their payroll taxes would be cut, but it probably will not entice many of them to hire more people.
Because they know that the tax cut would only be temporary. After just a handful of months the payroll tax would go right back to where it was before.
Businesses are not often moved by temporary tax cuts. If you want tax cuts to really move business, then you need to make them permanent.
So does that mean that I am against these payroll tax cuts?
Absolutely not. I very much hope that payroll taxes get cut. I am all in favor of the government taking as little money from me as possible.
Look, if the federal government is going to destroy our financial system anyway, I would much rather keep as much of my own money in my own pockets as possible.
So yes, I am all in favor of payroll tax cuts.
But no, those cuts are not going to do much to create jobs. If payroll tax cuts were going to create a lot more jobs we would already see it happening.
However, if this is passed it will be a great bribe to voters because millions of Americans will see their paychecks go up and when that happens they will think of Obama.
#2 Obama’s plan to extend unemployment assistance is going to cost about $49 billion but it is not going to do much to create any jobs.
Back in 2009, Congress first authorized an extension of unemployment benefits to a maximum of 99 weeks. Five times since then Congress has reauthorized this extension.
So has this made a huge difference in the number of unemployed?
Of course not. If it was going to make a huge difference it would have done so already.
Yes, these extended benefits are easing the suffering of those that are out of work, and yes they are giving them a little extra money to spend, but let’s not pretend that extending unemployment benefits is going to create a whole bunch of new jobs.
#3 Obama is proposing $50 billion in “immediate” infrastructure spending and $10 billion for a new infrastructure bank that will be dedicated to raising private capital to finance infrastructure projects
around the country.
Hopefully this will work out a whole lot better than the “shovel ready” jobs that Obama promised previously.
Yes, infrastructure all over this country is rapidly falling apart. Yes, it is a legitimate function of government to invest in public infrastructure.
But no, this is not going to create a ton of new jobs. It will create a few jobs, but it will also add to our rapidly growing national debt.
#4 According to the fact sheet on the jobs plan released by the Obama administration, direct financial aid to state governments will prevent up to 280,000 teacher layoffs, and it will also help states retain more police and firefighters.
Essentially, this is a “backdoor bailout” for the states. Yes, it will be a good thing if teachers, police and firefighters are able to keep their jobs. However, preventing job losses is not the same as creating new jobs. So this may help reduce the bleeding a little bit, but it is not going to turn the overall employment situation around.
#5 There are a bunch of other minor things in Obama’s proposal such as “modernizing” public schools and helping more Americans refinance their mortgages, but it is not entirely clear how those things will help create a lot more jobs.
Meanwhile, there are a whole lot of things that the Obama jobs plan does not do….
#6 The Obama jobs plan does next to nothing to prevent jobs from being shipped out of the country.
As I wrote about the other day, right now the way the system is designed makes it highly profitable to send American jobs overseas….
*It is legal to pay slave labor wages in many of these other countries. After all, why pay an American worker 10 or 20 times as much as a worker on the other side of the globe?
*In many of these other countries you do not have to provide any health care for workers.
*In many of these other countries there are virtually no environmental controls to worry about.
*In many of these other countries there are virtually no labor standards to worry about.
*In many of these other countries you only have to deal with a fraction of the “red tape” that you have to deal with in the United States.
Obama is doing absolutely nothing to address these imbalances.
#7 The Obama jobs plan does nothing about the unfair trade practices that are absolutely killing America on the global economic stage.
As I wrote about the other day, other nations are manipulating currency rates, they are openly stealing technology from our companies, they allow their workers to be paid slave labor wages and they put up huge barriers to goods and services from the United States and we let them get away with it. Our trade policies are absolutely insane, and the way that the new “global economy” is structured guarantees that U.S. businesses are going to be operating at a huge disadvantage. The following are just a few more of the reasons why foreign firms have a huge advantage over U.S. companies….
*Many foreign nations deeply and directly subsidize national industries and the U.S. government lets them get away with it. That puts our industries at a vast disadvantage.
*The United States has the highest corporate tax rate in the world. That puts our corporations at a vast disadvantage.
*Many foreign nations do not require businesses to provide health care for their employees. That puts our businesses at a vast disadvantage.
*Many foreign nations impose very little regulation on businesses. That puts businesses in the United States at a vast disadvantage. In the U.S., we have some of the most restrictive regulations in the world.
In 2011 we are going to end up with a trade deficit that is probably going to be well in excess of half a trillion dollars. According to one estimate, if the trade deficit was totally eliminated it would create 8.4 million new jobs inside the United States.
So why isn’t Barack Obama proposing to do something about all of this?
#8 The Obama jobs plan does nothing about the gigantic mountains of ridiculous regulations that are absolutely killing small business in this country. According to the Heritage Foundation, 75 new
major regulations that have cost U.S. businesses more than 40 billion dollars have been passed since Barack Obama first took office.
The Federal Register (which contains all federal regulations) just keeps exploding in size. Last year alone, 81,405 new pages were published in the Federal Register.
Right now there is a good chance that you are breaking dozens of federal regulations without even knowing it.
All of this regulation is crushing our businesses and is making us much less competitive in the global marketplace.
Yes, there will always be a need for common sense regulations on business activity. But what we have right now is an absolute madhouse.
#9 The Obama jobs plan does nothing about the negative effects of Obamacare. Obamacare is going to absolutely slaughter U.S. businesses. Look, when most other nations do not burden their businesses with providing health care and we force our businesses to comply with the nightmare that Obamacare represents, who do you think has the advantage?
The other day, I noted some of the effects that Obamacare is already having on the U.S. business community….
According to a recent report from the National Federation of Independent Business, one out of every eight small businesses in the United States have either already had or expect to have the health insurance plans for their employees terminated by the health insurance companies because of Obamacare. Another recent survey of mid-size and large businesses found that nearly ten percent of them plan to stop offering health insurance coverage to workers once Obamacare insurance exchanges begin in 2014, and another 20 percent are not sure if they will continue to offer coverage or not. Our health care system is deeply broken and the ones that keep getting the short end of the stick are average Americans.
If Obama was serious about putting Americans back to work, he would do something about Obamacare.
But he is not going to do that, is he?
#10 The Obama jobs plan makes our national debt worse. Yes, Obama insists that his plan will be “100%” paid for, but he has not told us how it will be paid for.
Exactly where in the world is he going to get an extra half a trillion dollars next year?
Obama probably intends to propose some tax increases that he knows that the Republicans would never, ever agree to.
So, no, Obama’s proposals will not be paid for.
The U.S. national debt has increased by more than 4 trillion dollars since Barack Obama took office. It is currently increasing by more than 2 million dollars per minute.
We cannot afford to pile huge amounts of additional debt on to the backs of our children and our grandchildren. What we have already done to them is deeply, deeply criminal.
In the end, some of Obama’s proposals will probably get passed, none of them will be paid for, our debt will get even bigger, and the fundamental reasons for our job losses will remain unaddressed.
So hopefully you can understand why I consider the Obama jobs plan to be a really bad joke.
Tonight, millions of Americans will be sleeping in seedy motels, in their cars or in tent cities.
Just check out these pictures from New Jersey. Can you believe that some hard working Americans actually have to live like that?
We had the greatest economy that the world has ever seen.
Things did not have to turn out this way.
But they did.
Now Obama has come up with a “plan” that will not fix any of our fundamental problems but that will get us into a whole lot more debt.
Please excuse me if I am less than thrilled.
Tomorrow, it will become official — the long-term unemployed are a political football. Obama will give a jobs speech proposing various ineffectual measures for creating jobs. The Republicans will reject these proposals, their goal being that Obama should have no successes between now and November, 2012, although little can be done to lower the unemployment rate in any case. Perhaps it is time to think outside the box.
According to various news reports, the President will soon start leaving the Imperial Capital to visit with the Little People living in those vast, mostly unexplored dominions outside the Beltway. He will rail against Do-Nothing Republicans.
For politicians, the unemployment rate is the magic number. The “official” rate now stands at 9.1%, but those not brain-dead know it is actually much higher. In politics, however, only the magic number counts. Most projections show the official rate will remain above 9% a year from now. That would certainly be true if the economy actually improved. The discouraged would then re-enter the Labor Force, driving the jobless rate up. Otherwise, nothing much will change between now and then.
The President needs that rate to fall in order to win re-election. The Republicans would like that rate to stay the same, or get worse. According to the peculiar logic of our political system, one party wants the economy to improve between now and the next election, and the other wants it to deteriorate.
Calculated Risk notes that on Labor Day, neither the New York Times or the Los Angeles Times had any front-page stories about Labor. He cites a new report about how the long-term unemployed are doing. As you might expect, they are very discouraged. Posting on Economix, the ever-cheerful Charlotte Rampel of the New York Times explored The Bright Side Of Unemployment? She cited the same report.
On Thursday the Heldrich Center for Workforce Development released its latest report on the hundreds of unemployed workers it has been following (and surveying) for two years. As you might expect from the report’s title — “Out of Work and Losing Hope: The Misery and Bleak Expectations of American Workers” — the report’s findings are discouraging.
The typical jobless worker has been pounding the pavement for months and is running low on savings, friends and hope. Even the lucky workers who have found jobs are not exactly thriving, as most of the re-employed in the center’s survey have had to take pay cuts.
Even so, the report did manage to find some good that has come of its respondents’ unemployment spells:
Clearly none of this means that all these workers would have been worse off if they’d kept their jobs. But it’s comforting to know that there has been a glimmer of silver lining for at least a few of the nation’s jobless.
While it is “comforting” to know that some of the disenfranchised have made good use of their time off, politicians are still left with the magic number problem. Let’s review. The Republicans want these people to stay unemployed so they can win the next election. This outcome is highly likely in any case, and the Republicans will do their best in Congress to make sure no one gets a job created by any measure put forward by President Obama. It would seem that Republicans favor “spending more enjoyable time with family” or “becoming more involved in the church or other voluntary organizations.”
However, there are risks in the Republican stance. Many of these unemployed may starve to death or kill themselves before the next election. After all, they are running low on savings, friends and hope. Once deceased, the long-term unemployed would no longer be counted as jobless, which would reduce the unemployment rate, which in turn helps the Democrats.
The Democrats want these people to get jobs. It would seem they do not favor “becoming healthier through exercise” or “working on projects around the house.” In so far as none of these people is likely to get a job anytime soon, there seems to be little hope that the magic number will decrease, which jeopardizes their re-election chances. They can hope and pray that a sufficient number of the jobless will starve to death or kill themselves before the next election, but that’s not something you can count on.
For the Democrats, the best solution seems to be something along the lines of Jonathan Swift’s Modest Proposal. What can not be left to chance must be accomplished through policy. In 1729, Swift suggested that “impoverished Irish might ease their economic troubles by selling their children as food for rich gentlemen and ladies.”
I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled…
Although Swift’s proposal was satirical, humankind has progressed a great deal since the early 18th century. Clearly, for the Democrats, there is an unwanted surplus of unemployed people. By converting them to food, these politicians can kill several birds with one stone. Not only will magic number will be reduced, but in slaughtering these outcasts, the fleshy parts can be converted to meat that could be sold in supermarkets, reducing the price of that expensive food item. The fatty parts could be converted to biodiesel, which would reduce our painful energy costs. The Republicans would be hard-pressed to argue against such a sensible policy.
However things turn out, 2012 is shaping up to be an interesting election year. Here at DOTE we’ll be keeping our eye on how things are going.
Last Friday, the Federal Housing Finance Agency filed lawsuits against 17 of the largest banks and financial institutions in the world. FHFA is seeking a total of $196 billion in restitution from these institutions for not disclosing risky mortgages sold to Fannie Mae and Freddie Mac that went sour. The government news release said, “The complaints filed today reflect FHFA’s conclusion that some portion of the losses that Fannie Mae and Freddie Mac incurred on private-label mortgage-backed securities (PLS) are attributable to misrepresentations and other improper actions by the firms and individuals named in these filings.” (Click here to read the complete press release naming all banks being sued.)
“Misrepresentations and other improper actions,”—that’s it? This is all just sloppy work where the banks didn’t pay attention to the facts? What an outrage! There are still no criminal prosecutions, let alone any investigations of the major banks that caused a global meltdown. By the time this is over, millions of homes will be foreclosed upon. The bankers that caused the mess have been rewarded year after year with huge bonuses since 2008! The FBI and the SEC can’t find a single criminal act by a single one of these 17 institutions? The incompetent (and I think criminal) scoundrels responsible are still in charge!
Goldman Sachs was one of the 17 banks sued by the government. That complaint said, “Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s misconduct was intentional and wanton. The immediate victims of Goldman Sachs Mortgage Company, GS Mortgage Securities Corp. and Goldman, Sachs & Co.’s fraud was Fannie Mae and Freddie Mac, two Government-sponsored entities whose primary mission is assuring affordable housing to millions of Americans.”
If there are allegations of “fraud,” why have there been no criminal prosecutions of Goldman Sachs or any of the other institutions? As early as 2004, the FBI was warning of widespread mortgage fraud. CNN reported, “Rampant fraud in the mortgage industry has increased so sharply that the FBI warned Friday of an “epidemic” of financial crimes which, if not curtailed, could become “the next S&L crisis.” Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. ‘It has the potential to be an epidemic,” said Swecker, who heads the Criminal Division at FBI headquarters in Washington. “We think we can prevent a problem that could have as much impact as the S&L crisis,’ he said.” (Click here for the complete 2004 story from CNN.) The financial crisis cause by mortgage fraud was not even close to the size of the S&L crisis—it was at least 40 times bigger!! Why didn’t the FBI stop it, and why are they not prosecuting the crime now?
And what about the “robo signing” stories that came to light in the last few years? There were countless reports documenting the creation of millions of mortgage documents by foreclosure mills across the country. They were effectively forging documents, such as Promissory Notes, so banks could illegally foreclose on homes. The banks reportedly “lost” the proof they owned the property and had the right to take back millions of homes. If that was the case, how did the banks create mortgage securities without the required paperwork? Documents such as Promissory Notes are required to be filed with the mortgage-backed securities. No Promissory Note—no security. Why is the Securities and Exchange Commission not prosecuting securities fraud? If there were no documents in a large part of the securities, how did the ratings companies give triple-A grades to what are now called “toxic assets?” Why aren’t the ratings companies being pursued criminally?
The fact is, not a single high profile New York banker has been prosecuted criminally. But, hope springs eternal; Goldman CEO Lloyd Blankfein recently hired a high profile defense attorney. I am not holding my breath on any sort of criminal charges to be filed against Mr. Blankfein.
In closing, I just want to add what I think is one of the most preposterous things about the $196 billion lawsuit. Bank of America is being sued for $6 billion by the government. At the first of the year, Treasury Secretary Tim Geithner forgave B of A $127 billion in possible buy backs of sour mortgage debt sold to Freddie Mac. I wrote about this extensively in a post titled “B of A Settlement, Another Taxpayer Rip-off.” Just a few weeks ago, Fannie Mae agreed to buy $73 billion in troubled mortgage debt from B of A. These two deals amount to $200 billion in back door bailouts for just one of the 17 banks being sued. We gave B of A more than $200 billion from Fannie and Freddie alone, and the government is suing to recover $6 billion? I have to wonder, is our government stupid, corrupt or both?
The government has not investigated or prosecuted crime that is obvious to anyone with a 10th grade education. Federal officials are giving the bankers that caused the entire financial calamity huge bailouts while pretending to punish them with a slap on the wrist. I think if there were widespread and genuine criminal prosecution, the entire system would collapse. That is probably why unmistakable crimes are being ignored by most federal and state authorities. Until fraud is removed from the system and criminal acts are punished, the country will not recover. Vibrant economies cannot thrive in an environment of lawlessness and mistrust.
By Greg Hunter’s USAWatchdog.com
Source: Bloomberg (click link above)
No, that’s not a stock. It’s the CDS spreads on the PIIGS (composite), and is up an astounding 60% today.
It’s over folks, despite the protests of BNP, which reacted in predictable fashion to a WSJ “opinion piece” this morning:
‘We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore,” a bank executive for BNP Paribas, who declines to be named, told me last week. “Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . We hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.”
The bank denied it, of course, and the source “declines” to be named.
So what’s the truth?
It’s simple: We’re all Greece.
There’s no material hiring going on in the US, nor will there be. Not because business wouldn’t like to hire, but because there’s no organic demand with which to require the hiring to take place. As a former CEO I can tell you that hiring is a dispassionate decision: You hire staff to produce the goods or services you sell – and for no other reason.
The Government took upon itself to create false economic demand after 2008 through deficit spending. Private business knows this cannot continue forever, or you get Greece. It’s not really very complicated; try using your credit card to maintain a $173,000 lifestyle when you only make $100,000 and see for how long you’re able to do it. That’s what our Government has sequentially done for three years running from 2008-2011.
Every businessperson with an IQ larger than their shoe size knows that this path forward will – because it mathematically must – fail. They were willing to accept a short-term incidence of this back in 2008, because that’s exactly what they believed it would be – a very short-term phenomena.
But now, in 2011, it’s clear that it isn’t a short-term phenomena. And as a consequence there is no hiring going on, because this Ponzi must end, and when it does these businessowners know the outcome will be horrific. They do not intend to get caught not under the falling knife, but the falling grand piano.
The President and the Republican candidates can claim to have “plans” or want “stimulus” or whatever. The fact is that none of this will work. It will not work because the claims of “deleveraging” and “balance sheet repair by consumers and households” is a lie.
De-leveraging and balance sheet repair? Where? Total consumer and mortgage indebtedness is only back to 2007 levels (when we hit the wall and we had a much-lower unemployment rate.)
The often-repeated claim that balance sheets at the consumer level have been “repaired” is a bald lie, repeated nearly daily in the media, in an outrageous and puerile attempt to goad both consumers and businesses into taking economically unsound steps.
This strategy of lie, lie and then lie some more has failed.
The only actual fix is to truthfully de-lever. This means not supporting the bankrupt, other than shepherding them through the courthouse door where their bankruptcy proceedings are heard. It may mean some sort of expedited process for bankruptcy, which I’ve advocated for quite a long while.
We need to remove one half of the total credit market debt in the system in the United States alone. There are only two ways to do it – default and/or pay it down, or grow fast enough without taking on any more credit that the percentage of GDP represented by debt declines.
The latter is not going to happen because the entire last 30 years of our so-called “growth” was a Ponzi built upon more and more debt everywhere. Yes, during Clinton, yes, during Bush (pick a Bush), yes, during Reagan.
This is the truth whether you wish to hear it or not. Whether you wish to face it or not. And until we as a nation and the world as a whole stop playing pyramid games with debt there will be no actual and functional recovery.
We used currencies, offshoring and other means of market manipulation to cover up that which could not work on a sustainable forward basis. We built the pyramid ever-higher, driving asset prices to the moon, and yet none of these “asset price” gains were real and underpinned by actual returned cash earnings.
The check is on the table folks. Europe was just as profligate as we were, and their banks were just as immature in their “analysis” before buying up debt – that is, lending people money who had no prayer in hell of ever paying it back.
This is the same game that was run in the 1980s, the 1990s with the Internet bubble, and then in the housing bubble in the 2000s.
In the 1990s when I ran MCSNet the claim of “trees grow to the moon” was predicated on the Internet doubling in size every three months. This was true for about a six month period immediately following the introduction of Windows 95, which was the singular event that brought Internet access to the mass-market.
From that point onward it was a knowing and intentional lie.
Yes, penetration continued to grow and yes, the network continued to expand, but the explosive doubling pattern happened on the original “uptake” and then ended. It had to, because if it had not every bacterium on the planet would have had internet access within a bit more than a decade. This, again, is mathematics.
There were literally thousands if not tens of thousands of people who had access to the core routing tables and data flow rates that knew the claims being made were lies, myself among them. Sure, as the type of data being moved went from plain text (Gopher and embryonic HTTP) to images to sound-and-graphics and then full-motion video the data requirements continued to grow but the fanciful claims of doubling every three months simply couldn’t have gone on for more than a couple of years because the following is what would have happened:
16 < End of first year
256 < End of second year
4,096 < End of third year (!)
65,536 < End of fourth year (!)
4,294,967,296 < End of eighth year (!!!!!)
Incidentally, that last figure is approximately (within one additional three-month period) the number of people on the planet.
This is the problem with exponential (compound) growth. It’s inherently a pyramid scheme and inherently must, at some point, end. It must end because eventually you run out of ability to sustain it – you run out of suckers and the pyramid collapses.
This always happens because it mathematically must happen.
When debt grows faster than output on a compound basis the two curves inevitably run away from one another and must always result in a collapse.
This is not a political issue, it is not a left or right issue, it is a function of simple mathematics. Those who were IPOing these businesses in the 1990s and who were building and selling houses into the ramp in the 2000s were simply believing that they would unload the bag on you before the leverage pyramid in that particular part of the economy fell over.
That’s all the last thirty years was folks, and now we’re desperately scrambling on a global basis to find just one more sucker. To obtain just one more hit off the crack pipe. To stave off death just one more day and draw one more breath.
Can we pull that off/ Maybe, for today. Maybe, for tomorrow.
But on a forward, sustainable basis?
There the math is clear and so is the answer: NO.