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More Sunshine from the White House
Tweet Share on Facebook January 31, 2009 Comment (4)More optimism from the White House today. Excerpts (with particularly gloomy parts in bold):
This morning I'd like to talk about some good news and some bad news as we confront our economic crisis. The bad news is well known to Americans across our country as we continue to struggle through unprecedented economic turmoil. Yesterday we learned that our economy shrank by nearly 4 percent from October through December. That decline was the largest in over a quarter century, and it underscores the seriousness of the economic crisis that my administration found when we took office. ... Already the slowdown has cost us tens of thousands of jobs in January alone.
And the picture is likely to get worse before it gets better. Make no mistake, these are not just numbers. Behind every statistic there's a story. Many Americans have seen their lives turned upside down. Families have been forced to make painful choices. Parents are struggling to pay the bills. Patients can't afford care. Students can't keep pace with tuition. And workers don't know whether their retirement will be dignified and secure.
Americans know that our economic recovery will take years -- not months. But they will have little patience if we allow politics to get in the way of action, and our economy continues to slide.
Rarely in history has our country faced economic problems as devastating as this crisis. But the strength of the American people compels us to come together. The road ahead will be long, but I promise you that every day that I go to work in the Oval Office I carry with me your stories, and my administration is dedicated to alleviating your struggles and advancing your dreams.
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Obama Adviser Summers: Unions Cause Unemployment
Tweet Share on Facebook January 31, 2009 Comment (7)Greg Mankiw helpfully points to this entry in The Concise Encyclopedia of Economics written by Lawrence Summer, the director of the National Economic Council:
Another cause of long-term unemployment is unionization. High union wages that exceed the competitive market rate are likely to cause job losses in the unionized sector of the economy. Also, those who lose high-wage union jobs are often reluctant to accept alternative low-wage employment. Between 1970 and 1985, for example, a state with a 20 percent unionization rate, approximately the average for the fifty states and the District of Columbia, experienced an unemployment rate that was 1.2 percentage points higher than that of a hypothetical state that had no unions. To put this in perspective, 1.2 percentage points is about 60 percent of the increase in normal unemployment between 1970 and 1985.
Me: Of course, reunionization of America seems to be a key plan in Obama's plan to strengthen the middle-class. Know what would help the middle class? Faster economic growth. As I have written before:
The problem is a lack of sustained or even spectacular economic growth. Consider this: During the 1980s, the economy notched 19 quarters of 3.5 percent GDP growth or better. In the 1990s, the economy also notched 19 quarters of 3.5 percent growth or better. So far this decade? Just eight. Or look at the number of quarters of "hypergrowth," say, 5 percent or better. (This was JFK's GDP goal in the 1960s, by the way.) There were 12 in the '80s, eight in the '90s. So far this decade? Just a single quarter, the third quarter of 2003.
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About Those Wall Street Bonuses ...
Tweet Share on Facebook January 31, 2009 Comment (107)Here is an interesting ideas from David Goldman of the Inner Workings blog:
Rather than claw back already-paid bonuses of about $18 billion, as some grandstanding Democrats suggest, Wall Street firms should issue common stock to employees in that amount and require them to invest the after-tax portion of their cash bonuses in the stock of their firms. The proceeds should be used to repay the government for funds injected into their firms. That will satisfy the public, which quite reasonably objects to the use of its tax money to compensate bankers who make an order of magnitude or two more than the average taxpayer, and it will incentivize the bankers to work hard and manage risks well.
Me: This makes more sense than about anything I have heard on Capitol Hill lately. Are we trying to solve a problem or score political points with some bogus populism?
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Michael Steele: New RNC Chairman
Tweet Share on Facebook January 31, 2009 Comment (8)I saw new RNC Chairman Michael Steele on Capitol Hill night. He didn't look like a guy who's inherited a big mess or guy with the weight of the world on his shoulders. He looked and sounded like he just nabbed the job of dreams and wants to start bright and early the next morning ...
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Obama Stimulus: Where's the Grandeur?
Tweet Share on Facebook January 31, 2009 Comment (2)Christopher Caldwell in the FT:
Stimulus, many economists have stressed of late, is about restoring what John Maynard Keynes called animal spirits. Keynes meant something like “morale”. But there is a more animal sense to “animal spirits” that appeals to the broad publi They are willing to be excited by what their government can do. But where is the Tennessee Valley Authority in all this? The Concorde-type project? The Apollo programme? Such initiatives work not just on economic fundamentals but also on the public’s entrepreneurial imagination and its optimism. But this bill is about funding babysitters, writing unemployment cheques and installing septic tanks with not enough money left over to give even one city a subway system.
Me: After Obama was elected, I jokingly emailed one his economic advisers and asked when they were going to build a bullet train from my home into DC. Now it looks maybe I'll get some more potholes filled.
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Kudlow: Kill the Obama Stimulus Plan. Kill It Dead.
Tweet Share on Facebook January 30, 2009 Comment (14)Larry Kudlow brings some needed clarity to the Obama stimulus proposal as only the Great One can:
And in what may prove to be the biggest stimulus-package hurdle of all, news reports suggest that Team Obama is contemplating as much as $2 trillion in TARP additions to rescue the banking system in one form or another. That would be $2 trillion on top of the nearly $1 trillion stimulus package. Government spending, deficits, and debt creation of this magnitude is simply unheard of. So the added TARP money will surely imperil the entire stimulus package as taxpayers around the country begin to digest the enormity of these proposed government actions. Financing of this type would not only destroy the U.S. fiscal position for years to come, it could destroy the dollar in the process. What's more, the likelihood of massive tax increases -- which at some point will become front and center in this gargantuan funding operation -- would doom the economy for decades.
Me: Here is what Fed economist Emre Ergungor said about nations that undergo a big credit crisis:
Banking crises can have devastating effects on the economies of developing and industrialized countries. In addition to the taxpayer costs of recapitalizing the banks, banking crises have negative longterm effects on the economy, such as slow growth, high interest rates, and lower living standards.
This seems to be right where we are headed unless we begin to adopt some pro-growth economic measures.
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Big Government and the GOP
Tweet Share on Facebook January 30, 2009 Comment (3)Rich Lowry makes some interesting points about the future of Big Government and the GOP:
I wonder if the excesses of the bailouts and the stimulus package will make big government politically vulnerable in a way it hasn't been in more than a decade by, 1) Again associating government spending with Washington irresponsibility through the truly dramatic new numbers for the deficit and the debt; 2) Intertwining government with Wall Street/corporate America in a way that makes it possible for a Main Street conservatism to run against both. There may be point here at which a Mike Huckabee populism and a Steve Forbes free-market economics can meet. There's usually a reaction to every action in American politics, and while the Democrats and Obama have basically a free hand to expand government in the current environment, you can already feel the backlash building.
Me: Look, the deficit is about to baloon to truly monstorus levels. And at the the same there is a good chance the economy, as perceived by most Americans, is going to stink on Election Day 2010 and Election Day 2012. I can see a Republican candidate for congress or the presidency saying the following.
Well, folks, we just let Washington spend trillions of our kid's money and all we got for it the longest economic disaster than anyone under 70 can remember. It's kind of like we all got so scared in 2008 that we all went a little crazy and got a little absent-minded. We forgot that private enterprise isn't the Big Money Guys on Wall Street, it's entrepreneurs starting new business and workers thinking up new and better ways to do their jobs. We forgot that Washington can a do a few things alright, big Big Government isn't so good at mutlitasking. We forgot that America's deep strength lies outside the 212 and 202 area codes. So let's get back to what really works, what turned America into the world's richest nation -- rewarding people who work hard and create and take risks to build the companies of tomorrow that will compete in the global economy. Not the bureaucrats. Not the politicians. Not even the traders on Wall Street.
Something like that. Also, cutting payrolls taxes for familes.
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A Pro-Growth Idea, Finally
Tweet Share on Facebook January 29, 2009 Comment (3)Ryan Ellis of Americans for Tax Reform passes this along about the idea to allow companies to repatriate foreign earnings:
Once again, Congress has the opportunity to use repatriation to inject much-needed and non-inflationary capital into the United States. According to Decision Economics, $545 billion is sitting overseas today, ready to be repatriated. If even half of that money was returned to this country, it would represent a one-time boost equivalent to 2 percent of GDP. Hundreds of billions of dollars would be available to lend, pay down debt, restructure, and (most importantly from a taxpayer perspective) avoid any potential government bailouts. Repatriation, though, should be the rule and not the exception. The United States is the only country in the world that tries to tax the worldwide income of its companies, and has set up complex deductions and credits as a result. A simple, territorial system similar to repatriation would be a pro-taxpayer and modern tax reform step.
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Pethokoukis Web Picks
Tweet Share on Facebook January 29, 2009 Comment1) The fabulous Fausta Wertz analyzes the possible collapse of Mexico.
2) John Tamny tell us why the upcoming trillion dollar budget deficits are worse than you realize.
3) Stan Collender says Wall Street banks should consider themselves federal agencies.
4) The Oil Drum tried to links the oil crisis and the financial crisis with a flowchart.
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Hooverism: Protectionism on the Rise
Tweet Share on Facebook January 29, 2009 Comment (7)My guy Dan Clifton of the Strategas Group raises a warning flag:
Domestically, both the House and Senate stimulus packages contain “Buy American” provisions as a way to bolster the domestic steel industry, and other industries are lobbying for similar treatment. The House approved a provision yesterday requiring that Department of Homeland Security uniforms be made from U.S. textiles. Large multinational corporations, on the other hand, are growing increasingly concerned that these protectionist measures will be greeted by international backlash. These new trade measures are coming at a time when global trade is expected to decline for the first time since 1982.
