We're less than 60 days out from the mid-terms, and the economic news appears to be getting worse by the day. However, thanks to guidance from Majority Leader Steny Hoyer and DCCC Chair Chris Van Hollen over the past few days, among many others, there's a
real glimmer of hope for Dems amidst these god-awful economic statistics and basic facts (see immediately below); and I'll get to that in a moment. (
Hint: We can't see the forest--Hoyer and Van Hollen do, however--because the trees are in the way.)
GDP Forecasts Downgraded, Again
Here's a new story that's just reared its head in the past hour, from Reuters: "Economists Cut U.S. Growth Forecast Again."
SNAP/Food Stamp Program Participation Is Increasing, Significantly
The headlines on this story, "
Food Stamp Participation Climbs 10%," from Wednesday, tell us that the government's Supplemental Nutrition Assistance Program ("SNAP" a/k/a food stamps) program participation rate has increased by 10% in the past year, alone. However, when you look closely at the June '10 vs. June '09 vs. June '08 statistics, the reality looks more like an increase of over 22% from June '08 to June '09, and another increase of more than 18% from June '09 to June '10. (Note: If someone could explain to me how that's
not the case, I'm ready to correct this observation.) Here are the stats, direct from the government:
Supplemental Nutrition Assistance Program ("SNAP," a/k/a food stamps).
The Fed Is Now Acknowledging That U.S. Growth Is "Decelerating"
The Federal Open Market Committee (the "FOMC," comprised of Federal Reserve officials and others), came out with their Beige book report (qualitative field reporting and analysis from the various Fed regions) on Wednesday, and it really wasn't pretty. Here's Thursday's (today's) NY Times' take on it: "Fed Report Finds Signs That Growth Is Slowing."
Nobel Prize-Winning Economist Joseph Stiglitz Slams US Housing Policy
Joseph Stiglitz, the man who practically invented New Keynesian economics (not to be confused with the Neo-Keynesian school of economic thought currently in vogue at 1600 Pennsylvania Avenue), has just published a piece over at ProjectSyndicate.org, entitled: "Fixing America's Broken Housing Market," which details the epic fail of our government's mortgage industry bailout efforts, while telling it like it is right here: "...the Fed's intervention in the housing market is really an intervention in the government bond market; the purported 'switch' from buying mortgages to buying government bonds is of little significance. "
So, a couple of trillion taxpayer dollars in stealthy Wall Street mortgage-related bailouts and two years later, Stiglitz observes:
For one out of four US mortgages, the debt exceeds the home's value. Evictions merely create more homeless people and more vacant homes. What is needed is a quick write-down of the value of the mortgages. Banks will have to recognize the losses and, if necessary, find the additional capital to meet reserve requirements.
This, of course, will be painful for banks, but their pain will be nothing in comparison to the suffering they have inflicted on people throughout the rest of the global economy.
Wall St. Has Pocketed $2 Trillion In Mortgage Bailouts Over The Past 24 Months, So...
...NOW, We're Hearing That Letting The Housing Market Crash And Burn May Be A Viable Option
And, all it takes is a quick review of the Labor Day lede in the NY Times to tell us that this tack, supported by Stiglitz (see above), since day one (before taxpayers were ransacked), may very well be on the table, finally, as we blog: "Housing Woes Bring a New Cry: Let the Market Fall."
Housing Woes Bring a New Cry: Let the Market Fall
By DAVID STREITFELD
New York Times
September 6, 2010
The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.
--SNIP--
As the economy again sputters and potential buyers flee -- July housing sales sank 26 percent from July 2009 -- there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.
--SNIP--
The further the market descends, however, the more miserable one group -- important both politically and economically -- will be: the tens of millions of homeowners who have already seen their home values drop an average of 30 percent.
The poorer these owners feel, the less likely they will indulge in the sort of consumer spending the economy needs to recover.
--SNIP--
Caught in the middle is an administration that gambled on a recovery that is not happening.
"The administration made a bet that a rising economy would solve the housing problem and now they are out of chips," said Howard Glaser, a former Clinton administration housing official with close ties to policy makers in the administration. "They are deeply worried and don't really know what to do."
Wherein, I present to you the "technical analysis" (Heh) of Karl Smith (h/t to Naked Capitalism), Assistant Professor of Public Economics and Government at the School of Government at the University of North Carolina at Chapel Hill: "Rome is Burning."
Rome is Burning
Tuesday ~ September 7th, 2010 in Economics | by Karl Smith
There is a critical point that I fear the commentariat is just not getting. In my darker moments I fear that some of my fellow economists aren't getting it either but we aren't going to go there.
Look at these two graphs because they tell you the fundamental problem in America today:
CHART: Capacity Utilization Total Industry (TCU)
CHART: Civilian Unemployment Rate (UNRATE)
We have very low capacity utilization (75%) and very high unemployment (10%).
That is, we have factories sitting idle for lack of workers - low capacity utilization. At the same time we have workers sitting idle for lack of factories - high unemployment.
There are machines waiting to be worked and people waiting to work them but they are not getting together. The labor market is failing to clear.
This is a fucking disaster.
Excuse my language, but you have to get that this is a big deal...
# # #
"So, where's the good news you promised us at the beginning of this diary, Mr. Gloom and Doom?" (You might ask.)
Please roll with me for another couple of moments...from Naked Capitalism, early this (Thursday) morning: "Latest Obama Economic Plan : Long on PR, Short on Economic Reality."
(Diarist's Notes:
1.) Diarist has received written authorization from Naked Capitalism Publisher Yves Smith to republish her blog's diaries in their entirety for the benefit of the Daily Kos community.
2.) Checkout the Konzcal link in Adams' post, immediately below, for the latest skinny on who might be replacing Christina Romer as Chairperson of the President's Council of Economic Advisors. Another hint: it's someone who's one of the few Stiglitz fans in the Obama administration!)
"Latest Obama Economic Plan : Long on PR, Short on Economic Reality"
Tom Adams
Naked Capitalism
Thursday, September 9, 2010 1:19AM
I participated in the White House Blogger conference call today, as a stand-in for the traveling Yves. The call was run by Jason Furman, the deputy director of the National Economic Council, who provided a brief recap of President Obama's speech earlier in the day. The stated purpose of the call was to emphasize the importance of the Administrations three economic initiatives: a R&D tax credit, a $50 billion infrastructure investment and change in the tax code to all businesses to frontload their deductions for capital investments. Mr. Furman emphasized that the Administration had been working hard from the outset to bolster the economy and that these initiatives were a stark contrast to the "failed policies" of the past administrations. His prepared remarks were less than five minutes long and then he opened the call to questions.
While I appreciate the Administration's efforts to broaden the reach of their communication, I must confess to feeling a bit let down by the presentation. As with prior initiatives with this administration, it was preceded by various rumors of potentially bigger, more game changing proposals, which failed to materialize. In addition, both the President's speech and the presentation on the call seemed to be more concerned with the politics of the debate, rather than the realities of the economy. Even I, a relatively passive observer of Beltway politics, was able to detect a that the economic initiatives, the President's press conference and the Blogger Conference Call were aimed more at influencing the election in November than they were at having an impact on the economy.
In fact, prior to the questioning, Mr. Furman didn't seem to make any effort (nor did the President earlier in the day) to explain why or how yet another set of Administration proposals would have any impact on unemployment, the housing market or small business creation.
Finally, after some prodding from questions by Mike Konzcal and Felix Salmon, Mr. Furman addressed certain current economic realities. While quoting Christine Romer's farewell speech, and sounding a bit like CalculatedRisk, he acknowledged that the impact of the housing market on the current recession. In prior recoveries from recession, residential investment has been an important factor in generating economic growth. Now, due to significant over-supply of housing inventory and the bursting of the housing bubble, residential investment is unlikely to help lead the economy out of recession. As a result, he said, with these initiatives the Administration is trying to find ways to generate economic growth from different avenues, since residential investment is unlikely to produce much anytime soon.
I found it refreshing to hear a genuine, rational economic explanation for the Administration's plans for a change, rather than yet another attempt at political posturing about "failed policies of Republicans". I don't happen to agree with their analysis that these initiatives will actually help foster other meaningful avenues of economic activity. I think that the problems with housing, banking, and the financial markets need to be resolved, rather than hidden or ignored, before any real recovery can take place. I'm also not convinced that Federal and local government agencies have demonstrated an ability to do much more than produce pork and waste from the stimulus money so far, so throwing another $50 billion at them seems like a loser economically and politically.
But wouldn't it be nice if more of the debate about the economy and the appropriate political responses to it, occasionally resembled the fleeting reference of Mr. Furman to the need for new avenues of growth? Unfortunately, the allotted time for our call expired after this remark. Soon enough, the President and his staff will return to playing politics, extending and pretending and doing their best to avoid any real debate or discussion of what the government can, and cannot do, to fix the economy.
# # #
So, first of all, thanks for reading this far...because, this diary really does have a bit of a happy ending...
If you read virtually every piece linked in the first portion of this diary, you'll see there's a general consensus that--eventually, and perhaps with a significant amount of luck, of course--over the next few years, things WILL gradually improve in the U.S. economy. Yes, in the meantime, we've pissed away trillions in direct and stealthy Wall Street bailouts (to the status quo), only to end up (to a great extent) having kicked the proverbial can down the road. (I'm not referring to the original Main Street stimulus package.) And, this does nothing to help out our Party in the mid-term elections, as well. However, there now appears to be a growing sense in Washington that we must now confront our harsh economic realities, and ultimately that's a good thing...but it's going to be quite painful, to understate the obvious.
And, I'm also very much in agreement with Naked Capitalism's Tom Adams' view of things, noted immediately above, too.
But...here's the truly outstanding takeaway from this diary, IMHO...
H.R.5297 - Small Business Jobs and Credit Act of 2010 (a/k/a "The Small Business Jobs Bill")
It looks like Dems everywhere have just been given marching orders from House Majority Leader Steny Hoyer and DCCC Chair Chris Van Hollen to direct our energies towards nailing our Republican senators--and reaming the GOP a new one, in general--as it relates to the their holdup of the Small Business Jobs Bill. For the moment, between now and Election Day, as Hoyer and Van Hollen noted on Tuesday, we should all be focusing, screaming and lobbying hard to break the Senate GOP bottleneck as it relates to passage of H.R.5297 - Small Business Jobs and Credit Act of 2010.
Enough of this convoluted miche mache message of happy economic news, which, quite frankly (IMHO) means little as far as the outcome on November 2nd is concerned. But, don't take MY word for this...
Top Democrats Throw Cold Water on Obama's Jobs Plan
By Jennifer Bendery and Matthew Murray
Roll Call Staff
Sept. 7, 2010, 6:18 p.m.
House Democratic leaders are already writing off President Barack Obama's $50 billion infrastructure proposal, saying that GOP opposition will likely doom any major bills on tap before the November elections.
House Majority Leader Steny Hoyer (D-Md.) said Tuesday that Democrats are looking at Obama's proposal to pass "additional legislation to invest in infrastructure," but he warned, "It will be very difficult to get a very broad agenda through ... because Republicans' obstructionism has, in effect, not allowed us to do some of the job-creating actions that we want."
The most likely scenario over the coming weeks is action on a continuing resolution to keep the government funded past the end of the fiscal year, along with a continued push for passage of the small-business jobs bill that has stalled amid Senate GOP opposition, Hoyer said during an AFL-CIO conference call.
Meanwhile, Rep. Chris Van Hollen (D-Md.) signaled that Democrats could take on Obama's $50 billion package, but not before the midterm elections...
Bold type is diarist's emphasis.
From a pragmatic, logistical, calendar and sheer common sense point of reference, I heartily concur with Hoyer's and Van Hollen's guidance! There is nothing that comes close to this bill on Capitol Hill that'll create more jobs on Main Street more quickly (even before Election Day, if it somehow miraculously makes it to the President's desk before then).
On a very personal level, I know this because the small software business that I own will hire no less than six additional people (all well-paid, I might add; essentially doubling our staff, virtually overnight), within thirty days (directly due to the contents of H.R. 5297) after this bill's passed and signed into law. I know of at least four other small business owners that are projecting similar or far greater results, once this bill is signed into law, too!
Unfortunately, the GOP knows this, as well. That's why they're being such obfuscating asses about it!
The two most widely-mentioned talking points about this bill are that: a.) it provides $30 billion in lending guarantees through community and regional banks (the traditional avenue for small business credit in the U.S.); and, b.) it will also deliver $12 billion in direct tax benefits for small businesses and entrepreneurs, nationally. However, this legislation is chock-full of numerous other small business benefits and stimuli, not the least of which being this key provision in the bill:
Title V - Tax Provisions
Small Business Jobs Tax Relief Act of 2010 -
Subtitle A - Small Business Tax Incentives
Part 1 - General Provisions
Section 501 -
Amends the Internal Revenue Code to increase from 50% to 100% the exclusion from gross income of the gain from the sale or exchange of qualified small business stock acquired after March 15, 2010, and before January 1, 2012...
This section of the bill, alone, will significantly increase the financial impact of this legislation on Main Street.
IMHO, passage of this bill will do more to support our country's entrepreneurial resources and enable small business job creation than any piece of legislation has done in the past ten years--if not in the past few decades!
Here's the Congressional Research Service's full Summary of H.R. 5297: "H.R. 5297:
Small Business Jobs and Credit Act of 2010."
Steny Hoyer is spot-on!
It is time for Democrats to K.I.S.S. (Keep It Simple and Stupid) the media: the Senate must pass H.R. 5297 NOW! (And, as a side benefit, if we end up kicking a bunch of GOPer Senators' asses in the process of getting this done, well, then we can look at that task as just a "feature" of the overall effort!)
You KNOW what to do: Senators of the 111th Congress.