By Marshall Auerback, a fund manager and investment strategist who writes for New Deal 2.0.
If nothing else, it’s clear (as one wag wrote this morning) that the state of Obama’s rhetoric is strong.
The President almost always gives a good speech, but it’s the follow-through that is generally problematic. And the speech itself sends mixed messages about what Mr. Obama views as his “achievements” and his priorities moving forward. For all of the talk about more jobs and tax cuts, the speech also made it clear there has been a shift to ‘fiscal responsibility’ with plans to pay back the 2 trillion in new debt, all well down the road (3 year spending freeze starting in 2011). The job initiatives announced were minor and there appears to be no additional fiscal relaxation of consequence apart from promises of a new jobs’ bill, the effect of which could be blunted if the President aims for “fiscal neutrality”.
A State of the Union address is always a good place for an incumbent President to set out his priorities, and in that regard, Obama’s speech is most revealing. He rightly argues that everything “begins with our economy” and then curiously emphasizes that “our most urgent task upon taking office was to shore up the same banks that helped cause this crisis.”
No, Mr. President. Your most urgent task upon taking office was to shore up employment. Over the past year it has become obvious that the policy to shore up the banks has been a dismal failure in this regard. It has done nothing to pull the economy out of its deepest slump since the late 1970s. The single most important thing Washington can do to help the vast majority of American citizens who do not work on Wall Street is to create jobs — tens of millions of them.
The President was right about one thing: “If there’s one thing that has unified Democrats and Republicans, it’s that we all hated the bank bailout. I hated it. You hated it. It was about as popular as a root canal.”
But at least a properly executed root canal solves the problem once and for all. The President and Congress have administered the economic equivalent of pain killers, without addressing the underlying problems in our financial sector. If we’re going to undergo root canal, then let’s fix the damaged nerve and prevent a recurrence of the problem. Tens of trillions of dollars have been committed to deeply insolvent institutions (the extent of which we still do not understand due to persistent stonewalling from the Treasury and Federal Reserve). These institutions continue to pay out massive bonuses to their staff on the basis of fraudulent accounting. And many of these institutions are still engaging in activities which continue to worsen household balances in order to maximize their own profitability. Households and non-financial institutions have hitherto received very limited assistance. If this is how the President measures success, God help us when we have failure.
Obama observed that “if we had allowed the meltdown of the financial system, unemployment might be double what it is today. More businesses would certainly have closed. More homes would have surely been lost.” All true, but there was little value to be gained by preserving what are fundamentally insolvent institutions. The President could have done something politically popular which would have resonated with the public by shutting down zombie banks, and used fiscal policy to promote employment via a Job Guarantee program. That would be both smart economics and politically popular. The two are not always mutually exclusive, but this administration curiously appears to conflate unpopularity with “responsibility”. This is what happens when you take your advice from a bunch of failed Rubinite retreads.
Again, the references to the banks reflect profound conceptual confusion at the heart of the President’s financial reforms: “A strong, healthy financial market makes it possible for businesses to access credit and create new jobs. It channels the savings of families into investments that raise incomes.” To repeat, credit is not a “flow” which one can access. Credit is a two-way contract between lender and borrower. The only thing that constrains the bank loan desks from expanding credit is a lack of creditworthy applicants, which can originate from the supply side if banks adopt pessimistic assessments or the demand side if credit-worthy customers are loathe to take out additional loans. The President would be more accurate in suggesting that a strong economy makes it possible for businesses to create new jobs, thereby creating a healthy financial market which facilitates access to credit.
Yes, President is correct to argue that the markets may well have stabilized…for now…but personal balance sheets have not. How long can the former be sustained in the absence of the latter not improving?
And reiterating his proposed fee on the biggest banks might play to the peanut gallery, but the real purpose is not to recover the money spent on TARP, but to change the structure of finance, particularly in the capital markets, once and for all. The President still displays an incoherent approach to financial reform and implicit beliefs in government budget constraints.
For all of the talk about tax cuts (”Let me repeat: we cut taxes. We cut taxes for 95% of working families.”), what really stands out is the President’s fiscal timidity. This represents the cut for 95% of working families that he promised on the campaign. It equated to about $8 per week, on average, for workers. This despite the fact that the President himself seems to recognize at one level that fiscal policy really does work:
Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. 200,000 work in construction and clean energy. 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, and first responders. And we are on track to add another one and a half million jobs to this total by the end of the year.
Surprise, surprise! Fiscal policy works! And if the President had implemented a national payroll tax holiday and introduced revenue sharing for the states, he could have trumpeted even greater economic achievements. Why muddle the message with talks of spending freezes and support for misconceived “bipartisan commissions” to discuss ways of reducing “runaway government spending” when unemployment has shown little sign of stabilizing, let alone coming down? The true engine of job creation in this country will always be America’s businesses, as the President recognizes, but he also notes that “government can create the conditions necessary for businesses to expand and hire more workers.” We have a mixed economy, which is why the President should not capitulate to the conservative lobbies now engaged in a renewed push for fiscal austerity even though the labor markets are disaster zones. History has a habit of repeating itself. The US government did exactly this in 1937 and the unemployment worsened. Japan did it in 1997 with the same outcome.
I could go on. It would have been interesting to hear the President explain how we would succeed in Afghanistan when both the British and Russians had comprehensively failed, but Obama clearly could only achieve so much in the space of an hour. Bowing to the conservative calls for “fiscal consolidation” at a time when unemployment is still very high and will continue to exert a massive deflationary force on the overall economy is the best way to ensure a double-dip recession occurs. Trumpeting the perpetuation of a failed banking system hardly strikes us as an achievement.
There were moments when the President really did appear to understand what it takes to make the state of the union stronger. Unfortunately, those moments were few and far between. Let’s hope for once the muddled message does not reflect the reality.
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Blah….blah….blah….that’s all we got from the President the first year and all we will get the second year….no change…no change….no leadership….no leadership…..SOOOOOO SAAAAAAD!
Andrew Samwick writes,
“One item that stood out as different was the acknowledgment that we are on our way to export-led growth, if we are to have growth at all. President Obama sounded like a good old-fashioned mercantilist with his claim that we would double exports in five years and support 2 million more jobs through those exports. I don’t think that’s a reasonable projection, but it does signal a different way of talking about what’s important in economic policy.”
Let me add to this by saying that it’s also gonna be very hard for us to have “export-led growth” when we have a consumer-based economy. And because our banking system encourages us to be consumers rather than producers, we should blame our banking system for hindering our efforts to build an export economy. So until we return to a time when our banks were subservient to the rest of our economy, especially our manufacturing base, our chances of ever being able to ramp up our exports will remain very low.
What’s making this even more difficult to do is the fact that our kids are at or near the bottom of the ladder in terms of math and science. So it going to be especially hard for our kids to grow up to become competent enough engineers with the necessary math and science skills to help build a viable manufacturing base for our country.
And before anyone here says that we can simply retrain many of our brilliant financial engineers to work in manufacturing, let me remind you that financial engineering, unlike most other forms of engineering, has been proven to be based on phony math and science. So having our financial engineers work in manufacturing won’t do one iota to bring our manufacturing base back to life. In fact, our financial engineers are such accidents-waiting-to-happen that they’d probably create a meltdown in manufacturing, just as they did in finance!
http://capitalgainsandgames.com/blog/andrew-samwick/1449/state-union-address-quick-reaction
As Quantitative Easing collapses the dollar, the 2 million “export” jobs we will create will come through teaching our daughters how to say (in the many languages of the countries with a sound currency)… “So, we go your hotel now?”
There’s really only one measure of any economic policy – does it help to create/preserve meaningful living wage jobs, or does it destroy them?
For 40 years every policy has destroyed them, and was intended to destroy them.
All of Obama’s actions have been firmly in the destructive mainstream, and the speech confirms that this will continue.
Yves, no, tell us what you REALLY thought of the speech. 8-)
The reason there weren’t many moments in which Obama seemed to have an understanding about what would improve the state of the union, is that Obama’s main concern is what will improve the state of Obama.
And he even failed to do that.
I think income taxes to anyone earing less than 100k per year should be eliminated this would be a massive stimulus of disposable income entering the economy. On the other side of the equation cut military spending in half by giving up on the international empire of bases and occupations.
In the medium term policies to balance trade should be enacted so that the level of foreign investment by American corporations is regulated to a level where trade balances on average.
Once a strong resolution scheme is in place ready to take the fall of a big financial player the fed should be audited.
“policies to balance trade should be enacted so that the level of foreign investment by American corporations is regulated to a level where trade balances on average”
This doesn’t make any sense. The level of foreign investment by American corporations would have to EXPAND DRAMATICALLY to get to a level where trade balances on average. What are you going to do, pass a law to FORCE them invest more in Indonesia and Mexico?
You have a great post here, Mr. Auerback, and I can’t agree with anything you’ve stated.
Of course, it sounded more like Obama was sending a loud message that he was excusing the crooks of Wall Street for the theft of trillions.
It also sounded very paltry, and very little very late in the game.
Where’s the economy? Just on Wall Street amidst the fantasy finance gamers?
We’re not going to suddenly stumble over an economy in this country. It must be created from the ground up, not from the royalist pigs down.
Thank you.
Sorry, Mr. Auerback, I meant to type, “I can’t disagree…”
I agree, this was great.
Obama … who cares? What has he done? Provide cover for Bernanke and Geithner, who still hold their jobs. The Great Ponzi Money Laundry is still in business. May it last long enough to allow me to cash out.
Obama talks around the energy problem with techno- cornucopian buzzwords but never addresses consumption. Consequently, the economic problems get worse and worse. The economy will continue to drift into total insolvency until energy issues are addressed. We are in a long running energy crisis, not a banking or credit crisis.
Peak oil took place in 1998. Don’t believe me, go to the EIA website and see for yourself. Oil @ $80 a barrel is too costly. The auto- based infrastructure is not profitable when oil costs more the $35 a barrel.
As usual, Auerback is completely wrong. How can this dude be taken seriously by anybody? Money is not a substitute for oil nor is it a substitute for jobs. Our economy has been ‘stumulated’ with cheap credit for decades. We Americans have accumulated a lot of ‘stuff’ but have nothing ‘real’ to show for our ongoing energy impoverishment. Who wants to visit a freeway overpass or a parking garage?
Excuse me while I go over to Energy Bulletin and see if anyone has anything cogent to say about the speech last night.
With cash for clunkers boosting 3Q GDP and Christmas spending Boosting 4th Quarter GDP numbers will come out tomorrow showing the recession is officialy ended. Somehow it doesn’t feel like the Great Recession is over.
This tax holiday idea is certainly making the rounds. So, some specially designated group of middle income earners gets a few hundred more in their paychecks. Not enough to buy anything substantial and the tax holiday can’t go on for ever. So, you get a few hundred that you know is not going to last as an income flow. What to do? What to do? Pay off some credit cards [likely for some] … buy something new for the home [likely for others]. The former adds zippo to GDP that later adds something [mostly to the GDP of China]. So, what do we get over the medium and long term for this little gimick. Bubkis.
We need policy guidelines that rebalance this horribly out of wack economy… more real economy and less ponzi economy. Policy can encourage that … however the ideas I see floating around are not doing that right now.
Tax holidays cannot possibly solve the problem in the medium or long term and I have yet to see a reasonable case that they will help much in the short term either.
Ed,
A payroll tax holiday would provide up to $650 per month to a household with $100k income, whether you were the worker or the owner of a small business S-Corp. I think that would be meaningful. Perhaps then, a mortgage payment could be paid, or a car purchased, or a meal out, etc..demand will increase in our economy, thus working to restore output and employment. There is no reason that it could not eventually be made permanent if that becomes desired by the public.
What is a “Ponzi Economy”, is that a technical term? I’m not an economist. Resp,
According to the National Taxpayers Union, (http://www.ntu.org/main/page.php?PageID=6) people who’s adjusted gross income is greater than $113,000 already pay more than 70% of all income tax collected. And the bottom 50% of the population (with adjusted gross incomes of less than $32,000) pay less than 3% of all income tax collected.
These are worrying numbers. It is even more worrying to think about destabilizing the situation further. Right now, 50% of the population can vote for give-aways that they aren’t going to have to pay for. What happens when everyone who makes $$410,000) pay 40% of all income tax collected.
And no, I am not rich. My income tax is in the 15% bracket. Although I did retire early. You know why? My taxes were so high it wasn’t worth working any more.
Whoops. Didn’t proofread.
RIGHT NOW, the top 1% of all taxpayers, (those with AGI’s of greater than $410,000) pay 40% of all income tax collected (data as of 2007).
And 70% of all taxes are from people who make more than $113,000 a year. Right now, over 50% of the population can vote for expensive federal giveaways, secure in the knowledge that they are going to get their ‘fair’ share of the ‘loot’, but that they aren’t going to have to pay any significant amount of the cost. What happens when everyone who makes less than $100,000 doesn’t have to pay any of the costs associated with expansion of federal spending?
Right now, congress and the president spend like drunken sailors. Who can wonder why, when the income tax has been made so progressive that 50% of all voters pay less than 3% of the cost of the programs they enact. The miracle is that they aren’t worse.
The rallying cry of the American Revolution was “No Taxation without Representation”.
If I was rich, at this point I would be thinking it’s time for a new rallying cry “No Representation without Taxation”.
Why should someone who is on welfare, or someone who doesn’t pay any income tax be able to have any influence on spending bills. If you aren’t kicking into the pot, you shouldn’t get to vote on how the money is spent.
DLR,
The solution then would be to run MUCH higher fiscal deficits would it not? So that the Govt could maintain spending levels while cutting current taxes to workers.
The Govt’s fiscal deficits are MUCH TOO LOW, that is what is causing all of this. Resp,
Those data are for the FEDERAL INCOME TAX, which makes up only 1/3 of all taxes paid in the country, but gets virtually 100% of the press. The other 2/3 of the tax code mostly (though not completely–corporate tax, etc.) hits the middle and lower income earners hardest.
I don’t understand the outright hatred conservatives have for Obama.
A better command of the English language and the fact that we have stopped torturing the (still being denied access to America’s vaunted legal system) prisoners at Gitmo are all that I can see to distinguish this administration from a 3rd term of W & Cheney.
You can almost see the puppeteer’s hand up their butts at this point.
>> I don’t understand the outright hatred conservatives have for Obama.
>> A better command of the English language…
Maybe that’s it.
Well, as a bona fide Conservative (do libertarians get to call themselves conservatives?) let me address some of the reasons for the “the outright hatred conservatives have for Obama”
1) Continuing to grow the size and scope of the federal government. Conservatives are in favor of small government and balanced budgets.
2) Continuing to bail out the banks. Socialism for the rich, the powerful and the well connected is disgusting to all true conservatives.
And all of us bona fide Conservatives hated Bush too, for the same reasons, and plenty of others – like engaging in kidnapping and torture.
dlr,
I am sorry – I did not mean to offend by painting “conservatives” with such a large brush. I live in an area where the Bush “cult of personality” runs strong – and Obama hatred runs deep. These people call themselves ‘conservatives’.
What I cannot understand is why they loathe Obama so much, when his policies are a simple continuation of of Bush/Cheney policies. Is it an underlying racism? Clearly it cannot be policy, because he hasn’t changed anything!
I wish that real conservatives would get a grip back on their politicians so that we could have an adult discussion about where best to steer our country. IMHO, I don’t think that Sarah Palin should be among those invited to the table. Peace.
this is the first time i disgree with Yves.
my reasons are due to what i believe are the 2 key points i hope the hell he pounds away at from yesterday onward until people get it.
1. the bit about the US should work it’s ass off to be #1 in the world and not to settle for 2nd.
2. the more important part is this passage:
“But I also know this: if people had made that decision fifty years ago or one hundred years ago or two hundred years ago, we wouldn’t be here tonight. The only reason we are is because generations of Americans were unafraid to do what was hard; to do what was needed even when success was uncertain; to do what it took to keep the dream of this nation alive for their children and grandchildren….”
side note: i believe obama made the bs discretionary budget freeze announcement was the finance/econ people who read this blog, and other like to raise holy hell that it’s bullshit and financial reform is what’s needed, transparency, clear, nonfraudulent sccounting, the FCIC hounded so they do their job, etc,etc, etc.
ps: i live in an area where 75% of people even today believe there should be -0- govt regulation of almost any type and bush/cheney where the greatest prez/vp ever to lead this country.
Tim,
This is Marshall Auerback’s post, but I disagree on your point 1.
People in general, and Americans in particular, seem to have a very bad case of “above average” bias, a desperate need to think they are the best, or very good, in the face of contrary evidence. This leads to all sorts of distorted behavior.
It isn’t reasonable to expect America to be number 1 forever. The effort to hold on to “leadership” past our country’s sell by date is leading to damaging outcomes for ordinary people (supporting a bloated military and international financial services industry as a ways of preserving our imperial reach).
The speech, like all Obama speeches, changed nothing. Obama came to office and did not repudiate his predecessor’s disasters. Last night he did not repudiate his own failures. We remain on the same course we were before. This is the wrong course according to most Americans and most of those who have been right about the housing bubble, the meltdown, and the current state of the economy.
The discrepancy between what Obama says and does is well known, but too charitable. We are far enough along in his Administration to say it like it is. He flat out lies most of the time. Another way to look at this is where does the money go, and when. Trillions to banks starting even before the 2008 election when Obama pushed hard for the TARP. And jobs? There was his weak, poorly constructed stimulus. It was too little, filled with unproductive tax cutting. The actual jobs created were few, especially in light of the rising unemployment numbers. There were 2 or 3 programs for homeowners but these were tiny. They went nowhere. Besides they were geared to shoring up house prices more than helping distressed homeowners. Now a year into his Administration we hear about jobs again. Another program that’s too small and is filled with wasteful and unproductive tax cuts. And then just one day after this weak tea, the Senate with Obama’s strong backing reconfirms Bernanke.
I have to disagree with Marshall. Obama’s economic message is not muddled at all. His actions have been strong and consistent. Trillions to the banks, crumbs for the rubes. November should be interesting because Democratic losses look to be heavy. This is not the result of a good Republican message but a failure by Obama and the Democrats to deliver on any of their platform. The question is will those losses pierce the bubble around the Obama White House. At one time I though it might although not enough to salvage his Presidency. Now I’m not sure even of that. The modus operandi of the Obama Adminstration when confronted by incontrovertible failure is to make a few cosmetic changes and go on as before. Discussing what Obama could do is rapidly approaching complete irrelevance. We already know what he will do, and change plays no part in it.
I agree with you, and the shellacking the Democrats will be administered in nine months or so will only serve to give Obama the political cover he needs to in order to accomplish his true goal: destruction of social security and Medicare during 2011. In fact the Obama Administration is an unmitigated success; in that the results achieved so far are exactly those their masters have desired. But in order to understand this one has to ignore the rhetorical shadows on the wall that are just illusions projected by Obama and his puppet showmen from the roadway in front of the fire. Only by leaving the darkness of the cave and entering the sunlight can one comprehend reality and see who is really pulling Obama’s strings.
And you allude the sunlight is reached only by focussing on the ACTIONS of the Obama Administration. By doing this it becomes quite clear that his job is to continue, and in some cases intensify, the policies of the Bush Administration while projecting an illusion of at least trying to do the opposite. In other words, outside of the cave, the exact same corporate elite as Bush’s are making policy while Obama and his people create the shadows by dancing in front of the fire in the cave below. Obama’s scope of power is not in deciding policy but in projecting a better set of rhetorical shadows than his predecessor ever could. His real job is to project the illusions that will not only allow him to run out the clock on the “left’s” turn in power by not achieving anything of importance, but to also cheerlead policies that deny the possibility of future reforms. For example on health care he must before the 2010 elections pass a bill that by mandating private insurance will effectively block the dangerous (to the elite) idea that Medicare could be expanded. There must (and will) be a bill that cements the notion that Americans will go through private insurance companies to get their health care. Since Americans refuse to vote for third parties, the resulting voter anger will propel many Republicans to power and this in turn will allow Obama to “hear their anger” and take a turn to the right by using a hatchet on Social Security and Medicare.
The constraint that Obama must meet is to keep a decent portion of the left side of the political spectrum believing in him. This is easier than it may seem since he and the corporate elite know that in the wise words of Rahm Emanual, “liberals are fucking retarded” or at those still supporting Obama are. A great sign of the truth of this statement is the raving reviews many left-leaning blogs gave his SOTU speech and how they rejoiced in the poll numbers which followed. Retarded indeed; after starving through eight years of Bush these people are happy with Obama continuing just about every Bush policy while balancing that with some vague promise to allow gays to serve in the military; a policy change he could have made any time in the twelve months he has been in power. But I guess if you only have one little token snack to give; there is no benefit in giving it your famished supporters too early. These liberals satiated by DADT remind me of an old Eddie Murphy skit:
If you’re starving and somebody
throw you a cracker,
you gonna be like this:
“Goddamn, that’s the best cracker
I ever ate in my life!
“That ain’t no regular cracker, was it?
What was that, a Saltine?
“Goddamn, that was delicious.
“That wasn’t no Saltine. That was…
That was a Ritz. That wasn’t a Ritz?
“God, that was the best cracker
I ever ate in my life.
“Can I have another one, please?
Please, one more.”
Who knows, maybe Obama will have to throw them another symbolic cracker or two next year as well to keep his retarded supporters sweet to him while he prepares to destroy the last of America’s safety net.
The poem is interesting but I object to “God-dam”…I’ll respect your beliefs, please respect mine…
Oh, and my son has cognitive disabilites and it’s humiliating to be called retarded…..Best Wishes!
Kudos for bringing up a burning issue of a year ago: letting Citi and perhaps BofA go into receivership. Purge the rottenness out of the system!
We have gone Japanese, not Swedish. The economic result was predictable.
ZIRP led to booming financial markets, but there is no multiplier/feedback effect into this real economy. It is the Rogoff/Reinhard credit crisis story once again. Slow slog.
Am not sure that the “conservative” criticism leads Obama to reprise 1937, though. He has the largest Congressional majority in quite some time. He can do whatever he wants fiscally.
Basically it will take saving to get out of the debt trap.
Writing down unpayable principal is a very helpful part of that process.
Will this happen: doubt it.
Prognosis: more downside risk to stocks, 4000 Dow target one of these years realistic (adjusted for flation).
I agree with you, but, we could have gotten out of the debt trap years earlier if Citibank and Bank of America had been forced into receivership. If the bondholders of Citibank and Bank of America had had to take a massive haircut, and got the rest of their bonds converted to equity, both of those banks would now have pristine balance sheets, and billions of dollars worth of debt would have been purged from the system. Since between the two of them they represent 50% of the banking assets in the America, that would have been huge in terms of getting us out of the ‘recession’ sooner.
The Bush/Obama ‘too big to fail’ doctrine means that now 50% (at least) of the American Banking system is, in fact, bankrupt, and will have to spend the next 10 years or more repairing their balance sheets.
The more he talks the less people listen. He has fully overexposed himself with a solid year of this jibberish.
Americans as a whole have certainly awoken to the ruse this Administration intends to pull on them.
Over the last 20 years, government largesse has imprisoned what is left of middle America, and they don’t like it. The paltry tax cuts he promised don’t resonate compared to the orgy of dollars spent on bailouts, labor freebies, pet projects, earmarks, and the like.
He has surrounded himself with a cadre of unsavory crooks, and they are undermining his credibility. Pelosi? Geithner? Reappointing Bernanke? Rahm? He should do some serious housecleaning, and distance himself from these clowns. You are the company you keep.
All of his grandiose initiatives, once revealed, have fine print that offends peoples sensibilities and they are tiring of checking all his facts.
As households continue to cut back and restrain themselves, the Federal Govt signals its intent to continue its orgy of wasteful spending. It is a slap in the face, and we know who ends up paying that bill.
This idiot is the natural offspring of a gullible electorate tricked by timely political blathering coming off the post-Bush financial meltdown. Shameful embarrassing stuff.
Oh, and the speech? Same as all of them. Mesmerizing, awesome, inspiring, and utterly forgotten by now.
You’re right that Obama fatigue has set in.
Where I disagree and call people “Communist” is that I think only entitlement programs for other people are unpopular. When the entitlement benefits me, then it is necessary and deserved.
All Obama’s policies have been antijob. He seems to be heading more populist direction with his supposed “spending freeze.” However, the problem is the government is in the way of job creation. All government can do is expand itself. Where do government jobs come from? Taxes, and at worse debt. Same thing with spending. I rather have the Chinese lend to entrepreneurs than the US government. All government can do is spend money, and so far, this is proven to be the case with the stimulus, and not investments what investors do that will create gains for the future of the economy. He doesn’t know what he is doing, and low interest rates do nothing to create prudent investment. Savings have to occur, and without savings, industrial capital is hard to come by. 8, or 14 dollar taxcuts isn’t going to create much jobs, and in fact could only lead to increased deficit thus even more government borrowing that is why congress consistently raises the debt ceiling to pay off government liabilities, and even more programs.
And another point I would like to make focal though minor, is increasing minimum wage during recession, or depression. What’s the point of that? To make employers not hire more? Obama is a politician, and a ideologue. A politician that lies, and ideologue that doesn’t grasp economics.
New Deal 2.0 is very much a Keynesian website. I been to that sight, and much of the comments there are by Keynesian big government ideologues who hate the free market concept. I don’t think Obama will do much other than the same. There is already tax cuts, and tax credits for many people such as government housing that has expanded dramatically lately. It’s just more Keynesian behavior to try to stimulate the unproductive parts of the economy at the expense of the viably productive parts, spending at the expense of savings. Instead of allowing the economy readjust, it seems that Obama, and Congress are engaging in quasi-planned economy policy. It’s not going to work, and the process in trying to do so it will a arduous one not bearing much fruit.
Here’s a somewhat different interpretation of last night’s performance:
http://outsidethe-cardboard-box.tumblr.com/post/357393472/state-of-the-cardboard-box
(Satire)
Cheers!
Marshall Auerback: “It would have been interesting to hear the President explain how we would succeed in Afghanistan…”
Maybe this article from The Independent (28 Jan.) fills in that gap. Apparently the new solution is to buy them off!
“Britain and the US are backing a new strategy to buy off “soft” supporters of the Taliban in a radical attempt to end nine years of war in Afghanistan. The plan, to be approved at a 60-nation conference in London today, comes amid unexpected signs of growing political support for the equally high-risk idea of talks leading to a political settlement with the Taliban leadership.
“In a telling move, on Tuesday night the UN Security Council bowed to pressure from the Afghan President, Hamid Karzai, to lift sanctions imposed on former officials who served in the Taliban government driven from power by the US-led invasion of 2001.
“The multimillion-pound “peace and reintegration” fund would seek to lure low ranking Taliban fighters, who join out of poverty rather than ideology, by giving them jobs, schooling or land for farming. An effective amnesty for these men, now believed to make up 75 per cent of the insurgency’s ranks, means that even those who took part in attacks involving the deaths of British or US soldiers would be rehabilitated”.
http://www.independent.co.uk/news/world/politics/the-new-afghan-plan-buy-off-taliban-1881327.html
In a way, this sounds more sensible than a “Forever War”. But after so much sabre-rattling rhetoric, the lack of principle behind the whole Afghan adventure is thrown into heavy relief.
“Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed. 200,000 work in construction and clean energy. 300,000 are teachers and other education workers. Tens of thousands are cops, firefighters, correctional officers, and first responders. And we are on track to add another one and a half million jobs to this total by the end of the year….”
What another million or so entitlement public sector jobs with good secure salaries and pensions to go with it. Who pays for all this?
Read the “Bookseller of Kabul” to see what your average Afghan feels about the Taliban. They despise them. At least those in the northern part who are not Pushtun.
As noted by Andrew Samwick:
“…it’s also gonna be very hard for us to have “export-led growth” when we have a consumer-based economy. And because our banking system encourages us to be consumers rather than producers, we should blame our banking system for hindering our efforts to build an export economy. So until we return to a time when our banks were subservient to the rest of our economy, especially our manufacturing base, our chances of ever being able to ramp up our exports will remain very low.”
CORRECT. Accurately stated essence of the problem. Banking used to be about 2% of the GDP. Now it’s over 20%.
( http://www.bea.gov/industry/gdpbyind_data.htm )
What’s wrong with this picture!
While many might not agree with the recent Supreme Court’s decision on campaign finance, Obama’s attack on the Supreme Court was unprecendted. The Justices were his invited guests and then he ambushes and humiliates them before an appaulding crowd of bufoons (aka Senators and Representatives).
The Judiciary is very protective of its Third Branch of Government. I would not be surprised if the Administration gets some nasty surprises from the Courts.