Archive for Wednesday, August 3, 2011

Going nowhere: Economy struggles to find footing

August 3, 2011

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— Shoppers won’t shop. Companies won’t hire. The government won’t spend on economic stimulus — it’s cutting instead. And the Federal Reserve is reluctant to do anything more.

Without much to invigorate growth, the economy may be in danger of slipping into a stupor like the one Japan has failed to shake off for more than a decade. And Wall Street is spooked.

The Dow Jones industrial average Wednesday barely broke an eight-day losing streak, finishing up about 30 points. A nine-day losing streak would have been the Dow’s first since February 1978.

Even with the gain, the Dow has fallen 828 points, or 6.5 percent, over the past nine trading days. Investors didn’t even pause to celebrate the resolution over the weekend of a dangerous debt standoff in Washington.

Stunned by news last week that the economy barely grew in the first half of 2011, economists are lowering their forecasts for the full year and recalculating the odds that the economy will slide back into recession.

Kurt Karl, chief U.S. economist at Swiss Re, has cut his 2011 forecast for growth this year to 1.8 percent from 2.6 percent. And he has bumped up the likelihood of another recession to 20 percent from 15 percent.

“The last week has made it much more likely that corporate profit estimates will be revised lower,” said Nick Kalivas, a vice president of financial research at MF Global.

The stocks that have fallen the furthest have been those of companies that fare best in economic expansions. Industrial companies like Caterpillar and Boeing, energy companies like Exxon Mobil and Chevron, and retailers like Amazon and Coach have all fallen by more than the broader stock market.

Investors have pushed government bond yields to their lowest level of the year. The 10-year Treasury note now yields 2.6 percent. Bond yields typically fall when the economy is weak because nervous investors view bonds as a safe place to park their money, and there’s less chance that inflation will erode their value.

The economy started sputtering early in the year. Economists at first thought the slowdown would be temporary, the result of a short-term rise in gasoline prices and an earthquake in Japan that disrupted shipments of auto parts and electronics.

But the weakness persisted. And it worsened as a political fight over debt and deficits raised the risk that the U.S. government would not be able to pay all its bills.

“It now seems fairly clear that those shocks have done a lot more damage than we expected,” says Leo Abruzzese, global forecasting director for the Economist Intelligence Unit. “They seem to have had a devastating effect on confidence.”

After the government reported that the economy grew at an annual pace of 0.4 percent in the first quarter and 1.3 percent in the second, Abruzzese is cutting his estimate for 2011 growth from 2.4 percent to less than 2 percent.

It’s hard to see anything lifting growth to the 2.5 percent needed to keep unemployment from rising, let alone the 5 percent needed to bring the rate down significantly from June’s 9.2 percent.

“Sales are what keeps the market moving higher, and there’s not much demand when there’s only 0.4 percent growth,” said Andrew Goldberg, U.S. market strategist at JP Morgan Funds.

When the economy grows less than 2 percent over a 12-month period, it risks slipping into recession, says Mark Vitner, senior economist at Wells Fargo Securities. Over the most recent such period, the economy grew just 1.6 percent.

Few economists are predicting another recession, despite a series of weak economic reports. Gasoline prices have come down from their high of almost $4 a gallon in May. And Japanese factories are starting to crank up again after the March earthquake.

At the heart of the economy’s problems are the debts that consumers built up during the early and mid-2000s. Many borrowed against the equity in their homes, convinced that house prices would rise forever.

When housing prices collapsed, people were left owing more than their homes were worth. Others charged up their credit cards. Now it’s payback time, and Americans are spending less or spending cautiously as they slash their debts.

Companies are reluctant to hire until they’re convinced enough customers are ready to buy their products or services. Corporate profits are booming, though, because companies laid off millions of workers, learned to operate more efficiently with smaller staffs and expanded in growing markets overseas.

“If companies were inclined to hire, they could,” Abruzzese says.

So companies are waiting for consumers to spend, and consumers are waiting for companies to hire them or offer generous pay raises and job security. It’s a tough cycle to break.

Comments

thuja 3 years, 7 months ago

But the wealthy don't want to pay taxes because they are the "job creators"

Say it with me "job creators".

Also, now say, "Made in China"

Ron Holzwarth 3 years, 7 months ago

Yup!

And pretty soon the minting of the coinage and the printing of the paper money of the U.S. currency will be subcontracted to a company in China.

Richard Heckler 3 years, 7 months ago

People's Budget = $4 trillion reduction

This is the only budget that does everything this country needs:

* Creates good-paying jobs
* Fully maintains our social safety net
* Invests in education
* Ends our costly wars
* Closes the tax loopholes that have made offshoring jobs profitable
* Ends oil and gas subsidies that pollute our country at taxpayer expense
* Creates a national infrastructure investment bank to help us make intelligent investments for the future

What the Peoples Budget does very specifically:

http://cpc.grijalva.house.gov/index.cfm?sectionid=70&sectiontree=5,70

http://www.npr.org/2011/04/15/135435883/the-nation-obama-should-fight-for-peoples-budget

http://www.democracynow.org/2011/4/14/while_obama_touts_compromise_with_gop

http://www.thenation.com/blog/159939/fighting-peoples-budget

NOW....

How in the world could either party members turn down an opportunity to cut $4 trillion from the debt? By way of the "Peoples Budget"

It goes like this. The savings would come by way of white collar entitlements aka pork barrel spending aka earmarks aka reckless spending and tax hikes. It was fear of losing special interest campaign money, guts to terminate Bush tax cuts and backbone to cut off those pork barrel corporate subsidies.

The remedy:

One answer to problems such as this: CUT OFF special interest financing of elections! YES even at the local level.

Our government is always claiming the USA is about democracy. In that case allow the citizens to practice democracy by allowing citizens to vote in these measures come 2012:

Let's demand a new system and vote in Fair Vote America : http://www.fairvote.org/irv/ Demand a change on the next ballot.

Let's have public financing of campaigns. Citizens cannot afford special interest money campaigns for it is the citizens that get left out. Let citizens vote on this issue. http://www.publicampaign.org/

Bribery of elected officials is the most stinky of all bribery!

Flap Doodle 3 years, 7 months ago

How to not appear crazy on the internet: "...And there is another type of Caps Lock user who doesn’t capitalize whole sentences but INSTEAD capitalizes a few SPECIFIC words for EMPHASIS. Now read a sentence like that aloud, shouting every time you come to a capitalized word, and tell me you do not sound like an absolute freakin’ lunatic. This method can turn even basic known facts into crazy-sounding gibberish (“The SQUARE of the HYPOTENUSE of a RIGHT triangle equals the SUM of the squares of the OTHER two sides”)... http://pajamasmedia.com/blog/tips-for-not-appearing-crazy-on-the-internet/?singlepage=true

gl0ck0wn3r 3 years, 7 months ago

The "People's Court" is the way to solve THIS problem FOREVER because the RICH people WILL NEVER,ever,want to SOLVE it.

The judge from the show's original 12 years was Joseph Wapner. Rusty Burrell was his bailiff, Jack Harrell was the announcer, and Doug Llewelyn was the host and court reporter, who would announce the matter of the dispute at the beginning of each trial. He would also interview the plaintiff and the defendant after the court ruling, to gauge their responses to the verdict. Llewelyn would often end each episode with a jaunty "Don't take the law into your own hands: you take 'em to court." which became something of a 1980s catch phrase. If a case ended with a verdict for the defendant, however, Llewelyn would instead end the episode by saying, "If someone files a lawsuit against you and yet you're convinced you've done nothing wrong, don't be intimidated. Just be sure to stand up for your rights: go to court."

Judge Wapner would greet his litigants by saying, "I know you've been sworn. I've read your complaint..."

The People's Court deals in small claims matters. When the show premiered in 1981, litigants could not sue for more than $1,500, which was the limit for small claims court at the time in California. As the laws in California changed, so did this amount. By the end of the original run in 1993, litigants could sue for up to $5,000, which is now the law in most states.

Researchers for the show would examine small claims filings in Southern California and approach the plaintiff and defendant in interesting cases. The producers would offer to have Judge Wapner arbitrate the dispute if they would agree to dismiss their action and be bound by Judge Wapner's decision. Through this approach, the show could get real people with real cases. However, even though the show is decorated and run like a real courtroom, it is not a real court or part of any judicial system, but instead a form of binding arbitration.

The losing party does not actually need to pay the judgment, as such. Instead (as is stated in the disclaimer at the end of each show), both parties are paid from a fund (set up by Ralph Edwards-Stu Billett Productions). This fund was based on the amount of the lawsuit claim, but an exact formula was not stated. The fund was to be first divided equally, then any monetary judgment ordered was subtracted from the loser's half (and presumably both halves in the case of cross judgments). Each litigant received at least what remained of their half in shows concluding with that disclaimer.

The disclaimer did not call this fund an "appearance fee", a term which appeared later in connection with The People's Court and other court shows. There may have been a later period when The People's Court paid the judgment, plus expenses and only a modest appearance fee to each litigant.

Richard Heckler 3 years, 7 months ago

An estimated 20 million need full time jobs since the Bush/Cheney home loan fiasco and the Bush failed bailout plan.

Yet elected officials don't seem to understand that cutting benefits that taxpayers pay for will not produce the desired results. It will take money out of the economy.

Privatizing any taxpayer funded benefit program is among the dumbest ideas on the table. Private industry will steal those tax dollars in a flash then claim they don't know where are tax dollars went = another tax dollar bailout.

The only answer is the feds putting say 11 million back to work thus generating economic growth. Tax dollars would be paid on this money which = government getting some of that money back. In addition this jobs bill money would create other jobs due to the spending that is stimulated which generates more tax dollars. Now the USA is generating new revenue dollars.

Generating more and more and more tax dollars is key to survival of the USA and our benefits that are quite good benefits. Yes we know that the Koch family and Wal-Mart family money are working against great gov't benefits paid for by taxpayers. But why is the question?

These great back door operators want to get their hands on OUR trillions of tax dollars which will make them more wealthy. What is privatizing? Moving our tax dollars from safe gov't programs to private industry and their:

  1. CEO salaries
  2. stock options
  3. advertising
  4. shareholders
  5. huge profits that will likely avoid taxes
  6. corp jets
  7. contributions to special interest campaigns

All of the above = corp waste of OUR tax dollars!!!

cato_the_elder 3 years, 7 months ago

When sworn into office, Barack Obama and his Democrat cohorts could have done the following, all of which would have been supported by Republicans and would have jump-started our economy:

  1. Reduce corporate income taxes.

  2. Reduce personal income taxes.

  3. Abolish the Capital Gains Tax.

  4. Abolish the Estate Tax.

Instead, they spent trillions of dollars we didn't have on pork-barrel rewards for their supporters. Where is the American economy now, after 2 1/2 years of Obamanomics?

Government cannot create prosperity. Only free enterprise can, and only if government gets out of the way. Bear that in mind when you cast your vote in 2012.

jafs 3 years, 7 months ago

Why would you think that a Democratic president, elected by folks who were upset about ongoing Republican policies, would immediately enact those same policies?

That just doesn't make any sense.

Ron Holzwarth 3 years, 7 months ago

I have to agree with jafs on that one. # 1, 2, 3, and 4 might all be good ideas. But, I'm not sure they would be in the best interests of the country, because there is no way to go back and try it the other way.

But I am sure about this: They all appear to be Republican policies!

jayhawklawrence 3 years, 7 months ago

As a country we are in danger of creating an entrenched and wealthy elite that controls private property and a large population of poor renters.

The idea of an expanding and dynamic middle class will become, like the "American Dream", something that politicians use in their speeches that will have no meaning in reality.

This is where the Libertarian philosophy will lead.

Our political leaders share in the blame for creating a dim and depressing vision for our nation.

jayhawklawrence 3 years, 7 months ago

I think every American has to reconsider their political party affiliation and look at becoming an Independent. We need to open our minds to the possibility that neither political party and none of the biased opinion writers and television anchors is serving the best interests of the average American.

Then we need to try to identify candidates who have better character, intelligence and experience than what we see in politics today. We have to vote for people who want to serve the needs of the Average American, not the wealthy elite or the special interests or the ideologues. Not the heavily funded lobbyists or the think tanks writing legislation that our puppet legislators sign off on.

We need to change the way the game is being played by punishing these people with our power to vote.

We need to tell them that we are not for sale.

Ron Holzwarth 3 years, 7 months ago

Are you seriously talking about that? Your statements appear to be exactly in line with the ideas of the founders of the Republic of the United States of America. Political parties are not mentioned in the Constitution at all, because the founders agreed with your statements. When the Constitution was written, they thought that every American would be what we call an Independent today. Political parties were a later idea.

But there's a problem with your statements. And that is, the lobbyists and the controlling interests of the current political parties will fight those ideas to the bitter end.

jayhawklawrence 3 years, 7 months ago

The data clearly shows that the Bush tax cuts contributed to the hole we dug ourselves and that the Republican Party is aligned with the wealthiest Americans at the expense of the rest of us.

jayhawklawrence 3 years, 7 months ago

What we need in government today is a house cleaning.

We are getting a level of quality that is unacceptable. We need a quality revolution in government and more thoughtful and bi-partisan decision making or we are not going to be able to compete in the 21st century.

We are going to continue on a downward slope and if we do that, the middle class will begin to disappear. Another country will become the new world super power.

We have two competing groups in politics today and neither one has a clue.

Neither one can manage or make decisions with the power we gave them to lead.

monkeyhawk 3 years, 7 months ago

"Shoppers won’t shop. Companies won’t hire. The government won’t spend on economic stimulus — it’s cutting instead. And the Federal Reserve is reluctant to do anything more."

Yet, Mr. Obama is still having the boogie down at the White House on the backs of those who actually pay income taxes.

Where did all that stimulus money go? Wasn't that for roads and infrastructure? Didn't it pi-- anyone off the see the prez and his buddy, the GE tax evader, giggle about ""no shovel ready jobs".

cato_the_elder 3 years, 7 months ago

"Where did all that stimulus money go? Wasn't that for roads and infrastructure? Didn't it pi-- anyone off the see the prez and his buddy, the GE tax evader, giggle about 'no shovel ready jobs'."

You bet it did.

usnsnp 3 years, 7 months ago

Corporations do not want to hire until they see consumers spending more, but how is this going to happen, if people do not get hired they have very little money to spend, if workers do not get some type of pay raises they cannot spend more, if people that are retired do not get cola raises on their retirement they do not have extra money to spend. Corporations are swimming in money, the problem is that they want a sure thing other wise they are not going to spend money. As for lowering taxes, American corporations and the American people are paying taxes at the lowest rates in over 60 years. The lowering of taxes while fighting two wars is one of the major reasons that we are in financial trouble, the implementing part D for drug benifits with no fee and not letting Social Security Dept. bargin with drug corporations for discounts is another big reason we are in financial trouble.Yes Federal. State, and local governments have made mistakes, corporations have made mistakes, the American people have made mistakes, but look at the group that has screwed up things the most, CONGRESS. Example FAA funding, 4000 FAA employees furlowed( some of them are safety inspectors), 70,000 construction workers being layed off, Federal Government loosing 25 to 30 million a day in taxes on tickets (most of this money is going into the pockets of the Airlines), where is CONGRESS, they are on a 5 weet recess. The only thing CONGRESS is intrested in is staying in office and living off the tax payers.

jayhawklawrence 3 years, 7 months ago

The consensus is that the health care bill needs to be improved, but one of the main reasons this has not happened is not because of health industry lobbyists. It is because the Republican Party needs a bogie man to scare people. They have a large number of zealots who will mime whatever they are told.

A typical example is a wealthy businessman I know who said he was so angry at Obamacare that he laid off half of his employees and downsized his company. He later had a change of heart and hired them all back.

I asked him what it was about Obamacare that upset him so much. What specific feature in the bill did he have a problem with?

His response to my astonishment was, "I don't really know but I have my people looking at it."

Most of the loudest complainers really have no idea what is in the bill.

jayhawklawrence 3 years, 7 months ago

You may call me a liar if you like, but I am telling the truth.

Most people know that most of the loudest complainers know nothing about what is in the bill.

If there was no Obamacare bogie man, the Republican Party would have to invent something else.

jayhawklawrence 3 years, 7 months ago

The new bogie man is the stimulous bill that supposedly did not do anything.

The rhetoric is not supported by the facts.

What we need to do is analyze the data correctly and modify our strategy appropriately. We can probably assume that plenty of mistakes were made but mistakes are to be expected and learned from. There can be no improvement if there are no mistakes. Mistakes are a part of any improvement process. If we are not allowed to identify mistakes and make adjustments, you will not be able to improve the process.

The current competing option is to eliminate more taxes and regulations for the wealthiest Americans and corporations.

In order to approve a massive payout to the wealthiest Americans, Republicans have to beat us to death with anti-Obama rhetoric.

This is what we are going to get for the next 2 years.

In my view, no political philosophy or recovery plan will be effective unless it is created and implemented by good management philosophy and not impeded by political saboteurs and uncompromising zealots and opportunists.

Leaders with good character, intelligence and experience will choose good management over partisan politics because this is what the country wants and needs. Without better quality management in government, we cannot compete in the new global economy.

Fossick 3 years, 7 months ago

"The rhetoric is not supported by the facts."

Actually, it is. The program ought to be judged by what was claimed of it before it was passed, and what was claimed was that without it, unemployment (Q3 2011) would be about 7.5%, but with it, unemployment would be ~6.5% http://factcheck.org/Images/image/2009/Articles/6_16_2009_Making_Sense_Stimulus_Spending/Romer-Bernstein_Chart.jpg

Unemployment is currently about 9%.

So either: a) The stimulus didn't do anything (and it sure didn't do what was claimed), or b) government economists don't know what they're talking about, or c) both a and b.

The White House claim is that, 2 years later unemployment is worse than their scare numbers because Bush left things in a far worse predicament than they understood. While that is a politically helpful dodge, is simply a variant of b). Their admission that they didn't know the facts before they spoke and acted ought not raise our confidence in their retrospective explanations.

There can be no argument that the stimulus failed to do what was promised. None. The proof is in the charts of those who promoted it.

But the stimulus did do one thing: buried deep within its bowels is an obscure accounting rule change that allows corporations to depreciate jets on a 5-year schedule rather than a 7-year one. Yes, the infamous "tax break for corporate jets" was created in the Stimulus bill. So while it did not put people to work, it sure made the White House speechwriter's job easier.

gudpoynt 3 years, 7 months ago

So... shame on Obama for thinking tax breaks on corporate jets would stimulate the economy... which apparently they did not.

And now... shame on Obama for citing those tax breaks on corporate jets as part of the hole in the tax revenue stream that is contributing to our deficit.

But... no shame on Tea Party and GOP lawmakers for insisting on the continuation of those very tax breaks that were part of a stimulus package they seem adamant in declaring a failure?

I'm confused.

Fossick 3 years, 7 months ago

I'm not surprised. The 'tax break' was actually an incentive to buy corporate jets, which would allegedly support the American jet industry, save jobs, and all that good stuff that the stimulus was going to do. After including it in the stimulus, Obama then turned around and cited it as an example of all the evil tax breaks the evil rich get for being rich.

The fact is that it's both a tax break and a stimulus; Most loopholes are. It is dishonest to criticize one half of it and half of those who benefit from it - and have your ignorant minions running around parroting your words - when you know full well that the only reason they can take advantage of it is because they did what you asked them to do, which was purchase a corporate jet between January 2009 and January 2010, thereby supporting the very jobs you wrote the law to support.

That Obama mentioned it 6 times in one speech just means he's a panderer to the ignorance of his class-envy minions, no more. If there's shame in that, it didn't seem to keep him from being elected.

gudpoynt 3 years, 7 months ago

Well, I don't think that Obama has ever cited tax breaks, nor the rich that take advantage of them, as "evil".

Inflammatory rhetoric aside, it's true, the accelerated depreciation for things like corporate jets was reinstated in the 2009 stimulus bill. I say reinstated because it used to exist from 2001 to 2004 (http://www.irs.gov/newsroom/article/0,,id=182005,00.html), and was initially meant to boost the airline industry after 9/11.

But the reinstatement of nation-wide accelerated depreciation wasn't limited to corporate jets. It applies to a wide range of qualifying assets, such as equipment and machinery.

In other words, the reinstatement of accelerated depreciation was never meant to apply ONLY to corporate jet owners. At least as far as I've read. It was meant as a stimulus for anyone who has significant investment in capital assets, and the industries that make those assets.

So implying that Obama somehow snuck it into the stimulus bill only to rail against it later is a bit dishonest.

Furthermore, of all the provisions in the '09 stimulus bill, for which not one Republican voted, this particular one received some Republican kudos. Notably, from our boy Todd Tiahart, one of the more conservative kids on the block, who's constituents in the "Air Capital City" of Wichita have felt a huge constriction in their darling industry.

All that aside, I think what Obama is trying to say when he calls for ending tax breaks for corporate jet owners (and yachts, don't forget he also mentions yachts quite a bit), is that we need to be a little more discriminatory on which types of capital assets should be given a break, and which ones can do without.

The fact that if a yacht has a bed and a crapper, it can be considered a 2nd home, and thus the owner can take advantage of the mortgage interest deduction on that asset, is an example of the type of loophole Obama and other Democrats are saying we should probably close.

Granted, the total amount of money to be gained by closing such loopholes is a minuscule fraction of our current national deficit, and using them as examples is a clear case of assigning way too much importance to something relatively trivial in an effort to score political points.

But it still makes good fiscally conservative sense to address the issue. Bottom line, Obama is merely saying that we'll get more deficit reducing bang for our buck by ending tax breaks such as these, than any economic stimulus we will get by keeping them around.

I really don't see anything wrong with attempting to fine tune the provisions originally laid out in the stimulus bill. Keep the ones that worked, get rid of the ones that didn't. It was a stimulus bill after all wasn't it, which means that everything that was in it should be considered only a temporary solution. If the temporary solution looks like it might keep working, then let's keep it going. If it looks like it didn't do what it was supposed to do, let's get rid of it.

gudpoynt 3 years, 7 months ago

In any event, the Teapublicans now find themselves in the awkward position of supporting the continuation of these tax breaks that were part of stimulus bill they insist never worked.

jayhawklawrence 3 years, 7 months ago

Whatever bill gets passed will be a bi-partisan bill or no bill at all.

That makes your comment moot.

The best thing our government can hope for is to ratchet down the rhetoric and try to create some stability in the market.

But I doubt the Republicans will be able to do that.

I have voted mostly Republican since I was 21 years old. Last time, I went about 60% Republican which means I voted for more Democrats than I ever did before.

I have yet to see a single person I will want to vote for. I find the Republicans disgusting and the Democrats unrealistic.

Maybe we need to post some want ads.

LHS56 3 years, 7 months ago

Change isn't going to come folks. Am I the only one that saw that 90% of the jobs are classified as service jobs? We are simply trading money. Pay a plumber $100 to fix a leak? Charge him $100 to do his tax return. Just trading dollars. The jobs are outsourced from the USA or goods are imported. New jobs are needed? Where? What? When? We rewrote the specifications so Boeing could have the contract for the airplanes or those jobs would have been lost to FRANCE. When we start losing jobs to France, we have a problem.

cato_the_elder 3 years, 7 months ago

As I've said before, Obama has become Jimmy Carter faster than Jimmy Carter became Jimmy Carter:

http://www.marketwatch.com/story/dows-losing-streak-now-in-ninth-day-2011-08-03

cato_the_elder 3 years, 7 months ago

"Jimmy Carter was an outstanding prez in contrast to Obama."

You may have a point. Obama's already worse than Carter.

Flap Doodle 3 years, 7 months ago

At least we'll all get tickets to the 2016 Olympics in Chicago, won't we?

Flap Doodle 3 years, 7 months ago

Your tax dollars at work: "...The Palestinian Authority is spending more than $5 million per month in salaries for 5,500 convicted and alleged terrorists imprisoned in Israel -- payments that defy congressional rules for U.S. funding to the PA, according to a new report from an Israeli research institute. Palestinian Media Watch released a report last week that found that all Palestinian and Israeli minority Arabs in Israeli prisons for terror acts have been legally receiving a monthly salary from the PA under a new law passed in April that simply “formalizes what has long been a PA practice..." http://mypetjawa.mu.nu/archives/208853.php

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