Millennial Double Whammy

The Millennial double-whammy = debt + no income

Harvard: Just 6 in 10 Millennials have jobs, half are part-time - Paul Bedard

A comprehensive new Harvard University report on Americans under 30, the so-called Millennials, shows that the economy is having a crushing impact, with just 62 percent working, and of those, half are toiling at part-time jobs.

The report, released by Harvard's Institute of Politics, paints a depressing economic portrait of young Americans, many of whom are stuck with huge college tuition bills and little chance of finding a high-paying job.

But over half, or 59 percent of those aged 18-29, have gone to college and The report reveals that time in college is a better sign of social status than income, mostly because jobs aren't available.

Check list for those just starting out:

[ ] Learn the word "retrench"
[ ] Avoid debt
[ ] Find a lucrative career-path (whether you go to college or not)
[ ] Start saving

Sandbaggers

Collecting Disability Becomes A Career Choice For Men - Michael Barone

Between 1996 and 2011, the private sector generated 8.8 million new jobs, and 4.1 million people entered the disability rolls.

Is This a Recovery?

Americans’ Incomes Have Fallen $3,040 During the Obama ‘Recovery’ - Jeffrey H. Anderson

Americans must be wondering how much more of this “recovery” they can afford.  New figures from the Census Bureau’s Current Population Survey, compiled by Sentier Research, show that the typical American household’s real (inflation-adjusted) income has actually dropped 5.7 percent during the Obama “recovery.”  Using constant 2012 dollars (to adjust for inflation), the median annual income of American households was $53,718 as of June 2009, the last month of the recession.  Now, after 38 months of this “recovery,” it has fallen to $50,678 — a drop of $3,040 per household.

Yet it gets worse.  Amazingly, incomes have dropped even more during the “recovery” than they did during the recession.  In fact, they’ve dropped more than twice as much as they did during the recession.  From the start to the end of the recession, the real median income of American households fell $1,413, or 2.6 percent.  From the end of the recession to the present day, it has dropped $3,040, or 5.7 percent.  This begs the question:  What kind of “recovery” compares unfavorably with the recession from which it’s ostensibly recovering?

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Moreover, we’re still not headed in the right direction.  Last month, American households’ real median annual income fell by another $543 — from $51,221 to $50,678.  Sentier’s Gordon Green, former chief of the Governments Division at the Census Bureau, says, “This latest decline in real median annual household income is indicative of a struggling economy.”  He adds that, while we are “technically” in a recovery, “real median annual household income is having a difficult time maintaining its present level, much less ‘recovering.’”

Similarly, the percentage of Americans who are employed has dropped during the Obama “recovery” — from 59.4 percent during the final month of the recession to just 58.3 percent last month.  That’s according to the Obama administration’s own figures. 

The Economy - Jan 2012

MURRAY AND BIER: Avoiding a lost decade - Iain Murray and David Bier

Japan’s 1990s were lost for all the same reasons America’s 2011 was lost - the status quo prevailed. In 1986, Japanese economic growth fell from 4.4 percent to 2.9 percent. In response, the Bank of Japan slashed the discount rate in half, from 5 percent to 2.5 percent. During the next three years, Japan created one of the largest economic bubbles in history. It didn’t last. Real estate prices fell by 80 percent from 1991 to 1998, and the stock market collapsed to a quarter of its 1989 high.

Throughout the 1990s, Japan tried at least 10 fiscal stimulus programs and left interest rates below zero, while economic growth kept marching southward. None of this did anything other than ruin Japan’s fiscal health, taking the country from the best fiscal position in 1990 to annual deficits of 7 percent of gross domestic product and a national debt of 227 percent of GDP. Sound familiar?

The president has vowed that his new pile of programs will be different. He has called for new publicly funded infrastructure projects, and yet that’s exactly what Japan tried in the 1990s, repeatedly on a massive scale ($1.4 trillion in 2011 dollars). Rural towns were paved over, given grand new bridges, and a huge highway system was built. All of it failed to spur growth, and similar schemes are bound to fail as well.

Economic growth is not created from the top down. Government’s main job is providing a constant, consistent playing field - something Washington lawmakers have done much to undermine over the past decade. Americans can create wealth. Extending unemployment benefits indefinitely, playing around with new gimmicks or suggesting more stimulus won’t help in the long run. Leaving individuals free to use their talents and keep what they earn will. The recovery will only start with significant regulatory relief.

Eurozone Downgrades - Desperate, But Not Serious - Forex.com

The much-feared, yet equally much-anticipated, EU sovereign credit rating downgrades have arrived. The winners were Germany, the Netherlands, Finland, and Luxembourg, which saw their AAA ratings sustained. The losers were Belgium, Austria and France, which were cut one grade to AA+. The biggest losers were Italy, Spain and Portugal, which were cut two grades to BBB+, three steps above junk. The hope was that France could maintain its AAA rating, but a single notch downgrade was not entirely unexpected. Still, it does jeopardize the AAA rating of the EFSF and the successor ESM, but we will need to see the ratings agencies make that determination later.

Debt crisis: as it happened January 16, 2012 - Szu Ping Chan and Andrew Trotman

S&P has stripped the European Financial Stability Facility (EFSF) of its AAA crown, potentially pushing up the bail-out fund's borrowing costs, and adding to the eurozone's general woes. S&P said that the fund was only as good as its backers, and that the EFSF could face further downgrades if "additional credit enhancements" were not put in place. The head of the EFSF said the downgrade would not reduce its €440bn lending capacity, though Germany's finance minister Wolfgang Schaeuble has ruled out any hike in EFSF guarantees.

The Economy - October 2011

This is just the beginning. Things are going to get worse before they get better. Americans need to follow some good old-fashioned advice:

• If you're in debt, pay off your debts.
• If you're out of debt, do not borrow.
• If you're having trouble making ends meet, reduce your overhead.
• If you're unemployed, acquire some marketable skills asap, or start your own business. Do not rest until you get some cash-flow.
  
• If you're earning money, set some aside for the future.
  
• If you're going to college, pay as you go. Under no circumstances enroll in a college you cannot afford. And while you're there, gain some knowledge that will get you started on a rewarding career.
• Have some self-respect: Do not depend on the government to take care of you, and don't mooch off of friends and relatives.
• Create wealth through your own productive labor (including mental labor). Labor is only productive if someone is willing to exchange cash or services for it, or it increases your personal capital.
• Don't vote for politicians who promise to give you something. They are con-artists and thieves.

A long, steep drop for Americans' standard of living - Ron Scherer

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth – think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people's buying power by 3.25 percent since mid-2008.

Scary Budget Fact of the Day - Peter Suderman

The United States will officially pass the 100 percent debt-to-GDP line on Halloween. Via Zero Hedge:

October 31, elsewhere known as Halloween. Yes, ladies and gentlemen: All Hallows E'en will be doubly scary this year: for the first time since World War II, US debt will officially surpass GDP on Halloween 2011.

Student Loan Bubble To Exceed $1 Trillion: "It's Going To Create A Generation Of Wage Slavery" And Another Taxpayer Bailout - Tyler Durden

USA Today reports once again on one of its favorite subjects, student loans are set to surpass $1 trillion in total notional for the first time in history on what appears to be relentless demand and interest for this cheap form of educational financing, making this debt burden the single largest form of consumer debt, well bigger than outstanding credit card debt, and smaller only compared to mortgage debt. "The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards."

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So... debtors know it's a bubble, lenders know it's a bubble, everyone knows it's a bubble, yet it is growing faster now than ever before.

More EU Crisis

Europe on the Brink - Megan McArdle

I haven't been blogging much about Europe because I felt like I was mostly repeating myself. Europe is not an optimal currency zone. It opted for monetary union without the fiscal or labor market integration that make America's sprawling currency zone work. So far, the various governments have failed to mount a really credible coordinated response. I don't see how the thing can hold together, except that Jesus, it will be hell if it all falls apart.

But it's probably worth interrupting your regularly scheduled unemployment-and-kitchen-blogging to point out that it all really seems to be coming to a head:

In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone's mind: "If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems."

The Economy - September 2011

California Employment at Record Low - Christopher Palmer

The percentage of working-age Californians with jobs has fallen to a record low, and employment may not return to pre-recession levels until the second half of the decade, according to a research group.

Just 55.4 percent of working-age Californians, defined as those 16 or older, had a job in July, down from 56.2 percent a year earlier and the lowest level since 1976, the Sacramento- based California Budget Project said in a report released late yesterday.

California’s 12 percent unemployment rate in July, the nation’s second-highest after Nevada, compared with 9.1 percent nationwide. The most-populous state lost 1.4 million jobs during the recession that began three years ago, and has gained back only 226,800, or about 17 percent, according to the report.

Senior IMF Economist Expects Hard Default For Greece. Soon. - ForexCrunch

The Greek government says any more steps will only deepen the recession and make things even worse. The debt trap is quite clear at this stage.

These complications triggered not only the aforementioned expectations for a hard default, according to WSJ:

“I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.”

A hard default means a messy one. A default that is not controlled could have a serious domino effect: it can push banks to bankruptcy (such as French banks, that are highly leveraged), and it can send bond yields of other countries much higher. A hard default for Greece also seriously endangers .

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All in all, the bailout mechanism secures only one thing: a crisis on every inspection. Last time, it ended with a reshuffle of the Greek governments, fresh austerity measures and violent protests on the streets of Athens.

Zero Jobs 101 — the Psychology of Alienating Employers - Victor Davis Hanson

Zero jobs last month — a net change of zero job growth? It was just announced that last month’s unemployment is still above 9% — despite the nearly five trillion dollars in Keynesian pump-priming, the near zero interest rates, the expanded unemployment and food stamp support, and the government takeovers and subsidies of businesses. There is a scary sort of deer-in-the-headlights look about Obama and Biden that is quite disturbing, as if they are thinking, “This was not supposed to happened to us. Geithner, Goolsbee, Orszag, Romer, Summers assured us that all this borrowing would turn things around — but they are all gone or leaving, so now we are alone? What to do?

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Here is the lament I heard: the near $5 trillion in borrowing in just three years, the radical growth in the size of the federal government and its regulatory zeal, ObamaCare, the Boeing plant closure threat, the green jobs sweet-heart deals and Van Jones-like “Millions of Green Jobs” nonsense, the vast expansion in food stamps and unemployment pay-outs, the reversal of the Chrysler creditors, politically driven interference in the car industry, the failed efforts to get card check and cap and trade, the moratoria on new drilling in the Gulf, the general antipathy to new fossil fuel exploitation coupled with new finds of vast new reserves, the new financial regulations, an aggressive EPA oblivious to the effects of its advocacy on jobs, the threatened close-down of energy plants, the support for idling thousands of acres of irrigated farmland due to environmental regulations, the constant talk of higher taxes, the needlessly provocative rhetoric of “fat cat”, “millionaires and billionaires,” “corporate jet owners,” etc. juxtaposed, in hypocritical fashion, to Martha’s Vineyard, Costa del Sol, and Vail First Family getaways — all of these isolated strains finally are becoming a harrowing opera to business people.

Despite enormous opportunity for many cash-rich firms to take advantage of the down cycles (low interest, plentiful potential employees, discounted prices, etc.), they are taking a pass, almost as if to collectively sigh, “This bunch doesn’t like me much and I’m going to hunker down, hoard my cash, and sit out the next year and a half until they are gone.” And the administration’s efforts to counteract these symbols and impressions by courting a high-profile, hyper-capitalist Warren Buffett, or a GE CEO Jeffrey Immelt have proven even more ironic: the former calls for higher taxes that his firms seek to avoid, or targets his post-mortem wealth to (more efficient?) private foundations that rob the Treasury of billions in lost inheritance taxes, or knows higher taxes won’t much matter to his tens of billions in net worth; the latter’s firm paid no 2010 U.S. income taxes on many of its profits and outsourced jobs overseas.

Bad Luck

BARACK OBAMA MUST BE A ROBERT HEINLEIN FAN! - Glenn Reynolds

Robert Heinlein:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as “bad luck.”

Barack Obama:

“We had reversed the recession, avoided a depression, gotten the economy moving again,” Obama told a crowd in Decorah, Iowa. “But over the last six months we’ve had a run of bad luck.”

WOLF: The bad-luck president - Dr. Milton R. Wolf

Mr. President, you didn’t run into bad luck. You created it.

America is indeed blessed, but it’s not by some accident that previous generations were able to create the most prosperous nation in the history of humankind. Our founding principles of constitutionally limited government, individual liberty and free-market capitalism have unleashed the powerful American engine of prosperity. This engine is fueled by individual players’ investments of labor and capital, and both are supplied directly in proportion to their confidence of realizing reward.

Americans will have enough confidence to invest themselves in our economy only when the basic tenets of the free market are observed. Chief among them is private property, the guarantee that the government will not seize a citizen’s belongings through confiscatory taxation or other means. Consumer sovereignty is the individual’s right to freely use his purchasing power, which in turn signals to suppliers what and how much to produce. Fair competition is the even playing field where all Americans play by the same rules and are judged by the same standards.

The Economy - August 2011 (part 2)

Labor Force Participation Rate Drops To 63.9%, Lowest Since January 1984 - Tyler Durden

... the labor force participation rate, and the reason why the general unemployment rate declined to 9.1%, just dropped to 63.9%, the lowest in 16 [ed. 26] years, or matches the participation rate from January 1984.

Capitol Journal: U.S. budget ax hangs over California - George Skelton

The dirty little secret is that California's current state budget is not $85.9 billion, the size of the much-debated, deficit-plagued general fund. You've got to add in the special funds ($34.2 billion) — much of them fed by fees dedicated for specific purposes — plus bond money ($9.4 billion). That totals $129.5 billion, but it still ignores federal dollars.

The real state budget includes an additional $79.2 billion in federal largesse, representing 38% of total state spending. This brings the grand total to $208.7 billion.

So the state of California is getting a nearly $209-billion spending program while putting up less than $130 billion itself.

The Economy - August 2011

Nightmare on Wall Street: Dow Plunges 513 - Adam Samson

According to preliminary calculations, the Dow Jones Industrial Average fell 513 points, or 4.3%, to 11,384, the S&P 500 tumbled 60.2 points, or 4.8%, to 1,200 and the Nasdaq Composite slid 137 points, or 5.1%, to 2,556. The FOX 50 tumbled 37.5 points, or 4.2%, to 864.

Tension on Wall Street was extremely high on Thursday. Traders piled up into Treasury bonds, seen as one of the safest non-cash assets during tumultuous times. Indeed, Treasury yields on 10-year Treasury securities dipped well below 2.5% -- the lowest since November.

"The mood is pervasively negative," said Peter Kenny, managing director at Knight Capital Group. "It would take quite the imagination to come up with a silver bullet" to re-instill confidence in the economy.

The VIX, sometimes referred to as a gauge of fear, spiked 36%. The Dow, S&P 500 and the Nasdaq all plunged into correction territory and into the red for the year.

U.S. incomes fell sharply in 2009 - David Cay Johnston

U.S. incomes plummeted again in 2009, with total income down 15.2 percent in real terms since 2007, new tax data showed on Wednesday.

The data showed an alarming drop in the number of taxpayers reporting any earnings from a job -- down by nearly 4.2 million from 2007 -- meaning every 33rd household that had work in 2007 had no work in 2009.

Average income in 2009 fell to $54,283, down $3,516, or 6.1 percent in real terms compared with 2008, the first Internal Revenue Service analysis of 2009 tax returns showed. Compared with 2007, average income was down $8,588 or 13.7 percent.

Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009. The data come from annual Statistics of Income tables that were updated Wednesday.

Analysis: Obama, Bernanke out of ammo to boost jobs, growth - Alister Bull

"It seems we've thrown everything at it. We've had QE1 and QE2, Stimulus 1 and Stimulus 2, and the unemployment rate is still 9.2 percent," said John Makin, an economist at the American Enterprise Institute in Washington. "Maybe there are just not many options here at this point," he said.

World stock markets shuddered after disappointing U.S. growth and manufacturing numbers and investors rushed to buy long-dated U.S. Treasury bonds in a move that suggests deep concerns about the economic outlook.

Data on Friday is expected to confirm the U.S. unemployment rate remained stuck at 9.2 percent in July.

Lawrence Summers, a top Obama adviser until last year, wrote in a Reuters column on Tuesday the odds of another U.S. recession were 1 in 3. Goldman Sachs has said a slight tick up in the unemployment rate could provide a strong recession signal.

US borrowing tops 100% of GDP: Treasury - AFP

US debt shot up $238 billion to reach 100 percent of gross domestic project after the government's debt ceiling was lifted, Treasury figures showed Wednesday.

Treasury borrowing jumped Tuesday, the data showed, immediately after President Barack Obama signed into law an increase in the debt ceiling as the country's spending commitments reached a breaking point and it threatened to default on its debt.

The new borrowing took total public debt to $14.58 trillion, over end-2010 GDP of $14.53 trillion, and putting it in a league with highly indebted countries like Italy and Belgium.

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The last time US debt topped the size of its annual economy was in 1947 just after World War II. By 1981 it had fallen to 32.5 percent.

Ratings agencies have warned the country to reduce its debt-to-GDP ratio quickly or facing losing its coveted AAA debt rating.

Moody's said Tuesday that the government needed to stabilize the ratio at 73 percent by 2015 "to ensure that the long-run fiscal trajectory remains compatible with a AAA rating."

Federal Red Ink, Part 2

Federal budget deficit on track to eclipse $1 trillion for third year - Vicki Needham

Still, through eight months of the 2011 fiscal year the nation is facing its third straight $1 trillion-plus deficit -- totaling $927.4 billion so far compared with $935.6 billion during the same period in 2010, about $8 billion less, according to the report.

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The nation started out 10 years ago, when President George W. Bush took office, with a surplus of $127 billion in 2001. Projections at the time showed the federal budget was expected to run $5.6 trillion in surpluses through the decade.

Instead, the country began battling growing deficits, hitting a record $454.8 billion in 2008, following the approval of tax cuts, a new Medicare drug benefit program and funding for the ongoing wars in Iraq and Afghanistan.

The Bush administration then passed the $700 billion TARP during a financial crisis in the fall of 2008 while the Obama administration tacked on a $787 billion economic stimulus package in February 2009 as a way to accelerate the nation's economic recovery.

In December, Congress and the White House agreed to an $858 billion comprehensive package for a two-year extension of the 2001 and 2003 Bush-ear tax cuts for all income levels, as well as an extension of federal unemployment benefits through the end of 2011, which could push the fiscal 2011 budget deficit to $1.4 trillion, about the same as the record level in 2009, up from last year's $1.3 trillion.

Historical Amount of Revenue by Source - taxpolicycenter.org
This is a simple chart which indicates that tax receipts have been relatively stable over the last decade. Our financial troubles are entirely due to excessive spending.


Fanniegate: Gamechanger For The GOP? - Walter Russell Mead

The Tea Party WMD stockpile is currently stored in book form: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. By Gretchen Morgenson, one of America’s best business journalists who is currently at The New York Times, and noted financial analyst Joshua Rosner, Reckless Endangerment gives the best available account of how the growing chaos in the mortgage and personal finance markets and the rampant bundling of dubious loans into exotically toxic securities plunged the world, and millions of American families, into the gravest financial crisis since World War Two.

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Fannie Mae, a historically staid and predictable government linked company, needed to turn into a cutting edge speculative growth engine to make the hundreds of millions Johnson wanted. Since taxpayers stand behind Fannie Mae’s debts, Johnson needed to get the politicians to back his desire to turn this milkwagon into a Porsche. Fortunately for him — and unfortunately for the country and the world — he found a way.

Fannie Mae would adopt the goal of increasing the percentage of Americans who owned their own homes, targeting the inner city poor who, allegedly, were blocked from home ownership by racial discrimination. (A bogus study to this effect was widely circulated; devastating criticisms and rebuttals quietly ignored.) This is where such luminaries of the American political scene as ACORN and La Raza get into the act. They served as cheerleaders for Johnson’s self-enrichment plan, camouflaging a Wall Street rip-off by hymning its benefits for the poor.

The purpose of no doc, no money down loans wasn’t, Heaven forbid, to generate rich fees and high interest rates for mortgage brokers and Wall Street. No, the smarmy defenders of the Great American Rip-off told us, those features were necessary to make sure that poor people (so cruelly, unfairly locked out of mortgages because they didn’t qualify for the stuffy old-fashioned kind) could participate in the American Dream. Anybody who opposed Jim Johnson’s get rich scheme was a racist who hated the poor. Political correctness married Wall Street chicanery as Maxine Waters, Chris Dodd and Barney Frank led the band; crooked accountants and clueless rating agencies performed the ceremony; big government dowered the couple with a debt guarantee and bankers dressed as flower girls showered the happy pair in a confetti of junk mortgages and junk bonds.

Fannie Mae and the housing market were off to the races — and where Fannie Mae led the way, the financial markets followed. Regulators were captured by the interests they were supposed to regulate; favors were dispensed with a lavish hand; taxpayer-provided money was used to assemble a vast lobby focused on extracting more money from hapless taxpayers to make James Johnson even richer. In the process, millions of financially unsophisticated low income people were stuck with obscenely unfair mortgages, honest whistle blowers were subjected to savage personal attacks, home prices lost all touch with reality, taxpayers were stuck with losses that may approach one trillion dollars, and financial markets were poisoned almost beyond repair.

When Government Jumps the Shark - Walter Russell Mead

Read the whole thing. Described are the four stages of the government program life cycle: Great White Hope, Great White Father, Great White Elephant, Great White Shark.

The fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way. At this stage the government program has moved beyond being wasteful and has become unsustainable. Fannie Mae goes from providing mortgages to creditworthy households to providing vast numbers of mortgages to uncreditworthy households, poisoning the financial system with bad loans. Medicare is unsustainable in the medium term and hugely expensive day to day — even as the procedures and regulations of Medicare warp investment decisions across the entire health care system.

But even as these programs become unsustainable, they have become so powerful — there are so many interests and industries that grow rich on these programs, and so many families for whom these programs have become the cornerstone of what little financial security they have — that they cannot be touched. One way to tell when an elephant has morphed into a shark: when pundits and politicians start describing a government program as a ‘third rail’: you touch it, you die.

The Great White Shark is a menace that cannot be controlled. The program has gone rogue: the Army Corps of Engineers isn’t just building pointless dams. It is building bad dams. The agricultural subsidies aren’t just encouraging farmers to plant wasteful crops; by subsidizing corn ethanol they are contributing to food price inflation that threatens political stability in countries like Egypt. But just as the programs are most in need of reform, reform becomes impossible. If you try to stop Fannie Mae from tempting poor urbanites into ruinous mortgages that will leave them worse off than before while bringing the global economy to the edge of ruin, the race lobby (aided and abetted by the real estate lobby) will attack you as a racist and an enemy of the American Dream.

The problem today is that we are looking not just at one or two government programs that have succumbed to elephantiasis or turned into sharks; the progressive complex of social and economic policy as a whole has reached this point. Today many of our New Deal and Great Society programs are either elephants or sharks. They either lead us to misallocate scarce resources in ineffective ways or they threaten us with ruin by becoming politically untouchable budget busters.

Democrats' Tax-And-Spend Insanity - IBD Editorial

Indeed, few ideas have been so thoroughly discredited as the one that says more government spending will increase jobs. As the chart above shows, government outlays climbed more than 40% between 2006 and 2011. At the same time, the employment figure has dropped by almost 5 million.

The Cato Institute's Mark Calabria, who pulled the data together for the chart, is quick to point out that just because there's a correlation between rising government spending and falling jobs doesn't mean there's a causal relationship.

However, he says, it does "suggest to me that continued massive government spending is not going to turn around the job market."

Calabria is being overly cautious.

In our view, the chart doesn't just suggest anything. It practically screams that government spending won't create jobs. If it did, there's no way we'd see so many unemployed today after wildly increasing federal outlays.

Texas Business Climate

The Lone Star Jobs Surge - WSJ Editorial

What explains this Lone Star success? Texas is a big state, but its population of 24.7 million isn't that much bigger than the Empire State, about 19.5 million. California is a large state too—36.9 million—and yet it's down 11,400 jobs. Mr. Fisher argues that Texas is doing so well relative to other states precisely because it has rejected the economic model that now prevails in Washington, and we'll second that notion.

Mr. Fisher notes that all states labor under the same Fed monetary policy and interest rates and federal regulation, but all states have not preformed equally well. Texas stands out for its free market and business-friendly climate.

Capital—both human and investment—is highly mobile, and it migrates all the time to the places where the opportunities are larger and the burdens are lower. Texas has no state income tax. Its regulatory conditions are contained and flexible. It is fiscally responsible and government is small. Its right-to-work law doesn't impose unions on businesses or employees. It is open to global trade and competition: Houston, San Antonio and El Paso are entrepôts for commerce, especially in the wake of the North American Free Trade Agreement.

Rick Perry vs. Jean-Jacques Rousseau - Roger Kimball

Here’s an statistic worth pondering: 45 percent of net U.S. job creation in the last two years comes from Texas.

Yes, Texas: the state that is the poster child for right-wingery, the state with no state income tax whose population is growing at about 1000 per day (see a connection?) while bankrupt behemoths like California are bleeding jobs and people.

Companies Leaving California in Record Numbers - Mark J. Perry

California currently ranks #49 among U.S. states for "business tax climate" (Tax Foundation) and #48 for for "economic freedom" (Mercatus). It shouldn't be any surprise then that companies are leaving the "Golden State" in record numbers this year (see chart above) for "golder pastures" and more business-friendly climates in other states.

From Joe Vranich:

"Today, California is experiencing the fastest rate of disinvestment events based on public domain information, closure notices to the state, and information from affected employees in the three years since a specialized tracking system was put into place. Out-of-state economic development officials are traveling through the state to alert frustrated business owners and corporate executives to their friendlier business climate versus California's hostility toward commercial enterprises.

The Economy - June 2011

"Bad news" articles on the economy are plentiful at this point.

Editorial: Obama Recovery Still Feeble After Two Years - IBD Editorial

But the fact is that the Obama recovery is one of the worst ever. Certainly the worst since the Great Depression. It's so bad, in fact, that even 24 months after the recession officially ended there are few places beyond the stock market and corporate profits that have shown much, if any, improvement. A few examples:

• Jobs: The number of people with jobs has barely changed since June 2009 — up just 0.4%.

• Unemployment: While the unemployment rate has dropped a bit, the number of long-term unemployed is up by a third, and the average length of unemployment is now a staggering 38 weeks.

• Earnings: Median weekly earnings are down slightly between Q3 2009 and Q1 2011, after adjusting for inflation, according to the Bureau of Labor Statistics.

• Housing prices: The National Association of Realtors reports that median price for existing home sales dropped 10% since June 2009.

• Gas prices: Pump prices climbed 52% over the past two years, according to the Department of Energy.

Pro-Obama media always shocked by bad economic news - Michael Barone

Unexpectedly!

As megablogger Glenn Reynolds, aka Instapundit, has noted with amusement, the word "unexpectedly" or variants thereon keep cropping up in mainstream media stories about the economy.

"New U.S. claims for unemployment benefits unexpectedly climbed," reported CNBC.com May 25.

"Personal consumption fell," Business Insider reported the same day, "when it was expected to rise."

"Durable goods declined 3.6 percent last month," Reuters reported May 25, "worse than economists' expectations."

"Previously owned home sales unexpectedly fall," headlined Bloomberg News May 19.

"U.S. home construction fell unexpectedly in April," wrote the Wall Street Journal May 18.

Those examples are all from the last two weeks. Reynolds has been linking to similar items since October 2009.

Obama’s worst nightmare: The slow economy slows some more - Jennifer Rubin

The Wall Street Journal headline reads, “May Data Indicate Slowdown.” Many Americans didn’t know things had previously picked up. The economic picture is, in any event, far from rosy:

The U.S. manufacturing sector slowed sharply in May, according to data released Wednesday by the Institute for Supply Management. Price pressures lessened.

Separately, private businesses barely added jobs in May as large companies cut workers, according to a report released Wednesday. The news is sure to raise further fears about the second-quarter U.S. economy.

The ISM’s manufacturing purchasing managers’ index fell to 53.5 in May from 60.4 in April. Readings above 50 indicate expanding activity.

The job picture is alarming as well. “Private-sector jobs in the U.S. rose by just 38,000 last month. . . . Economists surveyed by Dow Jones Newswires had expected [payroll giant Automatic Data Processing Inc.] to report a much larger job gain of 190,000 last month. The April data were revised to show a rise of 177,000 versus 179,000 first reported.”

All of that comes on top of gloomy data from the housing market.

Stocks Fall 279 Points—Mainstream Media, Google Search: It Didn’t Happen? - Rovin

But, let’s give credit where credit’s due. Patrick Allen posted this story at CNBC dot com with a title that just has to have the liberal media cringing:

“Horror for US Economy as Data Falls off Cliff”

Adding another post by Reuters that CNBC posted to their site, (and dared to mention “a failed stimulus”), might be a recipe to call into action President Obama’s “rapid response coordinator” Jesse Lee, (see Morrissey’s related post), to put a stop to what Douglas Borthwick calls “a sugar-high wearing out”:

The sugar high that has buoyed the U.S. economy over the past six months is wearing out, and there is little in economic growth or foundation to show for it,” said Douglas Borthwick, a managing director with Faros Trading in Stamford, Connecticut.

In a related story that had to be found across the pond, Nile Gardiner at the Telegraph filed this story, (including a quote from none other than the New York Times’ Robert Reich) that will (most likely) never be written by an American Liberal News Agency:

Why Barack Obama may be heading for electoral disaster in 2012
By Nile Gardiner

……Ultimately, the 2012 presidential election will be decided by the state of the economy, and new data released this week makes grim reading for the White House. In fact you cannot watch a US financial news network at the moment, from Bloomberg to CNBC to Fox Business, without a great deal of pessimism about the dire condition of the world’s biggest economy. 66 percent of Americans now worry the federal government will run out of money in the face of towering public debts.

After 29 months of the most left-wing presidency in US history, the American superpower is heading towards the economic abyss - Nile Gardiner

Under President Obama unemployment has remained above 8 percent for every single month, with the exception of January 2009 when he entered the Oval Office, rising as high as 10.1 percent in October 2009. By any measure, this is a terrible track record, and as even The New York Times acknowledged earlier this week, “no American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent.”

The dire jobs figures are just part of an extraordinarily grim picture for the US economy, nearly two and a half years into the Obama presidency. As ABC News reported yesterday, “a cascade of negative economic reports this week is leaving Americans wondering if this is really a recovery from the recession that officially started December 2007 and ended June 2009.” And the housing market, in which 67 percent of Americans have a stake, is in serious trouble, with home prices sinking to their lowest levels since 2002, falling by 4.2 percent in the first quarter of 2011 and for eight straight months in a row.

US house price fall 'beats Great Depression slide' - Stephen Foley

The ailing US housing market passed a grim milestone in the first quarter of this year, posting a further deterioration that means the fall in house prices is now greater than that suffered during the Great Depression.

The brief recovery in prices in 2009, spurred by government aid to first-time buyers, has now been entirely snuffed out, and the average American home now costs 33 per cent less than it did at the peak of the housing bubble in 2007. The peak-to-trough fall in house prices in the 1930s Depression was 31 per cent – and prices took 19 years to recover after that downturn.

The latest Case-Shiller house price index was just one of a slew of disappointing economic data from the US yesterday, which suggested ebbing confidence in the recovery of the world's largest economy. The Chicago PMI manufacturing index showed a sharp slowdown in the pace of expansion in May, missing Wall Street forecasts and sending the index to its lowest since November 2009.

Employers add fewest jobs in eight months; unemployment jumps to 9.1 percent - Brady Dennis and Neil Irwin

Employers added 54,000 jobs in May, the Labor Department said Friday, down from 232,000 in April. The unemployment rate rose to 9.1 percent from 9 percent. That deterioration in the labor market marks only the latest in a slew of recent signs that the economic recovery is losing momentum.

It is the second time that growth has stumbled; a similar scenario played out last summer, reflecting the long, uneven process of clawing out of a recession spurred by a financial crisis.

Employers from coast to coast describe a situation in which tepid economic growth alone isn’t enough to prompt them to add to their payrolls. Sales have been rising, but slowly and tenuously. Doubts about the future have continued to chip away at confidence and prevented many business people from taking the leap of faith required to expand and hire new workers.

Employment and Recent Graduates

Survey: 85% of New College Grads Move Back in with Mom and Dad - Erica Ho

Thanks to a high unemployment rate for new grads, many of those with diplomas fresh off the press are making a return to Mom and Dad's place. In fact, according to a poll conducted by consulting firm Twentysomething Inc., some 85% of graduates will soon remember what Mom's cooking tastes like.

Times are undeniably tough. Reports have placed the unemployment rate for the under-25 group as high as 54%. Many of these unemployed graduates are choosing to go into higher education in an attempt to wait out the job market, while others are going anywhere — and doing anything — for work. Meanwhile, moving back home helps with expenses and paying off student loans.

National Debt

U.S. Treasury: China Has Decreased Its Holdings of U.S. Debt - Terence P. Jeffrey

Since September 2008, when they eclipsed Japan, entities in mainland China have been the largest foreign owners of U.S. government debt. But, as indicated by the Treasury Department chart linked here, Chinese ownership of U.S. Treasury securities peaked in October 2010 and has declined in each of the four most recent months reported by the Treasury Department.

At the end of October 2010, China owned 1.1753 trillion in U.S. Treasury securities. That dropped to $1.1641 trillion by the end of November, $1.1601 trillion by the end of December, $1.1547 trillion by the end of January, and $1.1541 trillion by the end of February 2011.

Quantitative Easing

Sarah Palin for the Fed? - New York Sun

The big question as Chairman Bernanke gets set for his first quarterly press conference is how Sarah Palin was able to figure out sooner than everyone else that the Federal Reserve’s campaign of quantitative easing wouldn’t work. Disappointment in the Fed’s policies is being reported this morning at the top of page one of the New York Times. It reports that “most Americans are not feeling the difference” from the Fed’s “experimental effort to spur a recovery by purchasing vast quantities of federal debt.” It reports that “a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.”

Plus, everything you need to know about QE2:



Via Liberal Compassion: Liberal Elite Tells Those Suffering From High Food Prices To Get "A Better Job"

The Market

Fed Policy Makers Signal Support for Abrupt End to Asset Purchases in June - Craig Torres, Scott Lanman and Steve Matthews

Federal Reserve policy makers are signaling they favor an abrupt end to $600 billion in Treasury purchases in June, jettisoning their prior strategy of gradually pulling back on intervention in bond markets.

“I don’t see a lot of gain to reverting to a tapering approach,” Atlanta Fed President Dennis Lockhart told reporters yesterday. “I don’t think that is necessary,” Philadelphia Fed President Charles Plosser said last month.

Central bankers, who next meet March 15, are about half way through their second round of bond purchases. To bring the program to a full stop in June, they must be confident that the economy is strong enough to endure higher long-term interest rates and rising expectations of an exit from the most expansive monetary policy in Fed history, said Dan Greenhaus at Miller Tabak & Co. LLC in New York.

“If this is a self-sustaining recovery that can withstand higher interest rates, then why not get the hell out?” said Greenhaus, Miller Tabak’s chief economic strategist. “Still, I am nervous about their ability to withdraw from this policy without broader disruptions.”

The Fed announced in November that it would buy $600 billion of Treasuries through June in a bid to boost the recovery and reduce an unemployment rate lingering near a 26- year high. The program, known as QE2 for the second round of so- called quantitative easing, followed $1.7 trillion of asset purchases that ended in March 2010.

QE To Infinity: Not? - DoctoRx

Fed staff members, such as Brian Sack, the New York Fed official in charge of carrying out the bond buying, have argued the total amount, or stock, of securities the Fed has announced it will make has more impact on longer-term interest rates than the timing of those purchases. That’s a view now held by several members on the Federal Open Market Committee, including the chairman.

“We learned in the first quarter of last year, when we ended our previous program, that the markets had anticipated that adequately, and we didn’t see any major impact on interest rates,” Fed Chairman Ben S. Bernanke told the Senate Banking Committee during his March 1 semiannual monetary-policy testimony. “It’s really the total amount of holdings, rather than the flow of new purchases, that affects the level of interest rates.”

Fed Vice Chairman Janet Yellen supported that perspective, saying at a monetary policy forum in New York last week that “the stock view won out over the flow view.”

The italicized paragraphs (my doing) above are key. We can hope that this signals that the parties in Washington have agreed, at least in principle, on significant deficit reduction, so that ordinary debt market mechanisms can finance the Federal deficit without the central bank adding to the money supply as it has been doing with quantitative easing. Presumably, it is a show of confidence in the economy. Of course, a year ago a similar show of confidence gave way to the summer slowdown and QE2. Will past be prologue?

Guest Post: The Coming Rout | zero hedge - Bill Quick

The Fed is currently pumping about four billion dollars per day of funny money into the markets (mostly), which has turned stocks, bonds, and commodities into helium-filled balloons.

Turn off the helium-money all at once, and watch all those balloons turn into bricks. Except for gold and silver…maybe.

I’m no longer of the opinion that we’re going to hit new highs on the Dow. I think we’re pushing on a string now, and if they pull the puppet master’s strings, look out below.

From the comments: In other words, “here, hold my beer and watch this…”

Federal Budget

Why Koch Industries Is Speaking Out - Charles G. Koch

Federal data indicate how urgently we need reform: The unfunded liabilities of Social Security, Medicare and Medicaid already exceed $106 trillion. That's well over $300,000 for every man, woman and child in America (and exceeds the combined value of every U.S. bank account, stock certificate, building and piece of personal or public property).

The Congressional Budget Office has warned that the interest on our federal debt is "poised to skyrocket." Even Federal Reserve Chairman Ben Bernanke is sounding alarms. Yet the White House insists that substantial spending cuts would hurt the economy and increase unemployment.

Plenty of compelling examples indicate just the opposite. When Canada recently reduced its federal spending to 11.3% of GDP from 17.5% eight years earlier, the economy rebounded and unemployment dropped. By comparison, our federal spending is 25% of GDP.

Uncloudy day on the budget front - Scott Johnson

Geithner freely conceded under questioning from Senator Sessions that the president's own budget calls for interest payments and obligations that are "excessively high" and "unsustainable."

Spending Cuts In Perspective - John Hinderaker




USA, Inc - John Hinderaker

If the United States were a company, what financial shape would it be in? And what would it make sense to do to put the company on a sounder footing?

...

First, the "bottom line:"

Slide 27:

As USA Inc. we have a continuing and enormous negative cashflow and negative net worth...effectively "in the hole" by negative $45 TRILLION!! [Ed.: So much for the insistent liberal theme that we're not broke.]

Economic Warfare

Was the U.S. a victim of an economic 9/11 in 2008? - Patrick Poole

It should be noted that Freeman doesn’t claim that outside forces were responsible for the major factors of the economic crisis, namely the subprime mortgage fiasco, but that these outside forces might have intentionally helped things along. The report identifies three key stages in this possible economic attack:

• The first phase was a speculative run-up in oil prices that generated as much as $2 trillion of excess wealth for oil-producing nations, filling the coffers of Sovereign Wealth Funds, especially those that follow Shariah Compliant Finance.
• The second phase appears to have begun in 2008 with a series of bear raids targeting U.S. financial services firms that appeared to be systemically significant.
• The risk of a Phase Three has quickly emerged, suggesting a potential direct economic attack on the U.S. Treasury and U.S. dollar.

Financial terrorism suspected in 2008 economic crash - Bill Gertz

“There is sufficient justification to question whether outside forces triggered, capitalized upon or magnified the economic difficulties of 2008,” the report says, explaining that those domestic economic factors would have caused a “normal downturn” but not the “near collapse” of the global economic system that took place.

Economic Warfare: Risks and Responses - Kevin D. Freeman

A number of potential causative factors exist, including sub-prime real estate loans, a housing bubble, excessive leverage, and a failed regulatory system. Beyond these, however, the risks of financial terrorism and/or economic warfare also must be considered. The stakes are simply too high for these potential triggers to be ignored.

Cramer: Feels Like Financial Terrorism - Jim Cramer

My conclusion: I believe that fear can destroy many stocks, but this selling feels motivational and not done by those who sell short stocks as a way of living. I sure would like to be able to see who is selling these stocks in order to take financial terrorism off the table.

Business Climate

California taxes away jobs while Texas adds them - Mark Hemingway

In 2008, 70 percent of all the jobs in the country were created in Texas. In 2009, all of America's top five job-creating cities were in Texas.

More recently, "Texas created 129,000 new jobs in the last year -- over one-half of all the new jobs in the U.S. In contrast, California lost 112,000 jobs during the same period," according to "Texas vs. California: Economic growth prospects for the 21st Century," a new report by the Texas Public Policy Foundation released in October.

Texas is home to 64 Fortune 500 companies -- more than any other state in the union. (California has 51 and New York has 56.) For five years in a row, Texas has topped Chief Executive magazine's poll of the best state to do business.

Meanwhile, California is ranked dead last in the Chief Executive's survey. California state treasurer Bill Lockyer even went so far as to pen a Dec. 20 op-ed in the Los Angeles Times denying "the claim that we have a hostile business climate."

So why are businesses flocking to Texas and fleeing California? Well, as a recent headline from The Economist put it, in California "They paved paradise and put up the parking taxes."

Texas has no personal income tax. With a top rate of 10.3 percent, California has the third-highest state income tax after Oregon and Hawaii.

The tax advantage goes much deeper. The Tax Foundation cites California as having the 33rd highest corporate income tax topping out at 8.8 percent -- much higher than Texas' modest 1 percent gross receipts tax on business.

California's capital gains tax is the highest in the country, whereas Texas levies no tax on capital gains. California's sales tax is the second highest in the nation and its energy taxes are the highest in the country.

And as California's taxes have gotten higher, the state's revenue has become more unstable.