Cash for Clunkers

Cash for Clunkers is a prime example of the law of unintended consequences in action. It reduced the supply of running used cars at a time when recession-minded buyers increased the demand for used cars. Anyone understanding the simple economic principle of supply and demand could foresee an increase in used car prices as a result.

It was also a colossal waste of real assets and highly destructive to the environment.

Whoops—'Cash for Clunkers' Actually Hurt the Environment - Takepart.com

Back in 2009, President Obama’s “Cash for Clunkers” program was supposed to be a boon for the environment and the economy. During a limited time, consumers could trade in an old gas-guzzling used car for up to $4,500 cash back towards the purchase of a fuel-efficient new car. It seemed like a win for everyone: the environment, the gasping auto industry and cash-strapped consumers.

Though almost a million people poured into car dealerships eager to exchange their old jalopies for something shiny and new, recent reports indicate the entire program may have actually hurt the environment far more than it helped.

According to E Magazine, the “Clunkers” program, which is officially known as the Car Allowance Rebates System (CARS), produced tons of unnecessary waste while doing little to curb greenhouse gas emissions.

The program's first mistake seems to have been its focus on car shredding, instead of car recycling. With 690,000 vehicles traded in, that's a pretty big mistake.

Other People's Money

Sooner or Later ... - Glenn Reynolds

Sooner or later, you run out of other people’s money. Something that can’t go on forever, won’t. Debt that can’t be repaid, won’t be. Promises that can’t be kept, won’t be.

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?

...

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. 

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.

Economic Stimulus

Obama’s Economists: ‘Stimulus’ Has Cost $278,000 per Job - Jeffrey H. Anderson

The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.

In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the “stimulus,” and taxpayers would have come out $427 billion ahead.

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.

The Economy - September 2010

NOTE: Thomas Straubhaar lives in Germany and wrote these columns for Der Spiegel.

America Has Become Too European - Thomas Straubhaar

A firm belief in the individual's ability, ideas, courage, will and a reliance on one's own resources brought the US to the top. The American dream promised everyone the chance of upward mobility -- literally from rags to riches, from minimum wage to millionaire. The individual's pursuit of happiness was seen as the crucial foundation for the well-being of society, rather than the benevolent state which cares for its subjects -- and certainly not the welfare state, which provides a social safety net for its citizens.

In the American system, every man was responsible for himself -- in good times and bad. No one could count on government assistance, not even the wannabe millionaire who did not make it and ended up homeless.

For many US citizens, the financial crisis has turned the American dream into a nightmare. Millions of Americans are struggling with high levels of debt, and not only because they bought overpriced houses during the housing boom and can no longer afford their mortgages. Often families are burdened with loans they took out during better times for cars, furniture, electronic gadgets or university tuition.

A Return to Traditional American Virtues - Thomas Straubhaar

Both the behavior of the American government and the Federal Reserve makes one thing clear: They do not see the solution to the US's economic woes in a return to traditional American virtues. Obama is not calling for the unleashing of market forces, as Ronald Reagan once did during an equally critical period in the early 1980s. On the contrary: Obama, driven by his own convictions and advised by economists who believe in government intervention, has taken a path that leads far away from those things that catapulted America to the top of the world in the past century.

The Obama administration's current policies rely on more government rather than personal responsibility and self-determination. They are administering to the patient more, not less, of exactly those things that led to the crisis.

Our Debt Is More Than All the Money in the World - Kevin D. Williamson

I have argued that the real national debt is about $130 trillion. Let’s say I’m being pessimistic. Forbes, in a 2008 article, came up with a lower number: $70 trillion. Let’s say the sunny optimists at Forbes got it right and I got it wrong.

For perspective: At the time that 2008 article was written, the entire supply of money in the world (“broad money,” i.e., global M3, meaning cash, consumer-account deposits, checkable accounts, CDs, long-term deposits, travelers’ checks, money-market funds, the whole enchilada) was estimated to be just under $60 trillion. Which is to say: The optimistic view is that our outstanding obligations amount to more than all of the money in the world.

Global GDP in 2008? Also about $60 trillion. Meaning that the optimistic view is that our federal obligations outpace the entire annual economic output of human civilization.

Interview With Marc Faber: It Is Not A Matter Of If With Hyperinflation, But When - Ron Hera

HRN: Do you think hyperinflation in the US is possible?

Dr. Marc Faber: The Federal Reserve doesn’t want to create a hyperinflation. I mean Mr. Bernanke may be incompetent, but he’s not an evil person per se. He just doesn’t have sufficient knowledge to be a central banker, in my opinion, and has misguided economic theories, but he’s not evil in the sense that he would not wish to debase the currency entirely. Clearly, if the US economy moves into a double dip recession and you have deflationary pressures reappearing, in the housing market, for example, and if the S&P drops from roughly 1,100 down to say 900, then I think further monetization will happen. I believe that because of the unfunded liabilities and the deficits of the US government, which will stay high for a long time; sooner or later there will be more monetization anyway.

It’s more a question of when it will happen rather than if it will happen. For sure it will happen but will it happen right away, say in September, or maybe only in two years time? Eventually, before everything collapses we’ll have an inflationary bout which may not be so strongly felt in consumer prices, as in stocks or housing or precious metals prices or in commodities like oil; or inflation could occur mostly in foreign currencies, in other words, in Asia where the currencies could appreciate.

Obama Stimulus Made Economic Crisis Worse, `Black Swan' Author Taleb Says - Frederic Tomesco

U.S. President Barack Obama and his administration weakened the country’s economy by seeking to foster growth instead of paying down the federal debt, said Nassim Nicholas Taleb, author of “The Black Swan.”

“Obama did exactly the opposite of what should have been done,” Taleb said yesterday in Montreal in a speech as part of Canada’s Salon Speakers series. “He surrounded himself with people who exacerbated the problem. You have a person who has cancer and instead of removing the cancer, you give him tranquilizers. When you give tranquilizers to a cancer patient, they feel better but the cancer gets worse.”

Today, Taleb said, “total debt is higher than it was in 2008 and unemployment is worse.”