Is Obama using regulations to bypass Congress and fundamentally change the US?

Labels: ,

Why Sarah Palin won't run for the Presidency

Sarah Palin won't run for president, and it is pretty easy to see that won't happen for one reason: look at how Fox News is handling her appearances on Fox. With Newt or Santorum, Fox News gave them a warning as soon as it became obvious that they were going to run and immediately put them both on a 60 day leave. Thus Fox benched them well before they had made an official decision. I am sure that Fox must have already talked to Palin and that she must have assured them that she was different and wasn't going to run. Otherwise, they wouldn't still be having Palin on Fox commenting on different issues.

Labels: ,

Do solar energy units pay for themselves?

I got an add from Amazon.com on a sale of various Solar energy units. Normally this 60 Watt solar charger goes for $600. Right now it is on sale for $300. A kWh reportedly costs about $0.12, so running a 60 watt light bulb for an hour should cost about $0.0072. At that rate, running the solar unit sixteen hours a day and assuming no rain or clouds, you would have to run it for 7.135 years before it would pay for itself -- that assumes a zero interest rate. At its normal price, it would take 14.27 years to pay for itself, again assuming no interest. The problem is that even these are very optimistic assumptions. It doesn't include the costs of the battery or how the battery's efficiency will decline over time. I assume that one would need to replace the batter a couple or a few times over this time period. Those costs would have to be added to the total and it means that the hour calculations shown above will be too favorable to solar power. I assume that there are also additional costs of installation.

See a related story available here on a half billion dollars in government loan guarantees for Solyndra.

Labels: ,


Wikileaks releases cable on Mexico/US gun issue

Apparently, the US embassy in Mexico didn't think US claims about the number of guns in Mexico from the US were very accurate.
Comment. Claims by Mexican and U.S. officials that upwards of 90 percent of illegal recovered weapons can be traced back to the U.S. is based on an incomplete survey of confiscated weapons. In point of fact, without wider access to the weapons seized in Mexico, we really have no way of verifying these numbers. Joint efforts to develop intelligence that can serve the impetus for investigations and prosecutions of individuals or companies that market firearms to the cartels, will require Mexican and USG law enforcement agencies to share essential crime scene forensic information on a real time basis. Post law enforcement agencies will continue to work closely with their Mexican counterparts to break down institutional divisions and facilitate more information sharing on arms trafficking cases both among the Mexican agencies and with U.S. partners. . . . .

Labels: , , ,

Job data worse than it looks?

Since April total employment from the Employer Survey has increased by just 158,000. That comes to just 39,500 new jobs per month. Using the Household survey data showed that there has actually been a loss of 47,000 jobs. Since March, 237,000 jobs have been lost. Remember Goolsbee's point that one month alone doesn't make a trend? Well, what about four months? From Reuters.

Nonfarm payrolls were unchanged, the Labor Department said on Friday, the weakest reading since September. Economists had expected a gain of 75,000 jobs. The report underscored the frail economy and kept fears of a recession on investors' radar.

"The economy is slowly grinding to a halt. The problem, however, on the policy side is that I wonder whether the numbers are truly weak enough to galvanize a political response," said Steve Blitz, senior economist at ITG in New York. . . .

Adding to the weak tenor of the report, nonfarm employment for June and July was revised to show 58,000 fewer jobs.

The average workweek dropped to 34.2 hours, the fewest since January, from 34.3 hours. Average hourly earnings fell three cents. . . .

Well, there was "recovery summer" in 2010, how Obama was taking credit for the drop in unemployment rates at the beginning of this year, signs that the economy was mending in May 2009, and "better days ahead" in September 2010.

A pretty obvious note on the problems with the Employer Survey report.

It includes alleged statistical quackery. The Labor Department statisticians use a controversial “birth-death model” to try to estimate each month how many new businesses were created and how many firms have gone out of business. Ultimately these changes show up on tax records, so the government can check how close its estimates were. But in the meantime, economists love to throw bricks at this model. Many just don’t think it works. Jim O’Sullivan of MF Global said it drives him crazy when analysts take the results of the birth-death model and simply add or subtract it from the headline job number. . . .

8 in 10 think that we are in a recession.

Confidence in the economy is poor, with eight in 10 Americans believing the nation is in a recession, according to a new poll on Friday.

One-third of those surveyed in a CNN/ORC poll think the recession is serious even though, by definition, the U.S. is not in a recession.

A recession is when the economy experiences two straight quarters of negative growth. In the past quarter, the economy grew on an annualized basis of 1 percent.

However, economic performance is often linked to expectations and confidence in the economy. For example, those who view the economic outlook as bleak will save more and spend less, leading to an even weaker economy.

The public’s economic outlook has been worse in the past. In September 2009, nearly nine in 10 Americans thought the country was still in a recession. In June 2011, 48 percent of respondents in another CNN/ORC poll said they feared the country was descending into another Great Depression.

About two-thirds of respondents to Friday’s poll said the president should focus more on creating jobs, as opposed to deficit reduction. . . .

Labels: ,

Despite massive subsidies, virtually no Chevy Volts have been sold

This is a nice experiment given that the Cruze and the Volt are the same cars with the exception that one is all electric. The Volt even with all the massive subsidies that it receives has sold almost no cars. From Fox News:

In August, and for the second month in a row, the Chevy Cruze was the best selling compact car in America, with 21,807 cars sold.
The Chevy Volt? Not so much.
Only 302 of the plug-in hybrids were delivered to customers, up from 125 in July. . . .
The total [sales for this year] stands at approximately 3,772.
With over 7,500 built since production began in late 2010, many of which are tied up as demos, and production currently running at 150 cars a day, GM is certainly on track to build more than 10,000 cars by Christmas break, but are the customers there to buy them? . . .

Labels: , ,

If the government forces risky loans, can the government then claim that they didn't know the loans were risky?

So what about the government forcing banks to make these risky loans? How can the government claim ignorance that these loans were risky? Can these banks now sue the government?
The federal agency that oversees the mortgage giants Fannie Mae and Freddie Mac is set to file suits against more than a dozen big banks, accusing them of misrepresenting the quality of mortgage securities they assembled and sold at the height of the housing bubble, and seeking billions of dollars in compensation. A foreclosed home in Arizona. The Federal Housing Finance Agency suits are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others. The Federal Housing Finance Agency suits, which are expected to be filed in the coming days in federal court, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among others, according to three individuals briefed on the matter. The suits stem from subpoenas the finance agency issued to banks a year ago. If the case is not filed Friday, they said, it will come Tuesday, shortly before a deadline expires for the housing agency to file claims. The suits will argue the banks, which assembled the mortgages and marketed them as securities to investors, failed to perform the due diligence required under securities law and missed evidence that borrowers’ incomes were inflated or falsified. When many borrowers were unable to pay their mortgages, the securities backed by the mortgages quickly lost value. Fannie and Freddie lost more than $30 billion, in part as a result of the deals, losses that were borne mostly by taxpayers. . . .

Labels: ,


A down and dirty campaign from "both sides"?

It isn't clear from Howard Fineman's discussion why the Republicans would want a "dirty" campaign. It is the Democrats who have nothing else to run one. Republicans have a lot to run on -- Obama's disastrous record and how they would do things differently. From Howard Fineman on Hardball:
"I don't think that the numbers are good enough, and I don't think that the temper of the country are going to be good enough, which is why when I talk to Democrats outside and inside the White House, as I did today. What I heard was a slightly different message. It's not going to be a 'Morning in America' campaign, it's going to be a darkness at midnight campaign about the Republicans. it's going to be about the fact that the Republicans in Congress pushed Paul Ryan's bill Medicare, about how they pushed Cut, Cap and Balance. It's about how Republicans wanted to dismantle Wall Street reform. It's going to be about how the Republican presidential candidates have embraced the Tea Party. Those are going to be the two central messages of a campaign that's mostly going to be about attack. I think this is -- just like 2008 was in some respects an uplifting campaign, from both sides, this one is going to be down and dirty from the beginning from both sides."

Labels: ,

Even if Obama gets what he wants (and it actually works), unemployment will still be above what it was when he became president

Remember the unemployment rate was 7.8 percent when Obama became president. If Obama gets what he wants, it looks as if the unemployment rate will still be as high or higher than it was when he took office.
QUESTION: If Congress were to pass the package that the President's going to announce, unemployment would be under 9%?JAY CARNEY: Based on, when you're talking about economic predictions, yes. Economic analysts, economists will be able to look at this series of proposals and say that 'based on history, based on what we know, based on their collective expertise, that it would add to economic growth and cause an increase to job creation.In 2009, the White House said President Obama's stimulus plan would bring unemployment to below 8%.
Meanwhile, the world economy is slowing.
Factories around the world are throttling back, signaling a broadening of the slowdown in economic activity that is raising the specter of a double-dip recession.In the U.S., a survey of purchasing managers showed the factory sector barely expanding in August as the job market struggles to pick up and businesses confront weakening sentiment. Asia's manufacturers also pulled back, with bellwethers such as South Korea and Taiwan contracting while China's expansion slowed further. Meanwhile, manufacturing in a large swath of Europe contracted for the first time in two years as downturns gripping Greece and Ireland threaten larger economies such as Italy and France.The manufacturing reports show how slowdowns in different parts of the world are feeding off one another. Asia's fast-growing economies, for instance, are confronting weakness in the advanced economies that are big buyers of their exports. Likewise, companies in the U.S. and other advanced economies rely on growth in the emerging economies to offset weakness at home. . . .
The Obama administration actually has lower growth forecasts released this week. Is Obama trying to play an expectations game?
President Barack Obama on Thursday sharply cut estimates for U.S. economic growth, underscoring the difficult challenge he faces in spurring a stronger recovery and creating more jobs. . . .

More detail here:

The White House budget office forecast on Thursday that unemployment would remain at 9 percent through the 2012 presidential election year, an outlook that it said calls for the sort of the job-creating tax cuts and spending President Obama will propose next week.

The unemployment outlook for the next 16 months reflects a 9.1 percent rate this year, down slightly from the 9.3 percent forecast when President Obama made his annual budget request in February. Next year, the projected jobless rate is 9 percent, up from 8.6 percent in the February forecast.

Unemployment will not return to the 5 percent range until 2017, the budget office said, reflecting the intensity of the hangover from the most severe recession since the Great Depression. . . .

Labels: ,

Worker Productivity Plummets in the Second Quarter

It is worrisome that worker productivity is falling more than hours worked is increasing. It means that total amount produced per worker is falling and that eventually means lower wages.
Worker productivity in the United States fell this spring more quickly than previously estimated while labor costs were rising at a faster clip. Both developments could pose threats to a fragile economic recovery. The U.S. Labor Department reported Thursday that productivity declined at an annual rate of 0.7 percent in the April-June period, a bigger drop than the 0.3 percent decline reported a month ago. Labor costs rose at an annual rate of 3.3 percent, faster than the 2.4 percent increase originally reported. The changes reflected downward revisions made last week to overall economic growth which showed the economy's output barely growing in the spring. Declining productivity, if it persists for a prolonged period, would represent a serious economic threat while rising labor costs would cut into corporate profits. . . .
Meanwhile it isn't too surprising that more Americans are blaming Obama for the current economic problems. This new poll from CNN is available here.
Only a third of all Americans approve of how President Barack Obama is handling the economy, according to a new national survey. And with a CNN/ORC International Poll also indicating that more than three-quarters of the public say the country is in bad shape right now, there's little wonder why the president is getting such low marks. According to the poll, released Wednesday morning, 28% of people questioned say things are going well in the country today. "That may be a slight uptick from early August but it still represents a double-digit drop from earlier this year," said CNN Polling Director Keating Holland. "And it's clear that economic jitters are a drag on President Obama's standing with the voting public." . . .

Labels: ,

Government Loan Guarantees are sometimes pretty costly to taxpayers

There is a reason why the private market won't give companies a loan sometimes. Obama gave them $535 million, or $483,363.00 per employee. Of course, we know what a waste of resources solar energy is. From The Hill newspaper.

“Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion,” Solyndra's CEO said.

A California-based solar company that received a $535 million loan guarantee from the Obama administration announced Wednesday that it will shut down.

The company, Solyndra Inc., said Wednesday it would suspend its manufacturing operations and lay off 1,100 employees effective immediately. The company said it intends to file a petition for Chapter 11 bankruptcy protection.

“Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion,” Solyndra CEO Brian Harrison said in a statement. “Raising incremental capital in this environment was not possible. This was an unexpected outcome and is most unfortunate.” . . .

UPDATE: More stories on case. From ABC News:

ABC News and the Center for Public Integrity's iWatch News first reported on questions about the choice of Solyndra for the loan in May after the Department of Energy disclosed it was being forced to restructure its loan package for the company, which was showing early signs of financial distress. One of Solyndra's major investors was George Kaiser, an Oklahoma billionaire who raised between $50,000 and $100,000 for Obama during the 2008 election. . . .That's when the Government Accountability Office issued an unusually blunt assessment of the Energy Department's loan program in general, concluding that the department had "treated applicants inconsistently, favoring some and disadvantaging others." The government loan guarantee was supposed to spur 1,000 full-time jobs once Solyndra's solar plant was fully operational. Instead, as the company announced Chapter 11 bankruptcy today, reports surfaced that 1,100 would lose their jobs. . . .

From Fox News:

Solyndra LLC of Fremont, Calif., had become the poster child for government investment in green technology. The president visited the company in May 2010 and noted that Solyndra expected to hire 1,000 workers to manufacture solar panels. Other state and federal officials such as former Gov. Arnold Schwarzenegger and Energy Secretary Steven Chu also visited the company's facilities.But hard times have hit the nation's solar industry. Solyndra is the third solar company to seek bankruptcy protection this month. Officials said Wednesday that the global economy as well as unfavorable conditions in the solar industry combined to force the company to suspend its manufacturing operations.The price for solar panels has tanked in part because of heavy competition from Chinese companies, dropping by about 42 percent this year.Republicans have been looking into the Solyndra loan for months. The House Energy and Commerce Committee subpoenaed documents relating to the loan from the White House Office of Management and Budget. GOP Reps. Fred Upton of Michigan and Cliff Stearns of Florida issued a joint statement on Wednesday saying it was clear that Solyndra was a dubious investment."We smelled a rat from the onset," the two lawmakers said.Shortly after the company's announcement, it became clear that the bankruptcy would serve as further ammunition to criticize an economic stimulus bill that provided seed money for solar startups -- even though officials said interest in providing Solyndra with guaranteed government loans was first sought under the Bush administration. . . .

Clearly we must have better ways to spend this Stimulus money. From The Week:

If massive federal spending does actually succeed in permanently creating or saving large numbers of jobs (an assertion which is often long on rhetoric and short on evidence), it must rely on targeting companies based on their ability to compete rather than merely their participation in a political effort like “green energy.” If we are going to saddle our economy with huge new debts in the hope that we can stave off another recession, we really need to be more sure that the investments we make are cost-effective instead of merely politically convenient. The Obama Administration appears to have neglected that imperative the first time around.

Note that Solyndra couldn't get the same loan guarantee from private banks for a very good reason. Read post. This reminds me of how the government interfered with GM's business decisions.

Based on the evidence assembled so far, no Wall Street investment officer would have recommended the loan or, if he had, would have kept his job for five minutes. Pouring $535 million into an objectively lousy investment is not how Wall Street makes money.

But it all too often is how politicians get re-elected. “Green jobs” are a big plus for the “environmental movement,” which is a very important liberal special interest. That backing these particular jobs was also a favor for a very important Obama political fundraiser was another plus.

This is a textbook case of capital being allocated for political reasons (it will earn us votes) instead of economic reasons (it will make us rich). It is also further proof that politicians can’t make economic decisions even if they wanted to. And they can’t make them for the exact same reason pigs can’t fly: they aren’t designed to. . . .

UPDATE: CNBC blames competitive pressure from China. Apparently, even a giant government subsidy can’t change the realities of the global marketplace. As long as American workers are far more expensive and not far more productive than equally qualified workers elsewhere, subsidies and finger-pointing can’t produce increased employment. . . .

EDITORIAL, "Obama’s solar stimulus snafu," Washington Times, Wednesday, August 31, 2011

Founded in 2005, the company manufactured a rooftop solar panel designed chiefly for commercial applications. Solyndra was a poster child of the utopian future envisioned by the Obama administration when oodles of green jobs would relieve the nation's unemployment rate, generate clean energy and help the environment. Energy Secretary Steven Chu rushed through loan guarantees, and money began to flow to Solyndra from the Federal Financing Bank. The terms of the loans, just more than 1 percent interest in most cases, were well below the rates competitors had to pay.Competition in the solar marketplace is stiff, particularly from China, and Solyndra couldn't make a profit. In the spring of 2010, the company spent around $3.5 million promoting an initial public stock offering (IPO) to raise $300 million to retire some of the government debt, but the company couldn't escape an inconvenient truth: In the first three quarters of 2009, it grossed $59 million against production costs of $108 million. Solyndra argued that economies of scale would eventually drive down the red ink, but the investment community wasn't impressed, and the IPO was withdrawn.When government loan guarantees of more than half a billion dollars were secured, Solyndra bragged that its new plant expansion would create 3,000 construction jobs and 1,000 permanent manufacturing positions. On a plant-site visit, Vice President Joseph R. Biden Jr. enthused, "These are jobs that won't be exported." Not so, Joe. After the failure of the IPO attempt, Solyndra sent half its manufacturing to China. . . . .

UPDATE: Another alternative energy scandal.

In June, House Republicans passed the 2012 Homeland Security appropriations bill, which included an amendment adding $1 billion to the Disaster Relief Fund of the Federal Emergency Management Agency (FEMA). In a sensible move for taxpayers, the amendment offsets this new disaster funding by cutting spending on the Advanced Technology Vehicles Manufacturing Loan Program. This may ring a bell with readers as the funding conduit for one of Washington's adventures in crony capitalism.

In 2009, the Department of Energy announced that it would loan more than half a billion dollars through this program to a California-based company, Fisker Automotive, to make luxury electric cars. About a month after the loan package was conditionally approved, CEO Henrik Fisker and Joseph Biden appeared in the Vice President's hometown of Wilmington, Delaware to announce that Fisker would now be making some of its cars at the city's old General Motors factory.

At the event, Mr. Biden described many "long talks" he'd had with Mr. Fisker. The Vice President's office later said that Mr. Biden didn't make any direct appeals to Energy before the loan was approved, but Delaware's chief of economic development told the Journal that Mr. Biden was the state's "secret weapon, except there is nothing secret about Joe Biden."

All of this is background to say that the GOP has found the federal program that is arguably the most deserving of a cut to free up funds for disaster victims. But Senate Democrats refuse to pass the House bill and Mr. Cantor has earned their ire this week by continuing to press for cuts in corporate welfare. . . .

UPDATE: More on potential corruption in giving the low interest rate loan to Solyndra.

ABC News discovered that the solar-tech firm Solyndra got unusually low interest rates on its federally-guaranteed loans before it collapsed last month, sending 1000 workers to the unemployment line in California. Other green-tech firms receiving loans paid as much as three and four times the interest rate Solyndra secured for its $535 million from Barack Obama’s 2009 stimulus bill from the Treasury’s Federal Financing Bank. ABC notes that other green-tech firms didn’t have the connections that Solyndra had to Obama:

The $535 million loan to Solyndra Inc., issued by the U.S. Department of Treasury’s Federal Financing Bank, included a quarterly interest rate of 1.025 percent, the government bank reported in July. Of 18 Energy Department loans cited in the bank’s report, Solyndra’s rate was lowest. Eight other Energy Department projects, each also backed by the Federal Financing Bank, came with rates three or four times higher, the report shows.

That treatment is in keeping with the history of the loan to the California solar panel maker, an arrangement inked in September 2009 with great fanfare — and touted, not long after, during a factory visit from the president. Monthly government bank reports filed since then reveal Solyndra’s rate as the lowest for any energy-related project in nearly every report; in every case its rate was well below that of most energy projects, which ranged from cutting-edge electric car makers to wind and solar ventures. …

Solyndra’s most prolific financial backer is George Kaiser, an Oklahoma oil billionaire who was a bundler of campaign donations for Obama’s 2008 race. Kaiser’s Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra’s parent company, bankruptcy records filed Tuesday show.

And guess who gets paid out of the bankruptcy first?

Under terms of the bankruptcy filing, investors including Argonaut — which led a $75 million round of financing for Solyndra earlier this year — will stand in line before the federal government and other creditors.

When Solyndra announced that round of fundraising this February, it noted that the DOE had refinanced terms of the $535 million loan to extend the payment period. Under an “inter-creditor agreement” cited in the bankruptcy filing, the investors in the $75 million financing are considered first lien holders. That leaves Obama officials to confront the prospect of waiting behind private companies.

Don’t think that this happened by accident. Before Obama took office, Solyndra applied for the federally-subsidized green-tech loan, and only scored a B+ from appraisers, which ABC calls a “red flag.” . . .

The White House has to explain why it overruled the FFB’s auditors and ignored the warnings from appraisers while fast-tracking over half a billion dollars to a teetering company at loan rates far below what FFB charged other companies. . . .

UPDATE: Now the FBI has raided the Solyndra offices.

But at the end of 2010 they had privately confided to Energy Department officials that Solyndra was rapidly going broke and on the verge of shutting down, according to newly released records and interviews. Solyndra’s inability to repay its debt leaves taxpayers liable for repaying the loans.

In February, the Energy Department agreed to a refinancing for Solyndra that allowed investors who put in new money to get their funds repaid first — before taxpayers — if the company defaulted on the federal loan.
. . .

Federal agents conducted a day-long search at the California headquarters, removing boxes and copying computer files. They also searched the home of the company’s chief executive, Brian Harrison, according to Solyndra spokesman David Miller.

Miller said he believed the FBI was focusing on the loan guarantee, which also has been the subject of a House subcommittee investigation. . . .

UPDATE: Question: Suppose a business executive tried to have the types of excuses that the government offers here for a bad investment, what would the response be? Would his investors simply say "OK, you didn't anticipate the large government subsidies"? From Fox News:

The testimony came as Republican and Democratic lawmakers raised sharp questions about the decision that ultimately left taxpayers on the hook for millions, and as newly released emails show administration officials were raising doubts about the loan proposal to Solyndra months before it was finalized.

Rep. Fred Upton, R-Mich., said the program was "shrouded in secrecy and uncertainty," questioning whether the loan represented "one bad bet" or the "tip of the iceberg."
Jeffrey Zients, deputy director of the White House budget office, acknowledged that Solyndra's bankruptcy will "limit the government's recovery of funds." He called the outcome "very unfortunate."
But at a hearing Wednesday, he said administration officials provided a "thorough examination and analysis" of the loan proposal and said a "challenging global solar market" has made business harder for companies like Solyndra. . . .

Silver said Solyndra's projects were considered "advanced" dating back to 2008. "In 2009, Solyndra appeared to be well-positioned to compete and succeed in the global marketplace," Silver said.
But emails released by the House Energy and Commerce Committee show that the relevant credit committee decided "not to engage in further discussions with Solyndra" in the final days of the Bush administration. After the change in administration, officials restarted the loan review process for Solyndra.
"A half a billion dollars that was not supported in January under the Bush administration was ... conditionally recommended in March," Rep. Joe Barton, R-Texas, pointed out. . . .

From Mary Kissel at the WSJ's Political Diary:

To the annals of extraordinary government spin, add Deputy Secretary of Energy Daniel Poneman, who just published a short defense of the Obama administration's backing of Treasury's 2009 $535 million loan guarantee to now-failed solar company Solyndra. "Winning will require substantial investments," Mr. Poneman wrote. "Last year, for example, the China Development Bank offered more than $300 billion in financing to Chinese solar manufacturers."

Set aside that if Beijing wants to use its own taxpayer cash to back solar investments, that's an effective subsidy to U.S. consumers of solar panels, which is no bad thing. Mr. Poneman's defense of the Solyndra investment also had the misfortune to land on the same day that the Washington Post revealed more evidence that the White House exerted political pressure on the Office of Management and Budget to approve the loan. In one email, a staffer complained about "rushed approvals" and a lack of sufficient time "to do our due diligence reviews," in direct opposition to Mr. Poneman's claims that the Solyndra deal was prudently vetted.

The administration is trying to play down the Solyndra scandal, with a White House spokesman telling the Post that the loan guarantee was "merit-based." . . .

From Politico:

ABC News reports on newly released emails from the administration from two years ago:

"This deal is NOT ready for prime time," one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.

"If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY," wrote Ronald A. Klain, who was chief of staff to Vice President Joe Biden, in another email sent March 7, 2009.

And The Washington Post reports that the administration tried to “rush federal reviews” on the loan so that Biden could make the announcement in September 2009 at a groundbreaking for Solyndra’s new factory:

One e-mail from an OMB official referred to “the time pressure we are under to sign-off on Solyndra.” Another complained, “There isn’t time to negotiate.”

“We have ended up with a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week),” one official wrote. That Aug. 31, 2009, message, written by a senior OMB staffer and sent to Terrell P. McSweeny, Biden’s domestic policy adviser, concluded, “We would prefer to have sufficient time to do our due diligence reviews.”

From USA Today:

In March 2010, the accounting firm PricewaterhouseCoopers issued a standard but stern warning about Solyndra, a California solar panel manufacturer: The company wasn't making money and never had, which raised "substantial doubt about its ability to continue as a going concern." Yet when President Obama visited Solyndra's plant in Fremont two months later, he gave a rousing pep talk and declared that "the future is here." . . .
Even if Solyndra's collapse is nothing more than good intentions gone awry — a big if — it is a cautionary tale about why government should be extremely wary about betting tax dollars on specific companies. If there's one thing the marketplace virtually always does better than government, it's picking individual successes in an uncertain and highly competitive business. In fact, government involvement can unfairly tilt the playing field toward one company and away from competitors. . . .

Solyndra employee claims: "Everyone knew that the plant wouldn’t work. But they still did it. They still built it."

Labels: , , , , ,


Did Stimulus merely move jobs around or hire the unemployed?

Garett Jones and Daniel Rothschild have this.

In an effort to boost hiring and job creation and to invest in a variety of domestic infrastructure programs, Congress passed and the president signed the American Recovery and Reinvestment Act (ARRA), commonly known as the economic stimulus package, in 2009. ARRA represented one of the largest peacetime fiscal stimulus packages in American history. But little is known about the ways in which organizations and workers responded to the incentives created by the bill.

To address the lack of knowledge about ARRA funding, we surveyed hundreds of firms, non-profits, and local governments that received ARRA funding. We collected over 1,300 anonymous, voluntary responses from managers and employees that allow us to better understand what happened at the organizations that received contracts funded by ARRA spending. This bottom-up study of ARRA is the first of its kind. We hope that others, especially government agencies, will build upon this on-the-ground analysis.

The survey asked a number of questions critical to analyzing the effectiveness of ARRA: Were new workers mostly hired from the unemployment lines or did they get "poached" or "raided" from other organizations? Did workers "game" the unemployment insurance system by waiting until benefits ran out before taking a job? Did Davis-Bacon prevailing wage laws force organizations to pay above market wages to new hires? . . .

In another case study, a budget shortfall forced a mid-size city to lay off 185 public workers—but the city received a $4 million stimulus grant to improve municipal energy efficiency. The manager of a construction company received funds for "the last thing on our list; and truthfully, the least useful thing." It happened to be a crane and a forklift. . . .

The second paper suggests that the stimulus did not "create or save" nearly as many jobs as the models indicate. On the basis of 1,300 interviews, Messrs. Jones and Rothschild estimate that merely 42.1% of the firms that received grants hired people who were unemployed. Instead, they poached workers from their competitors. . . .

The WSJ summarizes the findings here.

For readers who want to know, an important account is offered in a pair of new Mercatus Center working papers by the George Mason economists Garett Jones and Daniel Rothschild, who did field research on what they call the supply side of the stimulus.

The Keynesian theory was that a burst of new government spending would take up some of the slack in aggregate consumer demand. This was justified in 2008, again in 2009, and is still defended now based not on real-world observation but on abstract macroeconomic models that depend on the assumptions of the authors. The Congressional Budget Office's quarterly studies—often cited to claim the stimulus created tens of thousands of new jobs—are based on such a model. By informative contrast, Messrs. Jones and Rothschild interviewed actual people who received stimulus dollars and asked how they spent the money.

In the first paper, the authors survey 85 different businesses, nonprofits and local governments across the country and conclude that "As is often the case when economic models are transferred from the blackboard to actual public policy, there was a gap between theory and practice."

One of the major patterns Messrs. Jones and Rothschild uncovered was that the top-down stimulus was poorly targeted. In one redolent example, a federal contractor said he was told to use smaller, nonstandard tiles that are harder and more expensive to install in order to increase the cost of the project. That way, the government could claim the money was moving out the door faster. The famous Milton Friedman line about government ordering people to dig with spoons to employ more people comes to mind. . . .

In another case study, a budget shortfall forced a mid-size city to lay off 185 public workers—but the city received a $4 million stimulus grant to improve municipal energy efficiency. The manager of a construction company received funds for "the last thing on our list; and truthfully, the least useful thing." It happened to be a crane and a forklift. . . .

The second paper suggests that the stimulus did not "create or save" nearly as many jobs as the models indicate. On the basis of 1,300 interviews, Messrs. Jones and Rothschild estimate that merely 42.1% of the firms that received grants hired people who were unemployed. Instead, they poached workers from their competitors. . . .

Labels: , , ,

Obama Administration moves to block AT&T merger

Here is the news:

The U.S. government sued to block AT&T Inc. (T)’s proposed $39 billion acquisition of T-Mobile USA Inc., saying the deal would “substantially lessen competition” in the wireless market. AT&T shares fell as much as 5 percent.
In the complaint filed today in federal court in Washington, the U.S. is seeking a declaration that Dallas-based AT&T’s takeover of T-Mobile, a unit of Deutsche Telekom AG (DTE), would violate U.S. antitrust law. The U.S. also asked for a court order blocking any arrangement implementing the deal. . . .

I don't know if the Obama administration actually follows the stock market, but T-Mobile has been losing customers and its profits have been falling.

T-Mobile, one of the largest mobile networks in the United States, lost 50,000 customers in this second quarter alone.

This quarter, though not as dire as the previous reports from Q1 2011 and Q2 2010, where it lost 99,000 and 93,000 respectively, still presents a negative picture for the U.S. wireless giant.

Overall, the total revenues were down slightly compared to the previous quarter; with just over $5 billion generated this quarter, down from $5.4 billion from the same quarter last year.

While contract customers were dropping in their thousands, T-Mobile partly made it up in sales of pre-paid sales, as the pre-paid customer segment is rising in the company’s portfolio.

Still with over 33.6 million subscribers, though losing 281,000 contract users, it had gained 231,000 pre-paid customers this quarter.

T-Mobile has lost nearly 150,000 customers this year.

But as contract customers are a fixed and regular source of income, it is worth mentioning that contract customers are far more valuable to T-Mobile and other mobile networks than unreliable, revenue dripping pay-and-go customers. . . .

On profits:

During the first quarter of 2011, T-Mobile saw its revenue hit $4.63 billion, putting it in line with the first quarter of 2010. However, the company's profit fell over $200 million year over year from $362 million last year to $135 million in the first quarter of 2011. . . .

Someone at Info World also thinks that T-Mobile is a dying company:

But ultimately, T-Mobile is a dying company. Despite its slightly lower prices and a reasonable set of cellphones and Android smartphones, its contract-based customers are fleeing to Verizon Wireless, AT&T, and to a lesser extent Sprint, and its pay-as-you-go customers are looking more and more at the nation's fifth largest carrier, Metro PCS. . . .
The iPhone is not the only reason T-Mobile is struggling, but I'd argue it's the biggest reason that affects customer behavior. T-Mobile's other problems are invisible to customers, but just as important to its long-term survival (or lack thereof). . . .
Because parent company Deutsche Telekom decided not to invest in the company's U.S. spectrum licenses a decade ago, T-Mobile has very little spectum that can be used for the emerging LTE 4G networks. Over time, that decision will relegate T-Mobile to second-tier network status -- unlike its four major competitors. . . .
It's hard to imagine how T-Mobile can succeed in its current state. . . . .

Even left wing think tanks think that jobs would have been created.

ITIF finds that investments in America's digital infrastructure will spur significant job creation in the short run. Specifically, ITIF estimates that spurring an additional investment of $30 billion in America's IT network infrastructure in 2009 will create approximately 949,000 U.S. jobs. . . .

UPDATE 2: If AT&T's merger was going to hurt consumers by raising prices, should Sprint be happy or upset? They should be happy. If the merger was going to lower prices and provide better service, should Sprint be happy with this increased competition? The fact that Sprint is filing an antitrust suit against AT&T tells us everything that we need to know about whether this merger will increase efficiency.

UPDATE: Not clear that this is the way to run things.

“The news caught everybody by surprise,” said Steve Largent, president and CEO of CTIA-The Wireles Association, which hadn’t taken a position on the transaction. “AT&T was in the middle of explaining and detailing the merger that was being proposed when the Justice Department filed,” Largent said. CTIA includes AT&T, T-Mobile and Sprint Nextel Corp. (S) among its members. . . .

Labels: ,


"Confidence Drops to Lowest Level Since April 2009"

That Stimulus is working really well. From CNBC:

Consumers' confidence in August dropped almost 15 points to the lowest level since April 2009 as worries about the economy fueled the wildest stock market swings since the financial meltdown in 2008. . . .

The Conference Board said Tuesday that its Consumer Confidence Index fell to 44.5, down from a revised 59.2 in July. The number was the lowest level since April 2009 when the reading was 40.8. It also is far below the 53.3 that analysts had expected. A reading above 90 indicates the economy is on solid footing; above 100 signals strong growth. . . .


Is the world better off if Steve Jobs didn't give much money to charity?

The New York Times appears upset that Steve Jobs hasn't given much money to charity. The question is whether Jobs did more good by amassing wealth so that he could control the companies that he ran. Is it even a close call? From a piece today by Deborah L. Jacobs at Forbes:

In his New York Times column today, “The Mystery of Steve Jobs’s Public Giving,” Andrew Ross Sorkin shines a spotlight on the fact that the former Apple CEO and Forbes billionaire has never been public about his philanthropy. He briefly considers, though seems to dismiss, the possibility that Jobs has been an anonymous donor.

Sorkin does an admirable job of marshaling the evidence that Jobs has devoted much more energy to building wealth than to sharing it. But whether Jobs has been charitable or not, what he does with his money is his choice. And he has the right to remain silent about it.

Like other wealthy people, Jobs has no doubt been badgered by fund-raising requests. He refused to join the lineup of nearly 70 U.S. billionaires who have pledged to give away at least half their fortunes during life or at death. Facebook co-founders Mark Zuckerberg and Dustin Moskovitz are among those who have joined the philanthropic campaign led by Berkshire Hathaway‘s Warren Buffett and Microsoft co-founder Bill Gates. . . .

This author has it exactly right.

What a loss to humanity it would have been if Jobs had dedicated the last 25 years of his life to figuring out how to give his billions away, instead of doing what he does best.

We'd still be waiting for a cell phone on which we could actually read e-mail and surf the web. "We" includes students, doctors, nurses, aid workers, charity leaders, social workers, and so on. It helps the blind read text and identify currency. It helps physicians improve their performance and surgeons improve their practice. It even helps charities raise money.

We'd be a decade or more away from the iPad, which has ushered in an era of reading electronically that promises to save a Sherwood Forest worth of trees and all of the energy associated with trucking them around. That's just the beginning. Doctors are using the iPad to improve healthcare. It's being used to lessen the symptoms of autism, to improve kids' creativity, and to revolutionize medical training.

And you can't say someone else would have developed these things. No one until Jobs did, and the competitive devices that have come since have taken the entirety of their inspiration from his creation.

Without Steve Jobs we'd be years away from a user-friendly mechanism for getting digital music without stealing it, which means we'd still be producing hundreds of millions of CDs with plastic cases.

We would be without Pixar. There's a sentence with an import inversely correlated to its length.

We would be without the 34,000 full-time jobs Apple has created, just within Apple, not to mention all of the manufacturing jobs it has created for those who would otherwise live in poverty.

We would be without the wealth it has created for millions of Americans who have invested in the company.

We would be without video conferencing for the masses that actually works. Computers that don't keep crashing. Who can estimate the value of the wasted time that didn't get wasted?

We would be without a whole new way of thinking. About computers. Leadership. Business. Our very potential.

Last year Change.org wrote of Steve Jobs, "It's high time the minimalist CEO became a magnanimous philanthropist."

I've got news for you. He has been. . . .

UPDATE: Rush Limbaugh talks about Jobs and the news about him available here.


Obama's Midwest Bus Tour was not a bus tour at all

Obama actually flew from town to town on his bus tour of the Midwest! Apparently he did this for every campaign stop.

He FLYS into an airport somewhere in the midwest, hops into a brand new 1.1 Million $ bus, paid for by you and me, for a “bus tour” ‘around the midwest’, and after an hour or so, gets driven back to the airport for ANOTHER FLIGHT, lands at another airport where another 1.1 Million $ brand new black bus is waiting for him… and repeats all that until his midwest bus‘tour’ is done?? Oh yes......and THEN he leaves on a 12 day vacation to Martha's Vineyard.......to REST UP from this campaign bus tour!
And don't forget........those brand new shiny black buses aren’t DRIVEN to the location where they meet Obama. Those buses are loaded up on one or more C-17s. Then, they are flown to the destination ahead of AirForce- AND!.......this is REPEATED FOR EVERY CAMPAIGN STOP.

Of course, American Taxpayers paid for Obama and these buses to get flown from town to town.


Newly Published Research: "The effect of macroeconomic news on stock returns: New evidence from newspaper coverage"

Here is some newly published research that I have with Gene Birz in the latest issue of the Journal of Banking & Finance. This paper finds that media bias can have real economic effects. We will see how many downloads this paper gets. Hopefully, it will get some attention.

Journal of Banking & Finance
Volume 35, Issue 11, November 2011, Pages 2791-2800

The effect of macroeconomic news on stock returns: New evidence from newspaper coverage

Gene Birz and John R. Lott Jr.
Received 19 May 2010; accepted 13 March 2011. Available online 17 March 2011.
Previous literature has produced weak evidence to support the hypothesis that real economic news affects stock returns. This is, in part, attributed to the difficulty of measuring how investors interpret macroeconomic announcements in different economic environments. In this paper, we choose a different approach of measuring macroeconomic news to better estimate its effect on stock returns. Since newspaper stories provide an interpretation of the statistical releases, we choose newspaper stories as our measure of news. Our findings indicate that news about GDP and unemployment does affect stock returns.
Keywords: Stock returns; Macroeconomic news; Information

Labels: ,

Alan Krueger, Obama's nominee to head the Council of Economic Advisers

Austan Goolsbee did his dissertation trying to show that higher tax rates didn't reduce how hard people worked. Obama's new nominee for that position, Alan Krueger, has a very similar set of beliefs. Krueger argued for example that higher minimum wages do not impact how many jobs are available for low wage workers. This guy fits Obama's view of the world and economics very well. From The Hill newspaper:

With the economy in dire straits in January 2009, Krueger, a Princeton economics professor, wrote that a consumption tax would be one possible tool to keep longer-term deficits in check as the government worked to stimulate the economy.

Krueger also stressed that he was not sure whether consumption taxes were the best way to proceed, only that the idea was worth considering. But he added that a 5 percent national sales tax could create an extra $500 billion per year in revenue “and fill a considerable hole in the budget outlook.”

“The prospect of greater revenue flowing into federal coffers would probably help lower long-term interest rates because the government would need to borrow less down the road, and further bolster the economy,” Krueger wrote on The New York Times website. . . .

Labels: , ,