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9/07/2011
A useful comparison between the Great Depression and the current recession
The second myth here is particularly useful in that it points out the policies followed during the Great Depression made things worse. The useful comparison is between the US and other countries. That same point is relevant today as I have pointed out in several of my op-ed pieces and posts regarding Canada, Germany, and the rest of the world generally.
The third edition of More Guns, Less Crime on pages 330-332 provides the first empirical research on the impact of the Castle Doctrine/Stand your ground type laws, and it finds that NH Gov. Lynch's concerns about public safety are not well founded. From the Concord Monitor in New Hampshire.
. . . . "Criminals should not have a greater right to life than us," said Rep. Jenn Coffey, an Andover Republican and women's self-defense advocate, flanked by about 50 people gathered in the Legislative Office Building in support of the bill. The state's senators are set to take up the override vote when their session opens at 1 p.m.
Senate Bill 88, which passed both houses by veto-proof margins, allows citizens to use deadly force in self-defense wherever they "have a right to be" without attempting to retreat from the situation, a provision that currently applies only to situations occurring in the victim's home or surrounding area. The bill also includes provisions related to the experience of Ward Bird, who was imprisoned for waving a gun at a woman on his property. Lynch has said he would sign those provisions into law separately, but Republican legislators say they want the entire bill to become law.
Yesterday's Republican press conference follows a public relations push by Lynch in recent weeks to see his veto of SB 88 stand. Backed by the top law enforcement officials in the state, the Democratic governor has visited local communities to argue that the bill will lead to more gang violence and avoidable homicides.
Lynch released a statement yesterday ahead of today's vote.
"This debate should not be about political wins or losses inside the State House. It is about public safety," Lynch said. "And it should not be about a political ideology.
"The only ideology of law enforcement is keeping us safe, and law enforcement from across the state and at all levels oppose this bill, because they say it will make our communities more dangerous." . . .
I was looking through some past articles on Krugman and I came across this piece that did a good job of summarizing my views on Krugman's after the Tucson shooting earlier this year. It was amazing that within just a couple hours after the attack, with no evidence, Krugman was already assigning blame.
HOW did a deadly shooting spree by a disturbed young man with the typically inscrutable politics of political killers turn into a crazy referendum on the state of American political discourse?
Mere minutes after the identity of the alleged Tucson gunman hit the wires, partisans began a reprehensible scramble to out Jared Loughner as ideological kin to their political opponents. Actually, well before that time, some left-leaning opinionators began suggesting that Sarah Palin's now-infamous crosshairs map probably had something to do with the shootings. At the very least, intemperately fiery right-wing rhetoric probably had something to do with creating a cultural "climate" unusually encouraging to would-be assassins. Before anybody really knew anything, some people seemed to have become convinced that if not for the heavy weather of partisan antagonism summoned by intemperate tea-party types, Gabrielle Giffords would not have got a bullet through the brain.
In a blog item on Saturday, before any significant details about Mr Loughner's motivations had come to light, Paul Krugman wrote:
You know that Republicans will yell about the evils of partisanship whenever anyone tries to make a connection between the rhetoric of Beck, Limbaugh, etc. and the violence I fear we’re going to see in the months and years ahead. But violent acts are what happen when you create a climate of hate. And it’s long past time for the GOP’s leaders to take a stand against the hate-mongers.
This struck me as irresponsibly premature, and one might have thought that, given a little more time and information, Mr Krugman would change his tune, or at least turn down the volume. Nope. . . .
The announcement by the World Economic Forum was the latest bad news for the Obama administration, which has been struggling to boost the sinking U.S. economy and lower an unemployment rate of more than 9 percent. Switzerland held onto the top spot for the third consecutive year in the annual ranking by the Geneva-based forum, which is best known for its exclusive meeting of luminaries in Davos, Switzerland, each January. Singapore moved up to second place, bumping Sweden down to third. Finland moved up to fourth place, from seventh last year. The U.S. was in fourth place last year, after falling from No. 1 in 2008. The rankings, which the forum has issued for more than three decades, are based on economic data and a survey of 15,000 business executives. The forum praised the U.S. for its productivity, highly sophisticated and innovative companies, excellent universities and flexible labor market. But it also cited "a number of escalating weaknesses" such as rising government debt and declining public faith in political leaders and corporate ethics. The results of a survey of 142 nations comes a day before Obama is preparing to tackle jobs issues in a speech to the U.S. Congress, and just as U.S. polls show a clear majority of those surveyed say they disapprove of the way Obama is handling the economy. . . .
It is often funny to see the media always coming up with explanations for even the tiniest changes in stock prices. Every day when the market closes the media gives a short sentence saying why the market went up or down. Now the market supposedly is going up a hundred points according to the future markets because of Obama's new "stimulus" plan?
U.S. stock futures pointed to a higher open amid speculation that President Obama will inject $300 billion into the economy to spur jobs growth. . . .
UPDATE: Notice that after Obama's new Stimulus speech on Thursday, September 8th, 2011, the market crashed, but the media barely mentioned that it was a response to Obama's speech. Granted events in Greece undoubtedly played an important role, but it could have been played as Obama's speech not stemming the concern.
Government work rules restrict what public employees can do, often in the name of safety. But critics say the rules have, over the years, been manipulated for political ends by bureaucrats and unions. Sometimes, the rules restrict public employees so much that they put lives in danger. From an incident in California in which police and firefighters watched as a man drowned himself, to a public school teacher in Texas who stood by as one of his pupils was beaten up by another student, government and union work policies have had tragic consequences. FoxNews.com takes a look at five of the most serious cases. 1) Firefighters Not Allowed to Save Drowning Man On Memorial Day -- . . .
Concern about costs are a fine reason to include in making foreign policy decisions. Concerns about short term political considerations is not so laudable. From Fox News:
The Obama administration has decided to drop the number of U.S. troops in Iraq at the end of the year down to 3,000, marking a major downgrade in force strength, multiple sources familiar with the inner workings and decisions on U.S. troop movements in Iraq told Fox News. . . .
The generals on the ground had requested that the number of troops remaining in Iraq at the end of the year reach about 27,000. But, there was major pushback about "the cost and the political optics" of that decision that the number was then reduced to 10,000. . . .
Ron Paul runs a pretty dishonest campaign ad against Rick Perry
This ad uses some subterfuge that is disheartening. First, on the theatrics, note that a young Ron Paul is shown with Reagan, but when Perry is linked with Al Gore, current pictures of Rick Perry are used. The obvious implication is that Rick Perry recently endorsed Al Gore for president, not long ago as it actually occurred in 1988, 23 years ago. The other thing that was left out was that when Gore ran for the presidency in 1988, he was considered the conservative Democrat in the race. Al Gore's views on gun control, abortion, and spending were much more conservative than they were later. It was basically after that run that Gore realized that the had to move well to the left if he was going to have a place in the national Democratic party 1988 was before Gore went nutty on the environment. Rick Perry was still a Democrat at that time in 1988 and it was just before he switched parties to run as a Republican.
Germany and its Northern European allies believe only intense market pressure can force weak economies to cut spending and improve competitiveness. But Greece has learned that whenever the crisis in Europe's periphery threatens to overwhelm the core, Europe will ignore previous broken promises and step up with a fresh bailout.
Italy now appears to be making the same calculation. The government insists it will fulfill its commitment to balance the budget by 2013, but ministers show no appreciation of the urgent need for structural reforms to address the chronic weakness of an economy that grew on average 0.3% between 2001 and 2010 and experienced a 25% increase in unit labor costs relative to Germany over the same period. Instead, they talk incessantly of euro-zone bonds as a solution to misfortunes they blame largely on external forces. . . .
Greeks apparently believe that they have Europe and the world over a barrel, that they can make the rest of the world pay their bills by threatening to default. Greece’s default would be painful for everyone, but for Europe and the United States, indeed for the world, the alternative would be even worse. If politicians in Ireland, Portugal, Spain, Italy, and other countries think that their bills will be picked up by taxpayers in other countries, they won’t control their spending and they won’t sell off assets to pay off these debts. Countries such as Greece have to be convinced that they will bear a real cost if they don’t fix their financial houses while they still have the assets to cover their debts. . . .
Obama has been so consistently blaming Republicans in recent months for not approving the free trade agreements with South Korea, Colombia and Panama that it came as an utter surprise to his deputy press secretary, Josh Earnest, that he hasn't sent them to Congress yet. . . .
Biden refers to Republicans as "the Barbarians" at the gates
"you are the only folks keeping the barbarians from the gates" "stop this onslaught" "the other side has declared war on labor's house"
"President Obama, this is your army. We are ready to march. Let's take these son of bitches out and give America back to an America where we belong." James Hoffa spoke before Obama, but Obama didn't reprimand Hoffa for the type of language used here. Realclearpolitics refers to this as "Hoffa Threatens GOP at Obama Event." In fact, Obama said that he was "proud" of Hoffa immediately after the union leader's remarks shown above. Obama's talk was not billed as a political talk so it was billed to the taxpayers to pay for its costs. Listen to this portion of the speech at the bottom of this page and tell me it was not a political speech.
MR. CARNEY: Mr. Hoffa speaks for himself. He speaks for the labor movement, the AFL-CIO. The President speaks for himself. I speak for the President.
What the President was glad to do yesterday was have the opportunity to present his views on the importance of working Americans and on the importance of taking measures to help working Americans --
Q Okay, so the precedent --
MR. CARNEY: -- to create jobs and grow the economy.
Q So the precedent you’re setting right now for the 2012 election is, the candidate -- the Republican candidates are the ones that we need to pay attention to, and those who introduce them at rallies, their surrogates -- you don’t have to pay attention to anything that they say.
MR. CARNEY: Jake, I really -- I think I’ve said what I can say about this.
Q I just -- is that the standard now?
MR. CARNEY: You can report it as you --
Q I’d rather not have to do this Washington Kabuki every time something happens --
MR. CARNEY: It’s up to you to do the Kabuki --
Q -- but if that’s the standard -- if that’s the standard, then --
MR. CARNEY: The standard is, we should focus on the actions we can take to grow the economy and create jobs, instead of focusing on Kabuki theater.
Q Did the President find the comments appropriate?
HOFFA: Everybody here's got to vote. If we go back and keep the eye on the prize, let's take these son of a bitches out and give America back to America where we belong! Thank you very much!
Listen to the video of the speech from above and see if Hoffa made the statement the way that everyone is reporting it. Hoffa might have made other statements, but surely this is the one that has gotten people upset. Media Matters seems to be willing to do anything to go after Fox News.
UPDATE 2: DNC Chairwoman Debbie Wasserman Schultz refuses to criticize Hoffa's comments available here.
UPDATE: Someone in the UK had the same thoughts that I did. Obama calls Republicans on language when Democrats constantly use much worse language, yet he never specifically condemns Democrats for what they have said.
. . . But the statements today by Jimmy Hoffa Jr and Vice President Joe Biden demean the presidency and, tactically speaking, are stupid own goals. Hoffa, the Teamsters president, was warming up a Detroit crowd when he said: “President Obama, this is your army. We are ready to march. Let’s take these son of a bitches out and give America back to an America where we belong.” Biden, whose mouth has long been a liability for Obama, was at an AFL-CIO rally when he told union members: “You are the only folks keeping the barbarians from the gates…the other side has declared war on labour’s house.” These comments were not nearly as bad as the statement last week by Congressman Andre Carson last week that members of the Tea Party want black people “hanging from a tree”. Let’s not get too sanctimonious here – they’re fairly common sentiments behind the scenes on both sides of the political divide. The difference, of course, is that they were uttered publicly by someone chosen by the White House to introduce Obama and by the sitting vice-president at a time when Obama is calling for a bipartisan coming together to tackle the economy. To add to their foolishness, they follow on from Obama’s sensible call in January for “civility” in public discourse and for people to talk “in a way that heals, not a way that wounds”. Hoffa’s comments were much worse than Biden’s, though the vice-president’s demeanour suggests he could be a liability on the campaign trail (I’d wager there’s a campaign plan for him to be used only in “rev up the base” type events). Put together, they are embarrassing enough to require an apology from Obama. . . .
What impact did the German regional election have on German stocks? The Conservative government has done a fairly good job running things. Their unemployment rate was exactly the same as ours in January 2009, but while ours is now at 9.1 percent and theirs is 7 percent. The US and Germany have both incurred a lot of debt since then, though theirs has gone up because they are trying to bail out the other spendthrift countries in Europe. My own guess is that it is the fear that the German Social Democrats will regain control that is causing stocks in Germany to fall.
In a recent study done at an Italian restaurant, researchers found that diners who used larger utensils ate less, surprisingly enough. The researchers believe that bigger forks somehow trick people's minds into thinking they've eaten more. . . .
Another possibility is that eating a meal with a big fork is awkward and more difficult. Could it simply be that if you make eating more difficult, people will eat less? I did see some research years ago that babies who were breastfeed consumed less milk during any given meal than those feed from a bottle. The reason was that more work was required by the baby. One interesting consequence of this is that breastfeed babies are thus more likely to wake up during the night wanting to eat more. It seems hard to think that breastfeed babies are having some "mind tricks" occurring to them.
Just as the size of our houses have doubled over the last 30 years, so apparently also have the sizes of our meals (though the meal sizes have grown more slowly).
Meal sizes have grown over the past few decades, contributing to an obesity epidemic in the United States. In fact, Cornell University researchers recently found amusing proof of portion swelling when they compared the 1936 and the 2006 editions of that homemaking classic, Joy of Cooking. They found that the recipe for chicken gumbo went from 228 calories per serving in the 1936 version to 576 calories in the 2006 edition. Why? The editors simply had to jack up the portion sizes to meet our oversized modern-day appetites. . . .
US Post Office Deficit will reach $9.2 billion this fiscal year?
While everyone wants Congress to give the Post Office billions of dollars, there is a solution to all this: get rid of the Post Office's monopoly. Whose fault is it that the Post Office has these horrible labor contracts that force all this inefficiency? From the New York Times:
the agency is so low on cash that it will not be able to make a $5.5 billion payment due this month and may have to shut down entirely this winter unless Congress takes emergency action to stabilize its finances. “Our situation is extremely serious,” the postmaster general, Patrick R. Donahoe, said in an interview. “If Congress doesn’t act, we will default.”
In recent weeks, Mr. Donahoe has been pushing a series of painful cost-cutting measures to erase the agency’s deficit, which will reach $9.2 billion this fiscal year. They include eliminating Saturday mail delivery, closing up to 3,700 postal locations and laying off 120,000 workers, nearly one-fifth of the agency’s work force.
The post office’s problems stem from one hard reality: it is getting squeezed on both revenue and costs.
As any computer user knows, the Internet revolution has led to people and businesses sending far less conventional mail.
At the same time, decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.
Missing the $5.5 billion payment due on Sept. 30, intended to finance retirees’ future health care, won’t cause immediate disaster. But sometime early next year, the agency will run out of money to pay its employees and gas up its trucks, officials warn, forcing it to stop delivering the roughly three billion pieces of mail it handles weekly. . . .
Judge Napolitano has a slightly old piece on why we should abolish the USPS available here.
In the 1840's, the cost of mailing a letter was determined by weight and distance. An average one-ounce letter cost $0.14.5 to mail from New York to Boston. And in 1841, it took five days to get there. Then a man named Lysander Spooner started a business to compete with the post office. He charged lower rates. He delivered in less time. And he brought the mail directly to your home, not just to the post office in your town. Not to be outdone, the post office kept lowering its charges for stamps. By 1851, both Spooner's company and the government were charging $0.03 to deliver that same one-ounce letter from Boston to New York. And so the federal government, unaccustomed to competition, sued Spooner and his company and tried to get a jury to put him out of business. The jury loved what Spooner did. He made life better and cheaper. The feds lost. And then they did what they always do when they have competition they can't tolerate, they outlawed it. So in 1851, the feds were losing money by delivering mail from post office to post office and Spooner was making money by delivering mail from post office to private homes and businesses. And Congress thought it would make the post office solvent by banning the competition from charging less than the post office charged. The $0.03 stamp stayed in place for over 100 years with Congress using tax dollars to fill in the deficits in the post office's budget. . . . Since the 1960s, the price of a stamp has gone up from $0.05 up of $0.44. The service is worse. . . . .
11 Crimes committed with Guns from "Gunwalker" Program
The information is provided here. In some sense, with 11 crime scenes from 2,000 guns SOLD to violent drug gangs, wouldn't you think that there would be more than 11 crime scenes? Is it because the American guns aren't used by drug gangs? Is it because these guns can't be linked to crimes? I don't think that either of these options don't make the government look good.
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.
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.
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. . . . .
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. . . .
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. . . .
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. . . .
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? . . .
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. . . .
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."
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%.
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. . . .
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. . . .
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." . . .
“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.” . . .
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. . . .
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. . . . .
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. . . .
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. . . .
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." . . .
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.”
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. . . .
Amazed how lucky I am that I have had jobs where I could just think about whatever I wanted to think about. I have published over 90 articles in academic journals. I received my Ph.D. in economics from UCLA in 1984.
Intrade probability that Newt Gingrich will win the Republican Presidential Nomination Intrade probability that a Republican will win the 2012 Presidential election. Intrade probability that Republicans will control the House of Representatives after 2012 Congressional Elections Intrade probability that Republicans will control the Senate after 2012 Congressional Elections
