More Dismal Economic Numbers In January

The effects of failed Republican economic theories continue to make themselves known.  The latest numbers to come out:

Only 550,000 new housing starts (annualized) were started in December.

589,000 new jobless claims were filed last week.

The corporate welfare giveaway didn’t save the banks and now they want more.

The housing number ties together a number of issues.  The Fed’s record low rate cut hasn’t changed much with regard to new housing.  People are refinancing their mortgages like mad, but not many people are buying new houses.  So that policy failed.  (It also failed to get credit flowing through the system.)  Also hurting housing is unemployment.  13.5% unemployment translates to a populace that isn’t able to buy a house.  That effect is maintained by 589,000 new jobless claims.  Over 1 million people are losing their jobs every month.  How are they supposed to buy groceries, let alone new houses?

The solution does not lie with dispensing billions of dollars to mega-corporations.  It’s millions of people and small businesses that need the government’s help, not the tiny numbers of ultra-rich people and corporations.  Rich people are sitting on our billions, letting the economy slide further into recession toward depression; watching as workers lose their jobs and their houses; hoping the spread between them and the rest of the citizenry grows each day.  Which leads to the third article: banks are still “teetering on the brink”, as MSNBC put it, because they used the money to pay for bonuses and buyouts of smaller banks, not to improve their business standing.  Banks who received billions of taxpayer dollars with no oversight or transparency did things with that money that nobody can trace.  But they want more.  Excuse me?  That malfeasance was exactly why I opposed the TARP program from the beginning: the Bush “administration” pushed it through as fast as they pushed the mis-named patriot act through.  But they said the financial system would collapse without immediate assistance.  Well, the assistance went out and the system is still looking at a collapse.  Hopefully the new President and the 111th Congress tries to solve the real problems and not the made-up ones Bush peddled.

A little oversight and some bank-busting would be a darn good start to any implemented solution.  Smaller banks aren’t having the problems that the mega-banks are.  That’s for good reason: they didn’t bundle people’s risky mortgages and bet on them irresponsibly.  Those who did so should be held to account: executives should lose their jobs and be prosecuted (where applicable) and their corporations should be broken up.  Enforce the Sherman Anti-Trust Act.  Work out plans for troubled homeowners and help maintain foreclosures.  Get some of the TARP money back.  It wasn’t dispensed as dictated by law – it should be repaid in full with interest.  Or how about creating a national bank?  One that is transparent and has oversight.  Let it compete with the rest of the banks and let’s let the “free-market” decide which one does the best job.

Interest Rates, Inflation, Housing Starts and OPEC

The Federal Reserve cut its federal funds rate to a record low yesterday: it will hover between 0% and 0.25% for the forseeable future.  I don’t think this action will do anything very meaningful since there was very little room downward for rates to move anyway.  The Fed has cut the rate for a solid year and a half, which followed a steady rise in rates in an attempt to recover from “Bubbles” Greenspan’s rate cuts in the firt half of this decade.  Bernanke’s current approach looks too similar to Greenspan’s for me to have much confidence that it will manifest it’s supposed intended response: a rise in economic activity by a majority of Americans.  The last thing our economy needs right now is for another bubble to grow and pop.

Consumer prices in November fell by a record amount (don’t you love all the records the Republican economy is setting?).  Prices fell 1.7 percent, surpassing the previous record decline of 1 percent set in October. It was the largest one-month decline dating to February 1947.  Part of it really is good news: energy prices were the main driver, which means some money is freed back up to pay for other goods and services.  If prices continue to fall, we’ll see how devastating deflation can be.  The early signs aren’t good: companies that saw their profits slipping fired workers instead of taking a hit; workers (consumers) haven’t seen a real increase in wages in 20+ years, they’re carrying massive debt on their credit cards, and they tapped all the equity on their homes, which means they have no more money to spend; fewer sales mean fewer profits which means more fired workers.  Fewer employed consumers means less buying.  And so on.  Compounding all of this more recently was the 2005 Bankruptcy Bill, which mandated that borrowers pay off their credit cards before their mortgages, which led to more foreclosures than those just from the sub-prime lending fiasco.  Put all of this together and the picture moving forward isn’t pretty.  That’s why it will be necessary for President-elect Obama, as well as state and local officials, to initiate and sustain projects that will re-employ workers.  That’s the only way out of this mess.

The Commerce Department reported last Friday that retail sales dropped by 1.8 percent in November. The decline was the fifth straight monthly drop, a record stretch of weakness.

In other economic news, the Commerce Department reported that construction of new homes fell in November by 18.9 percent, the biggest drop in a quarter-century. The steep decline pushed construction down to a seasonally adjusted annual rate of 625,000 homes, the slowest pace on records dating to 1959.  The Cons goal has been to make American life just like it used to be.  How’s that looking now?  Are home sales at 1959 levels a good thing?  From the article: “Builders continue to be discouraged by the prospects of a housing turnaround amid what’s likely to be the worst recession in decades, spurring rising unemployment and foreclosures.”  Things aren’t likely to change any time soon.

Keep in mind that Bush’s Treasury Department has largely wasted $300 billion by giving it to banks so they can buy up their competition.  No bad assets were taken care of, no jobs were created.  The economy will be the worst since the Great Depression and the “Compassionate Con-servative”, who has utilized the most expansive definition of executive power in our history, does nothing.  This will be a good lesson for Americans to learn: we can take action early on in a crisis and pay a little bit or we can delay action until the crisis grows out of control and pay a whole lot more.  Most Americans will end up paying a very high price for Bush’s actions.

Finally, in a move that should shock absolutely no one, OPEC decided to cut their production by 2.2 million barrels per day.  OPEC decided just a short time ago to decrease output by 2 million barrels per day.  So since oil has backed of its speculation-fueled record high price in July, OPEC has cut production of oil by 4.2 million barrels per day.  That’s a very significant cut: it’s 1/6th its total production.  Moving forward, America needs to promote hybrid and all-electric vehicles.  OPEC countries have no love for the U.S. and we’ve transferred too many billions of dollars to them as it is.  If we as a country can make oil more irrelevant, we should do so.  Our security and the state of our climate would benefit from such moves.

Auto Industry Bailout

The Democratic-led Congress continues to push for an auto industry bailout of at least $25 billion.  When this was first proposed, little was mentioned about executive pay or ensuring American automakers would change how they do business.   The original $25 billion offer was a giveaway, just as much as Bush’s Bailout has been a giveaway to banks.  Remember, the portion of the $700 billion given away so far hasn’t been used to buy bad assets, it’s been used to buy other banks.  Actions taken in countries around the globe has done more to thaw the frozen credit markets than the obscene corporate welfare check Bush’s government wrote.  So the original $25 billion corporate welfare check everybody in Washington wanted was as immoral as Bush’s Bailout.

A few more things about this auto bailout.  I don’t care as much as most other people do how bad it would be for a company like GM to fail.  I am keenly aware that thousands of jobs would be lost in multiple industries across the nation.  I have a two-part response to the “too big to fail” argument.

First, GM made this bed.  They did so deliberately, with full knowledge that foreign car makers were shifting their approach in America.  GM and others have fought against universal health care for decades, which has only multiplied the amount they are forced to spend on their own employees health coverage each year.  Their operating expenses are higher because of their actions.  GM and others also fought against increasing CAFE standards for decades.  They worshipped at the free-market altar, convinced some magical hand would take care of everything.  Obviously, they were wrong.  Meanwhile, GM has been making cars with better fuel efficiency in every other market across the world because foreign governments were adult enough to mandate those efficiencies.  GM squashed every technology that would wean the industry off fossil-fuels.  So when GM says they need billions of taxpayer dollars to retool everything in America, I don’t have a whole lot of sympathy.  They made business decisions to build inefficient vehicles so they could maximize their profits.  Did they pass those profits along to their workers or to America as a whole?  No, the profits were privatized, as was their right.  Now that GM is in trouble, what do they do?  They ask for a handout from the government they spurned for decades.  They ran a bad business model and want their losses socialized.  Did they make their request with an offer to change their business model?  No.  It’s only being discussed because millions of Americans correctly viewed GM’s request as the stinking pile of manure it is.  Here’s where the politics comes in: the auto industry has spent millions of dollars on lobbying Congress for decades (instead of using the money for improved technologies).  That wallet padding has corrupted a number of elected officials, Democrats and Republicans alike.  Instead of making more objective decisions, lawmakers are willing to bend the American taxpayer over the table for GM’s sake.  That’s immoral.

Which leads to my second point.  Thousands of jobs will be lost if GM fails.  That’s beyond dispute.  But what about the millions of jobs already lost this year?  And more to the point – what about Americans?  Where is our bailout?  Industries across the board have constructed unfair playing fields Americans are forced to play on.  Where is our bailout?  Where is our relief?  Why don’t we have living wages?  Why don’t we have universal health care?  Why don’t we have the most technologically advanced vehicles on Earth?  Why has American ingenuity been kicked to the curb time and time again?  Where is the talk of capping executive compensation, of closing the loopholes corporations have generated to get around what little control there is?  Where is the talk of splitting the Big 3 automakers up to increase competition?  Both parties are too willing to give corporations whatever they damn well please and every time they do, it’s living, breathing Americans that suffer because of it.

News came this morning that House Speaker Pelosi wants some of the appropriated $700 billion to go to the auto corporations.  Not surprisingly, Bush is pushing back, saying that if Democrats want money for the autos, they need to do it in a brand new appropriation.  This makes sense for two reasons.  Bush’s cronies want all the $700 billion to go to themselves.  There has been zero oversight or transparency that the money is actually going to where Congress authorized it to go (I don’t see much mention of oversight or transparency with respect to the auto bailout either, surprise, surprise_.  That’s a scandal by itself, but I think Americans are incredibly scandal-fatigued by this “administration”.  That $700 billion is sitting on top of an already large pile of debt America possesses.  Bush’s cronies are going to walk away with most or all of it and the rest of us will be left holding the bill.  Bush and the Cons also want to destroy more unions.  They’ve been very efficient at doing so over the past 8 years, neatly continuing what St. Ronnie started in the 1980′s.  The longer the automakers go without any assistance, conditional or not, the more likely they are to fail.  If they fail, thousands of union jobs will be lost.  It will be harder to get those back than it will be to create new jobs period.  That’s another big reason why Pelosi’s crew is working so hard to hand the auto corporations cash quick.  Unions will be rightfully upset that not enough was done to save their employers.  I definitely support those unions, but I don’t see a viable long-term solution being discussed in Washington.

Bush and Banks Robbing the American Taxpayer

I’ve written about this a little since Sep 15th, when everything in the financial markets went to hell.  I didn’t trust the Bush “administration” to handle the financial crisis with any degree of honesty or integrity.  I take no pleasure in reading news reports that my worst fears continue to come true.  Bush and Sec. Treasury Paulson are taking American taxpayers for a ride; a ride that they will never be held accountable.  How bad is it already?  As detailed by Jerome a Paris, here are the up-to-date details:

• the original $700 billion bailout;
• an additional $140 billion in tax breaks for banks (quietly non-announced by the Bushies);
• $150 billion for AIG, on much sweeter terms than they were paying for the earlier $85 billion bailout (with a whoopping 5% drop in the interest rate they have to pay, for instance);
• lest we forget, the $29 billion guarantee to JPMorgan for Bear Stearns assets (but that’s almost small change now);
• and $1,200 billion new liabilities on the Fed’s (ie ultimately the taxpayers’) balance sheet, backed by mostly junk paper;

That’s $2.3 Trillion in just under two months’ time.  From a party that will whine for the next four years that Democrats are being fiscally conservative.  Is it responsible or moral to give away more taxpayer money to banks that ran around unregulated for years?  Is it responsible or moral to renegotiate the AIG deal with a lower interest rate when they blew through their original giveaway in a few weeks’ time?  Is it moral or responsible for the Federal Reserve to refuse to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral?

This is the kind of immoral and irresponsible behavior that cost the Cons the 2008 elections.  Yet, the lesson they’ve learned so far from the elections is they didn’t attack Democrats enough; they weren’t loud enough about their failed ideas and policies.  Believe me, the American voter heard more than enough disgusting Con attacks.  Voters have suffered under the Cons’ failed policies.  The problem is Con policies are too extreme for America.  If Cons want to come back toward the center-left the nation actually occupies, they’ll win plenty of elections.

Around the Blogosphere 10/24/08

I argued against the Bush Bailout because I didn’t think the Bushies would be transparent about where the money was really going to go.  I hate it when I’m right: the Bush Treasury Department decided to redact key parts of private contracts that would tell the public how much taxpayer cash various law firms, accounting companies and stock management houses are going to receive.  The uber-secret Bush administration took Amerians hostage to get taxpayer money to bailout his Wall St. cronies while telling those same Americans transparency and oversight would be maintained.  When Bushies say something, the exact opposite is actually true.  This case is no different.  Americans deserve to know where their money is going.

If Democrats win by landslides this November, a political realignment will be afoot.  As Paul Waldman notes, I fully expect the corporate media to push the meme that a “right-wing nation” is still dominant, despite overwhelming evidence to the contrary.  The discussion surrounding the 2000 and 2004 elections consisted of how bankrupt liberal policies were.  No such similar discussion about the failure of conservative ideology occurred after 2006, and it isn’t likely to happen after 2008 either.  Progressives will continue to have a lot of work to do to demonstrate that so-called “liberal” policies are actually very mainstream.  It’s the right-wing ideology that is extremist.  It’s had more positive attention due to the efforts of the CONservative machine set up over 30 years ago.  Americans are ready for somebody to actually govern this country again.  I’m confident Democrats are more willing than CONServatives to do so.

Clever little video.

Around the Blogosphere 10/21/08

Matt Stoller did an analysis of League of Conseration Voters endorsement patterns of incumbent Democrats and Republicans.  The result: it looks as though Democrats must reach a higher lifetime LCV score to receive an endorsement than Republicans.  Does LCV include Republicans, even though their voting patterns aren’t as strong as Democrats, just to appear bipartisan?  Is there a similar trend with other single-issue advocacy groups?  CONservative groups aren’t shy about discriminating against Democrats.  Think of the NRA.  A Democrat would have to be very conservative before the NRA endorsed them in a race.  Now think of NARAL.  They continually endorse Republicans that are anti-choice.  The progressive movement needs to do some serious self-examination moving forward.  A progressive agenda cannot be fought for and enacted when advocacy groups get behind people who don’t believe in that agenda.  LCV asks activists for money.  Activists would do well to keep track of how LCV operates when deciding whether or not to donate.  A table of Colorado officials can be found after the fold.  The LCV Scorecard can be found here.

Sarah Palin is a super-socialist.  She’s touring the country trying to scare voters into believing Barack Obama is a socialist because of his tax policy.  What kind of tax policy does Sarah Palin believe in?  A policy that dispenses tax money from oil and gas drilling to Alaskan citizens.  Is that oil and gas exclusively sold to Americans?  No, it’s sold overseas.  The rest of America then pays more for oil and gas that we buy from overseas.  So mainland U.S. consumers are paying more at the pump to give every Alaskan a $3,200 check every year.  There’s no way I’m voting for this hypocrite.

I’m voting for Barack Obama in spite of Colin Powell.  Powell continues to demonstrate he’s more interested in power than standing up for what he believes.  If Obama was behind in the polls, I doubt very seriously Powell would have endorsed him.  Powell wants Obama’s ear.  I hope Obama doesn’t give it to him.

Vote for McCain.  The last 10 seconds are hilarious!

Talk to your parents about McCain.  Some really clever videos are being produced this election cycle.

Proponents of “drill or bust” purposefully leave out an important part of reality.  In ten years time, off-shore drilling, for instance, will produce ~200,000 barrels of oil per day.  OPEC is holding an emergency meeting this Friday (three days from now) and they’re proposing to cut current production by 2,000,000 barrels per day.  OPEC wants oil to cost $70-$90 per barrel, which this year meant $3.00-$4.50 gas in America.  Any gain in supply from the U.S. will be met with cuts in supply from OPEC.  There will be no cut in oil or gas prices if we drill more.

Do you enjoy “Are You Smarter Than a 5th-Grader?”  Sarah Palin shows she can’t answer a 3rd graders’ question.

How “green” is your bathroom?

How the Banksters Made a Complete Killing Off the Bailout is a good article.  Much was made in the corporate media about how strong the oversight over the Bailout was going to be.  I didn’t trust that it would be there and the details in this article validate that view.  The Democratic-led Congress is going to own the fallout from the financial crisis.  I really hoped they would make a hard push for tough oversight.  They still can…

News & Discussion Items 10/8/08

Paul Rosenberg nails the past 8 years in a very short post.

The second Presidential debate was last night.  Sen. Obama said the words “middle class” four times.  Sen. McCain didn’t say them at all.  That’s why McCain is losing.  He doesn’t care that the middle class is struggling.

Britain has put together a rescue package for its banks.  Which is quite different than the Bailout Bush prushed.  See, Britain is buying shares in the banks until such time that their financial affairs are back in order.  British banks are not just getting money handed out to them, as they are in America.  Spain is following in America’s footsteps.  The framing of each case is critical moving forward.

A number of swing states have seen voter rolls purged – likely illegally.  A New York Times look into the matter hasn’t picked up any patterns of responsibility by either major party.  Regardless, a lot of people could be turned away come Election Day or told to vote on provisional ballots, which are rarely counted.  My own state of Colorado is on the list.  Despite an increase in population all decade and very successful voter registration drives, there are currently 100,000 fewer voters left on the rolls than in 2004.  That’s going to be a big problem come November 5th.  This situation provides strong evidence of the need for same-day registration.  Americans should be able to wait longer than 4-5 hours for an official count for something as important as President.

NASA’s Phoenix lander is currently expected to keep operating until about the middle of November 2008.  At its high latitude, the amount of sunlight it can receive is currently decreasing as Mars moves into its fall and winter.  Soil sampling will continue until no power is left on the craft.

Some 76 million Americans own their homes.  Housing values have fallen about 30% since their peak two years ago.  Which means approximately 12 million Americans owe more on their homes than they’re worth – about 16%!  That percentage is up from only 4% in 2006 and 6% in 2007.  9% of homeowners are between one month overdue or in foreclosure.  Here is why that’s really bad news.  More upside-down houses results in more foreclosures which drags other home values down, which puts more owners upside-down and so forth.  That’s what initiated the mortgage crisis and then the financial crisis.  With the credit markets frozen, fewer mortgages will be approved, keeping housing values and sales down for some time to come.

Economic News: Bad and Worse

Wall St. continues its free fall, with the Dow falling over 500 points today after falling 370 points yesterday.  Indices are at the same level as they were in the fall of 2003.  Retirement accounts have lost $2 Trillion in value.  The problem?  Despite the approval of the Bush Bailout by Congress last Friday, no one has any confidence in anyone else.  Banks still refuse to lend to one another or to credit-worthy customers.  As I and others stated last week, the Bush Bailout didn’t address the fundamental problems in the economy.  More and more people recognize that and are reacting to it.

They’re also reacting to the realization that the Bush administration’s refusal to do anything about the housing bubble for over two years spread tons of bad debt and risk around to world banks.  So the world is staring a deep recession in the face because the Bushies decided they’d rather wait until America was in debt past its eyeballs before proposing something.

The Federal Reserve is offering to buy up another $300 billion of loans from banks, without collateral of course, to unfreeze credit markets.  How are they going to pay for that?  By borrowing money from the banks.  By printing more money.  Printing more money, by the way, increases inflation, which was at 5.4% last I checked (and that’s a b.s. low-ball calculation by economists who want to pretend the economy is doing better than it really is).  In an era of stagnant incomes and rising unemployment, higher inflation will simply wreck the middle class’ ability to stay afloat.

The economy has been running on credit, as everyone should be well aware of by now.  First in the 1980s and 1990s with credit cards.  Then in the 2000s with home equity.  Now that credit is being taken away in a flash.  What’s left has two distinct faces: consumer borrowing is down for the first time since 1998.  While it’s good that people are borrowing less, it also means they’re going to spend less.  After all, incomes after inflation haven’t increased in years.  Consumers without credit will have no money to spend unless one of two things happen: incomes increase (the better solution) or credit flows again (the worse option).  Raising incomes will put our economy back onto the path of health again in a meaningful way.

Oh, here’s the worse economic news.  Foreclosures were running at record rates for the past 12 months or so.  Well, it turns out that the government uses numbers from RealtyTrac.  So good, so far?  Well, RealtyTrac hasn’t kept track of foreclosures in 900 rural counties across the United States.  Here’s a choice piece of the article:

But in West Virginia last year, it [RealtyTrac] counted fewer than 500 foreclosure notices. New federal statistics counted 12,000 notices in the state, since the start of 2007.

Heck, that’s only 24 times as bad.  Who’s counting?  Thankfully, a Democratic Senator in July co-sponsored the Foreclosure Prevention Act, which Congress passed in July. The bill required the Department of Housing and Urban Development to measure foreclosure rates in each state.

So amid stagnant wages, rising unemployment, rising inflation and worse foreclosure numbers than have been reported in two years, the Republicans have done a pretty good job of wrecking America’s economy.  Their pursuit of making the richest Americans uber-rich has affected millions of good, hard-working Americans negatively.  That’s the reason Barack Obama is leading John McCain by double digits in polls and is nearing a blowout in the electoral college numbers.  That’s the reason why John McCain and Sarah Palin are inciting their supporters with hate speech.

What’s In the News 10/3/08

Sirota asks a good question:

If, as bailout proponents insist, the government is going to make lots and lots of money off buying Wall Street’s devalued assets, why aren’t private investors buying those assets right now?

The Bush Bailout passed.  Unfortunately, Dems now own the mess.  Congratulations on your capitulation, geniuses.

Gov. Ritter’s Energy Office launched an expanded solar rebate program.  It sounds alright – only 170 solar electric systems and 750 solar hot water systems will be installed.  The bright side: $300,000 per year should be saved on electricity.  Every little bit helps.

Groceries cost 10.5% more this year than last year.  That’s only groceries.  Not health care, energy, gas, or anything else.  All those items have risen in costs at similar or greater rates.  Is anyone you know bringing home 10.5% more money this year than last year?  Class warfare, folks.

How good were economy fundamentals before Bush held us hostage?  3,000,000 jobs have been created under Bush’s watch.  3 million total in 7.5 years.  Under Bill Clinton, an average of 2,600,000 jobs were created every year.  Bush = 3 million new jobs.  Clinton = 22.75 million new jobs.  Combine this awesome statistic with the previous figure on how much more groceries cost in just one year.  The official (poorly calculated) unemployment rate will move past 7% by early 2009.  One more disaster that Bush will hand off to his successor.

Economic Solutions & Discussions

It’s taken a while, but some alternative solutions to the corporate welfare the Senate just approved yesterday are making their way into the blogosphere.  Thoughtful criticism is also being generated.  Though by no means exhaustive, here are a few that I’ve read and wanted to pass along.

Michael Moore’s proposal.

The first of bonddad’s mark-to-market criticism

More of bonddad’s well-written thoughts on why what’s been proposed won’t fix the real problem.

Senator Bernie Sanders lays out 9 reasons why the Senate Bailout is bad for Americans.

I agree with bonddad that the Senate Bailout doesn’t address the underlying problem.  As usual, Democrats got scared from Republican fear-mongering and so passed a bill that deals with the symptoms.  The economy will not get better as a result of this bill’s passage.

Speaking of which, Republicans are handing Democrats the worst economy since the Great Depression.  As we move forward, look for plenty of criticism from those who did the actual wrecking.  Look also for few solutions to be offered.  R’s are better at the former than they are at the latter.

What happens when the Bailout doesn’t pay for itself?  What happens when American taxpayers are saddled with $700 billion in debt?  How many issues will go unaddressed in the next 4, 8, …, years as we’re forced to spend billions on interest alone, nevermind the principle?  The rich created this problem.  Let the rich pay for it.  The rest of us have enough to get done already.