economy

Debt Ceiling – Again and Again

by Dave

This is not about limiting government spending. This is about the spending that the Congress approved, but did not have the funds to pay for it. So, it is necessary to borrow the money, and this increases our total debt. And, as I have written many times before (actually 13 posts), it has to be paid or we are in default, and this will be catastrophic.

Nothing will not be resolved by the McCarthy bill, because it has no chance passing the Senate. What the Republicans want in the House, is their “Pound of Flesh” and to make Biden look bad.

What Kevin McCarthy wants to do, is to undo many of the achievements Biden was able to accomplish in his first 2 years in office.

Per the link below: “The House bill was crafted to meet a series of demands from the ultraconservative Freedom Caucus, and it was altered in the final stretch to address regional concerns from some Republicans. Republicans in swing districts, after initially hesitating, ultimately fell in line.”

The White House Press Secretary reiterated that “this bill has no chance of becoming law,” blasting its spending caps, which she said would slash funding for “health care, education, Meals on Wheels and public safety.”

NBC News McCarthy passes his debt limit bill, but the path to averting default is deeply uncertain

Everyone can be in favor of cutting back federal spending, as long as it doesn’t affect them. Republicans want to force the hand of Democrats in choosing whether to shut down air control towers, or cutting off 1 million seniors in nutritional support programs. So, programs that are working must be shut down, but Biden gets to choose under the bill:

{See CNN link, of “Discretionary, non-military agency cuts that are in the proposed 2024 budget”] Examples the agencies gave included shutting down 125 air traffic control towers, slashing nutrition services for 1 million senior citizens and eliminating affordable housing assistance for close to 1.1 million families.

Also, the reduction would impact the 6.6 million students who rely on Pell Grants and the 1.2 million women, infants and children who receive nutrition assistance through WIC, DeLauro said. Plus, 200,000 children would lose access to Head Start and 100,000 children would lose access to child care.

Note: Representative House Appropriations Committee Ranking Member Rosa DeLauro, a Democrat from Connecticut, asked government agencies earlier this year about the potential impact of reducing fiscal 2024 discretionary, non-defense spending (with the exception of veterans’ medical care) to fiscal 2022 levels.

See CNN Reporting:

Here’s what’s in the House GOP debt limit bill

Most bizarre item is the elimination of additional IRS agents, which will answer the phone and help collect more tax, and actually result in lowering the deficit.

We’ve had some pretty close calls in the past. The House is acting like a high speed race driver, who is trying to make a turn at the highest speed possible. I am very concern that the House just might push us into default.

Stay tuned,

Dave

What’s wrong with this recession?

by Dave

I know this is not a particularly exciting topic. If I had done a piece on International Beer Day, which as everyone knows was August 5, then perhaps there would be a lot more interest. And yes, I’m sure that as I write this blog, there are still some people celebrating. International hangover day is January 1.

Can one word have more than one definition? I caught a bit of Sean Hannity show on Fox News, and it seemed he really had difficulty with this idea. His favorite definition of recession is two quarters of negative GDP growth. And, so by this definition, we are in one. He really made a big deal that the Democrats were hiding something big. They weren’t and he is wrong.

There is a second definition, which is also real simple. The National Bureau of Economic Research (NBER) panel of 8 economists makes a formal declaration that the country is in one, using all the relevant data. This hasn’t been done yet. They meet in secret. Economic data always lags behind the actual events, so economists at NBER back date the onset or end of recessions.

There’s No US Recession Until an Obscure Panel of ‘Eggheads’ Says It Is So

Case in point is the 2020 recession created by Covid-19 health restrictions. With health shut down, economic activity was cratering in February to March 2020. Unemployment of course was soaring, as businesses shut down or restricted the number of people inside their business. However, NBER had to wait for the jobs data. So, on June 8, 2020, they announced a recession had begun back in February. Of course, by then, it was obvious to just about every living sole who worked in the hospitality area, we were in a recession. Then, 17 months later, on July 19, 2021, the NBER declared the recession had ended in April 2020. Yes, you read that right! So, the June 8, 2020 announcement, the NBER was declaring we were in a recession, when it had already past. Don’t believe me- read the following links:

It’s official: The Covid recession lasted just two months, the shortest in U.S. history

Ok. The nice way to avoid the topic is to admit that economic contraction is likely, then change the topic quickly to something everyone can agree on, like why International Hangover day is not on August 6, immediately following International Beer day.

The second quarter GDP decline was only 0.9%, as reported on July 28, 2022. The second quarter is from April to June 2022. So, it is likely economists are looking at other data, including unemployment. If we are in a recession, then unemployment should be going up. Latest numbers show the unemployment rate is slightly lower.

US Job Growth Surges, Tempering Recession Worry and Pressing Fed

Sean Hannity is a Fox News commentator, who enjoys bashing Democrats. Incumbent presidents rarely get re-elected if there has been a recession within 2 years of their re-election. Donald Trump had the misfortune to be running for re-election in 2020, during the Covid recession.

See link: All the U.S. Presidents Who Won Re-Elections During a Recession

See link: U.S. recession ended in April 2020, making it shortest on record

So Hannity’s rant was pure politics.
But, there are real concerns. Inflation is real, and with high gas prices, consumers may spend less. So, a contraction in the economy, brings down inflation. But, it should cause unemployment to increase. So be careful what you wish for. Do you want gas prices back to $3.50/gallon or job security?

Stay tuned,

Dave

Debt Crisis – What’s not True

by Dave

“The past debt ceiling paid for everything in the Trump administration, plus seven months of this Biden administration.”

— House Minority Leader Kevin McCarthy (R-Calif.), in an interview on Fox News, Sept. 21

The Washington Post call McCarthy’s statement “highly misleading.” Debt accumulates when the government spends more than it takes in. However, the cause of this debt can occur much earlier, when the legislature authorizes spending and changes to tax laws.

So, Trump’s 2017 tax cuts for the wealthy and business owners have contributed to increased debt since the debt ceiling was suspended in 2019. The CARES act, was a 2.2 trillion dollar program, signed into law by President Trump in response to the economic fallout of the COVID-19 pandemic in the United States. Democrats and Republicans supported the suspension or increases in the debt ceiling three times under President Trump.

Republicans and Kevin McCarthy are real hypocrites, because the debt ceiling must be increased as a result of spending bills and tax cuts they supported during the Trump administration.

Republican refused to approve increases or suspension of the debt ceiling in 2011, 2013, 2014 and 2015 while Obama was president until we were at the brink of exhausting all extraordinary measures to keep from defaulting on our debt. Then suddenly raising the debt ceiling was ok, under the Trump administration.

The US credit rating fell after the 2011 debt ceiling crisis, which increases the interest we pay on our debt obligations, even though in the end, the debt ceiling was raised.

Honestly, the debt ceiling should not exist. Per Wikipedia: In January 2013, a survey of 38 highly regarded economists found that 84% agreed that, since Congress already approves spending and taxation, “a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.” Only one member of the panel, Luigi Zingales, disagreed with the statement. Rating agency Moody’s has stated that “the debt limit creates a high level of uncertainty”and that the government should change “its framework for managing government debt to lessen or eliminate that uncertainty”.

Stay tuned,

Dave

Links:

Washington Post, White House rules out concessions over debt ceiling while GOP refuses to help avert crisis

Washington Post: McCarthy’s misleading claim that 2019 debt-ceiling hike paid for all of Trump’s policies

Congress Must Suspend or Raise the Debt Limit

Wikipedia: Debt Ceiling

Wikipedia: History of Debt Ceiling

Politifact Kevin McCarthy’s Honesty

Mostly “Pants on Fire” or “False” statements.

I am tired of our erratic president

by Dave

If there is a common tread of everyone who has worked closely with Donald Trump, it is his erratic actions and his inability to work within the system. It is what caused General Mattis, our former Secretary of Defense e to quit. Similarly, Rex Tillerson, our former Secretary of State, also resigned. His long time personal lawyer, Michael Cohen, describes Trump’s total disregard for ethics and honorable and looks simply at what is best for himself. Similarly, our former National Security Adviser, John Bolton, describes Trump as highly impulsive and self-serving.

The long awaited stimulus package negotiations was obviously going too slow for Donald Trump, so in a tweet, the negotiations were ended. It is likely Steven Mnuchin didn’t even see this coming. It was likely that the only way to get the bill passed in the Senate, would be with the help of Democrats.

Passage of the stimulus bill was vital to keeping certain sectors of our economy from failing and helping those affected by Covid-19 regulations get by with rent and basic essentials until there is a vaccine, likely to happen in 2021.

So, passage of Stimulus II was only going to be a bipartisan victory, not an exclusive Republican victory like the confirmation of Amy Coney Barrett, which I believe will happen. It might not be completed by election day, but she will be soon on the Supreme Court.

Please do not elect Donald Trump to another four years. Joe Biden could have gotten Stimulus II through both houses of congress, because he understands the process and has the patience.

Stay tuned,

Dave

Upcoming Election

by Dave

An incumbent president, usually runs on his achievements during the prior  three plus years.  But, much of what Donald Trump has claimed to have accomplished is not true.  From environmental issues, energy,  the economy and immigration, Trump has claimed credit for accomplishments during the Obama administration.  Trump also falsely portrayed much of his own administration’s efforts as successes, when in fact they were not.

The 20,000 lies that Trump has told over the last 3 1/2 years are quite incredible.  His version of a stupendous economic recovery in 2018-2019 is total nonsense.   The economy was not in collapse at the end of Obama’s term.  It definitely had crashed during George Bush’s last year, losing 800,000 jobs a month and it was President Obama had turned it around, adding about 200,000 jobs a month.  In fact, when Trump cites statistics on how well his administration has done, he typically goes back in time, to the date of his election (November 8, 2016) and not his inauguration date in 2017  just to steal some credit from President Obama.

In the upcoming blogs,  I intend to examine more closely the “three E’s”  – the environment, energy and the economy, plus I intend to  address immigration policy and the “build the wall” craze (it should be called enhance the “see-through fence” initiative).   Trump could brag all he wanted as a real estate developer.  Now he is getting caught every single day, in multiple lies.

Immigration policy is a real pile of crazy sh*t,  Sorry, I just didn’t know how to express this any better.  For months Trump kept bragging how great his policies were,  because apprehensions at the southern border were going down, 40%,  then 61% and finally 78%.   So, immigrants were not trying to sneak into our country, because they were afraid of being caught.  Of course, apprehensions started to rise,  and Trump again bragged that his policies were a tremendous success because they were going up.   Down is great, up is great, who cares, it’s all in the presentation?    In January 2020, the President celebrates great numbers on immigration again, this time apprehensions again were going down.   So, down, up and down again, all with dubious statistics, and all causes to celebrate the tremendous success.

I believe it is necessary to dispel the barrage of  false claims in order to establish the truth.   There is an enormous distribution system of false information.  Energy, environment and the economy issues are all intertwined.    The  “fake news” is often slick presentations, with selected facts helped along by industry lobbyist  groups.  Just one small example –  I saw on a cable news program, a clip showing barges filled with coal going down the Mississippi river,  and the newscaster was talking about how US coal exports had doubled since 2016, which is true.  Yet, in about 2 minutes, I could verify that US coal production had continued it’s steady decline during the Trump administration.  This rise in exports was simply that more coal was being sent overseas,  because the demand was dropping in the US.    Major coal companies filed for bankruptcy in 2019 and 2020, including Cloud Peak Energy and  Murray Coal.

So, I am preparing my first blog on the environment and more will follow.  I am always receptive to comments from my visitors, contrary to my opinions.  As usual, I will support my statements with links from the internet.

Stay tuned,

Dave

Trade Wars and Protectionism

by Dave

Stocks rose yesterday, and will probably give back their gains today.  Lots of slow down, but no melt down like 2008.

Per the Wall Street Journal on August 13:

The Trump administration abruptly suspended plans to impose new tariffs on about $156 billion in goods from China, saying the move was driven by concerns about the impact an escalating trade fight would have on businesses and consumers ahead of the holiday shopping season. The shift fueled a rally on Wall Street, sending the Dow Jones Industrial Average up 1.44% to 26279.91. But it wasn’t immediately clear if the retreat marked a significant step toward resolving the more than yearlong trade conflict between the U.S. and China.  Under the reprieve, the U.S. agreed to postpone until Dec. 15 tariffs of 10% on smartphones, laptops, toys, videogames and other products that were set to take effect on Sept. 1. The value of those goods imported in 2018 was about $156 billion, according to a Wall Street Journal analysis.

Did Trump just now realize that tariffs could result in higher cost to consumers?

The New York Times columnist, Thomas Friedman,  yesterday (Aug 13)  had some comments which sounded complimentary of Trump:

Trump was right in arguing that America should not continue to tolerate systemic abusive Chinese trade practices — intellectual property theft, forced technology transfers, huge government subsidies and nonreciprocal treatment of U.S. companies in China — now that China is virtually America’s technology equal and a rising middle-income country.

Friedman quickly changes his tune.  Good objectives coupled with a failing strategy  leads nowhere.  Actually, tariffs hurts rather than helps the US economy.    Friedman mentions Trump is obsessed with the trade deficit.  As long as workers are paid low wages in China, it is not really a fixable problem.

See Thomas Friedman’s column, Trump and Xi Sittin’ in a Tree.   If you don’t know this song, the next line goes  K I S S I N G.  However, this is another tree, where the sides are too far apart for meaningful discussions, and neither has a way down from their high perches.   Friedman writes,  “Both men have overplayed their hand and are desperate to be seen as the winner in their trade war.”

Fareed Zakaria gave a more broad perspective of how imposing tariffs on a country do not accomplish anything but an immediate retaliation, and the consumer pays the price every time.   CNN link 

Finally,  our Make America Great Again President can no longer claim that the stock market made exceptional gains since he’s been in office.   See  CNN comparison.

Stay tuned,

Dave

 

 

Trump’s economic advisors

by Dave

“It is a horrible deal, really horrible, but we’re going to fix that”

This is any particular quote from Trump but applicable to many accords – from NAFTA, the Trans-Pacific Partnership and to many bilateral accords, most recently his attack on he  South Korean Trade Agreement.   The same quote can be said of the Iran Nuclear deal and the Paris Accords on Climate Change Mitigation.   Everything is blamed on prior administrations, but most of the blame still goes to President Obama.

A minor case in point –  on January 12, 2018,  Trump cancelled a trip to the US embassy in London, citing Obama poor decision in moving the Embassy at a cost of 1.2 billion dollars.   It was decided upon by President Bush and not Obama.   Trump rarely lets facts get in his way.

Gary Cohen,  was the head of the National Economic Council,  and chief economic advisor to Trump.   He is generally accredited for Trump’s tax cut and jobs program, signed into law on December 22, 2017.   On March 6, 2018,  Gary Cohen resigned in March, just before the imposition of tariffs on aluminum and steel.  It was widely reported that he was against the tariffs.  Larry Kudlow has been appointed to this position.   Kudlow is a strong believer in  supply-side economics, which means that a cut in federal taxes, will stimulate the economy sufficiently to make up for the loss in tax revenue.  He been dead wrong a number of times, beginning with the opinion that tax increases would dampen the economy during the Clinton administration.  Just the reverse happened, and the economy boomed after this.

Kudlow was a strong advocate of George W. Bush’s substantial tax cuts, and argued that the tax cuts would lead to an economic boom of equal magnitude. After the implementation of the Bush tax cuts, Kudlow insisted year after year that the economy was in the middle of a “Bush boom”, and chastised other commentators for failing to realize it. Kudlow firmly denied that the United States would enter a recession in 2007, or that it was in the midst of a recession in early to mid-2008. In December 2007, he wrote: “The recession debate is over. It’s not gonna happen. Time to move on. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). The Bush boom is alive and well. It’s finishing up its sixth splendid year with many more years to come”. In a May 2008 column entitled “‘R’ is for ‘Right,'” Kudlow wrote: “President George W. Bush may turn out to be the top economic forecaster in the country”. By July 2008, Kudlow continued to deny that the economy was looking poor, insisting that “We are in a mental recession, not an actual recession.” Lehman Brothers collapsed in September 2008, creating a full-blown international banking crisis.

Larry Kudlow is well educated, articulate and  very straight forward.  He has been a regular commentator on MSNBC.  His comments is generally appreciated, as he is well informed.  However,  he has been frequently wrong on the basic moves of the economy, I believe because of his philosophical perspective of less government intervention.   This has been chronicled in a book entitled Superforecasting (2015).   The book explains how experts in various fields, do no better than amateurs.

Two key advisers right now, are Peter Navarro, Director of the National Trade Council  and Wilbur Ross,  Secretary of the Commerce Department.   In many administrations, these organizations and individuals might not receive much attention, as they engage in behind the scenes negotiations on trade and commerce.   However,  as fears of a trade war with China,  intensify and concerns of the impact on our economy is debated,  these two individuals are increasingly in the media, particularly in the business news reporting.

Peter Navarro is a very controversial figure at present.  Wikipedia labels him as a heterodox economist, with opinions  outside of the mainstream economistss.   He is also considered a protectionist and isolationist by Wikipedia.   According to the Guardian:

Navarro was a key architect of Trump’s “America First” policy of economic nationalism and a tireless critic of China’s economic policies – one of his books is decorated with a map of America being stabbed in the heart with a knife marked Made in China. Although he has agitated for aggressively protectionist trade policy since joining the Trump campaign in 2016, the tariffs are his first key victory. During the campaign, Navarro, the only economics PhD in the Trump team, described his role as merely a facilitator. “The president – he’s the man who leads,” he told the Wall Street Journal. “He says, ‘I want to do this. How do we do it?’ The way I help is figuring out how you might do it.”

Protectionism, or economic nationalism?  Perhaps the choice of words doesn’t matter; it is the outcomes in the long run that are important.   I’ve included links on Peter Navarro at the end of this blog.

Finally,  a key adviser to Donald Trump is  Wilbur Ross.   His view on trade, as per Wikipedia:

On the subject of foreign trade, Ross has said: “I am not anti-trade. I am pro-trade, but I’m pro-sensible trade. [Being anti-trade] is a disadvantage of the American worker and the American manufacturing community.” Ross has also said that the government “should provide access to our markets to those countries who play fair, play by the rules and give everybody a fair chance to compete. Those who do not should not get away with it – they should be punished.” Initially in favor of the Trans-Pacific Partnership, Ross has said that after examining the agreement, he found it was “not consistent with what was advertised.”[34]

In 2004, The Economist described Ross’s views as protectionist. Germany’s chancellor Angela Merkel has also voiced concerns during 2018 World Economic Forum in Davos over Ross and the Trump administration views as “not the proper answer”.  Ross, at the 2018 World Economic Forum, responded to concerns by noting that “There have always been trade wars. The difference now is U.S. troops are now coming to the ramparts.”

Wilbur Ross has appeared on a number of business news stations, including MSNBC, and I happen to like his straight forward answers to questions.  He always seems to be well prepared, informed and polite.   He chooses his words well.    However, he seems to underplay the affect of the proposed tariffs  might have on the stock market.

How the Trump trade wars will finally be resolved, is difficult to say.   Republican biased news stations say that in the end,   the hard position taken  by Trump will result in China yielding, particularly on intellectual property rights.  Other commentators see only an escalation of tariffs, as China would rather fight than be seen as having given in to the US.   Economic nationalism works on both continents, sometimes escalation is easier than compromise.  Certainly, the sell off in the stock market is based on the potential for a protracted battle.

As I publish this blog, the Dow is poised to drop around 500 points.

I have included a number of links on Cohen, Kudlow, Navarro and Ross.   All individuals  have extensive biographies available on the Internet.

Stay tuned,

Dave

Links:

Wikipedia:Wilbur Ross

Wikipedia:  Peter Navarro 

Peter Navarro, the economist shaping Trump’s economic thinking

Wikipedia:  Larry Kudlow

New York Times:  Larry Kudlow is the new favorite to replace Gary Cohen

Wikipedia:  Gary Cohen