Showing posts with label Uncertainty. Show all posts
Showing posts with label Uncertainty. Show all posts

Tuesday, June 05, 2012

Not Coming From The White House

The editorial board of Bloomberg News put up a recent piece which perfectly summarized the answer to "Who's to blame" for our economy.

CEOs broadly point to overregulation as the biggest economic damper. But the raw numbers of new regulations don't support the uncertainty purveyors, either. The Office of Management and Budget says 931 major regulations -- those with enough economic significance to require OMB review -- were issued by the executive branch during the first three years of George W. Bush's first term, more than the 886 from Obama's first three years.

Right. So why wasn't this a problem during the Bush Administration? But let's get to the main answer.

Companies are also sitting on cash or refusing to hire because, paradoxically, unemployment is a drag on consumer demand, a problem they lay at the president's feet. It's important to note that historical data collected by economists Carmen Reinhart and Kenneth Rogoff show that it takes almost five years for employment to recover from the wreckage of a deep financial crisis. 

Hiring is down because consumer demand remains low as households continue to deleverage. Employers are also using technology and other productivity enhancements to make do with fewer workers.

If there are fewer workers in an economy that is 70 percent consumer driven, then demand is going to suffer because there are less consumers. If the government does not stimulate demand, what entity does it?

The article also has a couple of other things to say of note.

Much of the problem is self-inflicted by Congress. Lawmakers are putting off until after November's elections a crush of expiring Bush-era tax cuts, the payroll tax reduction and dozens of other tax breaks and spending programs. If they expire, and if an approved $100 billion in spending cuts occur at the same time, economic growth would slow to 0.5 percent next year, the Congressional Budget Office says.

This is the elephant in the room that no one wants to tackle. Letting all the tax cuts expire and cutting spending would be a disaster for our economy and we would likely dip into another recession.

Those invoking the uncertainty principle fail to mention that inflation and interest rates are historically low. Federal Reserve Chairman Ben Bernanke has repeatedly pledged not to raise rates at least through late 2014 -- a gold-plated certainty guarantee if we ever saw one.

Yeah, where's the uncertainty again? And how about all those folks that keep saying that inflation is going to happen? Any day now...

So, the issue of uncertainty is not coming from the White House. It's coming from the private sector and, to a certain extent, Congress, for failing to move before the election. Of course, we all know what the goal of the House is so I guess I don't blame them:)

Thursday, September 15, 2011

The Last Resort

A key point that needs to be made in as president attempts to get his jobs bill passed is that federal government spending is spending of the last resort. This idea will bounce off most of the right these days. Sane people (such as myself) can't hope to pry the base's irrational fear from their cold, dead minds.

But it needs to be said anyway and I'm happy that former Labor Secretary Robert Reich said it in a recent piece in my local paper. In fact, he said a great deal of things which made complete sense. Of course, this means that nearly everyone on the right will hate it immediately.

Let's take a look at a few of Reich's comments.

Tax cuts, we know, don't have a huge multiplier effect because people in times of economic stress tend to use tax cuts to pay off debt or to save, rather than to spend.

Hence the reason why tax cuts really don't work most of the time.

The main motivation for businesses to hire is customers. Consumer spending is 70 percent of the economy. If consumers are holding back because they are under water with their mortgages and they are worried about losing their jobs, they don't have the cash to spend.If you've got the private sector, businesses and consumers, unwilling to spend, where do you look? Government is the spender of last resort. ... If government can't do it, we are not going to have a recovery.

Exactly. So, it's not the panic mongering myth of "uncertainty." Businesses simply don't have customers and most of these potential customers have less and less money to spend. This is why I state continually that less people having more money is a very bad thing for the overall health of our economy. Sooner or later, the greed at the top will be their own undoing and ours as well.

We are losing ground [to other countries] on education. We're losing ground on labor unions. And we have a politics that has been quite regressive, favoring privatization and deregulation. ...The only way out of this is not only a sufficiently high stimulus, but also addressing inequality through stronger education, stronger labor unions and tax reform.

I agree with everything here except the high stimulus. I think he underestimates the effect that short term debt to GDP will have in relation to our standing in the world.

But here's the best part

This isn't a zero-sum game. A lot of wealthy people are beginning to understand that they would do better with a smaller percentage of a rapidly growing economy than with a big chunk of an economy that's dead in the water.

Yep. And his mention of the zero sum game idea made me grin from ear to ear.

Thursday, September 01, 2011

Three For Thursday (1)

Well, it's official. CEOs now make more money than their companies pay in taxes. The only uncertainty they must feel is where to spend all that money. Here are some examples.

* eBay whose CEO John Donahoe made $12.4 million, but which reported a $131 million refund on its 2010 current U.S. taxes.

* Boeing, which paid CEO Jim McNerney $13.8 million, sent in $13 million in federal income taxes, and spent $20.8 million on lobbying and campaign spending

* General Electric where CEO Jeff Immelt earned $15.2 million in 2010, while the company got a $3.3 billion federal refund and invested $41.8 million in its own lobbying and political campaigns.

So, where are all these high taxes I keep hearing so much that are holding back business? It's very clear to me....I'd say very CERTAIN...that with these low numbers, we also have a revenue problem in addition to a spending problem.

But, hey, being this low on the list of income inequality is no big deal at all. We're what?...60th or something? And the fact that the eroding skills of our work force, due to this inequality, are causing us to fall behind in the global economy should also be of no concern, right?

I'm just being my usual ol' silly self.

Monday, August 22, 2011

Uncertainty? Really?

Steve Wynn, CEO of Wynn Resorts, had this to say recently about President Obama during a conference call.

And I'm saying it bluntly, that this administration is the greatest wet blanket to business, and progress and job creation in my lifetime. And I can prove it and I could spend the next 3 hours giving you examples of all of us in this market place that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right. A President that seems -- that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they are frightened of this administration. And it makes you slow down and not invest your money.


Well, this is Obama's deal, and it's Obama that's responsible for this fear in America. The guy keeps making speeches about redistribution, and maybe we ought to do something to businesses that don't invest or holding too much money. We haven't heard that kind of talk except from pure socialists.

Fairly typical of what we hear every day now from the president's critics. It's the "uncertainty" and the "socialism" that is holding back the private sector. What makes these statements so unusual, though, is what was said earlier in the call.

We had a great first quarter, the best in our history. And we went through it -- we were just around $400 million in the first quarter. We are $447 million this time, and that quarter was about 59% better than a year ago. And in fact, for the 6 months, we're 62% better than a year ago. We are all, in this organization, heartened by the results.

On January 3, -- excuse me, on July 3, I got a phone call. I was in a different city from my colleague, Marc Schorr, and he told me that on the third day of July, we equaled in Las Vegas, our cash flow, our profits of the entire year of 2010. That was a very supercharged thing to hear, but we did $271 million last year and we hit $271 million on the third of July. So for the balance of the year, everything from here on in, in Las Vegas is improvement. And we benefited from a very favorable whole percentage.

So let me see if I have this line of thinking down here...President Obama is a "giant wet blanket" to business...there are examples that "prove" this...and he is a (snore) socialist. All of this has led to the best quarter they have ever had? And it only took six months this year to make what they made last year? Uh.....what?

There is no logic or reason to the irrational feelings these people have. They make statements simply based on personal preference, not reality. They are making record profits and they still hate him. It's no different than someone like me saying that the Dave Matthews Band sucks. It's an opinion with no basis in fact.

Why can't they simply admit that it's the same thing with the president?

Thursday, July 28, 2011


Any of those people below him regular readers of mine?