Some Good Economic News

Via Saint Petersblog:the graph with the national debt over the years. As you can see the debt goes down when Democratic presidents are in office. The national debt is now at $5 trillion.

Under Obama the deficit has actually gone down from a year ago.

The excess of spending over revenue totaled $90.5 billion last month, smaller than the median forecast of economists surveyed by Bloomberg News and down 13 percent from $103.6 billion in August 2009, according to a Treasury Department report issued today in Washington. The gap for the fiscal year that started in October was $1.26 trillion compared with $1.37 trillion last year at the same time.

Part of the reason spending is down is because of stimulus and TARP money that was used to stabilize the economy last year. The news that the deficit shrunk is good, but there is more that needs to be done. Consumer confidence is down. The lack of hiring creates a smaller tax base. The Conference Board's Consumer Confidence Index is expected to release a positive report. However, people are still not optimistic.

David Resler, chief economist at Nomura Securities, said, "Consumer attitudes have remained gloomy. Although an improvement from September, October's anticipated rise isn't much of an overall improvement."

The economic policies of the Obama administration has bee light years ahead of the Bush administration. The hole the Obama economic team in is huge. Obama would have been better off politically if he took on financial reform at the height of public anger towards Wall Street. Obama instead decided to push forward with health care reform. The result was a political disaster that helps the Republicans during the midterms.

It's Consumer Confidence Stupid

In February of this year, I wrote how America's economic future depends on restoring consumer confidence.

Obama's middle and lower class tax cuts are intended to make people start spending. The problem is consumer confidence.

Obama has his work cut out for him. The progressive version of trickle down economics is not enough. Americans need to feel confident about where the country is heading. The President needs to make Americans feel the country is on the right path. Only then will consumors spend and lending institutions will give out loans.

Robert Reich repeated the same message today at TPM Cafe.

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.

Eventually consumers will replace cars and appliances and other stuff that wears out, but a recovery can't be built on replacements. Don't expect businesses to invest much more without lots of consumers hankering after lots of new stuff. And don't rely on exports. The global economy is contracting.

My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.

Reich was one of the major players crafting economic policy in the Clinton administration. The Clinton people understood the importance of making life easier for working families. The Obama administration have grand concepts of recreating health care and changing America's infrastructure with the stimulus package and cap and trade. Their acting like kids that finally got a chance to play with their shiny brand new policy toys. The number one issue is restarting the economy and stop printing money, in order to avoid inflation. Obama bought the money losing General Motors and made no push to raise the minimum wage. Talk about priorities.

On the bright side: the Obama foreign policy people have their shit together.

The Tim Geithner Capital Hill Show

Tresury Sec. Tim Geithner told the House Appropriations subcommittee money lending institutions pay back to the Treasury Department will be used to bail out other companies.

"We're still in a very challenging economic and financial situation," Geithner said.

Geithner sends a message to Governors, such as Mark Sanford, whom want to use TARP money to pay down their state deficits.

Treasury Secretary Timothy Geithner said the U.S.’s $700 billion financial rescue package can’t be used to aid cities and states facing budget crises.

The law “does not appear to us to provide a viable way of responding to that challenge,” Geithner told a House Appropriations subcommittee in Washington today. Among the hurdles: Money from the Troubled Asset Relief Program is reserved for financial companies, he said.

Geithner left open the possibility of a federal response to California's deficit.

The Treasury Sec. told the Senate Banking Committee lending institutions are getting stronger.

“There are important indications that our financial system is starting to heal,” Mr. Geithner told lawmakers, though he cautioned that it was still too early to talk about an “exit strategy” for the government.

I have several questions. When will the lending institutions be financially solvent enough to stand on their own? How much money being repaid to the Treasury Department? Is the Obama administration willing to reform banks are does it want to maintain the status quo? This is a lot of money we are dealing with and Geithner does not project confidence. Overly-dramatic hand gentures don't count.

ABC News reports consumer confidence dropped 3 points this week. The national unemployment rate in April increased to 8.9 percent. The unemployment numbers are effecting the stock market. The Republican response of tax cuts and spending freeze are not backed by economists. Talking points aren't the answer. Geithner needs to explain what that answer is.

Rubio Is In

The Miami Herald reports Marco Rubio has filed paperwork to seek Mel Martinez's Senate seat. Alan Mendelsohn is hosting the private fundraier at his home. Rubio told the Miami Herald he is just "testing the waters." Translation: Rubio is praying Charlie Crist doesn't announce his Senate candidacy.

``When I decide whether to run, trust me, everyone will know.''

That explains filing the paperwork a month ago and remaining mum.

Mendelsohn hasn't been afraid of showering Republicans with financial love. In 2000, Mendelsohn's company contribed $8,800 to Florida legislature races. Mendelsohn gave Tom Feeney $1,400. Which says much about Mendelsohn's taste is politicians.

Rubio can rally the conservative base. The problem is Rubio never ran a state-wide race bfore. Rubio's anti-environment ideas and horrible pitch to increase sales taxes during an economic downtown make easy cannon fodder. Rubio doesn't realize that two-thirds of the economy is consumerism. Rubio is likable and photogenic. He is a better poster child for the GOP then Bobby Jindal will ever be. Rubio's economic policies will be a hard sell in the general election.

Expect Rubio to run for Governor if Crist runs for the Senate. With the state of the economy and budget, it would be wiser for Rubio to run for a Congressional seat or Mayor of Miami. It would be political suicide for Rubio to run during the current economic climate. (Rubio has ambitions far beyond Florida.) My concern is Rubio is truly economically clueless. That isn't what Florida needs in a Governor.

How FDR Saved the Economy

Mika Brzezinski claimed, "The new deal did not work." I was not shocked that Jim Johnson agreed.

She's right. The New Deal did not end the Great Depression, but World War II did.

Some may claim the War caused massive government spending, it did, but it also sent millions of men into the armed forces to fight the war.

That's not to say New Deal programs (SEC, FDIC, etc) weren't needed. But no one should be under the impression that the New Deal did anything to bring an end to the worst economic crisis in history.

The country was living on rations. Until 2009, America borrowed at it's most during WWII. FDR signed the GI bill into law. That helped veterans get homes and college educations.

Short answer: the economy sucked during WWII. Imagine what the deficit would have been if FDR approved Bush-level tax cuts. Lincoln signed the Revenue Act of 1861 to pay for the civil war. Tax cuts during war are a bad idea.

Obama's middle and lower class tax cuts are intended to make people start spending. The problem is consumer confidence.



Obama has his work cut out for him. The progressive version of trickle down economics is not enough. Americans need to feel confident about where the country is heading. The President needs to make Americans feel the country is on the right path. Only then will consumors spend and lending institutions will give out loans.

Off topic: Congratulations to Jim. He will be blogging at Creative Loafing.