Thursday, November 8, 2012

Toay's links

Today's quote: "We are in a period of heightened financial market volatility which is typical of a post-bubble deleveraging period when the forces of debt deflation are countered by massive doses of government reflationary polices." David Rosenberg, Gluskin Sheff

1--Obama Will Be Worst Fiscal President ever, Unless He Changes, Trimtabs

Here’s my evidence, before Obama was elected in 2008 after tax take home for everyone who pays taxes was just under $7 trillion annualized. That $7 trillion number included capital gains, an income source the US Bureau of Economic Analysis does not include in national income. Why is capital gains not included? Is there a prejudice against income on capital? Who knows. It’s the government.

In 2009 after tax take home pay bottomed at around $6 trillion annually. Take home pay has risen about 3% to 4% per year nominally since then. However after inflation take home pay has grown all of 1% or so. In other words since Obama has been president after tax take home for everyone who pays taxes is still down by about 5% nominally and more than 10% after inflation.

By the way yes, we at TrimTabs are the only ones I know of who talk in terms of after tax take home pay. The rest of the economic universe seems to think GDP is good measure of economic activity. That is because most financial market participants are sheep willing to believe what they are told by the government agencies. In reality GDP is spreadsheet based methodology that tracks maybe 60% of the US economy and badly at that. GDP was created in the 1930’s to help FDR track manufacturing employment. There was no real time data available then. But there is real time data available now. Unfortunately, Wall Street economists and top financial journalists aren’t interested in real time data and make decisions as if GDP means something.

2--FHFA launches pilot REO property sales, Housingwire
Background on "bulk sales" of distressed properties

3--Fiscal Cliff: Reality Show or Morality Play?, Huffington Post

Britain's own fiscal cliff was the 2010 austerity agenda of Prime Minister David Cameron and the Conservative Party. A set of drastic measures aimed to increase growth and reduce debt, it has failed spectacularly on both fronts. The UK economy today is indisputably worse than it was when the tightening began, with a shrunken GDP and the deficit shooting up. Government spending cutbacks -- integral to the plan -- helped bring about this new recession. Cameron and Chancellor of the Exchequer David Osborne have yet to take responsibility for their policies, accusations of incompetence from the press and a slap-down from the International Monetary Fund not withstanding.
The U.S. Congress seems determined to follow this running leap into extreme austerity. The most likely modification to the current plan is an extension of some of the Bush-era tax cuts. Yet there hasn't been any move to extend the payroll tax holiday. Workers on the low end of the pay scale need the additional take-home pay that this measure has been providing. Because these employees spend their paychecks (they save the least of any group), they've also been helping to stimulate the larger economy. To eliminate this prime tax relief issue for the working class would be a major blunder.
Slashing federal agencies -- the planned "sequestration" of Treasury Department funds when the overall budget hits a targeted figure -- would be even worse. Medicare and Medicaid are exempt, but if the pressure to restore military spending succeeds, countless key economic drivers will have to be decimated instead, in order to reach the magic targeted number. With the pain spread across a wide range of departments, you might assume that the impact would be insignificant. No. The shrinkage would be, roughly, a substantial 12 to 15 percent. The cuts would lead to another recession here, in a mirror of what's happening in Great Britain....

The sequester should be repealed outright, and it certainly should not be replaced. We need a strong stimulus that increases employment, not by wishing for it, but through public sector hiring. The Fiscal Cliff show is a morality play that celebrates puritanical righteousness and unnecessary punishment. As we've already seen on the UK stage, it's headed towards an unhappy ending.

4--Monsanto wins California: GMO labeling law defeated, RT

5--After election, Obama moves to slash social spending, WSWS

 The drive to cut spending likewise conflicted with the desires of voters themselves: according to exit polls, only ten percent said that the deficit was the most important issue facing the country.

In the coming weeks, the White House will seek to cut a deal on spending cuts and tax cuts intended to avert the so-called fiscal cliff, which involves the simultaneous expiration of all Bush-era tax cuts, the temporary payroll-tax cut agreed to by the Obama administration and congressional Republicans two years ago, and across-the-board cuts to military and social spending of nearly ten percent.

In the place of these measures, triggered January 1 or soon afterwards, Obama and the Republicans are seeking to work out a deal that would make even sharper cuts in social entitlements like Medicare, Medicaid, and Social Security while raising taxes on working people and cutting them for corporations and the rich.

Obama has proposed to cut nearly $4 trillion from the deficit over ten years. This would include $320 billion from the long-standing entitlement programs, Medicare and Medicaid, which provide health care to seniors and the poor respectively. But the deal that is likely to be worked out between Congress and the White House will likely entail even sharper cuts to key social programs.

Wall Street sent its own message to the re-elected president with a post-election selloff that sent the S&P 500 down by 2.3 percent Tuesday. The banks and major corporate CEOs have been clamoring for the US to announce cuts to social programs, and ratings agencies have threatened to downgrade the country's debt rating unless a deal is worked out.

In a press conference Wednesday, the Democratic Senate Majority Leader Harry Reid repeatedly stressed his intention to collaborate with the Republicans, saying, “It is better to work together... Everything doesn't have to be a fight—that’s the way it's been the last couple of years.”

The day after the Democrats expanded their majority in the Senate, Reid said, “I'm willing to negotiate any time on any issue,” and added, “I'm going to do everything in my power to be conciliatory.”

Reid made it clear he intends to cut social spending as soon as possible, saying, “I am not for kicking the can down the road. Waiting for a month, six weeks, six months, that is not going to solve the problem.”

The Democrats' determination to slash social spending is exemplified by ongoing speculation in the press that Erskine Bowles, the co-chair of the National Commission of Fiscal Responsibility and Reform—better known as the Simpson-Bowles Commission, which proposed trillions of dollars in spending cuts—will be nominated for the position of Treasury Secretary, being vacated by Timothy Geithner.

Even before Election Day, Obama made clear his determination to slash billions of dollars in social spending. “There's no doubt that our first order of business is going to be to get our deficits and debt under control,” he told MSNBC. “We've already made a trillion dollars worth of cuts. We can do some more cuts. We can look at how we deal with the health care costs in particular under Medicaid and Medicare in a serious way, but we are also going to need some revenue.”

6--Greece pushed to the brink, WSWS

The latest austerity measures represent a substantial increase in the attacks taking place on all European workers and will serve as a model for new cuts in Spain, Portugal and across the continent.

The most recent austerity measures have already driven unemployment up to over 25 percent, slashed wages by up to 60 percent and led to the closure of 70,000, mostly small businesses. Mass poverty and hunger are commonplace today on the streets of Athens.

Now, in line with the latest package, a further 13.5 billion euro (US $17.2 billion) is to be cut. The plan is to destroy 150,000 jobs, reduce wages by up to 30 percent and slash pensions by between five and 15 percent. Additional cuts in the health care sector, which is already completely under-funded, total 1.5 billion euros. Similar cuts are on the agenda for the education system. Universities are to be shut down with massive reductions in teaching staff. The retirement age is to be raised from 65 to 67.

Further legislative changes adopted relate to labor law. Job protection statutes are to be watered down by reducing severance pay and payment deadlines. Layoffs are to be made easier, thereby driving up unemployment once again. In addition, the controversial merger of social security systems, rejected by a majority of parliamentarians last week, has simply been included in the legislative package and now adopted.

The cumulative effect of the succession of austerity measures will be to continue pushing Greece into the abyss. Previous cuts have already led to an enormous increase in the country’s debt burden, which will reach 189 percent of GDP this year. The country’s economy has shrunk by 21.5 percent since 2007, and another year of deep recession is predicted for 2013.

7--The fiscal cliff flap, naked capitalism

Now it’s outside the scope of this article to address long form, but we will stop to remind readers that the budget hysteria is completely, utterly misguided. The last thing this economy needs is austerity. You can look at Europe and see how fiscal retrenchment in economies with lots of idle resources has only made matters worse. The IMF has even admitted that math of budget cutting fails because GDP falls even more than the deficit is reduced, which results in the debt to GDP ratio getting larger (and that’s before you factor in longer-term damage due to skill and infrastructure erosion, suicides, deterioration in health, etc). But the neoliberal economists have the same sort of religious zeal as the neocons. Just as the neocons laid in wait since the 1980s before they were able to take us all on a wild, costly, and hugely destructive ride in the Middle East, this crowd of true believers (lead by billionaire Pete Peterson) has been similarly engaged in a long-term campaign and looks poised to unleash its own version of adventurism...

Voters want growth, not austerity, and above all, do not see ‘entitlements’ as on the table.
· Two-thirds give an intense positive response to a “plan to invest in new industries and rebuild the country and create jobs over the next five years.” That is 5 points higher than “a plan to dramatically reduce the deficit to allow the economy to grow over next five years.”
· By 67 to 26 percent, voters say the priority should be growth rather deficit reduction.
There is no evidence that voters have any interest in the contours of Simpson-Bowles approach to the budget.
· Over 60 percent rule out cuts in Medicare and Social Security as part of a deficit reduction package.
· Almost three-quarters find acceptable in any such plan creating a new higher rate for those earning over a million dollars.
By putting Paul Ryan on the budget, Republicans decided to put social insurance for seniors on the table, but the Obama’s biggest advantage over Romney was on whom voters trust to deal with Medicare: 51 to 38 percent, a 13-point advantage.
It would seem to be a stick in the eye to defy such clear voter wishes, but that’s never stopped Obama. And he will get away with it because large parts of his base even now don’t perceive that his talk and image don’t map at all onto his policies. This long-planned betrayal might finally wake them up to the actual policies, as opposed to the persona, that they voted for.


 

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