Thursday, February 10, 2011
This Has Got To Be Good News
JOLTS holds the answer - we just aren't getting that many hires compared to separations. Hires and separations were almost balanced for December. Part of the problem is government employment.
If you take December JOLTS seriously, you see that although government separations have increased over the year (from 1.4 to 1.6) so have openings (1.5 to 1.7). So my hunch is that we are seeing a wave of government retirements. Hiring is also up for government over the year from 1.3 to 1.4. That curve will unbend later in the year and we will see more net job gains.
Bernanke strikes back. He has a lot of ammo! You can make a very good case that the "deal" caused more havoc than the Fed's QE2 program. It certainly could not have convinced anyone that we were going to get our fiscal house in order.
Also the current Congress seems likely to way undershoot its promise to cut spending. Where does that leave investors and the dollar? CBO freaked out and presented a much worsened ten year picture to Congress over it.
Bernanke's full testimony. Here is some of the relevant stuff:
For example, under plausible assumptions about how fiscal policies might evolve in the absence of major legislative changes, the Congressional Budget Office (CBO) projects the deficit to fall from its current level of about 9 percent of gross domestic product (GDP) to 5 percent of GDP by 2015, but then to rise to about 6-1/2 percent of GDP by the end of the decade.2 In subsequent years, the budget situation is projected to deteriorate even more rapidly, with federal debt held by the public reaching almost 90 percent of GDP by 2020 and 150 percent by 2030, up from about 60 percent at the end of fiscal year 2010.None of that can be challenged. The problem is near-term. The amounts in the Social Security Trust Fund are meaningless, because no one's going to lend us the money ten years down the road, and we are slated to run eye-popping deficits as a far as the eye can see. We are currently running a Social Security deficit, and CBO changed its predictions to predict a 10 year deficit of around 550 billion. After that, it gets much, much worse.
The long-term fiscal challenges confronting the nation are especially daunting because they are mostly the product of powerful underlying trends, not short-term or temporary factors. The two most important driving forces behind the budget deficit are the aging of the population and rapidly rising health-care costs. Indeed, the CBO projects that federal spending for health-care programs will roughly double as a percentage of GDP over the next 25 years.3 The ability to control health-care spending, while still providing high-quality care to those who need it, will be critical for bringing the federal budget onto a sustainable path.
The CBO's long-term budget projections, by design, do not account for the likely adverse economic effects of such high debt and deficits. But if government debt and deficits were actually to grow at the pace envisioned, the economic and financial effects would be severe. Sustained high rates of government borrowing would both drain funds away from private investment and increase our debt to foreigners, with adverse long-run effects on U.S. output, incomes, and standards of living. Moreover, diminishing investor confidence that deficits will be brought under control would ultimately lead to sharply rising interest rates on government debt and, potentially, to broader financial turmoil. In a vicious circle, high and rising interest rates would cause debt-service payments on the federal debt to grow even faster, resulting in further increases in the debt-to-GDP ratio and making fiscal adjustment all the more difficult.
We only have a few years to come to grips with this problem. And here's a hint: high-speed rail and expensive energy isn't going to redress it. Nor will bailing out pension funds of local governments, or paying student loans for students, etc. Nor can we raise taxes regressively very much. We already did that in the 1983 "fix"; it hurt the lowest earners so much that we've been cutting taxes for them ever since. We know we have to raise the Medicare tax. That had better be it.
Forget the scalpel - get out an axe and a chainsaw and just start cutting away.
By definition, the unsustainable trajectories of deficits and debt that the CBO outlines cannot actually happen, because creditors would never be willing to lend to a government with debt, relative to national income, that is rising without limit. One way or the other, fiscal adjustments sufficient to stabilize the federal budget must occur at some point. The question is whether these adjustments will take place through a careful and deliberative process that weighs priorities and gives people adequate time to adjust to changes in government programs or tax policies, or whether the needed fiscal adjustments will come as a rapid and painful response to a looming or actual fiscal crisis. Acting now to develop a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence.The Greek solution is an awful solution which much inevitably cause a depression and default. Since much of our debt is actually owed to the citizenry, inevitably government social programs would be cut sharply should we adopt that path (the path we are already on).
Of course most of us here know the answer.
...fingers crossed on that MOMA, but I would like to respectfully add, I remember being in a blizzard last week that according to the weather channel "was going to affect 100 million people before it was over". I don't know if it touched that many people but I do know schools were closed around here for two days and I'm certain with the schools closed, even if the government offices were "open"...nobody was really there either. I know you have all kinds of contacts all over maybe you can check with them. I noticed none of the states in the midwest were listed in the weekly gainers/losers list so I am just a bit suspicious and willing to wait another week or two. I hope you're right and it is good news...fingers crossed. Thank you. A Frigid Lurker
Republic of Haven
"The Republic of Haven, known as the People's Republic of Haven while governed by the Legislaturalists and the Committee of Public Safety..."
"During its first centuries of existence, the Republic of Haven was one of the most prosperous human worlds in the galaxy, and was viewed as a sort of "interstellar Athens." Considering the poverty of its less favored citizens an aberration in light of Haven's prosperity, the Havenite government launched welfare measures which, after a few centuries, became a caricature of a welfare state."
"The original Havenite Constitution was replaced by a new document which enshrined Legislaturalist rule."
"Two centuries of deficit spending had wrecked Haven's economy to the point that the Legislaturists and the Dolist Managers were unable to fix the problem at the beginning of the 20th Century PD."
"Dolists were the part of Havenine original lower class; they did not work and were supported with a Basic Living Stipend to live on."
Here's a quote from the first page of the first book.
On Basilisk Station
"The last three quarters all confirm the projection, Sid." He glowered sideways at his military colleague. "It's the naval budget. We can't keep adding ships this way without—"
"If we don't keep adding them," Elaine Dumarest broke in sharply, "the wheels come off. We're riding a neotiger, Mr. President.
And from the Treasury to the companies. A huge amount of discretionary federal spending is really payments to corporations.
And we could afford to cut the corporate tax rate if we just cut out all the special deals.
Frigid Lurker - you have a point! Claims are extremely volatile anyway. However this is part of a declining trend.
"Ah, the Gaze of the Basilisk."
ELO: Turn to Stone
"The city streets are empty now
The lights don't shine no more"
My word verification is sphosuxa.
Is it a mythical beast or a description of our long-term economy? You make the call! Sigh.
to raise revenue and bring some jobs back home.
Better to raise taxes on our poor and devalue the dollar.
"And yet no one wants to mention tariffs..."
I think Buffett's plan has merit. I don't see how a long-term unsustainable trade deficit is even remotely in our best interests.
Squanderville versus Thriftville
"We would achieve this balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties -- either exporters abroad or importers here -- wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance."
It could easily be adapted to lower our trade deficit by 10% each year for 10 years though.
But, it is unlikely our trading partners will not return the favor, That will result in reduced trade globally and increased prices globally. I really don't see how this "Buffet Plan" can work.
Just noodling around, it looks as if oil imports are about 1/2 of the trade deficit. Adding this IC would not only increase the cost of energy, but it would also affect just about every other product made, and transported, in America. It seems like this plan would be impoverishing ourselves. I don't buy Buffet's reasoning that trade partners would not retaliate and the dollar will continue to be the reserve currency.
First, until you solve the energy problem, you cannot even consider tariffs.
Second, we have a poverty problem already. Beating those whose legs are already broken does not make them get up and walk.
It's such a bad idea I am absolutely convinced it will be implemented.
Once you do that you are left picking amongst the awful ways it will be someday be remedied.
"It seems like this plan would be impoverishing ourselves."
We are impoverishing ourselves long-term every time we export a US dollar, the entity we export that dollar to hoards it, and they ship us hard goods in exchange.
Those hoarded dollars will eventually come back to us. In the meantime we pretend they don't exist.
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