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Tuesday, February 23, 2010

But The Bumblebee Still Flies

As CR notes, Q4 state tax collections were bad, and by "bad", we mean "still declining in a very unambiguous way".

Still, the US economy appears to be growing. This February we are crossing the line to YoY gains on WIET and CIT. FUT already crossed and continues positive.

FUT (Federal Unemployment Tax) is a particularly encouraging indicator, because it is not paid on tax-exempt employees (such as non-profit charities, churches), on state and local employees, or on federal employees. So it is a measure of private employment, which is a particularly important indicator given the Census and its distortion. So I don't care what the unemployment and employment official stats may say for February - it is a decent month. Not great, but not bad.

If one tried, one could make a case that the economy will continue decent growth in 2010, or one could make the case that the economy would subside once more in the later part of 2010. There are indications both ways. Usually, that is an encouraging sign.

I won't try to make any case. In my view this is somewhat fragile and the final trajectory for 2010 depends most on government policy and fuel prices (which will control a lot about spending power). We are entering the danger period, because M1 and M2 don't look too good. This is related to the fall in deposits. See historical H.6 and H.8.

I think we are going to squeak through if Congress would just get off its butt and approve the unemployment extension. This is urgent. Over two million people will lose their unemployment benefits through April if they don't, and even if they do, some people are now facing another interruption in unemployment benefits, which is not going to help.

And that is why I spent part of yesterday afternoon running around in a frenzy yelling stuff about "President Buffoon". It is governmental malpractice to be pushing insurance reform before the unemployment extension is approved. But seriously, folks, it is. It doesn't matter what you do at top levels if the money isn't inserted at the ground levels. This is an administration so occupied with posing before the mountains on its home range that it forgets to change the oil in the trucks and feed the livestock.

I have completely had it with this administration. I can't be polite about it any more. It's got grandiose delusions or something of the sort. If it were a human being it would be Reverend Jim from Taxi. Nice, but so far out there that things are getting unnecessarily difficult.

Our future choices are constrained - that is true. But that is an overarching situation affecting the entire developed world. See BIS on the topic. We can't spend heedlessly, and I utterly agree that we have to make hard choices. The unemployment benefits question isn't one of those choices. It's a no-brainer.

The calm before the storm. State and local gov't layoffs
next. Uniformly spread across the Country with the
exception of the Dakotas.
This administration is pretty much the antithesis of "git 'er done".
John - it was a unique experience wandering through the Whitehouse.gov health care postings only to discover after a few hours that there was no real proposal. Not enough detail to figure out what's really being proposed.

Anon - Oh, yeeeeessss. The money's drying up on the ground. It's gonna hurt. Not just that. A bunch of social programs and subsidies, funding for universities, etc.
Learned something interesting about CA. Seems that a lot of retirees left the state for Baja California. It's much cheaper to live there and they can retire to a beachfront condo. I talked to a guy in NY whose dad moved down there. He said the last time he went, there were a bunch of new condos. I'm guessing these folks sold out during the height of the boom and decided to get out while the getting was good. Meanwhile, Contra Costa County has a 9.75 local tax rate. Just amazes me.
What is your logic behind extending unemployment insurance again? I personally know several people (20 somethings) who are unemployed and collecting insurance but have refused to take job opportunities because they pay LESS than what they are currently receiving on unemployment insurance. Don't we at somepoint need to force these people to take lower paying opportunities?
The unemployment benefits question isn't one of those choices. It's a no-brainer.

The money has to come from somewhere.

I suggest that if a person takes further extended UE benefits, his date of SSA collection has to get pushed back the same number of months.
Anon - if it were up to me, which it obviously isn't, I would extend insurance but cut the benefits (from the original).

First extension -10% for six weeks.
Second extension -20% for eight weeks.
Third extension -30% for ten weeks.

This is what should be done, because eventually we all need to adapt to the economy as it is.

However, the current economy cannot withstand the shock of five million people coming off unemployment.

It is not even worth suggesting this to Congress, because they won't, because they reason that people will be pissed and they want reelection. Instead, they are trying to insert these interim periods as a gentle hint to get off your duff and do something. But many people can't find a job, so it is not helping too much.

Btw, the last extension had something to do with the Q4 surge. People got big back checks which funded some of the retail sales!
Well, anon, let me tell you how that plays out. I went from a $50k a year job (during the tech bust) to a year and a half of unemployment. I did make enough to live on with that and so I didn't take anything until that totally ran out. I had to take an $8 an hour job, as that was all that was out there. That led to my wonderful career in call centers. After all this time, I have finally managed to work my way into a call center where I am paid as much as I made on unemployment. I can finally start to pay back my student loan. Since I'm a boomer, it's pretty unlikely I'll build much of a retirement fund. I say, more power to them. It shows some intelligence to make as much as you can, as long as you can. Those minimum wage jobs will likely still be there when the money runs out.
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