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David Leonhardt reviews the consumer strike for the NY Times.
… The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem. …
… If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don’t need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse.
Earlier this year, Charles M. Holley Jr., the chief financial officer of Wal-Mart, said that his company had noticed consumers were often buying smaller packages toward the end of the month, just before many households receive their next paychecks. “You see customers that are running out of money at the end of the month,” Mr. Holley said.
In past years, many of those customers could have relied on debt, often a home-equity line of credit or a credit card, to tide them over. …
Michael Barone liked Leonhardt’s piece, but begs to differ in one important place.
Even good journalists can make mistakes, based on commonly held assumptions which are simply wrong. Take the New York Times’s economics reporter David Leonhardt. In an insightful and well written article about the huge drop in consumer spending, Leonhardt writes,” If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day.”
The only problem is that, as Megan McArdle pointed out in a July 8 blogpost on The Atlantic website, “the evidence is not ambiguous: Hoover did not tighten up on spending.” She goes on to provide the facts: …
Weekly Standard explores some of the contradictions in the president’s speeches.
‘I’m the president of the United States, and I want to make sure that I am not engaging in scare tactics. And I’ve tried to be responsible and somewhat restrained so that folks don’t get spooked.” So said President Obama at his June 29 debt ceiling press conference. Two weeks later, CBS Evening News anchor Scott Pelley asked Obama whether he can “tell the folks at home that, no matter what happens, the Social Security checks are gonna go out on August 3?” President Obama replied that whether it was Social Security checks, veterans’ checks, or disability checks, “I cannot guarantee that those checks go out on August 3 if we haven’t resolved this issue, because there may simply not be the money in the coffers to do it.”
These statements are representative of Obama’s contradictions, in word and deed, over the course of the entire deficit debate. Gelatinous is an apt description (to paraphrase Speaker John Boehner) of the president’s rhetoric, for Obama has been slippery and irresolute—the opposite of the responsibility and restraint he touts.
To be responsible, a leader should express ideas to the American people in clear and informative language. Yet the deficit debate has been marked by Obama’s fondness for referring to “revenues” (taxes), “investments” (spending), the need to “reduce spending in the tax code” (increase taxes), and the importance of “further improving Medicare” (cutting Medicare) by further empowering the Independent Payment Advisory Board, whose cuts—at least under current law—would go to fund Obamacare, not cut the deficit. …
Mark Tapscott says there is one place the president excels.
Here’s an interesting couple of numbers that emerged during this past week: According to Jim Messina, his campaign manager, through the second quarter of 2011, President Obama now has 552,000 contributors to his 2012 re-election campaign.
And the Bureau of Labor Statistics announced that during the same two quarters, the U.S. economy generated 260,000 jobs.
In other words, Obama attracted twice as many campaign donors as his economic policies created new jobs. That probably explains a great deal about yet a third number that received a great deal of attention this week: Gallup’s finding that a “generic Republican” leads Obama by eight points in voter preference for 2012.
Jonah Goldberg wants to know who’s the ideologue?
… The president, we are told, is a pragmatist for wanting a “fair and balanced” budget deal. What that means is tax increases must accompany spending cuts. Any significant spending cuts would be way in the future. The tax increases would begin right after Obama is reelected.
Now keep in mind that tax hikes (or what the administration calls “revenue increases”) are Obama’s idee fixe. He campaigned on raising taxes for millionaires and billionaires (defined in the small print as people making more than $200,000 a year or couples making $250,000).
During a primary debate, he was asked by ABC’s Charles Gibson if he would raise the capital gains tax even if he knew that cutting it would generate more revenue for the government. The non-ideologue responded that raising the tax, even if doing so would lower revenue, might be warranted out of “fairness.” As he said to Joe the Plumber, things are better when you “spread the wealth around.” …
Todd Zywicki, George Mason law prof outlines the disasters of the auto-bailouts.
Last month, President Obama barnstormed through Ohio, unveiling his surprising decision to claim credit for the success of the multi-billion dollar government bailouts of General Motors and Chrysler.
Why surprising?
Because despite the efforts of the administration and its willing accomplices in the media, the belief that the auto bailouts were a success is simply a myth. Leave aside the obvious point that the government still stands to lose billions of dollars on its investment as well as many billions more from the preferential tax treatment of the reorganizations. Not only was the bailout unnecessary to save the American automotive industry but the politicized bankruptcy process left both General Motors and Chrysler in a weaker competitive position than if they had simply reorganized in a standard chapter 11 process.
First, the belief that the bailouts were a success rests on a central misunderstanding: the belief that GM and Chrysler would have collapsed had the government not intervened. Yet large corporations reorganize in bankruptcy routinely in the United States and GM in particular is the prototype of the type of firm for which chapter 11 was designed: a firm with strong going-concern value, specialized labor and capital investments, but plagued with decades of bad management decisions and a need to fix crushing labor agreements, eliminate underperforming lines, and streamline an overgrown dealership network. Given the obvious viability of a leaner, more-efficient GM there is little doubt that it would have successfully reorganized. …
Thomas Sowell points out how anti-business actions and rhetoric hurt the very people the administration should want to help.
… Blithely piling onto American businesses both known costs like more taxes and unknowable costs — such as the massive ObamaCare mandates that are still evolving — provides more incentives for investors to send their money elsewhere to escape the hassles.
Hardly a month goes by without this administration coming up with a new anti-business policy — whether directed against Boeing, banks or other private enterprises. Neither investors nor employers can know when the next one is coming or what it will be. These are unknown unknowns.
Such anti-business policies would just be business’ problem, except that it is businesses that create jobs.
The biggest losers from creating an adverse business climate may not be businesses themselves — especially not big businesses, which can readily invest more of their money overseas. The biggest losers are likely to be working people in America, who cannot just relocate to Europe or Asia to take the jobs created there by American multinational corporations.
Andrew Malcolm with the best of late-night.
Leno: Obama’s latest economic recovery plan: He told Treasury Secretary Geithner to take the little money we have left and buy lottery tickets.
Leno: Democrats warned today that if the debt limit is not raised by Aug. 2, the federal government will cease to function. How do you tell?
Letterman: So CNN has canceled the TV show of ex-Gov. Eliot Spitzer. And you have to wonder how will the poor guy spend an hour now.
Leno: CNN has canceled Eliot Spitzer’s show, “In the Arena.” Apparently network executives made the decision after realizing it was still on.
Fallon: Illinois schools are dropping the written parts of their standardized school tests. Asked why, a spokesman said, “We simple does not needs them.