Forward Observation Post – Vermillion

Views and Vents from the Frontline of the Culture War

Archive for category Economy

The Momentum is Coming to an End

Nov 15

Posted by FOPVermillion in Economy, Politics | 2 Comments

Obama’s obsession with pushing through health care reform to the exclusion of everything else is costing him.  I understand this is seen as his signature item and a many liberals and Democrats WANT the legislation very badly.  The problem is that as James Carvile said, “It’s the economy stupid.”  Everyone is worried about 10%+ unemployment and the fact that the job pool is shrinking.  They are much less concerned about health care right now.  If Obama had not come into a bad economy when he took the oath of office, he and the Dems could be rolling through one piece of major legislation after another.  However, that is not the case and the Administration seems tone deaf, to be generous.  They have too much invested in health care reform to let it go but this article by Scott Rasmussen highlights the the fact that the dems are losing the public.  If they cannot get this beast passed soon, and they make it the cornerstone of next year, they will have serious problems.

Come next November, the economy and jobs will be the number one issue.  If the Dems have any chance not to repeat 1994, they need to be able to point to things they have done to create jobs.  Without that, they will have to spend their time and war chests to convince the voters that the bills they have passed will not do as much damage as many analysts suspect.  This is not a good position to be in.  “Re-elect me because my it won’t be as bad as my opponent says it will be” is not a strong selling point.  I suppose they will try to pass Stimulus II but there is no chance it will have an impact prior to the election unless it business and tax friendly so that the effects can be felt right away.  Continuing to extend unemployment is not a winner in my book.  It does help ease the pain of being out of work, but it doesn’t get people back to work.

Right now Obama is dividing the party and focusing on the wrong things.  In short order, Obama could take his party from majority to minority status in a short two-year window.  Considering how much I do not like the direction this President and Administration want to take the country in, I am happy to see it happen.  Twelve months ago, I expected the Democrats would be in power for four years for sure and more than likely another four based on Obam’s popularity.  Now with all the missteps and ham-handed manner they have governed, there is a real chance they will blow it all before Obama is even up for re-election.  Amazing.

- FOP Vermillion

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Why We Are Not Excited

Oct 30

Posted by FOPVermillion in Economy, General | No Comments

I was reading Peggy Noonan’s column today and I think she nailed it.  We are in the middle of good economic news and potentially the end of the recession and no one is excited at all.  As she starts off:

The new economic statistics put growth at a healthy 3.5% for the third quarter. We should be dancing in the streets. No one is, because no one has any faith in these numbers. Waves of money are sloshing through the system, creating a false rising tide that lifts all boats for the moment. The tide will recede. The boats aren’t rising, they’re bobbing, and will settle. No one believes the bad time is over. No one thinks we’re entering a new age of abundance. No one thinks it will ever be the same as before 2008. Economists, statisticians, forecasters and market specialists will argue about what the new numbers mean, but no one believes them, either. Among the things swept away in 2008 was public confidence in the experts. The experts missed the crash. They’ll miss the meaning of this moment, too.

The biggest threat to America right now is not government spending, huge deficits, foreign ownership of our debt, world terrorism, two wars, potential epidemics or nuts with nukes. The biggest long-term threat is that people are becoming and have become disheartened, that this condition is reaching critical mass, and that it afflicts most broadly and deeply those members of the American leadership class who are not in Washington, most especially those in business.

I read the rest of the column and I have to agree that we as a people are getting frustrated and disheartened.  I know why I am.  I am in the group that disagrees with the people in power and no one is listening to me (which is why I started the blog).  The proposed solutions treat me as a child who can’t be responsible while at the same time taking more and more of my money for my “own good” to fund this junk.  If Peggy is seeing this also, it is not something simply out here on the fringe.

Yes, I don’t see any of the leaders out there presenting a path to recovery and prosperity.  The Democrats with everything going on are more concerned with consolidating power than they are fixing the mess.  Regardless what Obama says about how we need to let him clean it up, I have not heard a plan.  Lowering emissions and decreasing energy use is not a plan to grow the economy.  Offering heathcare to those who don’t have it won’t grow the economy.  And spending $787 billion on stimulus over several years is not showing much progress either.

Where is the leadership?  Where is the plan to get us back?

I think Peggy says it nicely about our current leaders:

We are governed at all levels by America’s luckiest children, sons and daughters of the abundance, and they call themselves optimists but they’re not optimists—they’re unimaginative. They don’t have faith, they’ve just never been foreclosed on. They are stupid and they are callous, and they don’t mind it when people become disheartened. They don’t even notice.

At some point, children have to grow up.  Hopefully, it will be soon enough to make the pain bearable.

- FOP Vermillion

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Bono’s Vision

Oct 18

Posted by FOPVermillion in Economy, Environment, General | No Comments

Bono had a piece in the NY Times today.  It was interesting because it gives a nice insight into the liberal thought process without the hate and personal attacks that you often see.  The thing that stood out to me was that even while being supportive of Obama, it was weak and damning to a point.

To start the essay, he points out that Obama’s win of the Nobel Prize was not based on accomplishment but based on projection.

There’s a sense in some quarters of these not-so-United States that Norway, Europe and the World haven’t a clue about the real President Obama; instead, they fixate on a fantasy version of the President, a projection of what they hope and wish he is, and what they wish America to be.

However, Bono thinks the “virtual Obama” is the real Obama and the basis for this opinion is a part of the speech given at the UN last month.  The key passage for Bono is:

“We will support the Millennium Development Goals, and approach next year’s summit with a global plan to make them a reality. And we will set our sights on the eradication of extreme poverty in our time.”

The millennium goals are a set of guidelines that according to Bono are to reduce “extreme” poverty.  Of course that is just one part (the whole list is below), but it is a part that is near to his heart.  The remaining parts of the three “extremes” that need to be addressed are ideology and climate.  If only these three extremes could be eliminated, the world would be a better place.  Based on Obama’s words, Bono believes the changes needed can happen as long as there is action behind them.

Now, I think this is all wishful thinking and not just because Obama has not shown he is big on follow through.  The words are getting old to me as the results are few and far between.

But to the three extremes:

  • Poverty:  I believe that the root to the poverty problem is not a lack of wealth but a lack of opportunity.  People going about and doing what they are best at … chasing a profit motive will create more wealth than any other method.  The biggest barrier to opportunity is the government systems that empower few and funnel wealth to those who do not earn it.  As long as there are dictators and feudal lords who can demand wealth from those around them at the point of a gun, there will be limited opportunity.  Considering the make up of the majority of governments at the UN, I do not expect that much will truley change in this area.  There may be wealth transfer but it will not make its way to the people who need it.
  • Ideology: When most people think of extreme ideology, they think left-right.  As much as I disagree with the opposition, the real problems in this area are outside of the US.  Currently, radical Islam would be the best example of this in my mind.  Those who disagree and refuse to submit are executed.  The problem is not one of understanding, it is of acceptance.  In this area, the US is not the problem.  Until I see true moderates in this area outside of the country, I do not expect there will be any progress regardless of who the President is.  In the end, we are not the ones saying submit or die so it is only logical to assume the ones saying it must change or be defeated.
  • Climate:  If you have been reading this blog you know my thoughts on man made climate change/global warming.  The bottom line is I think it is bad science.  the planet warms and cools over time and we can do nothing to stop it.  The fact that the theories have to keep changing reinforces my point.  Let’s get to where we can acurately predict the weather a few years out before we start making dramatic changes to society to prevent a potential coming problem.

The entire list of Millennium Development Goals are:

  • Eradicate extreme poverty and hunger;
  • Achieve universal primary education;
  • Promote gender equality and empower women;
  • Reduce child mortality;
  • Improve maternal health;
  • Combat HIV/AIDS, malaria, and other diseases;
  • Ensure environmental sustainability; and,
  • Build a global partnership for development assistance.

The actual problems that Bono see are ones that will need to be solved by people and not governments.  The three extremes are problems of the world and people and will not be solved by decree.  They will only be solved, where they can be solved, by a billion small individual actions.  No matter what Obama’s actions are, or what the UN does, the end result will be minimal change if the real change does not come from the bottom up.

- FOP Vermillion

Goal 1: Eradicate extreme poverty and hunger Universal Declaration of Human Rights, article 25(1); ICESCR article 11
Goal 2: Achieve universal primary education Universal Declaration of Human Rights article 25(1); ICESCR articles 13 and 14; CRC article 28(1)(a); CEDAW article 10; CERD article 5(e)(v)
Goal 3: Promote gender equality and empower women Universal Declaration of Human Rights article 2; CEDAW; ICESCR article 3; CRC article 2
Goal 4: Reduce child mortality Universal Declaration of Human Rights article 25; CRC articles 6, 24(2)(a); ICESCR article 12(2)(a)
Goal 5: Improve maternal health Universal Declaration of Human Rights article 25; CEDAW articles 10(h), 11(f), 12, 14(b); ICESCR article 12; CRC article 24(2)(d); CERD article 5(e)(iv)
Goal 6: Combat HIV/AIDS, malaria and other diseases Universal Declaration of Human Rights article 25; ICESCR article 12, CRC article 24; CEDAW article 12; CERD article 5(e)(iv)
Goal 7: Ensure environmental sustainability Universal Declaration of Human Rights article 25(1); ICESCR articles 11(1) and 12; CEDAW article 14(2)(h); CRC article 24; CERD article 5(e)(iii)
Goal 8: Develop a global partnership for development

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Promoting Irresponsibility

Oct 8

Posted by FOPVermillion in Economy, General | No Comments

I was listening to the radio today and I heard the ad for freecreditreport.com.  You know the one where the guy bemoans the fact that he when to buy a car and could not get what he wanted because he didn’t know his credit was bad.  Every time I hear this comercial, it makes my blood boil because the target audience is obviously people who do not understand personal finance or how credit really works.  If you are responsible with your money and pay your bills, you will not be in a situation where you find out your “credit is whack”.  At the same time, most people who know anything about credit scores knows that having a credit report does not grant you credit.

So if every one knowledgeable knows this then who are they targeting?  The answer is pretty obvious.  Those who have no clue about credit, probably have bill payment issues, and likely live beyond their means.  With their success, they promote more of the same.  This ends up creating more problems for people who need help and not enabling.  As the rule of shovels goes, “When you find yourself in a hole, stop digging.”

On a grander scale, this is what the government is doing at the moment.  They are spending more on debt (debt maintenance is rapidly growing as a portion of the budget), ignoring their credit (debt level), and living beyond their means (spending more than the tax revenue generates), all while refusing to address the problem because it could affect their power.

We are in debt as individuals and as a society and we refuse to accept the reality of the situation.  We must become fiscally responsible or it is just a matter of time before it ruins us.  The first step is spending less than we take in, and it needs to be in real terms.  The games with off budget, and funds repaid with IOU’s needs to end.  The other common game in government is the baseline budget that has built in increases.  A reduction in growth that actually increases spending year over year should not be labeled as a cut.  Unless we can make these little changes, we have no chance of pulling out of this dive.  We must promote responsibility if we are to have a chance, at both the individual and government levels.

- FOP Vermillion

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The Problem is Jobs

Oct 4

Posted by FOPVermillion in Economy | No Comments

Most people who visit this site have seen the chart from Innocent Bystanders which shows the actual unemployment number versus the projected unemployment (see below) when the stimulus bill was being debated.  However, the percentage is just part of the story.  The truth is that overall jobs available are decreasing (see below: also from Innocent Bystanders) and this has gone on for twenty-one months.  This is a sobering thought on its own.  This article from FoxBusiness.com gives a bunch of stats relating to unemployment that may be news if you have not delved deep into the numbers.

The truth is the numbers are much worse (17%) when the discouraged and part-time workers are included.  This means that when the economy takes off, the unemployment number will not be coming down any time soon since the jobs will bring the discouraged workers back.

With this in mind, it is clear we are in bad shape and despite what VP Biden, says, the stimulus is not working.  So now Major Garrett reports that the Administration is looking at measures they can take to help (don’t call it Stimulus II).  The problem is, and this is a big one, the proposed changes do hardly anything to create jobs.  For the most part, the proposals are designed to make unemployment more comfortable which may be compassionate but is does nothing for the problem.  The job creator that I see in the report is an extension of the first time home buyer credit.  It may help some.  I see the home credit as a smaller cash for clunkers which has created artificial demand for homes that otherwise would not have existed so it likely will help some.

What we need are JOBS.  I am not optimistic with the current leadership but our best bet now to get out of the recession is for someone to  step up and admit that the targeted stimulus and “shovel ready” projects are not creating work and they need to take a free market approach.

Here are some things I would like to see although I do not expect they will be likely considering who is in charge at the moment.

  • A stop on any legislation that if passed would harm business and restrict hiring.  If this one happens, it will be because the legislation was defeated. This would help move the business mindset away from risk management and damage minimization.  The fear of what might be forced on the market is encouraging playing it safe.
  • Tax incentives to encourage hiring.  This one is pretty obvious.
  • Tax incentives to encourage businesses to spend the cash they are accumulating.   They are sitting on huge cash reserves and they will not spend it if they don’t see a benefit.
  • A tax holiday for individuals to increase take home.  Let;s face it … if we have more in our pockets, most of us spend it and consumer spending is needed if we are to come out of the recession.
  • Incentives to encourage investing.  Those who have money are sitting on it or going for “safe” investments like gold.  That is no good for the markets.

We need to get people out of the fear mode and optimistic about the future.   To do that, we need things that are going to move the people with the money, whether that is individuals or businesses.  Increasing unemployment benefits and reducing the cost of insurance while you are out of work will not accomplish that.

- FOP Vermillion

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Opening the Lock Box

Sep 27

Posted by FOPVermillion in Economy, Politics | No Comments

I saw this article about Social Security having problems because of the economy.  The points about cash flow and how people are dealing with being laid off are all reasonable and I will not argue them.

However, I have real problems with how the writer glossed over the issue of receipts being less than payments in the next two years.

The deficits — $10 billion in 2010 and $9 billion in 2011 — won’t affect payments to retirees because Social Security has accumulated surpluses from previous years totaling $2.5 trillion. But they will add to the overall federal deficit.

Sounds good, right?  If Social Security was a business that had $2.5 trillion in investments to draw on when things are tough it would be no big deal.  The thing is this is the government and not a business.  There is no savings, no surplus, and no Al Gore lock box where money is kept for a rainy day.  Next year and the year after that we will spend $19 billion more than we make.  That means that unless Congress runs a surplus during these two years, we will add to the deficit every year we have to draw from the accumulated surpluses.

If we are honest about the accounting gimmicks, we have $2.5 trillion in debt that is getting ready to be called in as people retire.  We are in a difficult position and pretending we have until 2037 when the “surplus” runs out to solve the problem is not productive.  Denial is a time honored political strategy when it comes to the third rail but we do not have eighteen years to come up with the ideal solution.

I do not expect we will have a solution right away especially considering the failure of the Bush Administration’s attempt to change Social Security.  However, we do need to be honest about the situation we are in and point out misrepresentation in the press and elsewhere when we see it.

- FOP Vermillion

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Ford Coming on Strong for the Right Reasons

Sep 1

Posted by FOPVermillion in Economy, Politics | No Comments

Being an owner of Ford vehicles, I was proud of them when they did not get into bed with the government and take the easy way out the way GM and Chrysler did.  The big government types had to be expecting that Ford would be crushed by the new companies that would be reborn out of bankruptcy.  Instead, the public has rallied around the carmaker and they are reporting a 17% gain on sales over last year. I am pleased that there are so many people out there that, even when offered free money, were not going to support those that were “to big to fail” and are going elsewhere with their dollars.

In the same spirit, Toyota and Honda were big winners in the whole cash for clunkers jackpot.  It just goes to show that people will not accept less just for the sake of substance.

Now with this all said I think the recent car sales were a national sugar high and we will see a significant dip in sales this fall.  We tilted the market with incentives that were not tied to any real activity or demand and now we will have to settle back into normal levels.

- FOP Vermillion

J O B S – Not Being Stimulated

Aug 31

Posted by FOPVermillion in Economy, General | No Comments

This article by the Heritage Foundation reinforces what I am seeing in the business sector.  The problem with the economy in general is that the current environment is one where risk and investment is being avoided on a massive scale.  This is topping the natural creation of new jobs.  Companies are not going to hire people when the next time congress meets, they could get whacked with regulations, taxes, and fees that completely undercut their strategy.  Business is in a bunker mentality.  Until they know the shelling is over, they are going to continue to lie low and make safe moves.

No matter how much our leaders in DC want to make us believe they can stimulate us out of the recession, the truth is it will take individuals who are willing to invest and risk to create the jobs that will grow us out of these times.

- FOP Vermillion

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