Saturday, January 24, 2009
Best wishes for our Barack Obama Yes We Can team
LOOKING AHEAD by Wally Dobelis
At his inauguration on Tuesday, January 20, President Barack Obama promised swift action to deal with the huge problems his administration has inherited. To begin with, the stock marked gave immediate warning, with a Dow Jones Industrials drop of 4%, or 332 points , precipitated by the announcement from State Street Corp, everybody’s pension trust manager, of a $6.3B unrealized loss .
Once more, it brought into question the Paulsen/ Berneke TARP (Troubled Assets Relief Program) strategy of mid-2008 that set up a $700B fund to produce instant relief to the collapsed credit system, by spending $350B on bank equities and capital assets (mostly subprime mortgage tranches). It was approved by some conservative thinkers, Heritage Foundation, for one, as the initiative that avoided a catastrophic failure of the financial markets. To remind us, $168B went to 116 primary banks , $82B to smaller banks, $40B to AIG and $50 to Citigroup, not to omit the $136B for GM and Chrysler.
The remaining $350B were released by the Congress January 15,at the request of President Bust and under pressure from President-Elect Obama , to provide immediate stimulus funds for revival of the economy, both in direct payments and tax relief, with $50-100B to be applied immediately to avoid foreclosures.. At this point the stock market values were down 40% and unemployment had reached 7% .
This method of continued relief was objected to by conservative thinkers, such as Patrick Buchanan the free market critic, who accuses President Bush of losing 3M jobs in his first four years, another 1M in 2008, and of de-industrialization of the US, with growing dependence for essentials of life on Japan, China and other Asian countries, and for borrowing from the same countries to pay for the goods they supply.
Stimulus payments find critics in both parties, who remind us that President Bush’s $168B second term package was used by the recipients largely to repay credit card loans, strengthen savings and pay for Chinese-produced necessities in 99-cent stores. Further, the infrastructure strengthening activities – highway and bridge repairs - may well be dissipated in “pork” payments, such as administration costs. Monies passed to the 30-odd states in budget distress would reward sloth and not encourage painful basic changes in tax and administrative structure to remedy essential problem areas. Extensions on unemployment benefits are seen by the same critics as discouraging active job search.
Coming back to Buchanan, he advises tax relief and activities of the private industry as the basic Reaganesque solutions to the problems of economy. He recites facts of the Great Depression, such as the Crash of 1929, which by 1931 produced unemployment of 16% . By 1933 there was a stock market values drop of 89% , the GDP was down by 33%, unemployment was 25% and thousands of banks had closed . FDR was elected in 1932, and continued winning, virtually wiping out the GOP, but his Keynesian spending tactics – the New Deal that boosted employment through massive public works and established social support programs such as Social Security – did not turn the economy around. It took the war orders from the European allies in the 1930s and ‘40s to first bring the US industry back to life, followed by the US involvement in WWII . The national war effort all but eliminated unemployment, down to 1.9%. Buchanan compares FDR’s solutions to those of President Reagan, who in 1980 inherited Jimmy Carter’s stagflation of interest rates at 21% and inflation at 12%. Reagan brought in Paul Wolcker, who cut taxes, and turned around a 10% unemployment rate, bringing on an industrial boom and creating several million new jobs.
These analyses do not give adequate credit to President Obama’s bold actions. He sees a loss of jobs, savings and dreams deferred and defeated every day that we spend pointing fingers and dragging our feet, and wants instant action, starting the day after the Inauguration. Early in January the jobless benefit recipients’ count jumped to 4.6M, by 101K, highest since November 1982, and corporate income tax receipts fell by 41% in December, compared to a year earlier. Obama’s composite FDR/Reagan tactic, a stimulus package of $825B for two years, is the result of the thinking of a bipartisan team that includes Paul Wolcker. It concentrates on both spending and a tax cut, a methodology that will boost the deficit (projected by the Congressional Budget Office as $1.2B this year) and the $10.6B national debt. When FDR tried to balance the national debt in his second term, unemployment jumped from 14% to 19%. Obama cannot afford to raise the taxes to the wealthy; in fact, his heath care plan of $50-65B a year may have to wait . Obama’s new jobs tactic – 3M by 2011 - envisions building roads and bridges and other needed infrastructure, doubling alternative energy production in two years and improving energy efficiency in homes and business buildings (tough to stimulate investment if gas prices stay low), putting medical records on line in five years (watch the stifling privacy issue), expanding broadband throughout the US, equipping and improving education and investing in science, research and technology, at a cost of $1.3T. Our most sincere best wishes for his - and our – success.
A friend sends a message for anyone who is looking for temporary full time employment, with the US Census Bureau, now in full gear: http://www.2010censusjobs.gov or call 1-866-861-2010.
At his inauguration on Tuesday, January 20, President Barack Obama promised swift action to deal with the huge problems his administration has inherited. To begin with, the stock marked gave immediate warning, with a Dow Jones Industrials drop of 4%, or 332 points , precipitated by the announcement from State Street Corp, everybody’s pension trust manager, of a $6.3B unrealized loss .
Once more, it brought into question the Paulsen/ Berneke TARP (Troubled Assets Relief Program) strategy of mid-2008 that set up a $700B fund to produce instant relief to the collapsed credit system, by spending $350B on bank equities and capital assets (mostly subprime mortgage tranches). It was approved by some conservative thinkers, Heritage Foundation, for one, as the initiative that avoided a catastrophic failure of the financial markets. To remind us, $168B went to 116 primary banks , $82B to smaller banks, $40B to AIG and $50 to Citigroup, not to omit the $136B for GM and Chrysler.
The remaining $350B were released by the Congress January 15,at the request of President Bust and under pressure from President-Elect Obama , to provide immediate stimulus funds for revival of the economy, both in direct payments and tax relief, with $50-100B to be applied immediately to avoid foreclosures.. At this point the stock market values were down 40% and unemployment had reached 7% .
This method of continued relief was objected to by conservative thinkers, such as Patrick Buchanan the free market critic, who accuses President Bush of losing 3M jobs in his first four years, another 1M in 2008, and of de-industrialization of the US, with growing dependence for essentials of life on Japan, China and other Asian countries, and for borrowing from the same countries to pay for the goods they supply.
Stimulus payments find critics in both parties, who remind us that President Bush’s $168B second term package was used by the recipients largely to repay credit card loans, strengthen savings and pay for Chinese-produced necessities in 99-cent stores. Further, the infrastructure strengthening activities – highway and bridge repairs - may well be dissipated in “pork” payments, such as administration costs. Monies passed to the 30-odd states in budget distress would reward sloth and not encourage painful basic changes in tax and administrative structure to remedy essential problem areas. Extensions on unemployment benefits are seen by the same critics as discouraging active job search.
Coming back to Buchanan, he advises tax relief and activities of the private industry as the basic Reaganesque solutions to the problems of economy. He recites facts of the Great Depression, such as the Crash of 1929, which by 1931 produced unemployment of 16% . By 1933 there was a stock market values drop of 89% , the GDP was down by 33%, unemployment was 25% and thousands of banks had closed . FDR was elected in 1932, and continued winning, virtually wiping out the GOP, but his Keynesian spending tactics – the New Deal that boosted employment through massive public works and established social support programs such as Social Security – did not turn the economy around. It took the war orders from the European allies in the 1930s and ‘40s to first bring the US industry back to life, followed by the US involvement in WWII . The national war effort all but eliminated unemployment, down to 1.9%. Buchanan compares FDR’s solutions to those of President Reagan, who in 1980 inherited Jimmy Carter’s stagflation of interest rates at 21% and inflation at 12%. Reagan brought in Paul Wolcker, who cut taxes, and turned around a 10% unemployment rate, bringing on an industrial boom and creating several million new jobs.
These analyses do not give adequate credit to President Obama’s bold actions. He sees a loss of jobs, savings and dreams deferred and defeated every day that we spend pointing fingers and dragging our feet, and wants instant action, starting the day after the Inauguration. Early in January the jobless benefit recipients’ count jumped to 4.6M, by 101K, highest since November 1982, and corporate income tax receipts fell by 41% in December, compared to a year earlier. Obama’s composite FDR/Reagan tactic, a stimulus package of $825B for two years, is the result of the thinking of a bipartisan team that includes Paul Wolcker. It concentrates on both spending and a tax cut, a methodology that will boost the deficit (projected by the Congressional Budget Office as $1.2B this year) and the $10.6B national debt. When FDR tried to balance the national debt in his second term, unemployment jumped from 14% to 19%. Obama cannot afford to raise the taxes to the wealthy; in fact, his heath care plan of $50-65B a year may have to wait . Obama’s new jobs tactic – 3M by 2011 - envisions building roads and bridges and other needed infrastructure, doubling alternative energy production in two years and improving energy efficiency in homes and business buildings (tough to stimulate investment if gas prices stay low), putting medical records on line in five years (watch the stifling privacy issue), expanding broadband throughout the US, equipping and improving education and investing in science, research and technology, at a cost of $1.3T. Our most sincere best wishes for his - and our – success.
A friend sends a message for anyone who is looking for temporary full time employment, with the US Census Bureau, now in full gear: http://www.2010censusjobs.gov or call 1-866-861-2010.
# posted by Wally Dobelis @ 11:28 AM 
