March 25, 2009

Things the Obama Admin and Its POS (Pork Over-Stuffed) ‘Stimulus’ Had No Part In (Bonus: More Evidence of No Recession Until 3Q08)

Filed under: Economy,Taxes & Government — Tom @ 11:31 am

I suspect this will turn into a multi-part venture, because these kinds of things need to be documented as they occur.

Three things in the past week or so clearly fit the description of “Things Over Which The Obama Administration’s POS ‘Stimulus’ Had No Influence”:

  • Housing starts were up 22.1% in February, beating expectations of a roughly 3% decline.
  • Existing home sales were up 5.1%, again whipping expectations, this time of a 1% decline. The first-time homebuyer credit of up to $8,000 is a large element of this improvement. But that is something virtually everyone supported, because it’s an immediately stimulating tax cut. It has nothing to do with the hideous POS (Pork Over-Stuffed) portions of the plan.
  • Durable goods orders were up 3.4% in February, beating expectations of a 2.0% decline (January’s contraction was significantly revised downward from -4.5% to -7.3%).

While I’m at it, here’s another graphic example of the dire impact of the POR (Pelosi-Obama-Reid) Economy last year:

CensusDurables12mos0209

It took a month or so, because durables manufacturers can’t react on a dime, but the generally steep declines beginning in August clearly show that the Pelosi-Obama-Reid energy-starving, tax increase-promising magic had its effect.

The graph is also another entry into evidence showing that the National Bureau of Economic Research’s (NBER’s) claim that the country was in recession during the first half of 2008 lacks credibility.

Ignoring compounding, durable goods orders were up 0.3% from March to June. That’s not impressive, but it’s also not negative, meaning that it was not recessionary.

NBER says that a recession requires “a significant decline in economic activity spread across the economy” that is “normally visible in production, employment, real income, and other indicators.”

Historical results on the ground continue to show that for the most part there wasn’t any decline from March through June, let alone a significant one:

  • Durable goods orders increased slightly (see above).
  • Manufacturing overall was barely contracting, according to the Institute for Supply Management (March through June index values averaged 49.1%; a reading above 50% indicates expansion).
  • Everything except manufacturing was basically okay until the June reading (March through June values were 49.6%, 52.0%, 51.7%, and 48.6%). That June reading of sentiment in the real world is where I detected that the POR Economy had begun sometime during that month.
  • The ISM indices on a weighted-average basis show that the economy as a whole improved from March through May (values were 49.1%, 51.5%, and 51.4%).
  • GDP wasn’t in decline. Instead, second quarter annualized GDP growth was 2.8%.
  • Disposable income increased at an annualized rate of 10.7% in the second quarter, and would have been positive even without the tax stimulus payments of $75.4 billion during that period ($77.5 minus $2.1). (The annualized increase in disposable income was $380 billion; the non-annualized equivalent of roughly $95 billion comfortably exceeded the stimulus payments.)

The only thing consistently declining during that time was employment (March 26 reminder: And the seasonally adjusted employment drop as a percentage of the workforce during the first six months of 2008 was lower than during the previous two recessions). Declining employment alone does not a recession make; it never has.

The case that NBER blew its recession call from December 2007 through June grows ever more compelling. At worst, there was a mini-recession from December through February, followed by 3-4 decent months, followed by the POR Economy’s recession that began in July after it began taking hold in June.

Back to the original point of the post: The above good-news cites are examples of the economy attempting a recovery on its own, thanks largely to lower energy prices and lower mortgage rates. Certainly no one can legitimately claim any stimulus/Porkulus-related impact on the above results. Based on estimates of when the mislabeled “stimulus” money will actually be spent, no one will be able to do so until sometime this fall, if even then.

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3 Comments

  1. Good article! Of course we all like to see others agreeing with us. I’ve posted a link to this article from my blog which started speculating on the subject of the fake recession/ non-fake money riot last January.

    Comment by Martel Firing — March 25, 2009 @ 5:00 pm

  2. #1, except that millions of people out of work is not fake and I’m one of them. This was all predictable when the price of gas went over $2.50/gal and therein lies the crime of mismanagement and malfeasance of POR, yes all three of them since all three were in agreement that high gas prices are what they want for their precious AGW hoax. Have you noticed the price of gas lately, its been creeping back up and its not due to excess demand but the price of oil. Because of the misconduct of the RULING POR party in causing over a trillion dollars to be printed, the dollar is devaluing and the price of oil is going up as a result. http://tonto.eia.doe.gov/oog/info/twip/twip_gasoline.html

    I pointed out the effects of printing money, their term is monetizing the debt, makes it sound benign doesn’t it? http://www.publiusforum.com/2009/02/19/investing-in-high-unemployment-and-high-inflation/ I am predicting $100/barrel oil by the end of the year based on a 60% devaluation of the dollar. At that value any recovery will be aborted. The British Pound dropped by 30% so we now will be falling against both the Pound and the Euro. The Europeans have flatly said they have spend all they are going to spend, they did it early with no effect. The reason why Obama wants the Europeans to spend more is so their currency will fall in tandem with the dollar and so disguise the devaluation to the public. The Europeans apparently are not going along with the deception. (Tom that should be the idea for a good article)

    BTW- If the Euro and Dollar devalued at the same time then the price of oil would not rise since the world markets wouldn’t have anything to compare it to unless they try gold, but even that isn’t reliable since people flew to gold when ONE major currency devalues not all of them, therefore the demand for gold would level off, IMO.

    Comment by dscott — March 26, 2009 @ 9:35 am

  3. Thanks, TB. As had been predicted — if anyone would have listened — we already had signs of recovery in January as employment is a lagging indicator. This obviated the need for a Keyensian stimulus (which is never needed except maybe in times of war).

    The crisis mentality was created in order to drop the stock market and create panic so as to force through ill-advised policies. When the recovery is in full swing, the Obamunists will take credit even though they had nothing to do with it (except blunt and delay it). They will then ride it into the ’10 midterms before the full adverse affects of their policies occur in ’11. This is called a political business cycle, which — as I have commented several times here and on other blogs — has been the Dem strategy since taking control in Nov.’06, and the main reason Doh!-bama won last year. I don’t understand why educating the public regarding this isn’t one of the focal points of Conservatives and Republicans before the midterms.

    Political business cycle – “A business cycle that results primarily from the manipulation of policy tools (fiscal policy, monetary policy) by incumbent politicians hoping to stimulate the economy just prior to an election and thereby greatly improve their own and their party’s reelection chances. Expansionary monetary and fiscal policies have politically popular consequences in the short run (tax cuts, falling unemployment, falling interest rates, new government spending on services for special interests, etc.). Unfortunately these very policies, especially if pursued to excess, can also have very unpleasant consequences in the longer term (accelerating inflation, an unsustainably low rate of savings to support future investment, damage to the foreign trade balance, long-term expansion of government’s share of the GNP at the expense of people’s disposable incomes, etc.). So immediately after the election is over (and the next election is far away), politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, allowing interest rates to rise, etc. Thus the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint encouraged by trying to schedule an artificial boom at every election time.”

    - A Glossary of Political Economy Terms ( http://www.auburn.edu/~johnspm/gloss/political_business_cycle )

    Comment by Joe C. — March 26, 2009 @ 10:10 am

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