February 26, 2011

Goldman, AP to Lawmakers: Keep Spending Like Mad or Economic Growth Will Suffer

Thursday, an odd warning emanated from the halls of the supposedly esteemed investment firm known as Goldman Sachs: If Uncle Sam spends $61 billion less during the second half of the current fiscal year, and ends the year with “only” $3.758 trillion in spending instead of the administration’s anticipated $3.819 trillion, economic growth will be seriously harmed.

Yesterday, similar nonsense was put forth by Jeannine Aversa at the Associated Press in reaction to the government’s report that economic growth during the fourth quarter was revised down to 2.8% from 3.2%, when experts (like the geniuses at Goldman) had expected the number to come in at 3.3%. The headlined whine: “State and local budget cuts are slowing US economy.”

First, here is the Financial Times report carried at CNBC reporting on Goldman’s federal spending gibberish:

Goldman Sees Danger in US Budget Cuts

The Republican plan to slash government spending by $61bn in 2011 could reduce US economic growth by 1.5 to 2 percentage points in the second and third quarters of the year, a Goldman Sachs economist has warned.

The note from Alec Phillips, a forecaster based in Washington, was seized in the ongoing US budget fight by Democrats as validating their argument that the legislation approved by the Republican-led House of Representatives last Saturday would do significant damage to the US recovery.

Chuck Schumer, the Democratic senator from New York, said: “This nonpartisan study proves that the House Republicans’ proposal is a recipe for a double-dip recession. Just as the economy is beginning to pick up a little steam, the Republican budget would snuff out any chance of recovery. This analysis puts a dagger through the heart of their ‘cut-and-grow’ fantasy”.

The Goldman analysis also points out that a potential compromise deal with $25bn in spending reductions this year – a more likely scenario – would lead to a smaller drag on growth of 1 percentage point in the second quarter.

The editorialists at Investors Business Daily smelled a rat — or, actually, dozens of them scurrying through revolving doors (bolds are mine):

… If it were anyone other than Goldman Sachs making the prediction, maybe we’d believe it.

… (Goldman’s assertion) is true only if you buy into the Keynesian premise that a $1 increase in government spending leads to a greater than $1 increase in economic output.

That idea has been disproved and roundly criticized after the Obama administration blithely predicted $2.50 in economic activity for every $1 in added government “stimulus.”

We’ve spent trillions more, but have little in the way of growth or jobs to show for it.

… The revolving door between Goldman and government is well-known. An investigative report last year by CBS News counted “at least four dozen former employees, lobbyists or advisers at the highest reaches of power both in Washington and around the world.”

They include former Treasury Secretary Henry Paulson, who crafted the stimulus plan and Wall Street bailouts; former Democratic House Majority Leader Dick Gephardt; and former SEC head Arthur Levitt, who as of last year was a paid lobbyist for Goldman.

No surprise, then, that Goldman Sachs would see even the modest cuts proposed by the GOP as a danger to the economy. With its shifting business ties to government, the cuts would certainly be a danger to them.

No one on Wall Street did better as a result of the government’s massive, disastrous intervention in the U.S. economy the past two years. Goldman didn’t just see its business grow. It also watched as government regulators selectively let some of its key competitors die.

Exactly. IBD also reminds readers that if $61 billion in spending reductions will really harm the economy, $821 billion in stimulus spending should have caused it to take off like a rocket. Of course, that’s not what has happened.

Also, there has apparently been no word from Goldman as to the potential effect on economic growth of a few more years of trillion-dollar federal deficits followed by $500 billion-plus deficits as far as the eye can see.

The Associated Press’s Aversa tried to sound similar alarms over state and local spending, again without basis. Especially catch the final bolded sentence in the third excerpted paragraph:

Deep spending cuts by state and local governments pose a growing threat to an economy that is already grappling with high unemployment, depressed home prices and the surging cost of oil.

Lawmakers at state capitols and city halls are slashing jobs and programs, arguing that some pain now is better than a lot more later. But the cuts are coming at a price – weaker growth at the national level.

The clearest sign to date was a report Friday on U.S. gross domestic product for the final three months of 2010. The government lowered its growth estimate, pointing to larger-than-expected cuts by state and local governments. The report suggested that worsening state budget problems could hold back the recovery by putting more people out of work and reducing consumer spending.

The report from the Bureau of Economic Analysis “suggested” no such thing. Here’s what it did say:

The small fourth-quarter acceleration in real GDP primarily reflected a sharp downturn in imports, an acceleration in PCE, an upturn in residential fixed investment, and an acceleration in exports that were mostly offset by downturns in private inventory investment and in federal government spending, a deceleration in nonresidential fixed investment, and a downturn in state and local government spending.

A different sentence in the report says that “The downward revision to the percent change in real GDP primarily reflected an upward revision to imports and downward revisions to state and local government spending” — but that’s a comment about the degree of January’s downward revision, not the overall GDP result.

Table 3 at the BEA’s full report shows that compared to the third quarter, on a seasonally adjusted basis, annualized state and local government expenditures fell by $9.1 billion. In a $13.3 trillion economy (in 2005 chained dollars), that isn’t even a rounding error. Aversa’s alarm has no basis in reality.

More importantly, as IBD noted with federal spending in previously unexcerpted text, studies by Harvard economist Robert Barro and Stanford’s John Taylor show that “… more government spending, by taking money out of the private sector, is a loss to the economy and that taking money away from government is a gain.” Sure, it may take a quarter or two for offsetting private sector gains to show up in the GDP numbers. But they will show up — or they will as long as the government doesn’t let the leaden hand of overregulation prevent it from happening.

Goldman and the AP’s Aversa fail to make anything resembling a case that growth will be held back indefinitely as long as spending reductions continue.

Cross-posted at NewsBusters.org.

Rush Calls Out AP For Critiquing Montana Legislators While Ignoring Obama Admin ‘Lawlessness’

Thursday, the Associated Press’s Matt Gouras “reported” (“Tea party vision for Mont. raising concerns”) on legislative proposals in Montana. It got the attention of Rush Limbaugh, who skewered it as only Rush can.

Gouras’s opening paragraphs read like a press release from an opposition party:

With each bill, newly elected tea party lawmakers are offering Montanans a vision of the future.

Their state would be a place where officials can ignore U.S. laws, force FBI agents to get a sheriff’s OK before arresting anyone, ban abortions, limit sex education in schools and create armed citizen militias.

His third paragraph uses the “some people” tactic, which is more often than not AP code for “people I found who agree with me”:

But some residents, Democratic Gov. Brian Schweitzer and even some Republican lawmakers say the bills are making Montana into a laughingstock.

Limbaugh got wind of Gouras’s gunk, and the self-described “America’s anchorman” let it rip, and called out the wire service for selectivity in criticizing compliance with laws and the Constitution (link will go behind subscriber wall in a week; some paragraph breaks added by me; bolds are mine):

You want to hear something hilariously funny? This is from the Associated Press, State-Run out of Montana. Let me give you the headline: “‘Tea Party Vision for Montana Raising Concerns’ — …”

Now, this is not an editorial. It’s supposed to be a news article. And when the AP writes that not everyone is buying their vision, or something, that means they disapprove of it and they manage to find a couple of people to quote who share their disapproval. It means the disapproval starts with AP, their premise and their narrative starts with them, and then they go out and try to find a couple people.

It’s not that people in Montana are raising hell and AP hears about it and says, “Whoa, we got a story.” This is AP creating a story. And what we have here is the Associated Press raging at a bunch of people who are passing laws which would, for example, ignore US laws.

What the hell is going on? We have the president of the United States himself saying, (paraphrasing) “That law doesn’t count anymore, I’m not gonna defend that law, the Defense of Marriage Act.” We have a president of the United States who himself is lawless. We went through this in great detail yesterday. Make no mistake. And it’s not arguable. This is a lawless regime. And so here, the AP in Montana is about to have a conniption fit, they are having a conniption fit because of the Tea Party vision for Montana.

Well, where are you, AP, on the defense of marriage and this regime simply choosing to ignore laws it doesn’t like? How about when a president ignores various federal court rulings? A federal judge has ruled Obamacare unconstitutional. No big deal, we’re gonna keep implementing it. And you’re worried about lawlessness in Montana? We’ve had an administration that’s come out and said, “You know what, this Defense of Marriage Act, it’s been around since the Clinton years, we don’t like it. We’re not gonna defend it anymore.” Lawlessness! The president does not have such authority, and yet the AP wants to tell us how off the tracks and wacko they’re getting in Montana.

… (The AP’s Gouras writes) “Arizona, Missouri and Tennessee are discussing the creation of a joint compact, like a treaty, opposing the 2010 health care law.” It’s already been declared unconstitutional, AP. “Idaho is considering a plan to nullify it, as is Montana.” Why, how radical. All of this is happening within the bounds of the law. They’re passing legislation to do this. They are not unilaterally implementing things, such as our president is doing.

Though there may be an exception out there somewhere, the establishment press on the whole hasn’t even entertained the idea that the Obama administration’s brazen continuance of Obamacare implementation is even the least bit problematic in light of Judge Roger Vinson’s ruling in Florida. Page 75 of that ruling makes it very clear that this is completely contrary to what the judge expects. What about “the declaratory judgment is the functional equivalent of an injunction” don’t they understand?

Outfits like the AP seem to believe that it’s more important to create stories based on their own preconceived notions about those who are opposing the advance of statism than it is to explore the legality of the statists’ actions.

Cross-posted at NewsBusters.org.

Positivity: Pastor of Catholic couple killed by Somali pirates praises their faith

Filed under: Positivity — Tom @ 8:20 am

From Santa Monica, California:

Feb 23, 2011 / 05:51 am

A sailing Catholic couple killed by Somali pirates during their global cruise to distribute Bibles was a “wonderful part” of a California Catholic parish, the couple’s pastor said.

Retirees Scott and Jean Adam of Marina del Rey, Calif. had decided to make a difference in the world by bringing Bibles to the “far-flung corners of the earth,” St. Monica Catholic Community pastor Msgr. Lloyd Torgerson said in a Feb. 22 interview.

“Our community believes in helping to form loving disciples who will transform this world,” he explained. Sharing Bibles was the Adams’ way of doing that during the sailing trip they began in 2004.

Their 58-foot sloop, the Quest, had separated from the Blue Water Rally cruise fleet traveling from Australia to the Mediterranean when they were hijacked by 19 Somali pirates in the northwest part of the Indian Ocean off the coast of Oman. The pirates captured the Adams and their friends Phyllis Macay and Bob Riggle of Seattle.

Four U.S. naval warships were tailing the captured vessel and Navy officials were engaged in negotiations with two of the pirates on board one of the American naval ships on the morning of Feb. 22.

But those talks were cut short by the sound of gunfire coming from the Quest, which Navy forces quickly boarded and captured. However, they found all four Americans had been wounded fatally.

Msgr. Torgerson said the Adams’ deaths made him feel “great great, loss” and “great pain.”

“They were faith-filled people, people of the Scripture, people of the Eucharist. They were great people of our community,” he told CNA.

Jean, who was a retired dentist and a mother of two, sang in the church choir.

The priest cited St. Paul’s words in the daily readings about receiving the “unfaded crown of glory.”

“They won the crown. I believe with all my heart they are with God today,” he continued, calling eternal life “the gift and blessing of faithful people.” …

Go here for the rest of the story.

Media stories report the following about the couple:

USA Today, Feb. 22 — “Their sailing adventure was a result of Scott Adam’s desire to meld his two callings, the sea and the Lord, Peace said. Scott Adam was an Episcopalian but worshiped at St. Monica’s Catholic Church, where his wife was a member of the choir, when they were onshore. They collected their mail at Marina del Rey on the west side of Los Angeles.”

Christian Post, Feb. 23 — “As a devout Episcopalian, Adam had initially considered becoming an ordained minister or a seminarian. However, Adam never finished his PhD. Adam eventually drifted from his study and decided to leave Fuller. After selling his home, he began living his dream.”

Saint Monica’s home page is here.