July 31, 2011

Debt-Ceiling Deal Allegedly Reached (See Internal Update: Unacceptable)

Filed under: Economy,Taxes & Government — Tom @ 9:09 pm

For reasons explained previously, mainly that so-called spending “cuts” will only be reductions from an inflated CBO baseline, that they aren’t actual reductions in year-over-year spending, and that they are more than likely to be back-loaded with minimal immediate impact, I’m not pleased with what has transpired.

I also question the very existence of an “agreement,” given that our not-credible president is the one who has announced it in “a surprise appearance,” and may be creating artificial last-minute pressure by doing so. How many times did we hear that Boehner and Obama were “close” from the establishment press 1-2 weeks ago, when it was NEVER the case? Update, Aug. 1, 2:15 p.m.: Told ya “Speaker John Boehner (R-Ohio) will need Democratic votes to clear the bill through the lower chamber. How many remains unclear.”

Here’s the situation as explained at the USA Today blog by David Jackson:
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AP’s Hurst Implies Default Would Happen on Aug. 2 Without Debt-Ceiling Increase, Claims Past Debt Limit Raises ‘Routine’

In his roughly 10 a.m. report this morning (HT to a NewsBusters emailer), the Associated Press’s Steven R. Hurst opened by saying that “The top Republican in the Senate said Congress and the White House were very close to a deal on raising the limit on U.S. borrowing that would avert an unprecedented default on America’s debt, ending one of the nastiest partisan fights in recent memory.”

In his second sentence, he wrote, based on a statement from Republican Senate Majority Leader Mitch McConnell, that an agreement would “likely extend U.S. borrowing authority, which expires on Tuesday, beyond the 2012 presidential and congressional elections,” giving casual readers the impression that default will occur if the borrowing authority ends.

That simply isn’t so. Who says so? Moody’s says so, as carried in a live blog item at the Wall Street Journal on Tuesday (HT Verum Serum):

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IBD on GDP Inadvertently Explains the G-A-P in Tax Collections

Filed under: Economy,Taxes & Government — Tom @ 11:35 am

PostRecessionReaganVsObama8Qtrs0711Why isn’t the tax money rolling in like it should in a recovery (even in the current pathetic imitation of one)?

The answer to that question can be inferred from a couple of points made in an Investors Business Daily editorial on Friday (bolds are mine):

… all told, from the end of 2008 to this year, the government estimates U.S. GDP was $314 billion less than first estimated, not including this year’s revisions.

Digging down into the data shows an even gloomier picture. Per capita GDP, the ultimate measure of both well-being and productivity for a nation, today remains lower in real terms than it was in 2007.

In the second quarter of this year, average annual real output per person stood at $42,499 — still 3.3% below its peak of $43,956 in the fourth quarter of 2007.

Looked at yet another way, the Commerce Department also estimates “potential” GDP — the size the economy would be with all resources used efficiently.

In the second quarter of this year, real GDP stood at a real annual rate of $13.33 trillion. But our potential, the government says, is $14.25 trillion. So we’re missing $920 billion in GDP, and Obama’s first term isn’t over.

Call this lost potential the Obamanomics tax.

If Barack Obama and the Democrats really wanted more tax revenue, they would have chosen economic policies which would have realized most of the potential identified above (which in my opinion is understated, because it probably doesn’t take into account business innovations and expansions which didn’t happen because of regulatory overreach, tax disincentives, and the looming Obamacare nightmare). The $920 billion gap in real GDP IDB noted is expressed in 2005 dollars, so it’s really about $1 trillion in today’s dollars. If we were achieving that, extra collections to Uncle Sam could be rolling in at the rate of about $300 billion a year, which would put us in the neighborhood of where tax collections were in 2007 and 2008.

Looked at another way using the graph at the top right comparing the Reagan Era’s Recovery to Obama’s, the economy could be (really should be) about 8% bigger today (12.9% vs. 5.0%). If so, GDP in today’s dollars would be about $1.2 trillion higher, and potential extra tax money rolling in to Uncle Sam would be about $350 billion greater.

But that’s not what Obama and Democrats really want. Oh sure, they’d like the money, but what it’s really all about is punishment, redistribution, and perverse retribution against “the wealthy” (except, of course, cronies who know how to play the favors game). If it weren’t, they’d have long since chosen policies which have historically increased economic growth and taxes coming into the government at the same time. But they won’t.

Red States, Including the ‘Newly-Reds,’ Excel at Job Growth

Filed under: Economy,Taxes & Government — Tom @ 7:59 am

But for them, the U.S. economy might already be in another recession.

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Note: This column went up at Pajamas Media and was teased here at BizzyBlog on Friday.

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Now that state employment information for the first half of 2011 is available, one can’t help but notice which states are up, as well as a particularly telling example of one which is down.

Though admittedly the comparison isn’t apples to apples, it’s worth noting that of the 757,000 seasonally adjusted jobs added in the overall economy this year from January through June, the ten states with the highest percentage employment growth were responsible for well over half, or 390,000 of them, even though they only have about 20% of the nation’s population:

SeasonallyAdjStateJobGrowthTop10First6Mos2011

What’s more, as the economy by all accounts decelerated in May and June, the ten states above stayed relatively strong. While the country as a whole gained only 43,000 seasonally adjusted jobs in those two months, they added over 90,000. Democrats who accuse Republicans of wanting the economy to tank, please note: If it weren’t for these ten states, we might already be in the midst of another recession instead of possibly heading towards one, as Goldman Sachs and others have recently asserted.

Six of the ten (Nebraska, North Dakota, Oklahoma, Texas, Utah, and Wyoming) have been conservative strongholds for decades. Montana, though its governor and two senators are currently Democrats, has been a red state in all but one presidential election since 1972. The final three highlighted above — Michigan, Ohio, and Wisconsin — were previously governed by Democrats who were replaced with GOP governors this year. All three are in the early stages of what may be remarkable turnarounds. I call them “the newly-reds.”

Led by Governor John Kasich, Ohio’s January-June seasonally adjusted jobs pickup is the Buckeye State’s best performance since 1994. Not coincidentally, that’s about when then-Governor George Voinovich stopped being even sort of conservative. Regardless of the party in charge, Ohio was governed like a blue state until Kasich came along. Even more impressive, in terms of what has actually occurred (i.e., the not seasonally adjusted figures), the state has added just over 200,000 private-sector jobs in the past five months, the best February-June total since 1999, when the national economy, largely due to Kasich’s previous work on the federal budget as a congressman, was far stronger.

In March, Kasich and the General Assembly tentatively won a bitter battle with the state’s public-sector unions and passed “SB5.” As I noted several weeks ago, SB5 prohibits public employee strikes, limits the subjects of collective bargaining, requires public employees to pay 15% of their health insurance costs, and prohibits forced union “contributions” by nonunion public workers. In June, the Governor signed a two-year budget which closed a projected $8 billion deficit dumped on the state by predecessor Ted Strickland without raising taxes and while keeping all-funds spending virtually flat. The Buckeye State reaped an almost immediate reward: Standard & Poor’s, which had downgraded the state’s debt rating just as Strickland departed in January, revised it to “stable” shortly after the budget’s passage.

The SB5 victory just noted is tentative because opponents have succeeded in getting a repeal initiative on the November ballot. It may not be an exaggeration to say that the state’s nascent recovery hangs in the balance.

Michigan’s performance is a bit less impressive, principally because it still has so far to go. Wolverine State employment contracted by over 600,000 on Democratic Governor Jennifer Granholm’s watch, so one shouldn’t be too impressed with the improvements achieved just yet. Nevertheless, Republican Rick Snyder, who succeeded Granholm, seems to have put a foundation in place for continued employment progress. In stark contrast to recent contentious budget battles, the state created an atmosphere of relative certainty by passing a budget four months ahead of time. Most notably, it features “a big reduction in business taxes,” which consumers end up paying anyway, and “an almost equal increase in income taxes.”

Then there’s Wisconsin. Has any state’s governor ever been vilified as severely and viciously as Scott Walker during his battle with the state’s public-sector unions earlier this year? Walker won’t get a thank-you card from them any time soon, but he should, because the alternative was massive government layoffs, most of which, as the Weekly Standard’s John McCormack has noted, have been avoided:

Walker’s budget repair bill, known as Act 10, is working just as he promised. To make up for a $2.8 billion deficit without raising taxes, state aid to school districts (the largest budget line) was reduced by $830 million. Act 10, Walker said, would give districts “the tools” needed to make up for the lost money as fairly as possible.

… Now that the law is in effect, where are the horror stories of massive layoffs and schools shutting down? They don’t exist​—​except in a couple of districts where collective bargaining agreements, inked before the budget repair bill was introduced, remain in effect.

McCormack goes on to explain that schools in Milwaukee and Kenosha have each laid off hundreds of teachers because those districts’ unions “cleverly” concluded contracts which avoided the employee healthcare and pension contributions contained in Walker’s budget repair bill. Teachers who have lost their jobs might be questioning union leaders’ “wisdom.” Meanwhile, the state’s employment pickup this year is more than triple that seen under Democrat Jim Doyle during all of 2010.

As to poorly performing states, the booby prize goes to Connecticut, which after eking out small early gains, has lost 9,000 seasonally adjusted jobs in the past two months. Only a fool would believe that this result has nothing to do with Democratic Governor Dannel Malloy’s poor public policy choices since he took office this year.

Malloy pushed billions of dollars of tax increases through the Nutmeg State’s legislature with promises that he would rein in spending in negotiations with the state’s unions. Fat chance of that. As of when this column was written, the unions, in the midst of a 20-year contract expiring in 2017 (you read that right), still hadn’t budged, even though because of their intransigence Malloy had to lay off over 6,500 state employees earlier this month.

Imagine that. A Democratic Party politician promises he’ll rein in spending after he gets his “needed” tax increases, and then fails in his followthrough. We’ve heard that tune far too many times, including now from President Obama and Democrats in Washington. Far too often in the past, spendaholic Dems have been accompanied off the cliff by go-along, get-along Republicans. Governors Kasich, Snyder, and especially Walker have shown that the “newly-reds” have a better way.

Positivity: World Trade Center cross still consoles victims, priest says

Filed under: Positivity — Tom @ 7:00 am

From New York City:

Jul 29, 2011 / 10:55 am

The World Trade Center cross is still a “sign of comfort” to many people, says the Franciscan priest who describes himself as its “unofficial guardian.”

On Sept. 13, 2001 construction worker Frank Silecchia found a 20-foot, cross-shaped T-beam from World Trade Center 1 standing almost upright in the wreckage of World Trade Center 6.

Fr. Brian Jordan, O.F.M., blessed the cross later that year on Oct. 4 and promised that it would be preserved.

Now almost 10 years after the September 11, 2001 terrorist attacks, the priest again blessed the cross in a July 23 ceremony before its relocation to the 9/11 Memorial and Museum.

“It’s a sign of consolation and comfort for those who lost loved ones,” Fr. Jordan told CNA on July 28. “For the dead, the cross signifies the death of Jesus Christ. It also gave hope and support to the living, especially the rescue and recovery workers, the firefighters, polices officers, construction workers and many others.”

The Franciscan priest, who is in residence at New York City’s Holy Name Parish, played his own role in responding to the destruction which killed thousands. He ministered among construction workers, worked with family members and uniformed service members, and blessed “many bodies and body parts.”

“We saw evil at its worst, but goodness at its best,” Fr. Jordan said. “The goodness was that Americans came together in those weeks. New York City came together in those weeks. People of all ethnic and religious groups and economic backgrounds came together. I was very proud of that.”

In the months afterward, the cross “dramatically” affected others, both Christians and non-Christians.

He particularly recalled a Mother’s Day Mass in 2002, when mothers who lost children or grandchildren and their husbands all gathered at the cross.

Two groups of U.S. Army special forces also attended, without telling anyone else in advance.

“One group had just returned from Afghanistan, while the other was preparing to go,” the priest reported.

“At the kiss of peace, to see these mothers embrace these young men who came from war, who were about to go, there wasn’t a dry eye in the house,” Fr. Jordan said. “I don’t care if you are John Wayne. Anyone who has any heart or emotion in them will start crying when they see the mothers who lost their children embracing soldiers who are going to war. …

Go here for the rest of the story.