The story is about rising unemployment, but there’s important information buried further down:
Job losses overshadow signs of recovery
Weak employment market likely to outlast pickup in spending
John W. SchoenNEW YORK— There were some hopeful signs among the blizzard of economic data released this week. But the recovery from the worst downturn in decades remains hostage to one of the ugliest numbers on the list: the unemployment rate.
“The hole that has been blown in the labor market is absolutely enormous,” said Heidi Shierholz, an economist with the Economic Policy Institute.
That hole continues to widen. On Thursday, the Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 551,000 — up from 534,000 in the previous week and more than Wall Street economists expected.
Further down:
The bad news on the job front has been partially offset by other signs that the economy may be on the mend. A private trade group said Thursday that manufacturing expanded for the second straight month in September, but at a slightly slower pace than in August and not as robustly as economists predicted. Construction spending also rose a bit in August.
And consumer spending, which accounts for 70 percent of total economic activity, jumped in August by the largest amount in nearly eight years, even though personal incomes continued to lag. Housing sales have also perked up this summer; pending sales of existing homes rose 6.4 percent in August.
Are you sure that’s good news?
But consumer spending and home buying have gotten a big boost from government programs like the hugely popular Cash for Clunkers car buying subsidies, which has expired, and the $8,000 first-time home buyer tax credit, which expires at the end of next month.
The story continued to note that both Ford and Chrtsler have seen sales drop once Cash for Clunkers expired. As the $8,000 “first-time¹” homebuyer tax credit expired, the normal expectation would be that home sales would drop as well.
President Obama has argued that without the 2009 economic stimulus bill, our economy would have been in even worse shape. Well, there’s no way to know that or prove that, but he’s the President, so his opinion counts for something. But the article I linked cited increasing job losses, and the Department of Labor is scheduled to release the September unemployment figures; odds are that they’ll be no better than August’s 9.7%, and possibly worse.
So, if the President believes that the American Recovery and Reinvestment Act of 2009 helped the economy — something he said again, just today — but knows that two major indicators, home and automobile sales, were “stimulated” by specific, expiring incentives, does that mean he’s going to be pushed to ask for yet another economic stimulus bill, especially if the September unemployment figures come in higher than August’s?
Think about it. President Obama’s porkulus added $787 billion to our already exploding deficit. And while there are still projects proceeding which were funded by unchecked borrowing the stimulus bill, two popular, successful and measurable programs from it have either expired already (C4C) or will expire soon.
More importantly, those two programs are designed to appeal to the middle class, to people who have kept their jobs. Cash for Clunkers was popular — though I’d suggest that some people will get a nasty surprise come tax time, since the $3,500 to $4,500 “incentive” constitutes taxable income in some states — but it was available only to people who could consider and buy a new car. That means people who still had jobs, and people whose credit was still in decent shape. The people who can buy a house to qualify for the first-time homebuyers tax credit have to be in good shape: they have to have jobs and have to have good enough credit to buy a house in the first place.² Poor people, people who cannot seriously consider buying a new car or a house needn’t bother to apply.
I called C4C welfare for the well off, and that’s exactly what it was. The homebuyers tax credit is the same thing, more borrowed money that will (supposedly) have to be repaid by all of the taxpayers — including those too poor to have benefited from those programs — to give to people who didn’t need the help, though I’m sure they appreciated it, thank you very much! But these reasonably well off (though not wealthy) people are also voters the President needs in 2012. These are precisely the people who are most likely to be turned off by the huge deficits that the President’s plans have generated, and the people most likely to be disdainful of the welfare class; what better way to win them over than to make them part of the welfare class?
There’s only one “logical” response, from the perspective of the President and the Democrats. As a couple of popular porkulus plan programs are expiring, it becomes obvious that what is needed is “son of stimulus,” yet another big government giveaway, something else to buy votes and increase government spending and entice more people to suckle at the government teat. What’s that you say? They’ll have to borrow another half-trillion or so? Not to worry, it’s only (other people’s) money!
What? We’re expected to actually pay it back eventually? Sometimes I wonder if that’s ever a consideration by the government, regardless of which party controls it.
________________________
¹ – It’s called a first-time homebuyer’s credit, but it isn’t limited to people who have never bought a house previously. A “first-time home buyer” is someone who hasn’t owned a principal residence for three years before buying a house.
² – The up to $8,000 first-time homebuyer tax credit is income-limited; the full benefit is restricted to singles who earn no more than $75,000 a year, and married couples earning no more than $150,000, but reduced credits are available to those earning more.
Because the first one worked so well?
Dana, all I hear from people like yourself is criticism of the President’s recovery programs, but no compliments for what has worked, and no suggestions about what would be better.
At least the stock market has rebounded significantly, home sales appear to have bottomed, and lending is increasing, while the cost of living has actually decreased.
You seem to want to continue the old policies that put us into this mess to begin with. I would label that as suicidal.
According to Bush Secretary of the Treasury Hank Paulson, September 2008 this nation was less than one day from a total meltdown of our financial institutions and Great Depression version 2.0. You folks have not yet seemed to comprehend this fact.
The Obama team has found themselves in unknown territory, as everyone should agree, so they have and will undoubtedly make some mistakes.
And now we learn that Wall Street is going back to their old ways with credit default swaps and the like, a cultural trait based on greed that has not yet been changed. We are not out of the woods yet!
According to Bush Secretary of the Treasury Hank Paulson, September 2008 this nation was less than one day from a total meltdown of our financial institutions and Great Depression version 2.0. You folks have not yet seemed to comprehend this fact.
And that created TARP.
But what good would a second stimulus bill do when all the $$$’s from the first one is slated to be spent nearer the 2010 election, for re-election purposes. Why do we need another bill to borrow money that isn’t there to borrow? If the Stimulus was needed to keep Unemployment at 8% when it’s now 10%, what’s the second stimulus bill going to do? Send it 12%?
There was a list circulating from some liberal think-tank about what economists thought would be the most effective stimuli – that is, what government programs would create the highest return on investment. The top three or four were all subsidies aimed at the poor – food stamps, boosting the EITC, etc. I don’t believe any of these were done, and instead interesting-sounding but poorly conceived programs like C4C and the homebuyer credit were passed in their stead.
Dana’s right that we have to worry about the deficit, but the theory is that if you apply the right stimuli you get all that money back and then some, kinda like a business investment. We didn’t apply the right stimuli, and now we’re suffering for it.
Jeff, good point.
It comes down to whether to stimulate tops down or bottoms up, i.e., supply side or demand side.
The tax cut for the under $250K earners and infrastructure projects that create jobs are essentially bottoms up, demand side, as are C4C, mortgage restructuring, and aid to states. The bailouts were tops down, supply side, and involved much, much more money. Except for preventing spreading melt-downs, these appear to be benefiting mainly the already wealthy and certain stockholders.
Your idea of direct subsidies aimed at the poor were not done, you are correct, and may have been politically impossible, due to fierce conservative opposition from both parties.
We have not yet come together as a nation, which probably won’t happen until we have soup lines and rioting in the streets. These hard times have hardly ameliorated the polarization due mainly to the right wing ideological absolutists.
Perry wrote:
The September unemployment figures came out earlier today: greater than projected job losses, and the unemployment rate up another tenth, to 9.8%. President Obama told us that, if we would just pass his stimulus plan, unemployment wouldn’t go above 8%. We did pass his stimulus bill, and unemployment is at 9.8%.
Now, we can’t know what would have happened to the unemployment rate or the economy if the stimulus bill had not been passed, but it seems to me that it wouldn’t have been much worse. The jobs Mr Obama promised to create or keep from being lost never materialized. His economic forecasts were based on an unemployment rate of 8%, so they’re pretty much worthless now, too.
Again, that’s wholly unknowable and certainly unprovable. Even if we assume that Mr Paulson was right, the 2008 TARP bailout was passed under the Bush Administration, not under President Obama; you can’t give Mr Obama the credit for that.
Face facts: the stimulus bill has not done what its proponents claimed it would do. All they have left is claiming that things would have been worse without it, and they can’t prove that.
In this comment, Perry twice makes a typographical/ phraseological error which actually explains it all. Rather than saying “bottom up” stimulation, he said “bottoms up,” which traditionally refers to finishing off your alcoholic drink!
That comparison to the stimulus plan is quite apt; that we can expect the inevitable hangover is next.
OK Dana, you got me on the “bottoms up” thing.
But look here what you said: “Face facts: the stimulus bill has not done what its proponents claimed it would do. All they have left is claiming that things would have been worse without it, and they can’t prove that.”
You are correct, but I will continue to accuse you of Monday morning quarterbacking. Even though I follow the economy pretty closely, I have yet to come across an expert who has any idea more than a guess about what we should be doing. We are far, far from out of the woods; hopefully we are not making the situation worse. In my view, the American people must be prepared for hardship for the long haul. We are going to have to help each other get through this.
Tackling the health care cost escalation problem is wise.
Investment in alternative fuel systems and technology is wise.
Putting people to work on infrastructure improvements is wise.
More bottom up stimulus of the poor and middle classes is wise.
Reigning in the continuing excesses in risk on Wall Street is wise.
What are your suggestions?
[...] asked, on October the oneth, if we would see the “son of stimulus” bill. President Obama has argued that without the 2009 economic stimulus bill, our economy would have [...]