Re-arranging the Deck Chairs Is Not a Net Positive

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So here we are. It is the middle of December 2011. The US (and global) economies still suck. The Federal Reserve continues to wring its hands and do pretty much nothing about maximizing employment (which means they are not doing their jobs).

These past few weeks, I've seen a number of articles in various news sites about various states offering "tax incentives" to businesses trying to get them to stay where they are or to move to another state. One of the first was when I saw reports in early October that the governor of the state in which I reside claimed that the Chicago Mercantile Exchange could be moving to Florida. Then at the end of November, I noticed that Cincinnati and Ohio had "lost" Chiquita Brands to North Carolina:

Chiquita Brands International Inc. decided to leave Cincinnati for many reasons, but the biggest one is undeniable: Money.

Lured by the promise of big savings, better air service to Europe and Latin America and a more diverse workforce, Chiquita announced Tuesday that it plans to leave Cincinnati, site of its home office of 24 years, for Charlotte, N.C.

North Carolina offered a package of grants and tax incentives potentially worth $22.7 million over 11 years, enticing the relocation of the world's largest banana seller.

The counter offer from the state of Ohio and Cincinnati to keep the company downtown amounted to $6 million to $6.5 million, Chiquita chairman and CEO Fernando Aguirre told The Enquirer late Tuesday.

A couple of days later, I see where Ohio, having offered a fraction of what North Carolina had offered for Chiquita had turned around and offered Sears hundreds of millions to move from Chicago to Columbus. At the end of the article on the Sears offer, I found this telling little nugget of information:

The largest incentive package in Cincinnati - a 2003 deal worth up to $52 million to keep Convergys Corp. downtown - was hotly debated for months before being approved. The deal kept Convergys downtown, but the company hasn't grown here, and instead has cut its city workforce from 1,500 to 1,000.

Tax incentives are a quick, short-term strategy to boost job numbers, but they don't always work in the long-term, said Wendy Patton, a former Ohio Department of Development official.

Just last week (December 7), the NY Times had an article on Fortune 500 companies being able to avoid paying any state taxes for years at a time, no matter how profitable they might be:

As states have struggled to balance their budgets by cutting services, laying off workers and raising taxes, a study to be released on Wednesday suggests that many profitable Fortune 500 companies have not been paying as much in state corporate income taxes as the average levied on American companies, with some big firms paying none at all in recent years.

A few companies, including DuPont, reported paying no state corporate income taxes from 2008 to 2010 even as they reported profits, according to the study, which was conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, nonprofit research organizations in Washington that advocate a more progressive tax code. (A spokeswoman for DuPont said that she had not seen the study, but that “DuPont complies with all tax laws and regulations” wherever it operates.)

...snip...

To gauge how much Fortune 500 companies are paying in corporate income taxes, the study looked at the 265 of them that are both profitable and disclose their state tax payments. It found that 68 reported paying no state corporate taxes in at least one year between 2008 and 2010. All together, the study found that the companies reported $1.33 trillion in domestic profits from 2008 to 2010, but paid states only about half of what they would have if they had paid at the average corporate income tax rate of all states — reducing their state taxes by some $42.7 billion.

Today, the NY Times had a related article on the battle between states for corporate business:

As the unemployment crisis grinds on, states are trying to both lure and retain businesses by offering tax breaks, grants, cheap loans — just about anything (short of candy and foot massages) they can think of. But how many jobs do these expensive incentives actually create?

And are the jobs any good?

Economic development programs cost states and cities billions of dollars a year, but many programs require little if any job creation, fewer than half call for wage standards, and fewer than a quarter require the companies to provide health care for their workers, according to a study of program requirements scheduled to be released Wednesday by Good Jobs First, a nonprofit research organization that tracks corporate subsidies. Some merely require companies to invest in plants or new equipment, which could actually enable them to reduce their head counts.

In doing some quick checks of der Google for this post, I noticed that Indiana had also made a play for the Chicago Mercantile Exchange. Fortunately for the good folks of Indiana, Ohio, and Florida, the Illinois legislature has bowed to the corporate blackmail:

While a tax-break package aimed at keeping Sears Holdings Corp. and Chicago's financial exchanges from exiting the state cleared the General Assembly on Tuesday, Illinois' business tax policies will continue to be a hot-button issue in the coming year.

Lawmakers from both sides of the aisle said they expect the parade of companies seeking special relief to continue, creating pressure to further examine how the state taxes business.

At this point in our national economic crisis the image that keeps coming to mind with all of these tax incentives for companies to stay or go is so much re-arranging of the deck chairs. These jobs are not net new jobs for the nation and wind up costing jobs IMNSVHO because of the lost jobs and services in both the losing state and gaining state. The losing state winds up offering larger incentives to try to save jobs and for the folks in the losing state who have lost their jobs, here's the struggle to make ends meet with unemployment so more bankruptcies and foreclosures. For the gaining states, there are all the costs associated in providing the sweetheart deals to the corporations to get them to move means non-reimbursed expenditures for infra-structure and more wear and tear on existing systems. If the state manages to "save" the jobs by bowing to the blackmail, it is that much less revenue coming in that cannot be recovered. Lose-lose-lose for all but a few folks in corporate management (Bonuses!)

And because I can:

Sorry, but these numbers do not add up

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So, you may have noticed that the November jobs report from the Bureau of Labor Statistics is out today (via CNN):

Hiring accelerated in November, and the unemployment rate unexpectedly plummeted to its lowest rate in nearly three years.

Employers added 120,000 jobs in November, the Labor Department reported Friday, marking a pick-up in hiring from October.

Meanwhile, the unemployment rate fell to 8.6%, the lowest rate since March 2009 and a significant decline from 9% just a month before.

Sounds great, right? Well not so fast there Bunky (from the NY Times):

Still, serious concerns remain about the economy’s ability to weather a potential meltdown in Europe.

American governments at all levels continued to bleed workers, for one. And the decline in the unemployment rate had a down side: It fell partly because more workers got jobs, but also because about 315,000 workers dropped out of the labor force. That left the share of Americans actively participating in the work force at a historically depressed 64 percent, down from 64.2 percent in October.

Even excluding these hundreds of thousands of dropouts, the country still had a backlog of more than 13 million unemployed workers, whose spells of unemployment averaged an all-time high of 40.9 weeks.

Think about that for a moment. There were 120K new jobs for November while 315K left the workforce because they had given up on finding a job. It takes nearly 100K new jobs each month just to maintain the status quo. 120K new jobs for the month, while positive, is still a pittance of what is needed. And more than 2 1/2 times the numbers of folks who got jobs left the workforce discouraged.

MSNBC notes that even the "good news" needs to be tempered as:

The average number of hours worked remained flat in November, while wages fell by 0.1 percent.

More than half the new jobs November were added by retailers, restaurants and bars. Retailers added 50,000 jobs, the sector's biggest gain since April. Restaurants and bars hired 33,000 new workers. The health care industry added 17,000.

"The quality of jobs is not as great as you would like to see," said Mark Vitner, a senior economist at Wells Fargo Securities. "A lot of the jobs were probably part-time positions and that is one of the reasons average hourly earnings fell."

Besides the fall in the official unemployment rate from 9% to 8.6%, the U6 number as reported has also fallen for November from October's 16.2 to November's 15.6. I'm not at all sure how this can be unless the U6 has been undercounting folks (which is my supposition). Without having been undercounting people for both the U3 (official unemployment number) and U6 (un and underemployment along with 'marginally attached' i.e., those who have given up looking), it just does not seem like both U3 and U6 could fall for November when so many have left the workforce.

Wednesday (November 30), the LA Times had this opinion piece that seems to have a clearer perspective than the official number.

Yesterday's weekly Initial Unemployment Claims report was back above 400K.

While my prediction of a double-dip recession by the end of the year (made back in June) may not happen quite as soon as I thought, the overall economy is still struggling and there are still millions of people wanting to work, without work available.

Meanwhile, Newt Gingrich apparently wants to make children the primary wage earners for their families.

And because I can:

Corruption or Incompetence; the Economic Effects Seem the Same

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One of the on-going arguments across the blogosphere and even the entire world is whether the economic problems of the last ten years are more related to incompetence or basic corruption. I must say, just the last week has offered plenty of evidence for both views. For example, we had this article from Bloomberg yesterday (Tuesday, November 29) about how then Treasury Secretary Hank Paulson met with his hedge fund buddies and gave them the first class insider information on his plans to place Fannie Mae and Freddie Mac into "conservatorship."

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information -- to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

...snip...

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

...snip...

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals -- and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.

“You just never ever do that as a government regulator -- transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

So, apparently what Paulson did was not illegal, yet there were and are no controls on Paulson or anyone else receiving this information. But it does smell of corruption. Or maybe Paulson was so incompetent as to believe that he was just sharing gossip with his friends that would harm no one.

Things to not be thankful for

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I, like so many of us, have much to be thankful for on this Thanksgiving 2011. I have the love of my family, even when we may not see each other for years at a time. I have my friends from all the times of my life, both "real" time and digital.

But for all the things we have to be thankful for, there are an equal number or more of things for which we cannot be thankful. Or at least, I cannot be thankful.

For example, while I can be thankful that the EPA may be willing to take a stand on fracking, I cannot be thankful that there will probably be gigantic loopholes in the rules that will mostly render them useless.

I can be thankful for FDL members helping out with #OccupySupply as well as being thankful for a District Attorney who knows how wasteful it is to arrest people for exercising their first amendment rights while not being at all thankful that we have elected officials so thin skinned as to demand an apology from a teenager speaking her mind.

I can be thankful for the sacrifice of a Bradley Manning while wondering how many folks who do not support Manning are in full support of people stealing emails from scientists because the scientists believe humans are causing climate change.

I can be thankful that US officials condemn Egypt for using excessive violence on protestors in Tahrir Square while wondering about the deafening silence from so many officials about the excessive force used to evict protestors in the US.

I can be thankful for the failure of the "super" committee to reach an agreement to further eviscerate the social safety net while being not at all thankful that so many of the Beltway Village Idiots Pundits and Politicians seem to think that people need the safety net because of some personal failings.

I can be thankful that some news outlets finally are reporting on the millions of working poor along with the millions of long term un and underemployed even while I try to not be thankful that Wall St wannabe MOTUs are joining the ranks as well. (It is difficult sometimes to not be as ungracious to them as they have been to us although I do try to keep from sending out to many negative thoughts as my karma does not need the bad reflections)

So yes, I am thankful for much this year as I am most every year at Thanksgiving. But there is as much to be unthankful for as there is to be thankful.

And because I can:

Occupy: Is this a wise use of resources?

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I, as have many of us, have been following the various #Occupy efforts with some interest. News coverage asking the plaintive whine "but what do they WANT?" combined with all the various attempts to make it all just a bunch of DFHs, druggies, and so on. (Rather defeated when even the Washington Post has articles like yesterday (Wednesday, November 16) where they lede with an admission that maybe the #Occupy folks did have some points in mind after all):

The movement began as a protest of major economic and political issues, but lately the most divisive issue has become the protests themselves. The Occupy Wall Street encampments that formed across the country to spotlight crimes committed on Wall Street have become rife with problems of their own. There are sanitation hazards and drug overdoses, even occasional deaths and sexual assaults.

So, in this one article, the Post manages to paint the original effort as valid but now has lost its way. In the overall online world there is an oft seen type of commenter known as a Concern Troll. That quoted paragraph from the Post seems to fit the definition to a tee.

Let's examine this a bit though. One of the themes of people like Mayor Bloomberg and Governor Cuomo as well as many other mayors and governors around the country is how things are so bad economically that the states must cut back in so many services, laying off teachers, first responders, cutting Medicaid eligibility, rolling back unemployment benefits, and generally destroying both the social safety net and wages and benefits for state workers. Yet here it is, New York City can incur millions of dollars in overtime costs going after unarmed, mostly peaceful protestors (according to this from WNYC it was over $5M by late October), yet city agencies are scrambling for funds:

The council’s concern over the issue comes as city agencies are scrambling to find ways to cut 2 percent of their current fiscal year budget and six percent in the next fiscal year. Those rollbacks are expected to help the city save $2 billion dollars overall.

As of this past Monday, Oakland had spent $2.4M dealing with Occupy Oakland and Portland, OR had spent $450K just for this past weekend's activities. Cincinnati has spent $128K in overtime. Jon Walker at FDL Action also asked yesterday where the money is coming from for these police actions.

You know how bad you think things are? They're worse than that.

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I was doing my normal review of news web sites this morning when I came across this headline at the Washington Post:

The median U.S. wage in 2010 was just $26,363

At first I was shocked by this but then, not so much. David Dayen had this post at FDL News back in September

There were a couple other pieces of big news from the release of Census data. First, real median household income declined in 2010 by 2.3%. The average household now makes $49,445 a year.

My bold. If you think about it, with the rise of multi-person earners in households, the two figures are not at all incompatible. Nevertheless, it is still a concern It reinforces the message being sent by the folks at the various #Occupy efforts around the country.

This post from NASDAQ.com points out some of the aspects of this:

Though the average wage of a single earner stood at $39,959.30 per year, that number was skewed by those at the very top of the survey - the 93,725 earners who took home more than $1 million annually. That top sliver - a fraction of a fraction of the top 1 percent - collectively took home $224.6 billion , or about $2.4 million per top earner.

...snip...

When one end or the other of a set becomes skewed, averages become extremely misleading. The $40,000-per-year figure seems reasonable until you realize that just over 66 percent of all workers come in under that number. As the SSA states, "by definition, 50 percent of wage earners had net compensation less than or equal to the median wage."

In more prosperous times, it might have been safe to assume that the average 4-person household contained two wage earners, but with U-6 unemployment at a seasonally adjusted rate of 16.5 percent in September, that's far from certain. It looks like half of all American families are a single layoff away from living in poverty.

n the meantime, the major banks earnings are boosted by an accounting quirk called the debt value adjustment, which means that their earnings rise if their creditors perceive their debt as riskier, and thus less valuable, TheStreet reports.

When two facts like these are set against each other, is it any wonder that the occupations in Zuccotti Park, Dewey Square and Grant Park continue to gather momentum?

According to this wiki, the 2011 poverty line for a single person is $10, 890 while for a family of four it is $22,350. In this post from last December, I did a "what-if" based on one person working a full-time, minimum wage job. Obviously, there are millions of people not even close to working a full time, minimum wage job.

This Google Docs Spreadsheet breaks out the income/population spread in $5K increments. This article from The Atlantic offers some perspective on the various group sizes.

Yeah, I'm part of the 99%. Why aren't you?

And because I can:

Only MOTUs and Banksters get TARPs.

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So there I was this morning, having completed my daily check for jobs in my chosen field of Software Quality Assurance and Testing (I do wish it would take longer than five minutes as that would mean there are actually some improvements in the economy but such is life), when I reached the NY Times and saw this article with the headline from Mayor Bloomberg that "‘Tent City’ Goes Beyond Free Speech":

“The Constitution doesn’t protect tents,” he said at a news conference in Queens. “It protects speech and assembly.”

The mayor expressed concern that those exercising a “right to be silent” might be getting drowned out amid the din of the protests.

“We can’t have a place where only one point of view is allowed,” he said. “There are places where I think it’s appropriate to express yourself, and there are other places that are appropriate to set up Tent City. They don’t necessarily have to be one and the same.”

A quick check of der Google shows that a lot of elected officials in places such as Durham, NC, Hennepin Co, MN, Seattle, WA, San Francisco and even Sydney, Australia are apparently in full agreement with Mayor Bloomberg. In fact, in this quick check, it was only Hartford, CT that did not seem to think tents and Tarps are the cause of the decline of Western Civilization. (I'm sure there are other cities fighting the use of tents and tarps and there may even be a couple of others allowing them besides Hartford).

David Dayen at FDL News notes that in fact there is only one tent in Zuccotti Park, a medicine tent. It seems folks owe a bit of thanks to Jesse Jackson for helping to block the NYPD from taking this tent down:

Bloomberg’s foray into originalism notwithstanding, the focus on tents also apparently extends to medicine. Because hours after the mayor made this statement, the NYPD tried to take down the medical tent at Zuccotti Park. Jesse Jackson, who was randomly on the scene in the middle of the night when this went down, helped save the tent, which is apparently not Constitutionally protected. Incidentally, the medical tent is the only tent at Zucotti Park. So he must really have it out for that tent. Such an eyesore!

So tell me Mr Mayor, where in the Constitution does it say that taxpayers have to bail out TBTF banks and give them a "TARP?" It seems that if Banksters and MOTUs get a TARP that protects their bonuses, surely folks who are protesting that largesse can have a tarp to protect themselves from the weather.

It seems to this ol' country boy that so many of the politicians around the globe are paid to be bullish and protect the MOTU and Banksters. Along with the Bloomberg article, today's NY Times had another article about how Gov Cuomo refuses to extend New York's "millionaire's tax":

Even as Occupy Wall Street stokes debate over income inequality, Gov. Andrew M. Cuomo dug in his heels on Monday against extending a so-called millionaires’ tax on high-earning New Yorkers, saying the income tax surcharge would place New York at a competitive disadvantage with neighboring states.

The problem when politicians are so bullish about the MOTU and banksters? When there are a lot of bulls around, there's bound to be a lot of bull shit around.

H/T Peterr for the post title

And because I can:

Limited Good Economic News Won't Last

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You might have seen some headlines from yesterday on the weekly report of Initial Unemployment claims about those claims "falling sharply" (Reuters headline phrase):

Applications for unemployment benefits fell by 37,000 to a seasonally adjusted 391,000 in the week ending September 24 from an upwardly revised 428,000 the prior week, the Labor Department said on Thursday.

My first prediction today is that the 391K figure first announced will be revised upwards when next week's report comes out. My second prediction is whatever good news that can be wrung from this report will have a limited overall effect.

CNN's report was a bit more circumspect with this:

The recent drop to 391,000 maked the lowest level since the week of April 2, when 385,000 new claims came in.

Still, economists cautioned against getting too excited about the better number. It's just one week of data, and according to a government spokesman, seasonal adjustments could have impacted the calculation.

...snip...

For the country overall, the unemployment rate is still at 9.1%...

Continuing claims -- which include people filing for the second week or more of benefits -- decreased by 20,000 to 3,729,000 in the week ended Sept. 17, the most recent data available.

That figure only includes people who are receiving benefits though, which typically run out after 99 weeks.

Including people who aren't currently receiving those benefits, about 14 million people remain unemployed in the United States.

Nice of CNN to point out that the unemployment figure does include those folks who persist in looking for jobs without finding them, even after they have exhausted all benefits.

These are only problems for the top 1%

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If you read me often enough, you have probably noticed that I tend to check various news and opinion sites throughout the TradMed each morning, after I've spent a few minutes reviewing emails and jobs sites. Most of the time, I just shake my head at the various levels of stupidity I find, not being able to quite give it the full YOU HAVE GOT TO BE F*CKING KIDDING ME! treatment so richly deserved. Then there are days like today where teh stoopid is so truly dumbfounding.

Today, we have Henry Kravis, co-founder of private equity firm KKR, sending up a fine whine to Bloomberg on how tighter credit rules are forcing the private equity firms to kick in more of their own money and making buy-outs more expensive. Sayeth Mr Kravis:

“As the debt markets tighten and the cost of capital goes up, something has got to give,” Kravis said yesterday at the Bloomberg Dealmakers Summit in New York. “You just have to pay more.”

Kravis, 67, said the cost of capital for a leveraged buyout has risen more than 2 percentage points since the firm agreed to buy Pfizer Inc.’s Capsugel unit in April, forcing buyers to put up more cash for deals and borrow less. Uncertainty in the equity markets also is making it more difficult to reap profits through initial public offerings or sales of companies owned by private-equity funds, he said.

...snip...

Buyout firms typically use loans secured on the targets they acquire to finance more than half of the purchase price and cash from their own funds for the rest. The firms seek to improve performance at the companies they acquire or expand them before selling them within about five years.

KKR, which Kravis created in 1976 with George Roberts and Jerome Kohlberg, is expanding into hedge funds, real estate and underwriting to reduce reliance on buyouts after the firm gained a listing on the New York Stock Exchange last year. KKR this year hired a group of former Goldman Sachs Group Inc. (GS) traders led by Bob Howard to start KKR’s first hedge fund.

Wow. Just. Wow.

Mr. Kravis joins JP Morgan Chase CEO Jamie Dimon as a poster child for those who have no clue about life amongst the peons. Now Dimon has set the whiners' bar high with his whines about how banksters get no love and how it's just so mean as to be anti-American to require banks to increase their capital but I think Kravis has nudged Lloyd Blankfein out of second place.

Private Equity firms use small per cents of their own funds and large debt in leveraged buy-outs. There seem to be as many articles saying LBOs are bad as there are good. I'm sure it is no surprise that I lean towards the LBO = bad perspective. While there may be some benefits in efficiencies, there are far too many examples of lost jobs, high interest payments on those loans, and destroyed pensions. The pattern seems to be Private Equity firm creates huge debt to take over Business. Business then has to service the resulting debt before investing in R&D, employees, pensions, whatever. In order to streamline costs, Private Equity firm is within a couple of years "forced" to declare bankruptcy, turning their pension obligations over to the Pension Benefit Guaranty Corporation. At the end of approximately five years, the private equity firm files for an "Initial Public Offering" for all or part of the firm they had taken private five years before. IN the intervening years, they have cut employees, destroyed the pension, used company assets to pay off the debt (which never seems to be in their names, but only in the name of the company they used the debt to acquire) and walk away with more millions to off set the devastation they leave in their wake.

Congratulations Henry Kravis, your whine even managed to top that of folks CNN found who complained that they were more like Joe Schmuck than Warren Buffett and shouldn't have to pay a "Millionaire's Tax":

Only 24% of millionaires said higher taxes on higher incomes is the fairest way to go, according to recent survey from Spectrem Group, a research firm specializing in finances of affluent Americans. The biggest chunk of millionaires, 44%, think a flat rate tax across all income brackets is the fairest system.

...snip...

One millionaire CNNMoney reader said that for the past five years, his tax rate (including state income taxes) has ranged from 40% to 55% -- which he thinks is more than enough money to be forking over to Uncle Sam.

Uh, Earth to CNN Money reader - taxes going to the state are not going to Uncle Sam. You might also check with the folks making $30K or $40K per year and find out how much they are paying in taxes and fees at all levels.

DoG, but these WATBs do tend to irritate, don't they?

And because I can:

Wait! I thought the South was where all the jobs are!

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Jobs.

Although the official time frame for "The Great Recession" was December 2007 through June 2009, for the millions of long term un and underemployed, the daily reality is that not only has the recession never ended, it is more applicable to The Great Depression than it is to any of the various acknowledged recessions since the end of WWII. One of the articles of faith from the always surprised Economists is that job creation lags other indicators, yet here we are, over two years since the "end" of the last recession and the official unemployment rate is still at 9.1% with the underemployed figure at 16.2% for August 2011.

Each week on Thursday, there's a report of the Initial Jobless Claims for the week before. Like many of the earlier weeks, last week's report forced the headline writers to find the lone tidbit of almost good news to concentrate on in their ledes. From Reuters:

(Reuters) - Americans filed fewer new claims for jobless benefits last week but the decline was not enough to dispel worries the economy was dangerously close to falling into a new recession.

Applications for unemployment benefits dropped 9,000 to 423,000 in the week ended September17, the Labor Department said on Thursday. That was roughly in line with expectations.l

Of course, once again, the earlier report had been revised upwards (from 428K reported on September 15). It is not going too far out on a limb to predict that the 423K reported for September 22 will be revised upwards on September 29.

I did not go too far out on a limb back in June when I first predicted a "double-dip" and it still was a short limb when I reiterated the prediction in July. Nouriel Roubini has made the same prediction last Thursday documented from his tweets (via Business Insider). A few days earlier (September 19), Roubini had written this op-ed on how to keep the coming Recession from being a Depression.

Here Is Class Warfare

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So apparently, the phrase of the week from Republicans is "Class Warfare!" as a response to President Obama's proposal for a new Millionaire's Minimum Tax. Paul Ryan and Lindsey Graham both used the phrase yesterday on the Bobble head shows. The proposed tax has also become known as the "Buffett Tax" in honor of billionaire investor Warren Buffett who has long noted the irony of his paying a lower tax rate for his investments (aka Unearned Income) than the rate paid by his secretary (Earned Income). Of course, the folks at Forbes Magazine and the Murdoch NY Post think it is a bad idea to do such a thing.

The reality is, and Buffett noted years ago, we are in a class war:

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

Regulations Are an Opportunity for Job Creating Innovation

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It is an article of faith among Republicans (and far too many Democrats) that all those pesky "regulations" are to blame for the lack of jobs today and the ongoing economic slowdown. Just the first of this month, McClatchy had an article where they had surveyed small business owners across the country and the consensus was that in fact regulations are not the problem for small business but lack of demand is:

When it's asked what specific regulations harm small businesses _which account for about 65 percent of U.S. jobs — the Chamber of Commerce points to health care, banking and national labor. Yet all these issues weigh much more heavily on big corporations than on small business.

...snip...

None of the business owners complained about regulation in their particular industries, and most seemed to welcome it. Some pointed to the lack of regulation in mortgage lending as a principal cause of the financial crisis that brought about the Great Recession of 2007-09 and its grim aftermath.

...snip...

Other small firms say their problem is simply a lack of customers.

My bold and I think we see where the folks complaining about regulations are really coming from. While the small businesses are struggling to make traction and find customers, the big businesses are squeezing every penny out of their operations in order to meet the quarterly demands of Wall St. And the anti-regulations crowd show an incredible level of short-sightedness. Instead of a knee-jerk "regulations bad" approach, they should be looking on regulations as an opportunity for innovation and building new businesses.

Economists Who Are Always 'Surprised' Should Re-Think Their Models and Assumptions

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Today's report of Initial Unemployment Claims from last week is out and once again, the economists are "surprised" at the figures reported (via Reuters):

The number of Americans filing new claims for state unemployment aid rose unexpectedly to 428,000 in the week ended September 10 from a revised 417,000 in the prior week, the Labor Department said.

It was the second straight weekly increase and took initial claims to their highest level since the week ended June 25. Wall Street analysts expected a modest dip in new claims.

Once again, that is an upwards revision from the previously reported figure. I'm feeling a tad too lazy to go back through all my blog posts to find the last week when there wasn't an upwards revision from the previous week's report but I know that it has been months since there has been anything but upward revisions. At best there might have been a week when the numbers reported were not revised at all a couple of months ago but that's it.

Realistically, I have to admit that the continual 'surprise' by the economists is just a continuation of the overall cluelessness shown by the financial elites as evidenced by this yesterday from the World Bank head (also via Reuters):

A Personal Reflection on September 11, 2001

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On Tuesday morning, September 11, 2001, I was living in Springfield, IL. I had been laid off from my previous employer back at the end of July so my usual routine was to get up, make the coffee, check my email and the various job hunting sites for anything within my skills and career field to apply to, then surf the news sites. That routine stayed pretty much the same, even the week before when I had visited my best friend in Jacksonville, FL for a week, having returned to Springfield on Saturday, September 8.

It was a sunny morning and my then feline companion had joined me at the computer when I saw the first news article about a plane hitting the World Trade Center. My first thought was something small like a single engine Cessna or something. Then I saw the reports of a second plane having hit the World Trade Center and knew my first thoughts had been so very wrong.

When I saw the news of the second plane, I turned on the TV and checked CNN. I think I hit there just as the South Tower was collapsing because all I really remember from that point was the confusion. I spent the rest of the morning in front of the TV, watching, just as millions of others around the country. I was sitting there feeling impotent and wanting to do something so contacted the local Red Cross. I wound up going in to the their offices and giving blood. Along with a couple of hundred other folks in the Springfield area (my guess is that most blood banks across the country hit their capacity for at least a few weeks after 9/11).

I had spent most of the previous year (2000) officially living in Manchester, CT but commuting into Manhattan on Mondays and home to Manchester on Fridays via Amtrak and living during the week in a furnished studio in Battery Park City. Most mornings, I would walk up South End Ave to the World Financial Center where I would duck into the lobby, up to the walkway over West St and down to Liberty St. The first few months, I had been working down on John St near the South Street Seaport. I would head on up Liberty Street, past the Deutsche Bank Building, crossing over Broadway and down through the financial district. Occasionally, I would go to the local offices of my then employer on Wall St, so would head down past the Stock Exchange (and The Bull) but nothing at that end of Manhattan was much more than a ten to fifteen minute walk. After a few months, I was going over to offices on 16th St, near Union Square, so I would catch the N or R lines of the subway in the basement of the South Tower.

Keep the Expectations Low - While Expecting To Be Disappointed

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So, here we are, waiting for President Obama to give his long awaited "Jobs" speech tonight. However, from the news reports and "analyses" in the TradMed speculating on the content and potential proposals I will not be holding my breath on there being much if anything worthwhile coming out of the speech. The cliche of "too little, too late" most comes to mind. While CNN had this report today on the stimulus from February 2009 having created jobs, it was nowhere near large enough. This article from Center for Economic and Policy Research from October '10, points out that there was a need for a stimulus nearly three times the size of the $787B from February '09.

We are and have been in an employment/jobs crisis for years now. Even while the official unemployment figure stays above 9%, even optimistic projections have unemployment to stay high through 2012, some projections have the high unemployment continuing as far out as 2020. Unfortunately, the current White House seems to be more willing to pretend to do something for show rather than actually doing something that will be effective.

As always, there are just some things that I do not understand. A large part of President's Obama's plan is further tax cuts (or rather, extending existing tax cuts such as the payroll tax cut). We have fairly strong evidence starting with the initial Bush tax cuts in 2001, that tax cuts have created few if any jobs over the past ten years yet we continue to be presented with tax cuts as a job creating panacea.

We also keep hearing about how businesses will create so many new jobs if they can only bring back the trillions in cash they have stashed overseas. Andrew Ross Sorkin of all people points out the fallacy of the tax holiday in this piece from the NY Times DealBook from this past Monday:

Once a Year Speeches Do Not Mean Support for Workers

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Today is Monday, September 5, 2011. Since it is the first Monday of September, it is the national holiday known as Labor Day. Supposedly, it is the day when our politicians and pundits proclaim their unrelenting love for all things worker related - even as they spend the other 364 days a year doing all in their power to destroy the lives of workers by cutting salaries, limiting benefits. Just today, the Washington Post's Robert Samuelson had a column decrying the state of labor in the US:

On this Labor Day, there is little good news about labor. We have entered a long period of crushing unemployment and downward pressure on wages that may well transform the nation’s economic and political landscape. There was no job growth in August, and the overall numbers are stupefying: 14 million unemployed; nearly 9 million part-time workers wanting full-time jobs; 6.5 million who want jobs but have given up looking and are, therefore, not counted in the official labor force. People are only gradually recognizing the magnitude of the problem.

...snip...

It’s not only the jobless who will be affected. No one has yet repealed the law of supply and demand. At last count, there were 4.5 unemployed workers for every job opening. Bargaining power has shifted from labor to capital. Sure, some workers will get promotions and seniority raises. Otherwise, gains will be slim. Since September 2008, annual wage and salary increases have averaged 1.6 percent, the slowest pace in 30 years, reports EPI’s Lawrence Mishel.

...snip...

Still, the harshest effects of joblessness fall on the jobless. “We’re creating a bifurcated society,” worries Harvard economist Lawrence Katz. “We’re talking about a lost generation of younger workers and displaced workers.” Younger workers have a harder time starting careers. Because many skills are developed on the job, long unemployment spells can lower lifetime earnings. The same is true of older workers. Even when those who lose stable jobs get new work, they often suffer a 20 percent earnings loss for 15 years or more, reports economist Till von Wachter of Columbia University.

If Beltway Pols Were 1st Responders, No Foundations Would Be Saved

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So here we are, coming to the end of another month with limited economic growth. Friday (August 26), the Commerce Department downgraded the second quarter US Gross Domestic Product (GDP) from 1.3% as initially reported to 1%. Via Reuters:

The rate of growth between April and June was cut from the government's first reading of 1.3 percent and followed a lethargic 0.4 percent pace in the first three months of 2011.

This means the economy grew only 0.7 percent in the first half of the year. Nonetheless, and despite a sharp fall in consumer confidence this month, economists do not believe the economy will fall back into recession.

Note for those with short memories - the first quarter GDP was initially reported at 1.8%, upped to 1.9% with some fanfare before being downgraded to .4%. That seems to be a bit of a trend these past few weeks and months where the various economic indicators get revised in a negative direction (negative that is in relation to what would be good news). For example, when the Initial Unemployment Claims for last week came out on Thursday, the previous week's claims were revised upwards (via CNN):

The number of first-time filers for unemployment benefits rose to 417,000 in the week ending Aug. 20, the Labor Department said Thursday. That's up 5,000 from a revised 412,000 the prior week.

The original report for the previous week was at 408K so the upwards revision was 4K. Since the business reporters like to latch onto a factoid or two to try to explain things, they've all seemingly latched onto the point that some striking Verizon workers had filed claims. But the number provided was 8.5K which means even without the Verizon worker claims (which will most likely be denied as strikers are rarely allowed to collect unemployment), it would still have the initial claims at 408.5K. From the previously linked CNN article:

Trickle Down Exists, Just Not as Commonly Supposed

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Trickle down economics is the phrase that has often been supplied to describe whatever current flavor of economics theory being propounded that says cutting taxes for the well-to-do is the quickest path to an economic nirvana. Supply-side is just one of the variants of this from over the years.

While what I just described is the most commonly used version of "trickle-down," we are now seeing examples of true trickle-down, i.e., the trickle-down of pain through the economy from all the various budget cuts at all levels of government. The past two days the Tampa Tribune has had articles showing the affects of cuts. First up is this one from yesterday on cuts for caregivers of the disabled:

The state Agency for Persons with Disabilities needs to slash about $90 million in services this year to meet its budget. The cuts not only affect contract workers like Davison, but employees in group homes who coordinate training programs, community outings and other activities for the disabled.

About 33,000 people in Florida with developmental disabilities like Cherta go through the agency to find companions who will not only care for them but also find ways to make them a part of their communities.

The agency serves about 50,000 people with autism, cerebral palsy, spina bifida and intellectual disabilities.

So where exactly is that good economic news?

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Well, here we go again. As usual, the past couple of weeks there have been a few articles on how the economy really isn't THAT bad. In fact, that was a large part of the title of this article from McClatchy while USA Today offered up this from a Maria Bartiromo interview with the head of AIG, Robert Benosche (with a McCainesque "There's a core of strength to the economy"). However once again, the reality on the ground rears up to refute the cheerleaders. Today's (Thursday, August 18) Initial Unemployment Claims report for last week is out and the numbers are back over the dreaded 400k line once again (via Reuters):

Initial claims for state unemployment benefits increased 9,000 to a seasonally adjusted 408,000, the Labor Department said.

Economists polled by Reuters had forecast claims rising to 400,000. The prior week's figure was revised up to 399,000 from the previously reported 395,000.

Given that the trend the last few weeks has been for an upwards revision of the previous week's numbers, I am not at all surprised at the upward revision from 395K initially reported to the 399K (although since I did not write a post on last week's report, I can't claim to have officially predicted the revision.)

Grasping at Straws on the Economy

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So, I guess it has been a rather eventful week in the world economy and the lives of the Beltway Village Idiots Politicians, Pundits, and Courtiers. I'll let Paul Krugman and Jane Hamsher do the honors of eviscerating the Standard & Poor downgrade of the US credit rating but do want to add my 2¢ in agreement that supposed neutral arbiters who sold their souls and "independent analysis" for the banksters crappy mortgage based securities should be well advised to STFU rather than interject themselves politically.

To the non-surprise of most folks living in the reality based world, the passage of the debt ceiling increase did absolutely nothing towards improving the overall economy and the budget slashing accompanying the increase is likely to push the economy back into recession (at least that's my prediction here, here, and here). Reuters had this on the "small blessings" of the debt deal:

"So be it"

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Yesterday, I wrote about my prediction for an "official" double-dip recession. One of the points I covered was the release by the Commerce Department of the second quarter GDP figures (along with the downward revision of the figures for the first quarter 2011 back to before the start of the Great Recession/Lesser Depression.)

Today, I have seen a couple of articles pointing out that the (lack of) government spending at all levels has been a large factor in the "disappointing" GDP figures. First up is this blog post from yesterday's Washington Post with the title "GDP Shocker: ‘Much of the drag was government’:

So what was the problem?

Government, according to Faucher. “The major drag came from government, on both the federal and state and local sides. Government subtracted 1.2 percentage points from growth in the first quarter, with the federal government accounting for about two-thirds of that,” he said.

Hoocoudanode, right?

Bloomberg reported it this way:

Spending and investment by state and local governments shrank at a 3.4 percent annual rate in the second quarter, matching the decline in the first three months of 2011, the U.S. Commerce Department said today. The fourth consecutive drop is the longest such slump since the government began compiling quarterly data in 1947.

The U.S. economy expanded at a less-than-forecast 1.3 percent annual rate, the Commerce Department said. State and local governments accounted for a 0.41 percentage point drag, the same as the first quarter, as governors and mayors adjusted to lower revenue by cutting employees and services.

Peterr over at Firedoglake has this post today pointing out the problems of folks at all levels when they have too much month left at the end of the money compounded by worry that Social Security checks may not be forthcoming in August. But this little nugget really says it all for me:

When even the Chamber of Commerce is telling Congress to worry about the economy, you know that the GOP has gone way off the deep end. OSK-Deutsche Bank economists concur, as do the folks at Macroeconomic Advisors

Now I do have to ask how many folks remember the response of Speaker of the House Boehner way back in February when it was pointed out to him that cutting jobs could hurt the economy:

So be it.

You really should be careful of what you ask for Mr Speaker.

And because I can:

The (Official) Double Dip Moves Closer

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Back about six weeks ago, I predicted that the economy was headed for an official "double-dip" recession. Today's Commerce Department report on the economy showed the second quarter of 2011 GDP growth at 1.3% but also reported a downward revision to the 1st quarter GDP from 1.9% to .4%. This is after the original 1st quarter numbers had been revised upwards slightly from 1.8% back in June.

The economy grew at a 1.3 percent annual pace in the second quarter after expanding just 0.4 percent in the first three months of the year. First-quarter growth was revised from the previously reported 1.9 percent increase.

While the recovery stepped-up in the second quarter, economists had expected a stronger 1.9 percent reading.

Fourth-quarter [2010] growth was revised to a 2.3 percent rate from 3.1 percent.

Now, I have been using the phrase "officially a double-dip" because for the millions of people among the long term un and underemployed, we've never left the Great Recession/Lesser Depression. It has been all one long scene of watching our unemployment run out, our savings and retirement plans get cashed in and spent while trying to survive and keep a roof over our heads. And this is not just limited to those folks covered by the official un and underemployment lists but includes the new college graduates from the last few years trying to find employment in their fields. It also includes the folks who gave up and filed for Social Security if they were eligible, just to have some money coming in. It includes all the folks who are now considered "independent contractors" or "self-employed."

Dispatches From the Economic War Frontlines

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The weekly report of Initial Unemployment Claims is out today (via Reuters):

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 398,000, the Labor Department said.

Economists polled by Reuters had forecast claims falling to 415,000. The prior week's figure was revised up to 422,000 from the previously reported 418,000.

I do hope the Beltway Village Idiots Pundits, Politicians, and Courtiers don't make too much of this news however. The 400K figure does seem to be a magic line for most but my guess/prediction is that after revision (which may or may not be reported), it will wind up back over 400K for the week. The upward revision of the numbers from the week before has seemingly become a staple on the reporting of this metric.

While the DeeCee folks do their Debt Ceiling/Deficit/Austerity Danse Macabre, there have been a few reports in the TradMed to remind the clueless of the realities being faced by millions of people who are not cocooned within the fog of life in the Beltway. Not that these articles penetrate the consciousness of most Villagers, given how they seem to always like to double down on the policy while "improving the messaging," but we can still hope they might see the light at some point, if only to protect their careers.

Jobs Numbers Continue to Stagnate While DeeCee Fiddles

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Well today's (Thursday, July 21) report of Initial Unemployment Claims from last week is out and once again, the numbers show little improvement (via Reuters):

Separately, initial claims for state unemployment benefits increased 10,000 to 418,000, the Labor Department said, above economists' expectations for a rise to 410,000.

The Reuters article is a revision of their initial report which had noted that last week's number had once again been revised upwards, from the originally reported 405K to 408K. At least they didn't say the "economists are surprised" for once.

Buried way down at the bottom of the Reuters article are these little nuggets of information:

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 50,000 to 3.70 million in the week ended July 9.

The number of Americans on emergency unemployment benefits declined 80,133 to 3.15 million in the week ended July 2, the latest week for which data is available.

A total of 7.33 million people were claiming unemployment benefits during that period under all programs, down 159,000 from the prior week.

My bold. My guess is that the "decline" in folks receiving extended (emergency) benefits is most likely due to people aging out of the system. The so-called "99ers." And please note that bolded piece once again. "A total of 7.33 million people were claiming unemployment benefits during that period..." The government officially recognizes at least 14M unemployed and 25M to 30M un and underemployed so this means that roughly half the people who are officially acknowledged as unemployed are not collecting any Unemployment compensation at this time.

Meanwhile, all the elected Neros in the Beltway Village continue to fiddle about with the "Grand Bargain" even when the DFHs at place like Bloomberg point out that whatever the results of massive budget cuts may be, creating jobs will not be one of them:

Advocates of reduced federal spending say shrinking the U.S. government would boost the economy and create jobs. They are wrong, according to Wall Street economists -- at least for the short term.

House Republican leaders, including Speaker John Boehner, urge spending cuts to lift employer confidence and increase investment and hiring. President Barack Obama, who signed into law a stimulus program now valued at $830 billion, has echoed the Republican assertions in recent comments, even as he has resisted cuts as deep and fast as they want.

Professional forecasters beg to differ. Fiscal retrenchment could subtract 1.5 percentage points to 2 percentage points from growth in 2012, a drag that will make it difficult to reduce 9.2 percent unemployment, say economists at Bank of America Merrill Lynch, JPMorgan Chase & Co. and Deutsche Bank AG.

I'm usually not one to take the predictions of Wall St economists as some form of gospel but the only group of people with a worse record than Wall St economists on getting things correct on the economy do happen to be the Beltway Village Idiots Politicians, Pundits, and Courtiers.

There is one small piece of a bit of Good News/Bad News. It seems the K Street lobbyists are having to actually work a bit these days. That's the good news. The bad news? We have to hear them whine about it now. Outside of the Banksters and the executives of the Sirius Cybernetics Corp, I can't think of any group who has less cause to whine which probably means we will now see dozens of articles on how the poor misunderstood lobbyists are just really trying to help all the poor widows and orphans honest.

And because I can:

Mr Bernanke, Just What the Hell Are You Waiting For?

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Yesterday (Wednesday July 13), Federal Reserve Chair Ben Bernanke was once again before Congress, testifying on the economy. Buried way down in the Reuters coverage of the hearing was this little nugget:

After recovering from the steepest recession in generations beginning in the summer of 2009, the U.S. economy has lost momentum in recent months. Gross domestic product expanded just 1.9 percent in the first three months of the year, and the second quarter does not look to have been much better.

Bernanke held to the view that recent weakness was due in part to temporary factors like energy costs and the effects on global industry from Japan's earthquake and tsunami.

But he acknowledged the labor market remains weaker than the Fed would like.

The labor market also remains weaker than the 14M unemployed and the 25M - 30M un and underemployed would like as well. While part of the stated Fed mission is "pursuit of maximum employment," the actions of the Fed over these last few years seem to have been more along the lines of "we'll pretend to do something and maybe the miracle will occur." As far as Bernanke's "...view that recent weakness was due in part to temporary factors...," as I've stated before, there are always "temporary factors" that are going to have an effect on life. It is part of life and should be part of his work to be anticipating and dealing with those "temporary factors" as they occur rather than using them as an excuse.

Economically, 'Good for Business' Is Usually Bad for People

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"Business Friendly Climate" is one of the buzz phrases we see and hear a bit more frequently these days. I guess it is a phrase that may have always been around to some extent but is not just limited to the business press. But what exactly does "Business Friendly Climate" actually mean? Googling the phrase brings up millions of pages of hits with apparently every state, city, and town in the country making the claim for themselves. President Obama says the US must become Business Friendly to create jobs. But to me, the more often I see and hear the phrases "business friendly" or "good for businesses," the more I become convinced that the end result will be something that is bad for humans and bad for living, breathing entities.

In case you are curious as to what precipitated this, it was a few articles the last week or so on both sides of the "it's good for business" divide. First up is this article from CNN on Tuesday, July 12 on businesses "fleeing" California:

Economists and Ethics: Is There an Effect On the Economy?

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Code of Ethics: A code of ethics is a set of guidelines which are designed to set out acceptable behaviors for members of a particular group, association, or profession. Many organizations govern themselves with a code of ethics, especially when they handle sensitive issues like investments, health care, or interactions with other cultures. In addition to setting a professional standard, a code of ethics can also increase confidence in an organization by showing outsiders that members of the organization are committed to following basic ethical guidelines in the course of doing their work.

I am not currently a member of the American Society for Quality (ASQ) but since I do consider myself a Quality Assurance professional, I have no problem adhering to the ASQ Code of Ethics. When I got my first QA position back in the early '80s, ASQ was known as the American Society for Quality control (ASQC) but the Code of Ethics was then as it is now. One of the many technical books I have read and used to help me in business is Ethics in Quality, which I found an interesting read, if only because the case studies used were not all black and white but showed the nuance of everyday life where sometimes there is no right or wrong answer nor are there always good choices available to folks.

The More Things Stay the Same

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Well, instead of being "surprised" by the June (lack of) Jobs Report, it seems the economists were "stunned" by the numbers (via Bloomberg):

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said he was “stunned” by today’s U.S. employment report.

He wasn’t the only one.

Not a single economist among 85 surveyed by Bloomberg News correctly forecast the 18,000 increase in payrolls in June reported by the Labor Department. Estimates ranged from a low of 60,000 to a high of 175,000. The median was 105,000 -- almost six times the actual number.

...snip...

It’s not unusual for payroll figures to fall outside of the range of economists’ forecasts. The same thing happened last month, as well as in October, November and December of last year.

That last paragraph should become a mantra for economists looking for excuses, but it most likely will not. As I've mentioned in earlier posts, there are always extraneous reasons for things happening within the economy. Like bad weather. And there will always be extraneous impacts that should be accounted for in any economic forecasting.

It Still Sux to be Correct

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Well, today's Jobs Report from the BLS for June 2011 is out and the news is not good. In this post from Tuesday (July 6), I had predicted:

My guess is that the private sector jobs (the ADP number) will be in the 50K range while the overall economy will be 20K to 25K max.

As I admitted in this post from yesterday (July 7), I was off fairly badly on my prediction for the ADP number. Unfortunately for the economy, I was a hell of a lot more accurate on the BLS number than the supposed expert economists (via Reuters):

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes the economy was on the cusp of regaining momentum after stumbling in recent months.

Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise.

Many economists raised their forecasts on Thursday after a stronger-than-expected reading on U.S. private hiring from payrolls processor ADP, and they expected gains of anywhere between 125,000 and 175,000.

The unemployment rate climbed to 9.2 percent, the highest since December, from 9.1 percent in May.

The Very Serious People Missing the Interconnectedness of Everything

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As we see the various articles today about President Obama and the "grand bargain" being offered to get Republican votes for raising the debt ceiling, we also see further indications of the total cluelessness of so many of the folks who live inside of the beltway village.

A few weeks ago, I wrote this post explaining how good jobs would attack the so-called deficit problem. This is without addressing the $3.7T plus costs of our wars since 2001 nor that the cost of the Bush/Obama tax cuts are far larger contributors to the "problem."

The last few days, I have seen a couple of articles reinforcing for me that Pete Peterson and his acolytes are winning the battle. Just last Friday (July 1), Bloomberg had this article on the Government Accountability Office releasing a study (pdf) on how people are going to have to delay collecting Social Security and "buy an annuity" in order to pay for their retirements:

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

...snip...

“The risk that retirees will outlive their assets is a growing challenge,” according to a study from the Government Accountability Office released today. Increased life expectancies and health-care costs coupled with declines in financial markets and home equity over the last few years have “intensified” workers’ concerns about how to manage their savings in retirement, the report said.

Of course, the study does not and cannot explain how we are all supposed to be able to come up with the cash to buy an annuity nor does it explain how we're are supposed to find insurance companies that will actually be around to pay off on the annuities, even if we could afford them.

"Good News" but Not that Good.

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In this post I wrote Tuesday, I predicted that the ADP Jobs report for June would come in at around 50K private sector jobs versus the economists prediction of 100K. Well the report is out (via Reuters) and I was way wrong while the economists were also under:

Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists' expectations for a 68,000 rise.

The original report in May (as I quoted and linked to Reuters in this post) was actually at 38K jobs so 36K is a downward revision. For what it's worth, I do like when I am wrong on these points, especially when I'm wrong and the numbers come in far better than I thought.

Now 157K jobs sounds like something to cheer about and I guess in a way it is but we shouldn't get all giddy with excitement quite yet. After all, the economy needs to add 100K to 150K jobs each month just to absorb new folks coming into the work force each month so 157K jobs does not dent the long term un and underemployment numbers by much. Tomorrow's numbers from the BLS for June will include public sector as well as private sector and it is likely the public sector jobs lost will push the 157K number down significantly. And I'll say right now that July will be worse. How can I say that? Many states start their fiscal years on July 1 and the budget axes will be showing the results as Politico discusses here:

New budgets from 24 states will impose severe cuts, according to the Center on Budget and Policy Priorities.

To make ends meet, Arizona will drop Medicaid coverage for 130,000 childless adults. Michigan will slice public school funding by $470 per student. New York will reduce education aid by $1.3 billion. Wisconsin plans to chop into the Earned Income Tax Credit, which hurts household budgets of the working poor.

And Minnesota? Its government shut down after state lawmakers failed to pass a budget.

Those cuts can reverberate through the private sector, since contracts with vendors and payments to businesses also get slashed.

According to this article from Reuters on the Initial Unemployment Claims report for last week, the Minnesota shutdown is already hitting the numbers:

Beltway Economic Conventional Wisdom Assuring Economy Will Not Improve

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In the year plus that I have been writing about the economy and life as one of the long term un and underemployed, I've mentioned a few times how difficult it is to catalog all of the stupidity, cupidity, and overall cluelessness of the Beltway Village Idiots Politicians, Pundits, and Courtiers (here, here, here, and here for example). A few weeks ago, I predicted that we will have a "double-dip" recession, even though reality for many millions is we have been in a depression and there has been no recovery that would be necessary for there to be a "double-dip" in the first place. Nevertheless, over the weekend, there were a few articles premised on how the deficit/debt is the worst thing going on right now in the economy. This one from CNN yesterday (July 4) starts things off:

CNNMoney surveyed 27 economists and asked them to choose from a list of possible threats facing the economy. What scares them most? A sovereign debt default by a European country such as Greece. More than half of those surveyed ranked it as one of their top two concerns, with 10 choosing it as their number one worry.

...snip...

Relatively few of the economists surveyed were worried about the other risks they had to choose from -- a slowdown among emerging economies such as China, or budget cutting by federal, state and local governments.

"Austerity is a short-term risk, but will help long-term," said David Wyss, former chief economist at Standard & Poor's, now visiting fellow at Brown University. "The odds of too big a budget cut seems small."

My bold and there we have it. What's a little austerity to those who have no fear of the consequences of that austerity. Given the propensity of economists polled by news organizations to be wildly and incredibly wrong in their predictions while then expressing their continual "surprise" at being wrong, I think we can safely say that the budget cuts that are coming will be both too big and soon followed by economists chanting "Hoocoudanode?" when the negative impact becomes obvious even to the most obtuse of the Beltway Villagers.