Thursday, September 8, 2011

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:

Devising short-term tax incentives is the antithesis of creating long-term certainty — sticking to the rules of the game. Indeed, such holidays can create perverse incentives. The debate over a tax break for companies to repatriate cash from overseas, for example, has already created a new moral hazard of sorts. When Congress provided a one-time tax break in 2004 for this purpose, it said such a holiday should never be repeated.

“If Congress enacts a second tax holiday, rational corporate executives will conclude that more tax holidays are likely in the future,” Chuck Marr and Brian Highsmith of the Center on Budget and Policy Priorities recently wrote. “That will make corporations more inclined to shift income into tax havens and less likely to make investments in the United States.”

John T. Chambers, chief executive of Cisco Systems, has been a longtime proponent of such a tax holiday. “We believe that at least temporarily reducing the incremental tax rate on foreign-earned profits would encourage companies to invest in the U.S.,” he wrote on his blog last year. The company does not seem so interested in investing here at the moment; it is in the process of eliminating some 10,000 workers in the United States.
US corporations have record amounts of cash on hand that they are not spending. This article from McClatchy last Thursday points out that lack of demand is far more of a problem for small businesses than the "regulations" that everyone in DeeCee seem to think are problematic:
Other small firms say their problem is simply a lack of customers.
Gee, 14M unemployed and 25M to 30M un and underemployed just couldn't have any bearing on this at all, right?

So-called "Free Trade" agreements also seem to be a favored remedy from Beltway Village Idiots politicians. There was a bit of irony in Mitch McConnell's opinion piece in yesterday's Washington Post calling for President Obama to submit three trade agreements to Congress:
What’s the real holdup? For three years, the administration has delayed finalizing these deals because unions have been extracting concessions in exchange for their support. Early on, they demanded further concessions and political reforms from our trading partners, all of which have been satisfied. Now, they’re demanding taxpayer funds for worker training programs that many believe are not only duplicative and costly but may not even be effective. Still, I and others have told the president we are prepared to allow this program to move ahead for a vote as a sign of good faith and to move the trade deals forward.
Why, it is almost as if Ol' Mitch is accusing the unions of holding these deals hostage or something. And we all know Mitch is a master at hostage taking for his own purposes. My guess is the unions have heard that giant sucking sound Ross Perot spoke of and did not like the sound at all.

Yes, we need jobs; good jobs, not just McJobs. More McJobs means more working age poor. Currently all we get is another week of Initial Unemployment Claims report where the so-called experts are surprised the numbers didn't drop and the previous week's numbers got revised upwards once again:
The number of Americans filing new claims for jobless benefits rose unexpectedly last week, further evidence of an anemic employment picture just hours before President Barack Obama unveils a plan on job creation in a major address to Congress.


Applications for unemployment benefits rose to 414,000 in the week ending September 3 from an upwardly revised 412,000 the prior week, the Labor Department said on Thursday. Wall Street analysts had been looking for a dip to 405,000.
So, we wait for the President to speak, knowing from history that it will include calls for "bi-partisanship." I, for one, will keep my expectations low but will still be disappointed as I know there could have been so much more done years ago if the change had actually been as promised.

And because I can:

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