There are worries, despite several months of job growth and signs of an economic recovery, that the economy is slowing down:
The drumbeat of bad news about the U.S. economy got louder on Wednesday, rattling financial markets and driving stocks to their biggest drop in a year.
The U.S. factory sector, which has been an engine of the recovery, notched its biggest one-month slowdown since 1984 as companies hit the brakes on hiring and production. Another report showed private-sector hiring dropped precipitously in May, prompting economists to ratchet down their expectations for the closely watched nonfarm payrolls report due on Friday.
The Dow Jones Industrial Average tumbled 279.65 points, or 2.2%, to 12290.14, its biggest point decline since June 4 of last year. Investors piled into the safety of Treasury bonds, sending yields on the 10-year note below 3% for the first time this year. Yields move in the opposite direction of price.
Wednesday’s reports marked a notable shift in sentiment, particularly among stock investors, who have largely shrugged off signs of economic weakness, choosing to focus on strong corporate-earnings growth. The slowdown of manufacturing output could crimp those profits.
The disappointing U.S. economic data followed poor manufacturing reports around the globe. The numbers, together with evidence of a continuing downdraft in housing and signs that companies and consumers remain apprehensive about spending, suggest the economy is rapidly losing speed.
Why won’t Jon Huntsman be the Republican nominee in 2012? This video posted by Verum Serum highlights many positions Huntsman has taken, including support for cap-and-trade and the stimulus, that aren’t going to jive well with the Republican base:
Over at Slate, Dave Weigel offers up an interview by Neil Cavuto from early 2009 with Jon Huntsman, former Governor of Utah, Ambassador to China and likely GOP presidential candidate, where he not only expressed support in the concept of economic; but believed the package being pushed through Congress wasn’t large enough (emphasis Weigel’s):
CAVUTO: Were you against the stimulus, Governor?
HUNSTMAN: Well, if I were in Congress, I probably would not have voted in favor because it didn’t have enough stimulus and probably wasn’t big enough to begin with.
Huntsman has been playing down his support of the stimulus. For example, in a recent interview with George Stephanopoulos, Huntsman said that he wanted more in terms of tax breaks; including a corporate income tax cut. However, Weigel points to a post at Washington Monthly by Steve Benen, who breaks down that claim; posting video of Huntsman in his on words:
Some Keynesians, such as Larry Summers, are claiming that the recent earthquake in Japan - truly a devastating and saddening event that has claimed the lives of thousands - could help that country’s economy:
It may lead to some temporary increments ironically to GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake Japan actually gained some economic strength.
After expressing sorrow for the people of Japan, former White House economics adviser Larry Summers said, “it may lead to some temporary increments in GDP as a process of rebuilding takes place. In the wake of the earlier Kobe earthquake, Japan actually gained some economic strength.” Any economist is dead wrong to claim that there is a silver lining in a natural or man-made disaster. As it turns out, earthquakes and tsunamis are not stimuli. Destruction will not create prosperity.
As economics Professor Steven Horwitz notes, “If one really believes such disasters are good for the economy, even in the short run, then one should positively recommend burning down neighborhoods and destroying farm machinery. After all, think of the demand for construction workers and equipment, as well as the demand for manual labor on farms that would generate. Why we’d be rich as kings in no time, right?”
President Obama wants to nationalize wireless internet according to a report in New American in what appears to be another measure argued to be stimulus, but in reality is nothing more than just taking over a sector of American industry. New American doesn’t seem to be much of a fan of the proposal either:
In what amounts to the next initiative undertaken by the Obama Administration towards its ever-expanding program of government expansion and nationalization of various aspects of the lives of the American people (such as the government takeover of health care, intervention in banks, and the nationalization of various automobile companies, such as General Motors), the federal government is now embarking upon a program of government-directed wireless internet (Wi-Fi) delivery.
President Obama outlined his plan for government wireless access and broadband expansion at a press conference on February 10th at Northern Michigan University in Marquette, Michigan. The press conference revealed yet another well-known truth about the proposal, characteristic of any other initiatives which believe that government is capable of expanding access to any commodities: it is rooted in his Quixotic, insolvent, debunked, and expansionist view of government, and in his failure to realize the proper relation of government to the myriad possibilities made possible by the free market, in a more efficient and capable manner. The Wi-Fi expansion proposal not only reflects an unconstitutional view of government spending and scope, but is also a continuation of Franklin Delano Roosevelt-style economics, which failed the country in the height of the Great Depression and continue to contribute towards the national deficit and economic woes.
As you’ve probably heard, the January’s unemployment numbers came out on Friday. According to the Bureau of Labor Statistics, unemployment fell last month to 9% (from 9.4% in December) and the economy only added 36,000 - less than what was expected:
The unemployment rate unexpectedly fell to 9 percent in January, the lowest level in nearly two years, but the economy added just 36,000 new jobs last month.
The Labor Department reported Friday that more than 500,000 Americans reported finding jobs in January, improving the jobless rate from December’s 9.4 percent to 9 percent. The last time it was that low was in April 2009.
Experts had expected that the unemployment rate would rise to 9.5 percent for January. In all, 13.86 million people looking for jobs couldn’t find work in January.
“The overall trend of economic data in recent months has been encouraging, as initiatives put in place by this administration are taking hold, but there is still considerable work to do,” said Austan Goolsbee, chairman of the Council of Economic Advisers. While “the 0.8 percentage point decline in the unemployment rate over the past two months is a welcome development,” he said, it still “remains unacceptably high.”
Indeed, the news isn’t all good — even as the unemployment rate shrank, non-farm businesses reported the creation of 36,000 jobs, far fewer than the 136,000 new jobs that had been anticipated for January. Bad weather throughout much of the country is likely to blame, with snowstorms hurting the construction industry especially hard, marked by 32,000 jobs lost last month.
Below is a collection of several links that we didn’t get around to writing about, but still wanted to post for readers to examine. The stories typically range from news about prominent figures in the liberty movement, national politics, the nanny state, foreign policy and free markets.
The Obama Administration and Democrats are presenting Republicans with their first challenge on reducing the size and scope of government with a vote expected to occur in the first half of the year to raise the debt ceiling to almost $14.3 trillion. Democrats and some Republicans are warning of dire economic consequences if the increase isn’t passed.
Over at the Daily Caller, Douglas Holtz-Eakin, a former head of the Congressional Budget Office, takes issue with the view presented by the Obama Administration:
To me, at least, leadership means you don’t “talk down” the economy and don’t demagogue important economic issues. As director of economic policy for the McCain 2008 campaign, I took great pains to ensure that the senator was not perceived as predicting (or worse, advocating) doom for the U.S. economy. When running for president one should act and speak like someone who would be president.
I’ve never been sure that the Obama team understood or agreed with this view. As a candidate and even as president, Barack Obama has been uneven in his handling of economic distress. At times he has appeared presidential, but at others seemed willing to predict the worst “unless” his policies were adopted (think back to the debate over the stimulus bill). This has the same feel. Goolsbee’s quote — “The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.” — has no business being uttered by a prominent administration official.
According to reports, President Barack Obama is showing a renewed interesting in extending all of the 2001 and 2003 tax cuts in exchange for extension of unemployment benefits and extending the Making Work Pay tax program, which was part of last year’s failed stimulus bill:
In saying he would be open to a temporary extension of the Bush-era tax cuts for the affluent, President Obama told Congressional leaders he would seek GOP concessions: a year-long extension of unemployment insurance and tax cuts for middle-income and working poor Americans that were in the stimulus law but also expire at the end of this year. Those include the Making Work Pay tax cut of $400 for middle-income individuals and $800 for couples, a tuition tax credit, an expanded earned income and child credit for the working poor, and a payroll tax credit for new hires.
That package would cost the Treasury around $150 billion a year. But without it, taxes would still rise for 95 percent of Americans, a White House official said.
House lawmakers approved legislation permanently extending the lower tax cuts for middle class Americans on Thursday.
The tax cuts implemented in 2001 and 2003 by the Bush administration are set to expire at the end of the year unless they are renewed by Congress.
CBS News correspondent Mark Knoller tweets that President Obama will signal support in a speech today.Obama no doubt realizes that the has very little leverage over Republicans, and all he do can is work out a compromise; one that will do much to anger his base.
Remember when Paul Krugman was against monetizing debt, hyperinflation and deficits. That was all before he became an apologist for the Obama Administration. Via Instapundit, Tom Maguire from JustOneMinute provides us with an example of Krugman’s hypocrisy.
Here is Krugman in March of 2003:
Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.
And that’s way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account — as the C.B.O. cannot — the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it’s clear that the 10-year deficit will be at least $3 trillion.
So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don’t matter. But we’re looking at a fiscal crisis that will drive interest rates sky-high.
A leading economist recently summed up one reason why: “When the government reduces saving by running a budget deficit, the interest rate rises.” Yes, that’s from a textbook by the chief administration economist, Gregory Mankiw.
But what’s really scary — what makes a fixed-rate mortgage seem like such a good idea — is the looming threat to the federal government’s solvency.