Chestwader Alert: Another Created or Saved Jobs Report

Much like the tales of the fish that got away, you'll need your chestwaders to slog through the muck in the latest fairy tale report on the wonders of that trillion dollar stimulus:

“The Recovery Act appears to be stimulating private investment and job creation at a time when the economy needs it most,” Christina Romer, chairwoman of the Council of Economic Advisers, said in testimony prepared for a hearing of Congress’s Joint Economic Committee.

Romer cited the Build America Bond program, which has subsidized interest costs for about $118 billion of local government securities sold to finance public-works projects, and tax credits for companies that invest in plants to build solar panels and wind turbines.

The report says the stimulus has “saved or created” about 3 million jobs, and is moving toward a goal of 3.5 million jobs by the end of the year, according to an administration official speaking on condition of anonymity before the report’s release today.

The Obama administration has been stepping up its efforts to defend the $862 billion stimulus measure passed by Congress soon after Obama took office, as the U.S. economy struggles to recover from the worst recession since the 1930s.

THREE MILLION JOBS? No, not really according to Veronique de Rugy:

As it turns out, when you unpack the numbers, you find that Romer and her team didn’t actually count how many people got a job thanks to the stimulus. Instead, the number is a projection that relies on the myth that a dollar of government spending creates up to 2.5 dollars of economic growth.

That’s strange. Robert Barro of Harvard University has estimated that, even in the best-case senario, $1 of government spending will generate between $0.40 and $0.70 of economic growth, i.e., much less than the amount of growth that we would get if that dollar was invested privately. What’s more, if that dollar has previously been taxed out the economy, then the overall effect of $1 of government spending is a destruction of $1.10 of economic growth. Not exactly the rosy projections that Romer is touting today. (And Barro is not alone. Even the most optimistic projections of the economic effect of government spending never display such numbers. Never.)

de Rugy is testifying before Congress to make this and many other points exposing the fairy tales contained in the latest fantasy report on the magical stimulus so please read the rest.  No doubt this latest "created or saved" report was designed to convince an increasingly skeptical electorate Democrats' latest experiment in Keynesian economics wasn't a complete disaster.  Perhaps they should take James Carville's latest advice and start praying instead.

Greatest Decline in Money Supply Since the Great Depression

 The Telegraph reports the US money supply is contracting at a rate of 9.6% annually.  This is greatest decline since the Great Depression:

"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.

David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. "You truly cannot make this stuff up. The US governnment is freaked out about the prospect of a double-dip," he said.

Frightening indeed.  Harvard economist Greg Mankiw posted this satirical summary of the global economy which sums it up as he said "in a nutshell:"

Gault on the Stimulus

New Consensus Sees Stimulus as Worthy Step 

“It was worth doing — it’s made a difference,” said Nigel Gault, chief economist at IHS Global Insight, a financial forecasting and analysis group based in Lexington, Mass.

Mr. Gault added: “I don’t think it’s right to look at it by saying, ‘Well, the economy is still doing extremely badly, therefore the stimulus didn’t work.’ I’m afraid the answer is, yes, we did badly but we would have done even worse without the stimulus.”

“Quotation is a serviceable substitute for wit.” 

H/T: Memeorandum

Saturday Night Live Opener - Biden in the Oval Office

Via Breitbart TV
You know the old saying "while the cat's away, the mice will play." With Obama safely bowing his way through Asia, Sheriff Joe Biden sneaks into the Oval Office and plans to fix all Barack's problems. I saw this Saturday Night Live opener last night and thought there were parts that were very funny. The end tends to fall a bit flat but the Biden commentary on the "stimulus is working," and "we're going to cave like crazy on health care," make this clip worth a watch.

Posner to Romer: Where Are Your Academic Scruples?

Judge Richard Posner wrote a piece for "The Atlantic" yesterday questioning Christina Romer, chairman of the President's Council of Economic Advisers, on her August 6th presentation to the Economic Club of Washington DC titled, "So is it Working? An Assessment of the American Recovery and Reinvestment Act at the Five-Month Mark."

Posner challenges Romer on her answer to the group of economists as to whether the stimulus package, passed in haste in February by Congress, was in fact working. Romer answered "Absolutely." Posner finds this answer irresponsible coming from an academic and goes on to question why those who leave academia to pursue a public role don't retain their academic scruples:

I do not think her analysis is responsible, and I am concerned with the fact that academic economists, when they become either public officials or public intellectuals (like Paul Krugman), leave behind their academic scruples. (This is one of the themes of my book Public Intellectuals: A Study of Decline [2001])--and Krugman was one of my examples of the phenomenon.

and then again here:

This raises the question of the ethical responsibility of academic economists, such as Romer (and Krugman, and Lawrence Summers, and many others), who write for the media or join the government, either to adhere to academic standards in their nonacademic work or to make clear to the public that they are on holiday from those standards and that what they say in their public-intellectual or governmental careers should not be thought identical to their academic views.

Ouch! Posner makes it clear he agreed with the stimulus, at least in theory, but found the design lacking and the delivery "lazy." He challenges on a variety of levels Romer's claim the stimulus is working. I won't rehash the whole article because it is a worthy read. I have read a number of Judge Posner's legal opinions and found them straightforward and readable even for someone without a law background like myself. His economic blog is not always as straightforward, at least to this layperson anyway. I think this piece in the Atlantic is more approachable, however.

I respect Judge Posner immensely, he gives an honest assessment and puts his political opinions to the side. I appreciated reading why the stimulus could have worked had it been designed better. I have held the opinion it would have been preferable to do the tax holiday or no stimulus. Because I believe him to give fair assessments though, I give his opinion more weight than a partisan assessment.

This leads to his larger point, Krugman, Romer, Summers and Buffet, lent their credibility to Obama during his campaign. As Obama had no governing experience, their backing gave his economic plans some weight. When these same high profile academics allow their scruples to "take a holiday" in service of a political agenda, the layman will have difficulty discerning political spin from solid academic opinion. For example, the other night Krugman wrote an opinion on the public option and its significance to the Progressives. On Americablog, Krugman's opinion was touted because it agreed with a political point of view but given great weight because of his academic pedigree:

Not that Nobel laureates aren't intrinsically smart folks, but I think this analysis of the politics of the public option is particularly insightful.

Now that the Nobel laureate finds Obama's willingness to sacrifice the "public option" to come up short, the commenters start questioning Obama's intelligence:

He was a lecturer and has no published or scholarly academic papers.

I don't know where the meme came from that he is "brilliant" and "all seeing" and "highly intelligent." It probably came from the same place as "he's playing eleventy dimensional chess" and "he's 25 steps ahead of everybody else."

I think this whole "constitutional scholar" thingy is way overrated.

What is the definition of "scholar" when it comes to Obama?

Those comments look as though I might have plucked them straight from a right wing blog. In fairness, most left and right wing blogs become echo chambers to varying degrees. Opinions that agree are "genius" while those that don't are "stupid." This can certainly contribute to political discourse that becomes frenzied. Obviously there is more at play in our heightened political discussion, not the least of which is hyperpartisan media-types who both lament and ridicule an uninformed public. Still, Posner's point is an excellent one. An academic "on scruples vacation" might fool an uninformed public but they can't get past their peers. Posner didn't need a disclaimer to weed through Romer's discussion, but it would be nice if Posner didn't need to advise the "uninformed public" Romer's academic scruples were in Cancun for spring break.
UPDATE: Brad DeLong of Grasping Reality with Both Hands defends Romer.
Judge Posner's response to Prof. DeLong

Postcards From the Economic Abyss

Jared Bernstein made an appearance on the Pravda channel MSNBC to tout the news 2nd Quarter GDP only contracted at a rate of 1% compared to the 5.4% and 6.4% contraction of previous quarters. As I write President Obama takes to the airwaves to proclaim this news proof positive of the wondrous efforts of team Obama to save the economy from complete collapse. MSNBC is all a-tingle with this "green shoot" of good news and running with it for all it's glory. The President made quite a fuss about the riproaring success of the cash-for-clunkers program. Phew, what a relief, never mind those nasty polls you have been seeing lately, we're all saved.

Not so fast, let's take a look at the big picture and what those miraculous GDP numbers tell us. Donald Marron has prepared a handy-dandy little chart that shows broad weakness in 2nd quarter GD:



Marron notes the most glaring feature of the data is the broadness of the weakness in each sector of GDP. Offsetting the weakness is increased government spending and more importantly a decrease in imports:

A sharp decline in imports, finally, was the biggest contributor to growth in Q2, at least in an accounting sense. It’s important to choose your words carefully here, since declining imports are clearly not the path to prosperity.

And as for government spending:

Not surprisingly, government spending helped offset the declines in private spending. Most of the boost came from defense spending, but state and local investment also helped (perhaps some glimmers of stimulus?).

Credit where credit is due, there is a glimmer of hope from the Trillion dollar stimulus. But the GDP estimate shows declines in every category of private demand. The red bars reflect declines in consumer spending, residential investment, business investment in equipment and software, business investment in structures, and exports.
Just imagine how bad that would have looked without cash-for-clunkers.

UPDATE: Keith Hennessey has a great analysis of 2nd Quarter GDP numbers.

Democrats and Famed Beauty Queens Suddenly Concerned about the Economy

Someone better let notorious beauty queen Maxine Waters know that President Obama is already all over creating or saving millions and millions of jobs. Rep. Waters is under the mistaken impression that jobs are suddenly a problem:

“It does not appear that there is any real hope in sight for new job creation and for jobs for the people that need them perhaps the most,” said Rep. Maxine Waters (D-Calif.)

This sudden revelation has inspired a "disparate group of lawmakers" to extend portions of the stimulus to the tune of a mere $88 billion or so. Approximately $65 billion of that total is being sought by Rep. Waters and a few other Democrats to extend unemployment and COBRA benefits set to expire at year's end when the stimulus was sure to have brought the economy back from the abyss.

In the House Republican Representative Patrick Tiberi (R-Ohio) is co-sponsoring a bill with Rep. Richard Neal (D-Mass.), to extend a carryback provision that allows businesses to carry back losses to past tax returns, and other expiring provisions such as the homebuyer tax credit which has permitted an increase in home sales. A similar effort is being pushed in the Senate by Sens. Max Baucus (D-Mont.) and Olympia Snowe.(R-Maine)

Senator Snowe teamed with several other hard line conservatives giving the votes needed to pass the stimulus legislation that is obviously such a banner success it demands an encore. While I won't profess to have the legislative prowess of the group that is responsible for Stimulus I, I can't help but wonder if it ever crossed any of their brilliant minds to do something really crazy like cancelling some of the pork/porn from the first monstrosity and use it in ways that proved to be, well, stimulating.

Dems Start to Eat their Own

Dan Gerstein makes the case in Forbes that Pelosi's divisive strategies and involvement in crafting the disastrous stimulus is to blame for wrecking Obama's agenda. His prescription for the failing Obama agenda:

Overreaching can be a very dangerous thing in our politics--especially when the head of your party got elected running against it. And sometimes the only solution to overreaching is, well, overthrowing.

CNN offers up the Blame Obama argument citing claims congressional Democrats being "baffled" and "frustrated" by the President's lack of leadership on policy points:

“We appreciate the rhetoric and his willingness to ratchet up the pressure but what most Democrats on the Hill are looking for is for the president to weigh in and make decisions on outstanding issues. Instead of sending out his people and saying the president isn’t ruling anything out, members would like a little bit of clarity on what he would support – especially on how to pay for his health reform bill,” a senior Democratic congressional source tells CNN.

CNN also notes some blame is being directed at the Senate negotiators, who have "repeatedly missed deadlines." While negotiators, presumably Baucus et al on Finance became targets in the Senate, Blue Dog congressional representatives get the lion share of blame from the lefty blogs and are massive targets in the comments at KOS and Huffington Post.

So while it is rather amusing to watch the Dems form a circular firing squad, the question remains who is most to blame for failing to propose and pass the much promised health care reform, particularly since the Dems enjoy huge majorities in both the House and Senate? Laura Meckler, Jonathan Weisman and Gerald F. Seib in a piece for The Wall Street Journals seem to suggest the buck stops at Obama's door. While the Dem leadership would like to lay blame at the Republican's efforts to effectively undermine efforts at reform, even the most partisan pundits have difficulty bolstering that claim. James Carville is quoted on this point stating:

"President Obama is ratcheting up the stakes too," said James Carville, a veteran of former President Bill Clinton's failed effort to retool health care in 1993-94. "He's certainly not talking them down. And they're pretty big. They win this health-care thing, and they get some decent kind of evidence of [an economic] recovery, they might be in pretty good shape this time next year. But if they lose this, the Republicans understand the stakes too. Nobody is being very coy about it."

Rather than tone the stakes down, Obama is preparing to hold yet another prime time presser this evening. Despite a 10 day full court press, the President appears to be losing ground. Waterloo? It sure looks like it.