Archive for the ‘Stimulus Plan’ Category

Obama the job creator … say, what?

December 20, 2016

According to his economists, the trillion dollar stimulus program was a bust!

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Lots of MSM headlines these days about the strong economy that Obama is handing Trump … with a strong suggestion that Trump will have a hard time matching Obama’s stellar performance as a job creator.

Really?

On the plus side, the reported unemployment rate has dropped from the financial crisis highs.

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For today, we’ll push aside the facts that (a) American’s who have been economically crushed largely voted the Dems out of office; and (2) the labor force participation rate has dropped precipitously – giving the unemployment rate a faux boost.

But, let’s dig a little deeper into the numbers … using the Administration’s own analyses.

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Where the stimulus money went … and why it didn’t “drop kick” the economic recovery.

February 13, 2012

Nice, balanced retrospective in the NY Post re: Team O’s stimulus and why it didn’t — in Joe Biden’s words — “drop kick” the economic recovery.

First, where did the money go?

Biggest chunk to tax cuts that were so diffused — averaging $10 per paycheck —  that they were either overlooked by folks or not enough to neutralize the impact of crushing debt loads or employment uncertainty.

Next biggest chunk to bail out states’ entitlement programs — mostly Medicaid and unemployment benefits.  Just kept things even, no economic boost.

Thirdly, to teacher retention.  Forestalled layoffs, but only temporarily since cash-strapped localities eventually had cut-back when the Fed funds stopped coming and locals couldn’t afford.

Lastly, to the so-called shovel ready infrastructure projects.  Many of those that could of mattered either weren’t really shovel ready or got caught up in government red tape — i.e. the approval & permitting process.  So, spending went to silly or half-baked initiatives — e.g. turtle crossings and bullet trains.

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The Solyndra mess … key points.

September 20, 2011

The AP published a nice summary of the Solyndra fiasco. Here are some highlights …

* * * * *
Projected Losses

Solyndra was hemorrhaging hundreds of millions of dollars for years before the Obama administration signed off on the original $535 million loan guarantee in September 2009.

The company’s SEC filings outlined losses prior to the loan and said bluntly: “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”

“We have incurred significant net losses since our inception, including a net loss of $114.1 million in 2007, $232.1 million in 2008 and $119.8 million in the first nine months of fiscal 2009, and we had an accumulated deficit of $505 million at Oct. 3, 2009,” the company said in a December 2009 filing to the SEC. “We expect to continue to incur significant operating and net losses and negative cash flow from operations for the foreseeable future.”

The DOE brushed off the losses, saying: “Of course start-up companies incur early losses.”

But, the company said: “ … net losses and negative cash flow from operations for the foreseeable future”.

Hard to brush that off.

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Subordination of Gov’t Loan

When Solyndra started imploding earlier this year, “The Obama administration restructured the half-billion dollar federal loan to Solyndra in such a way that private investors — including a fundraiser for President Barack Obama — moved ahead of taxpayers for repayment in case of a default, government records show.

The Administrations defense:

Administration officials defended the loan restructuring, saying that without an infusion of cash earlier this year, solar panel maker Solyndra Inc. would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.

Even with the Administration’s agreement to subordinate the gov’t loan to private creditors, Solyndra filed for Chapter 11 bankruptcy protection a few months later and laid off its 1,100 employees.

Remember the auto bailouts when the Administration subordinated secured creditors beneath the unsecured union obligations?

I guess the new rules are simply that Obama supporters get priority claims in bankruptcy proceedings  …

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Political jitters

Emails show the White House was worried about the likely effect of a default by Solyndra on Obama’s re-election campaign.

“The optics of a Solyndra default will be bad,” an OMB official wrote in a Jan. 31 email to a colleague. “The timing will likely coincide with the 2012 campaign season heating up.”

The budget official, whose name is blacked out in the email, wondered whether Solyndra should be allowed to restructure its loan.

“Questions will be asked as to why the administration made a bad investment, not just once (which could hopefully be explained as part of the challenge of supporting innovative technologies), but twice (which could easily be portrayed as bad judgment, or worse),” the email says.

News flash: even without a 2nd round of money down the rat hole, the gov’t loan guarantees reads through as “bad judgment, or worse”.

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Ken’s big question

Why hasn’t anybody been fired?

If DOE’s head Steven Chu – you know, the Nobel winning scientist —  signed off on this loan guarantee, he should be terminated immediately.

That’s what happens to in private VC firms when a partner loses a half-billion dollars in 18 months on an indefensible investment.

P.S. I don’t think Chu’s Nobel prize was for either oil spill remediation or high tech venture capital work.  If I’m wrong, let me know.

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Where was Joe Wilson when Obama said “It will not add to the deficit”?

September 12, 2011

President Obama – and most lib-pundits – seem to have completely forgotten the debt ceiling and credit downgrade.

Pssst … we have no money !!!

And, they appear  hopelessly confused re: what’s  “debt” and what’s a  “deficits”.

Let’s review …

A deficit is an annual shortfall —  when spending exceeds revenues.

In a gov’t context, a deficit happens when spending exceeds tax receipts in the current year !.

Debt is the amount of money that is owed to other people or entities.  It is the sum of annual deficits.

Now, the important point …

A deficit needs to be funded by borrowing, which adds to outstanding debt.

OK, with that as clarifying background …

Obama said a couple of times that his laundry list of potential job creating ideas ” …  will not add to the deficit.”

Here’s what the AP had to say about that:

It’s hard to see how the program would not raise the deficit over the next year or two because  most of the envisioned spending cuts and tax increases are designed to come later rather than now, when they could jeopardize the fragile recovery.

Deficits are calculated for individual years.

The accumulation of years of deficit spending has produced a national debt headed toward $15 trillion.

Perhaps Obama meant to say that, in the long run, his hoped-for programs would not further increase the national debt, not annual deficits.

Said differently, the only way that the 2012 deficit doesn’t increase is if other spending is cut or taxes are raised in 2012.

Neither is likely to happen (a) because there isn’t time (b) because there isn’t will, and (c) because either would neutralize any impetus from O’s spending.

So, it’s practically certain that the deficit will increase, and that short-term debt will increase.

Most interesting: the added borrowing may push Obama up against the debt ceiling again before the 2012 election … his only real line in the sand during the debt ceiling negotiations.

Hmmm.

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Another gov’t funded green energy company bites the dust …

September 2, 2011

Punch line: A big chunk of the Stimulus money was thrown at the development of green energy technology. Unfortunately, the recipients have proven to be non-competitive.

Excerpted from SFGate.com: Solyndra closes Fremont plant – stimulus hopes dim

Solyndra received $535 million of stimulus money in 2009 to build a solar panel plant.

This week, Solyndra announced that it will close its last remaining factory, lay off its 1,100 employees and file for bankruptcy.

The bankruptcy also represents a high-profile failure for a federal stimulus program that gives loan guarantees to green-tech manufacturers.

Solyndra, whose solar modules are thin tubes rather than flat panels, struggled to compete against a flood of low-priced solar cells pouring out of China.

Solar module prices have plunged more than 40 percent in recent years, squeezing companies’ profit margins even as sales of solar systems grow. Two other U.S. solar companies, Evergreen Solar and SpectraWatt, filed for bankruptcy protection in August.

The administration’s response: “We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed, but we can’t stop investing in game-changing technologies that are key to America’s leadership in the global economy,”

Full article: Solyndra closes Fremont plant – stimulus hopes dim

Ken’s Take: I’m all for green energy alternatives, but I certainly don’t think that the Feds should be in the venture capital business.

There’s a reason that these companies couldn’t raise private capital: they’re not competitive in the world market.

Think about it: Would you put your company’s manufacturing plant in China or California?

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Another Obama economist bites the dust …

May 19, 2011

Well, to be technically correct, Jared Bernstein was Biden’s chief economist and one of the crafters of the administration’s  Trillion Dollar-Stimulus plan.  He fronted for the 3 million jobs saved or created.

Adios, Jared.

Just announced: “Jared Bernstein, the former top economic adviser to Vice President Biden, joined the Center on Budget and Policy Priorities on Monday, May 16, as a Senior Fellow”.

Sommers, gone.

Romer, gone

Bernstein, gone.

Obama says: His economic program saved us from catastrophe. and is working just fine, thank you.

Yeah, right.

“Cash for clunkers” … CLUNK !

September 21, 2010

From the WSJ …

Earlier this year, Christina Romer, the former chairman of the Council of Economic Advisers, wrote that cash for clunkers was an example of “very nearly the best possible countercylical fiscal policy in an economy suffering from temporarily low aggregate demand.”

Economists Atif Mian of the University of California Berkeley and Amir Sufi of the University of Chicago have examined “cash for clunkers,” the $2.85 billion program that subsidized consumers to buy new cars and destroy older ones.

Their conclusion: The program “had no long run effect on auto purchases.”

It did juice sales during its two-month run last summer, by about 360,000 cars, but then it quickly hurt sales by about the same amount, in effect stealing purchases from the future.

The program was a wash in a mere seven months.

Messrs. Mian and Sufi caution that …  if this is the result from the “best possible” stimulus program — per Ms. Romer — the impact of the others must have been awful.

Excerpted from WSJ: Stimulus for Clunkers, Sept. 20, 2010
http://online.wsj.com/article/SB10001424052748703904304575497903033602826.html?mod=WSJ_Opinion_AboveLEFTTop

The “Paradox of Thrift”… explains a lot.

July 27, 2010

Here’s why much of Stimulus has been ineffective in actually stimulating the economy …

The meltdown occurred largely because consumers (and businesses) were over-leveraged. That is, they were carrying too much debt – way too much debt.

When asset values plummeted (think home prices) panic understandably set in.

So, any “free cash” that flows in (think gov’t rebate checks) goes to retiring debt (i.e. deleveraging) instead of consumption.  That’s good for balance sheets, but doesn’t stimulate the economy.

Economists call it the “paradox of thrift.”

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Excerpted from Minyanville.com: Why There’s No Case for Healthy Economic Growth, Jul 23, 2010

The consumer is simply carrying too much debt.

In the US, consumption represents 70% of GDP, but the consumers’ debt/GDP ratio, which spurted from 100% in 2001 to more than 135% in 2008, still stands at 126%, nearly three years after the recession began.

Much of the nine-percentage-point decline is due to financial institution write-offs as opposed to debt repayment, so it appears that the consumer has a long way to go to even get back to the 100% ratio. The next healthy economic upswing must await the healing of household balance sheets.

Unfortunately, to get a healthy consumer balance sheet, savings must increase to repay the debt, which leaves less for consumption.

Lower consumption means slower economic growth with all the attendant implications for employment.

This is known in the economics profession as “the paradox of thrift.”

Unfortunately, the politicians are promoting ill-conceived schemes that wind up only prolonging the agony — like “Cash for Clunkers” and the “homebuyer tax credit.” These programs promote more debt which will have to be reduced in the future

The need to work off debt together with the loss of retirement income by the baby boomers will cause them to put off retirement for several years.

This will trickle down to the younger generation who will find it increasingly difficult to find satisfactory employment.

We’ll see the U6 unemployment measure (which counts the underemployed) continue to stay high – very high.

Full article:
http://www.minyanville.com/businessmarkets/articles/overconsumption-economy-consumers-finance-investors-economcy/7/23/2010/id/29290

Great moments in transparency: Recovery.gov

May 26, 2009

Ken’s Take: Did anybody really expect that the pork-laden, faux stimulus package would be “transparent”? 

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According to USA TODAY:

Although President Obama has vowed that citizens will be able to track “every dime” of the $787 billion stimulus bill, a government website dedicated to the spending won’t  be complete until next spring — halfway through the program,

Recovery.gov now lists programs being funded by the stimulus money, but provides no details on who received the grants and contracts.

The site currently lists total amounts available and already spent — as of last week, $72.2 billion available and $15.4 billion spent. There’s also an interactive map showing allocations for each state.

After the first data become available in October, the plan’s watchdog board will wait six to nine months for the White House Office of Management and Budget to issue new guidance on how far down the spending chain the money must be tracked.

People accustomed to getting easily searchable information quickly could be frustrated …  

Executives at Onvia, which collects government contracting information for its clients, are skeptical that recovery.gov can meet the administration’s stated goals.  “It’s really, really hard.”

Full article:
http://www.usatoday.com/tech/news/techpolicy/2009-05-06-stimulus_N.htm

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Does $1.3 million per new job sound high to you? … Economists rip stimulus plan

March 16, 2009

Excerpted from WSJ, “Old Europe Is Right on Stimulus”, March 12, 2009

A recent study by a trans-Atlantic team of four economists subjected the Administration’s stimulus to the most recent Keynesian scholarship.

The White House estimates of 3.6 million new jobs is based on an “Old Keynesian” model on the impact of government spending, while the new models adjust for the rational behavioral response to the stimulus by businesses and consumers.

What the four economists found is that the Administration’s estimates for stimulus growth were six times as high as they could produce under a modern Keynesian simulation. By their estimates, the stimulus would produce, at most, 600,000 jobs and add perhaps 0.6% to GDP at its peak.

For those keeping score at home, that’s $1.3 million in spending per job … and pushes the US deficit over 60% of GDP

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The Administration is already worried that its stimulus will come up short … and the outside intellectual godfathers of the Obama plan are denying paternity.

Full article:
http://online.wsj.com/article/SB123681403239101741.html

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Foreclosures hurt all property values … NOT !

February 26, 2009

Ken’s Take: Obama keeps claiming that foreclosures have a debilitating economic impact on practically all homes prices.  That’s just not true.

First, U.S. foreclosures are concentrated in only a handful of states: AZ, CA, NV, FL, and MI … and within a handful of overbuilt, price-bubbled communities within those states.

Second, the evidence suggests that homes need to be immediately proximate to — i.e. within a couple of blocks of — a high number of foreclosures for there to be any significant impact.  In other words, foreclosures in California don’t impact home values in New York.

Third, even if homes are proximate to foreclosures, the impact on home values is minimal and short-lasting, unless there has been a significant economic causal shock in the community (e.g. an auto plant closing)

Bottom line: stopping foreclosures will only help those being foreclosed upon — most of whom deserve to be foreclosed upon.

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Below is a summary of the article’s context.  See the source article for the analysis.

Excerpted from Weekly Standard, “Obama’s Fuzzy Housing Numbers”, Feb 24,2009

If President Obama is to sell his mortgage bailout plan to the public, an important argument will be his claim that preventing foreclosures actually helps all homeowners by preventing housing prices from dropping:

“This plan will not save every home, but it will give millions of families resigned to financial ruin a chance to rebuild,” Mr. Obama told a crowd here, in one of the communities hardest hit by the housing crisis. “It will prevent the worst consequences of this crisis from wreaking even greater havoc on the economy. And by bringing down the foreclosure rate, it will help to shore up housing prices for everyone.”

The claim that the program helps “shore up housing prices for everyone” has been frequently repeated by administration officials. Housing and Urban Development Secretary Donovan elaborated on the point:

And in all, this will help, as I said, 3 to 4 million families. But let’s be clear: This will also help millions of other families, as well. Recent research shows that neighboring homes to foreclosed homes lose as much as 9 percent of their value. So people who are not in danger of foreclosure still are suffering from nearby foreclosures. This will help those families, as well. Our estimates are that the average home — not the average home in foreclosure, but the average home across the country will gain $6,000 in value relative to had this plan not been put in place.

The president, the administration, and its advocates can promote any mortgage relief plan they choose on whatever basis they wish. But any claims that there is evidence that bailing out the mortgages of particular individuals helps all property owners is simply not supported by any real research and should be viewed with great skepticism.

Read the full analysis – with numbers and sources:
http://www.weeklystandard.com/weblogs/TWSFP/2009/02/obamas_fuzzy_housing_numbers_1.asp

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The Stimulus: Obama’s missed opportunity … to do something right (and maybe great)

February 26, 2009

Ken’s Take: Sameulson is a left-leaning economist, which should give him some broad credibility. I think his analysis is right on target.  Below are highlights.  Full article is well worth reading.

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Excerpted from IBD, “Stimulus Needs More Power At Front End” Samuelson, February 20, 2009

Judged by his own standards, President Obama’s $787 billion economic stimulus program is deeply disappointing.

Given his dire warnings (about the economy), you’d expect the stimulus package to focus almost exclusively on reviving the economy. It doesn’t, and for that Obama bears much of the blame. His politics compromised the program’s economics. Look at the numbers.

* * * **

The Congressional Budget Office estimates that about $200 billion will be spent in 2011 or later — after it would do the most good. For starters, there’s $8 billion for high-speed rail …  the design and construction will occupy many years. It’s not a quick stimulus.

Then there’s $20.8 billion for improved health information technology — more electronic records and the like. Probably most people regard this as desirable, but here, too, changes occur slowly. The CBO expects only 3% of the money ($595 million) to be spent in fiscal 2009 and 2010.

The peak year of projected spending is 2014 at $14.2 billion.

Consider the retrofitting of federal buildings to make them more energy-efficient.  Obama says “We’re creating jobs immediately.”  Yes — but not many. The stimulus package includes $5.5 billion for overhauling federal buildings. The CBO estimates that only 23% of that would be spent in 2009 and 2010.

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Worse, the economic impact of the stimulus is already smaller than advertised. The package includes a “patch” for the alternative minimum tax. This protects many middle-class Americans against higher taxes and, on paper, adds $85 billion of “stimulus” in 2009 and 2010.

One problem: “It’s not stimulus … Congress was going to do it anyway. They do it every year.” Strip out the AMT patch, and the stimulus drops to about $700 billion, with almost 30% spent after 2010.

The stimulus package offers only modest relief to states. Using funds from the stimulus, states might offset 40% of their looming deficits,. The effect on localities would probably be less.

The stimulus provides most funds to states through specific programs. There’s $90 billion more for Medicaid, $12 billion for special education, $2.8 billion for various policing programs. There’s a big downside: “Temporary” spending hikes for specific programs … will be harder to undo, worsening the long-term budget outlook. The major outcome:  more power centralized in Washington.

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No one knows the economic effects of all this; estimates vary. But Obama’s political strategy stunts the impact from what it might have been.

By using the stimulus for unrelated policy goals, spending will be delayed and diluted.

Politics cannot be removed from the political process. But here, partisan politics ran roughshod over pragmatic economic policy. Even the token concessions (including the AMT provision) to some Republicans weakened the package.

Obama is gambling that his flawed stimulus will seem to work well enough that he’ll receive credit for restarting the economy — and not be blamed for engineering a colossal waste.

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Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=320024639130404

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Do as I say, not as I do … Barack "Line by Line" Obama threatens to "call out" governors & mayors if they waste money

February 26, 2009

Ken’s Take:

After signing a near trillion dollar pork-laden, spending plan, President O warms mayors and governors that American taxpayers “expect to see the money that they’ve earned — they’ve worked so hard to earn — spent in its intended purposes without waste”. 

That’s a non sequitur since most of the Obam-dictated “intended purposes” are wasteful and non-stimulative to start.

Do people really buy thiese contradictions and  mumbo jumbo?   

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Excerpted from yahoo.com, “Obama warns mayors not to waste stimulus money”, Feb 20, 2009

President Barack Obama warned the nation’s mayors on Friday that he will “call them out” if they waste the money from his massive economic stimulus plan.

“The American people are watching,” Obama told a gathering of mayors at the White House. “They need this plan to work. They expect to see the money that they’ve earned — they’ve worked so hard to earn — spent in its intended purposes without waste, without inefficiency, without fraud.”

Using his presidential pulpit, Obama demanded accountability, from his friends in local government as well as his own agencies. He said the new legislation gives him tools to “watch the taxpayers’ money with more rigor and transparency than ever,” and that he will use them.

“If a federal agency proposes a project that will waste that money, I will not hesitate to call them out on it, and put a stop to it,” he said. “I want everyone here to be on notice that if a local government does the same, I will call them out on it, and use the full power of my office and our administration to stop it.”

The president did not specify how, exactly, he would call out one of his own agencies or a local government about wasteful projects.

http://news.yahoo.com/s/ap/20090220/ap_on_go_pr_wh/obama_mayors

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Foreclosures will NOT hurt your neighborhood’s property values … (unless you live in CA, FL, AZ, NV, MI)

February 23, 2009

Ken’s Take: This is a very insightful, must read analysis … one of many that Team Obama seems to have missed.

Big idea: Federal subsidies to bailout delinquent homeowners will not often involve helping “neighbors” but rather those who live thousands of miles away, mainly in just five states: California, Florida, Arizona, Nevada, and Michigan. 

In truth, Obama’s “Homeowner Affordability and Stability Plan” compels taxpayers in most states to help those in just a few.  And,there is neither evidence nor logic that suggests a drop in property values in those 5 states impact property values in the other 45 states. 

Foreclosures aren’t a national problem — they’re an isolated regional problem and, of course, a personal problem for overstretched borrowers.

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Excerpted from NY Post, “The Foreclosure Five”, Reynolds, Feb 21, 2009

When President Obama discusses his $275 billion mortgage bailout, he talks as if it was a national problem, caused by a national decline in home prices. “We must stem the spread of foreclosures and falling home values for all Americans,” he says.

But there is no national market for homes and no national price for homes. Instead, most of the United States will pay for the folly of few.

The beneficiaries of taxpayer charity will be highly concentrated in just five states – California, Nevada, Arizona, Florida and Michigan. That is not because the subsidized homeowners are poor (Californians with $700,000 mortgages are not poor), but because they took on too much debt, often by refinancing in risky ways to “cash out” thousands more than the original loan. Nearly all subprime loans were for refinancing, not buying a home.

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Foreclosure Rates

One out of 76 homes in Nevada went into foreclosure in January, for example, compared with one out of 173 in California, with Arizona and Florida close behind.

But,nationwide, foreclosures fell 10% in January, to one out of every 466 homes … in the 25th ranked “median” state,  only one out of 949 homes was in foreclosure – just one-tenth of 1% … in New York, by contrast, only 1 out of 2,271 homes went into foreclosure … in Vermont, foreclosures amounted to just one out of 51,906 homes

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Home Prices

As of the third quarter of 2008,  home prices were still higher than a year before in 18 states, and down less than 2% in a dozen others. Double-digit declines in home prices were confined to just four states – surprise, every one of the Foreclosure Five except Michigan.

Even though California home prices fell 20.8% over the year ending in the fall of 2008, however, they were still 50% higher than they were just five years ago.

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Underwater Mortgages

Obama is particularly interested in mortgages that are underwater – that is, larger than the value of the home.

But again, this varies enormously by state. The state with the tenth highest percentage of underwater mortgages, Texas, has the same 16.5% underwater as the so-called national average. The other 40 states have a below-average percentage of homes that are worth less than their mortgages, which means the mean average is not at all typical of most states.

Only 4.4% of New York mortgages are underwater, not even a tenth as many as in Nevada.

Full article:
http://www.nypost.com/seven/02212009/postopinion/opedcolumnists/the_foreclosure_five_156287.htm?&page=0 

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CNBC’s Rick “the Plumber” Santelli asks: Raise your hand if you want to pay some deadbeat’s mortgage

February 20, 2009

On air yesterday, Rick Santelli — a CNBC reporter — lashed out at Obama’s stimulus and mortgage plans.

Live on the floor of the CBOE, Santelli asked  folks: ” How many of you people want to pay for your neighbor’s mortgage (because they) don’t pay their bills? Raise their hand. (no hands raised, lots of booing) President Obama, are you listening?”

The video was looping on cable yesterday and rcord-setting on YouTube and other video sites. Link is below if you haven’t seen it.

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Ken’s Take:Santelli’s rant was a Joe the Plumber moment. 

Rick the Reporter captured the frustration of the more than 90% of Americans — mostly tax payers — who work hard, live within their means, pay their bills, etc. 

Even Obama admits that sub-prime mortgages are only 12% of all mortgages but more than 50% of all foreclosures.  He wants responsible folks  to kick in to provide sweet deals to irresponsible deadbeats.  

I don’t think that’s going to fly.  My hunch: Santelli has started an avalanche.

This may be Obama’s “New Coke” moment — a misread American tastes …

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This will get you fired up (unless you’re behind on your mortgage on have your hand out).
http://www.youtube.com/watch?v=bEZB4taSEoA

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What about the guy that got laid off?

February 19, 2009

No surprise that I’m not a big fan of Obama’s plan to bailout the mortgage deadbeats.

For starters, consider the following (none of which I’ve heard the pundits pounce on):

First, even I am sympathetic to the working stiff who anted in a down payment and has a history of making his payments on time, but has been jolted by the economy with declining home prices and, worst of all, a lost job.  I say, cut that guy mucho slack.  I don’t mind my tax dollars helping him out.

But, Plan Obama says multiply earnings times 31% to calc mortgage payment.  The nuns taught me that anything times nothing is nothing — so this guy — the most deserving, in my opinion —  is out in the street,  That’s not fair, is it?

Second, Obama says 10 million mortgages will be impacted at a cost of $75 billion.  That’s $7,500 per loan — of which $5,000 is the sum of the annual incentives (principal reduction) if the borrower makes his payments, and at least $1,500 are processing costs to the lender.  That leaves a whopping $1,000 that goes to modify loans that average over $200,000.  Doesn’t add up to me.

Third, politically incorrect, but shouldn’t this plan be limited to social security card carrying US citizens.

Fourth, keep in mind that 1/3 of all home owners don’t have a mortgage — they own their homes free and clear of any liens or mortgages … and over 90% of all mortgage holders are making their payments — just as they always have.

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For the record: here’s what economists were saying pre-stimulus …

February 19, 2009

Since Team Obama has started the chatter that “saving or creating jobs” will be measured against an 11% unemployment rate, I checked to see what economists were saying right before the stimulus was passed.  Consensus was 8.8% — to me that’s the bar to apply to Obama’s program.  Let’s see what happens.

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http://online.wsj.com/public/resources/documents/info-flash08.html?project=EFORECAST07

Article:
http://online.wsj.com/article/SB123445757254678091.html

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The stimulus package broken down …

February 17, 2009

Great analysis by the Washington Post.  Good numbers and clever charting.

Too big to extract, so here’s the link.  Worth browsing.

http://media3.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.gif

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Hey, Mr. Stimulus … What about small business?

February 17, 2009

Ken’s Take: I was surprised recently when — for a special occasion —  I attempted to make reservations at an Annapolis restaurant (Northwoods) that many locals propped as the the best in the city. It had closed after a couple of decades.  An article in the local newspaper listed it as a casualty of the economy.  Also, I got emails on the same day from a local painter — practically begging for work at any price, and from a local carpenter who was networking to land a job in web design (you read that right).  Since then, I’ve noticed the number of small businesses dying.  Bottom line: the stimulus package is giving more to ACORN than it is to small businesses in total.  That’s sad.

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Excerpted from Knowledge@Emory, “Will the 2009 Stimulus Act Fizzle?”, February 12, 2009

Have you heard anything about what Congress is providing for small businesses in the current economic stimulus package being debated in Washington?

Small businesses in particular are concerned that the stimulus package misses the boat. Small businesses are defined as companies with fewer than 10 employees, and they account for almost 80 percent of all U.S. companies, according to the National Federation of Independent Business (NFIB) lobbying group. Small businesses are credited with generating about 70 percent of all new jobs.

“Funding, not consumer spending, is the core issue for small businesses,” he says. “Right now lenders are hesitant to extend money to commercial borrowers even when they have a good track record, and in some cases are actually calling in loans that they have already funded.”

“The freeze in funding is hurting small businesses much more than the shortfall in sales is hurting them  … Without the necessary cash to grease the gears and keep the business going, companies have had no choice but to reduce costs. And that, unfortunately, results in a cutback on capital expenditures and a need to lay off workers. So cash, in the form of loans, is the mechanism that is most important, but the stimulus bill can do little to help in that regard.”

“Typically, the propensity for risk taking goes down in a weak economy … The typical rounds of early stage financing from friends and family and angel investors depends on excess capital. Reduced wealth means that these usual sources of early venture financing are unavailable to entrepreneurs … in the current environment, many banks are not willing or able to provide loans or lines of credit, leaving very few options for entrepreneurs.”

Increased SBA funding in the stimulus package could provide some rapid assistance to small businesses

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Full article:
http://knowledge.emory.edu/article.cfm?articleid=1218

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Jefferson (Thomas of Virginia, not William of Louisiana) is rolling over in his grave …

February 17, 2009

These Jeffersonian quotes have been making the email rounds.  Even if TJ didn’t really say this stuff, it’s worth reading.

Too bad TJ wasn’t here for the stimulus debate.  Oops, I forgot.  There wasn’t time for one.

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“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”

“To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.”

“The democracy will cease to exist when you take away from those who are willing to work and give to those who would not”

“It is incumbent on every generation to pay its own debts as it goes.”

“My reading of history convinces me that most bad government results from too much government.”

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Thanks to SGC for the heads-up

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Getting to $787 Billion … here are the details

February 16, 2009

The Wall Street Journal has summarized what’s in the stimulus bill.  Even their summary is too long to post, so here’s the link.

http://online.wsj.com/article/SB123458384689487271.html

Worth browsing ….

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Obama’s team sets the stimulus bar at limbo level …

February 16, 2009

Obama says the trillion dollar pork-laden, faux stimulative program will “save or create up to 4 million jobs”. 

Last week, I pointed out that “up to” provides mucho definitional cover by itself, but that the serious wiggle room comes from “jobs saved” — a comparison against some fabricated “what if” number.

Well, the fabricated “what if” number is already being planted:

Austan Goolsbee, one of Obama’s chief economic advisers, says  he’ll consider the effort successful if the worst scenarios don’t come to pass, “if by the end of 2009 we aren’t looking at GDP numbers that are huge negatives, if unemployment rises to the 8% range rather than the 11% that some are predicting.”

I can’t find any non-Obama paid economist saying 11%.  Most economists are saying that the unemployment rate will peak in the range of 8 to 8.5% if we do nothing.  Apparently, Team Obama is prepared to declare success (i.e. claim millions of jobs saved) is the stimulus plan does about as well as doing nothing. The jobs saved will be calculated against a disaster scenario that they’ll specify, thank you. 

In other words, a victory party is guaranteed …

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Reference for Goolsbee quote:
http://money.cnn.com/2009/02/13/news/economy/easton_economicteam.fortune/index.htm?postversion=2009021310

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For sale: state owned aircraft … yeah, right

February 13, 2009

Now that the Feds have bailed out the states, will the governors have to be like the bank CEOs and give up their state owned airplanes & helicopters?

I know they have them … rode on a couple of them a few years ago.

Let’s have Barney Frank make the governors come in and raise their hands if they have one.

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Save Elkart … buy an RV

February 10, 2009

Pres Obama brought tears to people’s eyes last night reporting back from his touch-and-go photo op in Elkart, Indiana.

Portraying Elkhart as Anytown, U.S.A., Obama emphasized that Elkhart’s unemployment rate has soared to over 15% and implied that the pork-laden stimulus package would fix that fast.

No reporter asked how that might happen.

You see, Elkart is a one or two industry town — depending on whether you count “manufactured housing” (i.e. trailers) and RVs (think Winnebago) as one industry or two.

Since many trailer park folks miss “prime” by a couple of points, the credit crunch is a problem.  Since RVs get about 5 MPG, high gas prices tends to dampen demand.

Does Pres Obama plan to breathe life back into credit-risky trailers and eco-unfriendly RVs? Or, does he plan on the laid off unionized factory workers picking up shovels to work on road crews?

It’ll be fun following Elkhart’s revival over the next couple of months.

For the record, I’m betting under on this one.

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What’s magic about one stimulus bill? … Answer: nothing … so bite size it

February 5, 2009

Pres Obama and his surrogates have taken to repeating a mantra: the stimulus bill must be big and must be enacted quickly or else we’ll face an economic catastrophe.  The logic: we’re already taking a shelling and economists say $1 trillion is about the right number.

I’m struck that the emphasis is on big and quick … not right and effective.

There are parts of the proposed bill that make sense and seem to have consensus — e.g. extending unemployment benefits.  Others are debatable philosophically but can probably pass the “does it stimulate” criteria — e.g. Barack O’s $500 refundable tax credits.  Many (most ?) are outright pork and pay-offs.

Why not break the bill into parts?  Pass the stuff that’s on target and relatively non-contentious now … then debate the marginal and flakey stuff in due course.  Since most of that stuff won’t make a bit of difference to the economy, delaying won’t matter.

Even if $1 trillion is the right number, we can roll up to it … it’s not necessary to swallow it in one huge gulp.

What am I missing?

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What's magic about one stimulus bill? … Answer: nothing … so bite size it

February 5, 2009

Pres Obama and his surrogates have taken to repeating a mantra: the stimulus bill must be big and must be enacted quickly or else we’ll face an economic catastrophe.  The logic: we’re already taking a shelling and economists say $1 trillion is about the right number.

I’m struck that the emphasis is on big and quick … not right and effective.

There are parts of the proposed bill that make sense and seem to have consensus — e.g. extending unemployment benefits.  Others are debatable philosophically but can probably pass the “does it stimulate” criteria — e.g. Barack O’s $500 refundable tax credits.  Many (most ?) are outright pork and pay-offs.

Why not break the bill into parts?  Pass the stuff that’s on target and relatively non-contentious now … then debate the marginal and flakey stuff in due course.  Since most of that stuff won’t make a bit of difference to the economy, delaying won’t matter.

Even if $1 trillion is the right number, we can roll up to it … it’s not necessary to swallow it in one huge gulp.

What am I missing?

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