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Chickens and the Roost

Chickens and the Roost

Yes, the chickens are coming home to roost.  All of a sudden, the man who had all the answers three years ago has none.  He was calm, cool and collected.  He convinced the American citizenry that he could solve all of the country’s problems, and that it was critical that we abandon the “failed policies of the last eight years”.

We are 17 months away from the next presidential election and the economy is definitely slowing.  Aggregate demand for goods and services is weakening.  And unless President Obama changes course on legislation enacted in the last two years, we are likely to enter yet another recession.  He won’t, though, and it will prove to be his undoing.

Conservative pundits and Republican presidential candidates are licking their chops.  The President’s economic policies are failing.  People vote with their wallets.  They know Socialism doesn’t work.  Should the economy slow further, it would not surprise me to see other Democrats, sensing opportunity, toy with a Presidential run of their own.  Even Anthony Weiner’s troubles aren’t enough to take the spotlight off the economy.  (Perhaps the President should appoint Representative Weiner to the post of Social Media czar.)

Unfortunately, we predicted extended economic weakness two years ago.  It was easy to spot.  We had lived through the Carter Administration.  Those who don’t understand history are doomed to repeat it.  Over-regulation chokes off economic growth.  Businesses and individuals thrive on certainty.  The health-care legislation, Dodd-Frank, and impending tax increases (unless the Bush tax cuts are extended further), coupled with out-of-control government spending and astronomical deficits have created the uncertainty.  Employment is declining.  Unemployment is increasing.  The stock market, that predictor of future corporate earnings, is falling.  Oil, gas, and other commodity prices are high.  Aggregate demand is suffering.

This is Obama’s legacy.  He can no longer blame anyone else.  And we predicted it.

Chickens and the Roost

Supply and Da Man

First of all, a wonderful Memorial Day to you all.  I pray that your travels, picnics, barbeques and parties would be safe and fun.  And let’s remember our fallen heroes, who without them and their ultimate sacrifice, we wouldn’t have the freedom to enjoy what we do.

The economic calendar of last week revealed what appears to be a slowing economy.  First, the analysis.

  • Durable goods orders, a highly volatile statistic, were down significantly, reflecting slower orders for cars, airplanes, refrigerators and washing machines.
  • The second estimate of  Q1 GDP growth was anemic at 1.8%.  3% would be healthy and would suggest an economy growing fast enough to grow our employment base.
  • Having said that, initial jobless claims rose to 424,000, which again suggest a slowing economy.  Employment is not likely to grow unless jobless claims fall below 400,000.
  • Consumers are more upbeat, for now.

There are two things which conservatives who have any hope of reaching the White House in 2012 must address in order to have a chance–employment, and oil prices.  The two go hand in hand.  High commodity prices are a drag on the economy and act like a tax.  $4.00 gasoline keeps people from spending on other things, like durable goods, which create jobs.  The current administration has been an abject failure in handling the economy (never mind foreign policy).  Republicans would do well to address these issues, and not each other.

Chickens and the Roost

Supply and Da Man

U.S. markets closed off today, while foreign markets ended generally positive.  A bright spot in the US economy was the release of new home sales, which were estimated to be up 7.3% in April, to 323,000 new homes sold.  This represents the fourth month in a row of increasing new home sales, but we’re coming off a dismal low. In 2005, 1.4 million new homes were sold.

The housing market reflects a classic supply/demand equation.  The supply of housing far outstrips demand, and with a glut of foreclosed homes still in the market, the housing market is unlikely to return to 2005 levels for several years.

The markets seemed to be more concerned with the nation of Greece’s ability to service it’s debt.  Keep in mind that about the only difference between Greece and the United States is 270 million people.  Investors have yet to figure that out.

Chrysler today repaid $7.6 billion in government loans to the United States and Canada.  Perhaps this will tide Treasury Secretary Tim Geithner for another 20 minutes or so.

Having said that, Secretary Geither hinted today that it would be “irresponsible ” for Congress to allow the nation to default on its debts by not raising the debt ceiling.  Is he kidding?  It would seem to me that allowing the nation to run $1.2 trillion deficits, and the general handling of the economy by this Administration would be the very definition of irresponsible.  Perhaps he should be examining how we got to this point.  A little circumspection could go a long way and would be a pleasant change of pace.

Wisconsin: Not Just Cheeseheads After All

Wisconsin: Not Just Cheeseheads After All

Who would have thought that the state with the first Socialist governor and subsequent Socialist Party candidate for President, Robert LaFollette, would be the first state to actively attempt to bring the public employee unions under control?  What’s next?  Vermont goes Conservative?

So much of life can be equated to the supply and demand theory of economics.  That is, there’s unlimited demand for things, but always a limited supply and when demand outstrips supply, there’s friction.  This concept can be applied to the present fiscal situation that Wisconsin, and all states for that matter, face.  They are out of money.  Tax revenues, that is, supply, have outstripped the demand for services.  The public unions, in fact all unions, have been feeding at the trough of the nation’s largesse for years.  Governors have conceded “rights” (also known as privileges in the real world) to them in an attempt to keep these spoiled brats, for lack of a better term, happy.

But state goverments are struggling to provide basic services, and in order to remain fiscally solvent, something has to give.  Credit Governor Walker with having the cajones (a Texas term for chutzpah), to admit to his state and the rest of the country that this has to stop.

The consequences of what’s playing out in Madison are significant.  Does a special interest group get to dictate how much of the fiscal pie they get to keep?  Or does the duly-elected governor decided how to run his state?  And if the unions fall in Wisconsin, what about all the other states that are stuggling to balance their budget and keep taxes down?  And at what point do the taxpayers, the customers, the folks actually paying the bills, get to decide how much they’re willing to pay for under-performance?  I don’t get to demand a raise if I don’t perform in my job.  How are the unions any different?

I know the union contracts were negotiated in good faith, but the times are different.  A job with fewer benefits is better than no job at all.  The supply of money is limited, and they don’t get to demand more than what there is available.  And the people who actually do the paying should get to call the shots.

I wish you the best, Governor Walker.  To quote Simon and Garfunkel, “…our nation turns it’s lonely eyes to you…”.

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