Unemployment Rate Falls, But Jobs Numbers Fail to Impress
-- Unemployment rate for December.
The good news? The unemployment rate fell from 9.8 percent to 9.4 percent. The bad news? The number of new jobs created fell far short of economists' expectations.
The number of new jobs added in December was 103,000, but economists had estimated that the number would be 150,000 and some suggested that 200,000 – the magic number for driving big reductions in unemployment – was within reach.
In November, 39,000 jobs were added, but the rate increased because of the number of long-term unemployed and weak private-sector hiring. In December, touted by many demand-side economists as the pivot point in the Obama recovery, the rate did go down, but job growth wasn’t what it was expected to be.
The takeaway? For another month, unemployment is over 9 percent and signals for the economy are decidedly mixed. Caution will still reign in the private sector.
Obamacare at Center of Debt Battle
“This thing is a huge budget buster. So, what they have is a piece of paper of what they manipulated to say this thing reduces the deficit. I will eat my tie if that is the outcome of this law."
It took Democrats only one day to embrace the merits of obstructionism. Democratic lawmakers were so eager to impede the new majority that they even raised procedural hurdles to the reading of the Constitution.
Now that, calls for a cold glass of Haterade.
But the more substantive fight is over the Republican bill that would repeal President Obama’s national health-care law. The bill, initially dismissed as a empty act of political theater by Democrats, is increasingly the subject of serious debate and discussion.
The full repeal isn’t going anywhere, but it has touched off a discussion about perceived weaknesses in the legislation.
Part of the Democrats’ line of attack is that repeal would add to the deficit on the grounds that the original bill was scored by the Congressional Budget Office as reducing the deficit.
But, Republicans point out that the CBO has to accept any assumptions made in law. If Congress proposed a law that said the government would profit from the sale of leprechaun gold, the CBO can only ask how big the pot is, not question the probability of such an outcome.
And there, you have the big problem for the president and his party on health care for the next two years. Voters simply aren’t inclined to believe that having the government underwrite the addition of 15 million people to the insurance rolls is going to save money.
While Democrats touted a $500 billion cut to Medicare by some future, presumably politically braver Congress, we’ve now watched for 15 years as budget-balancing cuts to Medicare payments to doctors from the Clinton era have been staved off at great expense.
The argument that giving away health insurance saves money never really took hold with voters, and the decision to create a new entitlement at a time of fiscal alarm is perhaps the greatest source of opposition to the president’s plan.
Meanwhile, the Obama administration is pushing hard for an early vote on increasing the current debt ceiling from $14.3 trillion. The government’s line of credit was increased by $1.9 trillion in February, the latest in an escalating series of debt hikes in the past four years.
The Obama team wants a debt vote by the end of March to reassure American creditors that we’re good for the money. Not that the Bank of China would come and try to repossess the Lincoln Memorial or anything, but as a sign to the bond markets that there’s not going to be a big debt crackup.
But Republicans are increasingly heard wondering whether a crackup would be such a bad thing and increasingly invoke the TARP bailout fund of 2008 as the last time a president told them that failure to borrow gobs of money would result in worldwide depression.
Which brings us back to health care. Democrats are trying to burnish their credentials on debt ahead of the credit-limit vote by accusing Republicans of trying to increase deficit spending by repealing the president’s new entitlement. Republicans are pushing back, but the CBO score is powerful ammunition for Democrats when dealing with sympathetic media outlets.
You read it here first – the CBO will soon become a battleground as Republicans look for scores on alternative legislation. The GOP will be looking for some evidence that their plan saves money.
The only problem is, they don’t have a health plan on which they agree – other than that the one enacted by the President is rotten.
Obama’s Pro-Business Pivot Welcomed Warily
“They give with one hand and take 100 times more with another, either through inaction on bigger issues…or with thousands of unnecessary regulations."
-- Dan DiMicco, CEO of Nucor steel, to the Wall Street Journal on the Obama administration’s efforts to make peace with the business community.
Business leaders are offering encouraging words about President Obama’s effort to re-brand his administration as business friendly. But the substantive battles still lie ahead.
The president today will introduce Gene Sperling as the new head of the National Economic Council.
While longtime economic adviser Austan Goolsbee will likely still keep the president’s ear, Sperling is a Clinton Democrat and a proponent of a cooperative relationship between government and business – a cartel model favored by the former president and his team.
Following the appointment of banker and longtime political operative William Daley as his new chief of staff, the Sperling pick is intended to reinforce the idea that Obama is going to put aside his strategy for economic “leveling” or redistribution in favor of job growth.
But today also sees news in the Wall Street Journal from administration sources that a possible simplification of the tax code may be put off for a year.
This simplification is the great hope of the business community because it will likely come with a reduction in America’s high corporate tax rates. News that they will have to wait another year for the carrot after two years of the stick from the White House won’t please the captains of industry.
The other big looming question is on the administration’s proposed carbon crackdown. If the EPA goes ahead with its global warming effort, any good feelings from the roll out of the Clinton all-stars will likely dissipate.
The certain downside of the pivot – anger on the left – is already being realized as liberal groups are railing against the selection of Daley and Sperling and wondering why Obama is nuzzling Democrats’ old friends in the business world.
But, with the president unable to obtain new stimulus from Congress, unlikely to get another round of cash pumping from the Fed and still facing an anemic recovery, he has little choice but to try to enlist the help of business in affecting a real turnaround.
Turning to the Clinton model he once dismissed is the president’s only option, and he must embrace it, even if only half-heartedly.
Remember, Democrats believe they lost the 2010 election so badly because of the state of the economy and high unemployment. The motivation to reverse those conditions will drive them to an array of interesting policy decisions.
Bernanke Set For Hill Grilling
"I think you'll see some guys up there banging their shoe on the table.”
-- Former Bush White House spokesman Tony Fratto to Reuters on Ben Bernanke’s Senate testimony scheduled for today.
Expect Federal Reserve Chairman Ben Bernanke to tout signs of a continued, if modest, recovery as evidence that his policy of printing $600 billion in new money to buy up existing U.S. debt is working.
The effort, which Bernanake says is aimed at stabilizing interest rates but critics say is just printing devalued currency to pay off government obligations, is the second round of this audacious strategy.
The Bernanke Fed in 2008 and 2009 acquired some $1.55 trillion in debt with created cash, which the bank calls “quantitative easing.”
While critics worried about the weakening of the dollar then, the depth of the financial crisis hushed many skeptics. But the second round has expanded the criticism from the usual quarters, like libertarian Fed foe Ron Paul, to more mainstream players.
The concern now is that the weakened dollar will actually stifle the economy. Nothing has the power to kill a comeback like inflation, as rising energy prices are currently demonstrating.
The other fear is that when the debt buy back ends in June, that the economy will crash like a five-year old coming down off a sugar high – that having so much cash sprayed into the economy for so long has created an artificial and unsustainable condition in the economy.
Remember that there is new momentum in Congress behind the movement to audit the secretive Fed, a first step toward curtailing some of the bank’s expanding powers. If Bernanke’s answers don’t satisfy, the momentum will only grow.
Proposed Shift in Defense Spending Gets Chilly Reception
Defense Secretary Robert Gates’ five-year plan to finance the Afghan war with deep cuts to other parts of the defense budget landed with a thud on Capitol Hill.
Defense hawks don’t like the idea of trading strategic arms strength for the Afghan effort. Budget hawks and liberals don’t like that the plan isn’t a savings, but rather a shift in allocation.
Gates has succeeded in getting both sides to dislike the plan, often an early sign of potential compromise. What we have not seen, though, is any interest in enacting the changes. Congress can appropriate whatever it likes for defense, whether the administration asks for it or not.
While there had been some interest in the cuts to weapons systems proposed by Gates, the decision to finance the $78 billion, five-year cost shift partly through major reductions to Army and Marine personnel alarmed many who see an expanding array of military threats in the years to come.
And Now, A Word From Charles
“The election of November did not give (President Obama) a road to Damascus moment where he decided to become a centrist. He's not.
He's a smart man, and he understands there is no way in the next two years while the House is Republican that any of the liberal agenda is going to pass.
So the next two years he is devoted to presenting himself as a centrist. That is smart, the only way to get reelected. Then, if he gets reelected, he has free hand for the next four years.”