Karl Denninger on Pres. Obama's 'Cheerleading' Speech at US Chamber of Commerce
from
(snip)"The Foolishness Of Obama And Jobs
This morning our Dear President intends to try to press his luck.
President Barack Obama will challenge American business leaders today to move their cash from the sidelines to invest in the U.S. as part of what he will call a shared burden to boost the nation’s economy.
Obama will make a case in a speech to the U.S. Chamber of Commerce, which has been among his strongest critics, that he is doing his part to improve the business climate after a free- trade agreement with South Korea, a deal to extend Bush-era tax cuts, and a State of the Union address that proposed more government support for infrastructure and “innovation.”
Uh huh. Shared burden eh?
There's a reason that businesses aren't hiring Mr. President. You should have paid attention to people like myself and the handful of others who told you that this was going to happen.
Here's the problem: Commodity price cost-push which is a direct result of your fiscal policy, which has in turn dictated monetary policy, has led companies to suffer insane input cost increases. They can either absorb them or pass them through to customers. There are no other choices; every dollar in cost has to go somewhere.
But with high unemployment, they cannot pass through those costs. The customer will not buy. Yet that inability to pass them through means they also cannot hire, because the other alternative, "eat them", hits profits.
The paradox is that without actual improvement in the employment rate there is no tax base with which to try to pay for the deficit. The employment rate has been falling since July of last year, and it now stands at the lowest level since the recession began, erasing the small upward movement from January to July of last year.
By essentially demanding that The Fed bail out the profligate spending of the government, and getting that, commodity price ramps have destroyed the ability of businesses to hire. If they take the hit on profits then the stock market will collapse as negative earnings are not conducive to high stock prices. If they don't take the hit on profits then eventually the cost-push will kill them anyway, since the entire "hopium" game has been predicated on people going back to work and the government being able to withdraw the stimulus measures. There is no evidence that the latter is going to work either.
You're caught in a trap of your own making Mr. President. Back in 2008 I predicted exactly this outcome, and pointed out that there was no escape from the deflation of all this bad debt, despite the protests of Paulson and Geithner. The path that you chose wouldn't work not because of bad luck or similar, but because it couldn't work on a mathematical basis, any more than you can "solve" your own personal financial problem if you lose your job by whipping out the credit cards and charging them up to pretend you still have your former income.
The bad debt in the system has to be forced into the open and defaulted.
This morning, incidentally, there are a whole host of people who are claiming that the employment report was "light" due to the weather. This is a lie. The Household Survey, which is what I use (and always have) on an unadjusted basis is the only reasonable way to look at this report because it is not subject to these games. If you work for one hour during the month the household survey counts you as "employed." The idea that the weather would stop anyone from working for the entire month is abject nonsense, and while no survey is perfect, unadjusted numbers annualized remain the best option, as the "seasonality" is then automatically part of what you're looking at (since January a year ago is still January!) (snip)
The 'employment rate' Karl is referring to is the actual percentage of working age Americans who have jobs and are ( arguably in some cases ) paying taxes. The employment rate is at a 30 year low ... and declining ... as more and more Americans join the ranks of the 'permanently unemployed' !
Re: Karl Denninger on Pres. Obama's 'Cheerleading' Speech at US Chamber of Commerce
You'd think someone has to move to break this foolish stalemate.
Re: Karl Denninger on Pres. Obama's 'Cheerleading' Speech at US Chamber of Commerce
^^^ they're waiting on the 'forced hand' of the recently appointed 'debt reduction super-committee' to act ... which will also allow for 'blame shifting' regarding whatever budget cuts and/or tax increases actually come down. A recent update ... from
(snip)Debt- Reduction Committee’s Automatic Cuts Could Fall Heavily on Younger Generation
Countless battles are being waged behind the closed doors of the Congressional deficit-reduction super committee, which has less than a month to strike an agreement on reducing federal spending by at least $1.5 trillion over the next decade.
But while the committee members battle secretly over taxing the rich or cutting programs for the poor, the automatic cuts that will take affect if the committee fails to reach an agreement would create a greater imbalance between the old and the young than between the wealthy and the poor.
“When push comes to shove they are going to cut programs for the kids,” said Ron Haskins, a senior fellow at the Brookings Institute. “Elected officials, they don’t want to mess with the elderly. Not only are they a huge constituency, but relative to many other constituencies they are well organized.”
The two of the three major entitlement programs, Social Security and Medicaid, will remain untouched by the automatic cuts, which would kick in for the 2013 fiscal year budget if the super committee fails to create a deficit-reduction plan that passes through Congress.
The third big-dollar entitlement program, Medicare, would be cut a maximum of 2 percent, or about $11 billion in the fiscal year 2013 budget, according to the Bipartisan Policy Center.
The vast majority of the back-up plan cuts would fall on discretionary spending, with half of the $109 billion yearly cuts coming from defense spending.
There are few concrete details on how the remaining $55 billion would be cut, but a report by the Federal Funds Information for States, which does budget analyses for the National Governor’s Association, shows that cuts to children’s programs would likely far outpace cuts to programs for the elderly.
Taking into account likely budget reductions for public education, Child Welfare Services, Child care subsidies and the low-income infant nutrition program known as WIC, the younger generation lose about $5 billion in federal funding, according to the report.
About $250 million would be cut from programs aimed toward seniors, such as the Administration on Aging and housing for the elderly.
“I don’t think Congress on either end understands the consequence of their inaction,” James Jones, an Oklahoma Democrat and former House Budget Committee chairman told Bloomberg. “You’re creating generational war.”"(snip)
For better or worse, 'new' tax increases for debt reduction or any other purposes cannot actually be passed without a successful vote of both houses of congress ... which is unlikely. However, a de-facto income tax increase would occur without congressional action on January 1st if the 'extended GWB tax cuts' currently in effect are not renewed before the end of this year ... which is also unlikely.
This information was posted in the spirit of economic news, not politics.
As to commodity prices and 'cost-push' effects on businesses as discussed in the original post, indeed prices of most global commodities as well as food and energy have been increasing again recently. Earlier moderation in US dollar denominated prices for global commodities was attributable to the distressed Euro ( byproduct of Greek gov't debt crisis ), which increased the US dollar's use as a 'safe haven' currency. This can quickly reverse, however, as the immediate threat of a Greek default moderates.
As to small business outlook re the economy, future hiring etc, I offer this update without additional comment ...
... except to point out that nothing has really changed for the better over the course of the past 9 months !
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