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Thread: the Pink Elephant in Obama's State of Union Speech

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    Default the Pink Elephant in Obama's State of Union Speech

    since the vast majority of this will have direct economic consequences ....

    (snip)Obama's Speech and America, Inc.

    Watching Obama deliver his State of the Union Speech last night, reminded me of all the rah-rah quarterly meetings that we had to attend as Managing Directors at Goldman, where senior management would remind us all of how great we were, and if there were any areas of competitive weakness relative to our adversaries at other banks, all we had to do was step up our game, innovate and globalize (or something like that.)

    Obama wasn't delivering a summary of what has, or is, going on for most Americans last night, no such negative status report. And, if you didn't expect him to, he gave good speech - full of reminders of how it is America's destiny and the American dream to be great and powerful, "robust democracy" that we are.

    There was a massive pink elephant in the room called reality though. So, when he waxed proud when he said, "We are poised for progress. Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing." I had a different reaction.

    My reaction was wtf? Two years after the worst recession? After? Really? What about the 26 million people unemployed or underemployed in the country? What about the 4.4 people applying for every job, compared to the 2.9 people per job after the 2000s recession? What about the 4.4 million jobs that should have been added, just accounting for a population coming of job age alone, forget any kind of growth, compared to the fact that instead, the job pool declined by a quarter of a million people in the past two years, because the time required to get a job is at record highs? What about the nearly 8 million FAMILIES that have been foreclosed upon because of the reckless investment bank race to create $14 trillion dollars worth of toxic assets in the five years leading up to the financial crisis and leave them to shatter lives and the non-stock market evaluated economy? What about the fact that the government fiscally stimulated the banking system by a multiple of 20 times more than it stimulated its citizens, with nary a fight from the politicians our democracy is so lucky to have as representation? What about all that warm, cuddly multi-trillion dollar support from the Fed and the Treasury Department on our country's way to Sputnikian economic greatness?

    "The rules have changed," said Obama.

    Yes, they certainly have. Businesses can offshore jobs because it is in their best profit and shareholder and stock value interest to do so, with no federal incentive to alter this strategy - that's why corporate profits and CEO salaries are up, whereas the average median employee salary on a comparative basis is stuck somewhere in the 1970s. That's why staring at the abyss of potential bankruptcy in the fall of 2008, Goldman Sachs and Morgan Stanley got the Fed's blessing to become federally subsidized bank holding companies. And we, taxpayers, are still on the hook for the Fed's $29 billion of backing of Bear Stearn's assets taken over by JPM Chase in a government sponsored merger in the Spring of 2008 and coming with a bunch of still-being-wrangled lawsuits, not to mention gleeful federally backing of the further consolidation of the banking system to fewer, more powerful, more obtuse, more risky players.

    All of which, though technically not a result of changing rules, but rules staying the same and working for the reckless, were still rubber stamped by the Obama administration (yes, and Bush too, and Clinton's deregulatory team, etc.) and its financial king's, Tim Geithner, until recently Larry Summers, and incoming JPM Chase's Bill Daly and GE's Jeffrey Immelt as job czar. (GE and JPM Chase, having been happy bailout recipients, of course.) Small businesses can't hire as many people, because they can't afford their financing, even if banks will give them usefully sized loans, they don't get the 0.25% interest money the banks get from the Fed when they need it. Individuals got hosed, meanwhile, by shady home loans and shadier modifications and higher fees on all sorts of credit, from cards to student loans (a record $884 billion of which are outstanding to students whose tuitions rise as their job and loan-payback prospects fall).

    We're not talking just about steel mill job eliminations over the years, we're talking about the solidification of the administration's decision to ignore the mistakes and devastating consequences of Big Finance and Obama suggesting last night, that people consider becoming teachers, with a smile. No disrespect to teachers, of course, they work much harder and make do with much less than traders, but you don't see Vikram Pandit, Citigroup CEO rushing out the door to become one, no you see him getting approved for a RAISE, of the sort a teacher can only dream about, from a base salary of $1 million to $1.75 million this year, after Citigroup's survival was ensured only because of massive government stimulus. Why? Because he is now valued at a 75% pay increase, that Washington, and Obama would like to believe is due to his hard work, and not to a government handout. America at its best.

    There were some useful elements to his otherwise CEO like speech (you department heads sitting out there - you work together so America, Inc. can be the best it can be.) They included adopting a fair immigration policy that doesn't chuck people out of the country because the path to being here is so laden with decade long bureaucracy and cost, keeping some elements of an otherwise insurance-company gift of a health care reform bill that the GOP House just repealed and that doesn't reform the cost of health care - such as covering pre-existing conditions and people up to the age 26 under their parents' plan (if their parents have a plan, that is) even though Obama backed off from even trying to convince the room to consider full coverage for all without egregious premiums, and wanting to increase the spread of clean energy initiatives (that he said will create 'countless jobs' as opposed to the countable 5 million he said it would create during is campaign.)

    But, in the end, Obama's practiced eloquence in delivery, peppered with a few American success stories - who can deny the hero behind the Chilean mine worker rescue his due? - and the now-debated investment over spending word choice, belied a strong dose of something akin to condescension. If you don't have a job, it's because of the Internet, not the banks hoarding $1 trillion that we gave them at the Fed. If we're falling behind China in education, it's because bad teachers should be removed, good ones rewarded and parents (who apparently aren't doing as good as job as they could of this) are not focusing on the education process more at home. If America, has the 'most prosperous economy in the world' for its corporations and financial insitutions, its because we all share a common, attainable dream.

    So, just go out and innovate and compete and get it. We'll be here watching the banks' backs.(snip)


    With tremendous thanks to author Nomi Prins ...

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    Default Re: the Pink Elephant in Obama's State of Union Speech

    I also liked the part where Obama said he wants utilities to be required to generate 85% of their electricity by wind and solar by 2030. Is he serious ? That will NOT happen by 2030 or even 2040.

    T. Boone Pickens is bailing out of wind generated elctricity after sinking billions of his own money. He can't sell the juice he's generating because of the power grid.
    Wind generated electricity in Texas effectively has to be used there.

    Nobody lifted a finger to implement the Pickens Plan. Obama sat on his hands for two years. So did the Dem controlled Congress.

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    Default Re: the Pink Elephant in Obama's State of Union Speech

    Obama has/had a hard time like anyone who would have taken office. This country needs a lot of unity, to over come all the B.S. We are dealing with. But will all these politicians do what is right for this country or will they fight each other just because they are on different sides? Fat wallets fighting over stuff to make their wallets fatter while most people struggle. Some day they will figure out that things need to change. We need to get back to making and buying American made products and quite out sourcing jobs to other country's. That is the only way We will be able to get out of this funk.

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    Default Re: the Pink Elephant in Obama's State of Union Speech

    ^^^ unfortunately, the same 'pink elephant' applies. American made products will never be able to successfully compete with foreign products when the differentials in gov't mandated costs for minimum wages and benefits, worker safety compliance, environmental compliance, product liability, regulatory financial compliance, energy costs, corporate taxes etc. have to be borne by the American business but NOT by the foreign business.

    For your 'suggestion' "to get back to making and buying American made products and quite out sourcing jobs to other country's" to become a realistic option, one of two courses of action would have to be followed ...

    - If the additional mandated costs / taxes are left in place on American companies, the only way to (artificially) make the resulting product prices of American products economically competitive with those of 'foreign' competitors is for the US to cut off access to the 'foreign' competitors' products by American customers. This could be accomplished by tariffs ( i.e. imposing a heavy tax upon every imported product entering the USA ... example a called for 27% where Chinese products are concerned ), by relative currency devaluation of the US dollar etc. However, all of these options achieve their objective of allowing American companies to operate profitably via the mechanism of allowing the market price of all products available in US stores to rise significantly. In an environment of stagnant US wages and resulting 25%+ price increases, this strategy involves some major risks.

    - If the additional mandated costs / taxes are left in place on American companies, the only way to ( artificially ) force American consumers to buy more expensive American products is to erect outright trade barriers to eliminate lower cost 'foreign' products from the US marketplace. Such trade barriers ( i.e. import quotas ... example ethanol which makes the US price 54 cents per gallon higher than Brazilian ethanol available for import but stopped by a US quota ) would make American products the 'only available option' to US consumers, regardless of price. This involves a different kind of risk i.e. that foreign countries will also block the export of American products. It also introduces a risk of shortages, as well as extreme price increases in certain market segments due to lack of remaining domestic production capacity.

    The ugly truth here is that there is no such thing as a 'free lunch'. As 'developed' countries choose to spend more and more money on environmental compliance, worker safety, minimum wage, mandatory employee benefits, social welfare benefits, alternative energy etc. to improve the standard of living of their citizens, the associated taxes and costs make the products and services provided by those developed countries more and more expensive versus competitors from 'undeveloped' countries. Once this cost differential reaches the point of no return ( i.e. the price advantage of foreign products and services exceeds the profit margin of US product and service providers ), there is no positive long term option for US product and service providers that are exposed to 'foreign' competition.

    I would also add that, in many cases these days, US companies is a misnomer. In point of fact, many DJIA US companies now earn the vast majority of their actual profits via offshore divisions. In essence, those profits from foreign operations subsidize US front office management, engineering, sales, etc. as well as 'unprofitable' domestic business operations. However, just this week, a lightly publicized but highly significant precedent was set. Sara Lee split itself into two separate companies ... with the profitable foreign operations new company about to be purchased by international investors, but with the 'unprofitable' domestic operations new company left to an uncertain future fate.
    ~
    Last edited by Melonie; 01-29-2011 at 07:21 AM.

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