Most economists usually side step politics. We don’t. If there is a linkage to the US real sector, let’s highlight that.
Obama inherited a situation he had a direct hand in creating. When in the Senate, along with Clinton, Dodd and others, he protected the twins from needed reform. As president, he then made things worse (although he blames lack of progress on the Republicans). The WSJ noted that he got almost all he wanted – stimulus, Obamacare, housing bailouts, Dodd-Frank and more. “…Obama has had the freest run of policy of any president since LBJ.” But as we explained for three years in our political blog, these were all policies bound to fail. This was the result.
Yet even given these man-made headwinds we expected the good ‘ol economy to do a bit better than it has, not hitting on 8 of 8 but at least 6 of 8.
First, we missed the psychological impact of the potential fiscal blow coming at the start of 2013, on both consumer and business, but especially on job creation.
Most don’t need reminding that a calamity is scheduled to occur on Jan/1/13 unless politicians work to prevent it. The tax increases are from the expiration of the ’01 and ’03 tax cuts, the expiration of the payroll tax cut and the start of Obamacare tax increases – all to the tune of maybe $495 bln. The top tax rate on dividends will almost triple (15% to 45%); capital gains taxes will be 50% higher; taxes on wages will also spurt. Business planners will sit still. From the Heritage Foundation, “One business official says that ‘as long as proposed changes remain up in the air, companies will be forced to continue to burn fuel operating in a holding pattern rather than charting productive courses forward.’” Translation – they will continue to hold cash rather than create jobs.
Next, although it was clear that employers had permanently done away with many job positions because new employees are to represent a time bomb (health care), the interventionist policies of the administration caused even more of an adjustment that we thought. For example, the explosive cost of Obama’s health plan is of course independent of the number of hours worked, only the number of workers. This is one reason hours worked are now back to pre-recession levels but the per cent of adults who have a job is in the cellar. Easy.
Finally, the antics of the deer-in-the-headlight types - elitists of the E-Z, are beginning to worry even the US, and not just exporters. It is opaque, it is fuzzy to most laymen but they have grown a tad uneasy nevertheless. Tiny Greece is one thing; Spain is quite another. Of course the equity market may be part crap shoot, but it worries folks when it tanks and the media links this to E-Z events. This breeds hesitation on the part of the consumer, equity holder or not.
To get outside and off the keyboard we do a bit of landscaping during daylight hours. Plants are fun but the exercise also provides a heads up. Gardens are a great litmus paper for consumer activity (or lack of) just ahead. They - gardens, are the first to go. Past two or three weeks we’ve noted a hesitation; folks less likely to put in a few more penstemon or clematis than they might have been in April. “We’ll wait a bit. Thanks.”
Politicians had better not.
Robert Craven
Obama inherited a situation he had a direct hand in creating. When in the Senate, along with Clinton, Dodd and others, he protected the twins from needed reform. As president, he then made things worse (although he blames lack of progress on the Republicans). The WSJ noted that he got almost all he wanted – stimulus, Obamacare, housing bailouts, Dodd-Frank and more. “…Obama has had the freest run of policy of any president since LBJ.” But as we explained for three years in our political blog, these were all policies bound to fail. This was the result.
Yet even given these man-made headwinds we expected the good ‘ol economy to do a bit better than it has, not hitting on 8 of 8 but at least 6 of 8.
First, we missed the psychological impact of the potential fiscal blow coming at the start of 2013, on both consumer and business, but especially on job creation.
Most don’t need reminding that a calamity is scheduled to occur on Jan/1/13 unless politicians work to prevent it. The tax increases are from the expiration of the ’01 and ’03 tax cuts, the expiration of the payroll tax cut and the start of Obamacare tax increases – all to the tune of maybe $495 bln. The top tax rate on dividends will almost triple (15% to 45%); capital gains taxes will be 50% higher; taxes on wages will also spurt. Business planners will sit still. From the Heritage Foundation, “One business official says that ‘as long as proposed changes remain up in the air, companies will be forced to continue to burn fuel operating in a holding pattern rather than charting productive courses forward.’” Translation – they will continue to hold cash rather than create jobs.
Next, although it was clear that employers had permanently done away with many job positions because new employees are to represent a time bomb (health care), the interventionist policies of the administration caused even more of an adjustment that we thought. For example, the explosive cost of Obama’s health plan is of course independent of the number of hours worked, only the number of workers. This is one reason hours worked are now back to pre-recession levels but the per cent of adults who have a job is in the cellar. Easy.
Finally, the antics of the deer-in-the-headlight types - elitists of the E-Z, are beginning to worry even the US, and not just exporters. It is opaque, it is fuzzy to most laymen but they have grown a tad uneasy nevertheless. Tiny Greece is one thing; Spain is quite another. Of course the equity market may be part crap shoot, but it worries folks when it tanks and the media links this to E-Z events. This breeds hesitation on the part of the consumer, equity holder or not.
To get outside and off the keyboard we do a bit of landscaping during daylight hours. Plants are fun but the exercise also provides a heads up. Gardens are a great litmus paper for consumer activity (or lack of) just ahead. They - gardens, are the first to go. Past two or three weeks we’ve noted a hesitation; folks less likely to put in a few more penstemon or clematis than they might have been in April. “We’ll wait a bit. Thanks.”
Politicians had better not.
Robert Craven
No comments:
Post a Comment