Where is the US economy headed?

ci, you truly do live in fantasy land, don't you?

So, when the economy starts recovering, you're going to credit Obama? After all, you credited him for the crash and you now say he owns it. Just want to be able to link here later when you claim he doesn't deserve credit for the economy...

Cycloptichorn

It depends upon size of recovery. The economy is cyclical by nature, and even despite Obama, it will cycle upward at some point, but I do not believe it will be much of a recovery, it will languish in mediocrity, compared to what it could be with a more sound economic policy. If it really takes off big time, that would be something I would have to consider, but I don't think it will. But I do think it will turn around in a very mediocre fashion.

So basically, you won't give Obama credit no matter what happens. Gotcha.

I think you are pretty irrational on this issue, especially as you blamed Obama for the stock market crash in '08. It's obvious that you are starting from a position of partisanship and picking and choosing facts to match your position, instead of the other way around.

Cycloptichorn

If it takes off more than I think it would have without Obama, I would have to consider crediting Obama, but I don't think that will happen. Yes, I am partisan, I believe conservative policies are more sound and linked to the realities of economics, as are you partisan. Admit it. I think you are wrong, you think I am wrong. We just need to watch now what actually happens.

Yes, I am partisan; but you don't see me blaming, say, Republican Senators for the stock market crash, just b/c I disagree with their politics, the way you have been blaming Obama for months. it's irrational.



I suspect you are going to carefully re-define what you 'thought' would happen without Obama's policies or leadership, so that no matter how well things go over the next 3-4 years, you won't have to credit him. We will see.

Cycloptichorn

Laffer is as wrong about this as he is most of his analysis. And here's a quote from him, yesterday -



Someone ought to clue this guy in that Medicare and Medicaid are already ran by the government...

Cycloptichorn

okie has a crystal ball that he uses to determine the future economy of our country. okie just hasn't noticed that his crystal ball is wrong 100% of the time.

http://news.yahoo.com/s/nm/20090805/bs_nm/us_usa_housing_deutschebank?sec=topStories&pos=2&asset=&ccode=


Let's all pray that these experts are wrong.......

(As a total aside, Roger, I was meeting today with the salesman for our local yellow page phone book. Nice guy whom I have known for several years. I mentioned having been to ABQ. Turns out he was born there but grew up in, gasp, Farmington! Small world, isn't it?)

In his paper for the Texas Public Policy Foundation, “The Prognosis for National Health Insurance” (www.LafferHealthCareReport.org), Dr. Laffer urges Congress to work toward a solution that will not penalize the 70 percent of Americans who currently are happy with their health care arrangements, and that will not increase the federal deficit while only reducing the number of uninsured Americans by roughly one-third. Instead, Laffer emphasizes the need for patient-centered reform.

The study indicates that reforms need to focus on reducing costs by closing what Dr. Laffer has coined the “health care wedge” " a separation of effort and reward by which a patient understands the true costs of their health care and is therefore driven to be more efficient in his or her spending. This separation is actually the reason health care costs are skyrocketing, according to Dr. Laffer.

“When the government spends money on health care, the patient does not,” says Dr. Laffer. “The patient is then separated from the transaction in the sense that costs are no longer his concern. Health care reform should be based on policies that diminish this wedge rather than increase it.”

Health care costs have risen over the past 50 years, while the patient’s out-of-pocket contribution has plummeted: half of all medical expenditures in 1950 were paid by patients in the form of out-of-pocket expenses; today only 10 percent of expenditures are paid the same way.

Dr. Laffer’s research concluded that the current proposals being discussed in Washington would:

•raise total federal government expenditures by 5.6 percent more than otherwise, adding $285.6 billion to the federal deficit in 2019;
•increase national health care expenditures by an additional 8.9 percent;
•raise medical price inflation 5.2 percent above what it would have been otherwise;
•slow U.S. economic growth in 2019 by 4.9 percent less than the baseline scenario of doing nothing;
•increase the current net present value of funding health care re¬form based on President Obama’s priorities by $1.3 trillion (due to higher medical inflation and expen¬ditures), or $ 4,354 for every man, woman, and child in the U.S.; and
•still only insure about one-third of those currently without insurance " at a cost of approximately $62,500 per new person insured.
Dr. Laffer says there are many solutions available to better the health care system without destroying what already is good in the system. The path to true health care reform is through patient-centered solutions, which emphasize the patient-doctor relationship and work to shrink the wedge by allowing patients and doctors to make more effective and economical health care choices. These solutions include:

•Provide for individual ownership of insurance policies " the tax deduction that allows employers to own your insurance should instead be given to the individual;
•Better leverage Health Savings Accounts (HSAs) " HSAs empower individuals to monitor their health care costs and create incentives for individuals to use only those services that are necessary;
•Allow interstate purchasing of insurance " policies in some states are more affordable because they include fewer bells and whistles; consumers should be empowered to decide which benefits they need and what prices they are willing to pay;
•Reduce the number of mandated benefits insurers are required to cover " empowering consumers to choose which benefits they need is only effective if insurers are able to fill these needs;
•Reallocate the majority of Medicaid spending into simple vouchers for low-income individuals to purchase their own insurance " an income-based sliding scale voucher program would eliminate much of the massive bureaucracy that is needed to implement today’s complex and burdensome Medicaid system and produce considerable cost savings;
•Eliminate unnecessary scope-of-practice laws and allow non-physician health care professionals to practice to the extent of their education and training " retail clinics have shown that increasing the provider pool safely increases competition and access to care and empowers the patient to decide from whom they receive their care; and
•Reform tort liability laws " defensive medicine needlessly drives up medical costs and creates an adversarial relationship between doctors and patients

Headed for a “Jobless Recovery?”
Is the U.S. Economy Headed for a “Jobless Recovery?”
By Don Miller
Associate Editor, Money Morning

Could the U.S. economy be looking at a "jobless recovery?"

After the worst financial crisis since the Great Depression reached its apex late last year, the U.S. economy has shown signs of life in recent months. Stock prices have soared. The housing market " once in veritable freefall " seems to be bottoming out in preparation for an eventual upsurge. And just last week, the government said that businesses cut jobs in May at the lowest rate in six months, a report that offered encouragement both to investors and to the millions of U.S. workers who have lost their jobs.

But U.S. Federal Reserve Bank Chairman Ben S. Bernanke threw cold water on hope for a full-blown economic rebound when he hinted that the U.S. labor market could well be facing a jobless recovery " an upturn in which the economy and corporate profits advance, but virtually no new jobs are created to compensate for years of layoffs.

Just this week, economists at the Federal Reserve Bank of San Francisco said they see signs that the current turnaround could mimic the aftermath of the 1990-1991 recession " a wheezy, drawn-out recovery with little hiring that means years of additional problems for U.S. workers.

philsbackupsite.wordpress.com/.../is-the-us-economy-headed-for-a-“jobless-recovery”/

See the prediction that almost half the mortgages will be underwater by 2011 for further illustration of the problem.

to be clear: the problem is the lack of wages in an economy determined (or so we are told) to rely on wages rather than financial industry gimmicks and games to support the consumption of a nation.

There will not be any rebound to levels we have enjoyed since the great depression for many reasons. There has been too much spending going on that continues to increase debt without any hopes of increasing jobs to levels that will provide enough tax revenues to cover current and past spending.

That will be the major drag on our economy. There is no way to increase consumer spending by dropping interest rates, because they're already at new lows without much wiggle room for any effect.

Factory jobs that used to be the mainstay of the middle class and our economy has been trashed because of poor management and cheaper labor costs outside the US.

The only places where our economy can grow are the service, alternative energy, high tech and biotech industries. New hires in those industries are not be seeing the pay and benefits enjoyed only a couple of years ago, and older workers will be retired sooner to take advantage of hiring from colleges and universities at much cheaper cost.

These dynamics will essentially bring down pay scales, and economic growth will be slow compared to the past. With lower wages and benefits, consumer spending will likewise struggle to retain the 75% of our economy.

Unemployment will hit higher levels before they begin to stabilize and turn positive, but we're really looking at a long-term scenario. My wild guess is a minimum of at least eight to ten years beginning next year if we end the year on a positive note.

With the stimulus plan money still not having much impact on our economy, I'm hoping it'll be better than any of us hopes for.

Bush Deficit vs. Obama Deficit

President Barack Obama has repeatedly claimed that his budget would cut the deficit by half by the end of his term. But as Heritage analyst Brian Riedl has pointed out, given that Obama has already helped quadruple the deficit with his stimulus package, pledging to halve it by 2013 is hardly ambitious. The Washington Post has a great graphic which helps put President Obama’s budget deficits in context of President Bush’s.

http://www.google.com/search?q=Too+high+a+deficit+being+posted+by+the+Obama+Administration&rls=com.microsoft:en-us:IE-SearchBox&ie=UTF-8&oe=UTF-8&sourceid=ie7&rlz=1I7DKUS_en

A scary stat at 1st glance, hawk, but I would contend that if you (collective "you") bought a house in the last few years & INTEND TO STAY THERE for a decade or so, you will probably come out okay. Assuming you have a steady job and a fixed rate mortgage, you will be fine. You may be underwater now, but only if you need to sell in this market.
In my burg, a lot of suffering is going on amongst people who were going to grad school at UVA for 3 years or so and assumed they could buy and then flip it for a profit when they moved on. It didn't work out.
And I would argue again, as I have on a number of threads from economics to architecture to urban planning, that there is a dramatic shift developing amongst young professional Americans about where they want to live. Not in the suburbs, perhaps, but in the urban core.
Enough from me.

marsz, I'm looking at Obama's deficit from a different perspective; his deficit would not have been so bad if he didn't have to fight this recession that's on a scale not seen in modern times. I also believe his promise of cutting the deficit in half was premature; nobody can know how our (and the world) economy will look like by 2013. No economist can predict that, because there is no way to measure the future of the world economy that far ahead.

All we can hope for is that this recession will have a minimizing effect by the stimulus plan; it will not turn it around on a dime, but the pain to more people can be less when the stimulus plan begins to take effect.

I have not agreed with all of Obama's spending, but it's easy to be critical from the back seat. I wouldn't want that kind of responsibility for all the tea in China.

It's going to be a long drawn out struggle to improve the unemployment picture, but all I know is that we will not see those 4.7% unemployment rates for several decades. I hope I'm wrong.

Homeowners with the riskiest mortgages taken out during the housing boom have seen the greatest erosion in equity, in part because they were "affordability products" originated at the housing peak, Deutsche said. They include subprime loans, of which 69 percent will be underwater in 2011, up from 50 percent in March, Deutsche said,

Of option adjustable-rate mortgages -- which cut payments by allowing principal balances to rise -- 89 percent will be underwater in 2011, up from 77 percent, the report said.

Regions suffering the worst negative equity are areas in California, Florida, Arizona, Nevada, Ohio, Michigan, Illinois, Wisconsin, Massachusetts and West Virginia. Las Vegas and parts of Florida and California will see 90 percent or more of their loans underwater by 2011, it added.


http://www.reuters.com/article/GCA-Housing/idUSTRE5745JP20090805

Add to that a bunch of new cars obtained by trading in clunkers also being underwater, and all of those repos go on the market. Thats going to mean additional trouble for carmakers trying to sell new vehicles.