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Posts Tagged ‘Stimulus Package’

Second Stimulus: Barack and a Hard Place

Posted by Larry Doyle on July 7th, 2009 1:50 PM |

Does the United States economy need a second Stimulus Package? Can we afford to do it? Can we afford not to do it? What happened to the first one? Why hasn’t that package seemed to have a greater impact?

So many questions and seemingly so few concrete answers. The White House itself is sending out mixed messages on this topic. Add it all up and there is little doubt the U.S. economy is “between Barack and a hard place,” and neither looks all that appealing.

From my standpoint, the reason why we are at this juncture is ultimately due to the fact that the government, media, and financial industry have not fully explained the basic structural changes at work in our economy currently. That structural change centers on the fact that our economy is adjusting from running on excessive debt to operating on real savings and cash flow generated by real earnings. That adjustment takes time.

Obama has largely painted himself into a corner in regard to the economy and another stimulus package. What is surrounding Barack and team?

> The Wall Street Journal reports House Majority Leader Hoyer Signals More Stimulus May Be Needed. Steny is not exactly going out on a limb here, while clearly trying to curry favor with his constituents back home.

> Bloomberg highlights that Obama Adviser Says U.S. Should Mull Second Stimulus:

The U.S. should consider drafting a second stimulus package focusing on infrastructure projects because the $787 billion approved in February was “a bit too small,” said Laura Tyson, an outside adviser to President Barack Obama.

The current plan “will have a positive effect, but the real economy is a sicker patient,” Tyson said in a speech in Singapore today.

> The other side of the stimulus coin has real White House representation in the persons of Austan Goolsbee and Joe Biden, as Bloomberg reports:

Tyson’s comments contrast with remarks made two days ago by Vice President Joe Biden and fellow Obama adviser Austan Goolsbee, who said it was premature to discuss crafting another stimulus because the current measures have yet to fully take effect.

While Barack is catching it from all sides within his own party, the talk of green shoots has significantly subsided. From my standpoint, it seems rather obvious that the following are true: (more…)

Which Way Is the Wind Blowing?

Posted by Larry Doyle on April 25th, 2009 1:24 PM |

Barack Obama strikes me as an individual who views popularity as necessary while principles are convenient. I see this in his engagement with the American public, the international audience, and political constituencies. While the strong liberal Democratic leadership is not only setting policy and writing legislation, Obama and team are working to appease a large percentage of the audience at home and abroad.

If one is trying to be all things to many people, ultimately an individual risks being measured as lacking depth. I believe that Obama runs a very high risk of being painted as a lightweight for this very reason. Let’s touch upon a few examples of Obama’s waffling while simultaneously working on growing his popularity:

1. Stimulus Package: rammed through Congress by Pelosi and Reid without a fair and full reading of the bill. We are now paying for the shortcomings in the bill. Obama “sold” this package via his Town Hall “concerts.”

2. On the “torture” front, Obama initially declared he was moving forward without reviewing and potentially prosecuting Bush officials. In the face of massive pressure from a hard core liberal element of the Democratic Party, Obama quickly reversed course and indicated he may pursue investigations and prosecutions of Bush officials. Getting pushed around by “friends” does not exactly send a message of character and strength to the world.

3. Budget: Obama will run over a number of Blue Dog Democrats specifically on the health care front via a process known as reconciliation which disallows filibustering. The use of the reconciliation process has never been used for major legislation. The overall budget is a MASSIVE spending proposition which dramatically escalates the federal deficit.

4. Budget Deficit: under pressure from the same Blue Dog Democrats and after putting forth the largest budget ever, Obama is now recommending a “pay as you go” bill which would instill higher taxes or spending cuts after this budget.

Why do we need to wait? Why shouldn’t we impose this “pay as you go” before the budget? Very simply, Obama would not be able to hold to his promise of not raising taxes on the middle class.

Bloomberg provides insight on the pay-as-you-go approach, Obama Urges Congress to Pass Law Enforcing Fiscal Discipline.

The timing of Obama’s newly found fiscal discipline is very interesting. Why? Earlier this week, Obama came out with a “bold” approach to imposing real discipline within his cabinet. Bloomberg shed light on Obama’s boldness,

Obama was criticized as doing too little to confront the deficit when he ordered his Cabinet to cut $100 million out of the budget in the next 90 days, which would cut this year’s projected deficit by about 0.006 percent.

Yep, this newfound discipline is starting with an aggressive move of cutting 6 thousandths of 1 per cent from this year’s budget. Such a “draconian” (NOT) level of cuts hints at how large Obama’s budget is while seriously questioning his integrity and that of the Democratic leadership on this topic.

A President who has an agenda a mile long but six inches deep risks being exposed when the wind kicks up. Speaking of wind and Obama, which way is it blowing today?

LD

Missed Opportunity

Posted by Larry Doyle on April 21st, 2009 7:52 PM |

Yesterday I asked, Is The Stimulus “Stimulating?” Today, Bloomberg reports how Caterpillar Says U.S. Stimulus ‘Missed Opportunity. Specifically, the bulldozer manufacturer described the Stimulus Package  as “disappointing and less effective than measures approved by China.”

“The infrastructure portion of the stimulus package was disappointing in that it was less aggressive than other countries and missed an opportunity to correct past underinvestment in U.S. infrastructure.”

In my piece, I highlighted how the Stimulus Package was more a promotion of the Democratic agenda rushed through Congress without a full and proper review. Without targeted spending on immediate areas of need and benefit, our economy suffers while our deficit worsens. While the Democratic leadership railroaded the Stimulus legislation through Congress, which country did enact targeted fiscal stimulus? China.

The Chinese economy is benefitting from their stimulus while many workers in our country suffer. While President Obama visited Caterpillar in February to push the Stimulus Package, I do not get the sense that he would be invited back now. Caterpillar’s CFO said:

“We think China has it right,” Chief Financial Officer Dave Burritt said in an interview. “The majority of their package is on infrastructure spending. We are seeing life there. We are seeing the turnaround. We would like to see a more robust infrastructure package in the United States.”

I would qualify that statement as a courteous indictment of the political process in our country. Caterpillar is not the only company benefitting from the Chinese stimulus. Additionally,

United Technologies Corp., Eaton Corp., and Dupont Co. are among other U.S. industrial companies that said they have seen results from China’s plan. This week all three reported first- quarter sales declines ranging from 12 percent to 20 percent.

United Technologies’ fire and security division “is seeing some benefits from the stimulus already in terms of the dollars which are flowing through to infrastructure,” Akhil Johri, the head of investor relations, said today. The Hartford, Connecticut-based company is the maker of Otis elevators, Carrier air-conditioners and Pratt & Whitney engines.

At Wilmington, Delaware-based DuPont, the third-biggest U.S. chemical maker, “electronics customers are reporting some benefit from the China stimulus package,” CEO Ellen Kullman told analysts on a call today.

Eaton CEO Sandy Cutler, on a conference call yesterday, described China as “the first market where we can really string things through to government stimulus activity.”

Caterpillar predicted the U.S. recession in October 2007, two months before it officially began, and said today it expects the world economy to decline about 1.3 percent this year.

Missed opportunities do not necessarily always present themselves again.

LD

Is the Stimulus “Stimulating?”

Posted by Larry Doyle on April 20th, 2009 5:30 AM |

As I referenced on my radio show last evening (note: you can listen to an audio recording of the show from the BlogTalkRadio player in the right sidebar), China’s economy is benefitting from economic stimulus enacted by its government. Well, the U.S. government also enacted a major Stimulus Package in early February. How is our package doing? Is it impacting the economy? Our economy certainly does not seem to be benefitting significantly from any government stimulus.

I wrote on February 7th that Martin Feldstein, renowned Harvard economist who sits on Obama’s Economic Recovery Advisory Board, called the Stimulus Package An $800 Billion Mistake.

Feldstein’s concerns about the Stimulus as reported by the Washington Post, focused on several items:

1. On the spending side, the stimulus package is full of well-intended items that, unfortunately, are not likely to do much for employment.

2. The largest proposed outlays amount to just writing unrestricted checks to state governments.

3. The plan to finance health insurance premiums for the unemployed would actually increase unemployment by giving employers an incentive to lay off workers rather than pay health premiums during a time of weak demand.

4. A large fraction of the stimulus proposal is devoted to infrastructure projects that will spend out very slowly, not with the speed needed to help the economy in 2009 and 2010.

5. The problem with the current stimulus plan is not that it is too big but that it delivers too little extra employment and income for such a large fiscal deficit.

Let’s see how business executives view the rollout of the Stimulus Package. Would they agree or disagree with Feldstein’s concerns? (more…)

Economic & Market Highlights 10/20/08

Posted by Larry Doyle on October 20th, 2008 10:45 PM |

The markets had a very solid rebound of app. 5% across the board which brings us back to the levels seen literally one week ago. What prompted the rally??

1. Credit continued to loosen. 3mo Libor moved down to 4.05. This rate was in the 4.75% a week to ten days ago.

2. Speculation that the Fed will cut rates at next week’s meeting. The Fed Funds rate is currently at 1.5%. (I also am concerned about this move. I think it increases the chance for real growth in the money supply which becomes a precursor to increased inflation)

3. Speculation that there will be another stimulus package coming from Washington. This package would be in the vicinity of $100-150bln. This package would likely be a mix of extended unemployment benefits, spending on infrastructure, and debates about tax cuts vs spending on liberal programs. (I view this as a shot of morphine to a patient that needs a long term program of more exercise, a balanced diet, and clean living) (more…)






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