Econony at ‘Stall Speed’

U.S. Economy Running at ‘Stall Speed’

Excerpt:

Pacific Investment Management Co. and BlackRock Inc., which together oversee almost $5 trillion, say the U.S. economy is stalling.

Bill Gross, who runs the world’s biggest bond fund at Pimco, and Peter Fisher, head of fixed income at BlackRock, say the Federal Reserve is preparing measures to counter the slowdown.

“We’re not looking at a recession yet, but we’re at a tipping point,” Gross said yesterday in an interview on Bloomberg Television. “We’re at what we call a stall speed in which corporate profits don’t grow, jobs aren’t created,” said Gross, who is based in Newport Beach, California.

The U.S. recovery that began two years ago has been losing momentum and there are even odds the nation will slip into a recession, according to Harvard University economics professor Martin Feldstein

Comment: Despite QE1, QE2, TARP, Auto bailouts, Cash for Clunkers, Rebates for home buyers, et cetera. Job creation is near zero. My take is that Obamacare has introduced a lot of doubt into the business world and is counter-productive to economic growth

Legislative Star Chamber?

'Super Congress': Debt Ceiling Negotiators Aim To Create New Legislative Body

Excerpt:

Debt ceiling negotiators think they've hit on a solution to address the debt ceiling impasse and the public's unwillingness to let go of benefits such as Medicare and Social Security that have been earned over a lifetime of work: Create a new Congress.

This "Super Congress," composed of members of both chambers and both parties, isn't mentioned anywhere in the Constitution, but would be granted extraordinary new powers. Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers -- six from each chamber and six from each party.

Legislation approved by the Super Congress -- which some on Capitol Hill are calling the "super committee" -- would then be fast-tracked through both chambers, where it couldn't be amended by simple, regular lawmakers, who'd have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

Comment: See also

Ron Paul Sounds Alarm on “Disturbing” Super Congress

Image: The Star Chamber

Entitlement state time bombs ... the road to fiscal perdition

A short history of the entitlement state

Excerpts:

FDR began the entitlement era with the New Deal and Social Security, but for decades it remained relatively limited.

...

... in the mid-1960s with LBJ's Great Society and the dawn of the health-care state. Medicare and Medicaid were launched in 1965 with fairy tale estimates of future costs.

Medicare, the program for the elderly, was supposed to cost $12 billion by 1990 but instead spent $110 billion.

...

Social Security's fiscal trouble began in earnest in 1972 with bills that increased benefits immediately by 20%, added an annual cost of living adjustment, and created a benefit escalator requiring payments to rise with wages, not inflation. This and other tweaks by Democrat Wilbur Mills added trillions of dollars to the program's unfunded liabilities. Believe it or not, these 1972 amendments were added to a debt-ceiling bill.

None of these benefit expansions were subject to annual budget review and thus they grew by automatic pilot. They are sometimes called "mandatory spending" because Congress is required by law to make payments to those who meet eligibility standards, regardless of other spending needs or tax revenues.

According to the most recent government data, today some 50.5 million Americans are on Medicaid, 46.5 million are on Medicare, 52 million on Social Security, five million on SSI, 7.5 million on unemployment insurance, and 44.6 million on food stamps and other nutrition programs. Some 24 million get the earned-income tax credit, a cash income supplement.

By 2010 such payments to individuals were 66% of the federal budget, up from 28% in 1965. (See the second chart.) We now spend $2.1 trillion a year on these redistribution programs, and the 75 million baby boomers are only starting to retire.

We suspect that in the 1960s as now—with ObamaCare—liberals knew they had created fiscal time-bombs. They simply assumed that taxes would keep rising to pay for it all, as they have in Europe.

On Monday night Mr. Obama blamed President George W. Bush's "two wars" for the debt buildup. But national defense spending was 7.4% of GDP and 42.8% of outlays in 1965, and only 4.8% of GDP and 20.1% of federal outlays in 2010. Defense has not caused the debt crisis.

...

Then came Mr. Obama, arguably the most spendthrift president in history. He inherited a recession and responded by blowing up the U.S. balance sheet. Spending as a share of GDP in the last three years is higher than at any time since 1946. In three years the debt has increased by more than $4 trillion thanks to stimulus, cash for clunkers, mortgage modification programs, 99 weeks of jobless benefits, record expansions in Medicaid, and more.

...

This is the road to fiscal perdition. The looming debt downgrade only confirms what everyone knows: Congress has made so many promises to so many Americans that there is no conceivable way those promises can be kept. Tax rates might have to rise to 60%, 70%, even 80% to raise the revenues to finance these promises, but that would be economically ruinous.

Yet Mr. Obama and most Democrats still oppose any serious reform of Medicare, Medicaid and Social Security. This insistence on no reform reinforces the notion that our entitlement state is too big to afford but also too big to change politically. This is how a AAA country becomes AA, the first step on the march to Greece.

Comment:  Every young thinking adult should read this. At 62 I may well be dead (and in heaven) before this time bomb goes off.

Obama's curious exercise of presidential "leadership"

Boehner Repeals Murphy's Law

Excerpt:

... by rejecting everyone else's plan while offering no plan of his own, the president effectively took himself out of the game. This curious exercise of presidential "leadership" transformed Mr. Obama into the Newt Gingrich of this debate, while Mr. Boehner looked serious and reasonable.

That seems to be the liberal reading as well. The New York Times appears to be reeling. Maureen Dowd quotes a Democrat as saying we're watching President Obama "turn into Jimmy Carter right before our eyes."

Comment: He seems content to enjoy the trappings of the presidency: the world tours, the entourage, the fawning, et cetera. First lady Michelle the same.

Deciding not to buy a Lamborghini

When a cut is not a cut

Excerpt:

No plan under serious consideration cuts spending in the way you and I think about it. Instead, the "cuts" being discussed are illusory, and are not cuts from current amounts being spent, but cuts in projected spending increases. This is akin to a family "saving" $100,000 in expenses by deciding not to buy a Lamborghini, and instead getting a fully loaded Mercedes, when really their budget dictates that they need to stick with their perfectly serviceable Honda. But this is the type of math Washington uses to mask the incriminating truth about their unrepentant plundering of the American people.

Comment: Ron Paul

Fiat 500 - Very Cute

Fiat commences 500 national media onslaught

Excerpt:

The FIAT brand's new tagline, "Simply More," defines the Fiat 500 as everything you need and nothing you don't. It represents the notion that the simple things in life are treasures, alongside the thought that the richness and fullness of a life well-lived is defined by one's view of self-expression.

Comment: We drove by the Luther dealership in Brooklyn Park and looked at 4 models in the showroom. Very cute. (We are not in the market ... happy with the two vehicles that we currently have)

Debt deal: Big issues kicked

Leaders Agree on Debt Deal - Plan to Cut $2.4 Trillion in Spending, Avoid Default Fails to Resolve Fraught Issues

Excerpt:

For all the down-to-the wire drama, the deal leaves the hardest questions unanswered and sets in motion years of fiscal pain. It imposes spending caps for the next 10 years, but leaves the details of what programs would be cut to congressional committees.

And it launches a ferocious, months-long argument over how to rewrite the tax code and what changes to make in popular programs like Social Security and Medicare—issues that were ultimately shelved in this debate.

So while one uncertainty would be lifted from the economy with the increase in the debt ceiling, others would be prolonged.

Comment: Findings of the Bowles-Simpson commission should be considered

Loose lips

Loose Lips Trip Up a Good Hands Executive

Excerpt:

Some agents were angry about the changes and the company's recent performance, said people who heard the remarks at the bar. Mr. Wilson, who wasn't at the bar, was a popular target.

Then came the two words that helped end Mr. Lacher's 20-month career at Allstate: "f—ing a—."

Some people who heard the double-barreled expletive or are familiar with an internal investigation about the incident launched by Allstate said Mr. Lacher was talking about Mr. Wilson, the chief executive at Allstate since 2007.

Another account has Mr. Lacher saying Mr. Wilson "would have to be a "f—ing a—" if he didn't feel responsible for the company's performance.

Either way, some of the people who heard Mr. Lacher's remarks interpreted them as highly critical of Allstate's chief executive. Accounts of the incident rippled through the Leaders Forum the next day, according to several people. Eight weeks later, Mr. Lacher lost his job.

Comment: It's one thing to feel this way ... but keep lips sealed

Summer projects

Summer project season at the Peet household. Time for home maintenance.

Projects:

• Replaced broken brick on the front of the house. (I chipped off the edge with the snow plow last Winter). I had a tough time finding a contractor for such a small project. Finally found a mason who replaced the brick on Friday
  
• New tile in the master bedroom bath. Existing tile is cracking. We purchased new slip resistant tile at Kate-Lo Tile & Stone. Today is tear out of the old. Tomorrow and Wednesday setting and grouting of new tile
  
• Driveway repave by DMJ asphalt. Our driveway really took a beating last winter and is cracked up by the street. I had hoped to not have to do this but had to. Asphalt turned out to be 1/3 the cost of concrete. Good article on Concrete vs Asphalt Driveways? This project looks to happen in September

Delayed gratification and Retirement

What a Marshmallow Experiment Can Teach You About Retirement

Excerpts:

Decades ago, in what's now come to be known as the "Marshmallow Experiment," Stanford researcher Walter Mischel gave a group of three to five year-olds a choice: Eat one marshmallow now, or wait fifteen minutes and get two marshmallows. The experiment was intended to measure children's ability to delay gratification.

What did Mischel discover? About 30 percent of the children were able to wait fifteen minutes to get the second marshmallow; the rest gobbled it down before the time was up.

...

So what does all this have to do with retirement planning? Quite a bit, actually. The fact is, almost half of all Americans start their Social Security benefits at age 62, which provides the lowest possible income. But if they could instead wait until age 70 to start receiving benefits, they could almost double their monthly income and increase their expected lifetime payout.

Comment: The Stanford marshmallow experiment . I turn 62 in 18 days but won't be starting retirement or social security yet. But I doubt I wait until 70. I'm also not much of a marshmallow fan!

Hwy 169 / Hwy 81 Overpass completed

Devil of a traffic problem is fixed

Excerpt:

A $50 million exorcism of the notorious "devil's triangle'' of traffic delays and crashes in the northwest metro is down to the finishing touches on a new up-and-over bridge on Hwy. 169.

A quarter mile of Hwy. 169 through Brooklyn Park and Osseo has been rebuilt on piers that now take the highway over traffic signals at Hwy. 81 and N. 85th Avenue that once intersected Hwy. 169 in a nightmarish triangle.

The triangle was known for trying delays, rear-end collisions and even fatalities. Driver tempers flared in the 20, sometimes 30, minutes it took at rush hour to inch along Hwy. 169 through the two signals at Hwy. 81 and 85th Avenue. Compounding the delays, an occasional freight train would roll across 169, bringing traffic to a halt.

The project -- four years in the making -- unclogs another of the Twin Cities' biggest traffic bottlenecks, one that 56,000 vehicles travel through daily.

Comment: Earlier posts on project:

• Speaking of the Highway 169 Triangle (Jan 10,2010)
  
• Hwy 169 / Hwy 81 completion date Fall 2011 (July 13, 2009)
  
• Hwy 169 "the devil's triangle" redo delayed (December 15, 2006)
  

Comment: A vast improvement.

King of Calypso: Barak "and his mission has failed"

What Harry Belafonte would ask Congress about the debt crisis

Excerpt:

“Barack Obama and his mission has failed because it lacked a certain kind of moral courage, a kind of moral vision . . . a kind of courage we are in need of,” said the King of Calypso.

“When he said ‘Yes, we can,’ it was politically clever, but he never defined what it is we can do. So we filled in those spaces — what we thought he meant — only to find we were disappointed, because none of those points was satisfied.”

Comment: "Day–O". More on Harry Belafonte here

How bad is it?

Focus Turns to Weekend Negotiations

Comment: Graphic from above WSJ article.

Running out of Cash: The world's largest tech company has more cash than the world's largest sovereign government.

Apple Now Has More Cash Than The U.S. Government

Daily statement from the U.S. Treasury

Comment: Cash Bundle Image Source

Screen grab from Estimates of When the U.S. Will Run Out of Money

"Gmail Man" - Microsoft Slams Google in Parody Video

Microsoft Slams Google in Parody Video

Excerpt:

"Gmail Man" follows a personified Google bot poking through private emails to find semi-relevant keywords for banner ads. As email users are horrified by his actions, he shrugs them off with a hearty laugh and complete indifference.

Comment: I'm not bothered by Gmail ads ... don't think I've every clicked on one!

Milton Friedman on School choice (School vouchers)

Reason.tv: Happy 99th Birthday, Milton Friedman!

Excerpt:

This is the man, after all, who introduced the concept of school vouchers, documented the role of government monopolies on money in creating inflation ...

Comment: Worthwhile video

Speaking of Gmail (and YouTube)

New Google Project Goes for the Jugular

Excerpt:

Gmail continues to trail Hotmail and Yahoo Mail in user number -- at 190 million users to Hotmail's 360 million and Yahoo's 270 million.

Comment: www.emailintervention.com

Top 10 most-visited Internet sites

Top 10 most-visited Internet sites

The List:

1. Facebook
   
2. google.com
   
3. youtube.com
   
4. yahoo.com
   
5. Yahoo Mail
   
6. bing.com
   
7. Microsoft Live Mail
   
8. msn.com
   
9. yahoo.com
   
10. gmail.com
    

Comment: Of these: I used to use both Yahoo mail and Hotmail. Supplanted by Gmail and a jrpeet.com branded Gmail. My homepage is IGoogle. I use finance.yahoo.com to track investments. I probably visit youtube daily but not directly ... something sent to me generally

Some Facts About the Debt Limit

Some Facts About the Debt Limit

Excerpt:

The Democrats like to point out that the ceiling was raised 18 times during the Reagan administration. That’s right, an average of about once every six months. In other words, those increases were small and highly temporary, as you can see from the chart. It is also noteworthy that the total increase in the debt ceiling during the Reagan years was almost exactly equal to the increase in the debt ceiling during the Clinton administration. Neither, however, is in the same universe with the spiraling debt the Democrats have racked up since they took control of Congress in 2007.

Comment: Unsustainable

Obama on Libya: "a matter of days not weeks" (March 18th)

Comment: That was in March! MONTHS! Billions!