To Those Who Support The UAE Ports Deal: Are you willing to stake your life on it?
by Bill Simon
Seriously, I have a question for those who blindly support the President on this deal: Are you truly willing to stake your life on your beliefs that the UAE are our buddies for life? You may be doing just that.
The interesting thing you should take note of is that regime change in the countries of the Middle-East can happen at the snap of your fingers.
At one time, we were best buds with the Shah of Iran. In 1979, he was pushed into exile and was replaced by the Ayatollah Khomeini, who promptly established an extreme Islamic regime. Anyone born after 1980 recall something called the “Hostage Crisis?”
The fact that Dubai Ports is owned/controlled by the government of the United Arab Emirates should really give ANYONE with half a brain’s knowledge of history a long pause to consider the consequences of turning ANY control over our ports to a government-run company from any Arabic/Islamic state of the Middle-East.
Xenophobic? Puh-leeze. You’re a complete imbecile if all you can muster is that those of us who are against this deal are “racist” in our objections.
We know history, and you don’t. In this case, it won’t be that those who ignore history are doomed to repeat it. It will be that those who ignore history doom others to repeat it.
Technorati Tags: Ayatollah Khomeini, Dubai Ports
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February 28th, 2006 at 11:57 am
Bill, the framing of your question is, at best, disingenuous. But I’ll take the bait anyway and say, yes, I’m prepared to stake my life on it. As you’ll see from my blog, I have posted several times on this issue in the last few weeks. I’m and American living and teaching just outside of Dubai (about 6 miles away). If this place were anywhere near as bad as you’ve made it out to be, then already am staking my life on the Dubai and UAE governments.
I’ve read your posts on this topic. To put it mildy, your arguments are specious and your information is dated. Still I respect that you, like many Americans, have strong feelings about the matter and am, frankly quite glad the nation is having this debate.
February 28th, 2006 at 2:11 pm
Thank you for taking the time to respond.
One question: Do you suppose the Americans living and working in the American embassy in Iran back in 1979 had ANY inkling of what was about to happen when the Shah was overthrown?
February 28th, 2006 at 3:24 pm
Bill,
Yes to staking my life on it and ditto Starling. In fact, in a very small way I did stake my life on it back in 1979 when I joined the U.S. Navy largely due to the ongoing Iran Hostage Crisis. Ironically I helped maintain F-14 Tomcats utilizing parts previously destined for Iran’s fleet of Tomcats purchased while the Shah was in power then held up after the Ayatollah took over.
Again I reiterate the indisputable fact that if islamic terrorists desire to attack America with some form of WMD (if they are no longer able to accomplish their goals with box cutters), it won’t matter which country/company operates a few port terminals. They will find a way to get the weapon(s) into this country (if not already here)whether by air, sea or ground. One could argue that UAE terminals will be the safest due to the overwhelming scrutiny being placed on this transaction.
Bart
February 28th, 2006 at 4:55 pm
Gosh, Bart, with the amount of insight you have on all of life, why don’t you have an ambassadorship to Somewhere where we could really take advantage of your skills and knowledge?
Perhaps Tom Price can make you Ambassador to the Forsyth County Sheriff’s Office, eh? You’ve taken at least one tour of their facilities, haven’t you?
February 28th, 2006 at 7:09 pm
Gee Bill, did you actually come up with that BS all by yourself? If you really desire to be humorous, may I suggest you click here — http://jeffjustice.com/workshoppe.html — it might help, but you have miles to go.
Bart
February 28th, 2006 at 8:54 pm
Bart,
I don’t need any help with being funny. Those folks who have a clue know how funny I can be.
March 3rd, 2006 at 11:47 am
http://www.lastbestchance.org
I don’t favor this deal. Why would we want to expose our ports to known or perceived threat?
Frankly, I am not in favor of any foreign entity running or managing our ports. Seems to me we are selling America out to the highest bidder.
On another issue, many of our toll roads are being run by foreign entities as well. The Republican governor and Republican leaders in Indiana are moving to provide a 75 year lease to a foreign partnership http://www.indystar.com/apps/pbcs.dll/article?AID=/20060220/NEWS02/602200442/1006/NEWS01.
March 10th, 2006 at 12:58 am
To Maurice, eight of the ten largest ports in the US have foreign owned terminal operators, in some cases owned by foreign governments. Flags represented in these eight ports include China, Denmark, Dubai, Hong Kong, Japan, Singapore, South Korea and Taiwan. This reality is the result of the economics of the container shipping industry and has been decades in the making.
The truth of the matter is that this is NOT a national security issue. Terminal operators employ longshoremen to load and unload ships. They do not secure our ports – the government does that.
This hyped up issue is nothing more than protectionism and a plain old political power grab hiding behind feigned concern for national security.
And many Republicans in Congress took the Democrats’ bait, sold out the President (not to mention principle) and joined the xenophobic frenzy out of fear that they’d look weak this fall on national security. Weak compared to whom? The Dems? Ha!
Besides, all they accomplished in beating up the President over this was to make the Dems who began the demagoguery look right. They aren’t.
To Bill, 1979 Iran has no real bearing on this, but if Dubai were taken over, as was Iran, by a government hostile to the US, we could always freeze their US assets as we did with Iran. The fact that DP World is government owned is just another in the school of red herring swimming around the real issues here – protectionism and domestic politics.
Oh, and recognizing xenophobic rhetoric and demagoguery does not equate to calling the speaker racist. Playing on irrational fears of voters, yes. Pandering to latent racial, ethnic and religious biases, yes. Dishonest, certainly. Racist themselves? Only as a means to an end. But in some ways, that’s worse, I think. The racist is ignorant. The demagogue knows better.
March 10th, 2006 at 6:14 am
It now seems that the port deal is dead. Rather than have his first veto overridden, Bush’s Arab buddies have backed out in favor of an American firm (which one is not clear).
It seems to me that this whole story has ignited a spirit of economic nationalism in both parties. This is a very good thing. Perhaps we are seeing the death throes of the NAFTA/CAFTA/MFN era, and the birth of a WTO that works to isolate non-democratic, exploitation-driven regimes
rather than reward them. I say that because had the British company not been bought out by DP World, the whole subject would never have been discussed.
March 11th, 2006 at 9:29 pm
Please read and comment, I think Charley is right this about the global effects on our economy and security,
The U.S. trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to “political turmoil,” billionaire investor Warren Buffett warned.
“Right now, the rest of the world owns $3 trillion more of us than we own of them,” Buffett told business students and faculty Tuesday at the University of Nevada, Reno. “In my view, it will create political turmoil at some point. … Pretty soon, I think there will be a big adjustment,” he said without elaborating.
Buffett, head of Omaha, Neb.-based Berkshire Hathaway Inc., was in Reno for the opening of the company’s R.C. Willey Home Furnishings store.
He spoke the same day Berkshire Hathaway disclosed its purchase of Business Wire, a privately held distributor of press releases, for an undisclosed amount.
San Francisco-based Business Wire will operate as a wholly owned subsidiary of Berkshire Hathaway, whose other holdings include the insurer Geico Corp. as well as stakes in American Express Co., Anheuser-Busch Cos. and The Coca-Cola Co. Business Wire competes with PR Newswire to distribute company regulatory filings and press releases to investors and the news media.
The U.S. trade deficit soared to a record $665.9 billion in 2004, and Buffett said he expects it to top $700 billion this year.
“That’s $2 billion a day. We are like a super rich family that owns a farm the size of Texas. You sell off a little bit of the farm and you don’t see it,” he said.
Fifteen years ago, the U.S. had no trade deficit with China, he said.
“Now it’s $200 billion. If we don’t change the course, the rest of the world could own $15 trillion of us. That’s pretty substantial. That’s equal to the value of all American stock,” Buffett said.
“That’s the big danger. Our national debt does not bother me. Our public debt is not at a crazy level,” he said.
Meanwhile, Buffett said U.S. companies generally are enjoying some of their best times ever.
“Profits are at close to record levels. So business in America is doing very well – better than its lower-paid workers, by some margin,” he said.
“This is a pro-business United States. If you get a group of businessmen together they’ll complain about regulation and liability suits, all kinds of things. Some of those things they are right about and some of it they are just complaining to complain,” he said.
U.S. corporations seem to be acting more ethically in the wake of scandals at Enron and elsewhere, but that’ primarily due to bad publicity rather than new federal checks and balances, he said.
“I think corporate American to a fair degree has cleaned up its act,” he said. “The press has probably contributed very significantly to that. I think managers are behaving better because of fear rather than just becoming better managers.”
Buffett said students will have to decide personally whether a master’s in business administration will benefit their careers or if they’d be better off plunging into the real world.
“The one piece of advice I can give you is, do what turns you on,” he said. “Do something that if you had all the money in the world, you’d still be doing it. You’ve got to have a reason to jump out of bed in the morning.”
By Warren Buffett
March 13th, 2006 at 12:18 pm
Dear John,
Warren was kind of rambling there, so let’s try to focus on what might relate to the ports deal.
He says he’s not particularly worried about the size of our national debt because it is not historically out of line and I agree with him on that (though I do think we do need to reign in our fiscal deficits even if they are not outrageously high by historical standards). He said he IS worried about the amount of “us” that is owned by “the rest of the world”, though, and also appears concerned about the size of our trade deficit, which is what leads to “them” owning more of “us.”
So, let’s consider that apparent problem in general and then how it ties in to concerns over the ports deal.
First the general problem – foreigners “owning us.” My first question is just what it is that they own that might be cause for worry. 17-18 years ago, many in the US were alarmed that Japan was going to end up owning the US. They were buying whole companies, they were buying securities, they were buying landmark real estate including Rockefeller Center and Pebble Beach Golf Club, and there was no end in sight to their growing economic dominance. I think we can all agree those fears were seriously misplaced.
Now we fear China, which has, I believe, been a major buyer of US treasuries, financing our fiscal deficits, and has also been investing in US assets, when not deterred by alarmist politicians and media as in the case of last year’s bid for Unocal. So then Warren is concerned they and others will soon own too much of us.
Well, that begs the question of what else they could possibly do with all the dollars they earn from trade. As long as we run a trade deficit, our trading partners end up holding dollars at the end of the day. Their options are few. They can buy US goods and services, US assets or US securities, or they can sell the dollars to someone else who wants to do one of those things.
If they do the first, no more trade deficit and nothing left to discuss, so we must be supposed to worry about the latter two.
Let’s consider securities – specifically the large amounts of treasuries the Chinese and others have been buying. While I agree that any sudden change in their appetite for US treasuries could be disruptive, I can’t see any logic behind thinking such a sudden change is remotely possible. Again, what else are they going to do with their dollars from trade? OK, let’s say, just for argument sake, that they suddenly decide the US government is a bad credit risk (though Warren is not concerned about the size of our debt). Well, first, with so much US debt in their hands already, they certainly have a stake in our economic stability, so don’t expect massive dumping of US debt. The only possible buyer of a panic dump would be the US Fed anyway, and then only at huge losses to the foreign sellers. To paraphrase an old friend, when you owe your banker a modest sum, he has you in his pocket – when you owe him a fortune, you have him in your pocket.
But more seriously (and realistically), let’s say the Chinese and others decide just to slow down a bit on buying our debt. Again, their other options are to buy our goods (which would make us very happy) or to buy other securities or assets from us. If they do the latter, then they are bidding for those things against the US investors buying them today. Treasury prices fall (rates rise) while other asset prices rise (returns fall), but investing reality is that this only attracts money to the newly higher relative returns on treasuries as US investors sell assets to foreigners and look to reinvest the proceeds. Nothing has really changed in the aggregate except that the foreigners now own tangible things instead of government debt. The problem with their buying so much of our debt is not that we owe foreigners – it is that we owe anyone, and then only if the amount is so large as to crowd out private borrowing or render us insolvent as a nation, unable to pay our debt except by monetizing it.
So, is foreign ownership of tangible assets and private sector securities the thing we are supposed to be worried about? Why? If they are investing in US businesses, they are creating US jobs and have a bigger stake in our economic future. If they are buying real estate, it is still US real estate. They can’t pick it up and take it home. They can only use it or rent it here and they must pay taxes on it in the meantime. And if they buy resource assets, as the Chinese firm CNOOC tried to do last year in bidding for Unocal, then that is really no different than us exporting those same resource goods, reducing our trade deficit (if they actually send the resource home instead of selling it here, that is).
That bid, by the way, raised the same kinds of rhetoric as the ports deal – alarmist claims that it was a threat to our national security to have a foreign country own such a strategically critical asset in the US as oil. It didn’t matter that oil is a fungible commodity and that even if China shipped home all of Unocal’s output, it would make no difference in our access to oil supplies or what we pay for it.
Now the pols and the talking heads are saying we can’t sell something as critical to our national security as ports to foreigners. And I’m giving the speakers the benefit of the doubt by assuming their concern is truly all foreign ownership – that the general fear is not just cover for specific bias against Arabs or Muslims.
Well, we are not selling our ports to foreigners. A foreign business that operates terminals at some of our ports is (or was) selling those operations to another foreign entity. Foreign businesses, in some cases government owned businesses, run terminals at eight of our largest ten ports. They employ Americans to unload and load ships. Just like Toyota and BMW employ Americans to build cars here. But NONE of them run security. So unless they are otherwise violating US laws in the way they do business (they ARE subject to the same laws as US-owned businesses, after all), or they are somehow fronts for criminal enterprises – i.e. drug smugglers or terrorist organizations – then they are no threat to national security.
So, again, opposition to the ports deal based on national security concerns, if not out of ignorance and if we rule out anti-Arab/anti-Muslim bigotry, can only be cover for two things – protectionist opposition to foreign investment in the US (perhaps an indirect maneuver toward trade protectionism) or a simple opportunistic grab for political power (i.e. shameless demagoguery). If the former, it is wrong on economic grounds. If the latter, it is just plain wrong and why any Republican would want to hand the Dems such a gift as to give them cover fire from the right in their latest attack on Bush is beyond me.
Regards,
Bob
March 13th, 2006 at 3:30 pm
Bob,
The absolute dollar of debt is so high it is squeezing out countries that can even finance our debt. The rule of supply and demand , puts us dealing with countries like Communist China and Saudi Arabia holding the upper hand.Japan is moving to zero savings rate economy, which will put us having higher interest rate deals with oppressive dictatorships.
”
As far as Japan , I would suggest you read a book by former Reagan Treasury Sectary Pete Peterson called Running on Empty. Peterson pointed out during this time , we went back to Japan and said if you build cars in the U.S. with are labor and environmental standards you will have no tariffs. That is why we have Honda,Toyota…. here today hiring American workers.This is called raising the bar ,not promoting a race to the bottom with billions of workers willing to work for less than 2$ a day at the expense of the American middle class. Also Japan is not a repressive dictatorship like UAE or Communist China.
Next, The spread between Rich and poor in countries like China is growing. They have around 75 % of their population making less than 2$ a day. To think Communist China would not sacrifice millions of people in a trade or global cold war is naive. The problem is we are trying to compare countries like China and UAE is if they are the same as Canada, England, Japan…..
My biggest concern about this issue is that we are losing economic and national security beyond this deal.President Bush even hesitated via a question as to who is most dangerous China, Iran or North Korea. So my question is does it not concern you we are so dependent on China from everything from cloths ,parts computers……… I am for free trade, but ,I am not for putting my eggs all in one basket, with countries like China,UAE,Saudi Arabia…….
As far as Democrats or Republicans, I do not think this is a football game. That is why 4 former Republican Treasury officials have spoken out about the above issue of trade&spending(Paul Roberts Pete Peterson,Bruce Bartlet and Paul O Neal).My first loyalty is to my family,friends,faith and Country, being an Republican does not come close. I do appreciate your thoughtful question.
March 13th, 2006 at 11:51 pm
Actually, John, Japan is not “moving to [a] zero savings rate economy.” At over 27% of GDP in 2004, Japan is saving at nearly twice the rate of the US and more than 6% of GDP higher than the Euro Area and the world average. What’s more, it’s savings rate exceeds its investment rate by around 3 1/2% of GDP, so they still need to find an investment home for a lot of money each year.
See: http://www.imf.org/Pubs/FT/weo/2005/02/pdf/chapter2.pdf
As for China, they may have a wide gap between rich and poor, but they also have a rapidly rising standard of living and growing middle class eager to consume. I hear Buicks are very popular over there.
Oh, and that “growing” gap is a misleading statistic at best that applies just as well to the US. The absolute size of the gap is less important than whether standards of living are rising for all income groups rather than disporportionately for the rich at the expense of the poor. In other words, is the rising tide lifting all boats? Many argue that in this country it is not, but whether that’s the case in China, too, I couldn’t really say. Maybe you have some numbers?
As for whether China would “sacrifice millions of people in a trade or global cold war”, I’d say first that that sounds a tad like fear-mongering to me, but further that the more integrated they are into the world economy and the more of a stake they have in our economy as an outlet for their goods and their investment dollars, the more interest they have in global security and peace. Why would they want to sour the relationship with one of their biggest customers and put tens or hundreds of billions of newly acquired assets at risk by igniting conflict with us? I don’t think they’re irrational. Do you?
As for whether they or the UAE are like Canada, England or Japan, I hear the latter is more like a cross between Switzerland and Disneyworld. But how does trading with either of them or allowing them to invest in the US translate to losing economic and national security? Makes for a catchy sound bite, but what does it mean?
As for the relative dangerousness of China, Iran and North Korea, what does that have to do with the question at hand? And if it’s an important question in its own right (perhaps just as a change of subject?), I’d say it depends on the circumstances and how you define dangerous, but probably not China in any case. Sorry if I hesitate to pick between the other two. So what’s your answer, anyway?
As for being “so dependent on China” or “putting [our] eggs all in one basket”, we are not dependent on China and our eggs are quite spread around the globe. We are currently the beneficiary of trade with, and investment from China, but dependence presumes they have something we can’t get anywhere else. I don’t think that’s the case. Do you?
Finally, re the appeal to authority of the last paragraph, I was not aware that any of these men had spoken out about trade with, or foreign investment from China, UAE or Saudi. What did they have to say? Are they opposed to the ports deal? On what grounds?
My point about Republicans and Democrats, John, was not that anyone should back the President on this issue just because of party loyalty. I disagree with a lot of Republicans on a lot of things and agree that principle trumps party. But the point is that a number of GOP pols are abandoning principle and President out of fear that the Dems might out flank them and seize the national security high ground for the fall elections, and are joining the Dems in demagoguing an issue where the President is clearly right. I was very pleased to see on the news today that Senators Isakson and Chambliss, along with Reps Linder and Gingrey, have finally spoken out about the issue.
Isakson said, “This issue that came up was a firestorm more out of the ignorance of all the facts than anything else.”
And Linder said pretty much what I just wrote, that “The American people thought it was a bad deal because they have been made to fear it. The Democrats jumped on it a couple weeks ago because we’re in a political season, and Republicans responded to try and outdo them.”
Well said, guys.
March 14th, 2006 at 7:39 am
Bob,
I would like you first to read this article about the falling saving rate in Japan.Then I will be happy to move on to the other topics.By the way note this is 2004 #s and the trend is going down.
JAPANESE PERSPECTIVES
Japan’s falling savings rate reflects a global competition for funds
By TERUHIKO MANO
The national savings rate dropped to as low as 2.8 percent in 2004, according to a report released by the Cabinet Office last month. This is incredibly low, given the figure had been above 10 percent until as recently as 1999.
When Japan’s huge trade surplus was a politically sensitive issue, the frequent criticism from abroad was that the Japanese were saving too much and should be trying to spend more and import more instead.
The savings figure tells us how much of a person’s disposable income (after taxes are deducted) is being put aside for the future. Naturally, things like falling income, rising tax and social security burdens and expanding consumption will push down the savings ratio.
The rate, which was 10.2 percent in 1999, has fallen sharply: It was 7.6 percent in 2000, 5.1 percent in 2001, 4.5 percent in 2002, and 2.8 percent in 2004. There are two major reasons for this decline.
One is that income continues to face downward pressure from burdensome scandals and intensifying competition with cheap overseas labor that began entering the market after the end of the Cold War.
This April’s tax hikes will likely draw down savings even further, but another strong factor is the building safety scandal, which has revealed that several condominiums were built to false earthquake-resistance specifications. People will likely tap their savings as they scrounge up additional funds to buy new houses.
The second reason is that people are finding it difficult to tone down inflated spending habits that were formed during the bubble years. If they want to maintain their current level of consumption in a tough income situation, they will inevitably tap their savings.
The savings rate in 2004 represented a drop of 1.34 percentage points from the previous year, with the consumption factor accounting for 0.98 points and the income factor the rest.
While the economy is attempting to make a turnaround now that one of its engines — investment — has finally revved up, the other engine — consumption — has eaten into many people’s savings.
Japan will be hit by these two factors simultaneously as it braces for the impact of its rapidly graying population.
Needless to say, people save for a rainy day, or for emergencies and retirement, and they will naturally tap their savings when they begin to rely solely on pension benefits. And while it is often said that young people accustomed to credit cards don’t tend to save as much as prior generations, it is the elderly population in fact that contributing more to the drop in the national savings rate.
One issue that merits attention is that the Bank of Japan’s zero-interest-rate policy has prompted people to shift their savings from bank deposits to more risky financial tools that offer higher returns, including stocks, foreign currency deposits and foreign currency-denominated securities.
This changing pattern of savings management has also resulted in less money being put into government bonds, thereby pushing up JGB yields.
Further efforts must be made to cut public expenditures to make a smaller, more efficient government. Allowing the continuation of bid-rigging practices that waste taxpayer money is out of the question.
The growing stream of money flowing into foreign-currency-denominated investment tools means Japanese people are refusing to manage their funds at home — creating something of an exodus of funds out of the country. WHILE Japan still maintains a current account surplus and more and more foreign investors are pouring money into Japanese stocks, the yen’s current weakness shows yen-denominated funds are flowing out of Japan at a faster pace.
And the favorite destination for such funds is the United States — a country known for its low savings rate.
Since last year, the U.S. savings rate has been in negative territory — meaning that American consumers are spending more than they earn. If Americans’ savings run dry, investment and consumption will shrink and they will have to rely on savings from outside the U.S. This is why the U.S. government, despite its huge trade deficit, is unable to give up its pursuit of a strong dollar.
But America is not alone. Emerging economic powers like China and India are fundamentally in a state of low savings, and what has ensued is a worldwide competition for savings. The U.S. can still rely on funds from overseas, but once those funds start flowing out, interest rates will rise and the dollar could fall rapidly.
Depreciation of the dollar will result in lower values for dollar-denominated assets, or a decline in savings.
Diversification of fund management is essential in an era of globalization, and foreign-currency-denominated investment tools are a viable option. But one must be fully aware of the foreign-exchange risk. If the dollar falls by 1 yen each month, it will result in a 10 percent loss over one year — a drop that cannot possibly be offset by interest rate gaps.
Teruhiko Mano is a professor at Seigakuin University Graduate School.
The Japan Times: Feb. 20, 2006
(C) All rights reserved
March 14th, 2006 at 10:45 am
John, I have alread read that article and several others on the subject. Did you read the IMF report I linked?
Your article, like most press coverage of this savings rate question, focuses only on household savings and ignores corporate and government savings. The IMF figures are correct and show that while Japan’s national savings rate has fallen from its earlier, arguably excessive heights, it remains well above US, Euro and world levels, and well below that required to finance investment in their country. Such a surplus of savings over investment is what works its way into foreign investment and since that is what we were discussing, those are the relevant figures.
As for the article’s comments about “US savings rates in negative territory”, that conclusion is wrong for the same reasons and for an additional one. Reported US household savings figures do not count all forms of income earned by households. It excludes capital gains in particular, whether realized or not. It is also not clear that we account very well for private retirement plan contributions and disbursements, but it IS clear we are understating household income.
See: http://www.bea.gov
Note: This exclusion of significant income sources for households may afflict the Japanese data as well.
Now, I’m not sure exactly how this pertains to the question of foreign ownership of US port terminal operators. I was just responding to the various tangential comments of your earlier post. Is this question of Japanese savings rates going to tie back in to the topic at hand somehow?
March 14th, 2006 at 11:34 am
Correction: Meant to say, in the second paragraph above, “it remains well above US, Euro and world levels, and well above that required to finance investment in their country.”
March 14th, 2006 at 11:35 am
Bob ,
In America 70% of consumer spending is driving our economy.The amount of savings or availability to debt for 70% of your customers ie consumers would be huge factor in any non bias model. Second Japan now is up to 50% of their economy driven by consumer spending, while their consumers are heading toward debt ,Japan will need to finance its own problem. That is why interest rates will keep going up as consumers fall deeper into debt.This problem is further being driven by Congress irrational spending. As a money gets tighter , monthly cash flow for buying goods will drop due to the increase of debt and equity payments put on consumers.
Minimum Credit Card Payments Scare Banks
By JOE BEL BRUNO, AP Business Writer 49 minutes ago
NEW YORK – Making the minimum payment on your credit card bill might not be as easy as it used to be — and two of the nation’s largest banks say their own finances might suffer as a result.
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Both Citigroup Inc. and JPMorgan Chase & Co. said in recent filings with the
Securities and Exchange Commission that delinquencies and charge-offs might spike in the second half of the year. That’s when the banks believe new federal guidelines that require significantly increased monthly minimum payments will begin to hurt customers already struggling to pay bills.
The new requirements imposed by the Office of the Comptroller of the Currency — which regulates banks and some credit card companies — are designed to help customers avoid getting deeper into debt. However, a new spate of defaults as customers adjust to the new minimums could hurt profit at the nation’s card issuers — especially those that cater to borrowers with weaker credit.
“Banks will not only have increased losses, but reduced revenue as well,” said Lehman Brothers analyst Jason Goldberg. “For some customers, the banks will have to reduce interest payments in order to keep them from defaulting. There’s a bit of uncertainty because it’s hard to predict human behavior.”
Banks have instituted the new minimum balances at a time when American families continue to reel from credit card debt. The
Federal Reserve said last month in its survey of consumer finances that 46.2 percent of all families now carry a credit card balance — up from 44.4 percent in 2001.
Meanwhile, consumers are also carrying higher balances — with the mean balance growing to $5,100 from $4,400 in 2001, according to the report. The median income is currently $43,200 and the typical family’s credit card balance is now almost 5 percent of their annual income, according the Fed said.
The new guidelines require credit card issuers to charge an amount that includes not just the outstanding fees and finance charges, but at least 1 percent of the principal owed. This could cost JPMorgan and Citigroup each about $500 million of losses and lost revenue this year, Goldberg said.
Citigroup, the nation’s largest financial institution with about $120.32 billion in revenue last year, has more than 130 million credit card accounts. The majority of its card holders pay more than the minimum due, but the bank didn’t have a specific breakdown available, according to Citigroup spokesman Samuel Wang.
At JPMorgan, which has more than 110 million credit card accounts and posted about $80 billion of revenue last year, customers were required to make the new minimum requirements at the end of 2005. Prior to the change, about 10 percent of its overall customers were making only the minimum payment, said JPMorgan spokesman Paul Hartwick.
Bill Hardekopf, chief executive of credit card Web site Lowcards.com, said many of the credit card companies will be affected as consumers move to consolidate their cards.
He believes most consumers will get over the “sticker shock” of being forced to make higher payments, and the amount of defaults will lessen as months go by.
“The new minimums could be very beneficial to credit card companies because they’ll get their money quicker, but it could become very expensive if it has the effect of driving more consumers into bankruptcy,” he said. “It’s too early to tell, but this won’t hurt the big boys as much as it will hurt the subprime lenders.”
Subprime lenders have a higher incidence of charge-offs and delinquencies, and charge customers higher interest rates because they are deemed less credit worthy. Some of the bigger public companies that have large subprime businesses include issuers such as Capital One Corp. and Providian Financial Corp.
The actual impact of the new minimum payments won’t be known for a few quarters, analysts said. In fact, JPMorgan said in its filing with the SEC that it expects the first six months of the year to see sharply fewer bankruptcies as a result of new laws that went into effect.
Credit card companies were besieged by losses stemming from a surge in consumer bankruptcies in the fourth quarter. Banks reported a sharp increase in loan charge-offs amid a rush of consumer bankruptcy filings prior to the Oct. 17 change in the nation’s bankruptcy law, which made it more difficult for consumers to discharge their debts.
March 14th, 2006 at 11:47 am
Bob,
You had many valid questions , I just want us to agree on facts point by point. Because my point is much , more global than just this Port deal.
March 14th, 2006 at 11:08 pm
John, at the risk of extending this tangent even farther off topic, what facts would you like to agree on point by point?
For example, what facts are you citing when you write, “In America 70% of consumer spending is driving our economy.The amount of savings or availability to debt for 70% of your customers ie consumers would be huge factor in any non bias model. Second Japan now is up to 50% of their economy driven by consumer spending, while their consumers are heading toward debt ,Japan will need to finance its own problem.”?
No offense, but I can’t make heads or tails out of your reference to 70% of US consumers.
As for Japan, I’ve already posted data showing that it is still running 3 1/2% of GDP in surplus savings, so it is clearly already able to “finance its own problem”, whatever that problem may be, as well as to lend and invest substantial sums in the rest of the world. And if you’re suggesting they have a consumer debt burden problem, what evidence do you have of that?
On the other hand, we could just skip back to your first post and you could explain what you mean by “economic nationalism” and why it is a good thing. I’m a lifelong student of history, as well as economics, and I’ve always found nationalism, in all its sordid forms, to lead to nothing but trouble.
March 15th, 2006 at 6:42 am
The ‘economic nationalism’ comment was mine, not John’s, so allow me to explain it. To me, it means an economic structure that serves our people first, and is consistent with our values. It should, in no way, be an effort to drag anyone else down. That is what dictatorships do.
As a working class individual, I lack the time to do exhaustive research as others can. I simply believe that doing business with nations that do not respect basic labor rights, political rights, or religious rights is not morally defensible. My moral compass is not fixed on the S&P 500 index or my calculator.
I have no doubt others will come out with fancy numbers disputing the fact with which most Americans must deal; wages are falling relative to the cost of living. It is sickening to see these inflation figures deliberately exclude “the highly volatile food and energy sectors”. They’re volatile all right – in an upward direction only! What the hell do you think we’re spending our money on, wild weekends on Grand Cayman? No, Mr. Number Man, we’re gassing up the car, heating our homes, and putting food on the table.
Wages are stagnant in America. Is it unreasonable to assume that American workers competing directly with cheap overseas labor is a factor? Is it ignorance to see corporate CEOs for who they are – bean counters with no regard for God and country? Is it pandering for a citizen to rise up and say this pattern should not be allowed to continue?
Bob, you say that China holding our national debt is not a problem, that they are simply reinvesting the dollars they earn right back into their own economy. Do you not feel that their investments give them a position of influence with regard to government policy? I see government officials today agressively promoting policies that widen the gap between rich and poor, put downward pressure on wages, and roll back civil liberties. If allowed to continue, the Chinese will have remade our economy in their diseased image within 25 years. After that, they will not need the voting strength of the so-called Christian right (the voting bloc that unwittingly sustains Chinese and other totalitarian ambitions). Forced abortions and atheist indoctrination would follow, along with total disregard for the environment.
With all this in mind, yes, I do see a difference between a British or Japanese firm owning a U.S. port versus Chinese or U.A.E. ownership.
March 15th, 2006 at 6:45 am
Correction: that last post should say:
….reinvesting the dollars they earn back into our economy.
March 15th, 2006 at 8:24 am
Bob,
A key factor in the U.S. economy is consumer spending. American consumers real wages are dropping and their debt load is increasing.The two areas American used most to keep up with real wages going backwards is home refinancing and credit cards.This is why we are seeing an increase in defaults. Also as interest rate keep climbing ,you will see more defaults.
In the financial service industry , smart lenders look at credit trends. Japan was a high saving rate economy and a major buyer of U.S.debt,They are moving toward a lower to negative saving rate via the average Japanese family. The investors of debt from Japan, will seek higher returns ie supply and demand.
GDP is only one factor in looking at an economy. GDP is gross not net. The majority of American families saving rate is now negative 1%. Healthcare is growing 4 times faster than wages. College cost ,child care and energy prices are all out of control relative to wages for most American families.Just because Exxon had a great quarter does not mean that the average American family did well.
A major mistake you learn in turning around a failing business is understanding the difference between gross and net. The theory guys who try to buy market share at a loss generally build a house of cards.I have made a good living following them and fixing the problem.This is the same empty argument I hear about are current trade arrangement.
In turning around a business , I was told all the time if we do not do that (unprofitable)sale, we will go out of business. In fact opposite happen every time. Same applies to trade we can not keep buying more than we sell ,and make it up in volume.
Most of my adult life I spent creating products and business understanding the relationship of payment transactions relative to risk via B to B and C to B. The key to making a profit was understanding which way the trends were moving.Also let the #s tell you what to do , not force #s to make your point. Finally the devil is in the details, macro #s without breaking them down to micro segments will hurt you every time ie IMF.
I am not an isolationist , yet if you are falling behind you must make adjustments. Like stopping China stealing our I.P. rights estimated as high as 250 billion dollars a year.
Tom Price’s plan of lowering are legal , regulation and tax structure to match countries like Communist China is a race to the bottom. I agree with Pete Peterson the key is raising the bar not lowering it. Thanks jk
March 15th, 2006 at 12:01 pm
First of all, guys, real wages are not falling. They did fall by some 17% from 1973 to the 1991 recession low and they were flat through much of the 1990s, but they have been rising since. Check with the BLS at http://www.bls.gov/ces/cesbtabs.htm if you think I’m making that up.
What’s more, the labor force participation rate has been rising steadily since the 1960s from under 60% of the 16 and over population to 66% since 1989 and more than 67% during the tech bubble.
What that means, gentlemen, is that not only are incomes more than keeping pace with inflation on an hourly basis since the 1991 recession, but household incomes are doing much better than that because a greater percentage of people are working than ever before.
As for why we look at “core” inflation, Charley, without food and energy, it is to see whether those volatile components of the basket are, in fact, having a broader inflationary impact. In other words, are broader prices also rising? No one is ignoring, trying to hide, or lying about inflation. Both numbers are reported, as are other inflation measures that are more realistic in an economic sense, though less popular in the press.
But the realities of gas prices, for example, are that
1) They do not move in an “upward direction only”, but have moved up and down repeatedly over the last several decades. Most recently, while they spiked over $3/gallon after the supply disruptions of Katrina, they subsequently fell back below $2 just a few weeks later. Longer term, and looking at the raw material, oil, prices have swung from $35/barrel in the early 1980s to under $15 by 1986, back into the twenties a few years later and then plunging below $10 in the 1990s. They are high now because world demand is rising and the natural result is that we, as a major oil consuming nation, are looking for alternatives, buying more hybrid cars and fewer SUVs, and investing in development of alternative fuels and technologies.
and 2) When they do move up but other prices don’t, the effect they have on consumers is not that of general inflation, but rather like that of a tax increase, reducing disposable income available for other consumption. This would have the non-inflationary effect of slowing other spending.
It would be misleading, then, to look only at the “all items” CPI, especially for policy purposes.
As for food prices, according to the BLS, the food and beverage component of the CPI has seen average price increases of 2.56% per annum for the last five years and 2.54% for the last ten. That is only slightly higher than the 2.0-2.1% average of “core” inflation over the same periods and certainly not cause for alarm.
Now, Charley, re China holding US debt, no, I do not think that gives them undue influence over US policy. They are the world’s most populous nation, a major trading partner, a growing consumer of oil, cars, computers and everything else, and are certainly influential, but owning US debt in large amounts makes them more dependent on our success as an economy and less likely to do anything disruptive here or globally.
As the world economy becomes more integrated, our interests and those of our trading partners do not collide, they coincide.
There is no “race to the bottom” and we are not “falling behind” anyone. Trade, and economics in general, is not a zero sum game. One does not gain only at the expense of others. Trade brings mutual gains.
As for the rest of your alarmism over China – e.g. remaking “our economy in their diseased image”, “other totalitarian ambitions” and “forced abortions and atheist indoctrination would follow” – I can only say “Sheesh!”
Now to John, I repeat:
1) household savings rates in Japan are not negative and there is no basis for saying they are headed toward being so,
and 2) US household savings rates are not negative – they are erroneously measured, leaving out significant sources of income.
The reality is that US household net worth has risen by 6.4% per annum from 2001 thru 2005. And that’s including a 4% decline in 2002 due to a 7.4% decline in financial assets. The 2005 gain in household net worth was 8%.
See: http://www.federalreserve.gov/RELEASES/Z1/Current/default.htm
That said, I do think we need better tax policies to encourage household savings and reduce incentives for borrowing. We also need to reign in wasteful federal spending as the government is a major dis-saver. But forgive me for not being alarmed, as you appear to be, over household balance sheets or the relative size of the federal deficit or debt.
Finally, re your comments about interest rates, they are rising because the Fed has been tightening as the economy has heated up. Rather than being alarmed by their rise, one should be concerned if they were not.
Bob
PS: Why do you both insist on attacking the UAE by bashing China? The UAE is not China. Geographically, culturally, politically or economically.
March 15th, 2006 at 1:03 pm
Bob,
I am not sure what you do for your job and it would be interesting to know. Regardless the people I talk to in the money business do not have your rosy outlook of the data. I can give you many examples , but Paul Craig Roberts explains best the laziness in regards to looking into the facts.In my business ,if I was this lazy we would be out of business. Please read, Thanks jk
Nuking the Economy
By PAUL CRAIG ROBERTS
Last week the Bureau of Labor Statistics re-benchmarked the payroll jobs data back to 2000. Thanks to Charles McMillion of MBG Information Services, I have the adjusted data from January 2001 through January 2006. If you are worried about terrorists, you don’t know what worry is.
Job growth over the last five years is the weakest on record. The US economy came up more than 7 million jobs short of keeping up with population growth. That’s one good reason for controlling immigration. An economy that cannot keep up with population growth should not be boosting population with heavy rates of legal and illegal immigration.
Over the past five years the US economy experienced a net job loss in goods producing activities. The entire job growth was in service-providing activities–primarily credit intermediation, health care and social assistance, waiters, waitresses and bartenders, and state and local government.
US manufacturing lost 2.9 million jobs, almost 17% of the manufacturing work force. The wipeout is across the board. Not a single manufacturing payroll classification created a single new job.
The declines in some manufacturing sectors have more in common with a country undergoing saturation bombing during war than with a super-economy that is “the envy of the world.” Communications equipment lost 43% of its workforce. Semiconductors and electronic components lost 37% of its workforce. The workforce in computers and electronic products declined 30%. Electrical equipment and appliances lost 25% of its employees. The workforce in motor vehicles and parts declined 12%. Furniture and related products lost 17% of its jobs. Apparel manufacturers lost almost half of the work force. Employment in textile mills declined 43%. Paper and paper products lost one-fifth of its jobs. The work force in plastics and rubber products declined by 15%. Even manufacturers of beverages and tobacco products experienced a 7% shrinkage in jobs.
The knowledge jobs that were supposed to take the place of lost manufacturing jobs in the globalized “new economy” never appeared. The information sector lost 17% of its jobs, with the telecommunications work force declining by 25%. Even wholesale and retail trade lost jobs. Despite massive new accounting burdens imposed by Sarbanes-Oxley, accounting and bookkeeping employment shrank by 4%. Computer systems design and related lost 9% of its jobs. Today there are 209,000 fewer managerial and supervisory jobs than 5 years ago.
In five years the US economy only created 70,000 jobs in architecture and engineering, many of which are clerical. Little wonder engineering enrollments are shrinking. There are no jobs for graduates. The talk about engineering shortages is absolute ignorance. There are several hundred thousand American engineers who are unemployed and have been for years. No student wants a degree that is nothing but a ticket to a soup line. Many engineers have written to me that they cannot even get Wal-Mart jobs because their education makes them over-qualified.
Offshore outsourcing and offshore production have left the US awash with unemployment among the highly educated. The low measured rate of unemployment does not include discouraged workers. Labor arbitrage has made the unemployment rate less and less a meaningful indicator. In the past unemployment resulted mainly from turnover in the labor force and recession. Recoveries pulled people back into jobs.
Unemployment benefits were intended to help people over the down time in the cycle when workers were laid off. Today the unemployment is permanent as entire occupations and industries are wiped out by labor arbitrage as corporations replace their American employees with foreign ones.
Economists who look beyond political press releases estimate the US unemployment rate to be between 7% and 8.5%. There are now hundreds of thousands of Americans who will never recover their investment in their university education.
Unless the BLS is falsifying the data or businesses are reporting the opposite of the facts, the US is experiencing a job depression. Most economists refuse to acknowledge the facts, because they endorsed globalization. It was a win-win situation, they said.
They were wrong.
At a time when America desperately needs the voices of educated people as a counterweight to the disinformation that emanates from the Bush administration and its supporters, economists have discredited themselves. This is especially true for “free market economists” who foolishly assumed that international labor arbitrage was an example of free trade that was benefitting Americans. Where is the benefit when employment in US export industries and import-competitive industries is shrinking? After decades of struggle to regain credibility, free market economics is on the verge of another wipeout.
No sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy. The total number of private sector jobs created over the five year period is 500,000 jobs less than one year’s legal and illegal immigration! (In a December 2005 Center for Immigration Studies report based on the Census Bureau’s March 2005 Current Population Survey, Steven Camarota writes that there were 7,9 million new immigrants between January 2000 and March 2005.)
The economics profession has failed America. It touts a meaningless number while joblessness soars. Lazy journalists at the New York Times simply rewrite the Bush administration’s press releases.
On February 10 the Commerce Department released a record US trade deficit in goods and services for 2005–$726 billion. The US deficit in Advanced Technology Products reached a new high. Offshore production for home markets and jobs outsourcing has made the US highly dependent on foreign provided goods and services, while simultaneously reducing the export capability of the US economy. It is possible that there might be no exchange rate at which the US can balance its trade.
Polls indicate that the Bush administration is succeeding in whipping up fear and hysteria about Iran. The secretary of defense is promising Americans decades-long war. Is death in battle Bush’s solution to the job depression? Will Asians finance a decades-long war for a bankrupt country?
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: paulcraigroberts@yahoo.com
March 15th, 2006 at 4:32 pm
John, perhaps you’re attempting to change the subject again by introducing an attack on Bush’s jobs record, and I’ll get to that in a sec, but if you’re calling my arguments intellectually lazy or lacking in facts, I suggest you go back over this entire conversation with an objective eye and see where you find coherent, factual arguments. No offense.
As for job creation, Mr. Roberts says “1 million jobs in five years”, but according to the BLS’s Current Population Survey, over 5.5 million more people held jobs last month than Robert arbitrary point five years earlier – about 7.5 million if you only go back to the recession low of early 2002. You realize Bush inherited a recession, don’t you?
Now, if you look at non-farm payrolls (which do not capture most small business job creation, by the way), we have created almost 4 million private sector jobs since the recession ended and 1.9 million in the last year alone. Roberts has to go back to tech bubble employment highs to claim only 1 million jobs created.
But again, if you ask regular folks instead of just larger businesses, job growth has been much more robust than the non-farm payrolls figures suggest.
Now, I won’t say Roberts is being lazy – just disingenuous and misleading.
For example, he says “while joblessness soars” and backs it up with nothing but a slap at NY Times journalists. The reality is that the number of unemployed persons in the US has dropped by some 1.5 million people in the last 3 years. And even if you count people “not in labor force” but who “want a job now” (i.e. those who say they want a job but aren’t actively looking for one), the number of unemployed is still down more than 1.1 million. I don’t know what you might call it, but “soaring unemployment” certainly doesn’t fit.
Finally, re “what [I] do”, let’s just leave it general – my background over the last couple of decades is banking, corporate finance and economics. And right now, I’m spending way too much time following this discussion from one change of subject to another with no end in sight. Good luck with your business endeavors.
March 15th, 2006 at 5:48 pm
Bob,
I apologize if you were offend by my lazy comment, I was referring to the economic writers lack of challenging the reports you sighted ,not you.In fact as I told you , I thought your question are very intelligent, that is why I am trying not give you sound bite answers.
I would like to point out that Paul Craig Roberts said “no sane economist can possibly maintain that a deplorable record of merely 1,054,000 net new private sector jobs over five years is an indication of a healthy economy”.
You are talking about gross jobs , Paul Roberts is talking about net jobs after layoffs….. The point he is making as well as other economist is this # is not keeping up with population growth combined with legal and illegal immigration. That is why entitlement cost is exploding as we import poverty, which is another topic.
I will show you my press release I put out on the UAE deal. You will see my concern is much more global.You are welcome to call my office at 770 852 2222. I did not mean to offend you, even though we disagree on some things, you lend allot to the website blog
Congress Trades Away American Security
The United Arab Emirates ports management deal represents a glaring example of current misplaced economic and trade priorities: the government’s obsession with money (for a select few) over the interests of most Americans.
The ports management deal is not an isolated mistake. Many others have happened, but perhaps none as nakedly blatant. For example, how do most Americans benefit when:
Drug companies end up writing the new Medicare prescription drug provisions which keep prices artificially high for seniors by forbidding government- negotiated prices based on volume?
The American-funded Import/Export Bank helps subsidize Communist Chinese nuclear power development? With a trade imbalance of over $200 billion per year, we are already sending too much money to China.
Congress has repeatedly neglected vital aspects of our national and economic security, leaving us vulnerable to being cut-off by other countries. Here are a few examples:
45% of our oil and gas come from abroad, much from countries with unstable governments, unfriendly populations
Nearly 50% of our computer and electronic products are manufactured overseas
70% of the products sold in major retailers are imported from countries like Communist China and Mexico
Our soaring trade and budget deficits leave us deeply indebted to foreign countries, including Saudi Arabia and Communist China
Illegal immigration is currently tolerated, making it impossible to control who enters the country
Legal immigration is abused to secure cheap labor
Congress ignores the results of these unhealthy dependencies (declining American wages, record trade and budget deficits, and national security vulnerabilities) and just pours fuel on the fire. It passed CAFTA after NAFTA. It refused to crack down on widespread illegal Chinese trade practices by threatening to withdraw from the World Trade Organization (WTO).
Rep. Tom Price—and most in Congress—have refused to change course; they are simply too indebted to big-money campaign donors and lobbyists. They must be replaced.
Please support our campaign to change Congress by voting for John Konop in the Republican primary this July and by donating whatever you can afford. Thank you very much; as always, your comments are welcome.
.
March 15th, 2006 at 8:41 pm
“You are talking about gross jobs , Paul Roberts is talking about net jobs after layoffs…..”
Sorry, but you are mistaken. The BLS reports two sets of employment figures each month, one from the Current Establishment Survey (a.k.a. “non-farm payrolls”) and the other from the Current Population Survey, where they survey individuals as to their employment status. The former, to which Roberts was referring, reports the net change in employment as reported by (mostly large) employers. The latter, which is mostly cited in the press just for the unemployment rate calculated from the survey results, also gives you a net change in employment (you just subtract last period’s number employed from this period’s number employed). There is no “gross jobs” number reported by anyone, to my knowledge.
As for jobs not keeping up with population growth, since the labor force participation rate has been pretty steadily sitting at 66% for the last three years, about a point from its all-time high, while the number of unemployed people has been dropping, it seems we ARE keeping up.
Or to clarify that using the non-farm payrolls data, we have added 179k NET new jobs per month for the last two years (243k last month). Most pundits cite a figure of 150k per month as the level required to keep pace with growth of the labor force. Over those two years, then, we have added almost 700k more jobs than necessary to keep pace with population growth.
Hope that helps.
PS: I don’t think a platform of protectionist/isolationist rhetoric is going to fly in the sixth district, but that’s just a guess.
March 15th, 2006 at 10:29 pm
Bob,
In all due respect the decline of real wages for most Americans is real. Everyone from Warren Buffett, Pete Peterson ,Paul Craig Roberts….. have all agreed this is a problem. As I said you are using macro #s , not breaking them down between mega rich and the average American family.
You would have a hard time convincing many Americans that healthcare is not growing 4 times faster than wages. I had this problem in my last business. You would have a hard time convincing people that college cost, energy cost and child care are not out of control relative wages. And if their is such a shortage of labor why are real wages not going up. A new twist on supply and demand.
As far as using housing net worth. My son collects baseball cards and tells me all the time how much the card is worth. I tell him it is only worth what ever someone will pay you. A house could be worse than a baseball card , because my son does not have 8% to 10%(closing ,repairs…) cost to sell his baseball card.
My son has not borrowed an interest only loan against his baseball card to pay the bills every few years. As you know refinancing of homes represents 31% of consumer spending. The Vice President even talk about the declining saving rates relative debt.I am surprised as a bank executive, you are not concerned about the decline of real wages and increase debt of the average family.I know many consumer lenders who watching this closely. Why do you think the monthly minimum was raised on credit cards. You know it was to start getting the debt to equity back in line.
Warren Buffet,Alan Greenspan,Pete Peterson….. issued a warnings about the trade deficit being out of control.The question is simple can we match the tax, legal and environmental condition of countries like communist China.This is a race to the bottom. As I said we need to raise the bar ,not to sell out middle class America.
I work building successful business for two very high net worth individuals. They taught me that if the business idea can not be explain on a back of a napkin beware. The problem is simple you can not buy more than you sell and finance the loss long term. Warren Buffet is right we are like a rich farmer selling off his land parcel by parcel. This is not the America I want to leave for my kids. Thanks jk
March 15th, 2006 at 10:37 pm
Bob.
Did your job data include the 20 million illegal immigrants in our country. Did your job data include the estimated 10 to 12 million illegal immigrants using fake social security cards every year.Thanks jk
March 16th, 2006 at 8:07 am
Gee, John, if the flood of illegals is stealing American jobs, and if they are missing from the data as you suggest, then wouldn’t that imply that the official job numbers understate actual job creation?
But then BLS only surveys 400,000 business establishments and a random sample of 60,000 households each month, so they probably did miss a few illegals. I guess we should just trash the factual data and go with your so much better informed gut, then.
March 16th, 2006 at 11:56 am
Bob,
Are you also discounting Warren Buffett, Pete Peterson (former Republican Treasury Secretary), Paul Craig Roberts (Former Republican Assistant Treasury Secretary), and John Williams (economic consultant and Dartmouth economist) who have all voiced concerns about falling wages and trade deficits? Should Alan Greenspan not have issued a warning about trade deficits?
Have you ever operated a business in the unsecured credit industry? The success of the business is the ability to understand trends. Most American families are under the pressure of out-of-control healthcare, energy, college and childcare.
For me to better understand your viewpoint, it would help if I knew I what part of the banking industry you have experience? And, what do you do now?
Many on the side I come from do not have your same rosey outlook. Also are you involved in any candidate’s campaign?
March 16th, 2006 at 7:57 pm
Bob,
I am confused with your statement on illegal immigrants. The Social Security department issued a statement in 2004 that 9 million of the jobs counted were on phony social security cards which they attributed to illegals. So we added 8 to 9 million jobs of people who are not legally here . That would be an overstatement of jobs not an understatement. Those jobs replaced Americans in the count, unless they left and are now illegal immigrants in Mexico. I am sure Americans did not leave here to work in Mexican sweatshops at 50 cents an hour with their kids.
March 17th, 2006 at 1:34 pm
I’m not discounting anyone, John, but if these guys really did claim that real wages are falling, as you assert they did, they are wrong. As I showed you, while real wages for US workers did fall during the 1970s and 1980s, they have been rising fairly steadily since the mid-1990s. And no, the “mega rich” do not skew the data. The numbers I cited are hourly wages for production and non-supervisory workers.
Re inflation, you can cherry pick all the sectors you want to find the few with higher rates of price increases, but the reality is that the average consumer spends his or her money on much more than just health care and college tuition. As big as medical care is, it’s still only 16% of consumer spending, only slightly larger than what we spend on cars, furniture and other durable goods and much smaller than the 29% we spend on food, clothing and other non-durables. Higher education is less than 1.5% and child care doesn’t even merit its own category. Oh, and energy goods and services are only 4.6% of spending, down from 5.6% ten years ago and 9.1% 25 years ago, so while that sector has seen sharply rising prices recently, it matters less and less as time goes by.
And while prices consumers pay for medical care have risen by an above average rate for the last five years, it still only comes to 3.2% p.a. Even the relatively small part made up by health insurance premiums (less than 10% of medical spending by households) has seen prices rise no faster than overall medical costs. Prices on non-durables, on the other hand, have risen by only 2.2% p.a. and those on durables have actually fallen by 2.2% p.a. over the same period.
See: http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Selected=N
The point, John, is that you can’t claim consumer suffering from inflation based on a few anecdotes, especially when the data doesn’t back you up.
As for your latest post, are you really suggesting that those “8 to 9 million jobs” don’t exist or that if illegals hold them then that somehow means more Americans are unemployed than the reported data shows? Think, John.
And let’s quit with the “Americans [leaving] to work in Mexican sweatshops at 50 cents an hour with their kids” nonsense. Such conjuring of unpleasant images may fly on talk radio, but not if one wants to be taken seriously.
By the way, on the question of trade deficits, you might want to grab yesterday’s Wall Street Journal – there’s a great column on page A12 titled “Trade Deficit Disorder.” Protectionist doomsayers have been moaning about trade deficits leading to our ruin for the last 30 years. Warren’s “selling off the farm” line is just the latest in a long line of erroneous analysis. This column makes some great points as to why they have been, and still are, wrong.
The bottom line, John, is that more Americans are working than ever before, real wages have been in an uptrend for a decade, inflation is not a problem, and Americans benefit from trade. Your “America is going to heck in a foreign made hand-basket and no one can afford health care or college” campaign rhetoric has no basis in economic reality.
Finally, re your personal questions, I don’t need to prove to you that I’ve made unsecured consumer loans to uphold the facts I’ve cited. They stand on their own. And no, I am not “involved” in any campaign, unless you count having an opinion on who should represent me. I post because bad economics (and political rhetoric based on it) is a pet peeve of mine, not because I have a horse in this race.
March 17th, 2006 at 10:50 pm
Bob,
If you are right please explain why mortgage defaults are at record highs. By the way Citibank and Chase are seeing similar results with credit cards. I am old school conservative with business: bill paying is a key indicator of how well consumers are doing. Americans are falling behind on their bills, and sadly it will keep getting worse.
The reason I ask what part of the bank you worked at is this is common knowledge with the consumer side of the bank business. We can go back and forth questioning each others data. But, if you are right, I will ask you again why are American Families falling behind on their bills at a record pace?
Home loan delinquency rate shows increase
By Noelle Knox and Barbara Hansen, USA TODAY
More Americans fell behind on their mortgage payments at the end of last year as they struggled in the face of hurricane damage, rising interest rates, higher gas prices and holiday credit card bills, the Mortgage Bankers Association said Thursday.
The percentage of Americans who were delinquent on their home loans rose to 4.7% in the fourth quarter, the highest level since mid-2003. Late mortgage payments soared in the hurricane-stricken states of Louisiana and Mississippi. (Chart: Rates in all 50 states.)
And homes going into foreclosure reached alarming levels in a handful of Midwest states — Ohio, Indiana and Michigan — that were once the backbone of industrial America but have seen an exodus of manufacturing jobs.
About one in five mortgages in Louisiana and Mississippi was overdue. But “the results in those two states simply magnify the trend in the national data,” said Doug Duncan, chief economist for the MBA.
March 18th, 2006 at 8:05 am
Bob,
One more question, if we are becoming so efficient why are we selling less goods than we buy as a Country? If you combine falling wages and defaults, a logical conclusion is the efficiency came at the expense of hard working American middle class family wages. I realize you do not want to pull out the record growth in billionaires, yet in statistics you learn to pull exceptions out to get a better understanding of what is happening with the group you are analyzing.
The concept that you only use the mean method to study groups is not taught in research methods. I realize it is easier not to look at segments of groups, but in any risk management business you would likely go broke eventually using a simple mean method to look at numbers. Thanks jk
February 22, 2006
Productivity, the Trade Deficit, and Dark Matter: Part II
Michael Mandel
I’m going to continue (finally) my previous post. Most commentators implicitly or explicitly assume that that the trade deficit has risen because the U.S. is consuming too much (call this the “Spendthrift America” view of the world).
I find this to be highly unconvincing. The rise in the trade deficit ($700 billion) has come at the same time that U.S. productivity has soared way above expectations (adding an additional $1.2 trillion to output). As a result, the Spendthrift America view of the world requires an absolutely astounding increase in the U.S. propensity to consume over a very short period of time–almost $2 trillion above expectations. This is very unlikely.
In addition, the real reason why the trade deficit is so large has to do with a shortfall in measured exports, rather than an excess of imports. Consider this: In May 1997, the forecasting firm DRI/MCGraw-Hill (now part of Global Insight) forecast that imports of goods and services in 2005 was going to be $1846 billion. The actual number, $1997 billion, was only 8% higher than forecast. By contrast, exports are 30% lower than forecast.
exports imports
billions of $
actual 2005 numbers 1271 1997
2005 trade as forecast in 1997 1828 1846
difference -30% 8% b
So here’s the real question. If productivity and output has gone up so much more than expected in the U.S., we’d expect the U.S. to be more competitive on global markets, not less. So why have measured exports fallen so far short of expectations?
There are four possible explanations for the exports shortfall:
1. Slow growth in our trading partners.
2. China has become more productive even faster than we have.
3. Exports are undermeasured (the “dark matter” hypothesis).
4. Productivity and growth in the U.S. have been overmeasured (call this the “Deluded America” hypothesis).
I think that many of the commentators on the trade deficit implicitly believe #4. I will continue this line of argument…perhaps not in my next post, but soon.
March 18th, 2006 at 2:31 pm
“If you combine falling wages and defaults, a logical conclusion is the efficiency came at the expense of hard working American middle class family wages.”
Oh … My … Gosh!!! You would deny the sunrise if it conflicted with your preconceived notions. How many times do I have to prove to you that real wages are not falling? If you think the BLS’s numbers are wrong, John, how ’bout presenting some evidence that they are wrong instead of just repeating your “falling wages” mantra?
“I realize you do not want to pull out the record growth in billionaires …”
What part of “production and non-supervisory workers” do you not understand? That is whose wages I am talking about. Not greedy CEOs, not a few newly made billionaires, not the idle rich, not the Hollywood rich – just everyday working folks, John. Real wages for production and non-supervisory workers have been in an uptrend for a decade … whether you choose to believe it or not.
March 18th, 2006 at 3:20 pm
Bob.
You would have a hard time raising money with bankers or investors , if your concept was based on marketing to a rising wage & high saving rate Non- supervisory workers in America. I challenge you to find anyone who is raising money with that in their business plan.
March 18th, 2006 at 4:38 pm
LOL. Who said anything about high US savings rates? OR raising money? But if you want to find companies looking to benefit from rising incomes, look around the district.
And do you really think home builders, financial service firms, specialty retailers, restaurants, ISPs, cell phone companies, furniture makers, software firms, publishers, forest product companies, the travel industry or any other significant industry in the US is investing based on the notion of a “race to the bottom”?
I’m having a hard time coming up with any business whose pitch is “we’re betting that Americans are gonna be getting poorer.” OK, maybe the payday loan industry and that auto pawn broker, Title Max, but I think they are the exception, not the rule, don’t you?
March 18th, 2006 at 5:19 pm
Bob,
Home builders inventories are building up as well as home defaults.
Financial Service industry , is raising monthly minimums due to lack of credit quality. This is to raise the debt to equity ratio. You do not raise equity rates on consumers if their is a high saving rate.
Retail industry is getting killed by Wal- Mart. and Wal-Mart CEO is leading a charge to raise minimum wage due to the trend in retail sales.
Cell phone business biggest new product is pre-paid phones to credit impaired consumers.
The market conditions are what determine how much money you put up to get a loan for a business. I challenge to talk to any small business man and ask him what banks want him or her to put up to borrow money in today’s market. They will not describe your rosy world. Also they would explain your healthcare #s are in a different planet. They will tell you healthcare cost is rising faster than what they can pay their employees. Welcome to the real world. Thanks jk
March 19th, 2006 at 7:25 pm
Bob,
This was in Fridays news.
The Post asked a half-dozen financial planners to review the Fed data about what different groups of Americans own and what they owe. We asked them what advice they would give someone confronting the financial situation faced by the average American, using median numbers, or the midpoint at which half of the population is above and half is below each indicator.
They don’t like what they see.
“This is awfully sobering,” said Peter Speros, managing director of Sullivan, Bruyette, Speros & Blayney Inc., a wealth-management firm in McLean. “These numbers are just so much worse than I would have thought. It’s a real eye-opener.”
Specifically, Speros and the other planners said, if the average family walked into their offices, they would sit them down and give them some tough talk. Time to pare back expenses, the financial advisers would say, in order to build a cash reserve big enough to get everyone through a layoff or other unforeseen adversity. And the family would get an earful about saving more aggressively for retirement, so members could have some hope of retiring at a reasonable age and maintaining the standard of living they and their family are accustomed to. Only 49.7 percent of American families even had a retirement account in 2004.
Those at the median are not the only Americans who need help. The planners had advice for the typical family headed by someone who is young, middle-aged, retired, and for the affluent and poor. The bad news: Each of these groups need to do some things differently. The good news: Their financial problems are not hopeless.
March 19th, 2006 at 8:46 pm
Actually, John, homebuilders are doing just fine and delinquency rates on residential mortgages are, too.
Residential mortgage delinquency rates are running 1.7% compared to 2% or higher throughout the 1990s to 2003. In 1991-1992, they were over 3%.
On all consumer loans, the delinquency rate has been running from 2 3/4% to over 4% for a decade and a half. It’s now 2.68%.
On credit cards, it was over 5% in the 1991 recession, hit 5% again in 2001, and is now 3.46%.
As for the homebuilders, rumors of their deaths are greatly exaggerated: http://biz.yahoo.com/ap/060316/homebuilders_mover.html?.v=1
Let me know when you are ready to consider the real world, John. You know – the place where facts support one’s rhetoric. You are long on the latter and short on the former.
March 19th, 2006 at 8:48 pm
Oops, forgot the delinqueny rates link. Here it is: http://www.federalreserve.gov/releases/chargeoff/delallsa.htm
March 20th, 2006 at 6:07 am
There is a reason I do not put much faith in ‘facts and figures’; because the people who generate them are, more often than not, looking to rationalize an opinion rather than justify one. Impatiality is dead today.
It also occurs to me that for all the talk about Republicans being the party of values, a Democrat like me (admittedly an ex-GOPer) can go to a nomoinally Republican blog, try to start a values-based discussion of trade, and fail completely!
The almighty dollar is not the only factor here. Materially supporting countries that trample basic human liberties makes us culpable in that oppression. How do we FEEL about that?
Oh, one last item. John, you mentioned that Wal-Mart’s CEO supports an increase in the minimum wage. Huh?
March 20th, 2006 at 3:43 pm
Bob,
“jump in new homes construction” Building and selling are two different concepts. Home inventories are running high talk to any realtor. Find me bankers who are not concerned about home delinquencies. The equity rate in homes is at a all time low. This is called looking at trends.You most of never been a part of the credit side of the bank. I am also guessing you never had to raise money for projects in the past As I said talk to people in the real world in small business , ask them how hard it is to raise money. Ask a small businessman if you need more or less money to put down Thanks jk
March 20th, 2006 at 4:09 pm
Charley, FYI
Taking on critics of its treatment of employees while acknowledging the needs of working-class customers, Wal-Mart Stores Chief Executive Lee Scott, called on Congress to consider raising the minimum wage.
March 20th, 2006 at 4:31 pm
John Konop says: “You most of [sic] never been a part of the credit side of the bank. I am also guessing you never had to raise money for projects in the past …”
You would be wrong on both counts. Perhaps you should worry more your faulty, unsupported by the facts arguments and less about me, John.
March 20th, 2006 at 5:12 pm
Charley, re “There is a reason I do not put much faith in ‘facts and figures’; because the people who generate them are, more often than not, looking to rationalize an opinion rather than justify one.”
That’s funny. I would say those who refuse to consider facts contrary to their opinions, or even to find and present facts in defense of their opinions when challenged, are the ones engaged in rationalizations. Dismissing widely followed and decades-in-use economic statistics simply because they contradict one’s views, absent a reasonable argument questioning their validity or meaning, is what logicians call slothful induction.
As for talking about values, what would you like to talk about?
I believe that, in no particular order, economic, political and religious freedom are the foundational values of this nation. I also believe that all the people of the world deserve the same freedoms, but that belief about the rest of the world is only a general guide and not a strict decision rule.
For example, we can do more good for the Chinese people by engaging them, trading with them, and exposing them to our values than we can by engaging in xenophobic rhetoric and policies. Absent evidence that we are buying slave-produced goods when we shop at WalMart, trading with China is more moral, in my opinion, than refusing to trade with them.
Not that China has anything to do with Dubai, of course, but I’ve given up waiting for an answer to that question.
March 20th, 2006 at 5:18 pm
Bob,
I have never met a lender is liberal as you. I have given you sources from Pete Peterson, Paul Craig Roberts,Paul O Neal Alan Greenspan, Warren Buffett, John Williams…… , yet you think 3 former Republican Treasury Secretaries, X Fed Chairman, Billionaire and top banking economist all wrong and over reactive. Bruce Bartlet former Republican in the Treasurer department and well respected economic writer was fired for challenging the plug and play #s you are using. I know allot of people in the banking industry and no one I talk to has your rosy outlook. Thanks jk
March 20th, 2006 at 6:27 pm
“I have never met a lender is liberal as you.”
No, John! Not the “L” word!
Actually, I AM quite liberal, but in the classical sense of the word, which is very different from its current usage. I’m curious, though. What is it that, in your opinion, makes me “liberal” as the word is used today?
BTW, I tend to agree with the editorial board of the Wall Street Journal, economists such as Larry Kudlow and columnists such as David Brooks on many things. Are they “liberal”, too? If so, what makes them so?
March 20th, 2006 at 10:48 pm
Bob,
The term liberal in banking ,relative to credit is not a political term. The term means loose credit standards. Larry Kudlow and David Brooks are not in the lending or credit business. In all do respect someone from the credit side of banking would of understood what the liberal comment meant.
March 21st, 2006 at 7:06 am
OK, you want a fact? Ronald Reagan used unrelenting military, economic and diplomatic pressure to bring down the Soviet Union. He did not “trade” our way to victory in the Cold War. Yes, he also made sure the U.S.S.R. and China did not renew their Stalin-Mao era alliance by opening up our market to the Chinese. Reagan knew full well we was strengthening Chinese Communists in the process, but it was the only way to isolate and starve the Russian Communist machine.
Oh, while we’re talking about facts, here’s another one for you; there is no more U.S.S.R. I realize this comes as a great shock to you, but please check this out for yourself. So, why the hell wouldn’t we want to finish the job Reagan started, using the same method, and rid the world of the last great bastion of tyranny?
Going back a few decades, how would history have been written if Henry Ford had not been allowed to help Hitler re-industrialize Germany in the early 30’s? The point is that there are many different ways to coddle evil, and usually, coddling is considered, at the time, to be the most convenient course. It is simply easier to allow others to manufacture our goods, lend us money on a seemingly limitless credit card, do menial labor, run our ports, etc. than do the hard work of maintaining our civilization.
In the end, massive public and private debt, illegal immigration, trade imbalances, and foreign run infrastructure all point to the same thing; a lazy America that has lost its’ way. As a society we are drowning in excess and compulsion, with no real appreciation for sacrifice (we’re talking more than a ‘Support our Troops’ bumpersticker), and no real fear of loss.
I am not saying that an more self-sufficient economic struvture would have no downside; indeed, I can envision quite a few short-term hardships. Without doubt, you could envision more, but growth and maturity are not painless processes, for either the individual or society. That’s another fact, by the way.
March 21st, 2006 at 8:32 am
Bob,
I will give you credit it admitting that NEOCONS like yourself are liberal. You define the split in the Republican party between traditional conservatives and NEOCONS.
The National Journal recently ranked Arlene Specter over fiscal hawks Ron Paul, Walter Jones and Jeff Flake. The Republican party is for less government, personal responsibility and fiscal control. National Journal definition of conservative “became a proxy for how you voted with the administration”- which is no indicator of conservatism at all according to fiscal Republican hawk Jeff Flake
March 21st, 2006 at 8:50 am
Bob,
Leading indicators signal slowing growth
Signs of caution pop up for second half of the year
Aleksandrs Rozens – Associated Press
Tuesday, March 21, 2006
New York — A closely watched gauge of future economic activity declined slightly in February following a sharp rise in January, a private research group said Monday.
The decline, which follows four months of gains, suggested to some analysts that the nation’s economic growth will slow in the second half of the year.
The Conference Board said its Index of Leading Economic Indicators fell 0.2 percent in February, following a revised 0.5 percent rise in January. The January increase had initially been reported at 1.1 percent.
Economists on Wall Street had expected the index to decline 0.3 percent in February.
The Conference Board said its coincident index, a measure of the current economy, rose 0.3 percent in February, following no change in January and a 0.4 percent increase in December.
In the latest report, the largest negative components were consumer expectations, building permits and stock prices. The positive components included manufacturers’ new orders for non-defense capital goods and orders for consumer goods and materials.
“Essentially the story is we have got moderate growth through the first quarter. We may tick up in the second quarter, and we may tick down in the third quarter,” Ken Goldstein, an economist at the Conference Board, told The Associated Press. “Growth is going to be a little slower the second half of the year.”
Frank Nothaft, chief economist at the mortgage consolidator Freddie Mac, said some of the growth anticipated for the first half of the year is related to reconstruction efforts amid regions hurt by hurricanes last year.
“This pumps more money into the economy, spurring growth,” he said, adding that the slowdown in the later half of 2006 would reflect the series of interest rate increases by the Federal Reserve.
The U.S. central bank, concerned about inflation that could hobble the economy, has raised interest rates 14 times since June 2004. The series of rate increases has effectively raised borrowing costs for consumers and businesses.
The higher rates have already had some impact on housing, where sales of homes have slowed and economists believe the Fed will raise rates again later this month.
While the Index of Leading Economic Indicators dipped in February, the nation’s economy saw gains in the jobs market. That same month employers expanded payrolls by 243,000 jobs, far more than expected.
March 21st, 2006 at 9:11 am
“In all do [sic] respect someone from the credit side of banking would of [sic] understood …”
With all due respect, John, I’ve told you your baseless assumptions about my banking experience were wrong. Are you now calling me a liar?
And if “liberal” means “loose credit standards”, please tell me where on Earth you find any basis in my posts for saying anything at all about credit standards.
“I will give you credit it admitting that NEOCONS like yourself are liberal. You define the split in the Republican party …”
My, my. We do like our labels, don’t we? Now I’m a “NEOCON” as well as a liberal. Is neocon a credit term, too, or are you now admitting that you meant liberal in the political sense after all? And what split did I define? I don’t recall.
John, I strongly suggest, if you are serious about running for office, which I assume you are doing for all the right reasons even if I think you’re wrong in most of what you say, that you refrain from name-calling on public blog sites. You might also want to talk about what your agenda would be in office, on the off chance you were actually elected, rather than just trying to convince people of how bad things are. There ARE real problems in the world, John. You don’t need to make up fake ones.
March 21st, 2006 at 10:13 am
Bob,
You called yourself a liberal. NEOCON is not a negative political term to people who have your views. In fact NEOCONS like yourself actually refer to themselves as NEOCONS. The question I have do you not see that when Arlene Spectra is considered my conservative then Ron Paul that this is NEOCON vs, traditional conservative debate on definition.As far as politics I am not a politician, if you want someone to tell you what you want to hear vote for Tom Price.But do not complain about 9 trillion dollar debt and 720 trillion dollar trade debt.
March 21st, 2006 at 10:43 am
“You called yourself a liberal.”
I guess the distinction between the classical meaning of liberal and the current usage is not one you grasp. Think John Locke and Adam Smith, John. You know who they were, don’t you?
“NEOCON is not a negative political term to people who have your views.”
You really think you know my views, John? You’ve spouted empty rhetoric about how our economy is going to heck in a foreign made hand-basket and I’ve disputed it with hard data. We haven’t discussed anything remotely related to “neocon” ideas. You are merely flailing about, looking for a label that allows you to categorize my views without having to know what they are.
As for you not being a politician, are you not running for office and asking people to give you their vote?
PS: Who is Arlene Spectra?
March 21st, 2006 at 11:14 am
Bob,
Adam Smith would of been a NEOCON. You just made my point. The problem is free market works between western nations. If you have dictatorships were they can in slave workers at $2 a day ,with no moral rules , you end up loosening your middle class.This is why every major religion has spoken out against trade deals like CAFTA that promote slave labor and destruction of the middle class. If you kick a dog it will bite.
March 21st, 2006 at 11:31 am
LOL. Adam Smith a neocon, slave labor in Central America, every major religion against free trade deals, and a “loosening” middle class, whatever that means. On those silly notes, I quit. You apparently aren’t interested in seriously discussing real issues.
March 21st, 2006 at 12:57 pm
Bob,
I am sorry you do not take billionaire Warren Buffett, PaulO Neal, Paul Craig Roberts,Bruce Bartlet,Pete Peterson,John Williams,Alan Greenspan…. as having a serious understanding of economics and our economy. You can fire Paul O Neal and Bruce Bartlet for standing up against plug and play # s you quote. But at the end of the day , everyone has to look in the mirror and ask themselves what is the truth.
If you believe the way we fix the trade deficit is by matching or beating the legal,regulatory and tax structure in countries like communist China you should vote for Tom Price. If you believe in big government pork programs driven by lobbyist ,like the highway,energy ,drug prescription…. bills you should not support me. I wish you luck , and I do respect you right to disagree. Thanks jk
March 24th, 2006 at 3:04 pm
Bob,
This is what happens when you put all your apples in the plug and play numbers.
Senior Producer
MSNBC
Updated: 1:18 p.m. ET March 24, 2006
John W. Schoen
Senior Producer
A government report Friday confirmed what home buyers and sellers have been finding out recently: The once red-hot U.S. housing market is cooling off. The result is that sellers in many parts of the country have been cutting prices, and buyers are finding they have more bargaining power when they go house hunting.
Sales of new homes plunged in February, while the median price of a new home dropped for the fourth straight month, providing fresh evidence that after five years of record setting sales, the nation’s once-booming housing market is cooling off.
The Commerce Department reported that sales of new single-family homes dropped by 10.5 percent last month — the largest amount in nearly nine years and the second straight monthly drop.
Story continues below ↓
——————————————————————————–
advertisement
——————————————————————————–
“The housing market is in a downturn, there’s no doubt about it,” said Scott J. Brown, chief economist at Raymond James & Associates. “It’s just a question of how severe.”
The answer to that question: A lot depends on where you live. In the West, where sales had been booming and prices rising rapidly, the government’s figures showed a nearly 30 percent drop in February sales from the month before. Sales in the Northeast fell nearly 13 percent. The slowdown was more modest in the Midwest and South, where sales and prices had been moving up more slowly,
‘The housing market is in a downturn, there’s no doubt about it.’
— Scott J. Brown
Raymond James & Assoc.
With demand weakening, new home prices are also falling. The median price of a new home sold last month dropped to $230,400, down by 1.6 percent from January and 2.9 percent lower than this time last year. (The median is the mid-point where half the homes sold for more and half for less.)
The latest government data seemed to contradict a report Thursday that sales of existing homes rose by a stronger-than-expected 5.2 percent last month after falling for five straight months. The National Association of Realtors, which issued the report, said the February numbers got a one-time shot in the arm from warm weather and lower mortgage rates in January. But the longer-term trend is still downward, according to the realtors group’s chief economist.
“What we have here is still the soft landing scenario we’ve been predicting,” said NAR chief economist David Lereah. “The increase we experienced in this report is an aberration because of warm weather.”
Economists said the discrepancy in the two reports may also be the result of statistical variations in the way the two reports are assembled. Sales of existing homes are reported when those sales close, while new home sales record the initial contract of sale. As a result, the report on existing homes tends to lag current market conditions, analysts said, and may not reflect the impact of the slowdown.
Seasonal adjustments to the data often overstate month-to-month changes in winter months, when the number of homes sales and pace of construction is usually slowest, analysts said.
CONTINUED: Backlog building
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March 25th, 2006 at 8:17 pm
Bob,
More news from the real world.
An Economy On Thin Ice
By Paul A. Volcker
Sunday, April 10, 2005; Page B07
The U.S. expansion appears on track. Europe and Japan may lack exuberance, but their economies are at least on the plus side. China and India — with close to 40 percent of the world’s population — have sustained growth at rates that not so long ago would have seemed, if not impossible, highly improbable.
Yet, under the placid surface, there are disturbing trends: huge imbalances, disequilibria, risks — call them what you will. Altogether the circumstances seem to me as dangerous and intractable as any I can remember, and I can remember quite a lot. What really concerns me is that there seems to be so little willingness or capacity to do much about it.
We sit here absorbed in a debate about how to maintain Social Security — and, more important, Medicare — when the baby boomers retire. But right now, those same boomers are spending like there’s no tomorrow. If we can believe the numbers, personal savings in the United States have practically disappeared.
To be sure, businesses have begun to rebuild their financial reserves. But in the space of a few years, the federal deficit has come to offset that source of national savings.
We are buying a lot of housing at rising prices, but home ownership has become a vehicle for borrowing as much as a source of financial security. As a nation we are consuming and investing about 6 percent more than we are producing.
What holds it all together is a massive and growing flow of capital from abroad, running to more than $2 billion every working day, and growing. There is no sense of strain. As a nation we don’t consciously borrow or beg. We aren’t even offering attractive interest rates, nor do we have to offer our creditors protection against the risk of a declining dollar.
Most of the time, it has been private capital that has freely flowed into our markets from abroad — where better to invest in an uncertain world, the refrain has gone, than the United States?
More recently, we’ve become more dependent on foreign central banks, particularly in China and Japan and elsewhere in East Asia.
It’s all quite comfortable for us. We fill our shops and our garages with goods from abroad, and the competition has been a powerful restraint on our internal prices. It’s surely helped keep interest rates exceptionally low despite our vanishing savings and rapid growth.
And it’s comfortable for our trading partners and for those supplying the capital. Some, such as China, depend heavily on our expanding domestic markets. And for the most part, the central banks of the emerging world have been willing to hold more and more dollars, which are, after all, the closest thing the world has to a truly international currency.
The difficulty is that this seemingly comfortable pattern can’t go on indefinitely. I don’t know of any country that has managed to consume and invest 6 percent more than it produces for long. The United States is absorbing about 80 percent of the net flow of international capital. And at some point, both central banks and private institutions will have their fill of dollars.
I don’t know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change.
It’s not that it is so difficult intellectually to set out a scenario for a “soft landing” and sustained growth. There is a wide area of agreement among establishment economists about a textbook pretty picture: China and other continental Asian economies should permit and encourage a substantial exchange rate appreciation against the dollar. Japan and Europe should work promptly and aggressively toward domestic stimulus and deal more effectively and speedily with structural obstacles to growth. And the United States, by some combination of measures, should forcibly increase its rate of internal saving, thereby reducing its import demand.
But can we, with any degree of confidence today, look forward to any one of these policies being put in place any time soon, much less a combination of all?
The answer is no. So I think we are skating on increasingly thin ice. On the present trajectory, the deficits and imbalances will increase. At some point, the sense of confidence in capital markets that today so benignly supports the flow of funds to the United States and the growing world economy could fade. Then some event, or combination of events, could come along to disturb markets, with damaging volatility in both exchange markets and interest rates. We had a taste of that in the stagflation of the 1970s — a volatile and depressed dollar, inflationary pressures, a sudden increase in interest rates and a couple of big recessions.
The clear lesson I draw is that there is a high premium on doing what we can to minimize the risks and to ensure that there is time for orderly adjustment. I’m not suggesting anything unorthodox or arcane. What is required is a willingness to act now — and next year, and the following year, and to act even when, on the surface, everything seems so placid and favorable.
What I am talking about really boils down to the oldest lesson of economic policy: a strong sense of monetary and fiscal discipline. This is not a time for ideological intransigence and partisan posturing on the budget at the expense of the deficit rising still higher. Surely we would all be better off if other countries did their part. But their failures must not deflect us from what we can do, in our own self-interest.
A wise observer of the economic scene once commented that “what can be left to later, usually is — and then, alas, it’s too late.” I don’t want to let that stand as the epitaph of what has been an unparalleled period of success for the American economy and of enormous potential for the world at large.
The writer was chairman of the Federal Reserve from 1979 to 1987. This article is adapted from a speech in February at an economic summit sponsored by the Stanford Institute for Economic Policy Research.
March 25th, 2006 at 8:25 pm
Bob,
More news on how the plug and play numbers about employment.
Additional Slack in the Economy:
The Poor Recovery in Labor Force Participation During This Business Cycle
Public Policy Brief No. 05-2
by Katharine Bradbury
This public policy brief examines labor force participation rates in this recession and recovery and compares them with the cyclical patterns in earlier business cycles. Measured relative to the business cycle peak in March 2001, labor force participation rates almost four years later have not recovered as much as usual, and the discrepancies are large.
Among age-by-sex groups, the participation shortfall is especially pronounced at young and prime ages: Only for men and women age 55 and older has participation risen more than is usual four years after the business cycle peak.
The brief examines explanations and different recovery scenarios for various groups—older workers, women, teens. Depending on the scenario, the current labor force shortfall ranges from 1.6 million to 5.1 million men and women. With 7.9 million people currently unemployed, the addition of these hypothetical participants would raise the unemployment rate by 1 to 3-plus percentage points. Current low rates of labor market participation thus potentially represent considerable slack in the U.S. labor market.
This brief is based on materials presented in briefings to the President and Academic Advisory Council of the Federal Reserve Bank of Boston in March and April 2005.
Full-text brief
March 25th, 2006 at 9:02 pm
“This is what happens when you put all your apples in the plug and play numbers.”
Sorry, John, but that comment makes zero sense. What, exactly, has happened as a result of someone putting apples in plug and play numbers? What on earth could putting apples in any sort of numbers possibly mean?
BTW, if you’re worried about the housing market, and if you actually want to be a congressman, perhaps you should share with us, in your own words, just what it is about the housing market that worries you, what policies you think are responsible for the conditions that worry you, and what you think ought to be done to remedy the situtation.
The same goes for your Paul Volcker column. What point are you trying to make that it supports? What exactly is wrong and what do you propose doing about it?
When you can answer those questions rather than posting nonsensical comments about apples and plug and play numbers, then this conversation might be worth having. Absent that, it’s not.
March 25th, 2006 at 9:30 pm
Bob,
The posting were to demonstrate that your rosy out look on the economy is not shared by Pete Peterson, Alan Greenspan ,Paul Volcker,Warren Buffett,Paul Craig Roberts…………… The following press release explains my position.This is similar view as two Former Republican Treasury Secretaries Pete Peterson and Paul Craig Roberts.
Rep. Tom Price Digs a Hole to China
Congressman Tom Price recently held a Telephone Town Hall to discuss the economy and taxes. He opened by calling the economy “relatively strong” and said he was “befuddled” by the media’s negativity regarding consumer confidence.
The 1st Caller Asked About Trade
She reminded her Congressman about the rapid and widespread loss of America’s manufacturing base to foreign companies. She reminded him that our national debt is “astronomical” and shared her deep disappointment with the trade deficit. She reminded him that our great nation was based on technology and manufacturing, which we are losing. She concluded by saying: “I’m all for participating in a global economy, but at what cost?”
That last line is what Tom Price should have been telling her—not the other way around! Unfortunately for working Americans, that’s no where near what he said.
Tom’s Answer Neatly Summarizes Why He Must be Removed from Congress
He said: “The fundamentals of our economy—and why jobs move away from our shores—are no different than the economic costs for any business. Primarily, the things that drive economic costs for business are: taxation, litigation, and regulation. And so it’s important that we get a handle on those three things.” That’s it; end of answer.
Translation: to be competitive America should model its taxation, litigation (i.e. liability/legal), and regulatory systems after the countries that are taking our jobs, such as China and India.
Tom Price Wants Americans to Win the Race—to the Bottom!
Let’s ignore for a moment his shocking failure to include wage differences on his list of reasons that “jobs are moving away from our shores”. Does he really believe that an endless supply of $2 per day foreign labor isn’t a factor?
He (and too many others in Congress) are willing to move America toward:
Communist China (which embraces child and forced labor)
Mexico (with its justice-for-sale legal system)
India (home to four of the world’s most polluted cities)
Tom Price will avoid the mess he’s creating by relaxing in his multi-million dollar home and raking in his first-class, tax payer-subsidized retirement and health insurance benefits. The rest of us, however, will be left to fend for ourselves.
A Formula for Economic and Social Disaster
Unfair trade policies like NAFTA (and CAFTA, which Price voted for) are forcing American companies to reduce wages; hire cheap legal and illegal immigrants; outsource jobs; move operations overseas; and eliminate medical and retirement benefits—just to survive.
Every major religion has spoken out against these unfair trade agreements—Tom Price, however, turns a deaf ear in favor of multinational corporations and their high-priced lobbyists.
We Must Level the Playing Field
John Konop’s answer is to negotiate fair trade deals that benefit the majority of Americans (not just an elite few). If a trade deal lowers the standard of living for most Americans, why do it?
Please vote for John Konop for U.S. Congress and forward this email to your friends. Thank you…
March 25th, 2006 at 9:43 pm
Bob,
This is part of another press release.
Federal Deficit:
Rep. Price claims he supports a “balanced budget amendment”, yet he votes for (or approves of) virtually every bloated spending bill in Congress: the Transportation Bill (with its bridge to nowhere); the Energy Bill (with its oil company give-aways); No Child Left Behind (though he was not in Congress at the time this was passed, he has repeatedly voiced his strong supprt for this legislation), and the Medicare Prescription Bill (BIG supporter of it).
I believe a balanced budget is absolutely vital to our country’s future. The time for talk has passed; it’s time for action. We need representation that’s not bought off by lobbyists and that’s strong enough to stand up to misguided party leadership.
March 25th, 2006 at 10:37 pm
“The following press release explains my position. This is similar view as two Former Republican Treasury Secretaries Pete Peterson and Paul Craig Roberts.”
Pardon me, but I don’t see the similarity. Are you telling me that these guys like to prop up straw men, too?
Had Tom Price actually suggested me model our tax, legal and regulatory systems after China or India, then I’d be worried about him, too. Fortunately, he didn’t.
And I challenge you to find any of them saying that NAFTA or CAFTA are “unfair trade policies.” Furthermore, to say that “every major religion” opposes these trade agreements is absurd.
Here’s a tip for you, John. Repetition does not create its own truth.
March 26th, 2006 at 9:45 am
Bob,
Mr. Price on numerous occasions has made the point , when asked how we can compete with countries like communist China, that we need to change our tort system,regulations and tax structure.
As far as trade many conservatives do not support the destruction of the middle class trade deals.
Paul Craig Roberts
Paul Craig Roberts is a former Senior Research Fellow at the Hoover Institution, a former Assistant Secretary of the Treasury in the Reagan Administration, and a prolific and popular journalist.
[edit]
Affiliation
He is considered part of the paleoconservative wing of conservatism. In recent years, he has become increasingly known as an opponent of government regulated “free-trade agreements” like NAFTA, and the World Trade Organization
As far as major religion you can find statements like the one bellow in almost every major religion.
CAFTA: HOW ELECTED OFFICIALS BETRAYED AMERICA
By Pastor Chuck Baldwin
August 5, 2005
NewsWithViews.com
Most of us are aware that Congress has passed and President Bush has signed the Central American Free Trade Agreement (CAFTA) into law. CAFTA is the latest in a series of international trade agreements to which the United States has committed itself.
Sold to Congress as promoting “free trade,” international agreements such as the North American Free Trade Agreement (NAFTA) and now CAFTA are actually huge compromises of American sovereignty and independence for the benefit of wealthy international corporations.
Consider that since President Bill Clinton and Senate Majority Leader Bob Dole collaborated to pass NAFTA, nearly 400 manufacturing plants have been closed, tens of thousands of American jobs have been exported overseas, and the American people are now strapped with a gargantuan federal trade deficit. But that is just the beginning!
NAFTA and CAFTA are precursors for an even more egregious “trade agreement” called The Free Trade Area of the Americas (FTAA). FTAA would, in effect, all but erase our national borders, establish a European Union (EU)-style international government, and even pave the way for a multinational currency.
Adding insult to injury is the fact that many of the mostly Republican members of the House of Representatives who voted for CAFTA knew they were defying the will of the majority of their constituents and were passing legislation dangerous to America’s very security.
Consider the words of my own Congressman, Jeff Miller. Jeff is a conservative Republican representing the First Congressional District of Florida. Before his initial election to Congress, I interviewed Jeff on my radio talk show. He forthrightly articulated his opposition to NAFTA and similar trade deals. In that interview he said, “NAFTA itself may be the death-knell of American agriculture.”
In a letter to a constituent dated June 1, 2005, Congressman Miller said, “I do not believe CAFTA is good for Florida.” He further said, “CAFTA is an outsourcing agreement.”
Miller went on to say, “CAFTA will be a market for ‘turnaround’ exports-products shipped south for assembly and then final sale in the U.S.- particularly textiles and semiconductors. Fabric will be sent to the region, stitched into final apparel and home furnishing products, and shipped right back to the United States. That’s not traditional job-creating exports at all. Rather than servicing new foreign markets, these ‘exports’ serve the same domestic market U.S.-based factories once supplied. The only difference: American workers are removed from the equation. Due to Central American turnaround trade that currently exists, the U.S. trade deficit with CAFTA-6 countries rose nearly 60 percent from 1997-2004.”
Congressman Miller then said, “Still further, at a time when the U.S. is rapidly outsourcing both its service and manufacturing jobs, CAFTA will make it illegal for any state or federal agency to adopt a ‘Buy American’ policy.”
Sounds pretty convincing, doesn’t it? It should. Everything Miller said is true. But guess what? In spite of everything he said, Jeff Miller voted for CAFTA! Yes, my friends, after rightly outlining many of the dangers and draconian elements to CAFTA, he turned right around and voted for it! How could he do this? How could he betray his home district, his state, and even his own conscience?
You can rest assured that Jeff Miller was not the only Congressman to sell out America’s workers and farmers (not to mention our sovereignty and security). The arm-twisting that went on behind the scenes smacks of all that’s wrong and rotten in Washington, D.C.
According to Congressman Ron Paul (R-TX), “Leaving aside the arguments for or against CAFTA itself, the process by which the bill ultimately passed should sicken every American who believes in representative government.”
Paul continued, “Yet even after months of unprecedented wheeling and dealing by corporate lobbyists, congressional leaders, and the White House, the Washington establishment still failed to pass CAFTA in the U.S. House. That’s right, when the 15-minute voting period expired last Wednesday evening, CAFTA seemingly had been defeated. But pro-CAFTA forces were so determined to get what they wanted, they broke the rules. House leadership ignored the time limit and kept twisting arms and making deals until they finally had the votes to pass CAFTA nearly an hour later.”
Ron Paul then said, “Rest assured that you will pay dearly for these bribes used to buy votes. One of my colleagues estimated that the price tag for buying the CAFTA vote will be at least $50 billion. That’s right, $50 billion to win a vote. Is that what you want from your representative in office
March 26th, 2006 at 11:09 am
OK, so Paul Craig Roberts has lost his free markets edge since he was in the Reagan administration – at least according to the unattributed quotation about him that you posted. But you said Alan Greenspan, Paul Volker and a bunch of others oppose NAFTA and CAFTA, but have yet to provide a direct quote from any of them that supports that assertion.
As for religious opposition to NAFTA and CAFTA, do you really think one opinion piece from one preacher/talk radio host/2004 minor party VP candidate/vocal opponent of the Republican party, who describes Islam as “a religion of violence and hatred”, proves any point about “every major religion”?
Sorry, it doesn’t. But at least we now know where you get your xenophobic world view and reflexive opposition to Republicans in office.
March 26th, 2006 at 11:51 am
Bob,
I will give you many more examples from Baptist,Methodist,Catholics,Jewish………. Who all oppose CAFTA based on moral grounds.
http://www.tradejusticeusa.org/issues/trade_agreements/cafta-main.htm
http://www.ajws.org/index.cfm?section_id=8&sub_section_id=12&page_id=413
http://www.usccb.org/comm/archives/2004/04-141.htm
http://www.tradejusticeusa.org/issues/trade_agreements/documents/OCBC-soc-2004-final.pdf
http://www.lwr.org/advocacy/tradejustice/CAFTA/index.asp
http://www.pcusa.org/trade/cafta.htm
When Warren Buffett, Alan Greenspan , Paul Volcker …. are all issuing warnings,about are trade deficits , what trade deals do you think they are talking about ? When Warren Buffett is proposing a his new trade policy deal it is about reforming NAFTA, CAFTA WTO…. Bob you are a smart guy , do you really want to argue that they are not talking about reforming are current failed trade policy ?
Do you really want to become part of the NEOCON group that has declared war on respected Republicans economist like Bruce Bartlet, Paul O Neal, Warren Buffet,Pete Peterson,Paul Craig Roberts, Lou Dobbs John Williams………. just because they are telling the truth about our economy. “The truth will set you free”
March 26th, 2006 at 3:39 pm
Actually, John, only two of the five organizations you linked represent religious entities – the Presbyterian Church and the Confederation of Catholic Bishops, the latter of which doesn’t actually oppose CAFTA. As they stated in July 2005, “USCCB and CRS do not oppose or support CAFTA. Rather, we seek to create a climate in Congress for moral dialogue and evaluation of CAFTA, which places the human person at the center of all economic activity.”
The others are actually international relief (2) and political (1) organizations that just happen to operate under a banner of religious faith.
More importantly, none of the four groups you cited that actually took a position against CAFTA did so on the basis of US trade balances, foreigners taking American jobs, a “race to the bottom”, making the US “more like China and India”, or any of the other nonsense you are talking about.
In some cases, they actually want to protect jobs in Latin America from competition from the US. In others, they want us to force other countries to adopt stricter labor laws or other regulations (on humanitarian or other non-xenophobic grounds) as a condition to free trade, want to remove provisions that knock down barriers to investment in those countries, or want to allow other countries to engage in restrictive trade practices to protect specific industries from competition in the interest of either economic development or cultural heritage.
As for the rest, expressing concern about the size of trade deficits and suggesting we find ways to increase personal savings to reduce consumption, as Volcker was talking about, is not the same as opposing free trade deals.
And BTW, Paul O’Neil, Warren Buffet, Pete Peterson and Lou Dobbs are not economists. Peterson comes the closest – he’s an investment banker. And I have no idea what John Williams you might be talking about.
March 26th, 2006 at 9:18 pm
Bob,
You really do not want to argue that Jesus would support U.S. dollars to build child labor sweatshops overseas at the expense of the American middle class? I can give you more sources but I would think the association of Baptist churches in Massachusetts would be a good start.
Catholic
Central American and U.S. Bishops Joint Statement
Catholic Relief Services
Maryknoll Association fof the Faithful
Missionary Oblates Justice & Peace/Integrity of Creation Office
Pax Christi USA
Leadership Conference of Women Religious
Testimony of Guatemalan Bishop Alvaro Ramizzini
Jewish
American Jewish World Service
Protestant
Presbyterian Church (USA)
Association of Baptist Churhes of Massachusetts
Lutheran World Relief
Association of Baptist Churches of Massachusetts
American Friends Service Committee
Bob, You really do not want to argue that Investment bankers , CEO’s and Treasury Sectaries do not qualify as economist ? You sound like the Attorney for Ken Lay at ENRON. You may disagree, with billionaire Warren Buffet, Treasury Secretary and former CEO of ALCOA Paul O NEAL, Treasury Secetary Pete Peterson, Assistant Treasury Secretary Paul Craig Roberts………. are all qualified as experts by any rational standard. Please stop attacking the messenger and deal with the issue. Thanks jk
March 26th, 2006 at 10:53 pm
“You really do not want to argue that Jesus would support U.S. dollars to build child labor sweatshops overseas at the expense of the American middle class?”
Oh, yeah, that makes perfect sense. Or not. If you’re going to try to put words in my mouth, at least have the decency to make me coherently evil.
“You sound like the Attorney for Ken Lay at ENRON… Please stop attacking the messenger and deal with the issue.”
Enron? LOL. What issue would you like me to deal with, John? You’re the one running for office and you have yet to articulate a single coherent policy proposal, never mind an agenda. All you’ve done is prattle on vaguely about how bad things are and how much worse they are going to get, dismissed government statistics that contradict your claims, blamed Tom Price, George Bush or the Republican party generally for it all, and dropped names of public figures you claim agree with you.
You sound like most of the angry left, John – all finger pointing and alarmism, but no viable solutions. “Everything’s going to heck and it’s that guy’s fault” is not an agenda and, as Kerry/Edwards showed, it’s not a great campaign strategy either.
March 26th, 2006 at 11:14 pm
PS: You aren’t going to convince me now that your opposition to free trade was all about your moral/religious concerns about child labor in other countries. You’ve made it clear from the begining that your objective is to keep out foreign made goods – and immigrants – based on the misguided notion that doing so would be good for this country. It wouldn’t. Nor would it do a thing to reduce child labor overseas.
And remember, too, that this whole argument started because you wanted to paint Dubai as some cross between a Chinese labor camp and a haven for terrorists. In fact, I asked you once what China had to do with a Dubai company unloading ships here. You never answered. You just changed the subject.
March 27th, 2006 at 7:37 am
Bob,
Conservatives like myself are speaking out due to poorly negotiated trade deals by both parties. To call us Isolationist and racist only shows we are right you have no argument. We are also upset about the out of control spending driven by lobbyist clients needs and not the American people. Bob, you are a smart guy, to attack conservatives , by distorting their positions and life work is wrong.
I will give you the difference between Tom Price and I.
He feels that we can out tax structure,regulate and tort reform countries like communist China to fix the trade in balance. I think we need to level the playing field, and if we do not we will destroy the middle class. If you read Pete Peterson former Republican Treasury Secretary book “Running on Empty” he claims that we used this strategy while he was in office.
On spending , Tom Price has voted and or supported pork bills Highway, Energy, No Child Left Behind, Drug Bill……. Instead of blaming everyone in Congress for forcing him to sign the pork bills, Why not just vote NO.
Pete Peterson is right, a tax cut is not a tax cut unless you are willing to cut spending at the same rate. If you cut taxes and do not deal with spending all you are doing is deferring the bill in the future with interest. Bob if you keep supporting guys like Tom Price do not complain about 9 trillion dollar debt or interest rates going up.
I will be happy to deal with the UAE deal after you have time to deal with this last post. Thanks jk
WASHINGTON – From the moment George W. Bush began campaigning for the Oval Office in 1999, White House watchers have wondered what kind of president he would be: The Ronald Reagan of his generation? Like his father, the first President Bush? Perhaps even, in some ways, similar to Bill Clinton?
This year’s State of the Union address, which was panned by a chorus of conservative commentators, has intensified the debate about Bush’s political philosophy.
In the Monitor
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The Wall Street Journal editorial page accused President Bush of playing “miniball,” code for a Clintonian love of “small political ideas.” Robert Novak reported private concern among congressional conservatives that Mr. Bush was moving toward bigger government. George Will called Bush’s most memorable line – that America is addicted to oil – “wonderfully useless.”
“He’s conservative by temperament; many of his policy positions, such as cutting taxes, are on the right side of the political spectrum,” says John Green, a political scientist at the University of Akron in Ohio. “But he doesn’t have a consistent set of conservative principles. That’s what a lot of the complaint has been about, especially after the State of the Union.”
Specifically, Bush’s education initiative, No Child Left Behind, and the expensive new prescription-drug benefit for seniors have left many conservatives wondering whatever happened to the party’s commitment to small federal government. Bush’s immigrant guest-worker program also divides Republicans. And as the Iraq war drags on, so, too, are conservatives increasingly conflicted.
Columnists, of course, aren’t usually running for election, or trying to protect their party’s slim majority in Congress, as Bush is doing. And they often don’t represent the views of rank-and-file voters. A Gallup poll of State of the Union watchers, two-thirds of whom were Republicans, showed a 75 percent positive rating, including 48 percent who were “very” positive.
But pundits can also be the canary in the coal mine. When Bush nominated his counsel Harriet Miers to the Supreme Court, conservative columnists raised doubts about her reliability on key issues. Her nomination was withdrawn.
Richard Viguerie, the direct-mail guru who helped fuel the Reagan revolution of 1980, asserts that Bush’s inconsistency as a conservative has alarmed many of the most active members of the party – the donors, fundraisers, and grass-roots activists who drive turnout on election day. A recent online poll by Mr. Viguerie of more than 1,000 conservative activists found that 67 percent say Bush is not governing as a conservative, and 64 percent give him a D or an F on government spending.
Even though Bush won’t be on the ballot, conservative disappointment in him could hurt the Republican Party in this November’s midterm elections, he says.
“The party has been hijacked by big-government Republicans,” says Viguerie, hinting that it might be good for the party to lose congressional power later this year. “The importance of losing elections is greatly underrated,” he adds. “There’s not any way Ronald Reagan would have been elected in 1980 if [Gerald] Ford had been elected in ‘76.”
Among conservative columnists, perhaps one of the president’s staunchest admirers is Fred Barnes, editor of the Weekly Standard. In his new book, “Rebel-in-Chief,” he delves into the tricky terrain of defining Bush’s philosophy as president. “Big-government Republican” doesn’t capture Bush, he suggests, nor do comparisons to recent presidents.
“His strategy is to use government as a means to achieve conservative ends,” Mr. Barnes writes. Thus, instead of trying to abolish the Department of Education, the Reagan-era position, Bush has sought to achieve the conservative goal of accountability in public education by requiring testing and then sanctions for schools that fail to meet standards.
Mr. Barnes separates presidents into two categories – those who govern and those who lead. He places Bush in the latter category, observing his penchant for far- reaching initiatives. Looking at the issue of presidential temperament, Barnes writes, “Bush is actually a mixture of FDR [Franklin Delano Roosevelt] and TR [Teddy Roosevelt], with FDR’s cool optimism and TR’s pugnacity and determination.”
Drawing any sort of comparison between Bush and the Roosevelts strikes some presidential historians as off-base, but on one score, at least, even Bush’s critics credit him with a level of political pragmatism that keeps him in the game. Take the failed initiative to partially privatize Social Security. While conservative columnists scolded Bush for taking his top domestic priority of 2005 and reducing it to a call for a bipartisan commission on entitlements, other analysts say he was just being realistic.
“He’s going to go back and try pushing his Social Security idea again?” asks historian Robert Dallek. “It won’t go anywhere. It was a political blunder.”
Another factor that may hurt Bush somewhat in the eyes of conservatives is the memory of Reagan, which grows more positive as time passes. Even though Reagan never actually succeeded in shrinking the federal government, his campaign against big government delighted libertarians and fiscal hawks, who now complain that Bush has abandoned that legacy. Federal spending leaped 35 percent during Bush’s first term, the Cato Institute notes.
“We hoped [Bush] would be more like Reagan than his father, but clearly he is not like Ronald Reagan,” says Viguerie. “Reagan was no pure conservative – he wandered off the conservative reservation here and there. But there was such a massive reservoir of goodwill for Reagan, because he was one of us. He walked with us and came to our meetings and receptions and dinners and sat with us.”