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ECONOMIC INDICATORS

11/20/04 <link>
Budget deficit and borrowing continues to explode

Daniel Gross of Slate writes about this:

On Nov. 3, as the bleary-eyed nation returned to work, the Treasury Department announced an impending crisis. If the lame-duck Congress doesn't raise the statutory $7.384 trillion debt limit, which was intentionally breached in October, by Nov. 18, the world's greatest power will run out of cash.

Congress, with the White House's blessing, left town before the election without dealing with the debt limits—but not before passing an appalling, special-interest-written, corporate tax bill that will deprive the government of more than $100 billion in future revenues. That double irresponsibility—the lousy tax bill and the ignored debt limit—was a fitting end to the past four years of essentially one-party rule.

The only solace for sullen Democrats is that now Republicans might have to clean up their own fiscal mess. The fiscal record of the past four years has been one of unmitigated—and seemingly intentional—irresponsibility. A Republican Congress working with a Republican president created the massive new Medicare prescription-drug entitlement, passed a new, subsidy-crammed farm bill, committed hundreds of billions of dollars to war efforts, and loaded up on pork-barrel spending. Meanwhile, taxes were reduced—on wage earners, investors, and companies. The end result: We collected about the same amount of taxes in fiscal 2004 as we did in fiscal 1999. But we spent 34 percent more. The total national debt has risen 30 percent in the past four years. The fiscally conservative Clinton administration had committed government to restraining spending. But now a massive structural gap has opened up between the country's financial inflows and outflows. It's only the willingness of the Chinese and Japanese central banks to buy our debt that keeps us afloat.

Freed of the need to run for re-election, will Bush act more fiscally responsible in a second term? Wishful thinking. This crowd literally doesn't have a clue when it comes to fiscal matters. Bush actually believes he has restrained Congressional spending, Cheney believes deficits don't matter, and most members of the Bush economic team can't—or won't—speak truth publicly. As for Congress, when it comes to managing the nation's fiscal affairs, House Majority Leader Dennis Hastert is a pretty good wrestling coach, and Senate Majority Leader William Frist is a pretty good doctor.

And so, while the moral-values crowd may have won, the fiscal orgy in Washington is sure to continue. Given Bush's mandate and his stated desire to fix the Alternative Minimum Tax (a huge tax reduction), make the temporary tax cuts permanent (ditto), and transform Social Seucrity (massive borrowing), his pledge to halve the deficit by 2009 is absurd.

In decades past, increasing Republican dominance of the House and Senate would have meant more fiscal discipline. But Republicans increasingly dominate the states that are net drains on Federal taxes—the Southern and Great Plains states—while fading in the coastal states that produce a disproportionate share of federal revenue. (It's Republicans, not Democrats, who are sucking on the federal teat.) What Amity Shlaes quaintly identified in today's Financial Times as the "southern culture of tax cutting" has been married to the southern culture of failing to generate wealth and the southern culture of depending on federal largesse. The offspring is an unsightly deficit monster.

Establishmentarians have long wondered when the grown-ups will asserts themselves in the Republican party. The stark truth today is that there are no grown-ups. The day before the election, I saw my congressman, Republican Chris Shays of Connecticut, greeting potential voters on Platform 19 at Grand Central Station, the launching point for the 5:01 to New Haven, the Bushenfreude express. When I thanked him for cutting my taxes, Shays smiled broadly. But when I suggested that he had raised taxes on my children, he looked at me quizzically. "You have to know all these tax cuts aren't really tax cuts. They're just tax shifts," I said. "All this debt has to be paid back."

Shays acknowledged that there had been a massive increase in debt. "But 40 percent of that is due to spending." That was the moment I realized my sober, moderate representative may have slipped the surly bonds of reality. Like virtually every other Republican in Congress, Shays had voted for each of Bush's revenue-reducing tax cuts and every spending-increasing budget. And yet he seemed blissfully, willfully unaware of the role he—and his party—played in controlling, originating, and approving all that spending. "And did you vote for the Medicare bill?" I asked. "I did," he smiled. As I scurried off to get a seat before the doors closed, I heard a plaintive cry from one of the last remaining Republican moderates in Congress: "But I voted against the farm bill!"

If this is what passes for a deficit hawk, we're in big trouble. The Republicans have suffered no political consequences for destroying the nation's balance sheet, after all. Why should they take the painful efforts needed to fix the mess they created? No one is holding them accountable. It leaves those yearning for some return to fiscal sanity in the perverse position of hoping for a crisis in the bond or currency markets to shock the faith-based crowd back into reality. And when that adjustment comes, I can't wait to see how conservatives try to find a way to blame it on Clinton.

2/16/04 <link> (UPDATED 2/24/04)
JOBS, JOBS, JOBS - where are they?
Poor economic policy forces Bush administration to continue to rely on fakery to ensure re-election
As election 2004 approaches, this is an appropriate time to review the Bush administration's record on job creation, since this epitomizes their "policy" on a wide variety of issues. Click here for a detailed report. 

1/1/04 <link>
What does the economy hold in terms of growth and jobs for 2004?
First, here's a concise summary from the always brilliant economist Paul Krugman:

...Commerce Department figures reveal a startling disconnect between overall economic growth, which has been impressive since last spring, and the incomes of a great majority of Americans. In the third quarter of 2003, as everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage and salary income, adjusted for inflation, rose at an annual rate of only 0.8 percent. More recent data don't change the picture: in the six months that ended in November, income from wages rose only 0.65 percent after inflation. Why aren't workers sharing in the so-called boom? Start with jobs. Payroll employment began rising in August, but the pace of job growth remains modest, averaging less than 90,000 per month. That's well short of the 225,000 jobs added per month during the Clinton years; it's even below the roughly 150,000 jobs needed to keep up with a growing working-age population. But if the number of jobs isn't rising much, aren't workers at least earning more? You may have thought so. After all, companies have been able to increase output without hiring more workers, thanks to the rapidly rising output per worker. (Yes, that's a tautology.) Historically, higher productivity has translated into rising wages. But not this time: thanks to a weak labor market, employers have felt no pressure to share productivity gains. Calculations by the Economic Policy Institute show real wages for most workers flat or falling even as the economy expands. An aside: how weak is the labor market? The measured unemployment rate of 5.9 percent isn't that high by historical standards, but there's something funny about that number. An unusually large number of people have given up looking for work, so they are no longer counted as unemployed, and many of those who say they have jobs seem to be only marginally employed. Such measures as the length of time it takes laid-off workers to get new jobs continue to indicate the worst job market in 20 years. So if jobs are scarce and wages are flat, who's benefiting from the economy's expansion? The direct gains are going largely to corporate profits, which rose at an annual rate of more than 40 percent in the third quarter. Indirectly, that means that gains are going to stockholders, who are the ultimate owners of corporate profits. (That is, if the gains don't go to self-dealing executives, but let's save that topic for another day.) Well, so what? Aren't we well on our way toward becoming what the administration and its reliable defenders call an "ownership society," in which everyone shares in stock market gains? Um, no. It's true that slightly more than half of American families participate in the stock market, either directly or through investment accounts. But most families own at most a few thousand dollars' worth of stocks. A good indicator of the share of increased profits that goes to different income groups is the Congressional Budget Office's estimate of the share of the corporate profits tax that falls, indirectly, on those groups. According to the most recent estimate, only 8 percent of corporate taxes were paid by the poorest 60 percent of families, while 67 percent were paid by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class warfare!" the right shouts.) So a recovery that boosts profits but not wages delivers the bulk of its benefits to a small, affluent minority. The bottom line, then, is that for most Americans, current economic growth is a form of reality TV, something interesting that is, however, happening to other people. This may change if serious job creation ever kicks in, but it hasn't so far. The big question is whether a recovery that does so little for most Americans can really be sustained. Can an economy thrive on sales of luxury goods alone? We may soon find out.

UPDATE on 2/16/04: The charts previously attached to this post have been deleted and updated charts have been posted in the post on 2/16/04.  

5/10/03 <link>
Fiscal crises in the states
As the fiscal situation is the states worsens, it might be a good point to take a snapshot of what caused it and what states are doing about it. The Center for Budget and Policy Priorities has some useful information on this. We quote directly from their analysis below.

Did states spend their way into the current fiscal crisis?

State Spending Grew More Slowly During the 1990s than in Previous Decades After adjusting for inflation, the amount that states spent per resident, using funds they raised from their own sources, increased by an average of 2.0 percent per year between 1989 and 1999.  This is well below the average annual spending growth during the 1980s (2.9 percent) and over the entire 1949-1999 period (also 2.9 percent). (eRiposte emphasis) Most of the growth in state spending that did occur during the 1990s was in education, healthcare, and corrections — areas where costs were rising, need was growing, and/or voters were demanding improvements.  After accounting for inflation, nine out of ten new state dollars went into these three areas. Education increases were driven in part by the fact that the school-age population grew faster than the general population and that school costs grew faster than general inflation.  In addition, a number of states undertook new educational initiatives (such as reducing class size, equalizing funding among school districts, and increasing accountability), many of which had significant costs. Health care increases were largely driven by the fact that health care costs grew almost twice as rapidly as general inflation and that Medicaid enrollment rose among disabled individuals and the elderly, two groups with expensive health care needs.  In addition, states expanded health care coverage among low-income children and pregnant women. Corrections increases largely reflected the growth in the prison population.  The number of prisoners under state jurisdiction nearly doubled from 1989 to 2000. States also built up their rainy day funds during the 1990s, raising total reserves to their highest level in twenty years.  By the end of fiscal year 2000, states had total year-end balances (which includes both general fund balances and rainy day funds) of almost $50 billion or 10.4 percent of expenditures.  Prior to the last recession of the early 1990s, states had total balances of only $12.5 billion or 4.8 percent of expenditures.  As a result, states were better prepared for this economic downturn than they were for the recession of the early 1990s. (eRiposte emphasis) Steep Revenue Declines Are the Main Cause of States’ Current Problems The major cause of the current state fiscal crisis is a steep drop in revenues, which have fallen twice as far as during the recession of the early 1990s. State revenues have declined relative to the same quarter of the prior year in each of the last six quarters, according to inflation-adjusted data collected from state revenue departments by the Rockefeller Institute of Government.   Revenue in each quarter of FY2002 was well below the same quarter of the previous fiscal year — about 13 percent below in the crucial April-June quarter, which is the most important quarter for tax receipts.  Thus far, state revenues have not rebounded. One reason for the revenue decline is the economic downturn, especially the stock market decline.  Another is the ongoing erosion of state tax bases as services, which states generally do not tax, become an increasing portion of overall economic activity.  The substantial tax cuts that many states instituted in the 1990s also played a role in reducing state revenues, and about 25 governors this year have proposed raising taxes to help balance their budgets... Conclusion The current fiscal crisis is not the result of massive overspending by states.  State spending grew during the 1990s, but more slowly than in previous decades and primarily in education, health care, and corrections, all areas with rising costs, need, and/or public demands for improved services.  Rather, the current fiscal crisis is a revenue crisis, for which even states with the most well-stocked reserve funds were unprepared. (eRiposte emphasis)  If the federal government fails to provide fiscal relief, states will be forced to close their budget shortfalls entirely through spending cuts and various kinds of revenue increases.  Both types of measures not only risk harming vulnerable populations such as poor, elderly, and disabled individuals but also will take money out of the economy, undermining stimulus efforts undertaken at the federal level.

Severe State Fiscal Crisis may be worsening

States have closed, or are closing, about $80 billion in budget shortfalls for the current fiscal year (which ends June 30 in most states) and another $79 billion in shortfalls for FY 2004, according to the National Conference of State Legislatures. Forced by balanced budget requirements to close these deficits, states have been cutting important programs and services, including education, health care, and public safety. Now the crisis appears to be worsening.  New data show that in a number of states, including California , Colorado , Connecticut , Idaho , New York , North Carolina , and Pennsylvania , revenues for April fell short of expectations, so these states are raising their deficit forecasts.  Clearly, states are unlikely to pull out of the fiscal crisis by themselves anytime soon.  Without new revenues, states are likely to enact increasingly painful budget cuts. State Budget Shortfalls May Be Growing Though significant, the spending cuts states have already enacted are far from sufficient to solve their budget crisis.  As of late April, states still faced about $22 billion in shortfalls for 2003 and another $54 billion for 2004, according to NCSL.  With rainy day funds and other reserves largely drained, and with very limited ability to borrow funds to cover operating costs, states are likely to close these shortfalls through large spending cuts and perhaps tax increases. Ultimately, the amount of spending cuts may well exceed what anyone has acknowledged to date.  In the last few days, states such as California , Colorado , Connecticut , Idaho , New York , North Carolina , and Pennsylvania have reported lower-than-expected revenues for April.  Because April marks the end of the income tax filing season, states pay close attention to April receipts in developing revenue projections, and often revise forecasts as a result. The national scope of the revenue problem is confirmed by U.S. Treasury reports, which show federal taxes coming in below last year’s levels and lower than expectations.  Since state income taxes use essentially the same tax base as federal income taxes, the Treasury reports — combined with initial state reports for April — suggest that the state fiscal crisis may be getting worse and that even more painful measures may lie ahead.

2/3/03 <link> (UPDATED 2/14/03)
Why we don't have much stuff here 
Well, the indicators are not pretty and there is no point harping on the obvious! Nevertheless, here are some recent snippets that signify the signs of the times.

President Bush proposed $2.2B budget with record-shattering deficit of $307 billion which does not even include any Iraq war costs

Chart, via Atrios.

Some "interesting" comments include this:
"...At a news briefing this morning, Daniels was asked why the administration did not include an estimate in the budget for the cost of war with Iraq. 'We all earnestly hope that there will be no war and that that could be averted," he said (our emphasis). "So it would have been very unnatural to include costs for a conflict that Saddam Hussein could avert at any day by complying with the world community's 11 years of demands that he disarm. We will be prepared, should the day come when the president orders some action or some expansion of the current war on terror, and we'd be prepared to move quickly to talk to Congress about the necessary resources.'..." (!!!)
and this:
"...
*A $670 billion to economic growth plan that would eliminate taxes individuals pay on corporate dividends, accelerate and make permanent Bush's 2001 tax cuts.
*A $400 billion increase for Medicare over the next 10 years to reform the program and create a prescription drug benefit for seniors. The drug benefit proposal has drawn criticism because it would require to enrollment in a managed-care style program for eligibility.
The deficits predicted in the 2004 budget underscore an astonishing reversal of fortunes for the government. A few years ago, a $387 billion surplus was predicted for the 2004 fiscal year. The government now projects a $307 billion deficit--and shortfalls of more than $1 trillion over the next five years.
'A recession and a war we did not choose have led to the return of deficits,' Bush said of the budget (our emphasis).
At the same time, the administration uses conservative, supply-side theory to make the case that the president's tax cut proposals are the fix for an ailing economy. The budget presents an optimistic rebound for the economy, with 2.6 percent expansion this year and 3.6 percent in 2004..."

Some more bad news relating to the budget - many economists think the 2003 deficit forecast may be optimistic. In the meantime, states are facing an unprecedented (in recent times) economic crisis and massive deficits or shortfalls of their own, with little or no help coming from the Federal Government. In the meantime, the present bunch of "leaders" in the GOP shame conservatism with their hypocrisy on deficits. More indicators here at the DCC website, and some responses to the Bush State of the Union here from the Democrats.

Also, CalPundit dissects a thoroughly dishonest piece of reporting by Jerry Bowyer in NRO, which claims that Clinton had a worse deficit than Bush. To quote CalPundit:

12/13/02 <link>
Top 10 Ways you will know when the Nasdaq has hit bottom - by Marc Andreesen
A friend forwarded this humorous Top 10 list, which Marc Andreesen apparently used to begin his talk at a recent Forrester conference in Boston. Enjoy!
10. Michael Dell just borrowed lunch money from the "Dude, you're getting a Dell" kid 
9. The market cap of Cisco is surpassed by Crisco 
8. Sun's new slogan: "We put the bank in bankruptcy" 
7. Jack Welch's new girlfriend is Suze Orman 
6. SEC Chairman Harvey Pitt launches SEC investigation into his own conduct, is forced to resign by the White House 5. Gary Winnick feels so bad, he offers to give back a TENTH of the money he stole from investors 
4. Dell adds an "i" to the end of its name, and starts selling sandwiches with pickles 
3. Investors snap up whatever Jimmy Buffett is buying 
2. Winona Ryder stops shoplifting at Saks, starts shoplifting at Wal-mart 
1. Larry Ellison is not only going through Bill Gates' trash, he's returning the cans for deposit

12/9/02 <link> (updated 12/12/02)
Meet President Bush's New nominees: Treasury Secretary John Snow, SEC chief William Donaldson
JOHN SNOW
Mr. Snow is CEO of CSX Corp. - a railroad company. As this Citizens for Tax Justice memo shows:
"...In three of the past four years, Snow’s company, CSX Corporation, paid no federal income tax at all..."
"...In fact, instead of paying taxes, CSX supplemented its $934 million in pretax U.S. profits over the four years with a total of $164 million in tax rebate checks from the federal government...."
Not to make too fine a point, as Lean Left also mentions, Mr. Snow opposed parts of the Sarbanes Corporate Reform Bill, and was a part of Mr. Cheney's "Energy Task Force" meetings. What is also interesting is that Mr. Snow in the past came down strongly as a balanced-budget advocate, but today he is pushing supply-side tax-cutting as the panacea for our economic ills! Back to square one. One positive action of Mr. Snow's which we must mention is his quitting the controversial males-only Augusta National Golf club. (In the meantime, Mr. O'Neill fumes.)
WILLIAM DONALDSON
Another individual with a past that is colorful enough to raise doubts about how effective he is going to be. 
He was previously CEO at Aetna and faces a class-action lawsuit over hiding financial problems! (Also see Wash. Times). He has also been opposed to corporate reform and full disclosure previously. Back to square one here too? We'll wait and see.

12/6/02 <link>
Treasury Secretary Paul O'Neill and WH Economic Adviser "resign" upon WH request
About time. Not that we have confidence that successors would do much better, but we'll give Mr. Bush some benefit of the doubt, for now. The crisis facing the nation is most seen in the states (see below) and we'll hear more of this next year. Unemployment just hit an 8-year high (below).

State Governors blame Congress/WH for fiscal irresponsibility and deepening crisis
Here's a quote:
"...Last month, the National Governors Association (NGA) declared that the states are facing their worst fiscal crisis since World War II, as governors and legislatures struggle to close budget shortfalls totaling $67 billion [my emphasis]. Standard & Poor's, a credit rating agency, has warned of a possible downgrade for bonds issued by nine states, including California, Indiana and Arizona. Governors of both political parties are ratcheting up their demands and emphasizing Washington's responsibilities...Administration officials faced a barrage of complaints last month at the NGA meeting in Austin. 'In every one of those meetings the topic has been exactly the same,' said Glendening, 'the state of the economy, the federal government's role in causing much of the problems the states are facing and deep concern over the federal government's lack of a response in any way.' [my emphasis] Among governors, that sentiment is bipartisan. 'I realize the federal government can't go in and rescue everyone. It's not all their fault,' said Arkansas Gov. Mike Huckabee (R). 'But when we hear that the government is going to bail out the airlines, to heck with the airlines. We're providing the services that you're supposed to be providing. Help us out.' But Bush administration officials are resisting the governors' entreaties for direct federal aid. 'As to the question of whether federal taxpayers should be on the hook for states' budget problems, I'm skeptical,' R. Glenn Hubbard, chairman of the president's Council of Economic Advisers, told the Financial Times this week..."

Incidentally, 
There is also a healthcare crisis in the making

Unemployment hits 6% and some "experts" are caught by surprise
I have to say, duh. "...'The numbers are disappointing,' said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. 'But they are not a bell ringing in a double-dip recession. What we have is this productivity led, so-called jobless recovery.'..." No doubt productivity is up, but I'm not sure if I'm alone in the observation that many people who do have jobs are overworked. Many people I know are working through vacations. That aspect of the productivity growth is not a healthy one for companies or employees, regardless of the fact that those of us who have jobs are thankful. 

11/08/02 <link>
Fed cuts rates 0.5% - is it the end of the cutting session?
Some people think not. In the meantime, European central banks stand pat.

Productivity gains continue promising trend

9/30/02 <link>
NABE says Fed should stand pat on rates since they feel the economy is improving
This is a poll of 32 forecasters, polled in the Sep. 3-19 timeframe. Their main risk item seems to be "geopolitical" issues (e.g., Iraq), and they view the risk of a housing bubble, deflation or double-dip recession as low. The strength of their optimism lies in the low interest rate scenario of today.
Other market gauges however are predicting a Fed rate cut
2Y T-bond rates are lower than the Fed Funds rate. Implied yield on the Fed Funds futures contract also pricing in a 100% chance of a 0.25% drop in the Fed funds rate. We know of no great forecasters, but the stock market certainly isn't optimistic about the economy!

9/26/02 <link>
IMF cites risks to world economic growth
In the midst of protests against its global policies (updated on 9/28/02).

9/24/02 <link>
Indicators fall, foreign investment into U.S. plummets
With war talk, and dour economy and still-doubtful corporate ethics, what else is to be expected?

9/23/02 <link>
Where are we headed?
Not up - not soon, anyway. At least we hope interest rates keep going down so we can refinance again!

9/11/02 <link>
They say it's no housing bubble, this.
Time will tell.

9/10/02 <link>
Home mortgage defaulters hit all-time high
Since we have been interested in understanding whether the housing market is in a bubble of its own, this news is somewhat distressing.