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While President Obama‘s new tax plan may not appease everyone, it is appalling for the Conservatives to call it  “class warfare on the wealthy.” Excuse me, but the wealthy have enjoyed tax cuts for years and have loopholes galore, unlike the middle class.  Since Bush enacted those tax cuts for the wealthy some years ago, I would like to know where the plethora of jobs are that the wealthy claim to create?

Upon Obama’s speech about his version of Warren Buffet‘s plan, the Conservatives were crying foul. No jobs can be created when you tax those making over $250,000 and close loopholes on oil companies! Okay, then someone please explain to me why we are in such a jobless quagmire. What have those wealthy been doing all these years that has allowed us to slip into the highest unemployment rate in decades? We have lost many more jobs than have been created and tax rates on the rich are the lowest they have ever been.

The GOP needs to get its head out of its…wallet. There will be a groundswell eventually, and it will rise from the middle class, those who have born the brunt of this Conservative class warfare upon them for years. Unless they are dyslexic, Conservatives better realize they have this bassackwards. It has been and is class warfare on the middle and the middle is sinking under the duress. This strong stance by Obama was a long time coming, and while it may be political posturing, as some have suggested, you better believe the day is coming when the middle class rises to say, “I’m mad as hell and I’m not going to take it anymore!”

—cher

The old adage about  how “Nero fiddled while Rome burned”  has never applied more to the U.S. Congress than it does today.  As most Americans are enjoying the Independence Day  weekend, Congress is set to begin its mid-summer break, and won’t be returning to Washington until July 12.  It’s not that a holiday from work, even for elected officials, is such a bad thing;  it’s just that 1.7 million non-elected Americans are left wondering how to makes ends meet,  now that their unemployment compensation has expired.  As payments rapidly grind to a halt, the unemployed will spend at least the next two weeks worrying about when or if an extension will be forthcoming.  As usual, the Congressional Democrats and Republicans are pointing at each other for the failure to pass an extension bill before the break, and both parties are claiming the high ground.

Speaking for the Republicans, Senate Minority Leader Mitch McConnell said he really does believe that an extension is necessary in an economy with a 9.5% unemployment rate.  He does, however, oppose increasing the federal deficit to fund the extended benefits.   In fact, the majority of Republicans have agreed to support extended unemployment benefits if the extension is paid for with unused stimulus money; a stipulation that the Obama Administration and most Democrats have vehemently opposed.

Harry Reid, speaking for the Democrats, accused the Republicans of abandoning a large segment of unemployed Americans at a time when government help is most needed.  He went on to blame the Republicans of approving every single tax break for the wealthy during the Bush Administration, but not caring about ordinary, working people who lost their jobs through no fault of their own.  And so “the beat goes on”, and the finger pointing continues as the “fires” of unemployment continues to destroy the life savings of the middle class.

Over the last several weeks the economic data, and the capital market’s reaction to that data, have shown that the economic recovery in the United States is still very fragile.  Consumer confidence is  very low, the real estate market remains in a deep slump, retail sales are sluggish, and good jobs are hard to come by.  Regardless of the ballooning national debt, the country remains at a critical stage where additional stimulus programs are desperately needed to bring the economy back to good economic health.  Although we all worry about the future effects of continued deficit spending, the continuation of support for the unemployed is one area where funding must continue.  Not only must Congress pass the unemployment extension bill without further delay, but it must assure Americans that compensation will continue until specific, national  economic criteria are met.  Balancing the budget, or at least reducing the budget deficit, can not and should not be done on the backs of the unemployed.

Rich

For some reason, it feels like the the waning few months of the Bush Administration happened ages ago.  I remember it well;  those were the “not so good old days” when the financial services industry and the American auto industry were crashing and burning.  Those were the days when the stock market, along with everyone’s 401-K plans, was losing over 50% of its value, and the economy was shedding about 750,000 jobs per month.   Yes, those were the “not so good old days” when fear gripped the American public, and the “doom and gloomers”  told us that Barack Obama was going to ruin America by turning it into a socialist state.   The simple fact  is that Barack Obama has only been President for a little over one year, and the contrast to where we were back in January 2009 is nothing less than startling.

The Labor Department, which recently released the job numbers for March,  said that the economy added 162,00 new payroll jobs during the month.  This performance marked the first sign of substantial job growth since The Great Recession began, and the largest one-month increase in three years.  Although the jobs growth numbers represent a positive trend headed in the right direction, they still are far below the job growth levels needed to move the unemployment rate down from around 9.75%.  Most economists believe that the American economy needs to create around 125,000 jobs per month just to keep up with the general population growth.  In fact, the economy would have to create jobs at three time that level to make a dent in the unemployment rate, which is comprised of about fifteen million Americans currently looking for a job.  The job growth numbers may be inadequate, but they are a great improvement over the 750,00 jobs per month lost in the first quarter of 2009.

The turnaround in the “jobs”  numbers is only one clear indication of a slow but steady return to economic health in America.  Another indication is the increase in the value of the stock  market, which (measured by the Dow Jones Industrial Average) has risen form a low of around 6,700 to just under 11,000 in a period of one year.  Not only did the much-maligned Obama health care legislation provide relief from the consumer-unfriendly policies of the big insurance companies  for millions of Americans, but it has proven (thus far) to be good for businesses, who have seen their stock values increase significantly.  Contrary to the loud, bellicose and obstructionist tactics of elected officials in the Republican Party, the sky did not fall when health care reforms were passed, and the Earth continued to spin on its axis.  The truth is that the first year of the Obama Administration has been very good for America by almost any standard of measurement.

As President Obama and the Congressional Democrats  move ahead over the next several years with a progressive agenda, things will continue to improve across America.  When the mid-term elections are held in November, Americans should look back over the last couple of years and marvel at how far we have come over such a short period of time, and to remember that the Republicans want nothing more than to unravel all that has been accomplished and to turn back the hands of time.

Rich

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• 162,000 jobs added in March, most in 3 years (msnbc.msn.com)
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For the second day in a row the U.S. stock market has experienced significant sell-offs, primarily based on worse-than-anticipated economic news. As measured by the Dow Jones Industrial Average, the market lost 122 points on Wednesday, and is headed for another 200 point drop today. Ignoring the impact of unfavorable economic data, many analysts blame the decline on President Obama’s proposed rules that would limit types of trading banks can do with their own money. Investors in financial stocks believe that tighter controls could hurt profits a the big banks, which may, in fact, be true. Those who blame the Obama Administration and proposed regulatory changes for driving stock values down have conveniently forgotten that one year ago the financial services industry in America was on the brink of insolvency. The principal reason for that precarious position was a lack of regulatory oversight on the creation and re-marketing of exotic, derivative investments that created high levels of income, but also carried high levels of risk. As a result of their poor judgment, some of the largest financial institutions in the country were forced to ask the American taxpayers for billions of dollars in loans and subsidies just to stay afloat. Now that time has come to “pay the piper” by enacting regulations to prevent the same disastrous circumstances from happening again, the financial institutions are pouring millions of dollars into lobbying efforts to kill any legislation that would hurt their ability to make profits.

As weary investors know all too well, the stock market is in a “nervous” state of mind. The run-up in stock values over the last nine months has triggered concerns that expectations about an economic recovery are getting too high. The continued high unemployment rate, the weakness in manufacturing, and the tightening-up of Chinese monetary policy have all contributed to a feeling among investors that stock values may be too high. This sell-off, of course, will pass like all others, and the stock market will again continue its slow climb as the economy steadily improves. What will hopefully NOT pass America by is the absolute necessity to regulate the financial services industry’s ability to bring the country to near collapse through irresponsible practices. It is time to remember why the financial services industry almost put America into another Great Depression”, and to support President Obama’s proposed legislation.

—Rich

Shortly the Thanksgiving holiday will be here, the Christmas season will move into high gear, and the year of 2009 will close its books for good. For millions of Americans 2009 will be remembered as a year of high anxiety and looming uncertainty. The economy at the start the year was in a free fall, near to total financial meltdown, and shedding jobs by the millions. By year’s end, the economy has pulled itself back from the precipice of disaster, re-established a degree of financial stability, and found a new equilibrium level of production and employment. Unfortunately, the new economic equilibrium levels are far short of those needed to make even a small dent in the unemployment rate. Although the Economic Stimulus Package has had a short term impact with programs such as Cash for Clunkers and the $8,000 tax credit for first time home-buyers, these programs have not been enough to effect economic growth in any significant way.

What will the year of 2010 have in store for the beleaguered American economy? To start off with, most economists believe that economic growth will stall from the 2.5% rate experienced during the last two quarters of 2009 to around 1.0% throughout most of 2010. This stalling will be largely due to the winding down of government supports that were present in 2009. Federal Reserve Chairman, Ben Bernanke, has warned that tight credit and a weak job market will make consumers cautious in their spending. In fact, many economists are now predicting that the jobless rate could climb to 11 percent by the middle of 2010, before beginning a very slow descent. Some economists have gone so far as to say that it may be four years or more before the unemployment rate returns to more normal levels.

All these dreary economic predictions spell bad news for the Obama Administration, which has been overly-optimistic about the ability of the American economy to rebound from the mess it inherited from the prior administration. There is little doubt that continued high unemployment rates will have a major impact on the 2010 mid-term elections, and may hamper Obama’s ability to accomplish other major campaign initiatives. The truth of the matter is that there is very little the Obama Administration (or any administration) can do to effect the economy in any significant way without changing the American capitalistic system. At this point, the best governmental action is “no governmental action”. The American economy must be left alone, with no further stimulus programs, to find its way back to prosperity. Time has come to put Adam Smith back in the drivers seat, and to let the “invisible hand” guide the economy back to good health.

—Rich

One of the few things that both Democrats and Republicans can agree upon is that the current number of unemployed workers in this country is painfully high.  Although the official “unemployment rate” is hovering around 10%, the actual unemployment rate is probably closer to 20%.  The reason for this wide disparity is that the official rate only takes into consideration those individuals who are actively seeking employment.  Those unemployed who have simply given up trying to find a job; who are perhaps waiting to be recalled or who have come to the conclusion that finding a job is hopeless, are dropped from official statistics.  The sad fact is that close to 20.0 million Americans who would rather be working cannot find a job, and the even sadder fact is that this situation is  unlikely to change much in the near future.  The U.S. economy has significantly downsized, and the required labor force has downsized along with it.

The return to the level of productivity (and the low unemployment rates) of the “good old days” may not be so easy to achieve in today’s global economic environment.  The longer the recession lasts in America and Western Europe, the greater the advantage of developing countries (such as China and India) to claim a larger share of the means of production.  A good example of this is China’s purchase of the Hummer line of vehicles from GM.  While American companies have been delaying investments in technology and new plants & equipment, their Asian competitors have been steadily becoming more efficient through massive re-tooling.  When the dust of the “great recession” finally settles across heartlands of America and Western Europe, we may find that the “normal” rate of unemployment has been re-defined to be closer to 10% than 4%.

If, in fact, high levels of unemployment become a permanent part of the American economic landscape, the future Presidents and politicians will have a thorny set of social issues to deal with.  These will be the same issues that the Europeans have solved through socialistic policies that ultimately squelch productivity, and that the third world nations, such as Brazil, have solved by creating police states to protect the wealthy.  Either way, the standard of living for the average American family is likely to decline for the first time in the history of this great nation.

—Rich

Step right up, folks, and come on aboard!  The stock market roller coaster is leaving the platform for another exciting, thrilling and fun-filled trip through the land of gains and losses.  It’s time again to break out the Valium, buckle your seat-belt  and hold on tight.  After  relatively smooth sailing since reaching its bottom in March of 2009, the stock market is once again headed into a period of wide swings and new levels of unpredictability.  The daily economic news reports and corporate earnings releases are seized upon by investors, who are willing to bet the farm that either a new age of prosperity is dawning or that the world is coming abruptly to an end.  Yesterday, stock market investors flocked to the “buy window” because GDP growth for the third quarter came in at a healthy 3.25%; however, today stock market investors are trying to unload everything they own because consumer spending in September fell by 0.5% .  Today’s “sell mood” was further strengthened by a Reuters/University of Michigan report that said consumer confidence was still in the tank.  If the stock market could be subjected to in-depth psychoanalysis, the prognosis would likely be that it  “highly conflicted”.  In other words, it doesn’t know whether it’s coming or going.

Unfortunately, nobody has a crystal ball, and nobody really knows what the future will bring.  All we can reasonably say is that the economy has moved away from the precipice of collapse to more solid footing.  We can also reasonably say that the the economy has reached an equilibrium where millions of potential workers are simply not needed, at least not for the time being.  That fact that these millions of workers are not needed is reflected in the “official” unemployment rate of about ten percent.  The drag on consumer spending will continue until the unemployment rate drops by a considerable amount, and the stock market will not move much higher until consumer spending increases.  This is the conundrum.

For those Americans with significant portions of their 401′Ks invested in the stock market there are really very few good options available, other than holding on to what you’ve got , and weathering the storm.  Don’t be frightened too much by wild market fluctuations, because they will likely continue for quite some time.  The winners of the “investment game” will be those who are patient, and willing to wait for consumer spending to inch back up, pulling  the economy out of  prolonged recession.  Expect 2010 to be a year of economic “water treading”, without much real growth until 2011.

—Rich

Hold on to your hats, America, the recession’s not over yet.  Although the economy grew at a healthy rate during the July to September time frame, causing many economists to announce the end of the recession, it seems that the “recovery party” is over; at least for the time being.  The Labor Department said on Friday that the American economy lost about 263,000 additional jobs in September, which was worse than the 201,000 lost in August, and way above Wall Street’s expectations of losses amounting to 180,000.   With the additional job losses, the September unemployment rate rose to 9.8%, the highest it has been since June 1983.  Believe it or not, the 9.8% unemployment rate is actually the good news; the bad news is that the “real” unemployment rate (taking into consideration those individual whose unemployment comp has run out, and who have given up trying to find a job) is more like 17%.  Given this sad scenario, Federal Reserve Chairman, Ben Bernanke, said the unemployment rate is very likely to remain above 9% throughout the entire 2010.

The main driving force behind the growing legion of the unemployed (about 15.4 million of them) is a continuing and unrelenting slump in retail sales.  The lack of demand at the retail level, of course, directly impacted manufacturers, who saw a drop-off of almost 1.0% in September.  Overall, the mood of the country can be summed up in one word, “uncertainty”.   Americans have not seen any significant changes in the economy or in the political realm that has given them reason to become optimistic about the future.  For example, the country is still engaged in a costly military engagements in Iraq and Afghanistan, there has been little to no significant tax reform, the Congress is hopelessly split on the issue of health care reform, the country is running trillion dollar deficits, and the value of every one’s 401K is still in the tank, along with the Dow Jones Industrial Average.  Combine all the negatives mentioned above with a nervousness concerning future employment possibilities, and it is not hard to see why a general feeling of malaise has fallen over our land.

One thing that most economists agree upon is that economic recovery in America will take a lot longer than originally anticipated, and that the path to recovery will be a bumpy road.  As the fourth quarter of 2009 begins, we are all witnessing one of those “bumps”.

—Rich

Most economists,  in government and in the private sector, have concluded that the nation’s unemployment rate will be around ten percent by year’s end.  The general feeling is that unemployment will continue to rise even as the overall economy steadily improves.  They call this the “lag effect”.  The theory is that companies “burned” by the prolonged downturn in business, and the burdensome carrying cost of excess inventory will only hire people back when they absolutely have to.  If, in fact, the economic prognosticators are correct, a ten percent unemployment rate will be as bad as it gets, at least for this recession.  Although not ideal, an unemployment rate of ten percent indicates that the vast majority of Americans have managed to hold onto their jobs.  For them, the “American dream” goes on without interruption.

In travelling the highways and byways of  our great country over the last two years I have seen very little indication that the vast majority of Americans have dramatically changed their life-styles.  The parking lots of the supermarkets and retail malls seem to be as crowded as ever, the streets and highways seem to be bustling with traffic, the theaters and sporting events are packed with people, and no tent cities or “Hoovervilles” have sprung up along the Pennsylvania Turnpike (to the best of my knowledge).  In fact, everyone seems to be getting along pretty well.  Perhaps the best indicator of all is the number of people willing to spend their disposable income on the slot machines.  My wife and I recently visited (for the first time) the newly built Meadowlands Casino in Western Pennsylvania.  We were both stunned to discover that the place was bursting at the seams with activity, and that almost every single machine was being used.  Even the high-roller room, which requires $25 or more per pull, was packed to the gills.

Yes, I’ve heard all the news stories about the devastating effects of the recession on the American public, and yes I’ve heard the politicians promise to bring relief to struggling families,  but I just haven’t seen any Hoovervilles yet.  Maybe ten percent unemployment is not too bad after-all?