James Pethokoukis

Politics and policy from inside Washington

White House: 10 percent unemployment ‘within months’

Jun 22, 2009 22:52 UTC

WH spokesman Robert Gibbs echoes what his boss said recently:

The U.S. unemployment rate is likely rise from already high levels to 10 percent in the next couple of months, a White House spokesman said on Monday.

“I think the president has said this, and I would certainly say this, I think you’re likely to see unemployment at 10 percent within the next couple of months,” White House spokesman Robert Gibbs told reporters.

The U.S. unemployment rate already stands at 9.4 percent, the highest level in about 25 years, and many analysts believe it could continue to climb despite the $787 billion economic stimulus package passed early this year by Congress.

Earlier this year, the Obama administration had predicted the unemployment rate would peak at 8 percent before beginning to fall toward the end of 2009.

COMMENT

The closest person to a grown up in the administration is, dare I say it, Hillary Clinton…closeted at State.

Certainly appearing to denigrate freshment everywhere; this entire cabinet {and supporting staff) is analagous to the incoming high school freshman class; a bunch of 15 year old snot nosed louts hanging out with the school bullies, entranched in the belief that ‘they’ are the coolest.

In fact, they are naive apologists with no hopes of discovery.

Posted by Hank Reardon | Report as abusive

Sarkozy: France on left side of Laffer Curve

Jun 22, 2009 22:03 UTC

This, from the president of France: “I will not increase taxes,” he said, “because an increase in taxes would delay the end of the crisis and because by increasing taxes, when we are at our level of taxation, we would not reduce deficits — we would increase them.”

Bloggy goodness from around the web

Jun 22, 2009 21:25 UTC

1) Megan McArdle points out that if there is little economic cost to cap-and-trade, then how will it change behavior and limit emissions? Good question.

2) Scott Grannis (the Calafia Beach Pundit) looks for a return to economic normalcy in, oh, about 3-5 years.

3) Kurt Brouwer of Fundmastery take a funny look at “shovel ready” projects.

4) Donald Marron wonder about paying for healthcare reform.

5) My boss Jeffrey Cane writes a quite funny piece about the Jack Welch MBA!

Credit card meltdown?

Jun 22, 2009 19:19 UTC

Some doom and gloom from David Wyss of S&P via the NYPost:

David Wyss, S&P’s chief economist said banks should brace for a plastic meltdown as credit-card losses track the unemployment figures almost exactly. “Credit-card losses, on average, are equal to the unemployment rate plus about 5 percent,” he said, noting his estimates that the nationwide jobless rate could rise as high as 12.5 percent by 2011.

“If one more thing goes wrong, say oil goes over $100 a barrel, or the banks have to deal with another big hit like the commercial real-estate market dropping substantially, unemployment could continue to rise through 2011,” Wyss said.

The Fed’s next move …

Jun 22, 2009 18:29 UTC

I think Mike Darda of MKM Partners nicely encapsualtes the Fed’s thinking:

With the unemployment rate 3-4 percentage points above what is widely deemed to be neutral, the Fed probably believes the economy is running more than $1 trillionbelow potential. In other words, don’t expect the Fed to start laying the groundwork for tighter monetary policy until a sustained turn in both output and employment is underway. Of course, this will risk an eventual inflation problem, but as long as inflation doesn’t escape the mid-single-digit range, it’s a risk the Fed is probably willing to take (as opposed to a relapse in the credit markets, and a third leg down in the economy, if they tighten too soon).

Economic growth makes the world a whole lot brighter

Jun 22, 2009 17:42 UTC

My pal Larry Kudlow makes a point that shouldn’t need making during a terrible recession. But I guess it does:

On a related note, Washington is spending far too much time focusing on regulations right now. They’re not devoting nearly enough time to figuring out ways to truly grow our economy. It is a statist governmental approach. This great country of ours is thirsting for free-enterprise incentives and solutions. And as the latest polls show, Americans are becoming fed up with the out-of-control spending, borrowing, debt-creation, and tax increases.

What we need is serious economic growth. That is priority number one. What we need is risk-taking and entrepreneurship. Of course, we need transparent markets. But it is the growth message that is being overlooked.

My spin: Weak growth makes every economic problem look worse. Are bond price rising because of inflation fears or perhaps also default fears because of the combo of high debt and forecasts of wimpy U.S. growth going forward?

COMMENT

I must say that overall I am excpectionaly impressed with this blog.It is easy to see that you are passionate about your writing. If only I had your writing . Just added your article to my list I look forward to more updates and will be returning daily.

Why Obamacare may be flatlining

Jun 22, 2009 17:11 UTC

“I need a crash cart, stat!” The political prospects for major U.S. healthcare reform have taken a decided turn for the worse in recent days (at least from the point of view of many Democrats). And you don’t need to be some totally plugged-in Washington insider to understand that.

Just take a look-see at the stock market performance of industry players such as Aetna, Cigna, UnitedHealth Group, and WellPoint. Shares have been trending higher of late. What’s been slowly dawning on Wall Street is that the legislative process in Washington is unlikely to produce a national public health insurance option that could eventually squeeze out the private sector. Indeed, the betting markets give just a 43 percent chance of that happening, despite a Democrat president and Democrat control of Congress.
[See why Obama's big economic gamble is failing.]

Fact is, the prospects for any sort of bill that would produce major changes are in as much doubt as at any time since President Obama took office. Worried that the plan was growing too expensive, the critical Senate Finance Committee appears to have jettisoned any idea of a public plan option and is also cutting back on subsidies to help fully insure the nearly 50 million Americans who don’t have health insurance for one reason or another. On Sunday, Sen. Diane Feinstein, a California Democrat, said she doesn’t think Obama “has the votes right now,” to pass a bill, while Sen. Lindsey Graham, a South Carolina Republican, said spiraling cost estimates were “a death blow” to a public insurance option being included in the final legislation.

So what just happened? How is it possible that Democrats cruised to a huge victory on Election Day in November 2008 and are yet again unable to make good on their top legislative priority? Why are the ghosts of Bill Clinton’s 1994 healthcare reform debacle suddenly flitting about Capitol Hill? What happened was the Great Recession, the political impact of which the Obamacrats completely misunderstood. Oh, they knew the financial and economic crisis helped sweep them to office. That part they got just fine.

But they also assumed that the downturn would create such a sense of economic insecurity that time would be ripe for the sort of expansive, government-led healthcare changes that the party has been dreaming of for two generations. Instead, the Great Recession made healthcare less of a priority for voters than economic recovery — as fast as possible, please — and job creation. A recent spate of polls shows concern about healthcare (and climate change and pretty much everything else) lagging concern about unemployment. Healthcare lags concern about the shocking enlargement of the federal budget deficit, which has grown partly due to government actions — such as the $800 billion Obama stimulus package — to deal with the recession, as well as by the decline in tax revenue caused by the downturn itself.

And then last week, the Congressional Budget Office, the respected arbiter of what new government programs might cost, calculated that the Senate Finance Committee’s health reform bill would cost more than $1.6 trillion over 10 years. That was determined to be a political no-go by Senate Democrats– a smart conclusion given the recent polling — and the committee moved on to a still evolving plan B.

It is also ironic that the Obama administration, so aware of the latest research in behavioral economics, would forget about a phenomenon called “loss aversion”, which suggests people feel the pain of financial losses more acutely than comparable gains. Seems the whole healthcare plan was built up on the theory of losing something now — such as tax-free, employer-provided health benefits — for something later, like lower costs and a more sustainable government fiscal situation. (Polls show Americans reject that and don’t even want $500 in new taxes to pay for universal healthcare.) To recession-shocked voters, that probably doesn’t seem like a more economically secure situation at all.

COMMENT

I am shocked at the number of feather-brained people who have written comments that this piece is racist. Is it that you are stupid or just illiterate?

Posted by ccd2 | Report as abusive

Poll: ‘Blame Bush’ running out of steam

Jun 22, 2009 14:08 UTC

From Rasmussen:

A new Rasmussen Reports national telephone survey finds that 39% of voters now say the country’s economic problems are caused more by the policies Obama has put in place. That’s a 12-point jump from a month ago.

Fifty-four percent (54%) still say the country’s economic woes are due to the recession Obama inherited from President Bush. That figure is down eight points from 62% from early June.

By a two-to-one margin, voters also have more confidence in themselves than in the president when it comes to the economy. This marks a significant shift from just after Obama took office.

Sixty percent (60%) of voters now trust their own economic judgment more than the president’s. In early February, 49% had more trust in themselves while 39% trusted the president more.

Obama’s healthcare troubles

Jun 22, 2009 13:39 UTC

I think this bit from First Read echoes what I have been saying:

So let’s get this straight: Barack Obama won last year’s presidential election by seven percentage points (53%-46%) campaigning, in part, for some form of universal health care; his party is about to have 60 votes in the Senate; polls show the country is receptive to overhauling health care; and the president’s approval rating is between 56-60%. But Senate Democrats, like Dianne Feinstein, now say that Obama might not have the votes to pass health care? “I think there’s a lot of concern in the Democratic caucus,” she said on Sunday, per the AP.

My spin:  What is going wrong: big deficits, too much all at once, voters who don’t see how reform wil benefit them but understand how higher taxes will hurt them.

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