Trust me, these are not the kind of numbers that the White House and congressional Democrats want to see. Goldman Sachs is now forecasting unemployment to rise all next year, peaking at 10.5 percent. The firm expects the economy to grow at just 2.1 percent. Also, the budget deficit will be a few billion bigger at $1.6 trillion. If correct, these stats absolutely confirm the collective freakout happening right now among Ds on Capitol Hill, such as calling for Geithner to resign. Economist Jan Hatzius:
A classic from David Goldman:
The crystal-meth monetary policy at the Fed makes everyone feel better, until they don’t. The nonstop rise in the price of dollar hedges tells us that it can’t last forever. Large balance sheets attached to the Fed’s money pump can show profits, and the price of spread assets (as PIMCO’s Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isn’t just the 17.5% broad-measure unemployment number that we should worry about, but the massacre of smaller businesses, who are concentrated in the most vulnerable sectors: real estate, construction, and retail. Retail sales may get a temporary shot in the arm from cash for clunkers, and a combination of tax credits and (de facto) subsidized mortgage rates may hold up the bottom of the housing market for a short time. But today’s data show how fragile these matters are.
These seem pretty indisputable. From Keith Hennessey:
1. The clearest violation is the 5% excise tax on cosmetic surgery and similar procedures (including teeth whitening). I assume that cosmetic surgery and similar procedures are skewed toward the high end of the income distribution, but there certainly are many people getting these treatments with annual family income less than $250,000.
It’s easy to understand why the House Financial Services Committee would vote to open the Federal Reserve’s monetary policy decisions to government audits. Transparency is one of the buzz concepts of 2009. And if measured pound-for-pound of power, the central bank is probably the most opaque institution in Washington.The Fed is also terribly unpopular. And deservedly so. Its easy monetary policy and lax regulation helped create the American housing and financial crisis that spawned the Great Recession. Moreover, its role in the policy responses to the crisis from TARP to the AIG bailout have earned it scorn across the political spectrum. Attacking the Fed is good politics. Just ask Christopher Dodd, the embattled Senate Banking chairman, who hopes to Fed-bash his way to another term.But such combativeness makes for poor economic policy. When you’re a nation preparing to float $11 trillion or more in government debt over the next decade, you don’t want your creditors musing whether political pressure could nudge your central bank to go soft on inflation. And auditing monetary policy would likely lead to an explicit congressional assessment of that policy. Who might do the assessing? How about dovish House Financial Services Chairman Barney Frank? He already wants to boot the regional Fed banks presidents from the FOMC because they vote too often for higher interest rates.The Fed audit bill also makes it a bit harder to pass financial regulatory reform next year. There are jagged policy disagreements between Frank and Dodd, as well as between Dodd and Richard Shelby, the ranking GOP member on his committee. The Fed audit amendment doesn’t make agreement any easier since the idea is less popular in the Senate. (Senator Judd Gregg, the New Hampshire Republican, calls it absolutely inexcusable.)”For the first time, I now think it’s possible financial reform doesn’t happen this election cycle,” says one financial industry insider in Washington. And who knows what the 2011 political environment for reform will be like with a likely influx of anti-Fed, anti-Wall Street Republicans and the Fed perhaps tightening despite continued high unemployment.Make no mistake, renewing faith in the U.S. economy requires a sweeping financial overhaul. And now that might now happen.
Don’t interpret passage of the watered-down Kanjorski amendment as the peak of the “break up the banks” movement. It may be about to get some new allies on the right, folks tired of Big Government, Big Money and crony capitalism.