Despite President Obama’s Stimulus Bill Caterpillar hired Workers in China instead of U.S.

Posted by PITHOCRATES - August 12th, 2012

Week in Review

Remember the Obama stimulus plan?  To pay for all those shovel-ready jobs?  And pull the economy from recession to robust economic growth?  That was going to save or create 3.5 million jobs?  President Obama even said that the Caterpillar CEO said he would start rehiring some of the 20,000 employees laid off recently if Congress passed the president’s stimulus bill.  Well, the Congress passed the president’s stimulus bill.  And it appeared Caterpillar did go on a hiring spree.  In China (see Caterpillar exporting China-made goods by Ernest Scheyder posted 8/8/2012 on Reuters).

Caterpillar Inc (CAT.N) has begun exporting Chinese-made machinery to the Middle East and Africa, part of a plan to offset a dip in China’s economic growth, a top official at the company said in an interview…

China’s economy has been pressured this year by a drop in its domestic property market and high inflation, with the economic growth rate slowing to 7.6 percent in the second quarter, the slowest pace in more than three years.

That is reflected in waning demand for the machinery Caterpillar makes at its 18 Chinese plants, and caused a glut of inventory.

How about that?  Caterpillar is building equipment in China to export to the Middle East and Africa.  Pity they didn’t build that equipment in the U.S. for export to the Middle East and Africa.  That would have added to the president’s ‘win’ column in creating jobs.  And he needs it.  For all the talk about the jobs he ‘saved’ or created his overall record since being president isn’t good.  According to The Washington Post there are fewer people working today than when he took office.  Making him a net destroyer of jobs.  Not a net creator of jobs.  Further proof that the president’s economic policies are a failure.

Guess the president’s state capitalism isn’t as good as the Chinese’s.


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Obama Delivers his $447 Billion Political Stimulus Plan to Congress

Posted by PITHOCRATES - September 12th, 2011

Had the $800 Billion Stimulus worked we wouldn’t need the $447 Billion Stimulus

We have a plan. Rather, Congress does. President Obama delivered it today. And he reiterated that they must pass it now. That there was no time for political games. Like he was doing. Saying basically that if the Republicans don’t pass it they don’t want to help the economy. And, by extension, they hate the American people. For only those who hate the American people could deny them jobs (see Obama urges no “political games” on jobs plan by Laura MacInnis and Matt Spetalnick posted 9/12/2011 on Reuters).

President Barack Obama called on Republicans not to play “political games” with his jobs plan as he pressed for swift passage of a $447 billion package he hopes will revive the U.S. economy and boost his re-election prospects…

He took aim at Republicans who have resisted many of his economic initiatives in the past.

“We can’t afford these same political games, not now,” Obama said.

Economic initiatives in the past? Like that $800 billion stimulus? You know, if that had worked we would not need another stimulus. But we apparently need another stimulus. So the previous stimulus must have failed. And, if so, why would this stimulus be any different?

It would appear that the only one playing a game now is the president.

Stimulus Sleight of Hand: Taking from the Private Sector to Stimulate the Private Sector

So let’s take a look at what the president calls stimulus. First of all, where is that $447 billion going to come from (see Obama proposes tax hikes on wealthy to pay for $447B jobs bill by Sam Youngman posted 9/12/2011 on The Hill)?

The White House said Monday that President Obama wants to pay for his $447 billion jobs bill by raising taxes on the wealthy and business.

Oh. He’s going to pay for his jobs bill by raising taxes on the job creators. I mean, let’s face it, poor people don’t create jobs. Rich people do. And businesses. And why aren’t they creating them now? They have no idea what cost this administration is going to levy on them next. Like a tax hike to pay for another stimulus bill.

The stimulus will be temporary. But you can bet those tax hikes won’t be. They’ll be permanent. And a disincentive for rich people and business owners alike to risk their money to create jobs.

The administration would tax the income investment fund managers make, known as “carried interest,” as regular income instead of as capital gains, which has a low 15 percent tax rate. This is another long-standing administration goal that has been resisted by Wall Street as well as some Democrats.

The administration estimates the capital gains change would provide $18 billion in revenue.

In other words, he wants to chase what investment capital we have out of the country.

A lot of people lose money in the stock market. Because it’s risky. It’s like gambling. Where there is no such thing as a sure thing. So those who take big risks often lose big. Even Donald Trump has filed for bankruptcy protection a couple of times. That’s why when they do win they need to win big. To cover all of those times they don’t win. But when you raise the tax rate on those winnings from 15% to 33% (the current top marginal income tax rate), it’s going to make investors think twice. That’s an increase of 120%. They may not just whistle a happy tune and pay it. You see, the funny thing about capital, it’s mobile. You can move it. And park it.

European investors are parking their money in U.S. banks at a negative interest rate while they wait out the European sovereign debt crisis. American investors can just as easily move their money out of the country. And wait for a more favorable investment climate before returning. Which won’t create jobs. Or provide tax revenue.

Another $3 billion would come from changing the way corporate jets depreciate. With a few other revenue raises, Lew indicated the total measures proposed by the administration would bring in $467 billion, $20 billion more than the cost of Obama’s jobs bill.

What is it with him and corporate jets? He sure hates those corporate jets.

So he will pull a half trillion dollars out of the private sector. So he can inject it back into the private sector. Less a small handling fee. And the usual gifts to his political cronies. Resulting in more debt. And very little stimulus. If any.

This is less stimulus. And more political sleight of hand. Taking from the private sector to stimulate the private sector.

The White House dug in on its refusal to say how many jobs the package would create, pointing instead to an estimate from Moody’s that said the bill would create about 1.9 million jobs.

Lew noted that he was not a part of Obama’s economic team when NEC director Christina Roemer and Vice President Biden’s former chief economist Jared Bernstein said that the original stimulus package would reduce unemployment to below 8 percent.

After months of being reminded by Republicans that the recovery act did not cut unemployment, which is now at about 9 percent, Lew said he thinks it is “dangerous to ever predict unemployment rates.”

If Moody’s prediction is accurate, that’s $ 235,263.16 per job. It would be cheaper just to give $30,000 to 1.9 million people. That would only cost $57 billion. And it would probably stimulate more. Of course, they won’t do that. Because that wouldn’t reward any political cronies.

And there’s a good reason why they’re not making any predictions. Because they know this stuff doesn’t work. They only made the unemployment rate prediction because they thought the economy would have fixed itself in short time. It usually does. That’s why they were in such a rush to pass it. They had to pass it before the economy recovered. They had no idea how bad things were. Or how their policies would make things worse. Because they have no idea of how the economy works.

And isn’t the refusal to make unemployment predictions an admission that they have no faith in what they’re doing? Vis-à-vis the economy, that is. For they have full faith and confidence in the political effects. They can predict the campaign donations this will generate. And the likely votes. But they won’t make these predictions public. For it will be admitting the truth of this political stimulus.

Stimulus that Works: Cutting Costs for Business

But someone knows how to create jobs. Not by putting more money into workers’ pockets. But buy cutting a business’ costs (see Detroit Sets Its Future on a Foundation of Two-Tier Wages by Bill Vlasic posted 9/12/2011 on The New York Times).

The newest Chrysler workers earn about $14 an hour, compared with double that amount for longtime employees on the same shift. With the economy slumping and job creation once again a pressing issue in the White House and Congress, the advent of a two-tier wage system in Detroit is spiking employment for one of the country’s most important manufacturing industries…

What was once seen as a desperate move to prop up the struggling auto industry is now considered an integral part of its future. The demand for $14-an-hour manufacturing jobs is providing Detroit’s Big Three automakers with a ready pool of eager new employees. Last year, Chrysler was flooded with inquiries about the jobs here, and it froze the list after receiving 10,000 applications.

So someone understands. American cars weren’t selling because they couldn’t compete in the market place. They couldn’t sell the cars they had. And they certainly weren’t going to expand production. But cut labor costs and look what happens. They can compete in the market place again. And create jobs.

So far, about 12 percent of Chrysler’s 23,000 union workers earn the lower wage, and over all, 4,000 or so of the 112,000 U.A.W. members are second-tier hires. Those numbers are expected to grow — and in fact can increase significantly even under the current contract. The jobs are central to the contract talks now because they are viewed as a critical element of the industry’s continued recovery.

The benefits for the lower-tier workers are scaled back as well. They get a maximum of four weeks paid time off a year, versus five for the longtime workers. And instead of the guaranteed $3,100-a-month pension a full-paid worker receives after age 60, the new hires have to build their own “personal retirement plan” based on contributions from the company of less than $2,000 a year.

This is stimulus that works. Cut costs for business. And business creates jobs. Which is the goal of stimulus.

Raising taxes on business won’t cut costs for business. So it won’t stimulate. Raising taxes on business to pay for a stimulus bill will tap the brakes on the very economy they’re trying to stimulate. And what is government spending that doesn’t stimulate? Pork. Earmarks. Rewarding political cronies.

Keynesian Stimulus Spending stimulates Politics, not Economic Activity

Let the political games begin. And the lying. The latest stimulus is no different from the first stimulus. It will fail. Only it will be less of a failure. The only good thing we can say about it.

Detroit has shown the way. If you want to create jobs. If you want to stimulate the local economy. You cut costs. You don’t raise them. And you do it in a way where there is little uncertainty. The two-tier wage system is here to stay. The automotive companies can plan on this cost certainty.

You know another name for this? Supply-side economics. That’s right. They fixed the car companies on the supply side. Not the demand side. That’s why they won’t take this model and apply it to the rest of the economy. That would go against every Keynesian fiber in their body. But they did in Detroit. Because they had to save the UAW. And things were so bad in the U.S. automotive industry that they had to drop politics this one time. But they will be damned if they’ll concede defeat and stop their Keynesian ways everywhere else. I mean, if they did, how, pray tell, would they reward their political cronies?

Keynesian stimulus spending stimulates politics. Not economic activity. Whereas supply-side economics stimulates economic activity. Not politics. So you can see why those in government are Keynesians. Because spending our money before we can is more important than our economic wellbeing.


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Whose Recession is it Anyway?

Posted by PITHOCRATES - October 11th, 2010

The Democrats had a Big Say in Bush’s Last 2 Years

Obama keeps saying he inherited a mess.  That’s why the economy is worse now than it was under Bush.  Because all that bad in the Bush administration had momentum.  Obama just couldn’t turn it around on a dime.  He would need time.  But this is a bit disingenuous.

The Democrats took control of the Congress in the 2006 midterm elections.  How big a deal is this?  Big.  The Democrats are already chastising the Republicans for what they may do if they win control of Congress in the 2010 midterm elections.  If the Republicans win and they don’t rubberstamp everything the Obama administration wants, they’ll attack the Republicans as obstructionists.  Why?  Because if you don’t have Congress a president has a very difficult time advancing his agenda.  Just like Bush did.  When the Democrats were obstructionists.  (In the Democrat’s world, being obstructionist against Republicans is being patriotic.)

So you have that.  The last two years of the Bush administration were hamstrung by the Democrat controlled Congress.  Nancy Pelosi.  Harry Reid.  Big time liberal Democrats.  The last two years of Bush’s presidency were theirs.  They controlled Congress.  They dictated what happened in the House and the Senate.  They controlled the committees.  Appointed the chairpersons.  All of them.  Including the ones with oversight responsibility for Fannie Mae and Freddie Mac (Barney Frank and Chris Dodd).  Who caused the subprime mortgage crisis of 2008.  So, given all of that, you cannot assign sole responsibility for the subprime mortgage crisis of 2008 on George W. Bush.  The Democrats were knee deep in that mess.

Members of the Obama Administration are Taking to the Lifeboats

If the Obama administration was the Titanic, the 2010 midterm elections are its iceberg.  Unlike that ill-fated passenger liner, though, this iceberg is on everyone’s radar.  And they’re taking to the lifeboats.  Gone or soon to be gone are Robert Gates, David Axelrod, Larry Summers, General James Jones, most of his economic advisors, and, of course, Rahm Emanuel.  To name a few.

Ewen MacAskill wrote in the Guardian (see White House staff exodus exposes Obama to charges of disarray) that it’s an Obama problem.  Unless you’re in Obama’s inner-circle, he doesn’t really care what you think or say (as is evident by the number of his czars – his real trusted advisors).

In a blog on the Politico website, Alvin Felzenberg, the presidential historian and author of The Leaders We Deserved, writes: “These departures are a reflection of Obama’s leadership style. Why he has such a difficult time earning and retaining the loyalties of people outside his circle of intimates is anyone’s guess.”

Unable to influence Obama to change course before this November’s bloodletting (and knowing that he may very well double down after the bloodletting instead of tacking to the center a la Clinton), they’re leaving.  Before they’re branded for life for the political carnage of this administration.

Obama’s Economics Team Hit the Ground Running

Besides having Congress for the last 2 years of the Bush presidency, the Democrats came in prepared.  They were honing their economic plans during the 6 months before Obama took the oath of office.  Or so says Professor Ross Baker, a political scientist at Rutgers University.

“The exhaustion rate for this administration is more accelerated due to the problems they encountered in January 2009. There was no presidential ‘honeymoon’,” Baker said today. He added that some of them had been working intensively on economic policy in the six months before Obama took over.

After 2 years of control of Congress and a 6-month preparation to ‘jump-start’ the economy, an objective observer can’t be all that impressed with the results.  And finds it hard to blame George W. Bush.  Especially when Christina Romer (a member of Obama’s economics team) guaranteed us that unemployment would remain under 8% if Congress passed the Obama stimulus plan.  And what did we get?  Record deficit spending and a higher unemployment rate.

Romer, in a statement she has since said she regretted making, promised Obama’s economic stimulus plan would get unemployment down to 8%, whereas it has stayed above that, with the latest figure at 9.6%.

Don’t forget, they were working on that stimulus plan for 6 months.  And the real unemployment rate is north of 10%.  When you put it all together, this recession is more Obama’s than Bush’s.  Which probably has a lot to do with the exodus from the Obama administration before the midterm elections.


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