Is the GOP cooking the books to avoid recession till after Election Day?

[rn79870]

Is the worst over? Are we on the road to recovery? Will the next president take office against a backdrop of economic improvement, as Bill Clinton did in 1993? Or has something deeper and more intractable gone wrong? Early this year, the optimists, including Citigroup chairman Bob Rubin and Treasury secretary Hank Paulson, argued that the slowdown was short-term and that a "stimulus" package should be "targeted and temporary." This with rare haste the Democratic Congress enacted. As a result, most taxpayers got one-time $600 checks in May, prefigured by bubbly messages touting "Good News!" if you filed your taxes electronically.

The rebate isn't the only little Dutch boy thrown headlong at the dike this election year. Government spending, especially for defense, will be up: Military spending as a share of GDP is expected to grow by $75 billion in fiscal 2008, enough to neutralize a 0.3 percent decline in GDP. d!ck Cheney was secretary of defense for Bush 41; just before the 1992 election he engineered a big run-up in outlays, as the military restocked following the first Gulf War. (It was exposed in the first Clinton "Economic Report.") Is the Pentagon up to that trick again? I'd be astonished if it were not.

But much of the ordinary effect of interest cuts on new lending—like a rebound in construction and automobile sales—didn't happen this time. That's because the fall in home prices (and therefore the value of collateral) overwhelmed the benefit of cheaper money to the banks. And the banks barely cut mortgage rates, so consumers saw no benefits at all. Lower interest rates did cut the value of the dollar, however, and that promotes exports and foreign investment. (These days New York Times real estate listings come with a currency converter.) It also boosts the stock market, since multinational firms can report their (unchanged) foreign income as higher dollar earnings.

Possibly all this stimulus will ward off the two-quarter decline that has historically defined a recession. Don't be surprised: Republicans haven't had an election-year slump since 1960. On the other hand, the National Bureau of Economic Research, which has the official call, may describe the early spring as a recession anyway. Republicans will welcome that, too, so long as they can plausibly call the summer a "recovery." Even if they can't stop a recession, they may be able to make it short and shallow enough, this year, to put John McCain in the White House. But all this brings up an important question—what of next year?By James K. Galbraith

http://www.motherjones.com/new....html

Interesting article on how a previous administration sets up the subsequent administration to look incompetent. Either McCain or Obama may face more of a problem than either expects cleaning up after Bush jr.

[OriginalWheelman]

We're in a recession. No one will say we are in a recession, because the public will panic and the recession will get worse. The sheep need herded away form the term so they can go about their lives wondering, instead of panicking. Jesus was right when he called humans sheep, and I don't believe he was complimenting us...

[Cold_Zero]

Not to get into a full blown religious debate, but Jesus used Goats and Sheep together in the parable. I would much rather be a sheep than a goat. Human logic says that being related to a sheep is a bad thing. Yet when St John the Forerunner saw Jesus at the banks of the Jordan what did he say? "Lamb of God that takes away the sin of the World."

Back on topic.What is interesting is that in Indiana prior to the November Elections for President and Governor there is always talk about repealing the State/Local Gas Tax to help families. Ironic thing about this is, only the Democratic Governors have repealed the Gas Tax in Indiana.

[OriginalWheelman]

The lamb reference you mention was keyed to the Jewish sacrificing of lambs as atonement, as Jesus' death was to atone all of the world. I'd debate this with you but I don't want to get into it out of respect for the rules.

[smockers83]

Enough religion

It will be interesting to see what exactly has been going on if things are uncovered with a new president/administration. Reminds me of an article I posted a couple months ago about an economic cover-up.

zerothread?id=338715

[skylndrftr]

I'm neither a sheep nor a goat...I'm a ray (I hunt Australian TV hosts)

I think economically, there is little incentive for those currently in government to really try and help you and me. There incentive is to help companies. I don't know what the technical definition of a recession is (I'm sure its some impenetrable economic jargonism), but I don't think either party is really goign to do a lot to pull us out of it.

Wahts their incentive? Both of them are using it as a campaign issue to try and win votes.

The GOP says 'we'll fix it its congresses fault' (despite controlling effectively 49% of congress). The Dems say 'we'll fix everything its Bush's fault' ( despite continuing to act like presidential pets).

We've just had the first major bank failure I think since I was born ('84), that should tell us all we need to know in an industry that has such a wide reachign effect on our economy and an open and revolving door between industry, regulators, and political office.

[Eikon]

Are we in a recession? I think yes! But according to those books, we are not in recession... very close to it, but not technically in recession.

Are those books being cooked? Probably! I've never met an employed economist who didn't try to make the numbers appear slightly better than they really are.

But the above issues are not really that interesting to me.

What I'm interested in talking about are:

1.) Why does Bush get blamed for the poor state of the economy?

2.) What portion of our economies poor current state is due to rising oil prices?

3.) What portion of our economies poor current state is due to the crashing housing market and crushed mortgage industry?

4.) What did fault did Bush have in the rise of oil prices?

5.) What fault did Bush have in the housing and credit crisis?

My thoughts:1.) He's an easy target, he's already disliked, so why not just pile on. But in reality, the current economic crunch is almost entirely due to inflation caused by oil prices and the mortgage and housing crunch. 2.) I'd say oil prices have had a large impact on the economy. They cause the consumer to spend more money on energy, much of which exits our country to foreign lands and is never reinvested in our country. It results in much less available spending for things like clothing, home improvement, toys, electronics, vacation, fun, etc... That hurts the economy a lot!3.) The mortgage and housing industry has eliminated a great deal of our countries wealth. We've lost out on our equity in our homes, or lost our homes entirely. We've lost billions in stock and security values due to the credit crisis. I've actually heard experts say that our nations economy started a downturn 3-4 years ago, but the strength of the housing market kept the entire ship afloat for a few years. 4.) I'll blame Bush some for the cost of oil prices.. maybe I'd tag $.50 a gallon on him. I think the instability in the middle east has caused speculators to drive up the costs of oil somewhat. That instability is due to Bush's poor job of planning to clean up the Iraq mess prior to going into Iraq. The rest of the increase in gas is due to other factors... rapidly increasing demand by China, india, etc... Lower production by OPEC, speculators driving the market themselves, storms and issues with refineries. etc... 5.) Bush had almost nothing to do with the housing and mortgage crunch. If he had a crystal ball and could have seen it coming 4 years ago, perhaps he could have done something to help out a bit...

My point is that everyone likes to pin the blame on Bush for the economy sucking right now.. That's a load of crap!

[Cold_Zero]

Enough religion

I think OriginalWheelMan handled it very well. Notice the discussion did not continue..

All I know is that we got slammed by the shrinking availabilty of credit in the Financial Markets. Since most investors are steering away from Debt Backed Assets. Last week when the Fannie Mae and Freddie Mac announced their troubles, we took a hit (hard) and we dont even do Home Mortgage Loans!

[smockers83]

Those are some good thoughts there, I pretty much agree with them all. I'll comment further on certain issues.

2) Rising oil prices have caused other prices to go up as well--corn, other food stuffs, mail, and I'm sure some other goods as well. The question in this area is has spending been cut? As people need to spend more on energy, they substitute more of their budget into energy and away from the other things. If spending were cut, people would actually be decreasing their budgets and saving more, in theory.

3) The loss of wealth due to the housing market and everything that it entails affects every part of the economy. By eliminating wealth you eliminate money in the economy. My guess as to the biggest areas affected by this though are the retailers.

4) Indirectly, some with what's going in the Middle East. Directly, who really knows?

5) Apparently, I heard this for the first time yesterday, that the Fed knew about the problems and laxing in the mortgage industry 3 or 4 years ago. Not that this has to do with Bush really because the Fed is really separate from the gov in terms of what it does.

[rn79870]

What's interesting Seth is that any one of the factors you have named, plus one you haven't named (Iraq) wouldn't have caused the current problems we are facing.

1. The Economy. You can't address the economy without looking at the effect the war has had on it. 1/2 trillion dollars to date, with another 100 billion headed that way. Depending on how soon we are able to leave, the final bill will end up being + or - 1 trillion dollars. Someone has to repay that. And that repayment will be with dollars that could have been used far more productively for other means, or heaven forbid, left in the pockets of the citizens. That would stimulate the economy more than the $600 gift GW made. Remember, the war is setting back each family $100.00 a day, $3000 a month.

2. Oil prices. I can't put GW in the target for this one either. His lack of leadership in the matter is what bothers me. He could have taken a leadership role in opening new drilling by use of the Executive order process (he is giving this lip service, but that's worthless). All in all, I give him a 35% fault in this.

3. The housing/mortgage crisis has been long coming. I posted a mother jones link to the timeline for that crisis and it goes way back before GW. So we can't put GW on the hot seat for that one.

4. Rising oil prices? GW really can't be faulted for the acts of investors. However, if the OPECKers had the least bit of respect for him, he might have made a little headway with increasing the amount of oil produced.

5. Housing credit crunch.June 20, 2000: Treasury and hud urge Fed to investigate subprime units of major banks. No Fed action follows.

June 26, 2000 First Union closes The Money Store, takes $2.8 billion write-down.

Dec 14 2000 As Congress heads for Christmas recess, Sen. Gramm attaches 262-page amendment to an omnibus appropriations bill. Commodity Futures Modernization Act will deregulate derivatives trading, give rise to Enron debacle, and open door to an explosion in new, unregulated securities.

Dec 27 2000: American Homeownership and Economic Opportunity Act makes it harder for consumers to get out of lender-required insurance. National Association of Realtors lobbies hard for it, spending $9 million, plus $4 million in contributions.

March 6, 2001: ftc sues Citigroup and its subsidiary Associates, nation's 2nd-largest subprime originator, charging "systematic abusive lending practices" involving 2 million borrowers; 18 months later Citigroup settles for a paltry $215 million.

April 6 2001 : Fed chair Alan Greenspan signals concern with "abusive lending practices that target vulnerable segments of the population and can result in unaffordable payments, equity stripping, and foreclosure."

July 27 2001: "'Predatory' is really a high-profile word with no definition," Ameriquest chairman Stephen W. Prough tells Congress, urging rollback of subprime regulations

You can follow the problem as it develops from 2000 (when GW should have noticed it) through May of 2008.

http://www.motherjones.com/new....html

Why blame GW for this? It happened on his watch and it is something (at least in hindsight) that could have been prevented.

So what blame does GW have? If you look at the individual issues his blame is more a matter of ignoring problems than mishandling them.

However, when you add his biggest contributor to the problem, that is the war in Iraq, the house came tumbling down. Would we have a recession, or be in the same position without the Iraq problem? I sincerely doubt it. I also believe GW has been so occupied with the problem he created in Iraq that he has had little time left to address the other issues facing his presidency. I just feel he is, and has been in over his head.

[rn79870]

5) ...because the Fed is really separate from the gov in terms of what it does.

Smocky the "fed" is the body, the "gov" is its head. Yes, the "gov" controls the fed part. Therefore, the government needs to accept responsibility for the act of the federal agencies.

[smockers83]

The Board of Governors are appointed by the President, confirmed by the Senate, but that's about it. Its a quasi-public institution. The Fed is not to be under the power of the government for various reasons. The Fed makes its own policies, makes its decisions by itself, decides how to conduct its own business, etc. In terms of what it does, it is independent, as I said earlier.

Here's my question to those that blame Bush for a lot of things. Lets say Bush is the CEO of a company and people like Bernanke are managers or VPs or something. If the CEO asks his people about what's going on and they don't really tell him, is it the CEO's fault for not knowing? Shouldn't the other people get fired for not saying anything? What doesn't get reported goes unknown except to those that have the information at hand. To me that makes sense, but its probably too simple. If Bush was told about all of the stuff that people are blaming him for, then sure we can blame him.

[Encryptshun]

The Board of Governors are appointed by the President, confirmed by the Senate, but that's about it. Its a quasi-public institution. The Fed is not to be under the power of the government for various reasons. The Fed makes its own policies, makes its decisions by itself, decides how to conduct its own business, etc. In terms of what it does, it is independent, as I said earlier.

Yes. That is why the President gets reported as "asking the Fed to do X or Y" rather than telling them.

Here's my question to those that blame Bush for a lot of things. Lets say Bush is the CEO of a company and people like Bernanke are managers or VPs or something. If the CEO asks his people about what's going on and they don't really tell him, is it the CEO's fault for not knowing? Shouldn't the other people get fired for not saying anything? What doesn't get reported goes unknown except to those that have the information at hand. To me that makes sense, but its probably too simple. If Bush was told about all of the stuff that people are blaming him for, then sure we can blame him.

The CEO is selected by the Board of Directors. The Board of Directors is selected by the shareholders. If the stock tanks because the CEO's leadership team isn't working with the CEO, the shareholders will vote in a new Board who will fire the CEO. Yes, the CEO is and should be accountable for not being able to work with corporate leadership. Because that's what you hire a CEO to do -- to steer the ship. Now, I DON'T agree with the analogy in the first place, because to your point the FED doesn't answer to the President.

[skylndrftr]

Here's my question to those that blame Bush for a lot of things. Lets say Bush is the CEO of a company and people like Bernanke are managers or VPs or something. If the CEO asks his people about what's going on and they don't really tell him, is it the CEO's fault for not knowing?

OMG absolutely! Hes in charge. He makes a HUGE deal about being in charge. ts a two way street buddy! If you can't control those under you, how can you run a coutnry? Seriously

Shouldn't the other people get fired for not saying anything? What doesn't get reported goes unknown except to those that have the information at hand.

Yes

To me that makes sense, but its probably too simple. If Bush was told about all of the stuff that people are blaming him for, then sure we can blame him.

The "I'm not evil I'm dumb" routine has been used far to many times by this group for me to believe it for a second. And incompetence is not an excuse for this or other things when you ran for the position.

[rn79870]

I think your argument would best be limited to the judiciary. The President appoints a member to the judiciary and that member is confirmed by the senate. Once appointed the justice exercises his own discretion, (that's why they are "life" appointments). However, with respect to other agencies and cabinet members, as well as advisers, they serve at the convenience of the President. If they can't do the job, we blame them and we blame the president for keeping them around.

[smockers83]

I'm not saying the Fed doesn't answer to the president, its that the executive and legislature can't impose their own policies on the Fed. My analogy wasn't solely for the Fed, but everything.

Encryptshun, point taken. I agree with the "I'm not evil, I'm dumb." I put this into a sports analogy (know more about that) and it made more sense to me than the CEO one I tried to come up with.

[OriginalWheelman]

Our government tries not to get involved. The Fed is a regulatory agency, not a player. It's like teaching a kid to ride a bike. You sit there and watch, and let it happen, but occasionally you need to give them a nudge to keep them upright. We have an open market, and this is one of the downsides.

[skylndrftr]

its THE downside. the worst difference between a free/open market and a little more socialism is that in a free market (as we're seeing now) taxpayers prop up failing businesses but don't see any of the profits when those companies get their act together and start making money.

[smockers83]

Umm, no not really. Whether a free market or a little bit of socialism/nationalism, taxpayers are still going to be propping up the gov sponsored businesses. If you're talking about the Fed, they don't use taxpayers' money. They either make the call to print money, sell bonds to take money out of circulation, or buy bonds to put money in circulation. In the case that they bought the mortgages, just substitute mortgages for bonds. Taxpayers' money is not used in Fed transactions.

[skylndrftr]

Not true Smockers,

Tax payer money is bailing out F/M mortgage brokers when we buy shares in them.

And when the Fed prints more money they are using the authority entrusted in them by the government and by extensions taxpayers and when they devalue my currency they are using my money.

The republican administrations are really not in the interest of reducing government size or involvement in regulation. They are interested in maximizing the profit of large corporations and minimizing their losses when they do stupid things. Free market my ***.

[smockers83]

And again you failed to understand what I was saying. If you buy Fannie and Freddie shares, that's your money, not taxes. I'm not buying shares, so your money is your money, not mine.

When they devalue our currency they are using your money? How do you rationalize that?

Don't a lot of engineering students take economics classes in college?

[WDRacing]

IMO the mortgage/realistate/housing problem that is plaguing our nation is a result from a few key things. Actually two...ignorance and greed...mostly greed.

Bare in mind...I said it was MY opinion.

Banks and other lending establishments authorize people for home loans at 125% what they're qualified for. They enable people to make "interest only loans", they sell awful variable rate loans...and they do so in a manner that makes the buyer feel comfortable.

Then the banks get all butt hurt when all of the sudden the housing market stops bursting at it's seems with growth. Even though speculator after speculator said that the growth can't go on forever. They continued to make bad investment after bad investment...simply because they wanted to increase there profit margin.

The buyers aren't off the hook either. They sign therefore accepting responsibilty for all payments until the loan is finalized. If you do the math, when the interest rate goes up...big shocker here...so the does the mortgage payment.

So...we know where I stand.

Here's my question. Since people are seeking to blame the Gov for the current recession...should they be allowed to step in and tell the banks who can and can't buy a house?

Should they bail banks out? Or Airlines...who money is buying these? Is it my tax dollars saving these greedy corporations that mismanaged everything so badly that they failed utterly? Even though the share holders retire with a metric amount of millions...?

Just thinking out loud...here.

WD

[rn79870]

IMO the mortgage/realistate/housing problem that is plaguing our nation is a result from a few key things. Actually two...ignorance and greed...mostly greed.

Mostly greed is correct. Much greed.

Should they bail banks out? Or Airlines...who money is buying these? Is it my tax dollars saving these greedy corporations that mismanaged everything so badly that they failed utterly? Even though the share holders retire with a metric amount of millions...?

Just thinking out loud...here.

WD

Brian, you're tax dollars are going to be very busy paying for something else, but then, we'll not go there right now.

[WDRacing]

Bob, if you can't NOT blame everything on Iraq then we'll never have a decent conversation. Let me ask this. Have our income taxes gone up since we invaded Iraq? Has Iraq caused big companies to go oversea's in search of cheap labor? Has Iraq caused the banks to invest poorly?

WOULD the money we spent in Iraq have been used to...decrease taxes? Force companies to not outsource, force banks to not invest poorly? Answer...NO. Could it have been used wiser, yes.

But the war isn't the biggest issue with our country being in a recession. At the moment the biggest thing is oil...period. This has caused a general inflation across the board. When everything increases in price but the wages people are paid...you get a recession.

It's also not a cover up...the more people that scream recession the worse it gets. It's like the meteor policy...it won't be made public until someone in the general public see's it. The Gov will say nothing, because if they do you get panic.

Does our entire gov spend badly and piss money down the drain...you bet ya. Ear marks and wasteful spending have been going on since Democracy became our way of life. This is nothing new...

[rn79870]

Brian, you don't truse me not to put a liberal or Democratic spin on the issues, but my friend, I'm not doing that. Even GW's financial advisors have admitted that financing the war has been at the expense of other programs and services that would have addressed the current economic conditions this country faces.

The country has stretched it's financial assets too thin. Consider that your share of the national debt was $31,000 and some change. When the costs of this war are factored in, your share goes up to over $40,000. That amount will go higher, much higher, if McCain gets his way and our presence in Iraq lasts 100 to 1000 years.

Your causes of the recession are partially true. The war has played a big part in it. See my thread on the war math and you'll see the experts are blaming the war (partially) for the rising price of crude oil.

I honestly believe that one of the "fixes" for the recession involves us being out of Iraq. The sooner the better. It's time that we worried about America and Americans and not the citizens of other countries.

When you find that you've made a wrong turn, it's best to turn around as soon as possible, not keep driving with the hope that you'll find a shortcut leading to your destination. I say turn now, not 1000 years from now.

From the "war math" thread.

With the exception of a few lonely surviving supply-siders, most economists believe that deficits matter, and the huge deficits to finance the war will have their toll in the long run. Deficits matter in both the short run and the long. They help crowd out private investment that would have stimulated the economy far more than the war expenditures; and the reduced investments reduce long-run productivity. With 40% of the funds borrowed from abroad, Americans will be sending interest payments abroad - lowering living standards at home. Finally, even Fed Chair Bernanke (formerly the president's economic adviser) admits that the deficits have reduced the room to manoeuvre - the ability of the government to respond to the looming economic crisis.

[C-Kwik]

When they devalue our currency they are using your money? How do you rationalize that?

Don't a lot of engineering students take economics classes in college?

Its a money supply issue. More money in circulation without an increase in a supply of goods means prices of goods start to inflate to match the money supply. There is a natural occurrence of this within the economy, but printing money to cover the national debt would artificially and dangerously inflate prices. Even money has its own set supply and demand curves...

[WDRacing]

if McCain gets his way and our presence in Iraq lasts 100 to 1000 years.

I was willing to listen and talk things out and enjoy a conversation until you posted that. Not but a few sentences after you said you weren't gonna spin anything...

McCain doesn't want to keep troops there for 1000 years, that statement is OUT OF CONTEXT. So please...let it the f*** go. There IS going to be a downsize...EVERYONE is saying there will be...SO stop with the "But McCain is the WAR DEVIL...yada yada".

Literally thousands of different programs wasted millions of dollars over the last 8 years. All of which could have been used to fund various economic assisting research and developement.

If you want to keep making threads that bash McCain and argue about Iraq please stop labeling them as other things to lure people that want to discuss other topics.

We all know what the deficit is, we all know that Iraq has taken a metric **** ton of our money, we all know that the current administration couldn't budget there own milk money. So can we please discuss some other things?

[smockers83]

I understand how it works, but they aren't using his money.

[WDRacing]

Its a money supply issue. More money in circulation without an increase in a supply of goods means prices of goods start to inflate to match the money supply. There is a natural occurrence of this within the economy, but printing money to cover the national debt would artificially and dangerously inflate prices. Even money has its own set supply and demand curves...

Well sinbce China owns like 3/4 of our debt, lets just print out a C5 full of money and give it to them. That way it stays out of circulation and possibly ruins there market...WIN

[skylndrftr]

we already tried that in iraq...couple billions in cash on pallets in a C5 flat out gone. Lets not try it again.

China can't call in our debt because their currency is tied to ours. Plus we're the main freaking customer.