“Core Chicago Team Sinking Obama Presidency” – The Washington Note
(I think we all knew that some pieces like the above were due. No need for a quote – the title’s enough… then comes the ultra-insider-y article… the comments are also unusually… pathetic in a well-informed yet DC-snowblind kind of way… Read a bit and you’ll see what I mean, then take a look at the piece that inspired the piece… almost like a real-time Allen Drury novel…
More later…)
Comments 39
I read the piece yesterday;it’s very well informed. Obama needs to clean his house,and take charge. That might not be his strongest suit.
February 9th, 2010 at 6:28 am
One of these days, Luce will figure out the policies are the problem, he’s much like Camille Paglia in a way, insisting Obama’s been ill served
by his staff, well he picked them didn’t he. Clemon’s suggestion for a B Team is hilarious, really, a text book of the Journolist insularity
February 9th, 2010 at 6:42 am
he picked them didn’t he
He’s a bad picker,Geithner and Bernanke are also very bad news bears.
February 9th, 2010 at 7:00 am
@Rex: He couldn’t clean his suit, let alone his house.
February 9th, 2010 at 9:01 am
@Rex: He couldn’t clean his suit, let alone his house.
Neither could I,but I could hire people that could,and fire them if they couldn’t. Michelle is going to have to clean house,if BO can’t.
February 9th, 2010 at 9:37 am
@ narciso:
Agree 100%. The one thing it’s against their religion to admit is that their actual policies are the problem. Typically, they cling to one or another opinion poll that seems to show that their ideals or some abstract rendering of their policy goals, gets good numbers. Or they assume that if they market themselves better, the sheeple will come aboard. Or they suggest that, once implemented, the new entitlement will attract a constituency that will fiercely defend it.
Any notion that there are competing ideals, that the fundamental problem has always been what happens to the ideal when you attempt to make it real, that the marketing problem begins with the treatment of citizens as sheep, and that the creation of a new entitlement addiction is understood as undesirable and unaffordable – any of that makes you a rightwing extremist who hates sick people.
And you’re also right about the B team. It sounds like the institutionalization of Carter’s crisis of confidence summits, and would probably help complete the super-Carterization of this administration.
February 9th, 2010 at 9:39 am
@ narciso:
Agree 100%. The one thing it’s against their religion to admit is that their actual policies are the problem.
The Economics/Jobs problem is a Debt problem which is itself a policy problem. Whose policy is that Debt is good,and more debt is better. Everyone’s. Which policy of Obama’s is the one that is unique to him? Or is it his character flaws that is most inflammatory? I see nothing in BO’s economic opinions that hasn’t been present for decades,the same regarding his social,political policies. I see nothing new,what am I missing?
February 9th, 2010 at 10:06 am
@ Rex Caruthers:
I don’t think you are missing anything on the level of policy, except maybe a difference of degree that has as much to do with our cultural-economic conjuncture as with ideological novelty. Episode of Obama Year One represents even more of the same, by multiples, under the label something altogether new. The Obama-Bernanke-Geithner response to the impending breakdown of neo-liberalism has been exponentiated neo-liberalism. The other difference is the potential for bringing the breakdown closer, and qualitatively deepening it, by way of the effort to push it further away – it’s a classic pain avoidance pattern, understandable as unchanging human nature, but the kind of thing that we sort of hope that our leaders, and if not them the gods, protect us from when it becomes dangerous to society.
(They’re about to have a debate about the Chicago problem on FNC. I got up late and still haven’t walked the doggies, so I expect I’ll have to miss it – no big, these things hardly ever live up to the hype.)
February 9th, 2010 at 10:28 am
While the debt problem does impact the economy, and by extension jobs, the jobs problem is really there because no company in their right mind is going to hire people with carbon taxes, health care and tax rate increases still in play. They could care less about the debt. The debt is an entitlement issue to them.
As long as OSlash keeps dabbling with policy that makes it impossible for a business to have any reasonable expectations of their core costs, they aren’t hiring anyone. And to the extent the proposals make employee’s more expensive, with health care requirements and taxes, there will be fewer of them. Europe did quite well on the debt side for along time, but has had unemployment woes forever.
Make no mistake – the unemployment situation, while some reflection of the economic problems we went through, is being extended solely by Obama. This is his problem. And everyone knows the 9.7% rate is a statistical anomoly. The real rate is much higher. It will not be down this year. The democrats are going to get killed.
February 9th, 2010 at 10:28 am
Make no mistake – the unemployment situation, while some reflection of the economic problems we went through, is being extended solely by Obama
JEM,you’re making this sound like a fact,it’s not,here’s the fact,the economy’s bad because no one is buying,and there not buying because they’re out of credit,and they’re out of credit,because of debt. For decades,we grew our companies on debt.and now,hard cash is it. There are other annoying,but peripheral side issues,like the ones you mentioned,Americans want to buy their way out of the mess,but their credit cards are maxed out.
February 9th, 2010 at 10:43 am
Ah, the scorpions have finally finished exploring the dimensions of their bottle and are commencing to sting one another. Good times!
February 9th, 2010 at 11:01 am
Sully wrote: Ah, the scorpions have finally finished exploring the dimensions of their bottle and are commencing to sting one another. Good times
Sully,check out the manual for scorpions below
http://www.marketwatch.com/story/how-to-invest-for-the-debt-bomb-explosion-2010-02-09
February 9th, 2010 at 11:15 am
@ Rex Caruthers:
Rex,
The problem with that article, as with all such, is that 90+% of people don’t have the physical and mental capability to significantly affect their fate after such a catastrophe, and most actions that the ones who do have the capability to take before such a catastrophe will be wasted.
Most who survive will be random lucky ones. The author himself reveals his incapacity to consciously affect outcomes with his “shoot over their heads” comment. Anybody who even thinks of firing warning shots in the presence of a real threat should rethink the idea of owning a gun. He’s in the category of a former boss of mine who told of going outside his house (!) to look for a suspected intruder with an unloaded (!) shotgun.
That said, I think the idea that we’re headed for a near term societal breakdown type catastrophe is way out there. “There is a heap of ruin in a nation” is the relevant quote.
February 9th, 2010 at 11:41 am
Sully,Same ole,Same ole
The stock market is up 180 points because of the ecstasy of the EU borrowing a fortune to prevent a Greek default. They really think that we can borrow our way out of this debt overhang. Does the name Ponzi ring a bell?
February 9th, 2010 at 11:53 am
@ Rex Caruthers:
Rex,
My point isn’t that there won’t be trouble, and plenty, over debt one day. My point is that the trouble may be a surprising distance in the future. And that, when it comes, the trouble will almost certainly be manageable.
‘I’m not saying we won’t get our hair mussed; but we’re talking 20, 30 million dead tops.’
i.e. About the same as a major new flu epidemic on the scale of 1919.
For example – the country can solve almost it’s entire debt problem by cutting Social Security and Medicare benefits by 80 or 90%. Sure, a bunch of old farts will eat cat food until they die of some trivial ailment for which they can’t afford treatment; but the country will go on.
for another somewhat less contentious example – the country can put into effect a 20% value added tax on top of existing taxation and generate $2.8 Trillion of revenues per year.
for yet another example – the country could pass a wealth tax and take 50% of all personal wealth over (say) $1 million per person and generate tens of trillions on a one time basis.
February 9th, 2010 at 12:23 pm
Samuelson had some slightly less extreme suggestions in the WaPo yesterday – may put them up in a post for discussion sometime, esp. since this don’t have much to do with the Chicago Way in DC – anyway I think a Ryan-like approach would be worth trying first.
February 9th, 2010 at 12:47 pm
@ CK MacLeod:
I was just thinking off the top of my head, of course. On reflection, a better way would be to pass a law confiscating the wealth of anyone convicted of a felony. That would both generate revenue and inspire prosecutors, judges and juries to administer justice more efficiently, swiftly and rigorously in cases involving the wealthy.
And then there is defaulting on all public pensions (except those of police and the military, of course).
February 9th, 2010 at 1:22 pm
Rex Caruthers wrote:
Actually Rex it is a fact – the hiring managers in survey after survey are saying just that. They see a glimmer of hope, do they seize it? No they hold back for the aforementioned reasons.
I acknowledge people aren’t spending, and our savings rate is in the high single digits right now, which is very different as people are getting their own finacnes in the best shape they can. But right now everyone is playing a game of chicken. People won’t spend because they are worried about thier job. Employers won’t hire because they are afraid of what costs they are signing up for. The normal signals of economic activity are being ignored by employers, which means consumers will keep a tight hold on their wallet. The reason employers won’t move is because of Obama, not the debt.
February 9th, 2010 at 2:30 pm
@ JEM:
What definitive evidence do you have that if the “Obama overhang” was removed, and every one of those survey respondents acted, that it would a) take a substantial bite out of unemployment, and b) do so on a durable and sustainable basis?
February 9th, 2010 at 2:33 pm
“and our savings rate is in the high single digits right now”
Paying Down Debt isn’t savings,There is practically no “asset” Savings.
February 9th, 2010 at 4:11 pm
My savings comment is only as it is traditionally calculated, I am sure that they using some of that savings to pay down debt.
CK – I can only report what the majority of hiring managers are saying is holding them back – uncertainty of the climate under which they would assume the liabilities of more employees. There has been much reporting on the increase in temporary employment, and hours of existing employees are increasing, but by now we should have seen some net increases in employment if we are to believe the GDP numbers. Employers are bracing for a period where they are unsure of the cost of labor and are not going to commit.
In Europe no one hired anyone because you could never fire them – so the productivity of labor became unknown, therefore the price of labor became unknown. The reason employers aren’t hiring is because of labor cost uncertainty. Why is there uncertainty? OSlash’s employment cost nightmare. At this point I doubt any business is going to do much of anything until they see the democrats lose their majority in one of the chambers because they know Obama, and don’t trust him.
February 9th, 2010 at 4:39 pm
I mean look at the strident manner in which Obama is doubling down on health care. He is going straight ahead with a plan employers know will increase their employment costs and until they are certain it is dead they will be cautious.
February 9th, 2010 at 4:41 pm
JEM, I’m not disputing that Ø and Ø-ism qre having a negative impact, I’m just wondering whether we can quantify it. Rex takes the position that the US economy is deeply sick. The idea that Ø is the problem seems to imply that if we could just nullify him, the good times would be rolling again.
February 9th, 2010 at 4:57 pm
Rex: Are you related to Joe Bftsplk?
Please tell my teenage kids that no one is spending. Look at Guess Jeans, Joe’s Jeans and Urban Outfitters for a little reality check, and, today, the lines at McDonalds and Starbucks were still long, and Amazon and Apple are kicking butt, and, believe it or not, people are still buying John Deere Tractors and Caterpiller backhoes.
You are a dear fellow, Rex, but you are too dismal on the one hand, too hopeful on the other hand. You are hopeful or naive for thinking President 0slash could just fire all of his Cheekago flunkies and make a new start. They are all one and the same, Rex. They all got CHAIDS, my frem. They are what they are and that ain’t good, Rex. You see, these libral pwogwessives have been lying for so long that they start to believe their own shirt. Then they get angry and hateful at those of us who see their shirt for what it is, bacteria laden foul smelling shirt.
February 9th, 2010 at 7:42 pm
CK MacLeod wrote:
My only thought would be to look at economic activity in previous recoveries and evaluate how employment numbers rose compared against this one. Then you would have some empirical measure to see exactly what the OSlash effect is.
Right now all we have is what the hiring managers are saying is holding them back from more hiring. And of course, economists have intimated in their comments that with this level of GDP growth and hours increase and temp employee increases we should be seeing more hiring.
February 10th, 2010 at 7:18 am
@ Rex Caruthers:
As I pay down my mortgage I’m saving unless I’m simultaneously accumulating other debt. There is no other logical way to think of “saving” except in terms of net effect on your assets versus liabilities. And what is true of an individual is true of the mass of individuals.
February 10th, 2010 at 8:17 am
@ JEM:
I think there is something to the idea of an Obama/socialism/government intrusion effect; but this fairly big time economist friend of mine regularly warns that unemployment doesn’t start to improve until well into a recovery, just as it doesn’t start to get worse until well into a recession.
Employers are slow to lay off, and they’re slow to rehire both for psychological/inertia type reasons, and because an optimum staffing/capacity plan actually should have some “excess” people and other productive resources in it to take advantage of market opportunities. For a time when managers are remembering bad times, rising inventories, falling sales, etc. they can run the machine at high revs while skimping on maintenance and such; but that eventually ends. They’re also helped in their conservatism re hiding by the high unemployment, which makes workers less likely to rebel and leave.
February 10th, 2010 at 8:38 am
Sully wrote: @ Rex Caruthers:
As I pay down my mortgage I’m saving unless I’m simultaneously accumulating other debt. There is no other logical way to think of “saving” except in terms of net effect on your assets versus liabilities. And what is true of an individual is true of the mass of individuals
Sorry Sully,but real Savings is Capital that can be loaned/invested. Paying down a mortgage/credit card debt does not create the kind of liquidity that drives capitalism. This is a good part of the reason things are so f–ked up now. Banks have to book “savings” as a liability,while debt/loans are an asset. So they stopped paying much interest on Savings. Example,when I was a kid in the FIFTIES,I used to recieve 3.5% annual interest on my passbook savings. Adjust for inflation,how much interest do Savings accounts earn today?
February 10th, 2010 at 9:37 am
@ Rex Caruthers:
Savings aren’t assets if you’re talking about passbook savings. Not to the bank. Passbook savings are payable at their face value on demand. That’s a liability no matter how you slice it.
Now, the interest the bank can earn by investing the aggregate amounts in its passbook savings accounts, over and above the interest it pays out on each account — that is an asset. So is a performing loan, which is worth more than its on-demand face value over its lifetime.
But the reason banks can get away with the low payoffs on passbook savings today is that there are other options for small savers, and the small savers of the 1950s have entered the investment trading market in vast numbers over the last 30 years. Who would put lots of dough in a passbook savings account today? At least put it in a 6-month CD until you decide to do something more profitable with it. There’s no effective demand for high-payoff passbook savings.
Over the last 100+ years market investment has outperformed every kind of saving. The return hovers around 11% as a seminal trend, with ups and downs factored in. With market investment now so accessible, and money-market instruments available to individuals through every bank and credit union, there’s no real demand for a higher return on passbook savings.
February 10th, 2010 at 9:58 am
JED,
Sounds like a Wall Street Commercial,so how did this marvelous system producing such great returns turn to s–t.?
February 10th, 2010 at 11:01 am
JED, I forgot,The government is to blame. Well,actually it is.
February 10th, 2010 at 11:03 am
@ Sully:
Yes, employment is a lagging indicator. But I am only reporting what hiring managers are saying right now and what some economists are hinting at. Obviously, my empirical evidence is scant, hiring managers could be lying to us for instance, I am only going by their current public pronouncements and my own knowledge of the hiring game at this time.
If employers are worried about the price of labor, that it is an unknown, it is pretty standard economic fare that they will consume as little of it as possible. And while the financial crunch was a sudden shock to the system, the unemployment rate took off after the election and in response to government policy advocated by OSlash got worse. Again, the empirical evidence once this is all done will be intersting to digest. But I do think there is more to the unemployment rate than just a macro economic event in response to the financial meltdown of last year/end of 2008.
February 10th, 2010 at 11:24 am
But I do think there is more to the unemployment rate than just a macro economic event in response to the financial meltdown of last year/end of 2008
The Macro event that opened up the Dike was the abrupt end of the Japan carry trade in summer 2007. That event created the financial meltdown of 2008. One aspect of the unemployment rate is the effect of software modeling programs that based on corporate revenue downturns,create layoffs via Enterprise Software like SAP.
February 10th, 2010 at 11:31 am
@ Rex Caruthers:
Rex,
The dollar with which I pay down my mortgage does not disappear. It adds to the bank’s store of dollars available to lend. I might grant you a very minor effect in that my bank might itself be in trouble or be i a conservative frame of mind and thus may simply hold extra reserves; but that doesn’t make what I did any less a part of “savings.”
Velocity has slowed; but that is independent of savings.
February 10th, 2010 at 12:22 pm
@ JEM:
JEM,
I suspect you and I are not really in disagreement except in terms of emphasis and scale of effect. Uncertainty causes businesses to go slow with hiring decisions (and it delays new business formation – easiest to see in retail probably). President Obama, by reaching for the stars rather than simply following through on his more moderate campaign promises, has increased uncertainty.
You write of hiring managers like a recruiter (which I am). Are you a recruiter or a staffing manager?
February 10th, 2010 at 12:26 pm
The dollar with which I pay down my mortgage does not disappear. It adds to the bank’s store of dollars available to lend
Sully,your mortgage has been sliced/diced so many times,nobody knows who owns the damn piece of paper. If you default,make sure that the owner of the mortgage shows up at the foreclosure hearing,because,it won’t happen. You have 100 owners each with a piece of your house.
February 10th, 2010 at 1:45 pm
@ Sully:
Actually I do the hiring – I run the HR staff of a “smaller than used to be” medium sized US Company.
I wish I had better numbers to back up what I am hearing instead of having to fall back on classical economic theory, but everything I read, and everyone I talk to – or that my staff talks to – is just real worried about adding anyone to the payroll because they don’t know what they are signing up for – uncertainty on steroids.
February 10th, 2010 at 1:49 pm
@ JEM:
On my last gig we experienced uncertainty on the other side of the coin.
The company originates small commercial mortgages and we had built up to 750 FTEs in 8 locations when the subprime residential mortgage crisis hit. We stopped expanding; and then within a few months we had to cut down severely on the number of loans we were originating because of inability to sell security derivatives even though the underwriters and risk guys could prove that our particular type of mortgage was not seeing higher default rates or other problems and the mortgages were/are backed with solid property values (we loaned up to 80% of valuation established by and our own appraisers).
The parent company told us to hold on the staff and do whatever we had to to keep them busy in expectation of the market coming to its senses. For almost six months we stayed staffed for more than double the business level, keeping the people busy with training and market research type stuff concerned with the national mortgage broker pool. By the time the parent told us to cut the staff in half we were down to about 10% of the peak volume (which was about what the parent could fund based on revenue from the existing book of loans). Then we spent 6 months with about 5 times the staff we needed for that level of volume. By the time we did the second round of layoffs we were doing rolling paid days and weeks off to mix things up because we had trained for everything the training staff remotely felt themselves qualified to do.
During the eighteen months before we finally cut back to a skeleton staff the CEO and board simply couldn’t believe that the market would not fairly quickly get back to buying securities that yield several times the money market rates.
February 10th, 2010 at 3:44 pm
Sounds familiar. Order boards going strong and then all of a sudden – wham!
We held workers longer, just to see if it was a a short term situation, did training, improvement projects, etc., etc. In the end the reality was too obvious. Tried voluntary furloughs, across the board pay cuts, plant shut downs, and the like but eventually had to cut about 35% of the employees. A lot of skill that was really just starting to pay for itself right out the door. What a waste.
February 11th, 2010 at 4:18 am