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Wall Street Weekly | 07/10/2009 9:45 am

Stimulus Not Working? Let's Have More! by Liz Peek

If the stimulus spending isn’t working, does it make sense to make it bigger?
© Shutterstock

Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 7/6) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Holy smoke! Now even the Pope is weighing in on financial regulation. In a rare encyclical, the Pontiff added his voice this week to those clamoring for economic overhaul. Come to think of it, maybe we could use some divine guidance.

The Big Debate underway is whether the United States needs a new stimulus program. This is idiotic. Whether you are a fan or foe of the monstrous $787 billion package pushed through Congress earlier this year, it is preposterous to assume that such an ungainly mishmash of programs could be implemented to any real effect in just a few months. Some $100 to $150 billion of the total has been committed to various projects, but only a portion of that has found its way into bank accounts. Moreover, if the stimulus spending isn’t working – does it make sense to make it bigger? No!

Anxiety about the stimulus package, and about the course of the economy, stems mainly from rising unemployment. The administration’s rosy outlook for stemming job losses proved unrealistic. (This should give some pause to those who buy into Obama’s projected "cost savings" from health-care reform or "green job creation" from cap-and-trade. These numbers, truly, are complete fiction. There is nothing I have found in either bill that would support such projections.)

While the labor situation does look gruesome, there are some encouraging signs. The four-week moving average of unemployment claims dropped in May by 53,000; normally a decline of 40,000 would signal the end of a recession. Continuing claims, though still high, appear to be peaking. The truth is that the numbers are so messed up by the auto industry bankruptcies that they are inconclusive. Data from the next two or three months will be much more telling.

While the signals are still mixed, there continue to be more positive than negative readings on the economy. Business confidence is improving, earnings estimates are moving slightly higher, the drop in consumer credit has slowed, house prices are stabilizing and manufacturing inventories are dropping. Moreover, two serious developing headwinds – rising oil prices and higher interest rates – have slumped from their recent highs.

The latter is good news and bad news, and points to just how delicate the current outlook remains. Oil prices and interest rates have backed down because growth prospects suddenly dimmed – dimmed precisely because oil prices and interest rates had increased. Investors, and policymakers, are in effect chasing their own tails. As oil prices zoomed higher in recent months, and as investors become concerned about projected budget deficits from our free-spending administration, consumers were hit with higher fuel costs and a drop in the opportunity to refinance their mortgages. This latter activity, as I’ve written before, has been far more stimulative than any program out of the Beltway.

The respite on interest rates may prove short-lived. The Federal Reserve has signaled that it is becoming less aggressive in its purchases of certain assets, including Treasuries, as it begins to unwind the buildup of its balance sheet. Some fear the Fed may be moving too quickly to rein in its largesse, but others correctly point out that moves to stimulate or restrict the economy almost always are overdone.

The Fed has to get this sort of push-pull just right, or it is possible that we could indeed fall back into recession. Joe Biden was blasted recently for admitting that the administration had "misread" the economy. Newsflash: this is tricky business, which is why many people, including myself, are aghast at the Obama team’s growing incursions into all sectors of commerce.

163 Reader Comments (so far…) Sign In or Register to comment

STACY SEARS
Very well put Deber! The 2012 election is critical to the survival of our country.  I just hope that people will continue to realize they’ve been hood-winked and we can somehow limit the damage.  SJ, I hope things improve for you soon. 
By STACY SEARS on 07/11/2009 4:58 am
sibelle daubigne

I always thought he was a charlatan! Lots of intelligent people were aware if it before the election, but globalization (international finances) set him up, as he was a perfect "empty suit" to control the "melting pot" which is getting larger everyday!

"Democracy and Socialism have nothing in common but one word EQUALITY. But notice the DIFFERENCE: while Democracy seeks equality in LIBERTY, Socialism seeks equality in RESTRAIN and SERVITUDE". 

By sibelle daubigne on 07/11/2009 9:14 am
deber B

Well, Sibelle, everyone knows that a president has to get his campaign promises "done" in the first 100 days.   So far, everything he has done hasn’t worked.   It is now six months.   He may be toast.

I believe our present administration is all about equality across the board.   Take time to read what the second stimulus addresses….taxing the rich even more.   Soon, we will no longer have the rich to pay everyone’s bills.   Then what?

By deber B on 07/11/2009 4:19 pm
sibelle daubigne

Deber, lots of people might find themselves (Poor and less poor) in long waiting lines, waiting for michelle to distribute cans of SPAM.

"The American Republic will endure until the day Congress discovers that it can bribe the public  with the public’ s money!"

That is why the next election will be SO important! 

By sibelle daubigne on 07/11/2009 8:01 pm
Libra Lady
SJ…yes it has….where I work, donations are declining big time…people don’t have the money to donate…they are hanging on to it and I don’t blame them at all.  We had to reduce staff and now we can’t offer all the services to provide to the women and children of need.  It’s really a very sad situation….many agencies in our area are feeling the pain….non-profits are getting hurt big time….obama is hurting the needy big time!!!!   I am so sorry about your business…you have been going through tough times now and it doesn’t look very hopeful right now….what a mess Our Country is in!!!
By Libra Lady on 07/10/2009 7:11 pm
deber B

Hope and Change in Africa

Obama declares to Africa: End tyranny, corruption

ACCRA, Ghana (AP) — America’s president and Africa’s son, Barack Obama dashed with pride onto the continent of his ancestors Saturday, challenging its people to shed tyranny, corruption and conflict in favor of peace. Campaigning to all of Africa, he said "Yes you can."

"I say this knowing full well the tragic past that has sometimes haunted this part of the world," Obama told a riveted Ghanaian Parliament. "I have the blood of Africa within me."

The emotional touchstone of his visit: a tour of Cape Coast Castle, the cannon-lined redoubt where slaves were kept in squalid dungeons, then shipped in chains to America through a "Door of No Return" that opens to the sea.

"It reminds us of the capacity of human beings to commit great evil," Obama said, the ramparts and the ocean behind him. Speaking in the company of his family, he said it was important that his girls, in their privileged upbringing, see that history can take such cruel turns.

The White House said Obama held no big public events in a city frenzied to see him because Obama wanted to put the light on Africa, not himself. But in the faces of those who lined the streets and in many of Obama’s own words, this trip was about his presence, the first black U.S. president coming to predominantly black sub-Sahara Africa for his first time in office.

Obama billboards dotted the roads. Women wore dresses made of cloth bearing his image. Tribal chiefs, lawmakers, church leaders, street vendors — to them, it felt like history.

"All Ghanaians want to see you," lamented Ghana’s president, John Atta Mills, before feting Obama to a breakfast banquet of hundreds of guests at the coastal presidential castle.

To their disappointment, most people did not see him. The lack of open events and the heavy security kept many in this West African nation away from Obama. They watched him on TV.

Yet there was no dampening the overall tone of joy. Headlines screamed of Obama fever.

"It makes us proud of Ghana," said Richard Kwasi-Yeboah, a 49-year-old selling posters of the American president. "We’re proud he chose us. It proves that Ghana is really free."

At the heart of Obama’s message here: African nations crippled by coups and chaos, like Ghana has been in the past, can reshape themselves into lawful democracies. He said it takes good governance, sustained development, improved health care.

And that the moment is now.

"Africa doesn’t need strongmen," Obama said. "It needs strong institutions."

The son of a white woman from Kansas and a black man from Kenya, Obama bluntly told Africa to take more responsibility for itself but proclaimed: "America will be with you."

Sub-Saharan Africa is one of the poorest places in the world.

Obama also got openly personal — recalling the grandfather who endured being called "boy" as a cook for the British in Kenya, the father who once herded goats in a small Kenyan village. Not mentioned was the path of his wife, Michelle, who is a descendant of slaves.

In essence, Obama’s history with Africa seemed to give him freer license to speak about the continent, as if he were being honest with a friend. He gave an unsentimental account of squandered opportunities, brutality and bribery in postcolonial Africa.

About every time Obama cited his basic argument — that democracy is about more than holding elections, that Africa resist the drug trade and enforce a rule of law — members of Parliament raucously cheered him on. Then again, this audience was friendly. When Obama left, a choir sang a song to his campaign theme of "Yes we can," a line he used himself.

Evoking the memory of American civil rights giant Martin Luther King Jr., Obama noted that King was in Ghana in 1957 to hail Ghana’s independence from the British. He quoted King as calling the moment a triumph of justice, and told young Africans they must remember that.

"You can conquer disease, end conflicts and make change from the bottom up," Obama said. "You can do that. Yes you can. Because in this moment, history is on the move."

All together, Obama was spending less than 24 hours in Ghana. But they packed in personal moments, in contrast to his summit-heavy travels across Russia and Italy over the last week.

At a maternal health clinic in Accra, he turned into a sentimental dad when he met a group of mothers holding newborns. "This is the highlight of the trip," he said, beaming.

By afternoon, he was contemplating the human capacity for evil at the castle, which served as a headquarters for the trans-Atlantic slave trade. Obama walked with his arm around Malia, 11. The first lady held the hand of Sasha, 8.

"Hopefully one of the things that was imparted to them during this trip was their sense of obligation to fight oppression and cruelty wherever it appears," the president said.

Ghana and the U.S. have something of a diplomatic kinship. Obama is the third straight U.S. president to visit this tropical nation; George W. Bush was here just last year.

That reflects just how much the United States, which dwarfs Ghana’s size, wants this country to be a model of democracy and invests tens of millions of tax dollars to help it.

But what the Obama White House did not want on this trip was the Bill Clinton moment. In 1998, on a blisteringly hot day, a crowd at a Clinton rally nearly caused a horrific trample.

That also affected why Obama did not hold an outdoor event of his own.

Obama will be back to Africa. But he suggested that he won’t go for the traditional model of devoting a trip to Africa alone, as if it is separated from world affairs. Instead, African nations might be wrapped into his multinational travels more often.

"What happens here," he said, "has an impact everywhere."

Associated Press writers Mark S. Smith and Todd Pitman contributed to this story from Accra

By deber B on 07/12/2009 5:30 am
deber B

I agree with Newt Gingrich.   Since the $787 billion was geared towards special interest programs known as the "pork laden stimulus" it failed miserably.   It has been my opinion that President Obama took his eye off the ball and kept it on campaign mode.   If he really wanted to help all Americans, stop the job loss, help people keep their homes he could have done one very simple thing:

            Put $5,000.00 into the hands of every tax paying American immediately.    Had he done that, people could’ve paid their mortgages, kept their jobs and stimulated the retail sector.   We never needed this stimulus.   What we needed was to cut taxes and put money in the hands of all Americans.   A recession occurs when our country is out of balance (soaring house costs).   It’s purpose is to rebalance an unbalanced real estate market.  This recession was complicated by the subprime mortgages but we could’ve saved homes and jobs if we had given the money to the people who needed it.   Instead we have $787 billion most of which is still sitting in the White House.

However, he didn’t elect to do that.   Instead, he addressed eight years of ignored democratic wails to spend on the handouts, and special interest programs.   They literally couldn’t wait to get into office to start the spending frenzy.   So, where did that get us?   Where we are today.

Not only has this administration misrepresented themselves as moderate democrats during the campaign phase but as they showed their vision as far left leaning they then began to push huge government control to as the only means to solve a problem.     Let’s face it.   If companies are in trouble they need to fail.   Bailouts don’t work.   Reorganizing the way you do business strengthens a company.   When smaller companies are on the edge and face bankruptcy during a recession they need to fail.   Newer more innovative companies, historically, always come in and take their place.  What we have here is an administration who grossly tampered with this recession.   Historically, tampering with a recession and our one depression clearly indicates that it prolongs its recovery.   That is where we are now.

As Joe Biden stated that this administration "misread" the economy, one has to ask what else have they misread?   Why can’t this country club ivy league, tax evader administration figure this out?   And, finally, why are they taking this fine country into further debt to support their political agenda instead of helping the great people of the United States?  And lastly, why aren’t they promoting personal responsibility instead of rewarding those who don’t practice personal responsibility?

We have a serious problem with our medicare and welfare socialist programs already in place.   Why isn’t this administration fixing those broken programs so that they will have a strong base on which to build Universal Health Care?   My fear is that Americans are failing to "follow the money" with this administration.   We need to know who will benefit greatly financially  from Universal Health Care and the Cap and Tax bill.  Why the rush?     This is vital information all of us should have.   This isn’t a "transparent" administration as Obama promised on his campaign.

Our economy started the moves toward recovery before the $787 billion stimulus bill was passed.   Why is that?   Historically, recessions are real estate driven and real estate is the reason they recover.   Let me be clear that a small percentage of our population was underwater with their mortgages.   Most Americans have good credit and live within their means.   These same Americans, as housing appraisals went down, stepped up to the plate and started buying.   They bought foreclosures and they bought new houses.   Just that alone started the ball rolling with builders going back to work, appliance and retail sales….anything and everything to do with buying a first or second home.   The one thing this administrataion did right in the beginning was to give first time homeowners a tax credit for buying.   It worked.

In closing, many Americans have lost all confidence in Obama’s failed policies.   The polls show this.    They know he cannot pay for Universal Health Care and they are outraged with the Cap and Tax bill.   Now he promises $13 billion over 3 years to other countries and we, literally, have no way to pay for that.  Americans really can add and subtract.  America elected a very inexperienced left leaning President to make these hard choices in the face of a very large recession.   God Bless Ronald Reagan because he knew what to do when Jimmy Carter handed him a country faced with a 22% mortgage interest rate, a recession and inflation.   He simply got down to the task of cutting taxes to small businesses, the heartbeat of America without blaming his administration for his hard task at hand.

American needs a strong leader to do what is right for all Americans.

By deber B on 07/10/2009 11:26 am
F P
Ronnie screwed the American people with his discredited Supply side Econ and trickle down BS. We’ve been living with that debacle for too long now esp in the Bush Administration.  Historically doesn’t count Deber in this recession—it’s credit and it’s disastrous consequences by bankers who got totally out of control with their suspect algorithms. And by credit card debt that is still massive and by bankers who gave sub-prime loans to anyone who walked in the door. I blame it on the people too but many we suckered by big banks and now we’re paying the piper for those bankers total screw-ups. 
By F P on 07/10/2009 11:54 am
deber B

Here’s how and why some of the stimulus has been spent:

Billions of dollars in federal aid delivered directly to the local level to help revive the economy have gone overwhelmingly to places that supported President Obama in last year’s presidential election.

That aid — about $17 billion — is the first piece of the administration’s massive stimulus package that can be tracked locally. Much of it has followed a well-worn path to places that regularly collect a bigger share of federal grants and contracts, guided by formulas that have been in place for decades and leave little room for manipulation.

“There’s no politics at work when it comes to spending for the recovery,” White House spokesman Robert Gibbs says.

Counties that supported Obama last year have reaped twice as much money per person from the administration’s $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain, a USA TODAY analysis of government disclosure and accounting records shows. That money includes aid to repair military bases, improve public housing and help students pay for college.

By deber B on 07/10/2009 12:59 pm
S.J. Morgan

You are right deber….  They gave the money to the states that shored up their defits and did nto reign in their own spending.  What are they going to do next year when there is less payroll tax collected??? 

My state covered the defitcit for teachers ( yes those union members  that helped him get elected).  Those teachers  sit home this summer on vacation while the parents ( those that provide funding for them to have a job) of the kids they will teach are struggling to live on unemployement and wondering if they willl even be able to stay in the school district their kids attended last year.  They may have to move to a Blue county that received some money..but thos ejobs have been filled.

My union carpenter brother is having to take his travel trailer to a city 150 miles away to work and leave his wife who clean homes here in their home.

 Most will not be able to participate in sports programs because the district requires the student have health insurance. ( I’m dealing with this now in the summer program I coach).  Parent cannot afford insurance when they are struggling to make a house payment and put food on the table first.

It is all a vicious circle….. 

 

By S.J. Morgan on 07/10/2009 1:20 pm
deber B

If only our country had put an experienced person in the White House who could logically figure out that to put real dollars ($5,000) into the hands of all Americans (who file taxes) we wouldn’t be in the mess we are in now.   He chose the democratic mantra of borrow and spend for all the wrong reasons.   S. J. I am so sorry you are being affected by all of this.   I pray you make it through it.

I’m in northern Virginia and the shopping malls are packed every day and no foreclosure signs.   Homes are selling left and right and have increased in value by 4% this year.   Obama never had his heart in helping people  recover quickly and painlessly based on the decisions he has made.   Please hang in there.

By deber B on 07/10/2009 1:35 pm
phyllis Doyle Pepe

Here’s some of the rest of that USA article:

Not all of the money favors places that supported Obama. About a third of the $17 billion, or $5.5 billion, in contracts that the federal government has signed for projects ranging from repaving runways to cleaning up nuclear waste has gone overwhelmingly to counties that supported McCain.

Jake Wiens, an investigator with the non-profit Project on Government Oversight, says it’s too soon to draw meaningful conclusions about whether the type of aid in the stimulus favors Obama’s constituents.

But, he says, "it will be important to pay close attention as the data come in to ensure that political favoritism plays no role."

The imbalance didn’t start with the stimulus. From 2005 through 2007, the counties that later voted for Obama collected about 50% more government aid than those that supported McCain, according to spending reports from the U.S. Census Bureau. USA TODAY’s review did not include Alaska, which does not report its election results by county.

By phyllis Doyle Pepe on 07/10/2009 1:31 pm
deber B
Follow the money, phyllis.   Anyway you look at it, Obama’s stimulus plan has failed to create real jobs for the people who desperately need them in at least five states.   He took a golden opportunity to help Americans immediately and he passed it up to pay back his campaign donors.    He is not the "Hope and Change" man today that you voted for back in November.   Minus 8 in the polls means America is awake now.
By deber B on 07/10/2009 1:47 pm
phyllis Doyle Pepe
He is exactly who I voted for, deber, with eyes wide open. Did you read the Krugman piece that I posted? You spoiled the other thread on the CIA and the G8 Summit by introducing Michelle’s clothes and it got so ridiculous they took it down. Your distain for this president is apparent, but please do not lecture us in  all these supposed failings over and over, because, in the end you really don’t know much except what you read and you pick and choose what suits your agenda. You may counter that with, "well, you do the same" except some of us really don’t. Some of us get our information from all different sources  including listening to lectures and finding independent sources. All I’m asking is stop the angst, in other words, state your cases but refrain from the mudslinging. 
By phyllis Doyle Pepe on 07/10/2009 3:12 pm
deber B

If posting the "handbag" ruined a thread I’m sure that the blame doesn’t fall on me.  It was all over the news.  When you are attending your, uh, lectures and finding independent sources what you are listening to and reading are the opinions of other people.   I post opinions of people as well.   You really are way too funny, phyllis.   Reminds me of "my dog is better than your dog."  

I am reporting what I believe  to be the truth the same as you.   I don’t sling mud.   The democrats still have that title on this site.

If you don’t enjoy reading my posts, it really is quite simple.    Don’t read them.   I scroll by many posts.   That system works for me.        Now go back and tend to your flock.  : )

By deber B on 07/10/2009 3:28 pm