A Topic Left Alone

Gen. Stanley McChrystal stole the headlines today because of insanely stupid remarks by himself and his staff in front of a reporter from, of all places, Rolling Stone. Congratulations Joe Barton, your news cycle was exactly 5 days long. Anyways, more things happened than comments that should not have been made by a General in charge of a war that, let’s face it, might not ever be won in the traditional sense of winning. McChrystal is out, Petraeus is in, and the War in Afghanistan goes on.

This situation, even though it is not the best news story for the White House, does draw attention away from one of the major story lines of the Obama Administration- the economy. This is what the major economic news has been over the past 36 hours since the McChrystal story broke…

- There will be no budget this year

- There will be no discussion about the long term budget objective of the US until December (this means a VAT is coming)

- -New Home Sales dropped 33% in May

- The Canadian Banking System is the envy of the world and Canada has a more stable economy that the US has

- President Obama is considering price controls for health care

- Chancellor Angela Merkel of Germany has told Obama that cutting the deficit will help growth, not stunt it

- According the Federal Reserve, non financial companies have stock piled $1.84 Trillion in cash and liquid assets

I can go on and on, but the problem is that almost no one is talking about this news, especially the top two stories listed, because at the end of the day- the economy is just not sexy to talk about when we have a General resigning and an oil spill that is destroying the gulf coast. However, next week, specifically next Friday, we get a new jobs report (I bet continue to see almost no private job growth because of that last bullet point, which I will tackle soon) and that means for one hour we get to talk about the failure of the stimulus once again.

This could easily develop into a book- the mishandling of the economy by the Obama Administration, but I think the most telling point about the economic failures of the regime comes from a member of his economic team- his Chair of the Council of Economic Advisors Christina Romer. This is the same Christina Romer that wrote a paper 6 months before he appointment to the Administration that cutting taxes is a great way to stimulate growth…Romer and her husband estimate the GDP multiplier from 1 dollar of tax cuts to be 3 while the models the Obama Administration ran said that the GDP multiplier for taxes is .99 and the multiplier for government spending is 1.54 (Want the in depth to this from a brilliant economist who gives a much deeper look into the issue?… http://nationalaffairs.com/publications/detail/crisis-economics)

My question is- why isn’t the administration listening to her? It is clear the stimulus, which was supposed to keep unemployment at 8% or lower (their models also indicated that if the stimulus was not passed unemployment might reach 9%…gasp!) is not working. It is also clear that they should recheck their models and maybe get some more opinions on how to fight this recession. Are they? Nope, they claim their models are correct and that we just need to spend more of the government’s income. Did I say Government Income? I meant money they will take from the taxpayers and redistribute your money the way Congress sees fit…without your say. Remember, the Government does not create wealth, it only finds ways to spread it around.

Of course the answer is simple…she disregarded her own findings to write the Obama plan for recovery… http://otrans.3cdn.net/ee40602f9a7d8172b8_ozm6bt5oi.pdf

So which is it Romer…is your paper wrong, or are you giving in to political pressure to push a stimulus that is costing the American people jobs while allowing the Administration to push for higher taxes? I think it is time for some answers on this contradiction. Maybe the Obama Administration thinks the multiplier for each dollar of their stimulus is greater than 3? I would like to know what is exactingly going on while the private sector continues to flail in the wind.

Oh boy I cannot wait for the fight on the VAT.