Burning Down the House

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The seemingly irreconcilable conflict over the debt ceiling has the potential to burn down the nation's economic house — and, with it, the political house as well.

Let me backtrack a bit.

There just wasn't anything good about last week's jobs report. It was bad news across the board. For all incumbents. No matter on which side of the fence you may stand.

It's probably worse for Democrats right now since they hold the White House and the Senate. Republicans hold only the House, but there is no reason for them to feel smug, either. And that certainly doesn't mean that House Democrats or Senate Republicans are immune (although a case could be made for Senate Republicans).

No incumbent can assume that he/she is safe because the incumbents are responsible for making the system work — and it ain't working.

Unemployment went up for the third straight month. Many economists had been anticipating at least a modest rebound for the American economy, with fuel prices easing and all that.

But I guess I should have known something wicked this way came because gas prices around here have been going up lately. (I don't know what they've been like where you live, but I paid about $3.38/gallon a couple of weeks ago at the station down the street and today, the price at that very same station is $3.59/gallon.)

And then came what I have often heard described as a bucket of cold water on the recovery — the unemployment rate is the highest it has been since last September.

My friends who support Barack Obama don't like to hear this because it contradicts their cozy view of the world — but his Republican opponent in 2012 is going to be much less important than his record in office — and that record is not too great right now.

Oh, they like to remind me that George W. Bush was president when the economy went south, and they like to recite Obama's legislative achievements, but the bottom line is that fingerpointing and a list doesn't put food on the table or keep a roof over your head.

They like to tsk, tsk among themselves and shake their heads disapprovingly over the possibility of facing an extremist like Michele Bachmann or Newt Gingrich or Sarah Palin in the general election because they think the choice is obvious if that comes to pass. In fact, as far as they are concerned, it isn't a choice at all — so they keep talking about those rivals because they are certain that those candidates are not electable.

And they'd like to see one of them win the GOP nomination. Then, as they see it, the election will become a slam dunk for Obama.

But it isn't going to be that simple.

Oh, I expect the Republicans to nominate someone who is more conservative than Obama. That's a given. The Republicans are the conservatives in our political universe, the Democrats are the liberals. And, in today's Democrat Party, anyone to the right of Nancy Pelosi is considered suspect.

It's no better on the Republican side, where anyone to the left of John Boehner tends to be regarded as a RINO.

That leaves an incredibly large bloc of politically homeless Americans in the middle who are being stretched too thin by two polarized parties, and I think more Americans may well be receptive to the idea of a third party or an independent candidate than they have been for a couple of decades.

Unless an insurgent candidate pops up to challenge Obama for the nomination, we already know who will be nominated by the Democrats. I doubt that the Republicans will nominate an extremist, but, contrary to all the discussions I hear, I also doubt that it will matter.

The dynamics of a race that features an incumbent are entirely different from the dynamics of a race that has no incumbent on the ballot. Obama won a non–incumbent race in 2008. Now, he must win a different kind of race. Historically, the rules for such a race are crystal clear.

If the incumbent is meeting or exceeding expectations, like Ronald Reagan in 1984 or Bill Clinton in 1996, he will win, possibly in a landslide. If not (see the gentlemen who were replaced by Reagan and Clinton four years earlier — when many disaffected Americans opted for an independent candidate rather than either of the major–party nominees), he will be defeated, again possibly in a landslide.

What will matter is what conditions are like when the voters go to the polls — and we can't know, in July 2011, what those conditions will be in November 2012.

No, sir, voters are not fortune tellers, and they can be fickle. What they like today they may very well dislike tomorrow — and vice versa — but they do have an idea which way the wind is blowing right now — and it isn't at their backs.

Relentlessly high unemployment has dragged consumer confidence to its lowest level in three years, writes Vicki Needham in The Hill — and who knows where consumer confidence will be on Election Day?

I do know that the electorate has been impatient lately. How could the incumbents possibly have missed that fact? In House elections, where the volatility has been more pronounced, one party has taken at least 20 seats from the other in the last three elections.

Is that significant? You tell me. Prior to 2006, it was extremely rare for either party to take as many as 10 seats from the other in a single election. If a double–digit movement did occur, it was considered a shift of seismic proportions. In the last three elections, more than 100 House seats have flipped from one party to the other.

Here's something else: The first of July has come and gone with no one, to my knowledge, observing that it was the second anniversary of the date when the recession was said to have ended.

Two years of "recovery" have brought zero net movement in the unemployment rate — yet Obama's top political adviser is deep in denial, insisting that Americans won't care about the jobless rate when they go to the polls.

Nonsense. It's the only issue many voters do care about.

For What It's Worth

This morning's thought is little more than a rumination, I suppose. As Scrooge told Marley's Ghost in "A Christmas Carol," it "may be an undigested bit of beef, a blot of mustard, a crumb of cheese, a fragment of an underdone potato."

If that is so, perhaps I should be able to dismiss it as easily as Scrooge hoped to dispatch Marley's Ghost by saying, "There's more of gravy than of grave about you, whatever you are!"

But, as Scrooge learned, that is not so easily done. It has become no easier in the 165 years since Dickens' holiday tale was first published.

Whatever its source, this thought has been on my mind today. And it will not rest until I address it.

When it was announced yesterday that unemployment had gone over 10% for the first time in more than 26½ years, it re–ignited the now familiar finger pointing from both sides. The Democrats continued their descent into denial, chanting the litany, "It was Bush's fault!" Meanwhile, on the other side of the aisle, the Republicans burst into a spirited rendition of their patented lockstep dance, the "The GOP One–Step." Sort of a circular firing squad.

Well, as long as we're assigning blame — and there is plenty to go around — it's a good idea to heed the musical advice of the late Michael Jackson and look at the man in the mirror. I know an individual doesn't have any clout, but this is a nation of more than 300 million individuals. How many of those are adults?

It is true that corporate greed and bankers' excesses played large roles in the economic implosion, and it is true that politicians of both stripes enabled them through legislation (or the absence of it), but many individuals were willing participants as well. They heard the admittedly self–serving sales pitch from politicians encouraging them to spend their money and juice up the economy long before September 11 (after which, urging people to travel and buy expensive luxury items was packaged as a patriotic act), and they lived beyond their means.

At first, with all that fuel being poured into it, the economic engine hummed merrily along. But the engine grew dependent on that constantly increasing fuel source, and it began to sputter when some people reached the limit of their spending potential. It had to make a downward adjustment to compensate. If you have ever gone on a diet, you know how painful that kind of adjustment can be.

Have you ever known someone who achieved an astonishing weight loss — only to gain it all back and 30 additional pounds as well? That seems to have been the case with the American economy in the last 30 or 40 years.

Take, for example, the subject of automobile fuel efficiency. As long as I can remember, there have been heated discussions about making all vehicles more efficient whenever something has caused a sharp spike in gas prices, and sales of small cars have surged. But, when those gas prices have gone back down, as they always have (although seldom, if ever, to the level that existed before the spike), those concerns have gone away, too, as have many of the small, fuel–efficient vehicles that were briefly popular. Taking their places were cars and trucks (and, in recent years, SUVs) that were bigger and gaudier and more wasteful than those vehicles that preceded them.

Ultimately, the economic engine could not be sustained. And now, as everyone tries to dig out from under this pile of rubble, there are TV commercials extolling the virtues of "getting back to basics." They're still telling you to spend your money — this time on things that are important but not always necessary.

Well, I suppose that's an improvement from hawking things which were neither important nor necessary.

It now appears that this will not be, as many had feared, a second Great Depression. Perhaps a Great Recession. Barack Obama and the Democrats are eager to take credit for avoiding a catastrophe, but educated economists never seem to agree on anything and, since their opinions are the ones that matter on economic issues, the jury is still out on whether the Democrats' actions accelerated or impeded a recovery.

For that matter, there is still plenty of debate over whether we actually are in recovery mode. It can't be a true recovery, some argue convincingly, until the economy stops losing jobs.

But, if things ever get back to "normal" — whatever that may mean — the adults of today need to take from this experience (and they need to instill in the next generation) a commitment to thrift.

Yes, the economy needs people to spend. That's the juice that keeps it going. But our parents and grandparents learned some important survival lessons during the Depression that weren't handed down to most of today's adults.

And one of the most important was saving for that rainy day.

In recent decades, personal savings declined rapidly. That needs to change. Recovering from a recession does not have to mean snapping up the first shiny bauble one sees.

There have been many technological advances in my lifetime, and each one seems designed to prove that no one can predict the future.

But you can prepare for it.

Riding the Storm Out

When I was a teenager, there was a song by a popular band of the time that was titled, "Riding the Storm Out."

It might be a pretty good anthem for those who have been hammered by the current recession.

I know the millions of unemployed Americans are yearning for a time when, as Louis Uchitelle writes in the New York Times, help will be wanted by employers again.

"Recessions have their milestones," Uchitelle writes. "There is the start, of course, in this case December 2007; the worst months, the winter and spring of this year; the gradual return to economic expansion, late this year maybe; and, finally, adding jobs."

The improvement in the employment picture typically occurs at the end of a recession — and, given the fact that this recession is deeper than any that most people living today have witnessed, that is going to take awhile.

And even when employers start hiring again, hiring activity is apt to be "spotty and cautious."

That part, I suppose, should be obvious, even if it is an unpleasant truth that most unemployed Americans don't want to think about.

"Most Americans don't consider a recession really over until work is once again plentiful, and the unemployment rate — which is now at 9.5% — finally starts going down," Uchitelle writes. "Ask economists when that will occur this time and they hesitate. No sooner than next summer, nearly all of them say. And that's a guess, verging on wishful thinking."

Mark Zandi, chief economist at Moody's Economy.com, observes that it will take time for manufacturing and construction to stop losing jobs, and it will take time for businesses to regain enough confidence to hire employees.

So the outlook is for a "jobless recovery," Uchitelle writes, comparing it to the last two recessions. But this one is worse because, instead of job losses in the tens of thousands each month, we have witnessed an economy that has been hemorrhaging jobs in the hundreds of thousands every month.

To move things along, Uchitelle suggests another stimulus package may be necessary. But I get the sense that there isn't much of an appetite on Capitol Hill for more debt (Uchitelle suggests a stimulus package with a price tag approaching $1 trillion). The Democrats may be able to muster enough support in the House, but it's going to be another matter to get the necessary 60 votes in the Senate, even with the recent addition of Al Franken and the defection of former Republican Arlen Specter.

But what choice do lawmakers have? More than a quarter of the states already have unemployment rates in double digits, and more are likely to join them in the months ahead. The Obama administration and the Democrats in Congress were warned by economists like Paul Krugman that the first stimulus package was too small, but they made concessions and compromises in a misguided — and unsuccessful — attempt to achieve bipartisanship.

Bipartisanship must not be a concern this time. The Democrats have the numbers in Congress. They do not need to ask the Republicans for permission. They must act — boldly and swiftly — for the good of the people who sent them to Washington.

To push through another stimulus package, at the same time that he is pressing for health care reform, Obama is going to have to demonstrate whatever skills of political persuasion he possesses.

He's going to have to use whatever "political capital" he has left. If he does not, his party faces a huge setback at the polls next year.

That is the reality.

It is not a pleasant prospect, but it is the only way the Democrats will be able to ride out this particular storm.

Economic Forecasts

In what may be greeted in many quarters as good news, the National Association for Business Economics Outlook reports that indicators suggest the end of the recession may be in sight, according to Julianne Pepitone at CNNMoney.com.

The news will continue to be mixed, the NABE says. The panel anticipates a rebound in economic growth in the second half of 2009, but it still expects to see a decline in economic activity for the second quarter. As far as the short term is concerned, that really isn't much of a surprise. We've been seeing a decline in gross domestic product for months now, but recent months have suggested that the decline is leveling off.

But any gains that may come in the remaining seven months of this year are not likely to offset the losses we've seen. That, by the way, is my own interpretation, not the NABE's — and it's based primarily on the 6% drop in GDP that we witnessed in January.

Employment will lag behind, as it typically does during a recovery, and will show signs of turning up by the early months of next year, says NABE president Chris Varvares. The panelists predict that, nationally, unemployment will level off before it gets into double digits, with the rate dropping to 9.3% by the end of 2010, which is higher than the current rate of 8.9%. Presumably, it will take longer in some states than others.

And, as Pepitone writes in her summary of the NABE report, "Almost three out of four survey respondents expect the recession will end by the third quarter of 2009."

Since we're a little more than a month away from the start of the third quarter, that's good news, isn't it? Well, it seems to be — until you take into account what the rest of the respondents say. Granted, they are in the minority. But the majority opinion is not always right.

Are the remaining economists hedging their bets? That's hard to say. But Pepitone points out that 19% of the economists who were surveyed by the NABE say recovery won't begin until the fourth quarter and 7% believe it will begin in 2010. So, clearly, there are skeptics.

Personally, I'm doing what I can, which isn't much in the grand scheme of things. I'm trying to remain patient. But I'm not a trained economist. I've tried to understand the concepts that have been discussed, but it all comes back to my personal situation.

I didn't create the conditions that led to this recession. I didn't profit from the culture of greed that so many people say brought the economy to its knees.

I can only hope that things get better soon. For me, things will be better when I have a job.

Until then, it's mostly white noise to me.

The Bottom Line

I seem to be spending a lot of time at CNNMoney.com these days — which might not be a good thing for my morale, since the economic news hasn't been good.

Of course, for that matter, when was the last time the economic news was good?

This evening, Jeanne Sahadi, senior writer for CNNMoney.com, is reporting that the Congressional Budget Office has calculated (at the request of House Republicans) that "[t]he long-term cost of the $825 billion economic recovery package before Congress could rise to $1.2 trillion over 10 years."

For most of us, a figure that rises into the trillions is simply beyond comprehension.

Conservative Michelle Malkin calls it "stimulus you can't afford."

Well, if anyone has an alternative to the package that's being proposed, I'd like to hear it. So would a lot of other people, I imagine.

Realistically, what choice do we have?

That figure is the cost of the stimulus plan plus interest. I'm no economist, and I'll admit that it's not a pleasant situation, but I have a simple question. What's the cost of not doing anything?

Not just in terms of dollars but in terms of the impact on people's lives.

It seems to me that, in my history studies, I learned that Herbert Hoover and the Republicans essentially did nothing because they believed the economy would right itself and they didn't want to interfere.

So things got worse. And, in 1933, Nero — I mean, Hoover — turned over an economy to Franklin D. Roosevelt that was already mired in the early years of the Great Depression. It took the rest of that decade — and the outbreak of World War II — to bring the nation out of the depths of economic despair.

If, when next month's new jobless claims are calculated, we find out that the economy is continuing its recent trend and sheds another half million jobs, the number of people who have lost their jobs in the last year will exceed 3 million. And, without an economic stimulus package, how many more will lose their jobs before things finally start to turn around?

I realize that $1.2 trillion is a lot of money — but it seems to me that the Bush administration tried to do a lot of things on the cheap. The Bush administration assured Americans all the while that the war in Iraq could be won quickly and that it would mostly be paid for by the revenue from the oil fields in that country. Bush even made a dramatic landing on the USS Abraham Lincoln and made a speech to the sailors beneath a banner reading "Mission Accomplished" nearly six years ago.

It was even suggested that the oil revenue would generate a surplus for the American economy. The Iraqi people would throw flowers at our feet, we were told.

Instead, what do we have? Was the mission really accomplished? Did we get that surplus? Were flowers thrown at our feet?

No. As a matter of fact, we have, as my friend Kyle observes in his therapy malaria blog, a war that has consumed nearly $600 trillion. "Where does that money go?" asks Kyle. "To contractors with no oversight on whether they deliver or not, weapons manufacturers, constant construction of places we destroyed, and corporate executives of the above."

And, during Bush's last visit to Iraq, instead of having flowers thrown at his feet, a journalist threw shoes at his head.

The issue before us today is what can be done to hasten the time when the recovery is under way, when those who are unemployed can get jobs again, when those who are facing the loss of their homes can feel secure under their own roofs again.

If there are elements of the plan that should be scrapped and some money can be saved, by all means, let's hear a reasonable explanation — not a kneejerk reaction. Congress needs to be involved in this from the start. It needs to fulfill its constitutional duty — not march in mindless lockstep behind the president, as it did for so much of the Bush administration.

Time is certainly of the essence, but both Democrats and Republicans need to study the proposal and suggest logical changes if they have them to suggest. The taxpayers have paid for enough pork. There have been enough bridges to nowhere.

Let's not get mired in partisan debate. Let's remember that we're all on the same side, and let's have constructive discussions with one goal in mind — to end the recession.

That's the real bottom line.

Mounting Pressure

A mere week ago, Barack Obama took the oath of office and became the 44th president.

It was unrealistic for anyone to expect immediate change as a result — although he did take several steps in his first few days that were "logical," as the therapy malaria blog observed recently.

Nevertheless, for the unemployed or for those who have lost their homes, change can't come soon enough. The pressure continues to build on the jobless and the homeless. Even those who still have their jobs or still have their homes can feel a certain amount of pressure.

The wolf is at the door.

When he was running for president in 1980, Ronald Reagan liked to say that "Depression is when you're out of work. A recession is when your neighbor's out of work. Recovery is when Carter's out of work." It was a nice play on words that supported Reagan's political philosophy at the time.

Reagan, like Obama, combined his personal popularity with the unpopularity of his opponent and his opponent's party and rode the wave to the White House, where he continued to enjoy residual popularity for awhile. Eventually, by the time he left office and certainly by the time of his death in 2004, he was regarded by most historians as a successful president, but in his first few years in office, his popularity began to wane as those who struggled in the recession of that time saw no change in their own condition.

Before he had been in office for a full year, Reagan's approval rating dipped below 50% and it remained there for the next two years, which included the period surrounding the midterm elections of 1982 (when Reagan famously urged voters to "Stay the course"). The Republicans managed to gain a Senate seat but lost more than two dozen House seats in that midterm election.

Twenty-eight years later, Obama showed a similar gift with words when he told his listeners, following his (at the time) surprising loss in the New Hampshire primary, "We have been told we cannot do this by a chorus of cynics who will only grow louder and more dissonant in the weeks to come."

The primary, he said, was a "reality check." He and his campaign, Obama asserted, had been "warned against offering the people of this nation false hope. But in the unlikely story that is America, there has never been anything false about hope." He went on to rally the faithful with his now famous slogan, "Yes, we can."

Obama made a similar point while telling a story about a stop he made at a diner where he had been told that tasty pies were available. While he was there, he said, the employees told him they wanted to get a picture of him to tease the owner because the owner was a diehard Republican.

When the owner came out with the pies, Obama said to him, "Sir, I understand that you are a diehard Republican."

The owner said, "That's right."

Obama said, "How's business?"

The owner said, "Not so good. My customers, they can't afford to eat out anymore."

Obama said, "Who's been in charge of the economy for the last eight years?"

The owner said, "Republicans."

Obama said, "You know, if you kept on hitting your head against a wall over and over again and it started to hurt, at some point would you stop hitting your head against the wall?"

Those are the words that one can say from the outside, where one does not carry the responsibilities of the office. Now the job is his, and the "chorus of cynics" likely will become deafening.

Only yesterday, seven companies announced layoffs that will put more than 70,000 people out of work, bringing the total for the first month of 2009 to over 200,000 — and when new jobless claims are announced next month, the news is likely to be worse. Of course, Obama hasn't been president for the whole month. But that's a technicality for the unemployed.

Obama's critics on the right are feeling compelled to defend and assert themselves. Conservative radio talk show host Rush Limbaugh said Obama was "frightened of me" after coming under fire for saying that he wanted the new administration to fail.

"My attitude is that, if the economy's good for folks from the bottom up, it's gonna be good for everybody," Obama said during the general election campaign.

Sounds a lot like the "rising tide lifts all boats" rhetoric that was used to support Reagan's supply-side economics plan in the 1980s — which is also known as the "trickle-down theory."

Back in the 1980s, things didn't seem to "trickle down" fast enough — if they trickled down at all.

Jesse Jackson, who mounted two unsuccessful campaigns for the Democratic nomination in the 1980s, criticized that rhetoric in his speech to the Democratic convention in 1984. "A rising tide doesn't lift all boats," he said. For the boats stuck at the bottom, in the mud and the muck, he said, there was what the government blithely called a "misery index" that could calculate how much of a struggle it was to pay the landlord or even put food on the table.

Ask an economist what the "bottom line" is, and you'll likely get an answer with a lot of numbers, but you won't see the human faces behind it.

Those faces are there, but they're strained.

The wolf is at the door.

Goodbye, Dubya

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George W. Bush says he isn't sure how he'll feel a week from today, when he gets up in the morning and is no longer president of the United States.

But three out of four people apparently will be relieved when his eight-year presidency comes to an end.

I don't know if Barack Obama has the answers. But I'm glad the country will be going in a different direction.

I don't know if, as some have suggested, the "worst" of the recession is behind us. But if the worst is behind us, what remains appears to be bad enough.

I don't know if the recovery will begin in 2009 or if that's merely wishful thinking.

What I do know is that this country has been taking a self-destructive approach and needs to shift gears.

Retail sales during the holidays were worse than expected.

Like my fellow Americans, I hope for the best for the new administration. And I hope Obama truly will be open to points of view that differ from his own.

If an idea has merit, it shouldn't matter whether it comes from the left or the right.

What's important is results.

P.S. Bush has asked for 10-15 minutes of airtime on the major TV networks to give a farewell address to the nation tomorrow night. As of this writing, there has been no announcement regarding if — or when — he will be accommodated.