Posts Tagged ‘economy’

Reich Reviles Rotten Reaganomics Rehash

Posted: Friday, December 17, 2010 at 6:58 am
By: Cory Allen Heidelberger
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Senator Tim Johnson was on SDPB Dakota Midday Tuesday insisting that he had no choice but to vote for the $858 billion Stimulus II that the Republican leadership and President Obama worked out. Funny: Senator Tom Harkin from Iowa thought he had a choice. So did twelve other Senate Democrats, six Senate Republicans, and one Senate Indy-Socialist (roll call vote #276 here).

South Dakota’s last Democrat in Washington needs to read more Robert Reich. America’s best darn former Secretary of Labor critiques exactly this false “have no choice” excuse. Reich says we ought to have the courage to choose something other than a rehash of failed Reaganomics:

Supply siders are also fond of claiming that Ronald Reagan’s 1981 tax cuts caused the 1980s economic boom. There is no evidence to support this claim. In fact, that boom followed Reagan’s 1982 tax increase. The 1990s boom likewise was not the result of a tax cut; most of it followed Bill Clinton’s 1993 tax increase.

Nor did George W. Bush’s tax cuts trickle down. Between 2002 and 2007 the median wage actually dropped. And Bush’s record of job creation was pathetic relative to Bill Clinton’s, when taxes were higher. Under Clinton, America added 22 million net new jobs. Under Bush, barely 8 million [Robert Reich, “The New Tax Deal: Reaganomics Redux,” blog, 2010.12.16].

Holy cow: our gal Stephanie and my man Dennis both voted aye! Michele Bachmann and Anthony Weiner voted nay. We should have more votes with alignments like that.

Wow: two empirical examples of significant tax increases followed by better economic growth than we got after the Bush tax cuts… ineffective cuts that we are now extending.

I know, it’s all over but the shouting. But there are economic lessons we aren’t learning… and I intend to keep shouting them.

Our Future

Posted: Monday, December 13, 2010 at 12:40 am
By: Ken Blanchard
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StraussAll political action aims either at preservation or change.  Leo Strauss says something like that somewhere.  As usual, he is right.  I am tempted to think that all economic policy, whatever its pretensions, aims either taking wealth away from those who have it or making sure that those who have it keep it.  In most cases, it’s the latter.

Michael Barone has some essential reading at Real Clear Politics:

The template for the Obama Democrats’ policies, the New Deal of the 1930s, was not designed to stimulate economic growth, but to freeze in place a tolerable but not dynamic status quo.

The New Deal’s father, Franklin Roosevelt, believed that the era of economic growth was over, just as many contemporaries believed that technological progress was at an end (how far could you go beyond the radio and the refrigerator?). FDR, like his cousin Theodore, was an affluent heir who had contempt for men who built businesses and made money. They were “economic royalists” and “malefactors of great wealth” — sentiments echoed by Barack Obama last week.

This is right, and it points to the essential limitation of economic policy.  Political communities are composed of tribes, and tribes worry about who has what.  They do not think in terms of who makes what, or who will make what in the future.

Machiavelli notes that innovators have as enemies all the partisans of the existing regime.  They have as allies only dreamers and dreamers are not ordinarily prone to risk.  For this reason, it is probably neither necessary nor possible to have an economic policy that promotes growth.  The best that one can have is an economic policy that does not stand in the way of growth.  The U.S. has had that for most of its history.  Are we about to lose it?

Robert Samuelson is worried.

It is becoming clear that the Great Recession has left a deep and possibly lasting scar on the American psyche. From CEOs to ordinary families, we are a nation that is more cautious, more fearful and more risk-averse. This widespread and — so far — indestructible anxiety has hobbled the recovery and helps explain the slow pace of job creation. The economy’s revival depends in part on risk-taking, but risk-taking is in eclipse.

The American economy has long been a tremendously efficient engine of job creation and technological progress because it has allowed innovators to flourish and established firms to perish.  If you don’t believe me, ask someone who invested in Movie Gallery while you are searching your Netflix Instance Watch menu.  Or ask the IBM people who thought that the money in computers was in the hardware and not in Bill Gate’s operating systems.

I don’t think we are at the end of our run, but we might be.  A lot of what Samuelson worries about turns on temporal psychology and there isn’t a lot that Barack Obama or Congress can do about that.  But governments can put the screws on future economic growth in order to save or try to save the privileges of those who benefitted from yesterday’s regime.

The New York Daily News is worried about that.

The public pension time bomb that fiscal watchdogs and this page have warned about for years is now exploding – and ripping huge holes in government budgets across the state.

No municipality will sustain more damage than New York City, which next year faces a mind-boggling pension tab of $8.35 billion – a 19% increase in one year – at a time when Mayor Bloomberg and the City Council are forced to hack away at practically every other expenditure.

Public pensions are squeezing state governments from sea to shining sea.  Obama’s great stimulus plan didn’t much stimulate anything, but it did a lot to shield public workers from the recent recession.  The great peril we face right now is that government will clamp down on all the engines of economic growth in order to “to freeze in place a tolerable but not dynamic status quo.”  If that happens, we will really be what the Chinese think we are: a declining power.  I would also note that the status quo will become a lot less tolerable for a lot of people.

Some Biofuel Skepticism

Posted: Friday, December 10, 2010 at 11:50 pm
By: Ken Blanchard
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children-of-the-corn-revelationA number of intrepid readers took issue with last night’s post on bioethanol.  One question concerns the “energy balance” of ethanol production.  Producing a gallon of ethanol requires a input of energy.  If the output is greater than the input (a positive balance) then ethanol production adds to the total stock of available energy.  If the reverse (a negative balance), then bioethanol production reduces the stock of energy.

Here is one answer, from “Ethanol Production: Energy, Economic, and Environmental Losses”, by David Pimentel, Tad Patzek, and Gerald Cecil (

To produce a liter of 99.5% ethanol uses 43% more fossil energy than the energy produced as ethanol and costs $0.42/L($1.59/gal)…  The total energy input to produce 1L ethanol is 7,333 kcal (Table 2). However, 1 L ethanol has an energy value of only 5,130 kcal. Based on a net energy loss of 2,203 kcal ethanol produced, 43% more fossil energy is expended than is produced as ethanol.

If that is correct, bioethanol production is consuming, not supplementing, available energy supplies.  The authors acknowledge that there are contrary findings.

Shapouri (Shapouri et al. 2004) of the USDA is now reporting a net energy positive return of 67%, whereas in this chapter, we report a negative 43% deficit. In their earlier report, Shapouri et al. (2002) reported a net energy positive return of 34%. Why did ethanol production net return for the USDA nearly double in 2 yr, while corn yields in the U.S. declined 6% during that period (USDA 2002, 2003)? The Shapouri results need to be examined and explained.

Shapouri et al. (2004) omit several inputs. For instance, all the energy required to produce and repair farm machinery and the fermentation and distillation equipment is not included…

Shapouri et al. reported a net energy return of 67% after including the co-products, primarily dried distillers grain (DDG) used to feed cattle.  These co-products are not fuel!

Who is right?  Common sense sheds some light here.  One of the problems with government subsidies is that they make it a lot harder to evaluate the true costs and benefits of any subsidized activity.  What would happen if all government subsidies to all forms of energy production were ended immediately?  Coal, oil, natural gas, and hydroelectric power would continue to be produced.  The same is true, I suspect, of nuclear power.

By contrast, large scale wind and solar power generation would come to a grinding halt.  Would bioethanol continue to be produced?  It is pretty clear that the producers don’t think so.  That is what fuels the controversy.  The corn ethanol industry is tenuous enough with the government subsidies.  That would not be so if the energy balance were significantly positive.

Even if the energy balance were positive, that would not mean that ethanol production is a good idea just now, let alone that subsidies are in order.  Producing ethanol from corn means either diverting a substantial portion of the world’s corn crops to energy production, or significantly increasing corn production.  It probably means both.  The first necessarily increases the cost of corn and so raises world food prices.  The second results in an increase in carbon emissions, something we are supposed to be trying to avoid.

Ron Bailey has a nice summary of the issue on the Reason website.  Here is an abstract from a paper in Science to which Ron directs us.

Most prior studies have found that substituting biofuels for gasoline will reduce greenhouse gases because biofuels sequester carbon through the growth of the feedstock. These analyses have failed to count the carbon emissions that occur as farmers worldwide respond to higher prices and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels. By using a worldwide agricultural model to estimate emissions from land-use change, we found that corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years. Biofuels from switchgrass, if grown on U.S. corn lands, increase emissions by 50%. This result raises concerns about large biofuel mandates and highlights the value of using waste products.

Okay, so what about the ideal of energy independence?  I believe in that ideal like I believe in fairies, but has ethanol production reduced our consumption of foreign oil?  Here is a bit by Robert Bryce at the Manhattan Institute website:

Between 1999 and 2009, U.S. ethanol production increased seven-fold, to more than 700,000 barrels per day (bbl/d). During that period, however, oil imports increased by more than 800,000 bbl/d. (In addition, U.S. oil exports—yes, exports—more than doubled, to about 2 million bbl/d.[3]) Data from the U.S. Energy Information Administration show that oil imports closely track domestic oil consumption. Over the past decade, as oil demand grew, so did imports. When consumption fell, imports did as well. Ethanol production levels had no apparent effect on the volume of oil imports or on consumption.

I do not know whether, in the foreseeable future, biofuels might become a viable source of energy.  Fossil fuels represent millions of summers followed by millions of years of underground processing.  A corn crop represents one summer and all the processing is on our tab.  So I am doubtful, but I do not underestimate the power of human ingenuity.

Right now bioethanol looks like a bad gamble.  It doesn’t add significantly to the supply of energy, and probably subtracts from it.  It doesn’t make us less dependent on foreign oil.  It increases the cost of fuel and that doesn’t help the economy.  It raises the cost of food, and that doesn’t help people who eat food.  It’s bad for the environment.  What it does do is shift wealth toward some at the expense of others.  But hey, living in a corn producing state, I am all for ethanol subsidies.

Ethanol: Immortal & Immoral

Posted: Thursday, December 9, 2010 at 11:45 pm
By: Ken Blanchard
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Insane-Clown-Energy-DrinkIt looks like the President and the Lame Duck Democrats have cut a deal with Republicans.  The country can breathe a sigh of relief that taxes won’t go up across the board on January 1st.  Another sigh of relief is coming from the ethanol industry.  From the Washington Post:

The White House and key lawmakers cleared the way Thursday night for swift Senate action to avert a Jan. 1 spike in income taxes for nearly all Americans, agreeing to extend breaks for ethanol and other forms of alternative energy as part of the deal.

I don’t find a lot to cheer in this.  It is widely assumed that a significant tax increase would be another shock to an already weak economy.  That might well be true, but maybe it would have done more good for Congress to show that it was serious about getting our fiscal house in order.

As for extending the ethanol subsides, I’m all for it.  I live in South Dakota and work for the state.  We have a lot more ethanol plants than beach volleyball courts.  I figure what floats the state economy floats me, and I am worried about the sinking of fiscal real estate hereabouts.

Of course, ethanol subsidies make no sense on any other grounds.  Ethanol production doesn’t increase our “energy independence”, whatever that might mean.  It takes more energy to produce a gallon of ethanol than the gallon actually contains.  That extra energy isn’t coming from wind towers.  Over the next five years, these subsides will cost us over $25 billion dollars.

Ethanol production doesn’t yield any environmental benefit and certainly none at a reasonable cost.  From Forbes:

Australian academic Robert Niven found that ethanol gasoline lets out more harmful air toxins than regular gasoline. The Congressional Budget Office finds that taxpayers are shelling out $750 for every metric ton (2,205 pounds) of carbon kept out of our atmosphere. To put that in perspective, the carbon-offset company Terrapass values the reduction of 1,000 pounds of emissions at a mere $5.95.

When you add up the environmental costs of corn production, the equation looks much worse.  Virgin prairie has been plowed up to produce corn for fuel.  The machines that work the fields aren’t solar powered.  From Pajamas Media:

A gallon of ethanol emits less carbon dioxide (CO2) than a gallon of gasoline when combusted. However, CO2-emitting fossil fuels are used to make fertilizer, operate farm equipment, power ethanol distilleries, and transport the ethanol to market. In addition, when farmers plow grasslands and clear forests to expand corn acreage, or to grow food crops displaced elsewhere by energy crop production, they release carbon previously locked up in soils and trees. For several decades, such land use changes can generate more CO2 than is avoided by substituting ethanol for gasoline.

Ethanol production raises the price of gasoline and it raises the price of food.  Tariffs keep cheaper ethanol produced south of the border out of the U.S. market, which makes the system all the more expensive but is probably an act of Christian charity.  Diverting corn to ethanol production raises the price of tortillas which results in hungrier children.

But hey, as long as it brings money to the Dakotas and Barry’s own Illinois, why should I complain?  The issue has made odd bedfellows of conservatives and environmentalists, who have united in opposing the subsidies.  That’s amusing, since it was the green lobby that gave us ethanol in the first place.

I can’t help pointing out that subsidies for wind and solar power differ from the above only in so far as they currently do much less damage.  But they are no more economically or environmentally advantageous.

The ethanol regime is what you get when you base your energy on beautiful ideas like “renewable energy” or “green jobs,” and not on any rational estimate of the costs and benefits of energy technologies.

SD Cost of Living Exceeds US Average

Posted: Thursday, December 9, 2010 at 7:53 am
By: Cory Allen Heidelberger
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Here’s news to straighten your curls: South Dakota’s cost of living is higher than the national average.

Say what? The last time I ran numbers on cost of living and salaries, I found that in Quarter 1 of this year, South Dakota’s cost of living was 92.8% of the national average, the 13th lowest in the nation. When I checked my usual source, the Missouri Economic Research and Information Center (MERIC), I found South Dakota’s cost of living jumped in the third quarter to 101.25% of the national average. That ranks us 32nd in the nation.

Hold on—really? I’ve been following these cost-of-living figures for some time, and South Dakota’s has consistently floated around the 90% level. How did we suddenly, in just a couple quarters, boom up over 101%?

I emailed MERIC to find out if they could explain this strange stat. They replied (with admirable alacrity!) that Q2 saw “a huge increase in transportation, housing, and grocery costs” (dang—don’t tell me Sarah Palin was right!) and that Q3 saw a big surge in health care costs. MERIC explains that sometimes some cities participating in the C2ER/ACCRA cost-of-living survey misreport or don’t report for a certain period, while other experience some price volatility that mucks up the comparisons. MERIC says their own state of Missouri dropped out of its normal position in the top 10 for a couple quarters, then bounced back.

So what do you think, fellow South Dakota shoppers? Have we seen an unusual price spike in the last couple quarters that didn’t happen in other states? Or is this sudden 101.25% cost of living just an artifact of gimpy data?

Just in case these numbers are legit, permit me to run my favorite cost-of-living calculation: teacher pay purchasing power:

State Avg Teacher Pay (AY 2008-2009) % US Avg TP Rank Cost of Living Index (2010 Q3) COL Rank Teacher Purchasing Power
SD $35,070 64.56 51 101.25 32 63.77
ND $41,654 76.68 50 98.59 24 77.78
MN $51,938 95.62 20 103.4 34 92.47
IA $48,638 89.54 26 94.51 16 94.74
NE $44,957 82.76 42 90.78 6 91.17
WY $54,602 100.52 16 99.61 29 100.91
MT $44,426 81.79 46 99.43 28 82.26
US $54,319 100

Short form: by current cost of living data, public school teachers choosing to live and work in South Dakota will have less than 64% of the purchasing power than the national average. If those teachers leave South Dakota for any neighboring state they will make more money and be able to buy more with that money. Even in Minnesota, with the highest cost of living in the neighborhood, teachers would enjoy 45% more purchasing power than they do in South Dakota… at least by Q3 numbers.

The Jobs Report & Battle Royale

Posted: Saturday, December 4, 2010 at 12:38 am
By: Ken Blanchard
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A few weeks ago I finally watched Battle Royale, one of the few pieces of classic jhorror cinema that I hadn’t seen yet.  The plot is very Japanese.  As the movie opens you are told that the Japanese economy is in crisis and that school kids are in rebellion against the adults.  The Japanese state responds by passing the BR Act.  A ninth grade class is chosen at random and transported to an island.  Once there, each is given a sack contain weapons.  They are told that at the end of three days one of them will be allowed to leave the island alive, but only if all the others are dead.  If more than one is alive after three days, all of them will be killed.  A sadistic former teacher runs the show, broadcasting an hourly report of deaths.

The action turns on how fast or whether each student accepts the rules of the game.  Some begin killing immediately.  Others form coalitions which steadily decay into betrayal and murder.  The protagonists, you guessed it, are a couple who swear not to betray one another.

One thing that stuck with me was the description of the crisis that is responsible for this horrific scenario.  Unemployment, we are told, reaches fifteen percent.  That’s it.  And what does the youth rebellion consist in?  What about the violence against adults?  Well, a little.  But mostly we are told that the children stop coming to school.  In this film, playing hooky draws a death sentence.

The Japanese, apparently, have a very disturbing view of their youth and of their own attitude toward the young.  They also have a ridiculous notion of what constitutes a real crisis.  But therein is a tale.

This morning I read in the Aberdeen American News that the jobs report about to be issued would be “rosy”.   From McClatchy:

On Friday morning, when the Labor Department reports November employment numbers, they’re likely to show strong hiring for the second straight month.

Oops.  In fact the jobs report was terrible.  From the New York Times:

The United States added a total of just 39,000 jobs last month, down from an upwardly revised gain of 172,000 in October, the Labor Department reported on Friday. With local governments shedding jobs, the additions in the private sector were too small to reduce the ranks of the unemployed or even to keep pace with people entering the work force.

The unemployment rate, which is based on a separate survey of households, rose to 9.8 percent in November. It was the highest jobless rate since April and up from 9.6 percent in October.

Something is wrong.  We are used to an economy that cycles up and down.  Recessions are followed by recovery, and vice versa.  A few years when you can’t find a job are followed by years when you get to choose the best offer.  Just now, the recovery seems to be stalled.

It’s a little early yet, I think, to send a bunch of middle school boys and girls to an island with sacks of grenades.  But Battle Royale has something to teach us.  A 9.8% unemployment rate means that 90% of Americans who want a job have one.  My grandfather feared losing his farm and having to stand in a soup line to avoid starvation.  Most folks I know today fear not getting a raise next year or, shudder, having to take a pay cut.

Fear is relative, but a little perspective might be in order.  The economic dismay is general among developed nations.  The cause is not a mystery.  Governments have spent too much.  Too much wealth has been diverted from the investment in the productive economy to maintain high levels of consumption.  One way or another, that will be adjusted.

From Athens in Greece to Athens in Georgia, we all fear that something will be taken away.  Any attempt to balance the books brings howls of pain from all of those who enjoyed the imbalance.  If we don’t balance the books sooner, we are going to face much worse things later.  If you don’t believe me, watch Battle Royale.

Hearing only one side of the immigration debate

Posted: Friday, November 19, 2010 at 1:33 pm
By: Tim Gebhart
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Seems like when it comes to immigration the only news that’s fit to cover is bad news. Case in point: this week various local media ran stories about an Arizona sheriff talking about all the bad guys sneaking across the border. As far as I can tell, though, not one South Dakota media outlet mentioned an annual report released October 27 by the U.S. Department of Labor about employment-based immigration programs.

The report, which covers the period from October 1, 2008, to September 30, 2009, showed the impact of the economy on employment immigration. There was nearly a 40 percent drop in permanent resident, the so-called “green card,” certifications and an overall 35 percent decrease in temporary certifications, although those for temporary agricultural workers increased slightly. At least insofar as South Dakota is concerned, none of these foreign workers are harming the economy.

In the green card category, there were 14 jobs certified in the state with an average wage of $74,671. That’s nearly $30,000 higher than the Census Bureau’s last estimate for South Dakota’s median household income.

The Labor Department approved 1,146 positions in temporary “specialty” occupations. Those jobs paid an average of $56,784, some $10,000 higher than the median household income. Some 1,800 seasonal jobs were approved, paying an average hourly wage of $8.33. That’s more than $1.75 an hour higher than the minimum wage applicable during most of that time period. (Interestingly, the majority of the certifications for seasonal jobs were for fiberglass laminators.

And before someone complains that these jobs could have gone to American workers, the certification process requires the Department of Labor to determine there are no qualified and available U.S. workers and that the employment of the foreign workers will not have an adverse effect on wages and working conditions of U.S. workers.

But Americans don’t hear about this valuable contributions foreign nationals make to our state and the economy — only that there are criminals and terrorists coming into the country illegally.

Smoking Ban to Hurt Biz? First Data Available in December

Posted: Sunday, November 14, 2010 at 9:09 am
By: Cory Allen Heidelberger
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South Dakota’s smoking ban took effect Wednesday, expanding freedom for South Dakotans. My wife and I are already looking forward to smoke-free dinners at the Moonlite and other venues whose smoke previously would have sent us out the door without ordering.

The question remains: will the smoking ban hurt business? I still don’t think so, based on various anecdotal and empirical examples and my own reasoning, and the fact that opponents of the ban, like State Senator Russell Olson, resorted to desperately stupid arguments. The Federal Reserve Bank of St. Louis also agrees with me (another reason my cousin Aaron will want to “END THE FED!!“).

But we won’t have to guess. We’ll get our first bit of hard data next month, when the state Business Tax Division publishes the State Taxable Sales Comparison for November. Last month, statewide taxable sales in eating and drinking places were up 2.7%, $2.5 million, over October 2009—rather slow, given October taxable sales across all sectors were up 8.7% over October 2009. We’ll also be able to look beyond monthly snapshots and consider fiscal year comparisons. FY 2010 showed a measly 0.6% growth in taxable dining-and-drinking sales over FY2009, though that sector still outperformed the overall 1.5% decrease in taxable sales.
gain in taxable dining and drinking sales
gain in overall taxable sales
Table 1: Change in South Dakota taxable sales by fiscal year

If we’re really ambitious, we’ll even be able to look at data city by city and look at eating establishments and drinking establishments separately. (Hey, Department of Revenue: any chance you could start posting this data in quick and easy HTML tables or Excel spreadsheets instead of those big honking PDF files?)

And even if I’m wrong, even if the revenue reports for the bar and restaurant sector show a decline in business that we can trace to the smoking ban and not to more people staying home to enjoy homemade rhubarb wine from their organic gardens while they watch movies on Netflix on their expanding broadband connections, any revenue decline will have to offset more than the hundreds of millions of dollars in health care cost savings as more people get the hint and kick the cancer sticks.

We’ll also have to measure any revenue losses against some quantification of the freedom gained by more South Dakotans to relax and work in more places without smelling like butts.

Coming to terms with defeat, or not

Posted: Saturday, November 6, 2010 at 12:42 am
By: Ken Blanchard
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margaritavilleSome people say that there’s a woman to blame
but I know: it’s my own damn fault

Those who have just been shellacked in an election would do well to listen to Jimmy Buffet’s Margaretville a few times, while searching for their lost shaker of salt.  When Republicans get shellacked they inevitably whine about the biased press.  That’s a little bit harder now that Fox News dominates Cable, but when did reason ever persuade the wounded heart?

In 2006 and 2008 the Republicans got shellacked nationally.  It didn’t happen because the other side cheated or because the press was biased or because the moon was in Virgo.  They got beat because they lost the confidence of the electorate. In a Republic that’s getting beat fair and square.

In South Dakota this year the Democrats got shellacked from top to bottom.  My esteemed Keloland Colleague and NSU Colleague Emeritus, David Newquist, is ready with excuses.  He blames the “the socio-economic factors affecting the Democratic Party in South Dakota.”  He doesn’t spell out those factors, but it doesn’t much matter.  In politics, as in golf, you have to play the ball where it lies.

I think it is a scandal that the Democrats did not run a candidate against John Thune.  David again is ready with excuses.  He seems to think that Senator Thune will do such terrible things to an opponent that no human being could dare to challenge him.  I think that that is utter nonsense.  Republicans Rand Paul in Kentucky and Daniel Webster in Florida bore up under much worse abuse than any candidate has ever dished out in South Dakota.  Instead of turning pale and withdrawing, they fought and won.  I cannot believe that Democrats in South Dakota are such cowards as David imagines them to be.  I think that the uncontested Senate race, the first in the state’s history, was a deliberate strategy.

Nationally, Democrats are looking for their own excuses.  One of the most common ones is that President Obama let his foes define him.  Here is E.J. Dionne:

President Obama allowed Republicans to define the terms of the nation’s political argument for the past two years and permitted them to draw battle lines the way they wanted. Neither he nor his party can let that happen again.

That’s just another version of the standard excuse used by both sides after bad news: the voters didn’t reject us or our policies!  We just didn’t explain ourselves properly.

Nonsense on stilts.  When President Obama put forth health care reform as his highest priority (among his other highest priorities), he very clearly defined the terms of the argument.  Health care reform would “bend the cost curve downward,” i.e, health care reform would save the nation money spent on medicine.  The problem was that no one believed it because it obviously wasn’t true.  Even if you believe the CBO estimates, the best you are going to get out of the health care bill is a wash.  But the CBO estimates always include caveats indicating that the savings in the bill depend on Congress doing things that it has always promised to do but has never actually managed to do.

Here’s why the Democrats took a bath in this election: First, the economy is in dreadful shape.  The President today praised the unexpected growth in private sector jobs.  But that growth is not enough to make up for population growth, let alone enough to depress the unemployment numbers.  Voters are hurting.

But there are two kinds of pain.  One is the kind you have when you break your ankle.  It really smarts, but you aren’t too worried because you figure you are going to get better soon enough.  The other is the kind of pain that makes you think that something much worse is happening, something that you won’t get over.  Pain plus existential fear is a lot worse than just pain.

The trillion dollars a year deficits we are running really worry a lot of us.  They make us wonder whether the economic pain we are suffering isn’t more like the persistent cough or the ache in the gut that won’t go away.  Maybe the whole system is sick.  Does the President have any plan to put us back on the road to fiscal health?  That is one thing that he didn’t define very well.

The deficits are the second thing that weighed down the Democrats.  The third thing was the health care bill.  As the economy stalled and the deficits mounted, the Democrats spent all their energies not on the present crisis but on the thing that they have wanted for decades.  The people didn’t want it.  The voters expressed their dismay not only in opinion polls but in actual elections, but the Democrats in Congress pushed ahead anyway.  That was the third thing.

The economy, the deficits, and the health care bill, in that order, did the Democrats in.  They ought to come to terms with that.  It might not get better.

Obamanomics Digest

Posted: Wednesday, October 6, 2010 at 10:52 am
By: RadioActive Chief
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A number of items all of which are indicative of the underachievement characterizing Obamanomics:

Jobs, jobs, jobs: missing in action.
Private sector sheds 39,000 jobs in September

Private employers unexpectedly cut 39,000 jobs in September after an upwardly revised gain of 10,000 in August, a report by a payrolls processor showed on Wednesday.

That’s OK. Consumer spending will keep things going…right? Ooops!
Middle Class Slams Brakes on Spending

Middle-class Americans made their deepest spending cuts in more than two decades, slashing spending on such discretionary items as restaurant meals and alcohol during the recession.

Households in the middle fifth of the population sliced their average annual spending to $41,150 in 2009, the Labor Department said Tuesday in its annual spending breakdown. That was down 3.1% from 2007 and 3.5% from 2008, the steepest one-year drop since records began in 1984. The drop came even as those households’ after-tax income remained relatively stable over the two years, at an average $45,199.

Looks like folks thing the prudent thing to do given current conditions is to hold onto more cash for…who knows what the B.O. administration will do next…but that’s OK, the poor are doing better now under Obamanomics. Aren’t they?

Meanwhile, the poorest Americans spent more as prices for necessities like food and rental housing climbed. Spending rose 5.6% from 2007 to 2009 for the poorest fifth of consumers, the most of any other income group, despite a 5.5% drop in after-tax income to an average $9,956 a household. In some cases, elderly people and others with low incomes dipped into savings or relied on credit to get by.

“What you’re looking at here is people at the bottom trying to hang on,” said Timothy Smeeding, public affairs professor and director of the Institute for Research on Poverty at the University of Wisconsin in Madison. “You can’t go below a certain level.”

Expenses up, income down. How’d that “Summer of Recovery” thing turn out? Apparently not so hot, which leads to…:

Food Stamp Recipients at Record 41.8 Million Americans in July, U.S. Says

The number of Americans receiving food stamps rose to a record 41.8 million in July as the jobless rate hovered near a 27-year high, the government said.

Recipients of Supplemental Nutrition Assistance Program subsidies for food purchases jumped 18 percent from a year earlier and increased 1.4 percent from June, the U.S. Department of Agriculture said today in a statement on its website. Participation has set records for 20 straight months.

Unemployment in September may have reached 9.7 percent, according to a Bloomberg News survey of analysts in advance of the release of last month’s rate on Oct. 8. Unemployment was 9.6 percent in July, near levels last seen in 1983.

A bit of a time lag to compile the stats, but the picture is unmistakable.
But hey, at least the TARP and other bailouts have the big financial guys looking up now…or not.

Goldman Sachs Says U.S. Economy May Be `Fairly Bad’

Goldman Sachs Group Inc. said the U.S. economy is likely to be “fairly bad” or “very bad” over the next six to nine months.

“We see two main scenarios,” analysts led by Jan Hatzius, the New York-based chief U.S. economist at the company, wrote in an e-mail to clients. “A fairly bad one in which the economy grows at a 1 1/2 percent to 2 percent rate through the middle of next year and the unemployment rate rises moderately to 10 percent, and a very bad one in which the economy returns to an outright recession.”

Doesn’t look like the financial capital of the world will lead us out of the economic mire, either:

New Yorkers’ Income Falls for 1st Time in 70 Years+

The recession put a 3.1 percent dent in the personal incomes of New York state residents, who endured their first full-year decline in more than 70 years, according to a report released Tuesday.

Paychecks or net earnings tumbled 5.4 percent, while dividends, interest and rent slid 8.4 percent, to a grand total of nearly $908 billion, the state comptroller’s report said.

Not only did New Yorkers’ personal incomes fall “almost twice” as much as they did in the nation as a whole, but they have yet to recover to pre-recession levels, Comptroller Thomas DiNapoli said.

The drop occurred even though the job-destroying recession was milder in New York than in the rest of the country.

Hmmm 70 years. That goes back to 1940, just before WW-II finally bailed the country out of the Great Depression.

Meanwhile, it’s 27 days until election day….