Monday, April 13, 2009

Poll Arising Obama

Greg Sargent analyzes a new Gallup poll and comes away with some strong evidence that Obama is well within the mainstream.
So 68% of Independents — more than two thirds — have confidence in Obama to do the right thing on the economy. That’s only three points less than the 71% overall who feel this way. Meanwhile, the same can be said of only 38% of Republicans — thirty points less than the percentage of independents who feel this way.

Two points on this. First, it illustrates a trend we’ve been seeing since 2008, and even 2006: A merging of the attitudes of independents and Democrats. And second, it illustrates that the American people’s starkly polarized attitude towards Obama — something that was a big topic last week — continues to be driven largely by increasing Republican isolation.

It's that last point that is absolutely vital. It would be one thing if Obama was clearly losing independent voters or less than 50% of independents believed in him. But this poll clearly shows that it is the Republicans who are out of touch with America and who it believes it can fix the economy.

America has rejected the Republican party on this issue.

Worse Than Worst Case

Nouriel Roubini argues that the bank stress tests are pointless for numerical reasons, not political ones. He reveals that the worst-case scenario being used to test banks has already been surpassed by good old reality. (emphasis mine)
The spin machine about the banks’ stress test is already in full motion; some banking regulators have already leaked to the New York Times the spin that all 19 banks who are subject to the stress test will pass it, i.e. none of them will fail it.

But if you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.

The FDIC and Treasury used assumptions for the macro variables in 2009 and 2010 both the baseline and more adverse scenarios that are so optimistic that actual data for 2009 are already worse than the adverse scenario. And for some crucial variables such as the unemployment rate – that is key to proper estimates of default rates and recovery rates (given default) for residential mortgages, commercial mortgages, credit cards, auto loans, student loans and other banks loans – current trend show that by the end of 2009 the unemployment rate will be higher than the average unemployment rate assumed in the more adverse scenario for 2010, not for 2009! In other terms, the results of the stress test – even before they are published – are not worth the paper they are written on as they make assumptions on the economy that are much more optimistic –even in the worst scenarios that the FDIC has designed - than the actual figures for Q1 of 2009.

I wrote last week that the stress tests were useless because the results looked to be a foregone conclusion, but if Roubini is correct, we have borderline negligence and fraud on our hands here. The tests are foregone conclusions because the banks were never in any danger whatsoever of failing them. It seems to me that Roubini is suggesting that the numbers used in the stress tests were so unstressful that of course all the banks would pass -- and combined with the mark-to-market accounting changes, we're seeing borderline mass fraud being perpetrated by the Treasury department and the fiancial sector.

Ahh, but it gets worse. The unemployment rate shows every indication it will continue to increase at its current rate of about four to five tenths of a percentage point every month. We're at 8.5% now. A little quick math shows some nasty numbers ahead.

Even if the economy were to turn to positive growth by Q3 – as the consensus forecasts expects – the unemployment rate would rise for at least another 12 months as job market data are lagging indicators of economic activity. For example, in 2001 the recession was short and shallow – only 8 months – and over by November but job losses continued for another 19 months until August of 2003. So based on current trends – and even generously assuming that the economy recovers positive growth by Q3 of 2009 (quite an heroic assumption) it is almost certain that the unemployment rate will be 10.5% by December of this year (and would thus average about 9.5% for the year); in a more adverse – but more realistic scenario – the unemployment rate would reach 11% by December of 2009 and average 9.8% for the year.
Another 3 million jobs lost by the end of the year or so, plus more people joining the ranks of the underemployed and those who have simply given up. The end of the year will find some counties in America hitting 20% unemployment with even worse of a U-6 number, possibly approaching 33% -- one in three workers -- or more. That's the reality of what's going to happen over the next 12-18 months.

It really is going to be colossally bad by Q1 2010. If you haven't lost your job yet, be counting your blessings...but be aware we're nowhere near out of the woods just yet. It's very possible that we've only gone though less than half of the total job losses in this country so far from this massive recession...and if that's true, if we have another 3.5% or more to go in the unemployment rate before we bottom out, then it's going to be very very bad in this country very very quickly.

And it will be a very long time before jobs come back. They may not ever come back to some places in the country. We're literally going to need entirely new industries to get America back on its feet...but luckily, we have a President that understands that.

They Call Me Cuban Pete

Obama has lifted some travel restrictions to Cuba, but only for Cuban-Americans so far.
The decision, which comes days before President Obama leaves for the Summit of the Americas in Trinidad and Tobago, represents a significant shift in U.S. policy toward Cuba.

Several key components of America's nearly half-century embargo on the island nation, however, will be preserved.

Among other things, Americans still will be barred from sending gifts or other items to high-ranking Cuban government officials and Communist Party members.

Travel restrictions for Americans of non-Cuban descent also will remain in place.

Before he was elected, Obama promised to lower some of the barriers in Cuban-American relations.

Provisions attached to a $410 billion supplemental budget Obama signed in March also made it easier for Cuban-Americans to travel to Cuba and to send money to family members on the island. In addition, they facilitated the sale of agricultural and pharmaceutical products to Cuba.

The provisions loosened restrictions enacted by President Bush after he came to office in 2001.

Several members of Congress see broader relations with Cuba as vital to U.S. interests. A group of senators and other supporters unveiled a bill March 31 to lift the 47-year-old travel ban to Cuba.

"I think that we finally reached a new watermark here on this issue," said Sen. Byron Dorgan, D-North Dakota, one of the bill's sponsors.

Sen. Richard Lugar, R-Indiana, another sponsor of the bill, issued a draft report in February that said it was time to reconsider the economic sanctions. Lugar is the ranking Republican on the Senate Foreign Relations Committee.

It's a start, and the measures have pretty decent bi-partisan support other than of course a few Republican obstructionists.

This very much seems like the thingto do for a President interested in actual diplomacy.

The Kroog On Republicans

Paul Krugman takes a shot at explaining the modern GOP.
Today’s G.O.P. is, after all, very much a minority party. It retains some limited ability to obstruct the Democrats, but has no ability to make or even significantly shape policy.

Beyond that, Republicans have become embarrassing to watch. And it doesn’t feel right to make fun of crazy people. Better, perhaps, to focus on the real policy debates, which are all among Democrats.

But here’s the thing: the G.O.P. looked as crazy 10 or 15 years ago as it does now. That didn’t stop Republicans from taking control of both Congress and the White House. And they could return to power if the Democrats stumble. So it behooves us to look closely at the state of what is, after all, one of our nation’s two great political parties.

One way to get a good sense of the current state of the G.O.P., and also to see how little has really changed, is to look at the “tea parties” that have been held in a number of places already, and will be held across the country on Wednesday. These parties — antitaxation demonstrations that are supposed to evoke the memory of the Boston Tea Party and the American Revolution — have been the subject of considerable mockery, and rightly so.

But everything that critics mock about these parties has long been standard practice within the Republican Party.

Thus, President Obama is being called a “socialist” who seeks to destroy capitalism. Why? Because he wants to raise the tax rate on the highest-income Americans back to, um, about 10 percentage points less than it was for most of the Reagan administration. Bizarre.
The only difference is that it took some people those 10 to 15 years to figure out that the Republicans are mostly useless loudmouths with zero ideas. But it also took the Democrats an equally long time to start presenting real ideas and fundamental policy changes. Clinton was a good guy in many respects, but he was basically a center-right red state Democrat, as was Carter before him, as was LBJ before him. Obama is still the most progressively liberal President we've had since, well, the last economic disaster we had.

Given the choice of real ideas presented well and obstructionist nonsense from a party that decimated the economy, even the American people will listen to reason.

But, Krugman wisely warns that Democrats should keep a gimlet eye on the Republicans.
For now, the Obama administration gains a substantial advantage from the fact that it has no credible opposition, especially on economic policy, where the Republicans seem particularly clueless.

But as I said, the G.O.P. remains one of America’s great parties, and events could still put that party back in power. We can only hope that Republicans have moved on by the time that happens.
And they will have moved a whole new level of crazy. Obama still has to fix the economy. If he doesn't, the GOP will be given another chance.

And they'll finish the job they started with Dubya.


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