Posted by Tina
** President Barack Obama on Friday warned that economic recovery in the United States ”will be measured in years, not months” as he scored a major victory in his young presidency with the approval in Congress of a $787 billion (542) bill to revive the economy. *** The American Recovery and Reinvestment Act is the largest spending plan the US has ever seen. Telegraph (UK) **
CRISIS OVERSTATED
** As he (Obama) tells it, today’s economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover. *** This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don’t come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That’s a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost — fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now. *** Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82. *** Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That’s comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%. *** Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn’t compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn’t come close to the 90% devaluation of the early 1930s. Bradley R. Schiller, Wall Street Journal **
WRONG TURN
** “Zombie banks” was the term for Japanese financial institutions propped up by government in the 1990s despite their basic insolvency after a real-estate bubble. These unprofitable banks, in a financial revenge of the living dead, cast a decade-long pall over Japan. *** At the time, American officials like Pres. Barack Obama’s economic guru Larry Summers urged the Japanese to give up on failed institutions. Instead, Japan pumped 12 percent of its gross domestic product into saving the banks and got a “lost decade” of economic stagnation in return. Economic analysts across the board agree that the Japanese example must not be repeated, even as our lawmakers stumble into repeating it. – Rich Lowry, Real Clear Politics **
TAX CUT PROMISE ALL SMOKE
** Taxpayers from coast to coast are less than impressed with the plan’s $400-a-year refundable tax credit, which would show up in most paychecks this spring as an added $13 per week when federal withholding rates are adjusted. It drops to about $7.70 a week at the start of 2010. *** “It’s an extra bag of popcorn and a Pepsi, if you know what I mean,” said Glen Falke, 64, an arborist from upstate New York. “It’s not a big deal for me.” *** But residents of cash-strapped California are especially underwhelmed because a slew of proposed state tax increases – on everything from the gas tax to sales tax – threaten to wipe out the modest payday bonus from Mr. Obama. *** “That $13 isn’t going to do much when the state is raising everything,” said Linda Fernandez, 65, a special-education teacher in San Dimas, Calif. *** “The middle class never really benefits,” she said. “The problem is all politicians promise us the world and very few can deliver much.” S. A. Miller, Washington Times **
A victory? Id call it a sham…a failure to adequately serve the American people…a dereliction of duty. I’d call it the worst piece of legislation to ever come down the pike.