Category Archives: Business

Business, Economics, Media Criticism, Political Commentary, Uncategorized

$1.8T

47 Comments

That’s the size of the current projected budget deficit for this year:

The deficit for the current budget year will rise by $89 billion to above $1.8 trillion — about four times the record set just last year. The unprecedented red ink flows from the deep recession, the Wall Street bailout, the cost of President Barack Obama’s economic stimulus bill, as well as a structural imbalance between what the government spends and what it takes in.

As the economy performs worse than expected, the deficit for the 2010 budget year beginning in October will worsen by $87 billion to $1.3 trillion, the White House says. The deterioration reflects lower tax revenues and higher costs for bank failures, unemployment benefits and food stamps.

For the current year, the government would borrow 46 cents for every dollar it takes to run the government under the administration’s plan. In one of the few positive signs, the actual 2009 deficit is likely to be $250 billion less than predicted because Congress is unlikely to provide another $250 billion in financial bailout money.

So it’s not all bad news.

Obama didn’t inherit most of this deficit. He created it (or rather, let Pelosi and Reid create it) with the insane porkulus bill, which wasn’t about stimulation at all, but paying off Democrat constituencies. So it’s not surprising that it’s not working. And to the degree that it’s not working, and we get less tax revenue from a shrinking economy, that’s his deficit as well.

Just for contrast, consider that 1.8 trillion was the entire federal budget in the year 2000. This is economic madness.

[Late morning update]

Obama fails the fact check:

-His assertion that his proposed budget “will cut the deficit in half by the end of my first term” is an eyeball-roller for many economists, given the uncharted terrain of trillion-dollar deficits the government is negotiating.

-He promised vast savings from increased spending on preventive health care in the face of doubts that such an effort, however laudable it might be for public welfare, can pay for itself, let alone yield huge savings.

-He pitched a remedy for Social Security’s long-term crisis that analysts say won’t fix half the problem.

Glad someone at AP is finally doing their job.

[Mid-afternoon update]

More thoughts:

President Obama continues to distance himself from this “inherited” budget deficit. But the day he was inaugurated, the 2009 deficit was forecast at $1.2 trillion — meaning $600 billion has already been added during his four-month presidency (an amount that, by itself, would exceed all 2001-07 annual budget deficits). And should the president really be allowed to distance himself from the $1.2 trillion “inherited” portion of the deficit, given that as a senator he supported nearly all policies and bailouts that created it?

The president also talks of cutting the deficit in half from this bloated level. But even after the recession ends and the troops return home, he’d still run $1 trillion deficits — compared to President Bush’s $162 billion pre-recession deficit. In other words, the structural budget deficit (which excludes the impacts of booms/recessions) would more than quintuple.

It’s a good point. What did then-Senator Obama do, if anything, to prevent any of this year’s deficit? If he’d been in charge, it would probably been even bigger, and last year’s as well.

Business, Economics, Political Commentary

No One Tell Barack Obama

2 Comments

A Tennessee dry cleaner is offering free services to the unemployed:

Magnolia Cleaners will clean a person’s professional job interview clothes, up to $25 per week, according to The Daily Post-Athenian. That amounts to the equivalent of two men’s or women’s two-piece suits and two dress shirts or two dresses.

With the unemployment rate at 13.8 percent in McMinn County, the company wants to help people facing difficult times by giving them a more confident appearance when they interview for jobs.

During the Depression, Roosevelt’s National Recovery Administration arrested a tailor for charging a nickel too little to press a suit. What will his protege in the White House do when he finds out about this?

Business, Economics, Media Criticism, Political Commentary

The Story That Doesn’t Fit The Narrative

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The media doesn’t want to talk about Fannie and Freddie:

Do you know how much we’ve committed to backstopping Fannie and its partner-in-crime Freddie Mac (FRE)? $400 BILLION! Back in February that was doubled from the original $200 billion.

But the news of the quarterly loss is getting hardly any attention. Nothing here at the NYT business section, for example. Nothing at the blogs that were going nuts when AIG was revealed to have paid out bonuses back in March.

The problem is that the Fannie and Freddie disasters don’t fit into any conventional media narrative. At AIG you had Joe Cassano, lurking in the shadows, turning AIGFP into his own personal casino, while taking home gargantuan pay.

Fannie Mae? They help nice families get into homes. Their motto is something about helping the people who help house America. Who could be against that? Plus, the Fannie and Freddy story doesn’t help explain the idea that laissez-faire deregulation is what allowed Wall Street to go crazy. Fannie and Freddy had their own freakin’ regulator, OFHEO. Two companies with one regulator to look into both of them.

And then you have all the Democrats on the inside (Rahm Emanuel, for example) on the outside (Barney Frank), who have ties to the company’s worst years.

Yes, inconvenient, that.

Business, Economics, Space

Virgin Vision

28 Comments

Will Whitehorn talks a good game:

He foresees uses of the spaceship for science experiments, for example as an alternative to visiting the International Space Station or using unmanned flights for pharmaceuticals companies seeking to use microgravity to change particles.

Later, the aircraft could be used to launch small satellites or take other payloads into space, Whitehorn says. “We could put all of our server farms in space quite easily…”

…Eventually, he sees the possibility of transporting passengers to terrestrial destinations in spacecraft outside the atmosphere instead of by plane. He says a journey from Britain to Australia could be done in about 2-1/2 hours.

“That’s a 20-year horizon,” he said.

I’d take that a lot more seriously if he had liquid engines…

And of course, he never misses an opportunity to bad-mouth the competition:

Virgin is not the only non-governmental party trying to develop space travel in the private sphere, but Whitehorn is confident it will be the first to take passengers into space.

SpaceX, led by veteran Silicon Valley entrepreneur Elon Musk, is developing space-launch vehicles but they are not designed to carry passengers.

Well, yes, if you ignore the Dragon…

And of course, XCOR might beat them, though if they don’t get to a hundred klicks, the claim will be that they’re not in space, despite the stars, curvature of the earth, and minutes of weightlessness.

Business, Economics, Political Commentary

Obama’s Policies More Bankrupt Than Chrysler

4 Comments

Hard to argue:

Obama’s grand design for U.S. automakers is the perfect opportunity to show where his moderate rhetoric varies from his big-government actions. He has said he doesn’t want the government to be a permanent owner of big companies, arguing — in part correctly — that he inherited the bailouts and partial nationalizations from the Bush administration. But Obama’s plans for Chrysler and General Motors belie his claims that he doesn’t want the government to dig in further. His actions show that he isn’t shy about using the powers he inherited to favor political allies such as Big Labor at the expense of millions of Americans with savings vehicles invested in auto company debt securities.

The government-union ownership structure — in which the United Auto Workers retiree health care fund would own 55 percent, Fiat would own 20 percent, the U.S. government would own 8 percent, and even the Canadian government would own 2 percent (Canada is “home to several to several large Chrysler facilities,” according to the Wall Street Journal,) — also has little to do with repaying taxpayers.

As a Wall Street Journal editorial just before the bankruptcy announcement put it: “Taxpayer-shareholders are likely to be far better off with a smaller stake in a truly private company that is better insulated from political meddling. Private owners are more likely than the Treasury or the unions to try to run the company for profit, and so increase its equity value over time.”

But that wouldn’t accomplish the political goals.