ALTERNATIVE ARGUMENTA

By Patricia L Johnson and Richard E Walrath

The $150 billion dollar economic growth package was announced by President Bush on January 24, 2008 after a bipartisan agreement was reached with the leaders of the U.S. House of Representatives.  The plan consists of $100 billion in temporary relief for families, and $50 billion in business incentives.

The plan calls for taxpayers to receive rebates of “up to” $600 for individuals, and “up to” $1,200 for couples.  Anyone eligible for the above, would also be eligible for an additional $300 per child, which sort of gives you the impression that if you’re married and have two kids you’re about to receive “up to” $1,800 from Uncle Sam.

Don’t rush out and spend the money yet!

Whenever this administration uses the words “up to” you can bet your booties you’re going to get less, so how much less?  Department of the Treasury examples follow:

Married with children:

1) Married couple with two children*, earned income of $4,000, no federal income tax paid.

Individual rebate = $600

Child tax credit = $600

TOTAL = $1,200

2) Married couple with two children, earned income in excess of $3,000, AGI = $45,000, federal income tax is $323.

Individual rebate = $600

Child tax credit = $600

TOTAL = $1,200

3) Married couple with two children, AGI = $48,000, federal income tax is $773.

Individual rebate = $773

Child tax credit = $600

TOTAL = $1,373

4) Married couple with two children, AGI = $80,000, federal income tax paid in excess of $1,200.

Individual rebate = $1,200

Child tax credit = $600

TOTAL = $1,800

5) Married couple with two children, AGI = $160,000, federal income tax paid in excess of $1,200.

Individual rebate = $1,200

Child tax credit = $600

Phaseout reduction = ($500) [5% x ($160,000 - $150,000) = $500]

TOTAL = $1,300

*All children referenced in the examples are qualifying children for purposes of the child tax credit.

Looks like you won’t be pulling in $1,800 unless your adjusted gross income is more than $80,000 and you have paid in more than $1,200 in federal income tax.

The current agreement also provides a temporary tax cut for businesses providing them with the opportunity to purchase equipment this year and deduct an additional 50% of the cost in 2008.

Treasury Secretary Paulson says that he hopes the Senate doesn’t meddle with the stimulus package.  He’s afraid that the Senate might put some stimulus into it–like money for food stamps as well as extended unemployment compensation.

The package does not provide assistance in the form of extended unemployment insurance benefits, food stamp money, or spending on infrastructure, but it does provide some assistance for homeowners who are struggling to keep their homes in the current mortgage crisis. 

Will it be enough?

Of course not!

How much worse are economic conditions today than they were when the first Bush tax-cuts went into effect? 

Is there anyone who would disagree that they are much worse today than they were then?

So, why are we talking about a $150 billion stimulus, maybe, when hundreds of billions in tax-cuts were put into effect then?  Granted, most of those Bush tax cuts went to the rich and business, and we see how much benefit they provided to the economy. 

The purpose of the Jobs and Growth Plan of 2003 was to stimulate the economy with the influx of $350 billion dollars.  On a temporary basis it succeeded in providing some stimulus, but in 2003 we weren’t looking at 1.8 million subprime loans getting ready to reset with higher rates over the next two years.

If the situation is far worse today–as it is–how is $150 billion going to solve the problem?

By Richard E Walrath

The Democrats shouldn’t waste time on Bush. Get a bill on his desk as soon as they can without tax-cuts for business and the rich.  That’s the most inefficient means of providing stimulus.  They just pocket the money.  If Bush wants to veto the bill, let him do it.  

He and the Republicans can take the heat in November. 

Food stamps, extended unemployment benefits, and a month’s rent would be good for starters. 

On the McLaughlin Group this past Friday, Monica Crowley said that the last time they gave out refunds some of the people didn’t spend them–they saved them. 

That’s because they started passing them out from the top. 

Try doing it from the bottom this time, and all the money will get spent.

By Patricia L Johnson

The U.S. stock markets were closed Monday in observation of Martin Luther King Jr. Day but that didn’t stop the Dow Jones industrial average futures from dropping 436 points or 3.6%, following the lead of foreign markets.  Japan’s Nikkei 225, Hong Kong’s Hang Seng, London’s FTSE-100, German’s DAX 30 and France’s CAC040 all dropped considerably on Monday and Tuesday.

So what happened - what spooked the world markets?

One thing that happened is the Conference Board leading index decreased by 0.2 percent in December.  This is the third month in a row this indicator has decreased, and it has been down four of the past six months.  Of the 10 components in this index, six were negative for the month of December 2007 — not a real good sign.

The FOMC, under the direction of Chairman Ben Bernanke, has already taken adequate measures to date based on market conditions, but the foreign sell off caused an emergency video meeting Monday night and on Tuesday morning the FOMC announced a decrease in the federal funds rate 75 basis points to 3-1/2 percent and a decrease in the discount rate 75 basis point to 4.0 percent and left he door open for further cuts following their scheduled meeting for next week.

President Bush has announced his plans for a stimulus plan to jump-start the economy, but it shouldn’t surprise anyone that Bush’s new stimulus proposal will have little impact on the people in this country that need it most, the poor and the middle class.

Where the Democrats want a plan that provides additional spending for food stamps, extended unemployment and infrastructure projects, Bush has different priorities stated in his weekly radio address:  “This growth package must be built on broad-based tax relief that will directly affect economic growth — not the kind of spending projects that would have little immediate impact on our economy”.

The January 18, 2007 Press Briefing by Treasury Secretary Henry Paulson and Chairman of the Council of Economic Advisors, Ed Lazear provide us with few details on the plan.

The total package will probably be between $140 to $150 billion, with the biggest portion, perhaps $100 billion benefiting individuals and perhaps $50 billion for business investment incentives.

Secretary Paulson when asked whether or not Social Security recipients might get a one time payment responded:

…”The Christmas season has come and gone. We’re not trying to decorate a Christmas tree here.”

He further stated the proposed stimulus plan:

 ”is focused on broad-based tax relief for those who are paying taxes, and that was the principle he [President Bush] laid out. This is something that has worked well before, has worked in 2001, worked in 2003 — get to consumers, put money in the hands of people, letting them spend it rather than the government spend it.”

The problem with the Economic Growth and Tax Relief Reconciliation Act of 2001 [June 7, 2001] and The Jobs and Growth Tax Relief Reconciliation Act of 2003 [May 28, 2003] is the outcome.

As Chairman Lazear indicates in the press briefing

“There are two major parts of the economy that we have to deal with: the consumption side, and the investment side. Consumption is important, of course, because it is the major component of GDP; it’s 70 percent of GDP. But in addition to that, investment is extremely important not only because it’s a significant part of GDP, but also because investment is the way that we create demand for labor. And demand for labor means more jobs and more wages, and that’s the reason that we have to focus on that side as well.”

Over the past seven years the stimulus plans put in place by this administration have added a grand total of 6,011,000 jobs to the economy.  That’s 6.0 million in seven years, or little more than 71,000 jobs per month to an economy that needs twice that many jobs added just to keep pace with population growth.  Source:  Bureau of Labor Statistics

The subprime mortgage crisis is the force pulling the economy down and with 1.7 million subprime mortgages scheduled to reset in 2008 and 2009, the maximum $150 billion dollar stimulus plan proposed by the White House may do little to curb recession fears.

What we may be looking at is another “growth” package from 1600 Pennsylvania Ave that grows little more than grass on the White House lawn and may be the very reason why world markets are ringing alarm bells.

By Richard E Walrath

So far, you’d think the subprime mortgage crisis affects only houses in the cheap rent districts.  Not so, the next wave is going to hit homes that look like these.

FDR declared a Bank Holiday until a way could be figured out to keep the banks from going under.  We need a a Home Holiday on mortgage increases for 90 days.

One of the funniest things the media is putting out now is the idea that Willard Romney will benefit from the economic crisis we’re having because he has such extensive business experience. 

Does he have an MBA, too?  Just like Bush?

That will be such a help! 

Why do I refer to him as Willard Romney?  That’s because it’s his first name. 

By Patricia L Johnson

The National Bureau of Economic Research (NBER) is the organization responsible for calling a recession, “a recession”.  They determine when a recession begins based on their definition: 

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real [inflation adjusted] GDP [gross domestic product], real income, employment, industrial production, and wholesale-retail sales.”

The last time NBER’s Business Cycle Dating Committee called a recessionary period was in 2001, for the 8-month period beginning March 2001 and ending November 2001.

The November 2001 trough was announced July 17, 2003.
The March 2001 peak was announced November 26, 2001.

The CBO, in their January 2008 report Options for Responding to Short-Term Economic Weakness indicate five economists, “Richard Berner (Morgan Stanley), Martin Feldstein (HarvardUniversity), William Gross (PIMCO), Robert Shiller (Yale University) and Lawrence Summers (Harvard University) have all stated that the probability of a recession this year is greater than 50 percent.”

All too often the media is full of reports about how this or that economist missed the boat on a forecast, but we’ll give these guys the benefit of the doubt and agree that we’ll probably have a recession this year.

Although a recession won’t be called until ‘after the fact’ our economy is now operating in slow motion, so now what?

The Federal Reserve has been taking bold actions to keep the economy running on an even keel, but even the Big Bank may not be able to stop the tsunami caused by the subprime mortgage mess.  There are still 1.7 million subprime ARMs that will reset in 2008 and 2009.

Many of the 2008 presidential hopefuls have put together various stimulus packages.  Whether or not a stimulus package is needed to jump-start the economy has pretty much been answered, while the remaining question becomes what type of stimulus package will best serve our failing economy.

Three questions must be answered when looking at the various proposals.

1. Are they cost effective? 
2. Are they timely - do they provide a quick fix to the economy?
3. How sure are we of the end result?

The CBO has listed nine possibilities and prepared a chart (page 20) indicating the pros and cons of each.

• Lump-Sum Rebate
• Temporary Tax Reduction
  • Withholding Holiday for the Employee Payroll Tax
  • Across-the-Board Tax Rate Cut
• Deferring or Eliminating Scheduled Tax Increases
  • Extending the AMT Patch
  • Deferring or Eliminating Tax Rate Increase under EGTRRA or JGTRRA
• Cut in Corporate Tax Rates
• Incentives for New Investment
• Extending Operating Loss and Carryback Provision
• Direct Transfer Payments to Households
  • Extending or Expanding Unemployment Benefits
  • Temporarily Increasing Food Stamp Benefits
• Providing General Aid to State and Local Governments
• Investing in Public Works Project

Deciding what to do shouldn’t be complicated if you look at the prior stimulus packages put into place during the Bush administration - they didn’t work, so obviously a different approach is needed.   Providing tax cuts to the rich and tax and investment incentives to big business, just didn’t provide the goals sought - unless the goal was to bankrupt the rest of us.

A review of the Consumer Price Index, CPI, report issued January 16, 2008 could provide an excellent case for directing the brunt of a new stimulus package to those needing it most, the poor and middle class.  The increases in basic necessities over the past year; food, energy and medical costs has impacted all of us, but has been especially detrimental to the poor and middle class. 

Nearly all the indicators have gone up considerably in the 12-months ended December 2007 v. the 12-months ended December 2006, with Energy commodities having the biggest increase at 29.4%, followed by Energy at 17.4%, Transportation 8.3%, Medical Care 5.2%, Food and Beverages 4.8%, Energy Services 3.4%, Other Goods and Services, 3.0%, Housing and Education at 3.0% each, Recreation at .8% and Apparel at -.3%.

The percentages indicated above are a sum of all items within a particular index.  Some increases in the food and beverage group over the past year are milk up 19.3%, cheese up 13.0%, cereal up 5.4%, bread up 10.5%, fruits and vegetables up 5.9%, and meats, poultry, fish and eggs up 5.4%.

Maybe I’m wrong, but it seems to me that eating, staying warm and being able to afford medical care when necessary shouldn’t be a luxury in this country, but that appears to be the direction we’re heading.

Food and energy costs spur increase; industrial production stalls 

WASHINGTON - Higher costs for energy and food last year pushed inflation up by the largest amount in 17 years, even though prices generally remained tame outside of those two areas. Meanwhile, industrial output was flat in December, more evidence of a significant slowdown in the economy.

Click the following link to read full story:  http://www.msnbc.msn.com/id/22681319/

By Richard E Walrath

The big ‘ R’  is fast closing in on us, so now we hear about plans for doing something about heading it off. 

Hillary Clinton is proposing a $70 Billion stimulus plan for those with lower incomes–that’s called trickle up.

What I don’t understand is why does it take seven years and $700 billion of trickle down to get us where we are? 

Why not just skip the trickle down idea since we know it doesn’t work?

If we can head off the big ‘R’ with only $70 Billion, just think of what we could do with $700 Billion!

People are way over their heads in debt, and have no way out except bankruptcy which the Republicans have made more difficult and more costly to protect their business interests, but bankruptcies are on the rise.

People on the bottom half just can’t make it any more on their incomes.  The median household income is below $50,000.  Food, housing, health care and energy are consuming more and more of their incomes.

Add a debt burden that has been steadily growing to this picture, and you see the
Big ‘R’ fast approaching.

What the bottom half needs is an increase in income–not just a short-time, one-time
stimulus. 

Wages have been suppressed and depressed for years.  The minimum wage stayed at $5.15 an hour for almost ten years! 

When you have to stop going out to McDonald’s, you know things are getting bad.

Starbuck’s sales are dropping.  People who used to spend $3 for a cup of coffee aren’t going to do that anymore.  Appleby’s has been having problems for some time and Wendy’s is even worse off.

Even more telling are McDonald’s sales which have fallen.  People aren’t eating out so much–even to buy a hamburger.  When you have to stop going out to McDonald’s, you know things are getting bad.

Next thing people will have to do is learn to boil water and make soup.

Meanwhile, debt in the bottom half has soared.  Add to this grim picture growing unemployment and the financial crisis due to the subprime mortgage mess, and you can understand the situation we are in. 

Richard E Walrath is a former budget analyst and co-owner of the Articles and Answers News and Information sites:  Articles and Answers  Articles and Answers 2007 and the Alternative Augumenta blog.

By Patricia L Johnson

Each month the Bureau of Labor Statistics (BLS) prepares the Employment Situation Report for the prior month.  This particular report is a big deal because it’s a “market mover” meaning the results of this report have the ability to push the Dow Jones Industrial Average, DJIA, higher if the results are good, or send the stock market spiraling if the numbers are poor.

The employment report consists of a combination of data from two separate sources:

•  Household Survey is a sampling of approximately 60,000 households and only covers a small percentage of employed persons.
• Establishment Survey is a survey conducted on approximately 400,000 businesses of all sizes and represents about 33% of total nonfarm employment.

Between the two data sources the BLS is able to provide us with various information in their report, including the following figures for December 2007, as released on January 4, 2008. 

• Unemployment Rate - 5% - Household Survey
• Nonfarm payroll employment - +18,000 - Establishment Survey [138,495]
• Number of unemployed persons  - 7.7 - Household Survey
• Total employment - 146.2 million - Household Survey

The figures released each month are the seasonally adjusted totals and the key number is the increase/decrease in nonfarm payroll employment.  In the month of December 2007 the increase in nonfarm payroll employment is +18,000, meaning 18,000 jobs were added to payrolls during the month of December 2007.

During a President’s term of office, the number of jobs produced during his/her administration becomes a very important issue because job creation is based on economic policies put in force by the administration.

Upon release of the January 4, 2008 Employment Situation Report, the White House placed a Fact Sheet on their website claiming “Since August 2003, more than 8.3 million jobs have been created“. 

Knowing the Bush administration didn’t start in August 2003 and knowing 8.3 million jobs since August 2003 averaged out to little more than 160,000 jobs a month I decided to research the subject further.

During the eight years, Bill Clinton was in office, his economic policies produced 23.1 million jobs [average 240,000 per month] as follows:

Data extracted on: January 12, 2008 (11:19:19 AM)

Employment, Hours, and Earnings from the Current Employment Statistics survey (National)

Series Id:     CES0000000001
Seasonally Adjusted
Super Sector:  Total nonfarm
Industry:      Total nonfarm
NAICS Code:    N/A
Data Type:     ALL EMPLOYEES, THOUSANDS

Year
Dec

1992
109418

2000
132484

At the end December 1992 the Bureau of Labor Statistics, BLS is indicating total, seasonally adjusted nonfarm employment, of 109,418,000.  At the end of December 2000, the total has increased to 132,484,000.  The difference is 23,066,000 or 23.1 million new jobs were produced during the Clinton presidency. 

In contrast, George Bush has been in office seven years and his economic policies have produced a total of 6.0 million jobs as follows:

Data extracted on: January 12, 2008 (11:31:47 AM)

Employment, Hours, and Earnings from the Current Employment Statistics survey (National)

Series Id:     CES0000000001
Seasonally Adjusted
Super Sector:  Total nonfarm
Industry:      Total nonfarm
NAICS Code:    N/A
Data Type:     ALL EMPLOYEES, THOUSANDS

Year
Dec

2000
132484

2007
138495(p)

p : preliminary

At the end December 2000 the Bureau of Labor Statistics, BLS is indicating total, seasonally adjusted nonfarm employment, of 132,484,000.  At the end of December 2007, the total has increased to a preliminary figure of 138,495,000.  The difference is 6,011,000 or 6.0 million new jobs have been produced during the seven year period from January 2001 through December 2007, the length of time President Bush has been in office.  

If the White House is stating 8.3 million jobs were created and I’m saying 6.0 million jobs have been created, who is correct? Both figures are correct - they just represent different periods of time.  The White House is simply ignoring the job losses incurred during the first 32 months of the Bush presidency.

There have been 8.3 million jobs created since August 2003, but there were 2.3 million jobs lost during the period from January 2001 through July 2003, bringing the job creation total down to 6.0 million from January 2001 through December 2007.

This is a very important subject and you really shouldn’t believe either what the White House is stating, or what I’m indicating regarding these numbers.  To confirm the validity of the numbers, you should extract the data yourself from the Bureau of Labor Statistics.

What these numbers prove is the economic policies put forth by the Bush administration, mainly The Jobs & Growth Tax Relief Reconciliation Act of 2003 have backfired. 

The tax cuts in this plan were intended to “encourage consumer spending that will continue to boost the economic recovery and create jobs” and ”promote investment by individuals and businesses that will lead to economic growth and job creation.”

Our country cannot move forward with policies that create little more than 71,000 jobs per month.

Most Americans are worried about the economy and think this country needs change.  The major change needed is to go back to the policies that were in effect under the Clinton administration, where all of us prospered, not just the rich and big business.

Patricia L Johnson is a former special assignment writer/photographer and co-owner of the Articles and Answers News and Information sites. You may read more by this author at http://www.articlesandanswers.com or http://articles2007.spaces.live.com

By Richard E Walrath

People are way over their heads in debt, and have no way out except bankruptcy which the Republicans have made more difficult and more costly to protect their business interests, but bankruptcies are on the rise.

People on the bottom half just can’t make it any more on their incomes.  The median household income is below $50,000.  Food, housing, health care and energy are consuming more and more of their incomes.

Add a debt burden that has been steadily growing to this picture, and you see the Big ‘R’ fast approaching.

What the bottom half needs is an increase in income–not just a short-time, one-time stimulus. 

Wages have been suppressed and depressed for years.  The minimum wage stayed at $5.15 an hour for almost ten years! 

Meanwhile, debt in the bottom half has soared.  Add to this grim picture growing unemployment and the financial crisis due to the subprime mortgage mess, and you can understand the situation we are in.