Markets say budget deal is bad for economy

(9 am. – promoted by ek hornbeck)

  I’ll keep this short and to the point.

   First of all, the stock market had a horrible day BECAUSE of the budget deal.

MARKET SNAPSHOT: U.S. Stock Losses Intensify After Senate Vote

 I’m watching the numbers now, and stocks will be closing near their lows of the day. People are putting their money where their pocketbook is and saying that the budget deal will hurt the economy.

  How much will it hurt the economy?

JPMorgan Chase has an early answer to that question.

As such, regardless of how the Committee fares, it appears that a first rough estimate is that the total tightening implied by the recent legislation would subtract about 0.3%-point from GDP growth next year.

   This drag may appear fairly small, but it is on top of the substantial tightening that was already in place prior to the passage of the debt deal. Most of that fiscal tightening comes about through the automatic expiration of temporary stimulus measures. The table below details those measures, the largest of which is the one-year 2%-point payroll tax holiday, which expires next January. Other large programs that are scheduled to expire or phase out are emergency unemployment benefits, accelerated depreciation, increased transfers to the states, and much of the remaining spending associated with the 2009 Recovery Act. All in all, by our estimates federal fiscal policy will subtract around 1-3/4%-points from GDP growth next year. Given that GDP growth has been 1.6% over the past four quarters when fiscal policy has been much less of a drag, this doesn’t bode well for next year. There are elements of uncertainty in our 1-3/4%-point drag estimate, and the largest such uncertainty is probably political, as some measure could get extended.

 In other words, JPMorgan Chase is expecting GDP growth to flatline this year and next year at near zero levels.

 If you want to know what is coming down the line, just look across the pond to Britain. Remember Britain and their new conservative government? They were going to dramatically cut everything the working class and poor might want, and still have economic growth. Does that sound familiar?

 Some government departments are seeing their budgets cut by a quarter, welfare payments are to be cut, and capital expenditures are being postponed. Libraries are closing, and local governments are preparing mass redundancies.

  With a budget deficit of more than ten per cent of G.D.P., Britain clearly had to address the public finances. But rather than following the Obama model of introducing a short-term fiscal stimulus to revive growth and tax revenues, Osborne and his boss David Cameron opted for the cut-and-slash policy methods of Andrew Mellon and Philip Snowden-in an effort to balance the budget by 2015. At the time, I and many other observers said that the likely outcome of this absurd exercise in self-flagellation was a sharp dip in growth, and possibly even another recession.

  So how’s that working out for you guys? The WSJ reported on that today.

 According to a survey of purchasing managers at U.K. factories, manufacturing activity contracted in July for the first time since June 2009.

  If this contraction carries over into other parts of the economy, it raises the possibility that the U.K. will end September of this year with a gross domestic product not much greater than in September 2010, and possibly even lower.

   And there is good reason to suppose that manufacturing isn’t the only weak spot. According to a European Commission survey released last week, confidence among service providers and retailers weakened even more sharply than among manufacturers during July….

  And the big cuts in public-sector spending and jobs have yet to come, though higher taxes on consumption and incomes have already been put in place. Overall, what’s happened so far is austerity-light, the prelude rather than the main event.

  So the entire Anglo-world is embracing austerity in the teeth of a double-dip recession and against all evidence that it will work.

  But we must do whatever it takes to protect the TBTF banks. Even if it means gutting the real economy to pay interest on bad debts.

 Meanwhile the Fed is considering printing some more money to throw at the economy, and gold is responding to this by hitting new all-time highs.

  Who could possibly have anticipated something like that?


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    • gjohnsit on August 2, 2011 at 22:47

    We’re going to need those tips.

  1. who could possibly have anticipated that a stealth, super congress, the size of a criminal jury, boobytrapped with

    hidden triggers (and triggers within triggers)would be created as the best way to structure federal revenues and expenditures over the next ten years?

    Yep, …” we must do whatever it takes to protect the TBTF banks. Even if it means gutting the real economy to pay interest on bad debts.”

    This is now the second time in three years that the

    propaganda machine has dredged up the “fear of economic

    catastrophe” playbook to formulate policy and mould

    public opinion. And this is actually borrowed from the

    “imminent threat” playbook, a strategy that has sucked the

    life out of every annual budget, and most likely will continue–WITHOUT DEBATE.

  2. why in the f..k do we continue to pay taxes?  The Republicans won — they finagled it so the wealthy individuals and corporations would STILL NOT pay their fair share of taxes and, in many cases, WILL NOT pay any taxes at all, and even receive a refund!

    In order to accommodate the Republicans once again, every social program under the sun is up for grabs, in November.  Programs that benefit ordinary Americans.  It’s apparent that we are to continue paying taxes like the good little people we are, while deriving NOTHING, but nothing in return from the government and continuing to help see to it that the wealthy get wealthier still and the gap of wages continue to expand between the rich and the poor.

    If we have to have a “magical” committee of 12 to do the dirty work, why can’t we get rid of the House and the Senate altogether?  What are they needed for?  

    Ludicrous absurdities: insufficient description of what has transpired.  November should bring about more chaos, again, at our expense.

    The way you gain absolute control over a populace is to impoverish them and keep them ignorant by undermining education or denying it altogether.  

    Thanks, gjohnsit!    

  3. A (select) few of the super-rich made a lot of money off of the Great Depression, buy buying assets for pennies on the dollar, then waiting for (or helping) the economy recover. If we would have just let the markets crash (so the super-rich could come in and scoop up enough cheap shit), there would now be incentive for the super-rich to allow for some real government-sponsored economic recovery. As it is now, they’re still trying to wipe out a few more middle-income jabronies (which is what should have already happened instead of bailing out a deregulated/crooked financial sector to prop up unwise 401k investments. When the economy is torn down far enough, the super-rich will then allow for some government-sponsored economic recovery (but not before, they want to get the most bang for their depression investments/bucks).

    • banger on August 5, 2011 at 22:36

    I have some vague notions about certain parts of the oligarchy benefiting in the long-term by transitioning the society to a neo-feudal order but that doesn’t seem enough reason for the current arrangements. This policy of austerity is clearly and unambiguously meant to contract the economy and I haven’t seen a good argument yet as to why they want to do that.  

  4. puts his money where his mouth is (he was one of the first to go to Wisconsin, and do some major screaming)!  Here’s an excellent letter he has written on August 5, 2011.

    You want to quibble with Michael Moore and his advice?

    30 Years Ago Today: The Day the Middle Class Died …a letter from Michael Moore

    Friday, August 5th, 2011


    From time to time, someone under 30 will ask me, “When did this all begin, America’s downward slide?” They say they’ve heard of a time when working people could raise a family and send the kids to college on just one parent’s income (and that college in states like California and New York was almost free). That anyone who wanted a decent paying job could get one. That people only worked five days a week, eight hours a day, got the whole weekend off and had a paid vacation every summer. That many jobs were union jobs, from baggers at the grocery store to the guy painting your house, and this meant that no matter how “lowly” your job was you had guarantees of a pension, occasional raises, health insurance and someone to stick up for you if you were unfairly treated.

    Young people have heard of this mythical time — but it was no myth, it was real. And when they ask, “When did this all end?”, I say, “It ended on this day: August 5th, 1981.”

    Beginning on this date, 30 years ago, Big Business and the Right Wing decided to “go for it” — to see if they could actually destroy the middle class so that they could become richer themselves.

    And they’ve succeeded.

    On August 5, 1981, President Ronald Reagan fired every member of the air traffic controllers union (PATCO) who’d defied his order to return to work and declared their union illegal. They had been on strike for just two days.

    It was a bold and brash move. No one had ever tried it. What made it even bolder was that PATCO was one of only three unions that had endorsed Reagan for president! It sent a shock wave through workers across the country. If he would do this to the people who were with him, what would he do to us?

    Reagan had been backed by Wall Street in his run for the White House and they, along with right-wing Christians, wanted to restructure America and turn back the tide that President Franklin D. Roosevelt started — a tide that was intended to make life better for the average working person. The rich hated paying better wages and providing benefits. They hated paying taxes even more. And they despised unions. The right-wing Christians hated anything that sounded like socialism or holding out a helping hand to minorities or women.

    Reagan promised to end all that. So when the air traffic controllers went on strike, he seized the moment. In getting rid of every single last one of them and outlawing their union, he sent a clear and strong message: The days of everyone having a comfortable middle class life were over. America, from now on, would be run this way:

    * The super-rich will make more, much much more, and the rest of you will scramble for the crumbs that are left.

    * Everyone must work! Mom, Dad, the teenagers in the house! Dad, you work a second job! Kids, here’s your latch-key! Your parents might be home in time to put you to bed.

    * 50 million of you must go without health insurance! And health insurance companies: you go ahead and decide who you want to help — or not.

    * Unions are evil! You will not belong to a union! You do not need an advocate! Shut up and get back to work! No, you can’t leave now, we’re not done. Your kids can make their own dinner.

    * You want to go to college? No problem — just sign here and be in hock to a bank for the next 20 years!

    * What’s “a raise”? Get back to work and shut up!

    And so it went. But Reagan could not have pulled this off by himself in 1981. He had some big help:  the AFL-CIO.

    The biggest organization of unions in America told its members to cross the picket lines of the air traffic controllers and go to work. And that’s just what these union members did. Union pilots, flight attendants, delivery truck drivers, baggage handlers — they all crossed the line and helped to break the strike. And union members of all stripes crossed the picket lines and continued to fly.

    Reagan and Wall Street could not believe their eyes! Hundreds of thousands of working people and union members endorsing the firing of fellow union members. It was Christmas in August for Corporate America.

    And that was the beginning of the end. Reagan and the Republicans knew they could get away with anything — and they did. They slashed taxes on the rich. They made it harder for you to start a union at your workplace. They eliminated safety regulations on the job. They ignored the monopoly laws and allowed thousands of companies to merge or be bought out and closed down. Corporations froze wages and threatened to move overseas if the workers didn’t accept lower pay and less benefits. And when the workers agreed to work for less, they moved the jobs overseas anyway.

    And at every step along the way, the majority of Americans went along with this. There was little opposition or fight-back. The “masses” did not rise up and protect their jobs, their homes, their schools (which used to be the best in the world). They just accepted their fate and took the beating.

    I have often wondered what would have happened had we all just stopped flying, period, back in 1981. What if all the unions had said to Reagan, “Give those controllers their jobs back or we’re shutting the country down!”? You know what would have happened. The corporate elite and their boy Reagan would have buckled.

    But we didn’t do it. And so, bit by bit, piece by piece, in the ensuing 30 years, those in power have destroyed the middle class of our country and, in turn, have wrecked the future for our young people. Wages have remained stagnant for 30 years. Take a look at the statistics and you can see that every decline we’re now suffering with had its beginning in 1981 (here’s a little scene to illustrate that from my last movie).

    It all began on this day, 30 years ago. One of the darkest days in American history. And we let it happen to us. Yes, they had the money, and the media and the cops. But we had 200 million of us. Ever wonder what it would look like if 200 million got truly upset and wanted their country, their life, their job, their weekend, their time with their kids back?

    Have we all just given up? What are we waiting for? Forget about the 20% who support the Tea Party — we are the other 80%! This decline will only end when we demand it. And not through an online petition or a tweet. We are going to have to turn the TV and the computer and the video games off and get out in the streets (like they’ve done in Wisconsin). Some of you need to run for local office next year. We need to demand that the Democrats either get a spine and stop taking corporate money — or step aside.

    When is enough, enough? The middle class dream will not just magically reappear. Wall Street’s plan is clear: America is to be a nation of Haves and Have Nothings. Is that OK for you?

    Why not use today to pause and think about the little steps you can take to turn this around in your neighborhood, at your workplace, in your school? Is there any better day to start than today?


    Michael Moore

    [email protected]

    P.S. Here are a few places you can connect with to get the ball rolling:

    Main Street Contract for America

    Showdown in America

    Democracy Convention

    Occupy Wall Street

    October 2011

    How to Join a Union, from the AFL-CIO (They’ve learned their lesson and have a good president now) or UE

    Change to Win


    High School Newspaper (Just because you’re under 18 doesn’t mean you can’t do anything!)

    See Front Page of MichaelMoore’s website!

    Join Mike’s Mailing List | Follow Mike on Twitter | Join Mike’s Facebook Group | Become Mike’s MySpace Friend

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