Obamaville Shanty Towns: Tent Cities Sprouting Up Across America

Monday, December 14, AD 2009

As the recession continue to take its toll on our fellow Americans, rendering more and more of them homeless, tent cities have begun sprouting up across this great country.  It would not be fair to blame President Obama for the predicament that our nation is in, but President Obama has done nothing to help the situation.

President Obama’s ‘stimulus package’ only rewarded government contractors with more spending.  It is also correct to point out that former President George W. Bush’s ‘stimulus package’ did nothing more than President Obama’s spending bill.

Small businesses and the private sector in general got almost zero benefit for either porkulus spending bills.  Though this recession is typical of a business cycle, there are some things that can be done to alleviate the stress the economy is undergoing and maybe expedite the expiration of the current recession.  President Obama has done neither.

So it is fitting and fair to label the tent cities that are sprouting across America as Obamavilles.

(Note: In case the above YouTube video is taken down by the Blueshirts, you can see the entire story and video here.)

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23 Responses to Obamaville Shanty Towns: Tent Cities Sprouting Up Across America

  • Perhaps this can be the campaign song for Team Obama in 2012:

  • I would like to know what you think Obama could have done differently over the past year.

    There’s so much misunderstanding over the role of fiscal policy during this recession. It was precisely the huge expansion in the public deficit that counteracted the collapse in private demand, preventing huge negative growth rates, and equally dire employment numbers. Think of it this way: we went from a deficit of 2 percent of GDP in the balance between private income and spending shifted from to a surplus of over 6 per cent – in increase in private savings by 8 percent of GDP. What do you think would have happened without the fiscal crutch?

    It’s fustrating how few people get this point. I listened last night to John King lecture Larry Summers on how government debt is exploding at the very time when households are tighening the belt. Honestly, I thought this fallacy went out with Herbert Hoover! Here’s the issue: the vast majority of the increase in debt during this recession was because of the recession (lower taxes etc). In the jargon, it comes from automatic stabilizers. You work against the stabilizers, you make the recession worse. Moxt experts quite rightly felt that the depth of the collapse in private demand justified going even further than automatic stabilizers – hence the stimulus. The standing “crowding out argument” does not work in an environment when interest rates are near zero and nobody is lending (the case of a liquidity trap).

    Anyway, have a look at this post I did on what governments did right, and 4 key fallacies surrounding this recession.

  • MM,

    he vast majority of the increase in debt during this recession was because of the recession (lower taxes etc)

    Don’t you think if there was less federal government bureaucracy and programs, instead of raising taxes, that we wouldn’t have gotten to this point?

  • MM:

    Moxt experts quite rightly felt that the depth of the collapse in private demand justified going even further than automatic stabilizers – hence the stimulus.

    Except as the author rightly pointed out that the stimulus didn’t do ANYTHING. Most of the money in the Obama stimulus has yet to be spent.

    I supported TARP under the idea that despite that it would be mishandled, the banks needed shoring up. But make no mistake, there was a ton of corruption in TARP and even more under Obama’s stimulus.

  • Think of it this way: we went from a deficit of 2 percent of GDP in the balance between private income and spending shifted from to a surplus of over 6 per cent – in increase in private savings by 8 percent of GDP. What do you think would have happened without the fiscal crutch?

    My guess is that if Congress hadn’t passed a stimulus the Fed would have engaged in more quantitative easing, and we’d be pretty much where we are now. I don’t think Obama is to blame for our current troubles, but the things he’s done haven’t been particularly helpful either.

  • It also would have been nice if they had used tax cuts, or focused a higher percentage of the spending in 2009 and 2010, rather than just handing out money to every Democratic Congressperson’s favorite pork project.

  • Tito – I don’t get your point. The recession was caused by greed in the financial sector. Government softened the blow …. dramatically. And by that I mean monetary, fiscal, and financial sector policy.

  • I reckon living in a tent in Colorado in mid winter won’t be too much fun.

  • MM,

    This is a normal business cycle. Recessions occur every 5-7 years.

    To blame anyone is like throwing darts at a dartboard.

    I was just touching on the debt. Meaning that if we had less wasteful federal programs to defund the debt would be a bit more manageable.

  • John: I take your second point, but not the first. Multiplers are much larger on the expenditure than tax side. And I never got the whole “pork” thing — that’s the whole point of stimulus. Of course, it would be nice to get some socially worthwhile investments going (greening buildings, trains etc) but that’s not really the point of stimulus. The whole “pork” fetish is really an argument for good times – when you are supposed to be building your reserves to use them in times like this.

    On the tax point, Krugman just referenced some cutting edge new research suggesting that tax cuts are a really bad idea in liquidity type situations – http://krugman.blogs.nytimes.com/2009/12/14/a-new-paradox/

  • Tito,

    No, this was not a normal business cycle. It was the buggest global slowdown since the Great Depression. The fact that a meltdown was avoided comes from policymakers learning the lessons of the Great Depression (see the chart in my post).

    On your second point, it certainly makes sense to run prudent fiscal policy in good times to store up reserves for the lean years. And the debt profile today would not look so scary if we had gone into this in good shape. But we did not – the major fiscal loosenings of the last administration were not paid for – Iraq war, tax cuts for the wealthy, medicare part D expanion. Each of these added more to the debt than any single Obama initiative, and they didn’t even pretend to pay for them.

    The key fiscal challenge is that taxes are too low for teh level of desired spending. And if you disagree, you need to be willing to cut military spending or medicare – nothing else is going to cut it.

  • Blackadder, that’s possibly right, but (i) QE doesn’t come without cost; (ii) its success has been limited – again, it comes back to the fact that monetary policy has limited value in a liquidity trap.

  • MM,

    I agree with you that taxes are too low for the level of desired spending.

    Which to me means that we need to cut more federal programs.

    We have never had an income tax at all in this country, with a couple of exceptions, until the current income tax I believe was finally imposed in 1913.

    There is nothing that warrants to take people’s hard earned money.

  • Tito,

    Much as it might hurt to admit it, MM is right here. This wasn’t an ordinary business cycle.

  • Tito:

    (1) But what programs? As I said, you can’t do this without touching the military and medicare.

    (2) Your last sentence is not fully aligned with developments in Catholic social teaching, and reflects more a laissez-faire liberalism. Remember Pope John XXII: “the economic prosperity of a nation is not so much its total assets in terms of wealth and property, as the equitable division and distribution of this wealth” (Mater Et Magistra, 1961). Powerful stuff, that!!

  • MM,

    There’s room for disagreement on taxing hard working Americans and redistributing to the proletariat in Catholic Social Teaching.

    Pope John XXIII’s teaching is not set in stone nor is it mandatory.

    And by wealth he didn’t mean taxes, he meant equitable distribution, ie, opportunities to capital, resources, etc. Not take from workers and redistribute to the proletariat.

    BA,

    I’m not debating whether it’s ordinary or extraordinary (if I gave that impression, I didn’t mean to). But the fact remains it’s a business cycle that the socialist leaning Democratic Party is exploiting to further control our lives.

  • But what programs? As I said, you can’t do this without touching the military and medicare.

    Means testing Medicare and Social Security would be a start.

  • Multiplers are much larger on the expenditure than tax side.

    You will get quite an argument from some macroeconomists on that assertion.

    I would like to know what you think Obama [ie the Administation and Congress] could have done differently over the past year.

    1. Undertake a special audit of Citigroup, Bank of America, JP Morgan Chase, Wells Fargo / Wachovia, Goldman Sachs, Morgan Stanley, and GE Capital [?] to determine their authentic book value.

    2. Erect a fund of about $300 bn to compensate defined benefit pension funds and purchase preferred stock in insurance companies as needed, as these entities are abnormally invested in bank bonds.

    3. Prepare articles of incorporation for the successors of each of the foregoing. Each should have at least two successors – an ongoing business concern and a holding company which owns certain assets (illiquid securities, delinquent loans, and swaps & derivative). Citi, Bank of America and JP Morgan might have three successors: the dead asset holding company, their deposits-and-loans business, and their capital markets business.

    4. Recapitalize the aforementioned banks and investment firms through swapping debt (bonds, securitized receivables, l/t loans, &c) for equity in the successor corporations. If any one corporation retains a positive book value, it should be divided between its erstwhile creditors and equity holders; otherwise, the former bondholders, &c. get the whole enchilada.

    5. Call in all outstanding Fannie Mae and Freddie Mac debt and replace it with common stock. If necessary, agree antecedently to exchange the Fannie Mae and Freddie Mac bonds held by sovereign wealth funds abroad with U.S. Treasury debt.

    6. Suspend collection of federal payroll taxes. Phase them back in per the performance of the macroeconomy.

    7. Transfer responsibility for unemployment compensation to the federal government.

    8. Institute reductions in pay and benefits for all federal employees. Compensation would be cut each quarter in step with the decline in domestic product per capita.

    9. Remove all conditions on intergovernmental transfers from the federal government to state and local governments bar one: they have to cut the compensation of all public employees in their purview in step with the decline in per capita income in the country at large.

    10. Legislate a pre-packaged bankruptcy for General Motors, Ford, and Chrysler which would feature compensation cuts of at least a third for the workforce and legatees in return for equity shares in proportion to losses. The bondholders might get preferred stock. In lieu of making use of TARP funding, have the Federal Reserve provide a bridge loan by purchasing their commercial paper.

    11. Cut the minimum wage to $4.60 an hour.

    12. Institution a mortgage modification program along the lines suggested by Martin Feldstein (with NO means testing): those whose mortgages are held by Fannie Mae, Freddie Mac, or banks held by the FDIC might apply for a reduction in the principal equal to the fall (since they purchased the home) in the OFHEO price index for their area; in return, their chattels could be attached and their wages garnished if they defaulted.

    13. Institution of comprehensive tax reform as part of medium term planning for a return to fiscal balance: the elimination of deductions and exemptions, the gradual replacement of the payroll tax with enhanced income levies, the gradual institution of a component which taxes an index of one’s personal consumption, and a an enhanced per-dependent credit.

    14. Introduction legislation to erect a revised financial architecture some features of which might be as follows:

    a. Divestiture of subsidiaries which hold deposits domiciled abroad;

    b. Prohibitions on the ownership of financial firms by non-financial firms, or (for more than a temporary period) of non-financial firms by financial firms.

    c. Separation of deposits-and-loans banking from securities underwriting, proprietary trading (in securities, futures, options, &c.), ‘prime brokerage’, and private equity.

    d. Separation of securities underwriting from all activities other than corporate lending.

    e. Separation of proprietary trading from all other activities.

    f. Separation of prime brokerage from all other activities.

    g. Separation of private equity from all other activities.

    h. The separation of mutual funds from retail brokerage, trust companies, and treasury services firms.

    g. The separation of mid-market, corporate, and governmental lending from mortgage, farm, consumer, and small business lending. The former would be lodged in national banks which take deposits only from governments and incorporated entities; the latter would be lodged in banks which could take deposits from anyone but would constrained to operate within geographic catchments.

    h. Erection of an exchange for trading in swaps and derivatives.

    i. Prohibition of credit default swaps and insurance on securities.

    j. Prohibition on the use of credit to purchase securities other than initial public offerings; limit the ratio of margin loans in individual portfolios to one quarter of total assets; limit the permissible leverage of hedge funds accordingly;

    k. Erection an agency similar to the FDIC to act as a receiver of bankrupt securities firms and roll them up as rapidly as possible.

    l. Prohibition on the securitization of receivables.

    m. Turning Fannie and Freddie into self-liquidating entities.

    15. Postponement of action on medical insurance UNTIL THE BLOODY BANKS ARE REPAIRED.

  • Means testing Medicare and Social Security would be a start.

    Bleh.

  • socialist leaning Democratic Party

    Hillarious!!

  • Morning’s Minion writes Monday, December 14, 2009 A.D.

    “preventing huge negative growth rates”

    I have read this phrase in several places. I have not succeeded in understanding what is “a negative growth rate”. Is it shrinking?

    [I make the point chiefly to illustrate that much discussion about matters economic has similar fine-sounding nonsensical phrases].

It's A Depression, Thus Sayeth The Veep

Wednesday, October 21, AD 2009

During these dismal economic days, we can always rely upon the  comic stylings of Joe Biden to raise our morale, just as the American public during Depression I looked to the Three Stooges for comic relief.  I assume Jolly Joe in the above video was thinking of  the old Reagan line from Reagan’s 1980 campaign for President:  “A Recession is when your neighbor loses his job.  A Depression is when you lose your job.  A Recovery is when Jimmy Carter loses his!”  Needless to say, the brighter lights in the Administration were reaching for extra strength pain relief as they saw the human gaffe machine use the “D” word, especially since they have been attempting to convince a sceptical public that the recession  is ending.

What makes this especially hilarious is that Newsweek, the unofficial house organ of the Obama administration, ran a puff piece on Biden last week entitled “Why Joe is No Joke” .  Hint Joe, when you are a politician and one of the most sycophanic press journals on your side runs a story arguing that you are not a joke, that is most definitely not a good sign.

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13 Responses to It's A Depression, Thus Sayeth The Veep

  • “We can always rely upon the comic stylings of Joe Biden to raise our morale, just as the American public during Depression I looked to the Three Stooges for comic relief.”

    Remember a few months ago when we were speculating on who the Third Illinois Stooge might be to go with Blago and Burris? Looks like the great state of Delaware stepped up to fill the gap — thank you very much Delawareans 🙂

    Blago, Burris, and Biden…it even kinda rhymes with Moe, Larry, and Curly!

  • Wait, am I supposed to be tickled at Biden for actually slipping out the truth? It is a depression and its not going away. Man, I’d love it if the Administration actually admitted reality.

  • C’mon Anthony. ‘Not going away’ on what time scale?

    The decline in per capita income over the last year or so has been on the order of 4-5%. That during the period from the fall of 1929 to the spring of 1933 was on the order of 30%. We have a ways to go ‘ere we can be said to be suffering adjustments on the scale people did during the Depression.

    No one is certain at this point whether production levels have stabilized or whether there will be a secondary contraction brought on by renewed stress on the banks (as leases on commercial real estate contracted after 2003 expire) or by a currency crisis (given the ratio of public sector borrowing to domestic savings).

    The tax increases necessary to balance the public books will likely put a drag on economic growth for a couple of business cycles, even if nothing acutely disagreeable happens over that time. The situation is bad enough without overstating matters.

  • Nah. Its a depression.

  • Just another in a long line of VPs who were best kept a closet and brought out for state functions only.

  • I’m just waiting for him to mis-spell tomato during a photo-op with school children. LOL

    God bless our poor doofus Veep.

  • Ha! Loved this. Just wish the overall effects of this administration were half as funny and a billions times less scary. Hey you want to catch some frightening stuff Obama is up to, catch my post tomorrow. Are you aware of the “Climate Debt Treaty” Obama is scheduled to sign in Denmark next month? Effectively signing away our sovereignty as a free nation and subjugating it to the New World Order?

    Like you blog – I’ll be back.

    Marvin D Wilson

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  • Hi there, nice site with good info. I really like coming back here often. There’s only one thing that annoys me and that is the misfunctioning of comment posting. I usually get to 500 error page, and have to do the post twice.

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4 Responses to Obama Funemployment-Take 2

  • Reminds me of the crisis during the Reagan years, you know, the homeless. Every night on the news, all the news specials, stories about how unconscionable that there were homeless people living on the street. Apparently all those homeless people got homes when Clinton came in office. Well, all except for those who were still homeless and had to be rounded up and put in abandoned and condemned buildings whenever the Democratic Convention or major sporting events came to town. Now I suppose we’ll hear about how liberating it is to be free from a mortgage, cuz the Obama years are all about hope, change, and freedom.

  • Rick, when a Democrat is in the White House, for most members of the media it is always “morning in America”.

  • In my town, NPR ran a stories about how the stimulus was working three days in a row. The bad news was that it was about the same road project. Just told it three different ways. Also didn’t mention that the project was slated to last 90 days and the people employed would be out of work again at the end of that time.

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Concord Coalition: 14.4 Trillion Dollar Deficit

Friday, August 28, AD 2009

14.4 trillion

In this earlier post I reported that the Obama administration is predicting a 9 trillion dollar deficit over the next ten years.  Now, the non-partisan Concord Coalition is predicting here a 14. 4 trillion dollar deficit over the next 10 years.

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$668,621

Friday, June 5, AD 2009

Household Debt

Hattip to Daniel Indiviglio at the Atlantic.  USA Today is reporting that the share of the Federal debt for each American household is $546, 668 with private average debt of 121, 953.  Of course these numbers do not include the average household share of liabilities incurred by states and local levels of government.  Does anyone believe that we will ever climb out of this debt abyss except through the terrible remedies of hyper-inflation or debt repudiation?  As I have often stated on this blog the debt that we are amassing is fiscal lunacy and our economy will soon smash into a brick wall of government debt.

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3 Responses to $668,621

  • It certainly is insanity Don.

    I can’t for the life of me believe that the administration thinks it can create this debt and then unload it 4-8 years later on Obama’s successor to pick up the pieces. A debt of this size I imagine would come to roost within a few years.

    Unless this is exactly what he wants… everyone and everything indebted, thereby creating a nation where the average citizen is completely dependent upon government for his sustenance.

    Bankruptcies in every sector of the economy would be much preferable. This debt load needs to be liquidated with real assets sold off. Monetizing the debt via money creation will carry a real and dreadful hyperinflation.

    This is why I lean in favor of commodity standards in currencies. None of this would be possible if money were pegged to real things. As long as we are on a fiat currency we’ll be stuck in the boom-bust fantasy land.

    If only I had enough fiat money to buy gold!

  • Read the history of Weimar Germany.

  • I think the fellow at USA Today misplaced a decimal point. There are (I think) around 114 million households in the United States. If I am not mistaken, the ratio of the federal public debt (a stock datum) to annual domestic product (a flow datum) stood at 1.19 in 1945. I do not believe it has as yet ever been higher. That would translate to $17 trillion at the present time, or about $150,000 per person.

    One question of interest is the effect of structural surpluses on economic performance over periods of time exceeding one business cycle. Fiscal stimulus through tax rebates, tax cuts, or public expenditure has been a policy tool for containing economic contractions. In said circumstance, you would be speaking of manipulating aggregate demand over a time frame of a year or two. There would certainly be transition costs in making the necessary adjustments in baseline of taxation and expenditure in order to run budget surpluses as a matter of course, but would economic performance thereafter be diminished as against a hypothetical situation where the budget was balanced over the course of the business cycle as against the reality of the last five decades, where we run a deficit nine years out of ten?

    Consider the following parameters: population stasis, complete price stability, and rates of improvement in real income near historical means (about 1.3% per annum). Recall also that the United States government paid off the whole of the national debt during the period running from 1792 to 1835. A commitment to run a budget surplus of 2% of domestic product per annum (2.4% during years of expansion and balanced during recession years) would allow for the liquidation of a debt of 119% of domestic product over that sort of time frame. Of course it would require that our politicians be very different sorts than in fact they are.

AIG Bonus Recipient Quits via NY Times Editorial

Thursday, March 26, AD 2009

Over the last week the news cycle has been enjoying a Five Minutes of Hate over the bonuses being given out to a number of individuals in the AIG Financial Product division, with some going to so far as to say that at a minimum they should all get jail time, and since that’s not possible they should see all their earnings taxed away.  Given the, “our problems are all the result of Wall Street greed” narrative which many have applied to our current financial crisis, and that as fallen human beings we are all prone to envy, this can hardly be surprising.

For those wanting to know about the reality behind the fracas, this editorial in yesterday’s New York Times is illuminating.  It is an open resignation letter from Jake DeSantis, an executive vice president of the American International Group’s financial products unit (and a recipient of one of the infamous bonuses), to AIG’s CEO.

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3 Responses to AIG Bonus Recipient Quits via NY Times Editorial

  • It’s truly fascinating to see how many intelligent people let themselves be governed by their passions.

  • It is also a horror to begin the tar and feather process because they got what was coming to them. Their bonuses, up to February 11, 2009, were guaranteed under Porkapalooza. Inserted there by….. surprise….. Christopher Dodd, the public official most responsible for This Mess. Fun to find out how his 2010 fortunes for re-election may be diminishing. This just in- Pat Toomay- Catholic Conservative Pro-Life- has sizable lead over the tortured Arlen Specter in preliminary GOP Senatorial polls. I love the smell of sudden and convulsive change.

  • My very first reaction when this story broke was, “I wonder how many of these people receiving bonuses had nothing to do with the transactions in question?” Realistically, probably 95% of the employees at AIG are about as culpable for this mess as are you or I.

Red Ink

Wednesday, March 25, AD 2009

bush-obamabudget1

A look at the federal budget since 2000, with projections, for what little they are worth, by the White House and the Congressional Budget Office to 2019.  By CBO estimates last week, the budget deficits between now and 2019 would total $9, 300, 000, 000, 000.00.  The entire cost of WW2 for the US in 2008 dollars was 3.6 trillion.  This year the budget deficit will total 13% of our gross domestic product.  This isn’t economic policy, it is lunacy.  These type of deficits are completely unsustainable, and we are running towards national bankruptcy.  It is impossible to borrow these type of funds from abroad.  We will simply create the funds out of thin air.  The long term impact on our children and their children can be easily imagined.  As the Heritage Foundation points out, this is a completely bi-partisan disaster.  Politicians have acted like teen-agers with stolen credit cards for far too long.  However, this will stop.  It will stop either by voters throwing out of office the fiscally irresponsible, or, much more likely in my estimation, the economy will simply hit a brick wall.  This will not, cannot, go on.  How it is stopped is up to us.

Update I:  The President of the EU slams current US economic policy as a road to hell.  I never thought I would live to see the day when a President of the EU would have more economic sense than a President of the US.

UpdateII:  Hattip to Instapundit.  A sign of things to come.  Stocks slide after a lack-lustre sale of T bills and notes: 

“Bond prices fell after the auction of $34 billion in 5-year Treasury notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 2.77 percent from 2.71 percent late Tuesday. The yield on the three-month T-bill rose to 0.19 percent from 0.17 percent Tuesday.

Investors gave an unexpectedly cool response to the note sale just a day after a $40 billion auction of 2-year notes suggested strong demand. The government is running up huge deficits in order to fund an array of plans to provide stimulus to the economy and support to the ailing financial system. Any suggestion that demand for U.S. government debt is weakening is a negative for stocks, simply because Wall Street has been relying so heavily on the government’s rescue plans.

The surge of worry over the debt auction wiped out the market’s early optimism in response to durable goods and home sales data.”

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9 Responses to Red Ink