Building repairs are underway on public housing in Imboden, Ark., and Cumberland, Ill., states across the country are receiving money to weatherize the homes of low-income residents, and the Silver Star Construction Co. is about to start work on two road-resurfacing projects in south-central Oklahoma with a total cost of $12 million…
…Slowly but surely, the $787 billion American Recovery and Reinvestment Act — better known as the economic stimulus package — is beginning to percolate nationwide, six weeks after President Obama signed the legislation.
…In most cases, though, the money is working its way into the system far more gradually as officials strive to meet not only existing guidelines for programs receiving aid but also reporting requirements that have been added to make sure that stimulus funding is spent as intended and to account for the jobs it creates.
Politico’s Ben Smith on conservative governors caving in their fight against stimulating their states.
Summers predicted “‘sense of freefall’ in the US economy would end in the next few months but cautioned that the risks of deflation and more job losses had not gone away” reports FT, which also noted:
With fiscal conservatives complaining about the scope of President Barack Obama’s budget plans, which include a far-reaching reform of health care and the introduction of a cap-and-trade system for carbon emissions, Mr Summers insisted that the measures “aren’t luxuries to be deferred at a time when we have a weak economy”.
Increased government investment would provide a stimulus effect, he said, and reforms to health care would save taxpayer money in the long run.
Mr Summers was saved from answering in full a question on whether the administration might ask Congress for a second fiscal stimulus plan when two protesters briefly interrupted the lunch and called for the economics adviser to resign.
Baseline Scenario’s Simon Johnson cautions more money may be needed: “Why is a depression scenario still on the table? … the danger in this situation arises primarily from the attitude and approach of the US Treasury … The most compelling evidence for lack of readiness comes from those who are now most articulate in Treasury’s defense. ‘Congress will not provide any more money’ and ‘you must recognize the political constraints’ are sensible points. But think about what they also imply. Treasury is not making the case, full-time and flat-out, for more funding – on a contingency basis – from Congress. At least from my conversations on Capitol Hill, I see no signs that this is Treasury’s top priority … if you’ve taken nationalization off the table and you have very little cash remaining for anything bailout/rescue-related, you are vulnerable to runs.”
It seems that the people who could not see an $8 trillion housing bubble are now optimistic about the economy’s prospects. That’s what the Washington Post tells us. The article points to strong bank profits, respectable March retail sales, and a modest rise in exports. While it is possible to say that all the numbers could have been worse, these data do not provide much grounds for optimism.
In the case of bank profits, much of the profit was driven by a surge in mortgage refinancing which produces large fees for banks. This surge will continue for the near term, but before long most of the people who are able to refinance their mortgages will have done so. Banks have also opted not to declare large write-downs of bad loans in the current quarter. They have apparently decided, possibly for political reasons, to defer write-downs of bad debts for future quarters…
“Pension Plans Post First Gain In Funding in Eight Months,” reports W. Post.
Dems Recess Homework: Health Care
CQ: House Democratic leaders are asking their members to use the spring recess to reach out to constituents and sell the White House and congressional plans to overhaul the nation’s health care system. Rank-and-file Democrats have been asked to hold at least one event each on the economy, health care and energy while home in their districts … Hoyer’s office has been distributing talking points and sample press releases to members, urging them to focus on how rising health care costs are hurting businesses, individuals and the economy as a whole. Democratic leaders also are pushing the message that a health care overhaul will help people who already have insurance — by letting them keep what they have while lowering premiums and increasing access to doctors.”
Health Care for America Now also active during recess: “We are mobilizing for health care over the April recess, and have organized over 100 events in over 40 states with over 30 Members of Congress during the break. These range from town halls to rallies to other inventive forms of public action … Click here to search for an event to attend in your area. And if you can’t make an event, at least send a (free!) fax to your Members of Congress and let them know how important health care reform is to you.”
Joe Paduda begins a series on debunking universal health coverage myths: “In several areas the US already has longer waiting times and poorer access to care than countries with universal healthcare. If the US adopts universal healthcare as practiced in other countries, the evidence indicates access will go up and waiting times may well go down.”
No Time For Armchair Climate Quarterbacks
…next week, Congress begins an intense round of hearings on a comprehensive Democratic energy/climate bill. Not some pony plan from a columnist’s daydream. Not an obscure bill introduced by a backbencher to make a symbolic point. An actual, serious piece of legislation: the bill Democrats on the relevant committees will sign off on; the bill Obama will support; the bill that will go to the Senate; the bill that could, if everything goes well, if everyone in the progressive coalition rallies behind it to generate overwhelming political pressure, become law. If you are serious about wanting energy and climate legislation in this Congress, this is your chance. No other. The game is underway.
So now, on the cusp of an enormous fight against dishonest and well-funded proponents of doing nothing, Friedman decides it’s time for ‘an alternative strategy, message and messenger’? Are you kidding me?! The only conceivable effect Friedman’s endorsement of an alternative bill can have is to divide support and distract attention from the best chance for a serious energy/climate bill in 30 years. His timing could not possibly be worse.
Republicans’ main attack is a claim that climate legislation will cost U.S. households $3,100 a year. They got the number by doing some additional math based on a Massachusetts Institute of Technology study, and they’re sticking with it, even though John Reilly, an MIT economist and the author of the study, told them that they misinterpreted his work and that their number is wrong…
…What the bill doesn’t spell out yet is how the government would compensate consumers for higher electric, gasoline and heating bills. The size of the increase is unknown because it depends on factors that are still being discussed — including how strict the limits would be. The draft bill in the House contains no language on paying back consumers. Lawmakers are working on those provisions. Under one proposal, revenues the government collects would be returned to consumers.
MinnPost busts Rep. Michelle Bachmann peddling the phony stat.
TNR’s Brad Plumer assesses the congressional landscape for a carbon cap:
So a great deal depends on Waxman’s much-praised legislative skills. And what about Republican “yes” votes in the Senate? Well, Susan Collins of Maine has said she’s in favor of cap and trade. Olympia Snowe once introduced a bill on the issue. The George Voinovich, who’s set to retire next year, is sour on the odds of crafting policy that can placate both green groups and 60 senators, but he’s still hoping to reach a consensus, and told ClimateWire that senators are quite mindful that the EPA will soon have the authority to regulate carbon on its own if they don’t act.
Meanwhile, there’s the always-mercurial John McCain, who has sponsored cap-and-trade bills in the past, but at this point claims he hasn’t been consulted by either the White House or Senate Democrats. I’ve been trying find out if there’s any back story here—in theory, one would imagine he could be a very strong ally for Obama on this issue. With any luck, more on that later.
There’s also some tension between the House and Senate legislative approaches. The Waxman-Markey bill is a gigantic omnibus measure straddling everything from efficiency grants and electric-grid upgrades to carbon caps. This is the all-or-nothing approach. The Senate, meanwhile, is doing things piecemeal. Jeff Bingaman’s energy committee is slowly marking up its own energy legislation, which will include renewable-power requirements and appliance standards and green-job training but no carbon cap. (The cap is being put together by Barbara Boxer’s environmental committee.) How this all gets wrangled together into law is still an open question.
LA Times on climate threat to corn growers: “Global warming could rob the U.S. economy of $1.4 billion a year in lost corn production alone, a national environmental group estimated in a report released Thursday. The Environment America study, based on government and university data, projects that warming temperatures will reduce yields of the nation’s biggest crop by 3% in the Midwest and the South compared with projected yields without further global warming.” Full Environment America study “Hotter Fields, Lower Yields” here.
Stress Test Meeting Today
President Barack Obama plans to meet on Friday with top financial regulators to sketch out the next steps to take with the ‘stress tests’,” reports Reuters. “Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair will meet with Obama to brief him on the progress of the tests and discuss the next steps…”
Watch out for leaks. Bloomberg reports: “The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of ‘stress tests’ that will gauge their ability to weather the recession, people familiar with the matter said. The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month … ‘It is premature for banks to talk about the stress tests,’ [Financial Services Roundtable's Scott] Talbott said yesterday. ‘They aren’t finalized yet and there is no framework to evaluate the results.’”
Calculated Risk scoffs: “What ever happened to transparency? This suggests the results are very ugly for some banks. It’s amusing that the article mentions Citi – I doubt Citi wants the results released!”
Goldman Sachs looking to pay back goverment. WSJ: “Goldman Sachs Group Inc., riding a rising market, is considering making a multibillion-dollar offering of its shares to investors as part of an effort to repay a $10 billion government loan, according to people familiar with the matter … Repaying the government is favored by Goldman’s employees, eager for the paydays of the past; by investors, who applauded the firm’s finance chief when he made the suggestion; and its executives, who believe the government’s role will make it harder for the firm to compete.”
No Unions = Temp Workers = Bad Economy
Over the past decade, U.S. businesses increasingly have relied on contract workers as a way to keep a lid on health-care and retirement benefit costs and to give them more flexibility to adjust payrolls as conditions change. Now, with the American economy flashing code red, companies from Wall Street to Silicon Valley are casting off temporary workers and freelancers left and right, typically without any severance pay.
While the ability to shed contingent workers helps protect corporate profits, economists say it’s a net negative for the economy. That’s because while companies may save on labor costs, they aren’t likely to use those savings to boost investment with the economy so weak, preferring instead to rebuild their balance sheets.
Meanwhile, the people who lose their jobs will be forced to cut spending drastically, particularly because many of them earn below-average pay and thus have little savings to fall back on. The overall result is a decrease in demand, further depressing the economy.
Too bad it’s not easier for workers to organize for fair pay and benefits. If only there was legislation to fix that…
Wal-Mart, meet your new union. NYT: “After years of legal challenges, a Quebec government arbitrator has awarded workers at a Wal-Mart store a labor agreement. The collective agreement, announced on Wednesday by the United Food and Commercial Workers Union, is the only one to cover Wal-Mart employees in North America.”
USA Today reports public employees paid significantly more than private. Conservative quoted attacking public employee benefits, when the problem is unfair compensation in the private sector.
Squeeze Put on GM Bondholders
Squeeze may be on GM bondholders. NYT: “General Motors is working on a new debt-exchange plan for its bondholders, one that would most likely offer only equity instead of cash or new debt, a person briefed on the proposal said on Thursday.”
WSJ adds: “The new debt-exchange offer, which could be presented as soon as next week, is sure to face strong resistance from bondholders. But the offer may be a last chance at avoiding bankruptcy, which GM worries would be more expensive and disruptive than an out-of-court solution … Treasury officials, many of whom are now working on GM’s restructuring from an office in Detroit, plan to meet in coming days with a committee representing GM’s bondholders.”
“President Barack Obama, saying he was committed to a strong U.S. auto industry, announced on Thursday the government would buy 17,600 new fuel-efficient vehicles from ailing American automakers by June 1″ reports Reuters. It “includes the purchase of 2,500 hybrid sedans that will be ordered by April 15, the largest one-time purchase of hybrid vehicles for the government fleet in history … Swapping older federal cars for hybrids and fuel-efficient vehicles will reduce gasoline consumption by 1.3 million gallons per year and cut carbon dioxide emissions by 26 million pounds, the White House said.”
The purchase would have been twice as big if the Senate didn’t cut the House stimulus bill after purchasing fuel-efficient to reduce energy costs, support American auto jobs and spark demand for green vehicles was derided as pork.
Shrinking Trade Gap
The trade report released Apr. 9 shows that the trade bubble continues to collapse—and that’s good news. The trade deficit shrunk to $26 billion in February, or an annual rate of $313 billion, down from $743 billion a year ago. Goods imports alone are down 33% over the past year. Leaving out oil, the imports of nonpetroleum goods are down by 26% over the past year…
…A deeper fall in imports and the trade deficit will have several salutary effects. First, it will mean that the U.S. has to borrow less from overseas. Second, it will make it easier to fix the financial system, since banks and other financial institutions will not be funneling so much foreign money into the U.S. economy. Third, and perhaps most important, it will become easier to see just what remains of our manufacturing base. I’m reporting a new story right now about how excess globalization, fueled by the credit bubble, distorted growth statistics in the U.S. and around the world.
The downside of the fall in global trade is that it is going to be very harmful to many countries which grew too dependent on exports, including Japan and Germany. If I’m right, and the global trade boom was another manifestation of the global credit boom, a big chunk of these exports are not going to come back any time soon.
NYT notes that exporting American farmers also are taking a hit.
Protecting The Paris Hilton Tax
Michael Kinsley rips right-leaning Dems for trying to prevent reinstatement of the estate tax: “Ten Democrats have joined the Republicans in calling for a $10 million exclusion and a 35 percent rate. This is amazing. The number of people who leave estates of even $7 million is minuscule. The number leaving more than $10 million is smaller still. Yet to save these very few very wealthy people a small fraction of their estates, these senators are willing to hand their party’s president an embarrassing defeat. Why on earth? ”
Economist’s View’s Matk Thoma suggests: “To try to overcome the political opposition, and to try to meet a worthy goal, I would increase and broaden the tax, and then earmark the revenues specifically for programs designed to promote equal opportunity, e.g. Head Start programs, funds to allow anyone to attend the college of their choice without running up large debts, or alternatively to help to start a business, and so on. To further help with the political opposition, the collected funds, or more precisely the programs the funds support, would be made available to everyone on an equal basis.”
ataxingmatter recommends waiting: “There are a number of Bush changes to the Code that should be reversed rather than extended. Putting major ‘reforms’ off will permit the people to become better educated about the impact of those changes, which favor the upper class over ordinary Americans. That understanding could lead to better reforms.”
Beware The Social Security Cutters
Times Justin Fox jumps on the “recession is killing Social Security” bandwagon previously debunked by Dean Baker and Firedoglake’s Phoenix Woman.
Immigration Reform On Slower Track
After yesterday’s NYT report that the President would begin to address immigration in May, CNN follows: Multiple Obama administration officials tell CNN that the White House is not pushing to pass a comprehensive immigration reform bill this year. … it’s a top priority for the President’s first term … the White House insists the New York Times story on immigration ‘isn’t news.’”
Terrance Heath contributed to the making of this Breakfast.