This is bad news - not just for the many, many Americans who are still struggling to get by, but for the long-term economic health of the country. People not working are people not paying payroll taxes, and without that revenue, it's bad news for Social Security and other federal programs. That's why a real jobs program is necessary:

The economy is projected to add jobs this year at a pace too sluggish to make much of a dent in unemployment, according to a new White House forecast that suggests President Obama's advisers expect the jobless problem to be a fact of life throughout his term.

With the release of the annual Economic Report of the President, the Obama administration laid out a sweeping economic agenda that includes overhauling health care, restructuring financial regulation and dealing with long-term budget deficits. But the backdrop for all those initiatives is an economy that, if the administration's forecast is correct, will be functioning well below its potential for years to come.

The nation will add an average of 95,000 jobs a month this year, according to the forecast, a bit below the number that economists think needs to be generated just to keep up with population growth. The unemployment rate is projected to come down quite slowly after that, averaging 8.2 percent in 2012, when Obama will be up for reelection.

Are the Blue Dogs shamelessly self-interested and venal, or are just plain stupid? Economists are predicting these high unemployment numbers through the end of 2011, and these clowns want to cut government spending even further. As long as they get to keep their jobs, they don't give a crap about putting even more Americans out of work. Lovely!

Blue Dog Democrats want Congress to go further than President Barack Obama’s proposal to freeze spending in next year’s budget.

The group of House centrists will soon introduce a bill capping discretionary spending at specific levels. The move would challenge their leadership and the president, who are balancing concerns with the nearly $1.6 trillion deficit in 2010 with those who say government spending on job creation is the way out of the recession.

The spending levels sought by the Blue Dogs may result in spending cuts, which would go beyond Obama’s proposal to save $250 billion over the next decade by freezing non-security discretionary spending for three years, said Rep. Baron Hill (D-Ind.), a senior Blue Dog.

“Two hundred and fifty billion is a lot of savings with a freeze on discretionary spending, but I think we can do better,” Hill said in a brief interview.

The group has yet to hash out the details on the spending caps bill, but it has near-unanimous support among its members, a Blue Dog aide said.

Via Raw Story, some infuriating news. Remember that children's book with the Gingerbread Man? "Ha ha, you can't catch me!" That's what this reminds me of. No matter what, the bankers always seem to slither away.

Bug - or feature?

On the same day that President Barack Obama announced an ambitious plan to reform the US financial system, bankers at the largest Wall Street institutions indicated that they are already finding ways around the proposed changes.

Sources at three Wall Street banks told BusinessInsider's John Carney that "they are already finding ways to own, invest in and sponsor hedge funds and private equity funds" despite the proposed restrictions on those activities. One unnamed operative at a major bank said his firm expects the reforms to affect no more than one percent of its business.

President Obama announced two major reforms of the financial system on Thursday. The first would see the US in effect return to the separation of commercial and investment banking that was mandated by law until 1999, when that rule in the Depression-era Glass-Steagall Act was abandoned.

Many economists say allowing banks to be both lenders to the public and investors in large hedge funds and other securities contributed to the economic collapse of 2008.

I try to walk that line between being supportive of Obama - and being blind to his very real failings. I don't like a lot of his policy decisions - and neither does Paul Krugman. Today, Krugman writes that the administration's problems aren't the fault of "trying to do too much," but rather bad policy decisions on Obama's part:

The stimulus was too small; policy toward the banks wasn’t tough enough; and Mr. Obama didn’t do what Ronald Reagan, who also faced a poor economy early in his administration, did — namely, shelter himself from criticism with a narrative that placed the blame on previous administrations.

About the stimulus: it has surely helped. Without it, unemployment would be much higher than it is. But the administration’s program clearly wasn’t big enough to produce job gains in 2009.

Why was the stimulus underpowered? A number of economists (myself included) called for a stimulus substantially bigger than the one the administration ended up proposing. According to The New Yorker’s Ryan Lizza, however, in December 2008 Mr. Obama’s top economic and political advisers concluded that a bigger stimulus was neither economically necessary nor politically feasible.

Their political judgment may or may not have been correct; their economic judgment obviously wasn’t. Whatever led to this misjudgment, however, it wasn’t failure to focus on the issue: in late 2008 and early 2009 the Obama team was focused on little else. The administration wasn’t distracted; it was just wrong.

The same can be said about policy toward the banks. Some economists defend the administration’s decision not to take a harder line on banks, arguing that the banks are earning their way back to financial health. But the light-touch approach to the financial industry further entrenched the power of the very institutions that caused the crisis, even as it failed to revive lending: bailed-out banks have been reducing, not increasing, their loan balances. And it has had disastrous political consequences: the administration has placed itself on the wrong side of popular rage over bailouts and bonuses.

You see why the bully boys of Wall Street dislike Sheila Bair - and Elizabeth Warren? Because they actually think of the people hurt by the financial industry's long, drunken binge and are trying to repair the damage. No wonder these women are unpopular with the in crowd:

FDIC Chairman Sheila Bair indicated Thursday that she is exploring the idea of reducing the principal on as much as $45 billion in mortgages her agency has acquired from failed banks.

That would be the first significant government attempt to employ a measure that some economists and consumer advocates have long argued is the only really effective way to stop foreclosures.

Although the $45 billion in mortgages only amounts to less than half of one percent of mortgages nationwide, the move would be significant because the idea of reducing principal has been all but dismissed for the last nine months by the Obama administration.

Economists like Yale University's John Geanakoplos, however, have argued that cutting the principal on delinquent loans should have been the administration's practice all along. For the nearly quarter of American homeowners who owe more on their mortgage than the house is worth, it's by far the best way to keep them in their homes and reduce foreclosures, Geanakoplos said in an interview last month.

Bair made her comments in an interview with Bloomberg News. She has not yet discussed her proposal with the Treasury Department, a senior administration official said Thursday in a brief interview. Though unfamiliar with the details of her proposal, the official said it was promising.

The Federal Deposit Insurance Corporation no longer owns the mortgages directly; but when it sold them to solvent banks, it agreed to shoulder some of the future losses. Bair's move would effectively make sure that homeowners directly benefit from that guarantee, not just the lenders.

It's like deja vu all over again. Despite the fact that we know the causes of deficits are more important than the actual deficits, despite the fact that most top economists are calling for more economic stimulus and jobs programs, the New York Times has raised the anti-deficit banner in much the same way they did the "weapons of mass destruction" rationale for invading Iraq. (And look how well that all turned out!) This, of course, from the same paper who looked away while Bush trashed the economy.

And now our anti-deficit president's going to do another symbolic tour - in Allentown, of all places. Too, too ironic!

WASHINGTON — As Democrats renew their push to create jobs, they are at odds over the timing, cost and scope of additional measures, with the White House’s concern about high budget deficits pitted against the eagerness of many in Congress to spur hiring before next year’s elections.

After months in which his focus has been on a health care overhaul and foreign policy issues, President Obama will pivot later this week to the economy, convening a White House forum on Thursday to discuss ideas for job creation and then traveling to Allentown, Pa., for his first stop on a “Main Street Tour.”

Congressional Democrats return from a holiday break intent on packaging new proposals for tax incentives and construction projects to promote employment, with the House, where every member is up for re-election next year, on a much faster track than the Senate or the White House.

While the political rationale for additional government action is clear, it is an open question whether it would have any substantial economic effect. Still, the impetus for the activity will be underscored on Friday when the government releases figures for job losses and the unemployment rate for November.

With joblessness, which stood at 10.2 percent in October, likely to remain high through 2010 even as the economy recovers, the stage is set for what could be a yearlong tussle between deficit reduction and government incentives for job creation, and between the politics of Wall Street and Main Street.

An "open question" on whether it would have "any substantial economic effect"? Gee, you'd think a New York Times reporter would read Paul Krugman at least once in a while.

In a move that's akin to acknowledging the roof has massive leaks, but you won't consider any solutions that involve anything more costly than putting pots and pans under the leaks, President Obama announces he wants to do something about unemployment - but he doesn't want it to cost anything:

WASHINGTON (Reuters) - President Barack Obama assured Americans on Monday that boosting jobs was a top priority, but gave no specifics about how to meet this goal that some economists say warrants more government spending.

The White House said separately that all "sensible and reasonable measures" would be considered to encourage employment, but also stressed that it must be balanced with the need for the United States to tackle record budget deficits.

"Our economy is growing again for the first time in more than a year," Obama told reporters after a meeting with his Cabinet. "We cannot be sit back and be satisfied given the extraordinarily high unemployment levels that we have seen."

[...] Obama has also said he is interested in solutions that would not cost much public money, warning that adding to the U.S. debt could trigger a double-dip recession.

Reacting in the NY Times, Krugman is, well, appalled:

What? Huh? Most economists I talk to believe that the big risk to recovery comes from the inadequacy of government efforts: the stimulus was too small, and it will fade out next year, while high unemployment is undermining both consumer and business confidence.

Now, it’s politically difficult for the Obama administration to enact a full-scale second stimulus. Still, he should be trying to push through as much aid to the economy as possible. And remember, Mr. Obama has the bully pulpit; it’s his job to persuade America to do what needs to be done.

Instead, however, Mr. Obama is lending his voice to those who say that we can’t create more jobs. And a report on Politico.com suggests that deficit reduction, not job creation, will be the centerpiece of his first State of the Union address. What happened?

It took me a while to puzzle this out. But the concerns Mr. Obama expressed become comprehensible if you suppose that he’s getting his views, directly or indirectly, from Wall Street.

I suspect a lot of this goes back to what Howard Dean said when I interviewed him: That the young people who came out in record numbers to vote for Obama are concerned about the deficit. Well, isn't it time you put on your teaching hat and explained why that can't be the priority right now, Mr. President?

Let's see: No new jobs, benefit extensions screwed up and Christmas is coming. You'd think the administration and Congress would be doing something about this, but you'd have better luck asking Underdog:

Nov. 19 (Bloomberg) -- The number of Americans filing claims for unemployment benefits held at a 10-month low last week, a sign firings are letting up as the economy recovers.

Initial jobless claims were unchanged at 505,000 in the week ended Nov. 14, in line with the median forecast of economists surveyed by Bloomberg News, Labor Department figures showed today in Washington. The number of people collecting unemployment insurance dropped in the prior week, while those getting extended payments jumped.

The loss of 7.3 million jobs since the recession began in December 2007, the biggest drop of any postwar economic slump, makes an acceleration in firings less likely as consumers begin to spend. A rebound in hiring may take longer to develop as companies have ample room to boost hours for current employees before taking on additional staff.

“The labor market is improving, but at a glacial pace,” said Tom Porcelli, a senior economist at RBC Capital Markets in New York, who had forecast claims would fall to 503,000. “People are having a hard time finding a job as companies remain wary of the economic recovery. We expect it will be a jobless recovery.”

Who could have guessed? Apparently all those people losing their homes are helping the economy recover faster than expected. So let's look on the bright side of all those homeless, helpless families:

The pain of millions of people across America losing their homes hardly inspires confidence in the future. But in a brutal way, it could be restoring the financial health of the U.S. consumer faster than many recognize.

One of the biggest clouds on the economic horizon is the vast amount of debt U.S. households took on during the boom years. The Federal Reserve puts total household debt, including mortgage debt, at about $13.7 trillion, or 125% of annual after-tax income, a burden that many economists believe will take several years to pare down to what they see as a more sustainable level of 100%. During that "deleveraging" process, the logic goes, U.S. consumers -- whose spending makes up more than two-thirds of the U.S. economy and about one-fifth of the global economy -- won't be able to play a leading role in any recovery.

The gloomy forecasts, though, miss an important point: Debts have value only to the extent that they are being paid, and a rapidly rising number of U.S. households aren't doing so. Those defaults are leading to losses at banks, a wave of foreclosures, trouble for neighborhoods and strife for families. But they are also providing an immediate, albeit radical, form of debt relief.

"It's not ideal, because it carries other costs," said Karen Dynan, a consumer-finance specialist at the liberal Brookings Institution think tank who recently served as a senior adviser to the Federal Reserve. But it is "going to help get household balance sheets back to the right place."

If one accounts for defaults, U.S. households' debt burden is shrinking a lot faster than the official data suggest. First American CoreLogic, which tracks the performance of mortgage loans, estimates that some 9.3% of the nation's 52.4 million mortgage holders were 60 or more days behind on their payments as of July. That represents relief on about $1.2 trillion in loans. The official data miss most of that, because the Fed doesn't erase debts until banks have foreclosed, sold the homes and taken the loans off their books, a process that can drag out for more than a year.

As a result, some economists are expecting a sharp improvement as widely watched indicators of consumers' finances catch up to reality. Joseph Carson, director of global economic research at AllianceBernstein, expects the share of households' after-tax income that goes to pay loans, rent and other financial obligations to fall to 16.3% by the middle of next year, well below the average for the 20-year period leading up to the housing boom. As of June, it stood at 18.1%.

"It's part of the cleansing process of a downturn," he said. "And it's happening a lot faster than people realize."

While new unemployment claims rise again and Americans are losing their homes because they can't find work - work that doesn't exist, Republicans obstruct the passage of extended unemployment benefits by adding "poison pill" amendments aimed at ACORN and at providing yet another tax cut.

We won't forget. And we won't let you forget.

NEW YORK (CNNMoney.com) -- The number of first-time filers for unemployment insurance rose last week, snapping two weeks of significant declines, according to a government report issued Thursday.

There were 531,000 initial jobless claims filed in the week ended Oct. 17, up 11,000 from an upwardly revised 520,000 the previous week, the Labor Department said in a weekly report. The week included the Columbus Day holiday.

A consensus estimate of economists surveyed by Briefing.com expected 515,000 new claims.

"[The initial claims figure] is somewhat surprising," wrote Jim Baird analyst at Plante Moran Financial Advisors, in a research note. "Excess slack in the system and employers' hesitance to ramp up hiring appear likely to weigh on the labor markets for some time."

[...] The government said 5,923,000 people filed continuing claims in the week ended Oct. 10, the most recent data available. That was down 98,000 from the preceding week's ongoing claims, and would -- if not revised -- mark the first time since late March that continuing claims were below 6 million.

But the slide in continuing claims may signal that more filers are falling off those rolls and into extended benefits.

Continuing claims reflect people filing each week after their initial claim until the end of their standard benefits, which usually last 26 weeks. The figures do not include those who have moved to state or federal extensions, nor people who have exhausted their benefits.

It's pretty clear that any health care "reform" bill will be a sorry compromise between what the New York Times on Sunday so delicately calls "organized interests."

This is important, because as you may have figured out, we're the only non-organized interest. No one is inviting us to the table to have a reasonable discussion (and no, allowing us to leave comments on the White House website is not a "discussion.") That means the proposals that are most likely to cut costs and improve efficiency are least likely to remain, and the ones most likely to remain are the ones that stick it to us.

For now, that seems inevitable. Although Congress does have its inspirational members, the legislative body is still a wholly-owned subsidiary of the banking and insurance industries. We're more likely to see progress in legislative tweaks after the bill is finally passed:

WASHINGTON — As the health care debate moves to the floor of Congress, most of the serious proposals to fulfill President Obama’s original vow to curb costs have fallen victim to organized interests and parochial politics.

Peter R. Orszag, the White House budget director, says containing costs will be a priority as health care legislation advances.

And now the last two initiatives with real bite that are still in contention — a scaled-back “Cadillac tax” on high-cost health plans and a nonpartisan Medicare budget-cutting commission — are under furious assault.

Most economists’ favorite idea for slowing the growth of health care spending was ending the income tax exemption for employer-paid health insurance to make lower-cost plans more attractive. But that would hurt workers with big benefit plans, and a labor-union lobbying blitz helped kill that idea by the Fourth of July.

Lobbying by doctors, hospitals and other health care providers, meanwhile, dimmed the prospects of various proposals to cut into their incomes, including allowing government negotiation of Medicare drug prices and creating a government insurer with the muscle to lower fee payments.

“The lobbyists are winning,” said Representative Jim Cooper, a conservative Tennessee Democrat who teaches health policy.

Total health care costs in the last 20 years have doubled to about 16 percent of the economy, with no signs of tapering. Along with universal coverage, Mr. Obama has made controlling those costs a central pillar of his health care overhaul, calling the current course “unsustainable.” The effort is a pivotal test of his campaign promise to break the stranglehold of special interests.

In his weekly radio address on Saturday, Mr. Obama applauded the bill set for a vote next week in the Senate Finance Committee. “By attacking waste and fraud within the system,” he said, “it will slow the growth in health care costs, without adding a dime to our deficits.”

In an interview, Peter R. Orszag, the White House budget director and the official most associated with the drive to cut costs, singled out the proposed Medicare commission and the “Cadillac tax” as evidence of progress. “A key priority now,” Mr. Orszag said, “is to make sure cost containment holds up as we move through the legislative process."

Neither element appears in any of the other four health care bills on Capitol Hill, and both face dug-in resistance in the House.

Although the bills contain other measures aimed at medical costs, most of the surviving ones do not antagonize any organized interest. Among them are voluntary efficiency measures like encouraging the coordination of medical records, disseminating information comparing the effectiveness of treatments and various pilot projects.

White House officials argue that in any case it is prudent to start with such tests, and that many could be expanded to more comprehensive programs. But their real impact is hard to gauge, and the nonpartisan Congressional Budget Office assigns them little weight. (The budget office credited the Finance Committee bill with reducing the federal deficit, but how much it will slow the growth of total public and private health spending is another question.)

The tax on gold-plated insurance plans is the last vestige of most economists’ favorite idea, eliminating the tax exemption for employer plans. The finance bill would impose a 40 percent excise tax on insurance plans that cost more than $8,000 a year for an individual or $21,000 for a family.

The bill has aroused the frantic opposition of labor and business lobbyists who appear to have found friends in the Capitol. On Wednesday, 157 House Democrats — a majority of the party — signed a letter to Speaker Nancy Pelosi opposing the tax.

“It has no legs in the House,” said Representative Pete Stark, the California Democrat who is chairman of the health subcommittee of the tax-writing panel.

The proposed Medicare commission, aimed at providers instead of consumers, is becoming a case study in the political difficulty of reducing medical payments.

The commission was intended to side-step the interest-group pressure that often stymies Congress. Modeled after the nonpartisan commission for military base closings, it would present a roster of Medicare cuts that Congress could block only with legislation.

But along the way, the White House and the Senate Finance Committee have cut deals for political support with lobbyists that may circumscribe the cost cuts, potentially including the recommendations of the commission.

Again and again, these issues arise that could have been solved by a straightforward push for a single-payer, government-run system. But that, of course, would have required a political system that didn't have corporate sponsors. It's painful to watch them tie themselves in knots, trying to rationalize the death-for-profit system:

Any health-care overhaul that Congress and President Obama enact is likely to have as its centerpiece a fundamental reform: Insurers would not be allowed to reject individuals or charge them higher premiums based on their medical history.

But simply banning medical discrimination would not necessarily remove it from the equation, economists and health-care analysts say.

If insurers are prohibited from openly rejecting people with preexisting conditions, they could try to cherry-pick through more subtle means. For example, offering free health club memberships tends to attract people who can use the equipment, says Paul Precht, director of policy at the Medicare Rights Center.

Being uncooperative on insurance claims can chase away the chronically ill. For people who have few medical bills, it is less of a factor, said Karen Pollitz, research professor at the Georgetown University Health Policy Institute.

And to avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania's Wharton School.

Continue reading »

Those of us out here already know how bad it is. When are the economists going to catch up with reality?

Oct. 2 (Bloomberg) -- The U.S. economic slump earlier this year was so severe it short-circuited the government’s model for calculating payrolls, raising the risk that today’s jobs report may be too optimistic.

About 824,000 more jobs may be subtracted from the payroll count for the 12 months through last March when the figures are officially revised early next year, a Labor Department report showed today. The revision would be the biggest since at least 1991.

The bulk of the miss occurred in the calculations for the first quarter of this year, the Labor Department said. The economy shrank at a 6.4 percent annual pace in the first three months of 2009, the worst performance since 1982.

The figures raise the possibility that the government’s calculations continue to miss the mark.

“We are probably still underestimating job losses,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “There could be another 30,000 to 40,000” that the data isn’t picking up, he said.

That would mean the loss of jobs for September could turn out to be as high as 300,000, rather than the 263,000 reported today by the Labor Department. Today’s report also showed the jobless rate climbed to 9.8 percent last month, a 26-year high.

The potential revision for the year through last March would mean that the economy lost 5.6 million jobs for the period instead of the 4.8 million now on the books.

Majikthise: Population economists take note: Madame Curie had her Nobel Prize first, her baby second.

Bay of Fundie: Sadly, yes. Plus some awesome book reviews.

Rev. Billy and the Church of Life After Shopping: A Peace Activist Thinks about G-20.

Phydeaux Speaks: Poll numbers say whuh?

Wonkette: I think we've got our campaign video for 2010. Vote Progressive or vote with this guy.

Bobby Jindal Touts Louisiana's Economic Successes While Refusing to Credit Stimulus Package

I bet you won't hear about this on the Sunday Talk Shows even if you disagree with the way the president handled the stimulus.

From the WSJ: U.S. Economy Gets Lift From Stimulus

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. "There's a method to the madness. We're getting out of this," said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

Economists say the money out the door -- combined with the expectation of additional funds flowing soon -- is fueling growth above where it would have been without any government action.

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter -- something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

I can tell you now that this news will be buried deep into the tar pit of Bobble heads' lost dreams and missing pens. I challenge the media to cover this. Will they? We'll see. All the idiot conservatives that said the stimulus failed have to eat their words because Rupert, the Overlord of their Universe has put it in his WSJ pages.

John McCain: The Stimulus is a Failure, But Don't Dare Ask Arizona to Give Any of the Money Back

dday says:

The recovery is still jobless thus far, which means it's not a real recovery yet. And the White House made two mistakes - one, they soft-pedaled the recession, claiming that unemployment would not go above 9% or so, leaving them susceptible to the charge that the stimulus isn't working; and two, they put far too much of the stimulus into tax cuts instead of the public investment that would have made it even more successful, particularly on the jobs front.

But without the public investment the stimulus has thus far provided and will continue to provide, we'd be mired in more negative growth and a near-depression.