Saturday, March 7, 2009

Economic Woes Continue, Omnibus Appropriations, MN Drags On, Cabinet Picks Stalled

Economic Woes Continue -- But Potential Hope on the Horizon
It was published today that the official unemployment rate hit a 25-year high in February at 8.1%. This is worse than the peak of the '90-'91 recession (7.8%) and far worse than the very minor mini-recession at the start of the century (6.3% in 2003.) This coincides with my declaration that the severity of the recession has surpassed either of those downturns and is now tracking towards the double-dip recession of the early 80s, when unemployment peaked at 10.8%. It appears likely that unemployment will surpass this rate before it gets better.

Unemployment has risen since March 2007, when the rate was 4.4%, but much of the loss has happened in recent months. Since May of 2008, the rate has increased by an average of 0.3% per month, with the last 3 increases in December, January and February being 0.4%, 0.4% and 0.5% respectively.

There is cause for hope, as I mentioned in my last blog, and we saw more evidence of this this week, although it was mostly drowned out by the employment data. Consumer borrowing unexpectedly rose in February -- indicating that the credit markets are starting to stabilize. Retail sales were down far less in February than was expected.

All of this plays into my theory, driven by the Council on Economic Indicators LEI index, that we appear poised for the economy to resume positive economic growth approximately August of this year. Again, this does not mean things will immediately get better. In 1991, economic growth resumed in the 2nd quarter of the year, but unemployment didn't peak until the 2nd quarter of 1992, fully 12 months later and did not drop to pre-recession levels until 2 years after that.

So, what we will likely see, is a continued rise in unemployment at a rapid rate for the next 6 months, followed by a stagnation in the labor market for another 12 months. It may be late 2010 before we see unemployment drop and near the end of President Obama's term before unemployment returns to normal.

Based on the rate of decline in employment, it appears that before my predicted August economic growth, it appears unemployment will peak in the summer at 10-11%, rivaling the economic conditions of the early 1980s.

Keep in mind that the unemployment rate only includes people actively searching for jobs that are unemployed. It does NOT include people who have stopped looking or underemployed people (people working part-time who are attempting to work fulltime), including these people would add approximately 6.5% to the already-high rate.

So, things are very bad right now, but there is some light at the end of the tunnel. I'm going to put my neck out here and say we will see:
(1) A choppy stock market for the next 3 months, followed by a partial recovery (although to nowhere near the highs)
(2) Mixed economic news and steadily rising unemployment for the next 6 months, followed by modest recover
(3) Unemployment peaking at 10-11% and staying there for 6-12 months before starting to decline and slowly declining to more normal levels by 2012

We'll see if my prediction skills are as good as the so called experts.

Omnibus Appropriations
Congress is in the process of passing what is known as an "Omnibus Appropriations" bill to finish the fiscal year. The government's fiscal year runs from October. In theory, the congress is supposed to pass and the President is supposed to sign appropriations bills for each cabinet department prior to October. Of course, this often doesn't happen and this year, rather than reach an organized agreement on the budget, former President Bush and the Democratic Congress agreed only to a series of extensions of government services, not a real budget.

So, the "omnibus" bill covers all departments and funds them through October. This is work that should have been done before President Obama got to office, but here we are. It is a $400 billion bill and Republicans have been making hay about the approximately $4 billion in earmarks that have be stuck in the bill. Surely they are right, the earmarks are largely irresponsible spending, but the President has made it clear that he doesn't intend to get into a fight over a budget that is for a year that is almost over.

It appears that the Omnibus bill will push through with little Republican support (the bill passed the House on February 25th with only 16 Republicans supporting and is now being debated in the Senate, with strong Republican opposition) and will be signed by the President.

The more interesting question is whether President Obama will take on congressional Democrats in the upcoming appropriations bills for the fiscal year beginning in October. This debate should start in April. I hope the President takes a stand but fear he will not want to spend political capital fighting with congressional Democrats he needs to pass legisliation.

Minnesota Senate Race Drags On
I sound like a broken record, but months after the new Senate took office, we still have no winner for the Minnesota Senate seat in the race between Al Franken (D) and Sen. Norm Coleman (R). Six weeks into the election contest trial, Coleman's lawyers have asked the court to set aside the results of the election and order a new election. I contend Al Franken will eventually take office, but we may not have seen the end of this.

The bottom line is that our current system is incapable of accurately determing a winner when the margin is as small as in the Franken/Coleman race.

If this can happen in our electoral systems, isn't this a glaring sign that we need serious reform? Can you imagine if this happened in the Presidential race? We might have to take on a partisan Supreme Court Decision...oh wait...

Continued Slow Treading for the President's Cabinet
President Obama is 47 days into office now, 3.2% of his Presidential term and he still does not have an approved Commerce Secretary (former Washington Gov. Gary Locke is pending), Health and Human Services Secretary (Kansas Gov. Kathleen Sebelius is pending) or a number of key undersecretary positions at Treasury filled (he had two undersecretaries withdraw this week.)

I cannot recall in my lifetime another President that had so much trouble filling his cabinet. Part of the President's problem is that the Obama Administration's vetting process is so extensive that it a. scares off some potential nominees and b. slows down the process. The other piece of this though, is that Senate Republicans have used an unprecedented number of stall tactics against appointees. In 2001, Bush had all but 1 of his cabinet heads (John Ashcroft) approved on the day he took office.

President Obama must clean this up if he is going to get things done -- he needs a capable staff under him. The lull that you now see in administration actions is largely a result of the administration runnig out of capacity -- there is simply only so much that the President can do himself.

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1 comment:

Minnesota Central said...

Regarding the Minnesota Senate seat, this legal battle is actually running ahead of schedule considering that challenges of this magnitude generally take six months to be finalized (see Washington Governor race and Louisiana Senate race). I say ahead since the Coleman legal team did not want to start calling witnesses until mid-February but the judges forced them to start immediately. It was evident that they needed the time --- their exhibits were faulty and their witnesses had not been fully vetted.
The Election Contest Court has now heard all the witnesses and oral arguments. Now, they must review the exhibits and determine which challenged ballots should be counted.
Here’s a recap of where it stands.
Franken had a margin of 225 at the start of the trial. During Coleman’s lead Attorney Joe Friedberg’s closing he said about Franken’s case "They have proved the viability of a number of ballots to an absolute certainty where there can be no conceivable question but that most of the ballots they put in issue should be opened and counted." In effect, agreeing that the Franken campaign's list of ballots should be counted.

So during oral arguments, Friedberg has conceded that 252 ballots should be added. Since Friedberg’s closing, the Franken team has finalized its list bringing the total to more than 380. Plus individual voters have sued to have their votes counted and the Election Contest Court has ruled that they should be accepted; therefore the minimum Franken margin is over 500.

Now, let’s look at the Coleman arguments. There are three : #1. during the time from election night until the recount occurred a packet of ballots was lost; #2. since some ballots got damaged during the machine counting process, duplicates had to be prepared and potentially this could have lead to double-counting; and #3. rules were not applied consistently. There were many other claims promoted by Coleman supporters, but they were not brought up in court as many of them were pure urban legends.
Let’s give him 46 for the Minneapolis precinct with the lost ballots. [Personally, I agree with Coleman based on a prior case (Sparks-Schwab). It’s a hard standard, and this court has held to past decisions and statutes. No doubt that voters did vote, but if the purpose of a recount is to prove the count, this cannot be done if the ballots are missing.]
Add to that the double-counting claim -- caused by possible human errors in labeling the duplicates and originals. Coleman thinks he should have a net gain of 61 votes based on his selected 10 precincts (the most often cited is the Mpls precinct with a 14 vote discrepancy), but he is ignoring there are also many precincts (maybe more than 300) where Coleman won (like White Bear Lake which had a 13 vote discrepancy) and thus potentially that net gain could be much lower.
Then there is the stringent rules applied in Carver County in accepting absentee ballots that could result in no more than 83 votes. {Personally, Coleman argument doesn’t make sense since the County may have contacted the voters to correct the mistake and eventually the voter did participate.)
Adding it all up … is less than 200 .. and that assumes the judges agree with him.

So to win, Coleman must hope that the Court agrees to accept 1,359 ballots from Coleman’s spreadsheet. However, considering how many blank cells are listed signifying that the voter wasn't registered; or the voter isn't currently in the Statewide Voter Registration System, etc. that shrinks his pool …. to 6.

From what is stated above, it is not surprising that this week Coleman’s attorney Friedberg said that he expects Franken to win … but that Coleman will appeal and then win.

Coleman’s talks of appeals are a waste of time … especially if Franken’s 225 vote margin is over 500.
Coleman wants to appeal based on violations of Equal Protection but that is not really relevant here. No voter was denied an opportunity to vote. However those that choose to vote via absentee had to follow certain procedures. In Minnesota, voting is a right, but to vote via absentee is a privilege. The Court should see that there was no bias since the procedures were followed successfully in approximately 280,000 cases but 2% of the participants had problems. Many of these “problems” were rejected by the Coleman legal team such as violation of the witness requirement, signature mismatches, non-registered voters, etc.

The main argument that is being made is that some counties applied a strict review while other counties were lax (if are there more than Carver County is unknown but that was the only one discussed in court). OK, except all candidates were subject to the same review by the county, so those that complied with the rules are probably in proportion to those that did not. This is not a case of a “class of voters” that are being denied … just random people who did not comply with procedures. The analogy would be that one county has a higher rate of ticketing speeders than other counties … it may be true, but if you followed the speed limit, you did not get ticketed … and if you did get a ticket, don’t try an argue that you would not have been cited in other counties.

Materiality is also a consideration. If Franken’s lead is 500 and Carver had 83 voters rejected due to strict application of the rules, then even if every voter had been a Coleman voter, Franken would still win. The purpose of an election is to determine a winner, not to determine the precise margin of victory.

The Election Contest Court will probably complete its work in the next two weeks and then the ballots will be opened … a winner declared … and Coleman will have to decide if he wants to stall the inevitable a little longer with an appeal. My guess is that he won’t (the legal bills are running up and as the loser he will have significant court fees to pay.) If he does the MN-Supreme Court should process his claim quickly. He then has two choices … appeal to the federal courts using the Equal Protection argument; or appeal to the US Senate that the election had too many problems to be considered valid and that they should request Minnesota to hold another election.
So, the ball is in Coleman’s court … he can decide how long he wishes to drag this out … April … May … or June. So as I started with this comment, the proceedings are actually running ahead of schedule.

I am glad that Coleman has taken his case to trial. The trial is proving that the multiple reviews by local election officials and re-enforced by the State Canvassing Board, Minnesota had a clean election. With 42% of the vote, Franken may be able to claim that he prevailed in this contest, but clearly the voters are not enamored with either candidate. Let’s end the claims of fraudulent and stolen elections and get on to seating a Senator.