Friday, December 4, 2009

On Job Summits, Employment and Stimulus, President Obama's Shrinking Coalition, Analyzing the Early Senate Health Care Votes, Goldilocks vs. DC

Where Are The Jobs?

President Obama's highly covered and largely window-dressing "jobs summit" with business leaders has come and gone and the basic question on the mind of the population remains the same -- when will we return to a reasonable level of employment?

Why do I call the summit window-dressing? Because I don't need a summit to know when private industry will start hiring. Private industry will start hiring when their leaders believe that hiring a person will increase their bottom lines. Factories hire people when they believe they can sell more goods profitably and need more people to make them. Service industries hire people when they believe they can sell more services and need more people to provide them. Period. This isn't because business is evil, it is simply because businesses exist to make money. Ask yourself this -- if the President asked you to give money to other people for nothing in exchange, would you? If so, assume he's asking and I'll send my address. And businesses are no different.

So why has unemployment remained high? Because productivity in businesses is surging and sales are still somewhat soft. When productivity goes up, I need less people to do the same amount of work and I don't hire people. Businesses learned how to be more efficient in the recession because they had to in order to survive and consequently employment has lagged. This is very typical in a recession and believe it or not, is a good thing for the long run. Higher productivity means higher output and more wealth when businesses do grow by enough to hire.

But all is not bleak on the jobs front. The monthly BLS report this week showed that private payrolls dropped by only 11,000 jobs last month, the smallest decline in two years (since December 2007, to be precise.) 11,000 is basically a wash. A wash doesn't help bring down a double-digit unemployment number, but it does mean, that for the first time in two years, employment is no longer getting worse. We have a huge hole to dig out of, obviously, but this is as bad as it is going to get employment-wise. And that's great news.

The BLS report also showed unemployment dropping from 10.2% to 10.0%, but ignore that number. You aren't really dropping unemployment until employment grows. This drop was all about people dropping out of the workforce, not about people finding jobs. When the job growth number is 308,000 in a month, the amount that would be needed to drop the unemployment rate by 0.2% organically. We still have almost an 8 million job gap to reach a normal unemployment level of 5%.

So what's a government to do? Odd as it sounds, the best policy is probably to stay the course. The stimulus is actually working, having helped to swing GDP growth positive in the third quarter and it appears it will continue in positive territory in the fourth quarter. There is still plenty of stimulus money left...the latest government report shows:
Tax Cuts -- $92.8B out of $288B spent (32.2%)
Spending -- $144.8B out of $499B spent (29.0%)
Total Stimulus -- $237.6B out of $787B spent (30.2%)

So there is still plenty of life left in the stimulus, which is doling out a slow but steady feed into stabilizing the economy.

Of course, political winds are pushing the President to look like he is doing something, so I expect a series of small initiatives -- more unemployment benefit extensions, some small tax credits, some more infrastructure spending. But that, too, will be window dressing.

The economy is slowly recovering, but people are impatient and Democrats are scared. Expect more saber-rattling from the GOP and more jobs bills from the DEMs.

The Shrinking Obama Cult of Personality

When President Obama was elected President, it appeared that the old political order had been broken. Sure, he carried the Gore / Kerry parts of the country. He swept the Northeast, dominated the mid-west and carried the west coast. But he also won states that neither Kerry nor Gore was close in -- Virginia, Indiana, North Carolina. Heck, he was darn close in Montana -- not a lot of old faithful Democrats there.

As the President's poll numbers have slowly slid, I've continued to point out that he had at least maintained the coalition that gave him a 7.2% margin of victory in the national popular vote on election day.

Now, for the first time, that coalition is broken. His numbers have fallen below his vote totals from last November for the past five days. He is still in positive territory, but the recent trend has to scare the White House.

Judging by his monthly trend, we continue to see a pattern: A few months of stability, followed by a few months of decline. This was okay when he was riding high, but he is getting into dangerous territory now. The public is turning and the White House has yet to show an ability to win them back. He still has the Democratic loyalists and some of the Independents, but the Indies appear to be leaving a little every month.

So what does all this mean?

First, Democrats have more and more reason to be scared of a rout in 2010. As goes President Obama, so they will go. Forget all politics is local. Most politics for national offices is national. See 2006 and 2008 if you don't believe me. Updates on my 2010 projections in my next blog.

Second, President Obama doesn't have a lot of capital left to leverage against the scared moderates, like Sen. Blanche Lincoln (D-AR), who is up for re-election next year. This makes getting things like Health Care Reform through the Senate extremely difficult.

Early Health Care Votes

In the elusive search for 60 votes to break a filibuster in the Senate and move a bill forward, we have some early indications of the dividing lines, based on the votes on early amendments. Here is a recap:
(1) Roll Call Vote 355 -- on Sen. Mikulski's (D-MD) amendment to ensure women's preventative services were covered from dollar one in the bill
Vote: 61-39 for
Democrats voting no: Nelson (NE)
Republicans voting aye: Collins (ME), Snowe (Me)

(2) Roll Call Vote 356 -- On Sen. Murkowski's (R-AK) amendment to remove women's preventative services from the list of services that the government health board could provide requirements for
Vote: 59-41 against
Democrats voting aye: Nelson (NE)
Republicans voting no: none

(3) Roll Call Vote 358 -- On Sen. John McCain's (R-AZ) motion to send the bill back to committee
Vote: 58-42 against
Democrats voting aye: Nelson (NE), Webb (VA)
Republicans voting no: none

(4) Role Call Vote 360 -- On Sen. Thune's (R-SD) amendment to strike a number of the provisions in the bill, including the public option
Vote: 51-47 for (note: because of Senate procedural rules, this amendment required 60 votes)
Democrats voting aye: Bayh (IN), Carper (DE), Lincoln (AR), McCaskill (MO), Nelson (NE), Udall (CO), Warner (VA), Webb (VA)
Republicans voting no: none

(5) Role Call Vote 362 -- On Sen. Hatch's (R-UT) motion to send the bill back to committee
Vote: 57-41 against
Democrats voting aye: Nelson (NE), Webb (VA)
Republicans voting no: none

As you can see from the above, the Democrats have their work cut out for them. An outright majority in the Senate appears to oppose the public option in its present form. Two Democrats -- Nelson and Webb, appear to want to ditch the health care debate entirely for now. Only two Republicans, Collins and Snowe, show ANY inclination to break with their party on ANY issue in this debate.

If Harry Reid figures out a way to get to 60 within these constraints, he would indeed be a genius. This bill could still happen, but it appears the only path to success is going to be to ditch the public option (completely or near completely), give in on the abortion issue and find a way to get liberals to accept that as the best that they are going to do.

Stay tuned...

This Porridge is Too Hot and Too Cold

Oh, the pains of a centrist policy in a polarized Washington. Democrats hate the new Afghanistan policy because we are sending more troops. Republicans hate it because we have defined a date to start leaving (at least a soft date.) It seems nobody much likes President Obama's new Afghanistan strategy. Which is, frankly, probably the best endorsement of the policy available.

The good news for the Obama Administration is that there is zero chance that either party will band together to deny him funding for the war. He will get his policy in the Afghanistan war. Like I said before, I just pray he has it right.

Site Update

We had 353 visitors to the site last month, our high water mark for 2009. It only stands to reason that November means elections and elections means visits to prognosticating sites like this one. But thank you sincerely for reading. I hope you find this site interesting and thought-provoking. As always, I welcome your comments and suggestions.

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