Week's Summary

While I have tried not to be overly cynical on this blog, sometimes with the news that comes in, I can't help it. That's why I am posting this commentary from George Shipp. Sometimes his commentary is too cynical, even for me, but today I am finding it to be right along the lines of how I feel.

CHOICE Asset Management Commentary:
It was quite a week, chock full of news. The Dow Industrials reversed the prior week’s loss and climbed back above 10,000 with a 311-point gain, as our governmental authorities once again collectively said “whatever it takes.” (And whatever the consequences down the road, some would say) Before getting to economic and other details, consider these moves out of Washington, all coming in just a single week:

- By a rare 98-0 Senate vote, following similarly overwhelming 403-12 House passage, Congress is extending unemployment benefits, to provide at least another 14 weeks of relief for the jobless (20 weeks in states with 8.6% or higher unemployment).

- Buy a home before May 1, and you will receive at least $6,500 ($8,000 for first time buyers).
So far, 1.4 million have claimed the 1st-time benefit, at an overall cost of $10 billion. The new version expands the program to “move up” buyers, with a 50% increase in income ceilings for qualification ($225,000 for couples).

- H.R. 3548 also widens the time period businesses (like homebuilders) can claim losses, to offset previously booked income. That portion was deemed budget-neutral because large businesses paying foreign taxes will not receive a planned tax credit until 2018.

- And an additional employer payroll surtax of 0.2% helped fund the unemployment benefit. [Yeah, that'll be a good incentive to bring back jobs.]

- Fannie Mae reported an $18.9 billion quarterly loss, and asked for an additional $15 billion of taxpayer support.

- Fannie introduced a home “deed for lease” plan whereby, if you are facing foreclosure and cannot qualify for a mortgage modification (i.e. even after re-works and interest rate subsidies your income does not reach 31% of the new payment), you may be able to exchange your home ownership claim for a lease “at market rates” (which by definition will be lower). That’s right, taxpayers, you will be the lucky landlords who will assume responsibility for homes that have proven to be unaffordable, and you will rent them through a third-party management company to help out your neighbors who made those decisions.

- Fannie was going to sell $3 billion of tax credits to Goldman, Sachs and/or Berkshire Hathaway, but the Treasury ultimately nixed that as not in the taxpayers’ best interest.

- The FHA was unable to meet its deadline to issue an updated financial report. Its auditor said its computer models were “creating unexplained inconsistencies,” according to the New York Times.

- The House of Representatives passed a 1,994-page, $1.05 trillion Health Reform bill by a narrow 220-215 vote. Obviously, there is still a long road ahead before the plan becomes law. According to the (libertarian, i.e. small-government advocate) CATO Institute, the bill “would create 111 government agencies, boards, commissions and other bureaucracies -- all overseen by a new health-care czar bearing the Orwellian title ‘commissioner of health choices.’" About $730 billion of new taxes and fees would support the expansion. [There is just something majorly wrong with our political system if the majority are screaming they don't want this bill, but it passes anyway.]

From the “we don’t know whether to laugh or cry department,” following Administration assertions that the ARRA legislation (stimulus bill) had “saved” 640,249 jobs, many localities and reporters seemed to question the calculation, for example:

- The Associated Press reported that President Obama’s economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council. “Trouble is, only 508 people work there.”

- The Milwaukee Journal Sentinel said that federal data indicated more than 10,000 jobs were saved or created in Wisconsin, but “that is rife with errors, double counting and inflated numbers based more on satisfying federal formulas than creating real jobs.”

- The Chicago Tribune reported that official counts of 473 teachers “saved” at the North Chicago Community Unit Schools District 187 could not be accurate, since the district only employs 290 teachers. “In the official report, Wilmette Public Schools District 39 was credited with 166 jobs saved by stimulus aid. Superintendent Raymond Lechner said the number should be zero. At Dolton-Riverdale School District 148, stimulus funds were said to have saved the equivalent of 382 full-time teaching jobs -- 142 more than the district actually has.”

- The Sacramento Bee said that the California State University system calculated it was able to retain 26,156 employees, equating to more than half its workforce and more than all “jobs saved” in Michigan, the highest unemployment state. But CSU spokeswoman Clara Potes-Fellow said “This is not really a real number of people.”

[Personally I was wondering how on the earth the government was going to measure their promise of "saving" jobs. I am not exactly sure why I wondered that when you can say just about anything with statistics; especially with statistics that are not based on any real data. Sounds like these were put together by the same statistics department that helped Pelosi with her statement of: "500 million Americans will lose their jobs" without the stimulus bill. According to her, that would occur every month without proper government action. However, according to the US census bureau, the current population of residents in the country stands at about 305,000,000. Ironically, her numbers would include her and the rest of the Senate, which I am all for.

The good news is that this also came in from another Economists commentary: "...The overriding message of last week's elections in the United States was that people are highly focused on the economy in general, and on unemployment in particular. As a result, politicians are becoming increasingly nervous about their re-election prospects. Notably, we would point out that current approval ratings for the US Congress are below the lows reached in 1994 and 2006 - the years marketing the two most recent major party takeovers of Congress." Personally I am focused on more than just unemployment, but I am happy that most others notice the poor job of representing the government is doing. Personally I don't think this definitely means there will be a party shift. I think it means we are headed for a more fundamental shift and both parties better make some changes.]