Quick Hits - February 16, 2012

The basic framework of a deal has been reached between Republican and Democrat Congressional negotiators to extend the temporary 2% Social Security Payroll tax reduction through to the end of the 2012 calendar year.  The deal was achieved after Republican's dropped their demands that the $94 billion - $100 billion cost for the extension of the temporary payroll tax reduction was 'paid for' by spending cuts elsewhere in the federal budget.

The change in approach by the Republicans is a major concession to the Democrats - done to avoid the political fight of appearing to risk a 'tax increase' on working American's who are averaging about $40 a month in additional take home pay because of this temporary reduction.

Also included in the deal framework is a restructuring of the extension of the unemployment benefits from the current 99 weeks to provide benefits for between 63 and 73 weeks depending on the state that the recipient lives in and the unemployment rate of that state as well as the elimination of an Obamacare required reduction in Medicare reimbursements payable to doctors and hospitals. 

The final deals are discussions about how to 'pay for' the unemployment and Medicare changes - but these are not seen as deal breakers.

This reduction is the cornerstone of the President's claim to have delivered a tax cut to 95% of American workers - and dates to the 2009 American Recovery and Reinvestment Act, the $800 billion plus economic stimulus program intended to boost the country out the 2008-09 recession and into an economic recovery.

However, while a talking point for the President, the first two years of this temporary tax reduction has done little if anything to stimulate the economy - and doing so for an additional year will likely deliver little real positive effects for the economy.  Rising prices in energy and food are eating up any real 'gains' that the worker is getting.

There will be some backlash towards the GOP Congressional leadership for their surrender on paying for this temporary tax reduction - as the already excessive budget deficit will grow by another $100 billion for 2012.  More and more Americans are looking at what's happening in Europe - and the status of the US national debt / budget deficits and growing more and more concerned about the country's future.

Fox Business New's host John Stossel notes in his op-ed today...

“What the president was talking about is not even a cut. The politicians just agreed that over the next 10 years, instead of increasing spending by $9.48 trillion, they’d increase it by ‘just’ $7.3 trillion. Calling that a ‘cut’ is nonsense.”

Fox News host, Bill O'Reilly was even more blunt in his talking points memo yesterday, saying that if President Obama wins re-election in November, 'You will not recognize this country in 4 years....'

The US Department of Labor has released the latest data on new jobless claims, showing that the new claims has fallen to 348,000 in one of the best weekly numbers in 3 years.  This number is 13,000 fewer than last week. 

The President, his campaign, and elements of the mainstream media are touting this as another major sign that the economy is turning around - along with the decrease in the official unemployment rate to 8.3% in January along with a net 243,000 jobs being created.  What is being left unsaid is that this job 'growth' is not even covering the population / job force growth numbers...as the total percentage in the US labor market continues to decline.

Zerohedge is also extremely skeptical over the latest numbers and the perception that is trying to be created that the economy in finally in a recovery...

The onslaught of 'favorable' jobs numbers continues with the latest initial claims printing at 348K, down from an upward revised 361K, on expectations of a rise to 365K. This was the lowest number since March 2008. As a reminder, the abnormally warm January and February weather as discussed previously by David Rosenberg is a key reason in the ongoing favorable impression of the economy that this data skew creates. Granted the self-delusion of employers is just as palpable as that of market participants: claims went from sub 400K in the days before Lehman to nearly 600K in the weeks after. Continuing claims printed at 3.426MM down from 3.526MM, on expectations of 3.495K. Those seeing the 99-week expire increased as 23K people dropped out of EUCs and Extended Claims. Expect to see this "favorable" trend reverse within weeks, as the groundwork for more easing has to be set (more on that shortly).

Despite the hype and efforts to drive a perception that doesn't fit the reality of just how dismal this President's economic policies have been, we need to continue to ask the question as to ' WHERE ARE THE JOBS?

Democrats said their costly plan ($1.2 trillion, including interest) would “save or create” up to 4 million jobs and bring the unemployment rate down to about 6% today. The unemployment rate has not fallen below 8% at any point in the last 36 months. Furthermore, the official unemployment rate does not actually count unemployed people who have given up looking for work.


The above chart shows the “labor force participation rate.” This statistic represents the share of working-age Americans who are either employed or unemployed but looking for work. It is not a pretty picture. Only 63.7% of working-age Americans are currently in the workforce – the lowest in almost 29 years!


To put it another way, 36.3% of working-age Americans do not have a job and are not even looking.

When compared to the previous post 1960's recessions, including the as deep 1981-2 recession, the failure of the efforts of this Administration is even more apparent..

These are the messages that will resonate in this election season - not the spin coming from the Obama Administration, the Obama campaign, or the mainstream media busy carrying water for the campaign.

Of course, the campaign and Administration are concerned about this information countering the meme that they are promoting that we are in an economic recovery that is gaining momentum and speed due to the policies of the Administration. 

In 2008, the Obama campaign launched a 'Fight the Smears' project.  This was to get ordinary Americans to sign up and work to fight information against the Obama candidacy - which was called 'smears'...things like Obama's connection to Weather Underground terrorists Bill Ayers and Bernadine Dohrn, the racist and anti-Semite Rev. Wright, or his connection to hard care Marxist activists.  1 million supposedly signed up for 'Fight the Smears' to counter the 'misinformation'.

Obama has re-launched this program for his 2012 campaign, calling it now the 'Truth Team'.  The goal is to get 2 million citizens to sign up and use their efforts to take on the Super Pacs and others to combat 'misinformation' from the right about Obama and his policies.

At PJ Media, Zombie has embraced this approach by Team Obama - with the Truth Team Comics...

And Chris Muir, who produces the excellent Day by Day cartoon also picks on the same meme in today's edition...

In another shameless effort on my part to tweak the Obama Truth Police, I have to highlight some more truth about the expiration date that exists on pretty much everything that Obama and his team says or promises.  One of Obama's campaign pledges from 2008 - and continued throughout the last three years (beyond the 'I provided 95% of Americans with a tax cut' and the 'I will halve the budget deficit in three years') is that no American who earns under $250,000 per year will see a tax increase.

Well, this has been broken in numerous ways, but one of the ways this is being broken is in the penalty one is obligated to pay if one doesn't purchase health insurance under Obamacare.  In testimony about the budget, Obama WH Budget Director Jeff Zients found himself placed in a no-man's land in his effort to make the Administration spin.....and not demolish the core of the Administration's legal argument towards the Supreme Court about the constitutionality of Obamacare's Individual Mandate.

New Jersey Republican Scott Garrett asked White House budget director Jeff Zients about his claim that no one earning under $250,000 will see a tax increase under his boss: "So if I am part of a family that does not buy health insurance in violation of the President's health-care program and I got to pay because of that, that is not a tax increase—that is not a tax on me?"


Mr. Zients replied, "The Affordable Care Act saves money," which is not merely irrelevant but false. Mr. Garrett tried again and Mr. Zients said "I'm not sure I'm following the question." Mr. Garrett once more: "Is that a tax on me or is that not a tax on me?"


Mr. Zients: "Well, this is—" Mr. Garrett: "A moment ago you said there's no tax increase." Mr. Zients: "There aren't." Mr. Garrett: "So that's not a tax?" Mr. Zients: "No." Mr. Garrett: "That's not a tax. Okay. I just want to be clear on that because that's not the argument the Administration is making before the Supreme Court."

Which party and candidate is the one that puts their own personal interests before the needs and best interests of the country?

In yesterday's QH, I noted that the EU Finance Ministers were floating an approach towards the Greek bailout where they would offer Greece a bridge loan to cover their March 20 debt obligations and delay final determination on the bailout until after Greece's new national elections in April to ensure the new government would continue to honor the austerity measures demanded of Greece.

Today, the German Finance Minister has ruled out this approach as the EU still considers its options for Greece.

With these additional delays, with the continuing moving goalposts of what Greece must do for another bailout, it's becoming more and more apparent that there are key officials in the European Union who do not want to bail out Greece - but also do not want to appear as if they are just sending the country down the slide.  The Telegraph's Ambrose Evans-Pritchard highlights this with his column today stating that Germany is playing with Greek Fire...

It is clear that Berlin, Helsinki, and the Hague have taken the decision to eject Greece from the euro whatever the country now does. Even if Greece complies to the letter with the impossible terms of the EU-IMF Troika, it will not make any difference. A fresh pretext will be found.


"There are some who don’t want us in the eurozone any more," said Evangelos Venizelos, the Greek finance minister. "They are playing with fire."


Indeed they are. Kostas Kiltidis, a Macedonian MP from the orthodox LAOS party, could hardly contain his fury when we had coffee in the members’ hall of the Greek parliament.


"You answer war with war. We are the cradle of European civilization and nobody can take us out of our own home. There is no legal mechanism for this. If they try, others are going to die economically with us." …


Rising tensions are making the crisis even more volatile – too many moving targets / goalposts; too many demands for taking over all / part of Greek sovereignty; for some Greeks, default is looking preferable to being at their knees before the EU Finance Ministers – and in particular Germany.

This has moved far beyond being an economic consideration for the EU, the ECB, the IMF, and the bankers / investors who will bear the brunt of a Greek default on their debt obligations.  Politics and power has taken precedent in this Greek tragedy.  Statists in the region want to leverage this crisis to permit them to increase their power and reach - particularly the power and reach of the EU bureaucracy.  They want to double down on the failed architecture that led Greece (and the other troubled nations) to this precipice thinking that doing again with more fervor will deliver different and better results.

Unfortunately, too few people have the courage to accept the inevitable and use the default like a company uses Chapter 11 bankruptcy reorganization...to reorganize not only their finances, but to also reorganize their country's business practices to lessen the embracement of euro-socialism, to empower the people and their productivity, and create an environment where the country can operate within its means.

This will mean pain - but Greece no longer has a pain-free option to undertake.  It's time for the Greek to think about the Greeks as opposed to the EU.

On This Day in History

1804 - During the First Barbary War, US Navy Lieutenant Stephen Decatur leads a military mission into Tripoli Harbor to burn and destroy the frigate USS Philadelphia which had been captured by the Bey of Tripoli after running aground outside of Tripoli.  British Admiral Lord Horatio Nelson called this the 'most daring act of the age'.

1923 - English archaeologist Howard Carter enters the sealed burial chamber of the ancient Egyptian ruler King Tutankhamen

1945 - US military forces under General Douglas MacArthur recapture the Bataan Peninsula on the Philippine island of Luzon - almost three years after the Japanese captured this area and led the captured US and Filipino troops on what became known as the Bataan Death March.

1985 - The terrorist and anti-Semitic group Hezbollah is founded.  The core mission focuses on the elimination of the state of Israel and the establishment of an Islamic republic in Lebanon.  Hezbollah is supported by Syria and Iran.  In 2011, 4 senior officials of Hezbollah were indicted for their role in the murder of former Lebanese Prime Minister Rafic Hariri on Feb 14, 2005.