Bleed-curing the economy in 2006, old Western style

Bush's Budget Expected to Be Aggressive Program Cuts and Spending Freezes for 2006 Are Intended to Trim Record Deficit

Program Cuts and Spending Freezes for 2006 Are Intended to Trim Record Deficit - The Bush administration is preparing a budget request that would freeze most spending on agriculture, veterans and science, slash or eliminate dozens of federal programs, and force more costs, from Medicaid to housing, onto state and local governments, according to congressional aides and lawmakers.

2006 will be when the United States of America will be all about increased homeland security and defense spending. Hooray. That’s W’s Harvard MBA hard at work. In 2006, everything except homeland security and defense will be held constant or cut.

Almost half-trillion dollar tax cut for the wealthy (80% of all tax cut refunds) to invest in their global portfolios, er, to spend for stimulating the economy has already evaporated, e.g. the lack of consumer spending and economic growth to show for it. The still lackluster economic results 1½ years later means that a significant portion was invested and/or saved than spent. The tax cuts just didn’t work as originally advertised.

I know - the wealthy “deserve” it. Presumably, it was their money to begin with.

However, consider that most of us aren’t wealthy. And that it is the not-so-wealthy consumers among us that spend and drive the economic engine, which taken together grows the wealth of this country. And the average consumer can't continue on spending too much, since they’ve overloaded their credit and home equity lines already.

Right now, circa 2003-2005, we actually have an investment glut in this country – lots of capital with no productive use since there’s insufficient, unsustainable consumer demand – as evidenced by flattening retail sales and a large slack in hiring, which has failed to replace all the jobs lost over the last four years much less to create all-new jobs to sustain the population's growth.

Meanwhile, the wealthy did their duty at tax time, investing most of their tax cut monies, and finding low returns domestically, resorted instead to foreign capital markets of China, Southeast Asia, and elsewhere to get the double digit returns they’ve become so use to 90s-style.

Under such circumstance, Bush’s tax cut for the wealthy during wartime was and is the very wrong choice and simply unprecedented. No other president has ever reduced the tax income the Fed receives while the country has to spend massive sums of money driving war efforts – for sound, obvious arithmetic reasons, until W.

In any event, education, veterans benefits, Medicare, Social Security, R&D, roads and infrastructure, housing programs are all on the block. One wonders how long we we afford such enormous expenditures for tax cuts and Iraq, even after these cuts. In comparsion, these programs are a pittance, yet ones so many Joe “W” Sixpacks rely on and even more so will over time, given:

1. More non-degreed (75% of population) Americans can’t find low-end [manufacturing and assembly] jobs many of which moved offshore, have given up looking for a job altogether, thus not counted as part of employment or unemployment rates, and thereby not contributing as taxpayers,
   
2. We have poorly educated kids who score in the last quartile of standardized exams, versus well-educated foreign students who are better equipped for the jobs of tomorrow, which immigration tightening cannot mitigate, especially given virtual outsourcing trends,
   
3. Americans save 2% of income while borrowing the rest at double-digit interest rates payable to foreign creditors as the dollar devalues,
   
4. Average weighted salaries are stagnant across the board particularly for Americans with no bachelor or advanced degrees, and as oil, medical and housing costs are rising significantly along with increasing offshore and outsourcing pressures,
   
5. Almost 25% of Americans have little or no health care coverage, and with low or nil savings, meaning significantly increasing catastrophic healthcare costs to come

Where does that leave Joe “W” Sixpack a decade from now - gainful employment in the military or homeland security? If Joe only knew or cared…as they charge up & overload their credit cards, how dependent we are on foreign “crack” credit.

Trade Deficit Leaps Again - $60.3 Billion Gap in November Is 7th Monthly Record Set in 2004

The monthly U.S. trade deficit soared to an all-time high of $60.3 billion in November, the Commerce Department reported yesterday, sending the dollar tumbling and raising new worries about whether the U.S. economy has become too dependent on borrowing from foreigners.

And as China’s domestic consumption increases over the next 5-10 years - consider how their surged hunger for commodities had led to a drastic rise in steel, rubber, and oil prices this past year - foreign creditors will eventually shift their funds elsewhere in search of higher returns. Interest rates will rise. And many average Americans will finally feel what’s it’s like to have to live within their means.

From where I stand, the gathering macroeconomic trends for the next 2-5 years look pretty ugly for the average Joe. For W, it’s all cost-cutting now to salvage what he can out of this shoddy economy, lacking proactive planning that reflect any long-term vision except military and security spending, the former of which is being cut back since we can’t afford it already.

Mark these fonts, such simpleton policies will leech us bone dry – and we’re already beginning to see worrying symptoms today - large cuts in the military budget, unbelievable deficits, jitters in the bond and currency markets.

Through lens of Cold War-era history, one could almost find it ironic; al Qaeda did to us what we did to the Soviets, albeit with a whole lot better ROI.

Killer waves were sometimes only inches high

A color-coded map, based on data from four Earth-observing satellites, shows how the wave generated by the Sumatra quake spread out to varying heights three and a half hours after the seismic event.

While a tsunami can rise to great heights when it arrives at the shore, such waves are often barely noticeable in the ocean.

In this case, scientists found that two hours after the undersea quake that launched the tsunami, the wave was about 2 feet (60 centimeters).

An hour and 15 minutes later it was down to about 16 inches (40 centimeters).

After eight hours the main wave was down to about 2 to 4 inches (5 to 10 centimeters), though a portion in the Bay of Bengal was still at about 10 inches (25 centimeters), the N0AA scientists said Monday.

An earthquake deep beneath the ocean off Indonesia caused the tsunami by shifting the sea floor, resulting in displacement of the water overhead and causing a wave to spread out from that location.

Unlike surface waves that affect only a shallow amount of water, a tsunami stretches all the way to the sea floor and, as that rises to the land, so does the wave. Arriving at shore, such waves can grow suddenly by dozens of feet.

The satellite imaging did not provide a depth for the waves that came ashore.

The new measurements were based on data from four Earth-orbiting satellites. Researchers hope the work will help them develop models to improve tsunami forecasts.

The data, which took several days to analyze, came from the TOPEX/Poseidon and Jason satellites operated NASA and the French space agency, CNES; the European Space Agency’s Envisat; and the U.S. Navy’s Geosat Follow-On.

Moving off the docks

A nice piece that explains how much the fishery business has changed drastically over the past few decades: The harsh economics with razor-thin margins, fast-growing and oft-changing demand, where the fishes come from today vs. a decade ago, how business has moved off the dock and open marketplace to the e-office and keyboard, as well as the fierce cut-throat global competition.
Moving Off the Docks

Technology Transforms Once-Parochial Seafood Business Into Global Enterprise

The shrinking dollar

A handy primer on how a foreign exchange imbalance affects you.
Everyday Economics - The 97-cent weakling

Day by day, your dollar buys fewer and fewer euros or yen. If you think you don't care, just wait. You will.

A few things that I worry about (politically-speaking)

Politically Speaking
Right-of-center oratory (as I see it on cable news in particular) is quite effective for inflaming the passions and promugating a sense of self-rightousness but does little to help reach common ground and get working political solutions for everyone, not just the most impassioned and vocal lot.

Putting such passions in perspective, simply put, is that for the past 4 years the numbers just haven't added up under W. While cable news' fiery almost-sermons are worthy that of a Christian Coalition convention yet, in the end, can't negate several trends: We as a nation are weakening economically and militarily, our foreign policy is mostly a one-dimensional military push with no diplomatic or geopolitical prongs or depth, we increasingly can't compete in the global marketplace and we aren't planning or investing for the long-term.

On this blog, I try to focus on numbers, not name-calling, and more often than not, the numbers bleed red and show that we are weaker, not stronger, irregardless of the tough rhetoric W projects in sound bites or his admittedly memorable catch-phrases.

What I Worry About
I worry about competing against the likes of Indians and mainland Chinese that enthusiastically pump out 3-4x more highly-educated scientists and programmers from their schools than we do, to outsourced jobs and their aim at usurping our economic might patiently and methodically.

I worry that American job growth has been stagnant for the past 3 years, new jobs' wages that are almost $2/hr lower then before while we're working harder, longer (then even the Japanese now) for less then before, and with an increasing number of unemployed ill-equipped or insufficiently trained to compete for the technology jobs of the 21st century.

I worry about the budget deficit and our inability to finance the military that is leading to drastic cutbacks and basic education that puts us almost last among the G8 and the world.

I worry about our lack of an energy policy, relying on Saudis and the Middle East (home to the 9/11 terrorists and Wahabiist-Muslim extremism) as our main energy suppliers, doing little to promote alternatives.

I worry about tax cuts as being the primary economic policy of the US government to drive growth that mostly benefit the wealthy, who invest the bulk of their refunds back into their portfolios that are tied to global capital markets for higher returns, not spent domestically where it's needed to drive US economic growth and jobs.

I worry about the jittery bond markets and our undervalued dollar that is slowly losing its credibility as the world's de-facto currency arising from our enormous record budget and trade deficits.

I worry that this in turn may prompt Euro and Asian creditors to forgo our bond and debt instruments in the future, driving up prices for everyday consumer items (the majority of which we import) and our interest rates for credit cards, mortgages, and loans, thereby making already poor Americans (and businesses) poorer and richer Americans (and businesses) invest their money overseas for better rates of return.

I worry that we're not doing anything to alleviate poverty and promoting economic growth at political hotspots that engender terror and global unrest, and particularly, not engaging as leaders with full presidential involvement in a full-court press in the Israeli-Palestinian peace process (especially now w/o Arafat).

I worry about ineffective homeland security (that is also cyber- and tech-smart) to protect ourselves and our children from even-smarter, more-patient and stealthier terrorists looking for cheaper, more effective ways to harm us en masse.

I worry about eliminating our complacency with national competitiveness that is inextricably linked to reforming education for the 21st century, in order for us to remain [at least one of] the world's economic superpower[s] creating new markets and new types of jobs.

I worry about paying down our debt and saving a surplus so our children won't have to deal with an unstable national economy and have to pay the burdens we incurred.

I worry about single-/two-issue Americans dominating our political discourse taking our security, as embodied today by Iraq, and moral values to be the end all, be all.

I worry that there is much more at stake for the United States to take the leadership role in but we're stuck with Iraq front-and-center, pumped daily by 24/7 cable news-cycle economics, leaving room for little else on the policy agenda.

Postscript
Great statesmen in time of war would be the likes of Roosevelt who during WWII rallied the nation and the world (with Churchill) to wholeheartedly sacrifice in order to win the war against the evil that was Naziism. They had also laid out and executed a plan that kept the peace as well as led the largest successful rebuilding of the major nation-states of Western Europe and Japan. Or Lincoln who instituted land-grants to establish the nation's leading universities in midst of a mighty bloody Civil War.

In light of such historical greats, unfortunately, W is but a simpleton - whether in terms of long-term vision, pragmatism, or depth and breadth of leadership. The world is mighty complicated, and it requires more than one man's guts to run the greatest nation on earth, a man who based on his gutsy eye-to-eye meets trusted Musharraf (sp) and Putin, not realizing that both men have cataracts and stand for many things we Americans abhor.

Apparently, a lot of these things don't seem to be of much concern for those worried about our moral compass and setting the right direction for this great nation - and the world's singular role model for democracy. And it often seems like many Americans just don't care anymore.