National Unemployment and the Economic Status

July 23, 2009

By Padmini Arhant

The ravenous economy has absorbed about $3.7 trillion dollars via bailouts and stimulus plans, (please refer to individual stimulus package topics for breakdown) yet the nation’s jobless rate rising like a tidal wave rather than settling along the shores. Several arguments mounting regarding the precarious job situation across the nation with some fifteen states like California, Michigan, Indiana, Ohio and others experiencing double digit in job losses accumulated over a period of time.

Not surprisingly, criticisms with an ominous prediction such as a possible return of the ‘Great Depression’ from various political and economic factions pouring against the current administration’s level of action and apparent inaction in averting the precipitous decline of the job market.

The irony being, President Obama’s opponents and fierce critics expressing deep concerns over the present generation’s children and grandchildren burdened with the burgeoning multi-trillion dollars national deficit from the ‘supposedly’ bizarre and revolutionary health care reform.

Unfortunately, the pervasive selective memory among the cynics forbids anyone from reminding the junkyard legacy by the previous administration. Nevertheless, it’s important to revisit the situation in order to find a pragmatic and an effective cure for the epidemic unlike a band-aid treatment tactic by the prior administration.

As detailed earlier on many occasions, the wild adventures in the past eight years eroded the fundamentals of the capitalist system. Immediately following the 9/11 attacks, the widespread panic about the United States economic and national security surely had an impact on the American investments ranging from housing to stock market including the exodus of some expatriates selling homes combined with the withdrawal of their investments.

The Bush-Cheney administration laid out the extravagant scheme to trump the situation with yet another war by invading Iraq when the mission in Afghanistan had barely begun. Conservative ideology dictates that wars promote prosperity. Actually, the notion might not be far-fetched because wars are highly beneficial to the nexus group gambling with others’ life and nation’s wealth.

When the administration inheriting a surplus economy engaged in a dubious agenda at the most improper and inconvenient time, the market conditions in 2002 and onwards became more volatile due to enormous speculations surrounding the United States affordability to wage another war.

The Bush-Cheney administration sailed through the storm with false assurances and blatant lies that Iraq war would be self-funded through oil revenues expected to be reaped exclusively by the United States in return for the establishment of democracy.

One must also not forget the administrations’ prophesy on the premature valentine’s day celebration by the cheering Iraqis handing out rose bouquets to the U.S. occupying forces at the expense of their blood and national treasury.

The excessive borrowing commenced at the dawn of the Iraq war with the fiscal conservatives now objecting to their constituents’ health care benefits, then turning a blind eye and signing a blank check to an unarguably a corrupt administration.

Funding two simultaneous wars converted the national surplus to national deficit adversely affecting the Treasury Notes and subsequently the U.S. currency in the international market. In the backdrop of the weakening Bond market, the stock market performance accelerated with investors’ confidence in the growth of different sectors specifically the oil and defense stocks due to the on-going wars, technology sector and the financial sector with hyperbolic balance sheets.

Above all, during that time the Federal Reserve and the Treasury’s overly cautious inflationary measure by reducing the interest rates beyond market conditions and unleashing the free market from necessary regulations in an utter conflict of interest essentially provided a fertile ground for the financial sector to exploit the unique opportunity in the lending activity.

In addition, the conglomerate like AIG and major investment banks extending towards the commercial bank’s activities risking long-term investments for short-term gains induced further competition for the traditional banking sector adopting strategies detrimental to the key components of the economy viz. the housing market, retail and commercial lending.

The financial sector’s unethical and unscrupulous practices in every aspect of lending targeting the nerve of the economic system i.e. the consumer, exacerbated the economic recession.

From the notorious sub-prime mortgages in the housing market now appropriately defined as ‘toxic assets’ bundled into the mortgage backed securities exchanged through international trading, to teaser rates offered on credit card later escalating to atrocious interest rates exceeding market affordability…are primarily responsible for the chronic ailments of the current real estate and the liquidity crisis.

Unequivocally the present woes of the economy are attributable to the overwhelming greed by the financial sector and the defiance for any rule of law until date. As clarified by President Obama during the press conference on date, the financial regulatory reforms are in order.

Since some prominent economists have been recently pushing for more stimulus over and above the total $3.7 trillion dollars, it’s necessary to obtain the facts and details on earlier investments to evaluate the methods applied as a result of the negative economic growth and dismal unemployment rate.

Please refer to stimulus package details followed by careful analysis in the subsequent segments.

Meanwhile, it’s imperative and incumbent on all bailout recipients and the previous administration officials regardless of hierarchy to come forward, testify under oath to Congress as the representatives of the American electorate, and explain exactly where and how the trillions of dollars have been invested.

Is it a coincidence that Goldman Sachs after being assisted by the former Treasury Secretary Henry Paulson in gobbling Bear Stearns and Lehman Brothers, emerges with a bumper profit rewarding its every employee with a despicable amount $700,000 bonus the past week ? – Absolutely not.

It’s about time the criminals of the financial world are brought to justice in order to avoid a twenty first century revolution in the world’s modern democracy.

Congress must act in the interest of the people and abide by the constitutional rule of law with an honest and thorough investigation of the massive bailouts carried out at the expense of the hard working American taxpayers.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Business, Economy, Featured | Leave a Comment 

Omnibus Spending

March 5, 2009

March 5, 2009

It has been the topic of the day and rightfully so. The American taxpayers’ wallet is drained for various bailouts from financial institutions to auto industry and others waiting in line for their respective turn.

Is it the present administration’s fault that the nation is dependent on borrowings and charity?

The response varies as it depends on the network and the guests appearing on the programs to discuss economy, finance and stock market.

Those nostalgic about the previous administration claim that it is entirely the current administration’s fault.

For some reason their calculation of the incumbent administration in office since swearing in i.e. January 20, 2009 up until now works out to three months, unless they have a custom made calendar that converts every year into leap year with some months extending beyond thirty one days and somehow only the Democratic administrations are privileged to such magical occurrence.

To shed light on the relevant topic of spending bill $410 billion approved by the Senate and awaiting the President’s signature, there appears to be some legitimate concerns regarding the infamous “earmarks” or “pork barrel” issue that always finds its way into every legislative bill.

According to news media, 40% of GOP members and 60% of Democrats are responsible for the estimated 8,570 earmarks worth $7.7billion . The following article supports it.

March 4, 2009

Senate votes to keep earmarks in bill – By David Espo, Associated Press – Thank you.

“The Senate voted overwhelmingly to preserve thousands of earmarks in a $410 billion spending bill Tuesday, brushing aside Senator John McCain’s claim that President Barack Obama and Congress are merely conducting business as usual in a time of economic hardship.

McCain’s attempt to strip out an estimated 8,500 earmarks failed on a vote of 63-32.

The Arizona’s senator’s proposal also would have cut roughly $32 billion from the measure and kept spending a last year’s levels in several federal agencies.

Last year’s Republican presidential candidate said both he and Obama pledged during the campaign to “stop business as usual in Washington,” and he quoted the president as having said he would go line by line to make sure money was spent wisely.

The White House has said Obama intends to sign the legislation, casting it as leftover business from 2008. Spokesman Robert Gibbs pledged Monday that the White House will issue new guidelines covering earmarks for future bills.

McCain’s proposal drew the support of 30 Republicans and two Democrats, and the outcome reflected the enduring value of earmarks to lawmakers. While polls routinely show these pet projects to be unpopular, local governments and constituents often covet them.

The maneuvering came on legislation to assure continued funding for several federal agencies past March 6. At $410 billion, the bill represents an 8 percent increase over last year’s spending levels, more than double the rate of inflation.

Republicans made two other attempts during the day to reduce spending in the bill, but failed both times.

Sen. Dan Inouye, D-Hawaii, chairman of the Senate Appropriations Committee, said McCain’s call to hold spending level with a year ago “doesn’t account for inflation.”

As an example, he said some programs would have to be cut if federal workers were to receive a pay raise.

The House passed the legislation last week, and Democratic leaders are working to clear it without changes so the president can sign it by Friday.

While Republican opposition in the House focused more on the bill’s overall spending, McCain and allies turned the Senate spotlight squarely on earmarks.

“How does anyone justify some of these earmarks:

$1.7 million for pig odor research in Iowa;

$2 million ‘for the promotion of astronomy’ in Hawaii;

$6.6 million for termite research in New Orleans;

$2.1 million for the Center for Grape Genetics in New York,” he said.

He also noted the legislation includes 14 earmarks requested by lawmakers for projects sought by PMA Group, a lobbying company at the center of a federal corruption investigation. Sen. Tom Coburn, R-Okla, said he would seek to have them removed.

Taxpayers for Common Sense estimates the legislation contains 8,570 disclosed earmarks worth $7.7 billion. House Democrats declined to provide an estimate of the number of pet projects in the bill, and put their cost at $3.8 billion.”

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Analysis:

It is evident from the article and news media discussions that this particular bill primarily aimed at stimulating the economy has some of its priorities mixed up. As stated earlier in my article “Economic Recovery Plan” earmarks or estimates for pet projects is a contentious issue with notable reasons for objection by some lawmakers.

This is no longer a partisan issue as both parties have participants in varying percentages responsible for wasteful spending. On the one hand, we have economic turmoil with American families receiving pink slips instead of paychecks and children literally dependent on charity for survival.

There are worse situations like in the golden state of California, northern Californian school district is forcing K-12 students in public schools to stay home on Friday, making it a four-day week due to again “messed up priorities” by the State legislators. The victims in the merciless fund slashing are none other than the educators and students.

Qualified teachers’ job contracts are terminated because of severe cuts in essential programs like education. The head of this state living up to the reputation of the title “Terminator” leaving students seeking help from parents, peer group, neighbors, and strangers/aliens on the cyber space or even outer space.

Do the pet projects’ sponsors have any idea how desperate the situation is for those struggling to make ends meet particularly with a fear mongering of the “socialism” concept by the capitalist panderers denying the failure of capitalism in the absence of regulatory process?

What does this mean to parents dealing with job insecurity and lack of support to take care of the children on the day, they should be in school?

Hoping the children will be protected by guardian angels while they are at work and risking visits from a social worker on accounts of child neglect and possible abuse.

Those who lack the support of extended family relying on hired help in this perilous economy have to choose between the safety of their children and the tight family budget, since borrowing is out of question with indefinite freezing of the credit market to families and small businesses.

One might assume the federal aid to states should address these problems. Even though the federal aid has been approved for this purpose, whatever benefits allocated for education and relief to families in the federal stimulus package is siphoned off by the state budget targeting the same programs.

The state legislators had to emerge victorious in the long fought battle to balance the budget using people at the bottom of the socio-economic scale as the sacrificial lambs.

Obviously, on the other hand both state and federal lawmakers favoring the pet projects vigorously debate in the House and the Senate floor to defend their own jobs as pet projects is an insurance for re-election in their constituency.

If surplus funds are the reasons for earmarks, why not allocate those funds to the deserving entity i.e. the taxpayers in the economy. It would make sense for taxpayers to use their own money to spend on their dependents’ education, health care and housing payments.

It is conclusive that earmarks like the ones highlighted in the articles should have never been inserted in the first place, and now regardless of whose business is being taken care of i.e. whether previous or present administration, the burden is squarely on the taxpayers with the passing of this bill loaded with unnecessary and meaningless pet projects.

American taxpayers were promised on the campaign trail about the elimination of earmarks by both parties and now is the time to honor that commitment without any reservation.

In the real world, students can enroll in the best educational institutions only upon excellent academic achievement, similarly secure dream jobs (during the glorious days) and stick with it purely on competence.

Unfortunately, the entities to whom the criteria should apply i.e. Washington and Wall Street are exempt from performance based hiring or firing despite their successful duo disastrous mismanagement of the world’s economic power, the U.S. economy.

Taxpayers as voters have the power to promote and implement the agenda in 2010 to realize the campaign slogan “Change is effective when it happens from the bottom up and not from the top bottom.”

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy, Featured | Leave a Comment 

Senate Debate on Economic Recovery Plan

February 7, 2009

The Senate is engaged in vigorous debate over the economic stimulus package from President Barack Obama.

It appears there is massive confusion in the determination of priorities on this bill. The honorable Senators are concerned about the effectiveness of this bill given the magnitude and the urgency to address serious challenges facing our nation.

Individual viewpoints during debate are healthy and sometimes serve the purpose to remain objective.

However, in this particular process overindulgence could lead to distraction and become counter-productive.

After viewing the Senate discussion of the bill, it is apparent that Senators are yet to configure the policies and programs to achieve the pertinent goals.

For instance, there is mix up between creating jobs and dealing with foreclosures. In order to target the specifics of the current economic recession, let us breakdown the various components in requirement of stimulus and revival.

The consensus is to have a stimulus plan that yields the desired result of averting further economic meltdown by setting the pace for recovery.

As stated earlier in the economic recovery plan posted on February 3, 2009 the culminating factors of the economic crises are;

Housing market, Job market and Stock market.

Housing market – It is important that foreclosures are dealt with effectively and refinancing opportunities made available to homeowners in dire state.

Current plan has $15,000 in tax credits for new homebuyers in an effort to improve the housing prices through home sales. Unless and until the existing homeowners rescued from losing homes through foreclosures and others with affordable mortgage payments to adjust the deficiency in home value, any measures in this sector will be futile.

At the same time, an amendment to the debated stimulus bill to handle foreclosures saving approximately 1.5 million families from this crisis is a repetitive exercise as claimed by those Senators in opposition to this amendment.

The reason being, as articulated by the Senators against the amendment, The Troubled Assets Relief Program (TARP) worth $700 billion was committed for this purpose along with bailout of financial institutions.

Accordingly, $50 billion was allocated towards foreclosures and restructuring of mortgage programs.

Therefore, it is imperative to derive that $50 billion from the previous TARP fund and apply towards the revival of housing market crisis. It is quite possible that $50 billion will not be adequate to provide instant relief but action recommended than inaction.

More reason to verify the exact distribution of the previous TARP fund i.e. $700 billion bailout and redirect any unused portion towards challenges such as housing market and consumer spending.

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Objectives of the Stimulus/Recovery Plan:

The primary focus of the current stimulus package must be job creation, aid consumer spending and investments with safe returns.

Job creation: President Barack Obama’s proposal aims for creation of 3 million jobs through various avenues such as —

Direct investments in public works projects i.e. repair and reconstruction of infrastructure across the nation.

Tax incentives and financial assistance to small businesses and corporations with limited resources.

Minimize payroll tax to curb mass layoffs.

Restore manufacturing jobs with necessary financial assistance and modified tax structure.

Consumer spending: The stimulus package offers relief to consumers with tax credit of $500 for individuals and $1000 for couples. It is essential for consumers to utilize the credits towards consumption of goods and services rather than reducing personal debts as again that would be beneficial to the financial institutions, the major contributor of the economic recession.

It is worth remembering that the Bush administration experimented with this stimulus strategy last summer, i.e. 2008 with $300 rebate per child and a cap on annual income of the family. Obviously, the trial and error method did not payoff due to neglect of other crisis like housing, stock and financial markets.

The lesson learned is to treat housing, job, financial and stock market crisis individually and isolate them from one another even though they comprise the entire cause of the economic recession.

Other ways to trigger consumer spending is to ease the burden on families with energy costs i.e. heating homes around this time of the year is significantly high and reduction of surcharges and taxes on the energy bill will provide relief to population in the worst affected regions of the country.

Consumers represented across the social and economic spectrum in a society range from youth population to families, senior citizens and self-employed individuals…

Any tax benefits and financial assistance should be inclusive of all potential consumers to obtain maximum gains.

Investments with safe returns: All investments must produce optimum returns, secured with viable collaterals and subject to rigorous oversight. Most importantly, the investment must generate jobs and/or income for taxpayers as well as create opportunities to tackle other issues like health care, energy and education.

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Partisan Politics vs. National Interest

It is common knowledge that the two major political parties have unique positions on fiscal policies.

The Republican Party is vehemently opposed to tax increases to reaffirm the political platform of the party, while scouring for wasteful spending.

Fiscal responsibility is necessary for a nation saddled with alarming deficit. Nevertheless, desperate times call for desperate measures. Now is the moment to rescue the nation with prudent investments and techniques to revitalize growth in all sectors.

During elimination of costs proven liabilities, diligence is required from legislators to distinguish investments from wasteful spending. Funding National Endowment for Arts is a worthy cause as it promotes creative and Performing arts besides employment opportunities for a significant population who are ultimately taxpayers in the economy.

Sometimes, political debates overshadow the ambition to resolve major national crises.

The Democratic Party must be committed towards immediate mission to revive the economy and therefore abstain from elaborate spending spree on frivolous projects that form the basis for unnecessary political debates.

Compromise on both sides by finding common ground to restore consumer and investor confidence is vital for economic recovery.

With mass layoffs, collapse of housing, financial and manufacturing sectors… partisan politics is symbolic of Washington and it is time to get past conventional ways to demonstrate that representatives in the House and Senate care for their constituents, the real victims of the economic catastrophe.

Conciliatory effort and collective action from all sides is what required to helping our nation survive the worst economic period in recent times.

The Senators can confirm their willingness to work together for national interest by approving the President’s recovery plan.

Taxpayers as electorate are viewing the situation with the hope that policy makers will put aside their differences and reject political scores by pledging support to the job creation proposal from President Barack Obama.

Thank you.

Padmini Arhant

Written by Padmini Arhant · Filed Under Economy | Leave a Comment