Apr 22 2009

Democrats Had Their Chance – Muffed It!

I know a lot of people think it is way to early to declare the Democrats efforts in DC a total failure, but it really isn’t. Things have been put in motion which cannot be reversed, even if the Democrats were willing to admit their screw ups and try and undo them. The economic forces at work, along with the glacial pace of the Federal Government, are pushing things into a direction that cannot be avoided. The momentum here is immense and unstoppable

The big Democrat mistake was, at its core, believing naive socialist theories that government can out perform the private market. They gambled the government could create jobs faster than the economy could if it was unleashed by tax cuts. It seems Democrats are going to have learn that lesson the hard way, and we are the ones who will feel all the pain (which we will gladly reflect back in the voting booths come next year).

The bleak future outlook for the world economy is a clear sign that the Democrats took a wrong, left turn this year when they decided to rely on the slow moving government spending over the fast action we have seen many times in response to tax cuts. That decision point is past, now we get to be slowly tortured over this summer as it plays out.

Here is the current outlook for the global economy – and it is not just bad, but historically bad:

 

The global economy is set to decline by 1.3% in 2009, in the first global recession since World War II, the International Monetary Fund (IMF) says.

In January, the IMF had predicted world output would increase by 0.5% in 2009.

It now projects that the UK will see its economy shrink by 4.1% in 2009, and by a further 0.4% in 2010.

But other major economies are predicted to shrink even more, with Germany declining by 5.6%, Japan by 6.2%, and Italy by 4.4% in 2009.

The prospects for the advanced economies are not much brighter in 2010, with an overall forecast of zero growth.

That alone is going to be a nasty headwind against economic growth. But in addition to this, Liberals were hoping there spending would fix economy, but the problem is their stimulus spending is still stuck in the Federal Bureaucracy, a situation I have been tracking with this graph (click to enlarge):

As I noted in the last post on the recovery, there is basically no money coming out of the government and into the economy (this would shoe up in the last set of columns under “Disbursements”). There is no stimulus happening, which means things are continuing to degrade. BTW, the chart covers the two big beneficiaries of the stimulus money – Dept of Energy and Dept of Transportation. The 5 departments and one agency in the graph, coming in at  combined $105 billion, represent a third of all spending in the plan:

The economic stimulus package proposed by Democratic House leaders totals $825 billion and includes three broad pieces: a $365.6 billion spending measure for such brick-and-mortar projects as highways and bridges; a $180 billion measure to boost jobless benefits and Medicaid, among other things; and a $275 billion tax-relief package, which includes a plan to give a $500 payroll tax holiday to all workers, a proposal from Mr. Obama’s presidential campaign.

This was the plan at the proposal stage. I found this great graphic below (click to enlarge) at the DoD Recovery Status site, which shows the enacted plan and where the money was supposed to go (or ‘is not going’ to be precise):

The DoD is getting less than 1% of the money meant to stimulate the economy. Too bad, the DoD has tons of projects in progress it could have expanded quickly. It also has the procurement staff to handle a lot of simultaneous procurements, as well as the staff to manage them. The bottle neck is the admin staff. They just don’t move fast (they have libraries full of laws and processes that have to followed) and cannot handle this large a bulge of new projects. The truth is seen in the second column of my graph, showing how slowly the money is being tagged to projects, let alone spent.

Here’s the problem. A third of this stimulus package money  is stuck in the federal bureaucracy, and the tax refunds are just not doing anything ($13 a week?). The rest is aimed at the safety net money that only helps when you are so far gone financially you need to welfare. The government is stalled. It is just impossible to fathom the Democrats in Congress were ignorant of the snail’s pace of federal acquisition (especially outside the DoD, which due to its mission is nimble and well staffed). It was either historic incompetence or fraud on their part to claim the plan would impact the economy. 

With no stimulus money and shrinking global economies the government revenues are going to continue to fall, the deficits continue to sky rocket. Look at the following graphs of (a) federal revenues and (b) federal spending and deficits.

 

 

 

One thing to note is how revenues were growing just fine under Bush, even with the blow we took on 9-11. Also note how Clinton left a declining economy to Bush, who took office in 2001, but was only able to get some initial tax cuts in place during the summer of 2001 (when Dems turned a GOP senator and took control of the Senate for the next two years). Even with the Clinton downturn he inherited and the blow on 9-11, President Bush’s low tax policies were slamming revenues through the door for years.

But now look at 2008, 2009 and the prediction for 2010. Lots more red ink than during the Bush years (recall, Dems took hold of the purse strings of Congress in 2006). Revenues are dropping like a rock, with a rosy assumption they will turn up again later this year. I would say, given the global outlook, that is probably way too optimistic.

And if that doesn’t happen, if revenues don’t turn around, the spending will continue out the roof and the red ink will flow like a tsunami. Worse, the stimulus money will still be stuck in DC and the job market will be horrible. The people will be getting really, really, pissed off.

Forces are in play which cannot stop a massive failure by the Democrats, because I just can’t see what will lift the economy in the coming months. There is nothing there to pull it off.

10 responses so far

10 Responses to “Democrats Had Their Chance – Muffed It!”

  1. Terrye says:

    The Democrats do not know what they are doing.

  2. crosspatch says:

    Terrye, they know *exactly* what they are doing and they know they need to create a “crisis” in order to grab complete control of pretty much everything.

    GM shutting down for 9 weeks this summer is going to hurt thousands of people and not just at GM, all the suppliers and contractors that make their money from the auto industry are going to hurt as are all the services in the communities surrounding auto plants.

  3. Aitch748 says:

    Don’t forget the banks actually announcing that they were ready, willing, and able to pay back all the money they got from these bailouts and Obama going to them and telling them that the government would not accept repayment.

    (WSJ)

    I agree with Crosspatch: Obama and the Democrats want to grab as much power as they can before the voters get a chance to vote them out of office.

  4. Boghie says:

    AJ,

    You are being unfair.

    President Obama displayed courage and oversight when he sleuthed

    $100,000,000

    in savings out of expenditures of

    $3,700,000,000,000

    in FY2010!!!

    He is amazing…

    In one fell swoop of the pen he cut to the bone. He cut 0.0027% out of the annual expenses. We are talking about 0.27% of 1% of expenditures. These are deep cuts. Cuts to the bone.

    Then again, I lose more when my employer rounds my Social Security ‘investment’ every other month or so. So much pain…

  5. groy says:

    The few Democrat who aren’t corrupt are ignorant beyond explanation…..

  6. ivehadit says:

    Have you all seen this:

    http://drsanity.blogspot.com/2009/04/poliitical-left-united-in-hate-with.html

    Found it a macsmind.com. Imho, says it all.

    FTA:”In the few short months that the dedicated leftist Barack Obama has been in the White House, we have seen a rapid acceleration of the “forces of revolution” rising to overthow this country. Obama’s World Apology and America Bashing Tour is nothing if not a crystal clear deliniation of the sides of this battle. There is no dictator or tyrant he won’t abase himself to, or belittle his country for; there is no ally that he is not willing to give up or betray in order to demonstrate his willingness to submit to Islamic bullying.

    But, as I have mentioned before in “The Four Pillars of the Socialist Revival”, appeasement and enabling of terror is only one way that the political left hopes to advance their ideology; it’s important to remember the other three prongs of their strategy. Our new President seems intent on implementing all four as quickly as possible so as to achieve the “foundation” of this new leftist utopia.

  7. crosspatch says:

    You know you are in trouble as a liberal socialist when Fidel Castro says you are “conceited and superficial”.

    Also, I found this at another blog but it is typical of the kind of Orwellian twisting of reality coming out of Washington and facilitated by the press. You now have Barney Frank blaming George Bush for the increased quotas in sub-prime mortgages as if he had nothing to do with it while he takes great credit on his own website.

    Absolutely shameless idiocy.

  8. WWS says:

    The housing market was supposed to show a slight seasonal uptick in March, like it usually does every year. However, it has just been reported that March home sales fell to annualized sales of 4.57 million, a horribly depressed number. What’s worse, a full 50% of those sales was made up of foreclosed and distressed housing.

    Don’t believe the happy talk you hear about “economic recovery” – it ain’t anywhere near close, things are being propped up by smoke and mirrors.

    Watch the unemployment rate, home sales, and consumer credit numbers. They all influence each other, and unlike earnings, they can’t be faked even with the government’s help.

    All three of those areas are still continuing sharply downward. And nothing can get better until these three areas are addressed, because they have the power and influence to continue to drag the rest of the economy down into the hole with them.

  9. owl says:

    I loved the chart showing the red and you pointing out the years the Dems controlled Congress. This is the type thing that is never brought home to the general public by the MSM. I think everyone would be surprised if a line of voters were questioned about who was in charge the last 8 years. Don’t ask them to name 5 Senators but just this.

  10. [...] How about from April 22nd: I know a lot of people think it is way to early to declare the Democrats efforts in DC a total failure, but it really isn’t. Things have been put in motion which cannot be reversed, even if the Democrats were willing to admit their screw ups and try and undo them. The economic forces at work, along with the glacial pace of the Federal Government, are pushing things into a direction that cannot be avoided. The momentum here is immense and unstoppable [...]