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The President Admits The “Recovery” Is Smoke And Mirrors

By: Jack_Savage (Diary)  |  February 5th, 2013 at 07:11 PM  | 

RESIZE: AAA

In my view, true recovery is one that has a lasting foundation of effective business policies, fiscal sanity and monetary restraint. A Democrat recovery, we now know, is a house of cards created and sustained by writing hundreds of billions of dollars in hot checks (h/t – Lloyd Bentsen). Don’t believe me? Here is what the President had to say today:

But we’ve also seen the effects that political dysfunction can have on our economic progress.  The drawn-out process for resolving the fiscal cliff hurt consumer confidence.  The threat of massive automatic cuts have already started to affect business decisions.  So we’ve been reminded that while it’s critical for us to cut wasteful spending, we can’t just cut our way to prosperity.  Deep, indiscriminate cuts to things like education and training, energy and national security will cost us jobs, and it will slow down our recovery.  It’s not the right thing to do for the economy; it’s not the right thing for folks who are out there still looking for work.

Did you get that? Cuts will hurt the economy, so it stands to reason that the only engine driving the “recovery” is deficit spending. Not wise policies. Not robust growth in the private sector. The miserable, pathetic, cowardly plan of borrowing from our children to avoid pain now.

The President is too clever by half. Most of his low-information supporters have bought into the self-fulfilling prophecy that deficit spending sustains the economy, so reducing the deficit hurts it, and therefore we CANNOT cut spending. At all. Ever.

The Big Truth at the heart of this belief is that Obama has nothing left. He has no plan. He has no policy of growth. His business killing regulations have begun to kill the geese that lay the eggs, and he has nowhere else to go. There will be no increase in tax revenue through growth, just by confiscating more of the shrinking pie, which leads the pie to shrink further, which leads to…well, you get it.

The argument that spending restraint will cripple the economy is also an admission that Barack Obama’s policies have utterly failed, and the only thing he has to lean on is deficit spending.

The house of cards is tottering. It will soon fall.

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  • PowerToThePeople

    Well put Jack, another good piece. But you left out where his new honesty included the usual “Republicans are too blame” statement.

    • Jack_Savage

      “Blame You Can Believe In”. I wonder how we got to a place as a nation where we would tolerate someone like this in the White House.

  • Jim_Riggs

    As a businessman I think the economy is going to be just fine. Spending cuts or no spending cuts. Tax increases or no tax increases. And I also think it has very little to do with either political party.

    • Jack_Savage

      There are “microeconomies” all over the place, so maybe you are in a place where that is true. If you think things are great, and will be fine no matter what, I have to wonder what business you are in and your geographic location.

      • rbdwiggins

        The most prosperous geographical location is Northern Virginia… Where the inhabitants are direct beneficiaries of the Keynesian economy, Obama’s “stimulus” plan is working just fine and the recession doesn’t exist.

        • Jack_Savage

          Exactly. That’s what has turned VA into a blue state. Trough dwellers.

      • Jim_Riggs

        Manufacturing. My customers are in the mid-Atlantic.

        • Jack_Savage

          Hmmm…what industry?

          • Jim_Riggs

            Electronics.

          • Jim_Riggs

            Is there any particular reason for you interest?

          • PowerToThePeople

            Jim, he asks because it is seldom any businessman, and I assume by that you mean business owner, is OK and feels secure in a financial environment where collapse is possible, spending is uncontrolled, and tax increases are a very real possibility.

            Business always takes the biggest hit because they are perceived as having the deepest pockets even though most business is small or medium business and the money well does not run deep. So when financial security is at risk, most businesses tend to turtle when it comes to job creation, research and development, pay raises, and so on because the future is so uncertain. They raise prices to protect their bottom line due to falling sales. The list could go on and on.

            So for a business owner or even a professional businessman to make the statement that all will be OK in such an uncertain time and with the pending huge business taxes that must come, it just seems to most to be a very funny statement coming from one who claims to be an owner of a business. The only businesses that will not suffer are seedy or illegal ones since tax increases do not affect them and people always find ways to pay for vices.

            A bad economy is one of the biggest killers of businesses, increased taxes is another. So everyone in any type of business is worried about those things, deeply.

          • Jim_Riggs

            Yes, I am the owner. One of two anyway. Been in business 16 years and 2012 was a record year. We hired 8 new employees, some temp, some permanent. Taxes have never factored into any hiring or capital purchase decisions we’ve ever made.

            I don’t buy into the-sky-is-falling philosophy. Three years ago, maybe. I think right now is a great time to start a business.

          • PowerToThePeople

            All that may be true Jim, I am not here to state you are telling the truth, lying, or exaggerating as the internet is an unprovable place. I could tell you about me, but again, no way to prove it one way or the other. That being said, if you are doing that well as a small business in this economy, count your lucky stars as it is not the norm. And if you and your business partners are not scared of a possibly worse economy and higher taxes that are coming, then somehow your business model differs from all other models or you are just one lucky guy in business when you know little about business. That is not being said as an insult, it is a simple fact.

            Business relies on a decent to good economy, no other way around that. If people are scared, they do not spend like they would and your bottom line suffers. If you supply contractors or other business, you are still affected since people are not opening their pools due to cost, not building additions or new homes, people are not buying your customers products, etc so your customers buy less from you since they sell less. It is a domino affect.

            When taxes are raised, business loses money. A) They make less on each dollar, B) they pass on the cost or some of the cost to the buyer who ends up buying less so their revenue is still cut.

            So I am not sure how higher taxes would not factor into business decisions you make as that makes no business sense, but as I stated earlier, not here to challenge your assertions as you may one of the only businesses that does business like no other. Just clearing up why business is affected by bad economy and taxes and why higher taxes and a worse economy scares them to death.

          • fromthesidelines

            Given that the Dow is at all time highs, it would seem that Jim’s success is not an outlier, but rather a microcosm of a broader pattern. This doesn’t mean that government couldn’t do more (or, less) to further foster economic development. Still, Jim and the Dow are telling the same story. Do you genuinely believe that efficient capital markets are inherently disconnected from economic fundamentals?

          • gmat

            The DOW comprises a lot of international companies with a lot of revenues from outside the US, so yes, there is a disconnect between the US stock markets and the US economy. The market went up in the fourth quarter while the US economy contracted slightly.

            Also, a lot of the money that has been printed in the US the last few years has not found its way to Main Street because main Street has been deleveraging, so that money found its way to Wall Street, into stocks and corporate bonds (corporate CFOs have been borrowing money like crazy, and why not, interest rates are nil).

          • fromthesidelines

            The Dow is comprised of 30 companies based in the US. Yes, many have large portions of their operations and revenue overseas, no question about that. However, that’s not disconnected from the US economy. For example, rising exports decreases our trade deficit; that is absolutely a positive economic fundamental for the broader US macro-economy.

            Think about the reverse case — when Chinese manufacturers make a large portion of their revenue from overseas customers (such as ourselves), does that not benefit the broader China economy? Of course it does. Same here. Its a global market. When US companies out-compete non-US companies, in any market, that benefits the broader US economy. Furthermore, yes, interest rates are nil — and that’s another positive economic fundamental.

            I agree with your comment regarding “Main Street” — there are still large pockets in the US that are unwinding from the debt-fueled asset bubbles of the last decade, and not everyone has yet been able to fully benefit from low interest rates to rebuild their balance sheets. But that’s just a matter of time. We’re already seeing some of the hardest hit segments, in particular real estate, start to turn things around.Fewer and fewer people are underwater on their mortgages and their 401ks have enjoyed a steady bull market. This will ultimately translate to people feeling more prosperous. It just hasn’t reached the tipping point yet.

            That doesn’t mean everyone will someday do better. Economic disruption causes winners and losers. There will always be people, and even entire regions, with the misfortune of becoming obsolete due new technologies, changes in consumer preferences, and other factors. That’s the price of allowing free markets, rather than central planners, to allocate scarce resources.

            Still, on a macro-level, it is conditions like these — rising exports, low interest rates, increasing home values, etc — that are the economic fundamentals which is driving, slowly, a fairly broad-based recovery. I realize not everyone is experiencing it yet, and it could certainly reverse course for any number of reasons. There is still a ton of risk out there. But, these are the fundamentals that are enabling many companies, not just multi-billion conglomerates on the Dow, to succeed and to be optimistic about the future, despite these risks.

            Congrats, Jim. I hope for your continued success.

          • Jack_Savage

            What PPTP said.
            Shale oil business, I get it. Electronics for the TSA or other goverment agency, OK. Paver in a blue state awash in stimulus money, maybe.
            A business person is by nature optomistic, but there are none that I am aware of that are increasing staff or making any capital investments. None. Every single one I talk to expects very slow growth, if any, this year, and that is if everything remains as “good” or better than it is right now. Three medium sized companies in my little corner of the world went bankrupt last month, with more on the edge. Those who have survived have burned through reserves, and no one got a bonus last year.
            I just don’t see it.

          • Jim_Riggs

            We’re a CM. Our product mix includes cryptography, commercial refrigeration, swimming pool systems, underwater ultrasonic exploration, video surveillance, sports broadcasting, medical imaging, vehicle alcohol monitors, and power distribution systems. We’re working with a start-up trying to develop helmet sensors/recorders for brain injury monitoring. We’ve spent about $300k on equipment in the last 18 months.

            Yes, I’m a very optimistic person but I’ve never been more excited about the future.

    • rbdwiggins

      The economy will be just fine… Just as soon as someone figures out how to remove tens of thousands of pages of new regulations from the federal register, limit the EPA’s jurisdiction to the Potomac River and the airspace inside the US Capitol Building, roll back the punitive progressive tax structure, reform the welfare state and our unsustainable entitlement programs, repeal Obamacare , balance the federal budget, and shut down Treasury’s printing presses until the public debt falls below 2007 levels… And I can guarantee you with absolute confidence that it will never happen while Liberals/Progressives/Democrats are in charge of anything…

      • Jack_Savage

        Exactly. But one trick Obama has no idea how business works – he thinks the profits businesses make are eternal, everlasting and excessive.

  • gmat

    It’s not just a question of avoiding pain.

    If you cut public spending faster than you grow private spending (as just occurred in the 4th quarter, eg), the economy contracts, revenues drop while safety net spending goes up, and you end up with a bigger deficit than you started with.

    Making government spending cuts proportionate to private sector growth occurs for me as sounder a fiscal policy.