Mish's Global Economic Trend Analysis

"The Blame Game"
Media Hype Over Sequester Cuts
Did Obama Tax the US Into Recession?
Walmart Slow to Stock Shelves as Consumer Sales Slump

Posted: 28 Feb 2013 10:13 PM PST

Finger-pointing and fear-mongering over trivial budget non-cuts are now in full swing. Obama is blaming House speaker John Boehner and of course Boehner is blaming Obama.

Of the more ridiculous hype, Obama asserts "Navy ships could lie idle and children would lose out on vaccinations if the cuts are not halted."

Mercy!

Mainstream Media Nonsense

New York Times: Austerity Kills Government Jobs as Cuts to Budgets Loom
Washington Post: Sequester will sock a vulnerable economy

Cooler Heads vs. Mainstream Media

Cooler heads prevail in non-mainstream media reports such as that of friend Tim Wallace as noted in Media Hype Over Sequester Cuts

Cooler heads also prevail in a NBC/WSJ Poll that shows "A majority of Americans (53%) prefer that Congress move ahead with the current sequester cuts or a plan that contains even more cuts, suggesting the public's general appetite for reducing spending."

Blame Game Campaign

Getting the media all hyped up over trivial "non-cuts" is all part of Obama's "Blame Game" Campaign. To be fair, Republicans have countered with their own campaign.

With those thoughts, I have a musical tribute to offer.

Musical Tribute to Shirley Ellis

Come on everybody!
I say now let's play a game
I betcha I can make a rhyme out of anybody's name

Obama!

Obama, Obama, bo Ama, Bonana fanna fo Fobama
Fee fy mo Mobama, Obama!

Everybody do Boehner
Boehner, Boehner, bo Oenner, Bonana fanna fo Foehner
Fee fy mo Moehner, Boehner!

Link if above video does not play: Shirley Ellis "The Name Game" (Merv Griffin Show 1965)

Let's do Chuck

I will let readers work out the "Name Game" rhyme to Chuck (or Buck) on their own accord. Suffice to say that a couple words appear that represent the true state of the economy.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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Media Hype Over Sequester Cuts

Posted: 28 Feb 2013 03:59 PM PST

President Obama is playing the media like a fiddle (more accurately like the fools they are). Countless mainstream media articles talk about the devastation that is sure to follow if the sequester cuts take place. Obama has even hyped this up with threats of cuts on vaccinations for children.

Here is one example of the hype: New crisis looms as budget cuts hit US on Friday.

Billions of dollars in harsh budget cuts are hitting the U.S. government on Friday, and officials are conceding that last-minute moves by both Democrats and Republicans in Congress to soften the blow are doomed.

Economists and lawmakers alike agree that the cuts, the potential shutdown and the country's series of fiscal crises overall are hurting the country's shaky comeback from the Great Recession, and the effects will be felt around the world. Both political parties have said the cuts — of 5 percent to domestic agencies and 8 percent to the military— could inflict major damage to government programs and the economy at large.

Obama, speaking to a group of business executives Wednesday night, said the cuts would be a "tumble downward" for the economy, though he acknowledged it could takes weeks before many Americans feel the full impact of the budget shrinking.

Domestic agencies would see their budgets frozen almost exactly as they are, which would mean no money for new initiatives such as cybersecurity or for routine increases for programs such as low-income housing.

"We're not going to do that," said Sen. Tom Harkin, a Democrat.

Budget Freeze Oh My!

My friend Tim Wallace pinged me today with a few thoughts. ...

Hi Mish

In 2006 the Federal spending was $2.6 trillion. In 2008 the budget had gone up to $2.9 trillion, an increase of "only" 12.2% in two years. Then, the "financial crisis" hit and a "one time" increase in the budget was put in place to bail out all the political cronies.

That "one time" increase ballooned the budget to $3.5 trillion, an increase of 18% over 2008, but an increase of 32.6% over 2006!

So, what happened to this "one time" increase? Did it go away the next year? Of course not!

Federal spending has remained above $3.5 trillion since, and is even up again to about $3.6 trillion. This is 33% more than 6 years ago.

Suppose inflation was the basis for budget increases. Then let's use the joke of a 2% a year inflation rate that Bernanke claims. On that basis, spending based on 2000's numbers would be $2.3 trillion! If you double the rate of inflation to 4% a year since 2000, spending would be $2.9 trillion ($600 billion less - each year than the current budget).

Clearly the problem is spending yet allegedly mere decrease of $85 billion (most of it back-loaded) is too much for Obama and Bernanke.

Tim

This media hype over sequestration is ridiculous.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Did Obama Tax the US Into Recession?

Posted: 28 Feb 2013 11:31 AM PST

Here's the question of the day: Did president Obama tax the US into recession?

Trim Tab's Charles Biderman makes that exact claim in U.S. Entered Recession in January Yet Fed Fix Keeps Stocks Pumped.

Welcome to the new recession. TrimTabs tracking of real-time wages and salaries shows that the United States has entered into a recession this year. I had been predicting a slowdown after the big bump in December incomes due to the hike in taxes. It has taken a while for us to get a handle on income this year given all the changes in tax rates. But now enough time has passed that I can say I was right. The U.S. economy has slowed enough to enter into recession.

This is how I know we have entered into a recession. After-tax wages and salaries net of inflation have been shrinking year over year since the second week in January. What has been growing dramatically in real time this year is income and employment tax payments. Withheld income and employment taxes have been running about 8.3% higher year over year, comparing the same 33 business days between Tuesday, January 8 and Monday, February 25.

Checking with our favorite official Washington economist, we now know that higher employment taxes accounted for 6% and new soak-the-rich taxes 2% of that 8.3% gain. That means that, before inflation, after-tax wages and salaries grew by only 0.3% for the 135 million Americans that have jobs subject to withholding.

After inflation? Well, what is inflation now? If you believe the Fed, around 2%. Others say higher. Regardless, there is no doubt that the Obama Administration has taxed us into a recession. Congratulations.

Inquiring minds may wish to read the rest of Biderman's article for some interesting thoughts on insider selling, stock buybacks, and Trim Tabs' employment projections vs. BLS reporting.

When Did the Recession Start?

Biderman claims the recession started in 2013. I suggest the US has been in recession since last June or July but the recession was masked over by four identifiable factors.

Obamacare was responsible for huge hiring of part-timers in the third and fourth quarter, distorting unemployment statistics.
Tax policy and Obamacare policy further shifted expenses and salaries into 4th quarter, yet nominal GDP was still negative for the quarter.
Electioneering games, particularly in regards to military spending, distorted the third quarter statistics.
Blatantly dishonest GDP deflators have overstated Real GDP for all of 2012 but especially the second half of the year.

Let's assume I am wrong about recession timing, and Biderman is correct. The initial question remains.

Is Obama to Blame?

The answer is no, not really. If the US was not in recession before and is now, the tipping factor is likely to be 2% payroll tax hikes that started in January and secondarily state tax hikes such as Proposition 30 Tax hikes in California, not specifically Obama's tax-the-wealthy policies.

Certainly Governor Brown and union fearmongering is responsible for the hikes in California.

Who is to blame for the payroll tax hikes? I suggest both parties. There never should have been a cut in the first place with these preposterous budget deficits.

It's not that I am against tax cuts. Rather I am against preposterous budget deficits and both parties are certainly to blame for that.

This does not detract from Biderman's overall analysis, just the finger-pointing about who is to blame.

Ultimately, Fed policies, fractional reserve lending, and Congressional spending are the real culprits in this mess, and I bet if Biderman gave it a second thought, that he would agree (regardless of which of us is correct on timing).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Walmart Slow to Stock Shelves as Consumer Sales Slump

Posted: 28 Feb 2013 09:58 AM PST

Looking for strong evidence a consumer slowdown is in progress? Look no further than a Bloomberg reports that shows Wal-Mart's Slowness to Stock Shelves Worsens, Sales Slump.

Wal-Mart Stores Inc (WMT), already struggling to woo shoppers constrained by higher taxes, is "getting worse" at keeping shelves stocked, the retailer's U.S. chief told executives, according to minutes of an officers' meeting obtained by Bloomberg News.

"We run out quickly and the new stuff doesn't come in," U.S. Chief Executive Officer Bill Simon said, according to the minutes of the Feb. 1 meeting. Simon called "self-inflicted wounds" Wal-Mart's "biggest risk" and said an executive vice president had been appointed to fix the restocking problem, according to the minutes.

Once a paragon of logistics, the world's largest retailer has been trying to improve its restocking efforts since at least 2011, hiring consultants to walk the aisles and track whether hundreds of items are available. It even reassigned store greeters to replenish merchandise. The restocking challenge emerged as Wal-Mart was returning more merchandise to shelves and reducing staff in many stores.

Wal-Mart's inability to keep its shelves stocked coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Simon said in the company's Feb. 21 earnings call.

There's Something Happening Here

In case you missed it, please consider Walmart Senior VP Asks "Where are All the Customers? And Where's Their Money?"; "February MTD Sales a Total Disaster"

With a tribute to Buffalo Springfield (sorry I cannot find a decent musical video) ...
There's something happening here. What it is, is exactly clear ...

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Economy News

28.2.13

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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