WaPo: High Unemployment is Structural, Get Used to It

http://www.washingtonpost.com/wp-dyn/content/article/2010/09/07/AR2010090706644.html?hpid=topnews

My Man Mitch: Daniels 2012

If you're like myself, or millions of other disillusioned Americans, you are painfully counting down the days, like Tom Hanks in the movie Castaway, until we have the opportunity to vote for a new president in 2012. In fact, I think we're all chomping at the bit to vote for anybody new, anytime soon.

That being said, a lot of speculation and straw polling is going on about who the GOP's presidential nominee will be. Several people have been lining themselves up early to take a stab at it: Tim Pawlenty, Mitt Romney, John Thune, Sarah Palin, Haley Barbour, etc. One name that has been tossed around (and which I've paid particular attention to) is Indiana Governor Mitch Daniels. While he has not taken many visible steps to set himself up for a run, I'm going to go out on an early limb: Mitch Daniels is the right man for the job.

Indiana has gone from having a state budget deficit to a budget surplus, created jobs, and expanded capital investment in the midst of a major economic downturn. Although Daniels has the TV-friendly charisma of a bologna sandwich, he has a lifetime of achievements in the public and private sectors. This guy is the anti-Obama, and it's not just for show.

Common Since: Where can we find someone capable of setting straight Washington's gluttonous taxing-and-spending-rollercoaster-of-doom? How about a plain ol' Midwestern governor who has actually already accomplished exactly what needs to be done. My Man Mitch. Let's draft him.

This Weekly Standard profile of Daniels is a MUST READ.

A Little Insight into the Financial Reform Bill

http://www.forbes.com/2010/05/24/financial-reform-economy-tarp-opinions-columnists-william-m-isaac.html?boxes=opinionschannellatest

United States of Government Dependence

How to Pay Down the Debt

How do we pay down the public debt? "Economic growth, duh." is the conclusion of columnist James Pethokoukis. That's easier said than done and requires an ideal public and private economic environment. But his Weekly Standard article makes some valid points on why other solutions wouldn't work.

Warning: Graphic Images!

http://nationalaffairs.com/publications/detail/america-in-the-red

Where Can I Find "The Complete Idiot's Guide to Optimism"?

Today I read and reflected on this article by Republican speechwriter Mark Lange. In it, he places the responsibility for job creation squarely on the shoulders of the pessimistic American. He asserts that yes, there are major challenges to finding employment, and no, we cannot rely on government spending to create the necessary amount of jobs. On these points we agree.

Although I am relatively green in the working world, I have heard from countless people that this is the worst job market in their entire lifetime. I know people from every walk of life that have been laid off. It's extremely difficult to maintain optimism about the country, the economy, and our personal well-beings when faced with such situations. Lange claims that the only the only true remedy is a strong dose of optimism. That seems a repugnant medicine to swallow for many.

Americans feel powerless when faced with being laid off, defaulting on a mortgage, being delinquent on credit card payments, and experiencing anonymity among a labor pool that numbers in the millions. We are ready, willing, and more-than-able to work, but no one will give us an opportunity. What are we to do?

I take comfort in the borderline-sinister words of Rahm Emanuel: "Never let a crisis go to waste." Pundits would argue that the Democrats have taken advantage of this crisis to expand the role of government. Other talking heads would argue that the Republicans have seized the crisis to become the party of "No" and steer the nation in the direction of isolationism. Let's set aside the partisan punditry for a moment and consider what this maxim could mean to us - the American lay-person.

I am a firm believer that when one door closes, two others open. And there is always great opportunity in the face of great adversity. Collectively and individually, we need to pick ourselves up and dust ourselves off. Relying on our pessimism and frustration with Washington and Wall Street to reverse our fortunes will only produce mediocre and sluggish results. There is no spoon-fed panacea to cure our recessionary woes and no legislative silver bullet to kill unemployment. Astute and measured policies will certainly help, but we've got to take the reigns on this one. We have to create opportunity, and it starts with one innovative idea at a time. New concepts, new techniques, and new applications of knowledge are requisite in every sector of the economy. Individuals acting in their own self-interest in creative ways are guaranteed produce opportunities. And those enterprises will compound upon each other profession by profession, industry by industry, and city by city.

Common Since: Economic recovery will require an aggregate approach. Erudite regulations and increasingly accessible credit will help. But there is no magic hat from which to pull out a rabbit. The resurrection of the American economy relies upon the renaissance of American optimism. Solutions are not going to come from the top down, but from the inside out. I searched Amazon.com for The Complete Idiot's Guide to Optimism, however it doesn't exist. We'll have to start writing it ourselves, one page and one person at a time.

Why Rail, Why Now?

Here is an interview from the Bradenton Herald with Stuart Rogel, CEO of Tampa Bay Partnership. Myself and others have been working with TBP to support public transit initiatives. Cross-state high-speed rail and regional rail/bus networks need our support if we are going to improve the physical development and quality of life of our state. This is a long-term vision that requires immediate action. The reason Florida looks the way it does today is because a generation of leaders were not prepared for the unprecedented growth in Florida's population during the 20th century.

Will it be cheap? No. Will it be easy? Not likely. Will it be worthwhile? Most definitely.

I will report more on my position and the logic behind it in future posts. Be on the lookout for information concerning TRANSITion Tampa Bay, a group we founded to encourage support among young professionals.

The Case for Regulation

In reference to yesterday's post, here is another viewpoint from Robert Reich, Secretary of Labor in the Clinton administration. He may a too far to the left of me on some issues, but here he supports my stance that the investment vehicles and trading practices of financial institutions need new regulations to prevent future economic chaos.

http://www.ft.com/cms/s/0/0666adfe-ffb6-11de-921f-00144feabdc0.html?nclick_check=1

The Time to Regulate is Now

I am a defender of free markets, low taxes, and minimal regulation. However, there is a reasonable and moderate extent to which these principles are effective. The current global economic situation is a direct result of actions within the financial world. Obviously "Exhibit A" is the use of loosely-regulated mortgage backed securities, the most risky form of collateralized debt obligations. Since the beginning of the Great Recession and the bailout of assorted financial institutions including AIG, Citi, and BoA, no significant regulatory reforms have been enacted to prevent the continuation of similar practices. I'm no financial guru, nor can I comprehend Gaussian copula models (models for pricing CDOs), but I can tell you that the financial system needs a new set of limits. Financial and banking institutions have been aching to pay back TARP funds and return to profitability, and I'm not so sure I can trust them to avoid new unorthodox and seriously risky investment vehicles. While the White House and Congress have been hammering away at passing health care reform and carbon cap-and-trade legislation with exorbitant projected costs, they have put financial reform on the back-burner. 2009 was a year of misplaced priorities. The time to regulate is now.

Further reading:

http://online.wsj.com/article/SB10001424052748703652104574652242436408008.html

Is A Double-Dip Recession Imminent?

Benn Steil of the Council on Foreign Relations seems to think so, according to this WSJ article.

Our Money, Our Choice: Vanishing Act or Balancing Act?

There exists one measure we can enact to transform the political culture of Washington, reduce our deficits, and ensure the wiser allocation of tax dollars: a Constitutional Amendment requiring the Federal Government to balance their budget.

Such Amendments have been proposed several times since 1982. In fact, the idea dates back to the founding of our republic. All attempts have failed to pass.

I am a believer in neither pure Keynesian theory nor pure supply-side theory. However, DC political hacks from both parties buy into one common tenet: deficit spending is OK. Not only only do they operate as if it is perfectly alright, but that it is acceptable all the time. This is even contrary to the basic Keynesian theory that deficit spending should be used only to lift the country out of a recession because it will balance itself out after the economy recovers. How can you pay back debt if you never cease deficit spending?

Nearly all local governments and States are required to balance their annual budgets. I'm having a hard time finding exact figures, but I believe at least 49 states must balance them by law. This is why states hit hardest by this recession/depression, such as California and Florida, are having such budget crises. They are cutting services and raising taxes and fees in order to bridge their budget shortfalls. While it is preposterous to say that anyone enjoys a chaotic budget crisis, it is the only way to deal with excessive outlays and stunted tax revenue forecasts. Reconciling with reality is far preferable to augmenting our public debt to unsustainable levels.

The most recent iteration of the proposed Balanced Budget Amendment would require that if Congress did not present a balanced budget bill to the President, he would have line item veto power to strike any appropriations in order to balance it. Raising taxes significantly would create a populist backlash, so the only reasonable solution would be to cut spending. This balanced budget requirement would therefore guarantee that the government reform healthcare, Medicare, Social Security, Defense spending, and any other bloated appropriation or entitlement. I'm not an economist, and I don't pretend to think I have all the answers, but this seems like a logical place to start.

One of the best political books I have read was "Running On Empty" by former Commerce Secretary Pete Peterson. This book was published in 2005, well before this recession started. But Peterson focused much deserved attention on the danger of our ballooning deficit. At the time, we were running a real $470 billion deficit simply on entitlements through 2014. This was before the final three years of excessive spending under W, TARP, and the $787 billion ARRA stimulus. If you want a clear picture of how serious our deficit was before the stimulus, read this book. It will scare your pants off.

Common Since: Extreme deficit spending is threatening to bankrupt this nation. Many people talk about it, but few act on it. Passing a Balanced Budget Amendment to the U.S. Constitution should be the first of several measures taken to secure our nation's finances and future.