Criticizing the Carrier Deal, Shows Why Democrats Lost

One thousand jobs saved by a man who has yet to take the oath of office has Democrats reeling in agony. Most notably, Larry Summers, predicted "Trump’s Carrier deal could permanently damage American capitalism".  This former Clinton appointee and Obama economics advisor, also just following Trump's win, warned that a "badly designed" infrastructure plan "will only hurt the working class".  So, there you have it, Trump's focus on jobs is bad for capitalism and bad for America's working class.

And, it doesn't stop there. Dozens of left-leaning media types are pumping out negative commentaries as noted by these samplings of headlines that appeared in one "positive" from Investor's Business Daily (IBD):

"Trump's Carrier Victory Is the Economy's Loss"
"Trump's Carrier deal is right out of Putin's playbook"
"Is Trump's Deal With Carrier A Form Of Crony Capitalism?"
"Trump Cheered for Carrier Deal Even as Other Jobs Are Trimmed"
"Bernie Sanders: Donald Trump 'Has Endangered' U.S. Jobs With Carrier Deal"

Even the White House chimed in by claiming that this is just a fraction of the manufacturing jobs created by Obama, which, by the way, is a complete lie, since under Obama, more than 300,000 manufacturing jobs just went poof!  And, in the latest employment report, another 4,000 manufacturing jobs were lost. How does that square with Trump saving 1000 Carrier jobs? Or, the promise by Obama that he would create 1 million manufacturing jobs in his second term. 

My take on all the criticism of Trump and the Carrier Deal by Democrats is somewhat different.   I think that all the negative commentary only shows that Democrats really don't care about the American worker.  Instead it's all about sparring over politics.  Trump won on a pro-worker agenda and the Carrier deal was just a part of it.  This is why Trump won so many blue collar votes. The Democrats just don't get that.

References:

Trump’s Carrier deal could permanently damage American capitalism: https://www.washingtonpost.com/news/wonk/wp/2016/12/02/why-trumps-carrier-deal-is-bad-for-america/?utm_term=.95e00eef54ec

A badly designed US stimulus will only hurt the working class: http://larrysummers.com/2016/11/14/a-badly-designed-us-stimulus-will-only-hurt-working-class/

No, Obama, you presided over a loss of manufacturing jobs, and failed to deliver on exports: http://www.washingtontimes.com/news/2016/nov/30/no-obama-you-presided-over-loss-manufacturing-jobs/

Manufacturing Sector Loses 4,000 Jobs in November - CNS News: http://www.cnsnews.com/news/article/susan-jones/manufacturing-sector-loses-4000-jobs-november 

Here's Why Trump's Carrier Deal Is So Important: http://www.investors.com/politics/editorials/heres-why-trumps-carrier-deal-is-so-important/

Donald Trump’s support from blue-collar Colorado voters led to upset in a Democratic stronghold: http://www.denverpost.com/2016/11/11/donald-trumps-support-from-blue-collar-colorado-voters-led-to-upset-in-a-democratic-stronghold/

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Larry Summers On Unemployment Insurance

As an economist, it must be really tough working for President Obama and advising him on the economy when, in doing so, your own past analysis and work have to be compromised.

Certainly, Christina Romer, a key economic adviser to the President, has already had to put her treatises, theories, and dissertations aside when it comes to promoting his economic policies. In fact, just last month, Romer -- in a paper co-written with her husband -- stated that the elimination of the Bush Tax Cuts would have a negative impact on the economy (Click here to See Story: Romer’s Research: Expiration of Bush Tax Cuts Will Be Highly Contractionary). Of course this totally flies in the face of the intentions of the Obama and the Democrats who just can't wait to let the Bush cuts expire in January so they can spend and waste even more money on all their left-wing pet projects.

Then, there's Larry Summers.

Like Romer, he's another key economic adviser to the Presicent and no slouch when it comes to economics. He worked for President Reagan when tax cuts were used to drive the economy following the Carter recession. He was also an adviser to President Clinton during a very robust time in our economy. Then, too, early on in his career, he was the chief economist for the World Bank. And, before joining the current administration, he was the President of Harvard University. Now he's the Director of Obama's National Economic Council.

Summers, like Romer, has written much on a variety of topics with regard to economic practice and theory. However, one article is especially interesting in view of the fact that Obama just signed another extension of unemployment insurance into law. In 2005, writing for the highly sought out and respected Concise Encyclopedia of Economics, Summers wrote an extremely interesting economic argument "against" extending unemployment insurance in a paper that was simply titled "Unemployment". In that article, Larry argues that welfare and extended unemployment insurance only worsen and sustain jobless levels because it acts as a deterrent to the unemployed looking for any new job. His conclusions in that paper are firmly based on research and thorough resourced empirical data.

With Summers' article in mind, you really have to wonder from whom Obama is actually getting his economic advice. Clearly, it's not from Summers. And, as outlined previously, it doesn't appear to be from Romer, either. In fact, Obama indirectly slammed Larry Summers' work when, in targeting the GOP leadership, he made this comment: "These leaders...are advancing a misguided notion that emergency relief somehow discourages people from looking for a job..." A "misguided notion"? Oh, really? Then Larry Summers, too, must be misguided!

Of course, the indirect attacks on Summers aren't just exclusively confined to Obama. Nancy Pelosi, too, took her shot at Larry when she made the comment -- just a couple of weeks ago -- that "most economists" believe that extending "unemployment insurance is the best way to stimulate the economy." Obviously, with that comment, Larry's beliefs are just marginal because he isn't, in the words of Nancy, in the category of "most economists".

The reality is that most of the economists who are working for the administration must have to bite their tongues when promoting the economic policies of the President. Their past and current works often tell a different story than what Obama would have us all believe. This economy is suffering because this President isn't truly getting advice from his advisers. What we are actually getting is a bunch of economic policies that are designed to destroy the economy; not recover it from a deep recession. Romer and Summer's are merely acting as useful idiots in Obama's real quest to push his radical, ideological agenda.

Throwing Water On My Prediction

It didn't take long for my prediction of a 10% unemployment rate on Friday to have water thrown on it.

This morning -- as is the case every month -- Automatic Data Processing (ADP) corp released it's own pre-unemployment report statistics. In their report, they showed a vastly improved employment situation for February with the least amount of jobs being shed since April '08 (Click to See Full Story: Private sector sheds 20,000 jobs in February).

The reason that the ADP Report is so significant is because that company is one of the largest payroll processing companies in the country. As a result, they are able to easily tell if payroll headcounts have declined or risen from one week to another or, as in this case, from month-to-month.

Of course, if I'm wrong on the upcoming report, then so is Larry Summers in predicting that the February "snows" would distort the unemployment situation. I'm still betting that the unemployment rate will go up based on the rising number of jobless claims that have been reported in the last 7 weeks. Whether or not it goes up to 10% is anyone's guess, now, with ADP reporting such better numbers than expected.

Please note: I intentionally scheduled my blog to be posted at 1:00 in the morning (rather than my normal 6-ish posting time) "knowing" that the ADP report would be released just a few hours after that. I could have easily waited and, then, never published that entry after having seen a favorable number. However, I was determined to be truthful to my prediction and not play games with other influencing statistics that had yet to be released. As it is, my prediction is significantly weaker than it was yesterday when I originally wrote that posting.

Summers On Winter

Yesterday, Larry Summers -- one of Obama's chief economists -- warned that the blizzards of 2010 will probably "distort" the unemployment numbers (Click to See Full Story: Winter storms to distort US jobless figures-Summers).

First, you had the Associated Press saying that last week's unexpected filings for unemployment insurance benefits (jobless claims) was a result of the recent storms (Click to See My Blog Entry: Another Bad Employment Number). Now, Obama's front man on economics is saying the same for the monthly unemployment numbers that are due to be released this Friday.

A couple of points..

First, my guess is that Friday's numbers are going to be really bad. Summers is acting like he doesn't know what the they will be; but, the agency that will be reporting them actually reports to Obama and I am quite sure everyone was already given a heads up. That's why Summers is suddenly out on the street trying to soften the blow by using the ridiculous "the weather did it" story. Last month, when the rate looked better, it was Christina Romer out in front hyping the positive effects of the stimulus package in creating jobs. One thing you can always count on is that there are no poker faces in the Obama Administration when it comes to holding either good or bad cards.

Secondly, isn't it interesting that Summers is following the Associated Press' lead of last week on the winter weather affecting unemployment. It makes you wonder if the always-loving-Obama AP wasn't used as a "point man" in helping to get the public mindset primed to believe that weather -- as opposed to Obama's failed stimulus -- is responsible for bad unemployment. I know I'm sounding quite cynical but the Associated Press has almost always managed to make lemonade from every lemon that Obama hands this country.

The bottom line is that I will be surprised if Friday's unemployment numbers aren't bad. The consensus of economists is that the rate will jump from 9.7% to 9.8%. However, my guess is that we will go back up to 10%. Just my opinion.

Unemployment as Far as The Eye Can See?

Here's something you won't see on the front page of the New York Times or on the nightly news at NBC, CBS, or ABC. But, it's really big and should have gotten more attention than the near zero attention that it is now getting.

Larry Summers, Obama's economic guru, said Friday that the unemployment rate could stay "unacceptably high" for years. Then, he went on to say the $787 billion stimulus and other programs helped stave off even more economic disaster (Click to See Full Politico/Yahoo Story: "Summers: High unemployment for years").

Of course, this is rather disingenuous in that the name "Stimulus Package" implies more than some kind of stop-gap measure. It was specifically touted to "create and save" jobs and keep the unemployment rate below 8%. Now, were looking at rates in the double digits.

It was supposed to "stimulate" the economy. That was how Obama sold this massive left-wing free-for-all spending package. Now, we are supposed to believe that all this spending was only the equivalent of "two aspirins"! I'm quite sure that the 15 million people who are without a job will appreciate that "happy" news!

This is the kind of "truth" that would seriously damage Obama's agenda going forward and this is why this comment isn't in the headlines in our mainstream media. It appears, once again, that the media's job is to make this President look good at all cost by keeping any "bad news" from getting sunlight.

An American Economy Based On A Baseless Dollar?

More than once, Obama's chief economic adviser, Larry Summers, has made a statement that has been very similar to the following quote of just 3 weeks ago:

"The rebuilt American economy must be more export-oriented and less consumption-oriented, more environmentally oriented and less fossil-energy-oriented, more bio- and software-engineering-oriented and less financial-engineering-oriented, more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population."

This, in my opinion, is an insight into all that Obama and his people have been doing since he took office. Simply speaking, I think that Larry Summers and Barack Obama want to see the destruction of the U.S. dollar as a means to the goals that he has expressed in the quote above.

Ever since Obama took office, he has massively increased the debt load and the deficits. That, in turn, has weakened the American dollar. When Obama took office you could exchange 1.32 dollars for one Eurodollar. Today, you will need to cough up 1.45 dollars for that same benchmark of European currency. That's a decline in the value of the dollar by 22%. The exchange rate with some other currencies is even worse.

Whenever the dollar is weakened, our products become cheaper to buy in other countries. Likewise, products being imported into America become more expensive for Americans to buy. We are already seeing this in oil prices. Despite the worldwide usage decline and the complete overstock of this commodity, oil prices have still been rising. Yesterday, it hit $75 a barrel before falling back. Most oil is traded in dollars. We are the world's leader in oil consumption. We import more than we domestically produce; and, therefore, the price will rise with any fall in the dollar. In effect, the weakened dollar is punishing us all at the gas pumps.

As the dollar continues to weaken, domestic products become cheaper and more attractive to buy than similar imported products. This could force manufacturers to establish or, just maybe, re-establish manufacturing operations in this country in order to regain price competitiveness. Subsequently, our exports could expand. I believe that is what Summers means in his comment that "a rebuilt American economy" must be "more export oriented."

The downside to the Summers philosophy is that America imports more than it produces domestically. In most cases, this is because many items are not even made here anymore. This is certainly the case for consumer electronics, most textiles, ceramics, etc. When Summers says "less consumption-oriented", he's not kidding. As the dollar falls, all those imported flat screen TV's will cost a lot more to buy because of it. Further, as the unemployment rate rises and the value of homes decreases, fear will cause consumers to hold onto cash and pay off their bills. People will buy less and save more money because they will have learned the value of saving from the hardships of this recession; just as the survivor's of the Great Depression did in and after the 1930's.

Mr. Summers is also right when it comes to his statement that American society will become "more environmentally oriented and less fossil-energy-oriented". As noted previously, the fall in the U.S. dollar will force world oil prices up and that, will, as a consequence, force up the price of gasoline. This, then, will make alternative and domestic sources of energy more competitive with fossil fuels; but, also, it will make every American's energy costs exceedingly more expensive. Because of the falling dollar and high imported oil prices, this Administration will be able to force-fit America into wind and solar by artificially pushing the cost of fossil fuels up.

The comment of "more bio- and software-engineering-oriented and less financial-engineering-oriented" is really referring to more control over Wall Street and our banking system. The mindset of this Obama-government is to completely control banking and completely stifle any more of those radical "wealth building" activities of Wall Street. We can see this with Obama's tactic of giving bailout money to Wall Street and the banks so he can absolutely control them; both in terms of business operations and in terms of salaries.

Our leadership in "bio- and software-engineering" might not be as doable as Summers thinks. We are losing ground in both these areas to countries who are getting educationally stronger than we are. However, it appears from the context of these words that Federal money will be funneled into these activities. We have already seen that in software-engineering due to Obama's push for the complete national database of health records. His funding and relaxed rules on Stem Cell research will certainly give a boost to bio-engineering.

Summer's last comment --- "more middle-class-oriented and less oriented to income growth that disproportionately favors a very small share of the population" --- is really key to Obama's populist and socialist attitude towards the rich. That statement says it all about his plans to kill off the wealthy through taxing and, ultimately, the redistribution of the nation's wealth. In effect, from that statement alone, it is the intent of this Administration to eliminate entrepreneurship in America by punishing the more creative wealth builders and giving that money to the less instrumental members of our economy. The downside is that unemployment will rise because we won't have the funds available for the building of new business opportunities and current business expansion.

I personally find Mr. Summers comments to be anti-capitalistic and naively socialistic. It is obvious that the Obama Administration seems to falsely think that a weak dollar is the key to rebuilding America. I say falsely because the big drawback of the Summers/Obama philosophy for a weakening dollar is the fact that our country will be so in debt that it will make us more and more dependent on the foreign countries that hold all that debt. For years we have been emasculated in dealing with Arab oil-producers because we are so dependent on their oil. In the future, we will be similarly emasculated in dealing with countries that hold our debt; like China. China, today, is increasingly trying to be the world's superpower and we are becoming more and more subservient to them. Not good!

Additionally, as the dollar falls, so does the value of our bonds (our debt). This, then, poses a real problem for China and all those other countries that we need, debt-wise, to bankroll all of our unfunded spending. But, if anyone buys our debt and the value of the dollar falls faster than the interest rate that is being paid on it, they will lose money on their investment. To overcome this problem, the buyer of our debt has only two choices: (1) stop buying, completely or (2) demand higher and higher interest rates.

If China and other countries continue to buy our debt, but at higher rates, it will mean that our national debt will be much more costly to us than it had been previously. We will have to issue more and more less effective debt instruments in order to cover our deficits. The interest that we will pay will skyrocket. Like the Carter years, the interest rates to buy a house will be double digits; probably above 20 percent. To buy a car may cost you interest of 15% or higher.

If the value of the dollar falls too low and China and other countries completely stop buying our bonds, we will be in a world of hurt. At that point, our dollar will literally collapse because all of the bonds will fall to junk status. Inflation will be uncontrolled. In fact, our economy could be very similar to many of history's "Banana Republics" that have all fallen by the wayside.

Debasing the dollar is OK if you don't have as much debt as the United States already has. But, we are increasingly looking like a spender who is quickly becoming the "up to their eyeballs in debt" debtor. Typically, that kind of person eventually winds up in bankruptcy court. There is no bankruptcy court for a country; just complete and utter collapse.

The Worst Is Yet To Come for Foreclosures

This year, about $30 billion in Adjustable Rate Mortgages (ARMs) had their interest rates reset and the resulting monthly payments were jacked up by as much as 63%. In a worst case example, a person who had a $2000/month mortgage payment, before the interest rate was reset, might wind up with a new payment that is as much as $3,260/month after the reset. That's why the first half of this year saw the rate of foreclosures rise by 15%. People just can't afford the new mortgage payments and still keep themselves above water on all the other bills and those expenses associated with home ownership.

Also, contributing to the high rate of foreclosures is the ever climbing unemployment rate. Both historically and statistically proven, about 45% of all foreclosures are a direct result of people losing their jobs.

But here's some ominous facts that say that 2010 will be the "mother" of all foreclosure years in this country.

First, it is estimated that $67 billion worth of ARMs are due to have their monthly payment rates reset in 2010. This is more than twice the number of ARMs that were schedule to reset in this year (See Full Story). It is highly possible, from this fact alone, that 2010 could see double the foreclosure rate over this year's rate. That means more houses will hit the market; driving home prices down even further.

Secondly, the unemployment rate just keeps rising. Many economists are predicting a 13% (or even higher) unemployment rate for next year. That could mean another 4 or 5 million workers losing their jobs next year. Since nearly half of all foreclosures result from the loss of jobs (See Full Story), 2010 could be a horrible year when there is both high unemployment and ARM resetting. This one-two punch could literally send foreclosures through the roof.

Third, unlike this year, there are a number of ARMs that have 3, 5, or 7-year balloon payments or similarly scheduled loan "recasts" that are due under the contractual commitment of the original loan. Simply speaking, this means that a number of Adjustable Rate Mortgages are set to be mandatorily renegotiated. The problem lies in the fact that the bulk of these kinds of mortgages are as much as 50 percent upside down on on the value of their homes due to the falling of home prices. Because of this, two things can happen. The mortgage lender can demand a massive one-time payment in the tens of thousands of dollars to bring the equity level up on the home before a new mortgage is even renegotiated. Secondly, the mortgage lender might dictate a monthly mortgage rate that is set extremely high because he (the lender) will be forced to realize an abnormaly high risk for a home that has extremely negative equity. As a result, many homeowners with recasts and balloons due will be forced into foreclosure because they won't be able to afford the new payments or come up with thousands of dollars in the equity that is needed to have a new and reasonable mortgage loan and affordable monthly payments.

Lastly, this country hasn't really seen a substantial rise in commercial mortgage loan defaults. But, that could all change next year as businesses struggle to pay their bills against declining business activity. This could result in a potentially high rate of foreclosures against business properties. You can also expect bankruptcies to rise markedly.

While the foreclosure rate for the first half of 2009 was up by 15%, the rate in June 2009 was up 33% from June 2008 and that's a warning that the worst is yet to come.

If you listened to the chief economist on Obama's economic team, Larry Summers, you would have heard him say the Obama economic policies pulled us back from the "brink of catastrophe" (See Full Story).

However, I believe that, unless economic policies are changed, the real "catastrophe" is yet to come. If next year sees the continuation and growth of high unemployment and the foreclosure rates keep climbing, we will fall into an economic abyss that Larry Summers seems to think the Obama policies may have dodged. But, sadly, the Obama administration has really done nothing to effectively stop the rising rates of unemployment and foreclosure. Now, they want us to all believe that they have done their jobs and they all appear to be taking their victory laps.

If all that I have outlined above comes to pass, 2010 could be a disastrous year. Consumer confidence will plummet as the increase in foreclosures will continue to reduce the value of their homes. Bank failures will rise as the foreclosure rate rises. The unemployment rate will be exacerbated by these conditions. And, more Americans will have their dream of home ownership taken away from them. In some cases, forever!

The Search For Economic Recovery

According to Larry Summers, Obama's chief economic adviser, the stimulus package is working because the number of searches on Google for the words "economic depression" have come down to normal levels after having been 4 times higher in January (See Full Story).

My guess is that the number of Google searches for the words "michael jackson dead" are down, too. Using Mr. Summers' logic, am I to assume that Michael Jackson is now alive again?

I guess Summers would prefer to put a happy face on his own miserable performance by completely ignoring those statistics that say the economy is poor and getting poorer like rising unemployment rates, increasing foreclosures and bank defaults, and falling consumer confidence and spending.

While the searches for "economic depression" might be down, my guess is that they have been replaced with increasing searches for the words "one term presidents"!