A Democratic Panic Attack?

By: Larry Kudlow
CNBC Anchor

With the disappointingly soft jobs report for July, and a faltering recovery overall, is Team Obama getting ready for some sort of new, liberal-left, Keynesian, big-bang stimulus package? Will they be desperate to “do something”?

Already there are rumors of an August surprise (to use the phrase of business columnist Jimmy Pethokoukis) where Fannie Mae and Freddie Mac forgive underwater mortgages held by millions of Americans. And with state and local government jobs having fallen 169,000 year-to-date, perhaps the Democratic Congress and the White House will seek an even bigger spending plan for teachers and Medicaid workers — on top of the $26 billion plan that just passed the Senate.

Or maybe the Democrats will come up with a new infrastructure-spending bill, perhaps for green technologies and whatnot. Or maybe they’ll extend unemployment benefits even more. My liberal friend Robert Reich is even talking up the New Deal’s Works Progress Administration (WPA), where the government employed millions during the 1930s.

With the announcement this week that Council of Economic Advisers chair Christy Romer will leave the White House to go back to teach at Berkeley, it looks like the center of economic gravity will shift leftward inside the West Wing.

Meanwhile, over at the Fed, it seems ever more likely that the FOMC meeting next week will produce a much more dovish policy statement, one that will lengthen the “extended period” near-zero-interest-rate language and hint at new cash purchases of Treasury and mortgage bonds to increase the central bank’s balance sheet and expand the basic money supply. Already, in recent weeks, the dollar has been plunging.

Of course, Republicans will push harder to keep the Bush tax cuts for the wealthy — as they should. But Democrats are now trapped by Treasury man Tim Geithner’s statements that extending low tax rates for successful earners, investors, and small businesses would actually imperil economic recovery. This is his war against investment and capital formation.

Maybe the Democratic revolt in favor of keeping all the Bush tax cuts will gather steam. But Democrats are more likely to push for greater spending than investment tax incentives. They’d rather take your money than let you keep it.

The GOP also should call for lower corporate tax rates, including full cash expensing for businesses. But so far they haven’t made much noise on this, despite the fact that cash-rich businesses are mostly avoiding new hires in the face of the Obamacare regulatory threats and the uncertainty about future tax burdens.

The bottom line? Panic over this stalled economy may be setting in.

The unemployment rate is hanging stubbornly at 9.5 percent and economic growth looks to be slipping to only 2 to 3 percent. In order to get unemployment down significantly, the economy has to grow by at least 4 percent.

Inside July’s jobs report, small-business household employment dropped by 159,000 jobs — a very bad sign. In the three months to April, this survey produced 417,000 new jobs. In the three months to July, it fell by 151,000.

At the same time, private payrolls in the corporate survey rose by only 71,000 in July, compared with an expected gain of 100,000. In the three months to April, payrolls gained by 154,000. Over the past three months, payrolls have increased only 51,000. They need to grow at a better-than 200,000 monthly pace in order to reduce joblessness.

So just like the overall economy, the jobs recovery is faltering. It isn’t a double-dip recession. But the story is moving in the wrong direction. And if the Democrats in power push for a big-bang summer surprise that seeks even more failed stimulus spending, they will do much more harm than good.

The Intrade pay-to-play investment parlor already shows a 60 percent likelihood of a GOP House takeover this November. That’s the ultimate silver lining in this story.

quote Originally posted by ray b: wiki ???? do any of you fact check so much of what you think you know is WRONG !!!!!!!!!!!!!!!!!

Isn't this site just full of articles that can be posted by ANYONE?

quote Originally posted by partfiero: Isn't this site just full of articles that can be posted by ANYONE?

yes anyone and everyone can post but it is edited to weed out nuts and spin
that insures balance and fairness something totally lacking from neo-conned blogs

quote Originally posted by ray b: I guess the GOP/tea people can't google ????????????? that explains why they believe so much false BS I told you it was from wiki not a blog or opinion piece the idea was from the GOP and the conservative southern democratic wing remember back then the partys were not single wing structures like today they had a far bigger centrist balance and would try ideas from the other side unlike today

If you read here you will know I am not a Tea Party card carrier, don't lump.
Where did you say it was from Wiki?

quote Originally posted by ray b: In June 1937, some of Roosevelt's advisors urged spending cuts to balance the budget.

So you are saying that Rosie's advisers all of a sudden got a brain fart and started thinking like the GOP and the conservative southern democrats.
I need facts Ray if I am going to live in "The real world".

[This message has been edited by partfiero (edited 08-10-2010).]

quote Originally posted by ray b: the idea was from the GOP and the conservative southern democratic wing remember back then the partys were not single wing structures like today they had a far bigger centrist balance and would try ideas from the other side unlike today

Do you have names and dates to prove this out, I am not old enough to have lived through this time.
If I am going to believe this like you do, I do not want to base my beliefs on remember back thens.
Are you also saying that Rosie was stupid enough to go along with these hair brained ideas?
I though he was the master of getting us out of the depression.

[This message has been edited by partfiero (edited 08-10-2010).]

quote Originally posted by ray b: yes anyone and everyone can post but it is edited to weed out nuts and spin that insures balance and fairness something totally lacking from neo-conned blogs

There are over 3 million articles and 60 million edits. These posts and edits can be done by anyone in the world.
There are inside editors, but only because they decide to be. They do not work for Wiki and no one knows who they are. About 75% of the edits are done by about 1400 people, the remaining 25% is done by everybody else in the world who chooses to do it.
Who all of these people are, who knows.
I would not take all of wiki as fact not knowing what all of these unknowns agenda is.
And one of the inside editors could be Bill Ayers, or the leader of the KKK, or even worse, a politician, no one knows.

[This message has been edited by partfiero (edited 08-10-2010).]

quote Originally posted by partfiero: I never have gone to blogs for even entertainment purposes. I was born and raised in the projects. Poor would have been a blessing, eight children and $hit poor was the norm. There you learn to recognize spin and jive. I haven't been anyones fool since maybe five, with the exception of a few women. One of my mentors when I was young was my next door neighbor, a black guy who was a loner. Taught me much about life and who real friends are, and if you have more than a few, you have no clue of the meaning. Also taught me about intelligence. One of his favorite saying was,"The dumber a person is, the smarter they think the are, and the smarter a person is, the dumber they know they are". Some how I made it out and became a hated Republican business person. Never took one dime of the peoples money, no welfare or unemployment. My mother, a republican, whom you insinuated when you said all republicans are mean, instilled pride in her eight children. 7 out of 8 became what you refer to as rats because they own a business. Put my time back by coaching less than fortunate kids for 22 years. We are on the opposite ends of the political spectrum, but you have no clue about me personally. Don't lump me into your racist, mean, neo-con, hateful and uncaring republican corporat rants of yours. It does speak volumes about you ignorance of what folks who you never met are and how they think, just because they lean to the right.

do not over rate yourself
the [ international ] CORPrats aka the new world order
are not the small biz guys like you