The market yawns at health care reform

Memo to my conservative/Republican friends that are bitterly opposed to the health care reform legislation that just passed.

The fate of health care reform was in serious doubt when the market closed Friday.  As of 11:15 a.m. today, the first trading day after reform passed, the markets yawned.  The Dow is up a tiny fraction, as is the NASDAQ.  Virtually no movement at all on the dollar.  If this really were a dramatic, government takeover of 1/6 of the nation's economy, with dire consequences for the budget and the economy, wouldn't the markets have reacted negatively?  And if you want to say that the reaction is priced in already, well, then it must have been viewed POSITIVELY, because the Dow is up over the last several weeks, in the time that health care reform revived, and is WAY up since early in Obama's presidency.

Far more likely is that the market thinks that health care reform will not dramatically effect the economy in the short or long run.  Which is probably correct, though I think there will be a LONG term positive effect.  What we can be reasonably sure of is that the market does not see short or medium term sharply negative effects, or we'd see the Dow down 2 or 3 percent, at least. 

HEALTH CARE REFORM PASSED!

The epochal, hugely historic health care reform measure just passed the House!  Today will, in time, be seen as one of the great legislative days in the history of the United States!  I haven't been this thrilled with anything political in the United States, ever.  Nothing in my lifetime (1970) is even close.

Teddy Roosevelt first proposed universal health care for all.  FDR seriously considered including it in what became Social Security in 1935.  Truman proposed it in the 1940s.  Nixon proposed it in the 1970s.  Nixon was a Republican, as was Teddy Roosevelt.  Clinton, as we all know, proposed it and worked hard on it for a year.  And while what emerges as law in the next week doesn't come especially close to truly universal coverage, it is a huge step forward.  It is also a vital step towards a sane and rational health care system that doesn't cost twice as much per person as France or Germany.

Following a weekend of incredibly high drama, with every vote fought over tooth and nail, and with the outcome in doubt until early this afternoon, just moments ago, the House passed the Senate version of health care reform.  This horribly flawed bill now goes to Obama, who will of course sign it, probably tomorrow.  Passage of the health care reform legislation represents a huge victory for him, as he was, as I said in my post yesterday, all in on Health Care reform.  The amount of effort, time, thought, arm twisting and sheer energy put into this bill by Obama, Nancy, Harry, and so many other very important people will surely be chronicled in best selling books to come, and maybe even a $100 million grossing documentary.  There is a lengthy New York Times article on this point today, which I haven't yet read. 

http://www.nytimes.com/2010/03/21/health/policy/21reconstruct.html

The Senate must now vote on the House fixes to the Senate bill, and will do so via use of reconciliation, which means that it cannot be filibustered, and is guaranteed an up or down vote.  Harry Reid (Senate Majority Leader) and Dick Durbin (the # 2, and the guy responsible for counting the votes) have very confidently and quite credibly said they have the 50 votes to pass this series of fixes.  If the Senate passes the same set of fixes as the House did earlier today, those fixes will go to Obama for his signature, which again should happen pretty quickly.  The entire health care reform effort of the last year should (finally) be over in less than 5 days.  A year and change of intense effort, following on talks over decades, stretching back to Teddy Roosevelt, albeit with long periods of inaction, has now, for the moment, ended.  A great, great deal of work remains in the coming years, to be sure, but I suspect Congress is going to take a fairly long break from serious health care reform.

We have made huge strides down the long, arduous road towards universal health coverage (and a rational health care system).  This is just a monster win for America, a truly great day for us all, even though a great many Americans can't see that yet.

There is no easy way to measure it, but this bill probably consumed more presidential effort than any since the great Civil Rights Act of 1964.  And it passed.  *whew*.  Now, after the Senate presumably votes to approve the house-approved changes to the original Senate bill (I'm probably going to blogger hell after writing that last sentence) health care reform can get off the front pages and people can see that it doesn't do any of the terrible things that the the GOP says it does.  And so will begin the democrats' and Obama's political rebound.  More on that in a coming post.

Health care will pass tonight

By all press accounts, the suspense is gone.  Nancy has the votes, with several to spare.  The vote on the rules by which debate will proceed, which is an excellent indicator of how the final vote will go, has just been concluded, and it has passed by 224-206, thus with 8 votes to spare.  No republican votes. 

This may well be the exact number that votes for the health care bill in two hours.  I don't know for sure.  In any event, the deed is done, and health care reform will certainly pass in just a few short hours.  WOW.

Dems appear to have the votes

The latest breaking news is that a deal has been reached with Bart Stupak and other pro-life lawmakers for them to vote for the bill.  If true, that would almost certainly cinch the vote for Pelosi.  It now appears upwards of 95% that the House will approve HC reform today!  WOO HOOO!!!

Glued to C-Span

I'm at work, earphones plugged into the computer, with C-Span on in the background.  Maybe that's an indication that I need help.  But I am SO into the upcoming health care vote.  I'm pretty confident that if it passes, both the Senate bill and the fixes, that it will get somewhat more popular with the public in the coming months and years.  There's just not much in it that hurts an ordinary voter.  There just isn't.  And when that sinks in, and when pre-existing conditions go the way of the dodo bird, it will likely become popular.  IF it passes.  And I'll be glued to C-Span.  I'm almost sorry I agreed to go out tonight; I likely won't be able to watch live as the final vote is cast.

Health care reform does not poll well-- so what?

I read a great article about why legislators should be very wary of taking actions based on public polls, particularly regarding complex issues.  I wish I'd written some of this myself.  I didn't-- and I don't think my commentary can improve upon it.

http://www.politicsdaily.com/2010/03/20/george-gallup-health-care-and-the-peril-of-legislating-by-polls/

Obama's all in

First, in news that just broke moments ago, according to several key democratic members, the House will vote on the Senate bill tomorrow, and not use "Deem and pass." This is a good thing, in my view.

To use a fairly well known poker metaphor, as Andrew has, Obama has moved all of his chips into the middle of the table. He is going all the way with his hand, and he'll either win big or lose big, and very likely we'll know which of these tomorrow. Its better than 80-20 now that he'll win big. It is to his great and everlasting credit, win or lose, that he finally moved all in. It did take him long enough.

A bit of big-picture review. My friend Andrew, who is nearly always right about policy matters, has been bitterly critical of Obama on health care, and not without quite a bit of justification. For example, he was saying about June 2009 that Obama could not, under any circumstances, leave the writing of the Bill to Congress. He said, and I'm paraphrasing, that Harry Reid and Nancy Pelosi could not be trusted to organize a trip to McDonalds, let alone a hugely complex piece of vital legislation. Reid in particular has seemed weak, the various congress people each had their own agenda, etc. Instead, he was calling on Obama to get in the trenches, write the bill in essence, then allow cosmetic tweaking and try and jam it down Harry and Nancy's throats. I'm the PRESIDENT, Andrew basically wanted Obama to say. I disagreed at the time, saying that giving Congress a few more months of headroom was good politics and made good sense. I think in the fullness of time he was right and I was wrong. Obama WRITING the bill was never in the cards, but he needed to be MUCH more aggressive earlier on. To use poker terminology, Obama was playing a good game of LIMIT poker. In limit poker, your bet sizes are rigidly limited. You either bet the amount you are allowed, or you don't bet at all. You can't move your big stack of chips in the middle and force your opponent to either call or fold. In no limit poker, by contrast, you can (and occasionally do) move all of your chips into the middle.

Obama was making small demands, small shows of strength. In short, he was playing limit poker. Sure he wanted health care reform, of course, but he wasn't exactly setting any presidential effort records to get it. There were set piece speeches and events, but not a consistent, sustained effort.

Then in January, Scott Brown in Massachusetts became the 41st Republican vote in the Senate-- the Democrats could no longer defeat a Republican filibuster with only democratic votes. And no GOP members wanted to play along. Which was very disappointing, but it was clear by about March 2009 that the GOP was going to oppose Obama in lockstep on big things. When John McCain isn't with you on immigration reform, you know the party's gone nuts.

Anyway, after some brief talk of moving onto the economy and not focusing on health care, Harry, Nancy and Obama have been focusing non-stop on it, like a laser beam, for weeks. This in the face of an economy still deeply troubled and with polls showing the health care reform effort deeply unpopular. This is a truly astounding act of political courage by the democrats. Courage and democrats has not often been used in the same sentence in recent years (at least not without the modifier "lacking," or its equivalent) and for good reason. The democrats have by and large taken the easy way out, taking small shots at the GOP, but not frontally attacking their idiocy. In short, the democrats, like Obama, have been playing limit poker.

Well that all changed a few weeks back, beginning publically with the televised summit. In having the summit at all, Obama basically announced that he was moving all in. Enough of this limit crap, he in essence said, I'm playing no limit, and I'm playing for keeps. All in boys and girls. That drastic change in presidential attitude, on behalf of a pretty crappy bill, and in the face of stiff public opposition, tells me that Obama really believes that health care is MONSTER important, and is willing to take gigantic political risks in order to further the great moral and economic cause of serious health care reform. And he deserves great praise, in my view, for moving all in.

Tomorrow, in all likelihood, the final cards will be dealt and we'll see Obama achieve a huge, historic, glorious, hard-earned victory. But it will have been earned only because Obama finally moved all in.

Health Care Reform will likely pass

If I had to guess, the dems will pass it with 3 or 4 votes to spare. 

The fantastic CBO report, indicating that the health care reform bill will cut $138 billion off of the federal deficit in the next 10 years, and much more thereafter, probably sealed the fate of the bill in favor of passage.  This projection by the CBO gives much needed political cover to moderate democrats in districts that voted for McCain (or barely for Obama) that they can run as "smaller government" types while voting for this health care reform effort.

From what the dem leaders are saying this morning, and from yesterday's hugely positive developments, (the CBO projection) it now appears 80-20, at least, that the dems will pass the huge, comprehensive (and rather awful) health care reform package, probably on Sunday.  As my readers know, despite the bill's huge flaws, I consider this a monumental step forward in American history.  Once this bill is fixed up in the coming years (and it may take quite a few years), this achievement will be fully on par with the creation of social security and Medicare in its impact on America. 

There has been a TON of talk about the procedure involved in this latest leg of the health care reform battle.  What is likely going to happen is that the House will pass the Senate bill, unaltered.  This bill has some substantive problems, in addition to the smelly "bribes" needed to get votes 57-60 in order to pass a Republican filibuster.  These include the infamous Nebraska giveaway, the Louisiana Purchase, a special deal for Florida, and more.  Google these phrases for more info.  After the House passes the Senate bill it goes to Obama, who signs it.  It is then law.  Next, the House and Senate will pass identical fixes to the bill, which will proceed through "reconciliation" a procedure in the Senate which precludes the use of a filibuster.  The Democrats thus only need 50 votes (with Biden to break a tie, if needed) and not 60.  This is not a challenge-- it was always getting ALL 60 members of the Senate to vote for a health reform bill that was the problem.  50 is easy.  If that second bill, passed through reconciliation, gets a majority in both chambers IT goes to Obama for signature.  Thus this round of health care reform would (mercifully) end, probably next week.

For Larry, what do I think of deem and pass?  There has been talk, not yet silenced, that rather than the House simply vote on Health Care reform, they would vote on a rule for debate on the reconciliation package which would "deem" the Senate Health Care bill passed if the second reconciliation package passed.  This way the members could "avoid" voting directly for the Senate bill.  Its a sneaky act of political cowardice (the Senate bill itself is very unpopular in the House, and easy to vilify in campaign commercials.), and I don't much like it.  Typical democrat way of doing things-- terrified of their pathetic, idea-less GOP opposition, who ran the country damn near into the ground when they were in power.  A Trillion dollars blown in Iraq, Great Recession, torture, etc.  And Nancy and Harry are afraid of these IDIOTS! 

But do I, in the end, support Deem and Pass?  Yes.  If I was a yes vote in the House, and Nancy told me about this crazy procedure, I'd object.  Strongly.  But if she said, "look there are 5 wavering moderates that don't want to directly cast a vote for HC reform, but would rather use this crazy procedure," I'd be ok with it.  Health care reform is much too important to worry about process.  I will add that using this crazy procedure would almost certainly be a significant political NEGATIVE to those who go along with it.  Think many tens of millions won't be spent on ads saying, "Congresswoman X voted for Obama's health care reform bill and then lied about it?"  Of course they will.  And the ads will be more than a little truthful.

The democrats contend that deem and pass has been used before, and it has, but never for the purpose of avoiding a clear recorded vote on an issue of signficance, let alone an issue of monumental, epochal, country changing significance.   So I don't really like it at all.  But its constitutional, and if they do it, it will stick.

In any event, in the end, who cares?  Health care reform is BY FAR the biggest issue facing America.  I mean BY FAR!!  I actually don't think that can be seriously debated.  Given that, and given that this (seriously flawed) effort represents a very significant first step towards getting rid of the health insurance companies and towards a rational health care system, all other concerns must yield. 

DEAR US HOUSE:

PASS THE SENATE BILL, HOWEVER YOU WANT TO.  NOW. 

Flyingpinkunicorns

Israel and settlements

For those that haven't heard, Israel was in the news last week for its insane, idiotic, and counterproductive settlement policies.

Here's the background.  In Israel, Obama is seen as not really pro-Israel.  He dared to make a big speech in Cairo, and for other reasons.  Anyway, Hillary is really liked in Israel on her own merits and because Clinton was and is popular there.  Joe Biden is popular in Israel to those in the know.  Anyway, Biden was there last week, and met with Prime Minister Netanyahu.  He told him that we weren't happy about proposed settlement expansion plans.  While Biden was in Israel, Netanyahu's Interior Minister, a right-winger from the religious Shas party named Eli Yishai.  What's a bit ironic is that Shas has never been focused on the settlements at all, unlike Likud, but more on that some other day.

The fact that this announcement took place while the US Vice President was in the country caused a stir.  Israel apologized for the timing of the announcement, but not the substance of it.  Admirable honesty.  The only thing admirable about the whole Israeli settlement situation.

Here's my take on settlements.  I HATE them.  I think they are hugely counter to Israel's national security interests (and America's!), as well as being counter to Israel's economic interests.  I think, to quote Thomas Friedman, that the settlement policy is "insane," and has been for many years.

The US has long allowed Israel to go its idiotic way on the settlement issue. Oh, we bleat about and complain, and pound our chest and tut tut, but except briefly under Bush 41, when we threatened to suspend loan guarantees to Israel, we just talk and do nothing about it. Which is what Obama is highly likely to do. Which is why Israel feels free to keep building settlements.  AIPAC (the American Israel Public Affairs Committee), which is by far the largest and most organized Jewish pressure group, is mindlessly pro whatever an Israeli government does, especially a right-wing Israeli government. To AIPAC, its Israel right, wrong, or pro or contra US interests. AIPAC doesn't speak for mainstream American jews on settlements, which many American jews dislike or hate, but there it is.


In the US, there is no gain politically in OPPOSING Israeli settlements.  This was true even before 9-11.  Let's be honest: Who in America loves a Palestinian? An Arab? And AFTER 9-11? Oops.

So we give Israel around $3 billion a year in mostly military hardware, give it all sorts of diplomatic cover and get bitch slapped in return on the settlements. Year after year.  If I were president, they'd be told that if they built so much as one more living room in occupied territories they'd be persona non gratta. We'd pull our ambassador, for good, cut as much aid as congress would let me, stop giving them cover in the UN, and I'd seriously consider selling high tech arms to Egypt and Saudi Arabia (not Iran, obviously).  I'd show them that if you bitch slap the heavyweight champion, you just might get hurt badly. And hey, if I lost reelection? I'm sure I'd do fine on the lecture circuit, the boardroom circuit, etc. That's what a president with chutzpah would do. We're allies, these settlements are insane, and we bitterly oppose them. Build them at your peril.

In return for this admittedly very tough stance, I'd be willing to consider modifying my views somewhat on the final status settlement negotiations. I have, strongly supported Israeli military actions to defend itself, in particular the war against Hezbullah in 2006.  I supported peace talks with the Palestinians when they made sense and opposed them when they did not.  I am HARDLY mindlessly anti-Israel!!!! But on settlements, I am mindlessly anti-settlement, and thus in the minds of some, anti-Israel. The settlements are, by all accounts hugely economically costly, soldiers in huge numbers don't want to be sent to defend them, they cause great diplomatic grief to the US, impede a final settlement, and generally PISS ME OFF.

In a way, I admire what the Israelis do on settlements. They manage to do something hugely: (i) not in their ECONOMIC interests (protecting those settlements is hugely expensive, not to mention building them), (ii) pretty damn clearly not in their SECURITY interests; and (iii) which America, Israel's only real ally in the world, opposes (but does nothing about).  After managing this trifecta, Israel then says, well, we did it, and we still love America.  Israel's got cojones on the settlement issue. Short on brains, painfully short on long term planning, but long on cojones. And that, at least, is worth admiring.

As for Bibi (Israeli Prime Minister Benjamin Netanyahu), he's reasonably happy that the current Palestinian government has clamped down on the worst of the madness and sees Hamas as its blood enemy. And he'll probably be happy to dribble a few crumbs their way if they continue to "behave."  But after the second intifada and the huge rift with Hamas, there's just no appetite in Israel for renewed grand talks. Even I oppose them, for heaven's sake!

I called in the late 90s on Arafat to unilaterally declare a Palestinian state. I think the idea still holds merit.  Let Israel fight the existence of a newly declared state, born under fire, occupied by an enemy. The irony won't be lost on anyone in the region. It would put the US in a very bad spot, get the Arabs to verbally support it, and very possibly result in some positive (for the Ps) changes on the ground.  I don't really see the downside.  At worst, false hopes are raised and nothing changes, which is probably the most likely outcome.  But a Palestinian state will happen someday, barring some catastrophic disaster, the question is when and what the terms will be.  So starting sooner rather than later is no bad thing in my view, especially with a seemingly responsible coterie of P's in leadership positions in the West Bank.

So much of this could have been written 2 years ago, 5 years ago, or (with a few tense modifications and other tweaks) 15 years ago. We're frozen in time, because both sides are basically frozen in their positions.  Israel proves daily what some deny-- that they are obsessed with settlements for their own sake-- greed-- simple greed (albeit badly misplaced), and faux security concerns (also misplaced).  If the settlements weren't significant to the Israelis, they wouldn't keep building them!  They tend to force moderate P leaders into the arms of the Islamic extremeists, exactly as Begin and others planned, so long ago.  Sad, really.

The March Jobs Report in early April will show at least 150,000 jobs gained

After a series of posts predicting job growth, and having apparently been slightly wrong on timing, I am making a specific, testable prediction for job growth for the current month. I'm predicting that there will be at least 150,000 jobs gained when the government releases the next report on the jobs market in early April. And I wouldn't be overly surprised if the number was over 250,000, a good number in general, and an absolute show stopping blockbuster compared to what has been going on.

I'm finally making a specific prediction because I finally think I know what's going on in the job market. Job growth has already resumed, but slowly. In fact, the other survey that the government conducts, usually considered less reliable, but still useful, shows 850,000 jobs GAINED in the last two months. This is an absolutely astounding number, given that the other survey shows slight job LOSS. I think the truth is somewhere in the middle, and closer to the weaker payroll survey. There's virtually no chance we have gained 425,000 jobs per month over the last two months (which would be a rocking strong total). The number of people filing first time claims for unemployment is MUCH too high for a job market boom. But still, these surveys, unless there are just huge problems with them, are telling us something, namely that there is some job growth out there. Which makes sense based on a few other things we think are going on.

February's numbers, depressed by the snow, showed some strength in wages, which implies a somewhat less weak labor market. Several sectors, including federal employment, temporary workers, and manufacturing, showed some strength. Construction was godawful, but that's probably weather related. In any event, construction layoffs have to slow radically in the coming months, or there wouldn't be any construction workers left!

As for March, the weather is currently quite good nationwide, there will be some census workers added (more in April), and there is one more month for banks to begin lending, which from what I have read hasn't started for small businesses yet (large businesses have had no problems getting money for a bunch of months). In short, this is the month where we finally get the positive job growth I've been predicting for months. You'll know as soon as you see the report whether I'm right.

There's little I like more than being right. But if I'm wrong, I'll post and let all of you know why, and what the report really said.

One other thing before I go. If my economic predictions are reasonably right, bonds are going to do VERY poorly over the next year, and stocks VERY well. If you own bonds, sell. Quickly. The Dow Jones index should get up over 12,000 fairly quickly, certainly by the middle of the Summer. 14k will soon follow. And I wouldn't be surprised if 16k or 17k followed soon thereafter. I think the market is pricing in a lasting recovery, but a weak one, that proceeds in fits and starts. In contrast, I am predicting a medium-strong and VERY consistent recovery. Predicting a consistent anything with the US economy is a surefire way to be dead wrong, but I think the amount of stimulus, both fiscal and monetary, is so historically unprecedented, that we will avoid a real slowdown for at least 2 years, and maybe 3. So the rest of 2010 will have somewhere between good and great growth, with good growth in both 2011 and 2012. The fed should begin raising interest rates in about September, very slowly and cautiously at first, and then beginning about March 2011 quite quickly, as the vigor of the recovery becomes clear. The best of the stock market growth should come between now and about June or July 2011. The next 15 months are going to be a historic bull market. For heaven's sake, BUY STOCKS! NOW.

I was right about the coming United States economic recovery. Its here, its real, and its effects have already begun to be felt in the labor market. The current statistics are (slightly) wrong, will be very misleading for February, when the jobs report comes out this Friday, the 5th, but beginning with the VERY NEXT report, due out on April 2, the job growth I have long been predicting (and virtually promising) will be here. Give me 5 more weeks, and then you may judge

While my timing was very slightly off (I had predicted job growth would begin in November, later revised to "by February,") I was, I think, very right in my overall predictions. The economy will add jobs this month (when the figures are reported in early April). North of 125,000. This will herald a long period of time in which the economy is growing, steadily, but not in a boom (say 2.8-4%), and in which we are adding jobs at a rate of circa 200,000 per month. The national unemployment rate, currently 9.7%, will most likely stay between 9.4 and 9.8 % for the next 3-6 months and then begin a long, steady, inexorable drop until it is around 7.4% or so when Obama wins a 41 state reelection landslide in November 2012 running on a strongly recovering economy, which was facing a possible depression when he took office. (See my post of December 20, 2009).The real credit will go to the huge and very creative approach to stimulating the economy taken by Time's 2009 Person of the Year, Ben Bernanke, (likely destined to go own in history as the most successful Fed Chairman of them all for his deft handling of the great financial crisis of 2008-2009), the monster bailouts put through by Paulson (Bush's guy) and Geithner at Treasury, the much loathed TARP rescue of the huge banks (which I always strongly supported) and the stimulus package passed in February 2009, with virtually no Republican vote


Many books will be written about the period of bailout, from late 2008-early 2009, and how they saved the US economy. I think I have outlined these books in various posts, including this one.

Back to the economy.


There have been recent signs of economic weakness which were somewhat surprising. I don't deny this. Nevertheless, I have the courage of my convictions of the above predictions. I know I was a little early in predicting job growth last year, (so sue me!) but it is now here, and in the next several months it will be clear to all.


On Friday the government will report that a lot of jobs were lost in February, probably more than 150,000, a bad number in line with the number of job losses late last year, and not at all in line with my relatively rosy predictions repeated above. But this won't in fact be true. Instead, the awful snowstorms on the eastern seaboard and in the south will have skewed the numbers, particularly in the construction sector. A lot of people will have been furloughed as a result of the bad weather, and thus show up in the statistics as having lost their jobs. Now that March is here and the weather will VERY likely improve sharply, many of these workers will be rehired. When coupled with hiring in the service sector, the beleaguered manufacturing sector (!) and Census workers, the result will be a solid, steady job growth, beginning THIS MONTH, and accelerating in the coming months.

Here is an article neatly summarizing what his going on now-- which is in essence what I predicted months ago would happen in January/February.

http://money.cnn.com/2010/03/03/news/economy/job_cuts/index.htm


This article states that, "private sector employers cut 20,000 jobs in February, the fewest since February 2008, when employment first began to decline." In short, businesses have cut pretty much all the workers they are going to cut as a result of the economic downturn. Home builders realized long ago that they were in a depression (that sector). Large manufacturers have done their cutting and, amazingly, are now ADDING jobs. Ditto the service sector, which was hammered by a monster slowdown in demand for their services in late 2008. That demand is creeping up, slowly, but up, forcing service sector businesses to expand the hours their current employees are working, and to hire new ones, often on a temporary basis, while the business leaders wait and see how demand for their services go.

Another factor which will spur job growth this year is if the logjam breaks in DC over health care (and other issues). Now I don't know if bills will be passed and signed into law, but I do know that by the Summer bills will EITHER pass or be deemed dead until next year. This will provide increased certainty regarding costs of new employees, which will help decision makers decide to add workers. Its not a huge thing in my opinion, but it will register.

The upshot? My predictions were right, I am reaffirming them, and in early April, when the jobs report for March comes out, you'll all see that I was right.


I know I said I'd donate $100 to Sarah Palin if we didn't have a month of 75,000 job growth by February 2010. That will not come to pass in the official numbers, but I think they are wrong, and there is evidence in the unemployment survey to support my view. Look, I am paying off under the spirit of my promise, not the letter. If we still haven't gained significant jobs by April of this year, I'll pay off. Give me a few months to go through coming data and see if I may have in fact been right but for the February snowstorms. If not, I'll pay up.

The most important issue facing the world.

I have come to believe that with the possible exception of global warming, the single greatest issue that the world's governments face is health care costs in the United States. I realize that sounds preposterous, but bear with me. I think I can make the case.

First some big picture background. Among the other startling changes in the world which have taken place since the end of World War II in 1945 is the absolutely unprecedented aging of the world. That is, the average age of a human being has shot up very dramatically in the entire rich world, to totally unprecedented levels. This is both because people are living much longer than ever before and, in a related phenomenon, the birth rate in the rich world has plummeted. This has, to say the least, been heavily commented on in recent years.

The average age of a human being has also gone up dramatically in most of the non-rich world, but this post focuses on the rich world (not least because I know a whole lot more about it).

In the rich world, which I am crudely defining as the US, Canada, Japan, all of Western Europe (even Greece), and a select few other countries which share rich world characteristics, specifically Taiwan, Hong Kong, Singapore, South Korea and Israel (these last two are two of the post-World War II world's most inspiring, unbelievable success stories-- I really should write a post about that someday). At the end of the Korean war South Korea was among the poorest countries on earth-- that was 1952. In 2009, South Korea has a per capita GDP very close to that of Italy! Its per capita GDP is about 59% that of the United States, and about 84% that of France, a staggering figure given the complete abject poverty it faced in 1952, the existence of a nutty, implacably hostile regime bordering it, etc. In raw #s, the United States' per capita GDP is about $46,000, and South Korea's is about $28,000.

www.wikipedia.org/wiki/list_of_countries_by_GDP_(PPP)_per_capita.

The entire rich world as I've defined it has one particular hugely significant demographic fact: the population is aging quite rapidly. In a select few countries, notably Japan and Italy, the number of people is actually falling for the first time since 1946, as more deaths are recorded than births. There are a series of reasons for this monster demographic shift which have been the subject of many hundreds of books. In the US, this trend is very much in place. However, our average age is increasing less rapidly than in any other medium sized or larger rich country because we have higher immigration than most and a higher birth rate than most. Nevertheless, this trend is very much in place here in the US.

One other "minor" note on demographics before I move on. China is not yet rich, though if you visited the big cities you could be forgiven for thinking otherwise. But due to the infamous one-child policy, and mass industrialization in the last 30 years, China's demographics have moved hugely towards those of the rich world.

Put simply, as I recall it, and I have not researched this point, the entire US will have the age profile Florida does now in circa 30 years. Imagine that for a second-- a US the same age as Florida. WOW! Also in around 30 years, China will have the same average age as the US does now. In the lifetime of a single person, China's demographics will have swung from those of a dirt-poor country to those of a rich country! In any event, the demographic changes since 1945 have been utterly astounding, truly amazing!

And old news. Ok, flyingpinkunicorns, shut up about demographics and get to the point! As people get older their health care costs rise. This is something less than a revelation.

As you've heard a lot in the last year unless you've lived on the moon, health care costs in the US are very VERY VERY high, per person. In fact, these costs are almost exactly TWICE the costs of France, per person. (Very slightly more, based on the latest figures). France is a large wealthy country with a health care system that works quite well thank you very much. I'm not picking some small, obscure, quirky country that isn't remotely similar to the US. France is also not an outlier- Japan spends less per person, Germany about the same. Now the US is richer than France, so perhaps somewhat higher costs per person might make sense. We're also world beating world leaders in the most expensive forms of health care, which might also justifiably drive per person costs up somewhat. However, we have about 310 million people and France has about 65 million, so perhaps maybe we should have some better economies of scale. Anyway, we spend slightly more than twice per person what France does on health care each year, and the gap between France and the US grows inexorably each and every year. This difference is just HUGE. We spend something like a TRILLION DOLLARS more every year on health care as a nation than we would if we spent what France did per person. A trillion, for those not used to these sorts of numbers is a million million!!! That's every year. Our entire GDP is about $13 trillion. So 1 out of every 13 dollars worth of value that Americans produce each year is spent on additional spending on health care spending above and beyond what we'd spend if we spent like France. Our health outcomes are worse than France, but that's beyond the scope of this post.

Worse, as I said, the gap between what we and France (and every other rich country) spends per person grows every year, and not by a little. In just 10 years, by my back of the envelope calculations, we'll spend about 1.8 TRILLION DOLLARS more per year as a country than we would if we spent what France does per person. This is insane, and unsustainable.

I think its actually crystal clear that with the possible exception of global warming, health care costs in the US are the biggest issue our government faces. Health care is everything, in my not-humble opinion! But the most significant issue in the entire world????

Yes, the entire world. As I said above, every rich country (and most emphatically China too!) has the same demographics, with slight differences in timing (large differences in the case of China). So every rich country is facing the same explosion in health care costs that we do. Its as predictable as the sun rising in the east tomorrow.

This next point may seem quaint, even silly, but I believe it to be quite real. The rich world looks to the US as an example! Now in recent years our politics have become quite silly, and thus no one is really looking at us except as a model of how NOT to do things. But since every rich country faces precisely the same problem in one fashion or another, a significant US effort to tackle health care costs would be watched very closely in Berlin, Tokyo, London, Seoul, etc. And yes, Paris too. Conversely, if after all the effort the last year, we fail to tackle the issue, that failure will be noted in those same capitals. After all, their politicians, elected all, (Beijing a huge and notable exception) face the same electoral pressures that ours do. If the super-rich huge US can't tackle its HUGE increases in health care spending, how can we in modest little Rome (or wherever) hope to take it on? I don't want to overstate this, but a successful US effort will redound positively in various world capitals, while an abject failure will redound negatively.

And make no mistake about it, health care costs are huge, huge issues in nearly every (really every) rich country. Follow any election anywhere in the rich world if you don't believe me. One reason the Tories are about to take back power in the UK is that the UK public believes they can now be trusted with the much loved, (and in some cases much loathed) and much abused National Health Service ("NHS"). (In order to give you an idea of how popular the NHS is in the UK, a politician running to abolish the National Health Service in the UK would have about as much success as one running in the US on a platform of abolishing Social Security and Medicare-- not much at all!). Canada's Medicare system (the identical name is a coincidence) is a huge political issue. It has had huge problems in recent years, many of which have been worked on and partially solved. Ditto the NHS in the UK. As Western Europe ages (faster than the US), managing the graceful decline of the welfare state just as more people need it is highly likely to be one of the defining issues in elections there for decades. It is difficult to overstate the critical importance of health care costs and delivery to the future of that portion of humanity that lives in the rich world.

Everyone who studies these things knows that the rich country with the most out of control health care costs is, by far, the US. Because of the huge problems in our health care system, the huge effort by Obama and the democrats to take it on over the last year, and the still out sized size and importance of the US, the outcome of our health care battle will be felt and heard around the rich world for years, perhaps decades. That's why I consider health care the most important issue facing the world, as well as the defining issue of our time in the United States.

Damn it, Congress, PASS THE SENATE BILL. Now. Then fix it as best you can during reconciliation. Then, after we lose seats in 2010, improve it in 2011. Then, after Obama rides my long-predicted economic expansion to a 40 odd state reelection landslide in 2012, improve it some more. Then improve it some more. This is a generational project. It took generations of bad policy to get in the hole we're in, now start the process of digging us out!

What does the MA Senate race mean?

As most or all of you know, unknown Republican Scott Brown beat the sitting Attorney General of Mass by 4 in a Senate special election. This race was primarily a referendum on Obama and the huge effort to reform health care. The results are crystal clear. In DEEP blue Mass, which Obama won by 26 (!), a basic political nobody from the GOP won and took Ted Kennedy's seat, which he'd held since 1484.

Don't believe anyone who tells you to the contrary, this election, coupled with the New Jersey governor's race in 2009 (blue state incumbent governor kicked out) and the New York mayor's race (highly popular incumbent BARELY squeaks to reelection) tells you the voters are as pissed at those in power now than probably at any time since 1932. Seriously. Right now, the dems have the power, and the voters are FURIOUS. As I recently said, if the McCain/Obama election were rerun right away, McCain would win solidly, possibly in a landslide. And Obama himself isn't unpopular. The voters are in a blind rage!

Phase I of the Obama presidency (Solid win, mandate to do big things, some willingness to do big things) is now over. The democrats are highly likely to run around like terrified rats on a sinking ship, scurrying to do what they think they must to save their own skins. The actual interests of the US of A will of course come in a distant second. This bodes ill for health care reform, immigration reform, energy reform. Of course, a do nothing congress is child's play to run against. America has all these big problems, you folks had all the power for two years, and you did diddly squat. Don't need Karl Rove to run THAT campaign!

The BIG question is what happens to Health Care reform. The democrats, as Andrew un-boldly predicted, are publicly swearing off hardball options, like ramming a bill through fast before the new Mass Senator is seated, or having the House vote on the Senate bill without a single change (It could then be signed by Obama). The chance of no health care bill has now gone up exponentially. That would very likely lead to an electoral wipeout in 2010, with the GOP taking back the house and coming very close in the Senate (dems currently hold 59 seats, counting Lieberman and Sanders, two independents) with the GOP holding 41.

If my very sunny predictions about the economy turn out to be wrong, the dems could face an electoral wipeout of epic proportions, particularly if they don't pass the unpopular health care bill. So why pass it? Because running against it in the abstract, as the GOP has, is MUCH easier than running against it as a law. Are you opposed to insurance companies NOT being able to discriminate based on pre-existing conditions? Try selling THAT to voters. Against greatly increasing coverage? Easier sell, but easy counter-sell. Want to give insurance companies MORE power? Good luck selling that. Selling this law, however much I despise the current bill, is HUGELY easier than selling it as a bill.

More to the point, the bill, however hugely flawed it certainly is, is a gigantic step in the right direction, overall. It turns the insurance companies partially into public utilities, a key step on the way to phasing them out, which is critical for the prosperity of America in the long run. It helps millions of people, almost immediately, by restricting health insurance company practices. It takes a big step (though not a huge one) towards universal coverage. It raises revenue, which we desparately need to do. The federal government BOTH spends too much AND taxes too little. Sorry GOP folks, but 2+2 =4, not 7.3, no matter how much you wish it too. If you support the continued existence of Medicare, Medicaid (in some form), social security, national defense, and don't wish to default on our debt, taxes must rise. Its really that simple. And the HC bill DOES raise some money. Of course it spends it as well, but the spending may end up shifting some spending within the health care system from the private sector to the government, resulting societal savings in HC overall, which I hugely support. So its worth fighting for, and, politically speaking, worth dying for, as horrendous and awfully flawed as it is.

Now we're in phase II of the Obama presidency. He's at about 50%, large, fairly compliant majority in the House, speaker totally on his side. Senate Leader is going to lose his seat in 2010, so he's not nearly as on Obama's side, but he STILL HAS 59 SENATORS. Can they get anything done? If not, they're not worth fighting for, except insofar as the GOP WOULD get things done, bad things, which would harm the republic, put us deeper in the fiscal hole, and make the US a far less fair and just country. The actions of the Senate in the next 2 weeks will tell us a giant amount about the next 10 months, before the 2010 elections.

And since full campaign mode will begin about early Summer, I am hugely pesimistic about big things getting done that are tough. So basically, with HC on the 5 yard line, first and goal, we just took a false start penalty and a sack. Is Obama going to play it safe, and try and kick a field goal (most likely result) (get a much smaller, watered down even further bill through in reconciliation) or is he going to try and force it into a very small space and let his receiver go make a play (call on the public to FORCE the Senate to vote-- but Harry would have to declare war and cooperate-- which he wouldn't).

Make no mistake, my readers. The democratic agenda is toast. Not because we only have 59 Senators, but because as a party, especially including our president, we are unwilling to take the big risks that bring big rewards.

I wanted Gore to run. When that didn't happen I was for Hillary. I hardly had a kind word to say about Obama. A year in, I can't say I've regretted the decision to support Hillary over Obama, even once, for even one second.

Woe is us.

Oops. The new polls are MONSTER favorable to Brown, the Republican in Mass. I retract my earlier prediction. I don't have the foggiest idea what's going to happen in Ma. tomorrow. Not a clue.

Obama is about to become more popular. Then less

Since I've been throwing around predictions as freely as Joe Lieberman has been throwing around positions on health care legislation, here's one more. Obama's popularity ratings in recent polls has been around 48-49%. I predict he gets about a 5 point bump if health care reform passes both houses and he signs it into law. This will last about 15 minutes, then Obama's popularity will resume its downward slide, into the mid 40s, or perhaps even the low 40s. From there I'm not sure yet. I have him in the low to mid 40s in say mid-February, the next move in his popularity will depend on: (1) the strength of my predicted Obama Boom; and (2) how much credit Obama gets for the coming recovery in the job market. I'm not sure about how much credit he'll get for that, I'll have to think about it.

Projected unemployment rates going forward.

I decided to predict job growth and thus unemployment rates going forward as the Obama Boom gains steam. The results were incredibly disappointing.

June 2010: 9.5%

December 2010: 8.7%

June 2011: 8.2%

December 2011: 7.7%

June 2012: 7.2%

December 2012: 7.1%

In other words, assuming I am right about the predicted Obama Boom, assuming it is of decent strength, and assuming it lasts uninterrupted until at least December 2012, three years, the unemployment rate in December 2012 will be around 7.1%. Although hugely better than the current 10%, 7.1% isn't exactly what we would call a Boom. That's how deep of a hole we are in as a result of 8 years of failed Bush policies, coupled with 8 years of total abdication of oversight responsibilities by Congress, including the last 2 years in which democrats had control of both houses of Congress. Nice work people.

My predictions on the general course of the economy since January 2009 have been good. Let's see if I can continue my recent economic forecasting, and put it to some good use. I am, of course, on record predicting an Obama Boom, starting about now, with job growth beginning before February. In this post, I decided to make some assumptions about the number of jobs created going forward and to crunch some numbers and thereby project the unemployment rate

In this post, I predict what the US unemployment rate is at various points in the future. The unemployment rate is of course a percentage, or a fraction, with the numerator being the number of unemployed people in the country and the denominator being the total work force (employed persons & unemployed persons who wish to work). The denominator does NOT count people not looking for work. So to take a simple example, if 10 people want work, and of the 10 9 are working and 1 is not, the unemployment rate is 10%. Thus in order to predict the unemployment rate, I must predict 2 things; (1) the number of net jobs created per month; and (2) the growth in the labor force. Predicting job growth is very hard, to say the least. Predicting labor force growth is quite easy in normal economic times. Coming out of a recession is the one time it is hard, and coming out of a deep recession it is especially hard.

The number of unemployed people are reduced each month by the number of net new jobs minus the growth in the labor force. That is, growth in the labor force tends to increase the unemployment rate, all other things (namely net job growth) being equal. For the mathematically inclined, number of people currently unemployed - (net new jobs created in December 2009 - growth in labor force in December 2009) = the number of people unemployed at the next report, in January 2010. To find the reported unemployment rate in January 2010, you take that new number of unemployed and divide it by the total labor force in January 2010.

That's how it works. I'm sure there's a simpler way to explain it to all of you, but I can't figure out how in a text format. I'm confident that if someone buys me a drink I can explain it better f2f.

As of December 1, 2009, according to the Bureau of Labor Statistics (the most commonly accepted and most comprehensive source), there are 15.375 million unemployed people, and the Labor Force is 153.9 million. Hence the 10% unemployment rate widely reported in the media. Note that these figures come from the current population survey.

http://www.bls.gov/

According to that survey, there are 138.5 million people working. 15.38 million unemployed + 138.5 million people working = 153.8 million for the total labor force. 15.38 million unemployed divided by 153.8 million total labor force = 10% unemployment. The total labor force does not perfectly equal the number of employed + the number of unemployed (as it should) due to rounding and other minor issues. Nevertheless, these are the numbers used by the bureau of labor statistics and reported on by the press.

According to the other major government employment survey, which attempts to accurately count the number of jobs, there are, as of December 1, 2009, 131 million non farm jobs, almost exactly. When you hear in the news that the economy created/destroyed X number of jobs in a given month, or year, that number is from this second survey. In the past, the number of jobs according to the second payroll survey has increased far faster than the number of jobs in the population survey. Thus the reported unemployment falls noticeably more slowly than the actual improvement which takes place in the job market. This is highly likely to happen in the coming Obama Boom. In any event, don't worry too much about this relatively minor statistical issue. If you read the rest of this post and the media reports in the coming months you'll understand my predictions (and, more importantly, what's going on in the labor market) just fine.

In general, when our economy is weak, growth in the labor force slows or even stops, as many people despair of finding a job, stop looking for work, and thus are no longer counted as part of the labor force (discouraged workers). As the economy recovers, the number of people in the labor force increases faster than usual, as formerly discouraged workers begin to look for work again. This will have a very significant impact on the size of the labor force as the economy recovers in 2010 and 2011. Alan Greenspan estimated recently that the Labor force under normal circumstances grows about 100,000 per month. This figure is consistent with what I have read elsewhere, and I accept it. The labor force did not increase at all in 2008 and 2009 due to the weak economy. Given that the labor force did not increase at all in 2008 or 2009, it thus has 2.4 million fewer workers than it would have if the economy had remained reasonably strong. (24 months (I'm assuming no growth for December 2009) multiplied by 100,000 per month). This is a huge, huge number! As many of these people happily trickle back into the labor force, the reported unemployment rate will drop far more slowly than it otherwise would as strong job growth resumes in 2010 (see my predictions, below). In short, this very unnatural pause in the growth of the labor force means that absent truly spectacular job growth, the reported unemployment rate will stay quite high for years to come.

I am, for simplicity, estimating 1/3 of this 2.4 million people are added back into the labor force each of the next 3 years. That's highly unlikely to happen so precisely, of course. Instead, more will reenter the labor force as time goes on and the economy improves, thus convincing people they can find work. However (a) I can't really make even an educated guess how it would break out; and (b) doing so would mean a lot of extra work for little extra gain in the accuracy of my predictions.

Accordingly, I assume for purposes of this post that the Labor force increases by 2 million per year for each of the next 3 years. This figure covers both the 1.2 million people that would normally be added to the labor force each year, plus the 800,000 per year for each of the next 3 years that are going to return to the labor force due to the stronger economy, as discussed above.

Two million people per year results in an average increase in the labor force of 166,666/month, for the next 3 years. This means that going forward if the economy gains 166,666 jobs in a given month the unemployment rate will stay the same (assuming no statistical fluctuations). If the economy gains 200,000 jobs per month for the entire year of 2010 (a halfway decent total, if a weak number at the start of an expansion), unemployment drops by only 400,000 people, a pathetic, godawful number for an entire YEAR early in a recovery. The unemployment rate would only drop by .4%, from 10% currently to 9.6%!!! Fortunately, I predict that job creation is going to be significantly stronger than 200,000 per month.

Note that I further assume that for the month of December 2009, there is no growth in the labor force and zero net jobs created. This assumption is merely for convenience.

Predicting how many jobs will be added per month, is of course very difficult. I could end up being way, way off. In addition, I predict a fairly smooth path to recovery. This is in fact unlikely to happen. Month to month, or even quarter-to-quarter, events are highly likely to unfold quite differently from how I predict. But over 6 month or year-long periods, my predictions may fairly be judged, as longer periods of time smooth out random fluctuations in both the economy and the federal statistics.

Here are my predictions, for all the world to see, and marvel at down the road:

January-June 2010: 275,000 jobs created per month.

Unemployment rate projection for June 2010: 9.5% (with 154.877 million people in the Labor Force and 14.73 million people still unemployed!) Since I don't expect as many people to rejoin the labor force earlier in the Obama Boom as I do later on, my REAL prediction for unemployment for June 2010 is 9.4%.

I note that this is an exceptionally daring prediction, FAR more optimistic than nearly every private forecaster. My reasons for being so optimistic about this time period are:

1) More of the federal stimulus money will be being spent;

2) Businesses cut far more jobs in 2009 that was justified by the drop in output/orders. I call these "panic job cuts." These will, I predict, begin to be quickly reversed, as corporate America already realizes that the risk of a second Great Depression has been more or less eliminated and will soon realize that the Obama Boom has begun.

3) Rock bottom interest rates have had even longer to work their way through the economy;

4) A boatload of temporary workers, more than 500,000, will be hired for the census, mostly during this time period;

5) I think that the jobs survey is currently underestimating the number of jobs being created, thus my 250,000 per month estimate is less of an increase over what is currently going on that is apparent;

6) I expect the serious problem of banks being unwilling to loan money to the small business sector, probably the number 1 headwind the economy faces, to begin to be solved towards the end of this 6 month period

7) I expect mortgage and car loans to get slightly easier (less hard) to get during this time period;

July-December 2010: 355,000 jobs created per month (!)

Unemployment rate projection for December 2010: 8.7% (with 155.877 million people in the Labor Force and 13.6 million still unemployed!)

Now the job machine has really turned on. This is also a daring prediction. Basically, I'm predicting a very strong recovery in 2010, with GDP growth probably above 4% and very possibly above 5%. This is of course in line with my other various posts predicting an Obama Boom, but is WAY WAY off of the consensus economic forecast of the people with the ultra fancy degrees and years of experience. Well, pardon my immodesty, but barring some huge external event, like a new big war, or oil going back over $150 a barrel and staying there, I'm RIGHT and the fancy PHDs that make good money trying to predict the economy are WRONG. What makes this fun, of course, is that time will answer this question. At the end of 2010, I'll either be right, plenty close enough to declare victory or, if the economy is much weaker than I expect, just dead wrong. And it'll be clear to all that read my blog and all those I talk to.

January -June 2011: 300,000 jobs created per month.

Unemployment rate prediction for June 2011: 8.2% (with 156.877 million people in the Labor force and 12.8 million people still unemployed.

I expect at least a mild slowdown from the previous 6 months because temporary census workers will be laid off starting late in 2010, the stimulus' effect will have largely been felt. On the other hand, by this time it will be crystal clear to all that the recovery is very real, and business investment and consumer spending could both propel upwards rather quickly.

I should add that trying to predict minor fluctuations a year out is, well, impossible. Predicting the macro trend of the economy is incredibly difficult, predicting minor changes within that trend is well-nigh impossible.

July-December 2011 255,000 jobs created per month.

Unemployment rate prediction for December 2011: 7.7% (with 157.877 million people in the Labor force and 12.27 million people still unemployed.

I expect monetary policy to tighten (interest rates increasing and the fed rapidly slowing the growth of the money supply and ending various extraordinary programs) beginning in about July 2010 and picking up speed through the end of 2010. The strong effects of these changes should begin to be felt in the July - December 2011 time frame.

January-June 2012 295,000 jobs created per month. The economy rebounds from a slight slowdown the previous 6 months, just in time to ensure Obama's reelection.

Unemployment rate prediction for June 2012: 7.2% (with 158.877 million people in the Labor force and 11.5 million people still unemployed.

This number is crucially important to Obama's reelection chances. If I'm way too optimistic here, and the actual unemployment number is over say 8.5%, he's in trouble. Over 9% he's toast. If, however, I'm right, and the unemployment rate is fairly close to 7.2%, and has been dropping for a long term, I think he'll win by more than 10 points.

July-December 2012 200,000 jobs created per month

Unemployment rate prediction for December 2012: 7.1% (with 159.877 million people in the Labor force and 11.3 million people still unemployed.

The economic hole we are in is SO DEEP that even after 3 years of pretty damn good growth in the number of jobs in America, the unemployment rate will still be 7.1%, a figure well above the average for the any decade since the 1930s. This is really not good.

Its of course possible that I'm not being optimistic enough. However, even a REALLY strong Obama Boom would still only bring the unemployment rate in December 2012 down to around 6%, still not full employment.

A final word of caution: Needless to say, my predictions after say June 2010 are merely guesses. But I have to make them in order to even take a stab at projecting/predicting the national unemployment rate in the future. And you wonder why economic forecasts are so very unreliable? The actual results are unlikely to be this smooth. But if I'm pretty close on each of these I will have done a spectacular job at predicting the recovery of the shattered job market. Conversely, if I'm way off, well I'll join the crowd.

Time listens to me

Time has named Ben Bernanke person of the year, just as I advocated. Glad someone out there is doing as flyingpinkunicorns suggests. Now if only congress and the president would listen to me, we'd all be much better off!

Ben Bernanke should be Time's person of the year

I call on Time to make Ben Bernanke the 2009 person of the year. Its not even close. Sorry Barack. More so than even Geithner, he has led a hugely aggressive, hugely creative and hugely successful effort to save the US and world economies from a second Great Depression, a fate which looked altogether too likely when 2009 began. This famous scholar of the Great Depression was and is bound and determined not to let another depression happen on his watch, and he has succeeded beyond almost everyones expectations, though not mine. As 2010 begins, the economy has, at a minimum, even if I'm WRONG on all of my predictions, clearly avoided a Great Depression, where unemployment rises well above 15%, perhaps even 20%, and mass bread lines form. And with a different less aggressive and determined Federal Reserve Chairman, that could have been our fate.

And, of course, as my loyal readers know, I believe that the economy is poised to begin a spectacular multi-year boom, which I have labelled the Obama Boom (because that is how the public will perceive it) although it really should be called the Bernanke boom. And with private debt considerably lower than before the Great Recession began in 2008, we are beginning 2010 on a sounder footing for a sustainable recovery than at any time in a great many years, probably since before the Vietnam buildup in 1966! Bernanke is in no small part the one man to thank for this wonderful scenario, and that's why he's my runaway choice for person of the year. In fact, if I were to pick person of the decade he would be a serious contender, and probably my pick, (Bin Ladin? W?) despite being only a minor player on the world stage until he succeeded Greenspan in 2006. Here's to W's one positive lasting legacy! When you sip champagne at 12:00 a.m. on 1/1/10, spare a thought for Ben the Great!

I'm going to donate $100 to Sarah Palin if I'm wrong.

EDIT 12-14-09: I have decided that the terms of my promise were too lenient-- I will donate $100 to good old Sarah unless the economy creates at least 75,000 jobs in at least one of December, January 2010 or February 2010. The only caveat is that this wager may not be settled until the final revisions for these months come in, in the middle of 2010. I actually think that we may be well over 100,000/month by February, and I may win this little wager very easily.

The job market is going exactly as I predicted. If the economy doesn't add jobs in a month before March 2010 (that is, in at least one of December 2009, January 2010 or February 2010), I will donate $100 to Sarah Palin's PAC (absent, god forbid, some huge calamity that interrupts the normal ebb and flow of the economy).

http://www.sarahpac.com/

As I DESPISE Sarah Palin passionately, this will HURT! But I need to demonstrate to all of you how sure I am that not only is the recession well and truly over, but that we will have a strong recovery, that will have job growth and that that will happen beginning VERY soon! I recently predicted that the economy would begin gaining jobs in about February 2010. Looks like I wasn't optimistic enough!

Oh, and if there's only one positive month, and its just BARELY positive, that will be a cheap win, and I'll STILL donate the $100!

All of the political discourse these days is about how Obama's poll ratings are falling (they are), health care reform is mildly unpopular (it is), and the job market, though less bad, is still absolutely awful (it is). This last point, as I've been telling you for months, is about to change. Too bad it won't be in time to help Obama pull the mediocre health care reform effort over the finish line.

Its amazing that the conventional wisdom is so slow to adjust to events that are reasonably clear. The conventional wisdom is still that the job market may get worse through at least the first half of 2010 and in any event won't improve much. Well, either I'm right and the conventional wisdom is wrong, or Sarah Palin's getting $100 from yours truly.

Recent economic reports have been strong. Consumer confidence (according to the University of Michigan survey, highly regarded in this area) rose to 79.1, from 68.8. In March 2008, as the recession had just begun and Lehman Bros was still worth billions, it was 84.2. Consumer confidence is at a number which indicates a soft economy, but NOT one in recession. Consumer confidence, and perceptions, are catching up to reality. The recession is of course well and truly over and GDP is expanding quickly.

I don't have the time right now to do the research to compile an estimate of 4th quarter GDP (the 4th quarter does end on December 31), but the growth will be strong, at least 3%, and don't be shocked if its up over 4%. Inventories at businesses are up, which is usually BAD for growth, but right now indicates rapidly increasing business confidence (rapidly increasing from the sub-basement that is).

The early news on holiday sales is reasonably good. In fact, retail sales jumped 1.3% in November, a stunningly good number, if it were free from sizable distortions. It isn't, but its still a solid number, indicating strong growth in the overall economy, and of a piece with the improved consumer confidence numbers.

Between improving consumer confidence, downright decent retail sales, the fallen dollar (which has already helped exports), and fairly good import/export reports, businesses are rapidly becoming convinced that they need to stop shedding employees, and need to consider starting to add employees.

Stay tuned. In an upcoming post I'll make some predictions about how many jobs will be created on average every 6 months, and working from that will make an educated prediction on the unemployment rate over the next few years.

Obama will dedicate leftover monies from the bailout to deficit reduction and job creation

As you may have heard, the Treasury Department has announced that it now expects to recover a lot more of the money it lent out to banks and other financial institutions in the various bailouts than was previously announced. In fact, as of this moment, the Treasury expect to MAKE A SMALL PROFIT from the money lent to the banks.

www.nytimes.com/2009/12/07/business/07/tarp.htmp?_r=18&hp

In short, the bank bailouts worked, and worked spectacularly well, at saving the banking system, as I have been saying. Bernanke/Geithner/Paulson are, at least as of now, heroes for their post September 2008 actions. (Their role pre September 2008 is, happily, beyond the scope of this post).

There is a large amount of money currently available to the Treasury Department for additional bailouts. I don't know how much, as this amount hasn't been released, but it is likely over $100 billion, possibly way over. The huge majority of this money is very unlikely to be needed for additional bailouts. I therefore predict that Obama and Congress will soon agree to dedicate around half of this "found money" to deficit reduction, in order to sound concerned about the deficit/high levels of spending, and around half to a new stimulus package, labelled a job creation program. Its a political win-win, and reasonable economically. This new job creation package will likely focus on construction spending. This could happen quickly, perhaps even as soon as Obama's speech on the economy tomorrow night.

Folks, the bailouts worked, the economy is recovering, the economy is on the verge of creating new jobs, and a new road/highway/bridge/tunnel building program is about to begin (which program is perfectly reasonable, given the decrepit state of our nation's infrastructure). My predicted Obama Boom will be clear to all in a few short months. If you have money you're thinking about investing, for heaven's sake, MOVE. Stocks and houses will both be more expensive in a few months than they are now, stocks much more so. Buy now, before the market realizes that the Obama Boom has begun!