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'Yes, but where's Mr. Hoover?'
By David Glenn Cox
Suppose that I was a candidate for President and the centerpiece of my campaign was to create jobs. After being sworn in I proposed to Congress a plan by which any American who purchased a new nuclear-powered aircraft carrier for ten billion dollars would earn a one billion-dollar tax credit. Why, it would be a wonderful plan; the steel industry would benefit, the ship building industry would benefit, the nuclear power industry would benefit, and the aircraft industry would benefit, as well. It would create tens of thousands of jobs. Only there isn’t anyone out there who could afford to buy such an aircraft carrier.
So, what would the cost be to the Treasury? The cost to the Treasury would be zero, but as a politician I could attach any number I liked to the program. I could go out on speaking tours and say, “You know, my fellow Americans, I recently proposed a plan for a thirteen billion dollar program to create new jobs because as your President I really care about creating new jobs!”
But the actual fact is that until someone purchases an aircraft carrier I haven’t offered one dime towards job creation. The recently passed Senate jobs bill offers thirteen billion dollars in tax credits in the form of a 6.2 percent Social Security waiver. Thirteen billion dollars in job creation, but until somebody actually hires someone for a job how much did the Senate spend? Not one dime. This is job creation by passing the buck.
This type of political bait and switch has become commonplace, but in a time of economic crisis it is hard to fathom. It reeks of Caligula naming his horse as pro-counsel or Napoleon declaring himself Emperor of the Island of Elba. It is a swirling detachment from a dangerous reality. The President and Senate are so proud of the Senate jobs bill that they proclaim it as a giant step forward. Last week the Obama administration announced that they may expand efforts to stem home foreclosures by mandating that all potential home foreclosures be reviewed by the administration's HAMP program before foreclosure.
Mark Twain once said, “God knows when even the little sparrow falls, but what good is that if the sparrow still falls?” HAMP (Home Affordable Loan Program) has offered temporary loan modifications to 830,000 applicants and permanent modifications to only 116,297. The program is administered through the banks themselves and only overseen by government officials. Wow, 116,297 permanent modifications and for the other 830,000, they wait on tenter hooks; they aren’t off the hook but swing in limbo. One late payment or form not properly filled out could eject them from the program and the home foreclosure process begins again.
How small is the number 116,297? Last year there were 2.82 million home foreclosures and for 2010 the number is expected to reach 4.5 million more. The Obama administration predicts that up to four million loans might be eligible for modification by the program they began last February. So in one year only 116,297 loans were permanently modified out of almost three million cases. With those odds the administration might as well advise troubled homeowners to buy lottery tickets.
It would be one thing if homeowners were just asking for a self-serving bailout, but the high number of foreclosures affects the economy as a whole. Sales of existing homes fell in January by 7.2 percent; the decline was the second largest drop on record. When was the worst recorded drop on record? December, the month before when sales of existing homes fell by 16.2 percent. All this with the Obama administration's offering of tax cuts for home purchasers. However, as we’ve learned, if no one purchases anything the cost to the treasury is zero!
New homes sales also fell to a record low of 309,000 annually, and how low is 309,000? It is a 23 percent drop from 2009, the second worst year on record! The lowest level in nearly fifty years. In 1996, for example, there were 1,128,500 new homes built, and we’re on pace this year for 309,000 new homes. This is the point where anyone serious about repairing the economy steps forward, because tax cuts just ain’t cutting it, Bob!
Franklin Roosevelt said, “The only thing we have to fear is fear itself,” but in this situation I think it is more a case of the only thing we have to fear is inaction itself. Or pretend action, butt-covering, buck-passing, tax-cutting programs that pay someone else to do something.
“It is high time to get back to fundamentals. It is high time to admit with courage that we are in the midst of an emergency at least equal to that of war. Let us mobilize to meet it.” Franklin Roosevelt
Imagine if this crisis were being treated as an emergency equal to that of war and the Congress and the administration proposed tax cuts for private industry to raise an army to protect us. That is the insanity of what is going on today; the Kerry-Lugar bill offers up $7.5 billion in cash to Pakistan to build new schools and infrastructure. For the states of this union, they are given permission to print bonds and Americans are offered tax cuts to buy new homes and cars.
Coca-Cola recently announced plans to purchase Coca-Cola Enterprises Inc., its North American bottler. The plan is a retrenchment to take more control of the franchise and to keep the profits in-house. You see, Coca-Cola is a business once thought to be recession proof, but it is now struggling. In a perverse example of just how bad the economy has become, H&R Block, the nation's largest tax preparer, has reported weak sales because of high unemployment. You don’t need much help with your tax return when your income is zero.
Ford Motor Company is on a pace to become the second largest automobile manufacturer in the world and has announced a $155 million retooling of its Cleveland, Ohio engine factory. The move will create sixty positions to be filled from the ranks of 900 to be laid off in July. The company is taking advantage of tax cuts and accelerated write offs offered in the President's stimulus plan. The company is also planning on spending $1.8 billion to upgrade factories in Canada and Mexico, so don’t say that tax cuts don’t have any benefits.
“If sales volume goes up and they don’t hire, they will become extremely profitable,” said Van Conway, senior managing director of restructuring firm Conway MacKenzie. “If volumes go up 10 percent, there will not be 10 percent more people hired. It will be closer to zero.”
Feb. 24 (Bloomberg) – "Ford Motor Co.’s finance unit said it is eliminating 1,000 jobs this year, a 20 percent reduction, after the automaker announced plans last week to cut 900 positions at a Mustang factory amid weak demand.
“Employers took 1,761 mass layoff actions in January that resulted in the separation of 182,261 workers, seasonally adjusted, as measured by new filings for unemployment insurance benefits during the month, the U.S. Bureau of Labor Statistics reported today. Each action involved at least 50 persons from a single employer.”
WASHINGTON (MarketWatch) -- "Consumer confidence fell sharply in February as Americans turned more pessimistic about job prospects and the U.S. economy, the Conference Board reported Tuesday. Just a month after touching a 16-month high, the research group's Consumer Confidence index sank 11 points to 46.0 from an upwardly revised 56.5 in January. It's the lowest reading since April 2009."
Perhaps consumer confidence fell because, unlike Congress and the administration, they read what passes for want ads in the newspaper and online jobs sites each day. There are no jobs; many of the jobs posted are illusionary, commission-only jobs or out and out fraudulent jobs. Maybe consumer confidence fell because consumers feel the heat of the flames while Congress and the administration name themselves Emperor of Elba or name their horse pro-counsel.
"As we were driving past a grade school some of the tots in the littlest end of the row wondered what it was all about. And one of the teachers leaned over to one of them and said: 'There's Mr. Roosevelt.' And the little tot looked up to her and said: 'Yes, but where's Mr. Hoover?'
"The great warmth of your welcome reinforces the obvious fact that so far as carrying on a campaign to get votes, my visit to this state has not been necessary. However, the purpose of coming down here is not to get votes. My visit to the south is to carry out the purposes of my trips to the west, to the coast and indeed throughout the country, which is not so much to be heard as to hear, and not so much to talk to you as to let you talk to me.
"I want to know about the problems of all this country, east and west and north and south, and for that reason, familiar though I am with conditions in this state, I have come to my second home, my home in the southland.
"When we stop listening to the apology that 'things might have been worse' and give our whole-hearted support to those who preach the gospel that through action they are going to make things better, then and only then will America resume her march to a better day." (From Franklin Delano Roosevelt's October 24, 1932 campaign speech.)
Mr. Hoover is in Washington.
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