Are We Heading Towards Recession?

The big economic news from yesterday was certainly the downwards revision of first quarter 2014 GDP by the Bureau of Economic Analysis:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2013, real GDP increased 2.6 percent.

The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, real GDP was estimated to have decreased 1.0 percent. With the third estimate for the first quarter, the increase in personal consumption expenditures (PCE) was smaller than previously estimated, and the decline in exports was larger than previously estimated (for more information, see “Revisions” on page 3).

At this point I think that it would be premature to forecast that the recovery, such as it has been, has ended and we are now settling into a recession. Rather than continue decline in economic activity I think things are largely pretty flat.

That’s very much consistent with the reports from the National Retail Federation which tends to have its ear pretty close to the ground. April retail sales were flat as were May retail sales. Their take is that consumers are tightening their belts which may, indeed, signal more contraction to come, possibly in the third quarter. I may try to look at manufacturing and exports to see if I can get any advance indications there.

Washington tends to be reactive rather than proactive so I guess it’s not surprising that nobody, from the White House to the Congress, is actually proposing anything that might increase economic activity. Neither is it surprising that supporters of the White House are continuing to blame the first quarter’s decline in economic activity on bad weather. That explanation will ring increasingly hollow with flat growth in the second quarter or declines to come.

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In Summary

Embedded in a column full of invective and excess verbiage, Michael Gerson provides a pretty fair description of the IRS scandal:

To review: After President Obama blamed “two Dilberts in Cincinnati,” an inspector general’s report found that high-level IRS officials in Washington were involved in directing additional scrutiny toward tea party groups seeking tax exemptions. Lerner admitted as much, before taking the Fifth Amendment to avoid testifying before the House oversight committee. The House of Representatives held her in contempt. And now the evidence of possible communications between Lerner and other agencies (including the White House) has gone missing under suspicious circumstances. It could be a regrettable series of rogue operations, IRS management failures and technical glitches. Or they could be taking us for fools.

It seems to me that there are at least four competing reactions to the problem:

  1. The White House is behind all of this and should be investigated hammer and tongs until Barack Obama is out of office.
  2. There’s an actual scandal here that’s worthy of better investigation than the House is likely to do.
  3. Nothing to see here, move along.
  4. What difference at this point does it make?

I think that #1 is unlikely but it seems to be the tack that partisan Republicans are taking. #2 is my position. #3 seems to be the tack that partisan Democrats are clinging to, a task that becomes more difficult with the passage of time. #4 could be attached to just about every story that comes out of Washington these days.

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What Price Honor?

I just heard a radio interview with Andrew Bacevich on Iraq in which he said two things with which I agree. The first is that, since we conquered the country in 2003, occupied it for eight years, and trained the Iraqi army that are now running like scared rabbits whenever they come in contact with ISIS forces, we have some obligation to the people of the country.

The other is that there are real limitations as to what we can do. Not the least of these (from my point of view) is that there is no domestic political support for a military intervention in Iraq.

The president has authorized three hundred American soldiers to go to Iraq. It’s unclear, at least to me, what they’re supposed to accomplish. A much larger contingent of American trainers accomplished, well, what we see now. How much better will 300 do? They might be useful as part of an air campaign but I’m skeptical that much can be accomplished with an air campaign.

However, if your objective is to be seen to be doing something, it’s something.

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The Price of Success

Contrary to Peter Beinart and Walter Russell Mead I think that President Obama’s policy with respect to Iraq has been a tremendous success. It has succeeded in its objectives. Barack Obama has been elected to the presidency twice and only one American soldier has been killed in Iraq since 2011.

Peter Beinart:

But sooner or later, honest liberals will have to admit that Obama’s Iraq policy has been a disaster. Since the president took office, Iraqi Prime Minister Nouri al-Maliki has grown ever more tyrannical and ever more sectarian, driving his country’s Sunnis toward revolt. Since Obama took office, Iraq watchers—including those within his own administration—have warned that unless the United States pushed hard for inclusive government, the country would slide back into civil war. Yet the White House has been so eager to put Iraq in America’s rearview mirror that, publicly at least, it has given Maliki an almost-free pass. Until now, when it may be too late.

Walter Russell Mead:

Welcome to President Obama’s brave new world. After six years in office pursuing strategies he believed would tame the terror threat and doing his best to reassure the American people that the terror situation was under control, with the “remnants” of al-Qaeda skittering into the shadows like roaches when the exterminator arrives, Obama now confronts the most powerful and hostile jihadi movement of modern times, a movement that dances on the graveyard of his hopes.

I think they’re losing sight of the bigger picture. President Obama acted as Candidate Obama promised. Had he acted differently he probably would not have been re-elected. They are demanding that President Obama act completely inconsistently with how American politicians act.

If it does not work out well either for the Iraqis, our allies, or for us, it simply reaffirms H. L. Mencken’s definition of democracy, i.e. the theory that the common people know what they want, and deserve to get it good and hard.

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The Pattern of All Patience

I faced this status report on the PPACA from Sharyl Attkisson at The Daily Signal with a bit of reluctance due to its source and its title. The Daily Signal is, after all, the new venture of the Heritage Foundation. Have some patience with it. I thought that all in all it was a pretty fair assessment of the progress of the plan to date. Here’s the meat of it:

In fact, the measure of the Affordable Care Act’s success rests neither with individual anecdotes nor in the Obama administration’s self-assessments. It’s a long-term process that many analysts say will take years to unfold.

One thing that’s not in question: The insurance industry already has been largely transformed.

Many who were considered uninsurable now have affordable policies. But the Affordable Care Act has shifted the cost burden for those who already had insurance. More policies now have bigger deductibles and cost more.

“In general, healthy people are paying more and unhealthy people are paying less,” says a source who supports and helped implement Obamacare but is disappointed with the results to date, “with those above-average [income] tending to pay more and those below-average [income] tending to pay less.”

“Is the new law effective in reducing the number of uninsured? Yes, but so far not very,” he says.

Read the whole thing.

Those who thought the PPACA would be an overnight success which, I presume, includes the president must surely be disappointed. So, too, are those who assumed it would be an immediate failure.

Those who, like me, are focused single-mindedly on cost control have even greater reason to be disappointed. We’ve got to take it on faith that there’s a pony in here somewhere, something to which we are not predisposed as a matter of temperament. The reliance on time inconsistency on the part of supporters of the PPACA, i.e. they assume that Congress, for example, will behave differently than it has in the past although its incentives remain the same, is very frustrating.

Still, the key point here is patience. The reform will neither succeed nor fail overnight.

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Status Report

Since starting my new gig I have written proposals for about a half million dollars in projects and assisted in the production of about a million and a half more. My proposals have become a sort of de facto standard for proposals in the company and are widely imitated.

As I think I’ve mentioned before the pretext under which my services were retained and the reason I was retained are two very different things. I think they have a genuine need for what I’m doing but if I were the owner I wouldn’t pay me what they’re paying me to do what I’m doing. It’s one of those paradoxes. As I’ve experienced with any number of customers I’m doing things they should be doing themselves if they had the background, experience, and inclination to do them.

At this point I can see three potential scenarios. Under one of the scenarios in six months they’ll be so happy with what I’ve been doing and I’ll be so indispensable that they’ll want to keep paying me. The next scenario is that in six months they decide I’ve done what they needed and that will be that.

Under the third scenario they’ll be so nervous about the money bleeding out to pay me that within a couple of more weeks they’ll call it quits.

I’ve already accomplished enough that I’d be satisfied with any of those outcomes. Not the least of those is demonstrating to myself that I’ve still got it. That’s very energizing not to mention gratifying.

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The States Stuck With the Tab

Juice-Voxer Sarah Cliff muses over the substantial bills to which states running their own healthcare exchanges under the PPACA look forward:

The Affordable Care Act provided federal grant funding for states to get their new web portals up and running. The Obama administration doled out $4.6 billion in grants to states launching their own marketplaces.

But Obamacare also requires state exchanges to become self-sustaining by the start of 2015. That means every state exchange that will operate next year now needs to figure out how to pay their bills. Every marketplace needs to be able to pay staff (which sometimes number in the hundreds), maintain office space and continue running outreach campaigns to increase the insurance rate.

Ms. Cliff goes on to outline different strategies the states will use to offset their costs: fees on insurance companies, grants from various sources, and new taxes for the most part.

That’s just the tip of the expense iceberg. The states need to find the money to pay the increased Medicaid caused by the lurkers, those who qualified for Medicaid under the pre-PPACA rules but for one reason or another were not enrolled. No one knows how many of them there were or their state of health. That will emerge over the next year or so.

Additionally, the states will eventually be expected to bear their full share of paying for all of those enrolled in Medicaid in their states. No one knows how much that will be, either. It’s within the realm of possibility that the governors who elected not to participate in the healthcare exchanges could look like bloody geniuses. Time will tell.

I wonder if the insurers will attempt to get the federal government to bear the costs of the new state fees. My suspicion is that’s precisely what they’ll do. That will result in unforeseen unforeseen expenses.

Illinois, wisely, acknowledged that running a healthcare exchange website was beyond its core competency but not nearly so wisely assumed that the federal government would be much better equipped to do so. I have no idea where Illinois will get the money to pay its ever-expanding Medicaid bill. It can’t pay the bills it already has, the Democrats running the state legislature are unwilling to take the blame for increasing taxes any more than they already have, and Illinois is driving companies and individual taxpayers out faster than any other state.

Raising rates doesn’t always mean that you’ll raise revenues. That’s a lesson that Illinois’s legislators haven’t really appeciated yet.

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Sunday Brunch

If I’ve mentioned it before, it’s been quite a while but every Sunday I prepare brunch for my wife and me. For guests, too, if we have them which we do on rare occasions.

My brunch usually consists of some sort of egg dish—scrambled eggs (my wife doesn’t like eggs that stare back at her), omelet, frittata, savory bread pudding, what have you—and sort sort of breakfast pastry, usually biscuits. I’ve made muffins, sweet rolls, bread rolls, and scones but I usually make biscuits. I’ve got it down to quite a science. I’ve post my recipe for biscuits before and I generally stick pretty close to that. The more frequently you make biscuits, the better your biscuits become.

Lately we’ve also been having bacon for a reason that makes sense to us but probably wouldn’t to anybody else. We both like bacon but in general I rarely prepare it. However, for the last several months Tally has preferred her food with a little bacon grease on it so I buy when it’s on sale, prepare it for our Sunday brunch, and save the grease for her.

One of these days I’ll need to write a little diatribe on bacon. I find it practically impossible to get good bacon any more. What is the world coming to?

We drink tea with our brunch. My wife doesn’t care for coffee and I’ve found it makes me jittery. This morning I’m preparing Scottish Breakfast from Tea Source. If you’re a tea drinker, it’s a great place to get good tea at a reasonable price.

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Trib Calls for Special Prosecutor. Again.

The editors of the Chicago Tribune have called once again for a special prosecutor for the IRS scandal:

On a matter this serious, the administration can’t adequately investigate itself. Given the amount of smoke now rising from the IRS, many Americans won’t be much interested in what one arm of the administration concludes about other arms, including the IRS, the Treasury Department of which it’s part, and possibly the White House.

That’s why we’ve urged Attorney General Eric Holder to appoint a special prosecutor — a phrase that, like “customer support” or “designated hitter,” provokes Pavlovian suspicions. We’ve been skeptical of some special prosecutors and their tendency toward mission creep. But we’ve also seen situations where only a special prosecutor has the independence and credibility to resolve a case that drips with politics, as when then-U.S. Attorney Patrick Fitzgerald of Chicago investigated (and convicted of perjury and other offenses) I. Lewis “Scooter” Libby, who had been Vice President Dick Cheney’s chief of staff.

Why Holder won’t act is a mystery he’s inviting Americans to resolve, uncharitably, in their own minds.

The latest revelations is that emails which may shed light on the matter which were required by law to be retained may have either been irrevocably lost or destroyed.

Only the most partisan can possibly doubt that there is a scandal here. The IG acknowledged wrongdoing more than a year ago and Lois Lerner’s early assertions that the actions were only those of a few rogue agents in a single office have been revealed as either most charitably mistaken or more likely baldfaced lies. The scandal is either the classic one of wrongdoing and subsequent cover-up or monumental incompetence and scofflawry. Either is a scandal.

Public trust in government is at historic lows. That may have been abetted by relentless Republican attacks on government but it’s obvious that the federal government has done itself little good over the last six years. We’re in desperate need of the air being cleared and I’m not really sure what actions or policies will bring that about.

If early indications are any gauge we’re shaping up for a strong anti-incumbent election in the fall. Since rates of retention in office approach 90%, an anti-incumbent wave would mean that only three-quarters of incumbents would be returned to office. I don’t think will quite do it.

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The Anthony-Kerry Home

If you’d like to see some pictures of a truly beautiful home, take a gander at the pictures in this gallery. That’s the Anthony-Kerry home in Beverly Hills, it’s up for sale, and it can be yours for a measly $9 million.

As those of you who are aficionados of this sort of thing may recognize, it’s a Green and Green home. Greene and Greene were a pair of brothers who were architects and building contractors back at the turn of the last century. The most prominent G&G home is probably the Gamble House in Pasadena. The Gamble House is now jointly owned by the University of Southern California and the City of Pasadena and it’s open to the public. It was used for the exteriors of Doc’s house in Back to the Future.

It’s not just the design of this house that’s beautiful but the materials and the remarkably fine craftsmanship, something for which the Greene brothers were noted. A Frank Lloyd Wright house may have a gorgeous design but if you’ve ever been in one you’ll acknowledge that it’s obvious that the attention to craftsmanship can’t hold a candle to a Greene and Greene home.

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