Economic Rebound? What Economic Rebound?
What’s really offensive about Aversa’s piece is that so many of the other top ten stories reveal how utterly ridiculous her characterization of an economy that is in “rebound” really is.
First, there’s number two, “Auto Industry Collapse.” In November, Chrysler was still collapsing, GM’s year-over-year sales were still declining, and Ford was running just about even. The Japanese trio of Toyota, Honda, and Nissan collectively improved, but total industry sales were flat and not rebounding.
Then there’s number three, “Foreclosures Head Higher.” Aversa herself writes that “by the end of the year, a record 14 percent of homeowners with a mortgage are either behind on their payments or in foreclosure.” That situation is getting worse, not better.
Number five, “Small and Mid-Sized Banks Fail,” is notable because Aversa seems to backtrack on her claim that the recession has ended when she writes that “the banks have been undone by real estate, construction, and industrial loans that soured as the recession has deepened.” Uh, what’s with the present tense?
Aversa also betrays a lack of confidence in number eight, “Federal Aid for Economy,” when she writes that “government stimulus programs spur sales of homes and autos but raise doubts about whether the economic recovery can be lasting if federal aid is withdrawn.” What kind of “rebound” is it if it can’t be sustained without Uncle Sam’s not-unlimited largesse?
I deliberately saved number six, “U.S. Spills Red Ink,” for last. While Aversa dutifully notes the record $1.4 trillion deficit Uncle Sam ran during the past fiscal year, she says it occurred because “financial bailout and war costs soar[ed].” Lord have mercy.
First, as I noted earlier this year, the government began retroactively accounting for the costs of bank, car company, and other bailouts under the Troubled Asset Relief Program (TARP) on a “net present value” basis, thus treating related outlays as “investments” that are not included in current spending. Two non-TARP exceptions to this are Fannie Mae and Freddie Mac, whose bailout costs thus far have exceeded $100 billion. On Christmas Eve, while much of the rest of the nation was engaged in last-minute holiday preparations and enduring airport weather delays, the Obama administration said it would provide the two government wards relief without limits.
Second, “war costs” didn’t “soar.” Total defense spending in fiscal 2009 was only $42 billion higher than it was in fiscal 2008, an increase of just over 7%. Even before determining how much of the increase directly relates to the wars, it accounts for less than 5% of the $962 billion jump in the deficit from the previous year’s $464 billion.
Finally, in addressing the deficit, Aversa missed or ignored an important story the rest of the press neglected, one which deserves its own entry on the list. That story is the catastrophic decline in federal tax and other collections that shows no signs of stopping, let alone “rebounding.”
Tax receipts for calendar 2009 will be about $2.04 trillion. That’s down about $530 billion, or 20%, from calendar 2008 (after adding back that year’s stimulus payments). The steepness of the decline in collections in an economy that contracted less than 4%, and where average employment declined by less than 5%, is proof positive that the “going Galt” phenomenon was very real in 2009.
As long as the administration-fostered atmosphere of uncertainty (yet another missed story) prevails, it will continue.