February 2010 3-Rant Special Edition

(Section 1)
2009 4th Quarter Economic growth misleading

“Economy grows at 5.7% pace, fastest since 2003″

The U.S. Real gross domestic product increased for a second straight quarter, crushing expectations by growing at a 5.7% seasonally-adjusted annual rate from October through December of 2009, but many economists expect the 5.7% GDP figure might be subject to large revisions in coming months, and analysts worry that growth could slow or even stop going forward. They point to temporary factors that propped up the economic numbers in the fourth quarter,that will soon fade.

Much of the fourth-quarter expansion was due to government stimulus and to companies boosting output to restock supplies depleted by the recession. A full 3/4 of the 5.7% increase came as American businesses shifted from sharply cutting stockpiles to rebuilding them. Inventories declined by $33.5 billion after falling by more than $100 billion in each of the previous three quarters. The change in inventories added 3.4 percentage points to growth, the biggest contribution to GDP from inventories in 22 years.

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(Section 2)

TARP, The bank tax, and populist flavored B.S.

President Barack Obama announced a plan to impose a new tax on banks to cover an expected $117 billion shortfall in the Troubled Assets Relief Program (TARP). The so-called “Financial Crisis Responsibility Fee” he’d like to see aimed at the top 50 financial firms, which have assets of more than $50 billion, and would constitute a 0.15 percent tax on the TARP liabilities of these institutions. The idea is to get back at least $90 billion in projected losses associated with the Troubled Asset Relief Program. The proposed tax would take effect on June 30 and reportedly collect $90 billion, over a 10 year period.

Even the banks that have already paid back their portion of the $700-billion federal bailout would be subject to a special tax under a White House proposal that opponents call punitive but the administration says is required to make taxpayers whole. However, auto companies General Motors and Chrysler, which are not expected to pay back all of their $66 billion of TARP money, will not be subject to the tax. Also exempted from the tax would be the failed and government-controlled mortgage giants Fannie Mae and Freddie Mac, which are largely responsible for the financial meltdown in 2008, and insurer AIG. AIG, has said it has not generated enough earnings to repay the remaining $62 billion it owes the government, despite recording two straight profitable quarters.

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(Section 3)

Here’s the new budget, same as the old budget

Obama unveils 2011 budget with $3.83T in spending

President Barack Obama unveiled a 3.83 trillion-dollar spending plan, pledging an intensified effort to combat high unemployment and asking Congress to quickly approve new job-creation efforts that would boost the deficit to a record-breaking $1.56 trillion.

Obama’s new budget blueprint preaches the need to make tough choices to restrain run-away deficits, but not before attacking what the administration sees as the more immediate challenge of lifting the country out of a deep recession that has cost 7.2 million jobs over the past two years.

“Until America is back at work, my administration will not rest and this recovery will not be finished,” Obama declared in his budget message.

The president just proposed a nearly $4 trillion budget with trillion dollar deficits projected as far as the eye can see, yet remarkably does this while posing as a deficit hawk. After all, he is freezing eight percent of the budget and creating a “bi-partisan” commission to study how to reduce the deficit.

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