Roubini: Recession Might Not Be Half Way Over

Dr. Doom, Professor Nouriel Roubini is the man who predicted the current financial crisis and yesterday he said the U.S. recession could drag on for years without drastic action. He says that this recession could last 36 months. As we are in the 15th month of a recession this is not good.

This is a nation of shopped-out and debt-burdened consumers who just lost their ability to keep over spending. They lost their resilience and started to give up on spending in the third quarter of 2008. This was when for the first time in two decades, personal consumption contracted. With personal consumption making up for over two-thirds of aggregate demand for the U.S. economy, the outlook for the U.S. is not good for 2009. Consumers are still at the center of the dynamics that will play out in the real economy in 2009.

Professor Roubini told CNBC in a live interview:

"Growth is going to be close to zero and unemployment rate well above 10 percent into next year."

Professor Roubini also said he sees:

"There is no hope for the recession ending in 2009 and will more than likely last into 2010."

Last he again pushed the idea of bank nationalization of at least the four major banks:

"Most of the U.S. financial institutions are entirely insolvent."

"The market friendly view for the banks is nationalization."

"Temporarily take over the banks, clean them up and get them working again."

According to Professor Roubini, unfortunately, Tim Geithner's Financial Stability plan won't solve our financial woes because it assumes that the system is solvent, while nationalization is the only option that would permit us to solve the problem of toxic assets in an orderly fashion and allow lending finally to resume.

UNEMPLOYMENT RATE JUMPS TO 8.1%

The unemployment rate for the United States jumped up to 8.1 percent in February, the highest since late 1983, as cost-cutting employers slashed 651,000 jobs. Both figures were worse than analysts expected. The net loss of 651,000 jobs in February came after even deeper payroll reductions in the prior two months, according to revised figures. The economy lost 681,000 jobs in December and another 655,000 in January.

Employers are shrinking their work forces at alarming clip and are turning to other ways to slash costs — including trimming workers' hours, freezing wages or cutting pay — because the recession has eaten into their sales and profits.

One of the major differences from other Recessions has been that the job losses are across the board. Construction companies eliminated 104,000 jobs. Factories axed 168,000. Retailers cut nearly 40,000. Professional and business services got rid of 180,000, with 78,000 jobs lost at temporary-help agencies. Financial companies reduced payrolls by 44,000. Leisure and hospitality firms chopped 33,000 positions.

This recession (Which may actually be a depression) has fallen into a vicious cycle in which all the economy's negative problems feed on each other, worsening the downward spiral.

Dow Headed towards 6000

The Dow has gone below 7000 today. I used to think that 7000 was the floor that this crisis on Wall Street would hit, but 7000 was not the floor, and 6000 may be the floor.

Paul Krugman Describes Obama's Budget As Real Change

Elections have consequences, that is how Professor Krugman starts his column in the New York Times this last Friday, and while many have heard this sentiment, I think few actually understand what that means. Back in 2000 many did not think there was really any substanstive difference between Gore and Bush. How wrong they were.

Elections do have consequences, and President Obama's budget as set-forth this week is another reminder of that.

Climate of Change
By PAUL KRUGMAN

Elections have consequences. President Obama’s new budget represents a huge break, not just with the policies of the past eight years, but with policy trends over the past 30 years. If he can get anything like the plan he announced on Thursday through Congress, he will set America on a fundamentally new course.

The budget will, among other things, come as a huge relief to Democrats who were starting to feel a bit of postpartisan depression. The stimulus bill that Congress passed may have been too weak and too focused on tax cuts. The administration’s refusal to get tough on the banks may be deeply disappointing. But fears that Mr. Obama would sacrifice progressive priorities in his budget plans, and satisfy himself with fiddling around the edges of the tax system, have now been banished.

For this budget allocates $634 billion over the next decade for health reform. That’s not enough to pay for universal coverage, but it’s an impressive start. And Mr. Obama plans to pay for health reform, not just with higher taxes on the affluent, but by putting a halt to the creeping privatization of Medicare, eliminating overpayments to insurance companies.

On another front, it’s also heartening to see that the budget projects $645 billion in revenues from the sale of emission allowances. After years of denial and delay by its predecessor, the Obama administration is signaling that it’s ready to take on climate change.

And these new priorities are laid out in a document whose clarity and plausibility seem almost incredible to those of us who grew accustomed to reading Bush-era budgets, which insulted our intelligence on every page. This is budgeting we can believe in.

Many will ask whether Mr. Obama can actually pull off the deficit reduction he promises. Can he actually reduce the red ink from $1.75 trillion this year to less than a third as much in 2013? Yes, he can.Right now the deficit is huge thanks to temporary factors (at least we hope they’re temporary): a severe economic slump is depressing revenues and large sums have to be allocated both to fiscal stimulus and to financial rescues.

But if and when the crisis passes, the budget picture should improve dramatically. Bear in mind that from 2005 to 2007, that is, in the three years before the crisis, the federal deficit averaged only $243 billion a year. Now, during those years, revenues were inflated, to some degree, by the housing bubble. But it’s also true that we were spending more than $100 billion a year in Iraq.

So if Mr. Obama gets us out of Iraq (without bogging us down in an equally expensive Afghan quagmire) and manages to engineer a solid economic recovery — two big ifs, to be sure — getting the deficit down to around $500 billion by 2013 shouldn’t be at all difficult.

But won’t the deficit be swollen by interest on the debt run-up over the next few years? Not as much as you might think. Interest rates on long-term government debt are less than 4 percent, so even a trillion dollars of additional debt adds less than $40 billion a year to future deficits. And those interest costs are fully reflected in the budget documents.

So we have good priorities and plausible projections. What’s not to like about this budget? Basically, the long run outlook remains worrying.

According to the Obama administration’s budget projections, the ratio of federal debt to G.D.P., a widely used measure of the government’s financial position, will soar over the next few years, then more or less stabilize. But this stability will be achieved at a debt-to-G.D.P. ratio of around 60 percent. That wouldn’t be an extremely high debt level by international standards, but it would be the deepest in debt America has been since the years immediately following World War II. And it would leave us with considerably reduced room for maneuver if another crisis comes along.

Furthermore, the Obama budget only tells us about the next 10 years. That’s an improvement on Bush-era budgets, which looked only 5 years ahead. But America’s really big fiscal problems lurk over that budget horizon: sooner or later we’re going to have to come to grips with the forces driving up long-run spending — above all, the ever-rising cost of health care.

And even if fundamental health care reform brings costs under control, I at least find it hard to see how the federal government can meet its long-term obligations without some tax increases on the middle class. Whatever politicians may say now, there’s probably a value-added tax in our future.

But I don’t blame Mr. Obama for leaving some big questions unanswered in this budget. There’s only so much long-run thinking the political system can handle in the midst of a severe crisis; he has probably taken on all he can, for now. And this budget looks very, very good.

Any one who honestly reads Paul Krugman knows that he is not an Obama apologist. Professor Krugman has been critical of Obama's bailout plans and did not think that the stimulus package Obama pushed for was bold enough. At the same time, I trust a lot of what Professor Krugman has to say about the economy. So when Professor Krugman says that this budget is a good progressive budget, than I am very hopeful.

Fourth Quarter GDP Figures Have Been Revised

To all those who have tried to suggest the economic problems of this country are not that bad (I'm looking at you Republicans) and that there were even signs of recovery at the end of Bush's administration, the news today is not good.

Highlighting that this nation is facing a major crisis, the fourth quarter GDP figures have been revised.

In Revision, G.D.P. Shrank at 6.2% Rate at the End of 2008, by Catherein Rampell, New York Times: The economy at the end of last year contracted at a far faster rate than initially estimated... With the exception of government spending, every major component of the economy shrank.

Output fell 6.2 percent at an annualized rate in the fourth quarter of 2008, revised downward from a previous estimate of a 3.8 percent decline.

The economy took the biggest hits in exports, retail sales, equipment and software, and residential fixed investment.

The downward revisions, though, came primarily because of a larger-than-anticipated contraction in inventories of unsold goods. ... Some hail the decline in inventories as potentially good news.

“The only plus to take out of this is that inventories weren’t as high, and that implies you don’t have to cut as much this quarter to get them back under control,” Mr. Gault said. He added that inventories were still too high, and he expected companies to further scale back their production, especially in response to the dismal consumer spending numbers.

Households also saved much more of their paychecks than initially estimated.

Professor Krugman comments in his blog

Minus 6.2%: Yikes.

And if the data on new unemployment claims are any indication (which they are), the economy is continuing to plunge at least as fast.

As Brad DeLong says, I think we’re going to need a bigger stimulus.

This will be a surprise for some, but it just confirms what most people thought was happening.

Obama forecasts $1.75 trillion deficit this year

Today President Barack Obama and his administration have predicted a deficit of $1.75 trillion in a budget proposal for 2009. This is the legacy of President Bush, a $1,075,000,000 deficit. This gaping hole in the treasury is huge! This deficit represents 12.3% of U.S. GDP (gross domestic product), and is the largest percentage share of GDP since the end of World War II.

The President's budget sets some major goals such as overhauling the healthcare system and shoring up the U.S. economy.

Now senior Obama administration officials are suggesting that the President's expensive policy goals will be offset by cuts in spending on existing programs that are no longer necessary or have proven wasteful. The Obama administration is promising to put the country in better fiscal shape.

This is going to be difficult to near impossible as federal spending is skyrocketing as Obama officials try to jolt the faltering economy with public-works spending and tax cuts and continue to bail out the troubled financial industry. Still President Obama has made a bold pledge to halve the more-than $1 trillion deficit he inherited from former Republican President George W. Bush in four years.

To do this Obama is producing tax increases on wealthier Americans and reduce the cost of the Iraq war as a troop drawdown, to curb the deficit. Currently the budget projects costs of fighting in Iraq and Afghanistan as totaling just over $140 billion this year and $130 billion in the 2010 fiscal year. Obama's budget proposes that annual costs will drop after the drawdown to $50 billion annually. The proposed budget would also phase out government payments to crop producers making more than $500,000 -- saving $9.8 billion over 10 years -- and eliminate subsidies for cotton storage, saving an additional $570 million over the same period.

Obama's Budget Plans

President Obama came out today and discussed his budget plans. It is how he kicked off this afternoon's "Fiscal Responsibility Summit" at the White House. In a bold statement that I am not sure is possible, President Obama said he intends to halve the country's budget deficit by the end of his first term.

NBC correspondent Chuck Todd reported on a meeting between President Obama and governors that took place last night and today. Watch his report here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

President Obama went over a number of the steps that he is taking to fix the mess he inherited. He talked about the accounting gimicks that would no longer be tolerated, so that we would have an honest accounting of the financial state of the budget. He also declares that "Pay as you go" will be reinstated to the budget.

Watch President Obama speak at today's summit here:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Lori Montgomery and Ceci Connolly wrote in Sunday's Washington Post: "President Obama is putting the finishing touches on an ambitious first budget that seeks to cut the federal deficit in half over the next four years, primarily by raising taxes on businesses and the wealthy and by slashing spending on the wars in Iraq and Afghanistan, administration officials said."

Now it had been rumored that President Obama had considered announcing the formation of a bipartisan Social Security task force, but had relented under pressure from the liberal left who were worried about what this would do to other initiatives like healthcare. Solve healthcare and you go a long way to solving Medicare (immediate problem) and Social Security (long term problem.)

All Gone

The Dow Jones closed down at its lowest level in six years. The gains in the market during the Bush years are all gone. The gains made after the crash which came in the wake of 9-11 are all gone. The Dow is at about half of its all-time high of 14,164, which was reached in October 2007. The total value of all shares of companies on the Dow has now dwindled to $2.45 trillion, down from $4.51 trillion. Bank stocks have been especially hit as investors grow increasingly nervous about the fragile economy.

This economic crisis is going to be one for the history books. The trouble is our government has become so split and dysfunctional, I'm not sure it can meet the needs of the crisis. Look at what has been happening in California. California is the world's 8th largest economy, but has a 42 billion dollar deficit. They needed a draconian budget of tax increases and cost cutting to keep going yet Republicans were not willing to work with Democrats and compromise. Luckily at the last minute the disaster was averted in California.

Fed Downgrades Economic Forecast for this Year

Do not expect a quick ending to the recession/depression lite, because today the Federal Reserve sharply downgraded its projections for the country's economic performance this year. They are predicting that the U.S. economy will actually shrink, while unemployment will grow.

Dear God when will it end.

Under the Fed's new projections, the unemployment rate will rise to between 8.5 and 8.8 percent this year. Personally I think they are being conservative here, I bet that it will be between 9.0 and 9.2. Of course this is using the metrics that don't count millions, and the actual number will be over 16 percent. Now the old forecasts, issued in mid-November, predicted the jobless rate would rise to between 7.1 and 7.6 percent. This was always a laugh. Employment is almost always the last part of the economy to heal once it emerges out of recession and is in recovery mode. Therefore the jobs picture will remain grim for years to come.

The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent. The last time the economy registered a contraction for a full year was in 1991, by 0.2 percent. If the Fed's new predictions prove correct, it would mark the weakest showing since a 1.9 percent drop in 1982, when the country had suffered through a severe recession.

Fed officials do predict that the economy should pick up speed in 2011, growing by as much as 5 percent, which would be considered robust, though I again say they are being optimistic.

House and Senate Pass the Economic Stimulus Package

Yesterday President Barack Obama earned his first major victory with the passing of the $787 billion economic stimulus package. The news commentators are marking this as a "major milestone on our road to recovery."

The House voted 246-183 to pass the economic recovery plan, again with zero Republican votes.

Then Senator Sherrod Brown of Ohio rushed back to Capitol Hill last night, to give the economic stimulus bill its 60th vote.

The package is now on the way to the White House.

Speaking in his weekly radio and Internet address, President Obama said, "I will sign this legislation into law shortly, and we'll begin making the immediate investments necessary to put people back to work doing the work America needs done."

Watch President Obama's Internet address here:

2/14/09: Your Weekly Address from White House on Vimeo.
LibertyAir Blog

Cluster F#@k to the Poor House

Just for fun, the Daily Show's take on the debate over the stimulus plan.

Watch it here:

The Daily Show With Jon StewartM - Th 11p / 10c

Clusterf#@k to the Poor House - Economic Recovery Plan

Daily Show Full Episodes
Important Things With Demetri Martin

Funny Political News
Joke of the Day

LibertyAir Blog

Geithner to Announce New Plan

Treasury Secretary Timothy Geithner is scheduled to unveil a plan to handle the government's second half of the $700 billion financial rescue program today. The plan as it is being leaked is to impose tough new standards on future payments to banks. It also calls for greatly expanding an effort to unclog credit markets to provide loans to consumers and businesses. The administration also announced that the program would be expanded beyond consumer and small business loans to provide aid to the troubled commercial real estate sector.


The administration's new plan will include a government-private sector partnership aimed at removing toxic assets from banks' balance sheets, although the details on how this program would operate were still being worked out.

The Obama administration is promising an aggressive effort to combat the worst financial crisis in seven decades, unveiling a program that could mobilize well over $1 trillion in public and private support to get the frozen credit markets functioning again.

The new plan would greatly expand an effort to unclog credit markets that provide loans to consumers and businesses. Funding for this effort would see a huge increase — from $20 billion up to $100 billion.

President Obama's First Town Hall Meeting

President Barack Obama held his first town hall meeting today. He traveled to the economically hard-hit town of Elkhart, Indiana. I listened to it, and thought President Obama did well. He took a lot of questions, gave a lot of good answers, and had a few really good lines which will make great sound bytes.

This was the First time President Obama traveled outside the capital to promote his plans for reinvigorating the economy. I really think this is the right strategy for the President. It worked well for Bush to be seen talking to people outside of Washington, and I believe it will put more pressure on Republicans. So far despite numerous attempts to reach out, President Obama failed to gather meaningful Republican support for the stimulus. So I think he needs to apply pressure from the bottom up. He needs to get a public which is very supportive of his efforts to apply pressure to on obstructionist Republicans. The question-and-answer sessions with citizens and later tonight when he meets with news reporters at a prime-time news conference will allow President Obama to appeal directly to the public and build more grass-roots backing of his plans. This is another reason I believe that Republicans have been making both tactical and strategic mistakes.

President Obama continued to implore the Congress to take action, repeating the nation can't afford to wait.

"We can no longer posture and bicker and resort to the same failed ideas that got us into this mess in the first place - and that the American people rejected at the polls this past November."

President Obama also made some news saying that he was going to push for putting some of the education money the "Centrists" in the Senate took out. This is good, because the Senate's cuts to education were stupid.

I will get video when it is available.


Note: Unlike the Town Halls of George W. Bush, President Obama's Town Hall was completely open to the public. And this was no Democratic stronghold, Obama lost the county with Elkhart, IN to John McCain 44 percent to 56 percent. Despite that fact, the White House did not screen its audience, and a number of them had a chance to ask President Obama questions. There were no partisan litmus test for attendees or for those asking questions.

The Economy Shrinks Again

It was predicted that the numbers would be bad, and this morning it was confirmed that they were. During the fourth quarter of 2008 the U.S. economy shrank at its fastest pace in 26 years. The gross domestic product (GDP) -- a crucial measure of economic performance -- shrank at an annual rate of 3.8% in the fourth quarter of 2008 as the credit crisis deepened the recession.

Some will say that 3.8% was better than expected, but I would not take much comfort in this as it will undoubtedly be revised down, and MarketWatch is reporting that the number are much closer to 5.1% if inventory is included.

The bad thing is that the economy may not have yet hit bottom.

The True State of Employment

Jobless rate

The other day I heard George Will pontificate that the unemployment rate of 8% is better than the 10% unemployment this nation faced during the recession of the early 80's. Yes it's true that today the United States is approaching an official uneployment rate of 8%, but we are not using the same methodology to determine the unemployment rate that was used in 1980. The methedology has been changed by both Reagan and Clinton. If the methodology used in 1980, before the Reagan Administration first changed it to hide the depth of that era's deep recession, were applied, it would be 17% today, or one in seven workers

Even still the number of jobless American workers receiving unemployment checks rose to the highest level since the government began keeping records in 1967. The Labor Department is reporting that the number of Americans drawing jobless benefits for a week or longer rose to 4,776,000 in the week ended Jan. 17, the latest data available.

This number eclipses the prior mark set in November 1982, when 4,713,000 million Americans drew benefits.

Americans who moved to collect their first unemployment checks rose for the third consecutive week, to 588,000, according to a government report released Thursday. The number of Americans filing for unemployment claims has surged by 61% from this time a year ago. The AP notes that the results “were worse than analysts expected.”

Tax Cuts: Been There, Tried That

The tax cut approach as stimulus has already been tried and failed as economic stimulus. The Bush administration often claimed as they tried to sell the Bush tax cuts of 2003, that they would generate 1.4 million jobs on top of the 4.1 million jobs that were expected to be generated over the eighteen months following June 2003. This did not happen. Not only did the promised 1.4 million additional jobs not appear, but the 4.1 million jobs expected with no action also failed to materialize. In all, only 2.4 million jobs were created—1.7 million short of the administration’s projection without their new policy.


You can check http://www.jobwatch.org/ to see what I am saying.


The Bush Administration called the tax cut package, its "Jobs and Growth Plan," and by it's own metrics the tax cut program fell short by a total of 3.1 million jobs. That would be called failure.


Republicans have but one answer to every problem, TAX CUTS.


This is wrong http://economistsview.typepad.com/economistsview/2009/01/the-2003-jobs-and-growth-plan-tax-cuts-didnt-work.html

What’s up with the Republicans?

New York Times columnist Bob Herbert asks the question, why is anyone even listening to the Repuglicans?

I would like to know too.

The Same Old Song
By Bob Herbert

What’s up with the Republicans? Have they no sense that their policies have sent the country hurtling down the road to ruin? Are they so divorced from reality that in their delusionary state they honestly believe we need more of their tax cuts for the rich and their other forms of plutocratic irresponsibility, the very things that got us to this deplorable state?

The G.O.P.’s latest campaign is aimed at undermining President Obama’s effort to cope with the national economic emergency by attacking the spending in his stimulus package and repeating ad nauseam the Republican mantra for ever more tax cuts.
“Right now, given the concerns that we have over the size of this package and all the spending in this package, we don’t think it’s going to work,” said Representative John Boehner, an Ohio Republican who is House minority leader. Speaking on NBC’s “Meet the Press,” Mr. Boehner said of the plan: “Put me down in the ‘no’ column.”

If anything, the stimulus package is not large enough. Less than 24 hours after Mr. Boehner’s televised exercise in obstructionism, the heavy-equipment company Caterpillar announced that it was cutting 20,000 jobs, Sprint Nextel said it was eliminating 8,000, and Home Depot 7,000.

Maybe the Republicans don’t think there is an emergency. After all, it was Phil Gramm, John McCain’s economic guru, who told us last summer that the pain was all in our heads, that this was a “mental recession.”

The truth, of course, is that the country is hemorrhaging jobs and Americans are heading to the poorhouse by the millions. The stock markets and the value of the family home have collapsed, and there is virtual across-the-board agreement that the country is caught up in the worst economic disaster since at least World War II.

The Republican answer to this turmoil?

Tax cuts.

They need to go into rehab.

The question that I would like answered is why anyone listens to this crowd anymore. G.O.P. policies have been an absolute backbreaker for the middle class. (Forget the poor. Nobody talks about them anymore, not even the Democrats.) The G.O.P. has successfully engineered a wholesale redistribution of wealth to those already at the top of the income ladder and then, in a remarkable display of chutzpah, dared anyone to talk about class warfare.

A stark example of this unholy collaboration between the G.O.P. and the very wealthy was on display in the pages of this newspaper on Jan. 18. The Times’s Mike McIntire wrote an article about the first wave of federal bailout money for the financial industry, which was handed over by the Bush administration with hardly any strings attached. (Congress, under the control of the Democrats, should never have allowed this to happen, but the Democrats are as committed to fecklessness as the Republicans are to tax cuts.)

The public was told that the money would be used to loosen the frozen credit markets and thus help revive the economy. But as the article pointed out, there were bankers with other ideas. John C. Hope III, the chairman of the Whitney National Bank in New Orleans, in an address to Wall Street fat cats gathered at the Palm Beach Ritz-Carlton, said:

“Make more loans? We’re not going to change our business model or our credit policies to accommodate the needs of the public sector as they see it to have us make more loans.”

How’s that for arrogance and contempt for the public interest? Mr. Hope’s bank received $300 million in taxpayer bailout money.

The same article quoted Walter M. Pressey, president of Boston Private Wealth Management, which Mr. McIntire described as a healthy bank with a mostly affluent clientele. It received $154 million in taxpayer money.

“With that capital in hand,” said Mr. Pressey, “not only do we feel comfortable that we can ride out the recession, but we also feel that we’ll be in a position to take advantage of opportunities that present themselves once this recession is sorted out.”
Take advantage, indeed. That, in a nutshell, is what the plutocracy is all about: taking unfair advantage.

When the G.O.P. talks, nobody should listen. Republicans have argued, with the collaboration of much of the media, that they could radically cut taxes while simultaneously balancing the federal budget, when, in fact, big income-tax cuts inevitably lead to big budget deficits. We listened to the G.O.P. and what do we have now? A trillion-dollar-plus deficit and an economy in shambles.

This is the party that preached fiscal discipline and then cut taxes in time of war. This is the party that still wants to put the torch to Social Security and Medicare. This is a party that, given a choice between Abraham Lincoln and Ronald Reagan, would choose Ronald Reagan in a heartbeat.

Why is anyone still listening?

Republicans have decided to "rule by hissy fit" as Atrios calls it. It is time to stop listening to them. After all the damage that John Boehner, Mitch McConnel, George W. Bush, Dick Chenney and all the GOP have done to our nation, they need to be relegated to the back of the closet. Democrats need to step up and take charge. Republicans are now lead by children who need to not be heard from.

Bad News on the Economy - Again

Brutal news on the job market yesterday, with six major corporations announcing combined layoffs of over 71,400 people. One of the companies was construction machinery manufacturer Caterpillar (CAT, Fortune 500) said Monday it will cut 20,000 jobs amid a "very challenging global business environment." Another company was Pfizer (PFE, Fortune 500) which said in an earnings report it would cut 10% of its staff of 81,900 and close five of its manufacturing plants. And a second round of cuts will shed about 15% of employees from the combined Pfizer/Wyeth staff of 120,000. That makes a total of 26,000 jobs lost. The company already cut 4,700 jobs in 2008.

Sprint Nextel Corp. (S, Fortune 500) will cut a total of about 8,000 jobs by March 31, the company said in a release. The telecommunications company's plan is to reduce internal and external labor costs by about $1.2 billion on an annual basis.

Home Depot (HD, Fortune 500), the world's largest home improvement retailer, announced Monday it will eliminate its EXPO design center business and cut 7,000 associates, or approximately 2% of the company's total workforce. The company blamed a lack of demand for big ticket design and decor projects.

Texas Instruments (TXN, Fortune 500) said it will slash its workforce by 3,400 employees to cope with weak demand and the slowing economy. More than half of those cuts will be layoffs while "voluntary retirements and departures" will make up the rest.

The cuts mark a horrific start to the week, and a brutal start to 2009. In the previous week, around 40,000 cuts were announced across multiple industries.

Glad that the Republicans have decided to be an obstacle to the stimulus plan.

Spending Is Stimulative

Last week, House Democrats released an $825 billion economic recovery package, which consists of $550 billion in government spending and $275 billion in tax cuts. Personally I hate this package, because while I believe a stimulus package is necessary, I do not believe the tax cuts should be such a large percentage of the package. Traditionally government spending results in more significant value for the dollars spent than tax cuts do. Still the provisions of the plan were put forward and have been examined and marked up by various congressional committees. The goal of House Democrats was to pass a full stimulus package sometime in mid-February.

Though Republicans at first voiced some support for the stimulus package when President Obama initially laid it out, now they are beginning to snipe and stab.

Conservatives are claiming that they are balking at seeing the size of the bill that emerged from the House. Cry baby, I mean Minority Leader John Boehner made his opposition known by simply saying "Oh. My. God."

Now conservatives are coalescing around "alternative" stimulus proposals like one crafted by the Republican Study Committee (RSC). But as usual in voicing their opposition, conservatives have started to push several lies and myths about the stimulus and its potential effect on the economy.

First and foremost the conservatives on the House Budget Committee released a report stating that the proposal "pours taxpayers' money" into projects, "many of which may be worthy in themselves, but have little to do with 'stimulating' the economy."

Harvard professor Robert Barro derided the plan as "voodoo economics," which is odd since it is actually the exact opposite of the original voodoo economics. Moon bat right-wing pundit Michelle Malkin is claiming that the stimulus will "at most be useless." Why anyone listens to that shrill harpy, I have no idea.

The truth is that an analysis by Moody’s Economy.com found that government spending results in more significant "bang for the buck." For every dollar invested in specific types of spending, the boost in real GDP is more than $1.30.

According to the analysis the most benefit comes from extending unemployment benefits ($1.64) and increasing food stamps ($1.73), but strong returns result from infrastructure investment ($1.59) and aid to state and local governments ($1.36), as well.

Furthermore, Moody's analysis also notes, "A well-timed, targeted, and temporary stimulus could in fact cost the Treasury less in the long run, since a debilitating recession would severely undermine tax revenues and prompt more government spending for longer."

Mark Zandi, chief economist at Moody's and former adviser to Sen. John McCain's presidential campaign, released his analysis of the House plan on Wednesday, and concluded that it would "provide a vital boost to the flagging economy," without which full employment would not return until 2014.

Minority Leader Boehner is also trying to come out and claim, "When it comes to slow-moving government spending programs, it's clear that it doesn't create the jobs or preserve the jobs that need to happen." Former Massachusetts governor Mitt Romney has said that "even if consumption were to bump up, it would not lead businesses to expand and to add jobs."

Former Secretary of Labor Robert Reich shoots down these talking points. Earlier this week Reich argued that, "The stimulus plan will create jobs repairing and upgrading the nation's roads, bridges, ports, levees, water and sewage system, public-transit systems, electricity grid, and schools."

It stands to reason that investing in infrastructure is going to lead to job creation, as someone needs to be hired to actually complete the various projects. By investing $100 billion in clean energy infrastructure alone, the Center for American Progress has estimated that 2 million jobs can be created in the next two years. Aid to states through bolstering Medicaid also "generates business and gets people into jobs," as a recent report by Families USA showed: "The new dollars pass from one person to another in successive rounds of spending, generating additional business activity, jobs, and wages that would not otherwise be produced."

Council of Economic Advisers Chairman Christina Romer and Vice President Biden aide Jared Bernstein, meanwhile -- by using the "1% of GDP equals 1 million jobs rule of thumb" -- estimated that a stimulus plan will create or save three million jobs. According to their calculations, "30% of the jobs created will be in construction and manufacturing," while "the other two significant sectors that are disproportionately represented in job creation are retail trade and leisure and hospitality."

Republicans and conservatives are again arguing that the answer is tax cuts. The Heritage Foundation, meanwhile, proposed an "alternative" to the House stimulus: "permanent tax reductions such as the ones Congress passed in 2003."

History shows that the tax cuts that conservatives are arguing for as a stimulus for economic growth is "weak at best." An analysis by the Center for American Progress Action Fund shows that every $10 billion spent on this kind of cut would create or save just 10,000 jobs, "versus nearly 60,000 jobs which could be created or saved by extending unemployment benefits and food stamps or investing directly in energy, transportation and education infrastructure." Furthermore, permanent measures will exacerbate the long-term debt much more than temporary measures will.

On a side note the National Republican Congressional Committee has an "issues" page on their website. This website issue page includes, as expected, a page on the "Economy." (Just so you note it's the seventh issue, behind Social Security and Border Security) Why I bring this up is that the web page tells it's readers, "Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong."

Yes you read that right, it actually states that "Thanks to Republican economic policies, the U.S. economy is robust and job creation is strong."

After clicking "read more," we learn all about the NRCC's message on the economy.

According to the NRCC we have Republican economic policies to thank for the state of the economy, which actually I agree with, but they think that the U.S. economy is robust and job creation is strong. According to them the Republican tax cuts are creating jobs and continuing to strengthen the economy. The NRCC's site also explains that if we stray from Republican economic ideas, we will "set back our economy."

Republicans are in another reality.

Lets hope that Democrats wake up and realize that conservatives have no real answers and push forward with a more progressive stimulus package.

Bush Defends His Economic Record

At yesterday's news conference President Bush was asked about the economy, and while Bush at least acknowledged that "obviously these are very difficult economic times" he deflected all responsibility for the economy's troubles.

In fact Bush did what he does best, blaming others:

"This problem started before my presidency, it obviously took place during my presidency," said Bush.

Bush also vigorously defended his 2001 and 2003 tax cuts. Falling back on his tired defense and seriously stupid statements he flatly stated:

"[He] will defend them after my presidency as the right course of action."

"There's a fundamental philosophical debate about tax cuts. Who best can spend your money, the government or you? I've always sided with the people on that issue."

But as the Washington Post noted yesterday, Bush "has presided over the weakest eight-year span for the U.S. economy in decades." The federal government "had a modest budget surplus when Bush took office," but his administration ran up deficits "even as the economy was growing at a healthy pace." When Bush took office, it was projected that the federal government would run a $710 billion budget surplus in 2009.

Now, the Center on Budget and Policy Priorities has calculated that Bush's tax cuts accounted for 42 percent of the fiscal deterioration between 2001 and 2008. Though Bush claims he "sided with the people" through his economic policies, he really just squandered their money.