5 Things to Know About President Obama’s Budget Proposal

The most important thing to know about President
Obama’s budget proposal is that it won’t go anywhere. It’s not
intended to, and the White House isn’t even bothering to pretend

Instead, it’s an election-year wish list—or, if you prefer the
White House’s gentler spin, a statement of values. “Our budget is
about choices, it’s about values,” President Obama
earlier this week. Here are a few of the choices his
budget would have the nation make.

Annual spending would rise. Outlays would
from $3.9 trillion in 2015 to $5.91 trillion in 2024. In theory,
the growth would be roughly commensurate with growth in the
economy, ticking up just slightly from 21.4 percent of GDP to 21.5
percent over the course of a decade. But the White House has been

coy with details about its assumptions
regarding the projected
growth rate of the economy, so it’s hard to assess this beyond face

Tax revenues would rise as a percentage of the
Obama’s budget would raise revenue levels closer
to spending levels in order to sustain the spending while reducing
annual deficits. Revenues would rise from $3.34 trillion, or 18.3
percent of the economy, in 2015 up to $5.48 trillion, or 19.9
percent of the economy, in 2024. That would be one of the highest

annual levels
in the nation’s history. 

The national debt would become even bigger.
Annual deficits would decrease, according to administration
projections, dropping down to 1.6 percent of the economy, thanks in
large part to increased tax revenue levels that partially close the
gap between collections and spending. But even smaller annual
deficits still add to the federal tab. Over the next decade, the
president’s budget plan would leave us with a debt that’s $8.3
trillion higher than it is now.

Growing debt would lead to bigger interest
This year, we’d spend $223 billion on debt
service. By 2024, the president’s proposal projects interest
payments of about $812 billion.

The budget would never, ever balance. The White
House even seems to have given up its old
about getting the budget into “primary balance”—a
technical annual balance that ignores the cost of carrying a heavy
debt load. (According to the Congressional Budget Office, the old
never reached primary balance either

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A. Barton Hinkle on Loving v. Virginia and Gay Marriage

The arguments for laws banning gay
marriage and the arguments for laws banning interracial marriage
are nearly identical: Tradition. States’ rights. Government’s
presumed interest in the ordering of private relationships for the
sake of an ostensible public good. But as A. Barton Hinkle
observes, those arguments did not hold up in 1967, when the Supreme
Court struck down bans on interracial marriage in Loving v.
, and they don’t hold up now in the expanding legal
battle over same-sex unions.

View this article.

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Bernanke Admits More Of His Mistakes

On the heels of yesterday’s confessions (as we detailed here), ex-Fed chair Ben Bernanke continues his contrition:


But apart from that, “nailed it.” What a great way to earn $250,000 per appearance (a year’s Fed salary): by admitting your mistakes destroyed the middle class.


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Bank Of England Finds No Evidence Of FX Market Collusion (But Suspends Employee)

“This extensive review of documents, e-mails and other records has to date found no evidence that Bank of England staff colluded in any way in manipulating the foreign exchange market or in sharing confidential client information,” the Bank of England said today in a statement. Yet, as Bloomberg reports, a staff member was suspended amid the probe of a widening rigging scandal though “no decision has been taken on disciplinary action.” As far back as 2006, they show concerns over the FX “fixings” that are at the core of this collusion but are careful not to condone any form of market manipulation. Well that’s that then – until the next whistleblower exposes them.


As we noted in the past (via WSJ),

As previously reported by The Wall Street Journal, several of the fired and suspended traders, including Citigroup’s former chief European trader Rohan Ramchandani, have at times served on a committee hosted by the BOE that serves as a forum for discussing industry issues. Mr. Ramchandani couldn’t be reached for comment.


The presence of several of these traders on committees related to the central bank has raised questions over whether BOE officials were aware of how bank traders have operated, particularly regarding how they trade and what information they share in the run-up to benchmark snapshots of rates that are captured at 4 p.m. London time on each working day.


As The Wall Street Journal reported in December, the examination of banks’ records do appear to show some efforts at collusion, people familiar with the matter say.

But nothing to worry about – the BoE has investigated and it’s all clear (Via Bloomberg),

The BOE is probing allegations officials condoned practices at the heart of a widening rigging scandal involving traders at the world’s largest banks. It said today the investigation has found no evidence to date its employees were involved in collusion.



The suspended individual, who wasn’t named, is being investigated and “no decision has been taken on disciplinary action.”



At a July 4, 2006, meeting led by BOE chief dealer Martin Mallett, attendees discussed “evidence of attempts to move the market around popular fixing times by players that had no particular interest in that fix,” according to the minutes. “It was noted that ‘fixing business’ generally was becoming increasingly fraught due to this behavior.”


In a May 2008 meeting of the subgroup, a “large majority” of those present expressed “concern about the lack of transparency among some methodologies and the impacts in managing order flow and pricing liquidity at times of concentrated benchmarked interest such as the 4 p.m. London fix.



At that discussion “it was suggested that using a snapshot of the market may be problematic” and “could be subject to manipulation,” according to the minutes.



“This extensive review of documents, e-mails and other records has to date found no evidence that Bank of England staff colluded in any way in manipulating the foreign exchange market or in sharing confidential client information,” the central bank said in today’s statement. “The Bank of England does not condone any form of market manipulation in any context whatsoever.”

It appears, however, that the BoE, once it began tto feel the pressure of investigation, ended its regular “meetings” with FX dealers (via Reuters),

Regular meetings between Bank of England officials and top foreign exchange dealers in London were discontinued in February last year, the BoE told Reuters on Wednesday.


This last meeting of the Foreign Exchange Joint Standing Committee’s chief dealers subgroup (CDSG) took place four months before media reports of allegations of currency market manipulation.


The CDSG, held under the auspices of the BoE to discuss industry issues and usually chaired by the Bank’s chief dealer Martin Mallett, last met at the Bank of England’s offices in Threadneedle Street in London.

So arm’s length now and back to business as usual, nothing to see here… we are sure the suspension of the staff member is for stealing too many paper clips or too much personal phone use…


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What Needs To Happen Before We See A Big Recovery?

Submitted by F.F.Wiley of Cyniconomics blog,

In a Bloomberg article last May, Caroline Baum summed up the economy nicely in a single question:

Four-and-a-half years of an overnight rate near zero and aggressive securities purchases by the Fed have succeeded in raising asset prices. The question is whether higher asset prices will deliver jobs and economic growth before they become destabilizing.

In other words, will the real economy mend before excessive financial risk-taking kills the patient?

Baum called it a “horse race.”

With 2013′s economic data mostly complete, let’s have a look at where the race stands.

We’ll start by asking what needs to happen before we get the robust recovery that many economists have predicted for the past four years. Our answer is that one or both of two things need to occur:

  1. Households need to borrow at the pace we normally see in economic expansions.
  2. Household income needs to grow strongly.

Of these choices, the best result would be number 2 with as little as possible of number 1. The worst would be another credit-fueled expansion (more 1 than 2) that feels good for awhile but ends badly further down the road.

But isn’t capital spending the key ingredient?

You may argue we’re missing a third possibility – a capital spending boom. Many claim this is the best way to get things going again. We would say it puts the cart before the horse, at least as far as what’s prudent and realistic.

In America’s consumer-led economy, businesses have no reason to ramp up capital spending unless they expect strong gains in consumption. That seems unlikely. We’ll discuss capital spending in more detail in the future; for now, we’ll point to the economy’s ample unused capacity, tepid overseas growth, growing financial risks and President Obama’s bumbling incursions into private markets. Is this really the best environment for entrepreneurs to launch a capital spending spree? We doubt it.

Okay then, how about credit growth and household income?

We can’t rule out the possibility that the Fed gets the credit boom it’s looking for. But we don’t expect it in the near term for the same reasons that capital spending won’t take off, nor is it predicted by survey data.

Which leaves household income. According to the personal income report released Monday, annual growth in real disposable income jumped to 2.8% in January. Based on this alone, you might conclude that households are flush with cash. However, it’s not unusual for this indicator to bounce around between the end of one year and the beginning of the next due to tax law distortions. We screen out the noise by averaging all December figures with the subsequent January figures and using the average for both months:

what needs to happen 1

As indicated on the chart, real disposable income has been slowing for three years and currently shows no growth at all. We’ll see at least a small bounce next month, since the latest figures are held down somewhat by the 2013 increase in Social Security withholding and small increase in tax rates. There’s also a small effect from the expiration of extended unemployment benefits in January. But these considerations don’t fully explain the downwards trend.

A more important factor is that new jobs are paying poorly compared to the average existing job. Employers are picking up part-timers and low-paid service workers and creating very few “breadwinner jobs.” Therefore, disposable income is much weaker than you would think if you just focus on employment growth.

And not only does the personal income report give us another perspective on the quality of newly created jobs, but it seems to explain the overall economy pretty well. We see the same declining three-year trend in consumption:

what needs to happen 2

And in capital spending:

what needs to happen 3

The remaining components of private domestic demand – housing and commercial construction – are related to supply factors and credit growth as much as household income. Nonetheless, total residential and nonresidential (structures) investment shows a similar pattern to the other charts:

what needs to happen 4

What’s more, demand would be even weaker if households hadn’t compensated for poor income growth by reducing savings:

what needs to happen 5


For all the chest-thumping from policymakers about the declining unemployment rate and increase in GDP growth in the second half of last year, these statistics are easily misread. More telling indicators, such as private domestic demand, haven’t picked up at all. Nor would you expect a robust recovery as long as employers create mostly lousy jobs.

Getting back to Baum’s horse race between the real economy and the risk of financial instability, the real economy seems to be falling behind. Financial risks are growing steadily, as we discussed in “Tracking ‘Bubble Finance’ Risks in a Single Chart.” The real economy, on the other hand, is held back by weak income growth.

Looking forward, it’s worth keeping an eye on the personal income reports and other indicators of employee compensation. We’ll surely see some improvement as temporary effects wash out. But as long as the declining trend remains intact, don’t expect the big recovery that policymakers continue to predict.

Bonus link

For more on why employment growth isn’t as simple as Keynesian economists touting full employment targets would like you to believe, we refer readers once again to Arnold Kling’s PSST theory. Kling builds out an up-to-date variation of Joseph Schumpeter’s theory of creative destruction. He explains why creating sustainable jobs after a bust can be a very slow process.


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Police Departments Sign Non-Disclosure Agreements with Surveillance-Tech Manufacturer, Conceal Info from Courts and Press

Here’s Kim
writing in Wired:

Tell no one I helped you.A non-disclosure agreement that police
departments around the country have been signing for years with the
maker of a cell-phone spy tool explicitly prohibits the law
enforcement agencies from telling anyone, including other
government bodies, about their use of the secretive equipment,
according to one of the agreements obtained by an Arizona

The NDA includes an exception for “judicially mandated
disclosures,” but no mechanisms for judges to learn that the
equipment was used. In at least one case in Florida, a police
department revealed that it had decided not to seek a warrant to
use the technology explicitly to avoid telling a judge about the
equipment. It subsequently kept the information hidden from the
defendant as well.

A copy of the contract was obtained from a police department in
Tucson, Arizona, which signed the agreement in 2010 with the Harris
Corporation, a Florida-based maker of the equipment used by the
department. The police department cited the agreement as one of the
reasons it withheld information from a journalist who filed a
public records request seeking information about the department’s
use of the equipment.

You can—and should!—read the rest here.
But if you want the short version, Frank Pasquale sums
it up
in five words: “State secrecy + trade secrecy =

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The next shoe to drop on your retirement account

March 5, 2014
En route to Colombia

President Obama released his 2015 budget proposal yesterday… and as expected, it contained even more language about his MyRA initiative.

As we’ve discussed so many times in the past, IRAs are an irresistible kitty for such a bankrupt government.

The US government itself estimates that over $5 trillion is tucked away in American retirement accounts.

They need that money. Your money.

Think about it– the Chinese are starting to dump their US Treasuries in record numbers. The Social Security trust fund is also on track to start dumping Treasuries in order to pay out record numbers of retirees.

The US government is struggling to come up with new funding sources… and retirement accounts are by far the easiest target.

Why? Because the majority of retirement accounts at trapped at big Wall Street banks, which are all de facto agents of the government. All the Treasury Department has to do is make a phone call.

Of course, they’ll claim that it’s for your own good. I suspect they’ll wait until there’s a big stock market crash and then say “We must protect Americans from such risky investments. And that’s why today we are requiring these banks to invest a portion of the retirement accounts they manage in the safety and security of US government Treasuries.”

A few weeks ago in his Sad State of the Union address, President Obama announced this MyRA program– a new initiative that will “help” Americans invest directly in US Treasuries.

Then he looked everyone in the eye and said, “These accounts will never go down in value…”

Naturally. How could loaning money at rates which don’t even keep pace with inflation to a country that has racked up more debt than any other nation in the history of the world possibly pose a risk?

After announcing MyRA, Mr. Obama took to the streets, and his team took to the media… flooding newspapers and airwaves with MyRA propaganda.

Yesterday’s budget announcement constitutes the next phase: automatic enrollment.

And I suspect that, just like Obamacare, there will soon come a time when it will become MANDATORY to have some sort of retirement plan set up, naturally with the government option at people’s fingertips.

This isn’t some far-fetched conspiracy theory. In fact, it’s already happened in so many countries over the last few years– from Argentina to Ireland to Poland.

In fact, even the Treasury Department grabbed government pension funds at least three times since 2011 in order to plug temporary funding gaps.

The Federal Times, a publication for senior government managers, ran a story back in 2011 entitled “Treasury raids your pension – but don’t worry, Geithner says”.

This idea is no longer theory or conjecture. It’s happening, and the conclusions are all supported by the data.

Anyone who thinks ‘that will never happen here’ is really fooling themselves… and playing very dangerous games with their hard-earned savings.

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What the Russian (and Chinese) papers are saying about Ukraine

March 5, 2014
En route to Colombia

“Putin: Unconstitutional coup is taking place in Ukraine. The U.S halted military cooperation and trade negotiations with Russia”

That’s the headline from a Beijing newspaper– and no surprise that it leans slightly to the Russian side.

Beijing Paper What the Russian (and Chinese) papers are saying about Ukraine

The article goes on:

“Russian president Putin said on 4th March that unconstitutional coup is taking place in Ukraine and Russia will only use the army to Ukraine under “the most extreme situation”. This was the first time that Putin declared this publicly since the escalation of the situation in Ukraine.”

“U.S. Secretary of State John Kerry threatened on March 2nd that the U.S and allied countries will take a series of actions including visa ban, capital controls, economic and trade sanctions, etc.”

“The White House issued this in a joint statement signed by the Group of Seven member countries and accused Russia of violation of the territorial integrity of Ukraine. The White House also declared temporarily not to participate in the preparation for the G8 summit scheduled for June in Sochi, Russia.”

– and of course :

“Chinese Permanent Representative to the United Nations Liu Jieyi called for dialogue of all sides to resolve differences and maintain regional peace and stability. The united nations security council held an emergency meeting on the Ukrainian situation. Liu Jieyi said in the meeting that China is deeply concerned about Ukrainian situation and condemn the extreme violence in Ukraine.”

Meanwhile, Russian newspaper Itar Tass had this headline (loose translation):

“Putin: Those [foreign nations] who are talking about imposing sanctions on the Russian Federation should first consider the impact of those sanctions”

Russian Paper What the Russian (and Chinese) papers are saying about Ukraine

The article goes on:

“President Putin told reporters that the damage to all countries involved is mutual:

“We can cause damage to each other– mutual damage. And this needs to be thought about. . . We believe our actions are fully justified. And any threats to Russia are counterproductive and harmful.”

Mr. Putin added that Russia is still preparing for upcoming G8 meeting.

“If [the other countries] do not want to come, they don’t have to,” he told reporters .

The Russian President also expressed the opinion that the U.S. has historically created its own geopolitical goals, and then dragging along the rest of the world underneath them:

“Our partners, especially in the U.S.– they always clearly formulate their geopolitical interests and pursue them very aggressively. Guided by the well-known phrase, “you are either with us or against us,” they drag the rest of the world along, underneath them. And whoever doesn’t go along is beaten and usually killed,” the President told reporters.

He emphasized that Russia’s actions come from legitimate grounds.So on one hand, the Chinese are essentially making the West out to be the belligerents, the Russians to be defending their interests, and the Chinese as the strong diplomats who are pushing for peace.

And on the other hand, the Russian papers are highlighting the utter hypocrisy of US foreign policy– it’s OK for America to invade whatever country it likes, but not for Russia to defend its own interests.

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Why Bankers Want Control of Ukraine

We all know about the important military consequences of controlling Ukraine to the US and Russia, but an equally important and overlooked topic is why bankers want control of Ukraine’s monetary supply and ultimately control of Ukraine through controlling its debt (the proposed $1 billion loan from the IMF). All major Western military invasions in the past several years – Somalia, Sudan, Afghanistan, Iraq, Libya and attempts in Syria – involved countries in which the Bank for International Settlements had not yet gained control of the monetary supply at the time of these invasions.

The international banking cartels represented by the World Bank, the IMF and the Bank for International Settlements are unhappy with their low level of influence in controlling the debt of emerging economic powers like China and Russia and know that they very well can’t directly declare war on Russia and China to effect regime change in order to obtain control of their debt as they accomplished with the aforementioned much smaller countries that didn’t have the military strength to withstand a US/EU/banking led invasion. However, these global banking cartels know that they can gain influence through regime change without direct military intervention in the 15 newly independent states of the former USSR a la John Perkin’s Confessions of an Economic Hit Man (or at least this was their first initial thought in Ukraine). Below, JS Kim of SmartKnowledgeU discusses the above neglected topic and the gravity of the growing military escalation in Ukraine at the current time.



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ADP Tumbles: Huge Miss To Expectations, Prior Data All Revised Lower, “Winter Weather” Blamed

More snow. That is the assessment of Mark Zandi and the ADP Private Payrolls, which just printed at 139K on expectations of a 155K print. But don’t worry: the number was pre-spun for idiot consumption, as the 139K was actually an increase from the January 127K. What was not said is that the January number was a massive revision lower from the previously announced 175K. What will also not be said is that the December ADP print was revised lower from 227K to 191K and the November 289K was chopped off and revised to only 245K. Of course, both of those numbers were massive beats at the time, and have now become misses, but who cares: they have served their algo kneejerk reaction purposes. And while the data is complete garbage, and is obviously manipulated and goalseeked (as we have shown before), it should be welcome to the US to know that in February it generated a whopping 1,000 manufacturing jobs.

But the punchline, certainly, is this from Mark Zandi: “February was another soft month for the job market. Employment was weak across a number of industries. Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures.

Because when economists become weathermen, only hilarious idiocy can emerge.

Following the revision, this was the biggest miss since February 2011. Luckily it was in January so it can be ignored.

This is what the current ADP job “gains” look like.

And here is the funny part: today ADP released its annual “data” revisions. The pre and post revised numbers are shown below. The blue are the original, the orange are the new. See if you can spot the difference.

Incidentally, this downward revision of 20% over the past three months is precisely as we predicted before the data came out, because the manipulation across all data sets is now so glaringly obvious a caveman can do it:

While the rest of the report is much comparable garbage, for those who still believe the lies they are spoonfed, here it is:




And from Mark Zandi and his merry weathermen:

Goods-producing employment rose by 19,000 jobs in February, up from a downwardly-revised figure of 12,000 in January. Nearly all of the growth came from the construction industry which added 14,000 jobs over the month; this followed downwardly revised increases of 17,000 in the prior two months. Manufacturing eked out a small gain in February adding just 1,000 jobs. January’s decline in manufacturing was upwardly revised to a loss of just 7,000 jobs.


Service-providing industries added 120,000 jobs in February, up from a downwardly-revised January figure of 116,000. The ADP National Employment Report indicates that professional/ business services contributed the most to growth in service-providing industries, adding 33,000 jobs. This was well below the average gains for the industry in 2013. Expansion in trade/transportation/utilities accelerated slightly after a poor showing in January, gaining 31,000 jobs in February. Financial activities employment fell for the second straight month after January’s reading was downwardly revised to an 8,000 job loss. These two months have been the weakest for financial services employment since January and February of 2011.


“The U.S. private sector added 139,000 jobs in February, well below the average over the last 12 months,” said Carlos Rodriguez, president and chief executive officer of ADP.


Mark Zandi, chief economist of Moody’s Analytics, said, “February was another soft month for the job market. Employment was weak across a number of industries. Bad winter weather, especially in mid-month, weighed on payrolls. Job growth is expected to improve with warmer temperatures.”

No further comment.

Finally, the ever so informative infographic:

Download the Press Release

National Employment Report
For more data and analysis, download the press release.

Download Press Release

For additional insights, download the historical data (Excel file)

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About This Report: The ADP National Employment Report provides a monthly snapshot of the current U.S. nonfarm private sector employment situation based on actual transactional payroll data.


National Employment Report
For more data and analysis, download the press release.

Download Press Release

For additional insights, download the historical data (Excel file)

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Infographic: ADP National Employment Report Shows 139,000 Jobs Added in February


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