Jul 24, 2011

Government paralysis leads to lack of confidence. Thanks Boner!

Putting pressure on an already lousy job market, the mass layoff is making a comeback. In the past week, Cisco, Lockheed Martin and Borders announced a combined 23,000 in job cuts. (See: Another Retailer Bites the Dust: Borders Doomed by Amazon Deal, Davidowitz Says)

Those announcements follow 41,432 in planned cuts in June, up 11.6% from May and 5.3% vs. a year earlier, according to Challenger, Gray & Christmas.

Meanwhile, state and local governments have cut 142,000 jobs this year, The WSJ reports, and Wall Street is braced for another round of cutbacks. This week, Goldman Sachs announced plans to let go 1000 fixed-income traders.

If these trends continue, we may soon be talking about losses in the monthly employment data -- not just disappointing growth, says Howard Davidowitz, CEO of Davidowitz & Associates
"Everything in business is confidence," Davidowitz says. "You lose confidence and businesses can't deal with that [and] who could have confidence with what's going on in Washington?"

Davidowitz is bipartisan in his criticism, calling the U.S. political system "dysfunctional and deranged." (See: "A Bunch of Morons in Washington": Howard Davidowitz Handicaps the Debt Ceiling Debate)
Still, the restructuring expert is a longtime and vocal critic of President Obama: "There has never been in a situation in my lifetime where a guy increases the debt by 40%, GDP growth is on the way down, Food Stamps are up, millions more are unemployed -- and to accomplish this we spent $4 trillion."
But it's an open question whether any president or policy mix could do much to revive the economy after the bursting of the credit bubble.

In This Time is Different, co-authors Ken Rogoff and Carmen Reinhart demonstrate that financial crises are typically followed by severe recessions, slow recoveries, subpar growth and greater frequency of recessions in the decade following the crisis. (See: Bernanke In Denial About Economy's Fate, Vincent Reinhart Says)

"No one believes the economy, Obama or not, is going to improve," my Breakout colleague Jeff Macke says in the accompanying clip. "Time [is] the only thing that heals."


  • Video: Obama: Boehner walking from ‘extraordinarily fair’ debt deal
    July 22: President Obama addresses the current state of US debt talks by announcing that House Speaker John Boehner has withdrawn from the negotiations. During the statement, Obama makes a strong challenge to Boehner to come up with a solution to avoid US defaults on owed debts. (NBC News)President Obama addresses the current state of US debt talks by announcing that House Speaker John Boehner has withdrawn from the negotiations. During the statement, Obama makes a strong challenge to Boehner to come up with a solution to avoid US defaults on owed debts. (NBC News)
  • Video: Boehner: Obama’s late tax adds stalled debt deal
    July 22: House Speaker John Boehner addresses the current state of the US debt talks and responds to criticism voiced by President Obama. (NBC News)House Speaker John Boehner addresses the current state of the US debt talks and responds to criticism voiced by President Obama. (NBC News)
  • Video: US economy a likely casualty in GOP war on reality
    July 21: Congressman Barney Frank, ranking member of the House Financial Services Committee, talks with Rachel Maddow about the economic repercussions if Republicans force the country into default by not allowing the debt ceiling to be raised.  (msnbc.com)Congressman Barney Frank, ranking member of the House Financial Services Committee, talks with Rachel Maddow about the economic repercussions if Republicans force the country into default by not allowing the debt ceiling to be raised. (The Rachel Maddow Show)


What do you think?
Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @atask or email him at altask@yahoo.com


I think the Republicans are unfit because they are UNWILLING to govern.

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