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Economy, Markets

Gregory Rowe follows stock prices at the New York Stock Exchange, Wednesday, Dec. 21, 2016, in New York. The Dow is close to the 20,000 mark. (Photo: AP)

Gregory Rowe follows stock prices at the New York Stock Exchange, Wednesday, Dec. 21, 2016, in New York. The Dow is close to the 20,000 mark. (Photo: AP)

The Dow Jones Industrial Average (INDEXDJX:.DJI) closed above 20000 for the first time ever in history, a response to the proposals and actions by President Donald J. Trump. Wall Street’s so-called fear gauge fell to its lowest level in roughly two-and-a-half years, another milestone indicating widespread investor confidence in the markets and policies of the new administration.

After opening at 19,994.48, the Dow closed up 155.80, or 0.78% to 20,068.51. The NASDAQ Composite (INDEXNASDAQ:.IXIC) also gained 55.38, or 0.99% to close at at 5,656.34. S&P 500 (INDEXSP:.INX) increased 18.30, or 0.80% to 2,298.37.

The markets have reacted favorably to President Trump showing he is serious about fulfilling campaign promises of lower taxes, less regulation, and more fiscal spending. After a breakfast with business leaders on Monday, he said they are aiming to reduce burdensome regulations by 75%.

On Wednesday, the CBOE Volatility Index (INDEXCBOE:VIX), otherwise known as the VIX, fell to 10.61. That’s lower than its average of around 12. An increase in the VIX, which gauges expected market volatility over the next 30 days, indicates investors are expecting a higher level of risk in the market, while a move lower suggests lower expected risk.

The Dow crossed the historical milestone just 64 days after crossing the 19000 threshold for the first time ever, a reaction to President Trump’s surprise victory over Hillary Clinton. It was flirting with 20,000 for weeks and came within a fraction of a point on January 6 before pulling back. Throughout the rally, materials and financials have been key to the bull surge.

They continued that run after President Trump on Tuesday signed an executive order green lighting the construction of the Keystone XL and Dakota Access pipelines.

But even as President Trump begins to win over the country and investors, the latter of which supported his rival during the election, the media continues to naysay. On Tuesday, just one day before the Dow crossed 20,000, the headlines were bleak.

Here’s Why Dow 20K Won’t Happen Any Time Soon

This Dow Jones Industrial Average (DJIA) Chart Says Stocks Have Already Peaked

Analyst: Trump Rally Is Over, Stocks Could Fall 25%

The headlines were reminiscent of the dire prediction made by New York Times economist Paul Krugman, who claimed the markets would “never” recover if President Trump was elected.

The Dow Jones Industrial Average (INDEXDJX:.DJI) closed

Policy

Copies of President Barack Obama’s proposed 2016 budget are displayed for sale at the Government Printing Office in Washington, D.C. (Photo: Reuters)

Copies of President Barack Obama’s proposed 2016 budget are displayed for sale at the Government Printing Office in Washington, D.C. (Photo: Reuters)

The Congressional Budget Office (CBO), as part of The Budget and Economic Outlook: 2017 to 2027, has just released fiscal projections for the next 10 years.

This happens twice every year. As part of this biannual exercise, I regularly (most recently here and here) dig through the data and highlight the most relevant numbers.

Let’s repeat that process. Here’s what you need to know from CBO’s new report.

  • Under current law, tax revenues over the next 10 years are projected to grow by an average of 4.2 percent each year.
  • If left on autopilot, the burden of government spending will rise by an average of 5.2 percent each year.
  • If that happens, the federal budget will consume 23.4 percent of economic output in 2027 compared to 20.7 percent of GDP in 2017.
  • Under that do-nothing scenario, the budget deficits jumps to $1.4 trillion by 2027.

But what happens if there is a modest bit of spending restraint? What if politicians decide to comply with my Golden Rule and limit how fast the budget grows every year?

This shouldn’t be too difficult. After all, even with Obama in the White House, there was a de facto spending freeze between 2009-2014. In other words, all the fights over debt limits, sequesters, and shutdowns actually yielded good results.

Obama-Spending-GDP

Federal Spending from start of Obama administration to the present. (Source: Dan Mitchell)

So if the Republicans who now control Washington are serious about protecting the interests of taxpayers, it should be relatively simple for them to adopt good fiscal policy.

And if GOPers actually decide to do the right thing, the grim numbers in the CBO’s new report quickly turn positive.

  • If spending is frozen at 2017 levels, there’s a budget surplus by 2021.
  • If spending is allowed to grow 1 percent annually, there’s a budget surplus by 2022.
  • If spending is allowed to grow 2 percent annually, there’s a budget surplus by 2025.
  • If spending is allowed to grow 2.63 percent annually, the budget is balanced in 10 years.
  • With 2.63 percent spending growth, the burden of government spending drops to 18.4 percent of GDP by 2027.

To put all these numbers in context, inflation is supposed to average about 2 percent annually over the next decade.

Here’s a chart showing the overall fiscal impact of modest spending restraint.

By the way, it’s worth pointing out that the primary objective of good fiscal policyshould be reducing the burden of government spending, not balancing the budget. However, if you address the disease of excessive spending, you automatically eliminate the symptom of red ink.

For more background information, here’s a video I narrated on this topic. It was released in 2010, so the numbers have changed, but the analysis is still spot on.

The Congressional Budget Office (CBO), as part

Opinion

Having lived in the Washington area for more than three decades, I have many friends who work for the federal government. Most of them will privately admit that they are very lucky since federal salaries and benefits are considerably higher than what they could earn in the private sector. And they’ll also admit that there’s lots of featherbedding, inefficiency, and waste where they work.

While I like my buddies, I don’t think it’s fair that taxpayers around the nation (particularly those with modest incomes) are sending so much money to Washington to subsidize overly generous compensation packages for a bloated federal bureaucracy.

So I’m pleased that President Trump announced a hiring freeze.

President Trump on Monday ordered an across-the-board employment freeze for the federal government, halting hiring for all new and existing positions except those in national security, public safety and the military. In the two-page order, Mr. Trump said the directive was a stopgap way to control the growth of government until his budget director recommends a long-term plan to significantly reduce the federal work force through attrition.

But keep in mind this is just a tiny step in the right direction.

First, it only addresses part of the problem.

For instance, most bureaucrats are at the state and local level, often carrying out mandates, regulations, and spending of the federal government.

The Wall Street Journal put together a good summary of the situation back in 2014.

When you include state and local governments, it’s clear where the public civilian workforce has been growing in recent decades. Local governments, in particular, have boomed from 4 million employees in the 1950s to over 14 million today. In the mid-1950s, state governments employed half as many people as the federal government. Today, state governments employ nearly twice as many.

Here’s the accompanying chart.

Moreover, federal employment numbers don’t include the gigantic “shadow bureaucracy” of government contractors.

And exactly how many people are technically private employees but actually get their pay from federal taxpayers? Well, because the federal government is so big and bloated, we don’t have an exact number.

Indeed, as reported by Government Executive, there’s not even an official inexact number.

How many contractor employees does the federal government rely on, at what cost per person, and how does that compare with the cost of assigning the same task to a full-time hire? When asked by Rep. Chris Van Hollen, D-Md., ranking member of the House Budget Committee, the Congressional Budget Office took a shot but left the $64,000 question unresolved. “Regrettably, CBO is unaware of any comprehensive information about the size of the federal government’s contracted workforce,” the nonpartisan analysts wrote in response. “However, using a database of federal contracts, CBO determined that federal agencies spent over $500 billion for contracted products and services in 2012.”

But we do know that it’s a very big number. An outside expert crunched the dataand concluded that there are 5-1/2 contractors for every federal bureaucrat.

Second, the real issue is that the federal government has accumulated far too much power and is involved in many areas that either belong in the private sector (Department of Agriculture, Department of Energy, Department of Housing and Urban Development, etc) or should be handled by state and local governments (Department of Transportation, Department of Education, etc).

In other words, as I explain at the end of this video, the correct pay for many federal bureaucrats is zero, for the simple reason that their jobs shouldn’t exist.

This is why I explained a few days ago that the real goal for the Trump Administration should be program terminations. The new hiring freeze is good, to be sure, but it’s largely a symbolic gesture.

And that’s not going to solve our very big problem.

P.S. Though the problem is even bigger in Europe.

P.P.S. A study from the European Central Bank found that excessive pay for bureaucrats undermines entire economies by breaking the link between compensation and productivity.

 

I’m pleased that President Donald J. Trump

Polls

US President Donald Trump hosts a meeting with business leaders in the Roosevelt Room of the White House in Washington on Monday January 23, 2017. (Photo: Reuters)

US President Donald Trump hosts a meeting with business leaders in the Roosevelt Room of the White House in Washington on Monday January 23, 2017. (Photo: Reuters)

The U.S. Economic Confidence Index conducted by Gallup is the highest ever measured the week after the inauguration of President Donald J. Trump. The index reached +13 for the week ending Jan. 22, the highest ever in Gallup tracking and the weekly average is higher than it has been since the Great Recession.

“Gallup’s U.S. Economic Confidence Index is the average of two components: how Americans rate current economic conditions and whether they feel the economy is improving or getting worse,” Gallup’s Justin McCarthy explains. “The index has a theoretical maximum of +100 if all Americans were to say the economy is doing well and improving, and a theoretical minimum of -100 if all Americans were to say the economy is doing poorly and getting worse.”

The Gallup U.S. Daily survey conducted a random sample of 3,044 adults and found the current conditions and economic outlook components both reached new highs last week.

Gallup US Economic Confidence Index

Thirty-three (33%) percent of Americans rated the economy as “excellent” or “good,” and 21% rated it as “poor.” The economic outlook score was +13, based on 53% of Americans saying economic conditions in the country were “getting better,” and 40% saying they were “getting worse.”

SURVEY METHODS

Results for this Gallup poll are based on telephone interviews conducted Jan. 16-22, 2017, on the Gallup U.S. Daily survey, with a random sample of 3,044 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia. For results based on the total sample of national adults, the margin of sampling error is ±2 percentage points at the 95% confidence level. All reported margins of sampling error include computed design effects for weighting.

Each sample of national adults includes a minimum quota of 70% cellphone respondents and 30% landline respondents, with additional minimum quotas by time zone within region. Landline and cellular telephone numbers are selected using random-digit-dial methods.

The U.S. Economic Confidence Index conducted by

Economy, Markets

Trader Peter Tuchman wears his "Dow Almost 20,000" cap as he works on the floor of the New York Stock Exchange, Thursday, Dec. 15, 2016. Stocks are opening moderately higher on Wall Street and the dollar is making more gains against other currencies a day after the Federal Reserve raised its benchmark interest rate. (Photo: AP)

Trader Peter Tuchman wears his “Dow Almost 20,000” cap as he works on the floor of the New York Stock Exchange, Thursday, Dec. 15, 2016. Stocks are opening moderately higher on Wall Street and the dollar is making more gains against other currencies a day after the Federal Reserve raised its benchmark interest rate. (Photo: AP)

The Dow Jones Industrial Average (INDEXDJX:.DJI) breached 20,000 for the first time ever in history, continuing the post-election rally in response to Donald Trump. The Dow opened slightly under the historical mark at 19,994.48 before quickly breaching.

As of 9:40 AM EST, the Dow gained 97.38, or 0.49% to 20,010.09.

The markets have reacted favorably to President Trump showing he is serious about fulfilling campaign promises of lower taxes, less regulation, and more fiscal spending. After a breakfast with business leaders on Monday, he said they are aiming to reduce burdensome regulations by 75%.

U.S. President-elect Donald Trump is seen speaking on a television on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016. U.S. stocks fluctuated in volatile trading in the aftermath of Trump's surprise presidential election win, as speculation the Republican will pursue business-friendly policies offset some of the broader uncertainty surrounding his ascent. Photographer: Michael Nagle/Bloomberg

U.S. President-elect Donald Trump is seen speaking on a television on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Wednesday, Nov. 9, 2016. U.S. stocks fluctuated in volatile trading in the aftermath of Trump’s surprise presidential election win, as speculation the Republican will pursue business-friendly policies offset some of the broader uncertainty surrounding his ascent. Photographer: Michael Nagle/Bloomberg

The Dow crossed the historical milestone just 64 days after crossing the 19000 threshold for the first time ever. It was flirting with 20,000 for weeks and came within a fraction of a point on January 6, but pulled back. Throughout the rally, materials and financials have been key and continued their surge after President Trump on Tuesday signed an executive order green lighting the construction of the Keystone XL and Dakota Access pipelines.

But even as President Trump begins to win over the country and investors, the latter of which supported his rival during the election, the media continues to naysay. On Tuesday, just one day before the Dow crossed 20,000, the headlines were bleak.

Here’s Why Dow 20K Won’t Happen Any Time Soon

This Dow Jones Industrial Average (DJIA) Chart Says Stocks Have Already Peaked

Analyst: Trump Rally Is Over, Stocks Could Fall 25%

The headlines were reminiscent of the dire prediction made by New York Times economist Paul Krugman, who claimed the markets would “never” recover if President Trump was elected.

The Dow Jones Industrial Average (INDEXDJX:.DJI) breached

Politics

President-elect Donald J. Trump holds a rally in Cincinnati, Ohio on October 13, 2016.

President-elect Donald J. Trump holds a rally in Cincinnati, Ohio on October 13, 2016.

President Donald J. Trump said he will call for a major investigation into voter fraud, including non-citizens, dead people voting and multiple state voting. The president made the announcement on Twitter Wednesday morning after a report by the Associated Press quoted him as saying he believed illegal voting may have cost him the popular vote.

While the media mocks the notion, with CNN’s Jake Tapper calling it “unsubstantiated,” polls show the vast majority of Americans agree with President Trump. Further, the actual academic research, including ongoing research at People’s Pundit Daily, does in fact indicate significant voter fraud.

For example, a joint study conducted by the Department of Political Science at Old Dominion University and George Washington University found non-citizen voting alone was enough to give Democrats the necessary number of Senate seats to pass ObamaCare and for Barack Obama to carry North Carolina in 2008.

We find that some non-citizens participate in U.S. elections, and that this participation has been large enough to change meaningful election outcomes including Electoral College votes, and Congressional elections. Non-citizen votes likely gave Senate Democrats the pivotal 60th vote needed to overcome filibusters in order to pass health care reform and other Obama administration priorities in the 111th Congress.

Research conducted by People’s Pundit Daily shows non-citizen voting in 2016 was up at least 30% since the study was conducted.

President Donald J. Trump said he will

Politics

obama-keystone-xl-pipeline

Pipeline stretch in Cushing, Oklahoma, left, and President Obama, right, who has threatened to veto the popular and approved Keystone XL pipeline.

President Donald J. Trump Tuesday effectively reversed his predecessor’s rejection of the Keystone XL pipeline and the Dakota Access pipeline. Keystone would bring in oil from Canada’s tar sands through Montana, South Dakota and Nebraska, then connect with existing pipelines to carry more than 800,000 barrels a day to refineries along the Texas Gulf Coast.

“Today’s executive orders affirm President Trump’s respect for the rule of law and his support for responsible infrastructure development, energy production and job creation,” Rep. Kevin Cramer, R-N.D., said.

In 2015, former President Barack Obama vetoed the bipartisan Keystone Jobs bill, marking his first veto of the Republican-led Congress and only the third of his presidency. TransCanada, the Alberta-based company that applied for permits to build the Keystone XL pipeline, filed a federal lawsuit in response at the beginning of 2016. The Canadian company claimed the White House arbitrarily, illegally and unconstitutionally rejected the project after multiple reviews gave the green light.

Republican House Speaker Paul Ryan, R-Wis., released a statement praising the decision, saying “It’s about time.”

“Thanks to President Trump’s executive order, the Keystone pipeline and the Dakota Access pipeline can finally be built. It’s about time,” Speaker Ryan said. “The unfortunate reality is that these important infrastructure projects were used by special interests to advance their radical anti-energy agenda and were therefore needlessly halted by the last administration—to the detriment of America’s national interest.”

President Trump said both the pipeline projects would be subject to a “renegotiation of the terms” and, though he is environmentally sensitive, he made clear his administration would not pass up a potential job boon.

“We’re going to put a lot of steel workers back to work,” President Trump said. “We’ll build our own pipelines, we will build our own pipes.”

Of the three executive orders the president signed related to pipeline construction projects, one aimed to expedite the environmental permitting process for infrastructure projects and another directed the Commerce Department to maximize the use of U.S. steel.

According to multiple State Department reviews under both Hillary Clinton and John Kerry, the Keystone pipeline would’ve actually benefited the environment by reducing the amount of emissions from transporting oil via rail and other methods currently in place. Further, the resources would’ve gone to foreign nations such as China, which have far more lax emission standards.

Americans overwhelmingly support construction of the Keystone XL pipeline, including a majority of Democrats (53%), over two-thirds of independents (68%) and nearly 9 in 10 Republicans (88%). According to a recent poll, 69% support the pipeline outright, up from 65% measured last year. However, 72% support its construction when respondents are told of the Obama administration’s own findings.

President Donald J. Trump Tuesday effectively reversed

Politics

FBI-Director-James-Comey-AP

FBI Director James Comey discusses race and law enforcement, Thursday, Feb. 12, 2015, at Georgetown University in Washington. (AP Photo)

James Comey will remain the director of the Federal Bureau of Investigation (FBI) under President Donald J. Trump, the administration confirmed Tuesday. He’s currently serving a 10-year term that expires in 2023.

Director Comey came under fire from both Republicans and Democrats during the 2016 presidential election, albeit at different times.

After running down a litany of felonies and misdemeanors at an unprecedented press statement, he refused to recommend charges against Democratic candidate Hillary Clinton. The former secretary of state mishandled classified information and maintained an illegal private server in her home used to conduct official State Department business. But she lied to the American public, not the FBI.

Meanwhile, despite Director Comey the Sunday before the presidential election announcing the re-opened investigation was complete and again she would be been cleared of all charges, Mrs. Clinton, Democrats and campaign staffers all blamed him for the loss.

[caption id="attachment_40324" align="aligncenter" width="740"] FBI Director James

Politics

http://www.peoplespunditdaily.com/wp-content/uploads/2015/11/Obama-Biden-Kerry-Keystone

President Barack Obama talks with Vice President Joe Biden and Secretary of State John Kerry in the hallway outside the Oval Office prior to entering the Roosevelt Room to announce the administration’s rejection of the Keystone XL pipeline, Nov. 6, 2015. (Official White House Photo by Pete Souza)

In his final hours in office, President Barack Obama quietly gave $221 million to the Palestinian Authority, which Republican lawmakers previously blocked. The move came after the Obama administration organized and indirectly allowed the U.N. Security Council to pass a resolution condemning Israeli settlements last month.

Prime Minister Benjamin Netanyahu described the U.S. decision as an “ambush,” and the Israeli government now looks to repair badly damaged relations with the U.S. under the new administration. Now, the latest move is likely to draw more bipartisan condemnation, as the Palestinian Authority is the politically-allied wing of Hamas, which is designated a terror organization by the U.S. State Department.

According to The Associated Press, a State Department official and multiple congressional aides said the Obama administration only formally notified Congress it would spend the money Friday morning, just before the inauguration.

The official said former Secretary of State John Kerry had informed some lawmakers of the move shortly before he left the State Department for the last time Thursday, and written notification dated Jan. 20 was sent to Congress.

That was only hours before President Donald J. Trump took the oath of office, just as Mr. Obama welcomed him to the White House for tea.

Further, on top of the $221 million for the Palestinians, the Obama administration also told Congress Friday it was going ahead with the release of another $6 million in foreign affairs spending, including $4 million for climate change programs and $1.25 million for U.N. organizations.

In his final hours in office, President

Politics

Former Exxon Mobil CEO Rex Tillerson testifies during his Senate confirmation hearing. (Photo: Reuters)

Former Exxon Mobil CEO Rex Tillerson testifies during his Senate confirmation hearing. (Photo: Reuters)

Sen. Marco Rubio, R-Fla., the final remaining holdout in the president’s party, announced on Monday he will vote to confirm Rex Tillerson as secretary of state. In a statement posted to social media, the hawkish two-term senator said he still had concerns but “the president is entitled to significant deference when it comes to his choices for the cabinet.”

“Given the uncertainty that exists both at home and abroad about the direction of our foreign policy, it would be against our national interests to have this confirmation unnecessarily delayed or embroiled in controversy,” Sen. Rubio said. “Therefore, despite my reservations, I will support Mr. Tillerson’s nomination in committee and in the full Senate.”

Sen. Rubio wasn’t the only Republican hawk concerned about Mr. Tillerson’s clear preference for objective realism over neoconservative intervention. Sen. John McCain, R-Ari., and Sen. Lindsey Graham, R-S.C., also expressed reservations about President Donald J. Trump’s pick for the State Department. Democrats and a few Republican senators wanted assurances Mr. Tillerson, given his history with Moscow, would not be soft on Russian President Vladimir Putin.

In 2013, Mr. Putin bestowed the Order of Friendship on Mr. Tillerson, a native of Wichita Falls, Texas. Mr. Tillerson began at Exxon Mobil as a production engineer out of the University of Texas at Austin in 1975 and went on to succeed former CEO Lee Raymond. Under his leadership, Exxon Mobil’s profits helped to make it the most valuable publicly traded company in the world.

However, over the weekend, both Sens. McCain and Graham made clear they would support the former Exxon Mobil CEO, leaving only Mr. Rubio as the remaining holdout.

Rubio said he “must balance these concerns with his extensive experience and success in international commerce.”

Mr. Tillerson’s experience is certainly not confined to Big Oil. He served as director of the United Negro College Fund and the National President of the Boy Scouts of America. The former Eagle Scout also served as chairman of the American Petroleum Institute. He first popped up on President-elect Trump’s radar in November after conversations with former Secretary of Defense Robert Gates and Secretary of State Condoleezza Rice, both of whom said they would highly recommend Mr. Tillerson for the post.

Sen. Marco Rubio, R-Fla., announced on Monday

People's Pundit Daily
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