Stuart Varney on Fox this morning says this unemployment report is strong. The 243,000 jobs created – a surprise, more than expected. An additional 60,000 jobs, unreported, were created in December. I smell books cooking. Varney says the Dow should be up 100 points when the market opens today. (UPDATE: the Dow is down 11 pts as I post. Oops: 9:28 pm Dow up 141). The cheeky Obamas are planning another $50,000 lingerie-shopping-spree to celebrate. This knocks the noise of yesterday’s devastating CBO report to the curb. Who cares. Right? Read on.
UPDATE INSIGHT 9:30 am CDT: Record 1.2M drop out of the labor force – IN ONE MONTH.Â So, with the Bureau of Labor Statistics planning to exclude nearly half of the labor force, wah la, Obama looks good.
A month ago, we joked when we said that for Obama to get the unemployment rate to negative by election time, all he has to do is to crush the labor force participation rate to about 55%. Looks like the good folks at the BLS heard us: it appears that the people not in the labor force exploded by anunprecedented record 1.2 million. No, that’s not a typo:Â 1.2 million people dropped out of the labor force in one month! So as the labor force increased from 153.9 million to 154.4 million, the non institutional population increased by 242.3 million meaning, those not in the labor force surged from 86.7 million to 87.9 million.Â Which means that the civilian labor force tumbled to a fresh 30 year low of 63.7% as the BLS is seriously planning on eliminating nearly half of the available labor pool from the unemployment calculation.
Yesterday,Â Jim Vandehei at Politico said some at Politico have been told on “background,” by Obama advisers, if the unemployment rate in the third quarter of 2012 is 8.5%, it will be impossible for him to win the Oval Office in November.
Nice. Today the number has dropped to 8.3% from 8.8%.
The CBO report outlook, as depressing as it was, reported a decrease in annual budget deficits. Here’s the rest of the story.
How will this miracle occur?Â According to current law, which is the only guide that the CBO can use, the Bush-eraÂ tax rates will expire across the board, and the Alternative Minimum Tax will not be restrained from reaching far into the middle class.
The latter change will increase the number of American households subject to the AMT from four million in tax year 2011 toÂ thirty millionÂ in tax year 2012.
If readers can imagine any Congress subjecting middle-class voters to that kind of a tax shock in a single year, then this will sound like very good news indeed. Otherwise, this is an exercise in irony…
…the automatic cuts passed in last yearâ€™s Budget Control Act would only deduct $105 billion from the deficit in 2015, while keeping the AMT and rate changes would add $395 billion to the federal governmentâ€™s coffers.
By 2020, the BCAâ€™s budget cuts only reduce the annual deficit by $137 billion, while the extra taxes add $685 billion to the kitty.
However, if Congress indexes the AMT as expected and extends the 2001/3 tax rates, the deficit picture looks bleak indeed.Â It would get only as low as $664 billion in 2015 before nearing a trillion dollars again in 2020, and exceeding it by 2022, even with the minimal cuts in place…
What happens to the economy if Congress allows these massive tax increases to take place?Â The CBO expects the economy to grow at a 2.0 percent rate in 2012, about the same stagnation rate we have seen for the past two years.
In 2013, though, with the capital sucked out of the market, the economy will slow even further to 1.1 percent, and for the economy to remain below its potential â€“ until 2018.Â Taxpayers and investors will lose ground on taxes and economic opportunity while Washington does nothing to curb spending â€“ the real driver of these deficits.
This is the result of Obamanomics, the result of out-of-control spending fromÂ bothparties, and the reason thatÂ actualÂ spending cuts â€” not just a reduction in the rate of spending growth â€” needs to be the central economic argument in this yearâ€™s election.Â Republicans need to start charting these numbers in digestible form now and start hammering them all the way to the general election no matter who wins the nomination, and activists have to focus on Senate and House races more than ever.