By Eldon Mast, on November 22nd, 2010
You may remember our famous chart that predicted the bottom for the bear market of 2007, 2008 and 2009 and then predicted the ensuing bull market to follow.
The methodology was simple. Compare a stock chart from the bear market of 1973 and 1974 with that of recent bear trends of 2008 and 2009.
The downward similarities were so striking that one would be led to believe that what happened next in the market in 1975 and 1976 would be a good prediction for what would happen in 2009 and 2010…
And what a prediction it has turned out to be. We published the chart three (3) days prior to bottom of the bear. We joked that we had no idea what would happen next and then showed the chart for the bull run of 1975 and 1976.
Since that chart was published, the graph has turned out to be the most visited page every day on The Good News Economist blog from that day back in March of 2009 until the present day!
So what did actually happen? Here you go… Look familiar?
Any guesses on what the 2011 chart might look like? (Hint: Take a peek at 1977)
Charts Source: Google Finance
By Emmanuel Tabones, on November 22nd, 2010
In his New York Times article (October 17, 2010) on the general impact of deflation on Japan, Martin Flacker spoke of “economists who portend that this represents a dark vision of the future.” Indeed, in a speech back in August 27, 2010, America’s most powerful economist, Ben Bernanke forcefully said that “The Federal Open Market Committee will strongly resist deviations from price stability in the downward direction,” as noted by Greg Robb, at the WSJ’s marketwatch.com.
In fact, just last month, Chairman Ben made noises about the Consumer Price Index being too low, and getting considerable flack for that, what with reports of rising commodity prices, which are normally associated with inflation. Bill Bonner at DailyReckoning.com, sarcastically noted that “Bernanke is ‘right’….Prices for people who neither eat, nor travel, nor heat their houses, are flat.” Adding further fuel to the fire, Bonner’s colleague Chris Mayer recently reeled off some revealing inflationary statistics courtesy of the Wall Street Journal:
“Corn is up 44 percent, milk is up 6.5 percent, hot rolled coiled steel is up 4 percent, copper is up 29 percent, and oil is up 14 percent from a year ago.”
And we are also back to paying over three dollars a gallon for gas, and gold is way above USD $1,300 an ounce. To quote Mayer, “One day, the Fed will wish inflation were only 2 percent,”
Other economic indicators reflect this dire picture, according to Eric Fry, also at DailyReckoning.com, who came up with U.S. inflation numbers way above 8 percent (courtesy of ShadowStats.com). In other words, the “monster” has already entered the building.
Bernanke instituted QE2 in part to curb the likelihood of deflation, even though to critics, it is becoming increasing clear that he may be preparing for the wrong battle. For many, it might look like the “barbarians of inflation” are inside the castle walls, but Emperor Ben has his back turned, fending off the “imaginary dragon of deflation.”
Now, perhaps that is a little bit of an exaggeration, for deflation remains a possibility, although a remote one, a fact which even Bernanke had acknowledged, before. Echoing that view, Jens Christensen, a senior economist at the Federal Reserve Bank in San Francisco, wrote in a FRBSF economic letter published in October 25, 2010:
“The recent economic slowdown has raised concerns about the possibility of sustained deflation in the years ahead. However, a refined model of inflation-indexed and non-indexed Treasury bond yields, which captures accurately the possible inflation outcomes perceived by bond investors, suggests that the probability of sustained deflation is just 5.3%. The model accounts accurately for the behavior of inflation-protected Treasury bond yields during the financial crisis and could prove reliable in evaluating deflation risk.”
So according to another leading Fed economist, the chance of sustained deflation is under six percent. I’m very sure most folks can live with that.
Meanwhile, on the other side of the world, the Chinese are grappling with the “beast” of inflation (NY Times, November 10, 2010), and that, my friends, is what Americans should really be concerned about, for it is already here, among us, regardless of the Fed’s CPI figures. And for those still wondering, QE2 should NOT be the weapon of choice.
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By Ajay Shah, on November 19th, 2010
What is a government to do when a company faces a near-death situation? In almost all cases, the right answer is to let the company go under: It is not the job of a government to prevent companies from dying. Indeed, creative destruction is central to the proper functioning of capitalism. Capitalism without failure is socialism for the rich.
But sometimes, the cost-benefit ratios can look startling. Sometimes, the disruption to the economy that comes from the death of a company can be rather large. Let’s look at three stories.
Three examples
GM: In July 2009, the US government chose to put $50 billion into the auto maker General Motors (GM) as part of a complex rescue, which included wiping out the existing shareholders and embarking on a complex restructuring of the firm. The old GM died there. GM got back to profitability this year. Seventeen months later, on 17 November, GM got back on its feet with an IPO which raised $23.1 billion. How impressive! See this story by Michael J. de la Merced and Bill Vlasic in the New York Times. This IPO was at $33. With this IPO, the US Treasury got down from 61% ownership to 26% ownership, so this IPO was the re-privatisation of GM. From here, if the US Treasury is able to sell its remaining 0.5 billion shares at $53 a share in the future, it will fully recoup the $50 billion that went into the rescue (ignoring time value of money).
Satyam: On 7 January 2009, Satyam announced that a lot of money was missing from their balance sheet. In the aftermath of this crisis, the government put Deepak Parekh, Kiran Karnik, Tarun Das, and three others in charge. Read this interview of Deepak Parekh with Tamal Bandyopadhyay in Mint, and this blog post by John Elliott. The new board put the firm up for sale. It was bought by Tech Mahindra. A collapse of the firm was averted; the employees and customers largely stayed in place.
UTI: When UTI got into trouble, I was opposed to government intervention. But by and large, I think the intervention worked well. US-64 unitholders did suffer losses: half of the gap between the NAV and market value was paid by the unitholders and half by the government. And the follow-through was excellent. The staff quality that MoF was able to muster on the problem was outstanding. The UTI Act was repealed, and UTI was turned into an ordinary company. `Bad UTI’ was separated out by `Good UTI’. The ownership was modified including the recent work of bringing in T. Rowe Price as a shareholder. All in all, the exchequer did well when selling off the shares in SUUTI. Privatisation hasn’t yet come about, but where we are is progress.
When is it right for a government to go in?
Should the US government have gone into GM? There was a fair amount of criticism of the Obama administration for the decision. There was concern that they were doing this owing to pressure from trade unions. But the outcomes have been quite nice, so (at least ex post) it looks like a good call.
In the case of Satyam, the existing shareholders were not expropriated. It can be argued that the failure of the firm was not their fault. But by that argument, many firm failures in India in the future will justify government intervention since most public shareholders are fairly powerless when the inside shareholders have over 50% shares. In his interview, Deepak Parekh says Had it happened to a consumer finance company or a small, or even big, manufacturing company, the government would not have come out and superseded the board. The normal procedures for bankruptcy and liquidation would have taken place.. I am not sure how the future will work out.
The problem of execution capability
Satyam, GM and UTI are success stories in that the government packed a mean punch in the execution. In particular, in Satyam’s
case, I had simply not expected that such a nice outcome could be achieved by the government. We should really admire the teams that worked on these problems.
But can we count on such high quality execution on such problems in the future? Our success in the Satyam or UTI stories should not be generalised to the view that in the future such high quality execution will always come about.
The exit strategy
The really amazing feature of the GM story is the clarity and commitment of the government in getting out of `Government Motors’
by doing a privatisation just 17 months after going in. All too often, government interventions turn into nationalisation and then
you’re stuck with a public sector company for a long time, with all the usual politics of the privatisation.
In the deep past, numerous weak companies have been nationalised in the decades of Indian socialism (e.g. National Textile Company) and generally the outcomes have been bad.
A particularly attractive feature of the Satyam story is that no government money was involved. The presence of government money
makes things much harder. In India, all too often, it’s easy to ask for government money and it’s easy to get it. And if the government
had got shares in Satyam, it’s not easy to see how they would have got out of it.
Similarly, a nice feature of the UTI story is that in the end, the UTI Act was repealed, and UTI is on course for turning into a
normal financial firm. Government intervention in the rescue did not yield an ossified PSU.
At the same time, while Satyam and UTI are good stories in terms of the exit path, we cannot generalise too much from this given the fact that GOI is at a standstill on privatisation. In general, we have to assume that what is purchased is never sold, which puts a crimp on a vast array of situations where government intervention might be evaluated.
To summarise
When most firms approach death, the decent thing to do is to let the firm die. We must rejoice in the extent to which Indian capitalism is able to bring about a steady pace of firm death. Building a good quality bankruptcy mechanism will increase the class of firms where resolution is handled in a routine and humdrum way, without the possibility of a special intervention. (Note that going through the bankruptcy process was an integral part of the GM story).
When a potential intervention situation arises, six questions need to be asked:
- Are the negative externalities of firm death really that onerous?
- Can government intervention be envisaged without requiring money?
- Are the Union ministers involved in the problem known for being smart and clean?
- Can a top quality team be put together which will work on a time-bound project starting from intervention until exit? Does this
team combine competence with cleanness?
- Do we see an exit strategy through which, within a short time, the firm will be fully out of government hands?
- Are we very sure that in the end, we will endup imposing no costs upon the government?
Ex post, these questions worked out well for GM, UTI and Satyam.
By Claus Vistesen, on November 19th, 2010
 The Eurozone seems to be the place where the party never ends these days as one skeleton after the other comes rattling out of the closet. Indeed, one has the impression that history is in the making these days and the only thing we can hope is that it will be for the better.
In truth however, I felt a good measure of sympathy for Ireland today as I read the Bloomberg report about how the country is now essentially on its way to accepting a deal that will have aid delivered from the EU, the IMF and, most painfully, from England.
Irish rebels fought for independence during World War I, boasting they served “neither King nor Kaiser.” Ireland may now have to do exactly that to qualify for a bailout partly funded by both Britain and Germany. Prime Minister Brian Cowen is edging toward accepting a rescue package that may threaten the country’s low-tax policies and put voters on the hook to repay loans the central bank says may be worth “tens of billions” of euros. For critics of Cowen’s Fianna Fail party, which governed Ireland through its decade-long boom, national pride is at stake. Cowen has “squandered” independence for a “German bailout with a few shillings of sympathy from the British chancellor,” the Irish Times newspaper said yesterday. The government should be “ashamed that Fianna Fail should be the ones to surrender sovereignty,” said Michael Noonan, finance spokesman for Fine Gael, the largest opposition party.
However, Ireland largely made the mistakes itself of which the biggest no doubt was to guarantee its banking system and essentially gamble that a) the economy could swallow the liabilities of its broken banks (which with a deficit of 32% of GDP in 2010 it obviously can’t) and b) that help could be reached elsewhere.
Iza’s report yesterday over at FT Alphaville about just how much European governments have promised during the past 2 years makes an extraordinarily important point and it well worth reading in its entirety;
As all eyes focus on what should be done about the Irish banking crisis, perhaps it’s time for the European Union, IMF and other related parties to take a closer look at some of the factors that may have exacerbated the problem. After all, it’s now becoming abundantly clear that the dishing out of an elaborate 100 per cent deposit guarantee back in September 2008 was largely nothing more than a massive bluff designed to steal attract deposit flows from neighbouring states to for the purpose of propping up Irish banks. Furthermore, as we’ve mentioned already, the EFSF is already turning out to resemble something like Paulson’s bazooka in its own right too. Which means — with everything becoming a high-stakes game of ‘Call my bluff‘ — it could be time to restrict the ability of sovereigns generally to randomly guarantee things they clearly can’t afford to guarantee in the first place. (If confidence in the Eurozone is to be restored properly that is.) After all, let’s just look at the dynamics of the Irish deposit guarantee itself.
So, this is about a deposit guarantees which if course is one of those guarantees a government never really can make due on in the case of the ultimate rout à l’End of Days. Yet, the point has general validity far beyond the issue of deposit guarantees. Basically, Ireland promised to make due for its banks … now that it appear that she can’t, it is up to the rest of the Eurozone to pay.
No doubt this view is shared in principle as well as sentiment by the prowling Proell from Austria who recently fired two stray missiles into the raging debate on how best to deal with the issue of solidarity in the Eurozone. Earlier in the week, he raised serious questions about whether Austria would make due on its promist to spit into the common funding scheme for Greece now that it was obvious that the country was missing its budget target yet again and most recently, he said to Bloomberg reporters that he was very interested in talking with Ireland about its famously low corporate tax rate in connection with the bailout.
You know, quid pro quo and all that.
Now, before we get into the blame game I should note that I agree with the Economist in their most recent take on the Eurozone mess in which they implicitly highlight that while timing is always difficult in politics there is still a continuum between good and bad and Merkel’s sudden urge to remind bondholders that they too might take a loss falls in the latter category.
At an EU summit at the end of October the German chancellor won agreement that any future euro-zone rescue scheme should include a mechanism for an orderly sovereign-debt default. The principle was absolutely right: unless default is a possibility, bond investors have no reason to distinguish between good and bad credits. But the idea of making bondholders lose money when sovereign credits turn sour was aired without any guidance about how and when it might apply. Astonishingly, the Germans failed to put together a detailed proposal for the summit.
I should make it clear that I fully back to idea of bondholders taking their share of the loss since if this is not a real possibility there is no way in which to secure an orderly default which is inevitably coming sooner rather than later to some of the most vulnerable Eurozone economies. Especially, and going back to Izabella’s point above the practical distinction between using bailout funds for governents and not banks is a mirage exactly because promises have been made and anectodal contracts have been signed with the electorate and, one is tempted to note, the devil herself. As I have said before, you may not like it and I agree with Izabella that the EU and IMF would be wise to monitor just what promises that are made in the future.
And speaking of promises; if Ireland seems to be mellow enough to be put into the bailout fold, there is another small country left in the waiting room in the form of Portugal. Again I think that the Economist has the right answer;
If only both sides gave up posturing, they would agree that the European rescue funds should be used to stabilise Ireland’s banks, insisting only on certain budget targets in return. Such a deal should satisfy Ireland’s euro-zone partners, which want an end to the uncertainty, and the European Central Bank (ECB), on which Ireland’s banks have become overly reliant for funding. It would also be wise to offer a similar deal to Portugal. Its banks are dependent on ECB support, and it too is in the bond markets’ sights.
I am not exactly tuned up on the actual difference between just pouring money into the banks or giving it to the sovereign which then uses the funds to make due on a foolhardy promise to secure the entire domestic banking sector’s liabilities. But really, the distinction should be next to none I think. And if you think that all this about Portugal is just me trying to kick up a bad mood, Bloomberg pulled one better on me with this elegant report about how investors are turning their attention away from Ireland and over to … well, you guessed it I think;
The markets indicate that country is Portugal with 10-year bond yields of 6.88 percent, compared with 8.26 percent in Ireland and 11.62 percent in Greece, which received rescue funds in May from the European Union and International Monetary Fund. Portuguese Finance Minister Fernando Teixeira dos Santos said Nov. 15 that while “there is a risk of contagion,” that doesn’t mean the country will seek financial aid. “Portugal isn’t in the situation that it is now because of Ireland,” said Steven Mansell, director of interest-rate strategy at Citigroup Global Markets Ltd. in London. “If Ireland reaches an agreement to tap the European Financial Stability Facility or some other mechanism to support its banking sector, I don’t think that will alleviate the pressure on Portugal.”
So, it seems as if the next stop might very well be far western rim of the Eurozone and its beautiful Algarve coastline.
By Eldon Mast, on November 19th, 2010
On Thursday the government’s report of jobless claims held onto the big improvement of the prior week and only rose 2,000 to a lower-than-expected level of 439,000. The four-week average of 443,000 is now down more than 15,000 from a month ago and signals solid improvement for November payrolls.
Also reported on Thursday by the Conference Board were leading economic indications that continue to strengthen. Gains now reflect two strong back-to-back 0.5 percent gains for the Board’s index of leading economic indicators. A big central positive is the factory work week, strength that is likely to continue given persistent uplift underway in the manufacturing sector.
Philly Fed data has been lagging national data recently — but not in November. Thursday’s report of the November index registers general business conditions jumping from a zero-flat trend to a ballooning 22.5. This indicates very sharp month-to-month growth. New orders also rose more than 15 points to 10.4. Shipments were also up more than 15 points, to 16.8.
And all this is translating into jobs. The region’s factory jobs index rose more than 10 points to 13.3.
Other readings confirm strength: unfilled orders rose while delivery times and inventory contraction slowed. Input prices show steep month-to-month pressure at an accelerating rate yet output prices, that is prices manufacturers receive for their finished goods, continue to contract though now only slightly.
This report points to accelerating strength for what is already solid growth for the national manufacturing sector. Interestingly, these results contrast with Monday’s weak Empire State report from the New York Fed, a report that had been significantly stronger than Philly’s recently. Month-to-month swings in regional data shouldn’t cloud what is generally a positive outlook and continued leadership for the nation’s manufacturing sector.
By B.P.T., on November 19th, 2010
At 5:15 AM EST, Federal Reserve Chairman Ben Bernanke spoke at the European Central Bank Central Banking Conference in Frankfurt, Germany. His speech defended the latest round of quantitative easing by the Federal Reserve, called for greater cooperation between central banks, and chastised China and other emerging economies for manipulating their currencies.
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By Winton Bates, on November 18th, 2010
The ratchet theory suggests that government spending tends to ratchet up in times of crisis (wars, social upheavals, recessions) and then to remain at the new higher level. It has been put forward as an alternative to Wagner’s law (discussed in an earlier post).
In terms of the ratchet mechanism, the explanation for upward movement in government spending may appear straight forward, reflecting public demands for the government to ‘do something’ to help solve a problem. The process is not entirely mechanistic, however, because public demands for government action can vary depending on ideological factors e.g. changing perceptions about the role of government in helping people who are adversely affected by a recession and about the effectiveness of deficit spending. It is also possible for the upward movement to occur for opportunistic reasons e.g. politicians with an ideological leaning toward big government ‘never want a serious crisis to go to waste’.
A variety of reasons have been put forward to explain why public spending might remain at the new higher level after the end of the crisis. The most mechanistic explanation is status quo bias – the tendency of people to choose to maintain the status quo rather than to change a policy. For example, once tax rates have been increased to fund war time spending, status quo bias may favour retention of higher tax rates.
In addition, new programs created during a crisis may tend to develop a life of their own by creating interest groups with a vested interest in their continuation – including newly created bureaucracies that will fight to prevent themselves from being eliminated.
However, the ratchet theory does not provide a complete explanation of the growth of government. In his review of Robert Higgs’ book, ‘Crisis and Leviathan’, Gary Anderson notes that while most historians argue that the Civil War was the pre-eminent crisis in American history, ‘following this particular crisis, government sank like a stone relative to the growth of the private economy’.
Dick Durevall and Magnus Henrekson did not find strong support for the ratchet theory in their recent study of trends in size of government in the UK and Sweden from the beginning of industrialization until the present:
‘There is no consistent evidence of a ratchet effect in either country. There is some evidence of an asymmetric effect in both countries in the post-war period, but this is reversed in subsequent periods. Hence there is no clear evidence that government exploits recessions and crises to permanently shift the government spending ratio upwards’ (p. 22).
In New Zealand, government spending as a percentage of GDP seems to have fallen during WW2 as well as in the latter half of the 1950s and the 1990s. At the same time, as noted by Bryce Wilkinson, ‘the timing of the increases in the state’s share looks opportunistic’. Wilkinson suggests that growth in government spending reflects ‘changing ideas about the role of the state and the increasing power of vested spending interests’ (‘Restraining Leviathan’, 2004: Figure 5, p.41).
It is also difficult to see a consistent ratchet effect in the following chart for Australia showing estimates of government spending as a percentage of GDP over the period from 1939 to the present. The increase that occurred in the 1970s has not been reversed, but during the 1950s the Menzies government seems to have managed to defy the ratchet effect by reducing government spending to levels close to those in 1939.
I have never previously thought that I might one day have reason to praise the economic achievements of the Menzies government. It seemed to me that the Menzies government’s greatest claim to support free enterprise was to have removed war-time price control, rationing and import controls (more or less and belatedly). However, the efforts of this government in reducing the size of government during the 1950s deserve high praise.
Summing up, it seems to me, to be important not to downplay the role of ideology in influencing trends in government spending. During some periods there may be a tendency for government spending to ratchet up in response to crises. Changes in government spending may also be influenced by changes in the power of interest groups (for example as changes occur in the age structure of populations). In the end, however, ideas about the role of government matter a great deal.
By Christopher Briem, on November 18th, 2010
WSJ looks at an updated metric of ‘low risk housing markets’.
Yeah, yeah, there we are… just as we have been for years at this point. What makes this year’s iteration noteworthy is the WSJ’s summary for why Pittsburgh’s ranking is so low. Verbatim from the WSJ: “Pittsburgh, where the natural gas industry is creating jobs and wealth“.
I bet the Marcellus Shale Coaltion makes a press release out of that.
So here is the deal. I think the source of this metric, the PMI group, has been regularly ranking us as the single safest (i.e. least risky) real estate market for years. Just one cite, but we were the single safest real estate market back in 2007. I am pretty sure few were talking about, or noticing, any big boom in natural gas related jobs in the region in early 2007. If that does not convince you, then lets go back further… 2004? Ditto. How about more recently? 2008: Check. I am pretty sure with a a few minutes I could find the same story repeated each and every year going back some time.
So we have been the least riskiest market long before Marcellus Shale was rediscovered, and we have not budged much from the top ranking in recent years. So the reason to gratuitously say natural gas is part of this year’s ranking is what exactly? Maybe the local economic impact of shale has been positive… maybe not… but the implied causality with mortgage and real estate risk is completely non-sensical as described. Any undergraduate completing an introductory statistics class would hopefully not use such logic in any context especially in light of the observed history.
Thus the state of quantitative reasoning these days. It’s just that it’s the WSJ no less in this case. If we describe this so badly, it kind of explains how we missed all the problems with those slightly more complex credit default swaps.
By B.P.T., on November 18th, 2010
At 8:30 AM EST, the U.S. government will release its weekly Jobless Claims report. The consensus is that there were 445,000 new jobless claims last week, which would would be 10,000 more than the number released last week, which was unexpectedly low.
At 10:00 AM EST, the Leading Indicators report for October will be released. The consensus is that this index increased by 0.6% last month, which would be the third month of improvement in a row.
Also at 10:00 AM EST, the Philadelphia Fed Survey report for October will be released. The consensus is that the index will be at 5.6, which would be an increase of 4.6 points from the previous month.
At 10:30 AM EST, the weekly Energy Information Administration Natural Gas Report will be released, giving an update on natural gas inventories in the United States.
At 4:30 PM EST, the Federal Reserve will release its Money Supply report, showing the amount of liquidity available in the U.S. economy.
Also at 4:30 PM EST, the Federal Reserve will release its Balance Sheet report, showing the amount of liquidity the Fed has injected into the economy by adding or removing reserves.
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By Thomas Knapp, on November 17th, 2010
Ever heard the one about “a tale told by an idiot, full of sound and fury, signifying nothing?”
The congressional earmarks saga is a tale told by charlatans trying to distract you from the Really Bad Stuff.
For those who don’t follow this stuff closely, here’s a simple version of how earmarks work:
1) Congress appropriates $130 billion for “Agriculture” (yes, that number is close to the current figure).
2) The Honorable Gentleman from Iowa puts an item — an “earmark” — in that appropriation requiring that the US Department of Agriculture $10 million of that $130 billion to fund the [the Honorable Gentleman from Iowa's name] Corn Research Center in Ames (I just made that up, but I wouldn’t be surprised if it resembles a real earmark).
The case against earmarks is that they:
- Are “pork” used by incumbents to buy re-election (”I earmarked $50 million in the Defense budget to ensure that the little dials on the Army’s radios would be manufactured right here in Secaucus”).
- Promote corruption (Acme Guide Missile Systems, Inc. gives a congresscritter a big campaign donation or a brown paper sack full of cash; said congresscritter earmarks an even bigger amount in a way that forces it to be spent with Acme Guided Missile Systems, Inc.).
- Result in silly/extraneous spending just to bring home the bacon (I seem to recall reading that the late US Senator Robert Byrd [D-WVa] once earmarked money to restore an old store as an “historic landmark” because it was the second location in the US to sell Chanel No. 5 perfume).
All of these things may be true, but here’s the case for earmarks:
- They generally constitute less than 1% of the federal government’s total budget. If that rate holds true for Agriculture, call it $1.3 billion total in that particular area. All the rearing and pitching about them is mostly just a way to distract from the fact that Congress is spending $128.7 billion in non-earmarked funds on Agriculture. Think maybe there’s a little fat in that bigger piece of the budget puzzle? But that doesn’t get talked about, because everyone’s throwing a fit about the Corn Research Center or whatever.
- They limit the power of the executive. Instead of handing Barack Obama $700 billion for “defense” and turning him loose to buy lollipops for the Russians and bombard Baghdad with packages of mail-order Swiss Colony cheese logs, Congress tells him that at least some of that money has to be spent in very particular ways. Granted, it pretty much amounts to those cheese logs going to Boeing workers in St. Louis instead, but any leash on the president, even one held by that bunch of reprobates down the street at the Capitol, is better than no leash at all.
So the two-case for earmarks is a) they’re not a big deal in the scheme of things and b) they may have at least one mildly positive feature.
I agree that that’s not a very strong case, but it’s a case, at least.
The important thing to remember is that all the caterwauling over it is intended to distract your attention from the 99% of the federal budget that isn’t earmarked. It’s pretty much a more boring version of “teh gays are gonna GETTT YEWWW!” or “Osama bin Laden may be under your bed right now — take off your shoes and stand in front of the porno scanner, please” or “the brown people who speak Spanish are going to take your job if you don’t give us another $10 billion to fight them off.”
Watch the birdie.
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