Shaken; Not Very Mixed

I was just thinking about an old Boondocks comic. Cesar, who usually plays the straight man, accuses Huey--the surly, militant black nationalist socialist--of never laughing. Huey insists he laughs at lots of things. Cesar then insists that laughing at Ari Fleischer (the then White House spokesperson) doesn't count, over Huey's loud protests that laughing at Mr. Fleischer certainly does count. Like Huey, I certainly got my share of yuks at Mr. Fleischer's expense, but I'm not sure how to handle Ms. Perino's most recent comments about US economy.

On the morning of September 17, Ms. Perino said the state of the economy was 'not clear cut,' but rather 'very mixed.' For example, housing prices are going up in some parts of the country, and going down in other parts--like Florida.




Ms. Dana Perino, telling a few knee slappers.

Just how mixed is 'very mixed'? The Dow Jones Industrial Average (DIJA) is the cumulative value one share from each of a representative group of companies on the New York Stock Exchange. For example, if the selling price of one share of Microsoft stock drops one dollar, and the price of General Electric stock goes up two dollars per share, then the Dow Jones Industrial Average goes up one dollar (assuming the share prices of every other company stay the same). On October 9 2007, the DIJA hit a record high of 14,164.53. Eleven months later, on September 17, the DIJA was 10,609.66--a loss of more than 25% of its value. This week alone, the DIJA dropped 504 points on September 15, climbed 141 points on September 16, and lost 449 points on September 17. For the week (and this is only Wednesday), by the DIJA measure, the stock market has lost seven percent of its value.

'Mixed'?

Another measure of economic health is charting the number of new houses built in a certain period of time. Housing and apartment construction fell by 6.2 percent in August 2008, the weakest level of construction in seventeen years. How bad is that? The number of building permits issued in August dropped 8.9 percent, giving for the year a projected total construction of 854,000 units. The last time the US built less than 1 million new homes in a one year period was more than sixty years ago.

'Not clear cut'?

When the 'bank' Lehman Brothers begged for a federal bailout, they were told (words to the effect) there was no room at the inn. 'Market forces' responded to Lehman filing bankruptcy, with the selling price per share of stock dropping .17 (that's seventeen cents) per share to a price of thirteen cents. Mailing a one ounce letter first class costs more than three shares of Lehman Brothers stock. However, there was room at the inn for AIG, to the tune of a federal loan guarantee of $85 billion USD. Eighty-five billion? Pocket change. When the Federal Housing Finance Agency (FHFA) put Fannie Mae and Freddie Mac into conservatorship, the federal government was placing itself on the hook for the two companies combined outstanding $5 TRILLION USD in securities, and a debt of $1.6 trillion.



'If you spend a billion here, and a billion there, pretty soon--you're talking about real money.' Senator Stuart Symington, during quieter & gentler times.

Not to worry: on July 30 2008, President Bush signed into law the Housing and Recovery Act of 2008, which anticipated the Treasury Department's need to dump money into Fannie Mae and Freddie Mac. How much money could Treasury Secretary Paulson give? I'd say 'the sky's the limit,' only it's more than that: the US Treasury is authorized to advance funds to the two mortgage lenders, limited only by the total amount of debt the entire federal government is permitted by law. How big is that? The new law raised that debt ceiling by another $800 million USD to $10.7 trillion USD.

So--am I saying that the federal government is $10.7 trillion USD in debt? No, I would never say anything like that, In the immortal words of Gene Autry: figures don't lie, but liars figure. US Presidents for years have simply decided that some expenses are 'off budget.' That doesn't mean the debt isn't real; it just doesn't count. For example, President Bush is trying his best to make sure the Freddie and Fannie bail outs are off budget, along with the $555 billion (and growing) spent on the Iraq war. So, the federal debt is more--much more--than the 'official' debt ceiling of $10.7 trillion.

I'd never thought I'd live to see the day that I missed Ari Fleischer.



Ms. Carmen Miranda. She has nothing to do with this note, but she is much better looking than Treasury Secretary Paulsen.