The Real 'Jobs' Story Is What America Needs

by: Charles Payne

The good news was that the market climbed off the canvass a couple of times yesterday.
The bad news was that the market was on the canvass a couple of times yesterday.

It was a real indecisive session yesterday as investors grappled with a bunch of economic data and the looming announcement from Ben Bernanke that more people believe will be an inconsequential dud. The CBO has come out with its latest budget and economic outlook update, and it's being cheered in the White House because the 2011 deficit could be only $1.3 trillion, or the third largest shortfall in the past 65 years. The phrase "severe slump" in the first paragraph is perhaps the only item in the report that will not change. You see, the $1.3 trillion number, along with cumulative deficit totals by 2021 of $3.5 trillion, are best-case scenarios.

The best case is debt held by the public will equal 61% of GDP by the end of 2021, the other possibility is $8.5 trillion or 82% of GDP. The differences are in these assumptions:

> Tax acts, including American Recovery and Reinvestment Act, are allowed to expire.
> AMT inflation indexing, extension of unemployment benefits, and payroll tax reduction allowed to expire at end of 2011.
> Sharp reductions in Medicare payments to doctors' takes effect end of 2011.
> Funding for discretionary spending declines over time in real terms in accordance with caps.
> Additional deficit reduction totaling $1.2 trillion over 2012 -2021 will be implemented.

We already know there will be a major White House push for payroll tax cuts and unlimited unemployment benefits, and I doubt doctors will ever get a Medicare reimbursement cut. In 1997, Congress approved a schedule of rate cuts to doctors that has been delayed ever since. The delays continue, including the one signed by President Obama on June 25 of last year that actually included a 2.2% rate hike. At the end of last year, Congress kicked the cuts down the road for a year. It's hard to believe the AMA would allow the cuts to ever happen since they essentially sold their soul to the new healthcare law.

After the CBO report was released, President Obama got on the phone with the CEOs of General Electric (NYSE:GE) and American Express (NYSE:AXP). From what I understand the three agreed we should focus on more U.S. engineering degrees and construction jobs refitting buildings for energy efficiency. Talk about two ends of the spectrum. Sure, I've argued for a long time we need to focus on high paying jobs like engineering, but the construction job thing is a scam. There will be no redeeming skills brought to people involved whose jobs will be mostly loading and unloading solar panels off of flatbed trucks. But, it keeps the green energy jobs pipedream alive and could quiet folks like Maxine Waters.

As for those engineering jobs, right now America has a PISA (global education testing/scores of 15 year students) score of 487 in math, which is under the OECD average of 496, and well below China's 600 score. In fact, our math score ties us with Portugal and Ireland, and puts us slightly ahead of Greece. So, more engineering graduates that are homegrown or foreign nationals that will take that knowledge back home are a large task indeed. I'm really hoping against hope there will be something new next week and not a doubling down on the same ideology that does nothing to generate sustained economic growth.

Speaking of the CBO, yesterday I got a chance to interview former CBO Director Douglas Holtz-Eakin, and pointblank asked about the nonsensical outlook that could see cumulative deficits by 2021 of $3.5 trillion or $8.5 trillion. He chuckled a bit, but talked about how unrealistic the update is and how it's up to the reader to believe the number or not. But, it's clear the best case scenario is a (sad) joke. Moreover, the great point was made that as long as the ideology drives economic policy at the White House businesses are not going to buy into it. On that note, he suggests the White House give up on green, union, and social agendas.

Interesting is that he made it clear that businesses in the end will determine where the economy goes. It was a point echoed by Liz Ann Sonders of Charles Schwab fame who was on before Doug. I asked her about the uncertainty of the political climate and she answered it has impacted the market and the economy. But, she pointed out it's not done because of the impact on businesses. When talking about the economy, she said "ultimately" businesses decide where they're going to go. I can tell you right now if that's the case then they'll need to be seduced and wooed rather than hit over the head.

You have to check out the show today as we have the CEOs of Jamba Juice (NASDAQ:JMBA) and CF Industries (NYSE:CF). The former stock I've watched for a couple of years wanting to buy for my son, while you know I love the latter which has been a homerun for us on many occasions. I'll get a feel for domestic spending, access to capital, and global competition and demand for food/nutrients. Check it out at 2PM EST/11AM PST on the Fox Business Channel.

The Market

Bank stocks act much better, but I am not sure if they are enjoying oversold bounces or a presumption of the Fed coming to the rescue. It might be the former. In fact, I'm much more impressed with yesterday's session than the 332 Dow points on Earthquake Tuesday because there was pressure throughout and still stocks found a way to rally into the close. Moreover, I believe stocks could give everyone a head fake and not crumble if Bernanke doesn't come through with strong hints of more money-printing.

Nasdaq will open under some pressure from the resignation of Steve Jobs, which hit like a bolt of lightning even though he has been ill for a long time. Jobs is an American original that broke the rules on how to succeed while overcoming obstacles that others would have accepted as defeat. If you want to be inspired read Steve Jobs' 2005 commencement speech at Stanford University. I feel so many people are giving up, simply not inspired by our history or their future. Although we don't want to hold a eulogy for a man that's still alive, somehow his life should be held up now as a source of inspiration and renewed spirit.

I get it that people feel hopeless, just moments ago we got another initial jobless claims report north of 400,000, a heartbreaking number. The ideas, including taxing the rich, do nothing to truly help the average person improve their lives, and will do little for them economically.

(Is it any surprise the day after the richest 15 tax dodgers in France asked for higher taxes they are going to get it with a tax hike aimed at raising $16.0 billion? But, there isn't enough money there, so there will also be higher taxes on alcohol, tobacco, and soda. By the way, Warren Buffett is going to host a fundraiser for President Obama next month when they will be pushing for higher taxes because those families making more than $250,000 should be hammered along with billionaires like the Oracle from Omaha.)

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Other ideas I'm hearing like refinancing mortgages backed by FNM and FRE mean changing a lot of rules of business and investment. For today, we'll be watching to see if the market can do it again, not just rally but rally late into the session.