"The reason why these numbers have gone up is that we've done a pretty good job of working with states that had done a poor job in the past in getting the word out about this program."- Agriculture Secretary Tom Vilsack
I didn't get a chance to write about this earlier in the week, but when the Administration goes on MSNBC to brag about how many people are on food stamps, it's time to be afraid. It's time to be angry. It's time to sound the alarm. But, mostly it's time for people to be insulted, particularly people on food stamps. Of course, it's wonderful when we help our fellow man, woman, and children but it's shameful to portray food stamps as a good thing for people to be stuck with.
It's a plain lie to say it's great for the economy.
There is an ugly side to people becoming dependent on food stamps that takes a toll on the spirit and greatness of the nation that can't be smoothed over with a grossly exaggerated assumption of a $1.84 multiplier affect. The money borrowed to pay for these benefits comes at higher tax rates, and even adds pressure on our overall creditworthiness as a nation.
What this Administration and liberals are really saying to people stuck on food stamps for long stretches of time is that you are too dumb to compete in this society, so don't even try. Let us use you as a conduit so the rest of the nation might reach for a life beyond handouts and minimum standards. In the meantime, limit your aspirations to flat screen televisions and handheld music devices. I call this trickle up economics, designed to mask the failures of government to create an atmosphere where people thrive.
This is not to be confused with government interfering so deeply in free markets as to destroy them, which is the fight we are watching currently.
As for the theory this is great instead of embarrassing for the nation, in Germany unemployment has come down 25 straight months but in America, food stamp participation has gone up more than 30 months straight. Which sounds more like real economic prosperity? I wouldn't brag about a record number of Americans on food stamps. I wouldn't tell anyone that it's a great thing they need a check from the government to feed themselves and family. There is an innate desire for humans to work and achieve. It can fade, however, by making poverty just comfortable enough and removing the stigma of long-term use of food stamps and welfare.
"You Just Wait"
Famous last words from those vowing to right wrongs and get even, "you just wait," is now the message from the White House for the next jobs plan. There is going to be a major speech on jobs in September, but until then cool your heels. I think the speech will be heavy on much of the same, including infrastructure and diminutive tax breaks. But, there will be a lot on how we should extend unemployment benefits for another 99 weeks while taxing the rich to pay for those benefits. The rich, of course, are those robber barons with household income north of $250,000 a year. I have a feeling we aren't going to hear as much on solar/wind projects replacing crude tomorrow.
Earlier this week Evergreen Solar, a Massachusetts solar panel maker, filed Chapter 11 bankruptcy. The company listed $485 million in liabilities. I'm not sure what they consider the $58.0 million in taxpayer funds that were poured into the company, beyond technical jargon; it can only be called lost. The company simply couldn't compete with Chinese rivals. Moore's Law is firmly in place with this industry, where technology will improve but prices will plunge. There will be winners, but I think they will mostly be Chinese names with cheaper costs. While true job-creating projects like the transcontinental pipeline languish in government red tape and roadblocks, billions in taxpayer money will be poorly used to prop up a different pipedream.
This used to be an amazing stock, and hit $103 a few years ago. The fact it's $0.18 now underscores the fact when a lot of taxpayer money is sloshing around there is a lot of fun to be had and jobs and profits, but it's artificial and temporary. The free markets will dictate winners in this space, and it's unlikely to be any of the companies that get those giant grants.
Although everyone is saying nice things about Sarkozy and Merkel, Europe is under immense pressure again this morning and it's leading to serious pain in our markets, too. There is an immediate problem in Europe, and the solution involves a pile of cash that isn't readily available. Late yesterday, we saw stocks that have been giant winners over the last couple of years take it on the chin a sign even bulls are raising money. It's not a vote of confidence, but remember we are in a place right now where leaders on both sides of the Atlantic are dumbfounded about cures.
I think Sarkozy is spot on with a balanced budget amendment to sovereign constitutions. That isn't going to help today, but should be pushed immediately. I'm not too keen on the Euro-bond. That said, there's no telling how much anxiety is going to build while our Commander in Chief frolics on Martha's Vineyard. Maybe he is not chilling on the beach but fine-tuning his new jobs plan or the speech to announce that plan, which will make his ninth major address on the economy and jobs. I continue to grapple with the fact the market is under pressure mostly from a lack of confidence in our elected leaders.
That lack of confidence, however, will manifest itself in a way that changes the macro picture and underlying fundamentals. There are so many cheap stocks by so many metrics but in a panic, they could move lower. The idea is to ride the right ones and even dip a toe into the hot lava from time to time. Try to have 20% in cash and 10% to 15% in gold, and try not to panic, although that's what's happening around the world this morning.