And the beating goes on
Automatic Earth

Just as it’s getting harder by the day to figure out which is the biggest disaster, the Deepwater Horizon spill or the Obama government's reaction to it, it's also good to ask which is worse off (and for how long), the Gulf coast or the entire country. Or, for those in dire need of consolation, the entire western world.

And sure, there's patches of light, someone finding a job, selling a house or managing to retire with full benefits. But that doesn't change the overall picture one bit: the trend is downward, with no sign of a halt in sight.

Some country, some government will still try their hands at stimulus of one kind or another. But, given the situation in the bond markets, the stock markets and the economy as a whole, the next stimulus may well prove to be the last. More people will lose their jobs, and they will not spend. Tax revenues will keep falling, leading to more job losses. Which lead to decreased tax revenues. And so on. With rising lay-offs, jobless numbers and foreclosures, you can't have economic growth, and without that growth, nobody can pay off their debt. It's as simple as it is dangerous.

I'm not even going to try to be comprehensive, just a few examples should do.

The new British government, only a few days old, starts off with a brave -or is that blind?- vengeance, says the London Times:

300,000 jobs in Britain's public sector face the axe

At least 300,000 Whitehall and other public sector workers may lose their jobs as the coalition government sets to work cutting the £156 billion budget deficit. As George Osborne, the chancellor, prepares to unveil the first £6 billion of cuts, the full scale of the job losses that will follow has begun to emerge. [..] "The outgoing chief secretary [Liam Byrne] said it all, there is no money," said a Treasury source. "There is no time either."

While the first wave of cuts will mainly target Whitehall waste, more severe reductions of up to 25% in some departmental budgets will follow in a comprehensive spending review in the autumn. Detailed research by The Sunday Times shows that at least 300,000 workers, including civil servants and frontline staff, will lose their jobs over the next few years. Some estimates suggest that the number of job losses could reach 700,000.

Bank bailouts will make Ireland insolvent

It is no longer a question of whether Ireland will go bust, but when. Unlike Greece, our woes do not stem from government debt, but instead from the government’s open-ended guarantee to cover the losses of the banking system out of its citizens’ wallets. Even under the most optimistic assumptions about government spending cuts and bank losses, by 2012 Ireland will have a worse ratio of debt to national income than the one that is sinking Greece.

On the face of it, Ireland’s debt position does not appear catastrophic. At the start of the year, Ireland’s government debt was two- thirds of GDP: only half the Greek level. [..]

What will sink us, unfortunately but inevitably, are the huge costs of the bank bailout. We can gain a sobering perspective on the impossible disproportion between the bailout and our economic resources by looking at the US. The government there set aside $700 billion (€557 billion) to buy troubled bank assets, and the final cost to the American taxpayer is about $150 billion. These sound like, and are, astronomical numbers. But when you translate from the leviathan that is America to the minnow that is Ireland, it would be equivalent to the Irish Government spending €7 billion on Nama, and eventually losing €1.5 billion in the process. Pocket change by our standards.

Instead, our Government has already committed itself to spend €70 billion (€40 billion on the National Asset Management Agency – Nama – and €30 billion on recapitalising banks), or half of the national income. That is 10 times per head of population the amount the US spent to rescue itself from its worst banking crisis since the Great Depression. Having received such a staggering transfusion of taxpayer funds, you might expect that the Irish banks would now be as fit as fleas. Instead, they are still in intensive care [..]

Berlin prepares for €10 billion yearly cuts, tax rises

The German government is to begin a drastic budget austerity programme next year to set an example to the rest of the eurozone, and comply with a "debt guillotine" that has been written into the German constitution. The cuts are expected to total at least €10bn ($13bn, £9bn) a year until 2016, a government officials said. Tax rises as well as reduced spending are likely to be considered[..]

The cuts are consistent with repeated promises by Angela Merkel, the chancellor, and Mr Schäuble, to reduce their €80bn record net borrowing requirement from next year. But the scale of the measures is likely to shock the other 15 members of the eurozone who have to impose austerity programmes as part of the €750bn stabilisation package for the common currency. They were hoping Germany would be the one source of economic growth for the monetary area.

Inevitably, the mastodont supply of sovereign debt can only be sold at the expense of the corporate debt market, which may just about dry up one of these days. What we may see then is that small businesses can’t get loans, and their larger brethern can't sell their bonds. Result: more job losses.

Corporate bond sales poised for worst month in a decade

Corporate bond sales are poised for their worst month in a decade, while relative yields are rising the most since Lehman Brothers Holdings Inc.’s collapse, as the response by lawmakers to Europe’s sovereign debt crisis fails to inspire investor confidence. Companies have issued $47 billion of debt in May, down from $183 billion in April and the least since December 1999, data compiled by Bloomberg show. The extra yield investors demand to hold company debt rather than benchmark government securities is headed for the biggest monthly increase since October 2008 [..]

Investors are fleeing all but the safest securities on concern European leaders won’t be able to coordinate a response to rising levels of government debt from Greece to Spain, while U.S. legislation threatens to curb credit and hurt bank profits. The rate banks say they charge each other for three-month loans in dollars has almost doubled since February. "This is a quintessential liquidity crisis," said William Cunningham [..] at Boston-based State Street Corp.[..]

"It’s not inconceivable to imagine a situation where the markets behave so poorly, the liquidity behaves so badly, and risk-tolerance just evaporates that -- particularly in Europe -- consumers contract, businesses stop hiring and stop investing, and economic activity halts."

David Goldman at Asia Times supplies a brief summary of what goes on today:

The Next Shoe to Drop Will be US Data…

The big drop in the stock market came after several pieces of bad news:

• Unemployment claims rose to 471,000 vs expectations of 439,000 in the week ended May 15;
  
• One in seven American mortgages is behind in payments;
  
• Foreclosures reached a record as the banks work through their backlog;
  
• Mortgage applications last week fell to the lowest level since the survey was conducted;
  
• Commercial real estate prices continue to fall

However, not everyone's desolate. Your tax dollars still keeps a few fine citizens up in the air:

Wall Street perks: "Marie Antoinette could fit into this crowd without missing a beat"

Some of the nation's biggest financial firms have increased the perks and benefits they pay their chief executives, despite the glaring spotlight from a public fed up with handsome bonuses at bailed-out Wall Street banks. The lavish fringe benefits included country club dues, chauffeured drivers, personal financial planning services, home security systems and parking. Some increases were in perks that Obama administration officials consider among the most egregious, such as corporate aircrafts for personal travel.

J.P. Morgan Chase awarded its chairman and chief executive, Jamie Dimon, $91,000 in personal travel on the company jet in 2009, up from about $54,000 the previous year. His total perks increased 19 percent, to $266,000. Dimon, along with Goldman Sachs chief executive Lloyd Blankfein and McLean-based Capital One chief executive Richard Fairbank, also received sharply higher perks related to personal and home security.

"Marie Antoinette could fit into this crowd without missing a beat," said Nell Minow, co-founder of the Corporate Library, which found in recent studies of several thousand U.S. companies that more chief executives received club memberships than a year earlier, and companies paid more to cover executives' personal use of corporate planes. "Many people would think the solution would be not to be so provocative of unrest and unhappiness, but no, they're saying, 'Go ahead and do that, just build bigger walls around your house.' "

We all know how Marie Antoinette ended. How Jamie Dimon is different from her, I can't tell. Money must be a lethal addiction.

Which is something not everybody has to worry about. An increasing number of Americans need to focus on just their next meal instead. Or where they’ll sleep tonight. How to clothe and feed their children. To top it off, a lot of well-fed and -dressed politicians resort to calling them lazy. A full cool million Americans won’t even be eligible for the emergency extension programs soon. When you get to that kind of numbers, you have to wonder how much longer this can go on before dramatic events come set in stone.

Long-Term Unemployment: No Help For The 99ers

This week Congress will consider legislation to reauthorize extended unemployment benefits for the rest of the year. It's going to be an epic fight: Republicans in the Senate will likely do everything they can to stand in the way of a bill projected to add $123 billion to the deficit, forcing Dem leadership to round up a supermajority for a last-minute Friday vote before Congress adjourns for its Memorial Day recess. Too bad the jobs crisis, in a big way, has already left this bill in the dust.

Hundreds of thousands of people have exhausted their extended unemployment benefits. In some states, laid-off workers can receive checks for 99 weeks -- and that's all they're going to get. This bill isn't for the "99ers" and there's no proposal on deck to give them additional weeks of benefits. "What's frustrating is that our government doesn't seem to think this is an important issue," said Christy Blake, a 35-year-old mother of two in Fruitland, Md. "We didn't put ourselves here. It wasn't our choice. [..]

Meanwhile, members of Congress are losing their appetite even for renewing existing benefits. Several members of the House and Senate have flirted with the idea that unemployment checks make people too lazy to look for work.[..]

More than a million people will probably be in Blake's boat by the end of the year. She's one of 19,000 in Maryland to have exhausted all available benefits, according to the state's labor department. As of last week, 65,400 people had exhausted benefits in New York -- up from 57,000 at the end of April. In Michigan, it's 34,900. In Illinois, 22,000. In Pennsylvania, 35,200. In California, 110,609. In Florida, the number had climbed to 130,000 before May and currently stands at 193,000.

But the worst tragedies over the next while will play out at state level. In Arizona, a mother would need child care so she can go to work, But she can only get that care if she’s unemployed... We’ll see a lot of these crazy cuts, executed by overzealous and underinformed civil servants.

Cuts to Child Care Subsidy Drive Mothers to Welfare

Able-bodied, outgoing and accustomed to working, Alexandria Wallace wants to earn a paycheck. But that requires someone to look after her 3-year-old daughter, and Ms. Wallace, a 22-year-old single mother, cannot afford child care. Last month, she lost her job as a hair stylist after her improvised network of baby sitters frequently failed her, forcing her to miss shifts. She qualifies for a state-run subsidized child care program. But like many other states, Arizona has slashed that program over the last year, relegating Ms. Wallace’s daughter, Alaya, to a waiting list of nearly 11,000 eligible children.

Despite a substantial increase in federal support for subsidized child care, which has enabled some states to stave off cuts, others have trimmed support, and most have failed to keep pace with rising demand, according to poverty experts and federal officials. That has left swelling numbers of low-income families struggling to reconcile the demands of work and parenting, just as they confront one of the toughest job markets in decades.

The cuts to subsidized child care challenge the central tenet of the welfare overhaul adopted in 1996, which imposed a five-year lifetime limit on cash assistance. Under the change, low-income parents were forced to give up welfare checks and instead seek paychecks, while being promised support - not least, subsidized child care - that would enable them to work. Now, in this moment of painful budget cuts, with Arizona and more than a dozen other states placing children eligible for subsidized child care on waiting lists, only two kinds of families are reliably securing aid: those under the supervision of child protective services - which looks after abuse and neglect cases - and those receiving cash assistance.

In view of all this, how could you still be surprised to see poor children see the quality of their education tumble ever more as well, so their chances of getting a decent job go down as they go through school. Something tells me many of them will at one point be labeled "lazy".

Summer School Canceled In Cash-Strapped Districts

Amber Bramble had to scramble to arrange summer plans for her 5- and 7-year-old daughters after their suburban Kansas City school district gutted its summer school program this spring. Her daughters were among about 2,500 of the Raymore-Peculiar district's 6,000 students who enrolled for free last summer in a program that combined traditional subjects with enrichment classes like music. But with state funding uncertain, the district decided to focus this year on about 800 students who either need to make up credits to graduate or are struggling to keep up with classmates.

Across the country, districts are cutting summer school because it's just too expensive to keep. The cuts started when the recession began and have worsened, affecting more children and more essential programs that help struggling students. And in districts like Raymore-Peculiar, although lawmakers ultimately decided to maintain summer school funding, they made the decision so late in the session that many administrators already had eliminated or scaled back the programs.

The cuts come even as President Barack Obama and Education Secretary Arne Duncan call for longer school days and shorter summer breaks. But in many states districts cutting summer school outnumber those using stimulus money to expand their offerings. "At a time when we need to work harder to close achievement gaps and prepare every child for college and career, cutting summer school is the wrong way to go," Duncan said in a written statement. "These kids need more time, not less."

So which is worse, the Gulf coast or the nation? You don’t have to pick, don’t worry about it. Save your energy for something or someone more deserving of your worries.

This is where we stand on the coast:

Oil spill now stretches 150 miles wide, 12 miles deep

[..] With oil pushing at least 12 miles into Louisiana's marshes and two major pelican rookeries now coated in crude, Jindal said the state has begun work on chain of berms, reinforced with containment booms, that would skirt the state's coastline.[..]

The spill's impact now stretches across 150 miles, from Dauphin Island, Ala. to Grand Isle, La. On Sunday, oil reached an 1,150-acre oyster ground leased by Belle Chasse, La., fisherman Dave Cvitanovich. He said cleanup crews were stringing lines of absorbent boom along the surrounding marshes, but that still left large clumps of rust-colored oil floating over his oyster beds. Mature oysters might eventually filter out the crude and become fit for sale, but this year's crop of spate, or young oysters, will perish. "Those will die in the oil," Cvitanovich said. "It's inevitable."

A team of White House luminaries apparently flew over the coast today, 34 days after the Deepwater Horizon rig blew up. White House press secretary Robert Gibbs angrily insisted that "we where there from day one". Pity nobody saw you. The president has named a commission that will report back in 6 months. Me, I shudder to think what the Louisinana coast will look like 6 months from now.

And tomorrow will bring more of the same.

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