ECONOMY
All Indicators Pointing Down

This week's economic news didn't leave a lot of reason to start the weekend smiling. Whether it be the revised fourth-quarter U.S. Gross Domestic Product (GDP) figures, a falling consumer confidence report, plummeting home prices, drastic Federal Reserve intervention in the financial markets, or a volatile stock market, the American economy seems to be living out an old saying: things get worse before they get better. Examining this past week in the context of the new GDP numbers is helpful in understanding exactly where the economy stands today -- and how much it needs to improve. The revised fourth-quarter numbers were as expected, confirming what many economists have been predicting -- that growth in the last three months 2007 was virtually unchanged from the previous quarter, sitting near zero at 0.6 percent. The numbers are even more disappointing when looking at the past 12 months; growth slowed to 2.2 percent over the entire year, the slowest pace since 2002.  If one were to argue six months ago that the American economy was not faltering, it may be possible to scrape together the numbers to prove the point. But yesterday's announcement shows that American economic future may have storm clouds ahead. This is just the opening salvo to slower economic growth.  

RIPPLES THROUGH THE ECONOMY: A further breakdown of yesterday's report reveals the magnitude of the crisis. Real personal spending rose just 1.9 percent from a three percent average over the last year, showing that consumer confidencehas reached rock-bottom lows. CNN reported, "The [consumer confidence] indicator, which is based on a survey of 5,000 U.S. households, fell 11.9 points from February to a five-year low of 64.5. Analysts had predicted a reading of 73.0, and the rapid decline in confidence could affect consumer spending significantly in the coming months." The Conference Board, which publishes this index, didn't mince words, either. "The decline in the Present Situation Index implies that the pace of growth in recent months has weakened even further. Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon." Another component of GDP worth highlighting is the drop in residential investment, which sank 25 poercent, the largest quarterly dive since the fourth-quarter of 1981. On Tuesday, new reports revealed that U.S. home prices had taken their steepest drop since the indicator was first used in 1987. Falling 11.4 percent in January alone, the decline reported in the Standard & Poor's/Case-Shiller index shows that for the past 19 months, prices have been consistently faltering. The numbers for Gross Domestic Purchases -- the total value of goods and services bought by Americans -- fell by 0.4 percent from last quarter's figure, the first time since 2001 there has been a decrease in the total worth of American consumption. 

THE DOMESTIC CONSENSUS: Mainstreet America is increasingly feeling the economic squeeze. In Ohio, "a record 1.1 million Ohioans are getting food stamps, the state's welfare agency said. "That's about 10 percent of the state's population. Caseloads have almost doubled since 2001, when an estimated 628,000 people were in the program," according to the Ohio Department of Job and Family Services. In West Virginia, "about one in every six West Virginians gets food stamps, the highest level of participation in at least 30 years."  In Oklahoma, "after 18 months of steady declines, the number of Oklahomans receiving food stamps increased in February compared with the same month a year earlier. Food stamps were distributed to 417,624 Oklahomans in February 2008, compared with 416,622 in February 2007." "More than one out of every three Oklahoma children received food stamps at least one month during the past year," said Howard Hendrick, director of the state Department of Human Services. "The February increase is a bad sign, since food stamps are considered a leading economic indicator," Hendrick said. 

HOW LONG WILL IT LAST?: Looking through the lens of fourth-quarter GDP numbers only confirms what America already knows: the U.S. economy is shaking. Tighter credit, declines in housing, and plunging consumer and business confidence have greatly increased the risks for slower growth, while skyrocketing oil prices have been felt heavily by the sagging U.S. labor market. Treasury Secretary Henry Paulson, in a speech he delivered Wednesday, pointed towards another leading economic indicator: new home construction. "Data releases every month creates headlines about declining housing sales, starts and prices," he said. "Yet declines are exactly what we should expect during a correction? The question many are asking is how deep the correction will be and how long it will last."

Under the Radar

MILITARY -- 'IRAQ EFFECT' FORCES ARMY RESERVE TO INCREASE BONUSES FOR RECRUITING AND REENLISTMENT: USA Today reports that "[t]he Army Reserve has reversed a serious recruiting drought by significantly increasing the amount of cash bonuses it pays to recruit and keep soldiers to bolster ranks thinned by five years of war in Iraq." In 2006, the Army Reserve paid $215 million in recruitment and retention bonuses but still fell "5 percent short of its recruiting goal." However, the following year, bonuses shot up 46 percent to $315 million making the Army Reserve "one of four Reserve components that hit or exceeded its 2007 recruiting and retention goals." But "the ever-increasing bonuses cannot be sustained," said Center for Strategic and International Studies Senior Fellow and former Pentagon official Christine Wormuth. She added, "Pretty soon we won't be able to afford the force" and that "prospect of repeated deployments -- 'the Iraq effect' -- means that finding and keeping good soldiers will continue to be tough for the Reserve." 

IRAQ -- BUSH SAYS RENEWED VIOLENCE A 'POSITIVE MOMENT': The administration has gone on a desperate PR blitz to label renewed violence in Iraq as "byproduct of the success of the surge." It is "what critics have wanted to see," said White House Press Secretary Dana Perino, calling it a struggle led by Iraqi security forces. "The State Department has instructed all personnel at the U.S. Embassy in Baghdad not to leave reinforced structures due to incoming insurgent rocket fire that has killed two American government workers this week." As rockets rain down on the Green Zone and two American soldiers died -- Bush cast the activity as a "very positive moment" in an interview with the Times of London. "It was a very positive moment in the development of a sovereign nation that is willing to take on elements that believe they are beyond the law," the President said. It's hard to see what Bush sees as positive. The explosion that burst an oil pipeline in Basra? Tens of thousands of Shiite protesters in Baghdad? A kidnapped "civilian spokesman for the Baghdad security operation?" In reality, the violence is undoing the very goals of Bush's surge. Iraqi forces aren't trying to restore "the law," as Bush thinks, but are trying to do the opposite -- suppress its political enemies before the October elections, historian Reidar Vissar noted. Most ironically, if U.S.-backed efforts "succeed," Iran's hand in Iraq will be strengthened.

ADMINISTRATION -- HAGEL SLAMS CHENEY'S CALLOUS IRAQ COMMENTS AS NOT 'OUT OF CHARACTER: Last week, Vice President Cheney made notorious comments exemplifying his distance from the situation on the ground in both Iraq and the United States. When asked about the sour public opinion on the war, he replied "So?" And when asked about 4,000 dead U.S. troops, he said, "The President carries the biggest burden, obviously." But in two interviews this week on NPR, Sen. Chuck Hagel (R-NE) ripped Cheney's callousness towards the public and the troops on the ground. Hagel told Dianne Rehm on Tuesday that he didn't think the "So?" comment "was out of character for the Vice President." On NPR's On Point on Wednesday, Hagel again went after Cheney, saying that his sense of Bush's "burden" in the war is ironic coming from a Vietnam draft dodger. "There is a credibility gap here, at least a little bit, with the Vice President, as far as I'm concerned," said Hagel. "Here's a guy who got five deferments during the Vietnam War, said publicly that didn't work into his plans." The public agrees with Hagel. A recent World Public Opinion poll found that 81 percent of Americans believe that when making "an important decision," government leaders "should pay attention to public opinion polls; 94 percent want this done 'in between elections.'"

Think Fast

Yesterday, Iraqi Security Forces continued their offensive against Shiite militias in Basra, as U.S. forces battled Mahdi Army fighters in Baghdad's Sadr City, and "tens of thousands of Shiite Muslims" protested the Iraqi government's crackdown on militiamen. Meanwhile, President Bush asserted yesterday that "normalcy is returning back to Iraq."

A coalition of "[m]ore than three dozen Democratic congressional candidates banded together yesterday to promise that, if elected, they will push for legislation calling for an immediate drawdown of troops in Iraq." Their plan would "leave only a security force in place to guard the U.S. Embassy in Baghdad."

In an interview yesterday, Secretary of State Condoleezza Rice said "that the United States still has trouble dealing with race because of a national 'birth defect' that denied black Americans the opportunities given to whites at the country's very founding." "That particular birth defect makes it hard for us to confront it, hard for us to talk about it, and hard for us to realize that it has continuing relevance for who we are today," said Rice.

"Nearly four months after the disclosure" that the CIA destroyed interrogation videotapes, "the list of legal entanglements for the C.I.A., the Defense Department and other agencies is only growing longer. In addition to criminal and Congressional investigations of the tapes' destruction, the government is fighting off challenges in several major terrorism cases and a raft of prisoners' legal claims that it may have destroyed evidence."

A pair of lawyers -- Republican Ted Olson and Democrat Laurence Tribe -- "have concluded that John McCain's 1936 birth outside the continental United States does not disqualify him to be president."

Former Rep. David Bonior (D-MI) said Thursday he is "proud" of his controversial pre-war trip to Iraq. "If more people in the Congress and elsewhere had spoken out, then maybe this war could have been avoided," he added. Without Bonior's knowledge, the trip was secretly funded by the Iraqi Intelligence Service.

In a 60 minutes interview, Al Gore ripped Vice President Cheney's denial of global warming. "You're talking about Dick Cheney. I think that those people are in such a tiny, tiny minority now with their point of view, they're almost like the ones who still believe that the moon landing was staged in a movie lot in Arizona and those who believe the world is flat. ... That demeans them a little bit, but it's not that far off."

Gov. Anibal Acevedo Vila of Puerto Rico "will surrender to the FBI today after being accused in an indictment of soliciting thousands of dollars in improper contributions in exchange for favors and government contracts." The governor had enlisted lawyer and friend Charlie Black -- an adviser to Sen. John McCain (R-AZ) -- to defend his allegations of grand jury unfairness.

Today, Lt. Gen. Martin Dempsey will "assume command of U.S. Central Command from Navy Adm. William J. Fallon, who announced unexpectedly on March 11 that he was quitting." Dempsey, who has been serving as the acting commander, opposed the administration's surge and is a "fan of transition" in Iraq.

And finally: Did you catch that large Easter Bunny wearing glasses and a pink vest at the White House's Easter Egg Roll on Monday? (See photo here.) The Washington Post's Al Kamen noted that President Bush and the First Lady spent a lot of time "chatting and having fun with Mr. and Mrs. Easter Bunny." Turns out that's because Mr. Easter Bunny was none other than White House counsel Fred Fielding.

Good News

"On March 29, 2008 at 8 p.m., join millions of people around the world in making a statement about climate change by turning off your lights for Earth Hour."

State Watch

ALABAMA: Former governor Don Siegelman ordered released from prison.

CALIFORNIA: State "Air Resources Board voted Thursday to slash by 70% the number of emission-free vehicles that carmakers must sell in the state in coming years."

ENVIRONMENT: "The American West is heating up faster than any other region of the United States, and more than the Earth as a whole."

Blog Watch

THINK PROGRESS: President Bush: Iraq's resurging violence is "a very positive moment."

WONK ROOM: Conservative columnist Robert Novak, the Prince of Populism.

BRAD WARTHEN'S BLOG: Sen. Lindsey Graham (R-SC) says Sen. Joe Lieberman (I-CT) "is a national treasure."

TV DECODER: Al Jazeera's American anchor quits, citing too much editorial control from the station's headquarters in Qatar.

Daily Grill

"[T]he surge is working. ... [N]ormalcy is returning back to Iraq."
-- President Bush, 3/27/08

VERSUS

"The State Department has instructed all personnel at the U.S. Embassy in Baghdad not to leave reinforced structures due to incoming insurgent rocket fire that has killed two American government workers this week."
-- AP, 3/28/08

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