Economic Report Card Worse Than Expected

Flurry Of New Reports Paint Bleak Picture; Confidence Lagging As Economy Shrinks

(CBS/AP)  The U.S. economy took a tumble in the summer that was worse than first thought as American consumers throttled back their spending by the most in 28 years, further proof the country is almost certainly in the throes of a painful recession.

The updated reading on the economy's performance, released Tuesday by the Commerce Department, showed gross domestic product shrank at a 0.5 percent annual rate in the July-September quarter.

That was weaker than the 0.3 percent rate of decline first estimated a month ago, and marked the worst showing since the economy contracted at a 1.4 percent pace in the third quarter of 2001, when the nation was suffering through its last recession.

GDP measures the value of all goods and services produced within the U.S. It is considered the best barometer of the country's economic fitness.

The reports come on the heels of a Wall Street rally that drove up major indexes more than 4.5 percent Monday on news of the government's plan to bail out Citigroup Inc., a move investors hope will help quiet some of the uncertainty hounding the financial sector and the overall economy.

On Tuesday, Wall Street showed some signs of stability as investors, heartened by government plans to aid consumer lending companies, selectively bought stocks after a huge two-day rally. According to preliminary calculations, the Dow Jones industrial average rose 36.08, or 0.43 percent, to 8,479.47. The index was up 164 points earlier in the session but also fell 161.

The Citigroup rescue came courtesy of the government's ever-evolving $700 billion dollar bailout package, out of which $310 billion has been committed so far to more than 90 financial firms, reports CBS News correspondent Jeff Glor.

But with the bailout's effectiveness in question and a presidential transition in full swing, uncertainty abounds.

"You've got a guy that's been trying to change a flat tire on a car going a hundred miles per hour. Now he's going to have to get out of the driver's seat and let someone else slide in," Art Hogan, managing director of Jefferies, told CBS' The Early Show. "It's a very difficult process, it's a very dynamic process and the rules of the game change everyday."

The new reading on GDP underscores just how quickly the economy deteriorated as housing, credit and financial crises intensified. The economy logged growth of 2.8 percent in the second quarter.

The new, lower third-quarter reading matched economists' forecasts. The downgrade from the initial estimate mostly reflected an even sharper cut back in spending by consumers and less brisk sales growth of U.S. exports.

American consumers - the lifeblood of the economy - slashed spending in the third quarter at a 3.7 percent pace. That was deeper than the 3.1 percent cut initially reported and marked the biggest reduction since the second quarter of 1980, when the country was in the grip of recession.

Consumers are hunkering down amid job losses, tanking investment portfolios and sinking home values, which are making them nervous about spending.

Underscoring the strain faced by consumers, the report showed that Americans' disposable income fell at an annual rate of 9.2 percent in the third quarter, the largest quarterly drop on records dating back to 1947. The government's initial estimate had showed a record 8.7 percent decline in disposable income for the quarter.

In a bit of good news, however, the New York-based Conference Board said its Consumer Confidence Index for November was 44.9, up from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967.

Sales of U.S. exports grew at a 3.4 percent pace in the third quarter. That was lower than a 5.9 percent growth rate intially estimated and marked a sharp slowdown from the second quarter's blistering 12.3 percent growth rate. The deceleration reflects less demand from overseas buyers coping with their own economic problems.

Home builders slashed spending at a 17.6 percent pace, marking the 11th straight quarterly cut and fresh evidence of the depth of the housing slump.

To help revive the economy, the Federal Reserve is expected to lower interest rates when its meets on Dec. 16, its last session of the year. Last month, the Fed dropped its key rate to 1 percent, a level seen only once before in the last half-century.

The Federal Reserve also announced Tuesday it will buy up to $600 billion in mortgage-backed assets in another attempt to deal with the financial crisis.

So far, though, the Fed's rate reductions, a $700 billion financial bailout package and a flurry of other radical actions have been unable to break though a dangerous credit clog, restore stability to financial markets and help the sinking economy.

Banks are failing and storied Wall Street firms have been crippled by the crises. Home foreclosures have soared and jobs are vanishing.

President George W. Bush argued Monday that the government's rescue of Citigroup was necessary to protect the financial system and help the economy recover. There could be more such moves if other institutions need help, he said.

But the need for any financial bailouts is not unanimously acknowledged, as some see it as a reward for mismanagement that places an unnecessary long-term burden on taxpayers.

"You've got lots of other banks that are going to need just as much money too. This is a gigantic problem going on out there," international investor Jim Rogers told CBS' The Early Show. "And unfortunately those turkeys in Washington are bankrupting you and me and our children … to save their friends on Wall Street. I find it outrageous. I find it morally outrageous and it's bad economics.

"Banks have been going bankrupt for hundreds of years … It's not the end of the world. You need to clean out incompetence."

President-elect Barack Obama sees as a top priority getting Congress to enact a massive economic stimulus package that he says will generate millions of new jobs. Mr. Obama unveiled Monday the economic team that will be charged with turning the nation's economy around.

The nation's unemployment rate is at 6.5 percent, a 14-year high, and will climb higher. Employers have cut payrolls every month so far this year and more losses are expected in the months ahead.

Given all the stresses, consumers are expected to burrow further, making it likely the economy will continue to shrink through the rest of this year and into 2009, more than fulfilling a classic definition of a recession. That is, two straight quarters of contracting GDP.

Despite the negative outlook, Wall Street was poised to extend its advance to a third day. The Dow Jones industrial average added more than 100 points in morning trading Tuesday.

[missingamerica]

Do ya think the "free traders" are telling themselves "Huh...I never thought trying to make all of the world''s workers compete against each other - and so lower my labor costs to a pittance - would hammer my stocks..."

[irmcvet97]

When one looks back at the year 2000 when the Incompetent Piece of Trash a few, a very few, still call a President took over, it seems like a Century ago. After watching Bill Clinton use the Pay as you go system on the Budget... After watching him hold Politician''s Nose''s to the grind wheel, telling them "If you want to cut taxes to the rich, YOU find a way to pay for in with Spending Cuts"... Bush choose to go back to "Trickle Down". Thus the Fascist Party just continued to buy Bridges to No Where and Borrow the money to buy them. The LARGEST shift to Wealth in our history, away from the Middle Class, to the Wealthy took place and NONE, ZERO, Na Da, Nothing "Trickle Down" to the working stiff to maintain the Middle Class. Thus for 8 straight years we saw the American Standard of Living FALL... Now after trashing EVERY regulation on Business they could find and borrowing record debt, we find ourselves in a financial crisis worse than any in our lifetimes... Yep the WORST in our Lifetimes and we can''t even SMELL the Surplus that was there when the Court''s gave Bush the Presidency!! Without a doubt the dumbest generation in the history of the World...

[irmcvet97]

7. Social Security and Medicare to be converted to a pay as you go system - you are not guaranteed a certain amount, only a certain percentage of what''''s available.

Posted by swin5 at 07:48 PM : Nov 26, 2008

Now you see, this is why the fascist can never be successful in a Democracy. Instead of UNDERSTANDING that the PEOPLE are running the show, they wish to pretend to be superior and ignore what the People want. I don''t care how many excuses you poor fools come up with, you aren''t going to make "Trickle Down" work but IF you can find Fascist Pol''s Stupid enough to try and change Social Security, that would be great with me. The LESS of you losers going forward the better as I see it!!

[mikezembill]

I sure hope that Bush is better at golf than he was at running the country.

[downtowner97]

Everything that went wrong in America prior to November 4, 2008 was Clinton''s fault. Everything that has gone wrong after November 4, 2008 is Obama''s problem. There was never even one moment when Bush was to blame for anything wrong in the country.

Bush has been working so hard to protect America from terrorists, he had to sacrifice the Constitution, the Bill of Rights, our economy, our jobs, our homes, our savings, and our reputation with the world. This wasn''t an easy choice for him, but fighting terrorists isn''t easy. Bush even had to give up golf to fight terrorists, and he really, really liked golf.

Now Obama wants to restore our rights, restore our standing with our allies, fix the economy, restore the constitution, and end the wars we''re fighting. When a president cares about all these unimportant things, the terrorists have won.

[whitemale08]

What the hell are you talking about?

For every semester for the last 8 years, the so-called ''Economice Report Card'' showed an ''F'' for failure.

We are in the middle of the worse ''DEBT CRISIS'' in history.

The British Global Finanical Empire is falling apart because there is no one else left to go into debt or is willing to.

However their ''plan B'' is ''environmentalism'' so they can force people to back into debt to meet standards being documented in the new global treaties on ''climate change''.

I don''t think it will work because people are not going to stand for it but they will try anyways.

Without the ''debt-farms'' you have no so-called Queen of England, Prince Phillip, Duke this and that, Lord whatever whatever.

We need to get rid of these blood-sucking parasites once and for all and enter a New Age of Renassaince

where Soverein Nations respect each others ''domestic economy'' with tarrifs and the individual is allowed to be creative and contribute to society without usury and debt.

[babooph]

Most CEO S supported Bush -now we are supposed to be shocked that the failed corp s were run into the dirt by incometant ,crooked fools ??The propaganda system sold them as brilliant capitalists,not the lobbyist sending bribers they really are.

[babooph]

I thought starting two wars paid by sacraficing our childrens future ,& letting the rich not pay taxes would make an economic utopia???Why not stop all tax on the rich forever to get us back on track ??Surely that lie can be sold like the others?

[doctxt]

EQUATION OF THE DAY:
FED LENDS OUR $ TO BANKS FOR 1% (PLUS) WE BORROW FROM BANKS @ 10 TO 20% (PLUS) 8% TAXES (EQUALS) WE FOREVER LOSE (PLUS) FED & BANKS WIN (MINUS) TRUTH (EQUALS) DEPRESSION (TIMES) MORE LIES (EQUALS) POLITICIANS (PLUS) INVESTORS (DIVIDED BY) GREED (MINUS) LAW (MINUS) GOD (EQUALS) REVOLUTION!!!

EQUATION EXPLAINED:
10 YEARS AGO PEOPLE HAD TO CHOOSE-MORTGAGE PAYMENTS OR GAS FOR CARS. THEY CHOSE GAS-MORTGAGE INDUSRTY CRUMBLED-FED SAYS FAULTY PAPER AGREEMENT BETWEEN BANKS AND INVESTORS CAUSED IT-HIGHLY PAID FEDERAL ECONOMIC GURUS LOOKED THE OTHER WAY-OIL COMPANIES REAPED $60 TO $80 MILLION A YEAR (TIMES) 10 YEARS = $800 MILLION (ONE COMPANY ALONE)-%u201CFAILOUT PLAN%u201D IS NOT ENOUGH%u2026 FORESIGHT IS AS GOOD AS HINDSIGHT-HAVE CONFIDENCE, THE PEOPLE WILL PAY FOR IT.

FAILOUT PLAN WAS TO BAIL OUT ILLEGAL IMMIGRANTS WHO BOUGHT AMERICAN SOIL VIA FANNIE AND FREDDIE-THEY GOT BAILED OUT FIRST-PLAN NOT WORKING FOR ANYONE ELSE. AFTER GOV%u2019T APPROVAL & MAE, MAC BAILOUT - GURUS CHANGE- WANT TO INVEST IN BANKS & INDUSTRY INSTEAD OF HELPING PEOPLE.

ABORTION IS OK-BILL IS ON FUTURE GENERATIONS THAT WILL BE KILLED, AND THEY ROB THE RETIREMENT EGGS OF US ALL.

THIS IS WHY WE HAVE AN ELECTORAL REVOLUTION-PEOPLE WANT CHANGE-WILL IT COME FROM POLITICIANS WHO ADMITTEDLY CREATED IT?

FREE MARKET ECONOMY-PRIVATIZE GAINS-SOCALIZE LOSSES!!!

NO NEW REGULATIONS!-THROW MONEY AT IT!-BANKRUPT AMERICA-MAKE WAY FOR THE AMERO!!!

THIS IS A BALANCED BUDGET-FOR THE GREEDY!

[doctxt]

The value of any home in the US is based on the needs of the city or town where it is. Ask any Tax Assessor.

Real Estate value is not created or manipulated by any other means.

Bailout? Why? The "Real "Estate" is still there. The only ones getting bailed out are those responsible for this whole mess.

The purpose for the bailout to keep "property value" %u201CInflatedly%u201D high. If the housing market corrected itself now, city and town governments wound find themselves in shutdown mode.

[swin5]

Final Steps:
13. Corruption in government will be considered treason and will be punishable by death. We can''t always expect our politicians to know what to do but we *** well have the right to expect them to be honest.
14. Realize that after World War II we became the heir to the British Empire. This must end - empires are too expensive to maintain. All troops to leave Afghanistan, Iraq, Germany, Korea, and Japan. As for Bin Laden - do you think the Israelis would have needed to invade half the Middle East to get him?

[swin5]

Further steps to save the economy:
8. End the foreign tax credit - companies with operations overseas can no longer deduct the amount they pay in foreign taxes from what they owe Uncle Sam.
9. End the oil depletion allowance - there isn''t a resource on the planet that won''t eventually run out.
10. Any company that has either more than half of its total payroll or total number of employees overseas will no longer be an American company, will not be listed on the NYSE, and will be afforded no protection by the American military.
11. A constitutional amendment that states that the purpose of government is to do only that which is absolutely necessary for the survival of the country and only that which can''t be done better by the private sector.
12. All election ballots have ''None Of The Above'' listed. If ''None'' wins, all candidates are declared ineligible and the election is held over.

[swin5]

Steps to save this economy:
1. Re-negotiate all trade agreements. A fair wage, pension and health benefits, vacation time and sick leave were ways in which the working class was able to secure a fair piece of the nation''s wealth. There are to be no tariffs on goods we can''t produce here, such as bananas. All other goods brought into this country are to have a tariff imposed on them equal to the wage difference between the countries as well as expenses related to social security, job benefits, pensions, OSHA and environmental requirements, etc.
2.No financial institution or company is allowed to become so large that it has a disproportionate affect on the economy.
3. Corporate salaries are tied to the lowest salary in a company - for example, the CEO can make no more than 10 times the wage of the lowest paid worker in the company. CEO wants to make $10 million - that''s OK but the cleaning lady makes $1 million.
4. Stop encouraging debt - no deductions for home mortgages - you get tax breaks for saving and investing, not borrowing and spending.
5. Balance the federal budget and make it a criminal offense, punishable by mandatory jail time, for any congressman who votes for more spending projects than the government can afford.
6. Reduce the senate to 50 members and the house to 270 - less politicians to cost us money.
7. Social Security and Medicare to be converted to a pay as you go system - you are not guaranteed a certain amount, only a certain percentage of what''s available.

[swin5]

Everybody,including the media, keeps calling this a credit crisis. It is not a credit crisis, it''s a DEBT crisis. Remember, Bernanke, Paulson, Obama, Bush, etc. are all millionaires and they can only see things from their perspective. Financial institutions are losing money on bad loans and have no money to lend out. They cry to the government which then gives them back the money they lost. So why are the credit markets still tight? Because the people are too much in DEBT. They owe too much already, can''t make the payments, are losing their jobs, and the government and the banks want them to take on more debt to get the economy moving again. It''s trickle down economics in a perverse way. Give the money to the rich (banks) and they will lend again. But it''s not working. The money needs to be in the hands of the working class, in the form of better paying and secure jobs, with health and pension benefits. If the people have a good and secure income, they can become consumers again and the economy will be just fine. Giving money to the banks and expecting people to go further into debt when they are already in over their heads, with a low paying job that is about to be outsourced, won''t solve anything other than to bankrupt the government and the entire country.

[incog-nito]

Here''s a solution most Americans will agree with: Continue blaming the "other side" for all the country''s ills. Go all the way back in history as far as you can to look for evidence to back you up. That way, when the inevitable demise of America happens, you can be content with the knowledge that somebody else is at fault. Best of all, you don''t even have to lift a finger to actually do anything.

[libsh8theusa]

Here is one to watch..


http://www.youtube.com/watch?v=O_TjBNjc9Bo&feature=related

[rickwar]

Like GM, our economy is in desperate need of a restructuring.

Posted by WarDogLRS at 05:19 PM : Nov 25, 2008


I''m not sure if it needs "restructuring" as much as it needs re-reguulating. We''ve been sold a bill of goods here for a number of years "world economy, world trade, be consumers, outsourcing is fine" The sad part of it is many believed it and bought into it fully, even the government. The "trickle down" or the best description "Vodoo economics" has been shown in the last year for what it is. A sham.

As we talk about national security, the first measure of that should be financial security, because all else pales in comparison. We''re borrowing for everything, including Iraq and defense.

All the while we''re being promised tax cuts and stimulus checks when what we should be talking about are slightly higher taxes designed to pay down the debt, based on a fair system, where everyone pays the same % of their income,this along with massive pork spending cuts and reduction in size of government. The Republicans under Bush have failed the core principals of Republican rule, smaller government.

We''re playing around the edges here, trying to stop disaster, we''re trying to buy time, time is running out.

[Countrykenrs]

Time for rich to pony up for their extraordinary good fortune for the past 200+ years. Since they consider Gommerment bailouts for them are justified how about nationalizing the wealth of the wealthy to pay off as much of the debts they have generated as is possible. If they don''t think this is fair TS; is it fair that we little people (their endearing name for the rest of us) and our progeny are indebted ad nauseum for their benefit? Why are we enabling a system which fantastically enriches a few and bankrupts the many.

[armydog2]

Hang onto your butts , this is going to be a long and bumpy ride!

[swin5]

To wardog

You are right but you are grossly underestimating the upheaval this country will face. We are looking at the total bankruptcy of this country.

Prediction - Stock market at 1200 to 1500 by next summer, maybe sooner.

Do you have any idea how many of the top 1000 companies in the country are in debt to a level 2 to 4 times their net worth? Translation - many companies in the U.S. have a net value in the negative numbers.