In the Beltway, they have the luxury of playing stupid Debt Ceiling Kabuki. But, via Atrios, in the real world, things are bleak, and they will get bleaker:

In Arizona, where there are 10 job seekers for every opening, 45,000 people could lose benefits by the end of the year, according to estimates from the state Department of Economic Security. Yet employers in the state have added just 4,000 jobs over the last 12 months.

Some other states will also feel a disproportionate loss of income unless hiring revives. In Florida, where nearly 476,000 people are collecting unemployment benefits, employers have added only 11,200 jobs in the last year. In Michigan, employers have added about 40,000 jobs since May 2010, but about 267,000 people are claiming jobless benefits.

[More. . .]

Reuters:

U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dousing hopes the economy would regain momentum in the second half of the year. Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise.

Revisions to April and May also were negative - "The government revised April and May payrolls to show 44,000 fewer jobs created than previously reported." What to do? Slash government spending of course. We are f*cked.

Speaking for me only

Paul Krugman discusses debt limit strategy:

Failure to reach a debt deal would have very bad consequences. But here’s the thing: Mr. Obama must be prepared to face those consequences if he wants his presidency to survive. [. . . W]hat’s really going on is extortion pure and simple. [. . .] And the reason Republicans are doing this is because they must believe that it will work: Mr. Obama caved in over tax cuts, and they expect him to cave again. [. . .] Republicans believe, in short, that they’ve got Mr. Obama’s number, that he may still live in the White House but that for practical purposes his presidency is already over. It’s time — indeed, long past time — for him to prove them wrong.

CNN Money :

The number of Americans filing for first-time unemployment benefits slipped only slightly last week, falling short of economists' expectations for a bigger drop. There were 428,000 initial jobless claims filed in the week ended June 25 -- 1,000 fewer than the week before, the Labor Department said. It marked the 12th straight week initial claims have stayed above the 400,000 mark -- and was worse than the 420,000 claims economists surveyed by Briefing.com had expected.

PIMCO & Co. get $8.5B. Homeowners probably get harassed:

In addition, the deal will require Bank of America to improve its payment collection process by hiring specialists to focus on high-risk loans, and do a better job of tracking whether the bank is adhering to its own internal loan-servicing standards.

As long as Wall Street's happy, no problem? Consider Sheila Bair's comment in the article:

“Unresolved legal claims could serve as a drag on the recovery of the housing market,” Ms. Bair said. “The healing of the housing market is essential to the recovery of the broader economy.”

I respectfully disagree. Unresolved legal claims like the ones BofA settled are not the major drag on the economy that the homeowner crisis is causing - it is the depressed housing market and balance sheet problems homeowners face. That is what is depressing aggregate demand. PIMCO & Co. getting these billions will have no discernible impact on the economy or aggregate demand.

Speaking for me only

Reuters:

New U.S. claims for unemployment benefits rose more than expected last week, a government report showed on Thursday, suggesting little improvement in the labour market this month after employment stumbled in May.

Maybe somebody should do something.

Digby and Greg Sargent lament that Americans have come to believe the Obama Administration's parroting of Republican talking points on the relationship between economic growth and cutting government spending. Digby writes:

It's fairly clear that the administration long ago bought into the deficit trope and threw in its lot with the confidence fairy to create growth.

Indeed, Obama proved me an idiot when I thought he would use the "deficit trope" to fight against renewing the Bush tax cuts. Instead, The Deal was born. I'm with Kevin Drum - this is the policy the Obama Administration wants.

Speaking for me only

Atrios says yes:

I really don't know why Greek leaders aren't telling the EU to suck on it. They're actually the ones who seem to be holding the cards, but they just don't realize it. Or pretend not to.

The EU seems to believe the alternative to Austerity Now! for Greece is worse:

The EU's economic and monetary affairs commissioner Olli Rehn said he was "certain that Greece will be able to take the decisions needed because the alternative is so much worse".

Not knowing the specifics, I can't say, but it seems to me the Euro-types have more to lose than Greece, who probably needs out of the Euro anyway. Last November, we had a similar discussion regarding Ireland. I think the Argentina model is worth studying here.

Speaking for me only

Since December, you have read me rail often against The Deal. My objection was not, per se, to the tax cuts, but rather to the fact that the tax cuts would be "paid for" by spending cuts in the following months. The efficacy of government spending as opposed to tax cuts is beyond dispute. Trading spending for tax cuts is terrible policy if your are trying to stimulate the economy in a zero bound environment.

As in December with regard to The Deal, Ezra Klein tries to make lemonade from this lemon of a policy, this time citing Larry Summers' endorsing more tax cuts as fiscal stimulus (and, to be fair, arguing for no spending cuts, good luck with that now). As for The Deal, Klein treats the proposed tax cuts as effective fiscal stimulus with no spending cuts tradeoff:

This election will be won or lost by governance and the economy, not by candidates and campaigns. Another $200 billion in economic stimulus will mean a lot more to Obama’s reelection effort than $200 million in ads.

(Emphasis supplied.) To imagine that spending cuts will not be traded off for those tax cuts is simply absurd. Obama and Dems need to argue for something better than this.

Speaking for me only

Apparently Paul Krugman faced some Chamber of Commerce hack this morning on TV repeating the missing confidence fairy argument about the economy:

So I didn’t have much time to take down the Chamber of Commerce guy on This Week today [--] you’ll see a lot of businesses complaining about the political climate — hey, a lot of them watch Fox — but very few actually saying that this climate is deterring expansion[. . .] It’s the weak economy that’s deterring growth, not the atheist Socialist secret Muslim Kenyan Hawaiian in the White House.

It reminds of me what former Bush Treasury Secretary Paul O' Neill said last August:

I must say I'm kind of amused by some of the conversation about companies hoarding $1.5 trillion worth of cash, or something, because I had a rule when I was in the private sector for 25 years, including 13 running Alcoa, and that is, don't hire people unless you have somebody demanding goods that you can't produce with the people you already have. Right? So it seems patently unrealistic to me to urge people to spend money unless there's a demand that they're not able to satisfy with their existing resources. [. . .] Why would you? I mean, it's crazy. It's not a charitable function if you're running a business to say oh, my goodness, we have so many millions of people unemployed, I should rush out and spend my cash and hire more people if there's no demand for the goods. It's crazy to me. [. . . More]

Double dip:

U.S. hiring slowed dramatically in May and the unemployment rate kept rising, adding to concerns the jobs market will take years to heal as the economy remains weak. Nonfarm payrolls rose by 54,000 last month as the private sector posted the smallest jobs gain in nearly a year, the Labor Department said Friday in its survey of employers. Payrolls data for the previous two months were revised down by a total 39,000 to show increases of 232,000 jobs in April and 194,000 in March. The jobless rate, which is obtained from a separate household survey, unexpectedly rose to 9.1% in May from 9.0% in April. There are almost 13.9 million Americans who would like to work but can't get a job.

The last line is incorrect. There are 13.9 million Americans who are reported as still looking for jobs who can't get a job. There are many millions more who would like a job but are so discouraged, they have stopped looking. The percentage of the working age American population who is employed is at a record low. The economy is in shambles for Main Street. Wall Street of course is making record profits. Well done Tim Geithner!

Speaking for me only

Atrios writes:

This won't happen.

“There is one bet right now: Bernanke will bail out the world,” said Brian Kelly of Brian Kelly Capital. “If that does not happen, then no investment will be safe.”

Bernanke won't bail out the world. He might bail out certain extra large financial institutions, including foreign ones, and the people they employ at absurdly inflated salaries. He might bail out the investors in certain classes of financial assets. The rest of us, not so much.

Can Bernanke (read the Fed) actually "save the rest of us?" I think this misunderstands (not Atrios) the limits of monetary policy in a zero lower bound environment. More . . .