Professional Documents
Culture Documents
Spending DA Aff
Spending DA Aff
Spending DA Aff.........................................................................................................................................................1
Spending DA Aff.............................................................................................................................1
Non-Unique.................................................................................................................................................................2
Non-Unique.....................................................................................................................................2
Non-Unique – A2: GDP..............................................................................................................................................3
Non-Unique – A2: GDP.................................................................................................................3
Non-Unique – Consumer Confidence.........................................................................................................................4
Non-Unique – Consumer Confidence...........................................................................................4
No Link – President....................................................................................................................................................5
No Link – President.......................................................................................................................5
Link Turn (Competitiveness)......................................................................................................................................6
Link Turn (Competitiveness)........................................................................................................6
Link Turn (Oil)............................................................................................................................................................7
Link Turn (Oil)...............................................................................................................................7
Link Turn (Oil) 1/2......................................................................................................................................................8
Link Turn (Oil) 1/2.........................................................................................................................8
Link Turn (Oil) 2/2......................................................................................................................................................9
Link Turn (Oil) 2/2.........................................................................................................................9
Link Turn (Ethanol)..................................................................................................................................................10
Link Turn (Ethanol).....................................................................................................................10
No Impact – Resilience.............................................................................................................................................11
No Impact – Resilience.................................................................................................................11
No Impact – Resilience.............................................................................................................................................12
No Impact – Resilience................................................................................................................12
No Impact – China....................................................................................................................................................13
No Impact – China.......................................................................................................................13
No Impact – Competitiveness...................................................................................................................................14
No Impact – Competitiveness.....................................................................................................14
No Impact – Competitiveness...................................................................................................................................15
No Impact – Competitiveness.....................................................................................................15
WNDI 2008 2
Spending DA Aff
Non-Unique
Recession is inevitable – credit crisis, auto industry, consumer confidence, employment
Joseph Brusuelas, Chief Economist, Merk Investments, July 11, 2008, An Economy in Trouble
Over the past few weeks many notable analysts have made the case that the economy is in the process of recovery.
The market has celebrated the wonder of the “resilient consumer.” Given the still fragile state of the economy we think that this is a
bit overblown. A cold-eyed, hard-nosed analysis of the true condition of all things financial provides us
with a very different assessment of the economy. But, with a major week of fundamental data and the onset of earnings
season for financials upon us we thought it pertinent to put a few ideas to rest. First, the credit crisis has yet to run its
course. A genuine credit crisis is comprised of two components: a liquidity crisis and insolvency crises. With already $400.00 billion
in global write offs within the financial sector alone one might be tempted to declare the credit crises over. Yet, the problems on the
balance sheets of financials will continue. Write-downs and the process of de-leveraging have yet to be finalized. We believe that there
are $75-$100 billion in write downs left in the US alone before we reach a conclusion to the liquidity portion of the crises. This will
continue to depress whatever appetite for risk taking in equity and credit markets remains. The Fed did not extend its primary dealer
credit facility well into 2009 by accident. Moreover, we have only begun to embark on the insolvency portion of the
economic tragedy unfolding before our eyes. Too many market players are operating on the unspoken assumption that the
fall of Bear Stearns and the near miss at Lehman have signaled that the end of the troubles are at hand. Unfortunately, this is not the
case. The crisis that has primarily engulfed Wall Street is beginning to spillover onto Main Street. Ford and GM will both be
candidates for mergers, bankruptcies or bailouts in 2009. It is quite clear to anyone that care to look that Fannie Mae
and Freddie Mac will have to be bailed out by the Federal Government. Pending legislation in Congress regarding the end of private fee
for service, if it is enacted, will put at least one major player in the healthcare sector and one minor actor at serious risk of insolvency
early next year. And do not forget the 200-250 small and regional banks that the Fed has warned us will eventually fail. Even such
stalwarts as the gaming sector, which has been traditionally impervious to systemic economic slowdowns is going to see a spree of
consolidations and perhaps a few insolvencies on the back of too much debt and a sharp reduction in demand from consumers who have
seen their discretionary income evaporate. Second, the consumer is no longer resilient but in fairly significant
trouble. A well -timed and quickly implemented fiscal stimulus program is masking the true condition of the
consumer. Pre-fiscal stimulus, the trend in real personal consumption was absolutely flat. Once the positive aspects of the stimulus
withers away the prevailing trend in real consumption will reassert itself and we shall be back to where we were in the first quarter of the
year. The market has observed six consecutive months of contraction in non-farm payrolls. Growth in the once
vibrant service sector has collapsed to near zero growth over the past three months. The major factors keeping the labor sector
from collapsing appears to be the very questionable birth-death model at the Bureau of Labor Statistics and the aforementioned
healthcare and hospitality sectors. Over the next few months the modeling at the BLS will catch up with reality and the
healthcare/leisure sector will experience outsized contraction based on current economic conditions and trends. The decline in real
income will put additional pressure on an already stressed consumer and set the stage for the final
capitulation. Finally, we will see a series of revisions to recent economic data, including GDP that may change current perceptions
of the economy. We expect that the downward revisions will confirm that we are in a mild recession. More
importantly, we anticipate that when we get to the final quarter of 2008 will see another downturn in economic
activity. Since 2007 my forecast for the economy has been “W” (no pun intended) shaped recession. We saw the first trough in late
February and early March of 2008. We are currently at the middle apex of the “W” and expect to see growth begin to decline during the
early portion of Q4’08. The final trough in our double dip scenario should occur in the second quarter of next year.
The sub trend 2.1% rate of growth that we expect to see in Q2’08 is a function of Washington priming the pump and the a vibrant
external sector. Once the stimulus from the Federal government begins to fade and the impact of the searing increase in the cost of
energy and commodities can be assessed on a domestic and global basis, the last vestige of support for the economy, net
exports will fade to away and the US economy will see its first major recession since the early 1980’s.
No Link – President
Presidential policy-decisions don’t effect the economy
Daniel Gross, Moneybox columnist for Slate and the business columnist for Newsweek, July 13, 2008, Neither
Obama nor McCain can cure ailing economy
Does the president really have any effect on the short-term direction and performance of the economy?
The answer is no, but with two important "buts." Over the past 219 years, the U.S. economy has expanded under all types
of presidents, Democratic and Republican, activist and somnolent. But there have certainly been notable policies that inflicted short-term
damage, such as Thomas Jefferson's ill-conceived embargo on trade with Britain in 1807 and Ulysses S. Grant's decision to place the
United States back on the gold standard, which contributed to a banking panic that in turn led to a recession that lasted for nearly all of
Grant's second term. Between 1929 and 1933, as a stock-market crash and credit crunch metastasized into the Depression, Herbert
Hoover adopted a hands-off approach that exiled his party from the White House for a generation. But today, while the president
of the United States may be the most powerful person in the world, "his influence on the short-term macro-economy is
generally overestimated by voters," says Thomas E. Mann, senior fellow at the Brookings Institution. Partisans might think the
economy got off the mat the minute Ronald Reagan was inaugurated in 1981 or when Bill Clinton took the oath in January 1993. But the
factors that influence the business cycle are so myriad, powerful and unpredictable that not even an executive as muscular as California
Gov. Arnold Schwarzenegger could bend them to his will. The megatrends that made the 1990s a long summer of economic love – the
end of the cold war, the deflationary influence of an emerging China, the Internet – would have happened with or without Rubinomics.
And most of the factors now making life miserable – commodity inflation, a housing bubble and a weak dollar engineered by the Federal
Reserve's promiscuous policies, the demand-driven surge in oil – would likely have materialized had John Kerry won in 2004. The
maturation of the Federal Reserve into a powerful, independent agency has further stolen the thunder from the presidency in short-term
economic affairs. By cutting interest rates and offering banks access to liquidity, Federal Reserve Chairman Ben Bernanke has
done more to stimulate the economy in the past year than Mr. Bush or Congress. There's a third reason the
identity of the next president won't matter all that much to the economy in 2009. The past 16 years of experience –
not to mention this year's campaign platforms – prove that Democrats and Republicans diverge sharply on fiscal and economic policy.
But on some of the big-picture items that matter most to short-term performance, a consensus has emerged over the years.
Modern Republicans have learned their lesson from Hoover and have embraced the necessity for short-term fiscal stimulus when the
economy slows. "We're all Keynesians now," as Richard Nixon said. Modern Democrats have also learned their lesson from Hoover,
who signed the disastrous Smoot-Hawley Tariff into effect in 1930. Twenty-first-century Democrats generally embrace the utility of free
trade, even during economic downturns. This isn't to say that the identity of the president in 2009 won't matter. Presidents tend to have
the most success enacting new policies in the first year in office. And the next president will appoint a Federal Reserve chairman early in
his term. But – and this is the first but – the macroeconomic impacts of early-term policies are often evident only
after several years. Harvard economist Benjamin Friedman notes that Nixon's imposition of wage and price controls in August
1971 helped smooth his re-election in 1972. "But these controls became a substitute for serious anti-inflationary policy, and were the
beginning of a set of policies that led to really severe inflation." So here's some straight talk about change we can believe in. Most of the
promises that Mr. Obama and Mr. McCain are making about the economy will founder on the shoals of a Congress
unwilling to be a rubber stamp, organized industry opposition, unanticipated events, budget realities and
changes in the macroeconomic climate.
WNDI 2008 6
Spending DA Aff
No Impact – Resilience
The capital market system and global economy is resilient
Gerd Häusler, October 7, 2005, Counsellor and Director of the IMF's International Capital Markets Department,
El Financiero (Mexico), Why the Global Financial System Is More Resilient
There are a number of reasons why we should be optimistic about continued international financial
stability. First, capital inflows into the United States—most of them private—continue to finance the U.S.
current account, and to support the U.S. dollar. These flows carry on unabated because of the country's
favorable growth and interest rates, as well as its deep and liquid capital markets. They are unlikely to
change direction abruptly since no other country or region enjoys the combination of robust growth and
deep financial markets that the U.S. offers. Second, through countervailing forces, financial markets have a
way of self-correcting. Institutional investors are unlikely to sit on the fence for long and will become less
risk-averse. They cannot afford to stay in risk-free but low-yielding cash positions, and need to remain
fully invested by searching for "undervalued" assets. There are additional market forces that make panic
and contagion less likely. One is the growing importance of strategic institutional investors, like pension
funds and life insurance companies, who take the long view, and are less likely to succumb to herd
behavior. Another, is the increasing sophistication of institutional investors, who are able to differentiate
between country- or company-specific versus systemic concerns. All in all, their diversity has increased
over the years and so has their investment behavior. We should welcome this contribution to financial
stability. All those factors that have strengthened the financial system over the past few years now
provide a welcome cushion if the global financial system were to come under stress. They would allow
market participants and policy makers time to adjust and, therefore, to avoid full-blown crises. The
much-strengthened balance sheets of the financial, corporate and household sectors can serve as one such
shock absorber for financial systems against severe market corrections. The wide dispersal of financial
risk from the banking to nonbanking sectors, improved risk management, and the enhanced
transparency and disclosure in financial markets also work in the same direction. As for emerging
markets, fundamentals have strengthened as many countries have shown solid economic performance.
They have also been building cushions against possible adverse developments, by accumulating reserves,
undertaking early financing of external needs, and improving debt structures. Institutional investors like
pension funds are increasingly making strategic allocations to emerging bond markets, and international
investors are taking an interest in local currency bonds. This should help deepen national markets and
reduce emerging market vulnerability to currency risk.
No Impact – Resilience
There’s no impact to recession—the US economy will bounce back
W. Michael Cox, senior vice president and chief economist at the Federal Reserve Bank of Dallas, Investor's
Business Daily, 1-9-02
Since 1960, the average recession lasted 11 months, with declines of 2.1 percentage points in total output and 1.7% in employment. The previous downturn,
an eight-month pause from August 1990 to March 1991, saw just a 1.5% slump in economic activity and a 1.1% drop in the number of jobs. Before 1940,
only one in seven recessions was over by 11 months. A third of them hung on for at least 23 months. Between 1887 and 1950, recessions meant an average
decline of 13% in industrial production. Since 1960, the toll has been reduced to 7%. Shorter, milder recessions arise from a shift away from the
dominance of boom-to-bust industries, such as farming and manufacturing. The
economy has diversified, with volatile sectors
not only being smaller slices of the pie, but also offset by more stable pieces, such as trade and services.
Recessions are part of the system. Periods of economic slowdown serve a purpose in a capitalist economy.
The pauses allow for time to correct excesses - rising inflation, bloated inventories, excess capacity, supply
bottlenecks and misallocation of resources. Boom times hide the excesses, and they're wrung out during
the down months. In recession an economy reorganizes itself, reallocating resources to emerge more
efficient and productive. Layoffs are traumatic, but labor and other resources are freed for eventual use in
the next wave of enterprises. Thousands of dot-com companies may have gone belly up, but we didn't lose
their know-how. The technology and human resources are still here. Recession doesn't equal regression.
We can reuse what we learned. Recessions are to some extent self-correcting. Now that a slump is here, the
economy won't continue to spiral downward. Once down, it won't stay down. In an economy where markets provide continual
feedback, behavior and expectations can change quickly. As demand falters, companies cut costs and reduce inventories. Prices adjust downward.
Consumers react by buying more, reviving demand. Policy responses are part of the cure. The Federal Reserve moved aggressively in 2001 to lower
interest rates. Credit is now cheaper than any time in the past 40 years. Looking ahead, the economy maintains considerable strength. Inflation remains tame
at less than 2%. Real personal income continued to grow in 2001, so consumers have more money to spend. America still sits on a mother lode of new
technologies - from electronics to medicine. The spirit of enterprise never lies dormant, not even in recession. Thus, the U.S. economy already has the
makings of the next boom.
No Impact – China
Economic ties prevent US-China trade war
The Vancouver Sun, July 14, 2008, Money ties China, U.S. together
The economic ties between China and the U.S. run deep. China relies on the U.S. as their largest
export market, just as the Americans rely on China to fuel its outrageous consumption with cheap
imports. "It's kind of like the relationship between a junky and a dealer," explains economics expert
Nicholas R. Lardy of the Peterson Institute. "The junky needs the dealer so he can get his fix, but the dealer
also needs the junky to buy his drugs." Trade between the two nations is rising at a dizzying pace. In 1980
their trade totalled $5 billion; last year it was $387 billion. It is also heavily lopsided. The U.S. imports far
more from China than it exports, resulting in a trade deficit of over $250 billion. This enormous consumption
is rapidly pushing America's debt towards $10 trillion. The numbers can get overwhelming and the question
becomes: How does America stay afloat? The U.S. economy is buoyed by foreign investment into its
treasury securities. Japan still possesses the largest holdings, but China is catching up. Since 2000,
China's ownership of U.S. securities has grown from about $50 billion to over $500 billion. Some political
pundits are concerned that by becoming America's banker, China could exercise significant influence
over the U.S. But that's not really the case. There's an old adage that says, if you owe the bank $100, that's
your problem. If you owe the bank $100 million, that's the bank's problem. China is now so deeply invested
in U.S. securities, any disruption to the value of the dollar would be a serious blow to its own reserves.
And since the Chinese rely on the U.S. market for their exports, they're forced to buy up new securities
as soon as they're issued to prevent the yuan from appreciating against the dollar. Neither country holds a
significant advantage over the other. Despite the enormity of the U.S. economy, the two nations have
built a system of co-dependency. Or as Catherine Mann, professor of economics at Brandeis University
and former adviser to the chief economist at the World Bank, puts it -- a system of Mutually Assured
Destruction. I think you can characterize it a lot like nuclear weapons," she says. "Whoever uses the
weapon, invariably gets hurt too." Each country has the means to significantly disrupt the other's
economy, but the collateral damage within their own country could be just as severe.
No Impact – Competitiveness
The US will inevitably lose competitiveness across numerous economic sectors
The Washington Times, 5-4-04, http://washingtontimes.com/upi-breaking/20040504-050045-2289r.htm
Geneva, May. 4 (UPI) -- The United States, Singapore, and Canada have been ranked as the world's
leading economies on competitiveness in 2004, according to a global survey published Tuesday. But the
study concludes the strong emergence of the larger Asian nations spearheaded by China, and India, and
soon Russia and central Europe "will generate a major shift in world competitiveness." The new breed
of emerging competitors, it says, "don't only provide manufacturing or services to western companies; they
compete in their own right with their own brands. They will assail markets, just as Japan did before, but
on a much wider scale." Globalization of the world economy, the study notes, has "quickly spread the
productivity revolution and techniques" to poor developing countries and underscores they now benefit
from both "lower labor costs and higher efficiency output." The report by the Lausanne-based
International Institute for Management Development (IMD) warns this combination "could be lethal for
traditional industrial countries and their workforce. Jobs will be lost, and companies activities will move
abroad." It adds the trends begun in the manufacturing sector now also affects the services industry.
No Impact – Competitiveness
Monetary policy has the biggest impact on US competitiveness and foreign nations and the
US will always manipulate it to undermine US competitiveness
Pat Choate, director of the Manufacturing Policy Project and professor in Advanced Issues Management at George
Washington University, and Charles McMillon, 1997,
http://www.cooperativeindividualism.org/choate_trade_deficit.html
Changes in exchange rates alter the price competitiveness of goods and services virtually overnight.
When the dollar is strong, the competitiveness of US exports is reduced and that of foreign imports is
increased. The reverse is also true. Many other governments explicitly use their exchange rate as a
balance wheel to set the level of their trade balance. The Chilean government, for example, is currently
manipulating their Peso, which does not float freely. They have recently re-weighted the basket of currencies
to which the Peso is pegged. Much like the recent experience in Mexico, the Chilean Government's goal is to
maintain a US trade surplus with Chile during the time Congress considers Chile's accession into NAFTA.
US policy makers have never developed an exchange rate policy and rarely consider the exchange rate
consequences of economic policy. The Plaza Accord of 1985 in which the U.S. joined with other industrial
countries to weakened the dollar and to improve the US trade position was a rare exception. The value of the
dollar to the Yen fell from 256 Yen per dollar in 1985 to 82 per dollar in the mid-1990s. This currency
manipulation provided temporary trade relief. Nevertheless, other nations increased their competitiveness to
offset the US move and again the US trade deficit soared. Japanese auto makers, for instance, are competitive
at an exchange rate of 90 Yen per dollar. Virtually every other time that the U.S. Treasury has engaged
significantly in exchange rate measures has been to assist other countries or global financial interests. In
1995 -- as the U.S. faced record trade deficits -- the US Treasury increased the value of the dollar
against the Yen to assist Japan's Government and banking sector deal with a recession and financial
pressures. The result of US actions was to reduce the cost-competitiveness of US products in the Japanese
market and increase that of Japanese manufacturers here. It worked. Japanese auto makers are now
flooding the US market with their exports. The U.S. trade deficit soared to a new record in 1996 and seems
assured of setting another record in 1997. In short, the price competitiveness of goods in many nations is as
much a function of the Government exchange rate policy -- theirs and ours -- as of producers'
competitiveness. The net effect of all this is fewer US export receipts and more foreign import bills.