As you can expect, most economists were surprised at this morning’s jobs numbers showing a net decline in nonfarm payrolls of
14,000 17,000 — the first actual decline since August 2003. According to the Wall Street Journal (Payrolls Unexpectedly Decline, Increasing Odds of Recession – WSJ.com):
Wall Street economists had expected a much sturdier 75,000 rise in payrolls last month. Jobless claims, after all, hovered near 300,000 for much of January, well below December levels. And a report released Wednesday from ADP and Macroeconomic Advisers that attempts to mirror the jobs report signaled 130,000 private-sector jobs were created last month.
Lost in the headlines is another piece of bad news: the number of workers who are part-time for economic reasons continued to grow. As I’ve noted before, the growth of involuntary part time workers is a hidden factor in economic downturns in the I-Cubed Economy. So hidden that policymakers and journalists don’t even talk about it — or recognize that it is there. But in January 2008, a net 100,000 additional workers joined the ranks of the involuntarily underemployed. That should be at least as worrisome as the net
14,000 17,000 unemployed.
In its last season, the storyline of the TV series The West Wing revolved around the election of President Bartlet’s successor. One episode featured the candidate who ultimately won agonizing over whether to take out a large loan back by his house in order to continue his faltering campaign. Part of the issue was whether a loser could raise enough post-election money to pay off the debt or whether he was simply signing away the family’s home.
The West Wing was always praised for its realistic portrayal of politics. Former White House and Congressional aides served as writers and consultants to the show. The idea of a political candidate taking out second mortgages is not uncommon—just as hopeful entrepreneurs often hock their houses for start up cash.
Now comes a new twist: taking out a loan using your donor list as collateral. According to a story in this morning’s Washington Post – With Crucial Loan, McCain Put His Bid Back in the Black, Senator John McCain took out a $3 million line of credit from the Fidelity & Trust Bank in the DC suburb of Bethesda, Maryland. The chief asset pledged as collateral according to the story was the fundraising list. But:
Because McCain would have to be alive to give the fundraising lists their value, [the McCain campaign’s lawyer Trevor] Potter said, the campaign took out the insurance policy on him.
So in part the loan was backed by the calculation of the Senator’s fundraising prowess. This is a good example of how the value of intangible assets is link with other assets. But, as the West Wing episode pointed out, losers can have a tough time raising money – even if you are still a Senator. The donor list may have been the most valuable asset in the package even as a stand-alone asset.
The November loan came at a critical time in the campaign, when McCain was failing behind and running out of money. The infusion of funds allowed McCain to not only carry on but put enough resources in to the key New Hampshire primary to become the front runner. Bottom line: if John McCain becomes the 44th President of the United States, it will because of the monetization of an intangible asset. Think about that.