debt

There is No Platinum Bullet

/ L. M. Walker / 1 Comment

But there is plenty of Gold ::

Here are my recently edited Google+ comments on, “Hey, let’s avoid the debt-ceiling standoff by minting a trillion-dollar platinum coin instead.”

Yeah, let’s borrow another trillion dollars, and then use it to buy a trillion dollars worth of platinum. Then we can mint it into a gigantic non-marketable, non-negotiable coin, deposit it into the Treasury, and use it as collateral for the cost of buying the Platinum and minting it into a gigantic coin. That sounds like a real winner, eh? Yeah, it’s a dumb idea, and not even possible since there isn’t a trillion dollars worth of platinum lying around anywhere for the taking.

On the practical side, why not just take the 261,498,900 troy ounces of Gold sitting in the Treasury, which is something the federal government already owns, then sell it all for $433 billion? This would raise $422 billion net, since the government would first have to redeem the gold certificates held by the FRB for $11 billion, which the gold currently stands as collateral. Then we can use the proceeds to cover 40% of this year’s budget deficit. Once this has been accomplished, then next year we can _ _   _ _ _ _   _ _ _ _ _ _ _ _ _ (you fill in the blanks).

One of the commenter’s admitted that the idea was crazy, but then went on to say that he thinks eliminating the debt ceiling is a good idea. His reasoning was that the government is constitutionally mandated to pay its debts, or something. To this I replied, “You just said the government has to pay its debts, and then said there should be no debt ceiling because the government must pay its debts. So how is the federal government’s act of continuing to borrow more on an unlimited basis synonymous with paying its debts?” He continued to repeat the same foolishness without stopping to try to understand my point, so my interest in the conversation waned.

My creditors have extended to me credit within certain limits. If I exceed those limits I will be forced to pay a penalty, and the extension of credit will cease. If I don’t bring the debt balance below the limit quickly enough, my accounts may be closed at the lenders discretion. Even an unlimited credit line has an implied limit. That is the point at which the debtor can no longer reasonably make principal and interest payments while meeting its basic obligations.

Having worked in the past as a corporate credit manager, I can state that when extending credit, one of the considerations is whether the debtor has enough annual income to cover principal and interest payments on all of its outstanding debt, while at the same time being able to cover its basic obligations. Using the same logic, it doesn’t take a degree in accounting or finance to understand that the U.S. government is already well beyond this capability. It is not setting aside monies to pay its debt principal, and is in fact not making principal payments at all. It is basically continuing to borrow more in order to meet its basic obligations, including the interest it pays on the debt.

Like it or not, the U.S. government has an implied credit limit, which has already been surpassed. It is currently borrowing to meet its basic obligations including interest paid on its “interest only” credit line. At this point, if the federal government were to raise income tax rates by 50% on everyone, it still wouldn’t be enough to cover principal and interest payments and to meet its basic obligations. To get there, on its current trajectory, would take better than a 100% across-the-board tax hike. Until the federal government balances its budget, there’s really nothing to look forward to or even discuss.

When creditors stop issuing credit, or begin to demand higher interest rates to compensate for the risk of default, that’s when the house of cards comes crashing down. When it comes to the federal debt, there is no platinum bullet. This government must either cut spending dramatically, or raise taxes by more than 100% across-the-board, it’s either that or face extinction.

Related: Solving the Debt Crisis | A Catch-22; From AAA to AA- in Four Years

Photo Via: The Most Expensive Journal

Black Unemployment Jumps 10.9% on Obama

/ L. M. Walker / 2 Comments

Are you better off today than four years ago?

– By: Larry Walker, Jr. –

According to the latest report from the Bureau of Labor Statistics, the official unemployment rate for all Americans rose by 1.3% since Barack Obama took office. But over the same period, the unemployment rate for Black Americans jumped by 10.9%, and the number of unemployed Black Americans climbed by 19.1%. So are we better off than we were four years ago? You might be, but the Black Community as a whole definitely is not. So will 90% of Blacks vote to re-elect Obama anyway? You betcha, because it’s not about tangible results, or even the content of one’s character; shamefully for many it’s about the candidate’s skin color.

Per the first chart above, the Official Unemployment Rate has increased slightly from 7.8% on January 31, 2009, to 7.9% by October 31, 2012, an increase of 1.3% (0.1 / 7.8). So the official unemployment rate isn’t any better than it was when Barack Obama took office, it’s about the same, or slightly worse. What about that?

And according the second chart above, the Unemployment Rate for Black Americans jumped from 12.7% on January 31, 2009, to 14.3% by October 31, 2012, for an increase of 10.9% (1.6 / 12.7). So the unemployment rate for Black Americans has continued to rise at a recessionary pace, in spite of Hope and Change. So what about that?

And according to last chart, the number of unemployed Black Americans has continued to surge at a recessionary pace, climbing from 2,254,000 on January 31, 2009, to 2,684,000 by October 31, 2012, for an increase of 19.1% (430,000 / 2,254,000). So the number of unemployed Black Americans, those who refuse to go on welfare or disability and remain in the labor force, has risen due to the countermanding policies of Barack Obama. What countermanding policies you say?

To name a few:

  1. Threatening to hike tax rates on the people who might have given someone a job instead.

  2. Forcing employers to provide health insurance to current employees, leaving no room for expansion or new hires.

  3. Spending borrowed money to subsidize solar panels, wind turbines, and battery operated vehicles, while the U.S. electrical grid remains vulnerable.

  4. Allowing strict EPA regulations to stifle jobs in the oil and gas, and mining industries.

  5. Increasing deficit-financed expenditures on Welfare, Food Stamps, and Disability as if that’s what Americans are demanding.

  6. Running up $5.3 trillion of debt in 4 years, the largest increase in our history, resulting in the first sovereign credit downgrade in American history.

Well, you can’t have it both ways. You don’t achieve job creation through raising taxes, forcing employer mandates, social engineering, killing current jobs, offering free rides, or destroying the nation’s credibility. So admit it, Obama’s policies didn’t work. They didn’t work for Franklin D. Roosevelt, they have never worked, and they aren’t working today. So what now? More of the same, or will you dare to be different? Common sense dictates that if you want a different result, you must try something different. See you on Tuesday. Be there!

If the unemployment rate don’t fit, vote for Mitt!

Data:

Worksheets on Google Drive

References:

Bureau of Labor Statistics: CPS Data Table A-2

Bureau of Labor Statistics: CPS Data Table A-1

Related:

Black Employment | Back to the 1970s

Has Obama Created More Jobs Than Bush Yet?

U.S. Jobs Deficit Sticks at 11.6 Million in October

/ L. M. Walker / 3 Comments

32 Years from Full-Employment

– By: Larry Walker, Jr. –

In the fairest sense, the U.S. Jobs Deficit has improved by an average of 30,000 jobs per month since January 1, 2011. And although this may be good enough for indifferent Obama loyalists, what it really means is that based on Barack Obama’s very best job creation averages to date, full employment is still another 32 years away. Based on yesterday’s Employment Situation Report, 171,000 nonfarm jobs were added in the month of October. However, since the U.S. needs to add a minimum of 320,850 jobs each and every month for the next 60 months in order to return to full-employment, October’s result fell short of the mark by 149,850.

When the entire Obama record is analyzed, it turns out that U.S. employers have only added a total of 194,000 nonfarm jobs since February 1, 2009 (133,755,000 – 133,561,000). The jobs deficit has increased by 5,521,000 during Barack Obama’s 45-month term, from 6,110,000 on January 31, 2009 to 11,631,000 on October 31, 2012. The average number of nonfarm jobs created on a monthly basis in 2012 is 157,000, which is ironically the same as in 2011. In contrast, the average number of jobs created in 2010 was 86,000, compared to an average loss of (422,000) per month in 2009.

So an average of 157,000 jobs a month, over the past 22 months, is the best that Barack Obama’s policies have been able to accomplish. This may sound great to some folks, but since 127,000 new jobs are required each and every month just to keep pace with population growth, what it really means is that we are clearly locked on a trajectory that chips away at the present 11,631,000 jobs deficit by a mere 30,000 jobs per month. So what does this mean in plain English? In other words, how many jobs must the U.S. create each and every month going forward in order to reach full-employment, and how long will it take?

Updated Jobs Benchmark

Updating Paul Krugman’s original benchmark with the latest figures, we discover that to be meaningful, the number of jobs needed to return to more or less full employment by December of 2014 (the original target date), or within the next 26 months, is now 574,346 jobs a month, as follows:

In order to keep up with population growth, we would need to create 127,000 jobs times 26 months, or 3,302,000. Add in the need to make up for the jobs deficit and we’re at around 14,933,000 (3,302,000 + 11,631,000) over the next 26 months — or 574,346 jobs a month.

But since that’s never going to happen under the countermanding policies of Barack Obama, we are forced to extend the time frame. However, even when we extend the target date to 5 years from today, which will be more than 8 years from the time the recession ended, the number of jobs needed to return to more or less full employment by October of 2017, or within the next 60 months, is now 320,850 jobs a month, as follows:

In order to keep up with population growth, we would need to create 127,000 jobs times 60 months, or 7,620,000. Add in the need to make up for the jobs deficit and we’re at around 19,251,000 (7,620,000 + 11,631,000) over the next 60 months — or 320,850 jobs a month.

Did the U.S. add 574,346 jobs last month? No. Did we add 320,850? No. In fact, according to the Bureau of Labor Statistics, the U.S. has only added 194,000 nonfarm jobs since Obama took office (i.e. February 1, 2009) (see related table). So what does that tell you? It tells me that Barack Obama’s economic policies have failed miserably. He’s the one who said, “If I don’t have this done in three years, then there’s going to be a one-term proposition.” So don’t blame conservatives and independents when the earth slides from under his feet on Tuesday.

Fair Enough?

In the fairest sense, when we average the number of jobs created over the last 10 months, we arrive at 157,000 a month. And when we average the number created in 2011 we ironically get 157,000 as well. Do the math. So in other words, there has not been any improvement this year over last year. So we’re not moving forward after all, we’re stuck in neutral. And since we know that it takes a minimum of 127,000 jobs a month just to keep up with population growth, we are only chipping away at the 11,631,000 jobs deficit by 30,000 jobs a month (157,000 – 127,000). Thus, on the current trajectory, full-employment is roughly 388 months — or 32 years away.

[For the mathematically challenged, take the jobs deficit of 11,631,000 and divide it by the twenty-two month average improvement of 30,000, and you get 388 months. Now divide 388 months by 12 and you get 32 years.]

So four more years of Obama’s trickle-down-government approach places us on the track to reach full-employment by around the year 2044. And that’s giving him the benefit of the highest job creation averages achieved during his entire presidency. I’ll be 84 years old by then, and my one year old twin granddaughters will be 33. I’m sorry, but no matter how you spin the numbers, Barack Obama isn’t worthy of a second term.

Until the number of Nonfarm jobs is expanding by a minimum of 320,850 a month for a sustained period of at least five years, anything short is bad news. The Romney-Ryan Team is the only one on the ballot with a plan targeted to come anywhere close to what’s needed. Aside from that, with the national debt already beginning its ascent towards $20 trillion, with 25 million Americans unemployed or underemployed, with the Federal Reserve devaluing our currency by printing money to purchase mortgage-backed debt on an unlimited basis, with our tax and regulatory structure mired in uncertainty, with a foreign policy meltdown, and with the price of gasoline hovering above $3.25 for a record 86 consecutive weeks, there is absolutely, positively, no reason to consider a second Obama term. None!

[Note: Paul Krugman and other left-wing cronies are now trying to push the idea that, since July 2011 only 90,000 jobs have been required to keep up with population growth. “The number used to be higher, but baby boomers are getting old — the same thing that affects the household survey.” However, even if such a radical 30% shift had occurred within the last four years, it would only alter the current jobs deficit by a diminimus amount — 592,000 jobs, from 11,631,000 to 11,039,000, so phooey! There’s no turning back now, we’re sticking with the original benchmark which Mr. Krugman laid out in December of 2009.]

Data:

Worksheet on Google Drive

Austerity Matrix

/ L. M. Walker / Leave a comment

Excerpt from: Krugman’s Anti-Austerity Madness

– By: Larry Walker, Jr. –

In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to try to reduce their deficit spending and are sometimes coupled with increases in taxes to demonstrate long-term fiscal solvency to creditors. However, austerity policies don’t have to include tax hikes, and in fact as we shall see the optimal austerity policy actually involves a combination tax cuts paired with deficit reduction.

The key phrase above is “to demonstrate long-term fiscal solvency to creditors”. If there were no creditors, then politicians and government officials wouldn’t have to worry about austerity. If there were no creditors, nations could simply print their own currencies on an unlimited basis, and spend without consequence. But in the real world, since creditors exist, some measure of austerity is required no matter what emotions dictate. Besides, history itself teaches us that printing money without restraint is the surest path to the vicious spiral of hyperinflation, a large increase in the money supply not supported by gross domestic product (GDP) growth, which leads to rapid erosion of a nation’s currency and ultimately to ever more pain.

In the table below, I have summarized all the possible fiscal austerity combinations available to the United States and Europe. When viewed graphically the optimal policy choice should be clear.

Although many Americans, including the President, think the way forward should involve some combination of spending cuts and tax hikes, credit ratings agencies disagree. For example, according to Fitch Ratings Co., “Fiscal Indecision Threatens US ‘AAA’ – Under current law, tax increases and spending cuts equivalent to about 5% of GDP will take effect in 2013 – if permanent, such a “fiscal cliff” could derail the US economic recovery…” Yet it’s not the spending cuts that are problematic, deficit reduction is a must, but rather the combination of tax hikes and spending cuts.

Following the Austerity Matrix, it turns out that:

  1. Tax hikes lead to the fiscal cliff no matter what happens with spending. Why? Because tax hikes lead to private sector austerity, resulting in job and benefit cuts, which leads to lower tax revenues and less economic output. So tax hikes should be off the table. The only reason they’re still being discussed in the United States is because of Obama’s “fairness doctrine”, which if you ask me is total nonsense. Besides, raising taxes on 1% of taxpayers won’t change anything for the other 99%, where the main problem is the lack of opportunities.

  2. Maintaining current tax rates can work, but only in conjunction with spending cuts. However, this only leads to slow growth, which is basically what we have now. Our current real gross domestic product (GDP) annual growth rate of 1.3% is not enough to change the trajectory of our ever increasing jobs deficit. If tax rates are maintained while spending levels are maintained or raised, we still wind up plunging over the fiscal cliff.

  3. The optimal fiscal austerity policy involves a combination of tax cuts and deficit reduction, which leads to rapid growth, or exactly what is needed following an economic crash. But, cutting taxes while maintaining or increasing spending levels only hurtles us over the fiscal cliff.

So there is only one viable fiscal austerity alternative: Cut taxes and reduce government spending. But this always brings up the same old moth-eaten question from faithless do nothings. How will you pay for the tax cuts? The apparently not so obvious answer is — with jobs.

Did you get that? Cutting tax rates across the board, which incidentally is included in the Romney-Ryan Plan, is not a way of giving anyone anything, since the government is merely enabling everyone to keep more of their own money. The dirty little secret is that this is how you grow an economy. When the government confiscates less money from the private sector, the economy eventually finds its footings and will dig its own way out of any hole. I challenge anyone to show me when this form of austerity has ever been implemented and failed to deliver greater revenues and higher levels of economic growth.

At this point you’re probably thinking, “Well, Bill Clinton raised taxes and cut spending and everything was copacetic.” But according to history, that’s actually incorrect. Although it’s true that President Clinton raised taxes during his first term, government spending also increased, that is until 1995 when his Democratic party lost control of both Houses of Congress.

It was actually during his second term when the austerity policy I’m talking about took place. That’s when Republicans passed the Taxpayer Relief Act of 1997, a reconciliation bill that reduced taxes and hence increased the deficit, paired with the Balanced Budget Act of 1997 (H.R. 2014 and H.R. 2015 respectively), each signed by President Clinton. Thus, it was actually tax cuts in conjunction with deficit reduction which produced the boom of the 1990’s, not the Clinton tax hikes.

The only differences between 1997 and today are that the United States wasn’t teetering on the edge of a fiscal cliff, and Republicans don’t currently control both Houses of Congress, but the solution to greater revenues, less spending and higher economic growth is the same.

Photo Credit:

Covertress | From Riches to Rags: Inflation & Poverty in Zimbabwe

U.S. Jobs Deficit Improves by 1,000 in September

/ L. M. Walker / 2 Comments

Measuring Relevance

:: The U.S. Jobs Deficit declined by 73,000 in September, however since it increased by 72,000 just one month prior, the result was a net improvement of an entire 1,000 jobs since July.

– By: Larry Walker, Jr. –

The ever elusive jobs deficit rose from 11,760,000 in July to 11,832,000 in August, and then pulled back to 11,759,000 based on yesterday’s Employment Situation Report. Employers added 114,000 jobs for the month, while the July and August figures were revised upward by 86,000. Thus, the U.S. realized a net gain of an even 200,000 Nonfarm jobs in September. And, since the U.S. needs to create a minimum of 127,000 jobs a month solely to keep pace with population growth; this results in an overall improvement to the jobs deficit of 73,000, as compared to the prior report. However, since the deficit increased by 72,000 in August, it really amounts to a net improvement of a mere 1,000 jobs since July.

Here’s the big picture. Today 12,088,000 Americans are officially unemployed (down from 12,544,000 in August). Another 6,427,000 are unemployed and want jobs, but have dropped out of the labor force and are not officially counted (down from 7,031,000 in August). Still another 8,613,000 are employed part-time for economic reasons (up from 8,031,000 in August). What this means is that 27,128,000 American’s are still unemployed or underemployed, an amount essentially unchanged since August. The truth is that if Barack Obama’s trickle-down-government approach had worked, then the jobs deficit wouldn’t be worse today than it was in December 2009, when it registered in at 11,479,000, yet it is.

In light of September’s minuscule improvement, how many jobs must now be created each month in order to reach full-employment? How long will this take? And, in light of the answer, is another four years of Obamanomics the cure? But first here’s a quick synopsis.

Synopsis

What is the jobs deficit? — It’s a measure of how far the United States has strayed from full-employment during the current economic recovery. More specifically, it tracks the shortfall in the number of jobs needed to keep up with population growth, and to recover those lost since the Great Recession.

Basically, the U.S. has needed to add 127,000 jobs a month since December 2007, the month the recession commenced, simply to keep up with population growth. Thus, a minimum of 7,366,000 new jobs have been needed since the recession began (58 months times 127,000). However, instead of adding jobs, the U.S. has instead lost 4,393,000 (see related table). So since we needed to add a minimum of 7,366,000, but instead lost 4,393,000, the sum of the two equals the current jobs deficit of 11,759,000 (see chart above). Got it?

Who initiated the benchmark, some right-wing economist? — No. The idea was actually initiated by Economist Paul Krugman. Here’s a quote from his December 2009 column: “Even if we add 300,000 jobs a month, we’re looking at a prolonged period of suffering — a huge cost from the Great Recession. So that’s kind of a minimal definition of success. Anything less than that, and it’s bad news.” But sadly, since December 2009, the U.S. has only averaged about 127,000 jobs a month. So in other words, we’ve basically been treading water since the measure was first established. For more, see Paul Krugman’s New York Times opinion piece entitled, The Jobs Deficit.

Updated Jobs Benchmark

Updating Mr. Krugman’s benchmark with the latest figures, we discover that to be meaningful, the number of jobs needed to return to more or less full employment by December of 2014 (the original target date), or within the next 27 months, is now 562,518 jobs a month, as follows:

In order to keep up with population growth, we would need to create 127,000 jobs times 27 months, or 3,429,000. Add in the need to make up for the jobs deficit and we’re at around 15,188,000 (3,429,000 + 11,759,000) over the next 27 months — or 562,518 jobs a month.

Since this isn’t going to happen under the evanescent policies of Barack Obama, we might as well extend the time frame. But, even if we extend the target date to 5 years from today, which will be more than 8 years from the time the recession ended, then the number of jobs needed to return to more or less full employment by September of 2017, or within the next 60 months, is now 322,983 jobs a month, as follows:

In order to keep up with population growth, we would need to create 127,000 jobs times 60 months, or 7,620,000. Add in the need to make up for the jobs deficit and we’re at around 19,379,000 (7,620,000 + 11,759,000) over the next 60 months — or 322,983 jobs a month.

Did the U.S. add 562,518 jobs last month? Nope. In fact we haven’t come anywhere close during the entire Obama recovery. Did U.S. employers add 324,200 jobs last month? Nope. We haven’t even come close to that, with the exception of the single month of May 2010, but those were just temporary Census jobs which disappeared in subsequent months.

Le Coup de Grâce

When averaged, the number of Nonfarm jobs created since the end of January of 2009 comes to a loss of -20,000 jobs a month. Well, that doesn’t work. So if we average the number of jobs created over the last 9 months, we arrive at 146,000 a month. That’s better. And when we divide this into the 4,393,000 jobs lost since the recession began, it tells us that at the current pace we should recover the jobs lost to the recession in another 30 months, or 2.5 years. That’s fantastic! It means it will only have taken 6.5 years to get back to square one!

The only problem with this less than rosy scenario is that since we still need to create a minimum of 127,000 jobs a month, in order to keep up with population growth, based on the 9-month average, the jobs deficit is only declining by 19,000 jobs a month (146,000 – 127,000). Thus, full-employment is more like 619 months away, or another 52 years. So four more years of the trickle-down-government approach places us on track to reach full-employment by around the year 2064. Huh? Sorry Democrats but, we can’t wait.

No matter how you spin the numbers, they aren’t good. Until we see the number of Nonfarm jobs expanding by a minimum of 322,983 a month, for a sustained period of at least five years, anything short is just bad news. The addition of 114,000 jobs in September was 65% short of the mark required to reach the long-term target. And with the national debt hovering above $16 trillion, and beginning its ascent towards $20 trillion, there’s really no good reason to consider a second Obama term. None!

The Obama-Biden program establishes a goal of creating 1,000,000 new manufacturing jobs over the next four years, which would be an improvement, considering their policies have thus far resulted in a loss of 610,000, since January 2009. But that only accounts for a potential of 250,000 jobs per year, or around 21,000 a month. What about the other 300,000 jobs?

In stark contrast, the Romney-Ryan Plan includes a goal of creating more than 12,000,000 jobs over the next four years, or more than 250,000 a month. So which plan is most likely in the best interests of the United States? The one we’ve already witnessed for the last four years, or something different? Vote Romney-Ryan for real change. Hey, it’s math! It’s arithmetic! It’s all about relevance! You can’t fool the jobs deficit.

“You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time.” ~ Abraham Lincoln

Data: Worksheet on Google Drive

Photo Credit: Direct Relevance | University of Miami, Department of Computer Science

Krugman’s Anti-Austerity Madness

/ L. M. Walker / 2 Comments

Kicking Common Sense Down the Road

– By: Larry Walker, Jr. –

When one of today’s most brilliant liberal economists recently mentioned the European fiscal crisis, he said, “Spain is suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that left Spanish industry uncompetitive with the rest of Europe. When the bubble burst, Spain was left with the difficult problem of regaining competitiveness, a painful process that will take years.”

Yet, when far less knowledgeable left-wingers, including the President, speak of America’s economic woes, they routinely regurgitate the meaningless thread, “We are suffering from 8 years of failed Bush policies.” But what does that mean? Aside from a flawed monetary policy which bails out cronies while treading on everyone else, and an out of control government which has become accustomed to borrowing and spending 50% more than its revenue, are we not also suffering the hangover from a huge housing bubble, which caused both an economic boom and a period of inflation that has left us uncompetitive with the rest of the world?

If it were possible for left and right to agree on our most pressing problems, perhaps we would have a chance of solving them, but when one ideology slovenly blames everything on the sum total of one man’s policies without distinguishing between what works and what doesn’t, we are condemned to the same infinite loop occurring in Europe. The only difference being that their fate ends with austerity, while ours ends with a plunge into a hyperinflationary abyss.

When referring to Europe’s current morass, economist Paul Krugman says, “But the truth is that the protesters are right. More austerity serves no useful purpose; the truly irrational players here are the allegedly serious politicians and officials demanding ever more pain.” Wait, austerity serves no useful purpose? It sounds like Mr. Krugman is saying that the protestors, fire bombers, and destroyers of personal property are the rational players, while serious politicians and officials seeking austerity are among the irrational. So what is austerity, and why would anyone in their right mind side with the protestors while deeming such measures irrational?

Austerity

In economics, austerity refers to a policy of deficit-cutting by lowering spending via a reduction in the amount of benefits and public services provided. Austerity policies are often used by governments to try to reduce their deficit spending and are sometimes coupled with increases in taxes to demonstrate long-term fiscal solvency to creditors. However, austerity policies don’t have to include tax hikes, and in fact as we shall see the optimal austerity policy actually involves a combination tax cuts paired with deficit reduction.

The key phrase above is “to demonstrate long-term fiscal solvency to creditors”. If there were no creditors, then politicians and government officials wouldn’t have to worry about austerity. If there were no creditors, nations could simply print their own currencies on an unlimited basis, and spend without consequence. But in the real world, since creditors exist, some measure of austerity is required no matter what emotions dictate. Besides, history itself teaches us that printing money without restraint is the surest path to the vicious spiral of hyperinflation, a large increase in the money supply not supported by gross domestic product (GDP) growth, which leads to rapid erosion of a nation’s currency and ultimately to ever more pain.

In the table below, I have summarized all the possible fiscal austerity combinations available to the United States and Europe. When viewed graphically the optimal policy choice should be clear. Although many Americans, including the President, think the way forward should involve some combination of spending cuts and tax hikes, credit ratings agencies disagree. For example, according to Fitch Ratings Co., “Fiscal Indecision Threatens US ‘AAA’ – Under current law, tax increases and spending cuts equivalent to about 5% of GDP will take effect in 2013 – if permanent, such a “fiscal cliff” could derail the US economic recovery…” Yet it’s not the spending cuts that are problematic, deficit reduction is a must, but rather the combination of tax hikes and spending cuts.

Following the Austerity Matrix, it turns out that:

  1. Tax hikes lead to the fiscal cliff no matter what happens with spending. Why? Because tax hikes lead to private sector austerity, resulting in job and benefit cuts, which leads to lower tax revenues and less economic output. So tax hikes should be off the table. The only reason they’re still being discussed in the United States is because of Obama’s “fairness doctrine”, which if you ask me is total nonsense. Besides, raising taxes on 1% of taxpayers won’t change anything for the other 99%, where the main problem is the lack of opportunities.

  2. Maintaining current tax rates can work, but only in conjunction with spending cuts. However, this only leads to slow growth, which is basically what we have now. Our current real gross domestic product (GDP) annual growth rate of 1.3% is not enough to change the trajectory of our ever increasing jobs deficit. If tax rates are maintained while spending levels are maintained or raised, we still wind up plunging over the fiscal cliff.

  3. The optimal fiscal austerity policy involves a combination of tax cuts and deficit reduction, which leads to rapid growth, or exactly what is needed following an economic crash. But, cutting taxes while maintaining or increasing spending levels only hurtles us over the fiscal cliff.

So there is only one viable fiscal austerity alternative: Cut taxes and reduce government spending. But this always brings up the same old moth-eaten question from faithless do nothings. How will you pay for the tax cuts? The apparently not so obvious answer is — with jobs.

Did you get that? Cutting tax rates across the board, which incidentally is included in the Romney-Ryan Plan, is not a way of giving anyone anything, since the government is merely enabling everyone to keep more of their own money. The dirty little secret is that this is how you grow an economy. When the government confiscates less money from the private sector, the economy eventually finds its footings and will dig its own way out of any hole. I challenge anyone to show me when this form of austerity has ever been implemented and failed to deliver greater revenues and higher levels of economic growth.

Because strait is the gate, and narrow is the way, which leads to life, and few there be that find it. ~ Matthew 7:14

At this point you’re probably thinking, “Well, Bill Clinton raised taxes and cut spending and everything was copacetic.” But according to history, that’s actually incorrect. Although it’s true that President Clinton raised taxes during his first term, government spending also increased, that is until 1995 when his Democratic party lost control of both Houses of Congress. It was actually during his second term when the austerity policy I’m talking about took place. That’s when Republicans passed the Taxpayer Relief Act of 1997, a reconciliation bill that reduced taxes and hence increased the deficit, paired with the Balanced Budget Act of 1997 (H.R. 2014 and H.R. 2015 respectively), each signed by President Clinton. Thus, it was actually tax cuts in conjunction with deficit reduction which produced the boom of the 1990’s, not the Clinton tax hikes.

The only differences between 1997 and today are that the United States wasn’t teetering on the edge of a fiscal cliff in the late 1990’s, and Republicans don’t currently control both Houses of Congress, but the solution to greater revenues, less spending and higher economic growth is the same.

Sophism

Austerity measures are the only way to avoid the bitter lessons of the Weimar Republic, and Zimbabwe. In this sense, serious politicians and government officials recommending the correct form of austerity, a combination of tax cuts and deficit reduction, are among the World’s most rational. But where are they? I actually agree with Mr. Krugman when he infers that the brand of austerity being practiced in Spain, tax hikes in conjunction with spending cuts, is detrimental, but that’s only one of nine possible fiscal austerity combinations, and as shown above — it’s one that doesn’t work. But, although Mr. Krugman has rightly identified the problem, his solution — printing money, and continuing to borrow and spend — is even more irrational.

Not all austerity programs are bad. Tax cuts paired with deficit reduction is the only austerity plan that works, and the only one any nation will ever need. Egging on protestors and attempting to create rifts between Germans and Spaniards solves nothing, nor does begging creditors to pour billions of dollars into a bottomless pit. Thus madmen like Mr. Krugman and those swigging from the same jar of Kool-Aid may be viewed as nothing more than facetious enablers of irrational whiners, crybabies and in some cases common criminals.

On June 7, 2012, Fitch Ratings downgraded Spain’s credit rating by three notches from A to BBB, or to just above junk bond status. So Spain skipped A (-), BBB (+) and sank straight to BBB with a negative outlook. This means that its borrowing costs went up, as investors demand higher and higher interest rates to compensate for the increased risk of default. It also means that fewer and fewer investors are inclined to funnel their savings into such improvidence, at least not until they see the fruits of a serious and meaningful austerity plan.

In the meantime, Spain’s loan delinquencies as a percentage of all loans continues to spike, its housing prices continue to deteriorate adding to the spike in loan delinquencies, and its unemployment remains at 24.63% further adding to its woes and the stressed loan market. If Spain follows the advice of Mr. Krugman, and rejects some form of austerity, it will continue on the course of a fourth-rate, junk bond servant, destined to borrow more and more simply to cover its debt service until it is eventually toppled by an adversary, plunges back into the Stone Ages, or otherwise succumbs to extinction.

Wrap

On September 14, 2012, Egan-Jones Ratings Co. downgraded its United States sovereign rating to AA (-) from AA on concerns that the Fed’s new round of quantitative easing, or QE3, will hurt the U.S. economy. In a note, the ratings agency said, “From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.”

Technically, the United States is worse off than Spain; the only consolation being a lower unemployment rate. But then again we don’t count all of our unemployed. In the United States persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Thus, when someone is unemployed but wants to work, if they have not looked for work in the last 4 weeks they are no longer counted (i.e. not in labor force). In fact, according to the Bureau of Labor Statistics – Table A-16, a total of 7,018,000 working age persons have dropped out of the labor force since January of 2009. If they were counted, the number of unemployed would be 19,562,000, and the official unemployment rate would be 12.1% (19,562,000 / 161,663,000).

From my perspective, despite all of the distractions, the Romney-Ryan ticket is more serious about tackling the nation’s deteriorating debt and employment trajectories, than the Obama-Biden road show, which continues to make promises it knows it can’t deliver. Obama-Biden had a fair shot and only made our fiscal situation worse than it was four years ago. It was on Obama’s watch that, the United States sovereign credit rating was downgraded for the first time in history (with a negative outlook). Although not every ratings agency participated in the downgrade, those that haven’t are simply waiting for the outcome of the November elections.

What should be clear is that another four years of irrational fiscal policies won’t make things better. There are only so many combinations of fiscal austerity measures, and only one leads to rapid economic growth. The Romney-Ryan Plan, which involves a combination of across-the-board tax cuts paired with deficit reduction fits the bill. In contrast, the Obama-Biden script, which by law is already fixed on a Grecian-Spaniard style combination of tax hikes and spending cuts doesn’t. Vote Romney-Ryan for serious-minded fiscal leadership, or vote Obama-Biden for irrational, Weimarian, sophistic, subordination.

References:

Paul Krugman: Europe’s Austerity Madness – Here’s why the protesters in Spain and Greece are right that inflicting more and more pain serves no useful purpose.

Anthony B. Sanders: Spain’s Loan Delinquency Spike as House Prices, Unemployment Continue to Deteriorate

Photo Credit:

Mount Holyoke College – The Weimar Republic and Revolt 1918-23 – The photograph shows children playing with bundles of worthless money.

From AAA to AA- in Four Years

/ L. M. Walker / 4 Comments

The New National Curse

– By: Larry Walker, Jr. –

In the year 2009 double-dealing returned to Washington, DC. Shortly after his inauguration, President Barack Obama pledged to cut the nation’s annual budget deficit in half by the end of his first term. At the time, he identified exploding health-care costs as the chief culprit behind rising federal deficits. He warned that the country could not continue its current rate of deficit spending without facing dire economic consequences. He said, “I refuse to leave our children with a debt they cannot repay. … We cannot and will not sustain deficits like these without end. … We cannot simply spend as we please.” Yet within four short years, the USA’s sovereign credit rating has been downgraded three times, from AAA to AA(+) on August 5, 2011, to AA on April 15, 2012, and again to AA(-) on September 14, 2012.

Talk is cheap. By September 20, 2012, after 44 month’s of empty words, health care costs have continued to rise. Having risen by 3.9% in 2010, health care costs are expected to rise by another 7.5% in 2013, or more than three times the projected rates for inflation and economic growth. As if this wasn’t bad enough, the national debt has exploded by $5,387,546,974,859 in the last 44 months, resulting in an average annual increase of $1.5 trillion, versus an average of $612.4 billion during the presidency of George W. Bush (see chart below). And there are still four month’s to count until inauguration day.

National Debt: The National Curse

“I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country.” – Andrew Jackson –

On Jan. 8, 1835, all the big political names in Washington gathered to celebrate what Democratic President Andrew Jackson had just accomplished. The national debt had been paid. It was the only time in history when the U.S. was debt free, and it lasted exactly one year. Back then like today, it wasn’t easy for politicians to slash spending — that is until Andrew Jackson came along.

During the election of 1828, Jackson’s opponents referred to him as a “jackass”. Jackson liked the name and used the jackass as a symbol for a while, but it died out. However, it later became the symbol for the Democratic Party when cartoonist Thomas Nast popularized it. But based upon the growth of the national debt over the past 44 months, the symbol no longer fits, or does it?

“For Andrew Jackson, politics was very personal,” says H.W. Brands, an Andrew Jackson biographer at the University of Texas. “He hated not just the federal debt. He hated debt at all.” Before he was president, Jackson was a land speculator in Tennessee. He learned to hate debt when a land deal went bad and left him with massive debt and some worthless paper notes. Ah, so unlike Barack Obama, Andrew Jackson brought some practical business experience to the White House, just like Mitt Romney will.

When Jackson ran for president, he knew his enemy: banks and the national debt. He called it the national curse. People ate it up. In Jackson’s mind, debt was “a moral failing,” Brands says. “And the idea you could somehow acquire stuff through debt almost seemed like black magic.” Yet if you listen closely to today’s Democratic Party, the national debt is no longer its enemy, but rather the anti-debt, fiscally responsible Tea Party.

Andrew Jackson pledged to pay off the debt. In order to do so, he took advantage of a huge real-estate bubble that was raging in the Western U.S. The federal government owned a lot of Western land — so Jackson started selling it off. He was also ruthless on the budget. He blocked every spending bill he could. “He vetoed, for example, programs to build national highways,” Brands says. “He considered these to be unconstitutional in the first place, but bad policy in the second place.” But nowadays, we hear repeatedly from Barack Obama stuff like, “The House should put aside partisan posturing and pass the measure authorizing $109 billion in spending over two years. So much of America needs to be rebuilt right now. We’ve got crumbling roads and bridges…” In other words, forget about the credit downgrade, borrow and spend now, pay later.

When Jackson took office in 1829, the national debt was about $58 million. Six years later, it was paid in full, and the government was running a surplus. This created a new problem: What to do with all that surplus money? So Jackson decided to divide it among the states. By the way, the phrase “the government was running a surplus” doesn’t mean the same thing as Bill Clinton’s four consecutive annual budget surpluses. Although that was a step in the right direction, the national debt was still over $5.7 trillion when he left office.

Andrew Jackson was a stand up guy, he fulfilled his pledge. But unfortunately, the debt would only remain at zero for one year. By January 20, 2001, the national debt had grown to $5,727,776,738,305. From the time Andrew “Jackass” Jackson paid it off, until the inauguration of Republican President George W. Bush, the national debt grew at an annual average of $34.7 billion over the ensuing 165 years.

Forward: To Insolvency

In the year 2000, George W. Bush was elected on a pledge to cut income taxes. By the end of his term, the national debt had grown by another $4.9 trillion — to $10.6 trillion or at an annual average of $612.4 billion over 8 years. Although in retrospect, most of the Republican Party finds his fiscal record detestable, it is notable that Bush never once pledged to pay down the national debt or cut the federal deficit. In fact the federal government was running at a slight surplus at the time of his election, so the federal budget wasn’t an election year issue. Nevertheless, the USA’s sovereign credit rating remained intact at AAA throughout both of his terms, and its debt-to-GDP ratio averaged around 62.4%.

Finally in the year 2008, under the banner of Hope and Change, along came Barack H. Obama, portending to be all things to everybody. After making a solemn promise to cut the federal deficit in half by the end of his first term, many thought he represented the second coming of old Jackass himself. But instead, from the time of his inauguration the national debt has grown by an additional $5.4 trillion, not only exceeding the Bush presidency, but in double-time. That’s a fact! The national debt now stands at just over $16.0 trillion, having grown at an annual average of $1.5 trillion over the last 4 years. To top it off, the U.S. sovereign credit rating has been downgraded three times on his watch, from AAA to AA(+) on August 5, 2011, to AA on April 15, 2012, and again to AA(-) on September 14, 2012. Meanwhile, the U.S. debt-to-GDP ratio has risen to 104% and is projected to reach 110% a year from today.

Conclusion

As Andrew Jackson put it, the national debt is “the national curse.” In the first 165 years after the debt was paid off in 1835, it rose by an average of $34.7 billion per year. And although it would increase by an average of $612.4 billion over the next eight years, during President Bush’s term, that doesn’t excuse President Obama. Besides, how can we hold Bush accountable for something he never pledged to do? Nonetheless, Barack Obama is on the ballot this year, not Bush. And he pledged to cut the deficit in half during his first term, but it has instead doubled. Your word is your bond.

You might be thinking, “So what? We can’t afford to go back to the failed policies of George W. Bush, because that’s what caused health care costs to spiral out of control, and that’s the reason the debt was so high to begin with.” Yeah, like that makes sense. Stop listening to far-left lies and think for yourself. As a consequence of Barack Obama’s shortsightedness, the USA’s sovereign credit rating has been downgraded three times, from AAA to AA(+) on August 5, 2011, to AA on April 15, 2012, and again to AA(-) on September 14, 2012. Another downgrade or two and U.S. backed securities will no longer be suitable for many bond investors. And what happens when there are more sellers of U.S. backed debt than buyers? Interest rates will skyrocket. And what happens when interest rates rise? Everyone’s borrowing costs will increase, as will the USA’s annual budget deficits.

Now it’s election time, and thus time to decide. Who’s to blame for Obama’s improvidence, Bush, the Republican Party, the Tea Party, or perhaps simply Obama himself? Well, allow me to spell out the American way. If you make a pledge and fail to deliver, there’s no one to blame but yourself. Not only did Obama fail to cut the deficit in half by the end of his first term, but the USA’s annual deficits have more than doubled, and its credit reputation has been trashed. Barack Obama has cursed the nation, and now is the time to cut his career short. And here’s my pledge, if we elect Mitt Romney and he screws up, I will personally help to expel the bum four years from now. But just for today, the ‘jackass’ in chief has got to go.

_____________________________________________________________

Addendum: Ratings History

Egan-Jones rating history for United States Government:

  • 9/14/2012 AA to AA(-)

  • 4/15/2012 AA(+) to AA (Negative outlook)

  • 7/16/2011 AAA to AA(+)

Standard & Poor’s rating history for the United States Government:

  • 08/05/2011 AAA to AA(+) (Negative outlook)

_____________________________________________________________

Photo Credit Via: Greetings Jackass

Labor Force Stagnation Concealed by Obama

/ L. M. Walker / 2 Comments

25 More Terms

– By: Larry Walker, Jr. –

Forget about four more years. Based on the USA’s current trajectory, it would take another 25 terms, or 98 years, for Barack Obama’s bizarre economic policies to restore the U.S. Labor Force to where it should be in the next four years, when compared to the growth rates achieved under the policies of George W. Bush. And then once that’s been achieved, based on the trajectory of the USA’s 11,832,000 Jobs Deficit, it will take something on the order of infinity to reach full-employment. So what’s the point of another Obama term, to fundamentally destroy the Global economy?

Earlier this month micro-journalists were roused over the fact that 368,000 additional workers dropped out of the labor force during the month of August. For the first time many were awakened to the fact that this was the only reason the official unemployment rate declined from 8.3% to 8.1%, but that’s about as far as they ventured. A handful went on to extrapolate that the real unemployment rate is actually 11.2% when based on the same labor force participation rate in place when Obama entered office, but hindsight is 20/20. A more substantive analysis would involve utilizing this information in order to project where we are headed.

Backwards

Last Friday, Egan-Jones Ratings Co. downgraded its U.S. sovereign rating to AA- from AA on concerns that the Fed’s new round of quantitative easing, or QE3, will hurt the U.S. economy. The ratings agency said the Fed’s plan of buying $40 billion in mortgage-backed securities a month and keeping interest rates near zero does little to raise GDP, reduces the value of the dollar, and raises the price of commodities. In a note Egan-Jones said, “From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%. In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.”

Topping this, according to the Economic Cycle Research Institute, the federal government’s release of overstated preliminary data is obscuring real-time evidence of recession. For example, the Obama Administration is purposefully overstating preliminary labor statistics in order to give a boost to his re-election bid, but this is a dangerous practice, because by the time economists are able to determine that we are in recession, it will be too late to issue a warning. In contrast, under the Bush Administration preliminary statistics were typically understated, and thus we had warning several month’s prior to the Great Recession.

Based on the August Employment Situation Report, the economy added a mere 96,000 jobs, while June and July’s numbers were revised downward by 41,000. Thus, the U.S. realized a net gain of just 55,000 Nonfarm jobs in the month of August. But micro-journalists ran with the 96,000 figure, basically ignoring a history of 42 consecutive months of subsequent downward revisions, as though this figure won’t also be revised downward next month. Nevertheless, since the economy needs to create 127,000 jobs a month just to keep up with population growth, the result led to an increase in the jobs deficit, which currently stands at 11,832,000.

As outlined in the last post, U.S. Jobs Deficit Increases by 72,000 in August, to be meaningful, the number of jobs needed to return to more or less full employment by December 2014, or within the next 28 months, is now 549,571 jobs a month. And even if we extend the target date to 5 years from today, which will be more than 8 years from the time the recession ended, the number of jobs needed to return to more or less full employment by August 2017, or within the next 60 months, is now 324,200 jobs a month. So even though micro-journalists ignored the fact that only 55,000 jobs were added in August, and instead sought to convince the public that 96,000 were added, it really doesn’t matter. What should be made clear is the point that we will never reach full-employment at the current trajectory.

Labor Force Stagnation

According the Bureau of Labor Statistics, the labor force grew by 10,436,000 during George W. Bush’s term, which encompassed two recessions (see chart below). During the first recession, which lasted from March 2001 to November 2001, the labor force grew by 539,000. And even during the first 13 months of the Great Recession (end of the Bush term), from December 2007 through January 2009, the labor force continued to expand by 401,000. In contrast, during Barack Obama’s full term to-date, the labor force has grown by a mere 409,000. In other words during Obama’s entire term the labor force has grown at a recession pace.

Even worse, the Great Recession ended in June 2009, yet from July 2009 to August 2012 the labor force actually shrank by 85,000. This means that, under the policies of Barack Obama, the U.S. labor force has performed worse than during the most recent recessions – way worse. Thus, the economy is not growing, it’s shrinking. So what about that?

  • Labor Force Growth During Bush Term (+)10,436,000

  • Annual Labor Force Growth Rate During Bush Term 0.907%

  • Labor Force Growth During Obama Term (+)409,000

  • Annual Labor Force Growth Rate During Obama Term 0.076%

  • Labor Force Contraction Since June 2009 (-)85,000

The Labor Force grew at an annual rate of 0.907% during both Bush terms, which is close to the rate of population growth, while annual growth has been almost immeasurable during Obama’s term, at just 0.076%. So what does this mean? It means that under Barack Obama’s trickle-down-government, borrow-and-spend economic policies, and based on the USA’s current trajectory, it will take approximately 25 more terms (98.1 years) for the labor force to grow to where it should be in the next four years. So perhaps instead of crying “four more years,” Obama loyalists should be shouting “98 more years,” because four more just won’t cut it.

Aside from the Constitution, the only other problem with anointing Barack Obama as our first Dictator is that even if all 7,031,000 Americans who have dropped out of the labor force during his term, those who still want jobs now, suddenly decided to return to the labor market, there’s no guarantee they would find work, because of the Jobs Deficit which currently stands at 11,832,000. In fact, based on the USA’s current trajectory, it will take something on the order of infinity to reach full-employment. Thus, hardcore Obama loyalists might as well be shouting, “Obama forever”.

But fortunately, most of us don’t have forever to wait, which is precisely why we need to end this ridiculous charade right now. There’s only one Plan on the ballot this November, and only one man capable of turning things around. And by turning things around, no, I don’t mean going back to the same policies which caused the last recession. That would be lame. I mean returning our government to some semblance of honesty and integrity. A POTUS who ignores his own jobs council, and then inundates the nation with lies and distortions, while concealing the truth about the economy, isn’t a problem solver; he is the problem of our day, the present, right now, today.

The first step in repairing the Republic is to vote this deceiver out of office. The second step involves hiring a turnaround guy, someone who doesn’t know how to fail, and then trusting in God to help him get us back on the right track.

Data: Worksheet on Google Drive

U.S. Jobs Deficit Increases by 72,000 in August

/ L. M. Walker / 3 Comments

Obama’s Cure – More Jokes

– By: Larry Walker, Jr. –

The U.S. Jobs Deficit increased by 72,000 in August, rising from a deficit of 11,760,000 in July to 11,832,000, based on Friday’s Employment Situation Report. The economy added a mere 96,000 jobs in August, while June and July’s numbers were revised downward by 41,000. Thus, the U.S. realized a net gain of 55,000 Nonfarm jobs in the month of August. But since the economy needs to create 127,000 jobs a month in order to keep up with population growth, this resulted in an overall increase to the jobs deficit of 72,000, as compared to the previous report.

Having been informed of the news prior to his DNC acceptance speech, that the hopes and dreams of another 72,000 Americans had been decimated, along with those of an estimated 27 million who were already unemployed or underemployed, Barack Obama slid into his quotidian comedy routine, ridiculing conservative economic policies, stating that, “They want your vote, but they don’t want you to know their plan. And that’s because all they have to offer is the same prescription they’ve had for the last thirty years: ‘Have a surplus? Try a tax cut.’ ‘Deficit too high? Try another.’ ‘Feel a cold coming on? Take two tax cuts, roll back some regulations, and call us in the morning!’”

Here’s the big picture. We had a recession which lasted for the last 12 month’s of the Bush term through the first 6 month’s of Obama’s, not for the last 30 years. Today 12,544,000 Americans are counted as officially unemployed. Another 7,031,000 are unemployed and want jobs, but have dropped out of the labor force and are thus not officially counted. And still another 8,031,000 are employed part-time for economic reasons. The truth is that if Barack Obama’s government-down, borrow-and-spend policies worked, then the jobs deficit wouldn’t be worse-off today than it was in December 2009, yet it is. So enough with the jokes, how many jobs need to be created each month in order to reach full-employment, and how long will it take? And in light of the answer, is four more years of Obama’s deficit spending and light-mindedness the cure?

Obama Got Jokes

No Mr. President, it’s not a surplus, or a cold that we feel coming on, it’s something much more fatal. You see, the U.S. National Debt surpassed the $16 trillion mark before Obama took to the podium. And why is this problematic? Well for one, the USA’s credit rating was already downgraded once on Obama’s watch, on August 5, 2011, the first such occurrence in American history. And secondly, because Barack Obama’s prescription for all that ails our economy is the same one he’s offered for the last 4 years: ‘Debt too high? Borrow and spend some more.’ ‘Entitlement spending bankrupting the nation? Add a new entitlement (Obamacare), then borrow and spend even more.’ ‘Job creation numbers insufficient? Tell more jokes, then borrow and spend a little bit more.’

Yet while Barack Obama has elected to waste the last four years of our lives running up the national debt, while capping on conservative economic policies, the U.S. jobs deficit has increased from 5,165,000 in December 2008 to 11,832,000, an increase of 6,667,000 (see chart below). Essentially, what this means is that since Obama implemented his $831 billion Stimulus plan, the economy has been unable to create a sufficient number of jobs for 6,667,000 new entrants, many of whom have been ushered straight out of high school or college into hopelessness and generational dependency. Do you think this is funny? I don’t. Exactly where have four years of Barack Obama’s borrow-and-spend prescription refills landed us?

Updated Jobs Benchmark

Updating Economist Paul Krugman’s job creation benchmark with the latest figures, we discover that to be meaningful, the number of jobs needed to return to more or less full employment by December of 2014, or within the next 28 months, is now 549,571 jobs a month, as follows:

  • In order to keep up with population growth, we would need to create 127,000 jobs times 28 months, or 3,556,000. Add in the need to make up for the jobs deficit and we’re at around 15,388,000 (3,556,000 + 11,832,000) over the next 28 months — or 549,571 jobs a month.

If we extend the target date to 5 years from today, which will be more than 8 years from the time the recession ended, then the number of jobs needed to return to more or less full employment by August of 2017, or within the next 60 months, is now 324,200 jobs a month, as follows:

  • In order to keep up with population growth, we would need to create 127,000 jobs times 60 months, or 7,620,000. Add in the need to make up for the jobs deficit and we’re at around 19,452,000 (7,620,000 + 11,832,000) over the next 60 months — or 324,200 jobs a month.

Did the U.S. add 549,571 jobs last month? Nope. In fact we haven’t come anywhere close in any month during the entire Obama recovery. Did employers add 324,200 jobs last month? Nope. In fact, we haven’t even come close to this number in any month during the entire Obama recovery, except for the single month of May 2010, but those were just temporary Census jobs that went away in subsequent months (see the related table).

The sad truth is that the U.S. only added 55,000 Nonfarm jobs in August (+96,000 minus 41,000 of previous overstatements). And because the jobs deficit increased by 72,000, we are currently on track towards a permanent decline. In other words, it is impossible to reach full-employment while the jobs deficit is increasing. Thus, we are NOT moving in the right direction, we are moving towards another recession. We have wasted 44 months coping with the unreasonable economic policies of Barack Obama, and what did we get in return? We are worse off today than before he started.

Incomplete or Deficient?

At this point, we either need to create 549,571 jobs each and every month to be on a track towards full employment within the next 28 months, or 324,200 jobs each and every month to be on track towards full employment within the next 5 years (which will be more than 8 years from the end of the recession). And although Barack Obama has orated a plan which would add 600,000 new jobs in Natural Gas by 2020 (or over the next 8 years), and 1,000,000 new Manufacturing jobs over the next four years, we are forced to give his plan a grade of “D” for deficient. Under Obama’s government-down, borrow-and-spend economic policies, most of us will indeed be in “a better place” by the time the U.S. reaches full-employment.

A lot of my friends, neighbors, and clients lost their jobs, lost their homes, divorced or filed for bankruptcy over the last 3 years and eight months. My neighborhood has been decimated, as our homes have lost a third of their value. Our business revenues have declined and leveled off at a lower tier. And as far as I can see, only one political party offers any hope of turning things around. The Obama-Biden plan includes a goal of creating 1,000,000 new manufacturing jobs over the next four years, which would be great, because their policies have thus far resulted in a loss of 582,000 manufacturing jobs since January 2009. In stark contrast, the Romney-Ryan Plan includes a goal of creating more than 12,000,000 jobs in the next four years, which is entirely doable.

I don’t care what the policies are as long as they lead to the desired result. The Obama-Biden goal is deficient. Even if the plan works, it won’t result in a sufficient number of new jobs to even keep pace with population growth (127,000 a month / 1,524,000 per year). In fact, Obama has set the bar so low that his plan is incapable of eliminating the jobs deficit, even if granted a second term. So what’s the point? Based on our current trajectory, Obama’s plan never comes close to full-employment, ever.

If you think that adding $5.3 trillion to the national debt over four years, establishing a goal of 1,000,000 new jobs when more than 12,000,000 are needed, and sprinkling it over with meaningless ramblings of a far-left gagman is a plan, then you might need to get your head examined. But if the cure for what ails America today really does involve reducing the growth of government spending, reducing income taxes and capital gains taxes, reducing the number of government regulations, and creating more than 12,000,000 new jobs in the next four years, and you reject it in favor of the former, then God help us all. If you’re still sane after filtering through all the nonsense, then you know what you have to do. Vote for the Plan, there’s only one.

Data: Worksheet on Google Drive

Obama’s Jobs Recovery — In Temporary Help Services

/ L. M. Walker / 1 Comment

One Term Wonder

Symptoms of Government-Down, Borrow-and-Spend Economics

– By: Larry Walker, Jr. –

According to Barack Obama, “We tried this trickle-down fairy dust before. And guess what — it didn’t work then, it won’t work now. It’s not a plan to create jobs.” But only the most gullible members of the Democratic Party would find such words edifying. What really matters to the majority of Americans, a point all but ignored by the Obama-Biden Entourage, is the fact that since the beginning of the Great Recession, a total of 4,778,000 Nonfarm Jobs have been entirely wiped out, and what we have been waiting to hear is a coherent plan whereby they might be recovered, not the comedic rhetoric of a left-wing jester.

In reality what Mr. Obama’s words describe are his own government-down, borrow-and-spend, loot-and-plunder policies, which have not only failed to add a single net Nonfarm Job (see chart below), but have instead added more than $5 trillion to the National Debt in just four years, resulting in the first credit rating downgrade in U.S. history. Instead of inundating the nation with more empty rhetoric, what every American deserves to know is the truth regarding where we stand, and how furthering Mr. Obama’s government-down, borrow-and-spend policies would help to restore both America’s credit rating and American jobs.

An analysis of real facts and figures, supplied by the U.S. Bureau of Labor Statistics, finds that during the Obama-Biden Administration a total of 316,000 Nonfarm Jobs have been lost, and regarding Private Sector Jobs, out of a mere 332,000 which have been recovered during the Obama-Biden Dynasty, every single one can be traced directly to the Temporary Help Services Industry. So when it comes to jobs, the pomposity we’ve all heard repeated over and over again by the Obama-Biden Crew and its cheerleading squad, including those prone to media-bias, is just that. A more substantive analysis begins.

Total Nonfarm Jobs

Examining the growth (decline) in Total Nonfarm Jobs [Private Sector + Government] since January 2001, it is clear that job creation is not something the Obama-Biden Administration should be bragging about. Here’s why (see chart below).

Total Nonfarm Jobs

  • From the end of January 2001 through the end of January 2008, a total of 5,557,000 Nonfarm Jobs were gained, during the Bush Administration.

  • During the last year of the Bush Administration, as a result of the Great Recession, from the end of January 2008 to the end of January 2009, a total of 4,462,000 Nonfarm Jobs were lost.

  • Thus, a total of 1,095,000 Nonfarm Jobs were gained during the Bush Administration.

  • During the Obama Administration, from the end of January 2009 through July 2012, a total of 316,000 Nonfarm Jobs have been lost.

  • Overall, we are still 4,778,000 Nonfarm Jobs in arrears, from a record high established by the Bush Administration at the end of January 2008.

Thus, in terms of Total Nonfarm Jobs, 1,095,000 were added during the Bush Administration, a rather pathetic record since we need to create 1,524,000 jobs a year (127,000 per month) just to keep up with population growth. In comparison, after nearly four years, and $5.3 trillion in new federal debt, not a single Nonfarm job has been added by the Obama-Biden Administration, but rather 316,000 have been lost. In spite of the policies of Obama-Biden, Nonfarm Jobs are still 4,778,000 short of the January 2008 peak, so gullible Obama-Biden loyalists need to find something else to showboat.

Total Private Sector Jobs

After cringing at the Total Nonfarm statistics above, gullible Obama-Biden loyalists will say that what they were really bragging about was their record on Private Sector Jobs (exclusive of Government). Okay, so let’s examine the growth (decline) of Private Sector Jobs since January of 2001.

Total Private Sector

  • From the end of January 2001 through the end of January 2008, a total of 4,016,000 Private Sector Jobs were gained, during the Bush Administration.

  • From the end of January 2008 to the end of January 2009, due to the Great Recession, a total of 4,662,000 Private Sector Jobs were lost, during the Bush Administration.

  • Thus, a total of 646,000 Private Sector Jobs were lost, during the Bush Administration.

  • During the Obama-Biden Administration, from the end of January 2009 through July 2012, a total of 332,000 Private Sector Jobs have been recovered.

  • Overall, Private Sector Jobs are still in arrears by 4,330,000 from a record high established by the Bush Administration at the end of January 2008.

So in terms of Private Sector Jobs, we have to hand it to Obama-Biden. While the Bush Administration lost 646,000 Private Sector Jobs over eight years, the Obama-Biden Administration has recovered 332,000 over the last four years. However, since we really need to create 1,524,000 jobs a year (127,000 per month) just to keep up with population growth, and since Private Sector Jobs remain 4,330,000 short of the January 2008 peak, the Obama-Biden Administration’s record isn’t really worth grandstanding. In fact, when government-down supporting, Obama-Biden loyalists discover the subsector in which these jobs were added, they should run as far away from their Party’s chosen platform as they can get.

Which Subsector(s) Gained Jobs?

Which areas of the Private Sector gained jobs during the Obama-Biden Administration? To know the answer, one must comb through all of the various industries detailed by the Bureau of Labor Statistics, in Table B-1, sector by sector. Were jobs gained in Mining and Logging, Construction, or Manufacturing? No. What about in the Wholesale Trade, Retail Trade, or Transportation and Warehousing? Nope. How about Information, Financial Activities, Education and Health Services, Leisure and Hospitality, or Other Services? Nope.

To be precise, the only sector of the economy where you’ll find any net jobs growth during the Obama-Biden Administration is under the Professional and Business Services category, and there only in the subsector named Temporary Help Services (under Professional and Business Services >> Administrative and Waste Services >> Administrative and Support Services >> Employment Services >> Temporary Help Services).

Temporary Help Services (NAICS 56132) – The temporary help services industry comprises establishments primarily engaged in supplying workers to clients’ businesses for limited periods of time to supplement the working force of the client. The individuals provided are employees of the temporary help service establishment. However, these establishments do not provide direct supervision of their employees at the clients’ work sites. So let’s examine the growth (decline) of Temporary Help Service Jobs since January of 2001.

Temporary Help Services Jobs

  • From the end of January 2001 to the end of January 2009, a total of 600,000 Temporary Help Service jobs were lost, during the Bush Administration. [Note: This accounts for nearly all of the 646,000 Private Sector Jobs lost over the period.]

  • During the Obama-Biden Administration, from the end of January 2009 through July 2012, a total of 576,000 Temporary Help Service jobs have been recovered. [Note: This accounts for all of the 332,000 Private Sector Jobs recovered during the period, minus losses in other sectors.]

So 600,000 Temporary Help Service jobs were lost during the Bush Administration, and the Obama-Biden Administration was able to recover 576,000 of them. In effect, since a total of 646,000 Private Sector Jobs were lost during the Bush Administration, among them, 600,000 or almost all were Temporary Help Service jobs. Since then, the Obama-Biden Administration has recovered a total of 332,000 Private Sector Jobs, and every single one of them, 576,000 minus losses in other sectors, were in Temporary Help Services.

Conclusion

From the end of January 2001 to the end of January 2009, a total of 1,095,000 Nonfarm Jobs were gained during the Bush Administration. In contrast, during the Obama-Biden Administration, from the end of January 2009 through July 2012, a total of 316,000 Nonfarm Jobs have been lost. Meanwhile, as Barack Obama, Joe Biden and their gullible loyalists boast about this great accomplishment, we are still 4,778,000 Nonfarm Jobs, and 4,330,000 Private Sector Jobs short of the record highs established by the Bush Administration at the end of January 2008. Even worse, since the population continues to grow, from the start of the Great Recession the real jobs deficit in the U.S. has increased to 11,760,000. That’s the record. Those are the facts. That’s the truth.

Like it or not, the only platform on the ballot this November which includes a plan and a promise to create more than 12,000,000 middle-class jobs over the next four years is the Romney-Ryan platform. In contrast, the plan and promise outlined by the Obama-Biden platform, to-date, includes more gloating, more lofty rhetoric, more special interest tax breaks, more deficit-financed subsidies, more uncertainty, more divisiveness, more government dependency, more government regulation, more borrowing and spending, higher health care costs, higher taxes, and with any luck a few more Temporary Help Service jobs.

It’s time to wake-up. It’s time to care. It’s time to do what’s in your best interests and that of your country. It’s time to stop believing in myths, and time to ‘Believe in America’.

“It is impossible to calculate the effect of deficit-financed government spending on demand without specifying how people expect the deficit to be paid off in the future.” ~ Theory of Rational Expectations

Chart Data | At Google Drive