Manipulation 201: Playing With Unemployment

February 4, 2012August 18, 2017 / L. M. Walker / 3 Comments

*“Mene, Mene, Tekel u-Pharsin” ~ Book of Daniel, Ch. 5 *

* By: Larry Walker, Jr. *

The writing’s on the wall! The massive decline of new entrants to the civilian labor force, which is shown graphically in the chart above, directly impacts the unemployment rate, making the employment situation appear far better than it actually is. If the 9.3 million workers who have effectively dropped out of the labor force, since the end of 2008, were instead of being excluded, counted as unemployed, the real unemployment rate would be 13.0% instead of yesterday’s published rate of 8.3%. Even if only 55.0% of those who have been incontestably and wrongfully removed from the labor force were counted, which would be consistent with the eight-year average prior to Obama, the real unemployment rate would be 10.9%, not 8.3%. Never before in history has there been a more blatant manipulation of official labor statistics.

Those focusing all their attention on the number of jobs created in recent months are focusing on the wrong data. Lest we forget, the Bureau of Labor Statistics includes in its definition of the word employed – “persons 16 years and over in the civilian non-institutional population who, during the reference week, did any work at all (at least 1 hour) as paid employees.” So for all we know, a huge portion of those 200K and some odd jobs, allegedly created last month, were people hired for one hour, paid with taxpayer subsidized grants or loans, and working to register democratic voters in an effort to guarantee another round of Obamanomics. You laugh!

While we do need to watch out for the above, we really need to focus on the number of persons who have been summarily deleted from the labor force over the past three years. According the Bureau of Labor Statistics, the civilian labor force declined by 802,000 over this period. And even worse, another 8,481,000 new entrants, the majority of whom would normally have entered the labor force, are unaccounted for. So where are they? The Great Recession officially ended in June of 2009, yet 9.3 million Americans have gone missing over the past three years and one month. Thus, the question is, are they really missing, or has someone manipulated the unemployment rate in an effort to improve Obama’s chances for re-election?

The dilemma posed by a declining labor force is that as the civilian non-institutional population continues to grow by approximately 1.0% each year, millions of potential workers are forced out of the market. In other words, if there are not enough jobs for the existing workforce, then there are no jobs at all for the approximately 2 million new entrants who come into the job market each year. The devastating result is that a smaller proportion of the populace is working today, to support a much larger cluster of retirees, the unemployed, and those who are otherwise unaccounted for.

As you can see in the table above, according to the Bureau of Labor Statistics (Table A-1, not seasonally adjusted), the labor force grew from 142,583,000 at the end of the year 2000, to 154,287,000 by the end of 2008, for an increase of 11,704,000 workers over the eight-year period immediately preceding Obama. As such, the labor force was expanding by an average of 1,463,000 new entrants per year, for the eight years prior to 2009.

But from the beginning of 2009 through the end of 2011, the labor force declined from 154,287,000 to 153,617,000. Thus, after three consecutive years of Obamanomics, the labor force declined by a total of 670,000, for an average loss of 223,333 workers per year. The table has been extended through January of 2012, and as you can see, the labor force continued to decline by another 132,000 in January of 2012, as the number of workers fell from 153,617,000 to 153,485,000. Thus, a total of 802,000 have left the labor force since the end of 2008.

So it may be said that Obamanomics has caused the labor force, which should be expanding each year by a multiple of the increase in civilian non-institutional population, to instead be slashed by a total of 802,000 workers in just 37 month’s. This would be bad enough in and of itself; however if we are to believe the Bureau of Labor Statistics, from a macro view, the real employment situation is far worse.

When Obama’s declining labor force is compared with the growth of the civilian non-institutional population, also shown in the table above, we can see that a total of 9.3 million Americans have effectively been removed from the labor force during the last three years and one month (add together the amounts highlighted in the lower right-hand corner). This is the difference between periodic changes in the civilian non-institutional population (the 3rd column from the left), minus periodic changes in the labor force (the 2nd column from the right). It represents the periodic increase in the civilian working age population, which has been unfortunately added to the ranks of those counted as not in the labor force. And as we pointed out previously, a total of 6.5 million workers were removed in the three year period ending with 2011.

To be specific:

In 2009, the civilian non-institutional population grew by 2,013,000, yet the labor force declined by 145,000, resulting in an increase of 2,158,000 persons counted as not part of the labor force. In other words, 2.1 million workers went missing in action (MIA).
In 2010, the civilian non-institutional population grew by 2,029,000, yet the labor force continued to decline by another 253,000, resulting in an additional 2,282,000 counted as not in the labor force. That’s another 2.3 million MIA’s.
Then in 2011, the civilian non-institutional population again grew, this time by 1,788,000, yet the labor force declined by another 272,000, resulting in 2,060,000 more persons counted as not part of the labor force. This resulted in another 2.1 million MIA’s.
To top things off, in the first month of 2012, the civilian non-institutional population grew by an additional 2,651,000, yet the labor force further declined by 132,000, resulting in an additional 2,783,000 persons counted as not part of the labor force. Although January data is, as always, affected by changes in population controls, nevertheless it is what it is. Thus another 2.8 million Americans went MIA.

In effect, there have been no new entrants to the labor force in the past three years and one month, as 802,000 existing workers have dropped out of the workforce, and all 8,481,000 potential new entrants have fallen by the wayside. In all, that’s a total of 9.3 million workers who have effectively been pushed out of the labor force. For those paying attention, that’s a total of 8,373,000 persons who are not included in yesterday’s official unemployment calculation (9,283,000 less a seasonal adjustment of 910,000).

According to the Bureau of Labor Statistics, the official unemployment rate through January 2012 is 8.3%, as calculated in the table below, where:

[ (A) Total Unemployed / (B) Labor Force = (C) Unemployment Rate ]

However, if we were to add back the 8,373,000 workers who have effectively dropped out of the labor force, during Obama’s reign of misery, the real unemployment rate would be 13.0%, as calculated in the following table.

Even if only 55.0% of those who have been incontestably and wrongfully removed from the labor force were counted, which would be consistent with the eight-year average prior to Obama, the real unemployment rate would be 10.9%, not 8.3%. Eventually the majority of these 9.3 million working age Americans will start looking for work, and if upon entering the labor force, they are unable to find gainful employment, the unemployment rate should begin to rise towards its true rate, which would be between 10.9% and 13.0%, as stated.

Conclusion: In going all the way back to the year 1929, besides the years 2009, 2010, 2011, and potentially 2012, the only other years that the United States has ever suffered annual declines in its civilian labor force were 1943, 1944, 1945, and 1951. And as far as the 6.5 million who dropped out of the labor force entirely, over the past three years (not including 2012), that represents the worst consecutive 36 month period in United States history, also dating back to 1929. Since we are not presently engaged in a World War, with millions being drafted out of the civilian workforce, and with millions being killed in action, isn’t this proof positive that the unemployment rate is being manipulated?

Based upon the facts, the Great Recession never really ended, and the unemployment rate has been manipulated. I am 99.9% certain that the Obama Administration is playing with unemployment.

Prerequisites: Manipulation 101: The Real Unemployment Rate

** Updated on 2/7/2012 & 2/10/2012!

Manipulation 101: The Real Unemployment Rate

January 15, 2012August 18, 2017 / L. M. Walker / 10 Comments

* Fake it until you make it. *

* By: Larry Walker, Jr. *

The following passage is from my last post, “Labor Force Contraction with Obama – And other hidden truths” :

“Most of the electorate understands that as the size of the labor force shrinks the unemployment rate declines. But is anyone really paying attention? Since this massive decline in the civilian labor force is a verifiable fact, it’s not surprising that the Obama Administration and much of the propagandist media have chosen to ignore it.”

Okay, I confess that I was begging the question. I am fully aware that most of the population doesn’t have a clue as to how the unemployment rate is calculated, and that a healthy subset could probably care less. So in this post I will explain in more detail how, as the size of the labor force contracts, the official unemployment rate declines.

First, here are a few key definitions, which are shown in more detail at the bottom of this post.

The term “non-institutional civilian population” includes persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.
The term “labor force” includes all persons, in the non-institutional civilian population, classified as employed or unemployed.
And the term “not in labor force” includes persons aged 16 years and older, in the civilian non-institutional population, who are neither employed nor unemployed.

The table above shows the number of Americans counted as part of the labor force, from 2001 through 2011. It does not include those considered, “not in labor force”. You can see that during Bush’s first three years in office, although the economy was in recession, the labor force grew by 2,929,000 (on a seasonally adjusted basis). In contrast, the labor force has contracted by 739,000 during Obama’s first three years.

The dilemma posed by a declining labor force is that the non-institutional civilian population has continued to grow by approximately 1.1% each year. So in reality, the labor force didn’t only decline by 739,000 workers over the last three years (on a seasonally adjusted basis), but rather a total of 6.5 million workers dropped out (on a non-adjusted basis). What this means is that a smaller proportion of the populace is working to support a much larger cluster of retirees, unemployed, and those who have dropped out of the labor force.

As you can see, the labor force grew from 143,800,000 at the end of January 2001, to 154,626,000 by December of 2008, for an increase of 10,826,000 workers over the eight-year period immediately preceding Obama. The labor force was expanding by an annual average of 1,353,250 new entrants prior to 2009. But since January of 2009, the labor force has declined by an average of -246,333 workers per year. However, in the macro sense, the real employment situation is dramatically worse.

When the declining labor force is compared with growth of the civilian non-institutional population, as shown in the table below, it is clear that a total of 6.5 million Americans have dropped out of the labor force during Obama’s three years in office. This is the sum of the amounts highlighted in yellow (below). It is the difference between annual changes in the civilian non-institutional population, minus annual changes in the labor force. It represents the annual increase in the working age population, who are not being counted as part of the labor force.

For example, in 2009, the civilian non-institutional population grew by 2,013,000, yet the labor force declined by 145,000, resulting in 2,158,000 persons who should have, but did not enter the labor force. In effect, they dropped out. In 2010, the civilian non-institutional population grew by 2,029,000, yet the labor force declined by 253,000, resulting in 2,282,000 more persons who should have, but did not enter the labor force. Then in 2011, the civilian non-institutional population grew by 1,788,000, yet the labor force declined by another 272,000, resulting in 2,060,000 more persons who should have, but did not enter the labor force.

In effect, there have been no new entrants to the labor force in the past three years, as 670,000 existing workers dropped out (on an unadjusted basis), and all 5,830,000 potential new entrants fell by the wayside. Overall, 6.5 million working age persons have dropped out of the labor force under Obama. Is this change you can believe in?

The massive decline of new entrants to the labor force, which is shown in the table above, and graphically in the chart at the top, directly impacts the unemployment rate, making the employment situation appear better than it actually is. How so?

First, we must understand how the unemployment rate is calculated. The unemployment rate is calculated by dividing the number of unemployed persons by the size of the labor force:

[ (A) Total Unemployed / (B) Labor Force = (C) Unemployment Rate ]

Thus, the official unemployment rate of 8.5%, as reported by the Bureau of Labor Statistics in the January 6, 2012, Employment Situation Report, is calculated as follows:

[ 13,097,000 / 153,887,000 = 8.5% ]

What this means is that, at the end of the year 2011, 13,097,000 persons were officially unemployed, out of a labor force totaling 153,887,000. And so 13,097,000 divided by 153,887,000 equals the unemployment rate of 8.5%. So how could this result have been manipulated? Why, that’s easy.

Manipulation 101

“There are three kinds of lies: lies, damned lies and statistics.” ~ Mark Twain

First of all, it is a fact that not everyone who is actually unemployed is officially counted as such. In fact, according to the Bureau of Labor Statistics, millions of Americans of working age, who are not working, are excluded from the official calculation.

Mathematically, what this means is that they have been removed from both the numerator and denominator of the equation (i.e. from both the number of unemployed and size of the labor force). Those eliminated from the official unemployment equation are classified as, “Not in the Labor Force.”

A subset of those not included in the labor force is referred to as “marginally attached”. The marginally attached are persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached.

When it comes to manipulating the unemployment rate, the main question is: What happens when an equal number of persons are subtracted from both the number of unemployed and the labor force? To answer this, let’s look at an example in the table below.

Starting in the middle of the chart, let’s assume that there are 14,000,000 unemployed persons out of a labor force totaling 140,000,000. That would make the unemployment rate 10.0%. Are you with me so far?

Now, let’s remove 3,000,000, from the labor force, and see what happens. Moving one column to the left, you will note that the unemployment rate falls to 8.0%, or by 2.0 percentage points, as 3,000,000 people are removed. That’s a decline of 20%. Wow! That was easy.

If we were to remove 10,000,000 from the labor force, we would get an even more dramatic result. Moving two columns left of center; you will notice that the unemployment rate falls even farther, to 3.1%, or by 6.9 percentage points, as 10,000,000 people are removed. That’s a decline of 69.0%.

Just to add some perspective, it works both ways. Moving one column to the right, you can see that the addition of 3,000,000 to the labor force causes the unemployment rate to rise to 11.9%, or by 1.9 percentage points (an increase of 19.0%). And finally, the addition of 10,000,000 to the labor force causes the unemployment rate to rise by 6.0 percentage points, or to 16.0% (an increase of 60.0%).

So it may be stated that, the act of removing workers from the labor force causes the unemployment rate to decline. It is also evident that an expanding labor force, in which new workers are unable to find work, should cause the unemployment rate to rise. Another fact is that classifying more workers as “not in the labor force” causes a greater percentage decline in the unemployment rate, than the percentage increase realized by allowing a natural expansion of the labor force. Got it?

Therefore, when the unemployment rate is higher than desired, all one has to do is remove a few million workers from the labor force, and voilà, “We are moving in the right direction.”

Now I’m not necessarily saying that the Obama Administration purposefully manipulated the unemployment rate, but since the Bureau of Labor Statistics is a governmental agency, run by a presidential appointee, it’s highly probable. I’m just saying that I no longer have faith in the Bureau of Labor Statistics’ ability to remain impartial. Perhaps going forward the functions of this agency, as well as others, should be factored out to private non-partisan concerns.

What’s the real unemployment rate?

The Bureau of Labor Statistics (BLS) itself admits that among those it has subtracted from a labor force, several million actually want to work. So I ask you this, If an individual is not working, but desires to have a job, is he (or she) not essentially unemployed? I say, “Yes”, but the BLS says, “No”. So is this a material issue, or is it diminimus? In other words, how many people are we really talking about?

Well, let’s turn to Bureau of Labor Statistics – Table A-38, Persons not in the labor force by desire and availability for work, age, and sex (below). To be precise, as far as BLS methodology goes, as of December 31, 2011, a staggering 87,212,000 working age Americans were not counted as part of the labor force. Among these, it is reported that 81,077,000 do not want a job, and that another 6,135,000 actually want to work.

To reiterate, in my book, if someone wants a job and doesn’t have one, that person is unemployed and should be counted as such. What’s the point of calculating an unemployment rate, which doesn’t include all persons who are unemployed?

Regarding those included or excluded from the labor force, here are a couple of important items to note:

First of all, the BLS only surveys around 60,000 households per month in order to come up with these figures. So as far as we know, the number of unemployed persons who want to work, but are not counted as part of the labor force, could be much greater than what’s being reported.
Secondly, according to Footnote No. 1, in Table A-38 (above), not everyone reported as wanting or not wanting to work is asked. Wait, so not everyone is asked? You know the old saying, “Never assume.”

So, in light of the fine print, the entire sampling outcome is at best grossly inaccurate, and at worst subject to outright manipulation.

From Table A-38, we can see that 6,135,000 workers, not counted as part of the labor force, actually want to work. So what would happen if we added them back into the labor force? Well, let’s run it and see.

In the table below, when the 6,135,000 workers are added back to the labor force, and rightfully counted as unemployed, the unemployment rate jumps from 8.5% to 12.0% (an increase of 41.2%). Is a deviation of 41.2% of material importance? I would think so.

I would contend, that based on BLS data, the true unemployment rate is closer to 12.0%. But at the same time, since only a small sample is surveyed, who’s to say that a large portion of the other 81,077,000 working age individuals, not counted as part of the labor force, don’t want jobs? Did anyone bother to ask them? No. So the actual unemployment rate could easily be much greater than 12.0%. Are you still with me?

In the table below, I have calculated the maximum unemployment rate. That is to say, what it would be if all 87,212,000 working age individuals, not presently included as part of the labor force, were included. When we count them all, the maximum unemployment rate jumps to 41.6%.

You laugh? Well, I’m not laughing. So, based on information published by the federal government, the actual unemployment rate is somewhere between 12.0% and 41.6%. That leaves a lot of room for play, as the lowest the rate can possibly go is 0.0%, and the highest 41.6%. [By the way, the maximum rate doesn’t include those considered to be employed who, for all practical purposes, really aren’t (see the definition of “Employed”, below).]

Disregarding the Bureau of Labor Statistics sampling assumptions, the methodology of which you may find at http://www.bls.gov/, for all we know, a larger segment of the population is becoming homeless, generationally dependent, or permanently unemployable. I believe that there are several million more unemployed Americans, who want to work, than we are being told.

In my entire life-time, neither the Bureau of Labor Statistics nor the Census Bureau has ever called upon me to participate in one of these monthly, 60,000 household employment surveys. So who are they calling? How can they call someone who doesn’t have a phone? Where do these numbers really come from? From what I can tell, that’s classified information. Have they ever called you?

So while Obama tells us on the one hand, “We’re making progress,” in reality, all that’s happened is that a larger segment of society has given up any hope of ever having a job. Based upon the job killing policies of his Administration, I would say this is more likely to be the case today, than at any time in U.S. history. So this is progress? And now Obama wants another term to, “finish the job.” I think we’re already finished; the baby boom implosion will take care of the rest.

The Bottom Line: The official unemployment rate is misleading, and can be easily manipulated. By simply removing two or three million persons from the labor force (a little here, a little there), one can easily trim a couple of percentage points off of the official unemployment rate, and then declare that the economy is improving.

Since the beginning of 2009, the net result of Obama’s anti-success rhetoric, coupled with the most reckless deficit-spending record in U.S. history, has been an increase of 6.5 million workers who are no longer counted as part of the labor force. And on top of this, the economy has lost 1.7 million jobs, since February of 2009. The real unemployment rate isn’t 8.5%, it’s somewhere between 12.0% and 41.6%, perhaps even higher, depending upon one’s perspective.

In light of this reality, I find Obama’s statement, “We are moving in the right direction,” to be most absurd. Come on man! But on the brighter side, there is a tremendous opportunity for a new Administration to step in, in 2013, and show the Socialists, Progressives, and Communists who have taken over the Democratic Party, and the delusional fakers and wannabe’s in the White House, who are on their way out of power, what the “right” direction genuinely looks like. Godspeed!

Definitions:

Labor force (Current Population Survey) – The labor force includes all persons classified as employed or unemployed in accordance with the definitions contained in this glossary.
Civilian non-institutional population (Current Population Survey) – Included are persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.
Employed persons (Current Population Survey) – Persons 16 years and over in the civilian non-institutional population who, during the reference week, (a) did any work at all (at least 1 hour) as paid employees; worked in their own business, profession, or on their own farm, or worked 15 hours or more as unpaid workers in an enterprise operated by a member of the family; and (b) all those who were not working but who had jobs or businesses from which they were temporarily absent because of vacation, illness, bad weather, childcare problems, maternity or paternity leave, labor-management dispute, job training, or other family or personal reasons, whether or not they were paid for the time off or were seeking other jobs. Each employed person is counted only once, even if he or she holds more than one job. Excluded are persons whose only activity consisted of work around their own house (painting, repairing, or own home housework) or volunteer work for religious, charitable, and other organizations.
Unemployed persons (Current Population Survey) – Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.
Not in the labor force (Current Population Survey) – Includes persons aged 16 years and older in the civilian non-institutional population who are neither employed nor unemployed in accordance with the definitions contained in this glossary. Information is collected on their desire for and availability for work, job search activity in the prior year, and reasons for not currently searching. (See Marginally Attached Workers.)
Marginally Attached Workers (Current Population Survey) – Persons not in the labor force who want and are available for work, and who have looked for a job sometime in the prior 12 months (or since the end of their last job if they held one within the past 12 months), but were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Discouraged workers are a subset of the marginally attached. (See Discouraged Workers.)
Discouraged Workers (Current Population Survey) – Persons not in the labor force who want and are available for a job and who have looked for work sometime in the past 12 months (or since the end of their last job if they held one within the past 12 months), but who are not currently looking because they believe there are no jobs available or there are none for which they would qualify.

Link to Chart Data: Google Docs

Obama’s Square Deal and Just Deserts

December 8, 2011August 19, 2017 / L. M. Walker / 2 Comments

What? Obama Borrowed $5 Trillion in 3 Years?

– By: Larry Walker, Jr. –

It was back on July 3, 2008 when Barack Obama exclaimed, “The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.”

To be fair, it took Bush a full 8 years to run up a $4 trillion dollar tab, yet just three years into his one-term proposition, Obama has already run up another $5 trillion, by his lonesome. So what does that make him, a genius? Today we have a national debt of $15.1 trillion that we are going to have to pay back — $48,254 for every man, woman and child, and $133,993 for every U.S. taxpayer. So it may be said that Obama’s record on the national debt is 333 times more irresponsible, and 333 times more unpatriotic, right? But let’s just call it, “Not Fair”.

To be equitable, all that Obama has accomplished, thus far, is to hand every citizen a $48,254 handicap, and to put every U.S. taxpayer $133,993 in the hole. Since I officially became a grandfather in October of this year, the thought of this lying, hypocrite lecturing my children and grandchildren about fairness, as he hands them each their share of $133,993 of the U.S. debt, because they will surely inure their ‘fair share’, makes me sick. Fair shot, fair share, same rules?

The quotation “All men are created equal” has been called an “immortal declaration“. So can Obama top this?

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed….” ~U.S. Declaration of Independence

I didn’t think so. Somebody needs to tell the idiot-in-chief that in America, everybody has a fair shot, everybody pays their fair share, and everyone plays by the same rules; the only exception being perhaps he and his cronies.

According to the U.S. Census Bureau, household income is a product of one’s level of education. It’s a fact that households with a Bachelor’s Degree, or greater, earn higher incomes. So if you want more income, you better finish college, otherwise, be happy with what you get, because it could be a lot worse. After all, this isn’t the 3^rd world. American’s know the drill, and we make the choices that we need to make, to get where we want to be. And if we fall short, we push our children forward.

Those with less than a 9^th grade education can expect to earn median incomes of $21,254, and mean incomes of $30,232, while those with some college can expect median incomes of $48,722, and mean incomes of $61,026. In contrast, those with professional degrees may expect to earn median incomes of $119,825, and mean incomes of $159,202. So anyone who wants to earn their ‘fair share’ should be prepared to plot their ‘own course’, and complete the necessary work. How high each wants to rise, and how they get there is a matter of free will.

Don’t lecture me about fairness. As far as I’m concerned it would be fair to put debt ridden administrations, like this one, and their political minions away – in the nearest penitentiary. Yeah, 14 years would send a powerful message. You want to overspend and force me, my children and grandchildren into debt; then you should pay the ultimate price. You talk about a fair deal? Is it fair for the federal government to be sitting on its collective butt, borrowing $4 billion per day on “our” behalf? I say not. That’s why you can take your 2% payroll tax cut and shove it! Then you can get off the stump, cancel that vacation, curb government spending and balance our collective budget. Otherwise prepare to be ‘thrown’ out of office, and to inherit your just deserts.

Related:

National Debt Bomb | 1976 to 2011

Four More Trillion | Not Change

National Debt: A National Disgrace

Photo via: http://ibloga.blogspot.com/2009/02/new-one-trillion-dollar-bill.html

Four More Trillion | Not Change

August 26, 2011August 19, 2017 / L. M. Walker / 1 Comment

– What? Obama Borrowed $4 Trillion in 2 1/2 Years? –

By: Larry Walker, Jr. –

Now, just two and a half years into his one-term proposition, Barack Obama has added $4 trillion to the national debt by his lonesome. So what does that make him? Today we have a national debt of $14.6 trillion that we are going to have to pay back — that’s $46,935 for every man, woman and child, and $130,786 for every U.S. taxpayer. It may be stated that Obama’s record on the national debt is 320 times more irresponsible, and 320 times more unpatriotic, no? But let’s just call it, “Not Change”. I know, I know, I can “go straight to Hell”, right Maxine Waters?

“You hypocrite, first take the plank out of your own eye, and then you will see clearly to remove the speck from your brother’s eye.” – Matthew 7:5

From Point of No Return

So what’s the plan, Stan? More ‘temporary’ shovel ready jobs? Overthrow another Libya? Form a government-run infrastructure bank (LOL)? Add another 99-weeks to unemployment benefits? Raise taxes on $250,000-aires? Form another debt commission? Raise the debt ceiling, raise the debt ceiling, raise the debt ceiling? Create a super-committee? Build a bullet train to nowhere? Tighten the noose around Gadaffi? Fix health care again? Another temporary Social Security tax cut? Extend the 100% bonus depreciation write-off on corporate jets and SUVs? Blame the Tea Party and Republicans? Give another speech? Take another bus tour to nowhere? Play another four-year round of golf?

Nah! I don’t think so. Looks like a one-term proposition to me, if that. Now it’s Obama vs. Obama. A kind of lose-lose hypothesis. Heck, this guy couldn’t even beat himself. We might as well bring Bush back. Or maybe we’d be better off without a President at all. How about a “none of the above” bubble on the next ballot? I’d rather have no President at all than four more years of misery. Hey Obama, why don’t you just do us all a favor by resigning right now?

It’s time for serious solutions. Give me something to die for. Give me a candidate I can stake my name and reputation on. Dazzle me with common sense. Show me how it’s really supposed to work. Rock my free-market world. Naturally, we independent small business types will be placing principles above personalities, so you best watch what you say, and do.

“A bill will be presented to the Congress for action next year. It will include an across-the-board, top-to-bottom cut in both corporate and personal income taxes. It will include long-needed tax reform that logic and equity demand … The billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. Every dollar released from taxation that is spent or invested will help create a new job and a new salary. And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy.” – John F. Kennedy, Aug. 13, 1962, radio and television report on the state of the national economy.

Related:

Off Grid Solutions 2: The Adjustable Principal Mortgage

June 18, 2011August 18, 2017 / L. M. Walker / 1 Comment

~ By: Larry Walker, Jr. ~

My previous advice proffered the simple concept of a Mortgage in-Kind Exchange. If you didn’t like that notion, perhaps you will like this one. An Adjustable Principal Mortgage is a solution that would allow a mortgage company to temporarily write down the principal amount of a mortgage to an amount comparable to the contracts original debt ratio, and subsequently make adjustments every third year as home prices fluctuate. Once the value of the home equals or exceeds its original cost, no further adjustments are required. Neither the length of the loan or its interest rate is adjusted, nor may monthly principal and interest payments ever exceed the original amount.

An Adjustable Principal Mortgage would spread risk equally between mortgagor and mortgagee. When housing prices return to normal, both the lender and homeowner will have met their objectives; for the former a trustworthy return on investment and the latter a reasonable debt ratio. If housing prices continue to slump, mortgage companies and their investors will lose an amount comparable to the decline in value of the underlying asset, while homeowners losses are likewise mitigated. The value of all mortgage backed securities will be known at any point in time, rather than the present state of uncertainty. The idea is modeled after the Biblical proverb of the unrighteous steward.

The Unrighteous Steward ~ Luke 16:1-9

(1) “There was a rich man who had a manager, and this manager was reported to him as squandering his possessions. (2) “And he called him and said to him, ‘What is this I hear about you? Give an accounting of your management, for you can no longer be manager.’ (3) “The manager said to himself, ‘What shall I do, since my master is taking the management away from me? I am not strong enough to dig; I am ashamed to beg. (4) ‘I know what I shall do, so that when I am removed from the management people will welcome me into their homes.’ (5) “And he summoned each one of his master’s debtors, and he began saying to the first, ‘How much do you owe my master?’ (6) “And he said, ‘A hundred measures of oil.’ And he said to him, ‘Take your bill, and sit down quickly and write fifty.’ (7) “Then he said to another, ‘And how much do you owe?’ And he said, ‘A hundred measures of wheat.’ He said to him, ‘Take your bill, and write eighty.’ (8) “And his master praised the unrighteous manager because he had acted shrewdly; for the sons of this age are more shrewd in relation to their own kind than the sons of light. (9) “And I say to you, make friends for yourselves by means of the wealth of unrighteousness, so that when it fails, they will receive you into the eternal dwellings.”

It’s purely a matter of survival for homeowners, bankers, investors, the U.S. economy, and the nation as a whole. The unrighteous steward did what he had to do to survive. Presently, no one in the United States is doing anything to address the underwater vortex threatening to destroy the livelihood of millions of American homeowners. To date, the actions taken by both government and the private sector have done nothing to avert a looming global economic collapse and worldwide depression.

The Problem

Jane is a 50 year old Georgia resident. She is married with two children. Jane purchased her home six years ago for $333,333. She initially made a down payment of $33,333 and took out a 30-year / 5% fixed rate mortgage of $300,000. She currently has an outstanding mortgage balance of $270,290, and the appraised value of her home has fallen to $150,000. If she were to sell the home today, she would incur a loss of $183,333, which is not deductible for tax purposes. Jane is not in default and can afford her mortgage payments, but one of the things bothering her is that her debt ratio, which started out at 0.90, has risen to 1.80. A debt ratio is calculated by dividing the amount of mortgage debt by the value of the home. A debt ratio of less than 1.0 is considered healthy, while a debt ratio greater than 1.0 is indicative of a loan at risk of default.

Jane feels cheated. By the sixth year, her debt ratio would have been 0.81, but for the decline in the value of her home. Her blood especially boils when she reads stories about homeowners cutting deals with lenders to stay in their houses literally for free, or of others who are in default yet have remained in their homes even after missing a year or two of payments. Jane has a bad, bad feeling that home prices won’t be improving within her lifetime, and fears that she may be foolishly throwing her money away. She would love for her mortgage company to reduce the principal balance of her loan, but that’s probably not going to happen, at least not until after a foreclosure.

So I will pose the same questions that I did last time, even though some of you took issue. “Does it make sense for Jane to sit there, stuck in a home that she can’t sell or refinance; making a payment every month on what she knows is a bad investment?” “Would you continue to invest $333,333 in an asset that you thought would be worth less than half in the future?” Although housing prices may rise over time, they didn’t reach their previous peak overnight, and life is finite. Jane is 50 years old, and doesn’t have another 30 years to waste. Since Jane doesn’t qualify for a loan modification, what options does she have? Presently, there doesn’t appear to be any solution other than to close her eyes, mask her feelings, keep paying, and go down with the ship.

Solution: The Adjustable Principal Mortgage

An Adjustable Principal Mortgage would allow the mortgage company to agree to temporarily write down the principal amount of a mortgage to an amount comparable to the contracts deemed debt ratio, and subsequently allow the principal to be adjusted every third year as home prices fluctuate. Once the value of the home equals or exceeds its original value, no further adjustments are required. Each time the principal is reset, it is re-amortized over the number of years remaining in the original term. The home is re-appraised at the end of each third year, and a new principal amount is calculated based on the ending debt ratio, multiplied by the current value of the home. At the end of the original term, any remaining balance is cancelled and the debt is considered paid in full.

The home may not be sold until its value equals or exceeds its original cost, without incurring a prepayment penalty. The penalty is calculated by subtracting the amount of all principal payments made to date, from the amount of debt owed prior to commencement of the Adjustable Principal Mortgage. In other words, anyone who opts out early will not be able to escape without having to make up the difference between the original debt and the adjusted principal. When the value of the home equals or exceeds its original cost, the homeowner may sell without penalty, paying off the balance at that time.

How it Works

A home appraisal is required at the beginning of the term, and every third year thereafter. At the end of the sixth year, Jane’s home had a fair market value of $150,000 based on a 55% decline in value. That being the case, the principal amount of the loan is written down to what Jane’s debt ratio would have been in that year had her home not declined in value. In this case, had the home not lost value, Jane’s debt ratio would have been 0.81 (see ‘Year 6 Base’ in the table above). The principal amount of the loan is thus reset to $121,631 (150,000 * 0.81) [see note regarding rounding at the end]. Not only is the principal reset to $121,631, but the loan is re-amortized over a 24 year period (the original 30-year term minus the first 6 years). This results in a monthly principal and interest payment of $726 for the next three-year period.

Jane feels better already. There is no longer any reason to doubt. With her monthly payments reduced from $1,610 to $726, she now has an extra $884 to save or spend, both of which will help out her family and the ailing economy either way. At the end of the ninth year, Jane’s debt ratio is a healthy 0.75, and a new home appraisal is required. The new appraisal concludes that the home has increased in value by 50% to $225,000. Thus, the principal will be increased in the subsequent year.

In the tenth year, the principal is raised to $169,703. This is calculated by multiplying Jane’s ninth year ending debt ratio of 0.75 by $225,000 (the current value of the home). The loan is then re-amortized over the remaining 21 years, resulting in a monthly principal and interest payment of $1,089 for the next three years.

Although Jane would not be allowed to sell without incurring a prepayment penalty, she can see on paper that by the end of the twelfth year her debt ratio has declined to 0.69 with roughly $70,000 in home equity. Jane doesn’t mind the increased monthly payment because it is still lower than her original payment of $1,610, and because it was fairly determined based on the value of her home. At the end of the twelfth year the required appraisal determines that the home has increased in value by another 25% to $281,250, so the principal must rise again.

Since Jane’s debt ratio at the end of the twelfth year was 0.69, and the appraised value is now $281,250, the principal amount of the loan is stepped-up to $193,628 (0.69 * $281,250). The loan is re-amortized over the remaining 18 years resulting in a monthly payment of $1,361 for three years. Once again, Jane doesn’t mind the increase because she now has almost $110,000 in home equity, plus she is still paying less than her original payment.

The required home appraisal at the end of the fifteenth year results in another 20% increase in valuation, making the home worth more than its original cost. Since the terms of an Adjustable Principal Mortgage cap any increase in valuation to the home’s original cost, the new mortgage principal is limited to $204,018. This is calculated by multiplying the debt ratio of 0.61 at the end of the fifteenth year by $333,333 (the original cost of the home).

In the sixteenth year, Jane’s adjusted loan principal of $204,018 is re-amortized over the remaining 15 years, resulting in monthly principal and interest payments of $1.613. Jane doesn’t mind this at all because her payments are essentially the same as they were under the original loan, plus she now has over $138,000 in home equity. The biggest bonus is that because her home has returned to its original value, Jane may now sell it free and clear at any time. If Jane keeps the home and it maintains an equal or greater value over the remaining 14 years, her monthly payments will remain $1,613, and her debt ratio will continue to decline.

In the example above, Jane is a winner. If I were her, I would quit while I was ahead by selling the home in the sixteenth year, but that’s her call. If she remains in the home for the full 30-year term, and if existing home prices continue to rise, Jane will have reached her original objective. Now let’s see what happens to the mortgage company.

With an Adjustable Principal Mortgage, at the end of the 30-year term, the mortgage company will have earned $240,583 in interest income and will have recovered $278,235 of the original $300,000 principal. The reason that the principal repayments are short by $22,000 is because the mortgagor shrewdly wrote off a portion of the loan in order to keep the homeowner happy. The mortgage company still receives $218,818 over and above its original investment.

In comparison, had the terms of the original loan been fulfilled, the mortgage company would have received $279,767 in interest and the full amount of the principal. Overall the lender has given up $60,942 in interest and principal payments in order to help out a borrower whose underlying asset had declined by 55% in the sixth year of the contract. The alternative would be to risk foreclosure and an immediate loss, most likely in excess of $120,290 with the additional loss of interest income. In this respect, both the lender and borrower are winners.

Goals / Terms

Temporarily reduce the principal amount of underwater mortgages to the product of the homeowner’s target debt ratio and the home’s current market value.
Require a new home appraisal at the end of each three-year cycle.
Re-amortize the loan over the remaining life of the original term every third year.
Reset the principal amount of the loan every third year based on the homeowner’s ending debt ratio times the new appraised value.
The original length of the loan may not be increased.
The original interest rate remains fixed at the original rate and may not increase.
The value of the home may not exceed its original cost, for purposes of adjusting the loan principal.
Monthly principal and interest payments may not substantially exceed the amount of the original contract. Substantial is defined as meaning within $10 per month.
The homeowner may sell the home at any time, however if it is sold before reaching a valuation equal to its original cost, the homeowner will incur a prepayment penalty. The prepayment penalty is calculated by subtracting the amount of all principal payments made to date, from the amount of debt owed prior to commencement of the Adjustable Principal Mortgage. (Exceptions may apply where reasonable cause exists.)
Once the value of the home equals or exceeds its original cost, the homeowner may sell without penalty, only required to payoff the balance of the Adjusted Principal Mortgage.

Benefits / Costs

Lenders – By implementing the Adjustable Principal Mortgage lenders would potentially eliminate foreclosure losses such as may occur in the example above, multiplied millions of times over. If every underwater borrower decided to walk away tomorrow, it would spell the end of the mortgage industry, the end of the U.S. economy, and a sustained global depression. The costs of home appraisals, origination, and processing fees are passed on to homeowners. Although lenders will recover less than the amount stated in their original contracts, the amount forgone will be entirely based on how quickly home prices rebound, while failure to act would be catastrophic.

Homeowners – Borrowers will have a renewed confidence in the housing market. They will also receive the benefit of lower mortgage payments while their houses are underwater, allowing them to save or spend money that they otherwise would not have. This will result in an extraordinary amount of economic stimulus, at no cost to taxpayers. Homeowners will be responsible for the cost of home appraisals, loan processing and origination fees. Such fees may be paid for preferably out of pocket, or added to the principal.

The Economy – The resulting increase in economic activity will mean restoration of jobs for loan officers, administrative assistants, accountants, real estate appraisers, and others. By reducing the number of foreclosures, abandonments, and short sales, the housing market will improve. As real estate prices begin to stabilize and then increase, home builders and real estate agents will also return to work. Under a capitalist system there are winners and losers. Without changes everybody loses, but by taking action, by spreading the risk and by making the system fair, everyone’s a winner.

“And I say to you, make friends for yourselves by means of the wealth of unrighteousness, so that when it fails, they will receive you into the eternal dwellings.”

It’s time to implement solutions designed to solve real problems. While politicians have wasted time covering the loses of some private sector risk takers, lambasting others, and imposing more restrictive regulations, it has never once occurred to them to propose a real solution. Meanwhile, as private sector lenders have been mired in Congressional hearings, attacked with new regulations, and in many cases forced to accept government bailouts, they have likewise not taken time to resolve the real problem.

Note: All figures are rounded up to the nearest value. The approximation above is not intended to be a cure-all, it’s just an idea.

Data: Original Workbook

Off Grid Solutions | Mortgage in-kind Exchange

June 12, 2011August 18, 2017 / L. M. Walker / 1 Comment

~ By: Larry Walker, Jr. ~

The first step in any recovery is acknowledging the problem. The second step is having faith that a power greater than oneself can restore sanity. Joe purchased his home four years ago for $300,000. He currently has an outstanding mortgage balance of $270,000. The appraised value of his home has fallen to $150,000. If he sells it for $150,000 today, he will eat a loss of $150,000 which is not deductible for tax purposes. Joe can afford his mortgage payments and has not missed any. Since he doesn’t qualify for a loan modification, what options does he have?

For one, he can continue to pay off the $270,000 debt, plus interest, on a home which has lost 50% of its value, thus incurring more than a $150,000 loss spread over time. Or if he finds this distasteful, he can simply walk away from the home and let the bank and the wizards of DC deal with it. Other than that he really doesn’t have many options. I say he doesn’t have many options, because I know some folks who have already walked away from their homes, renting them out to others while they rent elsewhere, with the idea of dumping them for a loss if things don’t improve in a couple of years.

Does it make sense for Joe to sit there, stuck in a home that he can’t sell or refinance; making a payment every month on what he knows is a bad investment? Would you invest $300,000 in something that you thought would be worth half in the future? Although housing prices may increase over time, they didn’t get to where they were overnight, and life is finite. Joe is 50 years old and doesn’t have another 30 years to waste. So what can the government or private sector do for Joe?

Solution: The Mortgage in-kind Exchange

One of the things eating away at Joe everyday is that he sees House B, a bank owned foreclosure which had an original cost of $600,000, still has an appraised value of $300,000, but has a selling price of just $150,000. Joe would love to purchase House B but he is not able to get out of his current mortgage without incurring a $150,000 loss. Joe would have to come up with a $120,000 payment to get out of his present mortgage, plus make a down payment on the bank owned home, which would make him even worse off.

A Mortgage in-kind Exchange is a unique idea that would allow Joe to sell his home for a loss and rollover the remaining $120,000 loan balance into a more valuable home. It would allow Joe to purchase House B for $150,000 with a $270,000 mortgage. House B would have an appraised value of $300,000 and a mortgage debt of $270,000, thus making Joe whole.

How it works – Joe is allowed to hold an option to purchase House B for a small earnest money deposit of $1,000 which will take the home off the market for up to a year giving him time to sell his old home. If the old home doesn’t sell within a year, Joe may either extend the option by making another deposit, or forfeit.

Benefits and costs – Joe would be better off by being allowed to purchase a more valuable home for the same amount owed on his underwater home. The banks would be better off because they will have reduced their REO inventories without incurring as big of a loss. The economy will improve by allowing faithful homeowners a chance to improve their personal debt-to-equity ratios. Housing prices will improve by removing homes selling for less than fair value from the market. The cost to taxpayers would be zero.

The banks can get involved by matching up faithful homeowners with qualified properties. The government can get involved by getting out of the way, and encouraging the free market to push solutions rewarding those who deserve it the most.

***Revised***

Upside Down In America

June 10, 2011September 6, 2018 / L. M. Walker / Leave a comment

~ By: Larry Walker, Jr. ~

Obama’s economic theory appears to be a hodgepodge of both supply-side and demand-side theory based primarily on a belief that if the government rewards special interest groups who vote for the chief executive’s political party, then said party will get re-elected.

In other words, Obamanomics is nothing more than a selfish power play. Missing from its objectives are the goals of economic growth and wealth creation. Inherent in its objective is the idea that there is already enough wealth in the nation to divide many times over until everyone is on an equal playing field. Once met, this objective will lead to the end of all economic activity in the United States.

Obamanomics is a theory that works best if the employees of an automaker are its only customers. It also works well if unionized school teachers are the only taxpayers within their respective school districts. In other words, Obamanomics works if the same money earned by an entity’s employees is reinvested in full back into the same entity. If giving incentives to employees is better than giving them to employers, then Obamanomics has nailed it. One can only wonder why those gosh darned employees aren’t hiring more workers.

For example, the Obamanomics version of auto industry bailouts was made with the assumption that if the government helped automakers, then they would produce more and better quality cars which someone would buy, thus returning the industry to profitability. What the theory failed to consider was that the reason American automakers were facing bankruptcy was due to the lack of demand, not supply. It wasn’t that U.S. automakers weren’t producing enough, or the right cars, it was that no one was buying them. And why did the demand for automobiles suddenly come to a screeching halt?

Upside Down

There’s a lot of talk these days about the decline in housing prices, but what does that really mean at a personal level? What are its effects on the economy as a whole? I’ll tell you how I feel about it.

Every waking day, I feel as though I’m mortgaged to the hilt, which is, through no fault of my own, a fact. It’s not a good feeling knowing that it will take many, many years, if ever, for the value of my home to return anywhere close to the amount I owe. What this does to me psychologically is make me not want to spend a dime on anything other than bare necessities.

Everything is basically on hold until my personal debt-to-equity ratio returns to a healthy level. This spills over into decisions I make for the business. ‘If it ain’t broke, don’t fix it.’ That means purchasing a new vehicle, new equipment, new appliances, or for that matter anything related to the house is out of the question.

Wants are out of the question; needs are the priority. They say, “Cheer up, live a little, go out and spend some money and don’t worry about it so much.” I say, ‘Mind your own blanking business.’ For me, until this situation is corrected I will continue to live below my means, and if you mess with me, you do so at your own risk.

Meanwhile, the U.S. government continues to spend us all into oblivion, thus assuring that if I ever do get my head above water again, the government will be there to make sure I drown. What politicians don’t realize is that none of their spending has done anything to improve the personal debt-to-equity ratio of any American, but has rather destroyed that of the entire nation.

As politicians from both major parties stare hopelessly into the abyss on a daily basis, none of them seem to have a clue as to how to fix the real problem. Some politicians have become so discouraged that they have resorted to exhibitionism, while others have convinced themselves that the way back is through incurring more debt. It doesn’t get any more delusional than, “We have to spend more to keep from going broke.” While many have chosen the path of insanity, that’s not the way for me.

Let’s face facts, when the amount of ones debt exceeds a healthy level (a debt-to-equity ratio of 0.5 to 1.5 being deemed healthy) there are only two ways out. (A) Reduce all unnecessary expenditures to a bare minimum applying the savings toward debt reduction. (B) File for bankruptcy and make a fresh start.

Some have chosen the latter, while I choose the former. Others don’t own a home and thus have no idea what I’m even writing about, which is the dilemma of most politicians. Most politicians don’t feel as though they own the national debt, and they plan on being long gone before any tough decisions have to be made. However, most of them will find themselves long gone by November of next year, if a serious effort isn’t undertaken soon.

It doesn’t take three years to solve America’s most pressing problem. I made my decision as soon as the crisis hit. There are only two options: A or B. No. Increasing income taxes on an upside down citizenry, increasing the amount of government regulations upon them, and imposing new health insurance mandates will not solve the real problem.

It’s time to fix the problem of this era. It’s time to pass a budget. It’s time to pay down the national debt. It’s time to reduce the size of government. It’s time to end excessive government regulation. It’s time to overthrow an unconstitutional government mandate. It’s time to make a decision, or get out of Dodge.

“If you’re not part of the solution, you’re part of the problem.”

Obama on Jobs: Created 0, Lost 2.5 Million

June 5, 2011August 18, 2017 / L. M. Walker / Leave a comment

Jobs Created, Saved, Recovered or Just Lost?

~ By: Larry Walker, Jr. ~

Hours after the White House received a disappointing jobs report, Barack Obama told autoworkers at a ~~Chrysler~~ Fiat Plant in Ohio that, “Even though the economy is growing, even though it’s created more than 2 million jobs over the past 15 months, we still face some tough times. We still face some challenges. There are still some headwinds that are coming at us. Lately, it’s been high gas prices that have caused a lot of hardship for a lot of working families. And then you have the economic disruptions following the tragedy in Japan.”

So his latest excuses are high gas prices, and the tragedy in Japan, neither of which were a problem for Obama when the March and April jobs reports were more favorable. First of all, Japan was hit with a tsunami on March 11, 2011, and the crisis over there has nothing to do with job creation or economic growth in the United States. Secondly, gasoline prices have been on the rise since February of 2009, primarily due to a decline in the value of the dollar. And the decline in the value of the dollar is primarily due to the federal government’s padding of the money supply to cover its out-of-control spending.

On the same day, the Italian automaker Fiat SpA agreed to purchase the U.S. Treasury’s remaining 6 percent interest in Chrysler for $500 million. This gives Fiat a 52 percent stake, otherwise known as the controlling interest, in Chrysler. Although Obama has spoken negatively of US companies that open plants overseas, he just sold the taxpayer bailed-out automaker to Italy. Nice going chief.

Even more troubling is Obama’s statement regarding jobs. He said that the economy has “created more than 2 million jobs over the past 15 months”. Which economy was that, the global economy, or the U.S. economy? According to data provided by the U.S. Bureau of Labor Statistics, the economy has lost nearly 7 million jobs since the recession began in December of 2007, and 2.5 million of those jobs have been lost since February of 2009. Did I miss some sort of fundamental transformation of the definition of words, or something?

A more appropriate statement by Obama would have been to say to autoworkers at the old Chrysler Plant that, “I’m sorry I sold you guys out to an Italian automaker, but what can I say, we needed the money. The economy has shrunk further under my presidency. Even though the recession officially ended in June of 2009, the economy has lost around 2.5 million jobs since I became president, which brings the total number of jobs lost since the recession began, in December of 2007, to around 7 million. I now understand that I have been leading this nation in the wrong direction, so my plan is to bring in a new group of advisors who have a better understanding of how the American economy works.” But instead, what we heard was more of the same.

Perhaps Obama would do well to heed the words of Abraham Lincoln who once stated, “I am a firm believer in the people. If given the truth, they can be depended upon to meet any national crisis. The great point is to bring them the real facts.” Obama has yet to bring us the real facts. Everything he says is biased in a way to make it appear as though he has accomplished something great, when in reality his policies are not even capable of fostering economic growth.

Created, Saved, or Recovered?

The word ‘created’ means to originate. Jobs are created when new jobs are added on top of existing ones. After a jobs market goes into recession (a period of sustained job losses), it enters into a state of recovery in which jobs that were lost are recovered. Once the jobs that were lost have been recovered then any additional jobs added are considered to have been created.

The word ‘saved’ means to preserve or guard from injury, destruction, or loss. Jobs are saved when they are prevented from being lost such as through the automotive industry bailouts. If one can prove that (x) number of jobs would have been lost but for some kind of intervention, then one can make the case that those jobs were indeed saved.

Then we come to that elusive word ‘recovered’. The word recovered means to get back, regain, or to return to a normal condition. Since the Great Recession began in December of 2007, the U.S. economy has lost nearly 7 million jobs. Once those 7 million jobs have been recovered, and only then, can Obama, or any other politician, start talking to us about the number of jobs created.

The Real Facts

To be precise, since the recession began, we have lost 6,493,000 according to the Bureau of Labor Statistics (BLS) Household Data, or 6,940,000 according to BLS Establishment Data. And that’s including Obama’s alleged creation of “more than 2 million jobs in the last 15 months”. In reality, the economy has merely recovered 1,081,000 jobs in the last 15 months according to BLS Household Data, or 1,797,000 according to BLS Establishment Data, neither of which exceeds 2 million. And further, since February of 2009, the month after Obama’s inauguration, the economy has lost a total of 2,422,000 per BLS Household Data, or 2,520,000 per BLS Establishment Data. In other words, we are a long way from a jobs recovery, and a lot further away from job creation.

From Employment Statistics May 2011

As indicated in the chart below, per BLS Table A-1, when the recession began in December of 2007, there were 4,659,000 American workers not counted as part of the labor force who wanted jobs, and another 7,664,000 who were counted as part of the labor force and unemployed, bringing total number of unemployed persons to 12,323,000. As of May of 2011, there were 6,227,000 American workers not counted as part of the labor force who wanted jobs, and another 13,914,000 who were counted as part of the labor force and unemployed, bringing total number of unemployed persons to 20,141,000. That means there are 20,141,000 Americans, or 7,818,000 more than the pre-recession level, literally sitting on the sidelines waiting for “change you can believe in”.

From Employment Statistics May 2011

As indicated in the chart below, per BLS Table B-1, at the beginning of the recession 137,963,000 Americans were employed. By February of 2009, the number had fallen to 132,837,000. When the recession ended, in June of 2009, the number had fallen further to 130,493,000. As of May of 2011, the preliminary number of employed Americans stands at 131,043,000. No matter how you slice it, not one job has been created during the Obama presidency. Although it’s true that some jobs have been recovered since the trough, the number of jobs has declined by 2,520,000 since Obama’s inauguration.

From Employment Statistics May 2011

References:

Images, Data 2, Data 3

Point of No Return | National Debt Tops Personal Income

May 29, 2011August 11, 2017 / L. M. Walker / 2 Comments

~ By: Larry Walker, Jr. ~

For the first time since World War II, the National Debt of the United States has exceeded personal income, on a per capita basis. The point of no return was breached in 2010, during Barack Obama’s second year in office, and the derangement continues to spin hopelessly out of control. This means that every dollar earned by an American citizen is now owned by the federal government, and then some. That’s right, the average annual income of most working-class Americans now belongs to the federal government. The warning of Thomas Jefferson has come to pass, “A government big enough to give you everything you want, is big enough to take away everything you have.”

Meanwhile, no senators voted for Barack Obama’s 2012 budget when it came up for a vote in the Senate on Wednesday. A procedural vote to move forward on the president’s plan failed 0 – 97, proving that Obama is basically a lame duck president, with no viable plan for resolving the government-manufactured fiscal crisis.

Historical Per Capita National Debt, Personal Income and GDP

In the year 1929, per capita personal income was $697, while each citizen’s portion of the national debt was $139. The federal government’s debt represented just 16.3% of gross domestic product, and 19.9% of personal income. Although not incurring any national debt at all would have been ideal, the percentage of debt to personal income was at least somewhat bearable back in the day; but this was about to change for the worse.

From Point of No Return

The point where a citizen’s per capita share of the national debt exceeded personal income first occurred at the height of World War II. In 1944, per capita personal income was $1,199, while each citizen’s share of the national debt reached $1,452. At the time, the national debt represented 91.5% of gross domestic product and 121.1% of personal income, on a per capita basis. Per capita national debt would continue to exceed personal income through the end of 1950, five years after the end of the war.

From Point of No Return

The point of no return was decisively breached in the year 2010 (see chart above). Although per capita personal income had grown to $40,441, each citizen’s portion of the national debt soared to $43,732. The national debt represented 92.5% of gross domestic product and 108.1% of personal income, on a per capita basis. The situation has worsened through the end of the first quarter of 2011 with per capita personal income of $41,486, versus per capita national debt of $45,782. Through March of 2011, the national debt now represents 95.1% of gross domestic product and 110.4% of personal income, on a per capita basis.

[In contrast, at the end of 2008 per capita personal income stood at $40,469, while each citizen’s share of the national debt was $32,886. In 2008, the national debt represented 69.8% of GDP and 80.9% of personal income, on a per capita basis. Although the United States government was dangerously close in 2008, it had not yet surpassed the point of no return.]

This might not be as big of a deal if the United States ever paid down its debt, but I can only find six years since 1929 where this actually occurred – 1930, 1947, 1948, 1951, 1956, and 1957. There is no chance of fiscal recovery with a president who, in the face of financial disaster, dares to submit a budget containing multi-trillion dollar per year deficits into the future. Until the right leadership is in place, you, I, our children and our grandchildren can look forward to living in a nation which basically owns us. Is this the same Republic that we inherited from our forefathers? I think, not.

Barack Obama has taken this nation in precisely the wrong direction; he has taken us beyond the point of no return. Yet there is still hope, but such hope, of necessity, lies beyond the realm of partisan politicians. Faith without works is dead. This isn’t World War II. It’s time to dramatically reduce the federal government’s footprint. It’s time to cut government spending. It’s time to lower (not raise) the debt ceiling. Tomorrow will be too late.

References:

Rejected! Senate Votes Unanimously To Ignore Obama’s Budget

Treasury Direct: Historical Debt Outstanding – Annual

Treasury Direct: Debt to the Penny through 3/31/11

Bureau of Economic Analysis: Table 7.1. Selected Per Capita Product and Income Series in Current Dollars (A)

Data Tables:

From Point of No Return

Link to All Data Tables and Charts

Link to Original Excel Spreadsheet

Jobs, Jobs, Overthrow Libya

May 23, 2011August 11, 2017 / L. M. Walker / Leave a comment

The Summer of Plan B

~ By: Larry Walker, Jr. ~

The summer of 2010 was supposed to have been the ‘Summer of Recovery’, but since that failed the Obama Administration has moved on to Plan B, the ‘Summer of Death and Destruction’. Notice how quickly the Obama Administration changes the topic when its achievements go awry. It’s almost like they thought, “Hey our economic policies are failing, so let’s turn to some controversial international topic to divert attention.” “I know, let’s bomb Libya, and point the finger at other allies.” Or, “Hey Osama’s been laid up in that Pakistani safe house long enough, let’s go over there and shoot him to take attention away from our failed economic policies.” But not so fast, let’s stick to tracking the success or failure of the Obama Administration’s economic policies. We’ll review his international policy mishaps later, when its fruits come to bear.

Jobs Growth since the End of the Great Recession

According to the National Bureau of Economic Research, the Great Recession, the longest of any recession since World War II, began in December of 2007 and ended in June of 2009. So where are we today?

From Jobs April 2011

When the recession ended in June of 2009, the American economy had a total of 130,493,000 jobs, and through the end of last month had a total of 131,028,000. That’s an increase of 535,000 jobs over the last 22 months, or average growth of just 24,318 jobs per month since the ‘recovery’ began. It can also be said that the economy has added 768,000 jobs since December of 2010, when the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” was signed into law on December 17, 2010. In effect, an average of 192,000 jobs per month have been added since Conservatives won back the House of Representatives, effectively derailing the Obama Administration’s failed economic policies.

Analytically, any and all jobs growth realized by the American economy since the end of the great recession has come since the December 2010 legislation was signed into law. Thus, all of the Obama Administration’s efforts prior to December of 2010 amount to nothing more than a waste of time and trillions of dollars in deficit-financed government spending. All the jobs growth added since the end of the Great Recession can be attributed directly to conservative economic policies. But we’re not quite out of the woods.

Looking backwards, the American economy had a total of 131,660,000 jobs at the end of April of 2000, versus 131,028,000 in April of 2011. Thus, Americans currently have 632,000 fewer jobs than we had eleven years ago. In addition, since the number of jobs peaked at 137,996,000 in January of 2008 (a record high), we are currently 6,968,000 jobs shy of the pre-recession level. Under the conservative growth rate of 192,000 jobs per month, the jobs market would recover to pre-recession levels within 36 months; while under the Obama Administration’s growth rate of 24,318 jobs per month, recovery would take 24 years. With the U.S. population growing at an annual rate of 1%, or by roughly 3 million per year, you can see that we have a long way to go.

To conclude, conservative economic policies are at least on the right track, although they need to be ratcheted up. Meanwhile the Obama Administration has in effect admitted its domestic economic policy failures and has resorted to bombing a former third-world ally into oblivion. It’s a good diversion, but it won’t win the ill-advised Obama a second term. It’s time to finish the job. It’s time to send Obama packing.

Sources:

Business Cycle Dating Committee, National Bureau of Economic Research

Establishment Data, Bureau of Labor Statistics

Link to Original Spreadsheet