obamanomics

2009 GDP | The Bottom Line

/ L. M. Walker / Leave a comment

Click to Enlarge

2009 GDP

Real GDP decreased 2.4 percent in 2009 (that is, from the 2008 annual level to the 2009 annual level), in contrast to an increase of 0.4 percent in 2008.

The decrease in real GDP in 2009 primarily reflected negative contributions from nonresidential fixed investment, exports, private inventory investment, residential fixed investment, and personal consumption expenditures (PCE) that were partly offset by a positive contribution from federal government spending.

So now it’s time for a huge tax increase, right?

Couple the worst GDP results in decades along with unemployment hovering around 10%, then add to that 4.5 million foreclosure filings expected in 2010, and mix in personal incomes falling by an average of 1.7% in 2009, and you will begin to understand Obamanomics.

Time to end this nightmare! Vote them out.

By: Larry Walker, Jr.

References:

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Obama’s Tax Fallacy II: Updated

/ L. M. Walker / 3 Comments

By: Larry Walker, Jr.

[Updated]

Tax Fallacy II, 95% B.S.

According to the Tax Policy Center, there were 151 million tax units in 2009 (excluding dependents of other tax units). Out of those 151 million tax units, 65.6 million, or 43.4% had zero or negative tax liabilities here. This confirms that only 56.6% of those who file income tax returns actually pay income taxes. But that’s not the end of the story.

According to the IRS Statistics of Income Report here, at the end of 2008, there were 9.2 million tax units who filed tax returns with additional taxes due. At the end of 2008, although $28.4 billion had been collected, the balance still owed by these 9.2 million tax units was $94.4 billion.

Also according to the same IRS Statistics of Income Report here, at the end of 2008, there were 3.4 million tax units who had open delinquency investigation cases. The net amount of taxes owed by these taxpayers was $24.9 billion. Although $3.8 billion was collected when such returns were filed, the difference of $21.1 billion was still outstanding.

So far we have one report which reveals that there are a total of 151 million tax units within the United States. We also have proof that only 85.4 million (56.6%) of these pay income taxes, while 65.6 million (43.4%) pay none. Next we have statistics from the IRS which tell us that out of the 85.4 million who pay income taxes, 12.6 million (9.2 + 3.4) actually haven’t paid, and in fact, they still owe $115.5 billion ($94.4 + $21.1). Are you with me so far?

So out of the 85.4 million who pay income taxes, 12.6 million actually haven’t paid what they owe. This means that only 72.8 million out of a total of 151 million tax units actually file their tax returns on time, and pay their share of income taxes. Thus, in real terms, only 72.8 million out of 151 million tax units, or 48.2% pay income taxes, while 51.8% do not.

This makes moot the following quote: “I gave 95% of working families a tax cut.”

Although I admit the rhetoric sounds good, when one considers the national debt which is heading towards $19 trillion, one has to wonder whether this is even such a good idea. When one considers an unemployment rate of 10% to 19%, depending on who you believe, one has to wonder what that segment of society thinks about the “95% Fallacy”. Shall we subtract the unemployed from those who pay taxes and add them to those who don’t, or just leave well enough alone?

However you want to look at it, there is no way on earth that 95% of working families received a tax cut. In reality, roughly 51.8% don’t pay any taxes to cut. And between 10% to 19% received a cut alright, but it wasn’t a tax cut. What it works out to, in reality, is more akin to an additional tax burden on the ever shrinking 48.2% who actually do pay income taxes. I’m still waiting for the proof behind those grandiose words. Prove it!

Update:

And now we have news that 100,000 federal civilian employees owe just about $1 billion in unpaid federal income taxes. When you tack on retirees and military personnel, the number jumps to 276,000 who owe more than $3 billion. Oh for crying out loud, fire them all starting at the top. Where was it that the buck stops again?

See: Fire Fed Workers Who Don’t Pay Taxes

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References:

IRS Statistics of Income

Tax Policy Center

TaxFoundation.org

Obama’s Tax Fallacy

/ L. M. Walker / 5 Comments

By: Larry Walker, Jr. [Updates in Red]

Barack Obama – “I gave 95% of all Working Families a tax cut…”

Really?

First of all 43.4% of Americans don’t pay any income taxes. That leaves the rest of us. So did 95% of the 56.6% who actually pay income taxes get a tax cut? I doubt it, but even if that were true, it’s not 95% of all Americans (or ‘working families’, whatever that means) [see Tax Fallacy II: 95% B.S. for more on this].

Is a refundable tax credit the same as a tax cut?

But the real fallacy lies in the fact that refundable tax credits are not tax cuts, but rather, they are subsidies. Subsidies are paid for by taking money from some Americans and giving it to others. This is also known as ‘spreading the wealth around’.

I’m not very cheery knowing that while I have been faithfully paying my mortgage, people are buying foreclosed houses down the street for $110K less than what I owe. And not only that, but the Government is giving them an $8,500 subsidy out of my tax dollars. It’s as if the $110K of potential equity wasn’t enough of a subsidy. Also, when the government refunds a person $8,500 to buy a house, it only applies to those who bought houses, not to 95% of all Americans.

The $400 ($800 for joint filers) Making Work Pay Credit is also a refundable tax subsidy. It is however only available in full to those (a) who made less than $75,000 ($150,000 for joint filers), (b) is reduced if income exceeds these amounts, (c) and it is not available at all for those making over $95,000 ($170,000 for joint filers) in 2009. Is it possible that 95% of Americans who actually pay income taxes made less than $95K ($170K for joint filers) and will get the full credit? Not when the top 50% of wage earners pay 96% of income taxes.

The earned income credit is a well known tax subsidy. If you made $10,000 and have a child, you will pay no taxes and will get back a $4,043 tax subsidy ($3,043 earned income credit, plus $1,000 child tax credit). This is not a tax cut, but rather a 40.43% bonus awarded for not trying very hard.

Non-refundable tax credits represent true tax cuts, as they can only be used to reduce the amount of tax actually owed, with the balance being lost. The child care credit is an example of a non-refundable tax credit, and has not changed in years. The retirement savings credit would be a good way to cut taxes, but unfortunately if you made over $27,750 ($55,500 for joint filers), you don’t qualify. The education credit used to be a way to cut taxes, yet it is already $2,500 per year, so nothing new was stated by Obama when he said he will give out a $10K credit over 4 years. Uh, we already have that, sir. [What is new, however, is that as of 2009, now 40% of the education credit has become a refundable tax subsidy.]

Another tidbit, right now, all three of my kids are in college. I’m divorced and they live with their mother out of state. I am paying part of the way for one while the other two have full scholarships. Because I don’t claim any of them as dependents, I am not allowed any credit for the tuition that I’m paying. I wonder how many others are in the same boat. It’s not that I want anything from the Government, but just want to let you know that there are cracks in the real world.

Capital Gains Tax Cut for Small Business?

Finally, Obama wants to give a Capital Gains Tax Cut for Small Business Investment. What does that mean? A capital gains tax cut only applies if someone has an appreciated asset to sell, which they have held for more than one year. So, first you have to have an appreciated asset. Then you have to either have a small business that buys and sells appreciated long-term assets, or would need to sell your business in order to benefit. The only problem with what Obama said is that the lower Capital Gains Tax rate that we already have, which is currently 0% for those in a 15% or lower tax bracket, already applies. Nothing new here.

As a small business owner I haven’t quite figured out how anyone can really use this one. And what kind of tax rate are we talking about anyway? He didn’t say anything specific. The only way I could use it is if I sold my business. But I don’t want to sell the business. And if I did sell my business I would already benefit from the Section 1244 exclusion or the low capital gains rate.

While you are applauding Obama’s words, you should stop and think about how a capital gains tax cut can benefit a small business. If anyone can explain it to me, I’ll be glad to listen, but to me, it’s just rhetoric.

In conclusion, all I heard from Obama tonight, regarding taxes, was the same class warfare, wealth redistribution rhetoric that I heard in 2008 when I cast my ballot for the other guy.

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References:

http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=2276&DocTypeID=7

Give Me a Tax Cut, or Give Me Death II

/ L. M. Walker / 8 Comments

Small Business Tax & Toil

By: Larry Walker, Jr.

Small business owners, like myself, pay twice as much in Social Security and Medicare Taxes as regular employees. Yet when we ask for a payroll tax cut on our own pay, what we get from the government is a crackdown on regional banks to give us more loans. Aside from the fact that 140 of these banks have failed since January 16, 2009 (here), what Obama’s Cluelessian economists fail to understand is that wealth is not created through amassing debt.

If Obama wants to run the Federal Government based on the myth that wealth is created through debt, that’s one thing, but his attempt to sell this ideal to small business owners like myself makes him look inept. Small businesses are already in debt. Adding more debt does not translate directly into increased sales, but rather into higher monthly principal and interest payments (aka. ‘paying current expenses out of future income’). It’s one thing to borrow money to start a venture, or to secure lines of credit for working capital, but it’s entirely another to pile debt upon debt in a degenerating economy.

Wealth is created by increasing sales of products and services while maintaining or reducing expenses. Bankruptcy is achieved through maintaining or increasing expenses in the face of declining revenue. It is a fact, not a theory, that Obama’s reckless economic policies will lead to the latter.

So what is the Small Business solution? What could possibly help small business owners survive in the face of a colossal governmental failure? A payroll tax cut for one. And what is it that justifies a payroll tax cut for small business owners? As I pointed out in Part I, small business owners pay an unfair burden of Social Security and Medicare Taxes, and we receive nothing in return. By nothing, I mean that we will receive the same benefits as regular workers after having paid twice the amount of payroll taxes (see the chart below).

Click To Enlarge

What we are asking for is fair. What we are asking for is economic justice. We want the Federal Government to stop unfairly burdening small businesses with an unjust burden of payroll taxes with no corresponding benefit. All we want back is some of our own hard earned money, produced from our own toil, in order to improve the future economic outlook of our communities and our nation.

If we get our desired tax cut, what will small business owners do? We will have been aided in paying our bills, in reducing our current debt, in not having to lay off additional workers, and in having survived for another day. And we will have done so with our own money, and not through a government handout.

Who will die? When I say, “give me a tax cut, or give me death”, it won’t be me or my fellow entrepreneurs who die. The first casualty will be the next laid off employee, and eventually the Federal Government. Every employee we lay off leads to negative government revenue, and reduced GDP. Most of us can scale back on spending and survive, but one can only cut so much before creditors are jeopardized. The Federal Government is well on the road that leads to death.

We will survive, but will the Federal Government? Small businesses have been cutting back on spending in the face of the economic decline. The Federal Government, on the other hand, has been increasing its debt. If Obama’s incompetent economic theory leads to the bankruptcy of the United States government, then that is just a natural consequence of spending more than annual revenue, year after year. Eventually the principal and interest payments will surpass revenue. But that’s Obama’s plan and not the road for me. As for me,

Give me a tax cut, or give me death!

—

Tips: 5 Ways To Manage Business Debt

The Real November Job Loss Number Was 255,000

/ L. M. Walker / 2 Comments

Joe Weisenthal Dec. 4, 2009, 2:56 PM

Source: BusinessInsider.com

Just about every time the monthly jobs numbers comes out, economic research firm TrimTabs comes out and slams the government’s methodology, usually honing in on the Birth/Death model of new businesses entering the market.

This week is no exception.

Frankly, we’re not sure what to make of their arguments. We’ve been hearing about this Birth-Death issue for a long time, but unless you believe they’re changing their methodology from month to month, then that issue only goes so far.

We welcome your thoughts.

————

TrimTabs’ Estimates 255,000 Jobs Lost in November, While BLS Reports a Decline of Only 11,000

BLS Revises September and October Results Down a Whopping 45%

Something’s Not Right in Kansas!

TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 255,000 jobs in November. This past month’s results were an improvement of only 10.2% from the 284,000 jobs lost in October.

Meanwhile, the Bureau of Labor Statistics (BLS) reported that the U.S. economy lost an astonishingly better than expected 11,000 jobs in November. In addition, the BLS revised their September and October results down a whopping 203,000 jobs, resulting in a 45% improvement over their preliminary results.

Something is not right in Kansas! Either the BLS results are wrong, our results are in error, or the truth lies somewhere in the middle.

We believe the BLS is grossly underestimating current job losses due to their flawed survey methodology. Those flaws include rigid seasonal adjustments, a mysterious birth/death adjustment, and the fact that only 40% to 60% of the BLS survey is complete by the time of the first release and subject to revision.

Seasonal adjustments are particularly problematic around the holiday season due to the large number of temporary holiday-related jobs added to payrolls in October and November which then disappear in January. In the past two months, the BLS seasonal adjustments subtracted 2.4 million jobs from the results. In January, when the seasonal adjustments are the largest of the year, the BLS will add anywhere from 2.0 to 2.3 million jobs. In our opinion, trying to glean monthly job losses numbering in the tens of thousands or even in the hundreds of thousands are lost in the enormous size of the seasonal adjustments.

In November, the BLS revised their September and October job losses down a surprising 44.5%, or 203,000 jobs. In the twelve months ending in October, the BLS revised their job loss estimates up or down by a staggering 679,000 jobs, or 13.0%. Until this past month, these revisions brought the BLS’ revised estimates to within a couple percent of TrimTabs’ original estimates.

The large divergence between the two results begs the question of what is causing the difference. While we don’t have an answer today, we will be poring over the data in an attempt to answer that question.

A comparison of TrimTabs’ employment results versus the BLS’ results from January 2008 through November 2009 is summarized below.

click to enlarge

Source: TrimTabs Investment Research – http://www.trimtabs.com/ and Bureau of Labor Statistics – http://www.bls.com/

Several other employment related data statistics support the conclusion that the labor market is not as robust as the BLS is reporting:

  • Automatic Data Processing reported on Wednesday that 169,000 jobs were lost in November.

  • The Institute of Supply Management (ISM) Non-Manufacturing Survey reported that the majority of companies surveyed were still shedding employees.

  • The ISM Manufacturing Survey reported weaker employment conditions in November.

  • Weekly unemployment claims were 457,000 in the week ended November 27, 2009. While last week’s results were below the important psychological level 500,000, the weekly claims are still uncomfortably high and point to a contracting labor market.

  • The TrimTabs Online Jobs Index reported lower online job availability in the past three weeks.

  • The Monster Employment Index declined in November.

We will have the opportunity to truth our employment model estimates at the end of January 2010 when the BLS releases its annual benchmark revisions. The BLS revisions are based on actual payroll data for March 2009. The BLS revision is then divided by twelve to correct prior month’s data back to April 2008. We also use the March 2009 revisions to adjust our model inputs and make any necessary corrections.

For a complete analysis of the current employment situation and economic conditions, refer to TrimTabs Weekly Macro Analysis published this coming Tuesday, December 8, 2009

The Raw Truth: GDP vs National Debt

/ L. M. Walker / 3 Comments

GDP vs National Debt – The Raw Truth

I am still mulling over the Bureau of Economic Analysis’ recent, erroneous, GDP projection after my last post Gross Domestic Product (GDP) Mumbo Jumbo. One aspect that was not addressed previously was the pace at which our National Debt is catching up to annual GDP.

The question for today is what will Gross Domestic Product need to be in 2019 in order to keep pace with the Federal Government’s ruinous spending? And based on the answer to that, at what pace must the economy grow annually?

click to enlarge

If we add the CBO’s 2010 to 2019 projected budget deficit of $7,137.0 billion to our current national debt of $12,087.3 billion, then the National Debt will total $19,224.3 billion by the year 2019. At the same time, GDP is averaging $14,198.5 billion annually. Thus, if our economy does not grow over the next 10 years, the National Debt will soon exceed GDP. [Note: GDP represents the amount that our economy can produce in a year.]

I know that the ‘hope and change’ crowd will say, “So what, It does not matter as long as the interest payments don’t exceed GDP”, or some other lame reasoning. However, I choose to look back to the days when the economy was growing at 5% per year with low unemployment. After all, surely America had some banner years in the past. The question should be, “how do we return to a more reasonable Debt-to-GDP ratio?” Not, “how far can we go before the economy breaks?”

Thus, the first scenario, below, determines the rate of growth necessary in order for GDP to match our projected debt. The second scenario determines the rate of growth needed in order to return to the 2003 debt-to-GDP ratio of 62.8%. Finally scenario three simply states the obvious.

Scenario #1 – The Road to Nowhere

GDP must grow from $14,198.5 to $19,224.3 billion in order to equal the National Debt by 2019. In other words, GDP must increase by $5,025.8 over the ten year period. This represents an increase of 35.4% for the period. That means that GDP must grow at a rate of 3.54% per year in order to equal our National Debt by 2019. As I clarified in my last post, GDP is currently declining at the rate of 1.21% per year, so although this is achievable, we still have a ways to go on this road to nowhere.

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Scenario #2 – Back to 2003

In order to return to the more prosperous, albeit not the most optimal, 2003 Debt-to-GDP ratio of 62.8%, annual GDP must grow to $30,611.9 by 2019. In other words, GDP must increase by $16,413.4 billion, over 10 years, in order for the National Debt to equal 62.8% of GDP. That equals a percentage increase of 116.0% over the 10 year period. In other words GDP must grow at the rate of 11.6% per year, over the next 10 years in order to return to the 2003 Debt-to-GDP ratio.

Scenario #3 – Stop Spending Money that we don’t have.

Of course there are many possible scenarios. One common sense scenario would be to stop spending money that we don’t have. I don’t think it’s possible to grow the economy at 11.6% per year. At least I don’t see any plans from the Congress, the Senate, or Obama that would come anywhere close. In fact, their current plans do nothing to increase GDP, but rather are focused shamefully on doubling the National Debt. And you know what that means: higher taxes, and higher interest rates, leading to less economic growth.

Conclusion

GDP must grow at an annual rate of 3.54% in order to equal the National Debt by 2019, a road to nowhere. GDP must grow at an annual rate of 11.6% in order to return to the 2003 Debt-to-GDP ratio of 62.8% by 2019. Government spending needs to be cut dramatically, and immediately. Any plan that falls short of scenarios #2 and #3 is not a plan. That’s the raw truth.

Sources:

GAO FINANCIAL AUDIT Bureau of the Public Debt’s Fiscal Years 2007 – 2008

CBO Budget Projections through 2019

Treasury Direct – Historical National Debt

Give Me a Tax Cut, or Give Me Death!

/ L. M. Walker / 5 Comments

Small Business Tax & Toil

By: Larry Walker, Jr.

I have been contemplating all the blood, sweat, and tears shed by Small Business owners such as myself. Having been in business for the past 9 years, I have come to the realization that:

  1. I am paying a hell of a lot in Taxes (and government mandated fees), and

  2. I am feeling mighty underappreciated.

The Federal Government, under the American Recovery and Reinvestment Act of 2009, chose to give a Social Security tax cut, the Making Work Pay Credit, to workers making under $75,000 per year. That’s all well and fine, but what about the Small Businesses who pay those wages? Small Business Owners have to pay double the amount of Social Security and Medicare taxes on our own pay, plus a matching amount on what we pay our employees.

As the owner of an S-Corporation, in order to write myself a paycheck I am hit with 25% in Federal Withholding Taxes, 15.3% for Social Security and Medicare (since as an owner-employee both halves come out of the same pocket), 5% for State Withholding Taxes and Federal and State Unemployment Taxes. Excluding Unemployment Taxes, I have to withhold and pay in 45.3% of my pay every month. On top of that, since I have employees, I also have to match 7.65% of their pay for Social Security and Medicare Taxes.

As a side note, I also have to pay County business license fees, Federal and State license fees, County property taxes, State Sales Taxes, Federal Excise taxes on telephone, cell phone and internet usage, interest and principal payments on a Federal SBA loan and other business debts, professional liability insurance, health insurance, matching retirement contributions, etc. … and then the actual operating expenses. When it’s all said and done, in return for my contribution to society, I get to keep about 20% of my gross income (toil). But lets just keep the focus here on Social Security, Medicare, and Income Taxes.

As an example, let’s say I have to write gross pay checks for myself and my employees of $8,000 per month. And let’s say $5,000 of that is for me, and the other $3,000 is for two employees. In order to pay myself $5,000 I have to set aside $2,265 for taxes ($5,000 * 45.3% = $2,265). In order to pay my employees $3,000 I have to set aside an extra $229.50 ($3,000 * 7.65% = $229.50) to match Social Security and Medicare.

So to summarize my gross pay started out at $5,000, but my net take home pay wound up being only just $3,117.50 (see the chart below). In the end, I have spent a total of $8,612.00. My employees took home $2,770.50, I took home $3,117.50, and the Government took home $2,724.00.

click to enlarge

When times are good and I can afford to take a full paycheck I have to fork over 45.3% of my earnings to the Government. When times are tough and I can’t afford to pay myself a full paycheck I still have to fork over 45.3% of my earnings to the Government. And when the business makes a profit, the Government will be standing there laying claim to another 30% or more of my toils (25% Federal Taxes and 5% State Taxes).

And now the Federal Government, through the Senate’s Health Care Bill, is proposing to:

  • Add an Excise Tax on Comprehensive Health Insurance Plans

  • Burden us with Employer Reporting of Health Insurance Costs on W-2 Forms

  • Hike Taxes on Health Savings Account Withdrawals by 10%

  • Raise the “Haircut” for Medical Itemized Deductions from 7.5% to 10% of AGI

(See How Does the Reid-Obama Health Bill Raise Taxes on Your Current Health Plan?).

If there is any common sense at all in Washington D.C., Congress and the President will realize that Small Businesses employ most of America, and that Small Business owners pay an unfair burden of Social Security and Medicare Taxes. And we receive nothing in return. By nothing I mean that business owners do not get double the Social Security and Medicare benefits for paying twice what the average worker pays into the system. When liberals start whining about tax cuts for the rich, perhaps they should try standing in the shoes of a small business owner. They would not last a week. They would die from their own complaining.

Do Small Business Owners deserve tax relief? You’re damned right! What can you do about it in Washington D.C.? Well, if you want Small Businesses to spend more, hire more, and stop the lay offs, then stop squeezing us.

  1. Give small business Owners an immediate tax cut of 50% of the Social Security and Medicare Taxes on the wages that they pay themselves. This is not only fair, but it would be just that simple.

  2. Or, if you really want to be fair, then give us a 50% tax cut on the Social Security and Medicare Taxes on all the wages that we have paid so far this year. It’s time to act.

Give me a tax cut, or give me death!

Obama’s Cluelessian Economics – Obamanomics

/ L. M. Walker / 4 Comments

By: Larry [Update: below in red]

As economists from across the globe are grappling to find a new name for Barack Obama’s economic policies, I have beat them to the punch. Cluelessian is Obama’s new model for future economic (failures). Thus, in an effort to ensure that others do not slip and fall down into the same bottomless pit, let me help you define the difference between Free Market Economics and Cluelessian Economics.

The two most basic concepts in free market economic theory are the laws of supply and demand. Under the law of supply as prices increase the quantity of goods and services increases, as additional investment is attracted into the market. Under the law of demand as prices decrease, the quantity of goods and services demanded increases, because more consumers are able to afford these goods and services. Where supply and demand meet is at the prevailing market price.

Now when a price is set below the prevailing market price in order control prices, less investment is attracted to produce the supply. Where the price is fixed as in the graph below, the quantity demanded is higher than the quantity supplied, thus creating excess demand, better known as shortages. And shortages lead to rationing.

On Health Care Reform

Under Cluelessian Theory, the laws of supply and demand didn’t work for everyone. Thus, what is being proposed with health care reform is an increase in the number of people covered by insurance through a legal mandate (demand), without increasing the price. This is only possible under the Cluelessian Model. In fact, under the new theory demand will increase, prices will decline, supply will decline (as insurance companies go bankrupt) and higher income taxes will make up the difference.

Under Cluelessian theory you actually wind up paying more for less, but that’s all right because higher taxes don’t count towards the price of health insurance, right? Also by following the Cluelessians we can get rid of all those evil, greedy doctors and insurance companies at the same time. So under Cluelessian theory it would appear that we would actually destroy the free market system, and create not only government run health insurance, but also government doctors and hospitals.

On Climate Change

Now when it comes to making an impact on the effects of that evil, and relentless Sun, that sits in the middle of our solar system spewing out all that heat, the laws of supply and demand just don’t quite cut it. So it will be necessary to dramatically reduce the supply of electricity, coal, natural gas, and gasoline; meaning that prices will necessarily ‘skyrocket’ (a Cluelessian axiom).

Cluelessian policies will necessarily call for a dramatic decline in the demand for energy. As the supply declines and businesses begin to lay off workers and shutter plants, and as people begin to freeze to death in their homes and to die of heat stroke, the Cluelessians will compensate by _______? (I don’t think they have thought this one all the way through.)

A. Raising taxes to help those who can no longer afford their energy bills?

B. Coming up with a nifty formula to demonstrate how many human beings they saved, or how many years of life they added to Planet Earth?

On Jobs

Under Cluelessian law, a job saved (or created) is equal to giving a pay raise to existing employees. Contemporary economists thought that a job saved entailed cancelling a layoff, or recalling laid off workers; and that a job created meant hiring new employees on top of the existing workforce. However, under Cluelessian theory, whatever makes you look good counts. As we saw recently in the news, the Southwest Georgia Community Action Council was able to save 935 jobs by providing a cost of living increase for only 508 people. (See the last post: Jobs and O-bonics Interpreted).

The Cluelessians haven’t yet been able to formulate a way to actually create jobs so please check back for updates over the next three (3) years.

[Update: The Cluelessians have just stated that a key part of their plan for job creation will involve housing Guantanamo terrorism detainees in U.S. prisons. Cluelessian economists are talking to Illinois officials about buying the Thomson Correctional Center, a maximum-security prison about 150 miles west of Chicago. A limted number of the remaining 215 Guantanamo detainees would be housed there which some Cluelessians are claiming could create up to 2,000 jobs. So now we have an even better understanding of how Cluelessian policies will impact future economic and social deterioration.]

Conclusion

So in conclusion it’s not very hard to understand Cluelessian Economics. Simply throw away the idea of a free market system. Forget about the laws of supply and demand. Under this new theory the Government will take care of all of us. The Government will supply our health care, energy, and employment needs. The Government will take the place of the free market. The Government is good, and we are bad. The Government knows all. And when the Government runs out of money, then under Cluelessian law, they will make up another lie (i.e. blame Bush).

Now if you want some real answers, you should check out The Just Third Way Blog, or The Center for Economic and Social Justice. You may even want to read, Capital Homesteading for Every Citizen or Binary Economics: The New Paradigm.

Related to and inspired by John Galt at: John Galt’s Wisdom Blog

Jobs and O-bonics Interpreted

/ L. M. Walker / 3 Comments

Why Take Math? So Your Ignorance Isn’t Broadcast Nationwide on the AP Wire

November 6, 2009

This is pretty funny. Or horrifying. Depends on how you want to look at it.

Several days ago, I noted on Twitter that there were a lot of “saved” jobs that weren’t saved at all but actually cost of living increases. About 24 hours after I noted this, there was an Associated Press article about that very phenomena.

Coincidence? Almost certainly. But I’ll flatter myself anyway.

But the laugh riot comes several paragraphs into the article as they look into why Southwest Georgia Community Action Council was able to save 935 jobs with a cost of living increase for only 508 people. The director of the action council said:

“she followed the guidelines the Obama administration provided. She said she multiplied the 508 employees by 1.84 — the percentage pay raise they received — and came up with 935 jobs saved.

“I would say it’s confusing at best,” she said. “But we followed the instructions we were given.”

“Confusing at best”? The multiplication of percentages is “confusing at best”? It seems obvious to me she should have multiplied 508 people by the amount the increase (.0184) and gotten 9.3. But she forgot that you have to divide the percentage by 100 before you multiply.

The fact that she had “saved” more jobs than there were people in the organization should have been a tip-off. But this is a pretty common problem with people who don’t have a very good grasp on mathematics… they don’t recognize obvious mathematical errors, they just plug in the numbers and go with whatever comes out.

And this, children, is why you pay attention at school. So you don’t get in the national news for doing something really stupid and then blame it on the instruction manual.

Via: Political Math Blog

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My Comments:

So I take it that instead of creating or saving 1 million jobs, we only created or saved around 10,000 (after moving the decimal place two places to the left). And since we know that no jobs were actually created, what Obama really means, you have to interpret the Obonics, is that, “we lost 4.2 million jobs, and we think we would have lost 1 million more, but thankfully our $787 billion dollar stimulus program saved around 10,000″. Right?

3.5% Growth in the 3rd Quarter? No! Try 0.87%

/ L. M. Walker / Leave a comment

Source: Trade and Taxes

Raymond L. Richman

The U.S. Bureau of Economic Analysis issued a misleading report when it announced October 29, 2009, that annualized Gross Domestic Product, measured in 2005 prices, increased 3.5 percent from the 2nd quarter 2009 to the 3rd Quarter of 2009. The fact is that annualized GDP in the 3rd quarter was $13,014 billion compared with $12,901 in the 2nd quarter , an increase of 0.872, less than one percent. The number, 3½ , asserted by the BEA was obtained by multiplying 0.872 by 4, in other words by extrapolating the rate of increase in the 3rd quarter for three additional future quarters, hardly a scientific way of prediction . What is worse, analysis of the data indicates no reason to expect any future growth of the economy at all.

Net private non-residential investment, the key to a growing economy, declined in the 3rd quarter. So did net exports. Exports increased but imports increased even more, resulting in a drag on the economy. Personal Consumption increased but that was due principally to a non-recurring factor, the “klunkers” rebate, a costly exercise in subsidized consumption which did more economic harm than good. We already have evidence that it was at the expense of sales in the succeeding period. Thus, it will contribute to a decline in the current quarter. And it will no doubt have a negative effect on auto repairs and maintenance expenditures. Although the administration claimed that it was intended as a stimulus to the economy, it was done at the urging of environmentalists wanting to reduce carbon emissions in the atmosphere. Personal Consumption may increase in the future but there was nothing in the 3rd quarter data to give any assurance that it will.

Personal consumption may grow if expectations about the future of the economy improve. Unfortunately, the data do not lend to the expectation of the economy’s growth. The real growth of the economy is dependent on fixed private investment. Private non-residential fixed investment fell, -1.88 percent in current dollars and -.636 percent in 2005 dollars. Multiply those by four!

The other principal contributor to economic growth is positive net exports. While exports of goods rose 4.65 percent in current dollars and 3.49 percent in 2005 dollars, imports increased faster, 6.43 percent and 3.86 percent respectively. This occurred in spite of a falling dollar which is supposed to increase exports and reduce imports. Multiply those numbers by four, too!

For years we have been warning that the growing trade deficits of the U.S. were a threat to the health of the U.S. economy. It caused the loss of millions of industrial jobs, depressed wages as the laid off industrial workers sought jobs in the service sector, and worsened the American distribution of income. It is urgent that we get trade into reasonable balance. If we succeed, the economy has a chance of recovering quickly because it would stimulate private investment , growth, and employment. These and other measures appear in our book, Trading Away Our Future (2008), which deals with the causes of and cures for the trade deficits.

The stock markets boomed on the news that GDP had grown at an annual rate of 3.5 percent. Pres. Obama and Dr. Romer, Chairwoman of the President’s Council of Economic Advisors, repeated the number. The latter should have known better. What should have been reported is that in the third quarter GDP rose, compared with the 2nd quarter, 1.06 percent in current dollars and 0.87 percent in 2005 dollars. The next day, after investors had time to read the release and the accompanying tables, the stock markets collapsed.

We have great respect for the Bureau of Economic Analysis and their statistical methods. But the extrapolation of the rate of growth into the future serves no purpose and adds nothing to the data and should be abandoned.

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Link to BEA Report: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Note: It says, “Real gross domestic product…increased at an annual rate of 3.5 percent in the third quarter of 2009…” The use of the term Annual Rate means that GDP actually only rose by 0.87% during the 3rd Quarter of 2009. Thus, I concur. This is a shameful deception by the Obama Administration and he needs to be called on it.

It’s also debatable whether when annualizing GDP growth one should take the previous three quarters plus the current one, or as makes no sense here, take the current quarter and expand it out by three future quarters at the same rate.

I don’t see any consistency with this even with the BEA. In checking the BEA’s 2nd quarter report, for example, GDP decreased by -0.8% in the 2nd Quarter but the annualized decrease was stated as minus -1.0%, not minus -3.2% as would be apples to apples. So what’s up with that?

http://www.bea.gov/newsreleases/national/gdp/2009/gdp2q09_adv.htm