10.2%

How's that hopey change thing workin' for ya? And before you start blaming Bush all over again, cogitate on the following chart: (hat tip Powerline)

The Deficit in Perspective

Take a hard look at this chart. Find your income level and drag your finger over to the column that says "Average rates under current law." That's probably not a number you like a whole lot...keep going and read your rate under the column titled "Rates needed to close deficit." If you are not yelling at your computer screen right now, you must like paying taxes. This chart comes from Investor's Business Daily in a column titled "Paying for Washington Mistakes," and it is worth a read:

The 2009 deficit was larger than the combined federal debt of the first two centuries of the country's existence. As staggering as that is to the mind, the 2010 deficit projects to be even bigger, roughly $1.5 trillion.

Unless Washington issues another foolish stimulus package or decides it will continue its ill-advised bailout business, the deficits should moderate somewhat. But the debt created by the deficits will still have to be paid. Ultimately, taxpayers will have to satisfy Washington's massive tab.

Now, this is BEFORE they pass the $1.2 TRILLION Healthcare "Reform" bill, or the economy killing "Cap and trade." Does it not make sense that when you are bailing as fast as you can, it might make sense not to add more holes to the hull?

The Importance of Manufacturing

There is an excellent analysis over at New Geography titled "Yes, manufacturing matters." This echoes an argument that I have made for some time that you can't give away all your manufacturing capacity and maintain a vibrant economy. We cannot be a nation of burger flippers and software programmers if we wish to continue leadership, or participation in, a global economy. Despite the duress that American manufacturers have been under from environmental kooks to cheap labor abroad, our productivity has soared. According to the article, manufacturing output has risen 81% since 1987, but the jobs involved in manufacturing have fallen below 9% of the workforce.

Some see this as the inevitable evolution of a developing economy - we start out on the farms, we move to the cities and become manufacturers, then we all become accountants and consultants. The reality is different though. Productivity has its limits and we may be approaching them, with frightening consequences:

Offshoring of production means that the United States is not generating enough wealth to pay its mounting and massive debts. The mindset among America’s economic elite – that the country does not need an industrial base – has put the country and the world economy in a ditch.

This is a far more serious problem facing the very structure of the American (and global) economy than climate change or health insurance; it just hasn't been trumpeted as a CRISIS yet. Oh but it will...

Is the GDP growing?

Well, the financial headlines point to a robust 3rd quarter, with GDP growth of 3.5%. Any port in a storm! However, you have to remember what makes up "Gross Domestic Product," and when you dig below the surface, it's not so good and may only be a blip. GDP is a rough measure of economic activity made up of consumer spending, investment by businesses and government spending. The seemingly good news is that a BIG chunk of the growth was consumer spending: 2.36%. But, what drove that? Well, there was the "Cash for Clunkers" fiasco - that was 1.7% of the total - per the Wall Street Journal this morning:

Economists said the massive stimulus injected by the U.S. government, such as the cash for clunkers program that lifted car sales, helped boost consumer spending. Since the federal stimulus reached its maximum effect in the third quarter and the unemployment rate remains high, there's uncertainty over the sustainability of the recovery.

And so where does the money that counts for almost half of the so-called "growth" come from? Well...you: from CNN Money: "Cash for Clunkers cost taxpayers $24,000 per car." Wait, $24K per car? That's damn near the price of a pretty well loaded Toyota Camry!

So, is the economy improving? Let's ask the folks - here are the results of an online survey over at CNN moments ago:

That's right - 64% of CNN - not those evil FOX people - think there is no recovery in their area. Folks, we are going to have to pay the piper with all this Federal lard being slathered over this economy and I suspect the American people know it.

Peter Schiff: Get out of the Dollar now!

This is the guy that was eerily accurate about the housing boom/bust. It's about 10 minutes long, but worth a listen. Certainly on a logical basis he is spot on.

It's the Jobs, Stupid! It's the Jobs, Stupid!

While Obama prances off to Copenhagen or dresses up a bunch of doctors in lab coats, the economy continues to suffer and unemployment continues to rise. Even left wingers can no longer hide the obvious - from the Americans for Democratic Action: Real Unemployment Rate at 17%. Click here for a fun graphic way to look at the "real unemployment rate," it's from January, but the methodology is the same.

Now comes news from Bloomberg this morning: the U.S. Recession May Erase Prior Expansion's Job Gains. Lovely:

Oct. 7 (Bloomberg) -- For the first time in three decades, a U.S. recession may wipe out all the jobs created during the previous expansion, according to Ed McKelvey, a senior economist at Goldman Sachs Group Inc. in New York.

Pending payroll revisions and the likelihood that employment will keep dropping in coming months mean the 8.3 million jobs created from 2003 through 2007 will be lost, McKelvey wrote in an Oct. 6 note to clients.

So, what does the Anointed One want to do? Build wind farms, tax productivity and socialize medicine. Great job programs all. At some point, the D's in Congress have got to start thinking about re-election. Based on the current trend, they are headed for a blood bath. How many more cliffs will this guy make them jump off of before they say "enough."

Stop the Spending, Cut the Taxes

Headline of the Investors Business Daily column today: Stop the Spending, Cut the Taxes. Exactly. The economy is shedding jobs faster than a collie's fur in mid-summer. Anyone not still under the cult following of this epic failure of a President knows what needs to be done, but the powers in Washington are explicitly ignoring it.

From the column:

Here we've had a $787 billion stimulus package, $700 billion in TARP funds and a variety of Treasury and Fed initiatives that, according to Bloomberg News, add up to $11.6 trillion in taxpayer exposure — all as part of an effort to revive the economy. And what do we have to show for it?

At the start of the year, the White House forecast 4 million new jobs by the end of 2010. It took some uncharacteristic understatement from Vice President Joe Biden, as he met with his middle-class task force Friday, to put the jobs report in perspective: "We still have a whole lot more work to do."

No kidding. Since the start of the year, the U.S. has lost 4.1 million jobs — 7.2 million total since the recession began.

Americans were told early this year that passing the stimulus was vital, that it would put us back on the path to economic growth and that joblessness would top out at 8.5%. Now we're looking at 10%.

Politicians may act surprised, but they shouldn't be. They caused it. Policies based on massive government spending, higher taxes and costly regulation don't work.

We've warned since last year that any "stimulus" built on Keynesian spending is doomed to fail. The idea that there's a multiplier effect — that is, a net GDP gain — from the government taking your money and spending it for you is, quite plainly, absurd.

Indeed, respected Harvard economist Robert Barro, in a National Bureau of Economic Research study last month, found no solid evidence for a positive multiplier effect. What he did find was powerful evidence that a one-percentage-point cut in tax rates leads to a boost in the growth of GDP of 0.6%.

No surprise. From Coolidge to Kennedy to Reagan to George W. Bush, tax cuts have galvanized weak economies.

The bigger lie being foisted on us is that increasing spending through healthcare "reform," is the ticket to economic nirvana - patently false. Can we please get some adults in Washington?

Payroll Problems

Quickie analysis over at Musings of this chart:

this is not good news for those moldy green shoots. Oh yeah, Mr. President, Americans are back at work.

Entitlements: The Elephant in the Room

Nabbed this chart from the Heritage Foundation site as a follow on to my earlier post about Great Britain's dilemma. This shows "as is" programs without adding in the proposed health care "reform" legislation (House version adds $1.4 trillion, current Senate bill a mere $850BB...this from the same people who told you that Medicare wouldn't cost that much).

As I have said frequently here - fix the current problems that we have first! Then see if there's any money to go around for other goodies and whether the American people want them. The Brits are already at the intersection of the red and blue lines - we are obviously heading there...how about some adult leadership that tries to solve a problem instead of expanding an existing one?

Britain's Woes

Excellent article in the Economist this morning that lays out the difficulties Great Britain faces in dealing with their crushing government debt. Wake up America! This is a harbinger of things to come:

• Enormous unfunded entitlements? Check.
• Socialized medicine? Check.
• Unchecked immigration that adds to the welfare rolls? Check.
• Having to go to the IMF for a bailout? Priceless.

That's right once "Great" Britain had to go to the IMF for a bail-out in the mid-1970's when their deficit reached 7% of their GDP. They are projecting a 12.4% of GDP figure for 2009-10. According to our government, and their rosy scenarios (which don't include Cap and Trade or Healthcare "Reform" legislation) we are going to hit 12.93% in 2009 and 8.54% next year.

Then there's the rate of increase - take a look at this chart from the article:

Two numbers pop - the first is the rate of increase - we are third at close to 50% over just 7 years! Then look at the forecasted debt as a percentage of GDP for 2014 - we're 4th at 112%. Think about that for a moment - the debt owed by the government will exceed the size of the gross domestic product. Repeat that a few times to yourself and see if you don't find yourself screaming "WTF??!!!"

Britain, as the article points out has the hard task of unwinding their socialist mess with reduced benefits and higher taxes (50% forecast). Why are we trying to put ourselves into their shoes?

From Consumption to Savings

Sobering post over at Motley Fool this morning. The author is laying out the argument that we are in a seismic shift in the United States, as big as the shift from agriculture to manufacturing. It is the shift from an economy based on mass consumption to one based on savings.

Most of our accounting jobs, advertising jobs, architecture jobs, engineering jobs, legal jobs, sales jobs, government jobs, and many other professions and occupations are simply funded by massive domestic consumption. As the fed continues to implement policies cutting off credit and raising interest rates on the private economy, consumption is sure to contract going forward as interest payments suffocate dollars away from good and services and more to savings..

None of this is the end of the world....simply massive convulsive change that you should now be prepared for as we are still in the early stages in 9.09.

Where it goes is anyone's guess...but you know it is going in that direction as the value of practically everything you own is crashing and we are bailing out bankers.

The big question comes with the BIGGEST consumer of all....the U.S. Governments...consuming $6.5 trillion dollars per year (50% and growing percentage of GDP)....right now running a $2 Trillion dollar deficit is supporting an unsustainable level of spending.....soon it will come to an end one way or another as receipts keep shrinking....and when it does at you will be prepared for the change....whether that is a benefit remains to be seen.

Overall, the Motley Fool is pretty apolitical, but you read the writing on the wall when you see that closing paragraph. We cannot spend our way to prosperity - the end of that road is Weimar Germany and Zimbabwe.

Japan is Growing up, will we?

Excellent column from the NYT last week by Ryu Murakami on the real story behind the landmark election in Japan a couple of weeks ago where the ruling party of the last 40 some odd years was thrown out.

Some highlights from the column:

The Japanese people are realizing that no government has the power to fix their problems. But this is a good thing — Japan is finally growing up

What a wonderful lesson that needs to be taught from Kindergarten up. Rugged self reliance and freedom are the hallmarks of a great nation, not dependence and subservience.

The depressing truth is hitting home. Though one stratum of Japanese society may benefit from the change in government, others may be hurt. Major corporations may be rescued with tax cuts while workers’ wages remain stagnant. If the minimum wage is raised, then corporations will shift production overseas.

The days when everything worked like a dream and everyone’s standard of living kept rising are over, and have been for a long time. Now that there is no longer enough money, the Japanese public has to make some hard choices.

Exactly. We desperately need to wake up in this country to the fact that WE DO NOT HAVE THE MONEY! Our government is printing or borrowing money from overseas to finance the largess they are incompetently attempting to bestow on us. This is a maelstrom and we are swimming to the bottom of the hole!

As I have posted here before, prior to ANY new Federal programs, we need to first repair/replace/address the problems we have already created for ourselves with the entitlement programs in place. Those decisions will not be easy, but they can be done in an equitable fashion if we address them now. Failing to do so is a certain train wreck. With examples like the USSR, which I posted on earlier, and Japan staring us in the face, what kind of liberal Koolaid do you have to drink to think that our experience will be any different?

Hat tip GSJr.

Fixing Healthcare

One of the writers for Little Green Footballs has pulled together a list of questions that need to be answered prior to any vote on so called healthcare "reform." Here's the link. It is a great, interactive resource.

I still go back to a more fundamental approach, as I posted here earlier. Simply put, let's first agree on what the "problem" is before we agree on new legislation. I would take it a step further. Given the sky-rocketing costs of unfunded entitlements, how about we fix those FIRST. Then we can explore a new entitlement?

This from Investor's Business Daily:

It's increasingly obvious that Congress and the president (regardless of the party in power) will deal with the political stink bomb of an aging society only if forced. And the most plausible means of compulsion would be for Social Security and Medicare to go bankrupt: trust funds run dry; promised benefits exceed dedicated payroll taxes. The sooner this happens, the better.

That the programs will ultimately go bankrupt is clear from the trustees' reports. On pages 201 and 202 of the Medicare report, you will find the conclusive arithmetic: Over the next 75 years, Social Security and Medicare will cost an estimated $103.2 trillion, while dedicated taxes and premiums will total only $57.4 trillion. The gap is $45.8 trillion. (All figures are converted to "today's dollars.")

The Medicare actuaries then note what happens once the trust funds for Social Security and Medicare's hospital insurance program are depleted: "No provision exists under current law to address the projected (Medicare) and (Social Security) financial imbalances. Once assets are exhausted, expenditures cannot be made except to the extent covered by ongoing tax receipts." Translation: Benefits would fall.

Social Security checks would shrink; some Medicare bills wouldn't be paid in full — and the shortfalls would progressively worsen. Retirees would scream. Hospitals might shut. No president or Congress would abide the outcry. Even the threat of imminent bankruptcy would rouse them to action. But restoring the programs' solvency would confront Congress and the White House with fundamental questions.

I know, I should stop making sense. Why bother fixing an existing problem, when we can create a new budget buster! This is the same logic that Pete Stark uses, glaringly illustrated here, that "the more you are in debt, the wealthier you are!" Think how practical this knowledge is in real life:

• The more you drink, the soberer you get!
• The more you read, the dumber you become!
• The more sex you have, the less chance you have of becoming pregnant!
• The more houses that are foreclosed, the richer the homeowners are!

You get the point, shame lefty statists don't...or can't.

Sanity in the Senate?

Let's pray for some sanity in the Senate! According to Bloomberg, it looks like some of the Democrat Senators are coming to their senses and realizing that the Cap and Trade Bill is the ultimate "clunker:"

Climate legislation would require 60 votes in the Senate. Most Republicans have said they oppose the cap-and-trade measure, and at least 15 of the Senate’s 60-member Democratic majority have said the House-passed version would hurt the economy and needs to be revamped to win their support.

The fight is far from over and this is only one of the two enormous daggers pointed at the heart of the American economy - Healthcare being the second. As we reported here yesterday, Cap and Trade will cost almost 2.5 million jobs (minimum) and that doesn't include the ripple effect of the increased cost of goods - Homebuilders are saying that their cost of production will increase close to 25%. But at least it increases costs to everyday Americans too! What was that bit about "not taxing anyone making less than $250K?"

Rumbler's wishful thinking scenario is that both of these monstrosities go down in flames. The sheen will be off the Obamiester at that point and the Dems will be scrambling to a) assuage their hard left base because they didn't get the "good stuff" passed AND b) running to the center to get as far away from this closet-communist Obama, in the hopes of being re-elected.

It probably won't go down that neatly, but seeing the people out there in the streets, like I saw today at our Congressman's Town Hall - gives me faith. At the end of the day, the American people may have voted for "change," but they did not vote for "communism;" they did not vote to have their Constitution usurped and replaced by some SEIU/Bolshevik dogma. They are mad and they want their country back. Scary scenario? If this legislation passes...our chances to get the country back on track will be greatly diminished. As you reach the point where those that receive all the benefits of the state outnumber those that provide it, the numbers of the latter will decline. Then what? Look no further than the former Soviet Union for your answer.

Please Tell Me You Are Kidding Larry!

So Larry Summers, AKA the White House Economic Advisor Tsar, AKA "WHEAT," says the stimulus is working because fewer people are searching for "economic depression" on Google. Leapin' Lizards Larry, maybe they are using Bing!

Bad Idea!

What is with O and the Donks? They keep bringing legislation to the floor that has failed dismally in every country it's been tried...you've heard all about the failures of socialized medicine. Here's some gouge on "cap and trade." Pull up a chair and learn you sumpin' this is another dagger poised at the heart of the American economy. You really have to ask yourself "why?" These are smart people...what on earth is the objective? Why pass laws that will obviously wreck an already wobbly economy? Most of all, what's the friggin' hurry? My guess is they know EXACTLY what they are doing. This is the most liberal, kook fringe bunch of socialists ever to control the levers of power in Washington - they didn't get there by being honest. They will not achieve their objective by being honest either...OK, here's the link to the video: CLICK HERE!

Jobs

A little screen grab from a frightening presentation over at TIP strategies - this is not "Global Thermonuclear War," it's a map of job losses. They have an animated version of this over there...very scary. Watch the last six months...ooh boy has that stimulus worked! JK.

It's Working!

Obama and his crowd deplore American exceptionalism, so they should be thrilled to find out that our credit rating will be down-graded! Robert Prechter, a bit of a doom and gloom guy, but one who predicted the 1987 Crash when all else were saying "remain calm," is stating the obvious...and he is not alone:

Prechter, known for predicting the 1987 stock market crash, joins a growing coterie of market heavyweights in forecasting the United States will lose its top credit rating as the government issues trillions of dollars in debt to fund efforts to bail out the economy.

Isn't this awesome (if you are an Obamanoid)??!! We can ruin our economy just like any other Third World Country...we are the world!

Unemployment Numbers - Fact vs. Fiction

This chart is courtesy of Innocent Bystanders and he makes a couple of excellent points, so be sure to click over there. It amazes me though that the Vice President, Joe Biden, can actually say that he sees "signs of hope" in these numbers. No mention of how badly we missed the forecast...no. Now, these are the same people that want to foist socialized medicine on us based on their economic models forecasting "savings" in medical expenses that will help pay for the increased budget. When you look at forecast versus performance, I wouldn't trust these folks to accurately predict the time it would take to walk across the hall. Finally, in the "definition of insanity" column - we've been stimulating for eight months now and look at the results. Soooo, we should double down on our efforts? Apparently so.

A Letter

I don't often plug in e-mails, but this one came across the screen this morning and is worthy of being reprinted here. As a small business owner, I can vouch for this sentiment even more than McGovern supported Eagleton:



"A Letter From The Boss To His Valued Employees"

To All My Valued Employees,

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my big home at last years Christmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don't see is the back story.

I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.

My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business - hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden - the nice house, the Mercedes, the vacations ... you never realize the back story and the sacrifices I've made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.

Yes, business ownership has is benefits but the price I've paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:

I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes, Property taxes. Sales and use taxes, Payroll taxes, Workers compensation taxes, Unemployment taxes and Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero, Nada, Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It's quite simple.

If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.

Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about...

Signed,
Your boss