FedUpUSA

Archive for July 9th, 2011

The grand financial recovery myth – 8 charts reflecting the true beneficiaries of four years of taxpayer bailouts.  Transfer payments make up 22 percent of household income and public debt surpasses annual GDP.

While the economy is recovering in raw GDP terms the working and middle class Americans are having a smaller and smaller piece of the pie.  The recovery is disproportionately flowing to a tiny fraction in our population and largely is based on targeted bailouts to the financial sector.  After four full years of bailouts and transfers to the banking sector it is clear that the inflation of the stock market has occurred only because of government support of failed banks (many who are now reaping profits overseas).  This also explains why unemployment is still stubbornly high and each month we keep shattering records for those receiving food stamps.  The upcoming decade if we continue down this path may be known as the great middle class swindle.  The evidence is rather conclusive that the current safety net resurrected by taxpayers has largely benefitted the same banking system that has led us down this unfortunate financial path.  Let us examine 8 charts regarding the current state of the economy.

Chart #1 – U.S. household income

U.S. household income is rarely brought up in the press.  The reason of course is that household income has gone absolutely nowhere for an entire decade.  Instead of focusing on this the media chooses to focus on fleeting stories that have little impact on the daily lives of Americans and serve more as mere sideshows and distractions.  While the cost of education, food, fuel, and other daily goods have soared to the stratosphere the wages that pay for these goods has shrunk.  Those who were able to stash money away in the stock market have seen practically no returns over the decade.  And why would they?  The big money to be had is in hedge funds where many make bets on a failing economy and profit handsomely.  The buy and hold investors thinks that purchasing a stock is largely a long-term investment and this is what they are conditioned to believe.  In reality, you have high frequency traders and hedge funds making billions of dollars on quick trades that have little impact on long-term sustainability and actually create crisis over the long-term.  With no income growth, that same paycheck is being eaten up by the cost of more expensive goods and the volatility of the market soars.

Chart #2 – Transfer payments

Source:  Of Two Minds

Transfer payments include welfare (financial aid), social security, and other subsidies by the government to certain businesses (i.e., ethanol).  I was amazed to see the above chart.  Government transfers now make up 22% of household income, a record amount.  Keep in mind this is happening at a time when the economy is supposedly recovering.  What the above chart is telling us is that more and more people unable to find work in the regular economy are depending on a variety of government payments.  Unlike the banks however, who needed taxpayer bailouts to continue financing their yachts and gambling lifestyle many of the above are using the funds to pay for food and basic necessities.  The fact that we are reaching a debt ceiling is troubling and we are clearly down an unsupportable road.  Bottom line is the money has run out a long time ago and all of this is now being financed on debt.

Read the rest at My Budget 360

Gee, who would have thought?

WASHINGTON, D.C. – Representative Steve Southerland, II issued the following statement today regarding the U.S. Department of Labor’s June unemployment report which indicates the national unemployment rate has swelled to 9.2%:

“Today’s unemployment numbers serve as a sobering reminder that the American people continue to suffer under the weight of crippling overregulation and wasteful Washington spending.  So far this year, House Republicans have approved legislation to put our Gulf Coast communities back to work, rein in wasteful spending, eliminate job-killing federal mandates, and make America energy independent.

Uh huh.  Let’s take it one at a time:

• Put our Gulf-coast communities back to work.  You mean with more government spending Steve?  I thought you were for fiscal responsibility?
• Rein in wasteful spending.  This, of course, does not include the $649 billion defense bill that was just passed including over $100 billion for Iraq and Afghanistan.  We have a debt problem and we spend too much?  Hmmmm….
• Eliminate job-killing federal mandates.  You got one – the idiotic $600 1099 nonsense.  I’ll give you that – but only that.  What else, specifically, are you referring to?
• Make America energy independent.  Oh really?  Doing what, exactly?  Drill-drill-drill?  You know full well that’s bullshit and can’t work.  Energy independence requires a holistic approach that will last for hundreds, not single-digit years.  This means, whether you like it or not, an accelerated look at technologies like liquid-salt based thorium nuclear power used to convert coal (or other carbon-bearing things) to liquid fuels.  It’s the thermodynamics stupid!

Then you have Pimco’s El-Erian, who spouted off this:

To address its economic woes, America desperately needs to transition from a series of ad hoc measures to a more holistic policy approach. The notion of a grand bargain can be a critical enabler in this regard, especially if four conditions are met.

First, a grand bargain can serve as the catalyst for unifying diverse policy actions into clearer, more comprehensive drivers for growth and medium-term fiscal sustainability.

Vital areas include tax and spending reforms, much greater emphasis on growth enablers (including infrastructure, education and retraining), and meaningful steps to restore a more normal functioning of the housing, labour and credit markets. To be effective, they must be implemented as a package of reinforcing measures and not a series of standalone announcements.

Define all of the above please, in specificity and identify how we’re going to pay for it.

Look, the problem we have right now is that we cannot afford to keep mortgaging the future.  We simply don’t have the money.  All the Keynes-style hacks have had their say, their prescriptions and policies have been followed, and it did not work.

The factual data is now in to buttress the mathematical expectations that I have been spouting off on for the last several years, and indeed going back into the 1990s when I was decrying the idiocy found in the so-called “tech bubble” and “new economy.”

In order to produce a durable and strong economy you must both produce within your nation what the people wish to consume and limit the reach and impact of government such that government consumes a reasonably-small portion of the whole, since government by definition must be paid for with economic surplus from private activity.

This is utterly lost on virtually everyone who’s commenting on the situation today, including people like Steve Southerland who claim to be fiscal conservatives.  Critters like Nancy Pelosi make no bones about the fact that they have placed half or more of the entire budget off-limits to adjustment, but we’re spending 43 cents more than we take in via taxes.

Care to explain how we will remove the government’s deficit when Health Care (Medicare/Medicaid), Pensions (Social Security) and now defense have been exempted?  That’s 69% of the budget which exceeds the 56% that we fund via taxes.

Oh, wait – we must add the 5% for interest (and this will start to rise rapidly if we don’t take care of our fiscal problems now), so it’s really 74% that’s “off limits.”

Do you really think we’re going to cut funding for the entire rest of the government to zero, including Pelosi’s and Obama’s salary?  Well, that’s what you have to believe, and even if we did that we’d still have a roughly $600 billion deficit!

To both the left and the right:

GO HOME – YOU’RE ALL A BUNCH OF LIARS AND FRAUDS.