Posts

The Spending Sequester Will Grow the Private Economy — Don’t Back Off

/0 Comments/in , /by

Photo Credit: Tax CreditsYesterday’s report of a 0.1 percent GDP decline for the fourth quarter came as a surprise to most forecasters. But it actually masks considerable strength in the private economy. Namely, housing investment in the fourth quarter jumped 15.3 percent annually, business equipment and software spiked 12.4 percent, and real private final sales rose 2.6 percent. All in, the domestic private sector of the economy increased 3.4 percent annually — a very respectable gain.

And here’s one for the record books: Working ahead of year-end tax hikes, individuals shifted so much money to the fourth quarter at the 35 percent top rate that personal income grew by 7.9 percent annually — a huge number. And there’s more: In order to beat the taxman, dividend income rose 85.2 percent annually. You think tax incentives don’t matter? Guess again.

Now, all this private-sector strength occurred despite the fact that government spending — namely military spending — dropped 6.6 percent. Inventories also lost ground and the trade deficit widened.

But here’s a key point: Military spending has now fallen virtually to its lower sequester-spending-cut baseline. It did so in one quarter by about $40 billion. So the brunt of the impact over the coming years has already been felt. (Normally, as of recent years, military spending has been virtually flat.)

Read more on this story HERE.

DeMint Urges Face-Off Over Debt Ceiling

/2 Comments/in , /by

With weeks to go before the U.S. reaches its statutory debt limit, some conservatives inside and outside of Congress have been getting cold feet about refusing permission to authorize new borrowings to pay the country’s bills.

But Jim DeMint, who quit the Senate late last year to become the next president of the Heritage Foundation, a conservative Washington think-tank, is urging Republicans in Congress to hold their nerve in the upcoming confrontation with the White House.

Mr DeMint, a Tea Party favourite in the Senate, said Republicans should use the debt ceiling to force the budget on to a sustainable path. He dismissed claims that a refusal to back new borrowings threatened sovereign default.

“The government itself is not going to shut down. In fact, I don’t think people are even going to notice it,” Mr DeMint told the Financial Times.

The U.S. Treasury has warned the country would run out of money to pay its creditors some time between mid-February and early March unless Congress acted to increase the $16.4 trillion borrowing authority.

Read more from this story HERE.

Surprise, Surprise: Murkowski Opposes Spending Cuts In Exchange For Higher Debt Ceiling

/10 Comments/in , /by

Breaking with the GOP, Sen. Lisa Murkowski (R-Alaska) said in an interview published Tuesday that she does not think the debt ceiling should be political leverage to cut government spending.

“If you incur an obligation, you have a responsibility to pay for that,” Murkowski told The Fairbanks-Daily News Miner.

The paper stated that Murkowski “doesn’t think the debt limit should be used for political leverage,” but the paper did not quote her directly beyond that on the subject matter. A Murkowski spokesperson confirmed that the story was accurate to POLITICO on Tuesday.

Read more from this story HERE.

Steyn: Kindly Note the Impending Bankruptcy

/1 Comment/in , , /by

Previously on The Perils of Pauline:

Last year, our plucky heroine, the wholesome apple-cheeked American republic, was trapped in an express elevator hurtling out of control toward the debt ceiling. Would she crash into it? Or would she make some miraculous escape?

Yes! At the very last minute of her white-knuckle thrill ride to her rendezvous with destiny, she was rescued by Congress’s decision to set up . . . a Super Committee! Those who can, do. Those who can’t, form a committee. Those who really can’t, form a Super Committee — and then put John Kerry on it for good measure. The bipartisan Super Committee of Super Friends was supposed to find $1.2 trillion dollars of deficit reduction by last Thanksgiving, or plucky little America would wind up trussed like a turkey and carved up by “automatic sequestration.”

Sequestration sounds like castration, only more so: It would chop off everything in sight. It would be so savage in its dismemberment of poor helpless America that the Congressional Budget Office estimates that over the course of a decade the sequestration cuts would reduce the federal debt by $153 billion. Sorry, I meant to put on my Dr. Evil voice for that: ONE HUNDRED AND FIFTY THREE BILLION DOLLARS!!! Which is about what the United States government currently borrows every month. No sane person could willingly countenance brutally saving a month’s worth of debt over the course of a decade.

So now we have the latest cliffhanger: the Fiscal Cliff, below which lies a bottomless abyss of sequestration, tax-cut-extension expiries, Alternative Minimum Tax adjustments, new Obamacare taxes, the expiry of the deferment of the Medicare Sustainable Growth Rate, as well as the expiry of the deferment of the implementation of the adjustment of the correction of the extension of the reduction to the proposed increase of the Alternative Minimum Growth Sustainability Reduction Rate. They don’t call it a yawning chasm for nothing.

Read more from this story HERE.

Gary Johnson: Obama Will Win

/7 Comments/in , /by

Libertarian Party presidential nominee Gary Johnson said Monday he thinks President Barack Obama will defeat Mitt Romney to win a second term.

“I think Obama’s going to win, that’s what I think,” Johnson told POLITICO in an interview. “[My vote is] really spread out, meaning I don’t think there’s any state that I’m going to do better than another.”

Johnson, who’s on the ballot in 48 states and the District of Columbia, hovers in single digits in the polls. The former two-term New Mexico governor declined to single out any state where he expected to do particularly well but said he had no regrets about how he ran his campaign.

“There’s nothing,” Johnson said. “I would ask that everybody look at it and maybe recognize that this is phenomenal that we spent $2 million and may get 5 percent of the general – now maybe it doesn’t turn out that way at all – but that we spent $2 million bucks and here we are playing in a game that by all accounts we should not be playing in, so no. Yeah, you make mistakes every single day, but the reality is: Holy cow.”

A CNN Ohio poll released Nov. 2 had Obama at 47 percent, Republican nominee Mitt Romney at 44 percent and Johnson at 5 percent. He has raised about $2.3 million, has about $35,000 on hand and is about $227,000 in debt, according to the Center for Responsive Politics.

Read more from this story HERE.

Fed’s Driving Youth Unemployment to Record Levels while GDP Stagnates

/0 Comments/in , /by

Photo credit: clementine gallot

Last week, the U.S. Department of Labor released its Employment and Unemployment Among Youth—Summer 2012 report. While many youths (ages 16-24) found a summer job this year, many did not even try. Fully 39.5 percent of the youth population neither worked nor looked for work this summer. This number has trended upward over time—it is almost double the rate (22.5 percent) from July 1989.

Of those who looked for work, many could not find it. The youth unemployment rate in July 2012 was 17.1 percent. By comparison, it was only 12.4 percent in July 2000 and 10.8 percent in July 2007. For men, blacks, and Hispanics, the youth unemployment rates in July 2012 were worse—at 17.9 percent, 28.6 percent, and 18.5 percent respectively.

Why are fewer youth participating in the labor force, and even fewer working? In part, because a bad economy always hits younger workers harder. The central problem with the labor market right now is a dramatic slowdown in job creation. While job losses rose at the start of the recession, they have since returned to pre-recession levels.

Hiring, meanwhile, has not recovered. Unemployment remains high because employers are creating fewer new jobs. This makes it much harder for those without jobs—like the youth—to find them. It also allows employers to become more selective in the people they do hire. That often means hiring older and more experienced workers.

Government policies have made this difficult labor market even worse for younger Americans. In 2007, Congress voted to raise the federal minimum wage to $7.25 an hour. Half of minimum wage earners are between the ages of 16 and 24. Raising the minimum wage, in addition to employer paid Social Security, workers compensation, and unemployment insurance prices many young workers out of the job market. An inexperienced high school student may not produce enough to be paid $7.25 per hour plus Social Security, workers comp, and unemployment insurance. As a result, since an employer is not allowed to pay her less by law, she is not hired and misses out on the job experience she needs to get a higher paying job: two-thirds of minimum wage workers earn a raise within a year.

Read more from this story HERE.

Click HERE for article regarding GDP’s 1.7% growth.

It’s Not Getting Better: GDP Slows to Sluggish 1.7 Percent Rate

/0 Comments/in , /by

This morning’s update from the Department of Commerce on economic activity in the second quarter shows that the economy grew at an anemic 1.7 percent annual rate. This follows a nearly equally weak first quarter growth rate of 2.0 percent.

How weak is this? In terms of economic output, the current recovery is the weakest of any since 1945: Total output is only 6.8 percent higher than when the recession ended in 2009, which was about 12 quarters ago. Compare that to the other really big post-war recession: 1981. After 12 quarters, economic output stood 18.5 percent higher than the end of that recession. Even the really slow recovery from the 2001 recession outdoes the current one: By 12 quarters following the end of the 2001 recession, economic output was 8.9 percent higher.

The weak spots in the current recovery stand out in today’s economic growth report. The Bureau of Economic Analysis traces the sluggish growth rate to slowdowns in the spending of households and businesses and shrinking inventories.

While the media will highlight the weak household spending numbers, the real focus of concern should be on business investment. When businesses hold back on improving and growing their productive capacity, that inaction directly affects hiring decisions and, thus, household incomes. And that’s what businesses appear to be doing this year: They are sitting this economy out.

Very few economic actions testify more strongly to the failure of current economic policy—especially the threats of tax increases next year—than what businesses are doing. Well before voters head to the polling booth in November, American business has apparently voted against the near-term prospects of the economy. Imagine the economy today if better economic policy had been the norm over the past several years.

Read more from this story HERE.

US on the Brink of the Greatest Depression Ever via Fox News

/2 Comments/in , /by

Photo credit: Mike Licht

Everywhere from FoxNews.com to CNBC.com, I suddenly see commentators warning of pending doom, economic collapse, and a new Great Depression. Welcome to my club. Perhaps America’s politicians and economists should have paid attention to an entrepreneur and small businessman that has been warning of economic collapse and a new Great Depression publicly for over two years.

More importantly, none of the current commentaries mention the “why’s” of this slow motion economic collapse…beyond the obvious — mountains of deficit and debt. None of them mention the dysfunctional structure of the current U.S. economy and the massive changes in the work ethic and mindset of the average American.

I am a successful small businessman and a patriot who loves America and always sees its greatness. I am also an optimistic, positive thinker who always sees the glass half full. But not this time.

This time we are in such deep trouble, the only solution is a radical restructuring of the politicians, the economy, and the way we view personal responsibility versus government handouts. If those changes don’t come then we are facing a long decline and the eventual end of America.

This time the results are going to be dramatically worse than 1929. This time we are facing The Greatest Depression ever.

Read more from this story HERE.

Video: The question is not “if,” it’s “when” our nation collapses from insolvency

/0 Comments/in , /by

This new “Government Gone Wild” video explains in simple terms that both parties are selling this country out. Collapse is inevitable absent fundamental change.

Heritage: Another Recession Is Imminent

/1 Comment/in , /by

Photo credit: Ed Yourdon

Yesterday, the Congressional Budget Office (CBO) reported that without a doubt, America will have a fresh recession next year unless Congress and the President prevent it.

We are facing the largest tax increase in history—Taxmageddon, scheduled to take effect January 1—and what experts are calling a “fiscal cliff” of sharp and unforgiving budget changes that will send the country spiraling downward. Congress and the President have the power to prevent this, and when the August congressional recess is over, that is exactly what they should do.

In its new report, the CBO said that if Congress does not act, it’s not economic growth we should be worried about, because the economy will actually shrink next year. It will shrink by 0.5 percent, and the unemployment rate will spike to 9.1 percent. As Heritage’s J.D. Foster explains: “Forget percentages—what does this mean in actual jobs lost if President Obama and Congress fail to act? It means roughly 1.6 million more Americans will be out of work—on top of the 12.8 million who already want to work but can’t find jobs.”

Preventing Taxmageddon and the fiscal cliff are necessary just to keep the economy from taking a nosedive. The status quo isn’t attractive, but Congress certainly shouldn’t make things worse. If Congress moves to prevent the nosedive, the CBO projects that the economy will grow only slightly next year, at an anemic 1.7 percent, and the unemployment rate will remain stuck around 8 percent.

Why? The CBO report makes it clear: Our spending problem continues, and it’s driven mainly by the three major entitlements: Medicare, Medicaid, and Social Security. Spending on these programs will outpace tax revenue over the next decade.

Read more from this story HERE.