The U.S. Debt is not just a Paper Number

$31 trillion is the debt limit set by congress. Today the debt is at $30.93 trillion. As you can see in this U.S. treasury graph the growth has increased at a horrifying rate. That debt is bonds sold by the government. That debt exists because the government spends more than is taken in through taxes. With higher interest rates any new bonds will cost more.

If this was your household would you continue borrowing or would you say NO to more spending? What would you cut out of the federal budget?

$30.93 trillion

Money Wasted on Border Security

Forgiving someone after breaking a law is amnesty. Both Republicans and Democrats are interested in Hispanic votes for their party. Neither cares about the well being of the country. The Los Angeles Times reports that The $46-billion security package in the immigration bill would benefit aerospace, technology and security companies, as well as border states. This is an unnecessary expenditure.

We can obtain substantially reduced illegal entry into the United States by denying undocumented workers employment.

Emphasis is on Hispanics because they are the largest group of illegal aliens. It has been reported that 40% of those in the country illegally are not from Latin America. Under current federal law, it is illegal for any employer to hire, recruit or refer for a fee any alien not authorized to work in the United States. For first offenders, there is a $250-$2,000 fine per illegal employee. For a second offense, the fine is $2,000-$5,000 per illegal employee. If the administration simply enforced the law there would be no problem and amnesty would not be an issue.

So why haven’t we simply enforced existing laws? My guess is that leading members of both political parties do not have the stomach to deny anyone a job. In addition companies that hire illegal aliens have a lobby that is successfully impeding government action against employers.

We need a new immigration law that provides for both migrant workers and high tech workers. The Senate bill would encourage more illegal immigration.

A Growing Welfare Class in the United States

I hear the constant drum beat that 47 million Americans pay no taxes. That those people are on the dole. All those people don’t really want to work. The argument goes they are happy sitting in their homes doing nothing.

Is this all really true? If so, how did this happen?

A Google search [percentage of Americans paying income taxes] confirms that about one half of all Americans do not pay income taxes. The sites How Stuff Works, Fox News, The Washington Post, Reuters, and others all offer their take on why this is fact and some offer arguments about changing the taxing system. All the postings do affirm that everyone pays Social Security and Medicare taxes.

From How Stuff Works: So who are the 49 percent of Americans who don’t pay income taxes? The vast majority are the lowest income households, the elderly and young working families with children.

The reason this situation exists and is becoming worse was clearly defined in a Market Watch article posted on April 24, 2012.

Manufacturing employment as a fraction of total employment has been declining for the past half century in the United States and the great majority of other developed countries. A 1968 book about developments in the American economy by Victor Fuchs was already entitled “The Service Economy.”

Although the absolute number of jobs in American manufacturing was rather constant at about 17 million from 1969 to 2002, manufacturing’s share of jobs continued to decline from about 28% in 1962 to only 9% in 2011.

From CNN: A very large portion of U.S. apparel imports comes from Bangladesh. Many companies have been shifting orders there, because labor costs in the country are so low. Bangladesh is on track to surpass China within the next seven years as the largest apparel manufacturer in the world.

It is already the third biggest exporter of apparel to the U.S., behind China and Vietnam. The value of clothing imported from Bangladesh into the U.S. has quadrupled over the last decade to $4.5 billion annually, according to the apparel group.

Go into any store in the United States and you will find most products have been made in another country. Talking to a lady at Trader Joe’s just yesterday and she complained that the fresh produce is primarily from Mexico.

Back in 2007 the total unemployed that included part time workers and those who have given up searching for a job was below 8.5% of the likely working population. Today that number is 13.9%. That is the BLS number referred to as U6 on the monthly reports. It’s an improvement from the maximum number of 17.1% reached in October 2009.

I can’t prove it but I believe no one wants to live poorly when they see the things they can have with an income. Unfortunately the poor are also the least educated. That condition of poor education is partially lack of opportunity and partially lack of capability. Not all of us are capable of working in Silicon Valley or performing surgery at the Mayo Clinic. Those less technical jobs have been sent to the places where labor costs less. Every company has the right to lower their costs. Middle class and blue collar America has paid the price for those off shored jobs.

So the wealthy of America (they pay most of the taxes) have concluded that welfare is a cheap price to pay to keep peace in the United States. It’s the thing the royalty of France and Russia did not understand. We all know how that worked out. There is no royalty in the United States but there is a wealthy class that is the equivalent of royalty. Once again the U.S. leads the list with 442 billionaires the most of any nation in the world says Forbes magazine. The New York Daily News reports that there are 9 million members of the millionaires club in the U.S.

My prediction is that the welfare class will continue to exist in the United States and is likely to grow throughout the 21st century. This is not negative. It is reality.

The 1% aren’t like the rest of us

This Op-Ed from the Los Angeles Times is really worth the read. I admit to being part of the 47% that Mitt Romney mocked. The findings of this survey confirm what I always knew.

The ultra-rich share few of the priorities of most Americans, but their access to policymakers is greater, a study finds.

By Benjamin I. Page and Larry M. Bartels

March 22, 2013

Over the last two years, President Obama and Congress have put the country on track to reduce projected federal budget deficits by nearly $4 trillion. Yet when that process began, in early 2011, only about 12% of Americans in Gallup polls cited federal debt as the nation’s most important problem. Two to three times as many cited unemployment and jobs as the biggest challenge facing the country.

So why did policymakers focus so intently on the deficit issue? One reason may be that the small minority that saw the deficit as the nation’s priority had more clout than the majority that didn’t.

We recently conducted a survey of top wealth-holders (with an average net worth of $14 million) in the Chicago area, one of the first studies to systematically examine the political attitudes of wealthy Americans. Our research found that the biggest concern of this top 1% of wealth-holders was curbing budget deficits and government spending. When surveyed, they ranked those things as priorities three times as often as they did unemployment — and far more often than any other issue.

If the concerns of the wealthy carry special weight in government — as an increasing body of social scientific evidence suggests — such extreme differences between their views and those of other Americans could significantly skew policy away from what a majority of the country would prefer. Our Survey of Economically Successful Americans was an attempt to begin to shed light on both the viewpoints and the political reach of the very wealthy.

While we had no way to measure directly the political influence of those surveyed, they did report themselves to be highly active politically.

Two-thirds of the respondents had contributed money (averaging $4,633) in the most recent presidential election, and fully one-fifth of them “bundled” contributions from others. About half recently initiated contact with a U.S. senator or representative, and nearly half (44%) of those contacts concerned matters of relatively narrow economic self-interest rather than broader national concerns. This kind of access to elected officials suggests an outsized influence in Washington.

On policy, it wasn’t just their ranking of budget deficits as the biggest concern that put wealthy respondents out of step with other Americans. They were also much less likely to favor raising taxes on high-income people, instead advocating that entitlement programs like Social Security and healthcare be cut to balance the budget. Large majorities of ordinary Americans oppose any substantial cuts to those programs.

While the wealthy favored more government spending on infrastructure, scientific research and aid to education, they leaned toward cutting nearly everything else. Even with education, they opposed things that most Americans favor, including spending to ensure that all children have access to good-quality public schools, expanding government programs to ensure that everyone who wants to go to college can do so, and investing more in worker retraining and education.

The wealthy opposed — while most Americans favor — instituting a system of national health insurance, raising the minimum wage to above poverty levels, increasing the Earned Income Tax Credit and providing a “decent standard of living” for the unemployed. They were also against the federal government helping with or providing jobs for those who cannot find private employment.

Unlike most Americans, wealthy respondents opposed increased regulation of large corporations and raising the “cap” that exempts income above $113,700 from the FICA payroll tax. And unlike most Americans, they oppose relying heavily on corporate taxes to raise revenue and oppose taxing the rich to redistribute wealth.

Some of the differences between the political views of the wealthy and other Americans may be explained by differences in the two groups’ economic experiences and self-interest. The wealthy are likely to have better information about the costs of government programs (for which they pay a lot of taxes) than about the benefits of those programs. They don’t usually have to rely on Social Security, for example, let alone food stamps or unemployment insurance.

Another possibility is that the wealthy — who tend to be highly educated, well informed and committed to charitable giving — seek the common good as they see it, and in fact know better than average Americans what sorts of policies would benefit us all. On the issue of federal deficits, for example, the public has come to see government debt as an increasingly important problem over the last two years, reducing the gulf between their views and those of the wealthy. Is that because the wealthy were ahead of the curve, or because their concern helped stimulate a steady drumbeat of deficit alarmism in the media and in Washington?

Our pilot study included a relatively small number of wealthy citizens, and they were all from a single metropolitan area. A larger-scale national study is needed to pin down more precisely the views of wealthy Americans about public policy. We need to understand how they formed the preferences they have, and how wealthy people from different regions, industries, and social backgrounds differ in their political views and behavior. We also need to understand more about their political clout.

Our initial results suggest the wealthy have very different ideas than other Americans on a variety of policy issues. If their influence is far greater than that of ordinary people, what does that mean for American democracy?

Benjamin I. Page is a political science professor at Northwestern University and co-author of “Class War? What Americans Really Think About Economic Inequality.” Larry M. Bartels is a political science professor at Vanderbilt University and author of “Unequal Democracy: The Political Economy of the New Gilded Age.”

Democracy in Decline

16.1% of registered voters in Los Angeles actually participated in yesterday’s city election. It is a sad commentary on the belief that democracy works. The message from the voters is that whoever they vote for the results will not change anything in city management. We were all taught that elections mattered. Apparently we have learned it just isn’t so. Why vote if the outcome makes no difference?

This may not signal the end of democracy in the next few years. However when I watch the Congress not doing its job it reinforces my suspicion that even at the highest levels of our society democracy is stumbling.

Those of you in other nations reading about the United States and believing that we have the answers to making government work should consider our current performance. Think twice or perhaps three or four times before joining this madness.

Politicians Use Fear to Get Their Way

Politicians use fear to motivate each other and the general public.

The President is wrong to use fear to motivate Congress!

In California the governor, Jerry Brown, used fear to motivate voters to vote for a .25% sales tax increase and an income tax increase on the wealthy. It worked! Now there are indications that the state may be able to restore many programs that had been canceled and save others that were scheduled for major reductions. The problem is that the additional state income may be spent on unnecessary new programs.

The city of Los Angeles wants voters to approve another .5% sales tax increase to bail out their shortfall. Their fear motivation is that the city will go bankrupt without the higher tax. That will be decided in a March 5 election.

President Obama is using the same tactic in his campaign to stop sequestration. The threat is long lines at airports, reduced food inspection, criminal illegal aliens will be let out onto our streets, companies doing business with the government may have to layoff half of their employees, we can’t send patrol ships to the Persian Gulf, etc. All of this the result of a 2.4% reduction in this year’s budget that must be absorbed in the next seven month.

The stock market is not panicked and we can only hope that it doesn’t panic. There are no demonstrations in the streets. Mr. President, you are alienating the public when you use fear as a tactic to get your way!

Sequestration to Make You Feel Guilty

Barack Obama is a master politician!

President Barack Obama wants to shock Congress into not implementing sequestration. To motivate Congress he has directed cut backs in employment of workers and critical military support just to get your attention.

Federal spending for both 2012 and 2013 is planned at $3.8 Trillion for each year. Ten percent of that number is $380 Billion. The Budget Control Act (called sequestration) of 2011 imposed caps on discretionary programs that will reduce their funding by more than $1 trillion over the ten years from 2012 through 2021. That does not mean $1 trillion in 2013. It means one tenth of that amount each year or $100 Billion a year.

Somehow Congress decided the first year’s reduction must be $109.3 Billion. That works out to 2.8763% of $3.8 Trillion budget. Is this a big deal? NO. However to make it a big deal the administration has decided to do as much damage as possible by layoffs and furloughs that will make everyone in Congress feel guilty. This is all in the hope that Congress will enact laws that will defer the cuts to some date in the distant future.

When hundreds of thousands of people receive their reduced paychecks in March, thanks to a four day work week, the anguished crying heard at congressional offices will receive immediate attention. Congress will cave into the Obama idea of finding another way to reduce spending. Then again perhaps his objective is no reduced spending. Either way he is likely to get his way.

The State of the Union – 2013

Sorry Mr. President. Very few of your ideas will become law.

President Obama told us of his dreams to enhance American life. For the most part they are dreams that are unlikely to become reality. He offered ideas that “will not cost government a dime.” How does he propose to provide early childhood education for every child that is four years old? Where will the money come from to provide high school tech training?

His answer is take the money out of defense spending, Social Security, Medicare and Medicaid. Tell that to AARP and the defense contractors.

We are in for four very difficult years in Washington.

Economic Facts

I have waited to write about this until this weekend hoping that economists and responsible government officials could offer reasonable explanations. They have not!

The United States economy is in trouble and no one wants to talk about it!

The U.S. economy shrank by .1% in the last quarter of 2012. That number would not be too bad if it weren’t for the fact that the economy grew by 3.1% in the third quarter of the year. That is a change in direction of 3.2%. No one wants to admit the economy is in trouble. Instead all the talking heads and all the government leaders are talking up positive data. The reasoning appears to be “if we ignore the situation maybe it will go away. Let’s be positive.”

Some worthwhile points:

Every wage earner saw his take home pay decrease by 2% thanks to the expired payroll tax holiday.
Companies don’t expand and don’t hire when there is no demand for their products.
The real unemployment rate is not publicized because it is too frightening for most people (especially those in government) to confront. It is the “Total unemployed…” from a monthly labor report in Table A-15 called U-6. The rate was 14.4% for January. The number has been unchanged for the past three months. This real unemployment rate peaked at 17.1% in October 2009. The historical typical rate has been between 7% and 8.5%.
The United States must add more than 200,000 jobs a month to reduce the unemployment rate. 150,000 new jobs simply meets the requirements of the growing work force. This fact has been repeated on newscast after newscast. Thus 157,000 new jobs in January are not satisfactory.
Housing prices may have leveled off but they are far from those that existed in 2007.
Corporate profits are for the most part up and that has been great for those who have significant stock ownership. Most Americans consider themselves well off if they have a $200,000 in retirement savings. Government statistics indicate most families have $50,000 in savings. Most people are not major beneficiaries of the past year’s increased S&P 500.
The coming sequestration or budget cuts will result in contractor and federal government employee layoffs. Both political parties seem to have settled on this event starting March 2013. There will be a cut of $85.4 billion of both defense and non-defense spending. That is the law that congress passed.

Our Congress needs to start developing solutions rather than arguing. Politics are destroying this nation.

Inauguration Day 2013

President Barack Obama offered an inaugural speech calling for unification of purpose regardless of political party. This is the sort of speech we all expect in an inaugural presentation. Sadly political divisions in the nation are more like chasms. He knows that there are major differences between the political parties and other groups in the country. Listen to Bill O’Reilly or Sean Hannity and there is affirmation of the split between the political parties.

Thus he tried to put the best face on a country that is seriously broken by geographic, religious, and racial disagreements. Never mind the breach between rich and poor or the labor unions battling the employers. When state leaders voice intentions to nullify or just plain ignore federal law and many who voice desires to succeed from the union, the president’s job will be about holding the nation together.

This may seem as all too negative. The president’s speech about one purpose was an “A” effort towards healing our differences.