Jun 02 2009

Have You Sacrificed Your Career And Life’s Work For Obama’s Liberal Economic Experiment?

This post was originally titled “Obama’s Lies On Economy Getting Out Of Control – Where Is The Job Creating Stimulus?” But it was lost over the weekend after the murders committed by the left and right fringe (see here and here) pushed the post down ‘below the fold’.  Comments by President Obama yesterday regarding the GM-Government fiasco reminded me of why I wrote this post in the first place – the failing and risky liberal economic schemes now destroying American dreams:

“The GM of the future will be different than the GM of the past,” Obama said in a speech at the White House, flanked by his top economic advisers. “I am absolutely confident that if well managed, a new GM will emerge that can provide a new generation of Americans with the chance to live out their dreams, that can out-compete automakers from around the world. 

Obama usually sugar coats things to the extreme. When he announced the pork laden ‘stimulus’ package he made it sound like everyone would be getting right back to work (didn’t happen, did it). His comments about the economy recently have been naively Pollyannish (or cleverly misinforming).

But here Obama is making it clear this generation will not see a new GM. This generation of workers will not live out their version of the American dream. And that is if things are well managed, and as we see below this administration has not managed things well.

And gets worse:

Obama also addressed workers at plants and dealerships who will lose their jobs as part of the restructuring, warning that “more jobs would be lost,” and adding they were “making a sacrifice for the next generation.”

It’s “a sacrifice you may not have chose to make, but a sacrifice you are nevertheless called to make so that your children and all of our children can grow up in an America that still makes things, that still builds cars, that still strives for a better future,” he said.

I usually don’t fall for the “Dear Leader” stuff, but this time I can’t help but note how the jet setting Obama’s  (Tens Of Thousands Of Taxpayer Dollars For A Date?) are clearly not sacrificing a damn thing while President Obama has volunteered hundreds of thousands to sacrifice their lives to his liberal economic experiments.

This is just incredible arrogance – telling Americans they must sacrifice for the next generation. He knows this economy is not coming back anytime soon. He knows that stimulus money is still stuck in the federal bureaucracy (see below). He knows the massive deficit spending is about the send us over another economic cliff. (update: one estimate as the price of the date at $250K!)

He knows and he just wanders off to party, like Nero watching Rome burn. Two examples of men who took on leadership roles way above their grasp.

Original Post: Tax cuts are the only mechanism for immediate economic stimulus. The minute the federal government says companies and individuals will PAY lower taxes, the withholding rates are adjusted and the new money flows into the economy. That is because, as we should all know, that we prepay our taxes throughout the year, either through the weekly paycheck withholdings or the monthly corporate prepayments. Tax cuts are immediate stimulus because we keep that money, it does not get shipped to DC where it wanders around the bureaucracy for months or a year before popping out the back side.

Federal ‘make work’ programs are one of the slowest ways to stimulate the economy. It takes years to move money through the constipated bureaucracy, 6+ months at its most nimble. It is like comparing a massive train accelerating from 0-60 mph (the bureaucracy) and a high end sports car (tax cuts). There is no doubt which is quicker.

And this fact of modern, bloated bureaucracies is why the democrats have failed to fix our economy and create jobs. This is not FDRs federal government with layers of ecological, equal opportunity, competitive bidding, minority access (etc, etc) processes in place.  The liberals in DC promised if we rammed through massive deficit spending we would save people from economic chaos. They lied.

And they continue to lie to this day, pretending everything is turning around:

President Barack Obama says the economy has stepped away from the verge of calamity and Americans are calmer about the future.

Hitting bottom is not stepping ‘away from the verge of calamity” – it is simply hitting a point of temporary stability. It is not getting as bad as fast as it was, but it is not getting better either. It is still gliding downward, albeit at a slower rate.

The problem is this: what has been done to make this an actual bottom from which we can rise off of? What policies have been put in place to make sure we don’t just slide at this slower rate farther down the hole for months and years to come? Is there another cliff in front of us we need to ‘step back from’ before we start another crashing downturn? Are the current policies going to turn this around, or are they actually going to send us over that next cliff?

I fear it is the latter, and so do a lot of other people.

For the first time since another Democrat occupied the White House, investors from Beijing to Zurich are challenging a president’s attempts to revive the economy with record deficit spending. Fifteen years after forcing Bill Clinton to abandon his own stimulus plans, the so-called bond vigilantes are punishing Barack Obama for quadrupling the budget shortfall to $1.85 trillion. By driving up yields on U.S. debt, they are also threatening to derail Federal Reserve Chairman Ben S. Bernanke’s efforts to cut borrowing costs for businesses and consumers.

The 1.4-percentage-point rise in 10-year Treasury yields this year pushed interest rates on 30-year fixed mortgages to above 5 percent for the first time since before Bernanke announced on March 18 that the central bank would start printing money to buy financial assets. Treasuries have lost 5.1 percent in their worst annual start since Merrill Lynch & Co. began its Treasury Master Index in 1977.

We have not stepped back from the edge, we are actually just passed one edge and looking at the abyss of another. If the credit market tightens up the economic growth will go through another round of constricting. Another round of constriction and dominoes will start falling again as more jobs dry up, more industries go under, more tax revenues fall.

The only way to stop this from happening is for that mythical stimulus to kick in – but it hasn’t and it won’t. It can’t. The constipated federal bureaucracy cannot move money through its bloated processes that fast. And it shows.

First, it shows in the meager amount of ‘shovel ready’ stimulus money dripping out of the federal government (click to enlarge):

I have been tracking $105 billion dollars of the $300+ billion stimulus money crammed through congress in February. I have been keeping tabs on 5 Departments and 1 Agency which represent one third of the stimulus money, including the two primary departments of Transportation and Energy which the Democrats targeted for the largest portion of the stimulus spending.

The far left columns show the amount of stimulus money budgeted for these 6 government entities – that is the stimulus money meant to create jobs. The center columns represent the amount assigned to specific projects or programs; this is where the bloated bureaucracy has finally determined where and how to spend the money. But it is not going anywhere yet. The last columns on the left (which are basically flat lined) is the money heading out of the bureaucracy and being spent to create jobs.

The totals and percentages for the money budgeted, obligated and dispersed as of 5/21/09 are as follows:

  • $105,335,650,000 budgeted (~1/3rd total stimulus package)
  • $15.8 billion obligated (15% of the budgeted total)
  • ~$75 million dispersed to actual work (0.071%).

Here we are coming on 4 months since the stimulus bill passed and nearly all the money is still stuck in the bowels of the federal government, losing its total value as the bureaucracy sucks off its handling fees. There has been basically NO economic stimulus from the so called stimulus bill to date.

This is why the democrats have failed to do ANYTHING about jobs – the second indicator things are not really turning around. Our tax money is sitting in the government being eaten up. Look at the history of job losses so far this year:

Does this look like we are heading in a better direction? Does this look like we have stepped back? Hell no, it doesn’t!

But it is even worse than that if you look at what President Obama and the Democrats have done to we average Americans in this major economic screw up. While the jobs money is stuck in the bureaucracy, the federal government is charging all of us for the deficit spending they are gorging on at the moment, racking up our personal debt to the government at a mind boggling rate. I cannot copy the graphic here, but everyone needs to follow this link and look at how much each household owes thanks to the Democrat liberal policies enacted only 4 months ago:

Taxpayers are on the hook for an extra $55,000 a household to cover rising federal commitments made just in the past year for retirement benefits, the national debt and other government promises, a USA TODAY analysis shows.

Got that? We all now owe Uncle Sam another $55,000 dollars per household! Per household! According to the US Census Bureau, the median household income for 2007 was $50,233.00. So the democrats in Congress and the White House have basically racked up 100% of the average household income in future debt. Gee, thanks guys and gals in DC!

And we all should know the median income levels are dropping since the recession hit in late 2008. So how bad is it right now? The best indicator for that right now is tax revenues (our 3rd indicator  of a suppsed economic turn around), which are a sign of personal and corporate income. That indicator is looking damn bleak:

Federal tax revenue plunged $138 billion, or 34%, in April vs. a year ago — the biggest April drop since 1981, a study released Tuesday by the American Institute for Economic Researchsays.

For example, 6 million people lost jobs in the 12 months ended in April — and that means far fewer dollars from income taxes. Income tax revenue dropped 44% from a year ago.

“These are staggering numbers,” Lynch says.

All the more staggering because the Democrats and President Obama already forecasted frightening levels of deficit spending for months and years to come, all the while assuming a fantasy turnaround on the economy which would be running at a ridiculous +4% by the end of this year. The following chart shows the Obama promise and the CBO numbers which have been proven to be more realistic. The question is now, how much worse is it really?

This economic BS from the Dems can be emphasized by noting that we are currently have a negative economic growth (shrinkage) of 5-6%. To get to their rosy numbers would be a never before seen swing of 9-10% in economic growth in a few short months. Which means that graph above is basically unrealistic. The real economic picture will be much worse than that.

There will be no economic growth with tightening credit and the stimulus money being held hostage in the federal bureaucracy. There needs to be SOMETHING to stimulate growth and there is nothing there. So where is the stimulus money? Where are the policies to stop us from sliding further? Apparently what little is getting out is going to districts and areas who need it the least:

States hit hardest by the recession received only a few of the government’s first stimulus contracts, even though the glut of new federal spending was meant to target places where the economic pain has been particularly severe.

Nationwide, federal agencies have awarded nearly $4 billion in contracts to help jump-start the economy since President Obama signed the massive stimulus package in February. 

This is another must read article because it shows how little money the current stimulus of $4 billion really is in an economy which is around $10 trillion dollars total. (note: these state level funds provided by the Feds may not the same as the funds I noted in the graphs above for federal government entities I have been tracking).  Check out these per capita numbers compiled by USA Today:

In Michigan, for example — where years of economic tumult and a collapsing domestic auto industry have produced the nation’s worst unemployment rate — federal agencies have spent about $2 million on stimulus contracts, or 21 cents per person. In Oregon, where unemployment is almost as high, they have spent $2.12 per capita, far less than the nationwide average of nearly $13.

21 cents!? $2.12! This is going to create jobs? Why not give people a $10 dollar tax rebate and REALLY stimulate the economy. Why not give everyone a $50,000 tax cut (the amount of new debt added per household) and really do something? This is the fallacy of the liberal mindset that thinks federal programs are better than letting people keep their money and spend it where they need to.

This will be history’s grand liberal experiment which fails so miserably that it deals the death blow to liberalism. Sadly, we had to learn this lesson the hard way, by direct and painful experience. Everyone wanted a quick and easy and painless fix. Soak the rich, redistribute wealth. We wanted Obama to wave his magic wand and make it all good again. So naive.

Well here’s a new lesson on the reality of economics. Wealth and debt are redistributed equally, it all depends on the economic conditions which are in play. In good times – with economic growth-  wealth is distributed. It all trickles down, whether from taxes or from economic growth.

We don’t live in those times. So now the liberals are redistributing the economic disaster onto our backs. The average household now has two debts to pay off: what it owes personally that it took on itself, and what it owes the government because pols can’t control their spending while using our money. This federal debt is what DC took out in our name.

If one looks at one of the key links above they will learn this inconvenient truth: the average household has $122,000 in personal debt. But they also owe an additional $547,000 in federal debt – and it is rising at an unsustainable rate. With median household incomes around $50,000 the federal debt is equivalent to taking 11 years of income away from the average household. We now all owe Uncle Sam a decade of financial servitude to the incompetence of Congress and this White House. We must work for a decade to pay back their screw ups!

This is the change Obama and the liberal Congress have wrought, they have stolen a decade from each of us to fund their failed liberal experiments.

And these people have only just begun to bankrupt us. To see what America will look like if we don’t stop them from this madness and their lies, look at what California is facing after decades of similar uncontrolled bureaucratic incompetence:

Faced with a ballooning deficit and a clear signal that voters won’t pay more to fix it, California Gov. Arnold Schwarzenegger released a budget plan Tuesday that would eliminate welfare, drop 1 million poor children from health insurance, cut off new grants for college students and shut down 80 percent of state parks.

Have we stepped back from the brink? Hell, we have just barely put our toes into this mess. As the start of this post noted, as long as deficits climb out of control (and they are faster than anyone can fathom right now) the longer we will be in this economic hell whole. 

If only we had just lowered taxes and let the economy do what it does naturally. If only we had not believed in the liberal fantasies of the 1930’s and just faced up to the reality of the first decade of the 21st century.

16 responses so far

16 Responses to “Have You Sacrificed Your Career And Life’s Work For Obama’s Liberal Economic Experiment?”

  1. crosspatch says:

    There is a major shoe yet to drop. With all this government debt, interest rates are going to HAVE to rise. There is simply no way around it. When that happens, within the next 6-9 months, you will see mortgage defaults begin to rise again. What is interesting now is the increase in defaults in the PRIME mortgage sector, not the sub-prime.

    Mortgage delinquency and foreclosure reached record highs in Q1 2009. What is telling is this:

    During the quarter, out of all the loans in foreclosure, 49.8 percent comprised prime loans and 43.2 percent comprised subprime loans.

    So we now see prime market mortgage defaults greater than sub-prime.

    Folks, you are being lied to and important facts are being glossed over by a cheerleader press who believes psychology can trump market reality. If everyone believes really hard, then everyone will be ok. While psychology plays an important part, it can not trump reality when it comes to things like money supply and a Peter Pan economic policy is destined to fail.

    Here is how it will unfold:

    The dollar is going to continue down causing prices of oil and basic materials to rise. This will put inflationary pressure on the economy. The Treasury and the Fed will be forced to increase interest rates to defend the dollar and to attract investment to the flood of government debt. The rise in interest rates will cause bond prices to fall. Rising interest rates will then result in more pressures in the housing markets and increase mortgage defaults putting more pressure on the lenders. It will also stop the current Wall Street rally.

    Within two years gold will be at about 1400 per ounce, Oil will be at somewhere around 100, mortgage interest rates will be ovver 10% and there is a good chance your local bank will be gone.

    Folks, it is my opinion that things are a lot worse than they (the press and the govt) are letting on. They are scared to death.

    Had they used TARP for its intended purpose of buying up “toxic” loans, we could well have been out of this mess again. Instead they are using it to buy equity stakes in the companies and doing a de facto nationalization of the largest banks and industries. Our national leadership are a bunch of wet-behind-the-ears idealistic nincompoops.

  2. kathie says:

    All the Obama’s decisions were made 2 1/2 years ago when the economy didn’t look like it does today. Those decisions were exactly wrong for what he found when he was inaugurated and he couldn’t let go of them or wouldn’t.

    He hated the fact that so many on Wall Street were getting so rich, and the workers were “loosing out”. The “little people” were not moving ahead fast enough.

    The crash changed all that, and now moving ahead and punishing the money makers, the tax payers, the home owners, the credit card payers, those who live within their means IS STILL ON THE TABLE! Obama’s policies do just that. While at the same time he grows government that takes payers money out of the economy. He does not ask states to get there houses in order. He proposes that the government takes on people who do not carry medical insurance, and he proposes that we live with out oil even though it could save the economies of many states. He thinks that taxing coal is a good thing to do. IS THE GUY CRAZY?

    He pushes through a stimulus bill, $786 billion and more bills, that nobody has read, when the money could have been used to help those unemployed until the economy stabilized. This is all so stupid and the result will be catastrophic. If Obama thinks the poor were poor before he came into office, he hasn’t seen nothing yet. As in all down terns, the poor are always hit the hardest.

    And to crown it all off HE GOES TO NEW YORK FOR A GATE WITH HIS WIFE. Are you kidding me?

  3. jd watson says:

    What do you expect when White House Budget Director Peter Orszag’s economic Bible is the book Animal Spirits, whose thesis is that we are all irrational economic beings guided primarily by psychology. This is associated with the primitive superstitution of “word magic”, i.e., that just saying the proper words, chanting the right “spells”, will miraculously transform reality.

    But magic never could change the laws of physics (or economics). We’re in for a long, rough ride.

  4. crosspatch says:

    Note this in the article I linked to above:

    Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve.”

    GM is going to shutter many plants this summer for 9 weeks. When they open them back up, many employees will be making much less than they were making before. The auto industry is one where the average salary has been decreasing for the past 10 years.

    The federal minimum wage rises on June 1 which will further increase unemployment. Car dealerships are closing around the nation.

    I see no improvement on the horizon and 2010 looks to be a very bad year for Pelosi and the Democrats unless they figure out some way to make it illegal to vote Republican between now and then.

  5. AJStrata says:

    jd watson,

    I never knew that – sadly it explains a lot. Ever notice how those who cannot grasp the technical details of a subject run to ‘feelings’ to explain things and claim some expertise?

  6. crosspatch says:

    What is most bothersome to me is the “bait and switch” that goes on with legislation. You have programs such as TARP that are “sold” to Congress and the public as being for a specific purpose but no language is included in the legislation for requirements on how the money is actually used or oversight of the dispersal of the funds. So it ends up being used for something completely different. In this case, bailouts of large campaign donors.

    I believe the government listened to and heard what they wanted to hear. They took a gamble that the bursting of the housing bubble would result in a short shakeout of weak institutions and then it would be back to business as usual. They heard the voices that were telling them what they wanted to hear but have not paid attention to actual market mechanics.

    The greatest source of wealth for the bulk of Americans was the value of their home. This wealth was used to fund college educations, buy things, improve things, or simply left as a retirement nest egg. We have seen in many areas a crushing destruction of that wealth. Where the home prices inflated the most is where you see the most reliance on that inflated wealth. At the same time another thing is going on. Early retirements are soaring as boomers are losing their jobs and opting for early Social Security rather than hit the bricks looking to start a new career so late in life. This is burning the Social Security candle at both ends by both reducing amounts paid in through payroll taxes while increasing benefit payouts. And it causes a third stress on the market by people who were living in expensive areas selling their homes and moving to less expensive areas now that they are on a fixed income. This results in more downward pressure on home values as inventories of unsold homes increase.

    The bottom line is that things aren’t working out according to the predictions of six months ago. We have started to see a chain of dominoes fall that is worsening the situation. Those people who have retired early will not ever be back in the workforce in the capacity they were before. That tax revenue that was factored in to Social Security projections is gone and is hemorrhaging at an increasing rate. In short, everything we knew about Social Security is wrong.

    It is going to be an interesting couple of years. Go long basic materials and natural resources, go short financials and bonds and be prepared to go short equities as soon as this rally is over.

  7. Alert1201 says:

    Thanks for the posts crosspatch. Very scary yet helpful info.

  8. crosspatch says:

    yikes!

    Federal deposit insurance fund holds about 1/5 the cash it held in March of last year. Was about 50bn in March 08. Was at about 10bn in March 09.

  9. crosspatch says:

    The Chines aren’t buying it either:

    “Chinese assets are very safe,” Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

    His answer drew loud laughter from his student audience

  10. crosspatch says:

    Frogg, I don’t like what I am reading in that story on Hot Air. Looks like it could be an attempt to “outlaw” whistleblowing.

  11. crosspatch says:

    Obama makes Richard Nixon look like a boyscout.

  12. KauaiBoy says:

    Wow that’s a lot to read to get to the fact that the most incompetent person was ordained to run the country. This can and will all be undone, not without great expense, but the real America will wake up and slap the children around for being so obstitant and then give them a long overdue time out with much quiet time. Ahhh, that’s change I can believe in.

    But when is he gonna get Osama?

  13. stevevvs says:

    They aren’t Liberal Policies, They are Socialist, and Fascist.

  14. crosspatch says:

    Obama just sold the Hummer division of GM to the Chinese:

    http://www.cnbc.com/id/31065937

    It’s his company now, with a 31 year-old student who has never run ANYTHING in charge of killing it.

    How do you think the Chinese will do in negotiations with the UAW?

  15. [...] Tax cuts are immediate stimulus because we keep that money, it does not get shipped to DC where it click for more var gaJsHost = ((“https:” == document.location.protocol) ? “https://ssl.” : [...]