Is the economic recovery real or illusory?

The Obama administration has poured about $6 trillion of borrowed money into this economy over the last four years. Has this resulted in a growing economy, or is the economy slowing down?

Take a look at this must-read editorial in the Wall Street Journal.

Excerpt:

The Great Recession is an apt name for America’s current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.

The country isn’t really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.

[...]February’s headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be “outstanding” and “amazing.” But if you account for the people who are excluded from that number—such as “discouraged workers” no longer looking for a job, involuntary part-time workers and others who are “marginally attached” to the labor force—then the real unemployment rate is somewhere between 14% and 15%.

[...]The number of Americans unemployed for six months or longer went up by 89,000 in February to a total of 4.8 million. The average duration of unemployment rose to 36.9 weeks, up from 35.3 weeks in January. The labor-force participation rate, which measures the percentage of working-age people in the workforce, also dropped to 63.5%, the lowest in 30 years. The average workweek is a low 34.5 hours thanks to employers shortening workers’ hours or asking employees to take unpaid leave.

When we borrow massive amounts of money and spend it today, we should expect to see some sort of return for all of that spending. But it turns out that when government does the spending instead of private citizens and private industry, then much of the money is wasted on nonsense that doesn’t create jobs and grow the economy. The numbers we have today put this point beyond dispute.

The Obama administration has been failing skilled immigrants for the past four years, as well:

When employers can’t expand or develop new lines because of the shortage of certain skills, the employment opportunities for the less skilled are also restricted. To help with this shortage, the administration’s proposals for job-training programs do deserve support. The stress should be on vocational training, postsecondary education and every program that will broaden access to computer science and strengthen science, technology, engineering and math in high schools and at the university level.

But the payoffs from these programs are in the future, and it is vital today to increase the number of annual visas and grants of permanent residency status for foreigners skilled in science and technology. The current situation is preposterous: The brightest and best brains from all over the globe are attracted to American universities, but once they get their degrees America sends them packing. Keeping these foreigners out means they will compete against us in the industries that are growing here and around the world.

This administration prides itself on being “pro-immigration” but they actually favor giving citizenship and voting privileges to millions of people who do not have marketable skills, who cannot speak English, and who disrespect the law by coming here illegally. The administration wants those people to become citizens because those people will vote Democrat. Meanwhile, skilled immigrants with advanced degrees in math, science, engineering and technology can just clear out of the country. They can learn here and work here temporarily, but eventually they have to go home. There are no green cards or naturalizations for skilled immigrants – they have skills, and they may be tempted to do nasty things like vote Republican. Democrats don’t want any of those independent, hard-working immigrants in this country. They are too hard to control and too hard to lie to.

Filed under: News, Debt, Deficit, Employment, GDP, Government Spending, Government waste, Immigration, Jobs, Labor Shortage, Recession, Shortage, Skilled Immigration, Trillion, Unemployment

GAO report finds that Obama’s massive spending is not sustainable

The Government Accountability Office is a federal government agency that audits the finances of the federal government. They report to Obama and they are part of his administration. So what do they think about his plans to fix the economy?

Take a look at this article from Breitbart.

Excerpt:

The Government Accountability Office (GAO)—the personal auditor of President Obama and the federal government—released its assessment of the federal government on January 17, 2013. The report’s findings illuminate just how dire America’s spending problem is and, therefore, how little the current cuts debated by Congress do to fix it.

The findings of the paper include these excerpts (emphasis added):

• “The projections in this Report indicate that current policy is not sustainable… Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 2.7 percent of GDP over the period.”
• “It is estimated that running primary surpluses that average 1.0 percent of GDP over the next 75 years would result in the 2087 debt-to-GDP ratio equaling its level in fiscal year 2012, which compares with primary deficits that average 1.7 percent of GDP under current policies.”
• “It is noteworthy that preventing the debt-to-GDP ratio from rising over the next 75 years requires that primary surpluses be substantially positive on average. This is true because projected GDP growth is on average smaller than the projected government borrowing rate over the next 75 years.”
• “If the primary surplus was precisely zero in every year, then debt would grow at the rate of interest in every year, which would be faster than GDP growth.”
• “The differences between the primary surplus boost starting in 2023 and 2033 (3.2 and 4.1 percent of GDP, respectively) and the primary surplus boost starting in 2012 (2.7 percent of GDP) is a measure of the additional burden policy delay would impose on future generations. Future generations are harmed by a policy delay of this sort, because the higher the primary surplus is during their lifetimes the greater the difference is between the taxes they pay and the programmatic spending from which they benefit.”

[...]This is the reality: when President Obama’s personal auditor says the federal government has a spending problem, it indeed has a spending problem—and one that is growing rapidly.

Something to think about during the debate on sequestration. We can’t stay on the course that we’re on. Things will not be OK.

Filed under: News, Debt, Deficit, Federal Government, GAO, GDP, Government, Report, Sequestration, Spending, Study

What causes Colombia’s economy to grow? What causes Venezuela’s economy to shrink?

Political Map of South America

Would you like to have a growing economy? Then follow the lessons of Colombia.

Excerpt:

Colombia expects lower fiscal deficits in 2013 than in 2012, while economic growth is projected at 4.8 percent for both years, Finance Minister Juan Carlos Echeverry said on Thursday.

Latin America’s No. 4 oil producer has seen a strong recovery from the global economic crisis, recouping three investment-grade credit ratings and continuing to reap strong inflows in the mining and oil sectors.

Presenting the latest fiscal plan, Echeverry said the government had revised down the 2012 central government fiscal deficit target to 2.4 percent of gross domestic product from 2.8 percent previously, and the consolidated deficit to 1.2 percent of GDP from 1.8 percent. The consolidated deficit includes the central and regional governments.

The central government deficit target is seen at 2.2 percent of GDP in 2013, with the consolidated deficit at 1 percent.

“This fiscal plan is serious, reasonable, we’re not extracting liquidity from the economy, but injecting liquidity into the economy,” Echeverry told reporters.

The government expects the economy to grow 4.8 percent this year and next. Economic expansion was 5.9 percent in 2011, the fastest growth rate in four years, helped by high foreign investment and strong consumer spending growth.

Colombia has attracted billions of dollars in foreign direct investment over the past decade, mostly into the oil and mining sectors after U.S. military aid helped security forces deal crippling blows to leftist guerrillas and cocaine cartels.

Consumer prices have remained at steady levels in recent months, and economists expect 2012 annual inflation to fall within the central bank’s target of 2 percent to 4 percent.

The fiscal plan forecasts full-year inflation at 3 percent this year and next.

Under Obama, the United States has been running deficits of between 8-10% GDP. Revenue is the same as usual, but spending to reward reckless, irresponsible behavior has skyrocketed.

Would you like to avoid a shrinking economy? Then avoid the policies of Venezuela.

Excerpt:

Venezuela has devalued its currency, joining Iran, Argentina and others whose wars on math brought the same result. Some call this a “restorative.” It’s not. It’s what happens when big government hits a wall.

Venezuela’s monster 47% devaluation from 4.3 to 6.3 bolivars to the dollar, reportedly ordered by President Hugo Chavez from his hospital bed in Cuba, marks the reckoning for his regime’s big-spending ways in Venezuela’s low-growth economy.

[...]This devaluation is characteristic of all tyrannies, which benefit by effectively expropriating the savings of the private sector through monetary means rather than the more common thuggery.

Chavez’s meltdown is coming for the same reason devaluations are also shaking Argentina, which is undergoing a new fiscal disaster of its own, Egypt, which is going through a slo-mo devaluation that’s pushing up the price of food and prompted its Islamofascist rulers to actually urge people to eat less food, and Iran, whose madhouse economics has triggered hyperinflation.

It’s how dictators do business. This is Chavez’s sixth devaluation in the last decade of his big-spending power, following devaluations in 2002, 2003, 2004, 2005, 2010 and 2011. Every one of these devaluations inflates away some of his debts — but at the expense of the country’s savings and investment, which are snapped away through inflation.

What’s more, this devaluation, which was done to plug his deficit spending and prop up the state oil company, will only cover 60% of the country’s deficit, meaning more devaluations ahead this year, likely to take the bolivar to 8 by year end.

Venezuelan officials, predictably, claimed it was “good” as well as an “improvement” that protects the middle class against “speculators,” echoing the party line of establishment economists such as Joseph Stiglitz, former Bill Clinton adviser and chief economist of the International Monetary Fund, who in the past has called devaluations an economic ” restorative.”

Tell that to the panic buyers across Venezuela. There, terrified consumers who are buying goods ahead of expectations of soaring prices, while the poor have seen their life savings wiped out.

When Obama took office, a US dollar was worth over 1.20 Canadian. Today it’s worth about 98 cents. He has been devaluing the currency in order to pay for massive government spending. Private savings of individuals have been devalued, as a result. Inflation is a hidden tax on those who earn and save.

In the United States, we are doing the exact opposite of Colombia. We are embracing Venezuela policies, and expecting Colombia results. Why are we stupid enough to believe words instead of results? Socialism doesn’t work. Capitalism does work. We should choose what works.

Filed under: News, Barack Obama, Big Government, Colombia, Corruption, Crisis, Debt, Deficit, Devaluation, Dictator, Economic Growth, Economy, GDP, Government, Hugo Chavez, Pork, Socialism, Spending, Venezuela, Waste

Conservative Party MP Pierre Poilievre explains how Canada escaped the recession

Conservative M.P. Pierre Poilevre (Nepean-Carleton), a member of the majority government in Canada, explains how Canada embraced the free entreprise system that America has rejected, and the results they got.

Here is the speech that went viral on Youtube:

And here is his article in the liberal Huffington Post.

Excerpt:

In a few days the “fiscal cliff” deadline will arrive and potentially bring massive automatic spending cuts and tax increases. Even if Congress and the President agree to avoid the cliff, the next crisis awaits. Treasury Secretary, Timothy Geithner, wrote the Senate this week to report that the “statutory debt limit will be reached on December 31, 2012,” which will require extraordinary measures to prevent a mass default. These measures will give the government 60 days before it runs out of money and Uncle Sam’s head smashes into the so-called “debt ceiling.”

It has long been said that when the U.S. sneezes, Canada catches a cold. So why have these debt-related ailments in the U.S. not afflicted the Canadian government?

The answer is that Canada has been practicing what the U.S. always preached: free markets, low taxes and minimal state interference. And it is working.

For example, Canada avoided the interventionist policies that led the U.S. to the sub-prime crisis.

In an attempt to expand home ownership, administrations from Carter to Bush Jr. forced banks to offer mortgages to people who would otherwise not qualify for them. Washington then ordered government-sponsored enterprises such as Freddie Mac and Fannie Mae to insure these “sub-prime” mortgages.

According to a 2010 Report on the U.S. Financial Crisis by the World Bank’s Development Research Group, Freddie and Fannie bought an estimated 47 per cent of these toxic mortgages. Harvard financial historian Niall Ferguson indicates that the amount of mortgage debt backed by these government-sponsored enterprises grew from $200-million in 1980 to $4-trillion in 2007.(1) The government pumped so much air into the housing bubble that it burst in 2008. The resulting financial crisis led to government bailouts of the banking sector.

Big government caused the economic crisis. So we are told the solution is more big government. Funny how the problem becomes the solution.

Because the Canadian government did not impose sub-prime mortgages on the country’s charter banks, we avoided the crisis and did not bailout a single financial institution. To keep it that way, Canada’s Finance Minister has ended all government-backed insurance of low-down payment and long-amortization mortgages. In other words, if you want to take on risky debt, taxpayers will not insure you.

Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).

Take a look at some of these graphs from earlier in the year about the Canadian 2012 budget. (This is straight from their government’s web site - they have new transparency/anti=corruption measures now, so the citizens know everything that government does). When comparing the deficit and debt of Canada to the United States, always multiply the Canadian number by 10 to get a benchmark to compare. For example, Canadian GDP is 1.7 trillion, and the US GDP is 15 trillion.

Canada’s budget deficit is around 30 billion, but ours is 1.2 trillion:

Canada Federal Budget Deficit / Surplus 2012

If we were doing as well as Canada, our deficit would be about $300 billion. But we have run up about 6 trillion in debt over 4 years! Not only that, but Canada’s national debt is only $600 billion. If we multiple that by 10, we would expect ours about $6 trillion. And it was that – during the Bush Presidency. But then the Democrats took over the House and Senate in 2007 and everything went wrong and we packed trillions and trillions onto the debt, including about $6 trillion during Obama’s first term.

Canada’s Debt to GDP ratio is 34%:

Canada vs US Debt to GDP

But things are even worse for the United States, now. The current United States Debt to GDP is 105%, according to official U.S. government figures. We are due for yet another credit downgrade, and should see Greece-like levels of Debt to GDP during Obama’s second term. We are spending too much, and we aren’t going to be able to make up trillion dollar deficits even if we confiscate every penny that rich people earn. (And they won’t be daft enough to keep working as hard if we did that – they would move, and probably to Canada)

What is happening to us here in the United States is self-inflicted. We are – and have been – voting to impoverish ourselves and generations of children born and unborn, by punishing those who work hard and play by the rules, and rewarding those who don’t work and don’t play by the rules. It didn’t have to be this way. We could have elected a President who actually knew something about business and economics. Knowledge matters. We can’t just choose a President who gives us the “tingles” and then expect him to perform the actual duties of being President. Competence is more important than confidence. Substance is more important than style.

Filed under: News, Banks, Business, Canada, Capitalism, Community Reinvestment Act, Conservative Party, Conservative Party of Canada, Corporate Tax, Debt, Debt Crisis, Debt Limit, Debt to GDP, Deficit, Economic Growth, Economy, Federal Debt, Fiscal Cliff, Free Enterprise, Free Market, Free Market Capitalism, GDP, Housing Bubble, Inflation, Jobless, Joblessness, Jobs, Mortgage, Mortgage Lending, Obamacare, Pierre Polievre, Recession, Regulation, Spending, Surplus, Taxes, Unemployment

The long-term impacts of the Romney and Obama economic plans

From the Tax Foundation. (H/T Tom)

Excerpt:

Over the past several weeks, Tax Foundation economists have published a series of studies that analyze the long-term economic and distributional effects of the tax plans outlined by President Barack Obama and Governor Mitt Romney. These comprehensive assessments were done using the Tax Foundation’s Tax Simulation and Macroeconomic Model, which measures how changes in tax policies affect the economic levers that determine economic growth, workers’ incomes and the distribution of the tax burden, says the Tax Foundation.

The candidates’ tax plans would have a starkly different impact on the economy.

• The Romney plan, which would reduce tax rates on individuals and corporations, would increase gross domestic product (GDP) 7.4 percent over the long run.
• The Obama plan, which would raise tax rates on individuals, would reduce GDP 2.9 percent over the long run.

These very different futures are the direct consequence of the candidates’ very different approaches to taxing the inputs of production, i.e., capital and labor.

• Obama would raise taxes on investors, which would reduce the capital stock by 7.5 percent.
• Romney would reduce taxes on investors, which would increase the capital stock by 18.6 percent.
• Obama would raise taxes on labor, which would reduce the wage rate by 2.3 percent and hours worked by 0.7 percent.
• Romney would reduce taxes on labor, which would increase the wage rate by 4.7 percent and hours worked by 2.9 percent.

[...]Tax Foundation’s analysis indicates that for every dollar of tax revenue raised under the Obama plan, the economy loses $10. Under Romney’s plan, for every dollar of tax revenue lost, the economy gains $8.

And more from the Tax Foundation. (H/T Tom)

As a follow-up to the Tax Foundation’s recent assessment of the macroeconomic effects of Governor Mitt Romney’s tax plan, Tax Foundation Senior Fellow Stephen Entin now turns his attention to measuring the macroeconomic effects of President Barack Obama’s tax proposals.

[...]The model results:

• President Obama’s tax plan would gradually reduce the level of gross domestic product (GDP) by nearly 3 percent, relative to the baseline projection, over five to 10 years.
• Labor income would be lower by a similar amount, driven down by fewer hours worked and lower wages per hour.
• The reduction in hours worked, about 0.75 percent, would be the equivalent of about a million jobs lost in today’s economy, with those still employed earning roughly 2.28 percent lower wages.
• Alternatively, one could view the result as losing four million jobs at unchanged pay levels.
• The plan would also trim the capital stock by about 7.5 percent (or over $2 trillion in lost investment in plant, equipment and buildings, things that drive productivity, wages and hiring).

The study also measured the economic and distributional effects of President Obama’s corporate tax plan and the tax changes contained in the Affordable Care Act beginning in 2013. The results found that these proposals would lower economic growth while substantially lowering workers’ wages and incomes. Ultimately, President Obama’s tax plans would be very harmful for the nation’s long-term economic outlook.

Do you like prosperity? Would you like to have a job? Would you like to be able to buy things for your friends and family? Would like to be able to give to charities? Then vote for Mitt Romney!

Filed under: News, Barack Obama, Capital, Economy, Election 2012, Employment, GDP, Growth, Investment, Jobless, Joblessness, Jobs, Labor, Mitt Romney, Salary, Taxes, Unemployment, Wages, Work