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Economic Statistics Indicate U.S. Financial Crisis

There should be little doubt that the U.S. economy is in significant trouble. Indeed, objective criteria, as well as spokespersons from both sides of the political spectrum, indicate an economy approaching crisis levels. A survey of views illustrates the challenge:

The latest report from the Bureau of Labor Statistics  reveals that “Real hourly compensation decreased 0.4 percent…”

The Bloomberg news service reports that “One in seven U.S. households has a negative net worth, as student loans and credit cards plunge a diverse group of people—including those with good jobs—into the red…Almost 15 percent of Americans, or 47 million people, live below the poverty line, according to the U.S. Census Bureau. Then there are the people loaded up with debt. Even people with good jobs can owe so much on credit cards, student loans, or mortgages that, on paper, they’re worth less than zero. About 14 percent of U.S. households fall into this category, with a negative net worth, according to an analysis this month by the New York Federal Reserve. Add up all their possessions—cash, property, retirement accounts—and subtract all their debts, and one in seven Americans ends up in the red. Overall, U.S. households have $12.3 trillion in debt, according to another New York Fedreport, released this week.”

Liberal-oriented truth-out.org  notes that: “…the evidence shows that living-wage, family-sustaining positions are quickly being replaced by lower-wage and less secure forms of employment. These plentiful low-level jobs have padded the unemployment figures, leaving much of America believing in an overhyped recovery… New research is beginning to confirm the permanent nature of middle-income job loss. Based on analysis that one reviewer calls ‘some of the most important work done by economists in the last twenty years,’ a National Bureau of Economic Research study found that national employment levels have fallen in U.S. industries that are vulnerable to import competition, without offsetting job gains in other industries. Even the Wall Street Journal admits that ‘many middle-wage occupations, those with average earnings between $32,000 and $53,000, have collapsed.”

The financial source Profitconfidential  notes that Washington is “hiding” inflationary statistics.

“According to government statistics, inflation was held to just 0.6% during the first seven months of 2015. Unfortunately, that data disregards the most basic items that everyone uses, including food and energy costs… (Alternative non-government measures of inflation tell a completely different story. The Chapwood Index is an alternative inflation indicator that looks at the unadjusted costs and price fluctuation of the top 500 items that Americans spend their money on in the 50 largest cities in the country. (Source: chapwoodindex.com, last accessed September 22, 2015.) The index looks at the fluctuations in the cost of items such as Advil, Starbucks coffee, insurance, gasoline, tolls, fast food restaurants, toothpaste, oil changes, car washes, cable TV and Internet service, cellphone service, dry cleaning, movie tickets, cosmetics, gym memberships, home repairs, piano lessons, laundry detergent, light bulbs, school supplies, parking meters, pet food, and People magazine.For example, in 2014, the [official consumer price index] CPI rose 0.8%. But according to the Chapwood Index, major cities like New York, Los Angeles, Chicago, San Diego, and Boston saw inflation for the trailing 12 months (through to June of this year) run over 10%.”

Ignoring real inflationary numbers has a dire effect on senior citizens, who have suffered through more years without a cost of living increase in their social security checks than at any other time in living memory.
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Republicans have been sharply critical of the President’s economic policies. GOP candidate Donald Trump uses the worrisome economic statistics as a bludgeon against opponent Hillary Clinton, who has pledged to continue the Obama legacy. His web site states:

“… let’s look at what the Obama-Clinton policies have done nationally.Their policies produced 1.2% growth, the weakest so-called recovery since the Great Depression, and a doubling of the national debt.

“There are now 94.3 million Americans outside the labor force. It was 80.5 million when President Obama took office, an increase of nearly 14 million people. Home ownership is at its lowest rate in 51 years…

“Nearly 12 million have been added to the food stamp rolls since President Obama took office. Another nearly 7 million Americans were added to the ranks of those in poverty.

“We have the lowest labor force participation rates in four decades. 58 percent of African-American youth are either outside the labor force or not employed. 1 in 5 American households do not have a single member in the labor force…Meanwhile, American households are earning more than $4,000 less today than they were sixteen years ago.”

While substantial disagreement exists about the remedies that should be applied to America’s broken economy, the reality that a crisis exists is one which has fairly widespread support.

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Seniors Adversely Affected as Federal Funds are Diverted

America’s seniors are suffering as federal funds are diverted to questionable uses.

As America’s national debt rapidly soars to the $20 trillion mark (it currently stands at over $19 trillion) key needs are facing a lack of funds, and Americans relying on Social Security and Medicare are the most directly affected.  The problems are not just the future insolvency of those programs. The impact has already been felt.

The Social Security Administration (SSA) projects that “Social Security’s Disability Insurance (DI) Trust Fund now faces an urgent threat of reserve depletion, requiring prompt corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided. Beyond DI, Social Security as a whole as well as Medicare cannot sustain projected long-run program costs under currently scheduled financing.”

Social Security will face virtual bankruptcy by 2034. Medicare will endure the same fate by 2030.

But those future dates are not the extent of the problem. During the Obama Administration, seniors have been subjected to an unprecedented lack of cost of living increases.

Since the regular program of Cost of Living increases began in 1975, (prior to that increases were provided by legislation) there has never been a period when such adjustments were lower than they have been under President Obama’s term. Not once had there been a year in which there was no increase at all. Since 2009, two consecutive years, 2009 and 2010, provided no adjustments, and there was also no adjustment in 2015.  Before 2009, the average annual increase was 4.4%; during the Obama presidency, it was 1.7%.

Social Security Cost-Of-Living Adjustments

(Chart provided by the Social Security Administration) 
Year COLA
1975 8.0
1976 6.4
1977 5.9
1978 6.5
1979 9.9
1980 14.3
1981 11.2
1982 7.4
1983 3.5
1984 3.5
1985 3.1
1986 1.3
1987 4.2
1988 4.0
1989 4.7

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Year COLA
1990 5.4
1991 3.7
1992 3.0
1993 2.6
1994 2.8
1995 2.6
1996 2.9
1997 2.1
1998 1.3
1999  a 2.5
2000 3.5
2001 2.6
2002 1.4
2003 2.1
2004 2.7
Year COLA
2005 4.1
2006 3.3
2007 2.3
2008 5.8
2009 0.0
2010 0.0
2011 3.6
2012 1.7
2013 1.5
2014 1.7
2015 0.0

It’s not just Social Security problems that are affecting America’s seniors. Medicare has taken a hit, and the problem has been accelerated and worsened due to Obamacare.  Three examples of how Obamacare hurts seniors are provided by The Daily Signal:

 1) Huge payment reductions that reduce access to care. According to the Congressional Budget Office (CBO), Obamacare will reduce Medicare reimbursements by $716 billion over 10 years. These cuts will hit Part A providers such as hospitals, nursing homes, skilled nursing facilities, and hospices, along with Medicare Advantage plans. The trustees predict that if Congress allows these cuts to go into effect, 15 percent of Medicare providers would go in the red by 2019, 25 percent by 2030, and 40 percent by 2050…

2) Medicare “savings” are spent on other parts of Obamacare. As CBO plainly states, “CBO has been asked whether the reductions in projected Part A outlays and increases in projected [hospital insurance] revenues under the legislation can provide additional resources to pay future Medicare benefits while simultaneously providing resources to pay for new programs outside of Medicare. Our answer is basically no.”

3) The ominous and looming power of IPAB.  When Medicare spending surpasses the target, IPAB will have to make recommendations to lower Medicare spending.

While America’s seniors, who have earned their Social Security and Medicare benefits through a lifetime of work, face cuts, questions arise about the diversion of federal funds to pay for benefits for illegal immigrants.

The Federation for Immigration Reform has estimated the cost of illegal immigration to U.S. taxpayers:

  • Illegal immigration costs U.S. taxpayers about $113 billion a year at the federal, state and local level. The bulk of the costs — some $84 billion — are absorbed by state and local governments.
  • The annual outlay that illegal aliens cost U.S. taxpayers is an average amount per native-headed household of $1,117. The fiscal impact per household varies considerably because the greatest share of the burden falls on state and local taxpayers whose burden depends on the size of the illegal alien population in that locality
  • Education for the children of illegal aliens constitutes the single largest cost to taxpayers, at an annual price tag of nearly $52 billion. Nearly all of those costs are absorbed by state and local governments.
  • At the federal level, about one-third of outlays are matched by tax collections from illegal aliens. At the state and local level, an average of less than 5 percent of the public costs associated with illegal immigration is recouped through taxes collected from illegal aliens.
  • Most illegal aliens do not pay income taxes. Among those who do, much of the revenues collected are refunded to the illegal aliens when they file tax returns. Many are also claiming tax credits resulting in payments from the U.S. Treasury.

The lack of priority the Obama Administration has given to the needs of seniors, while turning a blind eye towards the growing financial impact of illegal aliens, is a cause of deep concern.

(Note: We originally published this article on March 18. However, we were informed that many subscribers were not able to view it due to technical issues arising from a website update.)