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Jobs Report Reflects Decline of Middle Class

The December jobs report reflects the left’s disenfranchisement of the American middle class, a result of Mr. Obama’s placing what should be the most important segment of the U.S. population into a far lesser priority. There have been massive increases in programs for the poor, which have failed to alleviate poverty, and the rich have fared well. Fortune Magazine  described the outcome of Obama’s policies: “the über rich have experienced impressive real income growth, while the bottom 99% has seen almost none.”

The Minnesota Post  notes that “corporate profits skyrocketed during the Obama years, but the poverty rate didn’t decline and actually inched upward, both of which probably confound simple notions of whose side Obama is on.”

The practical expression of a presidential administration’s political goals and views is expressed in its budgetary and economic decisions, which are also the means with which an administration rewards friends and punishes the opposition. With the imminent conclusion of the Obama tenure, it is evident that the middle class, which was the portion of the electorate that least supported the current White House or its supporters in the hard left of the Democrat Party, has had a rough eight years.

As the New York Analysis of Policy and Government has noted, Data from The Pew Research Center reported “The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. The decrease in the middle-class share was often substantial, measuring 6 percentage points or more in 53 metropolitan areas, compared with a 4-point drop nationally. The shrinking of the middle class at the national level, to the point where it may no longer be the economic majority in the U.S., was documented in an earlier analysis by the Pew Research Center. The changes at the metropolitan level…demonstrate that the national trend is the result of widespread declines in localities all around the country.”

The Stratfor intelligence organization concurs.: “The threat to the United States is the persistent decline in the middle class’ standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power… In the 1950s and 1960s, the median income allowed you to live with a single earner — normally the husband, with the wife typically working as homemaker — and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well…  Government programs frequently fail to fulfill even minimal intentions while squandering scarce resources…”
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The reason for the past eight years of decline of the U.S. middle class was not the result of a cyclical downturn in business, nor the 2007—2009 recession.  It is the specific result of federal tax and spending practices which ignored the needs of the private sector, particularly small businesses, and redirects federal dollars away from essential needs such as economic growth, defense and infrastructure and towards entitlements (but NOT Social Security of Medicare.)

The most basic indicator of the health of the U.S. middle class is the availability and quality of employment.

The Wall Street Journal notes that “In the mid-1990s and early 2000s, it was common for economists to estimate the U.S. needed 200,000 or even 250,000 jobs every month to keep the rate steady over time.” The Labor Department’s [latest] survey of employers found that the economy created 156,000 new jobs in the last month of 2016, down from the 12-month average of 180,000. Some 12,000 of those were government jobs, including 5,000 for the feds. The numbers were even less inspiring in Labor’s household survey, which found only 63,000 net new jobs in the month. The household survey tends to better capture job growth among small businesses and it is the basis for the monthly unemployment rate, which ticked up to 4.7% from 4.6%.” However, if those who are working only part time because of a lack of full time jobs are counted, a shortage which can be blamed on Obama’s policies, the rate goes up to 9.2 percent. 5.5 million Americans fit into this category in December. Fortune  notes that a significant explanation of the reduced unemployment rate comes “from the large number of Americans who have dropped out of the workforce altogether.”

Among the marginally attached, there were 426,000 discouraged workers in December, down by 237,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available to them. The remaining 1.3 million persons marginally attached to the labor force in December had not searched for work for reasons such as school attendance or family responsibilities.

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What Politician’s Refuse to Discuss about the Economy

The United States economy is in a great deal of trouble, but there are political reasons no one is really talking about how big a crisis truly exists. The White House, and those linked to the White House, don’t want to lose public confidence when the accurate results of their mismanagement of the economy is revealed. Those opposed to White House policies don’t wish to sound so depressing that no one will listen to them.

The U.S. debt  is rapidly approaching the $20 trillion-dollar mark. Half of all that debt was accumulated during the Obama Administration.  Gross domestic product was at $18.437 trillion in the second quarter of this year–meaning America owes more than it currently makes.  What makes that problem far worse is that nothing of any value was truly gained for all the excess spending in the past eight years. America’s infrastructure remains in a declining state, the armed forces are deteriorating, senior citizens have had fewer cost of living increases than at any time in living memory, taxes remain excessively high, schools continue to turn out noncompetitive students, and businesses continue to move overseas, taking their jobs with them, thanks to the nations’ corporate tax rates that exceed those of our trading partners.

Under current policies, no upswing is in sight. In fact, some key observers such as Deutsche Bank believe that “The U.S. has a 60% of entering a recession in the next 12 months—the highest probability since the Great Recession.”

The Congressional Budget Office (CBO) predicted that in fiscal year 2016, the federal budget deficit will increase in relation to economic output for the first time since 2009. “If current laws generally remained unchanged—an assumption underlying CBO’s baseline projections—deficits would continue to mount over the next 10 years, and debt held by the public would rise from its already high level…by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years…CBO…estimates that the 2016 deficit will total $590 billion, or 3.2 percent of GDP, exceeding last year’s deficit by $152 billion (see table below). About $41 billion of that increase results from a shift in the timing of some payments that the government would ordinarily have made in fiscal year 2017; those payments will instead be made in fiscal year 2016 because October 1, 2016 (the first day of fiscal year 2017), falls on a weekend. If not for that shift, the projected deficit in 2016 would be $549 billion, or 3.0 percent of GDP—still considerably higher than the deficit recorded for 2015, which was 2.5 percent of GDP.”

The Congressional Budget Office also predicted that in fiscal year 2016, the federal budget deficit will increase in relation to economic output for the first time since 2009. “If current laws generally remained unchanged—an assumption underlying CBO’s baseline projections—deficits would continue to mount over the next 10 years, and debt held by the public would rise from its already high level…by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years…CBO…estimates that the 2016 deficit will total $590 billion, or 3.2 percent of GDP, exceeding last year’s deficit by $152 billion (see table below). About $41 billion of that increase results from a shift in the timing of some payments that the government would ordinarily have made in fiscal year 2017; those payments will instead be made in fiscal year 2016 because October 1, 2016 (the first day of fiscal year 2017), falls on a weekend. If not for that shift, the projected deficit in 2016 would be $549 billion, or 3.0 percent of GDP—still considerably higher than the deficit recorded for 2015, which was 2.5 percent of GDP.”
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Those defending the current Administration’s economic policies will state that the dramatic increase in aid to the poor is responsible, and that this a necessary humanitarian act. (The SNAP program, often referred to as food stamps, is up by about 40%.) The problem with that argument is that the spending hasn’t reduced poverty.  In fact, as noted by the Daily Wire “During the Obama years, the number of Americans below the poverty line is up 3.5 percent.” Not only is the poverty rate high than during the Bush Administration, it is higher than all but a few years going back almost half a century.

Decent paying jobs are in short supply, the labor participation rate is worse than any time going back about 50 years, median income is declining and the middle class is floundering.

Despite the dismal status, there is a roadmap for recovery, one followed by former presidents John F. Kennedy and Ronald Reagan. Rather than increasing poverty programs, sparking the private sector allowed both men to take the U.S. economy from the doldrums to growth. Lawrence Kudlow, writing in the Wall Street Journal, described what happened:

“Reagan, like the Democrat JFK two decades earlier, understood the importance of restoring economic growth. In 1980, Reagan adopted Rep. Jack Kemp’s “duplication” (as Kemp called it) of the Kennedy tax cut. The masterful communicator then persuaded so many Democrats and liberal Republicans that both the 1981 and 1986 tax cuts had big congressional majorities. The 1986 act passed the Senate 97-3 and took the top income-tax rate down to 28%, one of the lowest levels ever. Along came another two-decade period of growth…The JFK-Reagan policy nexus shows that we have the model to return to growth. It works. There is no reason the model cannot be used again now.”

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The Venezuelan Example

Americans are focused on the Olympics in Brazil, but it is the South American nation of Venezuela that deserves the most attention.

The Washington Post recently noted, “Venezuela is…well past the point of worrying that its economy might collapse. It already has. That’s the only way to describe an economy that the International Monetary Fund thinks is going to shrink 8 percent and have 720 percent inflation this year …This is an entirely man-made catastrophe. Venezuela, by all rights, should be rich…it has more oil than the United States or Saudi Arabia or anyone else for that matter.”

Bloomberg notes that “Catastrophe Is the New Normal for Venezuelans…The fact is, the Maduro government may have lost its way, but it’s still got an iron grip on this nation of 30 million people. And that residual clout, coupled with disarray among the president’s political foes, has given the regime the benefit of public doubt even in desperate times.

The Obama Administration’s policy choices have a number of similarities to Venezuela, where, despite reaping a fortune from its oil industry, (recent profits have declined due to lower oil prices)  the government has ruined its national economy.  An MRCTV review noted “The Venezuelan economy failed a long time ago… it failed thanks to the collectivist policies of former President Hugo Chavez and current President Nicolás Maduro. Anyone with functioning eyes could see it.”

During the almost eight years of the Obama Administration, the U.S. national debt has doubled, regulations have increased, and property rights have decreased.  The President has openly voiced his contempt for the private sector with phrases such as, when speaking of businesses, “You didn’t build that.”

Vast annual deficits continue to occur. Despite all that spending, nothing has been gained. A sixth of the economy, that portion involving health care, has come under government control. Poverty hasn’t been reduced, infrastructure remains deficient, the armed forces are dwindling due to lack of funds, and U.S. students lag behind their peers. Home ownership is down, as are middle class job opportunities. Senior citizens have received lesser cost of living increases than at any time in memory, and even the program the Administration remains proudest of, Obamacare, is beginning to sink into a fiscal crisis of its own.

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Since the start of the Obama Administration, Washington has, in the President’s words, been “fundamentally transformed.”  It has come to resemble nations with government-run health care, and centralized economies with more controlled markets. But in several ways, it has moved beyond economics and into the realm of a more tightly-guided political environment with agencies such as the Internal Revenue Service, the Department of Justice, and the Environmental Protection Agency being used to punish those with views that differ from the White House, much as Venezuelan authorities have sought to suppress dissent in their nation.

That reality poses a threat to the future of prosperity and freedom for American citizens. Much of the media, and the usual collection of cultural commentators, appear to have missed the resemblance and the lesson that should have been learned.

In the 2016 election cycle, Senator Bernie Sanders openly advocated socialist solutions to many of America’s challenges. Hillary Clinton, who initiated concepts such as Obamacare, has come very close to echoing Sanders’ policy choices. Where would those policies lead the U.S.? A look at how they fared in Venezuela is instructive.

The CATO Institute  noted that socialist policies destroyed the Venezuelan economy. “Milton Friedman once said that, if you put the government in charge of the Sahara desert, there’ll eventually be a shortage of sand. No wonder that, after 14 years of socialist government, Venezuela — the country with the world’s largest oil reserves — is currently importing gasoline. This fact highlights Venezuela’s painful descent into chaos, as the economy crumbles and the nation’s social fabric unravels. Socialism has turned Venezuela into an authoritarian basket case that thousands try to escape every year.… Despite receiving over $1 trillion in oil revenues since 1999, the government has run out of cash and now relies heavily on printing money to finance itself. The result is the highest inflation rate in the world: officially 56 per cent last year, although according to calculations by Steve Hanke of Johns Hopkins University, the implied annual inflation rate is actually 330 per cent.

“Venezuela was once South America’s richest country, taking in immigrants from all over the world. For many years, it was also a remarkable democracy in a region where most nations were ruled by military dictatorships. Today, socialism has turned Venezuela into an authoritarian basket case that thousands try to escape every year. With millions of Venezuelans no longer willing to put up with deteriorating living conditions, and a government willing to take whatever means necessary to hold on to power, it looks like the worst is yet to come.”