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U.S. Economy In Great Danger

The American economy is in a deeply troubled condition, according to the U.S. Office of Management and Budget’s latest report.

The 2016 deficit is now projected to be $600 billion, over $160 billion higher than the prior years’ deficit. In March, the Congressional Budget Office had predicted a $66 billion lower deficit.

This puts the total U.S. National Debt on track to reach a nearly $20 Trillion hole.  Despite the fact that the debt has just about doubled during President Obama’s tenure, close to nothing was gained from all that spending.  America’s infrastructure remains deficient, our military has weakened considerably, the middle class continues to shrink, and decent jobs continue to vanish. For the first time, America’s seniors have endured multiple years within a presidential administration without a social security cost of living increase.

The weak and worsening Gross Domestic Product forecast combined with massive spending on non-fundamental expenses is responsible. The forecast for a weak 2.7% growth rate has been even further downgraded to a mere 2.2%. Investors.com  notes “That means Obama will have the unique distinction of presiding over an economy that never once grew at more than 2.4% in eight years…This is, to put it mildly, a disaster. Growth at these low levels will mean that middle class families will continue to fall behind, more people will drop out of the labor force, more will end up in poverty, and more will be looking to the government for help…Even the White House admits that this combination of anemic economic growth and fast-growing  federal entitlements (which Obama has turbocharged) puts the government on track to pile up $9 trillion in additional debt — a 67% increase from today’s already historic levels. By 2026, interest payments alone will cost $787 billion…The Congressional Budget Office recently reported that, if nothing is done to change course, the national debt will equal 141% of GDP. (Even during World War II, the highest national debt got was 106% of GDP.)”

An improved outlook is nowhere in sight. The National Interest reports that “Deficits are projected to reach the trillion-dollar level by 2022 and continue growing from there. In total, the federal government is projected to rack up an additional $9.4 trillion in deficit spending over the next decade.”

The Obama/Democrat-progressive concept of high spending on social programs (other than Social Security and Medicare) at the cost of funding traditional governmental obligations has failed at both the federal and state levels.  The American Legislative Exchange Council (ALEC)  2016 “Rich States, Poor States” rankings indicate that states with more traditional spending habits (Utah, North Carolina, North Dakota, Wyoming, Arizona, Indiana, Tennessee, Florida, Wisconsin, Oklahoma) have the best overall economic outlook, while those with the most Democrat-progressive policies (Oregon, Hawaii, Illinois, Delaware, Minnesota, California, Connecticut, New Jersey, Vermont, and New York) have the worst overall economic outlook.

A 2015 analysis by the financial news source ETFdaily news  cited the reasons why the U.S. economy is in serious trouble: “Did you know that the percentage of children in the United States that are living in poverty is actually significantly higher than it was back in 2008?… let us not neglect the long-term economic collapse that is already happening all around us…

  • Back in 2008, 18 percent of all Americans kids were living in poverty.  [it has] risen to 22 percent…
  • In early 2008, the homeownership rate in the U.S. was hovering around 68 percent.  Today, it has plunged below 64 percent.  Incredibly, it has not been this low in more than 20 years.
  • While Barack Obama has been in the White House, government dependence has skyrocketed to levels that we have never seen before.
  • In 2008, the federal government was spending about 37 billion dollars a year on the federal food stamp program.  Today, that number is above 74 billion dollars…
  • the U.S. national debt was sitting at about 9 trillion dollars when we entered the last recession.  Since that time, the debt of the federal government has doubled.  We are on the exact same path that Greece has gone down, and what you are looking at …is a recipe for national economic suicide…
  • During Obama’s “recovery”, real median household income has actually gone down quite a bit.  Just prior to the last recession, it was above $54,000 per year, but now it has dropped to about $52,000 per year…
  • Even though our incomes are stagnating, the cost of living just continues to rise steadily.  This is especially true of basic things that we all purchase such as food.
  • In a healthy economy, lots of new businesses are opening and not that many are being forced to shut down.  But for each of the past six years, more businesses have closed in the United States than have opened.  Prior to 2008, this had never happened before in all of U.S. history.
  • Barack Obama is constantly telling us about how unemployment is “going down”, but the truth is that the  percentage of working age Americans that are either working or considered to be looking for work has steadily declined since the end of the last recession…
  • We have seen a spike in the inactivity rate for Americans in their prime working years…. the percentage of males between the ages of 25 and 54 that aren’t working and that aren’t looking for work has surged to record highs since the end of the last recession…
  • A big reason why we don’t have enough jobs for everyone is the fact that millions upon millions of good paying jobs have been shipped overseas.  At the end of Barack Obama’s first year in office, our yearly trade deficit with China was 226 billion dollars.  Last year, it was more than 343 billion dollars.
  • Thanks to all of these factors, the middle class in America is dying.  In 2008, 53 percent of all Americans considered themselves to be “middle class”.  But by 2014, only 44 percent of all Americans still considered themselves to be “middle class”…

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U.S. Employment Downturn continues

The economic news continues to deteriorate, as the latest Bureau of Labor Statistics (BLS)  report reveals that job creation is at a bare minimum level. But the overall lack of job creation is only part of the problem. Some of the most important jobs for the U.S. middle class are actually shrinking in number, the labor participation rate continues to decline to dangerously low levels, and the number of those who could only find part time work has grown larger.

According to the BLS release, “nonfarm payroll employment changed little (+38,000.) Employment increased in health care. Mining continued to lose jobs…In May, the civilian labor force participation rate decreased by 0.2 percentage point to 62.6 percent.  The rate has declined by 0.4 percentage point over the past 2 months…The number of persons employed part time for economic reasons (also referred to as involuntary part-time workers) increased by 468,000 to 6.4 million in May, after showing little movement since November. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job. In May, 1.7 million persons were marginally attached to the labor force, little changed from a year earlier….These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 538,000 discouraged workers in May, essentially unchanged from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force in May had not searched for work for reasons such as school attendance or family responsibilities.”

The raw numbers are discouraging, but an examination of the types of jobs lost and the few gained provides even more cause for concern.

The types of jobs that could provide a boost to the general economy both providing good pay and by reducing the continuous and massive trade deficit have continued to decline in number.

In May, mining employment continued to decline, losing 10,000 positions. The BLS notes that “Since reaching a peak in September 2014, mining has lost 207,000 jobs. Support activities for mining accounted for three-fourths of the jobs lost during this period, including 6,000 in May.”

Similar problems can be seen in manufacturing. Employment in durable goods declined by 18,000 in May, with job losses of 7,000 in machinery and 3,000 in furniture and related products.
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Masking the downturn in employment are some gains in health care, which added 46,000 jobs in May, with increases occurring in ambulatory health care services (24,000), hospitals (17,000), and nursing care facilities (5,000). Over the year, health care employment has increased by 487,000.

The BLS also downgraded previously reported employment numbers. The increase in total nonfarm payroll employment for March was reduced from 208,000 To 186,000, and the change for April was reduced from 160,000 to +23,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported.

A record 94,708,000 prospective workers are not currently in the workforce (a labor participation rate drop to 62.6%.)  Overall, this is the worst jobs report since September of 2010. The jobs creation number over the past three months is only 347,000, the worst stretch since 2012, and many of those are not the most desirable positions.

The prospects for future gains remain bleak. An excessively high regulatory regime, combined with anti-job policies such as the President’s Clean Power Plan and America’s uncompetitive corporate tax rate point to a continuation and perhaps a worsening of the current doldrums.

The poor numbers cannot be attributed to the 2007 recession; they indicate an economy that is entering a wholly new and separate downturn, a result of failed economic policies.

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U.S. Economy stagnates in debt and regulation

It’s already known that America’s 2016 national debt has surpassed the $19 trillion mark under President Obama, a dramatic increase from the debt accumulated over 233 years which at stood $10.6 trillion when he took office.

The hike has been startling, but even more so when one considers that nothing of significance or lasting value has been added to the U.S. with all that expenditure. Other periods of heavy spending resulted in clearly visible results.  During the 1940’s, extensive outlays produced a victory in the Second World War.  The 1950’s saw the development of the U.S. highway system. President Reagan’s arms buildup in the 1980’s ended the first Cold War.

Even in comparison with the anemic growth that has become common since Mr. Obama assumed office, the state and outlook of the economy as 2016 moves into February is worrisome. The latest Bureau of Labor Statistics release on Jobs indicates that job growth, in particular, remains disappointing.

The Bureau of Economic Analysis  notes that real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes – barely edged up at an annual rate of 0.7 percent in the fourth quarter of 2015, a reduction from the very weak third quarter increase of 2%.

CNS News reports that the huge jump in the national debt represents a liability of $70,612.91 for every U.S. household

The first evidence of an extremely expensive and utterly failed economic policy came from the $830 billion dollar “stimulus,” passed early in the Obama Administration’s reign, which tripled the yearly annual deficit.

The Wall Street Journal summarized it this way: “The federal government poured billions into the government and education sectors, where unemployment was low, but spent only about 10% on promised infrastructure, though the unemployment rate in construction was running in double digits. And some of the individual projects funded by the law were truly appalling. $783,000 was spent on a study of why young people consume malt liquor and marijuana. $92,000 went to the Army Corps of Engineers for costumes for mascots like Bobber the Water Safety Dog. $219,000 funded a study of college ‘hookups.’

“In aggregate, the spending helped drive federal outlays from less than $3 trillion in 2008 to $3.5 trillion in 2009, where federal spending has roughly remained ever since.
The legacy is a slow-growth economy: Growth over the last 18 quarters has averaged just 2.4% — pretty shoddy compared to better than 4% growth during the Reagan recovery in the 1980s and almost 4% in the 1990s recovery.

“The failure of the stimulus was a failure of the neo-Keynesian belief that economies can be jolted into action by a wave of government spending. In fact, people are smart enough to realize that every dollar poured into the economy via government spending must eventually be taken out of the productive economy in the form of taxes.”

In addition to skyrocketing debt with no substantive return, the nature of the once robust American economy seems to have been altered. The Heritage Foundation notes that “America’s Economic Freedom Has Rapidly Declined Under Obama, largely due to rapidly rising government spending, subsidies, and bailouts.”

Heritage’s annual 2016 Index of Economic Freedom reveals that “America’s economic freedom has tumbled. With losses of economic freedom in eight of the past nine years, the U.S. has tied its worst score ever, wiping out a decade of progress. The U.S. has fallen from the 6th freest economy in the world, when President Barack Obama took office, to 11th place in 2016.” In addition to the enormous new debt, the huge impact of new regulations and healthcare takeover are cited as reasons.

Heritage worries that “This is not something to take lightly. Economic freedom is the foundation of U.S. economic strength, and economic strength is the foundation of America’s high living standards, military power, and status as a world leader. The perils of losing economic freedom are not fictional. It is painfully clear that our economy has been performing far below its potential, with individuals, families, and entrepreneurs being squeezed by the proliferation of big-government bureaucracy and regulations…Self-inflicted wounds include:

  • The S. has the highest corporate tax ratein the developed world. This has driven new jobs to other, more competitive nations and has meant fewer jobs and lower wages for Americans.
  • The overall annual costof meeting regulatory requirements has increased by over $80 billion since 2009, with more than 180 new regulations in place. In terms of ease of starting a new business, analyzed by a recently published World Bank report, the U.S. is ranked shockingly low at 49th, trailing countries such as Canada, Georgia, Ireland, Lithuania, and Malaysia. No wonder the labor force participation rate has remained at near record lows after more than five years of steady decline.

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In the past, major global recessions were healed by the dynamic strength of the U.S. economy. However, eight years after the “Great Recession,” America’s failure to unleash the potential of its free market has not provided that boost.  The World Bank notes that “Global growth disappointed again in 2015, slowing to 2.4%. “

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Fundamental Weakness in U.S. Economy

There is growing evidence that the fundamental underpinnings of the U.S. economy are weak.

The indicators are significant.  The Federal Reserve  reports that Industrial production declined 0.4 percent in December. The decrease for total industrial production in November was larger than previously reported. For the fourth quarter as a whole, industrial production fell at an annual rate of 3.4 percent. Manufacturing output edged down in December. Mining production decreased 0.8 percent in December for its fourth consecutive monthly decline. At 106.0 percent of its 2012 average, total industrial production in December was 1.8 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in December to 76.5 percent, a rate that is 3.6 percentage points below its long-run (1972–2014) average.

The Bureau of Economic Analysis disclosed that the latest numbers for the U.S. Balance of Trade in goods and services indicated a deficit of $42.4 billion, meaning that foreign nations sold far more to the U.S. than America sold to them. “Year-to-date, the goods and services deficit increased $25.2 billion, or 5.5 percent, from the same period in 2014. Exports decreased $99.0 billion or 4.6 percent. Imports decreased $73.7 billion or 2.8 percent…Year-over-year, the average goods and services deficit increased $1.2 billion from the three months ending in November 2014.

The poor performance of the economy is reflected in the jobs picture. According to the Bureau of Labor Statistics the seasonally adjusted number of Americans 16 and over filing for unemployment in Dec. 0f 2014 was 147,190, but in December of 2015, it was 149,929. In addition, initial jobless claims increased by 10,000 in the January 10—January 16 period, the highest level in half a year.  Marketwatch notes that “initial claims have risen more than 14% after touching a post-recession low of 256,000 in early October.”

Writing in the Washington Times, Donald Lambro warns that the U.S. is headed for another recession.  “Much of the major economic data suggests we’re moving in that direction…Clearly our economy is slowing down and economists are forecasting that fourth quarter growth in 2015 will be down significantly…All the telltale signs are there. Consumers aren’t buying as they used to, even with rock bottom oil prices and a gas tank of regular costing less than $2 a gallon. Yet retail sales fell in December at the height of the Christmas buying season. A New York Times headline last week put it this way: ‘Retail Sales Were Lackluster in December, Signaling Fragile Economy.’

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Bloomberg notes that “Investment managers are warning that markets probably have further to fall …The Standard & Poor’s 500 Index will drop another 10 percent to 1,650.” That projected is mirrored by the International Business Times  Projections for 2016 are cloudy, with some prominent economists warning of an imminent U.S. recession and others predicting smooth sailing ahead.”

There is little reason to believe that direct Washington spending can or will stimulate the economy.  President Obama’s $831 billion stimulus package–The American Recovery and Reinvestment Act of 2009—accomplished little, and the nearly bankrupt federal government doesn’t have the resources for another attempt. The national debt, which skyrocketed under the Obama Administration, is nearing $19 trillion, and will grow even larger. The Congressional Budget Office  predicts that the federal budget will also be severely stressed in the coming year. “In 2016, the federal budget deficit will increase… If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years… Debt held by the public would also grow significantly from its already high level.”

The central question is how the generally robust American economy descended to its current condition, and why it continues to exhibit weakness. Similar to the 2007 recession, which was caused by decades of a misguided government legislation  that mandated high-risk loans which eventually caused serious harm to key financial institutions, the looming—perhaps better described as ongoing– crisis results from federal policies.

American employers face severe disadvantages. Tax rates are the highest of any developed nation, and regulations are more extreme. Bad trade deals continue to allow nations to sell relatively unhindered to U.S. consumers, while Washington does little to address discriminatory treatment of American productions sold overseas. In many cases, the intellectual property produced in the U.S., including software, entertainment features, and new/advanced technological techniques and goods are outright stolen through industrial espionage and other means, with little response from the U.S. government.

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The failed recovery

Six and one half years after the end of the “Great Recession,” the U.S. economy remains in the doldrums. Legitimate questions about the economic policies of the White House, and the apparent waste of over $720 million in “stimulus” funds, as well as the near doubling of the national debt, abound.

According to data from the World Bank America’s GDP growth rate in 2014 was 2.4%. In 2013, the Council on Foreign Relations noted that the “recovery” from the 2007-2008 recession was “the weakest of the post–World War II era.”

The Wall Street Journal concurs. “During the postwar period up to the current recession (1947-2007), the average annual growth rate for the U.S. was 3.4%. The last three decades have experienced somewhat slower growth than the earlier periods, but even in the period 1977-2007, the average growth rate was 3%… Contrast this weak growth with the recovery that followed the other large recession of recent decades. In the early 1980s, the economy experienced a double-dip recession, with contractions in both 1980 and ’82. But growth rates in the subsequent two years averaged almost 6%. The high growth that persisted throughout the 1980s brought the economy quickly back to the trend line. Unlike the current period, from 1983 on, the economy was in rapid catch-up mode and eventually regained all that had been lost during the early ’80s.

“Indeed, that was the expectation. As economist Victor Zarnowitz of the University of Chicago argued many years ago, the strength of the recovery is related to the depth of the recession. Big recessions are followed by robust recoveries, presumably because more idle resources are available to be tapped. Unfortunately, the current post-recession period has not followed the pattern.”

The Washington Post  has noted that “it took less than a year for America’s factory output to rebound from the 1991 recession. It took 3½ years to bounce back from the 2001 recession. Now, six years clear of the Great Recession, manufacturing output still hasn’t returned to the pre-crisis levels it reached in 2007, according to revised economic data from the Federal Reserve. The downward revisions highlight the persistent weakness in a sector that President Obama has long called crucial to the health of the U.S. economy and the fate of the middle class. They track with the continued disappointing employment numbers for manufacturing, which since January 2013 has added fewer than half of the 1 million jobs that Obama promised the sector would create in his second term. And they appear to reflect a deeper-than-previously-thought hit to defense and aerospace manufacturing as the result of Pentagon cuts and deficit-reduction measures Obama and Congress agreed to several years ago.”

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According to the Institute for Supply Management, (ISM)  Last month brought some disappointing statistics for the U.S. economy. In the Non-manufacturing business sector, activity decreased 4.8% in November. The New Orders Index fell 4.5 percentage points. The Employment Index decreased 4.2 percentage points. The Prices Index increased 1.2 percentage points.  Five industries reporting a reduction in employment in November, including: Mining; Utilities; Other Services; Construction; and Management of Companies & Support Services.

The New Export Orders Index for November registered 49.5 percent, which is 5 percentage points lower than October. The latest balance of trade figures from the U.S. Bureau of Economic Analysis,  released in September, disclosed that the goods and services deficit was $40.8 billion. Year-to-date, the goods and services deficit increased $14.9 billion, or 3.9 percent, from the same period in 2014. Exports decreased $66.3 billion or 3.8 percent. Imports decreased $51.3 billion or 2.4 percent.

The Institute for Supply Management  (ISM)  also reports that “Economic activity in the manufacturing sector contracted in November for the first time in 36 months, [decreasing] 1.5 percentage points from the October reading… The New Orders Index registered 48.9 percent, a decrease of 4 percentage points from the reading of 52.9 percent in October. The Production Index registered 49.2 percent, 3.7 percentage points below the October reading of 52.9 percent. The Employment Index registered 51.3 percent, 3.7 percentage points above the October reading of 47.6 percent. The Prices Index registered 35.5 percent, a decrease of 3.5 percentage points from the October reading of 39 percent, indicating lower raw materials prices for the 13th consecutive month. The New Export Orders Index registered 47.5 percent, unchanged from October, and the Imports Index registered 49 percent, up 2 percentage points from the October reading of 47 percent. Ten out of 18 manufacturing industries reported contraction in November, with lower new orders, production and raw materials inventories accounting for the overall softness in November…

“Of the 18 manufacturing industries, five are reporting growth in November in the following order: Printing & Related Support Activities; Nonmetallic Mineral Products; Miscellaneous Manufacturing; Food, Beverage & Tobacco Products; and Transportation Equipment. The 10 industries reporting contraction in November — listed in order — are: Apparel, Leather & Allied Products; Plastics & Rubber Products; Machinery; Primary Metals; Petroleum & Coal Products; Electrical Equipment, Appliances & Components; Computer & Electronic Products; Furniture & Related Products; Fabricated Metal Products; and Chemical Products.”

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New job numbers indicate poor recovery from recession

Yesterday’s job numbers from the Bureau of Labor Statistics demonstrate that America has yet to truly emerge from the Great Recession.

Despite White House claims, the nation still has not recovered from that greatest economic challenge since the Great Depression of the 1930’s. Government policy, which has hamstrung the free market, is largely to blame.

The White House continues to allege that much progress has been made, but a clear examination of key financial factors demonstrates otherwise.

EMPLOYMENT

The latest employment statistics from the Bureau of Labor Statistics (BLS)  indicates that less than half the monthly number of jobs that should have been created to truly lessen the recession’s impact was in fact created.  In addition, many of those jobs replacing those lost provided far lesser pay, and many went to immigrants as opposed to U.S. citizens who balked at the low pay levels. The percentage of people in the work force continues at near 40 year lows, and the number of long-term unemployed workers is at near historic highs.

The BLS released these notes yesterday: “Both the unemployment rate …and the number of unemployed persons … were essentially unchanged in October. Among the major worker groups, the unemployment rates…showed little or no change in October. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged …These individuals accounted for 26.8 percent of the unemployed in October…The civilian labor force participation rate was unchanged at 62.4… The employment-population ratio, at 59.3 percent, changed little in October and has shown little movement over the past year…Among the marginally attached, there were 665,000 discouraged workers in October, little changed from a year earlier.”

Ian Murray of the Competitive Enterprise Institute (CEI)  provides a worrisome analysis of the BLS report:

“… the American economy remains on life support. The unemployment rate, number of long term unemployed, and labor force participation rate are all essentially unchanged. The recovery from the great recession has been anemic… The size of the hole we are in can be seen by comparing where we are now in terms of jobs from where we would have been had the post-recession recovery followed the trajectory of past recoveries. We are now 6 million jobs behind where we should be, according to Congress’ Joint Economic Committee. The economy would need to add 516,000 jobs a month to match the pace of the average recovery at this stage. So what is different this time?

“One answer that has gotten too little attention is that the rate of regulation over the economy has increased over the past decade, including since the great recession began. Regulation has its costs—CEI’s Wayne Crews estimates the total annual burden of regulation on the economy at about $1.9 trillion. That number could support a lot of jobs….Meanwhile… the Department of Labor and National Labor Relations Board are pursuing a policy of further restrictions on employment conditions…When the nation went into recession in the early 1980s, high taxes were the largest supply-side problem to creation of new jobs. President Reagan worked with Congress to cut taxes significantly, and the result was the Reagan boom. Clearly, overly burdensome regulation is the largest supply-side problem today. A responsible President who cares about employment prospects would be working with Congress to cut regulations significantly, not imposing more of them.”

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“The ratio of workers to non-workers is nearing an all-time low. Part of the drop in headline unemployment numbers is explained by the fact that many have just given up on looking for work entirely…

“The share of long-term unemployed…People who are out of work for more than twenty-six weeks can sometimes end up permanently unemployable…

“Many who are working are underemployed. The unemployment rate is silent on those who have part-time jobs but would prefer full-time jobs…”

Other factors demonstrate the failure to adequately emerge from the Great Recession. The Wall Street Journal (WSJ) reported last week that first-time home buyers, a significant indicator of a healthy economy, has “declined to the lowest level in almost three decades…the third straight annual decline.” WSJ also reports that the minimal 1.5% growth in the economy from July through September “marked a deceleration from the second quarter of 2015” indicating that the economy is heading in the wrong direction.

Rather than stimulate the private sector, the White House has pursued a path of heavy government spending, beginning with the failed “stimulus” package that cost taxpayers almost $800 billion but failed to make a significant dent in the economy’s pace.

CNS  reports  “The federal government took in a record of approximately $3,248,723,000,000 in taxes in fiscal 2015 …That equaled approximately $21,833 for every person in the country who had either a full-time or part-time job in September.” The increased revenue comes from additional taxes, not increased economic activity, and represents money taken from the private sector that could have been used to create jobs.

Despite that enormous sum removed from the private sector where it could have created employment, Washington remains mired in debt.  The Washington Times Notes that “…Mr. Obama’s spending agreement with Congress will suspend the nation’s debt limit and allow the Treasury to borrow another $1.5 trillion or so by the end of his presidency in 2017. Added to the current total national debt of more than $18.15 trillion, the red ink will likely be crowding the $20 trillion mark right around the time Mr. Obama leaves the White House. When Mr. Obama took over in January 2009, the total national debt stood at $10.6 trillion. That means the debt will have very nearly doubled during his eight years in office, and there is much more debt ahead with the abandonment of “sequestration” spending caps enacted in 2011.”

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Economy languishes as high taxes set record

The U.S. economy continues to languish.

The U.S. Census Bureau has announced that “advance estimates of U.S. retail and food services sales for June, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $442.0 billion, a decrease of 0.3 percent.”

Concern over the worrisome retail numbers is matched by poor news from the manufacturing portion of the economy. According to the Federal Reserve   “Industrial production decreased 0.2 percent in May after falling 0.5 percent in April. …Manufacturing output decreased 0.2 percent in May and was little changed, on net, from its level in January. In May, the index for mining moved down 0.3 percent after declining more than 1 percent per month, on average, in the previous four months. The slower rate of decrease for mining output last month was due in part to a reduced pace of decline in the index for oil and gas well drilling and servicing…”

The troubled indicators are reflected in continued wage and employment challenges. According to the Bureau of Labor Statistics,  the more accurate “U-6” unemployment number is 10.5%, but critics from across the political spectrum note that the number may not reflect the true extent of the unemployment crisis. Republicans claim that significant numbers of the un- and under-employed remain unaccounted. Socialist presidential candidate Bernie Sanders has stated that the true unemployment number for one segment of the population, unemployment African-American youth, is 51%.

Even those employed have little to cheer about. The Federal Reserve  reports that, over the long term,  wages have failed to keep up with the economy.
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The Pew Research Center notes that the purchasing power of wages has not progressed for decades. “For most U.S. workers, real wages — that is, after inflation is taken into account — have been flat or even falling for decades, regardless of whether the economy has been adding or subtracting jobs. Cash money isn’t the only way workers are compensated, of course — health insurance, retirement-account contributions, education and transit subsidies and other benefits all can be part of the package. But wages and salaries are the biggest (about 70%, according to the Bureau of Labor Statistics) and most visible component of employee compensation.”

One organization has increased its’ income during this era of economic challenges—the federal government. According to the monthly treasury statement Indications continue that the U.S. economy continues to languish.  According to the CNS analysis of the Monthly Treasury Statement,

“The federal government raked in a record of approximately $2,446,920,000,000 in tax revenues through the first nine months of fiscal 2015 (Oct. 1, 2014 through the end of June), That equaled approximately $16,451 for every person in the country who had either a full-time or part-time job in June…

Despite the record tax revenues the government ran up a deficit of $313,381,000,000 during the period.”

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Quick Analysis

U.S. GDP Decreases

Deeply worrisome figures released by the Bureau of Economic Analysis https://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm reveal that America’s Real Gross Domestic Product –the value of the production of goods and services in the United States, adjusted for price changes — decreased at an annual rate of 0.7 percent in the first quarter of 2015. Current-dollar GDP — the market value of the production of goods and services in the United States — decreased 0.9 percent, or $38.7 billion, in the first quarter to a level of $17,665.0 billion.

A review of the nature of the downturn is even more troubling. Two core economic functions vital to the long term health of the American economy, including exports (Exports of goods and services decreased 7.6 percent in the first quarter, while real imports of goods and services increased 5.6 percent.) and nonresidential fixed investments (which decreased by 2.8%)  played a key role. Another less basic function included a decrease in state and local government spending, which was offset by an increase in federal spending.

The reasons for America’s ongoing economic slide are not difficult to discern. It is clear that the recession of 2007 has little or nothing to do with the current crisis. In a pattern familiar to nations where the central government continues to play a greater role through increased taxes and regulations, the uncertainty and handicaps placed on entrepreneurship continue to drag down investment and business activity.  The President who tells those who start and grow businesses, especially small businesses, that “You didn’t build that” cannot expect that would-be creators of jobs and revenue would be anything but discouraged from proceeding.

U.S. businesses are increasingly handicapped by federal regulations, Obamacare costs, and the threat of an enormous increase in energy prices due to the threats to the future of coal. At the same time, they are competing not just in the global economy but even within the American domestic market with nations that offer lower and less inclusive corporate tax rates, and have a far less stringent regulatory regime. Continuous requests for a more level playing field, in which goods sold by other nations in the U.S. market should be manufactured under the same standards—have been ignored by official Washington, which pursues precisely the opposite course by supporting international trade agreements such as the Trans-Pacific Partnership, which will intensify the problem.

U.S. manufacturing, a key area of the economy both for domestic consumption and exports, continues to face difficult times due to prior legislation signed by President Clinton in 2000, who essentially guaranteed most favored nation status to China.  American industrial employment and manufacturing enterprises have never recovered from that act, or from Clinton’s earlier allowance of the sale of supercomputers to Beijing.

 

Text of the BEA Release

   Real gross domestic product — the value of the production of goods and services in the United States, adjusted for price changes — decreased at an annual rate of 0.7 percent in the first quarter of 2015, according to the “second” estimate released by the Bureau of Economic analysis. In the fourth quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month.  In the advance estimate, real GDP increased 0.2 percent. With the second estimate for the first quarter, imports increased more and private inventory investment increased less than previously estimated…

The decrease in real GDP in the first quarter primarily reflected negative contributions from exports, nonresidential fixed investment, and state and local government spending that were partly offset by positive contributions from personal consumption expenditures (PCE), private inventory investment, and residential fixed investment.  Imports, which are a subtraction in the calculation of GDP, increased.

Real GDP decreased 0.7 percent in the first quarter of 2015, in contrast to an increase of 2.2 percent in the fourth quarter of 2014.  The downturn in the percent change in real GDP primarily reflected a deceleration in PCE and downturns in exports, in nonresidential fixed investment, and in state and local government spending that were partly offset by a deceleration in imports and upturns in federal government spending and in private inventory investment.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, decreased 1.6 percent in the first quarter, a downward revision of 0.1 percentage point from the advance estimate; this index decreased 0.1 percent in the fourth quarter.  Excluding food and energy prices, the price index for gross domestic purchases increased 0.2 percent, compared with an increase of 0.7 percent.

Real personal consumption expenditures increased 1.8 percent in the first quarter, compared with an increase of 4.4 percent in the fourth.  Durable goods increased 1.1 percent, compared with an increase of 6.2 percent.  Nondurable goods increased 0.1 percent, compared with an increase of 4.1 percent. Services increased 2.5 percent, compared with an increase of 4.3 percent.

Real nonresidential fixed investment decreased 2.8 percent in the first quarter, in contrast to an increase of 4.7 percent in the fourth.  Investment in nonresidential structures decreased 20.8 percent, in contrast to an increase of 5.9 percent.  Investment in equipment increased 2.7 percent, compared with an increase of 0.6 percent.  Investment in intellectual property products increased 3.6 percent, compared with an increase of 10.3 percent.  Real residential fixed investment increased 5.0 percent, compared with an increase of 3.8 percent.

Real exports of goods and services decreased 7.6 percent in the first quarter, in contrast to an increase of 4.5 percent in the fourth.  Real imports of goods and services increased 5.6 percent, compared with an increase of 10.4 percent.

Real federal government consumption expenditures and gross investment increased 0.1 percent in the first quarter, in contrast to a decrease of 7.3 percent in the fourth.  National defense decreased 1.0 percent, compared with a decrease of 12.2 percent.  Nondefense increased 2.0 percent, compared with an increase of 1.5 percent.  Real state and local government consumption expenditures and gross investment decreased 1.8 percent, in contrast to an increase of 1.6 percent.

The change in real private inventories added 0.33 percentage point to the first-quarter change in real GDP after subtracting 0.10 percentage point from the fourth-quarter change.  Private businesses increased inventories $95.0 billion in the first quarter, following increases of $80.0 billion in the fourth quarter and $82.2 billion in the third.

Real final sales of domestic product — GDP less change in private inventories — decreased 1.1 percent in the first quarter, in contrast to an increase of 2.3 percent in the fourth.

Gross domestic purchases

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 1.1 percent in the first quarter, compared with an increase of 3.2 percent in the fourth.

Gross national product

Real gross national product — the goods and services produced by the labor and property supplied by U.S. residents — decreased 1.4 percent in the first quarter, in contrast to an increase of 1.4 percent in the fourth.  GNP includes, and GDP excludes, net receipts of income from the rest of the

world, which decreased $24.9 billion in the first quarter, compared with a decrease of $30.7 billion in the fourth; in the first quarter, receipts decreased $22.4 billion, and payments increased $2.5 billion.

Current-dollar GDP

Current-dollar GDP — the market value of the production of goods and services in the United States — decreased 0.9 percent, or $38.7 billion, in the first quarter to a level of $17,665.0 billion.  In the fourth quarter, current-dollar GDP increased 2.4 percent, or $103.9 billion.

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Real gross domestic income (GDI), which measures the value of the production of goods and services in the United States as the costs incurred and the incomes earned in production, increased 1.4 percent in the first quarter, compared with an increase of 3.7 percent (revised) in the fourth.  For a given quarter, the estimates of GDP and GDI may differ for a variety of reasons, including the incorporation of largely independent source data.  However, over longer time spans, the estimates of GDP and GDI tend to follow similar patterns of change.

Revisions

The second estimate of the first-quarter percent change in real GDP is 0.9 percentage point, or $40.7 billion, less than the advance estimate issued last month, primarily reflecting an upward revision to imports and downward revisions to private inventory investment and to personal consumption expenditures that were partly offset by an upward revision to residential fixed investment.

Advance Estimate  Second Estimate

(Percent change from preceding quarter)

 

Real GDP………………………….       0.2              -0.7

Current-dollar GDP…………………       0.1              -0.9

Real GDI………………………….       —               1.4

Gross domestic purchases priceindex….      -1.5              -1.6

Corporate Profits

Profits from current production

Profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) decreased $125.5 billion in the first quarter, compared with a decrease of $30.4 billion in the fourth.

Profits of domestic financial corporations decreased $2.6 billion in the first quarter, compared with a decrease of $12.5 billion in the fourth.  Profits of domestic nonfinancial corporations decreased $100.4 billion, in contrast to an increase of $18.1 billion. The rest-of-the-world component of profits decreased $22.4 billion, compared with a decrease of $36.1 billion.  This measure is calculated as the difference between receipts from the rest of the world and payments to the rest of the world.  In the first quarter, receipts decreased $28.9 billion, and payments decreased $6.5 billion.

Taxes on corporate income increased $9.3 billion in the first quarter, in contrast to a decrease of $4.8 billion in the fourth.  Profits after tax with IVA and CCAdj decreased $134.6 billion, compared with a decrease of $25.8 billion.  The first-quarter changes in taxes on corporate income mainly reflect the expiration of bonus depreciation provisions…Dividends increased $5.1 billion in the first quarter, compared with an increase of $18.6 billion in the fourth.  Undistributed profits decreased $139.7 billion, compared with a decrease of $44.3 billion. Net cash flow with IVA — the internal funds available to corporations for investment – decreased $132.1 billion, in contrast to an increase of $12.2 billion.

The IVA and CCAdj are adjustments that convert inventory withdrawals and depreciation of fixed assets reported on a tax-return, historical-cost basis to the current-cost economic measures used in the national income and product accounts.  The IVA increased $29.4 billion, compared with an increase of $27.5 billion.  The CCAdj decreased $220.4 billion, in contrast to an increase of $3.9 billion. Thefirst-quarter changes in CCAdj mainly reflect the expiration of bonus depreciation provisions…

Impacts of Bonus Depreciation on the First Quarter of 2015

The first-quarter changes in taxes on corporate income and in capital consumption adjustment(CCAdj) mainly reflect the expiration of both the 50-percent bonus depreciation provision and increased Section 179 expensing limits claimed under extensions of the 2010 tax acts.  For detailed data, see the table “Net Effects of the Tax Acts of 2002, 2003, 2008, 2009, 2010 (and extensions) on Selected Measures of Corporate Profits“.

BEA’s estimates of profits from current production are not affected by these tax acts because profits from current production do not depend on the depreciation-accounting practices used for federal income tax purposes.  BEA’s measure of current-production profits reflects economic accounting practices in which depreciation is based on an estimate of the reduction in the value of fixed capital used in the production process.  For a more detailed discussion on the effect of tax act provisions on the CCAdj, see FAQ 1002, “How do the economic stimulus acts impact NIPA Corporate Profits?”

_________________

Gross value added of nonfinancial domestic corporate business

Real gross value added of nonfinancial corporations increased 0.6 percent in the first quarter.Profits per unit of real value added decreased, reflecting increases in unit labor and nonlabor costs and a decrease in unit prices.

BEA’s national, international, regional, and industry estimates; the Survey of Current Business; and BEA news releases are available without charge on BEA’s Web site at www.bea.gov.  By visiting the site, you can also subscribe to receive free e-mail summaries of BEA releases and announcements.

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Washington’s heavy hand hinders U.S. economy

As the New York Analysis of Policy & Government recently reported, American manufacturing remains in a state of crisis, with less employment in that crucial sector of the economy now than at the start of the Obama presidency. The impact of that issue on the U.S. trade balance is severe.

The most recent releases of the U.S. Census Bureau and the U.S. Bureau of Economic Analysis indicate a worsening of the trade deficit, with the deficit increasing by a very significant $15.5 billion in the latest survey. Year-to-date, the goods and services deficit increased $6.4 billion, or 5.2 percent, from the same period in 2014. Exports decreased $11.7 billion or 2.0 percent. Imports decreased $5.3 billion or 0.8 percent.

The impact of adverse government actions concerning manufacturing is substantially responsible, although almost all sectors of the economy have been affected.  The Heritage Foundation’s latest “Index of Economic Freedom” noted that “substantial expansion in the size and scope of government, including through new and costly regulations in areas like finance and health care, has contributed significantly to the erosion of U.S. economic freedom.  The growth of government has been accompanied by increasing cronyism that has undermined the rule of law…”

Tax rates play a key role. The National Association of Manufacturers has released a study, “The United States needs a more competitive corporate tax system,” which clearly outlines the problem.

A summary of the report:

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“It is abundantly clear that, when compared to the rest of the developed world, the U.S. rate is out of step at best and uncompetitive at worst. The current global tax system in the United States puts manufacturing firms at a disadvantage inside and outside foreign countries. The current global tax system in the United States puts manufacturing firms at a disadvantage inside and outside foreign countries. If the United States converted to a territorial system as part of comprehensive tax reform, it would remove the current barrier to corporate repatriations (transfers in foreign subsidiaries’ profits to U.S. parent companies), promoting a marked rise in domestic investment. The profits of C corporations (entities taxed separately from their shareholders) are taxed once at the corporate level at the corporate income tax rate and again when the after-tax profit is distributed back to shareholders at personal income tax rates. The already high corporate tax rate, coupled with double taxation of dividends and capital gains, reduces economic efficiency by discouraging capital formation and broader economic growth.

“Currently, the United States is the only country in the G-7 that taxes the active foreign earnings of its companies worldwide. Only four other OECD countries have a worldwide system—Chile, Ireland, South Korea and Mexico. The other 29 have a territorial tax system in which business income earned abroad by foreign subsidiaries is wholly or partially exempt from home country tax. Again, the United States fails to respond to global trends. Fourteen of 34 OECD member countries had a territorial tax system in 2000, increasing to 23 in 2005 and 29 in 2014…

“The Tax Foundation maintains an international tax competitiveness index for the 34 OECD countries. Key principles of tax policy examined in the rating system are the competitiveness of the tax code, its neutrality between consumption and savings and whether it favors one industry over another. On all counts, the United States scores poorly, placing 32 out of 34 in the 2014 index. As outlined above, U.S. corporate tax rates, both statutory and marginal effective, are higher than tax rates in our major trading partners, making it harder for U.S. companies to compete in the global marketplace. Similarly, the U.S. worldwide tax system, an outlier when compared to tax systems in most other developed countries, puts U.S. global companies at a competitive disadvantage vis-à-vis their competitors outside the United States. Converting from a global to a territorial tax system would make U.S. rules more internationally competitive and unlock an estimated $2.1 trillion in stranded profits held abroad by U.S. multinationals. Our tax code is also biased, favoring consumption over saving (through high capital gains and dividends taxes, high estate taxes and high progressive income taxes). Furthermore, double taxation of corporate profits discourages firms from electing the C corporation structure that has wider access to capital markets.”

The continuing problems of slow-to-no growth, and high unemployment particularly in middle-class jobs could be resolved by a lessening of the heavy hand of government in areas such as business regulation and taxation. It is a step urgently required by the American economy.

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The under-reported desperation of the American economy

Despite government reports that desperately attempt to put a positive spin on the latest figures and the low-key coverage of a largely partisan media, the United States economy is in terrible health. The Federal Reserve gimmick of keeping interest rates artificially low cannot hide this reality.

An objective reading of essential indicators is distressing:

The Federal Reserve Bank of Atlanta forecast for GDP growth in the first quarter has fluctuated between a horrible 0.1% and an even worse 0%.

The U.S. Census Bureau’s  latest balance of trade figure reports a record high trade deficit in February of $35.4 billion.

Bloomberg News reports that the “Institute for Supply Management ‘s Index declined to 51.5, the weakest since May 2013…the gauge has fallen five straight months.”

So, women must pay close attention to men’s health in the usual sildenafil super life, especially a man’s blood sugar levels. Its results come in light as stressfulness, depression, humiliation, irritability, relationship problems buying generic cialis and even much more. Prostate congestion viagra uk purchase is very common symptom for this disease. Another finding cialis generika was done by Case-control study at Columbia University Medical Center and New York has not voted for a Republican Presidential nominee since Ronald Reagan’s landslide victory in 1984. Reuters notes that “U.S. private employers added the smallest number of workers in more than a year in March and factory activity hit a near two-year low, fresh signs that economic growth slowed in the first quarter [of 2015.]

The Bureau of Labor Statistics notes that the number of those 16 years of age and older who didn’t participate in the labor market increased to an all-time high of 93,175,000 in March, and the number of long term unemployed accounted for 29.8% of the unemployed.

The standard White House response to poor—in this case terrible—economic news has been to point to the impact of the last recession.  Unfortunately, however, many of the downturns over the tenure of the current Administration have come from figures that had at least slightly improved since then, meaning that these troubling numbers are the results of its own mismanagement of the economy.

That mismanagement promises to provide future harmful effects as well. As outlined in the Daily Signal,  the federal debt has been hiked by 70% since the President took office, to a record $18 trillion-plus, with another $486 billion added in the past fiscal year despite record increases in revenue.

All of that record-setting deficit spending under the current White House produced  no gains for the U.S. economy, and provided no substantial assistance to the aging national infrastructure.  American national security has been weakened due to cuts in defense spending, and business start-ups continue to fall behind the number of business failures. The Brookings Institute found that business start-ups have reached a 30 year low.