August 16, 2010

It Is Mathematically Impossible to Pay Off the U.S. National Debt: The Federal Government is the Nation's Largest Employer, Paying 40% More than the Private Sector; Feds Expanding Workforce by 600,000 While the Rest of the Country is Contracting; 60 Percent of the Population Now Gets More in Government Benefits Than It Pays in Taxes

Recession Chugs on, Except in Government

Examiner Editorial
February 8, 2010

White House apologists were quick to point to the unemployment rate decline from 10 percent to 9.7 percent as evidence that the recovery is gathering momentum and that President Obama's policies -- especially his $787 billion economic stimulus bill Congress approved last February -- are "working." But the back story behind the figures provides cold comfort.

First, the drop to 9.7 percent unemployment does not reflect the creation of new jobs that normally accompanies an economic recovery. The number of new jobs is actually declining. Total nonfarm payroll employment, for example, dipped by an additional 20,000 positions after a December decline of 150,000 positions.

The unemployment rate the day Obama took office last year stood at 7.6 percent and 134.6 million people had jobs. When he signed the economic stimulus, Obama promised the bill would bolster the economy sufficiently to keep unemployment below 8.0 percent. But the unemployment rate has exceeded 8.0 percent since last fall, and total employment stands at only 129.5 million. The stimulus has been a bust.

Second, anybody who thinks the job situation is going to improve dramatically in coming months is not paying attention to what's going on behind the unemployment rate. The Hudson Institute's Diana Furchtgott-Roth notes that:

“This is a better employment report than last month’s report, yet the economy is still not creating jobs. The percent of the unemployed who are out of work for 27 weeks or more exceeded 41%, an all-time high. This is unacceptable and shows that Congress and the President need to focus on job creation, rather than on expanding government, because the tax increases and borrowing used to expand government reduce overall job creation and create uncertainty."
Furchtgott-Roth further notes that "the labor force participation rate is the lowest since mid-1985." This means that fewer Americans are in the labor force.

Third, among the few sectors of the economy showing net employment growth over the past year is the federal government. The federal civil service is rapidly expanding as Obama increases the size of government, with 33,000 new positions being added in January alone. Only 9,000 of those new slots were for temporary census jobs. In other words, what we are seeing is good times for the public sector and the growing prospect of a continuing and perhaps even deepening recession for everybody else.

The Federal Government is the Nation's Largest Employer (Excerpt)

Career Guide to Industries, 2010-11 Edition

Federal Government Section - According to the Bureau of Labor Statistics, more than 1.8 million civilians work for the Federal Government, excluding the Post Office ...

With about 2.0 million civilian employees, the Federal Government, excluding the Postal Service, is the Nation's largest employer. About 85 percent of Federal employees work outside the Washington, DC metropolitan area.

A substantial number of job openings will arise as many Federal workers are expected to retire over the next decade; competition is high during times of economic uncertainty, however, when workers seek the stability of Federal employment.

Wage and salary employment in the Federal Government is projected to increase by 10 percent over the 2008-18 period.

Federal employees working in the continental United States receive locality pay. The specific amount of locality pay is determined by survey comparisons of private sector wage rates and Federal wage rates in the relevant geographic area. At its highest level, locality pay led to an increase of as much as 34 percent above the base salary in 2009.

In March 2009, the average earnings for full-time Federal employees were $74,403.

Federal Employees Earn 30 to 40 Percent More than Private-Sector Workers, Study Finds
August 10, 2010

Federal employees earn 30 to 40 percent more money than their private sector counterparts on average, a study from the conservative Heritage Foundation finds. These pay discrepancies persist despite the recession, unlike the situation in the private sector, where unemployment is 9.5 percent and wages have steadily declined.

The report comes on the heels of a new unemployment numbers showing another month of anemic job growth in the midst of President Obama’s “Recovery Summer” tour, where he is highlighting what he calls signs of economic recovery.

Those still employed are better off working for the federal government, the Heritage report found, where they could earn salaries 22 percent higher than their privately employed peers and benefits that are far more generous than those in the private sector.

The report found that in the private sector, wages are closely tied to productivity.
“Businesses that pay wages below the associated level of productivity lose quality employees to competitors paying higher wages,” the report stated. “Businesses that pay workers more than their productivity lose customers to competitors with lower prices because of lower costs.”
While the government portends to peg its pay rates to market wages, in practice federal wages often bear little resemblance to private sector wages in similar jobs.

The biggest culprit, according to the report, is the federal General Schedule (GS) pay scale, which determines the salaries of 70 percent of the federal workforce. Each of the 15 GS pay grades has 15 incremental steps, each earning slightly higher wages with wide ranges in pay depending on the step. For example, a college-educated, entry-level GS 7 position earns an average of $42,209 at step one. By step 10, a GS 7 level employee would earn an average of $54,875 per year, not counting benefits.

Advancement is achieved through seniority, with some positions offering so-called career track advancement, where an employee is promoted annually to the next pay grade until they reach the maximum. Commonly, this is done over a three year period – from a GS 7 grade to a GS 9 grade, for example. Once the employee reaches the maximum pay grade for their job, they can then advance through the steps based on seniority, to a maximum of 10.

Federal employees can be promoted to the next step faster based on good performance, the report noted, a metric that is not synonymous with productivity.

On average, federal employees earn 60 percent more than the average private sector employee – $79,000 vs. $50,000 respectively. Add in retirement and health care benefits and that gap grows to 85 percent.

Some of that gap is due to the fact that some federal jobs, like IRS agents and customs officials, are unique to the federal government, the study notes, so there is no private sector equivalent to compare them too.

Another factor that drives the raw average up is the fact that the government employs a higher percentage of college-educated Americans than the private sector does. Only 59 percent of private-sector workers have high school diplomas compared to the 89 percent of federal workers who do. Federal workers, the study noted, are also an average of five years older than private sector ones.
“A more skilled workforce naturally earns more than a less skilled one; education and experience increase workers’ productivity,” the study notes.
When Heritage controlled for similar occupations and employee characteristics, however, it still found a pay gap of 22 percent between federal and private sector employees.
“The federal pay system gives the average federal employee hourly cash earnings 22 percent above the average private worker’s, controlling for observable skills and characteristics,” reads the report.

“Including non-cash benefits adds to this disparity. The average private-sector employer pays $9,882 per employee in annual benefits, while the federal government pays an average of $32,115 per employee,” the study found.

The Heritage report also found that government jobs – in addition to being more lucrative – are almost impossible to lose. Despite a national unemployment rate that remained at 9.5 percent, federal employment has grown during the recession.
“Federal employees enjoy job security irrespective of the state of the economy,” the study documented. “Since the recession began, federal employment has risen by 240,000 – 12 percent. The unemployment rate for federal employees has only slightly risen from 2.0 percent to 2.9 percent between 2007 and 2009.”

Federal Government Expanding Workforce by 600,000 While the Rest of the Country is Contracting

Jobless millions signal death of the American dream for many

August 5, 2010

Richard Gaines is one of the best-known faces on Camden's Haddon Avenue. It is a rough-and-tumble street, lined with cheap businesses and boarded-up houses, and is prey to drug gangs. Gaines, 50, runs a barbershop, a hair salon and a fitness business. He works hard and is committed to his community. But Haddon Avenue is not an easy place to make a living in the best of times. And these are far from the best of times.

Just how badly the great recession has struck this fragile New Jersey city, which is currently the poorest in America, was recently spelled out to Gaines. In happier times – whatever that might mean for a city as destitute as Camden – local businesses on Haddon Avenue could at least rely on a bit of trade from those who made their money on the street.

Young men bought flashy clothes and got sharp haircuts and always paid in cash. But no longer. The economy is now so bad in Camden that even the criminals are struggling and going short.
"Even the guys who got money from illegal means really don't want to spend it," Gaines said.
Such a development, though, is just a snapshot of the deep problems still hitting the wider American economy. Growth rates are stuttering and a recovery is struggling to take hold. It may even now be showing signs of going backwards again, as countries such as Germany start to power forward. Joblessness has taken hold in America, with the numbers of long-term unemployed reaching levels not seen since the Depression of the 1930s. The figures are frightening and illustrate a society that remains in deep trouble.

The headline jobless figure of 9.5% is bad enough but does not begin to convey the problem as it fails to measure those who have stopped looking for work. Over the past three months alone more than a million Americans have fallen into that category: effectively giving up hope of finding a job and dropping out of the official statistics. Such cases now number some 5.9 million and their ranks are likely to grow as millions more find their jobless status becoming a permanent state of hopelessness. Surveys show that with each passing week on the dole their chances of finding a job get slimmer.

Though corporations, especially in the banking sector, are posting healthy profits, they are not hiring new workers. At the same time, government cuts are sweeping through city and state governments alike, threatening tens of thousands of jobs and slicing away at services once thought vital. Schools, street lighting, libraries, refuse collection, the police, fire services and public transport networks are all being scaled back.

America appears to be a society splitting down the centre, shattering the middle class that long formed the cultural bedrock of the country and dividing it into a country of haves and have-nots.
"A once unthinkable level of economic distress is in the process of becoming the new normal," warned Nobel-prize winning economist Paul Krugman in a recent New York Times column. Or, as Steven Green, an economics lecturer at Baylor University, put it to the Observer: "We are really in a tough spot right now."
There is a new name for those falling down the black hole of joblessness that has opened up in America's economy. They are the 99ers.

It is a moniker that no one wants. It refers to the 99 weeks of benefits that the jobless can qualify for in America. Government cash helps those laid off keep a tenuous grip on a normal life. It keeps a roof over their heads, pays a phone bill, puts food on a table and petrol in a car. But once the 99 weeks are up the payments stop – as is happening now for millions of people – and they are 99ers.

For many, that moment, which America's politicians have refused to extend, represents the moment of destitution; a sort of modern American version of the old Victorian trip to the workhouse. There are now more than a million 99ers and the number gets bigger each week.

But who are they? Despite Republican attempts to paint them as feckless or job-shy, they are usually anything but. The 99ers are people like Anne Strauss, 58, who spent 35 years working as a PR professional on Long Island. Despite spending every day hunting for work, she has not had a job since June 2008. She and her husband are now living on credit cards watching debts mount as they stare into the abyss.
"Looking for a job is the hardest I have ever worked," she said with a smile that conveyed no humour or happiness, only the deep stress that is common to many 99ers.
Strauss, along with about 50 other 99ers, protested on Wall Street last week, demanding an extension of the benefits that could keep them out of poverty. As bankers and financiers strode into the flag-draped Stock Exchange they chanted: "Shame! Shame!" and told their stories. It was a litany of middle-class lives shattered by the recession. There was Connie Kaplan, a corporate librarian who was desperate to resume her career.
"We are not bums, we are hardworking," she said.
Or Lori Ghavami, a New Jersey financial analyst in her 30s, who had once worked on Wall Street itself and now was staring at landlords' bills she was scared she could not pay. Or New Yorker Steven Bilarbi, 62, who had worked for the same employer for 37 years, until 2007. He has not worked since, despite refusing to spend daytime hours at home and engaging in a permanent job hunt. He is now living off savings and depleting his pension.
"I go to job fairs. I don't feel like staying home. What would I do? Watch game shows and soap operas?" he fumed.
Meeting 99ers is to tap into a deep well of anger at lives that have been knocked off course, shattering the enduring vision of the American dream that many had felt they had achieved. Just take Donna Faiella, a 53-year-old New Yorker who lives alone in Queens. She spent 28 years working in film post-production and video-editing. She was successful and had a career. Now she is desperate for a job, any job. But she cannot find one.
"I will do anything. I will sweep floors. You think I look forward to collecting unemployment? It is fucking degrading," she said, almost quivering with anger.
Faiella is in dire trouble. Joblessness has eaten away at her sense of identity.
"I feel like we are worthless. We are lost in the world. I don't know what to call myself. I don't have a title any more. What do we do? What do we do?" she implored.
Faiella has one week of benefits to go. Then her 99 weeks will be up. She will have a title again. But not one she expected. She will be a 99er.
"I am petrified. Do I become homeless?" she said, adding that she has begun making inquiries at local shelters.
If the 99ers are coming to symbolise a human segment of society that America is slowly abandoning to its fate, then Camden is the geographic expression of that marginalisation. Large stretches of the once bustling river port city seem to epitomise urban blight. Vacant lots and burned-out abandoned houses line many of its streets.

Its 79,000 residents have the lowest median household annual income of any city in the US at just $24,000 (£15,000). In terms of crime rates it was the nation's second-most dangerous city last year. Some estimates reckon that about a third of Camden's houses are empty. A third of its people are in poverty and a fifth are unemployed.

It is a deeply grim picture and it is getting worse. Camden's city government is facing the prospect of massive cuts as its cash-strapped resources have run out and it has built up huge debts. Services have already been cut and only a last-minute rescue last week saved Camden's three public libraries from being closed.

In a city that has had it tough for decades these are hammer blows to its residents. One woman who has watched in dismay as the recession unfolded outside her door is Dorothy Allen, 81, who has lived near Haddon Avenue for almost four decades. Known by almost everyone as "Mom", she calls herself "the mother of the block". She has never known anything like the area's current troubles.
"I have been here since 1971 and it's the worst it's ever been," she said.
Yet to listen to America's politicians many would think recovery is just a matter of time. Yes, they say, the recession has been hard, but America will pull through and everything will be as it once was. Last week New Jersey senator Robert Menendez visited Camden, stopping at a local health clinic. He spoke of the achievements of the Democrats in staving off economic disaster.
Job creation was coming, he told his audience of health executives: "It is not going fast enough to get people back to work but it's a dramatic turnaround."
It does not feel that way for millions of Americans all across the country. Camden is far from unique in slashing its services. In Colorado Springs more than a third of street lights have been switched off to cut the municipal electricity bill. The city has also sold off its police helicopters.

In Hawaii schoolchildren were told to stay at home for 17 Fridays to save costs. In a suburb of Atlanta local bus routes were closed, at a stroke wiping out public transport for thousands of people who relied on it to get to precious jobs.

Whether it's the poor of Camden or Colorado Springs or Atlanta, or among the growing throngs of the 99ers, millions of Americans are discovering that working hard, doing the right thing and obeying the rules are no longer enough.

Back at the 99er rally on Wall Street, Anne Strauss felt that way. During her working life she had refused to claim benefits to which she was entitled as she thought she was doing just fine. Now, as a newly minted 99er, she was looking for help from the country that she had always believed in. But the help was not forthcoming. It is hard to see how the version of the American dream that Menendez described could now ever apply to her. For Strauss, living on credit, desperate to work, but with no job in sight, that dream looks a thing of the past, not the future.
"This is not the country I grew up in," Strauss said.
Alexandra Jarrin, 49, worked for a small technology company near New York City, earned $56,000 a year, had petrol in her car and a roof over her head. She was enrolled in a graduate business school. Then, two years ago, she lost her job. She received her last unemployment payment in March, putting her among the first wave of "99ers" who have come to the end of their 99 weeks of entitlement to benefits. When interviewed by the New York Times, she was living in a motel in Brattleboro, Vermont, having paid $260 she managed to scrape together from friends and from selling her living-room furniture – enough for a week-long stay.

She said she wept as she left her old life.
'I thought, you know, what if I turned the wheel in my car and wrecked my car?'
Her vehicle is now on the verge of being repossessed. Jarrin has contacted her local shelter, but was told there was a waiting list.
"Barring a miracle, I'm going to be [sleeping] in my car," she said.

More Students Seek Public Sector Work

If you’re looking for job security, benefits, and a decent salary, consider working for the federal government. President Obama’s stimulus plan will create 200,000 new jobs over the next three years. Monster has a good overview of stimulus jobs, including who's hiring, where the jobs will be, and the types of jobs available. - Alison Doyle, Stimulus Jobs: Alison's Job Searching Blog, Guide to Job Searching, March 25, 2009
April 5, 2011

College graduates are increasingly looking for degree paths to prepare them for public sector work, but the end of federal stimulus funds is putting those positions in jeopardy.

The number of college graduates working for the federal government increased 16 percent from 2008 to 2009, according to an analysis of the American Community Survey from the U.S. Census Bureau. Employment in nonprofit organizations also increased by 11 percent during the same time period.

Brint Milward, director of the School of Government and Public Policy, said the number of students interested in majors that prepare them for positions in the public sector has risen since the school's split from the Eller College of Management in April 2009.

Milward said that the number of public administration undergraduates has increased by more than 200 in the last two years, from 305 to more than 500 today, and the number of political science majors has also increased from 900 to 1,200. The number of graduate students working toward a master's in public administration almost doubled over the same time period, from close to 50 two years ago to 96 today.

"There's no doubt that more people are asking for the major," Milward said. "Whether there are more opportunities, I don't know."

According to Bill Ruggirello, assistant director of UA Career Services, more private sector companies tend to try and reach out to students via career fairs.

"We have a couple of government types that come (to career fairs), but it in no way compares to the private groups," he said.

Ruggirello does not know yet if this trend continued this year. The annual career services survey to determine where students received employment will occur two weeks before graduation for students and about a month or two after graduation for employers.

He said that the job market has tightened in both the public and private sectors during the last couple of years, a factor Milward also addressed.

"The numbers sound right," he said in reference to the survey. "But it is important to note that, that is looking backward, not forward."

Out of the top five employers in Southern Arizona, four either are public sector companies or private companies that derive revenue from public funds. Raytheon is Southern Arizona's largest employer, followed by three public sector companies: the University of Arizona, the state of Arizona and Davis-Monthan Air Force Base.

The college class of 2011 is going into a job market with a starting salary higher than its recent predecessors, according to the National Association of Colleges and Employers, a Pennsylvania-based nonprofit that connects career service departments to employers,.

"The Southern Arizona economy is dominated by the public sector," Milward said. "Would I rather work for the parks departments or work at Dillard's? I don't know. I've worked in universities and government and I thoroughly enjoyed it, but I think it depends on that individual."

Milward said federal stimulus funds, which allowed local governments to retain workers in the last two years, will soon end and that will affect whether or not those same public sector opportunities will still be available.

"It's really striking to see how the public sector employs Arizonans," he said, "but demand in the market going forward, that's a little hard to predict."

Obama Stimulus: $1 Trillion, 600,000 Government Jobs and Few Media Questions

With a forecasted $1 trillion deficit for the foreseeable future, mainstream media hit and miss on just how much government will expand under current proposals.

Business & Media Institute
January 7, 2009

The words “economic stimulus” have a certain appeal to them because, after all, who wouldn’t want the U.S. economy to be stimulated?

But, as the country is nearing his inauguration on Jan. 20 and the inevitability of President Barack Obama’s stimulus project looms, many in the news media have neglected to determine the who, what, when, where, why and how much aspects of the stimulus.

Even before Obama is able to sign a economic stimulus package into law, as most are expecting, the Congressional Budget Office is reportedly expecting a $1 trillion deficit, more than double what it had forecasted in September, according to an article in the Jan. 7 Wall Street Journal.

And despite the staggering deficit figures, some are spreading fear that the economy will come crashing down if immediate, drastic – and expensive – action is not taken. One example is New York Times columnist and Nobel Prize-winning economist Paul Krugman, who in his Jan. 5 column detailed his “nightmare scenario”:
“It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious,” Krugman wrote. “As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy — well, you can see where this is going.”

“So this is our moment of truth,” Krugman continued. “Will we in fact do what’s necessary to prevent Great Depression II?”
‘Creating or Saving 3 Million Jobs’

While the pundits have wanted the government to shoot first, then ask questions later, they’ve sounded the theme of restoring jobs to rescue the ailing economy.

Obama has repeatedly said he sees the stimulus as a means of “saving or creating 3 million jobs.” Even on Jan. 7, at a press conference naming Nancy Killefer the Treasury Department’s first “chief performance officer,” a position created to track government spending, he told reporters the stimulus, or “economic recovery and reinvestment plan,” would require “dramatic investments to revive our flagging economy – save or create 3 million new jobs, mostly in the private sector.”

However, only a report by ABC’s Jake Tapper on the Jan. 5 “Good Morning America” pointed out the magnitude of “saving or creating 3 million jobs,” as Obama has explained on repeated occasions.
“Obama’s team is pitching a plan that will cost between $675 billion and $775 billion, one that creates three million jobs, 80 percent of them in the private sector,” Tapper said. “But they will face skeptics.”
Tapper illustrated this same point on his blog and included Republican Senate Minority Leader Mitch McConnell (Ky.) appearance on ABC's "This Week" in his “GMA” segment.
“Well, do we really want to create 20 percent of the jobs in the public sector?” McConnell said. “That would be 600,000 new government jobs. That’s about the size of the post office workforce.”
It’s difficult for some to imagine how 600,000 jobs could be created out of thin air. Conservative talk show host Rush Limbaugh theorized that one possibility could be the reinstitution of the draft on his Jan. 5 radio program.
“Barack Obama says he’s going to create three million new jobs, 80 percent in the private sector, which means 20 percent will be government jobs. That’s 600,000 government jobs. Where is he going to be able to do that real quick? Where could you do this in a matter of months? I said you could reinstitute the draft.”
Understanding the Scope – Government’s Role in the Economy

As Tony Strika explained in a post for Seeking Alpha back in November 2008, government does account for a percentage of gross domestic product (GDP) – the standard by which the economy is measured. However, the notion government can create wealth through job growth is one often misunderstood by the media.
“Well, it’s not the way it usually works, a president-elect trying to push a legislation through Congress two weeks before he's even sworn in, but this is no ordinary time,” “CBS Evening News” anchor Katie Couric said on her Jan. 5 broadcast. “And with the economy in crisis, Barack Obama went to Capitol Hill to meet with congressional leaders and urge them to approve a stimulus package he can sign soon after he takes office. The cost of the plan could run as high as $775 billion. It would include $300 billion in tax cuts. All this aimed at creating or saving three million jobs.”
But Peter Schiff, president of Euro Pacific Capital, explained that in theory government can’t create jobs in a Dec. 27, 2008 Wall Street Journal op-ed.
“Governments cannot create but merely redirect,” Schiff wrote. “When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.”
And the same is true for job “creation” by the government – as Schiff noted. Government’s interference in the labor pool by competing with private-sector jobs or by propping up inefficient jobs through acts like the auto bailout would disrupt the marketplace and further damage the economy.
“Similarly, any jobs or other economic activity created by public-sector expansion merely comes at the expense of jobs lost in the private sector,” Schiff continued. “And if the government chooses to save inefficient jobs in select private industries, more efficient jobs will be lost in others. As more factors of production come under government control, the more inefficient our entire economy becomes. Inefficiency lowers productivity, stifles competitiveness and lowers living standards.”
$300 Billion Tax Cuts or Redistribution of Wealth?

Another key components of Obama’s economic stimulus, which the media have often alluded to, is the $300 billion in so-called tax cuts.
“Later this week, he [Obama] will be delivering what aides are calling a major address on the economy and what to do about it,” Tapper said in his Jan. 5 “GMA” report. “But first, he's coming here to Capitol Hill to talk to Democratic and Republican leaders about the stimulus package, which could include up to $300 billion in tax cuts.”
But are they really tax cuts? Depending on who benefits, they’re not, according to economist Thomas Sowell, They’re really “welfare” if given to those who don’t pay taxes, the senior fellow at the Hoover Institute at Stanford University told Fox News Channel’s “Hannity & Colmes” co-host Alan Colmes on the Jan. 5 broadcast:
SOWELL: Well, insofar as that's true, yes, but sometimes you’re giving tax cuts to people who don't pay any taxes. And that’s not giving them back their money. That's simply handing out welfare.

COLMES: But you said not federal taxes, but they pay other taxes. They pay Social Security taxes. They pay other kinds of tariffs and taxes. You’re just talking about federal income tax.

SOWELL: Well, but if that’s the case, then – then you can cut down on the Social Security tax. If you really want to give back people the taxes they’re paying. Otherwise, you're giving out welfare and calling it a tax cut.
The Ultimate Cost

Congress and the incoming Obama administration have not settled on a total price tag for the stimulus. Obama declined to assign a specific cost when ABC correspondent Jake Tapper asked him to at his Jan. 7 press conference. According to Tapper’s question, the newly branded Obama economic team has the estimated price ranging from $675 to 775 billion. But Tapper noted that an Obama memo stated that economists are pushing for the stimulus to range from $800 billion to $1.3 trillion. However, Obama told it would be on the “high end” of their estimates.

NBC White House correspondent Chuck Todd suggested the cost would be “close to $1 trillion” on the Jan. 5 “NBC Nightly News” and explained that Obama would make the case that it is “urgently needed.”
“While today was all about getting congressional leaders on board, Obama will take his campaign directly to the public with a speech on Thursday, outlining why a massive stimulus package, which may cost close to $1 trillion dollars, is urgently needed,” Todd said.
However, the urgency expressed through the network media has lacked an explanation of where the source of the financing for a $1 trillion stimulus might come from. As Arthur Laffer, founder and chairman of Laffer Associates and a former member of the Reagan administration’s Economic Policy Advisory Board, explained – the money has to come from somewhere and that what a lot of people are missing, especially the media.
“You can’t bail someone out of trouble without putting someone else into trouble and the federal government doesn’t have a tooth fairy,” Laffer said on CNBC’s Jan. 5 “Fast Money.” “And every dollar of tax rebate or stimulus, whatever you want to call it has to come from the taxpayer sooner or later. And that’s going to hurt the economy.”
Laffer blamed both sides of the aisle for not making this realization and noted just how much the national debt has expanded.
“And frankly, they’ve pushed this national debt – it’s not just the Democrats, it’s the Republicans as well, they’ve been sort of clamoring for this as well,” Laffer said. “They’ve pushed the national debt to almost 100 percent of GDP.”
Alternative Proposals

Although they have not gotten a lot of broadcast network media coverage, there have been some alternative options for economic stimulus.

Laffer has proposed an across-the-board income tax holiday, which he claimed would stimulate economic growth.
“If you wanted to do a temporary targeted stimulus package, why don’t you do this – the national income tax, federal income tax is about $1.4 trillion projected for next year, a little less than that,” Laffer said. “Just imagine if we said for the next six months – Jan. 15 through July 15 – there will be no income taxes on anybody who earns income during that six month period – could you imagine the boom that we’d have during that six month period? That’s what you really want to do, is make tax rate reductions, so people want to work more, produce more hire more and buy more during that period.”
Some critics argue that wouldn’t be an effective stimulus, just as those that oppose the Obama tax cuts, because not everyone pays income taxes. Rep. Louie Gohmert, R-Texas, proposed a two-month tax holiday, which would include not just personal income taxes, but also FICA (Federal Insurance Contributions Act) taxes – Social Security, Medicare, etc.

That proposal won the favor of former GOP House Speaker Newt Gingrich, but there are doubts as to whether or not Gohmert’s plan would work. Business & Media Institute adviser Dr. Gary Wolfram, the William Simon Professor of Economics and Public Policy at Hillsdale College in Hillsdale, Mich. criticized by calling it “a Keynesian sort of idea.”

Repeating Japan’s Mistakes

The media should be showing how government stimulus doesn’t work, as Japan found out in the 1990s.

At the end of the 1980s, the Japanese economy experienced an asset bubble, which resulted in the crashing of their economy. To remedy the situation, the Japanese government employed a Keynesian strategy to stimulate their economy.
“Between 1992 and 1995, Japan tried six spending programs totaling 65.5 trillion yen and cut income tax rates during 1994,” Benjamin Powell wrote for the Ludwig von Mises Institute. “In January 1998, Japan temporarily cut taxes again by 2 trillion yen. Then, in April of that year, the government unveiled a fiscal stimulus package worth more than 16.7 trillion yen, almost half of which was for public works. Again, in November 1998, another fiscal stimulus package worth 23.9 trillion yen was announced. A year later (November 1999), yet another fiscal stimulus package of 18 trillion yen was tried.”
As Powell explained, the Japanese remained persistent with their repeated efforts to stimulate their ailing economy.
“Finally, in October 2000, Japan announced yet another fiscal stimulus package of 11 trillion yen. Overall during the 1990s, Japan tried 10 fiscal stimulus packages totaling more than 100 trillion yen, and each failed to cure the recession.”
It didn’t work, as former senior vice president and director of research for the Federal Reserve Bank of San Francisco Michael Keran explained in a release issued by House Minority Leader John Boehner’s office on Jan. 7.
“Japan in the early and mid-1990s engaged in major fiscal stimulus focused on infrastructure projects with deficits equal to 7-8% of GDP and a cumulative Debt/GDP of almost 150%. None of this led to economic recovery until the late-1990s when the Bank of Japan engaged in quantitative easing of monetary policy and the Government of Japan finally introduced a taxpayer bailout of the banks. The Fed and Treasury in the US have already taken such actions. The Japanese experience suggests that additional fiscal stimulus will only add to the Debt without helping the economy.”
This has gotten very little attention from the broadcast network media, with exception of former Bush adviser, Fox News Channel’s Karl Rove, who appeared in an interview on NBC’s Dec. 2, 2008 “Today.” “Today” co-host Matt Lauer referenced a Nov. 28, 2008 Wall Street Journal piece Rove wrote that used the Japan example and asked him if he thought Obama’s stimulus was destined to fail.
“He [Obama] laid some broad outlines, giving money to states in infrastructure spending and couple of other items,” Rove said. “And look, federal highway dollars, one out of every four federal highway dollars are spent in the year that they’re appropriated. Three out of four are spent years and years later. Japan put a half a trillion dollars into infrastructure spending in the decade of the ‘90s and it didn’t work in stimulating their economy.”
To give you an idea of the kind of job losses that have taken place since the Democrats took control of Congress, the American Observer created the following video (h/t Gateway Pundit):

Prez-Elect Makes New Pitch, Promises on Job Creation -- Including 600,000 New Government Employees

ABC News Blog
January 3, 2009

In his radio address today, President-elect Obama uses some new language when discussing what he wants the stimulus package to achieve in terms of jobs. First off, he has a name for the package -- the "American Recovery and Reinvestment Plan."

The president-elect says he wants to "create three million new jobs" -- this is a change from a few weeks ago, when he said he wanted the plan to create OR SAVE two million jobs.

He says the "No. 1 goal of my plan ... is to create three million new jobs, more than 80 percent of them in the private sector.”

If you do the math: 20 percent of three million means 600,000 new government employees.

Watch the address above or read the text HERE.

Unemployed? Need a Job? The Federal Government is Always Hiring

Fine-Tuned Finances
April 10, 2009

As of April of 2009, the unemployment rate is officially sitting around 8.5%. Some would argue that the methodology used by the Department of Labor to calculate those statistics is flawed and the true unemployment rate is much closer to 13%. Whatever the case somewhere between 1 and 8 and 1 and 12 American workers are without jobs. Others are forced to take part-time work or two-part time jobs instead of getting one full-time job.

We will probably see some sort of economic turnaround during the second half of 2009, but that doesn’t give much comfort to those who are currently unemployed. If you are currently without a job, there’s one employer that’s hiring all around the country that you might not have considered, and it really shouldn’t be much of a surprise at all. It’s the Federal Government.

As the size of the government grows, there will be a need for more federal employees. There are also going to be a lot more federal employees that retire in the near future as the baby-boomer generation retires. Many of these employees were first hired back in the Great Society Initiatives that President Johnson started back in the 1960′s. Since federal jobs can often be very lucrative, many of the people that started working for the federal government never quit their jobs. Since many of these people will be retiring in the next decade, there will be some great jobs to be found.

Currently the federal government has a cap of 2 million non-military civilian federal employees. This was placed hen the United States had a population of 200 million. Currently to get around that limit, the Federal Government has been using a large number of contractors to do the work that it can’t hire the people to do. It’s anyone’s guess as to whether or not that limit will be lifted in the near future, but if it is, there will likely be a surge in federal hiring.

If you’ve applied for work in the private sector before, you’re going to find that navigating your way through the hiring process with the Federal Government is extremely confusing. If there’s anyone you know, whether it be a friend, a family member or a member of your local church that’s already in the local system, it would be well worth your time to sit down with them and ask them how the process works.

It Is Now Mathematically Impossible to Pay Off the U.S. National Debt

The Economic Collapse Blog
February 8, 2010

A lot of people are very upset about the rapidly increasing U.S. national debt these days, and they are demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system.

It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

Well, for one very simple reason: That is not the way our system works.

You see, for more dollars to enter the system, the U.S. government has to go into more debt.

The U.S. government does not issue U.S. currency—the Federal Reserve does.

The Federal Reserve is a private bank owned and operated for profit by a very powerful group of elite international bankers.

If you will pull a dollar bill out and take a look at it, you will notice that it says "Federal Reserve Note" at the top. It belongs to the Federal Reserve.

The U.S. government cannot simply go out and create new money whenever it wants under our current system. Instead, it must get it from the Federal Reserve.

So, when the U.S. government needs to borrow more money (which happens a lot these days), it goes over to the Federal Reserve and asks them for some more green pieces of paper called Federal Reserve Notes.

The Federal Reserve swaps these green pieces of paper for pink pieces of paper called U.S. Treasury bonds. The Federal Reserve either sells these U.S. Treasury bonds or they keep the bonds for themselves (which happens a lot these days).
So that is how the U.S. government gets more green pieces of paper called "U.S. dollars" to put into circulation. But by doing so, they get themselves into even more debt which they will owe even more interest on.

So every time the U.S. government does this, the national debt gets even bigger and the interest on that debt gets even bigger.

Are you starting to get the picture?

As you read this, the U.S. national debt is approximately 12 trillion dollars, although it is going up so rapidly that it is really hard to pin down an exact figure ...

So the bottom line is this:
  1. If all money owned by all American banks, businesses and individuals was gathered up today and sent to the U.S. government, there would not be enough to pay off the U.S. national debt.

  2. The only way to create more money is to go into even more debt which makes the problem even worse.
You see, this is what the whole Federal Reserve System was designed to do. It was designed to slowly drain the massive wealth of the American people and transfer it to the elite international bankers.

It is a game that is designed so that the U.S. government cannot win. As soon as they create more money by borrowing it, the U.S. government owes more than what was created because of interest.

If you owe more money than ever was created you can never pay it back. That means perpetual debt for as long as the system exists.

It is a system designed to force the U.S. government into ever-increasing amounts of debt because there is no escape.

We could solve this problem by shutting down the Federal Reserve and restoring the power to issue U.S. currency to the U.S. Congress (which is what the U.S. Constitution calls for). But the politicians in Washington D.C. are not about to do that.

So unless you are willing to fundamentally change the current system, you might as well quit complaining about the U.S. national debt because it is now mathematically impossible to pay it off ...

60 Percent of the Population Now Gets More in Government Benefits Than It Pays in Taxes

Government relies on a variety of taxes to fund federal spending programs. The principal ones are (1) taxes on personal and corporate income to fund general operations, (2) payroll taxes to fund health and retirement programs, and (3) excise taxes to fund dedicated programs such as highways and public transportation. Each of these taxes impacts families differently depending upon such things as their incomes, spending habits, investments, employment and geography... The bottom 60 percent of American families will as a group receive more in government spending than they pay in taxes... In the case of the highest-income families, they are currently targeted for 43 cents in government spending for every dollar they pay in taxes, even though they disproportionately benefit from public goods such as national defense. - Scott A. Hodge, Accounting for What Families Pay in Taxes and What They Receive in Government Spending, September 21, 2009

John Stossel
February 10, 2010

Government is taking us a long way down the Road to Serfdom. That doesn't just mean that more of us must work for the government. It means that we are changing from independent, self-responsible people into a submissive flock. The welfare state kills the creative spirit.

F.A. Hayek, an Austrian economist living in Britain, wrote "The Road to Serfdom" in 1944 as a warning that central economic planning would extinguish freedom. The book was a hit. Reader's Digest produced a condensed version that sold 5 million copies.

Hayek meant that governments can't plan economies without planning people's lives. After all, an economy is just individuals engaging in exchanges. The scientific-sounding language of President Obama's economic planning hides the fact that people must shelve their own plans in favor of government's single plan.

At the beginning of "The Road to Serfdom" Hayek acknowledges that mere material wealth is not all that's at stake when the government controls our lives:
"The most important change ... is a psychological change, an alteration in the character of the people."
Statism's illogic exposed for all to see in F.A. Hayek's "The Fatal Conceit: The Errors of Socialism"

This shouldn't be controversial. If government relieves us of the responsibility of living by bailing us out, character will atrophy. The welfare state, however good its intentions of creating material equality, can't help but make us dependent. That changes the psychology of society.

According to the Tax Foundation, 60 percent of the population now gets more in government benefits than it pays in taxes. What does it say about a society in which more than half the people live at the expense of the rest? Worse, the dependent class is growing. The 60 percent will soon be 70 percent.

Rep. Paul Ryan of Wisconsin seems to understand the threat:

He's worries that "more people have a stake in the welfare state than in free enterprise. This is a road that Hayek perfectly described as 'the road to serfdom'" ...

Government Jobs: The New Path to the Middle Class

Don’t think that federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” federal jobs; that is, to make federal workers compete for their jobs with contractors. On its face, that competition might strike you as fair when, in practice it is anything but fair and those private companies looking to take over Federal jobs quickly learned how to “play” the system. Only the owners of the companies who take over federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country! They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country.

TMG Books - Are Federal Jobs The Factory Jobs of the Future?

It used to be that unionized factory jobs were the best path to the middle-class in America. Factory jobs, union factory jobs in particular, afforded the workers a good wage, health insurance, and a defined-benefit retirement plan—all three being the foundation of a middle-class lifestyle.

Most of those jobs no longer exist and in the economy of 2010, as I write this, the workers displaced by when a factory closes and their jobs being shipped overseas are slowly losing their grip on the middle-class because they are unable to find a job offering those same benefits. This is a tragedy, really.

And factory jobs are not coming back. America is making the transition from an economy where we built things to a service economy. The downside of that is that service jobs are most often not as good as a union factory job in terms of pay and benefits. And they are not the path to the middle class.

A job with Uncle Sam does provide all the pay and benefits of a factory job. In fact, Federal jobs pay more than comparable jobs in the private sector.

But don’t think that Federal jobs are safe from the same forces that shipped America’s good factory jobs overseas. For the last decade there has been a push to “privatize” Federal jobs; that is, to make Federal workers compete for their jobs with contractors.

On its face, that competition might strike you as fair when, in practice it is anything but fair and those private companies looking to take over Federal jobs quickly learned how to “play” the system. Every Federal job contracted out is one more path to the middle-class lost!

Only the owners of the companies who take over Federal jobs get rich—and the owners of these companies come from the same 5% of the population that owns 80% of the wealth of our country! They blanket Capitol Hill with lobbyists and buy our political system right out from under the working people of this country.

Federal contractors are taking over government jobs from which they are rightly prohibited. The government is even using mercenaries to fight our wars! The military is still a path to the middle-class for many Americans, it was for me, but even that is being robbed from our future generations.

Military personnel used to cook foods for the front-line soldiers and military mechanics once kept vehicles running in the motor pools; those are just two examples of good Federal jobs that have been taken over by contractors. And the truth is that the companies who assumed took those jobs from our young men and women are not doing it for less: They are not saving the American taxpayer a dime!

And what they are costing us are good jobs!

But for the time being, the Federal government does employ over two-million Americans. These are great jobs and each one represents an opportunity for the employee to achieve and maintain a middle-class lifestyle.

Federal employment is the factory floor of the future. And just like unions once fought to maintain the dignity of the American worker, every Federal employee and citizen of the United States who sees the value of having a strong and growing middle-class in our country must fight to keep Federal jobs for Federal employees.

Either that or there will be no path to the middle-class left in America!

Manufacturing Left Because of the Big Bad U.S. Government

By Dick Destiny

“Surveys of college graduates are finding that more and more of our top minds want to work for the government,” the man writes. “Why? Because in recent years only government agencies have been hiring …”

Everyone’s going for the security. They don’t want to work for the private sector where they can be fired because it’s cheaper to use foreign labor — except for security work or weapons manufacturing.

In any case, we ran this economist’s graph on hiring by the government a number of weeks ago:

For the past eleven years the vast majority of federal government hiring has been in homeland security.

The WSJ piece, which I suppose you should read, does not make any mention that American big business — like GE — is fine with making weapons with US workers, because the government and, by extension the taxpayer, pays for it. There’s no talk of firing ‘underperformers’.

However, manufacturing of non-military goods by the same company? That’s another matter entirely.

“Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles,” concludes Moore.
It’s their cowardliness, he implies. They don’t want to work for the private sector, which isn’t hiring anyone except those who are willing to work at jobs that don’t earn a middle class living, because they might get fired.

It’s an unusual argument. But it fits with the Ayn Rand-ian thing that you’re a weakling if you can’t make it as a millionaire or billionaire in corporate America. Ted Nugent spouts it all the time. The fired, the underemployed, government workers, unionized teachers — every manjack of them inferior.

Labor’s Decline Means Trouble for Workers

United Federation of Teachers
October 5, 2006

As labor unions have decreased in size and influence, American workers lost tremendous ground:

  • 90 percent of Americans have lost real income since 1973
  • 47 million — 16 percent of the population — have no health insurance
  • 50 percent have no retirement security
  • The top 1 percent of the population owns 75 percent of the wealth
  • No developed nation has a wider gap between rich and poor

Even big, highly profitable employers now offer minimal employee benefits. The percentage of Americans with job-based health insurance has steadily declined from 63.6 in 2000 to 59.5 percent in 2005, even as health-insurance premiums rose at double-digit annual rates. Even profitable companies whose pension plans are in good financial shape — DuPont, Verizon and IBM to name a few — are slashing pension benefits.

The UFT and other public-employee unions are going to find it harder and harder to win public sympathy in their contract battles if their wages and benefits are better than those of most workers in private employ.

The labor movement’s decline has had a serious impact on community standards and public policy as well. In states where few workers are unionized, more people live in poverty, households earn less money, and more people have no health insurance. In these weak union states, governments spend less on education, unemployment insurance and workers’ compensation.

Why the link? Because in places where unions are strong, working people have a political voice.

The ongoing decline in union membership is making it tougher for the labor movement to execute a successful political program. Even when most union households vote for the worker-friendly candidate, their votes can’t swing elections simply because not enough people belong to union households. Consider the results of the 2005 presidential election, when labor had its best get-out-the-vote effort in a generation. John Kerry beat George Bush among union members by 32 percent, but he lost overall by 3 percent.

The current rate of organizing in this country is not even remotely close enough to reverse the decline in union membership. To catch up to where we were in 1981 at the time of Ronald Reagan’s defeat of the air traffic controllers’ strike, we would need to organize 10.7 million workers...

Teachers’ unions are a particularly choice target of anti-union forces since more than 80 percent of the nation’s more than 4 million teachers belongs to unions, making teaching the most highly unionized sector of the work force. The Bush administration seized upon Hurricane Katrina to reopen most of New Orleans public schools as non-unionized charter schools. And the Detroit teachers union made $63 million in concessions in September in the settlement that ended their 16-day strike...

Socialism, Communism and the New World Order

Freedom and initiative are being replaced by ever higher taxation, regulation and centralization of power in Washington. Our economy is now stagnant and our standard of living is declining. Each year government takes a bigger share of our earnings, employs more and more of our people, enacts more rules that strangle our economy, and controls more and more of our lives. In the enjoyment of plenty, have Americans lost the memory of freedom? When citizens are willing to sacrifice their liberty for security, they will have neither liberty nor security and will soon find themselves living under tyranny. [Ellen Sauerbrey, The Spark That Has Triggered Rebellion, American Thinker, September 13, 2009]

We have become a nation of consumers rather than producers, and now the only true source of middle class is government employment. Yet the government does not create a traditional sellable product and thus produces no revenue outside of what it collects from taxpayers. So how can America survive without producers? And how can America produce anything when manufacturing jobs are being shipped overseas?

Perhaps it's time to nationalize everything so that Socialism doesn't just benefit the 25% employed directly by the public sector. This is what the financial oligarchy have in mind with the corporate state. However, once this happens, no one will have the good life except the elitists. Take Cuba, for example:

According to Barack Obama's Tax Plan:

When government mandates prices that are artificially low, it causes a transfer of wealth
out of the country. To see evidence of this, simply look at the communist nation of Cuba.

Though Cuba is communist, the difference between socialism and communism is that a socialist society is only about economic monopolies, whereas a communist society is about economic and political monopolies.

Since the communist revolution in Cuba in 1959, the country has seen a progressive economic downturn. Without the influx of money from the Soviet Union to bolster its economic, it has seen class equality achieved — everyone in Cuba (except for the ruling class) is poor.

Here is what Socialism has brought to Cuba:

  • Production is run by the government and the labor force is run by the state.

  • Capital investment is restricted and requires approval by the government. This ensures a lack of private sector jobs and economic competition.

  • The Cuban government sets most prices and rations goods to citizens.

  • Any firm wishing to hire a Cuban must pay the Cuban government, which in turn will pay the company’s employee in Cuban pesos.

  • Preferential treatment exists for the ruling class of the Communist party, which get luxuries average citizens do not, such as access to transportation, work, housing, university education and better health care.

  • Starting in the late 1980s the Soviet subsidies for Cuba’s state-run economy started to dry up. Before the collapse of the Soviet Union, Cuba depended on Moscow for sheltered markets for its exports and substantial aid. The Soviets had been paying above-market prices for Cuban sugar, while providing Cuba with petroleum at below-market prices. The removal of these subsidies sent the Cuban economy into a rapid depression known in Cuba as the Special Period.

  • Since 1959 Cuba has experienced slow growth in its Gross Domestic Product relative to other countries that were in a similar situation in the 1950s, stagnant trade, and amassed a significant debt amounting to some $16.62 billion in convertible currency and $15 to $20 billion dollars with Russia

  • Cuban citizens themselves have experienced a decrease in their caloric intake and a shortage of housing since 1959.

  • For some time now, Cuba has been experiencing a housing shortage because of the state’s failure to keep pace with increasing demand.

  • Food is rationed to Cuban citizens and state salaries are failing to meet personal needs of its citizens under the state rationing system chronically plagued with shortages.

  • As the variety and amount of rationed goods available declined, Cubans increasingly turned to the black market to obtain basic food, clothing, household, and health amenities.

  • There have been mass exoduses of Cuban citizens to the United States in an effort to achieve economic prosperity, causing a decline in productivity, innovation, and wealth creation in Cuba — not to mention a shrinking work-force, which contributes to the government’s failure to meet production demand.
And this is just the most recent example of how a government-run monopoly can wreck the economy. Keep in mind, this all started when Castro had his government seize the wealth and property of his country’s rich and wealthy, and took over the utilities and financial institutions.

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