Thursday, May 31, 2012

The drip, drip, drip of bad economic numbers.

"the governing elite . . . continue to flail about, believing in their self-anointed right to 'manage the economy' and plunder the private sector to keep their power and their government-centric world alive. . . The solution lies in restoring the balance between an over-sized public sector and the private sector. . . the repeal of overly burdensome and unnecessary regulations, and tax reform that broadens the tax base while lowering marginal tax rates. . . The time has arrived to curtail the power of the governing elite."

 --Charles Kadlec, Forbes  

Bad numbers summary:

➢ May was stock market’s worst month in two years.

➢ GDP revised downward to 1.9%.

➢ Consumer Confidence index down 4% in May.

➢ Only 75.7% of prime age workers (25-54) have jobs.

➢ Since recession began, 8.2 million fewer workers under 55 have jobs.

➢ Unemployment rate for teenagers: 25%.

➢ Recession recovery in jobs just 1.9% in 34 months.

➢ Recession recovery in GDP is worst of all 11 recessions in past 60 years, just half average rate of previous recessions.

➢ Record increase in number of people in poverty, approaching the 1960s levels that led to War on Poverty.

➢ Budget deficit and federal debt have reached their highest percentage since World War II, as has federal spending as percentage of GDP.

➢ During June 2009 to June 2011 “recovery,” median annual household income fell by 6.7%--greater decline than during recession itself.

➢ Standard of living has fallen longer and more steeply over past three years than any time since government records began 50 years ago.

➢ Housing crisis worse than during Great Depression, with home values one-third less than they were five years ago and home ownership rate lowest since 1965.

➢ Government dependency—percentage of persons receiving one or more federal benefit—highest in history.

➢ Real business nonresidential fixed investment (RBNRFI), which triggers economic growth and job gains, was highly positive under Clinton, healthy under Bush, but is negative under Obama.  

Bad numbers details:

Stocks in May had their worst month in two years. Government revised downward the U.S. GDP growth rate for the year’s first quarter from a weak 2.2% to a weaker 1.9%. The Consumer Confidence Index dropped a sharp 4% in May after falling slightly in April, suggesting to those who calculate the index that “the pace of economic growth in the months ahead may moderate."

Deeper down, one encounters more negative hard numbers. Peter Whoriskey, in the liberal Washington Post, writes that “the proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession,” reflecting the “profound and lasting effects” the downturn has had on workers. According to Whoriskey:
The percentage of workers between the ages of 25 and 54 who have jobs now stands at 75.7%, just 1% over what it was at the downturn’s worst. . . Before the recession the proportion hovered at 80%.
Mort Zuckerman, U.S. News publisher, expands on Whoriskey’s findings:
employment for those age 55 and up has risen 3.8 million since the recession began in December 2007, whereas the ranks of the employed in the under-55 age cohort have shrunk by 8.2 million. [So] as aging baby boomers remain in their jobs, youth employment shrinks; the unemployment rate for teenagers is now at 25%.
Harvey Golub is ex-CEO of American Express. In the conservative Wall Street Journal, Golub informs us that:
Over the past 60 years, there have been 11 recessions and 11 recoveries. Sadly, this recovery is near the bottom of all 11. Cumulative nonfarm job growth is just 1.9% 34 months into recovery, the ninth-worst performance [#10 and #11 were double recessions that would have had speedier recoveries, if each double were cut in two and measured separately] and well below the average job growth of 6.5%. Cumulative GDP growth is just 6.8% 11 quarters into this recovery, less than half the average (15.2%) and the worst of all 11.
Peter Wehner, in the conservative journal Commentary, offers a grand summary of bad economic news, some familiar, but much new to me:
during the Obama presidency the number of people in the U.S. who are in poverty has seen a record increase, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty. In addition, the budget deficit and federal debt have reached their highest percentage since World War II. The same is true when it comes to federal spending as a percentage of GDP. During the post-recession period from June 2009 to June 2011, the median annual household income fell by 6.7% – a more substantial decline than occurred during the Great Recession. The Christian Science Monitor points out, “The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the U.S. government began recording it five decades ago.” The housing crisis is worse than the Great Depression. Home values worth one-third less than they were five years ago. The home ownership rate is the lowest since 1965. And government dependency, defined as the percentage of persons receiving one or more federal benefit payments, is the highest in American history.

There’s a less known, but equally disturbing, statistic—the rate of real business nonresidential fixed investment (RBNRFI). Louis Woodhill, writing in Forbes, has the details. The capital gains tax cut that took effect on January 1, 1997 caused RBNRFI to grow by 38.6% during the first three years of Clinton’s second presidential term. Over the same period, real GDP increased by 14.3%, and total employment increased by 5.2%. During the comparable period of Bush 43’s second term, the increases were RBNRFI: 22.7%; real GDP: 7.8%; total employment: 4.4%. During the first three years of Obama’s term, however, the figures were disastrously worse: RBNRFI: -6.6%; real GDP: 1.2%; total employment: -1.8%.

Joel Kotkin is a geographer at Chapman University. He offers a look at troubles in his state—our largest and often our national trend-setter—California:
[Governor Brown’s] November ballot initiative . . . would primarily [tax] those whom Democrats call "millionaires" (i.e., people who make more than $250,000 a year). [Yet] people who are at the very high end of the food chain, they're still going to be in Napa. They're still going to be in Silicon Valley. They're still going to be in West L.A. It's really going to hit the small business owners and the young family that's trying to accumulate enough to raise a family, maybe send their kids to private school. It'll kick them in the teeth.
According to Kotkin, upwardly mobile families are fleeing in droves. As a result, California is turning into a two-and-a-half-class society. On top are the "entrenched incumbents" who inherited their wealth or came to California early and made their money. Then there's a shrunken middle class of public employees and, much farther below, a permanent welfare class. Today about 40% of Californians don't pay any income tax and a quarter are on Medicaid. The welfare recipients, Kotkin emphasizes, "aren't leaving. Why would they? They get much better benefits in California.”

Kotkin's summary: "the state is run for the very rich, the very poor, and the public employees."

And Obama wants to bring to the nation Brown’s (dare we say?) Californication of the upwardly mobile?! As Golub says:
The "animal spirits" so necessary for a true recovery have been dampened by this administration's policies and rhetoric. . . The president has said, over and over again, that he wants to increase taxes on businesses—small and large—and on financially successful individuals. He doesn't quite [use those words], but that is the effect.

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