It Wasn’t Great, But It Could Have Been Worse

Sorry for the lack of optimism in the new year, but the basically the average American was not the winner in the budget deal passed by Congress this week. Yes, we avoided the fiscal cliff, but we continued the direction of more government spending and bigger government.

Bloomberg reported yesterday that the bill the Senate passed would raise taxes on 77 percent of American households. The Hill reported yesterday that the bill the Senate passed will add roughly $4 trillion to the deficit when compared to current law, according to new numbers from the Congressional Budget Office (CBO).

On December 31st, Breitbart.com reported that the Congressional Budget Office has determined that the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

So where do we go from here? I guess it depends on what America wants to be. When you look at the history of America, you realize that America was settled by people who were not content to stay where they were in their social or religious situations. The Pilgrims came here to find a place to practice their religion without government interference, the Irish fled the potato famine and the harsh conditions imposed by their British lords, and many Jews fled the pogroms of Russia and European countries. All of these people (particularly early in our history) took risks in coming here. Americans later left the comfort of their eastern homes to settle the western frontier. Historically, we have been a people with a work ethic who expect to be rewarded for our efforts. If government spending and programs continue at their current rate of growth, will we be able to maintain that spirit of adventure, risk taking and achievement or will it be wiped out by government programs? Recently I was talking to a friend who is a retired teacher, and she shared a story with me about an experience she had while working on her graduate degree. One of the students in the graduate program was the third generation of his family to be on welfare. Obviously, one of his goals in getting an education was to break that cycle. That is wonderful. However, it was less wonderful when he stated that if he couldn’t get the job he wanted after completing the program, he would simply go back on welfare because that paid pretty well. That is the danger we face with an ever-expanding government.

With the current President and current Congress, our chances of changing our current direction toward bigger government and increased taxes is very small. Conservatives are a very small part of Congress, and frankly, the Republican establishment is not a whole lot different from the Democrats when it comes to big government. The only real hope to turn this country around is the mid-term elections in 2014. Otherwise, we can expect to become Greece very soon.

One (very unpopular) solution to our current fiscal problem would be to make sure that every person in America pays taxes. Right now approximately 50 percent of Americans pay no income tax. If all Americans paid income taxes, they might be more inclined to elect people who were not likely to increase them!

Just one other note on the general state of affairs. As the third Quantitative Easing (QE3) begins to take effect, expect gasoline prices to rise. The current price for gasoline that we are paying at the pump is more related to the sinking value of the U. S. dollar than it is the price of oil. Unfortunately, unless economic policy in Washington changes, that will continue to be the case.

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The Impact Of Quantitative Easing (QE3)

Investors.com posted an article today on QE3 and the impact it will have on the American economy. The article points out that the economic problems America is currently experiencing are not due to a lack of money–their fiscal.

The article reports:

Fed chief Ben Bernanke defends the QE program, claiming Fed studies showed it boosted GDP by 3% and led to 2 million new jobs.

Even if true, the basic arithmetic is irrefutable: The Fed‘s tab for the QE program is now over $3 trillion. And most of that new money went to buy government debt — not to “stimulate” the private sector.

The article points out that banks and companies are currently holding on to their money rather than spending or investing it. One reason for that is the uncertainty about future tax policy and future federal spending.

The article concludes:

We don’t mean to sound conspiratorial, but a major Fed action coming just before an election is highly suspect — particularly when the sitting president’s foe has said he would not rename Bernanke to his Fed post in January 2014, when his term in office expires.

The government’s addition of $1 trillion a year to our nation’s debt hangs over this economy like a dark cloud, keeping entrepreneurs and big businesses alike on the sideline. The “fiscal cliff” we’re about to go over will sock Americans — especially entrepreneurs — with a tax hike of almost $1 trillion. That’s why the economy’s dead — not insufficient Fed money printing.

Bad leadership has consequences.

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Sifting Through The Jobs Numbers

Ed Morrissey at Hot Air posted an article today about the jobs numbers just released by the Bureau of Labor Statistics. The news that you will probably hear Democrats talk about is that the unemployment rate has gone down to 8.1 percent. Obviously that number is nothing to brag about, but at least it went down. But when you take a look at the numbers that are part of that number, unemployment is a problem.

The article mentions that the workforce shrank by 368,000.

CNBC reported:

But job reports for June and July were revised lower. The June count fell from 64,000 to 45,000, while July’s number came in at 141,000 from an originally reported 163,000.

Despite hopes that job creation would be better than expected, the monthly report fell short of economist expectations that 125,000 jobs were added for the month. The government said private payrolls increased by 103,000, about half the 201,000 that ADP reported Thursday.

The article at Hot Air explains that the decline in unemployment was due to people leaving the workforce. The employment-population rate in August was 58.3 percent.

The article at Hot Air points out:

That’s a new 30-year low in the civilian participation rate, lower than April’s 63.6%.  That’s the reason for the decline in the jobless rate.  The workforce decline artificially depresses the official unemployment rate.  If we had the same level of civilian participation as we did at the beginning of the recovery in June 2009 (65.7%), we’d be looking at a jobless rate of well over 10%.  The employment-population ratio dropped to 58.3% in August, not as low as last year’s 58.2%, but still bouncing along a generational bottom.  That measure was 59.4% at the beginning of the recovery.

There is talk of another quantitative easing (it would be QE3) by the government, but considering that QE1 and QE2 were not overly popular, it is questionable whether this will happen.

There is a political class in Washington that wants to remain in power–it includes both Congress and the Executive branches of government. There have been a few cracks made in that power by the Tea Party, but it remains to be seen if they will be corrupted by their new acquisition of power. If the Tea Party is not corrupted by Washington, they will provide the only hope to turn this mess around. Meanwhile, it will be interesting to see what those currently in power are willing to do to the economy to get themselves re-elected.

 

 

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