Saturday, October 30, 2010

Stimulus: How China Created 22 Million Jobs While Obama Squandered 3.3 Million

Keys to success

Why Obama’s Stimulus Failed

By: Larry Walker, Jr.

China.org recently reported that China's economic stimulus created 22 million jobs over the past two years. During same time frame, the Obama Administration’s economic stimulus plan lost 3.3 million jobs. The Chinese government’s two-year stimulus package cost an estimated $595.4 billion, while the Obama Administration squandered an estimated $887 billion.

What China got right, and what the Obama Administration did wrong.

The Goal

First, the Chinese government put the focus on jobs growth, with a goal of reaching full employment. The Obama Administration simply sought to create 3.5 million jobs, which is pathetic considering that 15 million Americans are unemployed.

The Target

Second, China focused on helping businesses retain jobs by allowing them to defer social insurance payments. The Obama Administration focused on demonizing businesses, while allowing a social security tax credit directly to what they referred to as the “middle class”. The “Make Work Pay” credit amounted to an annual subsidy of $400 per year ($30 per month, or $1.50 per day) for the average working person. The Obama Administration also implemented an Economic Recovery Credit of $250 per year, which was paid directly to retired persons. Out of the $887 billion squandered on Obama’s stimulus plan; only around 13% ($116 billion) was allocated between these programs. Although one might be able to live off of $1.00 to $1.50 per day in China, it doesn’t work like that in America. On top of this, if jobs growth were the goal, it would have made more sense to stimulate employers, rather than workers and retired persons.

The Timing

Third, the Chinese government cut the rate of social insurance contributions and provided certain social insurance subsidies for businesses. The Obama Administration, after doing virtually nothing to help businesses for all of 2009, finally woke up. After having lost 3.9 million jobs by the end of 2009 (link), the Administration finally pushed for the “Hire Act”, but not until February of 2010. Although the “Hire Act” allows a tax credit for the employer’s portion of social security taxes on new employees, the catch is that businesses have to hire new employees who can demonstrate that they have been unemployed for at least 60 days. Unfortunately, the Obama Administration has failed, to this day, to do anything to help employers retain their existing workforce. The Obama Administration has failed by doing too little, too late.

The Result

In addition to creating 22 millions jobs, the Chinese government claims to have helped 1.6 million businesses, and to have saved 60 million jobs. The Obama Administration’s stimulus plan was supposed to save 1,613,000 jobs in addition to creating 1,887,000 jobs, but since it actually resulted in the loss of 3,348,000 jobs, it will now take the creation of 5,235,000 jobs, by January of 2011, to reach the original target (reference).

Revised: Stimulus Job Tracker

Revised: Stimulus Jobs Created or Saved - Click to Enlarge

Multiple Choice Questions (choose one):

Who creates jobs in America?

A. Retired Persons
B. Working Persons
C. Businesses
D. None of the Above

When job creation is the goal, whom should an economic stimulus target?

A. Retired Persons
B. Working Persons
C. Businesses
D. None of the Above

How much longer will the American people stand for an arrogant and incompetent government?

Related: Tracking the 5.2 Million Jobs Obama Squandered ; Minus 6.8 Million: Harry Reid’s Record on Jobs

Reference: China's economic stimulus creates 22 million jobs

Minus 6.8 Million: Harry Reid’s Record on Jobs

Fired Up and Ready to Go

Reid’s Record on Jobs

*By: Larry Walker, Jr.*

Harry Reid says, "I think it is my job to create jobs and I've done my best." Really? That was your best?

Harry Mason Reid is the senior United States Senator from Nevada and a member of the Democratic Party. He was first elected to the Senate in 1986, and was re-elected in 1992, 1998, and 2004, and is currently seeking a fifth term in 2010. Reid has served as the 24th Senate Majority Leader since January 4, 2007. Before his election to the Senate, Reid was a member of the United States House of Representatives, representing Nevada's 1st congressional district from 1983 to 1987. Altogether, Reid has been a part of Washington D.C. for 28 years.

As far as Reid’s record on job creation, since the time he became the Senate Majority Leader our economy has shed 6.8 million jobs. Let’s check the record:

Total Non-Farm Employment 2007 to 2010

Total Non-Farm Employment 2007-2010 (click to enlarge)

Chart: Bureau of Labor Statistics through 10/8/10

Total Non-Farm Employment, 2007-2010

So Harry Reid thinks it’s his job to create jobs, and he says he’s done his best. And from the time Reid became the Senate Majority Leader, our economy has lost a total of 6,866,000 jobs. If job creation is Harry’s job, and that was the best he could do, then perhaps it’s time to hand over the keys.

Is job creation even part of a Senator’s job description?

During their October 14th debate, Sharron Angle answered, "Once again, Harry Reid: It's not your job to create jobs."

She continued, "I believe my job is to create the policies that will encourage the private sector to do what they do best."

And then Angle hit the nail on the head, "We need to get back to work. The way we do that is by encouraging the private sector to do what they do best. Employers are in a cloud of uncertainty and they're holding back $2 trillion that they would like to invest in jobs ... They have lost confidence because of things like Obamacare."

When Harry Reid loses on Tuesday, he will have effectively fired himself.

Addendum: Nancy Pelosi was sworn in as the 60th Speaker of the House at the same time that Reid became Senate Majority Leader, on January 4, 2007.

References:

http://www.cbsnews.com/8301-503544_162-20019697-503544.html

http://en.wikipedia.org/wiki/Harry_Reid

http://stats.bls.gov/webapps/legacy/cesbtab1.htm

Related: National Debt: A National Disgrace

Georgia’s Proposed Constitutional Amendments and Referendum

No on Amendments, Yes on Referendum [UPDATED]

By: Larry Walker, Jr.

Someone called me on Friday and asked for my opinion on Georgia’s proposed Constitutional Amendments and its statewide referendum. I told him that I had not yet formed an opinion but would be doing so over the weekend. Well, here it is.

No on Amendment 1 [PASSED - BOO!]

Allows competitive contracts to be enforced in Georgia courts.

“Shall the Constitution of Georgia be amended so as to make Georgia more economically competitive by authorizing legislation to uphold reasonable competitive agreements?”

What it means: The amendment addresses non-compete agreements that prohibit a former employee from doing the same job for a different company for some period of time after leaving the first company.

Why am I voting no? The state legislature passed a law in violation of the Georgia Constitution and is now pushing for a Constitutional Amendment to validate its mistake. My interpretation: Do you want more government regulation in the private sector? Hell no.

No on Amendment 2 [NOT PASSED - GOOD!]

Adds a $10 tag fee on private passenger vehicles to fund statewide trauma care expansion.

“Shall the Constitution of Georgia be amended so as to impose an annual $10.00 trauma charge on certain passenger motor vehicles in this state for the purpose of funding trauma care?”

What it means: An estimated $80 million a year would be raised from auto registration fees and would be constitutionally earmarked to stabilize and expand the state’s trauma care network.

Why am I voting no? Because, this is nothing more than a tax hike. I would rather see the legislature find ways to cut spending on other programs to fund trauma care. My interpretation: Do you want your taxes raised through a Constitutional amendment, since we are not able to raise them through normal legislation? Hell no.

No on Amendment 3 [NOT PASSED - GOOD!]

Allows the state to execute multiyear contracts for long-term transportation projects.

“Shall the Constitution of Georgia be amended so as to allow the Georgia Department of Transportation to enter into multiyear construction agreements without requiring appropriations in the current fiscal year for the total amount of payments that would be due under the entire agreement so as to reduce long-term construction costs paid by the state?”

What it means: It allows the Georgia DOT to resume its practice of spreading the cost of major, multi-million dollar road projects over a number of years. The constitution currently requires the state to have all the money in hand before a contract can be signed.

Why am I voting no? Because, this policy would allow the state to spend more money than it has. It virtually assures that additional tax hikes will be required in the future. Voting yes, would allow the state to spend more money than it has in its budget. My interpretation: Do you want the state to go into debt to fund transportation projects? Hell no.

No on Amendment 4 [PASSED - BOO!]

Allows the state to execute multiyear contracts for projects to improve energy efficiency and conservation.

“Shall the Constitution be amended so as to provide for guaranteed cost savings for the state by authorizing a state entity to enter into multiyear contracts which obligate state funds for energy efficiency or conservation improvement projects?”

What it means: This is essentially the same concept as Amendment 3, applied to projects that would retrofit state facilities with energy- or water-conservation systems.

Why am I voting no? Because, this policy would allow the state to spend more money than it has. It virtually assures that additional tax hikes will be required in the future. Voting yes, would allow the state to spend more money than it has in its budget. My interpretation: Do you want the state to go into debt to fund energy efficiency or conservation improvement projects? Hell no.

No on Amendment 5 [PASSED - BOO!]

Amendment 5 would allow owners of industrial zoned property to choose to remove industrial designation from their property.

“Shall the Constitution of Georgia be amended so as to allow the owners of real property located in industrial areas to remove the property from the industrial area?”

What it means: The amendment affects only specific industrial areas in Chatham and Jeff Davis counties that were created via statewide constitutional amendments.

Why I am voting no? I do not reside in either of the two affected counties. I could therefore care less. My interpretation: Do we need a Constitutional Amendment just to help out a few folks in two Georgia counties? Hell no.

Yes on Statewide Referendum [PASSED - YAAA!]

Provides for inventory of businesses to be exempt from state property tax.

“Shall the Act be approved which grants an exemption from state ad valorem taxation for inventory of a business?”

What it means: The referendum would eliminate the state levy on business personal property. The exemption would be on items such as inventory, furniture and fixtures, office supplies, and office equipment.

Why am I voting yes? Because, I have always felt that it was wrong for the state to charge businesses an annual tax on office furniture, office supplies, inventory and equipment, when the business had already paid sales tax on the same. My interpretation: Do you want to stop paying annual taxes on items that you have already paid sales tax on? Hell yes.

Friday, October 29, 2010

Tracking the 5.2 Million Jobs Obama Squandered

"We have a system that increasingly taxes work and subsidizes nonwork." ~ Milton Friedman

 By: Larry Walker, Jr.

 "Tracking the 3.5 million jobs Obama will save or create." That was the title of a blog post, last updated on January 8, 2010, on a website named Understanding The Market - Capire Il Mercato. In a note, the author, Cole Kendall stated, "I will make the calculations in a way that provides a “best case” to the Obama team." Since Mr. Kendall decided to give up on his tracking operation at the end of 2009, I decided to finish it off.

Using the same criteria as originally outlined by Obama's (now former) economic team, jobs are defined by counting the total non-farm employment, from Table B-1 of the Bureau of Labor Statistics, "Employment Situation Report" (seasonally adjusted).

Instead of boring you with the month-by-month 2010 data, I went ahead and cut to the chase, skipping from December of 2009, where Mr. Kendall left off, to September of 2010, the latest data available from the 10/08/2010 report.

Following is an excerpt from the original blog post, followed by the revised tracker, and a brief analysis:

In an earlier essay I tried to explain President Obama’s notion of saving or creating jobs. The stimulus plan bill was passed by both houses of Congress last night and the final plan was a bit smaller than the earlier version, so the President now asserts that the plan will save or create 3.5 million jobs.

This post will track the 3.5 million jobs. There are a number of ways to measure jobs in the US. Some people work several different jobs at a time while others change employers frequently, so measuring jobs is not as simple as it might seem. There was a cartoon from the Clinton era showing the President speaking at a dinner that he had created 8 million jobs and an overworked waiter thinking that he had three of them. Obama’s economic team define jobs as use the payroll data (see here for their original report).

Just before the stimulus bill passed the Department of Labor issued a report (see here). The number of people working (see Table B1, about 2/3 of the way down, with the heading “Establishment Data”) was 134,580,000 (seasonally adjusted). This is a preliminary measure and will be revised next month and probably revised again in a year. Using the Obama team methodology, without the stimulus bill employment would be expected to fall by around 1,613,000 jobs during the next two years so that without the stimulus bill we would expect employment to be 132,967,000 in January 2011.

With the revised estimate of 3,500,000 jobs “saved or created”, employment should be 136,467,000, creating 1,887,000 in addition to the 1,613,000 jobs saved.

The table below will be updated with every new employment release to see how jobs have changed. The first column is the actual number of payroll jobs starting with the month before the stimulus plan passed; the second column is the total change in employment since the month when the stimulus plan passed and the third column shows the gap remaining of jobs to be “created” in order to reach the target.

Revised: Stimulus Job Tracker

Revised: Stimulus Jobs Created or Saved - Click to Enlarge

The conclusion is pretty grim, and certainly doesn't mesh with what Obama has been saying out on the campaign trail. The sad truth is that instead of creating 3.5 million jobs since the stimulus plan was passed, it has resulted in the loss of 3.3 million jobs. Since the stimulus plan was supposed to save 1,613,000 jobs in addition to creating 1,887,000 jobs, and since it actually resulted in the loss of 3,348,000 jobs, it would now take the creation of 5,235,000 jobs, by January of 2011, to reach the original target.

I don't know what you call this, but I call it a failure. It's so bad that most people simply stopped tracking it. So do we need another stimulus plan, or another Congress, Senate, and ultimately President? I don't think it helps having Obama roam around the country making false claims in an effort to re-elect the same folks who screwed this up. The thought of $887 billion of deficit-financed spending flushed down the drain doesn't bode well for those who supported it.

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time. ~ Abraham Lincoln (R-IL)

Sources:

http://stats.bls.gov/news.release/empsit.t17.htm

http://stats.bls.gov/webapps/legacy/cesbtab1.htm

http://understandingthemarket.com/?p=63

Table B-1 Data: Total Non-Farm Employment (Seasonally Adjusted):

http://stats.bls.gov/webapps/legacy/cesbtab1.htm

BLS Table Revised 10/8/2010

Chart Per BLS 10/8/2010

Wednesday, October 27, 2010

National Debt: A National Disgrace

Shovel Ready Debt

Who drove us into this ditch, again?

*By: Larry Walker, Jr.* [updated]

In the United States, the total debt outstanding as of September 30, 2010, stood at $13,561,623,030,891.70. It’s interesting to note that over the past 40 years, 69.1% of this debt is attributable to Democrat led congresses, and only 28.1% to Republicans. If we agree that the National Debt has reached the crisis level, then the question we must ask ourselves is, “Whom do I trust?” And before I go further, let me point out that I am neither a Republican nor a Democrat. I am a member of the Give Me The Damn Keys Back Party. No, actually I am a member of America’s Independent Party (AIP). Now, let’s check the record.

1971 to 1977 [Democrat Debt $249,514,293,050.07]

Carl Bert Albert represented Oklahoma's 3rd congressional district as a Democrat for 30 years. He served as the 54th Speaker of the United States House of Representatives from 1971 to 1977. During his six-year term as Speaker, Mr. Albert added $249,514,293,050.07 to the national debt, which represented an increase of 67.3%.

1977 to 1987 [Democrat Debt $1,504,869,616,658.42]

Thomas Phillip "Tip" O'Neill, Jr. represented the 8th and 11th congressional districts of Massachusetts as a Democrat for 34 years. He served as the 55th Speaker of the House from 1977 until his retirement in 1987, making him the second longest-serving Speaker in U.S. history. During his ten-year term as Speaker, Mr. O’Neill added $1,504,869,616,658.42 to the national debt, which represented an increase of 242.6%.

1987 to 1989 [Democrat Debt $732,128,343,528.90]

James Claude Wright, Jr., usually known as Jim Wright, represented the 12th congressional district of Texas as a Democrat for 34 years. He served as the 56th Speaker of the House from 1987 to 1989. During his three-year term, he added $732,128,343,528.90 to the national debt, which represented an increase of 34.4%.

1989 to 1995 [Democrat Debt $1,835,318,949,826.00]

Thomas Stephen Foley represented Washington’s 5th congressional district as a Democrat for 30 years. He served as the 57th Speaker of the House from 1989 to 1995. During his five-year term as Speaker, Mr. Foley added $1,835,318,949,826.00 to the national debt, which represented an increase of 64.2%.

1995 to 1999 [Republican Debt $833,443,098,884.30]

Newton Leroy "Newt" Gingrich represented Georgia’s 6th congressional district as a Republican for 20 years. He served as the 58th Speaker of the House from 1995 to 1999, ending 40 years of the Democratic Party being in the majority. During his four-year term as Speaker, Mr. Gingrich added $833,443,098,884.30 to the national debt, which represented an increase of 17.8%.

1999 to 2007 [Republican Debt $2,980,780,890,317.61]

John Dennis "Denny" Hastert represented Illinois’s 14th congressional district as a Republican for 20 years. He served as the 59th Speaker of the House from 1999 to 2007. During his eight-year term as Speaker, Mr. Hastert added $2,980,780,890,317.61 to the national debt, which represented an increase of 53.9%.

2007 to 2010 [Democrat Debt $5,054,649,131,676.47]

Nancy Patricia D'Alesandro Pelosi has represented California’s 8th congressional as a Democrat for 23 and one-half years. She has served as the 60th Speaker of the House since January 4, 2007. During her four-year term as Speaker, Mrs. Pelosi has added $5,054,649,131,676.47 to the national debt, which represents an increase of 59.4%.

Recap

Democrats have controlled the Congress for 28 of the last 40 years. Over this 40 year span, Democrat led congresses have added $9,376,480,334,739.86 to the national debt, which represents 69.1% of the total debt outstanding (as of 09/30/2010). In comparison, Republican led congresses have added $3,814,223,989,201.91 to the debt, which represents 28.1% of the total outstanding. In contrast, Nancy Pelosi is responsible for adding a grand total of $5,054,649,131,676.47, or 53.9% of the Democrats debt, and 37.3% of the total debt outstanding, in just four years.

During their 12 years of majority control, Republicans, Gingrich and Hastert added an annual average of $317,851,999,100.16 to the national debt. In contrast, in her short four-year term, Nancy Pelosi has added an annual average of $1,263,662,282,919.12. What Nancy Pelosi has done to this country in the last four years is nothing short of a national disgrace.

The question is which party do you trust to put a cap on our debt crisis: Democrat, Republican, or Independent?

Addendum: Harry Reid was sworn in as the 24th Senate Majority Leader at the same time that Pelosi became Speaker of the House, on January 4, 2007.

_______________

U.S. Constitution - Article 1 Section 7: "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

References:

http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt.htm

http://en.wikipedia.org/wiki/Speaker_of_the_United_States_House_of_Representatives

Related: Minus 6.8 Million: Harry Reid’s Record on Jobs

Sunday, October 24, 2010

MythBuster II: Has Obama Created More Jobs Than Bush?

Hmmm!

In Search of Private Sector Jobs

By: Larry Walker, Jr.

Without question, the majority of private sector jobs created in 2010 were created in the Service Sector. Understanding precisely where is quite revealing. After my last blog post, I received the following comments, from a blogger known as Patriot01: “Ever notice that they never say what KIND of jobs they've allegedly "created"? And I'd like an itemized list of the jobs "saved".........wouldn't you?” Well, of course I would, wouldn’t you? Are you ready?

Education and Health Services

Drilling down into the numbers, we found that most of those jobs were created in the Education and Health Services sub-sector. Yet when we analyzed this sector, we found that job growth has been fairly constant, even throughout the recession. In fact, you can call this a recession proof sector (graph and table below).

Series Id: CES6500000001
Seasonally Adjusted
Super Sector: Education and health services
Industry: Education and health services
NAICS Code: -
Data Type: ALL EMPLOYEES, THOUSANDS

Education and Health Services

Under President Bush, job growth in this sub-sector averaged 465,000 jobs per year, even during the worst of the recession. So far under Obama, annual job growth in this sub-sector is averaging around 332,000. So although the industry has been virtually recession proof, the number of jobs created under Obama is on the decline.

Under President Bush a total of 3,720,000 jobs were added to this sub-sector during his eight-year term. And so far under Obama a total of 578,000 jobs have been created. In terms of percentages, during the Bush years the sub-sector grew at an average of 2.8% annually, while under Obama average job growth has cooled to 1.7%.

So does this look like anything remotely close to proof of the absurd statement that, “Obama created more jobs in 2010 than Bush did in eight years?” Not hardly. But there’s more.

Employment and Temporary Help Services

The other sub-sectors where we discovered job growth in 2010 were Employment Services, and more specifically Temporary Help Services. So far this year, we have recovered 228,000 jobs in Employment Services, and out of those, 218,000 were under the sub-category of Temporary Help Services (graphs and tables below). Add these to the 261,000 jobs created in the, recession proof, Education and Health Services sector, and together they account for 489,000 jobs "created" in the last nine months, or basically the whole enchilada.

Series Id: CES6056130001
Seasonally Adjusted
Super Sector: Professional and business services
Industry: Employment services
NAICS Code: 5613
Data Type: ALL EMPLOYEES, THOUSANDS

Employment Services

Series Id: CES6056132001
Seasonally Adjusted
Super Sector: Professional and business services
Industry: Temporary help services
NAICS Code: 56132
Data Type: ALL EMPLOYEES, THOUSANDS

Temporary Help Services

Busted Again!

So there it is, Obama’s greatest feat to-date is that he has managed to slow job growth in the Education and Health Services sector, which has always been recession proof; and he has only managed to recover jobs in the Temporary Help Services sub-sector. And this, his cohorts call a great success? Those of us who are rationally-minded beg to differ.

We wonder how long our economy can sustain itself through providing temporary job search services, especially when the type of jobs people want no longer exist. Meanwhile, our non-existent Goods-Producing sector has hemorrhaged 6,524,000 jobs over the last 10 years, and nothing is being done about it. Where are those jobs? In China.

Charts and Tables from the Bureau of Labor Statistics, Establishment Data, Table B-1 (here).

Shocking Video: 60 Minutes Admits Unemployment is Actually 17%, 22% in California

HT: JammieWearingFool


Thursday, October 21, 2010

MythBuster: Has Obama Created More Jobs Than Bush?

Hmmm!

Rational or Ridiculous

by: Larry Walker, Jr.

So the latest spin by the left-wing media and the White House is to repeat the following mantra, "Obama created more jobs in 2010 than Bush did in eight years." However, how much sense does it make to compare an arbitrary nine-month period for Obama to a full eight-year term? Well none, none at all, at least not within the realm of rational human thought. For those of us who are rationally-minded, we will begin with the month that Obama took office, and compare his full term to-date with whomever.

Turning to the Bureau of Labor Statistics (BLS), when we added up the total number of private sector jobs created during Obama's short twenty one month tenure, we found that a total of 2,991,000 jobs had been lost (110,961,000 - 107,970,000). Oops!

Private Sector Jobs 2009/2010

Total Private Sector Employment (Bureau of Labor Statistics)

Private Sector Job Growth (Loss)

Busted!

Although I too could cherry-pick and find periods where private sector job growth was up by 4 or 5 million under Bush, I choose to remain among the rational. Needless to say, private sector job growth was at least slightly positive over Bush's eight-year term, while under Obama, the words - worst track record in history - come to mind.

Is there no shame?

Also see: Tracking the 3.5 Million Jobs Obama Saved or Created and Deceptive Claim from Obama & The Democrats or Obama's New Reality: Black Unemployment

Dismantling Nancy Pelosi

Nancy Pelosi (D-CA)

Common Sense and Opportunity Cost

By: Larry Walker, Jr.

According to the Speaker of the House of Representatives, Democrat, Nancy Pelosi, “For every dollar a person receives in food stamps, $1.79 is put back into the economy. It is the biggest bang for the buck when you do food stamps and unemployment insurance. The biggest bang for the buck."

It’s the biggest bang for the buck versus what? There is a basic concept in economics known as opportunity cost, which teaches us that for every choice we make, there is a cost which is related to the next-best choice available. In other words, if unemployment and food stamps provide the biggest bang for the buck, does that mean it’s better to be unemployed than employed? Let’s put this under the microscope.

Joe the Salesman generates commission income for his company of 5% of the amount of sales produced. Out of the income generated for the company, Joe receives a cut of 50%. Let’s assume that Joe personally makes gross pre-tax commission income of $50,000 in a year. In order to generate this income Joe’s sales must have been $2,000,000 for the year. The company Joe works for receives commission income of $100,000 and pays Joe his cut of 50%, or $50,000.

What has Joe produced? Joe has contributed a total of $2,000,000 in economic activity in order to earn his pay. This $2,000,000 will multiply throughout the economy vertically and horizontally through related businesses and suppliers. Joe earns his keep and is a productive member of society.

Now let’s look at Joe after he has been laid off and becomes a recipient of unemployment benefits and food stamps:

Joe is now on unemployment and he receives $15,800 per year in unemployment benefits and $5,000 in food stamps. Joe produces nothing to receive this income. Sure, Joe still spends all of his money on rent, food and the basic necessities, but the multiplier effect can only be calculated on the $20,800 that Joe receives and spends. The unemployment checks that Joe receives are generated from unemployment insurance payments made by his former employer, leaving the employer with less money to work with, as well as a smaller amount of sales and productivity. The food stamps he receives are funded by taxpayer dollars, which are currently paid for by money, which is being borrowed by the federal government. [Note: When congress chose to extend unemployment benefits for up to 99 weeks, the added cost was also deficit-financed.]

So if we are talking about the multiplier effect, then which Joe has the greatest impact, the working Joe, or the unemployed Joe?

Assuming that Nancy Pelosi was correct in her statement that, for every dollar spent on unemployment insurance and food stamps $1.79 is added to the economy, and assuming that the same multiple applies to the private sector, which sector will provide the biggest bang for the buck?

Working Joe produced $2,000,000 in gross sales, so he will have added $3,580,000 in economic activity.

Unemployed Joe produced nothing, but did consume $20,800 worth of goods and services. However, out of this, $15,800 was taken from his former employer, and $5,000 from taxpayers, which reduced their consumption dollar-for-dollar. In effect, unemployed Joe took $20,800 from another working Joe and spent the other working Joe’s money. But the other working Joe would have spent or invested the same money anyway. Thus, in my opinion, the multiplier effect of unemployed Joe is zero, since just a different Joe is spending the same money.

To make matters worse, not only is the unemployment and food stamps multiplier zero, it is negative, in my opinion. Why? Because of the fact that unemployed Joe’s food stamps and part of his unemployment benefits were paid for with deficit-financed money. Generations of working Joe’s across the country will be paying interest on this debt, through higher taxes, for years to come and eventually will have paid more than twice the initial amount in principal and interest payments. On top of this, Joe’s former employer is on the hook for higher unemployment insurance premiums, which could have been invested or spent to create additional jobs.

Lesson: All private sector employees produce more than they are paid, that’s the whole point. Unemployed persons produce nothing and merely spend dollars that would have been spent or otherwise invested more productively. The biggest bang for the buck is achieved through implementing government policies, which promote private sector growth, not through unemployment insurance and food stamps.

Related to: The Pelosi Effect

Wednesday, October 20, 2010

Who Obama Fears

Yuck!

Sanity - You want a different result? Try something different.

By: Larry Walker, Jr.

I hear that Obama thinks that voters are afraid. Afraid of what? This mug on the left? Ha Ha! Not.

I'm not afraid Mr. Obama. I'm a little bit sick and tired of seeing your face and hearing your disingenuous rhetoric, but I'm not afraid. I'm pissed off that while I've been working, starting and growing a business, and trusting that folks in Washington were doing their jobs, I came to find out they were not.

Anyone foolish enough to think that the financial crisis, the entitlement crisis, the national debt crisis, and most of our others problems started ten years ago, must have either been born then, or is under 20 years old (too young to know). Come on, our problems started ten years ago? That's a straight up lie. A big chunk of the problem lies in the folks below, the ones Obama fears.

The Problem
Guilty!
  1. Barbara Boxer – Congress 10 years, Senate 18 years = 28 years
  2. Harry Reid – Congress 4 years, Senate 24 years = 28 years
  3. Nancy Pelosi – Congress 24 years
  4. Barney Frank – Congress 30 years

It's naive to say that Bush and the Republicans caused all of our problems, since Bush was only in office for 8 years, while Boxer, Reid, Pelosi, and Frank have all been in Congress for over 20 years. And what have they done? Here's the short list - They ran up the national debt, exploded entitlement spending, crashed the financial markets, brought on the recession (no Harry Reid didn't do it alone), left us vulnerable on 9/11/2001, got us into a war - then reneged, and enriched themselves at taxpayers expense.

The Solution

The only way Obama will achieve any semblance of success is for us voters to remove these slackers and replace them with folks who want the same things that Obama wants. And what was it that Obama said he wanted? A balanced budget, real health care reform (not the present disaster), a strong economy, jobs, transparency, and bipartisanship - to name a few. Well, Democrats controlled both houses and couldn't get the job done. They couldn't agree among themselves on anything other than blaming Republicans for their own failures. So we're going to do you a favor. We're going to remove most of them from power, but especially these four. This is your opportunity to practice true bipartisanship. If you want Obama to succeed you'll get aboard.

Voters are afraid? Come on. Get honest. Obama is afraid. He's only been in D.C. for 6 years at best. Obama isn't running anything, he's just taking orders from the above. He's also afraid that people will really start holding him to his promises, and these four have done nothing but stand between him and his true potential.

Sorry but time's up. It's up to us. That's the deal. Voters will be doing Obama a favor by running these bums out of power.

_____________________________________________

U.S. Constitution - Article 1 Section 7 : "All bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."

Thursday, October 14, 2010

Tracking the 3.5 Million Jobs Obama Saved or Created

Abuse

"Tracking the 3.5 million jobs Obama will save or create."

By: Larry Walker, Jr. [Revised 10/15/10]

That was the title of a blog post, last updated on January 8, 2010, by Understanding The Market - Capire Il Mercato. In a note, the author, Cole Kendall stated, "I will make the calculations in a way that provides a “best case” to the Obama team." Since Mr. Kendall decided to give up on his tracking operation at the end of 2009, I decided to finish it off.

Using the same criteria as outlined by Obama's (now former) economic team, jobs are defined by taking the "Establishment Data" figure from Table B-1 [seasonally adjusted] of the Bureau of Labor Statistics - Employment Situation Report. Instead of boring you with the month-by-month data for 2010, I went ahead and cut to the chase, skipping from December of 2009 - where Mr. Kendall left off, to September of 2010 - the latest data from the 10/08/2010 report.

Following is an excerpt from the original blog post:

In an earlier essay I tried to explain President Obama’s notion of saving or creating jobs. The stimulus plan bill was passed by both houses of Congress last night and the final plan was a bit smaller than the earlier version, so the President now asserts that the plan will save or create 3.5 million jobs.

This post will track the 3.5 million jobs. There are a number of ways to measure jobs in the US. Some people work several different jobs at a time while others change employers frequently, so measuring jobs is not as simple as it might seem. There was a cartoon from the Clinton era showing the President speaking at a dinner that he had created 8 million jobs and an overworked waiter thinking that he had three of them. Obama’s economic team define jobs as use the payroll data (see here for their original report).

Just before the stimulus bill passed the Department of Labor issued a report (see here). The number of people working (see Table B1, about 2/3 of the way down, with the heading “Establishment Data”) was 134,580,000 (seasonally adjusted). This is a preliminary measure and will be revised next month and probably revised again in a year. Using the Obama team methodology, without the stimulus bill employment would be expected to fall by around 1,613,000 jobs during the next two years so that without the stimulus bill we would expect employment to be 132,967,000 in January 2011.

With the revised estimate of 3,500,000 jobs “saved or created”, employment should be 136,467,000, creating 1,887,000 in addition to the 1,613,000 jobs saved.

[Note: I have revised the table's format, to make tracking easier.]

The table below will be updated with every new employment release to see how jobs have changed. The first column is the actual number of payroll jobs starting with the month before the stimulus plan passed; the second column is the total change in employment since the month when the stimulus plan passed and the third column shows the gap remaining of jobs to be “created” in order to reach the target.

[Chart Revised through 10/08/2010]

Revised: Stimulus Jobs Created or Saved - Click to Enlarge

The conclusion is pretty grim, and certainly doesn't mesh with what Obama has been saying out on the campaign trail. The sad truth is that instead of creating 3.5 million jobs since the stimulus plan was passed, the plan has resulted in the loss of 3.3 million jobs. Since the stimulus plan was supposed to save 1,613,000 jobs in addition to creating 1,887,000 jobs, and since it actually resulted in the loss of 3,348,000 jobs, it would now take the creation of 5,235,000 jobs, by January of 2011, to reach the original target.

I don't know what you call this, but I call it a failure. It's so bad that most people simply stopped tracking it. So do we need another stimulus plan, or another Congress, Senate, and ultimately President? I don't think it helps having Obama roam around the country making false claims in an effort to re-elect the same folks who screwed this up. The thought of $887 billion of deficit-financed spending flushed down the drain doesn't bode well for those who supported it.

You can fool some of the people all of the time, and all of the people some of the time, but you can not fool all of the people all of the time. ~ Abraham Lincoln (R-Il)

New Table B-1 Data: http://stats.bls.gov/webapps/legacy/cesbtab1.htm

Chart Per BLS 10/8/2010

BLS Table Revised 10/8/2010

Other Sources:

http://stats.bls.gov/news.release/empsit.t17.htm

http://understandingthemarket.com/?p=63

Related:

Tracking the 5.2 Million Jobs Obama Squandered

Final: Tracking the 5.19 Million Jobs Obama Squandered

Monday, October 11, 2010

Obama's New Reality: Black Unemployment

Zilch

Excuse Me. You created how many jobs?

By: Larry Walker, Jr.

Yesterday, while Mr. Obama was shouting at a childish crowd in Philadelphia, which included streakers and book throwers, he mentioned something about he and Joe Biden having created 3 million jobs in the last nine months, or some foolishness. So we decided to visit the Bureau of Labor Statistics (BLS) to see how well he has performed among Black or African Americans.

The charts and tables that follow were produced on the BLS website (here). You may click on each to expand the view.

Number of Unemployed

In January of 2009, 2,278,000 Black Americans were unemployed. By the end of 2009 the number had grown by 565,000 to 2,843,000. By the end of September of 2010, the number stood at 2,860,000. Thus, the number of unemployed Black or African Americans increased by 17,000 over the last nine months, which differs greatly from Obama's account.

Seasonally Adjusted
Series title: (Seas) Unemployment Level - Black or African American
Labor force status: Unemployed
Type of data: Number in thousands
Age: 16 years and over
Race: Black or African American

Unemployment Rate

The unemployment rate among Black or African Americans was 12.8% at the beginning of 2009, and grew by 3.4% to 16.2% by year-end. From December of 2009 through September of 2010, the rate has decreased by a whole tenth-of-one-percent to 16.1%. That seems hardly worth bragging about.

Seasonally Adjusted
Series title: (Seas) Unemployment Rate - Black or African American
Labor force status: Unemployment rate
Type of data: Percent or rate
Age: 16 years and over
Race: Black or African American

Not In Labor Force

Meanwhile, the number of Black or African Americans who have dropped out of the labor force continues to soar. The number that bailed out increased by 526,000 in 2009, from 10,311,000 in January to 10,837,000 by the end of the year. In 2010, the number has continued to expand by another 203,000, from 10,837,000 in December of 2009 to 11,040,000 by September. And you call this a great achievement?

Seasonally Adjusted
Series title: (Seas) Not in Labor Force Black or African American
Labor force status: Not in labor force
Type of data: Number in thousands
Age: 16 years and over
Race: Black or African American

So the Party of Food Stamps has delivered exactly the opposite of what it said it would: no pay checks, more food stamps, more welfare checks, and a near permanent extension of unemployment benefits. It's time to end the disinformation and get honest. It's time to stop shouting and start listening. And folks, it's time to wake up and stop believing the lies.

Reference: Jobs created during U.S. presidential terms

Friday, October 8, 2010

The Pelosi Effect: Mis-, or Disinformation

Multiplier Effect

Rational Expectations vs. Obamanomics

By: Larry Walker, Jr.

"For every dollar a person receives in food stamps, $1.79 is put back into the economy." ~ Nancy Pelosi (D - CA)

In Economic theory, the multiplier effect is a measure of how an increase in spending produces an increase in national income and consumption greater than the initial amount spent. For example, if a corporation builds a factory, it will employ construction workers and their suppliers as well as those who work in the factory. Indirectly, the new factory will stimulate employment in laundries, restaurants, and service industries in the factory's vicinity.

Keynesian economists generally calculate multipliers that measure the effect on aggregate demand only. They blindly ignore the negative effects that their policies create in other parts of the economy, such as the effect that government borrowing has on the private sector, and the psychological effects on the general public.

According to the theory of rational expectations, it is impossible to calculate the effect of deficit-financed government spending on demand without specifying how people expect the deficit to be paid off in the future.

Thus, Nancy Pelosi's rant, that "For every dollar a person receives in food stamps, $1.79 is put back into the economy", and that, "It is the biggest bang for the buck when you do food stamps and unemployment insurance," was nothing but pure disinformation (with a capital "D"). It's disinformation because she purposefully omits the fact that the money being doled out is all deficit-financed. It is impossible to calculate the effect of deficit-financed government spending on demand without specifying how people expect the deficit to be paid off in the future.

Back in February of 2009, Justin Wolfers, a professor of business and public policy at Wharton, attempted to explain how the multiplier effect would work with Obama's (failed) Stimulus Plan.

At the time, Mr. Wolfers said that Obama's economic experts were estimating the multiplier would be 1.6 times the initial amount. He continued, "The administration's talking about spending almost a trillion dollars. It's hoping that'll generate $1.6 trillion throughout the economy." But Wolfers then cautioned that, "no one's sure that'll happen".

In his conclusion, Mr. Wolfers stated, "In order to fund that bridge the government's going to have to borrow money. If the government's borrowing money it may be that there's less money available for the private sector to borrow. And taking money out of the mouths of the private sector will crimp growth, which isn't multiplying anything."

It's curious that the multiplier effect touted by the Democrats as justification for their failed stimulus plan was only 1.6 (i.e. for every dollar spent, $1.60 would be put back into the economy), and that was to be achieved by repairing roads, and bridges, etcetera. And now here comes Nancy Pelosi making the clueless proclamation that government spending on unemployment insurance and food stamps will have an even greater multiplier of 1.79.

What gives?

Did it work with the Stimulus? Nope.

Will it work with unemployment benefits and food stamps? Nope.

Is this my new reality? Not for long honey.

It appears the Democrats have given up 'hope' on job creation; I mean, since they now believe they can get more bang for the buck by simply paying folks not to work. In fact, according to Nancy Pelosi it will yield, "The biggest bang for the buck".

Misinformation is false or inaccurate information that is spread unintentionally. It is distinguished from disinformation by motive in that misinformation is simply erroneous, while disinformation, in contrast, is intended to mislead. So was this mis-, or disinformation?

The time for change has come. Remember in November.

Addendum: It should also be noted that food, clothing and shelter are not discretionary items, and that discretionary spending is what drives our economy. Thus, the Pelosi Effect fails on all counts.

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