Sunday, May 29, 2011

Point of No Return | National Debt Tops Personal Income

Warning - No Return

~ By: Larry Walker, Jr. ~

For the first time since World War II, the National Debt of the United States has exceeded personal income, on a per capita basis. The point of no return was breached in 2010, during Barack Obama’s second year in office, and the derangement continues to spin hopelessly out of control. This means that every dollar earned by an American citizen is now owned by the federal government, and then some. That’s right, the average annual income of most working-class Americans now belongs to the federal government. The warning of Thomas Jefferson has come to pass, “A government big enough to give you everything you want, is big enough to take away everything you have.”

Meanwhile, no senators voted for Barack Obama's 2012 budget when it came up for a vote in the Senate on Wednesday. A procedural vote to move forward on the president's plan failed 0 - 97, proving that Obama is basically a lame duck president, with no viable plan for resolving the government-manufactured fiscal crisis.

Historical Per Capita National Debt, Personal Income and GDP

In the year 1929, per capita personal income was $697, while each citizen’s portion of the national debt was $139. The federal government’s debt represented just 16.3% of gross domestic product, and 19.9% of personal income. Although not incurring any national debt at all would have been ideal, the percentage of debt to personal income was at least somewhat bearable back in the day; but this was about to change for the worse.

From Point of No Return

The point where a citizen’s per capita share of the national debt exceeded personal income first occurred at the height of World War II. In 1944, per capita personal income was $1,199, while each citizen’s share of the national debt reached $1,452. At the time, the national debt represented 91.5% of gross domestic product and 121.1% of personal income, on a per capita basis. Per capita national debt would continue to exceed personal income through the end of 1950, five years after the end of the war.

From Point of No Return

The point of no return was decisively breached in the year 2010 (see chart above). Although per capita personal income had grown to $40,441, each citizen’s portion of the national debt soared to $43,732. The national debt represented 92.5% of gross domestic product and 108.1% of personal income, on a per capita basis. The situation has worsened through the end of the first quarter of 2011 with per capita personal income of $41,486, versus per capita national debt of $45,782. Through March of 2011, the national debt now represents 95.1% of gross domestic product and 110.4% of personal income, on a per capita basis.

[In contrast, at the end of 2008 per capita personal income stood at $40,469, while each citizen’s share of the national debt was $32,886. In 2008, the national debt represented 69.8% of GDP and 80.9% of personal income, on a per capita basis. Although the United States government was dangerously close in 2008, it had not yet surpassed the point of no return.]

This might not be as big of a deal if the United States ever paid down its debt, but I can only find six years since 1929 where this actually occurred – 1930, 1947, 1948, 1951, 1956, and 1957. There is no chance of fiscal recovery with a president who, in the face of financial disaster, dares to submit a budget containing multi-trillion dollar per year deficits into the future. Until the right leadership is in place, you, I, our children and our grandchildren can look forward to living in a nation which basically owns us. Is this the same Republic that we inherited from our forefathers? I think, not.

Barack Obama has taken this nation in precisely the wrong direction; he has taken us beyond the point of no return. Yet there is still hope, but such hope, of necessity, lies beyond the realm of partisan politicians. Faith without works is dead. This isn’t World War II. It’s time to dramatically reduce the federal government’s footprint. It’s time to cut government spending. It’s time to lower (not raise) the debt ceiling. Tomorrow will be too late.

References:

Rejected! Senate Votes Unanimously To Ignore Obama's Budget

Treasury Direct: Historical Debt Outstanding – Annual

Treasury Direct: Debt to the Penny through 3/31/11

Bureau of Economic Analysis: Table 7.1. Selected Per Capita Product and Income Series in Current Dollars (A)

Data Tables:

From Point of No Return

Link to All Data Tables and Charts

Link to Original Excel Spreadsheet

Sunday, May 22, 2011

Jobs, Jobs, Overthrow Libya

BLS: Jobs Growth

The Summer of Plan B

~ By: Larry Walker, Jr. ~

The summer of 2010 was supposed to have been the ‘Summer of Recovery’, but since that failed the Obama Administration has moved on to Plan B, the ‘Summer of Death and Destruction’. Notice how quickly the Obama Administration changes the topic when its achievements go awry. It’s almost like they thought, “Hey our economic policies are failing, so let’s turn to some controversial international topic to divert attention.” “I know, let’s bomb Libya, and point the finger at other allies.” Or, “Hey Osama’s been laid up in that Pakistani safe house long enough, let’s go over there and shoot him to take attention away from our failed economic policies.” But not so fast, let’s stick to tracking the success or failure of the Obama Administration’s economic policies. We’ll review his international policy mishaps later, when its fruits come to bear.

Jobs Growth since the End of the Great Recession

According to the National Bureau of Economic Research, the Great Recession, the longest of any recession since World War II, began in December of 2007 and ended in June of 2009. So where are we today?

From Jobs April 2011

When the recession ended in June of 2009, the American economy had a total of 130,493,000 jobs, and through the end of last month had a total of 131,028,000. That’s an increase of 535,000 jobs over the last 22 months, or average growth of just 24,318 jobs per month since the 'recovery' began. It can also be said that the economy has added 768,000 jobs since December of 2010, when the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” was signed into law on December 17, 2010. In effect, an average of 192,000 jobs per month have been added since Conservatives won back the House of Representatives, effectively derailing the Obama Administration’s failed economic policies.

Analytically, any and all jobs growth realized by the American economy since the end of the great recession has come since the December 2010 legislation was signed into law. Thus, all of the Obama Administration’s efforts prior to December of 2010 amount to nothing more than a waste of time and trillions of dollars in deficit-financed government spending. All the jobs growth added since the end of the Great Recession can be attributed directly to conservative economic policies. But we’re not quite out of the woods.

Looking backwards, the American economy had a total of 131,660,000 jobs at the end of April of 2000, versus 131,028,000 in April of 2011. Thus, Americans currently have 632,000 fewer jobs than we had eleven years ago. In addition, since the number of jobs peaked at 137,996,000 in January of 2008 (a record high), we are currently 6,968,000 jobs shy of the pre-recession level. Under the conservative growth rate of 192,000 jobs per month, the jobs market would recover to pre-recession levels within 36 months; while under the Obama Administration’s growth rate of 24,318 jobs per month, recovery would take 24 years. With the U.S. population growing at an annual rate of 1%, or by roughly 3 million per year, you can see that we have a long way to go.

To conclude, conservative economic policies are at least on the right track, although they need to be ratcheted up. Meanwhile the Obama Administration has in effect admitted its domestic economic policy failures and has resorted to bombing a former third-world ally into oblivion. It’s a good diversion, but it won’t win the ill-advised Obama a second term. It’s time to finish the job. It’s time to send Obama packing.

Sources:

Business Cycle Dating Committee, National Bureau of Economic Research

Establishment Data, Bureau of Labor Statistics

Link to Original Spreadsheet

Saturday, May 14, 2011

Real Per Capita GDP Declines on Obama's Watch

slacker

~ By: Larry Walker, Jr. ~

According to the latest report from the Bureau of Economic Analysis, real gross domestic product increased at an annual rate of 1.8% in the first quarter of 2011. But by now most of us understand that this is merely calculated by measuring an increase of roughly 0.45 percent from the fourth quarter of 2010 to the first quarter of 2011, and then multiplying the result by four (.045 * 4 = 1.8). That’s all well and good, but it doesn’t necessarily tell us the truth. What most of us really want to know is the annual rate of GDP growth since Obama’s policies were implemented, and how that compares to the previous administration. To arrive at the answer, one must first measure the annual rate of GDP growth from the time Obama took ownership of the economy, and then compare this to the previous rate. In terms of real (i.e. inflation-adjusted) per capita (i.e. population-adjusted) GDP, the U.S. economy has declined at an annual rate of -0.29% since 2008, as compared to an annual growth rate of 1.15% during the eight-years prior. That’s a decline of 396.5% for the mathematically inclined.

Real Gross Domestic Product: 2009 through 2011-1

The table below shows that real GDP grew at an annual rate of 0.71% from the end of 2008 through the first quarter of 2011. During the same period, personal consumption increased at an annual rate of 1.06%, private investment declined at an annual rate of -3.63%, net exports increased at an annual rate 9.2%, and government consumption increased at an annual rate of 0.74%.

Real Gross Domestic Product: 2001 through 2008

As the next table reveals, real GDP grew at an annual rate of 2.23% from the end of 2000 through 2008. During the same period, personal consumption increased at an annual rate of 2.72%, private investment declined at an annual rate of -0.08%, net exports declined at an annual rate -1.45%, and government consumption increased at an annual rate of 2.41%.

Definitions and Comparisons

Real Gross Domestic Product (GDP)

Gross Domestic Product is comprised of four components, personal consumption, gross private investment, government expenditures, and net exports [GDP = C + I + G + (X – M)]. Under Obama’s policies, real GDP has grown at an annual rate of 0.71% as compared to an annual rate of 2.23% during the previous eight-year period. In other words, GDP grew 214.1% faster in the eight-years before Obama. During the previous administration, an annual growth rate of 2.23% wasn’t bad considering the economy went through one of the worst recessions since the Great One. So exactly how can an annual growth rate of 0.71% be called a recovery? Now let’s compare all four components of GDP.

Personal Consumption (C)

Personal consumption is the largest component of GDP. Personal expenditures fall under one of the following categories: durable goods, non-durable goods, and services. For example, expenditures on rent, food, clothing, tobacco, alcohol, jewelry, gasoline, computers, cellular phones, and medical expenses are included, while the purchase of a new home is not. Real personal consumption is currently slumping along at an annual growth rate of 1.06% versus 2.72% before Obama. In other words, personal consumption was growing 156.6% faster before Obama’s fundamental transformation. All of the federal governments deficit-financed spending on unemployment benefits and food stamps doesn't appear to be doing the trick after all.

Gross Private Investment (I)

Gross private investment includes business investments such as construction of new facilities, purchases of software, and purchases of machinery and equipment. Personal spending on new homes is also included. Real gross private investment has declined at an annual rate of -3.63% under Obama’s leadership, versus a marginal decline of -0.08% previously. In other words, real gross private investment has slowed by -4,437.5% since Obama implemented his vision for America. What does that tell you? It tells me that the business community lacks confidence in the direction our nation is heading. For example, Obama’s policies of hindering new oil drilling, and seeking to end tax deductions which encourage expansion of the U.S. oil and gas industry won’t exactly translate into any improvement in private investment for the near future.

Government Consumption Expenditures and Gross Investment (G)

Government spending is the sum of government expenditures on final goods and services such as salaries of public servants, purchases of weapons for the military, and any investment expenditure by the federal, and state or local governments. It does not include transfer payments, such as social security, welfare, food stamps or unemployment benefits. Real government consumption is presently growing at an annual rate of 0.74% as compared to an annual rate of 2.41% before Obama. In other words, although the Obama administration has added almost as much to the national debt in the last two-and-a-quarter years as was added in the previous eight, government spending under the previous administration actually added 225.7% more towards economic growth. Perhaps it’s not how much government spends, but rather what it buys. The numbers don’t lie. It’s clear that Obama’s idea of government investment is not the kind that adds anything to our economy.

Net Exports (X – M)

Net exports are the difference between gross exports (what our nation produces in goods and services for other nations’ consumption), and gross imports (what our nation purchases in goods and services from other nations). Imports are subtracted from exports since imported goods are already included in C, I, and G. The only component of GDP with a more favorable result under Obama’s policies is real net exports, which is growing at an annual rate of 9.2% versus a decline of -1.45% in the previous eight years. However, this grand improvement has only added $104.4 billion to real GDP, representing just 0.78% of the total.

Real Per Capita GDP

Of course the best measurement of GDP is found in real per capita results, after all the economy is not static. The effects of population growth combined with inflation can weigh heavily on the economy. The U.S. population has continued to grow at an annual rate of 1.0% since 2000; meanwhile inflation has grown from nearly 0.00% to 3.16% since January of 2009. So let’s see how this combination has affected GDP, disposable personal income, and personal consumption.

As you can see in the tables below, real per capita GDP has declined at an annual rate of -0.29% under Obama’s policies, compared to an annual growth rate of 1.15% in the 8-years prior. Secondly, real per capita disposable personal income has grown at an annual rate of 0.55% versus 1.75% under the previous administration. Finally, real per capita personal consumption has grown at an annual rate of 0.06% versus an annual rate of 1.60% previously. Yet they call this a recovery.

To summarize, real per capita GDP is presently declining at an annual rate of -0.29% versus a positive growth rate of 1.15% under the previous administration. Would you call this an economic expansion? Not hardly. So what’s wrong with the present administration? It acts like it has accomplished something by putting more Americans on unemployment, welfare, and food stamps than ever. It acts like it won’t be satisfied until the last U.S. oil company is run out of business, or until every last local bank, Wal-Mart or McDonald’s franchise is shut down. What will real per capita GDP look like if Obama’s policies are allowed to continue? It’s time to get serious about the matter of peaceful domestic regime change. It’s time for this slacker and his court jesters to go.

Note: Chained-dollar estimates can be used to compute "real" (i.e. inflation-adjusted) rates of growth. However, comparisons of two or more different chained-dollar series must be made with caution, because the prices used as weights in the chained-dollar calculations usually differ from the prices in the reference period, and the resulting chained-dollar values for detailed GDP components usually do not sum to the chained-dollar estimate of GDP or to any intermediate aggregate. In other words, the columns in chained-dollar GDP component columns do not necessarily add up to total GDP, due to rounding differences.

References:

Gross Domestic Product, 1st quarter 2011 (advance estimate)

Bureau of Economic Analysis, Table 1.1.6, Real Gross Domestic Product, Chained Dollars

Bureau of Economic Analysis, Table 7.1, Selected Per Capita Product and Income Series

Inflation reaches 3.16% in April

Saturday, May 7, 2011

Obama on Oil | Living a Lie

Trust The Lies

“We’re actually producing more oil here than ever.” ~ Barack Obama (05/06/2011) ~

The truth: We are producing fewer barrels of oil here than we did in 1951. ~

Obama would be correct, if our nation was founded in the year 2003. But of course anyone born before 2003 knows that Obama’s statement is - in fact - not true. For those more interested in truth, than in the shallow words of lying politicians, we are actually producing fewer barrels of oil today than we produced in the year 1951, and 42.3% fewer than we produced in 1970.

It’s time to start drilling, and time to stop lying. If Obama won’t do it, then let’s find someone who will.

References (Check the facts):

http://tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPUS2&f=A

http://www.eia.doe.gov/totalenergy/data/monthly/pdf/sec3_3.pdf

Unequally Yoked | Social Security and the Working Class

Liberty?

Public vs. Private Sector Inequities

~ By: Larry Walker, Jr. ~

Did you know that most state and local government employees are exempt from Social Security taxes? Millions of Americans who are covered by state or local retirement plans do not pay into the Social Security system. If Social Security is such a great plan, then why are 17,738,156 [1] state and local government workers exempt? Why does the federal government continue to legally bind the rest of us to a sinking ship? This isn’t 1933 anymore. The time for change is now. Social Security is the biggest fraud in American history.

There is no retreat but in submission and slavery! Our chains are forged! ~ Patrick Henry

Teachers Retirement System of Georgia vs. Social Security

For example, teachers in the state of Georgia are covered by the Teachers Retirement System (TRS). Following are some of the differences between teachers covered by TRS and private sector workers covered by Social Security.

  1. Although Georgia teachers are required to contribute 5.0% of their pay into the TRS, the contribution is considered a pre-tax deduction. Workers covered by Social Security must contribute 6.2% of their pay on an after-tax basis.

  2. Georgia public employers pay a matching contribution of 9.24% into the TRS. Private sector employers pay a 6.2% match to the Social Security Administration (SSA).

  3. TRS contributions are invested in stocks, bonds and other liquid investments earning interest, dividends and the chance for appreciation in value. Social Security contributions are used to pay the benefits of current recipients. Any surplus is borrowed and spent by the federal government which is currently $14.3 trillion in debt.

  4. The normal retirement age for Georgia teachers is 60 years of age. Normal retirement for Social Security recipients is age 65, 66, 67 or greater.

  5. Georgia teachers may retire at any age after 25 years of service. Social Security recipients may not retire until they reach the age of 62 (with reduced benefits).

  6. The amount of benefits received by Georgia teachers is based on the two highest years of compensation. The benefits paid by Social Security are based on the average amount of earnings over a 35 year period.

  7. Georgia teachers become vested in their retirement benefits after 10 years of service. Upon separation from service they may either take a lump-sum distribution or rollover their contributions into an IRA. After the vesting period, Georgia Teachers may also take a lump-sum distribution or rollover the employer contributions into an IRA. Social Security recipients are vested after working 40 quarters, or 10 years, but have no rights to lump-sum distributions or rollovers.

  8. Upon separation of service or retirement, Georgia teachers may either take a lump-sum distribution or rollover their benefits into an IRA account. Georgia teachers may also elect to have their remaining benefits paid to their beneficiaries. Social Security recipients do not have any contractual right to take lump-sum distributions, make rollovers, or to pass benefits on to their heirs.

  9. The maximum amount of annual retirement benefits paid to Georgia teachers is determined by multiplying the average of their top two years’ salary by the number of years of service, and then by 2%. Thus an employee who earned $50,000 in their top two years, with 30 years of service, would receive an annual pension of $30,000 per year, or $2,500 per month [50,000 * (.02 * 30)]. The average amount of benefits paid to Social Security recipients is $14,088 per year, or $1,174 per month. The maximum Social Security benefit for a worker retiring in 2011 is $28,392 or $2,366 per month based on earnings at the maximum taxable amount for every year after the age of 21. The maximum taxable amount of Social Security wages in 2009/2010 is $106,800. [2,3]

Wisconsin Retirement System vs. Social Security

As a second example, teachers in the state of Wisconsin are covered by the Wisconsin Retirement System (WRS). Following are some of the differences between teachers covered by WRS and private sector workers covered by Social Security.

  1. Although Wisconsin teachers are supposed to contribute 5.0% of their pay into the WRS, the contribution is actually paid by their employer (i.e. amounts designated as employee contributions for accounting purposes are actually paid by the employer). [1 (pages 15-17)] WRS employees may also make additional tax deferred contributions to their WRS accounts. Workers covered by Social Security must contribute 6.2% of their pay on an after-tax basis.

  2. Wisconsin public employers pay a matching contribution of 4.5% into the WRS, but since they also pay the employees portion, their total contribution is 9.5%. Private sector employers pay a 6.2% match to the Social Security Administration (SSA).

  3. WRS contributions are invested in stocks, bonds and other liquid investments earning interest, dividends and the chance for appreciation in value. Social Security contributions are used to pay the benefits of current recipients. Any surplus is borrowed and spent by the federal government which is currently $14.3 trillion in debt.

  4. The normal retirement age for Wisconsin teachers is 65 years of age, or 57 with 30 years of service. Normal retirement for Social Security recipients is age 65, 66, 67 or greater.

  5. Wisconsin teachers may retire as early as the age of 55 (with reduced benefits). Social Security recipients may not retire until they reach the age of 62 (with reduced benefits).

  6. The amount of benefits received by Wisconsin teachers is based on an average of the three highest years of compensation. The benefits paid by Social Security are based on the average amount of earnings over a 35 year period.

  7. Wisconsin teachers become vested in their retirement benefits immediately and may either take a lump-sum distribution or rollover the employer contributions into an IRA upon separation. Social Security recipients are vested after working 40 quarters, or 10 years, but have no rights to lump-sum distributions or rollovers.

  8. Upon separation of service or retirement, Wisconsin teachers may either take a lump-sum distribution or rollover their benefits into an IRA account. Wisconsin teachers may also elect to have their remaining benefits paid to their beneficiaries. Social Security recipients do not have any contractual right to take lump-sum distributions, make rollovers, or to pass benefits on to their heirs.

  9. The maximum amount of annual retirement benefits paid to Wisconsin teachers is determined by multiplying the average of their top three years’ salary by the number of years of service, and then by 1.6%. Thus an employee who earned $50,000 in their top three years, with 30 years of service, would receive an annual pension of $24,000 per year, or $2,000 per month [50,000 * (.016 * 30)]. The average amount of benefits paid to Social Security recipients is $14,088 per year, or $1,174 per month. The maximum Social Security benefit for a worker retiring in 2011 is $28,392 or $2,366 per month, based on earnings at the maximum taxable amount for every year after the age of 21. The maximum taxable amount of Social Security wages in 2009/2010 is $106,800. [2,3]

Unequally Yoked

When it comes to retirement, not all Americans are treated equally. State and local government workers have great advantages over private sector employees. Not only does the private sector pay the salaries of state and local government workers through income and property taxes, and not only do we contribute towards their retirement, but we allow them to have better retirement plans than ourselves. As most of us sit, chained to the broken and antiquated Social Security system, state and local government employees continually bargain for more and more. Here are the major inequities in a nutshell.

  • Most state and local government employees contribute less towards their retirement plans than those covered by Social Security but receive back more in benefits. Wisconsin public employees contribute nothing towards their retirement yet receive back more in benefits than comparable working class peons.

  • State and local government employees have portable retirement accounts which actually exist. Americans who are covered by Social Security don’t have any portability of savings, nor have their funds been set aside or invested in any manner.

  • State and local workers have greater options for early retirement based on age and the number of years of service, while Social Security patrons must wait until the age of 62 to receive a reduced amount of benefits.

  • The age of full retirement for those covered by Social Security continues to be pushed back due to the lack of funds, while state and local employees are allowed to quit their jobs and take their savings with them at any time.

  • State and local employees are paid retirement benefits based on an average of their top 2 or 3 years of earnings, while Social Security benefits are calculated using an average of 35 years of earnings.

  • Social Security benefits are limited to $28,392 per year, in 2011, no matter how much is earned in a lifetime. The benefits paid to most state and local plan recipients are for the most part unlimited.

Not all workers in the United States are covered by Social Security, so why don't the rest of us have a choice? Since state and local retirement plans are required to invest contributions in a fiduciary capacity, why doesn’t Social Security? What makes state and local government employees better than the average American? Wouldn’t privately owned and managed retirement accounts be an improvement for all Americans? It’s time to end Social Security. It’s time for all American workers to be treated equally. The ‘Nanny State’ has failed. The era of big government is over. Give me liberty, or give me death!

Sources:

[1] WISCONSIN LEGISLATIVE COUNCIL - 2006 COMPARATIVE STUDY OF MAJOR PUBLIC EMPLOYEE RETIREMENT SYSTEMS

[2] Social Security Administration - Answers

[3] Your Retirement Benefit: How It Is Figured

Other References:

Teachers Retirement System of Georgia – 2010 Annual Financial Report

Wisconsin Department of Employee Trust Funds – 2009 Annual Financial Report

Wisconsin Retirement System (WRS) Benefit Summary

Related:

Obsolete Government Programs, Part 2 : Medicare

Obsolete Government Programs, Part 1 : FICA

Social Security - A Breach of Trust

The Social Security Bust Fund

Links:

Chile's Private Accounts Turn 30 - Investors.com

Bill Baar's West Side: NBC LA: A New Party Within a Party? Labor-Skeptic Democrats