Thursday, May 31, 2012

Watcher’s Council Nominations – Post Memorial Day Edition


Check out the Watcher’s Council, a blogging group consisting of some of the most incisive blogs in the ‘sphere, and the longest running group of its kind in existence. Every week, the members nominate two posts each, one written by themselves and one written by someone from outside the group for consideration by the whole Council. Then they vote on the best two posts, with the results appearing on Friday.

Council Submissions

Honorable Mentions

Non-Council Submissions

Enjoy! And don’t forget to follow them on Facebook and Twitter..’cause they’re cool like that!

Sunday, May 27, 2012

Adventures in Politicking II : No Shot

Repetitious Rhetoric vs. Genuine Policies

* By: Larry Walker, Jr. *

According to Barack Obama, “the President’s job is to make sure everyone has a fair shot." But as I explained in Part I, the United States Constitution declares that a President’s real job is, “to the best of his/her Ability, to preserve, protect and defend the Constitution of the United States.” Whether or not Mr. Obama has abided by the true standard will soon be revealed, with the Supreme Court’s ruling on Obamacare. However, when judged according to his self-contrived measure, based upon his job performance to-date, Mr. Obama’s policies actually ensure that future generations of Americans will have ‘no shot’.

In my post entitled, “Stimulus: How China Created 22.0 Million Jobs While Obama Squandered 3.3 Million,” I compared the goals of the Chinese government to those of the Obama Administration. The reason Mr. Obama’s stimulus plan fell short wasn’t because the federal government didn’t spend enough; China’s two-year stimulus package cost an estimated $595.4 billion, while the Obama Administration spent more than $830 billion. The main reason the Obama-Plan faltered was because it didn’t raise the bar high enough. You see, the Chinese government set a goal of reaching full employment, while the Obama Administration merely sought to create 3.5 million jobs, by January of 2011. The fact that Mr. Obama set a goal of creating just 3.5 million jobs, at a time when more than 15 million Americans were unemployed, is telling.

Mr. Obama’s employment policies haven’t lived up to his self-contrived ideal of what a President should do. If a President’s job is to “make sure everyone has a fair shot”, then why didn’t Mr. Obama make full employment his objective? Wouldn’t this have been more consistent with a ‘fair shot’, than squandering better than $830 billion to salvage a mere 3.5 million jobs, while leaving 11.5 million people on the sidelines, to make due on unemployment benefits, welfare and food stamps? Although his repeated use of the catchwords “fair shot” may play well in politicking, if he means that everyone should have an opportunity to participate in the economy, then Mr. Obama has failed.

According the U.S. Bureau of Labor Statistics, since December of 2008, a month before his inauguration, the Civilian Labor Force has declined by 261,000 (from 154,626,000 in December of 2008, to 154,365,000 by April of 2012). See chart below.

During the same time-frame, the Working Age Population (Civilian Noninstitutional Population) grew by 7,749,000 (from 235,035,000 in December of 2008, to 242,784,000 by April of 2012). See chart below.

So while the Working Age Population has grown by nearly 8 million, during Mr. Obama’s term, the Labor Force has contracted by 261,000. Is the fact that nearly 8 million newly added Working Age Americans haven’t gotten a shot at participating in the economy, since Mr. Obama took the oath, consistent with his rhetoric? That depends on your definition of the catchphrase, “to make sure everyone has a fair shot”. Is ‘no shot’ synonymous with a ‘fair shot’?

To top it off, the Number of Working Americans (Employment Level) has declined by 1,463,000 during Mr. Obama’s term (from 143,328,000 in December of 2008, to 141,865,000 by April of 2012). See chart below.

Has Mr. Obama learned the lesson and since shifted his policies towards a goal of full employment? Not as far as we know. All we hear from him lately is that everyone should have a fair shot, pay their fair share of taxes, and play by the same rules, as if this hasn’t always been the case.

Aside from repetitious rhetoric, what grand policy is Mr. Obama now promoting to advance his goal of fairness? Will the act of raising taxes on millionaires, and everyone else for that matter, open up new opportunities for the next generation? If so, how does that work? Will offering tax credits to small business owners that hire more workers and pay them higher wages, while simultaneously raising their tax rates, do the trick? Not in my opinion (see Obama’s Economic Fallacy: The Not-To-Do List).

The Bottom Line: Since Mr. Obama believes that his job has been to “make sure everyone has a fair shot”, and since the Labor Force has declined by 261,000, while the Working Age Population has expanded by 7,749,000, and the number of Working Americans has fallen by 1,463,000, all since the beginning of his four-year reign, and since he has taken a pass on making full employment his goal, it may be concluded that what Mr. Obama really means by the expression, a fair shot, is “no shot”. However you slice it, Mr. Obama had his shot, and failed. He has no shot at reelection.

Related:

Adventures in Politicking I : A President’s Job

Hope and Change on Ice

Manipulation 401 : U-3 vs Real Unemployment

To Give Americans a “Fair Shot,” Obama Should Stop Violating Our Rights

Thursday, May 24, 2012

Adventures in Politicking I : A President’s Job

* By: Larry Walker, Jr. *

“In America the President reigns for four years, and Journalism governs forever and ever.” ~ Oscar Wilde *

According to Barack Obama, the job of the President of the United States is to “make sure everyone has a fair shot." However, according to Article II (Sections 1 – 3) of the United States Constitution, in which the job of the President is officially and clearly outlined, nowhere do we find such 'verbage'. Therefore, it is unnecessary to try to figure out who’s included or excluded in 'everyone', and how fair a shot must be – before it becomes unfair. What a relief! So what’s the President’s real job?

According to the United States Constitution, a President's main job is, to the best of his Ability, to preserve, protect and defend the Constitution of the United States. The Executive Power is vested in a President of the United States primarily to act as Commander in Chief of the Military, to Read the opinions of the Principal Officers of each Executive Department, and to Grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.

The Constitution also grants a President the power, with the Advice and Consent of the Senate, to make Treaties, to appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all Officers of the United States, although the Congress may by law vest the appointment of such inferior Officers in the President alone, or in the Courts, or the Heads of Departments.

The President also has the power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.

Thus far, there’s no mention of making sure everyone has a fair shot. Has the current POTUS made enough nominations to to fill the growing number of judicial vacancies? No.

Other than the duties mentioned above, a President is commissioned by the Constitution to, from time to time, give to the Congress information on the State of the Union, and recommend to their Consideration such Measures as he may judge necessary and expedient.

I believe our forefathers meant that a President should give Congress the actual state of the Union, not just the part that improves his chances for reelection. And by making recommendations to Congress, I don’t think they meant publicly browbeating and demonizing those who might disagree.

The President may also, on extraordinary Occasions, convene both or either Houses of Congress, and in Case of Disagreement between them, with Respect to the Time of Adjournment, he may adjourn them to such Time as he shall think proper. The President is further directed to receive Ambassadors and other public Ministers. Finally, a President must take care that the Law is faithfully executed, and to Commission all the Officers of the United States.

Well, that’s it. Nothing here about making sure everyone has a fair shot.

Although Article II (Section 3) states that the President shall from time to time recommend for Congressional consideration, such measures as he shall judge necessary and expedient, that’s not the same thing as roaming around the countryside espousing radical, partisan ideals about what he feels is fair and unfair. In fact, some would call Mr. Obama’s attempts to indoctrinate the most radical elements of the public to his personal philosophy, through making repetitious statements regarding his own notion of fairness, instead of listening to the Principal Officers of each Executive Department, and instead of making his recommendations directly to our elected Representatives, as outlined in the Constitution, many of whom express genuine concern over whether such ideals may lead our Nation to the brink of bankruptcy, akin to Treason.

In other words, instead of egging on the most radical members of the public, inciting many to violence, Mr. Obama should be talking with our Congressional Representatives and Senators. The act of advocating to the general public, a policy of raising taxes in the midst of a weak Global economy, based upon nothing more than his own personal beliefs, after having been warned of, and in spite of, the dire consequences which will surely follow, instead of doing his job as clearly outlined in the Constitution, should be treated as a Crime against the United States. This is precisely why Article II (Section 4) adds that the President, Vice President and all civil Officers of the United States, may be removed from Office upon Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.

Conclusion:

The job of the President of the United States is outlined in Article II of the U.S. Constitution. The President’s job is not to lecture the public as Professor in Chief, nor to make sure everyone has a fair shot, whatever that means. And to take it a step further, it really doesn’t matter whether a presidential candidate used to be a college professor, a community organizer, a State senator or Governor, or the Chief Executive Officer of a Private Equity Firm, what matters is whether he or she is capable of comprehending the duties of the Office, as outlined in the Constitution, and has the willingness and ability to carry them out.

The qualifications for being President of the United States are also found in Article II (Section 1). “No person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty-five Years, and been fourteen Years a Resident within the United States.” That’s it.

Is Obama qualified to be President? Is Mitt Romney qualified? Are Ron Paul, Gary Johnson, and Tom Hoefling qualified? Your guess is as good as mine, however, this Election isn’t about qualifications any more than it's about some eccentric job description pulled out of thin air. This Election is about whether or not Mr. Obama has fulfilled the official job of President, not his make-believe ideal, to the satisfaction of the majority of the American people. It’s about whether we the people want real change, or perhaps just a freaking break. The fact that Mr. Obama has no idea what his job is, after nearly three-and-a-half years of on-the-job training, says a lot.

Related:

Hope and Change on Ice

Reference:

The United States Constitution

Tuesday, May 22, 2012

Hope and Change on Ice

Leroy Eldridge Cleaver
(8/31/1935 to 5/1/1998)

Remembering Eldridge Cleaver

* By: Larry Walker, Jr. *

"Right-wing conservatives and left-wing radicals here in the U.S. must be willing and able to sit down at the same table, look across the table at each other and see not an enemy, a target or a statistic, but a brother, a sister, a fellow American, another child of God. We must expand our hearts and enlarge our identity beyond ‘my people’ to include and embrace all of Creation." ~ Eldridge Cleaver

In the late 1960’s, after leading a troubled youth, Leroy Eldridge Cleaver became a prominent member of the Black Panthers. Having held the titles Minister of Information, Head of the International Section of the Panthers while in exile in Cuba and Algeria, and as editor of the official Panther's newspaper, Cleaver's influence on the direction of the Party was rivaled only by founders Huey P. Newton and Bobby Seale.

Cleaver and Huey Newton eventually fell out with each other over the necessity of armed struggle as a response to the FBI’s Counter Intelligence Program and other actions by the government against the Black Panthers and other radical groups. While Cleaver advocated the escalation of armed resistance into urban guerilla warfare, Newton suggested the best way to respond was to put down the guns, which he felt alienated the Panthers from the rest of the Black community, and focus on more pragmatic reformist activity.

In 1968, Cleaver was shot during an ambush he initiated against Oakland police officers, in which fellow Black Panther member Bobby Hutton was killed and two police officers were injured. Charged with attempted murder, he jumped bail and fled to Cuba and later to Algeria. Following Timothy Leary's Weather Underground assisted prison escape, Leary stayed with Cleaver in Algeria; however, Cleaver placed Leary under "revolutionary arrest" as a counter-revolutionary for promoting drug use. Cleaver later fled Algeria and went underground in France.

Cleaver returned to the United States in 1975, having become a born again Christian, and renouncing his ultra-radical past. The charge of attempted murder, stemming from the armed Panther attack on Oakland police in 1968, ended in Cleaver being sentenced to probation for assault. In the late 1970’s, he joined the Mormon Church of Latter-day Saints. Once his probation ended, he was baptized into the Church of Jesus Christ of Latter-day Saints on December 11, 1983. He periodically attended regular services, lectured by invitation at LDS gatherings, and was a member of the church in good standing at the time of his death in 1998.

Cleaver argued that the Mormons were among the few religious groups who, as an entity, did not propagate slavery. He simply found the claims that the Church was a “racist institution” to be unconvincing. Furthermore, Cleaver identified with Joseph Smith and with the ideas of a literal relationship to God as children, not as creations. He appreciated how seriously Mormonism took the written scripture.

Along with Cleaver’s theological conversion came a political conversion. By the 1980s, Cleaver had become a conservative Republican. He appeared at various Republican events and spoke at a California Republican State Central Committee meeting regarding his political transformation. He began lecturing on college campuses, promoting conservative issues and campaigned for then presidential candidate Ronald Reagan. In 1984 Cleaver ran for election to the Berkeley City Council but lost. Undaunted, he promoted his candidacy in the Republican Party primary for the 1986 Senate race but was again defeated.

Eldridge Cleaver’s journey, in his own words:

"I embarked upon a search to try to find out what was the truth. That led me to checking out all different kinds of religions. Because I knew that there must be some truth out there somewhere. But I found out that every time I went and checked out a religion or a sect or a denomination or a cult, people started calling me by names. I thought I’d better go check out the Mormons, so I went and studied their material, their doctrine. And People started calling me a Mormon... And then I went and checked out the Moonies to see what Rev. Moon was talking about. But I tell you, I was very reluctant, because after following Mao Tse Tung, and Ho Chi Ming, and Kim El Sun, I wasn’t ready for another great wise man from the East. And I said ‘Hey, I’m not a Moonie, I’m not a Mormon, I just got to the M’s!’

“You know, it’s a logical progression, it’s a metamorphosis. And what I found was that my heart was growing, I became more and more inclusive to be able to relate to more and more people on this planet.”

“I used to be a Marxist and I used to think all our problems were economic and political. But at the end of the day I found out that our main problems are spiritual problems. Because the connection between people and between Creation and the creator is not a political connection, it’s not an economic connection, it’s a spiritual connection. Your creator lays down markers in your life—you don’t know what all this is happening for."

"A lot of people said I sold out. The biggest drug dealer in Oakland said to me: ‘You know, you flipped out, man.’ I said, ‘No I flipped back in.’" ~ Eldridge Cleaver

------------------------------------------------------------

I can identify with Mr. Cleaver on several levels, although my life has been somewhat less dramatic. I grew up in the era. I was born in Detroit, Michigan in 1960. My father was a pioneer in the day, he was just completing his Master’s Degree when I came along. In 1964, my family headed for California, where we resided about 80 miles from Oakland. I remember the times. I remember the struggle.

Cleaver’s transformation was similar to my own. When my eyes finally opened, I came to know that, “… we are not fighting against flesh-and-blood enemies, but against evil rulers and authorities of the unseen world, against mighty powers in this dark world, and against evil spirits in the heavenly places (Ephesians 6:12).” Once I understood, I embarked upon my own spiritual journey. I ran with the Baptists, the Pentecostals, the Seventh Day Adventists, the Christian Scientists, then back to the Pentecostals. I just never made it to the M’s, yet.

In the early 1980’s, I too became a Reagan Conservative. Groupthink forever ceased to be my forte. Freedom requires an open mind. 'The connection between people and between Creation and the creator is not a political connection, it’s not an economic connection, it’s a spiritual connection.' I choose to live free. Today, I am an independent conservative, I am Christian, I am American, I’m Black, and I’m proud.

"If a man like Malcolm X could change and repudiate racism, if I myself and other former Muslims can change, if young whites can change, then there is hope for America.”Soul on Ice - by Eldridge Cleaver

Right On, Eldridge, Right On!

References:

One Journey Home: Eldridge Cleaver's Spiritual Path ~ by Linda Neale

From Black Panther to Mormon: The Case of Eldridge Cleaver ~ Mormon Matters

Photo via:

Library of Congress Prints and Photographs Division Washington, D.C. 20540 USA

Monday, May 14, 2012

Obama’s Economic Fallacy: The Not-To-Do List

Small Business Goals, Rewards and Incentives

* By: Larry Walker, Jr. *

“Contrariwise, if it was so, it might be; and if it were so, it would be; but as it isn't, it ain't. That's logic.” ~ Lewis Carroll *

In his latest weekly address, Mr. Obama outlined a mirage of goals, rewards and incentives which he says Congress ‘must’ act upon immediately. But for the most part, what he proffered are just more of the same tried and failed policies, conjured from the same line of illogical reasoning we’ve heard, time and time again, over the last four years. Therefore, what Mr. Obama coined as a “Congressional To-Do List” should rather be endorsed as the official “Not-To-Do List”. Why? Well, let’s test the logic of just one item on the, so called, 'To-Do List'.

Mr. Obama said, “Third, Congress should help small business owners by giving them a tax break for hiring more workers and paying them higher wages. Small businesses are the engine of economic growth in this country. We shouldn’t be holding them back – we should be making it easier for them to succeed.”

In order to understand why Mr. Obama’s argument is fallacious, one must understand what an argument is. Very briefly, an argument is an attempt to persuade someone of something, by giving reasons or evidence for accepting a particular conclusion. It consists of one or more premises followed by a conclusion. In a logical argument, the premises support the conclusion. When we place Mr. Obama’s argument in its proper order we arrive at the following:

Premise 1 – Small businesses are the engine of economic growth in this country.

Premise 2 – We (the government) shouldn’t be holding them back – we should be making it easier for them to succeed.

Conclusion – Congress should help small business owners by giving them a tax break for hiring more workers and paying them higher wages.

No one in their right mind would disagree with either premise. Yes, small businesses are the engine of economic growth in the USA. And no, the government shouldn’t be holding us back, but should rather get out of our way, and off of our backs, so that we may succeed. However, the premises Mr. Obama presented do not support his conclusion. Will the act of offering or failing to offer the reward of tax breaks to small businesses, that hire more workers and pay higher wages, make them any more, or less, the engine of economic growth in America? Will the act of passing additional governmental laws, rules, regulations and loopholes make it any easier for small businesses to succeed?

As a small business owner myself, I can state first hand, that offering my company a reward for hiring more workers and paying them higher wages won’t help my company in the least. That's because nowhere in my mission statement will you find the stated goals of hiring more workers and paying them higher wages. How many small business owners do you know that are in business for the purpose of hiring more workers and paying them higher wages? I’m in business to provide a top quality, affordable service, and to hopefully make a profit in the process, not to hire more workers and pay higher wages.

In my world, hiring more workers and paying higher wages are by-products of increased demand. But since demand is still a far cry from where it was in 2007, why would I suddenly alter my goals toward hiring more workers and paying them higher wages? If demand were to suddenly increase, I might be forced to hire more workers and/or offer higher wages, but I would not do so to receive a deficit-financed government reward. If, and when, I decide to hire another employee, the decision will be solely based on demand. But as long as the economy remains in its present lackadaisical state, if enacted, Mr. Obama’s proposed reward will wind up just like the 17 other so called tax cuts he has offered to small businesses over his failed term – another waste of paper and ink. If anything, what small business owners lack is an incentive to succeed, not more rewards for jumping through narrowly defined governmental hoops.

Goals, Rewards and Incentives

In order to understand how illogical Mr. Obama’s proposal is, one must have an understanding of goals, rewards and incentives. A goal is simply the purpose toward which an endeavor is directed. And while a reward is a positive reinforcement granted after the performance of a desired behavior, an incentive is an expectation of reward, offered in advance, in order to induce action or motivate effort.

Goal: The purpose toward which an endeavor is directed; an objective.

Reward: The return for performance of a desired behavior; positive reinforcement.

Incentive: An expectation of reward that induces action or motivates effort.

In the matter at hand, an incentive would be something offered upfront to motivate small business owners to reach their own goals. But what Mr. Obama has proposed is to reward small business owners after they achieve a government-imposed goal. According to Mr. Obama, the measure of success for a small business lies in the number of persons it employs. What’s wrong with this theory? The main problem is that it fails to align with the realistic goals of most small businesses. Following is a list of goals for my small business. As you can see, hiring more workers and paying them higher wages isn’t on the list.

  1. Offer top quality services at affordable prices.

  2. Make a profit.

  3. Control costs.

  4. Maintain sufficient demand to remain viable.

  5. Meet all current obligations with current revenue.

  6. Payoff existing debt without incurring more.

  7. Build and maintain a prudent reserve.

  8. Achieve moderate growth, in-line with current resources.

Hiring more workers and paying them higher wages might be Obama’s goal for business owners, but what business has he ever run? Common sense dictates that hiring more workers and paying higher wages are by-products of successful business practices, not primary objectives. It is only when small business owners meet their goals that business activity, hiring and wages increase. So instead of offering a reward for something low on the priority list of small business owners (not even on my list), Congress could do better by offering an incentive to help small businesses reach their true goals. Number one on that list is, indisputably, a reduction of individual income tax rates.

Lower Individual Income Tax Rates

Like me, since most small business owners are taxed at the individual level, lowering individual income tax rates will support small businesses in the following ways:

  1. Helps small businesses keep prices level by not forcing them to raise prices to meet higher income tax obligations.

  2. Enables small companies to maintain the same effective profit margin, in the present unstable economy, without raising prices or slashing expenses.

  3. Makes it easier to control costs without raising prices, or laying-off existing workers.

  4. Helps small companies stay in business in the face of lower demand, which is the by-product of oppressive government taxing and regulatory policies.

  5. Allows small businesses to meet current obligations without incurring additional debt.

  6. Enables small companies to pay down existing debt without incurring more.

  7. Allows small companies to build prudent reserve accounts to meet obligations in the face of future business cycle downturns.

  8. Helps small companies achieve moderate growth in-line with existing resources.

In addition, lowering individual income tax rates will enable increased consumer demand for the products and services offered by small businesses, since a rate cut would apply to everyone across-the-board. Lower income tax rates are therefore a win-win for the economy.

Who asked you anyway?

The only one asking for tax breaks for small businesses that hire more workers and pay them higher wages is Barack Obama. No small business owner that I know has requested any such nonsense. But on the other hand, everyone that I know would benefit from the incentive of lower individual income tax rates. If we can’t agree on this, can we at least agree not to raise individual income tax rates?

Raising tax rates on small business owners on January 1, 2013, which is what’s really on the table, will not help them reach their goals, nor will it achieve Mr. Obama’s fallacious goal. Raising taxes will rather have the opposite effect. Even if the proposed carrot on a stick, tax breaks for those who hire more workers and pay higher wages, is offered, the pending tax hikes will negate that reward, leaving both those who take the bait, and those who don’t in jeopardy.

Arbitrarily hiring more workers and paying higher wages, in a stagnant economy, will force small businesses to raise prices on existing customers, and raising prices, without regard to demand, will have the effect of reducing demand, as customers seek lower cost alternatives. The resulting drop in demand, in the face of higher costs, will lead to further price hikes, in order to meet current obligations. In effect, pursuing the third item on Mr. Obama’s ‘To-Do List’ would land most small businesses – out-of-business – in double-time.

I am frankly sick and tired of all the special interest gimmicks conjured from the illogical mind of an amateur. What Mr. Obama ought to do at this point is simply surrender the keys, and let someone who knows what they’re talking about manage the economy. That’s what I call a logical conclusion.

“Companies are not charitable enterprises: They hire workers to make profits. In the United States, this logic still works. In Europe, it hardly does.” ~ Paul Samuelson

Related:

Why Congress Shouldn’t Just Pass Obama’s Jobs Bill, Again

Obamacare’s Effect on Small Business

Picture via: Christ, My Redeemer

Saturday, May 5, 2012

Manipulation 401 : U-3 vs Real Unemployment


Another 522,000 left the labor force in April 2012.

April’s Bogus Unemployment Rate

* By: Larry Walker, Jr. *

Now that economists, media pundits, and the Obama administration have weighed in with half-hearted and inaccurate theories respecting April's decline in the U.S. unemployment rate, it’s time to set the record straight. We learned yesterday, that the official rate declined from 8.2% in March to 8.1% in April, but what’s really beneath the decline? To know, one must have an understanding of how the unemployment rate is calculated, and how to access the appropriate reports. From there it’s just a matter of simple mathematics. After poring through the numbers, I have concluded that the official unemployment rate actually rose to 8.3% in April, while the real unemployment rate ticked up to 11.1%.

According to the U.S. Bureau of Labor Statistics (BLS), as of May 4, 2012, “Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent.” What’s wrong with this pronouncement? The quandary is that nonfarm payroll employment comes from Establishment Data, reported in Table B-1, and has nothing to do with the official unemployment rate. The official unemployment rate is completely derived from Household Data, which is found in Table A-1.

Nonfarm payroll employment and the official unemployment rate are inapposite (one has nothing to do with the other). In fact, if you take a gander at Table A-1, from which the unemployment rate is officially derived, you will notice that the number of employed persons actually declined by 169,000 from March to April of 2012. Does it make sense that establishments reported the creation of 115,000 jobs, while households reported losing 169,000 jobs? Which data set are we to trust? Well, since most of the hoopla surrounds the decline in the unemployment rate, we shall focus on Household Data.

As I outlined in Manipulation 101: The Real Unemployment Rate, the Labor Force is comprised of those who are either Employed or Unemployed, and the Unemployment Rate is calculated by dividing the number of unemployed persons by the size of the labor force, as follows:

[ (A) Total Unemployed / (B) Labor Force = (C) Unemployment Rate ]

Thus, the official unemployment rate of 8.2% in March, as reported by the Bureau of Labor Statistics on April 6, 2012, was calculated as follows:

[ 12,673,000 / 154,707,000 = 8.2% ]

As shown in the table below, at the end of March 2012, 12,673,000 persons were officially unemployed, out of a labor force totaling 154,707,000, equaling an unemployment rate of 8.2%. Got it?

To take it a step further, if 12,673,000 persons were unemployed, out of a labor force of 154,707,000, then it should follow that the remaining 142,034,000 were employed. I found this to be consistent with BLS data and labeled the number of employed as item (D) in the table above. Next, in order to determine whether or not the decline in the unemployment rate is completely bogus, we must take into account some additional statistics from Table A-1, so I included the number of persons “Not in the Labor Force” (E), and the “Civilian Noninstitutional Population” (F). Now we will compare the March statistics to April’s calculation.

The April Employment Situation Summary concluded that a total of 12,500,000 persons were unemployed, out of a labor force totaling 154,365,000, equaling a decline in the official unemployment rate to 8.1%, from 8.2% in March. So what changed?

Comparing the monthly changes in the table below, you will note that from March to April, the number of unemployed persons (A) declined by 173,000. This would be a good thing, if they were all able to find jobs, right? So how many found jobs? Well, none. As you can see, according to Table A-1, the number of employed persons (D) also fell by 169,000. Since the number of employed and unemployed persons both declined, where did they go? As you can see the entire labor force declined by 342,000. Is it a coincidence that 173,000 plus 169,000 equals 342,000? No, it’s not.

The number of unemployed persons declined by 173,000, not because they were able to find work, the BLS merely removed them from the labor force. The BLS also removed an additional 169,000 persons from the labor force, who were considered employed just a month prior. Thus, 169,000 persons were ushered directly from a status of employed in March, to completely out of the labor force by the end of April. Does this raise any eyebrows? Also noteworthy are changes in the number of persons “Not in the Labor Forcewhich increased by 522,000, and the “Civilian Noninstitutional Population” which increased by 180,000. How de we reconcile this?

Reconciliation

The table below summarizes the truth behind the decline in the official unemployment rate.

Here’s what happened.

  1. The number of unemployed persons declined by 173,000 in April.

  2. The number of employed persons declined by 169,000 in April.

  3. The labor force declined by 342,000 in April, which is the sum of #1 plus #2.

  4. The 342,000 persons in #3, who officially dropped out of the labor force in April, were added to those considered “Not in the Labor Force”.

  5. The Civilian Noninstitutional Population (working age population) increased by 180,000 in April, but none entered the labor force.

  6. The number of persons counted as ”Not in Labor Force” increased by 522,000 in April, which is the sum of the 342,000 persons who were previously counted as unemployed (173,000) and employed (169,000), plus the 180,000 new working age persons who were swept under the rug.

Sequitur

To sum it up, in April, 342,000 persons dropped out of the labor force, while another 180,000 new entrants fell by the wayside. In effect, a total of 522,000 persons were removed from the labor force. So what would the official unemployment rate have been had the 342,000 April dropouts been instead left in the labor force and counted as unemployed? The answer is 8.3%, as shown below. Thus, the true unemployment rate ticked up by 1 basis point, from 8.2% in March to 8.3% in April, rather than down by 1 basis point as the BLS reported.

The labor force has historically grown at an annual rate of 1.0% (mirroring population growth), but looking back to December of 2008, it is safe to state that the labor force stopped growing altogether since Obama’s inauguration (see chart below). [Note: The labor force participation rate has likewise declined from 65.8% to 63.6% over the same period, or by 220 basis points.]

Final question: What would the unemployment rate be if the 1.0% per annum shortfall in the labor force, since January of 2009, was restored? Well, since 40 month’s have passed, the labor force should have grown by 3.33% ((1.0% / 12) * 40). And since the labor force stood at 154,626,000 in December of 2008, it should have grown to 159,775,000 by April of 2012, a difference of 5,149,000. Thus, the real unemployment rate is 11.1%, not 8.1%, as shown below.

Are we really moving the right direction? That depends on ones definition of the word “right”. Is manipulating the truth right?

“Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either.” ~ Albert Einstein

Related:

Manipulation 101: The Real Unemployment Rate

Manipulation 201: Playing With Unemployment

Real GDP Per Capita -- Dead!

Data:

Spreadsheets

Thursday, May 3, 2012

Real GDP Per Capita -- Dead!

Moving Forward -- Without Obama

* By: Larry Walker, Jr. *

Why do I get the eerie feeling that we’ve gotten nowhere in the last four years? The answer is because we’ve gone precisely nowhere with Obama. As the chart above displays, on a per capita basis, real gross domestic product has declined by a cumulative -0.20% during Obama’s four-year term (through Q1 2012).

President’s Ronald Reagan and Bill Clinton both inherited rather weak economies. Each achieved real GDP per capita growth of 1.52% in the first year in office, but by the second year, Reagan’s cumulative GDP had declined to -1.35%, while Clinton’s rate climbed to 4.34%. Yet by the end of the fourth year, Reagan’s policies resulted in cumulative GDP per capita growth of 8.47%, versus Clinton’s 8.19%. Man, whatever Reagan was onto needs to be codified and replayed, over and over and over again. Needless to say, both were overwhelmingly re-elected.

George W. Bush inherited a really crummy economy. After only achieving real per capita growth of 0.08% in his first year, by his fourth, Bush’s policies had grown the economy to cumulative real GDP per capita of 5.06%. And with that, Bush ’43 was easily re-elected.

The policies of Reagan, Clinton and Bush ’43 moved America ‘forward’. That’s what I call progress – moving the economy forward in real and measurable terms. Terms that every American could see, touch and feel in their own billfolds, as real GDP per capita was spread around, lifting many from poverty and mediocrity into new realities.

Why Real GDP Per Capita?

Why measure GDP on a per capita basis? GDP is an aggregate figure which does not consider differing sizes of nations. Therefore, it should be stated as GDP per capita (per person) in which total GDP is divided by the resident population on a given date.

Why use chained dollars? When comparing GDP figures from one year to another, it is desirable to compensate for changes in the value of money – i.e., for the effects of inflation. The factor used to convert GDP from current to constant values in this way is called the GDP deflator. Unlike the Consumer price index, which measures inflation or deflation in the price of household consumer goods; the GDP deflator measures changes in prices of all domestically produced goods and services in the economy.

It is only by comparing cumulative changes in real GDP per capita that we are able to understand whether today’s economic policies are helping or hurting. Furthermore, by making the comparison in 4 and 8 year increments we are able to determine whether to re-elect a POTUS or send him packing, or to continue with the same party affiliation or make a break towards independence. So where do we stand today?

GDP is Dead

Although Barack Obama also inherited a bad deal, his policies made it worse. The economy was declining at a real per capita rate of -1.27% in 2008, but by the end of 2009, Obama turned that into a decline of -4.33%. That’s a fact. Then, by the end of his second year, Obama’s stimulus programs resulted in a slight improvement, as the economy achieved negative cumulative growth of -2.15%. Although similar to Reagan’s second year decline to -1.36%, that’s where all similarities end.

Now in his fourth year (as of Q1 2012), Obama has achieved cumulative real GDP per capita growth of -0.20%. Compared to Reagan, Clinton, and Bush ‘43’s fourth year benchmarks of 8.47%, 8.19% and 5.06%, Obama is clearly a first-term loser. In absolute terms, the economy has gone nowhere under Obama. In terms that really matter, inflation adjusted dollars, as a percentage of the population; the economy hasn’t moved at all under the policies of Barack Obama. We are still below zero as far as real per capita growth – below zero, in spite of $6.3 trillion of additional debt. If Barack Obama is re-elected, he will be the only POTUS in modern history to be reinstated based on driving our economy into the ground.

Forward

“If you cry ''Forward'' you must be sure to make clear the direction in which to go. Don't you see that if you fail to do that and simply call out the word to a monk and a revolutionary, they will go in precisely opposite directions?” ~ Anton Chekhov

Forward? Yes, we will be moving forward – without Obama. The distraction of rising student loan interest rates is irrelevant in a shrinking economy. The concepts of a fair shot and a fair share are inapposite and unworthy of further discussion given the circumstances. And this garbage about being the only American around capable of giving a nod to take out a dangerous radical jihadist is just that – garbage.

I care about my children, my grandchildren, my parents, my sisters, my friends, my business, my customers, my community and my neighbors, but I could care less about Afghanistan. Why are Americans still dying in that cesspool? If Obama really wants to take responsibility for all of his actions, then why not include the fact that 69% of U.S. Afghan War casualties have occurred during his 39 month command? Explain that! How did Obama manage the war for only 30% of the time, 3 years out of 10, yet wind up responsible for 69% of the casualties?

Between the trail of blood, death and destruction abroad and his tanking of the economy at home there’s really no reason to grant Obama a second chance. It’s time for Obama to give up the keys, stop impersonating a president, and go home. Only new leadership will move America forward.

References:

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

Spreadsheet:

Per Capita Product and Income

Related:

Point of No Return | National Debt Tops Personal Income

National Debt Bomb | 1976 to 2011

Rising Interest on Federal Debt | Don’t Double My Rates

The Real Employment Situation – January 2009 through March 2012