Friday, February 26, 2010

Did GDP Fall by 2.4% in 2009?

More B.S. from D.C.

By: Larry Walker, Jr.

According to the Bureau of Economic Analysis (BEA's) second release regarding - the 4th quarter 2009 GDP, issued earlier today, GDP increased at an annual rate of 5.9% in the 4th quarter of 2009. That is the rate of increase from the 3rd to the 4th quarter, expressed as an annualized percentage rate. The BEA also stated that, in the 3rd quarter, real GDP increased 2.2%. Sounds good, right? Woo-hoo!

"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 5.9 percent in the fourth quarter of 2009 (that is, from the third quarter to the fourth quarter) according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.2 percent."

But if you read down a little further into the report, the part where the BEA re-enters the atmosphere, you will discover that real GDP fell by (2.4%) in 2009. That is the rate of decline from the 2008 level to the 2009 level. So, is this good, or bad?

[2009 GDP] "Real GDP decreased 2.4 percent in 2009 (that is, from the 2008 annual level to the 2009 annual level), in contrast to an increase of 0.4 percent in 2008."

Like I said in a previous post, it's like telling me that my IRA account grew at an annual rate of 5.9% in the 4th quarter, but when I look at my statement I find that my account balance has actually declined by (2.4%) from 2008. So am I better off? No. Are you?

The next time Obama & Company start boasting about 4th quarter 2009 GDP, I wish someone would stand up and say, "but, sir, GDP actually fell by 2.4% under your watch". Put that in your tea and drink it!

Click to Enlarge



Wednesday, February 24, 2010

Health Care Expenditures vs Income

Click to Enlarge

A Fiscal Conservative Opines: Where is all the excess?

By: Larry Walker, Jr.

I am once again attempting to overlay data upon data from different sources, not being certain whether any of them are accurate, yet they are all so called 'reputable'. There are some who will look at the table, above, and think that health care expenditures are out of control. I look at it and my take is that the lack of growth in real incomes is the problem.

In fact, health care expenditures have been on the decline since 2003. Granted I was not able to find the rate of change for 2009, even if there was no increase, health care expenditures have grown faster than incomes, the consumer price index, and GDP. This doesn't tell me that there is necessarily a problem with health care expenditures. What it tells me ... is that there is a problem with the economy.

Over the past ten years, consumer prices have risen by 25% while incomes have only risen by 9%. Does this mean that prices are out of control? Not to me. To me it means that our incomes are not keeping pace with inflation.

GDP is growing slower than prices. GDP is only growing at an average of 1.9% per year. For the past decade, GDP grew by 19% while prices grew by 25%. So again, is the problem with prices, or with GDP?

Let's be real. Unless prices rise, incomes will not. How can a business provide raises for employees every year unless the business is also raising its prices? One way would be to keep prices static and to increase productivity, which generally means doing more with less employees. Everyone expects to get a cost of living increase each year, however, in order to receive one, your employer must generally raise its prices in line with the consumer price index. Yet, if that was reality, then incomes would be rising as fast as inflation. Yet, prices have risen nearly three times as fast as incomes. So where is all the excess?

My suspicion is that the problem lies more in the area of manufacturing, international trade, unionization, and the growth of government. We don't make things anymore in America, we have become a service economy. Most of the products that we buy are imported from other countries. Unions are constantly demanding higher wages and better benefits. The number of government employees is growing as is their pay and benefits. The end result is that our Federal and State governments are going broke, jobs are being lost to emerging market economies, and the incomes of non-governmental and non-union employees are going down.

So the question is how do we improve the growth prospects for our economy? The answer lies in finding ways to increase exports and decrease imports, to lower income taxes and reduce the size of government, and to remove the restraints currently being imposed upon the free market. Our economy doesn't need more controls, but rather less.

You say rising health care costs are at the center of all of our problems. I say, you're focusing on the wrong statistic. If a man or woman has no way to earn their livelihood, then what good is a government run health care program. You will have your health care, but you will live in poverty. You will be taxed, but you will lack the wherewithal to pay your taxes. The poor will remain poor. The middle class will cease to exist. The government will continue to spend more than it can tax until even it falls by the wayside.

You cannot fix a problem, until you have identified one. So where is all the excess?

If the price of say automobiles rises, yet most of the autos are purchased from Japan, then there's your answer. Sure, some jobs were provided in America, but the excess (also known as profit) has left the country.

If the price of health insurance has risen, yet most of the insurance is purchased from domestic providers, then where is all the excess? The answer is in a broken governmental system. The government (federal and state) spends nearly twice as much on health care as does the private sector. The government gets its revenue by taxing those who are viable and paying for the health services of those who are not. The government pays less for services than does the private sector which in turn, means prices will rise for everyone to compensate for the shortfall created by government providers. Thus, prices rise, but incomes do not.

A major reason why incomes are not rising is because the cost of income taxes, social security taxes, and medicare taxes are set to rise every year. It's not that the rates have necessarily changed, but that the income ceilings have. So you work hard to make more than the social security cap, but by the time you reach that goal, the government has raised the bar (or removed it completely). This is not a progressive tax system, it's a progressive annual tax increase. It's a system designed to keep our economy in chains.

So where is all the excess? One need only look at our national debt. If there were excess, the United States Federal government would not be $13 trillion in debt. So there is no excess.

The problem lies not in price controls but rather in wealth creation. Wealth is not created through price controls. In fact, wealth is restrained by controlling prices. If prices did not rise, then neither would wealth. Yet, when wealth is not rising along with prices there is a breach.

If every American either worked for the government, or received government services, how would the government be able to continue as a going concern? The answer is that it would not. So then part of the solution, which is ingrained in your soul, is that bigger government is not the answer. On the other hand, if everyone worked in the private sector, and if everyone were able to sustain themselves, what would be the role of government? Most likely the role that was intended by our founders. So once again we can conclude that government is not the solution to our problems, government is the problem.

Message to uncle Sam, "get out of my way, and get off my back."

End of rant....


Other Links and Solutions:

Thursday, February 18, 2010

Debt & Taxes: Obama's Rate of Change

Obama's Rates of Change

By: Larry Walker, Jr. [Revised]

Today I am observing the rates of change embedded in Barack Obama's budget projections. My objective is to determine whether Obama represents 'change you can believe in', and whether or not his policies are in line with his rhetoric. I will compare Obama's 4 year budget projections during his first (and only) term, to the previous 16 year period. An observance of rates of change can provide assurance that the course charted is the one navigated. Here are a few observations.

  1. During the 16 year period ending with fiscal year 2009, GDP achieved an average annual growth rate of 6.8%, while government revenues (taxes) grew at 4.5%, and the national debt grew at 10.3%. Summary: The national debt outpaced economic growth, while tax revenues lagged the economy.

  2. In following Obama's budget projections for the four year period ending in fiscal year 2013, GDP will grow at an average annual rate of 5.2%, while government revenues (taxes) will grow at 12.9%, and the national debt will grow at 9.2%. Summary: Tax revenues will more than double the pace of economic growth, while the national debt will continue to grow faster than the economy.

Click to Enlarge

"Tax revenues will more than double the pace of economic growth, while the national debt will continue to grow faster than the economy."

After decades of reckless government spending, the change I would have expected, and could have believed in, would have led to an increase in GDP, a reduction in income taxes, and a dramatic reduction in government spending. Instead, it appears that the change I will get will be as follows:

  1. GDP will grow at an annual rate which is 23.5% slower than what we experienced over the last 16 years. This means that our wealth will be diminished.

  2. Income taxes will increase by 186% over the next 4 years. Taxes will consume more of a shrinking economy.

  3. Although the National Debt will grow at a slightly slower pace, it will: (a) grow 77% faster than GDP, and (b) continue to grow in spite of massive tax increases.

Conclusion: The course Obama has charted, is not the one being navigated. Obama talks about controlling the debt and deficits, cutting taxes for 90% of working families, and building a new foundation for economic growth. The only problem is that by following his budget, we will experience an increase in the national debt, higher income taxes, and lower economic growth. This is 'change', but it is the kind of change that I cannot, do not, and will never believe in.


Tuesday, February 9, 2010

Darth Brings Solutions : Obama Just Words

Darth sent his ideas to the next President, via Eternal Vigilance, in response to President Obama's debt crisis. I say, let Darth be heard.

From: Darth

To: Eternal Vigilance

I have been thinking about what President Palin and a conservative Congress can do to FIX the country when they take power. Here are a few ideas:

  1. The USA is BANKRUPT. Therefore, we need to declare CHAPTER 13. All contracts, promises, and ENTITLEMENTS are on the table. Create a National Bankruptcy Trustee Council that will dictate the changes just like a bankruptcy judge would. That way we only have to pass ONE BILL to make all of the painful changes.

  2. Lay off 80-90% of all federal workers. Eliminate departments, agencies, and commissions. Examples include Dept. of Education, most of the Small Business Administration, most of the EPA, HUD, National Public Radio, National Endowment of the Arts, ET AL.

  3. Privatize every function possible. Fire the union TSA and hire a contractor with a free hand to “profile” terrorists.

  4. Sell off assets. SELL, don’t lease, mineral rights offshore. Why the hell does the federal government have to own 50% of the land West of the Mississippi? Sell the BLM and most National Forests. Sell federal office buildings and lease back the ones truly needed. Sell off every technology that is not classified. Sell off dams and power plants. Sell Amtrak.

  5. Reduce all Congressional pensions to ZERO. Both the Republicans and Democrats bear responsibility for the mess they got us in. They can go back and work for a living. Cut civil service pensions to a minimum. Regardless of rank, pensions should be what the lowest civil servant gets.

  6. Invalidate all federal union contracts and their right to represent federal workers.

  7. Eliminate farm price supports, dairy cartels, etc. Let the free market drive down prices.

  8. Obviously, eliminate earmarks, aid to cities and states, and other pork barrel spending.

  9. Allow elderly people to have HMO coverage or catastrophic insurance instead of Medicare.

  10. Raise the retirement age for Social Security gradually. We are living longer, healthier lives.




I’ll think of a few more areas to cut later. How are the above for a start?


9 posted on Sunday, February 07, 2010 2:47:55 PM by darth


Saturday, February 6, 2010

Death Spiral: Obama's Progressive Debt

By: Larry Walker, Jr.

Piercing Obama's Echo Chamber

In analyzing the contribution to our National Debt by President (see table below), my initial idea was to determine the actual cost of each annual budget deficit, over time, by utilizing the Rule of 72, along with current and future interest rates. Since our debt has traditionally never been repaid, the future value of each deficit doubles roughly every 18 years, using an average interest rate of 4.0%. Although I found this to be sickening enough, what's even more striking is the progressive pattern of reckless spending under the last five administrations.

Chart 1, Click to Enlarge

What's striking is the fact that only a total of $740.5 billion was added to the Debt between fiscal years 1951 through 1981 (see table below).

Chart 2, Click to Enlarge

Contrast that with the following:

  1. Although I consider myself to be a Reagan conservative, his record on deficit spending was horrible. During his two terms in office, Ronald Reagan is partly responsible for adding $1.86 trillion to the Debt.

  2. George H. W. Bush, as a one-term president, was partially responsible for adding $1.55 trillion to our Debt. H.W. nearly surpassed Reagan in half the time.

  3. Bill Clinton is often touted as having run budget surpluses during his second term in office, however, this is mostly attributable to a Republican lead Congress. But even Bill Clinton overspent, and in the end would run up the Debt by $1.39 trillion during his eight year term.

  4. George W. Bush exploded the Debt by $5.31 trillion over 8 years. Although I would come to trust GWB with my life, I wouldn't trust him with my wallet. To be fair, I have deducted Obama's fiscal year 2009 addition of $787 billion for his failed Stimulus program, and I added it to Obama's 2010 deficit. I would also attribute $2.1 trillion of Bush's $5.31 trillion in red ink to Nancy Pelosi, and the majority Democrat Congress.

  5. Then we come to Barack Obama. Obama is projected to advance the National Debt by $5.15 trillion in his first (and last) term in office. Obama will go down in history as the most fiscally reckless president of all time, adding as much to the Debt in 4 years as Bush did in eight. Why would anyone even consider a 2nd term for Obama?

Barack Obama represents not only 'more of the same', but Obama has earned the nickname, 'Double Bush'. That's right, in fiscal matters Obama is twice as reckless as George W. Bush, not to mention twice as dangerous in terms of national security. The American people are too smart and too unforgiving to ever consider giving Obama a second chance. Sorry Barry, you blew it.

What really irks me about the first table is the addition of $5.72 trillion to the Debt between the fiscal period beginning October 1, 2007 and ending September 30, 2011 (highlighted in white). This can be mostly attributed to the current Democrat Congress led by Nancy Pelosi. Sorry Nancy but you're gone. And sorry to most of you coming up for re-election in 2010, but you're done too. Those who realized the error of their ways have wisely dropped out of the race. To those of you who are complicit, and still trying to hang around for another term, my only advice is to spare yourself the embarrassment.

Where was it that the buck stops again? So there you have it, I have pierced Obama's 'echo chamber' once again, in hopes of exposing his insular 'death spiral'. My goal is to inspire you to elect more responsible politicians in all of the upcoming races.

Sources: debt/histdebt.htm

More Government = Fewer Jobs