More Amateur Hour Economic Antics From Washington - Part 2: Gas Prices Rising, Household Incomes Plummeting, Retirement That Nevers Happens, and More

Last Friday, we reviewed the latest economic statistics, trends, and opinions of experts in the financial and economics area. The overall view is not good. Almost four hundred thousand Americans applying for first time unemployment benefits every week, Americans believing that their retirement years and the future of their kids will not be pretty, economic growth that is tepid beyond belief, etc.

Unfortunately, one post was not enough to cover all of the bad news from most corners of the economy and Washington:

- Some good news: the latest Thomson Reuters/University of Michigan's final reading index on overall consumer sentiment for August rose to 74.3, its highest index rating since May. Some bad news: the survey's gauge of consumer expectations fell to 65.1 from 65.6, the lowest level since December of 2001.

Additionally, about 50% of those surveyed stated that their own personal financial situation was worse than it was five years ago and the majority surveyed do not expect any wage gains during the year ahead.

- A separate survey from last week from the Conference Board showed consumer confidence hit its lowest level since November, partly due to higher gasoline prices.

- In a recent interview with USA Today, John Bogle, legendary founder of the Vanguard Group, was asked what worries him the most in the economy. His answer: "the coming train wreck in the financial system."

Bogle's view is that retirees hoping to live on the proceeds from their 401(k) savings or similar venues are due for a big surprise since, on average, these savings holdings are not enough to maintain a decent lifestyle. This makes many aging Americans ill prepared for retirement and will have them remaining in the workforce longer than previous generations.

- According to an August 23, 2012 Bloomberg article, an analysis by of the latest U.S.Census data by Sentier Research found some depressing findings:

• Unbelievably, Americans' incomes dropped more in the three-year economic expansion that started in June 2009, after the Great Recession ended, than during the longest recession since the Great Depression.
• Median household income fell 4.8% on an inflation-adjusted basis since the Great Recession ended in June 2009.
• That was almost twice the 2.6% drop in household income during the 18-month contraction.
• The Sentier analysis found that household income is 7.2% below the December 2007 level.
• Household income fell to $53,508 from $54,916 during the 18-month Great Recession. from December 2007 to June 2009 and kept falling during the 36-month period since then, dropping to $50,964 in June 2012.
• The report included the following summary quote: “Almost every group is worse off than it was three years ago, and some groups had very large declines in income.”

You know that we are not in a good economic place when household income continues to plummet even though the recession ended years previously.

Regarding the December 2007 level household income level, recall that Pelosi, Reid and the Democrats had already been in charge of both houses of Congress for nearly two years and one month later, in January, 2008, Democrat Barack Obama took over the White House. Just saying.

- On August 31, 2012, the Institute for Supply Management-Chicago Inc. announced that its monthly business barometer index dropped  from 53.7 to 53.0 in July. While an index reading over 50.0 indicates that the economy is expanding, U.S. manufacturing has been slowing down over the past months as sales have not matched manufacturers' expectations.

- Famous housing expert Robert Shiller, the developer and manager of the Case-Shiller Home Price Index recently reported that home prices are improving slightly and the sector is showing small signs of recovery, both good economic news items. The index rose .5 from June, 2011 to June, 2012, the first year-over-year increase since 2010.

However, he warned that storm clouds still lurk on the horizon since slowing Asian economies and the still dangerous European debt situation could slow down the U.S. economy. This slowdown would dampen the housing markets as consumers decide not to risk high priced purchases such as homes during times of economic stress: "We seem to have upward momentum … but there are a lot of clouds on the horizon too. We have the European crisis, which is looking very iffy right now, we have Asia weakening, we have the fiscal cliff — there’s a lot of things."

Thus, while the trend may have stopped going down in the housing market, there is likely a lot of good things that must happen before the industry can start growing again.

- The latest poll results from Gallup found that Americans' confidence in their economy has tied a low point not seen since January, 2011. The Gallup Economic Confidence Index was minus-27 in August, a reading that was slightly worse than July's reading of minus-26 and well below May's four-year high of minus-17.

Slipping confidence in the economy, a still burdened housing industry, retirement plans dashed, declining household income, and softening manufacturing numbers. Makes it hard to believe that 1) the Obama administration would proudly state that they did it their way (economically speaking) and it worked and 2) any American would actually believe that the current economic policies of Washington make any sense and are having any kind of positive impact on the economy.

Two steps from "Love My Country, Loathe My Government" are needed to be implemented immediately:

1. Step 39 would establish term limits for all Federal politicians, "one and done." The current batch of long time politicians in Washington are proving every day that they have no clue on how to fix the economy despite record high stimulus spending, record high federal reserve money printing, and record low interest rates. How much worse could it be to turn over the whole lot of them every few years?
2. In the shorter term, Step 26 would require every Federal poltician to sit through and pass a course on basic economic policy, theory and history. Again, how much worse could it be since it is pretty obvious, based on our current eocnomic disaster, that those making the policy decisions in the White House and congress how no solid knowledge or understanding of economics.

Oh, by the way, have you noticed how gas prices continue to escalate upwards, more than twice what they were back in January, 2007? High gas prices, caused mostly because we have not had, nor to we currently have, a long term energy strategy for the country? Paying more for gas every week depresses confidence and disposable income that could otherwise be used to expand the economy.

Note: the bad news is not over. Tomorrow we will go through the final batch of horrid economic news even though, according to the President, "the private sector is doing just fine." Huh?

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The United States Of Purple's website also provides you the formal opportunity to sign a petition to begin the process of implementing a Constitutional amendment to impose fixed term limits on all Federally elected politicians. Only by turning out the existing political class can we have a chance of addressing and finally resolving the major issues of or times

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