December, 2012, Economic and Financial Review, Part 2: The Economic Struggles of Young Americans, Rich Members Of Congress, More Pessimism, Teetering Europe

This is the second in a two part series we do every month where we review the latest economic and financial trends and statistics. Unfortunately, as we have done this each month this past year, we have found very little good news in the economic arena. Yesterday’s first post for this month discussed the continuing high unemployment situation, the growing pessimism of the American public and consumers, our probable drive off of the fiscal cliff, a still sluggish housing market, and lower than average overall economic growth.

Today’s post is not much more optimistic. In fact, it extends the pessimism discussion we reviewed yesterday.

1) The opinion polls reflecting the growing economic pessimism in the country reflected a gut feeling, an overall sense things are not going well in the economy. But an article from Moneynews from November 26, 2012 adds some solid statistics to this feeling of pessimism:

• In 1970, the average annual household income was $9,350, the average home cost $23,400, a gallon of gas cost 36 cents and the average car cost $3,900.
• In 2012 the average median income is $50,964, between a five and six fold increase over the past forty two years.
• This sounds like good news until we realize that the average home now costs $146,000 (over a six fold increase since 1970), we now pay an average of $3.43 for a gallon of gas (more than a nine fold increase), and the average car now costs $30,303 (an almost eight fold increase).

Thus, our feeling of doom and pessimism is not unfounded. It has become harder and harder to enjoy the simple things in life that previous Americans took for granted: a home for their family, a nice car, and the financial resources to enjoy the freedom that affordable gas and that nice car could create for Americans.

Given that we have previously reviewed how household income and household wealth has decreased dramatically over the past four years or so, the trend in this area is not good.

2) But the trend is even worse for younger Americans. Consider some statistics from a front page article in the November 18, 2012 edition of the Tampa Bay Times:

• 53.6% of college graduates under the age of 25 are unemployed or under employed.
• This compares to an unemployment/under employment figure of just under 15% for all Americans.
• 49% of 18 to 34 year old Americans have taken a job they don’t want just to be able to pay their bills.
• 24% of these younger Americans have taken an unpaid job just to get experience.
• 35% of younger Americans have gone back to school to combat their unemployment situation.
• 24% have moved back to live with their parents after living on their own
• Given these statistics, we have a whole generation of Americans, America’s future, that might be permanently stuck in the pessimism mode.

3) And the political class and Federal government have not made these young Americans’ plight any easier to overcome. Over the next year or so, severe and heavy Obama Care tax burdens will crush business expansion as businesses cut back on other expenses, including personnel expenses, to meet their increased Obama Care tax requirements.

The idiotic pronouncement from the Federal government that a full time worker is now any American who works more than thirty hours a week (vs. the standard, universally accepted 40 hour work week) will force the youngest Americans workers to, on average, lose work hours, earning power, and the chance to improve their lives.

Going over the fiscal cliff will take hundreds of billions of disposable income out of the economy, handing it over to the inefficient, crony infested Federal government and inept/corrupt political class. This will depress consumer and business spending and send the economy into another deep recession, restricting economic expansion and opportunity, especially harmful to younger Americans.

4) While younger Americans are struggling financially, members of Congress are doing quite well, especially Democrats. According to a recent Newsmax article, based on an analysis by Roll Call:

• Republican Rep. Michael McCaul of Texas is the richest member of Congress, with an estimated net worth of $305 million, the first time a Washington lawmaker has gone over the $300 million mark.
• Roll Call’s annual list of the 50 richest members of Congress reveals that seven of the top 10 are Democrats — and four of the 10 owe their fortunes to wealthy spouses.
• McCaul reported in 2010 that his wife had received assets as gifts from her parents, boosting his net worth from some $73 million to at least $294 million that year. His wife Linda is the daughter of Clear Channel Communications Inc. and founder Lowry Mays.
• Second on the 2012 list of wealthiest members of Congress is Senator John Kerry, D-Mass., up from No. 3 last year with a net worth of $199 million. His wife Teresa Heinz Kerry is the widow of the late Sen. H. John Heinz III of the Heinz ketchup fortune.
• At No. 3, down one place this year, is Rep. Darrell Issa, R-Calif., at $141 million. Issa is the founder of Directed Electronics Inc., which makes car alarms.
• Next on the list is Senator Mark Warner, D-Va., at $86 million. He made his fortune as co-founder of Nextel Communications Inc.
• Senator Jay Rockefeller, D-W.V., is No. 5, with $83 million. He is the great-grandson of Standard Oil Co. founder John D. Rockefeller.
• He is followed by Sen. Richard Blumenthal, D-Conn., at $79 million. His wife Cynthia Blumenthal is the daughter of New York real estate mogul Peter Malkin.
• Another Democrat, Rep. Jared Polis of Colorado, is No. 7 with a net worth of $72 million. Much of his wealth comes from Blue Mountain Arts, his family’s greeting card and publishing business.
• Senator Frank Lautenberg of New Jersey, yet another Democrat, is No. 8 at $57 million. He is co-founder of Automatic Data Processing, a payroll processing company.
• Senator Dianne Feinstein, D-Calif., No. 9 on the list, owes her fortune to her husband Richard Blum, president and CEO of the private equity firm Blum Capital Partners LP. Her net worth is estimated at $42 million.
• Rep. Jim Renacci, R-Ohio, is No. 10 with a net worth of $37 million. He has significant investments in fast-food chains, electronics companies, pharmaceutical companies, and oil giants, according to Roll Call.
• House Minority Leader Nancy Pelosi of California is at No. 13, with a net worth of $26 million, and Senate Minority Leader Mitch McConnell of Kentucky is at No. 37 with $9 million.

I do not begrudge these people their wealth and assets, I do not envy their wealth. I have no knowledge that they gathered their wealth in an illegal or immoral mode (unless you consider marrying for money to be immoral!).

What I do worry about is that these folks have been very rich and in power in Washington for a very long time. Given that they have been responsible for the dire economic state of the country, especially the plight of younger Americans, I do believe that they are not capable of understanding the difficult economic times most Americans are going through and either do not know how or do not have the desire to fix the economy since there is no sense of urgency in their lives.

Another reason for term limits (Step 39 from “Love my Country, Loathe My Government”), incompetence.

5) And although we have not discussed the financial mess in Europe for a while, that does not mean it has improved. According to a Moneynews article form November 20, 2012, France recently had its government bonds’ ratings downgraded, the eurozone in total is moving further into a recession with the worst still to come and France and Germany are expected to show negative growth of 0.4% and 0.3%, respectively, in the fourth quarter, according to Deutsche Bank Research.

The European Commission estimates the economy will grow just 0.1% in 2013 and the chances of another downgrade for France in 2013 are growing. Given that Europe is a major user of U.S. exports, a softening of demand and economic conditions there will have serious economic downsides for our economy.

6) U.S. domestic manufacturing activity unexpectedly shrunk in November to its lowest level in more than three years. The Institute for Supply Management (ISM) said in a Reuters article on December 3, 2012 that its index of national factory activity fell to 49.5 in November from 51.7 the month before:

• The index was shy of expectations of 51.3, according to a Reuters poll of economists.
• It was also the lowest since July 2009 when the U.S. economy was struggling in the aftermath of the financial crisis.
• When the index falls below 50 it indicates an eocnomic contraction is underway.
• "Since May the index has been very close to 50 and I think what we are seeing is that manufacturing has stalled and has yet to recover," said Christopher Low, chief economist at FTN Financial in New York.
• "Overall, today's report suggests that the manufacturing sector is likely to remain a weak point in the recovery for a few months yet," said Jeremy Lawson, an economist at BNP Paribas in a research note.

So, housing is still stalled, consumer attitudes are sinking into pessimism, and now it appears that manufacturing is stalling also.

  Sorry for the bad news over the past two days. But reality is what it is. And the reality is that over the past few decades, trusting established, or entrenched, politicians in Washington, has been to our economic detriment, not our benefit. Enjoy the view as we go over the fiscal cliff by the time we review the economic trends next month.

Our book, "Love My Country, Loathe My Government - Fifty First Steps To Restoring Our Freedom And Destroying The American Political Class" is now available at:

www.loathemygovernment.com

It is also available online at Amazon and Barnes and Noble. Please pass our message of freedom onward. Let your friends and family know about our websites and blogs, ask your library to carry the book, and respect freedom for both yourselves and others everyday.

Please visit the following sites for freedom:

http://www.reason.com/
http://www.cato.org/
http://www.robertringer.com/
http://realpolichick.blogspot.com/
http://www.youtube.com/watch?v=08j0sYUOb5w