Monday, June 29, 2015

June, 2015, By The Numbers: A Woeful Economy, Long Term Fnancial Ruin, The Economic Anchor That Is obama Care and MOre

On a regular basis we review the latest numbers and statistics as they appear in the real world to find out what reality is. You see, you cannot listen to American politicians to find out what is going on. They have a vested interest in keeping the truth and reality out of sight, given how poorly, selfishly, and greedily they act and perform.

They will either ignore numbers and facts or distort them, anything to keep us from finding out what they are hiding from us and what it means to them personally. I once worked for a manager whose favorite saying was: “there is nothing more devastating to an opinion that the right number.” In this series we examine those “right numbers” to show how poorly we are being served by what has to be the worst set of politicians ever to serve the country.

So here we go, no spin, no political BS, just the numbers and the usual sad political, financial, and economic reality they represent:

1) As we have proven any number of times, we have had to live through the weakest economic recovery in the past few years than any in the past century or so. This is all due to the fact that Washington politicians have no concept of how to implement sound economic policies that encourage economic growth. The latest government statistics on the economy show that we cannot expect anything different into the near future:
  • The Bureau of Economic Analysis recently their final view on the annual economic growth in the first quarter of 2015. Although their new forecast showed slightly better economic conditions, their view is that the economy is still contracting. Rather than estimating a .7% contraction in the first quarter, they now estimate a .2% contraction.
  • The nation’s whopping trade deficit subtracted 1.9 percentage points off the GDP in the first quarter as export levels are way down and cheaper imports increased. Obviously, as exports drop dramatically, the jobs that rely on exports will become more and more endangered.
  • Business investment shrunk by 2%, the worst performance since 2009, indicating that manufacturing jobs will also be difficult.
So despite spending over $800 billion on a failed economic stimulus program, despite living through an energy revolution that kept energy costs under control, and having the Fed printing trillions of dollars in false money, the Washington political class still cannot find a way to lead the country to a normal economic growth trend, leaving us stuck with anemic economic conditions and numbers.

2) Investor’s Business Daily recently reviewed the latest catastrophic condition of the country’s national debt situation, as estimated by the Congressional Budget Office (CBO). Unless we start forcing our politicians to have any kind of financial discipline, this is what the sad future economic numbers and condition of the U.S. looks like:
  • The CBO view is a 25 year forecast based on current trends.
  • The Investor’s Business Daily concluded that the findings are terrifying with the latest CBO estimate showing a whopping $7.4 TRILLION being added to the current level of $18 TRILLION of national debt.
  • If Washington does not change its spending ways, the national debt will almost triple by 2040 to a horrifying $54 TRILLION.
  • Since this would put the national debt at multiple times larger the the nation’s annual GDP, it is highly likely the economy and the country will collapse long before the $54 TRILLION level is reached.
  • This type of debt will cause Washington politicians to raise tax rates to pay off the ever rising debt which will result in lower economic growth and tax streams which will result in lower tax revenue which will result in higher tax rates…..
  • At the same time, as the debt grows out of control, investors of U.S. government debt will require higher and higher interest rates which will also add to larger debt to cover the higher interest rates which will require higher tax rates….
  • At some point the majority, if not all, of the tax revenue goes solely to paying interest payments on the debt which eliminates funding needed for defense, infrastructure, human needs, etc.
But as we said above, if the CBO numbers are right, the country will collapse long before funding for other government functions dries up.

3) We have often pointed out that criminal elements often take advantage of inept Federal government programs, bureaucrats, and politicians to steal taxpayer wealth from the Social Security program. Well, according to some recent inspector general findings and numbers, we do not need criminals to waste taxpayer wealth via Social Security:
  • A recent inspector general report found that over a ten year period, the Social Security Administration (SSA) overpaid benefits to 44.5% of its beneficiaries.
  • “Our review of 1,532 beneficiaries in current pay status as of October 2003 found that over a 10-year period (from October 2003 through February 2014), SSA assessed overpayments for 44.5 percent of sampled beneficiaries.” 
  • This translates into 4 million beneficiaries getting an extra $16.8 billion from the American taxpayer.
  • The SSA did eventually recover $1.8 billion in those overpayments but that amounts to only a little over 10%
Fraud and incompetence is still alive and well throughout Washington as these Social Security Administration numbers point out.
4) We have discussed other sources of this type of analyses before but let's look at what the Congressional Budget office says would likely happen if Obama Care was repealed:
  • The latest CBO says that repealing Obama Care would boost annual economic growth by an average of .7%
  • If correct, such a boost would get annual GDP numbers back almost inline with historical averages, way above the anemic economic recovery the Obama administration has crafted.
  • "CBO has determined what many in Congress have known all along," Republican Senate Budget Committee Chairman Mike Enzi of Wyoming said in a statement. "This law acts as an anchor on our economy by dragging down employment and reducing labor force participation."
  • Based on the CBO's most recent economic projections, this additional economic growth amounts to between $100 billion and $200 billion in today's dollars.
  • This economic growth is mostly driven by the fact that with Obamacare in place, some people face incentives to work less because they might lose subsidies or credits if their earnings rise. Removing those incentives leads to more hours worked and more jobs.
  • Another factor is that repealing some of Obamacare's taxes would cause businesses to invest and grow more.
Those are the latest insane numbers out of Washington. Obama Care is stifling economic growth (no secret here based on the multiple analyses we review every month in our “unfolding disaster that is Obama Care” series), Social Security continues to give away taxpayer money it should not be giving away, long term we are heading ever faster to a fiscal and financial disaster that we will never recover from, and short term,our economic prognosis continues to look tepid and weak. Have a good day.

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