Tuesday, October 6, 2015

October, 2015, Part 4, Political Class Insanity: Mismanaging the Economy At Epically Bad Levels

It is the beginning of another month which means it is time again to review the latest political class insanity from the American political class. Each month it takes us multiple posts to cover the wasteful spending, incompetent government organizations and employees, government programs that usually make a problem worse than resolving it, inane and idiotic politician comments, etc.

To review past posts on this insanity and idiocy, just click on the first few posts in each month listed to the right of this page. After reviewing just a handful of these insanity post we think you will agree that we are currently being served by the worst set of American politicians ever to hold office in our entire history

Today and tomorrow we will focus on economic insanity and incompetence from the American political class. Keep in mind the following realities when reading about the economic insanity and low performance generated by our Washington politicians:

  • This Presidential administration spent a whopping $800 billion in a so-called economic stimulus package.
  • This Presidential administration had the benefit of an energy revolution that significantly reduced the energy costs of businesses and households, freeing up money to be spent throughout the economy.
  • This Presidential administration had the benefit of the Federal Reserve Board printing trillions and trillions of dollars and putting them in play to jumpstart the economy.

Despite these tailwinds of almost a trillion dollars in Federal government stimulus spending, a once in a generation energy revolution, and trillions of dollars of Fed money stimulus, the Washington political class in general and this administration in particular produced a record anemic economic recovery. It is a recovery so weak that annual GDP growth never attained its long term average and in fact never broke 3%, household income and wage growth has stagnated, and so many people got discouraged by the horrible job market that the workforce participation rate is at a 40 year low.

That is insanely poor economic planning, strategy, and knowledge. And as a result, we are stuck with the following economic insanity:

1) Although Barack Obama is the first African-American President, someone who supposed would provide hope and change to the African-American community, that promise is not working out so well, according to the latest numbers from the Bureau of Labor Statistics. The Bureau announced that unemployment among African-American teenagers is more than six times higher than the national unemployment average, 31.5% vs. 5.1%.

This is also about double the unemployment rate for all teenagers, 31.5% vs. 16.3%. Given that that the 16.3% includes the 31.5% number, the unemployment rate for non-African-American teenagers is substantially less than 16.3%. 

And it is not just African-American teenagers that are suffering in this job deficient economy. The total African-American unemployment rate is 9.5%, just under double the national unemployment rate of 5.1%. Conclusions: black President or white President, no one in Washington has found a way to fix the job problem for most of America but especially for African-Americans. General economic incompetence from the American political class knows no skin color.

2) Additional data from the latest report from the BLS revealed that:

  • The economy added only 142,000 jobs last month, a rate not even enough to cover the growth in population.
  • The labor force participation rate hit its lowest level since 1977 with a record 94.6 million American adults NOT working.
Tough to believe that an economy can be managed so poorly when there was the help of an energy revolution. a massive economic stimulus program, and trillions of Fed paper dollars circulated. Pathetic.
3) Bloomberg recently reviewed the latest economic results and summed up their findings via an accurate quote from Thomas Simons, a money-market economist at Jefferies LLC in New York: "When you look through all the details of the data, there just isn't anything good to hang your hat on. It's been years since we've seen such an unambiguously bad report.":

  • Job creation was less than expected, or needed, at 142,000.
  • Previous job creation estimates from July and August were downward revised.
  • Average hourly earnings fell a penny on average.
  • Factory payrolls unexpectedly fell by 9,000 jobs:

  • The number of full-time employees dropped in September.
  • The labor force participation rate decreased to its lowest level since October 1977. 

4) Part of the problem with the anemic job creation numbers in September was that corporations had 59,000 in job reductions in September with a whopping 50% of those cuts coming just from Hewlett Packard. This 59,000 number was a 43% increase over the August results and 93% higher than the September, 2014 layoffs.

However, worse than the September results is the reality that for the entire third quarter there were almost 206,000 announced layoffs, this is the highest level since the third quarter of 2009. On a year to date basis, U.S. employers have already announced almost half a million layoffs for 2015 vs. only 363,000 for the same period last year.

5) Another recent Bloomberg article added some additional insights on how poorly the economy is doing:
  • A survey of 96 economists estimated that job creation would be 201,000 vs. the actual number of 142,000, indicating that the economy is softer than even what the experts expected.
  • Previous two months job creation estimates were reduced by a total of 59,000.
  • The good news is that retailers increased payrolls by 23,700 and employment in leisure and hospitality rose 35,000. The bad news is that these positions are usually lower paying jobs.
  • Average hourly earnings for the 12 months ending in September were up 2.2%, barely keeping up with inflation.
  • The underemployment rate, which includes part-time workers who would rather have a full-time position and people who want to work but have given up looking, dropped to a still whopping 10%, the lowest since May 2008, from 10.3%.
That’s enough economic policy insanity for today, more to follow tomorrow. But all of this depressing news does prove that we are being served by the worst set of politicians ever in this country today. Despite an $800 billion economic stimulus program, dropping energy costs, and a Federal Reserve printing press inserting trillions of dollars into the economy, the Washington political class cannot manage wage growth, robust hiring, and not even average economic growth. Pathetic.

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