It is the beginning of both another year and another month which means it is time to review the latest political class insanity from the American political class. For regular readers of this blog, you know that as 2014 progressed, the insanity, stupid quotes, ineffective governing and legislating, and general incompetence of our politicians seemed to accelerate as the year grinded on.
No major issues got addressed, never mind resolved. Obama Care’s implications across the entire country and entire economy continued to unfold in disaster after disaster. Our foreign policy, or what was passed off as a foreign policy, was in tatters. Terrorism was on the march across the world. Veterans were dying because the Federal government could not fulfill the medical and health care promises those brave veterans were promised. The national debt hit a mind boggling $18 TRILLION.
And our President continued to play golf and go on political campaign swings like no other President ever did. Congress narrowly missed becoming the least productive Congress of all time. Billions were spent and wasted on the November elections to elect people that did not deserve the time of day never mind billions of dollars. Racial division spread across the country, a division that was fomented and spread by those in office with something to gain.
And guess what? Over the past week or so, we have seen nothing has changed except the calendar. The political class is still out of control, the government entities that they rule over are bloated and ineffective, and the quality of life and freedom in this country continues to deteriorate.
I though yesterday would be the last post in this month’s insanity series but it requires one more day to tidy up the following disasters from the American political class, at least until next month. Today then will definitely be the last post in this series of political class insanity so enjoy one last day of the many ways that the political class wastes your tax dollars, screws up our freedoms and liberties, and generally messes up everything it touches.
1) Our insanity focus today will be on economic mismanagement and crises that the political class have dropped on us and the country. The following information mostly comes from a Heritage Foundation article that was published on November 29, 2014 by Stephen Moore. He is the chief economist at the Foundation.
He takes a stab at estimating the impact and burden that “Obamanomics” has placed on our economy and country:
Since the day that Lehman Brothers went bankrupt in late 2008, a few months before Obama took office, the Federal government has added about $8.3 TRILLION to our national debt.
This is about $72,000 of debt for each U.S.household.
The Federal Reserve has devalued the dollar by the $3.5 TRILLION that it has played with through its so-called monetary policy and three rounds of quantitative easing.
That debasement comes out to about $30,000 for every U.S.household.
The Obama administration spent about $830 billion on its failed economic stimulus program or about $7,200 for every U.S.household.
If we add these expenditures up with get $12.6 TRILLION or about $110,000 per U.S. household.
As Mr. Moore points out, all of those trillions have been spent and already “flushed through the economy.” What do we have to show for this flushing:
U.S. median household incomes have declined year over year for the past six years even though the recession ended five years ago at the same time that banks and bankers have gotten much richer.
There are about 15 million unemployed or underemployed Americans throughout the country.
Labor force participation rates are at their lowest levels since the 1970s.
While the official unemployment rate has declined over the past few years, that has as much to do with discouraged job hunting people leaving the workforce as it does with economic growth.
Minority unemployment rates are still much higher than the overall unemployment rate.
An amazing and depressing 45 million Americans are still receiving Federal food assistance every month despite the recession having ended years ago.
The national debt burden is now trending above 100% of GDP, a ratio that puts it up in the distressed economic realm of Greece, Spain, and other distressed economies.
According to a 2014 Brookings report, we are currently living in an economic time when more companies are closing and going out of business than than new businesses are starting up for the first time in a quarter of a century.
Just about every major expenditure of this administration, from Solyndra and dozens of other failed alternative energy investments to the horrific Obama Care website, have crashed and burned with no societal benefit in return.
So basically, we have flushed TRILLIONS of dollars away and have very little to see in return.
These conditions are bad enough but Mr.Moore points out even worse news. That additional national debt is being paid off today at very low interest rates. But how long will those low rates be in effect? He estimates that if interest rates eventually get rational from a historical perspective, say 3% or so, an additional $5 TRILLION in national debt will materialize solely because of increased interest payments or about $43,000 for each U.S. household.
This would increase the individual household burden to over $150,000 per household. This would make the interest payments on the national debt the biggest expense line in the Federal budget. These TRILLIONs of dollars of interest payments are TRILLIONS that cannot be spent on infrastructure improvements, education, improvements, etc.
Economically and financially as a country, the political class has taken us to a point where we have never been. And while things are not too bad today, higher stock market returns, lower gas prices, tame inflation, etc., he does conclude his article with a history-based warning relative to easy money, deficit spending, and printing money: “When other nations have tried to print their way to prosperity, the story hasn’t had a happy ending. For Argentina, Bolivia, Mexico and others, easy-money policies have crashed state economies and ended in misery. The poor have been hurt the most.”
If untreated, personal insanity will eventually kill. If untreated, financial insanity will also do the same and the American political class is part of the disease and the insanity, not the doctor and certainly not the cure.
2) So if the economy is so bad, why is overall economic growth starting to pick up and why is Obama talking about good economic news so much? Well, one source of insight into that disconnect comes from a recent article that appeared in the Guardian newspaper, ”Seven Years Ago Wall Street Was The Villain. Now It Gets To Call The Shots.”
The article was written by Joel Kotkin and it shows how the cozy relationship between the banking industry and the Washington political class has paid off handsomely for both parties at the expense of the rest of America. Mr. Kotkin points out that both major political parties are at fault here, not just the Republicans and the fault covers a wide range:
Recently proposed legislation will gut much of the financial controls that previous legislation placed on financial and banking institutions, “new rules, written largely by Citibank lobbyists and embraced by the Obama administration,” allowing them to go back to some very dangerous investing schemes with little additional oversight from the government.
Mr.Kotkin went onto explain why the Obama administration has endorsed this more lax oversight principles: “The ultra-rich so backed the president [Obama] that, at his first inaugural, noted one sympathetic chronicler, the biggest problem for donors was finding parking space for their private jets.”
Obama’s first Treasury Secretary, Tim Geithner, came from Goldman Sachs and ended up back on Wall Street in a high paying job while his successor came from Citibank.
Staying with the Citibank theme, Jamie Dimon, CEO of Citibank, has been called Obama’s “favorite banker.”
Despite the banking and financial shenanigans of the industry that directly led to the “Great Recession,” Obama’s Attorney General, Eric Holder, has not gone after any major banking figures for prosecution, unlike previous Presidential administrations that put thousands of bankers in jail for their criminal acts.
In this tepid economic recovery, a period when Democrats controlled most of the Federal government, the top 1% of earners saw their incomes rise by 11% while the rest of America experienced stagnant or declining incomes.
Or as a writer at the Huffington Post summarized it: “The rising tide has lifted fewer boats during the Obama years – and the ones it’s lifted have been mostly yachts.”
As a result of cozying up and coddling to large banks, in 1995, the assets of the six largest bank holding companies accounted for 15% of this country’s gross domestic product; by 2011 the political class had helped raise that percentage had to a sky high 64%.
Wow, talk about scratching each other’s back. Everyone wins but America and most of its citizens. Woodrow Wilson once warned us: “The government, which was designed for the people, has got into the hands of the bosses and their employers, the special interests. An invisible empire has been set up above the forms of democracy.” One hundred years later this piece of insanity has come true, we as a nation have allowed the political class to sell our souls to the banking industry bosses to our detriment and their advantage.
3) While the financial management of the Federal government has been insane, the state governments and the state politicians that operate those state governments have not done much better. According to a recent NewsMax article, state governments have unfunded liabilities of about $4.7 TRILLION, or about $41,000 for every American household.
Combine this estimate with the worse case scenario from the story above and the total government debt load for every U.S. household is about $200,000. In other words, every household would have to write a very large check, i.e. give up $200,000 of their personal wealth, just to pay off the debt the American political class has racked up.
The state debt load of $4.7 TRILLION comes from a new report by State Budget Solutions: "This spells trouble for the millions of baby boomers who are quickly approaching retirement age and expect to collect the pensions promised to them by government officials," writes Joe Luppino-Esposito, author of the "Promises Made, Promises Broken 2014" report. "State taxpayers who are not government employees will also feel the pinch, which could result in reduced government services as larger and larger portions of the states' budgets must be allocated to cover the public pension shortfall."
California carries the largest unfunded liability, an amazing $754 billion, followed by Illinois ($331 billion), New York ($307 billion), Texas ($296 billion), and Ohio ($289 billion). Certainly large liabilities but the report also looks at the liabilities from a funding ratio perspective, which compares state government assets to to state government liabilities.
Using this measurement, Illinois is in worst shape, with a funding ratio of just 22 percent — it has assets of $95 billion, about 22 percent of its liabilities of $426.6 billion. Other states with pathetically low ratios are Connecticut (23 percent), Kentucky (24 percent), Alaska (25 percent), and Mississippi (27 percent). Wisconsin, the state with the best ratio and financial picture is still at only 67% when you calculate their funding ratio.
The report found that most often the problem is that the political class in each state cut its financing of its liabilities such as state employment pensions in order to spend tax dollars elsewhere. Over time, this starving of pension funds and such has resulted in these anemic funding levels and ratios. Thus, state politicians are just as short sighted and economically ignorant as their Federal government brethren.
That will do it for the political class insanity for this month. Today was a little heavy on financing and economics but still insane how the political class at both the Federal and state levels is burying this country, our wealth, and our freedom in debt and how the politicians and bankers in this country have developed a symbiotic relationship at the expense of our economic well being.
We will return to the insanity early next month where I am sure we will talk about more debt, more stupid political quotes, more failed government programs, and other pieces of political class insanity.
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:
