The Jobs Spin

Watch this and then read below!

http://www.foxnews.com/politics/2012/11/02/unemployment-rate-rises-to-7-percent-economy-add-171000-jobs/

A few thoughts that will make you question the government jobs spin:

First the stats on 11/02/08:
Officially unemployed = 10,563,275 Actual unemployed* = 13,558,658
Food Stamps Recipients = 32,659,311

Compared to the stats today:
Officially unemployed = 11,992,107 Actual unemployed* = 22,645,113
Food Stamps Recipients = 47,109,282* = includes those who have given up

So in summary we are being told that the percentage of unemployment based only on the official number is within 0.1% (7.9% vs. 7.8%) of where it was when Obama took office. There are 2 problems with this misrepresentation. First the number does not include those who have given up. Second, the economy is growing so slow and families have lost so much that people are retiring at a slower rate plus new graduates are entering the workforce faster than they can be absorbed. So forget the percentage 22 million people need work – twice as many as when Obama took office. Time for a new strategy!!

 

Wake up America! Restore the Republic, Reject Socialism

Obama… the numbers don’t Lie!

So here are some stats to help you when you are discussing the election with your undecided friends. These are the facts and the numbers don’t lie. It doesn’t take a CPA to figure out if something doesn’t change quickly we are headed for an economic collapse. The tipping point is already on the horizon…

The Economy, Jobs & Taxes:

America’s Rank in Global Business Competitiveness: Before BO #1 Currently #7 (Source: US News & World Report)

Current National Debt – $16.2 Trillion   (Source: US Treasury)

New Debt Added Since Obama was elected – $5.5 Trillion  (Source: US Treasury)

Your share of the National Debt – $51,419 (Source: US Treasury)

Increase in your share since Obama took office – $17,554 (Source: US Treasury)

Federal Budget Deficits – 2 highest in history: 2009 – $1.416 Trillion & 2011 – $1.298 Trillion respectively (Source: CBO)

Proposed Tax Increases in Obama’s Proposed Budget – $1.9 Trillion (Source: OMB)

New Taxes Hidden in Obamacare – $810 Billion (Source: CBO)

Medicare cuts in Obamacare: $716 Billion (Source: CBO)

# of people Officially Unemployed: 12.014 Million (Source: US Labor Dept.)

# of people Unemployed, Underemployed or have given up – 22.728 Million (Source: US Labor Dept.)

The real Unemployment Rate: 14.7% (Source: US Labor Dept.)

# of people Unemployed More than 27 weeks: 5.0 Million (Source: US Labor Dept.)

Consecutive Months of Unemployment over 8% – 43 (Source: US Labor Dept.)

Pages of new Federal Regulations since Obama took office: 11,327 (Source: Federal Register)

Healthcare, Food, Gas & Education:

Avg. Increase in the cost of a family health plan since Obama took office: $3,065 or 24.2%  (Source: The Kaiser Foundation)

# of people on Food Stamps: 47,025,030 (Source: US Dept. of Agriculture)

Avg. increase in cost of Groceries for a family of 4: 5.15%  (Source: US Dept. of Agriculture)

Increase in the price of gas: 106%  up from $1.89 to $3.89 per gallon (Source: US Dept. of Transportation)

Avg. Increase for In-State Tuition since Obama took office: 25% (Source: The college Board)

So there you have it. The numbers speak for themselves. We can’t afford to keep spending at these levels and increasing taxes stunts growth while killing jobs. We saw the same trends during the Carter Administration. Reagan corrected the problem by managing down the size of government and cutting taxes to stimulate growth. We rode that wave all the way through the Clinton Administration. We can do it again but not with a president that is more interested in “redistribution” than growth and creating opportunity.

Wake up, America! Reject Socialism and Restore the Republic!

“If we can prevent the government from wasting the labors of the people, under the pretence of taking care of them, they must become happy” – Thomas Jefferson

Change the Conversation… it’s the wasteful spending, stupid!

“We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion dollar debt because we spend too much.” – Ronald Reagan

Truer words have never been spoken. Why is this so hard for politicians to understand? Probably because they are politicians not businessmen. It is time for America to look itself in the mirror and decide what kind of country we want to have – a government run “nanny state” where individual freedom and success is “sacrificed” for the “greater good” or an America that allows individual success to be rewarded and a government that follows its’ constitutional role?

The ongoing debate between the Republicans and Democrats has become exhausting. The never ending media coverage of the bickering is enough to disenfranchise most Americans but what is worse is the out of touch tone of the debate. Republicans want to reduce taxes and cut spending. The Democrats want to keep spending and raise taxes on the “rich”.

Also let’s not forget those “Patriotic Millionaires” they want their taxes raised – I guess they feel guilty about their success. But why do we need to raise their taxes? They can give as much as they want – just add a check box to the tax form for anyone who wants to pay more just like we have for the presidential campaign fund.

Here is the real bottom line – everyone is missing the real opportunity. Before we even start worrying about what programs to change, eliminate or whose benefits to cut, let’s first focus on the waste from inefficiency and fraud that we know exists at every level of the federal government. Too simple? Maybe but remember there probably hasn’t been a serious attempt at operational efficiency or cost control in Washington in the last 100 years. In business this is part of a never ending cycle to stay competitive or perish. However, the government has no competition so there is no imperative to be financially prudent. We have all heard the stories of agencies spending their full budget every year to avoid having it reduced.

Is there anyone out there that doubts that in a bureaucracy the size of the federal government there is not significant waste that could be reduced WITHOUT cutting into the core entitlements and services currently being offered? But do you hear politicians or bureaucrats talking about this – of course not!

So let’s try a little math. Let’s assume an annual federal budget of $3.7 trillion and for sake of argument, let’s say we could find 15% waste due to operating inefficiency, sloppy procurement practices and fraud. This hardly seems like a reach but the result would be a spending reduction of $555 billion off the original $3.7 trillion. The President could make such a demand of all government agencies by simply telling his cabinet that he is holding them responsible for the performance of their departments. After all aren’t government employees supposed to be professionals in their various fields of employment? Shouldn’t they be held accountable to a standard of performance similar to that of employees in private industry? If these workers would like to change the stereotype of government employees, one would think that they would embrace this challenge! Also this should become an annual challenge just like in private business, every year we build additional cost reduction and efficiency gains into our operating budgets, why shouldn’t the government do the same?

“Government does not have a revenue problem; government has a spending problem. Government does not have a revenue problem; government has a priority problem. It is time that we begin to fine tune our focus and decide what the priority of government ought to be.” – Marsha Blackburn

Unfortunately, part of the problem with this is it would result in a reduction of the federal workforce. This would be fought tooth and nail by the various unions that represent government employees. It would take courage and leadership for our senior leaders (both Democrats and Republicans) to go after these savings because there would be negative political consequences. But the truth is they are not in office to protect government jobs. By the way these jobs are a drag on the federal budget not a revenue generator so our leaders should be driving efficient operations to free up money for meeting our national needs. This approach doesn’t even begin to address other opportunities such as consolidation of redundant services, elimination of programs that are no longer valid or reform of entitlement programs and the tax code.

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!” – Ronald Reagan

So before we start talking about which programs to eliminate, whose benefits to reduce or whose taxes to raise, let’s start with the most basic of fiscal responsibilities; let’s manage the beast that is the federal budget just like a successful private company would. Let’s focus on operating efficiency, good procurement practices and reducing fraud. After all, this seems like a $555 billion opportunity that all sides should be able to agree on.

Wake up, America! We are being scammed by the politicians. It is time to hold them accountable. They must eliminate waste, inefficiency and fraud before they cut benefits or raise taxes. Let’s change the conversation – contact your representatives and let them know we are on to them. We want accountable action and we want it now.

Restore the Republic, Reject politics as usual!

“Governments don’t reduce deficits by raising taxes on the people; governments reduce deficits by controlling spending and stimulating new wealth.” – Ronald Reagan

To see more specifics on ways to attack the deficit, see my earlier blog – How to Balance the Federal Budget, http://wp.me/pv8jP-mQ

How to Reduce Federal Spending

Now that republicans and conservatives have taken control of the House of Representatives, the air waves are filled with debate on how they will fulfill all their campaign promises regarding the economy. The biggest questions focus on their ability to reduce the deficit without raising taxes. Most commentators act as if this is impossible but here is a newsflash for the media as well as Washington – it can be done!

There are two big problems for the republicans – first, they only control one house of Congress and second, they have no direct control at the department level – that belongs to the President.

All that said, if either side was serious about fixing this problem and salvaging the economic future for the next generation they could work together because together they have the ability to do it. The truth is the solution is so simple politicians can’t seem to see it.

Here are 10 very simple, time tested methods used in the business world that if applied to government would fix the economy, create jobs and bring spending under control:

1. Run the government as if it were a for profit business. This means it must be a model of cost control and operational efficiency.

2. Declare an across the board 10-15% budget reduction in every department and agency in the federal government – period, no exceptions. Since this has never been done it should be easy the first year. We know there is a ton of waste in the way the government operates. We do this (set a reduction target) every year at the company I work for and every year we find more areas to improve or fine tune. This should be an annual ritual for the government, too. It’s called continuous improvement.

3. Declare that budget reductions can not be met by simply reducing services to citizens. Evaluate all service offerings to determine if they even fall within the constitutional scope of the federal government, if not eliminate them. Let the states provide the things that they should provide. Also we should sunset all agencies which have outlived their usefulness.

4. Declare budget reductions can not be met by cutting core entitlement programs such as Social Security and Medicare. The recipients shouldn’t lose their benefits to allow uncessary spending to continue, the government should be forced to eliminate waste first.

5. Eliminate all “nice to have” spending. In government just like private industry there are “nice to haves” that will not affect the quality of services provided if they were delayed or eliminated all together. These should not be credited toward the 15% reduction requirement. All eliminated “nice to haves” should come right off the top.

6. Consolidation of operations, workforce reduction and outsourcing should be considered. How many buildings, vehicles, people, etc. could be eliminated without changing the quality of services provided? The size of the government’s footprint is incredible. How much money could be brought in by selling off excess assets? How much manpower could be eliminated through improved processes, systems and automation?

7. Evaluate all discretionary spending. Examples: Review all foreign aid programs. Review the need for all foreign military bases. Get out of the business of “funding research” instead create incentives to stimulate research in the private sector.

8. Hold the management accountable. Where else in America do managers get to ask for larger and larger budgets each year while delivering such pathetic results? Why shouldn’t there be a culture that challenges these managers to do more with less? The taxpayers are their “shareholders” so where is our shareholder value proposition? It is simple – make the managers manage.

9. Cut government wages to align with industry average wages for comparable private sector jobs. Realign government benefits and retirement programs to those in the private sector.

10. Negotiate lower prices from all vendors and suppliers. Tell all suppliers that the government must lower costs and that they must lower their prices to retain business. This happens all the time in the private sector.

Last and not least there is the nasty business of generating government income to fund the things which are necessary such as infrastructure, homeland security and national defense. We must cut base tax rates for business to stimulate investment and job growth. Creating business growth builds a larger tax base and job growth creates more individual taxpayers.

We must also either lower income tax rates for individuals or better yet scrap the progressive income tax model in favor of a national sales tax. A national sales tax is the fairest tax for individuals because it taxes your ability to spend not your earnings. In other words, wealthy people buy stuff, the more stuff you buy – the more tax you pay. It also taxes the underground economy which eliminates significant tax fraud by those that are self employed working for cash and not reporting their real earnings.

If the government held itself to the same performance standards as private companies do, we would be able to fix the deficit. If every time the government borrowed money to spend they had to provide a justification and a return on investment model before they borrowed it – how much of the spending would be approved?

In the end, if the politicians could just stop trying to get elected long enough to look at the real problem solving it might be easier than everyone thinks – eliminate the waste and increase the value. The only politician that seemed to understand this in the last 20 years was Ross Perot – but then Perot wasn’t really a politician, he was a successful businessman.

Restore the Republic, Reject Socialism!

“The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled”. – Ross Perot

“Government is like a baby. An alimentary canal with a loud voice at one end and no responsibility at the other”. – Ronald Reagan

Update: The Tipping Point

In an effort to prove they are part of the mainstream media and are totally clueless about the national situation, Parade Magazine published the following story last Sunday (3/28/10). They also ran an online poll for Americans to respond to. Both were on the subject of our out of control spending and associated national debt. 

Just Sunday I wrote a post on the subject in an attempt to bring focus on the potential disastrous effects the debt could have on our struggling economy. Later I found this article and was blown away by the nonchalant attitude of the writer with regard to the magnitude of the problem. See Parade article below: 

Parade Magazine 3/28/10 – Rebecca Webber 

Does America Owe Too Much?

Critics of government spending are voicing alarm about the growing national debt. In January, the U.S. public debt was $7.5 trillion—about 53% of the country’s total economic output, also known as gross domestic product (GDP). By comparison, Japan’s debt-to-GDP ratio was 192% and Saudi Arabia’s was 20% in 2009, according to the latest figures available. Economists use the ratio of public debt to GDP as an indicator of a country’s economic health. So what do these numbers mean? Is America’s debt level dangerous?

The short answer is, “No, but it might be soon.” A recent study from the National Bureau of Economic Research found that public-debt levels become perilous when they reach 90% of GDP. By that point, interest rates may be higher as investors demand greater returns on federal bonds, while massive interest payments detract from key government functions. “The interest can get so burdensome that the country can’t afford to repair its highways or educate its children or provide other essential services,” says Isabel Sawhill of the Brookings Institution. “You become a much weaker nation.” According to the Congressional Budget Office, U.S. public debt could approach 100% of GDP by 2020, given current spending levels and obligations for entitlement programs like Medicare, Medicaid, and Social Security.

Debt Around the World
America’s public debt is now 53% of GDP. Here’s how other countries stack up.

France 80% of GDP
Canada 72%
U.K. 69%
India 60%
China 18%

So seriously, the debt level is not dangerous yet – but will be soon? How bad is bad? America – it is time to do something besides worry… like STOP spending money we don’t have! Maybe if there were some still serious journalists working somewhere they would use the space to give this issue appropriate coverage. It really doesn’t make me feel better to see that we are in the same boat with France or India. 

They also included a link to a poll you could vote on. Here are the results of their on line poll: 

Parade Magazine Poll Results

Do you fear that our national debt will hurt our economy? 

Yes 93%

No 7%  

Thank God, Americans are smarter than the writer! 

To read my original post which includes several interesting charts and analysis of the national debt, go to:  The Tipping Point http://wp.me/pv8jP-jO 

If you would like to see the real time debt clock, go to:  US Debt & Population Clocks http://wp.me/Pv8jP-6z

Restore the Republic, Reject the Agenda of the Progressive Left!

The Tipping Point

The passage of the Healthcare Reform bill has accelerated the country down the road to financial disaster. By 2018 (if we don’t get there sooner) we will arrive at the tipping point. Here are the facts:

• The President’s 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next 10 years
• This is $1.2 trillion more than the administration projected. The White House Office of Management and Budget (OMB) originally projected a 10-year deficit total of $8.53 trillion.
• The federal public debt was $6.3 trillion ($56,000 per household) when Obama took office. Today it stands at $8.2 trillion ($72,000 per household). Based on the new projections it will reach $20.3 trillion (more than $170,000 per household) by 2020, according to the CBO.
• This will raise the federal debt to 90 percent of the nation’s economic output by 2020 according to the Congressional Budget Office. This is up from 40 percent at the end of fiscal 2008.
• This means we are following in the foot prints of Greece. Their socialist and labor dominated government is on the verge of economic collapse with a debt to GDP ratio of 115%.
• Typically in countries with debt-to-GDP ratios “above 90 percent, median growth rates fall by 1% and average growth falls considerably more,” according economists Kenneth S. Rogoff of Harvard and Carmen M. Reinhart of the University of Maryland.
• The slower the job growth, the more the administration wants to spend “to stimulate the economy”. Yet spending is exactly what we must avoid according to Moody’s who says continued government spending could cause the U.S. to lose our AAA credit rating.
• The loss of our AAA credit rating would result in higher interest rates on government borrowing that funds our spending deficits. This of course increases the deficit, creating the proverbial ‘vicious circle”.

 So what is the “tipping point” that could happen in 2018? The term “tipping point” can be applied to any process in which, beyond a certain point, the rate at which the process evolves (for better or worse) increases dramatically. United States is on the verge of reaching its’ tipping point (and not for the better) as it applies to the federal budget.

The event that may have marked the approaching tipping point may have recently occurred. The first Baby Boomer—born January 1, 1946—has applied for early retirement at age 62 and received her first Social Security check. An upturn in the Medicare growth rate is expected to begin in 2011 when the first Baby Boomers begin turning 65. From that point on, the number of retirees will continue to increase while at the same time, the number of workers per retiree will more rapidly start to decrease. This will result in the inevitable collapse of the Medicare & Social Security pyramid scheme.

Look at the chart below which shows the current distribution of funds taken in by the government.

Note: The percentage of the budget devoted to interest on the national debt was abnormally high in 1985 (14%) due to higher interest rates that were prevalent during the 1980s. Also in 2008, the  ratio of workers to retirees declined to 3.3 to 1. In 1945 it was 41.9 to 1. Simply put we have been burning up the reserves for years and judgment day is coming.

The other big factor affecting the federal budget is tax revenues which decline in a down economy. We have lost millions of jobs which will come back very slowly, if at all. So far this has been a jobless recovery. Yet the government must find ways to generate revenue to keep up with its’ obligations – not the least of which is all the entitlements owed to citizens who were forced to fund Social Security and Medicare throughout their work lives. Couple this with interest on the debt, the new healthcare reform and the results will be disastrous.

Indicative of the economy’s ongoing labor problems, is the fact that first-time claims for unemployment benefits remain relatively high at 442,000 last week. The number was a decline of only 14,000 over the previous week’s seasonally adjusted number.

“That level of debt (the deficit in the 2011 federal budget) is extremely problematic, particularly given the upward debt path beyond the 10-year budget window,” said Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget.

According to James R. Horney, a federal-budget analyst at the liberal Center on Budget and Policy Priorities, “The biggest part of the deficit difference (between the CBO and the OMB projections) is lower tax revenue due to the different economic assumptions. The administration assumes GDP and incomes will be higher, and that translates into higher revenues than CBO expects. Relatively small differences in economic assumptions can add up to big differences over 10 years.”

Ms. MacGuineas also added, “The proposed budget is woefully insufficient to achieve the president’s goal or the important fiscal goal of stabilizing the debt at a reasonable level in the medium and long term.” 

So here is the problem in a nutshell; many economists agree that the economy might get a short term bounce from all the corrective actions/interventions that the government has enacted. They project that it should result in a short downturn in the acceleration of the budget deficit but… they continue to fear the prospect of rising deficits later this decade, even after steady economic growth has returned and unemployment has declined. The CBO estimates that deficits will average more than 5% of GDP between 2016 -2020, even though they also project that the economy will be return to an average jobless rate of 5% during the same period.

Even Obama’s Director of the Office of Management and Budget, Peter Orszag, told reporters in March 2009, “Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios in a manner that would ultimately not be sustainable.”

So who is going to pay for all this spending… if the administration has its’ way the “wealthy” and corporations are going to foot the bill. The question is how much more of the load can this group carry? Below is a table showing the current distribution of taxpayer burden. As you can see it is already disproportionate. 

As this table clearly shows the top 10% of wage earners are now shouldering 61% of the total income tax load. Under a variety of ideas being discussed by the administration this imbalance will only get worse. To crack the top 10% you must have taxable income of just over $100K per year.

Wake up America! Many economists now say that the tipping point is in sight, with some saying that it could be as early as 2018. This means that there is still a small chance we can avert disaster… but time is running out. We must stop the spending and reduce taxes to stimulate the economy. A stimulated economy will result in government income growth but that alone will not fix the problem. Government can not be the sole guardian of the public. We must return to the model of government established by our founders. The federal government must let states and individuals become responsible for themselves. The federal government must focus on its’ enumerated constitutional powers. The states and local communities must take responsibility for everything else.

Healthcare Reform, rescue bills and all the entitlements are the straws that will break the camel’s back! The only way out of the mess we are in is to cut – spending and taxes – a lot! We have built a model that is unsustainable. We have to come to grips with the idea that big government is not the answer – it is the problem. The federal government must reduce its’ services to only those which are essential – national defense, infra structure and basic services. Social programs and luxury pork barrel spending must be eliminated. We ALL must sacrifice to fix this problem. Each citizen must be allowed to keep as much as possible so they can reinvest in their savings, in their communities or build businesses that will jump start the economy. If we don’t stop the wasteful spending now, we are headed for some form of socialistic government where we can all live together as peasants. 

Restore the Republic, Reject the Agenda of the Progressive Left, Stop Federal Spending! There is no other answer – Keynesian Economics do not work! We can not SPEND our way to prosperity! 

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan  

“Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States.” – Ronald Reagan

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” – Winston Churchill

 

Fiat Money and the Fort of Gold

According to the government, Fort Knox contains about 147 million troy ounces of gold. The government has a total of 248 million troy ounces of gold, mostly in bars that are 400 troy ounces each. Most of the gold in Fort Knox came from melting of the gold coins confiscated by FDR, and from other government operations while the US was still on the gold standard which we abandoned entirely in 1971.

At today’s prices the gold (248 million troy oz) would be worth an estimated $275,776,000,000 dollars which used to seem like a lot – until we started spending a trillion dollars at a time!

The Treasury Department still operates the United States Bullion Depository at Fort Knox, Kentucky, so what is the gold’s connection to U.S. currency and who owns it?

From 1879 to 1971, the U.S. dollar was backed by gold using what is commonly referred to as the Gold Standard. This meant that the bearer of U.S. currency could exchange it from currency to gold or silver. The government owned large stores of both and used them to maintain a balanced relationship between the value of the currency and gold or silver. This gold standard allowed the government to maintain stable purchasing power for the dollar in both the domestic and international markets.

From 1879 to 1933, the dollar was fully convertible to gold for both domestic and international traders. Gold convertibility was eliminated domestically in 1934 due in large part to the Great Depression. On April 3, 1933 FDR, declared a national emergency and prohibited the “hoarding” of gold coins and bullion by US corporations and citizens, requiring all stockpiles to be returned to the treasury in exchange for paper currency.  However it was maintained for foreign monetary entities until 1971. From 1934 until 1971 Americans could no longer redeem currency for gold. Also during this period private citizens were not allowed to have holdings of gold bullion.

Using a gold standard, the government has a legal limit on how much paper money it can print. During the Johnson administration, the U.S. could print paper dollars equal only to four times the value of the nation’s gold reserves. This sets the stage for trouble if foreign investors decide to cash out their dollars for gold which is exactly what happened. 

In the years leading up to 1971 the US government began printing more and more money to pay for the Vietnam War and other investments.  The excess printing of paper dollars, and the negative balance of U.S. trade, resulted in foreign countries demanding that America make good on its’ “promise to pay”. They began demanding gold from the U.S. in exchange for paper dollars. This led to a run on gold in the late 60’s/early 70’s that resulted in over $22 billion dollars of gold leaving the US Treasury. 

So in 1971 Nixon unilaterally canceled the Bretton Woods system and ending the direct convertibility of the US dollar to gold. In 1971, the United States government abandoned the gold standard. The US dollar was no longer a fixed currency. The dollar became fiat money, meaning it was no longer backed by gold or silver and was not necessarily redeemable even in coin.

This move opened the door for government spending and abuse on a scale never before possible by the federal government. From 1934 until 1971 the US paper money supply doubled. From 1971 until 2005 it multiplied 13 times. This does not even take into consideration what has happened in the last 18 months. 

So now, some not so deep thinkers are suggesting that the U.S. sell off our remaining gold assets. See excerpt from Parade Magazine, Sunday Feb. 14, 2010:

Should the U.S. Sell Its Gold?  

The U.S. has the world’s largest gold reserve—more than 8000 metric tons. That’s far more than Germany’s, which comes in second with 3400. At current prices, our reserve is worth an estimated $288 billion. Since the U.S. government could certainly use the funds, why not sell this valuable commodity? Does our country need to keep all of that gold?

“The gold reserve is a remnant of the monetary system we abandoned in 1971,” says Jeremy Siegel, a finance professor at the University of Pennsylvania’s Wharton School. “We could have sold it then, and maybe we should have. Since 1971, the return on gold has been 8.86% a year, while the return on stocks has been 9.76%. Even with the disastrous year we just had, stocks have done better over the long run.”

But there are good reasons not to sell now. “Our gold holdings swamp annual demand,” says Andrew Williams of the U.S. Treasury. “Even talk by the government of perhaps selling gold might cause the price to drop,” adds James Barth of the Milken Institute, an economic think-tank. He says that selling gold “could be viewed as a sign of weakness” by other countries and send the undesirable message that the U.S. is desperate for revenue.

While the President can authorize the Treasury to sell gold, that hasn’t happened since 1979. But even if he were to authorize a sale, he couldn’t spend the funds on health care, defense, or any other programs—the law requires that “all proceeds from the sale of government gold be used to pay down the national debt,” according to Williams. Despite how large the reserve seems, liquidating it would barely make a dent in the $12.3 trillion debt. Still, economists like Siegel argue that the stored gold brings the federal government little benefit, and the U.S. also spends a significant amount to safeguard it.  

The first question is; do we still have it? There have been rumors circulating for years that the gold may have already been spent by the government. However according to an independent by KPMG, LLP, it is all there. 

For audit info, go to: http://www.financialsense.com/fsu/editorials/2007/0423.html 

The next question is not as easily answered – is the gold encumbered? In other words, does it still belong to the United States government or has the Federal Reserve laid claim to it? The Treasury and the Federal Reserve Board have employed a range of strategies to try to minimize the role and importance of gold in the international monetary system. 

The U.S. Treasury has facilitated; selling, swapping, trading, and lending of gold by other countries, gold-holders, and mines in order to maintain an atmosphere of “oversupply” to bolster the dollar. All of this manipulation may have resulted in the encumbering the U.S. gold reserves which you would think would be the last thing they would want to do. Unfortunately, there is evidence that this may have happened so even though it is still there; the question remains –is it ours? This question needs to be answered. 

In the end if it is still property of the U.S. Treasury we should not sell it we should keep it! The way things are going it maybe the best collateral the country has left. It gives us a little security in case of a national emergency. 

Secure the Republic, Save the Gold, Stop the Spending, End the Fed! 

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.” –Thomas Jefferson 

“The trifling economy of paper, as a cheaper medium, or its convenience for transmission, weighs nothing in opposition to the advantages of the precious metals… it is liable to be abused, has been, is, and forever will be abused, in every country in which it is permitted.” –Thomas Jefferson

Spender-in-Chief Seeks Debt Counseling

On Thursday, President Obama used an executive order to create a debt commission. The commission will be charged with “taking on the impossible” and designing a plan to reduce the federal deficit.  To lead the commission Obama chose former Sen. Alan Simpson, R-WY., and Democrat Erskine Bowles, former chief of staff to President Clinton. 

“They’re going to try to restore reason to the fiscal debate and come up with answers,” said Obama. “The politics of dealing with chronic deficits is fraught with hard choices. And therefore it’s treacherous to officeholders here in Washington.”  

White House spokesman Robert Gibbs said Obama’s executive order sets up a debt commission to study options on spending and taxes because the U.S. Congress failed to create a congressional deficit panel of its own. The presidential commission will make recommendations but lacks the power to bind Congress to them.

Obama also signed the bill to raise government borrowing authority to $14.3 trillion and reinstall pay-as-you-go rules to require Congress to offset spending with cuts, Gibbs said. The White House is forecasting a record $1.56 trillion deficit in the fiscal year that ends on Sept. 30, 2010.

Vital creditors such as China and other investors question whether the White House is serious about fiscal responsibility. Failure to convince them will have a significant impact on the dollar and bond markets. They want to see a plan to control the deficit and spending. Obama’s current budget forecast show the debt level reaching 80% of GDP by 2020. The federal deficit reached an unprecedented $1.4 trillion in 2009 and most predict it will go even higher this year. 

The commission will consist of 18 members, six will be presidential appointees; there will be 12 sitting lawmakers, 6 appointed by Republican congressional leaders and 6 appointed by Democratic congressional leaders. A 14 vote majority would be required to implement any recommendation. The recommendations are due Dec. 1. 

The Republicans are wary but plan to participate. Their fear is that solutions may aim toward increasing taxes instead of cutting spending. 

“Americans know our problem is not that we tax too little but that Washington spends too much — that should be the focus of this commission,” McConnell said. 

House Minority Leader John Boehner, R-Ohio, says the GOP has proposed immediate spending cuts through a rescissions package. If they aren’t considered a Boehner spokesman said “That doesn’t mean we won’t participate in this commission, but it does indicate that Washington Democrats aren’t serious yet about shutting down their spending binge.”  

Jerry Lewis, R-CA., is the most vocal critic of the panel. “Instead of acting appropriately to rein in spending and control skyrocketing deficits, the Democrat Congress and the President have outsourced their constitutional responsibilities to a powerless commission apparently created to provide political cover,” Lewis said. “The American people are demanding accountability from their elected officials,” he added. “This commission, which isn’t slated to produce anything until after the November elections, is essentially a way to avoid this accountability.” 

Lewis is dead on in his assessment. Fixing the deficit will be a complex task to be sure but it starts with common sense. The first way to reduce a spending deficit is to stop spending. The way to stimulate growth in the tax base is to help it grow. The proven way to do that is to cut taxes and stimulate investment. The math is simple – example: would you rather have 5% of $10,000,000 (500,000) or 7.5% of $5,000,000 (375,000). 

It is also difficult to take this idea seriously from an administration that does not mention that it has nearly quadrupled the deficit in a year. It is kind of like asking Tiger Woods for advice on marital fidelity. 

Americans need to watch this closely as it appears as Rep. Lewis has pointed out to be another distraction from the real job of reining in out of control government spending. This gives the President a new way to avoid accountability and set up scapegoats if his policy failures continue. 

Wake up, America! It is time to clean house in Washington and start over with common sense solutions that cut spending and promote fiscal responsibility. Keep speaking out and letting your representatives know we are not going to take it anymore. 

Restore the Republic, Reject the Agenda of the Progressive Left, End Big Government Now! 

“The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale”. – Thomas Jefferson, letter to John Taylor, May 28, 1816

The Economy – There is no magic wand!

Today’s labor department job report shows initial claims for unemployment benefits increased 31,000 to 473,000. There are now approximately 14,577,800 officially unemployed Americans. That is almost 9 million jobs lost since mid 2007.  

Further aggravating the situation, the Producer Price Index for Finished Goods rose 1.4% in January. This increase followed a 0.4% increase in December and a 1.5% increase in November. The index for finished goods excluding foods and energy rose 0.3 percent in January. This is a meaningless number as we all require both food and energy. The bad news is about 75% of the increase last month was due to a 5.1% jump on food and energy goods. Prices for finished goods moved up 4.6 percent for the 12 months ended January 2010, their third consecutive 12-month increase.

Here is your warning sign; the 1.4% increase in January could easily translate into a 10+% inflation rate if the trend continues. Unless this is an anomaly we could be on pace for a significant inflation ramp. All the rescue efforts by the Federal Reserve has set the stage for this inflation, so now the Fed is going to have some decisions to make at its next meeting to try to stop it. This is why Bernanke has been saying we’re probably going to have to raise rates soon.

We have dug ourselves a very deep hole. China is no longer buying our treasury bonds and they sold off many that they had. Japan is now the biggest foreign holder of U.S. debt. Now the Federal Reserve holds the biggest share of our total debt, over $5 trillion. With our AAA credit rating at risk, the next step will be to raise the interest paid on our treasury bonds to get new investors. Do you see where this is going? It is a vicious circle. So now the Fed will drive up interest rates to try to stop the inflation and reduce the money supply which will ultimately kill economic growth.

Remember both Bush and Obama administrations said, we must spend to fix the economy. We were told that printing money, borrowing money and spending money would stimulate the economy. We were told not to worry about inflation. Now all of a sudden inflation is barreling down the road at us. We’re repeating the mistakes of many European nations such as Greece, Italy, Spain, etc. all of whom are currently in deep shit! Keynesian Economics do not work!  

Wake up, America! It is time to face the truth. The only way out of the mess we are in is to cut – spending and taxes – a lot! We have built a model that is unsustainable. We have to come to grips with the idea that big government is not the answer – it is the problem. I am not just talking about the federal government either. The federal government will have to reduce its’ services to only those which are essential – national defense, infra structure and basic services. Social programs and luxury pork barrel spending must be eliminated. State governments must get smaller too. States need to narrow their focus to the basic services they should provide. We are going to have to rely on communities to pull together and help their own. People are going to have to learn to fend for themselves. Everyone is going to have to sacrifice to fix this problem. Each citizen must be allowed to keep as much as possible so they can reinvest in their savings, communities and build businesses that will restart the economy. This is the only sane road back to prosperity. The alternatives involve deals with the devil which will lead us to a loss of sovereignty, a world government or some form of socialistic government where we can all live together as peasants.

Restore the Republic, Reject the Agenda of the Progressive Left, Eliminate Big Government! This is the only answer. 

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan  

“Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States.” – Ronald Reagan

Obama’s Rhetoric vs. Rep. Hensarling’s Facts

Last week when the President met with the Republicans at their retreat in Baltimore the Q&A session ended with an interesting exchange between Rep. Jeb Hensarling, TX 5th. Watch the exchange below and then view the Press Release put out Hensarling’s office providing the factual support of his comments. What makes this story even better is tht this week the President proposed a budget that was even larger than Hensarling had feared. Notice that the President again takes no ownership for the current economic situation and can’t man up with truth on what he is going to propose for the new budget. 

In his Stte of the Union speech, Obama said. “I know that some in my own party will argue that we can’t address the deficit or freeze government spending when so many are still hurting. I agree, which is why this freeze won’t take effect until next year, when the economy is stronger. But understand — if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery — all of which could have an even worse effect on our job growth and family incomes.” His idea of a responsible budget is 3.8 trillion dollars that is 25.5% of the GDP. 

Press Release

 

 

  

For Immediate Release January 29, 2010

Contact: George Rasley (202) 225-3484

WASHINGTON, DC — Congressman Jeb Hensarling, Vice Ranking Member of the House Budget Committee, released the following statement and fact summary sheet after President Obama challenged his facts on House Republican budget priorities verses Democrat budget priorities: 

“I asked the President today if he intended to propose the type of spending that has put our nation on the path to bankruptcy. Unfortunately, he didn’t assure taxpayers that he was committed to stopping the spending. 

“The President also challenged the facts I presented to him about House Republican budget priorities and Democrat budget priorities. I am happy to provide him with the following facts to back-up my statements. I stand by what I said. 

“I have great respect for President Obama. I am grateful he chose to address the House Republicans – and I give him credit for accepting our invitation. But, again, he didn’t answer my specific question on whether he would continue us on a path to tripling the national debt and increasing government spending to 24.5% of the economy. 

Assertion: “The Republicans proposed a (Fiscal Year 2010) budget that ensured that government did not grow beyond the historical standard of 20% of GDP.” 

FACT: Under the budget proposal put forward by House Republicans, spending as a percent of GDP is 20.7% of GDP in 2015, and in 10 years is at 20.7% of GDP. Source: House Budget Committee Republicans “The Path to American Prosperity” Budget Alternative, Table S-1 http://www.house.gov/budget_republicans/press/2007/pr20090401_gopbudget.pdf. Historical standard is 20.7% of GDP. Source: Heritage Foundation http://s3.amazonaws.com/thf_media/2010/pdf/wm_2780.pdf 

Assertion: “It was a budget that actually froze immediately nondefense, discretionary spending.” 

FACT: The House Republican budget froze non-defense/non-veteran spending for 5 years (FY2010-14). Source: House Budget Committee Republicans “The Path to American Prosperity” Budget Alternative, Page 39 http://www.house.gov/budget_republicans/press/2007/pr20090401_gopbudget.pdf 

Assertion: “It spent $5 trillion less than what was ultimately enacted into law.” 

FACT: The House Republican budget called for $36.913 trillion in spending over 10 years, whereas CBO estimated in March that the President’s budget would spend $41.726 trillion over 10 years. This is a difference of $4.813 trillion over a 10 year period. 

Source: House Budget Committee Republicans “The Path to American Prosperity” Budget Alternative, Table S-1 http://www.house.gov/budget_republicans/press/2007/pr20090401_gopbudget.pdf  and CBO’s Baseline and Estimate of the President’s Budget, June 2009 http://www.cbo.gov/ftpdocs/102xx/doc10296/06-16-AnalysisPresBudget_forWeb.pdf 

Assertion: “What were the old annual deficits under Republicans have now become the monthly deficits under Democrats.” 

FACT: According to CBO’s September 2009 Monthly Budget Review http://www.cbo.gov/ftpdocs/105xx/doc10552/09-08-mbr.htm  July 2009’s deficit was $181 billion. According to CBO’s December 2009 Monthly Budget Review http://www.cbo.gov/ftpdocs/108xx/doc10825/12-4-09MBR.htm  October 2009’s deficit was $176 billion. Comparatively, according to OMB’s Historical Tables (Table 1.1) http://www.whitehouse.gov/omb/budget/Historicals/  Republicans’ last annual deficit was $160.7 billion in FY2007. 

Assertion: “The national debt has increased 30%.” 

FACT: According to CBO’s January 2010 Budget and Economic Update (Table F-1) http://www.cbo.gov/ftpdocs/108xx/doc10871/AppendixF.shtml096834  the debt held by the public at the end of FY2008 was $5.803 trillion, and at the end of FY2009 was $7.544 trillion. This is an increase of 30%. 

Assertion: “Your administration proposed a budget that would triple the national debt over the next 10 years.” 

FACT: According to CBO’s June 2009 estimate of the President’s Budget http://www.cbo.gov/ftpdocs/102xx/doc10296/06-16-AnalysisPresBudget_forWeb.pdf  debt held by the public would rise from its 2008 level of $5.803 trillion to $17.126 trillion in 2019, which is 2.95 times larger than the 2008 level. 

Assertion: “Will that new budget, like your old budget, triple the national debt and continue to take us down a path of increasing the cost of government to almost 25% of our economy?” 

FACT: According to the President’s FY2010 budget (Table S-1) http://www.whitehouse.gov/omb/budget/fy2010/assets/summary.pdf debt held by the public is set to rise from $5.803 trillion in FY2008 to $16.027 trillion in FY2019, which is 2.76% times larger. Also, the President’s budget shows spending as a percentage of GDP at 24.4% for FY2010. CBO’s June 2009 estimate http://www.cbo.gov/ftpdocs/102xx/doc10296/06-16-AnalysisPresBudget_forWeb.pdf  of the President’s budget also shows federal outlays at 24.5% of GDP in 2019. 

UPDATE: “How did you arrive at the conclusion that what were the old annual deficits under Republicans have now become the monthly deficits under Democrats? And what is the back-up?” 

In the 12 years that Republicans controlled the House, the average deficit was $104 billion (average of final deficit/surplus FY1996-FY2007 data taken from Table F-1 below). In just 3 years under Democrats, the average deficit is now almost $1.1 trillion (average of final deficit/surplus FY2008 and 2009 data taken from Table F-1; FY2010 data taken from Table 1-3). Source: CBO January 2010 Budget and Economic Outlook http://www.cbo.gov/ftpdocs/108xx/doc10871/Chapter1.shtml 

It is time to stop the madness, stop the spending and lower taxes for businesses to stimulate the economy. We can not spend our way to prosperity. Keynesian Economics will not work now – they never have. The engine of the economy is private enterprise and free market economics. It is time to let them work. 

By the way, we need more people like Jeb Hensarling in the Congress – honest, articulate conservatives with principles and values. As for the President – learn from history, listen to the your citizens and start telling the truth. 

Restore the Republic, Reject the Agenda of the Progressive Left!