More Stimulus Equals More Unemployment

"Stimulus" is in the process of turning a nasty recession into a genuine depression. The evidence is in the "Employment Situation" report released by the Bureau of Labor Statistics (BLS) on November 6th. The "headline" unemployment rate shot up to 10.2%, the highest in more than 26 years. But the report was much worse than most people realize.

The "household survey data" showed that 589,000 jobs vanished during October. This is bad enough, but the three-month moving average of changes in total employment (current month and prior two months) shows that job losses are actually accelerating. The three-month moving average (TMMA) of changes in total employment began a serious decline in February 2007. It went into negative territory two months later. This indicator has now been negative for the past 21 months. During this time, total employment has declined by more than 8 million jobs.

As the financial crisis gathered momentum in late 2008, the TMMA fell continuously, reaching a bottom of 853,000 jobs lost per month in January 2009. Then this indicator began improving. By June 2009, when stories about "green shoots" were common in the financial press, the TMMA was "only" 230,000. However, it then began falling again. The October BLS numbers pushed the TMMA down to 589,000 jobs lost per month.

Economic growth is supposed to create jobs. However, the U.S. economy shed twice as many jobs (1,332,000) in the third quarter of 2009, when GDP grew at a robust 3.5% annual rate, than it did in the second quarter (691,000), when the economy contracted at a 0.7% rate. How can this be? To paraphrase the 1992 Clinton campaign, "It's the bonds, stupid!"

The massive sales of U.S. Treasury bonds to finance "stimulus", bailouts, and other government spending is sucking capital out of the private sector and destroying jobs. Once again, the October 6th BLS report tells the tale. The BLS "household survey" showed job losses of 589,000, while their "establishment survey" showed a reduction of payrolls of only 190,000. This shows that most of the damage is being done in small business, "under the radar screen" of the BLS.

Small businesses-especially new small businesses-account for essentially all net job growth. However, business creation and expansion requires capital, and more and more of the nation's capital is being commandeered by the U.S. Treasury in the name of "stimulus". The FY2009 Federal deficit was $1.4 trillion. This was almost a trillion dollars higher than FY2008. The capital to buy this additional debt had to come from somewhere, and much of it was squeezed out of business. Here are some indicators, both statistical and anecdotal:

• During FY2009, "Gross Domestic Private Investment" fell by 25% (almost $500 billion/year). It would have needed to grow by 5% to keep the unemployment rate from rising from an already-too-high 6.2%.

• Many venture capital firms are informing entrepreneurs that there is no money available for new startups. The firms say that they must husband their capital to meet the needs of their existing portfolio companies.

• The 500 largest U.S. non-financial companies now hold more than $1 trillion in Treasury bills, amounting to more than 10% of their total assets. Corporate cash flows are rising, but the money is being invested in government bonds, rather than growth.

• Banks have cut credit card credit lines by 25%, or $1.25 trillion. Because small businesses are often financed with personal credit cards, this has a direct impact on small business survival and growth.

If you divide the total real capital employed in the U.S. ("produced assets") by total employment, you get about $313,000. That is, for $313,000 in capital, the private economy can create one real, permanent, self-supporting job. In contrast, there are estimates that each of the jobs that the administration claims that "stimulus" has "created or saved" is costing about $1.2 million. If so, this means that selling the bonds required to fund one temporary "stimulus" job will take enough capital out of the private sector to destroy four "real" jobs. This explains why, as the "stimulus" spending has ramped up, job losses have accelerated.

Unfortunately, the Administration, the mainstream media, and much of the economics profession are responding to the worsening unemployment with calls for even more "stimulus". This would compound the tragedy. Each $313,000 of bonds sold to fund the additional spending could be expected to extinguish one private sector job. In addition, we can expect that the next increment of stimulus would be even more wasteful than the first $787 billion. The "best" projects would have been included in the first stimulus bill.

The "headline" (U-3) unemployment rate of 10.2% vastly understates the magnitude of the jobs crisis in America. John Williams' "Shadow Government Statistics" unemployment number for October is 22.1%. Williams estimates that we would have to create 22.6 million new jobs in order to get to "true" full employment. At $313,000 each, the private sector would have to invest an incremental $7.1 trillion to accomplish this.

Every year for the past 58 years, real GDP has been very close to 30% of total capital employed (real "produced assets"). Accordingly, an additional $7.1 trillion in private business investment could be expected in increase GDP by about $2.1 trillion/year. Most of this income would go to the 22.6 million new job holders and their families, but about a quarter of it would be captured by governments at all levels.

Canceling the job-destroying "stimulus" program would be a good first step toward providing the private sector with the additional capital required to achieve full employment. However, this would provide only about 10% of the money required. The rest would have to be mobilized by increasing incentives for real savings and investment.

The two most effective measures toward this end would be to stabilize the dollar and to repeal the corporate income tax. The corporate income tax brought in only $138billion in FY2009. This amounts to less than 1% of GDP, and less than a fifth of the cost of the "stimulus" bill. Repealing it now would produce higher employment and higher Federal revenues within months.

SOURCE

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The job-killing president and Congress

By: Newt Gingrich

Last Friday, the unemployment rate jumped to 10.2 percent. The underemployment rate -- including part-time workers who want full-time jobs and those who have simply quit looking for work -- reached 17.5 percent. How did Washington react? The next day the Democratic-controlled House passed a trillion-dollar increase in government disguised as a health care bill. In the face of the worst jobless rate in 26 years, the Obama administration and congressional Democrats don't seem to realize that adopting bad policies kills jobs.

What's most remarkable about this is that the president should know better. We now have proof that the Obama administration's job-killing policies are hurting America. In an interview with CNBC last January, when he was still trying to sell his massive $787 stimulus bill, President Obama predicted, "If we do nothing, things will get much, much worse. With the plan that we have, we will do better than we would otherwise have done." At the time, the Obama White House predicted that unemployment wouldn't get worse than 8 percent if the stimulus was enacted. By the middle of 2009, they promised, the massive spending bill would be having a positive effect on employment.

So much for promises. By the White House's own standards of success, its economic recovery policies have been an abject failure. That doesn't mean they don't keep touting the stimulus as a success, of course, aided by that most meaningless of economic metrics, "jobs created or saved." As recently as the end of October, Vice President Biden claimed that the stimulus act "saved or created" one million jobs. But consult a more objective source -- like the Bureau of Labor Statistics, the government's official job counter -- and you'll find that 3.2 million Americans have lost their jobs since February when the stimulus act was signed. In fact, the most accurate measure of jobs under the Obama administration and the Democratic Congress isn't jobs "saved or created," it's jobs "lost and dislocated."

American Solutions calculates that the 1 million jobs number cited by the administration as gains for employment actually represents future, additional unemployment. The one million jobs supposedly funded by the stimulus bill -- overwhelmingly in government -- will necessarily end when their government funding ends. Add these one million dislocated workers to the 3.2 million Americans who have lost their jobs since the stimulus was passed and you have an astonishing more than 4 million jobs lost and dislocated since the beginning of the Obama administration's policies.

Democratic economic policies aren't simply ineffective, they are affirmatively job killing. And they're about to get worse. The health care bill Speaker Nancy Pelosi bribed, cajoled and threatened through the House last weekend imposes a 5.4 percent income tax "surcharge" on any tax filer who makes more than $500,000 a year. The Joint Tax Committee has found that fully one-third of this new tax will be paid by small businesses, the engines of American job creation. What about 4 million jobs lost or dislocated don't Washington Democrats get?

The first thing to do is to take the approximately $500 billion in stimulus funds that haven't yet been spent and redirect it toward cutting the payroll tax in half for two years. Social Security and Medicare would be protected, and every single American who works would get a take home pay raise. Every single small business would have more money available to create more jobs. (This and other solutions for creating jobs and prosperity now can be found at www.americansolutions.com.)

Unless, of course, the point of the Obama economic policies isn't to create jobs, but to increase Democratic political clout by increasing the size of government. If that's the case, Democrats will find out soon enough that killing jobs in order to grow the Democratic Party by growing government isn't a bargain the American people are ready to make.

SOURCE

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BrookesNews Update

US jobless hits 10.2 per cent and government supporters blame rising productivity : The same media types who screamed blue murder with undisguised glee when unemployment hit 5 per cent under Bush are now telling us that the current 10.2 per cent rate is being driven by rising productivity and so there is little that can be done about it in the near future. This is utter nonsense
Could a new resource boom doom Australian manufacturing? : A sustained increase for a country's products can bring about a rise in the exchange rate. If this is not offset by a sufficiently large monetary expansion then the country's manufacturing base could be seriously damaged. And the theory of comparative advantage won't have a damn thing to do with it. Will this happen to Australia?
George Soros: crisis and myth :George Soros is at it again. This fanatical enemy of the market is misleading people as to the real cause of the financial crisis
Gore's Profits of Doom : Financial disclosure documents released before the 2000 election put the Gore family's net worth at $1 million to $2 million. Thanks to the global warming scam that Gore was instrumental in establishing his net worth is now $200 million. So why isn't he keeping Bernie Madoff company?
Having a little buyer's remorse? Hmm : American is now run by 'Czars' who are not checked on or responsible to anyone. But, they want to share the wealth. Have you noticed, however, that the politicians who want all of this, sure don't plan on giving up any of those wonderful perks that they get from their wonderful job related health policies in the House and Senate. And Pelosi has no intention of sharing any of her wealth
The vilification of Rush Limbaugh : I believe with all my heart that minorities, especially African-Americans, will never be free until they stop allowing people like Jesse Jackson and Al Sharpton to insist they adopt the mentality of victims. Likewise, they will not be free until they take the next bold step: start thanking God for America, and stop condemning the white male.
Before Dreams, there was Roots :As evidence mounts that Obama did not exactly write Dreams unassisted, Landesman gives us a good indication of how America's cultural honchos will react. For a century, in fact, they have been heaping uncritical praise on undeserving artists of a certain political stripe, especially minority artists. And for a century, they have been pulling the curtain shut behind their pet wizards when anyone questions their wizardry
How to become a 'Citizen Of The World' : Obama has bestowed instant cachet on the growing ranks of Americans who revel in the thought of being the first in their own social set to be considered cutting edge 'citizens of the world.' Especially since joining this community of global citizens confers upon them automatic virtue, along with instant and unassailable moral stature

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ELSEWHERE

Now Obama wants to put an ACORN fund-raiser on the federal bench: "David Hamilton was the first person nominated for a judgeship after President Obama took office. On Mar. 17, President Obama nominated Hamilton, who is currently a federal district judge in Indiana, to the U.S. Court of Appeals for the Seventh Circuit, which encompasses several Midwestern states. The main problem many senators have with Judge Hamilton is his controversial decisions. Hamilton ignored a felony conviction on a man’s record when being prosecuted for his third felony drug crime to avoid imposing a life sentence, for which Hamilton was unanimously reversed on appeal. Hamilton also struck down a law requiring convicted sex criminals from reporting information to police to track their whereabouts. He also petitioned the White House for clemency for a police officer who produced child pornography. He has also shown surprising hostility to people of Christian faith. He ruled that any prayers uttered in the Indiana statehouse that invoke the name of Jesus Christ are unconstitutional and cannot be permitted. Nor can anyone offer a prayer that is “sectarian” or “pervasively Christian.” Oddly, although prayers mentioning Jesus are somehow a threat to the republic, Judge Hamilton said that it’s okay to offer prayers to Allah."

ACORN say it has a constitutional right to your money: "Activist group and organized crime syndicate ACORN has a constitutional right to defraud the people of the United States, it claims in a federal lawsuit. Actually, the lawsuit, filed with the assistance of the allegedly terrorist-funded Center for Constitutional Rights, doesn't use the word fraud, but that's what it amounts to because ACORN argues in the document that it has a right to taxpayer dollars. I kid you not. ACORN claims the congressionally approved cutoff of federal funding that expires Dec. 18 violates the Constitution's prohibition on bills of attainder, along with ACORN's free speech and due process rights. Of course, due process is a rather specific legal concept that applies to judicial proceedings, rather than the lawmaking process. A bill of attainder singles out an individual or group for punishment without trial. Is it punishment for ACORN to be denied public funds? That implies the group has the right to receive those funds."

The "stimulus" that didn't stimulate: Ten States Face Looming Budget Disasters: "In Arizona, the budget has grown so gloomy that lawmakers are considering mortgaging Capitol buildings. In Michigan, state officials dealing with the nation's highest unemployment rate are slashing spending on schools and health care. Drastic financial remedies are no longer limited to California, where a historic budget crisis earlier this year grew so bad that state agencies issued IOUs to pay bills. A study released Wednesday warned that at least nine other big states are also barreling toward economic disaster, raising the likelihood of higher taxes, more government layoffs and deep cuts in services. The report by the Pew Center on the States found that Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin are also at grave risk, although Wisconsin officials disputed the findings. Double-digit budget gaps, rising unemployment, high foreclosure rates and built-in budget constraints are the key reasons."



Cold cash Jefferson (above) given 13 years for corruption: "Former Louisiana congressman William Jefferson stood motionless in U.S. District Court in Alexandria Friday as he was sentenced to 13 years in prison for corruption - the longest prison term ever imposed on a former member of Congress. The nine-term Democrat from New Orleans - found with $90,000 stuffed in his freezer - lost his re-election bid last year while under indictment - a result that U.S. District Judge T.S. Ellis found satisfying. "Public corruption is a cancer on the body politic," the judge said after an afternoon of delays and long recesses had turned to blustery evening. "It eats away and destroys the function of that body. It needs to be surgically removed."

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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)

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