This economy – how much longer?

George Rebane

[This is the addended transcript of my regular KVMR commentary broadcast on 14 September 2016.]

There was happy dancing at 1600 Pennsylvania Avenue this morning.  The much publicized mirth has to do with what appears to a break in the longstanding doldrums in which our economy has been mired for the last eight years.  Everyone by now has heard about the Commerce Department announcing the big jump in last year’s median income.  It went up 5.2% in 2015 dollars after having declined since George W Bush left office.  But before strapping on your dancing shoes, there’s more to this story than the headlines screaming ‘America gets a raise!’

To begin, America’s $18T economy is like a giant nuclear supercarrier, once underway it’s hard to slow it down or change its course.  But the folks in Washington have done their damnest to do exactly that with more tax increases and reams of new regulations that have poured sand into the gears of commerce affecting everyone from middle class households, through job creating small companies, to large corporations.  The bottom line is that this administration has successfully done its best to replicate the economic recovery from the Great Depression.

But when someone starts selling recovery statistics, the buyer should be careful.  Recovery has many faces and definitions ranging from nefarious through iffy to strong.  For example, does recovery mean finally turning the corner on the decline?  Does it mean having climbed back to pre-recession levels?  Or does it mean that the pre-recession trends have been re-established?  Or best of all, does recovery mean that we are now back on the pre-recession trendlines that extend over the recent economic canyon, and now yield numbers as if the recession had never occurred? (more here)

Everyone would agree that getting back to an economy that looks as if the recession never occurred would indeed be a full recovery.  And most people, save the pabulum promoting politicians, would consider that turning a corner is at best problematic.  Why? because a deep recession, like the one we’re attempting to climb out of, has many corners that can be turned.  The current one may not be the last or even lowest one.  So what kind of recovery is really being touted from Washington?

When we consider more than median income, we see an economic landscape that still looks much like an inner city street with houses needing maintenance, and some even boarded up behind weed choked yards.  Even with the so-called ‘raise’, America’s median wage is still below its pre-recession level.  The poverty rate has also yet to decline to its pre-recession levels.  And the 4.9% unemployment rate seems low because it is computed from a population of only those working or looking for jobs.  The tens of millions of Americans who have given up and left the workforce are now at historic heights.  They are treated like potted plants, and not even in the equation.  Think of it, if today more people become disillusioned and quit looking for work, then no additional jobs need be created for the ballyhooed unemployment rate to continue going down.  That’s a recovery?

There is not enough time here for us examine the failure of the recent economic stimulus attempts that have done nothing to grow the economy, but have almost doubled our national debt to $20T over the last seven years.  And our nation’s unfunded liabilities, now over $100T, are beyond reckoning.  Most people, with the exception of our progressive neighbors, know that the only thing that can delay the wolf from the door is to double economic growth rates from their current below 2% to above 4%.  Short of that, everything else maintains the misery and hastens the looming economic collapse whose ripples may become a tsunami that also renders our society.

In the face of this we have one candidate who proudly promises to stay the course, since she is a beholden co-architect of the status quo; and another who undoubtedly will make changes the details and effects of which cannot be known before November or even well into 2017.  But we do know what doubling down taxes and regulations a la socialist Bernie will mean for the future, because we can see seven years of it in the rear view mirror.

My name is Rebane, and I also expand on this and related themes on Rebane’s Ruminations where the addended transcript of this commentary is posted with relevant links, and where such issues are debated extensively.  However my views are not necessarily shared by KVMR.  Thank you for listening.

[addendum]  Here is a relevant graphic showing the uneven benefits of median wage increases for various racial groups in the country.

More information can be found here.

Among the many facets of Obamanomics that have inhibited our economy’s growth are the Dodd-Frank banking bill of 2010 its new Consumer Financial Protection Bureau that mangled the money markets especially as they impact lending and the availability of mortgages and operating capital for businesses.  Cato’s Mark Calabria testified to Congress that “the Dodd-Frank Act represents a massive expansion of legislative delegation to administrative agencies. Its constitutional flaws do not end there. As I have focused upon, the Consumer Financial Protection Bureau is characterized by a funding mechanism designed to specifically subvert Article I Section 9 of the Constitution. Additionally its data collection activities run afoul of our Fourth Amendment protections. These extensive data collections are in no way necessary for the CFPB to achieve its statutory mission. Such could be accomplished in a manner that does not offend the Fourth Amendment. As Courts have too often been slow to protect our Fourth Amendment rights, it did take almost 30 years for Olmstead to be reversed, Congress should move quickly to protect American consumers from harm of CFPB’s data collection efforts.” (more here)

When we add to this the national travesty of Obamacare that daily unfolds to reveal yet another promised benefit that has gone by the boards, and artificially low interest rates that promise mayhem at their normalization, we have an economy whose fuse has already been lit and proceeding toward explosion.  The bottom line is that EVERYTHING this administration has touched has come to cost more and become harder to make, sell, buy, and keep.

Comments

[BradC]

Check your figures George. "Census Bureau reports the largest annual gain since it began releasing such data in 1967"

The Trumpeteers are going to have to focus on other 'bitches du jour' (and there are plenty) for entertainment.

http://www.wsj.com/articles/u-s-household-incomes-surged-5-2-in-2015-ending-slide-1473776295

What a hoot!

[George Rebane]

BradC 626pm - ??? What is your point Mr Cross?

[fish]

Ok Brad sock puppeting.......!? Interesting!

Thanks Bobby!

[Russ]

When I heard this economic report coming less than 60 days before an election with one of the candidates running on the record of the last seven years, to sudden have big uptick in median income, the hair on the back of my neck when up, and the BS detector alarm behind my right ear when off. How convenient! Is it real? Or, is the government playing name with the numbers? Like they are playing games with the climate data to create warming that is not happening. They could be creating economic progress when none is happening. I want to see more evidence, a second and third source that we are now over the economic hump.

[Account Deleted]

Largest annual gain? And what is the percentage of adults in the US working for various arms of the govt vs private enterprise compared to years past? And what is the rise in govt debt?
Go ahead and compare. It's not a problem to increase the middle class pay rates when they work mainly for the govt. Just go more deeply into govt debt and print more money.
Manufacturing jobs are down and govt work force is up. What can go wrong? Venezuela is certainly doing just fine with that program.

[Russ Steele]

More evidence that the Government may be cooking the economic books:

However, a year-to-year comparison could lack precision based on a redesigned survey from the Census Bureau in 2014, which is intended to capture more income than the old survey.

Comparing oranges to grapefruit is not very useful and can be misleading, and that is what the government is attempting to do, giving Obama economic talking points while stumping for Hillary and polishing his own legacy. His real legacy is the slowest recovery in history.

[Bob Hobert]

Think of the boost to 'median incomes' that will occur when minimum wage jobs are eliminated and replaced by robots.

[Russ]

More on the medium household income.

"The highest rate increase ever since the stats were collected." Tom Sullivan.

Bureau of Labor Statistics said the average income declined in 2016, which is an independent source, not like the Census Bureau that issued the statement, they are part of the White House. One of Obama's first acts as President was to being this formally independent agency under the control of the White House. Who are you going to believe, the White House controlled Census Bureau of the Bureau of Labor Statistics?

Sentier, a research agency formed by former Census Bureau Staffers who left the agency has this to say:

Sentier data deflated with the CPI (see above) shows a jump in real median household income in 2015 which Sentier says was due in large part to low gasoline prices. Median household income is still down from its early 2008 peak.

More details at Zerohedge:
http://www.zerohedge.com/news/2016-09-15/deconstructing-median-income-farce

[Russ]

Harvard Business School:

According to an annual competitiveness survey, dysfunction within federal government is the single biggest barrier to economic progress in the United States.

By Lonnie Shekhtman, Staff SEPTEMBER 15, 2016

This is not the product of the natural dips and bumps that typically punctuate our economy. According to a study released Thursday by Harvard Business School, thee biggest threat to US competitiveness is our crippled political system and the “unrealistic and ineffective national discourse on the reality of the challenges facing the U.S. economy,” study authors reported.

“A lot of people think that what’s going in is we had a bad recession and that we’re just recovering,” Michael Porter, a study author and co-chair of Harvard’s Competitiveness Project, which conducts an annual survey of US business leaders, tells CNBC. “What we find is that all the major data points that started moving in the wrong direction started in the late 90s and 2000s.”

These data points plot a picture that doesn’t bode well for small businesses and average American workers, whose pay and job opportunities are declining as they’re competing with workers around the globe.

“We used to have the most skilled workers in world; now we don’t,” Dr. Porter says.

According to thousands of Harvard alumni, MBA students and non-Harvard responders, the country’s biggest problem is a tax code that hasn’t been updated in decades, even as the world has become more globalized, digitized, and as closed-off economies have opened for business.

http://www.csmonitor.com/Business/new-economy/2016/0915/Politics-is-crippling-the-US-economy-Harvard-study-says

[George Rebane]

We must always pay mind to the current cost of government regulations to our economy which today exceeds $1,000,000,000,000 - that's like T in a trillion and adds an additional tax of about 5.5% of our GDP.

[fish]

IN WHICH WE ARE REGULARLY REMINDED THAT TAXES AND REGULATION HAVE NO IMPACT ON BEHAVIOR.......

http://nypost.com/2016/09/15/taxpayers-are-fleeing-new-york-in-droves/

[Bill Tozer]

Ca the new Nordic Paraside?

http://www.forbes.com/sites/joelkotkin/2016/09/15/californias-boom-is-poised-to-go-bust-and-liberals-dream-of-scandinavia-on-the-pacific/#2a734c6759b1

[Russ Steele]

Census report of big jump in income is a little too good to be true

Brookings Institute is not buying the big hike in household income either. Details here:

https://www.brookings.edu/blog/up-front/2016/09/16/census-report-of-big-jump-in-income-is-a-little-too-good-to-be-true/

[fish]

Well gentlenmen ...those are all very troubling developments....at least ObamaCare is validating the the professional judgements of intellectual luminaries like Paul Krugman by improving health care!

"Medical costs jump in August by largest amount in 32 years, CPI shows"

Bending the cost curve indeed.....

http://www.marketwatch.com/story/inflation-jumps-02-in-august-cpi-shows-2016-09-16

[George Rebane]

We continue to note the silence of the lambs (sheeple?) when the obvious and long predicted foibles of socialism are pointed out in these pages. The sad part is that socialists are stasists who never learn, and instead double down on their disastrous public policies vowing to do it right the next time. It was ever thus.

[Russ]

Only in Obama's Growing Economy: Sears & Kmart MAY Close

Moody's analysts say Sears and Kmart don't have enough money — or access to money — to stay in business.

In a note published Wednesday, the analysts downgraded Sears' liquidity rating, saying the company is bleeding cash and will have to continue to rely on outside funding or the sale of assets, such as real estate, to sustain operations.

More details here:

https://sierrafoothillcommentary.com/2016/09/17/only-in-obamas-growing-economy-sears-kmart-may-close-doors/

By by more Nevada County sales tax revenue!!

[Russ]

Texas’s sprawling cities are growing Science, Technology, Engineering, and Math (STEM) jobs faster than the Bay Area.

http://city-journal.org/html/urbanism-texas-style-14728.html

The Progressives are killing California!