The Obama Bubble
By Randy FardalIt's a good allegory for the 21st century US presidency. Like many pre-bubble tech nerds, President Bush apparently believed that self-promotion would cheapen the Office of the President, so he did little of it. For instance, when competitors attacked his Social Security privatization plan, he didn't defend it, even though he was right and his demagogic opponents were wrong. In terms of political branding, the Bush administration was pre-bubble.
Now we have a president that, as they say in Bush's Texas, is all hat and no cattle. With a quarter-page résumé, he is little more than a brand name. And like the tech bubble, the Obama bubble is in danger of bursting, despite his plan to spend another billion campaign dollars inflating it over the next 14 months.
During the high tech bubble, many sell-side analysts, such as those at investment banks, overestimated the market value of certain firms. In fairness to the analysts, most were quite professional and even partitioned from the banking business. But their superiors often edited the reports to make them more optimistic because they hoped to underwrite an IPO or secondary offering for the firms they covered.
At the same time, many buy-side analysts, such as those managing mutual funds, switched from being value investors like Warren Buffet, to become trend investors like George Soros. They knew that the lofty valuations were unjustifiable, but they also realized it was dangerous to "fight the tape" so they too issued overly optimistic buy recommendations -- perhaps with tighter stop-loss orders though.
Similarly, Big Media "sell-side" journalists hoped to profit from a far-left presidency, so they hyped Obama, Inc. Leftist Big Media companies may have expected an Obama administration would hobble their talk radio competitors with the Orwellian "Fairness Doctrine." In addition, PBS and NPR have strong incentives to support candidates such as Mr. Obama, that are likely to help them tap deeper into the public treasury via taxpayer subsidies, tax-exempt business designations, and tax benefits for their donors.
General Electric, which in 2008 owned NBC and MSNBC, might have hoped to get favorable treatment for the wind turbine business it had purchased from Enron. NBC's "Green Week" promotions certainly had the appearance of journalistic feathering of the corporate nest. Even some non-conflicted "buy-side" journalists shrugged and played along because they feared fighting the populist trend. Or being called racist.
However, Obama's valuation, as measured by his poll numbers, has fallen enough to hit the implicit stop-loss triggers set earlier by wary buy-side journalists. They no longer fear accusations of racism and they don't care whether the polling trend recovers slightly, because now it's clear that Obama, Inc. never will achieve its original hype.
During its 2008 "IPO", Obama, Inc. was hawking virtual bottles of magical potion with a "Hope and Change!" smiley face label. But since then, none of its products has met the minimum tests for safety and efficacy. The products proved instead to sicken, not heal the economy, and Mr. Obama's foreign policy appears to be nurturing terrorist regimes. Peeling off the smiley face label reveals old images of Jimmy Carter and Hugo Chavez.
A recent New York Post column details the hype problem:
What's most perplexing about all of this: Barack Obama had undeniably the greatest, most successful product launch of the 21st century. Weeks before winning the presidency, he won Ad Age's "Marketer of the Year" Award, beating such brands as Apple, Nike and Coors. It was a hard-won honor: No presidential campaign in history had been run with such airtight, top-down control, with veteran political consultant David Axelrod stressing an aesthetic and thematic unity that resulted in the consistent use of a lovely font, two pithy slogans and high-tech advances. One of the first applications designed for the iPhone was the official Obama for America app.
...it all felt very organic and authentic, inviting and human. But when then-White House social secretary Desirée Rogers sat for a glossy profile with the WSJ magazine in April 2009, she let slip a cynical truth: "We have the best brand on Earth -- the Obama brand," she bragged. "Our possibilities are endless."
Then the smiley face label gradually peeled off:
Three years on, Barack Obama -- overexposed, way too talkative and kind of cranky -- now exists in what the Harvard Business Review calls "product limbo." It's a byproduct of the content not aligning with the sales pitch.
At this rate of decline, Obama, Inc.'s valuation soon will hit the Big Media sell-side journalists' stop-loss triggers, and they too will begin dumping. They watched the housing bubble take down hundreds of banks, so they might fear that a bursting Obama bubble could take down hundreds of Big Media journalists. To use another Wall Street metaphor, even Big Media partisans aren't dumb enough to try catching a plummeting refrigerator, so they'll just step aside and cut their losses, as they ultimately did with Carter.
How can Obama, Inc. re-brand its failed product line? Perhaps it will use its billion-dollar branding fund to place "New! Improved!" stickers over those old misleading "Hope and Change!" labels. Unfortunately for Mr. Obama, everyone already knows that the potion in those allegorical bottles still is toxic.
Why Obama Can't Lead
Why Obama Can't Lead
By Michael Bargo Jr.Since the late 1800s black churches in Chicago have been the center of black politics [i]. Early in the 1930s the "Black Machine" of Chicago was established as a subgroup of the white political machine [ii]. Because of the prominence of Mayor Daley I in the national political scene, Chicago's ability to create political leaders has meant that the Windy City became a gateway to national politics for black leaders [iii]. This is why Jesse Jackson moved to Chicago. Barack Obama, born in Hawaii, raised in Indonesia, educated in the Northeast, went to Chicago to begin his political career.
For 22 years he attended the church services led by Rev. Jeremiah Wright. African-Americans who attended his and other black liberation theology church services in Chicago are taught that their options are limited by the "other," and this other is white society. Personal choice is not the route to success; choices are limited by the overwhelmingly oppressive power of dominant white America. America is not, for Rev. Wright's paradigm, a land of opportunity, but instead a land of oppression.
In this political culture, the black political leader does not encourage his people to move forward, but rather convinces them that they cannot move forward. Whatever choices they make, their future is determined not by personal choice, but by the restrictive confines of white society. This is why actor-comedian Bill Cosby is viciously attacked when he suggests that African-Americans take responsibility for their own choices. His comments are perceived as an existential threat to the politics of black liberation and the entire political belief system that keeps the black political elites in power.
President Obama is constrained by the political paradigm of black leadership, since for him to be in control of the government would mean to betray his people. He would become the establishment "outsider" and he cannot do that. It would require the abandonment of his core beliefs. This is why he constantly blames former President Bush for the constraints that he still feels are holding him back. He is not in control; society and the world at large are. He blames the tsunami and Arab Spring for his economic failures. He leaves it to others (such as Senate leader Reid in the debt negotiations) to work out the details. The black political leader's handbook does not have a chapter on "owning" decisions.
His strategy is to highlight and blame the political context of his predicament, rather than make and own decisions. He cannot own his decisions since in his view, and the view of black politicians, only white society controls the process of decision-making. These decisions are by nature oppressive. There is no accommodation in black liberation rhetoric for "good" white establishment decisions. Obama then faces two constraints: he cannot personally become part of the oppressive establishment, and secondly, cannot engage in establishment decision-making. Whether he is consciously aware of these constraints, and chooses to go along with them, or is unaware of these constraints he imposes upon himself, does not matter. The effect is the same.
While in reality President Obama is the most powerful man in the world, his Chicago-forged sense of identity as a black political leader restricts him to complaining about why he can't effect meaningful change because of others, the excuse-du-jour now being the GOP House.
President Obama is not limited by the Republican Congress, or the decisions of past presidents, or the state of the economy; he is limited by his perceptions of what a black politician can and cannot do. Because black political thinking indoctrinates even its proponents into thinking that they are not responsible for their choices, that their futures are determined by white society, Barack Obama is either incapable of making decisions (because he never felt able to make them), or cannot betray the political paradigm of black leadership. Either way, the result is a lack of engagement in the decision making process.
Hollywood Auction Ends Myth of Zaftig Marilyn
Hollywood Auction Ends Myth of Zaftig Marilyn: Virginia Postrel
Illustration by Beth Höeckel
We should never again hear anyone declare that Marilyn Monroe was a size 12, a size 14 or any other stand-in for full-figured, zaftig or plump. Fifteen thousand people have now seen dramatic evidence to the contrary. Monroe was, in fact, teeny-tiny.
The 15,000 were the visitors who turned out over eight days to oooh and aaah at the preview exhibit for the June 18 auction of Debbie Reynolds’s extraordinary collection of Hollywood costumes, props and other memorabilia.
The two comments heard most often in the crowded galleries were (to paraphrase), “Wow, they were thin” and “It’s such a shame. These things should be in a museum.”
The two remarks are in fact related. The former demonstrates the truth of the latter.
When the auctioneer’s final hammer came down at 1:20 in the morning, the world lost a treasure. The collection Reynolds assembled over 40 years will now be fragmented and dispersed. “It was a melancholy day for Los Angeles and the rest of the country,” wrote Christian Esquevin on his Silver Screen Modiste blog, expressing a common sentiment. “We will never see the likes of this collection again.”
The movie business has never particularly valued its historical artifacts. Hollywood, notes director John Landis, treats costumes and props as “industrial waste,” to be recycled or discarded but not displayed or preserved. It also keeps an embarrassed distance from the enthusiasts who treasure such relics. Unlike, say, science fiction, the mainstream movie industry doesn’t embrace cult followings. And Los Angeles is notorious for its paucity of institution-building philanthropists.
A Failed Museum
Despite decades of effort, Reynolds never managed to find funding for the Hollywood motion-picture history museum she envisioned. The collapse of her most recent attempt, a project in Pigeon Forge, Tennessee, near Dolly Parton’s Dollywood, precipitated the auction. Reynolds has debts to pay.
From a strictly financial point of view, the collection was undoubtedly worth more in pieces than together -- $22.8 million for the 587 lots sold over the weekend, with a second auction planned for December. My cache of 1930s Fortune magazines would similarly sell for more if I sliced them up and sold the ads and covers separately on EBay.
But as a historical record, a costume collection, like a vintage magazine, is more than the sum of its parts. You learn more from considering the group as a whole.
Take the question of Marilyn Monroe’s size.
That White Dress
The auction’s top-ticket item was Monroe’s famous white halter dress from “The Seven Year Itch,” the one that billowed up as the subway passed. It sold for almost $5.66 million (including the buyer’s premium) to an unknown phone bidder. Sharing a rotating mirrored platform with Hedy Lamarr’s peacock gown from “Samson and Delilah” and Kim Novak’s rhinestone- fringed show dress from “Jeanne Eagels,” Monroe’s costume was displayed on a mannequin that had been carved down from a standard size 2 to accommodate the tiny waist. Even then, the zipper could not entirely close.
But that’s just one dress. Perhaps the star was having a skinny day. To check, you could look across the room and see that Monroe’s red-sequined show dress from “Gentlemen Prefer Blondes” was at least as petite, as were the saloon costume from “River of No Return” and the tropical “Heat Wave” outfit from “There’s No Business Like Show Business.”
Half a Person
In fact, the average waist measurement of the four Monroe dresses was a mere 22 inches, according to Lisa Urban, the Hollywood consultant who dressed the mannequins and took measurements for me. Even Monroe’s bust was a modest 34 inches.
That’s not an anecdote. That’s data.
The other actresses’ costumes provided further context. “It’s like half a person,” marveled a visitor at the sight of Claudette Colbert’s gold-lame “Cleopatra” gown (waist 18 inches). “That waist is the size of my thigh,” said a tall, slim man, looking at Carole Lombard’s dress from “No Man of Her Own” (a slight exaggeration -- it was 21 inches). Approaching Katharine Hepburn’s “Mary of Scotland” costumes, a plump woman declared with a mixture of envy and disgust, “Another skinny one.”
The pattern she noticed was real. At my request, Urban took waist measurements on garments worn by 16 different stars, from Mary Pickford in 1929 (20 inches) to Barbra Streisand in 1969 (24 inches). The thickest waist she found was Mae West’s 26 inches in “Myra Breckinridge,” when the actress was 77 years old.
Waist sizes are easy for the general public to notice and understand. Trained eyes find other patterns that can only emerge when costumes are examined together, rather than treated as individual icons based on who wore them.
Variety Versus Trends
Historians can compare the construction and cut of the “Mutiny on the Bounty” uniforms from 1935 with those from the 1962 remake, for instance, or analyze how Elizabethan court dress was imagined for “Mary of Scotland” or “The Private Lives of Elizabeth and Essex” in the late 1930s, versus “Young Bess” or “The Virgin Queen” from the mid-1950s.
To understand the past, you need a large sample. Only then can you separate idiosyncratic variation from broad trends. With more costume examples, notes Kevin Jones, curator of the museum collections at the Fashion Institute of Design and Merchandising in Los Angeles, you can “get a complete picture of the overall look and feel of a particular production and the specific style of an individual designer.”
One of the strengths of Reynolds’s collection was that she assembled multiple costumes from the same movie -- 12 lots from “Desiree,” for instance, not just Marlon Brando’s coronation robes as Napoleon.
The Entire Cast
She saved not only Audrey Hepburn’s iconic Ascot costume from “My Fair Lady” but also Rex Harrison’s accompanying Henry Higgins suit; not just Gene Kelly’s sailor uniform from “Anchors Aweigh” but also Frank Sinatra’s; not just Norma Shearer’s embroidered Juliet gown but two of Leslie Howard’s Romeo doublets and pants plus the costumes for Lady Capulet, Paris, two female extras and a Montague pole bearer. The auction broke apart such groupings, likely forever.
It also complicated preparations for a landmark costume exhibition. In October 2012, the Victoria & Albert Museum in London will mount the largest motion-picture costume display ever, with costumes representing a century of movies, borrowed from at least 13 institutions and private collections.
Vibrant Art Form
The show is being curated by Deborah Nadoolman Landis (John’s wife), a costume historian and Oscar-nominated costume designer who directs the David C. Copley Center for the Study of Costume Design at the UCLA School of Theater, Film and Television. Its goal, she explained, is to show costume design “as a vibrant modern art form” and “a key component of cinema storytelling.”
Reynolds had enthusiastically pledged whatever costumes from her collection were needed. “She gave me all of her inventory books and said, ‘Look through them. I’ve been trying to do this for years. Please pick whatever you want, and I would love to share these with the world,’” says Landis.
Financial reverses spoiled those generous plans, leaving Landis to hope that anonymous bidders will step forward to volunteer their new prizes for the exhibit. She attended the auction in hopes of identifying these buyers, and the back page of the auction catalog carried the V&A’s plea to borrow eight iconic costumes.
Eccentric and Valuable
Yet even as scholars and fans mourn the collection’s breakup, dreaming of the museum that might have been, they admit the importance of private collectors. These enthusiasts may not all preserve artifacts in museum-quality condition, keeping costumes unaltered and mostly in the dark. But without the sometimes-eccentric people who buy at auctions out of their own passion to own a piece of movie history, no one would have saved these objects in the first place.
“Thank God for them,” says Deborah Landis. “Thank God for Debbie. We would have nothing. It would have been rags. That was the old way. We used everything until it fell off the hanger. That was the tradition in Hollywood.”
Free-Ranging Market Would Save Wolves, Ranchers
Free-Ranging Market Would Save Wolves, Ranchers: Brendan Borrell
Illustration by Alexandra Falagara
Get your rifles ready: Wolf season opens at the end of August, and for as little as $11.50 you’ve got a better chance than ever of bagging this toothy predator.
In July, Montana doubled its kill quota to 220, and Idaho, well, it has declined to set a quota. Wyoming plans to treat wolves as predators in most of the state, allowing them to be killed on sight. If all goes according to plan, the Rocky Mountain wolf population will be knocked down 60 percent from its peak of 1,733 in 2009.
This is obviously a perfectly sound strategy for preserving an iconic American species, which taxpayers have spent hundreds of millions of dollars breeding and feeding. No, not wolves, but public-lands ranchers, whose livestock graze on federal property and who are increasingly concerned about attacks by free-ranging wolf packs.
During this 15-year saga over wolves in the West, which pits conservationists against cowboys, it was easy to miss that the most outspoken cattlemen were not simply asking to guard their private property from deadly intruders. They were defending their right to pay rock-bottom prices to let their cattle graze unchaperoned on 162 million acres of federal land. Conservationists, trying to protect the wolf, were forced to claim these open spaces, vilifying ranchers and hunters and tying up federal regulators in a two-year lawsuit that was ultimately circumvented by Congress.
Fostering Conflict
Living with predators is never easy, but federal grazing policies seem designed to foster conflict rather than cooperation. The future of both wolves and ranchers depends, in part, on reforming our archaic and noncompetitive system through a shift to transferrable federal grazing permits sold on a regulated market.
Increased fees could offset government land management costs, improve environmental monitoring and enforcement, and compensate ranchers when wolves and other predators kill livestock. Environmental groups should be allowed to purchase and retire federal grazing permits in choice wolf habitat. The hunts should also continue, but with limits.
Wolves once roamed throughout the United States, but their presence was never welcome among men and women trying to make a living off the land. In the late 19th century, settlers and government workers devastated Western wolf populations using poison-laced animal carcasses inside and outside their stronghold in Yellowstone National Park. Animals that survived still faced shrinking forest habitat and a decline in their prey species, such as bison and caribou. In 1973, the northern Rocky Mountain wolf became one of the first animals listed under the new Endangered Species Act, but the move only provided the bare minimum of protection and little hope for recovery.
That’s due to the complicated history of public grazing, which also dates back to the late 19th century, when the federal government encouraged western expansion into fertile valleys suited to agriculture. Unclaimed tracts in the uplands became a tragedy of the commons as shepherds and cattlemen competed for space, their livestock trampling healthy stream beds and turning grassy meadows into dustbowls. Range rights were enforced through coercion and violence.
The Taylor Grazing Act of 1934 reduced overgrazing by granting ranchers renewable leases to specific allotments, which allowed them to build fences and encouraged them to take care of the public land.
Today, ranchers have 26,000 permits to graze millions of livestock on pasture managed by the Bureau of Land Management and the Forest Service. They pay $1.35 per head of cattle per month -- a price set by cattle prices, livestock production costs and, ostensibly, private grazing lease rates. But since 1980 that amount has decreased 40 percent to its statutory minimum, and it is typically one-10th of grazing fees on private property and state lands.
Taxpayers Foot Bill
The U.S. spends about $135 million per year managing public-lands grazing, according to the Government Accountability Office, but collects only $21 million in fees. Taxpayers also foot the bill for the Agriculture Department’s predator control program, whose hunters killed 81,684 coyotes and 478 wolves in 2009.
These subsidies might be acceptable if the federal government adequately managed public lands for both food security and environmental sustainability. But many allotments have more cattle than they can support, and land managers rarely hold ranchers accountable when they violate their contracts or damage public lands. Permits have been revoked in just a handful of extreme cases after bankruptcies and charges of animal abuse. It’s a plum deal for these lucky ranchers, who drop their calves and cows off at the beginning of summer and pick them up a hundred pounds fatter in the fall.
In 1995, the range wars began anew. That’s when Canadian wolves were reintroduced to Yellowstone to bring the elk-heavy ecosystem back into balance. Other wolves started moving into northern Montana and Idaho on their own. As their numbers swelled, they were killing a few hundred sheep and cattle every year.
Ranchers have always had the right to shoot wolves caught in the act of attacking livestock, but they wanted to be able to shoot any wolf on sight and to enlist sport hunters for their cause. In 2011, they got their wish. Congress -- at the urging of the Public Lands Council and the National Cattlemen’s Beef Association -- took the unprecedented step of booting Rocky Mountain wolves from the endangered species list.
Idaho and Montana plan to use hunting to keep wolf populations hovering at just above the threshold that would invite federal scrutiny: a couple of hundred animals each. Wyoming has agreed to treat its 340 or so wolves as predators in all but the northwest corner of the state.
Remarkably, legislators from these states are also seeking, through the 2012 Interior Department appropriations bill, to weaken environmental oversight of grazing permits, ban judicial review of wolf protection in Wyoming and the Midwest, and restrict legal challenges to grazing management. These moves would only lead to more acrimony in the West and, inevitably, more money wasted in the courtroom.
A Market Approach
Reducing wildlife conflicts through a market approach is not a new idea. In a few cases, environmental groups have paid ranchers to voluntarily retire federal permits, and the conservation group Defenders of Wildlife began a program -- now run by the federal government -- to compensate ranchers for confirmed livestock kills. For state land trusts, open permit auctions are obligatory because the law requires them to reap the highest profits to support schools.
Congress should make this happen on a wider scale, empowering land managers to fully appraise permits using the latest environmental and livestock science and by allowing ranchers to sell them at market rates. The Endangered Species Act may be our best tool for keeping wolves from going extinct, but a fair market for grazing could help find the right balance when wolves roam free.
CBO Outlook Is Partly Cloudy With Chance of Storms
CBO Outlook Is Partly Cloudy With Chance of Storms: The Ticker
The Congressional Budget Office this morning updated its projections for the U.S. budget deficit, unemployment and economic growth. It's a lot like the weather: Partly cloudy, with a chance of storms ahead. For the deficit, the CBO now estimates the red ink will total $1.3 trillion for the fiscal year ending Sept. 30, down slightly from a previous projection of $1.4 trillion.
A little better, but even so, 2011 would be the third consecutive year of deficits above the trillion-dollar mark. At 8.5 percent of GDP, the deficit would be the third-largest since 1946.
For fiscal 2012, the CBO projects a deficit of $973 billion, down from its previous forecast of $1.1 trillion.
It expects joblessness to fall to 8.9 percent in this year's fourth quarter, and to 8.5 percent by the end of 2012. But the CBO sees unemployment remaining above 8% until 2014.
The budget office updated its July forecast to reflect the policy changes enacted in the Budget Control Act, aka the debt-ceiling deal. The new outlook, however, does not reflect other developments since early July, including this month's plunging stock markets and the weakness in some economic indicators.
The CBO said it would have tempered its near-term growth forecast if it took all that into account. With that caveat, CBO projects inflation-adjusted GDP will be a still sluggish 2.3 percent this year and 2.7 percent in 2012. That forecast reflects CBO’s expectation of continued growth in business investment, modest consumer spending increases, gains in net exports (exports minus imports) and the beginning of a recovery in new-home construction.
The budget agency warned of larger deficits and greater debt if Congress extends the Bush tax cuts, indexes the alternative minimum tax for inflation, and prevents cuts to Medicare payments to physicians -- each a policy under discussion on Capitol Hill. If all that happens, annual deficits from 2012 through 2021 would average 4.3 percent of GDP, compared with 1.8 percent in CBO’s baseline projections.
Berk: Kill Business Profit Tax; Dock Investors Instead
Berk: Kill Business Profit Tax; Dock Investors Instead
Illustration by Ryan Thacker
The corporate income tax, part of the U.S. tax code since 1909, is a failure on all counts. It isn’t raising much money. It isn’t creating socially desirable incentives, and it isn’t immune from manipulation. We should get rid of it in favor of more efficient levies on capital.
There are two commonly held myths about corporate taxes. First, that they bring in a lot of money. They don’t. Last year, only 8.9 percent of government revenue came from such sources. Second, that companies pay the tax. They don’t; only people pay taxes. The corporate tax is extracted from persons associated with a business: investors, employees and customers. Government revenue from these people has been dropping steadily since the peak of almost 30 percent in the 1950s.
One reason why the corporate contribution is low is the tax break for debt. Companies’ payments to debt holders are deductible, while dividends for equity holders aren’t. This imbalance was written into law a century ago, when corporate-tax rates were so low that the disparity didn’t seem to matter. As those levies have climbed, corporations have become eager to take on leverage and thus lower their payments to the Internal Revenue Service.
We witnessed the consequences of this policy in 2008. Corporations, especially banks, opted to issue too much debt, ultimately imposing huge costs on society. One might argue that the leverage subsidy could be better eliminated by simply removing the exemption for debt payments. But that solution is unlikely to succeed, given corporations’ immense lobbying power in Washington.
Creating Loopholes
This brings up a second reason to eliminate the tax. For individuals acting alone, it is effectively impossible to bend the tax code to our will. We can’t afford to hire lobbyists to argue for tailored exemptions for us. We aren’t likely to channel campaign contributions to politicians who can create loopholes just for us, or to ask top accounting firms to reinterpret the tax code to our advantage.
Such ploys are so expensive that it’s cheaper to pay what is due. But if we were taxed as a group, the equation would change. Then we could share tax avoidance costs. If the group were large enough, it would become beneficial for us to engage in tax avoidance.
From a tax perspective, a corporation is a large collection of individuals sharing the costs of avoidance. General Electric Co. (GE), for example, posted $14.2 billion in profits last year but reported paying only $1.1 billion in taxes, an average rate of just 7.4 percent. Corporations strive mightily to pay much less than the statutory 35 percent tax rate on their profits -- a socially wasteful activity.
Meanwhile, the corporate tax’s mischief keeps increasing. Because the levy distorts corporate incentives, it imposes a significant indirect burden on individuals. Workers bear large costs because, by subsidizing leverage, more firms go bankrupt, thereby undermining job security. The rest of us are forced to pay when these over-leveraged firms are deemed too big to fail and must be funded by large government bailouts.
Most importantly, our political process is compromised by the tax-avoidance strategies that corporations adopt. It is hard to understand why we, as a society, are prepared to incur these additional costs for a tax that raises less than 9 percent of government revenue. Surely we are better off eliminating the tax altogether and replacing it with a direct one on individuals.
Taxing Dividends
The obvious alternative would be additional taxes on investment income. Dividends could be taxed at regular rates for individuals, rather than the current 15 percent, which is low by historical standards. The capital-gains rate could be increased, too, from its current maximum of 15 percent on long- term profits.
Greater reliance on investor taxes would be simpler, more equitable, more efficient and more easily enforced. These changes could be implemented without adding to the true load that investors already shoulder. If investors are currently paying most of the corporate tax anyway, increased investment taxes merely offset what was previously paid as corporate taxes.
For society as a whole, efficiency gains would arise as corporations shake free of perverse incentives to spend time and money on tax avoidance. Managerial talent could be redeployed more productively. GE’s shareholders would no longer need to finance the world’s best tax-law firm. Businesses could concentrate on product innovation and profit expansion, creating more lasting value.
Self-Employment Should Play a Bigger Role in Jobs Programs
Self-Employment Should Play a Bigger Role in Jobs Programs: View
Illustration by Bloomberg View
Cammie Allie and Ann Costlow are small-scale entrepreneurs who aren’t trying to start the next Microsoft. Yet both have battled back from unemployment to create successful businesses, with the sort of government support that could help thousands of other jobless people, too.
Allie manages apartment buildings in Portland, Oregon; Costlow owns four creperies in Maryland. To get started, each drew on business coaching and income support from an unusual state-funded jobless initiative. These self-employment assistance programs provide 26 weeks of income support, typically about $10,000. Participants try to start enterprises, rather than being required to look full time for traditional jobs.
Founding a business isn’t for everyone. Hours are long, initial earnings puny, and the failure rate high even in boom times. A weak economy makes everything harder.
For some displaced workers, however, self-employment may be their best hope. Entrepreneurial aid to the jobless is typically aimed at older, educated workers who lost good jobs in battered industries. With the national unemployment rate above 9 percent, such candidates face slim odds of finding appropriate work through a standard job hunt.
In Oregon, people opting for self-employment get business pointers as well as detailed reviews of their startup plans. Examiners look for clear ideas about pricing, supplies, customers and competition. Only candidates judged to have at least a moderate chance of success can proceed.
Oregon’s Successes
Oregon recently surveyed 369 people who have participated in its program since 2000. Seventy percent had started a business; nearly half of those were hiring workers. The small survey’s responses might be skewed toward recipients who thrived. Even so, Oregon’s successful entrepreneurs each created an average of 2.63 additional jobs.
In New Jersey, about 600 jobless people a year try self- employment. Data on success rates is fragmentary, but state officials say participants have started businesses in at least 33 fields, including computer services and catering. When such ventures thrive, founders don’t just earn income -- they keep hiring, becoming job multipliers.
Self-employment aid closely matches the cost of regular unemployment benefits, which can run $400 a person per week. Britain, France and Sweden have operated similar entrepreneurial assistance programs since the 1980s, with good results. In the U.S., though, only about a dozen states have followed suit, and most programs are tiny.
Bureaucracy is partly to blame. Current state and federal rules don’t allow unemployed workers to pursue self-employment aid right away; instead they must qualify for regular jobless benefits first, which takes weeks. States also worry that some startup dreams might fizzle quickly, wasting taxpayer money.
Living With Risks
Making the entrepreneur’s path risk-free is impossible. Still, that shouldn’t stymie such aid. Three of the biggest states -- California, Texas and Florida -- are home to 30 percent of America’s unemployed. These states don’t currently offer entrepreneurial assistance to the jobless; setting up such programs would be a big help.
Two other changes could help make entrepreneurship a likelier path back to work. First, states should tell the newly jobless about the self-employment option right away, rather than making them wait a month or two before becoming eligible. And second, minor income from a side business -- capped at a reasonable level of, say, $750 a month -- shouldn’t be automatically counted against jobless benefits. In some cases this year’s hobby can be built into next year’s business.
When 4.7 people are out of work for every job opening, unemployed Americans deserve better odds of becoming their own bosses.
Tuesday, August 23, 2011
The Federal Reserve Saves The Stock Market?
The Federal Reserve has saved the stock market! Well, at least for a day. That was one heck of a "dead cat bounce" that we saw on Tuesday. Normally, after the kind of dramatic decline that we saw on Monday there is some sort of a rebound, but on Tuesday the market did not begin to soar until the Federal Reserve pledged to leave interest rates near zero until mid-2013. Once the Fed made their announcement, the market went haywire. At one point the Dow was down more than 200 points, but by the end of the day it was up 430 points. It was a desperate move for the Federal Reserve to pledge not to raise interest rates for the next two years, and it has stabilized financial markets for the moment. But what is the Fed going to do to save the stock market when it starts crashing next week or next month? The underlying financial fundamentals continue to get worse and worse. Europe is a mess, Japan is a mess and the United States is a mess. The Federal Reserve can try to keep all of the balls in the air for as long as possible, but at some point the juggling act is going to end and the house of cards is going to come crashing down.
This move may calm nerves for a day or two, but there is still a tremendous amount of fear out there at the moment. Many investors are pouring money into "safe havens" right now. Huge amounts of cash are being poured into U.S. Treasuries and the price of gold is absolutely soaring. The price of gold is up about $220 in just the last 30 days alone.
So how high could the price of gold go in the coming months? Well, analysts at JP Morgan are forecasting that the price of gold could hit $2,500 by the end of this year.
Yes, that is how wild things are becoming. The Federal Reserve is painting itself into a corner. Never before has the Fed pledged to leave interest rates near zero for the next two years. The following is an excerpt from the statement that the Fed released earlier today....
To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent. The Committee currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.
Needless to say, the rest of the world is not pleased by this nonsense from the Fed. Yes, the Fed has stabilized financial markets for the moment, but a lot of ill will is being created with the rest of the globe. The following is what Bruce Krasting had to say about how the rest of the world is going to react to this latest Fed move....
Brazil, Argentina, Korea, Indonesia are going to scream bloody murder over perpetual ZIRP. Russia is likely to get downright ugly with their rhetoric. I wouldn’t be surprised if they took this opportunity to vote with their feet and just abandon the dollar as a reserve holding. China will also make noise. They will make more calls for a new international currency to replace the dollar. The Central bankers in Japan and Switzerland are puking in the trashcan over this. Bernanke is exporting US deflation to them. Shame on the Fed for pursuing Beggar my neighbor policies. They deserve all the global criticism they are about to get.
The Federal Reserve is using up all of the ammunition it has available and the game has barely even begun.
Things are going to get a lot worse. The U.S national debt continues to pile up at lightning speed. The debt ceiling deal essentially does nothing to fix our debt problems. Thousands of businesses and millions of jobs continue to leave the United States. As a nation, we are constantly becoming poorer and we are constantly getting into more debt.
Meanwhile, Europe is on the verge of a financial meltdown and Japan has a "zombie economy" at this point.
Many fear that we could be on the verge of another major global recession. The following is how a recent Der Spiegel article described the current global financial situation....
Many economists have been pointing out that last week's panic resembled the fear that swept financial markets after the collapse of US investment bank Lehman Brothers in September 2008.
Then as now, banks stopped lending each money. Then as now, banks' cash deposits at the central bank doubled within days. The European Central Bank reacted by assuring banks of unlimited liquidity in the coming months. It was an emergency measure that led to short-term relief but sparked anxious questions among bankers and stock market players. How long can the central bank keep up its market-soothing liquidity operations before it finally loses its credibility, the most important asset of a central bank? Is the financial crisis about to escalate?
In the old days, the U.S. and Europe could just borrow gigantic stacks of cash in order to solve any problems. But now things are dramatically changing.
China's official news agency recently stated that the U.S. needs to understand that things are different now....
"The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone"
Not that the U.S. government and the Federal Reserve are going to suddenly give up their old habits. The U.S. government is addicted to debt and the Fed is addicted to printing money. When push comes to shove, they are going to resort to their favorite tricks.
But at some point the rest of the world is not going to play along anymore. When that moment arrives, it is going to be very interesting to see what happens.
Meanwhile, the U.S. economy continues to slowly unravel, and people in this country are getting very angry. Millions of Americans families are barely scraping by right now. Most Americans just want someone to "fix" things, but unfortunately there are no easy "fixes" to our financial problems.
As our economic problems grow even worse, frustration inside the United States is going to continue to escalate. A brand new Rasmussen survey found that only 17 percent of Americans now believe that the U.S. government has the consent of the governed.
That was a brand new all-time low.
Faith in the major institutions of our society is already dangerously low and the economy is not even that bad yet.
As horrible as things are now, the truth is that this is rip-roaring prosperity compared to what is coming.
In the months and years ahead, America is going to be greatly tested. As the recent London riots have shown, things can spiral out of control very quickly.
When the economy completely collapses will America be able to handle it?
Wake Up America
Wake Up America! 10 Very Obvious Reasons Why The Devastating U.S. Jobs Famine Is Going To Suck The Hope Right Out Of America
Do you have friends, neighbors and relatives that can't find work? Well, unfortunately the current U.S. jobs famine is about to get a whole lot worse. Right now there are approximately 13.9 million unemployed Americans. That does not count those that "are not looking for work". That does not count those that are working part-time jobs but that are desperate for full-time work. The truth is that we need tens of millions more full-time jobs in order to give one to everyone that wants one. Sadly, the long-term trends that have caused this mess continue to get worse. Unless truly dramatic changes are made, the U.S. economy is going to continue to bleed jobs and that is going to suck the hope right out of this country. It is time to wake up America! It is not a big mystery why we don't have enough jobs. But sadly, very few of our leaders are talking about the real issues.
Something has got to be done. Unemployment is already at epidemic levels, and this country can't afford for things to get much worse. Just check out how a recent article in The Wall Street Journal summarized our current predicament....
There are more unemployed than the combined populations of Wyoming, Vermont, North Dakota, Alaska, South Dakota, Delaware, Montana, Rhode Island, Hawaii, Maine, New Hampshire, Idaho and the District of Columbia.
If they were a country, the 13.9 million unemployed Americans would be the 68th largest country in the world, bigger than the population of Greece or Portugal (each of which has 10.8 million people) and more than twice the population of Norway (4.7 million.)
Isn't that incredible?
The number of unemployed Americans is larger than the entire population of Greece.
There are millions of Americans that will be sitting at home in front of their televisions tonight wondering why they can't find jobs. Last month, only 58.1% of Americans over the age of 16 were employed. Our economy should be able to do far better than that.
All over the Internet there are stories of people that have sent out hundreds (or even thousands) of resumes and nobody even wants to interview them. One recent survey found that approximately 80 percent of all Americans believe that it is "difficult" to find a job right now.
Unfortunately, things are going to get much, much worse before all this is over.
The following are 10 very obvious reasons why the devastating U.S. jobs famine is going to suck the hope right out of America....
#1 Our politicians simply do not care that America is bleeding jobs. Amazingly, even with rampant unemployment plaguing this nation, Obama administration officials continue to declare that it is okay that we are losing manufacturing jobs because a lot of cheaper products are things that "we don't want to make in America" anyway. The following is what U.S. Trade Representative Ron Kirk told Tim Robertson of the Huffington Post the other day....
Let's increase our competitiveness... the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don't want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don't want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure.
The economic negligence that recent administrations have demonstrated has been absolutely mind boggling. Blue collar male workers in particular are being absolutely devastated by the loss of manufacturing jobs. Back in 1967, 97 percent of men with a high school degree between the ages of 30 and 50 had jobs. Today, that figure is down to 76 percent.
#2 The Obama administration has now instituted a policy of "backdoor amnesty" for illegal immigrants by executive fiat. Janet Napolitano has announced that from now on there will be a case-by-case review of all deportation cases. Cases involving criminals will be prioritized and most others will be thrown out. A list of 19 factors that will allow government officials to use "prosecutorial discretion" in immigration cases has been distributed. Recently, I listed a few of those "factors" on The American Dream website....
-arrival in the U.S. as a young child
-actively "pursuing an education"
-serving or served in the U.S. military
-spouse of someone in the U.S. military
-18 years old or younger
-"elderly"
-pregnant or nursing
-victim of a "serious crime"
-serious disability or health problem
-caring for a family member with a serious disability or health problem
Obviously, it is not going to be too difficult for most illegal immigrants to fit into at least one of those categories.
On top of everything else the Obama administration has announced that it will now allow illegal immigrants to apply for work permits....
Illegal aliens living in the United States typically don't apply for work permits for fear of deportation, but under the new policy, they could apply for work permits if granted deferred action or parole and compete with 22 million Americans who can't find a full-time job.
So now blue collar Americans workers will have even more competition for the dwindling number of jobs.
#3 State and local governments all over the country are dead broke, and an atmosphere of austerity is sweeping the nation. Right now state and local governments are slashing jobs at an unprecedented rate.
In the past, government jobs were considered to be very secure and they definitely paid a lot higher than average. But now that era is coming to an end, at least on the state and local government levels.
According to the Center on Budget and Policy Priorities, state and local governments have eliminated more than half a million jobs since August 2008. UBS Investment Research is projecting that state and local governments in the U.S. will cut 450,000 more jobs by the end of 2012.
#4 U.S. businesses are being absolutely crushed by mountains of nightmarish regulations, and yet the federal government, the state governments and local governments just continue to pile them on. For example, the U.S. Food and Drug Administration is projecting that the food service industry will have to spend an additional 14 million hours every single year just to comply with new federal regulations that mandate that all vending machine operators and chain restaurants must label all products that they sell with a calorie count in a location visible to the consumer. Due to these kinds of ridiculous regulations, many business owners have simply given up and many other potential business owners figure that owning a business is just not worth the hassle.
#5 As I have written about so many times before, the "global economy" is really bad for American workers. When we merged our economy with the economies of nations where it is legal to pay slave labor wages, we made it inevitable that we would start losing massive amounts of jobs.
Why would a giant corporation pay a U.S. worker 10 to 20 times as much as a worker on the other side of the globe? Investors actually expect big companies to have an "outsourcing" strategy today. When more jobs get shipped out of the country, profits go up, stock prices go up and executive bonuses go up.
Big corporations don't exist to provide you with jobs. They exist to maximize shareholder wealth. If taking your job away and giving it to someone in Asia will make more money for them, then that it exactly what they are going to do.
#6 Unfair trade is absolutely killing our economy. It would be one thing if the U.S. was running a massive trade deficit solely because we were incompetent. But the truth is that a big factor is that a number of our "trade partners" are economic predators that are purposely trying to prey on us.
The other day, I wrote about some of the things that China does to steal our jobs, our factories and our wealth....
China massively subsidizes their biggest corporations, they brazenly steal technology from anyone that they can, they openly manipulate exchange rates and they allow their workers to be paid slave labor wages.
Today, we spend about 4 dollars on imports from China for every 1 dollar that China spends on imports from us. China now even makes more beer than we do. Even the new Martin Luther King, Jr. Memorial on the National Mall was made in China.
Until our politicians start insisting on a level playing field, all of this is going to continue.
#7 Small businesses are traditionally one of the primary engines of job growth in this country. But right now, small businesses all over America are having a really hard time getting anyone to loan them money. A big reason for this is that the Federal Reserve is actually paying banks not to make loans. Unfortunately, if small businesses can't get the money that they need, then they can't hire people.
#8 A lot of people may not want to hear this, but businesses in the United States are being absolutely taxed into oblivion. The U.S. now has the highest corporate tax rate in the world, but that is only a very small part of the story.
Michael Fleischer, the President of Bogen Communications, wrote an op-ed last year for the Wall Street Journal entitled "Why I'm Not Hiring". The following is how Paul Hollrah of Family Security Matters summarized the nightmarish taxes that are imposed when Fleischer hires a new worker....
According to Fleischer, Sally grosses $59,000 a year, which shrinks to less than $44,000 after taxes and other payroll deductions. The $15,311 deducted from Sally’s gross pay is comprised of New Jersey state income tax: $1,893; Social Security taxes: $3,661; state unemployment insurance: $126; disability insurance: $149; Medicare insurance: $856; federal withholding tax: $6,250; and her share of medical and dental insurance: $2,376. Roughly 25.9 percent of Sally’s income is siphoned off by Washington and Trenton before she receives her paychecks.
But then there are the additional costs of employing Sally. In addition to her gross salary, her employer must pay the lion’s share of her healthcare insurance premiums: $9,561; life and other insurance premiums: $153; federal unemployment insurance: $56; disability insurance: $149; worker’s comp insurance: $300; New Jersey state unemployment insurance: $505; Medicare insurance: $856; and the employer’s share of Social Security taxes: $3,661.
Over and above her gross salary, Bogen Communications must pay an additional $15,241 in benefits and state and federal taxes, bringing the total cost of employing Sally to approximately $74,241 per year. Sally gets to keep $43,689, or just 58.8% of that total.
After reading all that, can you really blame business owners for not wanting to hire additional workers?
#9 The national debt is like a giant albatross around the neck of the economy. The U.S. national debt has increased by more than 4 trillion dollars since Barack Obama took office. The rampant government spending that has been going on has not done much to create new jobs, but it will be a massive burden that will weigh down economic growth for many years to come.
When a nation is drowning in debt, a tremendous amount of economic resources must go to servicing that debt. Right now, hundreds of billions of dollars a year that could be used to build up our economy are instead being used to pay interest on the national debt. If interest rates go up significantly, we could soon be paying over a trillion dollars a year just in interest on the national debt.
#10 Right now America is very deeply divided and a tremendous sense of pessimism has set in. One recent survey found that 48 percent of Americans believe that it is likely that another great Depression will begin within the next 12 months. With such a negative feeling in the air, it is going to make it even less likely that business owners will be in the mood to hire people.
I know that I pick on Detroit a lot, but it really is a microcosm of what is happening to America. The following video contains some absolutely amazing footage of the ruins of Detroit....
Sadly, what is happening to Detroit is happening in hundreds of other communities across the United States.
All over America, neighborhoods that were once teeming with hope and prosperity are now falling apart. Hopelessness is rampant and it is spreading. The number of Americans on food stamps has increased 74% since 2007. If not for our increasingly overwhelmed "safety net", we would already have mass rioting in the streets.
Sadly, we are already seeing all sorts of signs that society is collapsing. As the economy continues to fall apart, the violence in our neighborhoods is going to get even worse.
The following is one very shocking recent example from the Chicago Tribune....
Moments before she was slain last week on Chicago's Southwest Side, 17-year-old Charinez Jefferson begged the gunman not to shoot because she was pregnant, prosecutors said today.
Despite her plea, Timothy Jones, 18, opened fire on Jefferson anyway, yelling an expletive at her as he shot her in the head, prosecutors said. He then stood over her as she lay on the ground and fired several more times, striking her in the chest and back.
America is changing. The country that so many of us have loved all of our lives is becoming unrecognizable. Large numbers of communities have had all of the hope sucked right out of them. Tens of millions of Americans that want to do things the "right way" are rapidly losing faith in the system.
When you can't get a decent job after months and months of trying it can be absolutely soul-crushing.
What do you tell someone that has spent a year sending out resumes and has used up all of their savings?
The era of endless prosperity for America is at an end. The cold, hard consequences of decades of bad decisions are starting to set in.
Unless a dramatic change of course happens, the long-term trends noted above are going to get progressively worse. It won't matter who is running Congress and it won't matter who is in the White House.
Right now our economy is rapidly hurtling downhill on a bus without breaks and we are headed directly for a cliff.
Please wake up America.
Many Baby Boomers Will Be To Work As Wage Slaves Until They Drop Dead
21 Signs That The New Reality For Many Baby Boomers Will Be To Work As Wage Slaves Until They Drop Dead
All over America tonight, millions of elderly Americans are wondering if their money is going to run out before it is time for them to die. Those that are now past retirement age are not going to be rioting in the streets, but that doesn't mean that large numbers of them are not deeply suffering. There are millions of elderly Americans that are leading lives of "quiet desperation" as they try to get by on meager fixed incomes. Many are surviving on Ramen noodles, oatmeal, peanut butter or whatever other cheap food they can find in the stores. There are some that are so short on cash that they will not turn on the heat in their homes until things get really desperate. As health care costs soar, millions of elderly Americans find themselves deep in debt and facing huge medical bills that they cannot possibly pay. A lot of older Americans would go back to work if they could, but jobs are scarce and very few companies seem to even want to consider hiring them. Right now caring for all of the Americans that have already retired is turning out to be an overwhelming challenge, and things are about to get a whole lot worse. On January 1st, 2011 the very first Baby Boomers turned 65. A massive tsunami of retirees is coming, and America is not ready for it.
Sadly, most retirees have not adequately prepared for retirement. For many, the recent economic downturn absolutely devastated their retirement plans. Many were counting on the equity in their homes, but the recent housing crash crushed those dreams. Others had their 401ks shredded by the stock market.
Meanwhile, corporate pension plans all across America are vastly underfunded. Many state and local government pension programs are absolute disasters. The federal government has already begun to pay out significantly more in Social Security benefits than they are taking in, and the years ahead are projected to be downright apocalyptic for the Social Security program.
So needless to say, things do not look good for the Baby Boomers that are now approaching retirement age.
The following are 21 signs that the new reality for many Baby Boomers will be to work as wage slaves until they drop dead....
#1 According to a shocking AARP survey of Baby Boomers that are still in the workforce, 40 percent of them plan to work "until they drop".
#2 A recent survey of American workers that included all age groups found that 54 percent of them planned to keep working when they retire and 39 percent of them plan to either work past age 70 or never retire at all.
#3 A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
#4 A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
#5 Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
#6 Most of the bankruptcies among the elderly are caused by our deeply corrupt health care system. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
#7 The U.S. government now says that the Medicare trust fund will run dry five years faster than they were projecting just last year.
#8 Starting on January 1st, 2011 the Baby Boomers began to hit retirement age. From now on, every single day more than 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every single day for the next 19 years.
#9 Over 30 percent of all U.S. investors currently in their sixties have more than 80 percent of their 401k retirement plans invested in equities. So what happens if the stock market crashes again?
#10 All over the United States predatory lenders are coldly and cruelly foreclosing on elderly homeowners. You can read what one lender is doing to a 70-year-old woman and her terminally ill husband right here.
#11 Medical bills are absolutely devastating large number of elderly Americans right now. Many are going to great lengths to try to pay their bills. An elderly woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends. However, a neighbor ratted her out, and so now the police are shutting her garage sales down.
#12 Social Security's disability program has already been pushed to the brink of insolvency and wave after wave of new applications continue to pour in.
#13 Approximately 3 out of every 4 Americans start claiming Social Security benefits the moment they are eligible at age 62. Most are doing this out of necessity. However, by claiming Social Security early they get locked in at a much lower amount than if they would have waited.
#14 According to the Congressional Budget Office, the Social Security system paid out more in benefits than it received in payroll taxes in 2010. That was not supposed to happen until at least 2016. Sadly, in the years ahead these "Social Security deficits" are scheduled to become absolutely nightmarish as hordes of Baby Boomers retire.
#15 In 1950, each retiree's Social Security benefit was paid for by 16 U.S. workers. In 2010, each retiree's Social Security benefit was paid for by approximately 3.3 U.S. workers. By 2025, it is projected that there will be approximately two U.S. workers for each retiree. How in the world can the system possibly continue to function properly with numbers like that?
#16 According to a shocking U.S. government report, soaring interest costs on the U.S. national debt plus rapidly escalating spending on entitlement programs such as Social Security and Medicare will absorb approximately 92 cents of every single dollar of federal revenue by the year 2019. That is before a single dollar is spent on anything else.
#17 Most states have huge pension liabilities that are woefully underfunded. For example, pension consultant Girard Miller recently told California's Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities. When you break that down, it comes to $22,000 for every single working adult in the state of California.
#18 Robert Novy-Marx of the University of Chicago and Joshua D. Rauh of Northwestern's Kellogg School of Management recently calculated the combined pension liability for all 50 U.S. states. What they found was that the 50 states are collectively facing $5.17 trillion in pension obligations, but they only have $1.94 trillion set aside in state pension funds. That is a difference of 3.2 trillion dollars. So where in the world is all of that extra money going to come from? Most of the states are already completely broke and on the verge of bankruptcy.
#19 According to one recent survey, 36 percent of Americans say that they don't contribute anything at all to retirement savings.
#20 According to another recent survey, 24 percent of all U.S. workers say that they have postponed their planned retirement age at least once during the past year.
#21 Even though prices for necessities such as food and gas have been exploding, those receiving Social Security benefits have not received a cost of living increase for two years in a row. Many elderly Americans that are living on fixed incomes are being squeezed like they have never been squeezed before.
There are millions of Americans out there that have done everything "right" all of their lives, but that now find the system letting them down in their golden years.
So how badly are some people hurting? Well, a reader identified as "Anna44" recently shared with us what some of her family members have been going through in this economy....
My B-I-L was a dealership owner/manager who worked long hours over 38 years and had to close his doors when Saturn was dissolved. When his dealership went under, 72 others lost their job. That’s 72 families who took a hit. He lost his home, everything. A few of his former employees lost their homes as well eventually. They were not lazy or WORTHLESS. It took him a year and a half to finally find something, but now he lives in a hotel unable to qualify for a house or apartment. This is an educated man who competed nationwide for top dog and got it more then once. His biggest fault? He’s almost 60, young enough to need the work, but too old to be hired.
As for my husband- 26 years AF officer, handling millions & billions on International & National levels has just entered his 7th month of unemployment. Two tours abroad- lazy he is NOT. He doesn’t qualify for unemployment, nor is he counted because he gets a retirement check. He wants and needs to work- yet there is little out there. If he doesn’t find something soon, we too will lose the home we sunk every cent into after 20 years of saving for it!
These are Americans that should be getting ready to enjoy their golden years, but that are now fighting just to survive.
Today you will find a disturbingly large number of elderly Americans flipping burgers or welcoming people to Wal-Mart. But most of them are not doing it because they are bored with retirement. Rather, most of them are working as wage slaves because that is what they have to do in order to survive.
Sadly, there are a whole lot of companies out there that do not want to hire people that are past a certain age. If you are older than 50, there are a lot of jobs that you should just basically forget about applying for.
Instead of valuing the experience and wisdom of our elders, our society openly makes fun of them and treats them as undesirables.
If you are afraid of getting old, you are not being irrational. Getting old is indeed something to fear in this society. We tend to treat elderly Americans like garbage.
Abuse of the elderly is rampant. For example, a report from a couple of years ago found that 94 percent of all nursing homes in the United States had committed violations of federal health and safety standards.
As the U.S. economy continues to crumble, the way we treat the elderly is probably going to get even worse.
Right now there is tons of bad news about the economy, and another major economic downturn would put even more pressure on federal, state and local government budgets.
The truth is that there is simply no way that we can keep all of the financial promises that we have made to elderly Americans even if the most optimistic projections for our economy play out.
If the worst happens, we are going to see a lot more elderly Americans eating out of trash cans and freezing to death in their own homes.
The United States is facing a retirement crisis of unprecedented magnitude. A comfortable, happy retirement is rapidly going to become a luxury that only the wealthy will enjoy.
For most of the rest of us, our golden years are going to mean a whole lot of pain and suffering.
That may not be pleasant to hear, but that is the truth.
Bad News
The bad news about the economy just keeps rolling in. If this is an economic recovery, what in the world is the next "recession" going to look like? Today there was another huge truckload of bad economic news. The stock market had another 400 point "correction", applications for unemployment benefits are up again, inflation is higher than expected, home sales have dropped again and Europe is coming apart at the seams. The financial markets have been in such a state of chaos recently that days like today don't even seem "unusual" anymore. But we should all be alarmed at what is happening. We haven't seen anything quite like this since the darkest days of 2008 and 2009. If more bad news keeps pouring in, we may soon have a very real panic on our hands.
I would have thought that my article yesterday, "20 Signs That The World Could Be Headed For An Economic Apocalypse In 2012", would have contained enough bad economic news to last for a while. But today there was another huge bumper crop of depressing numbers.
Are you ready for the carnage?
*The Dow fell 419 points today. That was a 3.7% drop. The S&P 500 shot down 4.5% and the Nasdaq plummeted by a whopping 5.2%.
*European bank stocks got absolutely hammered.
*The number of Americans applying for unemployment benefits jumped back above 400,000 last week.
*The recent inflation numbers have really taken analysts by surprise. The consumer price index rose at a 6.0% annual rate during the month of July. As I mentioned yesterday, the producer price index in the U.S. has increased at an annual rate of at least 7.0% for the last three months in a row.
So now we have high unemployment and high inflation. Oh goody! All of this stagflation is almost enough to make one nostalgic for the 1970s.
*The housing market is getting even worse. According to the National Association of Realtors, sales of previously owned homes dropped 3.5 percent during July. That was the third decline in the last four months. Sales of previously owned homes are even lagging behind last year's pathetic pace. Mortgage rates are now the lowest they have been since the 1950s, but there are very few interested buyers in the marketplace.
*The Philadelphia Fed's latest survey of regional manufacturing activity was absolutely nightmarish....
The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, decreased from a slightly positive reading of 3.2 in July to -30.7 in August. The index is now at its lowest level since March 2009
*Morgan Stanley now says that the U.S. and Europe are "hovering dangerously close to a recession" and that there is a good chance we could enter one at some point in the next 6 to 12 months.
All of this bad news is sending the price of gold through the roof. The price of gold soared to a brand new all-time high of $1,829.70 an ounce on Thursday morning. So far, the price of gold is up almost 30 percent in 2011.
Meanwhile, millions of average American families are deeply suffering and are desperately hoping that things won't get even worse. Everywhere you turn, there is a tremendous amount of stress in the air.
According to the New York Times, 25 million Americans "could not find full-time jobs last month".
As the economy crumbles, good paying full-time jobs are becoming increasingly scarce. People are hurting and they are looking for leadership.
Well, Barack Obama is running around the country promising that he will unveil some "solutions" very shortly.
So what are those solutions going to include? Well, the plans are still in the development stage, but the Obama administration is reportedly considering the following....
-The creation of a new government agency that will be dedicated to job creation. This will entail more government spending and more government paper pushers, but it will probably not do much to create good paying full-time jobs.
-Pushing even more free trade agreements through Congress. That way even more of our good jobs can be shipped to countries on the other side of the globe where paying slave wages to workers is still legal.
-A "reverse boot camp" that will train military veterans for civilian jobs. That sounds like a good idea, but we already have millions and millions of highly trained Americans that can't get jobs.
-An extension of the payroll tax cut for at least another year. That will put more money into the pockets of U.S. workers, but it will also mean less revenue for the federal government. The existing payroll tax cut has not exactly resulted in a "jobs boom", but removing that tax cut is certainly not going to help the economy either.
-An extension of long-term unemployment benefits. Yes, that will help the unemployed survive and will give them some money to spend into the economy, but it will not create many jobs for them. Plus it will put the government into even more debt.
-The creation of an infrastructure bank. Like most of the proposals above, this will entail even more government spending. I know that a "shovel-ready" joke is called for about now, but I can't think of one at the moment.
The ironic thing is that Barack Obama is riding around on his multistate "jobs tour" in a $1.2 million bus that was made in Canada.
You just can't make this stuff up.
Things have gotten so bad out there that even Wal-Mart is suffering now. Sales at Wal-Mart stores that have been open for at least a year have fallen for nine quarters in a row.
Not that anyone should have much sympathy for Wal-Mart, but it is a sign of just how bad things are getting out there.
So is there much hope for the future? Well, considering the fact that only 32 percent of 15-year-olds in the United States are proficient in math, things don't look good.
Our education system is a joke, tens of thousands of factories have already closed, more are closing every day, millions of jobs have been shipped overseas and most of our politicians are either incompetent or corrupt (or both).
So you would think that with all of our problems, authorities would be focused on the big issues.
But no, time after time they just keep picking on average Americans.
For example, a woman that lives in the Salem, Oregon area that is fighting terminal bone cancer tried to raise some money for her medical bills by holding a few garage sales on the weekends.
Well, the authorities in Salem got wind of this and now they are shutting her down.
This is absolutely unbelievable. A video news report about this incident is posted below....
Massive fraud and corruption at the big banks caused a worldwide financial crisis in 2008 and yet not a single Wall Street executive has gone to prison because of it.
Yet a cancer-stricken lady tries to hold a few yard sales to pay her bills and authorities come down on her like a ton of bricks.
Does that seem fair to you?
Our world is getting crazier every day. The bad news is going to keep pouring in. Global financial markets are being held together with chicken wire and duct tape. At some point the pyramid of corruption and con games is going to come crashing down.
If you still have faith in the system, you are not very wise. We are heading for an economic collapse that will be absolutely unprecedented, and you need to be getting prepared.
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