THE ENTERPRISE--A LOT TO WATCH FOR

THE ENTERPRISE--A LOT TO WATCH FOR

ECONOMISTS DON'T GET IT
Economists love to study numbers and reach conclusions.  Some are right, and many are horribly wrong, because the assumptions behind the numbers are wrong, wrong, wrong.  This is the case in  recent economists' pronouncements of the cost of regulatory burdens on small business.  They opine that it isn't all that great. (Check WSJ Article "Small Business Regulatory 'Burden' Is Tough to Quantify." Jan. 29-30 edition p. A2)  As usual, they miss a few critically important points. 

GOVERNMENT BUREAUCRATS DON'T GET IT EITHER.
How do you quantify the hours wasted trying to figure out what regulations your small business must comply with?  How to you quantify and assign a cost to the intimidation factor--that paralyzes many small businesses.  How do you quantify the constantly changing regulatory landscape and the fact that many of the so-called exemptions and tax relief take longer can cost more to understand than they are worth.  Economists, politicians and government bureaucrats have never had to make payroll, comply with hundreds of obscure regulations and still make enough money to stay in business.  They simply ride, like parasites, on the backs of businesses struggling to stay alive.

PEGGY NOONAN HIT IT ON THE HEAD--AGAIN
Readers know I like Peggy Noonan, and she is especially on target when she critiques presidential speeches, an area where she spent a lot of her life--writing them for President Ronald Reagan. The best of her quotes are here, but you can find her whole speech no the WSJ site and probably on her site:
---"The State of the Union speech was not centrist, as it should have been, it was merely mushy, and barely relevant."
---"Rhetorically the speech lay there like a lox, as if the document itself knew it was dishonest, felt embarrassed, and wanted to curl up quietly in a corner of the podium and hide.  But the president insisted on reading it."
---"The administration continues to struggle with the concept of priorities,  They cannot see where the immediate urgency is."
Noonan identified the central elements of the missed opportunity:
--"An inability to focus on what is important now."
--"Unresponsiveness to the political moment."
--"An attitude that was small bore and off point."
--"Unbelievability."
Noonan hits the central issue of Obama-speak in a couple of statements:
--"...there is often about the president and air of delivering a sincere lecture in which he informs us of things that seem new to him but are old to everyone else.  He has a tendency to present banalities as if they were discoveries."
Finally, she sums it up in two sentences that could be about Detroit and its tragic deterioration
 (Look at this:  http://www.huffingtonpost.com/2011/01/26/detroit-decline_n_813696.html#218521  )
--"But out deterioration isn't new information, it's a shared predicate of at least 20 years' standing, it's what we all know.  When you talk this way [Mr. President], as if the audience is uninformed, they think you are uninformed."


FOR EVERYONE WHO EVEN THINkS ABOUT VOTING FOR OBAMA IN 2012 (OR VOTED FOR HIM IN 2008)
Please go read the post on my FORBES blog (copy this into your browser):
http://blogs.forbes.com/prospernow/2011/01/27/america-is-broke-who-will-fix-it/
(I pasted the text, minus the graphics, of the blog at the end, if you'd rather read it that way.)

Then look at these outcomes that further confirm the failures.

HERE IS WHAT HE'S DONE FOR YOU OTHER THAN MAKING NICE SPEECHES ON TV VERY OFTEN

Report Card on Obama's First Two Years

By K.E. Campbell

Two years ago today, Barack Obama was inaugurated as president of the United States.  Are you better off today than you were two years ago?  Numbers don't lie, and here are the data on the impact he and his policies have had on the lives of Americans:

	January 2009	Current	% chg	Source
Avg. retail price/gallon gas in U.S. (regular conventional)	$1.83	$3.104	69.6%	1
Selected commodities:
Crude oil, European Brent (barrel)	$43.48	$99.02	127.7%	2
Crude oil, West TX Inter. (barrel)	$38.74	$91.38	135.9%	2
Natural gas, Henry Hub, $ per MMbtu	$4.85	$4.48	-7.6%	2
Gold: London (per troy oz.)	$853.25	$1,369.50	60.5%	2
Corn, No.2 yellow, Central IL	$3.56	$6.33	78.1%	2
Soybeans, No. 1 yellow, IL	$9.66	$13.75	42.3%	2
Sugar, cane, raw, world, lb. fob	$13.37	$35.39	164.7%	2
Consumer Price Index (for all urban consumers)	211.1	219.2	3.8%	3
Producer Price Index:  finished goods	170.3	183.0	7.5%	3
Producer Price Index:  all commodities	171.0	189.9	11.1%	3
Unemployment rate, non-farm, overall	7.6%	9.4%	23.7%	3
Unemployment rate, blacks	12.6%	15.8%	25.4%	3
Number of unemployed	11,616,000	14,485,000	24.7%	3
Number of fed. employees, ex. uniformed military (curr = 12/10 prelim)	2,779,000	2,840,000	2.2%	3
Real median household income (2008 vs 2009)	$50,112	$49,777	-0.7%	4
Number of food stamp recipients (curr = 10/10)	31,983,716	43,200,878	35.1%	5
Number of unemployment benefit recipients (curr = 12/10)	7,526,598	9,193,838	22.2%	6
Number of long-term unemployed, in millions	2.6	6.4	146.2%	3
Poverty rate, individuals (2008 vs 2009)	13.2%	14.3%	8.3%	4
People in poverty in U.S., in millions (2008 vs 2009)	39.8	43.6	9.5%	4
House price index (current = Q3 2010)	198.7	192.7	-3.0%	7
S&P/Case-Shiller Home Price Index: 20 city composite (curr = 10/10)	146.4	145.3	-0.8%	8
Number of properties subject of foreclosure filings, in millions	2.82	2.87	1.7%	9
DJIA (12,403 on 6/3/08, date BHO clinched Dem. nomination)	7,949	11,825	48.8%	2
NASDAQ (2,480 on 6/3/08)	1,441	2,725	89.1%	2
S&P 500 (1,378 on 6/3/08)	805	1,282	59.2%	2
Global Dow	1,356	2,153	58.8%	2
U.S. rank in Economic Freedom World Rankings	5	9	n/a	10
Consumer Confidence Index (curr = 12/10)	37.7	52.5	39.3%	11
Present Situation Index (curr = 12/10)	29.9	23.5	-21.4%	11
Failed banks (curr = 2010 + 2011 to date)	140	164	17.1%	12
U.S. dollar versus Japanese yen exchange rate	89.76	82.03	-8.6%	2
U.S. money supply, M1, in billions (curr = 12/10 preliminary)	1,575.1	1,865.7	18.4%	13
U.S. money supply, M2, in billions (curr = 12/10 preliminary)	8,310.9	8,852.3	6.5%	13
National debt, in trillions ($000,000,000,000)	$10.627	$14.052	32.2%	14
Sources:
1 - U.S. Energy Information Admin.
2 - Wall Street Journal
3 - Bureau of Labor Statistics
4 - Census Bureau
5 - USDA
6 - U.S. Dept. of Labor
7 - FHFA
8 - Standard & Poor's/Case-Shiller
9 - RealtyTrac
10 - Heritage Foundation and WSJ
11 - The Conference Board
12 - FDIC
13 - Federal Reserve
14 - U.S. Treasury

 

I KNOW--MY GRAMMAR DOESN'T SOUND RIGHT BUT IT IS

READ IT AND WEEP--THEN SEND IT TO YOUR CONGRESSIONAL REPRESENTATIVES

BEST, JOHN

 

AMERICA IS BROKE!  WHO WILL FIX IT?

©John L. Mariotti 2011

 

In an Orwellian[1] twist of Obama rhetoric, the president tells Americans that we must keep spending because “Spending is investment.”  Or at least that’s my take from the State of the Union speech.  Spending is NOT investment when there is no return, and no prospect of payback, ever.  More important, spending MUST be stopped, when the bank account is dry. What part of that statement does our Harvard-educated president not understand?

 

Every responsible person knows (or should know), when you run out of money, you must stop spending.  But our government leaders apparently don’t get it.  They just have more dollars printed (each new one worth less than the others), or borrow more from China (who we already owe nearly a Trillion dollars.)  The CBO[2] just estimated this year’s US deficit at $1.5 Trillion!

 

Not only is our Federal government so deeply in debt that there is no foreseeable way to get out of the mess, but so also are most of our states.  A few states have been fiscally responsible, but most, and some of the largest states are in the worst shape:  California, Illinois, Michigan, New York ….  

American Pulse[3] Survey:  Americans Most Worried in Illinois, California and Michigan…

01.26.2011– COLUMBUS, OH – Three in five (61.3%) Americans believe the state they live in may be in financial trouble and unable to meet service requirements to its residents (versus 29.2% who do not), according to the latest American Pulse™ Survey of 5,206 respondents. It appears that residents of Illinois are the most concerned followed by California and Michigan. New York and New Jersey round out the top five.

The states that are in terrible financial condition are even worse off than their “books” show.  States have not accounted for pension liabilities as private companies must.  States show current contributions as expense, not billion dollar liabilities (money owed), and worst yet, most states use ludicrous actuarial assumptions to estimate the returns on pension funds.

 

States are hoping for a Federal bailout, but where will the Federal government get the money?  There is none left!  Here’s the situation.  America has been living beyond its means, spending more money than it takes in for a long, long time.  This problem has been growing for decades, but Barack Obama aided and abetted by two years of Democratic Congressional control has dramatically worsened the problem. 

 

So now Obama will “make nice” and talk about “freezing spending” on accounts that represent a small fraction of the budget.  But lets go back to some root causes of our problems.

 

1. We just spend too much on everything, and it’s getting worse, not better.  Unless the House Budget Committee, led by Rep. Paul Ryan, can clamp down hard—and with a Democrat controlled Senate and Obama as “spender in chief,” that’s not likely to be enough.  Interest on the debt is dependent on the amount of debt and prevailing interest rates—a huge cost and growing.  If interest rates go up to historical levels, the interest on the national debt will skyrocket—draining the nation’s coffers faster, and making the deficit even worse.

 

1. States have spent too much too, and the downturn in the economy reduced tax revenues at both state and federal levels, making the problem worse—because nobody reined in spending. 

 

The leading causes of Federal excess spending are huge “entitlement” accounts: Social Security and Medicare/Medicaid.  The aging population of America is depending on these to cover them in their old age.  The bad news is, that both of these must be cut in one way or another. 

 

1. Social Security: Pushing out retirement to age 70, and doing it now, (not in 10-20 years_, will help.  Changing COLA adjustments to cost based instead of wage based, and adding a means test to reduce benefits to high earners, will help too.  Nobody will like these steps, but such changes are mandatory.

 

Medicare & Medicaid present two different dilemmas. 

 

1. Medicare is full of waste and corruption, most of it hidden in “privacy protected” accounts.  These need to be opened up and cleaned up—now!  Means testing already exists, but it will need further changes.  Medicare abuses—charging fees for services not performed, or choosing expensive treatments, when less costly ones are suitable—must be stopped.

 

1. Medicaid is tougher since it is intended to help the poor.  But how poor? Medicaid recipients have been defined so that people who are not really “poor” at all can use Medicaid.  States must redefine these limits and the Federal government must go along, because living costs vary all over the USA, and any national limits are sure to be wrong—too high in some places and too low in others.

 

Most members of Congress are afraid to tackle Social Security and Medicare because they will be voted out of office before they can make meaningful changes.  But if they don’t do it, who will?  Certainly not President Obama.  Somebody has to do this.  A courageous president would demand it—but not our “Spender in Chief.”

 

1. Defense spending is the next big budget item.  It simply needs to be cut—by at least 15-20% across the board—and those in charge told to “make do.”  Defense spending is loaded with redundant, duplicatd military forces, administration, intelligence services (who don’t share information) and costly weapons systems, and many contract cost over-runs.

 

1. Six “welfare-like” budget accounts didn’t even exist in the late 1960’s:  food stamps, housing subsidies, low-income tax credit, supplemental security income, nutrition programs and disaster relief,  They add up to $200 Billion in spending we cannot now afford.  (And I’d bet they are also full of waste and corruption.)  And these don’t even include the $107 Billion Federal Unemployment budget.

 

1. Finally, the government is too big, too expensive, too complex and pays too many people too much money. GOVERNMENT WAS CREATED TO WORK FOR THE PEOPLE, NOT VICE VERSA.  Government has grown into a behemoth that meddles in every walk of life, telling Americans what they can and cannot do.  It must be simplified and drastically cost-reduced. E.g., The number of Cabinet level positions & departments must be cut in half--from 16 to 8—and the departments “combined, consolidated and downsized.”  Done right, this would save hundreds of billions.  This is exactly what happens in the private sector during competitive threats, or as a result of hard-nosed mergers. Start with the pay and benefit levels of public sector employees versus competitive private sector people.  These have been driven up by public employee unions, and must be cut—and hard.  Look what has happened!

 

 

The table posted at the end of this article appeared in a USA Today story last year.  It compares the compensation of federal and private employees. I am posting the whole table, and hope you will scroll down through it.  You will be amazed—and possibly disbelieving, but the link to the article is at the end.  That is one of the leading reasons why our State and Federal governments are “broke.”

 

We are down to the bottom line! Our President talks a lot but does little (“symbolic things”) or nothing at all. Their GOP predecessors were also guilty of overspending, but this group has topped everything and made the problems dramatically worse in a short two years.  Just study the deficit chart below.  Obama has made the problem much worse, and so has Congress.

 

 

What are “they” going to do to fix it?  When? How? And how soon? Every day that passes, the problem gets worse.  How hard will it be to fix Obama and the Democrats spending debacle?

 

Here’s a simple example that is frightening: 

1) Assume we don’t extend the “Bush tax cuts for the wealthy”

2) Assume we cut defense spending by 20%

3) Assume we implement a two-year federal employee wage freeze

4) Assume we cut domestic (non-defense) discretionary spending by 20%

Assume we do these all at one time. 

 

The amount saved would hardly budge the deficit.  Why? Because it would we offset by the interest cost on the debt—when interest rates go back to traditional/normal levels—which they inevitably must do before much longer. 

 

Can you imagine that?  All these big cuts would have an minimal effect on the deficit—which is now projected to average $1 Trillion per year for the next ten years.  This shows just how widespread and dramatic the cuts must be. 

 

Of course the best cure for a deficit is growth in the economy, which generates more tax revenue.  But President Obama’s anti-business policies (which won’t be cured by naming GE’s CEO as an adviser), job-killing programs  (like Obamacare) and stifling regulations (like the EPA’s) are stopping economic growth in its tracks.   GDP in 2011 is projected to grow—maybe 3% (and 1/3 of that is due to the tax holiday of 2% on employee Social Security withholding).  This is not real growth! 

 

AMERICA IS “BROKE” DUE TO OVERSPENDING—AND “BROKEN” DUE TO BUREAUCRACY, INEFFICIENCY AND WASTE—AND OUR PRESIDENT DOES NOTHING BUT MOUTH PLATITUDES LIKE “SPENDING IS INVESTMENT.” 

 

Hopefully the new House will push the Draconian actions needed.  Then we’ll see if the Senate and the President care about America’s future.  If someone doesn’t do something fast, America will become another Greece—or worse.  AMERICA IS BROKE!  WHO’S GOING TO FIX IT?

 

 

Comparison of Compensation—Private vs. Federal—Job by Job.

Job

Federal

Private

Difference

 

Airline pilot, copilot, flight engineer	$93,690	$120,012	-$26,322
Broadcast technician	$90,310	$49,265	$41,045
Budget analyst	$73,140	$65,532	$7,608
Chemist	$98,060	$72,120	$25,940
Civil engineer	$85,970	$76,184	$9,786
Clergy	$70,460	$39,247	$31,213
Computer, information systems manager	$122,020	$115,705	$6,315
Computer support specialist	$45,830	$54,875	-$9,045
Cook	$38,400	$23,279	$15,121
Crane, tower operator	$54,900	$44,044	$10,856
Dental assistant	$36,170	$32,069	$4,101
Economist	$101,020	$91,065	$9,955
Editors	$42,210	$54,803	-$12,593
Electrical engineer	$86,400	$84,653	$1,747
Financial analysts	$87,400	$81,232	$6,168
Graphic designer	$70,820	$46,565	$24,255
Highway maintenance worker	$42,720	$31,376	$11,344
Janitor	$30,110	$24,188	$5,922
Landscape architects	$80,830	$58,380	$22,450
Laundry, dry-cleaning worker	$33,100	$19,945	$13,155
Lawyer	$123,660	$126,763	-$3,103
Librarian	$76,110	$63,284	$12,826
Locomotive engineer	$48,440	$63,125	-$14,685
Machinist	$51,530	$44,315	$7,215
Mechanical engineer	$88,690	$77,554	$11,136
Office clerk	$34,260	$29,863	$4,397
Optometrist	$61,530	$106,665	-$45,135
Paralegals	$60,340	$48,890	$11,450
Pest control worker	$48,670	$33,675	$14,995
Physicians, surgeons	$176,050	$177,102	-$1,052
Physician assistant	$77,770	$87,783	-$10,013
Procurement clerk	$40,640	$34,082	$6,558
Public relations manager	$132,410	$88,241	$44,169
Recreation worker	$43,630	$21,671	$21,959
Registered nurse	$74,460	$63,780	$10,680
Respiratory therapist	$46,740	$50,443	-$3,703
Secretary	$44,500	$33,829	$10,671
Sheet metal worker	$49,700	$43,725	$5,975
Statistician	$88,520	$78,065	$10,455
Surveyor	$78,710	$67,336	$11,374

Source: Bureau of Labor Statistics, USA Today analysis http://www.usatoday.com/news/nation/2010-03-04-federal-pay_N.htm

You can see in the next graph how this differential has built up over time. It used to be that a federal government job paid less but was more secure. Now it is still more secure, but pays about 44% more on average (35% higher wages and 69% higher benefits). (Source: Reason magazine)

 

 

---

[1] George Orwell, author of the famous book “1984”

[2] Congressional Budget Office

[3] American Pulse Survey conducted 1/18-1/19/2011. Margin of error is +/- 1.4%. www.bigresearch.com