America's Race to the Bottom

Discussion in 'Business & Economics' started by kmguru, Jan 25, 2010.

  1. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    23,198
    U.S. budget for 2011shows a deficit of $1.3 trillion for the fiscal year that ends 30Sept10. That shortfall is actually $287 billion more than the Congressional Budget Office (CBO) had projected less than a week earlier… $105 billion of this $287 billion is due to a change in "assumptions." The CBO budget assumed that all of Bush's 2001 tax cuts would end this year, whereas the Obama’s budget kills those tax breaks only on incomes above $250,000.
    {Billy T insert: Still keeping his campaign promises to not raise taxes on 95% of the population.}

    The CBO budget also made the ridiculous assumption that the Alternative Minimum Tax (AMT) would be allowed to revert to its 2001 level, forcing 25 million taxpayers to calculate their taxes twice - and to then pay the higher of the two estimates. The Obama budget finally abandons that idiotic piece of fiction.

    For the period from 2011 to 2020, the CBO forecasted a budget deficit of $6.047 trillion, while the Obama budget released just days later projected a shortfall of $8.532 trillion - a difference of $2.485 trillion.

    In 2011, most of the extra “Obama spending” {above CBO assumptions} seems to be devoted to a jobs program and to additional defense expenditures for the wars in Iraq and Afghanistan. (Also} the Obama budget assumes that we'll be helped along by a robust economic recovery. {In 2010 - If you believe that, I have a bridge in Brooklyn I will sell you cheap.}

    The lowest projected deficit in the next decade is a $706 billion shortfall forecast for the fiscal year that ends in September 2014. … Since 2020 revenue* is projected at only 19.6% of GDP, taxes would have to go up by 70% from currently projected levels to make the budget balance. Yikes! Even if we introduced a federal Value Added Tax to try to meet that deficit, it would have to be set at an impossibly high rate.

    The current budgetary shambles is the fault of two presidential administrations, and both parties in Congress. They have wrecked what back in 2001 was a perfectly solid U.S. budgetary position.{Clinton’s balanced budgets} If U.S. budgetary problems continue on their current path, our elected officials in Washington will completely destroy the U.S. financial position in the next decade, and will lead the nation into bankruptcy. We need an immediate improvement in politician behavior on both sides of the aisle.

    Above text condensed by Billy T from: http://moneymorning.com/2010/02/03/obama-deficit-2/ I.e. it is not an exact quote. Mainly shorten phrases and I omitted long sections showing that GWB’s deficit projections for 2011 (made 10 years into the future) were about 41% lower than current projections for 2011.) and that such underestimation of the long term problem is common.

    * In part because 10 years from now a large part of the Baby Boomers, will be expecting to collect on their Social Security and no longer be the main tax payers. I.e. the shit is already well on its way to the fan. Long ago I predicted it arrives at the fan before Halloween 2014. Obama can only delay the coming depression and doing so will destroy the dollar.
     
    Last edited by a moderator: Feb 3, 2010
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  3. joepistole Deacon Blues Valued Senior Member

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    Absoutely right, both parties are going to have to work together in order to fix the budget problems in Washington. And unfortunately, the george II administration has locked into the need to raise taxes and/or face massive inflationary pressures down the road.

    The challenge here and the one I wrestle with every day is, will the United States be strong enough politically to make the choices it needs to make in the coming days, weeks, months and years?

    My answer to that question twenty years ago would have been a resounding yes. Today, not so much. Unfortunately there is real doubt about the ability of the US to effectively govern itself these days...begining in 1994.
     
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  5. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    “… Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks ... The number of people receiving unemployment insurance was little changed and those receiving extended benefits increased. … Worker productivity kept surging in the fourth quarter as companies squeezed more out of remaining staff to boost earnings, another report from the Labor Department also showed. … The figures raise concern the improvement in the labor market has stalled heading into tomorrow’s monthly employment report. …”

    From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aKxCzuYaGS.c&pos=2
     
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  7. S.A.M. uniquely dreadful Valued Senior Member

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    Its supposed to be a jobless recovery anyway. So what other measure of recovery is there, besides unemployment
     
  8. quadraphonics Bloodthirsty Barbarian Valued Senior Member

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    GDP, stock market performance, housing prices, home equity, savings, disposition of disposable income, corporate profits/stock dividends, production, inflation, investment spending, about 10,000 other possibilities.
     
  9. kmguru Staff Member

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    11,757
    See below

    Falling flat
     
  10. iceaura Valued Senior Member

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    With the current health care setup in the US, no significant increase in hiring at anything like the wages of the crash year - let alone the wages of the time of America's greatest prosperity - is likely, regardless of the "economy".

    Health care costs per full time employee are expected to rise at least 30% between the crash and the first likely opportunity for serious resurgence in hiring - four or five years after the crash.
     
  11. kmguru Staff Member

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    11,757
  12. kmguru Staff Member

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    11,757
  13. kmguru Staff Member

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    11,757
    This is scary...

    Please Register or Log in to view the hidden image!

     
  14. Read-Only Valued Senior Member

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    Before you get too carried away, Kmguru, there are some real factors that you aren't considering here.

    First, look at your top graph - there are more people in the US than in SEVERAL of those listed countries combined. Now, I realize those are per-capita numbers BUT they lead in to the next paragraph:

    Now look at the last graph - we also have a VERY large number of elderly who require very expensive care - and their numbers are rising rapidly.

    In short, there's NOTHING at all scary about what you posted once you consider what's actually behind those numbers/graphs.

    Everything has to be kept in the proper perspective - that's what you were missing completely.
     
  15. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    On 2009's Unemployment facts:

    "Through the 12 months to March 2009, the American economy lost 930,000 more jobs than had been previously estimated. It now appears that over 700,000 jobs were lost in each of the first three months of last year, a significantly worse performance than originally thought. Meanwhile, data for the last two months of 2009 were revised to show a larger increase in employment in November, but a larger decline in December, for a net drop of 5,000 jobs relative to previous reports.

    And while the employment-population ratio increased slightly from December to January, and off record lows, the problem of the long-term unemployed continues to grow. Just over 41% of all unemployed workers, over 6.3m workers, have been out of work for 27 weeks or more.

    ... Employment fell by over 300,000 jobs during the last three months of 2009, despite strong expansion in GDP. ... initial jobless claims have grown in recent weeks, indicating that what momentum there was in labour markets has been lost. ...

    From: http://www.economist.com/daily/news/displaystory.cfm?story_id=15473802&fsrc=nwl

    Note also that many who were long time without work have given up seeking a job so they are no longer included in the "unemployed" If included, along with the "under employed" (part time workers who want full time employment) most estimate of US unemployment rate fall between 15 and 20%.
     
  16. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    While it is true the US has large and growing fraction of elderly and that does cause some of the higher per capital medical cost, IT IS SOMETHING TO WORRY ABOUT AS THE CURRENT WORKERS MUST PAY THEIR SOCIAL SECURITY and often their parents medical expenses. Few have set aside adequate adequate funds for their old age and most have ignored their longer life expectancies and increasing medical expenses, even if they did save during their working years.

    Here is some data:

    “ By 2020 about 16.3% of the U.S. population is projected to be 65 or older. In China only 12.4% of the population will be 65 or older in 2020; in Brazil 8.7% and India only 6,7%. … Developing countries will grow faster than the U.S. because they will be supporting fewer retirees. ..."
    Part of post here:
    http://www.sciforums.com/showpost.php?p=2472648&postcount=68
    and originally from Jim Juback article here:
    http://articles.moneycentral.msn.co.../how-to-pick-2020s-hot-stocks-now.aspx?page=1

    Also many, if not most of the only European countries in Kmguru's post 68 graph have a GREATER THAN US FRACTION OF ELDERLY. For many years many of them have not even been having "replacement rate" of births. Thus your logic is backward. The US has Lower fraction of > 65 year olds than they do.

    I admit part of why the US has a smaller fraction of old people is that people in many of the European countries live longer (up to 4 years longer on average). That is another reason why US's profit driven medical system is such a bad deal - pay twice as much and die sooner.
     
    Last edited by a moderator: Feb 6, 2010
  17. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... In the medium term there are only two ways to bring the deficit back to a sustainable level—which means no more than 3% of GDP. Either taxes will have to rise, or a serious attempt must be made to rein in the entitlements—legally mandated programmes such as Medicare, Medicaid and Social Security—that constitute the great bulk of spending. Mr Obama is proposing only a bit of the first, and none of the second. Taxes on the rich (those earning $250,000 a year or more) will go up from next January, as the Bush tax cuts expire; but Mr Obama had promised middle America that it will pay “not one single dime” more in tax, and so he is extending George Bush’s budget-busting tax cuts for the remaining 98% of Americans.

    Any serious attempt to tackle entitlements now looks doomed. Health care offered a chance to do so (broader coverage could come with tougher cost controls). But a weak administration and a greedy Congress conspired to produce a baggy monster of a bill which, from a fiscal point of view, might have made things worse. No one dares touch defence, in a troubled world. The Social Security pension scheme is deemed sacrosanct by nervy politicians. It is a deeply depressing picture—and Mr Obama did nothing this week to lighten it. ..."

    From: http://www.economist.com/opinion/displayStory.cfm?story_id=15452793

    Billy T comment (his shortest): Things are bad and bound to get worse.
     
  18. kmguru Staff Member

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    11,757
    As per ADP (adp.com)

    January’s ADP Report estimates nonfarm private employment in the service-providing sector increased by 38,000, the second consecutive monthly increase. However, this employment growth was not enough to offset continued losses in the goods-producing sector. Employment in the goods-producing sector declined 60,000, with employment in the manufacturing sector dropping 25,000. The employment decline in the manufacturing sector was the lowest since January of 2008.

    This does not say cumulative, how may are still looking for jobs or gave up...

    Employment level non-farm August 2009 = 108,740,000
    January 2010 = 108,138,000

    Some historical data at http://www.adpemploymentreport.com/pdf/FINAL_Report_January_10.pdf

    What is needed is a conversion from % change to real numbers on a longer time scale with new entrant numbers.
     
  19. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    China may give the US a little push on its way to the bottom as it grows less dependent upon selling to the US market. There are many ways it can do this. US selling advanced weapon systems to Taiwan has China really pissed. Some higher officials are suggesting China stop financing the US debt. One has even suggested China dump some of its bonds on the market to "punish" the US if modern arms are sold to tiawan. Most are suggesting the makers of these weapons not be allowed to operate in China. - I.e. Boeing et.al. China may block UN sanctions on Iran also as part of its reaction to the Taiwan sales. IMHO, these sales are foolish. China is rapidly advancing the peaceful reunification (probably as "one nation / two economies" as in Hong Kong etc.) I.e. in a few years it will be the same as if the US had sold these modern weapons to mainland China.

    Here is part of why China is growing more bold, a little discussed option China is already using to decease its need of the US market for exports:

    “China … may choose to shrink its trade surplus through raising workers’ wages rather than letting the yuan appreciate …Higher labor costs would cut Chinese export competitiveness while boosting domestic spending power and sustaining economic growth … “Wage increases are a better option because they largely benefit Chinese workers,” … “Currency appreciation will only result in Chinese exporters losing out to competitors in Malaysia and Mexico.”

    Above is the first paragraph of my post at: http://www.sciforums.com/showpost.php?p=2475718&postcount=954

    Read it all - lots more details of interest there.
     
    Last edited by a moderator: Feb 10, 2010
  20. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    The Economist has a good review of how we got into the present economic mess. Here are a few lines from it:

    “…At the peak of the madness, the median large bank had borrowings of 37 times its equity, meaning it could be wiped out by a loss of just 2-3% of its assets. …

    Investors piled into ever riskier securities in 2003-07 to maintain yield at a time of low interest rates. …

    Chuck Prince, then Citigroup’s boss, {said} that “as long as the music is playing, you’ve got to get up and dance.” Performance is usually judged relative to rivals or to an industry benchmark, encouraging banks to mimic each other’s risk-taking, even if in the long run it benefits no one. In mortgages, bad lenders drove out good ones, keeping up with aggressive competitors for fear of losing market share. …

    The idea that markets can be left to police themselves** turned out to be the world’s most expensive mistake, requiring $15 trillion in capital injections and other forms of support. “It has cost a lot to learn how little we really knew,” …”

    From: http://www.economist.com/specialreports/displayStory.cfm?story_id=15474137&source=hptextfeature

    Billy T comment:As I see it, the only real change is that now governments are playing the same ultimately disastrous game. Each trying to boost its net exports* to others and going deeper into debt to keep its economy from immediate collapse.
    ---------------
    *Obviously impossible, unless there is net export to Mars, as my exports are your imports.

    ** While a common Republican POV for years, only under GWB was the SEC “put on a leash.” – Words of its ex-director under GWB, when called by Congress to account for the failure of the SEC to catch and stop any of several Ponsi schemes.
     
    Last edited by a moderator: Feb 13, 2010
  21. Dredd Dredd Registered Senior Member

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  22. Billy T Use Sugar Cane Alcohol car Fuel Valued Senior Member

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    "... A record number of Americans were in danger of losing their homes in the fourth quarter ... Loans in foreclosure rose to 4.58 percent of all mortgages, while those more than 90 days overdue -- the point at which lenders usually begin the process of seizing a property -- climbed to 5.09 percent, the Washington-based trade group said in a report today.

    “We have a hard-core block of unemployed who have been out of jobs for a long time, and that’s keeping the long-term delinquencies high,” Jay Brinkmann, the association’s chief economist, said in an interview. ..."

    From: http://www.bloomberg.com/apps/news?pid=20601087&sid=aHLH3zOdh4ro&pos=5

    Billy T comment:
    And more than 20% of home with mortgage are "under water." More and more of such owners are doing the economically smart thing - walking away, often by agreement with the bank, which avoids foreclosure cost (and possible "Owner Rage" destruction, if no agreement.)
     
  23. X-Man2 We're under no illusions. Registered Senior Member

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    Some people who have had it with this big economic mess(due in part by banks) dont just walk away from their foreclosed homes with out a show.Link is of a Man who bulldozed down his home.2 minutes long.

    http://tinyurl.com/ykeeg8c
     

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