"It's the economy, Stupid."
* * *
"It's the economy, Voter."
Pick who best personifies arrogance (circle one).
Why Vote Republican?
I think I'll go with this guy's take on the economy, an economic and finance expert, over the partisan extremist opinions of DNC hacks:
COMMENTARY
It's a Faith Thing
By BRIAN S. WESBURY
October 17, 2006; Page A14
With equity markets steadily gaining ground and the Dow Jones Industrial Average reaching record highs, it is getting harder for cynics and pessimists to argue that the U.S. economy is doing poorly. But this does not stop them from trying. Lately, the old class-warrior standby, that "Wall Street may be doing fine, but Main Street suffers," is echoing down the alleyways.
Fortunately, no matter how many times this theory bounces off the walls, there is little in the way of facts to back it up. The so-called "jobless recovery" was dealt a severe blow when the Bureau of Labor Statistics (BLS) reported that its annual recalibration of employment statistics will add 810,000 jobs to its previously calculated total. This is one of the largest revisions in history, exceeding the combined payrolls of GM, Ford, United and American Airlines.
In an additional blow to those who find things to worry about everywhere, the Treasury released its latest estimate of the budget deficit -- now expected to be $248 billion in FY 2006. Just eight months ago, the CBO guesstimated a $337 billion shortfall and the White House forecast a $423 billion deficit.
While cynicism and pessimism are part of human nature, handwringing based on out-of-date models and inaccurate data is unnecessary. Bad data and bad models are a dangerous combination that can bias political views and impact policy decisions. Recent revisions reflect the problem; the very data that caused so much indigestion previously now reveals a strong and resilient economy.
The driving force behind the good news is productivity growth fueled by innovation. If the 1980s and 1990s saw the invention and proliferation of new technology, the early 21st century is witnessing its implementation. The impact is immense, and it changes everything. The 2003 tax cuts have also played a major role. Before those tax cuts, the economy, job growth and the stock market were sluggish and stagnant. After them -- because they increased the incentives for risk-taking -- the economy and markets improved dramatically.
Business investment has boomed and nonfinancial corporate sector productivity has grown an annualized 4.3% over the past three years -- its most rapid growth in 45 years. Pre-tax corporate profits have doubled in just five years. Still, fears about growth and geopolitics have kept stocks cheap. A simple capitalized profits model (corporate profits divided by interest rates) suggests that even after recent strength, the broad U.S. equity market is 35% undervalued.
Part of this undervaluation reflects a view that the U.S. economy is fundamentally fragile, especially the consumer sector. But as long as tax rates are low, the economy will do just fine. It's a faith thing. Those who lack faith in free markets fret constantly about weak job growth, problems at old-line manufacturing firms and some signs of weakness in incomes. But this pessimistic view is heavily reliant on the BLS Establishment Survey, which was designed in a paternalistic age of large businesses and time-clock punching. It has difficulty capturing small business employment, the self-employed, independent contractors and many limited liability corporations. As a result, I have argued for at least a decade that it misses a great deal of our New Era Economy.
It is easier than ever to start and manage a new business and harder for the government to track those new businesses. Software programmers can work anywhere, any time. So can those who buy and sell on eBay. Masseuses, manicurists, landscapers, realtors, painters, dry-wallers and many other professions are naturals for small partnerships that avoid paying unemployment insurance, which means they escape the BLS establishment survey.
They do show up in a second BLS jobs survey -- the household survey, which is done in person or over the phone, and asks people, not employers, if they are working. A perfect example of these forces at work surfaced two weeks ago when the assets of Tower Records were sold off, including the flagship store on Hollywood's Sunset Boulevard, putting 3,000 employees out of work. Technology -- in this case, digital music downloading -- is boosting productivity rapidly. This type of creative destruction is both real and widespread. If former Tower Records employees use their intimate knowledge of the music business to make a living on eBay or consult to online music providers, they would disappear from the establishment survey, but remain in the household survey.
During the 12 months ending in September 2006, the household survey reported 2.54 million new jobs. Going back 24 months shows 5.5 million new jobs, an annual average of 2.75 million. This exceeds the booming 1995-2000 average of 2.34 million new jobs per year. The household survey, in contrast with the establishment survey, has consistently signaled a resilient economy. And it continues. In the past two months, the household survey has expanded by 261,000 per month, while the establishment survey rose by an average of just 120,000.
But that's not all. Because the payroll survey is the major source for both average hourly earnings and wage and salary estimates, these measures of income have also underestimated potential consumer strength. But like job growth, recent revisions found $160 billion of personal income that was previously uncounted.
This helps to explain the awesome tidal wave of tax revenues flowing into federal government coffers. Tax revenues grew 12% in 2005 and are up by 11.8% this year. Despite lower tax rates, total federal revenues are $410 billion higher this year than they were at their previous high water mark in 2000.
The problem is on the spending side. Federal government spending this past fiscal year was $907 billion higher than it was in 2000 -- the equivalent of adding both the Australia and Ireland GDPs to annual spending. If ranked, total annual U.S. government outlays of $2.7 trillion in 2006 would be the world's fourth largest GDP: Just below Germany, but 10% larger than China's entire economy. These spending increases make it even more amazing that the U.S. economy has been able to grow at a 3.7% annual average rate in the past three years. While pessimists fret about global competition, they rarely think about the fact that U.S. entrepreneurs must compete while carrying a government larger than China on their backs.
My estimates suggest that every percentage point increase in government spending as a share of GDP subtracts roughly 0.2% from real GDP growth. Between 2000 and 2006, spending jumped from 18.4% of GDP to a 20.3% share, a 1.9% increase. Whether this spending is financed by borrowing or taxation, it still crowds out the private sector and reduces potential real GDP growth by roughly 0.4%.
Nonetheless, tax cuts and productivity growth have overcome the negative impact of this spending splurge. Looking back, despite a dozen Fed rate cuts, the stock market did not bottom until the early months of 2003, when the pro-investment tax cut was finally on its way to passage. Since then, the Dow industrials is up 51%, the S&P 500 63%, and the Nasdaq 80%.
The lesson of all this is that when tax cuts and technology work together to encourage productivity growth, the economy and markets perform well. Massive positive revisions to employment and incomes, rising stock prices and a flood of new tax revenues paint a much different picture than conventional wisdom had expected. But history is clear. As long as government policies do not hinder entrepreneurship, the U.S. economy can overcome even the most daunting of challenges. Have faith.
Mr. Wesbury is the chief economist at First Trust Advisors L.P. in Lisle, Ill.
Let's take the canard about 10% of Americans owning 80% of all stock. First of all, this little donkey nugget ignores the fact that stock ownership is at an all-time high (over 70% of Americans own at least some stock). In addition, many Americans have other valuable holdings in fixed assets (bonds, CD's, cash value insurance policies) and real estate (home ownership is also at a record). Reading this screed, you'd think we were in another Great Depression.
Now, consider how Democrat (let's be honest - Socialist) spinners come up with the 10/80 whopper: they count outstanding shares of common and preferred class stock and then note that 80% of these shares are held by only 10% of investors. Now we all know of course, these investors never, ever sell their shares, they just hoard them and stuff 'em under their mattresses as heirlooms, and then greedily hold all this stock for themselves year after year as they grow into big fat Plutocratic Republicans, all nasty and evil and greedy and .... ok, ok: enough sarcasm. The point is that today's 10% of anything is not tomorrow's 10% in a dynamic Capitalist society. To put it bluntly, static assumptions suck, and the only greed in evidence here is that of Democrats for wealth they could never have created themselves.
Hey, idiots: do you know what the STOCK MARKET is? Yeah, it's a big building in New York, but that's not important right now. It's a collection of world-wide electronic trading platforms where tens of billions of stock shares are exchanged on a daily basis by tens of millions of people and institutions, in order to invest in companies - large, medium and small, so that they may have capital with which to grow and provide jobs and financial security for a vast number of people across the planet. Because that's what businesses do - unlike government, which taxes and spends but does not create. And who benefits from this creation, risk-taking, and investment? Everyone.
Ever notice how the "hard working" Americans remain at the bottom of the economic ladder. maybe they should become lazy and shiftless, and they'll get rich.
ROFL. As opposed to the old Bill Clinton Pets.com inflated stock market, when most of the stock was held by the homeless instead of by CEOs.
. [U.S. Census; Kaiser Family Foundation]= lying rat scumbags.
"..And by the way, the sky is actually green even though the evil George Bush insists it isn't...."
The senate voted 56-42 to raise the minimum wage, with the democrats voting NO.
The median income drops as the unemployment rate moves downward, because new people moving into the job market make less money. Once the market stabilizes, median income then goes back up.
What you need to measure to be honest is the income of the MEDIAN person from 2000, rather than allowing the median to move.
In other words, a lot more people are above the median now than they were when unemployment was over 6%.
Does the left even know HOW to tell the truth anymore? More Americans own stock that at any time in this nation's history.
And they think this will enhance their credibility how?
BS Repellant:
Private Sector, Public Sector – One America ~ Dick McDonald
If there ever was a need for fiscal understanding, it is now. Over 60% of Americans have bought into the notion that the economy is headed in the wrong direction; that Republicans and the Administration are incompetent. This notion is fed by late night talk show comics, academe, Democrat politicians, most newspapers and the electronic media. It got me to thinking are we really that bad off.
As an old accountant, I go to the source of all sources; the Constitution of the United States. The Preamble states:
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
I immediately go to the phrases “We the people” and discern that the private and public sectors of America are one. They are not two separate entities. The next phrase that instructs me is “promote the general welfare”. To me that means has the public and private sectors done a good job. And I come to a startling conclusion. “We the people” are doing such a fantastic job it is almost indescribable.
Accountants have this penchant for asking what assets do you own and what liabilities do you owe. When we subtract the second from the first we announce the result as the “net worth”. Therefore this morning I woke trying to determine what America’s net worth is; not that of the private sector or the public sector but the combination of both.
I first thought of the Federal Reserve’s estimate of the net worth of American Households and Non-Profits. In September, their report said that their combined net worth was $52 Trillion. There was only one problem. The $52 Trillion had been reduced by $10 Trillion of “consumer debt”. I thought to whom was that debt owed and realized that it was basically owed to Americans, not to foreign entities. Therefore on the Great American Balance Sheet (GABS) the $10 Trillion was both an asset and a liability; meaning they are a wash and mean nothing to America’s net worth.
Then I thought of the great concern of 2007 when President Bush wants to reform entitlements. In some estimates the unfunded entitlement liabilities will mushroom to $65 Trillion in the not too distant future. Then I realized that the entitlements are being paid to Americans not some foreign entity or group. If Americans have to pay for these entitlements and are entitled to receive these entitlements then the assets (amounts to be received) completely offset the liabilities (amounts to be paid) and there is no effect on America’s net worth.
I then thought about America’s “national debt” which stood at $8.5 trillion on 10/19/06. Of that amount $3.7 Trillion is “intragovermental debt”. Intragovernmental debt is nothing more than the debt one agency of the American government owes another agency of the American government. Therefore, the receivable of one agency completely offsets the payable of the other agency and has no effect on the GABS.
I turned my thoughts to the $4.8 Trillion of “external debt” remaining and asked the question how much of that debt is owed Americans. It turns out that $2.6 Trillion of that amount is owed to Americans so in the GABS we find that our sole liability is $2.2 trillion owed to Japan (31%), China (12%) and other foreigners. Let’s repeat that: American liabilities total only $2.2 Trillion not some fiction passed off as fact simply because politicians don’t have a clue how to run the public sector.
So the question I then asked is what are American assets worth. We know that the Household and Non-Profit analysis values those assets at $62 Trillion. That leaves the question of what is the value of all other assets in America. What is the worth of America’s military. What is its replacement cost? If any country could pay for it, what would it bring on the open market? What is the value of the infrastructure of America; the airports, the roads, the bridges, the parks, the ports, the government? What is the value of American business and know how? What are the costs to replace them? The real answer is they are irreplaceable but in terms of replacement costs, the costs would run to hundreds of trillions.
However, to be brutally conservative let’s just say that all things included American assets are worth only $120 Trillion. Now how much of those assets are owned by foreigners? Current account analysis says at least $6 Trillion. However, America is owed that much and more by foreigners and their countries so that is at a minimum a wash.
So how are we doing so far? The great concern of Americans seems tragically overblown by our own myopia, media ignorance (or device) and an academe more interested in teaching feelings than facts.
In conclusion, it appears we have an asset to debt ratio of 120 to 2 (60 to 1). As financial measurements go, that is spectacular. Every American should be proud. However, heading into the election of 2006 we can now conclude we have the least informed citizenry on the planet. I hope it stays that way. It starts our engine every morning and since it works, why fix it? On the other hand my dear reader; I hope you don’t fall for the negative nonsense trumpeted as fact and vote to retain the adults now running the country. http://www.dickmcdonald.blogspot.com
