Investor Business Daily analyzes Hillary’s recent speech on her plans to improve the economy.
But her answer to every question was the same: more government spending, more government mandates and regulations, and higher taxes on businesses and investors. Indeed, in 30 minutes she managed to pack in a huge number of new government programs.
It will be 8 years of the Obama economy part deux. Just remember that Obama is the first and only president in our 227 year history to fail to achieve 3% GDP growth even once during his term.
Well, not money actually belonging to children but money allocated to educate our youth so it’s the same thing, right?
First, the back story.
Democrats in Connecticut have created a massive debt problem with decades of poor fiscal decisions and now in desperate straits. According to Truth in Accounting, Connecticut is one of 39 “sinkhole states” that do not have enough assets to cover its debt. In fact, it ranks at the bottom of the list barely beating out New Jersey as the state in the worst fiscal condition. TIA calculates that Connecticut has only $10.1 billion of assets available to pay bills totaling $72.2 billion.
Fast forward to present day. What can a poor progressive do?
The obvious solution is to look for previously protected mountains of money and institute a tax for the common good.
American Interest documents just such a solution:
The state of Connecticut wants its richest university to share more of its wealth.
Facing budget shortfalls and a deep pension hole, Connecticut lawmakers this week proposed taxing the investment profits of Yale University’s $25.6 billion endowment, the nation’s second-largest after Harvard University’s. Yale is located in New Haven, Conn.
… Connecticut is home to more than 40 colleges. But the potential tax singles out Yale because it would affect only endowments with $10 billion or more in assets.
$10 billion is certainly a good starting point. How many universities could that possibly affect?
You will find more statistics at Statista
Once one state finds a new, hopefully legal source of income, how long before other desperate states follow suit? Every one of the universities listed in the graphic above are in a sinkhole state (although Indiana barely qualifies with only a debt of $700 per taxpayer).
And once the taxation of sitting money becomes legal, how long until it is applied to other private sources? Churches will probably be safe (hopefully), but your 401K? Don’t bet on it. After all, it is for the common good.
All are current headlines:
Bloomberg: Europe Stocks Slide Into Bear Market
Wall Street Journal: China Shares Fall Into Bear Market
The Street: Hello Bear Market: Russell 2000 Index Falls
Bloomberg Business: Retail Sales in U.S. Decrease to End Weakest Year Since 2009
Bloomberg Business: Shipyards Vanish as China Loses Appetite for Iron Ore: Chart
Financial Times: Commodities slide triggers ‘freight recession’ on US rails
Seeking Alpha: Here Comes The Recession And Bear Market
The usually upbeat CNBC: A recession worse than 2008 is coming
The Market Oracle: UBS Warns Stock Market “Rolling Over” – “Buy Gold”
Ted Kavadas has 10 scary charts posted at Seeking Alpha, and they are scary indeed. The first one surprised me, showing housing starts are not rising to healthy levels as I was led to believe by the MSM, but is rather hovering at the level of historical lows.
This one, on the other hand, is no surprise as it is a topic to which I pay closer attention — the seemingly never-ending “jobless recovery”:
I recommend glancing at all 10, but brace yourself first.
Perhaps a by-product of the declining workforce participation rate? But wait, we’re supposed to be focused on the rising employment rate and ignore the fact that more and more people have completely given up looking for a job (not to mention the massive underemployment problem).
Quora is a site where anyone can ask any question and anyone else can answer. Those providing answers include such luminaries as Steve Case (dot com billionaire), Ashton Kutcher (remarkably intelligent, contrary to his TV personas), Larry Summers (political economist), Sid Espinosa (Palo Alto mayor), Tiki Barber (former NY Giants running back) and many more.
Many of the questions are posed in a biased manner, such as the one below. I love it when someone with real life experience blows a hole in the bias to expose truth, especially when it demolishes a liberal line of group-think. Click through to read a Dane’s response to the question:
Glenn Kelman, CEO of technology-powered real estate brokerage firm Redfin, writes about how the economy is impacting not only politics, but demographics as well:
It turns out that over the past three years, Texas has been America’s fastest-growing state, adding 913,642 people, nearly the population of Rhode Island. Almost half moved from elsewhere in the U.S. Of the 22 markets Redfin serves, the three in our Texas business are growing the fastest, at an average of more than 300% per year. And why not? A home in Houston costs less than a third what it would in, say, San Francisco, and it averages more than twice the size.
This migration to affordable housing is accelerating because, for the first time in a generation, home prices are increasing faster than wages or credit.
… Newly mobile Americans, freed for the first time in five years from underwater mortgages, won’t just move across the street. They’ll move across the country.
It will be, in the most literal sense, a political movement. The conservatives tired of the taxes in coastal cities are already leaving, in a process of segregation that can only increase America’s polarization.
The bigger change will be that the rest of the political spectrum likes the cost of living in Texas too, and once there will likely move to the right. After all, your politics don’t just change where you live; where you live changes your politics. To hear conservatives tell it, even people who want to be liberal can’t afford it.
… This is why the move to Texas isn’t just a move, it’s a movement, of people, businesses and governments, for better and for worse.
Just as what happened to America in the 1960s, from beat poetry to psychedelic drugs, happened first in California; now it is happening in Texas, with its diversity, its small-government swagger, its megapolitan areas. Texas is, after all, a state of mind. And it’s becoming America’s state of mind.
Luring California businesses away is a growing phenomena, and Texas is rated at the top of the list of attractive destinations due to incentives offered to businesses.
There’s lots of room in the flyover states and home prices will forever be lower than coastal properties. And if the “small-government state of mind” can survive business success, there might be hope for us yet.
If you don’t read anything else this week, make certain you read 3 Key Metrics That Show Why We Can’t Avoid Recession by Joseph Stuber.
Joseph offers 3 charts that not only show why a recession is coming, but also clearly demonstrates how ineffective fiscal stimulus has been. In part:
The U6 unemployment number in January 2009 was 14.2%. Last month, the number was 14.6%. We have made no gains at all since President Obama took office in 2009 based on that metric. In January 2009, the participation rate was 65.7%. In October 2012, the participation rate was 63.6% — a drop of 2.1%.
The net takeaway from these numbers is that the U6 number would be even worse than it is if the participation rate had remained at 2009 levels. Consider that the BLS doesn’t take into account those workers who have simply given up. If those representing the 2.1% drop in participation rate were included in the number, the U6 figure would be even larger than 14.6%.
$7 trillion in borrowed money and almost $3 trillion in monetary stimulus has accomplished nothing to date to improve the unemployment situation. At what point do we accept reality? Government stimulus is not helping to resolve the problem and is, in fact, going to make it that much worse when natural market forces outweigh all other forces and we enter into a protracted recession.
Exactly. Now go check out ShadowStats.com.
Via Business Week comes the unbelievable news that Obama wants to double vehicle fuel efficiency standards. Just what we need in a struggling economy, more expensive cars, leading to fewer sales, leading to few jobs for production, transportation, sales and so on:
Government aims to double fuel efficiency. The Obama administration has released its final fuel efficiency standards for cars and trucks, requiring each automaker’s fleet to reach an average 54.5 miles a gallon by 2025, nearly doubling current levels. To meet the standard, automakers will need to introduce new technologies and sell more alternative fuel vehicles. Critics say the rules will add thousands of dollars to new car prices.
Manufacturers plea for tax cuts. With both presidential candidates proposing ideas to boost manufacturing, what companies want most are lower taxes and a simplified code. “It all sort of starts and stops right there,” said Harley Davidson (HOG) CEO Keith Wandell of tax rates, while MIT professor David Simchi-Levi said the “corporate tax structure is driving manufacturing outside the country.” Improved infrastructure and education would also help.
Big Goverment should listen (both sides of the aisle!).