Manipulation 401 : U-3 vs Real Unemployment

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Another 522,000 left the labor force in April 2012.

April’s Bogus Unemployment Rate

* By: Larry Walker, Jr. *

Now that economists, media pundits, and the Obama administration have weighed in with half-hearted and inaccurate theories respecting April's decline in the U.S. unemployment rate, it’s time to set the record straight. We learned yesterday, that the official rate declined from 8.2% in March to 8.1% in April, but what’s really beneath the decline? To know, one must have an understanding of how the unemployment rate is calculated, and how to access the appropriate reports. From there it’s just a matter of simple mathematics. After poring through the numbers, I have concluded that the official unemployment rate actually rose to 8.3% in April, while the real unemployment rate ticked up to 11.1%.

According to the U.S. Bureau of Labor Statistics (BLS), as of May 4, 2012, “Nonfarm payroll employment rose by 115,000 in April, and the unemployment rate was little changed at 8.1 percent.” What’s wrong with this pronouncement? The quandary is that nonfarm payroll employment comes from Establishment Data, reported in Table B-1, and has nothing to do with the official unemployment rate. The official unemployment rate is completely derived from Household Data, which is found in Table A-1.

Nonfarm payroll employment and the official unemployment rate are inapposite (one has nothing to do with the other). In fact, if you take a gander at Table A-1, from which the unemployment rate is officially derived, you will notice that the number of employed persons actually declined by 169,000 from March to April of 2012. Does it make sense that establishments reported the creation of 115,000 jobs, while households reported losing 169,000 jobs? Which data set are we to trust? Well, since most of the hoopla surrounds the decline in the unemployment rate, we shall focus on Household Data.

As I outlined in Manipulation 101: The Real Unemployment Rate, the Labor Force is comprised of those who are either Employed or Unemployed, and the Unemployment Rate is calculated by dividing the number of unemployed persons by the size of the labor force, as follows:

[ (A) Total Unemployed / (B) Labor Force = (C) Unemployment Rate ]

Thus, the official unemployment rate of 8.2% in March, as reported by the Bureau of Labor Statistics on April 6, 2012, was calculated as follows:

[ 12,673,000 / 154,707,000 = 8.2% ]

As shown in the table below, at the end of March 2012, 12,673,000 persons were officially unemployed, out of a labor force totaling 154,707,000, equaling an unemployment rate of 8.2%. Got it?

To take it a step further, if 12,673,000 persons were unemployed, out of a labor force of 154,707,000, then it should follow that the remaining 142,034,000 were employed. I found this to be consistent with BLS data and labeled the number of employed as item (D) in the table above. Next, in order to determine whether or not the decline in the unemployment rate is completely bogus, we must take into account some additional statistics from Table A-1, so I included the number of persons “Not in the Labor Force” (E), and the “Civilian Noninstitutional Population” (F). Now we will compare the March statistics to April’s calculation.

The April Employment Situation Summary concluded that a total of 12,500,000 persons were unemployed, out of a labor force totaling 154,365,000, equaling a decline in the official unemployment rate to 8.1%, from 8.2% in March. So what changed?

Comparing the monthly changes in the table below, you will note that from March to April, the number of unemployed persons (A) declined by 173,000. This would be a good thing, if they were all able to find jobs, right? So how many found jobs? Well, none. As you can see, according to Table A-1, the number of employed persons (D) also fell by 169,000. Since the number of employed and unemployed persons both declined, where did they go? As you can see the entire labor force declined by 342,000. Is it a coincidence that 173,000 plus 169,000 equals 342,000? No, it’s not.

The number of unemployed persons declined by 173,000, not because they were able to find work, the BLS merely removed them from the labor force. The BLS also removed an additional 169,000 persons from the labor force, who were considered employed just a month prior. Thus, 169,000 persons were ushered directly from a status of employed in March, to completely out of the labor force by the end of April. Does this raise any eyebrows? Also noteworthy are changes in the number of persons “Not in the Labor Force” which increased by 522,000, and the “Civilian Noninstitutional Population” which increased by 180,000. How de we reconcile this?

Reconciliation

The table below summarizes the truth behind the decline in the official unemployment rate.

Here’s what happened.

1. The number of unemployed persons declined by 173,000 in April.

2. The number of employed persons declined by 169,000 in April.

3. The labor force declined by 342,000 in April, which is the sum of #1 plus #2.

4. The 342,000 persons in #3, who officially dropped out of the labor force in April, were added to those considered “Not in the Labor Force”.

5. The Civilian Noninstitutional Population (working age population) increased by 180,000 in April, but none entered the labor force.

6. The number of persons counted as ”Not in Labor Force” increased by 522,000 in April, which is the sum of the 342,000 persons who were previously counted as unemployed (173,000) and employed (169,000), plus the 180,000 new working age persons who were swept under the rug.

Sequitur

To sum it up, in April, 342,000 persons dropped out of the labor force, while another 180,000 new entrants fell by the wayside. In effect, a total of 522,000 persons were removed from the labor force. So what would the official unemployment rate have been had the 342,000 April dropouts been instead left in the labor force and counted as unemployed? The answer is 8.3%, as shown below. Thus, the true unemployment rate ticked up by 1 basis point, from 8.2% in March to 8.3% in April, rather than down by 1 basis point as the BLS reported.

The labor force has historically grown at an annual rate of 1.0% (mirroring population growth), but looking back to December of 2008, it is safe to state that the labor force stopped growing altogether since Obama’s inauguration (see chart below). [Note: The labor force participation rate has likewise declined from 65.8% to 63.6% over the same period, or by 220 basis points.]

Final question: What would the unemployment rate be if the 1.0% per annum shortfall in the labor force, since January of 2009, was restored? Well, since 40 month’s have passed, the labor force should have grown by 3.33% ((1.0% / 12) * 40). And since the labor force stood at 154,626,000 in December of 2008, it should have grown to 159,775,000 by April of 2012, a difference of 5,149,000. Thus, the real unemployment rate is 11.1%, not 8.1%, as shown below.

Are we really moving the right direction? That depends on ones definition of the word “right”. Is manipulating the truth right?

“Anyone who doesn't take truth seriously in small matters cannot be trusted in large ones either.” ~ Albert Einstein

Related:

Manipulation 101: The Real Unemployment Rate

Manipulation 201: Playing With Unemployment

Real GDP Per Capita -- Dead!

Data:

Spreadsheets

Obama’s Economic Fallacy: The Not-To-Do List

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Small Business Goals, Rewards and Incentives

* By: Larry Walker, Jr. *

“Contrariwise, if it was so, it might be; and if it were so, it would be; but as it isn't, it ain't. That's logic.” ~ Lewis Carroll *

In his latest weekly address, Mr. Obama outlined a mirage of goals, rewards and incentives which he says Congress ‘must’ act upon immediately. But for the most part, what he proffered are just more of the same tried and failed policies, conjured from the same line of illogical reasoning we’ve heard, time and time again, over the last four years. Therefore, what Mr. Obama coined as a “Congressional To-Do List” should rather be endorsed as the official “Not-To-Do List”. Why? Well, let’s test the logic of just one item on the, so called, 'To-Do List'.

Mr. Obama said, “Third, Congress should help small business owners by giving them a tax break for hiring more workers and paying them higher wages. Small businesses are the engine of economic growth in this country. We shouldn’t be holding them back – we should be making it easier for them to succeed.”

In order to understand why Mr. Obama’s argument is fallacious, one must understand what an argument is. Very briefly, an argument is an attempt to persuade someone of something, by giving reasons or evidence for accepting a particular conclusion. It consists of one or more premises followed by a conclusion. In a logical argument, the premises support the conclusion. When we place Mr. Obama’s argument in its proper order we arrive at the following:

Premise 1 – Small businesses are the engine of economic growth in this country.

Premise 2 – We (the government) shouldn’t be holding them back – we should be making it easier for them to succeed.

Conclusion – Congress should help small business owners by giving them a tax break for hiring more workers and paying them higher wages.

No one in their right mind would disagree with either premise. Yes, small businesses are the engine of economic growth in the USA. And no, the government shouldn’t be holding us back, but should rather get out of our way, and off of our backs, so that we may succeed. However, the premises Mr. Obama presented do not support his conclusion. Will the act of offering or failing to offer the reward of tax breaks to small businesses, that hire more workers and pay higher wages, make them any more, or less, the engine of economic growth in America? Will the act of passing additional governmental laws, rules, regulations and loopholes make it any easier for small businesses to succeed?

As a small business owner myself, I can state first hand, that offering my company a reward for hiring more workers and paying them higher wages won’t help my company in the least. That's because nowhere in my mission statement will you find the stated goals of hiring more workers and paying them higher wages. How many small business owners do you know that are in business for the purpose of hiring more workers and paying them higher wages? I’m in business to provide a top quality, affordable service, and to hopefully make a profit in the process, not to hire more workers and pay higher wages.

In my world, hiring more workers and paying higher wages are by-products of increased demand. But since demand is still a far cry from where it was in 2007, why would I suddenly alter my goals toward hiring more workers and paying them higher wages? If demand were to suddenly increase, I might be forced to hire more workers and/or offer higher wages, but I would not do so to receive a deficit-financed government reward. If, and when, I decide to hire another employee, the decision will be solely based on demand. But as long as the economy remains in its present lackadaisical state, if enacted, Mr. Obama’s proposed reward will wind up just like the 17 other so called tax cuts he has offered to small businesses over his failed term – another waste of paper and ink. If anything, what small business owners lack is an incentive to succeed, not more rewards for jumping through narrowly defined governmental hoops.

Goals, Rewards and Incentives

In order to understand how illogical Mr. Obama’s proposal is, one must have an understanding of goals, rewards and incentives. A goal is simply the purpose toward which an endeavor is directed. And while a reward is a positive reinforcement granted after the performance of a desired behavior, an incentive is an expectation of reward, offered in advance, in order to induce action or motivate effort.

Goal: The purpose toward which an endeavor is directed; an objective.

Reward: The return for performance of a desired behavior; positive reinforcement.

Incentive: An expectation of reward that induces action or motivates effort.

In the matter at hand, an incentive would be something offered upfront to motivate small business owners to reach their own goals. But what Mr. Obama has proposed is to reward small business owners after they achieve a government-imposed goal. According to Mr. Obama, the measure of success for a small business lies in the number of persons it employs. What’s wrong with this theory? The main problem is that it fails to align with the realistic goals of most small businesses. Following is a list of goals for my small business. As you can see, hiring more workers and paying them higher wages isn’t on the list.

1. Offer top quality services at affordable prices.

2. Make a profit.

3. Control costs.

4. Maintain sufficient demand to remain viable.

5. Meet all current obligations with current revenue.

6. Payoff existing debt without incurring more.

7. Build and maintain a prudent reserve.

8. Achieve moderate growth, in-line with current resources.

Hiring more workers and paying them higher wages might be Obama’s goal for business owners, but what business has he ever run? Common sense dictates that hiring more workers and paying higher wages are by-products of successful business practices, not primary objectives. It is only when small business owners meet their goals that business activity, hiring and wages increase. So instead of offering a reward for something low on the priority list of small business owners (not even on my list), Congress could do better by offering an incentive to help small businesses reach their true goals. Number one on that list is, indisputably, a reduction of individual income tax rates.

Lower Individual Income Tax Rates

Like me, since most small business owners are taxed at the individual level, lowering individual income tax rates will support small businesses in the following ways:

1. Helps small businesses keep prices level by not forcing them to raise prices to meet higher income tax obligations.

2. Enables small companies to maintain the same effective profit margin, in the present unstable economy, without raising prices or slashing expenses.

3. Makes it easier to control costs without raising prices, or laying-off existing workers.

4. Helps small companies stay in business in the face of lower demand, which is the by-product of oppressive government taxing and regulatory policies.

5. Allows small businesses to meet current obligations without incurring additional debt.

6. Enables small companies to pay down existing debt without incurring more.

7. Allows small companies to build prudent reserve accounts to meet obligations in the face of future business cycle downturns.

8. Helps small companies achieve moderate growth in-line with existing resources.

In addition, lowering individual income tax rates will enable increased consumer demand for the products and services offered by small businesses, since a rate cut would apply to everyone across-the-board. Lower income tax rates are therefore a win-win for the economy.

Who asked you anyway?

The only one asking for tax breaks for small businesses that hire more workers and pay them higher wages is Barack Obama. No small business owner that I know has requested any such nonsense. But on the other hand, everyone that I know would benefit from the incentive of lower individual income tax rates. If we can’t agree on this, can we at least agree not to raise individual income tax rates?

Raising tax rates on small business owners on January 1, 2013, which is what’s really on the table, will not help them reach their goals, nor will it achieve Mr. Obama’s fallacious goal. Raising taxes will rather have the opposite effect. Even if the proposed carrot on a stick, tax breaks for those who hire more workers and pay higher wages, is offered, the pending tax hikes will negate that reward, leaving both those who take the bait, and those who don’t in jeopardy.

Arbitrarily hiring more workers and paying higher wages, in a stagnant economy, will force small businesses to raise prices on existing customers, and raising prices, without regard to demand, will have the effect of reducing demand, as customers seek lower cost alternatives. The resulting drop in demand, in the face of higher costs, will lead to further price hikes, in order to meet current obligations. In effect, pursuing the third item on Mr. Obama’s ‘To-Do List’ would land most small businesses – out-of-business – in double-time.

I am frankly sick and tired of all the special interest gimmicks conjured from the illogical mind of an amateur. What Mr. Obama ought to do at this point is simply surrender the keys, and let someone who knows what they’re talking about manage the economy. That’s what I call a logical conclusion.

“Companies are not charitable enterprises: They hire workers to make profits. In the United States, this logic still works. In Europe, it hardly does.” ~ Paul Samuelson

Related:

Why Congress Shouldn’t Just Pass Obama’s Jobs Bill, Again

Obamacare’s Effect on Small Business

Picture via: Christ, My Redeemer

Hope and Change on Ice

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Leroy Eldridge Cleaver
(8/31/1935 to 5/1/1998)

Remembering Eldridge Cleaver

* By: Larry Walker, Jr. *

"Right-wing conservatives and left-wing radicals here in the U.S. must be willing and able to sit down at the same table, look across the table at each other and see not an enemy, a target or a statistic, but a brother, a sister, a fellow American, another child of God. We must expand our hearts and enlarge our identity beyond ‘my people’ to include and embrace all of Creation." ~ Eldridge Cleaver

In the late 1960’s, after leading a troubled youth, Leroy Eldridge Cleaver became a prominent member of the Black Panthers. Having held the titles Minister of Information, Head of the International Section of the Panthers while in exile in Cuba and Algeria, and as editor of the official Panther's newspaper, Cleaver's influence on the direction of the Party was rivaled only by founders Huey P. Newton and Bobby Seale.

Cleaver and Huey Newton eventually fell out with each other over the necessity of armed struggle as a response to the FBI’s Counter Intelligence Program and other actions by the government against the Black Panthers and other radical groups. While Cleaver advocated the escalation of armed resistance into urban guerilla warfare, Newton suggested the best way to respond was to put down the guns, which he felt alienated the Panthers from the rest of the Black community, and focus on more pragmatic reformist activity.

In 1968, Cleaver was shot during an ambush he initiated against Oakland police officers, in which fellow Black Panther member Bobby Hutton was killed and two police officers were injured. Charged with attempted murder, he jumped bail and fled to Cuba and later to Algeria. Following Timothy Leary's Weather Underground assisted prison escape, Leary stayed with Cleaver in Algeria; however, Cleaver placed Leary under "revolutionary arrest" as a counter-revolutionary for promoting drug use. Cleaver later fled Algeria and went underground in France.

Cleaver returned to the United States in 1975, having become a born again Christian, and renouncing his ultra-radical past. The charge of attempted murder, stemming from the armed Panther attack on Oakland police in 1968, ended in Cleaver being sentenced to probation for assault. In the late 1970’s, he joined the Mormon Church of Latter-day Saints. Once his probation ended, he was baptized into the Church of Jesus Christ of Latter-day Saints on December 11, 1983. He periodically attended regular services, lectured by invitation at LDS gatherings, and was a member of the church in good standing at the time of his death in 1998.

Cleaver argued that the Mormons were among the few religious groups who, as an entity, did not propagate slavery. He simply found the claims that the Church was a “racist institution” to be unconvincing. Furthermore, Cleaver identified with Joseph Smith and with the ideas of a literal relationship to God as children, not as creations. He appreciated how seriously Mormonism took the written scripture.

Along with Cleaver’s theological conversion came a political conversion. By the 1980s, Cleaver had become a conservative Republican. He appeared at various Republican events and spoke at a California Republican State Central Committee meeting regarding his political transformation. He began lecturing on college campuses, promoting conservative issues and campaigned for then presidential candidate Ronald Reagan. In 1984 Cleaver ran for election to the Berkeley City Council but lost. Undaunted, he promoted his candidacy in the Republican Party primary for the 1986 Senate race but was again defeated.

Eldridge Cleaver’s journey, in his own words:

"I embarked upon a search to try to find out what was the truth. That led me to checking out all different kinds of religions. Because I knew that there must be some truth out there somewhere. But I found out that every time I went and checked out a religion or a sect or a denomination or a cult, people started calling me by names. I thought I’d better go check out the Mormons, so I went and studied their material, their doctrine. And People started calling me a Mormon... And then I went and checked out the Moonies to see what Rev. Moon was talking about. But I tell you, I was very reluctant, because after following Mao Tse Tung, and Ho Chi Ming, and Kim El Sun, I wasn’t ready for another great wise man from the East. And I said ‘Hey, I’m not a Moonie, I’m not a Mormon, I just got to the M’s!’

“You know, it’s a logical progression, it’s a metamorphosis. And what I found was that my heart was growing, I became more and more inclusive to be able to relate to more and more people on this planet.”

“I used to be a Marxist and I used to think all our problems were economic and political. But at the end of the day I found out that our main problems are spiritual problems. Because the connection between people and between Creation and the creator is not a political connection, it’s not an economic connection, it’s a spiritual connection. Your creator lays down markers in your life—you don’t know what all this is happening for."

"A lot of people said I sold out. The biggest drug dealer in Oakland said to me: ‘You know, you flipped out, man.’ I said, ‘No I flipped back in.’" ~ Eldridge Cleaver

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I can identify with Mr. Cleaver on several levels, although my life has been somewhat less dramatic. I grew up in the era. I was born in Detroit, Michigan in 1960. My father was a pioneer in the day, he was just completing his Master’s Degree when I came along. In 1964, my family headed for California, where we resided about 80 miles from Oakland. I remember the times. I remember the struggle.

Cleaver’s transformation was similar to my own. When my eyes finally opened, I came to know that, “… we are not fighting against flesh-and-blood enemies, but against evil rulers and authorities of the unseen world, against mighty powers in this dark world, and against evil spirits in the heavenly places (Ephesians 6:12).” Once I understood, I embarked upon my own spiritual journey. I ran with the Baptists, the Pentecostals, the Seventh Day Adventists, the Christian Scientists, then back to the Pentecostals. I just never made it to the M’s, yet.

In the early 1980’s, I too became a Reagan Conservative. Groupthink forever ceased to be my forte. Freedom requires an open mind. 'The connection between people and between Creation and the creator is not a political connection, it’s not an economic connection, it’s a spiritual connection.' I choose to live free. Today, I am an independent conservative, I am Christian, I am American, I’m Black, and I’m proud.

"If a man like Malcolm X could change and repudiate racism, if I myself and other former Muslims can change, if young whites can change, then there is hope for America.” – Soul on Ice - by Eldridge Cleaver

Right On, Eldridge, Right On!

References:

One Journey Home: Eldridge Cleaver's Spiritual Path ~ by Linda Neale

From Black Panther to Mormon: The Case of Eldridge Cleaver ~ Mormon Matters

Photo via:

Library of Congress Prints and Photographs Division Washington, D.C. 20540 USA

Adventures in Politicking I : A President’s Job

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* By: Larry Walker, Jr. *

“In America the President reigns for four years, and Journalism governs forever and ever.” ~ Oscar Wilde *

According to Barack Obama, the job of the President of the United States is to “make sure everyone has a fair shot." However, according to Article II (Sections 1 – 3) of the United States Constitution, in which the job of the President is officially and clearly outlined, nowhere do we find such 'verbage'. Therefore, it is unnecessary to try to figure out who’s included or excluded in 'everyone', and how fair a shot must be – before it becomes unfair. What a relief! So what’s the President’s real job?

According to the United States Constitution, a President's main job is, to the best of his Ability, to preserve, protect and defend the Constitution of the United States. The Executive Power is vested in a President of the United States primarily to act as Commander in Chief of the Military, to Read the opinions of the Principal Officers of each Executive Department, and to Grant Reprieves and Pardons for Offenses against the United States, except in Cases of Impeachment.

The Constitution also grants a President the power, with the Advice and Consent of the Senate, to make Treaties, to appoint Ambassadors, other public Ministers and Consuls, Judges of the Supreme Court, and all Officers of the United States, although the Congress may by law vest the appointment of such inferior Officers in the President alone, or in the Courts, or the Heads of Departments.

The President also has the power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.

Thus far, there’s no mention of making sure everyone has a fair shot. Has the current POTUS made enough nominations to to fill the growing number of judicial vacancies? No.

Other than the duties mentioned above, a President is commissioned by the Constitution to, from time to time, give to the Congress information on the State of the Union, and recommend to their Consideration such Measures as he may judge necessary and expedient.

I believe our forefathers meant that a President should give Congress the actual state of the Union, not just the part that improves his chances for reelection. And by making recommendations to Congress, I don’t think they meant publicly browbeating and demonizing those who might disagree.

The President may also, on extraordinary Occasions, convene both or either Houses of Congress, and in Case of Disagreement between them, with Respect to the Time of Adjournment, he may adjourn them to such Time as he shall think proper. The President is further directed to receive Ambassadors and other public Ministers. Finally, a President must take care that the Law is faithfully executed, and to Commission all the Officers of the United States.

Well, that’s it. Nothing here about making sure everyone has a fair shot.

Although Article II (Section 3) states that the President shall from time to time recommend for Congressional consideration, such measures as he shall judge necessary and expedient, that’s not the same thing as roaming around the countryside espousing radical, partisan ideals about what he feels is fair and unfair. In fact, some would call Mr. Obama’s attempts to indoctrinate the most radical elements of the public to his personal philosophy, through making repetitious statements regarding his own notion of fairness, instead of listening to the Principal Officers of each Executive Department, and instead of making his recommendations directly to our elected Representatives, as outlined in the Constitution, many of whom express genuine concern over whether such ideals may lead our Nation to the brink of bankruptcy, akin to Treason.

In other words, instead of egging on the most radical members of the public, inciting many to violence, Mr. Obama should be talking with our Congressional Representatives and Senators. The act of advocating to the general public, a policy of raising taxes in the midst of a weak Global economy, based upon nothing more than his own personal beliefs, after having been warned of, and in spite of, the dire consequences which will surely follow, instead of doing his job as clearly outlined in the Constitution, should be treated as a Crime against the United States. This is precisely why Article II (Section 4) adds that the President, Vice President and all civil Officers of the United States, may be removed from Office upon Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.

Conclusion:

The job of the President of the United States is outlined in Article II of the U.S. Constitution. The President’s job is not to lecture the public as Professor in Chief, nor to make sure everyone has a fair shot, whatever that means. And to take it a step further, it really doesn’t matter whether a presidential candidate used to be a college professor, a community organizer, a State senator or Governor, or the Chief Executive Officer of a Private Equity Firm, what matters is whether he or she is capable of comprehending the duties of the Office, as outlined in the Constitution, and has the willingness and ability to carry them out.

The qualifications for being President of the United States are also found in Article II (Section 1). “No person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty-five Years, and been fourteen Years a Resident within the United States.” That’s it.

Is Obama qualified to be President? Is Mitt Romney qualified? Are Ron Paul, Gary Johnson, and Tom Hoefling qualified? Your guess is as good as mine, however, this Election isn’t about qualifications any more than it's about some eccentric job description pulled out of thin air. This Election is about whether or not Mr. Obama has fulfilled the official job of President, not his make-believe ideal, to the satisfaction of the majority of the American people. It’s about whether we the people want real change, or perhaps just a freaking break. The fact that Mr. Obama has no idea what his job is, after nearly three-and-a-half years of on-the-job training, says a lot.

Related:

Hope and Change on Ice

Reference:

The United States Constitution

Adventures in Politicking II : No Shot

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Repetitious Rhetoric vs. Genuine Policies

* By: Larry Walker, Jr. *

According to Barack Obama, “the President’s job is to make sure everyone has a fair shot." But as I explained in Part I, the United States Constitution declares that a President’s real job is, “to the best of his/her Ability, to preserve, protect and defend the Constitution of the United States.” Whether or not Mr. Obama has abided by the true standard will soon be revealed, with the Supreme Court’s ruling on Obamacare. However, when judged according to his self-contrived measure, based upon his job performance to-date, Mr. Obama’s policies actually ensure that future generations of Americans will have ‘no shot’.

In my post entitled, “Stimulus: How China Created 22.0 Million Jobs While Obama Squandered 3.3 Million,” I compared the goals of the Chinese government to those of the Obama Administration. The reason Mr. Obama’s stimulus plan fell short wasn’t because the federal government didn’t spend enough; China’s two-year stimulus package cost an estimated $595.4 billion, while the Obama Administration spent more than $830 billion. The main reason the Obama-Plan faltered was because it didn’t raise the bar high enough. You see, the Chinese government set a goal of reaching full employment, while the Obama Administration merely sought to create 3.5 million jobs, by January of 2011. The fact that Mr. Obama set a goal of creating just 3.5 million jobs, at a time when more than 15 million Americans were unemployed, is telling.

Mr. Obama’s employment policies haven’t lived up to his self-contrived ideal of what a President should do. If a President’s job is to “make sure everyone has a fair shot”, then why didn’t Mr. Obama make full employment his objective? Wouldn’t this have been more consistent with a ‘fair shot’, than squandering better than $830 billion to salvage a mere 3.5 million jobs, while leaving 11.5 million people on the sidelines, to make due on unemployment benefits, welfare and food stamps? Although his repeated use of the catchwords “fair shot” may play well in politicking, if he means that everyone should have an opportunity to participate in the economy, then Mr. Obama has failed.

According the U.S. Bureau of Labor Statistics, since December of 2008, a month before his inauguration, the Civilian Labor Force has declined by 261,000 (from 154,626,000 in December of 2008, to 154,365,000 by April of 2012). See chart below.

During the same time-frame, the Working Age Population (Civilian Noninstitutional Population) grew by 7,749,000 (from 235,035,000 in December of 2008, to 242,784,000 by April of 2012). See chart below.

So while the Working Age Population has grown by nearly 8 million, during Mr. Obama’s term, the Labor Force has contracted by 261,000. Is the fact that nearly 8 million newly added Working Age Americans haven’t gotten a shot at participating in the economy, since Mr. Obama took the oath, consistent with his rhetoric? That depends on your definition of the catchphrase, “to make sure everyone has a fair shot”. Is ‘no shot’ synonymous with a ‘fair shot’?

To top it off, the Number of Working Americans (Employment Level) has declined by 1,463,000 during Mr. Obama’s term (from 143,328,000 in December of 2008, to 141,865,000 by April of 2012). See chart below.

Has Mr. Obama learned the lesson and since shifted his policies towards a goal of full employment? Not as far as we know. All we hear from him lately is that everyone should have a fair shot, pay their fair share of taxes, and play by the same rules, as if this hasn’t always been the case.

Aside from repetitious rhetoric, what grand policy is Mr. Obama now promoting to advance his goal of fairness? Will the act of raising taxes on millionaires, and everyone else for that matter, open up new opportunities for the next generation? If so, how does that work? Will offering tax credits to small business owners that hire more workers and pay them higher wages, while simultaneously raising their tax rates, do the trick? Not in my opinion (see Obama’s Economic Fallacy: The Not-To-Do List).

The Bottom Line: Since Mr. Obama believes that his job has been to “make sure everyone has a fair shot”, and since the Labor Force has declined by 261,000, while the Working Age Population has expanded by 7,749,000, and the number of Working Americans has fallen by 1,463,000, all since the beginning of his four-year reign, and since he has taken a pass on making full employment his goal, it may be concluded that what Mr. Obama really means by the expression, a fair shot, is “no shot”. However you slice it, Mr. Obama had his shot, and failed. He has no shot at reelection.

Related:

Adventures in Politicking I : A President’s Job

Hope and Change on Ice

Manipulation 401 : U-3 vs Real Unemployment

To Give Americans a “Fair Shot,” Obama Should Stop Violating Our Rights

Healthcare Costs Could Overwhelm U.S. Economy

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The U.S. Supreme Court is expected to rule in June on the Constitutionality of the Affordable Care Act, also know as 'Obamacare'. The latter name is either used pejoratively by the President's adversaries or in complimentary fashion by his supporters.

For better or for worse (and since the law won't fully go into effect until 2014, it may be too soon to tell), crediting or discrediting the President for the law is misleading. After all, the 2,700-page law was crafted by Congress, in conjunction with the healthcare, insurance and pharmaceutical industries.

However, the final bill was passed with no Republican votes, which made it immediately controversial.

A reasonable argument can be made that the law is too long, too complex and had far too much input from the private industries that stand to benefit from the law's existence.

The one thing that most Americans — conservatives and progressives alike — seem to dislike about the law is the mandate requiring every American to carry health insurance coverage. Conservatives see it as a direct assault on their freedom and progressives see it as a generous gift to the private health insurance industry.

No matter how one views the law, there is no denying the litany of problems with the current U.S. health care system.

Health care spending now accounts for 18% of the US economy — the highest proportion ever, according to the government. As recently as 1980, health care expenditures were just 4.2% of gross domestic product.

By comparison, in 2009, industrialized nations spent an average of 8.9% of GDP for healthcare expenditures, according to the OECD. If the U.S. spent 9% instead of 18%, the annual savings to the nation would be roughly $1 trillion annually. That's stirring when your consider that Americans spent $2.6 trillion on health care in 2010.

The saddest thing is how little Americans get for their health care dollars.

The United States spends more on health care than any other country. But, at 78.2 years, American life expectancy is just 27th in the world. On the other hand, Japan spends $2,878 per person — about $5,000 less than the U.S. — and has the highest life expectancy among developed nations.

In most of the OECD countries, health care expenses come to more than $2,000 per person each year. In the 10 countries with the highest costs, expenses are roughly twice that.

However, in the U.S., spending on health care per capita comes to nearly $8,000 per person, approximately $2,600 more per person annually than Norway, the second-highest spender.

In four of the countries with the most expensive health care, pharmaceutical expenses come to at least $600 per person per year. In the U.S., those costs are more than $950 per capita, the highest in the world.

Even if the health care system ultimately saves lives, attempting to pay off all its associated debt is destroying many others.

From 1999-2009, health insurance premiums for families rose 131%, while the general rate of inflation increased 28% over that period. The increases in health insurance costs are not relative to anything else in the economy. They exist in a world of their own, driven by profit, high executive pay, advertising and marketing.

A recent study by the American Journal of Medicine found that 62 percent of all bankruptcies filed in 2007 were tied to medical expenses. The more striking thing is that three-quarters of those who filed for bankruptcies in 2007 had health insurance. This is further evidence of a truly broken system.

However, last year, roughly 50 million Americans were without health insurance, according to Census Bureau data. This amounted to 17% of the population in 2011. A report by the Kaiser Family Foundation found that three-quarters of the 50 million uninsured in the US are actually employed. Again, more evidence of just how broken the existing system is.

Sadly, things are moving in the wrong direction. Due to the struggling economy, more Americans lack healthcare today than just four years ago. In 2010, the total number of Americans with health insurance fell for the first time in decades.

Yet, the nature of many accidents and illnesses is that they are unpredictable and often unpreventable. Invariably, the uninsured end up in the emergency room with no means to pay the bill. Hospitals still treat them, but the ensuing costs are passed along to the Americans who are insured in the form of higher prices.

For this and other reasons, the unfortunate reality is that the U.S. has an exceptionally expensive healthcare system that doesn't deliver much value for all of its massive costs. As previously noted, this is largely attributable to the fact that the system is profit-driven and bloated by expensive marketing and advertising costs. The system is also inflated by generous executive compensation packages and the need to satisfy Wall St expectations.

For example, the U.S accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales, followed by the EU and Japan. For years, the pharmaceutical industry has been the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue.

The profit motive is clearly one of the primary drivers of costs. But perhaps the most worrisome issue is how little we get in return for what we spend.

According to a 2007 report issued by the Commonwealth Fund (a non-profit group that studies healthcare issues), America has the most expensive, least efficient healthcare system compared to five other industrialized nations.

The report found that — in order — Germany, Britain, Australia, New Zealand and Canada all provide better care for less money.

The reports’ issuers said, “The U.S. healthcare system ranks last compared with five other nations on measures of quality, access, efficiency, equity, and outcomes.”

The report also studied convenience, such as waiting more than four months for elective, non-emergency surgery. The U.S. didn’t fare as well as Germany, but was better than the other countries.

The Commonwealth Fund has consistently found that the U.S. — the only one of the six nations surveyed that does not provide universal healthcare — is inferior to the other nations in many measures of healthcare.

Though the Affordable Health Care Act has yet to be fully implemented, things haven't improved in recent years.

If the US wants to continue thinking of itself as a world leader, then it has to be able to do better than other industrialized nations. Like education, the health of the nation's citizens is not just critical, but fundamental.

Unquestionably, the U.S. has a highly advanced, highly technological healthcare system. If you are in crisis and in need of intensive care, or some form of life-saving surgery, the U.S. is among the very best. The problem is that the U.S. system focuses very little on prevention and health maintenance, both of which mitigate future costs.

As of 2008, 80 percent of all healthcare dollars were spent on chronic conditions. As the old saying goes, an ounce of prevention is worth a pound of cure — and it could also be worth billions in savings. Quite simply, prevention is a lot cheaper than treatment.

However, cost will not be part of the equation in the Supreme Court's decision-making. The Justices will simply determine whether or not it is Constitutional for the government to mandate that the American people purchase health insurance.

If the Court rules that it is not Constitutional, it could call onto question the government's ability to mandate many things. After all, laws are supposed to be compulsory, not optional.

Would the overturning of the mandate invalidate the Massachusetts healthcare law signed by Mitt Romney in 2006?

While conservatives now vehemently oppose the Affordable Care Act, the concept of an individual health insurance mandate originated at the Heritage Foundation, a conservative think tank, in 1989. Republicans also introduced health care bills that contained an individual health insurance mandate twice in 1993. And of course Republican Mitt Romney championed and signed such a mandate into law as Massachusetts' governor.

The conservative approach has been to create a truly national health insurance market, allowing people to purchase insurance from any of the 50 states. This seems logical. The larger and more competitive a market is, the lower prices tend to be.

However, the U.S. problem is a matter of high costs, which ultimately drive end-prices for consumers.

The other long-time conservative solution to soaring costs is tort reform. However, the 15 leading insurance companies had a 5.7% increase in malpractice payouts from 2000 to 2004, while increasing premiums by 120% during that period. Since malpractice lawsuits don't appear to be the problem, tort reform is not the solution.

That said, a solution must be arrived at soon because health care spending will eventually strangle the economy.

The U.S. healthcare system encourages hospitals and doctors to perform unnecessary medical procedures on people who don't need them, while denying procedures to those who do.

According to a 2005 report by researchers at the Boston University School of Public Health, about 10% of the U.S. population is responsible for 70% of its health care costs. That group consists primarily of the elderly and the chronically sick.

While we can’t stop the aging process, we can do more to avoid lifestyle diseases such as heart disease, hypertension, and diabetes. We can also stop spending so much on end-of-life care, which simply prolongs the inevitability of death.

The health care costs related to our aging population are poised to worsen. The health care system is on a collision course with reality.

The U.S. is on the threshold of becoming the first-ever mass-geriatric society. For the first time in history, people 85 and older are the fastest growing segment of the population. Over the next 20 years, the number of people over the age of 65 will double to more than 70 million, or 20% of the population.

Ultimately, America needs to spend more money preventing disease than treating it. In order to regain control of spiraling costs, the focus must shift to prevention. It's the chronic conditions that people ignore for so long — usually because they don't have insurance — that are so expensive to treat.

However, the government, doctors, hospitals, and insurance companies can only do so much. Ultimately, we need to do a better job of taking care of ourselves.

Two-thirds of Americans are overweight or obese, and this is the public health issue of this generation. The CDC has reported that obesity is now overtaking smoking as the leading cause of preventable deaths.

Additionally, diabetes is now viewed as an American epidemic and it is projected to become this nation's most costly disease. Incredibly, 90% of diabetes cases are Type II, meaning they are almost entirely preventable.

Yet, Americans refuse to change their behaviors and their lifestyles.

Our physical well being is largely in our own hands. Until we start taking better care of ourselves, the personal and economic costs will become increasingly burdensome to our nation as a whole.

Will U.S. Follow Europe Back Into Recession?

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While the news that Europe is back in recession is not surprising, it is still troubling.

This week, Britain's Office for National Statistics reported that in the first quarter of this year Britain's economy shrank 0.2 percent, after having contracted 0.3 percent in the fourth quarter of 2011. That makes this Britain's first double-dip recession since the 1970s.

Officially, two consecutive quarters of shrinking GDP indicates a nation is in recession.

It's been four years since Britain's real GDP peaked in the first quarter of 2008. At the end of the first quarter of 2012, its GDP was still 4.3 percent below its pre-recession high. That's telling. It indicates that Britain never truly recovered at all.

On Monday Spain officially fell into recession, for the second time in three years. This means the Iberian nation is now grappling with a rather rapid double-dip recession. The Spanish economy is projected to contract 1.8% this year, according to the International Monetary Fund. Bad news.

Naturally, the credit ratings agencies have taken notice.

Standard & Poors downgraded Spain by two notches on Thursday, from "A" to "BBB+", saying the country's budget problems are likely to worsen due to economic weakness. The contracting economy will ultimately expand the nation's debt. S&P also assigned a negative outlook, meaning it may downgrade Spain again in the near future. The lower rating will likely raise Spain's borrowing costs, which is the last thing it needs right now. Moody's had previously cut Spain's credit rating by two notches back in February.

The pain in Spain is widespread. The Spanish unemployment rate is a whopping 23.6%, with youth unemployment at a stunning 49%. That's akin to a full-on depression. Spanish home prices dropped more than 11% in the fourth quarter, year-over-year. And in December, mortgages collapsed 39%. That's also akin to a depression.

Amidst all of this gloom, the Spanish government is following other European nations in trying to reduce its deficit through painful austerity measures. Many doubt that this will do anything but shrink the country's GDP, making it even harder to repay its debts.

"Austerity itself will almost surely be disastrous," said Nobel Prize-winning economist Joseph Stiglitz. "It is leading to a double-dip recession that could be quite serious. It will probably make the Euro crisis worse. The short-term consequences are going to be very bad for Europe."

The fear is that Spain may eventually follow in the footsteps of its smaller euro-zone partners — Greece, Ireland and Portugal — and need its own financial rescue. The problem is that there is no mechanism in place to bail out Spain. It's simply too big to save and there isn't enough money to rescue it.

Like Spain, Italy is another economic zombie, shouldering a Greek-like debt-to-GDP ratio of 121 percent. And, like Spain, it is also too big to save.

Data released earlier this month showed no growth in France's economy in the first quarter. It seems highly likely that France is now contracting as well. Europe is so interconnected that these things have a tendency to spread. If Germany — the continent's economic powerhouse — follows, it would be a most ominous outcome.

These are huge economies we're talking about here. A European recession will have global consequences. Germany has the world's sixth biggest economy; the UK is ninth biggest; France is 10th; Italy is 11th and Spain is 14th.

As a whole, the European Union has the world's biggest economy. When Europe gets sick, the rest of the world can get sick along with it. Recessions can be contagious and are often global.

Even China's massive economy is slowing from its torrid double-digit growth rate. The global demand for goods is declining and this will affect all exporters, including the U.S. That could result in higher unemployment here and elsewhere.

Yes, this could get ugly.

Due to widespread deficit and debt problems, European governments have been making large budget cuts. But the private sectors in most of these economies have been struggling for years. The only thing keeping most of them afloat has been government spending. That's where all the debt came from.

So, cutting spending, while seemingly necessary, will have the unintended consequence of cutting into GDP as well. That will hurt the European economies and cut tax receipts, which will only make the debt problems worse. It's a downward spiral in which the medicine only makes the patient sicker.

While the ratio of a nation's debt relative to the size of its economy is often viewed as critical, what is more important is the size of a nation's revenues. That's what allows a country to pay its debts.

Which brings us to the U.S.

Absent the government's deficit spending, real GDP has been flat for 15 years. Without the growth in government debt, the U.S. would be in a depression. Perhaps the deficit spending was the lesser of two evils, but now the government has an absolutely massive debt problem on its hands.

After the November elections, Congress will have nine weeks to make a whopping $5 trillion in tax and budget decisions. Even if it weren't for all of the ugly partisan politics the process will surely involve, it would still pose an incredibly difficult challenge and be very unpopular with voters. There is a whole lot less money to fund the government these days, yet there are even greater needs.

The U.S. is still dealing with the hangover from the Great Recession. During any recession, GDP and revenue invariably decline, while safety net payments increase.

In 2010 the federal government brought in $2.16 trillion in revenue — down from $2.56 trillion in 2007 — putting revenue at a 60-year low.

According to the Congressional Budget Office (CBO), automatic stabilizer payments (such as unemployment and food stamps) are adding significantly to the budget deficit. And with 22% of the workforce either unemployed or underemployed, GDP cannot reach its full potential.

The CBO estimates that automatic stabilizers added the equivalent of 2.4 percent of potential GDP to the deficit in 2010, an amount somewhat greater than the 2.1 percent added in 2009.

Millions of Americans remain in dire straights and this is adding to the deficit. These people are not contributing to government revenues, but are instead relying on them. This is not about to change any time soon. In fact, if the U.S. drifts back into recession, the ranks of the needy are certain to grow.

Since the financial crisis, only about 15 percent of the total debt increase was due to the 2008 bank bailout (Bush) and the 2009 stimulus (Obama), according to the CBO. The rest was the result of a huge drop in federal revenues. Absent a rather immediate and significant reduction in unemployment, revenues will not improve.

As it stands, revenues haven't rebounded much and that's a bad sign for the government, the annual deficit and the total debt — now $15.6 trillion, and climbing.

Though the U.S. has added nearly two million jobs over the past two years, the economy is still down about five million jobs since the recession. The unemployment rate has been falling because so many people have dropped out of the work force. That tends to lower the total percentage of those officially defined as unemployed.

The labor participation rate fell steadily after the recession began in 2007, yet it has continued to fall ever since the economy started its 'recovery' in 2009.

An alternate measure of the jobless rate is the employment-to-population ratio, which paints a more sobering picture of the employment outlook.

After peaking at the end of 2006 at 63.4 percent, the portion of the 16-and-over population holding a job (excluding those in prison, the military, or long-term care) fell to 58.2 percent by the end of 2009. Since then, the ratio has barely budged — rising by less than half a percentage point.

That's not good for the revenue side of the equation.

While a solid argument can be made that the U.S. government needs to reduce spending, such action will result in some very heavy consequences. What the government really needs, above all else, is more revenue. Without it, the U.S. will be attempting to bail out a sinking ship.

I'm not arguing that the U.S. doesn't have to reduce its deficits, and eventually its debt. It clearly needs to do both. The country's debt burden is massive and potentially crippling. What I am saying is that the U.S. is caught between a rock and a hard place, with no good choices any more. We're damed if we do, and damned if we don't.

The U.S. will surely follow Europe's lead and initiate its own round of austerity measures in 2013. The budget cuts will shrink GDP, thereby shrinking revenues. Even if those cuts result in a lower deficit (they will by no means eliminate it), they will not reduce the underlying debt. Consequently, the smaller GDP and lower revenues will only raise the debt-to-GDP ratio.

The ratings agencies won't like that one bit. You can expect the U.S. to be downgraded yet again, probably next year.

Congress should have cut the government's budget when unemployment was low and wages were stronger. But cutting spending during this time of high unemployment and stagnant (or declining) wages will only cause unemployment to rise even further, which will reduce revenues even further.

Cutting the safety net payments that millions of Americans rely on will also increase the chances of social unrest. Desperate people do desperate things. It could ultimately result in the kind of social upheaval not seen in the U.S. since the 1960s.

Such unrest has already begun in Europe. Will the U.S. follow Europe down that road?

U.S. Will Bounce From One Economic Crisis To The Next

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The U.S. economy appears to be stalling.

Gross domestic product rose at a 2.2% annual rate between January and March, slower than the 3.0% pace in the prior three months. The first-quarter growth reading was lower than expectations.

Economic growth needs to be at least 2.5% to improve the nation's dismal unemployment situation. Anything lower won't even keep up with population growth.

The Commerce Department reported that durable goods orders tumbled 4.2 percent in March, the largest drop in three years. Durable goods range from appliances to aircraft. And recent data also showed that industrial production was flat in March for a second straight month. These are sure signs that the U.S. economy is slowing.

Even before this latest round of bad news, the nation was already grappling with the worst recovery since the early years of the Depression era. For tens of millions of Americans, there has been no recovery at all. And consumer sentiment reflects this.

Consumer confidence remains stuck in recession territory. The consumer-confidence index fell to 69.2 in April from a revised March reading of 69.5, according to the Conference Board. Generally, when the economy is growing at a good clip, confidence readings are at least 90.

Here's the central problem for the U.S. economy: the middle class — the nation's economic engine since the end of the Second World War — is vanishing. And the economy is suffering as a result.

The long term erosion of the middle class has triggered a major loss of purchasing power. The result is chronically inadequate demand for goods and services. Consequently, the economy struggles to grow, leading to further shrinking of what's left of the middle class.

The nation's relentless unemployment issue is only one part of the problem.

From January through April, the economy added an average of about 200,000 jobs a month. Though job growth of any size is obviously a good thing, that pace is not nearly fast enough to recover the losses from the Great Recession and its aftermath in the foreseeable future.

At that rate of job growth, it would take us until 2019 to get back to full employment. The trouble is, the country should actually have even more jobs given population growth and the current size of the economy.

Here's some perspective: the U.S. labor market started 2012 with fewer jobs than it had 11 years ago in January 2001. The only reason the unemployment rate keeps dropping is because people continue dropping out of the labor force. They're too discouraged to continue looking for work. Most worrisome, the largest drop in U.S. labor participation is coming from men 20 years of age and older.

That's a troubling trend.

Believe it or not, the U.S. economy is now producing more goods and services than it did when the recession officially began in December 2007. However, it is doing so with about five million fewer workers. Employers have learned how to produce more with fewer workers. That's good for employers, but bad for workers and the unemployed.

Unemployment aside, the other major issue is stagnant or declining wages for those who still have their jobs.

U.S. corporations are reporting record profits. In fact, they are sitting on a huge pile of money — an excess of $2 trillion — and yet the unemployment / underemployment rate stubbornly remains at 22%.

Clearly, there is still plenty of money in the U.S. economy. The problem is that far too much of it is concentrated at the top and is not being spent into the economy.

American CEOs saw their pay spike 15 percent last year, after a 28 percent pay rise the year before. That's in line with a trend that dates back three decades.

CEO pay spiked 725 percent between 1978 and 2011, while worker pay rose just 5.7 percent, according to a recently released study by the Economic Policy Institute. That means CEO pay grew 127 times faster than worker pay.

Last year, CEOs earned 209.4 times more than workers, compared to just 26.5 times more in 1978.

As long as all of that money remains concentrated at the top, instead of being fairly paid to workers in the form of salaries and wages, the nation will remain in decline.

Wealthy Americans spend a much smaller portion of their incomes than does the large, but shrinking, middle class. There are only so many houses, yachts and exotic sports cars the wealthy will buy.

Big U.S. companies have emerged from the deepest recession since World War II more productive, more profitable, flush with cash and less burdened by debt, says the Wall Street Journal.

An analysis by the Journal of corporate financial reports finds that cumulative sales, profits and employment last year among members of the Standard & Poor's 500-stock index exceeded the totals of 2007, before the recession and financial crisis.

But judging by the way the economy is performing, and by the number of people requiring unemployment and other government assistance, you'd never know it. These huge corporate profits haven't translated into an adequate number of good-paying jobs.

Instead, companies have driven their employees — fearful of losing their jobs — into becoming increasingly more productive.

Overall, the Journal found that S&P 500 companies have become more efficient, and more productive. In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000.

While corporations and CEO's prosper, ordinary Americans continue to suffer, many of them toiling away in low wage jobs.

Out of 34 industrialized countries, the U.S. had the highest share of employees doing low-wage work in 2009, according to OECD data.

One-in-four U.S. employees were low-wage workers in 2009, according to the OECD. That is 20 percent higher than in the number-two country, the United Kingdom. Low-wage work is defined as earning less than two-thirds of the country's median hourly wage.

There are far too many low-wage earners for the economic well-being of the country. That's not good for a country in which 70 percent of the economy is driven by consumer spending. That sort of consumption seems unsustainable.

According to a recent study by University of California economist Emmanuel Saez, based on an analysis of American tax returns, in 2010, 93 percent of all new income growth went to the top 1 percent of American households. Everyone else, the bottom 99 percent, divided up the remaining 7 percent.

Again, as long as the middle-class continues to shrink and doesn't have adequate wages to spend back into the economy, this predicament will not only continue, but will worsen.

There is a widespread feeling of foreboding that the economy is not just stalling, but may in fact be headed for yet another contraction, resulting in a double-dip recession.

Famed economist Nouriel Roubini said the U.S. economy could fall into stagnation in 2013 and ultimately put the nation into the second half of a double-dip recession. Roubini, who correctly predicted the housing-market crash and recession of 2008-09, noted that real wages for U.S. workers are not growing and that America’s crushing debt is strangling growth. Roubini said that GDP will be “lucky” to grow 2% this year and the U.S. could retreat into near-zero growth next year.

And prominent Yale economist Robert Shiller, the designer of the Standard & Poor’s/Case-Shiller house price index, says that the global economy is mired in a "late Great Depression", despite the stimulus policies of central banks. Shiller says the world is in a “new age of austerity" and also says housing prices will drop by a further 20 percent as the downturn gripping the United States deepens.

All of that sounds quite stark. Yet, these two guys know what they're talking about. They've made accurate calls in the past. Both men can see the writing on the wall. And it isn't good.

Due to the financial crisis, the Great Recession and the subsequent stagnation, the federal government is dealing with a huge falloff in revenues. Meanwhile, there has been an enormous increase in consequent safety net payments for unemployment, food stamps and Medicaid. This is the reason for our continued annual deficits.

Government spending has actually fallen for six straight quarters as Recovery Act funds have been exhausted and state and local governments have struggled with tax revenue shortfalls.

Congress will be forced to act to address its fiscal crisis, or else the nation's credit rating could be downgraded yet again. Such a downgrade may inevitable no matter what Congress does. Yet, the legislative branch is now so dysfunctional that it would surprise no one if they fumble yet again.

The failure of Congress and the White House to agree on taxes and spending next year could spell doom for the economy.

Early next year, the government is set to enact huge budget cuts, while allowing the Bush tax cuts and the payroll tax cuts to expire. The likely result will be a choke hold on the already struggling economy.

We are finally seeing the limits of fiscal and monetary policies.

The Fed has pumped $2 trillion into the financial system, slashed overnight interest rates to zero and made the unprecedented promise to keep them there for an extended period. Yet, this is the best that monetary policy can do.

For good reason, Americans have little confidence in any of the institutions pulling the strings on the U.S. economy: Congress, the Federal Reserve or corporate America.

Europe is already in recession, and the U.S. is almost certain to follow. It is against this backdrop that the U.S. braces for yet another storm. We can only hope that we are not dashed upon the rocks like an old ship.

Given our structural deficiencies, it now seems that the U.S. is doomed to bounce from one economic crisis to the next. This seems to have become a way of life for us. It's a tough thing to get used to.

European Crisis Has Global Consequences

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What has been clear to me for quite some time is that Greece is going to exit the eurozone, either willingly or unwillingly. The nation is in a full-on depression and there is no way for it to ever repay its debts.

The Greek unemployment rate was last measured at 21.7 percent in February, a new record. More than half of young people (15-24) are without a job, a recipe for social disaster. In a population of 10.7 million, 1.1 million are jobless and only 3.87 million are employed, a decline of 8 percent, year-over-year.

Even the nation's population is in decline, which will thwart any lingering hope of long term economic growth. Absent a growth in population, energy supplies and credit, there can be no economic growth.

As it stands, the Greek economy is projected to contract by about 20 percent from 2008 to 2012. That's just brutal.

There has been a wave of corporate closures and bankruptcies across Greece. Tax collections, already poorly enforced prior to the economic meltdown, have collapsed.

Under these conditions, there is no way for Greece to grow its economy and service its debts.

Fearing a banking collapse, Greek depositors withdrew €700 million ($890 million) from the nation’s banks on Monday. This is creating a self-fulfilling prophecy and putting enormous strain on the Greek banking system, which will need even more funding from the European Central Bank.

The ECB is just one of the entities that Greece is heavily indebted to and will likely be unable to repay. At a minimum, given its plight, Greece may simply refuse repayment because it will otherwise remain permanently indebted.

At its heart, a debt crisis is really a crisis of confidence. In Greece, and elsewhere in Europe, there is no confidence.

The failure of Greek party leaders to reach an agreement to form a unity government is raising fears that Greece could soon be ousted from the euro zone. It may even choose to leave voluntarily. Such a possibility is rattling global financial markets. There is no mechanism for a nation to leave the euro zone and that is a vexing problem.

Any sign that Greece is preparing to exit the euro zone would trigger contagion in the more vulnerable euro zone bond markets, such as Spain and even Italy. The trouble in Europe is expanding and worsening. Leaders have been delaying some rather ugly outcomes for years, but they are now running out of time. They can no longer kick the can down the road because they have finally run out of road.

This week, Moody's downgraded the ratings of 26 Italian banks. But that's only half the story.

Moody's also downgraded 16 Spanish banks in what was the latest blow for a country already facing economic recession, surging unemployment and a property bust. There is a legitimate fear that the run on Greek banks will shift to Spain next.

The contagion in Europe has been continually spreading, from Greece, to Ireland, to Portugal, to Spain and even Italy. The yields on Spanish and Italian government debt are again rising to unsustainable levels. If unchecked, that could raise the crisis to entirely new levels. Italy and Spain are the third and fourth largest economies in the euro zone.

As it is, there are now debt and/or bank problems in countries that have been traditionally viewed as safe and stable: Holland, Austria, Switzerland and Sweden, for example.

The continent's recession will have global consequences. It will dampen demand and hurt exporters that rely on the European market, such as the U.S.

The European sovereign debt crisis and slowing global economy have driven the dollar to its longest rally since 1985, as investors seek to reduce risk. The strength of the dollar is weighing on dollar-priced commodities such as gold and oil, making them more expensive for holders of other currencies.

In essence, the purchasing power of the dollar is rising, making commodities cheaper. So, commodities aren't really going down in value; the dollar is going up in value.

On the one hand, this is good for the U.S. and American consumers. Lower pump prices would be a welcome outcome. However, while oil/gas prices are dropping here, they are rising elsewhere in the world. That will hurt other economies, and this is ultimately a global issue.

Furthermore, the strength of the dollar will make U.S. goods more expensive overseas, ultimately hurting American exporters. That's not good for the country's whopping trade deficit, or the economy in general. So the rising dollar can be viewed as a tradeoff, or a mixed blessing.

The global economy is just creeping along, reacting to one crisis after another. Even the giant Chinese economy is slowing. That's bad news. The world needs robust economies to spur trade and growth.

Ultimately, the nations of the world are grappling with unsustainable debts. And the whole world needs economic growth to service all those cumbersome debts. The trouble is, there can be no growth without debt. Growth equals debt. In order to grow, the world's economies will have to incur even more debt. But that's like adding more disease to an already sick patient.

Furthermore, there can be no economic growth without an abundant supply of oil, particularly cheap oil. Neither exists.

The global economy is inextricably linked due to trade, finance and the competition for finite resources, such as oil. That's why the pain in Europe will be felt worldwide.

Not every nation can be a net exporter, meaning that huge trade imbalances will not only continue, but will worsen. This is simply unsustainable.

As credit risk rises, lenders will become increasingly scarce and the cost of borrowing will reach unmanageable levels, as is already the case in parts of Europe.

When the price of oil drops, that means the world economy is slowing or stagnating. That's a bad tradeoff. And, as previously stated, if oil prices are dropping only in the U.S. due to a rising dollar, that has an opposite effect to the rest of the world, which must buy oil in dollars.

We are witnessing a slow motion train wreck, or even collapse. Europe's leaders, as well as the central bankers around the world, are attempting to hold back the tide.

How this ends is open to speculation, but one thing is certain; it won't end well.

Economic Growth Is Predicated On Debt

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Though the national debt already exceeds $15.7 trillion, and is bigger than the entire U.S. economy, it is projected to just keep on growing.

According to the latest estimate from the Congressional Budget Office (CBO), the government will run a $1.2 trillion deficit for the current fiscal year, which ends September 30. The new projection is about $100 billion higher than the previous estimate and is due primarily to the renewal of a 2 percentage point cut in payroll taxes and extended jobless benefits for people languishing on unemployment rolls for more than six months.

There have been persistently large deficits every year since the start financial crisis and subsequent Great Recession. Tax revenues fell nearly 17 percent in fiscal 2009, the biggest decline since 1932. That year, the deficit was $1.4 trillion, followed by $1.3 trillion deficits in both 2010 and in 2011.

According to the CBO, President Obama‘s proposed budget would produce a deficit of $977 billion in fiscal year 2013.

The problem stems from a huge collapse in personal and corporate tax revenues and a commensurate rise in safety net payments for things like unemployment, food stamps and Medicaid.

Last year, federal spending amounted to nearly 24 percent of GDP. However, federal revenues fell to 14.8 percent of GDP, the lowest intake relative to GDP in 60 years. The shrunken receipts were part of a continuing trend; revenues were 14.9 percent of GDP in 2009 and 2010.

It's evident that Washington has a revenue problem in addition to its spending problem.

U.S. corporations now contribute just 6.6 percent to the federal tax base. In the 1950s, US corporations contributed a 30 percent share.

Revenue from corporate income taxes was between 5 percent and 6 percent of gross domestic product back in the early 1950s. However, federal corporate tax collections made up only 1.3 percent of U.S. GDP in 2010.

Confronted by these historically low revenues, Congress will seek a combination of budget cuts and tax hikes. However, due to strong Republican opposition, the latter may amount to nothing more than allowing the already legislated expiration of the Bush tax cuts at the end of this year.

But, as Europe is painfully learning, austerity (aka budget cuts) can push a struggling economy right off the rails. The U.S. economy has become heavily reliant on government deficit-spending to maintain growth. Absent government deficit-spending, our economy would still be in recession (more likely a depression) and would have entered one years earlier, long before the financial collapse of 2008.

Think about what would happen to the economy if federal spending were halved right now, from 24 percent of GDP to just 12 percent. Even if spending were cut by a quarter, the economy would grind to a halt. Sadly, the U.S. economy has become wholly dependent on government deficit-spending.

As it is, economic growth remains sluggish. The U.S. economy expanded at a 2.2 percent annual rate in the first quarter after expanding at a 3 percent annual rate in the fourth quarter of 2011. That's not nearly good enough.

Growth would need to equal 5 percent for all of 2012 just to lower the average jobless rate for the year by 1 percentage point. Clearly, that's not going to happen.

Too many Americans are unemployed or have dropped out of the workforce altogether. In April, the number of people not in the labor force rose from 87,897,000 to 88,419,000, a whopping increase of 522,000. This is the highest on record. The labor force participation rate recently dipped to a new 30-year low of 63.6%.

Until employment improves considerably and genuinely (not some phony government accounting that ignores all the millions who have dropped out of the workforce), tax revenues will remain perpetually low.

So, without jobs there will be no economic growth. But if the economy isn't growing, companies won't hire. It's a chicken and egg conundrum.

To make matters worse, the U.S. will find it increasingly difficult to service its mammoth debt without robust economic growth.

The U.S. paid $454 billion in interest on its publicly held debt in fiscal 2011, which ended September 30. However, the National Commission on Fiscal Responsibility and Reform, better known as the 'debt commission', projects that the interest on the debt could reach $1 trillion by 2020 if Congress doesn't act immediately.

With a debt so massive, the U.S. desperately needs growth. Yet, the private sector isn't capable of doing it alone.

Despite this, Congress plans significant budget cuts next year, in addition to allowing the payroll tax holiday and the Bush tax cuts to expire. That combination will lead to a recession, the CBO announced on Wednesday.

If these planned tax hikes and budget cuts aren't changed, the CBO says it will result in a fiscal drop-off (commonly referred to as a "fiscal cliff"), that will shrink the economy by 1.3% in the first half of 2013 (a technical recession) before expanding 2.3% in the second half.

However, the CBO projects that this combination of tax hikes and budget cuts will reduce the budget deficit by 5.1% of GDP. Yet, last year, the CBO projected a budget deficit of $1.1 trillion in 2012, or 7.0 percent of GDP.

So, even if those budget cuts and tax increases are enacted as planned, they would still result in a continued deficit and even more debt.

How's that for an outcome? This fiscal "solution" would not only result in a recession, but would still leave the federal government with a budget deficit as well. That's what you call bad medicine.

Our economic system is predicated on debt. Since all money is loaned into existence, money equals debt. The economy can't grow without an expansion of debt, meaning that debts can never be fully retired. If debt isn't accumulating, then money isn't being created and the whole system locks up and shuts down.

It's for this reason that you can expect continued deficit spending and a perpetual expansion of the federal debt. It's been going on for many decades, with the exception of a brief respite during the Clinton years. When the government finally runs out of foreign lenders, the Federal Reserve will just ramp up its printing and further devalue the dollar.

This fiscal mess comes at a particularly bad time for a nation confronting a long term wave of retirements by its Baby Boomers, one-quarter of the population. This will dramatically raise expenditures for things like Social Security and Medicare, even as the nation's productivity suffers a parallel and resulting decline.

Such a decline in productivity is a recipe for disaster for a nation so reliant on the perpetual-growth economic model.

As I've said repeatedly, there are no good solutions to our economic woes; only very difficult choices. We have entered a debt trap that presents an enormous conundrum; do we continue to mortgage our nation's future by becoming even more grossly indebted? Or, do we show fiscal restraint and suffer the consequences of lowered growth, economic stagnation or even the possibility of another depression?

My guess is that the government maintains its deficit spending because it has no other choice. The economy must grow or it will die. Stasis equals death. Some entity must attempt to spend the economy into growth, meaning further debt. If it's not the private sector, then it will be the public sector.

There are some really serious and difficult challenges ahead us as a nation. And I'm not talking about ten years from now either. Some really unpleasant realities will have to be confronted starting next year, and again each year thereafter.

You could say there's a shit storm a brewin'.