US Credit Downgraded again on QE3 move: From MarketWatch
“SAN FRANCISCO (MarketWatch) — Egan-Jones Ratings Co. said Friday it downgraded its U.S. sovereign rating to AA- from AA on concerns that the Fed’s new round of quantitative easing, or QE3, will hurt the U.S. economy. The ratings agency said the Fed’s plan of buying $40 billion in mortgage-backed securities a month and keeping interest rates near zero does little to raise GDP, reduces the value of the dollar, and raises the price of commodities. “From 2006 to present, the US’s debt to GDP rose from 66% to 104% and will probably rise to 110% a year from today under current circumstances; the annual budget deficit is 8%,” Egan-Jones said in a note. “In comparison, Spain has a debt to GDP of 68.5% and an annual budget deficit of 8.5%.”
Over at Red State, Dan Spencer calls attention to the fact that today is a notable day:
“Deficit Day” is the date by which federal tax revenues run dry and the federal government begins adding even more debt on top of our exploding $16 Trillion national debt. This year Deficit Day falls on September 10th.
If lawmakers produced a balanced budget, Deficit Day would occur on December 31st, when the government spent the last dollar of its annual tax receipts at the stroke of midnight on New Year’s Eve. But we haven’t seen a balanced budget since the Eisenhower administration.
Conventional wisdom holds that the Clinton administration ran surpluses. But this is a twisting of the facts. It is true that the debt held by the public-which excludes money the government borrows from the Social Security trust fund-declined by $433 billion from 1997 to 2001. But, over those same years, the government borrowed $827 billion from the Social Security trust fund. In other words, the only way to claim that the Clinton administration ran surpluses is to admit that the government has no intention of paying back that $827 billion it borrowed from Social Security.
The latest that Deficit Day has fallen in the past 40-some years has been mid-December, at the end of the Clinton administration. The earliest was the beginning of July, during the Great Recession in 2009.
The gimmick accounting that our federal government employs would get you thrown in jail in the private sector. The gimmick borrowing-plus-money-printing that our government employs would make you ineligible to be credit-worthy for anything.
Unemployment fell .2% because so many Americans declined to continue looking for work. Is that hope for those 368,000 last month?
June and July jobs numbers declined. They were revised to show 41,000 fewer jobs created. According to Reuters, much of the original inflation was seen in the auto industry, which kept plants open for operation when they would typically close for retooling.
Manufacturing payrolls declined 15,000, the first downturn since September 2011.
Government payrolls went down 7,000, which stretching the decline in that sector for six straight months
Temporary hiring declined 4,900 for the first time since March.
The participation rate of employment declined to the lowest percentage in 21 years. At 63.5%, that hasn’t been seen since September of 1981.
Average hourly earnings declined one cent last month.
Job growth has declined: In 2011, the average monthly gain was 153,000. In 2012, the average monthly gain has only been 139,000 per month.
I don’t know about you, but this doesn’t seem to fit Obama’s plan to move FORWARD.
In a different article, I exposed the myth of income inequality, rhetoric that is constantly being repeated by the Obama administration and the media. Using data from the CBO and the IRS, Ron Schmidt of the University of Rochester School of Business was able to dissect and expose the inaccuracies being perpetuated. The Left frequently cited a CBO report that claimed to show income was at an all-time high, but it was revealed that reported only represented data until 2007 — right before the Great Recession began. The article is worth a two minute read.
Picking up where the CBO data left off, the newest CBO report confirms that that income gap is indeed shrinking — not expanding as we are constantly being told. According to CNBC,
Between 2007 and 2009, after-tax earnings by Americans in the top one percent for income fell 37 percent. On a pre-tax basis they fell 36 percent in the same period.
and at the same time,
when you take into account federal transfers, assistance and taxes paid, the incomes of the bottom 20 percent grew by 3 percent, while it fell a modest 2 percent for the middle 20 percent. In other words, the incomes of the top one percent fell 18 times more than the incomes for the middle class at the start of the recession.
The article goes on to show that the amount of taxes paid by upper-income earners is also higher now than before the Great Recession. Although the author was incorrect that the current highest level tax margin is the lowest rate ever (it was lowered in the 1986 IRC reforms to 28% ), he correctly concludes that the highest earners
paid an average effective tax rate of 28.9 percent on their income — far more than any other group, and more than twice the average effective rate of the middle class, who paid 11 percent on average.
Overall, a good analysis to help refute the continuous income inequality argument used as a justification to raise taxes on the wealthy in order to pay for the government’s overspending problem.
American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according an analysis of U.S. Census Bureau data by Sentier Research LLC.
The economic stagnation is due to a prolonged jobless rate above 8%, coupled with long-term unemployment. Just about every age group experienced income decline, with the exception of those over 65. The hardest hit were the 55-64 bracket.
Real median annual household income fell to $53,508 from $54,916 during the 18-month recession from December 2007 to June 2009, according to the firm’s study of income data for the 36- month period ended in June 2012. Incomes kept falling during the 36-month period since then, dropping to $50,964 in June 2012.
The debate continues as to whether or not the recession ever ended, or if we are about to enter a new recessionary period.
During the State of the Union, we heard President Obama talk repeatedly about fairness and taxes as he painted a picture of income inequality. The problem is that income inequality really is a myth, yet it is being perpetuated: the gap between rich and poor has never been higher.
The data used most frequently to substantiate this claim is a Congressional Budget Office (CBO) report from October 2011. However, the glaring problem with this report is that it only covers the period from 1979 to 2007 — ending right before the Great Recession. Convenient?
So in November, Ron Schmidt of the University of Rochester School of Business Administration, did an analysis of the CBO data and compared it to IRS data during the same time period — but through the year 2009, the latest year for which IRS data was available. He found something very, very different. In a reported summary,
According to IRS data, which extend through 2009, the average nominal Adjusted Gross Income (AGI) for filers with AGI of at least $500,000 declined by 17.8 percent from 2007 to 2009, and their average after-tax income declined by 19.9 percent. For those with AGI of less than $500,000, AGI declined by only 2.6 percent, and after-tax income declined by only 1.5 percent. These numbers certainly do not indicate an increase in income inequality.
In fact, there has been a marked decline in income inequality over the last decade. From 2000 to 2009, average AGI declined by 15.0 percent and average after-tax income declined by 11.0 percent for returns with AGI of at least $500,000. (Filers with an AGI of at least $500,000 represent 0.5 percent of all returns in both years, so this comparison is similar in spirit to the CBO report, which looks at the top 1 percent of households.) For all other returns, there were increases of 14.6 percent for average AGI and 17.3 percent for average after-tax income.
It revealed that income inequality is not only not at an all-time high, but also, due to the nature of economic and business cycles, it is relatively the same as it was twenty-five years ago.
The repeated calls for fairness last night reminds one of Margaret Thatcher’s famous speech in front of the House of Commons where she lambasted her opposition for suggesting that the gap between rich and poor had widened. The Prime Minister People responded that “people on all levels of income are better off than they were in 1979. The honorable gentleman is saying that he would rather that the poor were poorer, provided that the rich were less rich. That way one will never create the wealth for better social services, as we have. What a policy. Yes, he would rather have the poor poorer, provided that the rich were less rich. That is the Liberal policy”.
Liberal policy indeed is alive and well in America today. Thankfully, income inequality is not.
Though Obama may be pretending to draw a line in the sand between himself and the Republicans, he is really drawing a line for voters: Them vs The Rich Guy (millionaires and billionaires, anyone?) Setting up the narrative in the State of the Union for the year has allowed Obama to pander to the electorate during this campaign season and relentlessly go after those who have proven to be successful as a source of increased tax revenue to cover his spending problem.
Last week, I noted that Obama announced he wants to bailout all the industries. To quoth:
“I said, I believe in American workers, I believe in this American industry, and now the American auto industry has come roaring back,” he said. “Now I want to do the same thing with manufacturing jobs, not just in the auto industry, but in every industry.
Now, the Treasury Department issued an updated report today on the auto industry bailout.
The Treasury Department says in a new report the government expects to lose more than $25 billion on the $85 billion auto bailout. That’s 15 percent higher than its previous forecast.
The government still holds 500 million shares of GM stock and needs to sell them for about $53 each to recover its entire $49.5 billion bailout.
Shares today were at $20.49
I guess Obamanomics is the only place where a $25 Billion loss of taxpayer money is considered “a success” and “roaring back”. The spin is that the losses are less than the estimated $44 Billion, so hey, it’s okay! We saved the taxpayers $19 Billion!
“I’ve read it. I can tell you what’s in it. There are some ideas I agree with, and there are some that we should have a healthy debate about because I don’t agree with. The major drivers of our long-term liabilities as everyone knows are Medicare and Medicaid, and health care spending.
And:
Social Security we can probably fix the same way Ronald Reagan and Tip O’Neil sat down together…that’s manageable. Medicare and Medicaid — massive problem down the road. That’s something our children will have to deal with.
By around Election Day, the total debt of the United States will be $16,394,000,000,000.00 ($16.394 trillion).
Last time, we marked the 1000 days without a budget.Now it’s 1200 days. Did you know that Obama’s term as President is officially 1461 days? Almost the entirety of his administration has been operating without a budget.
I hope Mitt Romney will hammer this point home today during his VP rollout.
