Our United States economy is not really that hard to understand these days if you just read:

 The U.S. Census report    Http://www.census.gov/

A good (GDP) Gross Domestic Product publication    http://www.bea.gov/

And a Federal Budget Report     http://www.whitehouse.gov/omb/

FDR & U.S. Federal budget as a percentage of GDP

When the stock market crashed in 1929, the U.S. federal Budget was 2.5 percent of GDP. If we applied the 1933 Federal budget percentage to today’s $13.84 trillion GDP it would only be $346 Billion.

If we look at the $3.1 Trillion 2009 Federal budget and include TARP $700 Billion, Fannie Mae Bailout $250 Billion, and a percentage of Obama’s stimulus package $400 Billion, as well as, a $410 Billion budget extension, we get approximately $4.860 Trillion in Federal Budget. This is 35 percent of GDP. However, hard revenue only amounts to approximately $2.5 Billion. Over approximately $2.4 trillion is deficit spending.

If we consider State taxation, and national Health care costs (20 percent of GDP), we then realize that over 60 percent of GDP is for Federal, State, or local government and Health Care. 60 cents on the dollar is spent on otherthan Food, shelter, clothing, and non discretionary items. At best, 40 percent of GDP circulates within the private sector. 40 cents of every dollar is in the hands of “The people”. Our cash fuel tank is just above 1/3 full.

Needless to say, FDR had much greater economic envelop to work with during “The Great Depression” (approximately 95 percent of GDP) versus BHO (40 percent)!  In other words, 95 percent of GDP circulated within the private sector. 95 cents of every dollar was in the hands of “The people”! They had a full tank of cash fuel to run the economy on.

We then must consider Demographics. FDR had a much, much, much younger population to work with. When Social Security was implemented, the ratio of workers to SS recipients was 28 to 1. I could elaborate on all the social issues of the time like, agrarian versus sedentary lifestyles etc., but lets just move on to straight numbers.

Now there are approximately 2.8 workers supporting 1 worker on entitlements or 10 times less. 45 million Americans are over 65 years old. 5 million Baby Boomers will be leaving the work force a year for the next 20 years. Every year, 5 million Baby Boomers will be receiving entitlements paid for by 2.8 of our children. The labor force exodus will be very good for workers that are laid off. In a few short years, there will be a labor shortage and wages will go up, unless of course, companies continue to offshore. Why pay an American worker when you can hire 10 Chinese workers for the price of 1 American worker and pay zero health care, unemployment insurance, or entitlements? The bad news is that the Obama Socialist Welfare state will raise taxes and eat up any wage gains. In addition, deficit spending will continue to erode the value of a dollar.

The statistics are frightening, but a huge number of retirees have very little savings and receive the bulk of their retirement from Social Security. The numbers are absolutely frightening.

We must ensure that Social Security is sustainable! Per the graph below, Social Security is very sustainable if we cut back drastically on Federal government spending, eliminate Medicare and simply expand the current VA system to cover

Our most vulnerable. 

As one can see per the above chart, Social Security will be stable at a little over 5 percent of GDP for the foreseeable future. Medicare and Medicaid will become 20 percent of GDP or all present revenue.

We can reduce total government to below 18 percent of GDP and still provide stable  Social Security and Health care!

George Bush’s economic mess?

Barack Hussein Obama has stated dozens of times that he inherited the economy from George Bush.

If we look at this You tube video

http://www.youtube.com/watch?v=usvG-s_Ssb0  

And this You tube video http://www.youtube.com/watch?v=_MGT_cSi7Rs

paint a much different picture!

It seems the Democrats and Obama and their lack of oversight caused the bank failures! They encouraged and aggressively pushed loans for people that did not have the credit score or adequate means to afford a house. So now the same party that caused this mess is in power and blaming Republicans for the mess.

A little Primer

Demographics, Republican supply side economics, and the technology ERA created the roaring 90s. Bill Clinton turned that prosperity into huge Federal surpluses and maintained several years of balanced budgets. The Y2K fiasco kept a super Tech heavy stock market artificially inflated. Stock market liars and traders and the media

 kept the illusion going and made billions off of American investors.When the tech bubble burst, 6 trillion was lost from the 401ks of millions of Americans. The NASDAQ tumbled from above 6000 to 1200, then 911 hits.

In order to keep the Stock Market from tumbling further, George Bush and Alan Greenspan lowered interest rates. As a result of lowered interest rates, housing prices began to soar. Freddie Mac and Fannie Mae began adhering to very lax credit standards and very ridiculous loan programs and handed out billions to undeserving home buyers and investors. Meanwhile, we were engaged in and winning a war in the Middle East. The stock market hit all time highs, and many people recuperated the money they had lost in their 401Ks. Then the ARM loans and Sub Prime loans came do, the housing bubble burst, and people that lived beyond their means started walking away from the loans they should not have had in the first place. Loans brought to you by Barack, Barney Frank, Frank Raines, and associates. An economy brought to you by a democratically controlled House and Senate. 

The Obama Effect

When Barack Obama gained the democratic nomination in August 2008, the stock Market was 11,543. When Barack Obama won the election on November 4^th 2008 the DOW was 8900. When he took office in January 2009 the DOW hit 8000. When Barack Obama signed the stimulus bill, the DOW continued to slide. When Barack Obama, came out with the $410 billion budget extension for 2009, the DOW lost more ground. When he came out with his 2010 $3.55 trillion budget proposal, the DOW headed south of 7,000. When we then factor in Bernanke stating he will raise interest rates to quell inflation, it is clear that the Market reacts negatively to anything Obama. I feel there is collusion between the FED, Fannie Mae and Obama at the behest of the Stock Market.  All the emphasis and attention is on loosening credit and buying up foreclosed homes versus the Stock Market.

If Bernanke raises interest rates to pre 2002 levels, it will be very bad on both the housing Market and the Stock Market. Home owners will have to lower prices to sell. Our youngsters will have to pay high interest rates. People will flock to banks for better savings rates versus loss after loss in the Stock Market. A tumbling Stock Market will exacerbate an already untenable Baby Boomer/ Social Security retirement situation. With their 401k worth less, they will rely more and more on Social Security. What affect will 50 to 60 million retirees on (much lower than forecasted) fixed incomes have on the economy?

The stimulus

I looked at the stimulus package. It looked more like pent up closet tax and spend liberal agenda than a viable stimulus plan. I especially did not like all the money that is going to education, research, bio fuels, electrical infrastructure, and federal buildings. Given the price of tuition and tenured professor salaries, aren’t our universities over funded already? As far as bio fuel, aren’t battery powered cars a much cleaner method of propelling cars? Can’t we use Alaska CNG “compressed natural gas” for our interstate trucking? Shouldn’t we use agricultural land for food versus fuel? Can wind power be put in an aircraft fuel tank? Is Nuclear power the most efficient way to generate electricity? Isn’t natural gas the cheapest way to heat a house? Why hasn’t the federal government been able to maintain their buildings on the budgets of the past?

Did General Electric, Warren Buffet, and Obama engage in Fascist style collusion before and after the 2008 Election?

How will the universities that are slated for billions in research money help the economy when the products of research would end up being manufactured in China anyways?  How will doubling government from 18 percent of GDP to almost 40 percent of GDP stimulate the economy? 70 percent of the GDP is generated from small business and the retail sector, how will an 800 billion pork ridden federal and state budget bailout help the working class that pays the taxation? When 5 million Baby boomers retire a year and leave the stock market for a more secure money stream, how is funding far-fetched educational research going to help our 401ks right now?  Couldn’t we have just given our tax payers an 800 billion dollar tax refund? It was their money in the first place! 

How can a president that increases government 35 billion dollars a day for his first 35 days in office call it responsible?  How can a president ask people that live from paycheck to paycheck on a globalized economy to be patriotic and sacrifice, while he balloons government and leaves lazy government employees secure. They get better pay, better pensions, and free medical and dental, and great benefits. The tax payer gets a layoff notice and a foreclosure! Government is no longer for the people. It is for itself, and our children will have to pay for it.  

Obama the Anti-Clinton

I was under the impression that Obama would follow in the footsteps of Bill Clinton concerning government spending. I understood his “change” message to mean less military involvement, more efficient government, and less expensive health care for the tax payers. Instead, he expands the war in the Middle East, grows government, creates a massive deficit, and puts inexpensive healthcare on the back burner. In lieu of leaving Iraq on a short timetable, he wants to stay another 18 months and then leave 50,000 troops behind. By the time it is said and done, 50,000 troops will be in Afghanistan, 50,000 will be in Iraq and only 30,000 will get to go home. This scenario is no different than what John McCain or Hillary Clinton would have done. The change message has morphed into something much more status quo and inefficient. I feel bad for Bill Clinton. Standing by while an inexperienced 1 term senator wrecks the economy must be very painful for William Jefferson Clinton.

Unlike George Bush who allowed federal government to grow from $1.7 to $3.1 trillion, Bill Clinton cut government and controlled spending. During Bill Clintons last term in office, federal government grew from $1.6 to $1.7 trillion. Republicans were too busy with the Monica Lewinsky ordeal to appreciate this wonderful fiscal achievement. I believe Hillary Clinton would have followed her husband’s example.

Obama on the other hand is the Anti-Clinton. He along with his democratic cronies want to double the size of government and punish the rich. They will give the middleclass a tiny tax break then punish them a little later. Obama has spent almost as much money in 35 days as Bill Clinton spent in 4 years. Bill Clinton spent $1.7 trillion during his last year in office... Obama spent ½ the TARP funds, a $410 billion extension, and $800 billion on a stimulus. Our current democratically controlled congress feels bastardized socialism is a supporting premise for, and solution to, extreme fiscal stupidity.

True Socialized medicine is far different than our current accepted or perceived form of bastardized socialism. The Veterans administration and Armed forces hospital systems operate as true Socialized medicine systems. Doctors, Nurses, and hospital staff are paid a salary. While a doctor’s appointment in the civilian sector might cost $300 for a 20 minute appointment, which Medicare must pay for, a veterans Administration doctor may see 15 patients a day for $500 total. VA style health care for our seniors would save our children utter trillions and allow them to buy a home. Same quality care at 10 to 15 percent the cost to the tax payer. Finland uses Health Care software developed by the VA. If Finland is using Veteran Administration Software to run its entire country, why are we spending money to develop new software that does the same thing?

Why does Obama want to spend $634 billion as a down payment on a future health Care system, when we can simply expand the VA system to cover seniors and simply redistribute how we pay for private health care? Isn’t 1/3 employer, 1/3 employee, and 1/3 Health care tarrif tax a fair ay to distribute health Care expenses? China has taken millions of our jobs. They have taken millions of our jobs that used to create revenue and pay for social services here in America. Should they now get away scott free? Isnt levying a 15 percent health care tarrif tax on all imports originating from countries that devalue their currency a fair system? Or do we make the rich pay for everyone’s health care in this country? Do we push corporations out of this country by mandating them to pay the high cost of health care?

Why are we funding Medicare at $600 billion a year when we can expand the VA and then cover our Senior citizens for $150 billion a year?

George Bush’s 2009 budget as passed by congress was $3.1 trillion. Medicare spending was approximately $400 billion. The deficit that year was forecast to be $400 billion. Hard revenue was forecasted to be 2.7 trillion. As it turned out it was a little over $2.55 trillion. Adding his share of TARP, and other issues, Bush’s share of the 2009 deficit balloons to over $1 trillion.

A different course

Let’s say that all the people that purchased housing when George Bush lowered interest rates in 2002 did not live beyond their means. They did not buy houses to large for their paychecks, and they did not speculate or sign on to exotic mortgage programs. Let’s say they bought modest housing within their means on 5 to 6 percent fixed loans. Let’s say many bought within their means and financed on a 15 year fixed mortgage structure. Some even paid on Bi-pay. So now after 7 years of payments on a 6 percent 15 year fixed Bi-pay mortgage, some would only have maybe 4 years left on their loans. Had this happened, there would be massive equity and massive savings in America right now. The wealth affect would be pumping the stock market to over 15,000. Boomers would have double hat they currently have in their 401ks. Instead, the Democrats that control Fannie Mae and Freddie Mac insisted on letting everyone get a loan regardless of credit or circumstance. They screwed up the Economy and then blame it on George Bush.

George saved the American economy after 911. He won a war also. Unlike Vietnam, Iraq troops will come home to “thank you for your service”! I feel that had my parent’s generation been offered the George Bush Tax cuts and George Bush interest rates, they would have taken complete advantage of them. Instead of refinancing and taking equity out, they would have refinanced from 9 or 10 percent to 5 percent and paid off their homes as fast as possible. It is not George’s fault that 10 percent of the population speculated or lived beyond their means. As far as I am concerned, he was a damn good president and gave everyone an opportunity to gain wealth. He provided a path here Americans could pay off their homes and also preserve the stock market. All we as Americans had to do was to live within our means and honor our obligations. Obama on the other hand wants to take your wealth and is destroying the stock market! 

Finally, a balanced budget amendment of 18 percent of GDP would save the stock market for the long term. 18 percent of 14 trillion would be $2.55 trillion. This would leave 70 percent in our cash fuel tank.