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It’s been a long three years and eight months since Obama took office. In that time there has been little positive news for the private sector of the economy.

Obamacare, Cash for Clunkers, Cash for Caulkers, American Recovery and Reinvestment Act, have all been central command and control measures that have cost taxpayers, and the private sector, jobs and productivity through increased taxes, inflation, or debt.

Before the election lets look at the numbers and see what damage has been done by the Obama administration.

First lets step back in time and look at Bill Clintons record and why the Democrats are so proud of his economic growth record.

Clinton came into office after the 1991 recession when Bush 41 had increased federal spending to 22.1% of the Gross Domestic Product (GDP).

Clinton’s course of action?

Clinton did the opposite of Obama, he reduced the federal budget as a share of the GDP his first year to 21.4%, then 21.0%, 20.6% and 20.2% by 1996 when he was re-elected.

Many will give credit to the Republican lead congress but Clinton went along with the budgets and for better or worse he gets credit. By the time Clinton left office federal spending was down to 18.2% of the GDP and poverty had dropped down to a 26 year low of 11.3% in 2000 in sharp contrast to Obama’s 17-year high of 15.1%.

Obama took the exact opposite approach. Granted the housing boom and bust was more severe than the S&L boom and bust Clinton inherited but Obama has made a disaster much worse with his Keynesian economic approach to the economy.

To put in perspective if there was competent management at the White House and Federal Reserve the economy would have continued into recession another year after the 2007 decline to early 2010 as malinvestment was liquidated, mostly housing stock, and today the bad times would be in the past and economic growth would be a strong 5 to 7%. Strong realistic sustainable growth based on real investment, not gimmicks like quantitative easing or zero interest rate policies.

In 2008 the federal governments share of the GDP was 20.8%, lower than the 22.1% Clinton inherited, and the Obama administration promptly increased this to 25.2% in 2009. A portion was the Bush 2008 Troubled Asset Relieve Program (TARP), $700 billion, but a large portion was the Obama administrations American Recovery and Reinvestment Act (ARRA), $831 billion. The Obama record on spending as a percentage of the GDP is 25.2%, 24.1%, 24.1%, and a projected 24.3% for 2012.

This new debt is reflected in the “hard debt” or debt that is owed to the public.

Hard debt is subtracted from the total budget deficit giving a reduced number from what is normally reported in the media. This is a more accurate way to asses the economic record because this debt “crowds out” private investment. The more the federal government borrows the less there is for private investment and job creation.

Inter government debt, are IOU’s from one government agency to another. These debts can be repudiated by congress if desired and therefore is considered “soft” debt.

Social Security would be an example of soft debt obligation. The political feasibility of repudiating this soft debt is debatable but excluding it from the debt numbers gives a more accurate assessment of the damage done to the economy from the federal government removing funds from the private sector for generally malinvestments, such as Sondra, and other schemes that enrich special interested groups.

Money that if invested into the private sector would create sustainable jobs.

Clinton increased the debt owed to the public by a stingy 5% or less than 0.6% a year over eight years, from $3.248 trillion in 1993 to $3.410 trillion in 2000. Bush increased the debt from $3.320 trillion in 2001 to $5.803 trillion in 2008 or 9.4% per year. Obama entered office in 2009 with a debt that had skyrocketed to $7.554 trillion and further increased that debt to $11.578 trillion or 15% over three and one half years directly attributable to him.

Officially Obama entered office in January 2009 with $6.836 trillion of debt held by the public so starting the count at $7.554 allows for an adjustment period between the Obama administration and the Bush administration. These calculations give Obama the benefit of the doubt and a grace period for him to put his policies in place.

The numbers more often reported are total government debt which has gone up from $11.875 trillion to $16.350 (est.) trillion in 2012.

Officially the debt was $11.269 trillion when Obama entered office in January 2009 which is how the $5 trillion debt added number is calculated in the political advertisements.

Even with this allowance for an adjustment period between the Obama Administration and the Bush Administration its clear that Obama has lead the USA on an unsustainable debt path that will have severe economic repercussions in the near future.

One wonders is Obama intentionally following the Cloward and Piven strategy of intentional bankruptcy of the USA or was his decency and humanity snuffed out by his elitist inferior education at Harvard?

Does he have an economic clue at all?

We know his former economic adviser, Christina Romer, “unemployment will not exceed 8%,” did not have a clue about economics. Most economic professors do not understand economics because the textbooks are full of fallacies and propaganda.

Monetizing the debt.

What is not generally known outside financial and academic circles is the debt held by the Federal Reserve. Some economist considerer this much more damaging than debt “sanitized” by public ownership because it is “monetizing the debt” or colloquially “printing money.”

When the general public buys a US bond they forgo consumption, and bidding up the prices for goods and services available today, for a future pay off from the bond. When debt is monetized there is no such trade off, money is simply created with the accompanying inflationary consequences.

In 1993 the Federal Reserve owned 4.9% of the GDP in federal debt. From 1993 to 2008 the number varied from a low of 3.4% in 2008 to a high of 6.0% in 2004. In 2010 it was a historically “normal” 5.7%, then skyrocketed in 2011 to 11.1% of the GDP, the highest in the history of the Federal Reserve, even higher than the 10.7% in 1946 after WWII. Monetizing the debt could have catastrophic consequences to financial markets as well as personal finances.

For the record in 2012 the total federal debt, hard and soft debt, estimate is 104.8% of the GDP. Debt owed to the public 74.2%. Federal Reserve debt is currently 11.1%.

Many economist view 120% to 140% of the GDP owned as federal debt as the point of fiscal insolvency and massive economic readjustment would be needed. Greece is currently experiencing what “massive economic readjustment” is. When federal debt is highly leveraged any fiscal option will have sever negative consequences, austerity, bankruptcy, inflation, and in worse cases war. ANY option.

Unemployment.

This is probably the most smoke and mirrors because the unemployment number is so political. The Bureau of Labor Statistics (BLS) is caught between a failing administration pumping them for good numbers and the fight within the agency to remain credible. The agency, through the magic of seasonable adjustments, can make workers appear out of nowhere or disappear. And they have done this for the Obama Administration. Unfortunately for them there are many skilled bloggers that can wade through the smoke and mirrors and calculate a more accurate unemployment rate of 11.7% instead of the reported 8.1%.

Here are the numbers.

The highest monthly labor force participation rate (LFPR) recorded was 68.1% in July 1997. Currently the LFPR is 63.5%. The last time the LFPR was so consistently low was 1983-84. The civilian employment-population ratio tells the same story. Employment participation peaked at 64.7% in April 2000 and is currently 58.3%, the lowest since the early 1980s.

These numbers represent millions of Americans who would like work but have given up. One of the most insidious methods the BLS uses to make the unemployment numbers look better is to simply drop people off the rolls. Millions simply not counted make the unemployment numbers magically drop to politically acceptable levels.

In the last report from the BLS 96,000 jobs were added while the US civilian non-institutional population has grown by 186,000 people every month, on average, but the unemployment rate dropped from 8.3% to 8.1%. It would not surprise me to see 7.9% unemployment announced before the election despite what the reality is.

Annualizing the LFPR the highest years recorded were from 1997 to 2000 at 67.1% when federal spending was 18% of GDP. For 2011 the rate was 64.1% and for 2012 the estimate would be 63.7%.

For four years in a row the 67.1% participation rate was achieved. The 67.1% rate is very realistic if Washington DC and the Federal Reserve had competent management.

To compare the 1997-2000 period to 2009-12 period there are multiple way to do so but one of the simplest is to compare employment and the population growth of the two periods.

In 1997 there were 129.558 million workers and by 2000 that had grown to 136.891 million. The population was 272.822 million and grew to 282.296 million in that time. The employment/population ratio was an impressive 48%.

In 2009 employment was 139.878 million and in 2012 (est.) 142.558 million. The population in 2009 was 307.374 million and in 2012 (est.) 314.936. The employment/population ratio was 45%.

Simply put this translates into, conservatively, 8 million people who would have a job if we had competent management in Washington DC and the Federal Reserve.

The U-6 number.



The press underreports the “U-6” unemployment number or the number of workers who have part time work but would like full time work.

“The “U-6” unemployment numbers better reflect the true nature of the employment job market. The U6 unemployment rate counts not only people without work seeking full-time employment (the more familiar U-3 rate), but also counts “marginally attached workers and those working part-time for economic reasons.”

Note that some of these part-time workers counted as employed by U-3 could be working as little as an hour a week. And the “marginally attached workers” include those who have gotten discouraged and stopped looking, but still want to work. The age considered for this calculation is 16 years and over.”

From 1997 to 2000 the U-6 unemployment dropped from 9.4% to 6.9%. From 2009 to 2012 the U-6 increased from 14.2% to 14.7%, reaching a high of 17.2% under the Obama Administration.

What this means according to some economist, notably Arthur Okun, is that if the natural rate of unemployment is 5.3% and the real unemployment rate is 11.7% the US economy us currently underperforming by a whooping 13% of the GDP!

This means that with competent management the US GDP would be $17.6 trillion not the current $15.6 trillion. This has tremendous implications on our debt and ability to afford current federal programs.

Currently 24.3% of the GDP is federal spending but with competent management that number would be reduced to 21.6%. Tax collections are currently 15.8% of the GDP, with another two trillion that number would increase to around 18% of GDP closing the deficit spending gap from 8.5% of GDP to a much more reasonable 3.6% of GDP.

Every reporter in the US should understand these numbers, but they do not.

Every high school student should understand basic economics, but they do not.

Every university economics professor should understand basic fiscal economic policy, but they do not.

America, and the rest of the world, has intentionally mislead millions with bogus economic education that favors the elites, government, and theft from the people through inflation, taxes, and something for nothing schemes.

The lesson in these numbers is simple:

1. Do not spend over 18% of the GDP on federal programs.

2. Stay out of wars and foreign entanglements that drain the treasury.

3. Balance the budget.

Politicians and economist blabber on endlessly about multipliers and stimulus programs, some out of ignorance but other because they like the power that spending money brings. Some, like Christina Romer, are true believers and maybe just too obtuse to figure out a economic con game when they see it. But the facts are there for all to see. All the data is available on federal government web sites and easily accessible.

Its past time Americans stopped the blame game and rip offs using government as the preferred thief.

The federal budget needs to be 18% of the GDP.

That is the budget, politicians can fight over how to spend it but DO NOT spend over 18% of the GDP.

Doing otherwise will lead to inflation, bankruptcy, austerity, or war.