Tim Geithner Discusses the Economy, and Rick Santelli Blasts Him

A couple of good videos I had to share.

Federal Reserve Member James Bullard Has Thoughts on the Economy

James Bullard stopped by CNBC last week to share his thoughts on his outlook for the economy.

Non-Participants: The Massive Problem for Our Labor Force and Our Economy

In the debate between a strengthening vs. weakening job market, both sides have presented statistics that support their claims. The economic pros state that the economy created 243,000 jobs in January, which was much better than expected. However, on the other side of the coin, the number of people who left the labor force in January rose by 1.2 million to 87.8 million. In this article, we are going to examine the two and discuss the issues we have with such a large growth in non-participants.

First, we charted the number of workforce employed to non-labor force participants going back to 1975. We did this as opposed to labor force size, because unemployed persons in the labor force should be considered the same as non-participants for our economic analysis.



Since we are dealing with a broad time frame, along with large numbers, we wanted to refine the research further.

In order for an individual to be a non-participant in our economy, they need to depend on people who are working. Whether it's a retired senior citizen receiving Social Security checks funded by current employee taxes, or a 30 something who, while unemployed, foreclosed on his house, and moved back in with his parents.

Therefore, we feel the best indicator of this is taking the ratio of employed to the non-participants of the workforce.



Currently, for every non-participant, there are 1.611 people employed. This is the LOWEST level in our economy since May of 1983. Whether it's a college student who isn't working, a homeless person living at a shelter, or a family living in their parents basement, we have a record number of adult dependents in our economy and little job creation to show for it. This has a negative impact on social entitlement costs, tax collection, and our overall economic freedom.

Austerity Is Not the Cause of the Greek Debt Crisis

Increase in Government Spending year over year Versus Economic Growth



Over the past couple of weeks, I've heard some economists accuse austerity of being the reason that Greece is in an economic depression versus government spending. The chart tells a different story. Greek government spending surged when the country entered a recession in 2009. It's clear from the chart that the 'Keynesian surge' in government spending didn't have the impact it intended. In fact, it perpetuated one of the worst debt crisis in the history of the continent.

This Week in Economics: Jobless Claims

Jobless claims remain near 350,000.

Big Government Strikes Again!

I like how the government uses the word "might" as its reasoning for blocking a private corporation from building a wireless network. I wonder how much wireless network technology funding was included in the stimulus? I'm sure the two aren't related, right?

Arthur Brooks Discusses Free Enterprise and Big Government

We really are in a situation where free enterprise wants to conduct as much business as possible and the government wants to regulate and/or tax as many of those transactions as possible.

Lobbying: The Consequence of Bloated Government

Last week, I watched part 10 of Milton Friedman's Free to Choose. In it, Milton Friedman described the growth of lobbying and special interests in Washington DC. Lobbying was a major issue of George W. Bush's presidency, but has mostly been ignored since Barack Obama became President.

When lobbying was considered a social problem, it was highly debated on how to stop such a problem. If the government made lobbying illegal, lawsuits would follow alleging a violation of the first amendment. A real conundrum seemed to emerge about how to deal with the problem of managing so much power between so few.

In order to fix lobbying, we need to find its root causes. Why does lobbying exist? It exists because wealthy individuals and corporations have special interests that they would like the government to pursue. Why the government? The US federal government is the largest, most powerful organization in the world. Nobody can make special interests happen more than government. Even if it's at the expense of individual freedom.

Therefore, it is simple correlation between the development of big government and the development of lobbying and special interests. But, let's take this further. How related is the growth of big government of lobbying? We went back to 1998 to analyze the growth in government spending versus the growth of lobbying spending. What we found was an interesting relationship.



Lobbying growth of spending and government spending moved in tandem, with lobbying being slightly higher from 1998 to 2008. What was interesting is just before the growth in government spending related to TARP and the bailouts, lobbyist spending skyrocketed. It's interesting to see such an increase in lobbying just as the financial crisis was underway.

Money chasing money. With the increase in government comes the increase in lobbying. In addition to this comes a simple solution. By limiting the size and scope of our federal government, we limit the power of lobbyists that follow and empower individual freedom. Friedman's idea was a constitutional amendment fixing and limiting the growth of government spending. It's an acceptable model used by most states today.

So why don't we do it?

The Ballooning Debt to GDP ratio

A good video courtesy of How the World Works over at YouTube.

Sometimes, It Pays to Print Money!

At least, if you are a company that prints currency!

Rick Santelli VS Steve Liesman (Again)

Another great debate of free market versus government control!

The 'Vote for Me' Budget

After reading the Obama budget and reviewing it in yesterday's article, I feel as if I live in a socialist country whose leader is so needy for re-election, they would increase government spending to capitalize on political promises.

Rick Santelli Discusses the Tea Party Three Years After His Rant

Absurd: Obama's FY2013 Budget Claims

Last week, President Obama unveiled the FY2013 federal budget, aka the "Vote for Me" budget. In several speeches, the President has talked about $2 trillion in cuts over 10 years, or roughly $200 billion per year. Unfortunately, when we examine the facts, a different picture emerges.

This is the fourth fiscal year of the Obama Administration. Let's have a look back at some of the projections that have been in the past (and current) budgets

Social Security



In 2010, the FY2013 expense for Social Security was $797 billion, but now, it is projected to be $826 billion, or almost 4%.



Income Security



In 2010, income security expense for FY2013 was projected at $478 billion. Now, it's projected to be $559 billion, which is $81 billion, or over 15% more.



Health Care



The government is alleging that the ObamaCare legislation is going to save on healthcare, hence the decrease in some of the expenses. The government has estimated $60 billion less in expense in the FY2013 budget versus the 2010 estimate, however, early indication of the FY2011 results show only a $15 billion decrease between estimates and results.



Education



Education spending is all over the place. It appears the Obama Administration has tried multiple initiatives to improve education, with limited results. The bottom line is that the below chart clearly doesn't show spending restraint.



Transportation



The data speaks for itself on transportation. The government has apparently bloated the budget in some pipe dream to stimulate the employment market. This is despite the continued high unemployment rate amongst construction workers.



What It All Comes Down To

Somehow, despite these stats, the government is projected to spend $100 billion less in FY2013 than the FY 2010 budget projected ($3.8 trillion vs $3.9 trillion).



Why?

It turns out that the interest on the national debt is projected to be $300 BILLION LESS in FY2013 than the FY2010 projected. This is because of continued exceptionally low interest rates. If you remove interest on the debt, the government is actually spending $200 BILLION MORE.



Our federal budget is at the mercy of low interest rates, and in part, at the mercy of the Federal Reserve. A market shock that brings interest rates up could easily turn our $1 trillion deficit into a $1.5 trillion or $2 trillion deficit.

Overall, the President has failed to show fiscal restraint. We cannot find the $2 trillion in cuts that Bowles-Simpson made in any of the White House budget material. Politicians are telling one story and the numbers are telling another. Unfortunately for the American people, we are believing the former, while the latter cannot lie.

Starting Monday, A Slight Change to the Blog Schedule

Beginning Monday, articles will be posted every Monday and Thursday, as opposed to Monday and Wednesday.

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This Week in Economics: Jobless Claims, CPI, and PPI

Jobless claims at a 4 year low, PPI falls,

Chart of the Day: Our Deficit by Budget Year

This is one of the most illustrative charts when it comes to the Obama Administration's total lack of regard for spending control. Each fiscal year, the budget deficit for the current year is revised up with some story about how it will be "halved" in four years. More kicking of the can...

Milton Friedman on Limiting the Role of Government

We are responsible for the mess that big government has created.

Chart of the Day: Union Membership as a Percentage of Employed by State

Union Membership as a Percentage of Total Employment by State, for the Year 2011

Rick Santelli on the Unintended Consequences of Government Intervention

The most overlooked portion of economics, in my opinion, by the general public are the unintended consequences of government intervention. They are usually effectively blamed on other things like the free market.

Milton Friedman on the Invisible Hand Within Government

Government's propensity to grow is a natural desire of self-preservation. By offering everything to everyone, the government can also keep us on the "payroll."

Unemployed Youth Being Crowded Out by Older Workers: Thanks Federal Reserve!

Thanks to the exceptionally low interest rate policy of the Federal Reserve, workers age 55 and over are finding it more difficult to retire. This is because in some cases they are finding the returns on their fixed assets to be two or three times less than what they were before the recession.

So, is this older generation crowding out the younger?



While this chart is informative, it actually isn't very helpful. Trends of employment for the 16 to 19 and the 20 to 24 age groups have changed with more people going to college, living at home, etc. However, the age 25 to 34 group is more consistently expected to be working. Therefore, we've created another chart of the unemployment rate gap between the age 25 to 34 group and the age 55 and over group.



The gap in unemployment between the 25 to 34 age group and the 55 and over age group is at a 20 year high. While this may seem like a possible short term trend, it has long term consequences. It is generally accepted by economists that the age 25 to 34 group is going to work longer in order to have an affordable retirement. How much more is this impacted if this generation group has more difficulty finding employment?

With Social (in)Security and employment (in)security, how much more do we need to ask of our younger generations?

What Would Milton Friedman Say to Greece Today?

The end of the video is the most telling, but using the government for glamour was tried in New York, similar to Greece. See how it all worked out...

Chart of the Day: Unemployment Rate: Men vs. Women

Have a look at the unemployment rates for men versus women in our economy going back to 1948. Do we need gender affirmative action laws today?

Milton Friedman on the Enormous Size of the Federal Government

Since this video was recorded over thirty years, I wonder how much more the government has grown.

First Sign of Inflation: Large Growth in M2 Money Supply

Last week, I was reviewing some numbers on our money supply and inflation. I was also looking at the government's income in relation to inflation (found something slightly more interesting that I will share in a later post). Basically, the M2 money supply is growing at peaks (10%+) only seen two other times since the late 1980s.

The above chart is a reflection of a monthly analysis of the M2 money supply. I took those numbers and divided them by their previous year's counterpart (similar to how CPI inflation rate is measured) and got those results. The other two peaks were late 2001-early 2002 and early 2009.

Year over year M2 growth has registered at over 9% for the past six months, which is longer than the 2009 spike and equal to the 2001-2 spike. How is this happening now? We believe this could be a reflection of the European debt crisis. The surge began in the same month as the debt crisis and would explain a massive shift from holding euro currency to dollars.

However, despite this, we are not prone to inflation. We are likely more at risk of entering what Milton Friedman called the "euphoria of inflation." This is where economic growth picks up, as does inflation, but inflation is essentially tolerated. Unfortunately, the euphoria ends when, like the 1970s, inflation rates begin to inflict increased unemployment and unmanageable costs onto the economy.

For those of you who have been calling for an inflationary future, this is your first sign. And for those of you who think that the government is worried about inflation, check out the below videos.

Rick Santelli's Week of Confrontations, Easy Money, and Government Involvement

Some good conversation from Rick Santelli.

Dick Bove On the Absurdity of the Housing Bailout

Some good points from Dick Bove!

This Week in Economics: Jobless Claims

Jobless claims continue to fall.

Milton Friedman Discusses Inflation

Milton Friedman has a few good videos regarding inflation!

Is a Sugar Tax Coming?

Academia is calling for it!