Economy Archives

What Scrooge's 3 ghosts can teach about US Economy

By Michael Fumento

This holiday season, the American public and economy could benefit from being visited by three ghosts - or at least one politician willing to assume their role as blunt bearers of bad news as well as hope for a brighter future.

When Ebenezer Scrooge asks the Ghost of Christmas Present how sick Tiny Tim is, he gets not the answer he wants to hear, but the one he needs to hear: "If these shadows remain unaltered by the future, the child will die."

Contrast that with what Americans are routinely told about the economy: that all apparently bad news has a sterling silver lining; that laws of economics somehow don't apply to the United States; and that there's plenty of time to deal with these problems later. As I write in the Philadelphia Inquirer, "All of this is as dangerously false as it is soothing."

Fact is, use of terms like "soft patch" are utterly bogus. The economy has been in a downward spiral for three decades, masked only by ever-increasing borrowing. REAL unemployment hasn't gone down a bit in the last year and in fact has steadily increased over the past decade. Household income for the vast majority of Americans has been dropping for over a decade.

Excuses for why the economy is ailing are utterly ludicrous. The natural disasters in Japan? Really? Third-quarter US GDP growth was a mere 1.8%, in JAPAN it was 5.6%!

By now it should be obvious things won't just "get better." Things will just worse, UNLESS like Dickens' ghosts our political leaders start telling the public not what it WANTS to hear, but what like Scrooge, it NEEDS to hear. What it needs to hear is that "If these shadows remain unaltered by the future" the American economy MUST inevitably plunge into an economic depression, whence it will (eventually) emerge as a mere vestige of its former self.

January 5, 2012 12:01 PM  ·  Permalink

A Few Numbers Portending the End of the American Dream

By Michael Fumento

  • $38 billion: The amount to be cut from this year's federal budget, with much hooping and hollering by Congress and which Pres. Obama declared "painful."
  • $1.5 trillion: This year's projected deficit.
  • 2.5 percent: The fraction of the projected deficit that cut reduces.
  • $36 billion: Monthly interest on national debt this fiscal year (March 2010 through March 2011).
  • $139 billion: Monthly increase in national debt from March 2010 to March 2011.

Yes, we basically paid a month's interest.

We are a spendaholic people who feel entitled; which is why fully half of the budget goes to entitlements. We will not pay for that which we buy, and are greatly offended at the suggestion that we should. We will not change.

An effort to propagandize our way out of the Great Depression - the FIRST one -

Nero fiddled. We play Angry Birds, collect from Facebook "friends" we never heard of, and tweet about our latest bowel movements. Pathological narcissism has become the norm, and we have become a nation of electronic addicts like something out of Brave New World.

Says one of the few who really gets it, Cong. Michael Grimm Michael Grimm (R.-NY), "We're in a financial crisis. If we don't have massive cuts, we will lose the American dream for future generations."

It's lost already. Time to reread The Grapes of Wrath on your ebook, Apple, or Droid - or read it for the first time. It's going to be hell.

April 10, 2011 05:33 PM  ·  Permalink

CONSTIPATED COLOMBIA PACT AND THE MISSING MASSACRE

By Michael Fumento

Pres. Obama has made expanding U.S. exports a centerpiece of his economic plan. In his January State of the Union Address, he noted that "95% of the world's customers and fastest-growing markets are beyond our borders" and that export-related jobs "pay 15% more than average." At a time when jobs are in short supply, he later said, "building exports is an imperative."

So naturally, he's done everything possible to ease passage of the Colombia Free Trade Pact, which the Bush Administration negotiated and the then-Democrat controlled Congress battled up. Right? Wrong.

As I write-in Investor's Business Daily, the pact is lopsided towards the U.S. in that Colombia's exports to us are already tariff-free, while our products sent there carry duties of up to 25% - an estimated $3.2 billion total since the agreement was reached.

Those tariffs would disappear and, according to the U.S. International Trade Commission, expand opportunities for a broad array of U.S. sectors, increase our gross domestic product by about $2.5 billion, lower our massive trade deficit and create J-O-B-S.

That's also where export markets are opening up. Economic performance confidence levels are higher in Latin America than in any other part of the world. That's why other nations are busily entering trade agreements with Colombia, including the entire European Union.

Yet in December Obama refused to even send the Pact to Congress. I absolutely will not speculate as to why.

Not at all.

Nothing.

Not a hint.

Well, except that Big Labor doesn't like the Pact because it means competition for them. And Big Labor donates Big Money to political campaigns, with 90% going to the Dems.

But, of course, the Dems can't say that. So they say they're worried about protecting the rights - indeed the lives - of Colombian labor union members. Except that the percentage of such members reported killed last year was vastly below Colombia's overall homicide rate - not to mention a fraction of that of New Orleans.

But, under tremendous GOP pressure, it looks like Obama is finally sending the Pact to Congress - who, we should hope, has the wisdom to force the President to accept his own rhetoric.

April 9, 2011 01:37 PM  ·  Permalink

The Subsidy of America is Coming to an End

By Michael Fumento

Two items on the front page of yesterday's Washington Post: "Record U.S. Deficit Projected this Year" and "Two lawmakers from Michigan propose billions in incentives for buyers of electric cars." What's wrong with this picture? That's the problem. We don't see anything wrong with this picture. We want it all. But we can't have it all.

Some people think electric cars are nice, because the pollution they generate is off-site. But as Charles Lane, a liberal, writes: "If the cars were cheaper than gas-power cars of equal performance," that would be one thing. "But electrics are substantially more expensive than cars of greater quality." So we have to heavily subsidize them to get them out the door.

On the other hand, gasoline-powered car owners are forced to use ethanol. That's a subsidy to the everyone involved in the ethanol industry, and again it has to be subsidized because it's inferior to gasoline. It cuts your mileage and does essentially nothing to reduce pollution. You just can't go around subsidizing everything.

Behold a pale rider.

True enough, the main problem is entitlements. Which, not incidentally, are subsidies. Social Security, Medicare, and Medicaid already absorb 40% of the budget and grow inexorably without anybody casting a single vote to increase them. Left untouched, they will destroy the country. But earmarks are readily controllable and yet still uncontrolled.

Our nation has a spending addiction. And our politicians don't have the guts to tell the public that no, we can't have it all. And so we will continue to borrow and the Fed will continue to print money. In other words, subsidize the government so it can subsidize special interests.

But as Peter Orzag, Obama's former budget director, writes in the Financial Times, "International investors would be wise to pay close attention to fiscal trends within the U.S." Don't worry, they already are. And at some point, although it will be very costly to them, they will get nervous enough to stop subsiding our subsiding.

Orzag adds, "I hope it does not ultimately require a crisis to restore fiscal sustainability at the federal level, but I fear it will." Indeed, it will. At some point, some point soon, it will all come crashing down.

Watch.

January 28, 2011 12:09 PM  ·  Permalink

Stimulus plan sham

By Michael Fumento

There was never doubt that whenever the economy began turning around the Obama administration, and especially the $787 billion stimulus package, would get the credit. They did. The media called stimulus skeptics fools. Obama took credit, so did Christina Romer, chair of President Obama's Council of Economic Advisers.

But in my Investor's Business Daily article, I relate that she boasted of how much the U.S. was spending on stimulus versus European countries, without pointing out there was absolutely no correlation. Thus France spent about a fourth of the percentage of its GDP on stimulus as did the U.S., yet France had 0.3% growth in the last quarter while the U.S. "recovery" comprised a quarter in which our economy shrank by 1%!

This is par for Romer's course. For decades she's held that stimulus plans have little if any benefit on economic recoveries. Suddenly in January she essentially denied that position, saying the stimulus simply had to be big enough and spent fast enough. Then just this month she gave credit for the "recovery" to a stimulus package that hasn't even had time to work and is but a fraction of the money the Fed has been pouring into the economy.

As Tennessee Ernie Ford might have sung: "A whole lot of spending and what did we get? Another year gone by and deeper in debt!"

August 24, 2009 09:01 PM  ·  Permalink