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Trillions More in Debt with Nothing Good to Show for It

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It is easy to get caught up in all the hype of the media pundits, Ben Bernanke, Joe Biden and Barack Obama that the economy is slowly but surely recovering from the worst recession since the 1930s. It’s not. And what is even worse is that we are deeper in debt with nothing good to show for it.

In September of 2007, just months before the current crisis began, our national debt was a little over $9 trillion give or take a few billion. As of late last week, our national debt was quickly approaching $12 trillion. That is an increase in debt of $3 trillion in just two years! Of course, most of the new debt is a result of stimulus spending, other government handouts to stimulate the economy, and war – things Keynesians have always historically believed would turn any economy around. That theory has been disproved previously and this current economic crisis is just the most recent repudiation of it.

So, with all this spending what do we have to show for it. This week the Bureau of Labor Statistics announced that unemployment is at a 26 year high in the United States at 9.8 percent. Payroll employment has fallen for 21 consecutive months, with total jobs lost equaling 7.2 million. This is only the phony government number. It doesn’t count workers who have been unemployed so long they have given up on finding a job and those working part time who prefer full time. The total unemployed number, meaning the number the government has always used up until the Clinton years, is actually 17 percent! This is a Great Depression number. So it is interesting when Fed chairman Ben Bernanke says his monetary policies have kept us from an economic calamity.

In addition to higher unemployment, with the new debt we also have lower consumer confidence. The 2nd Quarter real gross domestic product number down at an annual rate of .7 percent. And lastly, Americans continue to lose their homes to foreclosures. They increased by 17 percent in the 2nd quarter in spite of a government spending program meant to help borrowers save their homes. Taking all these facts together, only a fool would believe the economy is recovering, Keynesian economics works, and Ben Bernanke has saved us from an economic abyss.

However, there is one sector of the economy that is doing pretty well as a result of all this new debt — big banks. As a group their stock prices are up. They are receiving a good rate of return on their bailout money being held in their Fed reserve accounts. Bonuses are being paid. And they are enjoying the privileges that come with Fed membership — anonymity when given our money and protection against failure. Perhaps when Bernanke, Biden, and Obama talk of recovery they have the big banks in mind.

One thing is clear. Most of America is not experiencing an economic recovery. $3 trillion more in debt and the economy is still in the dumper. The so-called jobless recovery policymakers speak of is an insult. It doesn’t give much comfort to the 7.2 million folks who have lost their jobs since December 2007. The only jobless recovery that is acceptable is the one that will result when the scoundrels who caused this mess lose their jobs. Americans will have this opportunity starting next year. Hopefully, they will take full advantage of it.

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About Kenn Jacobine

  • Doug Hunter

    That missing $3 trillion is mind boggling. That’s $10,000 in debt for every man, woman, and child in the country over and above the taxes you already pay. That’s $40,000 for a family of four. Yes, they literally could cut a check for $40,000 to every family of four in the country and an equal per capita amount to everyone else, balanced the rest of the budget and we’d be in the same position. I’m not so sure that wouldn’t have been a better stimulus anyway. It’s shocking, and amazingly they feel this is a great time to dump a bunch more money into climate change and healthcare and wonder why there is a sense of unease in the nation.

    Do you think you got your money’s worth?

    They spent on your family’s behalf $30K, 40K, or 50K. They didn’t present you a bill to authorize or get you to sign the credit slip yet you and your children will be required to pay that debt, with interest, under the threat of force and jail attached (at least if you don’t pay a corporation or business you just file bankrupty, no jail)

    Sorry if I went off on a rant there, interesting an thought provoking article. Keep bringing em and maybe someone will wake up!

  • http://takeitorleaveit.typepad.com/ roger nowosielski

    I totally agree with the general tenor of this article (not about Keynesian economics but this administrations incompetence to make a dent of a difference, even in the matter of public perception).

    We have been sold a bill of goods, no doubt about it. And it doesn’t matter what Bernanke and his cronies tell us, or their BC apologists.

  • http://ruvysroost.blogspot.com Ruvy

    interesting and thought provoking article. Keep bringing em and maybe someone will wake up!

    Doug, I sense lots of Americans have woken up – they go to demonstrations of various kinds – lots more decided to go back to sleep as it wasn’t worth staying awake for. Have you noticed the paucity of comments on politics lately – except in the most banal and mundane subjects, sex (Polanski) and sports (the 2016 Olympics)?

  • http://www.republicofdave.com Dave Nalle

    Kenn tends to go overboard with his “Austrian School” hostility towards Keynesianism. The truth is that in the world of economics both schools are considered obsolete and inadequate. But the scary part is that by any measure the debt to GDP ratio which Obama has burdened this nation with is unsupportable. It was a serious challenge even before the TARP bailouts, but there were ways to deal with it which might have required some austerity. But with trillions more larded onto the debt and the prospect of massive taxation driving GSP down it’s going to become a hole too big to dig our way out of.

    What the neo-keynsians (and Marxists) in the administration just don’t even begin to get is that driving down GDP with confiscatory taxes and excessive fees and penalties on businesses and individuals is potentially even more devastating than taking on more government debt. Declines in GDP act essentially like a multiplier of debt, and with debt going up and GDP going down at the same time we are well and truly screwed.

    Dave

  • Zedd

    Dave,

    How would you have fixed the problem???

  • http://www.republicofdave.com Dave Nalle

    You won’t like the answer, Zedd.

    I’d have started by entirely eliminating corporate taxes and inheritance taxes, and I certainly wouldn’t have capped it off by initiating a huge and expensive new healthcare system on top of all the other expenses.

    The revenue the government receives depends entirely on the healthiness of the economy. If government policy drives down the economy then government receives less revenue as a result. The best way to drive down the economy is to force businesses offshore and take money out of the hands of the investing class. It’s not something which the left wants to accept, but it’s reality.

    Get rid of businesses, get rid of the monied, investing class and you end up with a proletarian nation where everyone is poor and the economy goes nowhere.

    Dave

    Dave

  • http://blogcritics.org/writers/christine-lakatos/ Christine

    Great article, Kenn, all those numbers get me dizzy, especially when it is mixed with “hype”.

  • Bert

    We’re all gonna starve and die, the dollar will trade 1-1 with the Mexican peso, and people will be jumping the border to their country to find a job, only to find that Mexico finished the border fence for 1/3 the price, in half the time. Of course, some of it will be made out of wrecked cars, and cardboard boxes, but it’ll be 2,000 miles long…actually, what’s really going to happen is that the Moonies are finally going to take over the country, and then they’ll convert all of Asia, too. Then, the saucers will come, and the space-people will set up THEIR New World Order…somewhere in here, there has to be a good, worthy ‘B’ movie plot. Give me time, I’m working on it…maybe we’ll all just end up trying to sleep under a bridge, only to find out too late that the concrete came from the lowest bidder…doom, gloom, and misery…LOL

  • http://blogcritics.org/writers/christine-lakatos/ Christine

    I meant “hype” from the pundits and politicians..not your article.

  • Kenn Jacobine

    Dave,

    From your comment in #6 you sound like an Austrian to me.

  • http://www.republicofdave.com Dave Nalle

    To an extent, but I draw the line at the demand for hard currency. That’s where their ideas really start to break down in the real world. I favor Friedman-style monetarism for management of the money supply. Not that the current behavior of the Fed fits that model in any way.

    Dave

  • Kenn Jacobine

    With all due respect to Friedman, he was Keynes-lite on the monetary issue. He would’ve supported Bernanke’s manipulations but to a lesser extent.

  • http://www.riddledphantasms.com R.P.M.

    Funny about the guy who mentioned children paying for debt. When I worked in Congress we pushed for lowering “Death Tax”, the fact that people who had a total valuation of over 600k (given today’s avg. household earnings, throw in a house and a couple of cars and you get there quicker than you think) had to pay at that time up to 90% tax on that inheritance is a joke when we give countries like Egypt a seven billion dollar write off on their debt.

    Here Egypt send some more kaseem rockets into Gaza so school kids can be shot…sorry, but I lived there for the 5 months and this stuff is not media spun b.s., it happens and daily and I haven’t seen anything that is causing this to stop.

    Imagine if Montreal started lobbing missiles into school in Burlington, VT or Buffalo, NY? How long would it take before we made them look like underbelly of an Afghan Taliban mountain hideout? An hour? A day? Seriously, when talking about debt let’s look not just at what is causing it (I won’t take a cheap shot at President’s Obama confusing current times with FDR’s plan after the great depressing 9% unemployment while deplorable is not 28% and hence doesn’t need us to spend 3 to 1 what that plan called for and actually saw merits quicker than sooner).

    Great article by the way and just taking a quick poll how many of you have jobs? Or is taking pot shots at a guy giving “facts” vesus “opinion” now considered a job (I know blogging is hard work). Please let’s stop fighting. Focus on the solution, not the problem and all work together.

    There is more that Americans can do than sit back and poke with anonymous comments on websites. I will gladly list 50 socially proactive groups that work on helping fix the problems that ail America and the world today (while not our job to fix that, we tend to have lost isolationism after Pearl Harbor). Write your congressman if you are upset, not here. Join an interest group. Donate money to a PAC or charity of your choice. Attend personal finance classes or if you are savvy enough start them up yourself, Churches, Synagogues, even message boards and blogs are good places to start to find people who need help. Do something proactive about the Capital Gains taxes destroying middle American investors instead of buying into charismatic leaders of ALL NATIONS headstrong on punishing the oil companies and banks and other institutions who instead of being able to fight back go bankrupt leading to more big Govt.

    Hey those are just a few, maybe you think they suck, maybe you don’t, but you can do more than message boards.

    Cheers.

  • http://www.riddledphantasms.com R.P.M.

    Kenn what does #6 sounds like an Austrian mean? Are you calling him a Nazi or making some veiled comment to that end?

    I think saying eliminating inheritance tax and basically being a bit more conservative instead of less is a far cry from sticking children into ovens and leaving the bodies to rot.

    I hope that wasn’t where your comment was going or if it was I will gladly procure you tickets for the National Holocaust Museum in D.C. and you might want to re-think those kinds of remarks, especially as an educator. I would hope open mindedness would prevail over dogmatic teaching methods that sound kind of “1941 Austrian”. But, I guess having family members cooked alive isn’t something you would know about. Maybe you can add that to next quarter’s curriculum? :/

  • Kenn Jacobine

    R.P.M,

    I was referring to the Austrian School of economics. It is named that because the founding economists came from Austria. Important names include – Mises, Hayek, Rothbard, Haslitt, Menger.

  • Kenn Jacobine

    It is unfortunate that more folks that worked or are working in Congress are not familiar with their theories. :)

  • http://www.joannehuspek.wordpress.com Joanne Huspek

    Congress doesn’t have a clue much less theories. That’s why we’re in this mess.

    Good article, Kenn.

  • http://ruvysroost.blogspot.com Ruvy

    Here, Egypt sent some more Qassam rockets into Gaza so school kids can be shot…sorry, but I lived there for the 5 months and this stuff is not media spun b.s., it happens and daily and I haven’t seen anything that is causing this to stop.

    The link RPM provided to the Jerusalem Post was a dud, but a record of Arab terror from just the last few days would yield 50 items from Arutz Sheva, IMRA and the Jerusalem Post.

    Just sayin’….

    Moving on to the topic at hand….

    with trillions more larded onto the debt and the prospect of massive taxation driving GSP down it’s going to become a hole too big to dig our way out of.

    Just like I told you, Dave, back when you were saying that debt wasn’t really a problem and pooh-poohing my warnings about the heavy debt load Americans were carrying…. A correction in the verb tenses in your assertion, Dave. it’s going to become should be “it has become”….

    Blessings from the mountains of Samaria,
    Ruvy

  • http://mizbviewsfromthetower.blogspot.com Jeanne Browne

    Kenn — Spot on! I’m in the midst of a lawsuit with a bank over an unpaid credit card (actually, the bank du jour, since my account has been sold and re-sold like a mob contract) and what I’ve learned in dealing with them and their debt collection minions (much like the Monkey Army in the Wizard of Oz) is that recouping the funds (my actual balance is less than $2,000) is less important to them than punishing me for flaunting their authority. We Americans always talk about banks with sour disapproval, but I wonder how many of us realize just HOW powerful, and unjust (vindictive!) they are. We are in the middle of the Great Neo-Depression, not a recession, and nothing is “improving” except the power and bounty of the banks. By whatever system or theory one calls it, it amounts to Banks Screwing the Public, with the stunning assistance of government. I’m still holding faith with the President, but I’m very disappointed that this smart man seems to be buying into the audacity of economic bullshit he’s being fed by advisers and “experts.” I sometimes think we should have allowed those massive institutions we were told were “too big to fail” to just fail, fall off the edge of the economic flat earth. The results might have been worse, in some ways, than what we’re dealing with now, but perhaps it would have revealed the true villains in the piece and given us a chance to start from scratch with new perspective and new purpose.

  • Doug Hunter

    Jeanne #19

    It’s rare that I agree with you on much, but the last sentence of your comment was right on. I would liked to have seen the leeches get flushed from the system and hopefully replaced by a more responsible cohort of businessmen. I’m not buyng that the system would collapse, I think that was a ploy to walk with another trillion of public money. If the big ones failed the pieces would have been picked up by more responsible groups that didn’t get wiped out by greed in the first place (like your mob contract above).

  • http://mizbviewsfromthetower.blogspot.com Jeanne Browne

    Doug — Thank you! Even small moments of agreement between those on opposite sides of issues/opinion is gratifying and encouraging. And in this case, it’s an important reminder that the grotesque greed of the banks and the policies that protect them is not a liberal or conservative issue, it’s an American issue that affects us all (and the rest of the world as well).

  • pablo

    sure