FEDERAL INCOME, SPENDING, AND DEFICITS

There is a very interesting article on Federal spending and deficits at: http://blogs.wsj.com/economics/2015/01/26/you-ask-we-answer-why-is-the-debt-rising-faster-than-the-deficit/?mod=djemRTE_h  I suggest reading the whole article, but here are a few parts of it:

Click on picture to enlarge.


They also explain some apparent discrepancies:

After accounting for cash, the discrepancy in December was small, and is explained by little changes across Treasury’s several dozen other financial accounts, which include obscure assets like securities in the National Railroad Retirement Investment Fund, accounts at the International Monetary Fund, Special Drawing Rights, etc.

What about the change over all of calendar year 2014? The Treasury reported deficits of $488 billion but borrowed $668 billion. What happened with the other $180 billion? Again, cash explains part of it. Cash rose from $162 billion to $223 billion. That’s $61 billion accounted for and $119 billion unexplained.

What else does the government do in addition to spending and accumulating cash? It issues loans. The government’s loan financing climbed by $118 billion over the course of 2014. With lending programs, the government borrows from the public and turns around and lends out that money. (Most direct lending from the government is for student loans, but the departments of transportation, agriculture and energy, the Small Business Administration and the Export-Import bank all have significant lending programs too.)

Lending is not spending. If the government spends $1 million the money is gone. If the government makes $1 million in loans to lots of different borrowers, the odds are that most of the loans will be paid back. To be sure, these programs carry credit risk and can cost the taxpayer money when loans aren’t repaid. The solar-energy company Solyndra famously defaulted on a $535 million loan from the Energy Department, for example. But even Solyndra was part of a much bigger energy lending program that has an overall loss ratio of about 2%.

http://blogs.wsj.com/economics/2015/01/26/you-ask-we-answer-why-is-the-debt-rising-faster-than-the-deficit/?mod=djemRTE_h

INFLATEGATE

I have a hard time getting excited over so-called Inflategate.  Football is after all just another war game.  It seems to me that the whole furor about Inflategate is a canard because both sides played with the same footballs didn't they?  But wait wait, NO, it turns out that the offenses of  the Patriots and their opponents PLAYED WITH DIFFERENT FOOTBALLS!  Incredible.  a system made for corruption.  On the other hand, the Patriots played with properly inflated footballs in the second half and scored 35 points.  Throw out the first half if you want, the Patriots still won by a good margin.  After all, the Patriots even scored more points on rushing than the total score of the Colts, including three in the first half when the Colts could manage only one touchdown.

Of course it is legal for the two sides to roughen the new footballs their offense is going to play with.  I don't know how much difference it may make, but the two quarterbacks might like the ball roughened in different ways and that is legal.  Perhaps that is the reason for the two offenses playing with different footballs?

Can anyone really get excited over Inflategate?  Lets go on to more important things, for Heaven's Sake.

LEAST ACTIVE CONGRESS EVER - 2014

The news media is fond of pointing out that this last congress was the least active in passing bills in history when the year before was the least active on record at the time.  What they seem to be missing is that this is exactly what the Tea Party and some other conservatives want.  They want an inactive Federal government.  The voting public seems to agree as they elected even more of them.

It has taken Executive Orders by the President to keep the government moving.

GASOLINE PRICE SURGE IN OUR FUTURE

As nice as the lower gasoline prices are, they will mandate a price surge in our future because of cutbacks in oil exploration and development.  In the future cutbacks in drilling will cause a lag in developed projects as global oil consumption rises.

As far as the U.S. is concerned, it is possible that lower gasoline usage because of better mileage in cars and decreases in automobile travel usage could counteract the decrease in coming oil production; however, it seems like people are suffering from recidivism and buying gasoline guzzling SUV's again.  So it seems likely that a surge in gasoline prices will be in our future.

ON BLASPHEMY

With regard to the French satirical magazine Charlie Hebdo, one notable Muslim states that it is possible to be against violence but still outraged by blasphemy  (The act of showing contempt or lack of reverence for God, to religious or holy persons or things or toward something considered sacred or inviolable.*)  At first that sounded reasonable.  But then I started thinking.

It seems to me today that in America the word blasphemy is no longer in our vocabulary because it has come to be protected by the first amendment.  Oh, some people know the word, but do they ever use it?  I suspect that, if you took a poll, a large majority of Americans would no longer have any idea of what the word means.  Yes, many of us will object showing Christ with excrement to be at least in bad taste or disgusting rather than art, but the perpetrators are not prosecuted for blasphemy.  This is interesting because America is largely a Christian country and blasphemy is spoken of as unforgivable in the Bible (e.g. Mark3:29).

I think that when I was a child I recall swearing was called called blasphemy and perhaps those who do it would "burn in Hell."  I recall my mother saying heelio-copters rather than hell-i-copters to avoid saying the dreaded word.  She had some other spoken affectations as well.  Blasphemy was not always protected by the First Amendment in the U.S.  It is understood that free speech is not license.  the example usually given is that you can not cry "Fire!" in a crowded theater.  At one time blasphemy was treated the same way in a number of states.*  the New York anti-blasphemy law wasn't repealed until 1952.  The law was still on the books in Maryland as recently as 2003.*

I recall a young Muslim scientist from Saudi Arabia who came to work with us for awhile who went to a museum and was shocked at paintings of Christ on the cross, Mary with child, and Peter hanging upside down on the cross.  He couldn't believe such blasphemy would be permitted.  In fact, many Muslims feel that  paintings of any human beings is idolatry.**

* http://en.wikipedia.org/wiki/Blasphemy; http://en.wikipedia.org/wiki/Blasphemy_law_in_the_United_States
** http://en.wikipedia.org/wiki/Islamic_art

NOW EVEN SMALL BUSINESS AND FAMILY BUSINESSES OPTIMISTIC

There is more good news on the economy, but I wonder what the impact will be of the collapse of oil prices?  In December retail sales were down, largely because of lower gasoline revenues, but on net the consumer was not yet spending:

A CNBC article titled Small Business Optimism Hits 8-Year High  The National Federation of Independent Business said on Tuesday its Small Business Optimism Index increased 2.3 points to 100.4 last month, the highest reading since October 2006.  The index, which crossed the 100 mark for the first time in eight years, is now back at its prerecession average.*

In a separate article, Family Owned Businesses Optimistic, CNBC states Pricewaterhouse Cooper's "US Family Business" survey finds family businesses are feeling upbeat on growth projections, as 79 percent of respondents expect "steady growth" in the next five years. What's more, 70 percent reported revenue growth in the past year, according to the survey released Tuesday.**  Please note that family businesses can include some large businesses in addition to a lot of "mom and pop" businesses.

And it turns out the the WSJ agrees that small businesses are optimistic:***

(Click on figure to enlarge)

Small-business owners are also hiring more workers. The seasonally adjusted average increase in workers per firm was 0.2 workers per firm in December, a “historically large” number, said the NFIB. The report said that seasonally adjusted, 18% of firms reported increasing employment an average of 2.9 workers while 9% reduced their workforce by an average of 3.0 workers.
Small-business owners still report difficulty finding qualified workers. .... Of those looking for workers, 80% said they were seeing few or no applicants who were qualified for the open positions.***


*  http://www.cnbc.com/id/102333518
** http://www.cnbc.com/id/102329900
*** http://blogs.wsj.com/economics/2015/01/13/small-business-confidence-hits-expansion-high/?mod=djemRTE_h

LONG BOND HIT RECORD LOW! DECEMBER RETAIL SALES DOWN.

The yield on the government's 30-year bond fell to a record low of 2.395 percent, surpassing the previous record low of 2.443 percent set in July 2012, according to Tradeweb data. Recently, it traded at 2.432 percent.*

A weak morning got even weaker after 8:30 a.m. ET when December retail sales came in down 0.9 percent, well below consensus estimates of a 0.2-percent drop. It was the largest monthly decline since January 2014.
...................................................
But hold on. Much of the drop—not surprisingly—was due to a decline in gas station sales, which were down 6.5 percent from November, the largest month-over-month decline since December 2008, and 14.2 percent from a year earlier.**

* http://www.cnbc.com/id/102332516
** http://www.cnbc.com/id/102336449

MORE ON THE PLIGHT OF AMERICAN WORKERS

I have written on the plight of American workers before in what I view as one of my most important posts.*  In this contribution I point out as before: (1) the wages of the American worker must be below the cost of automation, and (2) the wages of the American worker must be below the costs of cheap foreign labor moderated by shipping costs, price of natural gas, etc.  But now also add that many low paying jobs have been or are disappearing.   So there is a three way push against low cost labor in America.

And something we are seeing now is the decrease in number of jobs related to the oil industry because of the oil glut worldwide.  It is not going to be a reduction of employees just in the oil industry (field workers, maintenance workers, etc.), but also a ripple effect of workers in related industries.  U.S. Steel, for example, has announced a large layoff of workers related to production of pipe for the oil industry and there are no doubt others.  These relatively high paying jobs are being replaced by lower paying service jobs in food and drinking and health care servers.  There are some jobs returning to the U.S. that overcome the above obstacles, but at an average wage of 23% less than when they were off-shored.**  Because of this, you can get a month like December with good job growth (preliminary 250,000) but a reduction of a nickel in the hourly wages.**

And it occurs to me that wage jobs that cannot be automated or off-shored are just disappearing, where possible, and to the degree possible handed off to the consumer.  Business phones are no longer answered by a person, but you have to "let your fingers do the walking" through an itemized number of steps until you can finally speak to a person, if lucky, when the itemized list doesn't satisfy.  At work, clerk typists but have all but disappeared and even secretaries serve more than one superior.  The typing (word processing and spreadsheets) is largely turned over to the worker.  Gas station attendants have disappeared except in certain places like Oregon where you are not allowed to pump the gas yourself.  Usually only one person now handles a gas station, and their job is more to handle sales from the convenience store part of the station because most people will pay at the pump by credit card.  Low cost buffets are flourishing, though you can still find low-cost "breakfast anytime" eating places where you are waited on by a person, heavily dependent on tips (they are even called tip workers). Supermarkets have now installed slef-checkout isles that often have lines.

So there is a double push against wage earners.  On the one hand their wages must remain below the cost of automation or the low cost labor of off-shoring moderated by the costs of shipping, natural gas, etc.  Then many low pay jobs are just disappearing where they cannot be automated or off-shored and their duties have been taken over by the consumer.

A bright spot in the recovery from the Great Recession of 2008-2009 has been recovery in construction workers which were the hardest hit in the recession.   As a nation, we missed a splendid opportunity to improve the infrastructure of the country at relatively low cost when there were many unemployed workers in the construction industry available.

There may be relatively short periods where wages of labor can rise to livable levels, such as in "bubble economies," but these periods should be of relatively short duration.

As I have said elsewhere, it looks like the Golden Age of American labor is over.*  I don't see where either political party in America has an answer to this, much as they might pretend they do.

*http://stopcontinentaldrift.blogspot.com/2014/05/plight-of-american-workers.html
** http://www.rpc.senate.gov/policy-papers/december-2014-unemployment-report;
http://blogs.wsj.com/economics/2015/01/09/was-2014-really-the-strongest-year-of-job-growth-since-1999/?mod=djemRTE_h

ELIZABETH WARREN'S ONLY CHANCE?

Elizabeth Warren, a so-called liberal politician who cares about the consumer, is often mentioned as a 2016 presidential candidate, although she has repeatedly said she is not running.  She was born  June 22, 1949, an early Baby Boomer, and will be 67 years old on election day in 2016.  So if she is going to run for president, she will have to do it in this next presidential election.

Even if whomever is elected in 2016 serves only one term, Elizabeth Warren will be 71 by the 2020 election, probably too old to run.  Democrats in particular tend to think that 70 is too old to run for president.

Republicans, however, are different in that Bob Dole and John McCain, both Republicans, ran for president when older than the age of 70, but neither was elected.  Ronald Reagan ran for president over the age of 70 but that was for a second term.  He was 69 when he took office for his first term.  More likely whomever is elected in 2016 will probably serve two terms because that is what we have been doing lately.  Beginning with Ronald Regan, 4 of the five presidents have been elected for two terms so Elizabeth Warren would be 75 by 2024.

Hillary Clinton is the favorite among Democrats to run for president at this time.  She was born October 26, 1947 and would be 69 on election day in 2016, and, if elected would also be 69, about the same age as Ronald Reagan.  Although Republicans favor older candidates, I presume they will make the argument that she is too old, if she runs.  If for some reason Hillary does not run, my guess is that Elizabeth Warren will.

Jeb Bush seems to be the favorite of the "establishment" Republicans.  He was born February 11, 1953 so will be only 63 at the time of the 2016 election.  Chris Christie was born September 6, 1962 so will be only 54 at the time of the next presidential election.  The oldest of the Republican hopefuls is Mitt Romney who was born March 12, 1947 and is slightly older than Hillary Clinton.  If he is the Republican candidate, it will be hard to say Hillary Clinton is too old.  Other main Republican hopefuls seem to be younger than Jeb Bush.

ITEMS WITH THE MOST PAGE VIEWS AND MY FAVORITES - IV

An eclectic blog (November, 2009, through December, 2014) with sections on Biography, Commentary (General, Economics and Investing), Fiction, Health Care, Oil and Gas, Politics, Photographs, and Poetry (Children's Poems, General, Health, and Space Poems) and (new) Poems By Others: http://stopcontinentaldrift.blogspot.com/2011/07/reunite-gondwanaland-2009-june-2011.html  As of the end of 2014, the blog contains 419 items.

In the new Poems By Others Section, Ogden Nash's poem Fossils garnered by far the most page views overall:  423 with 72 of these added in the past year [http://stopcontinentaldrift.blogspot.com/2013/01/fossils-by-ogden-nash-poem.html] as the blog bears down on 25,000 page views.  No posts in 2014 obtained as many as 200 pages views.  The year 2013 saw two pieces that moved into 200 page views category: My Maternal Grandmother (Biographical) with 220 page views [http://stopcontinentaldrift.blogspot.com/2013/10/my-maternal-grandmother-biographical.html] and Working Underground: My Rational Self and My Emotional Self with 210 page views [http://stopcontinentaldrift.blogspot.com/2013/01/working-underground-my-rational-self.html]. Previous items with more than 200 hits are: You Are So Lucky (Biographical) with 266 page views [http://stopcontinentaldrift.blogspot.com/2009/11/you-are-so-lucky.html] and Muammar Qaddafi And Me (Biographical) with 223 page views [http://stopcontinentaldrift.blogspot.com/2010/12/muammar-qaddafi-and-me-biographical.html]. The former was no doubt popular because of the Great Japanese Earthquake of 2011 and deals with my first three days in Japan in 1965. The latter was popular because of the overthrow of the Libyan dictator Qaddafi.

There are 13 others with 100 to 199 page views, one of which is biographical, a new one, The Tea Cup Seismograph on August 12, 2014 (145 page views) [http://stopcontinentaldrift.blogspot.com/2014/08/the-tea-cup-seismograph-biographical.html], and The Break Even Price Of Fracking Oil on October 8, 2014 (193 page views) [http://stopcontinentaldrift.blogspot.com/2014/10/break-even-price-of-fracking-oil.html].

Each piece I have written is like a child and I love them all, but it is common that some children are loved more than others. My personal favorite continues to be the Effectiveness Of Taxes from May 7, 2010 with 116 page views (up from 62) [http://stopcontinentaldrift.blogspot.com/2010/05/effectiveness-of-taxes.html] followed by Basics of Bureaucracy from July 26, 2011 with 129 page views (up from 127) [http://stopcontinentaldrift.blogspot.com/2011/07/basics-of-bureaucracy.html].  Important new additions to this small list of personal favorites is Is The Atmosphere An Infinite Sewer? from February 11, 2014 with 47 page views [http://stopcontinentaldrift.blogspot.com/2014/02/is-atmosphere-infinite-sewer.html] and The Plight Of American Workers from May 22, 2014 with 22 page views [http://stopcontinentaldrift.blogspot.com/2014/05/plight-of-american-workers.html]. In the first one, I point out why decreasing taxes on individuals is an inefficient way to stimulate the economy. I liked this so much that I refer to it in three other pieces. In the second one, that was written many years ago, I give some real rules of dealing with bureaucrats in a humorous fashion.  In the first new one on the atmosphere I also conclude that global warming is indeed occurring and that the atmosphere is not the infinite sewer that many believe.  In the second new one on American Workers, it is explained why the Golden Age of the American worker may be over.  It deserved 10 times the attention it got.

Let me give two Honorable Mentions. I wouldn't say this is a favorite of mine, but it can be important to some, i.e. Preferred Stock Investing from November 27, 2011 with 194 page views (picked up 7 more hits in 2014) [http://stopcontinentaldrift.blogspot.com/2011/11/preferred-stock-investing.html]. I have invested for about 60 years, but never got involved in preferred stocks until the last decade. I would also like to mention one poem Upon the Second Anniversary Of Apollo 11 from January 9, 2010 with only 12 page views, the first landing on the Moon [http://stopcontinentaldrift.blogspot.com/2010/01/upon-second-anniversary-of-apollo-11.html]. Normally a couplet or more just pops into my mind and I construct a poem around it (An example is So How About An Asteroid from July 20, 2011 with 76 page views) that contains my favorite couplet: Who could possibly be annoyed/About the study of an asteroid. The Second Anniversary of Apollo Eleven, however, was little noticed which I thought was too bad as this was the first time I sat down to compose a poem from scratch.