January 28, 2011

Uncle Sam’s $2 Trillion Accounting Deficit (‘Uncle Sam’s Dangerous Deterioration’)

Filed under: Economy,Taxes & Government — Tom @ 2:37 pm

The real deficit was $2 trillion last year, shattering all records.

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Note: This column went up at Pajamas Media under the title “Uncle Sam’s Dangerous Deterioration” and was teased here at BizzyBlog on Wednesday.
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A month ago, the federal government put out the real news about its financial condition as of September 30, 2010, the most recently ended fiscal year. Predictably, it was barely noticed, partially because the establishment press is disinterested in such things, and partially because of the report’s exquisitely timed release, i.e., during the week before Christmas.

For 14 years, a law with a poorly predictive name, the Federal Financial Management Improvement Act of 1996, has required that Uncle Sam publish consolidated financial statements using generally accepted accounting principles (GAAP), and that the Government Accountability Office (GAO) report on those statements. For the fourteenth consecutive year, the GAO was unable to render an opinion on them, because “weaknesses in federal financial management” prevented it from doing so. Specifically:

The main obstacles to a GAO opinion were: (1) serious financial management problems at the Department of Defense that made its financial statements unauditable, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.

In September, I pointed out that although the reported fiscal 2010 deficit using the government’s own set of accounting rules was going to come in lower than 2009, Uncle Sam’s cash spending deficit (i.e., receipts less disbursements) would come in significantly higher. The GAO’s presentation of the GAAP deficit, with the final two lines below added by me for clarity, proves that contention:

SpendingDeficits2009and2010

The government has been able to concoct an illusion of improvement because the Obama administration’s Treasury Department booked $115 billion in “losses” in the Troubled Asset Relief Program (TARP) in fiscal 2009 before it had sufficient evidence that setbacks of that magnitude would occur. In fiscal 2010 — shazam! — Treasury’s estimated TARP losses were revised far lower, enabling it to bury a gain of the same amount in its March 2010 monthly statement.

As shown above, after taking this accounting flimflammery out of the picture, the fiscal 2009 and 2010 deficits based on receipts and disbursements were really $1,302.1 billion and $1,409.1 billion, respectively. In other words, last year was about 8% worse than the year before, certainly not better. It is not without cause that radio talker and Liberty and Tyranny author Mark Levin called President Obama “the most profligate, irresponsible spender in world history” on his January 18 program.

Uncle Sam’s GAAP deficit, seen above as “Net Operating Cost,” was even greater, amounting to $2.080.3 trillion. This dwarfed the comparable number of $1.253 trillion in 2009. The increase occurred because the government’s obligations to its military retirees and veterans, civilian retirees, and its functionally bankrupt government service enterprises Fannie Mae and Freddie Mac exploded. More depressing: In 2008 and 2007, the comparable fully-loaded deficits were “only” $1.01 trillion and $275.5 billion, respectively. Again, a situation that was breathtakingly bad in fiscal 2009 got “progressively” worse in 2010.

How about Social Security and Medicare? Well, there’s bad news and, as is often the case with this bunch, pretend good news. The bad news, as seen here, is that the government’s actuarial liability for Social Security jumped by $270 billion in fiscal 2010 to almost $8 trillion. The program now runs at a deficit during most months. Without changes, Social Security will hemorrhage cash at an ever-increasing rate in the coming years.

As to Medicare, the government claims at that same link that its actuarial liability for that program decreased by $15.3 trillion, a stunning turnaround it attributes to the passage of ObamaCare. Here what the GAO had to say about that assertion:

Significant uncertainties … primarily related to the achievement of projected reductions in Medicare cost growth reflected in the 2010 Statement of Social Insurance, prevented us from expressing an opinion on that statement.

That’s polite accounting-speak for: “Though we can’t prove it, we think it’s a load of rubbish.”

In October through December of 2010, the first three months of fiscal 2011, the government’s detachment from financial reality only increased, and its march toward the abyss accelerated.

Except for seemingly endless unemployment benefits, the Obama administration’s stimulus programs, which really ended up stimulating nothing —  especially not employment — are supposedly over. Logically, federal spending should be going down. Nope. Outlays from October through December of 2010 were about 3% higher than the same three months of last year. That may not seem like much, but given that cash spending in fiscal 2010 was about 20% higher than it was just two years earlier, there’s no excuse for it.

Meanwhile, though federal receipts have increased by 9% over the first fiscal quarter of last year, they’re coming in well behind where they need to be to meet the Congressional Budget Office’s most recent full-year fiscal 2011 projected increase of well over 20%. Moreover, it’s federal income tax collections that are up, while Social Security and Medicare collections continue to plummet, even before this calendar year’s 2% Social Security tax cut kicks in. Social Security and Medicare collections were over 4% lower during the most recent quarter compared to the fourth calendar quarter of last year, and were a stunning 12% lower in December 2010 compared to December 2009.

The irony of all of this is, pun intended, rich. Despite this administration’s egalitarian rhetoric, the combination of upward movements in income tax collections combined with declining Social Security and Medicare receipts is a clear sign that many of the nation’s highest earners are prospering as they never have before, while the Democrats’ supposedly favored “working people” are earning less.

These very real numbers paint a portrait of a country in serious trouble led by an administration that seems hellbent on driving it over the cliff — while the Federal Reserve’s quantitative easing ensures that the runaway train remains well-fueled.

It’s up to the new House majority in Washington to stop the train for the next two years, in the hope of finding a new driver in 2013. Putting real teeth into spending reductions in return for raising the debt ceiling would be a decent first step. Frequently using disapproval resolutions to stop the most harmful new regulations would also help.

Any lawful means necessary must be employed. It’s not a stretch to say that our country’s survival as we know it may be at stake.

4Q10 GDP, First Pass: An Annualized 3.2%

Filed under: Economy,Taxes & Government — Tom @ 10:40 am

The BEA’s report is here:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 3.2 percent in the fourth quarter of 2010, (that is, from the third quarter to the fourth quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 2.6 percent.

That was (/surprise) short of expectations, according to an LA Times item:

The economy grew at a 3.2% annual rate in the fourth quarter of 2010, the Commerce Department reported, aided by stronger consumer spending and trade. Economists were expecting growth of 3.5% and don’t feel the numbers suggest strong hiring.

This failure to meet expectations didn’t keep the Associated Press from creating an illusion of momentum where there was none:

Stocks edge up after stronger GDP report

Stocks are rising in early trading after a report showed that the U.S. economy is growing.

… The Dow Jones is up 7 points, or 0.1 percent, to 11,997 in morning trading. The S&P 500 is up 1, or 0.1 percent, to 1,300. The Nasdaq composite is flat at 2,755.

For heaven’s sake, the rises cited are 0.06%, 0.07%, and nothing, respectively. Those are rounding errors.

The real reax: As of about 10:30, the Dow, S&P 500, and NASDAQ were down by 0.5%, 0.7%, and 1.2%, respectively. Update: End-of-day reax, at Investors Business Daily — “U.S. Stocks Slump On Egypt, Earnings, GDP Report”

The sixth post-recession quarter under Reagan came in at an annualized 8.0%. Reagan’s six-quarter post-recession average was 6.5%. Obama’s six-quarter average, subject to revision, is at 2.9%.

More later, if time.

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UPDATE: This one’s pretty straightforward — It was driven by consumption (3.04 of 3.20 points) and net exports (3.44 points), dragged back by inventory declines (-3.70 points), with just a dash (nowhere near big enough to support a powerful recovery) of other private investment (0.50 points).

The inventory decline of $114 billion represents roughly 8% of all inventories. Have businesses underestimated the ongoing strength of consumer spending, or have they cut back properly because the spending spike is unsustainable?

Lucid Links (012811, Morning)

Filed under: Lucid Links — Tom @ 9:26 am

Indiana Congressman Mike Pence won’t run for President (HT Hot Air) in 2012. That’s understandable.

Better news would be that he’s running to send RINO Senator Dick Lugar into retirement. Apparently, no. If he pursues higher office, it will be to become Mitch Daniels’ successor as Hoosier State Governor.

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Obama Hearts Reagan, according to Time, as covered by Mark Finkelstein at NewsBusters (HT Doug Powers at Michelle Malkin’s place).

I especially like the way Reagan used to bash the rich and oil companies for the supposedly undeserved “breaks” they receive, like Obama did in his State of the Union speech. (/sarc)

Anyway, heart this, in the words of the Congressional Budget Office:

The recovery in employment has been slowed not only by the moderate growth in output in the past year and a half but also by structural changes in the labor market, such as a mismatch between the requirements of available jobs and the skills of job seekers, that have hindered the reemployment of workers who have lost their job. Payroll employment, which declined by 7.3 million during the recent recession, gained a mere 70,000 jobs (or 0.06 percent), on net, between June 2009 and December 2010. (By contrast, in the first 18 months of past recoveries, employment rose by an average of 4.4 percent.)

One of those past recoveries is Reagan’s. Compare this:

ReaganVobamaJobs6qsRecov

This establishment press is positioning Team Obama’s decision to invoke Reagan as a supposedly clever move. It’s better interpreted as a sign of desperation.

I also find the move especially annoying because of this (direct YouTube):

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At the UK Telegraph: “Himalayan glaciers not melting because of climate change, report finds.”

Actually, it’s a half-and-half situation:

Researchers have discovered that contrary to popular belief half of the ice flows in the Karakoram range of the mountains are actually growing rather than shrinking.

The discovery adds a new twist to the row over whether global warming is causing the world’s highest mountain range to lose its ice cover.

It further challenges claims made in a 2007 report by the UN’s Intergovernmental Panel on Climate Change that the glaciers would be gone by 2035.

Although the head of the panel Dr Rajendra Pachauri later admitted the claim was an error gleaned from unchecked research, he maintained that global warming was melting the glaciers at “a rapid rate”, threatening floods throughout north India.

The new study by scientists at the Universities of California and Potsdam has found that half of the glaciers in the Karakoram range, in the northwestern Himlaya, are in fact advancing and that global warming is not the deciding factor in whether a glacier survives or melts.

Yet Obama, the EPA, and rest of his administration march along as if globaloney still has a shred of credibility. It doesn’t.

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The Associated Press seemingly can’t help itself, as illustrated in this housing-releated headline — “New-home sales in 2010 fall to lowest in 47 years.”

The headline would make you think that 1963 was worse than 2010. No, it wasn’t. Marty Crutsinger’s clunky first sentence clarifies:

Buyers purchased the fewest number of new homes last year on records going back 47 years.

Crutsinger also lowers the recovery bar when he writes that “… economists say it could be years before sales rise to a healthy rate of 600,000 units a year.”

600,000 would hardly be healthy. Every year from 1983-2007 except 1990 came in at over 600,000. The nation’s population is about 30% higher now than it was a quarter-century ago. The “health” benchmark is at least 800,000.

As illustrated a few weeks ago, 2010 was the not only the worst year for new home sales on record, it was the worst since World War II. Rebound? What rebound?

Positivity: Woman gets a chance to thank her hero 40 years after rescue

Filed under: Positivity — Tom @ 8:34 am

From Jacksonville, North Carolina:

January 23, 2011 5:12 PM

Although Michelle Acker Raynor was only a toddler at the time, the story of a man who was determined to bring her back to life after a near fatal drowning accident has been always been a special part of her life. After posting a message to find him online, the Jacksonville resident encountered a brief but surprising reunion with her hero four decades later and thanked him for his courageous effort.

“I just started to wonder if he was still alive, where we was, what is he doing and I said I was going to try to find him,” Raynor said. “I thought it was the most exciting thing that he replied back to me.”

The only information that Raynor had of him over the years was a clipping that was cut from an issue of The Daily News in 1966. The clipping is a photo of Sergeant J.E. Shirghio standing with his wife Hermima and Major Gen. Herman Nickerson, Jr. as he holds a Certificate of Merit for saving Raynor, who was just 3 years old. Raynor’s father, Paul Acker Sr. is just as grateful now for Shirghio’s brave act as he was years ago. Acker, who still finds the accident difficult to talk about now, said that he regretted leaving his daughter alone for just a moment, but was glad that he was given a second chance to see her alive and well.

“It was a dumb thing on my part, being young you don’t think of those things,” Acker said.

The incident occurred on June 5, 1966, when the then 31-year-old Acker took his four young children out for a day at the then Montford Point Swimming Pool. Acker was a single Marine who found himself raising the children on his own after a sudden separation from his first wife a year prior. Though times were hard, he was determined to keep his family together and give his children enjoyable memories.

“I took the kids to the pool like we did quite frequently and I was sitting on the edge of the pool for quite a while and this friend of mine brought her son in,” Paul Acker “Michelle was hanging out at the edge of the pool where the water goes to recycle and I left her in the pool and went back to the other side.”

After his son Bobby noticed her floating in the pool moments late, Acker and his oldest son Paul Jr. rushed into the pool to pull his daughter out of the water. Acker said that Shirghio, who was on duty as a lifeguard at the time, quickly responded to their calls for help.

“My son grabbed her and handed her to me and even with my military training I was so messed up that I couldn’t do anything,” Acker said. “(Shirghio) took her from me and put her on the ground.”

Acker said that his daughter was unresponsive for five minutes while Shirghio faithfully performed CPR on her.

“Just as the fire department showed up with equipment she came back,” Acker said. “He said that he had no idea that his training would work to bring somebody back to life.” …

Go here for the rest of the story.