Commentary: The US economy according to facts

On the long ago (in terms of political news cycles) days of July 18, 2015, I wrote a Facebook post about the reality of the economy. In those days, now long since forgotten by the general public, I took a snapshot of the nation and compared it to years past based on the well documented US Debt Clock. I decided to take another look today.

Michael Vass Vasquez, November 2015
Starting with July 18, 2000, before the Internet bubble exploded and the 9/11 terrorist attack, we see that the Population was 282.3 million, the Workforce was 135.2 million, NOT in Laborforce 69.1 million. Official Unemployment stood at 5.7 million with unofficial (U-6) unemployment at 9.6 million. Poverty contained 31.9 million Americans with 17.2 million getting Food Stamps.

Financially, the national debt was a mere $5.7 trillion, or $93,357 per citizen. This included the fact that $1.99 trillion was taken in via taxes, though the Government spent $3.2 trillion and the nation’s GDP stood at $9.7 trillion, with a Debt to GDP ratio of -58.6%.

For some all these numbers are scary or confusing or just boring. To help those people I will give the overly simplified 30 second soundbite summary. The population grew 15% (41.7 million people) in 16 years. The number of unofficial unemployed (U-6 from BLS) increased by 58% (a total of 5.6 million Americans). The national debt increased 240% (a total of $13.7 trillion) with poverty increasing 47% (up 15 million Americans) and Food Stamps increasing 155% (a total of 26.6 million Americans). The overly simple answer is the nation is on the wrong track and economically falling apart. [If you want to see the conclusion without numbers skip to the 10th paragraph – Numbers don’t lie – and continue to the end.]

For those that need more data and context I will continue. On July 18, 2008 – just as the recession was taking hold due to the Sub-prime mortgage crisis – the population stood at 304.5 million Americans, with a Workforce of 144.6 million and NOT in Laborforce of 80 million. Poverty at the time increased to 38.7 million Americans with 31.1 million needing Food Stamps.

The financials were also increasing, badly. The national debt grew to $10.4 trillion, or $165,655 per citizen. Government spending had increased to $5.6 trillion and the GDP was $14 trillion for a Debt/GDP ratio of 74.6%.

Given there was a recession starting with the potential of a global economic collapse. In the moment few could see how the fundamentals had fallen apart so quickly. Record tax revenues stood at $2.5 trillion, the workforce had increased 7% (9.4 million people). This positive was masking the government spending increase of 75%, the national debt increase of 82% ($4.7 trillion). The need to help so many families was linked to the Mortgage Crisis and not a bad economy based on bad policy. The nation was hurt by the Internet bubble and 9/11, and it had yet to fully recover. Government had sped up its micromanagement efforts to shore up the edges, and wars in Iraq and Afghanistan obscured the landscape.

But President Obama promised to fix the problems of the Bush Administration. President Obama would resolve the growing lack of jobs, control the debt, end the wars, and bring a social justice that would equalize the nation. But his Stimulus Plan failed, at a cost of nearly a trillion dollars. The Cash for Clunkers programs failed to improve the ecosystem and created a loss for the nation, as found by the University of Delaware and University of Jacksonville.

As the 2012 presidential election moved into its final stages, the economy on July 18, 2012 showed a record of failure. The population had increased to 313 million Americans. The workforce was showing the start of a long and nearly unabated decline to 142.2 million with 87.9 million NOT in the Laborforce as 22.9 million unofficially (U-6) unemployed. The national debt grew at a staggering 52% pace ($5.4 trillion) or more than $13,000 per citizen ($179,273) in just 4 years. Poverty had increased 19.9% (46.6 million Americans) and Food Stamps increasing 52% (47.2 million), again both in just 4 years.

The excuse was that the “Great Recession” and President Bush were at fault. These 2 excuses covered all negatives and distracted from an acceleration of negative trends. The fact that economic policy had made the situation worse was immaterial. The fact that longstanding trends of recovery after recession had been broken was largely unspoken. The downgrade of US credit rating and the massive loss to the public for the takeover of GM is ignored.

Just a year ago, as I mentioned at the beginning of this commentary, I noted the continued problem. The national debt stood at $18.8 trillion (July 14, 2015) with a record $3.3 trillion in tax revenues and Government spending at $6.7 trillion. The workforce had grown to 151 million Americans as the population increased to 323.3 million Americans. Much was made of the decrease in poverty (3.4 million people or 7.3%) as Food Stamps decreased (1.1 million Americans or 2.3%). Though nothing was disclosed of the fact that the number of people receiving Government aid exceeded the total workforce by 11 million (162 million getting some form of aid) with a swelling of 95.2 million Americans NOT in the Laborforce.

Credit: St Louis Fed
But today we see the fruition of the change in American economic policy. With 323 million Americans only 151 million are in the Workforce, a decline that is only now possibly hitting a stability point though it is too soon to tell. The NOT in the Laborforce remains steady at a peak of 95 million – an 8% increase from 2012, a 19% increase from 2008, a 38% increase versus 2000.

There is still 7.3% more Americans receiving Government aid than in the total workforce. Poverty has increased by 500,000 from 2012, though Food Stamps has decreased 3.4 million over the past 3+ years. This mixed data is coupled with record national debt of $19.4 trillion or $203,162 per citizen (more than 54% increase since 2000, and increase by 23% since 2008, up 13% since 2012). All this while tax revenue remains $3.35 trillion.

Numbers don’t lie, and looking backwards in time allows a clarity that being in the moment obfuscates. The past 2 terms of the Obama Administration has failed America. In fact, virtually every major metric has accelerated dangerously. The nation is in a more financially unstable position than even most conservative pundits predicted.

Given the trends shown by the facts, something has to break. The nation cannot continue on this path. Economically, unsustainability has been reached by my understanding, and every projections only shows an increased problem. When a stagnant workforce is exceeded by those receiving Government aid while record levels of tax income is collected, which itself is 103% short of Government spending, the only descriptor is unsustainable.

I am left with the thought that in 2017, no matter the President, this will come to a head. Either because of a President that may attempt to fix the problem (most likely Trump), or a President that doubles down on the Obama Administration path (most likely Clinton), the bluff of a strong economy will be called. But once that happens, the dominoes will have to start to fall.

I will say it now, for the record. No matter the President there will be a recession before 2020. How severe, and whether it will become a full on depression (which some could debate is already underway) is the only factor that will differ based on who is elected.

Often as a stockbroker I said that there is no way to predict future outcomes based on past performance, which is true. But more often to not, if you look back far enough and analyze the facts, you can get a pretty good idea of what may happen in the future. Our past economically shows a destabilizing trend of Government supplanting business, replacing growth with subsidy, instilling dependence. That’s what I see.

There is no partisanship in the numbers that exist. A further downgrade of US credit looms large on the horizon. As economies fail, civil unrest grows. It’s not a pretty picture. But the real question is what is the path back to the light? Especially as the general public becomes more complacent, less informed, and more apathetic to voting.

I can’t see that far ahead, nor can anyone I am aware of. But I will say that without pain there is no gain, as the saying goes. We cannot, and should not, try to minimize the problem to feel better about it. Nor can we continue to be distracted by symptoms and consequences because we don’t like the prospect of looking directly at the root problem.

This is a snapshot of America’s economic health – and we are not healthy. Any other conclusion, in my opinion, is a lie. But people like lies that feel good – or at least better than reality.

Sincerely,

Michael Vasquez
President – M V Consulting, Inc.

About the Author

Michael Vass
Born in 1968, a political commentator for over a decade. Has traveled the U.S. and lived in Moscow and Tsblisi, A former stockbroker and 2014 Congressional candidate. Passionate about politics with emphasis on 1st and 2nd Amendments.

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