ECONOMICS

Where are the jobs? In Health Care

By Andre Michael Eggelletion

 Millions of Americans have lost their jobs since the economy began its severe contraction in 2008. Millions more people are under-employed and finding it increasingly difficult to put food on the table. But one industry holds tremendous opportunity in an otherwise dismal job market: health care, or as Republicans like to call it: Obamacare.

Obamacare meets growth in demand

Every industry thrives when the demand is high for its goods and services, and the health care field is no exception to the rule. Because the birthrate exploded in the United States after World War II, we are now at the beginning of a 10 to 20 year-long period where these “baby boomers” will be requiring more health care services. This is why the health care industry has been the epicenter of job growth in every month of the recession. On average, 24,000 jobs were created in the health care field over the last 12 months. Experts say we can expect 24% growth in health care jobs, or 4.3 million additional jobs until 2021.

The time to get trained is now

The Affordable Health Care Act of 2010 was a wise answer to increasing demand for health care. As the health care industry retools, ramps up, and prepares to meet this explosion in demand, those who are looking for employment now have health reform to thank for good paying jobs for years to come. In fact, the demand for new health care professionals is expected to be so high that the rising concern within the industry is over having enough qualified health care professionals to meet this demand. Therefore, the time for training for a job in this area is now.

Looking forward to 2014

Most of the major areas of job growth under the Affordable Health Care Act won’t begin until 2014 when the health exchanges mandate goes into effect. At that time federal funding will be provided for states to establish American Health Benefit Exchanges and Small Business Health Options Program (SHOP) Exchanges. Whether you’re an individual or a small business owner, these exchanges are supposed to serve as an easy, cost-affordable way for you to get health-insurance for yourself or your employees. The establishment of these exchanges will create hundreds of thousands of new jobs.

The top 8 fastest growing health care careers through 2018:

– Bill and account collectors are forecast to increase 66%. Industry experts peg the growth to an increase in billing as more Americans get access to insurance and health care under reform.

– Cardiovascular technologists and technicians jobs are expected to grow 52%. Kim said as boomers age, they will need more stress tests and cardio scans, which will require experienced technicians to operate the equipment.

– Public relations specialists are forecast to rise 52%. "The interesting phenomenon happening right now is hospitals and health centers embracing social media," said Kim. As a result, he said hospitals are hiring people who are "social media" or public relations "specialists."

– Physician assistants are expected to see a 52% increase. Kim said the current shortage of primary care physicians means many health centers in areas facing doctor shortages are using physician assistants to fill the gaps.

– Pharmacy technicians are forecast to grow 52%. This trend may be fueled by the rapid growth of retail pharmacies and support staff needed to work with pharmacists.

– Customer service representatives are expected to rise 52%. Kim said more hospitals are changing their models and adopting a more customer-centric approach, which includes conducting customer satisfaction surveys.

– Massage therapists are expected to increase 52%. An aging population is boosting demand for this type of service, said Kim, as well as a slow shift away from conventional drug therapy.

– Clinical, counseling, and school psychologists are forecast to rise 43%. Again, Kim points to the aging population and more instances of depression and anxiety as the reasons behind the projection.

– Registered nurses are forecast to also increase 43% as health care centers boost their medical staff in anticipation of rising demand for services.

Michele Bachmann promises $2 gas

 

By Andre Michael Eggelletion

Tea Party/Republican presidential hopeful Michele Bachmann (R-MN) promised voters that they would pay only $2 per gallon for gasoline if she is President. In remarks on a campaign stop in South Carolina Bachmann said "Under President Bachmann you will see gasoline come down below $2 a gallon again… That will happen."  I can tell you now that the only way we will see $2 gas anytime soon, is if the economy enters another period of major contraction. I’ll talk about that later in this opinion editorial.

What is Michele Bachmann trying to pull?

Mrs. Bachmann is trying to out-“slick” Gov. “Slick Rick”. “Slick” Rick Perry wanted you to believe that Ben Bernanke was calibrating monetary policy to help President Obama get re-elected, which is a lie. Bachmann wants you to believe she can control gas prices as president, which is another lie. I know that there is a huge difference between campaign rhetoric and actual governing but this lie takes the cake. If Bachman really believes what she said, then she’s crazy. If she doesn’t know that no single individual, not even the president, can control gas prices, then she has no business in the White House.

Bachmann is trying to blame Obama for gas prices

Bachman also pointed to the increase in gas prices during Obama’s term of office. "The day that the president became president gasoline was $1.79 a gallon. Look what it is today" Bachmann said. But this is false, and I say more on that later. Bachmann and other conservatives also want you to believe that President Obama could have eased gas prices if he had allowed more drilling for oil. This too is false. It would take years for the United States to produce and stockpile enough oil to offset cuts in OPEC production that would be sure to come. Quite simply, the oil producing nations of the world are not about to allow falling oil prices to hurt their economies.

Gas prices during the Bush years

Careful study of this chart on gas prices since 1979 reveals some interesting facts. On January 15, 2001, five days before George W. Bush took the oath of office and became the 43rd President of the United States, the average U.S. price of gas was $1.66 per gallon. Gas prices peaked at $4.35 per gallon on July 15, 2008. Why didn’t Rep. Bachmann talk about the hardship on families caused by this $2.69 increase in gas prices under President Bush?

 

Why did gas prices fall during the last 5 months of President Bush’s final term?

Gas prices fell $2.32 per gallon during the final 5 months of George W. Bush’s presidency to $2.03 per gallon on the day Barack Obama became president. Rep. Bachmann’s claim that gas was $1.79 per gallon on January 20, 2009 is false. The reason for the drop in gas prices at that time was that there was a dramatic decrease in demand. Remember, at that time, the entire planet earth was experiencing the worst economic contraction since the Great Depression. It is typical to see demand for gasoline fall during even mild recessions; businesses and individuals simply drive less. But the Great Recession of 2008 brought about the kind of nose-dive in spending, especially in gas consumption, usually associated with depression level conditions. In short, Bush screwed up the economy so badly that the average American could no longer afford $4 and in some places $5 per gallon for gas.  

Who controls gas prices?

Gasoline prices are heavily influenced by demand. Oil prices are also contingent on geo-political stability, as well as trading activity on Wall Street in the crude oil market. Anyone who believes that these markets can be controlled for political, or any other purpose, by a single individual is delusional.

Why did gas prices increase under President Obama?

The reason gas prices rose during President Obama’s term thus far, from $2.03 to the current $3.60 per gallon (a $1.57 increase), is simply because the economy has improved and demand has increased. Not only has demand risen in the United States, it has risen tremendously in areas of the world where heavy investment in enterprise is taking place; mainly China and India. Likewise, the Arab Spring in the Middle East also helped oil prices to rise.

The only way Bachmann can bring back $2 gas?

As I indicated at the beginning of this editorial, the only way to get gas prices back to the $2 per gallon level is if the economy has another major contraction. Had the United States not raised the debt ceiling, and the U.S. actually defaulted on its sovereign debt, the economy would have contracted to such a degree. Likewise, as much as I hate to say this, if the Fed does what some in this country want to see it do right now, which is stop printing money, the economy will contract and we may see $2 gas. That does not mean the United States could or should think we can live on the Federal Reserve’s printing press forever. The plain truth is that the economic policies we hear from people like Bachmann and Perry are like using a sword instead of a scalpel to perform the surgery this economy needs. Their policies will abort the recovery and lead to a deflationary spiral in not only gas prices, but prices for goods and services that would lead to massive lay-offs and firings. If a business cannot optimize its prices, then it will start downsizing. If a Republican is elected president in 2012, and does what they are saying they will do, then they would put this country into a second Great Depression. 

Move Forward Detroit

 

By Andre Michael Eggelletion

It’s time to move on from the Kilpatrick era

 

There has been immense coverage in the local and national media on the former Detroit Mayor Kwame Kilpatrick. The question is whether or not there has been too much coverage, and is it’s time to move forward and focus on the future. Detroit has a new government that could benefit from an informed and active citizenry. As President Kennedy said in his address before the American Newspaper Publishers Association, April 27, 1961 the press is “the only business in America specifically protected by the Constitution- -not primarily to amuse and entertain, not to emphasize the trivial and the sentimental, not to simply give the public what it wants–but to inform, to arouse, to reflect, to state our dangers and our opportunities, to indicate our crises and our choices, to lead, mold, educate and sometimes even anger public opinion.” To fulfill those objectives the media must look to the challenges head a little more than those of the past.

Grassroots and Government to the rescue

In looking forward, Detroit has a promising, albeit, challenging future. The Motor City is in “overdrive” as described in the recent Planet Green network documentary, requiring us to look to Detroit’s creative pulse, which has always been a major asset. But in addition to grassroots entrepreneurial enterprise, Detroiters now have an opportunity to benefit from the Obama administration’s commitment to improving the region. Federal funds must be secured as soon as possible before any austerity measures in the Federal budget compromise closes the door on regional infrastructure development.

The Woodward light rail project

Specifically, Detroit now has a chance to galvanize regional efforts for the long-hoped for Woodward Avenue light rail project. The sticking point has always been who will have to pay for the project. Such a massive undertaking cannot be accomplished without raising taxes. But with help in the form of $70 to $75 million from M-1 investors, and a previously secured $25 million grant from the Obama administration, the region is closer than ever to finally bridging the 8 mile divide from downtown Detroit to the suburbs of Ferndale, Birmingham, Royal Oak, Huntington Woods, Pleasant Ridge, Berkley and Maple. There are already 19 stops from downtown to 8 mile in the proposed rail, including Cobo Center, the two stadiums, Midtown and New Center. Regionalizing this project is a pragmatic way to spreading the investment costs of creating jobs and expanding prosperity for the entire Wayne, Oakland, and Macomb tri-county area. 

Conclusion

Having the Motor City and the region in overdrive requires careful concentration on the road ahead. The citizens need perspective to make wise and intelligent decisions about what course to take. Therefore, the media should begin to focus more on the future opportunities and challenges facing this beleaguered region, and less on the sensations of the past. 

The Downgrade of America’s AAA Credit Rating and its Meanings

 

Standard and Poor’s unheeded warnings in Washington has led to an historic downgrade in America’s credit rating. Was this a result of congressional incompetence or intent?

 

By Andre Michael Eggelletion

 

The historic August 5, 2011 downgrade of America’s AAA credit rating by Standard and Poor’s has confirmed the trouble that many have feared. I and others have long-warned that decades of deindustrialization and building an economy based on borrowing and printing money would lead to ruin. But who knew that the coup de gras to the American economy would be politically self-inflicted. As S&P said, it is now “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics anytime soon.” Hopefully, the American people will identify those extremists in Washington who were either incompetent enough or intentionally willing to damage the country for political purposes, and vote them out.

How damaging is this downgrade?

Although Standard and Poor’s new AA+ with a negative outlook assessment on America’s credit alone is not a death sentence, it does confirm not only my long-held sentiments, but that of the markets in general as well. It says that if unchanged, our fiscal and economic path is unsustainable. As a result of this action, some of the things we can look for are further stagnation in the credit markets; rising bond yields and increasing difficulty in attracting foreign capital; an exacerbation of the foreclosure crisis due to possible rising interest rates and tightening austerity; extreme volatility in stocks; and strong momentum for rising prices in the precious metals and energy sectors.

Can the Fed maintain confidence?

The Fed has indicated that the measure of risk on Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. In other words, U.S. Treasuries should still be considered secure AAA collateral for practical purposes even though S&P has issued its historic downgrade. But this assurance from the Fed, though comforting, still does not answer many questions. The markets still want to know, how much longer the Fed can ride the back of the tiger, and will foreign interests who are also required to hold AAA assets as collateral finally begin to diversify? Remember, the Fed does not regulate and control how other countries deal with downgraded securities. Finally, everyone wants to know; at what points will Fitch and Moody’s follow Standard and Poor’s lead and issue their own downgrade?

What have we learned?

This was a close shot across the bow and a wakeup call for Washington. I only hope they were listening. If they were, then they heard a warning about using the full faith and credit of the United States in their insane game of political brinksmanship. All sides in Washington and their voices in the media need to understand that our expanding deficits and the national debt is not a partisan issue. All Americans are deeply concerned about our fiscal situation, as is the rest of the world operating under the dollar reserve system.

But the extremists in Congress who played the dominant part in adding the final straw to break the camel’s back act like they don’t understand that our economic trajectory has been a decades-long trend. Whether they acknowledge it or not, our problems have the momentum and economic kinetic energy of a one hundred car locomotive running at full speed. Therefore, to remain rigid and undiplomatic in an ideological posture trying to stop the train in its tracks is ill advised. In fact, they may have already initiated a catastrophic train wreck that promises to give the opposite of their stated desired result, and kill rather than save America. If, however, the intent among extremists on the Right in Congress was to damage our economic standing for political purposes, and I personally believe it was, then they are not patriots but enemies of the United States of America.

What we need are careful, deliberate, and meaningful steps to slow our momentum toward insolvency, and safely arrest and reverse our trajectory. We need to establish a sustainable path toward restoration of the prosperity that we inherited through the blood of our forbearers, if we are to ever reclaim our place in the world economic order. That means the long-contended interests of labor and business must be pragmatically addressed and balanced. It means substantive investments must be made in human as well as material capital. As President John F. Kennedy said in his inaugural address, “if a free society cannot help the many who are poor, it cannot save the few who are rich.” 

President Obama didn’t Cause our Economic Collapse or Make it worse

 

By Andre Michael Eggelletion

Don’t Blame the President

The Republicans want President Obama and the democrats to stop saying the deficit and the collapse of the American economy was inherited. The fact is that these conditions were inherited after being built up in the system for decades. When the United States and the global economy faced the worst economic crisis since the Great Depression in 2008, Barack Obama had not yet even taken the oath of office.

The verdict on what happened is in

The financial reckoning of 2008 confirmed what I and others had been predicting for several years: The unbridled excess in our financial markets, and lack of oversight from governments was leading us all to ruin. The lies that Republicans and the Tea Party continue to tell themselves and their constituents, about how we got into this mess, speaks volumes about their ability to diagnose, and enact policies to mitigate the nation’s economic problems. The verdict is in on the Right's insistence that financial and capital markets should be left to self-regulation, and it’s a guilty verdict for any such notion.

How the problem evolved

The unwitting public became prey under a system that could no longer be the tamed by the restraints of the Glass-Steagall Act of 1933. The world was moving towards a system where the old rules were no longer adequate and transparency along with accountability became impossible to attain. The ultimate collapse of these markets became unavoidable as nearly every counter-balance to excessive risk, abuse, adequate capitalization, and other indispensible protective measure against abuse and recklessness in these markets were systematically dismantled by Washington.

Where the Right went wrong on financial reform

The final blow to regulatory restraint can in the form of the Republican sponsored Gramm-Leach-Bliley Act, also known as the Financial Services Modernization Act of 1999, which finished tearing down the wall between commercial and investment banking, allowing our commercial banks to become critically indifferent to risk. Consequently, a torrent of dangerous new esoteric financial instruments was unleashed on the public, along with a “shadow banking” system that allowed banks and other financial institutions to speculate without adequate transparency, capital, or regulatory oversight. Proper funding came to be seen as unnecessary, and risk due to excessive leverage became a commodity to be bought and sold.

Our best hope

Whether we like it or not, our long period of economic integrity that withstood the carnage of bust cycles since the Great Depression has finally succumbed to decades of regulatory weakening, and come to an end. At this point, our best hope for restoring common sense economic rules of the road is the Dodd-Frank Act, or the Wall Street Reform and Consumer Protection Act of 2010. It offers the most comprehensive reform of financial regulation since the New Deal. We now have greater supervision of systemically critical firms regardless of their corporate form. The shadow banking industry of large interconnected financial firms, OTC derivatives, “repo” funding markets, hedge funds, and securitization are now being regulated. Capital and liquidity buffers, size constrain on financial institutions, and the riskiest financial activities are being subdued. We now have comprehensive regulations for the derivatives markets in the area of exchange trading, transparency, anti-abuse provisions, and capital and margin requirements. Today, virtually no corner of the financial markets can hide risk. When systemically critical risk is discovered the government, through the new Consumer Financial Protection Bureau and other agencies, can, if necessary, liquidate such firms before the taxpayer is put on the hook.

President Obama has made the future more secure

No, President Obama did not cause the financial recession, nor has he made it worse. The truth is that the President has made things better for the future. Thanks to the efforts of President Obama and the Dodd-Frank Act, we now a strong foundation on which the U.S. must now carefully build a more stable and balanced regulatory system–a system that protects the public, rewards innovation, tempers risk in systemically critical financial institutions. 

Municipal Bond Downgrade Looms

 

By Andre Michael Eggelletion

Moody’s assessment

As a part of its current review of America’s credit rating, one of the three largest credit rating agencies in the U.S., Moody’s has said at least 7,000 top-rated municipal credits would have their ratings cut if the U.S. government’s AAA credit rating is downgraded. That means $130 billion in municipal debt, which is secured and thereby directly linked to U.S. government agencies like Fannie Mae and Freddie Mac, would face a nearly automatic downgrade if the federal rating is reduced. Moody’s $130 billion assessment did not include compromise to local housing authorities and non-profits. Issuers that are partially dependent on the federal government, such as states receiving Medicaid matching funds, also will be reviewed for vulnerability.

Moody’s put the U.S. rating under review as talks stalled in Washington on raising the government’s $14.3 trillion debt limit. Democrats including President Barack Obama want to raise taxes to curb the national deficit while congressional Republicans have sought deeper spending cuts.

The damage bound to be sustained to cash strapped municipalities burdened with various unfunded mandates from their state governments, should also help to temper the reactionary opposition to collegiality from Republicans in Washington on the debt ceiling issue. If seeing more municipal services being cut, along with the jobs they provide, to their districts doesn’t make them grow up, then I don’t know what will. Maybe they believe they can successfully blame the devastation done to their constituents on the president. After all, they have tried to sell the idea that President Obama is a Muslim, Socialist, Communist, Marxist, black nationalist, neophyte who hates America. Will it work? I believe it will all backfire on the hard Right if their constituents love their children more than they hate having a black family in the White House. 

What Happens if We Fail to Raise the Debt Ceiling?

 

By Andre Michael Eggelletion

 

 

 

 

Here is some of what would happen if the Republicans in Washington refuse to allow the debt ceiling to be raised and forces the United States to default on its sovereign debt:

 

(1)      The United States would lose its triple AAA credit rating, thereby causing a significant increase in the difficulty to attract foreign capital.

 

(2)      The Federal Reserve would have to print money to cover the shortfall in revenue needed to run the government, and thereby hyper-inflate and destroy nearly all of the dollar's value.

 

(3)      Interest rates would soar to defend the crippling of the dollar caused by the Fed drastically increasing the money supply and nation going into sovereign debt default.

 

(4)      Unimaginable legal problems would then ensue as the Treasury has to decide who gets paid and who gets stiffed.

 

(5)      The stock market would see a 1000 point drop in a single day, as money is transferred into precious metals and cash reserve.

 

(6)      The price of precious metals would spike to astronomical levels.

 

(7)      Bond prices would collapse as yields soar to entice foreign capital

 

(8)      Government payments to all parties, except foreign bond holders, would cease or be cut by 60 to 80 percent

 

(9)      Federal, State, and Local agencies would implement an across the board freeze on all expenditures, including salaries.

 

(10)  Citizens on supplemental income, such as Social Security and Medicare would severely cut their spending, and the ripple effect would be felt throughout the economy. All businesses from the coffee shop, to the car dealership and hardware store would see a catastrophic loss of business. 

 

(11)  Those businesses and the vendors supplying them that initially survive would have to begin massive lay-offs and downsizing to stay alive.

 

(12)  College students on grants and loans would end up dropping out due to their inability to pay dramatically increasing tuition and rent costs, and return home help their families.

 

(13)  Those states, cities, and industries that depend on tourism would see a crushing loss of revenue, requiring many to declare bankruptcy.

 

(14)  The government could be forced to privatize much of the nation’s property and transportation infrastructure to collect badly needed revenue.

 

(15)  A period of draconian austerity or some serious belt tightening would have to be imposed while the government restructures its debt.

 

(16)  The United States may have to turn to the International Monetary Fund for structural adjustment loans and other assistance. The IMF would then impose the same programs of privatization of our infrastructure, liberalization of our capital markets, and austerity that have been offered to Third World countries and defaulting nations in the European Union.

Republicans should be ashamed of themselves over the fact they are a big part of the reason why this nation is in the financial shape it is in right now. They spent money like sailors during the Bush years and told us that deficits didn’t matter. They pushed for war in Iraq, which turned out to be the greatest strategic blunder in American history. They deregulated our financial system, and allowing commercial banks to become little more than gambling houses, and allowed corporations to move our jobs overseas. Now they want that same public that they abandoned to pay for the excess and malfeasance of those who they allowed to game the system. If the president refuses to force the beleaguered public pay, then the Republican leadership in Washington has said they will obstruct raising the debt ceiling and allow this great country’s reputation and credit rating to be irreparably damaged. In other words, they are willing to allow an economic perfect storm to ravage this entire nation just to make President Obama look bad and assure more fruitless tax cuts for millionaires and billionaire who don’t need it.

It takes a cold hearted person to ask America’s elderly to take cuts in their Social Security and Medicare benefits, after they have worked hard all their lives and paid into the system, and do it at a time when the costs of living are higher than they have been since the Great Depression. Our elderly are being asked to choose between paying for food and medicine, and paying their rent. For what… so rich people can get another ineffective tax cut?

The GOP is actually callous enough to satisfy the avarice of the rich at this challenging time largely of their own creation, that they have called for elimination of vitally needed programs such as day care, food stamps, and virtually every established measure of benevolence in America. Their proposals are not only shameful and unfair; they are against the will of a vast majority of the people of this country, as polled by Kauffman Economic Outlook: A Quarterly Survey of Leading Economics Bloggers, Second Quarter 2011.

The Politics of Fiscal Responsibility and the Debt Ceiling Debate

 

By Andre Michael Eggelletion

 

Economic brinksmanship over the debt ceiling

 

As the debate over raising the debt ceiling or allowing the United States to go into sovereign debt default reaches the boiling point, I have to ask why didn’t Republicans sound the alarm on the deficit and debt years ago when it could have made a difference? Why weren’t they concerned about issues these issues until they reached a crisis level, and why is their response so reactionary and reckless. The answers are simple: It wasn’t politically expedient to do it while they held the reins of government, and they seem to be willing to do incommensurable damage to the economy just to make this president look bad. They are willing to play the economic equivalent of the game of brinksmanship that Kennedy and Khrushchev played during the Cuban Missile Crisis, and risk an economically equivalent outcome.

 

GOP’s hypocrisy on the debt and the deficit

The truth of the matter is that Republicans are not serious about reining in deficits or keeping the national debt small. If they were they wouldn’t ask for more of the same kind of costly, and above all, ineffectual tax cuts for the wealthy that were given out during the Bush years. But there is one thing that they are serious about, and that is continuing the same kind of reactionary obstructionism toward this president that they have displayed since the day President Obama took the oath of office. Republicans are unabashed hypocrites on these issues, or maybe they have forgotten the first term of President George W. Bush, when former Treasury Secretary Paul O’Neill tried to warn his boss about the likely damaging effects of his tax cuts. Vice-President Cheney told O’Neill that “Reagan proved deficits don’t matter,” and subsequently, O'Neill was fired from his job as George Bush's Treasury Secretary for disagreeing too many times with the president's policy on tax cuts.

 

Proof of who are the biggest spenders

 

Under the Bush/Cheney deficits don’t matter rule, they presided over the largest expansion of federal spending since President Lyndon Johnson. The Bush Administration subsequently decimated a budget surplus of $128 billion left for them by President Clinton, and left a whopping record-setting $1.2 trillion budget deficit. Howbeit the Tea Party and mainstream Republicans conveniently forget how that it was conservatives who presided over the largest fiscal turnaround in U.S. history; a ten-fold loss to the Treasury. Contrary to the canard that it was the Iraq War that was responsible for the fiscal turnaround, the Treasury hemorrhaged money because of a record six year-long 5.3 percent increase in discretionary spending; 48.5 percent in his first term alone.

In addition to record discretionary spending, conservatives were silent as defense spending under Bush increased by 86 percent for wars that never should have been fought. According to the Center for Arms Control and Non Proliferation, even non-war related defense spending under Bush was 25 percent higher than it was Reagan, while Homeland Security spending increased three-fold from pre-911 levels.

 

In education, Bush’s No Child Left Behind caused an 18 percent annual increase in spending during his years in office. In agriculture, Bush’s 2002 farm bill doubled spending from 1990 levels. In health care, the 2003 Medicare prescription drug benefit added over $700 billion to the debt, and constituted the largest single expansion in Medicare’s entire history. In transportation, the 2005 highway bill, and its associated earmarks added another $300 billion to the national debt. In 2008 Bush’s budget called for spending $933 billion for discretionary programs. When pressed on how he proposed to pay for this spending Bush said, “They’re going to have to raise taxes to pay for it.”

 

Feigned and shameful indignation from the Right

 

The fact that the debt ceiling must once again be raised should not be a partisan issue, particularly since it clearly wasn’t an issue under the previous administration. The conspicuous silence of mainstream Republicans and the non-existence of the Tea Party during the Bush spending binge makes it disingenuous for Republicans to lay any claim whatsoever to being the party of fiscal responsibility. On top of that, the indignation conservative voters over the emergency triage measures that the Obama administration has had to take in the wake of the economic carnage of the previous 30 years of U.S. de-industrialization is feigned and shameful. They clearly support their party’s politicizing of fiscal responsibility, to satisfy their own prejudices; political and otherwise.

 

Both sides are to blame

 

The politicization of this nation’s fiscal affairs constitutes a gross dereliction of duty by both sides in Washington, and is the ultimate displays of indifference to our heirs. I say both sides because both sides are guilty of allowing the outsourcing of our jobs; the offshoring of our industry; the excessive deregulation of our financial system; the outsourcing of our monetary policy; the rise of an over-reaching military industrial complex; the approximate 40 times we have sent our military on either some peacekeeping mission, police action, low-intensity conflict, or all our war since the passage of the National Security Act of 1947; and the general sale of our government to the highest bidder. Considering the damage to the economy, and the suffering that the public would have to endure if the U.S. defaults on its obligations, I for one, am nauseated by the entire circus.

S&P Issues Dire Warning on US Debt, and its meaning

 

By Andre Michael Eggelletion

The guardian of the world’s reserve currency, the United States of America was issued a dire warning by the S&P on Monday about its status as the greatest debtor nation on earth. This sobering shot across the bow came in the form of an historic first time negative outlook on America’s AAA credit rating, moving it down from “stable” to “negative.” This means that the 70 year old rating agency believes there is a one-third chance of an official downgrade within two years.

Why is this happening?

The national debt has not gone down since 1961. Since then, of out of control debt and deficit spending has finally pushed the United States to the tipping point I’ve warned was approaching for a decade. The debt has risen dangerously from $290.5 billion in 1960, to $5.6 trillion in 2001, and to $14.5 trillion today. In 1960, unemployment was at 5.5 percent and a postage stamp was just 4 cents.

Who’s to blame for the debt and the deficit?

Both political parties are to blame for massive spending, however, it is a fact that for every dollar a Democratic president has raised the national debt in the past 63 years Republican presidents have raised the debt by $2.84But no single political party or institution is to blame for where we are; there is a lot of blame to go around for the debt and deficit. I saw the tipping point approaching about ten years ago. At that time America experienced the largest fiscal turnaround in US history, from a 2001 budget surplus of $128 billion to a 2009 deficit of $1.3 trillion. Because of a subsequent decade of fiscal irresponsibility in the form of massive tax cuts for the wealthy and giant corporations, two wars, spending increases, prolonged low interest rates, and a hefty stimulus policy to mitigate the worst downturn in 70 years, our deficit now stands at a 2011 projected $1.645 trillion.

What happens if the US credit rating is officially downgraded from AAA status?

Standard and Poor’s warning, combined with long-term bond holder recent sentiment, clearly indicates the highest level of risk to the Treasury market since the great depression. The world knows that if we lose our AAA credit rating, America’s ability to run its government on borrowed money will be compromised. As the Fed found out, bond yields didn’t behave as expected with the implementation of QE2. Instead of falling because of QE2, bond yields rose. If we lose our AAA credit rating, bond yields will rise dramatically as prices continue to fall. In short, we will have to pay through the nose to keep borrowing money from the Chinese. Consequently, taxes would then have to be dramatically increased and draconian budget cuts would filter down to the municipal level. The Fed would also have to print money like never before, which would further devalue the dollar and probably end its reserve status. If that happens, oil will no longer be priced in dollars and the price of gas would skyrocket to current levels in Europe; around the $8 per gallon. Local governments would also be in serious trouble. For example: Many may consider raising occupational license fees for small businesses from $125.00 to over $500.00. States many have to implement new and higher highway tolls, and increase the price for an automobile tag by several hundred dollars. In short, the burden of the ensuing budget shortfalls will be passed along to the public. Prices for everything would increase dramatically across the board; food energy, you name it. Finally, all of the associated increased austerity will abort the current hyper-anemic economic recovery and usher the United States into a second Great Depression.   

What needs to be done?

The time has come for Washington to put the well-being of this nation beyond politics. Republicans and Democrats must sincerely work together to correct the problems of the debt and the deficit while increasing economic growth. They must correct the trade imbalances that have gutted this nation of its jobs and revenue. Commercial banks must resume their traditional role of lending to credit starved small businesses and individuals to facilitate economic growth, and end the practice of gambling with deposits, securitizing bad loans and selling them off. For decades, corporations have been given tax breaks and other incentives, but have failed to operate with a sense of nationalism and patriotism and re-invest their $2 trillion in profits into American jobs. In the final analysis, our nation sits at the brink of a collapse that we may never recover from in our lifetimes. We are better than this. Every generation in our nation’s history have been called to action to advance a dream called the United States of America. This one is ours. The question is: Do we have the fortitude and patriotism to meet that challenge?    

Will the Federal Reserve End Quantitative Easing?

 

By Andre Michael Eggelletion

The Fed has been as quiet as a church mouse about extending its $600 billion second round of quantitative easing (QE2) beyond its scheduled end at the bottom of the second quarter. Washington should take notice: the longer the Fed stays silent, and does not clearly signal an assurance otherwise to the markets, the greater the likelihood that we won’t see a QE3. This means the Republican controlled US congress may be forced to end the Bush administration’s tax cuts. Likewise democrats and the White House will have to swallow making budget cuts that will be painful.

Will Washington have to paddle the canoe alone for a while?

The movement towards eventual monetary restriction and governmental austerity is being reflected elsewhere as well. Except for Japan, the world’s largest central banks are putting the brakes on financial aid to their economies. Indeed, the European Central Bank has already raised interest rates for the first time in three years. The ECB is grappling with rising inflation and the need to support a Euro that has been rocked by problems associated with regional monetary integration. This move by the European Central Bank comes in spite of Portugal and Ireland signaling the need of further help. Thus we can see that governments in the EU and US are being forced to paddle their own canoe a little further out into the waters of fiscal responsibility, at least for a while.

Japan can’t stop printing money

Japan, on the other hand, is expecting at least a year of deteriorating economic conditions because of the recent earthquakes, tsunami, and nuclear meltdown. In fact, Fukushima operator TEPCO says it will likely take up to a year to stabilize, shutdown, and render the reactor's uranium safe from heating up again. For this reason Japan will likely have to continue to pump money into its economy.

What is the long-term bond market telling us?

Meanwhile, the Fed does not want to increase an already high level of anxiety over bond market conditions in the United States. The news earlier this year of Pimco’s “bond vigilante” and “deficit hawk,” Bill Gross, selling his long-term bond positions is a clear vindication of public fears over the side effects of QE2, let alone the possibility of a QE3. Investors are worried that the Fed’s quantitative easing will be inflationary, harmful to the dollar, and consign the economy to low long-term growth. These domestic fears are echoed in the view from abroad that the U.S. government is becoming problematically dysfunctional because of its growing deficits, its handling of the budget process, and partisan controversy over raising the debt ceiling. This combination could spell even more trouble for long-term bonds.

What to expect from the Fed

For these reasons, combined with historic pressure from the public over the debt, I do not expect the Fed to continue quantitative easing. At some point, however, I do expect the Fed to be forced to defend the dollar and raise interest rates, as the European Central Bank has already done. Nonetheless, I do not expect the Fed to raise interest rates until core inflation moves beyond the yearly manageable level of 1.5 percent. In addition, with the recovery far from being deeply entrenched enough to risk aborting what is really little more than liquidity driven economic growth, look for no action by the Fed on interest rates. This is what I expect to hear in Fed Chairman Bernanke’s remarks in his historic first press conference following the Fed meeting on April 27.