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Free Markets, Free People

Economic Statistics for 22 Oct 13

The shutdown-delayed Employment Situation for September was another bad one. The notional unemployment rate fell a notional -0.1% to a notional 7.2%.  That’s all faeries and unicorns. In actuality, only 148,000 net new jobs were created. Average Earnings rose 0.1%, and the average workweek was unchanged at 34.5 hours. An additional 136,000 people left the labor force during the month, helping the labor force participation rate to stay unchanged at a historical low of 63.2%. One slightly more positive note is that the civilian labor force grew by 73,000 persons, while 133,000 more persons were reported as employed in September as compared to August.  When the numbers all shake out, nothing much has changed, as my estimate of the real rate of unemployment is 11.45% in September, compared to 11.46% in August.

ICSC-Goldman is reporting some retail sales improvement, with weekly sales growth at 1.4%, and year-over-year growth of 3.2%. Redbook, conversely, is reporting a weaker 2.9% year-over-year growth rate.

Foreign demand for US securities is again showing softness, with the 6th net outflow in 7 months of $-8.9 billion for August. Who is it that finances our deficits by buying US securities again? Oh, right. Foreigners.

Construction spending rose 0.6% in August, with a year-on-year increase of 7.1%. Gains were led by residential outlays, with both multi- and single-family sectors showing strength.

The Richmond Fed Manufacturing Index rose from 0 to 1 in October, as district activity remained flat.

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ObamaCare launch is debacle of the leadership’s own making

Everything I read about this debacle that is ObamaCare’s launch is summed up pretty well in this paragraph:

In an era where Google is making self-driving cars and Amazon offers next-day delivery for just about anything, the White House plunged ahead with a system it knew to be defective and is relying on the technology of the 19th century as the fall-back. Five days before the exchanges launched, the Health and Human Services Department increased the Virginia information technology company Serco’s $114 million contract by $87 million—to help process paper applications. Are contingency plans in place to sign up via telegraph?

Pitiful doesn’t begin to describe the effort. Incompetent is too tame to encompass the leadership. Inept would be a compliment if describing the launch.

And yet we think these people, the people who designed and put this monstrosity together and thought it good enough to launch, can be trusted with our health care.


It makes one wonder about the collective intelligence of the citizenry.

P.S.  Thought you’d like to know that in the new liberal conventional wisdom, “death panels” are now a “good thing”, especially if the state has final say.

Gee, never saw that coming.

BTW, can anyone guess the greatest lie of the 21st Century to date?

“If you like your insurance and want to keep it, you can.”


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ObamaCare rollout: When you’ve lost MSNBC …

How bad is it?  Well, here’s a clip of “Morning Joe” on MSNBC.  In it, the group isn’t even polite about it – they simply point out that the administration is now engaged in lying about it’s rollout and the numbers involved.  Even they can’t find it in themselves to prevaricate about what’s been going on.  It’s a disaster and even the left can see that:

Usually, when something is so bad that it can’t be denied, even the left will finally admit it.  Here’s that point.  Two years after it was passed, two years of being able to enlist the help of world class contractors and putting a state-of-the art system together, what have we got?

The Edsel of systems.  In fact, that’s not fair to Edsel.  It at least ran.

Meanwhile, Kathleen Sebelius continues to cash her paychecks.


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Observations: The QandO Podcast for 20 Oct 13

This week, Michael and Dale discuss the government shutdown.

The direct link to the podcast can be found here.


As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

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You may be a criminal

There’s an interesting little petition at MoveOn.Org. It got some press attention, and apparently MoveOn decided to try and cool it a little bit, and stop promoting it, even though it seems popular, with almost 50,000 signatures. Anybody can set up a petition at MoveOn, and the popular ones show up on the main petitions page. But, Move on has decided that this petition “may not reflect MoveOn members’ progressive values,” so they aren’t promoting it any more. The petition is still there, though, and here is what it says:

I call on the Justice Department of the United States of America to arrest Republican Majority Leader Eric Cantor, Speaker of the House John Boehner, and other decision-making House Republican leaders for the crime of seditious conspiracy against the United States of America.

Petition Background

The House GOP leadership’s use of the Hastert Rule and H. Res 368 to shut down the government and threaten the U.S. economy with default is an attempt to extort the United States government into altering or abolishing the Affordable Care Act, and thus, is self-evidently a seditious conspiracy. Arrest the perpetrators in Congress immediately and bring them to justice.

These people are so sure that they’re right that they see no problem at all with criminalizing politics, and threatening their opponents with prison. Political opposition to their preferred political views is not mistaken, in their view, it’s criminal. They seem serious about it.

You should probably try and think through the implications of that.

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Where the money goes

Once again, it’s time to look at the state of the Federal budget, and get our heads around how well—or badly—we’re doing as a republic. The short answer is…not well. Let’s take a look at a simple chart of the last full year of federal spending and receipts, which is Fiscal Year 2012. The chart is clickable, so you can see a full-sized version.

2012 Federal Budget

We spent $3,795.55 billion, while taking in $2,469 billion in taxes and receipts. That gave us a deficit for the year of $1.326.55 billion.

Much of the spending is required by law. Mandatory spending includes Social Security, Medicare, Medicaid, and retirement benefits for the military and federal workers. In addition, interest on the national debt of $227.73 billion must also be paid, by law. Overall, $2543.51 billion in spending was legally required. That’s 67% of all federal spending.

Keen observers will note that revenues of $2,469 billion do not cover that amount of mandatory spending. So, we missed being able to pay for required spending alone by by $74.51 billion. Essentially, we borrowed money to pay one-third of the interest on the money we’ve already borrowed.

Actually, we’re pretty lucky when it comes to the whole interest payments deal, because the average interest rate on the debt is hovering at around 2%.  Every additional percentage point in that interest rate translates to about $115 billion dollars in additional interest charges every year. If interest rates were to rise to the historical average of 6%, that would add about $575 billion per year to cost of servicing the debt. That would raise the annual debt service costs from $228 billion to $803 billion. That’s about $44 billion more than we currently pay for defense. So, let’s hope for a weak, struggling economy, right? Gotta keep those interest rates at historical lows.

Anyway, the remaining spending is all discretionary, so, we chose to spend another $1,252.53 billion in discretionary spending. $759.11 billion was spent on killing foreigners. Everything else the Federal Government does—all of the executive departments, science and medical research, the Judicial branch, and giving money to heathen foreigners to try and make them our friends—cost us $492.42 billion. Giving money to the heathen foreigners—also known as foreign aid—accounted for about $38 billion for the year, or 1% of federal spending.

So, what can we extrapolate about the future? Well, we know that, even if interest rates stay steady, mandatory spending on entitlements will rise as the huge population bolus that is the Baby Boom generation begin retiring. Without either significant new taxes and/or significant entitlement cuts, re. That means that, in the not-too-distant future, revenues will not cover even the cost of mandatory entitlement spending.

We can—and probably will—ameliorate this by slashing defense. It’s what the Europeans have done, after all. There’s this huge chunk of money that goes to defense, and it gives us a defense budget larger than the defense budgets of the next 19 largest nations combined. Obviously, we will be told, we’re acting like a bunch of paranoid maniacs, so we can cut defense by at least half, and still have a huge defense establishment in world terms. So, we got that going for us.

So, that’s the situation for FY 2012. In a couple of months, we’ll get a final accounting of FY 2013, and we’ll see where we stand. Revenues were significantly higher in 2013, and spending growth doesn’t appear to have kept pace, so the deficit probably fell to somewhere in the vicinity of $800 billion.

That’s progress, I guess, though one year does not make a trend. Let’s see how much Obamacare is gonna cost us next year, assuming it isn’t delayed because of all the fail.

Anyway, please feel free to show this spending chart to your ignorant friends.

UPDATE: Here’s a more detailed look at federal spending in 2012 by government function:

Government Function Amount (billions)
Social Security $778.574
National Defense $716.300
Income Security $579.578
Medicare $484.486
Health $361.625
Net Interest $224.784
Education, Training, Employment and Social Services $139.212
Veterans Benefits and Services $129.605
Transportation $102.552
Commerce and Housing Credit $79.624
Administration of Justice $62.016
International Affairs $56.252
Natural Resources and Environment $42.829
General Government $31.763
Community and Regional Development $31.685
General Science, Space and Technology $30.991
Energy $23.270
Agriculture $19.173
Allowances $0.125
Undistributed Offsetting Receipts $-98.897
TOTAL $3,795.547

These are total spending amounts by function, and include both mandatory and discretionary spending in each line item.

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ObamaCare – let the race to the bottom begin

Doctors in New York aren’t particularly happy about ObamaCare:

New York doctors are feeling queasy about ObamaCare — and many won’t participate in the new national insurance program because they fear they’ll go broke, The Post has learned.

“ObamaCare is going to send me more patients to see and then cut the payments to provide the care — that’s what’s going to happen,” predicted Donald Moore, a primary-care doctor in Prospect Heights, Brooklyn. “I will not accept it.”

Moore claims that President Obama made a big mistake by requiring uninsured residents to obtain medical coverage from for-profit insurers through the ObamaCare health exchanges instead of through public health programs like Medicaid.

Under tremendous pressure to keep costs down and profits up, Moore said he’s concerned that commercial insurers will pay doctors less for patient visits and services than either Medicaid or Medicare.

Many doctors, he argues, won’t be able to cover their costs with such skimpy fees.

Moore scoffed, “Who’s going to sustain the losses? The insurance companies? It’s basically going to be a race to the bottom.”

No kidding.  And that’s precisely what was predicted here long ago.  Just because you have insurance doesn’t mean a doctor is going to take you on as a patient.  Result?  The same solution – packed and overcrowded emergency rooms.  Hospitals going broke treating everyone who comes through the door on the pittance their insurer pays for the treatment.

And how do doctors feel about the beginning of ObamaCare?  Well they’re not sure at all how it works:

Despite a much publicized rollout, many other doctors said they haven’t decided whether to become ObamaCare providers, because they haven’t been notified by insurers or the state about ­reimbursement rates.

“I have not spoken with anyone who has made a decision to participate in the exchanges. We simply don’t have any information about which we can make a decision,” said Dr. Paul Orloff, president of the New York County Medical Society.

“We have no idea what the reimbursements will be or what the claims-form process will entail.”

Until they are, why would any sane medical practice take on new patients?


The Medical Society of New York State is conducting a survey of doctor concerns about the program and asking whether they will accept patients who buy policies.

“There’s a real question about how many doctors will participate. Doctors are concerned about being left holding the bag,” said Sam Unterricht, an ophthalmologist and the president of the state medical society.

The clumsy launch of ObamaCare in New York and elsewhere — with computer glitches and sketchy information — worries the medical community, he said.

“It’s really shaky right now,” Unterricht said.

Spooked about the payments they’ll receive under ObamaCare, other doctors said they’ve stopped hiring staff for their medical practices.

“I’m apprehensive. I’m certainly not hiring anyone new,” said James Reilly, an obstetrician who has delivered 4,000 babies and heads the Richmond County Medical Society.

“We want to see the impact on the bottom line,” said Reilly, who has a 12-member staff and pays a hefty $200,000 annual medical-malpractice insurance premium.

Yes, the enthusiasm for the new system is, well, overwhelming, isn’t it?  Of course they want to see the impact on the bottom line – they’re small business owners.  Government is involved in price fixing and they’d like to see if they can live with the fixed price or not.  If any other entity was involved in doing what the government is involved in here, they’d have been arrested.

But hey, when government decides it can make legal for itself what is illegal for you (consider the lottery, for instance) then you know you’re on the fast road to total decline.  The sign posts are whipping by so fast, no one can even read them anymore.


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Economic Statistics for 17 Oct 13

The Housing Starts and Industrial Production reports were delayed due to the government shutdown.

Initial jobless claims fell 16,000 to 358,000. The 4-week average 11,500 to 336,500. Continuing claims fell 43,000  to 2.859 million.

The Bloomberg Consumer Comfort Index fell to a nearly seven-month low of -34.1 last week.

The general business conditions index of the Philadelphia Fed’s Business Outlook Survey fell 2.5 points to 19.8 in October.

The Fed reports that M2 Money Supply increased by $25.7billion last week.

The Fed’s balance sheet rose $54.9 billion last week, with total assets of $3.814 trillion. Reserve Bank credit increased $51.1 billion.

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