I Hate to Be a Sour Puss, But...

There are many things to look at when considering the future of the country. There are of course the job loss numbers, which are counted in the most ridiculous manor, based on those who are still collecting unemployment.

Then there is the debt to income ratio. If the U.S. Were trying to make a car loan, it would be turned down. If not for the amount owed currently, the amount being borrowed on a daily basis.

The outcome is NOT as sweet as some would have you believe.

WASHINGTON – A new congressional report released Friday says the United States' long-term fiscal woes are even worse than predicted by President Barack Obama's grim budget submission last month.

The nonpartisan Congressional Budget Office predicts that Obama's budget plans would generate deficits over the upcoming decade that would total $9.8 trillion. That's $1.2 trillion more than predicted by the administration.

The agency says its future-year predictions of tax revenues are more pessimistic than the administration's. That's because CBO projects slightly slower economic growth than the White House.

The deficit picture has turned alarmingly worse since the recession that started at the end of 2007, never dipping below 4 percent of the size of the economy over the next decade. Economists say that deficits of that size are unsustainable and could put upward pressure on interest rates, crowd out private investment in the economy and ultimately erode the nation's standard of living.

Yeah that's my favorite part too, “crowd out private investment in the economy and ultimately erode the nation's standard of living.”

If private investment is crowded out, who is going to invest? I'll give you a hint GOVERNMENT! But the government doesn't really invest it just spends tax payer money, an action which by virtue weakens the economy.

Here is an interesting view of what's going on.

Obama's tax-cutting agenda is by far the biggest contributor to those budget gaps, the CBO said. As part of his campaign pledge to protect families making less than $250,000 a year from new taxes, the president is proposing to prevent the alternative minimum tax from expanding to ensnare millions of additional taxpayers. He also wants to make permanent a series of tax cuts enacted during the Bush administration, which are scheduled to expire at the end of this year.

"Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion," wrote Douglas W. Elmendorf, the CBO director. Combined with interest payments on that shortfall, the tax cuts account for the entire increase in deficits that would result from Obama's proposals.

While this may be true to some extent, I don't think that tax cuts are the root of the problem. In a normal economic environment tax cuts would result in higher revenue for the governemnt not less. Private investment results in wealth and job creation. The problem now is that the economic environment has been so tampered with that investment is stagnant. People (and companies) are holding on to their money, because they don't know what giant piece of legislation is coming next. Remember the part about "crowd out private investment," the government can't produce wealth, it can only confiscate it, and distribute it. Of course the redistribution is not done in a market friendly way. Take GM for example. The market dictated the collapse of GM, but the government "invested" in the failing company because it was "too big to fail." I wonder how long this mentality can continue without ECONOMIC GROWTH / WEALTH CREATION?

I blame the unsustainable deficits, and the fact that Obama administration has put it's hands in the economy to the point where private investment is too risky! If the economy / wealth were still growing deficit reduction wouldn't be such an issue.

Jobless numbers are also an indicator that investment is stagnant.

Friday's better-than-expected jobs report, while cheering stock investors, hasn't taken the threat of a double-dip recession off the table.

What's Next?

Even as the jobless rate held steady at 9.7 percent and the 36,000 workers laid off in February was much less than expected, economists and investment analysts said it's still too early to discount the economy's chances of revisiting recession.

"Eight months into the much-touted recovery, the economy should be adding jobs not just losing jobs at a slower pace," University of Maryland economist Peter Morici wrote in an analysis.

"No study of economic history could yield a conclusion other than that the US economy (walks) along the precipice of a double dip recession."

Wow finaly an economist who is not under "Hopenosis"! This has been my point all along. When are there going to be job increases. Who judges success based on a reduction of negative circumstances? Either someone who is trying to be optimistic, or someone who is lying.

There were two ways to view the Friday jobs report, and Wall Street clearly chose the more optimistic.

Uncertainty over the impact of this season's brutal weather pattern had caused wide disparities in projections, with most economists around the 75,000 mark but some whisper projections as high as 200,000.

Yeah it was the weather... Yeah...

"If the best the US labor market can do is printing modestly negative headline payroll reports at this stage of the cycle, one has to wonder how these numbers will look going forward barring either an acceleration in private final demand or a collapse in productivity growth," wrote Gluskin Sheff economist David Rosenberg in his daily note.

Indeed!

Economist Michael Pento, of Delta Global Advisers in Parsippany, N.J., said the better-than-expected jobs number was boosted primarily by the 15,000 Census workers hired and does nothing to mask what he considers the near-certainty that the second half of the year will see another leg down for the economy.

"We still haven't created any jobs. They can't get any loans, their incomes are down and they face much higher taxes in 2011 and higher interest rates," Pento said in an interview. "I don't know why anybody would think anything else. If I'm wrong I'll fall down and build a shrine to John Maynard Keynes."

You don't have to be an economist to see what is happening. Investment anywhere is a bad idea right now (unless the possibility of a large loss is not a worry).

Let's put this together in very simple manor. Economic uncertainty is one thing, but with the course of the economy is dictated by the government, how is anyone supposed to know where to invest? At least when normal market forces were in control there was some predictability, now the economy hangs on just a few people's decisions. In short; until the government gets out of the way we are not going to recover. Or is that the plan?

The problem with socialism is that eventually you run out of other people’s money. -- Margaret Thatcher.

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