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SCARY STATISTICS

Chris Markowski

*****BY CHRIS MARKOWSKI -THE WATCHDOG ON WALL STREET***

Alaska, Arkansas, Connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Maine, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Utah, Vermont, West Virginia, Wyoming and Washington D.C.

What do these states and district have in common?

The number of people receiving food stamps in the United States exceeds the total population of these states and a city.

Participation in the Supplemental Nutrition Assistance Program, (food stamps) has just reached another high.  The United States Department of Agriculture stated that SNAP participation rose 607,559 from August to September totaling 47,102,765.  One out of every 6.5 people in America is enrolled, whereas in the 1970’s one out of every 50 Americans received the aid.

It gets worse…The Republican Senate Budget Committee has released a study that shows that for every person that has been added to the jobs rolls since January of 2009, 75 people have been added to the food stamp rolls.

Welfare spending per day per household in poverty is $168, which happens to be more than $137 median income per day.  If you break it down by the hour, welfare spending per hour per household in poverty is $30.60, whereas the median is $25.03.

Fiscal year 2013 is off to quite a start.  The federal government ran a deficit of $292 billion for the first two months of fiscal year 2013, which is $4.8 billion a day.  If the Feds decided to take the weekends off, we would be looking at $6.5 billion a day.  Revenue to the federal government rose by 10% to the tune of $30 billion over the same period.  Government spending just like clockwork rose to an even greater degree; up more than 16%, an increase of $87 billion.  To put these obscene numbers into proper perspective, so far this year the government has borrowed 46 cents of every dollar it has spent.

Gary Alexander, Secretary of Public Welfare, Commonwealth of Pennsylvania put together a study looking at government benefits and concluded that a single mom is better off earning $29,000 a year and collecting government benefits than earning on her own $69,000 a year.  Not exactly a productive way to run a country.  To coincide with this epic failure in government assistance, Alexander points out that, “For every 1.65 employed persons in the private sector, 1 person receives welfare assistance.”

Currently 80% of Americans are concerned about the rising deficit and debt but 69% and 78% oppose Medicaid and Medicare cutbacks.  America’s net margin in 2011 was -56% vs. -7% fifteen years ago.  Expenses of $3.6 trillion (up 131% over 15 years) exceeded revenue of $2.3 trillion (up 59%).  The largest expense driver entitlement/mandatory spending rose 145% to $2 trillion while the largest revenue driver individual income taxes rose 66% to $1.1 trillion.  What we spend as a nation on entitlements has blown up over the past forty years.  Spending on entitlements was 56% of our bill in 2011, which is up from 25% forty years ago.  Contrast that with defense spending which is now 20% down from 42% and discretionary which is now 18% down from 26%.  Conservative estimates put unfunded expenses for Social Security and Medicare at $31 trillion, which is 66% of our long-term liabilities.  Future Medicaid expenditures totals $35 trillion.

The Congressional Budget office reports that virtually 100% of the projected increase in budget deficits over the next 75 years comes from rising Social Security, Medicare and Medicaid.  The CBO projects that as the economy recovers, or if the economy recovers, revenues will exceed the historical average of 18% of gross domestic product.  Federal spending which already exceeds its historical average of 20% of GDP, is projected to rise to 40% within thirty years.

How is this sustainable?

If one were to dissect and analyze the United States in the same manner one would look at the future prospects of a company for investment purposes, the phrase “strong buy” does not come to mind.  I found it quite humorous when Warren Buffet in a recent interview talked about getting government spending down to 22% of GDP and revenues around 18%.

Does anybody in his or her right mind think that Buffet would invest in such a negative cash-flow endeavor?

I think not.  The United States needs some fundamental restructuring.

From my 2006 column, Financial Parasites Vs. Gordon Gecko

Hollywood has taken great liberties and made a great deal of money in its portrayal of the “Wall Street Master of the Universe Tycoon” character.  There was Richard Gere playing Edward Lewis in the film Pretty Woman, (a Disney film about a hooker…Gee, it’s too bad and a wonder they didn’t make an attraction about that film at the Magic Kingdom) the corporate raider who used his power and influence to dismantle companies, until the “Hooker with a Heart” convinced him to build ships.  In Bonfire of the Vanities, Tom Hanks played Sherman McCoy, the haughty bond-trader that gets into all sorts of trouble when his mistress runs down a minority with the Benz. There are plenty more but probably the most infamous of them all is Gordon Gecko of the film Wall Street.

There is a scene in Wall Street where Gecko is speaking at the shareholder meeting of Teldar Paper and is pretty upset with the company and its executives for their dismal performance…

“Now, in the days of the free market when our country was a top industrial power, there was accountability to the stockholder. The Carnegies, the Mellons, the men that built this great industrial empire, made sure of it because it was their money at stake. Today, management has no stake in the company! All together, these men sitting up here own less than three percent of the company. And where does Mr. Cromwell put his million-dollar salary? Not in Teldar stock; he owns less than one percent. You own the company. That’s right, you, the stockholder. And you are all being royally screwed over by these, these bureaucrats, with their luncheons, their hunting and fishing trips, their corporate jets and golden parachutes.  Teldar Paper, Mr. Cromwell, Teldar Paper has 33 different vice presidents each earning over 200 thousand dollars a year. Now, I have spent the last two months analyzing what all these guys do, and I still can’t figure it out. One thing I do know is that our paper company lost 110 million dollars last year, and I’ll bet that half of that was spent in all the paperwork going back and forth between all these vice presidents. The new law of evolution in corporate America seems to be survival of the unfittest. Well, in my book you either do it right or you get eliminated. In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.”

Let’s get this straight; Gordon Gecko was a liar and a cheat.  He used insider information to make money and got what he deserved in the end, however, his occupation, “corporate raider” like Edward Lewis served a purpose.  Hollywood loved using the cold-hearted Wall Street caricature in their films, depicting them as destroyers of companies, responsible for job losses, etc.  The reality is that the old-time 1980’s corporate raider had a necessary function, they served a purpose; he or she forced companies to be accountable, efficient and profitable.

Did companies get broken apart; did people sometimes lose their jobs?

Yes, however these changes were inevitable, the raiders sped up the process, cut out the cancer, and allowed companies to grow and hire again.  These raiders created shareholder wealth.

***

We need to create some taxpayer wealth.  America is losing its edge.  I recently watched the first episode of the HBO series “Newsroom.”  I was a bit struck by the opening sequence of the program, where the actor Jeff Daniels is pushed by a college professor in to answering a question regarding the greatness of America.  Daniels rants about all the other free countries that exist on the planet today, and gives a listing of his own.  “The U.S. is: 7th in literacy, 27th in math, 22nd in science, 49th in life expectancy, 178th in infant mortality, 3rd in median household income, 4th in labor force, 4th in exports.”  Daniels states, “The first step in solving any problem is recognizing that there is one.  America is not the greatest country in the world anymore.”  I don’t necessarily agree with Daniels character, but he makes a good point.  In fact using the economic numbers I have provided earlier only strengthens his argument.

Note:  Newsroom is a very left-leaning liberal fantasy show, much like the West Wing so I grew tired of it quickly in all its ridiculousness. 

We need to reorganize, regroup and restart as a nation.  We need to start with cleaning up our balance sheet.  Spending more than one brings in is not a very good business model.  Spending money on entitlement programs that are unsustainable is also a recipe for disaster, just ask General Motors.

We need to streamline and become business friendly again.  Every year we continue to drop in the world business competitive index.  More and more countries compete for capital and investment; we need to be number one on that list, not nine.  I find it amazing that as a nation we would be outraged if we came in ninth place in medals at an Olympics, yet we are ninth in the world in competitiveness and nobody cares.  Streamlining means everything and anything, from cutting wasteful programs to ridding ourselves of the millions of miles of red tape we have heaped upon ourselves by unelected regulators.  No, I am no suggesting anarchy, no regulations; I am asking for some common sense.

A good place to start would be with the tax code.  The tax code divides the nation based upon who can get themselves loopholes written into the code and who cannot.  It is the source of all political power.  Superman has the yellow sun.  Politicians have the tax code.  It is absurd that the U.S. Constitution is 4,440 words long and the tax code is over 4 million.  Second place would be the Federal Register.  We need to streamline federal regulations and do cost benefit analysis of rules being proposed and eliminate all the red tape that has been created by unelected bureaucrats.  If we are in need of new rules and regulations they should be enacted by the legislative branch of government.  Third must be entitlement reform.  Start with Social Security and Medicare and focus on making the programs sustainable for our young generations.  Ideas like raising eligibility ages, means testing, and partial privatization must be on the table.  Welfare reform is another mountain that needs to be climbed.  We have fostered a culture where being on the government rolls is social acceptable and easy.  The idea that has become fact that there are jobs “Americans won’t do” needs to be rejected and replaced with the reintroduction of the classic old-fashioned American work ethic.

I read a great piece by Oleg Atbashian discussing his experiences as a former citizen of the Soviet Union and the contradictions that the citizens joked about.

The Six Contradictions of Socialism in the USSR:

There is no unemployment—yet no one is working.

No one is working—yet the factory quotas are fulfilled

The factory quotas are fulfilled—yet the stores have nothing to sell.

The stores have nothing to sell—yet people’s homes are full of stuff.

People’s homes are full of stuff—yet no one is happy.

No one is happy—yet the voting is always unanimous.

In America I discovered that most of my old Soviet jokes didn’t work in translation.  It wasn’t so much the language difference as the fact that Americans had no first-hand knowledge of a totalitarian government, ideological uniformity, and shameless propaganda.  But that is changing.  The more America progresses back to the Soviet model, the more translatable the old Soviet jokes become.  Let’s see how an old Soviet joke can be rewritten into a new American joke.

The Six Contradictions of Socialism in the United States of America:

America is capitalist and greedy—yet half the population is subsidized.

Half of the population is subsidized—yet they think they are victims.

They think they are victims—yet their representatives run the government.

Their representatives run the government—yet the poor keep getting poorer.

The poor keep getting poorer—yet they have things that people in other countries only dream about.

They have things that people in other countries only dream about—yet they want America to be more like those other countries.

***

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