My Fellow Americans, Are You Enjoying All That New Found Wealth?

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What’s the crazy old man in Venezuela talking about, you ask? Well, according to our government, as of 8:30 am last Wednesday, all Americans (as a whole) are $300 billion dollars richer than when you went to bed the night before. But, you don’t feel any richer, do you? That’s because you’re not. You are theoretically richer because your government, in its infinite wisdom, decided to change the way they measure wealth creation,i.e., the way the nation’s GDP is calculated and they  have gone back and rewritten history as far back as 1929.

A.Z. Leader at the Inform the Pundits blog did a piece on this change in the GDP calculation yesterday. You should check it out. AZ explains that the US Bureau of Economic Analysis (BEA) has changed the way corporations account for certain costs. The change that has the biggest impact on the GDP is the way companies account for Research and Development (R&D). Now, this is not just window dressing. This change in how R&D costs are accounted for is an important change and it will have consequences. If you’re not familiar with the accounting rules for businesses, let me give you a simplified explanation.

Businesses have basically two types of expenditures. The have operating expenses, which are deducted from gross income as they occur and they have capital expenses, which are not deducted from gross income as they occur. Typically capital expenses are for fixed assets (land, buildings, vehicles, and Machinery). The accounting principle that has been historically used is that these kinds of “capital” assets have a life and so the expense should be spread over the estimated life of the asset ( a building, for example, might be given a life of thirty years). Also, historically, Research and Development expenses, which may or may not lead to development of anything useful and can hardly be described as fixed assets, have always been deducted from gross income as the expenses occur. Now, however, the BEA has decide that R&D expenses should be treated as a capital expense. How they are going to decide over what “life” R&D expenses should be amortized, I have no idea.

So, how is this accounting change for R&D going to affect businesses, the government, and Americans in general? First, understand that some businesses do no Research and Development and others spend huge sums each year. For those companies that do have R&D, their cash flow out the door for R&D will be the same; but their allowed expense deduction will be a fraction of what was actually spent. With lower deductions, profits will appear to be higher, which will make their price earnings ratios appear to be higher, which may have a positive effect on their stock price, which means upper management will make more money on their stock options; BUT, because their reported profits will be higher, Uncle Sam will claim more in taxes and the company’s total cash flow out the door will go up. That’s not likely to be very positive job creation, will it? In my opinion, middle class Americans are going to be hurt by this change in how GDP is calculated.

The reference to Americans being theoretically wealthier in the opening paragraph as a result of the BEA change to GDP calculation came from this Zero Hedge article.

We are delighted to advise Americans everywhere that you are all now making some $300 billion more than you were before the 8:30 AM revision. At least that’s what the Bureau of Economic Analysis says: according to the quarterly revision, the revized annualized Disposable Personal Income is really some $300 billion higher compared to the pre-revision number. You are all richer!

No really:

And, with tongue in cheek, the author went on to say:

What’s that? You don’t feel a dollar richer compared to this morning? That’s irrelevant: everyone is now making about 2.4% more. A revised number in an Excel spreadsheet on a government computer said so, so it must be true.

So please go out and spend this extra income that was just created in some BEA spreadsheet. Your banker overlords will thank you.

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Unless you are in the upper 29% income bracket and I hope each one of you is that fortunate, you did not suddenly feel wealthier yesterday and you had no reason to feel that way. If anything, you probably had reason to feel poorer. There is another article at Zero Hedge that explains why that may be true. It’s titled: 44 Facts About The Death Of The Middle Class That Obama Should Know. Some of the stats the author lists are eye-popping. Do give this article a good read. For now, I will share the first seven of them:

1. According to one recent survey, “four out of five U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives”.

2. The growth rate of real disposable personal income is the lowest that it has been in decades.

3. Median household income (adjusted for inflation) has fallenby 7.8 percent since the year 2000.

4. According to the U.S. Census Bureau, the middle class is taking home a smaller share of the overall income pie than has ever been recorded before.

5. The home ownership rate in the United States is the lowest that it has been in 18 years.

6. It is more expensive to rent a home in America than ever before.  In fact, median asking rent for vacant rental units just hit a brand new all-time record high.

7. According to one recent survey, 76 percent of all Americans are living paycheck to paycheck.

I’m wonder who will get the chance to write the history of this “Progressive” era,; the progressives or someone honest?

Well, that’s what I’m thinking. What are your thoughts?

Original Post: Asylum Watch

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Election 2012: What Went Wrong?

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So President Barack Obama won Election 2012. What went wrong? Some people will go small and point towards factors such as the Chris Christie and Colin Powell’s backstabbing, a chance hurricane, a weak third debate from Romney, Romney’s unforced Jeep mistake, or the power of the ground game. But I think the what went wrong is something much bigger than this.

In my post Has America Passed the Point of No Return (ie, 50.1%+ Dependency on Government)? I quotes an article by John Hinderaker over at Powerline blog calledWhy Is This Election Close?:

…On paper, given Obama’s record, this election should be a cakewalk for the Republicans. Why isn’t it? I am afraid the answer may be that the country is closer to the point of no return than most of us believed. With over 100 million Americans receiving federal welfare benefits, millions more going on Social Security disability, and many millions on top of that living on entitlement programs–not to mention enormous numbers of public employees–we may have gotten to the point where the government economy is more important, in the short term, than the real economy. My father, the least cynical of men, used to quote a political philosopher to the effect that democracy will work until people figure out they can vote themselves money. I fear that time may have come….

…I am afraid the problem in this year’s race is economic self-interest: we are perilously close to the point where 50% of our population cares more about the money it gets (or expects to get) from government than about the well-being of the nation as a whole. Throw in a few confused students, pro-abortion fanatics, etc., and you have a Democratic majority…

I sensed that this was the case last week.

In my ‘endorsement of Romney post’, I tried to address this issue because I recognized that this might be the case- but notice that at no point did I ever realistically predict on this blog that President Romney would win the election because I have had too many conversations over the past week with people who voted for Obama because they perceived that Obama transferred wealth to them that they did not earn.

Teachers, auto workers, those who refinanced home loans, green companies, union workers, farmers, road workers, government workers, those on social security, those on food stamps, those on unemployment, those on government assistance- these people now make up over 50% of the population and realize that they only get by by using the power of the state to take wealth from those who produce and earn it and transfer it to them. The takers now outnumber the givers, and slowly but surely will ever more thoroughly plunder them.

The problem with passing this point is that there is no turning back- the process actually accelerates, as those who produce wealth realize that it is much easier to take than it is to work hard and produce, and as those producers of wealth drop out of the system it becomes necessary to plunder those who remain even more.

The rich- those millionaires who President Obama has been demanding more from and those businesses who remain productive and successful- are going to be either faced with one of two options- pay an ever increasing share of the wealth that the ever increasing share of takers demands, or join the ruling elite and use the power of the state to protect themselves from the predatory state and as a thank you reward the ruling powers with greater political contributions and support.

So where does this take us? Here is my prediction, from my earlier post Three Possible Futures for America:

…(Second Scenario): America is at a crossroads and that it if President Obama and his Democratic allies (also including any Republican that supports government attack on life, liberty, and protection of property) remain in power it is likely that the damage that they will do- together with the damage they have already done- will be too great to recover from and never again will children live the same prosperous, happy, and secure lives that their parents did before them. An Obama win here will be the end of America- another four years of him remaining in power will solidify the damage already done and he will do further damage- he will ignore Congress and implement his policies of steering wealth and power to his friends, regardless of the wishes of the American people…

The America that we all know and love and grew up with is gone. You now have two options. Option one- work the same amount and steadily become more poor, less free, and have your life be less secure. Or mole your way into the political elite, bow and scrape to your political masters, buy off politicians and corrupt the system as never before to protect yourself, and realize that America is on the path towards being a despotic nation just like every other nation in the world throughout the history of the world.

Personally, this means that at some point, I will need to shut down this blog and go into hiding- a fate that I have been barely avoiding for the past year as my enemies sniff ever closer and grow ever bolder. It’s time to get real small and avoid the coming storm. Or perhaps I will fight, like my patriot forefathers have done before me, putting my family and fortunes at risk of retribution in the vain hope of fighting a futile rearguard action in the name of liberty and freedom. I guess you’ll see which it is over the next several months.

Original Post:  A Conservative Teacher

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Conservative Policies Lead Canada to Pass Increasingly Liberal America in Household Wealth

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One of my undergraduate degrees is in International Relations and through this I began to study other nations and their public policies. Over the years, I have continued to follow the politics of other nations- my post on Yulia Tymoshenko, former PM of Ukraine, is one of my most popular posts. And of course I live a short distance from the great nation of Canada, so it was with great interest that I read the story of how Canadians are now more wealthy than Americans.

Here is the important data:

...In 2011 the net worth of the average Canadian household was $363,202 compared to the average American household at $319,970. That gives the average Canadian $43,232 more than the average American… America’s “liquid (non-real estate) assets are still greater than Canadians’”… while Canada’s unemployment rate has fallen to 7.2 percent, America’s was stuck at 8.2 percent…

Although I’m no expert in Canadian politics, I will note a couple reasons why Canadian wealth seems to be holding steady or going slightly up. A lot of the credit goes to Paul Martin, who as finance minister for most of the 90s made huge budget cuts, scaling down government to 1951 levels and eventually balancing the budget. Although this led to a short term reduction in economic growth and a temporary loss in tax revenue, the economy was crucially rebalanced away from the public sector towards the private sector, soon resulting to an increase in Canada’s credit rating and rapid increases in government revenue resulting from a quickly growing economy. Martin was even responsible for lowering Canada’s debt-to-GDP ratio from a peak of seventy per cent to about fifty per cent in the mid-1990s.

Although his stint as prime minister from 2003 to 2006 was less successful, Canadian politics had been moved in a crucial way more towards conservatism and the results of this turn were very successful. After Stephen Harper’s Conservative Party took control of the government, he continued to make cuts to government, attempt to balance the budget, expand free trade, expand drilling and the energy industry, and move away from other failed liberal ideas such as green energy and increased regulations.

But the real story here is not the growth of the wealth of Canadians households, which we should applaud, but rather the sudden and stunning decline in wealth in American households, which should lead to hard and important questions. Canadian Douglas Haddow, writing in The Guardian, put it best when he wrote (source):

“Being richer than an America that has seen its blue-collar cities gutted and its middle class begin to hollow out is a rather empty sort of victory. Especially when you begin to suspect that we’re not actually winning, we’re just losing more slowly.”

Or as Rulein Hades at The Globe and Mail put it (source)-

“We’re not suddenly that much richer – our American cousins are suddenly that much poorer.”

The whole world is catching on that under President Barack Obama and the Democrats who support him in Congress, including Senator Stabenow here in Michigan, America is in decline- its middle class is being hallowed out as government policy increases the divide between rich (those who have government connections) and poor (those who do not have government connections) and government ceaselessly attacks capitalism and wealth creation. Although I have my doubts that we will ever recover to where we once were, the first step is for us to stop digging the hole, and we can do this by changing our leadership in November.

UPDATE: Let me be clear about something- Canada has not become a ‘conservative’ nation, it has instead become more conservative than it used to be and thus experienced growth (or at least less decline). Relative to its past, it has now more embraced life, liberty, and the creation and protection of property, and the results have been an increase in household wealth. Of course there are still many liberal elements in Canada, but these do not explain the growth in wealth and I would argue are in reality holding Canada back from further wealth and happiness. Conservative policies are a positive variable to the government equation, and the introduction of them into a closed system brings more prosperity and happiness to people.

Original Post:  A Conservative Teacher

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CH 2.0 Video: Wealth Creation 101

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Right Hand Man made me aware of this very good video clip about wealth creation.  I watched it and found it to be outstanding.  If you have about 10 minutes it is worth the watch.

So the next time you hear a progressive/Marxist or even a Democrat bashing our free market system and making the claim that capitalism has failed us direct them to this video. They might actually learn something. They may actually wake up and wipe the progressive sleep from their eyes and see things in a different light. Or they may not.

Liberty forever, freedom for all!

Original Post: The Current

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