You can stick a fork in France - it's done. A majority of French voters are not willing to give up their entitlements, have taken an abrupt left turn back toward socialism, and elected as president someone who is promising a 75% tax on millionaires.
Bear in mind that France's public debt currently stands at 80% of its GDP (we're at 67% and rising fast). Their government spending equals 55% of their GDP, and their total tax burden is roughly 42% of total domestic income. They haven't had a balanced budget since 1974. But none of that matters - the citizens want more government spending.
But the thing about millionaires is that they're much more mobile than lower-income people. There are already indications that the wealthy are making plans to leave France rather than pay a 75% tax rate. This isn't a new thing for France - even back in 2006, it was estimated that, on average, one millionaire per day left the country. When Sarkozy was elected, he made a public plea for them to return and help rebuild the country. So much for that idea.
M. Hollande's election has also emboldened the Greek left, which is not at all happy about the austerity measures that had been put in place to control their own sovereign debt problem - which stood at 143% of their GDP back in 2010.
Odds are that our own next President will have to deal with the worldwide financial crisis that will result when Greece defaults on its debt, and is followed over the cliff, lemming-like, by Italy (public debt of 119% of GDP in 2010), and then France. It ain't gonna be pretty, folks, but that's what happens when a majority of voters feel that they are entitled to more than their government can afford to give them. And we're not far from that point ourselves.
Tuesday, May 8, 2012
Friday, May 4, 2012
Some Inconvenient Facts (About Unemployment)
I was fascinated by an article in this morning's local paper about how the economy was in a "virtuous cycle," and that 32 economists who were polled by the AP expect unemployment to drop below 8% by election day. This is, no doubt, cause for rejoicing at the White House, where the fondest dream is to have the reported rate below 8% by election day. But here are some inconvenient facts:
As CNBC recently reported, although 115,000 jobs were added in April, the total employment level actually dropped by 169,000. In other words, more jobs were lost than were created. How, then, did the unemployment level fall from 8.2% to 8.1%? Because another 342,000 people gave up and stopped looking for jobs, which means they are no longer counted as part of the "U-3" unemployment rate, which is the one that is always reported. The labor force participation rate fell to 63.6%, which is a 30-year low. The "Persons Not in Labor Force" number has risen to over 88 million. That's up roughly 8 million people since President Obama took office, and the trend shows no sign of leveling off.
The U-3 unemployment rate has now been above 8% for the longest continuous period of time since the Great Depression. But it would be even worse if we still counted those people who have given up and stopped looking for work. As zerohedge.com points out, government forecasting agencies, including the CBO, assume that the labor force grows by about 90,000 people every month as the US population continues to increase. Yet the U-3 number that is constantly being reported is based on an ever-shrinking labor force. The "U-6" unemployment rate, which includes people who are neither working nor looking for work - but would like to work and have looked for work sometime in the last 12 months, and also people who would like a full-time job but have had to settle for part-time work, is at about 14.5%.
Personally, I think those 32 economists were correct, and that the reported U-3 unemployment rate will be below 8% by election day...but it will not be because of economic growth and job creation - it will be because the Obama Administration will continue to lower the labor force participation number until they can report the number they want. As the old saying goes, "Figures don't lie, but liars figure."
As CNBC recently reported, although 115,000 jobs were added in April, the total employment level actually dropped by 169,000. In other words, more jobs were lost than were created. How, then, did the unemployment level fall from 8.2% to 8.1%? Because another 342,000 people gave up and stopped looking for jobs, which means they are no longer counted as part of the "U-3" unemployment rate, which is the one that is always reported. The labor force participation rate fell to 63.6%, which is a 30-year low. The "Persons Not in Labor Force" number has risen to over 88 million. That's up roughly 8 million people since President Obama took office, and the trend shows no sign of leveling off.
The U-3 unemployment rate has now been above 8% for the longest continuous period of time since the Great Depression. But it would be even worse if we still counted those people who have given up and stopped looking for work. As zerohedge.com points out, government forecasting agencies, including the CBO, assume that the labor force grows by about 90,000 people every month as the US population continues to increase. Yet the U-3 number that is constantly being reported is based on an ever-shrinking labor force. The "U-6" unemployment rate, which includes people who are neither working nor looking for work - but would like to work and have looked for work sometime in the last 12 months, and also people who would like a full-time job but have had to settle for part-time work, is at about 14.5%.
Personally, I think those 32 economists were correct, and that the reported U-3 unemployment rate will be below 8% by election day...but it will not be because of economic growth and job creation - it will be because the Obama Administration will continue to lower the labor force participation number until they can report the number they want. As the old saying goes, "Figures don't lie, but liars figure."
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