It's Time For Some Truth! Bill Clinton NEVER Balanced a Budget and NEVER Ran a Surplus

On Friday Former President Bill Clinton spoke at the dedication of a bridge at his Presidential library.  During his address he complained that Republicans try to take too much credit for his welfare reform legislation and for balancing the budget. The two parties can argue about who was behind welfare reform, but no one deserves credit for balancing the budget.  The truth is  the United States federal budget was not balanced in any of Bill Clinton's eight years as President. Not once!

The federal government has two types of debt public debt and intra-governmental debt.  Public debt is comprises securities held by investors outside the federal government, including that held by investors, the Federal Reserve System and foreign, state and local governments  Intra-governmental debt comprises Treasury securities held in accounts administered by the federal government, such as the Social Security Trust Fund.

Traditionally the annual federal government budget deficit or surplus is the cash difference between government receipts and spending, ignoring intra-governmental transfers. This is a trick as intra-governmental debt needs to be repaid just like the publicly held debt. This is also how Clinton claimed a surplus in three out of his last four years. (Source for all of the numbers below, US Treasury Direct).

Fiscal Year	End Date		Public Debt	Claimed Surplus
FY1997	09/30/1997		$3.789667T
FY1998	09/30/1998		$3.733864T	$69.2B
FY1999	09/30/1999		$3.636104T	$122.7B
FY2000	09/29/2000		$3.405303T	$230.0B
FY2001	09/28/2001		$3.339310T

These figures include the public debt but not the intra-governmental debt.  Its like paying off your American Express card while ignoring the fact that your Mastercard over the limit and months past due. Your Amex looks great but your budget is not balanced.

When the Treasury department reports the National Debt (now at $14.5 trillion) it counts both public and intra-governmental debt. Clinton's first full budget proposal in 1993 took effect in October 1993 and concluded September 1994 (FY1994) and his last started in October 2000 and ended in September 2001. Using those bookends and subtracting each year's national debt from prior years,  here's the national debt at the end of each year of Clinton Budgets.

Fiscal Year	Year Ending	National Debt	Deficit
FY1993	09/30/1993	$4.411488 trillion	$346.87 billion
FY1994	09/30/1994	$4.692749 trillion	$281.26 billion
FY1995	09/29/1995	$4.973982 trillion	$281.23 billion
FY1996	09/30/1996	$5.224810 trillion	$250.83 billion
FY1997	09/30/1997	$5.413146 trillion	$188.34 billion
FY1998	09/30/1998	$5.526193 trillion	$113.05 billion
FY1999	09/30/1999	$5.656270 trillion	$130.08 billion
FY2000	09/29/2000	$5.674178 trillion	$17.91 billion
FY2001	09/28/2001	$5.807463 trillion	$133.29 billion

To be fair, Clinton's FY 2000 budget came very close, it only added about $18 billion to the national debt, but in his last budget he was back up over $130 billion.

Despite what you may hear from Democrats on the campaign trail, there were no giant surpluses that Bush squandered (Bush did overspend, but there was no surplus to squander). The myth of Clinton balancing the budget and producing surpluses belongs with unicorns and and elves, in the realm of myths. The last president to preside over a balanced budget/surplus was Dwight Eisenhower, whose government saw surpluses of  approximately $2 billion dollars in 1956 and 57.

Neither Bill Clinton nor any Republicans deserve any credit for balancing the budget in the 1990s, because the budget was never balanced.

Morgan Stanley Warns US Nears Recession- That Was BEFORE Today's Bad Economic News

One of the world's largest investment banks, Morgan Stanley is warning that both the United States and Europe are on the precipice of a new recession and Wall Street is taking because  of recession fears.

Morgan Stanley analysts cut their outlook for global economic growth in a note last night and added the warning that both the  U.S. and Europe are “hovering dangerously close to a recession.”

The analysts lowered their global economic growth in 2011 to 3.9%, down from a previous estimate of 4.2%. They now see growth for 2012 at 3.8%, down from 4.5%.

In the developed markets, the analysts expect growth of 1.5% this year and next, down from a previous estimate of 1.9% and 2.4% respectively.

Making matters worse the Morgan Stanley news came before today's economic news which was all bad.

• The closely-watched guide to manufacturing known as the Philadelphia Index activity in the mid-Atlantic states slumped to its lowest level since March 2009.The bottom fell out of the Philadelphia Fed’s manufacturing index in August, and the details of the survey are even worse, with 47% of respondents saying new orders fell, and more than a third saying shipments decreased. 

• Sales in the heavily depressed US housing market fell unexpectedly(bad news is always unexpected), despite mortgage rates hitting their lowest level in 50 years. Sales of existing homes fell 1.5% in July, falling to an eight-month low. The National Association of Realtors ticks off a number of reasons why the housing market could get better -- including record-low mortgage rates -- but with so many homeowners underwater on their mortgage, it doesn’t look to be happening soon.

• Unemployment claims also rose sharply. The number of people claiming unemployment benefit ticked up by 9,000 last week, to a seasonally adjusted 408,000, according to the Department of Labor.

• The consumer price index, tracking the rate of inflation at the retail level, increased 0.5% in July, the biggest gain since March, the Labor Department said. Usually when there are indications of inflation, the fed reacts by raising interest rates to tighten the money supply, but if the fed did that now it would slow down the economy even further. The fed is between a rock and a hard place, normally with the economy heading toward recession they would losen the money supply.  The bottom line is the fed has two actions either one may kill the patient. 

There is one bright side President Obama says another recssion is unlikely

"I don't think we're in danger of another recession but we are in danger of not having a recovery that's fast enough to deal with what is a genuine unemployment crisis for a whole lot of folks out there and that's why we need to be doing more," he said during an interview scheduled for broadcast on the network's "Sunday Morning" program.

Whew, that makes me feel so much better, Obama has been so good at making economic predictions. Remember when he said that the stimulus would keep unemployment under 8%? Yep me too!  Allow me to suggest that Obama's predictions on the economy should be ignored.

The Signs of Recession 2.0 Continue To Grow

In posts last week we provided a list of all the economic signs that we've begun the second part of a double dip recession. This week is only half gone but signs of a downturn continue to pile up.

• Job Openings still low: The number of job openings in June was 3.1 million, essentially unchanged from May.  Openings have been relatively flat since February 2011 and remain well below the 4.4 million openings when the recession began in December 2007. There is some good news, the same report shows June layoffs/firings down slightly (2.5%) from May.

•  Productivity Down/Union Labor costs up: Nonfarm business sector labor productivity decreased at a 0.3 percent annual rate during the second quarter of 2011, the U.S. Bureau of Labor Statistics reported today, with output and hours worked rising 1.8 percent and 2.0 percent, respectively. Unit labor costs in nonfarm businesses rose 2.2 percent in the second quarter of 2011, because hourly compensation increased 1.9 percent while productivity decreased 0.3 percent. Over the last four quarters, hourly compensation increased more than output per hour, and unit labor costs rose 1.3 percent. The bottom line... businesses are paying more for less, which will lead toward lower earnings.

• Housing Prices continue to slip:  Prices of existing homes fell 2.8% in the three months ended June 30 compared with the same period in 2010, according to a report issued Wednesday by the National Association of Realtors (NAR). Even worse is the fact that the spring months are the heaviest months of the year for realtors. 

• The Federal Reserve Says so: The fed didn't actually come out an say, "look out here it comes!" but they took an unusual action which indicated that they think the economy will be in the toilet for the foreseeable future. 

The Federal Reserve announced on Tuesday that it plans to hold the benchmark interest rate at “exceptionally low levels” through at least mid-2013, breaking from the central bank’s usual less precise timelines.

With the Fed’s decision, the target interest rate will stay flat at between 0 and 0.25 percent for close to the next two years, if not longer....the Fed ....painted a grimmer picture than it did just two months ago.

Data since the committee last met in June show that economic growth this year “has been considerably slower than the committee had expected,” the statement said.

The committee, it said, “expects a somewhat slower pace of recovery over coming quarters than it did at the time of the previous meeting and anticipates that the unemployment rate will decline only gradually toward levels that the committee judges to be consistent with its dual mandate” to promote maximum employment and price stability.

And, the committee said, “downside risks to the economic outlook have increased.”

• Voter Confidence:

Job Market: Overall confidence in the U.S. job market is at its lowest level in two years. The latest Rasmussen Reports national telephone survey of American Adults shows that 50% of American Adults think the U.S. job market is worse now than it was a year ago. That's up 11 points from June and the highest negative finding since August 2009.

Economy: The Rasmussen Consumer Index, which measures the economic confidence of consumers on a daily basis, fell a bit further on Wednesday to reach another two year low. At 60.1 consumer confidence is down five points from a week ago, down eight points from a month ago and down 16 points from three months ago.

Gallup concurs: Americans' economic confidence plunged to -53 in the week ending Aug. 7, a level not seen since the recession days of March 2009. This deterioration coincided with the final wrangling over the U.S. debt ceiling and Standard and Poor's downgrade of the United States' debt rating. Economic confidence is now far worse than the -43 of two weeks ago and the -34 of a month ago. Seventy-seven percent of Americans said the U.S. economy is getting worse in the week ending Aug. 7. This is up from 71% two weeks prior and 64% a month ago. Substantially more Americans say the U.S. economy is getting worse right now than said so at this time a year ago. Fifty-five percent of Americans rated current economic conditions "poor" in the week ending Aug. 7 -- up from 49% two weeks ago. This is 10 percentage points worse than the 45% of a month ago and a year ago.

The drop in confidence means that the public will be less likely to spend money, rather they will hold on to it for the coming rainy day period.

At least one economist is predicting a second recession would be worse than the one that just passed, because the government has already used many of its recession-busting weapons.



A second recession without tools to correct it, a president who has neither the skills or knowledge to lead, and a public that is losing confidence in the economy is not very promising. Or as Bette Davis said in All About Eve, "Fasten your seat belts, it going to be a bumpy night!"

The Double Dip Recession Has Begun But Obama's Still Fiddling

Two months ago Peter Yastrow who according to CNBC is the “world’s largest LIBOR trader,” (equities, currencies, and interest rates) made a startling prediction

Yastrow,  said he is seeing ‘near panic’ with investors unwilling to punt on unpredictable commodities.

‘Interest rates are amazingly low,’ he told CNBC. ‘We’re on the verge of a great, great depression. The (Federal Reserve) knows it.’

One fund manager said 'almost every bit of data about the health of the U.S. economy has disappointed expectations recently.

While it is still unclear whether Yastrow's prediction is correct, it is clear that we have already sunk into, or at least at the brink of the second  downturn of a double-dip recession. Just take a look at the latest evidence:

• Jobs: last month unemployment rose from 9.1 to 9.2% and there is every indication that the July number released on Friday will show another rise. A Rasmussen survey of managers released today predicts layoffs are about to rise and hiring, fall.

• Consumer Income/Spending: The Dept. of commerce released the news today that consumer spending dropped 0.2 percent in June,  first decline since September 2009.Incomes rose 0.1 percent, the smallest gain since September 2010. People who are working are pocketing more of their paychecks. The personal savings rate rose to 5.4 percent of after-tax incomes, the highest level since August 2010.

• Durable Goods:Consumer spending on durable goods, a good cyclical indicator, has been falling since the end of first quarter. The main reason is the slowing pace of income increases and high level of job insecurity. 

• Manufacturing: The Institute for Supply Management, a purchasing managers group, said Monday its manufacturing index fell to 50.9 in July, down 4.4 points from June. It marked the sector's slowest growth since July 2009. Economists immediately called it "shockingly weak," "disappointing" and "not encouraging." 

• Confidence:Rasmussen Consumer Index, which measures the economic confidence of consumers on a daily basis is now 64.3, just half a point above the lowest levels of the past two years and down ten points from three months ago.  The Investor Index, which measures the economic confidence of investors on a daily basis sits at 68.9, down 17 points from three months ago.

All this is on top of the surprising news announced at the end of last week, the Gross domestic product, the best indicator of the country's  overall economic health rose at a paltry annual rate of 1.3% in the second quarter according to the  Commerce Department said, that number is likely to be revised downward. At the same time the first quarter results were downgraded from 1.9% to an almost nonexistent 0.4%. All of this indicates that the "recovery" we began to see at the end of 2010 has run out of steam.

Put it all together it seems as if our economy is in dire straights.

Today as he announced the passage of the debt ceiling compromise the President spoke about his plans for turning the economy around, an impotent mix of patent reform, maintaining tax rates for what he defines as the "middle class" and loans for construction work that will cost up to 20% more than necessary because of Obama's executive order about only using union shops or shops that give union benefits.

Once again the President is fiddling while the economy burns. Its time for Obama to cast aside his partisan political agenda and do what is necessary to help the economy.  Firstly he has to open up America's vast oil resources for drilling. This will not only put hundreds of thousands of American's to work, but it will lower energy costs freeing up both consumer and industrial money for investment.  Secondly its time to lower America's corporate tax rate, the second highest in the world. Lowing rates will encourage more businesses to remain in and invest in the United States also resulting in job growth.

Sadly that is not likely to happen under the Progressive leadership of Barack Obama.  The only possible good news coming out of the latest economic reports is the "class warfare" approach is likely to end soon.  Not because of any change of heart by the President, but because the ruined economy will leave everyone in the same, poor class.

Major Bond Fund Manager: US Is in Worse Shape Financially Than Greece

Bill Gross is one of the world's largest mutual fund managers, focusing mostly on bonds. Called "the nation's most prominent bond investor" by the New York Times, he co-founded Pacific Investment Management (PIMCO) and currently manages PIMCO's Total Return fund (the world's largest bond fund and fifth largest mutual fund) and several smaller ones. In other words this guy knows what he is talking about.

Gross spoke to CNBC today and made a startling accusation. When adding in all of the money owed to cover future liabilities in entitlement programs the US is actually in worse financial shape than Greece and other debt-laden European countries. Gross explains that while the public and the Congress is concentrating on our $14.3 trillion public debt, they are forgetting about the liabilities from entitlement programs, money guaranteed for Medicare, Medicaid and Social Security, which comes to close to $50 trillion, according to government figures. On top of all that are the debts created by the bailout of the financial system.

Taken together, Gross puts the total at "nearly $100 trillion," that while perhaps a bit on the high side, places the country in a highly unenviable fiscal position that he said won't find a solution overnight.

"To think that we can reduce that within the space of a year or two is not a realistic assumption," Gross said in a live interview. "That's much more than Greece, that's much more than almost any other developed country. We've got a problem and we have to get after it quickly."

Gross spoke following a report that US banks were likely to scale back on their use of Treasurys as collateral against derivatives and other transactions. Bank heads say that move is likely to happen in August as Congress dithers over whether to raise the nation's debt ceiling, according to a report in the Financial Times.

Apparently Wall Street is concerned that our government will not be able to negotiate a solution to our debt problem.

"We've always wondered who will buy Treasurys" after the Federal Reserve purchases the last of its $600 billion to end the second leg of its quantitative easing program later this month, Gross said. "It's certainly not Pimco and it's probably not the bond funds of the world."

Gross confirmed a report Friday that Pimco has marginally increased its Treasurys allotment—from 4 percent to 5 percent—but still has little interest in US debt and its low yields that are in place despite an ugly national balance sheet.

"Why wouldn't an investor buy Canada with a better balance sheet or Australia with a better balance sheet with interest rates at 1 or 2 or 3 percent higher?" he said. "It simply doesn't make any sense."

Gross also predicts that if Greece become even more of a crisis, it will be German Debt not that of the United States would be the safe-haven of choice for global investors.

Its time our Government woke up and smelled the coffee, its past time we got serious about our debt.

Are We Heading For A Double Dip or a Great Depression? (Democratic Demagoguery Will Help Decide)

There is the old saying, a recession is when your neighbor is out of work, a depression is when you are out of work. According to CNBC there are a lot of "yous" who are going to be unemployed in the very near future.

Peter Yastrow is the “world’s largest LIBOR trader,” according to CNBC. His trading focuses on equities, currencies, and interest rates.

Yastrow, market strategist for Yastrow Origer, said he is seeing ‘near panic’ with investors unwilling to punt on unpredictable commodities.

‘Interest rates are amazingly low,’ he told CNBC. ‘We’re on the verge of a great, great depression. The (Federal Reserve) knows it.’

One fund manager said 'almost every bit of data about the health of the U.S. economy has disappointed expectations recently

 There is no clear textbook of a depression, before the "Great Depression" any economic downturn was called a depression even if it was what we would call today a recession. A rule of thumb used by some economists for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.

To put  Mr. Yastrow's prediction in perspective the "Great Recession" we recently suffered had a GNP decline of 4.1% so in order for him to be correct we are about to go into a downturn that will be almost two and a half times worse than what we just went through.

Another fund manager told CNBC how worried he is about the economy:

The last month has been a horror show for the U.S. economy, with economic data falling off a cliff, according to Mike Riddell, a fund manager at M&G Investments in London.

"It seems that almost every bit of data about the health of the US economy has disappointed expectations recently," said Riddell, in a note sent to CNBC on Wednesday.

"US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing."

"And that’s just in the last week and a bit," said Riddell.

Its as if the economy has hit a brick wall. Over the past few weeks, unemployment, manufacturing, housing prices and durable goods orders have already begun a downward trend. Although it is by no means clear how severe the downturn will be.

Former Clinton Secretary of Labor Robert Reich said that our government is not dealing with the issues while the likely hood of a double dip continues to grow. In fact many key economic bellwether figures are already in worse shape than they were during the recession.

The US economy was supposed to be in bloom by late spring, but it is hardly growing at all. Expectations for second-quarter growth are not much better than the measly 1.8 per cent annualised rate of the first quarter. That is not nearly fast enough to reduce America’s ferociously high level of unemployment. The labour department will tell us on Friday whether the jobs situation improved in May, but there has been no sign of a surge in hiring. Nor in wages. Average hourly earnings of production and non-supervisory employees – who make up 80 per cent of non-government workers – dropped to $8.76 in April. Adjusted for inflation, that’s lower than they were in the depths of the recession.

Meanwhile, housing prices continue to fall. They are now 33 per cent below their 2006 peak. That is a bigger drop than recorded in the Great Depression. Homes are the largest single asset of the American middle class, so as housing prices drop many Americans feel poorer. All of this is contributing to a general gloominess. Not surprisingly, consumer confidence is also down.

Reich places the blame on both parties for dithering while Rome is burning. He wrote in the Huffington Post that things are about to get worse:

The only reason the economy isn't in a double-dip recession already is because of three temporary boosts: the federal stimulus (of which 75 percent has been spent), near-zero interest rates (which can't continue much longer without igniting speculative bubbles), and replacements (consumers have had to replace worn-out cars and appliances, and businesses had to replace worn-down inventories). Oh, and, yes, all those Census workers (who will be out on their ears in a month or so).

But all these boosts will end soon. Then we're in the dip.

Retail sales are already down.

What Reich a long term supporter of the Obama Administration is reluctant to say is the President's  policies are hurting rather nor helping the economy. Rather than create an environment that encourages business to grow and create jobs, it promotes an air of uncertainty, new costs and regulation. When it should be cutting tax rates to generate investment in the US economy, programs such as the new banking regulations, the oppressive EPA , anti-drilling policies and even Obamacare has increased costs and uncertainty to the point where many corporations and investors are spending their capital elsewhere.

Rather than try to work with the GOP to find a solution, our President and his progressive lemmings just try to cast aspersions on every Republican who dares to suggest a solution.  When a Republican speaks against the Democratic party call for tax increases, or suggests a way to get out of the mess that is Medicare the rhetoric begins:

Republicans are cold-blooded, capitalist pigs who want to push old people off cliffs, kill all people of color and/or gays who spend their time plotting how to take advantage of the poor and middle-class so they can line their coffers with more money than anyone deserves  (or give it to big business) and gloat brag about it at their white-supremacist militia meetings or at church (being a conservative of the Jewish faith I miss out on the last point).

If the progressives don't get of their fat arses and start working on solution rather than hysterical prose, we will find ourselves in a severe downturn. Based on the latest numbers, it is probably too late to prevent any slump but perhaps the harshness of it can still be controlled.

It is reminiscent of that old Groucho Marx routine:

Groucho: “If I gave you a million dollars, would you sleep with me?”
Woman: “A million dollars is a lot of money, and you don’t look that bad, so I guess I would consider it”
Groucho:: “Ok, but I don’t have a million dollars, would you sleep with me for $10?”
Woman: (indignantly) “What kind of girl do you think I am?”
Groucho: “We’ve already established what you are. Now we’re just negotiating the price

That's the answer to the question of whether we are heading for a recession or depression. We have already established that the economy is heading down, the question is will the Democrats stop fear-mongering and work on negotiating the size of the dip.

Consumer Confidence, Manufacturing And Housing- More Signs of Coming Recession Part Two

The Conference Board announced today that their Consumer Confidence Index fell to a six-month low of 60.8 from a revised 66 in April, a further sign that the still stagnant job market and the high gas prices based somewhat on the President's continued strangle-hold on domestic oil, is fraying the public's confidence of the United State's economic future.

The drop was a surprise (isn't it always) as economists had expected an increase to 67. Anything over a 90 is indicative of a healthy economy.

"Consumers are considerably more apprehensive about future business and labor market conditions as well as their income prospects," said Lynn Franco, director of The Conference Board Consumer Research Center. She said fears of inflation that had eased in April picked up again in May.

Adding fuel to the fire, the housing market continued its slide back into recession.

The U.S. housing market is in a “double dip” – the second wave of falling prices since the Great Recession gained steam in 2008, according to the folks who operate the S&P/Case-Shiller Home Price Index.

The index tracks 20 large metropolitan areas, including Portland, and found that current house prices are back where they were in mid-2002, on average, for those cities.

And if that isn't enough all indications are that the manufacturing sector is slowing down:

The May ISM purchasing managers index is forecast to drop to 57.5 in May from 60.4 a month earlier according to a survey of economists by Market News International.

It would mark the first time this year that the closely-watched manufacturing index has fallen below 60, though it is still well above the 50 mark that indicates growth in the sector.

HSBC economist Ryan Wang said U.S. exports, which fueled a rebound in manufacturing earlier this year, are now a key reason for the slower pace of growth in May.

"The slowdown seems to be global. That's impacting the U.S.," Wang said in an interview. "The key question is whether it turns into a more serious pullback."

Regional manufacturing indicators across the board have signaled a slowdown is on the cards. The Philadelphia Fed's manufacturing index plunged to 3.9 in May from 18.5 the previous month.

The New York Fed's Empire State report and Chicago PMI have also shown slower growth in their regions, while the Dallas Federal Reserve and Richmond Fed indexes reported contractions in May.

If this was any other President, or at least a republican one, the media would be all over the place screaming double-dip recession. With each passing day, the numbers seem to confirm that we are heading into another tailspin, which is why businesses and consumers alike seem to be keeping their money hidden in their mattresses. If this trend continues, sadly more people will find themselves out of work, and without a home.  If it continues long enough one of those jobless people will be President Obama--beginning in January 2013. Its time for the GOP to pick of the mantra of the Bill Clinton campaign "its the economy stupid!"