UPDATE: Top 10 U.S. Economic Issues to Monitor

It is Irresponsible to be Responsible

2012 Volume 15 Issue 1

Those who are irresponsible get rewarded.
Those who are responsible get punished.
Since it is irresponsible to be responsible in America today, we cannot rely just upon “In God we Trust.” Our destiny is in our hands, not His. God Bless America.

“It is irresponsible to be responsible.”







Photo: Mehmet Dilsiz















This is the new motto of America as I view it. Indeed, we should replace the motto on our currency from “In God we Trust” with this new motto given the anti-Judeo-Christian orientation of our current leaders. Since my article “The Top 10 U.S. Economic Issues to Monitor” was published in early 2008, we have elected Barack Obama as President of the United States. He is about to close out his current term of office. It is a big disappointment that all of those top 10 economic issues in the study have not been adequately addressed.

We are now, due to length of time and the magnitude of the problems, facing more serious negative repercussions than ever. In the almost four years of his Presidency no economic positives have been accomplished. Many economic indicators have actually deteriorated even further which now makes them a greater concern. We will address here only a few of those concerns to monitor.

Government Expenditures and Deficits

This still remains the most serious concern. Over the past four years, we have seen a rapid deterioration of the country’s finances and record levels of government debt unprecedented in the history of the Republic in this magnitude. The regional debt ceiling will be raised from $11.3 trillion to the requested $16.4 trillion. This is an increase of 45 percent during President Obama’s term. National debt has increased under Mr. Obama faster than any other president, and it increases at a rate of $4.25 billion per day. The U.S. debt as a percent of GDP is second only to Greece!

The Federal Reserve cannot, with its monetary policies, prevent this continued deterioration. It will take a coordinated effort that involves a meaningful fiscal policy. This fiscal policy is predominately the responsibility of the President. The Obama Administration has simply not addressed the situation adequately. Standard and Poor’s has stated that additional credit downgrades on U.S. debt could occur given the magnitude of the debt and continued deficits. The IMF has likewise expressed concern about these issues considering the global implications of a further U.S. credit downgrade along with the deficits since the U.S. dollar is a reserve currency.

Unemployment

Another concern is unemployment. While the Obama Administration will get this number, one way or another, below 8% (at today’s matrix: March 1, 2012) by the election, the real number is more in the neighborhood of 17% (using an historical matrix). Instead of getting America back to work with real jobs, the Obama Administration remains committed to dependency on the Federal Government and Obama. With over 50% of Americans paying no Federal taxes, we have almost slipped beyond traditional capitalistic based recovery.

Social Security and Medicare

There also has been no progress on the solvency issue of Social Security and Medicare. They still remain fiscally unsound. The issue must be faced on this government pension plan and all government pension plans from the Federal level to the state level to the local municipal level. Like Greece, there needs to be a mandated haircut of payments. Many have suggested 35% across the board. Talk has only centered on cutting Social Security, but if it is not accompanied by a similar cut in other governmental pension plans America could face anarchy. Social security recipients will not peacefully take a haircut while bloated government pensions continue. This warfare between the private sector and the public sector must not take place. We most likely will have social breakdown far more serious than we have recently seen in Greece bordering on, if not in fact, a Civil War.

Healthcare

Healthcare will find no solution within Obamacare. The only thing for sure is that senior Americans have seen their Medicare savings transferred (let’s state it correctly: confiscated) to others. The cost functions have already sky-rocked for those on Medicare, and we have yet to see what will be denied (not covered) to the elderly. With physicians rapidly dropping Medicare patients, the end game of forcing them to accept and become government workers is closer. Older Americans will be forced to pay out of their own resources for many medical needs.

Other Concerns

The issues of Concentration of Wealth, the Savings Rate, Consumption Binge, unfunded retirement plans, family debt, and current account deficit all remain. We have not yet had a rational dialog on how to solve these issues. The issue becomes far more complex when it appears that we could be on the verge of a Deflationary-Inflation! Like the Staginflation of the recent past, this should not economically exist with responsible government policy. What we could see is that all asset values deflate (such as homes and savings accounts) while all costs (such as energy, food, and healthcare) increase in cost.

Enlightened Leadership

Photo: Marilyn Nieves

America needs Enlightened Leadership. All that has occurred in the past four years is pointing the blame at someone else, and the creation of an environment of class warfare on multiple levels. Thus, one must seriously question the goals of the Obama Administration. Their failure to address these key economic issues calls into question if, given their Socialist-Communistic orientation, they are not actually intent on pushing America into an economic crisis. Only a true Greek-like or worse meltdown would allow a re-elected Obama to carry out the radical redistribution of wealth, which he and his mentors Reverend Wright and Bill Ayers believe in. The longer these economic issues remain, the more serious and devastating will be the outcome.

The Audacity of Hope appears to be social-economic-political destruction of America as we know it. Certainly, the comments of the Obama Administration about “the flaws of our Colonial document” (The U.S. Constitution and Bill of Rights) must be taken more seriously than in the past. The Obama Administration’s recent attack against Religion is of paramount concern, and the orientation of Attorney General Holder that “he will select what laws to be enforced,” brings into question our American principal of Rule of Law.

Since it is irresponsible to be responsible in America today, we cannot rely just upon “In God we Trust.” Our destiny is in our hands, not His. God Bless America.

For more on this topic, click here to read the original article, “Top 10 U.S. Economic Issues to Monitor.”

About the Author(s)

Darrol J. Stanley, DBA, is a professor of finance at the Graziadio School of Business and Management. He is well-known as a financial consultant with special emphasis on valuing corporations for a variety of purposes. He has also rendered fairness opinions on many financial transactions, and he has been engaged by corporations to develop strategies to enhance their value. He has served as head of corporate finance, research, and trading of four NYSE member firms. He likewise has been the principal of an SEC-registered investment advisor. He has completed global assignments as well as having served as Chief Appraiser of International Valuations/Standard & Poor's in Europe, Central Europe, and Russia.

Comments

Deepen Bhatt

March 15, 2012 at 9:14 pm

Sir, in the first of the ten issues, i.e. government expenditures and deficits, don’t you think Keynesian economics should apply where in times of crises, a government must spend into budget deficits in order to lift the economy? In 2008 I was taking your class in Finance and my book report was on Paul Krugman’s ‘The Return of Depression Economics’. I remember him mentioning that the $787 billion bailout money was inadequate, indeed by his own estimates it should have been closer to $1.3 trillion. Granted that the bailout hasn’t borne fruit and other determinants haven’t been positive either. But how do you stimulate a slumping economy without pumping more money into it? Thank you.


John Berardis

March 18, 2012 at 1:48 pm

Reply to Deepen Bhatt:
The initial financial crisis is long past. I am rather committed to the Austrian school but agree that government had to step in to maintain solvency of the financial system in 2008.
Krugman is a committed Keynesian, regardless of the problem being confronted. In my opinion his commentary has fallen into the political category and lacks objectivity.
Dr. Stanley makes the point that moving past the initial handling of the financial system crisis required addressing the 10 issues in his main article “Top 10 U.S. Economic Issues to Monitor”. This has not been done for the past 4 years. On the face of it, only political goals explain why.


Steven Zuckerman

March 21, 2012 at 3:50 pm

This shallow polemic has no scholarly value whatsover and is a sad commentary on your editorial policies.


Former Student

March 23, 2012 at 12:38 pm

I read the article because I am a former student of Dr. Stanley. However, I lost interest in the article when the political bashing and exaggeration began. I exit with nothing constructive to implement in to my financial strategy. I would appreciate and encourage an objective rewrite.


chris schmitt

March 25, 2012 at 9:00 pm

Two things America needs to do. One stay out of European entanglements and two get into Chinese markets if need be through gunboat diplomacy or tariffs whichever works. If we do not the political party in power will be irrelavent. The power will be squarely in Shanghai. We are in an economic war but we just did know it started 13 years ago. Dr. Stanley is correct in the unemployment data as those jobless for 24 months just fall off the radar screen. The value of the dollar has been a prime reason our trade imbalance and it is now causing the institutional meltdowns. How much money can America print? As much as it wants to ship to China, Korea, Japan and Germany they will fund the transfers with US Treasury debt issuances.


josephalbert

April 9, 2012 at 11:37 pm

Nice