Bad Unemployment Report Tangles Debt Deal
By Greg Hunter’s USAWatchdog.com
If the debt ceiling deal wasn’t complicated enough, Friday’s terrible unemployment report poured sand into the gears that ground negotiations to a halt. Nothing came out of Sunday’s meeting of Congressional leaders at the White House on resolving America’s debt crisis. Last week, the Bureau of Labor Statistics (BLS) said a paltry 18,000 jobs were created when many economists expected 4 or 5 times that amount. The “official” unemployment rate jumped up to 9.2%. That was all that was needed to polarize the Republicans and Democrats even more than they already were. One side says it does not want to raise taxes, and the other side says it does not want to cut spending. Both say it’s because of the bad economy. All will agree America is in deep financial trouble.
What a difference a day makes as the mainstream media gets it wrong–again. The day before BLS released its dismal unemployment numbers, it was widely reported that payroll company ADP said that private sector employment increased by 157,000. Good news, but hardly a dramatic turnaround. The U.S. needs in the neighborhood of 300,000 jobs a month for nearly 10 years to clear the backlog of the unemployed and underemployed. Yet, Reuters reported last Thursday, “With gasoline prices falling, automakers cranking up production and the decline in house values moderating, the dark clouds over the U.S. economy are starting to lift. The jump in private employment was the latest indication the economy was pulling out of its first-half slump, a view bolstered by better-than-expected June sales at retailers, but analysts still see only a modest recovery ahead.” (Click here to read the complete Reuters report.) How many times has the mainstream media gotten the “recovery” story wrong?
As I have been reporting for months, the economy is heading down, not up. Economist John Williams from Shadowstats.com said in his latest report government accounting gimmicks made the economy look better than reality. He says, “The weak data—now rattling the markets and consensus expectations—reflect some catch-up from the extremely poor quality of economic reporting in recent months. . . . The current intensification of the economic downturn is real, but the happier news of late-2010 simply was not as strong as earlier indicated.” And as far as the “official” unemployment number of 9.2%–forget it because it is a big fat statistical lie. The number for the real unemployment rate for 2011 right now jumped to 22.7%! (if unemployment was done the way BLS did it before 1994.) Williams goes on to report the new number of people out of work is, “the highest level seen in the current, protracted economic downturn.”
So, the economy is, without a doubt, in the tank. Now, there is talk of cutting the size of the debt reduction deal to around $2.5 trillion over the next ten years, down from the optimistic $4 trillion. That’s just $250 billion a year in reductions. With $1.5 trillion in annual budget deficits, that still leaves way more than $1 trillion in red each and every year as far as the eye can see. I know this sounds crazy, but what I just described is a rosy scenario. Interest rates are bound to rise and growth will surely be slow, if not nonexistent. And let’s not forget “Obama Care” which will, no doubt, cost way more than projected because Medicare sure did. This will all add trillions of dollars to the deficit, far beyond the $2.5 trillion in reductions.
The way I see it, the U.S. passed the financial fork in the road a long time ago. Military spending is out of control, and yet Congress does not even mention it. No one on the Sunday talk shows asked a single question about it. Bank bailouts continue, and not a word about that sacred cow either. The debt ceiling is being raised some $2.4 trillion in part to pay off the toxic mortgage debt that big Wall Street banks crammed into places like Fannie and Freddie. Bank of America was forgiven $127 billion in sour mortgage debt at the beginning of the year over at Freddie Mac, and neither party will utter a peep. When the debt ceiling passes, the other Wall Street banks that pawned off toxic mortgage-backed securities will be getting the same deal. It is outrageous there is not a single indictment of any New York banker—just more bonuses!!!
Ayn Rand once famously said, “You can ignore reality, but you can’t ignore the consequences of ignoring reality.” The consequences of reality are America is already in deep trouble, and so is the dollar. Even if a debt deal is reached in time to avoid the August 2nd deadline for debt default, the U.S. economic quagmire is profoundly negative for the dollar. Ultimately, it is the dollar’s buying power that will suffer, and as it declines, so will the standard of living for most Americans. I pray the buck does not fall off a cliff, but in today’s world, that is a definite possibility.