Last year, just before the election, the Labor Department released the unemployment numbers as dropping from 8.1% to 7.8%. Jack Welch famously tweeted that the number was phony and he was instantly attacked for saying so. There was quite a back and forth with many others of us saying the unemployment number made no sense. Now it turns out the numbers were fabricated for the election so Obama could say, look at what a great job I am doing. They guy who fabricated the numbers has now publicly said he did it at the instruction of higher ups.
If we can't believe the Labor Dept numbers we have a real problem since the Fed says the key number for QE is the unemployment rate. Much better number is ADP which has been redone by Mark Zandi and is now far more accurate than it once had been. Also look at participation rate and U-6 which is the real unemployment and underemployment number which is stuck around 13.5% for many months. If we now find that the unemployment rate is also subject to lies by the administration, then nothing is reliable when it comes to government stats.
Bernanke said this week that rates will be kept low for possibly several more years. Translation, we will have a slow economy for a very long time. That is likely correct. The underlying weakness of the labor market, the severe failure of our education system to turn out qualified workers in the world of the internet and math needs, and the entitlement and over regulation culture, and government takeover of key formerly private sectors of the economy like Obamacare, we are not going to have robust growth until at least after the next election in 2016. Obamacare is so disruptive to business and especially smaller companies and individuals, that uncertainty is the prevailing issue as long as this goes on.
Add to this the push now underway to force hotels, fast food and other employers of low wage people to raise wages by government fiat, is going to force labor cost much higher over the next few years, and that will harm the people who most need the job. It combined with Obamacare will force all of these companies to find ways to reduce head count, or hours worked, through more software programs to do things, more offshoring, and just working people harder which they can do since there will continue to be fewer job opportunities.
This is a major long-term structural issue which has serious implications for economic growth, income disparity, and the inability of the middle class to really get ahead on savings for retirement. This will mean the demand for more entitlements, huge fights over reducing the deficit by reducing entitlements, and the eventual weakening of the whole economy due to the allocation of far too much wealth transfer through Social Security, Medicaid and Medicare, ability to provide for defense, and other key needs.
50,000 people a week turn 65 – there is no way to pay for them the way we are currently structured. Sequester is making the deficit reduction look very good, but we all know that is not the solution to the underlying structural issues. To me this is the biggest issue the country faces over the next decade. I have little hope the current crop in Congress has the ability to make the changes we need. The issue is not will the US economy continue to improve-it probably will. But the real question is how much faster should it be improving and why is policy keeping the economy performing well below where it should be.
Some forecasters think the US is in good shape and the stock market will continue up into next year. The market may continue up, but that is ignoring the underlying risks long-term, which the markets often do. At 16.6 times earnings the S&P is likely not in bubble territory, but there is so much game playing with earnings these days that it is hard to know what the real multiple is. So stay invested in the stock market for now and just be aware it will change at some point- it always does.
As some of you know, I was one of the founders this year of a company that created an app for churches. The key feature is to assist the churches to collect donations over smart phones. I am also in the credit card processing business. I will tell you more another day. The point is, I now know a lot about developing these programs, payment systems and what it takes to develop these things to be secure and reliable. It has taken us a few months to get our little itty bitty program right and secure and to test it, and make sure it is working right. When I listen to how the administration went about Obamacare, it is really incomprehensible.
Now it turns out they have not even built 60%, or so, of the back end which takes your credit card and processes the payment. First, this is not new technology. It is elementary and well established technology. Why they are building this from scratch instead of going to the people in the business who do this every day, like First Data, and getting them to use existing secure programs is beyond me. How do you release a site that requires payment without having the payment portion fully built, tested heavily, and fully secure?
Yesterday four hacker experts said stealing your personal information from the site is easy and is being done already. There are already phony sites getting people to sign up. Last year there were $4 billion false refunds due to e filing which the IRS never checks for veracity. I got my refund in 10 days this year. How is this possible, I asked? Because it is all done by computer and nobody even looks to double check if the refund claim is legit. If you e file you can just make it all up and get a refund mailed to Russia, Bulgaria or wherever in a couple of weeks. And these people are going to run Obamacare and have all of your health and other information???? We are just starting to see the true disaster unfold that is Obamacare and nobody in the administration seems to even understand the basic issues.
They clearly lied about Benghazi it is now clear, they lied about Obamacare, they lied about the unemployment rate, and on and on. If you still believe anything this administration says, I have this bridge here in NY to sell you and some land just offshore in FL.
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