The Liberal Establishment Media keep singing their happy tune that the U.S. economy is improving, albeit slowly. But a liberal economist says otherwise.
Paul Krugman is a Nobel Prize-winning economist, an op-ed columnist at the New York Times, and an Obama supporter. And Paul Krugman thinks we are in a depression.
On December 11, 2011, Krugman wrote: “It’s time to start calling the current situation what it is: a depression.” Most recently, in his column of May 10, 2012, Krugman thinks matters have not improved. As he puts it: “How did we get stuck in what now can only be called a depression?”
When we think “depression,” images of the Great Depression’s soup and bread lines in the 1930s automatically spring to mind. We don’t see people lining up in those lines today, so this must mean America is not in a depression!
The reason why we don’t see those lines is because those who otherwise would be standing in those lines are getting food from the welfare state’s profusion of programs — food stamps, unemployment benefits, Aid to Families with Dependent Children, Social Security Disability, student loans…. Americans’ dependency on Government programs currently makes up as much as 35% of personal incomes.
In other words, what we have is a Hidden Depression.
Lance Roberts writes in his article on the Hidden Depression for StreetTalkLive, May 14, 2012:
Behind the mainstream media’s attention to the daily economic numbers there is a hidden economic depression running along the underbelly of the country. High levels of unemployment have kept pressures on wages even as work hours have lengthened. This, of course, is assuming full time employment. In reality many individuals are working but either part-time at one or more jobs to make ends meet or working full-time as a temporary hire at reduced wage levels. The declines in real income are evident. The burgeoning labor pool and demand for work is suppressing wages as companies opt for increasing productivity and streamlining employment to protect corporate profit margins. However, as the cost of living is affected by the rising food, energy and healthcare prices without a compensatory increase in incomes – more families are forced to turn to assistance in order to survive.
[...] Without government largesse many individuals would literally be living on the street. The chart [below] shows all the government “welfare” programs and current levels to date. The black line represents the sum of the underlying sub-components. While unemployment insurance has tapered off after its sharp rise post the financial crisis, social security, Medicaid, Veterans’ benefits and other social benefits have continued to rise. The government “safety net” is already under tremendous strain as the number of “workers” supporting the system has fallen markedly over the last 30 years.
[...] For the average person these social benefits, however, are critical to their survival as they make up more than 22.5% of real disposable personal incomes. With 1/5 of incomes dependent on government transfers it is not surprising that the economy continues to struggle as recycled tax dollars used for consumption purposes have virtually no impact on the overall economy.
More disturbing is that this huge increase in demand on “welfare” support in its various forms does not include the more than 46 million Americans which are dependent on the Supplemental Nutrition Assistance Program (SNAP), or more affectionately known as “food stamps.” Without this assistance the basic needs of survival for many families can not be met.
[...]the reality is that recycled tax dollars have been proven to generate little or no economic growth which is evident from recent GDP data. Astoundingly the total benefits in 2011 rose above $71 Billion which was a 107% increase from 2008. Yet we are told the economy is improving?
[...] As the ability to source income from traditional support programs becomes limited or exhausted – individuals can become very creative. Two of the most interesting areas that have been tapped to support basic consumption needs since the beginning of the “great recession”is student loans and disability insurance.
The number of individuals claiming disability has surged to the highest levels on record since beginning of the last recession. What is most notable, however, is when the surge of individuals claiming disability began – exactly two years from the beginning of the financial crisis. This is when the 2 years of extended unemployment insurance began to run out. [...] Today, more than 28 million Americans who are of working age have a disability – a level higher than at any other time in recorded history.
However, if you cannot claim disability why not just say you are going back to school? [...] The chart [below] shows only the federal student loan program which has surged 400% since the end of the last recession and is now the federal governments largest financial asset comprising 31% of its balance sheet. However, in reality, student loan debt in total, which including private label loan programs, has now reached $1 trillion.
[...] Even as the media trumpets that the Fed has saved the economy from a “depression,” it might just be a statistical victory at best. The government may say this is not the 1930′s where bread lines formed outside the corner soup kitchen, however, for many American’s the only difference is that they are found at the mailbox and online instead.
~End of Lance Roberts’ article~
America’s national debt now exceeds our GDP and is closing in on $16 trillion. It doesn’t take an Albert Einstein to know that our super-extended welfare state cannot continue as it is. Indeed the danger signs are already visible.
In four years, by 2016, the first of the Social Security funds — SS disability — will be in full collapse.
Brian Faler reports for The Washington Post, May 30, 2012:
“The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period. The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79% of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue.”
It is anticipated that by 2016 when the Social Security disability program runs out of cash, this will trigger a 21% cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty.
By 2017, one year after its disability program goes bust, the main Social Security program itself will be in trouble, paying out more in benefits than it takes in. In the 1950s, there were roughly 5 workers for every retiree; today, it is roughly half of that. With 78 million Baby Boomers moving into retirement, the demands on social security will be even greater in the coming years ahead. With demographics heading in the wrong direction and a much slower growth economy, the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033.