The Economy is at Cliff's Edge

The news media tend to report facts about the economy distinctly and separated from each other. Here is a collection of facts brought together, to provide a clearer, fuller snapshot of the incredibly dangerous position President Obama has us in …

Foreclosures are at near record highs despite pumping billions into bail-outs for homeowners in mortgage default. In July, one in every 397 homes got foreclosure notices in the mail. That number is up 9 percent from June. Regular real estate value recovery is prohibited by this inventory glut and the further wave of foreclosures certain to come. The impending commercial real estate mess may be even bigger in dollars but isn’t much talked about.

Jobless claims just hit a 5 month high. But the harder to measure, more widespread cancer is the monster-sized number of under-employed, working fewer hours or in lesser paying jobs than they were 18 or 24 months ago. This means dramatically reduced consumer spending. And Obama is creating a permanent underclass of unemployed who opt for the endlessly extended government benefits rather than taking lesser jobs than they lost or even looking at all.

Businesses – large or small – are not hiring. In fact, business owners are doing everything possible to eliminate jobs, accelerate automation, expand out-sourcing. Obamacare, Obama’s financial “reform,” Obama’s tax plots, etc., represent myriad threats and uncertainties about the costs of employing workers. No sane business owner will create a new job except under extraordinary duress, chasing demand, and most sane business owners are cutting jobs, delaying purchasing, and hoarding cash. Big business has $2-trillion in its mattress. Less easily measured, small business may be hoarding more. Oh, and the recent profits reported by some companies, that have been heralded by the TV pundits who promote stock market investing, is a mirage; those profits were created by cost cutting, inventory reduction, delayed purchasing and not hiring. But you can only cut so far before you hit bone.

Small business, the real jobs creator, is shrinking. For example, the number of U.S. restaurants fell by 5,024 units in the 12 months ending March 31, 2010. Within that loss, independents fared worse than chains. But the big chains are investing overseas, not here. If Obama manages to push through high-speed, intimidation-driven unionization, the next wave of loss might be 25,000 units instead of 5,000. Count the jobs. Or, as soon as the successful owners get whacked with tax increases coming in 2011 (ending Bush cuts, adding Medicare surcharge, etc.), watch ‘em find a way to lop off one employee at every location. The survivors’ revenues are off too; chains ranked 101^st to 200^th in size are down by a billion dollars from prior year. Businesses have hired 5.6-million workers from ranks of unemployed, for government subsidy – exemption from the 6.2 percent Social Security payroll tax until December. But this fact makes the total unemployment picture worse, as it is clouded by government finagling. Employee dumping in January is guaranteed, too.

This past week, Obama gave a $26-billion hand-out to selected states, purportedly to save police, fire and school teacher jobs. These are states that have been fiscally irresponsible, where the size of these workforces, their pay, their benefits and their pensions have been permitted to soar beyond reason or ability to pay for them. They’ve now been rescued and rewarded with money Obama does not have. Note: this money is passing through state governments to unions. This rewarding of bad behavior and transferring wealth manufactured of public debt to unions is both pattern and precedent predictive of massive state bail-outs to come.

Fannie Mae lost another $1.2-billion in the 2^nd quarter, posting its 12^th quarterly loss in a row, and has asked for another $1.5-billion bail-out. The worst managed, hamstrung-by-unions government monopoly, the U.S. Postal Service, may lose as much as $7-billion this year and, according to Postal Service Vice President Stephen Kearney, “faces a serious risk of insolvency.” So the Postal Service is again raising prices even though the CPI has inflation at its lowest rate in 47 years. You can just smell the bail-out.

Every federally run institution is actually insolvent. The trade deficit surged in July, but nobody seems seriously interested in corrective measures. The debt is multiplying as fast as Obama can invent his next spending spree. Space does not permit continuing this list.

And what has Obama been doing in the face of this? Playing basketball with LeBron, having birthday cake with Oprah (while his wife and family take a luxury vacation in Spain), vacations, golf, suing states that demand he seriously address the illegal immigration and border crisis, and promoting the construction of a victory mosque blocks from Ground Zero. He’s a bit too busy to tackle this economy thing.

Dan Kennedy is a serial entrepreneur, adviser to business owners, sought-after speaker and author of 14 books. His latest, “Make ‘Em Laugh & Take Their Money: A Few Thoughts on Using Humor as a Speaker or Writer or Sales Professional for Purposes of Persuasion,”  contains a selection of his BMI essays. More information about Dan can be found at www.NoBSBooks.com, and a free collection of his business resources including newsletters and webinars at www.DanKennedy.com.

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