MaxedOutMama

In my less-than-enjoyable GOP debate-watching experience, I noticed that Santorum spoke with real passion and commitment about restoring jobs. We need jobs.

Now there are two types of jobs in this country. One type, on which the coasts substantially run, are generated through beyootiful flows of government money. That is why the DC metro area is doing so well jobs-wise. They are closest to the spigot. These jobs are dependent mostly on getting your paws on gobs of other people's money, and/or moving money around in gobs.

The other types of jobs are Main Street jobs, and are generated by the rolling consumption and production in the Main Street economy. They tend to vary more with industrial and consumer strength, they tend to be less prestigious, they tend to generate less income, and they employ a whole heck of a lot more people.

So if you are GOP on the coast, you are for Romney, because you are a money-mover. If you are GOP in the heartland, you've already realized that the jig is up, and you are for Santorum. The wheels of commerce in your area ride much closer to the ground, and you have had a good long look at the bare tread on those tires. You are scared and you know something's got to give but soon.

It's not exactly that those heartland people are illiberal. The vast majority of the public strongly supports the basic social welfare net, including Social Security and Medicare. No, the reason the people in the heartland think the jig is up is that they know in their bones that we are getting to the point at which we cannot sustain those programs.

This is the reality that the people in the heartland are experiencing:


Open this one up and take a good long look at it.

This is per capita real disposable personal income indexed to the trough of the recent glorious recession, which was June 2009.





Ugly facts:

• US per capita real personal income as of December was most like that of September 2006, when by the indexed measure it was 100.7 compared to December's 100.9. By December of 2006, it was at 101.7.
  
• Per capita real personal disposable income rebounded after the late glorious exercise in economic frothiness, eventually rising to a peak of 101.7 in December of 2010. It stuck there for a few months, and then resumed its fall.
• We have achieved this decline in real per capita personal disposable incomes in spite of a 2% FICA tax cut, which we cannot afford to sustain and cannot afford to end. If we did end it without instituting something on the order of the Making Work Pay tax cut, we'd immediately fall into an outright recession.
• Five years? Five years no flipping growth in real per capita personal disposable incomes?
• Our fiscal base is declining. This was amply covered in the royally depressing CBO 2012-2022 Economic Outlook just published. It's only 165 pages, which I have read twice since Friday's employment report.
  
• That report lays out some pretty dire predictions. Ignore the baseline scenario, which is constructed on the payroll tax cut ending this month, and taxes being raised hugely next year. No, you want to look at the alternative scenarios and most importantly, the trust fund section.
  

The trust fund section is in Appendix D. Click on the bookmarks. Note that the DI trust fund is now projected to be exhausted during the course of 2016, which legally means that benefits are cut about 18-22% at that point. Less than five years from now. CBO assumes that we keep paying benefits anyway. Social Security deficits are vastly increased - by 2016 they are 38 billion annually, and in 2022 they are well over 100 billion annually. DI deficits are 43 billion in 2016 but remain pretty static through the rest of the forecast. The Hospital Insurance deficit is somewhere around 30 billion in 2016 but decreases slowly after that, this being due to a number of tax/premium increases plus other scheduled changes.

In the beginning of Appendix D CBO has helpfully pointed "Golly gee, Gomer, there ain't no money in them thar trust funds. What matters is cash flow." They phrased it slightly differently:

The balance of a trust fund at any given time is a measure of the historical relationship between the related program’s revenues and spending. That balance (in the form of government securities) is an asset for the individual program, such as Social Security, but a liability for the rest of the government. The resources to redeem a trust fund’s government securities—and thereby pay for benefits or other spending—in some future year must be generated through taxes, income from other government sources, or borrowing from the public in that year. Trust funds have an important legal meaning in that their balances are a measure of the amounts that the government has the legal authority to spend for certain purposes under current law, but they have little relevance in an economic or budgetary sense.

Thus, CBO is figuring the actual budget deficit from trust operations through the period (trust funds include Highway and government/military retirement programs) and came up with this, beginning in 2011:
At the end of the period it is over 900 billion annually.

Something's going to give. CBO points this out (page 23 internally):

The WWII debt was manageable because we entered into a period of prolonged growth due to international factors and demographic factors, and because the WWII debt was not generated by structural excesses.

Our current debt is now mostly going to rise due to structural excesses. The recession "bump" is over - now social spending takes over. Needless to say the alternative scenario is not sustainable and will generate an epic crash down the road.

Oddly enough, the US public seems to know this but the politicians have not caught up.

// posted by MaxedOutMama @ 2/08/2012 07:24:00 AM