Investing

Start A Business? In The United States? Are You Kidding Me?

Many of you have decided that you are going to attempt to start a business in the United States today.  Many of you are still convinced that this is “the land of opportunity” and that starting a business is fairly easy.  Are you sure about that?  Are you certain that you have considered all of the headaches involved?  Are you sure that you are ready to handle the thousands of regulations that apply to your business and the mountains of paperwork mandated by various levels of government?  Are you prepared to deal with entrenched unions, predatory lawyers and rabid environmentalists?  The truth is that the business environment has never been this toxic in all of U.S. history.  So even if you are able to start a viable business that can compete with the monolithic global corporations that dominate our economy, you still might not be able to make it.  In the end, thousands upon thousands of businesses across America have been doomed to failure by ridiculous regulations, mountains of paperwork, health insurance costs, predatory lawsuits or corrupt government officials.  So do you really think that you can beat the odds?

Historically, small businesses have been the driving force behind America’s economic growth.  But today, we have made the business environment so complicated that small business owners are being completely smothered by red tape.

The following are 10 areas that anyone wishing to start a small business had better think about before moving forward.  When you really stop and think about it, the fact that anyone out there is still attempting to start small businesses in America today is absolutely amazing.

#1 Regulations

If you plan to start a business in America today, you better get a hold of a good lawyer.  In fact, if you want to be safe, you better get a small army of lawyers.  You are going to need an expert on the federal regulations that apply to your business, you are going to need an expert on the state regulations that apply to your business and you are going to need an expert on the local regulations that apply to your business.

There are going to literally be thousands of regulations that apply to any business started inside the United States today.  There is no way that you will ever be able to learn them all.  Not only that, but the truth is that your lawyers will only be aware of a small fraction of them.

Do you know what the Federal Register is?  The Federal Register is the primary source of regulations for U.S. government agencies.  In 1936, the number of pages in the Federal Register was about 2,600.  Today, the Federal Register is over 80,000 pages long.  That is just one example of how bad things have gotten.

So what do you do?  Well, just do your best to try to learn about the major regulations that apply to your business and pray that you don’t end up violating some important regulation that you are not even aware of.

#2 Paperwork

Do you know what paperwork the federal government expects you to fill out?  Do you know what paperwork the state government expects you to fill out?  Do you know what paperwork the city or the county expect you to fill out?  Do you know what paperwork you will be required to fill out when hiring a new employee?

The truth is that the paperwork burden on small businesses has multiplied in recent years.  Many small business owners are so swamped with paperwork that they barely have time to conduct their actual businesses.

For example, the U.S. Food and Drug Administration is projecting that the food service industry will have to spend an additional 14 million hours every single year just to comply with a new federal regulation that mandates that all vending machine operators and chain restaurants must label all products that they sell with a calorie count in a location visible to the consumer.

14 million hours just to comply with one ridiculous regulation?  Yes, that is how bizarre things have gotten in America in 2010.

#3 Fees And Fines

Many small business creators in America are absolutely horrified to learn of the fees and fines that they must pay before they can ever even open their doors.  Much of the time it is revenue-starved local governments that are the biggest culprits.

For example, a reader of this column named Gene recently shared his regulatory horror story with us….

Started a new business this year in AZ. Paid over $10,000 in fees for permitting, $10,000 in fee for elec hookup, $10,000 in fees for gas hook up and an extra $200 fee per month just for the “privilige” of having gas. Adding up all the fees to start our business, I don’t think we would do it again. We are now just getting to the point that we are making our bills each month, and so we are not taking a paycheck, and don’t anticipate one for at least another year. Our family has been in business for ourselves for decades,and we know what we are doing, but the rising fees caught us off guard. Cities, municipalities, counties and states are raising all fees at astronomical rates to help offset the slump in their real estate income (since banks apparently don’t have to pay real estate taxes)…I’m telling you every business person I know is on their last leg.

#4 Taxes

The United States has one of the most (if not the most) repressive business taxation scheme in the world.  As a small business owner, do you know what taxes you will be expected to pay?  It is not just federal income taxes and state income taxes that you will be paying.  In a previous article, I detailed the various forms of taxes that Americans pay each year and most of them apply to small businesses as well….

Accounts Receivable Taxes

Building Permit Taxes

Capital Gains Taxes

CDL license Taxes

Cigarette Taxes

Corporate Income Taxes

Court Fines (indirect taxes)

Dog License Taxes

Federal Income Taxes

Federal Unemployment Taxes (FUTA)

Fishing License Taxes

Food License Taxes

Fuel permit taxes

Gasoline Taxes

Gift Taxes

Hunting License Taxes

Inheritance Taxes

Inventory tax IRS Interest Charges (tax on top of tax)

IRS Penalties (tax on top of tax)

Liquor Taxes

Local Income Taxes

Luxury Taxes

Marriage License Taxes

Medicare Taxes

Payroll Taxes

Property Taxes

Real Estate Taxes

Recreational Vehicle Taxes

Road Toll Booth Taxes

Road Usage Taxes (Truckers)

Sales Taxes

Self-Employment Taxes

School Taxes

Septic Permit Taxes

Service Charge Taxes

Social Security Taxes

State Income Taxes

State Unemployment Taxes (SUTA)

Telephone federal excise taxes

Telephone federal universal service fee taxes

Telephone federal, state and local surcharge taxes

Telephone minimum usage surcharge taxes

Telephone recurring and non-recurring charges taxes

Telephone state and local taxes

Telephone usage charge taxes

Toll Bridge Taxes

Toll Tunnel Taxes

Traffic Fines (indirect taxation)

Trailer registration taxes

Utility Taxes

Vehicle License Registration Taxes

Vehicle Sales Taxes

Watercraft registration Taxes

Well Permit Taxes

Workers Compensation Taxes

#5 Health Insurance

Do you know if you will be required to provide health insurance for your new employees?  Have you familiarized yourself with the new 2,409 page health care law enough to be able to set up a health insurance program?

As a result of the new health care law, health insurance premiums for employees are shooting through the roof.  Are you going to be able to afford them?  Would it be better to have fewer employees and work each of them harder so that you won’t have to provide health coverage for as many people?

Will you be able to compete with the companies in your industry that have received waivers from having to comply with the new health care law?

In the United States, our system places the burden of providing health care on to the backs of employers.  So are you ready to handle that burden?

#6 Pensions

Will the employees of your new business need pensions?  Do you know how to set up a 401K program?  Do you know what defined benefit plans are?

You can literally sit through an entire law school course on pension law and still understand virtually nothing about the subject.  The truth is that if you plan to provide your employees with some kind of pension program you had better hire someone who can at least pretend that they know what they are talking about to set it up for you.

#7 Foreign Competition

Especially if you are creating a small business that does manufacturing, you are going to have to deal with foreign competition.

So are you going to be able to compete with the companies in your industry that pay their workers on the other side of the world less than a tenth of what you are paying to your American workers?

On the other side of the world, companies often don’t have to worry about unions, worker’s comp, health benefits, retirement benefits, nightmarish environmental regulations, crushing taxes or miles of paperwork and red tape.

Are you certain that you can compete against that?

#8 Lawsuits

The more successful you become, the more inviting of a target you are going to be for predatory lawsuits.  The truth is that the courtrooms of America are packed with thousands of them, and the lawyers that bring them are hardly ever held accountable.

All of your hard work can go down the drain in a single moment.  There are hordes of lawyers out there that make their living by filing lawsuits against small to mid-size businesses.

The truth is that if you are running a small business, you are probably doing something wrong.

Just hope and pray that a predatory lawyer does not find out.

#9 Environmentalists

Protecting the environment is a good thing.  Unfortunately, there are many radical “environmentalist” groups that consider it to be a bad thing that humans even breathe because it produces carbon dioxide.

When Audi ran their now famous “Green Police” commercial during the Super Bowl last year, most Americans laughed it off and thought that nothing like that could ever happen in America.  Well, it turns out that it is happening in America.

Not only are government environmental regulations totally nightmarish at this point, but there are a growing number of radical environmentalist groups that are running around the country filing lawsuits against whoever they feel like.

#10 The Federal Government

Are you prepared for a federal government that can literally change all the rules at any time?

Many businesses across America are frozen in their tracks at this point because they don’t know what Obama and the U.S. Congress are going to do next.

The truth is that things are getting really bizarre in this country.  For example, federal agents recently raided an Amish farm at 5 A.M. in the morning because they were selling “unauthorized” raw milk.

If federal agents will raid an Amish farmer at 5 AM in the morning over some raw milk, do you think that they are going to have any mercy on your small business when the time comes?

The America that once embraced “free enterprise” and the entrepreneurial spirit is dead and gone.

Now we are a country filled with bureaucrats and red tape from sea to shining sea.

Is it any wonder why we can’t compete with the rest of the world?

Is it any wonder why so many millions of Americans are unemployed and can’t find jobs?

In an attempt to “solve” our problems we just keep passing more “reform” which means even more rules and regulations for our businesses to follow.

Just as they are doing on an individual level, the government is attempting to watch, track and control everything that our businesses are doing.

Everywhere you look in American society today, the government is gradually tightening the steel-fisted grip that is has around everyone and everything.  Pretty soon you won’t even be able to sneeze without the government telling you how to do it correctly.

Is that really the kind of society that we all want to live in?

What a nightmare.

Do you have a horror story from starting a business in America that you would like to share?  If so, please feel free to post it in the comments section below….

Will Ron Paul Be Able To End The Fed?

Is Ron Paul finally in position to really do something about the Federal Reserve?  U.S. Representative Spencer Bachus, the chairman-elect of the House Financial Services Committee, has announced that Ron Paul will chair the domestic monetary policy subcommittee starting next month.  This puts Ron Paul in tremendous position to be able to put significant pressure on the Federal Reserve.  In previous years Ron Paul has introduced legislation to end the Federal Reserve but it never got any traction.  During this most recent session of Congress an effort by Ron Paul to have a full audit of the Federal Reserve conducted gathered quite a bit of momentum for a while, but in the end it did not get passed.  However, a very limited examination of Fed activities during the recent financial crisis was passed, and that examination has revealed some really shocking things.  With so many Tea Party members entering Congress this upcoming session there may be more momentum than ever to hold the Federal Reserve more accountable.  Ron Paul is already talking about how he is planning for a full slate of hearings on U.S. monetary policy and he has indicated that he plans to restart a push to have the Fed audited.

And why shouldn’t the Federal Reserve be fully audited?  The Federal Reserve has more power over the U.S. economy than any other institution and yet it has not been subjected to a comprehensive audit since it was created back in 1913.

So what would an audit accomplish?

Well, it would hopefully expose what is going on inside the Federal Reserve.

A very, very limited examination of Fed transactions that occurred during the recent financial crisis forced the Federal Reserve to reveal the details of 21,000 transactions stretching from December 2007 to July 2010 that totaled more than 3 trillion dollars.  It turns out that the Federal Reserve was just handing out gigantic piles of nearly interest-free cash to their friends at the largest banks, financial institutions and corporations all over the globe.

These revelations have many members of Congress wondering what else has been going on inside the Federal Reserve.

For example, U.S. Senator Bernie Sanders was absolutely outraged by these “backdoor bailouts” by the Federal Reserve….

“The $700 billion Wall Street bailout turned out to be pocket change compared to trillions and trillions of dollars in near zero interest loans and other financial arrangements that the Federal Reserve doled out to every major financial institution.”

More members of Congress than at any other time in recent memory are openly wondering if it is now time “to pull back the curtain” at the Federal Reserve.  For those who would like to see the power of the Federal Reserve greatly diminished, there should be one primary goal right now.

Expose the Federal Reserve.

The truth is that the more the American people learn about the Federal Reserve and about what it has been doing the more they disapprove.

During his farewell speech on the floor of the U.S. Senate this week, Senator Jim Bunning noted that as the American people become increasingly aware of what the Federal Reserve is doing the less they like it….

“Public awareness of what the Fed is doing is increasing while public opinion of the Fed is falling.”

Unfortunately, the views of Ron Paul and other anti-Federal Reserve members of the Tea Party movement are strongly opposed by many other members of the Republican Party.

In a recent Bloomberg Television interview, Barney Frank noted this division within the ranks of the Republicans….

“I do not believe that Ron Paul’s views on the Fed represent the views of most Republicans.”

However, there is evidence that the tide is turning with the American public.

According to a recent Bloomberg National Poll, the number of Americans that would like to see the Federal Reserve held more accountable or even completely abolished is increasing….

Asked if the central bank should be more accountable to Congress, left independent or abolished entirely, 39 percent said it should be held more accountable and 16 percent that it should be abolished. Only 37 percent favor the status quo.

Those are very exciting numbers.  A majority of Americans now want the power of the Federal Reserve to be reduced or they want it shut down entirely.

If Ron Paul is able to get a comprehensive audit of the Federal Reserve passed, the revelations that would come out of that would certainly turn public opinion against the Fed even more.

So what is so bad about the Federal Reserve?

Well, think of it as a perpetual debt machine.

Did you know that the U.S. national debt is 5,000 times larger than it was a hundred years ago?

That’s right – back in 1910, prior to the passage of the Federal Reserve Act, the national debt was only about $2.6 billion.

Since that time, our debt has been endlessly skyrocketing.

Under the Federal Reserve system, the U.S. government cannot just go out and print money.  It is actually the Federal Reserve that issues our currency.

The way our system works, whenever the U.S. government arranges for the Federal Reserve to issue more currency, more government debt is created at the same time.  In fact, as I have written about previously, all of our money is now based on debt.

No debt, no money.

What we desperately need is for the current monetary system to be scrapped.  The federal government should take back the power to issue currency and should implement a new system based on money that is debt-free.

The truth is that it is insane that any sovereign government should have to go into debt just to produce more of its own currency.

Instead, what we have under the Federal Reserve system is a money supply that will forever be expanding, a currency that will forever be deteriorating in value and a national debt that will continue to skyrocket until the entire system collapses.

Since the Federal Reserve was created in 1913, the U.S. dollar has lost over 95 percent of its purchasing power.  This continual debasement of our currency is called “inflation” and it is a hidden tax on every man, woman and child in the United States.

It is absolutely guaranteed that every single dollar that you own will go down in value over the long-term.

But the American people have come to accept that a constantly expanding national debt and a currency that is constantly losing value is the most “rational” economic system that humanity has ever come up with.

So who benefits from all this?

Well, for fiscal year 2010 the U.S. government paid out over 413 billion dollars in interest on the national debt.  In future years that number is projected to rapidly skyrocket even more.

Wouldn’t you like to be getting a nice chunk of that 413 billion dollars?

It turns out that loaning money to the U.S. government is very, very profitable.

That 413 billion dollars is money that was transferred from the American people to the U.S. government, and then transferred from the U.S. government to big financial institutions, foreign countries, and very wealthy bankers.

So what did we get in return for our 413 billion dollars?

Nothing.

Sadly, this is not just going on in the United States.  This is going on literally in almost every nation on earth.

All over the world sovereign governments are drowning in debt and so they have to drain their citizens dry so that they can meet their obligations.

In the book of Proverbs, it tells us that “the rich ruleth over the poor, and the borrower is servant to the lender.”  Americans like to think that they live in “the land of the free”, but the truth is that we have become enslaved to debt.

But even worse, we have consigned our children and our grandchildren to a lifetime of debt.  They will have to work all of their lives to pay trillions of dollars in interest on all of the debt that we have accumulated in this generation.

How would you like to be born into a world where the previous generation had racked up a $13 trillion debt that now you were expected to pay off?

There is a reason why people like Ron Paul are so obsessed with the Federal Reserve.  It is not because they don’t have anything better to do.  It is because the future of our country literally hangs in the balance.

Throughout American history, presidents, top members of Congress and leading business people have warned us about the dangers of having a central bank.  In fact, even though our young people are no longer taught this, the debate over central banking was one of the most important themes in early American history.

But we didn’t listen to the warnings.

We were convinced that we knew better.

Well, now we have an economic system that is dying and a $13 trillion debt that we are passing along to our children and to our grandchildren.

Perhaps we were not as smart as we thought we were.

America’s Message To The Rest Of The World: You Send Us Oil And Cheap Plastic Gadgets And We’ll Send You Our Wealth And Prosperity

Have you ever seen pictures of extravagant wealth from places such as Dubai or Abu Dhabi and wondered where in the world they got all that money from?  Have you ever read news stories that talk about China lending us hundreds of billions of dollars and wondered how they could possibly have so much wealth?  Well, it is actually quite simple.  They got much of it from us.  Every month, the United States buys much more from the rest of the world then they buy from us.  It is called a “trade deficit” and the United States has been running one for decades.  In essence, what is happening each month is that we are transferring somewhere between 40 to 50 billion dollars of our national wealth to the rest of the globe and they are sending us oil and cheap plastic gadgets that Americans greedily consume.  By the end of the year we have usually transferred somewhere around a half trillion dollars of our national wealth out of the country for good.

In order to maintain our standard of living, the U.S. government has been going to the countries we have been sending our wealth to and has been begging them to loan us massive amounts of their dollars.  At this point the U.S. government literally owes trillions of dollars to the rest of the world.

Scoffers say that it is just a bunch of “paper money” that we are sending them, but the truth is that it is hundreds of billions of dollars of “paper money” that is not in the hands of average Americans.  We have sent massive amounts of our wealth and prosperity overseas and it isn’t coming back unless we borrow it.

Today there are dozens and dozens of U.S. cities such as Detroit, Michigan and Camden, New Jersey that are turning into post-industrial hellholes while thousands of gleaming new modern factories are going up all over China.  42.9 million Americans are now on food stamps (a 16 percent increase in just one year) while the oil sheiks of the Middle East build opulent palaces that are extravagant beyond belief.

Most Americans do not realize how serious the U.S. addiction to foreign oil really is.  We are constantly being drained of our wealth by the oil powers of the Middle East.

So what are they doing with all of this money?  Well, let’s take a look at just a couple of examples.

Have you ever heard of the Emirates Palace? It is located in the United Arab Emirates and it cost approximately 3.8 billion dollars to build. The following is how one writer for a major UK newspaper described it after a visit….

The Emirates Palace has so many biggest and best boasts, it could have its own chapter in the Guinness Book of Records, but the atrium is the whistles and bells, the jaw-dropping big daddy of them all — 60 metres high, 42 metres wide and topped with the largest dome in the world. Staff need golf carts to negotiate their way around it. It is decorated with 13 colours of marble, ranging from sunrise yellow to sunset red (to reflect the many hues of the desert), and lots and lots and lots of gold: 6,040 square metres of gold leaf cover the largest gilded expanse ever created in one building. It’s even in the food. I ate gold leaf on my chocolate cake. Apparently, it aids digestion.

In Dubai, there is so much wealth that they pretty much build whatever they can dream up.  For example, in Dubai you will find the largest “indoor ski resort” in the world.  One travel site describes it this way….

When one thinks of Arabia, let alone Dubai, one likely pictures an arid desert of heat and sun. One does not think of snow skiing. Yet, that is what one can do at Ski Dubai, arguably the largest indoor ski resort in the world. The resort features 22,500 square meters of ski area. The heavily insulated building is kept at 30.2 degrees Fahrenheit during the day and 21.2 degrees Fahrenheit throughout the night, which is when the snow is generated. The resort features five ski runs and is open year round.

But it is not just the Middle East that is getting incredibly wealthy off of the United States.  In a recent article entitled “China #1, United States #2? 25 Facts That Prove The Transition Is Really Happening” I detailed how China is in the process of surpassing the United States economically.

Over the past 25 years, the U.S. trade deficit with China has soared into the stratosphere.  In 1985, the U.S. trade deficit with China was 6 million dollars for the entire year.  In the month of August alone, the U.S. trade deficit with China was over 28 billion dollars.

For many Americans this can be difficult to comprehend.  For a moment, imagine a giant map of the world and that there is a gigantic pile of money in China and a gigantic pile of money in the United States.  Then start taking 20 billion dollars from the pile of the United States and give it to China every single month.

After a while, what is going to happen?

Well, the United States is going to be a lot poorer and China is going to be a lot wealthier.

As we have become poorer, it has been harder and harder to maintain our very high standard of living.

The U.S. government has been borrowing larger and larger sums of money from the rest of the world in order to “stimulate” our economy, but in the process we are piling up horrific amounts of debt.

The national debt of the United States is now 13 times larger than it was just 30 years ago.

If we did that again over the next 30 years, we would have a national debt of approximately $170 trillion by the year 2040.

Of course that will never happen.

Why?

Well, because the entire financial system would collapse and we would be forced into national bankruptcy long before we ever got into that much debt.

The truth is that we are already on the verge of total economic collapse.  In fact, CNS News is reporting that retiring U.S. Senator George Voinovich believes that the collapse could happen at any time now….

“I think we are on the edge of it right now. I really do,” said Voinovitch. “If we don’t do something about dealing with the debt and the budgets that aren’t being balanced for as far as your eye can see, we are over the cliff. We are on thin ice right now. And I don’t think that we can wait. We need to move forward. We need to move forward for our own benefit, but we also need to move forward because the world is watching us right now.”

Indeed, the world is watching us, and they are getting tired of financing our runaway debt.

Just this week there have been some very troubling signs.  For example, U.S. Treasuries just experienced their biggest two-day sell-off since the collapse of Lehman Brothers.

The rest of the world was deeply troubled when the Federal Reserve announced another round of quantitative easing.  Federal Reserve Chairman Ben Bernanke had promised that the Fed would not monetize U.S. government debt, but now that is exactly what is happening.  The rest of the world is less than thrilled by this.

In addition, many economists are warning that the tax cut deal that Barack Obama and the Republicans have agreed to will increase U.S. government debt even more.  In reaction to the deal, economist Nouriel Roubini recently posted the following message on his Twitter account….

“Obama-GOP tax deal costs $900 billion over two years. US kicking the can further down the road. Are bond vigilantes starting to wake up?”

A recent article on CNBC described what these “bond vigilantes” are….

Bond vigilantes – the term was coined by economist Ed Yardeni in the 1980s to describe major investors who demand higher yields to compensate for the perceived risks resulting from large deficits – could derail the country’s precarious recovery, some economists say.

The truth is that the U.S. government is not going to be able to borrow endless amounts of very cheap money forever.

At some point the U.S. is either going to face much higher interest rates on government debt or the Federal Reserve is going to have to step in and monetize the vast majority of all new government debt.

Either alternative will be absolutely disastrous.

Most Americans just assume that the wealth and prosperity that we have enjoyed for so many decades will always be with us.  But that is not the case.  We have been exporting our national wealth and our national prosperity so that we could fill up our shopping carts with cheap foreign-made plastic crap and so that we could fill up our cars with foreign oil.  It has been a fun ride while it lasted, but with each passing day a national financial implosion draws ever closer.

An economic nightmare is coming.

You better get ready.

Why Democrats And Republicans Are Both Wrong About The Bush Tax Cuts

All over the Internet, Republican pundits are declaring that extending the Bush tax cuts will save the economy and Democrat pundits are declaring that ending the Bush tax cuts will save the economy. Well, you know what? Nothing will save the U.S. economy. The U.S. government is going to continue to drown in a sea of debt no matter what happens with these tax cuts. State and local governments are also going to continue to drown in a sea of debt. Thousands of factories and millions of jobs are going to continue to be shipped overseas every single year. America is going to continue to transfer tens of billions of dollars of its national wealth to foreign nations every single month. Nothing that the Republicans and Democrats are debating right now is going to do a thing to alter the fundamental problems that the U.S. economy is facing.

Not that I personally do not like tax cuts. I would like my own personal income taxes to be cut down to zero percent please. I will take as many tax cuts as I can personally get.

And it is absolutely undeniable that the federal government is already handed way, way, way more money than it ever should need. Starving the federal monster of cash is a good thing. We need a much, much, much smaller federal government. But the odds of us ever returning to the kind of limited central government envisioned by our Founding Fathers is somewhere between slim and none and slim just left the building.

So aren’t less taxes always good? Well, not necessarily. You see, the federal government is planning to spend much more money in the years ahead. When you combine significant tax cuts with huge increases in spending you get lots more debt.

Extending the Bush tax cuts (and throwing in a few extra ones) will help the U.S. economy in the short-term, but without accompanying brutal spending cuts it will make our long-term debt problems even worse.

But most of our politicians don’t think about the long-term. Most of them just want the economy to turn around in the short-term so that they can get re-elected.

For example, Barack Obama is not completely stupid. He realizes that these tax cuts are probably his best shot at a short-term economic boost. If the economy starts to get back to “normal”, it may be just enough to get him another term in office.

And self-preservation is what most U.S. politicians are most interested in.

Meanwhile, we are heading for a national debt nightmare that threatens to destroy our financial system and plunge us into national bankruptcy.

But if our politicians did attempt to make the brutal spending cuts that would be necessary to balance the budget, most Americans would start screaming bloody murder. The truth is that the American people have become dependent on the government and they like getting their checks, their handouts and their government contracts.

Okay, so what will this deal that Obama has made with the Republicans actually do?

Well, it will extend most of the Bush tax cuts for two years (right up through the 2012 presidential election). The following are some of the details….

*All income levels will continue to be taxed at the lower rates instituted by the original Bush tax cuts. That means that the highest rate will remain at 35 percent.

*Barack Obama claims that extending these tax cuts will save the average American family approximately $3,000 next year.

*The 15 percent rate on capital gains and dividends will be continued.

*As part of the package, Republicans have agreed to a 13 month extension of long-term unemployment benefits.

*One new tax cut included in the deal is a reduction of the Social Security payroll tax by two percentage points for one year. So for a year U.S. workers will be paying just 4.2 percent instead of 6.2 percent.  Barack Obama believes that Americans will save $120 billion next year from this tax cut alone. For the average American family, it will mean that they will have approximately an extra $1000 in their wallets.

*The existing $1,000 child tax credit will be extended for the next two years.

*Another tax cut that is new would allow U.S. businesses to immediately expense all business investments in 2011. The Obama administration is claiming that this tax cut would be the biggest “temporary investment incentive” in American history.

*A compromise was reached on the estate tax. There will be an estate tax exemption of 5 million dollars per person and the maximum rate will be 35 percent.

So how much will all of this cost?

Well, all over the Internet the Democrats and the Republicans are arguing over figures.

One figure that is being thrown around quite a bit is $900 billion over two years.

But what is another $900 billion when we are already caught in a death spiral of government debt?

The IMF was already projecting that federal government debt was going to exceed 100 percent of GDP by 2015.

So how soon will we get there now?

Today, our national debt is more than 13 times larger than it was just 30 years ago….

So can’t we just “grow” our way out of this debt?

Not a chance.

Reducing taxes and increasing government spending will both stimulate the economy in the short-term, but both of them will always cause government debt to go up.

The sad truth, as I have written about previously, is that it is now mathematically impossible to pay off the U.S. government debt.

If you took every dollar out of every single wallet, out of every single mattress and out of every single U.S. bank and sent it to the government you wouldn’t even make that big of a dent in the national debt.

So can’t the U.S. government just go out and create more money and solve the problem?

No.

You see, under our system the creation of more money is also the creation of more debt.

As long as the Federal Reserve system exists, the U.S. federal government will be trapped inside a perpetual debt machine.

The best we can hope for is to slow the expansion of government debt down to a reasonable level.

But as I explained in a previous article, it is extremely unlikely that the U.S. government will ever have a balanced budget ever again.

The U.S. government currently has to borrow approximately 41 cents of every dollar that it spends.  The spending cuts that would be required to slash that much out of the federal budget would be beyond draconian.

Sadly, the truth is that even the really bad official budget deficit figures severely understate the extent of the crisis that we are facing.

If the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the annual U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion.

So anyone who thinks that we are just a “tweak” or two from fixing U.S. government finances is living in a world of delusion.

Unfortunately, the years ahead look downright apocalyptic.  After analyzing Congressional Budget Office data, Boston University economics professor Laurence J. Kotlikoff concluded that the U.S. government is facing a “fiscal gap” of $202 trillion dollars.

But the American people don’t want to hear this.  The American people don’t want to hear that there are serious consequences for running up the biggest debt in the history of the world.  The American people just want to be told that there are smart people working on the problem and that they are on the verge of “fixing” it.

But it is all a lie.  We can keep trying to “kick the can down the road” for a while longer, but eventually a day of reckoning is going to come and it is going to be painful beyond imagination.

Somehow we have the arrogance to believe that our children and our grandchildren should pay back all of the debt that we have accumulated.  What we have done to future generations is beyond criminal.

America has enjoyed the greatest party in the history of the world, but eventually it is going to be time to turn out the lights.

For now, however, the Republicans and the Democrats are busy trying to figure out ways that they can keep the party going for a little while longer.

Perhaps they can just slash taxes all the way to zero and the federal government can just borrow all of the money that it needs.  At least that way we wouldn’t be endlessly pouring our own money into the financial black hole called the U.S. government.

Say What? 30 Ben Bernanke Quotes That Are So Stupid That You Won’t Know Whether To Laugh Or Cry

Did you see Federal Reserve Chairman Ben Bernanke on 60 Minutes the other night?  Bernanke portrayed the Federal Reserve as the great protector of the U.S. economy, he claimed that unemployment would be 15 percent higher if the Federal Reserve had sat back and done nothing during the financial crisis and he even started laying the groundwork for a third round of quantitative easing.  Unfortunately, 60 Minutes did not ask Bernanke any hard questions and did not challenge him on his past record.  It was almost as if they considered Bernanke to be above criticism.  But someone in the mainstream media should be taking a closer look at this guy and his record.  The truth is that the incompetence that Bernanke has displayed over the past few years makes the Cincinnati Bengals look like a model of excellence.  Bernanke kept insisting that the housing market was stable even while it was falling apart, he had absolutely no idea the financial crisis was coming, he declared that Fannie Mae and Freddie Mac were in no danger of failing just before they failed, his policies have created asset bubble after asset bubble and the world financial system is now inherently unstable.  But even with such horrific job performance, Barack Obama and leaders of both political parties continue to publicly praise Bernanke at every opportunity.  What in the world is going on here?

Not that Bernanke is solely responsible.  His predecessor, Alan Greenspan, was responsible for many of the policies that have brought us to this point.  In addition, most of the other presidents of the individual Federal Reserve banks across the United States seem just as clueless as Bernanke.

But you would think at some point someone in authority would be calling for Bernanke to resign.  Accountability has to begin somewhere.

The Bernanke quotes that you will read below reveal a pattern of incompetence and mismanagement that is absolutely mind blowing.  Looking back now, we can see that Bernanke was wrong about almost everything.

But the mainstream media and our top politicians keep insisting that Bernanke is the man to lead our economy into a bright future.

It is almost as if we have been transported into some bizarre episode of “The Twilight Zone” where the more incompetence someone exhibits the more they are to be praised.

The following are 30 Ben Bernanke quotes that are so stupid that you won’t know whether to laugh or cry….

#1 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

#2 (On 60 Minutes in response to a question about what would have happened if the Federal Reserve had not “bailed out” the U.S. economy) “Unemployment would be much, much higher. It might be something like it was in the Depression. Twenty-five percent.”

#3 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

#4 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

#5 (When asked directly during a congressional hearing if the Federal Reserve would monetize U.S. government debt) “The Federal Reserve will not monetize the debt.”

#6 “One myth that’s out there is that what we’re doing is printing money. We’re not printing money.”

#7 “The money supply is not changing in any significant way. What we’re doing is lowering interest rates by buying Treasury securities.”

#8 (November 21, 2002) “The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost.”

#9 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

#10 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

#11 “Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.”

#12 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

#13 (October 31, 2007) “It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions.”

#14 (On the possibility that the Fed might launch QE3) “Oh, it’s certainly possible. And again, it depends on the efficacy of the program. It depends on inflation. And finally it depends on how the economy looks.”

#15 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

#16 (January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”

#17 “I wish I’d been omniscient and seen the crisis coming.”

#18 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.  The vast majority of mortgages, including even subprime mortgages, continue to perform well.  Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

#19 “The GSEs are adequately capitalized. They are in no danger of failing.”

#20 (Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

#21 (September 23rd, 2008) “My interest is solely for the strength and recovery of the U.S. economy.”

#22 “Economics has many substantive areas of knowledge where there is agreement but also contains areas of controversy. That’s inescapable.”

#23 “I don’t think that Chinese ownership of U.S. assets is so large as to put our country at risk economically.”

#24 “We’ve been very, very clear that we will not allow inflation to rise above 2 percent.”

#25 “…inflation is running at rates that are too low relative to the levels that the Committee judges to be most consistent with the Federal Reserve’s dual mandate in the longer run.”

#26 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

#27 “Not all information is beneficial.”

#28 “The financial crisis appears to be mostly behind us, and the economy seems to have stabilized and is expanding again.”

#29 “Similarly, the mandate-consistent inflation rate–the inflation rate that best promotes our dual objectives in the long run–is not necessarily zero; indeed, Committee participants have generally judged that a modestly positive inflation rate over the longer run is most consistent with the dual mandate.”

#30 (October 4, 2006) “If current trends continue, the typical U.S. worker will be considerably more productive several decades from now. Thus, one might argue that letting future generations bear the burden of population aging is appropriate, as they will likely be richer than we are even taking that burden into account.”

Jobless Recovery?: 25 Unemployment Statistics That Are Almost Too Depressing To Read

Guess what?  Unemployment is up again!  That’s right – even though Wall Street is swimming in cash and the Obama administration is declaring that “the recession is over”, the U.S. unemployment rate has gone even higher.  So are you enjoying the jobless recovery?  The truth is that there should not be any talk of a “recovery” as long as the “official” unemployment rate remains at around 10 percent and the “real” unemployment continues to hover around 17 percent.  There are millions and millions of American families that are living every day in deep pain because of the lack of jobs.  Meanwhile, there are all of these economic pundits that are declaring that we are just going to have to realize that chronic unemployment is the “new normal” and that if other nations can handle high rates of unemployment then so can we.  The most optimistic economists are projecting that we can perhaps get the unemployment rate down to around 8 percent by 2012.  On the other hand, there are many economists that are convinced that things are going to get even worse.

If you have never been unemployed, it can be hard to describe how soul-crushing it can be.  As the bills pile up and the financial obligations mount, the pressure can be debilitating.  Being unemployed for an extended period of time can easily plunge you into depression and grind your self-worth away to almost nothing.  After getting rejected dozens of times (or even hundreds of times), many Americans simply give up.  There are countless marriages and countless families that are being ripped to shreds by financial pressure even as you read this.  When the money is gone and there is no job in sight it can be a really, really empty feeling.

Of course there is a whole lot more to life than money, but it can be difficult to tell that to someone who can barely sleep at night because of the intense pressure to find a job.

The vast majority of Americans have at least one family member or close friend that is looking for work right now.  Times are really, really tough and unfortunately the long-term outlook is very bleak.  We should have compassion on those who are out of work right now, because soon many of us may join them.

The following are 25 unemployment statistics that are almost too depressing to read….

#1 According to the Bureau of Labor Statistics, the U.S. unemployment rate for November was 9.8 percent.  This was up from 9.6 percent in October, and it continues a trend of depressingly high unemployment rates.  The official unemployment number has been at 9.5 percent or higher for well over a year at this point.

#2 In November 2006, the “official” U.S. unemployment rate was just 4.5 percent.

#3 Most economists had been expecting the U.S. economy to add about 150,000 jobs in November.  Instead, it only added 39,000.

#4 In the United States today, there are over 15 million people who are “officially” considered to be unemployed for statistical purposes.  But everyone knows that the “real” number is even much larger than that.

#5 As 2007 began, there were just over 1 million Americans that had been unemployed for half a year or longer.  Today, there are over 6 million Americans that have been unemployed for half a year or longer.

#6 The number of “persons not in the labor force” in the United States recently set another new all-time record.

#7 It now takes the average unemployed American over 33 weeks to find a job.

#8 When you throw in “discouraged workers” and “underemployed workers”, the “real” unemployment rate in the state of California is actually about 22 percent.

#9 In America today there are not nearly enough jobs for everyone.  In fact, there are now approximately 5 unemployed Americans for every single job opening.

#10 According to The New York Times, Americans that have been unemployed for five weeks or less are three times more likely to find a new job in the coming month than Americans that have been unemployed for over a year.

#11 The U.S. economy would need to create 235,120 new jobs a month to get the unemployment rate down to pre-recession levels by 2016.  Does anyone think that there is even a prayer that is going to happen?

#12 There are 9 million Americans that are working part-time for “economic reasons”.  In other words, those Americans would gladly take full-time jobs if they could get them, but all they have been able to find is part-time work.

#13 In 2009, total wages, median wages, and average wages all declined in the United States.

#14 As of the end of 2009, less than 12 million Americans worked in manufacturing.  The last time that less than 12 million Americans were employed in manufacturing was in 1941.

#15 The United States has lost at least 7.5 million jobs since the recession began.

#16 Today, only about 40 percent of Ford Motor Company’s 178,000 workers are employed in North America, and a big percentage of those jobs are in Canada and Mexico.

#17 In 1959, manufacturing represented 28 percent of U.S. economic output.  In 2008, it represented 11.5 percent.

#18 Earlier this year, one poll found that 28% of all American households had at least one member that was looking for a full-time job.

#19 In the United States today, over 18,000 parking lot attendants have college degrees.

#20 The United States has lost a staggering 32 percent of its manufacturing jobs since the year 2000.

#21 As the employment situation continues to stagnate, millions of American families have decided to cut back on things such as insurance coverage.  For example, the percentage of American households that have life insurance coverage is at its lowest level in 50 years.

#22 Unless Congress acts, and there is no indication that is going to happen, approximately 2 million Americans will stop receiving unemployment checks over the next couple of months.

#23 A poll that was released by the Pew Research Center back in June discovered that an astounding 55 percent of the U.S. labor force has experienced either unemployment, a pay decrease, a reduction in hours or an involuntary move to part-time work since the economic downturn began.

#24 According to Richard McCormack, the United States has lost over 42,000 factories (and counting) since 2001.

#25 In the United States today, 317,000 waiters and waitresses have college degrees.

But this is what we get for creating the biggest debt bubble in the history of the world.  For decades we have been digging a deeper hole for ourselves by going into increasingly larger amounts of debt.  In America today, our entire economy is based on debt.  Even our money is debt.  We were fools if we ever thought this could go on forever.

Just think about it.  Have you ever gone out and run up a bunch of debt?  It can be a lot of fun sitting behind the wheel of a new car, running your credit cards up to the limit and buying a beautiful big house that you cannot afford.

But in the end what happens?

It always catches up with you.

Well, our collective debt is starting to catch up with us.  There is a sea of red ink on every level of American society.  It is only a matter of time before it destroys our economy.

If you think that things are bad now, just wait.  Things are going to get a whole lot worse.  A horrific economic collapse is coming, and it is going to be very, very painful.

Less Money, More Problems

How in the world is the U.S. economy going to recover if the American people have less money to spend?  Millions of American families are heading into 2011 knowing that either they won’t be seeing an increase in income or that their incomes will be smaller next year.  Long-term unemployment benefits are being cut off for millions of Americans, federal workers are having their wages frozen, Social Security recipients are not going to get a cost of living increase for 2011, taxes are going up for the vast majority of U.S. families and employers are forcing pay cuts on their workers across the United States.  Meanwhile, the cost of food just keeps going up, the cost of gas just keeps going up and the cost of health care just keeps going up.  So what are millions of American families that are already stretched to the limit going to do when they have less money in 2011?

Millions of unemployed American workers are heading for a very bleak 2011.  Unless Congress acts, and there is no indication that is going to happen, approximately 2 million Americans will stop receiving unemployment checks over the next couple months.

The government is really between a rock and a hard place on this one.  After all, who is so heartless that they actually want to cut off the little financial support that millions of deeply struggling American families are depending on?  Not extending the long-term unemployment benefits is going to mean more Americans are going to lose their homes, more Americans are going to go bankrupt and more Americans will end up in tent cities.

But as CNN recently reported, extending the long-term unemployment benefits through next year would cost the federal government $56.4 billion that we simply do not have.  The U.S. government is absolutely drowning in red ink and cannot afford to just chuck another 56 billion dollars more debt on to the pile.

At this point even Barack Obama is taking some small steps to get federal spending under control.  He has just announced a plan to freeze the pay of federal government workers for the next two years.

So how are federal government workers handling the news that they will not be seeing any raises for the next coupe of years?

Not well.  In fact, many of them are absolutely furious.

But can you blame them?

How would you feel if your wages were just frozen for two years and yet the price of everything just continues to keep going up?

Meanwhile, the Social Security Administration announced last month that there will be no cost of living adjustments for Social Security benefits once again next year.

According to the government, the cost of living is not going up.

So now our seniors will just have to stretch those meager checks even more.

As if all that wasn’t bad enough, now a whole slew of tax increases is coming.  The U.S. Congress is busy debating which (if any) of the Bush tax cuts that they are going to allow to expire, but the truth is that the Bush tax cuts are only a small part of the story.  There are so many tax increases scheduled to go into effect in 2011 that it is hard to keep track of them all.  In fact, there are many (myself included) that are calling 2011 “the year of the tax increase“.

But it is not just the federal government that is raising taxes.  In the past two years, 36 of the 50 U.S. states have jacked up taxes or fees.

In addition, many local governments are so strapped for cash that they are going to absolutely ridiculous lengths to raise cash.  For example, from now on if you are caught jaywalking in Los Angeles you will be slapped with a $191 fine.

This kind of thing is happening all over America.  Police departments are being turned into revenue raising operations.  Police are so busy writing tickets that they barely have any time to investigate actual crimes anymore.

Unfortunately, all of this latest news comes at a time when incomes are already down from coast to coast.  Median household income in the U.S. declined from $51,726 in 2008 to $50,221 in 2009.  Some areas are declining faster than others, but the truth is that almost all areas of the United States have been seeing incomes go down.  In fact, of the 52 largest metro areas in the United States, only the city of San Antonio did not see a decline in median household income during 2009.

Times are getting really tough.  Employers all over America are forcing their employees to take pay cuts.  Even some of the most prominent unions are agreeing to unprecedented concessions.  For example, just check out what The New York Times says is going on over at General Motors….

In its most recent union contract, General Motors is paying new employees $14 an hour, half the rate it pays its long-term workers.

Unfortunately, American families are going to have to try to do more with less during a time when prices are going to be going up.  Most economists agree that all of the quantitative easing that the Federal Reserve is doing is going to cause inflation to start increasing significantly at some point.  In fact, some of the top Federal Reserve officials have publicly stated that they want to purposely raise the rate of inflation as a way to stimulate the economy.

One of the great things about Americans is our relentless sense of optimism, but it is time for a major reality check.  Our economic system is in an advanced state of decay.  Our nation is a sea of red ink from coast to coast, we continue to consume tens of billions more than we produce every single month and we are rapidly being transformed into a post-industrial wasteland.

The economy is not going to be “getting better” in the long-term.  Unless fundamental changes are made to our economic system, we are going to continue to speed toward a horrific economic collapse.

The storm clouds are gathering on the horizon and time is running out.  It is imperative that we all make the most out of every single day because night is coming soon.

9 Shocking Examples Of Black Friday Violence – Is This A Foretaste Of The Economic Riots We Can Expect When The Financial System Collapses?

It seems with each passing year the madness on Black Friday gets even worse.  This year, there were reports of fights and rioting from coast to coast.  It was estimated that over 180 million U.S. shoppers headed for the stores on Friday, and whenever you get that many people together there are going to be problems.  But just how crazed ordinary Americans are getting over saving a little bit of money is deeply disturbing when you really start thinking about it.  If people will go this wild just to save 40 percent on a television set, then what in the world are they going to do when they have been without food for a couple of days?  If Americans will act like psychotic animals just to save 50 bucks, then what in the world will they do when they have lost everything and are desperate to survive?

All of us had better hope and pray that an economic collapse does not happen any time soon, because it is becoming increasingly apparent that the American people are not morally equipped to be able to handle one.  Greed and selfishness have become so rampant in America that large segments of the population have totally forgotten how to be any other way.

If the United States ever experiences a really, really bad economic downturn, this nation could very quickly start looking like New Orleans after Hurricane Katrina from coast to coast.  Most Americans would simply not know how to handle it.

The following are 9 shocking examples of Black Friday violence that should make all of us wonder what is happening to America….

#1 At a Target store in Buffalo, New York the crowds waiting impatiently outside suddenly became a chaotic mob once the doors opened at 4 AM on Friday morning.

One man that was lying on the ground remembers thinking “I don’t want to die here” while he was being trampled by crazed shoppers….

#2 Crowds were becoming so violent at a Wal-Mart in Sacramento, California that the police actually evacuated the store early Friday morning.

#3 Three women from West Palm Beach, Florida said that $1,000 in presents that they had just purchased at Best Buy were stolen from their vehicle on Friday morning within minutes of being purchased.

#4 One U.S. Marine reservist that was collecting toys for children was stabbed with a knife when he attempted to stop a shoplifter in eastern Georgia on Friday.

#5 Blogger Lynne Elder-Blau has posted about overhearing police officers describe a huge brawl that erupted this year at one well-known store on Black Friday….

Well, the girls and I were in a popular convenience store in Garden City last night while a store employee and a Garden City Police Department Officer were visiting. They were conversing about a large group of customers who got into a knock-down brawl at a nationally-known variety store in Garden City yesterday morning. Several police officers were brought in to break up the ball of adults who were pulling and tugging at products and actually punching other customers in their faces and stomach areas! We’re not just talking about a few people who were involved in this violent non-sense. The officer said that there was a large amount of people involved in this particular altercation. Ridiculous!!!

#6 A 21-year-old woman from Middleton, Wisconsin was arrested when she threatened to shoot other shoppers while waiting to get into a Toys R Us store for Black Friday.  The other shoppers had objected when she attempted to move to the front of the line.

#7 The following is video of customers literally tearing apart a store display at a Wal-Mart in Douglasville, Georgia as they pushed and shoved each other in an attempt to grab the best deals….

#8 The Los Angeles County Sheriff’s Department actually “locked down” a section of a Cerritos, California shopping mall after a wild fight broke out in the food court.  There were even reports that some people were  flinging chairs at other customers.

#9 At one Wal-Mart in Texas, a near-riot broke out right in the middle of the store as a huge crowd of customers pushed and shoved each other to get a handful of Black Friday deals that were being wheeled out to the floor….

If you want to see even more videos of Black Friday craziness, check out this and this.

Remember, the products that these Americans are fighting over are not free.  This is how crazy people are willing to go just to get a deep discount on an item.

So what is going to happen someday when people are desperate for food or shelter?

If this is how people act when the sun is shining, how are they going to behave once a really bad storm arrives?

In America today, fewer and fewer people are treating others the way that they would like to be treated themselves.

Instead of showing others kindness and respect, in 2010 most Americans would seemingly rather trample anyone who is in the way of getting what they want.

So what do you think?  Are Americans becoming more greedy and more selfish or are they basically “good” and “decent” people most of the time?  Feel free to leave a comment with your opinion….

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