Stuck in a rut...

 

 

"The distance between Wall Street and Main Street has never been wider..."

In church yesterday, we learned how our lifestyles can allow us to get stuck in a rut. Our life choices, leading to our life styles. However, not all ruts are bad - a stable marriage leading to a stable home life for kids to grow up in is a good rut. A life of bad choices can lead to a bad rut which is not only hard to break out of, but can lead to unhappy endings.

Our economy is stuck in a rut. I know, I know, we have bigger fish to fry right now. The fact remains however, this economy is languishing almost to the point of malaise. It is bad in just about all areas. The only unintended consequence which makes some feel better is the stock market. It is growing by using backwards logic. The worse the economy is, the more intrusive the Fed gets. The only arrow left in the Fed's quiver is to print more money. The extra money allows the speculators and day traders to inflate the value of many stocks.

An article in Sunday's paper addresses this issue. For the past five years now, since the technical recovery began, wages and the hourly work week have been stuck. That is, unless you are in the top 10% of the wage earners. For the other 90%, the average work week remains at 34.5 hours with wage growth barely moving a smidge from year to year. If the Fed would once again take a laissez faire positions on the economy, the top 10% would also feel the pinch.

Where are we right now, economically speaking? A few points to ponder:

• The U3 unemployment has dropped to 6.1%. Good news, right? Not really. It is a numerator and denominator issue. With more and more people exiting the work force, the U3 number automatically improves. If we had the same number of people in the work force today as we had at the start of 2008, we would have a much higher U3 number.
• The jobs created last month was again very disappointing. Only 142,000 jobs were added, which was the lowest so far this year.
• In addition, the number of part time as compared to full time jobs continues to be vexing to the experts. In June, an article in Human Events had this to say about this troublesome issue: "The U.S. economy lost 523,000 full time jobs in June. This was offset by a surge of 799,000 part time jobs. That gives us what the media is bizarrely reporting as 300,000 jobs created."
• More and more companies are attempting to use "inversion" to lower their tax burden. As the United States continues to have the highest corporate tax in the world (almost 40%), more and more companies are looking to acquire an overseas company and relocate their legal headquarters. The problem with our staggering corporate tax burden has been known about for years, but nobody seems to know how (or want to) fix it.
• Finally, let us not forget our good friend, Mr. Debt. I won't even go into our unfunded liability issue, as that is too scary for a Monday morning. As of this morning, our National Debt stands at $17.745T, and is galloping towards $18T. If the Fed ever lets interest rates float to where they should be, the cost of servicing this debt will be a back breaker. Meanwhile, our entitlements which are the big drivers in our debt, remain unchecked.

As you can see, the "rut" we have been in for the past five or six years remains unchanged. I could write the same article year after year with only minor modifications. Remember this in November when you vote. Status quo equals staying in our rut. We reelected this President and we might just end up reelecting our Governor. Welcome to life in the rut.