Safety Net? What Safety Net?
Good Morning all of you independent minds out there; your King of Simple News is on the air.
With unemployment in the United States now approaching 20 Million, it’s a good time for me to rerun a portion of an article that I originally wrote many years ago. It’s a short, thought provoking piece for those who want to understand the reality of America’s predicament.
Part of my back porch education, includes a memorable conversation with an older friend who is very bright and very realistic. Although this conversation occurred many years in the past while sitting in the Fairview Inn at Talkeetna, Alaska, I can recall nearly every word.
My friend explained to me in no uncertain terms that the U.S. could become a third world economy in the blink of an eye. I wanted to believe that he was crazy; but I knew better.
He explained that once a person loses his or her job, it’s a short trip to 3rd world status. That being said, employment then, is all that separates us from that unfortunate state. That and the social safety net that currently exists to supposedly create a floor for the level that one could sink.
But who supports that safety net? The remaining job holders; so with declining jobs and tax collection, is there a safety net? The short answer is no. At the date of this writing the State of California has a $26 BILLION budget shortfall. What services will be cut?
I want you to do something for me. Come on, pacify me for just a moment. I want you to stop reading and pretend that you are unemployed. Not only unemployed, but unemployable, as in, there are no jobs available. How long would it be before you personally reached third world status?
How long would it take before you couldn’t make your house and car payments or even purchase food? What would you do for medical care?
Don’t just dismiss this as, “It won’t happen to me.” That is what those in manufacturing, banking, home building, and the mortgage lending industries thought.
What would you do? Where would you go? I can tell you; in a short time you would go broke and reach third world status.
Scary huh? But you say you’re in management and life is good. Here’s a prediction. I hope I’m wrong. I believe the next huge round of layoffs in the U.S. will be in upper middle management. Companies in trouble will jettison their heaviest baggage first to save top management.
What are the job prospects to reemploy 20,000,000 people and at the same time to absorb the more than 200,000 new job seekers per month? It may help to remember that the #1 job in the United States is that of a sales clerk and number two, a cashier.
Our current basic employment in the U.S. is not creating wealth, it’s creating debt!
Think about all that I’ve just said. These may be dark thoughts, but unfortunately, all too true. Third world status is just a pink slip away. And what are your main stream politicians doing for you? They’re helping you pack for the trip!
“If you find you’re on the wrong train, get off at the next stop, it’s a much shorter trip back home.” ── Mike Folkerth
Wake up Middle America; this is your final boarding call.
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Once again, dead on Mike!
Most of us are one pay check from 3rd world. I suppose I could keep my family in food for a year or so…
here is even more gloomy data.
taken from here.
http://www.321gold.com/editorials/benson/benson070909.html
Hard Times
Richard Benson
Jul 9, 2009
Our measure of how bad it is in this economy for a broad swath of Americans can be analyzed by asking three basic questions: Are people working, are they making any money, and do they have any money in reserves? To answer these questions and more, below are some shocking facts!
First, are people actually employed? The glum employment situation continues to unravel and on the summer jobs front, 16-19 year olds are facing the worst environment since 1954, before their parents were even born. In 2007, 51 percent of graduating college students had jobs lined up before graduation. This year, less than 20 percent had jobs. Because they can’t find work, the youth of America are staying at home with their parents (maybe forever) and parents can be categorized as “payrents.”
The number of unemployed workers reported in the “headline” unemployment rate of 9.5 percent is now 15 million, but only seven million are eligible and collecting unemployment insurance benefits. Each week, when initial unemployment claims of over 600,000 are announced, it’s a virtual certainty that a million people have actually lost their jobs, considering 400,000 workers are out of the work force and not eligible to file. When a million jobs a week are lost, there is no way our current economy can replace them!
In America, only about 60 percent of workers are eligible to file for unemployment benefits. The rest are part-time, contract workers, and those that worked only a short time and don’t qualify to receive benefits.
An alternative measure of unemployment reported by the Bureau of Labor Statistics (”BLS”) shows a 16.5 percent unemployment rate. This measure, called the U-6, includes workers who would like a job but have stopped looking, and part-timers who want full-time work (there are approximately nine million part-timers seeking full-time employment). Unemployment and underemployment are massive.
Second, is anyone making any money? With 28 million people working part-time and 10 million self-employed (this includes dog walkers, yoga instructors and independent contractors, such as real estate sales agents), 38 million Americans in the work force are working but not making that much. Many firms and state and local governments have also begun to cut payroll hours and eliminate overtime altogether. The weekly hours worked were at their lowest level ever recorded in the BLS survey - if you don’t work, you don’t get paid! But the survey is very likely still overestimating personal income (hourly wages are multiplied by hours worked to give a good indication of income), so another way to measure income is to examine tax collections. If you are working part-time or are self-employed you’re counted as working in the survey, but if you’re not paying taxes, it’s because you didn’t make any money! State income tax receipts from January 2008 - April 2009 were down 26 percent from the year before, and money wired back to homes in Mexico from America is down 20 percent.
Small businesses are also failing at a catastrophic rate. These businesses used to be a major source of job growth and income, but not anymore! Mom and Pop businesses have been gutted and many used personal credit cards to fund their operations, resulting in a default rate that has grown to 12 percent on small business credit cards.
Third, does anyone have any financial resources? The government recently reported the savings rate had increased to 7 percent, but with personal income so grossly overestimated, it’s likely the numbers are way off. There’s a big difference between paying down your credit card debt (as your credit limit is cut), and stashing real cash in the bank. Cash in the bank is real savings, paying down credit card debt is not. But since the Fed cut interest rates to zero, many older Americans, who relied on the interest to help pay the bills, are scrambling and uncertain about the future.
In addition, 51 million Americans are collecting Social Security benefits. Nobody would consider this demographic rich or well to do. Indeed, given the high cost of living, you don’t live on Social Security, you simply subsist. Another 12 million people are collecting Social Security Disability (”SSI”). (If you’re 55 and used to work at an auto plant and have exhausted your unemployment benefits, SSI is likely where you will find your friends until you turn 62 and start collecting Social Security.) And still another 34 million people are collecting food stamps, and the total is rising at the rate of 4 million a year. (To be eligible for food stamps you need to have less than $2,000 in resources such as a bank deposit).
RECAP: Seven million people are collecting unemployment benefits, and another eight million are unemployed and collecting nothing! There are 38 million part-time or self employed workers, and 2.4 million people in jail (1 in 100 adults). 51 million are collecting Social Security benefits, 12 million are on Social Security Disability, and 34 million are on food stamps. What financial resources can this huge segment of the population have? Not much!
I bet no one under the age of 70 can remember an economy this bad. Tens of millions of Americans subsisting on government handouts are one paycheck away from homelessness and hunger. The hard times we are experiencing today, due to the misalignment of over-consumption financed by debt, are severe. It will take at least a few more years to work down the debt, build real savings and put the economy on a sound footing. If the American press focused on the economic statistics that reflect the seriousness of the economic catastrophe, the officials in Washington will surely panic. Americans could step up to the plate and ask for some of that bailout money that Wall Street received. It’s time to get grumpy and politically active!
You have to wonder what the government will do to try and jumpstart the dying economy. We expect three major policies by the end of the year:
First, there will be another massive stimulus for job creation;
Second, there will be another round of quantitative easing from the Federal Reserve to finance the job creation stimulus; and
Third, expect a major devaluation of the dollar to encourage exports and discourage imports.
God help the Federal Deficit and the saver because printing money like crazy, and devaluing the dollar, will only get inflation started…
…Whoever said that Hard Times weren’t interesting?
[Editor’s comment: Got Gold?]
Jul 9, 2009
Richard Benson
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Specialty Finance Group, LLC
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email: rbenson@sfgroup.org
Mike, you’re right about middle management.
The smart companies will realize that a lot of white collar jobs are not essential to everyday operations. Many companies spend so much time and money pouring over data looking for some magic bullet. Money and time that could have been spent on improvement in product or service.
Most business, education and govt operations don’t need to update their systems every three years. Most operations can be handled by 10 year old computers.
The Obama administration bought new computers for the Agriculture dept even after the dept stated that it wasn’t needed. Most upper management doesn’t seem to understand what roles computers play in their organization. It seems “hip” to bring in new computers to “improve efficiency”.
The worst expenses are “consultants”. Never has a consultant brought a new idea that wasn’t already expressed by someone in the company.
The new mantra for the next decade will be “Trim the fat” or “Back to basics”.
Pickdog,
I took one line from the article that says it all, “The hard times we are experiencing today, due to the misalignment of over-consumption financed by debt, are severe.”
Here is a link for those interested in the word, Hyperstagflation.
http://housingdoom.com/2009/07/09/tremblay-we-are-in-the-midst-of-the-great-baby-boomers-economic-stagnation-of-2007-2017/
Les,
Thanks for you comments. I have feared for some time that our make jobs-make work world of upper middle management would come to an abrupt end.
The economic environment that supports high paid, high maintenance, upper middle management is the same economic environment that supported Starbucks and Designer flavored water. How are the latter making out?
For any who did not click the link that Greg put up yesterday, here it is again and well worth your time to peruse. This, my friends, is reality.
http://www.theoildrum.com/node/5559#more
Pickdog, thanks for the “real” numbers, grim indeed. The mainstream media is still putting lipstick and perfume on this dead, rotting economy thinking people won’t notice the stench. I don’t see that working much longer.
As for a safety net, Corporate America has been cutting the ropes out of the safety net for almost all Americans for the past forty years. All the while they have been busy building their own safety net made out of bailouts. That one is working fine. Ours is laying on the ground in tatters.
It seems that collapse is only a matter of time. When that happens, I think Americans will support the another Hitler and the outcome will be worse than the first one. Remember, after WWII the planet still had plenty of readily available, high quality natural resources to rebuild from the war. That isn’t the case now.
I don’t think we have learned anyting from history. I don’t see Americans studying history, much less understanding its lessons. What we pass off as History in the schools is little more than memorization of useless facts with a heavy dose of propaganda.
If you haven’t already done so, read Dmitry Orlov’s book, Reinventing Collapse. It is genuinely insightful and gives a glimpse of what we are up against. I have found it useful in making personal preparations for some very hard times to come. If you are concerned it will be too grim to read, don’t worry, Orlov has a great sense of humor.
Greg,
Thanks for the comments. Orlov does have a good sense of humor and presents the big scary picture in a palatable manner.
So many bright minds have attempted to warn us over many years that this day would arrive.
It’s now become a matter of how we handle the future as individuals. Our president is a globalist of the highest order. He is also totally devoid of science and reality; delusional traits necessary to embrace expanding the global economy.
People wanted change and they got it. You spoke of our nation accepting a dictator when the system collapses; the masses may have already done so. I personally will never accept any such thing.
I’m now 4 weeks into my unemployment and still filling out paperwork and jumping through hoops and yet to see a penny of my unemployment benefits.
I was fortunate enough to see the writing on the wall about 18 months before the company I worked for went under and its remains bought out for pennies on the dollar by a larger company and to be gutted, shutdown, and absorbed.
Because over 70% of the work that was once done at the Colorado based company I worked for was outsourced to China I qualified for the Trade Adjustment Act, a program for workers to go back to school to retrain for a new career path.
This is pulled directly from the TAA website:
http://www.doleta.gov/tradeact/
Notice to Petitioners – July 2, 2009
Due to recent legislative expansions to the Trade Adjustment Assistance (TAA) program that went into effect on May 18, 2009, the Employment and Training Administration is experiencing a sharp increase in petitions for eligibility for the program. This increase in petition filings may result in a delay in the investigations of petitions and accompanying eligibility determinations, because it is necessary for us to provide thorough and appropriate consideration to each and every petition filed.
The TAA backlog is now 6 to 9 months long!! I will be lucky to be approved for classes starting in January 2010 and may have to wait until August 2010 to start classes.
So there’s a safety net that is taking 6 to 9 months to catch workers who have had their jobs outsources.
Isn’t it something that you are protected in the workplace against racial, age, sexual, and other forms of discrimination in the workplace, but your job can be sent 1/2 way around the world virtually over night and there’s noting that can be done about it.
So the same government that does nothing to keep my $65K a year job here in America will drag its feet for 6 to 9 months on a $15K over 2 years benefit for me to go back to college and retrain.
Here’s some simple math over the next 24 months I would have earned $130K at my job if the company had been managed properly and the jobs had not been outsourced. Now I will be lucky to make a 1/4 of what I made and perhaps if TAA comes though, get an education in Solar/Wind/Geothermal that I can make a living at two years down the road.
Mike Folkerth said: “People wanted change and they got it. You spoke of our nation accepting a dictator when the system collapses; the masses may have already done so. I personally will never accept any such thing.”
Nor will I Mike. And I personally know a few hundred that feel just like us.
Greg, I agree but what I do not understand is how so few Americans have not figured this out yet. I fear that when they do it is going to be very ugly.
George, sorry to hear about your situation.
I fear my employment (mid-management) situation is not too far behind yours. We have had 2 reductions in force to date (about 20% of the workforce) and things have not picked up…lucky, I have been preparing for this for years but after 2 years unemployed, I’d say the family would be tapped out…
Ironic that the TAA form has instructions also in Spanish.
Colorado Kid,
Thanks, I just fell out of my chair laughing! This country is doomed, perhaps I’d better call into work to see if I still have a job, or should I say yob:)
You have to figure that the airline and auto executives know what happening. Same for high-level government, Wall Street, Defense Contractors and Banking executives. I’ll bet they are just milking things as long as possible before they jump on their private yachts and sail away with their (probably useless) millions.
Those who stay are positioning themselves to take advantage of the crisis and become even richer and more powerful.
It seems to me that we should all be doing something similar. It would be interesting to hear what all of you are doing to “Live simple, live free, and live well” in the coming years.
Greg,
I’m not sure that the people you mentioned really do know what is going on. I interviewed several MBAs when writing my book and found them to be clueless of the happenings outside their personal confines.
In other news, Gov. Schwarzenegger said yesterday while negotiating with the state legislature “The key thing is to recognize that we have a shortfall of $26 billion,” he said. “It’s a huge drop in revenues. It’s historic. We’ve never seen this before in California.”
The key phrase was, “We’ve never seen this before in California.”
And my key phrase is, “You ain’t seen nothin’ yet.”
Mike,
On a positive note there were four very strong immigration amendments passed in the Senate this week:
1. The Sessions E-Verify amendment.
2. DeMint Fence amendment.
3. The Vitter no-match amendment.
4. The Grassley E-Verify amendment.
These of course need to pass next in the house which given the record of the current congress will be very difficult, but if they pass then we might start to see some major changes.
http://www.numbersusa.com/content/nusablog/beckr/july-10-2009/after-4-senate-victories-how-do-we-protect-them-backroom-death.html
Robert,
These are certainly good bills and we can only hope that common sense will allow their passage.
At the root of the absence of such common sense laws is America’s quest for exponential population growth…legal or illegal.