Can Liberals Count? Can Liberals Remember?

George Bush won Ohio in 2004 by 118,000 votes, but Andrew Sullivan remembers it differently, here:

"At this point in 2004, one recalls, George W. Bush was about to see a near eight-point lead shrivel to a one-state nail-biter by Election Day."

The real nail-biters were in Iowa, where Bush won by just 10,000 popular votes (7 electoral college votes), and in New Mexico, where Bush won by just 6,000 popular votes (5 electoral college votes), neither of which separately or together would have given victory to Democrat John Kerry.

Be that as it may, the real point of Sullivan's story is this:

"If Obama wins, to put it bluntly, he will become the Democrats’ Reagan."

Ah, no, he'll become the Democrats' W, or maybe their George H. W. Bush. Or if he's really really lucky maybe their Richard Nixon.

Obama's economic performance in the next four years would have to improve by 40 percent in seven key categories of economic measurement in comparison with all previous presidents to achieve the fair-to-poor record achieved by Ronald Reagan, whom I have shown elsewhere scored a lousy 42, just like Jimmy Carter.

President Obama's current score after 4 years is already 2 points worse than George Bush's score of 51 after 8 years, the worst two records in the post-war period. That means Obama would have to pull out  of his hat a veritable golden age to make him look as good as Reagan, which as I've said isn't saying much. To do it Obama would have to score a 32 in the next four years just to average out to a 42.

Can you imagine an Obama second term turning in an overall performance roughly close to that of JFK/LBJ, who rank 4th best out of 10 since WWII? Because that is what it would take.

Obama would have to go from worst for unemployment to 4th (think Clinton and W), starting tomorrow. He would have to go from worst to 4th for GDP (think Reagan and Eisenhower), for the next four years. He would have to go from worst to 4th for housing values (think Harry Truman). Only George Bush has been worse for the increase in Americans' total household net worth than Obama has been. To address that Obama would have to restore at least 1960s levels of prosperity to the country, if not Clinton era levels.

Fat chance.

Despite all the ruin which one man can rain down on a country through sheer incompetence and arrogance, the American people are a resilient lot and things will improve no matter who gets elected. The economy adjusts and moves on, and in many respects there is only one way to go but up. But if it's Obama who is elected again, I don't expect him to finish much better than a 48 after 8 years overall, because the first 4 have been such a disaster.

Obama Replaces Bush For Worst Economic Conditions Since WWII

If you thought George W. Bush was the worst president ever, you were right . . . until now.

Compared to every president since WWII in seven broad categories of economic measurement, Bush came in dead last. But in just four short years President Obama has managed to mess up what it took George Bush to do in eight. Call President Obama "The Quicker Screwer Upper."

My readers know that I have been examining and ranking every president from Truman to Obama in recent days from best to worst in a variety of broad economic categories: increase in the national debt, control of the rate of inflation, growth of the economy, real stock market performance for investors, increase in housing values for savers, increase in household net worth and rate of unemployment. Follow the links to examine the results for each one.

When put all together, it's easy to see who has been the best president overall, and who the worst. The ideal president, naturally, would score a 7 overall on this scale, placing first in every category compared to his peers. The worst president would score a 70, placing last by every measure. That last number tells you how I have counted the presidents. JFK, who was assassinated in his first term, is grouped together with his VP LBJ. Nixon, who resigned in his second term, is grouped together with his VP Ford. That leaves eight others: Truman, Eisenhower, Carter, Reagan, Bush the Elder, Clinton, Bush the Younger, and Obama, stretching from 1948 until 2012.

Here's the list showing them all, from best to worst, including the numerical ranking in each category, and the overall score. Democrat Harry Truman comes out on top, and Democrat Barack Obama comes up in dead last. Over time the economic difference between Republican leadership in the White House and Democrat has been infinitesimally small, a difference of just 0.13 percent, slightly favoring Republicans who average 6.03 compared to Democrats who average 6.04.

Otherwise the main take away is that the only president to score in the 20s like long ago Truman, Eisenhower, and JFK/LBJ has been Bill Clinton, who spent the majority of his term in office with Republicans in control of the Congress. Any president who can again score in the 20s like him will necessarily be two times better economically for the country than George Bush and Barack Obama have been. They've both been unmitigated disasters.

Ranking for Debt+Inflation+GDP+SP500+Housing Values+Household Net Worth+Unemployment = score

Truman 1+6+2+1+4+6+1                       = 21

Clinton 4+5+3+2+1+4+5                        = 24

Eisenhower 2+1+5+3+6+7+2                 = 26

JFK/LBJ 3+3+1+6+8+5+3                     = 29

Carter 5+10+7+8+3+1+8                        = 42 (tie)

Reagan 10+8+4+7+2+2+9                      = 42 (tie)

Nixon/Ford 8+9+6+9+7+3+6                  = 48

Bush The Elder 6+7+8+5+9+8+7           = 50

Bush The Younger 9+4+9+10+5+10+4  = 51

Obama 7+3+10+4+10+9+10                   = 53 

Net Worth Up Most Under Carter, Least Under "W" Since WWII

It's shocking, but true.

Total household net worth as reported by the Federal Reserve in its Z.1 Releases of the Flow of Funds Accounts shows that Jimmy Carter wins the award, hands down, for the increase in this metric during the course of his presidential term as compared with all other presidents in the post-war period.

In point of fact, the zenith of growth in total household net worth clusters around ole Jimmy with Nixon/Ford just preceding him taking 3rd position and Ronald Reagan coming after him taking 2nd. The whole period from 1969 through 1988 represents the time when Americans made their biggest gains in overall wealth.

I measured the overall gain from January 1 of the year of inauguration to the January 1 of the year leaving office, as summarized here by the St. Louis Federal Reserve. The overall percentage gain is then divided by the number of years in office, either 4 or 8, to get an annualized score, which is not the same thing, obviously, as actual annualized performance. Data from Truman is only for three years from 10-1-1949 to 1-1-53. For Obama, who just barely beats Bush The Younger for dead last, the data is for 1-1-09 to 6-30-12 taken from the very latest Z.1 Release yesterday (here).

Carter                 +16.02 percent per year

Reagan                 11.80

Nixon/Ford           10.21

Clinton                    9.74

JFK/LBJ                  8.78

Truman                   8.49

IKE                         7.39

Bush The Elder       6.17

Obama                    4.92

Bush The Younger  3.43

Both Romney And Obama Will Destroy The Economy By Destroying Housing

In November 2011 Romney told Hugh Hewitt, here, that it was not a good time to eliminate the mortgage interest deduction in view of the problems in the housing sector:

My own view is that the idea of limiting deductions in the way the Bowles-Simpson panel recommended makes a good deal of sense. I’d like to see us have lower tax rates, and have a broader base. And it sounds like their idea is looking for a way of doing that. I must admit, I don’t think that this is a great time to be eliminating the home mortgage interest deduction. We obviously have a lot of trouble in the housing sector right now, but I haven’t seen their proposal. It may work just fine, but I just haven’t seen it, so I wouldn’t want to comment on that. But the home mortgage interest deduction right now is something that I think we need to keep in place.

But by February 2012 it had become a good time to eliminate the deduction, at least for the rich, a position identical to Obama's, as noted here:

“In order to limit any impact on the deficit, because I do not want to add to the deficit, and also to make sure we continue to have progressivity in our tax code, I’m going to limit the deductions and exemptions, particularly for high-income folks,” Mr. Romney, a former governor of Massachusetts, said.

Reiterated in April at a private fund-raiser as reported here, the idea suddenly had become toxic again, enough to merit walkbacks from his advisers, reported here:

Senior advisers to Mitt Romney said Monday that Mr. Romney, the presumptive Republican nominee for president, was merely tossing around ideas, not making policy announcements, when his chat with donors about some significant changes to the tax code was overheard by reporters at a fund-raiser this weekend.

When it comes to Mitt Romney, we all know that there's no there there on any number of issues. But it is especially disturbing that neither Romney nor Obama seem to grasp the scope of the damage their shared idea of eliminating the mortgage interest deduction for the wealthy would cause to the American economy.

Wayne Allyn Root explains, here:

If you think the housing market is in trouble now, wait until the home mortgage interest deduction is eliminated for upper income homeowners.

From Manhattan, Great Neck, and Scarsdale, to Boca Raton, Scottsdale, and Brentwood, home prices in upper class neighborhoods from coast to coast will drop by about 35% overnight. That 35% number is not a guess, it’s automatic.

Today, if you’re in the top bracket, you deduct 35% of your mortgage interest off your tax bill. If tomorrow you can’t, your home is worth about one third less.

That's how economics works.

Unless Obama manages to also raise the top income tax rate to 40%. Then, when you lose your mortgage deduction your home will drop by about 40% overnight. Can you imagine the carnage to the housing market if this happens?

Obama's economic theories just don't compute. He believes that if you take away more of rich people's income through tax increases, and take away their deductions so that the value of their net worth collapses, that will be good for the economy.

He thinks if you take away rich people's money, consumer spending will somehow increase. Even though the facts are that the top 2% of income earners produce over 30% of U.S. consumer spending, while the top 5% produce 40% of consumer spending.

Just as a rising tide lifts all boats, a tsunami wiping out values at the top end of the housing market can only swamp values at the low end.

Six years after the collapse in housing began, we still have no leadership on the most significant economic problem facing Americans at all income levels.

Fired American Workers Take 50 Percent Pay Cuts And Do Nothing About It. Spaniards Take 15 Percent Cuts And March.

The American people will do anything for money.

Ask anyone over 50 who's been fired despite being highly productive and highly skilled, now working any job, or any number of jobs, just to pay the bills, but making half what they used to make. We're too old to sustain a fight, and they know it.

But they marched today in Spain, and over far less, as reported here:

"There's nothing we can do but take to the street. We have lost between 10 and 15 percent of our pay in the past four years," said Sara Alvera, 51, a worker in the justice sector, demonstrating in Madrid. ...

Protestors complained that they were being made to pay for the financial crisis while banks and the rich were let off.

"We have to all come out into the street, firefighters, street-sweepers, nurses, to say: enough," said Manuel Amaro, a 38-year-old fireman in Madrid holding his black helmet by his side.

"If we don't, I don't know where this is going to end."

I think prosperity has bred the fight out of Americans. Many have lost 40 percent of their net worth since 2008, but here we sit, just taking it, while Spaniards march over just 15 percent.

Something has put the fight back into Spaniards somehow. I admire them for that.

Don't you know that you can strike back at your oppressors, too, America?

Just stop working. Just stop cooperating. 

What if everyone just said "No" to work for a month, say starting August 1? And "No" to volunteering. And "No" to everything anyone expects of you. Employers would absolutely panic. You might even bankrupt them. Shouldn't someone go bankrupt for a change besides you?

The government would panic because it desperately needs the tax revenue. You might even get rid of the government, considering that its reaction just might de-legitimize it.

How about making someone else panic for a change?

How about if America protests for a change?

How about taking August off? Europe does. Why don't we?

Americans' Net Worth Drops 40%, 55% For Those Whose Home Is Their Primary Savings

So says the Federal Reserve in a just released report here:

[T]he decreases in median net worth appear to have been driven most strongly by a broad collapse in house prices. ... The decline in median net worth was especially large for families in groups where housing was a larger share of assets, such as families headed by someone 35 to 44 years old (median net worth fell 54.4 percent) and families in the West region (median net worth fell 55.3 percent). ... Although the overall level of debt owed by families was basically unchanged, debt as a percentage of assets rose because the value of the underlying assets (especially housing) decreased faster.

Meanwhile, Obama has focused his laser-like vision on his golf game and mucking with your healthcare while blowing off the real crisis in America. 

So much for not letting a good one go to waste, eh Rahm?

Socialists Agree: Obama's Their Man

As seen here:

STERN: You like Obama?

MACPHERSON: Yeah, I’m living in London and I’m socialist. What do you expect?


Can't wait until he confiscates her $60 million net worth.

Oh wait, he can't. Obama's only President of the United States. Elle Macpherson (Eleanor Nancy Gow) is Australian.

The Tax Man Stands In The Way Of The Deleveraging Crisis

Household net worth in Q3 2011 has fallen to $57.4 trillion, and relative to GDP this is still well above historical peaks in the post-war period in the 20th century.

If total household net worth relative to GDP fell to the post-war historical peak before the recent silliness, at present levels of GDP this implies a further pull-back in total household net worth of roughly 7 percent, or $4 trillion, to $53.4 trillion.

It is interesting to note that mortgage debt relative to current GDP also as shown here should correct down about 33 percent to match the post-war historical peak of that metric. With about $10 trillion in mortgage debt currently outstanding, a 33 percent adjustment down comes to $3.3 trillion, a figure very similarly sized to the outsized net worth noted above.

In other words, we could come a long way toward rectifying both metrics almost instantly by taking from net worth and paying down mortgage debt, if only the tax man didn't stand in the way.

It should be emphasized that roughly $5 trillion of $18 trillion in retirement funds stands ready in IRA accounts alone to address this problem, if only government gave people the freedom to do so.

Another interesting point suggests itself.

The post-war average GDP of 3.5 percent per annum has utterly failed to materialize in the first decade of the 21st century, as GDP has averaged instead in the neighborhood of 1.7 percent per annum.

Both net worth and debt measured against an economy pumping out 50 percent more GDP would mean I wouldn't be writing about this right now.

I'd be too busy relaxing and getting ready to make lots of money tomorrow.

There's more than one way to skin a cat: less meddlesome tax policy, or growth-oriented economic policy.

Preferably both.

Two Episodes of Nearly Vertical Exuberance in Net Worth

Two recent episodes of nearly vertical exuberance are shown by dramatic spurts in total net worth of households over 5 year periods: beginning from the mid-1990s and from about early 2003, coincident with stock market and housing bubbles.

A correction to trend implies a net worth decline to around $45 trillion, or 21 percent from the present $57 trillion.

Congressmen Get Richer, You Get Poorer

Just in time to echo my recent ranting about our rich, corrupt and unrepresentative Congress and why we therefore need a bigger one, Peter Whoriskey for The Washington Post here chimes in with this tidbit which shows just how unrepresentative our representatives have become:

Between 1984 and 2009, the median net worth of a member of the House more than doubled, according to the analysis of financial disclosures, from $280,000 to $725,000 in inflation-adjusted 2009 dollars, excluding home ­equity.

Over the same period, the wealth of an American family has declined slightly, with the comparable median figure sliding from $20,600 to $20,500, according to the Panel Study of Income Dynamics from the University of Michigan.

The importance of an individual member of Congress works according to the law of supply and demand: When the supply of Congressmen declines, their individual value increases dramatically. The supply of Congressmen is fixed by law, but their value now increases year by year because the number of people they represent continues to grow.

The US House acted in the 1920s to increase their own value in this way by stopping the House from growing in size proportionally with population. We never should have let them get away with it. Is it any wonder that their wealth has increased so dramatically since then? We have the finest Congress money can buy, and getting finer by the day.

It's rigged. It's a racket. And it's not working for the people anymore. It's working for itself.

We could stop this almost overnight if we simply increased the supply of representatives, just like we do with money. To make debts worth less, we print extra dollars with which to pay them off. We should do the same thing with Congressmen. To make them worth less, increase their supply. The cost of corrupting a much bigger Congress would therefore skyrocket, and the ability of the people to reign it in would improve commensurately.

Consider that in our country less than half the population is registered to vote, 146 million people in 2008. Of that, 131 million actually voted. This means the individual member of Congress on average has a voting constituency of 301,000.

But if we had the 10,267 representatives demanded by Article 1, Section 1 of the Constitution, the size of a representative's average voting constituency would plummet to . . . 12,760.

Tick-off just one mega-church, a few VFW posts, a local manufacturer or the PTA, and out he goes. Just 6,400 people could make your Congressman a loser, or a winner, and on a regular basis.

Sounds pretty representative to me, and a lot cheaper.

The Economy is NOT Improving: 3rd Estimate of Real GDP Falls to 1.8 Percent from 2.0 for Q3 2011

What a joke the news is today. GDP is revised down and all you hear on the news is Ho! Ho! Ho!

Q2 GDP was 1.3 percent, and Q1 0.4 percent, for an average growth rate in 2011 so far of barely 1.0 percent.

One percent. From 1930 to 2000 growth averaged 3.5 percent a year. That's the normal America, and it isn't anywhere in sight and hasn't been in over a decade.

If the economy were improving truly, GDP would be much in excess of 2.5 percent, the minimum growth needed to accomodate just the natural growth of the population. The last time we had such growth ended a year ago September, spurious as it was, consisting primarily of parasitical spending by government. It wasn't even tax money the government spent. It was borrowed money. For all that, 2010 growth overall was merely 3.0 percent, in 2009 -3.5 percent, in 2008 -0.3 percent.

The personal savings rate since September 2010 has fallen 30 percent.

The ratio of the number employed to the size of the population has fallen back dramatically to levels last seen in the 1970s and early 1980s.

The growth in employment in the post-war period has stalled with the stall in GDP:

Household net worth has fallen 12 percent since 2006, 85 percent of that from the housing collapse.

Without jobs there is no growth in the savings which form the foundation of housing wealth. Without housing wealth there is no middle class which consumes the products whose aggregate value comprises 70 percent of GDP. And hence no advance in GDP.

A rich man can smoke only so many cigars, a Christopher Hitchens only so many Rothmans.

Data here and here from The Bureau of Economic Analysis.

Representation Without Representation: Our Unaccountable $6 Billion Congress

According to stories here, here and here, in addition to the 535 elected members of the US Congress, there are about 10,000 staffers under various classifications who are hired by these office holders to assist them.

The average staff budget is said to be $1.5 million, which is in addition to the $174,000 annual salary of the elected representatives and senators themselves.

While the latter costs the taxpayers upwards of $93 million annually, the former is upwards of $800 million annually.

In other words, we willingly spend close to $1 billion in tax dollars every year for congressional representation which is pretty much universally despised.

And about five times as much to elect it. A CBS News/New York Times poll in October found just 9 percent of Americans approve of the job Congress is doing, but someone, somewhere, is pretty happy investing $5 billion to elect the right people. And "the right people" end up with net worths ten times that of their constituents.

Maybe it's time to change this.

How about following the constitution for a change?

Article 1, Section 1 of the constitution stipulates that representation "shall not exceed one for every 30,000." By that reasoning we should have a US House today with 10,000 representatives. Instead we have 435, thanks to the Republicans in the 1920s who simply refused to reapportion after the 1920 Census and fixed the number of representatives at the then current levels in 1929 through legislation.

The constitution wasn't amended. It was ignored. And today Republicans would claim the mantle of originalism. I'll believe it when I see it.

The great fear of the anti-federalists, who opposed the language of the constitution, was that no one man could conceivably represent adequately or honestly the interests of 30,000 citizens. They wanted the ratio to be smaller than that. Much smaller. Say on the order of one representative for every 15,000 of their fellows. That would imply today a US House of 20,000.

Instead what have we got?

Representation of one for 700,000 in a district, and climbing. Which is why you are so disgusted with your rich, arrogant and corrupt representative. He represents the guy who pays him the money he needs to advertise on radio and television so that you at least recognize his name and picture every two years and believe some stupid lie he tells about how he represents your interests even though he doesn't even know you exist. The last thing he wants is the real competition and anonymity of being just one of 20,000.

Imagine if your representative represented only 15,000 people. Chances are he would have to work pretty hard to get elected because no special interest is going to fork over millions just for his lousy vote.

He might even ring your doorbell.

What would it cost?

Even if you paid them all the same salary as we do today, half the anti-federalists' number, 10,100 representatives and senators, would cost us $1.76 billion. Their legislation might actually improve if we eliminated all their staff positions and made the elected do the actual work for a change. Throw in some campaign finance reform which stipulates contributions originate within the new districts, and repeal of the 17th Amendment, and you have a nice little package a decent presidential candidate could win on easily.

So far, however, none of them have enough imagination to see that 91 percent of the country is already ripe for the ideas.

If only they had some.

The Increase in the Wealth Gap is Due to the Housing Collapse

The latest figures from the Federal Reserve (link: compare lines 4 and 42) show that enormous wealth destruction in housing is the overwhelming cause of the dramatic decline in household net worth between 2006 and 2011.

Of the $7.8 trillion decline in net worth over that period, $6.6 trillion of that is all from the bursting of the housing bubble . . . nearly 85 percent.

Hurt most by this are the millions of middle class Americans whose primary asset is their home. Desperately trying to hold on to what they have, by scrimping, saving and working, they don't have the luxury of time to occupy much of anything to protest what is happening to them.

It is impolitic to say so, but their plight is the frequent one of the undiversified investor: too many eggs in one basket.

But that's not a bug, it's a feature of entering the middle class, whose goal is owning a home and raising a family in it, not sophisticated money management and investing. Such people who can scrape together the income of $40,000 to $50,000 necessary to support home ownership typically aren't going to have significant financial assets to manage. Of the 150 million wage earners in America, after all, fully 99 million make $40,000 a year or less.

Neither Obama nor the Republican candidates for president, nor Occupy Wall Street or the Tea Party for that matter, seem to talk much about any of this, yet the collapse of housing better explains the growing gap between rich and poor in America than do the supposed crimes of the one percent. The rich may be getting richer, but it's inspite of the fact that their own homes have declined in value, too. The middle class is being squeezed downward because its primary asset continues to lose value.

The deep frustration of so many of the American people with their elected leaders is that the leaders really don't represent them in this matter, in the same sense that sympathizing with, understanding, or trying to fix this problem doesn't have the urgency for them anymore than it does for the rich. The reason is that virtually none of them has personal experience of it. From our president to our senators and all the way on down to our representatives, we have leaders whose own high net worth and the insulation from our vulnerabilities that that affords make them remote, unfeeling, and unmotivated.

In point of fact, since it was Democrats and Republicans who conspired in the very policies which have misled Americans to drain $10 trillion in home equity over three decades (for example, dramatic changes to tax and banking policy in 1997 and 1999 under Bill Clinton, Newt Gingrich and Phil Gramm), it shouldn't be surprising that none of them really wants to talk about this gorilla in the living room. They helped make and sell the bed we're now sleeping in. And we bought it.

Of about 132 million total dwellings in 2010 of all types (table 3), just 61 million occupied dwellings are single family homes occupied by their owners, with an additional 11 million occupied by renters, according to the latest Census data here (link). That means something substantially less than 46 percent of total dwellings in the country could plausibly represent the American dream of the traditional middle class. The richest quintile, those households making over $100,000 per year, let it be remembered, lives in houses, too.

The Economic Policy Institute, whose president is a socialist, here (link) provides a useful summary of how wealthier individuals avoided the severity of the housing decline precisely because more of their assets were diversified and were not all riding on real estate (emphases added):

In 2007—prior to the Great Recession—median net worth was $106,000 (consisting primarily of home equity, as discussed later). ... Net worth for the top 1% was $19.2 million in 2007 . . ..

The updated figures for 2009 reflect the enormous destruction of wealth due to the bursting of the housing bubble. As a general rule, households with less wealth have a greater share of their wealth embedded in their homes. Thus, it is not surprising that the fallout from the deflating housing bubble disproportionally affected them. On average, the top 20% lost 16.0% and the bottom 80% lost 25.1% of their total wealth in 2008 and 2009. Average wealth of the bottom 80% was just $62,900 in 2009—a dropoff of $40,900 from 2007 and slightly less, in inflation-adjusted terms, than it was more than a quarter-century ago in 1983. Those at the top also lost ground but not nearly as much, percentage-wise. Average wealth of the top 1% was close to $14 million in 2009, down $5.2 million from 2007. ...

[H]ousing equity is a far more important form of wealth for most households. ... In 2007, the middle 20% of households held $196,700 in non-stock assets, and only $10,200 in stocks. In other words, non-stock assets—which are over-whelmingly housing equity—made up about 95% of this group’s wealth.

In the United States homeownership has long been associated with solid footing on the economic ladder, and yet the housing crash has meant that for a broad swath of people homeownership is no longer a reality.

The stepping stone from the lower and working classes to the upper classes, obviously, is the middle class. Very few skip that step, on the way up or on the way down. Rags to riches and back to rags again is interesting, but not common. Rich liberals from both parties, however, have a vested interest in minimizing the middle class to polarize the country. Rich Republicans and Democrats alike don't want the competition entrepreneurial Americans threaten them with, and leftist Democrats need a servile, manipulable constituency they can feed table scraps to in order to keep themselves in power. Some so-called conservative Republicans also, it must be said, seek their own fiefdoms of influence and power at the expense of impulses to limited government. George W. Bush's play for senior votes with Medicare Part D comes to mind.

What middle Americans should demand is a bigger House of Representatives to co-opt these entrenched interests by de-concentrating the power which the 435 now enjoy. Tea Partiers in particular should be advocating a return to the constitutional principle of one representative for every thirty-thousand of population, if their protestations to originalism mean anything. Instead of the bloated, rich and corrupt 435 politicians we've been stuck with for a hundred years, we should have 10,000 lean citizen legislators.

When we get them, things will begin to change for the better because our representatives will have far less power and far more reason to listen to the people. Special interests will have much less influence over them, campaigns will be far less costly, and Congressional staffs could be reduced dramatically, saving us money and getting some actual work out of our politicians for a change. The move would also take away the enthusiasm for radical proposals such as the elimination of the electoral college by dramatically expanding the pool of electors in presidential elections.

We might even persuade such a House to overturn the 17th Amendment, another blow for originalism, which would help improve the US Senate almost overnight. By returning the corrupting influences of campaign cash to state houses where senators would be appointed, we might actually be able to do something about corruption more often because it would be closer to home and we'd be more aware of it.

Net Worth of Poorest Republican Candidate for President is 10 X More Than 75 Percent of America

Here's the minimum net worth of the Republican candidates for president:

Sen. Rick Santorum: $880,000

Gov. Rick Perry: $1.1 million

Rep. Michele Bachmann: $1.8 million (Congressional disclosure is average of minimum and maximum)

Rep. Ron Paul: $3.6 million (Congressional disclosure)

Newt: $6.7 million

Gov. Jon Huntsman: $16 million

Gov. Mitt Romney: $190 million

Discussed here (link).

75 percent of the American people have a net worth in 2007 of $80,000 or less.

Brookings Institution Must Be Nuts: Says Congressional Wealth Reflects Middle Class

Brookings Corporate Sponsors

I refer to this in USA Today (link) back in November:

Lawmakers disclose their assets and liabilities only in broad ranges. So the numbers are estimates — the average of a member's lowest and highest possible net worth. Their actual wealth is often higher because disclosures don't include home values.

Despite some superwealthy members, Stephen Hess of the Brookings Institution says Congress generally reflects the middle class.

"In many cases, the top 10% are self-made … and it reflects something that's in the American psyche," he says. "We're not against people being rich. We just wish we were. But we are particularly attracted to people who made their own riches."

In the USA Today list of 530 US Representatives and Senators, fully 250 or 47 percent declare their net worth, sans their homes, to be $1 million or more. Add in everybody down to a declared net worth of $600K or more (the average of $1.1 million and $100K) and the list balloons to 315 or almost 60 percent of the Congress.

By contrast, 75 percent of the American people have average net worth of less than $80,000 as of 2007. In view of what has happened to housing values since then, I would expect more people to be worth even less than that.

Unlike the members of Congress in the USA Today report, household net worth calculations as tracked by the Federal Reserve include home values.

And between 2006 and Q3 2011, household net worth has fallen by $7.8 trillion, $6.6 trillion of which has been lost in the real estate maelstrom.

For Brookings to say Congressional wealth generally reflects the middle class is preposterous. Kind of like The Wall Street Journal claiming the tax money the government needs so desperately will be found in the middle class, not among the wealthy. Lies, damned lies, designed to rough you up before they pick your pockets again.

WE ARE RULED BY THE RICH.

Anyone who contributes one red cent to their campaigns should be . . . er, institutionalized.

The Next Bailout: Think Fed Leverage at 53:1 is Bad? Try the FHA at 417:1.

So says Fortune (link), or else it's curtains for Ginnie Mae:

The second catalyst [for government support of housing to decline] is the FHA, which looks increasingly like it will need a bailout. In its annual report to Congress, released a few weeks ago, the FHA reported estimated economic net worth of $2.6 billion backing $1.078 trillion insurance in force, for a capital ratio of just 0.24% (or 417x leverage). One year ago, the capital ratio was 0.50%, and in 2007 it was 6.4%.  The FHA's annual report claims it's adequately capitalized, but this conclusion relies on home prices not falling at all from here. ...

The government will have to pony up to recapitalize the FHA. FHA mortgages are fed into Ginnie Mae MBS, and Ginnie Mae MBS are explicitly backed by the full faith and credit of the United States government. So if the FHA runs out of funds, the government will have little choice but to step up. To do otherwise would be a default – not out of the question these days, but not very likely either.

FHA and VA loans fill void left by private lending

Dr. Housing Bubble weighs in with the big picture (link):

The trend for lower home prices has been baked in for nearly a year now. Last summer we had a mini burst of buyers thanks to artificial tax credits and low interest rates. I still view the current market as being designed for the nothing down leverage happy mentality that is present in our society. You have a large number of buyers purchasing homes with 3.5 percent down FHA mortgages and the default rates are soaring in this category. ...



Over half a decade ago I knew the bigger issue would be the cognitive dissonance that would linger from a post-bubble world. Many now realize that what occurred in the housing market was a once in a lifetime spending binge induced by debt. Yet some still think those days are only around the corner. The global debt crisis will not allow that. This is why most of the mortgage market is now dominated by the government. How many foreign governments or investors are going to trust Goldman Sachs or Morgan Stanley when they drop by their door steps with new mortgage backed securities? I think some have learned their lessons well and the data reflects this.


The housing market was bound to have a day of reckoning and it looks like it is slowly unraveling. It was simply impossible to have a shadow inventory growing with banks just ignoring the reality. We are now going into year five of the housing bubble bursting. You have millions of those in foreclosure who have not made a payment in one to even two years.


Ultimately the burden falls largely on the middle class. The Federal Reserve has a primary mission to protect banks. That is their bottom line. They are not looking out for the best interest of homeowners or working Americans. For the cost of the bailouts and shadow loans, they could have paid off close to every mortgage in the country. Yet even principal reductions were never on the radar because to do that, it would be to admit a financially broken system. Instead they opted to give out $7.7 trillion in backdoor loans to banks and forced the public to deal with “free market” solutions. An interesting situation no doubt but the problems we are now facing are based on this two-tiered system.



Confounded Interest points out (link) just how high the FHA default rates are:

As of October 2011 17.02% of FHA loans were at some stage of delinquency. The serious delinquency rate is 9.05%.


Clearly another government sponsored enterprise is repeating the mistakes of the past as we speak, having destroyed its capital base with non-performing loans swelling its balance sheet. FHA obviously should require down payments which are much higher than 3.5 percent in order to strengthen its bottom line, but it's probably too late to avoid bailing it out for the mistakes it has already made.

The New Global Fascist Order Slashes Dollar Borrowing Costs, But Not For You

It's not fascism when WE do it.

As reported here:

The U.S. Federal Reserve slashed the cost of emergency dollar loans to foreign banks as the world’s major central banks took coordinated action to prevent Europe’s debt crisis from triggering a global liquidity crunch.

The moves were announced in statements issued simultaneously by the U.S. Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Bank of Canada and the Swiss National Bank. ...

“Global central banks are opening the spigots and the casualty has been the dollar,” said Kathleen Brooks, research director at Forex.com.

“The extension of the dollar swap lines essentially means that dollars will be available cheaply and on request for the next 15 months to Europe’s troubled financial sector, which will probably greedily eat them up after being starved of much-needed dollar funding since the summer.”

Meanwhile the US consumer's liquidity crisis continues apace:

hours worked remain flat year over year;

real wages have declined nearly 2 percent year over year;

housing values have declined $6.6 trillion since 2006;

owners' equity in real estate is down $6.9 trillion since 2005;

household net worth is down $5.55 trillion since 2006;

unprecedented unemployment above 8 percent has continued for 33 months straight;

the US dollar has declined 27 percent in value in ten years;

debt delinquency rates are running at 10 percent;

open credit accounts have declined by 23 percent since 2008;

the annual percentage rate on the average credit card is nearly 15 percent;

a three year new car loan will cost you nearly 4.5 percent;

a 30 year mortgage will cost you 4 percent, if you can get one;

and the bank pays you doodily squat on your savings.

But if you're a European bank, the US Federal Reserve is making a gift of loans at just 0.58 percent:

The new [dollar swap] pricing will be applied to operations starting on Dec. 5. Seven-day loans would carry an interest rate of about 0.58 percent, down from 1.08 percent, based on the current one- week OIS rate of 0.08 percent.


The bankers' bank has picked its winners again. And you aren't one of them.

Remembering the $Trillions Withdrawn from the Housing ATM

Boy, don't we wish we had those back today.

Consider The Washington Post, May 30, 2007, here:

According to Fed data, homeowners' equity -- the value of their homes minus mortgage debt -- grew to nearly $11 trillion at the end of [2006], or double the value at the end of 1998. ...

[T]he housing boom ... fueled spending directly by turning homes into cash machines. As prices rose and interest rates fell, Americans extracted trillions of dollars in extra cash through home sales, mortgage refinancings and home equity loans.

Homeowners gained an average of nearly $1 trillion a year in extra spending money from 2001 through 2005 -- more than triple the rate in the previous decade -- according to a study by former Federal Reserve chairman Alan Greenspan and Fed economist James E. Kennedy. That's the "free cash," as the authors call it, left over after closing costs and other fees deducted from equity withdrawals.

Most of the money extracted during those boom years, nearly two-thirds, came from home sales, the authors found. Another 21 percent came from home equity lines of credit, while 15 percent came from mortgage refinancings.

About a third of the free cash gained during this period was used to buy other homes, they calculated. About 29 percent was used to acquire stocks and other assets. About 12 percent went to home improvements. And nearly a fourth, 23 percent, went to consumer spending, including paying credit card bills and reducing other non-mortgage debts.

Translated into dollars, a trillion dollars a year for five years over 2001 through 2005 is $5 trillion nominal in extra spending money, nearly a quarter of which, $1.15 trillion, was simply blown. Some people literally ate it, drank it, and danced the night away with it. If the study is correct, the extra spending money in the 1990s from our homes came to an additional $3 trillion. I can only guess about the 1980s, but even if only $1.5 trillion, this means Americans have easily extracted almost $10 trillion from home equity over the course of 30 years.

A review of the latest Federal Reserve data here shows that net worth of owners' equity in household real estate has fallen $7 trillion just since 2005. Falling from $13.2 trillion in 2005 to $6.2 trillion as of the end of Q2 2011, this is a decline of 53 percent. This metric pretty perfectly mirrors the bubble in housing which began in earnest in 1997, coincident with the change in the tax law permitting capital gains tax free every two years up to $500K with conditions. Except that the measure hasn't yet quite reached what it was in 1997. We're still about a trillion dollars shy of that mark in nominal terms.

Total real estate valuation over the same period has fallen less, from $22.1 trillion to $16.2 trillion, or 27 percent. But equity as a percentage of value has fallen more than valuation, 35 percent.

A longer term chart of the latter phenomenon found here shows that since 1980 home equity as a percentage of value has been under constant pressure, most probably from what is called portfolio shifting, debt expenditures from car loans and credit cards, college tuition, stock investing and second, third and fourth home investing piling into HELOCs, 2nds, refis and the like. The interest on all that stuff before 1986 was tax deductible in its own right, but after Reagan's famous tax reform, deductibility was restricted to interest from home equity loans and lines of credit only. That arrangement was formalized at levels up to $100K in 1987, precisely after which as shown in the chart the decline in owners' equity commenced with new vigor. So people who could financed everything they could through HELOCs, cash out refinancing and the like in order to continue to be able to deduct the interest expense on their tax returns.

As a result of this and the collapse in the real estate bubble, today we are faced with the dramatic all time low of 38 percent in owners' equity as a percentage of value, a decline of nearly 47 percent since 1982.

Just think how much better off we would be today if we hadn't tapped all that equity over those three decades, especially in inflation-adjusted terms. We truly have been the squanderers.

So present household real estate valuation at $16.2 trillion represents a level last seen in 2003 in nominal terms. But adjusted for inflation, that's $13.7 trillion, which was actually the total nominal value of household real estate last seen in 2001. To get to the pre-bubble valuations of 1996, today's number would have to fall yet further to $11.8 trillion.

In other words, to erase completely the effects of the bubble on valuations, adjusted for inflation, would imply that total real estate valuation would need to fall another 27 percent from here, or $4.4 trillion.

The American dream nightmare.

On Third Anniversary of TARP, S&P 500 Closes at 1099.23, Same as it Did 3 Yrs. Ago

What are the chances of that?!

Spooky!

Pay attention to the hand in the following chart, and the dot under it, and the closing it signifies in small print in the upper right hand corner, which was a Friday three years ago, October 3, 2008, the end of a tumultuous week in American history on which President Bush signed the TARP legislation:

I remember this vividly, because Jim Cramer came on television the following Monday, October 6th, 2008 (after what seemed like a weeks' long freefall in the markets and sheer panic among the politicians trying to get TARP passed to save their donors' bacon on Wall Street) telling people to sell if they needed their money within five years.

Well, here we are, three years later . . . in the same place.

Do you still have your money? 25 million unemployed/underemployed don't.

You'll notice TARP, signed on this date three years ago, did nothing to stop the freefall in the markets. Obama and McCain both were for it. So were Sen. McConnell, Speaker Boehner and Majority Leader Cantor. And most Democrats. The real fight against TARP was in the Republican Party, and we lost, as did they.

TARP's final cost to the taxpayer may end up as much as $37 billion, an amount similar to the paltry one House Speaker John Boehner was proud to report to great fanfare that he and the Republicans saved in the spring of this year on the budget the Democrats never passed as required by law last year.

Nor are the banks really healthy after nearly $80 billion in FDIC payouts for 396 bank failures. And let's not even talk about the housing sector, the vast repository of the wealth of the American people squandered in the "let the good times roll" of HELOCs, refinancing, and flipping.

OK, let's talk about it: household net worth, which for many is all about their homes' value, is about $7.7 trillion off peak, or back at levels last seen in . . . 1997.

As for Jim Cramer, well, telling people to sell in a panic is just stupid, as is telling people to buy in a panic. Those who kept their heads and were patient and held on and invested new sums along the way made some big money in the markets right up to August of this year.

Don't fight the Fed, as the saying goes, until the Fed stops fighting, which it just did . . . sort of.

The significance of today's market is that the S and P 500 is back where it was after all the TARP intervention, all the Federal Reserve emergency lending (massive! trillions! to foreigners too!), stimulus spending and quantitative easing has run its course.

We've declined, we're moving sideways.

I expect more of the same . . . until we decide it is important to do otherwise.

Household Net Worth Through March 31, 2011 Still $7.7 Trillion Off Peak

As reported here on June 9th: [N]et worth was at $58.1 trillion in Q1 2011.