The following appeared in Lew Rockwell and Financial Sense on 5-16-2012

John Williams: The Real Unemployment Rate: 22% – Not 8.1%

The coming fiscal cliff: hyperinflation on track for 2014

Jim welcomes back John Williams from Shadow Government Statistics. John believes the real unemployment rate is 22%, not 8.1%, which is why it still feels like a recession. He also calculates the CPI at 6%, not 2.8%, and explains how the government manipulates the rate of inflation. Lastly, John believes the US is still on track for hyperinflation in 2014 as we near the coming fiscal cliff. Listen to the interview.

John received an A.B. in Economics, cum laude, from Dartmouth College in 1971, and was awarded a M.B.A. from Dartmouth’s Amos Tuck School of Business Administration in 1972, where he was named an Edward Tuck Scholar. During his career as a consulting economist, John has worked with individuals as well as Fortune 500 companies. Formally known as Walter J. Williams, his friends call him John. For nearly 30 years, John has been a private consulting economist and, out of necessity, had to become a specialist in government economic reporting.

JIM: Joining me on the program today is John Williams of Shadow Government Statistics.

And John, before we get into a real big issue that’s going to hit the economy January 2013, I want to talk about the front page of your website. And you have two graphs that are available publicly and one is the unemployment rate where you have U3, U6 and then SGS, which is your own. Let’s talk about those numbers, what they mean for our listeners and the differences between them. [1:11]

JOHN: Sure. I’ve been a consulting economist for 30 years. What I’ve found over the decades is that the government’s reporting has moved further and further away from common experience, and really, the average guy has got a pretty good sense of what’s going on. If you feel the economy is not as strong as the government is saying or that inflation might be higher than what they’re reporting, you’re most likely right because you’re dealing with the real world.

The numbers use to deal much closer to real world experience.

And with the unemployment number, if you, let’s say, went around the entire country and asked everyone whether he or she was unemployed, you’d get an immediate answer. Most people have a pretty strong opinion as to what’s up, they have a job; they know what’s going on. But if you put all those numbers together, you’d come up with a much higher unemployment rate than the government reports, or at least the headline government number to date. So that’s all due to definition.

In order to be counted in the headline unemployment rate – and keep in mind, the government actually publishes six levels of unemployment. The third level they call U3 is the headline number – you have to obviously be out of work and willing and able to take a job, but you have to have actively looked for work in the last four weeks. There are people who’ve stopped looking for work after a period of time when there are just no jobs to be had, yet they’d take a job if it were available, and they otherwise consider themselves unemployed. They want a job; they are willing and able to work. And again, they’d take it as soon as it was offered. If you haven’t been looking in the last four weeks, the government will count you as a discouraged worker so long as you’ve looked for work in the last year.

If you haven’t actively looked for work in the last year, they don’t count you at all.

Before 1994, anybody who was a discouraged worker, irrespective of the period of time, was counted as a discouraged worker. So that where you have the U3 unemployment rate at, I believe it’s 8.2% in March, the government’s broadest number U6 (which includes what I call the short term discouraged workers, those who have given up looking for work, but not for more than a year) and also includes people who work part-time for economic reasons (they can’t get a full-time job, they want a full-time job but you know, no full-time job is available) that’s running up somewhat over 14%.

And what I do is I add to that my estimate of the longer term discouraged workers – those who have been discouraged more than a year. That puts you up over 22%.

What happens here is the people who are unemployed roll out of the U3 level; they become discouraged because there are no jobs to be had, and so they go into the U6 level.

And after a year, they roll out of the U6 level in terms of going into another world that the government does not count. I still estimate them, so my number is broader than the government’s number. So when you see the unemployment rate dropping, yet the broader measures are rising or staying at near historic levels, you do not have an economic recovery and that’s what we’re showing. [4:26]

JIM: And John, if we go back to the beginning of the year when we were closer to 9% and we’ve seen – or let’s say the fourth quarter of last year and we’ve seen it steadily come down. But it’s been my understanding that the decline in that unemployment rate (the “U3”) that the government reports, a lot of it is discouraged workers that are no longer counted, number one. And number two, correct me if I’m wrong, but isn’t there also a category, let’s say I’m unemployed and I get unemployment benefits for 99 weeks or whatever the timeframe is, once those 99 weeks end, aren’t I technically considered employed? [5:06]

JOHN: No. To be employed you have to have a job. What they call the Household Survey where they count the unemployed, they actually go around and survey 60,000 households or so each month. And they have a survey questionnaire that they use for determining whether people are employed or how many people in the household are unemployed or employed, but they don’t count the receipt of unemployment benefits as a factor in being defined as unemployed. So it’s separate from the jobless claims, and such now the fact that the jobless claims have come down some recently does not mean things are getting better.

What you have to keep in mind is that we have been in the most severe and most protracted economic downturn seen since the Great Depression. And this has been – the economy began to collapse in, certainly by the end of 2007 – and I mean collapse; we had a sharp decline in economic activity. And right now we are seeing nothing but stagnation or bottom bouncing at a low level of activity. So what might have been historic norms, when you were looking at much smaller recessions, don’t apply here. You have people who have been laid off, businesses that have cut to the bone wherever they can and the fact that you don’t have quite as many layoffs as you had doesn’t mean things are getting better. It just means that you have fewer people to lay off.

There are two sides to that: the one side is the jobless claims; the other side is the hiring. There are no good measures of that, but the Conference Board puts out a help-wanted index. It used to be with newspapers which were a – that was a very reliable, good indicator over time. The internet has taken over in that area and now they have what they call an online help-wanted advertising. It’s not as good a quality; it doesn’t have a history that the newspapers did. The most recent numbers, even though they are up overall, the number I would look at there is the new ads for advertising for hiring people. That actually declined in the last month and that’s not a good indicator. Everything we’re looking at here suggests we’re not seeing an economic recovery and that’s tied largely to inflation. The inflation has created an illusion here with some of the statistics. [7:26]

JIM: John, do you think this is one of the reasons when they keep doing survey after survey – and I think they just did one recently where over 80% of the country still feel we’re in a depression – is these numbers that you’re reporting, which are over 20%, are probably more reflective of what’s actually going on in the economy? [7:47]

JOHN: I believe so. Again, the average person has a pretty good sense of what’s going on. And if they look globally and they know things are not doing well, they will tend to extrapolate that into a national level. They hear the government’s numbers, but they tend to disbelieve them and there’s good reason for that. The government’s numbers don’t reflect what’s going on. It’s a matter of how they define it. They put in happy definitions that tend to give them a better economic result with lower inflation rates. [8:16]

JIM: Let’s go on to the second graph that you have on the front of your website which is the alternative inflation rate, and they are both tracking from what the government reports, which is CPI-U, and then you have your measure. And your measure is probably closer to around 6% right now. It has been coming down so that might line up with Bernanke’s comment that the inflation pressures have gotten a little better, but they’re still at 6%. When you consider that people are getting 2% on a 10-year Treasury note, when the real inflation rate is 6%!

So let’s talk about the difference between your numbers and let’s say the numbers that are reported every month by the government. [8:57]

JOHN: Sure. With the CPI, the Consumer Price Index the government’s broad measure of inflation, there you have something that is much more egregious, and really, sinister as far as I’m concerned in terms of what the government has done. You have to go back to the days of Mr. Greenspan in the early nineties, and Michael Boskin, who’s then the chair of the Council of Economic Advisors. They were beginning to protest that the Consumer Price Index overstated inflation. And oh, well, maybe we could correct that and get a lower inflation rate. That would help us reduce the deficit because it would reduce the cost-of-living adjustments for Social Security and such. Well, that’s something you’re seeing politicians playing with academic economists; in theory, it should have no relationship to the way people look at things. Again, it’s a matter of definition.

The average person when he thinks of inflation, at least what he thinks the government is reporting, he assumes that it reflects out-of-pocket expenditures and it reflects the inflation that you’d need to match if you wanted to maintain a constant standard of living if you were using the inflation measure to target your wage or salary or if your wages or salary are automatically adjusted by that or your pension or Social Security payments are adjusted by that. Or, if you are using that to set a downside limit to your investment target, you certainly want to beat inflation when you’re investing your funds. That’s not going to help you much if you can’t stay ahead of inflation.

So if the government is giving you too low of an inflation rate – which they are, and I’ll explain why – you’re really being cheated on a number of fronts and the government is not being honest putting that forward because they are using it to cut entitlement payments. (They’re trying to advance that further in terms of forthcoming budget deficit cuts with an even worse consumer price measure in terms of its significance.)

But what’s happened here? Go back in time to when this was used first in the cost of living adjustments in the auto union contracts. What they measured is what they called a fixed basket of goods. They’d take for example, let’s say they’d measure the price of a pound of beef or a gallon of gas or a loaf of bread, they’d price them out in current prices, and the next year they’d price out that same basket of goods. And whatever the change was in the cost of that basket of goods, that’s effectively how much your income had to go up in order to maintain a constant standard of living.

Now, getting back to Messrs. Boskin and Greenspan, if you ask Mr. Greenspan: What do you mean the CPI overstates inflation? His response was, well, let’s say the price of steak goes up, people are going to buy more hamburger and they buy more hamburger, their cost of living is going to go down. So really the CPI is overstated.

And Boskin would use the same example, only he would use people buying chicken instead of steak. Well, depending on how you define cost of living, if you use their definition, that is a cost of living but it’s not the cost of living of maintaining a constant standard of living. The government redefined it to make it maintaining a constant level of satisfaction, where you’d get to trade off dollars against your level of satisfaction. So if steak becomes too expensive and you don’t have the money to pay for it, you’re going to be satisfied buying hamburger instead of starving. That’s not what the average guy’s looking at or expecting here.

The other thing they did is they introduced hedonic adjustments, which are quality adjustments. Quality adjustments are legitimate. Let’s say the surveyors for the Bureau of Labor Statistics, who go out each month and measure prices at all sorts of different locations, all sorts of different goods, let’s say the price of an 8 ounce candy bar; and the next month they go to price it and the package is the same but it’s a 6 ounce candy bar. They will pick that up; they look for it and they will mathematically adjust for that, so that you’ll actually see inflation because you’re getting less candy bar for the money.

They then look at what they started introducing in the 1980s with these hedonic adjustments that would make quality adjustments to goods. They would have econometric models that would estimate quality improvements that you could not directly measure. And if you can’t directly measure it, the guy who’s spending his money isn’t looking at that as an out-of-pocket expense.

An old example was when the government mandated change in gasoline prices; they mandated a reformulation of gasoline to help the quality of air that came out of exhaust pipes. The effect was that it added 10 cents per gallon to the cost of gasoline; that was a big percentage back in those days. They didn’t count that in the CPI because it was not a quality improvement that the average person would look at or quantify in their out-of-pocket expense measure. The guy pumping his car full of gas is moaning and groaning that he’s paying an extra 10 cents per gallon, he isn’t thinking “I’m spending 10 cents a gallon here to make the air better.” [14:26]

But getting into a little more nebulous area, they have hedonic adjustments for all sorts of things, including college textbooks. Now, one of the factors that goes into how the computer model will quality adjust the books is whether the books have color pictures in them. This is textbooks. Now, the average student, unless he’s an art student, most likely does not care much whether he’s got black or white or color photographs in the textbook. His concern is how much am I out of pocket for my textbooks this semester. And the cost of the increased books gets mathematically shifted to reflect these nebulous measures.

The effect is – and there’s been some press on this recently. The government puts out the headline numbers, the Consumer Price Index All Urban Consumers, that’s the CPI-U. They also have the CPI-W which is for wage earners; it’s more of a blue-collar measure. It’s one that they use for adjusting Social Security payments et cetera. It tracks very closely to the CPI-U. But the Bureau of Labor Statistics said, oh my goodness, in that we have such a perfect measure now with all these adjustments – and this is really a Rube Goldberg index because they’ve done things to this that really make no sense. They’ve just tried to bring down the reported level of inflation as much as they could. They said, oh, if only we could take these back in time and restate history. Well, they did. They created another index called the CPI-URS (for “research study”). And so they take that back in time and they say, well, we’ve compared those two going back in time and the average difference per year is only half a percent.

Well, that’s accurate to a certain extent. What that half a percent reflects in a period of time before 2000 when the bigger changes were made, that’s the incremental reduction each year, roughly, as a result of all these methodological changes. The problem is if you’re looking at it going back in time, you can say that’s half a percent a year, but coming forward in time it’s cumulative. And coming forward in time, starting back in 1980 you see a difference of roughly 5 percentage points; in other words, 2 percentage points on top of that in areas that the Bureau of Labor Statistics doesn’t consider methodological.

But the effect is order of magnitude 7 percentage points that they’re now understating the inflation if you base on the 1980 methodology. If you base it on the 1990 methodology, it’s around 3%, which gets you up into the 6-plus percent range right now. So what I do with my estimates is I estimate what the current inflation would be if these changes had not been made using what the government’s published as the effects of the change. I have an additive system. I add back in the amount the government has said it’s taken out. So that with inflation somewhere – you can argue certain elements of it, but you know, running somewhere between 6 and 10 percent right now, nobody is staying ahead of inflation with anything that’s available in the domestic financial markets that’s reasonably safe, except for something like gold. I mean, over time, gold picks up the actual inflation.

In fact, if you go back to 1933 when Roosevelt abandoned the gold standard, since then the purchasing power of the dollar has dropped about 98 percent. That’s been fully covered by gold. And gold has actually covered more than the drop in the purchasing power based on the CPI-U if you look at my estimated adjusted work and try it out on the markets. [18:31]

JIM: John, a final question if I may. Come January 1st of next year, they’re calling it a “fiscal cliff.” We have the 1.2 trillion dollars of budget cuts that was agreed to last August when we had the debt-ceiling debate. And then on top of that we have the repeal of the Bush tax cuts, you have the repeal unless extended of the Social Security tax cuts; you have a 1.2% tax increase coming from the phasing out of itemized deductions for people in the certain income group; you have a 0.9% additional Medicare. So if you’re making 250, you could find yourself in a 45 percent tax bracket. Then you have the 3.8 percent additional tax on investment income capital from interest, dividends, pensions to annuity payments and real estate.

With the economy growing anemically at best, even if you want to take the government’s numbers at face value, at 2.2 percent, and given the fact that we’re in an election year where there’s no stomach in Congress to do any budget cutting, I mean, heck, the president can’t even get his own budget voted on by his own party. We haven’t had a budget in this country for over three years. What’s going to happen? I mean these guys have got to know, you cannot raise taxes 45 percent and cut 1.2 trillion from the budget and you think you’re going to have a booming economy. [20:05]

JOHN: Well, no chance of a booming economy. The deficit reduction is a fraud and the higher taxes will hammer the economy deeper in the ground. What can I tell you? Right now, disposable income, which is basically take home pay (after tax), adjusted for the government’s inflation is not growing. You can’t have any growth in the economy unless you’ve got real growth in income. The only way that consumption can grow faster than income is when you have debt expansion, and you don’t have either because of the debt crisis and the ongoing solvency issues of the banking system.

So you take a system that at best is showing flat disposable income, take the gimmicks out of it and you’re probably dropping 5 to 10 percent per year with disposable income after inflation adjustments. The taxes just make that worse. And again, that will severely hurt economic activity. In terms of the budget deficit, these guys are fraudsters. What can I tell you? You have a circumstance here where their budget deficit that they’re cutting is spaced out over 10 years; most of it is cutting the pace of increase in the deficit. They’re not really cutting the deficit per se.

All the budget projections are based on presumptions of 2 to 3 percent growth in the economy. We’re not going to have that. We don’t have that now. And with the weaker economy, you’ll end up with a much bigger budget deficit.

If you put in realistic projections of economic growth, that would more than offset this purported declines in the deficit. The deficit circumstance – they’re not doing anything serious here. Nothing is going on that will address the government’s long term solvency issues without a major change in political Washington. That may happen with the election, but it’s certainly not in place at the moment.

I don’t mean to sound like I’m getting upset here, but I really am upset with these guys. Where we are is a place we never should have gotten to, and the people in Washington know that and they’ve know where we’ve been going a long time; they’ve been playing politics with it. [22:19]

JIM: I’ve always marveled, John, when you look at Washington, they count a budget cut – let’s say I’m going to increase spending by 8 percent but I’m going to scale it back to 4 percent increase. They call that a budget cut. I mean look at the way the president has gone after Paul Ryan who’s not going to cut education spending. But if you listen to the president, we’re going to throw students out of the universities. I mean do you think they think we’re really stupid? [22:49]

JOHN: Yes. Absolutely. They’ve thought that for a long time. And to a certain extent it’s proven to be accurate with some of the voters. This is going to be a very interesting election year because the voting populace is not too happy with what’s happening with the economy; the average guy is feeling some financial pain and that usually leads to a change. But you need a real change here. You need someone in Washington actually addressing the problems and I just don’t see that happening, which leads to further disaster down the road – and not too far down the road. [23:47]

JIM: Yeah. I would say just looking at the numbers and the way that they’re growing that inflation scenario, I think, correct me, isn’t it still 2014? [23:35]

JOHN: 2014 I believe we will be in a hyperinflation. Yes. [23:38]

JOHN: All right. Well, listen, John, as always, I want to thank you for joining us on the program. And if you’re listening to this and you really want to understand why maybe what you hear on television doesn’t line up with what you see in reality, I highly recommend you go to John’s website – even better, get his newsletter – because John breaks out all these numbers and you get the real facts.

The website is called www.shadowstats.com. That’s all one word. And we’ve been speaking with its proprietor John Williams.

John, thanks for coming on the program. [24:09]

JOHN: Thanks so much for having me, Jim. [24:11]

Ron Paul has made legalizing gold and silver a central part of his campaign. He has written books about the Federal Reserve and brought the subject into the mainstream from the fringe in a few years due in large part to the housing bust. Still most people have no clue as to why using gold and silver as currency would benefit them.

Here is the short version…

First with modern credit cards and electronic banking we would not go back to the days of carrying around dirty gold and silver. What would happen is banks would issue ATM cards backed by physical gold or silver. Transactions would occur much as they do today with the swipe of a card. No need to carry cash or coins around if that is not desired.

Dollars would be issued by the bank and redeemed at clearing houses like in the first half of the 19th century. This is a simple process, bank ABC issues $100 of currency to John. John spends the $100 at Wal-Mart in the from of bank notes or his ATM card. Wal-Mart takes the $100 and deposits it at their clearing house, similar to clearing a check, and gets credit for the gold or silver that can be physically secured and removed from bank ABC to Wal-Mart XYZ bank. Its that simple.

The advantage of this is the government does not issue money. The government is financially treated like everyone else. They have an account. They have a budget. If they do not balance the budget they can go broke or are forced to plead for help. This happened in 1907 when treasury Secretary Chase issued federal notes not backed up by gold. J.P. Morgan and friends had to bail out the federal government. A gold standard would force government to balance their budgets or go to voters demanding more gold and silver. Not a pleasant proposition in 1907 or today.

Redeeming paper for gold is referred to as “species” payment. This occurred for US citizen up to 1933 when FDR outlawed the practice. Before 1933 any citizen could redeem paper dollars for physical gold at any bank on demand. This kept the federal government from inflating the currency.

So what’s in it for the average person?

Why is printing more money bad?

The gold standard helps the average consumer by keeping inflation at zero and prices declining.
Now for the boring, but essential example of a zero inflation economy.

This example is from the late economist Murray Rothbard.

If the USA has $200 in the economy and there are only three companies producing goods they will compete directly for that $200. This was referred to as “messy competition” by the capital owners of the 19th century.

Company A initially produces 2 units of mouse traps at $15 for total revenues of $30. 2 x $15=$30.

Company B initially produces 10 units of gas at a price of $5 for total revenues of $50. 10 x $5 = $50

Company C initially produces 20 units of silk at a price of $2 for total revenues of $40. 20 x $2 = $40.

This leaves $80 in savings. The demand for money would put the interest rate at say 5% for this example.

The total money in the economy is $200. $120 spent on consumption and $80 on savings.

Now what happens if company A builds a better mouse trap?

You knew that one was coming. Company A is able to reduce the production cost dramatically through new technology and can now sell their mouse trap for $10 instead of $15. Everyone is ecstatic about the new mousetrap and sales climb to 4 units.

But when that occurs total revenue climbs from $30 to $40. 4 x $10 = $40.

What happens to the other two competitors and savings?

Company B and C must hope the demand for money is such that they can maintain their price levels. More likely this will not be the case and then they will be faced with the choice of lowering their price to maintain sales or losing market share and maintaining their current price.

Understand what that means.

Industrialist hate having to constantly lowering prices and finding ways to save money whenever a competitor improves their productivity. Lower prices are good for consumers and a headache for capital owners. Competition is indeed messy under a gold standard.

Company B must choose to lower its price to $4.50 to maintain its market share of 10 units, total revenue now equals 10 x $4.50 = $45, or keep their product priced at $5 and lose 1 unit of market share, $5 x 9 = $45.

Company B did nothing wrong, they simply have to keep pace with the changing economy, which benefits the consumer, not company B.

Deflation allows consumers and retires who do not get regular pay raises to benefit in the increased productivity of society by allowing them to purchase more goods on their fixed income. Inflation robs them of purchasing power and transfers this wealth to capital users and the creators of new money.

Company C must lower prices from $2 to $1.9 losing revenue on sales of 20 units lowering revenues from $40 to $38. The alternative would be to keep prices at $2 and lose one unit of sales, $2 x 19 = $38.

The total revenue was $30+$50+40 = $120 but is now $40+$45+$38 = $123.

There has been an increased demand for money, $3 more, to be able to purchase the better mousetrap and take advantage of the lower prices offered by company B and C.

So what happens to savings?

The pool of loadable funds decreased from $80 to $77.

When this happens bankers will have less capital to lend and must then charge a higher interest rate for the remaining capital. These higher savings rates will eventually attract more savers wishing to take advantage of the high rates on their certificates of deposit, more deposits will be made, and the interest rates will decline again.

This cycle is critical to understand.

Under a gold standard when the economy is “hot” consumers feel good and demand money. Savings are depleted and interest rates go up.

When interest rates go up this is a signal to capital users to NOT invest.

The cost of money is too high and capital users will postpone high order capital projects to a later date when the interest rate is lower.

When the economy “cools” down and consumers become fearful they will choose to put their money into the bank, interest rates will fall, and capital users will want to take advantage of the lower rates to build higher order capital projects like new factories and natural gas plants.

There is a constant interaction between consumers and capital users, the majority of both are not consuming and building projects at the same time.

Why is this so important?

Because this is EXACTALLY what happened with the housing boom.

When the 2001 recession was over consumers started making purchases again and the Federal Reserve artificially LOWERED the Federal Funds rate to 1%! The opposite of what would have happened with a gold standard.

Both groups were given the green light to spend, spend, spend, and the inevitable result was the boom followed by the bust. Eliminating the Federal Reserve would prevent much, but not all, of the boom-bust business cycle.

Simply put the gold standard rewards savers, consumers, thrifty corporations, and distributes money in a just and efficient manner. Foolish spend thrifts and inefficient corporations are punished severely with a gold standard. This would include federal, state, and local governments, banks, and Fortune 500 corporations.

Would society have raised billions needed in gold or silver to bail out the banks in 2008?

Printing cash is cheap and painless for central banks and governments, the real cost are passed on in the form of invisible inflation to the 310 million uninformed economically illiterate Americans. A despicable dirty act by the Federal Reserve and Washington politicians.

Our central bank prints billions of counterfeit money every year that rewards special interest and robs the people of their earnings through inflation. Instead of deflation consumers get a constant barrage of inflation that very few are educated about and overwhelmingly are victimized by it in their most vulnerable retirement years. Economic illiteracy cost Americans billions.

What about the real world?

Is this for real?

From 1862 to 1879 the US used greenbacks, paper money, and returned to species payment in 1879.

Under a return to the gold standard from 1879 to 1897 prices fell 1% per year. GDP growth averaged 3.7% per year. From 1879 to 1889 the CPI declined 4.2% and wages rose an astonishing 23%. An increase in earning power for the average American of 27%!

Imagine if in this decade the average purchasing power parity for the average American went from $48,100 to $61,000. $13,000 more to save, spend, invest, for every man, woman, and child. This is what the reality was for the average American under the gold standard and why the Democratic Party fought for decades for “hard money.”

Interest rates declined from 5.98% in 1879 to 4.43% in 1889. Per capital income rose an astonishing 46% from the previous decade where greenback paper dollars were used for money. GDP rose 84% from the previous greenback decade.

Compare that decade to the increase in prices of 2,241% since 1913 when the Federal Reserve was created. $1 dollar today would be worth 4 cents in 1914.

Printing money is theft. The theft benefits the elites on Wall Street and the federal government. It is nothing more than stealing from the American people by deception to support a selected few. In the coming decade Americans will have a chance to put out of business our third central bank, hopefully with a constitutional amendment. Nothing good comes out of legalized plunder.

Washington and the various data collection agencies have for years now been telling the American public that the economy has been improving. It’s a lie. They know it and thinking Americans know it. Here are six graphs that bring home the state of the economy today as seen by the average American.

The first one is the most damming, Social Security tax collections are down 6.6% from the peak of $973.1 billion in January 2008. Even with the payroll tax cut of 2011 (12.4% to 10.4%) this is a good proxy for the wages of Americans because everyone pays this tax.

Would it be safe to conclude workers taxed wages are down 6.6%?

The second graph is real disposable personal income that is down 5.9% from May 2008. Since Obama was inaugurated there has been a slight drop from $32,814 to $32,600. In return people are getting EBT cards and dependence.

The third graph is the employment level. Since November2007 the US economy has lost 5,706,000 jobs that have not returned and increased the debt $5.993768 trillion.

The fourth graph is corporate profits. Corporation are making record profits of $1.493 trillion in October 2011.

With record profits there should be a recovery?

Hiring should resume and happy days are here again?

No.

As pointed out above what is happening is a transfer of wealth from the middle and lower classes to the elites in Washington and Wall Street. The transmission mechanism is the Federal Reserve and printing money. When new money is created the institutions in line first get to spend the money for goods and services at old prices. Consumers pay for the counterfeiting operation in the form of inflation tax.

Large corporations have staffs of accountants, economists, and finance majors monitoring cost and passing the corporations cost onto consumers much more rapidly than consumer income grows. Smart business staffs are not looking at the inflated profits but the REPLACEMENT cost of production.

If a corporation sells its goods for $1,000 and the previous sale made $800 the corporation could be deluded into a false sense of prosperity. If the staff falls for the central bankers’ trick they will hire more staff than is needed and make investments that will prove to be not needed sowing the seeds of bankruptcy. If it cost $1,200 to produce the same batch of goods today due to inflation they have lost money and they will soon go bankrupt if they choose to expand. Economist Peter Schiff refers to the current profits as “fake” profits that will disappear like the wind in the future.

Corporations know the “profits” are nothing more than money creation and most are unwilling to expand in an economy with a shrinking tax base and lower purchasing power for the average consumer.

Inflation is the largest single contributing factor in the increasing income equality between the rich capital owners, government and the rest of society. Simply put governments can raise taxes, issue bonds, and keep pace with inflation. Corporations can raise their prices to keep pace with inflation. When the job market is saturated with millions of unemployed workers looking for a job wages will decline.

The final two graphs, the money creation. The first is the monetary base up 200% since the TARP bail outs.

The second is the Federal Reserve ownership of federal debt, monetizing the debt, up 238% since Obama was inaugurated.

The direction the country and economy will go is limited at this late stage. There are four options on the table.

1. War. When Hoover’s, Roosevelt’s, Hitler’s, and Stalin’s central planning policies failed WWII erupted.

2. Austerity. The citizens of a country get taxed at exorbitantly high rates so the elites who own the debt can be paid back. The current economic policy of the Greek government. To hell with the peasants, the elites must maintain the standard of living they have become accustomed to.

3. Inflation. The same as number two except the tax increase comes from the printing press and show up at the supermarket.

4. Default. The best option for the people. Hit the reset button and start society over again. No Social Security, Medicaid, or government hand outs. The death of the age of legalized theft aka the welfare state.

When will the default come?

When inflation cannot be ignored and the Federal Reserve is forced to raise interest rates. That day will come.

Florida State Representative Steve Precourt authored HB 7209 in the 2010 legislative session to revise the Florida Public Service Commission (PSC).

The Florida Public Service Commission is “committed to making sure that Florida’s consumers receive some of their most essential services, electric, natural gas, telephone, water, and waste water in a safe, reasonable, and reliable manner. In doing so, the PSC exercises regulatory authority over utilities in one or more of three key areas: rate base/economic regulation; competitive market oversight; and monitoring of safety, reliability, and service.”

HB 7209 puts the PSC staff under the direction of the governor and Cabinet, here are some of the provisions in the bill;

1. Providing that the (commission) office shall have access to certain records of a telecommunications company and may require a telecommunications company to file records, reports, or other data; specifying limitations on the authority of the commission to access records; providing for the office to maintain confidentiality; amending s. 364.18, providing powers of the office to investigate and inspect 113 telecommunications companies; removing such powers from the commission.

Comment, transparency is in the public’s interest, not “confidentiality.” Government sanctioned monopolies should not expect, nor receive any confidentiality.

2. Amending s. 364.335, F.S.; revising the authority of the commission to institute a proceeding to determine whether the grant of a certificate of need concerning construction, operation, or control of a telecommunications facility is in the public interest.

Comment, there is always some good in any bill. Reducing bureaucracy is generally a good thing.

3. Amending s. 364.3376, F.S.; providing for the office to conduct certain investigations; amending s. 364.3381, 121 F.S.; revising the authority of the commission to investigate allegations of certain anticompetitive practices; amending s. 364.37, F.S.;

Comment, it is the job of the commission to investigate anticompetitive behavior. This is similar to a law that would prohibit prosecutors from investigating murder cases because the politicians do not want to offend certain ethnic groups with high murder rates.

4. Revising the authority of the commission to fix rates of water and wastewater utilities or implement changes of such rates; amending s. 367.0814.

Comment, utilities should be free market orientated, there should be more competition but the unmitigated gall of these utilities to pursue government authorized and sanctioned monopolies and then remove the oversight and let politicians perform the oversight is beyond the pale of decency. Shame on these people.

Republican Senator Mike Fasano said; “the bill was probably written by utility companies.”

He is probably right. The 88 page bill reads like a wishlist for the monopolies.

“That’s the big one,” Precourt said referring to the bill. “There’s some legitimate concerns about how to transfer into this Office of Regulatory Staff from what we have now. I would say that’s the toughest part to do.”

But asked if the plan might be jettisoned to increase the likelihood of a PSC reform bill being signed into law this year, Precourt held firm.

“They’re all vital parts to me,” he said. “I’d like to have the whole package.”

And the plans will likely not be combined, he added. “I would rather not mix and match the specific language of the bills, but they affect each other.”

Florida consumers know how much utility costs have increased and utility companies spend millions of dollars each year lobbying politicians.

In 2009 Florida Power & Light requested a $1.3 billion rate hike. PSC Chairman Nancy Argenziano led the fight against the rate hike.

Utility related special interest groups in Tallahassee supported the Associated Industries of Florida (AIF) backing the rate hike (Florida Power & Light is on the board of Associated Industries). AIF President Barnet Bishop requested an ethics investigation of Argenziano and eventually she was replaced on the commission.

In 2010, Precourt drafted and submitted the reforms to the Public Service Commission. The Precourt bill would essentially put the legislature in charge of the PSC. Argenziano said “putting politicians who get millions of dollars in contributions in charge of setting rates” is a disaster for consumers.

Argenziano was eventually kicked off the Public Service Commission, and said; “There is no counterbalance to special interest influence upon the legislature, no citizen/ratepayer group, certainly not the elected representatives. Money talks in Tallahassee, and it speaks more loudly each campaign session. It has spoken loudly in this matter.”

Precourt’s campaign contributions list show he was given money from Associated Industries and the utility companies.

In 2006 AIF gave Precourt an estimated $2,700.

In 2008 Precourt received contributions from Progress Energy and TECO Energy.

In 2010 AIF gave Precourt another $1,000, and FPL gave $1,000.

In 2011 AIF gave Precourt $500 and the General Electric Company $500. Other contributors include Exxon ($500) and TECO ($500). Precourt’s contributions in 2011 are over $100,000.

The same contributors that gave in 2011 and are likely to contribute on Precourt’s 2012 contribution reports. To get a idea of how big these special interest are here are a few of Precourt’s contributors past and present;

A Duda & Sons
ABC Liqueurs
Bank of America (15% market share)
Bell South
C.T Hsu & Associates
Dewitt Construction
Disney Worldwide Services
Exxon Mobil
Florida Home Builders Association
GEC (civil engineering)
Humana
Mark Israel principal owner of Universal Engineering Sciences (UES)
JMHC (construction)
Lykes Brothers
Mears (transportation)
Municipal Electric PAC
Orbitz
Pfizer
Publix
Seaworld
TECO
Universal City Studios
Walmart
Walt Disney
Waste Management

Higher utility rates are bad for our economy because it drains consumers of disposable income. For elected officials to side with energy monopolies betrays the trust of the taxpayers and voters.

Unfortunately very few people follow politics in Tallahassee, and for those that do we know that special interests have far too much influence.

Politicians that are truly for the people should support free utility markets where the conditions permit that will ensure competition will drive the price of services down.

In the absence of these conditions the government sanctioned monopolies have absolutely no expectation of privacy or independent authority to influence or set utility rates. Being granted monopoly status is not a free market and free market rules do not apply.

Government sanctioned monopoly utility companies should expect to be transparent and regulated.

When we look back on it ten years from now virtually everyone will understand the magnitude of the monumental blunder George Bush, Hank Paulson, Nancy Pelosi, Harry Reid, and Ben Bernanke made in bailing out the too big to fail banks. Not only did our central bank print trillions but in the process created a monster. Dictatorship by fiat.

Prior to 2008 there was consolidation in the banking industry. This has been going on for decades. In 1994 the four firm market share concentration was 11.8% for the ten largest states. The four largest banks controlled 11.8% of the market. In 2000 the four firm market concentration was 21.44% and by 2007 it had grown to 29.66%. Clearly before the 2008 banking crisis there was consolidation occurring in the banking sector. The largest banks had gained an astonishing 17.86% market share in 13 short years.

How?

The top four, Bank of America, JP Morgan, Wells Fargo, and Citibank were all involved in aggressive mortgage lending to the subprime marketplace. When their gamble failed they should have been allowed to go bankrupt and the banking sector would have reverted to its previous fragmented past market structure. Instead the bail outs rewarded these banks for their reckless behavior.

So what happened?

In 2008 the four firm concentration ration INCREASED to 32.03%. Despite their failures they captured market share thanks to the US taxpayers.

In 2010 the financial “reform” bill Dodd-Frank was passed that has put thousands of financial workers into the unemployment lines. Dodd-Frank placed a huge regulatory burden on the industry. Small banks that could not afford the accountants and lawyers needed to comply with the oppressive rules and went out of business, forfeiting their market share to the bigger banks. Since Dodd-Frank has been passed there are 334 fewer banks in the United States. Since 1994 we have went from 10,767 banks to 6,236.

But not everyone was a loser with Dodd-Frank. Dodd-Frank helped the too big to fail top four banks who now enjoy a 42.06% market share in the top ten states. The eight firm concentration ratio is now in the moderately concentrated area of over 50% of the market share. Instead of decentralizing the banking system in 2008 now there will be a continuous march towards centralization and oligopoly market structures.

The key characteristic of oligopoly competition is firms DO NOT compete on price the vast majority of the time. Oligopolies predominantly compete on service, features, and style. This means price fixing is almost assured and it will be perfectly legal. When there are 2 to 8 firms that dominate an industry is a very simple matter to look at a web site and see what a competitor is charging for xyz product. If the price is not in line with the maximum profit levels it is a simple task to advertise the product or service at BELOW MARKET COST to “discipline” the competitor. No direct communication is necessary for oligopolies to fix price, simply monitoring each others web sites and occasional Nash equilibrium gamesmanship will achieve maximum profit levels.

For the consumer this means they will receive gold plated service at a gold plated price. Instead of a 2% to 4% spread above the inflation rate banks will likely raise the spread to 3% to 5%, or more. The more concentrated the market share to easier it is to fix prices. Since Dodd-Frank has been passed there are 334 fewer banks in the United States. Since 1994 we have went from 10,767 banks to 6,236.

If the TBTF banks had been allowed to go out of business banking would have become more decentralized as the well managed surviving banks grabbed the 32% market share from the failed banks. Some economists estimate a 50% bank failure rate without the TARP funds. Let them fail.

What should be noted is that 2008 was pivotal in that there was a chance for the free market to punish the drive for a select few to create oligopolies in the banking industry and government stepped in and intervened on behalf of the reckless TBTF banks.

Instead the reckless industry standards were encouraged by the federal government during the housing boom by both congress, Maxine Waters, Barny Frank, Chris Dodd, and the Federal Reserve, Alan Greenspan’s 1% Federal Funds interest rate policy that created the cheap money that fueled the boom. No doubt in the back of Greenspan’s, Dodd’s, Frank’s, Waters, mind where the realization that they had created the biggest financial crap pile in the history of mankind, most likely bringing about the financial downfall of the United States. The least they could do was to get Federal Reserve Chairman Bernanke to bail out their friends and exit stage left.

We the people are left with the mess from their crap pile.

Florida Congressman John Mica has long been thought to have been the biggest supporter of Sun Rail in Central Florida. But the $1.2 billion Sun Rail project needed a special session in Tallahassee and support from state elected officials to become a reality. Many Republicans supported Sun Rail but perhaps none more than Representative Steve Precourt.

Precourt comes from a civil engineering background and was a principal owner in the engineering firm DRMP as is still receiving compensation from the firm for his forfeiture of stock in the company. In 2006 approximately 34% of his contributors had ties to the construction industry and he still receives substantial financial contributions from the industry.

After a deadly train collision in, Representative Steve Precourt wrote an op-ed in the Orlando Sentinel that said the “tragic event in California should not obscure the fact that rail transit remains a far safer mode of travel than the automobile.” Precourt used the piece to make an “ardent pitch” for the CSX commuter rail project in Florida. “Providing transportation alternatives to the entire state is vital to our economy and the health of our communities,” he wrote.

But a look at the facts according to the CATO Institute reveals that since 1980:

15 U.S. urban areas that were once served exclusively by bus transit have opened new light-rail lines. Light-rail lines are also under construction in at least two other regions, and in the planning stages in several more; and several other regions have opened or are planning commuter rail lines that use existing tracks. Rail advocates claimed that rail transit would cost little to build and operate, attract people out of their automobiles, relieve congestion, and restore inner cities. Although most transit agencies that built these lines claim they are successful, an objective look at the evidence reveals that these benefits are just as mythical as the streetcar conspiracy.

1. A recent review of rail projects found that the average cost was 40 percent higher than the estimates made when the decision was made to build it.

2. The Government Accountability Office notes that bus rapid transit can cost as little as 2 percent as much to start, cost less to operate, and provide faster service than light rail.

3. A comparison of the cost of rail transit systems with the benefits provided by those systems found that, “with the single exception of BART in the San Francisco Bay area, every U.S. [rail] transit system actually reduces social welfare.”

4. The cost of rail transit is so high that many transit agencies have been forced to raise fares and/or cut back on bus service, leading to actual losses in transit ridership in such regions as Baltimore, Los Angeles, and San Jose.

5. Even in regions where transit ridership has increased, those increases rarely keep up with increases in driving; so in almost every new rail region, transit carried a smaller share of passenger travel after rail service opened than before rail construction began.

6. The American Public Transportation Association brags that ridership on light rail transit is growing faster than any other form of transit. But this is only because agencies are offering so much more light-rail service. The average number of trips taken per light-rail vehicle mile declined from 7.3 in 1995 to 5.2 in 2005, indicating that light rail is suffering from a serious case of diminishing returns.

7. Although Denver, Portland, San Jose, and other cities often claim that light rail stimulated economic development, such developments are almost always supported by large tax subsidies. At best, the developments that result from rail transit are a zero-sum game, that is, they merely transfer developments that would have taken place anyway from one part of an urban area to another.

So with so many negatives why is Precourt so insistent on light rail for Florida?

Florida construction revenues are down 47% from 2007 and to put it bluntly the industry is desperate for any project, good or bad.

Roger Neiswender, representing the City of Orlando on the Central Florida Commuter Rail Commission, thanked Precourt for “spearheading legislative efforts in the House.” In 2009 Precourt was a speaker at “Floridians for Better Transportation’s Summit,” where he gave an update on the legislative process to create not only Sun Rail but a statewide network of government rail systems. Precourt’s use of the words “entire state” above is critical because Sun Rail is just the beginning of a $66 billion rail project.

Floridians for Better Transportation (FBT) is a statewide business and transportation association created in 1988 by the Florida Chamber of Commerce, to ensure an “adequately-funded transportation system.” Members include Florida Transportation Builders Association and the Florida Institute of Consulting Engineers, companies that profit from rail projects.

Precourt lobbied then Governor and former Republican Charlie Crist to hold the special session that concluded with the Florida Rail Enterprise Act, Sun Rail, and the planned statewide network of government rail systems. The Lakeland Ledger summarized Precourt’s positions;

“State Rep. Steve Precourt, R-Orlando, said lawmakers are considering a tax on rental cars as a one possible funding source. “It will probably include a rental care surcharge,” he said.

So Orlando residents are going to tax tourist, making us more uncompetitive with other tourist destinations, to fund transportation completely unrelated to tourism?

The Ledger reported Precourt said he’s more confident this time that SunRail will make it through the full legislature.

“I’m a SunRail supporter, and it is a different animal this time around,” he said.

In 2010 Precourt landed a “TEA” party opponent with no name recognition or political experience. But in 2012, Precourt’s support of government rail projects and corporate welfare has landed him a serious opponent in former Orange County mayoral candidate Matthew Falconer. Falconer has strong grassroots support in his first campaign, has a rock solid conservative record, and has deep roots in Southwest Orange County.

The Tea Party versus the establishment. This one should be fun to watch.

The following appeared in Lew Rockwell on 4-9-2012.

The West’s governments are going to default, one way or another. Politicians cannot bring themselves to stop spending money the governments do not have.

The deficits of the major Western governments are now so great as to be irreversible. The governments must now borrow money to be used to pay interest on money already borrowed. In the housing market, this is called a backward-walking mortgage. It invariably spells default. The subprime mortgages were mostly of this type.

The West’s largest governments are therefore subprime borrowers.

Politicians no longer speak about politically viable plans to call a halt to these deficits. They speak as though revenues will come from some unknown sources. They talk of reducing the debt-to-GDP ratios in the distant future. This is subprime mortgage thinking. It always leads to foreclosure and bankruptcy. But this fact did not stop lenders, 2002-2007. It does not stop them today. Lenders lend 90-day money to the U.S. Treasury for eight one-hundredths of a percent. “What could go wrong?” Answer: plenty.

What will make the coming Great Default different from Rome’s will be the speed of its arrival and the magnitude of the contraction.

Birth rates have fallen everywhere outside the United States. The number of aged retirees in every Western nation, including Japan, is increasing relentlessly. The number of children born is falling. The end is clear. So is the politics of kick the can.

Unlike Rome, the West’s intellectuals have defended the spread of the welfare state by means of a system of ethics. It rests on a variation of the Mosaic commandment against theft: “Thou shalt not steal, except by majority vote.” So widespread has this revised commandment been that the electorates in every Western nation will not tolerate its rejection. Yet the economics of the deficits points to the operational failure of the welfare system.

The defenders of the welfare state will then have to explain this widespread collapse of the programs. How did such an ethically superior system fail? How did it lead millions of welfare clients to trust a self-destructive state? How did it mislead so many addicts to government handouts? How did it lead them into a ditch, devoid of skills to compete in the post-default world?

Answer: because the welfare state was ethically corrupt before it was fiscally corrupt. It is based on theft by majority vote.

We have seen what happens to the false messiahs of the messianic state. Western Marxists had a solid though small market for their fat books until the Soviet Union went bankrupt in the late 1980s and shut down in December 1991. Overnight, Marxism lost its academic defenders. They became as invisible as Baghdad Bob did on the day American troops marched in.

The Marxist system had been seen by Western intellectuals as intellectually viable, one of several legitimate perspectives. Then, overnight, it was regarded as a total failure, and – even worse for intellectuals – a fool’s quest, a bad joke. Marxism was rejected in theory because of its visible loss of power. The ethics of Western Marxism – in contrast to Marx’s rejection of ethics – had always been an illusion. Marxism had always been what Marx had said it was: a matter of power. Defenders who steadfastly had defended Marxism in theory if not in actual practice were no longer willing to do in public. They did not want to be identified with historical losers – losers of power.

If Marxism had been ethically based, it would not have faded overnight just because its power base collapsed. The true believers would have stayed the course. But Marxism was never about ethics. It was always about power.

So is the welfare state.

The defenders of the welfare state have come in the name of a higher ethics. When the system goes belly-up fiscally, these defenders will face the same sort of existential crisis that the Marxists faced in 1992.

They ought to be able to see that the welfare state is a fraud, a delusion, and an ethical monstrosity: charity with guns. They ought to be able to see that theft is theft, with or without majority votes. But they don’t.

To a non-thinking person the obvious answer would be yes. Taking from the rich and giving it to the poor has been a dream of peasants for thousands of years. It certainly makes sense on the surface.

President Obama has adopted this for his 2012 campaign strategy. Let’s call it the Robin Hood election of the poor downtrodden president versus the slick banker.

The nonthinkers look at the wealth of the elites and think it was ripped off from the hard working people and they are justified in stealing it back. In the case of the Federal Reserve and federal government they are correct, but they are too obtuse to understand economics and what is really going on and who the real thieves are.

So putting the politics aside what are the facts?

Can the federal government reduce poverty?

On one word a big resounding NO!

The federal government makes the poverty problem worse.

How do I know?

Looking back at recent poverty rates we can see a clear pattern in the 1990s that as the federal governments share of the Gross Domestic Product (GDP) was reduced under Clinton the poverty rate declined, and more recently as the federal government expanded poverty increased.

In 1993 the federal government consumed 21.4% of the GDP and the poverty rate was 15.1%. There was a budget deficit of 3.9% of the GDP and the economy was coming out of the Savings and Loan bust. Let’s compare the size of the federal government to the poverty rate and see if there is a relationship.

Year………Federal Spending……Poverty Rate…..Deficit as a percent of the GDP
1993………21.4%……………………..15.1%……………….-3.9%
1994………21.0%……………………..14.5%……………….-2.9%
1995………20.6%……………………..13.8%……………….-2.2%
1996………20.2%……………………..13.7%……………….-1.4%
1997………19.5%……………………..13.3%……………….-0.3%
1998………19.1%……………………..12.7%………………..0.8% (Surplus)
1999………18.5%……………………..11.9%………………..1.4% (surplus)
2000………18.2%……………………..11.3%………………..2.4% (Surplus)
2001………18.2%……………………..11.7%………………..1.3% (surplus)
2002………19.1%……………………..12.1%………………..-1.5%
2003………19.7%……………………..12.5%………………..-3.4%
2004………19.6%……………………..12.7%………………..-3.5%
2005………19.9%……………………..12.6%………………..-2.6%
2006………20.1%……………………..12.3%………………..-1.9%
2007………19.7%……………………..12.5%………………..-1.2%
2008………20.8%……………………..13.2%………………..-3.2%
2009………25.2%……………………..14.3%………………..-10.1%
2010………24.1%……………………..15.1%………………..-9.0%
2011………24.1%……………………..15.6%(authors est.)-8.7%
2012………24.3% (WH est.)……16.0% (authors est.)-8.5% (WH est.)
Note, WH = White House estimate and the authors estimate.

The pattern is evident; less federal spending lowers the poverty rate. It is not a perfect fit, but the trend is obvious to all but the dullest among us.

I included the budget deficit because when the federal government borrows money it has to come from people who forgo spending or the Federal Reserve printing money, officially the Federal Reserve buying federal government debt.

The Federal Reserves ownership or “monetizing the debt,” of federal securities has increased 238% since Obama entered office, $1.66 trillion. This is extremely inflationary and moves income from consumers to capital owners. Consumers generally get pay raises once a year whereas capital owners can raise prices on their products as much as desired over the course of a business year. This creates more wealth inequality and poverty.

The second part of the borrowing involves taking money out of the marketplace and using it for government projects that will fail.

How do we know they will fail?

If government projects were economically viable the private sector would have already financed them. For every 100 Solyndras out there we might get one winner. The reason companies have to beg for money from the federal government is the private sector has calculated, overwhelmingly correctly, they will fail.

So why do we want the federal government removing capital from private markets and investing it in companies, projects, that will not be sustainable?

Its economic suicide and creates poverty when the workers lose their jobs.

But what about the rich?

One of the big glaring economic fallacies of Keynesian economics and class warfare is that the rich sit on their money and drink mai tai’s all day. To Keynesian economist this is a waste and the money should be taken from them and given to the poor man on the street who will spend the money creating jobs. The magical “marginal propensity to consume” effect.

What really happens is the rich man probably did not get rich by mistake. He learned to invest his money and knows inflation will eat away his savings if he does not invest wisely. He will take is money and invest it into a bank where other people will have access to his money and make loans that will build houses, hospitals, schools, roads, that will in turn create sustainable jobs and wealth for all of society.

The second most likely alternative is the rich man will invest in stocks. The value of these stocks can be used as collateral, financing, and other uses that benefit society.

The class warfare argument that a rich mans money is wasted and is better off given to the poor man is false. Economically, in the long run, society, and the poor man, are better off building a new road, hospital, school, shopping center, than giving someone “free” money and the money being spent on instant gratification.

Is the poor man better off starving now and getting a permanent job latter?

Most people would think so.

Conservatives in 2012 need to know the facts about poverty and its relationship to the size of the federal government. When the class warfare argument comes up they need to throw it back into the statist lap and ask them if they care about the plight of the poor then why do they support big government?

The lowest the poverty rate has been in two decades was 2000, 11.3%, when the federal government’s share of the GDP was the lowest it had been in 34 years, 18.2%.

As simple as the Robin Hood argument is so should be the conservatives’ argument that the more the government takes from the people the less money the people will have to spend.

On March 5th, 2012, the Florida House voted on House Bill 1399 that included a provision to remove the only elected official from the Orlando-Orange County Expressway Board; Mayor Teresa Jacobs. The removal of Jacobs from the Board created a controversy and pitted Tallahassee politicians versus local governments.

Jacobs however remains on the Expressway Board because the Florida Senate refused to allow the amendment removing her.

Why the Florida House wanted Jacobs out depends on who you ask. Many believe future Speaker Dorworth wanted Jacobs off the Board because she insisted on a land donation from a developer who owns land on an exit of the Wekiva Parkway. Dorworth is a “consultant” for that developer.

Another theory is Jacobs opposes the hiring of Representative Steve Precourt as the new Expressway Director. Precourt has shown interest in the $247,000 a year job and Jacobs feels there is a conflict of interest because of Precourt’s engineering (DRMP) firm working on expressway projects.

Steve Precourt sold his interest in DRMP in 2008. DRMP acquired his stock and Precourt receives monthly compensation from DRMP rumored to be $100,000 per year for 10 years. Precourt initially consulted with DRMP on transition jobs and clients but has not done work with DRMP for almost two years. Precourt has no future plans to work for DRMP.

In 2009 Precourt lobbied for the Florida Rail Enterprise Act of 2009. Precourt did not vote on it but he lobbied the governor to sign it.

Whatever the reason the effort to oust Jacobs draw criticism from all sides. The Orlando Sentinel quoted former Mayoral candidate Matthew Falconer who said; “this is just about powerful special interests who want to get people in their way, out of their way.”

Teresa Jacobs spending policies are opposed to the needs of the Orange County taxpayers (Sun Rail, arena) but she is the only elected official on the Expressway Board. With her gone Tallahassee politicians can gain control of our toll money and use it for any project in the state.

The people who voted for HB 1399 will argue they voted for the transportation bill. But with such a blatant miscarriage of the public trust an honorable public servant could never vote to remove the only elected officials who represents the interests of local taxpayers.

Do you think any of these politicians took a poll to see if we the people wanted Jacobs removed from the Board? Tallahassee is awash in special interest money and powerful egos and what we need are public servants who serve the will of the people.