Guess what? Deficit is growing again. What will the "deficit is too small" crowd say now?

It's not a lot, but it's the first time in five years. The deficit is growing again. For the fiscal year thus far the deficit is $195 billion. That compares with $175 billion at the same time last year.

While a $20 billion expansion is not a lot, it's the trend that counts. This is the first time in five years that the deficit has been expanding and not shrinking.

Furthermore, when the Fed raises rates, which is likely at its next meeting on December 15-16, that will result in further deficit expansion. Remember that under Ronald Reagan the deficit rose to nearly 6.0% of GDP (the largest in post WWII history until 2009-2010) and that was due primarily to interest payments. Interest was the single largest line item payment of the government. It also boosted the economy, tremendously. (The Reagan "boom.")

We have been absolutely correct here at MNE all along. We have never been forecasting recession as others have. We have been looking at top line government spending all along, not the deficit and now we (I) am saying that the deficit is growing again.

Will the others ever admit they are wrong?

QE does not make the euro harder to get, either. "It's about price, not quantity." Exporters are price setters.

Anna Schwartz obituary as published by AIER

One of the great American monetary economists, Anna Schwartz, died Thursday, June 21, 2012, in New York City. She was 96 years old....

Anna was best known as co-author with Milton Friedman of A Monetary History of the United States, 1867-1960 (1963). She also was the staff director of the United States Gold Commission, 1981-1982. Critics sometimes misinterpret the Commission's final report. They say that the report should have taken a forthright stand in favor of the return of the gold standard....

Anna noted that President Ronald Reagan was presumably in favor of the return of gold and that he appointed several members of the commission, including members of the executive branch. As she put it, the Republican appointees were waiting for a signal from the White House that never came.

Read it at Zero Hedge
Anna Schwartz obituary as published by AIER
Walker F. Todd, Research Fellow
Submitted by rcwhalen

The myth of out of control government spending

The myth of runaway spending.

Many of you have probably already seen the chart I posted below, but I it's worth another look particularly in light of Mitt Romney's recent comments on "fiscal responsibility."

"The mission to restore America begins with getting our fiscal house in order. President Obama has put our nation on an unsustainable course. Spending is out of control. Yearly deficits are massive. And unless we curb Washington’s appetite for spending, the national debt will grow to the size of our entire economy this year."

The chart shows that spending is clearly not out of control. In fact, it is lower now as a percent of GDP than when Ronald Reagan was in office.  By the way, the Republicans had no problem with Reagan's "out of control" spending.

Look at how government spending collapsed under Clinton. We still haven't recovered from that. And the Clinton surpluses are considered to be so virtuous. It was totally the opposite.

Supply side destruction. Worker pay collapsed under Reagan's voodoo economics team

Hey, Art Laffer...how do you explain this?

Wasn't supply side economics supposed to incentivize everyone to work harder because they'd get to keep more of their hard-earned money? Well, work harder they did, but they earned far less. Average hourly earnings collapsed under Reagan. Art Laffer how do you explain this? Laffer's the greatest con man of the last 30 years!

Average hourly earnings y-o-y % change

Setting the record straight: The truth about business investment under Obama

We've heard this pat line over and over again, that Obama is "anti-business." The president's detractors say that his anti-business views along with his regulatory excess (is this even true?) are the reason that businesses are not investing. They state it as if it is fact...businesses are not investing.

Is this really true?

I will once again examine this claim. The charts below have been constructed from data from the Bureau of Economic analysis.

Chart 1. Real Total Business Investment (billions $)

This first chart shows that total business investment under Obama beat Reagan, Bush 1 and Bush 2. And you can see that both Bush's--Republicans--were negative, by the way. Only Clinton beat Obama and that was over a period of eight years as opposed to Obama's three. Clinton also had the benefit of a booming economy, the Internet boom and Y2K. In addition, once Clinton started running surpluses, business investment slowed considerably. That's not evident necessarily in the chart, but it is upon examination of the data.

Chart 2. Real Growth in Business Investment compared to growth in GDP

The second chart is even more eye-opening. It shows that the growth in business investment relative to the growth in the economy has NEVER BEEN FASTER THAN NOW! (Again, I went as far back as Reagan.) Business investment is surging as a percent of GDP. In Obama's three years in office, the growth in business investment has been more rapid than Reagan, Bush 1, Bush 2 and even Clinton!

Let me be clear, I am not here to champion or support Obama. There are lots of things that this president is doing wrong--terribly wrong--and I was among the first to point out his hard-core neo-liberal leanings. I spoke about it way back in 2008 when he first selected his economic team.

However, let's call a spade a spade. The claim that businesses are not investing under Obama because of his "anti business" attitude is PURE BULLSHIT!! The numbers speak for themselves.