Some Questions and Observations

From time to time, I need to step back, try to move a bit out of the fray, and seek a broader perspective. It helps to make observation notes and/or pose questions. So I'll engage in this exercise with you:

1. Do we really think these income trends can continue in the US without a serious tearing of the social fabric?

2. We are told that unleashing business investment is the key to renewed growth. Eliminating regulations, providing more certainty for forward planning, and most of all, tax relief is what is needed. But it turns out business is loaded down with money:

Does anyone out there really believe business needs anything more than a lot more demand and orders?

3. Is there even a remote reason why we think the consumer is going to start spending? After decades of dis-saving, essentially funding the housing boom and then the bust, the consumer wants to, needs to, and is in fact saving again. He/she will not be the growth engine for the economy, unless something radical happens (rewriting of their balance sheet by major mortgage debt forgiveness):

4. How can anyone say the US is overtaxed? Taxes as a percent of GDP are at their lowest level since the 1950s'. And what about the claim that half the US doesn't pay taxes? Look at the employment taxes (Medicare, Social Security and Unemployment). This is a major piece of the US tax burden and mostly born by middle class workers. Everyone in the US who works pays a serious chunk of change in taxes.

5. Corporate earnings have been stunning. More or less steady volumes/revenues with many fewer workers. Wall Street has been thrilled. Does anyone think this trend can hold up? Take a look at this chart from John Hussman:

This tells us that with earnings having hit an historic high as a share of GDP, the next five years will almost definitely be lousy.

6. And how do you feel about our rush to austerity? If Republicans have their way, transfer payments to workers will be cut off as soon as possible. Take a look at this chart and ask yourself what that will do to our already stressed consumer:

The above data points and questions don't even include the tsunami brooding over Europe.

And a final question: do Republicans truly believe what they are saying, that the country needs lower taxes, less regulation, big budget cuts and an unwinding of the social safety net? Do they really believe if all of this happened that we would have a stronger economy? Or is this just seen as the best way to beat Obama?

What troubles me the most is I think both are true: they believe their own rhetoric AND they think it's the path to beat the President.