Owe Say Can You See

Spring is here! Baseball is just around the corner and everyone still believes that their baseball team can win the World Series.

Americans are an optimistic bunch. For evidence of that look at how people still believe that the Federal government's "baseball team" can still win the "big one" and turn the economy around.

People believe that the same feds who couldn't see the subprime fastball coming...

And who struck out completely when they started to get overleveraged curve balls coming their way from Wall Street (they actually thought derivatives made the financial system more stable - ha!)...

Have now hit a home run with the bases loaded.

Yes,people actually believe that the bumbling "Bad News Bears" - Bernanke, Geithner, Summers et al - have now won the "World Series" by not only preventing a depression...but putting the economy back on track for growth and prosperity.

Let's look at the latest uneployment numbers which many were celebrating, ignoring the fact that the headline numbers were skewed by the hiring of temporary census workers.

Underlying the headline numbers was more bad news: Long-term unemployed (more than 27 weeks) increased by 414,000 to 6.5 million; 44.1% of unemployed persons were unemployed more than 27 weeks; involuntary part-time workers increased to 9.1 million in March.

And importantly, U6 unemployment - the broadest measure of unemployment - rose to 16.9%. This is off the Decemeber 2009 peak of 17.3%, but higher than January (16.5%) and February (16.8%) of 2010.

All that the "Bad News Bears" did was to kick the can down the road. The same people who warned about the financial crisis of 2008 (and were ignored) are now warning of an even bigger crisis (and are again being ignored).

Neither Wall Street behavior nor behavior in Washington has changed one bit. Both continue to follow reckless policies. The people running the country will find out that there is no such thing as a "free lunch".

Even a casual look at the fiscal position of the federal government (not to mention the states) makes nonsense of the phrase Wall Street loves to use - the US is a "safe haven".

US government debt is a safe haven the same way Pearl Harbor was a safe haven in 1941.

Even according to the White House's new budget projections, the gross federal debt in public hands will exceed 100 per cent of the nation's economic output (GDP) in just two years' time.

The long-run projection of the Congressional Budget Office suggests that the US will NEVER again run a balanced budget. That's right, NEVER.

The International Monetary Fund recently published estimates of the fiscal adjustments countries would need to make to restore fiscal stability in the decade ahead.

The US came in a poor sixth, with the sixth largest budget cuts needed...the US needs to tighten fiscal policy by 8.8% of GDP...which will NEVER happen.

So take a moment to think about the REAL numbers before celebrating a victory by the team of Bernanke and Geithner et al.