The New Normal ‘Safety Net’: Surging Disability Benefits Claims

If you’ve paid into Social Security, become injured or sick, and can no longer earn more than $1,130 a month, you can get a monthly subsidy from the Disability Insurance Trust Fund. As Bloomberg notes, in 1990 fewer than 2.5% of working-age Americans were “on the check;” by 2015 the number stood at 5.2%, with geographical “disability belts” appearing across America.

Something changed in 2000…


That growth has left the fund in periodic need of rescues by Congress – most recently in 2015, when the Bipartisan Budget Act shifted money from Social Security’s old-age survivors’ fund to extend the solvency of the disability fund to 2023.

“None of us should be surprised that the cost of the program was rising,” says Stephen Goss, Social Security’s chief actuary.


He says the program’s growth is mostly a consequence of demographic change. Older workers are more likely to get sick, and as women have entered the workforce, they too have become eligible for benefits.

In 1956, when the disability insurance fund was created, qualification was based on a list of accepted medical conditions. In 1984, Congress broadened the criteria, giving more weight to chronic pain and mental disorders. The qualification process also became more subjective. Now, rather than check diagnostic conditions against a list, the process determines whether applicants are able to perform work that’s available. “It’s not as if you go to the doctor, the doctor says, ‘I’m sorry, son, you’ve got disability,’ ” Autor says. “It’s a social construct, because it’s about whether you can work.”

Source: Bloomberg

The geographic distribution of people on disability tells a different story to the government’s “it’s a demographic/aging issue” argument: Workers who might have endured pain for a physical job apply for disability when jobs disappear.

This has created what some economists call “disability belts” – rural areas in Appalachia, the Deep South, and along the Arkansas-Missouri border.

Source: Bloomberg

In a 2013 paper, David Autor, an economist at MIT, and his co-authors wrote that Social Security disability insurance was the single biggest source of federal transfers into areas that had been directly affected by trade with China and Mexico. Dan Black, now at the University of Chicago, found in a 2004 paper that growth in disability claims in Appalachia dramatically outpaced those in the rest of the country. Although it’s not designed to, Autor says, Social Security disability benefits function as unemployment insurance.

In the coming Congress, Republican Representative French Hill, who represents Van Buren County, plans to reintroduce a disability insurance reform bill he wrote after hearing Autor, the MIT economist, present his analysis of the program—a talk that echoed things Hill had heard from folks back home. The bill would require more frequent reviews of disability recipients with nonpermanent conditions.

Georgia Confirms Homeland Security Attempted To Hack Election Database 10 Separate Times

Last week we noted a letter from Georgia Secretary of State, Brian Kemp, to the Department of Homeland Security questioning why someone with a DHS IP address ( had attempted to hack into his state’s election database on November 15, 2016 at 8:43AM.  Now, according to WSB-TV in Atlanta, we learn that Georgia’s election systems were actually the target of hacking by DHS on 10 separate occasions.

The Georgia Secretary of State’s Office now confirms 10 separate cyberattacks on its network were all traced back to U.S. Department of Homeland Security addresses.


In an exclusive interview, a visibly frustrated Secretary of State Brian Kemp confirmed the attacks of different levels on his agency’s network over the last 10 months. He says they all traced back to DHS internet provider addresses.


“We’re being told something that they think they have it figured out, yet nobody’s really showed us how this happened,” Kemp said. “We need to know.”


Kemp told Channel 2’s Aaron Diamant his office’s cybersecurity vendor discovered the additional so-called vulnerability scans to his network’s firewall after a massive mid-November cyberattack triggered an internal investigation.

Meanwhile, Kemp pointed out that all of the attempted hackings occurred around critical registration and voting deadlines calling into question whether “somebody was trying to prove a point.”

The Secretary of State’s Office manages Georgia’s elections, and most concerning for Kemp about the newly discovered scans is the timing.


The first one happened on Feb. 2, the day after Georgia’s voter registration deadline. The next one took place just days before the SEC primary. Another occurred in May, the day before the general primary, and then two more took place in November, the day before and the day of the presidential election.


“It makes you wonder if somebody was trying to prove a point,” Kemp said.

Of course, the Obama administration, a pillar of “transparency” for sure, has confirmed the attacks originated at the DHS but has refused to provide a straight story on why the attempted hackings occurred.  Furious with the lack of answers, Kemp has now written a letter to the Trump administration asking for a formal review after his inauguration next month.

Last week, the DHS confirmed the large Nov. 15 attack traced back to a U.S. Customs and Border Protection internet gateway. But Kemp says the DHS’ story about its source keeps changing.


“First it was an employee in Corpus Christi, and now it’s a contractor in Georgia,” Kemp said.


Unsatisfied with the response he got from DHS Secretary Jeh Johnson this week, Kemp fired off a letter Wednesday to loop in President-elect Donald Trump.


“We just need to ask the new administration to take a look at this and make sure that we get the truth the people of Georgia are deserving to know that and really demanding it,” Kemp said.


Kemp says several of those scans came around the same time he testified before Congress about his opposition to a federal plan to classify election systems as “critical infrastructure,” like power plants and financial systems.

As we’ve said before, despite all the media attention on “Russian hackers,” this cyberattack, originated from within our own Department of Homeland Security, is the only actual confirmed case of hacking related to the 2016 election.


* * *

For those who missed it, here is what we wrote last week after the initial hacking was discovered.

Georgia Secretary of State Brian Kemp is anxiously wondering, as are we, why someone with a Department Of Homeland Security IP address would try to hack into his State’s voter registration database.  Even though DHS offered cyber security help to states prior to the election, the Wall Street Journal notes that Georgia was one of the states that specifically denied assistance.

The secretary of state of Georgia is asking the Department of Homeland Security to explain what appears to be an attempted breach of the state’s voter registration database by someone in the federal government.


In a letter to Department of Homeland Security Jeh Johnson dated Thursday, Georgia’s Secretary of State Brian Kemp said the state had discovered an unsuccessful attempt to breach the firewall of state computer systems. That attempt was linked to an IP address associated with DHS, he said.


“At no time has my office agreed to or permitted DHS to conduct penetration testing or security scans of our network,” wrote Mr. Kemp, a Republican. “Moreover, your department has not contacted my office since this unsuccessful incident to alert us of any security event that would require testing or scanning of our network.”


The alleged attempted intrusion by the federal government on a state computer system responsible for election security was detected by a third-party security firm working for the state of Georgia. The attempt was unsuccessful, according to the state. The computers also house information about company incorporations.

According to a letter written by Kemp to DHS Secretary Jeh Johnson, the attempted intrusion occurred 1 week after the election on November 15, 2016 at 8:43AM and came from an IP address associated with DHS (



Of course, since the hacking a state’s election database it technically illegal, even for DHS, Kemp had some fairly pointed questions for Johnson on who authorized the scan and how many other states were scanned without authorization.



Meanwhile, the potential hacking followed threats from Jeh Johnson leading up to election day to declare election systems “critical infrastructure” which would have given the federal government more authority over state databases.

The Department of Homeland Security made a major push in advance of November’s elections to help states secure election systems against possible hacking, as fears of foreign interference in the U.S. election process reached a fever pitch in the months leading up to Election Day.


The department also considered declaring election systems “critical infrastructure,” which would have given the federal government additional authority to protect the systems. DHS didn’t take that step, however, as many states expressed concern about additional federal authority over their election systems and said the constitution provided states the right to run their own elections.


As a result of some of the concerns, the department clarified that assistance on election-related security matters was voluntary and encouraged states to take advantage of DHS resources and expertise to help secure state election systems.


“DHS assistance is strictly voluntary and does not entail regulation, binding directives, and is not offered to supersede state and local control over the process,” Mr. Johnson, the DHS chief, said in September.


Georgia was one of the states that had declined the federal government’s assistance for election security, citing state sovereignty. “Right now, we’re just demanding answers,” said David Dove, a top aide to the Georgia secretary of state. “My boss, Secretary Kemp, has been a very vocal critic of the Department of Homeland Security declaring election systems critical infrastructure.”

After all the talk about Russian hackers, wouldn’t it be just perfect if it turns out that the Obama administration was the only group to actually attempt to illegally hack into a state election database?  That said, we won’t hold our breath waiting for Jill Stein and disaffected Hillary supporters to express their outrage over this incident.


Brian Kemp’s full letter can be viewed below:

Meet The Real “Fake News”

In its attempt to redirect the public’s attention from its historic failure to deliver unbiased, objective, factual reporting in the context of the presidential election in which virtually every single mainstream media outlet was revealed (courtesy of the hacked Podesta emails) and acted as a Public Relations arm for the Clinton campaign, said media has opened a new can of worms by ushering in the topic of “fake news” – a purposefully vague, undefined term meant to deflect and scapegoat by “exposing” propaganda websites, which in the latest incarnation of the narrative, are now allegedly serving to further Russian propaganda in the US.

As we reported earlier, none other than the Washington Post – a company owned by Jeff Bezos, who for the past year has been involved in a famous media spat with president-elect Donald Trump – pounced on a list created by a website that was created (according to its whois profile) on August 21 using as registrar and had its first tweet on November 2, and which among others, lists Drudge Report and Zero Hedge as representatives of “Russian propaganda.” This is how the “scientists” at the Goebbels-esque “PropOrNotdescribe their qualifications in determining and recommending which websites are fit to be burned (starting with a plea for investigations by the Obama administration) in a post “fake news” world:

PropOrNot is an independent team of computer scientists, statisticians, national security professionals, journalists, and political activists dedicated to identifying propaganda – particularly Russian propaganda targeting a US audience. We collect public-record information connecting propaganda outlets to each other and their coordinators abroad, analyze what we find, act as a central repository and point of reference for related information, and organize efforts to oppose it.


We work to shine a light on propaganda in order to prevent it from distorting political and policy discussions, to strengthen our cultural immune systems against hostile influence, and to improve public discourse generally.


Many of our contributors wish to stay anonymous, in light of possible Russian retaliation, as has happened in Finland and elsewhere.

In other words, while attacking the anonymity of so-called “Russian propaganda” websites (websites which chose to remain anonymous knowing this kind of retaliation was inevitable), the public servants and experts devoted to rooting out Russian propaganda in the US opt, themselves, to remain anonymous.

To be sure, we have no interest in uncovering who may be behind this particular organization (which conveniently stepped in after a similar list was floated last week by a discredited liberal professor, who likewise defined Zero Hedge as “fake news”). We do, want, however to warn readers about who the real source of documented fake news in the US traditionally has been. The US government itself, through its vast espionage and counterespionage apparatus.

But please don’t take our word for it.

Back in 1975, the United States Senate Select Committee to Study Governmental Operations with Respect to Intelligence Activities found in 1975 that the CIA submitted stories to the American press and that as part of the CIA’s playbook was the usage of disinformation tactics against America’s own population:

Question: “Do you have any people being paid by the CIA who are contributing to a major circulation — American journal?”
Answer: “We do have people who submit pieces to American journals.”

Question: “Do you have any people paid by the CIA who are working for television networks?”
Answer: “This I think gets into the kind of uh, getting into the details Mr. Chairman that I’d like to get into in executive session.”


Question: “Do you have any people being paid by the CIA who are contributing to the national news services — AP and UPI?”
Answer: “Well again, I think we’re getting into the kind of detail Mr. Chairman that I’d prefer to handle at executive session.”

One can imagine what was said later during the “executive session.” Then-CBS President Sig Mickelson goes on to say that the relationships at CBS with the CIA were long established before he ever became president, and that “entirely in order for correspondents to make use of CIA station chiefs and other members of the executive staff of CIA as sources of information.”

“I thought that it was a matter of real concern that planted stories intended to serve a national purpose abroad came home and were circulated here and believed here because this would mean that the CIA could manipulate the news in the United States by channeling it through some foreign country,” Democratic Idaho Senator Frank Church said at a press conference surrounding the hearing. Church chaired the Church Committee, a precursor to the Senate Intelligence Committee, which was responsible for investigating illegal intelligence gathering by the NSA, CIA and FBI.

This exact tactic — planting disinformation in foreign media outlets so the disinfo would knowingly surface in the United States as a way of circumventing the rules on domestic operations — was specifically argued for as being legal simply because it did not originate on U.S. soil by none other than CIA Director William Casey in 1981.

Former President Harry S. Truman, who oversaw the creation of the CIA in 1947 when he signed the National Security Act, later wrote that he never intended the CIA for more than intelligence gathering. “I never had any thought that when I set up the CIA that it would be injected into peacetime cloak and dagger operations,” Truman penned in 1963 a year after the disastrous CIA Bay of Pigs operation.

Of course, there was also the whole “Operation Mockingbird” fiasco:

“After 1953, the network was overseen by Allen W. Dulles, director of the CIA. By this time, Operation Mockingbird had a major influence over 25 newspapers and wire agencies. The usual methodology was placing reports developed from intelligence provided by the CIA to witting or unwitting reporters. Those reports would then be repeated or cited by the preceding reporters which in turn would then be cited throughout the media wire services. The Office of Policy Coordination (OPC) was funded by siphoning off funds intended for the Marshall Plan [i.e. the rebuilding of Europe by the U.S. after WWII]. Some of this money was used to bribe journalists and publishers.”

As contributor “George Washington” adds,  In 2008, the New York Times wrote:

During the early years of the cold war, [prominent writers and artists, from Arthur Schlesinger Jr. to Jackson Pollock] were supported, sometimes lavishly, always secretly, by the C.I.A. as part of its propaganda war against the Soviet Union. It was perhaps the most successful use of “soft power” in American history.

A CIA operative told then-Washington Post owner – yes, ironic – Philip Graham the following, in a conversation about the willingness of journalists to peddle CIA propaganda and cover stories:

You could get a journalist cheaper than a good call girl, for a couple hundred dollars a month.

Famed Watergate reporter Carl Bernstein wrote in 1977:

More than 400 American journalists … in the past twenty?five years have secretly carried out assignments for the Central Intelligence Agency, according to documents on file at CIA headquarters.




In many instances, CIA documents show, journalists were engaged to perform tasks for the CIA with the consent of the managements of America’s leading news organizations.



Among the executives who lent their cooperation to the Agency were [the heads of CBS, Time, the New York Times, the Louisville Courier?Journal, and Copley News Service. Other organizations which cooperated with the CIA include [ABC, NBC, AP, UPI, Reuters], Hearst Newspapers, Scripps?Howard, Newsweek magazine, the Mutual Broadcasting System, the Miami Herald and the old Saturday Evening Post and New York Herald?Tribune.




In November 1973, after [the CIA claimed to have ended the program], Colby told reporters and editors from the New York Times and the Washington Star that the Agency had “some three dozen” American newsmen “on the CIA payroll,” including five who worked for “general?circulation news organizations.” Yet even while the Senate Intelligence Committee was holding its hearings in 1976, according to high?level CIA sources, the CIA continued to maintain ties with seventy?five to ninety journalists of every description—executives, reporters, stringers, photographers, columnists, bureau clerks and members of broadcast technical crews. More than half of these had been moved off CIA contracts and payrolls but they were still bound by other secret agreements with the Agency. According to an unpublished report by the House Select Committee on Intelligence, chaired by Representative Otis Pike, at least fifteen news organizations were still providing cover for CIA operatives as of 1976.




Those officials most knowledgeable about the subject say that a figure of 400 American journalists is on the low side …. “There were a lot of representations that if this stuff got out some of the biggest names in journalism would get smeared” ….

How ironic that in the end it was the Washington Post itself which would get smeared.

* * *

An expert on propaganda testified under oath during trial that the CIA now employs THOUSANDS of reporters and OWNS its own media organizations. Whether or not his estimate is accurate, it is clear that many prominent reporters still report to the CIA.

A 4-part BBC documentary called the “Century of the Self” shows that an American – Freud’s nephew, Edward Bernays – created the modern field of manipulation of public perceptions, and the U.S. government has extensively used his techniques.

Former Newsweek and Associated Press reporter Robert Parry notes that Ronald Reagan and the CIA unleashed a propaganda campaign in the 1980’s to sell the American public on supporting the Contra rebels, utilizing private players such as Rupert Murdoch to spread disinformation. Parry notes that many of the same people that led Reagan’s domestic propaganda effort in the 1980’s are in power today:

While the older generation that pioneered these domestic propaganda techniques has passed from the scene, many of their protégés are still around along with some of the same organizations. The National Endowment for Democracy, which was formed in 1983 at the urging of CIA Director Casey and under the supervision of Walter Raymond’s NSC operation, is still run by the same neocon, Carl Gershman, and has an even bigger budget, now exceeding $100 million a year.

* * *

Perhaps the most damning evidence, as highlighted by @pierpont_morgan, can be found inside the Final report of the abovementioned Select Committee to Study Governmental Operations with Respect to Intelligence Activities, published in Aptil, 1976, in which several sections stand out.

One admits explicitly how the press had been extensively captured by the CIA and how dozens of American journalists collaborated with the CIA to fabricate, create and distribute fake news:

The Committee has also found a small number of past relationships that fit this category. In some cases the cover arrangement consisted of reimbursing the U.S. newspaper for any articles by the CIA  agent which the paper used. In at least one case the journalistic functions assumed by a CIA staff officer for cover purposes grew to a point where the officer concluded that he could not satisfactorily serve the requirements of both his (unwitting) U.S. media employers and the CIA, and therefore resigned from the CIA. He maintained contact, however, with the CIA and continued, very occasionally, to report to the CIA from the countries in which he worked.


(2) Of the less than ten relationships with writers for small, or limited circulation, U.S. publications, such as trade journals or newsletters, most are for cover purposes.


(3) The third, and largest, category of CIA relationships with the U.S. media includes free-lance journalists; “stringers” for newspapers, news magazines and news services; itinerant authors; propaganda writers; and agents working under cover as employees of U.S. publishing houses abroad. With the exception of the last group, the majority of the individuals in this category are bona fide writers or journalists or photographers. Most are paid by the CIA, and virtually all are witting; few, however, of the news organizations to which they contribute are aware of their CIA relationships.


(4) The fourth category of covert relationships resembles the kind of contact that journalists have with any other department of the U.S. Government in the routine performance of their journalistic duties. No money changes hands. The relationships are usually limited to occasional lunches, interviews, or telephone conversations during which information would be exchanged or verified. The difference, of course, is that the relationships are covert. The journalist either volunteers or is requested by the CIA to provide some sort of information about people with whom he is in contact. In several cases, the relationship began when the journalist approached a U.S. embassy officer to report that he was approached by a foreign intelligence officer ; in others, the CIA initiated the relationship.

Another section of the report focuses on how the CIA co-opted academics, reporting that “the Central Intelligence Agency is now using several hundred American academics who in addition to providing leads and, on occasion, making introductions for intelligence purposes, occasionally write books and other material to be used for propaganda purposes abroad.Beyond these, an additional few score are used in an unwitting manner for minor activities.

These academics are located in over 100 American colleges, universities, and related institutes. At the majority of institutions, no one other than the individual concerned is aware of the CIA link. At the others, at least one university official is aware of the operational use made of academics on his campus. In addition, there are several American academics abroad who serve operational purposes, primarily the collection of intelligence.

There is also the admission that the CIA used books explicitly for propaganda purposes:

The Committee has found that the Central Intelligence Agency attaches a particular importance to book publishing activities as a form of covert propaganda. A former officer in the Clandestine Service stated that books are “the most important weapon of strategic (long-range) propaganda.” Prior to 1967, the Central Intelligence Agency sponsored, subsidized, or produced over 1,000 books; approximately 25 percent of them in English…. The Committee found that an important number of the books actually produced by the Central Intelligence Agency were reviewed and marketed in the United States.

Oh, the CIA particularly enjoyed using the NYT and Washington Post for “repeat propaganda” (from page 200 of the report):

CIA records for the September-October 1970 propaganda effort in Chile indicate that “replay” of propaganda in the U.S. was not unexpected. A cable summary for September 25, 1970 reports:


Sao Paulo, Tegucigalpa, Buenos Aires, Lima, Montevideo, Bogota, Mexico City report continued replay of Chile theme materials. Items also carried in New York Times,  Washington Post. Propaganda activities continue to generate good coverage of Chile developments along our theme guidance. . .

And so on, and on, for over 670 pages of details how it was the CIA – not Russia, not Putin – that has been the primary creator and distributor of misleading, propaganda material in the US, also known as “fake news.”

* * *

Of course, all of the above remains largely under the radar; it will never be branded “fake” news in a polite setting. Meanwhile, anyone who dares to challenges the status quo – as we have seen in recent days – is immediately labeled a purveyor of “fake news”, or worse – a servant of the Kremlin.

Contributor “George Washington” has some topical thoughts on this particular issue, noting that the First Amendment of the U.S. Constitution protects the freedom of the press from censorship by government. Indeed, the entire reason that it’s unlawful for the government to stop stories from being printed is because that would punish those who criticize those in power.

Why? Because the Founding Father knew that governments (like the British monarchy) will always crack down on those who point out that the emperor has no clothes.

But the freedom of the press is under massive attack in America today. For example, the powers-that-be argue that only highly-paid corporate media shills who will act as stenographers for the fatcats should have the constitutional protections guaranteeing freedom of the press.

A Harvard law school professor argues that the First Amendment is outdated and should be abandoned. When financially-savvy bloggers challenged the Federal Reserve’s policy, a Fed official called all bloggers stupid and unqualified to comment. And the government is treating the real investigative reporters like criminals … or even terrorists:

  • The government admits that journalists could be targeted with counter-terrorism laws (and here). For example, after Pulitzer Prize winning journalist Chris Hedges, journalist Naomi Wolf, Pentagon Papers whistleblower Daniel Ellsberg and others sued the government to enjoin the NDAA’s allowance of the indefinite detention of Americans – the judge asked the government attorneys 5 times whether journalists like Hedges could be indefinitely detained simply for interviewing and then writing about bad guys. The government refused to promise that journalists like Hedges won’t be thrown in a dungeon for the rest of their lives without any right to talk to a judge
  • In an effort to protect Bank of America from the threatened Wikileaks expose of the bank’s wrongdoing, the Department of Justice told Bank of America to a hire a specific hardball-playing law firm to assemble a team to take down WikiLeaks (and see this)

* * *

With the (failing) mainstream media now desperate to focus the public’s attention to the fake “fake media” to divert attention from the real “fake media“, those Washington Posts and New York Times who have traditionally served as vessels for the government apparatus to brainwash the public, expect an even greater backlash as the American population realizes that none of this is actually new, and that it has always been the US government that was directly responsible for the blanket propaganda that has covered the US for decades: something which the government itself has confirmed on countless occasions in the past – one just needs to do the effort of stepping away from the information they are spoon-fed, and do their own research and analysis.

Which, incidentally, is what this latest round in the eternal war for information and influence, is all about.

Reflections On Recession Are A Very Real Affair

Where are we in history when the avowed Socialist (capital “S”) from Vermont is the only voice of reason for the Democratic Party in the aftermath of last week’s election? I don’t intend to make this some kind of political screed against one party or the other; I am on record numerous times claiming the America we live in of 2016 is a massive bipartisan scandal. But having seen the final margin of victory swing to Donald Trump from among a solid rust best collection of states cannot be lost on anyone, let alone Democrats as they begin to question what went wrong.

This is more than the Presidency, as populism makes its way on all levels of government and not just in the United States. But so far the response from that side has been predictably lamentable, with the epithets of racist, sexist, and especially xenophobia filling out too many score cards. And so it is left to Sanders to sound the voice of reason to try to register in what should have been easy to see and understand all along:

It is not good enough to have a liberal elite. I come from the white working class, and I am deeply humiliated that the Democratic Party cannot talk to the people from where I came from.
It’s not a question of what happens in the last week. The question is that she should have won this election by ten percentage points. The question is, why it is that millions of white working class people, who voted for Obama, turned their backs on the Democratic Party, and I think a lot of people do not think the Democratic Party is standing with them. That has got to change.

I would criticize Sanders for a lot of things, but he at least in this instance is standing for clarity and fact. On the other end are people like Paul Krugman who, in his emotional state, actually claims to be the spokesperson for not just the left but also now, suddenly, the center and right (some of).

So what do we do now? By “we” I mean all those left, center and even right who saw Donald Trump as the worst man ever to run for president and assumed that a strong majority of our fellow citizens would agree.

He goes on to argue that the US is doomed because of Trump, listing all of the ways in which he is absolutely sure (it’s math) that America just became irredeemable. Krugman even writes without any self-awareness, “we could see a slightly covert form of Jim Crow become the norm all across America.” Though he apparently has a crystal ball with which to soothsay the entire future of this country now set in stone, what also makes his list? The economy.

What he writes on that subject though is all future tense, with a little less emotion since last Tuesday. “My own first instinct was to say that Trumponomics would quickly provoke an immediate economic crisis, but after a few hours’ reflection I decided that this was probably wrong.” What Sanders, the socialist, knows that Krugman, the Nobel Laureate, clearly does not, indeed cannot, is that there is already an extendedeconomic crisis and it is the one that put Mr. Trump in the White House. There is no need to scare Americans about what Trump would do to the economy when it is clear to them it has already been done.


To Krugman and the legions in the media like him, this election was the failure of their opinions to sway voters to see the vast future of goodness that they have in store for everyone (at least for those who vote the “right” way). That has been the problem all this time, the economists who cry recovery at every instance who now wonder why voters don’t just vote the way they are told. For every grand economic scheme and plan, there is a Hollywood ending out there in the future, one in which the math is absolutely sure about – yet can’t ever seem to calculate the date of its arrival. The rest of America, and the world, has to eat and can’t cash a check delivered backward in time from some unscheduled future growth path.

It isn’t even as much a problem of projections as it is a steadfast refusal to account for our reality since 2007. Nine years is more than enough for whatever that will work should have long before now. From my perspective, the American people have been unbelievably patient, giving first Ben Bernanke the benefit of the doubt that he so clearly (to me anyway) had not earned and in fact should have led directly to his dismissal on the spot for 2008. The problem is and remains Economics (capital “E”).

In very basic ways it starts with very basic concepts. Still referring to the Great “Recession” as a recession is one of the first facets that must change. A recession is a temporary interruption in economic growth, a fact that almost every layperson easily understands with no need for formal regression mathematics. But even Economics has insidiously redefined recession so that the current definition no longer fits the word. Very quietly, behind the scenes, every orthodox institution from the IMF to the Fed to the CBO has pared back economic “potential” such that it is a literal fraction of its former path.

abook-oct-2016-retail-sales-pluckabook-oct-2016-retail-sales-pluck2ABOOK August 2016 Potential CBO LastABOOK August 2016 Productivity Hours Worked

To an economist like Krugman, that is a mathematical result that only changes the formula for how to produce a recovery; for people like Sanders and Trump, it is a very real disaster that because of the mainstream redefinitions goes undiscovered and certainly unexamined. Economists and the politicians who rely upon them keep saying it will get much better if everyone just lets it play out when even their math says the people are right.

This is far more than semantics about the word recession; it even goes deep within markets, including some places where the agents that operate within them should know better. Some months ago I presented a chart from a presentation given by Larry Summers earlier this year that even now when I see it I cannot help but still be astounded by it. It shows the forward OIS curve and its history throughout the aftermath of the “recession.”

ABOOK June 2016 Secular Stagnation Summers OIS

The best that can be said of what you see above is how markets may be fully efficient, but in order to reach that conclusion it would mean these markets were betting over and over on just how stupid and wrong the FOMC and economists would be.

What the history of the OIS curve shows is that what happened in 2008 was clearly not a recession, but that insisting it was had very real and distortive effects that still reverberate in important ways (stocks). It has the practical effect of shutting off the necessary inquiry into what is really wrong here, which is what the OIS curve actually displays in all its damning detail. As I wrote back in June:

It speaks directly to the idea of “efficient markets”; how can money markets, the very basis of the wholesale financial system, continue to be so wrong? The answer is that QE and the view of bank reserves as money for use in the real economy is and has always been mistaken. Therefore, the upward sloping OIS curve (the one that finds normalization “always” 6 to 9 months into the future) is a bet on bank reserves as money; the eventual shriveling of it is the same as we find everywhere else, from German bunds to US treasuries to eurodollar futures – monetary contraction.

But that leaves us with another contradiction that can only continue so long as the word “recession” remains the primary description. In other words, Dr. Summers wrote that it was “aggressive” policy action on the part of the Fed especially that saved us all from a 1929 repeat; but then later in his same presentation he shows another chart where the current economy is on track in just a few years down the road to underperform the 1930’s! They saved us at the one end, but we are doomed anyway at the other?

ABOOK June 2016 Secular Stagnation Summers Great Depression comp

And the response from the likes of Paul Krugman is “just give it some more time” without, apparently, appreciating that time is not just the X-axis on these charts, it is a huge cost that accumulates exponentially. The clock struck down to zero long ago.

The word “recession” does not apply, and removing it from the vocabulary of current economics (small “e”) will have the effect of what the American people demanded of this campaign – the start toward honest answers. Everything about the last decade has been monetarily screwed up, starting with “subprime is contained.” Economists have been making these promises at every important juncture but still do not ever account for failing to deliver. “Trust us” is no longer a workable arrangement and no amount of “it’s for your own good” will restore such faith.


Ridding ourselves of the Great Recession is actually a step in the right direction, as small and pedant as it sounds. It would announce what a majority of Americans already know to economists who won’t so long as they define all our terms. In my view, socialism would be an even greater disaster (Europe anyone?), but at least the socialists are more advanced than the economists. They at least know what the problem is and seek to exploit it; economists can’t even be honest about it, as if we let them down somehow by not blindly accepting their view. After all, their dynamic equilibrium models check for heteroscedasticity and you likely don’t even know what that is. But while they narcissistically preen over their elegant creations, you don’t need to know what it is because you already know quite well it is wholly, irredeemably useless.

This is why the recovery is political. So long as politicians turn to Krugman and Janet Yellen for answers because they sound technically proficient, we will never get any. They still think the problem is the “right” mix of “stimulus” to overcome hysteresis or whatever demographic linearity they spit out of their regressions. Meanwhile in the real world, Americans are under no such illusions. They have to take care of their families, and they are fed up waiting for Paul Krugman to be right about how all his numbers remain so certain.  The only number that truly matters is -$2.2 trillion, and that is the lower bound (below) cost of technocratic incompetence.


The Inconvenient Truth Behind Donald Trump’s Victory

Following the BREXIT vote in late June and passionate support for the Bernie Sanders campaign, the Presidential election of Donald Trump provided yet another sign that the American people, as well as many around the world, are increasingly demanding a new economic path. This piece is not written to opine on the election or the merits of Donald Trump. The intent is to highlight, through the use of a few charts, that the nation’s economic policy for the last 30 years has failed greatly and hollowed out the middle class. The consequences have been accumulating for years but have been camouflaged by ever increasing, but unsuccessful attempts to reignite economic growth.

The graphs below provide evidence that despite the narratives of the Federal Reserve, media pundits and most policy wonks, the economy is failing most Americans. While there are many ways to show the deterioration of the U.S. economy and the consequences endured by its citizens, we selected charts we deem to be the most telling.

We hope that no matter who you voted for, you study these graphs to better understand the impetus behind Trump’s victory. More importantly, we hope this helps everyone better grasp why economic policy must change before the consequences become dire.

As a supplement to these charts, we highly recommend reading or re-reading our important article “The Death of the Virtuous Cycle”. In that piece we identify and diagnose what we consider the most significant issue facing the United States and other developed market economies.

Income and Debt


Real Median Household Income is at the same level today as it was in 1998.


The ten-year average growth of wages has been declining for over 35 years.


Personal consumption (PCE), accounting for approximately 70% of GDP growth, has grown heavily reliant upon debt and transfer payments as wages are not sufficient to meet consumers demands. Transfer payments are payments from the government to its citizens. (Note: The numbers above do not add to 100% as there are other sources of consumption and wages are not entirely consumed.)


Secular economic growth (GDP) per capita has been in decline for the better part of the last 40 years. This helps explains the weakness in consumers’ wages and the increased dependency on credit and transfer payments.



Almost 95 million eligible workers are currently out of work. As a result the labor force participation rate has decreased over the last 16 years to levels last seen in the 1970’s.



The productivity (TFP) growth rate (black line) has been declining since the 1970’s and will likely turn negative in the next year or two. A lack of productivity growth results in weaker economic growth, a heavy price inordinately borne by employees.

Trade Deals



Trade deals, such as NAFTA (1994), make it easier for U.S. corporations to outsource jobs to foreign nations offering cheaper labor. As a result, the U.S. has lost millions of manufacturing jobs and significantly worsened the annual current account deficit.

Wealth and Income Inequality




Years of poorly designed economic and monetary policy have resulted in the redistribution of wealth from the middle class to the so-called “1%”.

We summarize with an apt tweet from Binyamin Applebaum of the New York Times:


The data for all graphs was courtesy of the Federal Reserve unless otherwise noted.

Clinton Foundation Memo Reveals It Was Breaking The Law

While there are conflicting reports whether the FBI may or may not indict the Clinton Foundation, which as the WSJ reported last week is being investigated by various FBI teams, even as other parts of the Bureau – and the DOJ – seek to squash the probe, the latest dump of Podesta emails has revealed a critical, confidential memo from prominent New York lawyer Kumiki Gibson to Clinton Foundation Chairman Bruce Lindsey (and former Bill Clinton attorney) which was performed as part of an inside audit of the foundation, and confirms that the charitable organization (which it found “operates more like a political operation”) was engaged in practices that broke the law.

Bruce Lindsey serves as the chairman of the Board for the Clinton Foundation

As Gibson, who according to her resume “counseled the William J. Clinton Foundation, an international not-for-profit organization, on structural, legal, and compliance issues” from May 2008 until January 2014, wrote the purpose of the confidential November 10, 2008 memo, was to “set forth the findings of my review of the Legal and Human Resources Departments of the William J. Clinton Foundation (“Foundation”) and those pertaining to other areas of the Foundation revealed during this review, and my recommendations to the Foundation based on this review.”

The summary reveals serious reservations about the viability of the foundation – which “operates more like a political operation” than a “professional, strategic, and sustainable corporation committed to advancing its overall mission” – if and when Bill Clinton were to depart and “the Foundation has to rise and/or fall on its own name and work only.”

While the Foundation has grown impressively over the past several years, it has a number of fundamental organizational challenges and deficiencies that undermine its effectiveness, expose it to significant risk, and, ultimately, threaten its long-term survivalThe Foundation (as opposed to its initiatives, which I have not reviewed) operates more like a political operation focused on immediate situations, tasks, and events, as opposed to a professional, strategic, and sustainable corporation committed to advancing its overall mission.  While that may not be a problem while the President is personally involved in the Foundation — and can garner support based on that involvement — it will be a problem when he is no longer involved, and the Foundation has to rise and/or fall on its own name and work only.

The chief risks identified in Gibson’s outside review, stem from both its Legal and Human Resource Departments, as well as Bill Clinton’s unwillingness to “allow the Board and CEO to make the changes necessary for it to become sustainable, even great.”

If the leadership (that is, the Board and the CEO) intends and wants the organization to survive beyond the President’s personal involvement, then it must take measures to move the organization onto a path of sustainability, starting with revamping both the Legal and Human Resources (“HR”) Departments; reviewing its corporate structure and governance documents; and, perhaps most importantly, having a frank discussion with the President about the current state of the organization, the future of the organization, and his appetite and willingness to allow the Board and CEO to make the changes necessary for it to become sustainable, even great.

As the summary concludes, “the time for making these changes, if they are desired, could not be better:  The presidential campaign, which distracted some key employees and caused uncertainty among others about the future of the organization, is now over; virtually all of the employees interviewed are anxious for more structure, professionalism, and mission-focus; and funders are expecting the same.”

Next follows a detailed and highly critical analysis of the Foundation’s (1) shared values, (2) strategy, (3) structure, (4) systems, (5) staff, (6) style, and (7) skills, which the review finds “the Foundation to significant legal and reputational risks, results in inconsistencies and inefficiencies, and undermines its work and viability” and leads to the following conclusion about the CF’s operational shortcomings:

The assessment of the organization through the 7-S Framework makes clear that the organization is not operating as effectively or efficiently as it should or could.  Indeed, it has major deficiencies in each of the fundamental areas.  Each of these deficiencies, standing alone, threatens the effectiveness of the Foundation in the short and long term.  When combined, as currently the case, they threaten its very existence (absent the President’s involvement).

The outside legal review of the Clinton Foundation is that, at least operationally, the only thing that was keeping the enterprise going was the presence of Bill Clinton, whose anchor role to match donors with “uses of funds” and subsequent distribution of favors , aka “pay for play” made the former president indispensable in an organization that would otherwise not survive:

Because it is unclear whether the President wants the Foundation to exist beyond his personal involvement, the Foundation’s leadership (that is, the Board and CEO) should address this question head-on with the President.  That will require a frank discussion with the President about his desire, willingness, and appetite to move the Foundation to the next level of development.  If the President concludes that he does, in fact, want the Foundation to survive and thrive beyond his involvement, then he should authorize and empower the CEO and Board to make the changes necessary for this survival.

* * *

However, while all of that is troubling, and suggests that the CF was – from day one – just a corporate extension of Bill Clinton’s persona, it was in no way illegal. Where the alarm bells go off, however, is taking a look at page 9 of the memo, where Gibson does a review of the Foundation’s “Legal and HR Departments”, something troubling emerges, which perhaps the FBI may want to take a particularly close look at. The following:

No matter what the leadership decides about the larger, over-arching question, it must act immediately to bring the Foundation into compliance with the law and standards that govern not-for-profits, and must create strong legal and HR offices so to prevent any lapses in the future.

Simply stated, what this means is that, as of the day the memo was written, the Foundation was not in compliance with the law and with standards that govern “not-for-profits.”

* * *

Among the policies and procedures that Gibson found missing or inadequate at the Foundation were the following, some of which – such as the procedures the CF was utilizing in Harlem –  may be in violation of the law. Here is a brief sample of the findings:

  • The Foundation lacks important policies and procedures and a real process to ensure compliance, resulting in increased risks, confusion, conflicting (and perhaps arbitrary) decisions, and inefficiencies.
  • The Foundation does not have a record retention policy, and the procedures currently utilized in Harlem may violate the law.
  • It is unclear whether lower level employees actually meet the definition of exempt under the Fair Labor Standards Act.
  • Processes and employment decisions are made on an ad hoc basis. 
  • Staff complained about the lack of comprehensive and/or written policies and procedures.
  • Staff complained about the lack of a real complaint and/or whistleblower policy.

And many more.

Furthermore, and more troubling, the review pointed to a high-ranking but unnamed foundation executive who was “being paid by [President Clinton], the government and the foundation” who “allowed the foundation to host what may have been (or may have been viewed as) a political event, apparently without official pre-approval from the foundation’s legal department and without regard, before the fact, to the impact of that decision on the foundation’s tax exempt status.”

While the conclusion avoids repeating the explicit accusation of operating outside of the law – we assume Gibson did not want to scare the Clinton Foundation too much, and thus avoid repeat work – it is a stark condemnation of the underlying practices and principles of operation:

The challenges and deficiencies plaguing the Foundation cannot be over-stated:  They are real and undermine the organization’s effectiveness, immediately and more long term.  To address the issues that present immediate threats, the Foundation should revamp its Legal and HR operations, should review its governance structure and documents; and should have an open and honest discussion with the President about the future of the Foundation.

It is illegal for tax-exempt non-profit foundations like the Clinton Foundation to be linked with partisan political events as described in the review report.

The Lindsey memo was distributed just two days before the Clinton Foundation signed an agreement with Obama’s transition office Dec. 12, 2008, as part of the president-elect’s decision to appoint Hillary Clinton as the nation’s chief diplomat. Obama wanted assurance that no conflicts of interest would arise between Clinton’s work as Secretary of State and the foundation, which had operations in numerous foreign countries.

It is unclear if any of these recommendations were implemented, or if the CF is now in “compliance with the law and standards that govern not-for-profits.” It is clear, however, that at least at one point it was not. It remains to be seen if such illegal activity will be grounds for the DOJ to permit the FBI to do its job and indict a foundation that, as lawyer determined, was operating in a fraudulent fashion.


Full leaked memo below (link):

Since 2014 The US Has Added 547,000 Waiters And Bartenders And Lost 32,000 Manufacturing Workers

As another month passes, the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In September, according to the BLS, while the number of people employed by “food services and drinking places” rose by another 30,000, the US workforce lost another 13,000 manufacturing workers.

The chart below puts this in context: since 2014, the US had added 547,000 waiters and bartenders, and has lost 32,000 manufacturing workers.

Yet while we would be the first to congratulate the new American waiter and bartender class, something does not smell quite right. On one hand, there has been a spike in recent restaurant bankruptcies or mass closures (Logan’s, Fox and Hound, Bob Evans), which has failed to reflect in the government report. However, what we find more suspect, is that according to the BLS’ seasonally adjusted “data”, starting in March of 2010 and continuing through September of 2016, there has been just one month in which restaurant workers lost jobs, and alternatively, jobs for waiters and bartenders have increased in 78 out of the past 79 months.

Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.7 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 58,000 manufacturing jobs have been lost.

Like last month, we remain curious what this “data” series will look like after it is revised by the BLS shortly after the NBER declares the official start of the next recession.

Podesta Email Reveals Clinton Health Initiative Had Concerns Over Foundation’s “Serious Conflicts Of Interest”

Remember in the last debate when Hillary was finally asked about “pay-to-play” allegations surrounding the Clinton Foundation?  Of course, anytime she’s asked about those allegations, she quickly pivots to what great work the Foundation has done for HIV/AIDS victims around the world.  Here’s what she said:

“I’m thrilled to talk about the Clinton Foundation…the Clinton Foundation made it possible for 11mm people around the world with HIV/AIDS to afford treatment.


There’s just one small problem with her statement about all the great work the “Clinton Foundation” does for HIV/AIDS victims around the world, namely it happens to be completely untrue.

As it turns out, all of the charity work related to HIV/AIDS victims that Hillary referenced above is actually carried out by the independent “Clinton Health Access Initiative” (CHAI).  Moreover, efforts on the part of the Clintons to falsely attribute the HIV/AIDS work to the Clinton Foundation ruffled some feathers among the management team at CHAI who wrote a memo to Bill Clinton expressing concerns about the “serious conflicts of interest” between the Clinton Foundation and CHAI.

Within the memo, the management of CHAI expresses great concern about “cases where we meet Clinton Foundation donors who believe that they have given money to support CHAI’s work because they have donated to the Clinton Foundation, when in reality CHAI does not receive the funds”…in other words, donors contribute money to the Clinton Foundation thinking it will be used to fund HIV/AIDS efforts when, in reality, none of it is actually used for that purpose…which is odd because that is exactly what Hillary said above at the 3rd Presidential debate.

Further, the line between CHAI and the Clinton Foundation is often blurred by the Foundation, creating ambiguity about our independence as an organization that is separately funded. CHAI is often portrayed by the Clinton Foundation as an initiative of the Foundation. The Clinton Foundation uses CHAI accomplishments in its publicity and fundraising events even though CHAI does not receive funds from these efforts. One example includes the Clinton Foundation Annual Trip, which is coordinated by Clinton Foundation personnel and includes stops to visit CHAI sites and CHAI programmatic work, which is publicized and promoted for Clinton Foundation fundraising purposes. We are very concerned about cases where we meet Clinton Foundation donors who believe that they have given money to support CHAI’s work because they have donated to the Clinton Foundation, when in reality CHAI does not receive the funds.

The memo from CHAI management goes on to express that as “a separate legal entity from the Clinton Foundation” they have concerns about “serious conflicts of interest” surrounding “Clinton Foundation appointed members who currently serve on the CHAI Board.”  Among other things, CHAI management was apparently concerned their board members’allegiance to the Clinton Foundation takes precedence over their fiduciary responsibility to act in the best interest of CHAI.”

CHAI has grown significantly and been successful over the past five years since we became an independent legal entity, thanks in large part to the sustainable relationships CHAI has built with our government partners and donors. We firmly believe that to continue this success CHAI needs a Board of Directors entirely independent of the Bill, Hillary, and Chelsea Clinton Foundation (“Clinton Foundation”). We believe this to be in the best interest of CHAI because of the underlying conflict of interest for the Clinton Foundation appointed members who currently serve on the CHAP Board, the significant risks to CHAI associated with a possible run for the US Presidency by Secretary Clinton, and the fundamental difference in culture and approach between the two organizations.


We are a separate legal entity from the Clinton Foundation but there continues to be ambiguity about the relationship. There are not only fundamental differences in culture and approach between the Clinton Foundation and CHAI, but more importantly, there are serious conflicts of interest in the way that the relationship is currently structured. In particular, there is a recognizable conflict of interest with the Clinton Foundation appointed members who currently serve on the CHAI Board.


Since becoming a separate legal entity from the Clinton Foundation in 2010, CHAI has proven to be successful operating autonomously. Despite this, we see increasing evidence that the Clinton Foundation plans to exert more control over CHAI. We fear that there is an agenda to ultimately fold CHAI into the Clinton Foundation. Recent communications that talk about the Clinton Foundation as the controlling entity of CHAI would imply a possible consolidation.


We are very concerned with the current conflict of interest among Clinton Foundation appointees to the CHAI board, where we see evidence that their allegiance to the Clinton Foundation takes precedence over their fiduciary responsibility to act in the best interest of CHAI.

So you’re saying the Clintons established a phony “independent” board of directors filled with their political cronies who were only concerned with enriching their friends and not their fiduciary obligations to the underlying charity?  Well, we just don’t see how that could possibly be true.


Below is the full memo:

Wikileaks Exposes Collusion Between Clinton Campaign, State Department, And New York Times

And the hits just keep on coming.

At the same time as the latest Wikileaks email dump revealed an email sent from the gmail account of DOJ assistant attorney general, Peter Kadzik, to the gmail account of John Podesta, warning him of a FOIA case that would make it “a while before the State Department posts the [Hillary] emails”, an off-the-record communication which the DOJ apparently had no complaints about, we learned of another coordinated, collusive event, this time involving not the Department of Justice, but the Secretary of State, the New York Times, and the Clinton campaign.

In an email dated March 1, 2015, just one day before the NYT’s story revealing that Hillary Clinton had a personal email server, a State Department official, Lauren Hickey, coordinated with Hillary Clinton’s presidential campaign staffers Heather Samuelson as well as Philippe Reines and Nick Merrill, on a statement given to The New York Times regarding how to frame its landmark story.

In the email also sent from the gmail account of State Department press aide Lauren Hickey (, the government employee told Clinton aides that then-State Department spokeswoman Jen Psaki had “just cleared” a statement to a New York Times reporter. Hickey attached the statement, which appeared to include a change made at the behest of the Clinton aides.

“Yes on your point re records – done below,” she wrote although it is unclear what change the Clinton campaign had requested.

Hi guys – Jen just cleared. She made the highlighted change — just rephrased a line about NARA updates state is undertaking. Yes on your point re records – done below. And yes will let you know — should be in the new few minutes.

The statement describes the State Department’s efforts to respond to document requests from the House Benghazi Committee, which uncovered the existence of Clinton’s server.

 “From the moment that the Select Committee was created, the State Department has been proactively and consistently engaged in responding to the Committee’s many requests in a timely manner, providing more than 40,000 pages of documents, scheduling more than 20 transcribed interviews and participating in several briefings and each of the Committee’s hearings.

One day after the exchange, the New York Times published its “groundbreaking”, if preapproved report revealing Clinton’s server to the public. A short time later, Hillary Clinton would announce her candidacy for president.

In a briefing Wednesday afternoon, State Department spokesman John Kirby declined to comment on the alleged leaked documents in a statement, but noted that “[providing] accurate information to the media and the public related to former Secretary Clinton’s emails… at times required communicating with her representatives to ensure accuracy.

Stated simply, collusion happen: it’s all for the sake of “accuracy.”

To summarize: on the same day we obtained evidence of collusion between the Clinton campaign’s chairman, John Podesta, and one of the top-ranked staffers at the Justice Department, we also have confirmation of collusion between the State Department, the Clinton campaign and the New York Times.

Or, as president Obama put it, “an honest mistake.”

* * *

The email in question showing the coordinated effort between State, the NYT and the Clinton campaign is shown below.

Paul Volcker Explains Why The Fed Can’t Raise Rates

In an op-ed posted by Paul Volcker and Peter Peterson in the NYT, the two financial titans start off by pointing out just how “strange” the current presidential campaign is in its historical context…

Together, the two of us have 179 years of life experience and 13 grandchildren. We have served presidents of both parties. We have seen more campaign seasons than we care to count — but none as strange as this one. Insults, invective and pandering have been poor substitutes for serious debate about the direction in which this country is going — or should be going. And a sound and sustainable fiscal structure is a key ingredient of any viable economic policy.

… but the main issue that troubles the two financial titans, is the lack of any practical discussion of the soaring US debt during the entire bizarre campaign – the one issue both agree is the biggest challenge facing the US economy today:

Yes, this country can handle the nearly $600 billion federal deficit estimated for 2016. But the deficit has grown sharply this year, and will keep the national debt at about 75 percent of the gross domestic product, a ratio not seen since 1950, after the budget ballooned during World War II. Long-term, that continued growth, driven by our tax and spending policies, will create the most significant fiscal challenge facing our country. The widely respected Congressional Budget Office has estimated that by midcentury our debt will rise to 140 percent of G.D.P., far above that in any previous era, even in times of war.

That staggering number has been ignored by most, and certainly the Obama administration, which has been glad to take credit for a sputtering “recovery” while ignore what caused it.

Unfortunately for Obama, just last week it was revealed that none other than the chair of the Democratic Party, Donna Brazile, was “peddling fiction” when the head of the DNC admitted to John Podesta that the “people are more in despair about how things are – yes new jobs but they are low wage jobs… HOUSING is a huge issue. Most people pay half of what they make to rent.

While the reality of the recovery was set to emerge sooner or later, the US debt continues to grow, and as of Friday hit an all-time high of 19,785,585,189,878.12, just $214 billion away from a nice, round $20 trillion, nearly doubling under President Obama, and worse: starting to accelerate again, despite the lack of any apparent economic crisis that demand a surge in debt issuance.


Back to the Volcker-Peterson lament, in which the two points out that “unfortunately, despite a brief discussion during the final presidential debate, neither candidate has put forward a convincing plan to restrain the growth of the national debt in the decades to come.

Throughout the campaign, Donald J. Trump has called for a combination of deep tax cuts that appear to far exceed proposed spending reductions, at the clear risk of substantially increasing the ratio of debt to G.D.P. Hillary Clinton has set out more balanced and detailed proposals, but they would still fail to stabilize and reduce our debt burden. Whoever wins, the new president will eventually face fiscal realities that force him or her to develop strategies for decreasing the national debt as a share of the economy over the long term.

Still, one can’t really blame the government for continuing its debt-funded spending spree – despite protests to the contrary – after all rates are so low, it would be irrational not to take advantage and add on more debt. However, it is here that the punchline from the Volcker op-ed kicks in, and explains why the Fed is stuck and will find it next to impossible to hike rates:

Our current debt may be manageable at a time of unprecedentedly low interest rates. But if we let our debt grow, and interest rates normalize, the interest burden alone would choke our budget and squeeze out other essential spending. There would be no room for the infrastructure programs and the defense rebuilding that today have wide support.

And there you have it: with debt continuing to soar, growing by the third-highest amount on record in fiscal 2016…


…all that would take for US interest expense to spiral out of control is a spike in debt servicing costs, i.e., interest. But that’s not all: US government debt is just a tiny fraction of total US liabilities and future obligations. How tiny? As the following chart from Bridgewater shows, it is less than 10% of the massive stack of US obligations that amount to well over 1,100% of GDP!

So, yes: a practical person may be forgiven for wondering just what will happen to the roughly $200 trillion in total US obligations as rates start creeping higher, especially since that “creep” is not due to actual economic growth (see the Brazile quote above and more or less every article we have written since 2009), but due to the Fed desire toonce again telegraph that it believes the US recovery has arrived (as it did in December 2015 only to admit it was dead wrong half a year later).

So what happens next? Well, in a world of rising rates and soaring debt… nothing good. Back to the Op-Ed:

It’s not just federal spending that would be squeezed. The projected rise in federal deficits would compete for funds in our capital markets and far outrun the private sector’s capacity to save, to finance industry and home purchases, and to invest abroad. Instead, we’d be dependent on foreign investors’ acquiring most of our debt — making the government dependent on the “kindness of strangers” who may not be so kind as the I.O.U.s mount up.


We can’t let that happen — not if we want an America that is able to provide growth and stability at home while maintaining global leadership. We would risk returning with a vengeance to stagflation — the ugly combination of inflation and economic stagnation that we tasted in the 1970s.

Are the any solutions? Well, according to the authors, “the solutions are clear enough” – they are just unpleasant.

A realistic approach toward the major entitlement programs is required, given that they are projected to account for all of the growth of future noninterest spending. We should make gradual adjustments to the Social Security system that still maintain present benefit levels for those at or near retirement, with particular attention to those most in need. Our health care systems can be made more efficient, with better approaches toward cost control. Since health care represents 70 percent of the growth of our major entitlement programs over the next 30 years, bending the cost curve is essential to the long-term well-being of our economy.


It’s no secret that our federal tax system is broken — unfair, inefficient and prone to political manipulation. It’s filled with exclusions, deductions, exemptions and preferential rates — so-called tax expenditures — that are ripe for reform. Those policies cost about $1.5 trillion each year and disproportionately benefit the well off. Tax reform could provide better incentives for economic growth, while raising more revenue, even as the code is simplified.


But we face an immutable fact. Fair and responsible reforms will take years to implement. And businesses and individuals will need time to adjust. Delaying action now will make the needed changes only more painful and difficult later on, while also increasing the risk of financial crisis before the reforms are even made. That is why the real debate should begin immediately.


Yet at the final presidential debate, both candidates missed the opportunity to clearly lay out their visions for a fiscally responsible, long-term future for our country. There’s still time to solve this problem. But our next president needs to show leadership in the first months.

Well yes, nothing serious was touched upon in the debate, but then again the American people no longer care about serious things. Instead, they are far more fascinated by whether Trump is a Putin spy, or if Hillary will revert to the TPP as soon as she becomes president and the next check from Malaysia clears.

As for Volcker and Peterson, they personally have nothing to worry about: “At our age, neither of us will personally suffer from a failure to act. It is those with long lives ahead — grandchildren and great-grandchildren — who deserve the benefit of prospering in a nation with sound finances. Take some advice from two observers who have been around for a while: The long term gets here before you know it.”

Sadly, nobody ever won a US election by focusing on what is truly important, and thus painful: case in point – Ron Paul. As for the broader American population, it is about to get the president it truly deserves, be it Trump or Hillary: those who routinely ignore the important, and focus on the trivial.