America is in a Depression, not a Recession

The Liberal Establishment Media keep singing their happy tune that the U.S. economy is improving, albeit slowly. But a liberal economist says otherwise.

Paul Krugman is a Nobel Prize-winning economist, an op-ed columnist at the New York Times, and an Obama supporter. And Paul Krugman thinks we are in a depression.

On December 11, 2011, Krugman wrote: “It’s time to start calling the current situation what it is: a depression.” Most recently, in his column of May 10, 2012, Krugman thinks matters have not improved. As he puts it: “How did we get stuck in what now can only be called a depression?”

When we think “depression,” images of the Great Depression’s soup and bread lines in the 1930s automatically spring to mind. We don’t see people lining up in those lines today, so this must mean America is not in a depression!

Wrong.

The reason why we don’t see those lines is because those who otherwise would be standing in those lines are getting food from the welfare state’s profusion of programs — food stamps, unemployment benefits, Aid to Families with Dependent Children, Social Security Disability, student loans…. Americans’ dependency on Government programs currently makes up as much as 35% of personal incomes.

In other words, what we have is a Hidden Depression.

Lance Roberts writes in his article on the Hidden Depression for StreetTalkLive, May 14, 2012:

Behind the mainstream media’s attention to the daily economic numbers there is a hidden economic depression running along the underbelly of the country.  High levels of unemployment have kept pressures on wages even as work hours have lengthened.  This, of course, is assuming full time employment.  In reality many individuals are working but either part-time at one or more jobs to make ends meet or working full-time as a temporary hire at reduced wage levels.  The declines in real income are evident.  The burgeoning labor pool and demand for work is suppressing wages as companies opt for increasing productivity and streamlining employment to protect corporate profit margins.  However, as the cost of living is affected by the rising food, energy and healthcare prices without a compensatory increase in incomes – more families are forced to turn to assistance in order to survive.

[…] Without government largesse many individuals would literally be living on the street.  The chart [below] shows all the government “welfare” programs and current levels to date.  The black line represents the sum of the underlying sub-components.  While unemployment insurance has tapered off after its sharp rise post the financial crisis, social security, Medicaid, Veterans’ benefits and other social benefits have continued to rise.   The government “safety net” is already under tremendous strain as the number of “workers” supporting the system has fallen markedly over the last 30 years.

[…] For the average person these social benefits, however, are critical to their survival as they make up more than 22.5% of real disposable personal incomes.  With 1/5 of incomes dependent on government transfers it is not surprising that the economy continues to struggle as recycled tax dollars used for consumption purposes have virtually no impact on the overall economy.

More disturbing is that this huge increase in demand on “welfare” support in its various forms does not include the more than 46 million Americans which are dependent on the Supplemental Nutrition Assistance Program (SNAP), or more affectionately known as “food stamps.” Without this assistance the basic needs of survival for many families can not be met. 

[…]the reality is that recycled tax dollars have been proven to generate little or no economic growth which is evident from recent GDP data.  Astoundingly the total benefits in 2011 rose above $71 Billion which was a 107% increase from 2008.  Yet we are told the economy is improving?

[…] As the ability to source income from traditional support programs becomes limited or exhausted – individuals can become very creative.  Two of the most interesting areas that have been tapped to support basic consumption needs since the beginning of the “great recession”is student loans and disability insurance.

The number of individuals claiming disability has surged to the highest levels on record since beginning of the last recession. What is most notable, however, is when the surge of individuals claiming disability began – exactly two years from the beginning of the financial crisis. This is when the 2 years of extended unemployment insurance began to run out. […] Today, more than 28 million Americans who are of working age have a disability – a level higher than at any other time in recorded history.

However, if you cannot claim disability why not just say you are going back to school?  […] The chart [below] shows only the federal student loan program which has surged 400% since the end of the last recession and is now the federal governments largest financial asset comprising 31% of its balance sheet.  However, in reality, student loan debt in total, which including private label loan programs, has now reached $1 trillion.

[…] Even as the media trumpets that the Fed has saved the economy from a “depression,” it might just be a statistical victory at best.  The government may say this is not the 1930’s where bread lines formed outside the corner soup kitchen, however, for many American’s the only difference is that they are found at the mailbox and online instead.

~End of Lance Roberts’ article~

+++

America’s national debt now exceeds our GDP and is closing in on $16 trillion. It doesn’t take an Albert Einstein to know that our super-extended welfare state cannot continue as it is. Indeed the danger signs are already visible.

In four years, by 2016, the first of the Social Security funds — SS disability — will be in full collapse.

Brian Faler reports for The Washington Post, May 30, 2012:

“The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period. The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79% of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue.”

It is anticipated that by 2016 when the Social Security disability program runs out of cash, this will trigger a 21% cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty.

By 2017, one year after its disability program goes bust, the main Social Security program itself will be in trouble, paying out more in benefits than it takes in. In the 1950s, there were roughly 5 workers for every retiree; today, it is roughly half of that. With 78 million Baby Boomers moving into retirement, the demands on social security will be even greater in the coming years ahead. With demographics heading in the wrong direction and a much slower growth economy, the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033.

~Eowyn

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18 responses to “America is in a Depression, not a Recession

  1. Thank you Dr. Eowyn for this most informative and documented post. It is truly frightening. A hidden depression is the perfect definition of our economy. It is a tragedy, because the liberal left had little to no expectations of the American people and their talents, believing that they knew what was better for the American people.

    The unemployment insurance trust fund is strictly administered, and that is why it remains solvent and not in the same shape as social security. Unemployment insurance is allowed as a buffer until people find employment, wherein proof of looking for employment must be given to each state unemployment agency.

    This is such a terrible travesty, because the real dignity of humankind was set aside because of the welfare state that we find ourselves in. Aid should only be a stop gap, not a lifestyle.

    I agree that collapse is imminent unless drastic changes are made. God help us.

    Thank you again, Dr. Eowyn, for your research and your regular scholarly presentation of the evidence. May God bless you abundantly always, and may the Blessed Mother, the angels and the saints, our family of the Church Triumphant, assist you always as you continue to be God’s warrior in Truth and Justice!

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  2. The depression is “hidden” by the SRM and the DNC. Ask anyone in the real world and you have it right in your face. I have a friend that was unemployed for over a year, another for two years. Me, 5 months unemployed last year, then temp job, now permanent, yet with pay much lower than my previous full-time job.

    The bleeding has got to stop. It is unsustainable…

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  3. Awesome post, thank you. xoxo

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  4. Thank you, sage! 😀

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  5. Hardnox, that’ll be a good first step! 😀

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  6. Wow, for once the Putzlicker Prize winner gets it right.

    Sort of.

    -Dave

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  7. Here comes the broken record. Reinstate Glass Steagall.
    Cancel the bailouts. Separate the illegal gambling debts of the banksters from legitimate debt which should be met by the government. Then, as the monetary system as we know it, the FED et al, will be shown as bankrupt, with nothing much left to help our Republic recover economically, Congress should utter credit as per the US Constitution for worthwhile projects, that will have a lifespan of up to two generations, that are large enough in scope to put our citizens back to work. We can’t pay off the debts, but we can make a plan to counteract the certain dismal result of the current monetary system, as explained so clearly and fully above by the awesome Dr. Eowyn.
    Sure it will collapse, may it already has collapsed.
    I say GREAT!
    Who cares about the dreaded oligarchs and their genocidal drive to starve us all to death, remove our healthcare, and make certain we have nowhere decent to live, and provide a lousy education for our children.
    They certainly don’t care a fig for us and never will and never have done. They think they are entitled to special treatment, as we have witnessed so recently, by the Queen celebrating her oligarchshipful Reign over her subjects over there in the UK and the Commonwealth.
    Her galavanting is not worthy of a comment by one journalist “the Brits are completely mad”. I can think of other ways of describing the antics they just got up to over there. Yuk! is one way.
    Anyway, to get back to the point.
    We can do something about our future.
    We can go back to the good ol’ Constitution and do it the American Way.

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  8. Dr. E, no one should be happy with Krugman’s estimation. I think it’s safe to say that his motivation for admitting the dire condition of our economy is directly antithetical to that of everyone here. That we intersect momentarily with this egotistical kook is mere coincidence. For starters, Paul Krugman is a Nobel Prize winner and so is Barry Soetoro. That should tell us all we need to know of the Nobel Prize.

    This man is a socialist through and through. His goal is to topple free enterprise. His main complaint with the Obummer administration is that the stimulus (stimuli) was not big enough. He would have spent us into even further long term damage if he had his way. These socialists want us in so deep that there is no escape.

    My guess is that you already know this about Krugman but perhaps others do not.

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    • CelestineC,

      My post was not intended to laud Krugman, though it is significant that a liberal pro-Obama economist believes we are in a depression. The title is meant to attract readers. LOL

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      • I knew your point from the outset but it still leaves Krugman hanging out there as a sympathetic figure and he is anything but. Krugman was posturing in December of 2011 for more stimulus spending while the socialist was still in office. Keep in mind these socialist ideologues, Krugman included, don’t want a recovery, they want devastation leading to a feeling of hopelessness leading to submission. They offer “hope and change” to the hopeless or in the case of many of the sheeple in the US, “hapless”.

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  9. For those who might be interested in how the Obama regime will deal with Krugman’s dissension. The AP just released a report titled “Buffett sees little chance of US recession” by CHRISTOPHER S. RUGABER, you will see this same article on various outlets with similar titles. (The AP gives the author in all caps. Is that indicating he is a corporation? Curious.) This release is just reaffirming the regimes commitment to the socialist ideology and Buffett’s commitment to the regime at a time when the economic reports, Democratic defections and Walkers win have shouted the people’s discontent. Read it for yourself to see what I mean. Simply Google “Buffett sees little chance of US recession” and choose your toilet…..er outlet.

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  10. I can figue out why the experts can’t figue out that we have been in an economic depression for years. The standard of living has been leaving the US for decades. A short while ago one person could support an entire family. Then two people was needed to do it. Now the jobs that these two people needed have disappeared. Some people claim there are really 86 million unemployed. Many are hiidden, some attending college thinking they won’t end up like many boomerang kids. What a joke. Democrats or Republicants both are responsible. This is a depression. If you have a job the situation is just manageble. However, you are also losing ground day-day.

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    • You do not need two incomes to support a family – my sister and her husband (with 2 kids) are proof of that. Many parents both work to afford a certain lifestyle (or the mom works to get away from the kids). Vacations, new cars, new clothes, and tons of stuff they don’t need. My sis and her family rarely eat out, never take vacations, and scrimp by with the basics. My sister chose to stay home and they give up stuff for it. It can be done.

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  11. I agree with DCG. There are certainly cases where two incomes are essential but so many young couples want everything perfect at once. They want new furniture, the latest phones, a big house, the latest cars , etc and when that is added together the costs mandate a two income family. It has been many years but I felt blessed to be able to stay home with my family for ten years. I loved teaching but loved staying home when my children were young. And yes that does demand sacrifice, older cars and family vacations visiting relatives not Mickey but it was all worth it. More people need to learn how to define needs from wants. You can live on a budget when you establish more parameters.

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  12. Pingback: America is in a Depression: 4 of 5 U.S. adults jobless, poor, or on welfare |

  13. Pingback: Many on Social Security Disability can but don’t want to work |

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