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Sunday
Oct072012

President Houdini, The Employment Magician

Contributed by Chriss Street. Specialist in corporate reorganizations and turnarounds, former Chairman of two NYSE listed companies. His latest book, The Third Way, describes how to achieve management excellence and financial reward by moving organizations from Conflict and Confrontation to Leadership and Cooperation. Chriss lives in Newport Beach, CA.

All great magicians employ misdirection to create miraculous illusions, leaving their audiences stunned and confused.  President “Houdini’s” miraculous creation of 873,000 jobs in the month of September magically drove down the national unemployment rate from 8.1% to 7.8%, just as absentee voting begins.  The trick left Republicans and economists equally befuddled, since the last time a similar monthly jobs increase appeared was June of 1983 when the economy was growing at an astronomical 9.3% annual rate.  But looking behind Barack the Great’s smoke and mirrors reveals that the President’s highly controversial July suspension of the “workfare” requirements that welfare recipients must actually do real work to be counted as employed seems to have dramatically reduced the U.S. Labor Department’s unemployment rate.

The Bureau of Labor Statistics publishes two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the “household survey”, and the Current Employment Statistics (CES) survey, also known as the “payroll survey”.   With most economists estimating the current U.S. economic growth at an anemic 1.5%, it seemed ludicrous that the Obama Administration could report a monthly gain of 873,000 jobs in the household survey, just short of the all-time record 900,000 jobs gain in June of 1983, when under President Ronald Reagan the economy was growing 6 times faster at 9.3%.  In fact, the same household survey report showed a recessionary slide of 195,000 jobs in July and another 119,000 decline in August.  Adding to the suspicions regarding the credibility of the household survey, the more reliable “payroll survey” that tracks the rate of jobs growth through IRS withholding data was unchanged from last month.

After the report, the internet “blew-up” with conspiracy theories that the employment numbers must have been consciously manipulated by the U.S. Labor Department to help the President’s reelection odds.  Even the highly-respected former CEO of General Electric, Jack Welch, tweeted: “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change the numbers.”

Like all spell-binding illusions, the real set-up for this phenomenally great employment report was engineered back on July 12, 2012, when the Obama Administration announced an Executive Order that eliminated President Bill Clinton’s highly-praised workfare reform that required welfare beneficiaries to get real job in order to continue to receive paymentsAccording to former Clinton Advisor Dick Morris, in 1996 Senate Republican Majority Leader Trent Lott stated: “I don’t want anyone going to a truck drivers’ school that advertises on a matchbook cover and avoiding work.”  The Republicans included 42 U.S.C. § 615(a)(2)(B) in the Temporary Assistance for Needy Families (TANF) reform legislation to make sure every states’ welfare recipients were required to work in a real job and also inserted section 607 to prevent future secretaries of Health & Human Services (HHS) from waiving the real workfare requirement.

With 1.4 million of the two million families receiving TANF payments not actually in real jobs, Obama took heat for changing the work rules.  The Heritage Foundation warned:

in the past, state bureaucrats have attempted to define activities such as hula  dancing, attending Weight Watchers, and bed rest as ‘work.’ These dodges were blocked by the federal work standards. Now that the Obama administration has abolished those standards, we can expect ‘work’ in the TANF [welfare] program to mean anything but work.

Presidential candidate Mitt Romney, a former governor, howledthe linkage of work and welfare is essential to prevent welfare from becoming a way of life.” Republican Congressional leaders screamed the waiver was a “blatant violation of the law” by allowing states to substitute “vocational educational training or job search/readiness programs” to “count as well” in meeting the work requirements.

But as the heat dissipated and the campaign news cycle moved on, President Houdini was positioned to triumph.  No one knows just how many of the up to 1.4 million TANF welfare recipients have now been re-designated by the states government as “employed”, but isn’t it just magical how 873,000 people started working last month.  Is Barack Obama really the new Ronald Reagan?

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Reader Comments (2)

This would be funny if it didn't mean that Obama magically gets re elected.
October 7, 2012 | Unregistered CommenterJaneb
Chris, Kudos for pulling the connections together. Why isn't your reportage in the Washington Times or other conservative media? Very few of the writers on conservative blogs write about financial specifics.

I have extended family in the midwest. The job market there is depressive. When the announcement came of over 800,000 new jobs appearing in a month, I immediately thought, of Mark Twain's famous quotation: "lies, damn lies, and statistical lies."

We live in the upper south now , retired. I have a BS in Mathematics, MBA, plus management and operations analysis in the banking sector. I left banking just as mergers & acquisitions (beginning in the late 1980s) led to the insanity today where 5 banks possess over half the banking activity in the USA today.

Anyway, as a retired "bean counter", I have been counting "Treasury" beans recently. Particularly concerning US debt and the horrendous doubling of debt in the past 6 years from $8 trillion to $16 trillion. My motto is: "Show me the numbers" and I'll decide for myself.

Here's the dilemma I see. People don't know what's going on. I play cards at a senior center. Most of the ladies live comfortable lives. Few worked full time but with their husbands retirements plus social security life is pretty good. Travel, visits to family around the country, etc. etc. Most are totally oblivious to Washington borrowing the country into oblivion plus the Federal Reserve printing money so much money it will cause devalution and/or inflation. . With the media pooh-poohing substantive discussions, who can blame them for being uninformed?

Anyway, I pondered and pondered and pondered. How could I pose a question to these ladies? Is there anything I could ask or suggest to penetrate their lack of understanding?

The only thing I could think of was to say one day, "Do you know how much Washington is borrowing to operate the government every month? (The answer, if you are a jeopardy whiz kid, is $103 billion per average borrowing during the 112th congress).

Anyway, the lady in question, with 15 grandchildren, waved it off laughingly, saying "No and I don't want to know." I doubt if her grandchildren will be thankful when they find out that each already owes $50,000 of what is already booked. That doesn't count unfunded liabilities, of course.

Here is the Excel recap I did with these ladies like this in mind. I am thinking about asking if I can post this on the bulletin boards at at our public libraries What do you think?

"The US debt has doubled in the past six years.
How dangerous is this? No one really knows.

THIS IS how fast Washington has added NEW US debt.
**** NEW DEBT ****.
$103 Billion – Average PER MONTH, 112th Congress.
$143 Billion – Average PER MONTH, 111th Congress.
$63 Billion – Average PER MONTH, 110th Congress.
$45 Billion – Average PER MONTH, 109th Congress.
$48 Billion – Average PER MONTH, 108th Congress
$23 Billion – Average PER MONTH, 107th Congress.

Source: US Treasury Debt to the Penny."

Also, there is a nice video done by a retired accountant about Washington's spending. 5-minutes.

Google Hal Mason Youtube debt
October 9, 2012 | Unregistered Commenterouttamoneyusa

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