-3.4% w/o the massive deficit
Aug 30 2013 delayed
FreeVenue public release of May 30th MemberVenue guidance ~
Stripped of reporting period noise, baseline Real GDP has been
climbing 26 months, much in thanx to dissipation of a petroleum
headwind which was a record -1.6% during the April 2011 Libya
crisis. On the short-term outlook, the
TRENDLines Recession Indicator's
measure of animal-spirits-plus
suggests GDP growth will continue it upward trek, reaching 3.1% in
January, but from that juncture it's all downhill.
Analysis by the
model attributes much of the decline to the (2Q15) combination of
rising Treasury yields and a secular uptrend of the federal Deficit
which together cause debt service on the national debt to crowd out
Federal discretionary and program spending. Longer term, the
model continues to develop its discovery (Sept/2012) of a fiscal
tipping point which leads to a potential 2024 austerity crisis and
ultimate multi-year Severe Recession.
Trendlines Recession Indicator
monitors and projects two macro metrics: (a) TRI - a gauge of
baseline Real GDP filtered of reporting period noise; & (b) TRIX
- a measure of the health of the underlying economy via a filtering out
the influence of Congress's fiscal policy Deficits.
The latter suggests the USA has been mired in a Structural Greater
Depression since late 2006.
month's guidance is in general agreement with today's announcement
by BEA its second
estimate for March (1Q13) Real GDP is 2.4% - compared to the 1.9% pace gauged by
May GDP is assessed @ 2.1%, up from 2.0% in April. The ongoing general decline in petroleum prices
provided a 0.1% tailwind to GDP growth this month. TRI's
analysis of the federal Deficits and its measure of
animal-spirits-plus indicates an upcoming 2.2% 2Q13, 1.7% 3Q13 &
2.4% 4Q13. It appears the growth rate of the current business
cycle faces a crest (3.1%) in Jan/2014.
projects Federal Deficits will rise to a record $1.4 trillion over
the next ten years, it is virtually impossible for the American
economy to suffer a prolonged contraction. Unfortunately, the
price of Keynesian economic activity as presently framed results in
deteriorating Deficit & Debt to GDP ratios. Employing
empirical observations, the model foresees a series of incremental
sovereign debt rating downgrades and ultimately an exponential surge
in 10-yr Treasuries yields.
Starting in late 2015, increasing debt service manifests in the
crowding out of federal program spending. TRI
forecasts annual GDP growth rates will suffer decline over the next
This scenario conflicts with my original
Sept/2009 analysis of USA economic activity over the past four decades
conclusion of the existence of an 8.5-yr business cycle with
probable troughs in 2017,
2026 & 2034. It appears the
magnitude of the Great Recession and its significance as a
once-in-a-lifetime "balance sheet recession" event has
temporarily blown out the harmonics of the natural behavioural rhythms.
Albeit many say the
post Great Recession softness is solely associated with ongoing deleveraging
related to balance sheet recessions, my analysis suggests there is
also a larger decadal secular
downtrend of GDP growth rates in play. This decline
trend is typical of maturing economies and also results from
activism among G-20 central bankers aimed at
damping business cycle amplitudes. The timing of
eventual hard or soft landings changes as inflation
and inventory factors come into play. Layered over those
natural cycles are the mitigation efforts: Monetary Policy actions by the Federal Reserve's
& the Treasury Secretary's guidance to Congress with respect to
prognosis for the American economy is simply horrific. The aforementioned
ever-rising Federal Deficits & Debt are plainly not sustainable.
The models conclude the Federal Gov't will pass thru a critical
tipping point in 2024 ... a year in which another projected record Federal Deficit
approaches 7% of GDP; the Federal Debt ($26 trillion) exceeds 120%
of GDP; today's annual Debt service of $235 billion
will have grown to $1.0 trillion; and the dagger thru the heart: trajectories
revealing more of the same.
Empirically, this perfect storm of
economic circumstances induces 10-yr Treasuries
above 7% and gives rise to a backing off on federal borrowing.
Congress will have no option but to implement the harshest of austerity measures
which then leads to
rocketing unemployment and ultimately collapsing economic activity.
The model suggests this Austerity Crisis results in Real GDP
plunging to -8.0% in 3Q24 in the worst stage of what will become a
multi-year Severe Recession.
A clue that the model's scenario is truly unfolding will manifest
upon seemingly mysterious incremental
rising yields on Treasuries yields which are strikingly in excess of
those of its G-8 peers. Enhancements to the
earlier this year predict tipping points for the major bond rating
downgrades from "AAA" to "C" along with associated projected 10-yr
yields ... and the subsequent post-intervention recovery.
The model concludes 10-yr yields will rise exponentially and the
upon surpassing 7% (2024) will signal the international investment community
has resigned itself to the fact the trajectory for structural Deficits
will only worsen without intervention. Realizing its
house-of-cards is caving, Congress will mitigate its future
borrowing needs by resolving to slash its Deficit over a four year
TRENDLines Recession Indicator
calculates this historic austerity measure ($346 billion x's 4) will
induce a 14-Qtr Severe Recession with Real GDP plunging to -8.0%
TRI's gauge of GDP over the whole event will avg -2.9%, compared to
-4.5% in the Great Recession (-3.1% BEA). Elimination of the
Deficit does not mean an easy ride thereafter. After rising to
a record 134%, the Debt/GDP ratio improves to only 125% by 2030.
As such, the bond rating is still a crummy "CCC" with 10-yr yields
of 4.8%. It is the USA's turn to find how long is the road
back to "AAA" ... number crunching says the ride thru the 21 series
upgrades takes 'til 2048!
these discussions concerning GDP activity over the past six years
are somewhat shallow albeit typical of conventional economic narrative. It
is indeed a trivial pursuit, one dealing with the patient's surface symptoms
... not the underlying disease.
The true extent of the malaise of the American economy is best
comprehended when economic activity is viewed thru a prism which
unveils the influence of the Federal Gov't Deficits.
This is accomplished via the filter of fiscal multipliers.
Trendlines Research has been publishing since Sept/2012 the
resulting metric (Structural GDP) depicted
as TRIX (red line) in the chart above and retroactive to 1970.
Analysis of long-term Structural GDP confirms the
same 8.5 year (102.5 month) natural
business cycle I found in my 2009 study using Real GDP. The
1974-'76 event was a Structural Severe Recession (-2.7% avg SGDP over
Qtrs). This was followed by the deeper 1979-'86
Structural Severe Recession (-3.0% avg SGDP over 8 years). On
its heels was the 1988-'93 Structural Severe Recession (-2.4% avg
SGDP over five years). At that
juncture, one can't help but notice the outstanding prosperity of
the 1994-Y2k era. The May/2001 to Aug/2006 event was a
Structural Technical Recession (-0.8% avg SGDP over five years).
The current episode
began Nov/2006 and is truly
massive. SGDP improved to -3.4% this month after plunging to a
low of -15.4% in Jan/2009. With SGDP averaging -8.0%
over the last 26 Quarters, this event is a defined Structural Greater
Depression with no sign of resurrection pending a sea change in
political leadership or some
To give this epic
event some historical context, SGDP avg'd -9.7% during the four
worst years of the Great
Depression (1930-1933). The current event is approaching a
full seven year span (2007-2013). SGDP was -17.1% in the
worst year of the Great Depression (1932).
It was -13.0% in 2009. So this structural contraction may be
slightly less deep but
it is far broader.
Keynesian Deficit measures (2.1% of GDP) in the Great Depression
which proved insufficient. The result was avg
Real GDP of -7.4% over those four years. Conversely, the
unprecedented fiscal policy actions in this event have virtually
masked the -8.0% negative SGDP. In fact, had Congress agreed to the extra $400 billion in stimulus requested
by Paulson/Bernanke/Geithner, the only negative year for Real GDP (2009) would have come in
positive ... not -3.1%.
Purists may argue about the merits of
long-term healing in a Keynesian environment vs a laissez-faires
approach and whether the funds were allocated properly, but clearly this
event would have been extremely worse from a socio-economic
standpoint had not the proper amount of fiscal stimulus
been implemented. The measures to hoist the -8.0% SGDP
"almost" worked perfectly. Congress did the heavy lifting via
its massive deficits (6.7% of GDP) and the FOMC assisted with accommodative
liquidity actions and communications aimed at restoring Confidence
levels. Rather than the expected -1.3% avg Real GDP,
favourable fiscal multipliers and innovative FOMC accommodation
resulted in 0.8% growth over these past seven years.
It appears the
improvements to SGDP are near an end. The normalization of
interest rates will adversely affect servicing of the national Debt,
resulting in ever-diminishing gov't discretionary spending from mid
2015 onward. SGDP will deteriorate to -6% over the next ten
years. Note that in the absence of federal Deficits post-2027,
SGDP and RGDP are again aligned.
May 30 2013
Recession Alert: The American economy continues
its struggle to recover from the Structural Greater Depression it entered in
underlying Structural GDP (TRIX)
improved to -3.4% this month, having avg'd -8.0%
over the past 26 quarters. The Congressional fiscal policy
measure of five massive trillion dollar Deficits
continued to lift Real GDP (TRI)
into positive territory: 2.1% in May. This
practice will prevent contractions & business cycle
soft-landings for several years but the measure is not
Trendlines Recession Indicator's
visible 2030 horizon reveals
will deteriorate after April 2015 as overwhelming
federal debt service commences to crowd out federal
program spending. Barring a sea change in
political leadership, findings via the TRENDLines Debt Wall model
suggest the USA is
en route to a record $1.4 trillion Deficit & $26
trillion Federal Debt by 2023. Deficit & Debt
to GDP ratios of 6% & 117% mirror economic metrics which empirically
lead to 7% sovereign bond yields, borrowing
austerity measures and in the USA's case ... induces a
14-Qtr Severe Recession (2024-2027).
Factors contributing to short/medium/long term weakness of the
RGDP & SGDP outlooks continue to be: (a) political dysfunction; (b) stubbornly high
unemployment; (c) rising international inflation & interest
rates; (d) structural deficits and sovereign debt rating
downgrades; & (e) by contrast and in an ironic twist,
the $15/barrel decline in USA Refiner Acquisition Crude and related
petroleum costs since the Libya crisis are in turn providing the
economy with a quantifiable tailwind!
renewing the nation's infrastructure, enacting new free trade
agreements and resolving systemic inefficiencies has slowed to a
snail's pace in Washington DC. Cynicism among
voters with respect to ethics and integrity in Washington gave rise to the
Tea Party movement. One of the world's most corrupt electoral
systems has led to utter dysfunction in the halls of Congress.
Many Congressmen appear beholden to donors. Their fundraising activities
(and those of the President) occupy far too much of their weekly
tasks. Crucial legislation always seems too close to the next
election. The lobby sector is worth billions.
Most every bill is
filibustered. 60 votes is the new definition of majority in
the Senate. Because a Budget has not been passed since 2009,
Continuing Appropriation Resolutions and the federal Debt Limit
extensions essentially have become a proxy for the nation's annual Budget debate.
It is a malaise that does not
distinguish Parties, has infiltrated several White House
administrations and apparently has spread to many State legislatures
and municipal councils.
Polarization and adversarial politics has unseated the spirit of
compromise. The gridlock stymies good and critical legislation
and is at the root of the breakdown in consumer/commerce confidence
Mismanagement of the
fiscal affairs stymied Keynesian options during and in the aftermath of the
Great Recession. Whilst Canada, Japan & other G-20 nations are
engaged in deficit-enabled infrastructure spending, the US Gov't finds its 105%
Debt/GDP ratio prevents such endeavours. Instead, Congress
borrows a trillion a year just to keep the phone & lights on...
Many of the
macro stats have been tainted over the past three years 'cuz so many
folks are still victims of the Great Recession. Clearly
the 11.7 unemployed (U-3) and 10.3 million under-employed & marginally
attached souls on the sidelines are
a drag on the economy.
At 13.9% in April, the
Real Unemployment Rate
(U-6) is not yet even half way back to its pre-recession
Dec/2006 low of 7.9% after rocketing to a 17.2% peak in Oct/2009.
The TRI model projects headline U-3 UR is on a glide path which won't see equilibrium
unemployment rate) 'til mid 2015. The wide-spread
malaise persists. This level
of progress does
not reflect so much a marginally improving economy as it does the realities of
an aging society. From Jan/2011 and thru the following
19 years, 10,000 boomers a day are turning 65 years of age.
Boomers are the 77
million Americans born 1946 through '64. The number of
people eligible for SS will nearly double from 46 million to 80
million by the time all the boomers reach 65. So the big
question is of the 150,000/month potential, how many are retiring?
The 63.3% participation rate has been in secular decline since Y2k
to boomers leaving the labour force, This is a long-term trend
which won't see the rate level off (48.5%) 'til 2050.
So in short, with this
many folks not working and so many graduating students and
immigrants not able to get their first jobs, the economy remains in
a rut. If there is any good news out there, it would be the
economy is finally surpassing the 106k new net job creations per month
required to hold the unemployment rate static considering graduating
students and immigration. This progress would be jeopardized
by any attempt to again raise the federal minimum wage.
When the US economy
entered the present Structural Depression event in March 2007, the
federal minimum wage was $5.15/hr. Despite the fragile
situation, Congress raised it 41% ($7.25) over the next 28 months
thereby making millions of then employed and potential hires
thoroughly uneconomic ... mostly affecting unskilled blacks and
Hispanics. Unintended consequences then put the next tier of
wage earners ($6-$9) at risk as they demanded the usual premium
compensation over the minimum wage earners. In this light,
Obama's SOTU demand of another 24% increase (to $9) borders on
(c) Rising International
Inflation & Interest Rates
forecasts the normalization of US interest rates will commence
in Dec/2014. But regardless of FOMC targets & activity, rising commodity prices and general
global inflation in the meantime means the housing sector may
already be facing a 2% rise in 5-yr mortgage rates by that juncture
... long before the domestic economy can handle them and thus yet another potential medium-term headwind.
(d) Structural Deficits
& Sovereign Debt Rating Downgrades
The USA's AAA sovereign bond rating was rightfully cut in July/2011
by Egan-Jones (S&P a month later). Egan-Jones trimmed it
again in Sept/2012. The remaining AAAs (Finland, Australia, Canada,
Germany, Luxembourg, Netherland, Singapore, Sweden &
Switzerland) have long had better fundamentals.
Failing mitigation, the structural deficits and
compound interest will see the Federal Debt rise to $26 trillion
by 2023 before a borrowing wake-up call brings this fiscal madness
to an end.
Having the ability to print currency, it is of course highly
improbable the Federal Gov't could ever actually default so fear of
redemption is not really an issue. Rather, rising yields
would reflect the prospect of inflation (from excess
printing), currency debasement and the derogatory effects upon repatriation of
funds. Further, the sale of bonds in a rising yield
environment will require deep vendor discounting.
model has determined by 2023 the federal govt's Structural Deficit
will rise to $1.4 trillion (6% of GDP). Servicing the $26
trillion Federal Debt (117% of GDP) will cost $1.0 trillion ($235
Empirical observations reveal a probable scenario. As Debt & Deficit to
GDP ratios rise, bond rating agencies will incrementally
downgrade long-term treasury bonds. The
model predicts the USA "A" series rating will fall to "B" (3.75%
yield) in 2018 and to "C" series (5.0% yield) in 2022. By 2024
yields will have exceeded 7.0% and long-term borrowing will almost
certainly grind to a halt. Congress will have no option but to eliminate
the Deficit over the ensuing 48 months.
A solution has been
elusive and for one to come to fruition the so-called grand bargain
must be struck. The loudest voices in DC come from the
62-member Tea Party
faction on the right and the Progressives on the left. The
latter wish to protect long-term entitlements and the former desire
a balanced budget. A compromise lies in striving to work
towards both ends concurrently so each feels similar gain (or loss).
Americans are finding
themselves in the same ramifications of this Keynesian experiment as
are the Eurozone peripheries and others before them (New Zealand,
Canada, Argentina etc). The
federal gov't was lax in its fiscal management last decade and
entered its Structural Greater Depression with a 72% Debt/GDP ratio.
It is 105% today. Realization of the severity of the
approaching wall may be quietly extinguishing entrepreneurship in
America. 47% of its citizens are takers. It is the Obama
doctrine: Ask not what you can do for your country.
Ask what the Gov't can do for you!
The future presents a
truly ugly Catch-22 scenario. Congress will find it must
continue its trillion dollar Deficits to sustain positive Real GDP.
However this practice bloats the federal debt and hastens the day the bond
vigilantes bring the Treasury auction yields to crisis proportions.
(e) Wow, Oil Prices become a
years of declining residual crude oil prices have finally reversed
this factor from an economic headwind to a tailwind.
The TRI model had calculated the
effect of cumulative quarters of high oil, diesel & gasoline prices
had at its peak during the Libya crisis shaved
1.60% off the April 2011 RGDP growth pace, nudging out the
former record for this factor of 1.55% in June 2008.
USA Refiner Acquisition Crude price plunging from $113/barrel to
$97, the baked-in headwind effects
finally exhausted in March 2013 and in turn provided instead a 0.2%
tailwind to GDP this month. The
trend to a reduction of the Stress Premium price component ($24 to $10/barrel) as global geopolitical issues
dissipated. The record for tailwinds (-1.38%) was set in July
2010, reflecting ramifications of the 71% RAC collapse.
It should be stated the American economy is much too
diversified and per capita disposable income too large for high
petroleum costs to induce a Recession. Just shy of the level
where oil price would do significant harm, the more vulnerable G-20
nations are already entering Recessions and thus paring back their Demand.
The definitive Oil/GDP ratio where G-20 Recessions would again be
induced is currently
$130/barrel RAC ($124 WTI).
That said, high petroleum prices can certainly damage susceptible sectors
of the American economy.
models first discovered (Nov/2009) predictable oil & gasoline price thresholds which if surpassed
harm auto sector growth. Breach of these definitive
petroleum/GDP ratios signaled setbacks for Light Vehicle Sales in 1980, 1990, 2008, 2011,
2012 as well as earlier this year, reflecting buyer resistance to excessive gasoline & diesel costs.
Although RACrude price has retreated below the LVS Barrier
($117/barrel), gasoline has been stubborn.
This current pump LVS Barrier is $3.58/gal, still a tad under today's national
gasoline price ($3.64) and the reason new car sales have been stagnant at the 15
million unit/yr pace since Sept/2012. The
forecast for imminently lower prices should
result in a surge of auto manufacturing and sales this Summer.
The environment for
tailwinds and a rejuvenated auto sector should be lengthy. The
models currently forecast $68/barrel USA RAC & a $2.70 pump price by
1Q18. The consequences of LVS Barrier incursions are dire.
During the Great Recession, volume declined 44% (16 million unit
annual rate to 9 mu/yr). The rate dropped by 1.2 mu/yr in the
2011 episode, 0.7 mu/yr in 2012 and 0.6 mu/yr again this year.
Gas Pump &
models are predicting dire consequences next decade. The
is predicting its LVS Barrier will be breached when gasoline rises
permanently above $4.11/gal in 4Q24, while the
suggests this happens upon RAC surpassing $144/barrel in 2026.
As both dates fall within TRI's projected Severe Recession, 4 mu/yr
may be sheared off EIA's projected 17 mu/yr 2026 pace. The
adverse effects will be borne by the gasoline/diesel fuelled
manufacturing sector. At this late stage, there is too little
time for mitigation efforts such as fleet changeover to natural gas,
electric and fuel cell units.
black swan event make its presence,
Gas Pump &
Barrel Meter models
both conclude any extraordinary price spike
would be constrained by the same Price Spike Ceiling which
firmly arrested the 2008 price run @ $129/barrel USA RACrude
($4.11/gal pump). That definitive petroleum/GDP ratio predicts
an upper limit today of
The PSC represents a threshold where certain demand destruction feedbacks attain critical mass. As
happened in the Summer of 2008, Demand and Price are reversed as alternative
energies, substitution and conservation measures are pursued. The negative effects of rising energy
costs on the disposable income of consumers and the profits and viability of
commerce and institutions inevitably takes a toll on the American economy.
Ironically, triple-digit crude prices have been for the most part
the USA's own making. In the realm of unintended consequences,
a plethora of avoidable events has thoroughly disappointed the
international investment community over the years. There was
the aforementioned refusal by successive Congresses to address the
long-term structural deficits; the Dec/2010 extension of the
Bush-era Tax Cuts; the Obama Administration's decision to
unveil the record 2012 $1.5 trillion Deficit Budget; and the
inability to pass the 2011 Budget on a timely basis as well and the
related threatened Gov't shutdown in April 2011.
If not enuf, the
National Debt (see
Debt Wall) was given widespread media scrutiny via the required
debt limit increase. The Debt Ceiling review by Congress forms
part of the USA's checks & balances to deal with Budgets that fail
to meet reality or Administrations that choose to operate via Continuing
Appropriation Resolutions in lieu of the
conventional Budget process. This string of fiscal management
episodes has caused a resumption of the secular decline of the
USDollar ... by some measures down 10% in the last 36 months despite general EURO
The USDollar has been debased as much as 40% since January 2002. The
journey was truncated by safe haven
activity in 2009, but the latest relapse is responsible for a $19/barrel component of today's $97 RAC
price. To give context
to the volatility, this
same factor was a record $30 in July 2008 and a mere $1/barrel on the day of
Barack Hussein Obama's first inauguration.
the ECRI Black Box Retrospect
TRENDLiners will remember in
(MemberVenue archive page)
TRI conversion of medium-term leading data sets began warning of sub
1% GDP ahead in 2012.
later, it appeared the downturn could lead to a limited
contraction. But on
Sept 26/2011, TRI gave the "all clear" upon finding the negative
inference was a mere anomaly within the forward-looking data.
Every monthly release from that episode to late May upgraded Year 2012 GDP.
Such is not the case
for the perma-bears. As of Jan/2012, David Rosenberg remained
stalwart in his 2010 position the USA entered an economic Depression
in 2007 which will manifest itself in up to four more Recessions by
the end of the decade. In Aug/2011, John Hussmann proclaimed
the USA was entering a double-dip Recession. On March 27 2012,
Robert Schiller forecast realty prices may plunge another 20% and
would not see new highs for five decades.
But the boldest claims
in the face of current realities come from what CNBC fondly call's
ECRI black box. Lakshman Achuthan was adamant
the Fed's FOMC would be impotent in efforts to halt an NBER defined Recession which had commenced
Sept 23 2011. In the face of an annoying 4.1%
2011Q4 GDP announcement and ECRI's first false positive signal, Achuthan again went
to the airwaves on Feb 27 2012 to declare yet another new Recession
would commence in 2012Q3. In recent weeks Achuthan has reverted
to the first call and mused often the BEA would downgrade 2011Q4 &
2012Q1 GDP by 3% in its scheduled July 2012 annual revisions ...
thus revealing the USA was in Recession all along. It did not
happen and he earnestly awaits the July 2013 numbers...
Their clients must be pissed. The S&P500 was 1055 when
Rosenberg told 'em to hunker down. 1119 when Hussmann said the
same. 1136 on ECRI's announcement. Today the S&P500 is
1654 ... and housing is up over $19k from this time last
year! The gross miscalculation by these practitioners is
traced to their failure to quantify the benefit (via fiscal
multipliers) to Real GDP by the
five massive trillion dollar Congressional Deficits.
the Great Recession retrospect
The NBER declared this event commenced in Dec/2007 and
came to an end in June 2009 (19 months). The American economy
finally surpassed the Nov/2007 $13.33 trillion Real GDP high water mark in
This marked the transition from recovery mode to expansion
of the new business cycle. So with the advantage of this most
recent revised economic data from BEA, it appears the
contraction lasted from Dec/2007 to Mar/2009 (16 months)
with an avg Real GDP of 3.1%. Much deeper than
originally calculated, each of BEA's annual revisions are bringing
the tally closer to TRI's original output measure: a
Dec/2007 to Aug/2009 (21 months) downturn with an avg RGDP of
To add some context to
the Great Recession historically, Structural GDP (Real GDP filtered
of Keynesian influence) avg'd -9.7% in the Great
Depression (1930-1933). The current event has a
much longer breadth (2007-2013) already and an avg SGDP of
-8.0%. SGDP was -17.1% in the Great Depression's worst year
(1932) and -3.1% in 2009. Thus it can be demonstrated modern era
fiscal & monetary policy was relatively successful in mitigating socio-economic
fallout this time around.
conventional inventory-related business cycle issues and special
balance-sheet deleveraging in play, this epic event was assisted by three main factors:
(a) the 2005 Realty
Bubble & the abrupt increases of Federal Minimum Wage. Median
home prices rose to 52% ($75k) above historic price to income ratio norms resulting in
extremely high mortgage and rent payments, robbing many families of
disposable income which normally would have been spent on goods and
services. It took four years for home prices to get back to
historic norms; (b) by June 2008 residual high petroleum costs
were paring 1.55% off the Real GDP growth pace & (c) when Structural GDP
was teetering near stall speed in Feb/2007, Federal Minimum Wage was
$5.15/hr. But by a mere 29 months later, Congress had raised
it a stunning 41% (to $7.25). Many firms could not justify
paying unskilled labour (present & potential) these new rates.
There was pressure from the tier above to have their remuneration
increased to $6, $7, $8 & $9. By Feb/2010 (36 months), the
unemployment rate had shot from 4.4% to 8.3%.
The Progressives and their President continue to wage
class warfare seemingly in an attempt to stretch the
rhetoric into the 2014 & 2016 campaigns. The
introduction of "middle class" as their battle
cry is odd. Throughout the British empire and
beyond, it is common knowledge the real middle class is
doing just fine! That's 'cuz most Americans are
understandably unaware of the relevant definitions.
The upper class is a culture's wealthiest 1%, whilst
middle class refers to a nation's highest 10% of
earners. Down the line comes the working class and
lower class populations. The celebrity President
again caters to the wannabees. (link)