Positively Perplexed

I just saw this cartoon and thought I would share. It shows me I wrote on a good topic. Click on the link to see it.
Kevin Siers of The Charlotte Observer Feb. 8, 2014 cartoon

Hunkered down with all the necessities a writer could need, I scrutinize the published data from “Chapter 2 of CBO’s February 2014 report The Budget and Economic Outlook: 2014 to 2024.” I felt my objective as a writer is to inform ‘the average Joe’ about our government’s economy.

I became interested upon this topic from reading Jay Rosen’s Feb. 6th tweet, “Read it five times. Thought about it for hours.” He cited Chris Cillizza’s Washington Post Feb. 5, 2014 article “Why the CBO report is (still) bad for Democrats.”

CBO a.k.a. The Congressional Budget Office is located in Washington, D.C. and led by 50+ year old Director Douglas W. Elmendorf. Dr. Elmendorf has two economic degrees from Harvard University and 15 pieces on sale on Amazon. He was appointed by Pres. Obama in Jan. 2009 for the director position at CBO. His extensive knowledge is capital.

I had to delve into the history of CBO to gather intel upon this report. CBO has an important Transparency and Objectivity statement. There are 21 highly intelligent, qualified economic advisers and 23 health advisers/doctors for Elemndorf to work with. CBO’s staff have high standards, high expectations. They just went to my Alma mater (University of Massachusetts Amherst) this past January for a recruitment at the Isenberg School of Management. Nancy Fahey is thee career woman to get an internship, fellowship or job there.

I digress, CBO published three spreadsheets (titled Quarterly, Calendar Year, Fiscal Year) within the Excel file as mentioned above along with Elmendorf’s eight-page slide show on Feb. 4, 2014.

First, the daunting “Quarterly” Excel spreadsheet has terms, under the ‘Output’ category, such as: GDP, GNP, Real and Potential GDP, GNP, PCE and other alphabet acronyms.

I found on investorswords.com the following definitions:

GDP, or Gross Domestic Product is calculated either by measuring all income earned within a country, or by measuring all expenditures within the country, which should approximately be the same.
GNP, or Gross National Product uses GDP, but adds income from foreign sources, less income paid to foreign citizens and entities.

GNP can be either higher or lower than GDP, depending on whether or not a country has a positive or negative result from net foreign inflows and outgo. Though GNP is still calculated, the United States shifted to GDP as its primary economic measure in 1991, in part because most countries in the world use GDP to measure the size and direction of their economies. As a result, GNP numbers are less common than GDP figures.

On the first worksheet titled “Quarterly”: the four quarters of 2014, CBO cited in billions of dollars the GDP will rise from 17,169 to 17,786 (+615) or an increase from 4.3% to 5.0% (0.7%). Yet, CBO cited the GNP will increase by 619 (17,410 to 18,029) which they say is up 0.4%. Evidently, foreign income gives US four more billion dollars.

However, the next data I don’t understand. CBO has columns itemized as Potential GDP, Real GDP, Real GNP and Real Potential GDP with the last three qualified with billions of 2009 dollars. Why would CBO put in billions of 2009 dollars in this report? That was five years ago.

What also confused me was when I compared the Potential GDP with the first listed GDP and found the Potential GDP to be two different numbers. 453 billion dollars less in Potential GDP is not reflected well.

The second category on “Quarterly” was titled, ‘Prices.’ The Personal Consumption Expenditures (PCE) went up 1.9 billions of dollars from the first to last quarters of 2014. Yet, the PCE without food or energy only went up 1.3 billions of dollars. Therefore, the food and energy markets seem to have a 600 million dollar industry.

The private wages and salary, employment cost index (ECI) was noted to increase by 2.4 from the first to last quarter of 2014 a.k.a. up 0.6%.

The imported refiner’s acquisition of crude oil will apparently decrease from 94.2 dollars per barrels to 91.6 dollars per barrels by end of the fourth quarter. The unfortunate problem I surmise is Pres. Obama is passing the Keystone XL pipeline that is devastating our beautiful indigenous people, the countryside and the natural resources we need 100 years from now.

Supposedly, the Federal Housing Finance Agency (FHFA) House Price Index, Purchase Only will improve by 6.3 points. However, if house sales increase than the wages needs to increase in kind.

The next category was about ‘Labor.’ CBO reported the 16+ year old civilian unemployment rate would decrease by 0.2 percent by end of 2014. While the 16+ civilian noninstitutional population would increase by two million, a 0.1 percent change. The Dept. of Labor defined those people as:

Civilian noninstitutional population: Persons 16 years of age and older residing in the 50 states and the District of Columbia, who are not inmates of institutions (e.g., penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces.

Nevertheless, the question begs to be asked, how many are incarcerated, in group/adult homes or in the military?

I found in the DOJ: Bureau of Justice Statistics 2012 report, published in Dec. 2013 by Lauren E. Glaze and Erinn J. Herberman, Ph.D., BJS Statisticians that 2,228,400 inmates were in custody in 2012. It was difficult to find any other data that wasn’t five or more years old for adult/group home residents. NPR published a story on July 3, 2011 and cited that 2,266,883 people serve in the military as of March 31, 2010.

Therefore, it seems the labor really needs an improvement. Yet, CBO showed there would only be one million more 16+ civilians working by the end of 2014 with a decrease of 0.1%. While the next two subsets make no sense to me. They were: Employment, Civilian, 16 Years or Older (Household Survey) and Employment, Total Nonfarm (Establishment Survey.) They rose one, two million respectively with the annual rate decreased by 0.6% and stayed the same respectively.

The 10-Year Treasury Note and 3-Month Treasury Bill were itemized next on “Quarterly.” I discovered on http://www.treasurydirect.gov/ they defined:

Treasury Notes, like other marketable Treasury securities, are debt obligations of the U.S. Government and are backed by the government’s full faith and credit. Offered in multiples of $100, notes pay interest every six months at a rate determined when they are auctioned. Notes can be held to maturity or sold prior to maturity. At maturity, the principal is paid to the owner.

Treasury currently issues notes as follows:

TYPE OF NOTE

FREQUENCY OF AUCTION

2-year

Monthly

3-year

Monthly

5-year

Monthly

7-year

Monthly

10-year

Original Issues: February, May, August, November

*Reopenings: January, March, April, June, July, September, October, December

Notes can be purchased either directly from Treasury or through an intermediary such as a bank or broker. Interest from notes is exempt from state and local income taxes, but subject to federal tax.

Meanwhile, treasurydirect.gov defined:

Treasury bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. Bills are typically sold at a discount from the par amount (also called face value). For instance, you might pay $990 for a $1,000 bill. When the bill matures, you would be paid $1,000. The difference between the purchase price and face value is interest. It is possible for a bill auction to result in a price equal to par, which means that Treasury will issue and redeem the securities at par value.

And CBO reported the 10-Year Treasury Note would increase by 0.7 percent and only have a 0.1 percent increase for the 3-Month Treasury Bill by the end of 2014. It does not seem like a positive projected year for T-bills.

The last category titled, ‘Income,’ in “Quarterly” perplexes me. I tallied the 11 different subsets for Percentage of GDP and they totaled 248.7 when in ‘Output’ there wasn’t a final total, just percentage change and billions of dollars.

The 11 different subsets were: Income, Personal; Compensation of Employees, Paid; Wage and Salary Disbursements; Nonwage Income; Proprietors’ Income, Farm, with Inventory Valuation Adjustment (IVA) & Capital Consumption Adjustment (CCAdj.).; Proprietors’ Income, Nonfarm, with IVA & CCAdj.; Income, Rental with CCAdj.; Interest Income, Personal; Dividend Income, Personal; Profits, Corporate with IVA & CCAdj.; Profits, Corporate, Domestic, with IVA & CCAdj.

The nonwage income posted will increase by 192 billion dollars by the end of the year. The rental income with CCAdj. will improve by ten billion dollars. The domestic corporate profits with IVA and CCAdj. will only go up 88 billions of dollars at a mere point-two percent increase in the GDP. The corporate profits with IVA & CCAdj. will increase by 83 billion dollars. Therefore, it shows the corporations at home will thrive, give US jobs. The proprietors’ income, nonfarm, with IVA & CCAdj. had a significant improvement of plus 53 billion dollars. Yet the farm, proprietors’ income will on go up three billion dollars.

Therefore, it seems the money is not in farming, if I read this right. The genetically modified organism (GMOs) are taking over, unfortunately.

The next two spreadsheets labeled “Calendar Year” and “Fiscal Year” have stumped me to sleep. The numbers from “Quarterly” with those two do not match. I thought there would be a commonality and/or continuity. I leave the decision up to you to decide where US is going. Feel free to comment or write me.

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