Background: Key issues the country is debating are in relation to the charges of government: national security, economics, and welfare of citizens. The issues at hand are identified in Future Forecast for 2014 and have made little progress towards resolution over the past year.

At the center of the stalemate in resolving issues are arguments, yes arguments in the public theater of the press, and the halls of congress, wherever there is a camera or microphone. The rational debate appears insufficient on the floor of the House of Representatives and the Senate. The arguments are over which branch of government is or is not fulfilling the obligations of their respective offices.

Continuing Forecasts:

In the New Rules Category:  U.S. Economy and International Trade is the root cause of most minority unrest in the streets and will continue. It is a failure of ethics to the point of being an “unethical fantasy.” How the congress of 1996-2000 could convince itself that it was more important to place the welfare of Chinese workers ahead of U.S. citizens is totally baffling. Unless it was related to campaign financing. Commission on China 2014 Annual Report.

The last update of 2014 takes into consideration the continuing imbalance in international trade with China of around $30 billion a month. The administration may remark about the $2 trillion in annual exports but ignores the delta . . . the lost opportunity costs.

That is another $720 billion trade deficit since 2012. The result, given roll-over in the economy is over $2 trillion more in lost GDP and $1 trillion more in lost tax revenue and fees. Bringing the total lost GDP over the period to $22 trillion and $11 trillion in lost tax revenue and fees as a result of discontinued domestic production.

It is highly likely that considering the cost of government-provided unemployment insurance, food stamps, and medical care alone when added to the cost of import goods, well exceed the cost of locally produced goods and services. Additional consideration should be given to the lost opportunities to learn and gain self-confidence.

Additional Forecast Items:

Given the serious nature of the trade issue, and the impact foreign goods and services have on national security, no other item will be addressed in this forecast.

The leadership of the nation has taken on a business graduate school mentality. That is, it has adopted the concept of disintermediation, a concept intended to reduce costs by eliminating steps in the process of manufacturing products and providing services.

However, rather than containing disintermediation within the sovereign territory of the U.S., it has been extended to foreign governments . . . placing the U.S. in a position of subordination to, and reliance on, the “ethics” of foreign powers.

In the case of China, it is responsible for the twenty-two trillion-dollar loss in potential GDP; eleven trillion-dollar loss in tax revenue and fees; and provided the funds to expand the Chinese military. That is to say, in an indirect way, the U.S. is threatening the security of the Pacific nations.

The U.S. has given up sovereignty of shipping and raw material markets to communist and socialist nations in the belief that somehow, this will benefit financially through reduced costs . . . which have increased costs via required government subsidies to an underemployed citizenry . . . and returned the U.S. to the definition of a colony . . . of China.

Check the labels on all merchandise in retail stores, supermarkets, and the origin of eighty percent of medicines. Not to mention the automotive and aircraft industries. Yes, some are good, however, becoming dependent on external sources is not.

NOTES:

1. Originally, disintermediation referred to banks giving up the concept of low-interest loans to customers . . . in favor of investing directly in the securities markets . . . for higher returns. Investing in securities is a speculative endeavor. The crash of 2008 consisted of “unethical transactions of a fantasy nature,” by using increasingly higher return rates on poor quality securities and off-the-books bets by market makers.

These bets were against the very securities they were underwriters on. This resulted in TARP and in the final analysis, the bad bets were passed to the citizens in the form of increased interest payments on the national debt.

2. Some will say addressing the trade issue will cause a trade war . . . currently, there is a trade war created by an inept U.S. congress of 1996-2000. And, it is destroying the nation.

For the benefit of citizens at large, a thumbnail description of “who is who” in the process of law-making and enforcement is listed below:

President of the United States of America (POTUS): The Executive Branch

The oath of office of the president of the United States. Before entering Office, the newly elected president will take the following Oath or Affirmation.

“I do solemnly swear (or affirm) Presidential Oath.  that I will faithfully execute the Office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.”

The power of the Executive Branch is vested in the President of the United States, who also acts as head of state and Commander-in-Chief of the armed forces. Under Article II of the Constitution, the President is responsible for the execution and enforcement of the laws created by Congress.

United States Congress: The Legislative Branch

Congressional Oath:

I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me god.

Established by Article I of the Constitution, the Legislative Branch consists of the House of Representatives and the Senate, which together form the United States Congress. The Constitution grants Congress the sole authority to enact legislation and declare war, the right to confirm or reject many Presidential appointments, and substantial investigative powers.

The United States Armed Forces: The Department of Defense:

Armed Forces Oath: I, do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; and that I will obey the orders of the President of the United States and the orders of the officers appointed over me, according to regulations and the Uniform Code of Military Justice. So help me God.

The mission of the Department of Defense is to provide the military forces needed to deter war and to protect the security of our country. The department’s headquarters is at the Pentagon.

NOTE: In relation to the oaths listed above. There is

In relation to oaths listed above. There is a separation of church and state, however, the words “So help me God” in oaths is in relation to adherence to “ethical” behavior in the performance of charged duties, a quality that is expected without mentioning for a sitting president. Think of it as the ethics contained in the ten commandments . . . do unto others.

Ethics:

Normative ethics is distinct standards for the rightness and wrongness of actions, how one ought to act, morally speaking.

(Unethical: lacking moral principles; unwilling to adhere to proper rules of conduct; not in accord with the standards of a profession.)

Fantasy

Something that is produced by the imagination; an idea about doing something that is far removed from normal reality that tells a story about things that happen in an imaginary world.

Law:

A system of rules that are enforced through social institutions to govern behavior. Laws can be made by legislatures through legislation (resulting in statutes), the executive through decrees and regulations, or judges through binding precedent (normally in common law jurisdictions).

Private individuals can create legally binding contracts, including (in some jurisdictions) arbitration agreements that may elect to accept alternative arbitration to the normal court process.

The formation of laws themselves may be influenced by a constitution (written or unwritten) and the rights encoded therein. The law shapes politics, economics, and society in various ways and serves as a mediator of relations between people.

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Usually there are observable activities that can be used as a basis for future forecasts. At this time, both nationally and internationally, activities indicate a continued state of flux between decisions to take future activity, something positive, to a state of retrenching. Notice there is no comment that any decision would be perceived as positive or negative. Moving forward or retrenching on current issues could both be positive or negative. The comment “much to do about nothing” seems to be the motto of Capitol Hill.

Nationally, interpretation of opposing sides regarding the State of the Union Address indicates the same issues of the economy, social security, national security, employment, immigration, healthcare, NSA spying both nationally and internationally, IRS actions, illegal drug trade, legalization of drugs, global warming, and political corruption remain undeterred. There is a stalemate between all branches of government over solutions. Government seems to have reached a point at which it does not control or understand the legal environment it has created. And, activity at the Supreme Court may not be providing outcomes that are conducive to a stable society . . . is it law for the sake of the profession . . . without consideration of the majority? If so, what will occur . . . a state of the minority opinion . . . turning societal mores and beliefs upside down? In today’s terms, it appears to be a game of Survivor where the weak eliminate the strong.

Internationally, taking it as the world turns: Korea is still a major powder keg; China is increasingly challenging its Pacific neighbors over territorial rights; Philippines conflict with southern territories has temporarily subsided with acquiescence of economic control to the rebels; South-east Asia is in turmoil over immigration into Australia; the entire area from India thru Africa is in a state of clandestine or open warfare; Europe from Italy thru the United Kingdom is experiencing major internal strife resulting from immigration, dictatorial governments and political corruption; Scandinavia is beginning to reject support for immigration; South America is in flux over the drug trade and dictatorial regimes; Mexico is a failed state, period; the United States is anything but united for all the reasons in the preceding paragraph.

What are the main drivers in the current national and international situation? And, is there evidence of resolution?

Main Drivers: Economics . . . the control of land and resources; people with skills to build economies; pursuit of personal and political power. Although statements regarding rights and freedom for individuals may be presented, they are a means of control in pursuit of economic ends and power. The robber barons of the day are more likely to be cooperating and coordinating political entities, elected or not.

Evidence of Resolution: Destabilization . . . resolution of one area in conflict in Korea, Philippines, China, South-East Asia, India thru Africa, Europe, Netherlands, South America, Mexico and the United States requires the majority to relinquish to the minority opinion and interest (as in ownership). The more liberal (socialist) appear to be striving for conservatism . . . and the conservative appear to be striving for socialism. Maybe the Polar Regions will also shift . . . and indeed the world will be standing on its head!

It is clear that the United States alone cannot prevent the clashing of forces. The question is can the United States protect its own turf in the future without the use of massive destructive force? The Future Forecast of 2014 and forward may be cloudy with showers to follow.

One issue is clear, the current situation is not one based on religious beliefs. However, it is one wherein the current robber barons may exploit for control. Are the robber barons wearing the cloak of socialism and religion falsely?

Final Update:

Are President Obama’s stated objectives in the State of the Union Address achievable? Yes, however, not by any means pursued by any administration since 1974.

The sequester is a subset of the fiscal cliff. As President Obama has stated, it’s a “complex” situation.

However, it may not be as complex as thought. It may be straight-forward and the complexity may be the mental manipulation attempted to ignore the obvious. Procrastinators and addicts are always looking for an alternative to get the next fix for whatever their habit may be.

Economist Richard Wolf appeared on the Bill Moyers Show and discussed capitalism hits the fan. Identified as central to the current economic situation are two camps of economists; those employed by essentially unproductive entities such as government, and those employed by businesses that must produce a profit. A similar association regarding economists was discussed on the Ken Prewitt show on 2/25/2013.

Essentially the discussion is this:

Economists employed by government entities have little commercial experience and rarely suffer consequences for incorrect projections. Economists employed by commercial businesses must produce fairly accurate projections as profitability in operations can only be achieved through a balance of market demand and supply produced by their businesses.

Economists in the government sector are frequently inaccurate, and the timing and direction of their projections can be wishful and years-off. Missing projections can have a significant impact on decisions made by business to invest or disinvest.

Economists in the commercial sector are usually more accurate out of a necessity for the business to survive and profit. Missing projections by a few pennies per share on a quarterly earnings report can move the value of the stock down markedly.

How do the two camps differ in interpreting data:

Government economists receive relatively historical (dated) information. Reports to the government are essentially from external entities, and may be on employment, sales and revenues based on daily, weekly, monthly and annual basis. Government generally fails to report accurately or timely on internal activities.

Commercial economists can receive real-time reports on their business activities and adjust as needed. They also use the same external reports government receives to assess the impact of government and competitors business, labor and other resource availability in making decisions.

Review of the current problem through definition and a graphical example:

1). The Federal Reserve has a normal function of controlling growth in the economy to between 3-4% annually. This range is expected to provide for limited inflation in the gross domestic product (GDP) while at the same time providing additional tax revenues to support government programs.

Maintaining a 3-4% growth rate in a normally balanced economy is achieved by varying the interest rates through the availability of money for lending in the banking system.

2). Unfortunately the economy can vary between expansion and contraction and tax revenues will also vary. However, government budgets are based on expansion at the tops in GDP growth. Declining tax revenues occur when the GDP contracts. This is a normal business cycle effect.

Contraction of revenues creates a shortfall in funds available to support previously passed legislation. The net effect is to cause government to borrow to close the gap. The result then becomes a compounded rate producing an ever growing deficit.

3). The abnormal and artificial growth rate in GDP achieved as a result of the Clinton administration’s actions of locking U.S. trade changes to the world trade organization (WTO) via the permanent normal trade relation (PNTR) with China, wildly inflated the rate of GDP growth.

This action significantly increased the sum of tax revenues available for long-term commitment to government programs. Since this growth rate was based on sub-prime borrowing, it could not continue indefinitely, and severe contraction in GDP and tax revenues followed.

The net effect was to significantly increase the compounded rate of government borrowing to cover previously passed legislation. The deficit had expanded beyond ability of GDP and tax revenues to overcome.

Graphic: CBO – Revenues and Outlays as a percent GDP

Comment on the chart. For the period of 1974 – projected 2021 average outlays exceed average revenues. The exception being the period of 1996 – 2004, during the period of boom and bust in the housing market (sub-prime lending), the failure of which caused the collapse of the economy.

Note 1: Locking the U.S. to the WTO prevented the Bush administration, and now the Obama administration from taking decisive action regarding trade inequities. The result is $20 Trillion lost in GDP and $10 Trillion lost in tax revenues.

Note 2: Over ten million jobs have been lost over this action. When the cost of unemployment insurance, food stamps and other assistance is added to the price of imported goods and services, the total cost of imports well exceeds the cost of domestically produced goods and services.

Some will say that total exports have increased significantly. Yes, this is true. However, the trade gap continues at nearly $500 Billion annually, which equates to a loss of $2 Trillion in domestic GDP and $1 Trillion in lost tax revenue.

In this respect, the Clinton economy was a myth.

Refer also to:

For a complete and confusing definition of the fiscal cliff