Category / United States Government

by Hoosier Econ

Food Chains Hit By Inflation

Inflation is being reported amongst the bigger food chains this past month. This will ultimately lead to higher costs for the consumer.

CNBC reported in Mid August:

“Food retailers like Red Robin Gourmet Burgers and Noodles & Company are sounding the alarm on inflationary pressures, raising the question: Is this the start to higher food prices for consumers?

“Official data show inflation only gradually rising for the economy as a whole with the personal consumption index gaining 1.6 percent in June; however, a dozen food companies in the past few weeks have warned steeper price hikes hurt results last quarter.

Prices are rising for several restaurant staples like beef, seafood and cheese. But costs aren’t up everywhere: Grain and vegetable prices, for example, have been declining.

“This morning Red Robin said lower margins, which fell 1.3 percent from the same period a year ago, were mainly due to higher food and beverage costs.

“Noodles & Company, which reported last night, posted a two percent drop in margins due to increased costs. During the company’s conference call, CFO Dave Boennighausen said the cost of goods sold rose 70 basis points last quarter as a result of modestly higher pork, dairy and shrimp ingredient costs, as well as more promotional activity.

“Wholesale food inflation rose 4.2 percent in the first six months of the year, its steepest rise since 2011; however, menu and grocery prices – what consumers are paying – were only up 2.2 percent and 1.6 percent, respectively, in the same period, according to the National Restaurant Association.”

These are striking numbers considering the purchasing power(Economies of Scale) these chains have compared too smaller food retailers. The smaller ones which most refer to as “Mom & Pop” will not be able to keep up as inflation keeps increasing. The consumer is still feeling squeezed on normal groceries going up in price. Eating out is a very easily controlled expense to decrease.

by Hoosier Econ

Census Bureau: 109 Million on Welfare

The Census Bureau released their fourth quarter 2012 results and found 35.4% of all Americans to be receiving welfare. Here is more from a lengthy CNSNews Report.

109,631,000 Americans lived in households that received benefits from one or more federally funded “means-tested programs” — also known as welfare

The number jumps when other programs are added in:

When those receiving benefits from non-means-tested federal programs — such as Social Security, Medicare, unemployment and veterans benefits — were added to those taking welfare benefits, it turned out that 153,323,000 people were getting federal benefits of some type at the end of 2012.

Here is a breakdown of what welfare program is received by Americans and how many on it:

82,679,000 Medicaid
51,471,000 Food stamps
22,526,000 Women, Infants and Children program
20,355,000 Supplemental Security Income
13,267,000 lived in public housing or got housing subsidies
5,442,000 got Temporary Assistance to Needy Families
4,517,000 received other forms of federal cash assistance.

by Hoosier Econ

Social Security Disability Insurance Fund Will Be Depleted in 2016

Charles Blahous of the Manhattan Institutue recently reported on some findings from the July 28th Social Security Trustees annual report. Social Security and Medicare are two government programs that have been long embedded in government spending. These programs are political hot topics whenever they are suggested to be “reformed” or made more efficient, political dogma ensues. Changes for the most part of these programs are made to give MORE benefits to people and not a regression. I will take some information from Mr. Blahous write up which he did testify in front of Congress about and then turn to two other sources for completion of this summary.

The public must understand the breakdown of how Social Security functions when pertaining to funds

Social Security has two trust funds. Payments for retired workers as well as spouses, children and survivors are made from the Old-Age and Survivors (OASI) trust fund. Payments for disabled workers and their dependents are made from the Disability Insurance (DI) trust fund. It has become commonplace to refer to the two trust funds’ combined operations as though they were one fund. This nomenclature is convenient but not truly accurate. By law each of the two trust funds must separately have a positive balance to allow them to make benefit payments.

Here is big point for people to grasp about this trust fund. Many people who support Social Security at any cost claim the program has too by “law” go on forever no matter what funding issues arise. That is true to a point and here is that BIG point. Once funding for the SS Disability Insurance fund starts going in the red, payments can be greatly reduced “BY LAW”.

The trustees have been warning for several years (long before I became one) that Social Security is on an unsustainable financial trajectory. We have now moved from a long-term problem to an immediate one. The DI trust fund is currently projected to be depleted in two years, in the fourth quarter of 2016. At that point, unless the law is changed disability payments will drop suddenly by 19 percent.

I would suggest reading Charles Blahous article (A Guide to the 2014 Social Security Trustees Report) a few times and even take some time to ponder it. It is a very nice write up and one to keep on file for further events.

Social Security and Medicare produce reports and the federal government then puts together a summary(Status of the Social Security and Medicare Programs) of these two reports. Here are some highlights of the summary pertaining to just Social Security.

Neither Medicare nor Social Security can sustain projected long-run pro- gram costs in full under currently scheduled financing

Social Security and Medicare together accounted for 41 percent of Federal expenditures in fiscal year 2013

The Trustees project that this annual cash-flow deficit will average about $77 billion between 2014 and 2018 before rising steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.

In October 2013, “60 Minutes” reporter Steve Kroft did a segment called “Disability, USA”.  If you have not seen it, I suggest you take a look at the SS disability situation happening in America.

Final summation: For years many Austrian Economic students have talked about the Social Security situation. They are usually met with resistance by economic pundits who produce wild and complicated graphs that say everything is o.k. Problem with this belief is it defies reality. Real money is being given to real people. This program has real issues that cannot be delayed as the physics of debt take over.

by Hoosier Econ

Year To Date Federal Government Deficit $460 Billion

The United States Treasury just released up to date tax revenue collection relating to 2014 fiscal government budget. 2014 government budget ends in September.
CSN News provides a more detailed analysis:

Inflation-adjusted federal tax revenues hit a record $2,469,178,000,000 for the first 10 months of the fiscal year this July, but the federal government still ran a $460,450,000,000 deficit during that time, according to the Monthly Treasury Statement.
After the current fiscal year, the second highest federal tax intake in the first 10 months of a fiscal year occurred in the first 10 months of fiscal 2007, when the government collected $2,432,115,460,000 in 2014 dollars – or $37,062,540,000 less than in the first 10 months of this fiscal year.

The total dollar amount already spent by the government stands at $2,929,628,000,000.

You can read the rest of the article here.

by Hoosier Econ

The Nine Pound Gold Shirt

Sometimes in life it’s o.k. to splurge on clothes shopping. But one man did it in a big way and Economic Policy Journal lays out the details:

Pankaj Parakh owns a pure gold shirt worth about £127,000 (roughly $213,000).He had it custom-made for his 45th birthday. The shirt, made out of 18-22 carat gold, weighs more than four kilograms (nearly nine pounds). The gold itself is 18-22 carat purity, and there have been no other metals used. It is lined with a thin cloth for added comfort

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by Hoosier Econ

Indiana Schools Back in Session: Examination of Their Debt

Indiana public schools are swinging into full gear and with that, their financial books are starting to get published in the back pages of your local newspaper. Most of their financial information from a broad spectrum is posted on the state website and can be found in the Department of Education “School Financial Reports” portal.

The debt held by public education has swelled in recent years in municipalities. For numerous years, Indiana school boards were able to pass tax increases and spending agendas without much say from the public. Since 2008 school boards must get these items on a ballot for voters to decide.

Here are some listings of a handful of school corporations around the state and how much “total principal” they owe. Time period covered is July 1, 2012 to June 30, 2013:

Brownsburg $188 Million

Avon $236 Million

Indianapolis Public Schools $642 Million

South Madison Schools $69 Million

Greenwood Community $20 Million

Plainfield Community $127 Million

Greenfield-Central Com Schools $96 Million

Carmel Clay Schools $153 Million

Zionsville Community Schools $200 Million

Fort Wayne Community Schools $133 Million

Rochester Community $13 Million

Seymour Community Schools $22 Million

Vincennes Community $31 Million

Lake Station Community Schools $15 Million

Tell City-Troy Twp School Corp $24 Million

Fremont Community Schools $5 Million

Vigo County School $58 Million

by Hoosier Econ

Texas Ranch For Sale: $725 Million or Best Offer

Per Associated Press:

One of the largest ranches in the U.S. and an icon for Texas horse and cattlemen has been listed for $725 million, marking the end of a decades-long courtroom battle among the heirs of cattle baron W.T. Waggoner, who established the estate in 1923.

The estate includes the 510,000-acre ranch spread over six North Texas counties, with two main compounds, hundreds of homes, about 20 cowboy camps, hundreds of quarter-horses, thousands of heads of cattle, 1,200 oil wells and 30,000 acres of cultivated land, according to Dallas-based broker Bernie Uechtritz, who is handling the sale along with broker Sam Middleton of Lubbock.

I did a little calculating on what a 30 Year Mortgage would be on this property if you put a $30 Million dollar downpayment on it and secured a loan for 4.25%. Your monthly payments would be just a shade over $3.4 Million a month.

by Hoosier Econ

Los Angeles Zoning Code Complexity

I’m currently relaxing in Oxnard, CA so I’ve had mornings skimming over the LA Times newspaper. They actually have a good business section and the editorials are as expected. I caught an article from their 7/31 edition in business section titled “L.A. To Revamp Zoning Code”. Before I begin, this blog takes the position that America is over regulated on every level of government. Many of these regulations are becoming petty and overlapping with other rules from various government entities. This makes business expansion and even home building very expensive and time consuming.
L.A. has a zoning code now over 800 pages of rules and amendments to rules. In 1946, the book only had 86 pages. The city council is now on a mission to revamp the book so it is less confusing and expensive for development. In the article, the city recently passed an ordinance that required businesses to put bicycle racks 50 feet from the door of the business but it collided with the American with Disabilities Act law of “an easy path to a door without bicycles blocking the path”. As the L.A. Times stated, it left the businesses coming to the city council for yet another amendment added to change the rule. Here are some other examples from the article of what just this one city faces in zoning:

– 60% of the zoning laws were just for certain districts but must be enforced everywhere.
– Want to build a single family home? That zoning has 300 different variations of rules.
– Starbucks found out if you wanted to have a store open up before 7 a.m. it needed a special permit. The cost was around $30,000 and waiting six months just for a decision.
– If you’re a small business or not a financially well off person looking to build a home you are less likely to get through the maze of rules. The system is designed so you have to hire consultant company or lawyers to get what you want approved.

Zoning laws usually are approved considerably easy to get passed. L.A. city council has now stated it will “take years” to change the code. Before regular citizens get a say, the council will consult with the groups that more than likely benefitted from the complex system.

by Hoosier Econ

U.S. Military Veteran Tells of How Bad Communism Is

The other day I was engaged in some conversation with a man about the social affects of what Communism brought to countries. We started discussing the old Soviet Union. In short, Soviet Union historically engaged in disinformation. One example was the government told Russian’s that America would stage “traffic jams” or “large gatherings” if saw the events on tv. He decided to share this story with me of what he experienced in dealing with people from the old Soviet Union. I am paraphrasing the story.

I was stationed in North Carolina in 1975. The U.S. decided to bring over some Russian troops to train with us for a short time. One weekend we had some down time so my Colonel decided we should take the Russian guys out to party. We took them to a dance hall and partied for a little bit. The Russians came up to us and stated we had staged the scene and it was all propaganda. My Colonel took the guys outside to his car, reached into his glove box and slammed a map of North Carolina on his car hood. He demanded that the Russians point to any city on the map and he will take them there and show that many other bars exist with people gathering. The Russians chose a city hundreds of miles away. So we started that way and stopping at several bars along the way. The Russians were completely blown away in what they saw and they also got pretty drunk.

by Hoosier Econ

Graph of the Day: Next Market Crash

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John Maxfield  from theThe Motley Fool penned an article in the USA Today that shows an enticing graph of potentially the next big crash in the markets.

Austrians economic disciples have been screaming the last decade about the Federal Reserve’s printing or now digitizing of money to the banks through borrowing. On top of that, the federal government has needed massive amounts of money to fund welfare/social programs that are by law “mandatory”.

Maxfield and Austrians part ways with his explanation in the article. There really is no more denying inflation is happening. Pricing is exploding across many sectors.

Personally, I have followed the Feds printing and done well. But the money supply is drying up and a downturn is very real down the road