Contents:If you want to skip the detail , the conclusions

provide a reasonable Cliff notes summary (page-14)

1- Where we are: The Promises: This is what we were promised by this president:

2- Where we are today….. The Result of the Promises:

3- This is where we are going : This is where we are headed with this presidents policies: Apocalypse Now:

4- Conclusion: The Report Card and Implications

Gary Crosbie1

Promises made as a result of passage of the two flagship pieces of legislation by the president relative to the economy :

868 billion Stimulus Bill: Remember Obama stated ….”President Bush’s increase in

spending of 4-5 trillion dollars was unpatriotic” . But… He would cut spending and reduce the deficit in

Half by the end of his first term: The 868 billion( 1 trillion with interest) stimulus package

would result in peak unemployment of 8% and 6.7-6.9% by the end of his first term

Create or save(?) NET three or 4 million jobs

Obama Care: The president said that he would not pass a healthcare bill

that would add one DIME to the deficit. Obama Care would cost aprox 900 billion dollars and decrease the deificit by approx 140 billion over 10 years

That you would be able to keep your doctor if you chose That the bill would be transparent with input from both sides

This was what we were promised by this President:

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Result of the Promises PART-1 1- Stimulus Package: Instead of cutting the deficit in half and reducing

spending ……………….to the contrary:a) The total debt was approx. 9-10 trillion dollars at the end of the Bush administration. An increase of approx. 4-

5 trillion(>approaching 17 trillion) dollars over 8 years.

b) This president has not cut spending …to the contrary he has spent 4.5- 5 trillion dollars over 3.5 years. So…this president doubled down on the debt…Obama spent in 3.5 years what Bush spent in 8 years bringing our spending from 18-20% to 24-25% of GDP. The average is 18-20%.

c) The deficit has increased from 479 billion in Bushes last year to over I.2 trillion dollars every year of O’bama’s presidency

d) The unemployment rate that was supposed to peak at 8% in 2009 has exceeded 8% every month and averaged about 9.4 % since 2009 .

e) The result of the stimulus, instead of saving or creating 3-4 million jobs ..the economy , by the end of 2011 has a net loss from his first day in office of more than 2 million jobs. 23 million Americans are either unemployed or underemployed with the lowest participation rate of 63 % since 1981 .

f) Because of the low participation rate the real unemployment rate is between 15-18%. As an example in April despite the fact we added 116,000 private sector jobs , 343,000 totally dropped out of the work force…. This is why the unemployment rate went down from 8.2 to 8.1 . Because more and more people are either losing there 79-99 months of unemployment and or are just totally discouraged and there fore are NOT counted by the bureau of labor and statistics. This is also why we have a NET loss of jobs in 3.5 years.

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Result of the Promises PART-2 2- Obama Care: Instead of modifying and improving the entitlement

system (Medicare and Social Security) the president established a brand new entitlement program……therefore to the contrary: Obama cuts 500 billion dollar from a bankrupt entitlement, Medicare to fund a

brand new entitlement program for 7-15 million people. Obama care based on new CBO estimates states that the plan will cost twice as

much as the original 940 billion dollars to 1.76 trillion dollars This Increases the deficit to plus 340 billion over 10 years. It should be noted this is a very conservative estimate because once the law is fully

implemented in 2014 there will be a mass exodus of companies from providing private heath care to there employees. The penalty will be 2-3K per employee..With the average cost of Healthcare of 12-18k per employee this is an obvious business decision. For a 2-3k penalty per employee, employers will eliminate healthcare coverage for there employees in mass. This will force increasing costs on the new health care system not included in the study.

This will also mean individuals will NOT be able to keep there personal doctor/Physician

Note…this moves us closer to the long term strategy of the left for a single payer socialized healthcare system

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By the Far Worst recovery of any recession since world war 2-Chart-1

Only two other recessions achieved -4% job losses at its trough. This recession achieved -6.5% and is just getting back to the worst previous achieved trough of -4% 38 months later.Chart-1

While the recovery is positive it’s a Jobless and a growth-less recovery

Note every other recovery achieved positive job losses >0 on chart 1

This recession.... has lost a net of 1-2 million jobs since the president took office due to the lack of growth and low participation rate(workers dropping out of the work force) Chart-2

No other president has had less employment at the end of his term than when he started

By Far the worst recovery of 19 post WW2 Recessions..

Lowest participation Rate since 1981.=24 million people are unemployed or underemployed- Real unemployment 16-18%

2-This is Where We Ended Up:

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1. The change in employment is by far the worst of any post world war 2 recession. See blue line in chart-. It has a negative slope reflecting no progress in 3.5 years.

2. The percent change of the worst recession was -5%

3. This recession is approx. 20% worse at - 6 % -Chart-2

2-This is Where We Ended Up:

The slope is neg indicating the economy is worse than when the president took office

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Where we are 1.7-2.2 % growth

The consensus GDP forecasts are around 2. to 2.4% not sufficient to significantly reduce unemployment . Barely sufficient to maintain sufficient growth to avoid a double dip. We need 4-5% growth , 250-300k jobs created a month just to keep up with job participation and 300-350k jobs consistently per month to make a significant difference in unemployment statistics.

The poor growth is due to a lack of leadership and uncertainty in this administrations position on tax policy , healthcare and regulations.

There are 10 new regulations coming out of the govt. per day placing business in the position of spending more time on compliance than generating new capital formation for growth and job creation. Regulations are stifling new C&I loans which are the drivers to new capital formation ,growth and jobs.

This particularly applies to small business who is responsible for 70-75% of GDP growth and 65-70% of new employment .

This is where we need to be to create jobs

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First Chart: This president has increased the debt 4-5trillion dollars in 3.5 years that it took Bush 8 years to accumulate. This has resulted in deficits that have exceeded 1 trillion dollars a year for every year he has been president putting him as the only president to accumulate more in deficits in one term than ANY president serving one or two terms in the history of the country

Note that Obama’s deficits are two to three times Bush’s at there highest year by year and are greater (sum of deficits) in 3 years than all of Bushes 8 years. Also note the dramatic reduction in the deficits in 2003-4 and 5 down to 167 billion was due to tax cuts which flushed the treasury with new revenue due to new business capital formation

Note the presidents budget (red in chart-1) sets the country on a dangerous fiscal course leading to massive future deficits ranging above the 900-1 trillion dollar range in the majority of future years. Also NOTE these huge deficit projections by the CBO occur EVEN WITH the presidents assumption of the end of the Bush tax cuts in 2013 and therefore even with 2 trillion in tax increases the presidents budget pushes the country off a fiscal Cliff.

Second Chart: Note chart to the left: As Washington continues to spend dramatically more than it can afford, every American will be on the hook for increasing levels of debt. Without reining in spending, the amount of debt per citizen will skyrocket from approx. 36k per capita in 2012 to over 100K in 2031 and approx. 136k in 2036.

Bush Obama

The downward slope of deficits in the Bush admin was due to the tax cuts

The apocalypse for future generations The slope increases exponentially

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1- Chart - The major entitlements.— Medicare, the Obama-care subsidies, and Social Security are pushing spending to unsustainable levels. These programs must be restructured to prevent crippling debt or tax burdens on future generations. This president has offered NO plan for restructuring Social Security Or Medicare. In fact he is using funds for Medicare to fund a brand new entitlement program , Obama care.

2- In fact the presidents own Fiscal commission headed by Bowles and Simpson who had a bi-partisan fiscal plan on tax reform; lower tax rates thru eliminate deductions broaden the base , cut spending and initiate entitlement reform was rejected by the president . HIS OWN COMMISION.

3-Bottom line….Spending on Medicare, Medicaid, Social Security, and the Obama-care subsidies will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will more

• than double. Future generations will be left with an untenable debt burden.

4-Note the red line which assumes 18.1 % revenue of GDP ..a long run average barely covers defense and entitlements with the remainder to be borrowed including accumulated interest on the debt.

Currently Revenue to GDP approx. 15%. Barely covers entitlements and defense in 2012-2015

15%

Note the significant increase in the slope and area of net interest

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5-Due to the poor policies of this administration low growth has resulted in an actual revenue to GDP% of around 15%.(see green line in chart on previous page ) . Thus barely covering defense and entitlements till about 2017-2020 but not discretionary spending or the interest on the debt.

6-Thus this chart exemplifies the fiscal cliff facing the country today. Note the exponential growth of the net interest on the debt. This assumes the current rates which is unreasonable. As future charts will show as that rate goes up which will happen closer to the average rate of 4.5-6 % net interest alone

will squeeze out entitlement obligations.

7-The key to increasing the revenue to GDP ratio is simple…..follow the Regan, Clinton and George W Bush economic plans…..improve incentives to

business to generate NEW capital formation by cutting marginal tax rates

8-That would include cutting capital gains and dividend rates that would have a multiplier effect on new capital formation for business .which geometrically generates investment , consumption and employment.

9- Now…There is a lag of about 1.5 to 2 years but the result is significant increases in revenues to the treasury as a result of this policy. 2 Years after the Bush tax cuts additional revenues resulted in a deficit for George bush of 165-176 billion dollars in 20007. Similar results for Regan and Clinton.( See chart on previous page 8)

Refer to chart previous page

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As previous slides illustrate the current slide simplifies the point that we are spending more (red line) than we produce (Total GDP), blue line.

This is the Fiscal Cliff and really underestimates the problem .

In the chart to the left we include only current debt. When we include unfunded liabilities ….

15.6 trillion for Social Security 82.06 trillion for Medicare With Medicaid the total reaches a staggering 118

trillion dollars.

As previous discussion pointed out, without significant reform in entitlements , given the retirement of baby boomers and soon(2019) only 2 people working for every one on benefits our financial system will collapse and we only need to look across the pond at Greece or Spain to see the game play

The presidents budget FY 2013 despite 2 trillion in tax increases actually increases the debt to GDP ratio.

Fiscal Cliff

4/2012

29/2011

Total Debt is 102% of

GDP

Debt

GDP

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Given the serious Fiscal Cliff defined previously remember this assumes a rational term structure of interest rates…a market based yield curve. Currently the yield curve on the short end has been artificially manipulated by the federal reserve. Bottom line the cost of debt is artificially low….when the fed takes off the breaks or the bond vigilantes decide interest rates need to normalize to reflect market risk premiums, rates are going to increase to norms with the 10 year normalizing around 5.5-6 %. This is not discussed enough because tripling of the interest rate will geometrically negatively effect the magnitude of the Fiscal Cliff as well as the time to provide workable solutions without significant pain.

In 2011, as the chart reflects, the U.S. spent more on net interest—interest paid on publicly held debt—than it spent on many federal departments, including Education and Labor.

Again this result is an optimistic short term view given the artificially capped low interest rate by the fed with the fed funds rate at.025 and the 10 year Bond rate at under 2%..

3-This is Where we are Headed with This Presidents PoliciesApocalypse Now:

Assuming current low artificial rates

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A. The chart to the right is the nuclear falling knife where the deficit and debt situation results in another downgrade or a normalization of rates by the bond market… higher….an average would be 5-6 percent having a draconian impact on our cost of debt.

B. In the chart to the right the redline shows as the debt grows the interest cost on the debt overtakes the cost of defense spending in 2019.

C. If entitlements are not reformed the risk premium for debt will go up dramatically. Assuming a best case scenario If it just goes up to the average of the past 30 years of 5-6% the effects are catastrophic….not only exceeding the defense budget by mid 2014 but pushing out expenditures for all entitlement programs, Medicare, social security, Medicaid etc. etc..

The Red line assumes, like today that the bond rates are artificially pegged at 2% for the 10 year bond. The rates will go up and if they assume the 30 year average of 5-6% the debt cost would exceed the defense budget mid 2014 and in 2019 would be 1.5-1.7 trillion dollars a year literally exceeding expenditures on Soc Sec and or Medicare.

Interest rates increase to free market rates of 4.5 -5.5%

The Nuclear Falling Knife - The Bond Vigilantes

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Report Card: Cut the debt in half by the end of first term.

Failed… We spent 1 trillion dollars on a Stimulus package. The result was the debt went up

between 5-6 trillion dollars…. a 50% increase in spending More in 3.5 years than Bush spent in 8 No shovel ready jobs (by the presidents own admission..”Shovel ready jobs weren’t

very shovel ready”) Result is we have a 102% debt to GDP ratio which means we spend more than we

bring in’

Reduce the unemployment rate as a result of the stimulus to 8% by 2009 and to 6.5-7% by 2012. Failed… Despite his promise….The unemployment rate has never been below 8% . This is the longest term of unemployment greater than 8% since World War 2. The average for his tenure is 9-9.4% For the first time There are 1-2 million fewer people working than when the

president took office

Total Transparency in Governance: Failed Despite the Presidents promise for leadership that cronyism would leave

capital hill and legislative decisions would get bi-partisan support …. both the stimulus and the Heath care bill were passed behind closed doors

and even with a majority house and super majority senate required payoffs to senators to pass the Healthcare law (La purchase, Cornhusker kickback etc.)

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Report Card (con) Leadership: On budget, Jobs, energy, deficit and fiscal reform.

• Failed:• What kind of Leader establishes a Fiscal Commission and TOTALLY IGNORES the

results: The president established his own Fiscal commission headed up by Erskine Bowes and Alan Simpson. There was bi-partisan participation to deal with the budget , deficits and recommendations for entitlement reform that are driving us toward the Fiscal Cliff defined in this paper. The results were completed and approved December 2010.

• Now there were some problems with pieces of the legislation from both sides of the aisle ..but with presidential and congressional leadership we could have at least tackled the tax reform issue that is such a critical first step(50% of the people in this country pay no taxes) to helping us deal with our long run fiscal problems.

• The president refused to further review, take up, act on any of the recommendations of his own commission. As a result nothing has been done by the president to engage in anyway with republicans to attempt a first step to resolve the issues that threaten our fiscal solvency within the next 2-5 years.

• The House has incorporated most of the recommendations of Simpson Boles in its budget (Paul Ryan) submittals which are not even brought to the floor in the senate by Harry Reid

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• What kind of leader other than a radical environmental socialist invests in green technologies that go bankrupt (e.g.Solyndra etc.) costing the taxpayers 100’s of millions of dollars despite the fact cost benefit analysis from the Bush administration refused loanable funds because the companies were financially unsound..

• What kind of leader while still in the midst of a recession recovery increase taxes on those earning >250K a year (the producers) to 44%(including Obama care taxes) and triples the capital gains tax on new investment to 30% when 70-80% of those are small businesses that contribute to 70% of new employment and 75 % of GDP. Studies show for every dollar that reduces marginal and capital gains rates generates $1.7-$2.5 in additional revenue to the government.

• Finally the ultimate confirmation of leadership. The president has submitted two budgets to the senate. The first was voted on and was voted down 97-0. The second was voted down by 99-0.

• Forget republicans….NOT ONE DEMOCRAT voted for the presidents budget for TWO YEARS.

• What kind of leadership presents two budgets that not ONE PERSON from your own party would vote for.

Report Card (con)

Leadership: On budget, Jobs, energy, deficit and fiscal reform.

• Failed:

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• Failed…• What kind of leader In a job and growth less recovery would deny the completion

of the Keystone Pipeline. A project that has been fully vetted by state and federal environmental agencies (with the exception of a very few ideological environmental extremist) for over 3 years and would guarantee 20K direct union jobs (150-200k complimentary jobs)and more energy independence from the middle east. The result would be …if this does not get resolved quickly because of Obama…..Canada will sell the oil to China.

• What kind of leader….except the most arrogant, egotistical and self centered individual would go back and adjust all the official biographies of past presidents to insert his supposed accomplishments…to self aggrandize his presidency to include Factoids on nearly every president's bio page going back to Calvin Coolidge.

• What kind of leader would in the process of bailing out General Motors for 50 -100 billion tax payer dollars literally destroy contract law by subordinating secured bond holders assets (who were first in line in the division of ownership). This in effect destroyed there wealth by subordinating them to the unions and union pension funds and giving ownership to the UAW who were responsible for the demise of GM in the first place.

• What kind of leader would allow the Senate to by-pass its constitutional responsibility to the American People by NOT PASSING A BUDGET IN OVER 3 YEARS.

Report Card (con)

Leadership:.On budget, Jobs, deficit and fiscal reform.(Con)

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Implications: If you have problems as I do with this presidents policies today. Think what it will be like when he does not have to worry about re-election. Bottom line if we re-elect this president ..everything discussed previously will continue and we will be on the “Road to Serfdom” with:Higher taxes that will stifle GDP growth, capital formation and job growthBigger government which will insert itself into every aspect of your life..Freedom as we knew it will be a memory.Cradle to grave entitlements will bankrupt the country and when its to late ……the pain for correction will be severe and our evening news will remind us of Greece. Fiscal policy will center around class ware fare...re-distribution of wealth from those who produce to those who do not.

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The bond market will increase our risk premiums on loanable funds through higher interest rates which will grow so dramatically that the cost of net interest on the debt will approach and eventually exceed our expenditures for entitlement programs.

The result will be more borrowing and higher interest rates thus hyper inflation that will challenge the misery index of the Carter administration.(>20%)

Stagflation will be the way of the future where inflation is greater than the growth rate of GDP.

We will continue to be over regulated(10 new regulations a day) with Dodd Frank as a classic example. So while you can’t walk around a financial institution without being run over by a regulator who won’t allow banks to lend or create capital….JP Morgan Chase just lost 2-3 billion dollars in questionable derivative trading….So where was the savior 2600 page Dodd Frank??????

Welcome to the USA of Greece and a lost Century.

Our credit will be downgraded due to our 118 trillion dollars of unfunded liabilities for entitlements and no plan to become more fiscally responsible

Implications: (Con)

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Given the previous conclusions the question becomes:1- How did this guy get elected in the first place……?

2- Why do we pay him ?

3- How can we stop paying him since all he does is campaign , play golf and vacation on taxpayers money.

4- Who is going to vote for this guy in Nov?

5- If you are going to vote for him…. WHY?

OR

Maybe

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As Jerry Seinfeld once said in one hilarious episode …..In response to a Kramer -ism………………

“You are an Idiot wrapped in a Moron.”

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(IT’S A JOKE!)