Biderman’s Daily Edge: Barack Obama Will Be Worst Fiscal President ever, Unless He Changes

Nov
07

Unless Barack Obama dramatically changes, I predict by the end of his second four year term he will have earned the legacy of being the worst fiscal president ever. Why? The US will be bankrupt after another four years of the same Obama we had for the past four.

 

Here’s my evidence, before Obama was elected in 2008 after tax take home for everyone who pays taxes was just under $7 trillion annualized. That $7 trillion number included capital gains, an income source the US Bureau of Economic Analysis does not include in national income. Why is capital gains not included? Is there a prejudice against income on capital? Who knows. It’s the government.

 

In 2009 after tax take home pay bottomed at around $6 trillion annually. Take home pay has risen about 3% to 4% per year nominally since then. However after inflation take home pay has grown all of 1% or so. In other words since Obama has been president after tax take home for everyone who pays taxes is still down by about 5% nominally and more than 10% after inflation.

 

By the way yes, we at TrimTabs are the only ones I know of who talk in terms of after tax take home pay. The rest of the economic universe seems to think GDP is good measure of economic activity. That is because most financial market participants are sheep willing to believe what they are told by the government agencies. In reality GDP is spreadsheet based methodology that tracks maybe 60% of the US economy and badly at that. GDP was created in the 1930’s to help FDR track manufacturing employment. There was no real time data available then. But there is real time data available now. Unfortunately, Wall Street economists and top financial journalists aren’t interested in real time data and make decisions as if GDP means something.

 

That is why I think the best economic indicator is current income, particularly after tax.

 

Back to why Obama will be the worst fiscal president ever. First I mentioned take home pay is still down 5% nominally and down more than 10% after inflation. Second the net worth of the US according the Federal Reserve Z1 Flow of Funds, currently is around $63 trillion, down by about $3 trillion from the start of 2008. The big decline is in home values. However stock prices are artificially being supported. In other words, without the Fed’s manipulation, my guess is the value of stock would be down by at least $3 and maybe $6 trillion, dropping the net worth of the US by another 5% to 10%.

 

So far under Obama, even before the start of another four more years, incomes are down and net worth is down. What is up is government debt. Surprise! Over the past four years, the US government has added $6 trillion in debt doubling the $6 trillion in debt when Obama became president. Before Obama take home pay was $7 trillion, 1.2 times total government debt of around $6 trillion.

 

Now, after four years of Obama take home pay is $6.6 trillion a little more than half the $12 trillion federal debt. Unless Obama dramatically changes his spots, and if the next four years are similar to the first four, take home pay could keep growing at around $200 billion a year reaching $7.4 trillion. That $7.4 trillion in take home pay will barely stay ahead of inflation. However, in order to achieve that modest growth, Federal debt would have to grow by at least $5 trillion to around $17 trillion total. So even if incomes grow moderately after eight years, take come pay will have plunged to 40% the amount of federal debt. Remember before Obama take home was $1 trillion more than total Federal Debt.

 

If the US take home pay to debt ratio does shrink as much as predicted, four years from now will the rest of the world still be willing to fund the US? I do not think so.

 

My guess is that Mr. Obama and his close buddies have no idea what they are doing, or else they would not be doing what they have been doing. The most dangerous are those people who think they are smarter then they are.

 

Unless Obama changes his policies, the US will be bankrupt in four more years. That will make him the worst fiscal President ever.

 

Charles Biderman
President & CEO TrimTabs Investment Research
Portfolio Manager, TrimTabs Float Shrink ETF (TTFS)

 

Tags:               

10 Responses to Biderman’s Daily Edge: Barack Obama Will Be Worst Fiscal President ever, Unless He Changes

  1. Reno Cowboy on November 8, 2012 at 12:51 am

    Pres. Spender will not change….His words from his winner speech were hollow to the max…Example: “I will get us away from foreign oil:” Translation: we will spend billions on alternative energy (More Solyndra’s to infinity)

  2. Ed on November 8, 2012 at 4:25 pm

    The next four years will not only be about continuing the president’s personal agenda (Solar/Wind Power, Union Labor, massive Tax increases), but it will also be about “revenge” on those that didn’t support his re-election (Banks, Wall Street, Big Oil).

    It would be very easy for the Pres. to bring a couple of big banks to their knees (C & BAC) to ultimately nationalize them. He believes nationalization has worked in the Auto industry, and will work in the Health Care industry. The most likely catalyst to get the snowball rolling down the hill will be falling off the “Fiscal Cliff”. This will be blamed on Republican failure to compromise, and the downward momentum will be hard to stop from there.

  3. [...] Trimtabs’ Charles Biderman prefers current income to the bubble and debt rewarding GDP ~ Trimtabs’ [...]

  4. Chris on November 9, 2012 at 2:21 pm

    I think Charles is being generous. In first month of fiscal 2013, US debt grew by about 200 billion. Multiply that by 12 and you are already at about 10 trillion in more debt.

    But that doesn’t include the 8-10,000 people being added to entitlements each day which will exacerbate the debt, make servicing the debt more expensive and exacerbate the debt even more. All of which will increase the chance of a downgrade and on and on it goes.

    Finally the costs of Obamacare have already exceeded expected costs and will continue to do so. Some estimates suggest this alone could add another trillion or more to the debt each year. If anything else goes wrong you very well could be looking at an additional 15-18 trillion in added debt over the next 4 years. My only question is: will it still be George Bushes fault?

  5. How Stupid on November 10, 2012 at 2:20 am

    Yes, Obama is a disaster. Romney would have been a disaster, too. Bush (or was that Cheney) was also a disaster. I’m sensing a trend here.

    The election sucked. However, there were a few good outcomes. One of them is that Karl Rove lost.

    http://howstupidare.blogspot.com/2012/11/how-stupid-are-karl-rove-and-friends.html

  6. Katie on November 10, 2012 at 4:29 am

    I’m having technical difficulties with this new Viddler video playback as follows: the video breaksup so can only hear the audio and it takes me to a viddler video playback which doesn’t include the transcript.

    Additionally, the video has hiccups after just a few seconds and so I’ll settle for just reading the transcript instead. Please revert back to your old embedded video playback which worked much better.
    Thanks!

  7. Tom on November 10, 2012 at 9:49 pm

    I am with you Mr Biderman. The best thing that Obama could do for the US economy is to force Congress to charge full speed over the so called Fiscal Cliff. Sure another recession will be guaranteed, but a recession is going to occur anyway (triggered by global slow down). The combination of mild tax increases with significant spending cuts will put the American ship back on course. And I will make a lot of money on my shorts.

    The ensuing 2014 economic and market rally should be one of the best in our lifetimes.

    Gridlock in Washington is a good thing.

    Cheers,
    Tom

  8. Ed_B on November 11, 2012 at 5:06 pm

    I would find all the blather about the “fiscal cliff” amusing where it not so financially dangerous to this nation and its citizens. What is this cliff that concerns so many? Why, it is the realization we would at long last have to live within our income as a nation. OMG! The horror! Let us hurtle over the edge of this financial precipice with smiles on our faces and songs in our hearts as we FINALLY do something that is at least vaguely responsible.

    Americans have proven in the past that shared sacrifice is not beyond our capabilities but there is a trick to it. To attain it, we MUST have real leadership that can explain the need for it and that ensures that everyone participates in it. Failing these conditions, it will not work. Hmmm… on second thought, I am unconvinced that this is possible given the current regime in power.

  9. Kim G on November 30, 2012 at 5:18 pm

    I’m not sure how you can blame Obama solely. Were Bush to have somehow miraculously gotten a third term, would things be better? Would McCain have done a better job? Most government spending was legislated into law years ago, and the revenue shortfall is due to the economy. Yes, entitlements and the military need to be cut. But don’t blame Obama for the mess we are in. That mess was decades in coming, and many (particularly most of the incumbents in Congress) deserve the blame.

    Unfortunately, the transition from the current unsustainable status quo to a sustainable future will be painful and politically difficult. It will happen one way or the other, either via Congress waking up and dealing with the mess, or via failed bond auctions and market-imposed austerity.

    It’s just a matter of time. But I don’t believe it will happen in 2013.

    Kim G
    Boston, MA

  10. Treena Pirtle on June 1, 2013 at 2:23 am

    Obama’s trip to Chicago should help pad the DCCC’s coffers. In April, events the president attended for the DCCC in San Francisco helped net $3.25 million for the committee.’*^,

    My blog
    <http://www.healthwellnessbook.com

Leave a Reply

Your email address will not be published. Required fields are marked *


Charles BidermanCharles Biderman is the Chairman of TrimTabs Investment Research and Portfolio Manager of the TrimTabs Float Shrink ETF (TTFS)

Biderman’s Practices of Success

I recently launched a new online course, Biderman's Practices of Success, on Curious.com (curious.com/charlesbiderman). The key to the practice of success is to be fully present in the moment and to be totally engaged in the important areas of life, particularly when we do not want to be. Read More.

Archives