April 25, 2024

What Financial Issues Do People Worry The Most About?

Besieged by the rising cost of energy and food, many consumers are barely able to make ends meet.  Throw in the fact that for many consumers real wages have been stagnant for decades and you have the makings for the establishment of a permanent financial underclass that is living on the edge of financial disaster.

According to a survey of 2,016 Great Britain consumers done by MoneySupermarket, the financial worries most on the minds of people is the rising cost of fuel and food.  Portraying the deep financial distress of the average consumer, only 9% of survey respondents said that they foresaw no financial worries in the next year.

The survey also showed that 8% of people had no one to turn to for help if a financial emergency arose.

The infographic shown below breaks out the financial worries of the survey respondents by age group.  It is interesting to note the older respondents had the greatest worries about the cost of fuel, utility bills and food costs, suggesting that the older age groups have less disposable income and/or are worried about having enough money for retirement.

The precarious financial condition of  many individuals in the survey is highlighted by the impact that a relatively small amount of money would have on their financial situation.  Shown below are the survey results to the question of what respondents would do if they suddenly received 1,000 British pounds, the equivalent of US $1,584.  Almost 50% of respondents replied that a 1,000 pound windfall would help to relieve their financial anxiety.

Although the survey does not directly inquire as to what amount of financial assets the respondents had, it appears somewhat obvious from the survey answers that most had very little or no savings on which to fall back on.  Nor does the survey report on what is the biggest problem confronting virtually every developed country in the world – the crushing level of debt burdens on consumers and governments.

Central banks have probably prevented a 1930’s style deflationary depression by printing trillions in paper currency to support over-leveraged banks, consumers and governments.  Unfortunately, Central Banks cannot manufacture what is most needed in weak economies which is  jobs and higher incomes.

Food Stamps For The Wealthy – Millionaires Meet Eligibility Requirements

Newt Gingrich started a food fight at the last Republican debate by calling Barrack Obama “The Food Stamp President” and suggesting that food stamps were creating dependence on the government.  Mr. Gingrich went on to say that he wanted to “help poor people learn how to get a job” so that they could get off the food stamp dole.

Although Mr. Gingrich’s pitch for individual self reliance and hard work resulted in a standing ovation from the Republican audience, the message may not play out as well across the broad spectrum of American society.

For decades, politicians have told the American public that they are entitled to all sorts of benefits and the public has grown to love them.  Promises of benefit cuts or austerity measures do not win elections. In this regard, Mr. Gingrich may lose more votes than he gains by trying to reduce the number of food stamp recipients.  (The food stamp program is now known as the Supplemental Nutrition Assistance Program or SNAP).

Courtesy: inquisitr.com

All well intentioned government entitlement programs expand exponentially over time.  The number of food stamp recipients has exploded to a record 44.7 million people and this is a voting bloc to be reckoned with.  Newt’s somewhat hostile message to food stamp constituents has probably lost him a considerable number of votes.

Mr. Gingrich, who has an incredible depth of knowledge on most topics, seems to be unaware that food stamps have become an entitlement not just for the poor, but also for many who are financially independent and chose not to work or have retired early.

Here’s an example I looked at for a married couple in Connecticut who both chose to retire at the age of 50 since they are financially independent with $5 million in liquid assets.  Since they will live off their savings until they start receiving pensions at age 60, the couple has no “earned income” and can therefore qualify for a decade’s worth of food stamp benefits.

Exactly how can multimillionaires qualify for food stamps?  The reasons lies in the lack of asset testing for SNAP eligibility.  Connecticut, like 34 other states, does not limit eligibility based on assets.  Most SNAP applicants, except for limited exceptions, do not have to report money in the bank, retirement assets, stocks or other assets.

According to the handy benefit calculator from the Connecticut Department of Social Services, the multimillionaire couple cited above are eligible for food stamps to the tune of $367.00 per month.

The food stamp program has grown not only due to tough economic times but to vastly widened eligibility guidelines.  The SNAP program costs the taxpayers over $75 billion per year.  Here’s a partial listing of who can qualify for food stamps.

  • Non-citizens
  • Unemployed
  • Retired social security recipients
  • Working people with low wages
  • Homeless
  • Legal immigrants
  • College students
  • Millionaires showing little or no earned income

The graph below from The Wall Street Journal shows the explosive growth in the SNAP program since 1970.

Courtesy: The Wall Street Journal

Mr. Gingrich drew some well deserved applause for trying to reassert the basic values of American free enterprise and self reliance.  However, based on the vast voting constituency that is now on the food dole, reducing or eliminating the food stamp program is a political impossibility.

More on this topic:

The Entitlement Society – Million Dollar Lottery Winner Feels Entitled To Food Stamps – “I have bills to pay.”

Obama Jobs Plan Bad Joke For Both Employed and Unemployed

The long awaited and hugely hyped Obama “Jobs Solution Speech”, hastily crafted between rounds of golf on the Vineyard, is unlikely to help either the employed or  unemployed.

Obama’s calls his new proposals the “American Jobs Act” but it strongly resembles the $825 billion stimulus spending program of 2009 which was ineffective and failed to stimulate the economy or create new jobs.   Taxpayers will likely fail to see the logic of a $447 billion stimulus program working any better than a $825 billion stimulus program.

The latest proposals out of the White House appear to be another desperate Keynesian attempt to keep the economy on life support long enough to boost Obama’s chances in the presidential election race.  Expecting voters to buy into Obama’s new program pushes the bounds of credibility.  Why would a relatively small $447 billion program work any better than the $4 trillion in deficit financed spending since Obama came into office?

Telling voters that the new half trillion dollar program will be paid for from future mythical budget cuts isn’t likely to fly either after seeing the results of the latest fiasco on deficit reduction talks that lead to a downgrade of the US credit rating.

Half of $447 billion “Jobs Act” program consists of payroll tax cuts for both employers and employees.  While probably adding to aggregate spending, the tax cuts do not address the fundamental problems of unemployment and income stagnation over the past decade.

Why Payroll Tax Cuts Won’t Work

What business bases hiring decisions on a 2% drop in the social security (FICA) tax?  Any business man stupid enough to decide to hire new employees simply because his share of the FICA tax will be slightly lower is already out of business.  New employees are added by businesses when there is added demand for their products and when they are confident that a lasting economic recovery is underway.  Today, there is subdued demand and no confidence – a cut in the FICA tax does nothing to change this situation.

Regarding the payroll tax cut for employees, here’s how one Connecticut resident assessed the situation.

“I am currently making $80,600 per year.   The recent reduction of 2% in the FICA tax resulted in an increase of $31 per week to my paycheck.  Meanwhile, the State of Connecticut just passed the largest tax increase in history, retroactive to the first of the year, which results in paying $17 more per week.  My weekly deduction for medical insurance increased by $12 per week since last year and our employer has suspended pay increases.

My net benefit from the FICA tax reduction is $2 a week.  Meanwhile, the cost of gasoline, home heating, insurance and groceries has risen at least 6% over the past year.  Even if the FICA tax cut was made permanent, an extra $2 per week is certainly not going to motivate me to spend more.

My savings goals for college funding and retirement have been destroyed by a collapsing stock market and zero interest rates on savings.  I  have to cut current spending in order to meet my savings goals and any extra income would be saved, not spent.”

Did Obama talk to any “real people” outside of the group of Washington elites and millionaire celebrity pals he hangs around with?  I think not.

Did Obama talk to any “real businessmen” before coming out with his warmed over and effective stimulus plan?  I think not.

Did Obama talk to “Helicopter Bernanke” about how to spread out the $447 billion of borrowed money?  The government could simply spend the $447 billion by sending every household in America a check for $3,886 attached with a note telling the recipients to thank their grandchildren whose future has been mortgaged.

Voters are rightfully disgusted by the rapid decline in their standard of living, the debasement of the US currency and the self serving dealings of the ruling Washington elites.  To pull out an old campaign slogan, “It’s time for a change”.

There are no easy answers to pulling a debt laden economy out of depression, but increasing transfer payments, small tax cuts, massively increased regulatory burdens, trillions in stimulus spending and zero interest rates have not worked.  Maybe the Washington elites should simply step aside, stop micro managing the $14 trillion dollar US economy and allow the creative forces of capitalism to work

Census Bureau Report Portrays Destruction Of The American Dream

It Already Is A Depression For Many

The latest report from the Census Bureau on income, poverty and health insurance coverage portrays a darkening economic picture for millions of Americans.  Incomes and living standards fell without regard to geography, race or work profession.  For many, the Census report only confirms the destruction of the “American Dream” of economic advancement.

  • For 2008 real median household income declined 3.6% to $50,303.
  • The official poverty rate in 2008 increased to 13.2% from 12.5% the previous year and is the highest since 1997.   There are now 39.8  million people in poverty.  The government definition of poverty for a family of four is an income below $22,025.
  • The number of people without health insurance increased from 45.7 million to 46.3 million.  The number of people with private health insurance decreased slightly to 201 million.
  • Incomes declined across all racial groups.
  • Incomes declined in every geographic region except the Northeast where incomes remained unchanged.
  • Income inequality was unchanged in 2008 from the prior year, indicating that no income class was spared from a decline in income.

While the government is rolling out the press releases congratulating itself on an economic recovery, many Americans remain in an economic nightmare of unemployment, poverty and hopelessness.   The latest stats from the Census Bureau provide little reason for optimism since without income growth there will be no economic recovery. The latest report on the number of homeowners in foreclosure signals no recovery to date in incomes or jobs.

U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month

Sept. 10 (Bloomberg) — Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.

A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier…. One in 357 households received a filing.

Foreclosures rose from a year earlier as companies cut payrolls by 216,000 workers last month…

“The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.”

With the real world unemployment rate approaching 20%, the government’s loan modification schemes merely delay inevitable foreclosure for many homeowners – without income any monthly payment is too high.  Nor is unemployment the only cause of foreclosures.  For those who still have jobs but are barely getting by, a decrease in income can easily lead to mortgage default.

We Need Income – Not More Debt


While the divorced from reality politicians in Washington decide on what new deficit financed spending program they should enact next, they are missing the big picture.  Our future long term national prosperity will be based on promoting free enterprise job creation – something that does not appear to be on the agenda in Washington.

Extended Unemployment Benefits Make Little Sense

Do Extended Benefits Reduce Job Seeker’s Motivation?

Excluding the depression of the 1930’s we are fast approaching a new official high in unemployment.  During the depths of the last worst recession of 1981, unemployment exceeded 10% vs 9.4% today.  If we include marginally attached and involuntarily part time workers in the unemployment numbers, the current unemployment rate exceeds 16%.

In response to the high level of unemployment and the difficulty of obtaining employment, Congress has enacted legislation that allows the unemployed in 24 states to collect up to 79 weeks of unemployment benefits.   The other states allow unemployment benefits  from 46 to 72 weeks.  In more normal economic times, the limit on unemployment benefits was usually up to 26 weeks.

Washington legislators are now proposing another extension of benefits for up to another 13 weeks that would cost up to $70 billion.  The additional extension of benefits was prompted by the fact that up to 1.5 million unemployed Americans would soon be losing their unemployment checks as they reach the current payment limits.

In addition, the duration of unemployment has reached new highs not seen since record keeping began.

Duration of Unemployment

Given the unprecedented level of unemployment, the duration of unemployment and well reasoned arguments on why unemployment will continue to increase, the entire concept of unemployment benefits should be reconsidered.

Should Unemployment Benefits Be “Free”?  –  Some Alternatives

  • Is the constant extension of unemployment benefits reducing the motivation of the unemployed to seek new employment?   In the past year I have tried to hire unemployed people for an entry level position in which the starting pay was comparable to or slightly above the level of unemployment benefits the job seeker was currently receiving.  In almost every instance, the job seeker declined the job offer, preferring instead to postpone employment until benefits ran out.  I have also heard this same story from other people.  To maintain unemployment benefits, many states require that a benefit recipient contact a certain number of employers per week to seek work – how many of the unemployed merely go through the routine of seeking employment to maintain benefit payments?
  • Should the economy weaken further and job losses continue, does it make sense for Congress to constantly extend costly unemployment benefits with zero obligation from the recipient?  Bill Clinton reformed welfare by requiring benefit recipients to work.  Why not do the same with the unemployed who are receiving benefits?   Many charities, local governments, hospitals and companies  could employ additional manpower in a variety of productive endeavors.   The unemployment benefits would still be paid by the government, but the benefits would have to be earned.  From a self worth perspective, getting engaged back into the real world would benefit the unemployed as well – sure beats watching television all day.
  • Instead of spending hundreds of billions on unemployment benefits and getting nothing in return, the government could establish job training programs or put the unemployed to work on infrastructure projects that the country sorely needs.  This was done in the 1930’s with the Works Progress Administration (WPA) and the country still benefits to this day from the roads, bridges, dams and buildings that were constructed.   The preferred way to do this would be for government bureaucrats to get out of the way and contract projects to private industry.  Paying people to do nothing accomplishes nothing.

Ideally, the economy recovers and private industry rehires many of the unemployed.  Realistically, the country may face continued massive job losses or at best a slow recovery where the unemployment rate remains in the 10% plus range for an extended period of time.   Maintaining an army of paid and unemployed workers to sit idle makes no sense.

More on this topic

When The Laid-Off Are Better Off

Would it surprise you to learn that survivors can suffer just as much, if not more, than colleagues who get laid off?  “How much better off the laid-off were was stunning and shocking to us,” says Sarah Moore, a University of Puget Sound industrial psychology professor who is one of the book’s four authors. “So much of the literature talks about how dreadful unemployment is.”

Obama – 40 more years!

For all of those worried about tax increases, slow economic growth and rapidly expanding deficits, I have one word – relax.  Consider the following comments made by the President today.

Obama Says Robust Growth Will Prevent Tax Increases

June 16 (Bloomberg) — “One of the biggest variables in this whole thing is economic growth,” the president said in an interview with Bloomberg News at the White House. “If we are growing at a robust rate, then we can pay for the government that we need without having to raise taxes.”

Obama has repeatedly said he would keep his campaign pledge to cut taxes for 95 percent of working Americans while rolling back tax breaks for households making more than $250,000 a year.

The U.S. economy shrank at a 5.7 percent annual pace in the first quarter… The median forecast for growth next year is 1.8 percent, according to the survey.

Obama warned that if economic growth remains “anemic” and Congress fails to adopt his plans to hold down the cost of health care, work on alternative energy sources and improve the U.S. education system, “then we’re going to continue to have problems.”

He also repeated his promise to cut the budget deficit, forecast to hit $1.8 trillion this year, in half by the end of his first term.

“If my proposals are adopted, then not only are we cutting the deficit in half compared to where it would be if we didn’t do anything, but we’re also going to be able to raise revenue on people making over $250,000 a year in a modest way,” he said. “That helps close the deficit.”

Fiscal discipline that leads to lower budget deficits is important, Obama said, to ensure investors around the world keep buying U.S. government debt.

From warning of a “financial catastrophe” some short months ago, we are now being told that:

  1. Robust economic growth will cover government spending increases
  2. 5% of working Americans will cover the tab for the other 95%
  3. New spending on health care, education and the environment will spur economic growth
  4. Deficits will be cut in half to only $1 trillion a year
  5. Fiscal discipline will cause investors to lust after U.S. debt securities

News like this is almost enough to make one believe that the recent 40% gain in stock prices is just the beginning of  new wealth creation for investors.

Before rushing into a 100% long position with your portfolio,  consider some of the potential headwinds that the President’s magic scenario will face.

Past decades in the U.S. have been distinguished by slow economic growth (despite huge credit stimulus), stagnate or declining real incomes and a massive increase in the debt burden on every sector of the economy.   In addition, American’s have seen their major asset categories – stocks and real estate – vaporized by multi trillion dollar losses.

Median Household Incomes Fell in 94% of the States – 1999-2005.

1999-2006 Income Declines

1999-2006 Income Declines

Courtesy: mwhodges.home

Household Debt Ratio

Household Debt Ratio

Debt to National Income

Debt to National Income

Debt to National Income Ratio

Debt to National Income Ratio

Workers in Manufacturing

Workers in Manufacturing

Personal savings rate

Personal savings rate

Decline In Purchasing Power US $

Decline In Purchasing Power US $


The national economic trends of past decades are:

  • Lower incomes
  • Staggering increases in debt
  • Dramatic decreases in savings
  • The destruction of our manufacturing base
  • A 90% decline in the purchasing value of our currency

If the President can reverse these trends, I say change the Constitution and give him 40 more years in office!

Would Mortgage Rates At 3.625% Stimulate Home Purchases?

percentThe Limitation of Low Rates

The Fed has done everything under its power to bring down mortgage rates and the best customer today can get a 30 year fixed rate mortgage at around 4.75%.  Despite the all time low in mortgage rates, the housing market continues to suffer as foreclosures and mortgage delinquencies mount.  If mortgage rates dropped even lower, say to 3.625%, would such a low rate stimulate the purchase of houses?  Rock bottom rates offered by some home builders give us some insight into this question.

Mortgage Rates Cut By Builders

As mortgage rates fall to near historic lows, some home builders are offering even lower interest rates, in an effort to lure buyers amid the slow spring selling season.

The latest sales promotion: Lennar Corp. is offering a fixed 3.625% rate over the life of a 30-year fixed rate mortgage. The deal is besting average rates that have fallen below 5% nationwide, but it comes as other builders are reporting mixed results from similar incentives.

Hovnanian Enterprises Inc.’s recent offer of a 3.99% rate sparked “underwhelming” interest from home buyers, says Dan Klinger, president of the builder’s mortgage operation. “It wasn’t like we needed crowd control,” says Mr. Klinger.

Bargain mortgage rates are the latest sales strategy from builders struggling to sell homes. Mounting unemployment continues dogging the sector, because people without jobs, or those afraid of losing one, are unlikely to purchase, no matter how low the rate.

The builders’ low rates may help first-time home buyers, “but it’s not going to goose the trade-up market,” says Thomas Lawler, a housing economist. “That’s because most trade-up buyers use the equity from their previous home for a down payment, and that equity often doesn’t exist any more.”

While some builders acknowledge that price cuts are the most effective way to move inventory, such cuts could cause buyers who have already bought a house at a higher price to walk away from their deposits.

It Always About Jobs

Apparently, low mortgage rates can help but not cure the sick housing market.  Bailouts and stimulus spending may help housing in the short run but in the long term it’s always about jobs.  Until the economy starts to recover and jobs become secure, potential home buyers will lack the confidence to purchase homes.   Expensive homeowner bailouts and foreclosure holidays accomplish little in addressing the underlying fundamental problems of housing.   Once the jobs come back, the housing market will cure itself.

Unfortunately a housing recovery based on income and job growth just became less likely.  The ADP March employment report just released shows major job losses in every sector of the economy.  Non farm private employment plunged by 742,000 jobs in March.  This is the 15th consecutive month of job losses with no hint of recovery on the horizon.   Anyone looking for a fast recovery in the housing market will be disappointed.

Why It Just Became More Difficult To Get An FHA Loan -Declining Markets

mortgageNew Appraisal Guidelines Effective April 1, 2009

All FHA appraisals dated on or after April 1, 2009 must include a Market Conditions Addendum in order for the loan to be insured by the FHA.  There are also new guidelines for appraisers to follow when the property is in a declining market area.

Appraisal-Related Policy Changes and Clarifications

Due to current conditions in the real estate market, it is paramount that appraisers are provided with sufficient guidance to properly appraise and document the appraisal report. Fannie Mae recognizes the Uniform Standards of Professional Appraisal Practice as the minimum appraisal standards for the appraisal profession. In addition, Fannie Mae has established its own separate appraisal requirements to supplement the Uniform Standards.

Adoption of Market Conditions Addendum and Appraisal Reporting Requirements for Properties located in Declining Markets

For all appraisals of properties that are to be security for FHA-insured mortgages and that are performed on or after April 1, 2009, the appraisal must include the Market Conditions Addendum.

Use of Closed Comparable Sales and Active Listings/Pending Sales for Appraisals in Declining Markets

As economic instability continues to impact many segments of the economy and as home prices continue to decline in many housing markets throughout the country due to job losses and increased foreclosures, FHA finds it necessary and prudent to set forth additional guidance for collateral assessment practices for properties located in a declining market. This guidance is also effective April 1, 2009.

Declining Markets

Although there is no standard industry definition, for purposes of performing appraisals of properties that are to be collateral for FHA insured mortgages, a declining market is considered to be any neighborhood, market area, or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory or extended marketing times.

Appraisal Reporting Requirements in Declining Markets

Appraisals of properties located in declining markets must include at least two comparable sales that closed within 90 days prior to the effective date of the appraisal.
In some markets compliance with this requirement may be difficult or not possible due to the lack of market data and, in these cases, a detailed explanation is required.

In order to ensure that FHA receives an accurate and thorough appraisal analysis, the inclusion of comparable listings and/or pending sales is required in appraisals of properties that are located in declining markets. Specifically, the appraiser must:

• Include a minimum of two active listings or pending sales

• Insure that active listings and pending sales are market tested and have reasonable market exposure to avoid the use of over priced properties as comparables.

• Adjust active listings to reflect list to sale price ratios for the market.

• Adjust pending sales to reflect the contract purchase price whenever possible or adjust pending sales to reflect list to sale price ratios.

• Include the original list price, any revised list prices, and total days on the market (DOM).

• Reconcile the adjusted values of active listings or pending sales with the adjusted values of the settled sales provided.

• Include an absorption rate analysis, which is critical to developing and supporting market trend conclusions, as mandated by the Market Conditions Addendum. F

Data Requirements

Data regarding market trends is available from a number of local and nationwide sources. Appraisers must be diligent in using only impartial sources of data.

Lender Responsibilities

Lenders are responsible for properly reviewing the appraisal and determining if the appraised value used to determine the mortgage amount is accurate and adequately supports the value conclusion.

Direct Endorsement lenders are reminded that if the appraiser they selected provides a poor or fraudulent appraisal that leads FHA to insure a mortgage at an inflated amount, the lender is held responsible, equally with the appraiser, for the integrity, accuracy and thoroughness of an appraisal submitted to FHA for mortgage insurance purposes.

Impact of New Appraisal Requirements

The new guidelines should ensure that an FHA purchaser is not overpaying when purchasing a home.  This benefit may be offset, however, by the fact that it may become more difficult for a purchaser to receive seller concessions from the seller since it will be more difficult for the concessions to be absorbed into the sales price. In the past, there would have been more latitude available by the appraiser to build the seller concession into the sales price through a higher appraised value.

The bottom line for many buyers may be that they now need significantly more cash at closing, in addition to the 3.5% down payment money.   It is not uncommon to have seller concessions of 4 to 6% which absorbed prepaid expenses and closing costs.  If the seller concession is not available, the borrower could easily be looking at additional cash out of pocket requirements of around $5,000 on a $150,000 purchase, in addition to the $5250 down payment.

Borrowers attempting to refinance (especially in a declining market), may find it much more difficult to do so with lower appraised values.  In addition, every reputable FHA lender will be examining FHA appraised values much more closely due to the lender liability for a poor or fraudulent appraisal.

The tighter appraisal guidelines should ultimately result in appraised values that more accurately reflect  housing values and thus prevent problems associated with inflated appraisals that occurred in the past.   Whether or not more accurate appraisals will lead to a more stable housing market is another matter, subject to debate.  A matter not subject to debate is that for anyone purchasing or refinancing through the FHA, getting a loan approval has just become more difficult.

Job Cuts And Pay Freezes – The Downward Spiral Continues

Companies by the thousands are announcing large layoffs to their labor forces and, in addition, cutting or freezing the pay of those who remain employed.

AT&T Freezes Salaries of 120,000 Management Workers

NEW YORK (Reuters) — AT&T Inc Chief Executive Randall Stephenson will forgo his 2008 bonus payment, and the company will freeze the salaries of 120,000 managerial employees this year, as the telecommunications company prepares for a grim year.

Stephenson’s decision, which he sent to employees in a memo on Friday, comes after the largest U.S. phone company said in December that it would cut 12,000 jobs, or 4% of its workforce.

As bad as the job cuts are, freezing and/or reducing pay for those still employed carries even more significance.   The last time large numbers of companies reduced workers’ pay  was during the depression of the 1930’s.

What type of demand destruction for their products or services are these companies forecasting that is forcing them to freeze or reduce pay?

US businesses are cutting costs drastically to survive as demand for their products evaporate.  The chilling irony is that lower incomes will further reduce demand, thereby creating a self perpetuating downward spiral. The United States and the global economy are in a vicious de leveraging that will take years to resolve.   Even a well conceived stimulus spending plan will do little to reverse the major trends working against economic growth.   Those forecasting a quick economic turnaround are likely to be disappointed.