Category Archives: Economics

Miscellaneous economy stuff

Hindsight

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…and learning from it for better anticipations.

Federal Reserve officials grappling with the legacy of expansive stimulus would find it difficult to return to the central bank’s precrisis role on the sidelines of financial markets, analysts and central-bank watchers say.

Well, NSS.  Frankly, these worthies should have known the outcomes likely from their intervention before they intervened.

Aside from the magnitude of the necessary rollback and its attendant difficulty—the Fed’s balance sheet has expanded four and a half times, from $1 trillion to $4.5 trillion since right before the Panic of 2008—there’s the human engineering aspect of personal political power:

The Fed has become “like an octopus,” said Jeffrey Cleveland, chief economist at Payden & Rygel, a Los Angeles money manager.  “Once you get the power and you are influencing all these markets, do you really want to retreat from all that?”

Well,…

New York Fed President William Dudley told an audience this month the portfolio isn’t likely to return to its precrisis size. Federal Reserve Bank of San Francisco President John Williams said this month the portfolio would be “significantly smaller” than it is today, but likely above $2 trillion in assets.

Still twice the original size of the Fed’s balance sheet.  Oops.

Now the rationalization, summarized in the subheadline of the article at the link:

Pulling out of newest central-bank innovations risks market disruptions

A definite possibility, but there’s not much concern for the underlying economy in that remark.  And the economy is what’s important.

We’ll see whether these guys are worth their taxpayer-funded paychecks by how well they learn from hindsight and their mistake.  It doesn’t look promising.

The Trans-Pacific Partnership Isn’t Dead

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The remaining 11 nations of the erstwhile TPP have made it clear that they intend to press on with the agreement, US participation or not, but that the US would be welcome back in, and other nations who could “meet the high standards in the TPP agreement” would be welcome, as well.

Todd McClay, New Zealand Trade Minister:

It’s clear that each country is having to consider both economic values and strategic importance of this agreement, but in the end, there is a lot of unity among all of the countries and a great desire to work together to come up with an agreement among 11 that…delivers for all of our economies and the people of our countries….

This is entirely appropriate.  The same principles the led to our initial attempts to form the 12-nation TPP—enhanced mutual economic and political security—apply to the remaining 11 nations.

Budget Cuts and Bribery

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…or budget cuts and coercion, depending on your perspective.

The president’s budget, due for release Tuesday, will spare the two largest drivers of future spending—Medicare and Social Security—leaving trillions in cuts from other programs. That includes discretionary spending cuts to education, housing, environment programs, and foreign aid already laid out by the administration, in addition to new proposed reductions to nondiscretionary spending like food stamps, Medicaid, and federal employee-benefit programs.

What’s going to be ignored in the inevitable hoo-raw over these allegedly terrible cuts to various aspects of our nation’s “safety” net is the truly terrible downside of those aspects.

The Federal monies being sent to the States for education, housing, environment programs, food stamps, Medicaid, and on and on in the seemingly endless, yet growing, list is in large part those States’ own money.  Its income and other taxes collected from each State’s citizens and businesses (which is to say each State’s citizens), with a fraction of those collections then returned to each State (the rest is sent to other States, which does the collected-from State’s citizens no good at all), but with a cynically attached value-add: Federal strings.  Use this money the way we tell you to use it, or we’ll reduce the amount of your money we return to you.

With the proposed cuts to these programs, the States actually will be gaining: the cuts will facilitate associated tax rate cuts, leaving more money in those States—those States’ citizens’—hands.  Just as importantly, though, the strings attached to the Federal funds transfers will be greatly weakened in favor of the States’ own decision-making.

We’ll find out, too and in short order, how sincere the Republican-controlled Congress, whose members ran on and were elected to effect fiscal discipline, really are, whether they’re more interested in maintaining Federal control over States’ individual and varied economic decisions, or whether we need to just keep doing what we’ve been doing the last several Congressional election cycles: firing those who fail to perform, and replacing them.

Congressman Mark Sanford (R, SC) had such a thought:

For a budget to have any meaning, it’s essential we have realistic assumptions in terms of economic growth and in terms of spending reductions.

True enough.  It’s more essential, though, that our representatives not use such excuses to block meaningful tax reform and actual spending cuts and with that continue to exercise too much control over the 50 States.

As an aside, this brings up two elephants in the safety net herd: Social Security and Medicare.  The foregoing—all of it—applies to these two things, also.  In spades.

Yet Another

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…Alinsky-esque distraction by the Ctl-Left.  This one is on the matter of Obamacare subsidies to health coverage providers to compensate them “for reducing out-of-pocket costs for some low-income consumers who sign up for plans on the exchanges.”

The Obama administration paid billions of our tax dollars to these providers, the amount for this year alone looks to be in the neighborhood of $7 billion, with the annual payout looking to rise to $16 billion in 10 years.

The House has sued to block further payments because no funds were appropriated for them, and so they’re illegal.  A number of State AGs are seeking to intervene in the suit.

More than a dozen Democratic state attorneys general took legal action Thursday seeking to preserve billions of dollars in federal subsidy payments….

It’s a fair debate to have in the courts, although, absent appropriation, there’s no money to spend, and so it would seem illegal to spend.

Now comes the cynical distraction.  New York Attorney General Eric Schneiderman said,

Millions of families across the country—including hundreds of thousands right here in New York—rely on these subsidies for their basic health care[.]

As if that’s relevant to the legality of the matter.  The courts should allow the spending independently of the law because tear-jerking.

Schneiderman is demonstrating the intellectual, legal, and moral bankruptcy of the Ctl-Left’s demands.  They’re wholly unable to present a case, and so they stoop to emotionalism.

Foolish

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President Donald Trump is willing to talk to the Progressive-Democrats in Congress in order to achieve tax reform, and it might seem like a good idea.  In the present situation, though, it’s a waste of time.

As the Trump administration reached across the aisle on tax reform for the first time Wednesday, Democrats communicated some requests of their own regarding the tax overhaul. Those requests included a middle class tax cut and that the overall bill not be part of a reconciliation package….

Of course the Progressive-Democrats don’t want a tax reform to be part of a reconciliation bill.  That way they can hold true reform hostage to their Big Government demands.  This is just Lucy offering to hold the football for Charlie Brown so she can jerk it away at the last moment.

It’s a waste of time to try to deal with a party that, at least since then Senate Majority Leader Harry Reid (D, NV) said he’d refuse to work with a President Mitt Romney, refuses to work with or cooperate with Republicans in Congress or the White House (vis., “revise Obamacare our way, or we won’t talk to you”).