Category Archives: Economics

Miscellaneous economy stuff

Immigration Limits

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I’ve written elsewhere about the folly of limiting the numbers of immigrants we allow in.

Here are a couple of interesting facts offered by Steve Case in a recent Wall Street Journal op-ed:

Canada got its new startup visa program running this summer, explicitly seeking to lure talented entrepreneurs away from Silicon Valley. Our Canadian friends even erected a billboard near San Francisco…urging foreign-born innovators to consider leaving Silicon Valley and move north.

And

Australia—despite having an economy 14 times smaller than America’s—will, as of Sept 1, offer as many employment-based green cards as the US.

Hmm….

An Alternative Solution

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KT McFarland has one, and it begins with acknowledging an inconvenient truth:

President Obama—face it, you’ve already lost the Syrian war.  You probably lost it a year ago when you laid down that “red line” threat without any idea how you respond if Assad called your bluff.

Now, some underlying that inconvenience:

If Assad calls your bluff and launches another chemical attack in response or widens the war, you’ll be faced with either backing off or escalating the Syrian war, just like LBJ did with Vietnam.

If you do escalate, and topple Assad, you’ll pave the way for Al Qaeda-affiliated rebels to take his place.  If Congress does not approve your attack plan, you will look even more ineffective.

Either way, those chemical weapons will remain—for Assad or the Al Qaeda rebels to use….

Her solution:

The single best thing you could do to improve America’s position in the Middle East is what President Kennedy did when the Russians shocked the world by being the first country to send a man into space.  In response, Kennedy pledged to land a man on the moon within a decade.  You should pledge America to becoming energy independent by the end of your presidency, and a major oil and natural gas exporter by the end of the decade.

…American energy independence would mean we no longer need to curry favor with one side or another in the perennial Middle East conflicts.

Becoming the Arab oil countries’ biggest competitor means they will be forced to worry about how they are going to meet their own domestic payrolls.  They will have neither time nor money left over to pay for terrorists or proxy wars.

(Although they will remain in a position to continue feeding bodies to the furnace.)

And this gives Obama an additional move vis-à-vis Russia:

Give Putin the choice—the US and Russia can either bury the hatchet and work together to solve Iran, Syria, Islamic jihad, and the other international issues on which we disagree, or we can continue to spar over those issues.

If Russia wants to work with us, we’ll work with them on energy projects.  If not, they might continue to humiliate us, but we’ll help bankrupt them.

Then remind Putin that the reason the Soviet Union collapsed and Reagan won the Cold War was because he maneuvered events so the price of oil fell from $40 to $18 dollars a barrel in nine months, thus causing Russian economy to collapse.

We are happy to do it again.

[T]he world still doesn’t want Russian cars or computers.  Russia remains a petro-state: one third of the country’s GNP and half their budget comes from energy exports.

What the lady said.  Plus, that energy move will have only salutary effects on our economy, currently mired in the Obama (non)Recovery.

The Coming Budget Debacle

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House Speaker John Boehner (R, OH) has figured out—or is finally willing to say out loud—that attempts to negotiate with President Barack Obama or with Senate Democrats over the content of the next budget, or on the debt ceiling, are wastes of bandwidth.

Obama already has announced that he won’t discuss the debt ceiling—he simply demands that it be raised commensurate with his spending increase demands.  The rest of the Democrats demand tax increases—or else.

In line with this, Senate Budget Committee Chairman Patty Murray (D, WS) is demanding a balanced approach to “deficit reduction.”

Actually, there’s much with which to agree in Murray’s demand.  We should have a balanced approach: to debt reduction, though (which, of necessity, includes deficit reduction, to the point of its elimination).  That balance is eminently well achieved by reducing taxes and then cutting spending to pay for that.

But this is a thing utterly inconceivable to Democrats, hence the coming debacle.  Or, Republicans will fold, again, creating an even bigger debacle.

The Recovery that Isn’t

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In a recent piece in The Wall Street Journal about post-Panic borrowing increases, James Sterngold and Matt Wirz had an interesting graphic showing the evolution of the US economy from just prior to that Panic to today.  Excerpted below is the part of that graphic indicating the jobs market evolution.

The graph is hard to read; here are some highlights:

  • More than 21 million Americans wanting a job at the 2010 peak, over 18 million still in that strait today.
  • Just under 16 million Americans out of work for at least 27 weeks (over 6 months), still nearly 12 million in that strait today.
  • Dropping out of the market due to discouragement in finding work—of any sort—peaking at over 1 million per year and still nearly that today.
  • Labor force participation rate near a 35 year low.

And there’s this, which takes a longer look at that last bullet:

Notice that bit on the right: after the Panic’s official end, participation rate continued to plummet.

As the WSJ points out,

If the participation rate merely returned to what it was at the end of the recession, nearly four million more Americans would be collecting a paycheck.

Had our recovery progressed as a normal one does, we’d be here:

A normal recovery coming out of a downturn as deep and steep as the Panic of 2009 typically sees growth rates of 5%-6% per year, or more.  This Obama recovery has been 6.7% over the entirety of his term in office—nearly five years.  Had we seen a normal recovery (and using a pessimistic 5%/year growth rate), we would have reached today’s unemployment rate after a bit over one year—late 2010—and we would have been back to full employment (in the range of 4.8%-5.5%) in just under 2 years—two years ago.

Had our recovery progressed as President Barack Obama promised it would when he was stumping for and signing the massive 2009 Stimulus Bill, we’d be here:

He promised in 2009 a 5.5% unemployment rate by a couple of years ago.  How many new jobs would have been created had we actually reached his promised number?  In December 2009 (some six months after the nominal end of the Panic of 2009), the civilian labor force was 153 million, of which 137.8 million Americans were employed, a 10% unemployment rate, according to BLS statistics, and using round numbers.

In August 2013, again using BLS numbers, the civilian labor force was larger, at 155.5 million (and it had a smaller participation rate than in 2009, but we’ll gloss over that for now).  There were some 144.2 million Americans actually employed.

However, a 5.5% unemployment rate corresponds, if my 1st grade arithmetic serves me well, to 94.5% of the civilian labor force actually employed: 146.5 million Americans.  Again consulting my 1st grade arithmetic book, there are some 2.3 million Americans that should be employed but aren’t—because Obama’s proudly proclaimed policies have come up short, and we aren’t anywhere near 5.5% unemployment.

Finally, there’s this:

Current population: 313.9 million
Current civilian labor force: 155.5 million
Current labor force participation rate: 63.2
Current unemployment rate: 7.3%
Employed Americans: 144.2 million
Unemployed Americans: 11.3 million of those looking for work

2007 population: 301.1 million
2007 civilian labor force (last full year before the Panic): 153.1 million
2007 labor force participation rate: 65.8%
2007 unemployment rate: 4.6%
2007 Employed Americans: 146 million
2007 unemployed Americans: 7.1 million

Over the last six years, our population grew by 4.3%; our labor force population grew less than that, at 1.6%; our employed population shrank by 1.2%; and our unemployed population grew, a lot.  We’re not even keeping up.

Yet despite these obvious failures of Progressive policies, Obama and his Senate counterparts threaten to shut down our government and blow up our national credit rating and with it our economy, if he’s not allowed to have more spending increases, yet higher taxes, and a yet higher debt ceiling so he can borrow to pay for his spending (because he knows higher taxes won’t cover it; he just wants the higher taxes because…well, just because).

Obamacare and Taxes

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Casey Mulligan has looked into this in a paper he has at the National Bureau of Economic Research titled “Average Marginal Labor Income Tax Rates under the Affordable Care Act“.  The full paper can be had through the NBER for five bucks.

Mulligan summarizes his paper here, on his blog supply and demand (in that order).

My summary of Mulligan’s summary is his comparison of Obamacare’s impact on our marginal tax rates with the impact of a couple of other programs and his comment on the impact of Obamacare on our take home pay—the part of our paychecks we actually get to use for our own purposes.

Several SNAP (formerly food stamp program) expansions in combination were a quarter of the ACA’s magnitude.  In terms of its impact on average marginal tax rates, the ACA hike is almost double the effect of permanently increasing unemployment benefit payments to 99 weeks from a baseline of 26 weeks[.]

And

[Obamacare] has not been introduced into a tax-free economy, so its marginal tax rate hikes add to marginal tax rates already in effect.  I estimate that, by 2015, the average marginal after-tax share among household heads and spouses with near-median weekly earnings will have fallen to 0.50 from 0.60 in 2007, largely from the ACA but also from other expansions in safety net programs.  That is a massive 17 percent reduction in the reward to working—akin to erasing a decade of labor productivity growth without the wealth effect….

That is to say, in just two short years—immediately on implementation of Obamacare—our median income wage earner will see his take home pay drop 17%, from 60% of his paycheck (already too small a portion) to a miniscule 50% of his paycheck.  As Mulligan notes, that is an enormous penalty to pay for the opportunity to work for one’s living.

Keep in mind, also, that the median weekly income in the US as recently as 2012 was the princely sum of $775.  This works out to a skosh over $40,000 per year.  It’s hard enough to feed, cloth, and educate a family on three-fifths of that.  Think about trying to do it on only half.