Category Archives: Economics

Miscellaneous economy stuff

Progressives and the Republican VP Choice

Posted on by
Reply

The immediate, and so far sole, response to the Republicans’ selection of Congressman Paul Ryan (R, WI) as their Vice Presidential Candidate has been to attack the man and the man’s budget—which one branch of Congress thought well enough of to pass twice, and from which the Do-Nothing Democrat-controlled Senate has run screaming, not even allowing a debate of it.

Here’s a sampling of the Progressives’ response.

  • A claim that the Ryan budget (summarized nearby) would increase taxes on the middle class so millionaires can continue to get tax cuts.  Their position is, then, that reducing the existing 6 tax brackets to two—10% and 25%—is a tax increase.
  • Obama Campaign Manager, Jim Messina:
    • [the Ryan budget will] end Medicare as we know it and slash the investments we need to keep our economy growing the all while cutting taxes for those at the very top [and]
    • doubled down on his commitment to take our country back to the failed policies of the past
    • Mitt Romney has chosen a leader of the House Republicans who shares his commitment to the flawed theory that new budget-busting tax cuts for the wealthy, while placing greater burdens on the middle class and seniors, will somehow deliver a stronger economy
  • Senate Majority Leader Harry Reid echoed Messina’s claim:
    • doubled down on his commitment to gut Social Security and end Medicare as we know it
  • Maryland Governor Martin O’Malley (D), continuing the Medicare theme:
    • a strong commitment to end Medicare as we know it

What are the Progressives’ alternatives?  Raise taxes on a group of Americans whom they routinely vilify.  Block all efforts to reform, and so save, Medicare, Medicaid, and Social Security (and yes, the reform will change these programs “as we know it;” that’s kind of the nature of reform.  Without reform, though, these programs will be bankrupt in 10-20 years).  Otherwise, the Progressives’ alternatives—since they decry earlier policies—seems to be to continue their current, destructive policies; policies that over the last three years have exploded our deficit, exploded our debt and earned our nation its first credit rating downgrade, suppressed an economic cycle recovery and held us in a post-recession recession with 8.1+% unemployment the entire three years, stalled GDP at 1.5%-1.8% growth that doesn’t even keep up with population growth,….

In the end, by focusing on attacking the Republican ticket and the only budget passed by one house of Congress, without offering any meaningful alternatives, the Progressives are simply confessing that they have no alternatives.  That they have no idea at all about how to fix our country’s ills.  That they have no clue about how to put Americans back to work in a burgeoning, free economy.

What a Central Bank Does vs What the European Central Bank is Doing

Posted on by
Reply

…and to too great an extent, what the Fed is doing….

As Spiegel Online International reports, the ECB intends to attempt to buy up southern Europe’s sovereign debt instruments on an enormous scale.  The idea is to get those, I’ll call them, toxic assets off the market so that lending can resume and the euro zone’s (and EU’s) market economies can restart.

There are a couple of fundamental problems with this scheme (and I use that term in the American sense).  I’ll elide, in this post, the clumsiness of it: it doesn’t satisfy central bank statutes, and the ECB risks becoming a secondary government while simultaneously losing its independence to national politicians.

One problem is the enormous risk this entails—not just for the ECB, but for the EU member nations that fund the ECB and so are on the hook for its failures.  That is to say, the taxpaying citizens of those nations are on the hook.  The risk is whether the bailed out nations will benefit and recover their economies.  If they do not, the losses will become astronomic: the Spanish and Italian debts alone sum to nearly €3 trillion.

Another problem is that this sort of scheme, even if carried out without those…inefficiencies…does not work.  For instance, the euro zone finance ministers, in their latest bailout round, approved a €100 billion to rescue the Spanish banks.  However, the benefits only lasted until those €100 billion ran out; then yields—the prices borrowers must pay in order to get others to lend—on Spanish and Italian government bonds went back up to dangerous levels.

Some understand this: Jürgen Stark, a former member of the ECB Executive Board, has already said

The ECB has a clear mandate to guarantee price stability.  Every additional responsibility compromises this core function.

Notice that: the purpose of the ECB—of any central bank—is to maintain price stability.  The legitimate purpose doesn’t even include maintaining full employment, as the Fed attempts to do.  (In a free market, unfettered by government interferences beyond such niceties as enforcing contract law and laws against things like lying or cheating, price stability combined with freedom in the market tend to maintain full employment through market forces.)

Price stability—monetary policy—for the EU, and for the euro zone in particular, is the über-framework, within which the various nations can structure their individual market economies as they see fit: against a backdrop of price stability.

Interferingintervening in the markets—monetary policy—is the job of elected governments, not that of central banks.

The ECB needs to stay out of the market for sovereign debt.

Obamanomics and Life Expectancy

Posted on by
Reply

Power Line quoted, earlier in the week, a Cato-conducted tongue-in-cheek study that applies Democratic Presidential Candidate Obama’s standard for attributing deaths to economic behavior, with the arithmetically driven conclusion that Obama has personally killed nearly 60,000 Americans with his own policies.  The Republican Presidential Candidate, Mitt Romney, plainly is a piker who does not kill efficiently, having done in only one, and taken far more time to do so.

Of course, the claim by the Democratic Presidential Candidate through his SuperPAC is dishonest, and the claim by Cato is ludicrous and made only to illustrate that point.  A fair question to ask, though, is what is the impact on American lives the Democratic Presidential Candidate has had with Obamanomics?  The answer is apparent.

The connection between poverty level and life expectancy has been well established, as the following graph (which takes a broad-brush view of splitting between poor and rich; however in the present context, finer gradations are not needed) illustrates:

The life expectancy delta between “rich” and “poor” over the 20 years of this study has reached +4-ish years in favor of the “rich” for the population in general, with a larger disparity among men.

On the other hand, the number of Americans living in poverty has been growing sharply during the 3+ years of Democratic Presidential Candidate Obama’s current term on the hustings.  In 2010, the number of Americans living in poverty was 15.1% of the population, while that had risen to 15.7% in 2011—an increase of 2.2 million Americans reduced to poverty in just that one year.  If we go back to 2009, we see an increase of some 5.2 million Americans living in poverty under Obamanomics.

The Democratic Presidential Candidate’s policies have shortened the lives of 5 million Americans by roughly four years—and he’s achieved this in only three years of campaigning.

One European’s View of Democracy

Posted on by
Reply

Italian Prime Minister Mario Monti had this to say earlier in the week:

If governments allow themselves to be entirely bound to the decisions of their parliament, without protecting their own freedom to act, a break up of Europe would be a more probable outcome than deeper integration.

Hmm….  The people’s representatives should be disregarded when Government Knows Better?  So much for the Sovereign People.

He went on, though, in a vein that leads me to believe that he’s not so much anti-democratic as he is simply incompetent, saying that if the euro were allowed to become a factor in Europe drifting apart,

then all the foundations of the European Project will be destroyed.

Of course the euro is at the core of the “European Project,” since it was designed as the tool with which the varying nations of Europe would be drawn together.  On top of which, without a common currency, there can be no expectation of a common Europe: it would be like each of the united States under the Articles of Confederation having its own currency as well as the use of everyone else’s.

Oh, wait….

Of course, a day later, Monti…clarified, suggesting that his remarks had been intended to support “constant and systemic dialogue” between governments and parliaments; however, when it comes to government negotiations at the European level

a certain amount of flexibility is necessary in order to reach agreements.

And he added this

Every government has a duty to explain itself and interact in a dynamic, transparent and effective way with parliament[.]

Fill the square of discussing, then overrule the parliament.  And notice his fundamental view of parliament, expressed twice above: government is separate from parliament, and above it.  The people’s representatives have no place in the government, except at government’s sufferance.

Again: hmm….

Some Are Starting to Get It

Posted on by
Reply

Bavarian Finance Minister Markus Söder, of the Christian Social Union (CSU), the Bavaria’s sister to Merkel’s Christian Democratic Union (CDU):

According to my forecasts, Greece should leave the euro zone by the end of the year.  Each new aid measure, every easing of the demands, would be the wrong path.  Athens must become an example demonstrating that this euro zone also has teeth.  At some point, everyone has to move away from mommy.  For Greece, that time has come.

What he said.