Category Archives: Economics

Miscellaneous economy stuff

And German Governance

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The following is excerpted from Spiegel Online:

SPIEGEL: Facebook is only eight years old, has annual revenues of $3.7 billion and, following its stock market debut, could be worth $100 billion. Is that normal?

[Co-founder of German business software giant SAP, Hasso] Plattner: Oh God, normal!? That’s just what America is like. They’re unbeatable when it comes to advertising. Don’t ask me if I think it’s a good thing …

SPIEGEL: Well, do you think it’s a good thing?

Plattner: You’re bombarded with advertising all day long there. But that’s just how it works. You really have to take your hat off to the Americans — the way they reinvent themselves again and again, especially in the high-tech sector.

SPIEGEL: But that could also be possible in Germany.

Plattner: A lot of the framework conditions are not right here. For instance, it’s much more difficult to obtain venture capital. But you need that so your company can quickly achieve a critical size. And anyone who follows all the daily debates in Germany that are critical of capitalism and growth could come to the conclusion that we Germans don’t want to be successful anymore.

…

Plattner: …it’s really only in Germany that I’m asked time and again such strange things like: Why growth? Or: Why does the database have to be so much faster? That just creates stress … And that, even though for the past 40 years IT has been almost exclusively about the question of speed. Americans are much more open and bolder in this respect. Their attitude has also long since been adopted by the Indians and the Chinese, which makes the competition even more difficult for us.

We, the people, have to take care, also, or we’re no better at governance than a top-down governance in China.  At least, though, we can correct our own mistakes.

House 2013 Budget Blueprint

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This is, indeed, a contrast in visions.  We are in the middle of a struggle for the future of our country, and the budget blueprint lays out the parameters of that struggle.

This table, from the House’s Committee on the Budget’s Web site, lays out the contrast pretty clearly.

 

The President’s Budget

House Blueprint

pending

 Net $1.5 trillion increase relative to current policy Cuts spending by $5 trillion relative to President’s budget

Taxes

 Imposes a $1.9 trillion tax increase; Adds new complexity and new hurdles for hardworking taxpayers, making it more difficult to expand opportunity Prevents President’s tax increases; Reforms broken tax code to make it simple, fair, and competitive; clears out special interest loopholes and lowers everybody’s tax rates to promote growth

Deficits

 Four straight trillion-dollar deficits; Breaks promise to cut deficit in half by end of first term; Budget never balances Brings deficits below 3 percent of GDP by 2015; Reduces deficits by over $3 trillion relative to President’s budget; Puts budget on path to balance

Debt

 Adds $11 trillion to the debt – increasing debt as a share of the economy – over the next decade; Imposes $200,000 debt burden per household; Debt skyrockets in the years ahead Reduces debt as a share of the economy over the next decade; Charts a sustainable trajectory by reforming the drivers of the debt; Pays off the debt over time

Size of Government

 Size of government never falls below 23 percent of the economy, making it more difficult to expand opportunity Brings size of government to 20 percent of economy by 2015, allowing the private sector to grow and create jobs

National Security

 Slashes defense spending by nearly $500 billion; Threatens additional cuts by refusing to specify plan of action to address the sequester; Forces troops and military families to pay the price for Washington’s refusal to address drivers of debt Prioritizes national security by preventing deep, indiscriminate cuts to defense; Identifies strategy-driven savings, while funding defense at levels that keep America safe by providing $554 billion for the next fiscal year for national defense spending

Health Security

 Doubles down on health care law, allowing government bureaucrats to interfere with patient care; Empowers an unaccountable board of 15 unelected bureaucrats to cut Medicare in ways that result in restricted access and denied care for current seniors, and a bankrupt future for the next generation Repeals President’s health care law; Advances bipartisan solutions that take power away from government bureaucrats and put patients in control; No disruption for those in or near retirement; Ensures a strengthened Medicare program for future generations, with less support given to the wealthy and more assistance for the poor and the sick

A couple of comments are in order (I’ll ignore the political hype in the characterizations in both sides of this table and address only the actual data provided).

First, notice that President Obama’s budget (about which neither he nor his Senate Democrat minions are serious; this is just a campaign speech) both increases Federal spending an enormous amount and increases taxes even more.  This certainly is one way to balance the budget (IFF the tax revenues resulting from those increases actually occur; however, raising taxes actually lowers tax revenue flowing by reducing the economic activity that produces those revenues), but it does so at the expense of our economy’s ability to function.  It constitutes $3.4 trillion dollars taken away from individual Americans and our businesses, either directly—those taxes—or indirectly by taking our spending decisions away from us and putting them into the hands of the Federal government.  It says that we Americans are utterly incapable of making our own money allocation decisions; we must yield those to our Betters in government.

The House budget blueprint, though (it’s certainly true that it could serve as a campaign speech, but it has the added—and critical—advantage of being an actual, workable budget blueprint), recognizes two fundamental things: the money involved is ours, not government’s; we only allocate some of our money to government to spend on our purposes (and not on government’s purposes).  Secondly, the government does not need the money, it does not need those taxes; government does need to spend less.  Period.  It really is that simple.

My second comment concerns the two plans’ attitude toward the appropriate size of government and from that their attitudes toward us Americans.  Obama wants to expand government, not only in size but in authority over our lives.  Government is the answer to our problems, and so the Progressives seek to increase our dependency on government.  Moreover this increase in dependency is not limited to those of us who already are government dependents.  Progressives want to make us all government wards.  We cannot be trusted to work out our own solutions, to make our own decisions.  We’re just not good enough at it.

The House blueprint, in stark contrast, shrinks the size and power of government.  This blueprint respects and trusts us Americans to make our own decisions, and to do a better job for each of us individually, as well as for any groups of us, than government can ever hope to do.  After all, at best, government is limited either to a one-size-fits-all solution (which perforce actually fits no one) or to a collection of “solutions” tailored to groups of us (groupings defined by government, mind you, not by us) that demands an army of bureaucrats to administer and another army of lawyers to interpret and defend.

The choice, then, is clear: whom should we elect this fall?  A collection of politicians who don’t trust us with our own lives, or a collection of politicians who are looking actually to reduce government’s—and their—power over us?

Energy Taxes

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The oil and gas industry paid, as recently as 2009, nearly $36 billion in corporate income taxes, a value roughly equal to 10% of the Federal government’s non-defense discretionary spending.

Moreover, the Tax Foundation estimates that, between 1981 and 2008, the oil and gas industry paid $1.45 in those corporate income taxes for every dollar of profit earned domestically.

On top of this, President Obama’s 2013 budget proposal contains tax increases that would drive the tax bite up by an additional $44 billion over the next 10 years—Executive Office accounting—or by $85 billion, according to the American Petroleum Institute.

On the other hand, the tax bite for the nuclear power industry is nearly a dollar of American taxpayers’ money paid to the nuclear power companies for every profit dollar those companies earn.  Wind power companies get from us taxpayers payments of $1.64 for every dollar of profit, and solar power companies hit us up for $2.45 for every dollar of profit.  Green energy, indeed.

Who is it that’s not paying its “fair share?”  Energy Secretary Steven Chu and Obama claim to have seen the light and “no longer share that view” concerning rising gasoline prices, and presumably the pricing of oil and gas generally out of our economy.

Who can believe them in the face of these facts?

Higher Gas Prices: Yes, or No?

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Earlier this week, Energy Secretary Steven Chu acknowledged at a Senate Energy and Natural Resources Committee hearing that he indeed told The Wall Street Journal in 2008 that

Somehow we have to find a way to boost the price of gasoline to the levels of Europe.

Now, with the damaging impact of rising gas prices on Obama’s approval rating, Chu claims a change of heart.

Senator Mike Lee (R, UT) asked Chu at that hearing

Are you saying that you no longer share the view that we need to figure out how to boost gasoline prices in America?

To which Chu responded

I no longer share that view.  When I became Secretary of Energy I represented the US government and I think that right now in this economic—very slow return—that we need to have, these prices well could affect the comeback of our economy and we’re very worried about that.  And so, of course, we don’t want the price of gasoline to go up.  We want it to go down.

Obama also was quick to downplay this rather dramatic shift.  At a news conference earlier this week, President Obama insisted to Fox News that it was foolish to think he wanted higher gas prices to wean Americans off fossil fuels, or for any other purpose.

You think the president of the United States going into reelection wants gas prices to go up higher?  Is that—is there anybody here who thinks that makes a lot of sense?”

Then, through his Press Secretary, Jay Carney, he insisted that he’d not instructed his Secretary to “clarify.”   No, Chu had made that earlier remark before he joined the administration, and so of course Republicans are taking it out of context to suggest it is administration policy.  This, though, means that Obama is claiming to have been utterly oblivious to Chu’s position when he selected Chu for Energy, that Chu’s preference for higher gasoline prices—to encourage Americans to shift to Obama’s “green” energy sources—couldn’t possibly have been among the reasons Obama selected Chu.

Never mind that Obama’s approval rating has slid to a nearby low of 41%, or that a new CBS News/New York Times poll indicates that 54% of Americans believe an American president can, indeed, do a lot about gasoline prices. That’s his story, and he’s sticking to it.

Since this change of heart is so plainly politically motivated, can we take Chu or Obama at their word on the matter?

On a separate but related note, Obama, through Carney, also tried to walk away from another allegation of his.  On Monday, Carney had said

What [Obama] is not willing to do is to look the American people in the eye and claim that there is a strategy by which he can guarantee the price of gas will be $2.50 at the pump.  Any politician who does that is lying, because…that strategy does not exist.

GOP Presidential candidate Newt Gingrich responded with a challenge to Obama to debate the matter, and energy policygenerally, offering a number of venues for Obama to select from: an oil rig, a gas station, a refinery, a university campus.  Obama avoided the challenge and had Carney respond, instead,

I said yesterday that anybody who said that would be a liar.  And I shouldn’t have gone into motivations.  I should have said anybody who says that doesn’t know what he’s talking about.

Hmm….

Stimulus Money Works

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The stimulus money intended to help Detroit-area folks obtain jobs really did succeed in aiding folks—all 2 of them.  Although the money really wasn’t intended to help them find jobs, but only to help them get dressed.

A chunk of a 2009 stimulus grant meant to provide as many as 400 low-income Detroit residents with clothing for job interviews actually helped…2.

Read the whole thing.