Tag Archives: economics

At Least He’s Consistent

Posted on by
Reply

Recall that President Barack Obama (D) touts his Stimulus Bill, with its explosion in national debt (which is still growing these 7+ years later), as good for our economy.  That it’s an economy still mired, these 7+ years later, in a pseudo-recovery that’s the slowest since WWII and that has a smaller per centage of Americans in the labor force than at any time since the Jimmie Carter (D) years is lost on, or ignored by, him.

Now he’s making the same claim about our nation’s exploding student debt, a pile of markers reaching $1.3 trillion, a pile that has doubled in total size, and a pile that has seen a doubling of per-graduated student debt, all over these same 7+ years of Obama and his administration.  This growing pile is good for our economy, he says.

Maybe not.  That growing debt represents a number of drags on our economy beyond the broader national debt.

It drives up the cost of borrowing for the rest of us by competing for the supply of loanable funds, whether from government or from banks.

That’s fairly minor.  More importantly, money spent on debt repayment is money not spent on

  • consumption or on saving for the borrower’s emergency money needs (at least one such emergency is virtually inevitable over the course of a lifetime)
  • future retirement (which results in an increased reliance on a bankrupt, or nearly so, Social Security and Medicare public retirement system)
  • big ticket items like housing and cars (certainly these are routinely borrowed for, but added debt?)

And there’s this: money not spent on student debt repayment because the student (now adult) borrower has defaulted on his debt represents two more drags on our economy: increased general borrowing costs in order to cover the lenders’ costs of absorbing those bad loans, and increased taxes (which, among other drags, is money withdrawn from the private economy) to cover government-guaranteed privately extended student loans.

All of those drags represent reduced overall private demand and so lower business prosperity and so fewer jobs.  All those drags also represent higher taxes tomorrow or increased (yet again) borrowing tomorrow—and so higher taxes the day after tomorrow.

This is the level of understanding of basic economics held by Obama and the Democratic Party.

EU, Great Britain, and Taxes

Posted on by
Reply

Some…suggestions…from continental leaders regarding Great Britain’s departure from the EU and the Exchequer’s suggestions of British corporate tax rate reductions, via The Wall Street Journal:

  • German Finance Minister Wolfgang Schäuble: we can’t have a “race to the bottom, now can we?”

Why not, I ask—what are you so terrified might result from letting those who earned the money keep more of it?

  • Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs: let’s not have any of this “exacerbated(?) fiscal competition between ourselves” nonsense.

I ask—why not?  What’s so terrible about competition, which spurs innovation, holds down costs for the citizenry, limits government power.  Oh, wait….

  • French Finance Minister Michel Sapin: “Whether you’re in the union or yo’’re out, we should all adopt a friendly attitude.” Or else.

So I ask—when are you going to adopt that friendly attitude, M Sapin?

Cut the taxes, guys.  If the continent want to run, screaming, away from the terror of competition, you’ll still have the Irish and the Icelanders with whom to play.  And a whole, wide world outside the European continent and its special snowflakes.

The Other Supreme Court That’s in the Election Balance

Posted on by
Reply

This one is the National Labor Relations Board, a Democrat/union-dominated entity that is nearly the last word on what employers are allowed and required to do.

It’s the NLRB that threatened Boeing with labor unrest expensive lawsuits for its effrontery in wanting to build an aircraft manufacturing plant in the right-to-work state of South Carolina and forced Boeing to keep primary manufacturing in the union state of Washington.

It’s the NLRB that decided that franchise employees actually are jointly employed by the franchise—a McDonald’s burger joint, for instance—and the franchisor—McDonald’s corporate headquarters, for instance—a complete rewrite of the prior NLRB view of franchise employment.

It’s the NLRB that keeps pushing for card-checks at union elections whose purpose is to have the employees decide whether they want a union to represent them, a move designed solely to eliminate heretofore secret ballots in those elections.

It’s the NLRB that has pushed through, regarding those elections, the right of unions to demand an election within 30 days of the start of their public efforts to “organize” a company but without the company’s opportunity to respond in those 30 days—or even to begin to respond to the unions’ non-public efforts to organize.

It’s the NLRB that pushed through its “Persuader” Rule which requires employers to identify publicly all sources of consultation or advice the employer might have contacted—however peripherally—for thoughts on how to deal with unions.

The list goes on.  And on.

The NLRB already is dominated by a Democrat/union majority, and it will only get worse with a Democratic Party President and a Democratic Party-owned Senate making the appointments to the five-member board.

Labor Costs Up, Prices Up

Posted on by
Reply

Starbucks is sharply raising its total compensation for its employees in the Seattle area.  Total compensation from wages and stock options is going up some 5% to 15%.  Carefully buried in the very last paragraph of The Seattle Times piece is this little nugget:

Last July, Starbucks raised its prices 3.5 times as much in Seattle as in the rest of the country.  It raised the price of its typical coffeeshop purchase across the U.S. by 1%, but in Seattle by 3.5%.

Hmm….

Economy and Integrity

Posted on by
Reply

The PRC is demonstrating the relationship between integrity and a centrally managed economy.

When China let Dongbei Special Steel Group default on a bond payment this spring, it was supposed to mark a new determination to allow long-coddled state industries to suffer the consequences of their bad decisions.

Three months later, the result has been…nothing. The ailing steel mill has missed five more payments on its $6 billion in debt, but has yet to formally file for the equivalent of bankruptcy protection, close unproductive units, or start a restructuring of its operations.

Nothing has happened here because the PRC has chosen to let short-term concerns about employment and what the government’s ruling Communist Party of China defines as “growth” to take precedence over concerns about integrity, contractual commitments, and actually paying creditors what’s owed them.  Which destroys anything that might flow from the short-term into long-term growth and prosperity.  This is all so that Xi Jinping and his CPC cronies can look good for the near term.

These business decisions not to pay, coupled with the government’s decisions not to allow market consequences and to not apply government sanctions for such unilateral contract abrogations, give a clear indication of the level of integrity extant in this particular centrally managed economy.

The reputation that results from such systemic lack of integrity, too, can only make it harder for any funding source to lend any more money, and it can only drive up the cost of such loans and borrowings as may still occur.  Such costs must rise in order to account for the high likelihood of continued consequence-free reneging defaulting on debt agreements.  After all, “default” in this kind of environment is a misnomer.  Refusal to pay is less a default than it is a playing of the lender for a sucker.