Tag Archives: economics

Economic Growth Rates

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The folks at Power Line addressed this in Presidential term aggregates; I thought I’d graph the GDP rates in each year of the last five Presidents’ terms.  The data for the graph were collected from here.

Aside from the fact that economic growth is poorer in Obama’s administration than it was in any of the preceding four Presidents’ terms, stretching back over 32 years, President Barack Obama’s performance year by year (first year compared to each of the others’ first year, second year compared to second year, and so on) generally has been poorer, also.  It’s certainly true that Obama’s first year was a continuation of President George Bush the Younger’s last, but so has each of those Presidents’ first years been continuations of their predecessors’ last years.  And President Ronald Reagan’s first year was a continuation of President Jimmie Carter’s last year—which was 3.8 points lower at 8.8% and declining from Carter’s prior years.

This also contrasts with Obama’s predecessors having had to work with the opposing political party controlling at least one house of Congress for significant portions of their terms, just as Obama has done.  Those Presidents, though, sought implementable bipartisan solutions rather than Obama’s “my way or no way” and “evil, obstructionist Republicans” attitudes.

Farm Subsidies and False Premises

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Negotiators [on a proposed milk price support bill] are…working out how farm subsidies should be restructured in the absence of a traditional subsidy called direct payments, which are paid to farmer regardless of crop price or crop yield.  Both chambers’ bills would eliminate this $5 billion annual subsidy in response to critics who say it pays farmers not to farm.  But they have argued over how to replace those payments, with major farm groups squabbling over whether subsidies should kick in based on crop prices or farmer revenue, and how to count the acreage on which the subsidies are based.

Unfortunately for our pocketbooks, those negotiators are operating from a false premise: that the subsidies need to be revised in any way.  The only ones who benefit from these subsidies in any large way are the large agribusinesses and the “farm state” politicians supported by them.  Mom and pop farms?  Not so much.  On top of that, though, us food eaters are materially harmed by the subsidies through the artificially inflated prices we have to pay for food that those subsidies create.  And the poor among us are harmed the most by those inflated prices.  Additionally, us taxpayers are harmed a second—and third—time by having to pay for those subsidies that are driving our prices up and by having to pay for the food stamps that are used to mitigate for the poor those artificially inflated prices.

No.  The subsidies need to be done away with: “replace” them altogether through a bill that eliminates all of the farm subsidies, which ding us for $25 billion annually.  That seed then lets the much larger $80 billion/yr food stamp program to be drastically reduced, if not eliminated altogether, since most of those remaining who truly need help would generally be within the resources of their local communities and states.

The Next Democratic Party Government Shutdown

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…is shaping up.  Never mind that a budget deal might actually otherwise be beginning to come together; many in the Democratic Party leadership are perfectly willing to shut down the government if they don’t get their way.  Again.

And in so many words.  House Minority Whip Steny Hoyer (D, MD) opposes even a continuing resolution to keep government funded if it doesn’t address the existing sequestration cut schedule.  But he won’t offer spending cuts elsewhere to offset them—just increase the damned spending.  House Minority Leader Nancy Pelosi (D, CA) has said she’ll oppose any sort of budget deal that doesn’t include an extension to unemployment benefits to pay folks for not working (which also is her tacit admission that President Barack Obama’s economic policies have been a dismal failure these past five years).

The House Democratic Party leadership’s colleagues in the Senate, where any deal can be blown up and the government shut down by the Democrat majority, are being cagily silent.  Here it comes.

Another Failure of Modern Liberalism

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Illinois has a deeply bankrupt pension system—it’s in the hole by $100 billion: a state is in the hole by $100 billion, not a nation—a pension system that’s the worst off in the country.

Their solution?  A bill just passed that in total is claimed to save $160 billion over 30 years and fully fund the systems by 2044.  That’s a bit over $5 billion a year on that $100 billion arrearage.  And it naively, if not cynically, assumes that future state legislatures won’t change the thing for all of those 30 years.

Some specifics, with my comments: the bill

  • pushes back the retirement age for workers ages 45 and younger, on a sliding scale

Why a scale?  20 years to a nominal retirement at 65 is plenty of time for workers to adjust plans.

  • replaces annual 3% cost-of-living increases for retirees with a system that provides the increases on a portion of benefits, based on seniority

Why freeze the COL?  If there’s to be one, why not tie it to inflation?  Today’s inflation is in the neighborhood of 2%-2.5%. Larger COLs aren’t necessary.

  • gives some workers the option of freezing their pension and starting a 401(k)-style defined contribution plan

Why only some?  Why not move them all to 401(k) type plans?  The private sector recognized the usefulness of such plans decades ago, and they make the workers more responsible for their own futures, instead of having government usurp that responsibility.

  • has workers contributing 1% less to their own retirement

So workers will become even less responsible for their own futures than they were.  Oh, wait—those plans….

Don’t expect this to have any effect on Illinois’ failed system other than to allow it to get worse.

A Thought on some Taxes

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Romain Hatchuel, Square Advisors LLC Managing Partner, has an excellent op-ed in The Wall Street Journal, but I want to comment on one small part of it:

In his November investment commentary for bond giant Pimco, [billionaire investor Bill] Gross asks the “Scrooge McDucks of the world” to accept higher personal income taxes and to stop expecting capital to be taxed at lower rates than labor.

Gross is right, partly.  The use of tax code to effect social engineering does not achieve the goals of the “engineering” effort, but it does effect coarse distortions in a free market.  These distortions range from slanting business decisions toward (or away from) debt according to the differential ways in which debt interest and capital gains are taxed; they impact individual investment decisions according to the way debt interest, capital gains, or dividends are taxed; they even distort the price (and so availability) of housing according to the way in which mortgage debt interest is taxed.

Capital should not be taxed at a lower rate than labor.  Businesses should not be assessed tax at all—the ones who actually pay those business taxes, after all, are the final customers—us—as that tax bill-as-cost-center gets figured into the prices charged.  Nor should there be deductions, credits, etc on individual income, with or without variation according to the source or amount of income.

Contra Gross, though, a single, low flat rate that every individual pays on the total of that individual’s income would achieve a market neutral tax that would impose the minimum of distortion on the market even from the tax’s existence (a 10% rate that everyone with an income pays even would represent a significant increase in total revenue to the Federal government).