Tag Archives: economics

Europe Misunderstands

Posted on by
Reply

As I write this, election day is beginning, and the Spiegel Online International article on which I’m commenting has already been published (the day prior, in fact).  Nevertheless, this is the European mindset with which we must deal.

The article begins with a number of valid points—our decaying infrastructure, our decaying educational system, our decaying economy.  But then it proceeds to lay display that broad misunderstanding of America and of the factors involved in this decay.  I’ll only describe a few; RTWT.

The hatred of big government has reached a level in the United States that threatens the country’s very existence. Americans everywhere may vow allegiance to the nation and its proud Stars and Stripes, but when it comes time to pay the bills and distribute costs, and when solidarity is needed, all sense of community evaporates.

No, small and limited government are at the center of our founding ideals—which are as valid today, if lost to too much of our national consciousness and conscience, as they were at our founding.  It is today’s big government that lies near the center of our straits.  It redistributes wealth without regard to validity of the redistribution and without regard to the will of its bosses, the Sovereign people.  Indeed, out government, from its size, has ceased to be responsible to us; it has become nearly impossible to control at all.

Moreover, that big government and that dependency on it for “welfare” is destroying the “sense of community” that Speigel so plainly misunderstands.  That community is purely local, neighbors and friends helping neighbors and friends.  Private charities and churches helping locally.  There is no community in redistributing Texas’ citizens’ wealth to bankrupt and spendthrift California.  There is no community in redistributing bankrupt New York’s wealth, such as it is, to bankrupt Illinois.  There is no community in redistributing such wealth as California, New York, or Illinois have to Texas, or to Georgia, or to South Carolina.  Yet this is what the Big Government social welfare programs do.

The country has forgotten the days when former President Franklin D. Roosevelt courageously told his fellow Americans that a collectively supported social welfare system didn’t translate into socialism but freedom, a “New Deal” that would strengthen America in the long term.

In fact, we’re living out the failure of FDR’s attempt at even his small form of socialism.  Social Security, with its add-on Medicare, are abject failures, wholly bankrupt.  These were borne of a premise that it was appropriate to take the hard-earned wages of a New Yorker and redistribute them to a current retiree in California—or Texas.  Even were the concept of such a mandate valid, the redistribution aspect prevents that New Yorker—and that Californian and Texan—from putting that confiscated money by for his own future retirement, or his own family’s current or future needs.

Underlying these failures, also, are demographics, of which FDR’s minions surely were aware.  Today’s retiree lives some three times longer in retirement than did FDR’s retiree, and he is supported by only 2-3 workers today against nearly 7 for FDR.  Now it’s true that FDR and his staff could not have predicted the hard numbers that would be realized in only four generations, but they certainly were aware that the demographics would not be static, that the demographics would evolve.

Here is the crux of Europe’s lack of understanding.

Naturally, an opposition party’s role must be to fight the government’s policies.

The United States is not Europe.  This may be the role of an “opposition party” there, but in the end, there are no opposition parties in our government.  There are parties that oppose each other, to be sure, but their role is not defined by who is in power and so who must, knee-jerk, oppose simply because of who is not in power, but by the ideals and principles for which each party stands.  And by the moral requirement of each legislator to represent his constituency—who are his boss.

Some details also illustrate Europe’s lack of understanding.

Instead, the more Obama sought to accommodate the Republicans, the more extreme their positions and the more hysterical their criticism became, eliminating any prospect of compromise. The three most important pieces of legislation Obama pushed through Congress since his inauguration in January 2009 were achieved with the votes of his fellow Democrats, even though they incorporated key Republican demands.

Obama opened the discussion by admonishing House Minority Leader (at the time) Eric Cantor (R, VA), when the latter demurred from Obamacare prior to its passage, “Eric, I won [the election].”  At a later summit concerning that same package, Obama repeated his jibe to Senator John McCain (R, AZ).

Obama’s biggest economic stimulus package, which provided for government investments of $787 billion, contained substantial tax cuts that the Republicans had demanded and to which the Democrats were in fact opposed, and yet only three Republicans in the Senate and none in the House of Representatives voted for the legislation. All Republicans in both houses of Congress rejected the healthcare reform that will be viewed as a historic achievement one day. And the financial reform legislation, which turned out to be far more moderate than the Democrats had hoped, received the votes of only three Republicans in each house of Congress.

Carefully elided here is the fact that the “stimulus” package also contained ruinous spending.  This was included even after the empirical evidence that Keynesian stimulus spending not wasn’t necessary, it was destructive rather than constructive.  One has only to review the economic responses to the Depression of the 1920-1921, in which the government did little, and the Great Depression of 1930-1942 in which the government did much.  FDR’s own Treasury Secretary ultimately realized the folly, but he lacked the courage to say so out loud, confining his lament to his diary:

We have tried spending money. We are spending more than we have ever spent before and it does not work.  I want to see this country prosper.  I want to see people get a job.  I want to see people get enough to eat.  We have never made good on our promises.  I say after eight years of this administration, we have just as much unemployment as when we started.  And enormous debt to boot.

Obamacare wasn’t just passed over Republican opposition, it was passed against the explicit instructions of Congress’ and Obama’s bosses in the American system of governance—the American people.  It remains opposed today by the Sovereign.  The financial “reform” legislation has hindered business with an explosion of regulation, and it has created a small board of bureaucrats that will determine the flow of money in the private sector on no other say-so than their own.  Worse, its budget is unlimited; not even the people’s elected representatives—that Congress—can control its funding.

Many bills were never even put to a vote in Congress, because the Republicans, more frequently than ever before, threatened to use or did in fact deploy the so-called filibuster….

Carefully elided here, too, are the 30+ House-passed jobs-related bills and two budgets that the Democrats in the Senate refused even to be discussed, much less be brought to the floor for a vote.

But this is the environment in which our newly elected government must operate in its dealings with the Old World.

Unemployment

Posted on by
Reply

The last Labor stat on the unemployment rate is out, and as usual, there are some interesting underlying numbers, also, as reported by Jeff Cox of CNBC.

First, the headline number: overall unemployment rose to 7.9% in October.  It’s important to note that due to problems related to the impact of Sandy, New Jersey and DC data are not included in this estimate; BLS says they estimated these missing data.

The underlying numbers:

  • 171,000 new jobs
  • the number of those employed part-time who would rather work full-time and those discouraged and so dropped out decreased to 14.6%
  • labor force participation rate, which consists of those working or looking for jobs (which includes the above underemployed), edged higher to 63.8%

But it wasn’t all even as “good” as those tepid numbers.  From the Bureau of Labor Statistics:

  • black unemployment rose to 14.3%—nearly twice the national average
  • Hispanic unemployment rose to 10%—25% above the national average
  • unemployment duration rose to 40.2 weeks
  • average work week showed no change
  • average hourly earnings for private nonfarm employees dropped by 1¢
  • number of unemployed rose by 170,000

Cox notes this, also:

President Barack Obama has touted the more than 4 million jobs created [sic] since the 2009 economic nadir, though the number is much lower—less than 200,000—when compared to the jobs lost.

As someone once said, this isn’t what a recovery looks like.

Morality and Politics, British Style

Posted on by
Reply

Mostly, the style is clueless, as this piece from The Guardian‘s Gary Younge illustrates.  For instance,

At times the contradictions are striking.  In August 2009, when opponents of Obamacare were disrupting town hall meetings with claims of death panels, Kenneth Gladney and other members of St Louis tea party got into a fight with Democrats at a public meeting.  He had to go to the emergency room with injuries to his knee, back, elbow, shoulder and face and ended up in a wheelchair.  It turned out Gladney, who had recently been laid off, had no health insurance.  He appealed for donations.

What contradiction is this?  Can Mr Younge really not see the difference between government handouts, which by definition begin as mandated confiscations from strangers, and private donations, which by their nature are purely voluntary?

Trace a map highlighting government dependency and those most reliant on benefits live in Republican states and often Republican counties.  In Floyd county in Eastern Kentucky, 40% of the income comes from the government.  In 2008 Floyd, where almost 20% live below the poverty line and the median income is almost 20% lower than the country, voted for McCain—a 27 point swing against the Democrats and the first victory for Republicans in living memory.

Of course.  Conservatives, far more than liberals, try very hard to avoid government handouts and once having been forced to accept them, to get back off that government dependency before they become addicted to it.  Conservatives understand what it means to be dependent and what it means to be self-capable.  This is what has made America great, even if the folks in Floyd County, for instance, don’t speak of it in these terms.

On some level explaining why poorer whites would vote for the Republicans demands a resource sorely lacking in American political culture at present—particularly during election time: empathy.  There are more to “interests” than just the economic.  If someone’s core conviction is that abortion is murder or gay marriage is wrong then their decision to vote for a candidate who is against abortion or gay marriage is not an act of delusion but conviction.

Indeed.  An understanding of the nature of dependency on handouts matters; this requires more than mere “empathy.”  It requires a basic understanding of the morality of that dependency, with the demand it creates for a share of someone else’s prosperity, which is where the transfer payments that is that dependency originate.  (Never mind the conflation of conservative social policies with conservative economic policies.)

Moreover some people, despite being poor, legitimately believe in free market and small government, even if it doesn’t benefit them in precisely the same way that wealthy people may favour greater government intervention even if it doesn’t benefit them.

Hmm….  But it does benefit the poor quite a bit, if not “in precisely the same way that wealthy people” might benefit.  A free market and small government favor their opportunity to do better, rather than to be trapped into merely getting by on the government’s dole.  They favor the poor man’s work to stop being poor.  Many poor people—generally those who haven’t spent generations on the dole—understand this at a gut level, even if they don’t articulate the strict economic science of it.

Meanwhile, that greater government intervention does benefit the wealthy—but only those wealthy who buy their way into the process and so to influence that intervention.  There is no morality here, only narrow, short-sighted pecuniary interest.  And it is far from universal: the Koch brothers, whom Mr Younge carefully elides in his article, also are firm believers in free market and small government—and they’ve spent enormous amounts of their wealth on supporting those.

Finally…poverty is not necessarily a permanent state.  People fall in and climb out of it.

Indeed.  Even—especially—the poor recognize the truth of this, if only at a gut level.  It’s that desire to improve their and their families’ lot in life, and these folks recognize this is possible only with free markets and limited governments.  Government handouts are designed explicitly to block this—guaranteed bread in return for votes for the incumbent.

In the end, Mr Younge complexifies the matter far too much, and so he gives short shrift to the simple matters underlying the situation.  The moral foundation of self-sufficiency, of being responsible for seeking one’s own (Adamsian) happiness is one.  The simple economic facts of the failure of handouts (which he seems to lump, indiscriminately, with hands up) to free individuals from the outcomes of dislocations, instead trapping them in dependency, is another.  Which he acknowledges in passing [emphasis added]:

In a report…the New York Times examined the growing number of people who were simultaneously dependent on government aid and against more government spending. “Many people say they are angry because the government is wasting money and giving money to people who do not deserve it,” it concluded. “But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.”

In a country where social mobility is assumed—even if it has in fact stalled—and class consciousness is [weak] the poor may vote in the interests of an imagined, but not necessarily imaginary future, rather than solidarity based on shared economic hardships.  A Gallup poll in 2005 showed that while only 2% of Americans described themselves as “rich”, 31% thought it very likely or somewhat likely they would “ever be rich”.

Because we still know a central truth: we’ve been through these situations before, and gotten out of them before.  We’re not used to dependency, we still decry it, and we still have our dreams and aspirations.  And successes.  Thus, we know we’ve been knocked down today, but we also know we’ll get back up.  We still have our morality to steel our backs.

Mr Younge, with his legitimization of the demand of one for a share of the prosperity earned by another, is a clear demonstration of the result of becoming used to government handouts at the expense of self-reliance, self-respect, and community.  No, “poor” conservatives aren’t voting against their interests when they vote against (or don’t vote for) an Obama or any other Progressive candidate.  These folks are voting for their (moral) interests.  Mr Younge, though, is simply unable to take seriously a moral underpinning for such voting.

Bailouts

Posted on by
2

Spiegel Online International carried a disturbing story Monday on the subject of bailouts.

The proximate item is Greece’s economic strait, and this is what Spiegel is reporting about that.  The current troika—the IMF, the European Commission, and the European Central Bank—are proposing

[a]nother partial default.  That, indeed, would seem to be the conclusion that Greece’s main international creditors have come to.  According to information received by SPIEGEL, representatives of the so-called troika—made up of the European Central Bank, the European Commission and the International Monetary Fund—proposed just such a debt haircut at a meeting last Thursday held in preparation for the next gathering of euro-zone finance ministers.

But half-measures simply prolong the problem and continue Greece’s addiction to handouts while at the same time providing no mechanism for getting the Greeks to self-sufficiency other than leaving them to their own, already failed devices—both those that drove them to this strait and those of the last three years that have had no useful effect.

Worse, though,

This time around, public creditors would be involved, meaning that taxpayer money from those countries which have stood behind Greece would vanish off the books.

But where is the justice in this?  Indeed, where was the justice, originally, in forcing the taxpayers of entirely separate jurisdictions—other nations—to indemnify the Greeks (and the Irish, and by extension, the Spanish, Italians, and Portuguese) against their own foolish decisions?  Indemnify rather than help, since no meaningful accountability mechanisms were applied.

That’s in the past; those innocent taxpayers already are dragooned into the existing bailout.  The primary question remains, though: where is the justice in compounding that prior error by extending it, by forcing responsible taxpayers to pay for continuing this folly?  And how does this enabling help the Greeks (and Spanish, Italians, and Portuguese; although these three already are attempting preemptive measures so as to avoid their own humiliation)?

Indeed,

Athens has only introduced 60 percent of the reforms [already] demanded by the European Union.

Yet,

The troika has already agreed to give Greece two extra years to meet its austerity goals, a delay that will likely result in a need for up to €30 billion in additional aid, according to the ECB and European Commission.  The IMF believes the funding gap will be closer to €38 billion.

Thus, the EU and the IMF know they’re proposing throwing money down a rat hole, and they’re proposing that anyway.  It’s true enough that cutting the Greeks off from further bailout moves will jeopardize the taxpayers’ money already committed.  However, it’s the nature of bankruptcy—which the Greeks will be better off going through—that such debts get written off and the creditors lose out.  But that’s the only way to stanch the bleeding here.  There’s no useful purpose in committing additional taxpayer funds to this failed effort.

Take careful note of the similarities to our own situation.  Failures here, too, says the current administration, need to be propped up with taxpayer money and, in our case, favored investors protected from the consequences of their decisions.

Death Tax Failure

Posted on by
Reply

The death tax, aka “estate tax” was, briefly, 0 for 2010, then rose to 35% of an estate’s value above $5 million for 2011 and 2012.  Next year—in addition to the fiscal cliff of the Obama tax increases and the Obama sequestration that occur on 1 Jan—the death tax is set to rise again, to a usurious 55% of anything above $1 million.

Never mind that this theft of a parent’s hard-won legacy, intended to be for the benefit of the his sons and daughters, simply leads to market distortions by those rich enough to be able to follow the Warren Buffet example of transferring wealth to, for instance, charitable organizations (good for them, though), and so avoiding—legally and appropriately—sending revenue unnecessarily to the Federal government.

Consider the choices lesser lights—Joe the Plumber with his business, for instance—are forced to make instead.

When [Mr Wurzelbacher] begins to consider retirement with perhaps $10 million of lifetime wealth, he can reinvest the profits in the business (which means growth and more workers) or live lavishly in retirement and spend the money down to zero.

In the first case, he is smacked with federal…death taxes that can take away half of the wealth.  In the second instance, he pays no tax.  A new study by the Joint Economic Committee Republican staff estimates that because of this disincentive to save and invest “the estate tax has cumulatively reduced the amount of capital stock in the US economy by roughly $1.1 trillion.”

Democratic Presidential Candidate Barack Obama insists that this is entirely fair—that death tax is needed for his redistribution programs.  Despite those choices and loopholes.

As the WSJ notes, though (the above link), there is a moral question here, too:

The levy makes Uncle Sam up to a half-partner in the proceeds of successful businesses.  That is on top of the property and income taxes and other assessments that owners pay year after year.  … What is truly unfair is when a family-owned enterprise has to be sold at auction to pay the death tax to the IRS.

Obama has yet to address this moral question in any serious fashion.  Keep that in mind as you go to the polls.