Tag Archives: political economy

Sovereignty and Sovereign Debt

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Josef Joffe, editor of Die Zeit, is upset with Germany’s high court.  It seems that this court has ruled, again, against the European Central Bank’s President, Mario Draghi, and the ECB itself in continuing to note that ECB moves to buy member nations’ sovereign debt not only is a violation of EU foundational law, it violates the sovereignty of those nations expected to put up their peoples’ money to buy that debt.  Germany’s highest court also committed the dastardly deed of kicking the latest matter to the European Court of Justice.  All in the name of protecting German national sovereignty.

So the docket of the German high court in Karlsruhe never clears, and the battle cry never stops: “It’s our sovereignty, stupid!”

And

The German plaintiffs’ key complaint against the ECB comes in Latin—ultra vires. They argue that it would go “beyond the power” of the ECB to buy sovereign debt.

The horror.  The horror.

While cynically ridiculing the idea of national sovereignty throughout his article, though, Joffe missed another point, perhaps caused by his evident lack of understanding of the nature and importance of national sovereignty.

The larger story proclaims: Europe is still far from the United States, a real union.  The EU has neither a real Federal Reserve, nor a common fiscal policy, nor commonly elected leaders to define the common good.  The logic of a “more perfect union” demands these commonalities, but it collides with the logic of nation-states rooted in 2,000 years of history.

Leaving aside the EU’s demonstrated contempt for the common man (recall its formation: some countries rejected the union in national referenda, so the governments involved told those impudent populations to shove it and signed the Maastricht Treaty, which dragged those populations into the EU against their will), Joffe’s remark misses the fact that the EU also has no common culture, nor does it even have a common view of the purpose of money.

Even in the EU—especially in the EU—national sovereignty matters.  A very great deal.

The Evil 1%

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James Piereson, Senior Fellow at the Manhattan Institute, had some thoughts on these folks.

This crusade [against the richest among us] is based on three questionable claims.  One is that the wealthy are mostly Wall Street bankers benefitting from rising stock and real estate prices, or executives who pay themselves extravagant salaries.  Another claim is that such people unfairly benefit from a system that taxes capital gains at half the highest marginal rate paid by those who earn salaries and wages.  Then there is the assertion that the “super rich” have abundant funds that can be taxed to improve the living standards of everyone else.

All of these claims are false.  By promoting them, the president and his supporters may hope to distract attention from ObamaCare and the economy.

My father always said, “Never let the truth interfere with a good story.”  The difference, though, between my father and President Barack Obama and his fellow…crusaders…is that my father was joking.

[According to] data compiled by the Congressional Budget Office, the top 1% received 15% of the national household income (before taxes) in 2010, up from 9% in 1980.  A taxpayer needed a taxable income of $307,000 to enter the top 1%, a figure that hardly qualifies as “rich” today, especially in cities like New York, Chicago, Los Angeles or San Francisco.

And

[Top] performers earn their incomes in highly competitive environments and through the voluntary patronage of consumers.  Where does their money come from?

The top earners depend heavily on salaries.  In 2010 the top 1% earned 36% of their incomes from salaries and wages (what the CBO calls labor income); 22% from businesses, farms, and partnerships; and just 19% from capital gains.  The majority of their income would thus be taxed today either at the corporate or the highest marginal rate rather than at the lower capital-gains rate of 23.8%.

There’s this tidbit, too:

From 1980 to 2010, as the top 1% increased their share of total before-tax income to 15% from 9%, their share of the individual income tax soared to 39% of the total paid, up from 17%.  Most were paying federal taxes at the highest marginal rate[.]

A 60% increase in income share (from a very small share to a small share) “matched” by a 129% increase in income tax share from small to large.  Hmm….

Minimum Wage and Collateral Damage

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The CBO, the other day, looked into the Democrats’ proposal—demand, really—to raise the Federal minimum wage to $10.10 from the present level of $7.25 per hour.

The CBO found two key outcomes from such a hike.  The first is that the increase is almost certain to cost jobs, to increase unemployment.  While acknowledging that the headline number of jobs lost—500,000—is only an estimate, the CBO said quite clearly that the range of the number of jobs that will be lost from this forced wage increase runs from a “very slight decrease” in jobs to 1 million jobs lost.  Notice that.  No increase at all in job availability will ensue.  A “very slight decrease” in jobs is a decrease in jobs.  Full stop.

The other key finding is this: the

increase to $10.10 an hour by July 2016 would eliminate 500,000 jobs, but lift 900,000 Americans out of poverty from the total of 45 million projected to be living in poverty in 2016.

900,000 Americans will be able to use the wage increase to climb out of poverty.  But 500,000 Americans will be forever locked out of that opportunity, will be sacrificed in favor of those others.  Low-wage jobs—minimum wage jobs—are low skilled jobs, are entry level jobs, in which the worker can accrue experience with which to earn promotion, gain needed skills for better jobs, bring extra money home to the family so the family as a whole can have a chance to climb out of poverty.  These jobs are how teenagers, just starting out, can begin to learn a work ethic, can start earning some money for college or for a car, or just earn some walking around money.

These folks, though, apparently are just necessary collateral damage on the way to equal outcomes for the survivors.

So much for equality of opportunity.

The CBO’s full report can be seen here.

Obama’s Stimulus Promise Revisited

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James Pethokoukis at AEIdeas did the visit, and this graph is the highlight of it.

The red dots on the right axis reveal the Obama tale.  It’s an especially humorous, if simultaneously mendacious, one, given that in this auspicious quarter we were supposed to be in the same prosperous state with or without Obama’s promised stimulus benefit.  The benefit, after all, only was supposed to ameliorate the pain of the last five years.

Instead, those red dots demonstrate, not just the failure of Obama’s stimulus, but the active damage that “stimulus,” in concert with the rest of Obama’s economic and jobs policies, have done and still are doing to our economy.

In case the dots’ captions are hard to read, here they are, from highest dot to lowest, all for December 2013:

  • unemployment rate based on the 2009 Labor Force Participation Rate: 11.8%
  • unemployment rate based on CBO’s then forecast for 2013’s LFPR: 10.1%
  • unemployment rate based on 2012’s LPFR: 7.9%
  • unemployment rate, actual: 6.7%

These compare with Obama’s promised rate of 5%, or roughly full employment.

Can we really afford another five years of these destructive Progressive policies?  Or even two more years?

Keystone XL’s Fate

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Here are two Congressmen who oppose building this pipeline.

  • Senator Tim Kaine (D, VA):
    • $15k-$50k stake in Kinder Morgan Energy Partners, intent on building a Keystone competitor pipeline
  • Congressman Alan Lowenthal (D, CA):
    • $15k-$50k stake in Enbridge Energy Management
    • $1-$15k in Kinder Morgan Energy Partners
    • $15k-$50k stake in Kinder Morgan Management; these three also are intent on building Keystone competitor pipelines

Crony capitalism, indeed.