Tag Archives: political economy

Economic Performance

Posted on by
Reply

The Wall Street Journal‘s Benn Casselman noted the stagnant condition of our economy.

Note that the graph indicates lowering expectations for our GDP’s performance for the second quarter (just completed): last month, the expectation was for a miserly 1.9% growth; economists’ July forecast is for an even more miserable 1.5% growth.  We’ll know in a few days, when the first official government guess is published.

Casselman also wrote that

There also are signs that consumers—whose spending has helped prop up the economy for much of the past year—are beginning to tighten their belts.  Retail sales grew a paltry 0.4% in June, Commerce Department figures showed, and would have been even worse if higher gasoline prices hadn’t forced drivers to spend more at the pump.

Read that carefully: even this limited consumer spending growth was more about paying higher prices (good for the immediate seller) than it was about buying more stuff (good for actual economic growth).

Things aren’t expected to get any better soon, but, then, neither are this administration’s policies.

Some prognosticators are more optimistic, though, noting for instance that a rebounding housing market remains present.  But I have to ask, against the backdrop of this failed recovery and stagnating economy: a “rebounding housing market” means lots of new mortgages as families buy these expensive assets.  How stable, really, is the families’ income; how certain is their ability to continue paying their mortgages were the present economy, so close to a tipping point into a new recession, actually to tip over?

Detroit and the Nation

Posted on by
Reply

In Detroit’s bankruptcy filing, Michigan Governor Rick Snyder (R) included a letter outlining his reasons for his approval of the filing.  Here are some of them [emphasis added].

  • The City’s unemployment rate has nearly tripled since 2000 and is more than double the national average.
  • Its citizens wait an average of 58 minutes for the police to respond to their calls, compared to a national average of 11 minutes.
  • The City’s police cars, fire trucks, and ambulances are so old that breakdowns make it impossible to keep up the fleet or properly carry out their roles.
  • The City has more than $18 billion in accrued obligations.
  • Detroit tax rates are at their current legal limits, and that even if the City was legally able to raise taxes, its residents cannot afford to pay additional taxes. Detroit simply cannot raise enough revenue to meet its current obligations….
  • The City’s population has declined 63% from its peak, including a 28% decline since 2000.
  • A decreasing tax base has made meeting obligations to creditors impossible.

Horribly high expenditures against a tax system that’s already very expensive for the citizens has driven Detroit into the ground and forced restructuring through bankruptcy.

What are the implications for the nation as a whole?

On the one hand, bankruptcy—legal bankruptcy—is not an option for the US.  Nations have no bankruptcy system available to them; all a bankrupt nation can do is to repudiate its debts or debase its currency, repaying with devalued (dollars)—to repudiate its debts through subterfuge.

Here lies the United States: we have horribly high expenditures (see Obamacare, Medicare, Medicaid transfer payments, Social Security, Federal public service union pensions, Stimulus spending, etc) against a tax system that is hammering the paying population into the ground while, by design, excluding half the tax base from tax obligations.   This combines to create on the national level massive annual deficits, exploding national debt, and increasing costs to borrow (presently low, Bernanke’s artificially suppressed interest rates will not be able to stop the market’s assessments of our national creditworthiness).

Detroit is the future of the United States under our current policies.  In that light, notice the loss of population as Detroiters fled the disaster—28% of its people just since 2000.  As our national disaster unfolds—unless we move to terminate our Federal government’s destructive policies and put aside our own disdain for work and responsibility—where will Americans go?

More on our “Recovery”

Posted on by
Reply

A study done by the National Employment Law Project has some troubling results on wages.

  • Americans’ after-inflation wages have dropped by almost 3% since President Barack Obama’s inauguration
  • people who earn between $10.61 and $14.21—in the minimum wage range—have seen their incomes drop by more than 4%
  • restaurant cooks, food preparation workers, home health aides, personal care aides, and maids and housekeepers lost 5%

Hmm….

Too Big to Fail

Posted on by
Reply

As a matter of law, Dodd-Frank ended the notion that any firm is “too big to fail.”  Banking will always involve some-degree of risk-taking….  But now, if a financial firm fails, taxpayers will not have to bear the cost of that failure.

Treasury Secretary Jacob Lew said that with a straight face at a New York financial conference earlier in the week.  Never mind that, under Dodd-Frank, not only is “too big”—systemic risk—defined by Government and not by our economy, “failure” is defined by Government and not by our economy, and the outcome of “failure”—what creditors will be allowed to recover, and by how much—will be defined by Government and not by our existing bankruptcy system.  That last, especially, means that, of course we taxpayers will be on the hook, especially to fill any gap between what Government-determined creditors will be allowed to recover and what the failed institution’s assets will support.

Lew also made a very Pelosi-esque demand in those same prepared remarks, when he got to the matter of Congressional dissatisfaction with Dodd-Frank.  While addressing the fact that three years after the law’s enactment, many (most?) implementing regulations, including highly critical ones (from the perspective of the law), have yet to be written, Lew admonished Congress not to meddle with the law.

[T]here will be time to see what is working and what is not [once regulators are finished with outstanding rules].

Treasury has to write the regulations so that we can see what is in the law…away from the fog of the controversy.

Hmm….

Wages of Welfare

Posted on by
Reply

…or, in this case, Obamacare, or maybe just generalized government meddling in people’s lives through our free market.

Ken Adams has been turning to more part-time workers at his 10 Subway sandwich shops in Michigan….

He added approximately 25 part-time workers in May and June as he reduced some employees’ hours and replaced other workers who left.  The move showed how efforts by some restaurant owners and other businesses to remake their workforces because of the Affordable Care Act may be turning the country’s labor market into a more part-time workforce.

And

For the entire U.S. workforce, employers have added far more part-time employees in 2013—averaging 93,000 a month, seasonally adjusted—than full-time workers, which have averaged 22,000.  Last year the reverse was true, with employers adding 31,000 part-time workers monthly, compared with 171,000 full-time ones.

Because delays in enforcing Obamacare notwithstanding, businesses need both to get their full-time numbers down in order to reduce their Obamacare cost baselines, and absent repeal, those delays will come to an end in just 12 short months.  Indeed, the practical effect of the delays is simply to prolong and enhance the hiring of part-timers rather than full-timers.

Here’s a more direct example:

Rod Carstensen, owner of 11 Del Taco restaurants around Denver, began in April converting his mostly full-time workforce into one comprising mostly part-time help to minimize his health-care costs.  He estimates the costs could have climbed by as much as $400,000 a year without the change.