Tag Archives: political economy

Artificially Low Interest Rates

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When the financial markets aren’t allowed to influence interest rates in accordance with market forces, there are wide-ranging consequences.  Here‘s one.

Ford Motor Co expects to spend $5 billion this year shoring up its pension funds, almost as much as the auto maker spent last year building plants, buying equipment and developing new cars.

The nation’s second-largest auto maker is one of a who’s who of US companies pouring cash into pension plans now being battered by record low interest rates.  Verizon Communications Inc contributed $1.7 billion to its pension plan in the fourth quarter and—highlighting companies’ sensitivity to this issue—Boeing Co now reports “core earnings” to separate out pension expenses.

Leaving aside the wisdom of defined benefit plans like pensions vs defined contribution plans like 401(k)s, and even assuming that interest rate assumptions underlying pension contributions in normal times are reasonable, this is money that would be better spent on capital plant, product development (both existing and new), hiring more workers, and so on.

Sort of like Ford did last year, but cannot use for this year’s priorities.

Are Republicans Folding Again?

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With the effective date of the Obama sequester, with its defense cuts, approaching, Republicans are starting to waver.  Congressman Tom Rooney (R, FL) of the House Armed Services Committee, for instance, now is saying he would rather compromise on taxes than allow the cuts to take effect.

If you were going to hold a gun to my head and say you had to pick one…my constituents would expect us to keep them safe.  If it takes closing [tax] loopholes to get there, I would be willing to do that.

A carefully anonymous “senior GOP aide” confirms the growing softness of the Republicans.  He’s saying that, with the cuts, Rooney’s position will gain support as more Republicans fold.

Republicans have already foldedcompromised on tax increases in the fiscal cliff negotiations just concluded.  More “compromise” means more tax increases.

How, exactly, are Americans kept safe when ever more of their money is taken by the government as taxes, Congressman Rooney?

I also have to ask: has the Republican Party become the RINO Party?

Some Remarks on Budget Negotiations

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Can the Progressives in this Congress and White House really be this…lacking in understanding?

The White House had suggested GOP willingness to let sweeping defense cuts take effect was the culprit [for the fourth quarter economic contraction just reported].

However, House Speaker John Boehner (R, OH) spokesman Brendan Buck had this:

These arbitrary, automatic cuts were a creation and demand of the White House in 2011.  Twice the House has passed legislation to replace them with common sense cuts and reforms.  If there was any uncertainty late last year about the sequester, it was because the Democratic-controlled Senate, per usual, never lifted a finger to pass a plan to replace it.

House Minority Leader Nancy Pelosi (D, CA) chimed in:

…today’s disappointing GDP report [of fourth quarter 2012 contraction] is a direct result of the economic uncertainty created by House Republicans’ strategy of obstruction and manufactured crises.

An exploding deficit, a destructive debt, stagnant and too-high unemployment, and a failed recovery from the Panic of 2008 aren’t crises at all—these are normal.  Congressman Sam Graves (R, MO), Chairman of the House Small Business Committee, noted

Is this stunt in economic growth really a surprise?  Anti-growth policies and an anti-business White House produce just that—a lack of growth[.]

Congressman Kevin Brady (R, TX), incoming Chairman of the Joint Economic Committee added

The bottom line is that America’s economy continues to struggle primarily due to President Obama’s penchant for political brinkmanship and the pervasive uncertainty caused by his focus on higher taxes, regulation and ObamaCare.

Unfortunately, yes.  And that’s to the severe detriment of our country.

Taxes and Spending

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…and how badly they’re misunderstood.  Texas Governor Rick Perry (R)

has for weeks called on the Legislature to cut taxes and continue to hold down government spending—even though Texas’ economy is booming.

The AP hasn’t a clue.  That should be “because,” not “even though” Texas’ economy is booming.  The anonymous reporter apparently thinks government owns our money, and when we have more, it should relieve us of it and spend it themselves….

The Brits Get It

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Or some of them do.  We need to figure it out, also.  Here’s another bit from The Telegraph; this lady was unimpressed with President Barack Obama’s “oration.”

There were some quite surreal moments when Mr Obama seemed to be channelling Gordon Brown at his most self-congratulatory.  Specifically rejecting the notion that America “must choose between caring for the generation that built this country and investing in the generation that will build its future” (that is, we can afford to support both the old and the young), he said: “For we… understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it.” Ah, yes—remember that refrain: we will govern for the many, not the few?  Which turned out to be a euphemism for high tax, high-spend economics, galloping entitlements and an epidemic of welfare dependency?  Warning to America: it didn’t work out.

And

Mr Obama made no attempt to explain how support at both these ends of the age range was going to be afforded.  Or what effect his insistence that the most expensive entitlement programmes—social security, Medicare and Medicaid—were untouchable would have on the US deficit.  Hard economic fact could be countered by ideological passion: “[These entitlements] do not sap our initiative; they strengthen us.”  Well, maybe.  But they have to be paid for with hard cash—by somebody.

And

The core message was pounded home relentlessly: American government is now in the redistribution and welfare-provision business, and this is not (contrary to appearances) at variance with the founding fathers’ conception of a nation that is inherently opposed to state interference and domination over the individual.

Then she offered an alternative from a roughly contemporaneous oration by the British Prime Minister, David Cameron.

Then we got Mr Cameron’s offering, which, by comparison with the Obama message, seemed to be coming from a future world: from those who had learnt the lesson of overly powerful centralised political institutions that have spent money like there was no tomorrow on programmes that were steeped in benign rhetoric about “social fairness”.

And

Mr Cameron had a dream of the European Union as an open, flexible, freely diverse fellowship of nation states, each of them democratically accountable to its own electorate, and all of them able to cooperate in whatever ways suited their individual needs at any given time.

Talk about role reversal.