Tag Archives: political economy

There He Goes Again

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Alan Blinder had another one in The Wall Street Journal the other day.  This time he’s bellyachingtalking about the Romney/Ryan ticket and averring that it’s from too deep in right field.  He supports this with three main points grounded in an FDR-ian…consensus:

  • a modest social safety net to protect vulnerable Americans from some of the downsides of unfettered markets,
  • Keynesian-style policies to shorten recessions, and
  • a progressive tax-transfer system to mitigate income inequality

It continues to amaze me that he can say those things with a straight face.  He didn’t make deep right field this time, either.  He fanned.  Struck out in three pitches.

There’s nothing modest about today’s “safety net.”  Far from FDR’s original supplemental income design for social security, with retirees expected to look to their own families for any needed additional support, today’s social security is intended to be replacement income, funded not by themselves and their own families, but solely by direct transfer payments from strangers—at immediate cost to those strangers’ ability to see to their own and their own parents’ financial futures.

Those highly touted, wholly unsuccessful Keynesian policies didn’t shorten the Great Depression, they prolonged it.  By putting floors under food and labor prices, Keynesianism made it far more difficult for companies to resume hiring and for the out-of-work (among too many others) to buy their food (and so were created food stamps).  On top of that, FDR’s Keynesian spending crowded out of the economy that already straitened private sector.  FDR’s own Treasury Secretary confessed the utter failure of these policies.  Henry Morgenthau confided 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.

Obama’s Keynesian stimulus spending has been a similarly dismal failure.  Unemployment remains above 8% (and underemployment above 14.5%) nearly four years after he began his spending spree.  Fewer people are working today than at the end of the Panic of 2008, even with the 4 million “new” jobs that the economy has created despite his policies.  Obama today has spent “more than we have ever spent before,” it still “does not work,” and he has “never made good on [his] promises.”

To see what does work, review the actions taken by President Ronald Reagan in response to the Carter Recession.  Then go back to the FDR era—just a decade prior to FDR himself—and review the actions taken by President Warren Harding in response to the Depression of 1920-1921, still in progress when he took office (and begun from the policies of another Progressive President).

Mitigate income inequality?  This is the wrong goal, and separately, it’s immoral.  It’s the wrong goal because everyone’s economic prosperity flows from supporting opportunity equality, not income equality, so that every man can show the best that there is in him, so that  every man can seek to the fullest of his ability (in John Adams’ terms) his own happiness.  This also allows—and actively facilitates—every man to maximize his ability to satisfy his duties to himself, his family, and those less well off than he by maximizing his ability to accumulate the resources with which to achieve that satisfaction.  Working toward income equality necessarily caps the ability of a man to maximize the outcomes of his own potential, and it disincentivizes both the man redistributed from and the recipient.  Here, then, is the immorality of forced income equality: it denies every man his opportunity to honor his own obligations.

There are a couple of lesser points in Blinder’s piece.

Any piece of legislation running 2,319 pages will have flaws.

There’s a hint there.  And

For people now under age 55, the Republicans would like to replace Medicare by vouchers that will almost certainly fall short of covering future insurance costs.

There are two small things about this.  First, it’s a carefully static analysis that ignores free market responses to the competition that flows from letting people exercise responsibility for their own medical costs.  But, then, how free would our market be after four more years of Progressive central planning?  The other thing is that this is of a piece with the Progressives’ general refusal to allow any part of today’s Social Security to be privatized.  Americans, you see, are just too grindingly stupid to be able to manage our own fiscal affairs.  We need our Progressive Betters in government to “guide” us.

Factual Errors

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Democratic Vice Presidential Candidate Joe Biden had a stirring speech at last Thursday’s Democratic Party convention, touting his running mate’s strong nerves in dealing with our economy.  And it was full of…errors.  Fox News‘ Elizabeth MacDonald has a scorecard; here’s just one item, though.

On the Auto Bailout: “Conviction. Resolve. Barack Obama. That’s what saved the automobile industry.”

Rebuttal: And lots of taxpayer money, $80 billion  to start. GM and its financing arm still owes  US taxpayers $25.1 billion, and taxpayers still own just under a third of GM, or 500 million shares, which remain underwater.  The stock must trade at around $53 a share for taxpayers to breakeven; they currently trade at around $21.  This past August, the Treasury Dept. revised higher the cost of the auto bailout by $3.4 billion, up from the prior estimate of $21.7 billion, an old estimate that had been revised higher over the past year.  GM continues to struggle, as the White House has pressured it to manufacture fuel efficient Chevy Volts, a line of cars GM has pulled the plug on.

Not mentioned in the Vice President’s speech, either, was the Administration’s pressure to pull the plug on car dealerships.  The Obama Administration pressured GM and Chrysler to halt relations with about 2,200 dealers—each one with roughly 50 employees.  That equals to about 110,000 jobs lost.

Notice that careful elision.  That’s 110,000 jobs, wholly unrelated to GM’s bad leadership, that steely-eyed Obama tossed into the can.  Because Big Government knows better than private enterprise—even one like GM—how that private enterprise should run its business.

RTWT.

Some Labor Questions

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The Wall Street Journal asked these on Labor Day, and supplied some answers.  Here are some of those questions and answers.

  • Q: How are America’s workers doing? Not good. Over the past decade, over the ups and downs of the economy, taking inflation into account, the compensation of the typical worker — wages and benefits—basically haven’t risen at all. … The Labor Department recently said that 6.1 million workers in 2009-2011 have lost jobs that they’d had for at least three years. Of those, 45% hadn’t found work as of January 2012. … Federal Reserve Chairman Ben Bernanke said Friday that unemployment is still two percentage points higher than normal….
  • Q: Things ARE getting better, though. The U.S. economy is creating jobs, right?  Back in December 2007 when the recession began, there were about two jobless workers for every job opening.  When the economy touched bottom in mid-2009, there were more than six unemployed for every job.  At last count, the BLS says there were 3.4 jobless for every opening.
  • Q: How much of this elevated unemployment is because the unemployed just don’t have the skills that employers are looking for right now?  Some.  …the bulk of the evidence is a lot of the unemployment really is the old-fashioned kind: the kind that would go away if the economy was growing at a stronger pace. Mr. Bernanke said as much at the Jackson Hole conference….

The Democratic Presidential Candidate has taken a bad situation and done little to improve it.  He has, though, actively attacked businesses—the hirers—demonizing them, (over)regulating them, demanding to raise taxes on them.

“How Democrats Made America Exceptional”

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Indeed.  But not in a good way.  Alan Colmes has an op-ed of this title in The Wall Street Journal; let’s look at some of his claims.

Conservatives blast the left for not appreciating “American exceptionalism”—even though Barack Obama is the only president to have ever used that phrase, at least in the past eight decades or so.

Which Democratic Presidential Candidate Obama did pejoratively:

I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.

Sure.  Our exceptionalism is just one among 20.  Or 192.  But this is a minor quibble.

Here’s the important stuff.  Here’s Social Security, for example.

Roosevelt created Social Security [wrote Colmes], a program that today keeps 40% of seniors above the poverty line and helps families with disabilities and those who have lost loved ones.

FDR did this at a time when there were seven American workers for every retiree, and the retirees had a life expectancy of five years in retirement.  Moreover, FDR designed it as a supplemental income program, with the retirees still expected to look to their families for any additional support needed.  Today, Social Security has three workers for every retiree, and the retirees have a life expectancy of fifteen years in retirement.  And today’s family man is taxed for the current retirement support of utter strangers.  He’s not allowed to set that money aside for his own retired parents in particular, or for his own future retirement.  Under these demographic facts, Colmes objects to redesigning Social Security, so that the promise of a safety net can be kept—if under different guise.

[Republican Vice Presidential Candidate Paul Ryan] wants to dismantle that same Social Security program.

No, let’s just leave it alone, and let it fail completely.

Food stamps.  Ah, yes.

Today the Supplemental Nutrition Assistance Program, better known as food stamps, feeds one in seven Americans. The program was established in 1939 by FDR’s then Secretary of Agriculture Henry Wallace.  Recipients are not all lazy bums sitting on their posteriors….

The only ones talking about food stamp recipients being lazy are Progressives trying to distract by denying a charge that isn’t being made.

More importantly, though, Colmes actually recites that food stamp dependency ratio like it’s a good thing that government policies have reduced 15% of Americans to such straits.  But why do we have a food stamp program at all?  FDR, via the National Labor Relations Act, put a floor under the wages employers were allowed to pay—at the height of the Depression, with 20+% unemployment—thus making it too expensive for employers to hire.  On top of this, he put a floor, with his Agricultural Adjustment Acts, under the price of food at which farmers could sell, ensuring that all of those out of work Americans—too many now unemployable by law—could not afford their daily bread.  Enter FDR’s food stamps, in an attempt to enable the artificially priced out of work to buy their food at those artificially inflated prices.  And those CCC and WPA programs of which Colmes is so proud?  Well-intentioned, to be sure.  But they worked in concert with FDR’s price and wage floors to crowd out the private employers that otherwise would have done the hiring—with the private economy’s far greater impact.  Indeed, these New Deal policies, far from providing relief from the impact of the Depression, prolonged it.

“Reproductive rights.”  Colmes has this to say:

The fight for women’s rights continues, as regressives try to put an end to already-established reproductive rights. Even if you don’t believe that 98% of Catholic women have used birth control, as a 2011 Guttmacher Institute study showed, the overwhelming majority has[.]

and

If Messrs. Romney and Ryan have their way, reproductive rights would be overturned and millions of Americans denied health-care coverage.

Here Colmes is cynically conflating the right to choose to have children—or not—with insurance coverage for the birth control mechanisms and abortifacients that facilitate that choice.  And he insists that it’s OK to force people or their religious institutions to pay for these even when it goes against their religious beliefs.  The fact that so many of us are sinners, anyway, somehow excuses this.  More, Colmes conflates objection to being forced to pay for something that violates one’s conscience with denial of availability altogether.  This is just more cynicism.  There’s nothing wrong with birth control for those who want it.  Insurance policies even exist that cover the incredibly cheap contraceptives as well as the abortifacients.  The problem is when the user is, by law, allowed to force others to pay for her contraceptives, her abortifacients, instead of buying them with her own money.

Colmes’ Progressives want the wrong type of exceptionalism for America.  They don’t want the old, foundational exceptionalism of self-reliance, individual responsibility, and a limited government that recognizes both the fundamental wisdom of Americans and that it has no standing to do for us for our own good.  They want Big Government acting in our stead.

Another Thought on Government

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One line from Michelle Obama’s speech on the opening day of the just concluded Democratic Party’s convention jumped out at me, and it did so because it epitomizes the difference between Progressive and Conservative views of government and responsibility.

[W]hen you’ve worked hard, and done well, and walked through that doorway of opportunity, you do not slam it shut behind you.  You reach back and you give other folks the same chances that helped you succeed.

Indeed, conservatives not only believe this, we live it.  Arthur Brooks, the author of Who Really Cares, says:

[W]hen you look at the data, it turns out the conservatives give about 30 percent more.  And incidentally, conservative-headed families make slightly less [6% less] money.

and

…conservatives are 18 percent more likely to donate blood.

Here are some more numbers from Brooks, via George Will:

In the 10 reddest states [in 2004], in which Bush got more than 60 percent majorities, the average percentage of personal income donated to charity was 3.5. Residents of the bluest states, which gave Bush less than 40 percent, donated just 1.9 percent.

There are notable exceptions to this.  The Clintons and Obamas, on the other hand, gave significant per centages of their income to charity.  But these exceptions demonstrate the truth in the data.

Conservatives already are, as a matter of course, reaching back and helping others.  We’re reaching sideways and helping others with current problems, too.  And we reach forward—we pay it forward [emphasis added]:

…lower income people give more [than those better off] because they think they are more likely to need charity or know someone who needs charity.

We don’t need government to force us to do our duty.  We don’t need government to dictate to us what our charities will be, or the mechanisms by which we will help.

Progressives, though, do need government to prod them, apparently, as they project this shortcoming of theirs onto all Americans.  From Brooks (Will), again [emphasis in the Will cite]:

People who reject the idea that “government has a responsibility to reduce income inequality” give an average of four times more than people who accept that proposition.

Mrs Obama was, in fact, preaching to the choir.  She was just in the wrong church.