Bad policy has a way of surviving, even though the results of bad policy may be plain for all to see. The US and the Western countries have managed, by government policies (political policies) to destroy the vibrancy of their economies. Perverse incentives and irrational agency costs so pervade these economies that real economic growth of the kind seen in the nineteenth and twentieth century is not likely to ever return.
Many in the Western world applaud the collapse of their own economies. They see economic growth as damaging to the well being of the population. Those who take this view are usually pretty well insulated from the downside of stagnant economic growth. But most of the citizenry are not insulated from that downside. Unemployment and under-employment mostly afflict folks that have no real way to protect themselves. In the US, minorities suffer the most from the collapse of the economy; white college graduates suffer the least.
John Maynard Keynes was, in my opinion, the greatest economist in history. Strangely, what passes as "Keynesianism" is an absurd, foolish set of doctrines that are routinely taught to undergraduates that suggest that wasteful government spending can lead to wealth. Keynes never believed anything of the sort as a perusal of his work would suggest. But, who reads Keynes these days? If you read Keynes, you will quickly run across the notion of "animal spirits" that motivate entrepreneurs to do the things that spur real economic growth. Where is that taught in the modern academic establishment?
In his classic "Treatise on Money," Keynes used the term inflation to mean mostly growth in the money supply. He was certainly no believer in the so-called trade-off between unemployment and inflation. He was aware of what happened in the 19th century when powerful economic growth carried Britain and the US to the pinnacle of power amidst more or less constant deflation (how can that be?). Keynes saw "pyramid building," which he cited in his 1935 work "The General Theory of Employment, Interest and Money" as a device to encourage business, not as Obama and his advisers see it, as a substitute for the private economy.
The media labels the Obama Administration as Keynesian. Nothing could be further from the truth. The Obama Administration basically believes in transfer payments to their political allies and throwing money down rat holes. Keynes would have been appalled. He probably would have joined the Tea Party.
The truth is that no amount of government spending or targeted tax cuts can do any good. They simply waste (future) taxpayers money and make things worse. Government is stifling entreneurial activity in the US and in Western Europe. It is that simple. Incentives do matter, contrary to what Obama and his folks think. Businesses are not the enemy, contrary to what Obama and his folks think. Until policies change, the future lies with Asia and parts of the world not bent on destroying private enterprise, but bent on encouraging it.
Just attend a movie in the Western world and you can see the stereotypes. Businessmen are always crooks and left-leaning lawyers and college professors and students are always the good guys. Businesses are portrayed constantly in the media as instruments of environmental destruction and unfeeling masters of downtrodden employees. Our modern literature portrays the same images. Pick up a college newspaper, anywhere in the country, you get the same message. College, student-run, newspaper columns spend most of their time counting up ethnic and social noses to see if they are all represented properly and if there are enough centers and resources sucking up tuition money to promote their agendas. Most of these latter efforts simply create divisions and animosities amongst people where there previously were none.
In short, the culture no longer believes in free enterprise. If you are rich enough or comfortable enough or have enough job security, then what do you care about people that can't find work or are in danger losing their job. In a sense, it is the preoccupation with pipedreams, that enables the liberal elite to ignore the economic plight of the average American or Western European. The average guy is pummelled by the government-only approach to the economy. But, what do Obama and his group care, except for their interest in re-election.
The controversy over the Boeing plant in South Carolina typifies the way this game is cynically played. The Obama Administration could care less if thousands of jobs are shipped out of the country so long as no non-union employees get hired in South Carolina by Boeing. It is not enough to be an American citizen to merit Obama's interest, you have to be a prospective union member as well. Obama could stop the travesty going on in the Boeing plant dispute, but he chooses not to. That tells us a lot about Obama.
In the end, you have to decide what kind of economy you want. China and Asia are choosing to have a dynamic economy with rising standards of living and increasing economic power. The US and the West have thrown in the towel and prefer political theater to economic progress. Not a pretty picture for those that need jobs and a future in the Western world.
Minggu, 11 September 2011
Jumat, 09 September 2011
Wasn't Listening to Me....Obviously
I was sorely disappointed that the President did not follow my advice in Thursday night's speech and offer up the repeal of his entire first two and a half years in office. I guess there wasn't much chance of that after all.
What he did was promise to push for more of the same measures that have stifled economic recovery in the US and he seemed truly unaware of the real reasons that the economy is adrift. So, at least, you can say one thing for the man -- he is consistent and (intellectually) deaf.
So, what's the future look like. If the pundits are right that folks are souring on the tea party, then the future cannot be very good. The main agenda for the tea party is rolling back the size and scope of government and tackling our national debt problems. If that is truly out of favor, then we will eventually be making the kind of headlines that Greece is making, without any savior (Germany) as a prospective bailor.
In the short run, though, what happens with the economy? How bad can it get? It can get worse, but not a lot worse. There are too many unemployed resources out there for things to deteriorate too much from here. Businesses will have to spend a fair amount of time figuring out how to do end-runs around government policies. There is simply no way, other than out-sourcing and labor-saving, to operate a growth business with the current climate of government intervention. It will take some time.
The price will be paid, not by Jeffrey Immelt (GE's CEO) or Warren Buffett or the various wealthy folks who support the Obama Administration. No indeed. The losers from the Obama Stagnation will be the poor, the minorities, the unemployed, and large swaths of middle America. The rich and comfortable and the public employees and union members who still have jobs will cheer the Obama crushing-machine on. While those, least able to protect themselves will be savaged by the big government suffocation promoted by the Obama Administration and its allies.
So, look for very slow, anemic economic growth in the US and Western Europe. Perhaps, another mild downturn, but nothing big on the downside. Stock markets should fare well, even though volatile. There will be rolling defaults in Western Europe and effective defaults among selected states in the US. But, all will survive the Obama policies in time.
What he did was promise to push for more of the same measures that have stifled economic recovery in the US and he seemed truly unaware of the real reasons that the economy is adrift. So, at least, you can say one thing for the man -- he is consistent and (intellectually) deaf.
So, what's the future look like. If the pundits are right that folks are souring on the tea party, then the future cannot be very good. The main agenda for the tea party is rolling back the size and scope of government and tackling our national debt problems. If that is truly out of favor, then we will eventually be making the kind of headlines that Greece is making, without any savior (Germany) as a prospective bailor.
In the short run, though, what happens with the economy? How bad can it get? It can get worse, but not a lot worse. There are too many unemployed resources out there for things to deteriorate too much from here. Businesses will have to spend a fair amount of time figuring out how to do end-runs around government policies. There is simply no way, other than out-sourcing and labor-saving, to operate a growth business with the current climate of government intervention. It will take some time.
The price will be paid, not by Jeffrey Immelt (GE's CEO) or Warren Buffett or the various wealthy folks who support the Obama Administration. No indeed. The losers from the Obama Stagnation will be the poor, the minorities, the unemployed, and large swaths of middle America. The rich and comfortable and the public employees and union members who still have jobs will cheer the Obama crushing-machine on. While those, least able to protect themselves will be savaged by the big government suffocation promoted by the Obama Administration and its allies.
So, look for very slow, anemic economic growth in the US and Western Europe. Perhaps, another mild downturn, but nothing big on the downside. Stock markets should fare well, even though volatile. There will be rolling defaults in Western Europe and effective defaults among selected states in the US. But, all will survive the Obama policies in time.
Sabtu, 03 September 2011
My Advice to the President
Dear President Obama:
Your decision to request that the EPA suspend its new regulations on ozone that could have easily cost another one million jobs is a good one. Build on it. In your speech on the 8th of September, make the ozone regulation suspension the start of something big.
Announce that you are now suspending all new regulations that are the result of Dodd-Frank, Obamacare, the 2009 Credit Card reform act, new NLRB rules such as the Boeing-South Carolina fiasco. Further, you are suggesting that Congress impose limits on lawsuits against business when the businesses themselves are not at fault (but their employees might be). You are further going to request that Congress suspend minimum wage laws and family leave act provisions until unemployment sinks below six percent. Finally, you are going to ask Congress to exempt all companies with less than $ 50 billion market capitalization from the absurd provisions of Sarbanes-Oxley.
It is okay to say that all of these onerous things will come back once the economy is healthy again, but, for now, we should be brushing them aside so that folks can go back to work.
Once unemployment is below six percent and economic growth is consistently above three percent, then you can go back to demonizing business and imposing roadblocks to growth and employment. You will still do a lot of damage with your policies, but the country would be in a better position to withstand your assault on capitalism at that point.
If you do this Mr. President, you will steal the thunder from Republicans, and virtually guarantee your re-election next year. But, more important by far, the US economy will have a chance to recover and American workers can once again go back to work.
Your Pal,
Ed Burton
Your decision to request that the EPA suspend its new regulations on ozone that could have easily cost another one million jobs is a good one. Build on it. In your speech on the 8th of September, make the ozone regulation suspension the start of something big.
Announce that you are now suspending all new regulations that are the result of Dodd-Frank, Obamacare, the 2009 Credit Card reform act, new NLRB rules such as the Boeing-South Carolina fiasco. Further, you are suggesting that Congress impose limits on lawsuits against business when the businesses themselves are not at fault (but their employees might be). You are further going to request that Congress suspend minimum wage laws and family leave act provisions until unemployment sinks below six percent. Finally, you are going to ask Congress to exempt all companies with less than $ 50 billion market capitalization from the absurd provisions of Sarbanes-Oxley.
It is okay to say that all of these onerous things will come back once the economy is healthy again, but, for now, we should be brushing them aside so that folks can go back to work.
Once unemployment is below six percent and economic growth is consistently above three percent, then you can go back to demonizing business and imposing roadblocks to growth and employment. You will still do a lot of damage with your policies, but the country would be in a better position to withstand your assault on capitalism at that point.
If you do this Mr. President, you will steal the thunder from Republicans, and virtually guarantee your re-election next year. But, more important by far, the US economy will have a chance to recover and American workers can once again go back to work.
Your Pal,
Ed Burton
Jumat, 02 September 2011
More Lawsuits By The Obama Team
FHFA is now suing the major banks for subprime lending problems. Just what the economy needs. Why not just pass a law saying that no one but rich people can take out mortgage loans? That would accomplish the same agenda as this lawsuit by FHFA. I guess the Obama folks still don't get it. People other than Obama and Buffett need a chance in this economy. Suing the banks just makes more certain that they won't get that chance.
No Jobs, No Surprise
The jobs report this morning was startling -- no new jobs created in the US economy for the month of August! It seems that Obama was listening this time as he quickly suspended the onerous new ozone rules propagated by his EPA. While suspending the new regulations will not create jobs, it will at least prevent the wholesale destruction of existing jobs. That's a start. The Administration, really for the first time, has halted something that destroys jobs!
Hope springs eternal. Maybe the President is beginning to get a glimmer of why his policies are destroying the American economy. This would be good news indeed.
Hope springs eternal. Maybe the President is beginning to get a glimmer of why his policies are destroying the American economy. This would be good news indeed.
Senin, 29 Agustus 2011
Economic Policy Confusion
Isn't it obvious that the politicians have no idea why the economy is staggering? After the arrogance of January, 2009, when the exuberant victors of the 2008 election proceeded to toss away $ 800 billion in a foolish waste of money known as "the stimulus."
The Obama folks assumed that throwing taxpayer money in the direction of Obama political allies (mostly state employee union members) would magically get the economy back on track. Why the Obama folks thought that, no one knows?
Then the Obama team began the process of erecting roadblocks (think Dodd Frank, Obamacare, the Credit Card Reform act, stifling regulations from the EPA and the NLRB) that would virtually guarantee that the economy had no real chance of recovery.
Now, Obama promises to come up with a new package to deal with the "jobs problem." This would be comical were it not so tragic. Putting up more roadblocks does not remove the original roadblocks.
This economy will not get out of its own way until the roadblocks are dismantled and real market forces are permitted to function again -- especially in the labor market.
Bernanke's comments on Friday were ridiculous. It is time that Bernanke return to academia. Bernanke's Fed is arguably the worst in the history of the Federal Reserve and its results on the economy are there for all to see.
The usual response by defenders of Obama and Bernanke is to say that things would have been much worse had they not done what they did. Really? When, other than the last time policies like these were tried in the 1930s, were things ever this bad.
The Reagan recovery in the 1980s shows how to get it done. Get the government off the back of the citizenry. That is the solution. The government is not the answer. The government is the problem and until it changes course (or gets changed), America will continue its slide into irrelevance.
The Obama folks assumed that throwing taxpayer money in the direction of Obama political allies (mostly state employee union members) would magically get the economy back on track. Why the Obama folks thought that, no one knows?
Then the Obama team began the process of erecting roadblocks (think Dodd Frank, Obamacare, the Credit Card Reform act, stifling regulations from the EPA and the NLRB) that would virtually guarantee that the economy had no real chance of recovery.
Now, Obama promises to come up with a new package to deal with the "jobs problem." This would be comical were it not so tragic. Putting up more roadblocks does not remove the original roadblocks.
This economy will not get out of its own way until the roadblocks are dismantled and real market forces are permitted to function again -- especially in the labor market.
Bernanke's comments on Friday were ridiculous. It is time that Bernanke return to academia. Bernanke's Fed is arguably the worst in the history of the Federal Reserve and its results on the economy are there for all to see.
The usual response by defenders of Obama and Bernanke is to say that things would have been much worse had they not done what they did. Really? When, other than the last time policies like these were tried in the 1930s, were things ever this bad.
The Reagan recovery in the 1980s shows how to get it done. Get the government off the back of the citizenry. That is the solution. The government is not the answer. The government is the problem and until it changes course (or gets changed), America will continue its slide into irrelevance.
Minggu, 28 Agustus 2011
The Jobs Problem
If cell phones cost $ 10,000 apiece and required $ 1,000 monthly service bills, who would own them? Well, no doubt, Warren Buffett would own one and perhaps Bill Gates and Barrack Obama as well.
But, what about the average guy. Would he own a cell phone at those prices? What if the economy was very strong, would most folks get a cell phone, if these were the costs?
The answer is pretty obvious. At that price, very few people would be interested.
This is the fundamental jobs problem in the US. Because of government mandates, the anticipation of Obamacare, litigation fears, OSHA rules, threat of unionization, a blithering variety of employment taxes, family leave laws, American labor is priced out of the market for most businesses. There are some businesses for which price is not an issue: Wall Street, the movies, professional sports, working at the White House, etc. But, for most private businesses who do the bulk of hiring in the US, labor is just way too expensive thanks to the various levels of government.
If you are a movie star and a sports celebrity (or even a reality show star), then these are not your problems. The wealthy don't really have a problem in this brave new Obama world. They are a-ok. That is why the Buffetts of the world strongly support the Obama program. It doesn't hurt rich people. It is the average guy or girl who has no real hope in the Obama economy, not the rich guy. The rich guy, like Buffett, is having a ball. this is fun for him.
The average American worker is simply not affordable anymore and it has nothing to do with with wage and salary and has everything to do with government. All of these programs to "help the average guy" have made the average guy way too expensive.
Unemployment is not going to go away in the US. This is the new reality. Those who are protected from the problem, like Warren Buffett, will continue to cheerlead for the programs that devastate middle and lower income Americans. "Let them eat cake" has a certain ring to it for the Buffett-Obama class. But, for the rest of America, life will stay pretty grim. I wonder how long Obama and Buffett can blame all of this on George Bush -- 10 years? 20 years?
But, what about the average guy. Would he own a cell phone at those prices? What if the economy was very strong, would most folks get a cell phone, if these were the costs?
The answer is pretty obvious. At that price, very few people would be interested.
This is the fundamental jobs problem in the US. Because of government mandates, the anticipation of Obamacare, litigation fears, OSHA rules, threat of unionization, a blithering variety of employment taxes, family leave laws, American labor is priced out of the market for most businesses. There are some businesses for which price is not an issue: Wall Street, the movies, professional sports, working at the White House, etc. But, for most private businesses who do the bulk of hiring in the US, labor is just way too expensive thanks to the various levels of government.
If you are a movie star and a sports celebrity (or even a reality show star), then these are not your problems. The wealthy don't really have a problem in this brave new Obama world. They are a-ok. That is why the Buffetts of the world strongly support the Obama program. It doesn't hurt rich people. It is the average guy or girl who has no real hope in the Obama economy, not the rich guy. The rich guy, like Buffett, is having a ball. this is fun for him.
The average American worker is simply not affordable anymore and it has nothing to do with with wage and salary and has everything to do with government. All of these programs to "help the average guy" have made the average guy way too expensive.
Unemployment is not going to go away in the US. This is the new reality. Those who are protected from the problem, like Warren Buffett, will continue to cheerlead for the programs that devastate middle and lower income Americans. "Let them eat cake" has a certain ring to it for the Buffett-Obama class. But, for the rest of America, life will stay pretty grim. I wonder how long Obama and Buffett can blame all of this on George Bush -- 10 years? 20 years?
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