Growing the economy is no longer an American policy objective. The Obama Administration rarely mentions the topic. They talk about the economy but do not seem to think that eononmic growth is really all that important. Somehow, according to Obama, you can get jobs and full employment with little or no economic growth. There are no prior historical examples of job creation without economic growth, but maybe Obama knows something that we don't know.
The main focus of the administration is to figure out how to put the economy into a straight jacket. The political rhetoric that garners support for this absurd economic program is to demonize the rich and successful. The media helps, of course. When was the last time you watched a television program where a businessman was anything other than a sleazy crook. The anti-business mentality not only infects the White House, it permeates our entire culture.
If business is the enemy and economic growth is irrelevant, then the future is clear. These are exactly the policy plans of Europe. Europe does not see economic growth as relevant and they are not facing their own fiscal cliff. There is no hope for Europe and political and economic stability are now unavoidable for Europe. That seems to be our future as well.
Only going "over the cliff," offers any real hope of facing up to the problems that America faces. Kicking the can down the road once more is not the solution. The media and the financial press will hail a "solution," but there will be no real solution, just more political rhetoric and a continued march down the path to Greece. Entitlements are not a "sustainable" economic policy. That's the true message of the European crisis.
Minggu, 25 November 2012
Jumat, 23 November 2012
Walmart and the Free Market
Walmart has provided low wage jobs for hundreds of thousands of Americans. None of those employees were promised a living wage, guaranteed health care, and a plethora of fringe benefits. If an employee did not want the low wage job that was offered, they could look elsewhere. That is still true. Nothing has changed.
Now the big unions want a new deal. The new deal is all about the living wage, health care coverage and host of other goodies not normally available to low-skilled, low wage employees. So, now Walmart is the bad guy, in the eyes of the unions.
Walmart should be free to offer whatever jobs they want to offer and if people don't want those jobs, then they can work somewhere else. This is an economic transaction, not a religious order. Any Walmart employees, unhappy with existing working arrangements, can leave and work somewhere else. That's what disgruntled employees of Walmart should do, instead of inconveniencing customers of Walmart with demonstrations. The customers of Walmart are well serviced by a company that provides products to the great middle class at lower prices than were previously available.
Walmart is a triumph of capitalism, not an icon to be pilloried by the liberal establishment. Those who want higher pay should develop the skill set and the energy level that can lead to a job with a higher pay level. Paying people more money than their skill set would justify will not encourage such people to develop the work ethic and skill set that would truly justify higher pay and all that goes with it. Long term, the effort to gut the essence of free market economics will lead to a poorer society with fewer opportunities for those who would like a step-up on the ladder of life.
Once again, a peek into the future is right in front of our eyes.....Greece.
Now the big unions want a new deal. The new deal is all about the living wage, health care coverage and host of other goodies not normally available to low-skilled, low wage employees. So, now Walmart is the bad guy, in the eyes of the unions.
Walmart should be free to offer whatever jobs they want to offer and if people don't want those jobs, then they can work somewhere else. This is an economic transaction, not a religious order. Any Walmart employees, unhappy with existing working arrangements, can leave and work somewhere else. That's what disgruntled employees of Walmart should do, instead of inconveniencing customers of Walmart with demonstrations. The customers of Walmart are well serviced by a company that provides products to the great middle class at lower prices than were previously available.
Walmart is a triumph of capitalism, not an icon to be pilloried by the liberal establishment. Those who want higher pay should develop the skill set and the energy level that can lead to a job with a higher pay level. Paying people more money than their skill set would justify will not encourage such people to develop the work ethic and skill set that would truly justify higher pay and all that goes with it. Long term, the effort to gut the essence of free market economics will lead to a poorer society with fewer opportunities for those who would like a step-up on the ladder of life.
Once again, a peek into the future is right in front of our eyes.....Greece.
Kamis, 22 November 2012
Redistribution Economics
Casey Mulligan, an econ prof at the University of Chicago, has provided a fascinating analysis of why so many people have given up looking for work in the Obama economy. His new book, "The Redistribution Recession," lays out the "high marginal tax rates" that the unemployed and the poor in general face in the Obama economy.
Here's an example you might not have thought about. Under the Obama mortgage loan foregiveness rules, the amount of loan forgiveness depends upon your income. The higher your income, the less you can receive in loan forgiveness. This functions like a tax: if you work and receive income you lose the ability to receive loan forgiveness. So, why work? The same kind of disincentives are in place with food stamps, unemployment compensation and host of government programs to help the needy and the middle class.
The result: people rationally choose to leave the labor force and live off of the various pecuniary benefits that one can receive if one is not working. The point is that you lose these benefits if you choose to work for a living. That is essentially the same as a tax.
Mulligan's argument is that, as folks drop out of the labor force (as more than 6 million Americans have done since Obama was sworn into office), the economy deteriorates because those 6 million and more are no longer producing anything. That lost GDP is gone forever. Transfer payments, Obama's favorite economic policy, reduce GDP. The result is that we are all poorer. In the end, the middle class suffers, because the middle class depends, for economic improvement, on a vibrant economy.
The policy of redistribution makes the whole society poorer than the society would be otherwise. Of course, a weak economy, made weaker by Obama policies, has the most severe impact upon our lowest income citizens. The result: policies designed to help poor people end up impoverishing poor people.
Yes, the middle class has lost ground in the last couple of generations. But, not for the reasons you might think. The steady rise of government and the steady rise of redistribution schemes has created disincentives for a growing number of Americans, who simply drop out. These folks, an increasingly larger percentage of the population, become a burden to themselves and to the country.
Fast forward....Greece.
Here's an example you might not have thought about. Under the Obama mortgage loan foregiveness rules, the amount of loan forgiveness depends upon your income. The higher your income, the less you can receive in loan forgiveness. This functions like a tax: if you work and receive income you lose the ability to receive loan forgiveness. So, why work? The same kind of disincentives are in place with food stamps, unemployment compensation and host of government programs to help the needy and the middle class.
The result: people rationally choose to leave the labor force and live off of the various pecuniary benefits that one can receive if one is not working. The point is that you lose these benefits if you choose to work for a living. That is essentially the same as a tax.
Mulligan's argument is that, as folks drop out of the labor force (as more than 6 million Americans have done since Obama was sworn into office), the economy deteriorates because those 6 million and more are no longer producing anything. That lost GDP is gone forever. Transfer payments, Obama's favorite economic policy, reduce GDP. The result is that we are all poorer. In the end, the middle class suffers, because the middle class depends, for economic improvement, on a vibrant economy.
The policy of redistribution makes the whole society poorer than the society would be otherwise. Of course, a weak economy, made weaker by Obama policies, has the most severe impact upon our lowest income citizens. The result: policies designed to help poor people end up impoverishing poor people.
Yes, the middle class has lost ground in the last couple of generations. But, not for the reasons you might think. The steady rise of government and the steady rise of redistribution schemes has created disincentives for a growing number of Americans, who simply drop out. These folks, an increasingly larger percentage of the population, become a burden to themselves and to the country.
Fast forward....Greece.
Rabu, 21 November 2012
More Big Government Needed
Another economist for big government. We don't seem to run out of these guys. This time Eduardo Porter is in the spotlight. His article in today's NY Times argues that the middle class is losing ground because government isn't big enough!
No, that is not a joke. Porter really said that.
I guess he must think government has been shrinking over the past few decades. What rock has he been hiding under?
As government in the US at all levels has expanded without any apparent limit, the position of the middle class has deteriorated. Yes, that is true. Guess why?
The government is not the friend of the middle class. It is the government that has taken away the incentives that the middle class once had to save and provide for their future and the future of their children. Now, the middle class presumes, incorrectly it turns out, that the government is doing the saving for them and will provide for them in their old age. Wrong.
The government and the Democrats are simply trading the future of middle class Americans for power today for a few entitled Democrats. Nancy Pelosi is not a middle class American, nor is John Kerry, Chuck Schumer, Barrack Obama or any of these folks. They are all one percenters. Big government won't hurt them. They know how to play the game.
The folks that will be decimated by the continued expansion of the government and the middle class are the middle class and the poor. Their future opportunities are rapidly disappearing in the wake of an ever expanding government and entitled class of government employees.
The rulemakers are ruling out a future for the American middle class. Fast forward to Greece to get a view of how well big government solves the problems of the middle class. Waiting in the wings are Spain, France, Italy and yes, even Germany. The big government outcome is visible for all to see. Maybe economist Eduardo Porter should take a glance at the future. Porter, of course, is one of the entitled, so maybe he hasn't noticed the turn of events in Europe.
No, that is not a joke. Porter really said that.
I guess he must think government has been shrinking over the past few decades. What rock has he been hiding under?
As government in the US at all levels has expanded without any apparent limit, the position of the middle class has deteriorated. Yes, that is true. Guess why?
The government is not the friend of the middle class. It is the government that has taken away the incentives that the middle class once had to save and provide for their future and the future of their children. Now, the middle class presumes, incorrectly it turns out, that the government is doing the saving for them and will provide for them in their old age. Wrong.
The government and the Democrats are simply trading the future of middle class Americans for power today for a few entitled Democrats. Nancy Pelosi is not a middle class American, nor is John Kerry, Chuck Schumer, Barrack Obama or any of these folks. They are all one percenters. Big government won't hurt them. They know how to play the game.
The folks that will be decimated by the continued expansion of the government and the middle class are the middle class and the poor. Their future opportunities are rapidly disappearing in the wake of an ever expanding government and entitled class of government employees.
The rulemakers are ruling out a future for the American middle class. Fast forward to Greece to get a view of how well big government solves the problems of the middle class. Waiting in the wings are Spain, France, Italy and yes, even Germany. The big government outcome is visible for all to see. Maybe economist Eduardo Porter should take a glance at the future. Porter, of course, is one of the entitled, so maybe he hasn't noticed the turn of events in Europe.
Senin, 19 November 2012
Are Their Limits?
Who should decide whether or not a driver, alone in his/her car, should wear a seatbelt? The government? Why?
What if the driver feels that they can drive more safely without the encumbrance and annoyance of a seatbelt? Does that count for anything?
The usual answer to this question is that if the driver sustains an injury the rest of society may have to pay for his/her injury. But, why is that? Why isn't the driver alone responsible for their own injury? Why is this the responsibility of someone down the street?
But what if the driver is correct? The driver may be a safer driver without the imposition of the seatbelt. What then? Aren't other people less safe if the driver becomes more, not less, accident prone because of having to wear a seatbelt?
It is not unreasonable to suppose that some people drive better when not encumbered by a seatbelt. Should we ignore that?
The requirement that a lone individual driving without passengers must wear a seatbelt or face the criminal justice system is an example of how out-of-control our regulatory regime has become in the US.
Individuals, when by themselves, should decide whether or not to wear a seatbelt without big government intervening. But, gradually, over time, the vast majority of Americans have come to believe that individuals, alone and by themselves, should be compelled to wear seatbelts. That shows just how far Americans have come from Thoreau's Walden Pond, where individuals controlling their own destiny was the over-riding principle.
Is there any limit to what the government can compel people to do when no one else is around nor even affected by their behavior?
What if the driver feels that they can drive more safely without the encumbrance and annoyance of a seatbelt? Does that count for anything?
The usual answer to this question is that if the driver sustains an injury the rest of society may have to pay for his/her injury. But, why is that? Why isn't the driver alone responsible for their own injury? Why is this the responsibility of someone down the street?
But what if the driver is correct? The driver may be a safer driver without the imposition of the seatbelt. What then? Aren't other people less safe if the driver becomes more, not less, accident prone because of having to wear a seatbelt?
It is not unreasonable to suppose that some people drive better when not encumbered by a seatbelt. Should we ignore that?
The requirement that a lone individual driving without passengers must wear a seatbelt or face the criminal justice system is an example of how out-of-control our regulatory regime has become in the US.
Individuals, when by themselves, should decide whether or not to wear a seatbelt without big government intervening. But, gradually, over time, the vast majority of Americans have come to believe that individuals, alone and by themselves, should be compelled to wear seatbelts. That shows just how far Americans have come from Thoreau's Walden Pond, where individuals controlling their own destiny was the over-riding principle.
Is there any limit to what the government can compel people to do when no one else is around nor even affected by their behavior?
Sabtu, 17 November 2012
The Price of Redistribution
Progressive taxation, income maintenance schemes, food stamps, public housing, and other redistribution schemes determine priorities. Given the level of redistribution in the US and Europe, there is no room left to provide for infrastructure rebuilding. Uwe Reinhardt's article in today's NY Times is another example, as if anymore were needed, of an economist off the rails.
Reinhardt laments the fact, undeniable, that US infrastructure is crumbling. Guess what, Uwe, there is no money available for infrastructure. Current tax revenues are mostly transfer payments going from one part of the US population to another. There is no room left to provide for basic needs like infrastructure, national defense, the court system, the schools, etc. Instead we need our tax revenues to provide things for people that they should be providing for themselves -- lunches for their own children is just one example.
The price of redistribution is that you will not have money available for basic services. Watch Greece. The Greeks can no longer even provide police protection for their citizens or deliver the mail. The Greeks perfected the Obama system -- massive redistribution and strangling government regulation. It worked. Capitalism and free markets were snuffed out in Greece and tax revenues were devoted to public employees and transfer payments to favored groups. Uwe Reinhardt, a Princeton professor, supports all of the anti-free market agenda and extols the virtue of the redistribution entitlement programs. He wonders why we have no money left for infrastructure.
Like a lot of things, the answer to our crumbling infrastructure, is not, as Uwe thinks, a matter of having the will. It is a matter of having the funds. You don't need a Princeton professor to do the math. It's pretty simple arithmetic. There is no money left for infrastructure. Forget about it. The road to Greece will have a lot of potholes.
Reinhardt laments the fact, undeniable, that US infrastructure is crumbling. Guess what, Uwe, there is no money available for infrastructure. Current tax revenues are mostly transfer payments going from one part of the US population to another. There is no room left to provide for basic needs like infrastructure, national defense, the court system, the schools, etc. Instead we need our tax revenues to provide things for people that they should be providing for themselves -- lunches for their own children is just one example.
The price of redistribution is that you will not have money available for basic services. Watch Greece. The Greeks can no longer even provide police protection for their citizens or deliver the mail. The Greeks perfected the Obama system -- massive redistribution and strangling government regulation. It worked. Capitalism and free markets were snuffed out in Greece and tax revenues were devoted to public employees and transfer payments to favored groups. Uwe Reinhardt, a Princeton professor, supports all of the anti-free market agenda and extols the virtue of the redistribution entitlement programs. He wonders why we have no money left for infrastructure.
Like a lot of things, the answer to our crumbling infrastructure, is not, as Uwe thinks, a matter of having the will. It is a matter of having the funds. You don't need a Princeton professor to do the math. It's pretty simple arithmetic. There is no money left for infrastructure. Forget about it. The road to Greece will have a lot of potholes.
Jumat, 16 November 2012
It's All About Revenues
As a percentage of GDP, revenues are at a lower level than they have been for years. Why is that? Because of the Bush tax cuts? No. The reason is that the recession of 2008 is still with us. The economy is in slow motion, so revenues have never recovered (as a percentage of GDP).
So, how do you get revenues up? That is where the rubber meets the road.
The democrats answer to that question is to raise tax rates. If so, why not raise them to 90 or 95 percent? That should raise revenues easily enough to solve the current deficit, if you take the democrat logic literally. A good beginning would be to tax Congressional pay at a 90 percent rate. I like that one.
Heck, 100 percent sounds even better. We could begin to make progress on reducing the national debt if we just confiscated everyone's income above $ 1 million.
Democrats believe that folks are indifferent to tax rates and will pay whatever the Congress decides without changing behavior. Thus, 100 percent rates really make sense. Lets do it. Economists like Austin Goolsbee don't believe that tax rates really matter. Folks are just as willing to work hard and produce jobs if you take all of their income and leave them with nothing as if you take 39 percent of the income. There is no difference, says Goolsbee. Maybe we should tax Goolsbee's income at a 90 percent rate and see if he still thinks that it doesn't make any difference.
The truth is that if democrats get their way and raise tax rates, the result will be further weakness in the economy and much lower tax revenues. The result: a further expansion in the deficit and a rising national debt. Combine that with economic stagnation and you get the Obama plan for our future.
Since tax rates are progressive, economic growth alone will dramatically raise tax revenues, just as economic contraction dramatically lowers tax revenues. These facts are true whether tax rates are increased, reduced or remain the same.
The main impact of raising tax rates is to signal a lower after-tax income for investments in the economy. Entrepreneurs and businesses, those greedy guys and girls, will pull in their horns by investing less, hiring less and generally taking an extended holiday. This is where the Obama "fairness" gambit leads -- a weaker economy, lower tax revenues, a ballooning deficit and economic stagnation for a generation or more.
So, yes, it is all about revenues and if you want to guarantee that revenues will decline, then begin by jacking up tax rates. That will definitely do the trick.
So, how do you get revenues up? That is where the rubber meets the road.
The democrats answer to that question is to raise tax rates. If so, why not raise them to 90 or 95 percent? That should raise revenues easily enough to solve the current deficit, if you take the democrat logic literally. A good beginning would be to tax Congressional pay at a 90 percent rate. I like that one.
Heck, 100 percent sounds even better. We could begin to make progress on reducing the national debt if we just confiscated everyone's income above $ 1 million.
Democrats believe that folks are indifferent to tax rates and will pay whatever the Congress decides without changing behavior. Thus, 100 percent rates really make sense. Lets do it. Economists like Austin Goolsbee don't believe that tax rates really matter. Folks are just as willing to work hard and produce jobs if you take all of their income and leave them with nothing as if you take 39 percent of the income. There is no difference, says Goolsbee. Maybe we should tax Goolsbee's income at a 90 percent rate and see if he still thinks that it doesn't make any difference.
The truth is that if democrats get their way and raise tax rates, the result will be further weakness in the economy and much lower tax revenues. The result: a further expansion in the deficit and a rising national debt. Combine that with economic stagnation and you get the Obama plan for our future.
Since tax rates are progressive, economic growth alone will dramatically raise tax revenues, just as economic contraction dramatically lowers tax revenues. These facts are true whether tax rates are increased, reduced or remain the same.
The main impact of raising tax rates is to signal a lower after-tax income for investments in the economy. Entrepreneurs and businesses, those greedy guys and girls, will pull in their horns by investing less, hiring less and generally taking an extended holiday. This is where the Obama "fairness" gambit leads -- a weaker economy, lower tax revenues, a ballooning deficit and economic stagnation for a generation or more.
So, yes, it is all about revenues and if you want to guarantee that revenues will decline, then begin by jacking up tax rates. That will definitely do the trick.
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