Category Archives: Economy

IT’S KRUGMAN TIME AGAIN

Today’s column begins “There has been plenty to criticize about President Obama’s handling of the economy.”  And then he goes on to criticize Congress for “this week’s refusal to implement debt relief by the acting director of the Federal Housing Finance Agency…”  For a minute I was concerned that Krugman had adopted views dangerous to his continued employment by the New York Times.

Further reading relieved my fears.  The debt relief he is calling for would increase the federal debt.  (I should have known better than to think otherwise.)  The debt relief he espouses is government assistance for people who bought houses with mortgages they could not afford.

The columnist closes with “As I said, Mr. Obama has made plenty of mistakes.”  “If our economy is still deeply depressed, much – and I would say most – of the blame rests not with Mr. Obama but with the very people seeking to use that depressed economy for political advantage.”

There you have it, straight from the pen of a Nobel Prize Winning economist.  The President has made plenty of mistakes but when it comes to Barack Obama even his own mistakes are not his fault.

MY 2 CENTS ON “YOU DIDN’T BUILD THAT”

 

“People know that vast personal incomes come not only through the effort or ability or luck of those who receive them, but also because of the opportunities for advantage which Government itself contributes.  Therefore, the duty rests upon the Government to restrict such incomes by very high taxes.”

Who said that?  It was not our current president.  Here’s a clue – It was the only President in our history who presided over an even longer economic recovery than Barack Obama.  It was Franklin Delano Roosevelt in an address to Congress in 1935.  It is no coincidence that the economic policies of both presidents failed.  Minds that think alike produce results that look alike.  Roosevelt ordered thousands of young pigs to be destroyed to raise the price of pork – in a depression!  Obama ordered thousands of serviceable cars destroyed which raised the cost of transportation for lower income families — in a recession.

As the opening quote attests, Roosevelt sought to siphon money from the employer class to pay for federal government programs.  Obama seeks to do the same.  Roosevelt’s plan for recovery was to put people to work on the taxpayer’s payroll, not in the private sector.  See the CCC and WPA.  Obama’s plan is to rebuild roads and bridges (WPA) and subsidize unprofitable environmental programs like the Solyndra (CCC).

Roosevelt took measures later declared unconstitutional by the Supreme Court.  See The Schechter Brothers and the NRA (National Industrial Recovery Act).  Obama has also been at odds with the Supreme Court.  Both presidents felt restrained by the Court, as well they should.  The Court is there to protect the people from an overreaching government.  Both presidents sought powers beyond those stipulated by our founders, albeit for different reasons.

When two presidents think so much alike and manage economic recoveries with results that are so much alike, it’s not coincidence.  It’s because their policies don’t work.  And what are those different reasons?  Roosevelt’s goal was to restore the economy and benefit lower income workers.  He just didn’t know how to do it.  Obama’s goal is to put a choker on capitalism and completely transform America.  He knows what he is doing.  It’s up to the voters not to let him do it.

 

100 FUND RAISERS BUT NOT A SINGLE MEETING WITH HIS JOBS COUNCIL

In the last six months the President has traveled to over 100 fund raisers but not once has he convened an official meeting of his jobs council.  That’s Barack Obama.

Two possibilities for reasons immediately come to mind.  First, raising money is such an all out priority that spending an hour or two improving the jobs picture is a sacrifice he doesn’t want to make; or second, he knows what the Council will advise him to do and he knows he won’t do it.  Both are likely to be correct.

Obama’s animosity toward the business world is very clear.  There is the statement in Dreams from My Father where he said his one and only job in a business firm was “like working behind enemy lines”.  Then there is his promise to put the coal industry out of business and his assurances to ACORN organizers and labor unions that in healthcare ”single payer is the goal”  That of course means there would be no more insurance companies.  And as we watch Air Force One jet from fund raiser to fund raiser at our expense, let us not forget how he railed against the captains of industry who came to his beck and call on smaller jets paid for, not by us but by their own stockholders.  Obama is not about follow the recommendations of advisors who tell him the way to create jobs is to create a favorable climate for private industry.

His record of job recovery coming out of a recession is the worst since the days of FDR in the 1930s.  The only accomplishments he has going for him with independent voters are 1) the Navy Seals got Bin Laden on his watch and 2) the passage of Obamacare.  The first had little to do with Obama’s planning and the second is unpopular and it’s a job killer.  He can’t run on his record so he has chosen a combination of the Alinsky model of demolishing your opponent and the ACORN tactic of gaming the election process as his strategy for winning re-election.  These are unsavory tactics but, unfortunately, the community organizer in Barack Obama excels at both.

FORTY-ONE STRAIGHT MONTHS OVER EIGHT PERCENT

Unemployment has been 8% or higher for the last 41 months and Barack Obama said in Ohio on Friday that the country is headed in the right direction.  If that’s the case, I have to ask just where it is he thinks we should go?

The U6 number which includes would-be workers who have given up and dropped off the stats is pushing very close to 15%.  The country hasn’t experienced such economic malaise lasting this long since the Great Depression, literally.

Increasing taxes on the rich won’t create jobs.  Adding an immeasurable cost of doing business with a health care plan when we still don’t know what’s in it won’t create jobs.  Blocking energy programs like the Keystone Pipeline and placing moratoriums on drilling in the Gulf doesn’t create jobs.  Subsidizing green energy programs like Solyndra hasn’t created any net jobs.  The Joint Economic Committee led by Congressman Kevin Brady issued a report saying that the Obama recovery now ranks dead last in modern times.  Spending stimulus, housing bailouts, auto bailouts, financial bailouts, cash for clunkers, extending unemployment benefits and $5 trillion in deficit spending left the Obama recovery dead last in modern times.

If you are a President, how do you create jobs?  You don’t.  Business creates jobs; you clear the road stand aside and cheer.  You don’t stand in the middle, over-regulate and jeer — and then blame the lack of progress on your predecessor.

WALKER WINS WISCONSIN, WHAT DOES IT MEAN

People vote their pocketbook and their deepest convictions.  Economics, abortion, gun rights and distaste for the opposing party are the four factors, broadly defined, that figure prominently in any election.  The Walker recall attempt only involved two, economics and opponent distaste.  Economics was the determining factor.

When campaigning for office in 2009, Scott Walker pledged to bring down the cost of state government and to deliver on the economy.  He did both.  Imagine that, a politician who keeps his promises.  It didn’t go unnoticed.  Wisconsin’s unionized government workers were among the very highest paid in any state and so far above their private sector equivalents that a sense of unfairness prevailed among the voters.  Why should I subsidize a government worker with my tax dollars when he or she already makes more than I do for the same work?

Unemployment in Wisconsin is 6.7%, far below the 8.2% national average.  On a per capita basis that translates to nearly 20% fewer people out of work in the state.

A lot was at stake here and everyone knew it.  An all out effort to defeat Walker was made by the unions and the Democratic Party.  The campaign was vicious at times and turned downright dirty when desperate Democrats introduced an unsubstantiated rumor at the last minute that Walker had fathered a child out of wedlock.  Feelings of opponent distaste ran high.  Nevertheless, some 11% of self declared Democrats voted for the Republican.  Fair is fair.

Wisconsin is a blue state.  Some pundits now say it will be in play in November.  I don’t know.  But one thing is sure; the wind is blowing our way.

HOW UNEMPLOYMENT IS COUNTED

The answer to the question “What is the U.S. unemployment rate?” is another question – which unemployment rate?  The U.S. Labor Department reports unemployment several ways.

U-3 Unemployment is the statistic most often quoted by the press.  But U-3 only counts as unemployed those people who have applied for a job in the last 4 weeks and have registered their application(s) with a government unemployment office.  So what the popular U-3 statistic counts is not people who are unemployed; it counts people who are currently looking for work.  There is big a difference.  In fact, it doesn’t even reflect all the people who have looked for work in the last 4 weeks, only those who reported their search to the government.  Job seekers who are no longer eligible for unemployment compensation and who apply directly to an employer instead of through an employment office are not unemployed as far as the U-3 number is concerned.  U-3 is currently 8.2%

U-6 Unemployment counts people who have applied in the last six months and also includes people only working part time on involuntary workfare in order to qualify for government benefits.  Obviously U-6 catches more of the truly unemployed.  However even U-6 doesn’t include the long term unemployed or anyone not actively seeking work.  U-6 is currently in the range of 15%.

In good economic periods the spread between U-3 and U-6 is much lower and therefore less important.  U-6 is by far the more realistic number reflecting true unemployment.  Reporting U-3 is more favorable to Barack Obama but this is not another case of MSM bias.  U-2 has always been the standard reference because it is less volatile.

INCOME DISPARITY

A picture of income disparity

Vertical scale = per capita income Horizontal scale = population segments

This chart was published in Mother Jones to make some point or another about the shame of income disparity in America.  The chart is taken from a book titled “The Haves and the Have-Nots,” by the World Bank economist Branko Milanovic. I don’t know why Milanovic selected these countries and can only surmise it was because they were the three fastest growing major economies in the world over some recent time frame.

What the chart says to me is (1) the poorest group in the U.S. is infinitely better off than the poorest group in the other nations, (2) income disparity is the least in the U. S.  This is apparent all along the scale from the most impoverished to the wealthiest as shown by the relative flatness of the U.S. curve, (3) whatever faults the American economic system may have, they are insignificant when compared to the other systems because every group is better off in America, particularly the lower income ones.  Mother Jones picked a rose and called it a thorn.

China is a socialist country; India is not; Brazil is somewhere in between.  Nevertheless, the chart is a good illustration of the superiority of an economic system that incentivizes individual entrepreneurialism and protects the rewards for success with a healthy respect for property rights.  It’s a fact of life that equal treatment is bound to produce unequal results because people are not equal.  The capitalistic system gets the best from the best; socialism does not.  And if China can be taken as an example, socialism doesn’t reduce income disparity either.