A Real-Time Account of Free Markets Eradicating Poverty

May 6, 2013 by

A few months ago we had a post, along with a video animation, on how free markets wipe out poverty and boost the overall standard of living. Lest one is inclined to think that it’s “just a theory”, read this recent account (“China: A Billion Strong but Short on Workers”, WSJ, 5/1/13) that puts that notion to rest. It’s yet more proof that free markets aren’t an ideology, but rather the natural order of things when government gets out of the way.

Following are excerpts from the above-mentioned account:

“Ms. Cui is contributing to China’s tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually.”

“The average monthly income for migrant workers rose 12.1% from a year earlier.”

“Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world’s second-largest economy.”

“When the bra maker set up a factory in southeastern China’s Jiangxi province more than a decade ago, hundreds of people lined up outside looking for work. Today, the manufacturer for Wonderbra and Elle Macpherson Intimates struggles to find enough workers to operate its production lines at full capacity.”

“For years Top Form competed for labor with factories moving inland to take advantage of lower costs.”

 

Filed Under: Corporations, Economic Growth, Living Standards, Poverty

How Free Markets Help the Poor

December 2, 2012 by

(To watch a video animation of the following, click here.)

Do you know what’s by far the most powerful force in lifting the poor out of poverty and raising the incomes of everyone else? Free markets. The government getting out of the way and letting businesses flourish results in jobs and rising wages.

No, it’s not labor unions that make wages rise. They only help a relatively small segment of workers at the expense of everyone else. If anything, they impede business creation. And that’s a tragedy, because the more businesses there are, the more competition there is for labor.

In order to attract the best workers and prevent them from working somewhere else, business owners are forced to raise wages and benefits. The result is an overall rise in the general wage rate and standard of living.

Let me illustrate. Start with a poor country. There are lots of people either unemployed or working in the agricultural or low-wage informal sector. But then the government opens the area to foreign or domestic investment. A shoe factory moves in, and people get jobs. Because it’s low-skilled labor, the jobs aren’t high-paying but they pay a lot better than what the people were earning before.

More factories move in and more people get jobs. And then, another factory moves in and finds that it’s having a hard time hiring good labor. So how does it attract workers? You guessed it: it’s forced to raise wages.

But it doesn’t stop there. In order to prevent their workers from going to the other factory and to hire new workers, all of the other businesses have to raise their wages as well. The average income and standard of living of the population go up.

In addition to enjoying higher wages, the people are learning new skills. There are more semi-skilled and even high-skilled people around. That attracts the attention of industries that require higher-skilled labor, like assembly plants and parts manufacturers. They pay even higher wages in order to attract top talent. Pretty soon more of them move in, and the low-skilled manufactures can’t compete so they move out, to other areas of the country where low-skilled and low-wage labor is still abundant. Then the virtuous cycle begins there, too.

This is happening in places like China and India. Just a few of decades ago southern China was poverty-stricken. Now it’s becoming a bustling and prosperous high-tech metropolis, thanks to this process of businesses competing for labor, and ultimately thanks to the government’s decision to let the free market flourish.

A similar thing happened in America as well. To once again get low unemployment and rising wages for the poor, the government has got to get out of the way.

*** Update – May 6, 2013 ***

The above is by no means just a theory. It’s what’s happening in practice. All of the above is reflected in this news article.

Following are excerpts:

“Ms. Cui is contributing to China’s tightest labor market in years, putting upward pressure on wages that already are rising in the double digits annually.”

“The average monthly income for migrant workers rose 12.1% from a year earlier.”

“Creating jobs in hair salons and insurance companies, instead of in steel mills and soccer-ball factories, helps fuel growth in the world’s second-largest economy.”

“When the bra maker set up a factory in southeastern China’s Jiangxi province more than a decade ago, hundreds of people lined up outside looking for work. Today, the manufacturer for Wonderbra and Elle Macpherson Intimates struggles to find enough workers to operate its production lines at full capacity.”

“For years Top Form competed for labor with factories moving inland to take advantage of lower costs.”

 

Filed Under: Economic Growth, Labor Unions, Poverty Tagged With: , , ,

Romney/Ryan the “True Progressives”?

October 17, 2012 by

The Economist magazine has an article on how to reduce inequality while maintaining economic growth. They call it “True Progressivism”. Among their prescriptions are:

* Eliminating tax subsidies for the wealthy like the mortgage interest deduction
* Means testing of entitlements, which Republicans always propose but Democrats always shoot down
* Cracking down on teachers unions
* Ending government bailouts of big companies

Wow – who would have thought Romney/Ryan are the “True Progressives”?

Not unexpectedly, in the article The Economist doesn’t t admit that the above prescriptions are much closer to the Romney agenda than the Obama agenda – in fact they’re anathema to the Obama agenda.

What’s wrong Economist? Can’t you bring yourself to say that in order for these things to have a shot at happening, Romney/Ryan are the way to go?

Waiting with baited breath to find out who The Economist endorses this time.
Update: Wouldn’t ya have guessed it: they endorsed Obama.

Filed Under: Economic Growth, Inequality/Top 1% Leave a Comment

A Silly Graph

August 29, 2012 by

The graph in question, highlighted by Washington Post blogger Ezra Klein, purports to depict current and future public debt. (“Tax Cuts, Wars Account for Nearly Half of Public Debt by 2019″) But the graph is silly. In fact, I would have thought that Klein grabbed it from The Onion.

The graph tries to show that most of the debt comes from tax cuts and the military. Yet it doesn’t mention anything about entitlement spending, which comprises about two-thirds of government spending – and which is by far the biggest factor driving the debt. The military, by contrast, comprises one-fifth of government spending. (Click here for the source, table 6.1.) Again, the graph makes no mention of entitlement programs – a tremendous omission, perhaps done deliberately.

Tax cuts? That’s like blaming your massive credit card debt on the raise you didn’t get. Or put it this way. If Ezra Klein were a spendaholic and came and told me his credit card debt is massive because his raises weren’t high enough, I’d take a few steps back, thinking he must be batty. Now don’t get me wrong – I don’t think he’s batty because he’s thinks the same thing vis-a-vis government debt. I just think he needs to re-take or take (if he’s never taken it before) Economics 101.

One other thing. After the Bush tax cuts, tax revenues…went up! Way up – from $1.8 trillion in 2003 to $2.6 trillion in 2007. So even with the tax cuts, we got a mega-raise.

Filed Under: National Debt/Deficit Leave a Comment

Journalistic Malpractice at PBS Frontline

April 24, 2012 by

If there were a clearer case of journalistic malpractice, I can’t think of one at the moment. This isn’t just media bias. It’s out-and-out journalistic malpractice bordering on deceit.

This evening the PBS series Frontline broadcast a program called “Money, Power and Wall Street”. It’s about the origins and consequences of the financial crisis that began in 2008. Just from the title, you know it’s dripping with bias.

Still, in order to try to maintain a facade of impartiality, and given that the program’s funding comes from American taxpayers of all political persuasions – not just from leftist taxpayers – you would have thought that Frontline would have at least briefly acknowledged the very popular and very convincing argument that the U.S. government had a significant hand in causing the financial meltdown.

During the program when the topic of subprime mortgages was introduced, which everyone agrees was at the crux of the financial meltdown, the narrator said that the subprime market went from being a very small niche market to a huge one. That begged the obvious question that surely was on the mind of any discerning viewer: how did the subprime market get so big?

This is where the journalistic malpractice really kicked in. Frontline totally ignored why the subprime market got so big. That’s because if they were to explain why it got so big, they would have had to discuss the Community Reinvestment Act (CRA) and the fact that banks, Freddie Mac and Fannie Mae, and other lending institutions were required by law to make loans to subprime borrowers. (Click here or here for a smidgen of the voluminous literature on the subject.)

Journalists and producers with a modicum of journalistic integrity, even if they leaned left, would have at least briefly mentioned that well-established line of thinking.

Based on what I watched, Frontline didn’t even mention the name Barney Frank in the whole discussion, let alone Freddie Mac or Fannie Mae – all players who were instrumental in promoting the continuation of loans to subprime borrowers.

One speculates as to why they would ignore it. It’s either deceit or ignorance or both. Deceit if the producers of the show were familiar with that line of thinking, and privately acknowledged that it even made some sense, but chose to not present that information because it wasn’t consistent with the agenda they’re trying to promote. Ignorance if the producers of the show have been so conditioned by leftist viewpoints over their lifetimes that they’re mentally incapable of understanding how any arm of the government, except perhaps the military and CIA, can do any wrong, leading them to dismiss the whole CRA angle outright – and ignore the question of how the subprime market got so large because they have no idea themselves how that happened.

Journalistic malpractice, while unfortunate, is a fact of life in a democracy. It’s inevitably going to happen in societies where there’s freedom of the press. People can choose not to patronize or fund the entity committing the malpractice. But what’s galling is when journalistic malpractice is carried out by entities that people are forced to fund through their taxpayer dollars. That goes against everything a free society should stand for. Taxpayer-funded entities should be bound to the highest of standards. Instead, in this case, PBS has been captured by leftists trying to foist an agenda. As the people forced to finance such entities come from both sides of the political spectrum, such taxpayer-funded entities should lose their subsidies, or barring that, be required to hire reporters, editors and producers on both sides of the political spectrum.

Journalists have a professional obligation to present all significant angles of a story. That’s woefully lacking in Frontline. It’s far from a news program. And it doesn’t bill itself as an opinion program. So propaganda program is a more apt description. “Money, Power and Wall Street” easily could have passed as a Michael Moore production.

The principal Frontline interviewer, by the name of Martin Smith, was fond of using the term “crap” while interviewing his subjects, in characterizing the subprime securities that caused the whole mess.

Mr. Smith, your manner of presentation of the issue at hand falls into that category, too.

* * *

BTW, here are some names behind the content of the above-referenced program:

  • Producer – Callie T. Wiser
  • Web Design & Development – Jordyn Bonds
  • Senior Digital Producer – Sarah Moughty
  • Director of Development – Sam Bailey
  • Director of Digital Media/Senior Editor – Andrew Golis
  • Managing Editor – Philip Bennett

Filed Under: Financial Crisis, Media Bias, NPR/PBS Tagged With: , , , , , , , , , , 2 Comments

Where’s Your Job? You Killed It, Dude

December 18, 2011 by

Apart from “Dude, where’s my welfare money,” a slogan or mantra for the age of Obama is, “Dude, where’s my job?”

It sums up both the sorry state of the economy, and the gimme-gimme-gimme entitlement mentality that’s fueling the sorry state of things.

A counter-slogan for the age of Obama should be, “Dude, you killed your job.”

Read on here.

 

 

 

 

Filed Under: Economy, Entitlement Crowd-Out, Welfare State Tagged With: , , , , , , Leave a Comment

A Proposal for Mr. Buffett

October 27, 2011 by

I have a proposal for Warren Buffett and his fellow billionaires like Bill Gates: Pool your tens of billions, and give that money to the U.S. government to reduce the federal deficit. Taken together, you may breach the $100 billion mark – a significant chunk of change, even when talking about the deficit.

Do it IMF-style, where there are conditions. I.e., if the government takes the money, it has to use it to pay down the debt rather than spend it. Like the IMF, disburse it in tranches, so that if the government isn’t living up to its commitment, then you can withhold the remaining funds.

Of course, you always could give your tens of billions without conditions, given that you seem to have a lot of faith in how the federal government spends its money, based on your campaign to raise taxes. But I would think that even you would realize that that’s like putting your money down a black hole (which should make you think twice about your eagerness to raise taxes).

Isn’t it obvious even to left-of-center people like yourself that the more money government takes in, the more it spends as opposed to pay down debt? That’s why I would think you would be reluctant to give your riches to the government without conditions. (And that reintroduces the irony of why you’re so eager to surrender your money to it through taxation.)

It’s telling that you are admirably giving so much of your wealth to charity, instead of to the federal government. You must think that charities are better stewards of money than the federal government. Why are you so willing to surrender your – and other folks’ – wealth to the government through taxation with no strings attached, but you don’t seem to be willing to give to it voluntarily? It must mean you don’t totally trust the government with your money – you have much more trust in private foundations and/or the private business sector. So why the campaign for higher taxes? It doesn’t make sense. Or if it does, please explain.

You should at least be demanding better accountability from the government in exchange for pledging your support for higher taxes. You have some great leverage – why don’t you use it? Or, are you satisfied with how the government is currently spending your money? If so, then why are you making your donations to private charitable foundations rather than to the government? It’s quite contradictory.

If I were a billionaire (keep dreaming, bub), I would try to set up a deal where I’d pledge my money to the federal government in exchange for it using that money to finance Social Security reform where the program is transformed from a spending program into a savings program via personal savings accounts (PSAs). But I understand that the likes of you and Mr. Gates, being left of center, probably aren’t too thrilled with government-sponsored PSAs. (Plus you’d get beaten up by your friends on the left, who’d accuse you of being handmaidens of Wall Street PSA money managers.)

But one thing you are in favor of is reducing the national debt, correct? So let me repeat: Pledge your billions to the federal government in exchange for it committing to using that money as seed money for paying down the debt, and committing to using its tax revenue (in addition to grants from you) to pay down the debt.

I doubt right-of-center billionaires would go for this idea because they don’t have as much trust in government being a good steward of money. But you seem to have more trust based on your willingness to raise taxes. So see what your left-of-center billionaire friends think of the idea. Who knows – it may even be the beginnings of the U.S. government getting its fiscal house in order.

If you’d be worried that imposing conditions would be perceived by the general public (especially the Left) as plutocratic, i.e. billionaires telling the federal government how to spend its money, then pledge the money with no conditions. Of course, in that case, two-thirds of the money would go toward redistribution, and most of the money redistributed wouldn’t be going to the poor.  (I.e., two-thirds of federal government spending now goes toward redistribution rather than toward traditional government services, and most of the recipients are middle class or rich.)

In that sense I could see why you’d rather give your money to charities rather than to the government.

And that should make you reconsider your desire to raise taxes on the wealthy.

Filed Under: National Debt/Deficit Tagged With: , , , , , , , , ,

Predictions: Did it Happen?

October 7, 2011 by

Jump back three years ago, October 8, 2008, on the eve of Barack Obama’s election to president. An article in the American Spectator by Peter Ferrara reviewed a newly released book by Steve Moore, Art Laffer and Peter Tanous, titled The End of Prosperity.

Writes Ferrara,

The book explains in full detail the economic disaster that will befall America if it takes a sharp left turn to neo-socialism under the leadership of the far left President Barack Obama, the ultraleft Speaker of the House Nancy Pelosi, Senate Majority Leader Harry Reid with 60 liberal Democrat Senators, and their pal the ultraliberal Howard Dean heading the Democrat party.

He continues,

One of the insights of the book is that a major factor already tanking the stock market and leading foreign capital to flee America is the threat of the economic policies promised by Obama. Obama proposes increases in every major federal tax, on savers, investors, employers, small business, big business, and anyone who would start a business. Obama also promises to add additional federal spending of almost $1.5 trillion over the next four years ….That would be on top of all the spending increases already scheduled for our exploding entitlements and other programs. Obama also promises a massive increase in regulatory controls….These retrograde economic would ultimately produce a deep, long term decline in America’s standard of living, particularly for the middle class and working people. America would actually fall behind countries around the world.

Ferrara indicated that what happened under President Carter was a precursor to what was to happen under Obama:

The poverty rate actually started increasing in 1978 during the Carter years, eventually climbing by an astounding 33%, from 11.4% to 15.2%. A fall in real median family income that began in 1978 snowballed to a decline of almost 10% by 1982. Average real family income for the lowest income 20% declined by 14.2%. Indeed, during the Carter years (1977 to 1980), real income declined for every quintile, from the lowest 20% to the highest 20%.

So, three years later, here in October 2011, were the predictions of Ferrara, Moore, Laffer, and Tanous correct?

If you were an Obama supporter, you would have laughed off their predictions as being absurd. But how wrong you would have been. Their predictions were excruciatingly on target. As discussed three posts below, the poverty rate is the highest it’s been since 1993. And average real family income has declined to levels not seen in 15 years.

Seems, though, that the authors were a bit off on their prediction that Obama would add additional federal spending of almost $1.5 trillion over the next four years. It turns out that Obama has added at least $3 trillion in additional federal spending in three years. (The amount by which our national debt has shot up during that time.)

Ferrara’s article was presciently titled: Prepare for the Worst.

The Obama-Pelosi-Reid episode is proof positive if you let big-government policies flourish, the consequences are tragic. We need new leadership. Fast.

Filed Under: Economic Growth, Living Standards, Predictions: Did It Happen? Tagged With: , , , , , , , , Leave a Comment

Obama Nation: Lower Living Standards, Rising Poverty

September 22, 2011 by

The Dow ended down almost 400 points today. But that’s not the real measure of prosperity or how the U.S. economy is doing. The real measure is per-capita income – i.e. income per person or the quantity and quality of goods and services per person. That’s what separates us from third-world countries. Our per-capita income of course is a lot higher, and over the decades it has increased faster. It’s also what separates us from Europe. Western Europe’s average per-capita income is equivalent to that of our lowest-income state (Mississippi). Europe’s per-capita income used to be equal or higher than ours, 40 years ago. But their welfare state has taken its toll – slower economic growth over the decades since, which really adds up.

But the welfare state is really taking hold here in the U.S., especially under Obama who has raised government’s share of the GDP from about 20 percent to 25 percent, and who has added more to our national debt in two-and-a-half years than George Bush did in eight years (which was bad enough as it was).

And it shows: our per-capita income here in 2011 has fallen to 1996 levels. That’s scary – usually per-capita income rises over time. It may fall during recessions, but then during the rapid economic growth that usually follows recessions, per-capita income spikes up.

In this Obama economy, however, post-recession growth is anemic. It was less than 1 percent at last count, which is slower than population growth, meaning there are fewer and fewer goods and services per person. Normally after deep recessions, growth is in the neighborhood of 5 to 8 percent. But when it comes to the economy, Obama doesn’t know what he’s doing (assuming he genuinely wants to help the economy, in contrast to many hard leftists who want to see growth come to a halt).

What more evidence do we need to show that big government solutions don’t work? They only make our standard of living decline. The main driver of rising per-capita income isn’t government, but the people outside of government who are producing the goods and services. It’s government’s job to make sure there are good ground rules. But too often, they go overboard on the rules, and coerce too much out of the private sector.

Another frightening bit of news: the percentage of Americans living below the poverty level is the highest since 1993.

What more evidence to we need to show that poverty is alleviated by private-sector-driven economic growth, and not clumsy government programs? It’s the latter that exacerbate poverty.

If government programs were the main alleviators of poverty, then practically all third world countries would now be first world, given that most of them have socialist governments. But they’re third world precisely because of their bloated governments. It takes months or years to just get permission to open a business in many of those countries.

So poverty in America reaches an all-time high, even though Barack Obama was expected by the economically naive to bring it to an all-time low.

Hopefully the Obama experience will squeeze that naïveté out of some of them.

Yes, the main cause of poverty is a shortage of goods and services in society. That’s what separates us from a third world country like Haiti. Yet now, goods and services per person are decreasing. Of course we’ll never become like Haiti (except perhaps in certain pockets like Democrat-controlled inner cities), but our standard of living will be a lot lower than what it could have been, had we had fewer economically illiterate people running our country.

 

 

Filed Under: Economic Growth, Living Standards, Poverty Tagged With: , , , , , Leave a Comment

Bill Clinton: Don’t Raise Taxes Now

September 21, 2011 by

Even Bill Clinton disagrees with Obama’s desire to raise taxes now. In a Face the Nation interview, he indicated that we shouldn’t raise taxes when the economy is so sluggish. He said to wait “a year or two” for economic growth to return, and then tackle the deficit by raising taxes.

The best plan of action is to not raise taxes at all across the board, or if you’re going to raise taxes, do so by closing loopholes like the mortgage interest deduction (which drives up interest rates and penalizes renters). And close loopholes in exchange for an across the board rate cut, which will help spur economic growth. Economic growth is the biggest generator of tax revenue.

Lest there be any doubt that tacking the deficit is best achieve through spending cuts and not through tax increases, two Harvard economists analyzed 107 separate attempts at fiscal reform in OECD (developed) countries from 1970 to 2007. The goals in each case was to lower debt-to-GDP ratios.

Their study confirmed the obvious: Instances that failed mainly relied on large tax increases and only modest spending decreases, if any.  Instances that succeeded mainly relied on large spending decreases and only modest tax increases, if any.

They also found that instances that relied on spending cuts rather than tax increases are less likely to create recessions.

Obama is setting us up for failure yet again.

The country needs a new CEO. Fast.

Filed Under: National Debt/Deficit, Taxation Tagged With: , , , , , , , 1 Comment

Explaining Econ 101 to a Big Labor Fan

September 6, 2011 by

In a mass-recipient e-mail that I received today from a labor union advocate, the writer lamented that employers don’t pay employers more. I e-mailed him back shedding light on why employers can’t pay their employees more than they or the writer would like.

An employer hired an employee to make widgets. The employer paid her $11 per hour. But he found that the amount he was paying her was more than the revenue he was generating from the widgets. So when she quit, he decided not to hire a replacement, because paying someone to do it would be the same as giving away money. Why not instead give away money to charity? Meantime, the employer just resorted to making the widgets himself.

Why not just charge higher prices to customers in order to cover the salary of an employee and hopefully have a little left over for the employer, one may ask. Well the employer already charges $13 for a widget, and customers already think that’s too high, especially when they want a lot of them. Were he to charge a higher price the customers likely would disappear and his revenues would be even less. (This is based on a real-life experience. Names have been changed to protect the innocent.)

So that’s a microcosm of why employers can’t pay more money to employees than they or labor union advocates would like.

The writer of the e-mail also lamented that welfare benefits aren’t higher. I replied that that would be tough now because the federal government is borrowing over 40 cents of every dollar that it spends, up from a historical average of about 15 cents, pre-Obama. That’s just not sustainable. Raising taxes wouldn’t help much because even confiscating all of the top 1 percent’s earnings would net about a trillion dollars, which wouldn’t even cover a year’s deficit. And a 100 percent tax rate wouldn’t be workable in any event because no one would work if they couldn’t keep any of their earnings. In fact, economists are saying that we’re headed for a 70 percent marginal tax rate (i.e. marginal tax rate is the rate on the additional income you earn, e.g. if you earn $50,000 per year and decide to work a little extra harder to make an extra $1,000, you’d have to pay $700 of that in taxes.) Few people would be willing to work that additional amount, and tax revenues would be way lower than projected, and you’d still be $14 trillion or more in debt.

People are only willing to pay so much in taxes before they either 1) find loopholes to avoid those taxes or 2) refuse to work because the tax rate makes it not worth it to work. So jacking up tax rates won’t result in much additional revenue, if any. And certainly not enough to even make a dent in the deficit and debt. For that, you need to cut spending. A good place to start is to reduce or eliminate the welfare benefits (i.e. government payments to individuals, including entitlements) that go to the upper middle class and rich. Often Republicans try to reform that (“means-testing”), but it always gets shot down by Democrats.

For example, instead of giving rich people Social Security and Medicare money, how about phase out that system so that they finance their retirement and medical benefits out of their own savings – where they’d be mandated to set up a Social Security and/or Medicare savings account during their working lives. (Oh but we can’t have that! That would be “privatization!” – the anti-reformers would howl.)

It’s a tragedy, and a gross injustice, that the Social Security and Medicare contributions of low-income workers are being transferred to middle-class, upper-middle-class, and rich retirees. Instead, the latter should fund their own retirement through their own savings. They tried fixing that a few years ago, but too many people howled “privatization!” so it never got anywhere.

 

Filed Under: Economy, Taxation Tagged With: , , , , , Leave a Comment

NPR’s Welna: Spend with Abandon … Until We’re Like Greece?

September 3, 2011 by

At least two things stuck out at me while listening to a portion of the Diane Rehm radio show yesterday as I drove home from a football game: the lack of economic literacy of a lot of people in America, the fact that some of those same people are reporters for taxpayer-funded National Public Radio.

(And, it’s a safe assumption that these people are good proxies for discerning the thought processes for many if not most people in the Obama administration – which explains our 9 percent unemployment and pathetic economic growth – only 1 percent currently, which is lower than our population growth, which means our per capita standard of living is declining, at least for now. Yesterday morning it was reported that no net new jobs were created for the latest quarter.)

One guest on the show in particular stands out. He’s a voice commonly heard on NPR, named David Welna. He doesn’t think that we have a deficit problem because, based on what I discern from his comments, we’re not yet facing a debt crisis like Greece. Welna seems to think that you can keep borrowing money with abandon. It’s only when the day comes when you’re so manifestly profligate that no one wants to lend to you anymore (or only lend to you at high interest rates), like what Greece is going through now, that you should think about reining in your spending.

David Welna: there (is) no deficit crisis because borrowing (is) very easy. Interest rates are extremely low. I’ve been in countries where there definitely was a debt crisis, and they couldn’t borrow any money….But that is not the case in the United States right now. …We haven’t had a recovery that’s adequate enough and that requires further government stimulus.

Diane Rehm: So you’re saying that Republicans succeeded in making the case for an artificial debt crisis?

Welna: They really set the narrative that we are broke when, in fact, right now, this is the best time the government has actually had to borrow money …

Actually the goal is to avoid a situation like what Greece is going through now, for obvious reasons (obvious to everyone except for people like Welna). We’re headed that way with current levels of spending, even without the additional trillions of dollars in additional money that Welna wants to borrow.

The federal government used to regularly borrow about 15 percent of what it spends. Now under Obama, it’s regularly borrowing about 40 percent of what it spends. Three trillion in additional debt in Obama’s first two years as president (compared with three trillion in eight years under Bush II, which was bad enough as it was). Welna, and probably Rehm, think all this is an “artificial” crisis – all a sham, and that there’s actually nothing to worry about because we’re not like Greece yet. If they had their way, we’d be borrowing 50 or 60 percent of what we spend.

While listening to the radio show, I was thinking that what if they were talking about, say, some complicated surgical procedure, even though they had no training in medicine whatsoever. They’d be laughing stocks. Well it’s the same thing – only it’s the American economy they were talking about with no training in economics whatsoever. Or, if they ever did have any training, they deserved an F.

 

Filed Under: Economic Growth, Media Bias, NPR/PBS Tagged With: , , , Leave a Comment

NPR Should At Least Pretend To Be Impartial

July 27, 2011 by

You know when you and another person or persons generally agree on things and you want to test your arguments by playing devil’s advocate – i.e. pose a question that you think your opponents would ask? Stating you’re asking a devil’s advocate question almost always implies that you and the other person are in agreement.

That’s the question a National Public Radio reporter asked a New Yorker reporter. The latter, one James Surowiecki, argued that the debt ceiling should be scrapped. The NPR reporter, Mary Louise Kelly, said, “Let me play devil’s advocate….many would argue that having a sort of ceiling in place fosters accountability.”

Mary Louise, you work for a taxpayer-subsidized radio corporation that is supposed to be for all Americans, not just left-leaning ones who are sympathetic to scrapping the debt ceiling. Your taxpayer subsidies don’t just come from lefties but righties as well. You can at least try to convey the appearance that you’re speaking on behalf of Americans of all political stripes. You should have dropped the “Let me play devil’s advocate.” That implies that you’re on Surowiecki’s side in the matter and that you don’t want him to think that you aren’t.

No, a hard-nosed reporter should in no way be worried about putting the  person he or she is interviewing in a tight spot provided the question is a legitimate one. And asking about the accountability issue is very legitimate.

Meanwhile, Surowiecki at first dodged the question. So Kelly asked it again. The only thing Kelly could muster up was that because Congress has raised the debt ceiling so many times in the past without a fight, it shows that the debt ceiling is a weak way to foster accountability.

Hey James – it appears that that’s changing. Congress is now starting to take the debt ceiling issue seriously as a way to foster accountability. In fact what’s happening now in Congress – a deal to raise the ceiling in exchange for spending controls – is unprecedented as far as I know.

So finally, the debt ceiling is fostering accountability! That kind of destroys Surowiecki’s argument that the debt ceiling is unnecessary because it has never worked in fostering accountability in the past. Well now, it is! And hopefully this will start a good precedent for the future.

One other note. Surowiecki said we’re one of the only developed countries that have a debt ceiling. “And, you know, most other countries, developed countries, seem to do reasonably well in terms of keeping their books in order without one.”

Yeah. Like Greece.

 

Filed Under: Media Bias, National Debt/Deficit, NPR/PBS Tagged With: , , , , Leave a Comment

Putting the brakes on rising living standards

June 28, 2011 by

GDP growth was revised upward for the first quarter of 2011, from 1.8 percent to a whopping 1.9 percent.

When looking at living standards, the GDP growth rate is practically meaningless if you don’t take population growth into account. And considering that the population growth rate of the U.S. is about 1 percent, that means per-capita GDP growth was a measly .9 percent.

This is scary stuff. The single biggest indicator of a country’s standard of living is the per-capita GDP average growth rate over the long term. There have been plenty of times when recessions put GDP growth way below average. But typically during the immediate-post-recession period, GDP growth skyrockets, making up for the negative growth during the recession. For example after the deep recession of the early 1980s, GDP growth shot up to 8 percent.

Yet now, post-recession (nominal) growth has been 2 to 3 percent. That’s way too slow to bring up our average economic growth rate to historical levels.

It can’t be emphasized enough how important long-term GDP growth is. It is what separates first-world countries from third-world countries. The difference between 2 percent and 3 percent GDP growth may not sound like much, but over the long term, it really adds up. Over 40 years, growing 1 percentage point higher means 50 percent higher per-capita income.

A seemingly small difference in GDP growth really manifests itself when comparing per-capita income of the United States vs. western Europe.  Some 30 years ago per-capita income was about the same. But since that time U.S. GDP growth has been slightly higher, as Europe’s massive welfare state has taken its toll. That has resulted in big differences in per-capita income; in 2010 it was $47, 200 in the U.S., whereas in Germany and France it was $36,000 and $34,000 respectively.

Regarding our slow post-recession growth, what’s going on? Obama’s economic policies, no doubt. They’re stifling economic growth, at at time when it should be flourishing. In a word, Obama is making our economy more like that of slow-growth, massive-welfare-state Europe.

The trillion-dollar “stimulus” has been a big stifler. It’s the same sort of policy that Japan tried during the 1990s in futile attempts to jump start its economic growth. But it only put itself deeper and deeper in debt, with the result that now its living standards are stagnant or falling. See this NYT article on what today’s Japan looks like, after spending itself into a hole, like Obama is now doing for the USA.

Such anemic growth post-recession is unprecedented in modern U.S. history as far as I know. And it’s because we have a president whose been successful in implementing a growth-inhibiting agenda, mainly such huge government spending. It just goes to show that government spending doesn’t spur growth. Keynesianism, as they call it, is unfortunately alive and well, but it only results in sickness.

 

Filed Under: Economic Growth, General, Welfare State Tagged With: , , , , Leave a Comment

Can I Start the Job When My Unemployment Benefits Expire?

May 11, 2010 by

 

Yep, Obama’s economy is here. Employers are having difficulty hiring because people would rather stay on unemployment than work.

See this article. It’s stark evidence that the unemployment rate goes down when unemployment benefits run out.

Chris Pompeo, vice president of operations for Landscape America in Warren, said he has had about a dozen offers declined. One applicant, who had eight weeks to go until his state unemployment benefits ran out, asked for a deferred start date. “It’s like, you’ve got to be kidding me,” Pompeo said. “It’s frustrating. It’s honestly something I’ve never seen before.”

There are a lot of things we’ll start seeing that we’ve never seen before, now that Obama is here. And little of it’s good.

Obama and the leftist majorities in Congress keep passing extensions of unemployment benefits. Will they do so indefinitely? We seem to be getting the Euro-sclerosis-like structural unemployment where the unemployment rate is so high because government benefits are so lavish. (Note: the word “generous” is normally used there, but when you’re lavish with other people’s money, that’s not generosity. It’s only generous when you give away your own money.)

As in Europe, people choose to be a ward of the state rather than work.

For more on this, see the Nov. 9, 2009 entry below: “More Unemployment Benefits = More Unemployment”.

Filed Under: Unemployment Tagged With: , , Leave a Comment