Can anyone remember how awful the U.S. healthcare free market system was that it needed to be replaced by the Affordable Care Act, otherwise known as ObamaCare? Can’t remember? That’s because it was ranked one of the best of the world and represented 17.9% of the nation’s economy in 2014. That’s down from the 20% it represented in 2009 when ObamaCare was foisted on Americans.
One of the best ways to follow the ObamaCare story is via Health Care News, a monthly newspaper published by The Heartland Institute. The January issue begins with an article by Sean Parnell, the managing editor, reporting that ObamaCare enrollment is overstated by 400,000.
“The U.S. Department of Health and Human Services (HHS) once again lowered its estimate of the number of Americans enrolled in health plans through government exchanges in 2014. The 6.7 million enrollees who remain are far lower than the eight million touted in May at the end of the last open-enrollment period.”
ObamaCare has been a lie from the moment it was introduced for a vote, all 2,700 pages of it, to the present day. Everything President Obama said about it was a lie. As to its present enrollments, they keep dropping because some 900,000 who did sign up did not make the first premium payment or later stopped paying.
Michael Cannon, Director of Health Policy Studies at the Cato Institute, said the dropout rate is a troubling trend. “It means that potentially hundreds of thousands of Exchange enrollees are realizing they are better off waiting until they get sick to purchase coverage. If enough people come to that conclusion, the exchanges collapse.”
Elsewhere in this month’s edition, there is an article, “States Struggle to Fund Exchanges”, that reports on the difficulties that “states are experiencing difficulty in paying the ongoing costs of the exchanges, especially small states. “’The feds are asking us to do their jobs for them. We get saddled with the operating costs,’ said Edmund Haislmaier, senior research fellow for health care policy studies at The Heritage Foundation.” Some are imposing a two percent tax on the insurance companies which, of course, gets passed along to the consumer. Even so, the exchanges are not generating enough income to be maintained.
Why would anyone want ObamaCare insurance when its rates keep rising dramatically? In Nebraska the rates have nearly doubled and another article notes that “A 2014 study finds large numbers of doctors are declining to participate in health plans offered through exchanges under the Affordable Care Act, raising questions about whether people buying insurance through exchanges will be able to access health care in a timely manner.” One reason physicians gave was that they would have to hire additional staff “just to manage the insurance verification process.”
Dr. Kris Held, a Texas eye surgeon, said ObamaCare “fails to provide affordable health insurance and fails to provide access to actual medical care to more people, but succeeds in compounding existing health care costs and accessibility problems and creating new ones.”
Health Care News reports what few other news outlets have noted. “In Section 227 of the recently enacted ‘Cromnibus’ spending measure, Congress added critical but little-noticed language that prohibits the use of funds appropriated to the Centers for Medicare and Medicaid Services to pay for insurance company bailouts.” William Todd, an Ohio attorney, further noted that “Congress did not appropriate any separate funding for ‘bailouts.’” Todd predicted that “some insurers are likely to raise premiums to avoid losses, or they will simply stop offering policies on the exchanges altogether.”
The picture of ObamaCare failure emerging from these excerpts is a very true one. Its momentum, in fact, is gaining.
In mid-December, the Wall Street Journal opined that “With the Supreme Court due to rule on a major ObamaCare legal challenge by next summer, thoughts in Washington are turning to the practical and political response. If the Court does strike down insurance subsidies, the question for Republicans running Congress is whether they will try to fix the problems Democrats created, or merely allow ObamaCare damage to grow.”
“King v. Burwell will be heard in March with a ruling likely in June. “Of the 5.4 million consumers on federal exchanges, some 87% drew subsidies in 2014, according to a Rand Corporation analysis.”
The Wall Street Journal recommended that “The immediate Republican goal should be to make insurance cheaper so people need less of a subsidy to obtain insurance. This means deregulating the exchanges, plank by plank. Devolve to states their traditional insurance oversight role, and allow them to enter into cross-border compacts to increase choice and competition. Allow insurers to sell any configuration of benefits to anyone, anywhere, and the private market will gradually heal.”
Or, to put it another way, eliminate ObamaCare entirely and return to the healthcare insurance system that had served Americans well until the White House decided that socialism was superior to capitalism.
The problem with the Affordable Care Act is that the cost of the insurance sold under the Act is not affordable and ObamaCare is actually causing hospitals and clinics to close their doors, thus reducing healthcare services for those who need them.
ObamaCare must go. If the Republicans in Congress did nothing more than repeal ObamaCare, the outcome of the 2016 election would be a predictable win no matter who their candidate will be. If not repeal, some separate actions must be taken such as eliminating the tax on medical instruments.
If the Republican Congress fails to take swift and deliberate action on ObamaCare between now and the 2016 elections, they will have defeated themselves.
The size and scope of government in the United States today would have been beyond the imagination of the American founders. For more than a century after the Constitution’s ratification, Americans took limits on government power seriously.
At the start of the 20th century, total government spending was less than 10 percent of GDP, with the majority of spending taking place at the state and local levels. In 1900, federal spending was a mere 2.8 percent of GDP compared to 21.1 percent in 2014. Meanwhile, state and local spending stood at 5 percent of GDP in 1900, but reached 11.5 percent in 2014. Overall government spending now stands at nearly 33 percent of GDP.
That tectonic shift is largely due to the growth of entitlements and the regulatory state. Nearly half of federal spending goes toward Social Security, Medicare, and Medicaid; government imposes huge regulatory costs on the private sector; and the higher taxes needed to finance big government erode economic incentives to work, save, and invest.
How big is too big?
There is a growing body of evidence that bigger government means slower growth of real GDP. Once the level of total government spending as a percentage of GDP reaches a tipping point, estimated to be from 15 percent to 25 percent of GDP, additional expansion crowds out private productive investment and slows economic growth. An overreaching government diminishes economic freedom and limits private exchange opportunities, restricting the range of choices open to individuals.
In a pioneering study of the link between government growth and national wealth, which appeared in the fall 1998 issue of the Cato Journal, economists James Gwartney, Randall Holcombe, and Robert Lawson found that a 10 percentage point increase in government spending as a percentage of GDP decreases real GDP growth by 1 percentage point. Thus, if government spending went from 25 percent of GDP to 35 percent, real GDP growth would slow over the longer term by a full percentage point. They also found that a 10 percentage point increase in the government’s share of GDP lowered private investment by 1.6 percentage points.
Factors of growth
One of their study’s key findings was that secure property rights — which includes a legal system that protects persons and property, enforces contracts, and limits the power of government by a just rule of law — play an important role in promoting economic growth.
The late Bernhard Heitger, an economist at the Kiel Institute for World Economics, more fully developed the positive relationship between property rights and economic growth in his pathbreaking article in the winter 2004 Cato Journal. In that article, Heitger distinguished between proximate and ultimate determinants of economic growth. The former are well known: additions to physical and human capital and technological progress (also known as “total factor productivity”). But Heitger was interested in the question of what drives capital accumulation and innovation. His answer: the structure of property rights and the associated incentives.
Conventional growth theory took private property rights and incentives as givens. Heitger rigorously showed that private property rights and the rule of law are the ultimate sources of economic growth and the wealth of nations. Well-defined private property rights improve efficiency and increase per capita income. In turn, as a nation grows richer, people demand stronger protection of their property rights, advancing institutional change.
Using data from an international cross-section of countries from 1975–95, Heitger found that “a doubling of the property rights index more than doubles per capita income” and that “more secure property rights significantly raise the accumulation of physical and human capital.”
Bauer’s foresight
That outcome would not have surprised Peter Bauer, a pioneer of development economics. He was critical of the simplistic idea that physical capital accumulation is the key determinant of economic growth. As early as 1957, in his classic Economic Analysis and Policy in Underdeveloped Countries, Bauer noted:
It is misleading to think of investment as the only or the principal determinant of development. Other factors and influences, such as institutional and political forces, the qualities and attitudes of the population, and the supply of complementary resources, are often equally important or even more important.
In the same book, Bauer also anticipated modern endogenous growth theory, stating: “It is more meaningful to say that capital is created in the process of development, rather than that development is a function of capital.” What mattered to Bauer, and to other classical liberals, in the process of development was freedom — namely, the freedom to pursue one’s happiness without government interference except to protect life, liberty, and property. (See James A. Dorn, “Economic Development and Freedom: The Legacy of Peter Bauer.”)
In that sense, Bauer argued that “the principal objective and criterion of economic development” is “the extension of the range of choice, that is, an increase in the range of effective alternatives open to people.” Free markets — resting on effective private property rights — and free people are thus the ultimate determinants of economic growth. When government expands beyond its core functions, it undermines the primacy of property, diminishes the principle of freedom, and erodes the wealth of nations.
The United States falls
The loss of economic freedom in the United States is revealed in the annual Economic Freedom of the World Report, published by the Fraser Institute along with the Cato Institute and a number of global think tanks. In 2000, the United States was the second most economically free country in the world, based on data from 1998. Today it is ranked 12th, based on 2012 data.
To move up the freedom ladder, the United States needs to change the climate of ideas and recognize the importance of private property rights and the rule of law. A legal framework that safeguards persons and property means incentivizing individuals to take responsibility for their actions and allowing people to learn from their mistakes. It means cutting back the size and scope of government and not bailing out businesses.
The nature of government is coercion; the nature of the market is consent. The “great constitutional charter” that George Washington referred to in his first inaugural address (April 30, 1789) was intended to bind Congress to the powers enumerated in Article 1, Section 8 of the Constitution. Thomas Jefferson reiterated Washington’s admonition by stating in his first inaugural address (March 4, 1801): “The sum of good government” is “a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned.”
Wise and frugal
The challenge for the 114th Congress is to return to “a wise and frugal government.” A first step would be to understand the detrimental effects of expanding government power on economic liberties — especially on private property rights. If history has taught us anything, it is that the size and scope of government matter, both for freedom and prosperity.
James A. Dorn is vice president for monetary studies, editor of the Cato Journal, senior fellow, and director of Cato’s annual monetary conference.
https://drrichswier.com/wp-content/uploads/20150116_dominosdetail.png313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-01-23 12:06:192015-01-23 12:06:19The Crowding-Out Tipping Point: Increasing economic growth means shrinking government by James A. Dorn
A value-creating business is “social” whether it pursues an explicit social agenda or not.
You can’t throw a rock these days without hitting someone who’s talking about entrepreneurship and why we need to encourage more of it. In the public and private sectors — especially in higher education — innovation, enterprise, and entrepreneurship are buzzwords like never before.
A big beneficiary of this trend is the field of social enterprise. Unlike ordinary businesses, the conventional explanation goes, social enterprises use their commercial activities to promote a broader aim of human well-being rather than simple profit maximization. An example is Jamie Oliver using the restaurant business to provide culinary training to disadvantaged youth or sell food that encourages healthier living, even if doing so hurts the bottom line. Because of these kinds of expansive goals, social enterprises tend to be looked on favorably by business students, governments, and the media.
But while social enterprises certainly do create value, emphasizing “social” goals over profits can be misleading because it implies that traditional profit-seeking entrepreneurship fails to produce wide-ranging benefits for large numbers of people. Thinking of social enterprise as distinct from conventional business helps obscure the vital truth that profit seeking is not only compatible with increases in human welfare, it is probably the most powerful force for producing them ever devised.
In fact, that’s the beauty of free-market enterprise: it’s social whether it pursues an explicit social agenda or not. Critics of government intervention often point out that good intentions don’t equate to good policies. Likewise, the absence of good intentions doesn’t equate to bad policy, and lacking a specific social goal doesn’t make entrepreneurs antisocial. Think of Adam Smith’s observation about the butcher, brewer, and baker, which reveals that commerce is social because it’s mutually beneficial, not because entrepreneurs necessarily have a larger agenda.
When a company like Uber charges a price for its services, it’s being social in the sense that it’s creating value for consumers, not just for itself. And the market is simply an elaborate network of voluntary exchanges in which buyers and sellers constantly make each other better off — which is why they do business to start with.
Free enterprise is therefore social enterprise, but the reverse is true as well: enterprise is social if and to the extent that it’s free. We are truly social when we choose our relationships and refrain from choosing our neighbors’. In a free market, the term “social enterprise” is redundant because it’s in the marketplace that human beings express some of their most fundamental social instincts. Buying and selling teach us about peaceful interaction for mutual gain — and reveal to us just how profoundly our well-being depends on our commitment to benefiting others.
However, if we choose coercion over peaceful cooperation, we abandon hope of a working social order. Any social enterprise worthy of the name is therefore hostile to economic intervention, because every intervention is a step away from social cohesion and toward conflict.
Unsurprisingly, the corporate state is the primary cause of antisocial tendencies in real-world enterprises. Take, for example, intellectual-property law. What could be more antisocial than prohibiting people from sharing ideas and using them to improve the welfare of others? Yet many who promote enterprise take it for granted that “protecting” ideas is an essential part of entrepreneurship.
This attitude hints at a broader institutional problem: the sort of enterprise supported by public rhetoric is rarely the kind of healthy economic activity that would be produced in a free economy. Instead, public support for enterprise tends to mean support for a few privileged ventures at the expense of others. Sadly, it’s common for governments the world over to emphasize the need for more entrepreneurship while simultaneously promoting policies that distort, penalize, or even outlaw it. That’s why it’s more important than ever to be wary of the different meanings attached to words like “social” and “enterprise” and how these useful terms come to be associated with harmful economic ideas.
If economics tells us anything, it’s that we can’t effectively promote enterprise without first abandoning the networks of privilege and regulation that undermine entrepreneurship and divert human talent into destructive practices. A vital step toward that goal is seriously considering the rhetoric we use to describe the market. Language radically alters perceptions of commerce and can make the difference between thinking of enterprise as zero-sum profit seeking or as the key to the countless benefits of peaceful exchange.
Matthew McCaffrey is assistant professor of enterprise at the University of Manchester and editor of Libertarian Papers.
https://drrichswier.com/wp-content/uploads/20150120_houstonfooddetail.png313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2015-01-21 10:12:512015-01-21 10:12:51The Pursuit of Profit Is Pro-Social by Matthew McCaffrey
As 2015 began the Journal Editorial Report on Fox News was devoted to having its reporters, some of the best there are, speculate on what 2015 holds in terms of who might run for president and what the economy might be. The key word here is “speculate” because even experts know that it is unanticipated events that determine the future and the future is often all about unanticipated events.
How different would the world have been if John F. Kennedy had not been assassinated? One can reasonably assume there would not have been the long war in Vietnam because he wanted no part of the conflict there. Few would have predicted that an unknown Governor from Arkansas would emerge to become President as Bill Clinton did. Who would believe we are talking about his wife running for President? That is so bizarre it is mind-boggling.
Most certainly, few would have predicted that an unknown first term Senator from Illinois, Barack Hussein Obama, would push aside Hillary Clinton to become the first black American to be nominated for President and to win in 2008. Despite the takeover of the nation’s healthcare system with a series of boldfaced lies, he still won a second term.
Obama now has two more years in which to try to destroy the U.S. economy; particularly its manufacturing and energy sectors. The extent to which he is putting in place the means to do that still remains largely unreported or under-reported in terms of the threat it represents.
The vehicle for the nation’s destruction is the greatest hoax of the modern era, the claim that global warming must be avoided by reducing “greenhouse gas” emissions.
A President who lied to Americans about the Affordable Care Act, telling them they could keep their insurance plans, their doctors, and not have to pay more is surely not going to tell Americans that the planet is now into its 19th year of a cooling cycle with no warming in sight.
To raise the ante of the planetary threat hoax, he has added “climate change” when one would assume even the simple-minded would know humans have nothing to do with the Earth’s climate, nor the ability to initiate or stop any change.
In 2015, the White House is launching a vast propaganda campaign through the many elements of the federal government to reach into the nation’s schools with the climate lies and through other agencies to spread them.
In particular, Obama has been striving to utilize the Environmental Protection Agency to subvert existing environmental laws and, indeed, the Constitution unless Congress or the courts stop an attack that will greatly weaken the business, industrial and energy sectors. It will fundamentally put our lives at risk when there is not enough electricity to power homes and workplaces in various areas of the nation. At the very least, the cost of electricity will, in the President’s own words, “skyrocket.”
Why doesn’t anyone in Congress or the rest of the population wonder why White House policies are closing coal-fired plants that provided fifty percent of our electricity when Obama took office and now have been reduced to forty percent? Did you know that more than 1,200 new coal-fired plants are planned in other nations with two-thirds of them to be built in India and China? We live in a nation that has such huge reserves of coal we export it.
The EPA attack on these plants is so illegal and unethical that one of the nation’s leading liberal attorneys, Laurence H. Tribe, who began teaching about environmental law 45 years ago, went on record to declare the EPA’s proposed Clean Power Plan is unconstitutional.
The plan is a regulatory proposal to reduce carbon emissions from the nation’s electric power plants. Tribe pointed out that a two-decade old Supreme Court precedent forbids the federal government from taking action to commandeer the powers of state governments by leaving them no choice but to implement it.
“The brute fact,” said Tribe “is that the Obama administration failed to get climate legislation through Congress. Yet the EPA is acting as though it has the legislative authority anyway to re-engineer the nation’s electric generating system and power grid. It does not.”
As 2014 came to a close, the Obama administration either proposed or imposed more than 1,200 new regulations on the American people.
Alex Newman, writing in the New American, calculated they will add “even more to the already crushing $2 trillion per year cost burden of the federal regulatory machine.” Not surprisingly, “most of the new regulatory schemes involve energy and the environment—139 during a mere two-week period in December, to be precise.”
“In all,” Newman reported, “the Obama administration foisted more than 75,000 pages of regulations on the United States in 2014, costing over $200 billion, on the low end, if new proposed rules are taken into account.” Just one, the EPA’s “coal ash” regulation, “is expected to cost as much as $20 billion, estimates suggest.”
Then add to that the EPA’s “ozone rule” that is estimated to cost “as much as $270 billion per year and put millions of American jobs at risk under the guise of further regulating emissions of the natural gas.” Released the day before Thanksgiving, “Experts also pointed out that the EPA’s own 2007 studies showed no adverse health effects from exposure to even high levels of ozone.”
These are just two examples of the regulatory strangulation of the nation’s economy and energy infrastructure.
This is Obama’s agenda for the remaining two years of his second and thankfully last term in office. Whether you know anything about the science of the climate or have ever even read the Constitution, the sheer disaster of ObamaCare should have told you by now that everything Obama has put in motion has had the single objective of destroying the nation’s economy in every possible way.
The voters have put Republicans in charge of both houses of Congress and their primary responsibility will be to reverse and repeal the damage of Obama’s first six years. The courts will play a role, but this is a job for our elected representatives.
https://drrichswier.com/wp-content/uploads/Obama-obamaville.jpg401600Alan Carubahttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngAlan Caruba2015-01-21 09:31:222015-01-21 09:31:47Obama Has Two More Years Left to Destroy the U.S. Economy
PURCELLVILLE, Va., Jan. 20, 2015 /PRNewswire/ — The Convention of States Project announces that 10 states have filed their Article V Applications for an amending convention of the states calling for fiscal restraint, limiting the size, scope and jurisdiction of the federal government and term limits. The states that have filed Article V legislation in at least one house include: Arizona, Massachusetts, Missouri, Montana, New Hampshire,New Jersey, North Dakota, South Carolina, Virginia and Wyoming.
These filings demonstrate the unity of purpose by the American people with the sole purpose of fighting back against the overreach of the federal government. In one week, resolutions were filed in all regions of the United States from New England/Northeast to the Northwest; from the South to the Southwest; from the East to the Midwest.
“Politicians and pundits try to tell us that the nation is divided on party lines, but the reality is that it’s a manufactured spectacle in order to divide the people,” Explained Mark Meckler, co-founder, The Convention of States Project. “As we saw in last week’s Gallup 2014 year-end review, 66% of Americans think that the federal government is the biggest problem in America. We are seeing Americans unite across the country galvanized by the solution that is Article V—the final check on federal power reserved to state legislators.”
The arrogance of the ruling elite in Washington, D.C. have not solved any of America’s challenges, or given the people new ideas. The Convention of States Project has a solution as big as the problem in Article V of the Constitution. A united nation acting through the state legislatures can solve America’s toughest challenges today: fixing healthcare, stopping the out-of-control spending, getting rid of the IRS and curbing over regulation.
About the Convention of States Project
The Convention of States Project is currently organized in all 50 states, including hundreds of thousands of volunteers, supporters and advocates committed to stopping the federal government’s abuse of power. Mark Levin, Sean Hannity, Glenn Beck, Governor Bobby Jindal, David Barton, Col. Allen West, Senator Tom Coburn (OK), Sarah Palin, Mike Huckabee, AMAC and U.S. Term Limits, among others have endorsed the Project. Article V applications have already been passed in Alaska, Florida and Georgia. We stand ready with 32 Prime Sponsors to pass this year and hope to meet the 34 state requirement by the end of 2015. For more information visit www.ConventionofStates.com.
https://drrichswier.com/wp-content/uploads/convention-of-states-project.png314641Dr. Rich Swierhttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngDr. Rich Swier2015-01-21 09:03:412015-01-21 09:03:41BREAKING NEWS: 10 States File Article V Applications to Rein in the Out-of-Control Federal Government
Let me preface this piece by saying that if you have convinced yourself that the government, by taking more of our money through higher taxes, will make us all more prosperous, then you need not read any further. I have come to learn that any attempt to persuade the far-left “tax-and-spend” crowd is a fruitless endeavor despite the obvious disconnect between what these people say, and what they do. This piece is directed at ordinary Americans who, as evidenced by the mid-term election results, have lost patience with the “big-government-is-best” crowd.
Whether it’s John Kerry’s tax avoidance scheme…or the Obamas spending $1,000 on just one meal at a club that charges an unbelievable $500,000 for membership, it’s clear that the leaders of the far-left are living by the credo “do as I say, but never as I do.”
I have asked many of the tax-and-spenders two simple questions and I rarely, if ever, get a reasonable answer.
Question #1: Do you voluntarily pay more in taxes? Hint; they always say no (despite demanding that we pay higher taxes).
Question #2: How does taking more of my money make me better off?
If you decide to tune in to Tuesday’s State of the Union speech or to ask your tax-and-spend friends the above questions, I have provided you below with a glossary of key buzzwords and phrases you will find in the president’s speech and in their answers:
“WE NEED TO” – The tax-and-spend crowd never discuss taxes in terms of “I need to” and “you need to,” largely because they avoid higher tax rates themselves and they know you don’t want to pay higher taxes either. Using the term “we” rather than the terms “I” or “you” is a clever rhetorical-trick they use to make you believe that the “other guy” is going to be hit by the new taxes, not you. Whether it’s John Kerry’s tax avoidance scheme by parking his $7 million luxury yacht in Rhode Island to avoid paying the $500,000 Massachusetts tax bill, the Clintons avoiding hundreds of thousands in estate taxes by using shady loopholes to divide their real-estate holdings into trusts, or the Obamas spending $1,000 on just one meal at a club that charges an unbelievable 500,000for membership, it’s clear that the leaders of the far-left are living by the credo “do as I say, but never as I do.”
“IT’S AN INVESTMENT” – I love this one because it requires tax-and-spend types to completely exit the world of the real for the world of wishful thinking. An “investment” is something individuals CHOOSE to do with their money where they put off immediate satisfaction for future payments based on a reasonable expectation of future gain. When government takes your money in the form of taxes to “invest” they do the following:
Tragically, this scene is repeated everyday inside the D.C. inner circle and rhetorically disguised as public “investments.”
1) They have CHOSEN for you what you chose not to do in the first place. If you wanted to “invest” in Solyndra then the opportunity was there, and the fact that Americans didn’t invest in Solyndra should have been a sign to the government that something was wrong. Instead, they took your money and gave it away at an incredible loss to all of us. Tragically, this scene is repeated everyday inside the D.C. inner circle and rhetorically disguised as public “investments.”
2) They distort the markets they enter by giving away your money to their connected friend’s businesses and, at the same time, assisting their connected friends in crushing their unconnected business competitors. If you have money, then it pays to make government connections to ensure your “investments” never lose.
3) They take your dollar and make it worth less before the “investment” is even made. The government bureaucracy siphons off a large percentage of your money before it arrives back in the economy, a phenomenon economist Arthur Okun called the “leaky bucket.” What “investment” have you ever made that is guaranteed to lose money before it’s even proposed? Only in government-speak is this a sound “investment.”
“FAIR SHARE” – An inconvenient series of facts for the tax-and-spend crowd, which they contort themselves to explain away, is that the government is taking a historic amount of money from you, and the highest income-earners already pay a significant share of the taxes. For the first time in American history the government took over $3 trillion from you in taxes, an astounding $1 trillion more than they took from you in the year 2000. Also, the top 20% of income-earners already pay 70% of the taxes and earn about 52% of income. Think about that, just 2 out of 10 Americans pay 70 cents of every tax dollar the government takes. If this isn’t a “fair-share” then you owe it to us to explain what percentage is, and how you figured that out.
Obamacare is decimating middle class incomes by hiking premiums while, at the same time, increasing the costs of healthcare for business owners and dramatically reducing the take-home-pay for their employees, as employee salaries stagnate to compensate for the increased healthcare costs.
“THEY DON’T NEED ALL THAT MONEY” – This one is ironic because most of the leadership of the modern tax-and-spend crowd seem to “need” a whole lot of money themselves. Whether it’s liberal rock-star Elizabeth Warren, or Bill Clinton, both with a net worth in the tens of millions of dollars, they appear to “need” millions of dollars for themselves, while telling the rest of us that we “need” a whole lot less.
“WE NEED TO BUILD THE MIDDLE CLASS” – This is an often used, yet ironic, statement considering so few of the tax-and-spend crowd are defined as “middle-class” yet, the people they preach to, are. Doubly ironic is that President Obama has rode roughshod over our economy with a hapless class warfare agenda of new and higher taxes on income, investments, capital gains, payroll, healthcare, and more. But, with each new tax, the rich get richer and the middle class are stuck in the mud. Here’s the painful truth about why this is happening:
1) The high corporate tax is driving quality manufacturing jobs out of our country, and to countries with more reasonable tax rates. This is harming the middle-class that needs these jobs to keep pace with the increasing cost of living.
2) The compliance costs for the massive new piles of red tape regulations the Obama administration has thrown at us are costing American businesses billions of dollars. But, here’s the catch, big businesses with connections get richer because they already have massive legal departments to deal with the regulations and their smaller competitors go out of business trying to comply. Again, the middle-class and small-business owners get screwed.
3) Obamacare is decimating middle class incomes by hiking premiums while, at the same time, increasing the costs of healthcare for business owners and dramatically reducing the take-home-pay for their employees, as employee salaries stagnate to compensate for the increased healthcare costs.
In conclusion, the President will deliver his State of the Union speech this Tuesday and, at some point in the speech, will use one, if not all, of the above terms and phrases as he proposes $320 billion in NEW taxes on us. He will disguise these taxes on us in flowery, class warfare rhetoric designed to divide us into artificial groups but, he will never be able to answer the simple questions I posed above without resorting to verbal judo and linguistic gymnastics.
EDITORS NOTE: This column originally appeared in the Conservative Review.The featured is by Charles Dharapak | AP Photo.
https://drrichswier.com/wp-content/uploads/SOTU_AP-e1421777335894.jpg323640Dan Bonginohttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngDan Bongino2015-01-20 13:10:322015-01-20 13:30:48A Handy Glossary for Tonight’s Class Warfare State of the Union Speech
We candelmakers are suffering from the unfair competition of a foreign rival. This foreign manufacturer of light has such an advantage over us that he floods our domestic markets with his product. And he offers it at a fantastically low price. The moment this foreigner appears in our country, all our customers desert us and turn to him. As a result, an entire domestic industry is rendered completely stagnant. And even more, since the lighting industry has countless ramifications with other native industries, they, too, are injured. This foreign manufacturer who competes against us without mercy is none other than the sun itself!
Here is our petition: Please pass a law ordering the closing of all windows, skylights, shutters, curtains, and blinds — that is, all openings, holes, and cracks through which the light of the sun is able to enter houses. This free sunlight is hurting the business of us deserving manufacturers of candles. Since we have always served our country well, gratitude demands that our country ought not to abandon us now to this unequal competition.
We hope that you gentlemen will not regard our petition as mere satire, or refuse it without at least hearing our reasons in support of it.
First, if you make it as difficult as possible for the people to have access to natural light, and thus create an increased demand for artificial light, will not all domestic manufacturers be stimulated thereby?
For example, if more tallow is consumed, naturally there must be more cattle and sheep. As a result, there will also be more meat, wool, and hides. There will even be more manure, which is the basis of agriculture.
Next, if more oil is consumed for lighting, we shall have extensive olive groves and rape fields.
Also, our wastelands will be covered with pines and other resinous trees and plants. As a result of this, there will be numerous swarms of bees to increase the production of honey. In fact, all branches of agriculture will show an increased development.
The same applies to the shipping industry. The increased demand for whale oil will then require thousands of ships for whale fishing. In a short time, this will result in a navy capable of upholding the honor of our country and gratifying the patriotic sentiments of the candlemakers and other persons in related industries.
The manufacturers of lighting fixtures — candlesticks, lamps, candelabra, chandeliers, crystals, bronzes, and so on — will be especially stimulated. The resulting warehouses and display rooms will make our present-day shops look poor indeed.
The resin collectors on the heights along the seacoast, as well as the coal miners in the depths of the earth, will rejoice at their higher wages and increased prosperity. In fact, gentlemen, the condition of every citizen of our country — from the wealthiest owner of coal mines to the poorest seller of matches — will be improved by the success of our petition.
Translated and slightly condensed by Dean Russell from Selected Works of Frederic Bastiat, Volume 1. Paris: Guillaumin, 1863. pp. 58-59.
https://drrichswier.com/wp-content/uploads/20141222_detail.png313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-25 08:50:482014-12-25 08:50:48The Candlemaker’s Petition by Frederic Bastiat
A modest proposal by David J. Hebert and Austin Middleton:
Dear Mr. President:
We applaud your valiant efforts to protect the American economy from the pernicious effects of cheap imports, but we fear you have overlooked one of the worst culprits.
Readily available goods for the consumer at reasonably low prices have been shown time and again to be toxic to domestic producers, who are the backbone of any advanced society. We urge you to expand your scope and protect us from someone your predecessors have neglected to stop: Santa Claus.
Every year on December 24, we struggle to fall asleep, anxious over the arrival of the villain known as Father Christmas. Santa’s crimes are not breaking and entering or stealing foodstuffs. No, Santa is guilty of the much more serious crime of destroying American jobs. Products imported from abroad and consumed domestically make Americans worse off. Every “gift” from Santa represents a reduction in measured American welfare; this is one of the fundamental assertions of national income accounting when calculating gross domestic product. In fact, the North Pole is worse than other countries, for the North Pole does not receive any goods produced for export from the United States. Thus, the US trade deficit with the North Pole is entirely one-sided.
American jobs lost due to Santa
Mr. President, using the methodology your own Council of Economic Advisors employed in evaluating the effect of the American Reinvestment and Recovery Act, where the volume of dollars spent by government equated jobs created or saved, we can estimate the employment impact the North Pole deficit has.
A recent Gallup poll reports that 77 percent of Americans identify as some sort of Christian and are therefore eligible to receive presents from Santa for good behavior. Crime-rate data published in the National Crime Victimization Survey, which gives a sense of the prevalence of naughty behavior, indicates that in 2013, there were 2,905 property crimes reported for every 100,000 people. Unreported crimes, however, are not reflected in these data, and Santa, of course, knows if you’ve been bad or good. As a means of attempting to capture this unreported bad behavior, assume that 90 percent of crimes go unreported, or that actual bad behavior is 10 times as common as the data suggest. This means that there are approximately 68,895,000 people who have been “good” for the year and are thus eligible for Christmas gifts.
Economist Joel Waldfogel’s groundbreaking analysis estimates that the average person receives $462 worth of Christmas gifts each year (in 1992 dollars), meaning that Santa takes away from us a potential $53 billion (2013 dollars) worth of economic activity. This is enough economic activity to employ another 1,193,000 full-time workers at the median household salary of $44,389. With the economy recently experiencing one of the worst downturns since the Great Depression, these jobs have never been more crucial to a nation’s recovery. But Santa’s economic terrorism does not stop there.
Santa as an anti-competitive monster
Recognizing the serious problems with monopolies, the US government passed a trilogy of bills (the Sherman Antitrust Act in 1890 and the Federal Trade Commission Act and the Clayton Antitrust Act in 1914) as a sort of last resort to counter the oppressive behavior of corporations, which tended to grow to an unreasonable size. History is rife with examples, from John D. Rockefeller and Standard Oil to Bill Gates and Microsoft, where the government successfully stepped in and corrected obvious market failures and improved the lives of all citizens.
“How does this apply to jolly ol’ Saint Nick?” you ask. His company has successfully integrated both vertically (Santa’s elves do everything in house, from production to distribution) and horizontally (while Santa is best known for making toys, he has expanded his empire into tablets, personal computers, and even automobiles, as recent car commercials attest). What’s more, he is also likely to be the single biggest violator of intellectual property rights in all of human history. Santa has an unfair advantage compared to other businesses, which must purchase their materials and shipping services from other companies.
This unfair business advantage has forced companies in the United States to kick off the holiday shopping season the day after Thanksgiving with a ritual known as “Black Friday.” In an attempt to capture what little of the market they can before Santa and his band of thieves dump toys, electronics, and other consumer goods on the world economy, some stores advertise sales as great as 50 percent off suggested retail price. This business practice is clearly unsustainable.
Illegal labor practices
Santa has managed to grow his empire through perhaps the most nefarious of means: child and slave labor. According to the critically acclaimed 1994 documentary The Santa Clause, starring Tim Allen, Santa has been using child elf labor since the beginning of his operation. Will Farrell’s 2003 documentary, Elf, confirms that once a worker becomes a part of Santa’s conglomerate, he or she is bound there for life, as we see when Santa personally comes to New York City to collect the rogue elf, Buddy.
Further, the working conditions of Claus’s cadre of elf labor are unknown. We do, however, know from NASA and the National Geospatial Intelligence Agency’s geothermal imaging of the North Pole that no significant thermal activity exists. This means that elves lack basic necessities like lighting and heat; it also means that their work must be done by hand. Forced to endure six months of night, the elves’ working conditions fail every reasonable standard set by the Fair Labor Standards Act of 1938. The United States has historically led the charge of correcting these practices elsewhere, which has had the demonstrable effect of improving people’s lives worldwide. Yet, Mr. President, you and Congress refuse to act in this situation, leaving elves perpetually impoverished.
Bypassing border control
Santa’s ability to penetrate the woefully unmonitored Canadian border highlights the potential threat of other undocumented immigrants’ entry. The US Customs and Border Protection division of the Department of Homeland Security, sharing responsibility with the Federal Aviation Administration (FAA), has proven incapable of securing entry into the country and collecting the duties levied by law on all imported goods. Despite the tracking of Santa’s whereabouts each year by the North American Aerospace Defense Command (NORAD), nothing has been done to protect our borders from this scoundrel. We must agree, though, that attempting to capture Santa may be a moot point, as he has been estimated to travel in excess of 650 miles per second, which no current military technology can keep up with.
Recommendations
The fact of the matter, Mr. President, is that all foreign producers have a degree of Santa in them from a domestic perspective. Foreign producers sell us goods and services, and while they do not do so at zero price like Santa, they still charge a lower price that our domestic counterparts are either unwilling or unable to match. Unlike Santa Claus, however, these foreign producers send us their “gifts of good cheer” 24 hours a day, 365 days a year. What’s more, they do not restrict their gift giving to any particular religious group, but instead offer their gifts to all the boys and girls regardless of religious affiliation.
We therefore urge you to be logically consistent: either recognize every foreign producer that sends exports to the United States as if they were like Santa Claus, celebrating their efforts at enriching our lives, or recognize that Santa is simply another foreign producer, and condemn his activity as destroying American jobs.
A lifelong resident of Northern Virginia, Austin Middleton is a PhD student of the history of economic thought specializing in Adam Smith’s political philosophy at George Mason University.
https://drrichswier.com/wp-content/uploads/20141222_santalanddetail.jpg313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-25 08:03:382014-12-29 06:49:14Please Protect Us from Santa Claus
President Obama’s year-end press conference last Friday was another missed opportunity (in a long list) to bridge the growing political divide in America.
If you pay careful attention to the words Mr. Obama uses and the context in which he uses them, you will notice a consistent and troubling pattern. Mr. Obama rarely uses any data or evidence when he talks about the economy and taxes and he carefully and deliberately uses terms that are impossible to define. He does this because he is employing a marketing technique in an attempt to sell Americans on his failed economic policies.
For example, President Obama uses terms such as “fair share” when talking about taxes without discussing what exactly that means. What is a “fair share?” Is there a number he can provide us to assist us in managing our finances? Does the fact that the top 5% of earners in the country pay the overwhelming majority of taxes not constitute a fair share? Is there evidence that his tax rate number actually generates growth and tax revenue? He avoids all of these “complexities” because he isn’t really interested in growth. He is interested in control of your money and, when you are ideologically committed to state control of a free economy, you use slick marketing to separate people from their hard-earned money.
Here’s another example: did you ever notice that when President Obama discusses the economy and growth he always talks about them in terms of what he will “allow” and “not allow?” “Allow?” What kind of country have we morphed into when Americans’ economic prosperity and security are held hostage to the ideology of one man? We are not a monarchy, yet, sadly, the administration is lording over the transformation of a once free economy into a state-controlled, economic monster. In this new economy, friends and donors to the politically-connected class move directly to the front of the line for government approved “credit” in the form of taxpayer subsidies and they write their own regulations to ensure that their competitors are buried in red tape.
These regulations are enacted to bankrupt ideological enemies of the President and his crony faux capitalist friends (i.e. coal, derivatives markets, the petroleum industry), with zero regard for the millions of lives negatively impacted by the administration’s ongoing assault on economic liberty.
These regulations double down on economic destruction by bankrupting small businesses not connected to the political cocktail-party-class who are unable to handle the massive legal fees needed to comply with the thousands of pages of red tape: regulatory measures slapped on their backs as they are trying to get up from the near knockout punch the recession delivered to them.
Finally, I need to address a counter argument, which many of the President’s supporters are using in a bait-and-switch tactic. It goes something like this, “The President is doing a great job! The stock market is up, fuel costs are down, and the economy is adding jobs.” While these statements are factually correct, they completely ignore the role of the President’s policy initiatives.
First, the stock market is up in spite of the President’s policies, and here’s the evidence. American businesses are doing quite well everywhere else but here. Much of their bottom line growth is coming from overseas sales and the cutbacks on expenses such as labor. In other words, many of these companies, due to our corporate tax rate, which is the highest in the industrialized world, are leaving us in order to stay profitable in a globally competitive market. If we refuse to fix this problem both outsourcing and off-shoring will continue and American employees will suffer.
In that sense, Obama is the Outsourcer-in-Chief.
Second, fuel costs are down because petroleum extraction technology has enabled us to tap into our, once-hidden, wealth of oil and gas. We are floating on petroleum wealth here in the United States and this is driving down fuel prices. But, and this is crucial, this is happening on PRIVATE land, not PUBLIC land. The President is actively standing in the way of us responsibly developing a limited subset of public land, and the hidden wealth underneath. That the President takes credit for the decrease in gas prices, despite his numerous attempts to block bipartisan energy development plans (i.e. Keystone, ANWAR, continental-shelf exploration), is utterly outrageous. If he would just get out of the way, gas prices would likely be dramatically lower, and stay that way permanently.
Third, although we are adding jobs, we are doing this slowly at the SLOWEST rate of any economic recovery in modern times. In the eight years of both the Reagan and Clinton administrations, they were both in office while the economy created over 15 million jobs. For President Obama to leave office with the same results, the economy would have to generate 10 million MORE JOBS in his final two years alone.
Mr. Obama’s state controlled “capitalism” model is an abysmal failure that has only succeeded in increasing the paper wealth of America’s crony faux capitalists. Surely, many of you remember the real economic recoveries of the Reagan and Clinton years when you and your neighbor both had smiles on your faces. The only people smiling now are the jokers who made big investments in expensive Washington D.C. cocktail parties to cater to the elected oligarchs who get to pick who wins and, tragically, who loses in our new, government controlled “free-market.”
EDITORS NOTE:
Dan Bongino is the bestselling author of the bookLife Inside the Bubble and was the 2012 and 2014 Republican nominee for the United States Senate and 6th congressional district in Maryland. He is a contributor at Conservative Review, a radio host and a frequent guest media-commentator on political issues and security matters.
https://drrichswier.com/wp-content/uploads/ObamaChamber672x339-e1419423842359.jpg373634Dan Bonginohttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngDan Bongino2014-12-24 07:24:332014-12-24 07:33:28Crony Faux Capitalism, and Proud of It?
In the 2012 election, President Obama released ads accusing opponent Mitt Romney of “shipping jobs overseas” as CEO of a private-equity firm, Bain Capital. Romney responded not by denying this aspect of Bain’s operations, but rather by insisting that he was no longer actively managing the company at the time the alleged outsourcing occurred.
I can understand why a politician would downplay such charges. After all, “the economy” is almost always a top election issue. Many voters buy into the rhetoric that companies involved in outsourcing are somehow responsible for a net loss of employment opportunities in the United States.
Far from being a cause of economic trouble, outsourcing is actually part of any highly developed market economy. Outsourcing, in a fundamental sense, is the source of all wealth.
To tackle the misconceptions surrounding this controversy, let’s start with a definition. Outsourcing means “hiring foreign workers to do a particular task, as opposed to hiring domestic workers.” Now why would an entrepreneur do this? It should be pretty obvious that the foreign labor costs less. Outsourcing therefore generates some combination of lower prices for the company’s products and higher profits for its owners—indicating that the company is creating more value with the resources it uses. So, as a corporate executive might say in defense of an outsourcing announcement, “it just makes economic sense for our customers and shareholders.”
But what about the workers? The media focus on the horrid “shipping American jobs overseas” aspect of outsourcing. Even if they acknowledge the gains for consumers (lower prices) and shareholders (higher business profits), many commentators will complain these are offset by the losses to American workers.
First off, let’s recognize that, in a free society, workers aren’t entitled to their jobs; most employment is an arrangement subject to termination by either party at any time for any reason. Individual workers are always losing jobs for all manner of reasons and finding new ones—even in a recession. The mass layoffs associated with outsourcing are not economically different, just more noticeable, and therefore more subject to political demagoguery—especially in a recession.
We shouldn’t ignore this kind of labor upheaval, whatever its cause. There is obviously going to be some pain associated with the adjustment process. It’s never easy for people to find new employment opportunities, let alone a large pool of workers released onto the market at the same time. Readjustment costs are especially acute for people with strong local ties, such as family obligations. Underwater mortgages make it difficult for some people to migrate. Retraining for new industries is especially tough for older folks, and so on. Sad stories abound, which politicians artfully manipulate in order to enact laws and programs aimed at interrupting the normal market process in order to “save American jobs.”
But economic change happens for a reason. In a free market, when outsourcing becomes viable, market forces are telling entrepreneurs, workers, and resource owners, essentially, “The old ways of doing things, the old places, the old patterns that you were so accustomed to—they’re not working so well anymore. There are better ways, better places, and better patterns available. For the good of all mankind, to take advantage of the greatest possible global opportunities, we need some rearranging. A large group of people in place Z will now be able to do what people in place F used to do, but at lower costs. That means people in F need to find something else to do, whether that involves moving to place Q, joining industry Y, retraining, or what-have-you.”
Of course the market is not a person and has no motives. What we call markets are just the systematic patterns of exchange, production, and specialization that take place between and among countless individuals across the world. Yet the core insight of economics is that while people tend to pursue only their own narrow interests, “market forces” act as if they are trying to maximize the value of what is being produced across the entire market space—in our case, the whole world. Long-distance business transactions are a natural and important part of this market process. It’s only labeled “outsourcing” when it’s done by a large corporation and involves a noticeable transfer of a certain production process across an arbitrary national boundary. The term invokes images of Gordon Gekko-like corporate executives in smoke-filled boardrooms, chuckling about the fat profits to be had by transferring widget production from Chicago to Shanghai.
But in reality all economic advances involve one form or another of outsourcing. We’re all doing it all the time. When a shopper selects German beer or Colombian coffee, few people accuse her of outsourcing (hardcore “buy-local” activists notwithstanding). Yet the consumer is engaging in trade in which some production took place in a far-off location. Is it any less outsourcing when I go online and buy a book from Boston, or a suit from Seattle? Outsourcing is everywhere!
Consider what a world of no outsourcing would look like. Everything you use—and I mean everything!—must be acquired within a few miles of where you live. As economist Russ Roberts said, we’ve already tried that. It was called the Middle Ages, and life was “nasty, brutish, and short.” Indeed, economic progress in recent centuries has been marked by ever-increasing outsourcing—what Adam Smith called an ever-extending “division of labor.” We have outsourced most of our food production from the field behind our own huts to the huge farms of the corn and wheat belts, with their great farming machinery, genetic engineering, and chemical marvels, themselves all dependent on highly specialized production processes that are outsourced across the globe.
We outsourced our clothing needs from the backyard flock and the spinning wheel to the textile mill, which itself was progressively outsourced from northern England in the 1700s to New England in the 1800s, then to the southern United States in the early 1900s, and presently to parts of Asia. We outsourced entertainment from the occasional village troubadour to the big recording studios and now, with the Internet, to specialists all over the world.
I could go on, but you get the point: Throughout history the rise in outsourcing has paralleled a rise in productivity, a rise in human opportunities and accomplishments, and a rise in global living standards. This is not a coincidence; economics indicates that outsourcing is not a bane to our economic health, but a core component of economic progress.
Nothing said here, however, is meant to countenance the many government interventions, here and abroad, that distort the patterns of global commerce, making them different from those the free market would have generated.
Economics makes clear that outsourcing is not the problem; the problem is scarcity. Outsourcing is (part of) the solution. Presidential candidates or anyone interested in promoting economic progress should think about policy changes that would allow American entrepreneurs, workers, and resource owners to better integrate themselves into an increasingly interconnected global economy.
Summary
Outsourcing occurs when people shop around for the best deals; we do it all the time as consumers. If it produces savings, those savings can be utilized for the purchase of other things.
Outsourcing boosts productivity and living standards. Stopping it means compelling “shoppers” (in this case, businesses) to settle for a more costly or less desirable option.
Tyler Watts is an Assistant Professor of Economics at East Texas Baptist University.
EDITORS NOTE: This article first appeared in FEE’s journal, The Freeman, in November 2012. The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government. See the index of the published chapters here.
https://drrichswier.com/wp-content/uploads/20141218_shippingcontainersdetail.jpg313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-19 14:58:402014-12-19 15:02:21CLICHÉS OF PROGRESSIVISM #36 – “Outsourcing Is Bad for the Economy” by TYLER WATTS
How monetary nationalism wrought havoc, but cryptocurrency can save us by Jeffrey A. Tucker:
The most surprising monetary innovation of our time is bitcoin, a privately produced digital currency and payment system. It is a global system that provides a dramatic alternative to central banking and monetary nationalism as we know it. As with other innovations, such as email and texting, it could challenge the dominance of government policies.
What will we lose if the private system replaces the government-managed one? A look at the history of central banking — and the theories behind the history — shows that we only stand to lose a system that has proven unworkable and dangerous in every way. As government management has been for the mail, education, health care, and every other sector, so has it been for money.
Modern central banking began a little more than 100 years ago. Economists and elite political figures became enamored with the prospect of a perfect money and banking system. They believed that if they could gather the smartest minds, give them vast resources, and put the power of capital and government behind them — jettisoning competitive uncertainties — America could finally stabilize a monetary system that had vexed the developed world for the previous 50 years.
Looming large in their minds was the great panic of 1907, which had come out of nowhere to lead to massive bank failures, tumultuous real estate prices, and job losses as far as the eye could see. All elite opinion — which you can read about in the academic journals of 1908 through 1914 — promised a solution. They would bring science to the problem of money management.
Scientific naïveté
This was the first stage, the period of scientific naïveté. If science could bring flight, internal combustion engines, and breakthroughs in medicine and psychology, surely it could do the same for a new field called “monetary policy.”
Those who argued this way meant that monetary science needs government power. This power would permit the manipulation of interest rates, provide a clearing system to immunize banks against failure, put a stop to private production of money and “wildcat banking,” and coordinate bank policy with national economic policy. The goal was to control inflation, smooth business cycles, and stop systemic upheaval.
Central banks were created throughout the world, especially in the emergent empire of the United States. The Federal Reserve was born — and opened for business November 16, 1914 — as a better and more stable embodiment of the national banks of the 19th century.
The founding board of governors.
What central banking actually did (which very few of its proponents realized it was doing at the time) was give government a blank check to do whatever it wanted without having to achieve that gravely difficult task: taxing its citizens. It created a cartelized, government-managed system that could issue debt, immunize that debt from a market-based default premium, create money, and grow itself to achieve the dreams of the political and financial elite. Suddenly, and for the first time in modern memory, there were no limits to what was possible with public finance.
Somehow, most economists hadn’t entirely realized the implications.
Funding the Great War
This first stage directly led to the shocker that few among the previous generations ever expected: World War I. As the economist Benjamin Anderson pointed out a few years after the peace, it was central banks in the United States, the United Kingdom, and Europe that made it all possible. Had this free-money spigot not been available, governments would have relied on the traditional mechanism of diplomacy to achieve peace, as opposed to a war they could not afford. Central banks became the “occasion of sin” that tempted governments to act in ways they otherwise would not have.
It wasn’t the case, as the textbooks often say, that the Great War “interrupted” the progress toward rational economic policy; rather, the new monetary institutions tempted governments to do something they otherwise might not have done. Central banks became the enabler of a most unwelcome horror.
The Great War was the first “total war.” It involved the whole developed world. It was accompanied by a universal draft, censorship, financial controls, and a suspension of the gold standard. It drew civilians into the conflict on a scale never before seen in the history of humanity. It employed poison gas, air bombings, and weapons of mass destruction that would have been previously unthinkable.
The resulting inflation led to revolution in Russia, central planning and price controls in the United States, and the first glimpse of modern despotism in Europe and England. The semblance of democracy replaced monarchy, government rule replaced markets in most countries, and new forms of political rule displaced old-world empires.
Most significantly from an economic perspective, the result of the war was massive debt accumulation, which meant that someone, somewhere had to pay. Governments’ debt obligations led to dramatic fiscal tightening in the early 1920s, giving way to the final stage of credit expansion in the mid to late ’20s.
In Germany, where the debt obligations and strict terms of peace were severe, the result was an incredible calamity: the Weimar inflation of 1921–23. This stage of stunning upheaval paved the way for the rise of Hitler as a demoralized and destroyed social order cried out for an iron hand. In the United States and Europe, there was Black Tuesday and the beginnings of the Great Depression. Just as a drinking bout leads to a hangover, the inflations of the 1920s created the conditions of the Depression.
The first wave of Keynesianism
Rather than recognizing the failures of central banking, the elites doubled down with new peacetime measures of central planning. This might be called the first wave of Keynesian economics. Remarkably, governments pursued what we now call Keynesian policies long before John Maynard Keynes released The General Theory, his magnum opus, in 1936. His book recommended inflationary finance, high government spending, and macroeconomic manipulation — precisely what governments were already practicing.
American schoolkids are taught every day that the New Deal saved the country from the Great Depression, which is false on the face of it given that the Great Depression lasted from 1930 all the way to US entry into World War II. The war intensified the privation.
Also contrary to what kids are taught in schools, the Federal Reserve during the Depression’s early years was not pursuing laissez-faire policy. The Fed was pushing down interest rates and manipulating reserve requirements in hopes of spawning a new inflation, which it failed to achieve due to a massive drop in velocity (a dramatic increase in the demand for cash). Both presidents Hoover and Roosevelt used government power to manipulate the system. Roosevelt devalued the dollar and even banned the private ownership of gold. He tried to patch the system with deposit insurance. Still, the hoped-for monetary stimulus did not arrive.
The second wave of Keynesianism
Following World War II, which was funded (like the first one) through debt issuance backed by inflationary finance, Keynesian theory was at new heights in terms of academic economic opinion. This was second-wave Keynesianism. Keynes himself was present at the 1944 Bretton Woods conference, which attempted to create a new global currency and a global central bank, even as the veneer of the gold standard were preserved. This system was obviously unsustainable, and it eventually collapsed in 1971.
The 1950s and 1960s saw the advent of a new system of social welfare, the Cold War of endless military buildup, regional military interventions in Vietnam, and an ever-larger expansion of government into the lives of citizens — all made possible by the blank-check policies of central banking. Had states had to depend on taxes and unsecured debt alone, none of this would have been possible. There would have been no debates and riots over war and the Great Society, because neither could have been funded out of taxes and unsecured debt alone.
It’s remarkable to consider the amazing failure of the intellectual class to see the errors of Keynesian policy in those days, but it was blind to them. The widespread opinion was that the only remaining problem in the world monetary system was the presence of gold, which was finally tossed out completely with the reforms of Richard Nixon. He closed the gold window in 1971 and introduced the age of fiat money in 1973 as the final step in bringing “science” to monetary policy.
A brief monetarist experiment
Nixon said his reform would “stabilize” the dollar, which “will be worth just as much tomorrow as it is today.” The immediate effect of Nixon’s reform was to ignite another round of global inflation in the mid to late 1970s — this time coupled with high unemployment, which created the very stagflation that Keynesian theory had posited was impossible.
Stagflation led to a new corrective policy trend that had finally come of age: monetarism. The theory of monetarism is that the central bank should follow a strict rule that accords with the mathematical certainties of the equation of exchange. It’s all rather simple: the quantity of money should expand at an equal pace with national productivity, given a constant rate of money circulation.
Easy, right? The new Fed chairman of 1980 attempted this expansion and it did worlds of good, if only for having unplugged the money machine before the US economy entered a state of complete crack-up. However, monetarism is a wonderful example of a theory that works on paper but fails in practice.
Monetarist policy was unsustainable for several reasons:
Counting money sounds easy until you try it; in an age of fiat currency, the difference between money and money substitutes can get fuzzy.
National productivity as a gauge can only be discerned by looking backward in time, whereas monetary policy has to look forward.
The rate of money circulation is anything but constant and is mostly determined not by the Fed but by consumers.
Deregulation without privatization
Regardless, the experiment in monetarism was short lived due to a sweeping financial deregulation in 1980 that caused an explosion of securitized moneys to appear over the following decade. This wild and wooly world of innovation took place within the context of central banking, a system that essentially privatized the gains from innovation but socialized the losses.
Freedom in finance, undisciplined by market competition, led to the freedom to inflate and pillage. The result was the savings and loan crisis, the first of many great crises to come. Throughout the remainder of the decade, Fed and Treasury officials from the Reagan administration — which had made noise about restoring a gold standard — tried desperately to fix world exchange rates through globally coordinated policies. They hoped to centralizing banking further and, quite possibly, bring about a new world currency based on the IMF’s special drawing right.
But it was a joke: nothing like this came about. Meanwhile, it became easy enough at this stage to look back at the record of central banking and see its relationship to monetary depreciation, the rise of despotism, and the loss of freedom. This train just could not be stopped. Not even the end of the Cold War could inspire government to pull back on its spending and debt. So long as the Fed was there to underwrite the Leviathan state, the Leviathan state would grow forever.
Following the terrorist attacks on September 11, 2001, the Fed went into overdrive with massive money expansion, based on no other theory than a belief that the economy could not be permitted to sink into recession, because that would imply that the terrorists had won. That policy, combined with financial deregulation and a too-big-to-fail policy, led to a crazy housing boom, resulting in a massive bubble that finally collapsed in 2008.
The third wave of Keynesianism
The financial meltdown of 2008 led to a third wave of Keynesian malpractice, beginning with huge bailouts, a zero interest rate policy, and the Fed becoming the main buyer of mortgage-backed securities. It was all an attempt to save the banks, and it worked — except that it also broke the banks of their traditional function of borrowing and lending.
The Fed made repeated statements about its desire to manufacture inflation, first in housing, then in the economy at large. But just as in the early 1930s, there was a problem that the Fed could not control: the collapse in velocity. The banks are the makers of money, and so long as their lending function was broken, the money would not leave the vaults to enter the streets.
Six years after third-wave Keynesianism was put into practice, the result has been slow growth, deflationary pressure, persistent unemployment, a continuing stagnation in household income, and a peculiar asset inflation in financial markets.
The big picture is unrelenting inflation, ongoing business cycles, and general mismanagement: exactly what we would expect under government ownership and control. The long-term pattern of the dollar’s purchasing power provides a good illustration of what happens when government controls a commodity as important as money.
The birth of bitcoin
How beautiful was it that Satoshi Nakamoto’s bitcoin was released onto a private forum in the midst of this chaos, at the end of a central-banking failure, at the dawn of a new millennium! Only a few had imagined that something like bitcoin, a fully private replacement for both nationalized money and reactionary payment systems, was possible.
Bitcoin is one of many new cryptocurrencies that uses a ledger system to bundle and commodify information into tradable units, to control the number created and the rate of creation via a protocol, and to permit unlimited trading on a peer-to-peer basis. The system eliminates political discretion from monetary policy. It captures the strictness of the old gold standard while bringing it into the digital age.
Only one or two academic economists ever speculated about the workability of a fully privatized digital money system. Some had tried private alternatives but had failed for a variety of reasons. Most of the establishment in economics, finance, and government ignored the possibility.
But by January 2009, cryptocurrency was a reality, and the subsequent five years have shown its spectacular viability as an alternative to national money. And it is a global solution, not a national one. Using cryptocurrency means using a currency whose value is universally recognized without complex conversions from nation to nation. It’s gold for the digital age.
We can look back and see how the Federal Reserve and the nationalized dollar brought about incredible calamities, from depression to war to Leviathan, and feel profound sadness and regret. But we can also look to a future in which we have a chance for a new beginning with a currency and payment network that is open source, noninflationary, not owned or managed by nation-states, and adaptable to the needs of users, not political elites.
To learn from history is, perhaps, to avoid repeating it. But it’s best to have a guarantee, and cryptocurrency offers one. In the same way that central banking nearly wrecked the world and created one calamity after another, bitcoin can save the world one transaction at a time.
Jeffrey Tucker is a distinguished fellow at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events.
https://drrichswier.com/wp-content/uploads/20141216_reservesealdetail.jpg313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-19 14:48:122014-12-19 14:48:12Epic Fail: 100 Years of the Fed
Something is terribly wrong with the ability of the Republican leadership in the House to think clearly or speak honestly. The Speaker authorized what will be a $1.43 trillion 12 month out of control omnibus spending bill. It is a 1600 page bill that had a massive amounts of pork in it, and is another bill that no one read before they voted for it. Pelosi never authorized such a large out of control spending bill when she was Speaker. This bill will contribute to the bankruptcy of the Republic.
That spending bill funded the the hiring of 1000 new federal employees, for 9 months. Those new employees will not have had the experience in immigration matters to interview each applicant, or the years of experience in national security to weed out criminals, terrorists, and fraudulent applicants. Yet those new employees will be issuing work permits and social security numbers to 5 million illegal immigrants. They will lack the experience to determine if the issuance of those work permits and social security numbers, to millions of illegal immigrant that apply have been residents in the US for 5 years, or if issuance of those permits will be in the best interest of the National Security of the Republic.
The American Chamber of Commerce and the Speaker know that issuing work permits and social security numbers to 5 million illegal immigration will depress wages for the 43 million unemplyed Americans seeking employment. The issuance of work permits and social security numbers to 5 million illegal immigrants was recently determined to be Unconstitutional by a US Federal Judge in Pennsylvania.
The American voters will hold the Speaker of the House responsible for ignoring the will of the American voters; he said he was opposed to Obama’s illegal Execitive Order on immigration, and for his outright support for the occupant in the Oval Office’s out of control spending. The omnibus spending bill was not what the voters were promised by the Republican leadership before the mid-term election. The American voters feel they were betrayed by the Speaker, and that he never intended to honor his pledges to the American people.
Please read the below listed article that is much more specific in details and includes quotes by the Speaker.
They always favored amnesty, but prior to the mid-term elections, in order to mobilize their voter base, the Republican leadership pretended to oppose Barack Obama’s threat of executive amnesty.
On February 24, 2014, the US Chamber of Commerce, the heart and soul of the Republican establishment, laid the groundwork for Republican amnesty for illegal aliens:
“There will never be a perfect time for reform. The political landscape isn’t going to be any more conducive to reform in two years or four years,” wrote Chamber President Tom Donohue. “The case for immigration reform is clear. The need is undeniable. The time is now.”
Donohue had previously stated that they would “pull out all the stops” to get immigration reform in 2014. The group planned to spend $50 million to blunt the influence of the Tea Party, largely because it opposed amnesty, and millions more to push for immigration reform legislation that the Congressional Budget Office had said would lower the wages of American workers
Having received his marching orders, on March 4, 2014, House Speaker John Boehner (R-OH) said that he wanted to get amnesty legislation done before the end of the year, even as he insisted that the immigration reform he and President Barack Obama had discussed in their White House meeting was not “amnesty:”
“He wants to get it done. I want to get it done,” Boehner said. “But he’s going to have to help us in this process.”
Then came the head fake.
Knowing support for amnesty was a losing issue, the Republican establishment focused their opposition on executive amnesty hoping that, if it was presented forcefully, voters might also think that it included any form of amnesty.
During the run-up to the mid-term elections, Reince Priebus, the chairman of the Republican National Committee (RNC), called executive amnesty “un-American” and “unconstitutional, illegal, and we don’t support it.”
Priebus promised that, if the Republican Party takes the Senate, they will do everything in their power to stop Obama from proceeding on the executive amnesty.
Even after the election, while simultaneously criticizing executive amnesty and oozing hypocrisy, Boehner said:
“That is not how American democracy works,” he said. “By ignoring the will of the American people, President Obama has cemented his legacy of lawlessness and squandered what little credibility he had left.”
“Republicans are left with the serious responsibility of upholding our oath of office. We will not shrink from this duty, because our allegiance lies with the American people,” he said. “We will listen to them, work with our members, and protect the Constitution.”
Among voters, strong “majorities of men (75%), women (74%), whites (79%), blacks (59%), and Hispanics (54%),” in addition to tri-partisan majorities of “self-identified Republicans (92%), Independents (80%), and Democrats (51%)” did not want Obama to enact executive amnesty.
Despite the fact that the Republicans sailed to victory in one of the biggest election routs of the past century and grew to historic levels in the U.S. House, they never intended to honor their pledges to American voters.
They did so not out of weakness.
In order to preserve their fragment of the political landscape as junior partners in a corrupt status quo, it is a more defensible position for the Republican establishment to be deemed eunuchs and cowards rather than what they are; bold-faced liars who care little about the Constitution and represent only themselves and the interests of their wealthy financiers.
https://drrichswier.com/wp-content/uploads/house-of-lies.jpg358500Joseph R. Johnhttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngJoseph R. John2014-12-18 06:47:132014-12-18 06:51:18Republican Amnesty: “In Lies We Trust”
Stimulus boosters assume their conclusions – by Robert P. Murphy
A recent article in Business Insider by Jim Edwards offers putative “Proof That Government Spending Cuts Hurt Economic Growth.” He even goes so far as to claim that “war is good (economically).” In this article, I’ll explain what’s wrong with this popular and age-old fallacy.
First, I want to point out something quite amusing. Edwards relies on a Financial Times story that presents a series of charts produced with data from the Bureau of Economic Analysis (BEA). Here is one of the charts, along with Edwards’s description:
This chart, from the FT’s Matthew Klein based on data from the BEA, seems to show that government has a pretty straightforward effect on GDP. When spending goes up, it adds to economic growth. When it goes down, it subtracts from it and hobbles the economy:
Edwards seems to think that the above chart shows at least a correlation between government spending and economic growth. After all, he wrote that the BEA chart “seems to show that government has a pretty straightforward effect on GDP.” But as Scott Sumner pointed out in amusement when he saw the article, the chart does nothing of the kind.
Look carefully at the legend. The various colored rectangles are different components of government spending. Specifically, the rectangles indicate how the change in each component — positive or negative — relates to the change in overall GDP. The black line is not GDP growth, but is instead the sum of the various components of government spending. In short, Matt Klein at the FT is telling us that if we take the BEA’s word for how much each component of government spending contributed to GDP growth in each quarter, then we can stack those numbers on top of each other and even add them up! Contrary to Edwards, the FT chart doesn’t “show” anything at all, except that the BEA each quarter announces how much various components of government spending contributed to, or subtracted from, GDP growth.
But let’s move past Edwards’s hilarious misinterpretation of the chart and get to the more fundamental issue. The problem with these ostensibly scientific and empirical measurements is that GDP itself is definedto include government spending. As they teach in any introductory macro class, the expenditure-based formula for GDP is
GDP = C + I + G + NX,
where C and I are private consumption and investment, G is government spending, and NX is net exports (gross exports minus gross imports).
Now we see the problem. Even if we set aside the serious theoretical and practical difficulties with the aggregation necessary to estimate these figures, we are still stuck with the fact that the above formula is an accounting tautology, not an economic theory. Yes, other things equal, an increase in government spendingG on the right-hand side will make GDP on the left-hand side increase dollar for dollar. The whole argument, however, centers on whether other things will remain equal.
For example, in a depressed economy with excess capacity, the typical Keynesian will say that an increase inG will cause private consumption and investment to increase also, so that a dollar of extra government spending will cause GDP to rise by more than a dollar — the famous Keynesian multiplier.
In contrast, the typical Austrian- or Chicago-school economist will say that an increase in G will tend to make private-sector spending fall by a greater amount, so that a dollar of extra government spending will cause GDP to fall. (We could get the confident support of free-market economists for this conclusion if we stipulate that the extra government spending is financed through higher taxes, which destroy more private after-tax income than they raise in extra revenue.)
Moreover, even if “total GDP” rises somewhat because of an increase in government spending, that wouldn’t be a good thing, because $10 million spent by politicians is not nearly as likely to channel resources to valuable uses as $10 million spent by private investors.
After this discussion, we can see why pretty charts from the FT showcasing government spending’s “contribution to GDP growth” quarter by quarter don’t really mean anything. It’s the same for the ex post “empirical” analyses that concluded that the Obama stimulus package “saved or created” such-and-such million jobs. The underlying models that generate these estimates assume a Keynesian world, and thus cannot test whether the Keynesian model is correct.
The critical yet missing piece of information in these analyses is the counterfactual, to know what the size of the economy and level of employment would have been in the alternate universe where government spending had taken a different course. From a naïve, “let the facts speak for themselves” perspective, the Obama stimulus package clearly hurt the economy. Remember that unemployment shot up higher with the stimulus than the Obama team warned people would occur without the stimulus.
The exact opposite happened with the so-called sequester. For example, the firm Macroeconomic Advisers, using a Keynesian model, predicted that the spending cuts would knock 1.3 percentage points off of second quarter 2013 growth, and 0.6 percentage points off of third quarter 2013 growth. Here’s what really happened:
It’s the mirror image of the Keynesians’ stimulus blunder. The economy grew faster with the sequester than the Keynesians said would occur without the “drag” of the spending cuts. In the case of the Obama stimulus, their excuse was, “Wow, the economy was worse than we realized, good thing we got that deficit spending in there, inadequate though it was.” In the case of the sequester, their response would have to be, “How about that, the economy was stronger than any of us realized. We dodged a bullet, since the sequester dragged down growth so much.”
In summary, we shouldn’t trust empirical “proof” that government spending boosts the economy, when the alleged evidence so often rests on a model that assumes as true the very issue under dispute. It is particularly absurd to argue that government spending on war makes us richer, because war doesn’t merely deploy scarce resources into unproductive lines — it actually destroys both equipment and workers.
Robert P. Murphy has a PhD in economics from NYU. He is the author of The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to The Great Depression and the New Deal. He is also the Senior Economist with the Institute for Energy Research and a Research Fellow at the Independent Institute. You can find him at http://consultingbyrpm.com/
https://drrichswier.com/wp-content/uploads/20141216_moneywastedetail.jpg313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-17 10:45:182014-12-17 10:46:10Does Government Spending Boost the Economy?
If you’ve been to crowdfunding sites like Kickstarter and Indiegogo, you might think that they are new phenomena, made possible only by the wonder of the Internet. That’s true in part, but crowdfunding actually has a long and proud tradition dating back well before the web was a twinkle in Tim Berners-Lee’s eye.
As my colleague John Berlau details in his new paper, “Declaration of Crowdfunding Independence: Finance of the People, by the People, and for the People,” entrepreneurs and inventors had a long track record in the early part of the last century in seeking funds directly from large groups of interested supporters. Henry Ford, for example, sought funding for his first car from friends, colleagues, and even his lawyer, whose investment of $5,000 in 1903 turned into $12.5 million by 1919.
Indeed, mass solicitations for funding were common among colonial-era entrepreneurs seeking to develop ideas into new ventures. Ben Franklin created a fire department and insurance company using the model in 1752. The insurance giant MetLife was founded by solicitation of policyholders in the 1860s. Railroads — the high-tech start-ups of the early 19th century — routinely raised money from citizens who could expect to use the service.
As the example of Henry Ford’s lawyer shows us, there was a crucial difference between earlier crowdfunding campaigns and today’s web-based equivalents: those who put up money got an investment share in the company rather than simple perks such as T-shirts or downloadable movies.
What happened? To put it simply, the Progressive Era happened. Beginning in the late 1910s, states began to pass laws restricting investment solicitations, based on the idea that people were being lured into turning over their savings for promises of pie in the sky. Progressive reformers wanted to protect vulnerable investors from losing their shirts; some even declared such investment sinful.
As is so often the case, these “Baptists” were accompanied by bootleggers in the form of local banks, who feared they were losing savings accounts to these investments. As Berlau points out, for example,
Kansas Bank Commissioner J.N. Dolley, who pushed through that state legislature the nation’s first “blue sky” law, was a former bank executive who worried openly about deposits being withdrawn for stock offerings. He complained, “The banks hear of such cases because usually the victim draws money out of a bank to buy his wildcat mining shares or his stock in a lunar oil company, or whatever it may be.”
Eventually, the federal government got into the act. It created the Securities and Exchange Commission (SEC) in 1934, which imposed more and more restrictions on how companies could raise money.
SEC rules prevented entrepreneurs from soliciting investment from the public and eventually created the class of the approved “accredited investor,” which turned general investment into a rich man’s pastime. And the reason there are so few peer-to-peer lending operations like Prosper or Lending Club is because the SEC requires that every loan made on peer-to-peer websites submit a separate prospectus or securities filing.
The good news is the tide can be turned back. And the development of new technologies like peer-to-peer lending and crowdfunding platforms represents the first steps in restoring American finance’s innovative spirit.
Debt and equity crowdfunding afford much greater potential for boosting companies, jobs, and the economy than the current versions of fundraising. Debt-based crowdfunding offers a specific rate of return, while the equity version offers an ownership stake similar to a share of stock and a claim on future profits.
These forms of funding allow a firm to expand quickly. According to a study by Crowdfund Capital Advisers, “While pledge or donation crowdfunding lead[s] to an increase of 24 percent in revenues, equity-based crowdfunding resulted in a quarterly increase of 351 percent[,] not including funds raised via the equity round.” In addition, “87 percent of firms either had [hired] or intended to hire new employees as a direct result of having raised equity or debt financing via crowdfunding.”
Thankfully, some in Washington have noticed these possibilities. The Jumpstart our Business Startups (JOBS) Act, which became law in 2012, has allowed limited investment crowdfunding. The SEC, however, has dragged its feet in issuing regulations pertaining to the liberalization and has taken a more restrictive view than seems to have been Congress’s intent.
The new Congress could go further. It could create a new, high upper limit for crowdfunding offerings and other exemptions from securities laws at $10 million, up from $1 million. The Startup Capital Modernization Act of 2014 (HR 4565), which contains just such a measure, has already been passed out of committee in the House. Congress could also significantly decrease, or abolish, the qualifications necessary to be an “accredited investor.”
The United Kingdom abolished its version of the accredited investor rule in the mid-1980s. That allowed ordinary people to share in the success of the Thatcher-era privatizations, which involved crowdfunding solicitations such as the “Tell Sid” campaign.
If equity crowdfunding worked for Henry Ford, it can work for people today.
Iain Murray is vice president at the Competitive Enterprise Institute.
https://drrichswier.com/wp-content/uploads/20141212_assemblylinedetail.png313631Foundation for Economic Education (FEE)http://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngFoundation for Economic Education (FEE)2014-12-15 11:12:302014-12-15 11:14:17Kickstarting It Old School: Crowdfunding may seem new, but it has a long history by Iain Murray
The U.S. was the world’s number one economy prior to World War II, but it took off big-time after the war and there has not been a day of my long life in which we were not number one—until now.
The International Monetary Fund recently released its calculations regarding the world’s economy and concluded that China is the number one economy, producing $17.6 trillion in terms of goods and services, as compared with the U.S. producing $17.4 trillion. It’s not an overwhelming gap, but it is a warning that our economy is going in the wrong direction and has been before and since the financial crisis of 2008.
Writing in Market Watch, Brett Arends, put it succinctly. “As recently as 2000, we produced nearly three times as much as the Chinese.”
As discomforting as the IMF news is, the worst news has been significantly under-reported in the nation’s media. The U.S. is now $18 TRILLION in debt.
In February of 2014, CNS News reported that “The debt of the U.S. government has increased $6,666 trillion since President Barack Obama took office on January 20, 2009, according to the latest numbers released by the Treasury Department.”
President Obama has been responsible for more debt over the course of his two terms to date than all previous U.S. Presidents in the first 227 years combined.
Writing in the Daily Caller, Tracy Miller, an associate professor at Grove City College, noted that “Over the first five years of Obama’s presidency, the U.S. economy grew more slowly than during any five-year period since just after the end of World War II, averaging less than 1.3 percent per year. If we leave out the sharp recession of 1945-46 following World War II, Obama looks even worse, ranking dead last among all Presidents since 1932.”
Why was this man reelected in 2012? One is inclined to find common ground with ObamaCare “architect”, Jonathan Gruber, who called voters “stupid.”
I prefer to believe, however, that the voters have been subjected to a non-stop campaign in the national media to get the first black American elected President and then to ignore some truly horrible facts about his two terms in office thus far.
The voters are not stupid, but they have been deliberately misled by the careful exclusion of news about the actual state of the economy.
Reality caught up with Obama in the two midterm elections of 2012 and 2014. The voters shifted power in Congress to the Republican Party. In the most recent midterms thirteen of the Senators who had voted for ObamaCare were defeated.
As December began, CNS News reported that “The labor force participation rate remained at a 36-year low of 62.8 percent in November, according to the Bureau of Labor Statistics.”
The BLS measures the percentage of “non-institutional population” in the labor force, those 16 years or older who were not in the military or working in a governmental job, i.e. the private sector. In September, the rate was the lowest since February 1978!
To put this in perspective, by November, the number of beneficiaries on the Supplemental Nutrition Assistance Program—food stamps—had topped 46,000,000 for 36 straight months according to data released by the Department of Agriculture. The Census Bureau reports that there are 115,048,000 households in the nation as of August 2014. That means the number of households on food stamps equaled 19.75% of all the households in the nation; one out of five. Those on this program outnumber the entire populations of nations such as Poland or Argentina.
It doesn’t stop there. On December 3 CNS News reported “The total number of people in the United States now receiving federal disability benefits hit a record 10,982,920 in November, up from the previous record set in May, according to newly released data from the Social Security Administration.”
How bad is the U.S. economy? In August, CNS News’ Terence P. Jeffrey reported that “109,631,000 Americans lived in households that received benefits from one or more federally funded ‘means-tested programs’—also known as welfare—as of the fourth quarter of 2012.” The data came from the Census Bureau. That was the same year Obama was reelected and it represented 35.4% of the entire U.S. population at the time. By the end of 2012, it had increased to 49.5%!
Means-tested government programs include Social Security, Medicare, railroad retirement, unemployed compensation, worker’s compensation, Veteran’s compensation and Veteran’s educational assistance. The largest of these programs are Social Security and Medicare.
Why does the U.S. have an $18 TRILLION dollar debt?
Consider that, in fiscal year 2013, the federal government paid out more than $2 TRILLION in benefits and entitlements according to data from the Bureau of the Fiscal Services’ Monthly Treasury Statement. You don’t have to be a mathematician to conclude that, if more Americans were working, there would be less need for many of the benefits programs and the largest among them would be more financially sound.
News of new jobs is always welcome, but it hides the deeper problem of too many unemployed and while Congress continues to debate what to do about Obama’s effort to give work permits to illegal aliens and protect them from deportation, the Center for Immigration Studies announced in June that “Since the year 2000 all of the net increase in the number of working-age (16 to 65) people holding a job has gone to immigrants (legal and illegal).” Should the U.S. make five million or more illegal aliens eligible to compete for jobs with its native-born and naturalized population?
The U.S. must pay billions in interest on its debt. The failure of Congress to address the need to reform the tax code, reduce the deluge of regulations negatively affecting the business and industrial sector, and get control over spending has dug the nation a very deep and dangerous hole.
Statistics can be daunting, but we all can feel that something is terribly wrong with the economy despite the news about a vigorous Wall Street. The fact remains that Main Street is in trouble. The nation requires an economy in which new businesses are created and existing ones can afford to expand. That is not happening.
https://drrichswier.com/wp-content/uploads/debt-spiral.jpg420631Alan Carubahttp://drrich.wpengine.com/wp-content/uploads/logo_264x69.pngAlan Caruba2014-12-15 09:10:582014-12-15 09:10:58We’re Number Two
One of the best ways to follow the ObamaCare story is via Health Care News, a monthly newspaper published by The Heartland Institute. The January issue begins with an article by Sean Parnell, the managing editor, reporting that ObamaCare enrollment is overstated by 400,000.
