Tag Archive for: recession

FDR’s Other ‘Day of Infamy’: When the U.S. Government Seized All Citizens’ Gold

/in , , , , , , , , , /by

Ninety years ago, Franklin Roosevelt told Americans they had less than a month to hand over their gold or face up to ten years in prison.

December 7, 1941 will forever be remembered as, in the words of Franklin Delano Roosevelt, “a date that will live in infamy.” Another infamous date is April 5, 1933—the day that FDR ordered the seizure of the private gold holdings of the American people. By attacking innocent citizens, he bombed the country’s gold standard just as surely as Japan bombed Pearl Harbor.

On this 90th anniversary of the seizure, it behooves us to recall the details of it, for multiple reasons: It ranks as one of the most notorious abuses of power in a decade when there were almost too many to count. It’s an example of bad policy imposed on the guiltless by the government that created the conditions it used to justify it. And the very fact of compliance, however minimal, is a scary testimony to how fragile freedom is in the middle of a crisis.

Suddenly on April 5, 1933, FDR told Americans—in the form of Executive Order 6102—that they had less than a month to hand over their gold coins, bullion and gold certificates or face up to ten years in prison or a fine of $10,000, or both. After May 1, private ownership and possession of these things would be as illegal as Demon Rum. After Prohibition was repealed later the same year, the sober man with gold in his pocket was the criminal while the staggering drunk was no more than a nuisance.

Hoarding gold was preventing recovery from the Great Depression, FDR declared. Government (which caused the Depression in the first place) had no choice, if you can follow the logic, but to seize the gold and do the hoarding itself. But of course, the big difference was this: In the hands of the government, huge new gold supplies could be used by the Federal Reserve as the basis for expanding the paper money supply. The President who had promised a 25 percent reduction in federal spending during his 1932 campaign, could now double spending in his first term.

What evidence suggested Americans were “hoarding” gold? Roosevelt pointed to a run on banks that immediately preceded his April 5 seizure decree. Indeed, people were showing up at tellers’ windows with paper dollars demanding the gold that the paper notes promised. But Roosevelt had prompted the bank run himself!

On March 8, three days after succeeding Herbert Hoover as the new President, FDR declared the gold standard to be safe. After all, America’s gold reserves were the largest in the world. Then out of the blue, on March 11, the President issued an executive order preventing banks from making gold payments. The message was clear: In spite of its campaign pledge to protect the integrity of the currency, this was an administration intent on spending and printing like none before. Citizens who wanted to protect their savings and financial assets suddenly had every good reason to find and keep whatever gold they could get their hands on. James Bovard writes in “The Great Gold Robbery,”

Roosevelt was hailed as a visionary and a savior for his repudiation of the government’s gold commitment. Citizens who distrusted the government’s currency management or integrity were branded as social enemies, and their gold was seized. And for what? So that the government could betray its promises and capture all the profit itself from the devaluation it planned. Shortly after Roosevelt banned private ownership of gold, he announced a devaluation of 59 percent in the gold value of the dollar. In other words, after Roosevelt seized the citizenry’s gold, he proclaimed that the gold would henceforth be of much greater value in dollar terms.

Dentists, jewelers, and industrial users were allowed to acquire gold to meet their “reasonable needs.” If you had a gold tooth, the government did not yank it out. But if you possessed more than $100 in monetary gold (coin or notes denominated in the yellow metal) after May 1, 1933, you were a villainous lawbreaker until private gold ownership was legalized four decades later.

With the passage of the Thomas Amendment to an agricultural bill on May 12, 1933, vast new presidential powers over money were affirmed by Congress. But even some of FDR’s own party still had a conscience. Democratic Senator Carter Glass of Virginia solemnly and honestly lamented,

It’s dishonor, sir. This great government, strong in gold, is breaking its promises to pay gold to widows and orphans to whom it has sold government bonds with a pledge to pay gold coin of the present standard of value. It is breaking its promise to redeem its paper money in gold coin of the present standard of value. It’s dishonor, sir.

When FDR followed up in June by abrogating the gold clauses in both private and government contracts, he asked blind Oklahoma Senator Thomas Gore, a fellow Democrat, for his opinion. Gore had lost his eyesight at the age of 12 but he saw right through FDR on this matter. He famously replied, “Why that’s just plain stealing, isn’t it, Mr. President?”

In his book, Economics and the Public Welfare, A Financial and Economic History of the United States, 1914-1946, the great economist Benjamin Anderson recalled Senator Gore’s words on the Senate floor:

Henry VIII approached total depravity, as nearly as the imperfections of human nature would allow. But the vilest thing that Henry ever did was to debase the coin of the realm. [See: “How Henry VIII Debauched English Money to Feed His Lavish Lifestyle.”

Many Americans were cowed by government threats to do the “patriotic” thing and turn in their gold as Roosevelt mandated. But true to the rugged individualism and defiance of tyranny ingrained in our culture, FDR’s order prompted widespread noncompliance. Best estimates, corroborated in this short video and elsewhere, suggest that for every one dollar in gold that Americans relinquished, they quietly kept three.

If the federal government tried today to seize the gold holdings of private American citizens, how much do you think we would turn over?

Call me a scofflaw if you want, but it would NOT get its hands on mine.

For Additional Information, See:

Great Myths of the Great Depression by Lawrence W. Reed

Media Still Peddling One of the Great Myths of the Depression by Lawrence W. Reed

The Great Gold Robbery by James Bovard

James U. Blanchard: Champion of Liberty and Sound Money by Lawrence W. Reed

FDR Campaigned on Fiscal Restraint in 1932. He Delivered Just the Opposite by Lawrence W. Reed

The Great Crash and Depression: 90 Years Later by Lawrence W. Reed

The Great Gold Robbery of 1933 by Thomas Woods

AUTHOR

Lawrence W. Reed

Lawrence W. Reed is FEE’s President Emeritus, Humphreys Family Senior Fellow, and Ron Manners Global Ambassador for Liberty, having served for nearly 11 years as FEE’s president (2008-2019). He is author of the 2020 book, Was Jesus a Socialist? as well as Real Heroes: Incredible True Stories of Courage, Character, and Conviction and Excuse Me, Professor: Challenging the Myths of Progressivism. Follow on LinkedIn and Like his public figure page on Facebook. His website is www.lawrencewreed.com.

EDITORS NOTE: This FEE column  is republished with permission. ©All rights reserved.

The Federal Reserve Hikes Interest Rates Again As Inflation Rages On

/in , , , , , , , , /by

The Federal Reserve announced an interest rate hike of 0.75 percentage points, bumping the range of the federal interest rate to between 3.75% and 4% following a Wednesday meeting of Fed policymakers.

The rate hike matches investor expectations and is the fifth consecutive hike since March and the fourth at this aggressive pace since June as the Federal Reserve attempts to cool the economy and blunt persistently high inflation, The Wall Street Journal reported Tuesday. All eyes are now on the Fed’s December meeting, with investors debating whether the Fed will continue at its aggressive pace of 0.75 percentage point hikes or slow to 0.5 in a bid to ease the pressure on an economy an emerging consensus of analysts say is heading towards a recession.

Some investors were hoping the Fed would begin a “pivot” towards reduced rate hikes in December after various signs that the economy was beginning to slow, Reuters reported Tuesday. However, following a Bureau of Labor Statistics report Tuesday that showed an unexpectedly strong labor market, with job openings in September nearly recouping an August decline, some investors believe the Fed will likely see itself as having more work to do in prompting a slowdown.

“Despite other signs of economic deceleration,” Ronald Temple, head of U.S. equity at financial advisory firm Lazard Asset Management, told Reuters, “the job openings data taken together with nonfarm payroll growth indicate the Fed is far from the point where it can declare victory over inflation and lift its foot off the economic brake.”

So-called “core inflation,” which measures inflation less food and energy, ticked up to 5.1% year-on-year in September, according to the Fed’s preferred inflation metric, the Personal Consumption Expenditures (PCE) price index. The more well-known Consumer Price Index (CPI) has repeatedly come in hot, with its most recent reading also showing soaring core inflation, up 0.6% on a monthly basis in September and up 6.6% on an annual basis.

Heightened rates have pushed people away from buying houses at the fastest rates on record, as 30-year fixed mortgage rates hit their highest levels in 20 years. Elevated interest rates are also putting pressure on the federal government, with the cost of interest on the $31.1 trillion national debt set to surpass the $750 billion spent on defense this fiscal year by 2026, according to CNN.

AUTHOR

JOHN HUGH DEMASTRI

Contributor.

RELATED PODCAST: THE FED’S WAR ON WORKERS: How the Federal Reserve is undermining workers’ recent modest gains.

RELATED TWEET:

RELATED ARTICLE: European Central Bank Takes Action As EU Teeters On Brink Of Recession

EDITORS NOTE: This Daily Caller column is republished with permission. ©All rights reserved. Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.

The Stock Market Officially Collapses Into Bear Market Territory

/in , , , , , , , /by

The stock market closed out a week of intense losses with the Dow Jones falling more than 750 points Friday, entering bear market territory amid a wave of investor fears.

At time of writing, the index had, at its lowest point, fallen more than 2.7% during the day to around 29,300 points, with the Nasdaq and S&P 500 down by 2.7% and 2.64% respectively at time of writing. With the Dow Jones officially falling more than 20% from its recent peak in June, stocks will have entered a slump known by investors as a “bear market” if the losses hold when trading ends Friday, according to CNBC.

The Nasdaq was down by 30.92% this year, with the S&P 500 down 22.98% this year, as of close of business yesterday, according to data from MarketWatch.

“Stocks were overvalued because their nominal price has been fueled by the inflation of the Federal Reserve,” Heritage Foundation economist E.J. Antoni told the Daily Caller News Foundation. “As soon as the Fed took away the punch bowl… what happened? Stocks immediately took a nosedive and are continuing to do so, because the only thing that has been fueling this economic recovery hasn’t been real growth, but again, money creation.”

After wavering early this week as investors awaited the Federal Reserve’s Wednesday announcement of a third interest rate hike in just four months, stocks tumbled, with Goldman Sachs warning clients that investors are preparing for recession and slashing its expectations for the S&P 500 stock index by 16%.

After wavering early this week as investors awaited the Federal Reserve’s Wednesday announcement of a third interest rate hike in just four months, stocks tumbled, with Goldman Sachs warning clients that investors are preparing for recession and slashing its expectations for the S&P 500 stock index by 16%.

“Now we’re faced with the reality of having to do it the hard way, of having to actually grow the economy and not just grow the money supply.” Antoni said.

AUTHOR

JOHN HUGH DEMASTRI

Contributor.

RELATED ARTICLE: Stocks Stay Volatile As Recession Fears Loom

EDITORS NOTE: This Daily Caller column is republished with permission. ©All rights reserved. Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.

Fearing Fed, Stocks Tumble And Major Investor Slashes Expectations

/in , , , , , , , , , /by

All three major U.S. stock indices fell Friday morning as investors worried that the Federal Reserve’s ongoing campaign of aggressive interest rate hikes would weaken the economy.

With Friday poised to be the fourth day in a row of slumping stocks, the Dow Jones Industrial average fell by 1.36%, the S&P 500 by 1.7% and the Nasdaq Composite fell by 2%, according to CNBC. Investors’ fears followed a late Thursday announcement by Goldman Sachs analysts, who slashed their year-end expectations for the S&P 500 by 16%, according to Reuters.

“Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook,” David Kostin, an analyst at Goldman, wrote in the note, according to Reuters.

This follows a Goldman Sachs note released earlier this week, which warned that the Fed was unlikely to relent from its pace of interest rate hikes, even in the event of a so-called “soft landing” where inflation is managed without inducing a recession. Fed Chair Jerome Powell has been clear that the agency will continue rate hikes until inflation is brought under control, and is well on its way to the Fed’s target of 2% annually.

Goldman’s earlier note predicted that the Fed would continue raising rates at least through the end of the year, with a 0.75% interest rate hike in November and a 0.5% interest rate hike in December. Central banks around the world, even some that previously had negative interest rates, have been aggressively pursuing rate hikes as inflation hammers economies worldwide, according to The Wall Street Journal.

AUTHOR

JOHN HUGH DEMASTRI

Contributor.

RELATED VIDEO: Clay Travis: 1.4% to 8.3% inflation under President Biden

RELATED TWEET:

RELATED ARTICLE: ‘Until Something Goes Wrong’: Goldman Sachs Warns Investors High Rates Are Here To Stay

EDITORS  NOTE: This Daily Caller column is republished with permission. ©All rights reserved. Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.

The Democrat Economists in Charge of Deciding ‘If’ There’s a Recession

/in , , , , , , , , /by

Why the Biden administration wants the “experts” to determine if there’s a recession.

Facebook is now censoring posts and videos about the Biden recession by using partisan fact-checks from left-leaning outlets to wrongly condemn them as “misinformation”.

The fact checks rely on the same argument being propounded by the Biden administration and its media allies that only the National Bureau of Economic Research and, more specifically, its Business Cycle Dating Committee, can officially decide if there’s a recession.

And anyone who isn’t on the Committee talking about a recession is spreading “misinformation”.

That’s an obvious problem because 2 out of 3 American voters, including even 53% of Democrats, believe that there’s a recession. That’s a whole lot of people to censor.

Totalitarian Communist regimes in Russia and China have criminalized discussions about domestic economic problems, and the American Left is trying to deploy its propaganda machine of partisan media outlets, fact checkers and Big Tech monopolies to duplicate their efforts.

It’s bound to fail.

Declaring that only a small group of “experts” is allowed to call it a recession despite the fact that two consecutive quarters of a shrinking economy is the definition of a recession is a gatekeeping fallacy.

And the experts are hardly any more objective than the fact checkers citing them.

Peter Blair Henry, the current vice chair of the National Bureau of Economic Research, was the head of the Obama campaign’s economics advisory team and then served on his transition team. And Henry has promoted Biden’s disastrous inflationary “Build Back Better” plan.

Of the eight economists on the Business Cycle Dating Committee, the team that the White House and the media insist are the only ones who get to decide if it’s a recession, several held posts in the Obama administration, and others were clearly aligned with the Democrats.

Christina and David Romer, a husband and wife team, already an innate conflict of interest, were described as “staunch Obama supporters” in an IMF profile. Romer had provided “briefing memos” to Austan Goolsbee, Obama’s radical economic adviser, during the campaign, and she went on to chair Obama’s Council of Economic Advisers. In that role, she aggressively pushed for an even bigger “stimulus package” than the one that damaged the economy under Obama.

Robert J. Gordon compared Trump to Hitler and declared that he would miss Obama’s “eloquence”. He claims that America’s growth is over and proposes a program of a “progressive tax code”, eliminating deductions, legalizing drugs, and providing a lot more welfare.

Gordon had joined lefty economists in arguing that the era of permanent economic malaise was upon us. During the 2016 election, his “The Rise and Fall of American Growth” was frequently cited as expert evidence that serious GDP growth of the kind Trump was urging was impossible.

The economist, or someone by that name from his university, appears to be a donor to Democrat candidates, the DNC and at least one anti-Republican PAC.

Gordon was also a signatory to an open letter titled, “Economists Oppose Trump’s Re-Election”.

The pro-Biden and anti-Trump letter included the contention that Trump “claimed to have the unique ability to generate growth (in real GDP) of between 4% and 6%, but never surpassed 2.9% in his first three years in office. Furthermore, analysts at Goldman Sachs and Moody’s Analytics have projected that Joe Biden’s economic plans, if implemented, would actually generate faster growth in both employment and real GDP.”

Gordon, along with other lefty academics, was expressing a political preference for Biden over Trump while claiming that this position was backed up by their “expert” opinion.

Biden’s economic plans led to a massive disaster, but there’s no reason to think that Gordon or any of the other economists involved in this letter are ready to admit that they were wrong.

And that Biden has inflicted a recession on America.

Another of the members of the Business Cycle Dating Committee who also signed the anti-Trump and pro-Biden letter is Mark Watson of Princeton. Watson was also the co-author of an infamous argument claiming that the economy performs better under Democrat presidents.

His work was cited by Obama’s Council of Economic Advisers co-authored together with James Stock, a member of the council who serves as another member of the Business Cycle Dating Committee.

Obama had appointed Stock to his Council of Economic Advisers in 2013. Stock was both an Obama and a Hillary donor. He also contributed $2,800, close to the maximum, to Biden.

The political conflict of interest in determining that the economy is in recession is obvious.

Of the remaining Business Cycle Dating Committee members, Robert Hall appears to have donated to a Democrat candidate. James Poterba had vocally praised Obama’s economic council members, calling them  “realists and pragmatists who are looking for what will work to address the particular problems we are facing”.

What that means is that of the eight Business Cycle Dating Committee members, a quarter are former members of Obama’s Council of Economic Advisers, half are public Obama supporters, one is a Biden donor, two have expressed public opposition to Trump and support for Biden.

This group of experts is anything but non-partisan and the lean is anything but conservative.

It’s fair to say that 6 of the 8 Business Cycle Dating Committee are either Democrats or aligned with Democrats. Another is ambiguous and only one has expressed no recent public political preference.

It’s obvious why the Biden administration is betting that a group stocked with its own political allies will be less likely to state the obvious about the state of the economy. Democrats, their media and their tech monopolies are using expert gatekeeping by their own allies to deny that there’s a recession even though the vast majority of Americans know that it’s already here.

It doesn’t take the Business Cycle Dating Committee to state the obvious. All it can do is stonewall what everyone can see around them. Beyond their political allegiances, many members of the Committee have a history of being fundamentally wrong about the economic measures of the Obama and Trump administrations. Many supported the Obama era inflationary spending that deepened our national debt and suppressed our economic potential.

There’s no reason to think they’ve learned to be any more correct or any less biased.

The new technocratic totalitarianism insists that the nature of reality is controlled by small groups of partisan handpicked experts and that ordinary people have no right to disagree, and that furthermore it is the job of the tech monopolies who control the marketplace of ideas to immediately stamp out such dissent as “disinformation” and a “threat to democracy”.

But reality isn’t controlled by experts and the efforts by the Biden administration to build a wall of experts around reality is as doomed to failure as similar measures in totalitarian states.

After first denying the reality of inflation, the Biden administration is trying to deny the recession.

The same experts who tried to deny the disastrous effects of Obama’s economy are trying to tell the same lies for Biden. But no amount of lies will turn a recession into a recovery.

AUTHOR

DANIEL GREENFIELD

Daniel Greenfield, a Shillman Journalism Fellow at the Freedom Center, is an investigative journalist and writer focusing on the radical Left and Islamic terrorism.

EDITORS NOTE: This Jihad Watch column is republished with permission. ©All rights reserved.

The Biden Administration Says U.S. Not in a Recession, but Federal Statutes Say Otherwise. Who is Right?

/in , , , , , , , , /by

Is the U.S. economy in recession? The answer is, paradoxically, both easier and more complicated than you might think.

As expected the United States posted negative growth for the second consecutive quarter, according to government data released on Thursday.

“Real gross domestic product (GDP) decreased at an annual rate of 0.9 percent in the second quarter of 2022, following a decrease of 1.6 percent in the first quarter,” the US Bureau of Economic Analysis announced.

The news prompted many outlets, including The Wall Street Journal, to use the R word—recession, which historically has been commonly defined as “economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”

The White House does not agree, however, and following the release of the data, President Biden said the US economy is “on the right path.”

The comments come as little surprise. Treasury Secretary Janet Yellen had recently hinted that the White House would contend the economy wasn’t actually in a recession even if Q2 data indicated the economy had contracted for a second consecutive quarter.

“There is an organization called the National Bureau of Economic Research that looks at a broad range of data in deciding whether or not there is a recession,” Yellen said. “And most of the data that they look at right now continues to be strong. I would be amazed if they would declare this period to be a recession, even if it happens to have two quarters of negative growth.”

“We have a very strong labor market,” she continued. “When you are creating almost 400,000 jobs a month, that is not a recession.”

Yellen is not wrong that NBER, a private nonprofit economic research organization, looks at a much broader swath of data to determine if the economy is in a recession, or that many view NBER’s Business Cycle Dating Committee as the “official recession scorekeeper.”

So White House officials have a point when they say “two negative quarters of GDP growth is not the technical definition of recession,” even though it is a commonly used definition.

On the other hand, it’s worth noting that federal statutes, the Congressional Budget Office, and other governing bodies use the two consecutive quarters of negative growth as an official indication of economic recession.

Phil Magness, an author and economic historian, points out that several “trigger” provisions exist in US laws (and Canadian law) that are designed to go into effect when the economy posts negative growth in consecutive quarters.

“For reference, here is the definition used in the Gramm-Rudman-Hollings Act of 1985,” Magness wrote on Twitter, referencing a clause in the Act. “This particular clause has been subsequently retained and replicated in several trigger clauses for recessionary measures in US federal statutes.”

It’s worth noting that Magness doesn’t contend the two consecutive quarters definition is the best method of determining whether an economy is in a recession, but simply points out that claims that it’s an “informal” definition of recession are untrue.

“It may not be a perfect metric, but it has a very long history of being used to determine policy during recessions,” Magness writes.

Some readers may find it strange that so much heat, ink, and energy is being spent on something as intangible as a word, which is a mere abstraction that has no value. And some policy experts agree.

“Whether [we’re] in a technical recession is less interesting to me than the following 3 questions,” Brian Riedl, an economist at the Manhattan Institute, recently said. “1) Are jobs plentiful? (Yes – good) 2) Are real wages rising? (Falling fast – bad) 3) Is inflation hitting fixed income fams? (Yes – bad.)”

Others contend that definitions matter, and that by ignoring the legal definition of recession, the Biden White House can continue to argue that the US economy is “historically strong” even as economic growth is negative, inflation is surging, and real wages are crashing.

As Charles Lane recently pointed out in the Washington Post, words have power. He shares a colorful anecdote involving Alfred E. “Fred” Kahn, an economist who served in the Carter Administration who was instructed to never use the words “recession” or “depression” again.

In 1978, Kahn — a Cornell University economist in charge of President Jimmy Carter’s inflation-fighting efforts — said that failure to get soaring prices under control could lead to a “deep, deep depression.” Carter’s aides, perturbed at the possible political fallout, instructed him never to say that word, or “recession,” again.

We don’t know whether this instruction stirred the wrath of Kahn, a verbal stickler notoriously disdainful of cant and euphemism; in a previous government job, he had sent around a memo telling staff not to use words like “herein.”

It did trigger his wit, though: In his next meeting with reporters, Kahn puckishly said the nation was in “danger of having the worst banana in 45 years.”

Lane’s anecdote about Kahn is instructive because it reveals something important about these debates. While they may have a certain amount of importance as far as political spin goes, they are meaningless as far as economic reality is concerned. Substituting the word “banana” for recession did not change economic conditions or the economic outlook one bit, which no doubt was precisely Lane’s point.

My colleague Peter Jacobsen made this point effectively earlier this week.

“[You] don’t need a thermometer to feel if it’s hot outside,” he wrote. “Economic issues, especially inflation, top the list of concerns for voters going into the 2022 midterms, and it isn’t particularly close. So officially defined recession or not, it doesn’t really matter.”

Moreover, Jacobsen explains, macroeconomic data like GDP have historically been the tool of politicians and bureaucrats, who use them to justify economic interventions.

“When GDP numbers fall below a certain level, politicians can use that data to try to push income back up. Or perhaps when the economy is ‘running too hot’ politicians can use fiscal and monetary policy to slow down the economy.

All of these metaphors about economies running hot or stalling are based on a central planning view of the economy. In this view, the economy is like a machine which we can adjust to bring about the proper results. Without macroeconomic statistics, central planners have fewer means by which to justify particular interventions. We can’t claim we need stimulus if we can’t point to some data indicating it’s necessary.”

The takeaway here is an important one. We don’t need “bureaucratic weathermen” telling us when the economy is good or bad anymore than we need them “managing” the economy with the money supply, which is precisely how we got here in the first place.

So while the debates over the R word are likely to continue, it’s important to remember it doesn’t really matter if you call this economy a recession or a banana. The fundamentals speak for themselves.

AUTHOR

Jon Miltimore

Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune. Bylines: Newsweek, The Washington Times, MSN.com, The Washington Examiner, The Daily Caller, The Federalist, the Epoch Times.

RELATED VIDEO: GDP Report Shows Economic Plunge

EDITORS NOTE: This FEE column is republished with permission. ©All rights reserved.

“Restaurant Recession” Hits NYC Following $15 Minimum Wage

/in , , , , , , , , /by

This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15 an hour minimum wage.

An article in the New York Eater (“Restaurateurs Are Scrambling to Cut Service and Raise Prices After Minimum Wage Hike“) highlights some of the suffering New York City’s full-service restaurants are experiencing following the December 31, 2018 hike in the city’s minimum wage to $15 an hour, which is 15.4% higher than the $13 minimum wage a year earlier and 36.4% higher than the $11 an hour two years ago. For example, Rosa Mexicana operates four restaurants in Manhattan and estimates the $15 mandated wage will increase their labor costs by $600,000 this year. Here’s a slice:

Now, across the city, restaurant owners and operators are reworking their budgets and operations to come up with those extra funds. Some restaurants, like Rosa Mexicano, are changing scheduling. Other restaurateurs are cutting hours and staffers, raising menu prices, and otherwise nixing costs wherever they can.

And though the new regulations are intended to benefit employees, some restaurateurs and staffers say that take home pay ends up being less due to fewer hours — or that employees face more work because there are fewer staffers per shift. “The bottom line is, we have to reduce the number of hours we spend,” says Chris Westcott, Rosa Mexicano’s president and CEO. “And unfortunately that means that, in many cases, employees are earning less even though they’re making more.”

In a survey conducted by New York City Hospitality Alliance late last year, about 75% of the more than 300 respondents operating full-service restaurants reported they’ll reduce employee hours this year because of the new wage increases, while 47% said they’ll eliminate jobs in 2019.

Note also that the survey also reported that “76.50% of respondents report reducing employee hours and 36.30% eliminated jobs in 2018 in response to mandated wage increases.” Those staff reductions are showing up in the NYC full-service restaurant employee series from the BLS, see chart above. December 2018 restaurant jobs were down by almost 3,000 (and by 1.64%) from the previous December, and the 2.5% annual decline in March 2018 was the worst annual decline since the sharp collapse in restaurant jobs following 9/11 in 2001.

As the chart shows, it usually takes an economic recession to cause year-over-year job losses at NYC’s full-service restaurants, so it’s likely that this is a “restaurant recession” tied to the annual series of minimum wage hikes that brought the city’s minimum wage to $15 an hour at the end of last year. And the NYC restaurant recession is happening even as the national economy hums along in the 117th month of the second-longest economic expansion in history and just short of the 120-month record expansion from March 1991 to March 2001.

Here’s more of the article:

“There’s a lot of concern and anxiety happening within the city’s restaurant industry,” says Andrew Rigie, executive director of the restaurant advocacy group. Most restaurant owners want to pay employees more, he says, but are challenged by “the financial realities of running a restaurant in New York City.” Merelyn Bucio, a server at a restaurant in Soho that she declined to name, says her hours were cut and her workload increased when wage rates rose. Server assistants and bussers now work fewer shifts, so she and other servers take on side work like polishing silverware and glasses. “We have large sections, and there are large groups, so it’s more difficult,” she says. “You need your server assistant in order to give guests a better experience.”

At Lalito, a small restaurant in Chinatown, they used to roster two servers on the floor, but post wage increases, there’s only one, who is armed with a handheld POS (point of sale) system, according to co-owner Mateusz Lilpop. Having fewer people working was the only way for him to reduce costs, he says. Since the hike, labor costs at Lalito have risen about 10 percent — from 30 to 35 percent to 40 to 45 percent of sales, he says.

These changes get passed onto the diner, some restaurateurs argue. Service can suffer due to fewer people on the floor, or more and more restaurateurs will explore the fast-casual format over full-service ones. Some restaurants are also raising prices for customers. According to the NYC Hospitality Alliance’s survey, close to 90 percent of respondents expect to raise menu prices this year. Lalito’s menu prices have increased by 10 to 15 percent. Lilpop says, and it’s not just the cost of paying his staff driving prices up — it’s a ripple effect from New York-based food purveyors’ own labor cost increases.

“If you have a farmer that has employees that are picking fruit, he has to increase his labor costs, which means he has to increase his fruit prices,” Lilpop says. “I have to buy that fruit from him at a higher rate, and it goes down the chain.”

A few economic lessons here.

  1. A reduction in restaurant staffing that results in a decline in customer service (e.g., longer wait times, less attentive wait staff, etc.) is equivalent to a price increase for customers.
  2. The increases in the city minimum wage to $15 an hour, in addition to directly increasing labor costs for restaurants, also affects the labor costs of companies that supply food, liquor, restaurant supplies, menus, etc. and causes a ripple effect of indirect higher operational costs throughout the entire restaurant supply chain as described above.
  3. Even for workers who keep their jobs, a higher minimum wage per hour doesn’t necessarily translate into higher weekly earnings, if the reduction in hours is greater than the increase in hourly wages. For example, 40 hours per week at $13 an hour generates higher weekly pre-tax earnings ($520) than 33 hours per week at the higher $15 an hour ($495).

Prediction: This will be a rough year for full-service NYC restaurants as they try to navigate a future with significant economic headwinds and significantly higher labor costs from the city’s $15 an hour minimum wage.

This article was reprinted from the American Enterprise Institute.

COLUMN BY

Mark J. Perry

Mark J. Perry

Mark J. Perry is a scholar at the American Enterprise Institute and a professor of economics and finance at the University of Michigan’s Flint campus.

EDITORS NOTE: This FEE column with images is republished with permission. Image Credit: Wikimedia Commons | CC BY 2.0

America Is Broken

/in , , , /by

Despite whatever President Obama said during his state of the union address, America the beautiful is broken.  Obama’s state of the union speech reminded me of his 2004 Democrat convention oratory.  His address was filled with socialist idealistic imagery, with attempts at igniting a passionate and mindless following by a misled and ill-informed sea of people willing to help him shove America over the cliff and unto the ash heap of history.

There were the typical political style utilization of numerous half-truths, hyperbole and non-sequiturs to make mostly non-existent and partisan points, while forging ahead with politics as usual.  To sum it up, it was a speech that became the hallmark of Barack Hussein Obama’s progressive political career.  There are some who believe he has retreated to his anti-American roots as a community organizer.

President Obama’s final presidential state of the union address provided a huge supply of sop to his far left anti-liberty political base.  It was also creatively molded to seem like a motivational speech of encouragement to a nation that in reality he disdains.  I am sure that Mr. Obama hoped that his speech would hoodwink  Americans into believing his presidency to be one of optimism, humanism, statesmanship and bi-partisan outreach.  Sure, if one is ignorant and totally void of understanding, Obama achieved that goal.  Taken in a vacuum, Obama’s speech probably secured that goal.

However, as time will reveal, it may quite likely be as ineffectual as using one of the “first black president” Bill Clinton’s state of the union speeches to characterize his presidency in isolation from Monica Lewinski.  “We the People” of America must refuse to accept the dregs of political leadership and raise our expectations.

Perhaps Americans should take a remedial course on civics, the constitutionally mandated role government and elected officials, including the president.  It has been said that knowledge is power.  As long as the people of America are either indoctrinated against the truth or simply not taught it in the first place, our rights will continue to be trampled away by big government.  At the same time, our republic as a whole s diminished in stature, power and wealth.

If president Obama truly desired to bring about a healing of the wounds his seven years has inflicted upon our republic, he could have done so during his state of the union address.  But rather, he remained on his long traveled path of promoting his doctrine of failed and wicked social, moral and political destruction.  Unfortunately, over 40 percent of the American people agree with Obama along with millions of illegal immigrants, Obama is emboldened in his gruesome goal to fundamentally change America into a land of muck, mire and misery.

The United States of America was envisioned as a blessed republic of “We the People” where the government was to be a servant of the sovereign citizens of our nation.  The government was also meant to be a mighty sword against evildoers and enemies of our republic, not a brutal beast of tyranny against law abiding sovereigns like you and I.  My Dad used to tell me that our nation and the government are both a reflection of the people of America.  Right now that is not a pretty picture ethically, morally, spiritually, or economically.

Throughout the duration of the president’s fifty nine minute state of the union speech he told half-truths and outright lies as well.  One major fib was his description of ISIS enemies as people riding around on pickup trucks and that they are not a threat to America’s existence.  The fact that he could say that with a straight face is jaw dropping.  Mr. Obama either forgot or chose not to mention that many murdering ISIS terrorists are cruising around in well fortified armored vehicles left behind by United States forces.  The Muslim ISIS are also heavily armed and with firearms and are plundering all whom they encounter, especially Black Africans and Christians.

I find it very interesting and telling how the president took people to task for daring to complain about or promote standing up to Muslims, who have come into America with a stated mission to change her.  But not once during Obama’s state of the union speech did he address the horrendous treatment of Christians or the millions of Black Africans who exist under the boot heel of Muslim abuse and humiliation.  Dear reader, it is put up or shut up time for us.  The status quo no longer has the ability to maintain or more importantly contain the forces of evil that are continuing to unite and attempt to beat America into submission to the will of enemies, both foreign and domestic.

Despite the fact that our nation’s standard of living is now lower than any time since the Korean War, or that the military is not the powerhouse it still was, even under the George W. Bush administration, or that the government schools are aiding our enemies by indoctrinating students against America and all that is good etc. etc. it is not yet over for our great republic.  All we have to do is seek providential guidance, reestablish real education and God’s forgiveness for allowing the destruction being heaped upon this country.  Then establish and stick to the political will to conduct the nation’s business in a manner that benefits our republics best interest.  Will it be difficult? Absolutely, but more importantly it will be well worth the effort.

God Bless You, God Bless America and May America Bess God.

VIDEO: 93% of U.S. Counties still in a Recession

/in , , , , /by

Eric Norath from the Wall Street Journal reports:

More than six years after the economic expansion began, 93% of counties in the U.S. have failed to fully recover from the blow they suffered during the recession.

Nationwide, 214 counties, or 7% of 3,069, had recovered last year to prerecession levels on four indicators: total employment, the unemployment rate, size of the economy and home values, a study from the National Association of Counties released Tuesday found.

National Association of Counties (NACo)  in a 2015 study reports:

County economies are the building blocks of regional economies, states and the nation. The conditions of a county economy can constrain and challenge county governments, residents and businesses, while also providing opportunities. This analysis tracks the performance of the 3,069 county economies in 2015 by examining annual changes in jobs, unemployment rate, economic output (GDP) and median home prices. It also explores wage dynamics in 2014 and between 2009 and 2014.

Watch the County Economies 2015 Report – Interview with Dr. Istrate:

To read the full study click here.

The following counties have returned to prerecession levels of total employment, the unemployment rate, size of the economy and home values by the end of 2015:

  • Anchorage Borough, Alaska
  • Fairbanks North Star Borough, Alaska
  • Kodiak Island Borough, Alaska
  • Marin County, Calif.
  • San Francisco County, Calif.
  • San Mateo County, Calif.
  • Santa Clara County, Calif.
  • Denver County, Colo.
  • Dolores County, Colo.
  • Minidoka County, Idaho
  • Clark County, Ind.
  • Elkhart County, Ind.
  • Gibson County, Ind.
  • LaGrange County, Ind.
  • Marshall County, Ind.
  • Steuben County, Ind.
  • Vanderburgh County, Ind.
  • Adams County, Iowa
  • Clayton County, Iowa
  • Dubuque County, Iowa
  • Jefferson County, Iowa
  • Johnson County, Iowa
  • O’Brien County, Iowa
  • Plymouth County, Iowa
  • Story County, Iowa
  • Douglas County, Kan.
  • Ellis County, Kan.
  • Greeley County, Kan.
  • Hamilton County, Kan.
  • Haskell County, Kan.
  • Hodgeman County, Kan.
  • Johnson County, Kan.
  • Leavenworth County, Kan.
  • Miami County, Kan.
  • Mitchell County, Kan.
  • Norton County, Kan.
  • Rawlins County, Kan.
  • Rush County, Kan.
  • Russell County, Kan.
  • Stevens County, Kan.
  • Wyandotte County, Kan.
  • Bullitt County, Ky.
  • Calloway County, Ky.
  • Campbell County, Ky.
  • Jefferson County, Ky.
  • Madison County, Ky.
  • Marshall County, Ky.
  • Nelson County, Ky.
  • Oldham County, Ky.
  • Scott County, Ky.
  • Shelby County, Ky.
  • Washington County, Ky.
  • Barry County, Mich.
  • Kent County, Mich.
  • Ottawa County, Mich.
  • Blue Earth County, Minn.
  • Carlton County, Minn.
  • Clay County, Minn.
  • Le Sueur County, Minn.
  • Marshall County, Minn.
  • Nicollet County, Minn.
  • Olmsted County, Minn.
  • Pennington County, Minn.
  • Polk County, Minn.
  • Rock County, Minn.
  • Benton County, Miss.
  • Union County, Miss.
  • Custer County, Mont.
  • Dawson County, Mont.
  • Deer Lodge County, Mont.
  • Fallon County, Mont.
  • McCone County, Mont.
  • Meagher County, Mont.
  • Musselshell County, Mont.
  • Powder River County, Mont.
  • Powell County, Mont.
  • Richland County, Mont.
  • Roosevelt County, Mont.
  • Sheridan County, Mont.
  • Valley County, Mont.
  • Box Butte County, Neb.
  • Chase County, Neb.
  • Cheyenne County, Neb.
  • Clay County, Neb.
  • Dawson County, Neb.
  • Douglas County, Neb.
  • Dundy County, Neb.
  • Furnas County, Neb.
  • Garden County, Neb.
  • Garfield County, Neb.
  • Gosper County, Neb.
  • Hayes County, Neb.
  • Keya Paha County, Neb.
  • Kimball County, Neb.
  • Lancaster County, Neb.
  • Loup County, Neb.
  • Perkins County, Neb.
  • Red Willow County, Neb.
  • Sarpy County, Neb.
  • Saunders County, Neb.
  • Thurston County, Neb.
  • Wayne County, Neb.
  • Anson County, N.C.
  • Bowman County, N.D.
  • Burleigh County, N.D.
  • Cass County, N.D.
  • Divide County, N.D.
  • Dunn County, N.D.
  • McKenzie County, N.D.
  • Mountrail County, N.D.
  • Sioux County, N.D.
  • Stark County, N.D.
  • Traill County, N.D.
  • Ward County, N.D.
  • Williams County, N.D.
  • Delaware County, Ohio
  • Fairfield County, Ohio
  • Franklin County, Ohio
  • Greene County, Ohio
  • Knox County, Ohio
  • Licking County, Ohio
  • Madison County, Ohio
  • Putnam County, Ohio
  • Union County, Ohio
  • Alfalfa County, Okla.
  • Canadian County, Okla.
  • Grady County, Okla.
  • McClain County, Okla.
  • Woods County, Okla.
  • Chesterfield County, S.C.
  • Oconee County, S.C.
  • Aurora County, S.D.
  • Anderson County, Texas
  • Andrews County, Texas
  • Atascosa County, Texas
  • Bastrop County, Texas
  • Bexar County, Texas
  • Blanco County, Texas
  • Brazos County, Texas
  • Caldwell County, Texas
  • Calhoun County, Texas
  • Collin County, Texas
  • Comal County, Texas
  • Crane County, Texas
  • Dallam County, Texas
  • Dallas County, Texas
  • Deaf Smith County, Texas
  • Denton County, Texas
  • DeWitt County, Texas
  • Dimmit County, Texas
  • Duval County, Texas
  • Ellis County, Texas
  • El Paso County, Texas
  • Fannin County, Texas
  • Fayette County, Texas
  • Frio County, Texas
  • Gaines County, Texas
  • Glasscock County, Texas
  • Grayson County, Texas
  • Grimes County, Texas
  • Guadalupe County, Texas
  • Hansford County, Texas
  • Hartley County, Texas
  • Hays County, Texas
  • Hockley County, Texas
  • Houston County, Texas
  • Hunt County, Texas
  • Jackson County, Texas
  • Johnson County, Texas
  • Karnes County, Texas
  • Kaufman County, Texas
  • Kendall County, Texas
  • Kenedy County, Texas
  • Kent County, Texas
  • La Salle County, Texas
  • Live Oak County, Texas
  • Lubbock County, Texas
  • McCulloch County, Texas
  • McLennan County, Texas
  • McMullen County, Texas
  • Maverick County, Texas
  • Medina County, Texas
  • Navarro County, Texas
  • Parker County, Texas
  • Parmer County, Texas
  • Randall County, Texas
  • Reeves County, Texas
  • Rockwall County, Texas
  • San Jacinto County, Texas
  • Schleicher County, Texas
  • Scurry County, Texas
  • Shackelford County, Texas
  • Tarrant County, Texas
  • Terrell County, Texas
  • Travis County, Texas
  • Upton County, Texas
  • Ward County, Texas
  • Webb County, Texas
  • Wharton County, Texas
  • Williamson County, Texas
  • Wilson County, Texas
  • Wise County, Texas
  • Yoakum County, Texas
  • Zapata County, Texas
  • Chittenden County, Vt.
  • Franklin County, Vt.
  • Lincoln County, Wash.
  • Calumet County, Wisc.
  • Dane County, Wisc.
  • Eau Claire County, Wisc.
  • Green County, Wisc.
  • Lafayette County, Wisc.
  • Outagamie County, Wisc.
  • Trempealeau County, Wisc.

RELATED ARTICLE: Six Years Later, 93% of U.S. Counties Haven’t Recovered From Recession, Study Finds