Inflation and Deficits

By Walter Williams
http://townhall.com/columnists/WalterEWilliams/2009/09/09/inflation_and_deficits

Green is the new Red

"the environmental movement is a perfect vehicle. In today’s America, it is the most natural place for someone with Marxist sensibilities and aspirations outside a college English department. A frontal assault on capitalism on behalf of the working people of the world is passé and doomed. A stealth assault on capitalism in the name of saving the planet is chic and entirely plausible. In this sense, green is the new red." -Rich Lowery, National Review

http://article.nationalreview.com/?q=MGYwNmYyNTEzYTg3YmE1MTU2ODc1MzQ5NmY5NGU4MWE=

Report card on schools-"F"

Excerpts from the Wall Street Journal

What the Public Thinks of Public Schools

By PAUL E. PETERSON

According to the just released Education Next poll put out by the Hoover Institution, public assessment of schools has fallen to the lowest level recorded since Americans were first asked to grade schools in 1981. Just 18% of those surveyed gave schools a grade of an A or a B, down from 30% reported by a Gallup poll as recently as 2005. . .

It's little wonder the public is becoming uneasy. High-school graduation rates are lower today than they were in 1970. The math and reading scores of 17-year-olds have been stagnant for four decades. . .

You cannot fool all the people all the time, President Lincoln said. And when it comes to student learning, the public seems beyond deceit. When asked how many ninth graders graduate from high school in four years, the public estimated that only 66% of students graduated on time—slightly less than the best available scholarly estimates.

When asked how American 15-year-olds compare in math with students in 29 other industrialized nations, the public did not fool itself into believing that the U.S. is among the top five countries in the world. Those polled ranked the U.S. at No. 17, just a bit higher than the No. 24 spot the country actually holds.

In another sign of declining confidence, the public is less willing to spend more money on public education. In 1990, 70% of taxpayers favored spending "more on education," according to a University of Chicago poll. In the latest poll, only 46% favored a spending increase. That's a 15 percentage point drop from just one year ago when it was 61%.

But when it comes to actual dollars spent per pupil, Americans get the numbers wrong. Those polled by Education Next estimated that schools in their own districts spend a little more than $4,000 per pupil, on average. In fact, schools in those districts spend an average of $10,000.

The public also dramatically underestimates the amount teachers in their state are being paid. The average guess in 2007 was around $33,000—well below actual average salary of $47,000 across all states. When told the truth about teacher salaries, support for the idea that they should get a salary increase plummeted by 14 percentage points. . .

Over $100 billion of the stimulus package went to K-12 education, doubling the federal contribution to school spending. A powerful public-school lobby will fight fiercely to keep federal aid to education at these historic highs.

http://online.wsj.com/article/SB10001424052970203440104574400850103134572.html

They just can't seem to understand the outrage is real

E-mail to Thomas Frank regarding his op-ed, The Red Scare Returns, from the Wall Street Journal.

http://online.wsj.com/article/SB10001424052970203440104574401163387229496.html

Mr. Frank,

It is not soviet style communism that the American public is worried about. It is the worldview that is aligned with a command economy approach, notably socialism/progressivism, and it’s inevitable mutation into totalitarian government systems.

“Soft” socialism is still socialism, and political elites that believe in a command approach are only a few steps away from the historically bad communists’ like Stalin, Mao, Pol Pot, Castro, Chavas, etc…

And you wonder why people are upset?

The angst you see in America is about one specific natural law that is not negotiable- Freedom- and the attack against it by those whose world view is guided by the command approach to economics and politics.

The public might not be able to articulate their instincts, but their instincts have told them to be aware -because when freedom is attacked, they know they are under attack.

The hazard of moral hazard

Excerpts from James Glassman's piece of the same title.

The most dangerous kind of moral hazard is produced not from explicit insurance policies (on which, after all, the insurer can raise premiums) but from implicit ones. If your teenager thinks you will bail him out of jail or fix it with the judge if he gets arrested, then he will be more apt to drive drunk. More broadly, in the jargon of Alcoholics Anonymous, your behavior would be called “enabling.” By rescuing an alcoholic from the consequences of his actions, you are encouraging him to drink because he figures you will rescue him the next time. . .

Over the past three decades, the world has been awash in just this kind of moral hazard, as governments have become more adept at economic rescue and as practitioners of the art have won praise for seeming to pull the world back from the abyss. . .

The financial historian Charles Kindleberger, in his classic Manias, Panics, and Crashes, had it right more than 30 years ago when he described “the moral hazard that the more interventionist the authorities are with respect to the current crisis, the more intense the next bubble will be, because many of the market participants will believe that their possible losses will be limited by government measures.”. .

the dirty little secret is that regulation can enhance moral hazard, not dampen it. When people expect regulations to protect them, they lose the incentive to protect themselves. . .

Kevin Dowd, an economist who specializes in risk management, wrote recently about the banking crisis in the Cato Journal, “The root problem is limited liability, which allows investors and executives the full upside benefit of their risk-taking, while limiting their downside exposure.” Dowd quoted Adam Smith’s warning about corporations in The Wealth of Nations:

The directors of such companies . . . being the managers of other people’s money than their own, it cannot well be expected that they should watch over it with the same anxious vigilance. . . . Negligence . . . must always prevail, more or less, in the management of such a company.

Another example of the organic approach would be to reduce, rather than increase, government’s role in protecting consumers. Consider federal deposit insurance, which was instituted in 1934 to prevent runs on banks. Originally, deposits were insured up to $10,000; today the limit is $250,000. In practice, as Kindleberger points out, the federal government protects all depositors in insured banks. The effect, he writes, is that insurance “encouraged banks to make riskier loans since they were confident that they were protected against runs—if these loans proved profitable, the owners of the banks would benefit.” If the government cut the limit on insurance to, say, $20,000, that single act would send a strong signal to consumers (put your money in a strong bank rather than a weak one) and to bankers (shore up your balance sheet or you won’t get deposits). That this is not likely to happen, to put it mildly, has nothing to do with whether it should happen.

What they teach in college.

And you wonder why the American public is ignorant of practical economics.

Top 10 college courses they don't want you to know about.

1. Queer mobilities- Oberlin College
2. Philosophy of Star Trek-Georgetown
3. Radical thought from Karl Marx to George Bush- Hobart and William Smith Colleges
4. Fem Sex- Carleton College
5. Harry Potter lit- Ohio State
6. Video game studies- MIT
7. Tree climbing- Cornell
8. Maple Syrup- Alfred University
9. Stupidity- Occidental College
10. Zombies- Old Miss
Honorable mention: Arguing with Judge Judy-Berkeley

source: Fox News

Time for a "town hall" during the joint session speech next week?

I picture President Obama's speech to the joint session of Congress next week resembling the British Parliament on CSPAN, with all of the grumblings, wails, shouts, table clapping, etc...

This just may be a "town hall" meeting like no other, and I believe it would be good for the republic.

Representatives and senators who are concerned about the path the administration is taking America down must voice their concerns in a vocal yet civil way.

Real growth in trouble

Frank Shostak, Von Mises Blog:

Recession, then, is not a weakening in economic activity as such, but rather is the liquidation of various non-productive activities that sprang up on the back of an increase in the money supply. . .

there is no such thing as stimulatory policies that can grow the economy. Neither the Fed nor the government can grow the economy. All that stimulatory policies can do is to redistribute real savings from wealth producers to nonproductive activities. And these policies encourage consumption that is not supported by useful production. . .

As a rule, monetary pumping "works" through the commercial bank expansion of credit. The increase in commercial bank reserves on account of the Fed's pumping gets amplified by means of credit expansion. At present, banks are finding it more attractive to sit on the massive pile of cash reserves rather than lend them out. So far in August, bank excess reserves stood at around $700 billion — against $1.9 billion in August last year.

The banks are still in the process of trying to fix their balance sheets. They are also having trouble finding viable borrowers — i.e., wealth generators. All of this raises the likelihood that the process of wealth formation is itself in trouble. . .

Over time, a situation can emerge where, as a result of persistent loose monetary and fiscal policies, there are not enough wealth generators left. Consequently, generated real savings are not large enough to support an increase in economic activity. In this situation, neither loose monetary policy nor loose fiscal policy can "work.

How the debt will hurt you- big time!

Excerpts from: Banana Ben Strikes Again By Michael Pento

Apparently having the world's reserve currency drop 13% since March, even as measured against a basket of other flawed fiat currencies isn't enough. And if you were to measure the dollar's performance against hard assets like copper since March, the currency has lost 50%. Yet despite those facts, Fed head Bernanke thought it wise to increase the size of the monetary base by $86 billion just last week alone! . .

In the long run it seems the Fed has acquiesced to the plain truth that having an $11.7 trillion National Debt means that a loose monetary policy is a necessity. Perhaps it was no coincidence the Fed increased its balance sheet in the same week it was announced that the deficit would grow by at least $9 trillion over the next 10 years.

The economic reality is that when a country owes a tremendous debt; it becomes less burdensome and easier to pay off under an environment where the currency is losing value. Of course the citizens of that same country become poorer while they are taxed without their consent through inflation. It is also true that the holders of that country's debt become victims as well. . .

The world's reserve currency can't inflate its way to prosperity. The danger of causing a disorderly decline of the dollar is very high. . .

no country in the history of planet earth was ever able to sharply devalue its currency while bringing about a stable economy and fostering real growth. That's because a strong currency is indicative of a strong country. One that is providing investors with solid economic growth, positive interest rates, a current account surplus and low inflation.

The opposite is evident in a country that is plagued with a chronically falling currency. But eventually a weak dollar will no longer mean the market goes higher. . . And unfortunately, it will also result in a much lower standard of living for most Americans. . .

the Fed has made it abundantly clear that it will rely on an inflationary monetary policy to help the government pay off its debt.

Washington's Lies

Excerpts from: Washington's Lies by Walter E. Williams

President Obama and congressional supporters estimate that his health care plan will cost between $50 and $65 billion a year. Such cost estimates are lies whether they come from a Democratic president and Congress, or a Republican president and Congress. You say, "Williams, you don't show much trust in the White House and Congress." Let's check out their past dishonesty.

At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee, along with President Johnson, estimated that Medicare would cost an inflation-adjusted $12 billion by 1990. In 1990, Medicare topped $107 billion. That's nine times Congress' prediction. Today's Medicare tab comes to $420 billion with no signs of leveling off. How much confidence can we have in any cost estimates by the White House or Congress?

Another part of the Medicare lie is found in Section 1801 of the 1965 Medicare Act that reads: "Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine, or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer, or employee, or any institution, agency or person providing health care services." Ask your doctor or hospital whether this is true.

Lies and deception are by no means restricted to modern times. During the legislative debate prior to ratification of the 16th Amendment, President Howard Taft and congressional supporters said that only the rich would ever pay federal income taxes. In 1916, only one-half of 1 percent of income earners paid income taxes. Those earning $250,000 a year in today's dollars paid 1 percent, and those earning $6 million in today's dollars paid 7 percent. The lie that only the rich would ever pay income taxes was simply a lie to exploit the politics of envy and dupe Americans into ratifying the 16th Amendment.

Gov't debt is not "environmentally sustainable"

Polluting us with debt By STEVEN HORWITZ

When the fall semester begins at many colleges and universities, it will be difficult to go through a day on campus without hearing about the need for environmental "sustainability." Those who overuse resources, the young say, are guilty of a form of "intergenerational theft," and this message has captured the hearts and minds of many and inspired them to political action.

But the growth in the federal government's debt is a largely ignored form of intergenerational theft. Over the eight years of the Bush presidency and the opening months of the Obama administration, we've racked up about $1.5 trillion in additional debt. Should Obama's proposed $3.35 trillion budget for fiscal year 2010 get passed, the Congressional Budget Office estimates the total debt by the year 2019 will be on the order of $9.3 trillion. At the moment, the U.S. government is borrowing nearly 50 cents for every dollar it spends. . .

Such a massive expansion of the national debt will indeed make future generations poorer. Government borrowing means less money for the private sector for economic growth and higher wages. And much of the stimulus money is being spent immediately rather than invested to improve capital. That's like clear-cutting a forest without replanting.

Uncle Sam's growing debt means more interest payments, which will reduce financial resources that future generations might have consumed or invested. This will have a cumulative effect, analogous to the buildup of carbon dioxide in the atmosphere. Government debt chokes off the supply of capital that is the very oxygen of sustainable economic growth.

In the language of economics, "debt pollution" causes the same kind of negative consequences for our children and grandchildren that air or water pollution causes.

As an economist, it is striking to me that there is little or no apparent interest on the part of the legions of young people captured by the rhetoric of environmentalism in the very same forces at work with respect to the national debt. If we have moral obligations to future generations to use our resources in ways that incorporate our children and grandchildren in our calculations, then we have such obligations with respect to both natural and financial resources.

Debt-financed green expenditures rob one set of resources from future generations in the name of trying to conserve other resources for them. Yet few environmentalists seem to see that contradiction and raise concerns about the debt.

If the environmental movement is really about improving the lives of generations to come and not just valuing nature more than humans, it should be just as vocal about the growth in the national debt and aware of its own contributing role to that growth as it is about the overuse of natural resources in the present day.

Mona Charen on the morality of healthcare

Excerpts from 'God's Partners.'

President Obama too has donned the preacher’s mantle. Speaking to a coalition of 30 faith-based groups, he thundered that opponents of health-care reform were “frankly, bearing false witness.” He then offered a religious justification for his policy preference that somehow failed to make liberal Democrats uncomfortable about church/state entanglement: “These are all fabrications that have been put out there in order to discourage people from meeting what I consider to be a core ethical and moral obligation: that is, that we look out for one another; that is, I am my brother’s keeper, I am my sister’s keeper. And in the wealthiest nation in the world right now we are neglecting to live up to that call.”

But the president really hit his stride when he spoke by conference call to about a thousand mostly Reform rabbis, asking for their support of health-care reform when they address their congregations at the upcoming High Holiday services. . .

According to Rabbi Jack Moline of Alexandria, Va., . . President Obama . . . told the rabbis that “I am going to need your help” in getting health-care reform passed. “We are God’s partners in matters of life and death,” the president added.

One cannot even fathom the sort of media firestorm that would have erupted if someone like Sarah Palin had said that. But beyond the blazing double standard, does President Obama really want to venture this deep into moralizing? This is treacherous ground for him. For one thing, a man who is already known for his messiah complex ought to choose his words more carefully. Religious people may think of themselves as striving to do God’s will, but declaring yourself God’s partner is a just a tad presumptuous. Besides, there are very good reasons to believe that Obama’s health reform would lead to worse outcomes, not improved care.

Quote of note

Adam Smith — said, “Mercy to the guilty is cruelty to the innocent.”

The rise of Germany's supply siders

Excerpts of a column by Daniel Schwammenthal

BERLIN—Even in the best of economic times, Germany's relationship with capitalism is ambiguous. Calling investors "locusts"—particularly if they are Anglo-Saxon—doesn't make one a radical here. And yet, in the midst of a global financial crisis, the country's free-market party is heading toward its greatest political success. Less than one month before general elections, polls suggest the Free Democratic Party could get a record 15% of the vote—putting them in a strong position in a future government with Angela Merkel's Christian Democrats. Meanwhile, the chancellor's current coalition partner, the Social Democrats, can't catch a break from the global banking failures. With their numbers in the low 20s, some 12 percentage points behind the leading Christian Democrats, they are heading toward their worst defeat in post-war history.

For the FDP's secretary general, though, there is nothing counterintuitive about this development.

"It is obvious that especially in difficult economic times, people have a gut feeling for who has an understanding of economics and who hasn't," Dirk Niebel told me in his office. Put differently, when the economy is humming along just fine, Germans think they can afford expansive welfare policies. But when the order books are empty, they quickly realize that wealth must be created first before it can be distributed. And in this global crisis, Germany's export-oriented economy is among the hardest hit in the industrialized world. Gross domestic product is expected to shrink by about 6% this year. Ideal circumstances, in other words, for the FDP's supply-side policies

Cultural-economic decline

Steven Malanga
Whatever Happened to the Work Ethic?
The financial bust reminds us that free markets require a constellation of moral virtues.

In Democracy in America, Alexis de Tocqueville worried that free, capitalist societies might develop so great a “taste for physical gratification” that citizens would be “carried away, and lose all self-restraint.” Avidly seeking personal gain, they could “lose sight of the close connection which exists between the private fortune of each of them and the prosperity of all” and ultimately undermine both democracy and prosperity.

The genius of America in the early nineteenth century, Tocqueville thought, was that it pursued “productive industry” without a descent into lethal materialism. Behind America’s balancing act, the pioneering French social thinker noted, lay a common set of civic virtues that celebrated not merely hard work but also thrift, integrity, self-reliance, and modesty—virtues that grew out of the pervasiveness of religion, which Tocqueville called “the first of [America’s] political institutions, . . . imparting morality” to American democracy and free markets. Some 75 years later, sociologist Max Weber dubbed the qualities that Tocqueville observed the “Protestant ethic” and considered them the cornerstone of successful capitalism. Like Tocqueville, Weber saw that ethic most fully realized in America, where it pervaded the society. Preached by luminaries like Benjamin Franklin, taught in public schools, embodied in popular novels, repeated in self-improvement books, and transmitted to immigrants, that ethic undergirded and promoted America’s economic success.

What would Tocqueville or Weber think of America today? In place of thrift, they would find a nation of debtors, staggering beneath loans obtained under false pretenses. In place of a steady, patient accumulation of wealth, they would find bankers and financiers with such a short-term perspective that they never pause to consider the consequences or risks of selling securities they don’t understand. In place of a country where all a man asks of government is “not to be disturbed in his toil,” as Tocqueville put it, they would find a nation of rent-seekers demanding government subsidies to purchase homes, start new ventures, or bail out old ones. They would find what Tocqueville described as the “fatal circle” of materialism—the cycle of acquisition and gratification that drives people back to ever more frenetic acquisition and that ultimately undermines prosperous democracies.

And they would understand why. After flourishing for three centuries in America, the Protestant ethic began to disintegrate, with key elements slowly disappearing from modern American society, vanishing from schools, from business, from popular culture, and leaving us with an economic system unmoored from the restraints of civic virtue. Not even Adam Smith—who was a moral philosopher, after all—imagined capitalism operating in such an ethical vacuum. Bailout plans, new regulatory schemes, and monetary policy moves won’t be enough to spur a robust, long-term revival of American economic opportunity without some renewal of what was once understood as the work ethic—not just hard work but also a set of accompanying virtues, whose crucial role in the development and sustaining of free markets too few now recall.

Click link to continue

A simple story explains government run health care

By George Mason University's Russell Roberts.

If you go to dinner with a large group of strangers and you know that the bill will be split evenly, aren't you more likely to order pricier dishes and drinks than you would order if you, and you alone, were responsible for picking up your full tab?

The answer is surely "yes." Let's say that you'd be content to order the pork chop priced at $15, but would get even greater enjoyment from ordering the rack of lamb priced at $25. If you alone were responsible for your tab, you'd order the lamb only if it is worth to you at least the extra $10 that it costs. So suppose that you value the lamb by only $8 more than you value the pork chop. In that case, you'd order the pork chop. You wouldn't spend an extra $10 to get extra satisfaction worth only $8.

But if the bill is evenly shared among, say, 10 diners (yourself and nine others), then if you order the lamb, your share of the higher bill will be only $1. That's $10 split evenly 10 ways. You'll order the lamb.

You might think that this sharing arrangement is good. After all, in this example, the cost to you of getting something you valued more (the lamb rather than the pork chop) was reduced. It became sensible for you to order the lamb.

Look more deeply, though. What happened is that society (here, the 10 diners) was led to supply something that wasn't worth its cost. The lamb was worth to you only an additional $8, but to make it available to you, society spent $10. Ten dollars were used to raise the welfare of society by only $8. (You're a member of society, so any improvement in your welfare counts as an improvement in the welfare of society.) That's a waste of $2.

You are better off, but the group is worse off.

Now look even more deeply. Everyone at the table faces the same incentives that you face. You're not the only person who will order excessively costly dishes and drinks. Everyone will. The entire table over-consumes. The total bill is higher -- even your share is higher -- than it would have been had the bill not been split evenly. Resources are wasted.

Such sharing of our medical-care bill takes place now on a massive scale. It is impossible to see how expanding this sharing will reduce the bill.

Why Keynesian policies fail

America's Record Recession

by Peter Ferrara

Keynesian economics was born in the 1930s, the brainchild of British economist John Maynard Keynes. It argued that the way to stimulate a flagging economy back into growth was to increase government spending and deficits. The extra demand for goods and services from that increased spending would induce increased production to meet the demand, restoring full employment and growth.

The concept was quickly embraced by politicians and lefty academics because it justified exactly what they wanted. For the liberal/left politicians dominant in Washington at the time, it gave them cover for the record government spending they wanted to buy votes, without having to raise taxes fully to pay for it. For the lefty academics, it gave them cover for their wish list of runaway government spending policies.

There was just one problem. It never worked to revive economic growth and end the Depression. Rather, as demonstrated by Amity Shlaes in her landmark book The Forgotten Man, it was one component of a slew of Big Government policies that put the "Great" into the "Great Depression," keeping unemployment absurdly high and preventing any natural, cyclical recovery for more than a decade.

The fallacies of Keynesian economics were exposed decades ago by Friedrich Hayek and Milton Friedman. Keynesian thinking was then fully discredited in the 1970s, when the Keynesians could offer no explanation and no cure for the double digit inflation, interest rates, and unemployment, and the persistent stagnation, that resulted from their policies. President Reagan formally dumped Keynesianism in favor of free-market and supply-side policies that produced a 25-year global economic boom.

Yet, President Obama showed up in early 2009 with the dismissive certitude that none of this history ever happened, and national economic policy was decidedly back in the 1930s.

The New Failure of Keynesian Economics
According to the National Bureau of Economic Research, the current recession started in December 2007. From the beginning, we approached this recession with old-fashioned Keynesian economics, rather than the more modern, incentives-oriented, supply-side economics that has swept the world. In February, 2008, then President Bush cut a deal with Congressional Democrat majorities to pass a $152 billion stimulus bill entirely based on the Keynesian rationale of countering the recession with increased spending and deficits. The centerpiece was a tax rebate of up to $600 per person, which had no significant effect on economic incentives, as reductions in tax rates do.

This Keynesian stimulus produced no significant blip in the raging economic downturn, richly earning its well deserved fate of having been completely forgotten. Bush Treasury Secretary Henry Paulsen, the economic guru of the Administration at the time, himself was intellectually stuck in the deep historical recesses of Keynesianism, failing to promote Reagan's free market and supply side policies to counter the downturn. Indeed, Reagan's 25-year global boom ended as the Bush Administration abandoned every component of Reaganomics one by one, culminating in Paulson's throwback Keynesian stimulus in early 2008.

Yet, contrary to his campaign theme of change, President Obama simply quintupled down on Bush's 2008 Keynesianism. Obama learned nothing from the Bush/Paulsen/Pelosi/Reid early 2008 Keynesian failure, which Senator Obama vigorously supported at the time. President Obama came back in February, 2009 to support a new, $787 billion, purely Keynesian stimulus bill.

Even the tax cut portion of that bill, which President Obama is still wildly touting to the public, was purely Keynesian. The centerpiece was a $400 per worker tax credit, which, again, has no significant effect on economic incentives. While President Obama is proclaiming that this delivered on his campaign promise to cut taxes for 95% of Americans, in the Democrat budget that passed Congress this year even this tax credit disappears after next year.

Since World War II, recessions have averaged 10 months, and the longest has been 16 months. Exactly when the current recession can be scored as over is unclear at this point (positive GDP growth may have finally restarted). But it now has been 20 months since the recession began in December 2007, and it will clearly end as the longest by far since World War II. Indeed, from 1887 to 1929, recessions averaged 10 months as well, with the longest during that time also 16 months. For over 120 years at least, recessions have lasted the longest only when countered by intellectually and practically discredited Keynesian economics. . .

. . . real economic recovery is now overdue by at least 4 months. Rather than promoting recovery, the Keynesian economic policies adopted by both Obama and Bush since the beginning of this recession have more likely delayed it, by borrowing hundreds of billions and ultimately trillions in investment capital out of the private economy, and destroying the jobs that would have resulted from that money in the private economy.

Cycles Naturally Go Up As Well As Down
Remember the term business cycle? The sweeping, pro-growth policies adopted by President Reagan were so successful in preventing any major downturn for 25 years that we don't seem to remember what that term means anymore. But it implies that along with periodic downturns the economic cycle will naturally turn up as well. Every morning the American people wake up and throw themselves into restoring the economic viability of their businesses, or finding themselves jobs. This is the primary factor in causing the economy eventually to turn back up.

The Keynesian economic policies adopted by Obama and Bush do nothing to help these businessmen and working people cure the economy. Borrowing close to a trillion dollars from the private economy to increase government spending by close to a trillion dollars does nothing to expand the economy on net. Indeed, it may well result in a net loss of jobs due to government carrying costs and the economic friction resulting from moving all of that money around. Moreover, again this policy does nothing to increase incentives for investment, starting new businesses, expanding businesses, creating new jobs, or entrepreneurship. For these reasons, the best estimate of the number of jobs saved or created by the Obama stimulus is exactly zero.

The result of the willfully blind, throwback, untutored Keynesian economic policies continued and wildly expanded by President Obama is the longest recession since World War II dragging on for around 20 months now, and maybe still more. Almost 7 million jobs have been destroyed during this overextended downturn. Besides the 250,000 additional jobs lost last month, another 422,000 former workers dropped out of the workforce altogether. Almost 800,000 workers are counted as officially discouraged because they can't find work, and so are not even counted as in the work force or in the official unemployment rate. Another 8.8 million who have been reduced to part-time status due to the recession are also not counted in the unemployment rate, and many others have suffered reduced hours as well. Over one third (5 million) of the 14.5 million unemployed have now been without work for at least 27 weeks, or about half a year, with almost 600,000 joining their ranks last month alone.

Personal income is down $427 billion from its peak in May 2008. Because the economy has been performing worse than expected, even the Obama Administration is now admitting that the deficit over the next 9 years will be $9 trillion, $2 trillion more than it projected at the time of its stimulus package in February. That is an increase in cumulative deficits of almost 30% from the mistaken Obama Administration projections of just 6 months ago. These deficit and debt numbers will only get worse as the recovery turns out to be not as strong as the Obama Administration has projected.

Rejecting Obama's rigid, doctrinaire Keynesianism, France and Germany saw economic growth return in the second quarter, with India, Brazil, and even communist China enjoying reviving growth as well. Clearly, what we have suffered in America is the failure of Keynesian economics yet again.

The Free Market Restores Economic Growth
The slowdown in economic decline we have recently experienced, and the actual recovery we will see soon, is due to the natural, curative process of the free market, not big government spending, deficits and debt, for the reasons discussed above.

. . . countries with higher government spending relative to GDP suffered deeper recessions over the past year and a half, while countries with lower government spending experienced shallower recessions or none at all. So, again, Keynesian spending stimulus does not seem to promote economic recovery.

Reigniting the Economic Boom
Economic recovery permanently reducing unemployment will only come from private job creating investment, which still has not sufficiently revived. Nothing in President Obama's Keynesian economic policies, or in Bush's Keynesian policies from 2008, helps with that.

Producing long-term, booming, economic growth will require a fundamental change in economic policy. Start with corporate tax rates that are now just about the highest in the world. Restoring American competitiveness will require reducing the federal corporate tax rate from 35% to at least 20%. Yet, Obama plans to raise the corporate tax burden further.

Sharply raising individual income tax rates and capital gains tax rates, as Obama plans to do, is exactly the opposite of what is needed to counter still catastrophic unemployment. Scrap all that economic foolishness and instead cut the middle class 25% income tax rate to 15%, leaving 90% of taxpayers with a 15% flat tax. Scrap as well the proposed new 8% payroll tax on businesses that do not provide employee health insurance, which would perpetuate unemployment and further reduce wage incomes.

Another component of a foundation for long-term, booming growth is a reliable supply of low cost energy. But here again Obama is pursuing just the opposite, with a program of massive taxpayer subsidies to switch to unreliable, high cost alternatives, and a new cap and trade tax imposing trillions in new cost burdens with no policy justification.

Finally, with only 10% of stimulus funding spent so far (another reason the Obama economic program deserves no credit for the slowing decline), University of Chicago economics professor Casey Mulligan is right. We should cancel the rest of the stimulus spending, which would cancel the borrowing of hundreds of billions more out of the private sector.

Unfortunately, President Obama is still wedded to his political talking points, and his ideological blinders seem now to be attached to the skin. So don't expect any policy changes, no matter what happens. Expect an eventual return to 1970s style economic results instead.

Government spending in real time

This compilation of all the spending "clocks" will shock you.

Click here: US Debt Clocks

The U.S. is not a capitalist republic, it is a union of subordinate socialist republics (USSR)

Marx's 10 Pillars from the Communist Manifesto of 1848 with comments showing alignment with the current government in ( ).

Nevertheless, in most advanced countries, the following will be pretty generally applicable.

1. Abolition of property in land and application of all rents of land to public purposes. (Kelo Supreme Court decision)

2. A heavy progressive or graduated income tax.(raising taxes, allowing the tax cuts to expire, income redistribution policies)

3. Abolition of all rights of inheritance.(the death tax)

4. Confiscation of the property of all emigrants and rebels.(giving property to immigrants, legal and otherwise, yet increasing regulation of citizens and businesses moving out of an over-regulated business and tax climate.)

5. Centralization of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.(T.A.R.P and other bank takeovers)

6. Centralization of the means of communication and transport in the hands of the state.(Increased FCC regulations and legislation proposed to crush dissenting opinion)

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.(GM, Chrysler, other)

8. Equal obligation of all to work. Establishment of industrial armies, especially for agriculture.(Not here yet but Ameri-corps, and other forced/mandatory voluntarism ideology based programs)

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.(National government supreme to state and local government, centralized control taking place, Anti-American world government ideology, International courts, etc...)

10. Free education for all children in public schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc.(we have the education/indoctrination camps already called public schools)

When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character. (this is code for socialism) Political power, properly so called, is merely the organized power of one class for oppressing another. (So we will replace it with oppression of all by the few with no checks and balances, they ignore the rule of law, factions counteracting factions and republican governance which prevents tyrrany) If the proletariat during its contest with the bourgeoisie is compelled, by the force of circumstances, to organize itself as a class; if, by means of a revolution, it makes itself the ruling class, and, as such, sweeps away by force the old conditions of production, then it will, along with these conditions, have swept away the conditions for the existence of class antagonisms and of classes generally, and will thereby have abolished its own supremacy as a class." (class warfare to gain power, in America we do not have static classes because of our republic and capitalistic economic system, the ideologues want to change this and in the process will create a society of massive suffering.)

Thanks to Chris Izenour for his help.

Socialism- a simple lesson

From Practical Economics

Socialism

Socialism is the name used to describe most command economic systems. Other names include communism, progressivism, collectivism and central planning. In socialism, the society, or more accurately stated, those in power, own or regulate the means of production and distribution in a country.

Socialist economies have several common themes that are in line with the aforementioned components of any command economy. Understanding the key tenants of socialism will help to further delineate the operational aspects of using a command economy approach as a means of answering the fundamental economic issues faced by any society. Variations of a socialist approach have been utilized throughout history with the same negative outcomes. The reason that socialistic approaches continue to emerge, however, is because their apparent nature seems to be at face value a positive way to run an economy. The underlying premise that every member of the society will share equally in the fruit of its labor is a cornerstone of socialist thought. What does socialism offer that is so compelling to the general public?

· An equal share to all
· No profit motive or greed
· Equality of pay
· Full employment
· No fear of losses
· Universal social programs
· The seemingly free benefits of a welfare state

Looking at what is promised under socialism, it is no wonder people are dazzled by what it offers. It is understandable that all humans would want these things. People might even believe they are possible. After all, if they can be envisioned, why can’t they come to fruition? Sadly, however, utopian ideals are toppled by a world where humanity and scarcity come face to face. To ignore “what is” for the dream of “what could be” is a fatal miscalculation that has lead to disastrous results. In times of crises, citizens are susceptible to socialist economies as well as socialist governments. Economic downturns, depressions, wartime, real or imagined inequities are all reasons for an elite, or group of elites, to offer socialism as a cure all.

History has shown that humans are highly susceptible to the lure of the utopia that socialism offers. This is dangerous because it can and has been used to secure power by tyrants.The rhetoric of socialism and the euphemisms that are used must not be taken at face value as factual or even possible. One reason socialism gains approval is because it is an economic system that ignores many realities of the inherent make-up and behavioral patterns of humans. In fact, socialists truly believe that the nature of man is altruistic. However, just because someone believes something is true does not give it the legitimacy to override reality, history, fact and experience. Quite possibly the biggest flaw in socialist ideology is the assumption that man is good because man has done good deeds. What is forgotten is the possibility that man does or is good because of his self-interest.

Two appropriate ideas help to explain the lure of the command or socialist economies. Winston Churchill stated, “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” While former President Richard Nixon opined that, “Capitalism works better than it sounds, while socialism sounds better than it works.”

The reality of socialism is that under a command approach there is less efficiency, less reliability and more directing people what to do. This all adds up to less freedom. As a result, long term suffering, increased death and a lower standard of living take place. The cost of socialism is inefficiency in moving scarce resources to their best use. Central planning The argument often heard is that we need the central planning found in socialist systems to maximize our complex and diverse society. Surely, humans would have to be better off if things were not left to chance and if intelligent humans were just given the power to best determine the economic needs of a society. After all, if we can put a man on the moon we should be able to plan the economy to provide for all. This worldview, although seemingly accurate, has no historical examples of effectiveness in guiding the scarcity question efficiently.

In his classic work, The Road to Serfdom, Nobel Prize winning economist, Frederick Hayek, discussed central planning and explained how the socialists have effective economic theory backwards.

One argument frequently heard is that the complexity of modern civilization creates new problems with which we cannot hope to deal effectively except by central authority . This argument is based on a complete misapprehension of the workings of competition. The very complexity of modern conditions makes competition the only method by which coordination of affairs can be adequately achieved.

There would be no difficultly about efficient control or planning were conditions so simple that a single person or board could effectively survey all the facts. But as the factors which have to be taken into account become numerous and complex, no one center can keep track of them. The constantly changing conditions of demand and supply of different commodities can never be fully known, or quickly enough disseminated by any one center.

While people will submit to suffering which may hit anyone, they will not so easily submit to suffering which is the result of the decision of authority. It may be bad to be a cog in an impersonal machine; but it is infinitely worse if we can no longer leave it, if we are tied to our place and to the superiors who have chosen for us. Once government has embarked upon planning for the sake of justice, it cannot refuse responsibility for anybody’s fate or position.

In a planned society we shall all know that we are better off than others, not because of circumstances which nobody controls, and which it is impossible to foresee with certainty, but because some authority wills it. And all our efforts directed toward improving our position will have to aim, not at foreseeing and preparing as well as we can for the circumstances over which we have no control, but influencing in our favor the authority which has all the power.

Although painted with the best of intentions, the inefficient actions of central planning does not make the reality any less harmful. In the end, central planning leads to a total breakdown of civility and sharing, the abuse of position, and the collective suffering of the masses due to elites commanding inefficiency and tyranny.

Intentional causation

Another flaw in the command approach to the scarcity question is that it views economic outcomes as a result of specific and intentional causes. In other words, a simple collective push here and a progressive pull there will create X or solve Y. The command frame of mind believes that specific and intentional policies will have pre-determined results. Because of this assumption, socialist leaders forge ahead with directives believing they control the results and can in fact micro-manage all economic activities like a switchboard operator. Unfortunately, a society made up of millions of humans making more millions of independent decisions based on personal desires undermines the theory of intentional causation. Thinking a group of experts can direct an economy ignores the systemic and dynamic nature of human interaction that Hayek so eloquently discussed.

Anyone who has ever undertaken a home improvement project can attest to the fact that what seemed so easy and straight forward was fraught with unexpected bumps and roadblocks followed by the frustration of unforeseen complications. Anyone who believes intentions will effortlessly create what one desires never tried to fix a leaky faucet. Applying intentional causation to the complexity of an economy is like attempting to shore up a breach in the Hoover Dam with a bucket and mop.

Intentions vs. consequences

Any look at the flaws of the command approach would not be complete without a discussion of the sincerity of the socialist worldview. If intentions were all that is necessary to determine if an economic policy is beneficial, the evaluation of the socialist mind would be golden. Goals, hopes and dreams, reasonable and idealistic as they seem to be, do not stand alone, however. Costs and consequences must always be factored into any choice being made in a world of scarce resources. This factor is ignored by socialists who are blinded by rose colored glasses and dreams of what might be. The fundamental flaw of a command approach is ignoring the reality of scarcity and human nature. With that said, however noble and sincere the socialists intention, ignorance to economic reality does not make the suffering of others less painful.