Sounds familiar

From a CNN Money article ("CBO chief: Budget outlook 'daunting'"):

The gist of his testimony went something like this: The outlook is bad under current law and daunting if many current policies are extended as expected. And even that may understate the fiscal problem the country faces, because it doesn't factor in potential effects of debt on economic growth.

Where have we heard this before? From a variety of places such as those 'angry radicals' in the Tea Party movement, the 'unpatriotic' Libertarians and the 'racist' conservatives. My only question is: why would the administration suddenly be so transparent with their assessment? Oh, that's right, because they only have so much control over the CBO. Well, that too will change...

Paying The Piper

Although I covered this issue in my equally obscure blog of several years ago (Maximum Wage), I thought it worth revisiting in light of comments made in this piece: Minimum Wage Hikes Deserve Share Of Blame For High Unemployment. At the time, the minimum wage in the U.S. was $5.15. I engaged in a discussion with someone who couldn't see the harm in raising this wage one dollar per hour. On the surface, this seemed a reasonable thought. After all, what is a dollar between friends? However, as I pointed out at the time, it amounted to a nearly 20% increase to the minimum. Money has yet to be found springing forth from trees.

The Bush administration, in its finite wisdom, allowed the newly crowned liberal congress of the time to pass a bill that would increase the wage in each of the next three years. The change in the years from 2007 to 2009 was $.70 per hour per year. The first year amounted to an increase of nearly 14%. The second was an increase of 12% from the previous year, 27% cumulatively. In 2009, the increase amounted to 10.7%, a mere 40.8% cumulatively. This means that any business employing people at the minimum needed to increase their payroll for these people by 40% over that three year period. Why do we have an employment problem? I can't imagine.

Four years later, we sit mired in an economic slump from which there appears little relief. After eight years of general ineptitude, we are now subjected to a more specific economic ineptitude seldom rivaled. Nations around the world are waking up to the fiscal reality of social engineering while our current incarnation of Big Brother takes us down that same path. The minimum wage is another of the many examples of such engineering at work. While there's no reason to expect this or any administration to come to its senses about the minimum wage, there is little doubt that such tampering has had an impact.

TANSTAAFL

Retail sales dropped “unexpectedly” in May. I have to ask: who doesn’t expect this economy to worsen? I would submit that anyone within reach of a microphone who is telling us that the economy is recovering does so without any conviction. At the risk of sounding like a broken record: nothing this administration, or this congress, has done will provide long-term recovery.

What I find amazing, at least in this article ("
Retail sales drop 1.2 percent in May"), is a statement like this: “The big drop raises new worries about the durability of the economic recovery.” There are no new worries, only the same old ones. There is no expectation of durability or recovery, at least not by anyone paying attention to the actions of Washington.

What do I mean by stating that this administration has done nothing to contribute to the long-term stability and/or growth of this economy? Prior to this president’s ascendancy, we heard the economy described as a depression, the worst since the 1930’s. Since he took office, he and his cohorts in Congress have written, passed and/or signed budget busting legislation related to healthcare, climate change and Wall Street “reform”. They propose to pay for all of these things through both borrowing and higher taxes. Borrowing creates future taxes and higher taxes stifle growth. What of these actions addresses the supposed depression upon which Mr. Obama ran his campaign?

Of course, they rarely use the words “higher” or “new” taxes, unless the words are accompanied by “on the wealthy”. While it may be a tired old mantra to many of us, it is the play on which much of their past success has been built. Make no mistake, however: a tax on anyone is a tax on everyone. Higher taxes on the oil companies translate into higher costs at the pump. Higher taxes on industry lead to higher costs of goods. Higher taxes on “the wealthy” lead to less investment by those people, leading to fewer jobs, leading to higher unemployment, leading to a higher tax burden on those who remain employed. Put simply, and by wiser people than I, there ain’t no such thing as a free lunch.

Double plus ungood

There has lately been added to the lexicon a phrase which defies justification: “too big to fail”. The claim is that there exist companies whose impact is so broad and thoroughly integrated into the fabric of our economy that failure of such a magnitude would be unsustainable. The argument is no less specious than those which defend government itself. Not that I am an anarchist by nature, but I do think that government is overrated and, were ours to collapse, people would find a way to survive without it.

As for these companies that supposedly must be saved I say: follow the money. Sure the politicians will tell us that the loss of jobs, the collapse of financial markets and the gap in services will be too great, but what they mean by these things are the loss of government jobs, the collapse of financial support for their next campaign and the gap of services they will be unable to parade before the electorate. Creating the illusion that certain companies are so critical that government intervention is necessary to keep them afloat is akin to claiming that the collapse of McDonald’s will bring starvation.

While many people would be suffering had GM gone into bankruptcy protection, those people would be the unionists forced to renegotiate contracts that would make GM more competitive rather than the taxpayers who have yet to gain a dime from being forced into an unneeded rescue. The bailout of companies like AIG speaks more to the origin of political fund raising than it does to the need to persist financial institutions which practice flawed policies. Compounding these actions is the fact that it is the self-same elected officials who, having passed ill-conceived legislation, created many of the risk pitfalls into which these companies fell.

Additionally, and perhaps most importantly, creating a culture in which companies believe that they will be saved from demise should they fail means creating one where the natural influence of risk is removed and decisions are made with less regard for their downside. The government already enjoys such a cushion from failure and now, thanks to the misguided actions of our politicians, so does big business.

Leon's Getting Larger

Despite the best efforts of the Ministry of Information, clues to the future of our economy continue to leak out. As I’ve said all along, nothing this administration is doing will benefit our economy in the long term. Further evidence of this fact can be found here “Private pay shrinks to historic lows”.

While our government has the ability to print money, it does not earn it. The money spent by the government is taxpayer money acquired through force. As this article shows, that money is now increasingly spent on the system under which we are all subjected. Rather than implementing policies which build jobs where money is generated, the administration continues to build the infrastructure where money is drained.

While this ultimately leads us to the likelihood of a one-term presidency, it comes at a cost for which we will all continue to pay indefinitely. The growth in government has historically been remarkably resilient to abridgment. Compounding this is the fact that no one of integrity has risen to a position of power in a very long time, so the next incarnation of big brother is likely to bring more of the same.

More Of The Same

Yesterday, the U.S. Senate passed a Wall Street "reform" bill aimed at curbing the greedy appetites of the nation's investment class, proving once again that the current batch of elected "representatives" know nothing about either the Constitution, for which they've sworn an oath, or economics.

Sure, their rhetoric will be all about the abuses of the investing elite and defense of the downtrodden citizen, but make no mistake about their actual intentions. Remember that they are all supported by many of the same people they claim to be "correcting" with this legislation. Remember also that demonizing the wealthy is modus operandi of the elected elite. We can be sure that the current bill is laden with pork, that it is riddled with loopholes, and that it provides covert support for those self-same people against which it is presumably targeted.

What this country needs are more people like Chris Christie, governor of New Jersey and lone gunman against government ineptitude. Christie has proven, in his short tenure, that he isn't concerned about getting reelected. He has made enemies on both sides of the aisle in a state suffering under the yoke of massive deficits, oppressive taxation and burdensome entitlement. While the yahoos in Washington carve up a pie that has less to do with reality each day, he is vetoing new tax proposals that will drive away investment in his state (N.J. Gov. Chris Christie swiftly vetoes 'millionaires tax,' property tax rebate bills). He routinely chastises both elected official and private citizen alike for questioning his unflinching efforts to reign in out-of-control spending and abuses of power. Had we several dozen of his ilk, we could return common sense and the Constitution to their rightful places within our government.

Slice the Pie

When the rich get richer, the poor must get poorer, right? Well, as with many of the assertions of the sound bite era, this is simply not true. It is, instead, an oversimplified summarization of economics used to push an agenda. The argument can be generally described as a zero sum gain view of economics where a finite amount of wealth exists and the only means for one group within the system to increase their wealth is to somehow take it from others. It is the basis on which much of the social engineering arguments are built. Wealth cannot be created, they’d have us believe. Instead, it can only be displaced from somewhere else. So, in order to bring fairness to all, money from the wealthy must be taken and distributed to the poor.

In fact, wealth is created every day. In simple terms, every time someone invents something new, they’ve created wealth. If we consider the iPod (or any such MP3 device) we can see how this works. Before the iPod, there were any number of gadgets used to carry music around. These included both tape and compact disc devices specially designed to increase convenience. The iPod supplanted each of these devices by bringing a smaller, more stable format to the industry.

On the surface, this would seem to have proven the position of the zero sum gain camp: iPod stole market share from other products, thereby shifting wealth from one party to another. However, what iPod also did was enable other media industries. For example, the new generation of devices carried ever greater volume of music, both helping the environment by lessening the need for compact discs and increasing the choice of the user. Additionally, a burgeoning medium, podcasts, was given a new, more convenient vehicle by which to spread. On top of these came the ability to add audio books and video, again increasing both availability and convenience. So the iPod increased the number of products available to consumers, thereby increasing wealth potential. Yet none of this was done at the expense of the poor.