Radioactive Communist Zombies

The Deficit Lie

Veronique de Rugy points outin The Corner that the deficit is going up, predicted to be larger next year by $150 billion for a total of $1.4 trillion (That's TRILLION).  As Ms. de Rugy points out (links original):

This is bad news for the American people, not only because more deficit is bad and unemployment remains high (even Krugman is down), but also because the administration and the Deficit Commission are already setting the stage for increased taxes in the future.

The narrative goes like this: The deficit is getting worse because of a lack in tax revenue, and while we don't have recommendations about how to cut spending, we can tell you right now that we need more taxes.

But tax revenues are not the problem, spending is the problem.  Yes, tax revenues are down a little, but spending is way up.  As Ms. de Rugy states (pdf file):

In 2009, the government added [to the deficit] an additional $592 billion: $245 billion for the financial bailout and $347 billion for stimulus spending.

That increased the deficit 209%

Now the solution that is going to come out of Washington will not be to cut spending.  Spending is like a drug to politicians.  The more they spend, the more they want to spend.  No, the "solution" will be higher and/or new taxes.  This will, of course, according to economists in the Obama Administration, shrink the economy further.

Which will cause the tax revenues to decrease and cause the deficit to increase which will cause there to be calls for more or higher taxes.  Until we're Greece.

Creating Unemployment, Not Jobs

Extending jobless benefits has passed the Senate now (by one vote) after some tack-ons were tacked off and some RINOs decided to vote for it.  Most Republicans were against the bill because it uses borrowing to pay for the benefits and they wanted to cut spending in other places, instead.  The Democrats think this is going to help the economy:

"This bill is about jobs because unemployment insurance goes to people who will spend it immediately," said Sen. Max Baucus, D-Mont. "That would increase economic demand. And that would help support our fragile economic recovery."

Right.  We discussed yesterday why this isn't so.

And today the Wall Street Journal expounds on that in an unsigned editorial.

Mr. Obama was nonetheless obliged to concede that, 18 months after his $862 billion stimulus, there are still five job seekers for every job opening and that 2.5 million Americans will soon run out of unemployment benefits. What happens when the 99 weeks of benefits run out? Will the President demand that they be extended to three years, or four?

And extending jobless benefits causes unemployment.  How's that?  Well, if you want more of something, subsidize it.  If you want less, tax it. (So why do we tax prosperity and subsidize poverty?)  And unemployment benefits subsidize unemployment:

A March 2010 economic report by Michael Feroli of J.P. Morgan Chase examined several studies and concluded that "lengthened availability of jobless benefits has raised the unemployment rate by 1.5% points."

A 2006 NBER study by Raj Chetty of UC Berkeley on a related subject begins, "It is well known that unemployment benefits raise unemployment durations."

Add to it that it will increase the debt and you have a recipe for a slower recovery and more unemployment.  But that's Obamanomics for you: a slow, painful economy and masses of debt.

How Not to Run the Economy

Every now and then the Wall Street Journal will run an op-ed by someone who doesn't fall in line with the Journal's usual opinions (and they have their token liberal(sub probably required) columnist, too).

One such contrary piece was published today (Monday).  It's by Alan S. Blinder (no joke) who is described as: "a professor of economics and public affairs at Princeton University and vice chairman of the Promontory Interfinancial Network, is a former vice chairman of the Federal Reserve Board."

In his piece (sub probably required), Mr. Blinder says Obama's economy polices are correct:

While [the Obama Administration] now eschews the phrase "fiscal stimulus," it wants to extend unemployment benefits and initiate or strengthen several other programs to create spending and jobs. But it also wants to let the Bush tax cuts end on schedule for those earning over (roughly) $250,000 a year.

(Actually, if Congress doesn't act, and it doesn't look like they will, those tax cuts will expire for everybody who pays income taxes.)

Mr. Binder agrees with the Obama plan:

Let the upper-income tax cuts expire on schedule at year end. That would save the government an estimated $75 billion over the next two years. However, it would also diminish aggregate demand a bit. So, instead of using the $75 billion to reduce the deficit, spend it on unemployment benefits, food stamps and the like for two years. That would surely put more spending into the economy than the tax hike takes out, thus creating jobs.

Really?  Taxing and spending will create more jobs then allowing people to keep, spend, and invest their money as they see fit.  This is like saying your car will run better if you take out half the gas, burn half of that on the ground, and then put the remainder into a car that doesn't work.  First you take the gas out (taxes), then you burn half of it on the ground (bureaucratic costs of redistributing wealth), then you put it in a car that doesn't work (unemployment payments).

With economic policies like these, who needs recessions?  We'll be in a lost-decade depression very quickly.

Green Economy: Green for Those Well Connected, Apparently

President Obama was in Michigan Thursday to give money to a Korean corporation.  Apparently the new green economy means green (money) for those who are well connected.  Henry Payne of The Michigan View reports:

The president handed $150 million in stimulus money over to Korean CEO Peter Bahnsuk Kim of LG Chem. LG Chem is an $11 billion Korean conglomerate that hardly seems a candidate for the American Recovery Act.

The stimulus which was supposed to keep unemployment below 8% (and it's now at nearly 10%) is now being spent on corporate welfare for foreign corporations. 

But these are the foibles of Keynesian economics which states that the government can grow the economy by spending money and it doesn't matter, apparently, how the money is spent.  Even if given to a Korean company.

Obama said his benevolence would create 300 jobs in Holland – but that’s $500,000 per job. At least it’s a bargain compared to the $ $1.25 million per job Obama spent on two solar companies in Arizona over the July 4 weekend. 

So in a "green" economy some get taxpayer (or borrowed) money from the government, and some don't.  And why do we have to give government money to these businesses to create jobs?  Because they are jobs that wouldn't exist without government money.  Which means they are jobs that will continue to keep on needing subsidies in the form of infusions of taxpayer dollars from now on.

I've got an idea.  How about stop spending money we don't have, stop threatening to raise taxes, and stop passing 2,000-page bills to regulate the economy so businesses can thrive and employ people the old fashioned way: without a government handout.

Unemployment: Stick Works Better Than a Carrot

With unemployment hovering just under 10% (and who knows how many people have left the work force discouraged) and Congress debating another extension of unemployment benefits, comes word of a study that shows using a stick rather than a carrot approach to unemployment works better at getting people back to work.

The Wall Street Journal's Real Time Economics blog reports (free, I think):

In the early 2000s [Rotterdam] ran a program that provided reemployment bonuses for job seekers who were able to find a job and hold it for at least six months. At the same time, benefit recipients who didn’t actively look for work, or otherwise failed to comply with eligibility requirements, would be subject to a temporary reduction in their benefits.

“Our main findings are that reemployment bonuses don’t seem to have worked, while benefit sanctions increased the job finding rate significantly,” the economists write.

In other words, people got off their duffs and looked for a job if it cost them money not to.  Getting paid to find a job didn't work nearly as well.  So it's logical that getting paid not to work won't get people employed either.

In economics, people react to incentives.  If there is an incentive not to work (i.e., unemployment benefits) then less people will work and unemployment will remain high.

Illegal Immigration Costs You Money

A study (pdf file) released recently postulates that illegal immigration costs each citizen house hold $1,117 per year.  The bulk of that comes from the cost of educating the children of illegal aliens.  The total cost?  $113 billion a year.

Oh, but what about the taxes paid?  They don't come close to off setting the costs as they only amount to $13.4 billion a year.  Or about 12% of the costs of illegal aliens.

Meanwhile, the Obama Administration is suing Arizona over that state's illegal immigrant law.  Looking at these numbers, you wonder why states might want to control illegal immigration even if the Obama administration isn't interested in it.  Could it be because three quarters of the $113 billion is borne by the states?

I have no problem with anyone who wants to come to the U.S. legally, obey the law, and pursue the American dream.  But illegal aliens are just that: illegal.  And they cost you and your family money.

On Strike

Today is a federal holiday and a lot of government services are closed.  I, personally, didn't notice this, except for the lack of snail mail (my Netflix movie didn't get back to Netflix today).

There have been in the past times when the government has shut down "non-essential services" due to budget impasses or there have been public employee union strikes.  And there has been great wailing and gnashing of teeth over the inability of some to access government services.  And yet, my life was by and large unaffected.

But what if business decided to go on strike.  Just a one-day-long business strike, where all businesses close their doors and refuse to do anything.  Would that affect your life?  You bet it would.  You could buy . . . nothing.  No food, no gasoline, in some cases no electricity (you'd probably still have water), no phone service (land line or cell), no Starbucks (my wife would go nuts), nothing.  There'd be no T.V. except for public television and no radio but public radio.  And if you get your T.V. through a satellite or cable company, then no T.V. at all.  There'd be no internet or email.  Oh, and a lot of you wouldn't be working.  No pay for one day.  Think what one day of no business would do to tax receipts, income taxes, payroll taxes, and business taxes.  If every business in the U.S. ceased operation for one day there'd be havoc.

Of course, it would never happen.  But it would be an exercise in letting people know exactly how much they depend on businesses everyday.  Businesses that supply you with what you need so they can make money.  It's great how that works. 

There are two principal means to acquire money and/or power: business or government.  In government you get more money and power by having a bigger bureaucracy with more regulations and higher taxes to pay for it all.  You necessarily empower government to control the lives and take the wealth of other people.  And you do it with the threat of violence.  (Stop paying taxes and see how long it takes IRS agents to show up at your door with guns.)  If you did this outside of government you'd be thrown in jail.

In business, you get more power and money through providing products or services others want or need.  You necessarily empower individuals by giving them choices and creating wealth.  And it is all voluntary.  (Don't buy Windows 7 and Bill Gates will not send armed nerds to your house.)

So next time you're enjoying the benefits of business, including quite possibly, your paycheck, give thanks for the millions of unsung heroes who are business people, providing for you your daily needs.

Obamanomics: Epic Fail

Pretty bad when even the AP notices things aren't going well:

The economic rebound is stalling.

A raft of weak new reports Thursday provided the strongest evidence yet that the recovery is slowing and added to concerns that the nation could be on its way back into recession.

Most notable was a rise in the number of people filing for unemployment benefits for the first time. The four-week average for jobless claims now stands at its highest point since March.

So, why is the recovery sputtering? 

Tell me, what have the Obama Administration and the Democrats done to help the economy?  Increased our debt horrendously in the name of "stimulus."  Passed or threatened to pass massive new regulations which only increase uncertainty in the economy.  Oh, yeah, Obamacare, adding more costs to employers and more uncertainty as we await the new IRS regulations.  And are they going to hike taxes as the Bush tax cuts expire and Obamacare requires more money.

Obama is making the same mistakes FDR did, and the Japanese did with their "lost decade."  We're going to have a lost decade if we don't vote these fools out of power.

U.S. Corporate Tax About to be The Highest.

Not only does the U.S. lead the world in the having one of the worst tax systems out there, but soon it's corporate tax may be the world's highest.

Right now, at 39.2%, the U.S. is only beaten by Japan's 40%.  But Japan is, according to some, about to cut their corporate tax rate to try to help their economy:

Within the pages of the Democratic Party of Japan's newly released economic "growth strategy" report, one section outlined a plan to slash corporate tax rates by up to 15 percent.

The problem is, capital is mobile.  And it will go where there is the least resistance to making more money.  If the U.S. hopes to compete in the world, it needs a corporate tax rate that is competitive with our competition.  Perhaps even a very low or zero corporate tax rate.

But, of course, the Democrats would never cut taxes for evil corporations.  Even to grow the economy.

Senator Dianne Feinstein Wants Health Care to be Rationed

An immutable law of economic is that if you put price controls on something to lower the price, you will lower the availability of that commodity and often cause shortages.  This can lead to rationing.  We saw this during the gas shortages of the 70s and we see it in socialized medicine in other countries.

Now, California Senator Dianne Feinstein wants to bring this to our medical care.  The San Francisco Chronicle's Below the Beltway blog reports:

Sen. Dianne Feinstein tried to insert a provision to set up a national rate authority to control premium increases, but it didn't comport with the rules used to pass the law in the Senate. Some states do regulate rates now, but California is not one of them. Now she wants to pass the rate authority as a separate bill.

Why?  Because insurer profits are up (oh, those evil corporations!).  But apparently Senator Feinstein hasn't studied Economics 101 or she'd know this will only lead to shortages of insurance and that can only lead to rationing, either by long waits or out right "you get care; you don't" decisions.  Maybe even death panels to decide who gets to live (get care) and who doesn't.

Unfortunately, Ms. Feinstein is not running this year.  But maybe we can put her in the minority, where she belongs.