Monthly Archives: July 2012
Pete DuPont does a little analysis of what should be major issues in the upcoming election. They don’t bode well for the current administration if, in fact, Republicans can get the media to actually pay attention and address them:
• Taxes. Big tax hikes coming in January will serve as dampers on economic growth.ObamaCare imposes a new 3.8% tax on investment income. On top of that, if the Bush tax [rates] aren’t extended, the top income tax rates will rise to 23.8% from 15% on capital gains and to 43.4% from 15% on dividends.
But beyond the economic impact, the Obama administration’s focus on class warfare fuels the nation’s dissatisfaction and plays on an unwise resentment towards successful businesspeople. Mr. Obama continues to push for higher taxes and does so in a way that is an attack on those who are successful–demanding that higher-income taxpayers pay their "fair share," when they already pay more than that.
The economic impact shouldn’t be waved off. When and if both capital gains and dividend incomes are taxed at a higher rate, they will effect both investment and retirement incomes. Don’t forget those” rich folks” whose retirement income is structured to depend on dividends from blue chip stocks they’ve methodically bought in small quantities over their working years. It obviously doesn’t matter that their incomes really don’t reach the “rich” threshold that the Democrats want you to envy, their retirement incomes will take an almost 200% tax increase hit regardless if the current rates aren’t extended. Apparently to collect less than a trillion dollars over 10 years taxing the “rich” (so they’ll pay their “fair share”) vs. spending $46 trillion Democrats are happy to sacrifice those folks.
As for investments, there’ll be a recalculation given the increase on capital gains and it will dampen investments, thus business expansion and finally job growth.
• Energy. The American people hear Mr. Obama talk about a broad energy strategy, but they see an administration that has attacked the coal industry with onerous regulations, done little or nothing to assist the natural gas boom, done what it can to slow down oil production, and wasted money on other initiatives that please green supporters but don’t lower the cost of energy.
This administration’s energy policy is a joke, but unfortunately it’s a very expensive joke. Its priorities are completely backward, but purposefully so. To call what they are doing a “policy” is simply absurd. This is agenda fulfillment with the people’s money on pie-in-the-sky projects that have yet to yield (nor do they even promise to yield) the energy required to make them viable. Meanwhile they’ve done everything humanly possible to retard the fossil fuel industry’s growth at a critical time for our economy. On the issue of energy, this administration gets an F-.
• Health care. Although ObamaCare remains unpopular, the Supreme Court ruling upholding it means that a 17% transfer of our economy from the marketplace to the control of the federal government is coming unless Congress and a President Romney can stop it. At a time when our nation needs lower taxes and more flexibility in health-care decisions, ObamaCare has increased taxes by hundreds of billions of dollars and allowed government to regulate most of our health care decisions.
The secretary of health and human services can now set rules that constrain doctors and hospitals and mandate prices. Mr. Obama once promised us all that if you were happy with your current health plan, you’d be able to keep it. The more we learn about ObamaCare, the unlikelier that looks–and the more the government will intrude in the relationship between doctor and patient.
Despite the disapproval of a majority of Americans, Democrats and this President rammed the legislation through anyway. That should tell most Americans what they really think of their opinion. It is a classic “we know what’s best for you” elitist move.
The second paragraph gives a hint though to the powers this legislation has given an unaccountable government bureaucrat. The Secretary of HHS now has tremendous power to make unilateral decisions that will effect everyone’s health care. Of course, that’s been discussed by some on the right, but for the most part the level of intrusion these powers will confer won’t really begin to be felt until, conveniently, after the election.
• Spending. Federal expenditures under Mr. Obama is both unparalleled and unsustainable. As National Review’s Jonah Goldberg notes, from the end of World War II until the end of the George W. Bush administration, federal spending never exceeded 23.5% of GDP, and the Bush years’ average was around 20%. The Obama spending rates have stayed above 23.5% in every year of his presidency. In the past four years, America has added $5 trillion in federal debt, and around $4 trillion of that was from Obama policies, according to The Wall Street Journal. Federal debt held by the public was 40.5% of gross domestic product in 2008. It’s now 74.2% and rising.
Despite the attempts by Democrats using fudged numbers and trying to spin it so Bush gets the blame, the spending by this administration is, as DuPont points out, “both unparalleled and unsustainable”. And, don’t forget, the President hasn’t signed a budget in over 1,000 days because the Democratic Senate has refused to pass one, despite the Constitutional requirement it do so.
Those are the things we ought to be talking about. Not whether or not Romney pissed off the Palestinians (who doesn’t piss off the Palestinians when they take a principled stand on Israel? How is this even news?).
These are where Obama’s skeleton’s are to be found. He’d prefer to keep this closet door firmly closed. The media, for the most part, seems content to help in that endeavor.
This election isn’t about anything but his administration’s abysmal record. Spending time talking anything else is simply a distraction. Unfortunately, given its unprecedented level of economic intrusion, we’re going to live or die economically with the policies that government applies. Talking about whether a candidate may or may not have insulted the London Olympics isn’t going to change that fact one iota. But it sure does distract from examining the previous administration’s record, doesn’t it?
The following statistics were released today on the state of the US economy:
Personal income rose 0.5% in June, but personal spending was unchanged. The PCE price index rose 0.1% for the month, up 1.5% from last year. The Core PCE price index rose 0.2% for the month, and 1.8% over last year.
The State Street Investor Confidence Index improved slightly in July to 94.0, which, at below the 100 level, indicates a demand for safety.
Consumer Confidence for July came in at 65.9 on the index, indicating confidence is still bumping along the bottom.
The Chicago PMI rose 0.8 in July to 53.7, indicating slightly faster growth in the Chicago area than last month. This report is usually seen as an indicator of the national PMI, which will be released tomorrow.
Home prices posted a strong jump in May according to S&P Case-Shiller, which shows a seasonally adjusted 0.9% increase. But, on a year-over-year basis, prices are down -0.7%.
The Employment Cost Index rose a relatively subdued 0.5% in the 2nd Quarter. Year-over-year, the ECI is up a moderate 1.7%.
In weekly retail sales, Redbook shows a very weak 1.1% year-over-year sales increase. ICSC-Goldman Store Sales showed a disappointing -1.7% decline in sales from last week, with a year-over-year sales increase of only 1.8%.
Need a story to get you all fired up this morning? Looking for something to make you see red?
The phone rang before sunrise. It woke Craig Patty, owner of a tiny North Texas trucking company, to vexing news about Truck 793 — a big red semi supposedly getting repairs in Houston.
“Your driver was shot in your truck,” said the caller, a business colleague. “Your truck was loaded with marijuana. He was shot eight times while sitting in the cab. Do you know anything about your driver hauling marijuana?”
“What did you say?” Patty recalled asking. “Could you please repeat that?”
The truck, it turned out, had been everywhere but in the repair shop.
Commandeered by one of his drivers, who was secretly working with federal agents, the truck had been hauling marijuana from the border as part of an undercover operation. And without Patty’s knowledge, the Drug Enforcement Administration was paying his driver, Lawrence Chapa, to use the truck to bust traffickers.
The concept of private property? Completely ignored. Permission? We don’t need no stinkin’ permission. We’re the federal government. We’re the DEA.
But eight months later, Patty still can’t get recompense from the U.S. government’s decision to use his truck and employee without his permission.
His company, which hauls sand as part of hydraulic fracturing operations for oil and gas companies, was pushed to the brink of failure after the attack because the truck was knocked out of commission, he said.
Patty had only one other truck in operation.
In documents shared with the Houston Chronicle, he is demanding that the DEA pay $133,532 in repairs and lost wages over the bullet-sprayed truck, and $1.3 million more for the damage to himself and his family, who fear retaliation by a drug cartel over the bungled narcotics sting.
Out of control? That’s a vast understatement. This is like Fast and Furious Jr. Who thought this up? Who approved it? Why didn’t they seek the permission and cooperation of the owner of the business and property? Where in the world do they get off commandeering private property and endangering the life and livelihood of a citizen without seeking his okay to use his property?
The operation was a fiasco:
At least 17 hours before that early morning phone call, Chapa was shot dead in front of more than a dozen law enforcement officers – all of them taken by surprise by hijackers trying to steal the red Kenworth T600 truck and its load of pot.
In the confusion of the attack in northwest Harris County, compounded by officers in the operation not all knowing each other, a Houston policeman shot and wounded a Harris County sheriff’s deputy.
17 hours before the owner of the truck was notified and that notification didn’t come from either the police or the DEA. The only thing the DEA didn’t commandeer for this operation was a clown car. Said Patty:
"I was not part of this," he said. "I had absolutely no knowledge of any of it until after it happened."
For its part, the DEA has not admitted that it was using Chapa as a spy because its official policy is not to comment on whether someone was an informant.
Lisa Johnson, a spokeswoman for the DEA Houston Division, confirmed that Patty’s demand had been received and noted that it would be investigated by the agency. But the Chronicle established Chapa was an informant based on interviews with multiple law-enforcement officials who spoke on the condition they not be named, and later by courtroom comments of prosecutors.
So now the DEA will drag its feet, pretend like it is investigating this, refuse to admit anything, and, as is fairly standard and routine behavior for government agencies violating the rights of the citizens these days, obfuscate, evade and attempt to block every move to shine a light on this operation.
This is outrageous. And, if the facts presented by the Chronicle are true, whoever put this together and executed it deserves to be put on trial and put in jail. That’s right, jail. We want someone held accountable for this travesty for a change.
As for Patty, pay the man, DEA. You screwed up big time, you were wrong to commandeer his property and put his life in danger. You had no right to do any of that and you owe him the chance to get his life and that of his family back in order.
It’s not like we haven’t seen where we’re headed before. One of the reasons for the war on individualism? Because it yields a desired result, a result, unfortunately, all to common in our history.
Auberon Herbert (via the WSJ) in "The Right and Wrong of Compulsion by the State", written in 1894, provides the lesson we’ve still apparently not learned:
We are fast getting rid of emperors and kings and dominant churches, as far as the mere outward form is concerned, but the soul of these men and these institutions is still living and breathing within us. We still want to exercise power, we still want to drive men our own way, and to possess the mind and body of our brothers as well as of our own selves. The only difference is that we do it in the name of a majority instead of in the name of divine right. . . .
In this case the possession of power would necessarily confer upon those who gained it such enormous privileges—if we are to speak of the miserable task of compulsion as privileges—the privileges of establishing and enforcing their own views in all matters, of treading out and suppressing the views to which they are opposed, of arranging and distributing all property, of regulating all occupations, that all those who still retained sufficient courage and energy to have views of their own would be condemned to live organized for ceaseless and bitter strife with each other.
In presence of unlimited power lodged in the hands of those who govern, in the absence of any universal acknowledgment of individual rights, the stakes for which men played would be so terribly great that they would shrink from no means to keep power out of the hands of their opponents. Not only would the scrupulous man become unscrupulous, and the pitiful man cruel, but the parties into which society divided itself would begin to perceive that to destroy or be destroyed was the one choice lying in front of them.
Sound familiar to anyone?
Gallup has a new indicator poll out that shows the nation’s national priorities according to its citizens. It’s interesting in many ways, but primarily because one of the highest calls for action is to address “corruption”.
(As an aside, notice the bottom two “priorities).
Notice carefully how the corruption question is phrased – “Reducing corruption in the federal government”. What sort of corruption? Well, one type, that most fair minded people would identify, is that which we call cronyism. As we listen to the uniformed continue to say we’ve been ravaged by the “free market” system, one can only shake their head in wonder that anyone would identify what we have as a “free market system”. Rarely, if ever, are markets allowed to function as they should in this country (or any others for that matter).
What we have is a system of cronyism (I’m removing “capitalist” from the description since there’s nothing “capitalist” about such a system) that is part of what is killing us economically. David Henderson gives us a good description of the system under which we must operate.
What is the difference between free markets and cronyism? In free markets, buyers and sellers are free to agree on price; no government agency restricts who can buy or sell, and no one is told how or what to produce. In contrast, under cronyism the government rigs the market for the benefit of government officials’ cronies. This takes various forms. Governments sometimes grant monopolies to one firm or limit the number of firms that can compete. For example, most U.S. municipalities allow only one cable company to operate in their area even though there is no technological reason more could not exist. The same is true for most other utilities.
Governments sometimes use quotas or tariffs to limit imports with the goal of protecting the wealth and jobs of domestic producers who compete with those imports. President George W. Bush did this in 2002, for example, when he imposed tariffs ranging from 8 to 30 percent on some types of imported steel. Governments sometimes subsidize favored producers, as the Obama administration did with the politically connected solar-energy firm Solyndra. Governments may use antitrust laws to prevent companies from cutting prices so that other, less-efficient companies can prosper: For example, beginning in 1958, the U.S. government prevented Safeway from cutting prices for a quarter of a century.
The entities governments help with special regulations or subsidies are not always businesses; sometimes they are unions. The federal government’s National Labor Relations Board’s (NLRB) complained against Boeing in April 2011, for example. In response to a complaint from the International Association of Machinists and Aerospace Workers (IAM), the NLRB sought to require Boeing to produce its 787 Dreamliner in Washington State rather than in Boeing’s chosen location of South Carolina. According to the NLRB, by saying that “it would remove or had removed work from the [Puget Sound and Portland] Unit because employees had struck” and by threatening that “the Unit would lose additional work in the event of future strikes,” Boeing was making “coercive” statements to its employees. As a matter of fact, it was not. Boeing was simply telling the employees some likely consequences of the union’s actions.
The Boeing-IAM case is not as simple as most of the press implied. It turns out there was a prior case of cronyism. The government of South Carolina promised Boeing “$900 million in tax relief and other incentives” in exchange for moving production to South Carolina. Such is the tangled world of cronyism.
As we discussed on the podcast last night, we have given, or at least allowed government to amass, power to do what it is doing. We have, over the years, allowed them to use tax exemptions and other favors, etc. to lure businesses to our states (and we’re then thankful for the jobs created) not understanding that by doing so, we empower politicians to be the decision makers in areas that should be the function of markets. And what does that foster? A culture that is incentivized to seek out politicians to grant such favors. To ask for, and receive, subsidies. To allow politicians to leverage that power into favoring businesses that fit their political agendas. They become the focus because we have given them the power necessary to grant those favors.
We see the same sort of game played at a national level as described by Henderson. That has nothing to do with capitalism folks. It has nothing at all to do with “free markets”. In fact, it is the antithesis of both.
Probably the most blatant and disturbing example of cronyism came in the auto bailout:
Of course, a much larger instance of cronyism under the Obama administration, one that makes the Solyndra case tiny by comparison, is the bailout of General Motors (GM) and Chrysler. Bush and Obama together diverted $77 billion in TARP funds to GM and Chrysler. In organizing their bailouts and bankruptcies, Obama violated the rights of Chrysler’s creditors and gave a sweetheart deal to the United Auto Workers union.
Law professor Todd Zywicki provides the details:
In the years leading up to the economic crisis, Chrysler had been unable to acquire routine financing and so had been forced to turn to so-called secured debt in order to fund its operations. Secured debt takes first priority in payment; it is also typically preserved during bankruptcy under what is referred to as the “absolute priority” rule— since the lender of secured debt offers a loan to a troubled borrower only because he is guaranteed first repayment when the loan is up. In the Chrysler case, however, creditors who held the company’s secured bonds were steamrolled into accepting 29 cents on the dollar for their loans. Meanwhile, the underfunded pension plans of the United Auto Workers—unsecured creditors, but possessed of better political connections—received more than 40 cents on the dollar.
Pure cronyism. The bankruptcy rules were thrown out by government in order to pay a favored constituency – labor. Henderson explains:
Moreover, in a typical bankruptcy case in which a secured creditor is not paid in full, he is entitled to a “deficiency claim”—the terms of which keep the bankrupt company liable for a portion of the unpaid debt. In both the Chrysler and GM bankruptcies, however, no deficiency claims were awarded to the creditors. Were bankruptcy experts to comb through American history, they would be hard-pressed to identify any bankruptcy case with similar terms.20
Why did the Chrysler bondholders not object? Many did. But, Zywicki notes, the federal government (in this case, the U.S. treasury secretary) had enormous power over financial institutions through TARP, and these institutions owned much of Chrysler’s secured debt.
While this has been going on for quite some time, never has it been as blatant as with this administration. And that blatancy is what has pushed the corruption priority up the list to where it stands second to job creation in this horrific economy.
What can be done to remedy this cronyism “corruption”. Only one thing, and unfortunately, those enjoying the power are where the remedy must come:
There is only one way to end, or at least to reduce, the amount of cronyism, and that is to reduce government power. To reduce cronyism, we must abolish regulations and cut or abolish special government subsidies. That way, there is nothing to fight about. For example, the government should not bail out companies or give special subsidies and low-interest loans to companies like Solyndra that use technologies or produce products that the government favors. It should have unilateral free trade rather than tariffs, import quotas, and other restrictions on imports.
Will it happen? No. Those who tout the power of markets and demand they be given priority are now considered “radicals”. Just listen to President Obama talk about the former administration and try to convince you “we tried their way before and look where it led”. Spinning a regime prior to his that was as wrapped up in cronyism as is his and claiming it represented free markets is standard, disingenuous, leftist boilerplate with nary a leg to be found standing in reality. It is pure, fatuous BS.
The “corruption in the federal government” isn’t lobbyists. They’re a symptom of that corruption. The problem resides under the Capital dome and within the offices of the executive branch. They have the power that is sought by the lobbyists. No power and there would be no petitioners. Instead, we see the number of petitioners for favorable treatment by government (usually at the detriment to their competitors) continuing to expand.
So while the public has finally identified a major problem (thanks to the blatancy of this administration) it has a long way to go before it realizes the means by which it must be fixed. Stripping the federal government of its power to grant favors to its cronies is almost an impossible task, given we have the fox in charge of the hen house.
I see nothing in the future that says those who must fix this are willing to divest themselves of the power to grant favors (see recent farm bill, an orgy of subsidies and pay offs (earmarks), for a perfect example). Show me when they’ve ever divested themselves of any meaningful power they’ve accrued.
And so cronyism will continue and we will continue to circle the drain of economic collapse. Meanwhile, Coke and Pepsi will fight about the marginal nonsense that won’t make a significant difference and make all the usual promises about being the panacea for all our ills that voters have been pining for so long.
Or it is “kick the can down the road” politics as usual.
Today’s only release is the Dallas Fed Manufacturing Survey for July, whose business activity index plunged to -13.2 from 5.8, while the production index fell to 12.0 from 15.5. This is the lowest business activity index score since September, 2011. The 19-point drop in the business activity index is also the biggest one-month decline since April 2005.
I ran across an article in Forbes by Mark Gibbs, a proponent of stricter gun control, in which he thinks, given a certain technology, that gun control in reality may be dead.
That technology? 3D printers. They’ve come a long way and, some of them are able to work in metals. That, apparently led to an experiment:
So, can you print a gun? Yep, you can and that’s exactly what somebody with the alias “HaveBlue” did.
The receiver is, in effect, the framework of a gun and holds the barrel and all of the other parts in place. It’s also the part of the gun that is technically, according to US law, the actual gun and carries the serial number.
When the weapon was assembled with the printed receiver HaveBlue reported he fired 200 rounds and it operated perfectly.
Whether or not this actually happened really isn’t the point. At some point there is no doubt it will. There are all sorts of other things to consider when building a gun receiver (none of which Gibbs goes into), etc., but on a meta level what Gibbs is describing is much like what happened to the news industry when self-publishing (i.e. the birth of the new media) along with the internet became a realities. The monopoly control of the flow of news enjoyed by the traditional media exploded into nothingness. It has never been able to regain that control, and, in fact, has seen it slip even more.
Do 3D printers present the same sort of evolution as well as a threat to government control? Given the obvious possibility, can government exert the same sort of control among the population that it can on gun manufacturers? And these 3D printers work in ceramic too. Certainly ceramic pistols aren’t unheard of. Obviously these printers are going to continue to get better, bigger and work with more materials.
That brings us to Gibb’s inevitable conclusion:
What’s particularly worrisome is that the capability to print metal and ceramic parts will appear in low end printers in the next few years making it feasible to print an entire gun and that will be when gun control becomes a totally different problem.
So what are government’s choices, given its desire to control the manufacture and possession of certain weapons?
Well, given the way it has been going for years, I’d say it isn’t about to give up control. So?
Will there be legislation designed to limit freedom of printing? The old NRA bumper sticker “If guns are outlawed, only outlaws will have guns” will have to be changed to “If guns are outlawed, outlaws will have 3D printers.”
Something to think about. I think we know the answer, but certainly an intriguing thought piece. Registered printers? Black market printers? “Illegal printers” smuggled in to make cheap guns?
The possibilities boggle the mind. But I pretty much agree with Gibbs – given the evolution of this technology, gun control, for all practical purposes, would appear to be dying and on the way to dying.
This week, Bruce, Michael, and Dale talk about the totalitarian mindset of the left, and its consequences.
The direct link to the podcast can be found here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.
The more I read political spin these days, the more I feel the shadow of Orwell’s “Ministry of Truth” from “1984” trying to solidify its existence.
Yesterday’s disastrous GDP numbers were followed up by this nonsense from the White House:
The estimates found economic growth slowed to 1.5 percent last quarter – down from 2 percent the previous quarter and 4.1 percent in the fourth quarter of 2011 — but the chairman of President Obama’s Council of Economic Advisers said that at least it’s still growing.
Yes indeed. “Still growing”. That’s a bit like saying a baby born without a brain and being kept alive on life support is “still alive”.
Technically true, but in the case of the baby, a condition everyone would agree is a tragedy. In the case of this economy, as stated, those numbers are a disaster.
"Today’s report shows that the economy posted its twelfth straight quarter of positive growth," Alan B. Krueger wrote in a statement. "Over the last three years, the economy has expanded by 6.7 percent overall, and the private components of GDP have grown by 9.9 percent."
Yes sir, the private sector is “doing fine”. 9.9% growth in three years! As for the GDP (which is forecast now to be at an annual rate of 1.3%), hey, it’s still growing.
Unsaid by the spokesman for the Ministry of Truth, is just “growing” just isn’t good enough to be considered “positive”. Rule of thumb?
Therefore, economists agree the ideal GDP growth rate is more than 2%, but less than 4%. In between the two recessions, the annual economic growth rate was ideal:
- 2.5% in 2003.
- 3.9% in 2004.
- 3.2% in 2005.
- 2.7% in 2006.
- 2.0% in 2007.
What economists are also coming to agree on is excessive debt – like that we’ve run up – puts about a 1.2% penalty on GDP. Or said another way, we’re unlikely to see GDP growth return to the “ideal” anytime soon, given the 10 year plan by government to spend 46 trillion dollars we don’t have. If you’re wondering what all that means, consult the Japanese economy for the last two decades. That’s likely the new “normal” with the policies in place from this administration.
But hey, if everyone would rather talk about Mitt Romney’s wonderful European adventure (hey, at least he’s not bowing to everyone in sight), that’s fine. It is certainly something the Ministry of Truth would approve.
They are as predictable as sunrise after something like Aurora. But, the gun banners have less of a leg to stand on now than they did way back then, although some, like Ezra Klein, try to make the case with selective statistics and the usual arguments. Howard Nemerov takes the time to demolish both.
The fact is there has been less violent gun crime since the lifting of the ban than when it was in place. In fact, we haven’t seen this low a level of violence since 1972, even while the number of guns in the country increased.
So attempting to find some correlation between the number of guns and amount of violence seems not to be there.
That doesn’t stop those who would ban your access to guns from trying. And one of their favorite means is by trying to ban scary guns … er, I mean assault weapons.
Much like politicians who rely on the public’s economic ignorance to sell economic policy that is, frankly horrible, they do the same with gun bans.
Assault weapons. Scary. Used in war. Kill bunches of people. As opposed to “regular” weapons which I guess aren’t as scary, aren’t used in war and, presumably as such logic must go, don’t or won’t kill bunches of people.
Perhaps a graphic is the best way to refute that “logic”:
It isn’t the way the weapon looks that makes it dangerous, it’s the nut wielding it. Banning so-called assault weapons is about as effective as banning cars that look like the one in the top left. If the idiot behind the wheel of the one on the right decides to drive it into a crowded sidewalk, are the people he kills any less dead because it didn’t look like the car on the left?
Of course not. The common denominator? The nut using the tool.
Not the tool.