Free Markets, Free People

Daily Archives: June 27, 2010


BlogTalk Radio – 8pm (EST) Tonight

Call in number: (718) 664-9614

Yes, friends, it is a call-in show, so do call in.

Subject(s):

Afghanistan – McChrystal out, Petraeus in – now what?

Oil spill – oil washes up on Pensacola beach, Mississippi sees no one skimming oil off shore – who’s in charge on day 69?

Economy – unemployment numbers, housing sales, GDP numbers – we’re in a recovery?

UPDATE [Dale]: Sadly, some weird technical glitch at BlogTalkRadio prevented us from getting a podcast recorded tonight.  We’ll try again next week.


Meanwhile, back in the Gulf, chaos still reigns

If there is a unified and coordinated effort in the Gulf, few people have apparently witnessed it. You know the travails of Louisiana – skimmer barges shut down for fire extinguisher and life vest inspections. Barrier island construction shut down because a federal agency wants them moved 2 miles further out.

In Alabama, Gov. Bob Riley says everything is being done “by committee” and no one is in charge while every agency seems to have absolute veto power. High water booms he’d requested specifically for the AL coast were finally found and before they could be deployed were inexplicably moved elsewhere.

Now comes the turn of Mississippi. Oil is headed for the beaches and as one critic says, it just doesn’t have to happen. Rep Gene Taylor got off of a flight over the area angry:

“It’s criminal what’s going on out there,” Taylor said minutes later. “This doesn’t have to happen.” A scientist onboard, Mike Carron with the Northern Gulf Institute, said with this scenario, there will be oil on the beaches of the mainland.

“There’s oil in the Sound and there was no skimming,” Carron said. “No coordinated effort.”

He’s right – it doesn’t have to happen. We’ve been told ad nauseum that the federal government has the containment situation in hand having been on the job since “day one”. Obviously that’s fiction. After a couple of trips to shore up his image, President Obama is back to the routine of golf vs. crisis management.

But Mississippi apparently is going to suffer the same fate as Louisiana and Alabama. No booms, no skimmer, no coordinated effort.

There were dozens of boats of all sizes running around, some leaving trails through the sheen. Two boats among a group near Ship Island were pulling boom in a line, but not using it to round up oil. That was at 10 a.m.

Taylor slipped a note to a fellow passenger.

It said: “I’m having a Katrina flashback. I haven’t seen this much stupidity, wasted effort, money and wasted resources, since then.”

Back on land in Gulfport, Taylor let loose.

“A lot of people are getting paid to say, ‘Look! There’s oil’ and not doing anything about it,” Taylor said. “There shouldn’t be a drop of oil in the Sound. There are enough boats running around.

“Nobody’s in charge,” Taylor said. “Everybody’s in charge, so no one’s in charge.

“If the president can’t find anyone who can do this job,” he said, “let me do it.”

Taylor, for those who are wondering, is a Democrat.

The administration likes to refer to the oil leak as a “man-caused disaster”.

So far the administration’s efforts at containment, well into 60 days now, has been as much of a man-caused disaster as the leak. And, as Rep. Taylor notes, it doesn’t have to be that way.

~McQ


Is Keynesianism finally dead?

By that I mean the belief that massive public deficit spending is the cure for an economic recession/depression?

It should be. And that’s the argument going on in at the G20 meeting in Toronto. The US is urging Europe and the rest of the world to “pump it up”. The rest of the world, rightly in my estimation, is resistant to the plea. The WSJ reviews why for us, using the US’s experience as the case study:

Like many bad ideas, the current Keynesian revival began under George W. Bush. Larry Summers, then a private economist, told Congress that a “timely, targeted and temporary” spending program of $150 billion was urgently needed to boost consumer “demand.” Democrats who had retaken Congress adopted the idea—they love an excuse to spend—and the politically tapped-out Mr. Bush went along with $168 billion in spending and one-time tax rebates.

The cash did produce a statistical blip in GDP growth in mid-2008, but it didn’t stop the financial panic and second phase of recession. So enter Stimulus II, with Mr. Summers again leading the intellectual charge, this time as President Obama’s adviser and this time suggesting upwards of $500 billion. When Congress was done two months later, in February 2009, the amount was $862 billion. A pair of White House economists famously promised that this spending would keep the unemployment rate below 8%.

Seventeen months later, and despite historically easy monetary policy for that entire period, the jobless rate is still 9.7%. Yesterday, the Bureau of Economic Analysis once again reduced the GDP estimate for first quarter growth, this time to 2.7%, while economic indicators in the second quarter have been mediocre. As the nearby table shows, this is a far cry from the snappy recovery that typically follows a steep recession, most recently in 1983-84 after the Reagan tax cuts.

The chart in question:

2.7% is not good, especially when most of the spending is government spending. Or said another way – this isn’t a great advertisement for over a trillion dollars spent to “stimulate” the economy.

And, as you see here – for the money, job creation has been absolutely abysmal, except for government jobs.

Now couple all of that with the awful news about house sales this past month (down 33%) and it would appear, economically, that the “stimulus” has essentially failed in its dual role of stimulating economic and job growth, wouldn’t you say?

Yet it seems the spin doctors in the administration want to pretend otherwise and, by the way, hook the rest of the world on their public spending addiciton. Thankfully, at least for their citizens, most of the rest of the world isn’t buying into the scheme. We, however, are stuck with the world’s most profligate spendthrifts in the guise of the Obama administration and the Democratic Congress.

We are told to let Congress continue to spend and borrow until the precise moment when Mr. Summers and Mark Zandi and the other architects of our current policy say it is time to raise taxes to reduce the huge deficits and debt that their spending has produced. Meanwhile, individuals and businesses are supposed to be unaffected by the prospect of future tax increases, higher interest rates, and more government control over nearly every area of the economy. Even the CEOs of the Business Roundtable now see the damage this is doing.

That’s a long way of saying the anticipation of raised taxes to pay off this unprecedented and massive assumption of public debt is keeping businesses on the sidelines and the business atmosphere unsettled. They’re not about to expand their businesses until they have a much better handle on what it will cost them to do so. That’s why, for what little recovery is taking place, it is mostly a jobless one.

Most who understand at least rudimentary economics knows that some “stimulus” from government spending, coupled with other government actions, such as tax cuts for individuals and businesses, may have a beneficial effect in times of recession. The stimulus funds get money in circulation and the tax cuts encourage businesses to expand and hire.

What we’ve seen is nothing but “stimulus” – no tax cuts, no incentive for businesses to come off the side lines. Additionally we’ve seen attacks on the business community, calls for much more draconian regulation and new mandates imposed by legislation such as health care reform.

The result has been a seemingly perpetually unsettled business atmosphere that has provided absolutely no incentive for companies to expand or hire.

What we should have all taken from this is that government “stimulus” funded by massive public debt isn’t the answer we were led to believe it was and, when it is all that is done, is more of a problem than any sort of a solution. All the “stimulus” has managed to accomplish is the promise of large tax increases to pay down the debt it created.

The other service it hopefully has rendered is to prove defective the once cherished Keynesian belief that government can spend us out of recessions.

~McQ

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