Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

The Problem, and the False Solution

Mark Steyn makes an interesting—indeed, vitally important—point about government spending. The Left is always keen on telling us that we are under-taxed, or that the "rich" aren’t paying their fair share, or some such nonsense.  We’ve argues long and hard here that what we face is not a revenue problem, but a spending problem. Mr. Steyn pithily sums up an important bit of evidence for that assertion.

The total combined wealth of the Forbes 400 richest Americans is $1.5 trillion. So, if you confiscated the lot, it would barely cover one Obama debt-ceiling increase.

That’s really the problem in a nutshell. This week, the President asked for a $1.2 trillion debt increase.  We could pay for it, I suppose, by confiscating all the wealth of the Forbes 400, and have a nice $300 billion left over…but there won’t be too many people left that we can soak to cover the next debt ceiling increase. Also, as a point of academic interest, President Obama’s debt ceiling increase is $200 billion more than the entire national debt was in 1980.

To the extent we do have a revenue problem, perhaps it’s not that the rich pay too little, but rather that the poor do. 47% of American’s don’t pay any income tax at all. Which means that the "soak the rich" argument can really be boiled down to the 47% of Americans that don’t pay income taxes think the remaining 53% aren’t paying their fair share.

Well, someone isn’t, at any rate.

At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done. Our most enlightened citizens think it’s rather vulgar and boorish to obsess about debt. The urbane, educated, Western progressive would rather "save the planet," a cause which offers the grandiose narcissism that, say, reforming Medicare lacks.

And reforming Social Security, while we’re at it. Which we aren’t. And which, combined, will eat up the entire Federal budget in the not-too-distant future.

Something that can’t go on forever, won’t. It’d be great to have a first-class military, generous Medicare and Social Security benefits. Along with all the rest of the coddling state that supports in the grand manner to which we’ve become accustomed. But the future won’t allow us to be that generous. You see, we’re heading to a $16.5 trillion national debt, because, instead of being prudent with our money in order to meet all those future obligations, we blew it.

We spent money we didn’t have to build carrier groups and JDAMs, No Child left Behind and Medicare Part D. At the current rate, the federal government will, sometime this century, consist of a single department that does nothing but collect taxes and issue Social Security checks, because there won’t be one red cent left over for Defense, Justice, State, Commerce, Agriculture, or Treasury. And, we probably won’t be able to afford even that.

Mainly, because we won’t be able to produce much of anything.

Last January, the BBC’s Brian Milligan inaugurated the New Year by driving an electric Mini from London to Edinburgh, taking advantage of the many government-subsidized charge posts en route. It took him four days, which works out to an average speed of 6 mph — or longer than it would have taken on a stagecoach in the mid-19th century. This was hailed as a great triumph by the environmentalists. I mean, c’mon, what’s the hurry?

What indeed? In September, the 10th anniversary of a murderous strike at the heart of America’s most glittering city was commemorated at a building site: The Empire State Building was finished in 18 months during the Depression, but in the 21st century the global superpower cannot put up two replacement skyscrapers within a decade.

The 9/11 memorial museum was supposed to open on the 11th anniversary, this coming September. On Thursday, Mayor Michael Bloomberg announced there is "no chance of it being open on time." No big deal. What’s one more endlessly delayed, inefficient, over-bureaucratized construction project in a sclerotic republic?

This is—as hard as it may be to believe—the same country that, in 1940, had an army smaller than Rumania, and by 1945, had the military power to, had we wanted, rule the globe. Now, we’re the country that can’t replace the World Trade Center in 10 years. This is not emblematic of a can-do country with the willingness to attack and solve problems with a vengeance.

But the president thinks that if we can only tax millionaires more, we can fix this place up quick.

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Dale Franks
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Economic Statistics for 29 Dec 11 (Updated)

Today’s economic statistical releases:

In a Dec 24 week clouded by the need for estimates, initial unemployment claims rose 15,000 to 381,000. Despite that, the 4-week moving average fell 5,750 to a 375,000, the eighth decline in 9 weeks.

The Chicago Purchasing Managers Index remains steady at 62.5 this month, but new orders are especially strong at 68.0.

The Bloomberg Consumer Comfort Index dropped to -47.5 last week, down from a reading of -45.0 last week.

Low prices and mortgage rates are boosting the housing sector, pushing the pending home sales index up 7.3% to 100.1.

The Kansas City Fed Manufacturing Index was supposed to be released this morning, but apparently, the Fed is delaying the release. Probably holiday-related issues.

UPDATE: The Kansas City Fed Manufacturing Index was much lower than expected, coming in at -4, vice analysts’ expectations of 6.

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Dale Franks
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Economic Statistics for 27 Dec 11

Today’s economic statistics releases:

S&P/Case-Shiller reports home prices are still trending downwards, with prices down -0.6% last month, following last month’s -0.7% decline.On a year-over-year basis, prices have dropped -3.4%.

Optimism on jobs and income resulted in a 9.3 point rise in consumer confidence, with the index at 64.5 for December.

The Richmond Fed Manufacturing Index came in at 3, showing mildly positive manufacturing expansion in the Richmond Fed district. This confirms similar readings from both the Philly Fed and Empire State surveys, both of which also showed mild manufacturing expansion. Conversely, the Dallas Fed reports that manufacturing activity in Texas declined in December as the general business activity index dropped to -3.0 from 3.2 in last month.

Investor confidence remains steady according to the State Street Investor Confidence Index, which holds steady at 99.3.

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Dale Franks
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Economic Statistics for 23 Dec 11

Today’s economic statistical releases:

A big surge in civilian aircraft pushed durable goods orders up 3.8%. Ex-transportation, orders rose 0.3%. On a year-over-year basis, orders were up 12.1% overall, and 7.2% ex-transportation.

Both personal income and personal spending rose by 0.1% in November.

New home sales rose 1.6% in November to a 315,000 annual unit rate. Over the last few months, sales have picked up modestly, but from a very low levels, and house prices have continued to decline,m down 3.8% last month to a median price of $214,100.

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Dale Franks
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Economic Statistics for 22 Dec 11

Today’s economic statistical releases:

The Commerce Department’s 3rd estimate of 3Q GDP was again revised downwards, to a 1.8% annualized rate.On a year over year basis, GDP was up 1.5% over 3Q 2010. The downward revision was led by a smaller decline in inventories and less growth in personal consumption.

Initial claims for unemployment fell for the 3rd consecutive week, down 4,000 to a much lower-than-expected level of 364,000. Continuing claims fell 79,000 to 3.546 million, the lowest level of the recovery.

The Chicago Fed National Activity Index fell to -0.37 in November from a revised -0.11 in October. Housing is still heavily negative in the report.

The Bloomberg Consumer Comfort Index climbed to -45 in the period ended December 18 from -49.9 the prior week.

Consumer sentiment continued to improve, to 69.9 in December from 64.1 in November.

The FHFA reported that house prices in October unexpectedly declined -0.2% after rising 0.4% in September. Analysts had expected a 0.3% rise in prices, not further downward price pressure.

The index of leading economic indicators rose 0.5% in November following October’s 0.9% increase. Positive elements include the treasury rate spread, building permits, consumer expectations, building permits, and falling unemployment claims.

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Dale Franks
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Economic Statistics for 21 Dec 11

Today’s economic statistical releases are a bit conflicted:

MBA Purchase Applications fell -2.6% overall last week, with purchases dropping -4.9% and re-fis falling -1.6%. So the positive housing numbers we’ve seen so far this month haven’t affected actual sales. Interest rates are attractively low, but that is balanced by poor employment conditions, tight credit, and a lack of equity.

A sweeping revision to the data method has sharply lowered the last 5 years of existing home sales reports. But last month, sales rose 4%, anyway, well above expectations, and the rest of the report is pretty positive, too, with housing prices firming up, and supply falling. Also, the gains are concentrated in single-family dwellings, and well-distributed geographically.

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Dale Franks
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Economic Statistics for 20 Dec 11

Today’s economic statistical releases:

Housing starts jumped 9.3% to an annual rate of 685,000. But that jump is led by a 25.3% jump in multi-family dwellings, so don’t assume that individuals are getting ready to buy single-family homes again. Also, the surge is led by a 53.8% increase in the Northeast, balancing off an  18.2% decline in the Midwest.

ICSC-Goldman reports a big bump in retail sales, up 3.4% for the week, and 4.6% over last year. Redbook, however, shows a far more modest increase, with same store sales only up 0.5% from last week, at 3.4%, while the month-to-month number is actually down -2.7%. That doesn’t bode well for the government’s retail sales report for December.

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Dale Franks
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Observations: The QandO Podcast for 18 Dec 11

This week–our last podcast before we go on hiatus for the Christmas Holidays–Bruce, Michael, and Dale talk about the end of the Iraq war, and the Republican nomination race.

The direct link to the podcast can be found here.

Observations

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