Free Markets, Free People

Monthly Archives: July 2011


The second term of Jimmy Carter?

Charles Hurt at the Washington Times seems to think so:

It has taken three decades, but Americans are finally living through Jimmy Carter’s second term.

Now we’ve got Jimmy Jr. barking at us from the White House about eating our peas and ripping off our Band-Aid. He might not even let us have our Social Security checks.

These are just the latest in a long line of nagging lectures. Already, we have been taught how we should sneeze into the crook of our arm. We need to drive less. And we need to caulk up those drafty houses of ours.

What ever happened to the soaring rhetoric and big bold ideas President Obama promised us in that historic election of his?

Billy Hollis hit this very well the other day.  This is how intrusive government has become.  And as we all know, this has been an incremental thing taking years and years.  Yes, it’s more prevalent under Democrats but Republicans have done their share as well.  

I lived through the Carter presidency and I can see many parallels to that time and that man.  I remember him as the incredible shrinking president.  It seemed he almost visibly shrunk in size as his term continued.   I’ve never been more happy to see a president shown the door  – until now.

Carter was pathetic and ineffective.  Obama is dangerous.  The good news, if there is any, is he’s also fairly incompetent and the Democrats couldn’t organize a circus if they had a monopoly on popcorn, hot dogs and cotton candy.   But that aside, there are some Carteresque things going on that certainly remind me of Jimmy:

One of the most unpleasant things about Mr. Carter was the condescending disdain he could barely disguise for struggling Americans and their irritating malaise.

Increasingly, Jimmy Jr. is having difficulty concealing that very same disdain for us as the political winds around him turn hostile and all of his bright ideas lie fallow as nothing more than socialist hocus-pocus.

But even Mr. Carter never laid bare so baldly and plainly as Mr. Obama did earlier this week his deep-seated contempt for this whole annoying process we call “democracy.”

I have to agree that Obama’s condescension is at least as bad as Carter’s.  I’m not sure what happens to some people when they achieve the Oval Office, but they seem to want to be the Daddy-in-Chief instead of the Commander-in-Chief.  There’s something within that makes them feel they have to meddle in the lives of others to the extent, as Hurt and Billy noted, of lecturing on eating their peas.  

And Hurt is right about Obama’s apparent disdain for democracy.  Other than a tool to get him elected, Obama has displayed little desire to accomplish his “change” legislatively.  Instead we have executive fiat the chosen path with the EPA getting ready to enact rules that appear to be regulator overreach and properly the  business of Congress.   We have the administration single-handedly shutting down oil and gas production.   The NLRB is on a vendetta against businesses and busily trying to enact a pro-union agenda.   Democracy?  Who needs it.

And then there’s the sanctimonious hypocrisy:

The problem with reaching a deal to raise the debt ceiling, he explained in a long sermon, is that there is this huge wave of Republicans who won control of the House in the last election by promising not to raise any more taxes and to cut the absurd overspending that has driven this town for decades.

He bemoaned – in public – that these Republicans are more concerned about the “next election” rather than doing “what’s right for the country.” In other words, he is saying the honorable thing would be for these Republicans to ignore the expressed wishes of voters, break their campaign promises and raise taxes. Wow.

Exactly.  This while he tries to frame the whole thing politically as well.  I mean what was the walk out but political theater – something of which Obama is a master?

Jimmy Jr., as Hurt calls him, has to go.  We’ve suffered through most of one term of the “Daddy-in-Chief” (one political sin among many). Among many things I’m most tired on the Chief Nanny.  I’d prefer we make him eat his political peas come November 2012 and go back to community organizing.  And among near future generations, I’d prefer Barack Obama be the example of a totally failed presidency and retire Jimmy to the political peanut farm.

~McQ

Twitter: @McQandO


Poll: US more unpopular now in Middle East than during Bush administration

I wonder if this is “unexpected”:

The hope that the Arab world had not long ago put in the United States and President Obama has all but evaporated.

Two and a half years after Obama came to office, raising expectations for change among many in the Arab world, favorable ratings of the United States have plummeted in the Middle East, according to a new poll conducted by IBOPE Zogby International for the Arab American Institute Foundation.

In most countries surveyed, favorable attitudes toward the United States dropped to levels lower than they were during the last year of the Bush administration. The killing of Osama bin Laden also worsened attitudes toward the United States.

Apparently “hope” isn’t selling anywhere.  And this isn’t a one-off problem either:

The poll was conducted over the course of a month among 4,000 respondents in six countries: Egypt, Lebanon, Jordan, Saudi Arabia, the United Arab Emirates and Morocco. Pollsters began their work shortly after a major speech Obama gave on the Middle East, in which he spoke broadly of his vision in the Middle East and pressed Israel, in unusually frank terms, to reach a final peace agreement with the Palestinians.

The findings are largely in line with those of a poll conducted in the spring of 2010 by the Pew Research Center, which also found favorable views of the United States and Obama slipping. As with the new poll, Obama got his worst ratings for dealing with the Israeli-Palestinian conflict.

So two plus years after the introduction of the Obama “unclenched fist”, we’re in worse shape than we were.

It’s also a repudiation of the claim that Obama was the driver of the “Arab Spring”.  Most people are unlikely to follow or find inspiration in someone of which they don’t think very highly.  And apparently,  according to this poll, that’s Barack Obama in the Middle East.

In five out of the six countries surveyed, the U.S. was viewed less favorably than Turkey, China, France — or Iran. Far from seeing the U.S. as a leader in the post-Arab Spring environment, the countries surveyed viewed "U.S. interference in the Arab world" as the greatest obstacle to peace and stability in the Middle East, second only to the continued Palestinian occupation. . . . President Obama’s favorable ratings across the Arab world are 10% or less.

Of course that doesn’t mean he doesn’t have his apologists:

Zogby said that he was surprised that favorable attitudes toward the United States had actually dropped to levels below where they were in 2008. By the same token, he said, Obama has been burdened by the fact that “every one of the issues that he’s inherited has been more difficult than he or anyone else expected.”

Really? Yeah, this couldn’t be Obama’s fault.  The man has done nothing in the Israeli/Palestinian situation but beat up Israel and what has it gotten him?   Bupkiss.   No progress and this nation that is now less popular (and certainly less respected) than it was under the last president who was supposed to be the worst thing since Adolph Hitler if you listened to the left.

Wonder what they’ll say about this?

~McQ

Twitter: @McQandO


Ratcheting up the scare tactics – Obama says no guarantee Social Security checks will go out Aug. 3

So typical of how politicians tend to treat the serious matters of policy when they want to literally scare up support:

President Obama on Tuesday said he cannot guarantee that retirees will receive their Social Security checks August 3 if Democrats and Republicans in Washington do not reach an agreement on reducing the deficit in the coming weeks.

"I cannot guarantee that those checks go out on August 3rd if we haven’t resolved this issue. Because there may simply not be the money in the coffers to do it," Mr. Obama said in an interview with CBS Evening News anchor Scott Pelley, according to excerpts released by CBS News.

The Obama administration and many economists have warned of economic catastrophe if the United States does not raise the amount it is legally allowed to borrow by August 2.

If nothing else this should forever kill the nonsense about the “Social Security lockbox”.

This is akin to what you always hear when you talk budget cuts or the like.  It’s is always about cutting police, fire and education services first – not the bureaucrat in some office doing redundant work.  You can’t scare people onto your side without such tactics, apparently.

But American’s aren’t at all convinced that the debt ceiling should be raised according to Gallup.  That means it’s time to scare the old folks again.

Nice.

MJW ADDS: Just to throw some graphic wood on this fire, James Pethokoukis put together a handy little chart to demonstrate what a huge lie Obama is telling, and the Dems and the media are trying to sell:

August revenue versus expenditures

Note that all interest, Social Security, Medicare and defense payments can easily be made, and we are not in manner, shape or form in danger of default.

An excellent breakdown of exactly what budgetary issues we are facing can be found here [HT: Insty].

~McQ

Twitter: @McQandO


What a difference a percentage point makes

Especially when you’re talking about GDP growth:

The "new normal" is a term coined by the brain trust at the giant bond fund PIMCO. Anthony Crescenzi, a PIMCO vice president, strategist and portfolio manager, is part of that brain trust.

"The difference between 2 percent growth and 3 percent growth is of major importance and has major implications for the entire economy, for financial markets, for the budget," he says. And the heart of the problem is job creation.

Crescenzi and his colleagues argue that the U.S. economy could actually grow 2 percent a year without adding any new jobs. That’s because the productivity of current workers is rising at about 2 percent a year. "In other words a company can produce 2 percent more goods and/or services a year even if it doesn’t increase the number of people it employs," he says.

Smaller Incomes Mark Zandi, chief economist at Moody’s Analytics, thinks some new jobs would be added in an economy growing 2 percent a year, but far fewer than one growing 3 percent. "In a 3 percent world we’d create roughly 1.6 million jobs a year," he says. But he says that in a 2 percent world, job creation would be less than half — around 700,000 jobs.

Meanwhile, in China, growth hit 9.5%.  So what is China doing, policy wise, that the US isn’t?  Well, for one thing it is encouraging businesses and has established a positive business climate.  Additionally, it isn’t borrowing money to pump into some black hole it calls “stimulus” at a rate faster than we’ve seen in recent history. Etc.

It’s pretty bad when you have to look to China to point out what the US should be doing.   As Henry Kissinger recently said, the Chinese used to think we had the financial side of things pretty much figured out.   Then this mess and resultant stupidity in reaction to it.   The one thing we should have had the inside track on, we didn’t, because we chose to recreate the failed policies of the Hoover/FDR era without a world war to finally pull us out of the mess (or at least I hope that’s the case).

Is this the “new normal” as Crescenzi claims?   PIMCO, btw, is the world’s largest bond fund (almost 2 trillion).  PIMCO also recently announced that it would no longer be buying US debt.

Why?  Because no one is confident the Federal Reserve knows what it is doing:

Some Fed officials at the June meeting also said additional monetary stimulus would be appropriate “if economic growth remained too slow to make satisfactory progress toward reducing the unemployment rate and if inflation returned to relatively low levels after the effects of recent transitory shocks dissipated,” according to the minutes.

Really? 

So they are considering a “QE3”?  Note the change from “last August” to now. 

Last August, when Bernanke signaled in a speech in Jackson Hole, Wyoming, that the Fed would embark on a second round of Treasury bond purchases, employers were cutting jobs, pushing up the unemployment rate to 9.6 percent. The weakness in the economy prompted Bernanke to focus on the possibility of deflation, or a broad-based drop in prices and asset values including homes and stocks.

The economy is in better shape now than in August, though hiring remains “frustratingly slow,” Bernanke said at a June 22 news conference. Employers added 18,000 jobs to their payrolls last month, the fewest in nine months, the government reported last week.

The Fed’s $600 billion Treasury bond-buying program, completed in June, was designed to spur economic growth, employment and consumer spending by lifting stock prices and reducing borrowing costs.

Is the economy in “better shape now than in August”?  I say ‘no’. And so do most of the economic indicators.  Dr. Robert Barro, Paul M Warburg Professor of Economics at Harvard University makes it clear where the current policy is leading:

Turning to quantitative easing, he warned that the US and UK are storing up inflation and that the Bank of England may be too complacent. Although there is no threat to inflation now, he said: "You have to have an exit strategy. Ben Bernanke [chairman of the US Federal Reserve] and [Bank Governor] Mervyn King are aware of this, but I think they are a little over confident about how they can accomplish it. Because you want to have this exit strategy without having a lot of inflation.

"That’s when the inflation would occur. If there’s a recovery and there’s all this liquidity and somehow the central bank has to reverse it."

That’s precisely where this is all headed – somehow at, at some point, the Fed has to wring out all this money it pumped into the economy.  And that stored up inflation is likely to explode during that process – a real economy killer.  Barro is saying he has little confidence in the Fed, deeming them “over confident” in their ability to do that while avoiding letting the inflation dragon out of the cage.

Meanwhile, in Europe …

Yeah, it’s a mess.  And given the propensity of our policy makers to recreate the policies of the Great Depression, I don’t see it getting better any time soon.  So yes, for at least the foreseeable future, the “new normal” may be 9.2% unemployment.  Because there is still no reason or incentive for US businesses to take the chance of expanding and hiring in such an uncertain economic atmosphere.

Until they are much more confident in the policies of this administration and the Federal Reserve, few if any are going to change the status quo.

~McQ

Twitter: @McQandO


Want a jobs program that will actually benefit America and its security? There’s one available …

Check out this graphic:

 

key-to-energy-security

 

Right now the US imports about 70% of its oil.  30 years ago, we only imported 28%.   What happened? 

Well our economy boomed, we created a huge demand for more oil and we had to find other sources.   But that’s not the only reason.  The government of the US hasn’t been the most helpful ally in this battle for resources.   ANWR is the perfect example of what not to do politically.  The Clinton era narrative of “it will take 10 years before we have anything” rings hollow right now some almost 20 years later.  Obviously had we done what was necessary then, we’d be reaping the benefit now.

But that graphic is stunning, don’t you think?   In a partnership with Canada (the country from which we import the most oil and it is a extraordinarily secure source), who now provides about 20% of our total consumption (US + Canada = ~ 58% of our annual total), we could be 92% self-sufficient in 20 years.  What that would mean is we could get that other 8%, for instance, from Mexico (now providing about 10% of the total).  Or not.  We’d no longer be held hostage by an oil cartel and unfriendly or unstable countries.

Right now 30% of our imports come from Saudi Arabia (2), Venezuela (4), Nigeria (5), Iraq (6), and Algeria (8).   We could eliminate every one of them as a supplier.  Every. One.

Of course that means doing something politically now.  But that doesn’t seem to register with this administration.  And that seems funny given the obvious screaming need for them to be seen creating jobs and driving the unemployment rate down.

Check out these numbers from a study by Quest Offshore Resources done at the behest of the American Petroleum Institute and the National Ocean Industries Association.

Key findings:

  • Total offshore-related oil and gas employment could hit 430,000 in 2013 if the permit slowdown is reversed, including about 187,000 new jobs.
  • New policies could result in a 71 percent increase in oil and natural gas spending in the Gulf to $41.4 billion.
  • Texas (will reach 149,000 jobs) and Louisiana (129,000) would gain the most from a return to normalcy in the Gulf, but the jobs impact would touch a number of non-Gulf states as well – including California, Pennsylvania, Ohio and Michigan, Quest says.
  • Tax revenues would accrue to all levels of government "if the government pursues a balanced regulatory approach that allows for the timely development of the backlog of (Gulf) projects in an environmentally responsible manner." Said API President and CEO Jack Gerard: "We need to create taxpayers, and that’s what this would be doing."

Result?  A 20 year program that would result in jobs, revenue and energy resources.

Seems like a no-brainer right?  Politicians are currently embroiled in debt ceiling negotiations, but take a look at what doing something like this would mean:

By granting comprehensive access to U.S. oil and gas reserves, $4 Trillion in state and federal revenue could be generated to fill American treasuries and eliminate nearly 30 percent of the national debt.

That growth would spur new jobs – lots of new jobs:

530,000 jobs could be created with increased access to U.S. oil and gas resources. To put that in perspective, that would provide enough jobs to employ 85 percent of Vermont’s entire population. By 2015, development of the Marcellus Shalealone could create 160,000 jobs in Pennsylvania, 20,000 jobs in New York and 30,000 jobs in West Virginia. Add that to the 9.2 million Americans currently employed by the oil industry and you’ve got the economic engine powering our economy and our way of life.

That is how you turn an economy around.  That is how you increase revenues to government.  That is how a smart government would approach the current problem (and in more areas than just gas and oil).

Instead we have the “permatorium”.   If you’re wondering why this isn’t happening, you need to ask the administration:

"The slow pace of Gulf development since the accident has cost jobs, revenue and energy production," said API President and CEO Jack Gerard. "The study shows what could be accomplished on jobs if project approvals and permits could get back to a normal pace. We’ve done the necessary work raising the bar on safety. We cannot continue to delay developing energy and hiring people in the Gulf. The disappointing unemployment numbers from the government last week make this more important than ever," Gerard added.

The “accident” of course is the spill in the Gulf.  And Gerard is right.  This slow down, after the industry has “raised the bar on safety” is inexcusable.  Especially in this unemployment climate.  Especially in this economic climate.  Especially with tax revenues down.  And especially with energy insecurity so prevalent.

9.2% unemployment, a slowing economy, a revenue starved government, a country suffering from energy insecurity and a huge part of the answer sitting right there in front of them – and they refuse to act. 

~McQ

Twitter: @McQandO


Eat my peas? Screw you, Obama – I’m not a child for you to raise

Obama says it’s time for us to “eat our peas“. Well, here’s the problem, jacka$$ – I don’t like peas.

I’m an adult. Been one for almost thirty years, in fact, so I have a lot of practice at it. I’m older than you, jerk.

So take your sage advice about how we adult citizens just have to suck it up and bend over for your political friends one more time, and shove it in Joe Biden’s cheek pouches.

___________________

If I were a political consultant for a Republican, tea-party-oriented candidate for president (or indeed for any federal office), I would suggest that a central campaign theme be “It’s time to start treating Americans like adults.”

I believe Obama’s condescending smarminess is grating and offensive to a lot of voters. The Republicans are fools if they don’t offer a counterpoint to it.

This “treat us as adults” theme encompasses many things. It means allowing us to make our choices about our lives and our jobs, and be responsible for the outcomes. That includes a whole host of areas that the federal government has completely screwed up in their attempts to treat us like irresponsible children.

    – We need to be responsible for our own retirement. We don’t need to be treated like children who don’t understand the value of money, can’t see the future, and don’t have the self-discipline to save.

    – We need to be responsible for our own healthcare. We don’t need to be treated like children who must be told what to eat, when to exercise, and what treatment they are to get when they are sick, without any thought to how to pay for it.

    – We need to be responsible for our own businesses. The vast majority of business owners are adult enough to know what safety precautions to take, and what accounting standards to use. The small minority that doesn’t understand safety should have their butts sued off and lose their businesses when they are negligent. The tiny minority that commits accounting fraud should be put in prison.

    – We need to be responsible for our property. That starts with allowing us to keep our own money, and spend it as we like. It also implies some stability that is not currently in evidence, so that we don’t lose huge sums in real estate and stock investments because of governmental incompetence and cronyism with the executives of large companies.

    – We need to be more responsible for our own safety. Sure, there’s always a need for law enforcement, but it can’t be the first resort for personal safety. Any law enforcement that could do that would be indistinguishable from a police state. Therefore, we need the right to buy, possess, and use the weapons that provide that safety.

    – We need to be responsible for raising our own children. We need to have more influence over their education, and we particularly need to stop wasting our time reversing the indoctrination they suffer at the hands of the educational bureaucracy.

    – We need to be responsible for treating other people appropriately. If we are stupid or obnoxious in our treatment of others, we need to suffer social consequences, not legal ones.

I know transitioning to treating Americans as adults would be hard. We’ve now had a couple of generations of government dependents, and they have been actively discouraged from learning the skills and responsibilities of adulthood.

The problem is that we’ve reached the end of our rope on supporting this class, which has a natural tendency to grow.

The fundamental problem we face (and that all societies face) is that there are plenty of people who don’t want to be adults. They want to go on being children. It’s easier, at least superficially. Being an adult is hard; you have to make agonizing decisions sometimes. You sacrifice your own pleasures for your children. You deal with random outcomes, such as acts of nature. You have setbacks, and you only have yourself and those who will voluntarily help you to deal with those setbacks.

So these folks have made a pact with the devil. They get to go on essentially being children, with their housing, food, and healthcare guaranteed at a certain level. They can have children without the trouble of getting married and taking on a long term commitment. They can slough off their education. When things go bad, they can do the equivalent of a toddler’s temper tantrum by blaming any convenient third party for their own lack of capability to deal with life.

They never gain the satisfactions of being an adult, but they do get to avoid the responsibilities – at least, until the whole thing comes crashing down around them, leaving them completely unequipped to deal with the wreaked society into which they will eventually be thrust.

Some of them go one step up the ladder. They take jobs in the public sector. OK, at least they are willing to work, and a lot of public sector employees do work pretty hard. But they still exhibit many of the same childlike expectations. They expect that their job will always be secure, with no thought or concern for where the money comes from. They expect constantly rising compensation. They expect to be insulated from any real criticism by those outside the bureaucracy, i.e., the common citizens.

It’s no wonder that we’re having trouble as a society facing reality. We have created a large class of people whose entire daily existence is based on avoiding the real, adult world.

However, I believe that group is still a minority. At least, I hope it is. With its natural tendency to grow, however, it won’t be a minority for much longer.

So, while we still have a majority of people who prefer to be treated as adults, we need to appeal to that desire. We need to leverage it to shame some people into dropping their something-for-nothing expectations. For example, we need those archetypical self-sufficient farmers to give up every single subsidy they get, and run their farms like the self-sufficient adults they pretend to be. We need to shame businessmen to stop sucking at the government teat and provide goods and services that people will voluntarily purchase, without subsidies, special favors, or restrictions on their competition.

No society constituted with a majority of childlike adults is stable. Greece is the most obvious recent example.

Obama is never, ever going to treat American citizens as adults. He is psychologically incapable of it. Where Bill Clinton could give in and sign welfare reform, Obama can’t. It’s simply inconceivable to his leftist soul that society could move further from his leftist principles instead of closer to them.

The short term, then, is for Republicans to stand firm against his desire to turn more Americans into childlike adults. No more taxes. Insist on spending cuts, using whatever leverage comes to hand. Endure stalemate, if necessary, because it’s worse than the alternative. Giving in to Obama just means more ground to retake later.

The medium term is to realize that a complete turnaround is absolutely necessary in the relationship between American citizens and their federal government. Citizens must be allowed and required to be adults.

I believe if the GOP embraces this as a guiding principle, we would see a bigger electoral triumph than 2010, bigger than 1994, bigger than 1980. I believe there is latent demand in our citizens for being treated as equals instead of wards. I think they’re sick of condescending lectures on eating their peas from incompetent, smug Democrats who have failed at everything they have tried. I think many are disheartened that they want to take on the mantle of adult responsibility, but they can’t because they can’t find jobs.

However, if we get another Republican candidate who is from the same vein as authoritarian Democrats – say one that believes government control of healthcare is just fine and showed his true colors by implementing it in his state – then the GOP will forfeit a lot of that latent demand.

The GOP might still win with such an authoritarian-minded, political class approved, “to the manor born” candidate. Bill Quick thinks his Pomeranian could beat Obama, and it’s hard to argue with his reasoning.

But without sweeping majorities, clarity of mandate, and courageous, principled leadership at the top, the Republicans won’t be able to get anything of consequence done. They’ll fritter, attempt to look “bi-partisan” to please the mandarins at the Washington Post and New York Times, get gamed by the Democrats, and lose what is probably our last chance to make a real reversal before the debt resulting from our social welfare failures sends the economy into complete meltdown.


Obama claims that stimulus worked when in fact it simply delayed the inevitable with borrowed money

Seriously out of touch:

Three days after the U.S. Department of Labor reported that the national unemployment rate had ticked up from 9.1 percent in May to 9.2 percent in June, President Barack Obama said that the loss of jobs in the public sector is “evidence” that his $830-billion economic stimulus legislation worked.

“Now, without relitigating the past, I’m absolutely convinced, and the vast majority of economists are convinced, that the steps we took in the Recovery Act saved millions of people their jobs or created a whole bunch of jobs,” Obama said at his Monday press conference.

Except he can’t point to anything to prove his point.  What we do know, however, is much of that money went to pay down the debt of the various states, which is hardly likely to create jobs.  We also know it was spent on things like “Operation Fast and Furious” which certainly didn’t lead to any jobs – at least here in the US.

So this is the only place he has to point:

“And part of the evidence of that is as you see what happens with the Recovery Act phasing out,” he said. “When I came into office and budgets were hemorrhaging at the state level, part of the Recovery Act was giving states help so they wouldn’t have to lay off teachers, police officers, firefighters. As we’ve seen that federal support for states diminish, you’ve seen the biggest job losses in the public sector–teachers, police officers, firefighters losing their jobs.”

Or, ”we didn’t save anything, we just delayed, for a short time, the inevitable.”

That makes it hard to claim that the stimulus “worked”.  Public sector jobs don’t contribute to the economy – they’re a drain.  Oh sure we’ve decided they’re a necessary expense, but they don’t contribute to the economy the way a private sector employee does.  What has been said for years is we can’t afford the overall expense of government – that it must cut back to “necessary” and drop the “unnecessary”.   There was the easy way to do it (when the economy was good) and had they done so state governments would have been in better shape when the downturn hit.  But they didn’t.  Government has a tendency to expand when revenues increase, not contract.  So when revenues contract, they are unable to fund the excess.

So the stimulus didn’t create or save jobs, it funded the excess jobs states and localities should have shed long ago as “unnecessary” and, more importantly, “unaffordable.”

Look, this unemployment problem is the beast that will devour Obama and he knows it.  But if this is the best he can come up with, he’s in for a very long and bumpy re-election campaign, at least when it comes to this subject.

~McQ

Twitter: @McQandO


Tax subsidies are a thing.

Many on the Right despise the very idea of a “tax subsidy” and think that a targeted tax credit or deduction is just letting people keep their money.  To say otherwise, so the conventional wisdom goes, is to assume that the government owns all our income.  I think there’s a well-meaning error in this thinking, and I’ll illustrate that with a simplified example.

Two countries are running deficits, or start with balanced budgets (take your pick).  Country A decides that next year they’re going to establish a tax credit for farmers worth $X.  Country B decides that they’re going to send an equal amount, $X, to their farmers as direct subsidy payments.

  • In both countries, farmers have an extra $X in their pockets.
  • Both countries must borrow an extra $X, meaning that future taxpayers in both countries are on the hook for $X plus interest.

There might be a minor difference in efficiency between having the IRS administer a tax credit and having the Department of Agriculture cut checks, but everything else is basically the same.  Yet Country A acted through the tax side of the ledger, while Country B acted through the spending side.  If Country B is subsidizing its farmers, then so is Country A.  Hence, tax subsidy.

There’s no trick here.  The key is that it’s not all about the spending and tax rates this year.  It’s about future taxpayers too. If current taxpayers don’t pay for what the government is spending this year, then future taxpayers must.  A deficit-financed “tax cut” without a spending cut is just shifting taxes into the future.  That doesn’t lower the long-term burden of government.

Importantly, there’s no claim here about who should pay, this year or in the future.  But the people who are really being “subsidized” are those who would be most politically vulnerable to getting taxed today if the burden wasn’t shifted onto future taxpayers.

Some on the Right say that if we raise taxes today, that won’t save future taxpayers anything because the government will just spend all the new revenues and then some, and we’ll be back in a deficit.  So we might as well “starve the beast” by cutting taxes, right?  That may have some strategic merit, but there’s still a tax subsidy to whatever extent “starving the beast” doesn’t work, and since big deficits tend to raise interest rates, there’s a built-in compounding cost to future taxpayers, so you better hope the strategy works well.  In the meantime, accepting big deficits makes it easy for supposedly small-government legislators to justify protecting their buddies first, and constant borrowing by its nature tends to risk fiscal crises.

Yes, cutting spending is harder than cutting taxes.  Promises to change tax rates and keep them there are more credible than promises to cut spending levels.  But spending is where the real battle is, so anyone who wants to carry the small government banner should be at least proportionally more credible on spending than he is on taxes.


Temporary worker hiring outlook dismal

One of the things economists watch to try to gauge the job market is how the temporary worker market is doing.   Many times a rise in temp workers signals businesses are gearing up for more permanent hiring as the economy gains steam.  The opposite is many times also true.   And, unfortunately, it appears that this particular indicator isn’t giving us the warm fuzzy feeling  we hoped it would:

Last month’s fall in the number of temporary workers could herald continued weakness in the job market.

The total number of temporary employees placed by staffing agencies dipped by 12,000 last month and is down 19,000 the past three months, the Bureau of Labor Statistics reported Friday.

Now perhaps 3 months can’t be considered a “trend”, but it is pretty darn close.  And it parallels the news we’ve been getting about unemployment and the economy in general.

Temporary workers, however, could be the most telling signal. The number of contingent workers started growing in fall 2009, about six months before the broader job market began to emerge from the recession. From September 2009 to March, employers added nearly 500,000 temporary workers.

Roy Krause, CEO of SFN Group, a top staffing agency, says temporary placements for white-collar jobs in accounting, computers and legal remain strong. But those for lower-skilled light industrial, clerical and certain call-center jobs — which accounted for most of last year’s growth — have slowed. "They tend to be more sensitive to economic conditions," he says.

An example:

Chemical maker Arkema of Philadelphia employed about 150 temporary workers earlier this year. But it trimmed that total by about 50 in April and May as the weak economy prompted it to cut its 2011 forecast, Vice President Chris Giangrasso says. Arkema, he says, will likely not add this year to its permanent staff of about 2,500 in North America.

Key point – “weak economy”.  He had enough growth last year to warrant hiring temp workers but not full time staff.   Now he doesn’t even have enough business to warrant 2/3rds of the temps he hired and had to let them go.

That weakness in the economy continues to linger because, as we’ve noted any number of times, of the unsettled business climate.  And that’s something government could do to help the situation – back off regulation, taxes and interference (*cough* NLRB/Boeing*cough*) and stay out of the way.   It seems, though, that doing so is just not in this administration’s genes.

And so the negative indicators continue to pile up while the President of the United States and a complicit media attempt to make bad guys out of the GOP as they hold the line against economy crippling tax increases.

Go figure.

~McQ

Twitter: @McQandO


Hold up the tank sale until after Egyptian elections

This is just not very smart politics or foreign policy:

While everyone in Washington was concentrating on the debt crisis this week, the Obama administration attempted to slip through a questionable arms deal that requires serious scrutiny. Though it got little attention, the Defense Department officially notified Congress on Friday that it was authorizing the sale of 125 M1A1 tanks to Egypt as well as other weapons, equipment, parts, training and logistical support. While most of the military sales to Egypt have sailed through without objection in the more than 30 years since it signed a peace deal with Israel, this is the first such sale since the fall of the Mubarak regime earlier this year. Which is exactly why the sale ought to be held up until the unsettled situation in the most populous country in the Arab world is better understood.

Why?

In the wake of Mubarak’s fall from power, the Egyptian military seems to have retained a firm grip on power. But the army seems intent on sharing power with a resurgent Muslim Brotherhood movement that threatens the foundation of the relationship between the United States and Egypt. Since the 1979 Camp David Accords, the Egyptian military has gotten all the high-tech and expensive equipment it wanted so long as it was clear their new toys would not be used to threaten or attack Israel. But as Egypt lurches toward the election of a new government that will probably be made up of Islamist elements, that peace is in jeopardy.

Emphasis mine.  We have no assurance or reason to believe that won’t happen given the direction of the country and the fact that the Muslim Brotherhood, an avowed enemy of Israel whose representatives have repeatedly said the treaty Egypt has with that country must be voided.

So here we are going along as though nothing has happened and preparing to sell 125 of the world’s most advanced battle tank to a country which could conceivably turn around and use them against Israel.  Since, as I noted in another post, we seem to have little if any leverage there and it appears the Muslim Brotherhood has little desire to talk with us, I would think we’d be leery of such a deal and perhaps use it as a method of gaining some leverage.   No?

Yes, I know we might see another country try to fill the gap by offering their tanks and equipment, but such a switch (Egypt is presently equipped with US military equipment) isn’t as easy as it sounds and it would be quite expensive.  It may be worth it to a Russia or a China (given the Suez Canal, etc.) to do that.

But at the moment this sale makes no sense – at least until the political situation is much more settled than it is at the moment.  125 tanks may not be enough to get the Brotherhood to change it’s mind, but it does represent more leverage than we currently have with their military – the institution that may be able to moderate the Brotherhood’s stance on Israel.  Why give away that sort of leverage for nothing?

~McQ

Twitter: @McQandO