Friday, February 27, 2009
California unemployment rate hits 10.1%
"As California goes, so does the nation," is the saying around here. Decades of liberal economics have crippled the Golden State. Now we have a progressive President and a very liberal Congress. Notice how many powerful Californians--all Democrats--there are in Congress: Nancy Pelosi, Henry Waxman, George Miller, Jane Harman. If the Californian economy is a litmus test, you can bet that it will not end well for the country in several years.
A Small Lesson on Government Regulation and Beer
When the federal government stepped out of the way of DIY home brewers, the micro-brew industry quickly grew with all of its innovations and large array of tasty choices. Another example of how less government means more freedom and prosperity.
Cato Scholars Address Obama's First Address to Congress
This is a far better critique of Obama's address to congress than CNN, NBC, or any other mainstream media outlet I watched on Tuesday; I am appalled at how CNN rarely is critical of Obama and his economic policy.
Thursday, February 26, 2009
Here Come Some Taxes
Here it comes---higher taxes and a cap and trade carbon scheme! It is just what our economy needs. I'm starting to seriously believe that Obama doesn't know what he is doing. When Obama calls for raising taxes on "the wealthy," you should know that this really means small businesses. The cap and trade scheme is a massive tax increase.
Wednesday, February 25, 2009
TARP Is Ripe For Fraud
Now don't you all worry your pretty little heads about government bailouts or "stimulus" packages because you should feel that your tax dollars are going to be spent efficiently and wisely. Afterall, if you can't trust the government who will you trust? (Snicker, snicker.)
The U.S. government's rescue of the financial system is vulnerable to fraud that could potentially cost taxpayers tens of billions of dollars, government watchdogs warned lawmakers Tuesday.
Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government's experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud.
He also said fewer than 5% of banks receiving government aid have responded to a request about what they have done with their bailout money.
The comments come as the Obama administration prepares to pour more money into the financial sector. Federal banking regulators begin a series of "stress tests" at the largest U.S. banks this week to determine whether they need greater infusions of government funds to survive a worse economic downturn.
The U.S. government's rescue of the financial system is vulnerable to fraud that could potentially cost taxpayers tens of billions of dollars, government watchdogs warned lawmakers Tuesday.
Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government's experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud.
He also said fewer than 5% of banks receiving government aid have responded to a request about what they have done with their bailout money.
The comments come as the Obama administration prepares to pour more money into the financial sector. Federal banking regulators begin a series of "stress tests" at the largest U.S. banks this week to determine whether they need greater infusions of government funds to survive a worse economic downturn.
Stimulus Today, Disaster Tomorrow
At best, the stimulus package may be able to stave off 1-2 percentage points off the unemployment rate. But I certainly don't expect it to generate 3-4% GDP growth which is the kind of growth needed to sustain our standard of living with population growth. I expect a very meager and weak recovery at best. Obama plans on letting the Bush tax cuts lapse which during a soft economy is a recipe for trouble. One thing is certain--the massive debt will create rising inflation. And it will eat into the value of dollar and it will make a strong recovery elusive. We are headed for some tough times.
HT: Liberty Pen
Tuesday, February 24, 2009
Democrats and Deficits
Remember all the flack and hate that Democrats and liberals generated when Dick Cheney uttered these words: "Deficits Don't Matter." Well, now that they have one of their own in the White House and Democrats control both houses, it seems that they have forgotten their bitter arguments against growing national deficits. Now it's "spending is stimulus!" If government spending is good for the economy, why wasn't it good when the Bush administration was doing it? Now that Democrats have abandoned the charade of fiscal responsibility and "pay as you go" (remember that bull crap) they have unveiled a new and bigger fiscal budget for 2009 and it's an 8.7% increase from the 2008 budget. Despite Obama's jawing about "fiscal responsibility" and cutting the deficit in half by his first term, taxpayers should brace to get socked with higher taxes in the very near future. Sadly, this is exactly the sort of change that I expected from Barack Obama.
Friday, February 20, 2009
Thursday, February 19, 2009
The Insanity of it all...
If you haven't heard the news, Obama plans on a $275 Billion dollar housing bailout.
Jeff Perren at Shaving Leviathan writes:
The insanity continues unabated.
Fresh from signing the largest legislative suicide pact in American history, Obama plans to intrude the Federal government still more into the housing market, amplifying the bad effects of the intrusions that led to the crisis by engaging in still more Federal welfare...
...explicit discussion of moral issues plays little part in public debates these days, even though it animates most of them. Instead, they focus almost exclusively on which route will maximize social utility and an abstraction called "the economy." They too frequently ignore that individuals have their own private economy and that should be the heart of their concerns.
Whenever moral issues do play a part in online debates, they tend to center around the personal motives of Congress and Obama himself. But it doesn't matter whether they are the accumulation of more power, as is likely, or simply a sincere belief that 'the strong' should help 'the weak'. It's irrelevant whether or not he and they are simply soft-hearted, to go along with their soft heads, or are just a bunch of calculating opportunists.
The effects will be the same regardless of their intentions and the first effect is to violate the right of dozens of millions who didn't default on their mortgage payments to choose whether or not to help the others.
The entire post is spot on. In the long run, Obama's plan to shore up struggling homeowners is close to removing risk from the housing market. Hey, don't worry if you can't pay your mortgage because Uncle Sam will always have your back. Eventually, it won't matter what your reason is to not pay your mortgage because you have a "right" to have a home. Right? I can see some angles here, Fannie Mae and Freddie Mac get some validation by being injected with 200 billion dollars; they both can rest assured that they will never have to compete with others or fear poor performance since their stockholders are the American taxpayer. Yes, even responsible taxpayers that avoided personal debt and "too good to be true" mortgage payments get to pitch in for this transfer of wealth.
Alas, another market distortion gets to be created. Home prices will once again be adversely "stimulated" by the lumbering forces of government trying to "do something." All of this will not end well. I can almost feel unintended consequences creeping up behind us.
Jeff Perren at Shaving Leviathan writes:
The insanity continues unabated.
Fresh from signing the largest legislative suicide pact in American history, Obama plans to intrude the Federal government still more into the housing market, amplifying the bad effects of the intrusions that led to the crisis by engaging in still more Federal welfare...
...explicit discussion of moral issues plays little part in public debates these days, even though it animates most of them. Instead, they focus almost exclusively on which route will maximize social utility and an abstraction called "the economy." They too frequently ignore that individuals have their own private economy and that should be the heart of their concerns.
Whenever moral issues do play a part in online debates, they tend to center around the personal motives of Congress and Obama himself. But it doesn't matter whether they are the accumulation of more power, as is likely, or simply a sincere belief that 'the strong' should help 'the weak'. It's irrelevant whether or not he and they are simply soft-hearted, to go along with their soft heads, or are just a bunch of calculating opportunists.
The effects will be the same regardless of their intentions and the first effect is to violate the right of dozens of millions who didn't default on their mortgage payments to choose whether or not to help the others.
The entire post is spot on. In the long run, Obama's plan to shore up struggling homeowners is close to removing risk from the housing market. Hey, don't worry if you can't pay your mortgage because Uncle Sam will always have your back. Eventually, it won't matter what your reason is to not pay your mortgage because you have a "right" to have a home. Right? I can see some angles here, Fannie Mae and Freddie Mac get some validation by being injected with 200 billion dollars; they both can rest assured that they will never have to compete with others or fear poor performance since their stockholders are the American taxpayer. Yes, even responsible taxpayers that avoided personal debt and "too good to be true" mortgage payments get to pitch in for this transfer of wealth.
Alas, another market distortion gets to be created. Home prices will once again be adversely "stimulated" by the lumbering forces of government trying to "do something." All of this will not end well. I can almost feel unintended consequences creeping up behind us.
Wednesday, February 18, 2009
Friday, February 13, 2009
Where your money will end up
The WSJ has a neat and simple graph. Look carefully at the tax cuts and what the biggest portion is aimed at. Do you remember the Economic Stimulus Act of 2008 and how it flopped?
Thursday, February 12, 2009
We could all use less Keynes and more Hayek
Dick Armey writes in the WSJ:
It's clear why Keynes's popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there. But it's harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations...
Of course, despite Mr. Obama's campaign promises to adhere to "Pay As You Go" budgeting, no one seems terribly worried about paying for what will likely be a trillion-dollar stimulus package. What everyone should agree on is that the money has to come from somewhere, either through higher taxes, borrowing or printing...
If the government borrows the money for the stimulus, then it will either have to print money later or raise taxes to pay it back. If the government raises taxes to pay for the stimulus, it will, in effect, be robbing Peter to pay Paul. If the government prints the money, it will increase inflation, which will decrease the value of the dollar. That would, in effect, rob Paul to pay Paul back with devalued currency...
Taking money out of the private economy -- either through taxes or inflation -- and spending it in a way that doesn't offset the loss of money with real economic gains is worse than doing nothing...
There is no way around it; this stimulus bomb is going to create inflation like nobody's business and it will do little to move the economy forward.
It's clear why Keynes's popularity endures in Congress. Intellectual cover for a spending spree will always be appreciated there. But it's harder to see any justification for the perverse form of fiscal child abuse that heaps massive debts on future generations...
Of course, despite Mr. Obama's campaign promises to adhere to "Pay As You Go" budgeting, no one seems terribly worried about paying for what will likely be a trillion-dollar stimulus package. What everyone should agree on is that the money has to come from somewhere, either through higher taxes, borrowing or printing...
If the government borrows the money for the stimulus, then it will either have to print money later or raise taxes to pay it back. If the government raises taxes to pay for the stimulus, it will, in effect, be robbing Peter to pay Paul. If the government prints the money, it will increase inflation, which will decrease the value of the dollar. That would, in effect, rob Paul to pay Paul back with devalued currency...
Taking money out of the private economy -- either through taxes or inflation -- and spending it in a way that doesn't offset the loss of money with real economic gains is worse than doing nothing...
There is no way around it; this stimulus bomb is going to create inflation like nobody's business and it will do little to move the economy forward.
Best post I've read today on Geitner and government intervention in the economy.
Do yourself a favor and read this great post. From Jeff Perren over at Shaving Leviathan:
When that disaster comes, and capitalism is blamed once again, there will be increasing pressure for out and out nationalization of the banks, something to which this Administration is already far too philosophically inclined. (Some reports have them mulling it over already and, of course, to a degree, the implementation of TARP has produced that as a fait accompli.)
...But allowing individuals the freedom to succeed or fail is contrary to the entire mindset in Washington, as it is to much of the country on most points of the political compass. Many, far far too many, delude themselves — despite enormous evidence to the contrary — that government control of such matters is practical. This represents the (let us hope, temporary) triumph of large swaths of the Progressive philosophy, made possible in large part by unhealthy acceptance of Pragmatism over the past 100 years.
When that disaster comes, and capitalism is blamed once again, there will be increasing pressure for out and out nationalization of the banks, something to which this Administration is already far too philosophically inclined. (Some reports have them mulling it over already and, of course, to a degree, the implementation of TARP has produced that as a fait accompli.)
...But allowing individuals the freedom to succeed or fail is contrary to the entire mindset in Washington, as it is to much of the country on most points of the political compass. Many, far far too many, delude themselves — despite enormous evidence to the contrary — that government control of such matters is practical. This represents the (let us hope, temporary) triumph of large swaths of the Progressive philosophy, made possible in large part by unhealthy acceptance of Pragmatism over the past 100 years.
Wednesday, February 11, 2009
Unions call for "Buy Canadian" policy
Canadian unions are taking their cue from their American counterparts by calling for a "Buy Canadian" policy. Can you smell protectionism and a trade war? Thank you, Democrats.
Their calls to for a "Buy Canadian" policy come after the federal government lobbied hard against efforts in Washington to attach a "Buy American" policy to a multibillion-dollar bailout program...Last Tuesday, Layton urged that Canada should adopt a "Buy Canadian" strategy in response to the "Buy American" clause included in the proposed U.S. stimulus package.
Their calls to for a "Buy Canadian" policy come after the federal government lobbied hard against efforts in Washington to attach a "Buy American" policy to a multibillion-dollar bailout program...Last Tuesday, Layton urged that Canada should adopt a "Buy Canadian" strategy in response to the "Buy American" clause included in the proposed U.S. stimulus package.
The Importance of Failure
Tyler A. Watts over at Mises.org writes on the added danger of bailouts that our politicians can not grasp:
I don't buy the probailout folks' predictions of impending economic chaos. But what if they're right? What if the short-run pain in store is just too terrible to endure if we don't start bailing out key industries? After all, we're talking massive unemployment, a new wave of foreclosures, a shrinking economy — in a word, recession. If the dire forecasts of the bailouters are correct, we'd be stupid not to do it; we'd be like a beaver caught in a trap: slowly dying, yet too timid to chew off his own foot to escape.
Capitalism depends on three highly complementary, yet distinct, institutions: prices, property, and "profit and loss." Classical-liberal economists have demonstrated the essential role of these pillars of prosperity for centuries. These fundamental institutions of the market economy are like legs of a stool. If we gradually weaken one leg, we will eventually bring the stool toppling down — economic collapse.
In this light, the implications of bailout are clear. Bailouts are designed to insulate people from the effects of bad decisions. When market prices change dramatically, exposing yesterday's poor investment choices, bailouts come "to the rescue," promising those left holding the bag that they won't have to endure the full cost of their errors...
...Bailouts, then, attempt to erase the effects of losses, or economic failure. But such efforts inevitably undermine the loss aspect of "profit and loss." Profit and loss go together — like up and down, left and right, good and bad. If we try to do away with losses, we'll wind up diluting the meaning of profits. After all, why strive for profits if Uncle Sam will cover your losses with a bailout? Why bust your butt to compete and succeed if you can just clamor for a handout instead? Bailouts destroy the profit motive — and all the benefits of a competitive economy.
By removing the risk of failure, government inevitably creates an environment where crony-capitalism flourishes. And we end up with the same essential distortions in our economy that has lead to the financial crisis.
I don't buy the probailout folks' predictions of impending economic chaos. But what if they're right? What if the short-run pain in store is just too terrible to endure if we don't start bailing out key industries? After all, we're talking massive unemployment, a new wave of foreclosures, a shrinking economy — in a word, recession. If the dire forecasts of the bailouters are correct, we'd be stupid not to do it; we'd be like a beaver caught in a trap: slowly dying, yet too timid to chew off his own foot to escape.
Capitalism depends on three highly complementary, yet distinct, institutions: prices, property, and "profit and loss." Classical-liberal economists have demonstrated the essential role of these pillars of prosperity for centuries. These fundamental institutions of the market economy are like legs of a stool. If we gradually weaken one leg, we will eventually bring the stool toppling down — economic collapse.
In this light, the implications of bailout are clear. Bailouts are designed to insulate people from the effects of bad decisions. When market prices change dramatically, exposing yesterday's poor investment choices, bailouts come "to the rescue," promising those left holding the bag that they won't have to endure the full cost of their errors...
...Bailouts, then, attempt to erase the effects of losses, or economic failure. But such efforts inevitably undermine the loss aspect of "profit and loss." Profit and loss go together — like up and down, left and right, good and bad. If we try to do away with losses, we'll wind up diluting the meaning of profits. After all, why strive for profits if Uncle Sam will cover your losses with a bailout? Why bust your butt to compete and succeed if you can just clamor for a handout instead? Bailouts destroy the profit motive — and all the benefits of a competitive economy.
By removing the risk of failure, government inevitably creates an environment where crony-capitalism flourishes. And we end up with the same essential distortions in our economy that has lead to the financial crisis.
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