Archive for category Economics
Paleface Speak With Forked Tongue
Posted by Tom in Economics, Energy Facts & Policies, Government Regulation, Nevada, Yucca Mountain on March 11, 2010
Yep, Obama’s at it again, saying one thing and doing another. This time it’s An Energy Head Fake, as today’s WSJ calls it. The litany of State of the Union promises included “a new generation of safe, clean nuclear power plants” and “new offshore areas for oil and gas development.” Hooray! The guy is really serious about reducing our energy dependency.
NOT! Since that time Interior Secretary Ken Salazar, halted the plan for leasing the energy-rich Outer Continental Shelf. But this wasn’t a military command “halt,” it was more like death by a thousand cuts, including:
- extending the public comment period by six months,
- taking “several weeks” (which turned out to be five months) to analyze comments,
- informing Congress that he was scrapping the lease plan,
- informing Congress that leasing will not begin for another two years,
- failing to comply with the deadline for submitting a court-ordered EIR for new leases off the Alaskan coast, and
- rebuffing Virginia’s request to allow offshore drilling.
Onshore, Salazar is canceling oil and gas leases in Utah and Wyoming. He also plans to have Obama designate 10 million of acres of western lands as “monuments” under the Antiquities Act putting them off limits for mineral rights. Nevada is impacted in this effort.
On the nuclear front, Obama’s promised $8.3 billion loan guarantee for two nukes in Georgia while nice is meaningless in the absence of regulatory certainty according to Mike Morris, CEO of American Electric Power. And of course Obama continues his head fake by putting the kibosh on Yucca Mountain as a nuclear waste repository.
Growth and attendant energy demand in China and India are all too certain. Continuation of our serious energy dependency is painfully assured. As long as we ignore real energy resources at our disposal and waste taxpayer money on subsidies for wind and solar we are endangering our economic future.
Unfortunately we are stuck with a president caught up in himself and his last “teleprompted” rhetoric. To put it kindly, “he doesn’t walk the talk.” I sometimes wonder if he listens to it at all!
Tom Motherway
“Stimulus or Sedative?” Thomas Sowell Never Disappoints
Posted by Tom in Business, Centrally Managed Economy, Democrats, Economics, Financial Crisis, Government Regulation, Monetary Policy on March 9, 2010
Sowell opens his succinct RCP post with an Abe Lincoln story: President Lincoln asked an audience how many legs a dog has, if you call the tail a leg? Some shouted “Five” but Lincoln corrected them saying that the answer was four. “The fact that you call a tail a leg does not make it a leg!”
The professor uses that tale to drive home the truth about the “stimulus” and the “jobs bill.” The idea behind stimulus, for example, is to get investors to invest, lenders to lend, and employers to employ. Prime the pump, put a little bit of water in to get the well flowing. That little bit of water, the government money, was never meant to restore the economy by itself, but to get the private business sector going. What has happened?
- After the Bush-started stimulus in 2008–business spending fell by 28%.
- Durable goods spending fell by 22%.
- Four months after the TARP billions–large TARP banks made 23% fewer loans.
- The velocity of money fell faster than at any time in the last half century.
- The WSJ reports the “sharpest decline in lending since 1942.”
Why would banks lend when, “from the White House to Capitol Hill, politicians are coming up with all sorts of bright ideas for borrowers not to have to pay back what they borrowed…” Why would investors invest when a substantial number of the consumers are unemployed? Why would employers employ when faced with higher taxes and more Obamacare mandates? In short, the outlook is uncertain and certainly more big government than private sector oriented.
Sowell points out that none of this is new: during the Great Depression of the 1930s, money velocity, lending, investing and employment were all lower than they were in the 1920s. The anti-buisness rhetoric and anti-business policies did not inspire any more confidence then than they do now. “In an atmosphere where nobody knows what the federal government is going to come up with next, people tend to hang on to their money until they have some idea of what the rules of the game are going to be.”
Economists have estimated that Roosevelt’s New Deal prolonged the depression by several years, how long will Barack Hussein Obama, Reid and Pelosi prolong our current difficulties?
Tom Motherway
We Need Jobs–Let’s Import Them
Posted by Tom in Economics, Employment, Immigration, Technology on March 9, 2010
Robert Litan’s article in the March 8th WSJ, Visas for the Next Sergey Brin, makes a good point: “to create more jobs, let’s import employers.? Given the anti-job, anti-capital stance of the Obama administration, our 9+% stated unemployment rate will by administration forecasts not fall to the 5% area for at least another decade. As we are well aware the true rate is over 15% when the “given-ups” and underemployed are taken into account. And Obama has no intent to decrease the size of the socialist state or reform the ever expanding, deficit producing welfare programs.
So what do we need? We need wealth, capital willing to take risks and create jobs in the process. We need entrepreneurs to translate that risk capital into successful businesses and create jobs in the process. Thus the article’s title character: Sergey Brin the Soviet-born American who founded Google!
Litan treats the “Startup Visa Act” jointly introduced by Senators Kerry and Lugar which would create a new, two-year visa for immigrant entrepreneurs who attract at least $250,000 venture financing in America. The visa would become permanent if the firm adds at least five non-family employees, attracts $1M in financing, or earns $1M in revenue. Fully 25% of the technology companies in the U.S. were founded by immigrants.
The idea is a good one but as the article points out could use some improvement. Why set such a high capital raising bar? A lot of tech companies were started with family money and credit card debt! And why limit the capital to U.S. sources? Don’t we want foreign investment that creates U.S. jobs? Finally isn’t immigration that brings mere wealth to the country beneficial to job creation? So why not issue visas based on permanent residence and at least $5M of new capital invested in U.S. businesses?
The H-1B visas–applicable to high skilled immigrants–are strictly limited, 65,000 in 2010 down from 195,000 in 2003. Tech firms have long complained about this limitation. As the article points out these visas are a likely source of the entrepreneurs that will start the next Google.
Intelligent immigration policy can create jobs, improved technology, capital, and favorable demographic patterns to boot. Hopefully Obama’s union bosses won’t object!
Tom Motherway
“Paygo” Is Really Meaningless!
“Now, Congress will have to pay for what it spends, just like everybody else,” saith Obama in his weekly radio address last month.“After a decade of profligacy, the American people are tired of politicians who talk the talk but don’t walk the walk when it comes to fiscal responsibility. It’s easy to get up in front of the cameras and rant against exploding deficits. What’s hard is actually getting deficits under control. But that’s what we must do.” (See: Politico post.)
As Steve Martin used to say, EXCUSE ME!!!
When this “bedrock principle” was raised by Senator Jim Bunning of Kentucky that Congress could only spend a dollar if it saves a dollar elsewhere, to ask where the $10 Billion in extended unemployment and Cobra benefits was being paid for, the Democrats were outraged and foot-in-mouth Vice President Joe Biden lambasted the Republicans as inhumane!
As Jay Ambrose of the OC Register points out, you would think that the Democratic Congress could find a measly $10 Billion in all the pork they’ve barbecued in recent legislation.
“The special sadness in all of this is the hypocrisy of a president who just recently sold paygo as a mighty step toward fiscal responsibility. Not only was Biden then turned loose on an honest man trying to make paygo work, but the whole paygo law is by and large a con game to begin with. It can be waived with flimsy excuse and seems to exempt virtually every other budgetary sentence that begins with a capital and ends with a period. Even if it were religiously heeded, the budget could be swamped by the costs of the exceptions.”
I cannot say it any better: “It’s time to start worrying, fellow Americans. Really worrying.”
Tom Motherway
NJ’s Chris Christie-”No More Road Down Which To Kick the Can”
Posted by Tom in Economics, Education Facts & Policies, State Finances, Unions on March 6, 2010
Another honest politician telling it like it is, Chris Christie told 200 of New Jersey’s mayors that the old game of tax and spend is over. See Ron Smith’s Baltimore Sun post, A leader opts for painful honesty in the Garden State.
“We have no time left,” said the governor, “We have no room left to borrow. We have no room left to tax. So we merely have time left to do this. We are all reaching the edge of a cliff. And it reminds me a bit of that part of ‘Butch Cassidy and the Sundance Kid’ where he had the seminal decision to make. So what did they do? They held hands and jumped off the cliff. We have to hold hands at every level of government, state, county, municipal, school board. We have to hold hands and jump off the bridge.”
“Governor Christie has wasted no time in implementing budget freezes through executive action. No doubt there will be a political firestorm in New Jersey as the pinch is felt by politically powerful entities such as the teachers, police and firefighters unions. Whether he can survive tackling the growing fiscal crisis with actual solutions is the question. He told the mayors to get ready for cuts in state aid in his upcoming budget, which will be presented March 16, but he promised he would give them a hand by implementing pension, benefit and arbitration process reform, something that will be bitterly opposed by the aforementioned unions.”
Ya gotta like this guy. We need a lot more like him–telling it like it it is. Hopefully voters will be smart enough to listen!
Tom Motherway
What’s Obama Up To?
Posted by Tom in Centrally Managed Economy, Deficit, Democrats, Economics, Financial Crisis, Individual Freedom, National Character, National Debt, Nationalized Health Care, State Finances, Statism, Taxation on March 5, 2010
On paper Obama appears to be a smart guy and reasonably well informed. I suspect he knows:
- We face $1.4 Trillion annual deficits for the next decade.
- Our current national debt is $12.3 Trillion and will grow by $1 Trillion a year.
- Estimated unfunded liabilities from social security and medicare are $107 Trillion.
- States with aggregate deficits of $350 Billion, debt of $1.9 Trillion, and unfunded liabilities of $1.4 Trillion are asking for federal handouts.
- Unemployment is 9+% with private sector growth stalled.
Why then would he promote a radical takeover of healthcare with 10 year costs of $2.3 Trillion that adds $1.86 Trillion to the deficit over the next 20 years, that creates employment taxes and mandates, each discouraging private sector employment, and that fails to solve the demographically certain failure of medicare, social security and medicaid? We’ve proven our inability to handle two, no three if you include medicaid, major entitlements, why add another? And why would he risk his party’s control of Congress and his own ability to govern to attain this goal that a majority of Americans don’t want?
Obama is smart enough to know that Obamacare will exacerbate the financial straights of the United States. It’s uncertainty will decrease private sector employment. It’s taxes will decrease private capital for investment. It will cede financial and technological leadership to other countries. In short, we will be worse off tomorrow than we are today. Why would he risk that…want that?
It is clear that he knowingly intends to drive us further to the brink. It is also clear that given his apparent intelligence he has an end-game in mind. Take our admitted crisis, you know the “never-let-a-crisis-go-to-waste” kind, explode it into a gigantic, off-the-clff catastrophe, then come up with a one-of-a-kind, popular solution that involves “shared pain” and if we are all lucky, someday “shared gain.” Call it a Cloward-Piven Strategy on steroids. (See: Cloward-Piven Strategy: Is It Obama’s? and references cited therein.)
As Larry Kudlow said in NRO, One Giant Government Leap Backwards,” One of the most galling features of this plan is a taxpayer-subsidized government-insurance entitlement for people earning up to 400 percent above the poverty line, or nearly $100,000 for a family of four. In other words, a middle-class health-care entitlement that will add millions of people to the federal dole. It’s all too reminiscent of the political dictum of the old New Dealer Harry Hopkins: tax and tax, spend and spend, elect and elect.”
So will Obama’s “Fiscal Responsibility and Reform Commission” turn out to be the VAT Commission with a European 12% sales tax on top of the income tax, excise tax, etc. And those on top of the various state sales, income and property taxes? All this to finance BIG GOVERNMENT? If so, we will then all have the advantage of being “in the same boat,” “equal,” and “happy” in an ever declining country and economy.
So for the literarily inclined, Obama wants us on Hayek’s Road to Serfdom where we will encounter Orwell’s Animal Farm with 1984’s Big Brother in control. As Obama recently said in response to a push-back, “we won the election.” And win the next election and the next, he aims to do with the creation of more and more dependency on him and less and less individual responsibility.
I won’t be around to witness the outcome but I hope the next generation will become informed and engaged, lest our grandchildren and great-grandchildren suffer horrible consequences.
Tom Motherway
Tale of Two States & Health Care
Posted by Tom in Centrally Managed Economy, Democrats, Economics, Government Regulation, National Character, State Finances, Statism on March 2, 2010
Yesterday’s WSJ editorially gave us a snapshot of ObamaCare (Back to the ObamaCare Future) using the sad story of Mitt Romney’s Massachusetts venture into state controlled healthcare. Of course Romney is now out burnishing his “conservative” credentials (read RINO) and the medical dictator job has devolved to Governor Deval Patrick.
What has happened? Costs have exploded–$47 M over budget. Spending has jumped 6.7% per year in a non inflation environment. Massachusetts insurance premiums are the highest in the nation having climbed at a 30% annual rate. Per capita health spending is 27% higher than the national average. Romney like Obama sold his healthcare as a way to control spending!
So Governor Patrick is proposing hard price controls on all Massachusetts healthcare. Regulators will cap insurance premiums; despite the fact that insurers pay out $1.12 in benefits for every $1.00 in premiums, a medical loss ration of 112%! He’s also filed a bill that will give regulators the power to review rates of hospitals and physicians; those that are deemed too high “shall be presumptively disapproved.”
Get the picture? OBAMACARE!
But there was also a positive state healthcare story in the same paper same edition. Governor Mitch Daniels of Indiana penned an op-ed, Hoosiers and Health Savings Accounts, relating his quest five years ago for a consumer-directed heath insurance option for state employees. He got Indiana’s HSA enacted. For those choosing this option, each has his own health savings account supplemented with a high deductible (catastrophic) insurance policy; the state deposits $2,750 per year into these accounts which grow with interest.
What happened? First year some 4% of employees signed up; this year over 70% of the 30,000 employees signed up; there is $30M of employee money in these accounts growing with interest. These employees will save more than $8M compared to those who stayed with the traditional insurance. Indiana will save at least $20M this year since total costs have been reduced by 11% solely due to the HSA option. HSA participants ran up only $65 in medical costs for every $100 in costs incurred by the employees in traditional plans.
Indiana’s 70% HSA participation rate compares to a national rate of only 2%. Why? Public employee unions have rejected the HSA plans. As we know, Obama, being the puppet of the public employee unions he is, has denounced high-deductible HSA related insurance as “not real insurance.” (See: Where’s the Consumer) Obama doesn’t want consumer driven healthcare. He wants to control this 16% of the American economy. He wants to control your healthcare, make your decisions for you. You aren’t smart enough to do it yourself. But, don’t try to tell that to the Hoosiers!
Get the picture? OBAMACARE!
Tom Motherway
Where’s the Consumer?
Posted by Tom in Economics, Nationalized Health Care on March 1, 2010
Cato’s Michael Tanner faults both parties for not focusing on the consumer in the recent “health care summit,” Bipartisan Indifference to Controlling Health Care Costs. Echoing the points he made in our video conference link last year, Tanner wants the consumer in charge of consumptions. He argues that the Democrats appear to view consumers as a class that needs protection and the Republicans only give lip service to consumer focused health care. He argues for high-deductible policies. When these are coupled with Health Savings Accounts, consumers make intelligent, cost-conscious choices. Insurance is meant to cover major unexpected illness or disease. “Insurance is ultimately meant to spread the risk of catastrophic events, not to simply prepay your healthcare.” Currently, we have third party payers–in effect someone else is paying for our health care, it’s free, so why not overuse it.
“Think of it this way. If every time you went to the grocery store, someone else paid 87 percent of your bill, not only would you eat a lot more steak and a lot less hamburger — but so would your dog. And food costs would go up for everyone.”
“The RAND Health Insurance Experiment, the largest study ever done of consumer health purchasing behavior, provides ample evidence that consumers can make informed cost-value decisions about their health care. Under the experiment, insurance deductibles were varied from zero to $1,000. Those with no out-of-pocket costs consumed substantially more health care than those who had to share in the cost of care. Yet, with a few exceptions, the effect on outcomes was minimal.”
“And, in the real world, we have seen far smaller increases in the cost of those services, like Lasik eye surgery or dental care, that are not generally covered by insurance, than for those procedures that are insured.”
Simple solution: 1) Tax employer provided insurance as the compensation it is. 2) Eliminate state line barriers to insurance competition. 3) Incentivize HSAs. 4) Allow tax credit/deduction for high-deductible policies. 5) And, enact significant tort reform capping damages. In short let the consumer decide. I can tell you it worked at the company I was associated with here in Reno: the employees loved it, the employer reduced premium expenses.
Sadly, Obama showed his true colors by denouncing high-deductible insurance and greater consumer cost sharing as “not real insurance.” He wants control, increased consumer dependency, and the power to dictate the economy. In short, BIG GOVERNMENT!
Tom Motherway
California Businesses Welcome in Nevada
Posted by Tom in Business, Economics, Government Regulation, Nevada, State Finances on February 26, 2010
One of the round table topics at our recent Reno Hayek Symposium dinner was state taxes and business environment. How did Nevada compare? Granted, Nevada has a deficit of some $880 Million, but that pales in significance to California’s, our immediate left coast neighbor has a current deficit of some $20 Billion. Remedies for each seem intractable but the pain index is surely greater the farther West you go.
Mark Bailey referred me to some testimony which highlighted a midyear 2009 comparison between the 50 states. The Tax Foundation presents an interesting comparison of data then available, “2009 Facts & Figures–How Does Your State Compare?’ I’ve shown below some selected categories (click image to enlarge):
Now this is just a thought, but I suspect that California taxes and fees and costs of doing business are going to increase. It’s a good bet they will increase at a more rapid rate than those in Nevada. Also, I would venture a guess that the total cost of living will proportionately increase and with the same dichotomy.
California businesses must compete internationally, particularly those in the tech world. And with the Obama deficit, debt, and unfunded liabilities about to create national pressure on all businesses, any advantage a business can gain at the margin will help it remain competitive worldwide.
So, all you frustrated California developers who have tech clients, come on over to Reno and take a look. We will be happy to introduce you to the people and the area. It’s really a friendly, help-your-neighbor place. Oh, and we’ll do our best to retire Harry Reid in November. Pity, but ol’ Nancy Pelosi will still be in office!
Tom Motherway
Obamanomics Will Lead To Our Demise
Posted by Tom in Business, Centrally Managed Economy, Democrats, Economics, Government Regulation, Taxation on February 24, 2010
I don’t know whether to laugh or cry to see the dynamic trio, Obama-Reid-Pelosi, ramming Obamacare down our throats at the small price tag of $950 Billion, oh yes and price controls on private insurers, expensive mandates on employers, and the government take over of 16% of the U.S. economy. Employers are not hiring, not investing, and not borrowing. At the very time jobs are needed businesses face health care uncertainty, higher taxes, falling consumer sentiment and high unemployment. Why invest if there aren’t going to be any consumers around to consume? Consumption is three quarters of the economy!
The only jobs the non-stimulus stimulus has created are government jobs–that would be the non-productive jobs that are a drag rather than a stimulus to the economy.
Speaking of economy, Robert Robb pens a dynamite article in Real Clear Politics today, The Chief Economic Worry About Democrats. With syllogistic logic he points out the elites lack of appreciation of investment capital and its function in the economy. Liberals assume a given level of economic output, a dangerously false assumption. Output doesn’t just happen it depends on investment capital. The government cannot supply that capital but can only redistribute what it takes by way of taxes. What it takes in taxes is withdrawn from private productive investment.
“Producers have to produce before consumers can consume. But producers cannot produce ex nihilo. Investment capital provides the financial bridge between production and consumption….In reality, however, the affluent provide most of the country’s investment capital. They are the ones with discretionary income. What the rich do with their money is very important economically.
“The Democrats want to raise taxes on the affluent and on corporations (which are repositories of investment capital). The numbers, and their effect on investment capital, are staggering..So, between Obama’s budget and the health care plan, that’s a shrinkage in the nation’s investment capital pool of up to $1.9 trillion over the next decade. But that’s only the beginning of the effects. Between Obama’s increased income tax rates, the income tax surcharge in the House health care plan, and state income taxes, the highest marginal income tax rate in most states will approach or exceed 50 percent. That will hugely discourage savings and investment by the affluent.”
“This tax-the-rich approach is justified as a matter of social justice. The government needs money, goes Democratic thinking, and it is fairer to get it from the rich than the middle class or the poor. Democrats also tend to believe that large disparities in income and large accumulations of wealth are evils to be ameliorated in their own right. The rich already pay a higher percentage of federal income taxes than they make in income. And the true social justice question shouldn’t be whether income or wealth disparities are increasing, but whether the lot of the poor is improving. Concentrating on the latter question leads to entirely different policy choices than concentrating on disparities.” (emphasis added)
Robb’s back to Adam Smith basics is brilliant, thus I’ve perhaps over quoted in this post. What I suggest is a read of the whole article and selected comments following the article which are displayed by clicking on “COMMENTS” at the end of the article.
Tom Motherway