Stimulus Goals: What are the true causes and effects?

This from RealClearPolitics:

“White House press secretary Jay Carney says the Recovery Act added several million jobs and lowered the unemployment rate. According to Carney, the “goals” of the stimulus package “have been met.”

A reporter asked Carney why unemployment is at 9% and not 7%, the percentage projected if the stimulus worked. Carney dismissed the question. “We’ve said repeatedly that we don’t want to relitigate the battles of the past,” Carney told the reporter.”

But was it the act that added the jobs and lowered the unemployment rate? And if it was is it sustainable?

In order for the politicians in Washington to keep being elected, they have to convince the majority of Americans that they are “doing something”. What exactly they are doing doesn’t matter as long as the results happen. Now some may say that this is good because the results that are all that matter. But would we say the same thing about President George W. Bush running his 2004 campaign on the highest home ownership rate in the history of the United States?

Of course, now we see that it was a bubble that ended up making many Americans bankrupt. So how do we know, again assuming the government stimulus did work, that it too did not also create a bubble that will burst in the face of Barack Obama and Mr. Carney?

The arrogance of politics is that anything a President or Congress does while it is in office makes for whatever the best results in the economy are. Imagine that the boost in GDP and the lowering of unemployment was because of new technological innovation or that the country’s rich saved more money for investment and invested in new business, how would that have anything to do with building new roads by the stimulus?

It wouldn’t.

The American people must wake up first to the fact that politicians cannot create jobs. All they can do is shift valuable labor and materials to a different sector of the economy. That means that more labor and materials are being put in an industry that it would’t be in if it wasn’t for the government entering the market and bidding up the price.

So what are we losing for those falsely allocated materials and labor?

Published in: on February 17, 2011 at 11:03 pm  Leave a Comment  
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Unemployment: Who is really to blame?

As soon as newly elected Democratic majority took over Congress in 2007, they aimed their scope at setting a new minimum wage. Unfortunately, while the Senators and Representatives were patting each other on the backs for passing the first bill that raised the minimum wage in nearly a decade, they forgot to consult any economics textbook.

Now with the United States deep in a lengthy recession and high unemployment continuing to rise, the latest installment of $7.25 an hour (from the original $5.15) that is on the horizon will undoubtedly put an enormous pressure upon already struggling businesses everywhere. And the result could be the most devastating round of “stagflation” since the presidency of Jimmy Carter.

On July 24th the government will force the business community to pay their employees for more than the market rate. But those businesses, already struggling just to keep their doors open, will not magically receive new revenue to pay those employees.

Instead, they will keep only their best employees and lay the others off. So while, the American people were told that the minimum wage bill was passed to help the low-skilled workers, it is in actually those very workers who would be hurt.

Now instead of more workers receiving higher wages, there will be more workers receiving no wages at all.  So much for government planning.

As unemployment rises, of course, more pressures are put upon the government to extend unemployment benefits. And more unemployment benefits add more government debt to an already bankrupt country.

And it is not just the federal minimum wage that Americans have to worry about, but also the state minimum wage laws. Many states raised their own minimum wage laws with the passing of this federal bill, exacerbating an already dire situation.

For example, states with more than a two-dollar increase in their minimum wage from 2006 to today had higher unemployment than those who had less than a one-dollar increase.

Over that time, states like California, Colorado, Michigan and Ohio, which have had a more than two-dollar an hour increase from their minimum wages, had their unemployment rates increase 6.1, 3, 6, and 4.8 per cent respectively.

On the other hand during this time, states like Alaska, Arkansas, Connecticut, and Maine, which had a less than one-dollar increase in their minimum wage, saw their unemployment rates increase only 1.5, 1.3, 3.5, and 3.3 percent.

Admittedly since the United States fell into a recession over that time, it is understandable to see higher than normal levels of unemployment. But it is clear that new restrictive minimum wage laws additionally fueled higher unemployment.

Simply put, minimum wage law causes a shortage of jobs and a surplus of labor. Both of which spell disaster for individual workers, as well as the economy as a whole.

So once the latest installment of minimum wage is fully in place, Americans will see more unemployment, a deepening recession, and a massive increase in unemployment benefits in coming months. This policy will make the economic recovery more difficult and the opportunity for the average Joe much smaller.

Luckily, for the Congressional Democrats and many state legislators who passed this law in 2007, the recession has taken the rap for the current rates of unemployment. This smoke and mirror has allowed the Democrats on the hill to shirk responsibility for the current crisis.

But once the American people see another spike in unemployment after the July minimum wage increase, these politicians who hurt the business community will have nowhere to hide, which seems only fair since so many of their victims will have nowhere to work.

Justin Williams is a Contributing Editor of ALG News Bureau

Published in: on June 17, 2009 at 12:03 pm  Leave a Comment  
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America in the Year 2013…

From the Washington Times via NetRightNation:

April 1, 2013 -Unemployment is approaching 25 percent, inflation is close to 40 percent, major portions of the U.S. are having power “brownouts,” and Americans are forced to go to foreign countries for timely and quality medical care. How did the world’s largest and most prosperous economy fall into such a morass in only a very few years?

Collapse of the American economy in 2013 began with several major policy mistakes by the Fed, the “Bush 43” administration, and Congress in the years from 2004-08, which were compounded with even greater policy mistakes by the Obama administration, Congress and the Fed from 2009 thereafter.

The Fed had created much of the housing and commodity bubble of 2004-08 by allowing excessive monetary growth. Both the Republican and Democratic Congresses had failed, despite many warnings, to reform Fannie Mae and Freddie Mac and the Community Reinvestment Act, which led to the subprime mortgage crisis.

Both the Bush administration and Congress engaged in excessive federal spending growth, culminating in the ill thought out and counterproductive bailout “TARP” scheme in late 2008. And finally, even though almost everyone knew Social Security and Medicare needed fundamental reform, Congress refused to seriously deal with it.

After promises of “change,” the new Obama administration, the Democratic Congress and the Fed only made changes for the worse. Despite an extensive history and strong empirical evidence – some of it coming from Mr. Obama’s own economists – going back to the Great Depression of the 1930s that spending stimulus programs did not work and that tax rebates and credits were ineffective (as contrasted with marginal rate cuts), Congress and the Obama administration, in early ’09, embarked on a record high spending “stimulus” program, along with a tax credit and rebate program for low-income people, many of whom had not paid any income tax.

Before these programs went into effect, the economy began to slowly recover, in part, because of the big injection of money by the Fed in the previous months. However, unemployment continued to rise, and thus the Fed continued to keep interest rates at record lows.

At the same time, Congress passed “card check” to make it possible for unions to gain control without a secret ballot. Congress also passed measures to make it easier for trial lawyers to sue employers for alleged discrimination, which further discouraged employers from hiring new workers. Congress also enacted into law a national health-care scheme, which essentially socialized all medical care in the United States, and passed measures to prohibit the construction of any new coal power plants.

As the 2010 election approached, the Obama administration, faced with not meeting its employment goals, decided to embark on a massive government employment program. This program further dampened the economy as government jobs (and in many cases totally unproductive jobs) were substituted for more productive jobs in the private sector. (Note: The private sector had to be drained of money to pay for the jobs in the public sector.)

Meanwhile, much of the rest of the world – particularly China and Southeast Asia – was growing again because their governments had not engaged in destructive economic policies. This global growth caused an increase in commodity prices, and coupled with the growth in U.S. government spending, caused a rise in inflation.

Despite the rise in inflation, the Fed was being pressured by the administration and Congress to continue to keep interest rates low, and Fed Chairman Ben Bernanke was replaced by a partisan Democratic economist who was in favor of bigger government.

As the 2012 elections approached, the Democrats were in a panic because the U.S. economy continued to be stagnant with still rising unemployment. They then decided to put even more people on government payrolls, making them beholden to the Democratic Party. The major TV networks and most newspapers, like the New York Times, continued losing money, so Congress and the Obama administration decided to give them low-interest, non-recourse loans, which all but assured very biased and positive coverage for the Democrats during the campaign.

Congress also reinstated the so-called “fairness” doctrine, which shut down much of the conservative talk radio opposition. Finally, Congress made it clear – without explicitly saying so – to much of corporate America that if the companies and their executives gave campaign funds to the Republicans, the companies would be cut off from potential government contracts (Chicago-like “pay to play”).

Despite the growing economic disaster, President Barack Obama narrowly won re-election in 2012, but by early 2013, the consequences of the open-ended federal checkbook, unrestrained money growth, and unleashed trial lawyers and environmentalists became apparent to all. Unemployment rose even more rapidly, and inflation rates began to make the United States look like a Third World country.

Americans found, as other countries had experienced, that national health insurance resulted in massive queuing and a steep drop in quality. Those who could still afford it, and had sufficient time, traveled to other countries (including the newly democratic and capitalist Cuba) to go to private, high-quality hospitals and clinics.

Companies were leaving the United States in droves because of higher taxes, power shortages, and endless harassment by trial lawyers, environmentalists and unions, along with growing protectionism, which increased their raw material and component costs.

Fortunately, it is only January 2009, and none of the above needs to occur – if Mr. Obama listens to some of the better economists he has appointed. But if the Obama administration and the Democratic Congress let themselves be captured by their big government, high tax, environmentalist, union leader and trial lawyer allies, the above scenario is as certain as was the end of the subprime mortgage bubble.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.


Published in: on January 16, 2009 at 12:58 pm  Leave a Comment  
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Marxist of the Week: President-Elect Barack Obama

This from the International Herald:

“President-elect Barack Obama and congressional Democrats are considering major expansions of government-assisted health care insurance and unemployment compensation as they begin intensive work on a two-year economic recovery package.

One proposal, as described by Democratic advisers, would extend unemployment compensation to part-time workers, an idea that congressional Republicans have blocked in the past.

Other policy changes would subsidize employers’ expenses for temporarily continuing health insurance coverage to laid-off and retired workers and their dependents, as mandated under the Consolidated Omnibus Budget Reconciliation Act of 1986, or Cobra, and allow workers who lost jobs that did not come with insurance benefits to be eligible, for the first time, to apply for Medicaid coverage.”

The Newer Deal here we come. It seems that President-Elect Obama believes that there was not enough ideas taken out of the Socialist and Communist platforms. Now he wants to do these two major things and believes that they will help the economy boom. Where is he going to get the money is my first question?

The first policy makes less sense then the second. The first policy gives unemployment benefits to part-time workers because this goes on the record of the employer, they are going to be unlikely to hire young people to work seasonal jobs. Why wouldn’t you apply for unemployment benefits? Along with that unemployment will only rise more. If you pay people not to work they won’t work.

The second policy makes a little more sense because you are giving money to businesses that lay-off worker. This is good in the sense that people may return to the job after the employer takes the time to lay people off and make a profit. The bad part is it does the same thing. It gives people the incentive not to work.


Agriculture Subsidy Opportunity!

This is from an forwarded email but is great satire for what actually happens in the agricultural sector:

“Honorable Secretary of Agriculture Washington, D.C.

Dear Sir:

My friend, Ed Peterson, over at Wells, Iowa, received a check for $1,000 from the government for not raising hogs. So, I want to go into the “not raising hogs” business next year.

What I want to know is, in your opinion, what is the best kind of farm not to raise hogs on, and what is the best breed of hogs not to raise? I want to be sure that I approach this endeavor in keeping with all governmental policies. I would prefer not to raise razorbacks, but if that is not a good breed not to raise, then I will just as gladly not raise Yorkshires or Durocs.

As I see it, the hardest part of this program will be in keeping an accurate inventory of how many hogs I haven’t raised.

My friend, Peterson, is very joyful about the future of the business. He has been raising hogs for twenty years or so, and the best he ever made on them was $422 in 1968, until this year when he got your check for $1,000 for not raising hogs.

If I get $1,000 for not raising 50 hogs, will I get $2,000 for not raising 100 hogs? I plan to operate on a small scale at first, holding myself down to about 4,000 hogs not raised, which will mean about  $80,000 the first year. Then I can afford an airplane.

Now another thing, these hogs I will not raise will not eat 100,000 bushels of corn. I understand that you also pay farmers for not raising corn and wheat. Will I qualify for payments for not raising wheat and corn not to feed the 4,000 hogs I am not going to raise?

Also, I am considering the “not milking cows” business, so send me any information you have on that too.

In view of these circumstances, you understand that I will be totally unemployed and plan to file for unemployment and food stamps.

Be assured you will have my vote in the coming election.

Patriotically Yours,

PS: Would you please notify me when you plan to distribute more free cheese?”


Published in: on September 22, 2008 at 10:46 am  Comments (1)  
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