The View From 1776
§ American Traditions
§ People and Ideas
§ Decline of Western Civilization: a Snapshot
§ Books to Read
§ BUY MY BOOK
Friday, July 30, 2010
A Pox On Both Houses
Both Republicans and Democrat/Socialists have failed to address the necessity for reforming our tax system and making it as permanent and stable as possible.
Doing so would have facilitated businesses’ making long-range, capital-intensive investments to bolster our manufacturing industries that create new jobs. For that, the ability to project, with reasonable confidence, tax costs over as along as twenty years is essential. The tens, or hundreds, of millions of dollars cost of new production machinery or a new production plant must be recouped over a very long time. In addition to depreciation cost, business managers must factor in their best estimates of long-range operating costs, of which taxes are a significant part.
As Austrian-school economists point out, government intervention such as constant shuffling of tax rates and imposition of new taxes to fund our socialistic welfare state, induces uncertainty. Too many American manufacturing businesses, finding this a hostile economic environment, have outsourced jobs to investor-friendly domains overseas.
Democrat/Socialists, who see business as the enemy in the Marxian class struggle, are oblivious to such considerations. Instead they bash business for failing to write off long-term investments and switch production to money-losing green cars and alternative energy boondoggles. This attitude is more than usually evident in the Obama administration, staffed mostly with career politicians or former inhabitants of academic ivory towers, people who have no first-hand experience with business management.
Bruce Bartlett, a left-leaning economist, explains what needs to be done about taxes in the short run and in the long run.
Quote:
Given the weakness of the economic recovery, it would be unwise to raise taxes; economists across the political spectrum are united on that. Unfortunately, this means that substantive debate on the efficacy of the Bush tax cuts and alternatives that might be better for the economy will be put off until next year.
Back to summary...
Mexico: A Subsidiary In Obama’s Chicago Corruption Machine
Mexico’s outrage about Arizona’s efforts to enforce United States immigration law, calling it racial discrimination, is rank hypocrisy.
Mexico is in the business of exporting illegals to the United States and importing U. S. dollars, subsidized by illegals’ freeloading on our welfare system and overloading the justice system with Hispanic youth gang crime.
In Arizona it’s a big business that keeps five Mexican consulates busy aiding illegals to enter the United States and to provide them with ID cards as cover.
Obama encourages this, because Chicago politicians know how to transform illegals, even dead people, into live votes for Democrat/Socialist candidates.
Back to summary...
Hayek vs. Krugman Re Keynes’s “Liquidity Trap”
Krugman is still riding a dead horse from Franklin Roosevelt’s disastrous New Deal.
A liquidity trap, in the various versions of Keynesian theory, occurs in a recession when businesses and consumers prefer to hold cash rather than to commit their funds to increased consumption or investment. The present manifestation of this condition is the low velocity of money in circulation. The Fed has pumped trillions of dollars into the financial markets, but bank loan demand remains low and businesses are holding huge amounts of cash, while consumers are saving more and paying down their debts.
Paul Krugman’s neo-Keynesian thesis is that this situation will grow worse, leading us into another depression, unless the Federal government steps into the picture and spends ever more fiat money for an indefinitely long time period. His thesis is little more than the failed “pump priming” policy of Franklin Roosevelt’s New Deal, a policy that contributed to converting an ordinary recession into twelve years of economic misery.
The Austrian economic thesis is that government intervention has frightened businessmen and consumers, causing them to take a wait-and-see posture. Obama has made clear that he intends to socialize as much of the economy as possible, especially energy production and use, along with our financial institutions.
Businessmen have repeatedly been alarmed by such thrusts as Obama’s stimulus plan, his take-over of the automobile industry, seizing control of the financial markets, continual business-bashing, Obamacare, threats to stifle business free speech while giving free rein to labor unions, and huge tax increases.
In addition to leading to paralysis of new investment and creation of new jobs, Obama’s damn-the-torpedoes rush to socialize as much of the economy as possible has prevented an orderly liquidation of excess inventories and uneconomic businesses, both of which are essential if private businessmen and individual consumers are to bring us back to economic growth and higher employment.
For a deeper understanding of Paul Krugman’s Keynesian lust for ever larger and longer lasting Federal deficit spending, read Jonathan M. Finegold Catalan’s essay on the Mises.org website.
Quote:
Krugman would temporarily alleviate the fall in employment and production through public expenditure; however, the problem with loose fiscal policy is that government cannot distribute and invest capital efficiently or profitably. Furthermore, government countercyclical policy tends to create regime uncertainty, which may directly contribute to the existence of this “liquidity trap.”
...While Keynes and Hicks would have perhaps shied away from massive monetary stimulus, operating with the understanding that monetary policy was ineffective during a liquidity trap, New Keynesian theory puts much more importance on a growing money supply. In fact, Krugman’s monetary solution to a liquidity trap is sustained inflation, where the central bank reverses fears of future deflation by instead causing an increase in the price level through massive monetary pumping (Krugman estimates this to be in the area of $10 trillion, borrowing the figure from a prior study conducted by Goldman Sachs). Periods of relatively high inflation would not be temporary, as to assuage fears of future deflation. Instead, the “optimum” monetary policy is one that targets relatively high inflation for a period long enough to shift the public’s rational expectations.
As is, the Keynesian “solutions” to a liquidity-trap run in the face of Austrian capital and calculation theory. The idea that government investment is as good as private investment is highly suspect, while a policy of monetary inflation is bound to lead to malinvestment.
Back to summary...
Cause And Effect
We now have definitive proof in the economy’s anemic drift that Obama’s Keynesian economic counsellors’ buoyant predictions of quick unemployment relief and rejuvenation of business activity were miles wide of the mark. In fact, Keynesian remedies have exacerbated our economic problem.
See Jennifer Depaul’s article on the Fiscal Times website.
Thursday, July 29, 2010
Most Americans Want To Cut The Federal Deficit
The Obama administration talks about it, but does the opposite.
Democrat/Socialists want to socialize the economy with additional burdens such as cap-and-trade regulation of energy, green jobs, and guaranteed labor-unionization of business, without regard to the resulting enlargement of deficit spending and the Federal debt.
Above all, in the name of socialistic egalitarianism, they are hell-bent upon raising taxes on businesses and wealthy individuals, whose investments fuel job-creating small businesses. Democrat/Socialists remain willfully ignorant of the simple fact that taking money from one group and giving it to favored special interests depresses economic activity and reduces tax revenues.
The Fiscal Times website reviews the situation.
Quote:
Allowing the Bush tax cuts to expire across the board, as current law demands, could knock some $184 billion from spending over two quarters, a hit of 5 percent on annualized GDP growth.
Back to summary...
Democrat/Socialist Party’s Pact With The Devil
Democrat/Socialists, while professing to care about the general welfare, remain firmly wedded to the evils of illegal immigration and tort bar extortions.
Putting a stop to tort bar extortion would significantly lower medical care costs by removing the need for medically unnecessary defensive tests and treatment. It will never happen so long as Democrat/Socialists control Congress, because tort bar political contributions are one of the two largest sources of Democrat/Socialist campaign funds.
Illegal immigration is expected to make Democrat/Socialist voter ranks swell to unmatchable proportions in the coming decade. For an understanding of the enormous social and economic costs of the illegal immigration that Obama favors, read Heather Mac Donald’s essay.
Back to summary...
Wednesday, July 28, 2010
Spending vs. Consumption
Spending is for purely political purposes mandated by collectivized government. Consumption is purposeful activity arising from free choices by individuals and businesses.
Government spending, as in Obama’s stimulus program, is simply taking money from some taxpayers and giving it to special interest groups that support the administration. Alternatively, it is funded by crowding small business borrowers out of the financial markets, as nearly all available funds go into low-risk Treasury debt, the condition now prevailing.
Consumption, in contrast, is using private funds for purposeful activity aimed at satisfying the needs of individuals and businesses.
Government spending, however many trillions of dollars that spending may be, cannot create stable consumption. Government stimulus spending is directed at what ivory-tower Keynesian economists decide is the proper end for a good socialist economy. Promoting high-cost, uneconomic green jobs, while stopping drilling in offshore waters is a typical example. Individuals and businesses understand that government stimulus monies are temporary. Businesses won’t re-hire laid-off workers because of a sales blip like that effected by the cash-for-clunkers program.
Professor William Anderson elaborates.
Be sure to read the first comment under his essay.
Back to summary...
Obama’s Libyan Lies
Contrary to Obama’s recent statement, his administration urged Scottish officials to release the Lockerbie bomber, a Muslim to whose faith Obama appears to be partial.
Tuesday, July 27, 2010
The Daily Socialist - 7/20/10
Is there a case for Keynes’s “liquidity trap?”
Keynes believed, and apparently Paul Krugman agrees, that failure of individuals and businesses to spend all their cash during a recession is bad, that government must intervene with large-scale deficit spending. Individuals’ and private businesses’ failure to spend is what Keynes damned as saving. Oddly, he also identified government deficit spending as savings, or what Democrat/Socialists call investment.
Monday, July 26, 2010
To Save The Economy Obama’s Administration Plans First To Destroy It
Treasury Secretary Geithner, who has reportedly never held a job in the private business sector, confidently espouses Paul Krugman’s hypothesis that higher taxes will impel economic recovery.
