Jonah Goldberg makes a great distinction:

…the difference between being pro-business and pro-market is categorical. A politician who is a “friend of business” is exactly that, a guy who does favors for his friends. A politician who is pro-market is a referee who will refuse to help protect his friends (or anyone else) from competition unless the competitors have broken the rules. The friend of business supports industry-specific or even business-specific loans, grants, tariffs, or tax breaks. The pro-market referee opposes special treatment for anyone.

Goldberg’s point is that the GOP must make up its mind about which one it is. Pro-business is crony capitalism, venture socialism and Big Government as we know it today. Pro-market is more the Tea Party putting real checks on Washington. Goldberg describes the GOP’s dilemma in more detail; RTWT.

To make my view clear: I am not pro-business, I am absolutely pro-market. The mentality that the economy would boom (and America would be great again) if only we could vote in smart people to tinker with the economy in good ways – if only the Republicans had power to do better Washington-y things than the Democrats do – that mentality is part of what has gotten America into a hole.

The truth is, nothing that government does to rig interfere with markets and business outcomes is ever much good. It never turns out anything as well as the politicians said it would, and never as well as what markets – that is, free people – could do, if left to their own devices.

To continue my series on this, I’ve been accumulating chart links. There are so many, especially on Zero Hedge which has great coverage. I’ll make some introductory remarks, then show the charts.

As a capitalist, I have no objection to the good inequality that investors, employers and consumers award by their actions in the marketplace. The problem is inequality awarded by force or fraud. That includes crime of course; but the systemic problems in our economy today arise, sooner or later, from *government force* and fraud. Under President Obama – and our nut-job economic planners at the Federal Reserve – we have more government intervention than ever. We also have more inequality. It can’t be a coincidence.

I believe that Obama likes it on some level, because the more inequality there is, the more he can offer (still more) government intervention as the alleged “solution”. While our problems did not start with Obama, he has exploited and worsened them because inequality of power – taking ever-greater amounts of power away from the People, giving ever-more power to the Party/bureaucrats/government – is the deep tendency of the State, and as well, the deep goal of the Left.

I could talk about the explosion of welfare dependency under Obama, which rapes the “working poor” (among others) for the sake of the “lazy poor”. But my focus today is on the rape of the middle class for the so-called “One Percent”, the wealthier people who gain from our government-planned economy and government-rigged markets.

The charts show that under Obama, U.S. income inequality has increased and may be the biggest it’s ever been.

More charts: (more…)

The gay left wants you to be super-mad at McDonald’s, Coca-Cola, and Visa for sponsoring the Sochi Olympics, and not because McDonald’s killed the McRib, Coca-Cola tastes like battery acid, and a Visa affiliate is still employing Alec Baldwin. The usual suspects… Mr Michelangelo Signorile, Mr. Dan Savage, and Mr Jon Avarosis are, of course, totes apoplectic.

Hey, @McDonalds: You’re sending #CheersToSochi while goons wearing Olympic uniforms assault LGBT people.

So, everybody has to hate McDonald’s and Coca-Cola, now, in addition to Hate Chicken, Hobby Lobby, and all those other things and people political correctness requires you to hate. However, it still okay… and indeed, politically correct… to support the Iranian Government, sharia law, and the Palestinian Authority; all of which carry out regular acts of real brutality against gheys but get a total pass from the left because shut up.

One of the more interesting things to happen since the ‘Duck Dynasty’ drama moved in to fill the void in a very slow holiday news cycle is that the left suddenly became champions of employers’ rights. Employers may not have the right to refuse to provide employees with free contraception, according to the left, but they sure do have the right to fire and punish people who make GLAAD all mad and stuff.

But what if the scenario were different? What if A&E were a bakery that, as a matter of company policy, did not provide cakes for same sex weddings. And what if Phil Robertson were an employee of that company who spoke out against that policy and was fired. Would GLAAD and the left still champion an employer’s right to fire an employee simply for saying things the management disagreed with?

For people who are intellectually consistent, the rights of the employer would not change based on the content of the speech. However, one cannot help but think that the left would respond differently if a different ox were being gored.

(more…)

Could be a hoax, but doesn’t sound like one:

…To all you workers out there preaching morality about those of us who live on welfare… can you really blame us? I get to sit around all day, visit my friends, smoke weed.. and we are still gonna get paid, on time every month…

If I was in a position where I had to work, that might be a different story…

The Soviet Union used to have a slogan, “He who does not work shall not eat”. Though aimed at the bourgeoisie, in tough times it was also applied to the lazy. In other words, the communists were tougher on non-working healthy people than we are.

Via Zero Hedge, who previously noted “the single mom is better off earnings gross income of $29,000 with $57,327 in net income & benefits than to earn gross income of $69,000 with net income and benefits of $57,045.”

To “celebrate” Dow 16000 and S&P 1800, both of which the stock market just hit intra-day, I’ve gathered a few links on rising economic inequality in the U.S. A few remarks first, to set context.

As a capitalist, I have no problem with inequality – when it comes about for the right reasons, that is, when sovereign consumers have awarded it by their actions in free markets. The problem is that, under President Obama, we have inequality for the wrong reasons.

Obama puts government in control of more and more of the economy, and he has the Federal Reserve bailing out the biggest players on Wall Street (as well as the government) and goosing the financial markets ever higher. That doesn’t come for free.

Whenever someone is bailed out, somebody else was “bailed in”; somebody else lost wealth (or purchasing power). Obama’s policies stealth-transfer it from the wages, pensions, savings and balance sheets of productive people to those who happen either to (1) receive government spending, or/and (2) own financial assets (stocks, bonds, etc.).

Many of those are productive people; but many are not and, in any event, everyone should have to earn wealth the real way, by pleasing their employer or their customers in the market. None merit bailouts. No one deserves government-orchestrated wealth transfers (stealthy or otherwise). No one.

I want small government, natural rights under Rule of Law, sound money and free markets because they are both moral and populist. They form the only moral social system (the only system that lets people be free and doesn’t steal from them, or enslave them). And, as a consequence of being moral, they form the only practical system where masses of deserving poor and middle-class people can and will get ahead.

The Big Lie of Leftism is that leftism somehow stands for the People, or the little guy. It doesn’t. As we see today with President Obama’s policies, producing a result of record inequality – for all the wrong reasons.

OK, now for some data. First, via Marc Faber and Zero Hedge, here is household net worth by wealth percentile:

You can see that, in the last six years, the share of wealth held by the bottom 75% has plunged from 12.7% to barely 10%. (more…)

Blogger Matt Walsh cuts through the nonsense about everyone deserving a living wage.

I was arguing about the minimum wage with someone recently. Halfway through the discussion, she forcefully proclaimed that “everyone deserves a living wage.”

I hear this idea quite a bit nowadays. There’s a lot of deserving going on, apparently. Everyone seems to deserve everything. We deserve a job. We deserve affordable housing. We deserve a phone. We deserve cable TV. We deserve internet access. We deserve higher wages. We deserve. We deserve. We deserve.
…
Is everyone qualified for a job? Is everyone worthy of one? Does everyone have a claim to a job? If you have a claim to something, that means you are owed it. So if I’m automatically owed a job, who, precisely, is in my debt? All business owners? So I suppose I can walk into an interview, plop down on the chair, put my feet up on the desk, light a cigar and shout, “I’m here to collect my debt!”

You are encouraged to read the whole thing.

I would expand on his point. In most any Sheetz or Wawa in the eastern part of this country, you can order a meal not by talking to a person but by entering selections on a touch screen. When people are demanding $15.00 an hour to do something a machine does for pennies… the machines have a real leg up in the job market.

It has come to this because is a very sizable contingent of voters in this country who believe that politics is a legitimate means to lay claim to the wealth possessed by others; that they “deserve” it.

The ruling political party is backed by moneyed interests (Media/Academia/Owners of Inherited Wealth) who know nothing of what it is to earn a living through hard work, conscientious budgeting, and striving to avoid making bad choices. Their foot soldiers are the Low Information Voters (Free Sh-t Army) who are dependent on Government benefits and who count on Government to save them from the consequences of their bad choices.

This is why the Middle Class Values championed by the Tea Party — keeping what you earn, a Government that is no larger than necessary and held accountable for its actions, the encouragement of self-reliance — are now derided as “radical” and “fringe” values. The Democrat Party and its constituencies simply cannot relate to them.

Democrat mainstream values are now EBT cards, Obamaphones, and demanding a “living wage” for a job that can be done by a touch screen.

From Reuters:

House of Representatives Speaker John Boehner on Monday opposed a bill to ban workplace discrimination based on sexual orientation and gender identity, dimming the chances of the White House-backed measure becoming law.

“The speaker believes this legislation will increase frivolous litigation and cost American jobs, especially small business jobs,” Boehner’s spokesman Michael Steel said in a statement.

Your thoughts on this topic are welcome in the comments. Here are mine. I agree that ENDA should be rejected, for the following reasons.

CA has had an anti-gay discrimination law for decades, which I supported, only then to see it mis-used. Without getting into details, I saw one friend use it to shake down employer after employer every couple of years, as each new one found out that he wasn’t a very good employee (regardless of his being gay). I also saw a good person suffer an anti-gay discrimination lawsuit whose allegations were wholly, boldly invented. (The suit failed in the end, but the lengthy process itself was a form of harm.)

Perhaps there are real cases of discrimination against good employees that these laws help to redress; but I’ve seen more that these laws empower lawyers – and grifters, liars and con artists. The broader point would be that these laws violate rights to property and to free association.

Just as an employee should be free to quit and move on to any employer who may want them, an employer should be free to fire any employee who works for them. The employer-employee relationship should be a private relationship between consenting adults; a relationship that either side can end at will. Laws which burden/restrict that are laws which violate people’s rights, opening the door to injustices of the kind I’ve outlined (and more).

Now, the reasons for opposing anti-discrimination laws (which might better be called “lawyer empowerment laws”) that I’ve just laid out, are not gay-specific. They work against these laws in general. Catching onto that, some people will respond: OK, but we do have these laws covering race, gender, religion, national origin, age, etc…why not add sexual orientation? As a longtime believer in equality-before-the-law for gays and straights, I don’t think that’s a terrible response. I am sympathetic to it.

But I keep coming back to the fact that two wrongs don’t make a right. That we have these laws to begin with, is a wrong; and we won’t escape the wrongness by broadening these laws to cover more and more categories. We should be looking, if anything, to reduce the categories.

RELATED (from Dan):  I had been planning on post on ENDA largely along the lines of the arguments Walter Olson makes here.  Just read the whole thing.

(And from Jeff): The heart of Olson’s argument is his last paragraph:

…At what point do we say no to future demands that protected-group status be accorded to employees based on political and controversial systems of belief, physical appearance (the “looksism” issue), family responsibilities, résumé gaps because of unemployment or other reasons, or use of lawful products or engagement in lawful activities in off hours—to name just a few…? If we say yes to all, we introduce a new presumption—familiar from the prevailing labor law in parts of Europe—that no employer should be free to terminate or take other “adverse action” against an employee without being prepared to show good cause to a judge. That is exactly the goal of some thinkers on the Left, but it should appall believers in a free economy.

Great point. ENDA is, in the end, just the next small step in the Left’s incremental strategy to make a society where no economic actions are private or unfettered; the politicians, judges, lawyers and bureaucrats rule all.

As Obamacare inflicts serious rate hikes on most consumers, quotes like the following are making the rounds:

In his story, reporter Chad Terhune also quoted a letter sent to a California insurance company executive. “I was all for Obamacare,” wrote a young woman complaining about a 50 percent rate hike related to the health care law, “until I found out I was paying for it.”

At first glance, one may admire the speaker’s sharp tongue. She gets to the heart of the matter.

But what is she really saying? That she wants to be generous with Other People’s Money. Not hers! For her, the key moral and emotional transaction in politics is to make herself feel good by having government take from others; by literally making others pay.

She also reveals that she has no idea how life works. She seriously thought that health care could be made “free” (i.e., sick people heavily subsidized, in inefficient exchanges that the government forces people to be in against their will) without herself having to pay the price for it, sooner or later, in some form.

I propose a politics where people are free to choose, and to keep most of what they earn.

• If they choose to spend their lives productively, they keep most of the results (and can give to others, if they wish to).
• If they choose not to spend their lives productively, then they bear most the consequences (although they will probably still find help from family, friends, and pro bono doctors/clinics, not limited to emergency rooms).
• Life’s transactions are voluntary – requiring both sides to feel they’re gaining in some way, or else the transaction doesn’t happen – and, as such, tend to get cheaper and more efficient over time.

Everyone wins. Except, perhaps, the short-sighted and the vengeful.

Not ‘that Rand’ (although he is often right), but the other one.

Many have noted how life today has come to resemble the corrupt, ever-decaying crony socialism depicted in Ayn Rand’s lengthy second dystopian novel. Now it’s even coming to resemble the demented communalism of her first dystopia, Anthem.

Anthem depicts a frightening future society which has de-valued the individual, replacing “I” (or “me”) with devotion to “We” in every possible aspect of life. The society’s philosophy is captured in sayings like these:

We are one in all and all in one. There are no men but only the great WE: one, indivisible and forever.

We are nothing. Mankind is all. By the grace of our brothers are we allowed our lives. We exist through, by and for our brothers who are the State. Amen.

Some people might agree with the above sentiments, for real. Have you ever heard of We Day? Watch the video at the link; it shows a vast, cheering orgy of thousands of “Me to We” activists celebrating their awesome We-ness.

Mixed in with calls to help The Children, some of the speakers bark sentiments and commands that would fit well in Rand’s dystopia. Just upgrade the event’s arena another notch (fill it with another 20,000 people) and it will start to resemble the North Korean Mass Games.

As for their desire to feed hungry children: Don’t get me wrong, of course that’s nice. I’m all for people helping other people – at their own expense.

But this gang (featuring Al Gore, for example) shows no understanding of what it would take to actually feed the world’s children. What it would take is: universal protection for individual rights to life, liberty and property under the rule of law – so that productive people, working hard for their own gain (not for the great “We”), will then produce, sell and distribute food on a large-enough scale.

More kids go hungry in countries that habitually interfere with production and trade; countries that don’t respect the individual who works to support her own life, liberty and property. Sadly, the Left has turned America into one of those countries, which means we will be cursed with increasing poverty and hunger in years to come.

At the G-8 meeting, perhaps when Obama wasn’t busy condemning Christian parochial schools as ‘encouraging division’ (but he’d never condemn Islamic ones, oh no!), the attendees came up with the Lough Erne Declaration.

It promises powerful action against the terrible ‘scourge’ of tax evasion:

1. Tax authorities across the world should automatically share information to fight the scourge of tax evasion.
…
4. Developing countries [ed: like Greece, maybe?] should have the information and capacity to collect the taxes owed them – and other countries have a duty to help them.

Now, I’m all in favor of obeying tax law (and I do), and ending ‘free rides’. But isn’t it interesting that the alleged scourge (number one!) is G-8 governments feeling they don’t get enough from their people?

It would never be that governments spend too much – on promises they can’t deliver. Never that governments fail to live within their means. Never that they’re grinding their productive people to death with regulations and mandates.

Never, ever that governments are trying to collect too much tax, which kills the economy and which people are morally right to dislike and, to some extent, resist.

Remember, when you earn money, it’s your money. Or it should be. It only exists (for government to tax) because you took the initiative to earn it. You can prove it easily, by just not earning. Quit your job and live off the dole – as many people do.

Greedy governments drive their citizens into off-tax activity by claiming too much of what citizens earn. That’s the real scourge.

And what the G-8 really promise, in the quote above, is to share their surveillance of you – the better to fleece us all. Big Brother just got a little bigger. Who knows, perhaps we’ll find out in the next Obamascandal that the NSA and IRS share surveillance information – about everyone, and with foreign governments as well as each other.

Via Zero Hedge.

UPDATE: Don’t think government is greedy? Think again. Merely by cutting his $100 million Africa travel budget by a few million, Obama could have restored White House tours.

From the comments: As Jane Austen puts it:

It only took a century for our country to get from no federal income tax to a place where it is considered the government’s right to extract as much personal income as they possibly can from those who earn it…

Now here we are…organizations like ICIJ claim to protect “integrity” by exposing tax evaders, as if it is not their money and governments have a right to confiscate large portions of private citizens’ incomes.

Something has gone seriously wrong.

I partly made this point last week. Now here’s Marc Faber saying it well:

The Fed has been flooding the system with money. The problem is the money doesn’t flow into the system evenly. It doesn’t increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market – things like stocks, bonds, art, wine, jewelry, and luxury real estate.

Money-printing boosts the economy of the people closest to the money flow. But it doesn’t help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

Bold added. Faber has neglected to mention that Big Government is “closest to the flow” of anybody; money-printing is, first and foremost, a hidden tax to pay for Obama’s oh-so-ingeniously-productive(!) deficits and spending. And a regressive tax, at that. Obamunism at work!

By the way, the effect that Faber talks about is well known to Austrian School economists and other believers in sound money; it’s called the Cantillon Effect.

And if anyone wants to say it’s Bernanke doing it, not Obama, my answer is this: Yes, but Bernanke was re-appointed by Obama and is absolutely doing what Obama needs and intends.

Even as I read about the stock market making new highs, I keep reading about more Americans on food stamps than ever before, more Americans quitting the workforce, old people who can’t get a decent income from their savings anymore, business people who can’t start businesses or who are cutting back or even shutting down, and Americans struggling under their debt loads and unable to make ends meet.

This is in Obama’s fifth year. Whom is Obama’s economic recovery (such as it is) for? Cui bono?

My answer is: Obama’s policies benefit the Big Government – Big Banking – Big Labor elites, in that order of seniority. My next question is: how did the world get to the point where the people who support Obama’s elitist policies are supposedly friends of the little guy?

Why isn’t Big Government recognized as the ultimate ‘special interest’? Why aren’t we all laughing in Obama supporters’ faces, when they pretend to stand for the People? And what will it take to get the average person to understand that she would find life much more feasible and affordable, if only America would return to a system of (genuine) free enterprise under sound money and small government?

Some days ago, cnbc.com ran an article called $2 Trillion Underground Economy May Be Recovery’s Savior. It uses quotes from experts:

The shadow economy is a system composed of those who can’t find a full-time or regular job…

“You normally see underground economies in places like Brazil or in southern Europe,”…

Estimates are that underground activity last year totaled as much as $2 trillion…double the amount in 2009, according to a study… “The jobs are in service industries from small food establishments to landscaping.”…

A report from ADP Research Institute states that many employers, especially in low-wage businesses such as retail and food service, plan to reduce workers’ hours to less than 30 a week to avoid having to offer health benefits through Obamacare…

“The result is less tax money paid to the various levels of government.” “Those working and not paying the taxes puts the burden on those who pay the tax,”…

Workers who aren’t on the books don’t get Social Security or health benefits…

Several points here leap out at me.

1. How Obamacare destroys full-time jobs, as predicted by many on the Right before it passed.
2. How ‘normal’ taxation creates Second or Third World conditions in the economy.
3. How people can at least survive, when taxes are lower (or absent).
4. The experts’ and media’s cluelessness about all this. Despite the information presented by the article, its unspoken perspective remains that government is robbed, when people avoid taxes. Umm… how about people being robbed, when an excessively large and redistributive government taxes them so heavily that they (or their potential employers / trading partners) are forced into the underground economy?

In other words: Shouldn’t we shrink government and lower taxes enough that people won’t need to be in the underground economy?

That’s the question these articles never ask; the one you’re supposed to never think about. They are always written from an assumption that people do something illegitimate, when they avoid the government’s tax man; never from an assumption that the government does something illegitimate, when it charges people enough to drive them to it.

Here’s a fun chart. (Source: Gluskin-Sheff. Hat tip, Zero Hedge.)

What does it mean? It means that, starting around 2008 or so, the stock market has been strongly linked to the Federal Reserve Bank’s “Quantitative Easing” (QE) policy.

We’ve seen that point before; this chart shows it another way. Since the second half of 2008, the market moves up if the Fed is growing its balance sheet; the market stops (or declines) if the Fed stops; which means that the ratio of them (shown above) has kept fairly level.

In other news (and also hat tipping Zero Hedge), a Chinese woman wants to sue the Fed over its QE policy:

A woman in Kunming, Yunnan province, is trying to sue the United States central bank after discovering that the real value of the US$250 she put in an account in 2006 had shrunk by 30 per cent.

She claims it was a result of the Federal Reserve issuing too much money.

Her attorney, her son Li Zhen , called the lawsuit “litigation for the public good” which aimed to stop the Fed from continuing its quantitive easing policy…

He filed the lawsuit alleging “the abuse of monopoly in issuing currency” last month at the Kunming Intermediate People’s Court…but the court has yet to decide whether to officially place the case on file.

Why didn’t I think of that? The woman gets the issue: that the Fed has been debauching the dollar. Whether her suit succeeds is another question, but God bless her!

Finally, I want to mention the recent controversy over Reinhart-Rogoff’s work. It might be boring, so further discussion is beneath the following ‘fold’.

(now with updates) (more…)

Just saw this on Zero Hedge.

You can view it in just a few minutes, but here’s the gist.

• Government is great at creating ‘make-work’ (jobs which are a net economic loss).
• Government is terrible at creating real jobs (jobs which are a net economic gain[1]).
• People need to understand that having a free enterprise system, which eliminates jobs by economizing on human labor, and which then creates new jobs (if allowed to) in unforeseen new areas, is what raises a country’s living standards.

I often hear left-wingers argue that it doesn’t matter if government ‘jobs’ are unproductive, because the recipients will spend the money on something else which is more productive. So let’s even pay people to do nothing at all: benefits for the unemployed, for street addicts, adult babies, nepotism/graft, etc.

Their argument is deeply wrong. It’s a recipe for a society where corruption, laziness and incompetence are rewarded, and a recipe also for a de-valued currency, leading over time to hyperinflation. Were it otherwise, then government spending would lead inexorably to prosperity, and Zimbabwe would be the wealthiest of nations. Neither is so.

([1] A subset of government jobs are, of course, necessary – and thus ‘real’ – even though they are ‘overhead’ to the rest of the economy. Example: police, courts, military.)

From the comments: A pingback from Religio-Political Talk puts us onto this video, wherein Prof. Lee Ohanian explains how FDR worsened the Great Depression:

Here, the point is not about FDR’s make-work policies (which also inhibited recovery), but about his efforts to fix prices and wages at artificially high levels (which prolonged the high unemployment).

I must hat-tip John M. Mason at Seeking Alpha for inspiring this post. He weaves some recent news articles into a story which I shall sharpen, with my own viewpoint and commentary.

First, consider that “Recovery in U.S. is lifting profits, but not adding jobs” (says the New York Times). As percentages of national income, corporate profits today are they highest they’ve been since the 1950s, and employee income is the lowest it’s been since the 1960s.

So what are companies doing with their profits?

• “More U.S. Profits Parked Abroad, Saving on Taxes” (says the Wall Street Journal).
• “U.S. Firms Send Record Cash Back to Investors” as dividends, share buybacks and mergers (says the Wall Street Journal).

In other words: Companies just don’t feel that they have many productive opportunities / uses for their money, in the U.S. And do feel that they face unpredictable, yet ever-growing regulation – as well as relatively high taxes. So, they don’t hire (in the U.S.). Instead, they dispose of their profits in ways that accomplish little but to reward their shareholders, thus raising the stock market.

Connect that, folks, to the market’s recent highs. But what does a rising stock market accomplish? Little but to make the wealthiest households feel wealthier.

And so, to the extent that rising consumer spending has contributed something to U.S. recovery, that spending has come more from the wealthier households. “Wealthier Households Carry the Spending Load”, says the Wall Street Journal. Meanwhile, Wal-Mart and Target, who serve less-wealthy households, have reported slower sales.

This is an economy suffering from the anti-market, anti-growth policies of the Obama administration. Not surprisingly, it is also an economy skewed to the wealthy.

I say “not surprisingly”, because I know that the two things are connected. It is precisely the middle and working classes which (more…)

Some make the case for how well things are going, in the U.S. economy. The statistics say that GDP has been edging up, and unemployment ticked down to 7.7%. One GP commentor recently put it like this:

…the stock market is reaching all time highs, the real estate market is bouncing back and the unemployment rate is going down. Yes, the unemployment rate needs to go down lower but overall, things seems to be really improving.

But I say, look at how we’ve gotten here: not in any way that can end well.

Last week, I mentioned that the markets are most likely up because the Federal Reserve Bank is pumping out $85 billion per month in new money. That’s a rate of about $1 trillion per year. By no coincidence, the government’s FY2013 deficit is projected to be around $1 trillion.

Please let me borrow, print-n-spend $1 trillion a year (or more), and I will also get you higher GDP numbers, along with financial market bubbles, $4.50 gas, and job growth that is positive, only after several years (and with a lot of part-time jobs). But, how much real wealth?

Analogy: Say your spouse is out of work. You have a family business. You create a job paying your spouse $50,000. The job doesn’t really produce much. You created it so your spouse will feel good. Paying for it tips your business into a loss, that you make up by borrowing. Has your household gained? Your tax return says that your household income is $50,000 higher. Is it?

The income isn’t an economic gain, if all you did was borrow money to simulate earned income. That’s what the government does. It borrows money, spends it on un-economic jobs (e.g., bureaucrats, bailouts, or paying the unemployed to do nothing), and says “Look – the national income (GDP) is up!” (^^)

I’ve said for a couple of years that GDP is not a number we should care about. We should look at GDP net of new debt.

According to this chart, in the four years of Obama’s reign so far, the U.S. has added around $1.1 trillion to its GDP level, and around $2 trillion in cumulative GDP (giving Obama credit for all amounts above the deep-recession GDP level that he inherited). In the same calendar period, the U.S. added $5-6 trillion in debt.

That’s a disaster. In the name of government deficits to “stimulate” the economy, we have, over several years, added much more in debt than we’ve gotten in GDP increases.

It’s not all Obama’s fault. But he’s captain of the ship, (more…)

Good article from Michael Boskin. Since it mostly speaks for itself (and since I’ve pounded the table on some of these ideas before), I’ll just quote a few highlights.

President Obama’s most recent prescription for economic growth—more government stimulus spending, new social programs, higher taxes on upper-income earners, subsidies for some industries and increased regulation for all of them—is likely to have the same anemic results as in his first administration…

Standard Keynesian models that claim a quick boost from higher government spending show the effect quickly turns negative. So the spending needs to be repeated over and over, like a drug, to keep this hypothetical positive effect going. Japan tried that to little effect, starting in the 1990s. It now has [ultra-high] debt-to-GDP…

Since World War II, OECD countries that stabilized their budgets without recession averaged $5-$6 of actual spending cuts per dollar of tax hikes…In a paper last year…Stanford’s John Cogan and John Taylor…show that a reduction in federal spending over several years amounting to 3% of GDPbringing noninterest spending down to pre-financial-crisis levels——will increase short-term GDP.

Why? Because expectations of lower future taxes and debt, and therefore higher incomes, increase private spending…

An economically “balanced” deficit-reduction program today would mean $5 of actual, not hypothetical, spending cuts per dollar of tax hikes…

…the demand by Mr. Obama and Senate Democrats that any dollar of spending cuts in budget agreements this spring (to fund the government for the rest of the fiscal year and when the debt limit again approaches) be matched by an additional dollar of tax hikes is economically unbalanced in the extreme…

Emphases added. Read the whole thing. Boskin backs his claims with examples, which I’ve omitted, to give you a reason to go there.

I’ve titled this “A start on fixing the economy” because we need additional steps to reduce government’s crushing, depressing burden on the economy. Spending cuts alone will not be enough. Repealing Obamacare would also help a lot, as would some other sort of measures to make clear to people that the Obama administration’s nonstop, unpredictable interference in business is over.

Today the stock market, as measured by the Dow Jones Industrial Average, hit an all-time high of 14,283 (intraday basis; closing at 14,253). A broader measure of stocks, the S&P 500 index, also seems to be doing well as it closed at 1539, nearing its all-time high.

So all is well in Obama’s economy, right? People are confident, great time to invest in stocks, right? Not necessarily.

The economy’s fundamentals remain poor. I believe that the Federal Reserve Bank’s “Quantitative Easing” program, which pumps around $85 billion per month of newly-printed money into the financial markets, causes the stock market to go up irrationally.

People know that America’s economic fundamentals are poor; but if the Fed is pumping so much money into the markets, then the markets are going to do well ‘no matter what’, at least for awhile. Realizing this, people feel a pull to join the party – after all, everyone else is doing it – and that makes markets go up even more.

I don’t see how it can end well. I see it as another market bubble. When the Fed stops QE – and it will have to, eventually – the stock market seems more than likely to crash. Bubbles are terrific fun, while they last. That is the phase we’re in now: the drug-QE-induced euphoria.

Moreover, what’s really going on here is (I believe) a process of inflation. I’ll explain. (more…)