"Everybody in, nobody out", so sayeth the Oz. Or, as Benito Mussolini once put it, "All within the state, nothing outside the state, nothing against the state". You can flag me now.
Showing posts with label Obama Administration. Show all posts
Showing posts with label Obama Administration. Show all posts
Thursday, August 6, 2009
Tuesday, February 17, 2009
Deconstructing the Lost Decade
There has been much talk of Japan's "Lost Decade" recently. In the IBD this morning, Robert Samualson lays out a few pertinent facts.
First and foremost is that, historically, government stimulus has a mixed record. Sometimes it works and sometimes it doesn't, and nobody knows why. Each situation is different enough that there is no conventional wisdom that applies to all.
Today, on one side of the argument, President Obama warns of a Japanese style stagnation; on the other, conservatives argue that the Japanese government instituted eight stimulus packages, none of which accomplished anything. They are both right and wrong at the same time. The Japanese experience has little to do with what we are going through now for the simple reason that we are not Japanese.
The problem in both cases is, once the formula has played itself out, where to find new areas of growth. Our government has been driving out manufacturing, or inviting them to leave, for decades. Americans really don't make much anymore. Now that consumers are staying home, we don't buy much anymore either. If we don't make anything or buy anything, then what are we doing?
This problem is bigger than any stimulus can solve. If we bring back the factories, we'll bring back the jobs, and bring back the growth. Anything less is wasted effort.
First and foremost is that, historically, government stimulus has a mixed record. Sometimes it works and sometimes it doesn't, and nobody knows why. Each situation is different enough that there is no conventional wisdom that applies to all.
Today, on one side of the argument, President Obama warns of a Japanese style stagnation; on the other, conservatives argue that the Japanese government instituted eight stimulus packages, none of which accomplished anything. They are both right and wrong at the same time. The Japanese experience has little to do with what we are going through now for the simple reason that we are not Japanese.
Japan has what Richard Katz, editor of the Oriental Economist, terms a "dual economy." On the one hand, export industries (autos, steel, electronics) are highly efficient. They face intense global competition. On the other, many domestic industries (food processing, construction, retailing) are inefficient and sheltered from local competition by regulations or custom.
Since the early '80s, U.S. economic growth has depended on a steady rise in consumer spending supported by more debt and increasing asset prices (stocks, homes). Just as the mid-'80s signaled the end of Japan's export-led growth, our slump signals the end of upbeat consumption-led growth.
The problem in both cases is, once the formula has played itself out, where to find new areas of growth. Our government has been driving out manufacturing, or inviting them to leave, for decades. Americans really don't make much anymore. Now that consumers are staying home, we don't buy much anymore either. If we don't make anything or buy anything, then what are we doing?
This problem is bigger than any stimulus can solve. If we bring back the factories, we'll bring back the jobs, and bring back the growth. Anything less is wasted effort.
Saturday, February 7, 2009
Broken Windows and the Unseen
I happened across an interesting chart earlier this week. With all the back-and-forth about the next Great Depression one is tempted to look at the years 1930 to 1940. What is really instructive are the years 1941, '42, and '43. We might conclude from this chart that WW II was a wonderful time.
And, why not? Employment was at an all time high; anyone who wanted a job could get one. Real wages rose as a large part of the labor force was directed into unproductive endeavors, never to return. Exports were, well, booming. (Pun intended). There are some who say that war is good for an economy; and the bigger the war the better. These people, needless to say, are idiots. Economics, like everything else, is ultimately about people. Numbers are only a reflection of the lives people are living, and sometimes that reflection can be a poor one.
Another trail I followed led to Frédéric Bastiat and his Broken Window Theory. Briefly, it is the story of a shoemaker's son who one day breaks a window at the shop. All the neighbors agree that fixing a broken window has many benefits, one of which is that it provides a job for the glazier. Left unseen, is the productive use the money paid to the glazier might have gone to. Bastiat goes on to argue that any ruler can immediately double employment simply by cutting off the right hand of everyone in the kingdom. (I need to find out more about this guy).
Today, there is general agreement that the Bush bank bailout was an unproductive use of our national wealth. The folks in Washington seem determined to try something similar in other areas. All manner of numbers are being tossed around to "prove this, and "prove" that. No doubt, there are some bridges that need fixing, and reducing the long term energy costs of government buildings seems reasonable enough. Still, those of us who continue to "stand athwart history yelling stop" can only look on in sadness. Our leaders have been foolish. There are precious few left to count the unseen costs of fixing our country's broken windows. Who will ask, "What future improvement will be left undone because we used our money recklessly today?"
And, why not? Employment was at an all time high; anyone who wanted a job could get one. Real wages rose as a large part of the labor force was directed into unproductive endeavors, never to return. Exports were, well, booming. (Pun intended). There are some who say that war is good for an economy; and the bigger the war the better. These people, needless to say, are idiots. Economics, like everything else, is ultimately about people. Numbers are only a reflection of the lives people are living, and sometimes that reflection can be a poor one.
Another trail I followed led to Frédéric Bastiat and his Broken Window Theory. Briefly, it is the story of a shoemaker's son who one day breaks a window at the shop. All the neighbors agree that fixing a broken window has many benefits, one of which is that it provides a job for the glazier. Left unseen, is the productive use the money paid to the glazier might have gone to. Bastiat goes on to argue that any ruler can immediately double employment simply by cutting off the right hand of everyone in the kingdom. (I need to find out more about this guy).
Today, there is general agreement that the Bush bank bailout was an unproductive use of our national wealth. The folks in Washington seem determined to try something similar in other areas. All manner of numbers are being tossed around to "prove this, and "prove" that. No doubt, there are some bridges that need fixing, and reducing the long term energy costs of government buildings seems reasonable enough. Still, those of us who continue to "stand athwart history yelling stop" can only look on in sadness. Our leaders have been foolish. There are precious few left to count the unseen costs of fixing our country's broken windows. Who will ask, "What future improvement will be left undone because we used our money recklessly today?"
Tuesday, February 3, 2009
Chinese Automakers Outsell US
For the first time in history, the automakers in China have outsold their US counterparts. January auto sales fell to 9.8 million, compared to China’s estimated selling rate of 10.7 million. With our rising unemployment, one has to wonder when China will start shipping jobs over here to take advantage of our cheap labor.
Emily Kolinski Morris , Ford’s senior economist is quoted as saying, “There are some faint signals emerging that we may be nearing the bottom.”
I doubt it. The Obama Administration seems determined to repeat the mistakes of Herbert Hoover by raising taxes and dishing out money we don’t have to the states for infrastructure. The good news is, that Hoover increased federal spending by 30% in 1930, while President Obama is only planning a 25% increase in 2009. I suppose we can call that progress.
Emily Kolinski Morris , Ford’s senior economist is quoted as saying, “There are some faint signals emerging that we may be nearing the bottom.”
I doubt it. The Obama Administration seems determined to repeat the mistakes of Herbert Hoover by raising taxes and dishing out money we don’t have to the states for infrastructure. The good news is, that Hoover increased federal spending by 30% in 1930, while President Obama is only planning a 25% increase in 2009. I suppose we can call that progress.
Tuesday, November 11, 2008
Join The Fun
King George at Let Them Eat Cake has taken up President-elect Obama's offer and shared his vision. A few others have joined in, including yours truely.
So, be creative, have some fun, and share your vision with our soon to be president. He's asking for it.
My Vision:
I was disappointed to hear you will not be holding séances in the White House. I would like to suggest we hold them in the Treasury Dept. instead. I can call Roosevelt, Morgenthau, Wilke, you name it, I know them all. As I’m sure you realize, their policies are what made the depression great, but the press still gives them high marks for saving us. I think their advice would be very useful to you.
Depending on how you want to play it, Andrew Jackson’s destruction of the Second Bank of the United States could be instructive for getting rid of this pesky Federal Reserve system. (Don’t tell Bernanke). I suggest we leave out William Jennings Bryant, (he tends to be long-winded) and Trotsky because he likes to appear with the ice pick still embedded in his head just to scare people. (He thinks it’s funny).
Think universally, act nationally,
The Great Zamboni
So, be creative, have some fun, and share your vision with our soon to be president. He's asking for it.
Sunday, November 9, 2008
Why Reagan Still Matters
Sam Huntington at Praesidium Respublicaetakes a look at some of Pesident-Elect Obama's advisors. Among others, Teresa Ghilarducci is expected to be appointed soon. From a personal standpoint, she has the worst idea I've heard yet.
IRA's were first instituted in 1974 largely due to the fact that the SSA retirement funds had become nothing more than a pile of IOU's, courtesy of our elected representatives. There was also a widespread, and well deserved, belief that the SSA could not fund anything more than a subsistence level retirement. In the thirty four years since, there is no indication that either of these conditions have changed.
It would seem that we now have our answer to McCain's question; where will Obama get the money for all his social programs?". He'll get it from the same people he always does, the only people who still have some: us. In the rush to save those “too big to fail”, those who have scrimped and saved all their lives are about to get “thrown under the bus”. If ever there was a case for a healthy dose of obstructionism, this is it.
Thankfully, Mr. Huntington leaves us with a gold nugget to put in our pocket.
The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.
IRA's were first instituted in 1974 largely due to the fact that the SSA retirement funds had become nothing more than a pile of IOU's, courtesy of our elected representatives. There was also a widespread, and well deserved, belief that the SSA could not fund anything more than a subsistence level retirement. In the thirty four years since, there is no indication that either of these conditions have changed.
It would seem that we now have our answer to McCain's question; where will Obama get the money for all his social programs?". He'll get it from the same people he always does, the only people who still have some: us. In the rush to save those “too big to fail”, those who have scrimped and saved all their lives are about to get “thrown under the bus”. If ever there was a case for a healthy dose of obstructionism, this is it.
Thankfully, Mr. Huntington leaves us with a gold nugget to put in our pocket.
“Not too long ago, two friends of mine were talking to a Cuban refugee, a businessman who had escaped from Castro, and in the midst of his story one of my friends turned to the other and said, "We don't know how lucky we are." And the Cuban stopped and said, "How lucky you are? I had someplace to escape to." And in that sentence he told us the entire story. If we lose freedom here, there's no place to escape to. This is the last stand on earth.” — Ronald Reagan, 1964
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