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The recently passed debt ceiling deal, the Budget Control Act of 2011, is already being attacked for its deficiencies. The bill was a necessary short-term fix for raising the debt ceiling to prevent a governmental default. However, it does not adequately address long-term fiscal problems. Reflecting the deal’s inadequate fiscal reduction plan to stabilize the government's debt, Standard & Poors downgraded the US credit rating from AAA to AA+.
243,000 new jobs? This is more than respectable. No unseemly disparagement by Republicans welcome, nor victory lap by Democrats. A pox on both their houses.
Proto-Supply Sider (who, among other things, generously cut oppressive tariffs) King Canute achieved mythic status by ordering the tide to cease rising. What often is forgotten is that he did so to show his sycophants the limits — not extent — of his powers.
As medieval chronicler Henry of Huntington wrote:
[A]t the summit of his power, he ordered a seat to be placed for him on the sea-shore when the tide was coming in. Then, before a large group of his flattering courtiers, he spoke to the rising sea, saying, ‘Thou, too, art subject to my command, for the land on which I am seated is mine, and no one has ever resisted my commands with impunity. I command you, then, o waters, not to flow over my land, nor presume to wet the feet and the robe of your lord.’
The tide, however, continued to rise as usual, dashing over his feet and legs without respect to his royal person.
Then the King leaped backwards, saying: ‘Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws.’
“Obey … eternal laws.” The business cycle is as sacrosanct as the law of gravity. Utopians sacrifice Virgins and pray (Cut Entitlements!) for Endless Summer; Neo-Keynsians chant mumbo jumbo (Stimulate Aggregate Demand!) and command winter to end. Harry Truman famously once said (long safely retired from the presidency): “My choice early in life was either to be a piano player in a whorehouse or a politician. And to tell the truth, there’s hardly any difference.”
By Charles Kadlec
This blopost originally appeared on Forbes.com, February 6, 2012
The Federal Reserve Open Market Committee (FOMC) has made it official: After its latest two day meeting, it announced its goal to devalue the dollar by 33% over the next 20 years. The debauch of the dollar will be even greater if the Fed exceeds its goal of a 2 percent per year increase in the price level.
An increase in the price level of 2% in any one year is barely noticeable. Under a gold standard, such an increase was uncommon, but not unknown. The difference is that when the dollar was as good as gold, the years of modest inflation would be followed, in time, by declining prices. As a consequence, over longer periods of time, the price level was unchanged. A dollar 20 years hence was still worth a dollar.
By Charles Kadlec
This blogpost originally appeared on Forbes.com, February 20, 2012.
The federal budget is a dense document totaling hundreds of pages of numbers. Yet, for all of the digital precision, the use of various “base line” budgets, numbers that span 11-year time frames and other arcana known only to Washington insiders and budget mavens obscure more than they reveal about what the federal government is up to.
To cut through the haze and spin, I chose to focus on President Obama’s “Proposed Budget”, and to compare all projections with actual 2011 levels. I came away with four observations:
By Charles Kadlec
This blogpost originally appeared on Forbes.com, March 5, 2012.
Last Friday, Treasury Secretary Timothy Geithner charged in a Wall Street Journal op-ed that those who oppose the Obama Administration’s regulatory regime for the financial services industry “seem to be suffering from amnesia about how close America came to complete financial collapse under the outdated regulatory system we had before Wall Street reform.” Au contraire, Secretary Geithner, it is you who choose to ignore and misrepresent the lessons of the financial crisis by perpetuating the myth that the source of the crisis was a lack of regulation.
By Charles Kadlec
This blogpost originally appeared on Forbes.com, March 19, 2012.
Do you know why oil and prices are moving sharply higher? Some blame the oil companies, charging they are manipulating prices. Others cite U.S. sanctions on Iran and the threat of a military encounter that would disrupt the flow of oil from the Middle East.
Speculators, too are blamed for ostensibly bidding up the price of oil. In the political arena, President Obama is taking credit for increased domestic oil production even as his critics point out the slow pace of drilling permits issued by his Administration soon will hamper additional increases in the U.S. oil production.
Yet, the basic reason for higher energy prices is being overlooked, even though it is right before our eyes: Oil prices are up because the value of the dollar is down. Our common sense hides this source of higher prices because we view the dollar as fixed, and prices as moving. News reports explain the sharp rise in consumer prices in February were caused by higher energy and food prices, implying that higher prices cause inflation. Of course, higher prices do not cause inflation. Higher prices are inflation.
Speaker of the House John Boehner, House Majority Leader Eric Cantor and their fellow House Republicans should claim credit for this jobs recovery. It never would have happened had they not stopped the counter-productive fiscal policies of the Obama Administration — starting with blocking the job killing increase in personal income tax rates that otherwise would have taken place on January 1, 2011, and then last fall refusing to vote for yet another round of wasteful “stimulus” spending and money losing investments in “green jobs."
By Charles C. Johnson
“An unlimited power to tax involves, necessarily, a power to destroy,” Daniel Webster argued in McCullough v. Maryland (1819).
Obamacare, with its unlimited power to regulate health care, might just wind up destroying the medical devices market with its 2.3% tax.
The so-called “device tax” is expected to raise $28.5 billion from 2013 to 2022. It applies most deleteriously to gross sales, not to profits, affecting the startups and mid-sized companies most likely to advance well-being. The tax applies to everything from cardiac defibrillators to artificial joints to MRI scanners, affecting millions of Americans. To understand how harmful the tax is, consider a hypothetical company with a $1 million in sales with only $100,000 in profits. Thanks to the tax, nearly 25% of your profits would be taken. Given the long lag time idea to market, medical device companies often take a long time before they turn a profit, but under Obamacare, they would still need to pay profits on those sales. Indeed the $20 billion is nearly double the annual amount the medical devices company spends on research and development.
By Richard Callahan
Job creation almost nil, unemployment increasing, the left is angry, the right is up in arms and the center is grumbling. What is wrong with this great experiment that promised so much?
Almost 4 years ago an eloquent, energetic, charismatic political outsider, Barack Hussein Obama, burst upon the scene. He arrived at a time of great economic turmoil and dissatisfaction with the regime in power and promised sweeping change. He promised change from an economic downturn gripping the country. He promised new, forceful leadership in which all citizens of the country would be united as one and prosperity and economic vibrancy would once again be restored. He promised American international leadership and the restoration of the American dream. Sadly, his promises have proven to be empty rhetoric and his policies have wreaked destruction on the unity of America, it's economy and the hope of so many Americans who believed his false prophecy.
By John Merlin
This piece originally appeared in Investors Business Daily on July 6th 2012
More workers joined the federal government's disability program in June than got new jobs, according to two new government reports, a clear indicator of how bleak the nation's jobs picture is after three full years of economic recovery.
The economy created just 80,000 jobs in June, the Bureau of Labor Statistics reported Friday. But that same month, 85,000 workers left the workforce entirely to enroll in the Social Security Disability Insurance program, according to the Social Security Administration.
The disability ranks have outpaced job growth throughout President Obama's recovery. While the economy has created 2.6 million jobs since June 2009, fully 3.1 million workers signed up for disability benefits.
In the past two weeks, four cities have been faced with bankruptcy: Stockton, CA: Mammoth Lakes, CA: Scranton, PA; and San Bernardino, CA.
Who’s next? Over at the Public Sector Inc. blog, Steven Malanga takes a look at some of the cities that could be facing bankruptcy. He targets three cities: Harrisburg, PA; Woonsocket, RI; and Detroit, MI as the cities that are facing insolvency in the near future. However, the truth is that there are many more who are on the verge.
By Charles S. Johnson
August 4th, 2012
The “8 percent unemployment” rate in recent months, unfortunate though it is, paints a too- optimistic picture of our economy.
Real unemployment is a frightening 15 percent, if we count the officially unemployed plus two other categories—people who have stopped seeking work but still want a job, and those who are working only part-time (and thus probably aren’t meeting their financial needs) because that is all they can find.
The U.S. Labor Department compiles two separate job reports. The economy gained 163,000 jobs in July, which helps to explain why the uptick in official unemployment was only marginal. But the Labor Department also found that 195,000 fewer people are considered employed than a month ago.
To learn how many jobs the economy gained or lost, the government surveys businesses. To learn how many people are working, it surveys households. From households, it obtains both the widely reported “unemployment rate” that’s based on active job-seekers who aren’t working and a less-publicized “U-6” unemployment rate.