Archive for the ‘2. Jobs & the Economy’ Category

OBAMACARE vs. TRUMPCARE

The new proposed American Healthcare Act recently passed the House of Representatives, and now the Senate is working feverishly on it since Obamacare is quickly falling apart and needs something to replace it.  Its failure will hurt many people by eliminating health insurance.  Since the U.S. is stuck with Obamacare for now, let’s take a look at it.

 Obamacare covers full-time employees in companies that employ 50 or more people.  Because Obamacare is very expensive, businesses are very wary of hiring additional full-time employees (FTE) and have consequently reduced their numbers to under 50 FTE’s, as well as converting full-time positions to part-time, so as to keep FTE’s under 50.  Consequently, the number of jobs that the Federal government reports each month is baloney because: (a) most of those new jobs are part-time jobs, and (b) the major reason the unemployment rate has lowered is because, after the unemployed run out of benefits, they are no longer considered looking for work and therefore taken out of the unemployment statistics that are calculated by the Bureau of Labor Statistics.  Those statistics consequently then depict a lowered (phony) unemployment rate; but they have nothing to do with the creation of jobs.  An accurate portrayal of employment is the “Civilian Labor Force Participation Rate” which was at it’s lowest level since 1978 when President Obama left office in January 2017.

2. Because Obamacare has deductibles as high as $5,000 for individuals and $10-12,000 for families, as well as very high co-pays, most people with Obamacare that are not subsidized by the government, tend to not benefit from it because they can’t meet their deductibles.  In other words, Obamacare for many people is like not having medical insurance…and at some point many will find it cheaper to just pay the IRS a fine every year for not not having expensive medical insurance that ends up each year in not providing any benefits.

3. With Obamacare’s IPAD (Independent Payment Advisory Board) or “Death Panels” as Sarah Palin calls them, expensive state-of-the-art medical treatment is severely restricted under Obamacare, for the elderly.

4. Though sold to the American public as saving the average American family about $2,500/year, it’s turning out to be far more expensive to everyone except those receiving government subsidies.  There are many, many people paying at least double their previous premiums.  Some are paying as much as five times their former premiums.  Moreover, the Federal government has spent billions in rolling out the Federal and State websites and in providing subsidies.  If and when fully implemented, some forecast that Obamacare will bankrupt the country.

Obamacare or The Affordable Care Act is rife with unintended consequences, some of the major ones I cited above. But there are many more (tax on medical equipment, doctor shortage, etc.).  All of the unintended consequences were completely predictable.  I don’t think that any revisions of The Affordable Care Act would be sufficient to fix it.  It was incompetently  and sloppily prepared.  I believe that it must be replaced after (this time) being carefully thought out.  Moreover, it’s failing so rapidly that soon there won’t be health insurance.  The House has prepared its version of healthcare insurance, the Senate is debating theirs.  A House-Senate Conference Committee will then meet to iron out the differences between them. The resulting bill will then need to be voted on by both the House and the Senate and then go to the President for his revision or approval.  Whatever replaces Obamacare will be much cheaper as well as a vast improvement by allowing individuals to actually choose their own plan and doctors.

All Services

HOW TO PAY OFF THE NATIONAL DEBT

The United States currently owes $20 trillion, $10 trillion of which President Obama spent in the 8 years he was President. That debt is an albatross around the neck of the Country and there is little likelihood that it will be even partially paid off anytime soon…or is there?

The richest country the world has ever seen, sitting on top of  huge untapped oceans of oil, natural gas and coal, as well as millions of square miles of publicly-owned land, and we’re the beggars of the world, owing trillions of dollars to China, Japan, and many other countries, including our own Federal Reserve, which creates money out of thin air.  This picture doesn’t make sense but what can be done to change it?

There are many proposals floating around to help address this problem, from a fair tax to a flat tax and the “Penny Plan”.  Ohio Governor John Kasich paid off billions of Ohio’s debt by cutting ineffective programs.  Wisconsin’s Governor, Scott Walker, cut programs and also stopped the Union practice of letting outragiously expensive Union contracts.  Former Florida Governor, Jeb Bush, created many jobs and took Florida from billions in debt to billions in surplus.

Various plans have been tried, some with dire consequences, like the “Sequester” that President Obama suggested and Republican leadership agreed to.  The Sequester has been devastating to the military because it cut budgets across-the-board, both good programs and bad.  There are many expensive Federal programs that are ineffective and do little or nothing, have been around for a long time, and need to be terminated.  Some programs simply need to be revised in order to make them effective and efficient.  But any revising or terminating requires a strong leader. That’s why the 2016 Presidential election was so important.  Not many leaders would cut ineffective government programs and perhaps also expand production of, and then sell off, oil, gas and coal to other countries and surplus public land to its citizens, but I believe that perhaps President Trump will do so to help pay off the National debt.  We’ll see.

Bringing back trillions in cash currently “parked” oversees by American corporations will also greatly help and will occur once the U.S. corporate tax is reduced from its current (highest-in-the-world) 35% down to about 15%.

CONSEQUENCES to the U.S. from PRESIDENT OBAMA’S ECONOMIC POLICIES

 

President Obama meant well.  He sounded sincere and touted “fairness” as his primary concern in his governance of the nation.  However, it’s true that “the road to hell is paved with people with good intentions.”  In plain English, it almost doesn’t matter if the President was sincere  and meant well if the results of his policies were to cause great  harm to hundreds of millions of people.  The percentage of Americans with full-time jobs (“Civilian Labor-force Participation Rate”) has not been as low as today (62% of civilian labor force) since the late seventies and if unemployment statistics were calculated the way they were in the year 2000, unemployment would be about 10%.  If they were calculated the way they were during the Great Depression, unemployment would be over 20%.  Below is my analysis of those major policies of President Obama that destroyed the American dream for many Americansand which President Trump and the Congress need to reform:

A. OBAMACARE/AFFORDABLE CARE ACT: This  law is a wet blanket on the economy. While I’m for good healthcare, and for insuring people with pre-existing conditions as well as kids up to the age of 26 years-of-age on their parents insurance, Obamacare is a bureaucratic nightmare with much more expensive premiums for most people, and unbelievably-high deductibles and co-pays.  This turns most Obamacare policies into catastrophic care only because most people will never meet their deductibles and will therefore be paying out-of-pocket for most of their healthcare.  This turkey needs to go and hopefully will be replaced with something created by a combination of Senators and Representatives from both major political parties.

B. IMPEDING ENERGY PRODUCTION:  A decision on the Keystone pipeline was made for political reasons.  Oil production on government land was significantly down, however, basically because the environmental lobby was against all fossil fuels.  Meanwhile, America has more gas, oil, coal, and shale oil than all of the countries in the Middle East combined but government regulations prevent most of it from being developed.  The wealth created by all of this energy could pay off the National debt, the trillions in unfunded liabilities, and produce an economic boom the likes of which no country has ever seen.  And as thoroughly, scientifically, and irrefutably proven in David Archibald’s, Twilight of Abundance, the warming trend of the earth over the last century, up until 18 years ago when it stopped,  is due mostly to Sun Spots and Solar Flares, not to the burning of fossil fuels.  

C. DEFICITS/NATIONAL DEBT: President Obama doubled the National Debt (from $9 trillion to $20).  The Federal government is still borrowing billions/month from the Federal Reserve so the annual budget deficit is currently over 1/2 trillion dollars/year.  Each year the Annual Budget Deficit is added to the total National debt and currently the National debt is about $20 trillion.  This amount of deficit spending and National Debt is unsustainable. The Federal Reserve  has the authority to print money and by doing so has been able to get away with this huge deficit spending,  but doing so without the backing of gold and/or legitimate loans from other countries, simply inflates our currency.  The U.S. dollar is currently the world’s “reserve currency,”  but our borrowing and spending may eventually change that.  When it occurs, the dollar will immediately decrease in value by about 30%, our credit rating dramatically reduced and interest rates on our borrowing dramatically increased, and our ability to borrow severely curtailed.

D. REGULATIONS:  Regulations are necessary in our society but government needs to be very careful in not over-regulating since this can and does add significant costs to the economy, negatively impacts business creation, and reduces freedoms.  The regulations written pursuant to Dodd-Frank, the Endangered Species Act (ESA), and the Affordable Care Act  (“Obamacare”), among many others, are excessively burdensome to people and the economy.  ESA, for example, has caused the destruction of most crops in California’s Central Valley due to the Delta Smelt, a small fish on the Endangered Species list. Dodd-Frank is a financial nightmare that does nothing to prevent future bank problems.  Obamacare has and is destroying jobs.

E.  HIGH TAXES:  Money taken from the economy in taxes should be limited because it hurts the economy.  Tax money should be used only for legitimate purposes.  Higher taxes is a drag and drain on the economy so  government needs to be careful to spend it wisely.  Lowering tax rates on everyone who pays taxes in order to stimulate the economy is the preferred way of increasing tax revenues and growing the economy to pay for Social Security, Medicare, Medicaid, unemployment benefits, etc.

F. CORPORATE TAXES:  A significant Obama policy  that has unintentionally done  harm to many people is the retention of the 35% corporate tax, which is higher than any other country in the world.  This has led to the flight  of many U.S. corporations and businesses to other countries, and with this flight, the jobs and taxes that go with them.  They need to be reduced to 15-20%.

G. PROLONGED UNEMPLOYMENT BENEFITS:  Extension of the duration of unemployment benefits for more than  12 months is very harmful to the unemployed as evidenced by studies showing  the unemployed usually do not even look for jobs until a few weeks prior to their unemployment benefits expiring.  At one point, Obama, in conjunction with a Democrat Congress, extended unemployment benefits to 24 months. “Compassion” was the stated reason, but getting the unemployed off of of the official unemployment roles  so that the official unemployment rate would be lowered is the real reaon.

H., I., J.,K., L., M., N., etc.

In closing, most Americans were proud that the U.S. elected an African-American President 151 years after the Emancipation Proclamation freed  American slaves, even if they personally did not vote for him.  The United States inherited slavery from England when it took over the country in 1776 but had to temporarily retain slavery  in order to form the Union to include Southern States (the “Great Compromise”).  At the first opportunity, the U.S. rid itself of slavery (in 1863).

The first African-American President unfortunately had no experience in managing anything or in guiding an economy and therefore the U.S. consequently is badly hurting economically.  While I believe President Obama meant well, he also still believed that failed liberal/”progressive” economic policies (“Keynesian economics”) were the way to stimulate the economy and therefore turned a blind eye to workable economic policies.

President Reagan demonstrated how to get an economy working and the proof is the fact that the Gross Domestic Product (which measures the size of the economy) of the United States almost doubled 1n the 10 years following Reagan’s implementation of his large reduction in tax rates (1983-1993) and curtailing Federal regulations.  President Kennedy also stimulated the economy during a recession in the 60’s by cutting tax rates.

 

 

TRUMP’S ECONOMIC PLAN: REDUCE TAX RATES TO INCREASE TAX REVENUE

 How can soon-to-be President Donald Trump pay for a trillion dollars in infrastructure improvements that he is advocating and still eliminate Budget Deficits and eventually the National Debt?  Few politicians explain this so I thought a U. of Penn Wharton graduate (me), who should know this, would explain it.  Many are concerned that the huge proposed infrastructure spending and proposed tax cuts will force the U.S. further into debt.  If you simply look at the economy as static, this would be true.  However, the economy is dynamic, not static.  Therefore, when you change some things, like reducing corporate taxes from the current 35% to President-elect Trump’s 15%, as well as reducing taxes on the middle class by about 1/3, this stimulates businesses in many ways, bringing back U.S. business and investment money to America and stimulating new businesses and the growth of existing businesses.  In addition, President Trump proposes imposing a 35% tax on any products companies try to sell in the U.S. if that company leaves the United States to make its products in another country.  Therefore, Trump’s economic plan  has both a carrot and a stick.  Moreover, Trump will repeal and replace Obamacare, which is a huge drag on the economy and businesses hiring full-time workers.

All of this resulting economic activity will result in a huge increase in the Gross Domestic Product (GDP), which is a measure of the size of the U.S. economy.  The taxes from this huge growth in economic activity, though the tax rates are reduced, will result in tax revenues being vastly increased.  President Ronald Reagan did this in the 80’s, as well as reduce regulations, and GDP consequently almost doubled in size within 10 years from the time that Reagan’s tax rate cuts went into effect (1983).  President Kennedy also did this in the 60’s.

GDP growth is extremely important because, with 4% annual GDP growth, the United States can afford to do what needs to be done without having annual budget deficits, that at the end of each fiscal year, are added to the total national debt.

However, the potential monkey-wrench in Trump’s economic plans, is that whenever the Federal Reserve significantly raises interest rates, which is likely to happen soon, a recession could follow.

PRESIDENT TRUMP WILL CREATE JOBS & FIX THE ECONOMY

After most recessions, Gross Domestic Product (GDP) growth comes back with  a strong minimum 5% increase/year.   But not this time…annual growth averaged under 2% for the past 8 years and the Civilian Labor Force Participation Rate diminished to 62.8%, the lowest it has been since 1978.   Moreover, the official unemployment rate is under 5%, but would be about 12% if it were measured the way it was back in the year 2000, and over 20% if it were measured the way it was during the Great Depression in the 30’s.

So what’s wrong this time?  Why not the usual strong growth?  Business has a few trillion dollars that it’s holding onto oversees, so why isn’t it spending its money to expand its operations and create millions of jobs?  There’s a lot of  reasons why business has been cautious in expansion…and we need to understand what the problem is in order to turn around the economy and foster substantial job growth.  Of course, the Affordable Care Act (“Obamacare”) is filled with disincentives to job growth, especially full-time jobs, so it’s largely responsible. The large number of new regulations and tax increases also adds additional burdens on job creators and that’s the other major cause.

But who am I to be pontificating on jobs and the economy?  Well, I do have a masters degree in Government Administration from the University of Pennsylvania.  And my degree is from the Wharton School in the U. of P., which is known for its econometric models of the economy.  To be clear, however, my education was in government, not economics, though I did need to have economics and accounting courses as well as a statistics course in order to graduate from Wharton with my MGA long ago.  I also worked for the Federal government for over40 years in various capacities, and have also worked for the state of Pennsylvania and the city of Philadelphia.

FORMER  SUCCESSFUL QUICK RECOVERIES

Let’s put aside education and experience qualifications because, from my observations, ideology trumps education.  I’ve seen PhD’s advocate  really stupid positions, even in light of contradictory evidence.  So I tend to look at the real world, what actually happens when a particular economic policy is followed and practiced.

I’ll start with the policies used by President John F. Kennedy in the early 1960s.  When confronted with a recession, he cut tax rates which led to increased economic growth and recovery.  In addition, when President Ronald Reagan inherited the worst recession since the Great Depression from President Jimmy Carter in 1980 (unemployment over 10%, inflation 13.5%, mortgage interest rates up to 20%), President Reagan cut tax rates to the extent that GDP almost doubled in ten years and tax revenues to the Federal government greatly increased in the 10 years following the tax rate cuts.  President George W. Bush had a similar experience with tax rate cuts, revenues to the Federal government significantly increased.

PAST FAILURES

Let’s look at what actually happened when the opposite approach was used:  it is estimated that President Franklin D. Roosevelt doubled the duration of the Great Depression in the 1930’s by using the John Keynes economic model of increasing government deficit spending and the US still did not even get out of the Great Depression until World War II.   Moreover, when Japan’s economy went bust in the 90’s, it spent trillions over a 20-year period trying to stimulate its economy.  The huge deficit spending did nothing except give Japan a large debt.

WHAT PRESIDENT OBAMA TRIED

Which brings us up to today when President Barrack Obama spent almost a trillion dollars in his “stimulus” package in a effort to turn around the economy…and also devalued the dollar by having The Federal Reserve Bank print trillions of dollars with no backing through it’s so-called Quantitative Easing 1, 2, and 3.  He also tried other short-term Federal spending programs such as his “cash for clunkers” and engaged in huge annual deficit spending, the extent of which has never been seen before.  His economic policies, based on the discredited theories of economist, John Maynard Keynes,  have actually have made the economy worse by piling up huge government debt (over $19 trillion in total national debt which is greater than the annual GDP of the US), with very little to show for it,  and whose interest payments will be unsustainable when interest rates increase.

Let’s look at other factors significantly adversely affecting the economy, such as oppressive government regulations.  One of the reasons for President Bill Clinton’s economic success in the 1990s was his significantly cutting back many Federal Regulations (as well as the reduction in government employment through attrition) as part of his “National Performance Review” initiative.  President Obama’s policy, on the other hand,  on preventing drilling for oil in the Gulf of Mexico, has resulted in 240,000 barrels/day less oil from the Gulf  which would have led to large increases in gasoline prices were it not for oil companies engaging in horizontal drilling and fracking on private and State lands.  Another example of over-regulation is the Dodd-Frank bill, the stated purpose of which was to prevent future financial meltdowns…but it did not even deal with the cause of the meltdown, Fannie Mae and Freddie Mac who threatened  and coerced banks into making housing loans to people who could not afford to repay them.  Dodd-Frank also had adverse impacts on small banks and dried up loan money for small businesses that would have otherwise been available to them to expand.

Then there’s Obamacare that is being implemented which has been estimated to actually cost the government up to 3 trillion dollars in the first 10 years, as well as lead to very expensive, rationed and inferior health care.   Then, of course, there’s EPA’s over-regulations, such as the one on carbon dioxide, which as we know, is an inert gas, the chief purpose of which is food for plant life, which turns carbon dioxide into oxygen.  Moreover, let’s not forget how hundreds of thousands of farm hands were suddenly unemployed when the US Department of the Interior shut off the water to California’s Central Valley in an effort to protect the Delta Smelt (a small fish) that was on the Endangered Species list.  All of these things have severely hurt jobs.  Finally, extending unemployment benefits to 99 weeks actually increased unemployment because studies show that, on average, unemployment benefit recipients don’t even begin looking for work until 4 weeks prior to the end of their benefits.

IS CUTTING TAX RATES FAIR?

But cutting tax rates isn’t fair, is it?  Even President Obama said in an interview a few years ago, when confronted with the fact that cutting the capital gains tax rate in the past has actually resulted in increased tax revenues to the Federal government, that he still would not cut the capital gains tax rate because “it wasn’t fair.”

So is it fair to cut tax rates even though we know that the result would be to increase tax revenues?  The nation would then have more money to help the poor, not less, so why not do it?  I can understand the “equality” argument but  is it really a good thing if everyone were equally poor as they are in many countries?   “So what” if there are some super-wealthy people…we know that in the United States they will eventually give most of their money to charity anyway and do it much more wisely than the Federal government!   Winston Churchill said that  capitalism is a bad form of government except that it’s better than all other forms of government.

THE SOLUTION

Cutting  tax rates and regulations have always worked in the past and would stimulate the economy and thereby create many jobs.   Political ideology is the only thing preventing our government from following these time-tested strategies.   Presidents Kennedy, Reagan and Bush all increased tax revenues by cutting tax rates for everyone.  Today, the bottom 50% of earners pay no Federal income taxes…the upper 10 %, on the other hand,  pay 70% of all Federal income taxes.  If you believe that’s not enough, how much is enough?  The U.S. corporate tax rate is currently 35%, the highest in the world, and consequently has led to many businesses moving their operations and jobs to other countries and caused the United States to lose many jobs.  It’s estimated that there are at least 3 trillion dollars off-shore that we could entice back to the US if we offered a zero corporate tax rate for the first few years and a contract stating that the businesses would remain in the US for at least another 5 years.  The US needs to put ideology aside and focus on solving the nation’s economic problems.  Although  President Obama can appear very friendly, his policies have really hurt the United States, so it’s time for newly-elected President Trump to: 1)try approaches other than very large amounts of Federal deficit spending and to forget about raising taxes on anyone in this under-performing economy; 2)approve the Keystone pipeline and begin granting permits for oil wells in the Gulf and on Federal lands; 3)rein in the Environmental Protection Agency on over-regulations; 4)eliminate job and small business-killing regulations; 5)cut corporate income taxes from their current 35% (the highest in the world) to 15% to lure back the large number of businesses that moved overseas to escape the U.S. confiscatory taxes; and 6)repeal and replace the Affordable Care Act (“Obamacare”).   I believe that President Donald Trump will do these things and by so doing will fix the economy and create jobs.

WHY DONALD TRUMP WAS ELECTED PRESIDENT? BACKBONE!

I’m sick of the media explaining that Donald Trump did well because of their many (half-baked) ideas and therefore I felt compelled to write this post, however, I must say that targeting blue-collar workers and rust-belt states was clever.

My credentials for saying what I’m about to say are simply that I’m a conservative, a graduate of U. of Penn’s Wharton School (but with a MGA , not an MBA), and have over 40 years employment with the Federal, a State and a city government.  I believe that Trump supporters support  him for the same reason that I like him:  the man has a stiff spine and is not timid.  When he’s criticized by the Press or political opponents, he doubles-down and fights back even harder.  In addition,  Trump’s focus on illegal immigration, the $19 trillion in National Debt, weakened military, Obamacare, anemic war on terror, tiny growth in the economy, etc. has touched a nerve with the electorate.  He’s truly a “Blue-collar Billionaire.”

Mitt Romney lost the 2012 Presidential election to President Obama because he refused to fight back.  He was more than capable, as evidenced by his outstanding performance in his first debate with President Obama.  When viciously attacked by the Obama campaign, he refused to fight back.  Governor Romney’s poor performance came on the heels of Senator McCain’s poor performance in the 2008 Presidential campaign.  Moreover, it followed President Bush’s unwillingness to fight back when constantly accused by the Left that, “Bush lied, people died.”

I’m not advocating picking stupid fights that can’t be won and simply receiving a black eye, but I also believe in not backing off when Democrats make false allegations.  For example, I believe that Speaker of the House, Paul Ryan, and Senate Majority Leader, Mitch McConnell, are often given bum raps when they don’t push a Bill in Congress that they know won’t pass.  However, there is a time to fight but Republican leadership doesn’t appear to have the stomach for it.  When there are good and rational reasons for not fighting, the Speaker and the Majority leader need to explain this on Fox News and other news outlets that are fair, otherwise don’t blame voters for thinking they are jellyfish-spine Republican Congressional leaders.

Donald Trump is a streetfighter.  “Turning-the-other-cheek” is not for successful politicians.  Trump is improving  his messaging and appointing impressive people to help him develop his policies.  He had a resounding victory over Hillary Clinton, thanks to his strong backbone. If he’s able to implement the policies he advocated in the election, he will go down in history as being one of our greatest presidents.  Congratulations and good luck Mr. President-Elect.

MINIMUM WAGE INCREASE: PROS & CONS

Who can be against a livable wage and why would they possibly be against it?  That’s what this post is about.   President Obama raised the minimum wage for Federal contractors from $7.25 to $10.10/hour.  It covers future Federal contracts only and therefore won’t affect many workers right now.  The President has urged Congress, however, to pass legislation to cover all minimum wage employees in the U.S.

The Congressional Budget Office (CBO) has recently reported that if the minimum wage were to be increased to $10.10 nationwide, or a 40% increase, about 500,000 to 1,000,000 million minimum wage employees, from the current pool of 16,500,000 minimum wage employees, would lose their jobs because employers could not pay it and remain in business.  Recently, however, the new proposed minimum wage has jumped to $15/hour.  The specific effects of such a raise have not been officially calculated, but it would surely result in millions of “minimum wage employees” losing their jobs because many employers could not afford to pay it and remain in business.

So why do it?  The main argument is that it’s not a “living wage,” that no one can live on and raise a family on that wage.  Sounds like a reasonable justification but, of course, we need to look at other sides of the argument before reaching sound conclusions.  I already cited one of the primary reasons why not to raise the minimum wage too high…the loss of about 1,000,000 minimum wage jobs; however, another significant reason is that it would almost shut down the first step on career ladders for unskilled workers…to the extent that they couldn’t even get that first job, get their foot in the door…because their work would not be worth $15/hour.  In addition, since only 15% of minimum wage employees live in poverty households, raising it would do little to reduce poverty.  Finally, many businesses, like restaurants, are very sensitive to the minimum wage and when that wage is increased substantially, restaurant prices increase substantially, which hurts the business or makes it fail (so the end result may be the elimination of jobs).  Moreover, it’s far more accurate to call “minimum wage” the “starting wage,” because that’s exactly what it is for most people.

It appears that labor union leadership and consequently the Democrat Party is the only beneficiary of dramatic minimum wage increases with everyone else being harmed; therefore, gradual increases in the minimum wage may be able to satisfy genuine concerns of the minimum wage argument.

The best way to raise everyone’s wages the most is to create a booming economy like they have in North Dakota where $15 is the starting wage in fast food restaurants because of the huge competition for employees that North Dakota’s great economy fostered.

 

IS CAPITALISM ETHICAL? DOES SOCIALISM WORK?

Bernie Sanders, Hillary Clinton, celebrities and academia advocating Socialism, unemployment and underemployment, the National Debt increased by $9 trillion (to $19 trillion) during Presdident Obama’s 7 & 1/2 years, annual GDP growth under 2% for Obama’s entire reign, …ad infinitum.  Is Capitalism to blame for America’s woes or is it the solution to our Nation’s economic problems?

Let’s take a closer look, first with very brief definitions of Capitalism and Socialism so we’re all clear on what we’re talking about.  From the book, ‘isms and ‘ologies by Arthur Goldwag, Capitalism is the “free exchange of goods in a competitive marketplace.”  In that same book, “Socialism” is defined as the opposite of Capitalism.  Further, “In socialist economies, the means of production are either controlled by or directly owned by the state…”

Capitalism is fueled by a motive to make profits and it does this by providing goods and services that consumers want and at a price that can beat competitors’ prices who also provide similar goods and services.  This forces capitalists to constantly improve quality and undercut competitors’ prices.   Socialism eliminates the profit motive and therefore satisfies some people’s altruistic side and also attempts to redistribute wealth from the “haves” to the “have-nots,”  satisfying some people’s idea of fairness.  Because in Socialism there is no continuous need to improve efficiency and effectiveness, there usually is significant waste and inefficiencies.  Capitalists would argue that they earn their profits, attending college for many years and then working 70-80-hour workweeks… and it’s their taxed profits that enables government to have the money to help others.

Capitalism creates wealth,  which then is taxed and used to help the poor and needy.  Socialism makes equality of outcome most important, consequently leading to everyone being equally poor with no large sums of funds available for government and charities to help those in need.  Socialism takes away the incentive for people to work hard and excel to provide for themselves and their families.  The top 10% of the wealthy pay 70% of all Federal taxes.  The lowest 50% of taxpayers pay no Federal income taxes.

Government is usually the culprit behind much fraud, unemployment and economic downturn and  is responsible for our current economic woes.  Loans to people unable to repay them was the precipitating event that caused the 2007-8 economic downturn.  Quasi-government Fannie Mae and Freddie Mac forced banks, with threats of lawsuits, to make those bad loans.  Therefore, to have the government fully control the economy is insanity.  Government does not understand business, does not understand how jobs are created, does not comprehend how many of its regulations, especially “Obamacare,” are destroying the economy.

The Dodd-Frank Bill, proposed by and named after two of the most significant initiators of the 2008 economic downturn (Congressman Barney Frank and Senator Chris Dodd), is truly absurd.  For all of its harm to small banks and to the economy, it doesn’t even address the cause of the downturn, Fannie Mae and Freddie Mac.

So, let’s answer our two basic questions, “Is Capitalism Ethical”, “Does Socialism Work?”  Capitalism is a huge engine for job creation and wealth to the extent that the Pacific Rim countries have embraced it, as well as China (and they are all becoming wealthy fast)…and there’s nothing unethical about making a reasonable profit for providing goods or services.   Socialism, on the other hand,  can be forced to work, but at the cost of civil liberties, prosperity, unemployment, and political interference in all aspects of your life.

Finally, how about some people becoming billionaires?  Is it ethical for anyone becoming that wealthy?  Huge wealth is certainly a possibility under Capitalism.  However, very wealthy people pay most of the taxes and also give much of their wealth, after providing for their families,  to charities, which use it more wisely than the government ever will. Finally, if you still have a problem with Capitalism, then call it “free enterprise” which means the same thing but is more descriptive and uncontroversial.  And if you’re still unconvinced if socialism works or has ever worked, just check out what’s happening in Venzuela, and if you think Socialism is great, then vote for Hillary Clinton and be prepared for the continued decline of the United Styates.

 

 

BOTH SIDES: the Economy & Jobs

I watched Sunday morning’s political talk shows which made me sick at the inarticulateness  of some journalists and ignorance by many, of all aspects of the issues.  So I thought, as a mostly non-partisan, I’d toss in my two cents worth of analysis.  First, however, let me state both the Democratic and Republican arguments on the economy and job creation.  Here goes… 

DEMOCRAT ARGUMENT: 1. “The Tea Party has swayed the Republican party to its  its extremist positions…if they would support the President in what he wants to do, the economy would improve and job growth would increase.   A Republican Senator said a few years ago that their number one job was to make Barrack Obama a one-term President.  Democrats also say that the Tea Party is racist and it doesn’t like the President because he is Black.”

2. “Many Republicans want to eliminate or reduce Social Security and Medicare while cutting taxes on millionaires and billionaires.  If we would increase taxes on the wealthy,  the U.S. would be O.K. plus the wealthy pay lower tax rates than their employees.”

3. “Through his 800 billion “Stimulus Package”, President Obama turned the economy around.  Things would have been much worse if we didn’t have the Stimulus Package.since the analysis I heard this morning was unimpressive.”

REPUBLICAN ARGUMENT: 1.  “President Obama’s Stimulus helped a little but it was President Bush’s $700 billion “TARP” (Troubled Assets Recovery Program) that preceded President Obama’s Stimulus that fixed the financial markets (1/2 of it was spent by Bush, 1/2 spent by Obama.”)

2. “The Republican plan for Social Security, Medicare, Medicaid simply makes these programs more efficient and this needs to be done because they are currently bankrupting the U.S. to the extent that soon they will no longer be able to afford them.  And these efficiences are minor  like raising the retirement age a few years for people currently under 55 years of age, turning the administration of Medicaid over to the States, and Medicare recipients given vouchers so they could purchase private insurance (and save over $6,000 per recipient from the resulting efficiencies).”

3. “No one’s taxes should be increased in our bad economy…it would make it even worse.  By millionaires and billionaires you are really referring to anyone making more than $250,00/year and this is not a millionaire but is an income level that many business owners fall into (and you’ll be hurting them, the job creators).  The top ten percent (over around $350,000/year) pay about 70 % of Federal income taxes.   Their tax rates are lower because tax on captal gains (from stocks) is lower and is lower as an intended incentive for investors to risk their money by buying stocks.”

4. “Republican Senator Mitch McConnell remarked that he wanted to make Barrack Obama a one-term President because he thought that this was the only way to fix the economy and create jobs…nothing to do with racism.  Morever,  the President is the cause of the continued economic problems in the U.S. (current 2% GDP growth vs. what it usually is at this point after a recession, 5%) with “Obamacare,” Dodd-Frank, etc.”

MY ANALYSIS

1.While the President says that he has tried to fix the economy, it  clearly has not worked and the Stimulus has added almost a trillion dollars to our national debt with very little to show for it.  No one even asked basic questions prior to the passage of the “Stimulus,”  such as, “is it worth the cost?”  The President needs to try other approaches.  He has added $9 trillion to the National debt in just over 7 years, which is now totals over $19 trillion.

2. I’m mostly non-partisan and as such believe that it might be a good thing for everyone to have health insurance.  Presently, the poor receive their health care at hospital Emergency Rooms since Federal law mandates that hospitals treat people for free who can’t pay.  The kindest thing that I can say about Obamacare is that, as currently configured, it is unaffordable to the U.S. (estimated to really cost up to $3 trillion the first 10 years).  However, it is much worse than simply being unaffordable,  but that’s  a separate article.   Obamacare is stifling job creation and really needs to be repealed and replaced by something much better.

3.  The recent Dodd-Frank bill  is forcing small community banks out of business and the small loans to small businesses disappearing with those banks thus stifling job creation.  This bill, authored by the two people most responsible for the economic meltdown, needs to be repealed…it didn’t even address the cause of the meltdown, Freddie-Mac and Fannie-Mae quasi-governmental mortgage lending institutions.

4. Many new regulations have been and are being created and implemented by the Obama Administration which have and will continue to kill jobs, hamper new job creation and seriously hurt the economy.  Others fortunately have been defeated, such as Cap & Trade, Card Check, etc.  It really does appear that the Obama Administration simply does not know how to foster job growth in our economy.

The above should be enough information for one to decide who has the better plan for creating jobs and fixing the economy.  You can easily verify on the Net any of the information in my analysis.  However, stay away from political websites if you want objective information and data.

KILLING THE GOLDEN GOOSE (the U.S. economy)

The golden goose (the U.S. economy) is still hurting.   So what’s to be done, if anything, by the Trump Administration?  There are many ideas on how to help the goose but what’s been done in the past few years hasn’t helped much.  The unemployment rate, while it has improved, is misleading because it computes part-time employees as employed and they currently make up about 3/4 of the newly employed.  In addition, people who are no longer actively looking for work, are not counted as being unemployed. Gross Domestic Product (GDP) has grown about 2% in the past 12 months, which is pitiful compared to usual  U.S. economic recoveries, which normally are about 5%/year.  The Civilian Labor Participation Rate is 62.7%, the lowest it has been since the late seventies.  To arrive at an effective solution on how to help the economy, one must discover the reasons that initially caused, and are still causing, it to be lackluster.

The initial causes were finally spelled out clearly in the book, Reckless Endangerment, by Gretchen Morgenson and Joshua Rosner:  the quasi-government mortgage institutions, Fannie Mae and Freddie Mac.  Basically, they forced banks to loan mortgage money to people who could not repay them, and they did this because of the amendments to the Community Reinvestment Act that President Clinton pushed through and that Representative Barney Frank and Senator Chris Dodd, as Committee Chairmen in the House and Senate in 2006, would not allow to be changed to make them fiscally sound.

But that’s “water under the bridge” so to speak, or is it?  The Dodd-Frank bill, which was supposed to add regulations mostly on banks to prevent the economic downturn from happening again, does not even address Fannie Mae and Freddie Mac.  It does ensure the failure of small community banks by placing  reporting burdens on them that only large banks can afford to comply with and making the penalties to banks so severe (the government would  take them  over) that banks are afraid to make loans.  But Dodd-Frank is just one minor peg in the goose’s coffin.

Other factors hurting our goose is Obamacare, which is slowly going into effect.  Obamacare affects everyone in the United States.  The President said it was based on Romney-care, or the medical insurance system put into place under then-Massachusetts-governor Mitt Romney.   Romney-care, however, only affected the 8% of Massachusettes residents who were not covered by medical insurance.

Then there’s the huge increase in the National Debt which is bankrupting the U.S. and thrusting a knife into the heart of the formerly “Golden” Goose.  Positive,  job-creating actions, like the Keystone Pipeline, which would also provide much-needed oil, were defeated by the President.

I could go on and on and on, but I think you have the idea…policy after policy is each hurting the economy.  I think that  we went over the fiscal cliff on November 1, 2012, when we re-elected someone who does not understand how the economy works.  With the inauguration of President Trump on January 20, 2017, the U.S. economy will tur around and there will be significant improvement in the economy.

JOBS FOR AMERICA (audio interview)

I decided to interview Steve De Maura (25-minute audio interview…click on the red words at the bottom of this introduction) because the U.S. economic problems mostly stem from the high unemployment rate which mean less taxes for governments at all levels and high annual deficits for the Federal government (most States may not legally have budget deficits).  In addition, US energy policy and using Keynesian economics (e.g., the “Stimulous” package) have made job creation and U.S. economic problems much worse. The interview focuses on the high unemployment rate: why it is so high and what should be done to bring it back down to very low levels.

Mr. De Maura began the non-profit organization “Americans for Job Security” or “AJS” (website www.savejobs.org) in 1997 to promote pro-market, pro-jobs public policy.  He was born in New Hampshire and raised in a small town in that State.  He received his higher education at American University in Washington, DC, after which he worked as a consultant for years before becoming director of “Americans for Job Security”.   AJS has a few thousand members who favor predictable regulations and lower taxes so as to foster job growth.  It funds its activities from member dues.

In the interview, Mr. De Maura discusses many aspects of the high unemployment rate in the U.S….

  1. The real unemployment rate (the U-6 Federal government report plus…)
  2. Why the “Stimulus” created only a small number of jobs
  3. Keynesian vs. Milton Friedman’s “Supply-Side” economics
  4. Unemployment in the Great Depression,
  5. Japanese attempts to stimulate their economy,
  6. Political interference with job and economic growth,
  7. The huge U.S. natural gas reserves, U.S. has more oil than the Middle East, and much more.

To listen to Steve De Maura’s interview, please click the below Red Link

Steve. de Maura-Job for Americans – Audio

Interview by Mike Russo 

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