Chance favors the prepared mind.
Louis Pasteur
Still Crazy After All These Years....
Every time I think Obama can't possibly say something profoundly more clueless, he surprises me to the downside.
Take Obama's recently well-publicized quote:
The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last ... 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government, oftentimes cuts initiated by ... governors or mayors who are not getting the kind of help that they have in the past from the federal government.Before getting started on this, the source I cite is the CS Monitor, which I've criticized before in the blog (see here and here). I really don't like the implied comparison of a gaffe between "The private sector is doing fine" and Romney's saying a few months back "I like being able to fire people."
Let's recall what Romney said:
I like being able to fire people who provide services to me. You know, if someone doesn't give me the good service I need, I want to say 'You know, I'm going to go get someone else to provide that service to me.Even a typical simpleton progressive has to know the difference between "I like firing people" and "I like being able to fire people"; they are entirely different things. All Romney is saying is that he likes being in an economy where if a dry cleaner did a lousy job on his clothes or he had a bad restaurant experience, he has the option of taking his business elsewhere. I have sometimes dealt with bad recruiters by "firing" them from future placements with me. It's not like having to deal with an inept President and/or Congress where you can't fire them for cause but have to wait 2 to 6 years to vote them out of office....
Going back to the Obama quote, editor Peter Grier then goes to parse the meaning of what Obama means by "just fine". Grier then gives Obama something like an 80-point curve on his economics practicum exam--a string of positive private-sector job growth numbers. Now I'm annoyed that Grier is largely accepting the fiction that Bush is responsible for the accelerating job cuts for the 3 months AFTER the 2008 election (and extending well into the Obama Presidency). This assumes that business was operating on irrelevant past, not future business expectations. Bush was a lame duck dealing with a Democratic-controlled Congress; Obama and an almost unprecedentedly strong Democratic Congress had been elected on a pro-regulatory, high spending agenda. The huge job losses occurred not in the aftermath of September 2008, when McCain was still running for President, but after Obama was elected. Also, Democrats had been in control of both chambers of Congress since the beginning of 2007: 11 months before the start of the "Great Recession".
I'm not going to exonerate Bush here. But among the points Grier is failing to make is that under Obama, we've seen one of the weakest job recoveries ever in the history of the country. This marks the end of 3 years after the formal end of the recession. Many, if not most of the month gains are LESS than new workers entering into the workforce. Obama, of course, is entirely spinning this by aggregating job gains over multiple years instead of average figures.
Many economists will say you need at least 3% sustained growth to gain enough jobs to make a dent in overall employment statistics. Not only has Obama failed to do that, but on his watch he's had the largest sustained long-term unemployed people whom may now be structurally unemployable and lowest labor force participation rate on record.. THREE YEARS INTO A RECOVERY. For example, I know some companies which automatically filter out job applicants whom has been out of work for 6 months or more. And a lot of jobs that have been added have been in Obama-opposed fossil-fuel expanded production--e.g., Williston, ND, which I believe Mark Perry of Carpe Diem has indicated has less than a 1% unemployment rate. It's not just Bakken oil production: there's natural gas fracking (similarly opposed by Obama's environmentalist allies) across multiple states, including Pennsylvania, which has quadrupled its production over the past 3 years. This is job growth that has occurred DESPITE Obama, not because of him. For 3.5 years, we have been telling Barack Obama to deregulate development of shale oil properties in the West and offshore exploration; instead, he has done things like moratoriums and freezes on drilling permits and putting off approval of the Keystone pipeline for entirely political purposes.
Obama has "created 4.3 million jobs"? (And notice that he's talking about 27 months, but he has been President now for 40 months.) Of course, recovery from a recession will have some kind of job growth: it's the quality of the job growth: its nature and extent.
What HUBRIS... Government doesn't create a single competitive product or service; it is dependent on the private sector, businesses and individuals, for its own resources. All this President has managed to achieve has been to introduce uncertainty to entrepreneurs and existing businesses, he has unleashed the EPA, he has maintained the highest marginal business tax rates among the world's major economies, he postponed free trade pacts negotiated by Bush well before the end of his term of office (I haven't seen any major new ones he's negotiated during his term in office), he has added over $5T (future taxes) to the national debt which is zero-sum with private sector investment, he has added massive new pushing-on-a-string regulations and mandates on businesses, he has rewarded inept regulators like the Fed by enhancing their authority and extended proven dysfunctional government domination over health care, mortgage and student loans, and he has played and continued to play a game of chicken over renewing the Bush tax cuts. I could go on, but I need to catch my breath... The point is, none of these things do a damn thing towards creating what Adam Smith called "the wealth of nations".
In fact, a new BCG study shows that under Obama's tenure, while the BRIC nations have been growing at a far higher rate than our own economy and creating a large number of millionaires, the US is shrinking its own numbers of millionaires. I wonder if the EPA can protect the endangered specifies of homemade American millionaires from Obama's poaching them, trying to shoot them down with increased tax rates and regulation!
But Obama obfuscates things further--despite picking and choosing his months of data. Because state and local governments are still shedding workers. That Obama is trying to engage in the morally hazardous step of bailing out states or local governments AGAIN as they struggle to balance their budgets, something Obama has never given a second thought of doing while doubling the publicly-held debt in less than one term in office: thumbs DOWN!--but I don't think Obama has a snowball's chance in hell of a state/local bailout surviving the House.
Let's provide context here: just under 1 in 5 workers works for the government. Barack Obama was President at the end of January 2009: total nonfarm 133,561K. As of May 2012: 133,009K. (In January 2008: 138,023K.) So we are still over 500K jobs under the starting point for Obama and 5M since the start of the recession. So the spin is that the private sector is net positive under Obama, but the state/local government folks aren't faring out so well. Okay, in March 2010 there were about 19.6M state/local workers. Since the beginning of 2009, they have lost less than 1M; they gained more than 1M during the Bush Administration. They are still up from the beginning of the Bush Administration. Of those 5M jobs lost since January 2008, only a small percentage are state/local jobs. In fact, they increased 160,000 during 2008 and that gain exceeded the losses in 2009. In 2010-2011, they lost nearly 500,000. Not including any 2012 layoffs, they've lost less than 10% of the 5M job loss since January 2008, although they have a higher percentage of the nation's labor force.
By any objective standard, state/local employees have been MORE PROTECTED than private-sector workers. Obama is focusing on QUALITATIVE, DIRECTIONAL (i.e., very weak) statistics, but let's face it: the reason that the states and locals are still having to layoff people is because of a lousy economy and unsustainable cost structures (e.g., pensions). Three years into a recovery, and they're still laying off people. Businesses cut workers to get to a sustainable cost structure, but if government similarly cuts workers, its workers are more equal?
Just because state/local governments were hiring a lot of people doesn't mean they were operating lean from the get-go. The last thing I heard was that schools are still in session despite all the teacher layoffs: maybe those teachers weren't needed in the first place... A lot of this has to do with the Democratic paybacks for teacher union support for years by the self-serving rationalization promising higher quality education through smaller class sizes, even while other countries showed better results with larger classroom sizes!
This is truly pathetic reasoning by Obama: $1.3T deficits, but he wants to help bail out Governor Jerry Brown (D-CA), whom still hasn't jawboned the unions into significant givebacks in unsustainable pension plans. Tom Hanks may have been Sleepless in Seattle, but Barack Obama is Clueless in Washington DC.
Interesting: Politicians Are Finally Discussing VAT's
I have spoken favorably on VAT's on a number of occasions (see here, here, here and here, although I opposed it during the recession, e.g., here)
Value-added taxes are like a sales tax assessed in incremental stages (i.e., business-to-business, like raw materials/components to assembly line) through final sales transactions. There are a number of reasons I've cited in the past on shifting to more of a VAT: for one thing, it's accepted in international trade circles; it also allow more even recognition of tax revenues, not to mention the government's dependence on accounting notions of income. We've had a tax system biased in favor of consumption (e.g., mortgage interest deduction) vs. wages and investments. And that's precisely the point James Pethokoukis raises here:
4) Anyway, it’s smarter to tax consumption broadly rather than work and investment narrowly. Especially in an economy that needs less of the former and more of the latter. And that is what a VAT does. Few doubt its ability to raise massive amount of revenue with fewer disincentives than the current system.Pethoukoukis points out a major problem, i.e., lack of transparency (it's a stealth form of taxation). In fact, I spoke on this point in yesterday's Friedman video commentary. The grand bargain has to be include government reorganization, significant (e.g., double-digits) year-over-year across-the-board budget cuts, tax simplication and pro-(supply side) growth policies
Why I Love Frédéric Bastiat Part III (Part I, Part II)
HT: Mark J. Perry, Carpe Diem. Dr. Perry says that this quote was written in a letter by Bastiat days before dying of tuberculosis on Christmas Eve 1850. (HT Adam Gurri whom elsewhere mentions finding the quote in a preface to his copy of Bastiat's Economic Sophisms.)
"Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race."
To fellow non-economists this may seem an obvious truth: just like a writer must know his audience, a business must know its customers. But Bastiat is going well beyond that. First of all, he is contrasting consumers versus producers of goods and services, notably businesses, but also (hopefully to a very limited degree) government. As suppliers, businesses and government have their own interests which stand in opposition to the consumer. The consumer wants to maximize the value of his income and property. A business, on the other hand, faced with a high cost structure, may seek to limit competitors, enabling it to raise prices and maintain margins.
It reminds of my social liberal accounting professor friend Tim whom once assured me that he was willing to kick in, say, an extra 25 cents per fast food meal if it all went to the workers. (Personally, I had no problem with Tim putting aside that amount on his own initiative and giving to the charity of his choice.) But as a consumer, Tim is worse off by paying more than is necessary for the fast food meal; the same money could be set aside and used to purchase other goods and services (which, no doubt, also among other things, would support other workers).
The consumer is best served by a government which works to support economic liberty, with an abundance of goods and services, not by artificial scarcities or prohibitions, e.g., barriers of entry to professions, price caps or floors, obsolete, broken immigration policies or protectionist trade policies. In addition, there's a consideration of consumer time and effort, e.g., finding a doctor whom will take my health insurance, or having to take time off work to get car maintenance done or a transaction completed at the Department of Motor Vehicles.
I would be better off having the option to drink raw milk available in Pennsylvania, but not in Maryland at any price. I don't like trade disputes impacting my ability to purchase South American fruit during the winter, Chinese silk ties, New Zealand lamb, Persian rugs, or Cuban cigars. If I lived in Portland, Big Taxi protects its turf against limo services by having the city enforce a minimum wait time and prices above its own fares (see exhibit below). Rent controls can limit my options to live in an area. If farmers can't find enough migrant workers, harvests may come in less than expected, resulting in higher produce prices.
In short, the free market and free trade ensure that we as consumers have an abundance of goods and services. Producers constantly compete to streamline costs and lower prices and/or introduce new or improved goods and services, gaining new customers. It may be that we produce certain goods or services more efficiently than other countries, and vice-versa. The answer is to think win-win: we get the best of both worlds in terms of globally competitive goods and services.
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| Courtesy of the Institute for Justice |
Musical Interlude: My Favorite Groups
Tom Petty (with the Traveling Wilburys), "Handle With Care". I'm going to shake up my format to include Petty hits in other contexts (e.g., Stevie Nicks) in addition to the Heartbreakers. The Traveling Wilburys was an unbelievable supergroup from the 60's/70's: George Harrison (Beatles); Tom Petty; Bob Dylan; Jeff Lynne (ELO); and Roy Orbison. I was a huge fan of each artist before the group formed.
One point here: in my view, there are few female vocalists whom have the pipes of Mariah Carey. (My issues with Carey are her material and vocal range showoff gimmick.) (Not to list all my favorite singers here, but Karen Carpenter is probably the most natural, flawless pop singer I've ever heard: the tone, the pitch, technique, etc. Done too soon. Barbra Streisand also has a wonderful, distinctive tone: lousy politics but a great singer.) There are a number of gifted male vocalists (e.g., Steve Perry and Mick Jagger), but just listen to how Roy Orbison stands out in the chorus here (the tone, the vibrato, the range: he effortlessly shoots through octaves). Some have estimated that the natural baritone had a 3- or 4-octave range. (I wish I could do that.) Such tragedies in Orbison's life: his wife died in a horrific traffic accident; his first two sons died in a home fire. A phenomenal songwriter in his own right, Oribson co-wrote his posthumously released hit (my favorite) "You Got It" with Petty and Lynne.
