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The world's most amazing achievement ever? How about the 78% percent reduction in extreme world poverty from 1981 to 2015.
— Mark J. Perry (@Mark_J_Perry) April 30, 2017
More at Global Extreme Poverty
In energy terms, operating today's global digital infrastructure surpasses the fuel demand of global aviation
The world today fabricates more transistors each year than the number of grains—not bushels, but grains—of wheat grown globally. And those silicon devices, along with a myriad other complex components from lasers to optical systems manifest not only in billions of consumer devices, but in megatons and trillions of dollars of hardware in the 'hidden' infrastructure of communications networks and warehouse-scale datacenters. The data coursing through the world's wired and wireless networks is now countable north of two zettabytes, an incomprehensible number.
Organized crime "Illegally trafficked cigarettes now have a higher profit margin than cocaine, heroin, marijuana or guns," a Virginia State Police official was quoted as saying by the state's Crime Commission.
Landline Users Now a Minority in the U.S.
Gaming gone bust, tribe turns to marijuana farming
San Diego County, California. The Iipay Nation of Santa Ysabel — which shuttered its 35,000-square-foot gaming hall in February 2014, buried under $50 million in debt — has transformed the vacant space into a high-tech medical marijuana operation, and is leasing part of the property to growers who cultivate and distribute the drug to legal dispensaries throughout the state.
From the Knowledge Economy to the Human Economy by Dov Seidman in the Harvard Business Review
Over the course of the 20th century, the mature economies of the world evolved from being industrial economies to knowledge economies. Now we are at another watershed moment, transitioning to human economies—and the shift has profound implications for management.
The industrial economy replaced the agrarian economy when people left farms for factories; then the knowledge economy pulled them from factories to office buildings. When that happened, the way workers added value changed, too. Instead of leveraging their brawn, companies capitalized on their brains. No longer hired hands, they were hired heads.
In the human economy, the most valuable workers will be hired hearts. The know-how and analytic skills that made them indispensable in the knowledge economy no longer give them an advantage over increasingly intelligent machines. But they will still bring to their work essential traits that can't be and won't be programmed into software, like creativity, passion, character, and collaborative spirit—their humanity, in other words. The ability to leverage these strengths will be the source of one organization's superiority over another.
This notion of a human operating system appeals to me because it hints at how fundamental the commitment to humanity has to be in a company. Many times, we see businesses launching initiatives or projects that take on problems such as bureaucracy or bribery. Think about these efforts as programs or "apps"—they are individually targeted at important problems, but without an operating system that lets them talk to each other and to the "hardware" of the organization, they can't accomplish much.
The Idle Army: America's Unworking Men by Nicholas Eberstadt in the Wall Street Journal
Millions of young males have left the workforce and civic life. Full employment? The U.S. isn't even close.
Labor Day is an appropriate moment to reflect on a quiet catastrophe: the collapse, over two generations, of work for American men. During the past half-century, work rates for U.S. males spiraled relentlessly downward. America is now home to a vast army of jobless men who are no longer even looking for work—roughly seven million of them age 25 to 54, the traditional prime of working life.
Received wisdom holds that the U.S. is at or near "full employment."...Benchmarked against 1965, when American men were at genuine full employment, the "male jobs deficit" in 2015 would be nearly 10 million, even after taking into account an older population and more adults in college....
Or look at the fraction of American men age 20 and older without paid work. In the past 50 years it rose to 32% from 19%, and not mainly because of population aging. For prime working-age men, the jobless rate jumped to 15% from 6%. Most of the postwar surge involved voluntary departure from the labor force.
Not even in dysfunctional Greece or "lost generation" Japan has the male flight from work proceeded with such alacrity. The paradox is that Americans—those who do have jobs—are still among the rich world's hardest-working people. No other developed society puts in such long hours, and at the same time supports such a large share of younger men neither holding jobs nor seeking them.
Time-use surveys suggest they are almost entirely idle—helping out around the house less than unemployed men; caring for others less than employed women; volunteering and engaging in religious activities less than working men and women or unemployed men. For the NEETs, "socializing, relaxing and leisure" is a full-time occupation, accounting for 3,000 hours a year, much of this time in front of television or computer screens.
There are the social effects, too. The male retreat from the labor force has exacerbated family breakdown, promoted welfare dependence and recast "disability" into a viable alternative lifestyle. Among these men the death of work seems to mean also the death of civic engagement, community participation and voluntary association.
In short, the American male's postwar flight from work is a grave social ill. Strangely, nearly everyone—the news media, major political parties, intellectuals, business leaders, policy makers—has managed to overlook it. The urgency of the moment is to bring this invisible crisis out of the shadows.
Imagine how different America would be today if another roughly 10 million men held paying jobs. It is imperative for the future health of the country to make a determined and sustained effort to bring these detached men back—into the workplace, into their families, into civil society.
A Very Depressing Chart on Creeping Cronyism in the American Economy
James Bessen, from Boston University Law School, has an interesting article in the Harvard Business Review about the source of corporate profits in the 21st century. Unfortunately, he finds that cronyist policies account for a depressingly large share of corporate profits:
"I find that investments in conventional capital assets like machinery and spending on R&D together account for a substantial part of the rise in valuations and profits, especially during the 1990s. However, since 2000, political activity and regulation account for a surprisingly large share of the increase."
Here's a very grim chart from his article. At the very least, I'll call this the most depressing image of 2016.
Ugh, what a dismal observation on the state of our economy. Companies are almost making as much money from manipulating Washington as they earn from serving consumers.
Bessen adds some analysis, including the very important insight that regulation and intervention tends to help big companies relative to small companies and new competitors:
"Much of this result is driven by the role of regulation… Lobbying and political campaign spending can result in favorable regulatory changes, and several studies find the returns to these investments can be quite large. For example, one study finds that for each dollar spent lobbying for a tax break, firms received returns in excess of $220. …regulations that impose costs might raise profits indirectly, since costs to incumbents are also entry barriers for prospective entrants. For example, one study found that pollution regulations served to reduce entry of new firms into some manufacturing industries."
It's also worth noting that he finds that this bad news really started back in 2000, which makes sense given that both Bush and Obama have pushed policies that have expanded the clumsy footprint of government.
What an awful cycle. Government gets bigger and more powerful, which lures companies into viewing Washington as a profit center, which then leads to more policies that expand the size and power of the federal government, which leads to further opportunities for rent-seeking behavior. Lather, rinse, repeat.
Oh, and don't forget this is one of the reasons why there's a revolving door of insiders who shift back and forth between the private sector and government, but their real job is always to be working the system to obtain undeserved wealth.
Glenn Reynolds: When leaders cheat, followers ... follow
The trust that underlies a law-abiding society is rotting away thanks to double-dealing in Washington. Back in the midst of the financial crisis, Gonzalo Lira looked at how people were responding to the mortgage meltdown and warned of a coming middle-class anarchy. He wrote:
"A terrible sentence, when a law-abiding citizen speaks it: Everybody else is doing it — so why don't we? ... What's really important is that law-abiding middle-class citizens are deciding that playing by the rules is nothing but a sucker's game."
America has been — and, for the moment, remains — a high-trust society. In high-trust societies, people extend trust to strangers and follow rules for the most part even when nobody is watching. In low-trust societies, trust seldom extends beyond close family, and everybody cheats if they can get away with it.
High-trust societies are much nicer places to live than low-trust ones. But a fish rots from the head and the head of our society is looking pretty rotten. As Lira says, "I'm like Wayne Gretsky: I don't concern myself with where the puck has been — I look for where the puck is going to be." Where will our society be in a decade if these trends continue? And what can we do to ensure that they don't?
We Are a Fish Rotting from the Head John Hinderacker at Powerline
The IRS scandal would have sunk a Republican administration, perhaps leading to impeachment. But the Democratic press is in on the joke, and the Obama administration is set to run out the clock in its usual fashion.
Worst of all, perhaps, is the way Barack Obama and his Attorneys General, Eric Holder and Loretta Lynch, have corrupted the Department of Justice. Time after time, federal judges have found that DOJ lawyers have lied to the courts on behalf to the Obama administration's political agenda. Paul described the latest instance, and one of the most shocking, here.
Then there is the fact that Barack Obama is a scofflaw. Repeatedly, he has ignored the Constitution and violated federal law, refusing to enforce the nation's immigration laws, imperiously changing his own Obamacare statute with no legal authority, and so on. Years later, the courts sometimes catch up with him; the administration has lost a number of 9-0 Supreme Court decisions where its lawbreaking was indisputable. But more broadly, the Obama administration's campaign of lawbreaking and stonewalling has succeeded.
Glenn asks the right question: if our purported leaders are scofflaws, why should the rest of us be honest?
How important is Trust? Well, the majority of our wealth is attributable to the degree of trust among people in society, the rule of law and a good school system. By those standards we are frittering away our wealth.
Ronald Bailey laid it out in "The Secrets of Intangible Wealth" in the WSJ
The World Bank, after measuring capital in the 21st century in nations around the world, announced that intangible capital accounted for the vast majority of the world's wealth. 1Natural capital (the country's natural resources (e.g. forest, farm land, mineral deposits) together with produced or built capital (e.g. machinery and equipment, structures, infrastructure, urban land, ) accounted for only about 20% of the wealth of rich countries and 40% of the poor. .. The report declared that the majority of a country's wealth is attributable to the degree of trust among people in the society, the skills and education of its citizens (e.g. its human capital) and the value of its institutions primarily measured by the rule of law.
In the WSJ Notable & Quotable: What Really Caused the Financial Crisis?
From economist Peter J. Wallison 's new book "Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why It Could Happen Again" (Encounter Books):
In public policy, as in medicine, a prescription is only as good as the diagnosis. The first question policy makers should have asked is how the U.S. mortgage market came to be dominated by loans that failed in such unprecedented numbers as soon as housing prices stopped rising. Instead, the government and those that have an ideological stake in denying its role in the crisis asked no questions; despite the insolvency of both Fannie and Freddie, the government-backed firms that dominated the mortgage market, they simply asserted that the private sector, and particularly "Wall Street," was responsible. That narrative, later endorsed by the majority report of the Financial Crisis Inquiry Commission (FCIC), has not only remained largely unchallenged in the media but has become the principal conceptual underpinning for the restrictive regulatory legislation—the Dodd-Frank Act—that has since been enacted in the United States.
You can't solve a problem if you don't tell the truth about it. When you look at how corrupt the investigation of the 2008 subprime mortgage scandal was, you can understand why the government hasn't taken the right steps towards solving the problem but is rather is building toward another mortgage meltdown.
"Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why It Could Happen Again" by Peter Wallison, ex-commissioner in the Financial Crisis Inquiry Commission (FCIC) reveals that the Democrat-led panel buried key data proving that the U.S. Department of Housing and Urban Development and other federal agencies pushed the housing market over the subprime cliff. The final FCIC report put the blame squarely on Wall Street.
Whistleblower: Pelosi Covered Up Role In Crisis.
In 2009, then-House Speaker Nancy Pelosi appointed her California pal Phil Angelides, a long-time Democrat operative, to lead the commission. The fix seemed to be in, and Wallison's account of the inner workings of the 10-member body confirms it. Here's what took place during the FCIC's 18-month, $10 million probe:
• Angelides provided no staff to help Wallison and other Republicans interview witnesses, conduct research or draft the report. But commission Democrats were assigned almost 80 staffers to help formulate their single theory that bank risk-taking and greed unleashed by deregulation caused the crisis.
• Angelides never notified Wallison or other commissioners about the hundreds of witnesses he called to testify in closed-door interviews with his staff, denying them the chance to cross-examine the witnesses.
• Staffers failed to put these private witnesses under oath, even though the final report was based almost exclusively on their testimony with little or no documents or data to back up their statements, which simply validated the Democrat narrative.
• Angelides buried evidence revealing that by 2008, three in four high-risk mortgages wound up on the books of HUD-controlled Fannie Mae and Freddie Mac or agencies such as the Federal Housing Administration. A data-rich memo by former Fannie Mae chief credit officer Ed Pinto proved that government, not the private sector, drove risky lending. But Pinto's research "was never formally made available by the chair or staff to the other members of the FCIC," Wallison writes.
• Angelides withheld the final draft of the report from Wallison and other commissioners until eight days before sending it to the printer, never giving them the time they needed to go over the wording or content of the almost 900-page draft.
• After Wallison filed a 43,000-word dissent, Angelides removed all but 9,000 words of it from the report widely distributed in bookstores.
Angelides effectively censored any hard evidence that the government's housing policies were the predominant cause of the financial crisis. The best-selling report was cooked up from the start.
Democrats passed the Dodd-Frank Act in July 2010, six months before the FCIC released its report — "a clear demonstration that the Democratic Congress knew well in advance exactly what this well-controlled commission would say." After Dodd-Frank shockingly left Fannie and Freddie untouched, the FCIC excused the glaring oversight by exonerating the toxic twins and their affordable-housing masters at HUD.
As a result, Fannie and Freddie, now under full federal control, are back making low down payment loans to low-income borrowers, and the Dodd-Frank-mandated Consumer Financial Protection Bureau is forcing banks to ignore credit risks in the name of affordable housing.
A corrupt investigation led to corrupt reforms.
Representative Jeb Hensarling (R-Texas) is doing his best to correct the historical record without much help from Republicans. WSJ, Hensarling's Housing History Lesson
Here's a sample of the Texas congressman's straight talk, from a Tuesday committee meeting: "Contrary to the fable told by the left, the root cause of the financial crisis was not deregulation but dumb regulation. Regulations and statutes that either incented or mandated financial institutions to loan money to people to buy homes they ultimately could not afford to keep. Exhibit one, Fannie and Freddie's affordable housing goals. Seventy percent of all troubled mortgages were backstopped by Fannie, Freddie and other federal agencies."
In the name of 'affordable' loans, the White House is creating the conditions for a replay of the housing disaster. WSJ: Building Toward Another Mortgage Meltdown by Edward Pinto
David Harsanyi writes Everything Liberals Have Told Us About Energy Is Wrong
In a chilling 2010 column, Paul Krugman declared: "peak oil has arrived."
So it's really not surprising that the national average for a gallon of gas has fallen to $2.77 this week – in 10 states it was under $2.60 – and analysts predict we're going to dip below the two-dollar mark soon. U.S. oil is down to $75 a barrel, a drop of more than $30 from the 52-week high.
The Institute for Energy Research estimates that we have enough natural gas in the U.S. to meet electricity needs for around 575 years at current fuel demand and to fuel homes heated by natural gas for 857 years or so – because we have more gas than Russia, Iran, Qatar and Saudi Arabia combined….
Every warning the Left has peddled about an impending energy crisis over the past 30 to 40 years has turned out to be wrong. And none of them are more wrong than the Malthusian idea that says we're running out of oil.
A stunning report in the Washington Post 1 in 3 U.S. adults have 'debt in collections'
An estimated 1 in 3 adults with a credit history -- or 77 million people -- are so far behind on some of their debt payments that their account has been put "in collections."
That's a key finding from a new Urban Institute study. It examined non-mortgage debt, including credit card bills, car loans, medical bills, child support payments and even parking tickets. The debt in collections ranged from as little as $25 to a whopping $125,000. But the average amount owed was $5,200.
"It's a stunning number," said Caroline Ratcliffe, senior fellow at the Urban Institute and author of the report. "And it threads through nearly all communities."
Researchers relied on a random sample of 7 million people with data reported to the credit bureaus in 2013 to estimate what share of the 220 million Americans with credit files have debts in collection. About 22 million low-income adults who did not have credit files were not represented in the study.
We've never fully recovered from the financial crisis that began in 2008. In fact, the The Typical Household, Now Worth a Third Less
The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.
For households at the median level of net worth, much of the damage has occurred since the start of the last recession in 2007. Until then, net worth had been rising for the typical household, although at a slower pace than for households in higher wealth brackets. But much of the gain for many typical households came from the rising value of their homes. Exclude that housing wealth and the picture is worse: Median net worth began to decline even earlier.
The song 16 tons is one of the most covered songs in history, but it was Tennessee Ernie Ford who first topped the charts with it
But we can't blame the company store anymore, it's the government's doing as Monty Pelerin writes in Government Is Destroying our Standard of Living
The Great Recession had a serious impact on all percentiles in the graph above. All are down from 2007. Liberals want to focus on how much better the "rich" are doing versus how poorly the "poor" are doing. The implication is that the rich are getting richer at the expense of the poor. This ideological nonsense is politically convenient and diversionary. There is no fixed pie where someone who gets a larger piece does so at the expense of someone receiving a smaller piece. That is only possible where government determines who the winners are….
The distribution at the top is not independent of government. The more government controls the economy, the more important it is to "have a friend in government." It used to be what you knew enabled you to succeed. Today, it is increasingly who you know. ….
Were the economy and its components growing at a real rate of 2 - 3%, then median net worth presumably would be growing at a similar rate….American's median net worth has been reduced by 60% to 70% from what might have been expected. How is this possible?
There are several reasons. I would argue that most of the blame goes to government:
Government is taking a much bigger share of the economy.
Government understates inflation which results in an overstatement of real GDP.
Taxes are higher, especially on capital gains which are unadjusted for inflation and taxed as if they were true gains.
Government interventions have destroyed the economy's ability to grow.
Government transfer payments have reduced the workforce, spreading a reduced output over more people.
Government's encouragement of the use of debt has created behavior not in the best interests of unsophisticated citizens.
Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules
Record Numbers Living Abroad Renounce U.S. Citizenship over IRS Reporting Requirements
Unlike other developed nations, the U.S. government taxes citizens on income they earn anywhere in the world. ...U.S. tax liabilities also cover children born to Americans abroad, extending the reach of the IRS across generations, as well as oceans.
…Helping boost the exodus, experts say, is a five-year-old U.S. campaign to hunt for undeclared accounts held by Americans abroad…..The tax dragnet has also swept up many middle-income Americans living abroad, prompting some to give up their U.S. citizenship. While people who renounce aren't freed of taxes due for past years, they don't want to risk sizable taxes and penalties for them and their children in the years ahead, experts say.
What kind of country does this to itself? With Medtronic's planned acquisition of Covidien and the announcement that the combined company will be domiciled in Ireland, U.S. tax policy has encouraged one more business to spend its money overseas. Medtronic, famous for its high-tech cardiac and spinal devices, will pay $42.9 billion for Dublin-based Covidien, which makes surgical tools and other medical supplies.
Shareholders of all companies—including employees who care about where economic growth will occur in the future—should know that America's federal corporate tax rate is 35%, which when combined with state and local levies rises to an average of nearly 40%. Ireland, where politicians evidently care about economic growth and as far as we know don't seek to stifle free speech on the topic, has a corporate tax rate of 12.5%.
Almost alone among civilized nations, Washington also demands to be paid on a company's world-wide earnings, rather than on money earned in the U.S. This tax is due whenever a company's overseas earnings are returned to America. Medtronic has about $14 billion overseas and rather than bringing it home and triggering the tax, the company will use the money to fund most of the cash portion of its $42.9 billion purchase.
The near-40% U.S. average rate is almost double the 21% average in the European Union, or the 22% in Asia, according to KPMG. As we noted recently, about the only place outside of captive Marxist countries with a higher corporate tax rate than the U.S. is the United Arab Emirates. But its top rate of 55% is generally applied only to foreign oil companies.
A big reason why the U.S. economy isn't growing as fast as it used to is that politicians not only don't want economic growth at the top of the agenda. They don't even want anyone to talk about it.
American families need a tax cut too and three charts show why
1.) Incomes have been going nowhere: "The April 2014 median income was 7.0 percent lower than the median of $56,941 in January 2000."…
2.) Higher education, the path to upward mobility, is an increasingly heavy burden:...
Middle-income families now paying 25 to 40 percent of their annual incomes to attend college. Remember, this is after accounting for any grants and scholarships that students receive.
3.) And then there's the rising cost of health care.
GM made $22.6 billion. We lost $10.6 billion
After filing for bankruptcy five years ago, General Motors is now one of the most profitable companies in the world.
GM has earned a stunning $22.6 billion since the dark days of the financial crisis, when the automaker was bailed out by the U.S. government. Taxpayers didn't fare nearly as well. They'd lost $10.6 billion by the time the U.S. Treasury department closed the books on the $49.5 billion bailout in December.
Make that We Lost $ 11.2 biillion. Taxpayer losses on GM bailout higher than first reported
Taxpayers lost $11.2 billion on the GM bailout, up from $10.3 billion the Treasury Department estimated when it sold its last GM shares on Dec. 9. A Treasury Department auditor said the government had written off an $826-million "administrative claim" tied to the GM bailout on March 20.
Goodness knows what the "administrative claim" consists of, but it was worth just south of a billion dollars. And if I had to bet, I'd probably bet this isn't the last write-off.
GM cars sold: 12 million. Recalled: 13.8 million.
GM has issued more recalls this year than ever before. There have been 29 separate recalls covering 13.8 million U.S. cars and trucks, and 15.8 million vehicles worldwide.
So far GM has agreed to pay the maximum fine of $35 million to the National Highway Traffic Safety Administration for the delay in the ignition recall. And it will be subject to closer oversight by the regulator.
Whoops, another recall. GM to recall further 3.4 million vehicles over ignition problems as drivers are warned to remove key chains until fault is fixed
General Motors says it needs to change or replace the keys for about 3.4 million cars because they could cause the ignition switch to move out of position if they are carrying too much weight. In a statement released Monday, GM said that the switches can rotate out of 'run' if the key has excess weight and the car 'experiences some jarring event', such as hitting a pothole or crossing a railroad track.
That can shut off the engines and disable power steering, causing drivers to lose control. Also, the air bags won't work. The recall affects seven cars with model years ranging from 2000 to 2014.
GM is already recalling 2.6 million older small cars, mostly in the U.S., for a similar problem where the ignition switch slips out of 'run' and causes an engine stall. In that case, the problem is with the mechanics of the switch. In this latest recall, GM says the problem is with the design of the key. GM began reviewing ignition switches across its line-up after initiating the earlier recall. GM links that switch problem to 13 deaths.
The ignition switches can unexpectedly slip from the 'run' to 'accessory' position, shutting off the engine. That shuts off the power steering and power brakes, making cars harder to control. It also disables the air bags, which won't inflate in a crash. GM said that this problem had caused at least 54 crashes and 13 deaths, but trial lawyers suing GM say the death toll is more than 60.
GM has acknowledged knowing about the problem for more than a decade, yet the cars weren't recalled until this year. Its chief executive, Mary Barra, will testify in front of a House subcommittee about the matter for a second time on Wednesday.
In 2014 GM Has Recalled More Cars Than It Sold In 2013 And 2012
GM Seeks Immunity From Lawsuits Due To Bankruptcy
Investors Business Daily Bank Bailouts, Stimulus Didn't Save Us from Second Great Depression
What is highly inconvenient for the left apologists for the Obama blitzkrieg of government programs and debt in 2009 and 2010 is that at the start of his presidency, he did lay out a counterfactual of what would have happened without the deluge of federal spending and debt.
Here's the punch line. According to the White House's own calculations, the economy would have been better off today if the government had done nothing instead of spending and borrowing $6 trillion.
The unemployment rate without the stimulus was expected to be 5% today. Instead it is 6.3% and in reality closer to 10%.
Another way to put this is that if the labor force had not declined and we had the 5% unemployment rate Obama says we would have had without the stimulus, there would be 5 million more Americans working today.
Here is another counterfactual to ponder: How much faster would the economy be growing today if we didn't have the carrying cost of $6 trillion in debt to contend with?
U.S. GDP was supposed to grow at over 2% each year under the do-nothing scenario. In reality, 2% has been the anemic recovery pace. Why does this matter? Because with even an average recovery we would have $1.3 trillion more GDP today. And under a supply-side, Reagan-style recovery, we would have $2 trillion more of GDP and collective income.
The real story of the financial crisis of 2008 was a massive real estate bubble facilitated by easy money from the Fed, government policies through federal entities like Fannie Mae and Freddie Mac that underwrite risky mortgage loans with near 100% loan guarantees, a Congress and White House that, as Rep. Barney Frank once famously put it, "rolled the dice" on the housing market, and private banks, investors and home owners who got caught up in a speculation frenzy. Then we asked the conspirators like Frank and Sen. Chris Dodd to fix it.
Now we're repeating the same inane pre-recession mistakes, with government again guaranteeing 90% of new mortgages, financed with easy money and many low down payment loans.
Here we go again. The problem is that when we let the left write the history books, we never seem to learn from our mistakes.
The Two Distinctly Different Outcomes for two different fiscal policies.
Obama's prescription for the last recession was to reinvigorate the economy by passing the ARRA and other policies over the next four years. These included ObamaCare to regulate the health care market, Dodd-Frank to regulate banks, Cash for Clunkers and extending unemployment benefits that collectively increased economic uncertainty and reduced incentives to hire and work.
President Reagan diagnosed government as the problem and prescribed a plan of lowering tax rates and reducing regulations to free firms and workers from disincentives to invest and work. This limited-government prescription led to a 92-month expansion — one of the longest on record — and helped increase the percentage of the working population from 57% to 63%.
Historically, there is a clear fiscal policy prescription for bringing people out of their parent's garage and back into creating businesses in their own garage: low taxes, spending restraint and stable regulations.
Report: Economic Growth 'Half of What the President Said His Policies Would Deliver'
"The farms in and around Mendota are dying of thirst. The signs are everywhere. Orchards with trees lying on their sides, as if shot. Former farm fields given over to tumbleweeds. Land and cattle for sale, cheap."
15 Reasons Your Food Bill is Set to Soar
The drought in California is so bad that some Bay Area communities could run out of water within 4 months.
In some districts, the wells are running dry while other reservoirs are nearly empty.
Some districts have long-running problems that began before the drought. Larger communities like Santa Clara Valley however, have fared better because of long-running conservation programs.
Springs that supply the state historical monument are running at just one-sixth normal and as a result Hearst Castle's fountains and pool are drying up
A powerful ridge of high pressure parked over Northern California has been responsible for a record 52 days of no precipitation in Sacramento.
The State Drought is called a Disaster In Slow Motion With Wildfires, Dry Wells
So far this year, Cal Fire has responded to more than 400 wildfires that have burned more than 1,000 acres. The five-year average for this time of year is 70 fires and 130 acres.
California is the nation's leader in dairy cows, and fourth overall in the U.S. for total number of cattle, trailing Texas, Nebraska and Kansas, Now ranchers are selling their cattle because there's no grass and little water.
Governor Jerry Brown says he's prepared to move water from Southern California to drier areas of the state as conditions worsen.
"The president called me today. He offered to do whatever he can do. He obviously can't make it rain," he said. "But there are some parts of California that are more privileged from the point of view of water availability than others. So we have systems. We can transfer it. But there are a lot of water rights, a lot of rules, so we've got to cut through that and make sure that those who need it most get the water to the extent we have it available."
This map shows just how bad the drought is today and how badly the Central Valley has been impacted.
The water shortage like so many other crises in California has been exacerbated by government. Californians are getting another first-hand lesson in the high costs of green regulation.
Local water districts that supply southern California, the Bay Area and the southern San Joaquin Valley may receive only 5% of their contractual allocations this year while growers in the heart of the valley might be cut off completely. Supplies for residents north of the Sacramento-San Joaquin River Delta could be sharply restricted for the first time.
Suffering the most are farmers south of the delta whose water allocations have plunged over the last two decades due to endangered-species protections. According to the Western Growers Association, up to 4.4 million acre-feet of water is diverted annually to environmental uses like wildlife refuges and salmon restoration. That's enough to sustain 4.4 million families, irrigate 1.1 million acres of land and grow more than 100 million tons of grapes.
Farmers are having to fallow hundreds of thousands of acres and pump groundwater, which depletes aquifers and can cause land subsidence. One irony here is that environmentalists are destroying one of FDR's great public-works programs—irrigating the naturally arid San Joaquin Valley.
California's biggest water hog is the three-inch smelt, which can divert up to one million acre-feet in a wet year. In 2008, federal regulators at the prodding of green groups restricted water exports south to protect the smelt, which have a suicidal tendency to swim into the delta's pumps. While wildlife refuges have continued to receive all 400,000 acre-feet of water they're entitled to under environmental regulations, farmers haven't gotten 100% of their water allocations since 2006. Even during years of heavy precipitation, federal regulators have supplied growers with 45% to 80% of their contractual deliveries.
More on the Green Drought For the sake of the smelt, California farmland lies fallow.
"Factory" is a good word to describe California's San Joaquin Valley. But "laboratory" might be a little better, for the region is an agri-tinkerer's delight. The soil being uncharacteristically fertile and the summers being long and dry, growers are afforded that most valuable of things: control. Emancipated from Gaia's caprice, farmers here can determine precisely not only how much water they wish to provide to their crops but when to add it, too. Which is to say that, in the Central Valley, irrigation is achieved not by the whimsy of the sky but by deliberately placed pipes, pumps, and microprocessors. It is here that the ancient earth meets the best of technology; where Silicon Valley meshes with the baser elements and, together, they yield life. …. This place is a miracle — a vast greenhouse in which, unmolested by the elements and provided with incomparably fecund terrain, farmers can do their thing as never before.
Just under 13 percent of all agricultural production in the United States takes place in the region, which the locals refer to proudly as "the Food Basket of the World"
Suddenly, as if crossing a line of demarcation — I am reminded of Checkpoint Charlie, the gate that linked West and East Berlin — we leave healthy fields bursting with life, and we arrive at . . . well, we arrive at nothing: just dust, quiet, and a few pieces of unused farming equipment. It's quite the shift: a real-life Before and After comparison. And sadly, most of the farm looks like this. Some 9,000 of Harris's 15,000 acres are fallow — devoid of water and therefore of crops and of workers and of attention. "Uncertainty is the new normal," CEO John Harris sighs from the driver's seat, his smile disappearing. "This is no way to run anything."
That the drought is making planning all but impossible is a refrain I hear all across the region.
The Central Valley's woes began in earnest in 2007, when the hardline Natural Resources Defense Council (NRDC) won a lawsuit against California's intricate water-delivery system, sending farmers like John Harris into a tailspin. In court, the NRDC's lawyers contended that the vast pumps that help to funnel water from the reservoirs up in the Sacramento–San Joaquin River Delta down to the Central Valley, to Southern California, and to the Bay Area were sucking in and shredding an unacceptable number of smelt — and, the smelt being protected by the Endangered Species Act (ESA) since 1994, that this was illegal.
In 2007, the pumps were turned down; the Delta's water output was lowered dramatically, contingent now upon the interests of a fish; and the farms that rely on the system in order to grow their crops were thrown into veritable chaos. Predictably, a man-made drought began.
This is a classic tale of activist government run amok — and, too, of the peculiarly suicidal instincts that rich and educated societies exhibit when they reach maturity.
Driving out of Harris Ranch after my tour, I am met by a string of protest signs that have been erected by a neighboring farmer. "STOP THE CONGRESS CREATED DUST BOWL!" one reads. "NO WATER = NO JOBS!" says another. A third has some choice words for Nancy Pelosi and Barbara Boxer. The farmers here are frustrated, of course. But their unease is nothing compared with that of their workers….
"Seeing what having no water in this valley did to our communities in 2009," Gutierrez tells me, "I had to get involved. It was devastating: The unemployment rate was 45 percent; people were standing in food lines. It had a terrifying impact….."People think of rich farmers," Gutierrez continues, "but they don't think about the people who actually work on these farms."
It is a choice that will be difficult to unmake. Suing is futile. … Because the ESA holds that researchers can declare their work private property, scientists must release only their findings and may keep their data and methods secret. Even when the work has been made public, the government's case has been flimsy at best.
Of all our present troubles, California's farming woes are perhaps the most inexplicably sourced and the most easily fixed. Complacently convinced of their infallibility, legislators in the nation's richest state have prostrated themselves at the feet of many silly ideas in recent years. But for authorities to have put the livelihood of millions of citizens at the mercy of a tiny little fish is almost too much to bear.
This will upset a lot of people.
FDR's policies prolonged Depression by 7 years, UCLA economists calculate
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.
After scrutinizing Roosevelt's record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years….
In an article in the August issue of the Journal of Political Economy, Ohanian and Cole blame specific anti-competition and pro-labor measures that Roosevelt promoted and signed into law June 16, 1933.
"President Roosevelt believed that excessive competition was responsible for the Depression by reducing prices and wages, and by extension reducing employment and demand for goods and services," said Cole, also a UCLA professor of economics. "So he came up with a recovery package that would be unimaginable today, allowing businesses in every industry to collude without the threat of antitrust prosecution and workers to demand salaries about 25 percent above where they ought to have been, given market forces. The economy was poised for a beautiful recovery, but that recovery was stalled by these misguided policies."
"High wages and high prices in an economic slump run contrary to everything we know about market forces in economic downturns," Ohanian said. "As we've seen in the past several years, salaries and prices fall when unemployment is high. By artificially inflating both, the New Deal policies short-circuited the market's self-correcting forces."
Cole and Ohanian calculate that NIRA and its aftermath account for 60 percent of the weak recovery. Without the policies, they contend that the Depression would have ended in 1936 instead of the year when they believe the slump actually ended: 1943.
Recovery came only after the Department of Justice dramatically stepped up enforcement of antitrust cases nearly four-fold and organized labor suffered a string of setbacks, the economists found.
"The fact that the Depression dragged on for years convinced generations of economists and policy-makers that capitalism could not be trusted to recover from depressions and that significant government intervention was required to achieve good outcomes," Cole said. "Ironically, our work shows that the recovery would have been very rapid had the government not intervened."
Millennials today are financially worse off than their parents were at the same age
Simon Black on Zerohedge
According to a recent survey by the Pew Research Center, just 33% of Americans think their children will have a better life than they did. On the other hand, 62% believe their children will be worse off.
They're likely to be right. The typical American family has seen its real income (adjusted for inflation) fall for 5 consecutive years now, and it earns less in real terms that it did in 1989.
According to the Census Bureau, median household income fell in 2012, and it languishes 8.3% below the pre-crisis peak in 2007.
The Brookings Institution, meanwhile, calculates that real incomes for working-age men in the US have fallen by 19 per cent since 1970.
80 is the new 60 when it comes to retirement
Running out of money in retirement is scaring the hell out of record numbers of older workers, forcing them to stay in the workforce.
Now 80 is the new 60 when it comes to retirement. Many older workers who finally clock out have sharply underestimated their financial needs in retirement, raising the specter of personal financial disaster.
Nearly half of older workers are on the job longer than they had planned to be — on average, by three more years than they estimated at age 40, according to a recent survey of Americans 50 and over by the Associated Press-NORC Center for Public Affairs Research.
Handsome Is as Handsome Gives writes Arthur Brooks in the Wall Street Journal
Donors to charity aren't merely generous souls. They're happier, healthier and better looking too
Camden, New Jersey: One Of Hundreds Of U.S. Cities That Are Turning Into Rotting, Decaying Hellholes
All over America, formerly prosperous communities are being transformed into crime-infested wastelands of poverty and despair. …… Jobs and businesses are leaving our cities at a staggering rate, and what is being left behind is poverty, crime and extreme desperation.
In Camden
-"In September, its last supermarket closed, and the city has been declared a "food desert" by the USDA. The place is literally dying, its population having plummeted from above 120,000 in the Fifties to less than 80,000 today."
-"Their home is a city with thousands of abandoned houses but no money to demolish them, leaving whole blocks full of Ninth Ward-style wreckage to gather waste and rats."
-"With legal business mostly gone, illegal business took hold. Those hundreds of industries have been replaced by about 175 open-air drug markets, through which some quarter of a billion dollars in dope moves every year."
-"On January 18th, 2011, the city laid off 168 of its 368 police officers, kicking off a dramatic, years-long, cops-versus-locals, house-to-house battle over a few square miles of North American territory that should have been national news, but has not been, likely because it took place in an isolated black and Hispanic ghost town."
-"After the 2011 layoffs, police went into almost total retreat. Drug dealers cheerfully gave interviews to local reporters while slinging in broad daylight."
-"The carnage left Camden's crime rate on par with places like Haiti after its 2010 earthquake, and with other infamous Third World hot spots, as police officials later noticed to their dismay when they studied U.N. statistics."
A glimmer of good news. Crime Rate in Camden, NJ Going Down After Unionized Police Force Sacked
The reorganization increased the amount of police on the streets and incorporated cutting edge technology such as ShotSpotter rooftop monitors. The initiative has already gotten results, according to city leaders.
Over the summer months this year, the murder rate fell by 22 percent and crime overall was down 15 percent, according to data provided by Camden County officials.
The Census Bureau calculates that there are 46.5 million people living in poverty in the United States, or 15% of the population
"Experts" in the Federal government assure us the unemployment rate is 7%. But if we include the 91.5 million people of working age who could be working (and would be working in a work-fare economy), then the real unemployment rate is double the official rate: 14% or even higher.
We want to believe the fake unemployment rate of 7% rather than the real rate of 14+% because the officially sanctioned forgery feeds our belief that our bloated, corrupt Empire of Debt is sustainable, fair and working well. To accept that we've been bamboozled, ripped off, taken advantage of and ultimately cheated out of an authentic economy and life by swindlers is too painful.
What If There's A Recession In 2014? Gonzalo Lira speculates.
If policymakers were gunfighters, they'd be out of bullets: They have run out of effective policy tools to improve the economy.
Before facing up to a possible 2014 recession, let's ask ourselves: What happened during the last recession?…To stave off what looked like financial and economic Armageddon, the Treasury Department first under Henry Paulson and then under Timothy Geithner, and the Federal Reserve under Ben Bernanke, basically threw money into the economy…..
Rather than take the hit, work out the bad loans, and organically regrow the economy, the Treasury and Fed measures were essentially morphine—or heroin—to dull the pain of the Global Financial Crisis: They made us feel great, but the disease is still there…. Overindebtedness. Bad debts piled on top of bad debts……
So to weather it, you'd have to know what's going to happen. A basic outline is pretty clear:
Stocks will take the brunt of the beating,…Bonds won't do so well either, at least not corporate issuance…Real estate? Forget it—….The only store of value will be commodities. Not just precious metals, but all commodities: Industrials, agros, and fossil fuels…..If there is such a rotation from equities and bonds into commodities, then the prices of food and transportation will rise—precipitously.
Thus we will have inflation, possibly severe inflation. But the Fed will be loathe to rein in inflation via interest rate hikes….The Fed cannot conceive of any way in which to help the economy that does not involve keeping interest rates low.
In other words, the government will not be able to save the economy…The Federal government and the Federal Reserve are out of bullets.
Which means we are on our own come a recession. And we'll be paying not only for the recession of 2014, but also for the recession of 2007-09, which was deferred, but not worked out.
Here are some of America's most famous brands currently held in foreign hands:
Budweiser, now owned by Anheuser-Busch InBev N.V., which is based in Leuven, Belgium
Alka-Seltzer, now owned by German company Bayer Schering Pharma AG
Ben & Jerrys, now owned by British-Dutch Unilever
AMC theaters, now owned by the Chinese
7-Eleven, now owned by the Japanese company, Seven & I Holdings
Woman's Day Magazine, now owned by the French company, Hachette Filipacchi Médias, S.A
Purina, now owned by the Swiss company, Nestle
Gerber, now owned by the Swiss pharmaceutical giant, Novartis
Firestone, now owned by the Japanese Bridgestone Corporation
Citgo, now owned by the government of Venezuela
French's Mustard, now owned by Reckitt Benckiser, a British conglomerate
Frigidaire, now owned by Sweden's AB Electrolux
The Plaza Hotel in New York City, now owned by Israeli billionaire Yitzhak Tshuva's El-Ad Group
Trader Joes, now owned by German billionaires Karl and Theo Albrecht
Dial soap, now owned by Henkel KGaA, based in Dusseldorf, Germany
Sunglass Hut, now owned by Italian eyewear seller Luxottica Group
Walter Russell Mead hits the mark again with Obama Flubs Inequality Message
Obama, and those who think like him, focus so much on socio-economic causes of inequality that they tend to overlook the impact of cultural factors like the breakdown of the family and the decline of strong community institutions.
Actually, there's plenty of evidence that unwed childbearing, father absence and fraying kinship and community networks exacerbate the problems of low-income people and make it incredibly hard for them to gain a foothold in the middle class. These are thorny problems that aren't easily solved by the kinds of government measures Obama champions. So his speech says very little about the ways that strong marriages, family stability, or a robust role for churches in helping struggling Americans improve their lives can all improve economic mobility in this country. These social and cultural factors are arguably root causes of inequality, and it's a pretty conspicuous omission to ignore that in a presidential speech on the subject. We're glad people are talking more about about the yawning gap between rich and poor, but this troubling reality deserves a better treatment than Obama gave it.
Obama can't solve the jobs problem Glenn Reynolds
Last week, President Obama gave a much-touted speech on "income inequality." But while inequality is a valid concern, it's not so clear that unequal incomes are the biggest problem America faces.
More troubling -- as figures as distinct as Slate's Matthew Yglesias and National Review's Mark Steyn both noted -- is the growing divide between an America where people have jobs, and an America where people live off of government benefits.
So why is President Obama less interested in the shortage of jobs and more focused on mere "income inequality?" I think there are two reasons. First, while expanding the dependency class might be bad for America (and for the dependents), it's good for the political party that passes out the pork. And second -- and this is more troubling -- I think that Obama has no idea how to address the underlying jobs problem.
Mark Steyn on The Post-Work Economy
Consider Vermont. Unlike my own state of New Hampshire, it has a bucolic image: Holsteins, dirt roads, the Vermont Teddy Bear Company, Ben & Jerry's, Howard Dean . . . And yet the Green Mountain State has appalling levels of heroin and meth addiction, and the social chaos that follows. Geoffrey Norman began a recent essay in The Weekly Standard with a vignette from a town I know very well — St. Johnsbury, population 7,600, motto "Very Vermont," the capital of the remote North-East Kingdom hard by the Quebec border and as far from urban pathologies as you can get. Or so you'd think. But on a recent Saturday morning, Norman reports, there were more cars parked at the needle-exchange clinic than at the farmers' market. In Vermont, there's no inner-city underclass, because there are no cities, inner or outer; there's no disadvantaged minorities, because there's only three blacks and seven Hispanics in the entire state; there's no nothing. Which is the real problem. Large numbers of Vermonters have adopted the dysfunctions of the urban underclass for no reason more compelling than that there's not much else to do. Once upon a time, St. Johnsbury made Fairbanks scales, but now a still handsome town is, as Norman puts it, "hollowed out by the loss of work and purpose."
"Work" and "purpose" are intimately connected: Researchers at the University of Michigan, for example, found that welfare payments make one unhappier than a modest income honestly earned and used to provide for one's family. "It drains too much of the life from life," said Charles Murray in a speech in 2009. "And that statement applies as much to the lives of janitors — even more to the lives of janitors — as it does to the lives of CEOs." Self-reliance — "work" — is intimately connected to human dignity — "purpose."
So what does every initiative of the Obama era have in common? Obamacare, Obamaphones, Social Security disability expansion, 50 million people on food stamps . . . The assumption is that mass, multi-generational dependency is now a permanent feature of life. A coastal elite will devise ever smarter and slicker trinkets, and pretty much everyone else will be a member of either the dependency class or the vast bureaucracy that ministers to them. And, if you're wondering why every Big Government program assumes you're a feeble child, that's because a citizenry without "work and purpose" is ultimately incompatible with liberty. The elites think a smart society will be wealthy enough to relieve the masses from the need to work. In reality, it would be neo-feudal, but with fatter, sicker peasants. It wouldn't just be "economic inequality," but a far more profound kind, and seething with resentments.
Zerohedge. The 5 Economic "Big Lies" The Government Is Telling You
1. "The Unemployment Rate Has Been Steadily Going Down"
2. "Inflation Is Low"
3. "Quantitative Easing Is Economic Stimulus"
4. "Obamacare Is Going To Be Good For Middle Class Americans"
5. "The U.S. National Debt Is Under Control"
Investors Business Daily. Obama's Debt Buildup Risks A Major Fiscal Catastrophe
Fiscal Fraud: The government issued an astounding $1 trillion in new debt during the first six weeks of the fiscal year. How could such a thing happen with nary a peep? Just like ObamaCare, it's more government deceit.
One recent estimate said U.S. debt is on pace to hit $22 trillion just three months from now — a surge of $5 trillion, or 30%, in barely five months. That's scary.
Such fiscal legerdemain would land a private investor or manager in prison.
Daniel Henninger in the Wall Street Journal Worse Than ObamaCare Obama's biggest failure is that he hobbled the U.S. economy.
A normal post-recession growth rate of at least 4% would have made it possible for Mr. Obama and his progressive allies to chase virtually any pie-in-the-sky policy they wanted. Instead, the U.S. has fallen far off its normal 3.3% growth rate.
A U.S. president, faced with such devastating labor-market problems and persistently weak growth, should do anything—anything—that will give the American workplace more lift. Instead, he's willing to entertain just one idea: more federal spending.
Ponder, though, a partial list of the public-policy decisions that have flowed steadily out of the Obama administration and directly into a job-starved U.S. economy:
The no-decision on the Keystone XL pipeline and its union jobs; the 2,000-page regulatory law draped in 2010 across the entire financial sector; the shutdown in 2010 and then the slow-walking of offshore oil drilling; siccing the EPA on the utilities industry and the National Labor Relations Board on all industry; a 2010 FCC decision to regulate Internet growth; a significant tax increase this year; support this month for jacking up the federal minimum wage to over $10, certain to smother new jobs; the Justice Department's $13 billion looting of J.P. Morgan JPM +2.00% bank; and of course Hurricane ObamaCare.
Barack Obama has the U.S. economy on lockdown. It's the worst thing this president has done. American resilience, and elections, mean it won't stay this way forever. But for a lot of poor and middle-class folks, living with mom in the basement is getting old.
The Jobs Number Is BS Says Former Head Of BLS
Keith Hall believes the US economy is a lot sicker than the 7.6 percent unemployment rate would lead you to believe. And he should know.
Hall was, from 2008 until last year, the guy in charge of Washington's Bureau of Labor Statistics, the agency that compiles that rate. "Right now [it's] misleadingly low," says Hall, who believes a truer reading of those now wanting a job but without one to be more than 10 percent.
The fly in the ointment is the BLS employment-to-population ratio, which is currently at 58.7 percent. "It's lower than it was when the recession ended. I think that's a remarkable statistic," says Hall, a senior research fellow at the Mercatus Center at George Mason University in Fairfax, Va.
That level tells Hall the real unemployment rate is actually about 3 percentage points higher than the BLS number. If the jobless rate is unacceptable at 7.6 percent, it'd be shockingly bad if he is right and the true rate is 10.6 percent.
Hall reckons there are millions of U-6 people on top of the 4.5 million long-term unemployed. "This has been a very slow, very bad recovery," he says. "And I think the numbers have really struggled as a result. In fact, I've been very disappointed in the coverage of the numbers."
A Jobless Recovery Is a Phony Recovery says Mort Zuckerman More people have left the workforce than got a new job during the recovery—by a factor of nearly three.
The longest and worst recession since the end of World War II has been marked by the weakest recovery from any U.S. recession in that same period.
The jobless nature of the recovery is particularly unsettling….The government's …household survey … includes part-time workers who want full-time work but can't get it, as well as those who want to work but have stopped looking. That puts the real unemployment rate for June at 14.3%, up from 13.8% in May.
The 7.6% unemployment figure so common in headlines these days is utterly misleading. An estimated 22 million Americans are unemployed or underemployed; they are virtually invisible and mostly excluded from unemployment calculations that garner headlines.
ObamaCare is partially to blame. The health-insurance law requires employers with more than 50 workers to provide health insurance or pay a $2,000 penalty per worker. Under the law, a full-time job is defined as 30 hours a week, so businesses, especially smaller ones, have an incentive to bring on more part-time workers……
These businesses' hesitation to hire is part of a larger caution among employers unsure about the direction of government policy—and which has helped contribute to chronic long-term unemployment that shows no sign of easing.
That brings us to a stunning fact about the jobless recovery: The measure of those adults who can work and have jobs, known as the civilian workforce-participation rate, is currently 63.5%—a drop of 2.2% since the recession ended. Such a decline amid a supposedly expanding economy has never happened after previous recessions. Another statistic that underscores why this is such a dysfunctional labor market is that the number of people leaving the workforce during this economic recovery has actually outpaced the number of people finding a new job by a factor of nearly three.
74% of small businesses will fire workers, cut hours under Obamacare according to a sobering survey released by the U.S. Chamber of Commerce.
""We are living through a profound crisis of the institutions that were the keys to our previous success—not only economic, but also political and cultural—as a civilization"
writes Niall Ferguson in his new book, The Great Degeneration, which is reviewed by George Melloan who calls it A Jeremiad to Heed.
Doomsayers are never popular, but sometimes they're right….That maxim applies to the writings of the economic historian Niall Ferguson.
With a focus on the United States, "The Great Degeneration" warns that Western civilization has entered into a period of decline due mainly to the strangling of private initiative by the ever-encroaching state. "….
The threatened institutions are representative government, the free market, the rule of law and civil society. Mr. Ferguson is dismayed at the explosion of public debt, the destruction of markets by excessive regulation, the replacement of the rule of law by "a rule of lawyers," and the decay of civil society as represented in part by the decline of thousands of private, voluntary organizations (Rotarians, Elks, et al.) that have contributed so much to social order and progress in America.
The most worrisome evidence of decline, he believes, is the "crisis of public debt," with government budgets out of control in the U.S. and Europe. He sees outsize debt as a symptom of the "betrayal of future generations: a breach of Edmund Burke's social contract between the present and the future."
[U.S. future obligations exceed future revenues by $200 trillion, and state and local governments face $38 trillion in unfunded obligations.]
The French author Alexis de Tocqueville marveled at the scope of American civil society in the 19th century, the many associations that owed their "birth and development" not to law but to individuals freely joining forces. Mr. Ferguson agrees with Tocqueville that "the state—with its seductive promise of 'security from the cradle to the grave'—was the real enemy of civil society."
Earlier this month, Ferguson wrote two op eds in the Wall Street Journal based on the premises of his new book.
How America Lost Its Way It is getting ever harder to do business in the United States, argues Niall Ferguson, and more stimulus won't help: Our institutions need fixing.
If poor countries can get rich by improving their institutions, is it not possible that rich countries can get poor by allowing their institutions to degenerate? I want to suggest that it is.
We used to have the rule of law. Now it is tempting to say we have the rule of lawyers, which is something different.
The decline of American institutions is no secret. Yet it is one of those strange "unknown knowns" that is well documented but largely ignored.
Each year, the World Economic Forum publishes its Global Competitiveness Index. Since it introduced its current methodology in 2004, the U.S. score has declined by 6%. (In the same period China's score has improved by 12%.) …In only one category out of 22 is the U.S. ranked in the global top 20 (the strength of investor protection). In seven categories it does not even make the top 50.
Niall Ferguson: The Regulated States of America Tocqueville saw a nation of individuals who were defiant of authority. Today? Welcome to Planet Government.
In "Democracy in America," published in 1833, Alexis de Tocqueville marveled at the way Americans preferred voluntary association to government regulation. ...Unlike Frenchmen, he continued, who instinctively looked to the state to provide economic and social order, Americans relied on their own efforts. "In the United States, they associate for the goals of public security, of commerce and industry, of morality and religion. There is nothing the human will despairs of attaining by the free action of the collective power of individuals."
Instead of joining together to get things done, Americans have increasingly become dependent on Washington.
As the Competitive Enterprise Institute's Clyde Wayne Crews shows in his invaluable annual survey of the federal regulatory state, we have become the regulation nation almost imperceptibly…..The cost of all this, Mr. Crews estimates, is $1.8 trillion annually—that's on top of the federal government's $3.5 trillion in outlays, so it is equivalent to an invisible 65% surcharge on your federal taxes, or nearly 12% of GDP. Especially invidious is the fact that the costs of regulation for small businesses (those with fewer than 20 employees) are 36% higher per employee than they are for bigger firms.
Here are three recent examples of what Ferguson is talking about.
What started as a small family business operating out of our home has grown to 22 states. Now, though, it might all turn out to be illegal, thanks to the bureaucratic thinking of the Department of Labor.
The business model that parents thought was an innovation, but that Labor sees as a menace, is simple but effective. You might have heard of it: cooperation.
Then there is the struggle to start a charter school in Maryland using a classical curriculum and science that Charles Murray talks about in A case study in the government as enemy.
Or the harassment experienced by one man who tried to start a non-profit to challenge the imagination of the rising generation by engaging them with the great books and America's moral and constitutional order. The IRS targeted my organization.
The Economist proposes we do the same again. Towards the end of poverty
The world's achievement in the field of poverty reduction is, by almost any measure, impressive. Although many of the original Millennium Development Goals (MDGs) —such as cutting maternal mortality by three-quarters and child mortality by two-thirds—will not be met, the aim of halving global poverty between 1990 and 2015 was achieved five years early.
The MDGs may have helped marginally, by creating a yardstick for measuring progress, and by focusing minds on the evil of poverty. Most of the credit, however, must go to capitalism and free trade, for they enable economies to grow—and it was growth, principally, that has eased destitution.
The world now knows how to reduce poverty. A lot of targeted policies—basic social safety nets and cash-transfer schemes, such as Brazil's Bolsa Família—help. ….. But the biggest poverty-reduction measure of all is liberalising markets to let poor people get richer.
The most important economic chart in Western civilization ---- and how it happened
AEI's Values & Capitalism series has published a little book, Economic Growth: Unleashing the Potential of Human Flourishing, that explores the benefits of growth and addresses common concerns regarding how growth impacts the poor, the environment, and culture.
Governments seeking to unlock long-term growth should eschew command-and-control policies. Instead, they should craft economic institutions that reward all types of investment in physical and human capital, and that help markets function securely and inexpensively. For instance, an impartial judicial system that defines and enforces clear property rights gives firms and individuals the right incentives for work and investment; they know the courts will adjudicate property claims and contract disputes fairly, and uphold the rule of law.
Other key institutions include a stable, relatively corruption-free government, one that is able to provide for national defense and other public goods; a market system for the production and distribution of most goods and services, to provide monetary incentives for efficient allocation of resources and creation of jobs and incomes without need of government control or subsidy; and a financial system, modestly regulated for safety and economic growth paired with a sound currency, to encourage savings and to channel those savings into loans for large and small firms.
All good stuff, but I would boil it down to this: Respect and reward innovators and innovation. As Deirdre McCloskey has put it, the West became a business-admiring civilization and that changed everything:
At Benedictine College, Paul Ryan spoke on the Morality of Free Markets
[W]hy is there such resistance to free enterprise? It's the old problem of greed. The critics say nothing good comes from commerce….Sure, free enterprise makes more stuff, they argue. But it relies on "greed"—on people pursuing their self-interest. And isn't the love of money the root of all evil…or something to that effect…?
At some level, we all ask ourselves, "How can I make ends meet?" But the successful ask a better question: "What's something people need?" Voluntary exchange is an act of good faith. It gives the buyer a good in exchange for something of equal value. It creates a culture of personal responsibility and good will. To attract customers, you must be trustworthy. To attract workers, you must treat them with dignity.
Free enterprise helps the workers themselves—because work gives people more than a paycheck. It gives them a sense of pride—a sense of purpose. It makes them a part of their communities. And when we share our gifts with other people, we show solidarity with each other. If farmers didn't harvest, people would go hungry. If doctors and nurses didn't practice, the sick would go untreated. We don't think of ourselves as greedy—even though we take part in the economy. And we shouldn't—because we're working to help our families. We're helping to put food on the table, to pay for our education, to save for retirement….
Free enterprise doesn't reward greed. It rewards value—because competition checks greed. And there's no greater opportunity for greed than government cronyism. Greed knows how to exploit the pages of regulations. It knows how to navigate the halls of power. So if we're concerned about greed, we shouldn't give it more opportunities to grow.
In the U.S, we have only a partially free market that's getting less so. Crony capitalism, banks too big to fail, and over regulation destroy free markets. Today's example
Stricter EPA Ozone Rules Could Put 'Entire Country' Out of Business, Industry Group Warns. Or as Peter Robinson writes, "Greed knows how to exploit the pages of regulations and navigate the halls of power."
105-Year-Old Texas Woman Reveals Bacon as her Secret behind Long Life She outlived 3 of her 7 children and her husband and attributes her long life to eating bacon every day. Bacon.
$763 billion. The One Number You Need to Know in O's Budget. That's the amount we'll be paying in interest payments in 2023 if Obama's budget is enacted. According to Kevin Williamson,
Under Obama's budget, in 2020 interest payments alone would amount to more than national-defense spending in that year. By 2023, interest payments alone would amount to more than all nondefense discretionary spending in that year.
Politically and economically unsustainable. Not one person in Congress voted for it.
It does not stand a chance of being ratified into law, but it is worth noting the fact that the president of the United States has just proposed a budget that amounts to a national economic suicide pact. And he couldn't even be bothered to do that on time. There may be a political case for his having done so, but as national economic leadership, this budget is grossly irresponsible.
Pew research reports US gun homicide rate down 49% over last 20 years
Two takeaways from the WSJ piece on The Crucial Years for Protecting Your Eye Health: By age 40, the lens of the eye gradually loses the ability to focus. If you're buying off-the -shelf reading glasses, don't select the ones that appear to make things clearest. It's probably a stronger prescription than your eyes need which can encourage their loss of focus to go faster. Don't wear your reading glasses while using the computer because it may encourage your eyes to weaken faster.
Insurers predict 100% to 400% Obamacare rate explosion
New regulations, policies, taxes, fees and mandates are the reason for the unexpected "rate shock," according to the House Energy and Commerce Committee, which released a report Monday based on internal documents provided by the insurance companies. The 17 companies include Aetna, Blue Cross Blue Shield and Kaiser Foundation.
Iran is now chairing the UN Council on Disarmament. Tossup as to whether that's more outrageous than Syria as chair of the UN Human Rights Committee
Americans are ditching driving Young people no longer see driving as freedom because they've only known driving as congestion.
Crossing the Rubicon means to pass the point of no return. The idiom refers to the moment when Julius Caesar and his army crossed the river Rubicon which marked the boundary between Gaul and Italy which was controlled directly by Rome. While Caesar had the right to command in Gaul, he had no such right in Italy. When he crossed the Rubicon with his legions, he committed an act of insurrection and was automatically condemned to death. Caesar himself said, "The die has been cast." Thus began Caesar's Civil War that lasted for four years. After defeating Pompey and his supporters. Caesar emerged victorious and established himself as the "perpetual dictator" of Rome.
There is about $1.8 trillion invested in various IRA, 401k and 403b retirement plans in the U.S. And that's not counting the trillions more in investment brokerage accounts earmarked for retirement.
Ed Driscoll sets the context. The EU Crosses the Rubicon; How Far Behind is the U.S.?
In 2008 Argentina stole the private pensions of its workers, nationalizing those funds to deal with their own debt problems. Bolivia did the same in 2010, as did Hungary. And Bulgaria did their own scaled-down version of confiscating people's private pensions in 2011. Of course, those are just no-name South American countries and backwater Eastern European countries. That can't happen here in America! Why, we're Americans! We have rights!
Unfortunately, the Democrats took note of what Argentina did in 2008 and have since bantered around ideas of rescinding the tax benefits of those programs, even outright nationalizing them. There was hope with the Republican backlash of 2010 that such outright theft would be made impossible, but with the 2012 election decidedly going left, socialist politicians' chops have been re-whetted for a piece of your IRA pie. Ultimately, however, the real risk is not so much the political desires of socialist politicians, but that the economic situation is so dire it will essentially force the decision to confiscate people's retirement accounts. That is the true risk of promising ourselves everything.
Paul Rahe The EU Crosses the Rubicon
This weekend, the government of Greek Cyprus -- under pressure from the European Union -- negotiated a bailout that had as one of its provisions an assessment on the capital of those with deposits in the banks on Cyprus. Those with under 100,000 Euros in their accounts are slated to receive a 6.6% haircut while those with more than 100,000 Euros in their accounts will be docked 9.9%.
Whether the government can secure the approval of the Cypriot legislature for this unprecedented move remains unclear. There is talk of lowering the tax on deposits under 100,000 Euros to 3% and of raising the tax on larger deposits to 12.5%. But while the difference no doubt matters to ordinary Cypriots, whose savings are modest, and to the Russian oligarchs who have parked huge sums in the Cypriot banks, when viewed from a larger perspective, it matters not one whit. Indeed, at this point, it does not even matter whether the Cypriot government backs off from this plan altogether.
It would be hard to imagine what one could do to turn an ongoing crisis into a total catastrophe that would be more effective than the terms imposed by the European Union on Cyprus. That such a move is in contemplation is an indication of the degree to which the authorities in Brussels and Nicosia are in the grips of desperation.
Explaining the bail-in at Zerohedge
A bail-in takes place before a bankruptcy, and involves losses being imposed on bondholders, something that has rarely taken place throughout the GFC and euro crisis. In fact taxpayers (the government) have consistently bailed-out the private sector in full. The Cypriot bank rescue is no exception, except this time there is a bail-in and ironically again not of bondholders but of the depositors first. This is a direct contravention to the usual legal claims on the capital structure.
This is an unprecedented assault on individual property rights and every individual in the developed world should take notice, and far from stabilizing the eurozone, the bail-out likely heightens contagion risk across the EU.
Why bother holding a bank account when your government can expropriate your savings? Far from containing a bank run in Cyprus it will exacerbate it, absent capital controls, and likely begin significant depositor flights across the European periphery.
These events I believe signify one of the most alarming developments in the Eurozone crisis and by dint the global economy since the financial crisis began.
US has 13 million more people since 2007 — and 3.2 million fewer jobs
Another 5 to 7 million new jobs would need to be created at this moment just to return the economy to a fully-employed state. Of course, that is above and beyond the 1,500,000 new jobs needed every year going forward to accommodate new job seekers.
We need even more jobs to support the costs of social security and medicare, especially given this report: Human longevity has improved so rapidly over the past century that 72 is the new 30, scientists say.
Researchers at the Max Planck Institute for Demographic Research in Rostock, Germany, said progress in lowering the odds of death at all ages has been so rapid since 1900 that life expectancy has risen faster than it did in the previous 200 millennia since modern man began to evolve from hominid species. The pace of increase in life expectancy has left industrialized economies unprepared for the cost of providing retirement income to so many for so long
The study, published in the Proceedings of the National Academy of Sciences of the United States, looked at Swedish and Japanese men – two countries with the longest life expectancies today. It concluded that their counterparts in 1800 would have had lifespans that were closer to those of the earliest hunter-gatherer humans than they would to adult men in both countries today. Those primitive hunter gatherers, at age 30, had the same odds of dying as a modern Swedish or Japanese man would face at 72.
Healthcare and medicine extends keep us younger for longer
The increase in human life expectancy had been largely achieved 'by removing environmental shocks, by making injuries and illnesses less fatal with medical technology, and by enhancing health at older ages by improving nutrition and reducing disease at younger ages'. The findings are published in the journal Proceedings Of The National Academy Of Sciences.
The Wealth of Nations Depends on the Health of Families by Patrick Fagan
Family, church, and school are the three basic people-forming institutions, and it is no wonder that they produce the best results—including economic and political ones—when they cooperate.
When men get married, their sense of responsibility and drive to provide gives them the incentive to work much harder. This translates into an average 27-percent increase in their productivity and income. With the retreat from marriage, instead of this "marriage premium," we get more single men (who work the least), more cohabiting men (who work less than married men), and more divorced men (who fall between the singles and cohabiters).
Adding all this together, the conclusion (visible in the federal data) is that married families with children are the main source of the higher income, education, and productivity that grows the economy and its capital.
Interestingly, and today controversially, chastity—sexual abstinence until marriage and lifelong monogamy thereafter—significantly strengthens marriages and therefore the economy. Research on the pathways to divorce shows this.
Thus the core strategy for forming great workers for the economy is growing intact married families who are united in worship through their community of belief and send their children to schools that inculcate those values and beliefs. Not only does that produce the greatest average human capital for the marketplace; it also produces the best citizens for the polis and the common good.
And from this strong family, other benefits abound: marriage, education, health, income, savings, longevity, and a society shielded from the many costs and sufferings of crime, addictions, sexual perversions, bad health, poverty, and abuse. While strong families will not fully obliterate all societal weakness, they massively reduce them.
In the Economist, Northern lights The Nordic countries are reinventing their model of capitalism, says Adrian Wooldridge
THIRTY YEARS AGO Margaret Thatcher turned Britain into the world's leading centre of "thinking the unthinkable". Today that distinction has passed to Sweden. The streets of Stockholm are awash with the blood of sacred cows. The think-tanks are brimful of new ideas. The erstwhile champion of the "third way" is now pursuing a far more interesting brand of politics.
Sweden has reduced public spending as a proportion of GDP from 67% in 1993 to 49% today. It could soon have a smaller state than Britain. It has also cut the top marginal tax rate by 27 percentage points since 1983, to 57%, and scrapped a mare's nest of taxes on property, gifts, wealth and inheritance. This year it is cutting the corporate-tax rate from 26.3% to 22%.
Sweden has also donned the golden straitjacket of fiscal orthodoxy with its pledge to produce a fiscal surplus over the economic cycle. Its public debt fell from 70% of GDP in 1993 to 37% in 2010, and its budget moved from an 11% deficit to a surplus of 0.3% over the same period. This allowed a country with a small, open economy to recover quickly from the financial storm of 2007-08. Sweden has also put its pension system on a sound foundation, replacing a defined-benefit system with a defined-contribution one and making automatic adjustments for longer life expectancy.
Most daringly, it has introduced a universal system of school vouchers and invited private schools to compete with public ones. Private companies also vie with each other to provide state-funded health services and care for the elderly.
Why are the Nordic countries doing this? The obvious answer is that they have reached the limits of big government. "The welfare state we have is excellent in most ways," says Gunnar Viby Mogensen, a Danish historian. "We only have this little problem. We can't afford it." The economic storms that shook all the Nordic countries in the early 1990s provided a foretaste of what would happen if they failed to get their affairs in order.
Policy makers would do well to study the Nordic model. Using competition and market forces to improve the delivery of governmental services, the Nordic countries also live within their means. Here at home, we can't even get a President to submit a budge or Senate to pass one, much less to address the very real problems of entitlements and debt.
7 Common Weight-Related Myths Debunked in the New England Journal of Medicine
Sex burns between 100 to 300 calories. Nope, only about 21
Small changes in diet or exercise lead to large, long-term weight changes. Nope, the body adapts to changes.
School gym classes have a big impact on kids' weight. Nope, they are not long enough or intense enough to make much difference.
Losing a lot of weight quickly is worse than losing a little slowly over the long term. Nope, dieters who lose a lot of weight to start with lose more weight.
Snacking leads to weight gain. Nope, no high-quality studies support that.
Regularly eating breakfast helps prevent obesity. Nope, two studies found no effect
Setting overly ambitious goals leads to frustration and less weight loss. Nope, people do better with high goals.
Leafy green vegetables are the top source of food poisoning and can be deadly. Study
While more people may have gotten sick from plants, more died from contaminated poultry, the study also found. The results were released Tuesday by the Centers for Disease Control and Prevention.
….Many of the vegetable-related illnesses come from norovirus, which is often spread by cooks and food handlers. So contamination sometimes has more to do with the kitchen or restaurant it came from then the food itself, Griffin noted.
CDC estimated 277 poultry-related deaths in 1998-2008, compared to 236 vegetable-related deaths.
Delinquency rates on student loans reach 'unsustainable' 15% Another credit bubble about to pop.
The double squeeze on seniors. Low interest rates mean Incomes from investments is way down and costs are up.
Since the financial crisis hit, we have borrowed and spent $5.7 trillion, or 41% of 2008 GDP (7.8% of total GDP over the period). That is an enormous sum. ….–and yet it has left us with unemployment in the range of 8%, and per-capita GDP that is still below the pre-crisis trend
Cry on Nigella's shoulders.
Women in their 50s have have the most empathy, study claims
For no one else, male or female, has as much empathy as women of this generation, according to a study of more than 75,000 adults. They will listen more other people's problems and also react better to their needs, showing sympathy, concern and emotion, the research claims.
Even a baby can sympathize. Research shows one-year-olds can guess thoughts through empathy
Infants as young as 18 months old can guess what other people are thinking, a new study claims. A study of children from rural China, Ecuador and Fiji found that their ability to see the world from others' perspectives emerges much earlier than previously thought.
It was previously thought that this ability to empathize only emerges in children between the ages of four and seven, but children from different countries develop it at different ages.
What we ought not to forget, but too often do
The exquisite wonder of spontaneous order - of markets, traffic, language and the internet.
No great mastermind, no central authority is behind it, just free people.
Did Economists Doom Obama's Presidency? by Samuel Staley
If President Obama loses the election in November, economists may well end up taking a share of the blame - for good reason. Their models misled him into applying ambitious stimulus therapies to jump start the economy and boost employment that haven't worked, vastly undermining his re-election prospects.
In short, in what is perhaps the most important exercise in economic policy modeling since the Great Depression, two of the nation's foremost economists failed. And the failure was an epic one. They predicted that unemployment would peak at 8 percent after the stimulus. In fact it peaked at 9.9 percent. So it's unclear whether trillions of dollars of stimulus spending bought the country any reduction in unemployment whatsoever. It's also hard to escape the conclusion that it would have been better to do nothing and let the economy run its course. Indeed, this failure is particularly notable because Romer and Bernstein's effort was well within accepted mainstream practice of the profession, not an exception.
Walter Russell Mead, "The overwhelming policy failures of modern American liberalism are undermining the basic viability of three of our greatest states"
Three states form the base of Democratic political power in the United States: California, New York and Illinois. All three states are locked in an accelerating economic, demographic and social decline; all three hope that they can stave off looming disaster at home by exporting the policies that have ruined them to the rest of the country.
Mary Williams Walsh, a talented reporter who is doing much to sustain the luster of the New York Times brand these days, has a must-read piece on the mess that is Illinois, and it is a compelling description of the misery and ruin that well-intentioned liberals combined with aggressive public sector labor unions inflict on the poor they ostensibly want to serve.
Narcissism, Consumerism And The End Of Growth using Japan as the "bellwether of economic stagnation and social recession.
What we're seeing in Japan is the confluence of three dynamics: definancialization, the demise of growth-positive demographics and the devolution of the consumerist model of endless "demand" and "growth." Japan is the leading-edge of the crumbling model of advanced neoliberal capitalism: that consumerist excess creates wealth, prosperity and happiness.
What consumerist excess actually creates is alienation, social atomization, narcissism, and a profound contradiction at the heart of the consumerist-dependent model of "growth": the narcissism that powers consumerist lust and identity is at odds with the demands of the workplace that generates the income needed to consume.
Narcissism is the result of the consumerist society's relentless focus on the essential project of consumerism, which is "the only self that is real is the self that is purchased and projected."….[According to Christopher Lasch] the ontological essence of narcissism: a fear of the emptiness that lies at the very core of consumerism.
"Personal gratification" is the driver of narcissism and consumerism, which are two sides of the same coin. Consumerist marketing glorifies the "projected self" as the "true self," encouraging self-absorption even as it erodes authentic identity, self-esteem and the resilience which enables emotional growth--the essential characteristic of adulthood. Personal gratification is of a piece with self-absorption, fragile self-esteem and an identity that is overly dependent on consumerist signifiers and the approval of others.
The ultimate contradiction in this debt-consumption version of capitalism is this: how can an economy have "endless expansion and growth" when pay and opportunities for secure, high-paying jobs are both relentlessly declining? It cannot. Financialization, consumerist narcissism and the end of growth are inextricably linked.
We need a third way that offers people work, resilience and authentic meaning. In my view, that cannot come from the Central State or the global corporate workplace: it can only come from a relocalized economy in revitalized communities
Re: The Obama claim to have created more jobs than Reagan
Net private sector jobs created during the first 37 months after the end of the recession that Obama inherited (June 2009-July 2012): 2.7 million
Net private sector jobs created during the first 37 months after the end of the recession that Reagan inherited (November 1982-May 1985): 9.8 million
But that chart doesn't tell the whole story. Below is Our Awful Economy in One Chart.
IBD Here's What a Huge Recovery Looks Like
Obama's policies have produced a smaller economic recovery than any since World War II. This recovery is so small that only half the jobs lost in the recession have been recouped. It's so small that there are almost half a million more long-term unemployed today than in June 2009, and millions have dropped out of the labor force altogether.
The Obama recovery is so small that median household incomes have been steadily falling since it started, and there are 11 million more people on food stamps and 2.7 million more mired in poverty. Indeed, had Obama's recovery merely been average, there would be about 8 million more people with jobs today, and the GDP would be $1.2 trillion bigger.
Mort Zuckerman on Why the Country is Unhappy Under Obama
The real unemployment rate is 15 percent, measured by what is called U-6, which includes people who are working part-time on an involuntary basis. We have 4.7 million fewer jobs than the peak reached at the end of 2007. And indeed much of the improvement in jobs has been through dubious "seasonal" adjustments, such as the July seasonal bump of 377,000 jobs—the largest such adjustment for July in the past 10 years. The labor participation rate has dropped to a 30-year low, and if not for that development, the unemployment rate would be much higher.
Fewer Americans are at work today than in April 2000, although the population has grown by 31 million since then. A worker between the ages of 50 and 61 who has been unemployed for over a year has only a 9 percent chance of finding a job in the next three months. A worker who is 62 years or older and similarly unemployed has about a 6 percent chance. And 50 percent of this year's college graduates are without jobs or are underemployed. What a waste.
Under Obama, Poor, Middle Class Incomes Fall Sharply. Biden was right. The middle class has been "buried during the last 4 years"
Since 2009, the middle 20% of American households saw their average incomes drop 4%. In 2011 alone, they fell 1.7%. The poorest 20% have fared even worse under Obama, Census data show. Their incomes have dropped more than 7% since 2009, and are now lower than they've been at any time since 1985, after adjusting for inflation.
Urban League says downturn has wiped out gains of last 30 years for the black middle class.
Via Instapundit who remarks how absurd it is to blame today's huge national debt on George W. Bush's spending on Iraq and Afghanistan.
Obama's Re-Election Case Rests On 5 Phony Claims
Bush's tax cuts did not cause the last recession. In fact, once they were fully in effect in 2003, they sparked stronger growth — generating more than 8 million new jobs over the next four years, and GDP growth averaging close to 3%. Those tax cuts didn't explode the deficit, either, as Obama frequently claims. Deficits steadily declined after 2003, until the recession hit.
What did cause the economic crisis? The housing bubble. And that, in turn, was the result of a determined federal effort to boost homeownership by, among other things, pressuring banks to lower lending standards.
Unemployment rate falls? Did Labor Secretary Solis mislead on jobs' revisions
The BLS reported that while only 114,000 jobs were created in September--which would have translated into a rise in unemployment from 8.1% to 8.2%--the unemployment rate fell dramatically to 7.8%. That unusual drop is the fastest in nearly three decades, and was unexpected even in the rosiest predictions.
One reason for the rise was an upward revision of 86,000 to the July and August jobs numbers--all of which came from a 91,000 increase in the estimate of public sector jobs. Private sector job estimates were actually revised downward by 5,000.
In addition, the BLS reported a large rise in the number of part-time jobs, adding 600,000 jobs to the total--a dramatic increase of 7.5%, not explained by any other economic indicators--and raising questions about whether the government had changed the way it counted part-time workers.
Ed Morrissey offers a possible explanation
The BLS conducts two surveys each month to determine employment data. The first is the establishment survey, which polls 410,000 businesses each month. The second is the household survey, which polls 60,000 households each month.
It doesn't mean a conspiracy is in place; it does strongly suggest that this month's sample of 60,000 households threw an outlier, especially when compared with the establishment survey and other economic data. If so, it will likely correct itself in the next report.
Zerohedge From Currency Debasement To Social Collapse: 4 Case Studies
Debasing money therefore debases trust. Grice emphasizes that history is replete with Great Disorders in which social cohesion has been undermined by currency debasements. The multi-decade credit inflation can now be seen to have had similarly corrosive effects. Yet central banks continue down the same route. The writing is on the wall. Further debasement of money will cause further debasement of society. Dylan, like us, fears a Great Disorder.
Zerohedge Bill Gross: The US Is A Debt Meth Addict - Unless The Fiscal Gap Is Closed Soon "The Damage Will Be Beyond Repair"
Big Bird makes more money than Mitt Romney, but is still on the government dole.
The Corporation for Public Broadcasting receives about $450million from Congress each year. About $280million goes to PBS and the local stations.
Federal funding makes up about 12 per cent of the PBS budget.
Shows like Sesame Street are multi-million dollar enterprises capable of thriving in the private market. According to the 990 tax form all nonprofits are required to file, Sesame Workshop President and CEO Gary Knell received $956,513 -- nearly a million dollars -- in compensation in 2008. And, from 2003 to 2006, "Sesame Street" made more than $211 million from toy and consumer product sales.
If you break that down, it works out to over $50 million a year "Sesame Street" is taking in from all that merchandising.
The Economy Durable goods drop 13.2% in August. Q2 GDP downgraded from 1.7% to 1.3%
'It's all unraveling' | Is this the last quarter of the recovery?
James Pethokoukis: Has the U.S. economy turned a corner? Yes, and then another corner and now it's going backward. A slew of bad economic data today. A taste of what economists are saying:
– It's all unraveling this morning. OK in the US jobless claims fell and the consumer comfort index improved. But the downward revision to GDP and the chillingly large drop in Durable goods orders is enough to send chills up your spine. Yes, aircraft and defense orders were the bulk of the weakness. But nothing there is reassuring.
GDP collapse puts U.S. economy into recession red zone
U.S. economic growth is dangerously slow. I've frequently written about research from the Fed which finds that since 1947, when two-quarter annualized real GDP growth falls below 2%, recession follows within a year 48% of the time. And when year-over-year real GDP growth falls below 2%, recession follows within a year 70% of the time.
Ace: I can only express my disgust so many times -- this is huge, and the media is embargoing it entirely.
Much of the news of the economic disaster ahead is being suppressed.
On May 7th, it was revealed that the Obama administration spent $8.35 billion on a "demonstration project" designed to postpone the vast majority of Obamacare's Medicare Advantage cuts until after the election. On July 31st, it was revealed that the Labor Department warned defense contractors against notifying workers of impending layoffs before the election as well, despite the fact that it would require violating the law to do so. On September 21, it was revealed that a report on the Greek bailout will also be postponed until after the U.S. election. ….
Thus, the president can continue to campaign on the "heartless" cuts a Romney administration will administer to healthcare in general, and seniors' healthcare in particular, even as those same seniors remain oblivious to the reality that $7.4 billion will be cut from the Medicare Advantage program in 2013. As a result, enrollees will lose an average of $515 in benefits. Americans remain equally oblivious to the reality that family health insurance premiums have gone up by an average $2,730, despite a 2008 promise Obama made to lower premiums by $2500 by the end of his first term.
Friday, the Administration offered a little quid pro quo.
If defense contractors don't issue the lay-off notices in October, the government will "provide the funds to pay the fines they impose on the contractors for non-compliance with regulations written by the government" You couldn't make this stuff up.
Student loans, "the new subprime' . The Department of Education released Friday the federal student loan cohort default rates.
The number, for all colleges, stood at a stunning 13.4% for the 2009 …there is now at least $122 billion in federal student loan defaults. And surging every day.
Disappearing people. There's the unemployment rate and the real unemployment rate without all the disappearing people. Real Unemployment rate is 11.7%
Economic Freedom. Zerohedge The Declining Economic Freedom of the United States
The United States, long considered the standard bearer for economic freedom among large industrial nations, has experienced a remarkable plunge in economic freedom during the past decade. From 1980 to 2000, the US was generally rated the third freest economy in the world, ranking behind only Hong Kong and Singapore. The ranking of the US has fallen precipitously; from second in 2000 to eighth in 2005 and 19th in 2010. By 2009, the United States had fallen behind Switzerland, Canada, Australia, Chile, and Mauritius, countries that chose not to follow the path of massive growth in government financed by borrowing that is now the most prominent characteristic of US fiscal policy. By 2010, the United States had also fallen behind Finland and Denmark, two European welfare states. Moreover, it now trails Bahrain, the United Arab Emirates, Estonia, Taiwan, and Qatar.
Lamb Castration, PETA and American Labor - Mike Rowe at TED. Don't miss it, it's great.
Taking on the dirty job of dignifying hard work, Rowe has his own very cool website and heads a foundation "to promote the skilled trades in areas of public awareness, reducing stigmas, education, career planning and job opportunities as well as support organizations that get us there.
Yeah, it's a trade thing."
His work on Dirty Jobs, where he is a "perpetual apprentice," has allowed Rowe to see from the front lines of the workplace our national attitudes towards work. "Pig farmers, electricians, plumbers, bridge painters, jam makers, blacksmiths, brewers, coal miners, carpenters, crab fisherman, oil drillers … they all tell me the same thing over and over, again and again," he says. "Our country has become emotionally disconnected from an essential part of our workforce. We are no longer impressed with cheap electricity, paved roads, and indoor plumbing. We take our infrastructure for granted, and the people who build it."
Rowe wrote that "the ranks of welders, carpenters, pipe fitters, and plumbers have been declining for years, and now, we face the bizarre reality of rising unemployment, and a shortage of skilled labor." This is the so-called "skills gap," where jobs that require certain abilities or know-how remain unfilled even in the face of a vast number of otherwise available workers.
Hard Unemployment Truths About 'Soft' Skills Nick Schultz
What exactly are the skills you can't find?" I asked, imagining that openings for high-tech positions went begging because, as we hear so often, the training of the U.S. workforce doesn't match up well with current corporate needs.
One of the representatives looked sheepishly around the room and responded: "To be perfectly honest . . . we have a hard time finding people who can pass the drug test." Several other reps gave a knowing nod. Applicants were often so under qualified, they said, that simply finding someone who could properly answer the telephone was sometimes a challenge.
More than 600,000 jobs in manufacturing went unfilled in 2011 due to a skills shortage.
Schultz says the principal missing skills are the punctuality and dependability inherent in a good work ethic along with an elementary command of English, interpersonal skills and enthusiasm and motivation.
5 Life Lessons Learned Working at McDonalds
No task is beneath you
"McDonald's founder Ray Kroc was famous for dropping in on a restaurant, driving [up in] his Cadillac, dressed in his business suit and gold watch, and then asking for a mop so he could clean up some spilled mustard,"
Challenge yourself to master new skills
Amazon founder Jeff Bezos recalled how proud he was that he could crack 300 eggs into a bowl with one hand. As Teets said, every job can teach you something about yourself, even if it's just to learn what you don't like.
Roll with the punches
What one Marine Corps lieutenant colonel learned about being an effective decision-maker under stress served him well during his multiple tours of duty in the Middle East.
Learn from the successes of others
Drew Nieporent, a successful New York restaurateur who owns Tribeca Grill with actor Robert DeNiro, still uses the lessons he learned while working at McDonald's, even as he's moved on to gourmet restaurants, Teets discovered. "As a current restaurant owner," he said, "seeing McDonald's on the resumes of applicants would be a huge plus."
How to deal with people and become a leader
Former White House chief of staff Andrew Card, who worked his way through college at a McDonald's, said a big part of his job was finding different ways to help each employee succeed.
Vincent Talleu is one happy baker! I found his video of Bakery Work mesmerizing and his bread photos divine. Thanks Sippican.
Thomas Sowell on The Fallacy of Redistribution
The history of the 20th century is full of examples of countries that set out to redistribute wealth and ended up redistributing poverty. The communist nations were a classic example, but by no means the only example.
In theory, confiscating the wealth of the more successful people ought to make the rest of the society more prosperous. But when the Soviet Union confiscated the wealth of successful farmers, food became scarce. As many people died of starvation under Stalin in the 1930s as died in Hitler's Holocaust in the 1940s.
How can that be? It is not complicated. You can only confiscate the wealth that exists at a given moment. You cannot confiscate future wealth -- and that future wealth is less likely to be produced when people see that it is going to be confiscated. Farmers in the Soviet Union cut back on how much time and effort they invested in growing their crops, when they realized that the government was going to take a big part of the harvest. They slaughtered and ate young farm animals that they would normally keep tending and feeding while raising them to maturity.
Among the most valuable assets in any nation are the knowledge, skills and productive experience that economists call "human capital." When successful people with much human capital leave the country, either voluntarily or because of hostile governments or hostile mobs whipped up by demagogues exploiting envy, lasting damage can be done to the economy they leave behind.
Fidel Castro's confiscatory policies drove successful Cubans to flee to Florida, often leaving much of their physical wealth behind. But poverty-stricken refugees rose to prosperity again in Florida, while the wealth they left behind in Cuba did not prevent the people there from being poverty stricken under Castro. The lasting wealth the refugees took with them was their human capital.
Seems to me our tax system is already extremely progressive . Via Instapundit
The Magnitude of the Mess We're In By George P. Shultz, Michael J. Boskin, John F. Cogan, Allan H. Meltzer and John B. Taylor
The amount of debt is one thing. The burden of interest payments is another. The Treasury now has a preponderance of its debt issued in very short-term durations, to take advantage of low short-term interest rates. It must frequently refinance this debt which, when added to the current deficit, means Treasury must raise $4 trillion this year alone. So the debt burden will explode when interest rates go up.
Did you know that the Federal Reserve is now giving money to banks, effectively circumventing the appropriations process?…The Fed now pays 0.25% interest on reserves it holds. So the Fed is paying the banks almost $4 billion a year. If interest rates rise to 2%, and the Federal Reserve raises the rate it pays on reserves correspondingly, the payment rises to $30 billion a year. Would Congress appropriate that kind of money to give—not lend—to banks?
The issue is not merely how much we spend, but how wisely, how effectively. Did you know that the federal government had 46 separate job-training programs? Yet a 47th for green jobs was added, and the success rate was so poor that the Department of Labor inspector general said it should be shut down. We need to get much better results from current programs, serving a more carefully targeted set of people with more effective programs that increase their opportunities.
We cannot count on problems elsewhere in the world to make Treasury securities a safe haven forever. We risk eventually losing the privilege and great benefit of lower interest rates from the dollar's role as the global reserve currency. In short, we risk passing an economic, fiscal and financial point of no return.
The problems are close to being unmanageable now. If we stay on the current path, they will wind up being completely unmanageable, culminating in an unwelcome explosion and crisis.
The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform. The need is clear. Why wait for disaster? The future is now.
Study: Uncertainty has raised the U.S. employment rate by a full percentage point. I 'm not surprised. When the future is so uncertain, businesses and people hunker down.
8,786,049: Yet Another Record for Americans Collecting Disability. Release of new data from Social Security Administration.
In August 2012, 142,101,000 Americans were working and 8,767,941 were on disability--meaning there were only 16.2 people working for each person collecting disability.
For every $1 Added to the Economy, Obama Added More Than $3 in Debt. Source Treasury Department
Ben Stein says It's Later Than Any Dare Think. When republics fall, it's not always slow.
Over $1 billion in customer funds which were supposed to be segregated funds 'disappeared' when MF Global went bankrupt in one of the 10th largest bankruptcies in US history.
John Corzine, formerly CEO of Goldman Sachs and former Senator for New Jersey (D) and former governor of New Jersey (D), was the CEO of MF Global was the money went missing.
Today the New York Times reports that No Criminal Case is Likely in Loss at MF Global. Highly unlikely are charges against Corzine.
That keeps the Administration's perfect record on persecuting Wall St criminals. Zero. No prosecutions under Obama and AG Holder at all.
By comparison, the Bush administration prosecuted and convicted over 1300 Wall St financial criminals including 130 corporate vice presidents and over 200 CEOs and corporate presidents.
The Clinton administration prosecuted over 1800 S&L (savings and loan) executives and won convictions in about 1000 cases.
Bush - 1,300 convictions;
Clinton - 1,000 convictions;
Obama - Zero attempts
The GAI report reveals that the Department of Justice upper echelon is stacked with attorneys from law firms representing the very same companies involved in the financial meltdown of 2008, as well as financial corporations with questionable actions during the Obama administration…AIG, Goldman Sachs, Wells Fargo, J.P. Morgan Chase, Bank of America, CitiBank, Deutsche Bank, ING, Morgan Stanley, UBS, Wilmington Trust, and John Corzine's MF Global.
These very same DoJ attorneys also happen to be some of Obama's biggest bundlers for Obama's 2008 bid for president.
"When we think of cronyism and the problems of cronyism and crony capitalism, we think in terms of economic loss and gain," Schweizer said in a phone interview. "What we're showing here is that cronyism is now permeating our justice system. So, it's not just a question of dollars and cents, it's a question of whether you're going to face legal jeopardy or not on what you're doing."
UPDATE: Ace: Good News: You Can Now Officially Steal $1 Billion From Your Customers And Avoid Prosecution, As Long As You're Hooked Up With the Self-Styled "Party of the Common Man"
A billion dollars of customer money just disappeared -- it wasn't lost in bad investments, it was lost as in "I can't find it" -- and apparently there is no criminality here.
People lose wallets. They lose cell phones. They lose pencils. They lose lighters.
They tend not to lose a billion dollars. Not without someone wishing it be "lost."
More of the unintended consequences of too-big-to-fail banks.
Cocaine cowboys know the best places to bank
...last month a Senate panel held a hearing on the U.K. bank HSBC Holdings Plc (HSBA) and its ties to drug lords, money laundering, al- Qaeda and rogue nations such as Iran and North Korea.
Here's a bank with $2.7 trillion of assets that flouted U.S. laws for a decade, according to the July 17 report by the Senate Permanent Subcommittee on Investigations. HSBC turned a blind eye to organized crime, Mexican drug cartels and overseas terrorism financiers, and gave them access to the U.S. banking system. HSBC's main U.S. regulator, the Office of the Comptroller of the Currency, for years tolerated its violations of anti-money laundering laws.
Let's try out a novel idea: Banks that help drug cartels launder money and give cover to those tied to terrorism should be put out of business. Is that really so hard for everyone to agree on?
Except we have this mutant species of corporation called too-big-to-fail banks whose collapse might wreck the global economy. No financial institution in the U.S. can survive a felony indictment. So these companies have become un-indictable, creating a perverse nonchalance regarding financial crimes. In 2010, Wachovia paid $160 million to settle criminal allegations of laundering Mexican drug money. By then the bank had been bought by Wells Fargo & Co. (WFC), and the Justice Department let it off with a deferred-prosecution deal. U
Here's a good example of "perverse nonchalance" from today's Business Insider,
Today the New York State Financial Authority accused UK investment bank Standard Chartered of having facilitated $250 billion worth of transactions on behalf of Iran….To set the scene, in 2006, the New York branch of Standard Chartered allegedly grew concerned about the amount of Iran business the bank was doing. The folks in London were underwhelmed to say the least.
(From the complaint) here's what New York said to London: "In October 2006, SCB's CEO for the Americas sent a panicked message to the Group Executive Director in London. "Firstly," he wrote, "we believe [the Iranian business] needs urgent reviewing at the Group level to evaluate if its returns and strategic benefits are . . . still commensurate with the potential to cause very serious or even catastrophic repetitional damage to the Group." His plea to the home office continued: "[s]econdly, there is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal repetitional damages and/or serious criminal liability."
And here's how London responded:
8. Lest there be any doubt, SCB's obvious contempt for U.S. banking regulations was succinctly and unambiguously communicated by SCB's Group Executive Director in response. As quoted by an SCB New York branch officer, the Group Director caustically replied: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians." — Page 5
Today is the 100th birthday of Milton Friedman, The Man Who Saved Capitalism
Well over 200 million were liberated from poverty thanks to the rediscovery of the free market. And now as the world teeters close to another recession, leaders need to urgently rediscover Friedman's ideas.
I remember asking Milton, a year or so before his death, during one of our semiannual dinners in downtown San Francisco: What can we do to make America more prosperous? "Three things," he replied instantly. "Promote free trade, school choice for all children, and cut government spending."
How much should we cut? "As much as possible."
Thanks to YouTube, Milton Friedman can be watched in all his glory. All ten episodes of his PBS series Free to Choose are there.
Here is a short except on what he has to say about Greed.
The editors at the National Review extol Professor Freedom
His work in the end was not about numbers, data, or equations, but about the alleviation of unnecessary human suffering and the removal of barriers to human flourishing. As he put it: "The only cases in recorded history in which the masses have escaped grinding poverty is where they have had capitalism and largely free trade."
He was unstinting in his criticism, but he was a famously happy warrior. His wit was one of his great pedagogical tools. Inspecting a government-run canal-building project in Asia, he noted that the workers were using shovels and wheelbarrows instead of bulldozers and earth-moving equipment, and was informed by his guide that using shovels meant more jobs for the workers. "Then why not use spoons?" Friedman asked.
Capitalism, Friedman argued, was good not because we need not protect the worker and the consumer, but because capitalism actually protects the worker and the consumer, while government merely makes proclamations about doing so.
Kevin Williamson on Freidman's Economics of Love.
Friedman's libertarianism was based on an economics of love: for real human beings leading real human lives with real human needs and real human challenges. He loved freedom not only because it allowed IBM to pursue maximum profit but because it allowed for human flourishing at all levels. Economic growth is important to everybody, but it is most important to the poor.
Thomas Sowell calls Friedman
one of those rare thinkers who had both genius and common sense. Most people would not be able to understand the complex economic analysis that won him a Nobel Prize, but people with no knowledge of economics had no trouble understanding his popular books like Free to Choose or the TV series of the same name.
As a professor, he did not attempt to convert students to his political views. I made no secret of the fact that I was a Marxist when I was a student in Professor Friedman's course, but he made no effort to change my views. He once said that anybody who was easily converted was not worth converting. I was still a Marxist after taking Professor Friedman's class. Working as an economist in the government converted me.
Although Milton Friedman became someone regarded as a conservative icon, he considered himself a liberal in the original sense of the word — someone who believes in the liberty of the individual, free of government intrusions. Far from trying to conserve things as they are, he wrote a book titled Tyranny of the Status Quo.
Milton Friedman proposed radical changes in policies and institutions ranging from the public schools to the Federal Reserve. It is liberals who want to conserve and expand the welfare state.
I'm all for seeing that every hungry person gets fed, but the fact that 1 in 7 Americans now gets food stamps is very troubling because you know as well as I that they are not in any danger of starving. More and more people are gaming the system.
Rich Lowry explains why Food Stamps are out of control
Two-thirds of the Agriculture Department's budget is devoted to welfare programs. The biggest is food stamps, which is now the nation's second-largest welfare program after Medicaid. Its inexorable growth during the past decade, through good times and bad, is a testament to government's self-generating expansion. Asked what labor wanted, the great 20th-century union leader Samuel Gompers answered, "More." The modern welfare state lives by the same credo. About 17 million people received food stamps back in 2000. Some 30 million received them in 2008. Roughly 46 million people receive them today. From 1 in 50 Americans on food stamps at the program's national inception in the 1970s, 1 in 7 Americans are on them now.
No longer do recipients have to pass an asset test or work and no one enforces the income eligibility. Fraudulent use of food stamps is so prevalent that even the Democratic legislators in Massachusetts passed a bill that would ban the use of food stamps, called EBT debit cards, to purchase tattoos, manicures, guns, porn, body piercings, jewelry and bail. Governor Deval Patrick vetoed the bill because he said, it humiliated poor people.
How can we let this go on when we are headed towards national insolvency?
Uncle Sam's 40-year average debt to GDP ratio is 38 percent. At the end of 2008 Washington was up to 40 percent. By the end of 2012 that number will be 73 percent, "the highest percentage since shortly after World War II," said CBO. ….These numbers disguise worse news, however. CBO does not count intra-government borrowing as part of the national debt. So when the Treasury Department "borrows" money from Social Security, CBO doesn't count it, even though cash will have to be procured -- through more borrowing -- to pay promised benefits to retirees. The full national debt already is 100 percent of GDP, compared to about 84 percent for Europe.
Arthur C. Brooks says America Already Is Europe
From the progressively of our tax code, to the percentage of GDP devoted to government, to the extent of the regulatory burden on business, most of Europe's got nothing on us…. How can we be slouching down the same debt-potholed, social-democratic road as Spain? There are three explanations, all of which point to a worrying future for America.
First, the American left is every bit as focused on growing government and equalizing incomes as the Spanish left…The second force leading us down the social-democratic road is cronyism. America possesses a full-time bipartisan political apparatus dedicated to government growth and special deals for favored individuals and sectors….Third, and most importantly, while a majority of Americans are neither leftists nor corporate cronies, they aren't paying much attention to the political system.
Looking first at Europe, Bret Stephens writes about The Entitlement State and Zombies
European leaders will not cure what ails their economies because the people who voted them into office are addicted to what ails those economies.
In other words, they are addicted to entitlements…..
it's a testament to the zombifying power of entitlements. It's sometimes said that modern Europeans aren't willing to fight for anything anymore. But that's not true: Every time an entitlement is even slightly at risk—whether it's raising the retirement age to 62 from 60 in France or tinkering with the legal architecture that guarantees jobs for life in Italy—Europeans go right to the barricades. That's not just because they are defending a financial benefit. They are also defending a way of being and a state of mind: a conviction that it's up to somebody else to provide for their well-being; a terror of what might happen should that somebody else fail to provide.
Observing this situation, Americans might suppose that we are still a long way from Europe. But consider this: As of the first quarter of 2010, 48.5% of Americans lived in a household that received some form of government assistance. That's up from 44.4% when the financial crisis began in 2008, and up from around 30% just 30 years ago. In the meantime, 49.5% of Americans paid no federal income tax as of 2009, up from 34.1% when George W.Bush took office.
Once ObamaCare kicks in, the percentage of takers will move north of 50% (if it hasn't already), and we will become a nation of modern zombies—or, if you prefer, democratic serfs…..Incentives matter, but not as much as habits do. And a habit of dependency, as any addict knows, will sooner drive a man to degradation than to reform.
Just last week we learned that just 80,000 found work last week while 85,000 dropped out of the labor force to collect disability payments from Social Security!
Mona Charen on The Failures of Obamanomics
From the beginning of the recovery in June 2009, more Americans have joined the ranks of the disabled (3.1 million) than have found jobs (2.6 million). Record numbers have also filed for unemployment insurance, welfare benefits, and food stamps (which one in seven Americans now receive).
The federal government has so many welfare programs that a top official of the Government Accountability Office couldn't even provide a fixed number to a House oversight committee, nor would Patricia Dalton "hazard a guess" as to what percentage of these programs are accomplishing the purposes for which they were created. What is not in doubt is the increase in funding President Obama has requested for welfare — 42 percent over 2008 levels.
Obama never acknowledges that his economic philosophy — enthusiastically enacted by a Democrat-dominated Congress in 2009 — not only has failed but makes no sense. By what logic does adding record numbers of people to the welfare rolls aid the economy? Fewer and fewer Americans are earning the money from which these expanded benefits are to be paid.
This can't go on and it won't. We are headed over the fiscal cliff into free fall.
I've been away all day so I'm only now catching up on the news.
And this is very good news. GAO: Recoverable Oil in Colorado, Utah, Wyoming 'About Equal to Entire World's Proven Oil Reserves
The Green River Formation, a largely vacant area of mostly federal land that covers the territory where Colorado, Utah and Wyoming come together, contains about as much recoverable oil as all the rest the world's proven reserves combined, an auditor from the Government Accountability Office told Congress on Thursday.
"USGS estimates that the Green River Formation contains about 3 trillion barrels of oil, and about half of this may be recoverable, depending on available technology and economic conditions," Mittal testified.
"The Rand Corporation, a nonprofit research organization, estimates that 30 to 60 percent of the oil shale in the Green River Formation can be recovered," Mittal told the subcommittee. "At the midpoint of this estimate, almost half of the 3 trillion barrels of oil would be recoverable. This is an amount about equal to the entire world's proven oil reserves."
Think of the implications of creating tens of thousands, if not hundreds of thousands of new jobs, of becoming truly energy self reliant, free from troublesome tyrants in the Mideast.
What an amazing world.
photo of earth from Russian weather satellite
The bad news is that about 75% of it is controlled by the Federal Government's Bureau of Land Management.
It's news, but not surprising news, that Public Employees Second Only to Financial Pros in Fraud according to the Association of Certified Fraud Examiners (ACFE), the world's arrest anti-fraud organization.
A congressional staffer who has worked to combat fraud at the federal level agreed that the amount of money being spent has stretched the government thin and left limited accountability. A culture has developed that excuses lavish spending programs, he said, pointing to the GSA's $800,000 Las Vegas retreat, which has resulted in several firings and resignations.
"The federal government is sending all of this money out and there's no follow up, no accountability," the staffer said. "It's part of the culture."
It doesn't help that states are gaming the system too.
This is astonishing, Kodak Had a Secret Nuclear Reactor Loaded with Enriched Uranium Hidden in a Basement in Rochester, N.Y.
Kodak's purpose for the reactor wasn't sinister: they used it to check materials for impurities as well as neutron radiography testing. The reactor, a Californium Neutron Flux multiplier (CFX) was acquired in 1974 and loaded with three and a half pounds of enriched uranium plates placed around a californium-252 core.
The reactor was installed in a closely guarded, two-foot-thick concrete walled underground bunker in the company's headquarters, where it was fed tests using a pneumatic system. …It wasn't until 2006, well after the terrorist attacks of 9/11, that it was decided to dismantle it.
This story brought to mind stories of neighborhood nuclear plants from 2008. Mini nuclear plants to power 20,000 homes
Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb.
The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.
The US government has licensed the technology to Hyperion, a New Mexico-based company which said last week that it has taken its first firm orders and plans to start mass production within five years. 'Our goal is to generate electricity for 10 cents a kilowatt hour anywhere in the world,' said John Deal, chief executive of Hyperion. '
So what is Hyperion doing today?
Hyperion Power Generation plans to build one of its first modular nuclear devices at the Department of Energy's Savannah River test site in South Carolina.
And it changed its name. SMR Developer Hyperion Power Now Gen4 Energy
The Gen4 Module (formerly the Hyperion Power Module) is a small next generation nuclear power reactor that will not require refueling during its 10-year operational lifetime, as well as no on-site access to nuclear fuel, which reduces safety and proliferation concerns. According to the release, G4M technology has the potential to provide power to undeveloped regions, demonstrate unmatched nuclear safety, as well as provide a cleaner energy source by emitting no greenhouse gasses. The G4M will produce 25 MW of safe and reliable electric power that is manufactured in a factory and transported to the installation site completely sealed. After its useful life it is replaced with an entirely new power module.
We all know that it took WWII to bring America out of the Great Depression, but I didn't know about the man who did it, FDR's arch nemesis General Motors President William Knudsen.
The FDR Lesson Obama Should Follow.
FDR—architect of the New Deal and outspoken opponent of Big Business—was forced by the collapse of Europe's democracies under Hitler's blitzkrieg to turn to the corporate sector to prepare America for war.
Yet Knudsen's answer to the appeal from FDR was immediate. He quit GM and moved to Washington to mobilize his friends in the private sector to get America ready for war. He joined with U.S. Steel's Edward Stettinius, Sears, Roebuck's Don Nelson and other corporate executives and engineers who left their jobs to accept a federal salary of $1 a year. Together, they made Roosevelt a promise.
If the president gave them 18 months, they would persuade enough of American industry to convert their plants to making planes, tanks, ships and munitions without throwing the rest of the economy into a tail spin. The result, they pledged, would be the most massive outpouring of weaponry the world had ever seen.
Roosevelt was under intense pressure from his own administration—and from his wife Eleanor—not to agree. They believed it was impossible to convert to a wartime footing without a comprehensive, centrally directed plan for total mobilization and a single commanding figure in charge—in short, a war-production czar.
This proposal was in effect Roosevelt's first introduction to supply-side economics. To arm the nation for war, Roosevelt not only had to agree to set aside his own ideological misgivings but almost a decade of his own failed economic policies. "Dr. New Deal," Roosevelt told the press, was going to have to make way for "Dr. Win the War."
The results, as Knudsen had promised, were staggering. Barely a year later—by the time Japanese bombs fell on Pearl Harbor in December of 1941—the scale of American war production was fast approaching that of Nazi Germany.
Many feared that with the end of government wartime spending—almost $300 billion worth, or $3 trillion in today's dollars—unemployment would boomerang, wages (which wartime work had driven up by an average of 70%) would fall and hopes for prosperity would be extinguished. Instead, private investment came roaring back, triggering steady economic growth that pushed the U.S. into a new era, as the most prosperous society in history.
"You are the great American," Undersecretary of War Robert Patterson told Knudsen at the war's end.
Why haven't any of the people responsible for the financial crash been charged and brought to trial?
In an explosive Newsweek article set to rock official Washington, reporter Peter Boyer and Breitbart contributing editor and Government Accountability Institute President Peter Schweizer reveal how Attorney General Eric Holder and the Department of Justice are operating under a "justice for sale" strategy by forgoing criminal prosecution of Wall Street executives at big financial institutions who just so happen to be clients of the white-shoe law firms where Holder and his top DOJ lieutenants worked.
Not surprisingly, of the elite bundlers who made up Obama's 2008 campaign, the second most represented industry after law was the securities and investment industry.
As Boyer and Schweizer report, Department of Justice criminal prosecutions are at 20-year lows for corporate securities and bank fraud. And while large financial institutions have faced civil prosecution, those typically end in settlement fees with the major banks that represent a fraction of their profits, often paid through special taxes on mortgage-backed securities.
Breitbart reports Top DOJ officials were Obama bundlers with Wall St Ties
Four of the top officials at the Department of Justice were all big money fundraisers for President Obama's 2008 campaign with strong ties to Wall Street—the very entity the Obama Administration has said must be criminally prosecuted for bringing about the biggest financial crisis in U.S. history.
The nexus between big money campaign fundraising and senior appointments at the Department of Justice raises numerous questions and appearances of conflict of interest that go far beyond mere recusal from certain cases. Furthermore, many of the financial institutions the Department of Justice claims to be criminally investigating for financial fraud are former clients of the law firms from which DOJ's top brass hail.
Where's the justice? Where's the deterrent to future reckless Wall Street criminal shenanigans?
The Washington Post on The shrinking labor participation rate
If the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 11.1 percent. If the percentage was where it was when George W. Bush took office, the unemployment rate would be 13.1 percent.
chart from Calculatedriskblog.com
David Goldman on the Disappearing Labor Force with lots of charts.
The big news in Friday's employment report was not the miserable 115,000 jobs the economy added in April, but the disappearance of 340,000 workers from the labor force. We haven't seen unemployment on this scale since the Great Depression. Indeed, since Obama took office, the labor force participation rate has fallen from 66% to 63% as almost 5 million American adults stopped looking for work. About a fifth of working-age Americans aren't working — and a fifth of all personal income is transfer payments.
Not since the 1970s has the overall labor force participation rate been this low. As women began entering the labor force in large numbers, the overall participation rose. Truly alarming, though, is the labor force participation rate for men:
has just fallen below the 70% mark for the first time in history. Again, the number means that 3 out of 10 working-age American men who are not in prison or the armed forces are not counted in the labor force. They are not looking for work to begin with.
For Americans with only a high school diploma, the results are even more dismal: fewer than 3 out of 5 Americans with only a high school education are counted in the labor force…For Americans without a high school diploma, the labor force participation rate is only 45%. Fewer than half are counted in the labor force, that is. The official unemployment rate for the least-educated cohort is 12.5%. That means that fewer than 2 out of 5 adult Americans without a H.S. diploma not in the military or prison actually have a job.
Dallas Fed President: Break up the Banks, End 'Too big to fail'.
A recent report by the Federal Reserve Board of Dallas accuses the nation's largest banks of being "a perversion of capitalism" and "a clear and present danger to the U.S. economy."
The report titled "Choosing the Road to Prosperity Why We Must End Too Big to Fail—Now" goes on to say the infamous Dodd-Frank bill, which was supposed to "regulate" the financial industry, "may actually perpetuate an already dangerous trend of increasing banking industry concentration."
JPMorgan, Bank of America, Citigroup, Wells Fargo and U.S. Bancorp, hold 52 percent of all U.S. deposits, according to the report, which makes that whole "too big to fail" problem seems a lot worse now than it did before Dodd-Frank.
In an effort to better understand the claims made in this report, PBS FRONTLINE interviewed the Dallas Fed CEO and president, former banker Richard W. Fisher.
You can watch a video of Fischer at the link
The Obama Jobs Gap is up to 15 million missing jobs
According to JP Morgan economist James Glassman, to restore the job market to where it was in 2007 before the recession, some 14.8 million jobs would have to be created.
I would love to believe that the new jobs report is as 'positive in every way' as the economists say in the Wall Street Journal - an increase of 243,000 jobs that pushed down the unemployment rate to 8.3%.
But Zero Hedge has a devastating rebuttal using the same statistics provided by the Bureau of Labor and Statistics. Implied Unemployment Rate Rises to 11.5%.
the spread between the reported and implied unemployment rate just soared to a fresh 30 year high of 3.2%. And that is how with a calculator and just one minute of math, one strips away countless hours of BLS propaganda.
Record 1.2 Million People Fall Out Of Labor Force In One Month, Labor Force Participation Rate Tumbles To Fresh 30 Year Low
Another disturbing indicator Social Security Trust Fund Outlook Takes $1 Trillion Dive
The outlook for Social Security's trust fund has deteriorated to an astonishing degree over the past year, new Congressional Budget Office projections show.
The nonpartisan budget scorekeeper released the estimates Tuesday as part of broader economic and budget forecasts. CBO expects the trust fund to peak in 2018 and decline to $2.7 trillion in 2022 — a full $1 trillion less than Social Security's own actuaries predicted last year.
The new trajectory suggests that the trust fund's current depletion date of 2036 may jump ahead several years when Social Security's trustees release their annual report this spring, making the retirement program more central to the 2012 election .
We're not only not out of the woods yet, we haven't even fully recognized the problem..
Robert Samuelson calls President Obama's rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico 'an act of national insanity"
Now consider how Obama's decision hurts the United States. For starters, it insults and antagonizes a strong ally; getting future Canadian cooperation on other issues will be harder.
Next, it threatens a large source of relatively secure oil that, combined with new discoveries in the U.S., could reduce (though not eliminate) our dependence on insecure foreign oil.
Finally, Obama's decision forgoes all the project's jobs. There's some dispute over the magnitude. Project sponsor TransCanada claims 20,000, split between construction (13,000) and manufacturing (7,000) of everything from pumps to control equipment.
Apparently, this refers to "job years," meaning one job for one year. If so, the actual number of jobs would be about half that spread over two years. Whatever the figure, it's in the thousands and important in a country hungering for work. And Keystone XL is precisely the sort of infrastructure project that Obama claims to favor.
The big winners are the Chinese.
The Washington Post editorializes Obama's Keystone pipeline rejection is hard to accept
We almost hope this was a political call because, on the substance, there should be no question. Without the pipeline, Canada would still export its bitumen—with long-term trends in the global market, it's far too valuable to keep in the ground—but it would go to China. And, as a State Department report found, U.S. refineries would still import low-quality crude—just from the Middle East. Stopping the pipeline, then, wouldn't do anything to reduce global warming, but it would almost certainly require more oil to be transported across oceans in tankers.
The environmental impact of the Keystone pipeline has been studied for three years, yet the President said the Republicans were rushing him into a decision within 60 days and that wasn't enough time. Charlotte Hays points out that when it came to showering the politically-connected Solyndra with millions of taxpayer dollars, the Administration couldn't move fast enough.
When it came to TARP and Obamacare, the Administration's urgency was so great, congressmen and senators weren't given time to even read the bills before they were voted on.
In short, the incontinent spending of many European governments, which awarded whole populations unearned benefits at the expense of generations to come, has—along with a megalomaniacal currency union—produced a crisis not merely economic but social, political, and even civilizational. The European Union that was supposed to put an end to war on the continent has resuscitated antagonisms that might end in bellicosity, if not in outright war. And the European Project stands revealed as what any sensible person could have seen it always was: something akin to the construction of a massive, post-Tito Yugoslavia.
Theodore Dalrymple, The European Crack-Up
In North Dakota, there is a major housing shortage as people flock to the cold, northern state where jobs are plentiful and well paid. But the downside of the oil boom is a housing shortage.
But now North Dakota ranks fourth in oil production among all U.S. states and will soon under go its own housing boom. Discovered in the out-skirts on the western fringe of the state, the Bakken oil find is one of the largest oil discoveries ever assessed by the U.S. Geological survey.
Employees working the oil fields travel long distances to work since housing is all but impossible to find in nearby towns like Williston. The community has a desperate need for new home construction and already has plans for a new major apartment complex.
In Stanley, which had a population of just 1,300 until new laborers started arriving to work in the oil fields, the population is bursting. In Williston and a number of other small western communities studies are going on to determine how much new housing is needed. Hundreds of workers are stuck living in temporary quarters in motels, hotels and trailers just to get by in the mean time.
So what are the natives doing?
They are heading to Arizona and Phoenix, 1500 miles away where prices have plunged since the real estate bubble burst.
"A lot of people have struck it rich," he says. "Oil companies are coming in and buying businesses and land. They're selling up there at the peak and buying down here at the bottom."
Some want second homes. Others move outright.
I think this story is delicious. After all those winters in the cold and the dark, some North Dakotans get a real break.
What strikes me most as I look back at 2011 is the pervasiveness of corruption among America's ruling class, the insider trading by the permanent politicians and the connected crony capitalists who rig the rules.
Michael Thomas on The Big Lie
As 2011 slithers to its end, none of the major problems that led to the crisis point three years ago have really been solved. Bank balance sheets still reek. Europe day by day becomes a financial black hole, with matter from the periphery being sucked toward the center until the vortex itself collapses. The Street and its ministries of propaganda have fallen back on a Big Lie as old as capitalism itself: that all that has gone wrong has been government's fault. This time, however, I don't think the argument that "Washington ate my homework" is going to work. This time, a firestorm is going to explode about the Street's head—and about time, too.
I have lived what now, at 75, is starting to feel like a long life. If anyone asks me what has been the great American story of my lifetime, I have a ready answer. It is the corruption, money-based, that has settled like some all-enveloping excremental mist on the landscape of our hopes, that has permeated every nook of any institution or being that has real influence on the way we live now. Sixty years ago, if you had asked me, on the basis of all that I had been taught, whether I thought this condition of general rot was possible in this country, I would have told you that you were nuts. And I would have been very wrong. What has happened in this country has made a lie of my boyhood
Gonzalo Lira says Nine weeks after its bankruptcy, the general public still hasn't quite realized the implications of the MF Global scandal.
Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn't turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.
But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer's money to be stolen so as to make JPMorgan whole.
Thus these 40,000 MF Global customers had their money stolen—there's no polite way to characterize what happened. And this theft was not carried out by MF Global—it was carried out by the authorities who were charged with handling the firm's bankruptcy.
These 40,000 customers were not Big Money types—they were farmers who had accounts to hedge their crops, individuals owning gold .....—in short, ordinary investors. Ordinary people—and they got screwed by the regulators, for the sake of protecting JPMorgan and other big fry who had exposure to MF Global.
Repo Men by Kevin Williamson
What's worse is that much of official Washington is looking at Wall Street and asking the same question. The answer: Easy. If Wall Street has done pretty well by investing in Washington, the more despair-inducingly germane fact is that Washington has done pretty well by investing in Wall Street. A catalogue of recent congressional insider-trading, self-dealing, IPO shenanigans, and inexplicably good investment luck would fill an entire volume, and in fact it has: The book has the Tea Party–bait title Throw Them All Out: How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals, and Cronyism That Would Send the Rest of Us to Prison, by Peter Schweizer of the Hoover Institution. That's a lot of title for a fairly slim book (176 pages of reportage, plus end notes), but, despite its relatively slender dimensions, it cost me an entire night's sleep: I spent half the night reading it in a single sitting and the other half having nightmares about it. It's the most offensive and disturbing thing I've read since sampling the oeuvre of the Marquis de Sade as an undergraduate.
"At the risk of oversimplifying it," one Wall Street insider explains, "imagine a bank went bankrupt. Then the regulators came in and cracked open all the customers' safe-deposit boxes, even though they knew for certain that none of the contents belonged to the bank. Then they tossed those assets into the pile for the creditors to pick through and told the box holders to get in line as well. That's what folks are saying is happening here. And in a situation like that, who wants a safe-deposit box?"
What exactly is crony capitalism?
All capitalism is driven by greed - the desire to not only achieve economic security, but to amass pools of capital beyond one's basic needs. This capital can fuel the kind of conspicuous consumption that offends egalitarians. But it also finances investments in new products and businesses, without which the economy cannot grow. More on that later.
What makes Crony Capitalists different is their willingness to use the coercive powers of government to gain an advantage they could not earn in the market. This can come in the form of regulations that favor them while hindering competitors, laws that restrict entry into their markets, and government-sponsored cartels that fix prices, grant monopolies, or both.
Crony Capitalists are also more than happy to help themselves to money from the public treasury. This can come from wasteful or unnecessary spending programs that turn government into a captive customer, subsidies that flow directly into their coffers, or mandates that force consumers to buy their products.
Examples abound. Heavily regulated industries attract and breed Crony Capitalists, who are highly skilled at capturing the agencies intended to regulate them.
Health Care
Military-Industrial complex
Market Capitalists do not go to Washington. They strive to please customers, not politicians. They put their own money at risk to earn their own rewards, never foisting losses on others. Because they are risking their own hard earned dollars, they are careful to invest where it makes the most economic sense, not where it curries political favor. They meet their rivals in open competition, may the best products win. They have no reason to be ashamed of their honestly earned wealth. Many are famous for their public spirit and generosity, whether it's in funding the arts or providing for those truly in need.
American Optimism by Elizabeth Scalia
Last week Mark Steyn wrote, "America is seizing up before our eyes," and that is a spot-on image. She is like a brilliantly conceived machine that, poorly maintained for more years than any of us cares to admit, has gone too long untuned; the oil of her invention has thinned out and broken down and now bit-by-bit, gear-by-gear—economically, socially, spiritually—she is making an ungodly noise and grinding to a halt.
There are probably ten thousand articles to be found on the Internet all fleshing out their theories of what is behind America's swift collapse. Curiously, most of them will touch—all without realizing it—on the seven deadly sins; Capitalist Greed; Spiritual Sloth; Physical Lust; Nationalist/Military Pride; Consumer Gluttony; Partisan Wrath; Class Envy. Good arguments can be made blaming some are all of these sins for our current dire straits and for the sense that we are standing upon a precipice.
The classical seven deadly sins and seven heavenly virtues are relevant in all ages, even ours, because human nature doesn't change.
Here is the article Elizabeth referenced: Mark Steyn, Occupiers part of grand alliance against the productive
At first glance, an alliance of anarchists and government might appear to be somewhat paradoxical. But the formal convergence in Oakland makes explicit the movement's aims: They're anarchists for statism, wild free-spirited youth demanding more and more total government control of every aspect of life – just so long as it respects the fundamental human right to sloth. What's happening in Oakland is a logical exercise in class solidarity: the government class enthusiastically backing the breakdown of civil order is making common cause with the leisured varsity class, the thuggish union class and the criminal class in order to stick it to what's left of the beleaguered productive class. It's a grand alliance of all those societal interests that wish to enjoy in perpetuity a lifestyle they are not willing to earn. Only the criminal class is reasonably upfront about this. The rest – the lifetime legislators, the unions defending lavish and unsustainable benefits, the "scholars" whiling away a somnolent half-decade at Complacency U – are obliged to dress it up a little with some hooey about "social justice" and whatnot.
America is seizing up before our eyes: The decrepit airports, the underwater property market, the education racket, the hyper-regulated business environment. Yet, curiously, the best example of this sclerosis is the alleged "revolutionary" movement itself. It's the voice of youth, yet everything about it is cobwebbed
Shocking everyone, especially the EU overseers in Brussels, is the Greek plan to put the negotiated bailout up to a vote of the Greeks.
David Pryce Jones asks Will the Greeks Save Democracy?
Prime Minister George Papandreou may look moth-eaten, but the announcement of this referendum is pretty brilliant politics. He ducks the blame for giving in to the Brussels mob, and he heads off the threat of a general election that he and his Socialist Party are certain to lose. Better still, he can be sure that the voters are going to say no and reject the bail-out by a large margin. Ouf! Greece will then be able officially to default, scrap the doom-laden euro, return to the drachma that it should never have abandoned, and devalue. That way, they can become competitive again, and the society will hold together.
The panic of the Brussels mob is wonderful to behold. ....Everyone with a head on their shoulders has been forecasting for years that the euro was certain to come to a crisis like this. The sovereignty of nations is stronger than the Brussels mob. Union was a historic mistake. The Greeks invented democracy, and it will be poetic justice if they save it now and free us all.
There may not be time for a referendum before the whole deal melts down, But what if the Greeks pressed the Germans for the £60 billion in reparations the Germans owe them.?
Hitler's men even raided the Greeks' central bank, forcing them to give Germany a massive 'war loan' — one that has never been paid back, more of which later. Economists estimate that if it were repaid today, it could cost the German government £60billion. The memory of that travesty has been reignited this week by Greeks angry at the austerity measures being imposed on them — primarily by Germany as it seeks to stop the euro crisis spinning out of control.
On March 14, 1942, a team of German and Italian lawyers, in the absence of any Greeks, signed an agreement obliging the Bank of Greece to provide Germany with a 'war loan' of 476million Reichsmarks (a currency which preceded the Deutschmark). And 70 years later not one penny of it, let alone any interest, has been repaid.
Economists (German ones, as it happens) have calculated that, allowing purely for inflation, Greece's 1942 loan to Germany would today be worth £9bn. But if one adds even a modest rate of interest of 3 per cent, then that debt increases to a staggering £60bn.
That would be enough to cover Greece's fiscal deficit for the next five years, giving the country time to restructure its economy and put government finances on a more sustainable footing.
Every other country in Europe had reparations apart from Greece. It's not fair to say Greeks should die for free.'
The moral vacuum in the ruling class was never more on display.
Jon Corzine, former co-head of Goldman Sachs, former U.S. Senator from New Jersey (D), former governor of New Jersey (D) until defeated in his re-election by Governor Chris Christie (R), after which he returned to Wall St as CEO of MF Global, a firm of 2800 employees.
With bad bets on European bonds, Corzine has bankrupted MF Global and will still get a $12 million severance. It is the eighth largest bankruptcy in U.S. history.
Even worse, some $700 million of customers' money is missing. The suspicion is that the firm co-mingled customer money with the firm's money to meet collateral calls and in the hopes that the firm could be sold.
...someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.
.. thousands of MF clients are about to realize that money they thought they had, even if completely unencumbered with other assets, read pure cash, read money not at risk, is now gone forever, and they will have to wait years until the bankruptcy process determines if the claim deserves priority status to the unsecured bondholders. Best case: assume a 70% haircut on the money, if it is every to be seen again at all.
What happens next? Why customers at all other brokerages, all other exchanges, afraid that their money will suffer the same fate as MF, even if they transact with perfect solvent clearers and agents, will proceed to pull their money, as they know they have nobody to trust but their own prudent and forward looking actions. Which in turn will start the kind of liquidity drain that killed not only Lehman, but froze money markets, and with that brought the complete capital markets to a standstill, only to be thawed after the Fed pledged multiples of the US GDP to rescue Wall Street in October of 2008.
And that, dear reader, is called unintended consequences, and how the bankruptcy of a small exchange can avalanche into a crippling Ice Nine of what is left of capital markets all over again, courtesy of crony capitalism, rampant criminality and a regulator and enforcement body that is more fascinated with midget porn than any regulating or enforcing of the very firms it hopes to get an assistant general counsel job from in a few short years.
The New York Times's Joe Nocera writes
The idea that Corzine, who single-handedly destroyed MF Global Holdings, was in a position to command so much as a penny in severance is horrifying. It suggests two things. The first is the extent to which "heads-I-win-tails-you-lose" remains the operative concept for Wall Street compensation. The second is that one's politics doesn't much matter when it comes to lining one's pockets. Corzine is an avowed liberal who has decried income inequality and Wall Street pay — but right up until the end, he had his hand out for millions he didn't deserve.
What If Bankers Prayed More asks Fr. Dwight Longnecker
I quoted correspondence I had received from an Englishman who had worked for many years in the City of London--the financial center. He said, "When I began in banking almost 40 years ago, the head of our Investment Banking division each morning gathered his staff together and began the day with a prayer! This division was responsible for investing the bank's money. The prayer was not that they would make a 'killing' or rack up great profits for the bank. Rather it was that they would properly care for the bank's assets and discharge their duties to their savers and shareholders responsibly and for the common good.
Can you imagine that happening on Wall St? I can't. And that's part of the problem. They are answerable to no one.
The Economist finds Detroit So cheap, there's hope
IT IS hardly news that the city of Detroit has been in long-term decline, a victim of everything from the problems of the "big three" carmakers to family breakdown, crime and middle-class flight, both black and white. But the scale of the recent collapse has caught even hardened Detroiters by surprise. When the results from the most recent decennial census appeared earlier this year, they showed that in the decade from 2000 to 2010 Detroit lost an astonishing 25% of its population, a demographic catastrophe (New Orleans apart) without parallel in the developed world.
Yet despite all the gloom, there is a bit of a sense that things might just be starting to turn, and the reason is simple: Detroit is now incredibly cheap. And that has drawn some admittedly rather pioneering types back into town. The most remarkable of these is Dan Gilbert. A 49-year-old native of Detroit whose motto is "We can do well by doing good", Mr Gilbert is reshaping Detroit's centre. Last year he moved his main business, Quicken Loans, the largest internet mortgage company in America, from the quiet suburbs into a building on Campus Martius park, the heart of downtown. His 1,700 staff there were joined, earlier this month, by another 2,000 people whom he moved into a second building nearby. From his window Mr Gilbert points to some of his other acquisitions, including one, of 800,000 square feet, that he bought for just $8m and intends to let out. It is hard to beat $10 a square foot for downtown office space.
And besides all this, a quiet revolution is taking place in Detroit's schools, which have done so much to drive people away. Thanks in large part to the generosity of Detroit's philanthropic phalanx, especially the Skillman Foundation, they are gradually getting better. Half of Detroit's children now escape the poorly run and poorly funded public schools, because of an explosion in the number of independent charter schools, religious foundations and rules that let pupils attend schools in neighbouring suburbs. The new Republican governor of Michigan, Rick Snyder, is pushing for a lot more school choice throughout the state; in May he appointed a businessman as the emergency manager for Detroit's public schools. Early days; but for the first time in decades, there are a few green shoots in Detroit's grim streets.
Peggy Noonan likes Paul Ryan as much as I do and writes much better, The Divider vs. The Thinker.
Mr. Ryan receives much praise, but I don't think his role in the current moment has been fully recognized. He is doing something unique in national politics. He thinks. He studies. He reads. Then he comes forward to speak, calmly and at some length, about what he believes to be true. He defines a problem and offers solutions, often providing the intellectual and philosophical rationale behind them. Conservatives naturally like him—they agree with him—but liberals and journalists inclined to disagree with him take him seriously and treat him with respect.
This week in a major speech entitled Saving the American Idea: Rejecting Fear, Envy and the Politics of Division , he attacked corporate welfare and crony capitalism
"Why have we extended an endless supply of taxpayer credit to Fannie Mae and Freddie Mac, instead of demanding that their government guarantee be wound down and their taxpayer subsidies ended?" Why are tax dollars being wasted on bankrupt, politically connected solar energy firms like Solyndra? "Why is Washington wasting your money on entrenched agribusiness?"
Rather than raise taxes on individuals, we should "lower the amount of government spending the wealthy now receive." The "true sources of inequity in this country," he continued, are policies "that enriches the powerful, and empty promises that betray the powerless." The real class warfare that threatens us is "a class of bureaucrats and connected crony capitalists trying to rise above the rest of us, call the shots, rig the rules, and preserve their place atop society."
Most of the country knows this. Angelo Codevilla in his essay last year, America's Ruling Class and the Perils of Revolution was prophetic.
Who are these rulers, and by what right do they rule? How did America change from a place where people could expect to live without bowing to privileged classes to one in which, at best, they might have the chance to climb into them? What sets our ruling class apart from the rest of us?
Its attitude is key to understanding our bipartisan ruling class. Its first tenet is that "we" are the best and brightest while the rest of Americans are retrograde, racist, and dysfunctional unless properly constrained. How did this replace the Founding generation's paradigm that "all men are created equal"?
You know that Drudge headline, "Vatican Calls for 'Central World Bank'."? A category error and
"Rubbish, rubbish, rubbish" says George Weigel
The truth of the matter is that "the Vatican" — whether that phrase is intended to mean the Pope, the Holy See, the Church's teaching authority, or the Church's central structures of governance — called for precisely nothing in this document. The document is a "Note" from a rather small office in the Roman Curia. The document's specific recommendations do not necessarily reflect the settled views of the senior authorities of the Holy See; indeed, Fr. Federico Lombardi, the press spokesman for the Vatican, was noticeably circumspect in his comments on the document and its weight. As indeed he ought to have been. The document doesn't speak for the Pope, it doesn't speak for "the Vatican," and it doesn't speak for the Catholic Church.
To suggest, as most of the immediate reporting and commentary did, that the Catholic Church was endorsing one or another set of proposals for re-ordering international finance, and was doing so as a matter of exercising its doctrinal authority, was a very bad category mistake, reflecting either the pitfalls of instant analysis in the 24/7 news cycle, progressivist-Catholic spin, or both.\
Bottom line (so to speak): This brief document from the lower echelons of the Roman Curia no more aligns "the Vatican," the Pope, or the Catholic Church with Occupy Wall Street than does the Nicene Creed. Those who suggest it does are either grossly ill-informed or tendentious to a point of irresponsibility.
The document is from the Pontifical Council on Justice and Peace with explanation here.
After an exchange of views on a private forum Rod Dreher writes
Global public and private debt exceeds a staggering 300 percent of global GDP. We are now living under conditions in which giant financial entities — investment banks, in particular — undertake operations that pose a direct and grave threat to the common good. This is what "too big to fail" means: that failure of the institutions in question poses such a catastrophic risk to the wider economy that the community is held hostage to their fortunes.
I think it's incumbent on us to admit that the Church's analysts are substantially correct in their diagnosis of the situation. The power of global financial entities has outstripped the power of nation-states to subordinate their activity to the common good, even as the commons cannot be protected from the irresponsibility of these entities. The solution proposed by the Pontifical Council is a form of global political and economic common governance in which nation-states relinquish sovereignty to a significant degree in exchange for gaining a measure of accountability and control over global capital. It is fairly clear why an American would find this dangerous and unacceptable (less so why a Bolivian or a Ghanian would), and why it would never fly. Yet the problem still remains. If not global government, what? This is a huge and complex problem. The Vaticanistas may have the wrong solution, but at least they're facing it. We're not.
Low birth rates a threat to economy, study shows
Throughout the developed world, lowered birth rates and family breakdown will have a devastating effect on the global economy and the welfare state's viability, says an international study released Oct 3.
"On current trends, we face a world of rapidly aging and declining populations, of few children — many of them without the benefit of siblings and a stable, two-parent home — of lonely seniors living on meagre public support, of cultural and economic stagnation," says the study, entitled "The Empty Cradle: How Contemporary Trends Undermine the Global Economy."
Co-sponsored by the Institute of Marriage and Family Canada (IMFC) and pro-family groups in the United States, the Philippines, Spain and Colombia, the study shows even developing countries such as Iran, Lebanon, Chile, Thailand and South Korea have seen their lifetime births per woman shrink to fewer than two from averages as high as six. Canada's birth rate is only 1.5 children per woman.
The study also examines the role of culture and religion.
"Today there remains in the individual countries of Europe, and of the West generally, a strong and growing correlation between conservative religious values and larger-than-average family size."
In France and Spain, for example, practising Catholic women have "significantly more children" than non-religious women.
"Much the same story can be found throughout the globe, where the religiously observant typically have markedly higher birth rates than does the rest of the population."
Recognizing that none of their suggestions are adequate, the authors of the study
indicate a philosophical approach is needed, "one that emphasizes the critical role of the intact, nurturing and financially secure family in sustaining and renewing the human, social and financial capital of aging societies around the globe."
One uncomfortable fact is that if the 40 million children aborted since 1973 were alive, we would not be facing a social security problem. About 25 million more people would be paying into the system and creating demand in the economy.
But it was Mark Steyn who put it best in It's the Demography, Stupid
The design flaw of the secular social-democratic state is that it requires a religious-society birth rate to sustain it.
Europe by the end of this century will be a continent after the neutron bomb; the grand buildings will still be standing, but the people who built them will be gone. We are living through a remarkable period: the self-extinction of the race who, for good or ill, shaped the modern world."
Peter Wallison on Wall Street's Gullible Occupiers
There is no mystery where the Occupy Wall Street movement came from: It is an offspring of the same false narrative about the causes of the financial crisis that exculpated the government and brought us the Dodd-Frank Act. According to this story, the financial crisis and ensuing deep recession was caused by a reckless private sector driven by greed and insufficiently regulated. It is no wonder that people who hear this tale repeated endlessly in the media turn on Wall Street to express their frustration with the current conditions in the economy.
Their anger should be directed at those who developed and supported the federal government's housing policies that were responsible for the financial crisis.....Fannie Mae and Freddie Mac...The Federal Housing Administration....
rules adopted in 1995 under the Community Reinvestment Act, regulated banks as well as savings and loan associations had to make a certain number of loans to borrowers who were at or below 80% of the median income in the areas they served.
Research by Edward Pinto, a former chief credit officer of Fannie Mae (now a colleague of mine at the American Enterprise Institute) has shown that 27 million loans—half of all mortgages in the U.S.—were subprime or otherwise weak by 2008. That is, the loans were made to borrowers with blemished credit, or were loans with no or low down payments, no documentation, or required only interest payments.
Of these, over 70% were held or guaranteed by Fannie and Freddie or some other government agency or government-regulated institution.
After the government, I do blame the greed of unscrupulous bankers and agents in the mortgage industry and last, the greedy investors themselves. There's enough blame to go around and it all goes back to greed. Greed is at the heart of all our financial troubles. No wonder Greed is one of the seven deadly sins
Deroy Murdock gives a good summary of all the green bankruptcies to date and the promise of many more to come.
Green Jobs Are a National Scandal
Citing Energy's data, Investor's Business Daily reports that subsidies for all energy sources averaged $1.65 per megawatt-hour in 2007. Wind and solar: $24. Similarly, while Obama "invests" up to $48.1 million per job, private employers hire the average individual for $58,510 annually, the Bureau of Labor Statistics calculates.
This entire fiasco helps illustrate what 19th-century French political economist Frederic Bastiat called "that which is seen, and that which is not seen." While politicians cut ribbons at ceremonies outside green-energy facilities, none will appear at a politically incorrect coal, natural-gas, or petroleum plant that got no loan guarantees — even to create more jobs more cheaply. Far worse, no one sees the companies, products, and jobs that never emerged because Washington politicians vacuumed the pockets of entrepreneurs who might have deployed private capital more productively and innovatively.
....While most free-marketeers would convert these funds to tax relief or debt reduction, only blind liberals cannot see that this extravagance impoverishes their favorite causes.
The only writer in America who can make even municipal bonds fascinating is Michael Lewis. Here he is in Vanity Fair with California and Bust .
And as he talked about the bankrupting of Vallejo, I realized that I had heard this story before, or a private-sector version of it. The people who had power in the society, and were charged with saving it from itself, had instead bled the society to death. The problem with police officers and firefighters isn't a public-sector problem; it isn't a problem with government; it's a problem with the entire society. It's what happened on Wall Street in the run-up to the subprime crisis. It's a problem of people taking what they can, just because they can, without regard to the larger social consequences. It's not just a coincidence that the debts of cities and states spun out of control at the same time as the debts of individual Americans. Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They'd been conditioned to grab as much as they could, without thinking about the long-term consequences. Afterward, the people on Wall Street would privately bemoan the low morals of the American people who walked away from their subprime loans, and the American people would express outrage at the Wall Street people who paid themselves a fortune to design the bad loans.
The beleaguered mayor of the city of Vallejo which has declared bankruptcy says
"My approach has been I don't care who is to blame," Batchelor said. "We needed to change."....
He didn't view the city's main problem as financial: the financial problems were the symptom. The disease was the culture.
Neuroscientist Peter Whybrow
thinks the dysfunction in America's society is a by-product of America's success...."We've created physiological dysfunction. We have lost the ability to self-regulate, at all levels of the society. "
the fantastic rise in rates of obesity ... The boom in trading activity in individual stock portfolios; the spread of legalized gambling; the rise of drug and alcohol addiction—it is all of a piece. Everywhere you turn you see Americans sacrifice their long-term interests for short-term rewards.
In the Spectator, The great euro swindle
Very rarely in political history has any faction or movement enjoyed such a complete and crushing victory as the Conservative Eurosceptics. The field is theirs. They were not merely right about the single currency, the greatest economic issue of our age — they were right for the right reasons. They foresaw with lucid, prophetic accuracy exactly how and why the euro would bring with it financial devastation and social collapse.
Meanwhile the pro-Europeans find themselves in the same situation as appeasers in 1940, or communists after the fall of the Berlin Wall. They are utterly busted. Let's examine the case of the Financial Times, which claims to be Britain's premier economic publication. About 25 years ago something went very wrong with the FT. It ceased to be the dry, rigorous journal of economic record that was so respected under its great postwar editor Sir Gordon Newton.
Turning its back on its readers, it was captured by a clique of left-wing journalists...The central historical error of the modern Financial Times concerns the euro. The FT flung itself headlong into the pro-euro camp, embracing the cause with an almost religious passion. Doubts were dismissed....The paper waged a vendetta against those who warned that the euro would not work....For a paper with the FT's pretensions to authority in financial matters, its coverage of the single currency can be regarded as nothing short of a disaster.
James Delingpole points to The Guilty Men
How did they get away with this stuff? It's a question I find myself asking time and again of all those establishment figures using every manner of dirty trick to promote the Man Made Global Warming scam. As we saw with Appeasement and we saw again with the Euro, foremost among these dirty tricks is a relentless campaign to discredit those who disagree with them by implying that they are mad, extreme, out-of-touch, unrepresentative, ill-informed. What's depressing, as we saw with the Appeasers and again with those Europhiles, is there is no great penalty for having been so totally wrong..... you can be sure that those Guilty Men won't actually be experiencing even the slightest frisson of guilt or embarrassment about the decent people whose reputations they have helped destroy, or the damage they have done to our economy, our democracy and our freedoms.
Government officials and bureaucrats are never held accountable. Can you think of one former or present official or bureaucrat who was held accountable in the financial and housing disaster that Fannie Mae and Freddie Mac precipitated?
Knowledge is dispersed and shared. Friedrich Hayek was the first to point out, in his famous 1945 essay "The Uses of Knowledge in Society," that central planning cannot work because it is trying to substitute an individual all-knowing intelligence for a distributed and fragmented system of localized but connected knowledge.
So dispersed is knowledge, that, as Leonard Reed famously observed in his 1958 essay "I, Pencil," nobody on the planet knows how to make a pencil. The knowledge is dispersed among many thousands of graphite miners, lumberjacks, assembly line workers, ferrule designers, salesmen and so on. This is true of everything that I use in my everyday life, from my laptop to my shirt to my city. Nobody knows how to make it or to run it. Only the cloud knows.
Matt Ridley: From Phoenecia to Hayek to the 'Cloud'
Milton Friedman explains the power of the free market using a pencil
The War Against The Young: Warning From Italy and Japan
The war on the young is led "by cadres of elderly men, content to manage decline" and exacerbated by younger generations, who don't seem to know what's going on or understand the gravity of the financial situation that will hit them in the future.
To succeed today, many young people need to recognize that no job will be waiting for them when they finish studying. They are going to have to create their own opportunities. It is a good time for creative entrepreneurs.
Italy and Japan have particularly bad cases of the blues; with relatively small numbers of young people and large ones of older people, the old are not only cunning and entrenched in positions of power: they can still beat the kids in elections. Politicians reinforce generational privilege rather than acting on the knowledge that, in the end, an economy that doesn't work for the young is an economy doomed to decline.
A warning too late? The recession that began in 2008 is hitting the young the hardest. The young are becoming a "lost generation" amid the recession.
In record-setting numbers, young adults struggling to find work are shunning long-distance moves to live with Mom and Dad, delaying marriage and buying fewer homes, often raising kids out of wedlock. They suffer from the highest unemployment since World War II and risk living in poverty more than others — nearly 1 in 5.
New 2010 census data released Thursday show the wrenching impact of a recession that officially ended in mid-2009. It highlights the missed opportunities and dim prospects for a generation of mostly 20-somethings and 30-somethings coming of age in a prolonged slump with high unemployment.
"We have a monster jobs problem, and young people are the biggest losers," said Andrew Sum, an economist and director of the Center for Labor Market Studies at Northeastern University.
Richard Freeman, an economist at Harvard University, added, "These people will be scarred, and they will be called the 'lost generation' — in that their careers would not be the same way if we had avoided this economic disaster."
Economists say this trend will continue for another decade and when it's over it will take another decade for this generation to recover fully.
Of course this delays the entire process of becoming an adult, getting married, buying a house, and starting a family.
When the Lost Generation is found again, they'll be older, inexperienced and without assets to speak of. And they will need to grow up fast.
Just how much are taxpayers on the hook with the bankruptcy of Solyndra?
More than half a billion dollars! $535,000,000 is the exact amount that we know of today
Solyndra got more stimulus than 35 states get for 'shovel ready' projects.
There's a congressional hearing scheduled for Friday before the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations.. Attorneys have advised the committee that ,Solyndra executives will take the fifth. No wonder with possible criminal charges in the future.
Iowahawk tweets Oddly, Solyndra execs no longer big fans of sunlight .
Former Federal prosecutor Andrew McCarthy calls the Solyndra debacle criminal fraud.
Homing in on one of the several shocking aspects of the Solyndra scandal, lawmakers noted that, a few months before the "clean energy" enterprise went belly-up last week, the Obama Energy Department signed off on a sweetheart deal. In the event of bankruptcy — the destination to which it was screamingly obvious Solyndra was headed despite the president's injection of $535 million in federal loans — the cozily connected private investors would be given priority over American taxpayers. In other words, when the busted company's assets were sold off, Obama pals would recoup some of their losses, while you would be left holding the half-billion-dollar bag.
OMB had figured out that there was no economic sense in restructuring: Solyndra was heading for bankruptcy anyway, and an immediate liquidation would net the government a better deal — about $170 million better. The case for leaving things where they stood was so palpable that OMB openly feared "questions will be asked" if DOE proceeded with an unjustifiable restructuring. So, with numbing predictability, the Obama administration proceeded with an unjustifiable restructuring. In exchange for lending some of their own money and thus buying more time, Solyndra officials were given priority over taxpayers with respect to the first $75 million in the event of a bankruptcy — the event all the insiders and government officials could see coming from the start, and that hit the rest of us like a $535 billion thunderbolt last week.
Solyndra is just the most egregious example of The Spreading Green Jobs Scam
Boondoggles: With a minimum of five green firms going bankrupt, taxpayers find themselves on the hook for at least one possibly illegal loan while paying ghastly sums for each green job created. We've been sunburned.
In Forbes is Greece and The Crisis of the Governing Elite
Europe's governing elite – and those who believe in the superiority of government in the management of the economy – is in crisis. Their visions of a more just society and economic security are being shredded by the stark reality that the governments they run are running out of money.
That begins a wonderful quote of Frederic Bastiat , "Everyone wants to live at the expense of the state. They forget that the state lives at the expense of everyone."
While Takis Michas writes in the Wall Street Journal Greece Won't Reform
"The present government has done absolutely nothing during the last 12 months to speed up privatizations, reduce the public sector or open up closed professions," Athanasios Papandropoulos, a leading economic analyst, told me recently in an interview. "In these 12 months it has not fired even one civil servant. The only thing it is doing is trying to tax the private sector out of existence. Why should we believe that they will do something different now?"
Bret Stephens takes a whack at What Comes After 'Europe'.
What comes next is the explosion of the European project. Given what European leaders have made of that project over the past 30-odd years, it's not an altogether bad thing. But it will come at a massive cost. The riots of Athens will become those of Milan, Madrid and Marseilles. Parties of the fringe will gain greater sway. Border checkpoints will return. Currencies will be resurrected, then devalued. Countries will choose decay over reform. It's a long, likely parade of horribles.
It's not just Solandra that's a bust says the Washington Post
A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
The program — designed to jump-start the nation's clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.
Despite controversy, White House doubling down on clean energy loans
To date, the DOE has finalized 17 loan guarantees for a range of solar, wind and geothermal projects. The department has issued 15 conditional commitments that must be finalized by the end of September.
Mark Steyn on Obama's magical thinking on green jobs
The estimated cost of the non-bill is just shy of half a trillion dollars. Gosh, it seems like only yesterday that Washington was in the grip of a white-knuckle, clenched-teeth showdown over whether a debt ceiling deal could be reached before the allegedly looming deadline. When the deal was triumphantly unveiled at the eleventh hour, it was revealed that our sober, prudent, fiscally responsible masters had gotten control of the runaway spending and had carved (according to the most optimistic analysis) a whole $7 billion of savings out of the 2012 budget. The president then airily breezes into Congress and in 20 minutes adds another $447 billion to the tab. That's what meaningful course correction in Washington boils down to: seven billion steps forward, 447 billion steps back.
On Thursday night, the president told a Democratic fundraiser in Washington that the Pass My Jobs Bill bill would create 1.9 million new jobs. What kind of jobs are created by this kind of magical thinking? Well, they're "green jobs" – and, if we know anything about "green jobs," it's that they take a lot of green. German taxpayers subsidize "green jobs" in their wind-power industry to the tune of a quarter of a million dollars per worker per year: $250,000 per "green job" would pay for a lot of real jobs, even in the European Union. Last year, it was revealed that the Spanish government paid $800,000 for every "green job" on a solar panel assembly line. I had assumed carelessly that this must be a world record in terms of taxpayer subsidy per fraudulent "green job." But it turns out those cheapskate Spaniards with their lousy nickel-and-dime "green jobs" subsidy just weren't thinking big. The Obama administration's $38.6 billion "clean technology" program was supposed to "create or save" 65,000 jobs. Half the money has been spent – $17.2 billion – and we have 3,545 jobs to show for it. That works out to an impressive $4,851,904.09 per "green job." A world record! Take that, you loser Spaniards! USA! USA!
One disabled man in New Jersey did and earned $15.4 million.
In the U.S. a "qui tam" action can be brought by any individual under the False Claims Act with knowledge of past or present fraud against the federal government to bring suit on its behalf. Whistleblowers, called "relators" , the person filing under the act stands to receive 15-25% of any recovered damages. With at least $87 billion a year lost to Medicare/Medicaid fraud, there exists the potential to make a
great deal of money for enterprising individuals or groups employing all the technological tools and information at hand to ferret out fraud.
Disabled New Jersey Man Earns $15 Million Exposing Largest Medicaid Fraud In History
Richard West was shocked when he went for some dental work and found his Medicaid benefits had maxed out.
Pulling up his Medicaid record, he totaled the care he'd received, the bills submitted by his provider -- and found the problem.
According to The Star-Ledger, West, 63, found the company arranging his nursing care, Maxim Healthcare, was over-billing the government for hundreds of hours of service from people he'd never seen.
After calling several government hot-lines and receiving no help, he got a lawyer of his own. That phone call unraveled a fraud stretched across 40-states and resulted in a $150 million settlement -- the largest for healthcare fraud in history. Monday, Maxim agreed to return $121.5 million in state and federal claims; $8.4 million to the VA, and pay a $20 million fine.
For exposing the fraud West will receive $15.4 million.
Tuckerton man's resolve helps uncover multimillion-dollar health care fraud
A one-time auto mechanic, truck driver, commercial fisherman and carpenter before his disease — a genetic disorder that prevents muscles from functioning — put him in a wheelchair, West gets 16 hours of nursing and home health care a day. He said he brought his case only because no one would listen to him.
He said it was not hard to figure out what was going on. "The hard part was turning them in," he remarked. West, who lives in Tuckerton, said he tried going through a county social worker, to the state Medicaid waiver office, and then the Medicaid hot line for fraud. "No one ever did anything," he complained.
Robin Page West, his attorney (and no relation to him), said winning will be a mixed blessing. "He no longer qualifies for Medicaid," she noted with a smile.
"The three most salient characteristics of Medicare and Medicaid fraud are: It's brazen, it's ubiquitous, and it's other people's money, so nobody cares," writes Michael Cannon in Entitlement Bandits.
Judging by official estimates, Medicare and Medicaid lose at least $87 billion per year to fraudulent and otherwise improper payments, and about 10.5 percent of Medicare spending and 8.4 percent of Medicaid spending was improper in 2009. Fraud experts say the official numbers are too low. "Loss rates due to fraud and abuse could be 10 percent, or 20 percent, or even 30 percent in some segments," explained Malcolm Sparrow, a mathematician, Harvard professor, and former police inspector, in congressional testimony.
The GAO reports that Medicare Fraud is Four Times Greater than the profits of all the health insurers in the country!
Next state over from me, little Rhode Island is showing all of us what happens when its pension system begins to fail under the weight of its promises.
From Walter Russell Mead, Rhode Island Pension System Collapsing
Rhode Island is one of the bluest states in the country, and one where public sector unions have long worked with sympathetic politicians to create a true blue system of well paid public employees retiring comfortably on generous pensions with cost of living raises automatically thrown in.
The only problem is that the state could never afford the beautiful utopia it was crafting, and so politicians and union leaders chose the path of systemic deceit. Taxpayers weren't told what the bill for the system would be; public service workers weren't told that the pension guarantees they'd been sold were worthless because taxpayers would not and could not foot the bill.
An economic crisis is nature's revenge on those who make and those who accept false promises; it is a holocaust of lies when the dross is burned away and only what is real and true remains.
A lot of people who believed Rhode Island's lies will now be looking for part time work in what they were told would be a secure retirement. As far as I can tell the union leaders and politicians who concocted this disaster between them have no plans to suffer any cuts in their own pay or pension plans — and intend to go on "serving the public" without any accountability at all.
Mead includes this great quote from Thomas Carlyle, Bankruptcy rules
Great is Bankruptcy: the great bottomless gulf into which all Falsehoods, public and private, do sink, disappearing; whither, from the first origin of them, they were all doomed. For Nature is true and not a lie. No lie you can speak or act but it will come, after longer or shorter circulation, like a Bill drawn on Nature's Reality, and be presented there for payment, — with the answer, No effects. Pity only that it often had so long a circulation: that the original forger were so seldom he who bore the final smart of it! Lies, and the burden of evil they bring, are passed on; shifted from back to back, and from rank to rank; and so land ultimately on the dumb lowest rank, who with spade and mattock, with sore heart and empty wallet, daily come in contact with reality, and can pass the cheat no further.
If you want to get really discouraged over this Labor Day weekend, read what Nassim Taleb (famous for his black swan theory) wrote.
The American Economy Will Transfer $5 Trillion to Banker Pay and Bonuses Over the Next 10 Years.
Such transfers represent as cunning a tax on everyone else as one can imagine. It feels quite iniquitous that bankers, having helped cause today's financial and economic troubles, are the only class that is not suffering from them – and in many cases are actually benefiting.
In other words, banks take risks, get paid for the upside, and then transfer the downside to shareholders, taxpayers, and even retirees. In order to rescue the banking system, the Federal Reserve, for example, put interest rates at artificially low levels; as was disclosed recently, it also has provided secret loans of $1.2 trillion to banks. The main effect so far has been to help bankers generate bonuses (rather than attract borrowers) by hiding exposures.
Taxpayers end up paying for these exposures, as do retirees and others who rely on returns from their savings. Moreover, low-interest-rate policies transfer inflation risk to all savers – and to future generations.
Perhaps the greatest insult to taxpayers, then, is that bankers' compensation last year was back at its pre-crisis level. Of course, before being bailed out by governments, banks had never made any return in their history, assuming that their assets are properly marked to market.
Nor should they produce any return in the long run, as their business model remains identical to what it was before, with only cosmetic modifications concerning trading risks.
So the facts are clear. But, as individual taxpayers, we are helpless, because we do not control outcomes, owing to the concerted efforts of lobbyists, or, worse, economic policymakers. Our subsidizing of bank managers and executives is completely involuntary.
I don't know how much credence to give this.
MARKET FAILURE VS. GOVERNMENT FAILURE: We've certainly seen a lot of the latter, lately. If "market failure" is an excuse for taking power away from markets, shouldn't "government failure" be a reason to take power away from government?
Glenn Reynolds, the Instapundit
The Government Failure link leads to op ed today by Gary Becker in The Wall Street Journal. The Great Recession and Government
The origins of the financial crisis and the Great Recession are widely attributed to "market failure." This refers primarily to the bad loans and excessive risks taken on by banks in the quest to expand their profits.
Although many banks did perform poorly, government behavior also contributed to and prolonged the crisis. The Federal Reserve kept interest rates artificially low in the years leading up to the crisis. Fannie Mae and Freddie Mac, two quasi-government institutions, used strong backing from influential members of Congress to encourage irresponsible mortgages that required little down payment, as well as low interest rates for households with poor credit and low and erratic incomes. Regulators who could have reined in banks instead became cheerleaders for the banks.
The widespread demand after the financial crisis for radical modifications to capitalism typically paid little attention to whether in fact proposed government substitutes would do better, rather than worse, than markets.
Government regulations and laws are obviously essential to any well-functioning economy. Still, when the performance of markets is compared systematically to government alternatives, markets usually come out looking pretty darn good.
Market failure AND Government failure - We had both.
Via American Digest, Lop Off 8 Zeros
Student loan debt is approaching $1 trillion, more than what all households owe on their credit cards. This is disastrous for students who may not find a job or take the job they really love instead of the one that pays the most or buy their first house. They will be "hounded for life" and may never be able to pay back all that they owe.
Nathan Harden on The next debt bubble: college loans
Moody's rating agency recently issued a report that should be a wake-up call to every student now considering taking out large loans to pay for college.
Total student debt is at an all-time high -- and may top $1 trillion this year. Meanwhile, default rates are rising alarmingly. Skyrocketing tuition, lax lending standards and high rates of unemployment have created the perfect financial storm.
Some advice to college students: Learn from our government's mistakes and avoid borrowing your way into a hole.
The Student Loan Bubble: Only Stupid People Will Be Surprised When It Bursts
Today we have more evidence that the student loan market is headed for disaster. We live in a world where the cost of education has become completely disassociated from the value that the education provides. The tuition is too damn high, and there aren't enough high paying jobs available for all of the young people with enormous debt. For many recent college graduates, default is inevitable.
Outstanding student debt has climbed 25 percent since the start of the financial crisis in 2008, according to the Federal Reserve Bank of New York — an increase from $440 billion then to $550 billion now. By contrast, every other major category of consumer debt, including mortgage debt, credit card debt, auto loans and home equity loans, is lower today than it was in the fall of 2008.
Not only has student debt risen precipitously, but more and more of those loans aren't getting paid off on time.
The problems of student-loan delinquency and default are only expected to get worse. Salaries and employment rates for recent college graduates have dropped,
The Atlantic has a good article on The Debt Crisis at American Colleges, calling it a "pernicious trend that the colleges themselves are encouraging."
How do colleges manage it? Kenyon has erected a $70 million sports palace featuring a 20-lane olympic pool. Stanford's professors now get paid sabbaticals every fourth year, handing them $115,000 for not teaching. Vanderbilt pays its president $2.4 million. Alumni gifts and endowment earnings help with the costs. But a major source is tuition payments, which at private schools are breaking the $40,000 barrier, more than many families earn. Sadly, there's more to the story. Most students have to take out loans to remit what colleges demand. At colleges lacking rich endowments, budgeting is based on turning a generation of young people into debtors.
Worse still is that college loans are not dischargeable in bankruptcy.
So even if you file for bankruptcy, the payments continue due. Hence these stern word from Barmak Nassirian of the American Association of College Registrars and Admissions Officers. "You will be hounded for life," he warns. "They will garnish your wages. They will intercept your tax refunds. You become ineligible for federal employment." He adds that any professional license can be revoked and Social Security checks docked when you retire. We can't think of any other statute with such sadistic provisions.
At Inside Higher Ed, James Miller advises professors, Get Out While You Can
Tenure won't save us from a higher education collapse. Start making alternative career contingency plans now because this collapse could be sudden and catastrophic.
The day that I signed on the dotted line of my promissory note, I didn't even understand what it would mean to have to pay back more than $40,000 in student loans. I'll tell you what it means: living in a crappy apartment in Queens well into my 30s. I vaguely remember my dad trying to get the message through to me, but I must have had cotton in my teenage ears.
via Instapundit who said "As stories like this spread, the higher education bubble will deflate.
He says, "Something that can't go on forever, won't. This can't go on forever."
In the long run, the growth in the cost of entitlements, Social Security and Medicare, are a major, major part of the deficit crisis.
In the short turn, Byron York writes, the problem is out-of-control spending on everything other than entitlements. Half of the current deficit can be attributed to the downturn, less tax revenues and more on income security programs like unemployment insurance and food stamps.
That's a deficit increase that would have happened in an economic crisis whether Republicans or Democrats controlled Washington. But it was the specific spending excesses of President Obama and the Democrats that shot the deficit into the stratosphere.
There is no line in the federal budget that says "stimulus," but Obama's massive $814 billion stimulus increased spending in virtually every part of the federal government. "It's spread all through the budget," says former Congressional Budget Office chief Douglas Holtz-Eakin. "It was essentially a down payment on the Obama domestic agenda." Green jobs, infrastructure, health information technology, aid to states -- it's all in there, billions in increased spending.
Like the $490,000 in Obama stimulus that created 1.72 jobs in Nevada.
A wasted stimulus trying to 'green' the economy
During the 2008 campaign, candidate Barack Obama said he would create 5 million well-paying "green" jobs within 10 years. Politico has reported that "he's spent considerable time since entering the White House trying to make that happen."
Last week Obama toured to much fanfare a Johnson Controls plant in Michigan where $300 million in conservation grants produced 150 jobs — at a cost of $2 million per position.
Stimulus funds intended to boost the green economy haven't been well spent. The latest example of this is Monday's bankruptcy filing by Evergreen Solar Inc. The Massachusetts company that the White House once said "is hoping to hire 90 to 100 people" thanks to stimulus money has $485.6 million in debt. Evergreen closed a factory in March, reports the Boston Herald, and cut 800 jobs. A Michigan plant is to be shut down, as well, causing the loss of even more jobs.
Green Vehicles of Salinas, Calif., which has burned through more than $500,000 in money "invested" by the city, folded last month without having produced anything of significance.
in Seattle,...a $20 million federal grant for home weatherization has, according to KOMO news, retrofitted only three houses and created 14 jobs in more than a year.
Even the New York Times Admits Obama's Green Jobs Agenda Is a Complete Disaster
In the Bay Area as in much of the country, the green economy is not proving to be the job-creation engine that many politicians envisioned. President Obama once pledged to create five million green jobs over 10 years. Gov. Jerry Brown promised 500,000 clean-technology jobs statewide by the end of the decade. But the results so far suggest such numbers are a pipe dream.
Federal and state efforts to stimulate creation of green jobs have largely failed, government records show.
Walter Russell Mead calls it Feeding the Masses on Unicorn Ribs
The belief that green jobs would drive a new era of American prosperity was — like the large majority of green policy chat — intellectually incoherent. The goods that drive renewable energy industries, like so much else in this world, are far cheaper to construct in Asia.
Here in particular Senator Obama as he then was would have benefited from a less gushing, more skeptical press. If his first couple of speeches on this topic had been met with the incredulous and even mocking response they deserved, he probably would not have married himself so publicly to so vain and so empty a cause.
Well, that's just about what it is writes Jennifer Rubin in The Washington Post.
Buried in the job stats was a number — 193,000 — that dwarfed all the rest. That is the number of workers who left the job market. If 193,000 left and only 117,000 jobs were added, we lost 76,000 jobs. Moreover, this is not an aberration.
When President Obama took office in January of 2009, the labor participation rate was 65.7 percent. Now, "The labor force participation rate is currently 63.9 percent. That is the lowest level since 1984," says Matt McDonald, a communications and business strategist who previously worked in the Bush administration. "If the labor force participation rate today were 65.7 percent, there would be an additional 4.2 million people in the workforce." In that case, the unemployment rate would be 11.5 percent not 9.1 percent.
Economist Robert Samuelson dares to write, It's the Elderly, Stupid
By now, it's obvious that we need to rewrite the social contract that, over the past half-century, has transformed the federal government's main task into transferring income from workers to retirees.
These transfers have become so huge that, unless checked, they will sabotage America's future. The facts are known: By 2035, the 65 and over population will nearly double; health costs remain uncontrolled; the combination automatically expands federal spending (as a share of the economy) by about one-third from 2005 levels. This tidal wave of spending means one or all of the following: (a) much higher taxes; (b) the gutting of other government services, from the Weather Service to medical research; (c) a partial and dangerous disarmament; (d) large and unstable deficits.
Older Americans do not intend to ruin America, but as a group, that's what they're about.
What sustains these contradictions is a mythology holding that, once people hit 65, most become poor. This justifies political dogma among Democrats that resists Social Security or Medicare cuts of even one dollar.
But the premise is wrong. True, some elderly live hand-to-mouth; many more are comfortable and some are wealthy.
The essential budget question is how much we allow federal spending on the elderly to crowd out other national priorities. All else is subordinate. Yet, our "leaders" don't debate this question with candor or intelligence. We have a generation of politicians cowed and controlled by AARP. We need to ask how much today's programs constitute a genuine "safety net" to protect the vulnerable (which is good) and how much they simply subsidize retirees' private pleasures.
Well I know people who think of social security as their travel fund.
Good, no great news on the technological front.
Energy in America: New Liquid Fuel Faster, More Efficient -- and Greener, Too
With a little help from genetic engineering, researchers at one Massachusetts company say they've created an organism that takes sunlight, water and carbon dioxide and creates liquid fuel.
Bill Sims, CEO of Cambridge-based Joule Unlimited, says the process utilizes a bacteria, produces a chemical product and secretes it. The result? A fuel that can fill demands for diesel and ethanol.
"The product that we make is diesel. It's very high cetane to very premium diesel. It is fungible, so it's infrastructure compatible," said Sims.
The product can be used in trucks, heavy equipment and further refined into jet fuel. Simply put, the organism created secretes the fuel in a direct process, working faster than current biofuel technology that often uses algae.
From the company's website, Joule Unlimited
Joule's renewable fuel platform will best the scale, productivities and costs of any known alternative to fossil fuel today, with no use of biomass, arable land or fresh water. Our inputs are sunlight and waste CO2. Our expected output? Millions of gallons of clean, renewable fuel that drops into existing infrastructure. Next step: change the world.
As Glenn Reynolds would say, Faster please.
Under the Nebraska small town of Elk Creek lies "rare earth" minerals in quantities sufficient to challenge China's dominance.
Elk Creek, Neb. (population 112), may not be so tiny much longer. Reports suggest that the southeastern Nebraska hamlet may be sitting on the world's largest untapped deposit of "rare earth" minerals, which have proved to be indispensable to a slew of high-tech and military applications such as laser pointers, stadium lighting, electric car batteries and sophisticated missile-guidance systems.
The U.S. has relied on China for years for the 17 minerals that are defined as rare earths by the International Union of Pure and Applied Chemistry. Despite having such obscure names as praseodymium, promethium and samarium - no copper or zinc here - they are necessary for such routine contemporary technologies as magnets, laser pointers and miniature electronics, such as iPods.
China has emerged as the world's predominant supplier, controlling 97 percent of the global market for rare earths. In recent years, lawmakers have expressed concerns about China's "rare earth" dominance, and these concerns were heightened when Beijing temporarily halted exports to Japan last year during a territorial dispute.
A Brazilian engineer invented the solar light made of a plastic bottle, water and bleach stuck through a roof during an energy blackout in 2002.
A band of MIT students installed 10,000 of them in Manila slums.
Currently, millions of Filipinos live without any kind of light source at all, but a band of resourceful MIT students have begun changing that. The students found that a one liter plastic bottle filled with bleach water and installed on top of a metal roof is a surprisingly simple way to light homes that have neither electrical connectivity nor natural lighting. The plastic defracts light and pushes it to every corner of a small slum house instead of beaming it onto one area like a typical lamp might. As part of their Solar Bottle Project, the organization Isang Litrong Liwanag, which means "A Liter of Light," has already installed 10,000 of these ridiculously basic but amazing lamps throughout Manila.
Mainly Americans and principally the Social Security Trust Fund, according to Business Insider using figures published by the US Treasury.
Hong Kong: $121.9 billion (0.9 percent)
Caribbean banking centers: $148.3 (1 percent)
Taiwan: $153.4 billion (1.1 percent)
Brazil: $211.4 billion (1.5 percent)
Oil exporting countries: $229.8 billion (1.6 percent)
Mutual funds: $300.5 billion (2 percent)
Commercial banks: $301.8 billion (2.1 percent)
State, local and federal retirement funds: $320.9 billion (2.2 percent)
Money market mutual funds: $337.7 billion (2.4 percent)
United Kingdom: $346.5 billion (2.4 percent)
Private pension funds: $504.7 billion (3.5 percent)
State and local governments: $506.1 billion (3.5 percent)
Japan: $912.4 billion (6.4 percent)
U.S. households: $959.4 billion (6.6 percent)
China: $1.16 trillion (8 percent)
The U.S. Treasury: $1.63 trillion (11.3 percent)
Social Security trust fund: $2.67 trillion (19 percent)
Still unknown is what will happen in the House tonight, so in the meantime here are some interesting facts to ponder.
Apple Now Has More Cash Than The U.S. Government
According to the latest daily statement from the U.S. Treasury, the government had an operating cash balance of $73.8 billion at the end of the day yesterday.
Apple's last earnings report (PDF here) showed that the company had $76.2 billion in cash and marketable securities at the end of June.
In other words, the world's largest tech company has more cash than the world's largest sovereign government.
That's because Apple collects more money than it spends, while the U.S. government does not.
"What we're trying to do is save the world from the Republican budget. We're trying to save life on this planet as we know it today."
Day Foster says By the Bye, You Could Zero Out Discretionary Spending . . .
. . . and you'd still have to raise the debt limit. That means no defense appropriations, no law enforcement appropriations, no highway appropriations. Nothing. None of it. And you'd still have to raise the debt ceiling. Or else default on interest payment. Or else decide which current beneficiaries don't get their Social Security and Medicare checks.
The $7 billion that he calls "a real, enforceable cut for FY2012″ represents what the government of the United States currently borrows every 37 hours.
If the CBO's scoring is correct — that it reduces the 2012 deficit by just $1 billion — then the "cut" represents what the United States borrows every five hours and 20 minutes. In other words, in the time it takes to photocopy and distribute Boehner's "plan," the savings have all been borrowed back.
Thank you Iowahawk making me laugh out loud as he envisions THE COMMENCEMENT OF THE BUDGETARY MELTDOWN END DAYS WHERE WE FACE FINAL ARMAGEDDON UNLESS WASHINGTON GETS ITS BAR TAB RAISED ANOTHER TRILLION. Or something.
I know the consequences of failing to do so are too horrible to contemplate, but I went ahead and contemplated them anyway. This resulted in a bunch of 140-characters-or-less prophesies for the Twitter hashtag #ConsequencesofDefault, which I have edited and compiled for your edification. If my inner Nostradamus is any guide, the post-apocalyptic future of August 3, 2011 looks grim indeed:
Beltway policy experts begin living by own wits; after 45 minutes there are no survivors.
Roving bands of outlaws stalk our streets, selling incandescent bulbs to vulnerable children.
NPR news segments no longer buffered by soothing zither interludes.
Breadlines teeming with jobless Outreach Coordinators, Diversity Liaisons, and Sustainability Facilitators.
General Motors unfairly forced to build cars that people want, for a profit.
Chaos reigns at Goldman Sachs, who no longer knows who to bribe with political donations.
Mankind's dream of high speed government rail service between Chicago and Iowa City tragically dies.
New York devolves into a dystopian hellscape of sugared cola moonshiners, salty snackhouses and tobacco dens.
At-risk Mexican drug lords forced to buy own machine guns.
Potential 5-year old terrorists head to boarding gates ungroped.
Defenseless mortgage holders forced to live in houses they can actually afford.
Without college loan program, America loses an entire generation of Marxist Dance Theorists.
Ronnie Bryant, a Birmingham coal operator speaks and, by chance, David McElory was there and heard him.
'I'm just quitting': A scene right out of 'Atlas Shrugged' in Birmingham
I was at a public hearing in an inner-city Birmingham neighborhood for various government officials to get public input on some local environmental issues. There are several hot topics, but one of the highest-profile disputes is over a proposal for a coal mine near a river that serves as a source of drinking water for parts of the Birmingham metro area. Mine operators and state environmental officials say the mine can be operated without threatening the water supply. Environmentalists claim it will be a threat.
After Bryant listened to all of the business-bashing, he finally stood to speak. He sounded a little bit shellshocked, a little bit angry — and a lot frustrated.
My name's Ronnie Bryant, and I'm a mine operator…. I've been issued a [state] permit in the recent past for [waste water] discharge, and after standing in this room today listening to the comments being made by the people…. [pause] Nearly every day without fail — I have a different perspective — men stream to these [mining] operations looking for work in Walker County. They can't pay their mortgage. They can't pay their car note. They can't feed their families. They don't have health insurance. And as I stand here today, I just … you know … what's the use? I got a permit to open up an underground coal mine that would employ probably 125 people. They'd be paid wages from $50,000 to $150,000 a year. We would consume probably $50 million to $60 million in consumables a year, putting more men to work. And my only idea today is to go home. What's the use? I don't know. I mean, I see these guys — I see them with tears in their eyes — looking for work. And if there's so much opposition to these guys making a living, I feel like there's no need in me putting out the effort to provide work for them. So as I stood against the wall here today, basically what I've decided is not to open the mine. I'm just quitting. Thank you.
"McElroy comments,
The only thing I'm sure of is that what I saw today is a broken process and a sham. We all want a decent environment in which to live, but when various people at a public meeting — including federal officials and community members — talk about "environmental justice" and make it clear that their intent is to make it harder for businesses to operate, well, I can see why a businessman would decide to quit. I consider myself an environmentalist — because I want to live in a safe, secure, clean world — but what I saw isn't reasonable concern for the environment as much as it's an ideological agenda.
Via Mollie Hemingway at Ricochet who read the comments.
... reader after reader talks about how running a small business is a thankless task made impossible by the burden of various regulations. My friends who run small businesses have reported horror stories about the difficulties they face in running a business while jumping through regulatory hoops. We need to find a better balance.
There is hundreds of billions of capital on the sideline not creating jobs because of uncertainty over regulations, taxes and the ability of the government to solve the problems of too much spending and too much debt.
It may indeed be, and I think it is, a "crisis of the old order " as economist Robert Samuelson writes today in the Washington Post
We have left our collective comfort zone. Ideas and institutions that, on the whole, served well since World War II are under a cloud. .... Governments everywhere are striving to protect the old order because they do not understand and fear the new.
Right now it's the uncertainty that is blocking economic growth as Dan Juneau, president of the Louisiana Association of Business and Industry, writes
Uncertainty is the bane of economic recovery. It is the main reason the Great Depression lasted for a decade. It is a major reason why the current economic slump continues. Business owners and investors do not create jobs when they fear factors beyond their control that could impact their profitability. Those factors abound at the moment.
A mammoth government intrusion into health care, rife with mandates and complex government regulations, sits in limbo in the courts. Businesses simply do not know at this point what the impact on their bottom lines will be if the law is upheld. The Obama administration's energy policies are killing domestic energy jobs while driving energy prices higher for businesses and consumers. The majority of businesses in the U.S. are non-union. Obama's appointees to the National Labor Relations Board continue to try to muscle through pro-union regulations that Congress has refused to enact. Free trade agreements sit idle in Congress, agreements that can expand American exports and create jobs.
The one element that absolutely will reduce the federal budget deficit and the national debt is a rapidly growing economy. That won't happen as long as our national economic policies put the public sector first, continue to create uncertainty, and throw roadblocks in the path of business investment and job creation. The June employment figures are a testimony to that fact.
Carol Iannone gives just one outrageous example of how the Public sector squeezes the taxpayers.
David Rubinstein, professor emeritus of sociology at the University of Illinois at Chicago, describes his retirement package and thanks the taxpayers of Illinois for his "cushy life":
After 34 years of teaching sociology at the University of Illinois at Chicago, I recently retired at age 64 at 80 percent of my pay for life. This calculation was based on a salary spiked by summer teaching, and since I no longer pay into the retirement fund, I now receive significantly more than when I "worked." But that's not all: There's a generous health insurance plan, a guaranteed 3 percent annual cost of living increase, and a few other perquisites. Having overinvested in my retirement annuity, I received a fat refund and — when it rains, it pours — another for unused sick leave. I was also offered the opportunity to teach as an emeritus for three years, receiving $8,000 per course, double the pay for adjuncts, which works out to over $200 an hour. Another going-away present was summer pay, one ninth of my salary, with no teaching obligation.
Professor Rubenstein estimates that given a normal life span, these benefits have nearly doubled his working-years salary. He puts "work" in quotation marks, citing his two-course-per-semester teaching load and other boons that make the tenured full professor's life a heavenly haven. He goes on to point out the basic unfairness of making taxpayers who really do have to work hard, and for much less in pay and benefits, foot the bill for this kind of costly, comfy retirement for those on the public payroll.
It's America's ruling class that Angelo Codevilla wrote so eloquently about last year in America's Ruling Class and the Perils of Revolution. At least David Rubenstein is sufficiently self-aware that he sees how unfair and unjust the situation is.
Peter Wallison writing in the Wall Street Journal, Government-Sponsored Meltdown
[T]he Financial Crisis Inquiry Commission (FCIC) reported in January that the 2008 crisis was caused by lax regulation, greed on Wall Street and faulty risk management at banks and other financial firms, few were surprised.
According to the FCIC majority report, the government's housing policies—led by the Department of Housing and Urban Development and the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac—contributed only "marginally" to the crisis. Moreover, Fannie and Freddie "followed rather than led Wall Street and other lenders" into the subprime and other risky mortgage lending that ultimately caused the financial crisis.
But the narrative is beginning to unravel with the publication of Reckless Endangerment by Gretchen Morgenson, a business reporter and commentator for the New York Times, and Josh Rosner, a financial analyst,
Far from being a marginal player, Fannie Mae was the source of the decline in mortgage underwriting standards that eventually brought down the financial system. It led rather than followed Wall Street into risky lending.
After James A. Johnson, a Democratic political operative and former aide to Walter Mondale, became chairman of Fannie Mae in 1991, they note, it became a political powerhouse, intimidating and suborning Congress and tying itself closely to the Clinton administration's support for the low-income lending program called "affordable housing."
I had always heard that Fannie Mae passed along its cost savings to homebuyers in the form of lower mortgage rates. I just began reading the book last night and was shocked to learn that the company kept billions of dollars, at least one-third of the government subsidy for itself each year that it paid out to executives, shareholders and friends in Congress. In his nine years at the company James Johnson took out more than $100 million in pay.
One former executive said, "Once he walked in the door, Fannie Mae became a political machine."
The authors write:
Washington played not one but three starring roles in creating the financial crisis of 2008. First, it unleashed the mortgage mania by helping to relax basic rules of lending that had been in lace for decades. Then its policymakers looked the other way as the mortgage binge enriched a few and imperiled many. Even after the disaster hit and the trillion-dollar bailouts began, Congress and administration officials did little to repair the damaged sustem and ensure that such a travesty could not happen again.
This was reckless endangerment of the entire nation by people at the highest levels of Washington and corporate America.
Very quietly on Friday before a long weekend a report was released by Obama's economists which revealed that the Stimulus has cost $278,000 per job
The report was written by the White House's Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the "stimulus" in adding or saving jobs. The council reports that, using "mainstream estimates of economic multipliers for the effects of fiscal stimulus" (which it describes as a "natural way to estimate the effects of" the legislation), the "stimulus" has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That's a cost to taxpayers of $278,000 per job.
In other words, the government could simply have cut a $100,000 check to everyone whose employment was allegedly made possible by the "stimulus," and taxpayers would have come out $427 billion ahead.
John Podhoretz says in Hands off our bulbs that GE and Philips Corp do.
The simple version goes like this: Four years ago, The People Who Know Better Than You decided Americans should no longer be allowed to purchase an incandescent light bulb. That's the kind with a filament you've been screwing into your light sockets just as your father and grandfather and great-grandfather did, dating back to the time of Thomas Edison.
The simple story is infuriating enough. But it's not the whole story, it's probably not the most important story -- and it certainly isn't the most worrisome story.
While the ban was sold and is being defended as a measure to improve America's energy efficiency, one must ask: Who exactly will benefit from this change?
Not the American consumer, who will not only be deprived of the kind of illumination he prefers but will be compelled to purchase new kinds of light bulbs far more expensive than the ones being banned -- for a neglible national savings.
So who then? It appears to be the Philips Corp. and General Electric. By quietly acquiescing in the ban and appearing thereby to demonstrate some environmental bona fides, Philips and GE have in fact used the power of government to create an entirely new market for themselves worth untold billions of dollars.
This is a new form of rent-seeking -- the term that describes the ways in which industries try to use the power of government to provide them with advantages the private marketplace won't. In this case, a silly "green" idea has now forced the invention of an unnecessary new market that a few large companies will dominate.
Owing to government interference of an entirely new kind, they will benefit from the fact that consumers and private industry will have to pay them more for their products. (And not just consumers, but government as well: Federal, state and local governments are the largest single purchaser of illumination products.)
And here's another stunning fact for you: GE has shuttered plants in the United States that have produced bulbs for more than a century -- and has moved its operations to China.
The long-term outlook budget outlook is even more daunting than it was a year ago
According to a new CBO report, U.S. public debt is set to exceed 100 percent of GDP in 2021, and reach 200 percent of GDP in 2037 if nothing is done to change its current trajectory, a significantly worse projection than was issued in last year's CBO report.
This year alone, the CBO projects that public debt will reach 70 percent of GDP, up from 62 percent at the end of fiscal year 2010. The historical average for the U.S. is about 20 percent.
Medicare Trustees Confirm Democrats' Medicare Plan Would Result in 'Actual' 17% Medicare Cut
In testimony before the House Ways and Means Committee today, two Medicare Trustess, Drs. Charles Blahous and Robert Reischauer, confirmed that based on our current path in 2024 there would be "actual" cuts to Medicare at 17%. They also confirmed that Medicare would end itself by 2024 unless actions are taken to save the program.
What it will take to fully fund local and state pensions?
A tax increase on every household of about $1400/year starting now and continuing for the next 30 years!
Our Wile E Coyote Moment Has Arrived
The Great Recession has now earned the dubious right of being compared to the Great Depression. In the face of the most stimulative fiscal and monetary policies in our history, we have experienced the loss of over 7 million jobs, wiping out every job gained since the year 2000. From the moment the Obama administration came into office, there have been no net increases in full-time jobs, only in part-time jobs.
The real job losses are greater than the estimate of 7.5 million. They are closer to 10.5 million, as 3 million people have stopped looking for work. Equally troublesome is the lower labor participation rate; some 5 million jobs have vanished from manufacturing, long America's greatest strength. Just think: Total payrolls today amount to 131 million, but this figure is lower than it was at the beginning of the year 2000, even though our population has grown by nearly 30 million.
We now have more idle men and women than at any time since the Great Depression. Nearly seven people in the labor pool compete for every job opening.
No wonder the general economic mood is one of alarm....We may well be in the midst of a "modern depression."
Mort Zuckerman, Why the Jobs Situation is Worse Than It Looks
What happens when big, important bills are not only not debated, they're not even read, but steam-rollered through Congress. In the words of then speaker Nancy Pelosi, "We have to pass the bill so you can find out what's in it."
The latest mishap with Obamacare. Medicaid for the middle class?
President Barack Obama's health care law would let several million middle-class people get nearly free insurance meant for the poor, a twist government number crunchers say they discovered only after the complex bill was signed.
The change would affect early retirees: A married couple could have an annual income of about $64,000 and still get Medicaid, said officials who make long-range cost estimates for the Health and Human Services department.
Up to 3 million more people could qualify for Medicaid in 2014 as a result of the anomaly. That's because, in a major change from today, most of their Social Security benefits would no longer be counted as income for determining eligibility. It might be compared to allowing middle-class people to qualify for food stamps.
Medicare chief actuary Richard Foster says the situation keeps him up at night.
"I don't generally comment on the pros or cons of policy, but that just doesn't make sense," Foster said during a question-and-answer session at a recent professional society meeting.
The greatest gift to the Greeks might be to let them go it alone writes Boris Johnson.
Bail-outs and austerity measures are only making the country's burden harder to bear,
There comes a moment in any decent tragedy when the penny finally drops. The light breaks. The protagonist suddenly realises what a chump he has been - that he has somehow managed accidentally to marry his mother and kill his father - and that all his assumptions about his life are upside down. And the really awful thing about the tragedy now playing on the streets of Athens is that we haven't even reached that bit yet.
For years, European governments have been saying that it would be insane and inconceivable for a country to leave the euro. But this second option is now all but inevitable, and the sooner it happens the better. We have had the hamartia - the tragic flaw in the system that allowed high-spending countries to free ride on low interest rates. We have had the hubris - the belief the good times would never end. We have had nemesis - disaster. We now need the anagnorisis - the moment of recognition that Greece would be better off in a state of Byronic liberation, forging a new economic identity with a New Drachma. Then there will be catharsis, the experience of purgation and relief.
I am convinced it's only a matter of time.
UPDATE: The Only Way Forward Is To Accept Reality: Greek Default Is Not The End Of The World
The catastrophe isn't default, it's "extend and pretend."
Greece Is About To Get Hit With Widespread Blackouts, As Power Workers Go On Strike Monday
Here comes more economic destruction in Greece, courtesy of the powerful power industry workers union.
I find Walter Russell Mead enormously perceptive. See how clearly he illuminates the life cycle of a government program.
When Government Jumps the Shark
In the first stage of a government program, there's a terrible social problem that has people wringing their hands. Not enough kids are going to college. Middle class families can't get home mortgages. The river keeps flooding the town. Sick old people who have worked all their lives are eating cat food in the hobo jungle.
The government offers a solution that will fix the problem at a relatively modest cost. It is the hero cutting the heroine loose from the railroad tracks as the train approaches. It is the Lone Ranger riding into town to fix the bad guys. The government program in this early stage is the Great White Hope: once we get it up and running, people believe, life is going to get better.
Often it does, and a well established and functioning government program makes itself very popular in the next phase. Retirees are cashing Social Security checks, and the cost to those still working is very low. More creditworthy families are building homes because federal market makers are enabling banks to lend more; more homes make for more construction jobs. Life is getting better — and as most people count them the benefits clearly outweigh the costs. In this second stage of life, the Great White Hope becomes the Great White Father in Washington, benignly scattering benefits among an adoring population.
In the third stage, the law of diminishing returns sets in....At this point the program enters the third stage of life: it is now a Great White Elephant. It is a large and expensive program that does less and less good at a higher and higher cost....
Little by little, mission creep sets in. A powerful cluster of interests organizes around the government program. The real estate lobby looks for ways to extend Fannie Mae's guarantees to more people. Programs and subsidies become steadily more complex, less comprehensible. Successive waves of 'reform' generally make things worse as the special interests focus with increasing power and skill on warping the programs to meet their needs and goals.
The fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way. At this stage the government program has moved beyond being wasteful and has become unsustainable. Fannie Mae goes from providing mortgages to creditworthy households to providing vast numbers of mortgages to uncreditworthy households, poisoning the financial system with bad loans. Medicare is unsustainable in the medium term and hugely expensive day to day — even as the procedures and regulations of Medicare warp investment decisions across the entire health care system.
...The problem today is that we are looking not just at one or two government programs that have succumbed to elephantiasis or turned into sharks; the progressive complex of social and economic policy as a whole has reached this point. Today many of our New Deal and Great Society programs are either elephants or sharks. They either lead us to misallocate scarce resources in ineffective ways or they threaten us with ruin by becoming politically untouchable budget busters.
The United States must tame and reform the programs and ideas gone rogue that hammer at the sides of our boat. We must impose our will on the fiscal chaos before the chaos works its will upon us.
The American government must not jump the shark.
Walter Russell Mead again. I can't help it, he's so good and a Democrat besides.
Fanniegate: Gamechanger For The GOP?
The Republican Party and especially its Tea Party wing have just acquired a new weapon of mass destruction — and it has nothing to do with any of Congressman Wiener's rogue body parts. ....
The Tea Party WMD stockpile is currently stored in book form: Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon. By Gretchen Morgenson, one of America's best business journalists who is currently at The New York Times, and noted financial analyst Joshua Rosner, Reckless Endangerment gives the best available account of how the growing chaos in the mortgage and personal finance markets and the rampant bundling of dubious loans into exotically toxic securities plunged the world, and millions of American families, into the gravest financial crisis since World War Two. It is gripping reading as well, and its explanations are clear enough that readers without any background in finance will have no trouble following the plot.
The villains? An unholy alliance between Wall Street, the Democratic establishment, community organizing groups like ACORN and La Raza, and politicians like Barney Frank, Nancy Pelosi and Henry Cisneros. (Frank got a cushy job for a lover, Pelosi got a job and layoff protection for a son, Cisneros apparently got a license to mint money bilking Mexican-Americans of their life savings in cheesy housing developments.)
If Morgenstern and Rosner are to be believed, the American dream didn't die of old age; it was murdered and most of the fingerprints on the corpse come from Democratic insiders. Democratic power brokers stoked the housing bubble and turned a blind eye to the increasingly rampant corruption and incompetence at Fannie Mae and the associated predatory lenders who sheltered under its umbrella; core Democratic ideas may well be at fault.
The story also undercuts what little is left of the credibility and the moral authority of the American establishment. What is especially shocking in this story is that the higher up and more powerful people are usually the most venal and corrupt. Low level researchers and bureaucrats are constantly raising questions and preparing devastating reports that expose the flawed premises behind Fannie Mae's policies. They are being constantly slapped down by the well connected and the well paid. The American establishment does not have the necessary moral strength and intellectual acuity to run the affairs of this country; Tea Party believers will find much in this book that confirms their worst fears.
Republicans of course have a few financial scandals of their own that Democrats can take out and rattle. But because Fanniegate offers a clear storyline, identifiable villains linked to specific disasters that have hit tens of millions of Americans in the pocketbook, and is overwhelming a story of Democratic abuses of Democratic ideas,
Rather than focusing on home ownership, American social policy should probably be looking at small business formation as the key to mass middle class prosperity in the next fifty years.
The American Dream is not in the last analysis a farm or a home and a good job. It is the dream that through hard work and good choices the average American can be prosperous and independent, and that ordinary people with these life experiences can govern themselves wisely and well without the 'guidance' of their 'betters'.
That dream is timelessly valid, and it is still the thing that people around the world admire most about the United States. We are going to have to re-imagine and re-engineer the dream to keep it alive in the decades ahead, but that shouldn't daunt us. America is a nation of dreamers; building the future by following those dreams is what we do best.
Walter Russell Mead on The Death of the American Dream II
The original graph from Obama's former Chair of the Council of Economic Advisor Christina Romer in January 2009 who resigned last September updated.
Maybe, that's why Obama's current top economic adviser, Austan Coolsbee, resigned from the White House so he can keep his job at the University of Chicago.
Democrat political strategist James Carville said, "This unemployment rate, for this long, is a humanitarian crisis of the first magnitude."
He continued "People, you know, if it continues, we're going to start to see civil unrest in this country. I hate to say that, but I think it's imminently possible."
There is a shortfall of 11 million jobs needed to keep up with the growth of the working-age population.
Michael Barone says employers have gone on a hiring strike because of the threat of more tax increases and increased regulatory burdens,
Nearly 40% of homeowners who took out second mortgages are now underwater on their loans, more than twice the rate of owners who didn't take out such loans.
The federal government now has $61.6 trillion in unfunded obligations that amounts to $534,000 per household, according to an analysis by USAToday.
Once Obamacare starts to kick in during 2014, 30% of companies say they'll stop offering coverage. There have been a number of waivers - 1372 - exempting employers from increasing the amount of health care coverage granted by Health and Human Services Secretary Kathleen Sebelius, mainly to labor unions or businesses that are in former Speaker of the House Nancy Pelosi's district.
Now it turns out that HHS never had authority to issue exemptions.
Michael Lind writes on Salon, Everything you've heard about fossil fuels may be wrong.
What if the conventional wisdom about the energy future of America and the world has been completely wrong?
As everyone who follows news about energy knows by now, in the last decade the technique of hydraulic fracturing or "fracking," long used in the oil industry, has evolved to permit energy companies to access reserves of previously-unrecoverable "shale gas" or unconventional natural gas. According to the U.S. Energy Information Administration, these advances mean there is at least six times as much recoverable natural gas today as there was a decade ago.
Natural gas, which emits less carbon dioxide than coal, can be used in both electricity generation and as a fuel for automobiles.
The implications for energy security are startling. Natural gas may be only the beginning.
Suddenly it appears that there may be enough accessible hydrocarbons to power industrial civilization for centuries, if not millennia, to come.
The environmental movement since the 1970s has been fixated religiously on a few "soft energy" panaceas -- wind, solar, and biofuels -- and can be counted on to exaggerate or invent problems caused by alternatives. Many of the same Greens who oppose fracking because it might contaminate some underground aquifers favor wind turbines and high-voltage power lines that slaughter eagles and other birds and support blanketing huge desert areas with solar panels, at the cost of exterminating much of the local wildlife and vegetation. Wilderness preservation, the original goal of environmentalism, has been sacrificed to the giant metallic idols of the sun and the wind.
It's tough out there for college graduates. I wish them all the best.
I was stunned to learn that student loan debt now tops credit card debt debt and is expected to reach $1 trillion this year. Student loan debt is not dischargeable in bankruptcy but remains a millstone around each student's neck, affecting the ability to buy a house or even get married in the first place.
A just-released Pew Study asked whether "Is college worth it?"
Fifty-seven percent of those questioned in the survey of members of the public said "the higher education system in the United States fails to provide students with good value for the money they and their families spend," according to the report. Moreover, three-quarters say "college is too expensive for most Americans to afford."
It's an unlucky time to be a graduate. The damage of the recession is evident in the lives of new graduates who can't find work.
The chemistry major tending bar. The classics major answering phones. The Italian studies major sweeping aisles at Wal-Mart.
"If you don't move within five years of graduating, for some reason you get stuck where you are. That's just an empirical finding," said Till von Wachter, an economist at Columbia.
Congratulations! You're in Debt writes Rich Lowry .
There's no doubt that graduating from college brings a significant economic advantage, but that doesn't excuse the waste and self-satisfied lassitude of American higher education. Colleges appropriate tuition dollars from America's students with an ever-accelerating voracity, yet don't deliver any additional educational benefits — indeed, they do the opposite. Higher education is one of the sectors of American life that most desperately needs a thorough re-conception.
Despite many fewer hours spent studying, grades are still high thanks to grade inflation. There are few professors who spend less time teaching, but many more "managerial professionals"
What kind of learning environment is it, after all, without a director of sustainability initiatives?
This is not a formula for drinking deeply from the fountain of learning. Arum and Roksa find only minimal gains in critical thinking, complex reasoning, and writing for many students. Forty-five percent of students barely ticked upward after two years, and 36 percent hadn't budged after four years.
At, Zero Hedge, a guest blogger Charles Hughes Smith minces no words.
Our Peculiar State of Suspended Animation. Three long years of extend and pretend have left the nation in a state of suspended animation, frozen in a moment of crisis.
The U.S. is in a peculiar state of suspended animation: nothing is actually moving, we're all frozen in an extended moment of disbelief, denial and crisis, waiting for something to finally break loose.
We know the present isn't sustainable, but we go through the motions of phony "reforms" and "trimming the deficit" as if another 1,000 pages of "reforms" will fix what's broken in the economy or that trimming $50 billion from $1.7 trillion annual deficits will actually matter.
The wheels visibly fell off the bubble-debt-fraud economy four years ago in mid-2007. It's worth recalling that the U.S. won a global war (World War II) in less than four years, yet now we are pleased to borrow and and squander an extra $1 trillion a year just to keep our fragile state of suspended animation from being disrupted by unpleaseant reality.
In a nutshell, here's the reality: the entire "prosperity" of the past decade was a false prosperity, constructed entirely of money borrowed by the private sector based on the rising value of McMansions and strip-malls that made no sense except as speculations based on the Federal Reserve's credit-bubble policies and Wall Street's systemic financialization of that debt based on fraud and misrepresentation of risk.
Union Busting, Massachusetts Style
Maybe the debate over public-sector benefits isn't all that ideological after all.
That would be the view of Massachusetts Democratic Speaker Robert A. DeLeo, who late Tuesday led an overwhelming majority of his House in passing a bill divesting policemen, firefighters, teachers and other municipal employees of the power to collectively bargain most health-care benefits. The 111-42 vote took place at 11:30 at night, so as to avoid a mass of protesting union workers set to descend on the State House the next day.
That's a tipping point that threatens widespread layoffs and the end of basic services. "The huge growth in municipal health-care costs is cannibalizing everything else," Michael Widmer, president of the Massachusetts Taxpayer Foundation, tells me. Mr. DeLeo and "other members of the legislature understand that what is at stake is their local schools and hometowns." The unions, in short, have walked Massachusetts so far into a hole that even Democrats can no longer ignore the problem.
What a sad commentary on the U.S. economy
McDonalds Hires 62,000, Turns Away Over 938,000 Applicants For Minimum Wage, Part-Time Jobs
McDonald's and its franchisees hired 62,000 people in the U.S. after receiving more than one million applications, the Oak Brook, Illinois-based company said today in an e-mailed statement. Previously, it said it planned to hire 50,000.
Remember that WHO study that ranked the health care systems of nearly 200 nations that showed the US way down on the list?
In October 2008, candidate Obama used the study to claim that "29 other countries have a higher life expectancy and 38 other nations have lower infant mortality rates." On June 15, 2009, as he was beginning to make the case for his health-care bill, the new president said: "As I think many of you are aware, for all of this spending, more of our citizens are uninsured, the quality of our care is often lower, and we aren't any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do."
Turns out it could be The Worst Study Ever
In fact, World Health Report 2000 was an intellectual fraud of historic consequence—a profoundly deceptive document that is only marginally a measure of health-care performance at all. The report's true achievement was to rank countries according to their alignment with a specific political and economic ideal—socialized medicine—and then claim it was an objective measure of "quality."
At its most egregious, the report abandoned the very pretense of assessing health care. WHO ranked the U.S. 42nd in life expectancy. In their book, The Business of Health, Robert L. Ohsfeldt and John E. Schneider of the University of Iowa demonstrated that this finding was a gross misrepresentation. WHO actually included immediate deaths from murder or fatal high-speed motor-vehicle accidents in their assessment, as if an ideal health-care system could turn back time to undo car crashes and prevent homicides.
What we have here is a prime example of the misuse of social science and the conversion of statistics from pseudo-data into propaganda. The basic principle, casually referred to as "garbage in, garbage out," is widely accepted by all researchers as a cautionary dictum. To the authors of World Health Report 2000, it functioned as its opposite—a method to justify a preconceived agenda. The shame is that so many people, including leaders in whom we must repose our trust and whom we expect to make informed decisions based on the best and most complete data, made such blatant use of its patently false and overtly politicized claims.
Medicare as we known it isn't an option. Betsy McCaughey
Medicare as we've always known it is already gone. It was eviscerated by President Obama's health law.
The truth is that the Obama health law reduces future funding for Medicare by $575 billion over the next 10 years and spends the money on other programs, including a vast expansion of Medicaid. In 2019, Medicare spending under the Obama health law is projected to be $14,731 per senior, instead of $16,162 if the law had not passed, according to Medicare actuaries (Health Affairs, October 2010).
The fact is that Mr. Obama's law raids Medicare. Mr. Ryan's plan, on the other hand, stops the Medicare heist and puts the funds "saved" in this decade toward health care for another generation of retirees.
Beginning in 2022, the Ryan plan offers each new Medicare enrollee a choice of private health plans and a premium paid to the plan they choose. The key is that the premium will be equivalent to what Medicare is projected to spend under the Obama health law: $15,000 a year on average, more for the oldest enrollees, less for the youngest, all inflation adjusted.
The Ryan proposal also includes a $7,800 annual medical savings account to help low-income seniors with out-of-pocket costs.
So what can retiring Americans count on in 2022 and after? The Obama health law leaves that up to an unelected board of presidential appointees called the Independent Payment Advisory Board, a cost-cutting panel.
Will Americans now in their 40s and 50s choose to put their health care in the hands of this cost-cutting board, or pick their own health plan when they retire? Whatever decision the nation makes should not turn on the false claim that President Obama has protected Medicare.
Why is it that simple common sense and the innate sense of fairness we all possess so eludes policy makers and politicians?
Welfare handouts aren't fair - and the public knows it
Like a mythical traveller seeking truth, a think tank has asked a profound question: what is fairness? And lo, the people have answered with (almost) one voice: what "fair" means is that those who are deserving shall receive, and those who are not shall be – well, not exactly cast out, but certainly not entitled to everything that's going.
The quite unequivocal reply that was received (with breathtakingly enormous majorities in some forms) came as no surprise to this column. To most voters, fairness does not mean an equal distribution of resources and wealth, or even a redistribution of these things according to need. It means, as the report's title – "Just Deserts" – implies, that people get what they deserve. And what is deserved, the respondents made clear, refers to that which is achieved by effort, talent or dedication to duty: in other words, earned on merit.
No, they say, as often as not, poverty is a consequence of lack of effort or self-control – and, therefore, the individual must accept the consequences. And they do not believe that such character failings and their consequences should be disregarded in the apportioning of welfare or help from the state – help which they know is made possible by the efforts of those who do "the right thing". They still have a firm and undaunted conception of the "undeserving poor" – a term so unfashionable that no politician would be capable of uttering it – and would like such people to be made to accept their reciprocal obligation to society in return for any assistance from public funds.
Even in California, in a poll, voters want a cap of pensions and a later retirement age to help balance the budget though no one expects Governor Jerry Brown to challenge the public unions. After all, he was the governor who, in 1978, signed the bills giving public employees collective bargaining rights in the first place.
UPDATE: More on that California poll from MIckey Kaus
The LAT doesn't point it out, but there's a huge gap between the preferences of "white" voters and "Latino" voters in the paper's poll when it comes to cutting pension benefits for public workers or raising their retirement age. On the issue of cutting retirement benefits of future government employees, whites are 62-32 in favor. Latinos are 53-39 against. On raising the retirement age, the gap's even bigger: whites favor it by a margin of 33 percentage points (63/30). Latinos oppose it by a margin of 16 points (39/55).
Americans depended more on government assistance in 2010 than at any other time in the nation's history, a USA TODAY analysis of federal data finds. The trend shows few signs of easing, even though the economic recovery is nearly 2 years old.
A record 18.3% of the nation's total personal income was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs in 2010. Wages accounted for the lowest share of income — 51.0% — since the government began keeping track in 1929.
I always pay attention to what Robert Samuelson has to say. Here he writes about Big Government on the Brink.
We in America have created suicidal government; the threatened federal shutdown and stubborn budget deficits are but symptoms. By suicidal, I mean that government has promised more than it can realistically deliver and, as a result, repeatedly disappoints by providing less than people expect or jeopardizing what they already have. But government can't easily correct its excesses, because Americans depend on it for so much that any effort to change the status arouses a firestorm of opposition that virtually ensures defeat. Government's very expansion has brought it into disrepute, paralyzed politics and impeded it from acting in the national interest.
We deploy government casually to satisfy any mass desire, correct any perceived social shortcoming or remedy any market deficiency. What has abetted this political sprawl, notes Wilson, is the rising influence of "action intellectuals" -- professors, pundits, "experts" -- who provide respectable rationales for various political agendas.
The consequence is political overload: The system can no longer make choices, especially unpleasant choices, for the good of the nation as a whole.
Peggy Noonan wrote in 2005
I think that a lot of people are carrying around in their heads, unarticulated and even in some cases unnoticed, a sense that the wheels are coming off the trolley and the trolley off the tracks. That in some deep and fundamental way things have broken down and can't be fixed, or won't be fixed any time soon.
She quotes Christopher Lawford who wrote in his remembrance of his family, an anecdote about Ted Kennedy.
Then, writes Mr. Lawford, Teddy "took a long, slow gulp of his vodka and tonic, thought for a moment, and changed tack. 'I'm glad I'm not going to be around when you guys are my age.' I asked him why, and he said, 'Because when you guys are my age, the whole thing is going to fall apart.' "
Mr. Lawford continued, "The statement hung there, suspended in the realm of 'maybe we shouldn't go there.' Nobody wanted to touch it. After a few moments of heavy silence, my uncle moved on."
Now that we all agreed that the whole thing is falling apart and we need real leadership before we , the President continues to disappoint, dissemble and distort the facts. Federal spending in up 84% under Obama
Cometh the Hour, Punteth the Man says Mark Steyn
I am completely behind Paul Ryan's Path to Prosperity.
For starters, it cuts $6.2 trillion in spending from the president's budget over the next 10 years, reduces the debt as a percentage of the economy, and puts the nation on a path to actually pay off our national debt. Our proposal brings federal spending to below 20% of gross domestic product (GDP), consistent with the postwar average, and reduces deficits by $4.4 trillion.
A study just released by the Heritage Center for Data Analysis projects that The Path to Prosperity will help create nearly one million new private-sector jobs next year, bring the unemployment rate down to 4% by 2015, and result in 2.5 million additional private-sector jobs in the last year of the decade. It spurs economic growth, with $1.5 trillion in additional real GDP over the decade. According to Heritage's analysis, it would result in $1.1 trillion in higher wages and an average of $1,000 in additional family income each year.
UPDATE: David Brooks calls it a Moment of Truth
Paul Ryan has grasped reality with both hands. He's forcing everybody else to do the same.
Stunning news
How a big US bank laundered billions from Mexico's murderous drug gangs
As the violence spread, billions of dollars of cartel cash began to seep into the global financial system. But a special investigation by the Observer reveals how the increasingly frantic warnings of one London whistleblower were ignored.
On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was setting. Mexican soldiers, waiting to intercept it, found 128 cases packed with 5.7 tons of cocaine, valued at $100m. But something else – more important and far-reaching – was discovered in the paper trail behind the purchase of the plane by the Sinaloa narco-trafficking cartel.
During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.
The authorities uncovered billions of dollars in wire transfers, traveller's cheques and cash shipments through Mexican exchanges into Wachovia accounts. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. Of special significance was that the period concerned began in 2004, which coincided with the first escalation of violence along the US-Mexico border that ignited the current drugs war.
Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.
More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.
Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor.
"What happened at Wachovia was symptomatic of the failure of the entire regulatory system to apply the kind of proper governance and adequate risk management which would have prevented not just the laundering of blood money, but the global crisis."
Stephen Moore says We've Become a Nation of Takers not Makers
Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.
It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?
Part of the explanation lies in the productivity gains in the private sector, but Moore asks where are the productivity gains in government?
One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we've gotten.
There are those who divide the world into two groups and those that don't.
Michael Phillips at Pro Commerce takes his two groups and wraps them up into his own Big Theory of Everything which extends the Frontier theory of Frederick Jackson Turner.
Cities are what people run away from, if they can. They run to the suburbs if they are optimistic and vigorous. That leaves the dominant life form in the city: angry, mean-spirited, self-hating, anti-American Democrats. That disproportionately includes trust-funders, non-profit do-gooders, academics, government employees and union supporters....Suburbs are generally joyful, enthusiastic, cooperative and Republican. Optimistic people leave the city. That leaves the cities with the Democratic malaise mongers.
I must say I rather liked the distinction of his commenter David Boxenhorn between Mundian and Modian
Mundians are attached to the pragmatic world and value data, production and empirical methods. Modians live in a world of mutual approval, social rank and status.
Rather like Angelo Codevilla's distinction between the Ruling Class and the Country Class which I thought was the best essay of 2010.
Or Dr. Sanity's distinction between 'thing-makers' and 'dream-merchants' in The New Looters --Public Unions and Crony Capitalists.
You might not think that there is much to connect public unions with corrupt businesses whose 'capital' primarily comes from government handouts, bailouts, or favors; but there you have it: both have a looter mentality that refuses to acknowledge reality and expects entitlements and handouts to continue ad infinitum.
Perhaps they did not start out to be looters, leeching off the productive; but they learned to survive and thrive in the environment of pull and privilege that big, intrusive governments create. They learned to buy votes and favors; to get the big government contracts and the big government's protection of their 'special' status.
Bill Whittle brilliantly explains Iowahawk's Feed Your Family on $10 Billion a Day
So let's all sit down together as an American family with a calendar and make a yearly budget. First, let's lock in the $3.7 trillion of critical family spending priorities; now let's get to work on collecting the pay-as-we-go $10 billion daily cash flow we need.
Easy peasy lemon squeezy.
Well look at this new report from the Congressional Research Services.
America's combined energy resources are the largest on the planet.
They eclipse Saudi Arabia (3rd), China (4th) and Canada (6th) combined – and that's without including America's shale oil deposits and, in the future, the potentially astronomic impact of methane hydrates.
The energy facts in the CRS report should be making front page news all over America. Mostly it isn't.
Will someone please tell the President. What better way to create jobs, provide energy, boost the economy and increase revenues to the government is there?
US: Most energy resources in the world and most incoherent energy policy
An astonishing example of how centrally planned economies can not respond well to the simple economic principles of supply and demand because of political demands. The government wants economic growth and jobs and so they build even when no one can afford to live in what's been built. The result 64 million vacancies that the average Chinese working couple can not afford.
Business Insider has reported There Are Now Enough Vacant Properties In China To House Over Half Of America
Now it brings us this stunning documentary from Australia.
What will happen to the nation's largest creditor when this bubble bursts?
US Finance Rank Near Worst in the World
Australia is Number 1 and We're 28th in a list of 34 developed countries in measurements of financial stability.
While the news is bad, there is a bright side.
"Here's the good news: Some of the top countries had their own fiscal challenges, made reforms and now rank highly," Walker said. "If we adopt the recommendations of the National Fiscal Responsibility and Reform Commission or ones that have similar bottom-line impact, we move from 28 to 8."
Victor Davis Hanson writes Decline is in the Mind
Any of us in 2-3 minutes can see how it could all be reversed -- a full-fledged effort to develop all our energy resources, from nuclear to natural gas, radical cuts in public spending, closed borders, fiscal sanity and pay as you go legislation, a return to merit instead of situational pleading. Given our wealth and talent in four years we could balance the budget, slash energy imports and make schools work far better with fewer dollars.
I just got back from the supermarket where everything seemed more expensive so I am not at all surprised the cost of producing finished foods jumped 3.9% last month!, highest jump in 36 years.
But that pales compared to this: Mandatory spending to exceed all federal revenues - 50 years ahead of schedule!
The White House Office of Management and Budget projects that in the current fiscal year (2011), mandatory spending alone will exceed all federal receipts. So even if we didn't spend a single cent on discretionary programs, we still wouldn't be able to balance our budget this year — let alone pay off any of the $14 trillion in debt that we have already accumulated.
Through the years, mandatory spending has steadily increased (with some fluctuation from year to year) in relation to revenues. Here is mandatory spending as a percentage of total federal receipts, by year, according to published White House figures:
1970: roughly 33 percent
2000: 47 percent
2005: 61 percent
2010: 90 percent
2011: 101 percent.
Dick Morris takes a different perspective. He says the core spending on the bureaucracy itself is driving the deficit
this deficit has been caused by a rapid run-up in discretionary, non-defense spending and in welfare entitlements like Medicaid and food stamps. The key to cutting spending and slashing the deficit is not to focus on Social Security or Medicare, but on the real culprits – discretionary spending and welfare entitlements.
In the past two years, we have added 80,000 federal workers, 11 million food stamp recipients and $50 billion in Medicaid costs under Obama.
His chart
Category 2008 2010 % Increase
Welfare $260 $400 54%
Domestic $485 $682 41%
Medicare $456 $528 16%
Security $612 $700 14%
Defense $612 $690 11%
Source: US Government
As Mort Zuckerman says Our anemic recovery continues because American consumers are planning for the worst rather than hoping for the best, and they continue to pay down household debt instead of spending cash.
Who could blame people for holding back when we see roughly 50 million Americans on one or more taxpayer-supported programs, be it food stamps or unemployment benefits? This downturn may not have the 1930s feel of despair, but in large part that is because, as the economist David Rosenberg of the wealth-management firm Gluskin Sheff put it, "The modern day soup line is a check in the mail."
For the life of me, I can't understand why we are not Drilling Here, Drilling Now: It's Just Common Sense
One of the problems we face right now is the uncertainty in Libya, an OPEC nation that has cut its normal daily output of 1.6 million barrels of oil per day (bpd) to just over 700,000, amid the political tensions surrounding Muammar Gaddafi. What this means for humanity as a whole is that there is now less oil on the world's market to meet the demand around the globe. What this means for you and I as Americans is that our refusal to "drill here, drill now" is catching up to us with a vengeance.
The noose we allowed foreign oil producers to place around our necks is tightening.
And the worst part of all this is neither the per gallon gasoline price nor the per barrel price of oil, but rather the fact that it doesn't have to be this way. We could be pumping enough oil here at home to offset the ramifications of the upheaval in Libya, but our president, various members of his administration, and the majority of Democrats in the Senate remain unwilling to budge on the idea. Therefore, we've literally turned our backs on billions upon billions of barrels of oil that we could be extracting and using right here at home.
We could be creating hundreds of thousands of jobs, reviving the economy, reducing the trade deficit, increasing our standard of living, reducing our energy costs and taking the lead in oil shale recovery.
The US could become the single largest exporter of oil and oil related products in the world, thus potentially eliminating its trade deficit, and increasing the national standard of living as well as making a massive dent in the national debt.
argues Steve McCann in The Only Way Out for the American Economy
All that is necessary is a political decision to reverse our energy policy and stimulate domestic production of hydrocarbons. From that would flow a true economic stimulus that would mend many of our ills.
It is beyond absurd that a country sitting on so much natural wealth refuses to exploit it for the benefit of its citizens and instead deliberately puts the nation in the position of being subjected to the whims of others and face national insolvency. It almost appears to be deliberate.
Time to Get Serious About American Oil
Alaska and the Gulf states have been blocked from developing America's oil by politically driven federal policy, much of it aided by misinformation. If Americans wonder what our economic Achilles' heel is, they need look no further than the federal regulatory system that delays permits for domestic exploration and production.
In Alaska, an oil company can buy federal leases, spend over $3 billion in permitting and capital costs, apply for an air permit from the Environmental Protection Agency (EPA), and then wait for five years and still have no permit. In one case, the EPA's refusal to grant a permit for Royal Dutch Shell to drill in the Beaufort Sea delayed the creation of 54,700 jobs annually and $145 billion in payroll.
As we watch fuel prices rise, inflation take hold, and government debt reach record levels, Alaskans and those in other oil-producing states are frustrated. We wonder why the Obama administration is openly hostile to a sector of our economy that has created hundreds of thousands of jobs, kept the country on an even keel even during the recession, and produces a global commodity we depend on every day.
All the more so when alternative energy - wind and solar power - have proved to be a disaster in Germany, Denmark, Spain and the U.K.
The real disruptive technology in the world is shale gas
New techniques of unlocking gas from rock thousands of feet beneath the earth's surface have potentially opened up huge amounts of cheap energy; the International Energy Authority recently ripped up its previous estimates of global gas reserves to predict that there was sufficient gas from shale reserves to meet the next 250 years of demand.
It's a game-changer, for sure.
That's Bill Gates speaking out on Government Budget Gimmicks and he's absolutely right.
"It's riddled with gimmicks," Mr. Gates said of the "tricks" states use to balance their budgets. Citing moves such as selling state assets and deferring payments, he said some methods are "so blatant and extreme," that "Enron would blush," referring to the energy company that collapsed a decade ago amid an accounting scandal.
Gates thinks that governments "need more scrutiny and should follow more-transparent accounting principles, such as those used by Google Inc. and Microsoft Corp." In other words, governments, like every corporation in the country, should be required to keep their books according to the governmental equivalent of Generally Accepted Accounting Principles and to have their books certified by an independent, politically insulated body that has a mandate to ensure honest accounting.
Imagine calling for honest accounting by government!
Medicare loses nearly four times as much money as health insurers make
In a newly released report, the Government Accountability Office (GAO) estimates that, in fiscal year 2010, $48 billion in taxpayer money was squandered on fraudulent or improper Medicare claims. Meanwhile, the nation's ten largest health insurance companies made combined profits of $12.7 billion in 2010 (according to Fortune 500). In other words, for every $1 made by the nation's ten largest insurers, Medicare lost nearly $4.
Once a government program gets started, it never ends. This report is a good guide as to where to start cutting
The U.S. government has 15 different agencies overseeing food-safety laws, more than 20 separate programs to help the homeless and 80 programs for economic development.
The agency found 82 federal programs to improve teacher quality; 80 to help disadvantaged people with transportation; 47 for job training and employment; and 56 to help people understand finances.
A report from the nonpartisan GAO, to be released Tuesday, compiles a list of redundant and potentially ineffective federal programs, and it could serve as a template for lawmakers in both parties as they move to cut federal spending and consolidate programs to reduce the deficit. Sen. Tom Coburn (R., Okla.), who pushed for the report, estimated it identifies between $100 billion and $200 billion in duplicative spending.
One chart tells it all. USA Inc. 2010 Income Statement
Income $2.2 trillion; expenses $3.5 trillion
From Mary Meeker's epic presentation Definitive Guide to the American Public Debt Crisis
Chris Cantrell on Radical Suits and Their Suckers
A better name for "community organizer" is "radical suit," because community organizers are really the lefty version of the corporate suits that fly in to the plant in their executive jets, issue just enough ridiculous orders to prove that they haven't a clue, and then head back to the FBO and the next gig.
Not to get too Marxist about this, but we are talking about the inevitability of a law of history. The productive forces are changing, and the social superstructure is going to have to change too. The liberal and the radical suits can help their Big Unit followers through the change or they can drive them into the ditch. It's their choice.
Via Instapundit, natch.
What a great and fitting term is "radical suit". And, yes, I do think we are undergoing a radical restructuring of our social infrastructure as Walter Russell Mead so persuasively argues in Race to the Bottom?
Is America in a race to the bottom, or are we going through what the Austrian born economist Joseph Schumpeter would call a process of "creative destruction"?
For many Americans, the changes in our society — stagnant or falling real wages for non-supervisory employees, cutbacks in public services, rising costs of medical care, an affordability crisis in higher education and on and on — look like the consequences of what is often called "the race to the bottom."
Blue collar workers have been getting the shaft since 1973; white collar workers are starting to get the same treatment now. Two of the same forces that drove down blue collar wages are starting to hit professionals: competition from overseas and the use of technology to raise productivity so that fewer workers are needed to do the same amount of work.
Tens of millions of Americans aren't just reading about American decline; they are living American decline. Access to middle class jobs is getting harder — and the jobs still around are less stable. Public services are slowly declining; cash strapped states and towns can't provide the kind of education that could open more doors. Roads and bridges aren't being maintained. Retirements are less secure. Health care is more problematic than ever as insurance prices rise — and fewer jobs offer decent plans. College tuition has exploded; we have a generation of college students carrying mortgage-sized student loans even as they scramble for elusive jobs in a snakebit economy.
And there's more. The wealthiest in our society have gradually been pulling away from the rest of us — not just because so many of them are getting so rich, but because more of them are focused on the global economy and the health of the global system than on the prosperity of the United States of America.
I wrote in my first post on Madison that I don't think that restructuring state government is about the race to the bottom: it's the way to avoid a race to the bottom.
The key to success is obvious: we need to continue to raise productivity throughout the economy. If productivity goes up quickly enough, wages can rise here even if they are falling elsewhere. This is getting harder; productivity is both easier to measure and to raise in manufacturing than in services.
In particular we are going to have to look at health, government, education and the legal industry.
What we've got to do here is to deploy technology and aggressive, creative reform and restructuring to health, education and government.
Staffs are going to have to shrink in ways that are simply unimaginable to present day government workers and their union leaders. Outsourcing government functions to private business will be a growth industry; in some cases the work will be outsourced overseas but in many others, the necessary expenses of all levels of government can and should be used to promote the growth of entrepreneurial small business rather than the maintenance of large bureaucracies.
The educational system is also going to change in ways the unions and the guilds can't imagine — and will fight to the death. Going forward, students need to be evaluated and credentialed on the basis of what they know, not on the basis of time served.
Showdown in Wisconsin.
James Taranto on what's going on: The Means of Coercion.
the Wisconsin dispute has nothing to do with corporations. The unions' antagonist is the state government. "Industrial unions are organized against the might and greed of ownership," writes Time's Joe Klein, a liberal who understands the crucial distinction. "Public employees unions are organized against the might and greed . . . of the public?"
There is a fundamental difference between private- and public-sector workers. A private-sector labor dispute is a clear clash of competing interests, with management representing shareholders and unions representing workers. In the public sector, as George Will notes, taxpayers--whose position is analogous to that of shareholders--are usually denied a seat at the table:
Such unions are government organized as an interest group to lobby itself to do what it always wants to do anyway - grow. These unions use dues extracted from members to elect their members' employers. And governments, not disciplined by the need to make a profit, extract government employees' salaries from taxpayers. Government sits on both sides of the table in cozy "negotiations" with unions.
It's quite striking the way almost every lie the left ever told about the Tea Party has turned out to be true of the government unionists in Wisconsin and their supporters:
In the private market, if you bought something and it's defective or doesn't work, you can return it. But you can't return poor teaching or get your money back if your eighth-grader still can't read the back of a cereal box.
Two-thirds of Wisconsin Public School 8th Graders Can't Read Proficiently - Despite the Highest Pupil Spending in Midwest, according to the U.S. Department of Education.
Walter Russell Mead on The Madison Blues and the death throes of what he terms "The Blue Social Model".
Despite the terrible impression created by irresponsible teachers in Madison fraudulently calling in sick and hauling children down to protests they do not understand, and despite tactics that have further damaged the already poor image of public sector unions, these working people and their families are not wrongdoers or parasites. But they have allowed themselves to be deceived by the false promises of demagogic and irresponsible politicians and they now stand in the way of inevitable, necessary and ultimately benign changes in the way our society works.
Technological change, global competition, and the rise of a more dynamic economy have wrecked the old social model, but old institutions, old habits of mind and old interest groups don't disappear overnight. In many ways, public sector unions and government employees are the last great citadel of the Blue Social Model and what we see in Madison (as well as Ohio and Tennessee) is a way of life fighting for survival in the last ditch. We should not be surprised that the battle is fierce, the tactics ruthless, the polarization intense: this is not just a struggle between interest groups, it is a conflict over basic ideas about how the world does or should work.
To put it in a nutshell, the only way forward for the United States is to unleash the full transformational power of information technology in the knowledge and service industries even if this entails (as it surely will) the destruction of the current institutional, bureaucratic and guild-based systems on which we currently rely.
It will amount to a large scale cultural and social revolution in this country and many of the adjustments will hurt. But overall, this is the only way to allow the overwhelming majority of Americans to enjoy the rising living standards that have characterized life in this country for the past 300 years. It is the only way to make the American economy dynamic enough to support the economic and security policies necessary to keep us safe in the turbulent century ahead.
the struggle in Madison this week is important. The United States must reform or decline; failure is not an option.
The Washington Post, Obama budget plan shows interest owed on national debt quadrupling in next decade
Starting in 2014, net interest payments will surpass the amount spent on education, transportation, energy and all other discretionary programs outside defense. In 2018, they will outstrip Medicare spending. Only the amounts spent on defense and Social Security would remain bigger under the president's plan.
The soaring bill for interest payments is one of the biggest obstacles to balancing the federal budget, pushing the White House and Congress to come up with cuts deeper than previously imagined...
The phenomenon is a bit like running up the down escalator. Without interest payments, the president's plan would balance the budget by 2017. But net interest payments that year are expected to reach $627 billion, up from $207 billion in the current fiscal year.
He said that combined federal, state and municipal debt in the United States is at a record high, beyond the famous post-World War II levels. Unlike interest payments made then, however, a huge portion of interest payments are flowing to investors in other countries, draining funds out of the U.S. economy.
Which is why Chris Christie has become such a consequential governor and national figure. Yesterday, in Washington, he gave a speech It's Time to Do the Big Things which is well worth listening to, if only to hear a politician tell the truth.
If the United States were a family household, this is what its budget would look like. Just how broke are we?
• The Federal government would earn $50,000 a year in tax revenue (the same as the average US household).
• It would be $325,000 in debt.
• It would pay almost $10,000 a year in interest on that debt.
• Last year, it would have spent $79,000.
• This year, it is hoping to spend $86,000.
• The $100 billion in spending cuts (that some politicians view as draconian) would be equivalent to the household cutting its $86,000 in planned spending down to a mere $83,700. Not a bad start, but the household has another $33,700 to go before it balances its budget.
If you had all the money in the world, what couldn't you do?
Well, according to Exchequer , you still wouldn't be able to pay off our debt.
The optimistic view is that our outstanding obligations amount to more than all of the money in the world.
Ambrose Evans Pritchard writes the scariest article I've read in some time.
Europe stumbles blindly towards its 1931 moment.
Unless the ECB takes fast and dramatic action, it risks destroying the currency it is paid to manage, and allowing a political catastrophe to unfold in Europe.
"Does the ECB understand the concept of contagion?" asked Jacques Cailloux, chief Europe economist at RBS. Three EMU countries have already been shut out of the capital markets, and footloose foreign creditors hold €2 trillion of debt securities issued by Spain, Portugal, Ireland and Greece.
The eurozone's fiscal fund (European Financial Stability Facility) is fatally flawed. Like Alpinistas roped together, an ever-reduced core of solvent states are supposed to carry the weight on an ever-widening group of insolvent states dangling beneath them. This lacks political credibility and may be tested to destruction if – as seems likely – Ireland is forced to ask for help. At which moment the chain-reaction begins in earnest, starting with Iberia.
Bundesbank chief Axel Weber might fairly conclude that it is impossible at this stage to reconcile the needs of Germany and the big debtors. If the ECB prints money on the scale required to underpin the South, it would set off German inflation, destroy German faith in monetary union, and perhaps run afoul of Germany's constitutional court. If EMU must split in two, it might as well be done on Teutonic terms.
All this is understandable, but is Chancellor Merkel really going to let subordinate officials at the ECB destroy Germany's half-century investment in the post-war order of Europe, and risk Götterdämmerung?
That is until I read that interest on the debt and entitlement expenses will take ALL of the revenue of the Federal Government in the year 2025 according to the Congressional Budget Office.
Gonzala Lira livens up the report as only he can in Is Europe Coming Apart Faster Than Anticipated?
The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering—
—in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it's going to get messy.
I think that these measures the European leadership is trying to carry out are simply postponing the inevitable. And what's inevitable is a crash of the peripheral members of the Eurozone—the PIIGS plus Belgium. Because even if the Irish are bailed out in the next day or two, in a few months time, we'll have another round of panic, this time over Portugal. And by next summer, it is going to be Spain—inevitably.
In my post just last week, The Tidal Forces Ripping Europe Apart, I argued that the stress of over-indebtedness coupled with an unwillingness to take haircuts and restructure the sovereign debt would rip the European Union apart.
I argued this would happen—I just didn't think it would happen so soon . . .
I See Dead People and they have Stimulus Checks
US Senator Tom Coburn put out a report called "Federal Programs to Die for: American Tax Dollars Sent Six Feet Under" showing rampant waste, fraud and abuse in government programs. This report has put together programs totalling $1 billion in federal monies given to the dead.
The Social Security Administration sent $18 million in Stimulus funds to dead people;
The Department of Health and Human Services doled out checks of $3.9 million in assistance to pay heating and cooling costs out of the Low Income Home Energy Assistance Program (LIHEAP) to dead people. See GAO Report of June 2010;
The Department of Agriculture cranked out checks for $1.1 billion to deceased farmers. See GAO Report of July 24, 2007;
The Farm Services Agency (FSA) provided 171,801 deceased farmers subsidies;
The Department of Housing and Urban Development cut checks for $15.2 million in housing subsidies to the dead. See HUD IG's Report of November 10, 2009;
Medicaid payments of over $700,000 in prescriptions for 1,800 dead patients and prescriptions for drugs written by 1,200 deceased doctors;
Medicare payments of $92 million in medical supplies prescribed by dead doctors and $8.2 million for medical supplies prescribed for non-living patients; and,
US rep.: Estate tax rise has some planning death
CHEYENNE, Wyo. -- U.S. Rep. Cynthia Lummis says some of her Wyoming constituents are so worried about the reinstatement of federal estate taxes that they plan to discontinue dialysis and other life-extending medical treatments so they can die before Dec. 31.
But she said many ranchers and farmers in the state would rather pass along their businesses - "their life's work" - to their children and grandchildren than see the federal government take a large chunk.
"If you have spent your whole life building a ranch, and you wanted to pass your estate on to your children, and you were 88-years-old and on dialysis, and the only thing that was keeping you alive was that dialysis, you might make that same decision," Lummis told reporters.
C. Edmund Wright lowered his health care costs for himself and his family and his premium went down 11%.
Health Care 101: How We Lowered Our Costs
Now I am not an Ivy League grad; nonetheless, I figured out how to dramatically lower my health care costs two years in a row. And by costs, I mean both insurance premiums and overall expenditures for health care -- without sacrificing anything.
In other words, I have succeeded in "bending down the cost curve" for our family.
Moreover, I submit that this case study -- of my rather typical family of five -- is a valid microcosm of how our country can address most of our nation's health care cost issues. And again, it is by doing the very opposite of what our government is trying to force down our collective throats.
And this is something that almost everyone could do. It is common sense and not hard to understand. By taking insurance companies out of the mix of routine services, we have reduced the cost of routine services -- and saved a ton of money on the insurance premiums. The bureaucratic involvement in every transaction is a huge cost that no one seems to calculate when trying to reduce costs.
In fact, ObamaCare infuses even more bureaucratic involvement in every aspect of our life. How can this possibly work? It cannot, of course, not to mention the fact that it is offensive and totalitarian.
A lot more Americans are in much deeper trouble than most of us realize
For his report on 60 Minutes Scott Pelley went to Silicon Valley and what he found is disturbing and distressing.
99 Weeks: When Unemployment Benefits Run Out
nearly 20 percent of the unemployed in America have college degrees.
Silicon Valley lost its jobs in construction, manufacturing and in high-tech engineering that went overseas. San Jose looks the same, but it shrank by 75,000 jobs. Many buildings there stand empty.
The national unemployment rate of about nine and a half percent sounds incredibly high and of course it is. But it doesn't nearly capture the depth of the trouble. It doesn't count the people who've seen their hours cut to part time. It doesn't count the people who have quit looking for work.
If you add all of that together, the unemployed and the underemployed, it's not nine and a half percent, it's 17 percent; and in California it's 22 percent.
And what makes it so much worse is that, nationwide, one third of the unemployed have been out of work more than a year. That hasn't happened since the Depression.
If we tried to start The Home Depot today, it's a stone cold certainty that it would never have gotten off the ground.
Ken Langone in Stop Bashing Business, Mr.President
This is really bad, I had no idea and all because the banks didn't 'perfect their security interest'. Bank of America, the largest U.S. bank halts foreclosures in all states.
Bank of America's troubled mortgage portfolio is a legacy of its July 2009 acquisition of Countrywide, a subprime specialist that was among the financial institutions with the most troubled loans, as well as its January 2009 merger with Merrill Lynch, which was a major player in the business of taking mortgages and transforming them into securities to be sold to investors.
From an interview of Janet Tavakoli by Ezra Klein today in the Washington Post.
This is the biggest fraud in the history of the capital markets'
Janet Tavakoli is the founder and president of Tavakoli Structured Finance Inc. She sounded some of the earliest warnings on the structured finance market, leading the University of Chicago to profile her as a "Structured Success," and Business Week to call her "The Cassandra of Credit Derivatives." We spoke this afternoon about the turmoil in the housing market, and an edited transcript of our conversation follows.
Ezra Klein: What's happening here? Why are we suddenly faced with a crisis that wasn't apparent two weeks ago?
Janet Tavakoli: This is the biggest fraud in the history of the capital markets. And it's not something that happened last week. It happened when these loans were originated, in some cases years ago. Loans have representations and warranties that have to be met. In the past, you had a certain period of time, 60 to 90 days, where you sort through these loans and, if they're bad, you kick them back. If the documentation wasn't correct, you'd kick it back. If you found the incomes of the buyers had been overstated, or the houses had been appraised at twice their worth, you'd kick it back. But that didn't happen here. And it turned out there were loan files that were missing required documentation. Part of putting the deal together is that the securitization professional, and in this case that's banks like Goldman Sachs and JP Morgan, has to watch for this stuff. It's called perfecting the security interest, and it's not optional.
EK: And how much danger are the banks themselves in?
JT: When we had the financial crisis, the first thing the banks did was run to Congress and ask for accounting relief. They asked to be able to avoid pricing this stuff at the price where people would buy them. So no one can tell you the size of the hole in these balance sheets. We've thrown a lot of money at it. TARP was just the tip of the iceberg. We've given them guarantees on debts, low-cost funding from the Fed. But a lot of these mortgages just cannot be saved. Had we acknowledged this problem in 2005, we could've cleaned it up for a few hundred billion dollars. But we didn't. Banks were lying and committing fraud, and our regulators were covering them and so a bad problem has become a hellacious one.
EK: My understanding is that this now pits the banks against the investors they sold these products too. The investors are going to court to argue that the products were flawed and the banks need to take them back.
JT: Many investors now are waking up to the fact that they were defrauded. Even sophisticated investors. If you did your due diligence but material information was withheld, you can recover. It'll be a case-by-by-case basis.
EK: Given that our financial system is still fragile, isn't that a disaster for the economy? Will credit freeze again?
JT: I disagree. In order to make the financial system healthy, we need to recognize the extent of our losses and begin facing the fraud. Then the market will be trustworthy again and people will start to participate.
EK: It sounds almost like you're saying we still need to go through the end of our financial crisis.
JT: Yes, but I wouldn't say crisis. This can be done with a resolution trust corporation, the way we cleaned up the S&Ls. The system got back on its feet faster because we grappled with the problems. The shareholders would be wiped out and the debt holders would have to take a discount on their debt and they'd get a debt-for-equity swap. Instead we poured TARP money into a pit and meanwhile the banks are paying huge bonuses to some people who should be made accountable for fraud. The financial crisis was a product of our irrational reaction, which protected crony capitalism rather than capitalism. In capitalism, the shareholders who took the risk would be wiped out and the debt holders would take a discount but banking would go on.
Daniel Henninger in the WSJ
It looks to me as if there's only one policy they haven't tried: economic growth.
Economists dispute among themselves about a lot, but not about the proven wonders of strong economic growth. It creates jobs, increases individual wealth, reduces debt, and enhances national well-being. Strong, as opposed to the middling, economic growth the U.S. has now, is so vital that a great nation should want to do whatever it takes to get it.
With it, we win. Without it, we lose. Economist Paul Romer, in an essay on economic growth, bluntly explained why: "For a nation, the choices that determine whether income doubles with every generation, or instead with every other generation, dwarf all other economic policy concerns."
Via Joe Carter at First Things, I read The Cost of Abortion by Jeanne Monahan and was staggered at the financial impact of abortion, something I had never considered. She references another article by Tom Glessner, who writes
Abortion is a moral and spiritual issue. It is an intense political and social issue. It is also a constitutional and legal issue that has divided the nation, splintered political parties, and emotionally devastated millions of people, both men and women.
Abortion is also an economic issue.
....the current economic crisis and, indeed, our economic future as a nation are impacted by the very uncomfortable fact that since 1973 (when the Supreme Court gave us constitutionally mandated abortion-on-demand) more than 52 million unborn children have been killed by abortion.
What impact has this massive destruction of human life had on our current economic situation? A very interesting study called The Cost of Abortion gives some insight to this question.
This study begins with the figures for the total numbers of surgical abortions carried out in the United States from 1973 to 2007. An assumption is made that one-half of these aborted children would be female and, based upon figures from the Centers for Disease Control, each female – at age 25 – would have an average of a single child.
The study then combines these calculations to generate a number of "missing persons" from the USA from 1973 to 2007. The Gross Domestic Product per capita for each year is then multiplied by the number of "missing persons". Accordingly, the sum of lost GDP from 1973 to 2007 due to surgical abortion is nearly $37 trillion.
It does not take a rocket scientist to understand that a loss of $37 trillion to our economy since 1973 has taken a big toll. Because of abortion, we have 52 million fewer taxpayers, who would have provided a strong economic foundation for the nation
Abortion is an economic issue. America's most valuable natural resources are human beings who through the creative genius of the human spirit create innovative ways to overcome problems. Abortion has destroyed a large portion of this natural resource.
But in this summer of unrecovery, it's still important to understand how so many smart people got so much so wrong.
Michael Barone on A Failure of Modesty
Democrats have been aimed at propping up the old order — holding up housing prices and the mortgage market, keeping the Detroit auto companies in place, maintaining the lush standard of living of public-employee-union members (the purpose of the $26 billion the House was summoned back to Washington to approve Tuesday).
Unsustainable patterns of production, Kling writes, prevent the trial-and-error process of private investment that creates new jobs and new patterns of production that will be sustainable.
But facts are stubborn things. The fact that the private-sector economy has not responded as administration economists expected and confidently predicted should be a wake-up call.
It shows the limits of expert knowledge and of the ability of political actors to make optimal economic choices.
Modesty, like frugality, is one of those virtues, forgotten or disregarded for far too long. Boy am I ready for its comeback
Robert Rizzo, the city manager of Bell City, California, a blue collar town of about 40,000 had sufficient shame to step down when the news broke and outraged citizens learned that his salary was $1.5 million/year including 28 weeks of vacation and sick leave.
That is not enough to keep him from being the poster boy, the obese result of too much gorging at the public trough.
The WSJ in its editorial, The Pension Bell Tolls
According to the California Foundation for Fiscal Responsibility, a nonprofit that advocates pension reform, Mr. Rizzo is hardly alone. The foundation lists 9,111 retired California government workers receiving pensions in excess of $100,000 a year. The top earner, one Bruce Malkenhorst, receives $510,000 a year for his tenure as city administrator of Vernon, California (population, 91). Not including health benefits.
These paydays are the inevitable result of the dominance of government unions in city and state politics. While most private workers have 401(k)-type plans that rise and fall in value with economic growth, unions negotiate guaranteed payouts that stay lucrative whether or not the cities can afford them.
Ace reports that
In 2005, fewer than 400 voters cast ballots in a special election that cleared the way for City Council members to dramatically boost their own salaries. In that election, more than half the votes cast were absentee ballots, the method of voting most susceptible to fraud.
I think low voter turnout is about to change, especially the disparity between government pay and private sector pay continues to widen as USA Today reports Federal workers earning double their private counterparts
Federal workers have been awarded bigger average pay and benefit increases than private employees for nine years in a row. The compensation gap between federal and private workers has doubled in the past decade.
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis. The data are the latest available.
Such a disparity is not only unfair, but unsustainable. So far, most people are in agreement. We don't want Two Americas: Public Bureaucrats and the People.
John Edwards was right. There are two Americas, just not his two (the rich and powerful versus everyone else). The real divide today is, on one side, the 20 million people who work for state and local governments and the additional 3 million who've retired with fat pensions. On the other, the rest of us, roughly 280 million Americans. In short, there's a gulf between the bureaucrats and the people.
Nationwide, unfunded retirement benefits are $3.2 trillion, according to Chris Edwards of the Cato Institute. On top of that, he estimates the unfunded debt for the health coverage of state and local government retirees is $1.4 trillion.
The real question becomes how do state and local governments unwind themselves from the crushing legal obligations for benefits and pensions incurred as a result of union contracts.
Pension Tsunami
The California state government provides a "defined benefit" pension plan to each of its employees. Such "defined benefit" pension plans are far more generous than any 401(k) or defined contribution pension plan available from any other employer in the state! In fact, the plan is so generous that it makes the average state employee a millionaire after only 22 years of work!
It would require putting $56,889 ($1,251,562/22 years = $56,889) into your 401(k)/IRA or other retirement account every single year during those 22 years! When you work for the state, the state does this for you!
Federal subsidies so far are propping up state and local governments. New York, California, Illinois, and Michigan are deep in their own fiscal holes, but how long can they expect other states to bail them out?
Dick Morris points to one way wherein
lies a golden opportunity to reform state governments and redress the imbalance of power between elected officials and public-employee unions.
Absent endless federal subsidies, states will simply no longer be able to afford to give the unions everything that they want. And governors — many of them newly elected Republicans — will realize that they can't even afford to honor agreements their big-spending predecessors OK'd.
The GOP Congress should then amend the federal bankruptcy law to provide for a way — now absent — for states to declare bankruptcy. (Municipalities can do so under current law, but states have no such relief.)
Here's the key: The reforms must require that states abrogate their public-employee union agreements in the bankruptcy process, just as private corporations like Delta and Chrysler have done. The wage hikes, the work rules, the pension plans all go out the window.
It's going to be a nasty fight
Obamacare Only Looks Worse Upon Further Review writes Kevin Hassett
68 grant programs, 47 bureaucratic entities, 29 demonstration or pilot programs, six regulatory systems, six compliance standards and two entitlements.
Getting that massive enterprise up and running will be next to impossible. So Democrats streamlined the process by granting Health and Human Services Secretary Kathleen Sebelius the authority to make judgments that can't be challenged either administratively or through the courts.
Via The Corner, comes this portrait of Obamacare with PDF, if you can bear looking more closely here
"We have to pass the bill so you can find out what's in it," Nancy Pelosi
The chart was developed by Republicans on the Joint Economic Committee.
Brownback, the committee's ranking member, added, "This updated chart illustrates the overwhelming expansion of government control over health choices and the bewildering complexity facing everyone affected by this law."
In addition to capturing the massive expansion of government and the overwhelming complexity of new regulations and taxes, the chart portrays:
$569 billion in higher taxes;
$529 billion in cuts to Medicare;
swelling of the ranks of Medicaid by 16 million;
17 major insurance mandates; and
the creation of two new bureaucracies with powers to impose future rationing: the Patient-Centered Outcomes Research Institute and the Independent Payments Advisory Board.
Brady admits committee analysts could not fit the entire health care bill on one chart. "This portrays only about one-third of the complexity of the final bill. It's actually worse than this."
Niall Ferguson knows that history may move slowly most of the time and then suddenly fast.
Sun Could Set Suddenly on Superpower as Debt Bites
What are the implications for the US today? The most obvious point is that imperial falls are associated with fiscal crises: sharp imbalances between revenues and expenditures, and the mounting cost of servicing a mountain of public debt.
According to the Congressional Budget Office's latest projections, the debt could rise above 90 per cent of GDP by 2020 and reach 146 per cent by 2030 and 344 per cent by 2050.
These sums may sound fantastic.
But what is even more terrifying is to consider what ongoing deficit finance could mean for the burden of interest payments as a share of federal revenues.
The CBO projects net interest payments rising from 9 per cent of revenue to 20 per cent in 2020, 36 per cent in 2030, 58 per cent in 2040 and 85 per cent in 2050. As Larry Kotlikoff recently pointed out in the Financial Times, by any meaningful measure, the fiscal position of the US is at present worse than that of Greece.
The astonishing report that concludes that taxpayer costs of divorce and unwed childbearing are More Than a Trillion a Decade.
Research on family structure suggests a variety of mechanisms, or processes, through which marriage may reduce the need for costly social programs. . . . Based on the methodology, we estimate that family fragmentation costs U.S. taxpayers at least $112 billion each and every year, or more than $1 trillion each decade. . . .
[E]ven very small increases in stable marriage rates as a result of government programs or community efforts to strengthen marriage would result in very large savings for taxpayers. If the federal marriage initiative, for example, succeeds in reducing family fragmentation by just 1 percent, U.S. taxpayers will save an estimated $1.1 billion each and every year.
The White House wonders "where did the jobs go?"
Ironically, at the same time, an Obama official, the Special Inspector General Neil Barofsky notes in a "scathing" report on the auto industry that Obama's 'Mandate for Sacrifice' Costs Thousands of Jobs:
the Obama administration rejected initial automaker plans which would have required relatively minimal dealership closings, insisting instead on far more drastic cuts -- as many as two thousand dealerships between the two corporations.
[W]hen asked explicitly whether the [Obama] Auto Team could have left the dealerships out of the restructurings, Mr. [Ron] Bloom, the current head of the Auto Team, confirmed that the Auto Team "could have left any one component [of the restructuring plan] alone," but that doing so would have been inconsistent with the President's mandate for "shared sacrifice."
Another New York Times piece says that federal job training programs don't work
Our ruling class is in the middle of what NYT columnist David Brooks calls a "high stakes test" as to whether the progressivist policies of this Administration with the staggering complexity of the new health care law with its 183 new agencies and panels and commissions along with the new financial reform 2300 page bill of still more staggering complexity will help improve or damage the health care and financial systems we have now.
This progressive era is being promulgated without much popular support. It's being led by a large class of educated professionals, who have been trained to do technocratic analysis, who believe that more analysis and rule-writing is the solution to social breakdowns, and who have constructed ever-expanding networks of offices, schools and contracts.
Already this effort is generating a fierce, almost culture-war-style backlash. It is generating a backlash among people who do not have faith in Washington, who do not have faith that trained experts have superior abilities to organize society, who do not believe national rules can successfully contend with the intricacies of local contexts and cultures.
This progressive era amounts to a high-stakes test. If the country remains safe and the health care and financial reforms work, then we will have witnessed a life-altering event. We'll have received powerful evidence that central regulations can successfully organize fast-moving information-age societies.
If the reforms fail — if they kick off devastating unintended consequences or saddle the country with a maze of sclerotic regulations — then the popular backlash will be ferocious. Large sectors of the population will feel as if they were subjected to a doomed experiment they did not consent to. They will feel as if their country has been hijacked by a self-serving professional class mostly interested in providing for themselves.
Richard Fernandez makes the case for the invisible hand, not The Dead Hand Again
The past for all of its faults contains a lot information about how things work. Human institutions — the existence of families, constitutional arrangements, etc — have evolved in response to concrete challenges. They are the way they are for a reason. Very often things seem simple because they are really complicated and unfortunately every now and again a generation of leaders comes along that sees no obvious use for this or that thing. And like a mechanic newly arrived on the scene, they pluck it out of the mass of roiling machinery without understanding its purposes or simply because they don't like who invented it and throw it away, believing in their wisdom or vanity, that the systems they inherited were conceived in ignorance, superstition and by NASCAR afficionados. Then without a backup, without an image, without the possibility of rollback the unexpected sometimes happens. Murphy shows up at the door. And looking up at that eminent Irishman they subsequently ask "why are you here?"
Thus the gold standard in public policy was to leave people to make their own arrangements unless there was a compelling interest to do otherwise. Because people do things for a reason, even if it is not clear to us why, and being in the innermost OODA loop, they are in a better position to change course if they get it wrong. The default activity of government, which operates in distant capitals was to do nothing. This attitude is captured in the folk saying, "if it ain't broke, don't fix it." But that is so yesterday. None of those old sayings stands a chance before the great enterprise of transcendant Hope and Change. And what is that? Just change it and hope it works.
Now if that doesn't turn out in the expected way, how about we try this. Instead of depending on the cumulative effects of generations of political dead hands, let's try relying on the invisible hand — the aggregate arrangments of people in the marketplace — for a change. People if left to order their affairs usually do so sensibly. My guess is that the man in the street understands very well where the jobs went.
Some selected items from Zerohedge's list of underreported or unreported facts: Presenting The Wall Of Worry: The 50 Ugliest Facts About The US eCONom who says "After reading these it almost makes sense that the market has become completely desensitized to the sad reality now pervasive in this country"
#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.
#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.
#29) For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.
#28) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009.
#27) U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.
#18) This most recession has erased 8 million private sector jobs in the United States.
#15) 39.68 million Americans are now on food stamps, which represents a new all-time record. But things look like they are going to get even worse. The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.
When a state has been chronically mismanaged, how does the comptroller pay the bills when the state owes $5 billion?
This is what the state owes right now to schools, rehabilitation centers, child care, the state university — and it's getting worse every single day," he says in his downtown office.
Mr. Hynes shakes his head. "This is not some esoteric budget issue; we are not paying bills for absolutely essential services," he says. "That is obscene."
States cannot go bankrupt, technically, but signs of fiscal crackup are easy to see. Legislators left the capital this month without deciding how to pay 26 percent of the state budget. The governor proposes to borrow $3.5 billion to cover a year's worth of pension payments, a step that would cost about $1 billion in interest. And every major rating agency has downgraded the state; Illinois now pays millions of dollars more to insure its debt than any other state in the nation.
Illinois Stops Paying Its Bills, but Can't Stop Digging Hole
In Illinois, the fiscal pain is radiating downward.
From suburban Elgin to Chicago to Rockford to Peoria, school districts have fired thousands of teachers, curtailed kindergarten and electives, drained pools and cut after-school clubs. Drug, family and mental health counseling centers have slashed their work forces and borrowed money to stave off insolvency.
In Beardstown, a small city deep in the western marshes, Ann Johnson plans to shut her century-old pharmacy. Because of late state payments, she could not afford to keep a 10-day supply of drugs. In Chicago, a funeral home owner wonders whether he can afford to bury the impoverished, as the state has fallen six months behind on its charity payments, $1,103 a funeral.
Few budget analysts are surprised to see Illinois, with a limping economy and broken political culture, edge close to the abyss. Two of the last six governors have served jail terms, and a third is on trial.
"We are a fiscal poster child for what not to do," said Ralph Martire of the Center for Tax and Budget Accountability, a liberal-leaning policy group in Illinois. "We make California look as if it's run by penurious accountants who sit in rooms trying to put together an honest budget all day."
Conrad Black on the meetings in Toronto
The G-8 and G-20 are a carnival of pointless blather.
The G-8 and G-20 economic summit meetings about to be inflicted on the unenthused population of Toronto are illustrative of the absurdity of much of the world's political leadership. A catalogue of all that is amiss in the world in policy terms is hardly necessary. These leaders constantly meet with each other, yet their itinerant economic summits seem not to have turned up the slightest prior apprehension of the current economic crisis, nor many useful ideas about how to mitigate it.
The cost of these meetings in Toronto is about a billion dollars
They should all waste less of their own and one another's time and clean up the messes they have made or inherited. Then they might be able to say something worth hearing.
Thomas Sowell is a national treasure. Here he is on A Mind-Changing Page and yes, it seems so.
This is more than just a question about history. Right here and right now there is a widespread belief that the unregulated market is what got us into our present economic predicament, and that the government must "do something" to get the economy moving again. FDR's intervention in the 1930s has often been cited by those who think this way.
What is on that one page in "Out of Work" that could change people's minds? Just a simple table, giving unemployment rates for every month during the entire decade of the 1930s.
Those who think that the stock market crash in October 1929 is what caused the huge unemployment rates of the 1930s will have a hard time reconciling that belief with the data in that table.
While the market produced a peak unemployment rate of 9 percent-- briefly-- after the stock market crash of 1929, unemployment shot up after massive federal interventions in the economy. It rose above 20 percent in 1932 and stayed above 20 percent for 23 consecutive months, beginning in the Hoover administration and continuing during the Roosevelt administration.
As Casey Stengel used to say, "You could look it up." It is all there on that one page.
Is the higher education bubble about to burst? Glenn Reynolds thinks so.
College has gotten a lot more expensive. A recent Money magazine report notes: "After adjusting for financial aid, the amount families pay for college has skyrocketed 439 percent since 1982. ... Normal supply and demand can't begin to explain cost increases of this magnitude."
A New York Times profile last week described Courtney Munna, a 26-year-old graduate of New York University with nearly $100,000 in student loan debt -- debt that her degree in Religious and Women's Studies did not equip her to repay. Payments on the debt are about $700 per month, equivalent to a respectable house payment, and a major bite on her monthly income of $2,300 as a photographer's assistant earning an hourly wage.
And, unlike a bad mortgage on an underwater house, Munna can't simply walk away from her student loans, which cannot be expunged in a bankruptcy. She's stuck in a financial trap.
There's the financial bubble, but also the reality bubble where college students learn disdain for real, tried and true methods of creating and distributing wealth.
Thomas Sowell on The Real Public Service
Commencement speakers express great reverence for "public service," as distinguished from narrow private "greed." There is usually not the slightest sign of embarrassment at this self-serving celebration of the kinds of careers they have chosen — over and above the careers of others who merely provide us with the food we eat, the homes we live in, the clothes we wear, and the medical care that saves our health and our lives.
This didn't come about because of the politicians, bureaucrats, activists, or others in "public service" that you are supposed to admire. No nation ever protested its way from poverty to prosperity or got there through rhetoric or bureaucracies.
It was Thomas Edison who brought us electricity, not the Sierra Club. It was the Wright brothers who got us off the ground, not the Federal Aviation Administration. It was Henry Ford who ended the isolation of millions of Americans by making the automobile affordable, not Ralph Nader.
Walter Russell Mead on the Top Ten Lessons of the Global Economic Meltdown
1. The American Century isn't over.
2. Liberal capitalism works.
3. The rogue states are parasites.
4. The old left is dead.
5. Nobody really understands the world economy.
6. That goes double for financial markets.
7. The Battle of Financial Markets is over; the Battle of State Finance has begun.
8. The demographic crunch time is here.
9. Culture matters.
10. The politicization of economic governance is dangerous business.
He concludes
It is clear that the mix of democracy and capitalism is a dangerous if necessary brew; after decades in which we failed to think the costs and risks through, we are now suffering the consequences of policies that create dangerously perverse incentives in both political and economic spheres. Reducing damaging but popular forms of state intervention in the economy while ensuring the state retains the authority and the ability to provide the effective legal and regulatory frameworks without which no modern economy can flourish is the fiendishly difficult and delicate task which Europeans and Americans alike must now undertake.
Well, the New York Times is finally catching on.
Crisis Imperils Liberal Benefits Long Expected by Europeans
Across Western Europe, the "lifestyle superpower," the assumptions and gains of a lifetime are suddenly in doubt. The deficit crisis that threatens the euro has also undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II.
Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.
With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.
In Athens, Mr. Iordanidis, the graduate who makes 800 euros a month in a bookstore, said he saw one possible upside. "It could be a chance to overhaul the whole rancid system," he said, "and create a state that actually works."
Mark Steyn as only he can takes a swipe at the hypocrisy of the NY Times in a Big Fat Greek Funeral
Greece has run out of Greeks to stick it to. So it's turned to Germany. But Germany too is in net population decline. The Chinese and other buyers of Western debt know that. If you're an investor and you don't, more fool you. Tracking GDP versus median age in the world's major economies is the easiest way to figure out where this story's heading.
"Another reform high on the list is removing the state from the marketplace in crucial sectors like health care, transportation and energy and allowing private investment," reported the New York Times. "Economists say that the liberalization of trucking routes—where a trucking licence can cost up to $90,000—and the health care industry would help bring down prices in these areas, which are among the highest in Europe."
Removing the state from health care brings down prices? Who knew? This New York Times is presumably entirely unrelated to the New York Times that's spent the last year arguing for the governmentalization of U.S. health care as a means of controlling costs.
Here in the U.S. even Paul Krugman sees a Lost Decade Looming.
the employment gains of the past few months, although welcome, have, so far, brought back fewer than 500,000 of the more than 8 million jobs lost in the wake of the financial crisis?
32 states have borrowed money from the federal government to make unemployment payments; California has borrowed $7 Billion.
The FDIC lists "problem" banks at 775 , one tenth of all US banks.
The 10 States Most Likely to Default according to the Business Insider
10. Wisconsin
9. Massachusetts
8. Ohio
7. Nevada
6 New Jersey
5 New York
4. New York City
3. Michigan
2. California
1. Illinois
As chaos spreads around the world and the U.S. deficit deepens, the White House seems confused and Congress can't even pass a budget. Have we ever lived through a time of greater incompetence?
In the last two days, two key policy spokesmen for the White House have given two entirely different visions of where we're headed.
One is Paul Volcker, legendary former chairman of the Federal Reserve. At 82, he's seen a lot, and he says time is "growing short" for the nation to address its burgeoning financial problems.
"We better get started," he said in a recent speech at Stanford University. "Today's concerns may soon become tomorrow's existential crises." In particular, he warned of "uncontrolled borrowing."
The other is Tim Geithner, our youngish Treasury secretary, who brushes aside talk of fiscal Armageddon. "The important thing," he said Wednesday, "is you're seeing the U.S. in a much stronger recovery than people expected even three months ago."
The lack of clarity and absence of a unified message is stunning. Fact is, the structural deficits the U.S. faces are monumental.
Scariest headline of the week via Maggies Farm entitled Yikes
Dow Theorist Richard Russell: Sell Everything, You Won't Recognize America By The End Of The Year
I post about only a few political issues. One of them is the federally-created drought in the Central Valley and San Joaquin valley of California that some dub the " Congressional Dustbowl" where the federal government controls the water and they have shut it off to farmers to save a tiny fish, the delta smelt and to protect endangered salmon.
"We don't want welfare, We want water"
Now a federal district court judge , who imposed some of the draconian rulings in this case endangered salmon, has reversed himself to rule that human beings are also part of the ecosystem. Water Sanity for Central California
District Judge Oliver Wanger declared to federal regulators that they must consider the impact of their "draconian" actions on human communities, something they've never done up until now.
"Federal defendants completely abdicated their responsibility to consider alternative remedies," Wanger wrote.
He also ripped into the environmental regulators for their junk science "guesstimates," stating that their shut-off "lacked factual and scientific justification, while effectively ignoring the irreparable harm (their regulations) have inflicted on humans and the human environment," according to the San Francisco Chronicle.
The water shut-off has been a nightmare for California. Huge farms growing the world's finest grapes, peaches, almonds, pistachios, plums and walnuts — as well as cotton, carrots, cantaloupe and the other lush truck crops that come out of California's temperate weather and rich soil — have gone fallow.
Adding insult to injury, water has increasingly been turned into a bargaining chit, with Washington using access to it as political leverage to force local congressmen to vote for unpopular bills like health care reform.
But the worst part of these decisions is the high human cost. California's communities have suffered terrible disruption, with unemployment as high as 45% in some towns and farm workers forced to stand in food lines for bags of Chinese-grown carrots near fields they once harvested.
Back when I posted Economic Suicide Pact, one brave Spanish economic professor looked at the economic effects of the torrential spending on wind energy in Spain and concluded:
each "green" job created cost $752,000 -$1.4 million in subsidies
each "green" job entailed the loss of 2.2.other jobs
Today, Christopher Horner reports that the
Spanish newspaper La Gaceta runs with a full-page article fessing up to the truth about Spain's "green jobs" boondoggle, which happens to be the one naively cited by President Obama no less than eight times as his model for the United States. It is now out there as a bust, a costly disaster that has come undone in Spain to the point that even the Socialists admit it, with the media now in full pursuit.
La Gaceta boldly exposes the failure of the Spanish renewable policy and how Obama has been following it. The headline screams: "Spain admits that the green economy as sold to Obama is a disaster."
The numbers in the long run are even scarier. The government itself says that the alternative energies sector will receive 126 billion euros in the next 25 years. Just an example: The owners of solar plants make 12 times more than what they pay for the energy coming from fossil fuel combustion. The majority are subsidies charged to the consumer.
The conclusion is that with the economy at the point of bankruptcy, it is not possible to keep injecting money in such a costly sector. And the government seems to realize this now.
Facing bankruptcy, facing reality and facing facts.
My man Paul Ryan on the Greek crisis and the choice we have before us
Do we want an opportunity state on top of a safety net or a crade-to-grave welfare state?
What we are seeing is the failure of European socialism and social welfare states. What is basically happening here is this sovereign debt crisis could come over and spread to us.
via Gateway Pundit
Let's just point out that what the IMF is recommending Greece do is to PRIVATIZE health care, energy, and transportation to get itself back on track.
Take 2 minutes to watch the video below, Is Washington Bankrupting America?
From a new site that promises to keep an eye on who is BankruptingAmerica.org
According to a recent GWU Battleground poll, 74 percent of likely voters are "extremely" or "very" concerned about the current level of government spending. And 58 percent think the level of spending is unsustainable.
Is the public right? Is Washington bankrupting America? Some facts from the video:
Spending per household has risen over 40 percent in the last 10 years – and is set to do so again in the next 10 – pushing debt (and interest on the debt) to unprecedented levels. But that's just a result of past spending.
Add in our government's $106 trillion in future spending commitments – that cannot be paid for – and it becomes clear that our government's spending is setting the country down a path toward bankruptcy.
We can solve it, but politicians will have to make tough choices.
Increasing taxes can't do the trick ($106 trillion is equivalent to taking all of the taxable income from every American nine times over), nor is it fair to saddle taxpayers with a problem created by government irresponsibility.
We need real spending reform. Merely returning to the spending per household levels of the 1990s would balance the budget in three years.
I've been posting on the huge problem of public pensions for some time. I'm glad to see that people are waking up and seeing it for what it is like Fred Barnes on the New Fat Cats
John Edwards was right. There are two Americas, just not his two (the rich and powerful versus everyone else). The real divide today is, on one side, the 20 million people who work for state and local governments and the additional 3 million who've retired with fat pensions. On the other, the rest of us, roughly 280 million Americans. In short, there's a gulf between the bureaucrats and the people.
Governor Chris Christie of New Jersey puts his fight with teachers and their union in roughly those terms. He says there are "two classes of citizens in New Jersey: those who enjoy rich public benefits and those who pay for them."
he pension explosion has created a fiscal crisis in many states, cities, and towns across the country, California being the worst off. Not only are pensions for government workers a perilously unfunded liability for many states, their soaring cost is causing sharp cuts in other programs.
"Paying for those pension promises is already crowding out funding for higher education, for parks, and for other areas like health care . . . and that crowding out is only going to get worse," California governor Arnold Schwarzenegger said last week.
State pension funds have gone up 2,000 percent in the past decade. The unfunded pension debt in California is $500 billion, according to a new study by Stanford University's public policy program. It's seven times greater than the state's general obligation bonds, says Schwarzenegger adviser David Crane.
A staggering pension shortfall "is not just [in] California," Crane told me. "It's every state." Nationwide, unfunded retirement benefits are $3.2 trillion, according to Chris Edwards of the Cato Institute. On top of that, he estimates the unfunded debt for the health coverage of state and local government retirees is $1.4 trillion.
Who's to blame? Well, in California, you can blame Jerry Brown for the California's half-trillion pension mess.
"Thank" Jerry Brown. As Governor "Moonbeam" of California in 1978, he signed the "Dill Act," which gave California public employees the right to collective bargaining.
Brown, who has been governor, Oakland mayor, and attorney general, now wants to be California governor...again. Four big, grateful government labor unions are backing him...again.
Here's Meg Whitman on California Pension Reform
We must raise the retirement age for non–public safety workers from 55 to 65. We must require state employees to contribute a larger portion of their salary to help pay for their retirement benefits. We must extend the vesting period, and we must bring new government workers in under a different deal where they receive a defined-contribution retirement plan similar to the 401(k) plans that most taxpayers have.
Jerry Brown, who enacted collective bargaining for the public-employee unions during his governorship in the 1970s, bears direct responsibility for the unfunded liability in our state retirement system. Brown has teamed up with union bosses to attack my policies and my business background because, for them, pension reform is unacceptable. They believe your tax money is their entitlement.
Greece is Europe's very own subprime crisis
This is going to be the most important week in the 11-year history of Europe's monetary union. By the end of it we will know whether the Greek fiscal crisis can be contained or whether it will metastasize to other parts of the eurozone.
Unless we hear some implausibly good news from Athens by Friday, it will soon blow up.
The blow-up has started
Standard & Powers first lowered its rating of Greek bonds, then Portugal's and today Spain's.
Heightened concerns over Europe
On Tuesday, a vice president of the European Central Bank said that the euro zone was facing its biggest challenge since the adoption of the Maastricht Treaty in 1997. Austerity measures in Greece and Portugal are already causing unrest there. Transportation workers in both countries protested on Tuesday, leaving train stations deserted because of strikes.
Officials from Standard & Poor's said the main reason for downgrading the debt of Greece and Portugal was the prospect that forced austerity packages would be an even bigger drag on economic growth.
It is the most vicious of circles: stagnating economies are forced to cut back more, which reduces their ability to generate revenue and thus pay off their debts. As part of the euro zone, these countries do not have the ability to print their own money to stimulate growth and bolster exports, so increasing debt and an increasing prospect of default result.
Walter Russell Mead on Europe in Crisis
Europe once again has blundered its way into a major crisis.
The Greek meltdown is on the surface just another financial crisis: yet another delusional country pursuing the path of least resistance has made promises it can't keep to public and private sector workers. Now the bill must be paid and the IMF called in to reorganize the national finances.
If that were all, it would not be so bad, but something much bigger and more troubling is involved.
The internal problem stems from the fact that the euro, widely hailed as Europe's greatest initiative, is starting to look like a strategic mistake. Europe's countries and cultures may be too different to live under the same set of economic policies.
This is a political crisis for Europe rather than a financial crisis because the only way out for the PIGS involves a large bailout from the northern countries led by Germany and France. Germans especially don't want to pay. It has been clear for some time that the Greeks cheated and lied their way into the eurozone, and for years they have pursued selfish and foolish economic policies. Why, Germans ask with some force and logic, should German taxpayers who cannot retire until their late sixties.
It's too soon to say where this latest euro-crisis is heading, but serious economic or political disturbances in Europe will soon affect us over here — and not in a good way.
Do you know what the chief actuary for Medicare wrote in a memorandum to his boss, the secretary for HHS, Kathleen Sibelius, about the costs of the new health bill a week before the final vote on the health care bill? Why weren't we told? Why am I not surprised?
The Prowler reports
Sebelius's staff refused to review the document before the vote was taken.
"The reason we were given was that they did not want to influence the vote," says an HHS source. "Which is actually the point of having a review like this, you would think."...
"We know a copy was sent to the White House via their legislative affairs staff," says the HHS staffer, "and there were a number of meetings here almost right after the analysis was submitted to the secretary's office. Everyone went into lockdown, and people here were too scared to go public with the report."
James Capretta summarizes
The actuary says that the legislation will increase health care costs, not reduce them — by about $300 billion over a decade.
The actuary also says that the financial incentives in the bill will lead many employers to stop offering coverage altogether. That means about 14 million people with job-based insurance today will lose it. Moreover, he estimates that the cuts in Medicare Advantage will reduce enrollment by 7 million people. So much for keeping the Democrats' other mantra of "keeping the coverage you have today."
The memo says the Medicare cuts will total nearly $600 billion through 2019, and that they will almost certainly jeopardize access to care for seniors by driving scores of institutions into financial distress.
The various taxes and fees on insurers and producers of drugs and devices will largely get passed on to consumers, says the memo. In other words, these taxes will hit the middle class hard and drive their premiums up, not down.
The actuary says the new long-term care insurance program created in the bill faces "a significant risk of failure" due to adverse selection — meaning that the program will attract the kind of enrollment that will require higher costs than can be covered by the premiums collected.
Neoneocon in her usual way puts her finger on it in The calm before the storms
The problem is that most Americans' trust in the ability of Congress to solve such things, or even to tackle them in a way that will not make them worse, is nonexistent. The idea that our representatives would listen to our concerns, be responsive to our needs, and then have the intelligence to craft solutions based on common sense and/or intelligent thought or even well-meaning effort has been waning over the years but has finally evaporated. If there had been any lingering faith in Congress, HCR erased it.
We assume that the cure will be worse than the disease. We expect that the bills will be rushed through without proper debate and enacted at the stroke of midnight, like evil spells in a fairy tale. We are no longer surprised at the depth and breadth of the corrupt and shady behind-the-scenes deals involved. We know the legislations will be lengthy and complex. We do not think our representatives possess the intelligence to even understand the bills they pass—that is, if they bother to read them at all—and either do not appreciate their negative consequences or actually intend them to do us harm. We know that, just when we think we've driven a fatal stake into the heart of an unpopular bill, it rises and staggers forward to attack us.
Little did I know when I wrote Who's Next about our skyrocketing debt and how we will ever pay it, that other countries besides Argentina have looked with salivating glee at private pension plans.
Argentina seizes pension funds to pay debts
Here is a warning to us all. The Argentine state is taking control of the country's privately-managed pension funds in a drastic move to raise cash.
So, over $29bn of Argentine civic savings are to be used as a funding kitty for the populist antics of President Cristina Kirchner. This has been dressed up as an anti-corruption and efficiency move. Aren't they always?
Now the seizure happened in October but somehow I never read about it until recently.
Argentina to seize pension funds, markets tank
Argentina's center-left President Cristina Fernandez on Tuesday signed a bill for a government takeover of the $30 billion private pension system in a daring and unexpected move that rocked domestic markets.
Critics said the government was looting pension funds ahead of a tough budget year when it has to find billions of dollars to pay and service debt, but the president said the private pension fund administrators were the looters.
"The failed experiment" of private pensions is finished, ANSES Director Amado Boudou said at the ceremony with Fernandez, before hundreds of political supporters.
The reform took Argentina's 10 pension fund administrators, known as AFJPs, by surprise and an industry group decried government claims that the funds had performed badly.
"The AFJP system is a solid mechanism that can be perfected, that has had an almost constant growth trend in the 14 years of its existence," Sebastian Palla, president of the Union of Argentine Retirement and Pension administrators, said in a statement.
Then I read The man who stole your old age: How Gordon Brown secretly imposed a ruinous tax that has wrecked the retirements of millions.
So, on one fateful night in that suite overlooking Hyde Park, they decided that, once in power, they would launch a massive multi-billion-pound raid on a gold-plated, copper-bottomed sector of the British economy - its pension funds.
Up until this point, company pension funds had enjoyed an important tax break on the financial investments they made in order to build up the capital from which employees could be paid when they retired. By long tradition, the funds paid no tax on the dividends they received from those investments.
The view of Brown and his penthouse cronies was that this concession had to stop.
Gordon Brown decided pension funds were a ripe target and knowingly destroyed what was once one of the great pension systems in the world. Eleven million people with company pensions and a further seven million with personal pensions were affected by the sleight of hand dreamt up in that posh Park Lane penthouse.
But it's even worse writes Alex Brummer, the city editor of the Daily Mail in his new book, The Great Pensions Robbery.
Public sector pension pots soared while everyone else suffered
Most public sector schemes still operate a retirement age of 60 whereas the rest of us have to soldier on to 65 to get our reward.
Public sector pensions are also not just salary-linked but index-linked to keep pace with inflation.
As the size of the public sector has ballooned under New Labour by up to one million workers, so the number of active members of these final-salary schemes has soared - from 4.2 million in 1995 to 5.2 million in 2007.
The Institute of Directors describes this mismatch in pension provision between those working for government and those in the entrepreneurial sector of the economy as nothing short of 'apartheid'.
And it is potentially dangerous as well as unfair.
'If private sector workers rebel against paying other people's pensions, we are heading for strife,' warns pensions expert Ros Altmann. 'I'm not saying that public sector workers don't deserve generous pensions. They do. But so does everybody else.'
As for the other half who have tried to save for a comfortable old age, those in the private sector have seen their pensions plundered, while those in the public sector, though feather-bedded for the moment, have a system that is ruinously expensive, unsustainable and can no longer be defended.
Doesn't that sound distressingly like what could happen here? Take a look at Steven Malanga's piece on The Beholden State. How public-sector unions broke California.
Given that the country is sliding into debt so large we have trouble imagining its scope or the world of hurt we're going to be in, this graph helps.
So, of course, the government will have to look for money in any place they can find it. A national sales tax or VAT is headed our way. Make no mistake about it. Charles Krauthammer explains
That's where the value-added tax comes in. For the politician, it has the virtue of expediency: People are used to sales taxes, and this one produces a river of revenue. Every 1 percent of VAT would yield up to $1 trillion a decade (depending on what you exclude — if you exempt food, for example, the yield would be more like $900 billion).
It's the ultimate cash cow. Obama will need it. By introducing universal health care, he has pulled off the largest expansion of the welfare state in four decades. And the most expensive. Which is why all of the European Union has the VAT. Huge VATs. Germany: 19 percent. France and Italy: 20 percent. Most of Scandinavia: 25 percent.
American liberals have long complained that ours is the only advanced industrial country without universal health care. Well, now we shall have it. And as we approach European levels of entitlements, we will need European levels of taxation.
That's bad enough, but far more worrisome is the recent move in Argentina to seize pension funds.
Argentina seizes pension funds to pay debts. Who's next?
The track record of government taking over programs is so bad, I cannot but be pessimistic about the government takeover of health care.
Take a look and see at what happened to the weatherization program, the much-touted $5 billion program to retrofit American homes to make them more energy-efficient.
In Indiana, state-trained workers flubbed insulation jobs. In Alaska, Wyoming and the District of Columbia, the program has yet to produce a single job or retrofit one home. And in California, a state with nearly 37 million residents, the program at last count had created 84 jobs.
The program was a hallmark of the American Recovery and Reinvestment Act, a way to shore up the economy while encouraging people to conserve energy at home. But government rules about how to run what was deemed to be a ''shovel-ready'' project, including how much to pay contractors and how to protect historic homes during renovations, have thwarted chances at early success, according to an Associated Press review of the program.
But after a year, the stimulus program has retrofitted 30,250 homes -- about 5 percent of the overall goal -- and fallen well short of the 87,000 jobs that the department planned, according to the latest available figures.
Ed Morrissey comments
Instead of creating 85,000 jobs with the $5 billion, the Department of Energy (which runs the program) claimed it created 8500 jobs, a tenth of the goal. That would put the cost of each job at a whopping $588,235.30, and that's only if the DoE has its numbers right. Those numbers appear to have been calculated using the White House "saved or created" algorithm, which wasn't exactly known for its accuracy. In any case, those jobs would likely be temporary anyway, which means we just tossed away $5 billion on temp work that mostly didn't occur, and when it did, got done poorly.
Monday Morning Coming Down
Who has better credit than Uncle Sam? If you ask the bond market, that elite list includes Berkshire Hathaway, Procter & Gamble, Lowe's, Johnson & Johnson, and a host of other blue-chip corporate borrowers. The U.S. government has the ability to levy taxes on the largest national economy in the world, a vast and fearsome revenue-collection apparatus, and more than two centuries of constitutional government under its belt. P&G has Tampax.
As hangover headaches go, this is going to be brutal, and investors apparently have more faith in Johnson & Johnson's ability to sell Tylenol than in Washington's ability to pay for it. Mitchell Stapley, an analyst with Fifth Third Asset Management, told Reuters that the numbers coming out of the bond market are a "slap upside the head of the government."
So here's a prediction for you: Obamacare is not going to happen, regardless of the fact that the president is going to sign it into law today, regardless of what happens in the 2010 and 2012 elections, and regardless of any speech given anywhere in Washington. The government's ability to simply say "Make it so!" and ignore economic reality is coming up against its limit.
Obamacare will be a huge new outlay on an already bloated federal budget, two-thirds of which is committed to Social Security, Medicare, Medicaid, national defense, and interest payments on the national debt. Somebody's not going to get paid. Bond investors are worried that it's going to be them, but my bet is that it's going to be those who have put their faith in Obamacare. But, hey, it was fun while it lasted. Have a Tylenol.
"In a private fee-for-service medical system, a dead patient is a revenue loss. In the National Health Service (UK), a dead patient was a cost savings." -Harry Bailey MD 1930-2003.
A Unique Perspective on the Delivery of Medical Care
Via The Anchoress who offers two anecdotes of her own in Obamacare & the Aging Population.
Since the Health Care Reform Act cuts $500 billion from Medicare, does anyone doubt that seniors will be urged and too soon required to take the painkiller instead of surgery?
Why don't we ever learn the Lessons of History?
With the elimination of private expenditures for health services, the form and amount of medical care were now dependent upon the budgetary priorities of the State. All members of the medical industry were put on low fixed monthly salaries and were mandated to examine and treat an overwhelming daily quota of patients. Medical research became dependent upon inadequate annual budgetary allocations from the government. Doctors' and nurses' incomes no longer depended on their professional skills or the number of patients they treated. Total unionization of the medical profession made it practically impossible for anyone to be fired. Without markets and prices determining the value and availability of health care, the government imposed a rationing system for medical services and pharmaceutical products.
Times are going to get even tighter as we deal with government Ponzi schemes.
Social Security starts cashing in on US debt
Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.
Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg's municipal offices.
Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn't be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.
"This is not just a wake-up call, this is it. We're here," said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. "We are not going to be able to put it off any more."
Promised pensions benefits for public-sector employees represent a massive overhang that threatens the financial future of many cities and states. The $2 Trillion Hole.
We are not the only ones. Virtually every Western Democratic Government is Insolvent.
UPDATED. Moody's, the USA rating agency , fears 'social cohesion' as AAA states retrench
"Growth alone will not resolve an increasingly complicated debt equation. Preserving debt affordability at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion," said Pierre Cailleteau, the chief author.
"We are not talking about revolution, but the severity of the crisis will force governments to make painful choices that expose weaknesses in society," he said.
IBD Editorial Time to Get a Grip on the Third Rail
While the Democratic leadership is trying to force a health care entitlement on a country that doesn't want it, the mother of all entitlements is in the red. Get used to it. It's only going to get worse.
Their decades of cowardice have led us to 2010, the year that Social Security begins its descent into the financial abyss. This year it will pay out $29 billion more in benefits than it takes in through the payroll tax that funds the retirement program.
A Sunday Associated Press report highlighting this deficit suggests that "it's time to start cashing" in the $2.5 trillion Social Security trust fund that has built up through the decades of the system taking in more than it has paid out.
Only problem: There is no trust fund.
It's not just the Capitol: Billions in red ink drowning California's cities, schools and counties, too
A chart by Veronique de Rugy who says, "This is what unsustainability looks like." Based on figures from the CBO, the chart reveals the long term trend of entitlements.
As Dennis Prager summarizes
As reported by the Washington Post: "President Obama's proposed budget would add more than $9.7 trillion to the national debt over the next decade."
CNN adds, "Of that amount, an estimated $5.6 trillion will be in interest alone."
"Deficits of that magnitude would force the Treasury to continue borrowing at prodigious rates, sending the national debt soaring to 90 percent of the economy by 2020, the CBO said."
CNN notes this particularly chilling prediction from the CBO: "By 2020 . . . debt held by the public would reach $20.3 trillion, or 90% of GDP. That's up from 53% of GDP in 2009."
The Blue Plate Special at the Belmont Club.
Matthews shrewdly asks Ryan why he thinks he can persuade voters that they can no longer have something for nothing when nobody else has before. And for a moment we catch a glimpse of a much more formidable Chris Matthews, a man who seems to have come to liberalism in part because he's seen conservatism fail to sell. And the congressman's riposte is simple: 'Chris, it will sell now because the voters have no choice. The party's over and sooner or later everyone who isn't brain-dead has to see that.' Entitlements have drained the treasury dry. An entire generation has blown its wad and doesn't even have enough kids to borrow from. And as any who's ever shaken his wallet and seen only old ATM receipts flutter out of it, the message is signally clear. Gotta get back to work.
Governor Chris Christie talks to 200 New Jersey mayors and Mish's Global Economic Trend Analysis provides a partial transcript
You know, Marlboro, after a two year negotiation, they give a five year contract giving 4.5% annual salary increases to the teachers, with no contribution, zero contribution to health care benefits.
But I am sure there are people in Marlboro who have lost their jobs, who have had their homes foreclosed on, and who cannot keep a roof over their family's head there is something wrong.
You know, at some point there has to be parity. There has to be parity between what is happening in the real world, and what is happening in the public sector world. The money does not grow on trees outside this building or outside your municipal building. It comes from the hard working people of our communities who are suffering and are hurting right now.
I've long been in favor of Health Savings Accounts or HSAs as they are known. Mitch Daniels, Governor of Indiana shows how such accounts have improved health and saved money, lots of money.
Hoosiers and Health Savings Accounts
The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.
State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we've been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay.
The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state's total costs are being reduced by 11% solely due to the HSA option.
Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we've found, also a major factor.
Overall, participants in our new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage
List of troubled banks at 16-year-peak, FDIC says
With bank failures running at their highest level in nearly two decades, the F.D.I.C. is racing to keep up with rising losses to its insurance fund, which safeguards savers' deposits. On Tuesday, the agency announced that it had placed 702 lenders on its list of "problem" banks, the highest number since 1993.
Not all of those banks are destined to founder, and F.D.I.C. officials said Tuesday that they expected failures to peak this year. But they also warned that the fund might have to cover $20 billion in additional losses by 2013 — a bill that could be even greater if the economy worsens.
Nearly 25% of all mortgages are underwater
That's 11.3 million households.
Nevada was the state with the worst record at 70% of all mortgaged properties underwater. That was followed by Arizona (51%), Florida (48%), Michigan (39%) and California (35%).
The obligations owed by Fannie Mae and Freddie Mac have been explicitly backed by the Federal Treasury. If we added those debts owing to the federal budget, our real debt to GDP Ratio is 130% and That Greece is amateur hour
Yet it is not just us, but the administration's very own Peter Orzsag who was pushing for consolidated GSE accounting two years ago. Yet with GSE debt most recently at $6.3 trillion, or about half of the existing Treasury debt, this would mean total US debt would not only explode by 50% overnight, but the recently increased debt ceiling would be immediately breached and America would find itself in technical default (where it really is right now for all technical purposes).
The Great Recession of 2011-2012
Despite the self-congratulatory assurances from the White House, Congress, and part of Wall Street that we have been saved from a slide into a 1930s depression, our most serious trials still lie ahead of us. We are unlikely to be able to get back to those halcyon days of perpetual prosperity and optimism that Americans (and most of the industrial world) enjoyed for the last 50 years. A tectonic shift is occurring beneath our feet and the world's economic climate has shifted. We face not just a few abrasive years of getting back to normal, but a generational hard slog of constricted markets, limited resources, and rolling setbacks.......
Folks will try to live just the way they have been but those lives will be more pinched, the opportunities more limited; caution and bitterness will replace the open-handed optimism that made it a wonder to be a 20th-century American, or even a Western European.
Don Peck in The Atlantic with a very depressing look at How a New Jobless Era Will Transform America
[Men have] suffered roughly three-quarters of the 8 million job losses since the beginning of 2008 … In November, 19.4 percent of all men in their prime working years, 25 to 54, did not have jobs, the highest figure since the Bureau of Labor Statistics began tracking the statistic in 1948.
… this era of high joblessness is probably just beginning. Before it ends, it will likely … leave an indelible imprint on many blue-collar men. It could cripple marriage as an institution in many communities. It may already be plunging many inner cities into a despair not seen for decades.
The principal group not suffering are government workers - How public servants became our masters
That money will come from taxpayers. The average private-sector worker, who enjoys a lower salary and far lower retirement benefits than New York or California government workers, will have to work longer, retire later, and pay more so that his public-employee neighbors can enjoy the lifestyle to which they have become accustomed. The taxpayers will also have to deal with worsening public services, since there will be less money to pay for things that might actually benefit the public.
We need more money. And more jobs. Who can argue with that? So why is the Administration and Congress not looking at expanded offshore drilling?
Especially given the recent report that Oil and gas drilling bans will cut GDP by $2.36 trillion which measures the lost opportunity we are letting slip through our fingers.
Jim Hoff is right when he calls these no zones "vast areas of opportunity." Democrats would do well to undo the permanent ban on drilling in ANWR, the 2009 scrapping of oil and gas leases in Utah and the nixing of offshore drilling
Ed Morrissey adds
There are obviously some opportunity costs lost in the refusal to use our own resources for energy production. Instead of sending billions to Brazil to boost oil production off of their coast, the private sector could invest its own money into leases and extraction. This would create hundreds of thousands of high-paying jobs here in the US, as well as reduce our trade deficit. It would provide a more stable bridge towards our shift to replacement energy sources in renewables, while boosting access to cheaper energy in the short run to make the American economy more dynamic. Without it, energy prices will rise much faster than inflation, making our economy more sluggish than necessary.
Think that the crisis in Greece has little to do with you? Think again. Spengler calls it a Political Time Bomb and quotes a letter from a friend in Athens.
The country is sliding into psychological despair within a cocoon of unrequited desires that have been inflamed and legitimized over the years. Anger is rampant.
Prime Minister Papandreou was on television last night, white as a ghost. He was telling the Greek press that he was thankful that the IMF was "offering" their technical expertise (technognosia) to Greece. Yes money is not coming, but how sweet of the IMF to be sending its experts to dictate terms over the next few weeks. It seems that someone in Europe gave him the unexpected news that the party is over. This reality has not yet even remotely begun to set in here. The media are giving the message that "the Europeans can't afford to let Greece go under….that Europe stands to lose too much….that Merkel and those stuffy Northerners will have to come to Greece's aid."
When the reality does start seeping in—hold on to your hats….
One of the delusions is that there is a moral kernel in the country that we can turn to for consolation and renewal. There is no such thing. The corruption went too deep. The country is completely unprotected on the cultural and moral front. This too has not seeped in. And yet when people become desperate; when their world starts to crumble around them and all their delusions about themselves and their good life not only collapse, but do so without any legacy to fall back on and no dream to look forward to, then beware. We are in unchartered territory where Furies and Ate pilot the ship.
Ate is the Greek word for "ruin, folly and delusion" by which the hero is lead to his death or downfall, usually because of his hubris. The personification of Ate is the goddess by the same name, eldest daughter of Zeus, who, in his anger over her manipulation of events, threw her out of heaven, down to earth where she wanders about treading on the heads of men, creating havoc.
The Furies from whom we have the words "furious" and "infuriating" are the three goddesses of vengeance, pursuing all crime without mercy, striking offenders with madness.
Another reason why the exploding deficits are such a concern. Stephen Spruiell explains
Investor Bob Wiedemer likes to say that the United States is the largest holder of adjustable-rate debt in the world — nearly 40 percent of our public debt is short-term and must be refinanced each year.
In this context, watch Rep. Paul Ryan — fast becoming the intellectual leader of the elected Right — as he puts the screws to an evasive Treasury Secretary Tim Geithner (ff to 62:15). Ryan confronts Geithner with a quote from a Wall Street Journal interview with OMB director Peter Orzag: "The 'unusual situation' the government finds itself in — with other countries willing to finance U.S. debt at low rates — 'won't last.' And, he added, 'When it flips, the question is how do you get ahead of that to avoid the downward spiral' of rising interest rates, a plunging dollar and a sinking economy."
Ryan looks up: "The vigilantes in the bond markets are going to get us, and the American people are going to get hurt.
While the British papers are chock full of stories about the implosion of global warming science and its grand narrative, there is almost nothing in the mainstream press except for the news Osama Bid Ladin has joined Al Gore in the ranks of the global warmists. Global warming science implodes overseas: American media silent.
This is a great story. It has everything a media outlet could desire; scandal, conflict of interest (IPCC head Pauchuri runs companies that benefited from climate scare stories), government cover ups - why then, has this unraveling of the basis of climate science that posited catastrophic man made warming not been making any news at all in the United States?
As global warming the political movement is losing its scientific justification, the American people - who will be asked to foot the bill to the tune of trillions of dollars if Obama goes ahead with his "green" plans - are grossly uninformed about the state of the debate.
What makes me so mad is that taxpayers as usual are footing the bill for scientists who should be investigated for fraud and, if convicted, jailed. Take, for example, Michael Mann, whose famous hockey stick graph showing runaway global warming, that was later discredited because the data was made up. TARP, the American Recovery Program awarded him $2.4 million. The Wall St Journal called it A case study in one job 'saved'
This scientific scandal is far worse than ENRON ever was. Via James Delingpole, I read Phillip Stott, a British academic, who is foaming with righteous indignation, on the life and imminent death of the AGW scam.
As an independent academic, it has been fascinating to witness the classical collapse of a Grand Narrative, in which social and philosophical theories are being played out before our gaze. It is like watching the Berlin Wall [pictured] being torn down, concrete slab by concrete slab, brick by brick, with cracks appearing and widening daily on every face - political, economic, and scientific.
And what can one say about 'the science'? 'The 'science' is already paying dearly for its abuse of freedom of information, for unacceptable cronyism, for unwonted arrogance, and for the disgraceful misuse of data at every level, from temperature measurements to glaciers to the Amazon rain forest. What is worse, the usurping of the scientific method, and of justified scientific scepticism, by political policies and political propaganda could well damage science sensu lato - never mind just climate science - in the public eye for decades
The UN climate panel, the IPCC lied to us about shrinking glaciers, increasing hurricanes, and rising seas and danger to the Amazon rainforest . What are they going to say to the children they terrified with tales of the Amazonian rainforest disappearing by the time they grew up? The UN climate panel shamed by bogus rainforest claim reports the London Times. Their claim that global warming would wipe out 40% of the Amazonian rainforest was based on an unsubstantiated claim by green campaigners with little or no scientific expertise. Shamed indeed.
The Wheels Come Off for the IPCC The IPCC has officially retracted claims that the Himalayan glaciers could disappear by 2035.The IPCC scientist admits Glaciergate was about influencing governments . He knew the evidence was extremely suspect but wanted to put political pressure on governments to take action
The head of the UN Climate change panel, Rajenda Pachauri, facing calls to resign, has refused. He got grants through bogus claims. Some of the grants were worth hundreds of thousands of dollars, the Times of London reports.
The good news is All the glaciers that aren't shrinking The Himalayan glaciers are growing, not shrinking. Alaska's Hubbard Glacier is growing. Norwegian glaciers are growing as are glaciers in France, Switzerland, Canada, Mt. St Helens, New Zealand, Russia, Iceland and Argentina.
Roger Simon calls it the politicization of science. And he's absolutely right. This is what happens when people don't care about the truth. Thank God for the Internet.
UPDATE. Russell Mead captures it all in one sentence.
The global warming meltdown confirms all the populist suspicions out there about an arrogantly clueless establishment invoking faked 'science' to impose cockamamie social mandates on the long-suffering American people, backed by a mainstream media that is totally in the tank.
I'm a bit late with this, but George Will's column, Liberalism is What is Killing California
And the state's income tax -- liberalism codified -- intensifies the effects of business cycles on the state's revenue stream: During booms, the stream surges and stimulates government spending; during contractions, revenues dwindle but the new government spending continues. Voegeli says that if California's spending had grown no faster than population growth and inflation from 1992 to 2006, it would have been $65 billion less in 2006, and per capita government outlays then would have equaled not those of Somalia or Mississippi but of Oregon, which is hardly "a hellish paradigm of Social Darwinism."
It took years for liberalism's mania for micromanaging life with entangling regulations to make California's once creative economy resemble Gulliver immobilized by the Lilliputians' many threads. The state, which between 1990 and 2007 lost 26 percent of its factory jobs and 35 percent of its high-tech manufacturing jobs, ranks behind only New York, another of liberalism's laboratories, in the number of outward-bound moving vans.
It took years for compassionate liberalism to make California's welfare menu contribute to the state becoming an importer of Mexico's poverty. It took years for servile liberalism to turn the state into what Voegeli calls a "unionocracy," run by and for unionized public employees, such as public safety employees who can retire at 50 and receive 90 percent of the final year's pay for life.
Over at Reason, Steve Greenberg examines How Public Servants Became Our Masters
There was a time when government work offered lower salaries than comparable jobs in the private sector but more security and somewhat better benefits. These days, government workers fare better than private-sector workers in almost every area—pay, benefits, time off, and job security. And not just in California.
According to a 2007 analysis of data from the U.S. Bureau of Labor Statistics by the Asbury Park Press, "the average federal worker made $59,864 in 2005, compared with the average salary of $40,505 in the private sector." Across comparable jobs, the federal government paid higher salaries than the private sector three times out of four, the paper found. As Heritage Foundation legal analyst James Sherk explained to the Press, "The government doesn't have to worry about going bankrupt, and there isn't much competition."
In California unfunded pension and health care liabilities for state workers top $100 billion, and the annual pension contribution has shot up from $320 million to $7.3 billion in less than a decade. In New York state, local governments may have to triple their annual pension contributions during the next six years, from $2.6 billion to $8 billion, according to the state comptroller.
That money will come from taxpayers. The average private-sector worker, who enjoys a lower salary and far lower retirement benefits than New York or California government workers, will have to work longer, retire later, and pay more so that his public-employee neighbors can enjoy the lifestyle to which they have become accustomed. The taxpayers will also have to deal with worsening public services, since there will be less money to pay for things that might actually benefit the public.
This is where we are going The rise of the permanent temporary workforce.
The forecast for the next five to 10 years: more of the same, with paltry pay gains, worsening working conditions, and little job security. Right on up to the C-suite, more jobs will be freelance and temporary, and even seemingly permanent positions will be at greater risk. "When I hear people talk about temp vs. permanent jobs, I laugh," says Barry Asin, chief analyst at the Los Altos (Calif.) labor-analysis firm Staffing Industry Analysts. "The idea that any job is permanent has been well proven not to be true." As Kelly Services, CEO Carl Camden puts it: "We're all temps now."
At home, Americans are Doing More and Buying Less.
Some are working longer hours, but a larger proportion, the poll shows, are spending additional time with family and friends, gardening, cooking, reading, watching television and engaging in other hobbies.
In many homes today, experiences have become a more valued element of life. Mr. Hoyt, at Moody's Economy.com, said that the behavioral changes were likely to be less transformative than what followed the Depression but that after three decades when consumer spending outpaced gross domestic product, the end of a spendthrift era may be here.
A terrific multimedia timeline graphic on the rise of unemployment across the country from 2007-2009.
"The worst is yet to come" writes Nouriel Roubini, one economist who saw the trouble coming and about whom Fortune magazine said
In 2005, Roubini said home prices were riding a speculative wave that would soon sink the economy. Back then the professor was called a Cassandra. Now he's a sage.
Unemployed Americans should hunker dow for more job losses.
This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.
Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.
The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.
Ben Bernake is more circumspect
In remarks to the Economic Club of New York, Bernanke predicted the economy should continue to grow next year, but he warned of "important headwinds," including a weak job market and tight credit for small businesses and households.
Those forces "likely will prevent the expansion from being as robust as we would hope," he said.
So what's an average person to do?
Megan McArdle who blogs on economics for the Atlantic has had her own share of economic travails. Newly engaged, she was surprised to find herself converted by financial guru David Ramsey whose message is simple Lead Us Not Into Debt.
Nonetheless, Ramsey has made a convert out of a secular journalist with one of the pricey M.B.A.s he likes to poke fun at. I have never felt as serenely in control of my finances as I have during these months of knowing that every single dollar is where it is supposed to be: either in the bank, or on a well-chaperoned date with our envelope organizer. The process has been surprisingly painless but, even more surprisingly, pleasant.
Michael Fitzgerald writes a terrific article on the curious economic effects of religion in the Boston Globe
A pair of Harvard researchers recently examined 40 years of data from dozens of countries, trying to sort out the economic impact of religious beliefs or practices. They found that religion has a measurable effect on developing economies - and the most powerful influence relates to how strongly people believe in hell.
It stands as one of the more intriguing findings in a growing body of recent research exploring how religion might influence the wealth and prosperity of societies. In recent years, Italian economists have presented findings that religion can boost GDP by increasing trust within a society; researchers in the United States showed that religion reduces corruption and increases respect for law in ways that boost overall economic growth. A number of researchers have documented how merchants used religious backgrounds to establish one another's reliabity
On a larger scale, religious denominations affect economics by creating bonds of trust and shared commitment among small groups, both necessary qualities for lending and trade. In the Middle Ages, studies show, monk-run estates outperformed those that used serfs, thanks to religiously inspired cooperation and frugality. The Quakers of 18th-century Britain, renowned for their scrupulous honesty, came to dominate British finance. Ultra-orthodox Jews similarly dominate New York's diamond trade because of levels of trust based on religion. Modern religious kibbutzim on average outperform their secular rivals, in part because of trust built through engaging in communal religious rituals.
Back in 1985 German-born Cardinal Ratzinger who was to become Pope Benedict XVI presented a paper entitled ``Market Economy and Ethics'' at a Rome event dedicated to the Church and the economy in which he predicted that a decline in ethics ``can actually cause the laws of the market to collapse.''
It is becoming an increasingly obvious fact of economic history that the development of economic systems which concentrate on the common good depends on a determinate ethical system, which in turn can be born and sustained only by strong religious convictions. Conversely, it has also become obvious that the decline of such discipline can actually cause the laws of the market to collapse. An economic policy that is ordered not only to the good of the group — indeed, not only to the common good of a determinate state — but to the common good of the family of man demands a maximum of ethical discipline and thus a maximum of religious strength. The political formation of a will that employs the inherent economic laws towards this goal appears, in spite of all humanitarian protestations, almost impossible today. It can only be realized if new ethical powers are completely set free.
On his visit to the White House, Pope Benedict quoted his predecessor Pope John Paul II
he reminded us that history shows, time and again, that "in a world without truth, freedom loses its foundation", and a democracy without values can lose its very soul ...Those prophetic words in some sense echo the conviction of President Washington, expressed in his Farewell Address, that religion and morality represent "indispensable supports" of political prosperity.
But there's more to it. Arab societies are strongly religious in their profession of Islam. Yet Arab societies, apart from oil money, have not developed economically as they should have. Joseph Loconte strongly suggests that economic prosperity requires religious liberty in Economic Prosperity: A Step of Faith
Christian reformers of the seventeenth century, in fact, were among the first to grasp the importance of freedom of conscience to the stability and economic well-being of the state.
Henry Robinson (1605-1664), a merchant and son of a wealthy London tradesman, traveled widely on the Continent...Robinson regarded the right of private judgment in matters of faith as essential to human flourishing, akin to the right to private property or private enterprise. These rights were connected, and the repression of religious freedom produced blowback in the economic realm.
These facts still seem to be lost on many Muslim intellectuals. They complain about the "deprivation of human capability" in the Arab world, but exonerate regimes that deprive people of their inalienable rights. They link economic growth to new forms of "social cohesion," but tolerate political arrangements that guarantee social strife. They even call for a "fundamental rethinking" of how Arab states should approach cultural and religious diversity—yet refuse to rethink their assumptions about the nature of religious belief or the moral demands of human dignity.
It requires no leap of faith—just, perhaps, a little historical memory—to realize this is not the road to economic development. It is the long and fractious and familiar detour to permanent stagnation.
Seven market-based health care solutions that have lowered health care costs and improved both access and quality of service have gone unnoticed. Congress to Healthcare Market: Drop Dead
1. Retail clinics
2. Retail clinic-hospital partnerships
3. On-site workplace healthcare clinics
4. Affordable $4 generic drugs that have already saved consumers $1 billion since Walmart introduced them in 2008.
5. Prepaid medical plans
6. Concierge medicine
7. High-deductible health insurance plans along with individually owned and managed health savings accounts.
Just for the record, the CBO released its cost analysis of the Republican health care plan and found it would reduce health care premiums and the deficit by $68 billion over 10 years.
How were the Republicans able to reduce costs?
• by creating high-risk insurance pools
• allowing people to purchase health insurance policies across state lines
• instituting medical malpractice reforms
Today, small businesses - the ones who create the majority of jobs - have difficulties finding affordable health plans for their employees because they lack the negotiating leverage a large business has. Under the Republican plan, rates would drop 7-10% for small business plans, 5-8% for the individual market and only 0-3% for large corporations.
Here are some miscellaneous health care stories from the past several days that seem worthy of notice.
I never knew that breast-feeding your baby helps you shed extra weight you gain during the pregnancy.
Breast-Feed the Baby, Love the Calorie Burn
Dr Miriam Grossman, a psychiatrist who spent 20 years counseling college students is on a tear to challenge the "sex ed oligarchy" What's missing in sex education.
She specifically wants to smash the ideas that "sex trumps everything" in life, and "promiscuity, experimentation and fringe behaviors" are healthy.
In Britain with recent changes to assisted suicide rules, a group of leading lawyers, peers and former judges warn Elderly and disabled could be forced to commit suicide under changes to rules
"The current law acts as a powerful deterrent against abuse and exploitation of vulnerable people and has been firmly upheld by Parliament. Removing these safeguards could lead to increase in vulnerable and disabled people being pressured into ending their lives."
Elder medical care is not one of the six core areas that are the focus of medical school training. The American Geriatric Society calls out to all medical schools to prepare all medical students to treat the elderly. There are just not enough geriatricians to go around (only 1 geriatrician for 2546 elderly today and in 20 years only 1 for 5000 elderly)
There are drugs that work to prevent prostate cancer and breast cancer. So why aren't people at risk taking them?
Gina Kolata tries to figure out why Medicines to Deter Some Cancers Are Not Taken
Much of what Americans do in the name of warding off cancer has not been shown to matter, and some things are actually harmful. Yet the few medicines proved to deter cancer are widely ignored.
"Rumbles through the medical community" as a third study questions the effectiveness of the popular cholesterol drugs Zetia and Vytorin.
A widely prescribed and expensive cholesterol drug is not as effective as niacin, a cheap vitamin, in helping to unclog coronary arteries in people already taking statins, the standard medicines used to lower cholesterol, according to a new study.
Broader Measure of U.S. Unemployment Stands at 17.5% reports The New York Times.
More than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.
This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.
The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.
With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.
Chart from Innocent Bystanders
Via American Thinker comes this graph of the day showing the extraordinary fossil fuel energy resources the United States has - more than Russia, Saudi Arabia, Iran, Iraq, Venezula and Canada. The figures are sourced from this Congressional Research Service report released last week.
Randall Hoven pulls out these statistics from that same report.
Total fossil fuels (oil, coal, natural gas) reserves of the US, in Barrels of Oil Equivalent: 1,321.3 billion BOE.
US consumption of fossil fuels in 2008: 14.8 billion BOE.
Earlier this week Daniel Yergin in the WSJ wrote about America's Natural Gas Revolution
Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called "tight" formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.
The potential of this "shale gale" only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.
With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential supply—a number that is bound to go up as more and more shale gas is found.
A 'shale gale' of unconventional and abundant U.S. gas is transforming the energy market.
The Wall St Journal calls it The Worst Bill Ever
In a rational political world, this 1,990-page runaway train would have been derailed months ago. With spending and debt already at record peacetime levels, the bill creates a new and probably unrepealable middle-class entitlement that is designed to expand over time. Taxes will need to rise precipitously, even as ObamaCare so dramatically expands government control of health care that eventually all medicine will be rationed via politics.
Yet at this point, Democrats have dumped any pretense of genuine bipartisan "reform" and moved into the realm of pure power politics as they race against the unpopularity of their own agenda. The goal is to ram through whatever income-redistribution scheme they can claim to be "universal coverage." The result will be destructive on every level—for the health-care system, for the country's fiscal condition, and ultimately for American freedom and prosperity.
Mr. Obama rode into office on a wave of "change," but we doubt most voters realized that the change Democrats had in mind was making health care even more expensive and rigid than the status quo. Critics will say we are exaggerating, but we believe it is no stretch to say that Mrs. Pelosi's handiwork ranks with the Smoot-Hawley tariff and FDR's National Industrial Recovery Act as among the worst bills Congress has ever seriously contemplated.
Annual Medicare Fraud: $60 Billion; Annual Profits of Top Ten Insurance Companies: $8 billion
As 60 Minutes reported last week, Medicare fraud is rampant and has now replaced the cocaine (ahem) business as the major criminal activity in South Florida
House Republicans Find 111 New 'Bureaucracies' in Health Care Bill
Among some off the new agencies, the list cites a Health Insurance Exchange; the Center for Medicare and Medicaid Innovation; the Public Health Investment Fund; the Public Health Workforce Corps; an Assistant Secretary for Health Information; the Food and Drug Administration Office of Women's Health; grant programs for alternative medical liability laws, infant mortality programs and other issues; and about 100 other government-sponsored creations.
26 reasons to oppose Pelosi's health care bill, H.R. 3962. Here are a few:
• Permits federal taxpayer funding of abortion services, above and beyond the status quo of current law.
• Provides for a "health care czar" called the Health Choices Commissioner, who could forcibly enroll individuals in government-run insurance and whose tasks include requiring random compliance audits on Americans' health benefits plans.
• Allows for "community organizations" like ACORN and Planned Parenthood to assist the Health Choices Commissioner in enrolling individuals in the Health Insurance Exchange.
• Provides for 13 new and different tax increases, including an employer mandate excise tax.
• "Grandfathers" out of existence individual health insurance coverage.
• Retains the "death panels" by providing for bureaucrats working for a new comparative effectiveness institute funded by a tax on health benefits. The institute could publish the protocols needed to deny patients access to life-saving treatments on cost grounds.
• Contains NO ban on federal promotion of assisted suicide and/or health care rationing of treatments.
• Slashes Medicare payments to providers by more than $400 billion.
Using the English to 12-year-old -AOLer Translator, I've translated the above.
I didn't know how JP Morgan Chase and Goldman Sachs made $6.8 billion in profit last quarter but then I read How Wall Street is making its billions.
the big investment banks are able to borrow money from the U.S. government at 0 percent interest. Then they can turn around and buy short-term bonds that pay 2 or 3 percent annual interest. Now they're making 2 percent on whatever they borrowed....
Are they investing the money in American business? "No, they are mostly buying Treasuries." So the money is just being shuffled from one Federal bank account to another, with each Wall Street bank skimming off $1 billion per month for itself? "Pretty much."
via Kottke
In the Financial Post, Have we learned anything?
WHAT EXACTLY HAPPENED? How could overly enthusiastic homebuyers in the United States sink the global economy?
The problem, however, was not that we had too few regulations; on the contrary, we had too many, and above all, faulty ones. Some readers may object that I am mainly quibbling about the meaning of words and fighting an ideological battle. You may have a point. Please feel free to call the problem whatever you like -- just so long as you are aware of what it consists of. Because what would be fatal would be for slogans about "insufficient regulation" to give rise to the idea that the crisis happened because the government was absent, and that the government must therefore intervene and regulate more to avoid a repeat.
The problem is, we do not have a casino economy. To borrow a metaphor from child rearing, we have a "helicopter economy." Helicopter parents hover over their kids, preventing them falling and hurting themselves. This means their children never grow up and learn to see dangers for themselves. And for this very reason, such children will eventually fall in more serious and dangerous contexts instead, because risk is part of the human condition. The helicopter economy works in a similar way. The government hovers over the banks and investors, making sure they do not get hurt too badly (and cleaning up any messes they leave behind.) Whenever there is an accident, the benchmark rate is lowered, the central bank extends credit and taxpayers' money is pumped in. The players never learn to look out for risks; they just continue their reckless behaviour, and sooner or later they will fall off a ledge that they were not watching out for and pull us all down with them.
Capitalism without bankruptcy is like Christianity without hell -- it loses its ability to motivate humans to be prudent or respect their fears.
There should never be a company that's too big to fail.
Wouldn't this be great.
Energy crisis is postponed as new gas rescues the world
America is not going to bleed its wealth importing fuel. Russia's grip on Europe's gas will weaken. Improvident Britain may avoid paralysing blackouts by mid-decade after all.
The World Gas Conference in Buenos Aires last week was one of those events that shatter assumptions. Advances in technology for extracting gas from shale and methane beds have quickened dramatically, altering the global balance of energy faster than almost anybody expected.
Rune Bjornson from Norway's StatoilHydro said exploitable reserves are much greater than supposed just three years ago and may meet global gas needs for generations.
Tony Hayward, BP's chief executive, said proven natural gas reserves around the world have risen to 1.2 trillion barrels of oil equivalent, enough for 60 years' supply – and rising fast.
"There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources," he said.
The US Energy Department expects shale to meet half of US gas demand within 20 years, if not earlier. Projects are cranking up in eastern France and Poland. Exploration is under way in Australia, India and China.
Texas A&M University said US methods could increase global gas reserves by nine times to 16,000 TCF (trillion cubic feet).
Natural gas has much lower CO2 emissions than coal, even from shale – which is why the Sierra Club is backing it as the lesser of evils against "clean coal" (not yet a reality). The US Federal Energy Regulatory Commission said America may not need any new coal or nuclear plants "ever" again.
As boom- and bust-prone as high finance always has been and remains, the greatest systemic risk to our economy is not Wall Street. It's the growing federal debt (and weakening dollar) being enacted by those Washington politicians -- the ones who want to protect us from Wall Street.
It soon may be not a risk but a certainty of generations-long economic stagnation and hard times as a direct result of "unsustainable" and ever-growing national debt, driven by a federal budget almost half of which is to be paid for each year by borrowing money -- primarily from China -- and already weakening the dollar such that foreigners are trying to get rid of their dollars any way they can.
And yet the same Congress and president who want to stop the banks from taking too much risk cannot stop themselves from ever more deficits. Indeed, so intoxicated -- nay, hypnotized! -- by debt is the current government that it is not even proposing to try to cut back.
Imagine if you had to spend 40% of all you earned on credit card interest. Not paying down your credit card debt, just paying the interest. How secure or hopeful would you feel about the future? Would you be looking to borrow more?
Yet, that's just the situation we're in.
In 2009, 40% of our income tax will go to pay interest on our national debt. Lawrence Kadish in Taking the National Debt Seriously writes that such debt makes our future unstable
unless Americans are made aware of this financial crisis and demand accountability, the very fabric of our society will be destroyed. Interest rates and interest costs will soar and government revenues will be devoured by interest on the national debt. Eventually, most of what we spend on Social Security, Medicare, education, national defense and much more may have to come from new borrowing, if such funding can be obtained. Left unchecked, this destructive deficit-debt cycle will leave the White House and Congress with either having to default on the national debt or instruct the Treasury to run the printing presses into a policy of hyperinflation.
It is against this background that Washington is now debating whether to create social programs it can't afford.
Even though no one can expect benefits under the proposed health care reform bill until 2013, cuts to Medicare and tax increases will take effect immediately, the AP reports.
By counting 10 years of Medicare cuts and tax increasing and only 7 years before and subsidies and benefits kick in, the cost looks lower than it really is.
Even more expensive will be health care premiums that individuals and families already pay -about $1700 a year to the cost of family coverage in 2013 said a study released today by Pricewaterhousecoopers.
At the heart of the argument is whether the Finance Committee bill does enough to draw young, healthy people into the insurance risk pool. By postponing and reducing penalties on people who do not sign up for health insurance, industry analysts predict it would attract less-healthy patients who would drive up costs.
"Market reform enacted in the absence of universal coverage will increase costs dramatically for many who are currently insured by creating a powerful incentive for people to wait until they are sick to purchase coverage," the authors of the report wrote
Because the study was commissioned by the industry group America's Health Insurance Plans, and despite the obvious fact that all corporate audits are performed by outside independent auditors such as Pricewaterhousecoopers, the White House attacked the auditing firm and not the specifics of the report.
"Those guys specialize in tax shelters," said Nancy-Ann DeParle, director of the White House Office of Health Reform. "Clearly this is not their area of expertise."
From Powerline
I want to focus on just one feature of the Baucus plan that the PWC report addresses: the "weak mandate" to buy insurance, coupled with a strong requirement on the insurance industry that it insure everyone, regardless of pre-existing conditions or state of health. This combination will devastate the individual insurance market:
PWC is stating the issue politely, to say the least. What is meant by a "weak mandate" is that, in the current version of the Baucus bill, there is no requirement to buy health insurance at all until after 2013, and by 2017 the penalty for failing to buy health insurance still amounts to only about 15% of the cost of the insurance. Now, think about it: if you know that you don't have to buy health insurance when you are young and healthy, but if you should get sick, or just get older, you can apply for health insurance at any time and it will be illegal for the insurance company to turn you down, what would you do? Obviously, you would defer buying insurance unless and until you get sick. This means that the pool of those who are insured will be lower quality, and the cost therefore higher for everyone who buys insurance. It is as though you could wait until you die, and then your heirs can buy life insurance on you.
This isn't reform, it is stupidity.
It actually would be very easy to make health insurance cheaper. All we have to do is allow insurance companies to compete nationally instead of state-by-state and eliminate all mandates that limit consumer choice. It has been estimated that these simple reforms--which are not part of any of the Democrats' "reform" bills, for obvious reasons--would reduce health care costs by one-quarter to one-third. Instead of such common-sense reforms, the Dems are proposing Rube Goldberg measures that will make health care more expensive. Instead of eliminating mandates, their measures, including the Baucus bill, increase them--in effect making cheaper health insurance illegal
Jennifer Rubin in Simple and Cheap points to Jeffrey Anderson who culled all the best Republican proposals for health care reform and put them on a single page.
1. Leave employer-provided insurance as it is and give individuals a $2,500 tax credit to equalize tax treatment for individuals who buy their own insurance.
2. Allow individuals to buy insurance across state lines.
3. Extend COBRA for up to 30 months, allowing people to keep their insurance if they leave a job.
4. Remove government regulations limiting insurers from offering premium breaks for healthy lifestyle choices.
5. Enact real malpractice reform (limit punitive damages to $250,000 and all noneconomic damages to $750,000).
6. Provide help to encourage insurance pools for the hard to insure.
Over 10 years Anderson's plan would spend $75B and include $345M in tax cuts.
At least even Congressmen would be able to read the whole thing.
The Congressional Budget Office director told Senator Max Baucus that his
plan to cut $123 billion from Medicare Advantage—the program that gives almost one-fourth of seniors private health-insurance options—will result in lower benefits and some 2.7 million people losing this coverage.
Imagine that. Last week Mr. Baucus ordered Medicare regulators to investigate and likely punish Humana Inc. for trying to educate enrollees in its Advantage plans about precisely this fact. Jonathan Blum, acting director of a regulatory office in the Centers for Medicare and Medicaid Services (CMS), said that a mailer Humana sent its customers was "misleading and confusing to beneficiaries, who may believe that it represents official communication about the Medicare Advantage program."
Meanwhile, we have the case of the Association for the Advancement of Retired Persons (AARP), and its fanciful Medicare claims. The self-styled seniors lobby is using all its money and influence to cheer on ObamaCare, even though polls show that most retired persons oppose it. AARP has spent millions of dollars on its TV ad campaign and bulletins and newsletters to its members, including eight million direct-mail letters over Labor Day. The AARP Web site claims that it is a "myth" that "health care reform will hurt Medicare," while it is a "fact" that "none of the health care reform proposals being considered by Congress will cut Medicare benefits or increase your out-of-pocket costs.
This is not good news.
The CBO predicts Social Security cash deficits in 2010-2011
John Taylor, a professor of economics at Stanford University, has put up on his blog some astounding charts to show
the immensity of the explosion of debt problem we now face in the U.S. His alarming debt charts.
Here's a grabber of a headline, U.S. Debt Crisis May Cause 'Fall of Rome' Scenario, Duncan Says
The U.S. has little chance of resolving its deteriorating financial position because the manufacturing industry continues to shrink, leaving the nation with few goods to export, said Duncan, now at Singapore-based Blackhorse Asset Management.
"As unemployment remains above 10 percent well into the foreseeable future, it won't be long before Americans start voting for protectionism," Duncan said. "That's going to be bad because protectionism will mean world trade will diminish and will overall reduce global prosperity."
Once the U.S. debt burden becomes too large and the government can no longer sell debt to the public the Federal Reserve will likely step in and monetize it, resulting in high levels of inflation, he said.
When the financial bubble burst, a lot of people with jobs in financial services lost them suddenly and had to find other ways of making a living.
"Something I've never seen before in 30 years is that this economy has made people really soul-search," says executive recruiter Jeanne Branthover, who heads global financial services for Boyden Global Executive Search. "They're saying, 'If I'm not going to make as much money as I did, I want to look for something that I really like this time.' "
As Riches Fade, So Does Finance's Allure
Cap and Trade could cost families $1761 a year
The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent.
A previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year.
The documents (PDF) were obtained under the Freedom of Information Act by the free-market Competitive Enterprise Institute and released on Tuesday.
These disclosures will probably not aid the political prospects of the Democrats' cap and trade bill. The House of Representatives approved it by a remarkably narrow margin in June -- the bill would have failed if only six House members had switched their votes to "no" -- and it faces significant opposition in the Senate.
Christopher Horner who filed the FOIA request said
"It's nice to see they're not spinning each other behind closed doors."
"They're not telling you the cost -- they're not telling you the benefit. If they don't tell you the cost, and they don't tell you the benefit, what are they telling you? They're just talking about global salvation."
We could lose half the doctors practicing today.
45% Of Doctors Would Consider Quitting If Congress Passes Health Care Overhaul
Two of every three practicing physicians oppose the medical overhaul plan under consideration in Washington, and hundreds of thousands would think about shutting down their practices or retiring early if it were adopted, a new IBD/TIPP Poll has found.
The poll contradicts the claims of not only the White House, but also doctors' own lobby — the powerful American Medical Association — both of which suggest the medical profession is behind the proposed overhaul.
It also calls into question whether an overhaul is even doable; 72% of the doctors polled disagree with the administration's claim that the government can cover 47 million more people with better-quality care at lower cost.
In my lifetime, I have never seen such a spontaneous, self-organized rally of up to so many --- 2 million people according to the Daily Mail, 60,000 according to ABC News. The spokesman for the National Park Service is quotes as saying, "It is a record.... We believe it is the largest event held in Washington, D.C., ever."
It was a remarkable event by ordinary people who are rightly alarmed about what's happening and not happening in Washington.
Nick Gillespie on the scene says
First, the crowd was truly huge. Second, the crowd was from all over the place (both geographically and ideologically). And third, the crowd, well-behaved and stunningly normal in the main, was genuinely pissed off at out of control spending and government policies. "Stop spending," was the basic answer to any questions about what Congress and the president should do come tomorrow. Throw the bums of either party out come next fall was the second most-common answer.
I'm with them, the people pushing back. The government is not fixing the economy, but making everything worse.
The president's chief economic advisor Larry Summers warns that the unemployment rate could stay "unacceptably high" for years which means no new jobs are being created in the private sector.
Already, 2 out of 5 Californians don't have a job!
So the idea we are starting a trade war with China at the behest of the steelworkers' union is mind-boggling because it could so easily "ratchet up into a full-blown trade war and inflict serious economic damage on both countries."
The problem that got us into this mess, the bad regulation of the financial services sector, has not and is not being fixed.
Bloomberg reports that Joseph Stiglitz, the Nobel Prize- winning economist says
the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
"In the U.S. and many other countries, the too-big-to-fail banks have become even bigger," Stiglitz said in an interview today in Paris. "The problems are worse than they were in 2007 before the crisis."
Which brings me to health care. Why doesn't the President just fix Medicare and Medicaid which will go broke in the next 10 years? Why does he want to cut benefits to seniors by cutting the only part Medicare that is competitive?
Medicare for Dummies says the Wall St Journal, with "contradictions worthy of the Marx Brothers"
No cuts, for anyone—except, that is, for the 24% of senior beneficiaries [who] are enrolled in the Medicare Advantage program, which Democrats want to slash by $177 billion or more because it is run by private companies. Mr. Obama called that money "unwarranted subsidies in Medicare that go to insurance companies—subsidies that do everything to pad their profits but don't improve the care of seniors."
In fact, Advantage does provide better care, which is one reason that enrollment has doubled since 2003. It's true that the program could be better designed, with more competitive bidding and quality bonuses. But Advantage's private insurers today provide the kind of care that Mr. Obama said he would mandate that private insurers provide for the nonelderly—"to cover, with no extra charge, routine checkups and preventative care."
Advantage plans have excelled at filling in the gaps of the a la carte medicine of traditional Medicare, contracting with doctors and hospitals to coordinate care and improve quality and covering items such as vision, hearing and management of chronic illness. If seniors in Advantage lose this coverage because of the 14% or 15% budget cut that Mr. Obama favors, well, that's "waste and abuse."
When they looked at the observable data instead of the computer models, MIT scientists found that Carbon Dioxide was irrelevant in climate change.
Professor Richard Lindzen of MIT has published a paper which proves that IPCC models are overstating by 6 times, the relevance of CO2 in Earth's Atmosphere.
Professor Richard Lindzen of MIT's peer reviewed work states "we now know that the effect of CO2 on temperature is small, we know why it is small, and we know that it is having very little effect on the climate."
The global surface temperature record, which we update and publish every month, has shown no statistically-significant "global warming" for almost 15 years. Statistically-significant global cooling has now persisted for very nearly eight years.
Go to the link above or this pdf from the Science and Public Policy Institute to see the graphs and scientific explanations to see why the theory of man-caused global warming is completely false.
All of this data leads to the conclusion that the UN/IPCC models are not only wrong, they are so far off the mark as to be laughable. The satellite and bathythermograph data clearly do not match the IPCC theory, which means that the theory is incorrect.
What this data does tell us is if CO2 concentration should double, global temperatures will not rise by the devastating 6 degrees F the UN predicts, but by a completely harmless 1 degree F. The ERBE data shows an Earth system that is radiating more heat into space as sea surfaces warm, in other words a system at equilibrium, and is clearly demonstrated by observed data. The UN theory of Anthropogenic Global Warming is dead wrong.
The big conclusion is devastating:
There are only a couple of conclusions to be made of this. Either the world has been misled by scientists working for the UN and IPCC due to faulty science, or faulty science has been deliberately used in a global scheme to generate tax revenues for the Governments instituting Cap and Trade Taxation policies.
Remember this as Congress takes up cap and trade in what can be called an Economic Suicide Pact that won't work but will bring the largest tax increase in American history.
There is a startling difference between the pay of the average federal employee who makes $79,197 and the average private sector employee who makes only $49,935.
graph from Chris Edwards
In light of the current economic crisis and the jobless rate of 9.5%, President Obama has decided to reduce the across-the-board increase in pay federal employees will get next year from 2.4% to just 2%.
You've heard a lot about Fannie Mae and Freddie Mac and the $34.2 billion and $51.7 billion respectively it cost to bail them out which is by no means the end. By the end of next year the continuing cost of bailouts for these two could approach $200 billion. EACH
Now it seems Ginnie Mae and FHA are following in their footsteps.
The Next Fannie Mae
Among the FHA, Ginnie, Fannie and Freddie, nearly nine of every 10 new mortgages in America now carry a federal taxpayer guarantee.
Herein lies the problem. The FHA's standard insurance program today is notoriously lax. It backs low downpayment loans, to buyers who often have below-average to poor credit ratings, and with almost no oversight to protect against fraud. Sound familiar? This is called subprime lending—the same financial roulette that busted Fannie, Freddie and large mortgage houses like Countrywide Financial.
Is anyone on Capitol Hill or the White House paying attention? Evidently not, because on both sides of Pennsylvania Avenue policy makers are busy giving the FHA even more business while easing its already loosy-goosy underwriting standards. A few weeks ago a House committee approved legislation to keep the FHA's loan limit in high-income states like California at $729,750. We wonder how many first-time home buyers purchase a $725,000 home. The Members must have missed the IG's warning that higher loan limits may mean "much greater losses by FHA" and will make fraudsters "much more attracted to the product."
In the wake of the mortgage meltdown, most private lenders have reverted to the traditional down payment rule of 10% or 20%. Housing experts agree that a high down payment is the best protection against default and foreclosure because it means the owner has something to lose by walking away. Meanwhile, at the FHA, the down payment requirement remains a mere 3.5%. Other policies—such as allowing the buyer to finance closing costs and use the homebuyer tax credit to cover costs—can drive the down payment to below 2%.
All of which means that the FHA and Ginnie Mae could well be the next Fannie and Freddie. While Fan and Fred carried "implicit" federal guarantees, the FHA and Ginnie carry the explicit full faith and credit of the U.S. government.
We've long argued that Congress has a fiduciary duty to secure the safety and soundness of FHA through common sense reforms. Eliminate the 100% guarantee on FHA loans, so lenders have a greater financial incentive to insure the soundness of the loan; adopt the private sector convention of a 10% down payment, which would reduce foreclosures; and stop putting subprime loans that should have never been made in the first place on the federal balance sheet.
The housing lobby, which gets rich off FHA insurance, has long blocked these due-diligence reforms, saying there's no threat to taxpayers. That's what they also said about Fan and Fred—$400 billion ago.
It is unbelievable to watch what is happening in California. In terms of unemployment, the hardest hit state is California and the hardest hit county in California is Fresno with a jobless rate reaching 40% in some towns.
There's been a three year drought, the farmers in the most productive valley in the world are really hurting, the government controls the water and they are not giving any to the farmers.
It's all going to the delta smelt.
This is not a story about fish. Rather, it is a story about how efforts to save the fish through a court-ordered water shortage have pushed a region already brought to the brink by recession over the edge.
It is also a story about how farmers are fighting back, using almost unimaginable stories of economic hardship to argue for a reversal of environmental rules that could see their farms thrive once again, but also endanger wildlife that may never come back.
Last December, fresh restrictions meant to protect the fish were imposed, effectively shutting down the spigots and starving the Central Valley farmers of water.
Those in Fresno County saw their monthly allotments evaporate, virtually overnight. Here's how Mr. Allen recalls it: "When it came time to get my initial water allocation in January, we were told it would be zero. In February, my heart was pounding. Zero again. March, same thing. April, zero." By that point, most of his crop of winter wheat had already withered and died.
Today, Interstate 5, the highway that slices through the San Joaquin Valley, is flanked by parched fields. Signs, in English and Spanish, proclaim: "Congress-created dustbowl" and "No water, No future" and "Like foreign oil? You'll love foreign food."
The bitter irony that farm families in the region known as America's salad bowl are flocking to food giveaways at churches and community centres is lost on no one.
Without water, farmers have left an estimated 200,000 hectares of once-productive farmland fallow. Thousands of farm workers, mainly Spanish-speaking migrants, have been laid off.
Mr. Howitt estimates lost farm revenue in the San Joaquin Valley could top $2-billion this year and will suck as many as 80,000 jobs out of its already-battered economy.
The problem is the Endangered Species Act, which, unless you impacted, you have no idea how draconian it is. The basic problem is there is no balancing of interests between animal and humans. Once a species is declared endangered, it doesn't matter how much money it costs to 'save' the critter or what economic devastation it creates in the surrounding human community, the species must be saved.
Now the California water agency is changing its course on the delta smelt and petitioning the federal government to reconsider its protections for the delta smelt citing new information about another population of smelt that's not effected by the state water operation.
I'm all for protecting ecosystems and endangered species, but not at such an egregious human cost.
Like Todd Allen in How green was my valley
His farm, a million-dollar operation in good times, is 70-per-cent financed. He also owes money on three tractors, a $140,000 drip system, which is useless to him now, and his house.
"I've never been in a predicament like this … so, if I can survive this year, I can survive anything," he says, blinking back tears.
When he began to farm full-time 20 years ago, he had a consistent water supply. He also had 10 employees and started with 600 hectares of cantaloupe, cotton and wheat.
This year, he has laid everyone off and is doing what little labour is left himself.
"You know, I am really scared for my family. I have two daughters and I thought I had a future going out here, and now I can't even sell this land because, without water, it is worthless," he says.
"It seems like in this economy the government would look for quick fixes instead of throwing money at everything. All they have to do is turn the pumps on. The water is there."
But most farmers here say they don't want a handout. At a town hall meeting in Fresno a few weeks ago, tempers flared as farmers flustered Interior Department officials by shouting: "We don't want welfare, we want water."
Just as the Obama administration has promulgated federal funding rules for embryonic stem cells, Forbes magazine reveals The Dirty Secret of Embryonic Stem Cell Research
Hope for any benefits from ES research is decades away.
Thomson blamed simple biology. Among other problems, ES cells require permanent use of dangerous immunosuppressive drugs. They have a nasty tendency to form tumors both malignant and benign including teratomas--meaning "monster tumor." Teratomas can grow larger than a football and can contain eyeball parts, hair and teeth. Yech!
OK, so how many "decades?"
"The routine utilization of human embryonic stem cells for medicine is 20 to 30 years hence," embryonic stem cell research advocate William Haseltine and then-chief executive officer of Human Genome Sciences.
Others say 'three to five decades' or 'never in my lifetime'.
Meanwhile adult stem cells (AS) have proved to be just as flexible as embryonic stem cells (ES) without the health concerns or moral baggage.
AS cells have now treated scores of illnesses including many cancers, autoimmune disease, cardiovascular disease, immunodeficiency disorders, neural degenerative diseases, anemias and other blood conditions. They've been used in over 2,000 human clinical trials. There has never been an ES cell clinical trial. Former National Institutes of Health director Dr. Bernadine Healy, once an ES cell research enthusiast," now calls them "obsolete."
That's why it hardly makes sense to vastly increase federal research funding for ES cells. Medical research spending is always a zero-sum game. However big the overall budget, every dollar approved for one grant is a dollar lost to others.
UPDATE; Researchers produce cells they say are identical to embryonic stem cells
Two groups of Chinese researchers have performed an unprecedented feat, it was announced today, by inducing cells from connective tissue in mice to revert back to their embryonic state and producing living mice from them.
By demonstrating that cells from adults can be converted into cells that, like embryonic stem cells from fetuses, have the ability to produce any type of tissue, the researchers have made a major advance toward eliminating the need for fetal cells in research and clinical applications.
I dislike being pressed to make any financial decision "right now" because I feel I'm being swindled. I feel that same way about the health care proposal now before the Congress.
What I read and see makes me want to yell to all of Congress, "Stop, stop. Go home. Take a break and come to your senses."
Mr. Obama's February budget provided the outline, but the House bill now fills in the details. To wit, tax increases that would take U.S. rates higher even than most of Europe. Yet even those increases aren't nearly enough to finance the $1 trillion in new spending, which itself is surely a low-ball estimate. Meanwhile, the bill would create a new government health entitlement that will kill private insurance and lead to a government-run system.
The most remarkable quality of this health-care exercise is its reckless disregard for economic and fiscal reality. With the economy still far from a healthy recovery, and the federal fisc already nearly $2 trillion in deficit, Democrats want to ram through one of the greatest raids on private income and business in American history. The world is looking on, agog, and wondering why the United States seems intent on jumping off this cliff.
The Congressional Budget Director says all the various health care proposals will increase, not reduce federal government spending and so the Federal Budget is on an unsustainable path
While the Vice President says We Have to Go Spend Money to Keep From Going Bankrupt
The Investors' Business Daily says the individual private health insurance is illegal under the House plan. It's Not an Option
It didn't take long to run into an "uh-oh" moment when reading the House's "health care for all Americans" bill. Right there on Page 16 is a provision making individual private medical insurance illegal.
So we can all keep our coverage, just as promised — with, of course, exceptions: Those who currently have private individual coverage won't be able to change it. Nor will those who leave a company to work for themselves be free to buy individual plans from private carriers.
What wasn't known until now is that the bill itself will kill the market for private individual coverage by not letting any new policies be written after the public option becomes law.
The public option won't be an option for many, but rather a mandate for buying government care. A free people should be outraged at this advance of soft tyranny.
Dick Morris points out that rationing health care is inevitable and it's older people who will suffer the most.
Obama's health care proposal is, in effect, the repeal of the Medicare program as we know it. The elderly will go from being the group with the most access to free medical care to the one with the least access. Indeed, the principal impact of the Obama health care program will be to reduce sharply the medical services the elderly can use. No longer will their every medical need be met, their every medication prescribed, their every need to improve their quality of life answered.
It is so ironic that the elderly - who were so vigilant when Bush proposed to change Social Security - are so relaxed about the Obama health care proposals. Bush's Social Security plan, which did not cut their benefits at all, aroused the strongest opposition among the elderly. But Obama's plan, which will totally gut Medicare and replace it with government-managed care and rationing, has elicited little more than a yawn from most senior citizens.
The organizational chart of the Democratic plan charted.
click image to enlarge. Via Maggie's Farm who Says it all.
Rick Moran asks
So what do we get after spending at least a trillion dollars over 10 years? The [5] CBO says we would still have 17 million legal Americans not insured. We would also almost certainly have some form of rationing. And the chances are good that we would have a system performing much worse for people who are insured today.
What God Has Joined Together, Recession Makes Hard to Put Asunder
For Some, the Downturn Keeps Divorce on Ice; Ms. Brewster, Husband Share a House Divided
A May survey by the Institute for Divorce Financial Analysts, a national organization for financial professionals who work on divorce cases, found that the recession was delaying divorces, and inspiring "creative divorce solutions" in living arrangements.
"People are saying, 'I've put up with it for the last 10 years, I can put up with it for another year,'" says Gary Nickelson, president of the American Academy of Matrimonial Lawyers. In a poll of 1,600 of its members, the group says, respondents estimated that divorce cases in the six months through March were off 40% from normal levels.
How did we fall so far so fast? And can consumer confidence and spending be restored when every household I know is saving as much as they can, worried about their jobs, afraid of losing them and troubled about what's happening to their retirement savings. Every sector of the economy is hurting. Hoping on a wish, Sears and K-Mart are starting Christmas sales in July.
Robert Reich on When will the Recovery begin? Never
The so-called "green shoots" of recovery are turning brown in the scorching summer sun.
Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings. One out of ten home owners is under water -- owing more on their homes than their homes are worth. Unemployment continues to rise, and number of hours at work continues to drop. Those who can are saving. Those who can't are hunkering down, as they must.
The X marks a brand new track -- a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin.
David Goldman on the Zombie Economy
It's not about getting a recovery going. That's not going to happen, not if Martians land in flying saucers with a billion tons of gold to invest in bank capital. It's about preventing something worse than we have now, namely screaming, bug-eyed, blood-in-the-streets, rape-the-crops-and-burn-the-women panic. Zombie not bad. Zombie good. Zombie better than alternative, which is you dead. Really dead. No breath, never get live again. Zombie is as good as it gets. You zombie, you still alive, sort of. You not zombie, you dead. Opposite of zombie not happy, lively, active. Opposite of zombie is you push daisies up. The best we can get out of this is a zombie banking system, one that still pays its debts because it earns enough interest from the toxic assets left over from the last boom.
Thanks to David Layman for pointing out the Cosmic Convergence of these two.
Here's Nouriel Roubini,Doctor Doom, on Brown Manure, Not Green Shoots who says the jobs situation is even worse than the headlines.
With the current rate of job losses, it is very clear that the unemployment rate could reach 10% by later this summer--around August or September--and will be closer to 10.5%, if not 11%, by year-end. I expect the unemployment rate is going to peak at around 11% at some point in 2010, well above historical standards for even severe recessions.
It's clear that even if the recession were to be over anytime soon--and it's not going to be over before the end of the year--job losses are going to continue for at least another year and a half.
The details also suggest that other aspects of the labor markets are worsening. If you include discouraged workers and partially employed workers, the unemployment rate is already above 16%.
Yes, we can print more money, but who's going to buy the paper? Paul Craig Roberts A Perfect Storm
It is obvious to Chinese officials that neither China nor the entire world has enough spare money to purchase $4 trillion of US Treasuries over the next two years.
The Obama-Federal Reserve-Wall Street plan for the US to spend its way out of its problems is coming unglued. The reckless spending is pushing the dollar down and interest rates up.
Every sector of the US economy is in trouble. Former US manufacturing firms have been turned into marketing companies trying to sell their foreign-made goods to domestic consumers who have seen their jobs be moved offshore. Much of what is left of US manufacturing–the auto industry–is in bankruptcy. More decline awaits housing and commercial real estate. The dollar is sliding, and interest rates are rising, despite the Federal Reserve's attempts to hold interest rates down.
When the Reagan administration cured stagflation, the result was a secular bull-market in US Treasuries that lasted 28 years. That bull market is over. Americans' living standards are headed down. The American standard of living has been destroyed by wars, by offshoring of jobs, by financial deregulation, by trillion dollar handouts to financial gangsters who have, so far, destroyed half of Americans' retirement savings, and by the monetization of debt.
The next shoe to drop will be the dollar's loss of the reserve currency role. Then the US, an import-dependent country, will no longer be able to pay for its imports. Shortages will worsen price inflation and disrupt deliveries.
Life for most Americans will become truly stressful.
Negative equity found to be the biggest reason for the mushrooming rate of mortgage foreclosures since 2007.
Zero money down, not subprime loans, led to the mortgage meltdown.
The horrific solution of the cap and trade legislation is far worse than the problem.
The formulation of the so-called Waxman-Markey bill was less traditional legislative sausage-making than an unspeakable practice out of The Jungle. Its architects bought off every possible interest group no matter what the policy consequences until they had a bare majority to slam it through the House sight unseen (a physical copy of the final bill didn't yet exist when it passed)
Originally, the Obama administration counted on $80 billion a year from the government's sale of emissions credits. To win over industry, Waxman-Markey gives the credits away for free. Poof! There goes the revenue.
The upshot is that an Environmental Protection Agency analysis says that under Waxman-Markey, there will be no reduction in emissions by 2020. The progressive Breakthrough Institute estimates that emissions could continue at their current business-as-usual rate through 2030. Perversities abound. According to the Los Angeles Times, under the bill, the U.S. "would use more carbon-dioxide heavy coal in 2020 than it did in 2005." Time writes that "the total amount of renewable energy generation under Waxman-Markey would actually be less than the renewable energy that would have been produced without the bill."
Even if Waxman-Markey were perfectly formulated, it would reduce global surface temperatures by only one-tenth of 1 degree Celsius in 100 years. That's a negligible difference, purchased at a great price.
The only people who benefit are the "permanent class of government-addicted elites"
The Obama/Pelosi/Reid Democrats in charge of everything in Washington have decided to order everything on the menu, and a permanent class of government-addicted elites --lawyers, economists, think-tankers, MSMers, senior bureaucrats-- are cheering them on because the growth in the size and complexity of government means a growth in the demand curve for specialist services at specialist prices.
The jobs supposedly created are an illusion.
Looking at the experience of creating green jobs in Spain which bet heavily on that premise and the promise of wind energy, a recent study found that each green job cost more than a million dollars to create and resulted in the destruction elsewhere of 2.2. jobs.
The Beacon Hill Institute at Suffolk University in Boston released a study today finding that the studies claiming economic benefits to government imposed green jobs were seriously flawed and that such programs actually hurt the economy.
Proponents of "green collar" jobs promise that government subsidization of these jobs will create a net increase in employment, economic growth, recovery from the current crisis, and energy savings, all in addition to environmental benefits. Unfortunately, these claims are based on seriously flawed economic analysis.
Given how poorly the stimulus has worked and given the 4 million newly unemployed in the past six months, it doesn't seem the right time to remake the energy sector to impose the largest tax increase in history when the economy is in recession.
Cap and Trade Fiction
The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment.
Costs range from the CBO estimate of $175/year which admittedly doesn't take account of the effect of the carbon tax on anything other than the consumers' own electric bill next year. Taking into account the ripple effect of higher taxes for everything, the Heritage Foundation estimates $1870 for a family of four by 2020.
Man-Made Disaster
Not since a misguided piece of legislation imposed tariffs that turned a recession into a depression has there been a piece of legislation as bad as Waxman-Markey.
The 1,000-plus-page American Clean Energy and Security Act (H.R. 2454) is being rushed to a vote by House Speaker Nancy Pelosi before anyone can seriously object to this economic suicide pact.
Its centerpiece is a "cap and trade" provision that has been rightfully derided as "cap and tax." It is in fact a tax on energy everywhere it is consumed on everything it is used to make or provide.
It is the largest tax increase in American history — a tax on all Americans — even the 95% that President Obama pledged would never see a tax increase.
Looking at the European experience Cap and Trade doesn't work
According to European Commission figures, emissions from the 27 member states rose by 1.9% in the first three years of the regime.
Translated across the Atlantic, any climate change bill will become the subject of the worst kind of pork-barrel politics riddled with loopholes for key industries before it becomes law.
Tilting at Green Windmills George Will looks at a puzzled Spanish professor Gabriel Calzada, an economics professor at Universidad Rey Juan Carlos who studied the effects at the "torrential spending" on wind and solar energy in Spain and concluded
each "green" job created cost $752,000 -$1.4 million in subsidies
each "green" job entailed the loss of 2.2.other jobs
Why are the leaders in Congress pushing so hard on this bill of a thousand pages which was just amended with 300 pages this morning. I would bet few,if any, Congressman have even read it.
The number of skeptics on global warming are swelling and the tide is turning . There is no scientific consensus whatsoever on global warming or what causes it. The science is not settled.
Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak "frankly" of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming "the worst scientific scandal in history." Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the "new religion."
If this passes the house, there is hope it will not pass the Senate. If it does, every Congressman who voted for it should be held accountable in 2010 for its consequences.
Mark Steyn on why "stirring up apathy" is the key to understanding the health care debate
Willie Whitelaw, a genial old buffer who served as Margaret Thatcher's deputy for many years, once accused the Labour Party of going around Britain stirring up apathy. Viscount Whitelaw's apparent paradox is, in fact, a shrewd political insight, and all the sharper for being accidental. Big government depends, in large part, in going around the country stirring up apathy – creating the sense that problems are so big, so complex, so intractable that even attempting to think about them for yourself gives you such a splitting headache it's easier to shrug and accept as given the proposition that only government can deal with them.
Take health care. Have you read any of these health care plans? Of course not. They're huge and turgid and unreadable. Unless you're a health care lobbyist, a health care think-tanker, a health care correspondent or some other fellow who's paid directly or indirectly to plow through this stuff, why bother? None of the senators whose names are on the bills have read 'em; why should you?
"For the first time in their lives, people feel sort of useless. All of a sudden, you can go to lunch for two and a half hours and really not be missed. It's a blow to the ego. You're talking about people who have never really failed."
Another effect of the credit crisis - Why Major Law Firms Are Shrinking
People are shellshocked," said one top partner at the firm who, like many of its current and former lawyers, spoke on condition of anonymity for fear of retribution. "If they survived the first two rounds, they're happy to have a job, but are still very nervous. And if their phones don't ring, if their work doesn't come back with a vengeance, they fear they aren't long for this world."
As the apocalypse on Wall Street ripples out into the larger economy, a thick red tide is lapping at the once-impregnable foundations of New York's corporate law firms, threatening to turn the industry — and with it, some iconic city characters — into an endangered species.
THE gentleman's profession of the law is becoming a vestige of the past, removed enough from reality to be remembered, like phone booths or fedoras.
While the legal industry is hardly battling the existential threat that is facing, say, the newspaper trade, Big Law — especially in competitive New York — is facing a potential paradigm shift as fundamental as the one that has hit investment banks and the auto industry. Big, as a business model (let alone as an expression of the national mood), seems bound for obsolescence.
Even before the news that the May unemployment is worse than predicted, 9.4%, the highest in more than 25 years, there's been precious little heard in Washington about creating new jobs except for the public sector. Two exemplary graphs show just what's been happening.
The first striking visual shows The Geography of Jobs at TIP strategies. It's animated so you have to click on the link to see it. It's well worth it to see the Jobs Gained and the Jobs Lost since 2004 and where.
Says Jim Geraghty in Watching Big Green Dots Turn Into Big Red Ones
the job losses in major metropolitan areas since the beginning of 2009 have been on par with Hurricane Katrina's impact on employment in New Orleans.
The second visual at Innocent Bystanders is reproduced below.
So, all that money spent on the Recovery Plan has made it worse! We would have been better off doing nothing.
Megan McArdle asks Is California Too Big to Fail?
So what about California? A reader asks. Ummm, that's a tough one. No, wait, it's not: California is completely, totally, irreparably hosed. And not a little garden hose. More like this. Their outflow is bigger than their inflow. You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession. You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets. Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!
I am not under the illusion that this will be fun. For starters, the rest of you sitting smugly out there in your snug homes, preparing to enjoy the spectacle, should prepare to enjoy the higher taxes you're going to pay as a result. Your states and municipalities will pay higher interest on their bonds if California is allowed to default. Also, the default is going to result in a great deal of personal misery, more than a little of which is going to end up on the books of Federal unemployment insurance and other such programs.
I know many will think the federal government should bail them out, but not me. We just have too much on our plates and the debt the U.S, in incurring is frightening and as Robert Samuelson says Risky Debt.
Let's see. From 2010 to 2019, Obama projects annual deficits totaling $7.1 trillion; that's atop the $1.8 trillion deficit for 2009. By 2019, the ratio of publicly held federal debt to gross domestic product (GDP, or the economy) would reach 70 percent, up from 41 percent in 2008. That would be the highest since 1950 (80 percent). The Congressional Budget Office, using less optimistic economic forecasts, raises these estimates. The 2010-19 deficits would total $9.3 trillion; the debt-to-GDP ratio in 2019 would be 82 percent.
Except from crabby Republicans, these astonishing numbers have received little attention -- a tribute to Obama's Zen-like capacity to discourage serious criticism. Everyone's fixated on the present economic crisis, which explains and justifies big deficits (lost revenue, anti-recession spending) for a few years. Hardly anyone notes that huge deficits continue indefinitely.
And that's without talking about Social Security or the looming unfunded public pension crisis in just about every state.
The plan most everyone seems to agree on is Soak the Rich. Only problem is they leave.
We can not imagine how bad it's going to get. The future looks dim indeed and California is the canary in the mine. There are lessons to be learned from the California debacle but will we learn them?
Victor Davis Hansen says
It is generally known that Americans want it both ways — green giddiness and plenty of oil and gas for their cars and homes; lots of government services and low taxes; a big military but spasms of isolationism. But now California is where the rubber meets the road, and we just saw the big-government side of the equation dissolve. With the highest income taxes, highest sales taxes, and biggest deficits, Californians finally said "no mas," and let the cutting begin. Of course, we have expanded government to such a degree that "radical" cuts will only get us back to about 2005-sized government, and "tax cutting" in this loopy state will mean holding firm at a 9% sales tax and 10%-plus income tax. But one must begin somewhere.
Fabulous charts at QanddO. Here's one.
The good news is Gimundo is back with good news served daily like
Delaying Retirement Can Ward Off Alzheimer's Disease
"The intellectual stimulation that older people gain from the workplace may prevent a decline in mental abilities, thus keeping people above the threshold for dementia for longer," Simon Lovestone, one of the study's co-authors, said in a press statement.
Happy News from the Recession: 5 Good Things about Hard Times
I quite liked the idea of Job Angels and Estonia's Bank of Happiness
The Bank of Happiness has no physical presence, but is merely an Internet portal where Estonians can register their contact details, along with details on what personal and professional skills they can use to help community members, as well as requests for what they'd like help with from others.
"I think young people would love to do this. Not everything has to be based on money," 18-year-old student Evelin Tamm told the Times Online. "I love to clean and to babysit. Perhaps, in return, someone could help me with my maths and physics."
Last week the trustees reported that the Medicare will run out of money in less than 10 years, by 2017, two years ahead than projected last year. Social security will run out of money in 2037. It will start running deficits in 2017. The trust funds have always been a fiction since the surpluses have been used to reduce budget deficits.
From the summary issued by the trustees
Medicare's annual costs were 3.2 percent of Gross Domestic Product (GDP) in 2008, or about three quarters of Social Security's, they are projected to surpass Social Security expenditures in 2028 and reach 11.4 percent of GDP in 2083.
The argument goes Medicare is going to bankrupt us which is why we have to have universal health care. To which Megan McArdle replies
I hear this argument quite often, and it's gibberish in a prom dress. Any cost savings you want to wring out of Medicare can be wrung out of Medicare right now:
The Wall St Journal reports that the "unfunded liability" of Medicare over the next 75 years is $38 trillion. Yes, trillion. It's hard to wrap your mind around just how big a trillion is.
A trillion seconds ago, no one on this planet could read and write. Neither the Roman Empire nor the ancient Chinese dynasties had yet come into existence. None of the founders of the world's great religions today had yet been born.
A million seconds is 13 days.
A billion seconds is 31 years.
A trillion seconds is 31,688 years
Do you believe the White House estimate that it could save $2 trillion in health care over 10 years just like that the Boston Globe asks.
President Obama is right that the cost of healthcare, now more than 16 percent of the economy, is simply unsustainable.
But will the industry's gauzy pledges of better coordination of care, more standardization of insurance claim forms, reduced administrative costs, and greater efficiency actually yield the promised savings?
Wesley Smith says we're Pushing Health Care Rationing By Not Discussing Health Care Rationing
rationing prohibits health care funders from paying for otherwise covered treatments, based on the patient's age, state of health, disability, or perhaps, because the patient committed politically incorrect lifestyle crimes such as smoking or being overweight.
The rationing has already begun and the elderly are hardest hit.
Viking Pundit reports on a story in the Boston Globe on the "pathbreaking effort to cut medical costs" begun by Massachusetts General Hospital: send home the frail elderly from the hospital sooner and reduce their emergency room visits.
Medicare is now the country's largest purchaser of health care. OMB budget chief Peter Orszag believes that "comparative effectiveness research" will determine what works best. Problem is virtual colonoscopies work best for the elderly but not for anyone else. So as the WSJ reports in How Washington Rations, Medicare now will refuse to reimburse for virtual colonoscopies.
The problem is that what "works best" isn't the same for everyone. While not painless or risk free, virtual colonoscopy might be better for some patients -- especially among seniors who are infirm or because the presence of other diseases puts them at risk for complications. Ideally doctors would decide with their patients. But Medicare instead made the hard-and-fast choice that it was cheaper to cut it off for all beneficiaries. If some patients are worse off, well, too bad.
All this is merely a preview of the life-and-death decisions that will be determined by politics once government finances substantially more health care than the 46% it already does. Anyone who buys Democratic claims about "choice" and "affordability" will be in for a very rude awakening.
David Brooks in Fiscal Suicide Ahead says that for Obama Health care costs are now the crucial issue of his whole presidency.
I tip my hat to Edmund Andrews who did what none of us can imagine - expose his personal financial delusions - to write all about My Personal Credit Crisis.
If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper's chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.
But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.
I felt foolish, ashamed and angry as I confessed to Bob. Why had I been trying to live a lifestyle that I couldn't afford? Why had I tried to keep up the image of a conventional suburban family man, when nothing about my situation was conventional? How could I have glossed over the fact that we had been spending about $3,000 more than we were earning, month after month after month? How could a person who wrote about economics for a living fall into the kind of credit-card trap that consumer groups had warned about for years?
Neo takes a much tougher view.
Andrews remains mystified as to how this could have happened to him. I can help him out on that: greed and denial. No one forced him to do any of this, and he of all people ought to have known better. But his story is an excellent example of how far many people in this country have come from any idea of personal responsibility.
Reality bites and hard.
In the comments, Beth said...
I read this with disbelief. This guy, after child support, was bringing home less than $3k a month, and his fiancee at the time had no job at all, and it made sense to borrow HALF A MILLION BUCKS???? He keeps saying how easy it was to borrow it, but until months after the bills actually start coming in, he never thought about how hard it would be to pay back. That's the kind of thinking I've seen in friends with manic depression, in a manic phase.
For the past 50 years, we've tried to control health care spending and no one is satisfied with the results. Yet, for the most part, we have better care, more advanced technology and more effective medicines than we did 50 years ago. But there's no question we waste enormous amounts of money and even more is lost to fraud. We cut back again and again on payments to doctors who treat Medicaid and Medicare patients with the result that make almost no money treating such patients.
Seems to me there are two ways to go. Either the government takes over and imposes price controls and rations health care or we let the market do it. Now, I can hear you say, but the market hasn't done it and it's not fair.
One country did it and did it well while spending far less. Singapore put the consumer in control with money each individual was required to put aside for health care. By using the money wisely and getting the care they wanted, they had money left over they could use in retirement. A twofer.
American health care policies are sick by Robert Herbold
I believe it's just plain silly for the folks in Washington D.C. to consider spending an additional $600 billion for healthcare. Why throw money at an ineffective and bureaucratic system that is totally out-of-control? Why not figure out how to get it under control before deciding to drown it with more borrowed money from the Chinese or, even worse, further taxing the rich and thus retarding investment that might have a chance of turning around our economy?
So, what countries seem to be handling healthcare most effectively and efficiently? Well, there's one nation that has the lowest infant mortality rate in the world as well as the third longest average lifespan for its citizens - and it spends only 3.7 percent of its GDP on healthcare. That country is Singapore.
Singaporeans participate in a mandatory savings program that sets up a "Medisave" account for each individual. The individual is required to pay a small percentage of his or her income each month into that account, and employers also make a contribution. For individuals who are unemployed, there is a government subsidy. Singaporeans also engage in a "Medishield" program, which is a national catastrophic illness insurance plan. Premiums for the Medishield program are small, because it is government subsidized; as a result, the premiums are paid for out of an individual's Medisave account.
Choice and Competition
Most significantly, when individuals in Singapore feel the need to go to a physician, they select the doctor based on the quality of the care they believe they will get and the cost associated with going to that physician. In essence, physicians compete for the patient's business. Individuals select carefully since it's their Medisave account money that's used to pay for the chosen physician.
Individuals cannot take money out of their Medisave accounts except for medical use. On the other hand, these accounts grow steadily over time because the government invests these funds for the individual in a safe and modestly performing investment fund.
What's important here is that the money is not the government's. It's the individual's money and, at retirement age, people actually have access to these funds. That's why individuals use the funds wisely.
I 'm not trained in economics, but I am trained in the law and the rule of law still means something to me. So I'm with Neo who writes
Where's the Outrage.
The general lack of concern about the administration's throwing out the usual rules regarding senior lenders in the Chrysler negotiations still has the power to surprise me.
There is no way this course of action can end up benefiting our economy, or even Chrysler. The only beneficiaries are the unions (at least, temporarily; if the company ends up failing, they will go down too)
Hedge funds which hold about $1 billion in Chrysler bonds, refused the government's offer to take 30 cents on the dollar. Legally, they couldn't: they are obligated to get the best return for their shareholders. The best return would be in bankruptcy court where their senior position as secured creditors under the U.S. bankruptcy code would be followed. These are the rules of the game that everyone knows. -
Neo quotes s Bill Frezza who asks
Has it dawned on you what the consequences will be if the President gets his way and consideration is given to creditors not according to contracts, rules, and established legal precedents but according to which group is most politically favored? And do you believe the President advanced the cause of economic recovery by publicly excoriating "speculators" who once hoped to profit by lending money against hard assets to an ailing company?
In Chrysler's case the TARP-backed lenders – that is, banks-too-big-to-fail now living on the dole – chose to kowtow to the executive branch. What they "sacrificed" was the economic interests of their shareholders in favor of the political interests of their management. The non TARP-backed lenders, in this case a handful of hedge funds trying to protect the pension funds, university endowments, and insurance companies that invested in them, balked at getting lower consideration for their secured debt than the UAW is getting for its unsecured obligations. Hence, a trip to court and a tongue lashing by the president.
This is a colossal abuse of power against the rule of law. Megan McArdle asks
when did it become the government's job to intervene in the bankruptcy process to move junior creditors who belong to favored political constituencies to the front of the line? Leave aside the moral point that these people lent money under a given set of rules, and now the government wants to intervene in our extremely well-functioning (and generous) bankruptcy regime solely in order to save a favored Democratic interest group.
One hedge fund leader blasted the "bullying" and "abuse of power". Hedge Funds outraged at Obama Bullying But Also Cowering in Fear
Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not. The managers have a fiduciary obligation to look after their clients' money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That's how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could "share in the sacrifice", you would not be happy.
The President's attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to "sacrifice" some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.
Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying. The TARP recipients had no choice but to go along. The hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people's money. The President's comments here are backwards and libelous.
This is America. We have a free enterprise system that has worked spectacularly for us for two hundred plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the oval office to be scolded for disobedience by the President.
And what do we taxpayers get out of all of this? Bill Frezza again.
A doomed third-rate car company majority owned by its militant union run by Italian management building congressionally designed "green" cars no one wants to buy financed by taxpayers into perpetuity because no private investor in their right mind will touch the company with a ten foot pole. Is this supposed to be economic policy or comic opera?
I don't see how this is going to turn out well.
The cavalier use of brute government force has become routine, but the emerging story of how Hank Paulson and Ben Bernanke forced CEO Ken Lewis to blow up Bank of America is still shocking. It's a case study in the ways that panicky regulators have so often botched the bailout and made the financial crisis worse.
In the name of containing "systemic risk," our regulators spread it. In order to keep Mr. Lewis quiet, they all but ordered him to deceive his own shareholders. And in the name of restoring financial confidence, they have so mistreated Bank of America that bank executives everywhere have concluded that neither Treasury nor the Federal Reserve can be trusted.
No wonder no banker in his right mind trusts the Fed or Treasury, and no wonder nobody but Pimco and other Treasury favorites is eager to invest in the TALF, the PPIP, or any of the other programs that require trusting the government as a business partner.
The political class has spent the last few months blaming bankers for everything that has gone wrong in the financial system, and no doubt many banks have earned public scorn. But Washington has been complicit every step of the way, from the Fed's easy money to the nurturing of Fannie Mae and Freddie Mac, and since last autumn with regulatory and Congressional panic that is making financial repair that much harder. The men who nearly ruined Bank of America have some explaining to do.
"The enormous pot of TAARP money has in fact corrupted both the private and the public sector," writes Donald Luskin in TARP Looking More Criminal by the Minute.
Yesterday's sensational claims by New York Attorney General Andrew Cuomo — that Ken Lewis, CEO of TARP-recipient Bank of America, was pressured into what amounts to securities fraud by the Treasury and the Federal Reserve concerning his bank's acquisition of Merrill Lynch — throws the question right into the headlines. It raises issues of corruption all around, and at the highest levels — from corporate CEOs and federal regulators to Mr. Cuomo himself.
What originally prompted my friend Larry Kudlow to ask if TARP is a criminal enterprise was Wednesday's report to Congress by TARP's special inspector general, Neil M. Barofsky, in which it was disclosed that "nearly 20 preliminary and full criminal investigations" are underway, including "large corporate and securities fraud matters affecting TARP investments, tax matters, insider trading, public corruption, and mortgage-modification fraud." When I first read that I rolled my eyes and said to myself, "Hey, what do you expect?"
It's easy to guess that Barofsky is looking into the possibility that Treasury Secretary Henry Paulson coerced the CEOs of the nine largest banks to accept capital investments from TARP, even though several of them didn't want the government as a stakeholder. Wells Fargo chairman Richard Kovacevich, for example, says that he was "forced to take the TARP money." Philip Swagel, who served at the time as assistant secretary for economic policy at the Treasury, admits that "there is no authority in the United States to force a private institution to accept government capital. This is a hard legal constraint."
But then again, the Emergency Economic Stabilization Act, the statute that authorizes TARP, doesn't give the Treasury the power to make direct investments in banks at all. It gives the Treasury the power to buy troubled assets and to write insurance against losses in troubled assets. But there's not one single solitary word in the act that authorizes the Treasury to buy stock in banks.
And there's not one single solitary word in the act that authorizes the Treasury to do anything at all for auto companies like General Motors and Chrysler. The act only authorizes helping "financial institutions." Yet billions of TARP dollars have gone to the two automakers.
A $700 billion budget buys one heck of a big dog — apparently a dog that attracts some pretty big fleas.
Is TARP a criminal enterprise?
Larry Kudlow asks
Is the whole TARP plan a criminal enterprise? Sounds farfetched, I suppose. But after reading about Special Inspector General Neil Barofsky's report, it may well be that TARP is just one big criminal problem.
Listen to this: Barofsky's investigators reported Monday that they have opened 20 criminal probes into possible securities fraud, tax-law violations, insider-trading, and mortgage-modification fraud related to TARP. Yup, those are criminal probes. Barofsky is the special IG overseeing the bailout program. And for some reason the mainstream media refuses to report this on the front pages where it belongs.
Barofsky's report spans 247 pages. And it says that the very character of the bailout program makes it "inherently vulnerable to fraud, waste and abuse, including significant issues related to conflicts of interest facing fund managers, collusion between participants and vulnerabilities to money laundering."
By the way, one of Barofsky's recommendations is for Treasury to abandon its whole plan of buying toxic assets from banks and investors. The IG's report also notes that what started last October as a single-purpose $750 billion effort to buy toxic securities has morphed into twelve separate programs that cover up to $3 trillion in direct spending, loans, and loan guarantees. In other words, TARP is nearly equal in size to the entire federal budget.
Think about this: TARP, which is now linked to substantial criminal activity, has ballooned to the size of a second federal budget and represents the biggest government-directed intrusion into the economy in history — vastly bigger than the New Deal. And not only is there TARP for banks, insurance companies, and non-bank financial institutions, but also for GM, Chrysler, and various auto suppliers, and perhaps soon enough for credit cards, newspapers, and other sectors of the economy.
Much as I am dismayed about the direction of the economy, I'm more distressed at what John Bogle calls the Crisis of Ethic Proportion
The old notion of trusting and being trusted -- which once was not only the accepted standard of business conduct but the key to success -- came to be seen as a quaint relic of an era long gone.
The proximate causes of the crisis are usually said to be easy credit, bankers' cavalier attitudes toward risk, "securitization" (which severed the traditional link between borrower and lender), the extraordinary leverage built into the financial system by complex derivatives, and the failure of our regulators to do their job.
But the larger cause was our failure to recognize the sea change in the nature of capitalism that was occurring right before our eyes. That change was the growth of giant business corporations and giant financial institutions controlled not by their owners in the "ownership society" of yore, but by agents of the owners, which created an "agency society."
The managers of our public corporations came to place their interests ahead of the interests of their company's owners. Our money manager agents -- who in the U.S. now hold 75% of all shares of public companies -- blithely accepted the change. They fostered the crisis with superficial security analysis and research and by ignoring corporate governance issues. They also traded stocks at an unprecedented rate, engaging in a dangerous spree of speculation.
What's to be done? We must work to establish a "fiduciary society," where manager/agents entrusted with managing other people's money are required -- by federal statute -- to place front and center the interests of the owners they are duty-bound to serve. The focus needs to be on long-term investment (rather than short-term speculation), appropriate due diligence in security selection, and ensuring that corporations are run in the interest of their owners. Manager/agents need to act in a way that reflects their ethical responsibilities to society. Making that happen will be no easy task.
Jeffrey Goldberg in The Atlantic on Why I Fired My Broker
For most of our our adult lives, my wife and I have behaved in the way responsible cogs of capitalism are supposed to behave—we invested in a carefully calibrated mix of equities and bonds; we bought and held; we didn't overextend on real estate; we put the maximum in our 401(k) accounts; we gave to charity; and we saved, but we also spent: mainly on gasoline, food, and magazines. In retrospect, we didn't have the proper appreciation for risk, but who did? We were children of the bull market.
Well, goodbye to all that. I took a random walk down Wall Street and got hit by a bus.
IT TURNS OUT that my crucial mistake was believing that the brokers and wealth managers and cable-television oracles who make up the financial-services industrial complex actually had my best interests at heart. Or so say the extremely smart—and wealthy—people I asked to help me figure a way out of my paralysis. One of these people was Robert Soros, the deputy chairman of the fund started by his father, George. I went to see him at his office, where he spent two hours performing an autopsy on my assumptions.
"You think a brokerage should be a place you go to pay commissions for fair and unbiased advice, right?" he asked.
"Yes," I said.
"It's not. It never has been." He then cited another saying of Buffett's: "'Wall Street is a place where whatever can be sold will be sold.' You are the consumer of their dreck. What they can sell to you, they will sell to you."
"But they told us—"
"They lied."
He went on: "You should be disheartened and disappointed. But don't kid yourself. You're a naive capitalist. They were never your advisers. Do not for a moment think that a brokerage firm is your friend."ß
Who Will Guard Your Nest Egg
Brokers are not legally bound to put your best interests first.
Independent registered financial advisors are.
Vetting a Potential Financial Advisor
There is so much sense in Nassim Nicholas Taleb's Ten principles for a Black Swan-proof world everyone should read the whole thing.
1. What is fragile should break early while it is still small.
2. No socialisation of losses and privatisation of gains.
Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing. We have managed to combine the worst of capitalism and socialism. In France in the 1980s, the socialists took over the banks. In the US in the 2000s, the banks took over the government. This is surreal.
3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus.
Find the smart people whose hands are clean.
4. Do not let someone making an "incentive" bonus manage a nuclear plant – or your financial risks.
5. Counter-balance complexity with simplicity.
6. Do not give children sticks of dynamite, even if they come with a warning .
Complex derivatives need to be banned because nobody understands them and few are rational enough to know it. Citizens must be protected from themselves, from bankers selling them "hedging" products, and from gullible regulators who listen to economic theorists.
7. Only Ponzi schemes should depend on confidence.
Governments should never need to "restore confidence".
8. Do not give an addict more drugs if he has withdrawal pains.
Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. The debt crisis is not a temporary problem, it is a structural one. We need rehab.
9. Citizens should not depend on financial assets or fallible "expert" advice for their retirement.
Economic life should be definancialised. We should learn not to use markets as storehouses of value: they do not harbour the certainties that normal citizens require
10. Make an omelette with the broken eggs.
Finally, this crisis cannot be fixed with makeshift repairs, no more than a boat with a rotten hull can be fixed with ad-hoc patches. We need to rebuild the hull with new (stronger) materials; we will have to remake the system before it does so itself. Let us move voluntarily into Capitalism 2.0 by helping what needs to be broken break on its own, converting debt into equity, marginalising the economics and business school establishments, shutting down the "Nobel" in economics, banning leveraged buyouts, putting bankers where they belong, clawing back the bonuses of those who got us here, and teaching people to navigate a world with fewer certainties.
William Black, the author of The Best Way to Rob a Bank is to Own One, was in New York last week for a conference at the John Jay College of Criminal Justice to answer the question "How did they get away with it."
Now Black won a reputation as the senior regulator who cracked down on banks in the savings and loan crisis of the 1980s ,so he knows what he's talking about. His interview by Bill Moyers last week on PBS was extremely disturbing and damning.
Hat tip Rod Dreher, Williamm K. Black, The government is lying to us.
Black goes on to say how can we justify not having a first-rate, nonpartisan investigation finding out why this happened and how it can be prevented. Why aren't we having that? Because, he says, the government literally doesn't want to know, or rather, doesn't want the public to know. Black alleged that the government is lying about the bank losses to maintain artificial public confidence. Moyers pinned him down on this point, asking if he really did believe that the Obama administration is intentionally deceiving the public.
Black: "Absolutely. Because they are scared to death of a collapse. ... I think they are sincerely just panicked: 'We cannot let big banks fail.'"
And if they keep lying about it? Black says banks will stay enormously weak, and the government will continue "obscene giveaways of taxpayer money."
You can watch the interview here and read the transcript.
Here are a few excerpts:
Fraud is deceit. And the essence of fraud is, "I create trust in you, and then I betray that trust, and get you to give me something of value." And as a result, there's no more effective acid against trust than fraud, especially fraud by top elites, and that's what we have.
It begins in the boardrooms and the CEO offices and this is how they do it.
Well, the way that you do it is to make really bad loans, because they pay better. Then you grow extremely rapidly, in other words, you're a Ponzi-like scheme. And the third thing you do is we call it leverage. That just means borrowing a lot of money, and the combination creates a situation where you have guaranteed record profits in the early years. That makes you rich, through the bonuses that modern executive compensation has produced. It also makes it inevitable that there's going to be a disaster down the road.
Liars' loans mean that we don't check. You tell us what your income is. You tell us what your job is. You tell us what your assets are, and we agree to believe you. We won't check on any of those things. And by the way, you get a better deal if you inflate your income and your job history and your assets.
This stuff, the exotic stuff that you're talking about was created out of things like liars' loans, that were known to be extraordinarily bad. And now it was getting triple-A ratings. Now a triple-A rating is supposed to mean there is zero credit risk. So you take something that not only has significant, it has crushing risk. That's why it's toxic. And you create this fiction that it has zero risk. That itself, of course, is a fraudulent exercise. And again, there was nobody looking, during the Bush years. So finally, only a year ago, we started to have a Congressional investigation of some of these rating agencies, and it's scandalous what came out. What we know now is that the rating agencies never looked at a single loan file. When they finally did look, after the markets had completely collapsed, they found, and I'm quoting Fitch, the smallest of the rating agencies, "the results were disconcerting, in that there was the appearance of fraud in nearly every file we examined."
Black said it was more than a financial crisis, it was a moral crisis, a fundamental lack of integrity. In the Savings and Loan crisis only about 10% of the CEOs engaged in fraud.
So, 90 percent of them were restrained by ethics and integrity. So, far more than law or by F.B.I. agents, it's our integrity that often prevents the greatest abuses. And what we had in this crisis, instead of the Savings and Loan, is the most elite institutions in America engaging or facilitating fraud.
David Brooks writes there are two overlapping narratives that explain the implosion of the global economy Greed and Stupidity
There's Greed
The U.S. economy got finance-heavy and finance-mad, and finally collapsed. When it did, the elites did what all elites do. They took care of their own: "Money was used to recapitalize banks, buying shares in them on terms that were grossly favorable to the banks themselves," Johnson writes.
An oligarchy takes control of the nation. The oligarchs get carried away and build an empire on mountains of debt. The whole thing comes crashing down. Johnson's remedy is clear. Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can't get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street.
Or does Stupidity explain it better?
Overconfident bankers didn't know what they were doing. They thought they had these sophisticated tools to reduce risk.But when big events — like the rise of China — fundamentally altered the world economy, their tools were worse than useless.
Banks got too big to manage. Instruments got too complex to understand. Too many people were good at math but ignorant of history.
The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We'd just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible. Instead of rushing off to nationalize the banks, we should nurture and recapitalize what's left of functioning markets.
Either way or both, we're in for crushing amounts of taxation.
Michael Boskin calculates that Obama's borrowing and spending adds $6.5 trillion to the national debt which will have to be paid back.
If distributed among those who pay taxes, only about 50% of the US population, every family will have to pay an additional $163,000.
These deficits are so large for a prosperous nation in peacetime -- three times safe levels -- that they would cause the debt burden to soar toward banana republic levels. That's a recipe for a permanent drag on growth and serious pressure on the Federal Reserve to inflate, not the new era of rising prosperity that Mr. Obama and his advisers foresee.
Charles Krauthammer on Obama's Ultimate Agenda
we are now so deep into government intervention that constitutional objections are summarily swept aside. The last Treasury secretary brought the nine largest banks into his office and informed them that henceforth he was their partner. His successor is seeking the power to seize any financial institution at his own discretion.
Obama has far different ambitions. His goal is to rewrite the American social compact, to recast the relationship between government and citizen. He wants government to narrow the nation's income and anxiety gaps. Soak the rich for reasons of revenue and justice. Nationalize health care and federalize education to grant all citizens of all classes the freedom from anxiety about health care and college that the rich enjoy. And fund this vast new social safety net through the cash cow of a disguised carbon tax.
Obama is a leveler. He has come to narrow the divide between rich and poor. For him the ultimate social value is fairness. Imposing it upon the American social order is his mission.
If Obama has his way, the change that is coming is a new America: "fair," leveled and social democratic. Obama didn't get elected to warranty your muffler. He's here to warranty your life.
"Congress and the White House are as prudent as a family that greets a huge, emergency roof-repair bill by visiting gourmet bistros, booking Caribbean cruises, and buying Maseratis for the teenagers." - Deroy Murdock
Look across the pond to see what crushing debt foretells about our future. The Spectator tells us just what will be needed to bring the U.K.'s budget into balance. via Tim Montgomery
To comprehend the scale of the sickening task awaiting George Osborne if he becomes chancellor, consider the following. If he were to raise VAT to 25 per cent, double corporation tax, close the Foreign Office, cancel all international aid, disband the army and the police, release all prisoners, close every school and abolish unemployment benefit he would still be unable to close the gulf between what the UK government spends and what it raises in taxes.
...in the long violent saga of mankind we have rarely done anything as benign as going shopping, rarely devised anything as socially advantageous as property rights and the rule of law, rarely enriched the poor or enhanced lives as we did by creating capitalism.
War, pestilence. And your problem is shopping?
Daniel Finkelstein in the London Times on whether there is a fairer, more rational alternative to capitalism.
I just can't keep up with all the news coming from Washington
America, World's Scariest Emerging Market by Desmond Lachman
A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers -- none of which is particularly well disposed to us.
Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.
The Czech prime minister told the European Parliament
"The U.S. is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on. All these steps, their combination and their permanency, are the road to hell."
The Financial Times says the crisis has broken the American social contract
people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists.
The Social Security surplus has run out, ten years early. Without that surplus the government will be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors.
"Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller," said Andrew Biggs, a resident scholar at the American Enterprise Institute. "Now they've essentially got to pay their own way, at least a little more fully.
"Instead of Social Security subsidizing the rest of the budget," he said, "the rest of the budget will have to subsidize Social Security."
Chairman Barney Frank and his House Financial Services Committee approves on a new bill that would impose financial controls on the pay of all employee of any company that received a capital investment from Washington
It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The prospect of a new era of government-controlled business, a dramatic break from American free enterprise is unnerving.
I await the plans from the Office of People Who Are Much Smarter Than You Are, the vast majority of whom have no business experience, on just how they will keep American car companies running and make them profitable.
Already, the Food Safety Modernization Act, pending in the House, promises a vast new bureaucracy to regulate even small roadside stands by forcing them to register with the federal government as 'food production facilities" or risk a million dollar fine.
It will only be eight or ten years before stocks recover to its prior peak
It's all too much, too fast, too expensive and too much indebtedness.
I just can't keep up with all the news coming from Washington
America, World's Scariest Emerging Market by Desmond Lachman
A singular characteristic of an emerging market heading for deep trouble is a seemingly suicidal tendency to become overly indebted to foreign creditors. That tendency underlay the spectacular collapse of the Thai, Indonesian and Korean currencies in 1997. It also led Russia to default on its debt in 1998 and plunged Argentina into its economic depression in 2001. Yet we too seem to have little difficulty becoming increasingly indebted to the tune of a few hundred billion dollars a year. To make matters worse, we do so to countries like China, Russia and an assortment of Middle Eastern oil producers -- none of which is particularly well disposed to us.
Like Argentina in its worst moments, we never seem to question whether it is reasonable to expect foreigners to keep financing our extravagance, and we forget the bad things that happen to the Argentinas or Hungarys of the world when foreigners stop financing their excesses. So instead of laying out a realistic plan for increasing our national savings, we choose not to face up to the Social Security and Medicare crises that lie ahead, embarking instead on massive spending programs that -- whatever their long-run merits might be -- we simply cannot afford.
The Czech prime minister told the European Parliament
"The U.S. is repeating mistakes from the 1930s, such as wide-ranging stimuluses, protectionist tendencies and appeals, the Buy American campaign, and so on. All these steps, their combination and their permanency, are the road to hell."
The Financial Times says the crisis has broken the American social contract
people were free to succeed and to fail, unassisted. Now, in the name of systemic risk, bail-outs have poured staggering sums into the failed institutions that brought the economy down. The congressional response is a disaster. If enacted these ideas would lead to an exodus of qualified employees from US banks, undermine willingness to expand credit, destroy confidence in deals struck with the government and threaten the rule of law. I presume legislators expect the president to save them from their folly. That such ideas can even be entertained is a clear sign of the rage that exists.
The Social Security surplus has run out, ten years early. Without that surplus the government will be forced to borrow an additional $700 billion over the next decade from China, Japan and other investors.
"Over the past 25 years, the government has gotten used to the fact that Social Security is providing free money to make the rest of the deficit look smaller," said Andrew Biggs, a resident scholar at the American Enterprise Institute. "Now they've essentially got to pay their own way, at least a little more fully.
"Instead of Social Security subsidizing the rest of the budget," he said, "the rest of the budget will have to subsidize Social Security."
Chairman Barney Frank and his House Financial Services Committee approves on a new bill that would impose financial controls on the pay of all employee of any company that received a capital investment from Washington
It would, like the tax measure, be retroactive, changing the terms of compensation agreements already in place. And it would give Treasury Secretary Timothy Geithner extraordinary power to determine the pay of thousands of employees of American companies.
The prospect of a new era of government-controlled business, a dramatic break from American free enterprise is unnerving.
I await the plans from the Office of People Who Are Much Smarter Than You Are, the vast majority of whom have no business experience, on just how they will keep American car companies running and make them profitable.
Already, the Food Safety Modernization Act, pending in the House, promises a vast new bureaucracy to regulate even small roadside stands by forcing them to register with the federal government as 'food production facilities" or risk a million dollar fine.
It will only be eight or ten years before stocks recover to its prior peak
It's all too much, too fast, too expensive and too much indebtedness.
Senator Gregg says U.S. couldn't even join EU due to debt levels
I agree with Fred Barnes that the incredible period of growth over the past quarter century was not 'fleeting' who writes
Obama also seems misinformed about America's economic record in recent decades. Prosperity was "fleeting," he said, --f he's talking about the past quarter-century, most Americans would love to return to that era. From late 1982 well into 2007, we experienced one of the greatest economic booms in the history of the world, interrupted only by two shallow and brief recessions. Prosperity wasn't fleeting. It was practically non-stop--until the housing bust and credit crisis hit last year.
Treasury Secretary Tim Geithner just had to defend his institutional takeover plan against charges of radicalism.
"Do you realize how radical your proposal is?" Rep. Donald Manzullo (R-Ill.) asked.
"It's not radical. . ." Geither began, before Manzullo interrupted him.
"You're talking about seizing private businesses and you don't consider that radical?"
Some people wonder whether Obama wants his bank plan to fail so he can nationalize the financial sector
I just don't have much confidence in the government running things. Neither does Scipio
You might wonder what sort of people will be attracted to these new centers of power and influence. Easy answer: The same sort of people who are attracted to the Internal Revenue Service, Environmental Protection Agencies and Departments of Education—petty busybodies, grim manipulators, and small-minded paper pushers. These types will exert more direct control over your life than any religion ever could. Indeed, this motley throng will become the new priesthood of the new America.
And from where will come the necessary funds to pay for all of this? It will come from you. You will be taxed and taxed again to pay for these creatures whose sole reason to live is to ride herd over you.