The above linked article is well worth reading, but I have as many serious problems with it as I do points of agreement. The problems begin right at the beginning:
“The record of President Obama’s first three years in office is in, and nothing that happens now can go back and change that. What that record shows is that President Obama, with his throwback, old-fashioned, 1970s Keynesian economics, has put America through the worst recovery from a recession since the Great Depression.
The recession started in December, 2007. Go to the website of the National Bureau of Economic Research (www.nber.org) to see the complete history of America’s recessions. What that history reveals is that before this last recession, since the Great Depression recessions in America have lasted an average of 10 months, with the longest previously lasting 16 months.”
For the moment I will leave aside the gratuitous slams on the bogeyman of John Maynard Keynes. The reality is that Washington economics are not even close to Keynesian economics and the disparagement is something of a smoke screen.
More importantly the problem is that we are not actually “recovering” from a recession, and the problem is only partly Barack Obama. I don’t wish to see him re-elected, but I can’t sit back and listen while people tell me that the problem is Barack Obama and his policies. It is far worse than that.
Economists have differing definitions of recession, but there seem to be two types, product driven and credit driven. Product driven recessions seem to involve situations where production out strips demand and the “recession” is a period of layoffs, decreasing inventory, adjustment an eventual recovery. This is why they take 10 to 16 months. Since I turned 18, however, recession has stopped being viewed as a necessary re-adjustment and as an “evil” to be fought. Screaming headlines, demand for actions, over-stated worries, fear-mongering replace argument. Politicians of all stripes have joined in to “solve” recessions and they have done so by expanding credit. Cheap credit is now expected and offered to everyone from kids with minimum wage jobs to the unemployed and those here illegally.
Congress has aided and abetted all of those actions, and beginning no later than the G.W. Bush administration (far earlier in some reckonings) has shifted debt from the private sector to the government itself. The result is far closer to a credit driven recession (depression) than any recession since the Great Depression. The reason is simple. Credit really means debt and debt has to be paid.
Recently, I posted a little graphic that shows exactly where we are. If the federal debt is reduced by eight zeroes, from trillions to thousands, and viewed as a household income the results are stark. We make about 20 k annually and spend 38k, a difference of 16k. Our outstanding debt is 142K. This is disaster plain and simple.
President Obama is responsible for a good deal of this mess, but it is entirely the fault of Congress and both parties. If you or I were in this mess we would have to get a much better job and drastically cut expenses and sell off assets. Congress, however, has credit cards and can raise its own debt ceiling and turn a blind eye while the Fed prints money and sells debt. But the inexorable reality remains despite the Geithners, Bernankes and Krugmans of the world. Incidentally, this is why Keynes is not the bogeyman. He advocated prudent government running a surplus in good times and saving deficit spending for bad times. I.e. spending the surplus saved by a prudent government. Frugality was key to Keynes and is foreign to Washington.
This is where the article gets much stronger:
“The American economy will likely show continued, long overdue, signs of life in 2012, which will amount to way too little, way too late, based on historical standards. But even worse than his first term is what Obama is brewing up for 2013 on his current course.
Most people do not know that already enacted in current law for 2013 are increases in the top tax rates of virtually every major federal tax. That is because the tax increases of Obamacare become effective that year, and the Bush tax cuts expire, which Obama has refused to renew for singles reporting income over $200,000 per year, or couples reporting over $250,000 per year (in other words, the nation’s small businesses, job creators and investors, in plain English).
As a result, if the Bush tax cuts just expire for these upper income taxpayers, along with the Obamacare taxes, in 2013 the top two income tax rates will jump nearly 20%, the capital gains tax rate will soar by nearly 60%, the tax on corporate dividends will nearly triple, and the Medicare payroll tax will leap by 62% for those disfavored taxpayers.
This is on top of the U.S. corporate income tax rate, which is virtually the highest in the industrialized world. The federal rate is 35%, with state corporate rates taking it close to 40% on average. But even Communist China has a 25% rate. The average rate in the social welfare states of the European Union is less than that. Formerly socialist Canada has a 16.5% rate going down to 15% next year.
These U.S. corporate tax rates leave American companies uncompetitive in the global economy. Yet under President Obama there is no relief in sight. Instead, he has spent the past year barnstorming the country calling for still further tax increases on American business, large and small, investors, and job creators.
Higher tax rates mean producers can only keep a smaller percentage of what they produce. So tax rate increases reduce the incentive for productive activities, such as saving, investment, starting businesses, expanding businesses, job creation, entrepreneurship and work, resulting in less of each. And that is what the tax tsunami of 2013 would do, which would once again swamp the weak economy.
Most small business profits are reported from households earning more than $200,000/$250,000 per year, and those small businesses produce more than half the new jobs. So the 2013 tax tsunami effectively targets small business, and the nation’s job creators. That will hurt working people the most, because they will lose the jobs and the wage income they need to maintain their basic standard of living.
In addition, the Obama administration is in the process of imposing a blizzard of new regulatory costs and barriers that will be building to a crescendo by 2013 as well. Academic studies estimate the total costs of regulation in the economy to be rapidly rising towards $2 trillion per year, or $8,000 per employee. That is close to 10 times the corporate income tax burden, and double the individual income tax. When the resulting effects on the economy are considered, the total losses due to regulatory burdens may total $3 trillion, or one fifth of our entire economy.”
This is the “perfect storm” of economic disaster the” liberals “and “progressives” have created wherever they have had control. California is a perfect example.
Sensible economists say growth is the real economic issue. US growth is anemic and job production is virtually non-existent. So no new wealth is being generated. Hiring and production are down, but taxes, spending, inflation and regulation go up. The policy creates an ever downward spiral. Less wealth created, more expropriated and spend unproductively. And the government insists on “stimulus” packages that take even more tax money and give it to non-competitive uses.
Having agreed with them I have to disagree because the only solution discussed is defeating Barack Obama. While that is a noble goal in itself and a fairly large chunk of the burden, the real burden involves reforming Congress and looking squarely in the mirror and admitting “we have met the enemy and he is us” as a long ago comedian once said.
What we really need is an adult national discussion answering these tough questions, among many others.
1) What is our life expectancy? Should we say 80 years and then acknowledge any day past that is gravy? Do we as a society say that anyone over 80 will receive certain standard treatments for accidents, injuries and diseases and if they don’t work we will simply make the patient comfortable until they pass?
2) What about Social Security? I think it should be junked and replaced with voluntary individual accounts like 401k’s over which the individual has almost total control. You shouldn’t force me to save money for retirement if I don’t want to and you certainly shouldn’t spend it. Or perhaps we should decide whether to expect people to live off their own means for a longer period and allow SS to kick in later. Say 72. Or even 80, when the risk of serious illness rises.
3) Who should get food stamps? the number of recipients is creeping toward 20%. Should they be Natural Born US citizens only? Should the foods be limited to a specified number of bulk items. Bulk grains, cheap meats, blocks of cheese, soy products, root vegetables and abundant fruits?
4) Should we get serious about immigration? Or maybe just bill back the country of origin for people here illegally. Your drunken illegal alien with a false id should represent a bill to his or her home country. Simple. Add up the costs and slap a surcharge on companies doing business here from the country of origin. Or reduce foreign aid. Or they can have them back. Figure out the costs and send the bill.
5) Take the credit card away from congress. Balanced budgets have been tried and to an extent succeeded. But congress goes around them and spends on the card. Stop it.
6) Stop the fed from printing money.
7) Look at all aspects of government with a jaundiced eye. The Education Department was created to improve education, but the stats are all downhill. Why do we have it? The energy department was created to end the energy crisis and alleviate dependence on foreign oil. Things are worse. Get rid of them. Take a long hard look and all the departments and force them to get by on a budget that decreases 1% per year (or more) for the next 20 years. Of course you have to word that so the weasels don’t figure out how to increase the budget by three percent while cutting by one.
8) Look are tried and true alternative energies, specifically thorium, although there are others. I have an entire category dedicated to thorium with lots of solid info, and even the fact that the Department of Energy has blocked development from time to time and the senate seems to be sitting on this promising technology which China, India and half the rest of the world are developing.
9) End the foreclosure mess. Foreclose all loans that are not performing. This will break the current big banks, but so what?
10) Take a hard look at all forms of entitlements, subsidies, and welfare. Why are there farm subsidies? How did Solyndra get 1/2 billion in tax subsidies? Why do tax breaks exist? We’ve mentioned food stamps, but what about all sorts of other credits, rebates, entitlements and subsidies? Every last taxpayer funded entitlement should be examined and most cut back or eliminated totally.
11) 51 percent of Americans pay no federal income tax. Should people who pay no tax vote? Should those not paying pony up? $1,000 per year would be something like $2.73 per day. Should we consider placing a price on the franchise? Is it logical that someone who has a stake in the country would pay more attention to voting? Should we establish the principal that you put some money where your mouth is? Or should we go whole hog and say that if you receive any entitlement from the government you can’t vote because it is a conflict of interest?
11) Should we finally decide on a better tax system that is less of a money-maker for specialized accountants and attorneys? A national sales tax, perhaps?
These are the among the questions we will have to answer and none are even being asked. Good as the article is and stark as it is in explaining the gross malfeasance of the Obama Administration, it simply does not go far enough. I fear we are at risk of replacing one problem with a solution out of the same litter.
The nation can’t get a better job, but it can created jobs by getting out of the way of growth and we most certainloy can cut spending.