Tag Archives: economic policy

On socialism

On socialism, overheard elsewhere:

An economics professor at a local college made a statement that he had never failed a single student before, but had recently failed an entire class.

Why? That class had insisted that Obama’s socialism worked and that no one would be poor and no one would be rich, a great equalizer. The professor then said, “OK, we will have an experiment in this class on Obama’s plan.” He decided to average all grades… everyone will receive the same grade so no one will fail and no one will receive an A…. (substituting grades for dollars – something closer to home and more readily understood by all).

After the first test, the grades were averaged and everyone got a B. The students who studied hard were upset and the students who studied little were happy. As the second test rolled around, the students who studied little studied even less and the ones who studied hard decided they wanted a free ride too so they studied little. The second test average was a D! No one was happy.

When the third test rolled around, the average was an F. As the tests proceeded, the scores never increased as bickering, blame and name-calling all resulted in hard feelings and no one would study for the benefit of anyone else.

To their great surprise, ALL FAILED and the professor told them that socialism would also ultimately fail because when the reward is great, the effort to succeed is great, but when government takes all the reward away, no one will try or want to succeed.

It could not be any simpler than that.

These are possibly the five best sentences you’ll ever read and all are applicable to this experiment:

  1. You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity.
  2. What one person receives without working for, another person must work for without receiving.
  3.  The government cannot give to anybody anything that the government does not first take from somebody else.
  4. You cannot multiply wealth by dividing it.
  5. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is the beginning of the end of any nation.

Governmental irony

America’s metamorphosis into a welfare state

From Tyler Durden at ZeroHedge:

Still confused why there are those who call America the USSA? Don’t be. As the following animation from the NYT so vividly shows, government benefits across the US have nearly tripled from a modest 7.8% of all personal income in 1969 to a ‘European’ 17.6% in 2009. And this before Obama went to town (as a reminder total debt has risen by over $4 trillion under Obama – a significant portfion of that has gone to fund social welfare)….

Read it all.

Going viral: Are you kidding me?

One man’s rage against the machine:

ZeroHedge: Here is why the Dow just passed 13,000

I know little about economics, but I know enough to go to the experts, so here’s Tyler Durden at ZeroHedge and his take:

Wondering why the DJIA just passed 13K again? Wonder no more: as the chart below shows it is entirely due to the nearly $7 trillion pumped by global central banks into the world stock markets just in the past 4 years. As Sean Corrigan from Diapason notes, the aggregate global central bank balance sheet has doubled in four years, after doubling in the 5 years before that. We would add that with the entire centrally planned ponzi scheme hell bent on preserving the illusion of nominal gains, global liquidity is now fungibly sloshing from one market to another with absolutely zero resistance whatsoever. At this rate, it should double again in 3 years, then 2, and so on. Will the Dow hit 52K in 5 years in that case? Why most certainly. Just ask any remaining citizens of the Weimar Republic….

Read it all. . . feel better now? I didn’t think so.

Happy birthay to Pres. Obama’s stimulus

Even if you don’t know a whole lot about how economics work (like me), you can look at the end results and figure out whether the stimulus was good economics/legislation or not. At this point, not.

From Investors Business Daily:

…So three years later, how do the stimulus results stack up? Here’s where various indicators stood in or around February 2009, and where they stand today.

Unemployment rate: The jobless rate is unchanged from February 2009 to January 2012, the latest month for which we have data. Both stood at 8.3%, according to the Bureau of Labor Statistics. Obama’s economists had initially predicted that with the stimulus, unemployment would stay below 8%.

Number of long-term unemployed: The number of workers who have been unable to find a job in 27 months or more has shot up 83%, with their ranks now at 5.5 million.

Civilian labor force: It has shrunk by 126,000. In past recoveries, the labor force climbed an average of more than 3 million over comparable time periods.

Labor force participation: The share of adults in the labor force — either looking or working — has dropped 3% — also highly unusual in a recovery. At 63.7%, labor force participation is at a low not seen since the middle of the very deep 1981-82 recession, when fewer women were in the work force. A lower participation rate makes the unemployment rate look better.

Household income: Median annual household income is about 7% below where it was in February 2009, according to the Sentier Research Household Income Index.

National debt: Up $4.5 trillion, or 41%, according to the Treasury Department’s monthly reports. The latest Treasury figures put the national debt at $15.4 trillion, larger than the entire U.S. economy.

Deficits: The deficit for fiscal year 2009 totaled $1.4 trillion. The Obama administration’s proposed deficit for 2012 is $1.3 trillion, which would mark the fourth year of deficits topping $1 trillion….

Read it all.

WSJ: “Immaculate contraception”

Because sometimes, the headline is just too good to pass up. From the Wall Street Journal editorial page:

Here’s a conundrum: The White House wants to impose its birth-control ideology on all Americans, including those for whom sponsoring or subsidizing such services violates their moral conscience. The White House also wants to avoid a political backlash from this blow to religious freedom. These goals are irreconcilable.

So you almost have to admire the absurdity of the new plan President Obama floated yesterday: The government will now write a rule that says the best things in life are “free,” including contraception. Thus a political mandate will be compounded by an uneconomic one—in other words, behold the soul of ObamaCare….

Under the new rule, which the White House stresses is “an accommodation” and not a compromise, nonprofit religious organizations won’t have to directly cover birth control and can opt out. But the insurers they hire to cover their employees can’t opt out. If that sounds like a distinction without a difference, odds are you’re a rational person….

Insurance companies won’t be making donations. Drug makers will still charge for the pill. Doctors will still bill for reproductive treatment. The reality, as with all mandated benefits, is that these costs will be borne eventually via higher premiums. The balloon may be squeezed differently over time, and insurers may amortize the cost differently over time, but eventually prices will find an equilibrium. Notre Dame will still pay for birth control, even if it is nominally carried by a third-party corporation.

This cut-out may appease a few of the Administration’s critics, especially on the Catholic left—but only if they want to be deceived again, having lobbied for the Affordable Care Act that created the problem in the first place….

We couldn’t recall any spirit of conciliation when the birth-control mandate was finalized in January, so we went back and checked the transcript of that call with senior Administration officials. Sure enough, back then they said that the rule “reflects careful consideration of the rights of religious organizations” and that a one-year grace period “really just gives those organizations some additional time to sort out how they will be adjusting their plans.”

A journalist asked, “Just to be clear, so it’s giving them a year to comply rather than giving them a year to in any way change how they feel or the Administration to change how it feels.” Another senior official: “That is correct. It gives them a year to comply.”…

There is simply no precedent for the government ordering private companies to offer a product for free, even if they recoup the costs indirectly….

The larger tragedy is that none of them objected to government health care, which will always take choices away from individuals and arrogate them to an infallible higher power in Washington. Who was it again who claimed that if you like your health plan, you can keep your health plan?

Read it all.

Obamacare architect: Expect steep increase in health care premiums

Color me surprised…not. Because it never was about health care–it’s all about government overreach, always for our own good. From the Daily Caller:

…Massachusetts Institute of Technology economist Jonathan Gruber, who also devised former Massachusetts Gov. Mitt Romney’s statewide health care reforms, is backtracking on an analysis he provided the White House in support of the 2010 Affordable Care Act, informing officials in three states that the price of insurance premiums will dramatically increase under the reforms.

In an email to The Daily Caller, Gruber framed this new reality in terms of the same human self-interest that some conservatives had warned in 2010 would ultimately rule the marketplace.

“The market was so discriminatory,” Gruber told TheDC, “that only the healthy bought non-group insurance and the sick just stayed [uninsured].”

“It is true that even after tax credits some individuals are ‘losers,’” he conceded, “in that they pay more than before [Obama's] reform.”

Gruber, whom the Obama administration hired to provide an independent analysis of reforms, was widely criticized for failing to disclose the conflict of interest created by $392,600 in no-bid contracts the Department of Health and Human Services awarded him while he was advising the president’s policy advisers.

Gruber also received $566,310 during 2008 and 2009 from the National Institutes of Health to conduct a study on the Medicare Part D plan….

“As a consequence of the Affordable Care Act,” [President Obama] said in September 2010, “premiums are going to be lower than they would be otherwise; health care costs overall are going to be lower than they would be otherwise.”

Gruber’s new reports are in direct contrast Obama’s words — and with claims Gruber himself made in 2009. Then, the economics professor said that based on figures provided by the independent Congressional Budget Office, “[health care] reform will significantly reduce, not increase, non-group premiums.”

During his presentation to Wisconsin officials in August 2011, Gruber revealed that while about 57 percent of those who get their insurance through the individual market will benefit in one way or another from the law’s subsides, an even larger majority of the individual market will end up paying drastically more overall.

“After the application of tax subsidies, 59 percent of the individual market will experience an average premium increase of 31 percent,” Gruber reported….

Read it all. Why do we continue to listen to “experts” who seem to have no understanding of human nature and how that affects the market? Sigh…

Effective compassion: Seven principles from a century ago

From Christians for a Sustainable Economy:

The crisis of the modern welfare state is a crisis of government, and it is more than that. Too many private charities and foundations dispense aid on the basis of what feels good rather than what works. As a result, they end up providing, instead of points of light, alternative shades of darkness….

Private charities and foundations can do a better job than government but only if they follow seven principles that effective poverty fighters of the past understood. Here are the principles, with historical meaning and contemporary applications, in alphabetical order.

1. Affiliation

A century ago, when individuals applied for material assistance, charity volunteers tried first to “restore family ties that have been sundered” and “reabsorb in social life those who for some reason have snapped the threads that bound them to other members of the community.” Instead of immediately offering help, charities asked, “Who is bound to help in this case?” Mary Richmond of the Baltimore Charity Organizing Society summed up in 1897 the wisdom of a century: “Relief given without reference to friends and neighbors is accompanied by moral loss. Poor neighborhoods are doomed to grow poorer whenever the natural ties of neighborliness are weakened by well-meant but unintelligent interference.”

5. Employment

New York charity leader Josephine Lowell wrote that “the problem before those who would be charitable, is not how to deal with a given number of the poor; it is how to help those who are poor, without adding to their numbers and constantly increasing the evils they seek to cure.” If people were paid for not working, the number of nonworkers would increase, and children would grow up without seeing work as a natural and essential part of life. Individuals had to accept responsibility: Governmental programs operating without the discipline of the marketplace were inherently flawed, because their payout comes “from what is regarded as a practically inexhaustible source, and people who once receive it are likely to regard it as a right, as a permanent pension, implying no obligation on their part.”

Today, programs that stress employment, sometimes in creative ways, need new emphasis….

6. Freedom

Charity workers a century ago did not press for governmental programs but instead showed poor people how to move up while resisting enslavement to governmental masters. Job freedom was the opportunity to drive a wagon without paying bribes, to cut hair without having to go to barbers’ college, and to get a foot on the lowest rung of the ladder, even if the wages there were low. Freedom was the opportunity for a family to escape dire poverty by having a father work long hours and a mother sew garments at home. Life was hard, but static, multigenerational poverty of the kind we now have was rare; those who persevered could star in a motion picture of upward mobility.

Today, in our desire to make the bottom rung of the ladder higher, we have cut off the lowest rungs and left many on the ground. Those who are pounding the pavements looking for work, and those who have fallen between the cracks, are hindered by what is supposed to help them. Mother Teresa’s plan to open a homeless shelter in New York was stopped by a building code that required an elevator; nuns in her order said that their code forbade such mechanical helps and that they would carry upstairs anyone who could not walk, but the city stuck to its guns and the shelter never opened….

7. God

“True philanthropy must take into account spiritual as well as physical needs,” poverty fighters a century ago noted, and both Christians and Jews did. Christians worshipped a God who came to earth and showed in life and death the literal meaning of compassion—suffering with. Jewish teaching stressed the pursuit of righteousness through the doing of good deeds. Groups such as the Industrial Christian Alliance noted that they used “religious methods”—reminding the poor that God made them and had high expectations for them—to “restore the fallen and helpless to self-respect and self-support.”

Read it all, check out their site and check out their letter to President Obama.

The Buffett Rule wouldn’t apply to Warren Buffett

From James Freeman at the Wall Street Journal:

Billionaire Berkshire Hathaway CEO Warren Buffett is once again thrilling the political class by volunteering other people to pay higher taxes. Long-time observers recall his opposition to former President George W. Bush’s efforts to reduce the tax rate on dividends. Since Berkshire pays no dividends, Mr. Buffett had little at stake but enjoyed the opportunity to pose as if he were a rich guy eager to cough up more dough to Washington.

In the current debate, President Obama is pushing the “Buffett Rule” to ensure that high-income earners pay higher tax rates. But even if it’s enacted, don’t expect the Buffett Rule to have much impact on Mr. Buffett. By an amazing coincidence, the sage of Omaha is already positioned to shield most of his rising wealth from such a tax….

This brings us to the Buffett Rule, which at its heart is a way to raise taxes on dividends and capital gains. Berkshire still doesn’t pay a dividend, and as for capital gains taxes, well, Mr. Buffett has already made clear that he’ll largely avoid them by transferring his fortune to the Gates Foundation and to charitable trusts controlled by his family. In fact, at the 2010 Berkshire annual shareholders meeting, according to Dow Jones Newswires, Mr. Buffett urged attendees to “follow my tax dodging example” and give away their wealth. Democrats in Washington may enjoy using Mr. Buffett as cover to raise taxes, just as long as they understand that he won’t necessarily be paying them.

Read it all. Why does this not surprise me? Who knew that Warren Buffet (whose company Berkshire Hathaway has a back-tax bill of $1 billion) would find a way to get media credit for something that won’t affect him? Color me unimpressed with both him and his secretary.