Lee Harvey Oswald is the Godfather of Today’s American Left

Posted by PITHOCRATES - November 24th, 2013

Week in Review

The assassination of JFK ruined this country.  Because it gave us LBJ and his liberal agenda (see If Kennedy lived: Imagining a different fate for JFK (and Johnson) 50 years later by Jeff Zeleny, Richard Coolidge and Jordyn Phelps posted 11/20/2013 on Yahoo! News).

Historian Jeff Greenfield imagines how history would have changed if Lee Harvey Oswald hadn’t been successful in firing a fatal shot to Kennedy 50 years ago. It’s the latest alternative history from Greenfield in his new book, “If Kennedy Lived: The First and Second Terms of President John F. Kennedy.”

Greenfield, who re-examined the political realities that were present prior to the assassination, told “The Fine Print” he believes that Kennedy’s survival would have likely meant the demise of then-Vice President Lyndon Johnson’s political career.

“The moment John Kennedy was shot, quite literally, LIFE Magazine — a very important medium back then — was launching a huge investigation into how this public servant had accumulated a $14 million net worth, and the answer wasn’t pretty,” Greenfield said of Johnson. “It had to do with radio and TV licenses, and something close to extortion.”

The investigation was halted once Kennedy died, Greenfield said, “Because it would’ve been too much of a shock to the system.” But in Greenfield’s alternate history, the investigation grows into a scandal for Johnson, and Kennedy ultimately replaces him in his second term.

So who gained the most with JFK’s assassination?  Liberals.  For in JFK’s December 14, 1962 speech to the Economic Club of New York he sounded more like Ronald Reagan than LBJ.  Where he championed private spending, not government spending.  He favored tax cuts over tax credits to stimulate the economy.  He talked about increasing consumer spending via personal tax cuts.  And using corporate and personal tax cuts to increase investment and profits.  Yes, he talked about businesses making more profits.  So they would hire more.  Something no liberal would say.

Instead of the Ronald Reagan-like JFK we got one of the most corrupt politicians ever to become president.  LBJ.  According to LIFE Magazine.  And the greatest explosion of the welfare state since the New Deal.  The Great Society.  Turning the U.S. away from capitalism and towards European-style social democracy.

This is the great tragedy of the JFK assassination.  Thanks to that anti-capitalist, Cuba-loving, America-hating assassin who had once defected to the Soviet Union.  A nation long admired by liberals since the day of Joseph Stalin.  This is the great tragedy the leftist communist Lee Harvey Oswald gave us.  Lee Harvey Oswald gave us LBJ, the Great Society and the rise of state-capitalism in the United States.  Everything liberals want.  And conservatives eschew.  Making Lee Harvey Oswald the godfather of today’s American left.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , ,

The Politics of Liberal Economic Policies

Posted by PITHOCRATES - November 18th, 2013

Economics 101

What doesn’t Kill You Makes you Stronger

They say what doesn’t kill you makes you stronger.  And you can see that in military basic training.  There have been some good movies showing what military basic training is like.  Perhaps one of the best is Full Metal Jacket.  Where Gunnery Sergeant Hartman played by R. Lee Ermey wasn’t acting as much as reliving his days as a Marine Corps drill instructor.  Watching it you may come to hate Sergeant Hartman for he was pretty sadistic.  But they didn’t design basic training to be a pleasant experience.  They designed it to prepare recruits for the worst thing in the world.  War.

In the miniseries Band of Brothers we follow Easy Company, 2nd Battalion, 506th Parachute Infantry Regiment, 101st Airborne Division, from basic training through D-Day and to the end of the war.  Airborne training followed basic training.  And was harder.  Fewer people make it through airborne training than they do basic training.  Ranger training is even harder.  And fewer people make it through Ranger training.  But airborne units and Rangers get the more difficult missions in combat.  Because they can do more.  For their training is more difficult.  But it didn’t kill them.  So it made them stronger.

Perhaps the most difficult military training is the Navy’s SEAL program.  Where if they get a good class of recruits they may have 1 in 10 complete training.  For it is that hard.  In fact, some have died in training because they refused to give up.  That’s why you will find few tougher than a Navy SEAL.  They are tough.  And they never quit.  Which is why we give them the most difficult missions to complete.  Missions that others would find impossible.  Proving that the more brutal and difficult training is the stronger and more able we get.

During the 20th Century the American Left has tried to replace Rugged Individualism with the Nanny State

Those who founded this nation were tough people who worked hard and never gave up.  They provided their own housing, food, clothing, etc.  If they needed something they figured out how to provide it for themselves.  They worked long hours.  Survived brutal winters and hostile environments.  But they never gave up.  In fact, they raised families while doing all of this.  With no help from government.  As there were no government benefits.  Yet they survived.  Even prospered.  For what didn’t kill them only made them stronger.  These rugged individuals could do anything.  And did.  Which is why the United States is the leader of the free world.  And the world’s number one economy.  Because of that rugged individualism.

This is the way America was before the progressives came and softened us.  And made rugged individualism somehow a bad thing.  Beginning with Woodrow Wilson.  Then FDR.  LBJ.  And then President Obama.  A long line of American presidents who eschewed individualism.  And thought in collective terms.  When the Americans rejected socialism they gave us progressivism.  When we rejected communism they gave us liberalism.  The 20th century has been a tireless attempt for those on the left to replace rugged individualism with the nanny state.  With their brilliant selves in power.  Managing the economy.  And making life fair.  To undo the unfairness of laissez-faire capitalism.  To make the United States better.  And more according to their vision.  Just like the socialists did.  And the communists did.  Yet no socialist or communist state became the leader of the free world.  Or the world’s number one economy.

Those who lived in those socialist and communist utopias learned one thing.  It was better to live someplace else.  And their ultimate destination?  The United States.  Yet those on the left refused to believe that life was worse in those states where they put people first instead of profits.  Like that unfeeling and cruel laissez-faire capitalism did.  Which is why Wilson, FDR, LBJ and Obama worked tirelessly to move the United States in the direction of socialism and communism.  Because they cared for the people.  Or the power they got by making so many people dependent on government.

Someone receiving a Comfortable Level of Benefits will not be pushed to Leave their Comfort Zone

So is it about the power or that thing about helping people?  What is it exactly that progressives/liberals really want?  Well, we can look at the historical record to determine that.  By looking at a point in time when America really changed.  With the assassination of JFK.  JFK’s chances of reelection weren’t great.  Which is why he went to Texas.  As he needed LBJ to deliver Texas to the Democrats.  Instead of electoral victory, though, he fell to an assassin’s bullet.  The great outpouring of grief and love for their fallen president exceeded the love he got before the assassination.  The heightened emotions allowed LBJ to pass the many programs of the Great Society into law.  In the memory of JFK.  The greatest expansion of the federal government since FDR’s New Deal.  Making the welfare state the largest yet.  In an attempt to put people first.  Not profits.  In fact, LBJ declared a war on poverty.  By providing government assistance to lift everyone out of poverty.  And he championed civil rights.  LBJ was going to make the United States that utopia socialists and communists always dreamt about.  For everyone.  Blacks.  And whites.  Especially blacks.  Who were suffering great discrimination then.  But things would be different for them.  Starting in the Sixties everything was going to get better.  And how are blacks doing today?  Well, if you use employment as a measure, not good (see Table A-2. Employment status of the civilian population by race, sex, and age by the Bureau of Labor Statistics)

Unemplyment Rates by Race Age Sex Rev 2

The federal government has done a lot for blacks.  More than any other minority group.  Affirmative Action was to correct all past wrongs.  By making it easier to get into college.  And to get a job.  Yet we don’t see that when looking at the unemployment numbers.  In fact, the group the government does the least for—white men—is doing the best.  They don’t need any help because they won life’s lottery.  By being born white.  According to liberals.  So there’s no Affirmative Action for them.  Yet they have half the unemployment rate black men have.  While white women have half the unemployment rate black women have.  And white 16-19 year olds have half the unemployment rate black 16-19 year olds have.  Brilliant progressives/liberals have been trying to make life better for blacks for 50 some years now and have failed.  Despite this blacks have never been more loyal to them.  Which answers the question what the Democrats care more for.  The people?  Or the power the people give them.  By getting them dependent on government.  Who they tell over and over again that they would have nothing if it weren’t for them.  The Democrats.  For blacks just can’t make it on their own without help.  Even though after receiving all of that help blacks are suffering the greatest levels of unemployment.  Clearly something isn’t right here.  And it goes back to that thing that made America great.  Rugged individualism.

You know what the difference is between a white SEAL and a black SEAL?  Nothing.  Blacks have equality of opportunity in SEAL training.  And that’s all they need.  They don’t need special treatment.  And the Navy doesn’t tell them that they do.  All they need is the strength.  And the will.  Which will be there if you don’t keep telling people that they can’t succeed without the government’s help.  Because if you keep doing that they will come to believe that.  And they will keep voting Democrat.  Looking for help.  Whereas those who face adversity and overcome it grow stronger.  Because what doesn’t kill them makes them stronger.

Handing out government benefits will make people like you.  But it won’t get them a job.  For someone receiving a comfortable level of benefits will not be pushed to leave their comfort zone.  And while they languish in their comfort zone they will not gain work experience.  Allowing others to gain experience and move up in their careers.  Making them more employable.  While those with less experience and less education are less employable.  And that’s what Democrats do when they buy votes with government benefits.  Make people less employable.  And blacks have been especially useful to them.  As they can stoke the fires of racism to drive blacks even further to the Democrat Party.  By calling Republicans racists.  Because they want to take away their benefits.  Just because they hate black people.  Or so goes the Democrat line.  So they keep voting Democrat.  While losing their rugged individualism.  And suffering higher levels of unemployment than everyone else.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT185: “When it comes to foreign policy the Republicans do what is best for the country while Democrats do what is best for their party.” —Old Pithy

Posted by PITHOCRATES - August 30th, 2013

Fundamental Truth

Wherever the Soviets pushed the Americans pushed back to Contain the Expansion of Communism

Once upon a time Democrats were practically warmongers.  Woodrow Wilson got us into World War I.  FDR got us into World War II.  Harry Truman got us into the Korean War.  And LBJ got us into the Vietnam War.  While Republicans were nearly pacifists.  Dwight Eisenhower got us out of the Korean War.  And Richard Nixon got us out of the Vietnam War.

Eisenhower was the Supreme Allied Commander in Europe during World War II.  Saw the carnage of war up close.  And was glad when it was over.  Unlike General Patton.  Who wanted to invade the Soviet Union.  Because he knew we would have to fight them sooner or later.  And rather do it then when they had the most awesome military force in the world still in Europe.  General Patton lost command of Third Army because of talk like that.  And later would die from injuries he got in a freak car accident.

It didn’t take long following the end of World War II for the Soviets to become the new big bad in town.  Just like General Patton foresaw.  Truman stood up to them in Berlin.  Greece.  Turkey.  Iran.  And Korea.  Wherever they pushed the Americans tried to hold the line.  To contain the expansion of communism.  It was the Cold War.  And it first got hot in Korea.  But the UN forces held the line in Korea.  After three years of war.  About as long as America spent fighting in Europe during World War II.

JFK’s refusal to commit American Military Power during the Bay of Pigs Invasion led to the Cuban Missile Crisis

Communism was a thorn in the side of democracy.  The democratic West believed in peace through strength.  With the occasional war breaking the peace.  While the communist East believed in a perpetual state of war with the occasional peace breaking that war.  The communists sought to expand through violent revolution.  If you contained it early (like in the Berlin Airlift) you could avoid a shooting war.  And keep it cold.  But if they got a foothold you could find yourself mired in a hot and prolonged war.  Like in Korea.

When Fidel Castro turned Cuba communist it was not a good thing for the United States.  For all their efforts to contain communism throughout the world here they were.  On Cuba.  Within missile range of the United States.  And Castro was cozying up to the Soviets.  Which is why President Eisenhower gave the green light for the CIA to remove Castro from power.  To remove a threat so close to the United States.  The plan was the Bay of Pigs Invasion.  Which proceeded under the following administration.  JFK’s.

The invasion, though, did not go well.  And unlike in the Guatemalan coup d’état, JFK did not commit American military power to help the invaders (unlike Eisenhower did in the Guatemalan coup).  Who were soon pushed back.  And defeated.  Which breathed new life in Cuba’s communist revolution.  Brought them more into the Soviet sphere.  And encouraged the Soviets to test this young president.  Which they did.  By sending nuclear missiles to Cuba.  Leading to the Cuban Missile Crisis.  And near nuclear war (Castro’s right hand man, Che Guevara, was angry with the Soviets because they refused to nuke the United States during the crisis).  While the Cuban people suffered under their communist oppressors.  And still do.

Today Iran—and Radical Islam—is the Thorn in the Side of Democracy that Communism once Was

Truman was the last Democrat warrior president.  LBJ got us into Vietnam.  But he also gave us the Great Society.  Turning the nation towards a welfare state.  A very costly welfare state.  Which the great costs of the Vietnam War threatened.  The government, much like they did during the Revolutionary War, began printing money to pay for all of this spending.  Devaluing a dollar pegged to gold.  With nations concerned with this devaluation they traded their dollars for gold.  Which is what is supposed to happen under a gold standard.  So nations don’t devalue their currencies.  But printing money is easier than cutting spending.  So President Nixon decoupled the dollar from gold.  So they could really print it.  Giving us the inflationary Seventies.

Since then Democrat presidents have done two things.  Expanded the welfare state.  And demonized their political opponents.  Which extended to their foreign policy.  President Carter cut back on defense spending.  And tried to make friends with our archenemy.  The Soviet Union.  A president the Soviets had little respect for.  Even considering a nuclear first-strike policy as they didn’t think Carter would ever launch his nuclear weapons.  And then President Carter criticized American ally, Mohammad Reza Shah Pahlavi, the Shah of Iran, for his human rights violation.  There was revolutionary fervor in the air.  The Shah implored for help from their long-time friend and ally.  The United States.  Who assured the Shah that the Americans would intervene militarily on his behalf.  But didn’t.  The Iranian Revolution followed.  And Iran became America’s new archenemy.

Iranian oil won World War II.  It fed the Red Army.  Iran served as a portal into the Soviet Union.  War material as well as oil flowed through Iran and into the Soviet Union.  After the war the Soviets didn’t want to leave Iran.  Give up that oil.  Or a warm-weather port on the Indian Ocean.  But the British and the Americans helped the Iranians keep the Soviets at bay.  Their actions included a coup.  And some human rights violations.  To keep what happened in Eastern Europe following World War II from happening in Iran.  Iran prospered.  And Westernized.  It was becoming everything the American left loved.  Secular.  It was becoming more like America.  Where men and women enjoyed doing things they could enjoy in New York City.  Which angered the Islamists.

Today Iran—and radical Islam—is the thorn in the side of democracy that communism once was.  And unlike their Cold War warrior forefathers, today’s Democrats choose party over country.  Basing their foreign policy on expanding the welfare state.  Or demonizing their political opponents.  President Clinton treated al Qaeda’s increasing acts of hostility against Western/American interests as a legal issue.  Which grew bolder until they culminated in the 9/11 attacks on the World Trade Center and the Pentagon.  Clinton did this so he wouldn’t waste money on defense by risking war to protect America.  Or anger his liberal base.  After 9/11, George W. Bush fought back.

The Democrats have demonized George W. Bush as a rich oil man who traded blood for oil.  While at the same time they said he was purposely causing oil shortages to raise the price of oil.  When an opportunity came to overthrow America’s new archenemy, Iran, President Obama did nothing to support the Green Revolution in Iran following questionable election results that kept Mahmoud Ahmadinejad in power.  An intervention that would have been in the best interests of both America and the Iranian people.  But when the Arab Spring blew through Egypt he was quick to tell our friend and ally, Hosni Mubarak, that he had to go.  Turning Egypt over to the Islamist Muslim Brotherhood.  But when civil war came to Syria he chose to do nothing.  Until now (to save face from his ‘red line’ comment about chemical weapons?).  When the opposition has most probably been infiltrated by al Qaeda.

What is the constant in these Democrat foreign policy decisions?  They are the opposite of what the Republicans would have done.  So they couldn’t have done them.  For it would have vindicated George W. Bush.  Angered their liberal base.  And made the world a safer place.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Family Farms, Big City Factories, Fertility Rates and Federal Debt

Posted by PITHOCRATES - July 9th, 2013

History 101

The Mechanization of the Farm began a Migration from the Country to the Cities

Before the Industrial Revolution (1760-1830ish) if you worked you most probably farmed.  For most everyone from the dawn of civilization on the Nile, the Euphrates & Tigris, the Indus and the Yangtze farmed.  To produce food for the civilization for the good times.  And food surpluses for the bad times.  For having enough to eat was never a sure thing.  And surviving the winter was a challenge.

What early civilizations needed were a lot of people to work the land.  For large-scale farming could produce large harvests.  Enough to feed everyone during the good times.  During the winters.  And even the occasional drought.  But it could be a risky game to play.  Because a lot of people to work the land also meant a lot of mouths to feed.  Which meant everyone worked the fields.  Men.  Women.  And children.  Anyone who ate worked.  As they did on the family farm.  Which is why they had large families.  For the more children they had the more land they could work.  Allowing them to eat during the good times.  During the winters.  The occasional drought.  While having large food surpluses to sell.  Allowing them to build wealth.  Just like the landowners in the Old World.  The aristocracy.  Only instead of peasants working the land it was family.

But with the Industrial Revolution came change.  The steam engine mechanized farming.  Allowing fewer people to produce more.  Also, steam power allowed factories away from rivers.  As they no longer needed moving water to turn a waterwheel.  So factories filled our cities.  Creating a lot of jobs.  This and the mechanization of the farm requiring fewer hands to work the land began a migration.  Of people from the country.  To the cities.

The Migration from the Family Farm to the Big City got People used to Bigger Government and Taxes

The world modernized in the 1800s.  Food was never more plentiful.  Allowing more people to leave the farm.  And think about other things.  Like electrical engineering.  Nikola Tesla gave us AC electric power.  And the AC electric motor.  Changing manufacturing forever.  Those little spinning machines filled our factories.  And operated the machines in those factories.  Everything we ever made we made better and more efficiently thanks to the electric motor.  Allowing us to manufacture more than ever.  And manufacture more complex things.  Factories grew.  With many levels of manufacturing contained within.  Packing more people than ever in these factories.

The common perception of this industrial world is of sweatshops.  Child labor.  Soot and smoke casting a pall over overcrowded cities.  Where people packed into overcrowded housing.  Thanks to that migration from the family farm to the big city factories.  Which changed things.  Instead of people raising a large family on a large farm where there was plenty of room and plenty of food to eat these families were living in cramped apartments in the crowded city.  And they had to pay for the food they ate.  And the more mouths they had to feed the more money it took.  This was a big change.  Whereas on the farm a large family meant more food.  And more wealth.  In the city, though, more children meant less food for everyone else to eat.  And more poverty.

The growth of cities also caused another change.  When people lived on scattered farms they didn’t need any government services.  But in the crowded cities they did.  Homes had utilities.  And sanitation.  Cities also had streets.  Which the city needed to maintain.  Eventually there was street lighting.  And traffic signals.  Police departments.  Fire departments.  Schools.  And teachers.  All of these things cost money.  And we paid for them with taxes.  Getting people used to bigger government.  And bigger taxes.  Then the progressives entered government at the federal level.  Who wanted government to do at the federal level what it did at the local level.  Be mother to the people.  Instead of just doing those things the Constitution said it should do.

A Falling Fertility Rate forced the Government to go into ‘World War’ Debt just to pay for Social Security and Medicare

The fertility rate (the number of children a woman has during her child-bearing days) fell all during the 1800s.  As large families went from being wealth producers on the farm to poverty inducers in the cities.  While federal debt from the American Revolutionary War fell during the early 1800s.  The debt fell because there wasn’t a lot of federal spending.  So it wasn’t hard to retire that debt.  But that federal restraint didn’t last.  There was a spike in federal debt (as a percent of GDP) following American Civil War (1861-1865) as they had to borrow heavily to pay for that war.  But after the war the debt level did not fall back to pre-war levels.  A trend that would continue.  As we can see here.

Fertilty Rate versus Debt as Percent of GDP

There was another spike in federal debt following World War I (1917-1918).  But the debt level never fell back to pre-war levels.  Then the Great Depression and the New Deal (1930s) began another spike in Federal debt.  That World War II took to record highs.  And once again after the war the federal debt did not fall back to pre-war levels.  Then came President Reagan.  Who had the guts to call communism what it was.  A failed economic system that oppressed its people and was the greatest killer of the 20th century.  To push the Soviet Union into the ‘ash heap of history’ Reagan forced them to spend more than they could afford.  By ramping up defense spending to a level the Soviets couldn’t match.  Which ultimately won the Cold War (1947-1991, with Reagan delivering the knockout blow during his presidency (1981-1989) ).  But federal debt levels, once again, did not fall back to pre-war levels.  In fact, despite the peace dividend President Clinton inherited he still raised federal spending.  Just at a reduced rate than it was during the Cold War.  President Bush gave us Medicare Part D (drugs for seniors).  Then came 9/11.  And the War on Terror.  Then President Obama.  Who despite ending the Iraq War had the greatest budget deficits of any president.  As he spent more than any other president.  As he tried to transform the country into a European social democracy.  Sending out debt soaring to new heights.

FDR gave us Social Security in 1935.  At the tail-end of a long decline in the fertility rate.  Promising great benefits to future retirees.  Which LBJ added to during the Sixties with his Great Society.  During the post-war baby boom.  Perhaps assuming that increasing fertility rate would provide a lot of new taxpayers in the future when the weight of all these new government programs (FDR’s and LBJ’s) would be felt.  But then two things happened that they didn’t quite plan on.  The birth control pill and abortion created a baby bust following the baby boom.  Worse, thanks to modern medicine people were living longer into retirement.  Consuming more Social Security and Medicare benefits than anyone had ever imagined.  And just when the full force of those baby boomers was going to hit there were going to be fewer taxpayers around to pay for it.  Thanks to that baby bust.  More retirees paid for by fewer taxpayers.  A recipe for disaster.  Which is why debt soared towards World War II highs following the Cold War.  Even though there was no world war.  Because the cost of all those government benefits far exceeded the tax revenue.  Forcing the government to go into ‘world war’ debt just to pay for Social Security.  Medicare.  And everything else the federal government was providing so they could play mother to the American people.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , ,

Civilian Labor Force Participation Rate and Recessions 1950-Present

Posted by PITHOCRATES - April 9th, 2013

History 101

LBJ was able to pass JFK’s Tax Cuts resulting in a Long Period of Economic Growth

The official unemployment rate is stuck around 8%.  But if you count all the people who can’t find a full-time job the actual unemployment rate is closer to 14%.  With every jobs report we hear the positive spin from the government about another down tic in the official unemployment rate.  And the hundreds of thousands of new jobs created.  But after three years or so of hearing these reports people start questioning the numbers.  And the rosy spin.  Because despite all the good news they tell us people are disappearing from the civilian labor force.  Which is the only reason why the official unemployment rate is falling.  Because they’re not counting a lot of unemployed people.  So looking at the civilian labor force may be a better indicator of the health of the economy.  Or better yet, the civilian labor force participation rate (CLFPR).  Which is basically the percent of those who can work that are working.  So let’s do that.  Starting with the Fifties.

Labor Force Participation Rate and Recessions 1950 to 1959

After World War II veterans went to college on the G.I. Bill.  These new college graduates with degrees in science, engineering and business management entered the workforce in the Fifties.  Helping the United States to develop new technologies.  New industries.  And a lot of new jobs.  American wells were busy pumping domestic oil.  Keeping gasoline cheap.  Having escaped the damage of war the American economy exported to those countries that didn’t.  And consumer spending took off.  Thanks to the new advertising industry telling Americans about all the great things to buy.  They bought houses and cars with borrowed money.  And used the new credit card to spend even more money they didn’t have.  Changing the American economy into a consumer-based economy.  Making the Fifties one of the most prosperous times in U.S. history.  Despite the Korean War.  And the Cold War.  Which was getting underway in a big way.  There was a burst of inflation to help pay for the Korean War.  When it ended they contracted the money supply to get rid of that inflation sending the economy into recession.  But once the recession ended the economy took off with all that consumerism.  Shown by the sharp rise in the CLFPR.  To correspond with the very good economic times of the Fifties.  Another monetary contraction happened in 1957 to tamp out some price inflation.  With a corresponding fall in the CLFPR.

Labor Force Participation Rate and Recessions 1960 to 1969

The Sixties started with another recession.  After it ended, though, the CLFPR continued to fall.  The recession was officially over but the economy was not doing well.  The CLFPR fell for almost three years following the recession.  Things were different from the Fifties.  For one, a lot of those war-torn economies were up and running again.  Providing some competition.  Especially a little island nation by the name of Japan.  Which one day would build all the televisions sold in America.  It was because of this fall in economic activity that JFK started talking about tax cuts in 1963.  Congress blocked his attempt to cut tax rates.  But after his assassination LBJ was able to pass the Revenue Act of 1964.  This lowered the top marginal tax rate from 91% to 70%.  And lowered the corporate income tax from 52% to 48%.  Among other favorable business measures.  Resulting in a long period of economic growth.  And a long upward trend in the CLFPR.

The Tax Cuts and Deregulation of the Eighties created one of the Longest Periods of Economic Growth

But following the Revenue Act of 1964 came the Great Society.  The Vietnam War.  And the Apollo moon program.  All paid for with a huge surge in federal spending.  Deficits began to grow.   As the government struggled to pay for everything.  And were unwilling to cut anything.

Labor Force Participation Rate and Recessions 1969 to 1979

The economy fell into a mild recession in 1970.  The CLFPR remained relatively flat.  To meet their spending needs they started printing money.  Devaluing the dollar.  Still part of Bretton Woods the dollar was still pegged to gold at $35/ounce.  That is, the U.S. agreed to exchange gold for dollars at $35/ounce.  But as they devalued the dollar our trading partners no longer wanted to hold dollars.  Because they were losing their purchasing power.  They wanted the gold instead.  So they began exchanging their dollars for gold.  Causing a great outflow of gold from the U.S.  Causing a problem for President Nixon.  He didn’t want the U.S. to lose all of their gold reserves.  But he didn’t want to cut any spending.  Which meant he didn’t want to stop printing money.  In fact, he wanted to print more money.  And the easy way out of his dilemma was by doing the most irresponsible thing.  He slammed the gold window shut in 1971.  And refused to exchange gold for dollars anymore.  And when he did there was no restriction to the amount of money they could print.  And they printed it.  A lot.  Creating double-digit inflation before the Seventies were over.  The inflation caused prices to rise.  Which Nixon tried to prevent with wage and price controls.  Causing a shortage of available rental property as people converted them into condos to get away from the rent control.  Gasoline stations ran out of gas as people filled their tanks with below-market priced gas.  And meat disappeared from grocery stores.  Wage controls kept wages from keeping pace with inflation.  So even though people had jobs they lost more and more purchasing power.  Or simply found there was nothing to purchase.  Throwing the economy into recession in 1973.  After the recession the CLFPR grew throughout the remainder of the Seventies.  But it wasn’t good growth.  It was growth sustained with double-digit inflation.  A bubble of artificial economic activity.  That would have to crash.  As all inflationary periods must crash.

Labor Force Participation Rate and Recessions 1979 to 1989

In the Eighties Paul Volcker, Federal Reserve Chairman, raised interest rates to double digits to wring out the double-digit inflation from the economy.  To restore people’s purchasing power.  And return the nation to real economic growth.  The tax cuts and deregulation of the Eighties created one of the longest sustained periods of economic growth in U.S. history.  With one of the longest upward trends in the CLFPR ever.  Indicating a growing economy.  With more and more people who could work finding work.  Proving that Reaganomics worked.  And worked very well.

If JFK or Ronald Reagan were President Today we wouldn’t be seeing a Freefall of the CLFPR

But it wouldn’t last.  Thanks to the government’s interference into the banking industry.  They had set a maximum limit on interest rates S&Ls (and banks) could offer.  When inflation took off people pulled their money from their savings accounts.  Putting it in higher earning instruments.  So they didn’t lose their savings to inflation.   This bad banking policy begat more bad banking policy.  They deregulated the S&Ls and banks.  So they could do other things to make up for their lost savings business.  And that other thing was primarily real estate.  They borrowed short-term money to make long-term loans.  Helping to create a housing bubble.  And when they began to wring that inflation out of the economy interest rates rose.  When those short-term loans came due they had to refinance them at higher interest rates.  While the interest they were earning on those long-term loans remained the same.  So their interest expense soon exceeded their interest income.  Creating the savings and loan crisis.  And a severe recession that ended the economic expansion of the Eighties.  With a corresponding fall in the CLFPR.

Labor Force Participation Rate and Recessions 1990 to 2000

Once the recession ended the CLFPR resumed a general upward growth.  But not as good as it was in the Eighties.  Also, it would turn out that much of the growth in the Nineties was artificial.  Bill Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending requirements.  And to qualify the unqualified.  Which created a surge in subprime lending.  And the beginning of a housing bubble.  The Internet entered the economy in the Nineties.  Just as the personal computer entered the economy in the Eighties.  Making Bill Gates a very rich man.  Investors were anxious to find the next Bill Gates.  Taking advantage of those low interest rates creating that housing bubble. And poured money into dot-com start-ups.  Companies that had no revenues.  Or products to sell.  Creating a dot-com bubble.  And a surge in computer programming jobs.  Also, as the century came to a close there was the Y2K scare.  Creating another surge in computer programming jobs.  To rewrite computer code.  Changing 2-digit date codes (i.e., ’78) to 4-digit codes (i.e., 1978).

Labor Force Participation Rate and Recessions 2000 to 2013

The Y2K scare proved to be greatly overblown.  Which put a lot of computer programmers out of a job in January of 2000.  And they wouldn’t find a dot-com job for the dot-com bubble burst in the same year they lost their Y2K job.  Throwing the economy into recession in 2001.  And then making everything worse came the terrorist attacks on 9/11.  Prolonging the recession.  As can be seen by the long decline in the CLFPR.  Which leveled out after the Bush tax cuts.  But then that housing bubble peaked in 2006.  And burst in 2007 into the subprime mortgage crisis.  Thanks to all those toxic mortgages Bill Clinton’s Policy Statement on Discrimination in Lending forced lenders to make.  And because Fannie Mae and Freddie Mac bought these toxic mortgages and had Wall Street package them into collateralized debt obligations this crisis spread worldwide.  Selling what they told unsuspecting investors were high yield, low risk investments.  Because they were backed by the safest of all loans.  Mortgages.  What they failed to tell these investors was that these mortgages were not safe 30-year conventional mortgages.  But highly risky subprime mortgages.  In particular adjustable rate mortgages.  Where the monthly payment would increase with an increase in interest rates.  And that is what happened.  And when it happened the unqualified could not afford the new monthly payment.  And defaulted.  Kicking off the Great Recession.  And because President Obama was more interested in national health care than ending the Great Recession he didn’t cut taxes.  Or cut regulations.  Instead, he increased taxes and regulations.  Making the current recovery one of the worst in U.S. history.  As can be seen in the greatest decline in the CLFPR since the Great Depression.  If you look at a continuous graph from 1950 to the present you can see just how bad the Obama economic policies are.

Labor Force Participation Rate and Recessions 1950 to Present

The JFK and Reagan tax cuts caused the greatest economic expansions.  And the greatest rise in the CLFPR.  Also, after most recessions there was a return to a growing CLFPR.  Interestingly, the two times that didn’t happen are tied to Bill Clinton.  Who created two of the greatest bubbles.  The dot-com bubble in the Nineties.  And the subprime mortgage bubble that was built in the Nineties and the 2000s.  The growth was so artificial in building these bubbles that the CLFPR did not recover following the bursting of these bubbles.  It might have following the dot-com bubble if the subprime mortgage crisis didn’t follow so soon after.  The current recovery is so bad that it has taken the CLFPR back to levels we haven’t seen since the Seventies.  Making the current recovery far worse than the official unemployment rate suggests.  And far worse than the government is telling us.  So why are they not telling us the truth about the economy?  Because the government wants to raise taxes.  And if the economy is improving there is no need for recession-ending tax cuts.  So they say the economy is improving.  As they hate tax cuts that much.  Unlike Ronald Reagan.  Or JFK.  And if either of them were president today we wouldn’t be seeing a freefall of the CLFPR.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Disposable Income, Federal Taxes, Federal Debt and our Spending Problem 1940-2012

Posted by PITHOCRATES - February 27th, 2013

History 101

Excessive Federal Taxes reduce Disposable Income which reduces New Economic Activity

The key to economic growth is disposable income.  The more disposable income people have the more economic activity they will create.  So the key to a healthy economy is maximizing disposable income.  And we can do that in a few ways.  First of all we need jobs.  And we can create more jobs with fewer costly regulations.  And lower taxes.  If we make it less costly to hire people businesses will hire more people.  Which they aren’t doing right now.  Primarily because of Obamacare.  Which is so costly to businesses that they’ve frozen new hiring.  And are pushing some full time employees to part-time.  As well as investing in capital equipment wherever they can.  Replacing people with machines.  Because machines don’t incur Obamacare costs, taxes or penalties.

For those lucky few who haven’t been replaced by machines they can earn some disposable income.  Depending on their skill level.  A low-skilled person who never graduated from high school cannot earn as much disposable income as a thoracic surgeon.  So if you want stuff.  And you want to stimulate the economy.  Become a thoracic surgeon.  Or something else that takes years of college and years of on the job training.  And hundreds of thousands of dollars of student loan debt.

But earning a good income isn’t enough.  Because from that income we must pay an enormous amount of taxes.  Greatly reducing our disposable income.  Some of the taxes we can see.  Such as those itemized on our paycheck stubs.  Federal and state income taxes.  And Social Security and Medicare taxes.  But there are a lot of taxes we don’t see.  Such as excise taxes on the things we buy from gasoline to liquor to cigarettes.  And then there are property taxes.  Sales taxes.  And the list goes on.  All of which take a bite out of our disposable income.  Siphoning away real economic activity over the years as the federal government added new taxes.  And increased the tax rates of the old taxes.

The Federal Government came up with the Withholding Tax to Prevent an all out Tax Revolt

When the Founding Fathers ratified the Constitution there weren’t many taxes.  Mostly custom duties and tariffs.  Which was enough to fund the limited government they created.  But ever since the Founding some in the federal government have been trying to destroy what the Founding Fathers created.  And replace it with what they fought so long to get rid of.  A very large government that reaches into all parts of our life.  Like a monarchy.  Where those in the federal government belong to a new aristocracy.  Who are more equal than everyone else.  And live a far, far better life.  If you don’t believe this just check out property values around Washington DC.

With the American Civil War killing a generation of fathers a lot of boys grew up with over protective and doting mothers.  When these boys came of age and entered politics they weren’t as manly as their father’s generation was.  Because they grew up without fathers to teach them to hunt and fight.  Instead, they grew up with mothers who taught them to be more nurturing.  Giving us the progressive movement.  Woodrow Wilson gave us a permanent federal income tax.  And tried to expand the federal government to be more of a monarchy with a powerful executive that can govern against the will of Congress.  And the people.  After World War I we returned to normalcy.  And Warren Harding and Calvin Coolidge gave us the Roaring Twenties.  And the modern world.  Then Herbert Hoover and other progressives caused the Great Depression.  With a crisis too good to let go to waste FDR picked up where Woodrow Wilson left off.  Exploding the size and reach of the federal government.  And the great surge in federal taxes began.  Over the years they added more and more.  Such as these (see Table 2.1—RECEIPTS BY SOURCE: 1934–2017).

Income Payroll Excise and Other Taxes Key

Some of these you are no doubt familiar with.  The biggest bite is the individual income tax.  Something most of us have received our W-2s for and have just prepared our federal income tax returns.  Or are about to.  Dreading it.  Unless we’re getting a refund.  Those who owe money will probably take their sweet time.  As they hate writing a check to the federal government.  Which is why the federal government came up with the withholding tax.  For if people had to write a check for the full amount of their federal income taxes each year there would be an all out tax revolt.  And probably a lot more imprisonment for people not paying their federal taxes.  For no one has that kind of money sitting around.  Which is why the government takes it from you before you can spend it yourself.

Excessive Federal Spending requires ever Higher Taxation and ever more Borrowing to Feed

The big debate in Washington now is the sequester.  And the automatic cuts of the sequester.  Which were proposed by President Obama.  Which Congress wrote into a bill.  And the president signed into law.  In hopes that Republicans and Democrats would come together and find a way to reduce the record high deficit.  The Republicans want to do the obvious.  Cut the spending that caused the record deficit.  Democrats want to do what they always want to do.  Raise taxes.  Saying that we don’t have a spending problem.  That the four years of trillion dollar deficits isn’t because we’re spending too much.  It’s because we’re not taxing enough to pay for that spending.   That rich people aren’t paying their fair share.  But that’s not what you see when you look at the numbers.

Income Payroll Excise and Other Taxes

These taxes are identified in the above table.  As government spending grew so did taxes.  In particular personal income taxes which provide the majority of federal tax revenues.  Which exploded after LBJ’s Great Society added a lot of new federal spending.  And after President Nixon decoupled the dollar from gold in 1971.  Unleashing inflation.  Note that personal income taxes are greater than corporate income taxes.  That’s because there are more people than corporations.  For example, Siemens AG is an international corporation that employs about 360,000 people.  Who all pay personal income taxes.  After personal income taxes comes old-age and survivors insurance.  Otherwise known as Social Security.  And all of these taxes have continued to grow.  Taking a bigger and bigger bite out of disposable incomes.  Putting a drag on new economic activity.  Note that the only falls in federal tax revenue were due to two Democrat-caused recessions.  Bill Clinton’s dot-com bubble burst causing a bad recession in 2000.  And his subprime mortgage lending bubble he started with his Policy Statement on Discrimination in Lending burst causing a bad recession in 2007.  Apart from these, though, the pattern has been more spending.  Not less.  Which would suggest that we do have a spending problem.

Also included on this chart is the federal debt.  Note how it spiked up during World War II.  Then settled down at a constant rate for about 30 years.  Until LBJ’s Great Society spending increased federal spending.  But these massive new taxes weren’t enough.  For that’s when the big deficits started.  Adding on to a growing federal debt.  With the only decline in this growth coming during President Clinton’s presidency.  President Clinton’s dot-com boom (before the bubble burst), the peace dividend from President Reagan winning the Cold War, the Asian financial crisis and Japan’s Lost Decade all helped the American economy shower the treasury with cash.  Putting the nation into a surplus for a year or so.  But that didn’t last.  As federal spending continued to outpace tax revenue.  Culminating with President Obama’s trillion dollar deficits.  With federal tax revenue at the highest since President Bush’s record high just before Clinton’s subprime mortgage bubble burst into the subprime mortgage crisis.  And the Great Recession.

So yes, Virginia, we have a spending problem.  A spending that requires ever higher taxation and ever more borrowing to feed.  Taking an ever bigger chunk out of disposable incomes.  Leaving less and less for new economic growth.  Explaining why the economy has never recovered from the Great Recession.  For President Obama’s policies only increase taxes and the cost of doing business.  And do nothing to create disposable income.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT157: “Now that the anti-establishment types are running government we are no longer to question authority but embrace it.” —Old Pithy

Posted by PITHOCRATES - February 15th, 2013

Fundamental Truth

The History of Oliver Cromwell’s New Model Army and the English Civil War were not that Distant

Benjamin Franklin said the first responsibility of every citizen is to question authority.  That was kind of America’s thing.  Giving the finger to the governing authority.  Figuratively.  And sometimes literally.  Starting with King George III.  One of our earliest flags said, “Don’t tread on me.”  This flag had a coiled rattle snake on it.  Franklin thought the rattle snake was a good symbol of the American people.  If the British left us alone this snake would cause no harm.  If you get too close this snake will warn you to back off by shaking its rattle.  If you don’t heed this warning and threaten this snake it will strike you with lethal force.

This problem with authority almost lost the Revolutionary War for us.  At first American soldiers didn’t like following orders.  For if they could rebel against their king they could just as easily rebel against a commanding officer.  George Washington stopped that.  But this mistrust of authority was systemic.  The state governments did not trust the Continental Congress.  That distant central power.  Anymore than they trusted that other distant central power.  The British monarchy.

So the Continental Congress was woefully underfunded throughout the Revolutionary War.  Finding it very difficult to supply the Continental Army.  Or pay her soldiers.  Something else the states didn’t trust.  A standing army.  For the history of Oliver Cromwell’s New Model Army and the English Civil War were not that distant.  Or the peace that followed.  Where that army helped keep the new government in power.  And unleashed great woe and suffering to the Catholics in Ireland and Scotland.

Kings don’t suffer Personal Attacks in the Newspapers like an Elected President Does

So the Americans stood up to that distant power.  And to her ministers in the American colonies.  Not afraid to speak truth to power.  To speak out about the abuses of King George in the colonies.  Which Thomas Jefferson summarized in the Declaration of Independence.  They spoke contemptuously of the ruling British authorities.  When they won their independence they transferred this contempt to the new federal government.  The states trusted the new central authority in the United States little more than they trusted the one on the far side of the Atlantic.  And many fought as passionately against it as they fought against King George.

Even those in the new central government didn’t trust each other.  Political parties formed.  Alexander Hamilton led the Federalists.  Who wanted a strong central government.  And Thomas Jefferson led the Republicans.  Who wanted a weak central government.  Keeping the power in the states.  Hamilton and Jefferson hated each other.  Despised each other.  Believed that the other was everything that was wrong in the new nation.  And they attacked each other viciously in the newspapers through their surrogates.  Which were extensions of these political parties.  So if you wanted fair and balanced news all you had to do was read at least two newspapers.  Weigh the vitriol and lies in each to arrive at the truth.  Which was somewhere in between.

And these papers were pretty nasty.  Even attacking the most beloved man in the country.  George Washington.  Calling him old and senile.  Secretly British.  A mere puppet controlled by that evil puppet master Alexander Hamilton.  George Washington could have been king with the blessings of the American people.  Instead he chose to keep the United States a republic.  And suffered horribly for it.  For kings don’t suffer the personal attacks in the newspapers like an elected president does.  This was representative government.  Where the people are sovereign.  And the president is a servant of the people.  Not the other way around.  Like in a monarchy.

You can call LBJ and George W. Bush Murderers but you can’t ask President Obama Questions he doesn’t want to Answer

People marveled at how George Washington stepped down from power after his second term as president.  Even King George said that if he did that he would be the greatest man in the world.  And he did.  Proving the American system.  But while others marveled about how he could give up power after so short a time in office Washington more likely marveled about how long he was able to stay in office.  For he hated the politics.  And the newspaper attacks.  He was anxious to step down.  He was giddy during the transfer of power.  Happy to be going home.  While poor John Adams had to deal with all the politics.  The newspaper attacks.  And the lies.

Contrast this to President Obama.  Who gets treated by the media with kid gloves.  Who don’t question him at all.  Or his administration.  It being more like a monarchy than a republic.  After 4 Americans died in Benghazi the president offered no explanation.  And the media did not pressure him for one.  When Congress finally got to question the Secretary of State, Hillary Clinton, they asked her who was responsible for the failure to provide for the security for our diplomats in Benghazi?  Who was responsible for not coming to their aid while they were under attack?  And who was responsible for the lie about it being a spontaneous uprising in response to a YouTube video?  She only yelled “what difference does it make?”  And that was that.  The media reported that the Republicans were mean to her.  And never pressed her for answers.  Or President Obama.

Even the people aren’t demanding answers.  Which is sad.  For once upon a time the people chanted, “Hey, hey, LBJ, how many kids did you kill today?”  Making the political pressure of the Vietnam War so unbearable that he refused to run for a second term.  But where is this outrage over President Obama’s use of drones to kill terrorists as well as the innocent civilians and children around them?  Or the targeting of American citizens without any due process?  We hear nothing from the people.  Or the media.  The same people and media who wanted to try the 9/11 mastermind, Khalid Sheikh Mohammed, in a U.S. court not far from Ground Zero during the Bush Administration.

Why the double standard?  Why was it okay to question authority in the Sixties and Seventies?  No matter who was in power.  But after that it was only permissible to question authority when Republicans were in power?  Why is it you can call LBJ and George W. Bush murderers but you can’t ask President Obama questions he doesn’t want to answer?  When Dr. Benjamin Carson spoke truth to power at the National Prayer Breakfast criticizing Obamacare and the president’s economic policies the Left attacked him for not showing deference to the president.  How dare he exercise free speech in a public setting they asked?  A far cry from “Hey, hey, LBJ, how many kids did you kill today?”  No.  This president we’re supposed to show deference to.  As if he was a king.  Why?  Apparently now that the anti-establishment types are running government we are no longer to question authority but embrace it.  So they can do whatever they want to do.  And change the country however they want to change it.  While that whole questioning authority thing was okay when they were on the outside looking in.  But now that they are on the inside looking out we need to question less and obey more.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

FT134: “There will always be poor and oppressed people because someone has to vote for liberal Democrats.” —Old Pithy

Posted by PITHOCRATES - September 7th, 2012

Fundamental Truth

Liberal Democrats would Not Like an America without Poor and Oppressed People

In the anti-nuclear power movie The China Syndrome Jack Lemmon’s character wanted to warn everyone about his dangerous nuclear power plant.  He was a control room operator at the plant.  During one event there was a vibration.  The reactor shut down (SCRAM) safely.  But Lemmon’s character did some investigating and found that some safety reports had been falsified.  And in his quest to publicize this fact people died.  So he did the only thing he could.  He locked himself inside the control room at the nuclear power plant.  Requested that the characters played by Michael Douglas and Jane Fonda come down to put him on the air live.  And threatened to create a nuclear catastrophe himself if that didn’t happen.  That’s right, as dangerous as that reactor was he did NOT shut it down.

Odd, really.  He threatened to cause what he was trying to prevent.  Why?  Well, consider what would have happened if he did everything he did with one change.  Instead of threatening his own nuclear catastrophe he shut down that reactor.  So it was safe and could not harm anyone.  If he did that what do you think would have happened?  No one would have brought that news crew (Douglas and Fonda) to the plant.  And plant security would have just broken into the control room and subdued Lemmon.  But because he left the reactor hot and dangerous they didn’t break in and subdue him.  And they brought in that news crew.  Because his threat of causing a nuclear catastrophe gave him power.  While a safe and shutdown reactor gave him no power.

So what do we learn from this?  Sometimes the thing you’re fighting against is the very thing that gives you power.  A purpose.  A reason for getting out of bed in the morning.  Something that gives you a job.  Something that pays the bills.  And it’s just not disgruntled nuclear power plant operators.  Imagine a world with no crime.  If there was no crime we wouldn’t need any police officers.  Something police officers wouldn’t like.  Just as firefighters wouldn’t like a world without fires or accidents.  Just as cardiologists would not like a world without heart disease.  Just as environmentalists would not like a world without global warming.  Just as advocates of affirmative action would not like a world without discrimination.  Just as liberal Democrats would not like an America without poor and oppressed people.

The Poor and Oppressed are a Favorite Constituency of the Federal Government

The more horrible the things people are fighting against the greater are the need for these people.  The Left makes use of this strategy all of the time.  Falling test scores means we need to spend more on education.  As in hiring more teachers.  And paying them more.  This works the other way, too.  When municipalities are running budget deficits because of costly public sector contracts calling for high pay and generous benefits they place a new millage on the ballot.  And warn the people that if they don’t vote ‘yes’ for these higher taxes they will have no choice but to increase the number of rapes, murders and assaults.  As well as increase the number of deaths from fires, heart attacks in the home and car accidents.  Because if the people vote ‘no’ they will lay off police officers and firefighters.  Instead of renegotiating those contracts that are causing their financial problems.  No.  It’s never cutting back on the things that are bankrupting their cities.  It’s always putting the fear of God into their electorate.  So the public sector workers can maintain their generous pay and benefits.

Of course some will say that our teachers, police officers and firefighters don’t get paid that much.  If that’s true then they belong to some real crappy unions.  Because you join a union to get better pay and better benefits.  And you pay union dues for the union’s help in getting better pay and better benefits.  Also, if we didn’t already pay them very well you would know what their pay and benefits were during these millage requests.  For it sure would help their argument for higher pay if most people made more than they did.  Because, let’s face it, we need good teachers, police officers and firefighters.  If we paid them less than most other people everyone would feel guilty and vote ‘yes’ without hesitation.  But during these millage requests they don’t make public their current pay and benefit schedule.  And it’s hard to find this information online.  Because that’s ‘personal’.  Even though we pay them with public money.  Which should tell you something.  They’re paid better than most people.  Because they’re asking for more without telling us how much they currently make.  For it is hard to get sympathy for your pay level when you make more than most other people.

It’s no secret that government workers get better pay and benefit packages than people in the private sector.  Especially in the federal government.  Where federal employment grows by leaps and bounds every year.  And they create ever new programs to fight against something.  So they can keep hiring more people into the federal bureaucracy.  To reward friends and cronies.  And to endear a growing federal government to ever more people.  So they will continuously help to support and promote that sprawling bureaucracy.  Through their votes.  And by making as many people as possible dependent on the government.  Making the poor and oppressed a favorite constituency of the federal government.  As it has been for a very long time.  Despite the numerous battles to end poverty and oppression.

The Liberal Democrat Answer to Poverty is Not a Job but a Government Entitlement

JFK was a tax-cutter.  Just like Ronald Reagan.  They both believed that you had to create a business-friendly environment to create jobs.  Because if a business did well it grew and hired more people.  That’s why both JFK and Ronald Reagan had strong economic growth and low unemployment during their presidencies.  And they each brought in a lot of tax revenue into Washington.  Even with their low tax rates.  So low tax rates are good.  They help businesses grow.  They help people get jobs.  They lower the price of consumer goods so people can buy more for less.  And they bring in more revenue to the government to help those who need help.  Of course liberal Democrats hate this.  Because if everyone is doing well there is no need for all their agencies and programs.  Or them.

Shortly after the assassination of JFK things changed.  LBJ became president.  Who was a big liberal Democrat.  Who declared unconditional war on poverty.  This was in 1964.  The plan was to explode the size of the federal government.  Which is what he did when he gave us the Great Society.  The war on poverty would become one of America’s longest war.  Longer than the wars in Iraq and Afghanistan.  Longer than the Vietnam War.  Even longer than the Cold War.  The war on poverty continues to this day.  Requiring ever more government agencies.  And programs.  Yet they’ve all failed to end poverty.  Proven by the fact that every generation of liberal Democrats running for office is an advocate for the poor and oppressed who have no voice but theirs.

The liberal Democrat answer to poverty is not a job but a government entitlement.  Because jobs lead to lower unemployment.  And less purpose for a liberal Democrat.  Liberals don’t want jobs and low unemployment.  They want high taxes and high unemployment.  So they can matter.  And make a difference.  So they can have a cushy job with high pay and generous benefits.  So they attack tax cuts.  They attack any lowering of regulatory costs.  And anything else that would help businesses create jobs.  Which would take the poor and oppressed away from them.  They don’t want people to be rugged and independent.  They want them needy and dependent.  And they want as many people as possible to be needy and dependent.  Even if it leads to a little rioting.  Especially if it leads to a little rioting.  For a little level of danger can be useful.  As it can be in a nuclear power plant in an anti-nuclear power movie.  Because it’s very hard to get taxpayers to vote for people that want to increase your taxes and make your lives more costly.  While some liberals genuinely care about making people’s lives better many more are like Jack Lemmon in The China Syndrome.  Who understand that they must maintain a certain level of poverty and oppression in the nation.  Or they will have no power.  As no one will vote for them.  Because if you’re in the business of ending poverty and oppression you need a certain level of poverty and oppression to fight against.  Always.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

JFK, Tax Cuts, Vietnam, LBJ, Great Society, Hippies, Race Riots, Keynesian Spending, Nixon, Carter and Ronald Reagan

Posted by PITHOCRATES - August 21st, 2012

History 101

Ronald Reagan would follow the Kennedy Example of Cutting Taxes to Grow the Economy

In 1961 West German Chancellor Ludwig Erhard gave John F. Kennedy (JFK) some good advice.  During JFK’s visit he told him not to make the same mistake the British had.  He told Kennedy NOT to follow their policy of high taxation.  Because it killed economic activity.  And economic growth.  England was suffering from her bad tax policy.  He urged the American president not to make the same mistake.

JFK heeded Erhard’s advice.  And cut tax rates.  This did not please liberals in his Democrat Party.  Who were all Keynesians.  And believed in large government interventions into the private sector.  Funded by large government expenditures.  Which in the Keynesian world you got in one of three ways.  Tax, borrow or print money.  You did not cut tax rates.  Which was blasphemous in Keynesian doctrine.  You never, ever, cut tax rates.  But Kennedy did.  Arguing that “an economy hampered by restrictive tax rates will never produce enough revenue to balance the budget—just as it will never produce enough jobs or enough profits.”

A message Ronald Reagan would give time and again some 20 years later.  And would follow the Kennedy example of cutting taxes to grow the economy.  Generating more tax revenue without having to cut spending.  The result of JFK’s ‘trickle-down’ economics were impressive.  He cut the top marginal tax rate from 91% to 70%.  And cut the 20% rate to 14% at the other end of the scale.  What did people do with these tax savings?  They saved.  And invested.  Savings rose from an annual growth rate of 2% to 9%.  Business investment from 2% to 8%.  New jobs grew at a rate of 100%.  And unemployment fell by one third.  With GDP rising some 40% in two years.  And despite cutting tax rates tax revenue rose.  The booming economy generating more tax revenue even at the lower rates.  Even more than the Keynesians said Kennedy was going to cost the government with his tax cuts.

The Social Upheavals of the Sixties, the Race Riots and his Unpopular Vietnam War all took their Toll on LBJ

Liberals love JFK.  But for none of these reasons.  They prefer to wax poetically about his fight to end economic and racial injustice.  Which were in reality low on his priority list.  Addressing civil rights only after trouble was escalating in the south.  But that’s the Left’s cherished memory of him.  And of Camelot.  The American royal family.  They don’t talk about JFK’s trickle-down economics.  His Bay of Pigs fiasco (the plan to oust Fidel Castro from Cuba that he withdrew support from after it met difficulty on the beaches).  His Cuban missile crisis (near nuclear war with the Soviet Union) which his indecision at the Bay of Pigs may have invited.   Or his war in Vietnam.  No.  They stay silent on the best part of his presidency.  As well as the worst parts.  And focus instead on the fairy tale that was Camelot.  Ignoring completely his excellent economic policies and the strong economy they gave us.  And all that tax revenue that poured into the treasury.  Yes, they may have liked having that money.  But they didn’t have to like how it got there.

Following JFK’s assassination Lyndon Baines Johnson (LBJ) ascended to the presidency.  An old school politician that knew how to make deals to advance legislation.  And boy did he.  He declared unconditional war on poverty.  And unleashed the Great Society to spend America out of poverty.  Keynesian to the core.  Pure demand-side economics.  Give poor people money which they will use to buy consumer goods.  That Keynesian consumption that was so crucial to a healthy economy.  So Johnson made good use of all that tax revenue JFK created with his tax cuts.  And LBJ’s Great Society consumed enormous amounts of that tax revenue.  As did JFK’s Vietnam War.  Now LBJ’s war.  Which LBJ escalated.  Government expenditures exploded during the Johnson administration.  And the spending obligations he put into place were only going to escalate future expenditures.  Oh, and we were also trying to land a man on the moon during this time.  All during a time when the world was changing.  When a bunch of filthy hippies began to protest anything that didn’t somehow gratify them (their rallying cry was sex, drugs and rock & roll).  And racial tensions simmered to the boiling point in our crowded cities.

The social upheavals of the Sixties.  The race riots.  The unpopular war on our living room televisions.  They all took their toll on LBJ.  The race riots especially hurt him as he had spent so much money on ending economic and racial injustice.  On a televised address he told the nation that he was through being the president.  He wasn’t going to run for another term.  And he wouldn’t accept a nomination for a second term.  He basically thanked an ungrateful nation.  And planned for his retirement.  Leaving a fiscal mess for the next president.  As well as a mess in Vietnam.  And the job for cleaning up these messes fell to Richard Milhous Nixon.

When Nixon entered the Presidency all those Spending Obligations of the Great Society were Coming Due

Nixon had a lot of liberal tendencies.  He was actually a member of the NAACP since 1950.  Long before JFK or LBJ talked of civil rights.  He believed in New Deal economics.  Of the good government could do.  He was also an environmentalist.  Giving us the Environmental Protection Agency (EPA).  And giving us emissions standards for our cars.  He gave us the Occupational and Safety Health Administration (OSHA).  And a flurry of other regulations.  Not what you would expect from a Republican these days.  Of course, few probably know this.  But they probably do know about Watergate.  At least the word ‘Watergate’.  Which was pretty tame by today’s standards.  Spying on the political opposition.  Then lying about it.

When Nixon entered the presidency all those spending obligations of the Great Society were coming due.  The cost of LBJ’s Great Society really hit the Nixon administration hard.  Enormous amounts of money were flowing out to poor people (so they could spend it and buy consumer goods).  To the war in Vietnam.  To the Cold War.  To the space program.  To the enlarged federal government.  Government spending was going off the chart.  But it wasn’t having the affect on the economy the Keynesians said it would.  They were taxing, borrowing and printing money like good little Keynesians.  But they were devaluing the dollar in the process.  And igniting inflation.  Worse, the U.S. dollar was the reserve currency of the world.  Foreign nations pegged their currency to the U.S. dollar.  The U.S. pegged the dollar to gold.  As the Americans devalued the dollar, though, the foreign countries traded their dollars for gold.  Gold began to fly out of the country.  So Nixon did what any responsible Keynesian would do.  Instead of playing by the rules of the game he changed the rules.  And decoupled the dollar from gold.  The Nixon Shock.  Ushering in the era of unfettered Keynesian economics.  Deficit spending.  Growing debt.  High inflation.  High unemployment.  Stagflation.  And malaise.

Jimmy Carter would see the worse of LBJ’s Great Society.  As it left his economy in a mess.  Despite all of that government spending.  And Carter suffered because he, too, was a Keynesian.  He believed in that GDP formula where GDP equaled the sum of consumption, investment, government expenditures and net exports (exports – Imports).  And the formula clearly states that the way to increase GDP (and increase the number of jobs) was to increase government spending to give money to people so they could buy consumer goods (increasing government spending and consumption in the formula).  It was simple arithmetic.  But the formula left out about half of all economic activity.  The intermediate business spending that takes place before any consumer goods enter our stores.  Think of things consumers don’t buy.  Like railroad track, blast furnaces, construction front-end loaders, etc.  Economic activity that JFK encouraged with his tax cuts.  As Ronald Reagan did so, too, some 20 years later.  Which is why the JFK and the Reagan economies were far better than any Keynesian administration.

Even after more than a decade of unfettered Keynesian spending consumption was only 34% of all economic activity in 1982.  Even though official GDP figures reported it at 65%.  Why the discrepancy?  Intermediate business spending.  The stages of production before consumer goods.  Coming in at 54% of real economic activity in 1982.  Which is why the tax-cut policies of JFK and Ronald Reagan worked.  And the spending policies of JBJ, Nixon and Carter didn’t.  Trickle-down works.  Because it creates jobs.  And those lower tax rates generate higher tax revenues because more people are working and paying taxes.  All things a Keynesian wants.  But they will reject them because they resulted from the ‘wrong’ policies.  Because Keynesians want to tax, borrow and print.  Regardless of their effect on the economy.

www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Keynesians, Gold Standard, Consumer Price Index, Money Stock, Nixon Shock, 1973 Oil Crisis, Gasoline Prices, Hidden Tax and Wealth Transfer

Posted by PITHOCRATES - April 24th, 2012

History 101

With the Increase in the Money Supply came the Permanent Increase in Consumer Prices that Continues to this Date

Keynesians hate the gold standard.  Because it puts a limit on how much money a government can print.  Keynesians believe in the power of government to eliminate recessions.  And their cure for recession?  Inflation.  The government prints money to spend in the private economy.  To make up for the decline in consumer spending.  But it turned out this didn’t work.  As the Seventies showed.  They printed a lot of money.  But it didn’t end the recession.  It just raised consumer prices.  Because there is a direct correlation between the amount of money in circulation and consumer prices.  As you can see in the following graph. 

 Source: M2, CPI

 The consumer price index (CPI) data comes from the U.S. Department of Labor.  The data is at 5 year intervals.  The CPI is a ‘basket’ of prices for a selection of representative goods and services divided by another ‘basket’ of prices from a fixed date.  The resulting number is a price index.  If you plot these for a period of time you can see inflation (a rising graph) or deflation (a falling graph).  M2 is the money stock (seasonally unadjusted).  M2 includes currency, traveler’s checks, demand deposits, other checkable deposits, retail MMMFs, savings and small time deposits.

The Breton Woods system established fixed exchange rates for international trade.  It also pegged the U.S. dollar to gold.  The U.S. government promised to exchange U.S. dollars for gold at a rate of $35/ounce.  Making the U.S. dollar as good as gold.  This set the rules for international trade.  Made it fair.  And prevented anyone from cheating by devaluing their currency to make their exports cheaper to gain an economical advantage in international trade.  The system worked well.  Until the Sixties.  Because of the Vietnam War.  And LBJ’s Great Society.  These increased government spending so much that the U.S. government turned to printing money to pay for these.  Which depreciated the dollar.  Making it not as good as gold anymore.  So our trading partners began dumping their devalued dollars.  Exchanging them for gold at $35/ounce.  Which was a problem for the Nixon administration.  For that gold was far more valuable than the U.S. dollar.  They could print more dollars.  But once that gold was gone it was gone.  So Nixon acted to keep that gold in the U.S.

On August 15, 1971 Nixon decoupled the dollar from gold.  Known as the Nixon Shock.  Reneging on the solemn promise to exchange U.S. dollars for gold.  And ramped up the printing presses.  Which you can see in the graph.  After August 15 the money supply began growing.  And continues to this date.  With the increase in the money supply came the permanent increase in consumer prices that, also, continues to this date.  In lockstep with the growth of the money supply.

Prior to the Nixon Shock Gasoline Prices were Falling at a Greater Rate than the Rate Consumer Prices were Rising 

Since August of 1971 the U.S. has maintained a policy of permanent inflation.  Which caused a policy of permanently increasing consumer prices.  Those high prices we complain about, then, are not the fault of greedy businesses.  They’re the fault of government.  And their easy monetary policy.  In fact, if it was not for government’s irresponsible monetary policy the high price we hate most would not be as high as it is today.  In fact, because of the efficiency of the industry bringing us this one product its price has not followed the general upward trend in consumer prices.  And what is this product?  Gasoline.  Which, apart from two spikes in the last 60 years or so has either been falling or holding steady in comparison to consumer prices.

 Source: CPI, Gas $/Gal

 These prices are from DaveManual.com.  And reflect generally the price at the pump over this time period.  Using at first leaded gasoline.  Then unleaded gasoline.  Using inflation adjusted average prices.  Then chained 2005 dollars.  These prices are not exactly apples-to-apples.  But the trending information they provide illustrates two major points.  The two spikes in gas prices were due to demand greatly outpacing supply.  And that even with these two spikes gasoline prices would be far lower today if it wasn’t for the government’s policy of permanent inflation.

Note that prior to the Nixon Shock gasoline prices were falling at a greater rate than the rate consumer prices were rising.  These trends stopped in the Seventies for two reasons.  The Nixon Shock.  And the 1973 oil crisis.  When OPEC punished the U.S. for their support of Israel in the Yom Kippur war by cutting our oil supply.  These two events caused gasoline prices to spike.  But then something interesting happened with these high prices.  It brought a lot of oil producers into the market to cash in on those high prices.  This surge in production coupled with a falling demand due to the U.S. recession in the Seventies caused an oil glut in the Eighties.  Bringing prices back down.  Where they flat-lined for a decade or so while all other consumer prices continued their march upward.  Until two of the most populous countries in the world modernized their economies.  India and China.  Causing a spike in demand.  And a spike in prices.  For it was like adding another United States or two to the world gasoline market.

Inflation is a Hidden Tax that Transfers Wealth from the Private Sector to the Public Sector

Keynesians love to talk about how great the economy was during the Fifties when the high marginal tax rate was 91-92%.  “See?” they say.  “The economy was robust and growing during the Fifties even with these high marginal tax rates.  So high marginal tax rates are good for the economy.”  But they will never comment on how instrumental the gold standard was in keeping government spending within responsible limits.  How that responsible monetary policy kept inflation and consumer prices under control.  No.  They don’t see that part of the Fifties.  Only the high marginal tax rates.  Because they don’t want to return to the gold standard.  Or have any restrictions on their irresponsible ways.

Keynesians believe in the power of government to manage the economy.  And they really like to tax and spend.  A lot.  But taxing too much has consequences.  People don’t like paying taxes.  And don’t tend to vote for people who tax them a lot.  Which is why Keynesians love inflation.  Because it’s a hidden tax.  The higher the inflation rate the higher the tax.  Because government also borrows money.  They sell bonds.  That we buy as a retirement investment.  But if there’s been a good amount of inflation between the selling and redemption of those bonds it makes it a lot easier to redeem those bonds.  Because thanks to inflation those bonds are worth far less than they were when the government issued them.  Even Keynes noted that inflation was a way to transfer a lot of wealth from the private sector to the public sector.  Without many people understanding that it was even happening.

If you ever wondered why it takes two incomes to do what your father did with one income this is why.  Inflation.  This never ending transfer of wealth from the private sector to the public sector.  Leaving us less to retire on.  Making it harder to save for our children’s college education.  Not to mention the higher cost of living that shrinks our real wages.  While they tax our higher nominal wages at ever higher income tax rates (income tax bracket creep is another inflation phenomenon).  Everywhere we turn the government takes more and more of our wealth.  All thanks to LBJ increasing the government spending (for his Vietnam War and his Great Society).  And Richard Nixon decoupling the U.S. dollar from gold.  Instead of doing the responsible thing.  And cutting spending.  But much like high taxes you don’t win any friends at the voting booth by cutting spending.  So thanks to them we’ve had permanent and significant rising inflation and consumer prices ever since.  And as a result a flat to a falling standard of living.  Where soon our children may not have a better life than their parents.  Thank you LBJ and Richard Nixon.  And thank you Keynesian economics.

 www.PITHOCRATES.com

Share

Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

« Previous Entries