Obama Job Approval has Fallen over the Last Year

Posted by PITHOCRATES - January 23rd, 2014

Politics 101

Ten Different Obama Job Approval Polls show Higher Disapproves than Approves

President Obama did not have a good 2013.  Especially near the end.  Because of the Obamacare rollout.  With the website being a disaster.  The enrollment numbers weren’t as projected.  Or needed.  And then all the cancellations in the individual market.  As people learned they couldn’t keep the policies and doctors they liked.  Which gave President Obama the recognition for being the best in at least one thing.  As PolitiFact named “if you like your health care plan, you can keep it” as the lie of the year.

The bad news continued into 2014.  The Obamacare enrollee numbers didn’t improve.  Most of the enrollees are the old and sick.  Not the young and healthy the Obama administration told the health insurers would be enrolling.  Which is breaking the economic model.  Guaranteeing not only that health insurance premiums will rise.  But some health care providers are actually requiring payment up front before providing services.  As they are not sure what the insurers will pay.  Making Obamacare an even bigger disaster.  Which is a big factor in driving President Obama’s job approval rating down (see President Obama Job Approval posted on Real Clear Politics).

President Obama Job Approval R1

The ten polls included in the RCP Average all share one thing in common.  They all have larger disapproval numbers than approval numbers.  With the average disapproval number being 8.4 points greater than the average approval number.  However you look at these numbers they are not good for President Obama.  For they say President Obama has not been good for the United States.

People don’t Trust President Obama and are beginning to Doubt his Past Claims of Accomplishment

Growing numbers of people don’t trust the president anymore.  Including those who were Obama supporters.  Who because of the ‘lie of the year’ don’t look at those other scandals as opposition propaganda anymore.  These scandals (Benghazi, IRS targeting conservatives, spying on journalists, spying on Americans, Fast and Furious, Solyndra, ‘recess’ appointments, executive orders to bypass the will of the people/Congress, etc.) are now just other things not to trust the president about.  The president has been less than honest to get what he wants (power).  While the American people don’t get what they want (jobs, affordable health care, etc.).  And it’s because of this that his job approval has entered a steady decline.

President Obama Job Approval Graph R1

Following a bump during the 2012 election Obama’s job approval has trended down.  The Obama administration lied about what happened in Benghazi to help their reelection chances.  Where the campaign message was that al Qaeda was on the run.  Which is apparently why the State Department under Secretary Clinton denied Ambassador Steven’s request for additional security to combat the resurgent al Qaeda in Libya.  As the recent bipartisan Senate report stated that the killing of four Americans in Benghazi on the anniversary of 9/11 could have been prevented.

Benghazi, the NSA spying on us, the ‘lie of the year’ and the other scandals have had their affect on the American people.  And after the Target point-of-sale credit card hack people are very suspect of the Obamacare website.  Especially when a security consulting firm says there is no security on the Obamacare website yet the Obama administration keeps telling us to trust them.  They’ll keep our data safe.  Even though Target couldn’t.  And they have functioning security systems in place.  Unlike Obamacare.  That has none.  So people don’t trust President Obama.  And they’re beginning to doubt his past claims of accomplishment.  As well as those rosy jobs reports from the Bureau of Labor Statistics.

The Lie of the Year appears to have Broken the Spell Obama held over some of his Admirers

The Democrat’s Keynesian economic policies created yet another housing bubble.  By keeping interest rates artificially low and relaxing credit standards they stimulated the housing market.  And housing prices soared.  But buyers didn’t seem to care.  Because they were borrowing the money to buy these overpriced houses.  Because of those low interest rates.  Even people who couldn’t afford to buy a house were buying a house. Thanks to subprime lending like the adjustable rate mortgage (ARM).  But when interest rates rose so did those monthly payments on those ARMs.  People couldn’t afford their mortgage payments anymore.  And defaulted.  Giving us the subprime mortgage crisis.  Which turned into the Great Recession.

The Democrats blamed the banks for the Great Recession.  Not their Keynesian policies.  Or President Clinton’s heavy hand on lenders to qualify the unqualified for mortgages (see Bill Clinton created the Subprime Mortgage Crisis with his Policy Statement on Discrimination in Lending posted 11/6/2011 on PITHOCRATES).  Not only did they deflect blame for the crisis they used the crisis to implement further Keynesian policies.  A near-trillion dollar stimulus bill.  Much of which went to Obama’s ‘friends’ in the green energy industry.  And to their friends in unions.  The government spent a lot of money.  They kept interest rates artificially low.  And when that didn’t work they used quantitative easing.  Basically printing money.  The Obama administration said their policies were working.  And declared the summer of 2010 ‘Recovery Summer’.  The recession was over.  Since then they highlighted the new jobs created with every jobs report.  While ignoring the number of people who have left the labor force.  Greatly skewing the numbers.  And grossly understating the real unemployment rate (see Wall Street adviser: Actual unemployment is 37.2%, ‘misery index’ worst in 40 years by Paul Bedard posted 1/21/2014 on the Washington Examiner).

Don’t believe the happy talk coming out of the White House, Federal Reserve and Treasury Department when it comes to the real unemployment rate and the true “Misery Index.” Because, according to an influential Wall Street advisor, the figures are a fraud…

…the Misery Index, which is a calculation based in inflation and unemployment, both numbers the duo say are underscored by the government. He said that the Index doesn’t properly calculate how Uncle Sam is propping up the economy with bond purchases and other actions.

“These tricks, along with a host of other dubious accounting schemes, underreport inflation by about 3 percent,” they wrote, adding that the official inflation rate is just 1.24 percent.

“Today, the Misery Index would be 7.54 using official numbers,” they wrote. But if calculations tabulating the full national unemployment including discouraged workers, which is 10.2 percent, and the historical method of calculating inflation, which is now 4.5 percent, ‘the current misery index is closer to 14.7, worse even than during the Ford administration.”

The 1970s were the heyday of Keynesian economics.  With spending out of control Richard Nixon did something that Keynesians longed for.  He decoupled the dollar from gold.  Allowing the Fed to print money like there was no tomorrow.  Igniting inflation.  And when the inflation rate was added to the unemployment rate it gave us a record Misery Index.  Until now, that is.  If you use the real data.  And not the ‘massaged’ data that makes their Keynesian policies appear to be working.  Telling us the recession ended in 2010.  When many feel the Great Recession has never ended.  Which is yet another reason not to trust the Obama administration.  Or not approve of the job President Obama is doing.  As the polls have been showing this past year.  And it’s not just because of Obamacare.  But the ‘lie of the year’ appears to have broken the spell he held over some of his admirers.  Who can now see the king is wearing no clothes.  No matter what his administration and those in the mainstream media say.

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The Left Hate Margaret Thatcher and Ronald Reagan because they Restored their Countries to Greatness

Posted by PITHOCRATES - September 16th, 2012

Week in Review

The British Left hates Margaret Thatcher.  So much that they are already selling t-shirts celebrating her death.  Though she is still alive.  For she is the Ronald Reagan of Great Britain.  A singularly remarkable person who came along just in time to save a nation in decline.  And restore it to greatness (see The Left hates Margaret Thatcher because she reminds them they are wrong about everything by Daniel Hannan posted 9/12/2012 on the Daily Mail).

Now and again, we are reminded of the sheer nastiness of a certain kind of Leftie. Not, let me stress, all Lefties: I have Labour friends who are motivated by a more or less uncomplicated desire to help the disadvantaged.

But they march alongside some committed haters who define their politics not by what they like, but by what they loathe. They also define opponents not as human beings with whom they disagree, but as legitimate targets.

A lack of empathy, bordering almost on sociopathy sits behind their talk of caring and sharing.

Not much different from the American Left.  Who hate their political opponents.  And attack them personally.  With no understanding of the underlying policy in question.  For they never say they prefer tax, borrow and print (money) Keynesian economics over a more Austrian approach of sound money and low taxation.  The kind of policies that have made great economies great.  Instead they say their opponents hate women, hate poor people, hate children, hate seniors, etc.  And yet they are the tolerant people.  Who tolerate everyone that agrees with them.  And hates all those who disagree with them.  Making these tolerant some of the most intolerant of people.  Which is why they hate Ronald Reagan in America.  And they hate Margaret Thatcher in Britain.  Even though they both returned their countries to prosperity after a decade of decline and despair.

I am just old enough to remember the end of the Seventies: power cuts, three-day weeks, constant strikes, price and income controls, inflation.

Worst of all, I remember the sense of despair, the conviction that Britain was finished.

I don’t believe you can grasp Margaret Thatcher’s achievement without the context of what she displaced.

Throughout the Sixties and Seventies, this country had been outperformed by every European economy. ‘Britain is a tragedy — it has sunk to borrowing, begging, stealing until North Sea oil comes in,’ said Henry Kissinger.

The Wall Street Journal in 1975 was blunter: ‘Goodbye, Great Britain: it was nice knowing you.’

Margaret Thatcher’s victory in 1979 was like a thaw after the cruellest of winters. Inflation fell, strikes stopped, the latent enterprise of a free people was awakened.

Having lagged behind for a generation, we outgrew every European country in the Eighties except Spain (which was bouncing back from an even lower place). As revenues flowed in, taxes were cut and debt was repaid, while public spending — contrary to almost universal belief — rose.

In America we were mired in stagflation and a record high misery index of the Carter Seventies.  Much of which he inherited from LBJ’s Great Society and Richard Milhous Nixon’s abandoning of the quasi gold standard.  The Nixon Shock.  Because he refused to cut Great Society spending.  As did Gerald Ford.  As did Jimmy Carter.  No one wanted to cut back spending and continued to print money to pay for the Great Society spending causing the record high inflation during the Seventies.  Which added to the high unemployment that gave Jimmy Carter that horrible misery index.  And malaise.  Like Daniel Hannan I’m just old enough to remember how bad it was in the Seventies.  And how great Ronald Reagan’s Morning in America was.  We were better off after 4 years of Ronald Reagan than we were after 4 years of Jimmy Carter.  And the numbers proved it.  Lower tax rates increased tax revenue.  Allowing even greater government spending.  Which was the source of the Reagan deficits.  Not the tax cuts.

In the Falklands, Margaret Thatcher showed the world that a great country doesn’t retreat forever.

And by ending the wretched policy of one-sided detente that had allowed the Soviets to march into Europe, Korea and Afghanistan, she set in train the events that would free hundreds of millions of people from what, in crude mathematical terms, must be reckoned the most murderous ideology humanity has known.

Margaret Thatcher and Ronald Reagan stood together against communism.  While Jimmy Carter eroded America’s military power so much that the Soviets actually put together a nuclear first-strike doctrine.  For unlike the policy of Mutual Assured Destruction (MAD) of previous administrations the Soviets believed they could launch and win a nuclear war against Jimmy Carter.  Reagan and Thatcher rebuilt and deployed nuclear and regular military forces to reduce the threat of a Soviet first-strike.  And made the enemies of Great Britain and the United States fear and respect our military might.  It was peace through strength.  For all free and democratic countries.  Not the detente of Jimmy Carter that encouraged the Soviets to add a nuclear first-strike doctrine.  The beginning of the end of the Cold War began under Thatcher’s and Reagan’s watch.

Why, then, do Lefties loathe her so much..?

No, what Lefties (with honourable exceptions) find hard to forgive is the lady’s very success: the fact that she rescued a country that they had dishonoured and impoverished; that she inherited a Britain that was sclerotic, indebted and declining and left it proud, wealthy and free; that she never lost an election to them.

Their rage, in truth, can never be assuaged, for she reminds them of their own failure.

The same reasons the American Left hates Ronald Reagan.  Because he, too, returned his country to greatness.

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Jimmy Carter, Malaise, Ronald Reagan, Austrian Economics, Morning in America, Barack Obama, Keynesian Economics and Great Recession

Posted by PITHOCRATES - September 4th, 2012

History 101

It was Morning in America again because Ronald Reagan reduced the Misery Index by 42.7%

Ronald Reagan was a supply-sider when it came to economics.  Of the Austrian school variety.  In fact, one of his campaign promises was to bring back the gold standard.  A very Austrian thing.  The Austrian school predates the Keynesian school.  When the focus was on the stages of production.  Not on consumer spending.  These policies served the nation well.  They (and the gold standard) exploded American ingenuity and economic activity in the 19th century.  Making the U.S. the number one economy in the world.  Surpassing the nation that held the top spot for a century or more.  Perhaps the last great empire.  Great Britain.

Following the stagflation and misery (misery index = inflation rate + unemployment rate) of the Seventies Reagan promised to cut taxes and governmental regulations.  To make it easier for businesses to create economic activity.  Easier to create jobs.  And he did.  Among other things.  Such as rebuilding the military that the Carter administration severely weakened during the Seventies (it was so bad that the Soviet Union put together a first-strike nuclear option.  Because they thought they could win a nuclear war with Jimmy Carter as president).  During the 1980 campaign Reagan asked the people if they were better off after 4 years of Jimmy Carter.  The answer was no.  Four years later, though, they were.  Here’s why.  (Note:  We used so many sources that we didn’t source them here to save space.  The inflation rate and unemployment rates are for August of the respective years.  The dollar amounts are annual totals with some estimates added to take them to the end of 2012.  The debt and GDP are not adjusted for inflation as they are only 4 years apart.  Gas prices and median income are adjusted for inflation.  There may be some error in these numbers.  But overall we believe the information they provide fairly states the economic results of the presidents’ policies.  (This note applies to both tables.))

Reagan entered office with some horrendous numbers.  The Carter administration was printing so much money that inflation was at 12.9% in 1980.  Added to the unemployment rate that brought the misery index to 20.6%.  A huge number.  To be fair Carter tapped Paul Volcker to be Fed Chairman and he began the policy of reigning in inflation.  But Carter did this far too late.  The only way to cure high inflation is with a nasty recession.  Which Volcker gave Ronald Reagan.  But it worked.  By 1984 inflation fell 8.8 points or 66.7%.  Even with this nasty recession the unemployment rate fell 0.2 points or 2.6%.  Which shaved 8.8 points off of the miserable index.  Or reducing it by 42.7%.  This is why it was morning in America again.  The Left to this day say “yeah, but at what cost?” and point to the record deficits of the Reagan administration.  Saying this is the price of tax cuts.  But they’re wrong.  Yes, the debt went up.  But it wasn’t because of the tax cuts.  Because those tax cuts stimulated economic activity.  GDP rose 12.6% by 1984.  And tax receipts even increased with those lower tax rates.  Because of the higher GDP.  By 1984 Reagan’s policies increased tax revenue by 28.9%.  And on a personal level the median income even increased 0.4%.  And this following a very bad recession a few years earlier.  Finally, gas prices fell 22.2%.  And the way Americans feel about rising gas prices this was truly morning in America again.

To Top off the General Malaise of the Obama Economy Gas Prices Soared while Median Income Fell

Barack Obama is a Keynesian through and through.  A believer in pure demand-side economics.  To that end his administration focused everything on increasing consumer spending.  Tax and spend policies.  Income redistribution.  Deficit spending.  Anything to make America ‘more fair.’  Raising taxes on the rich so the poor can spend more money.  With the Keynesian multiplier they believe this is the path to economic prosperity.  Just doing everything within their power to put more spending money into the hands of poorer people.  Increasing government regulation, fees and fines as well as taxes to bring more money in Washington so they can redistribute it.  Or spend it directly on things like roads and bridges.  Or solar power companies.  Even paying people to dig a hole and fill it back in.  Because these people will take their wages and spend them.  Creating economic activity.

So President Obama put Keynesian economics to work.  Beginning with a $787 billion stimulus bill.  Investments into green energy and the jobs of the future.  Like a Department of Energy loan of $528 million to the now bankrupt Solyndra.  Which was only one of many loans.  The bailout of the UAW pension fund (aka the auto bailout).  The government poured $528 million into GM.  And President Obama touted the Chevy Volt, boasting that GM would sell a million each year bringing his green goals to fruition (GM is struggling to sell 10,000 Volts a year).  A lot of malinvestment as the Austrians would say.  But a Keynesian sees any government expenditure as a good investment.  Because if all the people who receive this government money spends at least 80% of it (while saving only 20%) the Keynesian multiplier will be five.  Meaning that the net gain in GDP will be five times whatever the government spends.  So how has that worked for the president?  Well, here are his numbers:

The government spent so much money that the federal debt increased by $5.4 trillion.  Trillion with a ‘T’.  That’s over a trillion dollar deficit each of the president’s 4 years in office.  And his last year isn’t even a whole year.  Unprecedented until President Obama.  And what did all of that federal spending get us after about 4 years?  An unemployment rate 2.1 points higher.  Or 33.9% higher than when he took office.  Inflation fell but it did nothing to spur GDP growth which grew at an anemic 3.1%.  Which is less than a percentage point a year.  Which is why the Great Recession lingers still.  Meanwhile the Chinese are having a bad year with a GDP growth of 7.8%.  So all of that spending didn’t help at all.  In fact, it made things worse.  The economic activity is so bad that even tax receipts fell 2.2% after four years of President Obama.  Which has many in his party saying that we need to raise tax rates.  Contrary to what Ronald Reagan did.  And to top off the general malaise of the Obama economy gas prices soared 107.6% under his presidency.  While the median income fell 7.3%.  One has to look hard to find any positive news from the Obama economy.  And there is one.  Inflation did fall.  But even that really isn’t good.  As it may be an indicator of a looming deflationary spiral.  Giving America a lost decade.  Like Japan’s Lost Decade.

The Flaw in Keynesian Thinking is that it Ignores the Layers of Economic Activity above the Consumer Level

So there you have an Austrian and a Keynesian.  Both entered office during bad economic times.  Although things were much worse when President Reagan took office than when President Obama took office.  The misery index was 20.6% in 1980.  It was only 11.6% in 2008.  About half as bad for President Obama than it was for President Reagan.  It came down 16.4% under Obama.  But it came down 42.7% under Reagan.  Which is why it isn’t morning in America under President Obama.  Reagan increased tax receipts by 28.9 % by the end of his first term.  They fell 2.2% under Obama.  Adjusted for inflation Reagan averaged annual deficits of $348 billion.  That’s billion with a ‘B’.  Obama averaged $1.324 trillion.  That’s trillion with a ‘T’.  Or 280% higher than Ronald Reagan.  Gas prices fell 22.2% under Reagan.  They rose 107.6% under Obama.  Median income barely rose 0.4% under Reagan.  But it fell 7.3% under Obama.  In short there is nothing in the Obama economic record that is better than the Reagan economic record.

And why is this?  Because Obama’s policies are Keynesian.  While Reagan’s policies were Austrian.  Reagan focused on the stages of production to improve economic activity.  Cutting taxes.  Reducing regulatory compliance costs.  Creating a business-friendly environment.  A system that rewarded success.  Whereas Obama focused on consumer spending.  Tax, borrow and print (i.e., quantitative easing).  So the government could spend.  Putting more money into the pockets of consumers.  Which stimulated only the last stage in the stages of production.  So while some consumers had more money it was still a business-unfriendly environment.  Where tax, regulatory and environmental policies (as well as the uncertainty of Obamacare) hindered business growth everywhere upstream from retail sales.  From raw material extraction to industrial processing to construction to manufactured goods.  Where these Obama’s policies punish success.  For the bigger you get the more you pay in taxes and regulatory compliance costs.

The greatest flaw with Keynesian economics is that it looks at aggregate supply and demand.  With a focus on consumer spending.  And ignores the layers of economic activity that happens before the consumer level.  The Austrian school understands this.  As did the British when she became one of the greatest empires of all times.  As did America during the 19th century.  No nation became an economic superpower using Keynesian economics.  Japan grew to be a great economic power during the Fifties and Sixties.  Then went Keynesian in the Eighties and suffered their Lost Decade in the Nineties.  Some Keynesians like to point to China as an example of the success of Keynesian economics.  But they still have a fairly restrictive police state.  And their economic policies are hauntingly similar to Japan’s.  Some have even posited that it is very possible that China could suffer the same fate as Japan.  And suffer a deflationary spiral.  Resulting in a lost decade for China.  Which is very plausible considering the Chinese practice state-capitalism where the state partners closely with businesses.  Which is what the Japanese did in the Eighties.  And it hasn’t been great for them since.  As it hasn’t been great in America economically since the current administration.

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Tax Cuts, Gold Standard, Roaring Twenties, Great Depression, New Deal, Great Society, Stagflation, Ronald Reagan and Class Warfare

Posted by PITHOCRATES - February 28th, 2012

History 101

The Twenties saw one of the Greatest Explosions in Economic Growth in History despite being on a Gold Standard 

There is a duality in economics.  There is Keynesian economics.  And the Austrian School.  The Keynesians believe in central banking.  Forcing interest rates below market rates.  Purposely creating a permanent but ‘manageable’ inflation rate.  And other government interventions into markets.  The Austrians believe in a strong currency.  Even bringing back the gold standard.  Letting the markets set interest rates.  Are against purposely creating inflation.  And oppose government intervention into markets.  So these two schools are sort of the Yin and Yang of economics.  The dark and the light.  The wrong and the right.  The Keynesian and the Austrian.

So it’s not surprising to see periods of history where these two schools bump up against each other.  As we transition from good economic times to bad economic times.  And vice versa.  When politicians change policies for political reasons.  Or when politicians change policies for economic reasons.  When the Keynesians are out of power and want to get back into power.  Or the Keynesians are in power, have destroyed the economy and the electorate wants to throw them out.  Starting shortly after World War I.  When John Maynard Keynes’ ideas came to light.  Economic policies that used smart people and an active, benevolent government.  Exactly what Woodward Wilson and his progressives were looking for.  Who wanted to quantify human behavior and improve it.  With an activist and scientific government.  To bless the United States with their brilliance again now that the war was over.  And return to the new enlightened way.  Helping people everywhere to be better citizens.  And fixing all the ‘faults’ of free market capitalism.

But the progressives lost the 1920 election.  The voters favoring Warren Harding’s message to return to normalcy.  And rejecting the progressives and their new scientific ways of government.  They wanted jobs.  And that’s what Harding gave them.  By cutting taxes.  Thanks to the advice of his brilliant treasury secretary.  Andrew Mellon.  And getting out of the way of businesses.  When he died Calvin Coolidge continued his policies.  And the Twenties roared.  It was one of the greatest explosions in economic growth in history.  Where credit was plentiful.  Despite being on a gold standard.  As the United States electrified.  And modernized.  Electric power.  Telephones.  Radio.  Electric appliances.  Movies.  Even on the farm.  Where mechanization provided bountiful harvests and inexpensive food.  The Roaring Twenties were great times for consumers.  The average American.  Thanks to minimal governmental interference into the free market.  And capitalism.  But, alas, that wouldn’t last.

Ronald Reagan won in a Landslide based on an Economic Platform that was Austrian to the Core 

It was the mechanization of the farm that began the process that lead to the Great Depression.  The average American benefited greatly from those low food prices.  But not the farmers who went into debt to mechanize their farms.  And when those European World War I soldiers traded their rifles for plows the American farmers lost some valuable export markets.  Farmers were struggling with low prices.  And heavy debt.  Some defaulted on their debt.  Causing bank failures in the farming regions.  Which soon spread throughout the banking system.  And when president Hoover came to office he was going to help the farmers.  For Hoover, though a Republican, was a progressive.  He brought back activist government.  He interfered with the free market.  To fix these problems.  Price supports for farmers to import tariffs.  Raising costs for businesses.  And prices for consumers.  Then the Smoot-Hawley Tariff launched an all out trade war.  Crashing the economy.  And giving us the Great Depression.

The 1930s was a lost decade.  FDR’s New Deal policies increased the size of government.  And their reach into the free market.  Which prolonged the Great Depression.  But nothing they tried worked.  Despite trying their progressive brilliance for some ten years.  It took World War II to pull the United States out of the Depression.  When the government at last allowed businesses to pursue profits again.  And got out of their way.  This surge in economic activity continued after the war and through the Fifties.  And into the Sixties.  With none other than JFK cutting taxes in a very Austrian way.  Yes, Kennedy was an adherent to the Austrian school.  But LBJ wasn’t.  And when he took over things changed.  The progressives were back.  Calling themselves liberals now.  And instead of the New Deal they gave us the Great Society.  Which grew the government even larger than the New Deal did.  And the Great Society spent the money.  Along with putting a man on the moon and the Vietnam War, government spending exploded.  The Keynesians were hitting their prime.  For once they could do all of the great things they always said they could.  And in the process fix a ‘broken’ free market system.  Finally having brilliant people in all the right places in government.  Making brilliant policies to help people live better lives.

And then came the Seventies.  The government was spending so much that they turned to the printing presses.  Because they could.  Thanks to central banking.  Even if it was hamstrung by gold.  You see, at that time the dollar was convertible into gold.  And with the Americans printing so much money and depreciating the dollar countries holding U.S. dollars said, “Screw that.”  And converted their dollars into gold.  That great sucking sound they heard in the Seventies was the sound of U.S. gold reserves getting sucked out of the country.  Well, even though the Keynesians hated gold they didn’t want to see all their gold reserves disappearing.  So Nixon did something very Keynesian.  And decoupled the dollar from gold.  Freeing the government at last to spend as irresponsibly as the Keynesians wanted.  And spend they did.  Turning the printing presses on high.  Depreciating the dollar ever more and causing double digit inflation.  Worse, all that Keynesian spending did nothing for the economy.  There was high unemployment as well as inflation.  An unusual phenomenon as you typically had one or the other.  Not both.  But this was stagflation.  A Keynesian phenomenon.  And you measured how bad it was by adding the unemployment rate to the inflation rate.  Giving you the misery index.  And the misery was pretty high during the Keynesian Seventies.  It was so miserable that they joked about it on Saturday Night Live.  With Dan Aykroyd impersonating Jimmy Carter.  Joking about high nice it would be to own a $400 suit.  And how nice it was just to make a phone call to get the printing presses to print more money.  The people thought Aykroyd’s Carter was funny.  But they didn’t care for the real one all that much.  And made him a one term president.  As Ronald Reagan won in a landslide.  Based on an economic platform that was Austrian to the core.  Including a promise to return responsibility to government spending by reinstating a gold standard.  (Which was a political ‘bridge too far’.)

The Electorate paying Federal Income Taxes fell from 80% when Reagan was in Office to about 50% by 2009 

The Eighties were so prosperous that the Keynesians, liberals and progressives derisively call them the decade of greed.  They tried everything within their power to rewrite history.  Calling the exploding economic activity ‘trickle down’ economics.  But the figures don’t lie.  Despite the liars figuring.  The inflation rate fell.  Interest rates fell.  The unemployment rate fell.  And despite the cuts in tax rates the government was never richer.  Tax revenue collected under the reduced rates nearly doubled.  But there was little cutting in government spending.  Flush with all that cash they kept spending.  In part to rebuild the military to win the Cold War.  Which Reagan won.  But all the social spending continued, too.  Which led to some record deficits.  Not the trillion dollar deficits of the Obama administration.  But large nevertheless.  Which provided the meme to explain away the prosperity of the Eighties.  “But at what cost?” being the common refrain.  They talk about the deficits.  But very conveniently leave out that part of how tax revenues doubled at the reduced tax rates.

Well, as time passed the Keynesians got back into government.  In the late Nineties as they kept interest rates low again to stimulate the economy.  Creating the dot-com bubble.  And the early 2000s recession.  George W. Bush cut taxes.  Brought the economy out of recession.  But then the Keynesians went back to playing with those interest rates.  Kept them artificially low.  Creating a great housing bubble.  And the Subprime Mortgage Crisis.

Keynesian economics have failed throughout the last century of trying.  And taxpayers clearly saw this along the way.  Voting for Austrian policies every time economic policy mattered.  Especially after another failure of Keynesian policy.  Every time their policies failed, though, the Keynesians had an excuse.  Supply shocks.  Liquidity traps.  Something.  It was always something that caused their policies to fail.  But it was never the policies themselves.  Despite Mellon, Harding, Coolidge, Kennedy and Reagan proving otherwise.  So they had to try something else.  And they did.  Class warfare.  They transferred the tax burden to the wealthier.  Reduced the number of people paying federal income taxes.  And gave ever more generous government benefits.  This took the failed ideology out of the equation.  Making it easier to win elections.  For when Reagan was in office more than 80% of the electorate were taxpayers.  And Austrian economics won at the polls.  The Nineties ended with only about 65% of the electorate paying federal income taxes.  By 2009 that number shrunk to about only half of the electorate.  Which gave the tax and spend Keynesians an edge over responsible-governing Austrians.  Because people who don’t pay income taxes will vote for policies to increase taxes on those who do.  Not because of concern over economic policy.  But just to get free stuff.  Something Keynesians learned well.  When at first you fail just buy votes.  And then you can continue your failed policies to your heart’s content.

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Obama Angers Liberal Base, Obama Record Angers Independents

Posted by PITHOCRATES - April 15th, 2011

Obama is not the Liberal Liberals thought he Was

The liberal base of the Democrat Party isn’t happy with President Obama.  He’s not liberal enough.  Even though he’s the most liberal president to have occupied the White House.  And he’s done a lot.  But not enough.  Sure, he gave them Obamacare.  But he didn’t give them the public option.  And he’s done things that just boggle a liberal’s mind.  He said he would get us out of Iraq and Afghanistan.  Then he bombed Libya.  The base is not amused (see Democrats’ Disgust With Obama by Patricia Murphy posted 4/14/2011 on The Daily Beast).

For many Democrats, the budget bill was only the latest in a string of disappointments served up from the White House since 2009, when Obama swept into office on a tide of goodwill and a platform of base-pleasing promises they say he hasn’t lived up to. On the list are his pledges to close the prison at Guantanamo Bay, pass comprehensive immigration reform, and end the Bush tax cuts for the wealthiest Americans…

Some legislative grumbling is inevitable when a party returns to power after eight years. But a number of Democrats are past protesting the president, discussing among themselves ways to recruit a primary challenger in 2012.

A primary challenger in 2012?  It’s possible.  The latest Gallup poll shows him at a 41% job approval rating.  Worse, with independents, it’s down to 35%.  And this is a problem.  If you keep losing independents, you simply don’t win elections.  So not only is Obama disappointing the liberal base, he’s becoming a liability for the Democratic ticket.  If they can’t win with Obama, why not challenge him in the primary?

The Problem Liberals have is that they’re only 20% of the Population

So independents are abandoning Obama.  Why?  Probably because he lied to them.  He campaigned as a moderate.  But governed as a liberal.  The near trillion dollar stimulus that stimulated nothing.  Obamacare that was fast-tracked through Congress.  And all the job-killing policies.  Unemployment (U-3) is still flirting with 9%.  A more realistic unemployment number (U-6) is closer to 15%.  And gas prices have broken $4 already and the summer driving season isn’t even here yet.  Sure, all good news for liberals.  More problems for Big Government to fix.  But the problem is, most of the people aren’t liberals (see In 2010, Conservatives Still Outnumber Moderates, Liberals by Lydia Saad posted 6/25/2010 on Gallup).

Conservatives have maintained their leading position among U.S. ideological groups in the first half of 2010. Gallup finds 42% of Americans describing themselves as either very conservative or conservative. This is up slightly from the 40% seen for all of 2009 and contrasts with the 20% calling themselves liberal or very liberal.

And this is why independents are abandoning Obama.  Independents aren’t liberals.  Independents and moderates bought into all that hope and change stuff because they really hated George W. Bush.  But there isn’t a George W. Bush to hate anymore.  It’s going on two and a half years.  They gave Obama a chance.  And they don’t like his record.  Or the unemployment.  It’s as simple as that.  All they need is a Reagan-like candidate to ask that question again.  Are you better off now than you were four years ago?  And whoever that candidate is, we will hyphenate his or her name to ‘Democrats’.  And these Democrats will be like the Reagan-Democrats.  Who did to Jimmy Carter what a new batch of Democrats may do to Obama.  Make him a one term president.

Unemployment still High, Inflation and Misery trending Up

And speaking of Jimmy Carter, things are really going Jimmy Carter (see Food and gas costs push consumer prices higher by Christopher S. Rugaber, Associated Press, on 4/14/2011 on USA Today).

The Consumer Price Index rose 0.5% in March, the Labor Department said Friday. That matched February’s increase, the largest since the recession ended in June 2009. In the past 12 months, the index has increased 2.7%, the biggest rise since December 2009.

Hard to read that with a straight face.  The recession ended in June 2009?  Really?  Apparently, a lot of people didn’t get that memo.  Like the 15% who can’t find a job.

Consumers are spending more, but the steep rise in food and gas prices could limit their ability to purchase discretionary goods and services. Consumer spending makes up 70% of economic activity.

Rising inflation has caused many analysts to reduce their estimates for economic growth in the January-March quarter from roughly 3% or higher to as low as 1.5%.

Gasoline jumped 5.6% last month and has risen nearly 28% in the past year. Consumers paid an average price of $3.81 a gallon nationwide on Friday according to the travel group AAA.

Food prices rose 0.8% last month, the largest increase in almost three years. Prices for fruits and vegetables, dairy products, chicken and beef all increased. Coffee costs rose 3.5%.

High unemployment.  And rising prices.  We call this inflation.  If you add the unemployment and inflation rates you get the misery index.  And the last time it was trending like this Jimmy Carter was president.  His stagflation worked magic.  It made a bunch of Democrats vote Republican.  The Reagan-Democrats that made Carter one unhappy former president. 

Farmers do a far better job than Teachers

Have you learned anything reading this?  Have you followed any of the links to learn more?  To fact check?  If you said yes to any of the above you have learned quite a bit with your visit here today.  And I’m guessing that a lot of what you learned is probably new.  You probably learned little of this in the public school system.  Even with your 12 years there.  But after some 15 minutes and a few mouse clicks you have.  Pretty amazing, isn’t it?  And it makes you wonder why your public school didn’t teach you any of this.  I mean, we spend a fortune on public education.  Employ millions of people to teach our kids.  But they keep telling us we don’t spend enough.  So we spend more.  I guess because the public schools aren’t making our kids smart enough.  It’s puzzling.  Because we spend less and employ fewer people on farming.  And farmers feed more people than our public school system educates (see Conventional Education Will Go the Way of Farming by Doug French posted 4/15/2011 on Ludwig von Mises Institute).

We have a wider array of food available to us than ever before. Created by fewer people. The division of labor continues to work wonders. Thank goodness we’re not all stuck on the farm. According to the occupational employment numbers from the Bureau of Labor Statistics, 419,200 were employed in the farming, fishing, and forestry occupations in May of 2009.

The same May 2009 report listed 8,488,740 people employed in education, training, and library occupations. So more than 20 times more people are needed to educate a small portion of the population than to grow food for everyone. But what about serving the food? Yes, food-preparation and food-serving occupations totaled 11,218,260 employees, serving the entire population of over 308 million.

Meanwhile, it takes more than 8 million to educate the 81.5 million that are enrolled in school. History and technology would say this surely can’t last. A proud father recently told me of quizzing his kids about scurvy. And while his young daughter gamely took a wild guess, his crafty teenage son ducked into the next room to google it, quickly emerging to give the correct answer that the disease that killed so many centuries ago is caused by a deficiency of vitamin C.

Public education, then, is a case study of how not to be productive.  But is there anything more sacrosanct than public education?  Public school teachers?  When Wisconsin governor Scott Walker tried to balance the state’s books by restricting public sector workers’ collective bargaining rights, all hell broke out.  Even the president sent some of his people to the state to run interference to stop that legislation.  Why?  Because he was worried about the quality of that education?

This is the information age, yet the ability to communicate is not being taught, or not sinking in. [A] college English instructor…wrote on Boston.com that few of her students had received writing instruction in high school, and that correcting student papers was so time consuming that the task was virtually overwhelming. She quotes Vartan Gregorian, the former president of Brown University, who rightly understands that “the ability to read, comprehend, and write — in other words, to organize information into knowledge — must be viewed as tantamount to a survival skill.”

That doesn’t sound like a very high level of quality from our public schools.  It rather sounds like they’re doing a poor job.  Even though we pay more and more each year.

In a piece questioning the need for colleges offering majors in business, David Glenn writes that employers are looking for “22-year-olds who can write coherently, think creatively and analyze quantitative data, and they’re perfectly happy to hire English or biology majors.”

Yes, the facts and figures are a click away. The ability to use, understand, and communicate those facts is what must be taught and currently is not. And it doesn’t take an army of 8 million and a budget of 1 trillion dollars and counting to do it.

So if the schools are doing such a poor job, why do we protect these public sector workers with such passion?  What other employees that do such a poor job are treated so well?

Well, to understand this you have to look at the money.  For money never lies.  You see, educating our children is not their primary object.  It’s funneling taxpayer money to the Democratic Party via their union dues.  And producing future Democrat voters.  Yes, they may not come out of school with useable job skills.  But a good percentage of them will become moderate/independent voters.  People that a candidate Barack Obama can appeal to.  Especially when there is an incumbent in office that they’ve been taught to hate.

Hate, Fear and Charm

Liberals aren’t happy with Obama.  Because he’s toned down his liberalness.  Because he had to.  Liberals are only 20% of the population.  The voters he fooled last time (moderates and independents) probably won’t get fooled again.  And you just aren’t going to win an election with 20% of the vote.  So he has to move towards the center for the 2012 election.  And hope that the public school system keeps dumbing down our graduates so that they’re still naïve and ignorant enough when they vote for the first time.  Because after four years a lot of people are going to forget to hate George W. Bush.  Or even know who he is (the new voters in 2012 would have only been 14-17 during the last ‘hate’ cycle in 2008.  And you know what 14-17 year olds are thinking about.  That’s right.  Not politics).  And with the misery index trending Jimmy Carter, Obama is going to need all the ignorance and naiveté he can get.

With a record of abject failure, Obama is going to have to bank his reelection chances completely on feelings.  Not fact.  Hate, fear and charm.  No substance.  The platform will be simple.  To hate and fear the Republicans.  And tell charming lies to get people to believe them despite the evidence of the past 4 years.

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LESSONS LEARNED #55: “Liberals are all for trickle-down economics as long as the wealth trickles down from those who support liberals.” -Old Pithy

Posted by PITHOCRATES - March 3rd, 2011

 JFK Governed as a Conservative

We’ve had two ‘trickle-down’ administrations in recent times.  Both JFK and Ronald Reagan were proponents of supply-side economics.  Between these two administrations we had a few Keynesians (LBJ, Nixon, Ford and Carter).  JFK and Reagan cut tax rates.  The Keynesians never lowered the tax rate lower than JFK’s.  Reagan did.  But not the Keynesians.

JFK was a Democrat.  But he governed as a conservative.  He was strong on defense.  Even got us into Vietnam to prevent the dominoes from falling in Southeast Asia.  And he was business friendly.  But that doesn’t stop Democrats from loving him, though.  Most probably don’t know anything about his conservative side.  They think about Camelot.  Jackie.  John John.  “Ich bin ein Berliner” (the big Cold War speech after the Soviet Union built the Berlin Wall).  Landing a man on the moon and returning him safely.  “Ask not what your country can do for you; ask what you can do for your country.”  And the civil rights stuff.  Not that he was a hawk when it came to war (Bay of Pigs-sort of, Cuban Missiles Crisis and Vietnam).  And a tax cutter.

LBJ may have been JFK’s vice president but he was no JFK.  Kennedy wanted to build a strong economy and he believed that started with making a business-friendly environment.  Which he did.  Johnson, on the other hand, was a big, old school, liberal.  To him businesses were just cash piñatas for the government to whack.  He wanted their money.  Because he wanted to spend it.  And boy did he.  He exploded the role of government in our lives.  Increased taxes.  Increased regulation.  And increased the government bureaucracy.  He called it his Great Society.  And he gave FDR‘s New Deal a run for its money.

JFK’s Tax Cuts Stimulated Economic Activity

When Kennedy became president, there was a bit of a recession going on.  Unemployment got as high as 6.7% in his first year.  And the top marginal tax rate was 91%.  When he looked at the two the answer was obvious to him.  With a top marginal tax rate of 91%, there was little incentive to invest.  If your earnings exceed a certain amount, you only kept 9 cents of each additional dollar?  So why bother?  Like Billy Joel said, “You can pay Uncle Sam with the overtime.  Is that all you get for your money?”  Or like George Harrison said, “There’s one for you, nineteen for me.  Cause I’m the taxman.”   

No one likes paying taxes.  Especially confiscatory taxes.  It’s why the Beatles left the UK.  All you need may be love.  But even hippies want to keep their money.  And JFK understood this.  High taxes discouraged investment.  And drove some business away.  So he put together an economic plan that included cuts in the tax rates.  He brought the top marginal rate from 91% to 70%.  And how did that work?  Not too bad.  Based on the numbers.

In the four years following his tax cuts, tax receipts increased 41%.  So he brought more money into Washington by cutting tax rates.  And it gets better.  The unemployment rate went down 33% (from 5.7% to 3.8%).  And GDP increased 35%.  In the technical language of economists, these numbers are awesome.

The LBJ/Nixon Policies End the JFK Economic Expansion

Well, the party wasn’t going to last.  Thanks to Lee Harvey Oswald.  JFK was dead.  Assassinated.  And LBJ took the oath of office in Air Force One before leaving Texas.  Who can forget the image of a grief-stricken Jackie as Johnson took the oath?  Much like with the assassination of Lincoln, the consequences of that action was to forever change the country (we all wonder how Reconstruction would have gone with Lincoln).  JFK was gone.  LBJ was in.  And he was bringing his Great Society with him.  And the size of government would never be the same.

Johnson raised taxes in his last 2 years to pay for the massive federal spending.  Nixon cut them.  He brought the top marginal rate back to the Kennedy level.  But he didn’t cut spending.  And to keep up with the spending he started printing money.  Gold started flying out of the country so he decoupled the dollar from gold, igniting inflation.  The heady days of the JFK economic expansion were over.  Looking at a period that included the last 2 years of LBJ’s term and Nixon’s 6 years, it’s not a pretty picture.

Tax receipts soared 77% to pay for all that government spending.  And, not surprisingly, the unemployment rate soared, too.  It went from 3.8% to 5.6% (an increase of 47%).  GDP shot up an impressive 80%, too.  Landing on the moon, Vietnam and the Great Society created a lot of economic activity.  But that economic activity wasn’t real.  It was a bubble.  Paid for with high taxes and printed dollars.  So prices were high thanks to inflation.  And a lot of us didn’t have a job.  And this is what Carter got when he entered office.  Malaise.  Stagflation (high unemployment and high inflation).  And something we called the misery index (the sum of the unemployment and inflation rates).  Carter was not going into the 1980 election with a lot going for him.  And the Iranian Hostage Crisis didn’t help any either.

Ronald Reagan Cuts Taxes, Stimulates the Economy and Wins the Cold War

Then came Ronald Reagan.  He put Carter out of his misery by winning the 1980 election.  Then rolled up his sleeves.  And got to work.  When he came into office the top marginal tax rate was 69%.  By the time he left it was 28%.  The Left called him reckless and irresponsible.  That he ran high deficits.  And exploded the federal debt.  Well, yes, both of these did increase during the Reagan years.  But it’s not because of the tax rate cuts.  Those were caused by spending more money than the treasury collected.  And, believe you me, the treasury really raked it in during the Reagan presidency.

In 1981, tax receipts were about $600 billion.  In 1990 (adding in the first year of George H.W. Bush), tax receipts were about $1 trillion.  In other words, the Reagan tax rate cuts increased tax receipts by 72%.  The treasury collected more tax dollars at the lower tax rates.  So there is no way no how you can blame deficits and debt on the Reagan tax rate cuts.  And it gets better.

During the Eighties, the unemployment rate fell 26%.  And the GDP rose 86%.  Lower tax rates.  Higher tax revenue.  Lower unemployment.  And a surge in economic activity.  Wow.  Can it get any better?  Why, yes.  Reagan spent the Soviet Union into defeat in the Cold War.  They just couldn’t keep up.  Caused a lot of trouble on the other side of the Iron Curtain.  Long story short, after his presidency, Eastern Europe would be free of Communism.  And the Berlin Wall would be no more. 

Supply-Side Economics Works

The moral of this lesson?  Supply-side (aka, trickle-down) economics works.  It worked for JFK.  And it worked for Reagan.  What doesn’t work is the Keynesian economics of LBJ, Nixon, Ford and Carter.  They grew government.  Increased government spending.  Giving us higher taxes, higher unemployment, higher inflation and malaise.  The only thing that trickled down was their misery.

So if trickle-down can fill the federal coffers why do liberals hate it?  Because those who support supply-side economics are typically in the private sector.  Have jobs.  Don’t belong to a union.  And don’t need any help from government.  You put that all together and the answer is clear.  These people don’t lobby liberals.  So what good is their wealth when no part of it makes its way to liberal pockets?  Like Big Labor?  Or public sector unions?

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FUNDAMENTAL TRUTH #55: “Liberals are all for trickle-down economics as long as the wealth trickles down from those who support liberals.” -Old Pithy

Posted by PITHOCRATES - March 1st, 2011

 Under Carter it was ‘in Government we Trust’

Mention Ronald Reagan in a room full of liberals and no doubt you’ll hear some derisive comment about trickle-down economics.  You see, liberals don’t like Reagan.  They liked Jimmy Carter.  But hated Ronald Reagan.  Because Reagan dared to say the king was wearing no clothes.  Metaphorically, of course.  But not Carter.  He clung onto the illusion of Big Government as the people’s savior.  Though a practicing Baptist, for Carter it was ‘in government we trust’.

Carter was a one term president.  Liberals may have liked him but the rest of the country didn’t.  Granted, he came into office with some pretty bad economic problems.  He can thank LBJ‘s Great Society for that.  The greatest explosion of government spending since FDR‘s New Deal.  And then Nixon decoupling the dollar from gold didn’t help.  The left doesn’t much care for Nixon, either.  Which is funny.  Because he governed as a liberal.  He spent money and grew government.  And when he decoupled the dollar from gold he called himself a Keynesian (i.e., a Big Government guy when it came to economics).  Carter’s misfortune was to follow all of this financial devastation.  Well, that, and the fact he didn’t have a clue about how to fix things.

Reagan did.  “Government isn’t the solution to our problems, government is the problem,” Reagan said in 1981.  And the warning Klaxons went off throughout liberal-land.   There was imminent danger.  And his name was Ronald Reagan.  You see, Carter did all the right things.  For those on the left.  And what did he get?  High inflation.  High interest rates.  And high unemployment.  They measured the economy with the misery index as we wallowed through the stagflation of the Carter years.  During the 1980 presidential campaign, Reagan asked the simple question heard round the world.  Are you better off now than you were 4 years ago?  Reagan went on to win the election.  So the answer was ‘no’.

Reagan Fixed the Economy and Fired Air Traffic Controllers

Reagan cut tax rates.  And the economy eventually exploded.  We said goodbye to stagflation.  And the misery index.  They were relics of the Carter years.  It was a new morning in America.  People had jobs.  They were happy.  Optimistic.  And this infuriated liberals.  Because Reagan’s conservatism flew into the face of everything they held dear.  And then came PATCO

The Professional Air Traffic Controllers Organization.  A federal government union.  They went on strike in 1981.  Which was against the law.  Government unions could not go on strike.  The strike shut down much of air traffic in the U.S.  This was big.  No business travel.  No sports travel.  No vacations.  No mail.  A small group of some 11,000 controllers shut down air travel.  And greatly disrupted the economy.  Reagan ordered them back to work per the law.  They refused.  He fired them.  And the left howled.

So you can see why liberals hate Reagan.  He was a destroyer and debunker of liberalism.  And the people loved him.  He won reelection with 49 states.  The man was more popular than sliced bread.  Worse, people were happy.  Whistling a happy tune while they went on their merry way.  Which is all well and good if you’re one of the ones whistling.  But when you’re part of that tiny 20% of the population that wants to run the other 80%, there was nothing to whistle about.  Reagan had become liberal enemy number one.

Reaganomics Replaces Failed Keynesian Economic Policies

So they attacked.  Then.  And now.  And they zero in on those tax rate cuts.  Sure, they say, the tax cuts stimulated the economy, but at what cost?  Huge deficits and a skyrocketing debt.  This, of course, is not true.  The cuts in the tax rates nearly doubled tax receipts.  The Democrat House (Tip O’Neil and his fellow Democrats had the power of the purse) just went on a spending spree with all that cash pouring into Washington.  Remember, all spending bills originate in the House of Representatives.  Defense.  Entitlements.  And all discretionary spending.  And when tax receipts nearly doubled with cuts in the tax rates, it proved that Reagan was right.  And liberals were wrong.

But they keep repeating the lie.  Hoping that if people hear it enough people will believe it.  Then they move on to trickle-down economics.  Supply-side economics.  Reaganomics.  They love to disparage this term.  Despite the fact that under Reaganomics, the 1980s was one of the most prosperous periods in American history.  So what is supply-side economics?  Well, think of it this way.  When do you live better?  When you have a job?  Or don’t have a job?  It’s pretty hard to pay your bills if you don’t have a job.  You can’t buy gasoline.  Food.  Clothes.  Electronic toys.  Etc.  So I think most will agree that life is better when we have a job.  And where do jobs come from?  From businesses.  That are pursuing a profit.  If they can make a profit they expand their businesses.  And hire more people.  Thus creating more jobs.  And this is supply-side economics in a nutshell.  They’re economic policies that are business-friendly to encourage their growth.  So they will hire more people.

Makes sense.  To the sensible.  But not to a liberal.  Because liberals are Keynesians.  They want to redistribute the wealth.  Take money from the rich.  And give it to the poor.  They believe that is how you create economic activity.  By giving other people’s money to other people so they can spend it.  And we tried it.  Under LBJ, Nixon, Ford and Carter.  Didn’t work.  Liberals will blame everything under the sun why it didn’t work.  But never the ideology itself.  Which is flawed.  Because higher taxes reduce profits.  Which hinders business expansion.  Which hinders job creation.  Which hinders economic activity.  And this is exactly what happened under LBJ, Nixon, Ford and Carter.  Which is why Carter was a one term president.

Trickle-Down is Okay as long as it Fills Union Coffers

The funny thing is that the left often supports trickle-down economics.  Whenever they are supporting the UAW.  They support high pay and benefits for unskilled labor on the assembly line.  Because it stimulates the economy. Yes, we pay these people a lot.  But they go out and spend that money.  And that pumps a lot of money into the local economy.  We’ve all heard these arguments.  Whenever liberals are defending high union wages and benefits.  Of course, liberals got so greedy that they killed the golden goose.  Assembly plants left the country.  Robots replaced workers on the line.  The few jobs remaining have nice wage and benefit packages.  But at what cost?  Hundreds of thousands of jobs were lost in the deal.  A terrible cost as jobs drive the economy.  The more the better.  While fewer higher-paid jobs just don’t help anyone but the few who have those jobs.

It’s the same thing with public sector workers.  No one has a better salary and benefit package.  For many it’s like getting two paychecks for one job.  For every dollar in pay they get something like $0.75 in benefits.  Mostly health care and pensions.  Teachers are often some of the greatest beneficiaries when you factor in all the time off they get.  There’s a reason why these public sector workers strike and never quit these ‘horrible’ jobs.  Because they can’t find a better job.  So when states and cities have trouble balancing their budgets because of out of control health care and pension costs they raise taxes.  Make the rest of us live on less.  To save these jobs.  For these good people.  Sure, we pay them a lot.  But they go out and spend that money.  And that pumps a lot of money into the local economy.

So that kind of trickle-down economics is okay.  But Reaganomics was nothing but tax breaks for the rich paid for by the working poor.  While fat union pay and benefits stimulated local economies.  A double standard?  Yes.  But there is a difference.  Trickle-down from job creators doesn’t generate a lot of union dues.  Trickle-down from union workers and the public sector do.  That’s why the liberals support unions.  Because liberals get a lot of that dues money.  And loyal foot soldiers to advance their agenda.

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Europeans Wonder why Americans Don’t Love Obama as Much as They Do

Posted by PITHOCRATES - October 29th, 2010

Obama falls from grace because the American people have learned what the mainstream media wouldn’t tell them; the truth.

America, Europe, the Middle East, hell, the whole world had a love affair with Barrack Obama.  A man who did nothing but serve a partial term as a U.S. senator.  Before that?  Community organizer.  His resume had a lot of white space on it.  He is the most inexperienced person to ever become president.  Even Sarah Palin, who the Left disparages as stupid and experienced, has executive experience.  She was more qualified than Obama to be president.  Based on their experience.  Place their resumes side by side and no one can dispute this.  Yet Palin is stupid and inexperienced.  And Obama is the second coming of Christ.  And when the results of Obama’s policies reflect his experience, those infatuated express shock and disbelief (see Europe ‘dismayed’ as midterms highlight Obama’s struggles by Marian Smith, msnbc.com).

“They’re very confused as to how [Americans] could vote for Obama and then two years later turn around and vote for a completely different set of policies,” Sarah Oates, professor of political communication the University of Glasgow, told msnbc.com.

There’s a simple reason for this confusion.  The mainstream media was also infatuated with Obama.  They endorsed his candidacy.  But they never vetted him.  No one knew anything about Obama during the campaign.  They ignored his far-left associations with Reverend Wright and Bill Aires.  They didn’t discuss his criticism of the U.S. Constitution (it didn’t empower government enough).  Or his policy guide: Rules for Radicals by Saul Alinsky.  The mainstream media’s gross journalistic malfeasance hid the real man from the American voter.  The real Obama is not the Obama the American people voted for.  Hence his fall from grace.

Jimmy Carter handed off a worse economy than Bush.  But things got better when Ronald Reagan cut taxes.

Obama has told us ad nauseam that he inherited the worst economy since the Great Depression.  Some would argue that the numbers were pretty bad when Ronald Reagan took office.  But he followed Democrat Jimmy Carter.  So they don’t like to bring up his atrocious economy.  Because the economy he handed down to Ronald Reagan was pretty atrocious.  I mean, they didn’t use words like ‘malaise’, ‘stagflation’ or ‘misery index’ during the Bush economy.  And they’re not using them during the Obama economy.  But you repeat the lie enough, people just accept it as fact.

However, Obama remains broadly well-liked and many Europeans think the disenchantment that many American voters have been expressing is unfair.

“What he inherited was so enormous that no American president could have fixed it,” Manfred Gortemaker, professor of modern history at Germany’s University of Potsdam, told msnbc.com.

The bad economy Obama inherited was a long time in the making.  Because the Democrats were in power for a long time.  And it was their passion that caused it.  Affordable housing.  Putting people into houses who couldn’t afford houses.  Ask anyone which party you think of when it comes to affordable housing and they’re not going to say Republican.  The American disenchantment is with Democrat Big Government.  And Obama believes in Big Government.  The bigger the better.  America just can’t afford it anymore.  There isn’t enough money left in the private sector to steal to pay for it.  And Obama just wants to spend more.  But spending doesn’t work.  It didn’t help Carter.  That’s why he lost to Reagan.  Reagan cut taxes.  And, you know what?  That worked.  The electorate wants more Reagan.  Less Obama.

It’s good t be king.  As long it’s not 1790 France.  Or 2010 America where the Tea Party is spoiling a good time for the ruling elite.

The French can’t figure out the Tea Party movement.

“In all the French newspapers and magazines, people are writing, trying to figure it out,” Bacharan said.

Michelle Obama stayed at a 5-star Spanish resort while Americans were suffering near 10% unemployment and seeing banks foreclose on their homes.  There have been other vacations at very expensive and exclusive resorts.  And a lot of golf outings.  Obama has played more golf in 2 years than George W. Bush has in his 8 years.  Then there’s the latest presidential vacation.  They’re going to India.  They’ll be taking 40 airplanes.  Three helicopters.  A bunch of armored cars.  And they’ll be staying at the 5-star Taj Mahal hotel.  And only them.  The Obama party has booked the whole place.  It’s good to be king.

Now, I’m poking a little fun at my French friends.  That ‘good to be king’ line comes from Mel Brooks History of the World Part One.  But it’s something the French should understand.  While the masses are suffering, the Obamas are living like royalty.  They are detached from ordinary America.  Cold and detached.  Sort of like King Louis XVI and his queen, Marie Antoinette.  We’re just waiting for Michelle Obama to say, “Let them eat cake.”  Of course, we have the right to vote.  Unlike the people did in 1790 France with their ruling elite.  And it’s that right that the Tea Party is exercising.  Because they feel the way the French felt in 1790.  (Without the famine, of course.)

The Tea Party are not Nazis; Obama is not Hitler.  But the Nazis were Big Government liberals

The mainstream media has been falsely reporting a ‘Nazi’ element within the Tea Party.  They repeat the lie so often that many accept it as fact.  Even the Germans, no doubt sensitive to anything Nazi, are writing about it.

“The Holocaust was the result of murderous ideological fanaticism of the kind not to be found in leaders forced to face re-election every four years,” [a Der Spiegel newspaper] editorial said. “It is hard to imagine even the most hard-bitten Tea Party activist sincerely believing that President Barack Obama wants to systematically murder over 6 million people like Adolf Hitler did. And that is necessarily the implication.”

The German people elected Adolf Hitler to office in free elections.  He did not campaign on the Holocaust, though.  He did adopt what would eventually be Saul Alinsky’s Rules for Radicals.  He identified, isolated and attacked his enemies.  The Jews.  Obama has identified, isolated and attacked his enemies.  The Tea Party.  George W. Bush.  And Republicans in general.  Hitler was an environmentalist.  Obama is an environmentalist.  Hitler expanded state power.  Obama wants to expand state power.  Hitler controlled state media.  Obama has a willing and complicit mainstream media.  Hitler nationalized industries.  Obama nationalized industries.  Take away the crazy, the Holocaust and the militarism, and Hitler was just another Big Government liberal.  Like Mussolini.  Like Stalin.  And FDR.  And as Big Government liberals, they lied to their electorate to get elected (well, except for Stalin).  Then people learned the truth.

That said, Obama is no Hitler.  He is not a Nazi.  Sure, some kooks on the fringe say stupid things.  Just like some on the Left said George W. Bush was another Hitler.  Called him a Nazi.  But we need to stop the crazy. On both sides.  Obama got a pass by the mainstream media during the campaign.  They worshipped and adored him.  Got the people to vote for him.  And now people have learned the truth.  And here’s why Obama is NOT Adolf Hitler.  We can fix our mistake in the voting booth. 

www.PITHOCRATES.com

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LESSONS LEARNED #3 “Inflation is just another name for irresponsible government.” -Old Pithy

Posted by PITHOCRATES - March 4th, 2010

PEOPLE LIKE TO hate banks.  And bankers.  Because they get rich with other people’s money.  And they don’t do anything.  People give them money.  They then loan it and charge interest.  What a scam.

Banking is a little more complex than that.  And it’s not a scam.  Countries without good banking systems are often impoverished, Third World nations.  If you have a brilliant entrepreneurial idea, a lot of good that will do if you can’t get any money to bring it to market.  That’s what banks do.  They collect small deposits from a lot of depositors and make big loans to people like brilliant entrepreneurs.

Fractional reserve banking multiplies this lending ability.  Because only a fraction of a bank’s total depositors will ask for their deposits back at any one time, only a fraction of all deposits are kept at the bank.  Banks loan the rest.  Money comes in.  They keep a running total of how much you deposited.  They then loan out your money and charge interest to the borrower.  And pay you interest on what they borrowed from you so they could make those loans to others.  Banks, then, can loan out more money than they actually have in their vaults.  This ‘creates’ money.  The more they lend the more money they create.  This increases the money supply.  The less they lend the less money they create.  If they don’t lend any money they don’t add to the money supply.  When banks fail they contract the money supply.

Bankers are capital middlemen.  They funnel money from those who have it to those who need it.  And they do it efficiently.  We take car loans and mortgages for granted.  For we have such confidence in our banking system.  But banking is a delicate job.  The economy depends on it.  If they don’t lend enough money, businesses and entrepreneurs may not be able to borrow money when they need it.  If they lend too much, they may not be able to meet the demands of their depositors.  And if they do something wrong or act in any way that makes their depositors nervous, the depositors may run to the bank and withdraw their money.  We call this a ‘run on the bank’ when it happens.  It’s not pretty.  It’s usually associated with panic.  And when depositors withdraw more money than is in the bank, the bank fails.

DURING GOOD ECONOMIC times, businesses expand.  Often they have to borrow money to pay for the costs of meeting growing demand.  They borrow and expand.  They hire more people.  People make more money.  They deposit some of this additional money in the bank.  This creates more money to lend.  Businesses borrow more.  And so it goes.  This saving and lending increases the money supply.  We call it inflation.  A little inflation is good.  It means the economy is growing.  When it grows too fast and creates too much money, though, prices go up. 

Sustained inflation can also create a ‘bubble’ in the economy.  This is due to higher profits than normal because of artificially high prices due to inflation.  Higher selling prices are not the result of the normal laws of supply and demand.  Inflation increases prices.  Higher prices increase a company’s profit.  They grow.  Add more jobs.  Hire more people.  Who make more money.  Who buy more stuff and save more money.  Banks loan more, further increasing the money supply.  Everyone is making more money and buying more stuff.  They are ‘bidding up’ the prices (house prices or dot-com stock prices, for example) with an inflated currency.  This can lead to overvalued markets (i.e., a bubble).  Alan Greenspan called it ‘irrational exuberance’ when testifying to Congress in the 1990s.  Now, a bubble can be pretty, but it takes very little to pop and destroy it.

Hyperinflation is inflation at its worse.  Bankers don’t create it by lending too much.  People don’t create it by bidding up prices.  Governments create it by printing money.  Literally.  Sometimes following a devastating, catastrophic event like war (like Weimar Germany after World War II).  But sometimes it doesn’t need a devastating, catastrophic event.  Just unrestrained government spending.  Like in Argentina throughout much of the 20th century.

During bad economic times, businesses often have more goods and services than people are purchasing.  Their sales will fall.  They may cut their prices to try and boost their sales.  They’ll stop expanding.  Because they don’t need as much supply for the current demand, they will cut back on their output.  Lay people off.  Some may have financial problems.  Their current revenue may not cover their costs.  Some may default on their loans.  This makes bankers nervous.  They become more hesitant in lending money.  A business in trouble, then, may find they cannot borrow money.  This may force some into bankruptcy.  They may default on more loans.  As these defaults add up, it threatens a bank’s ability to repay their depositors.  They further reduce their lending.  And so it goes.  These loan defaults and lack of lending decreases the money supply.  We call it deflation.  We call deflationary periods recessions.  It means the economy isn’t growing.  The money supply decreases.  Prices go down.

We call this the business cycle.  People like the inflation part.  They have jobs.  They’re not too keen on the deflation part.  Many don’t have jobs.  But too much inflation is not good.  Prices go up making everything more expensive.  We then lose purchasing power.  So a recession can be a good thing.  It stops high inflation.  It corrects it.  That’s why we often call a small recession a correction.  Inflation and deflation are normal parts of the business cycle.  But some thought they could fix the business cycle.  Get rid of the deflation part.  So they created the Federal Reserve System (the Fed) in 1913.

The Fed is a central bank.  It loans money to Federal Reserve regional banks who in turn lend it to banks you and I go to.  They control the money supply.  They raise and lower the rate they charge banks to borrow from them.  During inflationary times, they raise their rate to decrease lending which decreases the money supply.  This is to keep good inflation from becoming bad inflation.  During deflationary times, they lower their rate to increase lending which increases the money supply.  This keeps a correction from turning into a recession.  Or so goes the theory.

The first big test of the Fed came during the 1920s.  And it failed. 

THE TWO WORLD wars were good for the American economy.  With Europe consumed by war, their agricultural and industrial output decline.  But they still needed stuff.  And with the wars fought overseas, we fulfilled that need.  For our workers and farmers weren’t in uniform. 

The Industrial Revolution mechanized the farm.  Our farmers grew more than they ever did before.  They did well.  After the war, though, the Europeans returned to the farm.  The American farmer was still growing more than ever (due to the mechanization of the farm).  There were just a whole lot less people to sell their crops to.  Crop prices fell. 

The 1920s was a time America changed.  The Wilson administration had raised taxes due to the ‘demands of war’.  This resulted in a recession following the war.  The Harding administration cut taxes based on the recommendation of Andrew Mellon, his Secretary of the Treasury.  The economy recovered.  There was a housing boom.  Electric utilities were bringing electrical power to these houses.  Which had electrical appliances (refrigerators, washing machines, vacuum cleaners, irons, toasters, etc.) and the new radio.  People began talking on the new telephone.  Millions were driving the new automobile.  People were traveling in the new airplane.  Hollywood launched the motion picture industry and Walt Disney created Mickey Mouse.  The economy had some of the most solid growth it had ever had.  People had good jobs and were buying things.  There was ‘good’ inflation. 

This ‘good’ inflation increased prices everywhere.  Including in agriculture.  The farmers’ costs went up, then, as their incomes fell.  This stressed the farming regions.  Farmers struggled.  Some failed.  Some banks failed with them.  The money supply in these areas decreased.

Near the end of the 1920s, business tried to expand to meet rising demand.  They had trouble borrowing money, though.  The economy was booming but the money supply wasn’t growing with it.  This is where the Fed failed.  They were supposed to expand the money supply to keep pace with economic growth.  But they didn’t.  In fact, the Fed contracted the money supply during this period.  They thought investors were borrowing money to invest in the stock market.  (They were wrong).  So they raised the cost of borrowing money.  To ‘stop’ the speculators.  So the Fed took the nation from a period of ‘good’ inflation into recession.  Then came the Smoot-Hawley Tariff.

Congress passed the Smoot-Hawley Tariff in 1930.  But they were discussing it in committee in 1929.  Businesses knew about it in 1929.  And like any good business, they were looking at how it would impact them.  The bill took high tariffs higher.  That meant expensive imported things would become more expensive.  The idea is to protect your domestic industry by raising the prices of less expensive imports.  Normally, business likes surgical tariffs that raise the cost of their competitor’s imports.  But this was more of an across the board price increase that would raise the cost of every import, which was certain to increase the cost of doing business.  This made business nervous.  Add uncertainty to a tight credit market and business no doubt forecasted higher costs and lower revenues (i.e., a recession).  And to weather a recession, you need a lot of cash on hand to help pay the bills until the economy recovered.  So these businesses increased their liquidity.  They cut costs, laid off people and sold their investments (i.e., stocks) to build a huge cash cushion to weather these bad times to come.  This may have been a significant factor in the selloff in October of 1929 resulting in the stock market crash. 

HERBERT HOOVER WANTED to help the farmers.  By raising crop prices (which only made food more expensive for the unemployed).  But the Smoot-Hawley Tariff met retaliatory tariffs overseas.  Overseas agricultural and industrial markets started to close.  Sales fell.  The recession had come.  Business cut back.  Unemployment soared.  Farmers couldn’t sell their bumper crops at a profit and defaulted on their loans.  When some non-farming banks failed, panic ensued.  People rushed to get their money out of the banks before their bank, too, failed.  This caused a run on the banks.  They started to fail.  This further contracted the money supply.  Recession turned into the Great Depression. 

The Fed started the recession by not meeting its core expectation.  Maintain the money supply to meet the needs of the economy.  Then a whole series of bad government action (initiated by the Hoover administration and continued by the Roosevelt administration) drove business into the ground.  The ONLY lesson they learned from this whole period is ‘inflation good, deflation bad’.  Which was the wrong lesson to learn. 

The proper lesson to learn was that when people interfere with market forces or try to replace the market decision-making mechanisms, they often decide wrong.  It was wrong for the Fed to contract the money supply (to stop speculators that weren’t there) when there was good economic growth.  And it was wrong to increase the cost of doing business (raising interest rates, increasing regulations, raising taxes, raising tariffs, restricting imports, etc.) during a recession.  The natural market forces wouldn’t have made those wrong decisions.  The government created the recession.  Then, when they tried to ‘fix’ the recession they created, they created the Great Depression.

World War I created an economic boom that we couldn’t sustain long after the war.  The farmers because their mechanization just grew too much stuff.  Our industrial sector because of bad government policy.  World War II fixed our broken economy.  We threw away most of that bad government policy and business roared to meet the demands of war-torn Europe.  But, once again, we could not sustain our post-war economy because of bad government policy.

THE ECONOMY ROARED in the 1950s.  World War II devastated the world’s economies.  We stood all but alone to fill the void.  This changed in the 1960s.  Unions became more powerful, demanding more of the pie.  This increased the cost of doing business.  This corresponded with the reemergence of those once war-torn economies.  Export markets not only shrunk, but domestic markets had new competition.  Government spending exploded.  Kennedy poured money into NASA to beat the Soviets to the moon.  The costs of the nuclear arms race grew.  Vietnam became more and more costly with no end in sight.  And LBJ created the biggest government entitlement programs since FDR created Social Security.  The size of government swelled, adding more workers to the government payroll.  They raised taxes.  But even high taxes could not prevent huge deficits.

JFK cut taxes and the economy grew.  It was able to sustain his spending.  LBJ increased taxes and the economy contracted.  There wasn’t a chance in hell the economy would support his spending.  Unwilling to cut spending and with taxes already high, the government started to print more money to pay its bills.  Much like Weimar Germany did in the 1920s (which ultimately resulted in hyperinflation).  Inflation heated up. 

Nixon would continue the process saying “we are all Keynesians now.”  Keynesian economics believed in Big Government managing the business cycle.  It puts all faith on the demand side of the equation.  Do everything to increase the disposable money people have so they can buy stuff, thus stimulating the economy.  But most of those things (wage and price controls, government subsidies, tariffs, import restrictions, regulation, etc.) typically had the opposite effect on the supply side of the equation.  The job producing side.  Those policies increased the cost of doing business.  So businesses didn’t grow.  Higher costs and lower sales pushed them into recession.  This increased unemployment.  Which, of course, reduces tax receipts.  Falling ever shorter from meeting its costs via taxes, it printed more money.  This further stoked the fires of inflation.

When Nixon took office, the dollar was the world’s reserve currency and convertible into gold.  But our monetary policy was making the dollar weak.  As they depreciated the dollar, the cost of gold in dollars soared.  Nations were buying ‘cheap’ dollars and converting them into gold at much higher market exchange rate.  Gold was flying out of the country.  To stop the gold flight, Nixon suspended the convertibility of the dollar. 

Inflation soared.  As did interest rates.  Ford did nothing to address the core problem.  During the next presidential campaign, Carter asked the nation if they were better off than they were 4 years ago.  They weren’t.  Carter won.  By that time we had double digit inflation and interest rates.  The Carter presidency was identified by malaise and stagflation (inflation AND recession at the same time).  We measured our economic woes by the misery index (the unemployment rate plus the inflation rate).  Big Government spending was smothering the nation.  And Jimmy Carter did not address that problem.  He, too, was a Keynesian. 

During the 1980 presidential election, Reagan asked the American people if they were better off now than they were 4 years ago.  The answer was, again, ‘no’.  Reagan won the election.  He was not a Keynesian.  He cut taxes like Harding and JFK did.  He learned the proper lesson from the Great Depression.  And he didn’t repeat any of their (Hoover and FDR) mistakes.  The recession did not turn into depression.  The economy recovered.  And soared once again.

MONETARY POLICY IS crucial to a healthy and growing economy.  Businesses need to borrow to grow and create jobs.  However, monetary policy is not the be-all and end-all of economic growth.  Anti-business government policies will NOT make a business expand and add jobs no matter how cheap money is to borrow.  Three bursts of economic activity in the 20th century followed tax-cuts/deregulation (the Harding, JFK and Reagan administrations).  Tax increases/new regulation killed economic growth (the Hoover/FDR and LBJ/Nixon/Ford/Carter administrations).  Good monetary policies complimented the former.  Some of the worst monetary policies accompanied the latter.  This is historical record.  Some would do well to learn it.

www.PITHOCRATES.com

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