After the Civil War Men became less Manly and the Federal Government became more Progressive

Posted by PITHOCRATES - March 25th, 2014

History 101

(Originally published February 12th, 2013)

Prior to 1900 the Role of the Federal Government was primarily to Provide for the Common Defense

In 1800 the new federal government didn’t do a lot.  It spent only about $11 million (in nominal dollars).  With 55% going to defense.  About 31% went to pay interest on the war debt.  About 2% went to the postal service.  And about 12% went to other stuff.  Defense spending and interest on the war debt added up to about 86% of all federal outlays (see Government Spending Details).

In 1860, just before the Civil War, spending increased to $78 million (in nominal dollars).  Defense spending fell to 37%.  Interest spending fell to 4%.  And postal service spending rose to 19%.  While spending on other stuff rose to 40%.  Just over 60 years from the founding the federal government had changed.  It was less limited than the Founding Fathers designed it to be.

In 1900 spending increased to $628.6 million (in nominal dollars).  With defense spending coming in at 53%.  The postal service at 17%.  Interest went up to 6.4%.  And other spending fell to 24%.  Again, defense spending consumed over half of all federal spending.  For the role of the federal government was still primarily providing for the common defense.  Running the postal service.  Treating with other nations.  And trading with them.  As well as collecting duties and tariffs at our ports which paid for the federal government.  There was a lot of graft and patronage.  And long lines for government jobs.  Primarily because government was still somewhat limited.  With a limited number of government jobs to reward campaign contributors.  But that was about to change.

The Progressives expanded the Role of the Federal Government in our Lives and made it more Motherly

The American Civil War killed about 625,000 men.  With an 1860 population of 31,443,321 those deaths amounted to about 2% of the prewar population.  To put that into perspective if 2% of the U.S. population died in a war today that would be approximately 6.2 million people.  And to put that into perspective the total population of the state of Missouri is about 6 million people.  So the American Civil War claimed a very large percentage of the population.  Leaving a lot of children to grow up without a father.  Which had a profound impact on the size of the federal government.

Prior to this generation American men were some of the manliest men in the world.  Tough and rugged.  Who could live off of the land.  Completely self-sufficient.  These are the men that made America.  Men who fought and won our independence.  Who explored and settled the frontier.  Farmers who worked all day in the field.  Men who dug canals by hand.  And built our railroads.  Men who endured hardships and never complained.  Then came the Civil War generation.  Sons who lost their fathers.  And wives who lost their husbands, brothers, fathers and uncles.  Who lost all the men in their lives in that horrible war.  These women hated that war.  And manly displays of aggression.  For it was manly displays of aggression that led to fighting.  And war.  Having lost so much already they didn’t want to lose the only men they had left.  Their sons.  So they protected and nurtured them.  Taught them to shun violence.  To be kinder and softer.  To be not so tough or rugged.  To be less manly.  And when these men grew up they went into politics and started the progressive movement.

The federal government was no longer just to provide for the common defense.  To run the postal service.  To treat with other nations.  To trade with other nations.  Run our custom houses.  No.  Now the federal government grew to be kinder, softer and more motherly.  The progressives expanded the role of the federal government in our lives.  Woodrow Wilson wanted to turn the country into a quasi monarchy.  With a very strong executive branch that could rule against the wishes of Congress.  The Federal Reserve (America’s central bank) came into existence during Wilson’s presidency.  Which was going to end recessions forever.  Then came the Great Depression.  A crisis so good that FDR did not let it go to waste.  FDR expanded the size of the federal government.  Putting it on a path of permanent growth.  And it’s been growing ever since.

They decreased Defense Spending and increased Borrowings to increase Non-Defense Spending

The federal government grew beyond its Constitutional limits.  And the intent of the Founding Fathers.  Just as Thomas Jefferson feared.  It consolidated power just as all monarchies did.  And that was Jefferson’s fear.  Consolidation.  Seeing the states absorbed by a leviathan federal government.  Becoming the very thing the American colonists fought for independence from.  So that’s where the federal government changed.  In the early 20th Century.  Before that it spent money mostly for defense and a postal service.  Now it spends money for every social program under the sun.  There is great debate now in Washington about reducing the deficit.  With the Democrats blaming the deficit problems on too much defense spending.  And too little taxation on the rich.  But if you look at the history of federal spending since 1940 the numbers say otherwise (see Table 3.1—OUTLAYS BY SUPERFUNCTION AND FUNCTION: 1940–2017 and A History of Debt In The United States).

Federal Spending and Debt

As defense spending (including Veterans Benefits and Services) rose during World War II non-defense spending (Education, Training, Employment, Social Services, Health, Income Security, Social Security, Energy, Natural Resources, Environment, Commerce, Housing Credit, Transportation, Community and Regional Development, International Affairs, General Science, Space, Technology, Agriculture, Administration of Justice and General Government) fell as a percentage of total federal outlays.  And the federal debt rose (federal debt is in constant 2012 dollars).  After the war defense spending fell to 50% while the percentage of non-defense spending rose.  And the federal debt dropped slightly and remained relatively constant for about 30 years.

This tug of war between defense spending and non-defense spending is also called the guns vs. butter debate.  Where those in favor of spending money on guns at the federal level are more constructionists.  They want to follow the Constitution as the Founding Fathers wrote it.  While those who favor spending money on butter at the federal level want to want to buy more votes by giving away free stuff.

Defense spending ramped back up for the Korean War and the Cold War during the Fifties.  After the armistice ended hostilities in Korea defense spending began a long decline back to about 50% of all federal outlays.  Where it flattened out and rose slightly for the Vietnam War.  After America exited the Vietnam War defense spending entered a long decline where it dropped below 30% of all federal outlays.  Reagan’s defense spending raised defense spending back up to 30%.  After Reagan won the Cold War Clinton enjoyed the peace dividend and cut defense spending down to just below 20%.  After 9/11 Bush increased defense spending just above 20% of all federal outlays where it remains today.

During this time non-defense spending was basically the mirror of defense spending.  Showing that they decreased defense spending over time to increase non-defense spending.  But there wasn’t enough defense spending to cut so borrowing took off during the Reagan administration.  It leveled off during the Clinton administration as he enjoyed the peace dividend after the defeat of the Soviet Union in the Cold War.  Non-defense spending soared over 70% of all federal outlays during the Bush administration.  Requiring additional borrowings.  Then President Obama increased non-defense spending so great it resulted in record deficits.  Taking the federal debt to record highs.

So is defense spending the cause of our deficits?  No.  Defense spending as a percentage of all federal outlays is near a historical low.  While non-defense spending has soared to a record high.  As did our federal debt.  Clearly showing that the driving force behind our deficits and debt is non-defense spending.  Not defense spending.  Nor is it because we’re not taxing people enough.  We’re just spending too much.  In about 50 years non-defense spending rose from around 22% of all federal outlays to 74%.  An increase of 223%.  While defense spending fell from 76% to 22%.  A decline of 245%.  While the federal debt rose 619%.  And interest on the debt soared 24,904%.  The cost of favoring butter in the guns vs. butter debate.  The federal government has been gutting the main responsibility of the federal government, defense, to pay for something that didn’t enter the federal government until the 20th Century.  All that non-defense spending.  Which doesn’t even include the postal service today.

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When it comes to Foreign Policy we need more Team America and Less President Obama

Posted by PITHOCRATES - March 20th, 2014

Politics 101

Thanks to President Obama the United States is now the Rodney Dangerfield of Superpowers

The American public is consumed with the missing Malaysian Airlines Flight 370.  They can’t get enough of the news coverage that is anything but news.  With cable news delivering 24/7 coverage of nothing but speculation.  Even the networks are giving the speculation expansive coverage.  They’d never give Obamacare, Benghazi, the IRS targeting conservative groups, etc., this kind of coverage.  But they will give Malaysian Airlines Flight 370 this kind of coverage.  For apart from the insufferable despair of the families who lost their loved ones it’s a great mystery people want to see unfold.  And be the one to solve it.  But while that is going on the world is becoming a less safe place.  Thanks to Vladimir Putin.

President Obama’s ‘please like us’ foreign policy has failed.  The reset with Russia has not improved our relations.  In fact, they are about as bad as they were during the Cold War.  With Putin doing some Cold War chess playing.  Completely unimpressed with President Obama he’s making bold moves.  And when he does all he gets from the United States is talk.  He annexed Crimea without any real opposition from the Western Powers.  Especially the United States.  And he is probably looking at the Baltic States now.  Seeing no reason yet to stop in his quest to put the Soviet Union back together.  This is what the American people are missing.  For the networks are barely covering it.  And the people are blissfully ignorant of how the United States is now the Rodney Dangerfield of superpowers.  We get no respect from our enemies.  So our enemies make bold moves.  Because that’s who they are.  The creators of South Park made a movie called Team America: World Police (2004).  This followed 9/11 and the beginning of the wars in Afghanistan and Iraq.  When the United States began its fight in the global war on terror.  Though a comedy the writers seem to have a better grasp on the real world than the Obama administration or the mainstream media.  Who think in the 21st century that war no longer exists because world leaders now discuss their differences like rational and civilized adults according to international law.  And honor their agreements.  But what they don’t understand is something that’s been true since the dawn of civilization.  There are three types of people in the world.  As a drunk in Team America: World Police explains crudely but succinctly.  (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

If you’ve watched the video you’ll understand what the three types are.  We’ll call them D, P and A (both singular and plural).  In the context of this movie America was a D.  And Kim Jong Il was an A.  As were the Islamist terrorists.  While the leftist ‘give peace a chance’ Hollywood liberals in the movie (who belonged to the Film Actors’ Guild) were P.  As was the United Nations who sent Hans Blix to inspect Kim Jong Il’s regime to make sure he didn’t have any weapons of mass destruction (WMD).  —SPOILER ALERT—  Team America, the world police, go tear-assing around the world, blowing up parts of countries as they hunt and kill terrorists.  Making the world a safer place.  While Kim Jong Il plots to set off WMDs, using the Islamist terrorists to plant his WMDs.  The F.A.G. actors publicly denounce Team America for their wanton destruction and call corporations the real enemy.  Even going to North Korea to attend a peace conference that Kim Jong Il was hosting.  Believing Kim Jong Il was a man of peace.  And were willing to kill Team America to help Kim Jong Il go forward with his peace plans.  Which was actually blowing up countries all around the world into third-world status.

Hitler promised the Naïve Chamberlain that the Sudetenland would be his last Territorial Acquisition

The movie showed the futility of diplomacy when you’re dealing with A.  Because they will lie and say anything you want to hear to shut you up and make you go away.  And when you do they’re just going to crap all over you and the world.  Because that’s what A do.  The P don’t understand that.  They think they can negotiate and arrive at an agreement with people who lie.  History is full of treaties that A have broken.  Because they don’t respect anything but strength.  And if all you got are words an A just isn’t going to respect you.  And will crap on you the first chance he gets.  Especially if you’re a P.  The Russian people understand this.  During the Sochi Olympics the Daily Show‘s Jason Jones interviewed Russians during the Sochi Games.  And a woman told him they have a saying in Russia.  Don’t be a P.  Which is why they love Vladimir Putin.  He’s not a P.  He’s an A.

Communists are A.  They just want to crap all over everyone.  During the Korean War every time they were losing on the battlefield they called for a ceasefire to negotiate a peace treaty.  Using the cessation in hostilities to reinforce their weakened positions.  Proving you just cannot trust an A.  Or negotiate with an A.  Yet the leftist ‘give peace a chance’ liberals think you can.  And that all George W. Bush did by being an A was make the world hate the United States.  Even though Muammar Gaddafi, who was a first class A, respected George W. Bush when he invaded Iraq.  Saw that strength.  Respected that strength.  And did not want to get his ass kicked by that strength.  So he gave up his WMDs willingly.  And joined the Americans in the fight against al Qaeda (Libya is a far less safe place today than it was under Muammar Gaddafi after the Iraqi invasion).  This is what A understand.  Strength.  It’s the one thing that makes them act.  Not words.  As this funny scene in Team America: World Police illustrates so poignantly.  (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

We ended the war in Iraq with a ceasefire.  Part of the terms that Saddam Hussein agreed to was to destroy his WMDs and document their destruction.  He never did.  In part because he didn’t have them anymore.  Having sent them over the border into Syria (most likely) on trucks and in two converted Iraqi Airways Boeings before the invasion.  Adolf Hitler promised the naïve Prime Minister Neville Chamberlain that the Czechoslovakian Sudetenland would be his last territorial acquisition.  Chamberlain returned to Britain with a treaty signed by Herr Hitler promising “peace in our time.”  Shortly thereafter Hitler launched World War II (the bloodiest and costliest war of all time) and removed Poland from the map.  Because Hitler was an A.  And you just can’t negotiate with an A.  Especially if you’re a P who believes we can settle all our differences if we only communicate with each other.  No.  An A sees anyone who wants to ‘open a dialogue’ as a P.  And they will laugh at how gullible they are.  Getting a lot of concessions by making promises they have no intention of keeping.  A love P.  Because they are so easy to crap all over.

The Russians like President Obama in Office because he is the Anti-Ronald Reagan

The Obama administration confuses being liked with being respected.  They think if people like America they will respect America.  Nothing could be further from the truth.  People respect people they hate.  At least, if they fear people they hate.  A key distinction.  For Vladimir Putin has no love for President Obama.  Who looks at him as a P.  Which Russians just don’t respect.  They even have a saying.  Don’t be a P.  So Putin has no respect whatsoever for President Obama.  Because he does not fear President Obama.  The recent sanctions President Obama issued by executive order only amused the Russians.  They thought they were nothing more than a joke.  Even replied with in-kind sanctions of their own.  Oh they had a good laugh at President Obama trying to act tough.  But they just don’t respect him.  But you know who they did respect?  Ronald Reagan.

During a radio check President Reagan was testing the sound levels before a radio address.  And he made a joke.  He said into the microphone, “My fellow Americans, I’m pleased to tell you today that I’ve signed legislation that will outlaw Russia forever.  We begin bombing in five minutes.”  This joke leaked out.  And made it to the Soviet Union.  And what do you think they did?  Did they have a good laugh like they did when President Obama tried to act tough?  No.  They didn’t.  They put their Soviet Far East Army on alert.  For they did not like Ronald Reagan.  But they sure as hell respected that crazy son of a bitch.  And feared him.  As well as the awesome military power of the United States.  Which they knew President Reagan had no problem using.  Unlike the current occupant of the White House.  Who wants to shrink the size of the military to pre-World War I levels.  Something only a P would do in the eyes of an A like Vladimir Putin.  No.  President Obama is more of an apologetic president for America’s greatness.  While President Reagan made no apologies.  He believed in American Exceptionalism.  And was damn proud of it.  The shiny city on the hill.  The beacon of liberty.  Defender of freedom.  And he would broadcast the Team America theme song proudly at our enemies.  Unlike the apologist now occupying the White House (WARNING: The following video is for mature audiences only.  For it’s pretty rude and crude and completely inappropriate for the workplace.)

America may have its faults but it is still the best country in the world.  Proven by the flow of immigrants (legal and illegal) to our shores.  We may be arrogant but that’s only because we have a right to be.  Because we are the best m-f’ing country in the world.  F*** yeah.  We’ve made the world a better place.  And the world knows this.  Which is why our enemies love having our country run by people who are ashamed of America’s greatness.  Because they can crap all over the world and get away with it.  Like Putin did by annexing Crimea.  Because they know there is no crazy son of a bitch in the White House that will use the awesome power of the United States to stop them.  Just a bunch of leftist ‘give peace a chance’ liberals who will wag their finger at them.  And if they don’t quake with fear they will wag their finger at them again.  Or write a letter.  The Russians couldn’t be happier.  And lament that if there were only people like the current administration running the United States in the Eighties the Soviets never would have lost the Cold War.  But now Vladimir Putin, former KGB officer in the Soviet Union, sees his chance.  He can put the Soviet Union together again.  As they have the anti-Ronald Reagan in office now.  And can do whatever the hell they want to.  Because they aren’t P.  They’re A.

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Peace through Strength

Posted by PITHOCRATES - March 6th, 2014

Politics 101

Bad Guys won’t open their Can of Whoop-Ass if there is a Chance they’ll get their Ass Kicked

Bullies generally pick on smaller and weaker people.  Smaller and weaker people don’t pick on tough guys.  They don’t walk up to a bully and give him a wedgie.  They’d like to.  But they don’t.  Why?  Because if a small and weak person did they’d get their ass kicked.  That’s why.  And people don’t like getting their ass kicked.  But sometimes it’s the tough guys that save the day.

In the opening scene of V for Vendetta Evey was about to get raped by some government thugs.  Then tough guy V came along and kicked their asses.  Saving Eve from a brutal rape.  In Die Hard the evil Hans Gruber was going to kill everyone in that building until tough guy John McClane happened on the scene.  And started killing the bad guys.  Saving the day.  In the movie Patton everyone wanted him thrown out of the Army after he slapped that crying soldier.  But when the Allies’ drive stalled in the Normandy hedgerow country who did they turn to?  That’s right.  Tough guy General Patton.  Who started kicking Nazi ass big time.  Breaking through their lines and advancing in every compass direction while British General Bernard Montgomery was still struggling o take his D-Day objective.  Caen.

People don’t like getting their ass kicked.  But if they are in danger of a good ass-kicking they’d want someone on their side who can kick ass as good as the next guy.  For even bad guys don’t want to get their ass kicked.  And if there is a chance of that happening they’re going to think long and hard before opening their can of whoop-ass.  Especially when someone else’s can of whoop-ass is bigger.

Only the Military Might of the United States could contain Soviet Expansion

The Roman Empire had one mighty can of whoop-ass.  Something her potential enemies understood.  And feared.  So they didn’t cause any trouble.  Because they didn’t want to get their ass kicked.  Which is why from approximately 27 BC to 180 AD there was relative peace in the world.  Pax Romana.  For the Romans had the mightiest military force in the world.  And if you went up against them you were most likely going to lose.  So they didn’t.  Instead, choosing to live in peace.

The British Empire was even larger than the Roman Empire.  And had an even larger can of whoop-ass.  Not only did they have armies throughout their empire which was so large that the sun never set on it.  The Royal Navy ruled the seas.  Which meant if you caused any trouble in the world you could expect an ass-kicking.  Either from her mighty military power.  Or her aid to a smaller and weaker country under threat from an aggressive neighbor.  The bad guys learned.  It wasn’t worth it.  If you tried to break the peace you were going to get your ass kicked.  Which is why from 1815 through 1914 when the British Empire ruled the world there was relative peace.  Pax Britannica.

The United States of America had come of age during the 20th century.  Growing even bigger and stronger than the empire that sired her.  The British Empire.  Who went into decline during the 20th century.  But just as Pax Britannica drew to a close and the world became a more dangerous place the United States stepped in.  Allowing the Allies to defeat Nazi Germany.  And Imperial Japan.  She grew to have the biggest can of whoop-ass in history.  And became the world’s policeman.  Pushing back against Soviet expansion.  In Europe.  The Balkans.  The Middle East.  And Southeast Asia.  The Soviets wanted to conquer the world.  And would have if not for America’s mighty military to counter their threat.  Leading to a period of relative peace following World War II.  Pax Americana.  As only the military might of the United States could contain Soviet expansion.

Vladimir Putin feels that he can put the old Soviet Union back together during the Obama Administration

During a sound check before a radio address President Reagan made a joke.  He said, “My fellow Americans, I’m pleased to tell you today that I’ve signed legislation that will outlaw Russia forever.  We begin bombing in five minutes.”  Reagan had a sense of humor and those present laughed.  The joke leaked.  The Soviets heard it.  And they put their Soviet Far East Army on alert.  You see, they had great respect for the awesome military power of the United States.  And they respected Reagan.  They did not like him.  But they respected him.  And if he said he was going to open a can of whoop-ass on them they got nervous.  For President Reagan may have spoken softly.  But he was not afraid to kick ass.

The Soviets had no such respect for Reagan’s predecessor.  Jimmy Carter.  In fact, they had so little respect for him that they developed a nuclear first-strike plan.  For Carter was gutting the military.  And wasn’t a tough guy when it came to foreign policy.  He was a president who wanted to focus on domestic policy.  A sign of weakness the Soviets could smell.   Anyone who gutted the military to pay for more domestic spending would never pull the nuclear trigger.  At least that’s what the Soviets thought.  Which is why they prepared a nuclear first-strike plan during the Carter administration.  Sure they could win a nuclear war against him.  The Soviets thought no such thing during the Reagan administration.  So instead of a nuclear war (which may have happened in a Carter second term) we had peace.  Because of our strength.

Peace through strength.  If you’re a bad-ass people will leave you alone.  Because no one wants to get their ass kicked.  If you’re hell-bent on beating the crap out of your neighbor so you can take her resources and there is a bad-ass in the world that can bring a world of hurt down on you it will make you think.  And pause.  This is why there was a Pax Romana.  A Pax Britannica.  And a Pax Americana.  Because people respect a bad-ass.  And will not incite it.  They may hate the bad-ass.  But they will respect it.  And not piss it off.

President Obama has a strong domestic agenda.  Like Jimmy Carter.  He doesn’t want to deal with foreign policy.  Like Jimmy Carter.  And he is not respected or feared by the world’s bad guys.  Like Jimmy Carter.  Who is far more inclined to make a speech and threaten action.  But is far less likely to open a can of whoop-ass.  Like Ronald Reagan.  Which is why Vladimir Putin feels that he can put the old Soviet Union back together during the Obama administration.  Because he doesn’t fear the wrath of President Obama.  As no one does.  For he is all bark and no bite.  At least, so far.  Apart from killing a bunch of people that can’t fight back.  Drone strikes.  Bombing Libya (that was no threat to American interests).  And killing Osama bin Laden with a SEAL team.  More of an imperial use of force than acting as the world’s policeman to safeguard liberty and democracy.  So Vladimir Putin has little to worry about during an Obama presidency.  Unlike conservatives in America.

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The Dow Jones Industrial Average and the Labor Force Participation Rate from Ronald Reagan to Barack Obama

Posted by PITHOCRATES - February 10th, 2014

Economics 101

(Originally published May 21st, 2013)

The DJIA and the Labor Force Participation Rate tell us how both Wall Street and Main Street are Doing

Rich people don’t need jobs.  They can make money with money.  Investing in the stock market.  When you see the Dow Jones Industrial Average (DJIA) increasing you know rich people are getting richer.  Whereas the middle class, the working people, aren’t getting rich.  But they may be building a retirement nest egg.  Which is good.  So they benefit, too, from a rising DJIA.  But that’s for later.  What they need now is a job.  Unlike rich people.  The middle class typically lives from paycheck to paycheck.  So more important to them is a growing job market.  Not so much a growing stock market.  For the middle class needs a day job to be able to invest in the stock market.  Whereas rich people don’t.  For a rich person’s money works enough for the both of them.

So the Dow Jones Industrial Average shows how well rich people are doing.   And how well the working class’ retirement nest eggs are growing for their retirement.  But it doesn’t really show how well the middle class is living.  For they need a job to pay their bills.  To put food on their tables.  And to raise their families.  So the DJIA doesn’t necessarily show how well the middle class is doing.  But there is an economic indicator that does.  The labor force participation rate.  Which shows the percentage of people who could be working that are working.  So if the labor force participation rate (LFPR) is increasing it means more people looking for a job can find a job.  Allowing more people to be able to pay their bills, put food on their tables and raise their families.

These two economic indicators (the DJIA and the LFPR) can give us an idea of how both Wall Street and Main Street are doing.  Ideally you’d want to see both increasing.  A rising DJIA shows businesses are growing.  Allowing Wall Street to profit from rising stock prices.  While those growing businesses create jobs for Main Street.   If we look at these economic indicators over time we can even see which ‘street’ an administration’s policies favor.   Interestingly, it’s not the one you would think based on the political rhetoric.

Wall Street grew 75% Richer under Clinton than it did under Reagan while Main Street grew 65% Poorer

Those going through our public schools and universities are taught that capitalism is unfair.  Corporations are evil.  And government is good.  The Democrats favor a growing welfare state.  Funded by a highly progressive tax code.  That taxes rich people at higher tax rates.  While Republicans favor a limited government.  A minimum of government spending and regulation.  And lower tax rates.  Therefore the Republicans are for rich people and evil corporations.  While the Democrats are for the working man.  Our schools and universities teach our kids this.  The mainstream media reinforces this view.  As does Hollywood, television and the music industry.  But one thing doesn’t.  The historical record (see Civilian Labor Force Participation Rate and Recessions 1950-Present and Dow Jones Industrial Average Index: Historical Data).

DJIA vs Labor Force Participation Rate - Reagan

The Democrats hated Ronald Reagan.  Because he believed in classical economics.  Which is what made this country great.  Before Keynesian economics came along in the early 20th Century.  And ushered in the era of Big Government.  Reagan reversed a lot of the damage the Keynesians caused.  He tamed inflation.  Cut taxes.  Reduced regulation.  And made a business-friendly environment.  Where the government intervened little into the private sector economy.  And during his 8 years in office we see that BOTH Wall Street (the Dow Jones Industrial Average) and Main Street (the labor force participation rate) did well.  Contrary to everything the left says.  The DJIA increased about 129%.  And the LFPR increased about 3.4%.  Indicating a huge increase of jobs for the working class.  Showing that it wasn’t only the rich doing well under Reaganomics.  The policies of his successor, though, changed that.  As Wall Street did better under Bill Clinton than Main Street.

DJIA vs Labor Force Participation Rate - Clinton

Despite the Democrats being for the working man and Bill Clinton’s numerous statements about going back to work to help the middle class (especially during his impeachment) Wall Street clearly did better than Main Street under Bill Clinton.  During his 8 years in office the LFPR increased 1.2%.  While the DJIA increased 226%.  Which means Wall Street grew 75% richer under Clinton than it did under Reagan.  While Main Street grew 65% poorer under Clinton than it did under Reagan.  Which means the gap between the rich and the middle class grew greater under Clinton than it did under Reagan.  Clearly showing that Reagan’s policies favored the Middle Class more than Clinton’s policies did.  And that Clinton’s policies favored Wall Street more than Regan’s did.  Which is the complete opposite of the Democrat narrative.  But it gets worse.

The Historical Record shows the Rich do Better under Democrats and the Middle Class does Better under Republicans

The great economy of the Nineties the Democrats love to talk about was nothing more than a bubble.  A bubble of irrational exuberance.  As investors borrowed boatloads of cheap money thanks to artificially low interest rates.  And poured it into dot-com companies that had nothing to sell.  After these dot-coms spent that start-up capital they had no revenue to replace it.  And went belly-up in droves.  Giving George W. Bush a nasty recession at the beginning of his presidency.  Compounded by the 9/11 terrorist attacks.

DJIA vs Labor Force Participation Rate - Bush

The LFPR fell throughout Bush’s first term as all those dot-com jobs went away in the dot-com crash.  Made worse by the 9/11 attacks.  As all the malinvestments of the Clinton presidency were wrung out of the economy things started to get better.  The LFPR leveled off and the DJIA began to rise.  But then the specter of Bill Clinton cast another pall over the Bush presidency.  Clinton’s Policy Statement on Discrimination in Lending forced lenders to lower their lending standards to qualify more of the unqualified.  Which they did under fear of the full force and fury of the federal government.  Using the subprime mortgage to put the unqualified into homes they couldn’t afford.  This policy also pressured Fannie Mae and Freddie Mac to buy these toxic subprime mortgages from these lenders.  Freeing them up to make more toxic loans.  This house of cards came crashing down at the end of the Bush presidency.  Which is why the DJIA fell 19.4%.  And the LFPR fell 2.1%.  Even though the economy tanked thanks to those artificially low interest rates that brought on the subprime mortgage crisis and Great Recession both Wall Street and Main Street took this rocky ride together.  They fell together in his first term.  Rose then fell together in his second term.  Something that didn’t happen in the Obama presidency.

DJIA vs Labor Force Participation Rate - Obama

During the Obama presidency Wall Street has done better over time.  Just as Main Street has done worse over time.  This despite hearing nothing about how President Obama cares for the middle class.  When it is clear he doesn’t.  As his policies have clearly benefited rich people.  Wall Street.  While Main Street suffers the worst economic recovery since that following the Great Depression.  So far during his presidency the LFPR has fallen 3.7%.  While the DJIA has risen by 86%.  Creating one of the largest gaps between the rich and the middle class.  This despite President Obama being the champion of the middle class.  Which he isn’t.  In fact, one should always be suspect about anyone claiming to be the champion of the middle class.  As the middle class always suffers more than the rich when these people come to power.  Just look at Venezuela under Hugo Chaves.  Where the rich got richer.  And the middle class today can’t find any toilet paper to buy.  This is what the historical record tells us.  The rich do better under Democrats.  And the middle class does better under Republicans.  Despite what our schools and universities teach our kids.  Or what they say in movies and television.

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Debt, Jobs and Criticism—Carter, Reagan, Clinton, Bush and Obama

Posted by PITHOCRATES - November 19th, 2013

History 101

The Democrats used the Power of the Purse to oppose the Reagan Agenda wherever they Could

The left hated President Reagan.  They called him just a “B” movie actor.  With many references to Bedtime for Bonzo.   With the implication that Reagan was a chimpanzee.  He was called stupid.  Senile.  And they said he hated the poor.  The usual stuff when it comes to Democrats calling the opposition names.  But as about as demeaning as it gets.  For the Democrats hated Ronald Reagan with a passion.  They may have hated him even more than George W. Bush.  Another president they called stupid.  Even making similar chimpanzee references.

They fought Reagan tooth and nail.  The Democrats held the House and they used the power of the purse to oppose the Reagan agenda wherever they could.  So Reagan had to compromise on some things.  Especially tax hikes.  But for the most part he kept his word to the American people.  And maintained high approval ratings.  Making it harder for the Democrats to block all of the Reagan agenda.  Which just made the left hate him more.

It’s funny the short memories Democrats have.  For any criticism of President Obama is met with charges of racism.  And because of that few criticize him.  Because no one wants to be called a racist.  Giving President Obama a free pass for most if his presidency.  Something neither George W. Bush nor Ronald Reagan ever enjoyed.  Yet the left says the right says the most vile things about President Obama.  Unprecedented things.  Like calling him a liar when he lied during the State of the Union Address.  Which must be different from saying ‘Bush lied people died’ over and over again.

President Obama is on Pace to add more Debt than Ronald Reagan

Among the terrible things the left said Ronald Reagan was doing was running up the debt to unsustainable levels.  And he did run up the debt.  About 99.4% during his 8 years.  Or about 12.4% a year.  Much of that spending, though, was to reverse the damage Jimmy Carter did to national defense.  He had gutted defense spending so much (cancelling bombers and missile programs) that the Soviet Union thought for the first time that they could win a nuclear war against the United States.  At least with Jimmy Carter as president.  They actually started drafting nuclear first-strike plans to replace the deterrence of mutually assured destruction (MAD).  Anyway, that spending led to the collapse of the Soviet Union.  Allowing the U.S. to win the Cold War.  Giving Bill Clinton a huge peace dividend during his presidency.

Bill Clinton wanted to nationalize health care.  And it didn’t go over well.  His big spending liberal agenda got neutered at the midterm elections.  As he angered the people so much the Republicans won both the House and Senate.  Forcing Clinton to the center.  Dropping any thoughts of national health care.  With Republicans even forcing welfare reform on him.  The Republican Revolution kept spending down.  And the debt only grew 13.6% during Clinton’s 8 years.  Or about 1.7% a year.

After the 9/11 terrorist attacks George W. Bush ramped up military spending.  For national security.  And two wars.  He also ramped up domestic spending.  Giving us Medicare Part D.  A program to subsidize the prescription drugs for Medicare recipients.  In the 8 years of the Bush presidency he added about 41.4% to the national debt.  About 5.2% a year.  Which sounded like a lot until President Obama came along.  A near trillion dollar stimulus bill that stimulated little.  Investments into failed solar power companies and electric car companies.  Automotive (i.e., union pension fund) bailouts.  In his 5 years in office Obama has raised the debt by 53.8%.  Or 10.8% each of his 5 years.  A little more than twice the rate of George W. Bush.  At this pace he will even add more debt than Ronald Reagan.  Adding up to 18.3% per year (over 8 years) if no one stops his spending.

Under President Obama the Gap between Black and White Unemployment grew Greater

President Obama said those ‘wise’ investments and higher taxes on those who could afford to pay a little more would generate economic activity.  His income redistribution would balance the playing field.  And raise the poor out of poverty.  While people everywhere celebrated the first black president.  For it would bring the races together.  This is why some on the right joked that President Obama was the messiah.  Because he was going to do all of that.  As well as make the ocean levels fall.  Black America especially loved the nation’s first black president.  As 95% of the black vote went to Obama in 2008.  Though the enthusiasm waned a bit in 2012.  As only 93% of the black vote went to Obama.  And how has black American done under the Obama economic policies.  Well, not as good as they did under the Bush economic policies (see archived data from Table A-2. Employment status of the civilian population by race, sex, and age in the Employment Situation Archived News Releases by the Bureau of Labor Statistics).

Unemplyment Rates by Race Age Sex 2003-2013 R2

The Great Recession officially ran from December 2007 to June 2009.  Which corresponds to the transition from George W. Bush to Barack Obama.  People often call the Great Recession the worst recession since the Great Depression.  Of course they say that primarily because the current economic recovery is the worst since that following the Great Depression.  And the reason for that is President Obama’s economic policies.

Unemployment was lower for everyone under Bush.  On average the unemployment rate for white/black men, women and 16-19 year olds under Bush was 4.2%/9.3%, 4.0%/8.2% and 14.7%/31.1%, respectively.  Under President Obama these numbers jumped to 7.8%/15.7%, 6.7%/12.2% and 21.8%/40.3%.  Which should give black America cause for concern.  For under President Obama the gap between black and white unemployment grew greater.  The gap between black and white men went from 5.1 to 7.9.  An increase of 55.6%.  The gap between black and white women went from 4.2 to 5.5.  An increase of 32.9%.  And the gap between black and white 16 to 19 year olds went from 16.5 to 18.5.  An increase of 12.7%.  So whatever President Obama is doing it isn’t helping America find work.  Especially black America.

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FT195: “Democrats ridicule Sarah Palin because we elected a far less qualified Sarah Palin—Barack Obama—twice.” —Old Pithy

Posted by PITHOCRATES - November 8th, 2013

Fundamental Truth

Democrats don’t want to face Conservatives in General Elections because when they do they Lose

Democrats want to win elections.  They spend enormous amounts of money to make that happen in tight races.  Which limits the amount of money they can spend elsewhere.  So they don’t want to spend any more money than they absolutely have to.  Which tells us one thing.  Whoever they say should be the Republican candidate and is the one that will take the Republican Party in the right direction is actually the candidate they want.  Because he or she is the candidate they think they can defeat easiest.

The Democrats loved John McCain.  They loved how he reached across the aisle.  How he could work with Democrats.  Always willing to compromise to give them what they wanted.  Without demanding hardly anything in return.  In fact, he valued his ability to compromise with Democrats more than any conservative principle.  Democrats like that.  And told Republicans that McCain was their candidate.  Nay, should be their candidate.  For this is the direction the people want the Republican Party to move in.  The Democrat direction.

So with John McCain in the general election the voters had a Democrat candidate (Barack Obama) and a Democrat-lite Candidate (John McCain).  Which is what the Democrats want.  Because it helps Democrats.  They don’t want a conservative that can get Democrats to cross over and vote Republican.  Like the Reagan Democrats.  While at the same time invigorating the conservative base.  That’s the last thing they want.  For when they have that in a general election (like with Ronald Reagan) they lose in landslides.

Whenever Republicans nominate a Candidate the left approves of they NEVER win General Elections

When the Republican candidate is a Democrat-lite candidate it will discourage the conservative base.  Which is what the Democrats want.  Fewer Republicans voted in 2012 than they did in 2008.  This decline in Republican turnout helped win the election for Obama.  So that’s what a Democrat-lite candidate does for Republicans.  And when it comes to Democrat voters they will never vote for Democrat-lite when they a full-blown Democrat to vote for.

This is why the Democrats praised John McCain during the 2008 Republican primary.  And why they praised Mitt Romney during the 2012 Republican primary.  Both moderate Republicans.  More importantly, neither was a conservative.  One (Mitt Romney) even gave Massachusetts universal health care.  Making it difficult for him to attack Obamacare without sounding like a hypocrite.  So the left loved both of these moderate non-conservatives.  Right up until the general election.  When they tore each of them a new you-know-what.

Watching Republicans campaign is like watching Gilligan’s Island.  Where each week we tuned in to see if this was the week they would finally get rescued from that deserted island.  And just when rescue seemed imminent Gilligan would do something to ruin everything.  While viewers never noticed the recurring theme.  They NEVER get rescued.  Just as it is with elections.  Every election the Republicans listen to the Democrats.  As if they are really interested in helping Republicans win elections.  Instead of doing everything within their power to win themselves.  And whenever Republicans nominate a candidate the left approves of they NEVER win general elections.

Being Likeable was Enough to get one of the most Unqualified Candidates elected President of the United States

The Democrats got John McCain for the Republican candidate.  Which they went on to defeat in the general election.  Just as they had planned.  But they got something else they hadn’t planned on.  Sarah Palin.  No one saw that coming.  No one even knew who she was when McCain announced her as his running mate.  But she was someone.  She served on the Wasilla City Council in 1992.  Became mayor of Wasilla in 1996.  She was chair of the Alaska Oil and Gas Conversation Commission.  And governor of Alaska in 2006.  Then, of course, Republican vice presidential candidate in 2008. 

She was dangerous.  A young and accomplished woman.  With real governing experience.  And a folksy charm.  She was likeable.  And she was conservative.  This to the left was a greater threat than al Qaeda.  They had to destroy this woman.  Lest she become more influential in Republican politics.  So they ridiculed her night and day.  From politicians to policy wonks to the mainstream media to late night television.  It was open season on Sara Palin.  And they had good reason to fear her.  For when the 2010 midterm elections came around she was part of a new political movement.  The Tea Party.  The movement was so strong that the Republicans took the House of Representatives back in 2010.  And the left did not want that to happen again.  So they attacked her.  And the Tea Party.

The Tea Party and Sarah Palin are the worst enemies the left can have.  Conservatives.  A recent Gallup Poll showed that only 21% of the electorate call themselves liberal while 40% call themselves conservative.  And 35% call themselves moderate.  Which means the majority of the electorate agree with the Tea Party.  And Sarah Palin.  Which is why Sarah Palin is so dangerous.  She has governing experience.  The majority of the electorate agrees with her.  And she’s likeable.  They just don’t want anyone like that on the ticket if they can help it.  Especially if they’re likeable.  So the Democrats ridicule Sarah Palin.  Because they saw how easy it is to get a far less qualified ‘Sarah Palin’ elected.  Barack Obama.  Who had no governing experience.  And shared an ideology with only 21% of the electorate.  But he was likeable.   And being likeable was enough to get one of the most unqualified candidates elected president of the United States.  Twice. 

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FT190: “The children are our future. God help us.” —Old Pithy

Posted by PITHOCRATES - October 4th, 2013

Fundamental Truth

Our Universities praise Government Intervention, Vilify Capitalism and Denigrate US History

I recently saw some students on television from our most prestigious universities.  I won’t say who or where they were because it doesn’t matter.  For they all pretty much think the same.  There were liberal Democrats.  And conservative Republicans.  Young people.  Just into their twenties.  They spoke of economics, health care, free markets, investing in education, etc.  Kids too young to have experienced life.  In fact, most were still on their parent’s health insurance policies.  But they knew everything there was to know.  Particularly the liberal Democrats.

In college kids don’t know anything.  That’s why they are there.  So someone can tell them all those things they don’t know.  The problem is this.  The people telling them what to think have a liberal bias.  It’s no secret.  The teachers’ unions demand pay and benefit packages well beyond what most people can get in the private sector.  The government let’s them gouge taxpayers.  And in return they teach our kids in public schools to become Democrat voters.  Then it’s on to college.  Where the anti-capitalist hippies of the Sixties went on to become college professors.  Who talked about the fairness in the former Soviet Union and the former East Germany.  Where they put people before profits.  Admiring their love of people.  And hatred of profits.  While glossing over on their oppressive police states, thought crimes, prisons for political dissidents, torture and wholesale executions.

These radical hippies took over higher education.  And wrote the curriculum.  Which praised government intervention into the free market economy.  Vilified capitalism.  And denigrated the United State’s role in history.  Programming our children to hate whatever they hate.  And to love what they love.  Even when the facts get in the way.  Which they can fix with a little history revisionism.

The Arts did Very Well during the Eighty thanks to the Generosity of Gainfully Employed People

They call the Eighties the decade of greed.  While at the same time calling President Reagan’s economic policies a failure.  Supply-side economics.  Of the Austrian school.  Everyone did well.  Everyone made money.  Which is why they were so materialistic.  Because they had good-paying jobs that allowed them to be materialistic.  Allowing them to buy Sony Walkmans and CD players.  Which everyone had to have.  Even though no one knew what they were before they hit the stores.  Proving Say’s law.

Say’s law is a part of supply-side economics.  In general it states that supply creates its own demand.  No one was clamoring for Sony Walkmans or CD players in the Eighties.  But when these companies explained how great they were all of a sudden we were demanding them.  Supply created demand.  Just as PC supply created PC demand.  PCs were on the market long before they were in everyone’s home.  It was a tough sell in the beginning.  Because no one knew what they would use them for.  But they have them now.  Just like the Internet.  For a generation who had just mastered the recording functions on their VCRs (video cassette recorders—what we used to record TV programs on before DVRs) the Internet was a confusing thing.  And many said “thank you, but no thanks.”  Then people began creating content and putting it on the World Wide Web.  Today, people can’t live without their Internet connection.  Again, supply created demand.

This is Say’s law in action.  Supply creates demand.  You make it easier for people to be creative and bring things to market and they will.  Two ways to do this is to lower tax rates and reduce the regulatory climate.  So people are more willing to take risks.  Which they will do if there is sufficient reward for taking that risk.  Reagan did both during the Eighties.  The economy exploded.  Everybody was working.  The jobs were so good that we had money for material comforts.  And generous donations.  The arts did very well during the Eighties thanks to the generosity of gainfully employed people.

Obamacare will take Money from the Young and Healthy to pay for the Old and Sick

But this isn’t what they’re teaching in our universities.  They say that Reagan did cut taxes and created an economic boom.  But at what cost?  For he had record deficits.  Because of those tax cuts.  Which is where that history revisionism comes in.  Yes, he cut tax rates.  And when he did tax receipts (actual money flowing into the treasury) nearly doubled.  But our universities don’t teach that.  As demonstrated whenever a liberal talks about Reaganomics.  Instead they attack Reagan.  Capitalism.  And Republicans in general.  Because they all believe that limited government is best.  Which threatens a ruling class.

Our universities teach our kids the economics school that benefits the ruling class.  By supporting an ever expanding government.  Keynesian economics.  Which has a proven track record of failure whenever we’ve tried it.  John Maynard Keynes himself advised FDR during the Great Depression.  FDR didn’t think much of Keynes.  But he liked his idea about government spending during times of recession.  Even though it only delayed the correction—and prolonged the recession—by interfering with market forces trying to correct market prices.  Giving us the Great Depression.  Keynesian economics also gave us the stagflation of the Seventies.  Japan’s Lost Decade in the Nineties.  The American dot-com bubble and recession in the Nineties/early 2000s.  The 2008 subprime mortgage crisis.  And the ongoing European sovereign debt crisis.  All of these crises have their roots in Keynesian economics.  The school of economics of the ruling class.  But what do they teach in college?  Free market capitalism is bad.  And Keynesian economics is gospel.

These twenty somethings were anxious to show how smart they were.  How in a mere 2-4 years of college they had learned everything there was to learn.  And could regurgitate the party line.  Rolling their eyes at the idiots around them.  Laughing with all-knowing condescension.  Praising President Obama.  Obamacare.  Believing that it will provide more for less.  When nothing in the world works that way.  More costs more.  Yet they naïvely bleat what they were taught.  These kids who haven’t opened up a letter from their private health insurer advising them that their premiums will rise by 50%, 75%, 100%, or more, to comply with Obamacare.  Because it costs more to have more.  And people now have to pay more even if they don’t want more.  In particular young people.  For Obamacare is a transfer program.  Where Obamacare will take money from the young and healthy (like these college students once they graduate) to pay for the old and sick.

These kids, of course, blame the Republicans for the government shutdown.  And that their concern for our deficits is silly.  For they believe we don’t have a deficit problem.  Yet the smaller Reagan deficits were the end of the world as we knew it.  And they don’t have a problem with members of Congress and their staff getting subsidies to pay for their Obamacare.  As paying for their Cadillac health care plans with their six-figure salaries would have been too much of a burden for them.  And beneath them.  So we should pity them while record numbers of Americans have disappeared from the labor force.  Especially during the government shutdown.  Where the grooms of the stool may not be there for them.  Forcing the ruling class to wipe their own bottoms after they go potty.

This is what government and the political left is turning into.  A ruling class.  The very thing we fought our independence from.  And they are getting away with this because they control education.  And because they do they can revise history.  And change their failures to successes.  And change conservative successes to failures.  All you need are fresh young minds to corrupt.  And corrupt they do.  These kids talk like they know everything.  But they know nothing.  Which is sad.  For the children are our future.  God help us.

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Bretton Woods, Nixon Shock, OPEC, Yom Kippur War, Oil Embargo, Stagflation, Paul Volcker, Ronald Reagan and Morning in America

Posted by PITHOCRATES - October 1st, 2013

History 101

(Originally published September 18th, 2012)

Under the Bretton Woods System the Americans promised to Exchange their Gold for Dollars at $35 per Ounce

Wars are expensive.  All kinds.  The military kind.  As well as the social kind.  And the Sixties gave us a couple of doozies.  The Vietnam War.  And the War on Poverty.  Spending in Vietnam started in the Fifties.  But spending, as well as troop deployment, surged in the Sixties.  First under JFK.  Then under LBJ.  They added this military spending onto the Cold War spending.  Then LBJ declared a war on poverty.  And all of this spending was on top of NASA trying to put a man on the moon.  Which was yet another part of the Cold War.  To beat the Soviets to the moon after they beat us in orbit.

This was a lot of spending.  And it carried over into the Seventies.  Giving President Nixon a big problem.  As he also had a balance of payments deficit.  And a trade deficit.  Long story short Nixon was running out of money.  So they started printing it.  Which caused another problem as the US was still part of the Bretton Woods system.  A quasi gold standard.  Where the US pegged the dollar to gold at $35 per ounce.  Which meant when they started printing dollars the money supply grew greater than their gold supply.  And depreciated the dollar.  Which was a problem because under Bretton Woods the Americans promised to exchange their gold for dollars at $35 per ounce.

When other nations saw the dollar depreciate so that it would take more and more of them to buy an ounce of gold they simply preferred having the gold instead.  Something the Americans couldn’t depreciate.  Nations exchanged their dollars for gold.  And began to leave the Bretton Woods system.    Nixon had a choice to stop this gold outflow.  He could strengthen the dollar by reducing the money supply (i.e., stop printing dollars) and cut spending.  Or he could ‘close the gold window’ and decouple the dollar from gold.  Which is what he did on August 15, 1971.  And shocked the international financial markets.  Hence the name the Nixon Shock.

When the US supported Israel in the Yom Kippur War the Arab Oil Producers responded with an Oil Embargo

Without the restraint of gold preventing the printing of money the Keynesians were in hog heaven.  As they hated the gold standard.  The suspension of the convertibility of gold ushered in the heyday of Keynesian economics.  Even Nixon said, “I am now a Keynesian in economics.”  The US had crossed the Rubicon.  Inflationary Keynesian policies were now in charge of the economy.  And they expanded the money supply.  Without restraint.  For there was nothing to fear.  No consequences.  Just robust economic activity.  Of course OPEC didn’t see it that way.

Part of the Bretton Woods system was that other nations used the dollar as a reserve currency.  Because it was as good as gold.  As our trading partners could exchange $35 for an ounce of gold.  Which is why we priced international assets in dollars.  Like oil.  Which is why OPEC had a problem with the Nixon Shock.  The dollars they got for their oil were rapidly becoming worth less than they once were.  Which greatly reduced what they could buy with those dollars.  The oil exporters were losing money with the American devaluation of the dollar.  So they raised the price of oil.  A lot.  Basically pricing it at the current value of gold in US dollars.  Meaning the more they depreciated the dollar the higher the price of oil went.  As well as gas prices.

With the initial expansion of the money supply there was short-term economic gain.  The boom.  But shortly behind this inflationary gain came higher prices.  And a collapse in economic activity.  The bust.  This was the dark side of Keynesian economics.  Higher prices that pushed economies into recessions.  And to make matters worse Americans were putting more of their depreciated dollars into the gas tank.  And the Keynesians said, “No problem.  We can fix this with some inflation.”  Which they tried to by expanding the money supply further.  Meanwhile, Egypt and Syria attacked Israel on October 6, 1973, kicking off the Yom Kippur War.  And when the US supported their ally Israel the Arab oil producers responded with an oil embargo.  Reducing the amount of oil entering America, further raising prices.  And causing gas lines as gas stations ran out of gas.  (In part due to Nixon’s price controls that did not reset demand via higher prices to the reduced supply.  And a ceiling on domestic oil prices discouraged any domestic production.)  The Yom Kippur War ended about 20 days later.  Without a major change in borders.  With an Israeli agreement to pull their forces back to the east side of the Suez Canal the Arab oil producers (all but Libya) ended their oil embargo in March of 1974.

It was Morning in America thanks to the Abandonment of Keynesian Inflationary Policies

So oil flowed into the US again.  But the economy was still suffering from high unemployment.  Which the Keynesians fixed with some more inflation.  With another burst of monetary expansion starting around 1975.  To their surprise, though, unemployment did not fall.  It just raised prices.  Including oil prices.  Which increased gas prices.  The US was suffering from high unemployment and high inflation.  Which wasn’t supposed to happen in Keynesian economics.  Even their Phillips Curve had no place on its graph for this phenomenon.  The Keynesians were dumfounded.  And the American people suffered through the malaise of stagflation.  And if things weren’t bad enough the Iranians revolted and the Shah of Iran (and US ally) stepped down and left the country.  Disrupting their oil industry.  And then President Carter put a halt to Iranian oil imports.  Bringing on the 1979 oil crisis.

This crisis was similar to the previous one.  But not quite as bad.  As it was only Iranian oil being boycotted.  But there was some panic buying.  And some gas lines again.  But Carter did something else.  He began to deregulate oil prices over a period of time.  It wouldn’t help matters in 1979 but it did allow the price of crude oil to rise in the US.  Drawing the oil rigs back to the US.  Especially in Alaska.  Also, the Big Three began to make smaller, more fuel efficient cars.  These two events would combine with another event to bring down the price of oil.  And the gasoline we made from that oil.

Actually, there was something else President Carter did that would also affect the price of oil.  He appointed Paul Volcker Chairman of the Federal Reserve in August of 1979.  He was the anti-Keynesian.  He raised interest rates to contract the money supply and threw the country into a steep recession.  Which brought prices down.  Wringing out the damage of a decade’s worth of inflation.  When Ronald Reagan won the 1980 presidency he kept Volcker as Chairman.  And suffered through a horrible 2-year recession.  But when they emerged it was Morning in America.  They had brought inflation under control.  Unemployment fell.  The economy rebounded thanks to Reagan’s tax cuts.  And the price of oil plummeted.  Thanks to the abandonment of Keynesian inflationary policies.  And the abandonment of oil regulation.  As well as the reduction in demand (due to those smaller and more fuel efficient cars).  Which created a surge in oil exploration and production that resulted in an oil glut in the Eighties.  Bringing the price oil down to almost what it was before the two oil shocks.

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Keynesian Policies and Obamacare reduce Household Incomes

Posted by PITHOCRATES - August 25th, 2013

Week in Review

President Obama is a horrible president.  Why?  Because he’s black?  No, that’s not it.  He’s a horrible president who just happens to be black.  One of the big reasons why he is a horrible president is because he is a Keynesian.  And has tried the same failed Keynesian policies of the past to turn the economy around.  And just as they failed in the past they have failed consistently during the Obama presidency.

Keynesian economics states that during a recession when people aren’t spending money the government should do something about it. They should start spending money.  And they should implement policies that put more money into consumers’ pockets.  So they go out in the economy and spend it.  Thus generating economic activity.  And pulling the nation out of recession.  The government could cut taxes to put more money into consumers’ pockets.  But they don’t like cutting taxes.  Preferring to add more welfare programs.  Which give money to consumers.  So they can spend it.  That’s how President Obama has chosen to pull the nation out of the worst recession since the Great Depression.  And as expected by every non-Keynesian, his Keynesian policies have been an abject failure (see Incomes Have Dropped Twice as Much During the ‘Recovery’ as During the Recession by JEFFREY H. ANDERSON posted 8/23/2013 on The Weekly Standard).

New estimates derived from the Census Bureau’s Current Population Survey by Sentier Research indicate that the real (inflation-adjusted) median annual household income in America has fallen by 4.4 percent during the “recovery,” after having fallen by 1.8 during the recession.  During the recession, the median American household income fell by $1,002 (from $55,480 to $54,478). During the recovery—that is, from the officially defined end of the recession (in June 2009) to the most recent month for which figures are available (June 2013)—the median American household income has fallen by $2,380 (from $54,478 to $52,098).  So the typical American household is making almost $2,400 less per year (in constant 2013 dollars) than it was four years ago, when the Obama “recovery” began.

Importantly, these income tallies include government payouts such as unemployment compensation and cash welfare. So Obama’s method of funneling ever-more money and power to Washington, and then selectively divvying some of it back out, clearly isn’t working for the typical American family. Nor would his proposed immigration bill help the income prospects of the median American.  And perhaps it’s just a coincidence, but the span of time over which the typical American household’s income has dropped by about $2,400 a year (during an ostensible “recovery”) corresponds almost exactly with the span of time that we’ve been living with the looming specter of Obamacare—which began to be debated in earnest around June 2009.

Another reason why President Obama is a horrible president is that he is more interested in transforming the nation than he is in improving people’s lives.  He wants to make it what it was before President Reagan made the nation great again.  President Reagan followed President Carter.  Who was another horrible president.  Because of his Keynesian economic policies.  While President Reagan wasn’t a Keynesian.  Which is why the economic recovery following Carter’s malaise was one of the strongest economic recoveries in history.  Making President Reagan a great president.  Because he made life better for people.  Unlike Carter and Obama.  Who made life worse.  Because of their Keynesian economic policies.

Obamacare, the pathway to national health care, is a big driver of the fall in household incomes.  The plan for Obamacare was to put the private health insurance business out of business.  So Obamacare can evolve into full-blown national health care.  And to do that they forced businesses to spend more money on their health insurance for full-time employees.  Of course, the idea was for businesses to avoid this additional cost by pushing people to part-time.  And taking away their health insurance.  Advancing the nation further down the Obamacare pathway to national health care.  Which is more important to him than household incomes.  Which he will gladly trade away to transform the country.  Not to just what it was before Ronald Reagan.  But even further left.  Because, for President Obama, what he wants is more important than what the people want.  Jobs, a rising household income and private health insurance.  Which makes him a horrible president.  Just as his Keynesian economic policies make him a horrible president.

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Is the New York Times ready to blame Bill Clinton for the Subprime Mortgage Crisis?

Posted by PITHOCRATES - August 18th, 2013

Week in Review

President Obama likes to say that the Republicans only want to try the failed policies of the past.  And he’s both right and wrong.  For the Republicans do want to implement the policies of the past.  Because these policies did NOT fail.  Contrary to President Obama’s recurring bleat.  For the policies of President Reagan were based on classical economics.  Those same policies that made America the world’s number one economic power.  While the policies of the left, Keynesian economic policies, have failed every time they’ve been tried.  And reduced America’s economic prowess.

Before John Maynard Keynes came along during World War I the U.S. economy was steeped in the philosophy of our Founding Fathers.  Thrift.  Frugal.  Rugged individualism.  These are the things that made America great.  For over a hundred years Americans worked hard and saved their money.  Spending as little for the here and now.  Always planning for the future.  They put everything they didn’t have to spend into the bank.  As everyone put away these small amounts of money banks turned the aggregate of these numerous small deposits into capital.  Which investors borrowed at reasonable interest rates because we had a high savings rate.  Providing plenty of capital to grow the American economy.  Thanks to a sound banking system.   That exercised sound lending practices.  With investment capital a high savings rate provided.

This system worked so well because people balanced risk with reward.  Bankers made wise lending decisions based on the likelihood of those loans being repaid.  And investors with a history of wise and responsible borrowing had continued access to that investment capital.  While banks who took too great a risk failed.  And investors who took great risks soon found themselves broke with no further access to investment capital.  This balance of risk and reward complimented with a populace that was thrifty and frugal with their money created Carnegie Steel.  The Standard Oil Company.  And the Ford Motor Company.  Risk takers.  Who balanced risk with reward.  And paid a heavy price when they took too great a risk that had no reward.

But the days of Andrew Carnegie, John D. Rockefeller (Standard Oil) and Henry Ford are gone.  These men probably couldn’t—or wouldn’t— do what they did in today’s regulatory environment the left has created.  The higher taxes.  And the financial instability caused by the left’s destruction of the banking system.  As the left has made high-finance a plaything for their rich friends.  By transferring all risk to the taxpayer.  Allowing bankers to take great risks.  With little downside risk.  Giving us things like the subprime mortgage crisis.  Where President Clinton’s Policy Statement on Discrimination in Lending (1994) unleashed 10 federal agencies on banks to pressure them to loan to the unqualified or else.  So they did.  Using the Adjustable Rate Mortgage as the vehicle to get the unqualified into homeownership.  These with no-documentation mortgage applications, zero-down, interest-only, etc., put people into homes by the droves.  Especially those who could not afford them.  Of course, banks just won’t loan to the unqualified without some federal assistance.  Which came in the guise of Fannie Mae and Freddie Mac.  Who bought those toxic mortgages from these lenders, repackaged them into collateralized debt obligations and sold them to unsuspecting investors.  And, well, you know the rest.

So Bill Clinton gave us the subprime mortgage crisis.  And the Great Recession.  It’s always the same.  Whenever liberals get into power they do the same thing over and over again.  They destroy the economy with policies that only benefit them and their rich friends.  America’s aristocracy.  Yet they talk the talk so well people believe that THIS time things will be different.  But they never are.  Already President Obama is talking about doing the same things to increase homeownership that got us into the subprime mortgage crisis.  And his disastrous policies didn’t even prevent his reelection.  Because he can talk the talk so well.  Just like Clinton.  So well that few look at the swath of destruction in their wakes.  At least, not on this side of the Atlantic (see The New York Times takes down the Clinton Foundation. This could be devastating for Bill and Hillary by Tim Stanley posted 8/14/2013 on The Telegraph).

Is the New York Times being guest edited by Rush Limbaugh? Today it runs with a fascinating takedown of the Clinton Foundation – that vast vanity project that conservatives are wary of criticising for being seen to attack a body that tries to do good. But the liberal NYT has no such scruples. The killer quote is this:

For all of its successes, the Clinton Foundation had become a sprawling concern, supervised by a rotating board of old Clinton hands, vulnerable to distraction and threatened by conflicts of interest. It ran multimillion-dollar deficits for several years, despite vast amounts of money flowing in.

A lot of people are scratching their heads as to why the New York Times would run this story.  For it is very out of character for a liberal paper to attack a liberal icon.  Could it be to air out this dirty laundry long before Hillary is a candidate for president?  What, that?!?  That’s old news.  We’ve talked about it already.  Talked it to death.  Nothing to see there.  So let’s focus on what’s important for the American people.

Or could it be that the left has grown tired of the Clintons?  After all, Barack Obama was the first black man elected president.  Something the young people can get excited about.  But will today’s young even know who the Clintons are?  Could be a problem for a party that historically gets the youth vote.  So is this the first sign that Hillary won’t be the anointed one in 2016?  And is this an opening broadside against Hillary?  A harbinger of what is yet to come?  Perhaps.  Or it could mean people are just not falling for the Clinton charm anymore.  Something our friends in the British media have no problem seeing through.

The cynical might infer from the NYT piece that the Clintons are willing to sell themselves, their image, and even their Foundation’s reputation in exchange for money to finance their personal projects. In Bill’s case, saving the world. In Hillary’s case, maybe, running for president.

It’s nothing new to report that there’s an unhealthy relationship in America between money and politics, but it’s there all the same. While the little people are getting hit with Obamacare, high taxes and joblessness, a class of businessmen enjoys ready access to politicians of both Left and Right that poses troubling questions for how the republic can continue to call itself a democracy so long as it functions as an aristocracy of the monied. Part of the reason why America’s elites get away with it is becuase they employ such fantastic salesmen. For too long now, Bill Clinton has pitched himself, almost without question, as a homespun populist: the Boy from Hope. The reality is that this is a man who – in May 1993 – prevented other planes from landing at LAX for 90 minues while he got a haircut from a Beverley Hills hairdresser aboard Air Force One. The Clintons are populists in the same way that Barack Obama is a Nobel prize winner. Oh, wait…

Wish America could see Clinton and Obama as plainly as this.  And not get lost in the gaze of their eyes.

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