Thursday, December 26, 2013

John Cochrane Gets It Right

Today's Wall Street Journal has an excellent opinion piece written by economist John Cochrane on the topic of health care.

Cochrane argues that government obstruction is what caused health care costs to get out of control in the first place and that Obamacare has taken a problem and turned it into a nightmare.

He argues that only the free market can deliver quality affordable care.  Citing all of the government's disruptive efforts in the health car market, Cochrane delivers a simple prescription for what ails us -- get the government out of the way.

His analysis deals with "pre-existing conditions" and policy cancellations.  Changing tax laws that have forced employer-based health insurance on the country is part of the solution.  But, many other reforms are cited in his excellent article.

A must read.

Sunday, December 22, 2013

The Activist President

Looking toward 2014, President Obama spoke of the things that government must do in 2014 -- just as he boarded a plane with his family for a couple of weeks in Hawaii.

If only he would just stay in Hawaii for the entirety of 2014!

The government, under Obama, has now euthanized the financial sector and the health care sector -- nearly thirty percent of the US economy.  But, I guess, in his view, there is more yet to be euthanized.

Obama's war on coal is certainly succeeding, but free market oil and gas discoveries are overcoming destructive government energy policies. Obama has tried, without success, to destroy the oil and gas sector.  Thank goodness he has failed -- so far.

Even the NY Times features daily hardship stories about middle class Americans who find themselves the victims of Obama government overreach.  The most recent stories are about Obamacare, but others have featured other middle class victims of this President and his policies.

The biggest losers under the Obama gameplan are, of course, the poor and the lowest skilled part of the American population.  Obama seems to want to condemn these folks to servitude with little or no hope of escape.  Enact higher minimum wages so that these folks cannot acquire the skill set to participate in the market economy.  Expand welfare programs, so that the alternatives to acquiring a skill are more attractive.  Turn everyone's attention to "the rich," so that there is a convenient villain.  Focus on "inequality," while supporting policies that virtually guarantee that folks at the bottom of the economic pile have no shot of escape.

Even on the education front, Obama chooses the teacher's union over students.  Obama has consistently worked to damage the education prospects of the poor.  Eliminating charter school funding in the District of Columbia was a direct assault by the President on the hopes and dreams of poor black Americans stuck at the bottom of the economic pile in prosperous Washington DC.

Folks like Obama think that the reason that we have poor people is that we have rich people.  If only, in Obama's view, we could rid ourselves of rich people (except for his friends like Warren Buffet and movie stars), then the poor would no longer be poor.

The old Soviet Union followed this gameplan.  Unless you were a significant player in the communist party, Soviet citizens were condemned to a modern form of slavery.  But, at least among the slaves, there was little inequality.  The slavemasters lived high while the slaves struggled in an economic situation that America's poor would find frightening.  Bureaucrats (slavemasters) always win in this gameplan.  They known best, they say.  Sound familiar.

So, if you want our health care plan you can get it.  If you want a health care plan you would like, forget it.  We know best, say the Obama folks as the free market seems more and more a distant memory.

Saturday, December 21, 2013

Is The Economy Booming?

The 4.1 percent GDP growth in 3rd quarter 2013 is being touted as a sign that the economy is set to surge forward.  Really?

Obama celebrates an economy with 2 million jobs created in 2013.  Really?

The US economy will, for the entire year of 2013, still remain under 3 percent growth.  Historically, 3 percent is the average growth of the US economy.  In other words, 3 percent is mediocre. 

The real race is between the number of folks leaving the labor force and those who are finding jobs.

Anyone actually participating in this economy knows that it is still on life support.

Government policy under Obama is mainly aimed at propping up rich folks and undermining the life chances of the poor and the middle class.  In this, he is succeeding.

Passing more laws that make it illegal to offer poor people jobs is just one more example of Obama's plan to make life more difficult for the poorest among us.  Obama and Buffett and Mark Warner can applaud this since they will continue to ride at the top of the stagecoach.  Why not simply raise the minimum wage to $ 1,000 per hour.  At least that will treat almost all Americans equally instead of singling out poor people by moving the minimum wage to $ 9 or $ 10 per hour.  Why not let these rules apply to everyone -- make everyone rich (by their logic) -- raise the minimum wage to $ 1,000 per hour. (Buffet and Obama and Warner could support that, since they would not be effected).

This economy is stagnant.  Europe is in even worse shape.  The western world is plagued by the overreach of government.  There will be no real economic growth until these policies are halted.

Friday, December 20, 2013

Mark Warner -- the $ 95 Man

Senator Mark Warner of Virginia is a master at saying one thing and doing another.  Describing himself as a moderate, Warner has supported the most extreme partisan left-wing programs that have been advanced by the Obama Administration -- chief among them: Obamacare.

Now Warner is trying to pretend that: a) he did not understand what he voted for, campaigned for, and championed; b) he wants to spare the nearly 6 million folks that lost their health insurance this year, thanks to Warner, the $ 95 penalty that they face for being unable to purchase replacement insurance.

This is a consistent Warner theme -- pass legislation that destroys the hopes and dreams (and health care) of the average American -- and then come up with some lame and paltry palliative.

$ 95.

I guess that is a substitute for health insurance coverage in the opinion of Senator Warner.

Obama, today, endorsed the Warner $ 95 plan and, illegally, eliminated the $ 95 penalty next year for those who, because of Warner and Obama, have lost their insurance and have no replacement insurance.

Too bad if you have a health problem.  You're still out of luck thanks to Senator Warner.  But, at least you don't pay the government the $ 95.  Thanks, Senator -- for nothing,

Tuesday, December 17, 2013

Another Republican Collapse

The Republicans have now embraced higher spending, higher taxes and expanded government by voting for the Ryan-Murray budget deal.  Within the week, expect enough Senate Republicans to join Democrats to make this government expansion a reality.

Had there been no Ryan-Murray compromise, the sequester would have remained in effect and government "discretionary" spending would have continued its downward trajectory, set in motion by the 2011 agreement known as "the sequester."

As usual, defenders of higher taxes and more government spending, say that this better positions the Republicans to retake the Senate in 2014 and the White  House in 2016.

But, Republicans routinely cave when they are the majority in both houses and occupy the White House.  That was the situation when the Prescription Drug Bill made its way into law.  When have the Republicans ever been for fiscal restraint?  The Eisenhower Era.  And don't forget Calvin Coolidge.

Even Ronald Reagan was unable to restrain the Republican desire to spend more money.

Does anyone really believe that electing John McCain or Mitt Romney would have materially altered the path of government spending in the US?

The Republican Party is cowardly and hypocritical.  They will avoid taking stands on principal at all costs.  Even Paul Ryan, who many once thought a spokesman for fiscal prudence, has joined the accomodation crowd.

So, if the Senate remains Democratic in 2014, is that the end?  When will Republicans ever stand up for fiscal discipline?  I think we all know the answer to that question.

Thursday, December 12, 2013

Healthcare: Big Issues; Little Issues

Obamacare has two features that will make it wildly unpopular once implemented (if that day ever comes):  (i) sky-high deductibles; (ii) tight, low-cost doctor and hospital networks.  The media focus on the website and the premiums (and subsidies) misses the bigger issues.

The sky-high deductibles will mean that most lower and middle income Americans still won't be able to afford health care.  If your plan has a $ 10,000 deductible, that means you pay $ 10,000 before the plan really kicks in -- every year.  Once the plan kicks in, there are very few doctors and hospitals that are covered under the plan.  (In New Hampshire, for example, only ten of the state's 19 hospitals are covered by Obamacare providers).  And, who are these doctors and where are these hospitals?

The doctors covered in the networks will be those who work cheap, maybe because they must.  Ditto for the hospitals.  The only real guarantee is that the best doctors and hospitals will not be covered in these Obamacare networks. 

The net result: if you are insured under Obamacare, you will pay large deductibles and then once the deductible is exhausted, you will be confined to the cheapest (and probably least talented) doctors and the worst (and likely most crowded) hospitals in America.  Unless, of course, your name is Obama or Buffett or Mark Warner or Nancy Pelosi or Harry Reid, in which case you will get the best doctors and the best hospitals.  "Let them eat cake."

Wednesday, December 11, 2013

The Sequester is Better

The budget deal forged by Paul Ryan and Patty Murray is a big mistake.  Doing nothing would leave the sequester in place.  The sequester is the right way to go -- Pentagon or no Pentagon.  There is no reason that the bloated military should be exempt from budget cuts.  Ryan is desperately trying to appease the House Republicans that are military spending hawks.  But this is a mistake.

The Ryan-Murray budget deal increases spending, increases taxes and provides for ephemeral spending cuts in the (unknown) future.  This is a typical outcome from a frightened and cowed Republican Party leadership.  No wonder Harry Reid praised this deal. 

There was no  reason to go this route and further exacerbate the differences within the Republican Party.

This deal will pass both Houses of Congress, but it shouldn't.  Maybe the Republicans should take a fresh look at their leadership in the House.

Wednesday, November 27, 2013

Janet Yellen and the Bankruptcy of Modern Macroeconomics

Janet Yellen is very well qualified to be the next Chairperson of the Federal Reserve.  No question about it.  She is one of the smartest economists on the planet.  The problem is she toils in a field that is intellectually bankrupt and politically motivated -- modern macroeconomics.

She knows modern macroeconomics as well any other academic around.  But, knowing modern macroeconomics is like knowing Grimm's Fairy Tales.  Modern macroeconomics bears little resemblance to the macro economies that it purports to analyze. The idea that only a dramatic expansion of sovereign debt is the prescription for a country choking in debt is patently ridiculous.  Yet, that is the number one prescription remedy proposed by Yellen and Paul Krugman and others of the modern macroeconomic stripe.

Whether one speaks of the Eurozone or it's twin -- the United States -- the modern macroeconomist lives in the simple world of the Keynesian cross diagram, put forth over a napkin by Richard Kahn (a student of Keynes) in 1928 to explain some of the ideas of John Maynard Keynes.  Nearly 100 years later, things haven't progressed much intellectually.  Most academic research in macroeconomics uses the method of "proof by assumption" to reach conclusions similar to Kahn's napkin demonstration.  If you just say that it works, then it works.  That pretty much sums up modern macroeconomics.

The problems in the US and the Eurozone stem from two broad facts: 1)  Government spending is facilited by massive, unprecedented and unsustainable increases in sovereign debt; 2) The micro-economics environment is being strangled through regulations, taxes, laws, and other rules of the road that make it almost illegal to hire employees and virtually impossible to run a private business.  The result: economic stagnation.  The pitiful economic condition of the US and Europe continues to puzzle the modern macroeconomist and it's no wonder.

Capitalism and free markets made the US the economic wonder of the world.  Obama and his predecessors seem intent on destroying this capitalist icon and they appear to be succeeding.  Europe has long been in the tank and has chugged ahead in the past only because of the awesome strength of the US economy, which pulled an unwilling and socialist Europe along.  The locomotive has stopped pulling and the train has slowed to a crawl. That won't change.

Meanwhile academics continue to push for more sovereign debt and more restrictions on the private economy.  Why not?   Most academics make their money, one way or another, from bureaucracies that don't have to compete in the private sector.  So, modern academics have only the faintest understanding of competitive markets.  Most academics don't believe in free markets anyway, so they live in the right space for their beliefs.

In the long run, only free markets really produce anything that anyone wants to consume.  We will be seeing soon what happens in health care when free markets are abolished by law.  We already know what happens in Europe when free markets are outlawed.

So, expect Janet Yellen to continue to call for more expansion in the Fed balance sheet (equivalent to increasing sovereign debt through the Fed) and more calls for higher US fiscal deficits and larger taxes on the private sector.  Like her fellow academics, Yellen sees little role for the private sector in the economy of her dreams.

Tuesday, November 26, 2013

Western Economies Continue to Stagnate

All quiet on the western front.  The US and Europe are going nowhere economically and the future doesn't look any brighter than the present.  The middle ages was a period of history where the world was economically dead in the water.  We're there again.....and for similar reasons.

Governments make the big decisions now, not individuals.  By and large, the body politic in US and Europe believe in big government solutions.  The health care debacle in the US is not unusual, just more obvious.  Usually, the citizen assumes that his bad experiences with his government are unique.  But bad experiences are not unique, they are ubiquitious.

Removing the economic incentives for performance means economic stagnation.  Government does not provide marginal incentives for performance.  In fact, government provides mainly incentives to cover up poor performance with almost no reverence for honesty and little or no concern for the truth.

China and the Asian periphery are just about the only places in the world today still experiencing economic progress.  Whether that will continue will depend upon unleashing the individual strengths of their countrymen.  If they leave it to government, these countries will falter just as the West has done.

Ironically, when a society becomes wealthy, it turns inward and begins to destroy the inner qualities that led to its economic success.  This is often true of families as well as countries.  It seems a natural human tendency.  It is no accident that the forefront of leftist political movements are populated with the children of the super affluent-- Obama Bin Laden is probably the most famous example.

Joseph Schumpeter was the first economist of note to realize that capitalism breeds its own destroyers and that wealth breeds contempt for what created the wealth.  The current American tide of opinion that makes financial success a criminal activity is an example of what Schumpeter foresaw in the 1930s in his famous book "Capitalism, Socialism, and Democracy."

Schumpeter noted that there was a natural tendency for the children of the affluent to resent their forebearers who created the wealth that they are born into.  In part, this is the expression of a guilt syndrome that permeates the inheriting classes.  These folks seek to expatiate their guilt by pushing government mandates that purport to outlaw poverty and other things that such folks see as a blight on their world view.  Joining up with academics and bureaucrats, these wealth inheritors, with time on their hands, dream up prisons to put average folks in -- prisons like Obamacare, Social Security, Medicare, Medicaid.

This is why elite schools, filled with children of the idle rich, are populated with extreme leftists, both on the faculty and among the student body.  These are all folks riding at the top of the stage coach, who peer, with their noses in the air, at the folks trying to cling to the stage coach.  At less elite colleges, you see less of this arrogant nonsense, both among faculty and among the student body.

So, don't expect economic progress in the Western world.  It will take a revolution in thinking to dispel the myth that government is the ticket to prosperity.  When calls for growth replace calls for redistribution, then real progress has a chance.....but not until then.

Monday, November 18, 2013

It's About Health Care Not About Health Care Insurance

What you really want is quality health care at an affordable price?  In some ways this goal is not possible.  There are some health care procedures that are not "affordable" for everyone.  Other developed countries don't offer these procedures to everyone precisely because they are too expensive.

That's why surgery, for example, is rationed in the United Kingdom and in Europe.  This rationing is accomplished by the simple expedient of long waiting lines.  You die before your number comes up.  Thus, you are not in the statistics that are cited, exclaiming the great advantages of socialized medicine.

Other data is simply based on fabrication.  Take the data on infant mortality.  The US ranks poorly in overall infant mortality, even though at every single "age-of-the-mother," the US ranks number one (lowest, in other words) in infant mortality.  How does this work?  It is because the US has more births to teenagers as a percentage of overall births than any other developed country.  Health care won't change that.  Only changing social behavior will improve infant mortality in the US.

So, what's the deal with insurance?  Why do the supporters think changing the insurance market can improve health care?  Notice that doctors are leaving medicare and medicaid and being dropped from Obamacare insurance plans.  So, now we are going to have better health care with fewer doctors?  Almost half of the hospitals in the state of New Hampshire don't qualify for Obamacare insurance plans.  And other states face similar problems.  So, now we are going to have better health care with fewer hospitals?

Meanwhile for most Americans, health insurance premiums and deductibles are skyrocketing.  Dramatically higher costs with fewer services.  That is the future for American health care and the facts are pouring forth daily.

But, I guess Obama and his allies will be happy because some people can buy insurance who couldn't buy it before.  As for the nearly 200 million Americans who already had health insurance and, by and large, were happy with it, they face a future with much poorer health care availability and dramatically higher costs.

Saturday, November 16, 2013

Read Liz Alderman in Today's NY Times: "Young and Educated in Europe, But Desperate for Jobs"

Liz Alderman has written an excellent account of what big government in Europe has done to the youth of Europe.  While aggregate unemployment is 12.2 percent across the European plain, youth unemployment varies from 25 to 56 percent, depending upon which sluggish European country you happen to find yourself in.  There is no future for these young folks.  The politicians have seen to that.

All of these countries make it almost impossible to fire employees and load businesses up with employee mandates that make employees far, far more expensive than their reported wage rates.  So, who hires?  No one.

Read the stories of young folks looking for work.  Note the disconnect between life up to and including higher education and then the depressing aftermath.

This is the US's future, as we have, in recent years, adopted our own version of European labor laws and the Obama folks are pressing to complete the picture.  Not until we have Europe will the Obama folks be happy.  So, take a look.  Read it and weep.

"Bombshell Paper" - Another Macro Theory Farce

Sean McElwee writes in Salon recently that "if only Republicans knew some economics...."  He then goes on to reference a "bombshell paper" that justifies, academically, more government spending and higher deficits.  The paper he references is a 2012 paper by Larry Summer and Brad DeLong entitled "Fiscal Policy in a Depressed Economy."  This absurd piece of work purports to "show" that increasing deficits now reduces national debt later.

How does this paper "show" this remarkable (and nonsensical) result?  In a manner that has become more and typical of academic macroeconomic "research," Summers and DeLong simply assume the result that they want and then discuss it as if they have "proven" something.  It is the new "proof by assumption" method of doing economics that seems to have taken over academic economics. 

Summers and DeLong assume: 1) a huge multiplier of changes in government spending upon current GDP (when has that ever happened?); 2) a huge multiplier for changes in government spending on future GDP (when has that ever happened?); 3) no impact of higher debt on interest rates; 4) higher inflation to reduce the real value of debt without any increase at all in nominal rates (when has that ever happened?) 5) much higher tax revenues plus (?) lower government spending as GDP rises (when has that ever happened?).  If all this were true, guess what?, they are right.  But, all of these assumptions are precisely the issues that need to be proven, not assumed as Summers and DeLong have done.  Why not just assume that none of the above assumptions hold, then you have "shown" that Summers and DeLong are spouting nonsense.  Which they are.

McElwee cites this absurd paper in a vitriolic attack on Republicans as not knowing any economics.  If this is what McElwee thinks is economics, no wonder he thinks Obamacare is great policy.

Friday, November 8, 2013

$ 10 Minimum Wage -- Bashing Poor People

The President is now planning to criminalize jobs that pay under $ 10 an hour.  Somehow, he thinks this helps poor people.  If so, why not make it even higher?  Why stop at $ 10?  You could just criminalize all jobs.  That would at least provide some equity between high paying jobs and low paying jobs.  Just outlaw them all.  A simple way to do that is to raise the minimum wage to $ 1,000 per hour.  Then practically everyone in the economy could experience the benefits of higher minimum wages.

The President never seems to run out of initiatives to diminish the life hopes of the average American.  Students loaded with massive debt (encouraged to take on that debt by the President's government loan program) enter a job market with poor prospects.  They are asked to pay triple the fair market rate for health insurance in order to subsidize the wealthiest demographic in the US -- the elderly.  His cronies in Congress passed the Dodd-Frank bill which effectively outlaws loans to middle (and below) class Americans.  Now his latest salvo, an increase in the minimum wage, is designed to cut off any opportunity to learn a skill by working temporarily at a pay scale that encourages employers to give a rookie a chance.

It is clear that President doesn't work very hard and maybe his idea is that no else should either.  What better way to accomplish this goal than to eliminate job creation and criminalize the act of making a job offer.


Wednesday, November 6, 2013

The Obvious Arithmetic of Obamacare

All of a sudden 30 million Americans, heretofore uncovered by health insurance, will be given health insurance plans that they can afford.  How can they afford them?  With subsidies that cover most of the cost.

Hooray says the far left!

Who pays?

Current medicare recipients for one.   Medicare lost $ 750 million in reimbursement dollars in order to finance Obamacare.

But, of course, that's not all.

If 30 million Americans are basically going to receive free or almost free health care, someone has to pick this up.

In addition to this, there is now blanket coverage for all kinds of things that many people did not think were worth covering.  But Obama thinks they are worth covering and his view is the only one that matters.

Who pays?

Someone has to make up for the billions and billions in subsidies and expanded coverage that people never knew that they needed until Obama came along.

The payers will be taken from three groups: 1) the taxpayer, of course; 2) all folks that are healthy and have current insurance will see their health care costs skyrocket with higher premiums, higher deductibles and higher copays; 3) the folks that want to continue with their own doctor ... no such luck....you will take the doctor that Obama thinks is right for you.....period!

If young folks don't sign up, the expected premium for high deductible plans will quickly shoot to over $ 2,000 per month.  Even with this exhorbitant price, you still will not be able to choose your own doctor and may not even be able to find a doctor that will treat folks with Obamacare insurance.  Medicare and medicaid recipients have already learned insurance is not much help if no doctor will treat you.

The website is the least of their problems.

Wait until people see the true costs of Obamacare and the collapse of the American health care system.  It's coming.

Stewart's Blog

One of my blog posts from back in September attracted the attention of James Stewart and he reported my comments in his own blog.  These comments ran in yesterday's NY Times.

The occasion was the announcement of a government settlement with the SAC hedge fund involving a $ 1.8 billion fine.

I was amused to read the the comments that followed the publication.  Many were vituperative rants about how terrible rich people are.  Most of the comments seem to miss the point of my blog and the point of Stewart's blog as well.

My point was simply that the government and the plaintiff lawyer industry, more often than not, end up tagging folks who aren't the guilty parties.

This is especially true when public companies are sued or fined or indicted.  Who pays when this happens?  Almost never do the so-called perpetrators pay anything.  Instead the shareholders of these companies are punished -- shareholders who are completely innocent and generally unaware of any criminal activity.

The actual wrong-doers usually go unscathed from these lawsuits, fines and indictments.  In many cases, the wrong-doers actually gain in income and wealth from their role defending the public companies against their attackers.  Additional stock grants and compensation are paid to senior officials to make up for lost stock value from the punishments extracted by the courts and the government regulators.

But, no one makes up the loss to the janitor sweeping the floor at night.  He gets hosed in this arrangement, even though he has no idea about any wrongdoing.

The real losers are almost always innocent, middle-class Americans.  The real winners are members of the plaintiff bar -- wealthy lawyers who live for class action lawsuits.  Sometimes the winners are just ambitious and hungry politicians, usually with their own special ethical problems that later come to light.

So, my real point is that if you see wrongdoing, go after the wrongdoer, not the innocent bystander.  Too often, these settlements end up punishing innocent folks, while the guilty emerge relatively unscathed.

I doubt that Stevie Cohen will worry much about the $ 1.8 billion settlement extracted from his hedge fund this week.  We will probably never know about Cohen's guilt or innocence.  That doesn't seem to matter to the regulators anymore as long as they can extract a headline-grabbing dollar settlement.

It seems to me that if someone commits a crime, then you should go after the criminal, not the innocent bystanders.  That's the main point of my blog.

Monday, November 4, 2013

1930's Economics in the 21st Century

You continue to hear economists bemoan the slow pace of economic growth in the western world.  Europe is still asleep economically and the US barely has a pulse.  All of this, say most economists, is the result of too little deficit spending!

Keynes made this argument in the 1930s when governments were relatively small and, in the US particularly, the reach of government was not very extensive.  Much has changed.

Keynes would not recognize the modern western economies.  Laws that prohibit hiring coupled with elaborate price controls (minimum wage, overtime laws, etc.) and workplace litigation over water-cooler conversations would come as quite a surprise to Keynes.  It is impossible to imagine that Keynes would think deficit financing and monetary largesse would have much of an impact on economies with this kind of government overreach.

Yet, the Krugmans and Janet Yellens (and Ben Bernankes) of the world continue to trumpet this absurd message -- that a world drowning in debt needs more debt.  Having laws that make it illegal to hire anyone (minimum wage laws in the US) and punish businesses that do make hires (Obamacare, discrimination laws in the US, and labor laws generally in Europe) don't faze the Krugmans, Yellens and Bernankes.  They don't think these things matter.  They remain puzzled by the sluggish economies in the US and Europe.

They are going to remain surprised.

Keynes would not be surprised.  He understood that you can strangle an economy with an over-extended government.  Absurd debt levels would have seemed to Keynes -- as absurd.

The US and European economies are strangling from regulation and taxation.  The western economies will never return to their old vigor until their governments back off.  The problem is not macro, it is micro.

What is lost on the modern Keynesians is that someone has to decide to hire someone, before getting a job can become a reality?  Modern governments place every conceivable roadblock in the way of a firm attempting to make a hire.  So, businesses are reluctant to hire, even when they wish to expand.  They look for outsourcing or automation solutions.  The last thing any rational firm wishes to do in the modern western economies is add to staff.

Meanwhile, the White House, according to today's WSJournal, is dusting off it's push to increase the minimum wage from $ 7.50 to $ 9.00, threatening the elimination of millions of potential and actual jobs! 

Why not cut to the chase?  Why not raise the minimum wage to $ 100 per hour?  Then everyone could live well, according to modern macroeconomists like Krugman and Yellen.

Modern macroeconomics is a fairy tale, that could only be told in a world in which we no longer live.  Governments have done everything possible to suppress the incentives for ordinary business to hire.  .

But, sooner or later, as the private sector becomes less and less important, the economy grinds to a halt.  The old Soviet Union and the post-1949 Chinese economy are the modern examples of what happens when the government makes all of the decisions.

In the western world, slow growth will disintegrate to no growth and/or negative growth.

Incentives matter, even if Krugman, Yellen and Bernanke think that incentives don't matter.  Nancy Pelosi was correct when she perceived that if her staff was forced into Obamacare, it would make government service less attractive.  That was probably the only time in her political life that she recognized the role of incentives.

If tax and regulatory policies discourage hiring, you won't get hiring. Doing Q1, Q2, Q3, Qwhatever won't matter. Q's don't hire, firm's hire.  This is what the modern macroeconomists never quite get.

Sunday, November 3, 2013

Thomas Friedman -- Extremist in Denial

Thomas Friedman is an extremist.  No question about it.  His opinion piece in today's NY Times says it all.

He describes the decline in America's reputation in Asia (based upon three conversations carefully handpicked, by the way -- typical of the research methods of extremists).  According to Friedman, the threatened shutdown a few weeks ago is the seminal event.   "That a minority of a minority" could threaten the shutdown of the US government............

This is what Friedman sees as America's real problem.

What doesn't bother Friedman is the impending bankruptcies of American cities, states and ultimately the Federal government.  (Detroit and Stockton are just the opening bells).  Friedman is not troubled by the Administration's repeated untruths that lay behind putting nearly twenty percent of the US economy in the direct hands of an unelected, incompetent and corrupt bureaucracy -- Obamacare.

That millions of Americans will not, in the not so distant future,  receive promised social security, medicare, medicaid, public pensions and health care is not a problem for Friedman.  That future generations will be stuck with trillions of debt for goods and services they will not receive does not cause a moment's pause for Friedman.  That Friedman and his generation are systematically looting their grandchildren does not bother him.  Who cares as long as the debt limit is extended and we can continue to spend our grandchildren's money.  That is the view of Thomas Friedman.

Friedman is one more extremist among the rich and powerful who holds the American public in complete disdain.  He sees people who think the government should balance it's budget as extremists.  Friedman is the extremist.  Friedman, along with the NY Times editorial staff, are helping to walk the US over the fiscal cliff.  Their arrogance is breathtaking.

"If you like your health insurance you can keep it....period."  Statements like this, made repeatedly, to justify the imposition of the most onerous and terrifying piece of public policy in US history doesn't bother Thomas Friedman. Friedman's health care is unaffected.  He and Buffett and Obama and Mark Warner need not worry.  It is the rest of the American citizenry who should be terrified.

Buffett, Obama, Warner and Friedman are the extremists and like all extreme leftists, they are personally unaffected by the policies that they inflict on others.  And, like all extremists, they don't care what the average American thinks.  Their contempt for the average American knows no bounds.

Today, the White House released a statement that read "telling the truth would have confused the message."  That pretty much tells it all for extremists like Friedman.  That statement doesn't bother him, but folks calling for the truth are the enemy in Friedman's eyes.

Thursday, October 31, 2013

Next Stop -- Insuring Grocery Bills

It's time to tackle Affordable Grocery Bills.  Yes, let's mandate that all Americans should be required to buy an insurance policy that covers grocery purchases.

To get started, let's decide what people ought to eat.  No more sugar.  No more alcohol.  From now on, everyone should eat brussel sprouts (and whatever some unelected bureaucrat thinks we should eat).

After all, is anything more important than "the right to eat."  Nothing I can think of.  Meanwhile we need to mandate the prices that grocery stores can charge for various food products.  We should get rid of the idea of "fee for product" and move toward "fee for nourishment."  This way we can accomplish the real goal.

Of course, as soon as we announce this ambitious plan, most grocery stores will decide to close their doors to anyone using Affordable Grocery Bill insurance and switch to pay as you go.  The rich will be the only future customers for what we now think of as the corner grocery store.

As for the bulk of humanity, they get insurance, which, by the way, is only valid at a store that is a two day drive from your home.  But, so what.  At least you are insured.

In the future, once we have enacted the Affordable Grocery Bill Act, everyone will have insurance, although it is unlikely many will get much in the way of groceries. If putting up our website costs nearly half a billion dollars, then you can imagine what other administrative costs will run.  Not much left for groceries.

So-Called Moderates Created Obamacare

Mary Landrieu, Mark Warner, Susan Collins, Mark Pryor, Joe Manchin and other so-called moderates provided the votes necessary to force the American public into the Obamacare swamp.  Somehow, these folks call themselves moderates as they transfer almost twenty percent of the American economy into the hands of incompetent, corrupt, unelected bureaucrats.  These are moderates?

Many Americans voted for these folks because the media spends all of its time on gay rights, abortion, gun control and other emotional wedge issues and zero on the issues of fiscal insolvency and the coming collapse of the health care system.  As long as Warner supports gay rights and abortion, he doesn't to have to answer for his overwhelming support of Obamacare and turning a blind eye to NSA overreach, IRS corruption and other failures of the Obama Administration.

That's how we got where we are....the moderates did it to us.  They don't seem moderate to me.

Wednesday, October 30, 2013

Surprise, Surprise...Health Care Costs are Headed Up; Quality Headed Down

The Obama Administration is destroying the American health care system brick by brick.  There is no real surprise here.  Once you decide that free market price rationing is inappropriate, you move on to the idea that unelected, unresponsive government bureaucrats should do the rationing.  That's where we are headed.

Meanwhile, health care providers (doctors, remember them?) are exiting from the system.  Hospitals are shuttering their doors.  Even if you have insurance, it won't really matter.  There won't be any real health care available, except, or course, for the rich and powerful.  Obama will be taken care of.  So will Barney Frank, so will Mark Warner, so will Diane Feinstein.  But, too bad if you are their gardener or cook.  You're screwed.

This is the hypocrisy, the arrogance and the mendacity of the big government crowd.  They lie, they distort, and they don't really care, because none of this effects them personally.  No wonder, this is the right way to go, according to Warren Buffett.  He won't have to suffer the indignities of the new health care regime, that the vast majority of Americans will face.  He is rich and powerful and could care less.

So, the website doesn't work.  That's the least of the problems.  Picture the worst public schools in America.  That's the vision of the hospital that the average American will face.  It will be dangerous, incompetent, and costly.  That's the future of health care for the average American.  But, Buffett, Warner and Feinstein are rich.  So, this is all okay with them, since they won't have to deal with it.

Thursday, October 24, 2013

New York Times Finally Notices the Obamacare Rollout

The New York Times today has finally surfaced some news coverage on the disastrous rollout of Obamacare.   After having ignored the issue for three weeks, the Times has given the story limited coverage in today's edition.  This is coming after nearly a dozen Democratic Congressman have publicly implored the President to delay the rollout.  Most of these Democrats are up for re-election in 2014.  Those that aren't up for re-election are mostly silent.

Nearly 40 people have managed to sign up for Obamacare in the state of Wisconsin.  That seems be a cause for celebration in the White House.  At that rate, we should reach White House enrollment estimates by sometime in 2176 -- that is, more than 150 years from now. Better late than never, I suppose.

No wonder that the NY Times has finally awoken.  The Times, always desperate to support the most extreme left wing political position that is out there, is now casting about for reasons to blame the Obamacare collapse on anyone but the Administration.  Good luck with that.

This is the most corrupt and inefficient administration in the history of the country.  The Obamacare rollout is predictable and consistent with the pattern of the Obama Administration.  The misstatements, evasions, and shoddy work habits of the Obama Administration are without precedent in America.  

Meanwhile, Obama's golf scores are getting better and White House parties are more entertaining than ever.

The Biggest Wealth Transfer of Them All

The federal entitlement programs -- social security, medicare, medicaid, food stamps -- and the state and local public pension programs have something in common.  Those who benefit aren't paying for the benefits.

The payers are mostly Americans who aren't born yet.

The folks that support the expansion of these programs claim it is fair and moral to expand these programs.  Is it fair to make unborn generations, who will not get these benefits, pay for the current generation?

This is the largest wealth transfer in the history of the world. The only reason it is possible is that the current generation of Americans is the most selfish in history.  Unlike the "greatest generation" that Tom Brokaw spoke of in his famous book about World War II veterans, this generation believes that everyone should sacrifice but themselves.

Why is it fair to raise taxes on future generations to support the current generation?  That is the proposed solution to public pension plans and to federal entitlements.  That's why Obama says that higher taxes must be part of any fiscal solution.

Soak future generations so that we can live high today.  That is the theme song of the Obama Administration.

Current taxpayers want to preserve all of their entitlements even though it impoverishes their children and grand children.  And these are people that claim a higher moral ground?

The selfishness of the current generation of Americans is amazing.

With zero personal savings, the current generation is willing to borrow and borrow and spend and spend and pass the debt on to their grandchildren.  They should be ashamed.

Tuesday, October 22, 2013

The Economy Weakens

Watch out below.  The US economy is slowing and Europe remains mired in the longest economic downturn in modern history.  If debt was a problem four years ago, the situation is far, far worse today.  Meanwhile, GDP has gone nowhere -- in the US and in Europe.  This means that debt as a percentage of GDP has skyrocketed in the western world and there is no prospect for this skyrocketing to slow in the future.  In fact, it is a virtual certainty that debt will outpace economic growth for generations to come.

Not a pretty picture.

Meanwhile, the US economy is slipping.  Part of this is the continued hammering of the financial sector by the Obama Administration.  Extorting fines for trading errors, which no one thought to be a crime until Eric Holder came along, is taking a huge toll on the financial sector.  It's not just the dollars that Wall Street is shelling out to Holder, the atmosphere in Wall Street is different.  Wall Street is looking inward and hunkering down, hoping to outlast the most anti-business Administration in the history of the country.

Employment gains are negligible and that won't change either -- in the US or Europe.  Why hire someone if you the add-on government costs are more than you pay the new employees and where firing people is a crime in Europe and is increasingly a crime (or a shakedown event) in the US.  This hiring avoidance is especially severe among the those without Ivy educations.  That's why those with Ivy educations don't really care.  They will be okay in the new economy.

The US economy is now poised to protect the rich and the powerful and the connected.  As the Wall Street Journal today notes, some of the most prosperous public companies in the US -- the solar companies -- are creating instant billionaires -- in businesses that will never be able to run at a profit.  But, government subsidies bilked from unsuspecting taxpayers are providing the loot that makes this scam work.

It is now all about connections, not about energy, hard work and imagination.  The liberal dream is coming true.  The mighty American economic engine is shutting down and the wealth of the powerful and the mighty and politically connected is protected.  As for the Americans looking to improve their economic situation, they are out of luck.  The health care rollout is a great example of how the Obama Administration views the average American.  The Obama folks could care less.  They party on while Americans are losing their health insurance and facing massive cost increases for a new Obama system which delivers far, far less in actual health care.

This is a pretty pessimistic outlook, but it is hard to see what turns this around.

Saturday, October 19, 2013

Not Newsworthy -- The US Health Care Collapse

The New York Times, the Washington Post and other left wing extremist newspapers have decided that the failures of the enrollment process of the Obamacare rollout are not newsworthy.  They are running exactly zero articles on a system that even its's supporters have described as a "failed" process (Ezra Klein).

That almost twenty percent of the US economy is in crisis is no longer of interest to the Times and the Post.  After having cheerleaded for Obamacare, which the American public has been consistently opposed to, now these newspapers refuse to report the failure of the exchange websites that virtually guarantee the failure of Obamacare.

Meanwhile, Kathryn Sebelius, the secretary of HHS, the government bureaucrat in charge of the website rollout, refuses to meet with Congressional committees to even discuss the failure of the rollout.

Tens of millions of Americans are finding themselves losing their health insurance, unable to enroll in the Obama exchanges, and left in limbo having no idea what their health insurance status is going to be in the new year.  The fear that the average America is now feeling about their future health care is of no interest to the Obama Administration and not newsworthy to the extreme left-wing American press.

Thankfully, there are still sources in the news media that believe the public has a right to know about the twenty percent of the American economy that now is ruled by unelected and incompetent bureaucrats.  The Wall Street Journal and the Fox News outlets have been reporting the dramatic and incompetent collapse of the website signup process for Obamacare.  They are also reporting the numerous misstatements of fact that seem the cornerstone of the Obama Administration.  Telling the truth is simply not part of their lexicon.

The New York Times, the Washington Post, and President Obama should be ashamed.  The average American should be terrified.

Wednesday, October 16, 2013

The Tea Party Has It Right

Agreeing to end the shutdown and extend the debt limit is a big mistake.  Taking Obamacare off the table is a big mistake.

In the short run, ending this current conflict will make the media and the Democrats (and Warren Buffett and other rich folks) happy.  But the net effect of ending the standoff is to punt 20 percent of the US economy (health care) into the hands of a corrupt and inefficient bureaucracy and virtually guarantee the bankruptcy of the US within a dozen years.

This could easily have been the last opportunity to save the country's fiscal situation and stop Obamacare.  It failed. That was always the most likely outcome.  That doesn't mean it was wrong to fight the fight. 

There is no other way to stop the coming fiscal collapse of the US other than trying to throw a monkey wrench into the locomotive that is driving us over the cliff.  Simply being "responsible" is the way of ultimate catastrophe.

The American culture has changed in the past two generations.  It is now a culture of dependency, inspired and encouraged by politicians, the media and academia.  The current culture is perfectly happy to spend the savings of generations that have not yet been born and to save nothing for their own retirement and health care needs.  This is the most selfish generation in the history of the country.

Simply getting along and letting this continue is the way of disaster.  That, unfortunately, is where we are headed.

Those who have tried to derail Obamacare and derail the ever-higher spiraling US debt load are not wrong.  They are right.

Tuesday, October 15, 2013

How to Guarantee a Huge Future US Default

The media has been arguing that a default now would be catastrophic.  But defaulting now, when our debtload is smaller than it will be any date in the future is far, far better than waiting a dozen years and defaulting when our debtload is twice as high and tens of millions of Americans will be expecting social security and medicare payments that they will not receive.

The idea that averting a government shutdown and/or default now is a good thing is ridiculous.  This is the same dumb idea that carried the day with the Greek bailout four years ago.  Now Greece is in much, much worse shape and probably faces a political nightmare ahead as the neo-Nazi and communist parties strengthen and the center left and center right parties disappear.  A similar fate awaits the modern Republican and Democratic parties.  Neither party is willing to face the realities of the US government debt debacle.

Only the much-maligned tea party has it right.  If you don't face the situation now, it may not matter what you do in two or three years.  Who wins future elections may not even matter.

Monday, October 14, 2013

Who Cares What the Indians Think?

That seems to be the theme from the President and from one of his harshest critics, Charles Krauthammer.  Both of these esteemed experts on political correctness think the Washington Redskins should be renamed.  What about the Washington "Native Americans"  -- that has a good ring to it!

The evidence is overwhelming that what few Indians care one way or another about this issue, would prefer to leave the Redskin name alone, just as they prefer the Florida State Seminole name to some other politically correct mascot.

It's interesting that folks that aren't in the maligned demographic seem to think that their views matter more than the views of the maligned demographic.  This is what happens when government and media folks think they should run everything and dictate all matters of life in everyday America.

Republicans Fold Once More

History is repeating itself.  Republicans are surrendering on sequestration and gaining no ground on entitlements.  Those who worry about looming bankruptcy of the United States have no where to go.  Both Democrats and Republicans are joining hands to drive the country over the cliff.

Ironically, after the Gingrich shutdown during the Clinton years, Republicans gained seats in the House the following year.  The public actually backed them, even though polls at the time said what pollsters wanted the polls to say. 

If Republicans had stood their ground in the current Shutdown crisis, their chances for the White House in 2016 and for control of the Senate would have been greatly improved.  But, having surrendered one more time when there was no need to do so, will simply lead to further gains for Democrats.  It's difficult to see why anyone should vote for anyone who supports the Shutdown compromise between the Senate and the White House.

The tea party Republicans should stand their ground and try to get the House to reject the Senate compromise.  

Friday, October 11, 2013

Obamacare Debut is Just The Beginning

As expected, the Obamacare rollout is a complete disaster.  No surprise here.  It involves significantly higher premiums, much higher deductibles and many more restrictions on where your health care dollars can go.

As time goes by, American health care will degenerate to third world status.  None of this should come as any surprise for folks that are used to the public schools and the post office.   Government is not the answer if you want something of quality that is affordable.  Only the free market can deliver that.

What the government does is provide a shoddy product at an extremely high price.  Obamacare is certainly in that tradition.  The real losers will be the very people that are supposed to be the winners -- the poor, the middle class, minorities....The rich need have no fear.  That's why they broadly support big government.  It doesn't hurt them.

Because Obamacare touches virtually every American, some good may come of this.  Americans may learn what Russians and Chinese already know -- government cannot efficiently provide services.  Perhaps, then, the average American will wake up to the unfolding disaster of the growing government control of every facet of American life.

The incentives in the private sector are missing in government.  Instead bureaucrats with little or no incentive to provide a quality product make all of the decisions.  The result is corruption and inefficiency.  We need look no further than to the modern day IRS to see what happens when government is in charge.  They pick their friends and go after their enemies.

Absent any direction from Congress, the Justice Department, the SEC, the EPA, the Education Department make their own laws.

More and more, America is a lawless land with a growing bureacracy in charge.  Obamacare is a poster child for this trend.  There are no rules for the ruler, only for the ruled.

Thursday, October 10, 2013

An Agreement is Not Good News

As the US continues down the path to almost certain bankruptcy, the stock market had its best one-day rally in a long time -- up over 300 points in the Dow, a whopping 2.2 percent increase in a single session.

What was the news?  Was it something that could avert the bankruptcy that lies ahead in little more than a decade?  Nope.  The news is that the Dems and Reps are likely to come to an agreement that guarantees more spending and more debt.  Is that really good news?

That the government won't default now -- as a matter of choice -- is scant consolation for the fact that agreements like the one in the works are virtually a guarantee of a default within a generation.  No Congressional vote can stave off the default that awaits us in a dozen years or so.

Is Greece (or Spain or Italy) better off today because the EU and the IMF provided the funding for them to expand their debt and continue spending money they don't have?

Boehner put it best: "This is not some game."  Right he is.   Either the growing debt crisis is faced or it is ignored.  An agreement simply ignores the problem.  Sadly, Boehner may not have the stomach to stand up for fiscal sanity. 

It is worth remembering that the stock market reached an all time high just a mere ten months before the collapse of Lehman Brothers which triggered the financial collapse of 2008.  The stock market has a poor record of anticipating disaster.  The 1929 collapse followed the peak levels of 1929, peaks reached just as the underlying economy was sliding into oblivion.

If history is any guide, the stock market's surge this year may be a prelude to disaster.

Monday, October 7, 2013

Shutdown Now; Shutdown Later

Today, all it takes to end the government shutdown in the US is a vote by Congress.  Within 15 years, it won't be so easy.

In 15 years, a vote by Congress will be largely irrelevant.  There won't be enough money to pay our bills, no matter what Congress does.

It will be at that point, that the government will inform the oldest Americans that the safety net that was promised is no longer there.  Having convinced these folks when they were younger they did not need to save and provide for their old age, the government will announce (surprise, surprise) that old folks should fend for themselves.

The politicians, who are creating this coming nightmare, will be comfortably relaxing in their wealth and old age and will blame all of this on "rich people" and "greedy Wall Streeters."

But the reality is that no level of government is setting aside the requisite resources to fund the future obligations embedded in social security, medicare, medicaid and public pension plans all over the US.  It is easy to promise things to folks in the future and to hope that unborn children will be happy to pay for all of this.  But, at the end of the day, the numbers don't add up.

One virtue of the current shutdown is that it focuses attention on the real problem -- a shutdown in 15 years that no amount of negotiating can avoid.  This doesn't worry the President and his allies because disaster is not going to occur on their watch and they are good at shifting blame.  But, for the country, the current shutdown is nothing compared to what is on the unavoidable horizon.

Thursday, October 3, 2013

John Harwood Fesses Up

John Harwood, supposedly a reporter by trade, held an exclusive interview with President Obama yesterday.  Harwood works for CNBC.  Today on CNBC he provided his listeners with a typical example of his (and NBC's objectivity) in reporting the news.  He argued that Republicans were 'psychopaths' and that President Obama was perfectly reasonable and was 'asking for nothing.'

It's good to see that Harwood is willing to openly admit that he has no objectivity in reporting the news from the White House.  It is something we have always suspected.

Even Becky and Joe recoiled from Harwood's summary of the issues and pointed out to Harwood that he was lacking in objectivity. 

No one should rely on this kind of news reporting, if the truth is what they are seeking.  John Harwood is little more than a spokesman for the extreme left wing of the Democratic Party.

Wednesday, October 2, 2013

This Aint Nothing

"This Aint Nothing" goes the great country and western song of a few years back.  I was thinking about that song as the deadline passed for Congress to reach a budget deal.  What happens 15 years from now?  No vote can save us then.  Medicare will be out of money and social security will be bleeding as well.  Then what?  That's the real budget crisis.

In a country choking on unaffordable entitlements, the Obama Adminstration has crammed down one more unfunded entitlement on a wary public.  This simply makes the clock tick faster toward America's impending insolvency.

The US is on track to go broke.  Whatever happens now is irrelevant unless it tackles the entitlements.  Putting this off, even for a year or two, makes it almost impossible to fix and guarantees the country's eventual insolvency.

So, why not fight now?  Shut down the government.  That's better than business as usual, which simply guarantees an eventual shutdown that no Congressional vote can then alter.

If the Republicans cave, then they deserve to be defeated in 2014.

Friday, September 27, 2013

"You Can Keep Your Existing Health Insurance"

I wondered about this statement at the time Obama made it.  Clearly, by changing all the rules of health care insurance and mandating conformity, it was unlikely that the vast majority of Americans would not find themselves forced by 'The Affordable Care Act' to have to deal with a completely different health insurance plan and completely different set of health care providers.

I now understand what Obama meant.   He was speaking to his immediate family and (politician) friends.  They are exempt from the "Affordable Care Act."  Clearly what he meant to say was: "if you are exempt from Obamacare, like me and my family, you can keep your existing health insurance."  He never meant to mislead.

Thursday, September 26, 2013

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans.

Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will.

Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsidiary of the US government?  We are now getting clear answers to these questions.

The big losers are minorities, the poor, the struggling middle class.  These are the folks that are being devastated by Obama's big government agenda.

The next hammer to fall on the middle class is the 'Affordable Care Act,' which, in theory, is due to begin implementation next week.  This 'Act' will destroy the American health care industry, impoverish the average American, and create a bonanza for bureaucrats and politicians.  The wealthy are totally unaffected, as are the politicians.  We don't know this yet, but soon we will know.  This will be the straw that breaks the camel's back.

Stuck under this morass of regulation, that tells you where you can send your kids to schools, what they should eat, what you should eat, where you should go to get your health care, what kind of car you can drive, and even what size soda bottles you are permitted to purchase, is the average American.  The land of opportunity is now the land of regulation and oppression.

Given how bad the public schools are, you might think that learning on the job might be able to give you just the lift you need to begin climbing the ladder of the American dream.  The big government boys have an answer for that too.  The minimum wage.  By escalating the minimum wage, the ladder's bottom rungs are effectively sawed off.  Too bad if you are poor, uneducated and striving to improve your circumstances.  Every opportunity to break out of the low income world has now been criminalized.

Meanwhile, JP Morgan may be facing an $ 11 billion fine from the big government boys.  Like everything else, this is a tax on the American worker, since he/she  are the owners of JP Morgan and will pay this $ 11 billion.  Who won't pay the $ 11 billion are any of the perpetrators of the so-called crimes for which this $ 11 billion is a settlement.  The janitor sweeping out the building will pay this fine and retire on a lower income thanks to the big government boys.  Meanwhile, the directors and senior executives at JP Morgan will see their compensation continue to sail higher and higher.  The rich get richer, the poor get poorer, courtesy of the US government and its cronies.

In every way, government is waging war on its own people.  These things we now know.

Saturday, September 21, 2013

Poor Policies; Poor Predictions

The Obama Administration and the Federal Reserve have consistently over-estimated the strength of the US economy.  The Fed has, on no occasion since 2009, had a remotely accurate prediction, constantly and consistently over-estimating economic growth by well over 40 percent on average.  With that record, one wonders why anyone cares what the Fed thinks about the future.  (The Wall Street Journal on Thursday reported, in a graphic, the predictions that the Fed had made over recent years).

Now, economists like Laura d'Andrea Tyson, a Clinton economic advisor, wonders why the poor are getting poorer in the Obama non-recovery since 2009.  After five years of government expansiveness and a Federal Reserve out-of-control, the rich are getting richer and the poor and middle class are losing ground.

Strangely, these results were perfectly predictable.  They follow from the Obama policies.  We have implemented in detail what David Stockman, in his recent book "The Great Deformation," has excoriated as 'crony capitalism' that benefits mainly rich folks.  It is no wonder that Warren Buffett supports all of this.  He does well in an Obama economy.  I doubt that his secretary's income is growing as fast as his personal wealth, regardless of who pays what in taxes.

Buffett, like other rich folks, is a hypocrite.  He knows that Obama's policies mainly benefit folks like him and destroy opportunity for the middle class and reduces them to scrambling for part-time work or applying for food stamps and other subsidies.  For Buffett, that works.  For Obama, that works.  For the poor and middle class, this is disaster.

Obama's only economic initiative this year is to encourage expansion of a law that makes it a criminal offense to hire an employee below a certain wage level.  This means that low-skilled workers that wish to learn a skill on the job are told.....no!  Forget about taking a job, without pay if necessary, to learn a useful skill that will enable you to get a real job.  That kind of apprenticeship, long a staple of growing economies, has been criminalized.  Obama would like to criminalize it further.

You wonder why Obama doesn't just propose a law saying that no one can hire a worker unless they are willing to pay them $ 150,000 and provide them with free health care.  That would pretty much eliminate any opportunity for folks below the top 25 percent in income and wealth.  I feel certain that Buffett could endorse such a proposal.  Then he could fire his secretary and no longer have to worry about what taxes she pays.

The hypocrisy of folks like Obama, Bernanke and Buffett knows no bounds.  They have spent the last five years in a successful effort to shut down the great American economic engine.  They have succeeded.  Expect the rich to get richer and the poor to get poorer.   That's where these folks are taking us.

Wednesday, September 18, 2013

A Rose By Any Other Name

The Fed announced today that it would continue it's bond buying binge to the tune of $ 85 billion monthly, a policy that has been in place since the 2008 financial collapse.  This has expanded the once miniscule Fed balance sheet to over $ 4 trillion. 

The Fed, of course, can create money digitally.  That's what it uses to buy the bonds.  It just says:  "let there be money" and there is money.   This massive expansion in the monetary base has created huge excess reserves in the nation's commercial banking system.  Why doesn't anyone loan this money out?

The pitiful loan activity is a result of two factors.  Dodd-Frank and activism in the Justice Department and others has made it a criminal activity to loan money to anyone who doesn't have the very, very best credit.  And people with that kind of credit have lost interest in borrowing to build businesses in the new Obama world of massive regulation and impending soaring health care costs.  So, not too many loans are getting on bank books.  The reserves are simply piling up.

But what happens if, heaven forbid, the economy recovers?  Ah, an outcome not contemplated by the Obama-Bernanke clique.  So far, they have successfully prevented any serious chance of a strong economic recovery that would quickly expand loans and the money supply, bringing on the inevitable out-of-control inflation.  But, that won't happen if you keep the economy from recovering.  I think that I am beginning to understand the Obama-Bernanke plan.  It's working.

Saturday, September 14, 2013

Inequality and the Poverty of Economics

The Journal of Economic Perspectives is an academic journal that summarizes the state of research in various fields of Economics.  Perusing this journal shows the extreme political bias of much of modern day economic research.  The Summer 2013 issue was devoted to "income inequality."  The main theme was that rich folks are getting richer, but, of course, the facts actually show just the opposite.  Not deterred by the facts, the various economists that opine in this edition blithely parrot absurdities such as wealthholders ability to "sustain their preeminence.

What is the analysis?  Imagine that you wanted to know if baseball teams created dynasties and "perpetuate" their dominance of baseball.  What facts would you want to assemble to prove this?

Here's the way economists think:  collect data that shows that back in the old days, the baseball teams that won the pennant won 65 percent of their games each year.  Then show that, today, the teams that win the pennant win 70 percent of their games each year.  (Don't bother to check whether the teams that won in the old days are the same teams that win today.  Why would that matter, say economists?)  Would that evidence convince you that certain teams are dominant and "maintain their preeminence?"  That is the precisely the kind of logic that perpetuates the factually incorrect myth that the rich get richer.  Check out the articles in the JEP and you will see.

The truth is that if you list out the 100 richest Americans today and then compare that to the one hundred richest Americans 25 years ago, you will find very little overlap.  The richest folks have more of the wealth (if you totally leave out the huge proportion of wealth transferred by government transfers such as social security, welfare, medicaid, food stamps and on and on), but it is a different set of rich folks as time goes on.  Wealth rises and falls in the US.

The opposite is true in Europe.  The wealthiest families in Europe are the same families that were wealthy 50 years ago.  Contrary to the complete nonsense you read from economists, the chances of improving your lot in Europe are almost non-existent.

Now, in the US, the Obama Administration would like to create the European model, which traps people into whatever economic group that are born in....or, actually reduces the life chances of the folks born into the bottom half of the income distribution.

Notice the data since Obama came into office.  Since mid-2009, long after the bottom of the financial collapse and well after the Obama $ 800 billion stimulus package, the economic position of lower income folks in the US has deteriorated.  The Obama sledgehammer on business has delivered results.  Jobs are scarce and what few jobs there are, are part-time.  (Obamacare, of course, influences this trend toward part-time employment by creating built-in disincentives to businesses to hire full time employees).

The real truth is that the US has historically always been the best place to be born if you want a chance to move up in the income distribution and it remains the best place for that purpose.  Obama is trying to kill off that opportunity, but so far he has not totally succeeded in this strange endeavor.

Economists have done a disservice to the public by presenting facts in a way that is totally misleading and obscuring the real truth about the economy and about the historical dynamism of the US economy.

Saturday, August 31, 2013

College Grads and Jobs

There is a growing discussion about whether or not college graduates are generally prepared for the workforce.  This is a very interesting (and revealing) discussion.

This is not so much about GPA as it is about more fundamental problems -- attitude tops the list.  Far too many college graduates think that they have 'paid their dues' by attending college and collecting a degree.  Many seem to think that joining the work force is akin to joining a fraternity or sorority.  They seem disappointed that employers' have high work expectations and are in no hurry to provide massive benefits and a club-med work environment to a rookie employee.

What every employer wants is someone committed to work hard, to learn new skills, and to already possess basic writing and mathematics skills.  The vast majority of college graduates, measured against these expectations of business do not measure up. 

That's the sad truth about higher education.  We don't insist that our graduates have adequate writing and math skills to perform at a high level in the work force.  Those graduates who do have these skills, likely had them before they entered college.  They certainly don't gain or nurture these skills in college.

As for attitude, there is no more-forgiving environment than the modern university.  Students can argue a C grade into an A grade, if they understand how things work.  It is a simple task to manage one's GPA to end up with a 4.0 without serious study.  Meanwhile, skipping classes, scrimping on assignments, cheating, massive drug and alcohol abuse are all tolerated with little or no punishment.  Moving from the university environment to a work environment is a real culture shock for most college graduates in the modern era.

More and more the modern college and university is a great four year social experience that probably makes it more, not less, difficult to adjust to the realities of a market-based economy.




















Thursday, August 22, 2013

The Nasdaq Flap

The Nasdaq halted trading today and was down for a couple of hours.  Listening to the financial media (CNBC, Larry Kudlow, etc.), you would have thought a great crime had occurred.  99 percent of the investing public had no idea and could care less, me included.

What serious investor could possibly be harmed by a two hour shutdown of the Nasdaq?  Are these pundits serious?  If there was ever an 'inside baseball' issue, this is it.  Only manic traders and hedge funds could possibly care one way or another about the Nasdaq shutdown.

No portfolio of any serious investor could possibly be damaged by a temporary shutdown of a stock exchange.  This is a ridiculous tempest in a teapot.

Obama and Higher Education

Just what we need, the Obama tenacles reaching into higher education.  In typical style, Obama points to a problem -- the high cost of higher education -- and proposes a solution that has nothing to do with the problem and actually will likely make the problem far, far worse than it is now.  This has been the pattern with the economic rescue plan, with the 'affordable' health care act, with wind and solar initiatives, and on and on.  Every problem that Obama has inherited has become a much bigger problem under his leadership.

What is wrong with higher education?  Mainly the government, as in most other things.  Federal funding for research grants and student loans has made higher ed less interested in scholarly pursuits and more interested in the pursuit of federal largesse.  Students are borrowing huge amounts of money to maintain a college lifestyle that for prior generations was simply unavailable.  Who could spend that kind of money on beer and fitness centers in the good old days?

Education itself doesn't cost much to provide; less today than a generation ago thanks to the advent of the digital age.  But 'higher education' is no longer in reach for middle income Americans unless they are willing to bankrupt themselves and their children to enrich university bureacrats and aging academics (and they are aging thanks to tenure).  There is a growing gap between 'education' and 'higher education.'  More and more these two concepts are separate and distinct -- perhaps, incompatible.

Obama is going to measure the inputs to higher education to figure out what the outputs are -- a completely absurd approach to measuring the effectiveness of an education program.  Why not measure the difference between a student's life chances when entering the institution with the life chances when leaving the institution.  The 'elite' colleges would not fair very well using a measure like that.  But, if only inputs are measured -- the Obama plan -- then the elite colleges will do very well indeed (that's why they are called 'elite'), but the community colleges, who fare much better using my measure will not do well under the Obama plan.

Once more, under Obama, the rich get richer and the poor and middle class will be left holding the bag.

Media Misleads Once Again

Reuters has a story today about the jobless claims number that is completely absurd.  According to Reuters, "...then new claims... rose...but...gave a positive signal for hiring during the month."  This conclusion is based upon absolutely nothing. 

What the data, in fact, shows is that jobless claims rose last week and rose more than the market expected -- not good news at all.  Worse, the numbers are barely (five percent on average) lower than the numbers in the early part of the year.  Given that revisions are typically well above five percent, a drop of five percent is statistically irrelevant.

The real truth is that the economy is not producing enough jobs and the few that are produced are mostly part-time, low wage jobs.  Not surprising, given the Obama economic program, which guarantees economic stagnation as far as the eye can see.

The media has made a habit of consistently distorting the truth about the American economy in their cheerleading effort to defend failed policy.

Read David Stockman

A new book by David Stockman, "The Great Deformation," challenges the current orthodoxy of financial market regulation.

This book is a great read.  Don't expect a calm and collected analysis.  This book is definitely not calm and collected.  Stockman takes on all comers and his style is blatantly polemical.  He aims his brickbats at the right and the left as he excoriates the rise of indebtedness, public and private, since the 1960s.

Don't think conservatives get a free ride in this book.  They don't.  Ronald Reagan and Milton Friedman are targets of Stockman.  Indeed, Stockman sees Reagan and Friedman as major culprits in the incredible growth of America's financial liabilities.  Some of this is, no doubt, sour grapes for his well-publicized split with the Reagan Administration in the 1980s when Stockman was Director of the Bureau of the Budget.  He resigned that post in a feud with the Reagan folks over their unwillingness to support spending reductions to accompany the famous Reagan tax cuts.

But, the heart and soul of Stockman's book is his interpretation of the 2008 financial crisis.  Here, Stockman makes a real contribution to what has been an embarassingly simple-minded consensus view of government policy.   Stockman argues that the federal government, including the Fed, should not have intervened to save AIG, Morgan Stanley and Goldman Sachs.  According to Stockman, saving these firms was the main purpose of the hastily-assembled $ 780 billion bailout backage, known as TARP.

Stockman argues that the financial system and the American economy was not threatened by the collapse of AIG, MS, and GS, as was argued at the time.  He shows, by analyzing the balance sheets of these firms, that the American economy could have easily survived the collapse of these firms.  Few, today, agree with that, but Stockman makes his case convincingly.

In essence, Stockman is challenging the "too big to fail" crowd that dominates government policy today and that dominated government policy in the Bush Administration in 2008.  By challenging a hackneyed consensus devoid of analytical underpinning, Stockman has done a great service, writing this book.  He's right.  Read his book.

Monday, August 19, 2013

Time to Buy Emerging Markets?

Emerging market stocks have been hammered this year as the US and Europe have enjoyed one of the best stock markets in history.  Why?  What happened to the argument that slow (GDP) growth in the developed world and much higher (GDP) growth in the emerging economies argued in favor of a heavy commitment of investment funds to emerging market?

As it turns out, emerging market economic growth has, indeed, been much, much higher than economic growth in the Western nations.  So, why did their stock markets put in such a pitiful performance thus far this year?  A similar pattern occurred in US history when foreign investors, mostly British and Russian investors, lost bucketloads of money betting on growth in the US economy in the 19th century.  This is not the first time that dramatic GDP growth failed to help investors in public stocks.

Many of the most vibrant companies in the countries that fall into the 'emerging market' category are not public companies.  They are privately owned companies that aren't included in any of the emerging market portfolios that you and I can own.  Instead, roughly 40 percent of the capitalization of 'emerging market' ETFs are typically government-owned or heavily regulated companies, such as the local telephone company or local utility company.  Are these good investment bets in a third world political environment?

If emerging markets boom, you are much more likely to make money owning Coca Cola stock than the stock in the local telephone company in Egypt or Venezuela.  The inherent logic behind huge investments in emerging markets never made any sense in the first place.

That said, it may now be time to buy the emerging markets, since everyone seems to be abandoning them in a rush.  India's stock market lost four percent of its value in a single day at the end of last week. 

It may be time to take another look at emerging markets, now that their staunchest supporters seem to be running for the exits.  But, one should be cautious.  Emerging markets involve stocks that have fundamentally different characteristics and corporate governance rules than Western investors may be accustomed to.

Wednesday, August 14, 2013

European Recovery -- Seriously?

The news services are abuzz this morning with the "news" that Europe has finally turned the corner with an economic rebound in the 2nd quarter of this year.  Underneath the headline is the dismal number of an annualized 0.3 percent estimated growth rate for the 2nd quarter.  Whoop-to-doo!  This is a recovery.  This number is not significantly different from a negative number, given the pattern of revisions.  Meanwhile, unemployment in Europe remains above 12 percent and sovereign debt is soaring on to new highs.

There are further stories that Greece is on the road to recovery.  What are their current statistics?  GDP only dropped an annualized four percent in the first half of this year.  Wow!  That's really something to write home about.  Combined with almost 28 percent unemployment overall and nearly 70 percent unemployment among youth, it sure sounds like Greece is just humming along.

Wonder what the statistics would show if Europe was doing poorly?

Monday, August 12, 2013

Some Good News for the US

Steve Moore's column today in the Wall Street Journal is worth a read.  The sequester, according to Moore, has worked.  Total federal spending has been slowed, even reversed, in the past two years, according to Moore.  This is, indeed, good news.  Let's hope it continues.

Moore notes that all it takes to continue to hold federal spending in line is to not undo the budget deal that led to the sequester in the first place.  It will be interesting to see if politicians can stick with the plan by doing nothing.

Update on Greece

Now, after five years of European Union policies, how do things look in Greece.  The headline today on Yahoo looks encouraging: "Greece Beats January-July Budget Target."  In fact, Greece did not do any such thing.  More bailout funds from the EU, though, made it look that way. 

Here is what the EU has done for Greece:  GDP today is 20 percent lower than it was in 2008, when the EU bailouts began.  Unemployment is at a record pace, pushing toward 30 percent.  These numbers are not very different from where the US was in 1933 at the lowest point of the Great Depression.

Meanwhile, civil order is breaking down in Greece.  Crime is rife and the only things growing are the nation's indebtedness and the black market.   Political discourse is moving to the extremes as the center breaks down.

Finally the debt to GDP ratio is rapidly climbing to 200 percent.  The EU has made a small problem into a large problem and has obligated the entire European continent to back a bailout that has absolutely no hope of success.  Politicians hard at work again!

Sunday, August 11, 2013

The Changing Face of the American Workplace

The US economy was once the envy of the world.  From 1865 to 1965, the US economy grew faster than any large economy in the world.  The great American middle class came into prominence during this period and American income and wealth had no rivals anywhere in the world.  For most of these years, there was no Federal Reserve or central bank in the United States, though central banks had a long history in every other large country in the world.  For most of these years, there was little business regulation and no income tax.  The Federal Reserve and the Federal income tax came into existence in 1913, coming on the heels of the best 60 years of economic growth in the history of the US.

Not that everything was rosy.  Financial panics and the great depression occurred during this 100 year span.  Unemployment rose and fell.  Markets rose and fell.  The dynamics of American growth were chaotic, though powerful.  But, with all of the chaos and panic, the American pie grew at an unprecedented rate, matched, in world history, only by modern China.  The standard of living of the average American grew at the fastest pace ever.  Unemployment levels above 6 percent were considered a sign of a 'recession.'  The current 7.6 percent unemployment rate would have been seen as an extreme economic slowdown  (not an economic recovery).

Since 1965, the American economy has grown at a dramatically slower pace.  The American middle class has consistently struggled, except for the 20 year period that followed the inauguration of Ronald Reagan.   The financial position of the average American is today untenable, if proper account is taken of the federal, state and local government debt.  America is headed for financial disaster and the American middle class is sitting in the passenger seat.

In the driver's seat is the new political class.  The fastest growing demographic in America is the American government or quasi-government employee.  On the defensive is the American private economy.  Besieged by so much regulation that most companies are not even aware of most of the regulatory burden that they face, small business is no longer the engine of American economic progress -- government is where the real growth is taking place.  Government employment has been the largest source of employment growth in the US economy since 1965.

Unfortunately, government doesn't produce anything but problems for the private sector.  Most government employees (including public school teachers, university professors, and bureaucrats of all stripes) view the private sector with suspicion.  They see private businesses as quasi-criminal enterprises bent on polluting the environment and exploiting their employees.  This culture dominates the media characterizations, not only in the daily news, but in television series and movies.

So what does all of this mean for the workplace in modern America?  Private businesses realize that they are the target of the political classes and they make adjustments.  They know that if they hire full time employees, their regulatory burden goes up.  They know if they hire 50 employees or more, they fall into certain categories that must face significantly higher costs of complying with the modern legal environment that has been imposed upon them.

So, what happens?  Small business reacts by hiring as few full time employees as possible.  Part time workers are easier to fire and are not subject to Obamacare and other regulatory burdens.  Many companies keep their companies deliberately smaller to avoid certain employment trigger levels that put companies under a much more severe regulatory regime.  Employees that are 'protected' under current laws -- minorities, women, persons over the age of 55 -- involve far greater expense to a private business than other employees.  So, fewer of them are hired.  Protecting an employee with legislation simply means making that employee more expensive to the employer.   Employers aren't stupid (a common assumption of the political class that supports these 'protections).'

So, today, the workplace is a very rigid bureaucratic environment.  The blizzard of paperwork that employees face is nothing compared to the blizzard of paperwork that companies face.  There is more concern with what might be said at the water cooler than what the work output might be.  Private email communications are now perused for politically incorrect comments.  Free speech doesn't apply to the workplace.  In financial service companies, mistakes or errors are seen as criminal (the 'whale' episode at JP Morgan is a modern instance).  Gone are the old processes of free people making free decisions in free markets.  Now you have to worry about whether Barney Frank or Elizabeth Warren is looking over your shoulder.

All of this means that America is in a period of relative economic decline.  The middle class will remain an endangered species as the political class bent on the destruction of the middle class continues to claim that all they care about is the middle class.  Gradually, less and less of America is based upon free market economics and more and more is driven by un-elected elites, who have spent most of their lives either in politics or academia.  The workplace is now a bureaucratic environment with rigid rules and little or no room for initiative and energy.  The dull and the routine is more and more a description of the modern American workplace.

The workplace is also becoming more and more a land of part-timers.  Businesses in America, like their European counterparts, are increasingly reluctant to hire people that, by law, they cannot fire.  Workers now have protections and guarantees that mean, even if workers received no wages at all, they are still very, very costly to business.  Increasingly, wages are a smaller and smaller fraction of the costs to an employer of hiring an employee.  The result is a much reduced take home pay and more and more of worker income is siphoned off to worthy causes, favored by elite bureacrats in the Elizabeth Warren mold -- bureacrats with virtually no life experiences similar to that of ordinary American workers.

A hundred years ago, a young employee could take a job at a reduced wage or no wage at all as a way of entering the work force and learning a trade.  Minimum wage laws, promoted by big unions, are designed to block such work force entrants and preserve a monopoly for existing workers.  These laws are effective and help destroy a large part of the Horatio Alger culture that once was.  The elite that make these rules don't face such problems since they, by and large, go to elite colleges and universities and find that entry into the work force doesn't involve wage and salaries anywhere near the minimum wage.

It is no accident that college students are in the forefront of the call for a "living wage."  A living wage virtually guarantees that the college students will not face future competition from folks whose start in life is not as pampered as their own.  The poor simply can't get through the front door, since their skill set rarely justifies a "living wage."  Meanwhile, those who support the "living wage' think of themselves as bastions of morality, while crushing the hopes of folks who would simply like to have an opportunity to move up in the world through their own work efforts.

Great wealth creates idle time for the wealthy.  It is no accident that the wealthiest US politicians are also those who most vociferously support the agenda of ever bigger government.  Why not?  It will never effect them.  As fewer and fewer Americans derive their living from the free market, the free market has fewer and fewer defenders.  The wealthy and the new bureacrats are the power brokers in modern America.  Their contempt for the American middle class and for free enterprise is on display every day in our media and in their political program.  It has changed the face of America and the American workplace.  Meanwhile, folks like Obama ponder why part-time workers are replacing full time workers in America.  He blames that on greedy businesses.  But, the reality is that Obama policies are one of the key reasons that full time workers are becoming an endangered species.

Friday, August 2, 2013

Another "European" Jobs Number

162,000 new jobs in July.  Not only is that an absurdly low number for an economy as large as the US, the job numbers for both May and June were revised downward as well.  No one is much interested in hiring anyone.  That's the main message of this report.

A subtext is reflected in the unemployment rate, which fell to 7.4 %.  How, if a pitifully low number of jobs are created each month, is the unemployment rate falling?  When people give up looking, they aren't counted anymore and more than 6 million have given up looking. Unemployment could get down to 1 percent if almost everyone just gave up and went on public assistance.  Is this the Obama plan?

The White House is succeeding in getting the economy that they have wanted -- the European economy -- no growth, no opportunity for the young and ever rising debt levels that have no conceivable way of being repaid.  This is the liberal dream.

Thursday, August 1, 2013

Big Companies More Valuable Than Small Companies

So what explains the surging stock market, when the fundaments of the economy remain weak?  Again, micro-factors favor large companies with access to government.  This is true for banks as well as for non-financials.  Smaller companies are getting hammered by higher tax rates, more mandates, and looming ObamaCare.  Large businesses, with some exceptions like coal, can deal with all the bureaucratic regulatory stuff because they have so much scale.  Not true for smaller businesses.

So what you're seeing is a change in the playing field.  The big guys are doing relatively well and small business is in the doldrums.  That is keeping with the Obama playbook of the grand corporate-government teamwork.  Obama can relate to big giant companies, because they are so much like the government and, in some ways, indistinguishable.  But small business is an annoyance in the Obama scheme.

The problem is: small business produces the new jobs for the economy; big business is a stagnant employer in the aggregate.  So folks looking for a job are out of luck.  The Obama economy is great if you're big and rich, but not so great if you're an out of work American or a small business enterprise.

Wednesday, July 31, 2013

Urban Renewal -- The Big Government Way

Having spent the past four days wandering the neighborhoods of Washington DC, it is clear that this city is a prosperous, booming area.  Wonder what business enterprises are sparking this growth?  Big government.

Years ago, when I was a newbie intern for the US Treasury, walking a couple of blocks from One Washington Circle (where I lived back when it was an apartment complex) was a dangerous undertaking.  No More.  For miles around, there are now leafy suburbs with casually dressed joggers and dog walkers.  The homes are well maintained and coiffed and the comfortable residents seems at ease with their plush surroundings.

Who lives here?  The new "protected" class.

These are the people that work for the federal government or the numerous so-called private businesses that devote their endeavors to providing services to government or lobbying to gain a share of government largesse.  These are the folks that view people outside the beltway as moronic environment-destroyers and homophobes.  They are comfortable in the knowledge that they are doing God's work, protecting the environment and defending the minorities and the poor from the caprices of the evil private sector.  These are the regulators, the tax collectors and the righteous -- living high on the taxpayer.

Out in the hinterland, struggling Americans are laboring with massive unemployment and stagnant economies and providing the tax revenues to support this ruling class that lives in modern luxury in much of Washington DC.  No real products are produced here. Indeed, the primary function for most of these Washington upper income folks is to find ways to restrict the private sector and to increase the flow of resources into their own pockets.  This is the new "European prosperity" for the ruling classes.

You wonder how much longer this can continue.  A dwindling private sector carries this elite group on its backs.  Meanwhile the poor in DC are shunted off into ghettoes with some of the worst public schools in America.  But, those folks are out of the view of this elite.  This elite lives in safe neighborhoods with protected jobs.  Even folks who take the fifth amendment before Congress, when they are asked about what they are doing, continue to prosper at full pay with zero work responsibilities.  This is the liberal dream, right here in Washington DC.