Monday, September 29, 2014

So, How Goes Europe?

"Businesses and consumers across the 18 countries that share the euro were more downbeat about their prospects in September than at any time since the end of 2013, likely reflecting disappointment with the pace of the eurozone's economic recovery and the conflict in Ukraine."

This cheery comment was the lead sentence in this morning's Wall Street Journal report on Europe by Paul Hannon.

We are in to year six of the non-existent European recovery.  Is growth simply over for Europe?

The massive debt problems that exploded in the Greek crisis of three years ago are now much, much worse.  The solution to massive debt problems was to add even more debt to the pile.

That isn't working and it has no hope of working.

The US should be watching this ongoing disaster in Europe.  Big government solutions ultimately lead to what is happening today in Europe.

And who are the losers?  Folks at the bottom of the economic pile.  When you destroy free markets you destroy the hopes and dreams of the poor and the middle class.  The rich continue to live like George Clooney and Warren Buffett.

Sunday, September 28, 2014

Medicaid Without Health Care

It is typical of the Obama Administration to tout form over substance.  Even the sympathetic voice of the New York Times cannot avoid the obvious.  While millions have been added to Medicaid rolls in the last twelve months, it is becoming increasingly impossible to find doctors that will treat Medicaid patients.  This will only get worse, much worse.

There was never any real intention to expend health care services.  Instead, the idea was to extend Medicaid and Medicare.  The fact that, increasingly, doctors refuse to take on Medicaid and Medicare participants was of no matter to supporters of Obamacare, Medicaid, and Medicare. 

Why does it really matter if these folks don't have access to health care? At least that they have access to a government program, regardless of whether any real health care comes with it.

Today's New York Times article in the business section by Robert Pear entitled "For Many New Medicaid Enrollees, Care is Hard to Find, Report Says."  The article comments that "...Obama Adminstration and state officials have done little to ensure that new beneficiaries have access to doctors after they get their Medicaid cards, federal investigators say in a new report."

This outcome, Medicaid without health care, is completely predictable.  It is the future of Obamacare that is being displayed.  Forcing everyone into a government program and then reducing the amount available for the program means that the amount of health care will prove inadequate.  As usual, those at the bottom of the economic pile, will find that they will bear the brunt of this "bait and switch" policy.  Government promises, but does not deliver.

Meanwhile, the Warren Buffetts of the world will do fine.  The one-percenters like Buffett put health care in a strangle-hold so that average and low income Americans get the short end of the stick.  Buffett isn't going to depend upon Obamacare, so what does it matter to him.  But, it will matter to the average American, who is giving up the best health care system in the world for an uncaring and undelivering government bureaucracy.

There is no sign that the Adminstration has any plans to deal with current doctor shortage for folks that have been forced into Medicaid.  But, they can point to lower costs.  One way of reducing costs is to not provide health care for the poor.  That seems to be the favored track of the Obama Administration.

Saturday, September 20, 2014

The Holder Transfer Payments

Increasingly the US government is a transfer machine that takes money from one group of citizens and gives it to others.

The Eric Holder lawsuits against the financial service industry is a great example of wealth transfer from average Americans to the friends of Eric Holder.

When a financial service company settles a lawsuit brought by the Attorney General's office, who pays?  Bad guys?  Think again.  The owners of the financial service companies are the payers -- not the bad guys.  And, who owns the financial service companies?  You do.

Long ago, whatever bad guys worked for these companies left for greener pastures.  Very few folks who may have played a role in parlaying misleading mortgages are involved today with financial service companies.  Even the owners of these companies are different.

It is, as if, someone who lived in a particular house on your block committed a crime, and the police arrested the person who bought the house from the criminal and who had absolutely no knowledge or participation in the crime.  The real bad guy could be miles away, relaxing and enjoying the fruits of his/her crime.  So, now the police come arrest an innocent person who just happens to be today's owner of the same house.

That's what Holder is doing.  He is extorting money from today's owners by alleging a crime by yesterday's employees.

Note what is not happening.  There are absolutely no charges or lawsuits against any individuals that perpetrated these so-called frauds.  No, indeed.  They will never be made to pay for these alleged crimes.  Instead, innocent shareholders, many of whom may have bought the stock long after the alleged misdeeds occurred, will pay the Holder transfer tax.

So, who wins -- friends of Eric Holder -- mostly various political interest groups like Moveon.Org receive much of the money that Holder is able to extort from the average, innocent taxpayer.

Retirement funds bear the biggest brunt of the Holder transfer tax, since more than 60 percent of financial service companies are owned by the retirement funds of average Americans.  Wonder what crime they committed?

So, large numbers of Americans will retire on a smaller pension fund thanks to the Holder transfer tax, while Holder's buddies live large.

Tuesday, September 16, 2014

Millennials' Malaise

An interesting article in today's Washington Post by Catherine Rampell mulls over the frustrating plight of America's 18-35 age group. The main points are: dwindling marriage rates, dwindling home ownership rates, dwindling job opportunities. These are all the predictable outcomes of the growth of big government solutions imposed on the economy over the last quarter of a century and the significant shifts in emphasis in our education system.

Ultimately skill development and work ethic determine economic outcomes.  When a society no longer thinks these things are important, the society loses its economic momentum.  The contrast between Asia and the western economies could not be more stark.  Asian youth find opportunities for jobs, housing and family development that were unheard of forty years ago.  The exact opposite is taking place in the western world.

Talk to American employers or visit the modern American university. 

American employers will tell you that, even with large levels of unemployment and record numbers of people leaving the work force, the pool of talented people with strong work ethic has been declining for more than a generation in the US. 

Any brief perusal of a college newspaper today will show what is emphasized on campus -- political correctness mainly.  Skill development including reading, mathematics, science and history are increasingly afterthoughts in the modern American university.  Instead, there is a constant focus on social issues and the "correct" political attitudes.

College graduates in modern America often view the job market that they are plunging into as a reward for their years of meandering through an increasingly dysfunctional education system. Instead of starting out and beginning the process of "paying their dues," many college graduates expect to move right into a lifestyle that matches the free flowing life of booze, sex and drugs that were the main components of their college days.  To many graduates, they have already paid their dues.  Now is reward time.

Meanwhile, politicians encourage a lack of interest in skill development and work ethic by beating the drums of inequality and promoting poverty-encouraging measures like increasing levels of the minimum wage.  All of this reinforces the idea that we are all "entitled" to, more or less, everything -- medical care, housing, old age income security and on and on.

The reality is that no one is really entitled to anything that their skill set and their efforts can't justify.  For a while, the political process can distort the workings of the economy, so that it seems like government can provide everything.  But, it can't.

Sooner or later the economic vitality and the cultural vitality of a country begins to wither away.  We can see that in modern America and the millennials are the first generation to feel the full brunt of the changing America.  European youth have been experiencing this phenomenon for decades, but for Americans, this is new.

Fortunately, there is positive change in other parts of the world.  This is likely to be the Asian century, as Asians, for whom skill development and work ethic take center stage, the future looks bright, especially for the young.  In some ways, this is a good outcome.  Good results should accrue to those who work to improve themselves and bad results should accrue to those who complacently think they are entitled to the fruits of other people's labor.






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Sunday, September 14, 2014

If Profits Are Evil, Then So is Economic Progress

Back in the good old days -- before the beginning of the seventeenth century -- the way to get rich was to get an army and then steal and extort from and enslave your neighbors.  That pretty much sums up world history until industrialization and free markets broke through on a grand scale in the seventeenth century.

Prior to the breakthrough of industrialization the plight of the vast bulk of mankind was to live relatively short lives with little to eat and no hopes of economic betterment.  That's just the way it was -- everywhere.

The critics of free markets think somehow that market outcomes are worse than government outcomes.  History suggests the opposite.  When free markets had little or nothing to do with outcomes, goods and services were allocated more or less by brute force and those with military muscle did well and the vast majority of humans lived in constant hunger and deprivation.

By the twentieth century free markets had created the wealthy societies of Western Europe and the US, while the rest of the world languished in hopeless retardation (as much of the world still does).  The poorest of the poor in Western Europe and the US lived far, far better than the top quartile of the population in any and every country outside of Western Europe and the US.  Free markets delivered prosperity for the folks at the bottom of the economic pile.

There have always been rich folks -- long before there were markets.  But, until free markets came along poor folks always remained poor folks with no hope of economic improvement.

In every society in the history of the world, there has been inequality of economic outcomes.  The interesting question is not whether there is inequality -- there is always inequality -- even in the "workers paradise" of the old Soviet Union.  The interesting question is what system best promotes the interests of those at the bottom of the economic pile.  To this question, there is only one answer that history will support.  Free markets are the best hope for those at the bottom of the economic pile.

It wasn't the institution of the minimum wage or government health care that lifted the economic hopes of the poor in the US and Western Europe.  In fact, the case can be made that these institutions and similar institutions designed to have government aid the poor have been total failures.  Left free to pursue their own fortune the vast bulk of poor people in Western Europe and the US became the middle class throughout the western world from the early seventeenth century to the beginnings of the twentieth century.  That's why poverty is now defined on a relative basis.  An American deemed by the bureaucracy to be in poverty would be considered wealthy in all but a few countries in today's world.

When you have few resources and few advantages in life, it helps if there are no government bureaucrats creating and enforcing laws that effectively prohibit you from learning a skill or working.  It also helps if the government doesn't dictate how you receive your income (through employer mandates).  All of these restrictions on free labor contracting really only hurt poor people, as the wealthy are rarely effected by this stuff.

Government poverty programs are notoriously ineffective.  Their main point seems to solidify an economic base for politicians.  You can look at modern America as a great example.  Sustainable economic growth is based upon building the skill sets required to produce things that other people want.  There are no historical examples that run counter to this simple proposition.  Nor, will there ever be.

Friday, September 12, 2014

Jason Furman is Embarrassing

Jason Furman, the chairman of the President's Economic Council, is presumably the principal advisor to the White House on economic policy.  Today, he appeared on CNBC to give his views.

Furman would have been a perfect policy advisor to the old Soviet Union.  He views businessmen as automatons, who have (and should have) no interest in profit maximization (pity their poor shareholders).  For Furman, everything is a political agenda.

Furman's number one idea for boosting economic growth in the US is to raise the minimum wage.  So much for being an economist.  His number two idea is to punish corporations who have moved some of their business operations out of the US to avoid the absurd levels of US corporate income tax.  If Furman gets his way, no rational corporation would ever headquarter themselves in the US, with chimerical and arbitrary policies, such as Furman advocates.

There must be something in the water around the White House that turns previously rational people into economic morons.  This would explain Administration economic policy and the resulting feeble economic growth of the US economy.  It is hard to stifle the US economy, but policy folks like Furman have succeeded with their proposals that serve only to convince rational business folks in America to sit this out until a rational Administration replaces these folks.

Monday, September 8, 2014

Chuck Schumer on Making America Less Competitive

As if the very highest corporate income tax rates weren't sufficient, Senator Chuck Schumer is fashioning some new legislation that punishes American corporations even more.

At the rate Schumer is going, having your corporate headquarters in the US is going to be a losing proposition for virtually any corporation.

Schumer, who never saw a tax hike that he didn't favor, has a long list of ways to spend taxpayer money and is hoping to get as much from corporate America as he can.

Ever hear the story of the goose who laid the golden egg.  Schumer is out to kill it.