Wednesday, September 22, 2010

Romer First, Now Summers....Gone

The two chief economic advisors to Obama will not be around in 2011. Summers announced today that he is returning to his secured, tenured professorship at Harvard (which he cannot do if he lingers in Obamaland past January the 1st). Romer has already returned to her protected sanctuary at Berkeley. Neither of these two need worry about the plight of the millions of unemployed Americans. Romer and Summers have safe jobs. They work for the government, i.e. they are professors.

Now, all eyes turn to what kind of Keynesian will replace Romer and Summers. It is unlikely that Obama will change stripes. He likes big government and despises the private sector, so that if he goes after a corporate type, you can be sure that the "new corporate type" will be someone whose sympathies rest with big government, higher taxes, and more regulation.

Only a new Congress can reverse the disastrous course of this presidency. Shifting the deck chairs won't help as long as the Captain Queeg is in command.

Monday, September 20, 2010

The Unemployed Over 50 -- Never Work Again?

Why can't the 50 and over population find jobs? The New York Times has a lengthy article today spelling out the cold hard one wants to hire anyone over 50 years of age. Why? The article gives no reasons and laments the problem.

The answer is obvious.

If you are an employer and you hire someone over 50 years of age, that person can sue you for age discrimination if you every decide to let them go. In fact, a large number of such folks do sue for age discrimination when laid off. They are part of the protected class along with minorities, women, etc. Who wants to hire people who can sue you if you lay them off later? The answer: no one.

Over 50s will not get hired until the absurd "age discrimination" laws are repealed or until over 50s gain the right to waive their rights to sue. As things stand now, only a fool would hire someone over 50 years of age.

You might say: well isn't that not hire someone because they are over 50 years of age. The answer is yes. But illegal immigration is also illegal.

Thursday, September 16, 2010

That We Know

Larry Summers, the main economic advisor, said on CNBC this morning that "a failure of regulation caused an economic crisis.....that we know" He could not be more wrong. A housing bubble induced by favorable tax treatment of housing combined with Fannie Mae and Freddie caused the economic crisis. Regulation actually made matters worse. The previous Basel accords encouraged banks to substitute riskier assets for safe assets (the new ones are likely to do the same).

Government regulation has never prevented a crisis and never will. Most economic crises are government induced. The government needs to get out of the way.

If Summers doesn't understand what caused the financial collapse of 2008, then it's no surprise that his policy recommendations to Obama have been as misguided as they have been. Summers should head back to academia, where he can continue to pretend that his policies work. People in the real world know better. "That we know."

Wednesday, September 15, 2010

The Role of the Tea Party

Yesterday's Republican primary results shocked the "official" Republican establishment and showed the power of the Tea Party. Why the Tea Party?

The truth is that Republicans share equal blame with Democrats for the colossal mismanagement of the American economy and the massive national debt. Republican moderates have lined up with Democrats time and time again over the past fifty years to produce the margins required to spend our way to our current plight.

The role of the Tea Party is to say: "no more." The Tea Party is not about electing Republicans or Democrats, but about electing people who will begin to tackle the project of rolling back big government. This is an important mission. More power to them.

Who cares which party controls the US Senate? The issue is who will begin to restrain the growth of government and move the country back toward free markets. Supporters of "cap and trade" like Mike Castle are no help in this great endeavor.

Long live the Tea Party!

Sunday, September 12, 2010

The Basel Capital Requirements

This week international central bankers are forging a new set of rules for banks that would move capital requirements from 4 percent currently to 7 percent (of outstanding loans). This absurd new policy comes just as the world economy is teetering on the brink, especially in the US and Western Europe, where the new Basel rules will have the most impact.

Why is it that no one wants the world economy to have credit? By every measure bank lending has shrunk, not only in the US but throughout Europe? How is a recovery supposed to take place when every "reform" measures reduces the available amount of credit?

The time to reduce or slow credit availability is during a boom, not during a recession. The Basel rules will only make things worse and could plant the seeds of a lengthy US-Western Europe slowdown in economic activity. Combined with the wrong-headed policies of the Obama Administration -- credit card reform, debit card reform, consumer protections in the FinReg bill -- the net effect of all of this is to dramatically reduce the available credit necessary to fuel a recovery.

Policy makers and politicians should take a holiday. The more they do, the harder it is for free markets to produce an economic recovery.

Maybe, just maybe, more regulation and more government is not the answer.

Monday, September 6, 2010

The Party of "No"

We constantly hear the comment that Republicans must put forth new ideas to get the economy going. Nope. That would be a big mistake. What the Republicans need to do is make the case that had the Democrats done nothing, the US economy would, today, be in a better place. And, it would be.

What Obama and the Democrats have done is create roadblocks to recovery. What the Republicans need to do is remove the roadblocks. The party of "no" is the way to go.

Free markets will bring recovery. Government intervention will simply impede recovery and prolong stagnation. That's what happened from 1929-1940 and that is what is happening now.

No new stimulus plans...please!

Saturday, September 4, 2010

Targeted Stimulus Ala Obama

Now, with 15 million Americans out of work, the Obama folks are preparing a new "stimulus" package to be unveiled next week. As usual, the Obama plan is "targeted." Targeted plans never work, because they are very easy to "game." You simply hire a good tax attorney and shoehorn yourself into the "target."

Nothing good can come from the Obama packages. Even suspending the payroll tax temporarily won't work, because it is temporary (as well as "targeted").

The only thing that works is for government to get out of the way and let free enterprise provide the economic recovery. Reduce the size of government and reduce the role of government into free markets.

Those who thinks the 1980s and 1990s was a bad economic period(which Obama seems to think), should support Obama. The rest of us would love to return to the economy of the 1980s and 1990s, when free markets reigned and unemployment reached a low of 4 percent.

Wednesday, September 1, 2010

Going It Alone

You might think that the whole world is plunged into a depression. If so, you could not be more wrong. Parts of Europe are booming, China growth is still well above 6 percent, India clocked in at over eight percent in the most recent quarter. Even Russia has growth exceeding four percent in this past quarter.

The US is the world's laggard. We have very high unemployment and anemic growth in a world that is recovering....just not us. This parallels a similar episode in the 1930s when the Roosevelt led recovery of the 30s faltered as the rest of the world sprinted to an economic recovery. In both the current episode and the experience of the 1930s, the heavy hand of government is the culprit.

The Obama/Pelosi/Reid agenda has stifled the US economy, while the rest of the world is recovering quite nicely. Most countries in the world have chosen to expand capitalism and free enterprise, including China interestingly, while the US has moved dramatically toward a government planned economy. Even Europe has owned up to its inability to afford the welfare state, while the US has spent the past two years dramatically expanding the welfare state. US government spending rose 16 percent in 2009, a rise not matched anywhere in the civilized world.

Obama and his cohorts are on a lonely path to economic stagnation that the rest of the world wants no part of. Come November 2nd, the American public finally has an opportunity to change this disastrous course.