Views on the News

Views on the News*

July 13, 2013


For decades, hubris has been the common currency of the economic policy world, and it is killing the economics profession.  In the 1960s and 1970s, liberal economists believed they could eliminate all poverty. In the 1980s, conservatives thought tax policy could permanently raise the savings rate. In the first decade of this century, some central bank economists thought they could engineer monetary policy (with the help of global capital inflows) to eliminate the U.S. business cycle.  Now the world is being flooded with money and debt.  The relational matrix of debt, interest rates, and growth has become the great conundrum of our time, a Rubik’s Cube of difficult choices with unintended consequences. Yet as the financial system has grown more stunningly complex, hubris strangely has shifted into high gear.  Keynesians demand massive new government spending, insisting that with the economy having so much excess capacity, debt doesn’t matter.  Many conservatives demand fiscal austerity, believing the announcement of which will somehow attract global capital.  The big granddaddy of them all is the hubris surrounding quantitative easing (QE), a policy tantamount to propping up a bicycle with a set of monetary training wheels.  In the United States and Japan, central bank economists are thrilled because QE rallied stock markets. The hope is that affluent stock owners will increase consumption, creating a trickle-down monetary effect to the rest of the economy.  Seldom mentioned is that central bankers have a terrible track record at identifying and controlling financial bubbles, including stock market bubbles.  Each January, the FOMC has predicted annual growth of roughly 3.5%.  The outcome was always closer to 2%, despite a grab bag of ever-increasing monetary stimulus.  Economists fare the worst in understanding politics.  The economics profession has ample reason to feel defeatist. For decades, despite a variety of fiscal and monetary stimuli under both parties, middle-class wages and salaries in real terms have stagnated.  Most Americans can sense something is fundamentally wrong. The traditional fiscal and monetary tools aren’t working the way the experts predicted.  Six in ten Americans still sense the country is moving in the wrong direction.  The field of economics is dying.  It is becoming less a science and more an art.  An economic policy rethink won’t be easy, but the first step is to deep-six the hubris, and we should mark the death of all government five-year economic forecasts.

(“The Death of Economics” by David M. Smick dated July 8, 2013 published by The Weekly Standard at http://www.weeklystandard.com/articles/death-economics_738065.html )


The American economy is strange and troubling with several paradoxes from the terrible 2008 crash and its aftermath.  First: for U.S. financial and equity markets, there has already basically been a full recovery from the Great Recession. Key indicators of performance for these markets-the Dow30, S&P500, Russell 2000, NASDAQ, etc. are all at higher nominal levels today than they were five years ago.  The story for the real economy, where tangible goods and services are actually created, is not nearly so happy, however.  Real per capita output in America is still distinctly below its level six years ago.  For our macro-economy, in short, we are looking at something now approaching a "lost decade."  When it comes to the labor market, there is no way to sugarcoat it: the situation here is basically a disaster, a crisis far worse than most commentators and policymakers seem to recognize, and with no clear prospects for appreciable improvement over the near-term horizon.  We as a country do a very bad job of measuring joblessness.  Mis-measuring the scale of the problem has significantly contributed to our present unwarranted complacency.  While the unemployment rate may be fine for some tasks (such as estimating how many people will be looking for unemployment benefits) it is utterly incapable of gauging how many should be, or could be, looking for work in the first place. A more basic and intuitively meaningful sense of how the jobs market is performing in this respect comes from the employment-to-population ratio (or simply the "employment ratio") for adult men and women.  When we look at these numbers, we get a very different picture of labor market conditions in America. By these numbers, there has been no "recovery" whatever in the jobs market since the Great Recession. Quite the contrary: the employment ratio today appears to be stuck at the same awful level recorded in early 2010-the worst level for more than a generation.  In purely arithmetic terms, the great bulk of the change is due to an exodus out of the labor force-that is to say, to a massive long-term rise in the number of adult men who are neither working nor seeking work.  Of course population aging has something to do with this gradual but cumulatively immense male flight out of the workforce, but we should not exaggerate this effect.  The plain fact is that men in what are generally regarded as conventional working ages have been increasingly opting out of the workforce altogether.  America's leadership has not yet paid serious attention to the collapse of work in modern America which is an egregious oversight, and our long-term social, political, and economic health all depend upon redressing this critical flaw in our country today.

(“The Astonishing Collapse of Work In America” by Nicholas Eberstadt dated July 10, 2013 published by Real Clear Markets at http://www.realclearmarkets.com/articles/2013/07/10/the_astonishing_collapse_of_work_in_america_100465.html )


President Obama is “historic,” but by almost every method of measure, this historic administration has been an unmitigated “historic” disaster.  With the latest round of unemployment numbers, we’ve just passed the longest recorded stretch of unemployment above 7.5% and we’ve turned out backs on allies and embraced enemies.  We’re also well on the way to nationalizing 20% of the nation’s economy and making the federal government the sole arbiter of our health care.  It was announced, conveniently at the start of a long holiday weekend, that President Obama was delaying the start of the employer mandate portion of his signature legislative accomplishment – the Affordable Care Act, also known as ObamaCare.  By delaying the implementation of this portion of the law, something not provided for in the law itself, the President has moved from ignoring laws passed by his predecessors (DOMA, immigration) into the rarified “historic” air of ignoring laws he passed himself.  ObamaCare has always been a means more than an end.  The progressive dream of a single-payer health care system is the end, but it’s an end the American people never would accept all at once.  If the system in which they found themselves failed so miserably, maybe even collapsed, single-payer would be a much easier sell.  ObamaCare was a mess from inception, one that would never work.  Costs for both consumers and the government skyrocketed when the opposite not only was promised but offered as one of the main justifications for passage.  Another was to provide coverage to the uninsured, but the Congressional Budget Office estimates that even when fully implemented ObamaCare would leave 30 million Americans without health insurance.  With those problems unaddressed, the system would collapse eventually anyway, but an eventuality isn’t soon enough for progressives.  People with insurance would be unhappy with it and the costs, but people adapt, unless, that is, the system was nudged to fail even more spectacularly than it already is going to, and sooner.  Rising costs for consumers were anticipated, even hoped for, but those will be blamed on “greedy insurance companies,” much like gas tax hikes are blamed on “greedy oil companies” rather than the hidden hand of government.  The Obama administration’s move to delay the employer mandate by a year incentivizes employers to drop their employee insurance coverage sooner.  More people will be forced into state level insurance exchanges, which will be expensive bureaucratic messes. Their failure and rising prices will be blamed on “greedy insurance companies.”  Waiting to swoop in to save us again will be the very same government that created the mess in the first place.  Big government fails and progressives are at the ready with an even bigger government solution.  We’ve seen it in the ever-expanding “war on poverty” and now we’re seeing it again.  This plan works only if people have the time to get used to the individual mandate. The only way for people to be made fully aware of just how disastrous ObamaCare is would be to have it all hit them at once. It won’t be pleasant, but it’s the difference between the frog dropped in boiling water and the one in the water as it’s brought to a boil.  The full-force of ObamaCare’s destructive nature hitting the American public and economy at once is repeal’s only hope, and repeal of a President’s signature legislative accomplishment, especially one with that President’s name married to it, would truly be “historic.”

(“An ‘Historic’ President” by Derek Hunter dated July 7, 2013 published by Town Hall at http://townhall.com/columnists/derekhunter/2013/07/07/an-historic-president-n1635237 )


The Founding Fathers granted the federal government several enumerated powers and a few implied ones, and then the Supreme Court took that idea a few steps further and granted the federal government the authority to use its taxing power to compel the citizenry to do whatever it wants it to do, as long as it uses certain turns of phrase. The federal government has developed a wide variety of ways to tempt states, local governments and individuals into obeying its most heartfelt wishes and desires without using its monopoly on violence.  There are two basic ways in which the federal government incentivizes state governments to spend money on things the federal government likes: through block grants and through matching grants.  Block grants are a mere lump-sum transfer, conditioned on the state carrying out certain activities.  For example, the federal government promises the states a fixed block grant worth a total of $16.5 billion a year for welfare programs.  Matching grants, on the other hand, depend on the states' own specific spending level: The more a state spends, the more money it receives from the federal government.  Medicaid services are a good example. The federal government picks up between 50% and 74% of the cost of each state's Medicaid program, depending on how rich the state is, for a total of $265 billion this year.  The country as a whole may also feel that a certain level of redistribution from rich states to poor states can help those poor states provide acceptable local public services, much like money is redistributed from rich to poor individuals through the federal tax system to enable the poor to afford higher levels of private consumption.  As is typically the case, the federal government has grown way beyond what would be a reasonable size based on these straightforward considerations.  There is no such thing as a free lunch, but there are heavily discounted lunches and as we have seen, even those come at a price.

(“Everybody wants a piece of federal pie” by Stan Veuger dated July 7, 2013 published by American Enterprise Institute at http://www.aei.org/article/economics/fiscal-policy/everybody-wants-a-piece-of-federal-pie/ )


It used to be that most of the people promoting race hate were white, but the sources of racism are different today from what they were in the past.  According to a recent Rasmussen poll, 31% of blacks think that most blacks are racists, while 24% of blacks think that most whites are racist.  The difference between these percentages is not great, but it is remarkable nevertheless.  After all, generations of blacks fought the white racism from which they suffered for so long.  If many blacks themselves now think that most other blacks are racist, that is startling.  Many black "leaders" and their followers have not waited for facts about who was guilty and who was not, but have immediately taken sides, based on who was black and who was white.  Among whites, according to the same Rasmussen poll, 38% consider most blacks racist and 10% consider most whites racist.  Broken down by politics, the same poll showed that 49% of Republicans consider most blacks racist, as do 36% of independents and 29% of Democrats.  The civil rights movement in 20th century America attracted many people who put everything on the line for the sake of fighting against racial oppression, but the eventual success of that movement attracted opportunists, and even turned some idealists into opportunists.  Over the generations, black leaders have ranged from noble souls to shameless charlatans.  After the success of the civil rights insurgency, the latter have come into their own, gaining money, power and fame by promoting racial attitudes and actions that are counterproductive to the interests of those they lead.  The time is long overdue to stop looking for progress through racial or ethnic leaders because such leaders have too many incentives to promote polarizing attitudes and actions that are counterproductive for minorities and disastrous for the country.

(“Who Is Racist?” by Thomas Sowell dated July 9, 2013 published by Town Hall at http://townhall.com/columnists/thomassowell/2013/07/09/who-is-racist-n1636228 )


The Republican Party was largely founded for one purpose: to stop the spread of slavery into the nation’s western territories, and if possible, abolish it altogether, and today if you think about it, abolishing government slavery is still the core purpose of the Republican Party.  The logical flip side of this coin, of course, is that the Democrat Party was, and still is, a pro-slavery political party.  A little history: near the end of the Civil War and after his re-election, Abraham Lincoln made the abolition of slavery in America his top priority.  During the 1864 presidential campaign, the Republican Party platform resolved to abolish slavery by constitutional amendment.  Democrats in both houses of Congress fought this amendment ferociously.  The measure passed the Senate, but the vote was far closer in the House.  In the end, every Republican in the House voted for the measure, and they were joined by 16 Democrats, for a final tally of 119 to 56, just enough votes to meet the two-thirds required for passage.  Thanks to the Republican Party, slavery was soon abolished in the United States.  Republicans are still fighting against slavery, and Democrats are still doing everything they can to keep people enslaved.  Today, there are two major differences: (1) Democrats are no longer satisfied with keeping blacks enslaved; today they want EVERYBODY enslaved, and (2) the Democrats have gotten much, MUCH better at convincing those in slavery that they really are not in slavery.  The Obama campaign Life of Julia is a perfect example: in every case, the government is not liberating, but enslaving this poor nondescript woman.  In every phase of her life, Julia has to turn to the government to survive.  She can’t get educated without the government’s help.  She can’t control her own reproduction without government help.  She can’t have a child or start a business or retire without the government.  There is no better definition of slavery than that.  The Republican Party must show the American people that they are becoming enslaved to government, and then remind the nation that it is still the party that stands for freedom from slavery and wake up the Democrat Party for generations to come.

(“Republicans: Still Fighting Slavery” by Mike Jensen dated July 11, 2013 published by Canada Free Press at http://canadafreepress.com/index.php/article/56480 )


Ronald Reagan once famously said “I didn’t leave the Democrat Party, the Democrat Party left me,” and these days, millions of conservatives around the country feel the same about a Republican Party seemingly hell-bent on abandoning every principle other than crony capitalism.  Conservative rock star Sarah Palin warned that if the GOP continues to back away from the planks in the Republican platform, from the principles that built this party of Lincoln and Reagan, then conservatives will leave to become independents, kind of with that libertarian streak that much of us have.  In other words, conservatives want government to back off and not infringe upon our rights.  This always raises the issue about a possible third party.  Venting frustration is one thing. Acting upon it is entirely another. When we’re frustrated, there are plenty of things we can justify as a response, but many of those things aren’t necessarily prudent.  This week we commemorate the anniversary of our Founding Fathers declaring their independence, so maybe it is time for conservatives to objectively analyze declaring their independence from the GOP.  First, weigh the pros and cons:




The Vision

The absolute worst use of time for conservatives would be essentially starting over to form a 3rd Party movement that may take decades to realize.

Instead of wasting more time on the rotting corpse that is the GOP, better to get to work now on what will inevitably take its place.

Political Impact

Leaving the Republican Party would essentially hand almost every election of consequence to the Democrats for the next several years and render conservatives meaningless.

By forming a 3rd Party, we become de facto independents, and instead of being taken for granted we become a crucial swing vote.


The reality is the two dominant parties have made this kind of effort almost impossible without an unprecedented fundraising and legal effort to build up to it.

If there’s anything American history has taught us, it’s that when we step out on faith and principle, providence handles the rest.

The Future

Most of us would agree the party is broken, but let’s not throw the baby out with the bath water here.

The longer we wait, the harder it will be to do what we’ll eventually have to go ahead and do anyway.

Now that you weighed the pros and cons, let the People decide.

(“Palin’s Provocative Proposal: A Cost-Benefit Analysis of Conservatives Leaving the GOP” by Steve Deace dated July 6, 2013 published by Town Hall at http://townhall.com/columnists/stevedeace/2013/07/06/palins-provocative-proposal-a-costbenefit-analysis-of-conservatives-leaving-the-gop-n1632357 )


* There is so much published each week that unless you search for it, you will miss important breaking news.  I try to package the best of this information into my “Views on the News” each Saturday morning.  Updates have been made this week to the following issue sections:

·  Language at http://www.returntocommonsensesite.com/intro/language.php

·  Elections at http://www.returntocommonsensesite.com/dp/elections.php

·  Energy at http://www.returntocommonsensesite.com/dp/energy.php

·  Taxes at http://www.returntocommonsensesite.com/dp/taxes.php


David Coughlin

Hawthorne, NY