New Study Reinforces Theory That New Deal Extended Depression and that Obama Risks Worse Fate

The authors say: "[Franklin D Roosevelt's] interventionist policies and draconian tax increases delayed full economic recovery by several years by exacerbating a climate of pessimistic expectations that drove down private capital formation and household consumption to unprecedented lows."

Although the authors support the Federal Reserve's moves to slash interest rates to just above zero and embark on quantitative easing, pumping cash directly into the system, they warn that greater intervention could set the US back further. Rowley says: "It is also not impossible that the US will experience the kind of economic collapse from first to Third World status experienced by Argentina under the national-socialist governance of Juan Peron."

The study is written by economists Charles Rowley of George Mason and Nathaneal Smith of the Locke Institute. It has been endorsed by nobel laureate James Buchanan. (No, not that one.)

Read more.

Germany and France Snap Out Of Recession Despite Stimulus Packages That Obama Called Too Small

Germany and France enjoyed a shock return to economic growth in the second quarter of the year, data showed on Thursday, ending their recessions earlier than many policymakers and economists had expected.

German gross domestic product rose by 0.3% in the second quarter, bringing an end to the country's deepest recession since World War Two and boosting hopes of recovery in the broader euro zone.

French GDP also grew by 0.3% in the second quarter. The consensus in a Reuters poll of economists had predicted a 0.3% quarterly contraction in both countries.

An interesting note...their recessions were significantly deeper than that in the U.S. (Germany's GDP contracted by 7.1% on the year compared to 3.9% in the U.S.), but look at the size of their stimulus packages in comparison:

So smaller, targeted packages (France = Less than 1.5% of GDP, Germany = 4.3% of GDP) appear to have been more effective than just throwing money at the problem (U.S. = almost 7% of GDP). Huh...

Also, who would have thought that the U.S. would be the most Keynesian country in the world (well, besides China, but they were running a massive surplus and are, well, COMMUNIST), and by a lot over France. Oh, how things have changed.

Source: http://money.cnn.com/2009/08/13/news/international/europe_economy.reut/index.htm?postversion=2009081304

Moral hazard, anyone?

In reference to a new New York program funded by federal stimulus cash (with a little extra from George Soros) that gives $200 for each kid under the premise of back-to-school shopping:

"It's free money!" said Alecia Rumph, 26.

Now, there were definitely worse uses of the stimulus cash around the country, and not being a New York citizen, this blog will not attempt to question the choice.

However, this shows the problem with Obama's promises of everything for everyone with no consequences. Bush did it with his "Go shopping!" request after 9/11, and if someone doesn't step in, it's only going to get worse.

Source: http://www.nydailynews.com/money/2009/08/12/2009-08-12_billionaire_feds_give_out_175m_to_aid_neediest_students_around_the_state_its_fre.html

Peter Vigue Sounds Increasingly Like A Candidate

On the same day that Senate President Elizabeth Mitchell (D-Vassalboro) shocked the state by declaring her candidacy for Governor, Cianbro CEO Peter Vigue gave a speech in Waterville that outlined his plan for Maine's economy.

The (presumed) Republican was in the backyard of likely primary opponent (and Republican Punk's favored son) Paul LePage, talking about his long-desired East-West highway, extending I95 up to the Canadian border, increased rail use, improved energy infrastructure, a $300 million "revolving capital loan" to attract business, and turning Maine into the "food basket" of the east due to Maine's proximity (one day's drive) to 2/3 of the U.S. population.

While his plans seem to be a little convuluted at times, he is a very intelligent man, strong leader, and has the business acumen and fiscal and regulatory conservatism that Maine needs. It seems unlikely that he'd be on this (decidedly non-Cianbro related) tour if he didn't have something up his sleeve. We'll keep our eyes out.

"Progressive" Economics Described Perfectly

1. Profits are a cost. Therefore, when the government runs a business, the absence of profit motive reduces everyone's costs. If all businesses made zero profits, then costs would be correspondingly lower and running the economy would be cheaper - and fairer.

2. Progessives are not against markets, which are known to create social benefits...except in cases when it's obvious that government is the fairer alternative.

3. Fiscal, and especially tax, policies should be decided solely on the basis of fairness.

4. Employers decide how much their employees cost them to employ; businesses could simply give employees more wages if they wanted to. But businesses don't want to because they're greedy. Government ought to force employers to bargain in good faith. Fork over that wasted income to those who deserve it, or else. That would be fair.

5. It's BS to think that taxes involve incentives. It's well known that people don't modify their efforts in response to taxes. Maybe this is because taxes aren't a cost. Or maybe it's because taxes are an exception to the principle that costs create incentives. Or maybe because people just don't think of taxes as a cost. Just thinking about this gives a progressive a headache, so let's change the subject. What's your stance on requiring food labels in restaurants?

6. Taxes on capital don't discourage capital formation as long as they're teensy-weensy taxes on lots and lots of transactions. It's a joke not to think this.

7. Wealthy people who don't want to pay more for government programs are greedy and selfish. All people should want to pay their fair share to support their government, especially when other people have to be more fair than me. And ordinary people who argue against higher taxes based on principles of efficiency or welfare optimization are the dupes of greedy corporate interests. But enough of this. What's your stance on fighting for bike paths?

8. "Greedy corporate" is one word. Sometimes the "greedy" is silent.

9. In every transaction between two parties, one party is an oppressor and the other a victim. If in doubt about which one is which, the oppressor is always the one with more money.

Source: http://www.asmainegoes.com/content/progressive-economics-made-plain-0

Ahnuld Watch: New Film Industry Tax Credits Take Effect

All eyes are back on the biggest RINO (that's Republican-In-Name-Only) in the country, Arnold "bounce the bi's off the tri's" Schwarzenegger, as California approved inevitable Oscar winners Beverly Hills Chihuahua 2 and Naked Gun 4 for tax credits under "The five-year, $500 million incentive program, signed into law in February, began accepting applications on July 1. In a statement, Schwarzenegger said the tax credits were crucial for retaining film and television productions — and the economic multiplier effects - in California."

Oh Ahnuld. You do not understand that the reason the movie industry is starting to spread out is the same reason every other major industry is leaving: high taxes and regulations. Meanwhile, Texas, arguably the most fiscally conservative state in the nation, is barely feeling a recession and is getting a constant influx of new citizens. Seriously, a U-haul rental from San Francisco to Houston costs nearly three times as much as the same distance and time going the other way. That is the market speaking in spades right there.

So here's an idea: rather than taking away revenue from one of the largest budgets disasters in American history, you should remove the many subsidies for favored industries you've instituted as Governor and lower taxes for ALL industries (and more importantly, people). Hollywood will come back, as there are economies of scale already, but then the market will form new industries in other areas where California has comparative advantage, that you are nowhere near smart enough to realize.

Maybe than you can run a conservative government instead of a Corporatist one. Again, just a thought.

Read more: http://www.politico.com/news/stories/0709/25556.html#ixzz0MfcGzePb

Strange Bedfellows: Republicans Are Joined By Greens In Opposing Maine Tax Reform

If the endorsement of the Wall Street Journal editorial board and The Economist magazine weren't enough to let the Maine Republican Party know they were wrong in opposing the Democrats' tax reform, this should be the final sign needed. The GREEN PARTY...yes, the party of Ralph Nader, Jello Biafra, and Pat LaMarche...is joining the Republicans in opposing the reform by calling it a "flat tax."

A quick recap of the reform: it would simplify the current four-tiered progressive income tax code that ranges up to 8.5% for the top bracket by cutting it to 6.5% for families earning under $250,000 and 6.85% for everything above that. To make up for the lost revenue, it expands the sales tax to cover previously exempt favored industries such as amusements, repairs, tourism, etc. and raises the tax by 1% on lodging and meals. So basically, it makes the tax code simpler, flatter, and broader. In essence, more fair and a step in the direction Republicans supposedly want.

Lower and flatter income taxes are always a good thing because it creates incentive for workers to keep working. Broader taxes mean that the state will avoid the trap seen in California, New York, and some European countries, whereby all the taxes come from a small percentage of the population and once a recession hits, revenue plummets.

Republican opposition to this package is based solely on politics. They smell blood, thinking that the Democratic control from top to bottom within the government during a recession will allow them to retake the Blaine House for the first time in 16 years and the legislature for the first time in 30+ by whipping up populist rage. And it is this kind of petty, anti-ideological politics that explains why they haven't.

Read More: http://kennebecjournal.mainetoday.com/news/local/6664630.html

Michigan Democratic Party Shows It Has No Clue

What would you do if you were the party in control of a large state with the highest unemployment rate in the nation and a dying industry at the center of your economy. If you are the Michigan Democratic party, you raise your minimum wage to a job-stifling high of $10!!!

While there are arguments for the minimum wage, such as that it prevents worker exploitation, there is no way around the fact that it benefits only low-income workers who keep their job, while forcing employers to let some other employers go/raise prices to pay for those raises. Money doesn't come from thin air.

It is rare that we see such an obvious case of a group ignoring facts to stick to basic ideology, and (in their mind) win working class votes.

Read more on the MDP's populist turn: http://blogs.tnr.com/tnr/blogs/the_plank/archive/2009/07/27/would-a-10-minimum-wage-save-michigan-democrats.aspx

Obama/Romney Tied In Potential Matchup

This is a few days old, but I forgot to post it. Sorry, my bad. Anyways, here goes the good news for the GOP from Rasmussen:

If the 2012 presidential election were held today, President Obama and possible Republican nominee Mitt Romney would be all tied up at 45% each, according to a new Rasmussen Reports national telephone survey.

This is especially good considering Romney has emerged as the frontrunner (assuming David Petraeus and Condi Rice stay above the fray, as expected). All of this, the frontrunner status and the running neck-and-neck with Obama, have to do with the economy. As long as the economy is struggling and people worry about the deficit and taxes, Romney's CEO "run the government like a business" appeal will be potent. This is especially true now that he has quit the ridiculous attempt to paint himself as an arch-conservative party leader. He is who he is, and like it or not, that is the Republican's best chance (right now) to take back the White House.

Other interesting notes from the survey:

The president, seeking a second four-year term, beats another potential GOP rival, Alaska Governor Sarah Palin, by six points – 48% to 42%.

With a margin-of-error of 3%, that is much closer than she has ever run before. At first glance, it would appear that she would have a serious chance. However, if I was a betting man, I would say that her poll numbers will never go higher. The people who don't like her are almost certainly not going to budge, and now that she has left public office, it seems unlikely she will have the platform to swing the very small minority of independents who would be undecided. President Obama does.

Finally, it is very important that she doesn't try to start any third-party bologna:

If Romney secured the GOP nomination and Palin chose to run as an independent candidate, Obama would win the resulting three-way race with 44% of the vote. Romney is the choice of 33% of the voters under that scenario, with Palin a distant third with 16% support. Three percent (3%) like some other candidate, and four percent (4%) are undecided.

She pulls almost entirely from Republicans, moving only 1% of would-be Obama voters into the "undecided" column (which was 3% in a 1-on-1 race) while taking 12% away from Romney (over a quarter of his support). There is no way should could come up with the funds to be anything more than a Ross Perot in 1992 electorally, and makes a Romney win very, very hard since all her support comes from the right.

Source: http://www.rasmussenreports.com/public_content/politics/elections2/election_2012/2012_match_ups_obama_romney_tied_at_45_obama_48_palin_42

60+% of the Country Oppose Stimulus; 60+% Support Stimulus

A new ABC/Washington Post poll shows that polling depends entirely on how you ask the question:

"Would you support or oppose additional federal spending above the 787 billion dollars already set aside to try to stimulate the economy? ... Do you feel that way strongly or somewhat?"

StronglySupport SomewhatSupport SomewhatOppose StronglyOppose Unsure
18 17 18 43 3

"Would you support or oppose new federal spending of about 800 billion dollars on tax cuts, construction projects, energy, education, and health care to try to stimulate the economy? ... Do you feel that way strongly or somewhat?"

StronglySupport SomewhatSupport SomewhatOppose StronglyOppose Unsure
43 27 9 17 3

This means, despite impressive numbers showing people strongly oppose a general second stimulus and do not want to add to the deficit (see previous polls), Republican hopes that they could regain power simply on the deficit alone were misplaced. Any opposition to stimulus needs to be three-tiered:

1. The massive deficit (obviously)
2. The fact that the previous stimulus did not work and any new one would be ineffective as well
3. The particulars of the package must be exposed as not worth it...more so than the last package where Republicans focused on things like birth control, which, while it shouldn't have been in there, was only a small piece.

Source: Polling Report

$23 Trillion

A series of bailouts, bank rescues and other economic lifelines could end up costing the federal government as much as $23 trillion, the U.S. government’s watchdog over the effort says – a staggering amount that is nearly double the nation’s entire economic output for a year.

If the feds end up spending that amount, it could be more than the federal government has spent on any single effort in American history.

In fact, $23 trillion is more than the total cost of all the wars the United States has ever fought, put together. World War II, for example, cost $4.1 trillion in 2008 dollars, according to the Congressional Research Service.

Even the Moon landings and the New Deal didn’t come close to $23 trillion: the Moon shot in 1969 cost an estimated $237 billion in current dollars, and the entire Depression-era Roosevelt relief program came in at $500 billion, according to Jim Bianco of Bianco Research.
The annual gross domestic product of the United States is just over $14 trillion.

In addition, TARP proves to be the perfect example of how giving government power will inherently lead to further (undemocratic) expansion.

Originally, TARP was intended, Barofsky writes, to facilitate “the purchase, management, and sale of up to $700 billion of “toxic” assets, primarily troubled mortgages and mortgage-backed securities.”

But that plan was soon rejected, and the TARP instead became a grab bag of bailout initiatives, including bailouts for GM, Chrysler and auto parts suppliers as the federal government struggled in real time to contain a spiraling economic disaster.

Barofsky reports that TARP has come to include 12 separate programs that include a total of as much as $3 trillion.

God bless George W. Bush and Barack Obama. I'll be over here, listening to Morrissey and slowly becoming an anarchist.

Read more: http://www.politico.com/news/stories/0709/25164.html#ixzz0Lpgw44MW

Definition of Insanity: We Want A New Housing Bubble!

Politicos on both the left and the right are getting upset with President Obama for his inability to stem rising foreclosures. There are calls for revisiting the idea of letting bankruptcy judges modify mortgages, a terrible precedent that would further trample creditors' rights. Even normally reasonable economists such as Mark Zandi are calling for some kind of new Homeowners stimulus. Of course, Barney Frank and Anthony Weiner (the Hot Dog reps) are looking to loosen Freddie Mac and Fannie Mae's lending standards, this time to help condo owners.

The fact of the matter is that the market is recorrecting itself, and the only way the government could stop this would be to form a new housing bubble through targeted tax cuts and subsidies and reduced lending standards. Unfortunately, some seem to be ok with that, which brings to mind Benjamin Franklin's famous definition of insanity.

Source: http://www.politico.com/news/stories/0709/25095.html

Issue Numbers Good for Republicans to Keep Hammering Debt Message

Now that Congressional Republicans have rediscovered their fiscal souls and oppose deficit spending again after 8 years of letting the Bush administration run rough-shod all over them, a variety of polls released yesterday seem to show that this is probably their best issue (along with Gitmo, which is a tad bit more controversial), and a much stronger one than we thought.

These numbers can all be found on Polling Report (most of it here: http://www.pollingreport.com/budget.htm) and don't require much commentary.

• 50% of Americans say they will base their 2010 congressional vote on the candidates feelings concerning Economic Stimulus(stimuli?). The next biggest issue is 23%.
• 54% of Americans are either not very or not at all confident that the last stimulus will ever work. 52% do not even think it will produce jobs.
• Depending on the poll, either a 52%-36% or 61%-33% margin opposes a new stimulus.
• 71% would prefer a slower recovery to an increased deficit.
• And, to those who do not believe people will vote based on deficit issues, 67% (correctly)believe that the deficit affects their everyday lives and finances.
• Finally, President Obama has fallen, for a few polls in a row now, to the point where the country is virtually split right down the middle (with a few undecided) on whether they approve of his economic policies.

Sorry Harry, A Conservative Second Stimulus Is Still One Stimulus Too Many

Harold Ford, Jr., former Rep. and Senate candidate from Tennessee and currently the leader of the moderate Democratic Leadership Council (of Bill Clinton fame), has a new editorial on the Politico calling for a new stimulus. You can read it for yourself here: http://www.politico.com/news/stories/0709/24927.html.

Ford stakes out an honerable position: attempting to craft a package that would entice Republicans and Blue Dog Dems concerned about the economy. In fact, his proposals, consisting of loans, not grants, to the States and a "vacation" from payroll taxes, paid for with returned TARP money, were central tenets of the Republican stimulus alternative. Surprisingly, he even advocates sacrificing expanded coverage in health care in order to get both reform and this new stimulus package without further breaking the budget:

It is also critical that we take concrete steps to restore fiscal balance in the long run. New budget estimates for health care reform show that tough measures to rein in spending and curb reimbursements can have a significant impact on the rate of growth in costs. The unfortunate truth is that cost-cutting may need to be prioritized over expansion of coverage, which, in any case, is unsustainable without massive cost savings.

The problem is the last stimulus went too far. If we could refund some of that money, specifically the $200 billion or so that had nothing to do with stimulus and solely sought to further the progressive agenda, conservatives and most of the nation could get behind this. Unfortunately, Pelosi, Reid, and Co. have made it clear to people like Paul Ryan and John Thune who would like to pursue this path that it is not going to happen. If that is the case, we are at such a tipping point budget-wise that the negative effects of any added debt are so great in the long term that the benefits in abating the recession now would be moot when the economy lurches back into a deeper one in 10 years.

Obama Pretends That He Underestimated The Crisis

Barack Obama's advisors want us to believe that he did not know that revenues were going to be weak when he wrote the FY 2010 budget earlier this year.

Christina Romer, chairwoman of the White House’s Council of Economic Advisors, said in a POLITICO interview that the administration — like many independent economists — did not fully anticipate the severity and pace of this recession. She said the White House will be updating its official forecasts.

Another challenge was that the slowdown “was going from a relatively normal recession into
something much worse, and we were at a pivot point, if not a turning point,” Romer said.

"Relatively normal recession"? That was not what Obama was saying at the time. The focal point of the last two months of his campaign (besides "Yes, We Can" rhetoric) was discussion of the worst crisis since the Great Depression. Once elected, he used the severity of the crisis to claim that we needed a massive expansion of government spending and power. Here is him speaking on the topic as President-elect:



There are only two answers to this apparant contradiction. He was either playing up the severity of the crisis to increase the government's control over the economy (as his Chief of Staff Rahm Emmanuel said, "you never waste a crisis.") Or, more likely, he downplayed the severity during his budget because he knew there was no way to appease his deficit hawk AND liberal progressive supporters at once, and showing that he could expand health care and stifle growth with Cap-and-Trade while still working the post-recession budget back towards stability was the closest he could get.

The fact of the matter is, tough decisions will need to be made concerning the deficit, and hopefully the President will stop playing coy and start thinking about what his choices will be.

Read more: http://www.politico.com/news/stories/0709/24899.html#ixzz0LGAv87Vx&C