Recently in Fiscal Policy Category

Now that we've made it past the first of the year, the focus here in New Hampshire turns in two directions: the upcoming Presidential Primaries and annual town/state budgets. Of the two, the primaries are receiving the most attention by both the populace and the media.

With the New Hampshire primaries scheduled for January 10^th, the media attention has been cranked up to "11". The various presidential wannabes have been spending every free moment in the Granite State, minus time in Iowa in preparation for tomorrow's Iowa Caucuses. (The one exception seems to be Jon Huntsman, who sees New Hampshire as the key to his moving forward.) There will be one last 'big' debate amongst the GOP candidates on the 7^th, with national coverage by ABC.

It's going to be intense for the next eight days.

The lesser of the two events, the annual battle of budgeting for the towns also start in earnest. Not that there hasn't been a lot of behind the scenes work on assembling proposed budgets for the various departments and schools.

Here in my small town the town and school budgets have been undergoing a lot of scrutiny by the board of selectmen, school board, and the budget committee. Everyone wants to cut spending, but of course it's always "someone else" who should cut their budgetary requests. It's never a pretty process and at times emotion can get in the way of logic and reason. When a position is cut in one of the town departments, many of us realize it means that someone we know, perhaps a friend, will lose their job. (That's happened to a friend of mine in the planning department. Her full time position - with benefits - was cut to part time. She couldn't justify staying there under those conditions and left for another job.) In some cases open positions have been eliminated for the time being, leaving some departments short staffed. But those are the choices that have to be made in order to keep spending in check when everyone is having a difficult time making ends meet, particularly those on fixed incomes within our town.

Once the various boards and committees have done their thing it will be up to the voters in each town to vote on them, either at town meeting or during the town elections in March. (A few towns hold their town meetings in April or May.) Towns with a board of selectman/town meeting form of government fall in to two categories: traditional town meeting and SB2.

The traditional town meeting is usually held in some time in March, and all registered voters are encouraged to attend. The voters will discuss and vote on all of the articles presented on the town warrant, some covering budgetary items and other with changes in zoning ordinances (assuming a town has any zoning at all). A second town meeting, usually called the school district meeting, deals will warrants pertaining to the towns school expenditures.

SB2 towns do things a little differently, with two different sessions for both the town and school portions of the warrants. The first session deals solely with discussion and amendments to the town and school warrant articles. The second session of each meeting takes place on election day in March, with the voters deciding whether to approve the various warrant articles discussed the previous session.

There are advantages and disadvantages to both systems, but they seem to work pretty well. In any case, the tax money that will be spent in the upcoming fiscal year is vetted by the very people that will be paying those taxes. (There are a few taxes which the town voters have no control, those being the county and state assessments levied upon them to run county operations and for some education funding, respectively.)

The state will be dealing with some supplemental budget items during the upcoming legislative session (the state runs on a two-year budget cycle). Sometimes adjustments are made if there's an unexpected expenditure needed to deal with unforeseen circumstances. Sometimes it's the other way around, with some line item that was approved but never implemented, meaning there are surplus funds that can go to other purposes to fill shortfalls someplace else. Sometimes the surplus goes towards the state's so-called rainy day fund, a savings account that can be used to fill revenue shortfalls under very specific circumstances.

All we can do is hope they folks in the state capitol don't go on some kind of a mindless spending binge. But then it does help that the GOP holds supermajorities in the state Senate and Executive Council and a majority in the state House.

It is said the truly smart will learn from the harsh lessons of others' failures. I can say that one member of the WP clan is that smart, that being the youngest of the WP sisters. (As she says, she made her own mistakes while growing up that our parents never found out about.)

It would be great if the political class presently ruling the US was as smart as my youngest sister. Unfortunately they are not.

They see the economic meltdown occurring in the Euro-zone, yet refuse to learn the lessons countries like Portugal, Ireland, Italy, Greece, and Spain are teaching us, the primary one being that eventually you will run out of other people's money to fund all the wonderful social programs that have been used to bribe the electorate.

Italy is the latest to teeter on the brink of insolvency, and should it go over the edge it is quite likely it will pull the rest of the Euro-zone with it. Greece's default damaged the European economy yet it has only a fraction of the GDP of Italy. Should Italy default Europe will take an additional $2 trillion hit it cannot afford. Is it any wonder Germany is considering abandoning the Euro and going back to the mark? Can anyone deny that this problem has been driving the British public to demand a referendum about whether or not to remain in the EU? At least those two countries see the problem and realize they'll have to bankrupt themselves in a doomed effort to prop up economic policies from Brussels.

But too many of our own politicians at the state and federal level, regardless of party, seem oblivious to the fact that unless we make some drastic changes in how our federal government taxes and spends we will be headed down the same path. Labor leaders ignore the fact that neither businesses or taxpayers are a bottomless source of funds, shortchanging their own members by making promises no one can keep.

Should the US fail to put its financial/economic house in order, and right quick, it will pull the world economy down with it into a depression unlike any we've seen before.

Listening to the plans President Obama has made to address the jobs problem, it is no surprise to anyone that he really doesn't have a plan, or at least not a new one.

If his $878 billion stimulus program had been used to actually address a number of problems within the country, those primarily being our crumbling infrastructure, rather than using it for political patronage, we might not have as much of an economic problem as we presently face. But far too many of us knew very little of that money would be used to stimulate anything but the growth of the federal government.

Will Obama's September 8^th speech try to make a case for spending even more money we don't have to pay for more political patronage? If history is any indication, then the answer is likely yes.

What the president really needs to do (but won't) is to rein in his renegade agency heads (NLRB or EPA, anyone?) who are making sure it's damn difficult for anyone to create jobs...except for government jobs.

What the president needs to do is to get the government out of the way of free enterprise to let it do what it does best - create jobs.

What the president needs to do is fire all his czars and advisers because, quite frankly, they have no idea what they're doing. Most of them are academics with little, if any, real world experience doing things like running businesses or meeting payrolls or dealing with an ever increasing avalanche of government regulations and paperwork that does nothing but cost time and money to deal with yet add little of benefit to anyone except bureaucrats.

What the president needs to do is realize that one of his predecessors, Ronald Reagan, was right when he said to America "Government isn't the solution. Government is the problem."

What the president needs to understand that no one in government, and I mean no one is either smart enough or wise enough to run the American peoples' lives. After all, everyone in government is having a hard enough time running their own lives, let alone those of 300,000,000 other people in this country. Every government that has tried to do so has ultimately failed, resulting in widespread misery. Quite often those governments end with fatal results for members of those governments.

What the president needs to understand that no one in government, and I mean no one, is either smart enough or wise enough to run the American economy. History is littered with plenty of examples to show this is true. Unfortunately the president and many in Congress have ignored this truth, figuring that this time they'll get it right. (They won't.)

All I expect from the president during his speech is more of the same old crap he's taken from the FDR, LBJ, and Karl Marx playbooks, just put in new wrappings and hyped by the Lame Stream Media.

In other words, "There's nothing to see here, folks. Move along!"

One of the things said about blogging is that bloggers shouldn't apologize for not blogging. Normally I would agree with that, but not this time.

It isn't that I haven't had anything to write about (quite the contrary). It isn't that I've lost interest (I haven't). It's merely that life has intruded, leaving me with far less time to write anything worthwhile.

Over the past couple of weeks or so I have been getting home late, usually from some kind of meeting of a town committee or board, though once because I had to make an unexpected trip to the WP In-Laws to pick up BeezleBub and we didn't get back until 10:30PM. At that point I was just too darned tired to do anything but go to bed.

It's been these little things that have contributed to my lack of posting anything inciteful, witty, or outright offensive (at least offensive to the Left). I've resorted to borrowing heavily from humorous e-mails or Facebook postings to make sure this blog stays active. I'm going to have to do that one more time as I had yet another late evening. But at least this is educational in that it makes our nations' fiscal problem a little easier to understand.

Received via e-mail:

Federal Budget 101

The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let's put the 2011 federal budget into perspective:

U.S. income: $2,170,000,000,000

Federal budget: $3,820,000,000,000

New debt: $ 1,650,000,000,000

National debt: $14,271,000,000,000

Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)

It helps to think about these numbers in terms that we can relate to. Let's remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.

Total annual income for the Jones family: $21,700

Amount of money the Jones family spent: $38,200  

Amount of new debt added to the credit card: $16,500  

Outstanding balance on the credit card: $142,710

Amount cut from the budget: $385

So in effect last month Congress, or in this example the Jones family, sat down at the kitchen table and agreed to cut $385 from its annual budget. What family would cut $385 of spending in order to solve $16,500 in deficit spending? 

It is a start, although hardly a solution. 

Now after years of this, the Jones family has $142,710 of debt on its credit card (which is the equivalent of the national debt). 

You would think the Jones family would recognize and address this situation, but it does not. Neither does Congress. 

The root of the debt problem is that the voters typically do not send people to Congress to save money. They are sent there to bring home the bacon to their own home state. 

To effect budget change, we need to change the job description and give Congress new marching orders. 

It is awfully hard (but not impossible) to reverse course and tell the government to stop borrowing money from our children and spending it now. 

In effect, what we have is a reverse mortgage on the country. The problem is that the voters have become addicted to the money. Moreover, the American voters are still in the denial stage, and do not want to face the possibility of going into rehab. 

Yup. I'd say the above pretty much explains it in terms we can all understand.

The irony of this? I received this by way of the very liberal parent of a friend of mine. It's a shame she hasn't been able to integrate this little bit of education into her view.

After all the dire predictions 'they' made about what would happen if Congress didn't raise the debt limit, it turns out they were wrong.

The President got his debt limit increase, but the stock market and at least one financial institution - Standard & Poor's - apparently didn't see it as a solution, and rightfully so. The stock market headed downwards, wiping out a year's worth of gains. Standard & Poor's is still threatening to drop the government's credit rating from AAA to AA or AA+ because of the government's continuing spendthrift ways.

The increase in the debt limit didn't solve the problem we're facing. It merely delayed the inevitable. Former Arkansas Governor Mike Huckabee offered an analogy that illustrated the problem perfectly.

Raising the debt limit solves the government's spending problem like raising the maximum legal blood alcohol content will solve the drunk driving problem.

I'd say he nailed it.

Over the past year and a half I've listened to a large number of people disparaging the Tea party movement. Most of them have been card-carrying Democrats (or at least those with the belief they know how to spend my money better than I do). Others have been RINOs or part of the so-called "Establishment" Republicans.

The Tea party has been excoriated in the press, with the New York Times, the Washington Post, and a number of other media organs of the Left leading the way. Washington politicians and other Beltway insiders have derided the Tea party as "hobbits", "terrorists", "Nazis", "racists", "jack-booted thugs", and a whole host of other derogatory labels.

As the volume of hateful rhetoric aimed at the Tea party and its supporters has increased, it has made me and others realize that the groups making these accusations must be really getting nervous. As one commenter to this piece wrote, "If you're getting a lot of [flak], you must be over the target." And so it must be as the Tea party gains supporters throughout the country at a local, state, and national level because they're tired of being ignored by the Coastal elite and the Beltway intellectuals.

My most memorable run in with an unabashed Tea party hater took place at our business when one of our customers went on a rant about "those goddamn Tea partiers wanting to take everything away from us!" There was no way I could not respond, so I asked her where she'd gotten that idea. Apparently she'd read it in the paper, in this case the Boston Globe. (One must remember, the Globe is owned by the NYT and has the same editorial policies as its parent corporation.) I calmly informed her that if her opinion was based solely on what she'd read in the Globe, then she'd been misinformed and lied to. She saw the Tea party as a bunch of religious fundamentalists bent on depriving the poor, doing away with Social Security and Medicare, and undoing decades of civil rights advances. I had to remind her that many of the civil rights advances came from the GOP, not her sainted Democrats. I reminded her the KKK were primarily Southern Democrats, not Republicans. I reminded her it was the Democrats who started us down this path of unsustainable spending going all the way back to FDR. I reminded her that it was LBJ who decided his Great Society was the answer to all of our society's problems, that it had failed miserably, and that it was funded by stealing from the Social Security trust fund.. I reminder her it was the Democrat majorities in Congress going back to 2007 that multiplied the annual deficits to many times that of all of Dubya's deficits combined.

I gave her the URL for the Contract From America website which explains the Tea party platform, none of which deals with social issues she claims the Tea party is involved with. She wasn't interested. Instead she chose willful ignorance and adherence to libelous propaganda from those who do not have her best interests at heart.

Maybe she will care when the country is unable to pay its bills and all of the government support she is 'owed' ends because there's no money left to pay for it all. Maybe she will care when all "the rich" she's constantly complaining about are either driven into bankruptcy or flee with their wealth to friendly climes and no one is left to pay for everything she is owed.

But I'm not holding my breath.

UPDATE:It appears Senator John Kerry has decided to add fuel to the fire by expressing his opinion that the media should not give equal time to those "absolutely absurd notions" voiced by the Tea Party because their opinions "are not factual."

What a putz.

I must admit to being on the edge of Debt Crisis Fatigue after being bombarded by Obama, the Democrats, and the media for months on end about our impending doom if Congress doesn't pass an increase in the already outrageous debt limit.

I might not have nearly as much of a problem with Congress doing so if the Spender-In-Chief were willing to support spending cuts equal to the increase in the limit, but we all know there's no way he'll do that.

In truth, I don't like the idea of raising the debt limit even one penny. History shows us the promises made by Congress to cut spending if only the debt limit is raised have never been kept. All we've ever seen from such promises is more taxes and more spending. The promises made aren't any more real than the old "The check's in the mail" dodge, except that we're talking trillions of dollars, a number that doesn't seem to faze Obama or Congressional Democrats, but scares the bejeezus out of just about everyone else.

It's ironic, considering that many of the same people pushing for increasing the debt limit were vehemently against it the last time the issue came up. The difference this time around? Last time it was a Republican in the White House while this time it's a Democrat, and he's asking for an increase that is far greater than the last one.

Talk about a double standard.

If the President and his Democrat cronies won't control their insatiable appetite for running up the national credit card, particularly if they're not the ones who will have to pay the bill, then it's up to the GOP and the Tea Party to do it form them. Better it be done now than when it will be so painful that it brings the economy down even more than it already is. Obama and the Dems aren't willing to admit that the credit card company (that means us, folks) aren't willing to raise their credit limit until they pay off what they've already charged. Until then it will have to be as so many of we so-called "little people" do under these circumstances - pay cash, or do without.

The national credit card is maxed out and the issuers - We The People - are saying "Enough!"

The ongoing disagreement between Congressional leaders and the President about the debt limit, taxes, and spending is showing the American people more than they wanted to see. To me this means far too many of the Democrats still seem to think we can fix the the deficit problem by spending even more money we don't have and can't pay back even if they make "the rich" pay their "fair share" in taxes, and the President acting like a spoiled and petulant child, placing all the blame for the outcome of his ill-advised and fiscally disastrous policies on the GOP because they don't or won't recognize his genius.

As much as the Democrats and the media try to spin it, the Democrats are about to reap what they've sown, namely a seriously broken financial system and the enmity of a large majority of the American people, particularly those in flyover country.

One commenter to a previously linked WSJ piece has proposed a solution to the spending problem with deep cuts for agencies and programs that manage to do nothing but waste billions of taxpayer dollars and create misery for far too many of the people they say they're helping.

Here we go. A quick way to save a few bucks.

2011 Budget Line items to consider - spending at the federal level, independent of state spending:

$129.8 Billion Education (why is the federal government involved in this?) - Zero out

$495 Billion Welfare (that's charity, right? Is this an enumerated power at the federal level or is it a state power? My take is I didn't see a charity power and Grover Cleveland agreed with me.

Grover Cleveland veto statement when vetoing charity to help Texas farmers:

"I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end that the lesson should be constantly enforced that, though the people support the government, the government should not support the people. The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood."

-zero out.

--snip--

$22.7 billion Fuel and energy (as in Ethanol?) Why does energy need a subsidy, it's suppose to provide the value, not absorb it? - Zero out.

There's plenty more, so I suggest you Read The Whole Thing. While I don't agree with every point brought up, I can live with these proposed cuts as compared to some of those proposed within Congress.

It's gotten to the point where President Obama resembles one of those romantic swains who does not understand that "no" means "no", or in this case "Hell no!"

We have an economy that is still foundering due to job-killing regulations made by rogue bureaucracies, job-killing legislation by Congress, bailouts to commercial and financial institutions that don't deserve them, and a government spending spree that looks more like a teenager running around using daddy's credit card. But the 'teenager' doesn't understand that the credit card has reached its limit. What's worse is that he wants the credit card issuer (i.e. the taxpayers) to pony up even more credit to keep spending money he doesn't have and can never pay back. When he doesn't get his way he throws a tantrum, blaming the over-the-limit credit card he used on those no longer willing to have their pockets picked by an ungrateful and willful child.

Try as he might, I don't think Obama's going to get away with painting the GOP as the cause of the upcoming default on August 2^nd. The Republicans are standing their ground, not willing to give the President a pass by reneging on their campaign promises and raising the debt limit in return for 'future' spending cuts. All one needs to do is look how such promises made by Democrats in the past all fell by the wayside once they got their way to see how foolish trusting them again would be.

On top of that, the President wants to impose an additional $1 trillion in taxes on top of those he's already added to pay for it all. (We all know that theoretical extra revenue will not be used to pay down the debt, but will instead be spent on stupid and foolish things we don't need, want, or can afford.) That's all we need is to have yet another $1 trillion in capital removed from the economy, money that otherwise would be used to expand businesses, create jobs, and expand the tax base. Neither the President or Congressional Democrats see that every action they have taken over the past 4 years has narrowed the tax base, increased uncertainties in the business world which in turn has discouraged investment and hiring, and stretched out a painful recession and the resulting high unemployment/underemployment an additional 2 years with who knows how many more to follow.

What part of "Enough! Not one red cent more!" does the President fail to understand?

All of it, apparently.

As we move closer to 2012, it has become increasingly apparent to those not previously cognizant that President Obama is, to put it in terms everyone can understand, an economic moron. Part of this lack of understanding can be laid at his upbringing and lack of a real-world education.

Between his parents, step parent, grandparents, and his pastor of 20 years, he was fed a continuous diet of anti-Americanism. We have no idea what he really learned in school, particularly at college (his transcripts are sealed). While speaking about bringing people together, his actions have done nothing but divided them. This is particularly true when it comes to economics, where it appears he's pulling his 'fixes' out of the past, with liberal doses of Marxist economic theory blended with the worst of the failed economic policies of FDR and Jimmy Carter. He really doesn't see why his efforts to fix the economy have failed or why his popularity has fallen so precipitously. Could it be because he's in over his head, being so ill-prepared and undereducated in how things really work?

That certainly seems to be the case, particularly in light of his most recent presser where he engaged in "false choices and demagoguery" rather than offering solid proposals. He talks about reaching a compromise with the Republican members of the House, but I get the feeling he's still defining compromise as "Sit down, shut up, and vote the way I tell you to vote." That hasn't worked since the Democrat takeover of the House and Senate back in 2006, and is less likely to work today since the GOP retook the House last fall.

All any of this shows us is that he really doesn't get it, doesn't understand how the economy works, and isn't interested in learning how it works. Instead he wants the economy to bend to his will. Unfortunately he will learn, as did King Canute, that the economy won't listen to him. The more he tries to bend it to his will, the worst it will get and the more those who actually drive the economy will rebel, just as they have to date. All he will do is to motivate even more people to "go Galt", driving more of the economic activity underground and away from the prying eyes of The One Term Wonder.

For anyone who's been paying attention for even the past 6 months, it's obvious that our country has a major problem: debt.

While this is not a new problem, it is the magnitude of our national debt that has become quite worrisome. On top of that we have a Congress (or at least one chamber of Congress) that seems incapable of dealing with this problem. Rather than dealing with it, they seem fine with staying the course they set over four years ago. It doesn't help that the President seems hellbent on allowing them to continue their profligate ways, all while trying to stymie the Republican opposition trying to deal with it buy doing what needs to be done.

While the Democrats are convinced this country has a major revenue problem, just about everyone else knows what we have is a spending problem, and that we've managed to dig what John Stossel is calling The Money Hole.

While part of Congress and the President seem unwilling to do something to fix the problem, there are a number of other chief executives at the state level who have similar problems and met them head on. One in particular stands above all the others.

Some governors have shown the way. You know about Chris Christie, Scott Walker, Rick Scott, John Kasich, etc. But you probably don't know about Luis Fortuno.

Fortuno is governor of Puerto Rico. Two years ago, he fired 17,000 government workers. No state governor did anything like that. He cut spending much more than Walker did in Wisconsin. In return, thousands of union members demonstrated against Fortuno for days. They clashed with police. They called him a fascist. (Gee, that seems to be the accusuation du jour, as a union leader called Chris Christie a Nazi, too. -ed.)

Fortuno said he had to make the cuts because Puerto Rico's economy was a mess.

"Not just a mess. We didn't have enough money to meet our first payroll."

Fortuno's predecessors had grown Puerto Rico's government to the point that the state employed one out of every three workers. By the time he was elected, Puerto Rico was broke. So the new conservative majority, the first in Puerto Rico in 40 years, shrank the government.

What did Fortuno cut? Believe it or not, everything, including his own salary. Nothing was immune from his budget ax. As he said, raising taxes wasn't going to happen because they were already too high. And he didn't waste time doing it, either.

Fortuno's advice for leaders who want to shrink the state: "Do what you need to do quickly, swiftly, like when you take off a Band-Aid. Just do it. And move on to better things."

The longer the delay, the less likely it will get done to the level needed in order to turn things around.

Many of our states are in a similar bind.

Governor Chris Christie of New Jersey has been fighting this battle from the day he took office. And while he hasn't been gentle in dealing with the Garden State's abysmal financial conditions, he has been straightforward dealing with them. He hasn't pulled punches. He hasn't apologized. And he hasn't taken crap from state employees or teachers who feel they are entitled to plunder New Jersey taxpayer's wallets. He's told it like it is and the taxpayers of New Jersey appear to like what he's been saying.

My home state of New Hampshire, while not in the dire financial straits seen in New Jersey, California, Michigan, and a whole host of other states, has still had to deal with the aftereffects of a four year spending spree by legislative Democrats that started in 2007.

Normally a frugal state, New Hampshire legislative Democrats and the governor opened up the floodgates for state spending, increasing the state budget by over 30% in four years. The only problem was that they used overly optimistic revenue projections to justify it. Their projections were wrong and they left the state with an $800 million+ deficit, something illegal under the state constitution. They attempted to plug the deficit by boosting business taxes during a deep recession and seizing surplus funds from a state-chartered (but not state-funded) medical malpractice insurance agency, just to name two instances where they tried to use un-New Hampshire-like tactics to refill state coffers. Both failed, the first when voters revolted and threw the Democrats out, and the second when malpractice policyholders sued the state in court and won a decision that banned it from 'appropriating' private funds to which the it had no claim.

This year the Republican-dominated legislature cut the budget by 10%, though the Democrat governor may veto it as it stands. (The GOP has a supermajority, meaning they can override the veto should the governor do so.)

It's not just the states that have had to bite the bullet to fix government overspending.

Our neighbor to the north found itself in a similar position to where we are today, but they didn't hesitate when it came time to put their financial house in order.

When I think Canada, I think big government. I'm embarrassed that I didn't know that in the mid-'90s, Canada shrank its government. It had to. Its debt level was as bad as ours is today, almost 70 percent of the economy. Canada's finance minister said: "We are in debt up to our eyeballs. That can't be sustained."

--snip--

The problem, he added, was that Canada had a government safety net that was more like a hammock.

So in 1995 Canadian leaders cut unemployment benefits and other programs. It happened quietly because it was a liberal government, and liberals didn't want to criticize their own. The result was that Canada's debt stopped increasing. As the government ran budget surpluses, the debt went down.

--snip--

Canada fired government workers, but unemployment didn't increase. In fact, it fell from 12 percent to 6 percent. Canadian unemployment is still well below ours. And the Canadian dollar rose from just 72 American cents to $1.02 today.

That means that laid off government workers got new jobs elsewhere and became productive citizens rather than a drain on the taxpayer's wallets and the Canadian economy. Isn't it likely the same thing will happen here as well? Or are our gummint employees only competent enough to work for the government? (Unfortunately that might indeed be the case, as sad as that sounds.)

So the question is whether or not Congress will tackle the fiscal mess they helped create? Or will they continue along the path of least resistance (and the least amount of work) and not address the problem until they have no other choice, like when we're coming after them with pitchforks, torches, and a lot of rope?

As a comment made to a link within my previous post, this little "thought experiment" in regards to taxation puts the effects of taxes on businesses and individuals into easily understandable terms.

A thought experiment suggested by Mr. Rich Karlgaard writing for Forbes.

Imagine your tax rates for a week's work:

0% on Monday
25% on Tuesday
50% on Wednesday
75% on Thursday
100% on Friday

Would you work on Friday? Not many would.

Reading the comments following this one the consensus was that no one would work on Friday and quite a few would also forgo working on Thursday as well. One wouldn't even work past Tuesday because as he wrote "...I've received 70% of my potential net income for the week. I think I call it quits at that point and go fishing for the next five days."

As another commenter opined "No industry will even bother to open from Wed[nesday] to Friday."

This thought experiment is a perfect illustration how what seems to be a reasonable policy to those making it would have a devastating effect on the economy, with businesses closed for 4 or 5 days out of seven because they can't get anyone to work past the first two or three days. There's no incentive to do so. In fact, there's plenty of incentive not to. The theoretical policy makers overlooked one very important factor that would greatly change the outcome: human nature.

The tax policy in the experiment assumed everyone would work all 5 days of the week because it would be for the good of all. But it wouldn't happen because, quite frankly, we humans aren't all that altruistic. Once the disincentive to work outweighs the difficult-to-find altruism, people will stop working.

And so it is with the proposed changes in the tax code. All they will be is a big disincentive for a lot of people who would otherwise work hard and make more money. If the only thing they're going to get out of that hard work is even higher taxes and less take home pay, they won't bother putting in the effort. Why should they? After all they aren't really being compensated for all that extra effort and are, in fact, being punished for it. That's one hell of an incentive to keep their income to a level where they can pay their bills with a little bit left over, and screw the rest. In turn, the government won't raise the revenue they think they will and the economy will continue it's slide to the bottom.

One other thing the proposed high taxes will allow? It will grant those in Congress the power to grant favors by creating all kinds of loopholes and tax shelters for those who will support them in their bids for re-election.

But wait, isn't this where we came in, when tax rates in the past were very high but the effective tax rate was low for the top earners because of the thousands of favors and exemptions granted by Congress? It looks like it to me.

I find it interesting that President Obama spent time touting the need for a better trained workforce in order to compete for manufacturing jobs in the future.

That sounds just great. Great. Yeah. The future. Uh-huh.

But what about the present?

What good will all that training do if there are no jobs to be had? It seems he's putting the cart before the horse, expecting more job training to be the answer to our economic woes.

The problem with our economy is not the major lack of workers needed to fill vacant jobs. It's that there are no jobs to be had in the first place. To put it in simpler terms, it's not a supply problem, but a demand problem. There is an ample supply of workers to fill jobs. There's just no demand for them by business.

To what can we attribute this lack of demand? President Obama.

His economic policies have been a disaster. They appear to be based upon wishful thinking rather than sound economic principles. For one thing one does not shepherd an economic economy by sucking so much capital out of the economy that there's less of it for investing to create new jobs. One does not foster economic recovery by laying more intrusive and draconian regulations on the engine of economic recovery, namely businesses large and small. One does not 'fix' the economy by making investment risky by constantly changing the rules, making it impossible for anyone to figure out whether investing is worth the risk or not (with the answer increasingly becoming "no").

All job training will do at this point is make sure we have an increasingly well-trained workforce still looking for work where none exists.

Can Mayor Dave Bing turn Detroit around? (This isn't the first time I've asked this question.)

Maybe. He has a long way to go before anyone can say Detroit has been saved.

He is doing one thing long overdue for his blighted and ever shrinking city: tearing down abandoned homes that have become nothing more than shelter for the homeless or hideouts for drug dealers, rapists, and other criminals preying upon the rest of Detroit's citizens. Some of those dilapidated homes are too dangerous to be occupied even by the criminals or the homeless.

I think I can safely say many of us have seen video or photos of what's left of Detroit's once vibrant neighborhoods, with many of them looking like something out of a zombie-apocalypse movie thriller. Most of the homes and buildings in those areas aren't worth rehabilitating or renovating, leaving block after block after block of decaying homes and businesses empty and soulless.

One of the more interesting parts in the article linked above are the thoughts of those actually performing the demolitions. You wouldn't think that tearing down abandoned homes would be an emotional trial for the wreckers, but for many of them it is.

Wreckers hide it, but when you spend weeks with them, riding in their trucks, sitting in their machines, trailing them all over their job sites right out to the dump where they'll deposit the remains of a house, it becomes clear that they're a reflective and empathetic group. They're raconteurs and historians. They want you to know what they've seen in this city. They want to take you there. They believe it'll help.

Mark Sherman insists on driving me down a street called Robinwood, a few blocks from Adamo's home base. "This one," he says, "breaks me up every time I'm on it." The stretch is so blighted it seems haunted. Somehow it's totally devoid of color. All the Craftsman-style homes, with their tapered support columns and stonework porches, are empty. "You can see," says Mark, tugging on the brim of his black John Deere cap, "these were really beautiful. Unique." And he's right. They're exactly the kinds of homes young families in Portland and Los Angeles line up to live in. "This is the perfect example," he continues, "of what can happen in two years. Two years ago, this street was mostly full. This is what happens when nobody cares."

They try not to think of the people who used to live in those homes. Those who worked hard, raised families, took pride in their homes, now long gone, leaving echoes of what used to be behind them.

I'm not sure I could do their job and not feel what they do. But they know it's a necessary job, so-called creative destruction, where the only way to rebuild Detroit is to remove those homes and other buildings that are now a blight infesting their city.

Will it work?

Only time will tell.

As I read this Professor Stephen L. Carter piece about the uncertainties of government regulation and its effects on businesses and hiring, the more I nodded my head in agreement. Everything I read reflects what I've heard from a number of business owners here in the Lakes Region of New Hampshire: Without knowing exactly what government is going to throw at us in the way of ever more overreaching (and expensive) regulations, there's no way we're going to hire anyone new. Period.

A lot of middling and small businesses have seen their margins shrink, leaving them very little in the way of wiggle room when new government regulations and requirements hit them. How is any business going to plan for the future when government "regulation" is now such a big unknown? With most of the new regulations having absolutely nothing to do with safety, environmental issues, or pay, but more often financial matters, all they do is add unneeded costs to businesses. Sometimes those new rules and regulations turn an otherwise profitable business into an unprofitable one, and when that happens far too many of them close.

All of these regulations do nothing but provide more employment for government workers, not workers actually producing goods and services our economy depends upon. How is this supposed to help our economic recovery?

(H/T Instapundit)

In a post by Matt Patterson, he tries to make the case for jobs that have been lost during this deep recession never returning. While it may be true that some types jobs may be gone forever, it is not inevitable that the total number of jobs will decline from here on out. Through the process of "creative destruction", one kind of job was replaced by a different one. But as Patterson writes, at least one economist thinks this pattern will no longer be true.

In his penetrating new book The Great Stagnation, economist Tyler Cowen warns that this may have been a temporary and anomalous phenomenon. Cowen calls the period from roughly the early 19th to the mid-20th centuries the era of "low hanging fruit." According to Cowen, technological advances in this period were relatively easy to produce and exploit, resulting in a staggering explosion of living standards.

But by around 1970, most of this low hanging fruit had been plucked and growth rates began to slow. Indeed, growth rates are "lower today than before 1973, no matter what exact numbers you settle on for the absolute living standard." Cowen sees this fact directly tied to the innovation plateau that was reached around the same time: "The United States produced more patents in 1966 (54,600) than in 1993 (53,200)," he notes. "Meaningful innovation has become harder, and so we must spend more money to accomplish real innovations, which means a lower and declining rate of return on technology."

--snip--

This digital depressant trickles all the way down to old fashioned companies. McDonald's recently announced it will do away with cashiers in many of its European restaurants, replacing them with touch-screen ordering systems. This innovation may (or may not) make ordering your Big Mac a faster experience, but it will definitely eliminate countless opportunities for young and low-skilled workers.

On his last point, couldn't it be the cost of labor in Europe is artificially high due to government mandates and labor laws that replacing expensive humans with less expensive technology makes economic sense? When government and labor laws make it more expensive to hire people for what would otherwise be minimum wage jobs, then how can it be a surprise to anyone that businesses like McDonald's won't hire them? (It's not all that different than what we see happening here every time the Leftists in Congress beholden to the labor unions raise the minimum wage. Each time that happens, joblessness among those seeking entry level jobs goes up because small businesses have a tougher time justifying the added expense, particularly during times of economic hardship.)

One commenter hit the nail on the head, detailing why Cowen's claim about the decline of the American economy is inevitable is absurd.

We are inventing more things, faster than ever before. The past innovations "destroyed jobs" -- and made society wealthier and created new jobs, different jobs, to replace those that had gone before. This is nothing but the song of the Luddites.

HOWEVER...

For that process of creative destruction to work, it is necessary to ALLOW the new jobs and new industries to be created. And THAT, not some illusory "low hanging fruit", is what has been changing over the last generation or two. The regulatory burden on new industries has climbed ever higher.

Right now, in laboratories around the U.S. people are working on fusion power, cheap space travel, synthetic fuel from algae, sensors for automated medical diagnosis, and so on, and on, and on.

And if we lived in a free country, sooner than you think, some of those would be part of our everyday lives. The decision to decline is a CHOICE -- not a fate.

Unfortunately our fate is in the hands of people within government who really don't like America all that much and are working as hard as they can to cripple its innovative and robust economy in an effort to make it more egalitarian (at least by their definition). Unfortunately we've seen the results of such socio-economic experiments before, and they've always turned out poorly for everyone involved...except the ruling class, of course. (And even then, some have seen their fiefdoms crumble away and leave them as destitute as the rest of their fellow countrymen.)

Unless we can break the government imposed malaise on our economy, we will indeed see those jobs lost over the past few years gone for good, with no new jobs to replace them, and we will indeed decline as a nation.

One of the conclusions I must draw from observations made over a number of yeas is that far too many of the Left are ignorant. I'm not talking about the kind of ignorance that comes from not being exposed to ideas, facts, or events outside one's experience, but willful ignorance, ignorance by choice.

Reading the comments of pro-union readers of South Carolina governor Nikki Haley's opinion piece in the WSJ about the NLRB's suit against Boeing were telling, showing (to me) how much of their thinking was pure indoctrination, not backed by fact or evidence. Their hatred of businesses in general and Boeing in particular was out in the open. If such reactions revealed anything, it was their willful ignorance about how the economy operates, how businesses function, where money actually comes from, and how unions have changed and are not the organizations they once were.

Many of the positive views of the unions expressed by the pro-union commenters were right out of the 1930's. Far too many of them seem to think that if it weren't for the unions "protecting" the working man today we'd all be working for slave wages and child labor laws would be struck down and all our kids would be working in the textile mills again. They truly believe only a union can provide fair wages, benefits, and working conditions that otherwise would be unavailable to anyone. That may have been true back 100 years ago, but not today. With all of the labor and employment laws on the books (many brought about by the work of the unions decades ago), the need for unions for that kind of protection no longer exists. But to read what some of the pro-union have put forth, you'd think we were only a day or two away from going back to those bad old days.

And then there's this bit of willful ignorance in which far too many of them indulge: money, and where it actually comes from.

Do they truly believe the money is all just piled in bank vaults, "meant to be shared equally amongst Americans"? To listen to some of them, the answer is yes. But it overlooks one principle that so many of the rest of us recognize as being a fundamental truth: Money isn't owed to anyone, it is earned. And that money isn't just sitting in piles in bank vaults where it does no one, even the rich, any good. It has to be used, has to circulate to be of any good to anyone. Otherwise it's just piles of paper with pictures of dead presidents printed on them.

One of the other falsehoods that many of the Left believe at a gut level appears to be that wealth is a zero sum game, and that for someone to become wealthy someone else has to become poor. They either don't realize or care that the size of the proverbial "pie" they want to portion out to everyone is not static. It grows and shrinks with the economy. And of those who do understand the size of the pie changes, far too many of them believe only the wealthy benefit when the economy grows, and only the middle class and poor see their share of the pie shrink when the economy shrinks. The truth is everyone gains and everyone suffers as the pie grows and shrinks. Everyone.

But why confuse them with the facts? They aren't interested in any case.

I am about to write one of the terms most hated by businesses in America these days:

SarbOx.

This refers to the Sarbanes-Oxley bill that came in the aftermath of the Enron debacle. While the intent of SarbOx was to help prevent another Enron and the economic damage that went with it, it has in itself created all kinds of harm to businesses because of its draconian requirements.

Accounting and reporting requirements have added to business costs with nothing to show for it. SarbOx fixed nothing. Even if it had been in force before the Enron debacle, it wouldn't have prevented it.

Some of the side effects of SarbOx:

A decline in IPOs (Initial Public Offerings). This is how private companies go public, offering stock to the public as a means to raise capital for expansion. Without this mechanism, many businesses can't expand as they might have planned, which means fewer jobs are created and less money can be made.

An increase in mergers and acquisitions because IPOs have fallen out of favor due to the requirements of SarbOx.

An increase in number of public companies going private. Some of this may be driven by the burden placed upon public companies by SarbOx. Going private removed much of this burden, but also made it more difficult to raise capital. Apparently they saw this as less encumbering than having to deal with SarbOx.

It slows down speedy financial disclosure, something the SEC requires. With the convoluted requirements of SarbOx, such disclosure is darn near impossible.

Costs of compliance are quite high. The SEC had estimated it would cost companies required to report under SarbOx only $91,000 per year to do so. The actual costs are closer to $7.8 million per year (this is a 2008 figure). Accounting costs have doubled due to the reporting requirements. Other than accountants and attorneys, how has this benefited anyone?

So it all boils down to this: SarbOx costs businesses billions in compliance costs, delays up-to-date financial reporting, has squeezed out investment capital, and cost jobs (except those of accountants). Yet with all it was supposed to do it hasn't prevented much of anything that existing SEC rules and regulations already covered. It wasn't that there weren't sufficient laws on the books to deal with things like the Enron scam. It was that what laws that were already on the books weren't being properly enforced. How does piling on even more laws, rules, and regulations fix that?

Unfortunately we're all paying the price for that lack of oversight and enforcement.

While killing a little slow time at our business this morning, I came across this at Instapundit, and it stuck a chord. Let's face it, despite what the media is reporting and the government is claiming, we're still within the grips of a what feels like a never-ending recession. The American people's confidence in the President is plummeting as he fails to deal with the economy.

One of Glenn's readers, Bill Archer, e-mailed him, telling him that the latest Quinnipiac University poll is right on target:

As a PA resident I can attest to the sea change in attitudes towards Barack Obama here.

It's public, it's palpable and it's entirely due to inflation.

It's astonishing to me that a bunch of guys who are supposed to be so smart think that women aren't going to the grocery store and leaving in a state of shock, disbelief and, occasionally, panic.

And a Democrat who frightens women cannot win anything. Period.

I just started playing a sort of instant citizen poll at stores. It began a week or so ago at Sams' Club: I was in one of THOSE lines and ended up chatting with a well dressed middle aged woman with a cart half full of grocery items.

I made mention of the fact that while I didn't normally make the hike to Sams' that with prices going up I figured I had to make the effort.

She exploded: Prices are sky high, she's feeding three kids, eating store brands and sale items but can't afford to stock up, on and on.

Then the lady in front of HER piped in: if prices keep going up she doesn't know what she'll do, their budget is already at the breaking point, trying to keep a daughter in college, off she goes. Then a man in the next line over heard them and HE jumped in: this is ridiculous, Washington is killing us, economy broken, he's off to the races.

I thought maybe this was just a coincidence, so I've started the same conversation in store lines twice more in the past week and it's exactly the same: people are frightened and EVERYONE wants to talk about it out loud.

The interesting thing to me is that everyone used to be very reluctant to speak out in public against Obama. You were always afraid some leftie whackjob would hear you and tear into you. You know what I mean.

But now the gloves are off, people are freaking out and Obama can raise FIVE billion dollars for his campaign and organize until the cows come home and call everyone in the country a racist until he turns blue but it's not going to convince anyone that they're not paying an arm and a leg for half a cart worth of food.

There is no more basic thing to people, and it's off the hook.

I don't see how the Republicans could possibly mess this up. Then again, after a lifetime of watching them do just that, if there's way they'll find it.

I have heard many of the same things at the local supermarkets, WalMarts, and the BJ's discount club. The subject also came up with some of our customers this morning. A few that I knew had been staunch Obama supporters have stated quite openly that they won't vote for him again, particularly if energy and food prices keep going up as they have.

Around here pay raises (assuming anyone actually gets one) aren't keeping up with the rise in prices. Gas prices are expected to be double what they were around here last summer, which will put something of a damper on some activities. (A lot of folks aren't going to be willing to pay $5 or even $6 per gallon for gas to run their boats, particularly if a fill up will cost $200 or more for a day out on the lake. Of those vacationers visiting this area over the summer, most will be from New Hampshire, staying close to home because they can't afford to travel very far for vacation. Even one of the biggest summertime events in central New Hampshire - Bike Week - is expected to have lower than average attendance this year due to the general economic conditions and the price of gas and amenities.

If prices continue to rise and the economic situation does not improve greatly, Obama will see his presidency end in January 2013, no matter how much money he spends on his re-election campaign.

Is it possible some types of manufacturing may return to the US? If oil prices and transportation costs keep climbing, then the answer is yes.

While a lot of manufacturing has moved overseas, primarily to China, the costs savings are starting to dwindle as Chinese workers are demanding and getting higher wages. And if transportation costs keep rising, then the lower cost of manufacturing goods overseas are offset by that and the goods start to approach cost parity with those made in the US.

There are a number of other reasons for some manufacturing coming back to the US, including shorter lead times, the ability to make custom versions of goods more quickly, and much more rapid response times to design changes, just to name a few.

Are there other reasons that might also bring more manufacturing back to the US? Undoubtedly. Is it something we can promote? Not likely...unless we can get government off our backs and make it more attractive for companies to do business here rather than overseas.