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Rambling thoughts on who knows what... Because not everything is as the conventional wisdom would have it... BLOGS I SORT OF LIKE... Volokh Conspiracy ProfessorBainbridge MarginalRevolution Patterico Powerline Ace Wizbang JustOneMinute XRLQ Betsy's Page HE WHO USED TO LINK ME EVERY NOW AND THEN InstaPundit Email Steve
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Monday, June 27, 2011
Clue to Politico...
It isn't that New Jersey Governor Chris Christie is a brawler' that makes him popular, but rather his willingness to not be cowed into abandoning his campaign promises. We know that fighting for the sake of fighting is silly, but even worse is backing away from doing what needs to be done because of some desire for 'civility'. That is why Huntsman has no chance. We could care less that he speaks softly. But we care - and strongly object - that 'getting along' is a cornerstone of his agenda. We're not looking to fight with the Democrats. Were they to support cutting the size of government and stop scaring people, we'd be happy with them. But they don't, and that is why we're determined to find someone to stand up to them. Wednesday, June 22, 2011
Please allow me to explain to the clueless Ben Bernanke what is "causing the current fragility in the U.S. economic recovery"...
It is because YOU'RE SCARING US!!! Let's review the basics: CHAPTER ONE: By definition, the economy grows only if/when businesses and consumers increase their spending. If they merely maintain their level of spending, the economy stagnates. And if they decrease their spending, the economy contracts. CHAPTER TWO: People don't take risks when they're scared. Businesses don't add new employees when they're worried about the long-term demand for their products and services. Consumers don't increase their spending when they're worried about needing that cash in the event something bad happens (loss of job, loss of or reduction in available credit, higher taxes or medical costs, etc.). That's it. All of the stuff and statistics Bernanke studies are merely symptoms of whether people are confident, cautious or worried. A decrease in home values? Indicative of a lack of buyer confidence in the supposed value of the house. A increase in layoffs? Indicative of business concerns that demand for their products and services is going to fall (thus not only requiring fewer people but also a need to cut expenses to conserve cash). A drop in car sales? Again, indicative of the car buying public deciding they'd rather not be spending a bunch of money on a new car. And so on and so on and so on. And it is no secret, at least to me, why people are running scared. People fear higher taxes (and not just those 'rich' folks Obama likes to talk about targeting). They fear that Bernanke's flood of cheap money is driving up the price of everything from gas to food to clothing. They fear Obama's anti-business agenda is going to make it more expensive and difficult to operate a business profitably. They fear that Obama's anti-oil animus is driving up the price of a gallon of gas (double what it was when Obama took office?). They fear that Obamacare is going to drive up their health care costs more than they would otherwise have gone up... and on top of not being able to keep the coverage they now have. They fear that Obama's huge spending is doing nothing but setting the groundwork for a huge economic collapse. They fear that wherever their kids are going to school, it is going to cost them more money (tuition, fees for playing sports, going on field trips and so on). They fear that Obama is playing favorites... and that they're not the ones he is picking to share the spoils with. And while, no offense to the esteemed Mr. Bernanke, it doesn't take a rocket scientist to figure out why things aren't going so well right now, it doesn't take three advanced degrees to figure out how to improve the environment. Americans are by nature an optimistic group of folks. Left to our own devices, we're the ones who are constantly looking for ways to improve our lives. We invent things that make life easier. We work harder to earn more money to buy stuff. We push to grow our businesses. That is, unless somebody comes along and squeezes the optimism and enthusiasm out of us. Obama and his Democratic colleagues in Congress and the alphabet agencies have done just that (Question: have you ever seen an Administration that is as hostile to business managers and people who make nice incomes as is this one? I haven't.) And they're seeing what happens as a result. Businesses aren't hiring, people aren't buying cars and houses, they're not spending their disposable income. However... as I said, we're by nature a pretty optimistic group of people. All that is needed... and I mean that, all that is needed.... is for Obama to announce that he won't be seeking a second term.... and for Bernanke to announce, that in light of his not having a clue, he is resigning as head of the Federal Reserve... and the economy will start to take off. Give people a reason to be optimistic (even if that is based on little more than the belief that the future won't be as bad) and things will turn around. Of course, since Obama and Bernanke are as clueless as can be, neither will do the right thing. So we're stuck. Until we see the light at the end of the tunnel. Tuesday, June 21, 2011
It is no secret that I am puzzled why economists don't pay more attention to how critical business and consumer confidence is in determining which way the economy goes. It's as if, in the words of a pretty smart guy, they "focus on the engine and ignore the fuel".
And sometimes, even when they do pay attention, they don't get it right. Today's example is Alan Blinder. According to Blinder, increases in business purchases of equipment is evidence that confidence isn't in the toilet. While Blinder is probably right that such purchases are being made, those purchases don't prove confidence is up, let alone growing. And his assertion that it does is an example of economic GIGO... you're not going to get it right if you don't know how the people who run businesses operate and think. First, not every business is in a position to make big investments in equipment and technology. Some businesses are rather low-tech, in that office PCs and an electronic mail machine are the only pieces of equipment that they have. Other businesses don't have the cash (or access to financing) necessary to cover a large outlay. These businesses can only grow by hiring people... and yet they're not hiring. Why? Because they're not confident about the future. Other businesses have options, they can invest in either new stuff or new people. For some companies, it is more cost effective to hire people, for other companies, buying stuff might represent the best use of available resources. And yet, for all of the buying of stuff, there isn't any real hiring of more staff. Why? Because, as odd as it might sound, there is less risk of buying a new piece of equipment than there is in hiring additional staff. With equipment, you know what you're going to pay, you know what it is going to cost to install and operate. You can pretty much figure on the production you're going to get from each piece of machinery. That isn't the case with hiring people. No manager today can say with certainty that they truly know what it is going to cost the company in terms of salary and taxes and benefits. Is health coverage going to stay at (for example) 10% of salary? Or is it going to jump to 14%? Are unemployment taxes going to stay constant? Or are they going up? Are the costs of reducing staff going to stay the same? Or is government going to make it harder and more expensive for a company to reduce staffing? Let's look at it a different way. There is no good reason that a manager who was confident about his company's future wouldn't generally want to hire staff. And yet they're not hiring. If confidence is indeed the fuel that powers the engine, this can mean only one thing. The fuel isn't there. grow by either hiring more people or buying stuff. And even though they may be buying stuff, they're not hiring. Why? Because they lack the confidence to hire more people. Monday, June 13, 2011
The (unfortunate) punch line isn't that 'shovel ready' wasn't indeed 'shovel ready' but that Obama thought there was such a thing
It shows a remarkable disconnect with the real world that he (or anyone else) could have thought that in a NIMBY world of regulation and review and court challenge that any project could be thought of as 'shovel ready'. And it was because those of us who live and work in the real world knew there was no such thing as 'shovel ready' that Obama's entire stimulus plan was doomed to failure. After all, once Obama had revealed himself to be that clueless on what was a centerpiece of his plan to revitalize the economy, why would we have had any confidence in anything else he put on the table? Wednesday, June 08, 2011
What kind of idiot mother continually sticks her 4 year old daughter on a bus where the kid is beaten and bullied on a seemingly daily basis?
It isn't enough to complain to the school. Filing a complaint doesn't satisfy the requirement that a parent do what they need to do to keep their kids safe. Why isn't the mom driving the kid to school? Why isn't the mom getting on the bus herself? Why isn't she doing what moms are supposed to do when their kids are getting hurt? Should the school do something? Of course. But their inaction/negligence doesn't get the mom off the hook.
Martin Peldstein misdiagnoses the reasons the economy isn't doing well.... and thus, his proposed cures won't quite fix what ails us.
The problem Feldstein has is the same that afflicts most professional economists: they view the economy as if it was an entity in its own right... rather than merely the aggregation of millions upon millions of people going about their lives and businesses on a day to day basis. Thus, to influence the economy, one must look to influence the people who comprise the economy. And before you can do that, you must understand why the people are acting the way they are. (Broken record alert) The underlying reason the economy isn't doing well is because (1) employers aren't hiring, (2) people with disposable income aren't spending what they have, and (3) the number of people with money to spend isn't growing. And the reason this is happening is because we're are scared. Employers are scared that not only will there not be an increased demand for their products but that the current level of demand won't last. They're scared about higher taxes (both corporate and on their own incomes) and regulations that constantly increase the costs of doing business. They're worried about how much more in the not-too-distant future it is going to cost them to provide health care to their employees. And scared employers bank their profits (as evidenced by ever-increasing piles of corporate cash), they don't hire and thus don't increase the pool of people with money. People with money aren't spending it because they're scared, and for many of the same reasons. They're worried about higher taxes. They're worried that the source of their income isn't all that steady and secure. They're worried about the higher costs of gas and food. They're worried about having enough money for retirement and paying the ever-increasing costs for college tuition for their kids and health care for their parents. And with people losing jobs and taking pay cuts and losing what value they thought they had in their home and retirement accounts, not only is there not an increase in the number of people with money to spend, there actually has been a decrease in this number (note: this may or may not be true on a quantifiable basis, but I argue it most definitely the case based on how people think of themselves and their finances). Given the level of fear, any proposal has to start with eliminating the fear. It is actually that simple: get rid of the fear and the economy will grow. Businesses will hire and people will spend. So how do we get rid of the fear? We have to start by looking at the causes of the fear. Get rid of the reasons people are afraid and you get rid of the fear itself. Let's start with the fear that taxes will go up. Eliminate that fear - and on a real basis, not merely temporarily so - and you've made a good first step. Follow up by freezing and rolling back the regulations that make it increasingly expensive to run a business. Get rid of Sarbanes-Oxley and the recently enacted financial reform bill. Turn the tables on regulatory review, so that government has to prove their case (that something or the other is harmful) rather than requiring businesses to prove the absence of any harm. Then come up with some ideas for reducing the costs of health care (not merely shifting the costs around, as is the case with Obamacare). Repealing Obamacare would be helpful, as most businesses would prefer the risks of the 'known' previous state than the potential damage from what they don't know about Obamacare. Get rid of the uncertainty people have about the value of their house (note: the push to freeze foreclosures is actually doing more harm than good). Make it easier for people to get out of houses they can't afford. Eliminate the fear businesses have of arbitrary and capricious bureaucrats coming in an ruining their businesses. Get rid of the so-called crony capitalism that leaves unfavored businesses feeling like the deck is stacked against them. Yes, as Feldstein and the rest of the conservative side of the economist profession argue, we also need to cut the federal government budget down to size. But while it is a long term problem, it isn't the reason businesses aren't hiring now. Fixing the 'economy' isn't all that tough... it just requires that one understand why things are the way they are. Tuesday, June 07, 2011
Given that Obama has pretty much revealed himself to have no grasp of what works and what doesn't work economically, why should anyone be reassured by his comment that he doesn't fear a double dip recession?
Wednesday, June 01, 2011
As a rule, Americans prefer to put off dealing with things that could go wrong, we prefer to wait until things have gone wrong...
We didn't deal with overpriced housing and too-easy credit until they blew up in our faces. We didn't deal with Bin Laden until after 9/11. On one hand, taking pre-emptive action can head off problems. On the other hand, who can really know if something is a problem until it actually does blow up in our face? (by definition, a 'bubble' is only confirmed once it does burst). For every crisis that has taken place, there have been many more that haven't turned out as bad as the doomsayers have predicted. The Gulf of Mexico hasn't turned into a vast graveyard. Millions didn't die from swine flu. Japan didn't overtake the United States in the 80s and 90s. And dealing in advance with a potential crisis requires changing the status quo that most people have gotten comfortable with... and changing the status quo in what is usually used as a negative way. It is precisely because so many Chicken Littles have been proven wrong over the decades that most people tend to take such claims with more than the proverbial grain of salt. Why bother to upend our lives in order to deal with some potential problem if the claims are just as overblown is usually the case. So it is with the supposed negative consequences of global warming. The public just isn't that interested in changing their lives - and in a negative way - on the off chance that this time the alarmists are right, that all sorts of bad things are going to happen if we don't immediately do X or Y. And now moving to the point I grudgingly have to make... The same dynamic holds with the debate over government spending and the size of the deficit/debt. People just aren't interested in giving up some of what they have because yet another group of Chicken Littles are screaming that the economy is going to collapse if we don't do X or Y. We can watch and listen to Paul Ryan and the others advocating drastic reductions in the size and scale of government. We can agree that they are intelligent and sincere in their beliefs. We can acknowledge the workmanship that goes into their Powerpoint presentations and web videos. We can admit that we don't have much in the way of hard numbers with which to to argue against them. But we're not going to jump on the bandwagon. We're not going to give up our slice of federal spending. At least not until we see that the doom and gloom that Ryan foresees comes to pass. And just as the global warming alarmists have become objects of ridicule (and deservedly so, in my opinion), so too will Ryan and his colleagues if they persist in pushing us to take preventative action before we agree that we are in a real crisis. It isn't enough to scream and make all sorts of dire predictions about the world as we know it coming to an end if we don't do what Ryan wants us to do. That is what the global warming alarmists have tried to do... and with little success to show for their efforts. Why should anyone expect us to respond any differently on the matter of federal spending? When you gotten used to tuning out one Chicken Little, it is only natural that we tune all of them out.
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