Personal Income Rises, but Spending Is Muted - WSJ.com

THE BASICS: Personal Income Rises, but Spending Is Muted - WSJ.com

It is astounding how many economists (Irwin Kellner at CBS for instance) don't see the importance of having the US turn around its fiscal policies to encourage job creation instead of benefit extensions.

What the Obama and Pelosi administrations (and in fact Bush as well) keep trying to do is to curry favor with those seeking handouts from the government.

This money doesn't fall from trees (yes, perhaps the printing presses of the Fed) but mostly from lenders and taxes.

Those smart enough to create jobs and generate wealth can see the writing on the wall. If we want jobs and wealth creation, then we need policies that support such activities. We don't have them. We have just the opposite.

Economic utility determines our desire for goods at a certain cost. When we make it more expensive to buy goods artificially (think VAT and sales taxes), then the utility of the goods drops and fewer are wanted. (This especially applies to Europe and the Dem's hope to get some cash out of Americans through a VAT tax.)

The Production equation says to add the costs of 'labor', 'capital' and 'raw materials'. So, what does the administration do? It raises the cost of labor in a globally competitive economy.

So each worker needs to be able to produce even more in order for the employer to pay a currently equivalent wage. This means more investment capital just as government borrowing is crowding out private. Taxes on capital and beating up on the banks and hedge funds doesn't help get lower cost capital to businesses either; etc.

(Clearly those who ignored the portents of the housing bubble are equally ignorant of the basic economics at work in the broader economy.)