What can be learned from grocery shopping: Henninger: America's Two Economies - WSJ.com

Henninger: America's Two Economies - WSJ.com


This is also why Laffer is right about the causes of the ongoing Depression in the 1930's and the lack of growth in socialist economies like America and Europe today.

Too much is going to the public sector - the supply and demand functions of the private economy need to restored and the amount of money taken by government as a percentage of GDP reversed.

Just like grocery shopping by almost everyone, when prices go up and salaries don't, people change what they buy and often buy less. With government regulation and taxes raising the cost of economic activity in the economy, there is less activity and different types of activity.

Democrats and unions don't want to and can't believe high taxes impact job creation and, as Mark Twain said, "It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so."

KNOWING HOW TO DRIVE IN SNOW ANALOGY: Is it the long run or the short run? - Irwin Kellner - MarketWatch

Is it the long run or the short run? - Irwin Kellner - MarketWatch


The alternative to the above (tax and spend) is the Art Laffer view that when taxes are too high (or likely to be) and when the labor or regulatory element of economic activity becomes a drag on the returns to investment, risk and entrepreneurship, then those with the inclination and proclivity to enhance economic activity (i.e. to invest and create jobs) just don't do so.

Think of the farmer who knows most of his crop will be taken by some governmental body. He plants his seed and the crop will be taken. He's likely to be prudent and hold onto more of the crop he has left (and not plant).

Similarly, the policies at work today and particularly in Europe, discourage investment and job creation (taxes, labor policies, etc.) are too high. These aren't being changed in any meaningful way and Obama is arguing they are irrelevant.

Like a car caught in a snow drift, flooding the accelerator to try and move a car forward through a mass of snow does nothing more than flood the engine.

Those who know how to drive in snow (understand business and investment) know they should try and remove the snowdrift (unfavorable tax, regulatory, labor and entitlement, etc. polices) before trying to move forward. Others, who haven't a clue about business, flood their economic engines (print money and borrow) and there are always unpleasant consequences. The first of which in this case is low job creation (US) or a new recession (Europe).

Is it the long run or the short run? - Irwin Kellner - MarketWatch

Is it the long run or the short run? - Irwin Kellner - MarketWatch


The alternative to the above (tax and spend) is the Art Laffer view that when taxes are too high (or likely to be) and when the labor or regulatory element of economic activity becomes a drag on the returns to investment, risk and entrepreneurship, then those with the inclination and proclivity to enhance economic activity (i.e. to invest and create jobs) just don't do so.

Think of the farmer who knows most of his crop will be taken by some governmental body. He plants his seed and the crop will be taken. He's likely to be prudent and hold onto more of the crop he has left (and not plant).

Similarly, the policies at work today and particularly in Europe, discourage investment and job creation (taxes, labor policies, etc.) are too high. These aren't being changed in any meaningful way and Obama is arguing they are irrelevant.

Like a car caught in a snow drift, flooding the accelerator to try and move a car forward through a mass of snow does nothing more than flood the engine.

Those who know how to drive in snow (understand business and investment) know they should try and remove the snowdrift (unfavorable tax, regulatory, labor and entitlement, etc. polices) before trying to move forward. Others, who haven't a clue about business, flood their economic engines (print money and borrow) and there are always unpleasant consequences. The first of which in this case is low job creation (US) or a new recession (Europe).

Potomac River Blindness - Barrons.com

Editorial Commentary | SATURDAY, JULY 14, 2012 Potomac River Blindness By JAMES BOVARD | MORE ARTICLES BY AUTHOR Government waste goes unseen in Washington. It is only a question of time: Washington soon will be convulsed by the next federal budget crisis. Unfortunately, neither presidential candidate is offering substantive proposals to curb soaring federal outlays. One side offers high taxation and high borrowing; the other offers lower taxation and high borrowing. Washington seems inherently unable to recognize the true threat to Americans' future posed by government spending. Proposals to scrutinize government spending routinely evoke cries of horror. After President Obama promised in 2009 that his stimulus plan "cannot and will not be an excuse for waste and abuse," the Washington Post published an indignant protest headlined "The Case for Waste." In it, George Washington University law professor Steven Schooner was quoted perfectly expressing the local conventional wisdom: "Are we capable of grasping the concept that in a struggling economy, it's more important to throw money at the problem, even if it's possibly inefficient and possibly inaccurate?" The notion of leaving money in private pockets is never considered—perhaps because it would be an unnatural act. Source of Prosperity It was a common saying in the countryside in the 1930s that "we cannot squander our way to prosperity." But in the capital city it was and is unimaginable that the government could be dragging down the national economy. The evidence of the benefit of government spending could not be more obvious to Washingtonians: the booming local economy, the lofty real-estate values, the ample opportunities for those with college degrees and a willingness to spend their lives writing unread briefs, memos, and reports. Further back in history, President Grover Cleveland declared in 1893 that "the waste of public money is a crime against the citizen." But today's Washington experts take a different view of floundering programs: They can be redeemed with a few more years of trial and more billions of dollars. For instance, the National Academy of Public Administration declared in 1994 that if HUD were not operating "in an effective, accountable manner" within five years, "the President and Congress should seriously consider dismantling the department and moving its programs elsewhere." HUD, of course, remains the prize flounder. At a hearing last year, current and former inspectors general recounted story after story of HUD's having no clue where its money went. Washingtonians view each billion dollars of government spending as magic beans that automatically sow blessings across the nation, thanks to the multiplier. Obama administration officials claimed that the 2009 stimulus would produce $1.57 in economic activity for each dollar spent, that Food Stamps generate $1.84 in economic activity per dollar of handouts, and that each dollar of unemployment benefits produces $2 in economic activity. Unintended Consequences Washington refuses to recognize the collateral damage from federal programs. Subsidized loans allow colleges to gouge students with higher tuition; agricultural subsidies inflate farmland prices and price out young farmers; training programs often provide young people with the illusion that they have marketable skills. Even when subsidies, such as those for ethanol, boost smog, damage Americans' car engines, and drive millions of Third World poor to the edge of starvation with inflated food prices, it is hard to find anyone in D.C. who will consider ending the programs. The government is unable to recognize federal failures in part because the political concept of waste is diametrically opposed to the economic concept. In economics, if a company produces something that people will pay for, it can thrive. In politics, if a program provides something people won't pay for, it garners votes, campaign contributions, or power. The more money a program spends, the more gratitude its beneficiaries show to politicians. The beneficiaries of wasteful programs are often the most grateful. Regardless of the severity of the next budget crisis, we will see more charades like last year's "historic" budget deal, when Democratic and Republican congressional leaders proudly claimed to have cut federal spending by $38 billion—out of $3.8 trillion. The Congressional Budget Office later revealed that the actual amount saved was only $352 million in the current fiscal year. Unfortunately, a 99% sham rate is about par for spending cuts. Congressmen will always prefer imaginary budget cuts, as long as government spending gives them real power to send money back home. Regardless of the government's own record, the nation's capital presumes that it knows best. Recent gargantuan deficits haven't deterred the Treasury Department from lecturing Americans about how to manage their personal finances. (Get a laugh at http://www.mymoney.gov/.) Costs of Citizenship Governments don't throw away money in a vacuum. With spending come futile attempts to curb "fraud, waste, and abuse." The more of an economy that is subject to political command and control, the greater will be the lost business opportunities and the harder it will be to create private prosperity. A billion dollars taxed away pre-empts the equivalent of 5,000 families from buying starter homes, or a million people from taking a summer vacation, or citizens from buying 40 million new books or 70 million cases of beer. Any of these private expenditures would create more jobs and more job security than a stimulus program. If congressmen have a right to seize and squander other people's money, citizens are nothing more than beasts of burden for political ambition. Until politicians feel an electoral knife at their throats, it will be business as usual—with a little rhetoric thrown in to delude people that problems are being solved. We cannot expect politicians and bureaucrats to reduce the power of political spending on their own; we must stop rewarding them with our votes. JAMES BOVARD is the author of Attention Deficit Democracy (Palgrave, 2006), Lost Rights (St. Martin's, 1994), and seven other books. Editorial page editor THOMAS G. DONLAN receives e-mail at tg.donlan@barrons.com

COMPARISONS: In U.K. Visit, Hollande Urges French to Cut Debt - WSJ.com

In U.K. Visit, Hollande Urges French to Cut Debt - WSJ.com


Can we say 15% in Singapore.

How can an investor handing over 75% to government compare with (assumably) an equally (but not more) talented investor paying 15%?

WHAT'S WRONG WITH A SINGULAR MONETARIST VIEW: Allan Meltzer: What's Wrong With the Federal Reserve? - WSJ.com

Allan Meltzer: What's Wrong With the Federal Reserve? - WSJ.com


Frank, if you consider Art Laffer's economic views to have any traction, then you'd recognize that the focus of the impediments to growth are sitting in Democratic tax and spend, entitlement and regulatory policies.

Obama, et al don't see their policies as an economic snowdrift standing in front of the train of economic progress, but they fail to see the problems they create because they are sadly ignorant, misguided and too narrowly focused.

Much of Europe is no better and the incentives to save, invest and create jobs are not there for individuals and businesses - especially smaller businesses. Unions and government workers *the favored job creators" are just the opposite - high cost and non-productive.

Young people should be in revolt and recognize that, should they have a job, they are being asked to support several generations of retirement beneficiaries - all on their single income.

I was an old Milton Friedman monetarist supporter too until I realized, as Laffer says, you eventually have to have incentives to save, invest, take risks and create jobs.

As someone commented yesterday in the Wall Street Journal, Obama's campaign is based on 'envy' and the equalization of outcomes, not the creation of opportunity.

WHY ANSWERS ARE HARD TO COME BY: How bad was the June jobs report? - Barrons.com

How bad was the June jobs report? - Barrons.com

There is the question of the dismal science and then again, there is abysmal difference in inputs and outputs seen and viewed as important.

To wit, a Keynesian would dismiss Laffer’s view that tax rates and investment incentives matter. A monetarist just worries about having enough money flowing through the economy.

Likewise, Democrats think government (read “Democrats”) know better than the average guy/gal in the street what is important for them; and, to wit, since people are generally eleemosynary in the Democratic universe, those who aren’t are perverse and selfish and undeserving.

Somewhat similarly, many Republicans thump their own religious knowledge and zeal to tell people how to live their lives.

To my knowledge, each economic point of view works best by excluding important considerations of outcome and opportunity. Hopefully, this new election cycle will present the tradeoffs in a way the voters can understand.

It’s also easy to see blatant examples (read Greece) where ignoring Laffer and focusing on Keynes have left a rather sorry economy. Not to say Obama is adhering all that avidly to past Greek political ways, but it does appear to be where his heart is.

And, to forecast the economy, it would be a huge challenge to be able to always be able to accurately gauge the temper of ascendant policies.

It does appear as though Obama has put the economy on a patch of economic ice with his fiscal and tax and regulatory policies. Bernanke’s money printing doesn’t do much when the economy is on the anti-growth ice of Democratic policies. In fact these policies are more like a snow drift blocking advancement.

And much of Europe is following the same path – more government, less for the private sector, abhorrence of risk and equalization of economic outcomes.

All one can say is the proof of anti-growth, big government policies are before our eyes and the evidence is more debt and no growth (and in many cases, retrenchment).