Saturday, February 26, 2011 - Goldman Sachsonomics

I’ve been hearing this argument – that reducing federal spending will reduce jobs.  This article shows a simple refutation of that line of thought. - Opinion: Goldman Sachsonomics


Washington's spending fight heats up next week as Democrats try to derail House Republican attempts to shave $61 billion from the federal budget. Believe it or not, their favorite argument seems to be that cutting government spending reduces economic growth. Seriously.

Chris Van Hollen, the budget leader for House Democrats, declared on CBS's "Face the Nation" last Sunday that the GOP budget cuts—a 2% reduction out of $3.6 trillion in fiscal 2011 spending—would cost 800,000 jobs.  This is nothing more than the old Keynesian "multiplier" back for another political run.

As our readers k now, this notion assumes that government spending is free to the economy, and that all government expenditures have only stimulative benefits. It also assumes that there are no economic costs to deficit spending, although such spending must be financed by borrowing or higher taxes. Thus if the federal budget were to increase by, say, $1 trillion, then we could magically lower the unemployment rate to 5% or 6%. It's plug and play economics: Plug in spending and multiplier numbers and, presto, you get the job creation or destruction numbers you need for a political talking point.

House Republicans are finally acknowledging that there is no Keynesian tooth fairy, that our $3.6 trillion government with its $1.6 trillion deficit has got to get smaller and start paying its bills, and the time to start doing so is now.




Tuesday, February 22, 2011 - The Showdown Over Public Union Power - Opinion: The Showdown Over Public Union Power


Government workers have taken to the streets in Madison, Wis., to battle a series of reforms proposed by Gov. Scott Walker that include allowing workers to opt out of paying dues to unions. Everywhere that this "opt out" idea has been proposed, unions have battled it vigorously because the money they collect from dues is at the heart of their power.

Unions use that money not only to run their daily operations but to wage political campaigns in state capitals and city halls. Indeed, public-sector unions especially have become the nation's most aggressive advocates for higher taxes and spending. They sponsor tax-raising ballot initiatives and pay for advertising and lobbying campaigns to pressure politicians into voting for them. And they mount multimillion dollar campaigns to defeat efforts by governors and taxpayer groups to roll back taxes.

Unlike businesses and industry groups that are also big [campaign] givers but tend to split their donations between the parties, some 95% of government workers' donations has gone to the Democratic Party, whose members are far more likely to favor raising taxes and boosting spending than are members of the Republican Party.




Saturday, February 19, 2011 - Athens in Mad Town - Opinion: Athens in Mad Town


For Americans who don't think the welfare state riots of France or Greece can happen here, we recommend a look at the union and Democratic Party spectacle now unfolding in Wisconsin. Over the past few days, thousands have swarmed the state capital and airwaves to intimidate lawmakers and disrupt Governor Scott Walker's plan to level the playing field between taxpayers and government unions.

Mr. Walker's very modest proposal would take away the ability of most government employees to collectively bargain for benefits. The bill would also require union members to contribute 5.8% of salary toward their pensions and chip in 12.6% of the cost of their health insurance premiums.

If those numbers don't sound outrageous, you probably work in the private economy. The comparable nationwide employee health-care contribution is 20% for private industry. The average employee contribution from take-home pay for retirement was 7.5% in 2009.

Unions are treating these reforms as Armageddon because they've owned the Wisconsin legislature for years and the changes would reduce their dominance.

Public unions have a monopoly position that gives them undue bargaining power. Their campaign cash—collected via mandatory dues—also helps to elect the politicians who are then supposed to represent taxpayers in negotiations with those same unions. The unions sit, in effect, on both sides of the bargaining table.




Why are you booing the first guy who came in here and told you the truth?"

I loved this anecdote about Chris Christie, Governor of New Jersey:


He introduced pension and benefit reforms on a Tuesday in September, and that Friday he went to the state firefighters convention in Wildwood. It was 2 p.m., and "I think you know what they had for lunch." Mr. Christie had proposed raising their retirement age, eliminating the cost-of-living adjustment, increasing employee pension contributions, and rolling back a 9% pay increase approved years before "by a Republican governor and a Republican Legislature."

As Mr. Christie recounted it: "You can imagine how that was received by 7,500 firefighters. As I walked into the room and was introduced. I was booed lustily. I made my way up to the stage, they booed some more. . . . So I said, 'Come on, you can do better than that,' and they did!"

He crumpled up his prepared remarks and threw them on the floor. He told them, "Here's the deal: I understand you're angry, and I understand you're frustrated, and I understand you feel deceived and betrayed." And, he said, they were right: "For 20 years, governors have come into this room and lied to you, promised you benefits that they had no way of paying for, making promises they knew they couldn't keep, and just hoping that they wouldn't be the man or women left holding the bag. I understand why you feel angry and betrayed and deceived by those people. Here's what I don't understand. Why are you booing the first guy who came in here and told you the truth?"

He told them there was no political advantage in being truthful: "The way we used to think about politics and, unfortunately, the way I fear they're thinking about politics still in Washington" involves "the old playbook [which] says, "lie, deceive, obfuscate and make it to the next election." He'd seen a study that said New Jersey's pensions may go bankrupt by 2020. A friend told him not to worry, he won't be governor then. "That's the way politics has been practiced in our country for too long. . . . So I said to those firefighters, 'You may hate me now, but 15 years from now, when you have a pension to collect because of what I did, you'll be looking for my address on the Internet so you can send me a thank-you note.'" - Opinion: Where the Leaders Are




Thursday, February 10, 2011 - Reaganomics: What We Learned - Opinion: Reaganomics: What We Learned


For 16 years prior to Ronald Reagan's presidency, the U.S. economy was in a tailspin—a result of bipartisan ignorance that resulted in tax increases, dollar devaluations, wage and price controls, minimum-wage hikes, misguided spending, pandering to unions, protectionist measures and other policy mistakes.

What the Reagan Revolution did was to move America toward lower, flatter tax rates, sound money, freer trade and less regulation. The key to Reaganomics was to change people's behavior with respect to working, investing and producing.

The results of the Reagan era? From December 1982 to June 1990, Reaganomics created over 21 million jobs—more jobs than have been added since.  The stock market went through the roof. From July 1982 through August 2000, the S&P 500 stock price index grew at an average annual real rate of over 12%.

The true lesson to be learned from the Reagan presidency is that good economics isn't Republican or Democrat, right-wing or left-wing, liberal or conservative. It's simply good economics.






Saturday, February 5, 2011 - How to Tax the Rich

I found these ideas amusing and intriguing. - How to Tax the Rich


Try giving them perks and privileges (an extra vote?) in return, says 'Dilbert' creator Scott Adams.


If we accept that the rich can be taxed at a different rate than everyone else, we can also imagine that there could be other differences in how the rich are taxed. That's the part we can tinker with, and that's where the bad version comes in. In a minute, I'll float some bad ideas about how the rich can feel good while the rest of society is rifling through their pockets.

I can think of five benefits that the country could offer to the rich in return for higher taxes: time , gratitude, incentives, shared pain and power.




Wednesday, February 2, 2011 - 'It Makes No Sense'

I’ve long advocated that students who graduate from our universities should be able to stay and work in the U.S.  We want the best and brightest from abroad to stay and help build our country and our economy. - Opinion: 'It Makes No Sense'


President Obama didn't have much to say about immigration reform in his State of the Union address last week, which is surprising given his focus on "winning the future." But what the President did say was well put and well timed.

"Others come here from abroad to study in our colleges and universities," said Mr. Obama. "But as soon as they obtain advanced degrees, we send them back home to compete against us. It makes no sense."

Employers hire skilled foreign nat ionals based on merit, not because they can pay them less. Immigrants are also some 30% more likely than non-immigrants to start businesses.

Winning the future is that much more difficult if our laws limit U.S. access to foreign-born human capital. The new Congress has a chance to help the U.S. economy by working with the White House to make it easier for the world's young and talented to stay in America after they've earned their Ph.Ds.