Tag Archives: Public Sector

Commentary

Thomas Sowell urges us to reflect on economic trade-offs and incentives

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Thomas Sowell

Article here on Creators.

Excerpt:

With all the laments in the media about skyrocketing unemployment among young people, and especially minority young people, few media pundits even try to connect the dots to explain why unemployment hits some groups much harder than others.

Yet unusually high unemployment rates among young people is not something new or even something peculiar to the United States. Even before the current worldwide recession, unemployment rates were 20 percent or more among workers under 25 years of age in a number of Western European countries.

The young have less experience to offer and are therefore less in demand. Before politicians stepped in, that just meant that younger workers were paid less. But this is not a permanent situation because youth itself is not permanent, and pay rises with experience.

Enter politicians. By mandating a minimum wage that sounds reasonable for most workers, they put a price on inexperienced and unskilled labor that often exceeds what it is worth.

Mandated pay rates, like mandated insurance coverage, impose on buyers and sellers alike things that they would not choose to do otherwise.

Workers of course prefer higher wage rates. But the very fact that the government has to impose those wage rates means that workers were unwilling to risk not having a job by refusing to work for less than the wage rate that has been mandated. Now that choice has been taken out of their hands, with the hidden cost in this case being higher unemployment rates.

The law of unintended consequences – hurting the very people they intended to help, because of their economic ignorance. They priced the youngest and most vulnerable workers out of a job, by mandating a minimum wage that no employer will pay to an inexperienced worker. During a recession, you LOWER minimum wage in order to make sure that those most in need can find a job rather than depend on the government.

When people have jobs, they have confidence to spend more money. Making sure that no policy harms job creation is a primary responsibility of government. Jobs, jobs, jobs. No one (especially Christians) should be dependent on the government for money – because the one who pays the piper calls the tune. And no Christian should dance to the tune of a secular leftist government.

If you are a Christian, but not yet a solid small-government fiscal conservative, then read the WHOLE thing. Christians need to understand that the free market is the best guarantor of our freedom of conscience.

Thomas Sowell is my favorite living economist. Walter Williams is number 2. If you click this link, you can read something from Walter Williams about the economic problems that are created by forcing insurance companies to cover people with pre-existing conditions.

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Commentary

How Democrat policies cause unemployment to increase

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Consider this article from the Washington Post. (H/T Belmont Club via ECM)

How Democrats prevent job creation

Most of the article talks about how Obama’s temporary hand-outs will not create any lasting jobs – they’ll simply go away as soon as the government stops taking money from the private sector to pay for these public works projects. But then the article talks about free trade and how free trade creates jobs. Is Obama in favor of free trade?

Excerpt:

More promising is the president’s call for a renewed national emphasis on exports, which currently support about 10 million jobs in the United States. It’s a sound concept, especially at a time when the weak dollar improves this country’s global competitiveness. But the goal he set in his State of the Union address — doubling exports to $3 trillion per year over the next half-decade — is unreachable via the laudable but modest policies that he has been willing to embrace so far, such as greater trade promotion efforts and relaxed controls on national security-related export controls. Though he called for “strengthened” trade relations with South Korea, Panama and Colombia, he did not challenge Congress to approve pending free-trade agreements with those three countries. That would require defying labor unions and other interest groups in his party. But it would create hundreds of thousands of jobs.

Free trade creates jobs by allowing our businesses to buy cheaper materials from abroad, and to sell their products into foreign markets. Consumers also benefit by being able to buy cheaper foreign goods, which allows them to save, invest or buy other things.

The only people who suffer are labor unions, who are paid salaries and benefits far in excess of what their skills really warrant. For example, a unionized GM auto worker in Detroit may be paid $70/hour in salary and benefits, while a non-unionized Honda auto worker in Ohio may be paid $40/hour. Unfortunately, these unions play a big role in getting Democrats elected, sometimes by using violence, etc., to get their man elected.

How Democrats cause jobs to be shipped overseas

Here is the latest from the Heritage Foundation. (dated 01/12/10)

Excerpt:

According to an Associated Press analysis reviewed by independent economists at five universities, the $20 billion spent nationwide on infrastructure so far “has had no effect on local unemployment rates.” And this was just the most recent embarrassing headline for the White House’s signature economic policy. Since the first reporting deadline in October, newspapers and other media outlets across the country have identified 94,341 fake jobs reported by the Obama administration as jobs “created or saved” by the stimulus. After the Government Accountability Office issued a report finding “significant reporting and processing problems that need to be addressed,” Obama administration spokesman Ed Pound offered this defense of the Obama administration’s jobs numbers: “Who knows, man, who really knows.”

Now Office of Management and Budget Director Peter Orszag issued a little-noticed memo last month ending the “saved or created” metric and instead directing agencies to count only jobs “funded” by stimulus dollars. But as Harvard University labor economist Lawrence Katz tells ProPublica, this is not really an improvement: “I just think it’s a silly exercise.” Instead Katz says a more accurate way to account for the effect of the stimulus is to look at the unemployment numbers put out by the Bureau of Labor Statistics.

That is a great idea. The latest BLS report issued last Friday found that the U.S. economy dropped 85,000 jobs in December, bringing the jobs lost total to 2.7 million since the stimulus was passed and 3.4 million since Obama became President. In contrast, the President’s White House Council of Economic Advisers had promised total employment of at least 138.6 million by 2010. Actual employment as of December was reported to be 130.9 million, leaving the Obama jobs deficit at 7.7 million.

The problem with infrastructure spending as stimulus, and really government spending as stimulus, is that Congress does not have a vault of money waiting to be distributed. Every dollar Congress injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It is merely redistributed from one group of people to another. Businesses are telling pollsters that among the biggest reasons they are not creating jobs is the prospect of new tax and regulatory burdens. A better solution to reduce unemployment is to simplify and reduce the barriers to business success.

The problem is that Obama is associated with special interests who are hostile to business, like unions, trial lawyers, and environmentalists, so he won’t do what needs to be done. Whenever Democrats tax, regulate, intimidate, and demonize business, they cause unemployment to increase. Fancy that. All this complaining by Democrats about “greedy corporations” and “global warming” cost you your job.

Obama promised that his policies would create jobs, but his policies failed. He predicted that his policies would work, but they did not work. He prescribed pixie dust to fix the economy, and it failed. He failed. And his only response to his failure is to blame his predecessor who embraced tax cuts and free trade, and presided over a 5.2% average unemployment rate over 8 years. George W. Bush didn’t attack businesses, and we all had jobs. Remember that?

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News

How Obama rewards Democrat special interest groups

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One way to reward your favored special interests is to exempt them from the taxes that everyone else has to pay.

Consider this article from CNS News. (H/T ECM)

Excerpt:

President Barack Obama on Thursday announced a plan to impose a new tax on banks to cover an expected $117 billion shortfall in the Troubled Assets Relief Program (TARP). The tax would apply to 50 financial institutions, which have assets of more than $50 billion, and would constitute a 0.15 percent tax on the TARP liabilities of these institutions.

However, auto companies General Motors and Chrysler, which are not expected to pay back all of their $66 billion of TARP money, will not be subject to the tax. Also exempted from the tax would be mortgage institutions Freddie Mac and Fannie Mae, which are largely responsible for the financial meltdown in 2008.

What do you suppose that businesses do when the government tells them to pay more taxes? Well, they just pass that on to their consumers.

But there’s more.

Consider this article from the Heritage Foundation. (H/T ECM)

Excerpt:

After a long-week of negotiations, unions have won an exemption from the excise tax on high-cost “Cadillac” health insurance plans. The excise tax would fall on health insurance plans that cost more than $8,500 for individuals and $23,00 for families (the union deal reportedly slightly increases these thresholds) starting in 2013. It is one of the many tax hikes proposed by Congress to partially offset the cost of its take over of the health care system.

Obama’s union supporters are getting exempted from another tax that will be paid by non-unionized workers.