Krugman blows the whistle on Obanomics
Even Krugman can see that there is no recovery in sight. See below. Obama has lost one of his biggest cheerleaders. Mind you, Krugman's own ideas about what to do are just more and more big government. He still hasn't figured out that it is business that creates jobs and that it is pro-business policies that are therefore needed
What will Ben Bernanke, the Fed chairman, say in his big speech Friday in Jackson Hole, Wyo.? Will he hint at new steps to boost the economy? Stay tuned.
But we can safely predict what he and other officials will say about where we are right now: that the economy is continuing to recover, albeit more slowly than they would like. Unfortunately, that’s not true: this isn’t a recovery, in any sense that matters. And policy makers should be doing everything they can to change that fact.
The small sliver of truth in claims of continuing recovery is the fact that G.D.P. is still rising: we’re not in a classic recession, in which everything goes down. But so what?
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 percent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 percent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
All of this is obvious. Yet policy makers are in denial.
After its last monetary policy meeting, the Fed released a statement declaring that it “anticipates a gradual return to higher levels of resource utilization” — Fedspeak for falling unemployment. Nothing in the data supports that kind of optimism. Meanwhile, Tim Geithner, the Treasury secretary, says that “we’re on the road to recovery.” No, we aren’t.
Why are people who know better sugar-coating economic reality? The answer, I’m sorry to say, is that it’s all about evading responsibility.
In the case of the Fed, admitting that the economy isn’t recovering would put the institution under pressure to do more. And so far, at least, the Fed seems more afraid of the possible loss of face if it tries to help the economy and fails than it is of the costs to the American people if it does nothing, and settles for a recovery that isn’t.
Snapshot of economy about to get a lot bleaker
The government is about to confirm what many people have felt for some time: The economy barely has a pulse. The Commerce Department on Friday will revise its estimate for economic growth in the April-to-June period and Wall Street economists forecast it will be cut almost in half, to a 1.4 percent annual rate from 2.4 percent.
That's a sharp slowdown from the first quarter, when the economy grew at a 3.7 percent annual rate, and economists say it's a taste of the weakness to come. The current quarter isn't expected to be much better, with many economists forecasting growth of only 1.7 percent.
Such slow growth won't feel much like an economic recovery and won't lead to much hiring. The unemployment rate, now at 9.5 percent, could even rise by the end of the year. "The economy is going to limp along for the next few months," said Gus Faucher, an economist at Moody's Analytics. There's even a one in three chance it could slip back into recession, he said.
Many temporary factors that boosted the economy earlier this year are fading. Companies built up their inventories after cutting them sharply in the recession to match slower sales. The increase provided a boost to manufacturers, but now many companies' stockpiles are in line with sales and don't need to grow as much.
In addition, the impact of the government's $862 billion fiscal stimulus program is lessening. That leaves the private sector to pick up the slack. But businesses are cutting back on their spending on machines, computers and software, according to a government report earlier this week. And the housing sector is slumping again after a popular home buyer's tax credit expired in April.
How creative destruction works (and is working in Las Vegas)
Creative destruction is an essential part of the free market. Economist Joseph A. Schumpeter coined the term in "Capitalism, Socialism and Democracy."
Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. ...
As we have seen in the preceding chapter, the contents of the laborer's budget, say from 1760 to 1940, did not simply grow on unchanging lines but they underwent a process of qualitative change. Similarly, the history of the productive apparatus of a typical farm, from the beginnings of the rationalization of crop rotation, plowing and fattening to the mechanized thing of today–linking up with elevators and railroads–is a history of revolutions. So is the history of the productive apparatus of the iron and steel industry from the charcoal furnace to our own type of furnace, or the history of the apparatus of power production from the overshot water wheel to the modern power plant, or the history of transportation from the mailcoach to the airplane. The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the same process of industrial mutation–if I may use that biological term–that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.
In my own words, "creative destruction" means this: Because there are limited resources in the world (scarcity), in order for there to be innovations and improvements there must also be a destruction and redistribution (through private decisions) of the scarce resources (raw materials and employees, etc.) that were being consumed by less productive means.
This is why it's so important that bad businesses are allowed to fail and lose money (as happens naturally in the marketplace outside of government interference). If bad businesses aren't allowed to fail, the limited resources that they are using will be stuck in inefficient and unwanted businesses instead of becoming available for better uses (as determined by the individuals in the marketplace). And if the government doesn't allow bad businesses to fail, successful businesses and taxpayers will be forced to subsidize them — literally rewarding failure.
Anyway, that's a long way of saying that there's a great story today in the Las Vegas Sun about how the recession is creating new opportunities for businesses — creative destruction in action.
Even as many retailers and food establishments are struggling to outlast the recession, franchises and chains are entering the market or expanding their footholds.
Some are taking advantage of the sharp decline in rent, the availability of storefronts at high-traffic shopping centers and declining competition. ...
“We are doing this for the long term,” said Loren Kreiss, spokesman for San Diego-based Kreiss furnishings, which in July at Town Square opened its 14th U.S. store. “We see the benefits when others are shying away. It is an opportunity for us to get in the market. Our strategy is to double down where we see the growth.” ...
The recession does have its benefits: [Business owner Todd] Miller says his rent is about a third of what was charged several years ago.
Recessions are a normal part of the business cycle (especially, as F.A. Hayek and my colleague Geoffrey Lawrence have argued, since the Fed inflates the money supply) and must be allowed to run their course.
If recessions are a normal part of the business cycle, why has this one lasted so long? Because it hasn't been allowed to run its course. From bailouts, to the stimulus, to Government Motors, to propping up Fannie and Freddie, to imposing huge new health care mandates, to the looming expiration of the Bush tax cuts, the federal government has been trying to save failing businesses for the last two years — hindering the creative destruction of the market.
And it's failed miserably.
The government's been trying to prop up failing businesses, and this has led to a failing economy. Government needs to get out of the way. Bad businesses need to fail so that new businesses can attempt to use the scarce resources, which were previously tied up in the bad businesses, in more productive ways.
As Las Vegas shows, creative destruction works — if it's given a full chance.
SOURCE (See the original for links)
GOP leader's Pro-Growth Message
It’s a bit too early for House Republican leader John Boehner to measure the drapes and pick out new wallpaper. But the Intrade pay-to-play prediction markets are now showing a 76 percent chance of a GOP House takeover in November, along with a 60 percent probability that Republicans will capture at least seven new Senate seats...
Well, Mr. Boehner’s speech was a very promising beginning to all this. Near the top he said, “Right now, America’s employers are afraid to invest in an economy stalled by ‘stimulus’ spending and hamstrung by uncertainty. The prospect of higher taxes, stricter rules, and more regulations has employers sitting on their hands.”
His first proposal to break that uncertainty? Boehner said, “President Obama should announce he will not carry out his plan to impose job-killing tax hikes on families and small businesses.” In other words, extend all the Bush tax cuts. To this end, Boehner quoted former President John F. Kennedy: “An economy constrained by high tax rates will never produce enough revenue to balance the budget, just as it will never create enough jobs.”
And Boehner was just getting started. He called for an Obama pledge to veto any lame-duck congressional actions that would damage the economy, including the union card-check bill and a national cap-and-trade energy tax.
He called for the repeal of Obamacare’s job-killing 1099 mandate that would require small-business paperwork to show any purchases of more than $600.
He slammed Obamacare in general, noting the creation of more than 160 boards, bureaucracies, programs, and commissions, and the 3,833 pages of new regulations already in place.
He called for an aggressive spending-reduction package that would rollback non-defense discretionary expenditures to 2008 levels, before the stimulus plan was put in place. He said he wants to end TARP and all TARP bailouts.
He bemoaned the fact that no one in the White House has any business experience, chiding Obama by saying, “We’ve tried 19 months of government-as-community-organizer. It hasn’t worked. Our fresh start needs to begin now.”
He called for a freeze on federal pay and hiring. He noted that, on average, federal employees now make more than double what private-sector workers take in.
He cited Wisconsin congressman Paul Ryan’s plan for $1.3 trillion in specific spending cuts. He called for strict budget caps. And he argued for pro-growth tax reform that would get rid of “the undergrowth of deductions, credits, and special carve-outs in order to bring simplicity and certainty, instead of transfer payments to the favored few.”
And he spotlighted the fiscal restraint of governors Bob McConnell of Virginia and Chris Christie of New Jersey, elected Republican officials who balanced their budgets by throttling spending instead of raising taxes.
Instead of playing it safe, it looks like Republicans intend to be aggressive in changing the statist, government-planning, socialist-lite agenda of President Obama, Majority Leader Harry Reid, and House Speaker Nancy Pelosi. It sounds like the new Republican party intends to end the ongoing war against private-capital investment, entrepreneurial rewards, free-market incentives, and private business that is plaguing the economy and sapping the strength of the recovery.
In a little over two months, the election will take place. In a little over four months, the 2003 tax cuts will expire. And in just a few weeks, congressional Republicans will presumably put more meat on the bones of their new platform. John Boehner’s Cleveland speech was a very encouraging beginning. Now let’s see if the Republican’s next step will truly provide some much needed optimism to the economy and body politic.
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)