Obama, Race and Affirmative Action: Why the Second Term Will Be Worse

The accelerated transformation of the American economy and polity into a mandatory racially-based spoils system was a defining trait of President Barack Obama’s first term in office. Though perhaps understated, it is set to become an even more defining trait of his second.

Obama, by various accounts, wants to be more aggressive about suing banks, employers, schools and other institutions whose practices, however unintentionally, adversely affect “disadvantaged” (read: nonwhite) populations. This is the doctrine of “disparate impact.” Attorney General Eric Holder already has used it to extract hundreds of millions of dollars in coerced settlements from Wells Fargo and other major banks. Its widespread application is further evidence, as if any more were needed, that “civil rights” has become a well-organized shakedown racket.

For too long, whites, including many self-described conservatives, have been muted in their criticism of mandated racial preferences. For them, a struggle somehow isn’t worth the trouble. Thus, they go along with campaigns to rebrand such coercion as “affirmative action” and, even better, “diversity.” The language may be benign, but the desired end is enforceable goals, quotas and timetables, accompanied by close monitoring to ensure “progress.” Equality of outcome, not equality of opportunity, is the overriding goal. If an employer’s work force, for example, is only two percent black and the surrounding labor market area is 10 percent black, that employer may have to explain to a government agency why it has “only” one-fifth the number of black employees it should have. Employee traits such as perseverance, punctuality, intelligence and an ability to work with others don’t matter much, if at all, in such a context.

Ground zero for this egalitarian enthusiasm is the ostensibly race-neutral Title VII of the 1964 Civil Rights Act. Affirmative action took root during the Johnson administration and then took off during the Nixon administration. In 1969, President Nixon’s Labor Secretary, George Shultz, with approval from Attorney General John Mitchell, oversaw the creation of a mandate known as the Philadelphia Plan, which required contractors working on large federally-funded construction projects to adopt numerical goals and timetables for black hires. Even more far-reaching, however, was the U.S. Supreme Court’s 1971 ruling in Griggs v. Duke Power Company. This 8-0 decision surely must rank as one of the worst decisions in the history of the High Court. It invalidated employee aptitude tests which, though race-neutral, had the effect of reducing the likelihood of blacks getting hired or promoted. The court rationalized that the tests were unrelated to job requirements, though common sense would dictate that if this were the case, the employer wouldn’t have administered the tests in the first place.

Bad law or not, however, Griggs would provide racial egalitarians with an Ur-text. For the first time in U.S. history, it now was possible to file a discrimination suit against organized activity unwittingly producing statistical disparities by race.

“Disparate impact” is at once bad law and a near-guarantee of full employment within the legal profession. It’s noteworthy that not a single presidential administration has ventured to challenge it. Only once, briefly, in the mid-Nineties, has Congress – more accurately, a few Republican members such as Sen. Bob Dole, R-Kan., and Rep. Charles Canady, R-Fla. – made a go of it. Facing at best token opposition, affirmative action supporters within and outside government have had almost free reign. As a report released in April 2011 by the Congressional Research Service indicated, affirmative-action federal regulatory mandates are more numerous than ever.

President Obama remains unsatisfied. He has little reason to fear further “progress,” since his administration is home to many diversity zealots, most of all, Attorney General Eric Holder and his chief civil rights enforcer, Thomas Perez. In December 2011 the Justice Department extracted a commitment from Bank of America for $335 million to settle allegations that its Countrywide Financial Unit had discriminated against black and Hispanic borrowers during 2004-08 – the period immediately before BoA took over the insolvent Countrywide. Perez and his team of prosecutors this past July also announced a $175 million “settlement” with Wells Fargo Bank for racial disparities in home mortgage lending. The government didn’t demonstrate any intent to discriminate, and for that matter, never looked for such intent. It didn’t matter; Wells Fargo succumbed. This sum, moreover, was in addition to a sizable out-of-court settlement the bank reached with the City of Baltimore and a prodigious one it reached with the City of Memphis and surrounding Shelby County, Tenn. It’s hard to conclude which was more appalling – the enthusiasm of government or the timidity of bank management.

President Obama says he wants to close “persistent gaps” in economic and social outcomes across race. At the same time, he knows enforced affirmative action isn’t popular among the nation’s white majority (with good reason!). While white members of Congress are fearful of acquiring the tag of “racist” if they openly oppose it, at the same time they are fearful of losing re-election if they openly promote it. Thus, the administration has made heavy use of the lawsuit, knowing even the threat of one can strike fear across a wide swath of organizations and not just one organization under a federal microscope. This has been a prevalent pattern at cabinet-level federal agencies that have a civil rights division, such as the Department of Justice, the Department of Labor, and the Department of Housing and Urban Development (HUD). A new player in Washington, the Consumer Financial Protection Bureau (CFPB), may emerge as the most powerful agency of all.

Authorized by the Dodd-Frank financial reform legislation of 2010, the CFPB is vested with broad powers to sic affirmative action attack dogs on potentially offending organizations to ensure their practices produce the right racial breakdowns. Bureau Director Richard Cordray already has flexed his muscles, remarking that his agency will protect consumers from unfair lending practices – as well as those that have “a disparate impact on communities of color.” Just to make sure lenders get the message, he added: “That doctrine is applicable for all of the credit markets we touch, including mortgages, student loans, credit cards and auto loans.” In his haste to achieve racial balance in loans, regardless of borrower creditworthiness, Cordray intends to subject all credit reporting agencies, including the three major ones – Equifax, Experian and TransUnion – to “effects tests.” Thus, if applications by blacks and Hispanics for mortgage or credit cards produce significantly higher rejection rates than applications by whites, these reporting agencies could be sued even if their risk analyses in no way took race into consideration.

Institutional lending isn’t the only realm where the Obama administration plans to turn up the temperature. Also likely to be closely monitored are: college admissions guidelines; voter ID requirements (all the better to fight minority “disenfranchisement”); school disciplinary codes; professional licensing examinations; employee background checks; and prison sentencing guidelines. The intent is to minimize or eliminate “disparities.” Because equality of outcome is the goal, equality of process – i.e., rule of law – necessarily becomes an obstruction.

The Obama administration over the last several months has given us a taste of what to expect. Last July, for example, HUD intervened on behalf of the National Fair Housing Alliance and the Greater New Orleans Fair Housing Action Center to drop their lawsuit against the State of Louisiana over its administration of federal “Road Home Program” grants to homeowners whose properties were damaged by Hurricane Katrina and Hurricane Rita in 2005. The catch was this: In exchange, the state would agree to make available an extra $62 million to about 1,300 black homeowners (nearly $50,000 per homeowner) in Cameron, Orleans, Plaquemines and St. Bernard Parishes.

Under the Road Home Program, a qualifying homeowner could receive as much as $150,000 toward rebuilding and temporary resettlement. The black grant program allocated $16.7 billion for resettlement and reconstruction costs, of which $13.4 billion went to Louisiana. This aid package would seem generous to a fault. Certain nonprofit civil rights groups didn’t think so. And so they sued.

The bone of the plaintiffs’ contention was the method of calculating award sizes. The State of Louisiana had used a standard insurance industry practice to derive grant amounts. Homeowners would receive the lower of either the pre-storm fair market value or the cost of repairing the damages. Because most, if not all, homes in black low-income New Orleans neighborhoods had low property values to begin with, Louisiana officials wound up setting aid levels on the basis of the market-value rather than cost-replacement method. The plaintiffs claimed this method had a “discriminatory impact on African-American homeowners.”

The suit, in other words, was preposterous. It was no different in principle than demanding that an insurance company pay $20,000 for parts and labor to fix a $10,000 car totaled in a wreck. The Department of Housing and Urban Development, predictably, sided with the plaintiffs. HUD Secretary Shaun Donovan rationalized: “This agreement is a huge help to families who clearly want to get back into their homes but continue to struggle to make the needed repairs to their properties.”

Affirmative action zealots within the U.S. Department of Education under President Obama also have been on the march lately. This past October, department bureaucrats coaxed an agreement from the Oakland, California school district to impose “targeted reductions” in the number of suspensions of black, Hispanic and “special education” students for violent or otherwise disruptive behavior. The district’s suspension policy allegedly had a “disparate impact.”

Russlyn J. Ali, assistant secretary for civil rights at the Department of Education, thinks such legal actions are overdue. “Disparate impact is woven through all civil rights enforcement of this administration,” she glowed back in 2010. The possibility that blacks, far more than whites, engage in behavior that should result in a suspension apparently is immaterial. Here’s a statistic that might be of interest to Ms. Ali: Nationally, the homicide rate among males ages 14-17 is nearly 10 times higher for blacks than it is for the average of whites and Hispanics in that age range. Here’s another statistic: In Chicago public schools, the very system headed not long ago by Obama Secretary of Education Arne Duncan, black students were arrested 25 times more often than white students during September 2011-February 2012. The Oakland case is one of about 20 similar cases underway across the nation.

SOURCE

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Unholy Alliance Comes Out of the Shadows and Into Your Living Room

Al Gore has sold his failing Current TV network to Al Jazeera, which plans to rename it Al Jazeera America - and so the Leftist/jihadist alliance is now official. While the American Left has been cooperating and collaborating with forces of the global jihad and Islamic supremacism for years, now their alliance is open and indisputable. Gore is even slated for a spot on Al Jazeera America's advisory board.

The Wall Street Journal reported that Current TV's co-founder and CEO, Joel Hyatt, explained that Al Jazeera was a perfect fit for the sale. Al Jazeera, he said, "was founded with the same goals we had for Current." Among those goals were "to give voice to those whose voices are not typically heard" and "to speak truth to power."

Some of the voices that would not typically have been heard but for Al Jazeera have included some of the world's foremost jihad terrorists. Pamela Geller has noted that Al Jazeera has "for years been the recipient of numerous Al Qaeda videos featuring bin Laden, Zawahiri, and American traitor Adam Gadahn. Yet they never seem to be able to trace where these videos are coming from. They have repeatedly been set up at the point of attack right before a bomb went off, so that they could take the picture of the slaughtered, dismembered bodies." What's more, "Al Jazeera is the leading terrorist propaganda organization in the world. Jihad murder mastermind Anwar al-Awlaki has praised Al Jazeera, and several years ago one of its most prominent reporters was arrested on terror charges."

Judea Pearl, father of the journalist Daniel Pearl who was murdered by jihadists in Pakistan, has dubbed Al Jazeera "the most powerful voice of the Muslim Brotherhood."

This is the organization that Joel Hyatt says has the "same goals we had for Current." Meanwhile, another group had also approached Current with an offer to buy the struggling network, but was refused - according to the Journal, they were "told on initial calls that [Current] wouldn't sell to someone they weren't ideologically in line with." A Current official explained that "the legacy of who the network goes to is important to us and we are sensitive to networks not aligned with our point of view."

The group that was not ideologically in line with Current was Glenn Beck's media company, The Blaze, which, the Journal said, "would have replaced Current programming with The Blaze programming."

So a Qatari network that consistently presents a favorable view of jihad terrorists who are sworn enemies of the United States is "ideologically in line" with Al Gore's network, but a conservative American one is not. Transforming Current TV into Al Jazeera America is so satisfying to Gore that he is going to serve on its advisory board; turning it into The Blaze would have been an unacceptable ideological deviation, a betrayal of its core principles.

Gore and Hyatt have thus confirmed the charges that conservatives have made against the Left for years, and that Leftists, when they have deigned to acknowledge them at all, have dismissed as baseless slanders: above all, that the Left hates America and traditional American values so much that it will sooner ally with the sworn enemies of this nation and its guiding principles than with any group that is dedicated in any way to preserving and protecting them.

This peculiar and suicidal impulse results from a variety of factors. Chief among them is the likelihood that Leftists generally underestimate their Islamic supremacist friends and allies, believing that once the Right and traditional American principles have been destroyed, the jihadis will be easy enough to control. This in turn rests on several false assumptions: one is that Islam is a Religion of Peace that has been hijacked by a tiny minority of extremists, who themselves are merely reacting to the evils perpetrated by the American imperialist war machine. Once that imperialist machine is irreparably damaged and put out of action, and its client Israel is destroyed, Muslims' grievances will all be assuaged, and they won't have any reason to commit acts of terror.

Or at least so goes the Leftist reasoning, or substitute for reasoning, which completely fails to take into account the martial teachings of the Qur'an, the Sunnah, and all the schools of Islamic jurisprudence, which teach that Muslims must wage war against and subjugate Infidels not because of the ills of their foreign (or domestic) policies, but simply because they are Infidels.

The second false assumption undergirding the Leftist assumption that they will not be co-opted and swallowed up by their Islamic supremacist friends is that religious people are ignorant and easy to manipulate. They believe this more about Christians than they do about Muslims, but Leftists generally underestimate the strength and power of the religious impulse, and believing their own unexamined dogmas about Islam's peacefulness, believe that that impulse doesn't really matter, anyway.

And as Jamie Glazov details in his superb United In Hate: The Left's Romance With Tyranny and Terror, there is an ideological kinship between the two allies as well: both Leftists and Islamic supremacists share a taste for authoritarianism, and a distaste for the freedom of speech and political dissent.

In any case, first the great foe of both must be completely defeated: the American Right, constitutional principles of free speech, and the values of freedom that have been the foundations of American society up to now. Al Jazeera America is certain to be on the front lines of that battle. And that's just the way Al Gore wants it.

SOURCE

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ELSEWHERE

France: Famous comic artist refuses top honor:  "One of France’s best-known comic book creators, Jacques Tardi, has refused the country’s highest honor saying he does not want to fall under any political influence. Tardi, best known for his works on the horrors of war and his Adele Blanc-Sec fantasy series, said he had learned this week that he was to receive the Legion d'Honneur medal. 'Being fiercely attached to my freedom of thought and creativity, I do not want to receive anything, neither from this government or from any other political power whatsoever,' he said in a statement. 'I am therefore refusing this medal with the greatest determination.'"

Iran to Citizens: Flee Isfahan:  "Iranian officials have instructed residents of Isfahan to leave the city, renewing concerns that a nearby nuclear site could be leaking radioactive material.  An edict issued Wednesday by Iranian authorities orders Isfahan's one-and-a-half million people to leave the city "because pollution has now reached emergency levels," the BBC reported.   However, outside observers suspect that the evacuation order may corroborate previous reports indicating that a uranium enrichment facility near Isfahan had been leaking radioactive material."

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena .  GUN WATCH is now mainly put together by Dean Weingarten.

List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)

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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)

Franklin Delano Roosevelt was a war criminal. Both British and American codebreakers had cracked the Japanese naval code so FDR knew what was coming at Pearl Harbor.  But for his own political reasons he warned no-one there.  So responsibility for the civilian and military deaths at Pearl Harbor lies with FDR as well as with the Japanese.  The huge firepower available at Pearl Harbor, both aboard ship and on land, could have largely neutered the attack.  Can you imagine 8 battleships and various lesser craft firing all their AA batteries as the Japanese came in?  The Japanese naval airforce would have been annihilated and the war would have been over before it began.

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The West IS racist



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The Democratic party was the party of slavery


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A New Hampshire Democrat legislator wants laws to chase away conservatives

If that's fair, why not have laws to chase away fat and ugly old ladies?


A New Hampshire legislator wants her constituents to know that she feels conservatives are the "single biggest threat" her state faces today, and she wants to use her powers to legislate to "pass measures that will restrict" the freedoms of  Granite State conservatives.

In a blog post made last month on the left-wing site Blue Hampshire, 3rd District State Representative Democrat Cynthia Chase advised her fellow legislators to use their positions to make New Hampshire less welcoming to any conservative or libertarian planning on moving to her state—not to mention those already in residence.

For those unaware, a conservative project of sorts has been underway in New Hampshire since 2001. The idea is that Americans of conservative ideals are to move to New Hampshire, gather in communities, run for office, and work to drive the state toward libertarianism and conservatism. It is called the "Free State Project" and adherents are called "Free Staters."

These Free Staters figure that the state’s motto, “Live Free or Die,” should really mean something and it is these citizens whose freedoms legislator Chase wants to oppress.

In her December 21 post, Chase wrote that, "Free Staters are the single biggest threat the state is facing today."

"In the opinion of this Democrat, Free Staters are the single biggest threat the state is facing today. There is, legally, nothing we can do to prevent them from moving here to take over the state, which is their openly stated goal. In this country you can move anywhere you choose and they have that same right. What we can do is to make the environment here so unwelcoming that some will choose not to come, and some may actually leave. One way is to pass measures that will restrict the 'freedoms' that they think they will find here. Another is to shine the bright light of publicity on who they are and why they are coming."

Of course, it is one thing to be a proponent of laws that might have the unintended consequences of restricting others' freedoms. If one truly believes in such policies, well, they may be disastrously wrong, but at least they'd be honestly wrong. A fine point, to be sure.

But here we have a legislator that doesn't just want to pass laws that are tangentially restrictive. She wants to purposefully use her powers to write laws to target individuals with whom she disagrees, take away their freedoms and liberties, and all in the hopes that the citizens she is oppressing might move away from her state.  As New Hampshirite Steve MacDonald notes, "this sounds like tyranny."

Imagine if a legislator had written a blog post targeting the freedoms of gays, or women, or some other minority? One would think that the media would go wild with such a story. But here we have an elected official suggesting that government be used in the United States of America to eliminate freedoms for certain citizens in order to gain political control and the media is silent.  Sounds like tyranny, indeed.

SOURCE

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'Forward' just a disguise for central planning

The political slogan "Forward" served Barack Obama well during this year's election campaign. It said that he was for going forward, while Republicans were for "going back to the failed policies that got us into this mess in the first place."
It was great political rhetoric and great political theater. Moreover, the Republicans did virtually nothing to challenge its shaky assumptions with a few hard facts that could have made those assumptions collapse like a house of cards.

More is involved than this year's political battles. The word "forward" has been a political battle cry on the Left for more than a century. It has been almost as widely used as the Left's other favorite word, "equality," which goes back more than two centuries.

The seductive notion of economic equality has appealed to many people. The pilgrims started out with the idea of equal sharing. The colony of Georgia began with very similar ideas. In the Midwest, Britain's Robert Owen – who coined the term "socialism" – set up colonies based on communal living and economic equality.
What these idealistic experiments all had in common was that they failed.

They learned the hard way that people would not do as much for the common good as they would do for their own good. The pilgrims nearly starved learning that lesson. But they learned it. Land that had been common property was turned into private property, which produced a lot more food.

Similar experiments were tried on a larger scale in other countries around the world. In the biggest of these experiments – the Soviet Union under Stalin and Communist China under Mao – people literally starved to death by the millions.

In the Soviet Union, at least 6 million people starved to death in the 1930s, in a country with some of the most fertile land on the continent of Europe, a country that had once been a major exporter of food. In China, tens of millions of people starved to death under Mao.

Despite what the Left seems to believe, private property rights do not exist simply for the sake of people who own property. Americans who do not own a single acre of land have abundant food available because land is still private property in the United States, even though the left is doing its best to restrict property rights in both the countrysides and in the cities.

The other big feature of the egalitarian left is promotion of a huge inequality of power, while deploring economic inequality.
It is no coincidence that those who are going ballistic over the economic inequality between the top one or two percent and the rest of us are promoting a far more dangerous concentration of political power in Washington – where far less than one percent of the population increasingly tell 300 million Americans what they can and cannot do, on everything from their light bulbs and toilets to their medical care.

This movement in the direction of central planning, under the name of "forward," is in fact going back to a system that has failed in countries around the world – under both democratic and dictatorial governments and among peoples of virtually every race, color, creed, and nationality.

It is one thing when conservative leaders like Ronald Reagan in America and Margaret Thatcher in Britain declared central planning a failure. But what really puts the nails in the coffin is that, before the end of the 20th century, both socialist and communist governments around the world began abandoning central planning.
India and China are the biggest examples. In both countries, cutbacks on government control of the economy were followed by dramatically increased economic growth rates, lifting millions of people out of poverty in both countries.

The ultimate irony is that the most recent international survey of free markets found the world's freest market to be in Hong Kong – in a country still ruled by communists! But the Chinese communists have at least learned, the hard way, a lesson that Barack Obama seems oblivious to. We are going "forward" to a repeatedly failed past, following a charismatic leader, after a 20th century in which charismatic leaders led countries into unprecedented catastrophes.

SOURCE

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The war did NOT end the Great Depression

It just concealed it. It in fact made living standards worse

In this article, we ask whether the U.S. economy during World War II can be meaningfully described as having “recovered” from the Great Depression. Our work builds on the earlier contribution to the topic by Robert Higgs (2006c, originally published in 1992). Higgs argues that the traditional macroeconomic measures of economic performance are inappropriate for wartime and that they overstate people’s real economic well-being during the war. We review his contribution in more detail as we proceed. Our contribution complements Higgs’s by examining a number of archival sources to explore how the wartime economy affected individuals and households. Rather than looking at traditional economic statistics, we explore newspapers, diaries, and other primary sources to discover the variety of ways in which the wartime economy actually amounted to a retrogression for many families because they had to supply additional labor, accept inferior goods, and do without many goods altogether as resources were diverted to the war effort and wartime controls constrained the market process.

This question was first explored in a rigorous way by Robert Higgs (2006c), who argues that the economy did not fully recover until after the war was over—in other words, that the war itself did not end the Depression. According to his analysis, the war effort distorted economic metrics such as GNP and unemployment figures because of factors inherent to producing goods that would be used destructively and the significant intervention into markets required for governments to gear all economic activity to the war effort. An economy in which resources are devoted to producing outputs that will kill others or destroy their property and in which priceand-wage controls and a military draft are dominant features is not an economy  whose health we can assess by using the standard tools.

Nearly all factories producing consumer durable goods were shifted to production of munitions. This shift forced a change in lifestyle for the American public. For example, new appliances were unavailable, so Americans were forced to maintain old refrigerators and stoves beyond their usual lifespan. Even though GNP statistics signaled a massive increase in production, the American consumer in fact had fewer purchasing options available. Higgs (2006c) offers a number of powerful arguments for his claim that a standard reading of the standard macroeconomic measures vastly overstates the economy’s health during World War II. He points out that unemployment statistics during wartime also deserve critical scrutiny. It is very easy to reduce the unemployment rate through a military draft that removes millions of men from the labor market, and the same processes of creating war materials that boosts GNP also require labor to complement the capital converted to wartime uses.

In view of the draft of 10 million men and the enormous demand for workers to build tanks, guns, and ships, it is no surprise that the war drove down the unemployment rate. Like the increase in GNP, however, this drop in unemployment did not translate into improved standards of living or a genuinely recovered private economy.

Higgs also argues that economies subject to wage and price controls are more difficult to judge in terms of GNP and related indicators. GNP uses market prices to measure the value of final products. If those prices are capped by law, market prices do not reflect the actual value to consumers, and GNP is accordingly distorted. To the extent that such controls cause surpluses and shortages, the deadweight losses and costs associated with nonprice forms of competition (for example, queues, rationing schemes, and side payments) are not captured in standard measures. Because GNP measures only the flow of resources regardless of the uses to which those resources are put, they do not allow us to make a leap from observed changes in GNP to inferred changes in consumer welfare.

Expenditures to blow up a city and rebuild it count the same as expenditures to create new goods and services that add to consumers’ wealth or utility. Therefore, Higgs argues, we should view wartime GNP figures with much skepticism.

The war was referred to as the “people’s war” in newspapers, and everyone was forced to make adjustments (Fleming 1942, 17). Shortages became common as the government tried to manage production and limited the use of many everyday products. During the war, “Americans had less money with which to buy fewer goods.” As one historian asks, “How can this be called anything but economic retrogression?” (Woods 2004, 27). The greatest example of economic retrogression during the war was a return to self-sufficiency. Even with rationing, food supplies remained scarce, and many Americans were forced to grow their own food. Although “victory gardens” did help to supplement purchased food, their cultivation was a major step backward in terms of the economic benefits created through the division of labor. Harvested fruits and vegetables were canned or dried as women sought to ensure a stable food supply through the winter months (Thomas 1987, 104).  Rural households might have been able to survive on a diet of home-grown foods, but urban populations often did not have the space or know-how to grow their own food, so the latter were generally affected more by rationing than were rural populations.

The great period of economic advance that occurred during the century preceding World War II was characterized by industrialization. The U.S. economy was transformed from a country of farmers and craftsmen to a nation of massive industrial production. Consider the improvements that were realized following the Civil War. Trains, typewriters, electric lights, manufactured clothing, and automobiles all made products cheaper and life easier for ordinary Americans. With industrialization came greater specialization. This division of labor made workers more productive. Instead of handcrafting an entire product from start to finish or growing a variety of crops to feed a family, the expanding and deepening of the division of labor allowed people to use their talents and knowledge more efficiently on a narrower stage of the production process.

During the war, the opposite movement occurred. As manufacturing was refitted for war production, there was a reversal in the trend toward specialization. Those remaining on the home front were forced to produce for themselves what they had previously been able to purchase. The household again became a center of production rather than consumption alone. The pressures of wartime meant a clear loss in productivity for those forced to engage in the more difficult processes of growing and canning their own food as well as sewing and resewing clothing to make it last longer. Women had less time to spend caring for their children as other household tasks, such as saving cooking grease or tin foil, consumed their time. Although manufacturing continued throughout the war and even increased, it was concentrating heavily on producing war supplies and munitions rather than consumption goods, especially consumer durables.

Every region and community dealt with the changing reality of the wartime economy differently. A study of the wartime experience of families living in El Paso, Texas, makes clear the degree to which rationing affected everyday life, uncovering the advantage enjoyed by those who lived on the U.S.–Mexico border. Richard A. Dugan describes how El Pasoans were largely able to maintain their desired level of consumption by supplementing what their ration books enabled them to buy with goods that were readily available at market prices across the border and that did not require using up any ration tickets (2000, 56). This resort might seem to be an effective way to purchase more without taking more than what the Office of Price Administration (OPA), the agency in charge of the rationing process, considered to be one’s “fair share,” but the OPA quickly spoke out against this conduct, declaring that El Pasoans were not participating in our “shared national sacrifice” and maintaining that the “benefit of location” should not be exploited

Many Americans, in particular those living in cities, did not have this advantage and hence felt the ration program’s full force. Even those who could avoid rationing were able to do so only by incurring significant transaction costs. Not only were various consumer items unavailable, but those that could be found were of inferior quality. Substitute goods were of substandard construction and were often uniform, precluding consumers’ choice of styles, shapes, and sizes. The reduction in variety and precision of sizes is yet another form of economic retrogression, and the consequent welfare losses for consumers are difficult to quantify in traditional measures. Living with shoes a half-size too big or being unable to get the cut of meat one prefers surely entails a reduction in well-being, even if it is not captured in GNP.

As the OPA tightened rations on particular items or items became completely unavailable, consumers turned to clearly inferior substitutes. Several products still sold today became widely accepted as substitutes during the war, including margarine as a substitute for butter. Boxes of Kraft Macaroni and Cheese became popular during the war because they were provided at a two-for-one discount per ration ticket (“World War II Rationing” n.d.). Spam also became a substitute for those craving meat. Other substitutes included “honey for sugar, corn oil for olive oil, cotton or rayon for wool, paper containers instead of tin; and wood furniture instead of metal” (“Making Do With Less” n.d.). The effects of these changes in consumption cannot be measured easily by economic aggregates but were the reality for families during the war. Even if household income remained the same or even increased, Americans were forced to live poorer lives during the war owing to the reduced quality, quantity, and variety of products available.

Shopping became a bureaucratic nightmare. Because there were more ration coupons than supplies, grocery shopping often required women to visit several stores to find needed supplies. These larger transaction costs associated with finding goods to purchase, regardless of the drop in quality of what would eventually be purchased, represent an economic loss owing to the war. In many cases, stores facing both food and labor shortages had to shut down (Thomas 1987, 103). These conditions created an extreme hardship especially for working women: “After eight or ten hours of riveting or welding or soldering, these wives and mothers had to stand in long lines in the stores and cope with rationing. By the time they reached the market at the end of their workday, the limited supplies were often depleted—unless they were fortunate enough to have a grocer who looked out for them, saving a good cut of meat or slipping a package of cigarettes into their grocery bag” (Gluck 1987, 13).

In January 1943, the Women’s Club of Mobile, Alabama, petitioned the OPA to adjust rationing quotas. Because municipal population at the time of the most recent census determined distribution quotas, changes in population had left some areas with less tn their fair share (Thomas 1987, 103). In the absence of market-clearing prices, goods had to be distributed according to criteria other than willingness to pay, and various forms of nonprice rationing outside of the official rationing system emerged, including a great deal of favoritism based on “who you know.” Price controls were put in place to allow all Americans to have equal access to goods during the war, but they created instead a system of payoffs, back-room deals, and black markets that benefited only those with a comparative advantage in exploiting the system rather than those who could best provide demanded goods at low prices and those who needed the goods.

Much more HERE

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena .  GUN WATCH is now mainly put together by Dean Weingarten.

List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)

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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)

Franklin Delano Roosevelt was a war criminal. Both British and American codebreakers had cracked the Japanese naval code so FDR knew what was coming at Pearl Harbor.  But for his own political reasons he warned no-one there.  So responsibility for the civilian and military deaths at Pearl Harbor lies with FDR as well as with the Japanese.  The huge firepower available at Pearl Harbor, both aboard ship and on land, could have largely neutered the attack.  Can you imagine 8 battleships and various lesser craft firing all their AA batteries as the Japanese came in?  The Japanese naval airforce would have been annihilated and the war would have been over before it began.

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Grading the Fiscal Cliff Deal: Terrible, but Could Be Worse

The faux drama in Washington is finally over. The misfits in Washington reached a deal on the fiscal cliff.

Republicans and Democrats managed to come together and decide that they should get a bigger slice of what the American people earn. Gee, what a surprise.

First, the good news:

…

…

Oh, wait, there isn’t any.

Now for the bad news.

The top tax rate will increase to 39.6 percent for entrepreneurs, investors, small business owners, and other “rich” taxpayers making more than $400,000 ($450,000 for married couples). This is Obama’s big victory. He gets his class-warfare trophy.

The double tax on dividends and capital gains climbs from 15 percent to 20 percent (23.8 percent if you include the Obamacare tax on investment income).

The death tax rate is boosted from 35 percent to 40 percent (which doesn’t sound like a big step in the wrong direction until you remember it was 0 percent in 2010).

The alternative minimum tax will still exist, though it will be “patched” to protect as many as 30 million households from being swept into this surreal parallel tax system that requires people to use a second method of calculating their taxes – with the government getting the greatest possible amount.

Unemployment benefits are extended, ensnaring more Americans in joblessness.

Medicare spending is increased as part of a “doc fix” to increase reimbursement payments for providers.

But let’s not delude ourselves. This deal is not good for the economy. It doesn’t do anything to cap the burden of government spending. It doesn’t reform entitlement programs.

And we may even lose the sequester, the provision that was included in the 2011 debt limit that would have slightly reduced the growth of government over the next 10 years.

What a dismal start to 2013.

SOURCE

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Becoming Europe

It’s a fair bet that every American who’s travelled outside the United States has heard people complaining about their societies becoming “Americanized.” By this, they usually mean the proliferation of things such as American television and fast-food chains (though that rarely stops them from watching Hollywood films or eating McDonalds).

More recently, however, millions of Americans have begun wondering if our own country is becoming “Europeanized.”

In one sense, to say that America is becoming like Europe seems odd. After all, when it comes to its dominant political ideas, religious culture, institutions and history, America is obviously Europe’s child.

That, however, is not what Europeanization means today. Instead it’s about the spread throughout America of economic expectations and arrangements directly at odds with our republic’s founding.

These lead to the prioritizing of economic security over economic liberty; to the state annually consuming close to 50% of GDP; to the ultimate economic resource (i.e., people) aging and declining in numbers; to extensive regulation becoming the norm; and perhaps above all, to a situation in which economic incentives lie not in work, economic creativity and risk-taking, but rather in access to political power.

Unfortunately there’s a great deal of evidence suggesting America is slouching down the path to Western Europe. In practical terms, that means social-democratic economic policies: the same policies that have turned many Western European nations into a byword for persistently high unemployment, rigid labor markets, low-to-zero economic growth, out-of-control debt and welfare states, absurdly high tax levels, growing numbers of well-paid government workers, a near-obsession with economic equality at any cost and, above all, a stubborn refusal to accept that things simply can’t go on like this.

It’s very hard to deny similar trends are becoming part of America’s economic landscape. States like California are already there — just ask the thousands of Californians and businesses who have fled the land of Nancy Pelosi.

Europeanization is also reflected in the refusal of so many Americans to take our nation’s debt crisis seriously. Likewise, virtually every index of economic freedom and competitiveness shows that, like most Western European nations, America’s position vis-à-vis other countries is in decline.

Between January 2008 and January 2011, for example, there was a marked growth in the amount of regulation in America — the pace being almost 40% more than the annual rate of increase between 1992 and 2008. Similarly, between 2008 and 2011 the number of people working in federal government regulatory agencies rose by 16% — a total of more than 276,000 people — at a time when private-sector employment was falling.

It’s no wonder the Nobel economist Robert E. Lucas asked in his 2011 Milliman Lecture at the University of Washington whether America was now “imitating European policies on labor markets, welfare and taxes.”

Such trends are deeply troubling. But here’s the good news. First, there remain many ways in which America has not succumbed to eurosclerosis. Risk-taking and entrepreneurship-levels remain, for example, much higher than in Europe. America’s labor markets also remain more flexible than those of Europe (despite American unions’ best efforts to the contrary).

Second, the problems of nations like Greece, Italy, Spain, Britain and France are functioning as a type of early-warning system. They’re enough of a “canary in the coal mine” to help us make the right decisions and get back to the principles that made the United States an economic superpower.

And this is the choice which increasingly faces America. We can either continue our long march towards a form of social democracy presided over by an all-pervasive European-like political class and associated insider-groups; or, we can embrace a dynamic market economy that takes liberty seriously and understands that government intervention in the economy must and can be limited.

Of course making such a decision isn’t simple. It involves trade-offs, the prioritization of different values, and fundamental disagreements about the role of government. And these discussions go beyond economics. They are arguments about what type of economic culture we want America to embrace and reflect to the millions throughout the world for whom the United States remains a lodestar for freedom.

But make no mistake, time is running out for America. We don’t have to become Europe. Yet the deeper the debt, the bigger the entitlements, the greater the regulations, and the more Americans look to government for their economic salvation, the harder it becomes for America to turn back from the road to permanent economic decline.

A great European and honorary American citizen Winston Churchill once said: “You can always count on Americans to do the right thing — after they’ve tried everything else.” I hope and pray he’s still right.

SOURCE

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A Bogus Example of Controlling Inflation with Price Controls



As the U.S. government prepared for and then engaged fully in World War II, it made increasingly stringent efforts to control inflation by imposing price controls. Late in 1942, these controls were strengthened substantially, and from early 1943 through mid-1946, when the controls were allowed to lapse, the consumer price index rose very little. These data have often been trotted out to prove that the government can successfully control inflation if only it makes the laws severe enough and the monitoring agency sufficiently large and powerful.

In reality, inflation was not controlled; only the legally revealed prices were controlled. This experience does not require rocket science to understand: if the government makes it illegal and punishable to raise legal prices (or to raise them by more than a stipulated small amount), then sellers will not set legal prices that violate the restrictions.

But legal prices need not be, and during World War II certainly were not, the same as actual prices. Sellers and buyers used a variety of subterfuges to make transactions in violation of the government’s price controls. Sellers might reduce the product’s quality, as many did at the time; require the buyer to wait longer for an order to be filled; require the buyer to purchase unwanted goods in order to purchase wanted ones; require the buyer to pay for bogus goods, as when tenants were required to pay the landlord a hefty sum as “key money,” ostensibly to compensate him for keeping a spare key in case the tenant lost his key; require the buyer to forgo services normally associated with the goods, such as routine maintenance of rented apartments; or require gifts or other ostensible gratuities not ordinarily given to a seller.

Sellers might also simply disregard the posted prices and refuse to sell to anyone except at higher (unlisted and unreported) prices. The methods of evasion were legion.

Milton Friedman and Anna Schwartz and other economists who have made corrections for the understatement of the price level during the war years have shown that even partial corrections are sufficient to establish that the government’s price controls were far from the success claimed at the time and often gullibly swallowed later by economists and historians. (For sources and more detailed discussion, see pp. 89-93 of my book Depression, War, and Cold War.)

Economists are trained in theory, statistics, modeling, and other skills. Historians are trained in the careful scrutiny and interpretation of historical sources. Neither economists nor historians, unfortunately, are trained to use common sense in their work. Postwar proponents of the reimposition of price controls have often pointed to the success of such controls during the war. Yet, despite thousands of employees and an army of volunteer monitors associated with the Office of Price Administration and despite the U.S. Attorney General’s prosecutory zeal in hauling alleged violators into court, the government’s price-control efforts during World War II failed to stem the tide of rising prices set in motion by the huge contemporary increases in the money stock.

Price controls, at most, only create a population of liars. True prices continue to do what the existing economic conditions cause them to do. No one can control the amount of precipitation by passing a law against reporting more than a stipulated amount of rain and snow.

SOURCE

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A government too grand to help its people

Bill O'Reilly

Jon Hammar saw combat in Iraq and Afghanistan, but his most brutal foreign experience was in Mexico. Last August, the 27-year-old former Marine corporal was incarcerated by Mexican authorities in Matamoros for trying to register an antique shotgun with customs agents. Foolishly, Cpl. Hammar followed instructions given to him by U.S. Border Patrol agents in Brownsville, Texas. He registered the gun with them and brought the paperwork to the Mexicans to get their stamp of approval in order to carry the gun through the country. Hammar and a friend were driving a Winnebago, hoping to have a nice surfing vacation with some hunting on the side.

Even though the Mexican authorities clearly saw that Hammar was trying to follow the rules, they seized the Winnebago and locked the corporal up in the notoriously corrupt CEDES prison anyway. There he was threatened by other inmates and told by guards that he could buy his way out of the hellhole by paying money to the "right people."

Hammar's parents, who live in South Florida, immediately contacted the State Department and were told to be patient. And so they were. Three months later, Hammar was still incarcerated and had not even seen a judge, and things were becoming increasingly desperate.

That's when his parents gave up on the State Department and contacted the media.

When the story crossed my desk, I found it hard to believe. Cpl. Hammar had served his country honorably, returned to the USA with post-traumatic stress disorder, been treated for nine months in California and simply wanted a vacation after his ordeal. It was obvious that he was being held on bogus charges, and the State Department seemed impotent. When we asked Secretary of State Hillary Clinton for a comment, she refused to say anything about the case. A few of her deputies visited Hammar in prison, but the official line was that State could do nothing more.

Sen. Bill Nelson and Rep. Ileana Ros-Lehtinen raised some hell about the situation, but things continued to deteriorate. Mexican authorities actually chained Hammar to his bed. Another inmate sent a picture of that out to the press.

In mid-December, the Fox News White House correspondent asked press secretary Jay Carney about the case. President Barack Obama's spokesman looked perplexed and said he did not know anything about it. As unbelievable as that sounds, I believe that Carney was telling the truth. And by telling one truth, Carney indicated another truth: Neither Obama nor Secretary of State Clinton had come to the aid of an American combat veteran who was being abused by Mexican authorities.

Disgusted by our apathetic government, I took the case directly to the government of Mexico. On national television, I bluntly told the new Mexican presidente, Enrique Pena Nieto, that if he did not release Hammar by Christmas, I would lead a boycott of Mexican tourism and products. The next day, Hammar was released after a Mexican judge ruled there had been no intent to commit a crime.

The ordeal cost the Hammar family tens of thousands of dollars in legal fees and untold emotional damage. Thankfully, the corporal did arrive home to South Florida in time to have a nice Christmas with his family. But this story is a cautionary tale for any American traveling outside the USA. If you get into trouble, you will be essentially on your own, even if you are a combat veteran. Our leaders in Washington are basically bureaucrats with short attention spans. If they couldn't work up the energy to help Jon Hammar, they are not going to help you.

True leadership means helping those who are powerless and sincerely need help. That takes time and energy. President Abraham Lincoln set aside one day a week to answer calls for help from the folks. The current administration would not answer a desperate call for months.

As for Mexico, it remains a corrupt country hostile to the rule of law. Let the buyer beware.

SOURCE

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena .  GUN WATCH is now mainly put together by Dean Weingarten.

List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)

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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)

Franklin Delano Roosevelt was a war criminal. Both British and American codebreakers had cracked the Japanese naval code so FDR knew what was coming at Pearl Harbor.  But for his own political reasons he warned no-one there.  So responsibility for the civilian and military deaths at Pearl Harbor lies with FDR as well as with the Japanese.  The huge firepower available at Pearl Harbor, both aboard ship and on land, could have largely neutered the attack.  Can you imagine 8 battleships and various lesser craft firing all their AA batteries as the Japanese came in?  The Japanese naval airforce would have been annihilated and the war would have been over before it began.

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Soaking the rich won't work

And a fat French actor has helped draw attention to that

Governments that are raising tax rates on the wealthy to plug budget holes are doomed to disappointment.

The decision by French actor Gerard Depardieu to flee to lower-taxing Belgium serves as a high-profile example of the folly of targeting the rich for additional taxation.

While the actor stated his reasons for moving were numerous, the 2012 election commitment of French President Francois Hollande to impose a "temporary supertax" of 75 per cent on individuals earning more than €1 million ($1.3 million) annually clearly figured in Depardieu's decision.

Although the French Constitutional Court has recently declared Hollande's 75 per cent rate tax unconstitutional, the French government has signalled its determination to persist with its tax policy, albeit in revised form.

The concerning aspect of the "Depardieu Shrugged" affair is that the French policy stance is hardly an isolated instance in the post-global financial crisis economic environment.

Numerous Western governments have already implemented, or are advocating, extra taxes on the wealthy as an apparent quick-fix to plug burgeoning budget deficits and runaway public debts created by years of excessive expenditure.

Eurozone countries such as Greece, Ireland, Italy, Portugal and Spain have joined France in raising top marginal income tax rates, while France and Spain have increased or re-introduced wealth taxes respectively.

Over the past few years Britain has introduced a raft of tax increases, including on personal incomes and capital gains, targeting the wealthy. In the US, Barack Obama called for raising taxes on families earning more than $250,000 during his 2012 re-election campaign, and has used this proposal as a key plank of recent "fiscal cliff" negotiations with his Republican adversaries.

Those possessing wealth may well be regarded by politicians as an instant source from which to collect extra revenues, but cases abound where governments pursuing "soak the rich" tax policies are subsequently frustrated by lower-than-expected revenues.

An important reason for such outcomes, as has been witnessed, for example, in Britain, as tax increases have not translated into substantial extra revenues, is that increasing taxation tends to dampen labour supply and capital accumulation, thereby hampering economic growth.

As a result of the disincentive effects of taxation, it is conceivable that present tax rates may be set so high that further increases in rates will actually reduce tax revenues received by the government.

Another important dimension to the problem, which seems to be continually discounted by revenue-hungry governments, is that the wealthy can prevent tax discrimination against them by relocating to lower-taxing jurisdictions.

In France, more than 400 homes have been placed on the Paris luxury property market since Hollande's election victory last May, and a number of French high net worth individuals have reportedly already relocated to countries such as Belgium, Luxembourg and Switzerland. It has also been estimated that about two-thirds of Britain's millionaires left the country when the Cameron [It was actually Gordon Brown] government increased the top marginal income tax rate to 50 per cent.

Movements by the wealthy to escape the burden of high taxes are also prevalent within highly decentralised federal systems, such as the US.

Data from the US Internal Revenue Service indicates that the numbers of wealthy tax filers in high-tax states, such as California and New York, have declined in recent years.

By contrast, the numbers of wealthy individuals have grown significantly in recent years in the likes of Texas, which does not impose a state income tax, suggesting some element of mobility from high-tax to low-tax US states in the process.

Even if the wealthy decide to physically remain in their country or region of residence, the integration of the global economy ensures they could relocate their finances or capital to less fiscally oppressive areas of the world with fewer obstacles.

One of the great paradoxes is how the political popularity of taxing the wealthy often overshadows the lack of economic and financial success that such policies deliver.

There seems little question that exorbitant taxes on the wealthy might appeal to the economically prejudiced who believe that rich people attained their wealth through ill-gotten profits raked from poor consumers.

To the extent that tax policies are rationalised on these grounds, the imposition of higher taxes on those with higher incomes in fact represents a political disendorsement of consumer choices.

After all, Bill Gates and Steve Jobs made their abundant fortunes by providing products which pleased customers around the world, just as Gerard Depardieu earned an enormous salary by gaining numerous admirers of his films.

Another populist view is that losing extra dollars in taxation will be far less painful to the wealthy than it would be for those in low to middle income brackets, so the wealthy ought to have their wealth shared about by the force of taxation.

But if high taxes on the wealthy indeed come with little or no pain, why is it that the wealthy often don't sit still, making efforts to relocate their wealth, and even their own person, to lower-taxing environments?

While tax-baiting the wealthy minority might bring politicians some plaudits among the less-wealthy majority, such policies are strewn with dashed revenue expectations and a lack of investor confidence of doing business in countries or regions that partake in such practices.

The weight of economic history will surely adjudge the Hollande supertax experiment as being not unlike a French souffle collapsing upon itself.

 SOURCE

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Class Warfare Tax Policy Causes Portugal to Crash on the Laffer Curve, but Will Obama Learn from this Mistake?

Back in mid-2010, I wrote that Portugal was going to exacerbate its fiscal problems by raising taxes.  Needless to say, I was right. Not that this required any special insight. After all, no nation has ever taxed its way to prosperity.

We’re now at the end of 2012 and Portugal is still saddled with a weak economy. And the higher taxes haven’t resulted in less red ink. Indeed, according to the Economist Intelligence Unit, government debt has jumped from 93 percent of GDP in 2010 to 124 percent of GDP this year.

Why did higher taxes backfire in Portugal? For the same reasons that higher taxes have failed in Greece, Spain, Bulgaria, France, Italy, the United Kingdom, and so many other nations.

Higher taxes undermine incentives for productive behavior, thus reducing an economy’s potential for growth. This means less economic output, which also means a smaller tax base. This Laffer Curve effect doesn’t necessarily mean less revenue, but it certainly means that tax increases rarely raise as much money as initially projected.

Higher taxes usually are a substitute for the real solution of spending restraint (i.e., Mitchell’s Golden Rule). Politicians oftentimes refuse to reduce the burden of government spending because of an expectation of additional tax revenue. Heck, in many cases, higher taxes trigger an increase in the size and scope of the public sector.

So did Portugal learn any lessons from this failed experiment in Obamanomics?

Hardly. Indeed, the government plans to double down on this approach – even though it’s increasingly apparent that higher tax burdens won’t translate into much – if any – additional tax revenue.

Amazing. The government imposes huge tax hikes, which don’t generate any positive results. Yet even though “tax revenue has fallen considerably below target,” confirming that there are significant Laffer Curve issues, the government chooses to repeat the snake-oil fiscal therapy of higher taxes.

Maybe it’s time for these fiscal pyromaniacs to realize that revenues might be falling because rates are higher. In other words, Portugal not only isn’t at the ideal point on the Laffer Curve (collecting the amount of revenue needed to finance legitimate activities of government), it may even be past the revenue-maximizing part of the curve.

To be fair, there are lots of factors that determine economic performance, so higher tax burdens are just one possible explanation for why the tax base is shrinking or stagnant.

The one thing we can state with certainty, though, is that Portugal’s fiscal problem is too much government spending. The failure to address this problem then leads to very unpleasant symptoms, such as lots of red ink and self-destructive class-warfare tax policy.

If all that sounds familiar, that’s because it’s also a description of what President Obama is proposing for the United States.

At the risk of bearing bad news to close the year, research from both the Bank for International Settlements and the Organization for Economic Cooperation and Development shows the United States actually faces a bigger long-run fiscal challenge than Portugal.

SOURCE

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Austerity Economics Doesn’t Work?

Re:  John Cassidy’s recent New Yorker piece, "It’s Official: Austerity Economics Doesn’t Work"

Is it official? Is austerity economics a failure?  Here’s how Cassidy’s piece begins:

With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work.

In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating.

Unfortunately, this is the only data in the article and it’s pretty strange data. Which data am I referring to? The fact that in June of 2010, Cameron “slashed the budgets of various government departments by up to thirty per cent.” That’s the official confirmation that austerity doesn’t work. If you slash the budgets of “some government departments” and you still get a recession, that confirms that austerity isn’t good for the economy.

That’s like a guy who drinks too much wine, beer and scotch every day claiming he’s not an alcoholic anymore because he reduced his consumption of some varieties of wine by up to 30%. Wouldn’t you want to pay attention to his overall consumption of alcohol? Some government department budgets were reduced by up to 30%? What happened to overall government spending? Cassidy never tell us. There are no data in the article about the overall level of spending in the UK. Cassidy continues:

One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” he told Parliament—what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But from a historical and scientific perspective, it is an invaluable case study.

Cassidy continues:

At every stage of the experiment, critics (myself included) have warned that Osborne’s austerity policies would prove self-defeating. Any decent economics textbook will tell you that, other things being equal, cutting government spending causes the economy’s overall output to fall, tax revenues to decrease, and spending on benefits to increase. Almost invariably, the end result is slower growth (or a recession) and high budget deficits. Osborne, relying on arguments about restoring the confidence of investors and businessmen that his forebears at the U.K. Treasury used during the early nineteen-thirties against Keynes, insisted (and continues to insist) otherwise, but he has been proven wrong.

If decent economics textbooks teach their students that “cutting government spending causes the economy’s overall output to fall, tax revenues to decrease, and spending on benefits to increase,” and “the end result is slower growth (or a recession) and high budget deficits” then we should be using the indecent ones. Because there’s no conclusive evidence or natural experiment to support that view.
After mentioning how important it is for Americans to learn the lesson that the UK has now learned, Cassidy continues:

Just like the Bush Administration (2008) and the Obama Administration (2009), Gordon Brown’s Labour government had introduced a fiscal stimulus to help turn the economy around. G.D.P. was growing at an annual rate of about 2.5 per cent. Once Osborne’s cuts in spending started to be felt, however, things changed dramatically. In the fourth quarter of 2010, growth turned negative and a double-dip recession began. So far, it has lasted two years. While G.D.P. did expand in the third quarter of this year, the Office of Budget Responsibility, an independent economic agency that Osborne set up, has said that it expects another decline in the current quarter. For 2013, the O.B.R. is forecasting G.D.P. growth of just 1.3 per cent. With the economy so weak, the O.B.R. says that the unemployment rate will tick up from eight per cent to 8.2 per cent next year. That austerity has led to recession is undeniable.

But Cassidy does not give the reader any actual data on those budget cuts of Osborne’s that undeniably caused the recession other than to say that some departments were cut by 30%. So let’s take a look at what actually happened.

I am not an expert on UK economic data so I’m going to give you the two sources I know about, the UK’s Office of National Statistics (ONS) and Eurostat.

There is no reduction in nominal spending in either the Eurostat or ONS data. So no nominal austerity.

In real terms, the Eurostat data show a slight drop in 2010. Less than 1%. Let me write that again. Less than 1%. That’s the austerity that plunged the UK into a double-dip recession according to Cassidy and provided the natural experiment that makes our understanding of austerity official. In 2011, according to Eurostat, real spending fell 4.1%.

Draw your own conclusions.

And of course, these changes in government spending are not the only things that are changing in the world. As Jeffrey Sachs writes in the Financial Times:

And the UK’s slowdown has more to do with the eurozone crisis, declining North Sea oil and the inevitable contraction of the banking sector, than multiyear moves towards budget balance.

Mr. Cassidy has helped his readers know something that probably is not true. There has either been no austerity in the UK or at best, very little. There is no natural experiment here.

SOURCE  (See the original for links and graphics)

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena .  GUN WATCH is now mainly put together by Dean Weingarten.

List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)

****************************

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)

Franklin Delano Roosevelt was a war criminal. Both British and American codebreakers had cracked the Japanese naval code so FDR knew what was coming at Pearl Harbor.  But for his own political reasons he warned no-one there.  So responsibility for the civilian and military deaths at Pearl Harbor lies with FDR as well as with the Japanese.  The huge firepower available at Pearl Harbor, both aboard ship and on land, could have largely neutered the attack.  Can you imagine 8 battleships and various lesser craft firing all their AA batteries as the Japanese came in?  The Japanese naval airforce would have been annihilated and the war would have been over before it began.

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A journey through America gives hope

Bill Steigerwald
 
Big, empty, rich and unchanged - that's a pretty boring scouting report for the America I "discovered" along the Steinbeck Highway. You can add a bunch of other boring but fitting words - "beautiful," "safe," "friendly," "clean," and "quiet."

Like Steinbeck, I didn't see the Real America or even a representative cross-section of America, neither of which exist anyway. Because I went almost exactly where Steinbeck went and stopped where he stopped, I saw a mostly White Anglo Saxon Protestant Republican America, not a "diverse and politically correct" Obama one. Mostly rural or open country, it included few impoverished or crime-tortured inner cities and no over-developed/underwater suburbs.

America the Beautiful was hurting in the fall of 2010, thanks to the bums and crooks in Washington and on Wall Street who co-produced the Great Recession. It still had the usual ills that make libertarians crazy and may never be cured: too many government wars overseas and at home, too many laws, politicians, cops, lawyers, do-gooders and preachers.

But America was not dead, dying or decaying. There were no signs of becoming a liberal or conservative dystopia. The U.S. of A., as always, was blessed with a diverse population of productive, affluent, generous, decent people and a continent of gorgeous natural resources.

Everyday of my trip I was surrounded by undeniable evidence of America's underlying health and incredible prosperity. Everywhere I went people were living in good homes, driving new cars and monster pickup trucks and playing with powerboats, motorcycles and snowmobiles. Roads and bridges and parks and main streets were well maintained. Litter and trash were scarce. Specific towns and regions were hurting, and too many people were out of work, but it was still the same country I knew.

I didn't seek out poverty or misery or pollution on my journey, and I encountered little of it. The destitute and jobless, not to mention the increasing millions on food stamps, on welfare or buried in debt, were especially hard to spot in a generous country where taking care of the less fortunate is a huge public-private industry - where even the poor have homes, cars, wide-screen TVs and smart phones.

I saw the familiar permanent American socioeconomic eyesores - homeless men sleeping on the sidewalks of downtown San Francisco at noon, the sun-bleached ruins of abandoned gas-stations on Route 66, ratty trailer homes parked in beautiful locations surrounded by decades of family junk. I saw Butte's post-industrial carcass, New Orleans' struggling Upper Ninth Ward and towns that could desperately use a Japanese car plant.

But the country as a whole was not crippled or even limping. In the fall of 2010, nine in 10 Americans who said they wanted jobs still had them. The one in 10 who were jobless had 99 weeks of extended unemployment benefits and more than 90 percent of homeowners were still making their mortgage payments.

Most of the states I shot through - including Maine, northern New Hampshire and Vermont, upstate New York, Wisconsin, Minnesota, North Dakota, Montana - had unemployment and foreclosure rates well below the national averages.

I didn't visit the abandoned neighborhoods of poor Detroit. I didn't see battered Las Vegas, where 14.5 percent of the people were unemployed and one in nine houses - five times the national average - had received some kind of default notice in 2010. But I spent almost two weeks in the Great Train Wreck State of California, where jobless and foreclosure rates were higher than the national average and municipal bankruptcies loomed.

America had 140 million more people than it did in 1960, but from coast to coast it was noticeably quiet - as if half the population had disappeared. Despite perfect fall weather, public and private golf courses were deserted. Ball fields were vacant. Parks and highway rest stops and ocean beaches were barely populated. Except for metropolises like Manhattan and San Francisco and jumping college towns like Missoula and Northampton, people in throngs simply did not exist. I went through lots of 30-mph towns that looked like they'd been evacuated a year earlier.

As I drove what's left of the Old Steinbeck Highway - U.S. routes 5, 2, 1, 11, 20, 12, 10, 101 and 66 - it was obvious many important changes had occurred along it since 1960. Industrial Age powerhouses like Rochester, Buffalo and Gary had seen their founding industries and the humans they employed swept away by the destructive winds of technology and global capitalism. Small towns like Calais in northeastern Maine had lost people and jobs, and vice versa.

New Orleans had shrunk by half, and not just because of Katrina. The metro areas of Seattle, San Francisco and Albuquerque had exploded and prospered in the digital age. The populations of the West Coast and the Sunbelt had expanded since 1960. The South had shed its shameful system of apartheid and its overt racism, as well as much of its deep-rooted poverty and ignorance. The Northeast had bled people, manufacturing industries and its once overweening role in determining the nation's political and cultural life.

Change is inevitable, un-stoppable, pervasive. Nevertheless, it was clear that a great deal of what I saw out my car windows had hardly changed at all since Steinbeck and his French poodle Charley raced by.

He saw more farmland and fewer forests than I did, especially in the East. But in many places I passed through almost nothing was newly built. Many farms and crossroads and small towns and churches were frozen in the same place and time they were eons ago, particularly in the East and Midwest.

In Maine the busy fishing village of Stonington was as picturesque as the day Steinbeck left it. He'd recognize the tidy farms of the Corn Belt and the raw beauty of Redwood Country and the buildings if not the people of the Upper Ninth Ward. And at 70 mph whole states - North Dakota and Montana - would look the same to him except for the cell towers and Pilot signs staked out at the interstate exits.

Steinbeck didn't like a lot of things about Eisenhower America - sprawl, pollution, the rings of junked cars and rubbish he saw around cities. And he lamented - not in "Charley" but in letters to pals like Adlai Stevenson - that he thought America was a rotting corpse and its people had become too soft and contented to keep their country great and strong.

But Steinbeck had America's future wrong by 178 degrees. Fifty years later, despite being stuck in an economic ditch, the country was far wealthier, healthier, smarter and more globally powerful and influential than he could have imagined. Its air, water and landscapes were far less polluted. And, most important, despite the exponential growth of the federal government's size and scope and its nanny reach, America in 2010 was also a much freer place for most of its 310 million citizens, especially for women, blacks, Latinos and gays.

You don't have to be a libertarian to know America is not as free as it should be. But there's no denying that today our society is freer and more open than ever to entrepreneurs, new forms of media, alternative lifestyles and ordinary people who want to school their own kids, medicate their own bodies or simply choose Fed Ex instead of the U.S. Post Office.

As for the stereotypical complaints about America being despoiled by overpopulation, overdevelopment and commercial homogenization, forget it. Anyone who drives 50 miles in any direction in an empty state like Maine or North Dakota - or even in north-central Ohio or Upstate New York - can see America's problem is not overpopulation. More often it's under-population. Cities like Butte and Buffalo and Gary have been virtually abandoned. Huge hunks of America on both sides of the Mississippi have never been settled.

From Calais, Me., to Pelahatchie, Miss., I passed down the main streets of comatose small towns whose mayors would have been thrilled to have to deal with the problems of population growth and sprawl. If anyone thinks rural Minnesota, northwestern Montana, the Oregon Coast, the Texas Panhandle or New Orleans's Upper Ninth Ward have been homogenized, taken over by chains or destroyed by too much commercial development, it's because they haven't been there.

The America I traveled was unchained from sea to sea. I had no problem eating breakfast, sleeping or shopping for road snacks at mom & pop establishments in every state. The motels along the Oregon and Maine coasts are virtually all independents that have been there for decades. You can go the length of old Route 66 and never sleep or eat in a chain unless you choose to.

Steinbeck, like many others have since, lamented the loss of regional customs. (I don't think he meant the local "customs" of the Jim Crow South or the marital mores of the Jerry Lee Lewis clan.) I didn't go looking for Native Americans, Amish, Iraqis in Detroit, Peruvians in northern New Jersey or the French-Canadians who have colonized the top edge of Maine. But I had no trouble spotting local flavor in Wisconsin's dairy lands, in fishing towns along Oregon's coast, in the redwood-marijuana belt of Northern California, in San Francisco's Chinatown or the cattle country of Texas.

Not to generalize, but the New York-Hollywood elites believe the average Flyover Person lives in a double-wide or a Plasticville suburb, eats only at McDonald's, votes only Republican, shops only at Wal-Mart and the Dollar Store, hates anyone not whiter than they are, speaks in tongues on Sunday and worships pickup trucks, guns and NASCAR the rest of the week.

Those stereotypes and caricatures are alive and well in Flyover Country. But though I held radical beliefs about government, immigration and drugs that could have gotten me lynched in many places, I never felt I was in a country I didn't like or didn't belong in. Maybe I just didn't go to enough sports bars, churches and political rallies, but for 11,276 miles I always felt at home.

SOURCE

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Happy New Year?

Thomas Sowell

The beginning of a new year is often a time to look forward and look back. The way the future looks, I prefer to look back -- and depend on my advanced age to spare me from having to deal with too much of the future.
If there are any awards to be given to anyone for what they did in 2012, one of those rewards should be for prophecy, if only because prophecies that turn out to be right are so rare.

With that in mind, my choice for the prediction of the year award goes to Bret Stephens of the Wall Street Journal for his column of January 24, 2012 titled: "The GOP Deserves to Lose."

Despite reciting a litany of reasons why President Obama deserved to be booted out of the White House, Stephens said, "Let's just say right now what voters will be saying in November, once Barack Obama has been re-elected: Republicans deserve to lose."

To me, the Republican establishment is the 8th wonder of the world. How they can keep repeating the same mistakes for decades on end is beyond my ability to explain.

Bret Stephens said, back at the beginning of 2012, that Mitt Romney was one of the "hollow men," and that voters "usually prefer the man who stands for something."

Yet this is not just about Mitt Romney. He is only the latest in a long series of presidential candidates backed by a Republican establishment that seems convinced that ad hoc "moderation" is where it's at -- no matter how many of their ad hoc moderates get beaten by even vulnerable, unknown or discredited Democrats.

Back in 1948, when the Democratic Party splintered into three parties, each one with its own competing presidential candidate, Republican candidate Thomas E. Dewey was considered a shoo-in.

Best-selling author David Halberstam described what happened: "Dewey's chief campaign tactic was to make no mistakes, to offend no one. His major speeches, wrote the Louisville Courier Journal, could be boiled down 'to these historic four sentences: Agriculture is important. Our rivers are full of fish. You cannot have freedom without liberty. The future lies ahead...'"

Does this sound like a more recent Republican presidential candidate?

Meanwhile, President Harry Truman was on the attack in 1948, with speeches that had many people saying, "Give 'em hell, Harry." He won, even with the Democrats' vote split three ways.

But, to this day, the Republican establishment still goes for pragmatic moderates who feed pablum to the public, instead of treating them like adults.

It is not just Republican presidential candidates who cannot be bothered to articulate a coherent argument, instead of ad hoc talking points. Have you yet heard House Speaker John Boehner take the time to spell out why Barack Obama's argument for taxing "millionaires and billionaires" is wrong?

It is not a complicated argument. Moreover, it is an argument that has been articulated many times in plain English by conservative talk show hosts and by others in print. It has nothing to do with being worried about the fate of millionaires or billionaires, who can undoubtedly take care of themselves.

What we all should be worried about are high tax rates driving American investments overseas, when there are millions of Americans who could use the jobs that those investments would create at home.

Yet Obama has been allowed to get away with the emotional argument that the rich can easily afford to pay more, as if that is the issue. But it will be the issue if no one says otherwise.

One of the recent sad reminders of the Republicans' tendency to leave even lies and smears unanswered was a television replay of an old interview with the late Judge Robert Bork, whose nomination to the Supreme Court was destroyed by character assassination.

Judge Bork said that he was advised not to answer Ted Kennedy's wild accusations because those false accusations would discredit themselves. That supposedly sophisticated advice cost the country one of the great legal minds of our time -- and left us with a wavering Anthony Kennedy in his place on the Supreme Court.

Some people may take solace from the fact that there are some articulate Republicans like Marco Rubio who may come forward in 2016. But with Iran going nuclear and North Korea developing missiles that can hit California, it may be too late by then.

SOURCE

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The Government That Ate America

On Monday morning, the talk in Washington, D. C. -- a city named for a president with entirely modest aspirations when it came to power -- revolved around more than late-night negotiations.

Matters such as income levels, "chained CPI," alternative-minimum tax patches and Medicare payments, swam before the eyes of our elected representatives who, understandably, looked goggle-eyed as they rehearsed their arguments or recounted their labors. The New York Times highlighted Illinois Democrat Richard J. Durbin's account of the proceedings: "It looks awful."

That might be because it is : predictably so. Americans have had a good if unsettling look at the number of patch jobs necessary to make the pistons of modern government move with anything resembling regularity.

The trouble here is obvious. Anyway, it becomes so with a little thought. The bigger the policy questions at stake become, the more numerous the stakeholders become; thus, the dimmer grow the prospects for reconciliation of variant viewpoints. Everybody wants his piece of the action. In a democracy, that means, everybody gets it.

If you've gathered by now this is an anti-big government sermon, you have certainly gathered correctly. Americans perennially bat back and forth the arguments over big government's costs and who ought to pay them. How about introducing into the mix the topic of big government's basic unworkability? Too big to pay for equals too big to work. Can there be any doubt of it?

What's been happening the past decade or so in Washington -- not just since the election -- is the slow-paced screening of a disaster flick, "The Government That Ate America," in which demands that Congress and the president do a bit of everything finally overload the machinery of government. The machinery sputters, fizzles, gasps. Orange and red lights start to flicker. YOU CAN'T HAVE EVERYTHING YOU WANT! is the message the control system flashes.

A national government -- leave aside a multiplicity of state and local governments -- that absorbs a quarter of Gross National Product, as ours does, is the kind of government that ... well, look around Washington today, next week, next month. No short-term deal can get the job done. A government grown too large for its old-fashioned purposes ---"to provide for the common defense, to promote the general welfare, and to secure the blessings of liberty to ourselves and our posterity" -- can safely be pronounced in drastic need of reform.

Both political parties in some measure escorted us to the "fiscal cliff." The party now in general charge, led by the biggest big-government lover ever to inhabit the White House, bears presently the heavier responsibility. But back to guns. Wait till Joe Biden is done rebalancing the economy. He can go on from there to replacing rifles with clubs, plus anything else he may have in mind. With big government, it seems, there's no rest, no recess.

SOURCE

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For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH,  POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC,  AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena .  GUN WATCH is now mainly put together by Dean Weingarten.

List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)

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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)

Franklin Delano Roosevelt was a war criminal. Both British and American codebreakers had cracked the Japanese naval code so FDR knew what was coming at Pearl Harbor.  But for his own political reasons he warned no-one there.  So responsibility for the civilian and military deaths at Pearl Harbor lies with FDR as well as with the Japanese.  The huge firepower available at Pearl Harbor, both aboard ship and on land, could have largely neutered the attack.  Can you imagine 8 battleships and various lesser craft firing all their AA batteries as the Japanese came in?  The Japanese naval airforce would have been annihilated and the war would have been over before it began.

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