Best. Econ. Videos. Ever.

The first one of these can be found on their site, or on YouTube. It is funny and enlightening. This one, shown below, should be sent to your liberal and moderate friends far and wide.

Would you hire new workers…

…if you were about to be hit with energy, health, income, and corporate income tax increases?

Don’t these people understand the first thing about business or economics. Of course they don’t. None of them has ever met a payroll or worked in anything other than a protected and coddled corporate environment.

U.S. job loss report is blow to still-fragile recovery

With the jobless rate stuck in double digits and Democrats worried that the weak economy will prompt voters to turn on them in fall elections, the White House plans more public events in coming weeks to underscore its concern about jobs and the economy. On Friday, President Obama called the employment report a setback during his announcement of $2.3 billion in tax credits to support renewable energy, which the administration says will create 17,000 jobs.

“The road to recovery is never straight,” Obama said, “and we have to continue to work every single day to get our economy moving again.”

Senate Democrats, meanwhile, have begun crafting a bill to encourage job creation, which Democratic aides said will likely focus on small business, infrastructure spending and “green” energy. The House passed a $154 billion jobs bill in December.

There will be recovery of sorts next year, but the idea that it will create jobs is pretty laughable. Those who weathered the last few years will do OK, but the policies put forth by the Democrats will result in very few new private sector jobs. Any real growth will be in government jobs and/or protected industries, indicating that they will essentially be patronage jobs – the only kind Democrats know how to create.

It’s time for new thinking on Taxes

I’ve blogged in earnest about the need to scrap the income tax as it currently exists.

First, let’s review the revenue collapse that occurs because our tax structure is so top-loaded. The moment the economy slows, the government drops deeper into deficit.

Second, let’s look at the trouble the Republicans have gotten themselves into by taking so many people off the tax rolls that they no longer can play the tax card politically. Tax cuts have become “pork” for conservatives, and all the carping (at me) in the world won’t change that fact.

No matter how you look at it, our reliance on income taxes is simply has to come to an end if the nation is to prosper. Let’s hope the “stupid party” realizes this, and starts to campaign on a total tax overhaul. The “Fair Tax” is one idea (I argue it needs serious tweaking). The article below talks about another angle.

A Tax Even Libertarians Can Love.

It’s time we replaced the income tax with a tax that favors thrift.

Many object that the income tax discourages work effort. Perhaps, but that doesn’t imply it causes harm. Many parents, for example, work longer hours hoping to earn enough to buy a house in the best possible school district, only to discover that when all follow this strategy, they merely bid up housing prices in those school districts. School quality is a relative concept, and half of all students must still attend bottom-half schools. If income taxation encourages people to spend more time with friends and family, that might actually be a good thing.

It’s nice that some one still realizes that man does not live by bread alone. But then, any one with a brain knows Jesus trumps Ayn Rand any day.

This harm could be avoided by replacing the income tax with a progressive tax on spending. Taxpayers would report their income to the Internal Revenue Service as before, and also their savings, much as we now document contributions to 401(k) accounts. A family’s income minus its savings is its consumption, and that amount minus a large standard deduction–say, $30,000 a year for a family of four–would be its taxable consumption.

Rates would start low, perhaps 20%, then rise gradually with total consumption. A family that earned $60,000 and saved $10,000 would have consumption of $50,000. After subtracting the standard deduction, its taxable consumption would be $20,000, for a tax bill of $4,000, about the same as under the current income tax.

With savings tax-exempt, top marginal tax rates on consumption would have to be significantly higher than current top rates on income. But unlike high marginal tax rates on income, which discourage thrift, high rates on consumption would encourage it.

Again, I recommend the entire article. One hopes the nation is still capable of changing its tax laws. If it can’t, we are doomed to a slow decline relative to the rest of the world.

Intelligent people support Free Trade. Period.

With Obama running up to Canada to say he was lying to his Union Backers on Free Trade, we can only hope he isn’t lying to the Canadians. I’ve never found arguments for protectionism the least bit persuasive, but if you are willing to try and persuade me, go ahead.


Great Myths of the Great Depression

The stock market crash was only a reflection — not the direct cause — of the destructive government policies that would ultimately produce the Great Depression: The market rose and fell in almost direct synchronization with what the Fed and Congress were doing. And what they did in the 1930s ranks way up there in the annals of history’s greatest follies. [...]

Did Hoover really subscribe to a “hands-off-the-economy,” free-market philosophy? His opponent in the 1932 election, Franklin Roosevelt, didn’t think so. During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.” Contrary to the conventional view about Hoover, Roosevelt and Garner were absolutely right.

The crowning folly of the Hoover administration was the Smoot-Hawley Tariff, passed in June 1930. It came on top of the Fordney-McCumber Tariff of 1922, which had already put American agriculture in a tailspin during the preceding decade. The most protectionist legislation in U. S. history, Smoot-Hawley virtually closed the borders to foreign goods and ignited a vicious international trade war. [...]

Smoot-Hawley by itself should lay to rest the myth that Hoover was a free market practitioner, but there is even more to the story of his administration’s interventionist mistakes. Within a month of the stock market crash, he convened conferences of business leaders for the purpose of jawboning them into keeping wages artificially high even though both profits and prices were falling. Consumer prices plunged almost 25 percent between 1929 and 1933 while nominal wages on average decreased only 15 percent — translating into a substantial increase in wages in real terms, a major component of the cost of doing business. As economist Richard Ebeling notes, “The ‘high-wage’ policy of the Hoover administration and the trade unions . . . succeeded only in pricing workers out of the labor market, generating an increasing circle of unemployment.”

Hoover dramatically increased government spending for subsidy and relief schemes. In the space of one year alone, from 1930 to 1931, the federal government’s share of GNP soared from 16.4 percent to 21.5 percent. Hoover’s agricultural bureaucracy doled out hundreds of millions of dollars to wheat and cotton farmers even as the new tariffs wiped out their markets. His Reconstruction Finance Corporation ladled out billions more in business subsidies. Commenting decades later on Hoover’s administration, Rexford Guy Tugwell, one of the architects of Franklin Roosevelt’s policies of the 1930s, explained, “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.”

A simple solution for Mr. Geithner

Word is that Mr. Geithner bombed the other day. It’s not hard to bomb when you are vainly trying to put Humpty Dupmty back together again. You can’t.

I’d argue that the way back is focus on value, and nothing else. If you want to reinflate a deflated economy, give people the ability to invest in assets. If that isn’t enough, then just give them assets and let them figure out how to increase their value.

This would be my plan, and given the opinion of the bankers these days, it would probably be popular with Main Street, and Main Street banks.

____

There are good loans/assets, bad loans, and loans we aren’t sure about yet. The solution should be obvious, if not politically popular.

A) Let every insolvent bank go under. Let all their shareholders and workers lose their investments and their jobs. (no bonuses)
B) Pay off every insured depositor and send them to the banks that didn’t screw up
C) Sell off every asset (loan) that is quantifyable to the highest bidder. (you have a whole slew of banks that just got a whole slew of new deposits)
D) Take the assets that back every unperforming loan (homes, businesses, buildings, strip malls) and sell them to investors at firesale prices. If need be, give the assets away.
E) Keep every “unquatifyable” loan in an “RTC style” entity until quantifyable, and then sell it.

Most of these assets have lost all of their value because they were built on the ephemeral value of 10% increases in American real estate as far as the eye can see. Any “solution” that doesn’t conform to that reality is merely an attempt to reinflate a popped and ripped ballon.

There is value, and there is complete lack of value. Focus on the value. Attempting to reignite value where there is none is a fool’s errand. Right now, the most value-less thing is the stock of banks and investment houses that invested in this crap. Step one begins with letting them go under.

___

Critiques welcome

Behold the “Pension” – Destroyer of Civilization

GM should be broken up and sold to any buyer who wants it. All assets should be turned over the the Pension Benefit Guaranty Corp. to cover the costs of taking over GM’s responsibilities.

Pension Agency Sounds Alarm on Big Three

“We take our obligations very seriously, managing our plans with integrity and prudence even during difficult times,” a Ford spokesman said. Chrysler declined to comment and GM couldn’t be reached. Each company has said a bankruptcy filing would be prohibitively expensive and could threaten car sales. However, GM and Chrysler have said they could run short of cash in coming months, barring federal aid.

The Pension Benefit Guaranty Corp. steps in to take over failed pension plans. After studying updated pension information for the auto makers in recent weeks, the agency has grown increasingly concerned that it might have to cover billions of dollars in pensions if one or more of the car companies should file for bankruptcy-court protection.

The agency’s letters were sent as the auto makers scramble to assemble blueprints for congressional leaders demanding viable business plans in exchange for a $25 billion bailout.

______

When writng books about the “fall” of Western Civilization (worry not, it will rise again eventually), future analysts and historians will be able to point to the “Pension” as one of the root causes of decline. As our society was able to throw off so much ‘value’ (in terms of lifestyle choices, baubles, and geegaws as well as food and shelter), the society became enamored with the absurd notion that its most productive citizen could quit at age 55 and live of the next generation(s). (which they then, in their laziness and narcissism, decided not to even produce)

This worked for a while, but as millions of public employee unions decided to go along for the ride, and increasingly disconnected soccer moms rubber stamped every increase in a bloated public bureaucracy that was failing miserably (education, fire, police, municipal, – and coming soon! – daycare!) , the system eventually failed.

With the rich lacking all political will to challenge the “tax eaters”, and the corporate chieftans shilling for “free healthcare” instead of challenging the unproductive “zeitgeist” of the times, each layer of burden laid upon the productive induced them to become less productive. EVERYONE wanted their “bailout.”

It was a nice idea, but the system can’t / couldn’t withstand the effects of human nature, which even Barack Obama will not be able to change.

Pensions and retirement that rely on anything other than your own efforts ought to be outlawed.