“Our practical choice is not between a tax-cut deficit and budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus.” John F. Kennedy


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Jul 26 2012

Obama’s Plan Worked?

C.M. Phippen

What plan was it that “worked”?

The plan where the debt held by the US government increased by an amount greater than the debt accumulated from George Washington’s presidency all the way to Bill Clinton’s?

The plan where US competitiveness fell from 1st to 5th?

The plan where unemployment went up as rapidly as the federal deficit and 700,000 more workers lost their jobs during the Obama recovery (I’d certainly hate to see an Obama recession)?

The plan where already unaffordable worker health insurance costs increased 23 percent?

The plan where the number of Americans in poverty rose by 6.4 million, to the highest level since the start of the war on poverty in 1965; and that is with the safety nets in place that were created by that war?

The plan where the number of Americans on food stamps increased 44%, to the highest rate EVER, all while the government runs ads touting dependence on food stamps to help you “look amazing“?

The results of the plan which lead Henry Waxman to declare this?

Aug 4 2011

Obama and the Never-Ending Recession

C.M. Phippen

With the debt ceiling debate finally over in Washington, it’s time to take a serious look at where our economy is headed and what are realistic expectations for job creation and growth.

The US federal government has borrowed $4.5 trillion, most likely the biggest Keynesian experiment in the history of the world in a peacetime economy, and economic growth apparently hasn’t been much stimulated. Stephen Moore made this point on The Kudlow Report recently. The response of Dean Baker, echoing once again the tired excuse for failure that has become the mantra of the left, was that things would have been much worse without all that “stimulus.”

Baker makes the assumption that the alternative to borrowing and spending (moving around) $4.5 trillion would have been to do nothing. He then went on to say that the current slowdown in the economy is precisely because government spending has slowed down.

Maybe I’m confused, but I thought the purpose of stimulus was to actually trigger growth, not to simply keep money moving around in the economy. The problem is, that’s all Keynesian economic stimulus actually does.

The theory is based on the idea that deficit-financed funds injected into the economy by government (after being taken out through the purchase of government bonds in the first place) will stimulate growth down the line. In tough economic times, individuals horde money just like the left is accusing large corporations of doing. The US savings rate is at its highest point since the late 1990s, even with high inflation. (Nearly 30 percent from 2010 – 2011). The effect then remains the same as if the original investor had simply placed his money in a bank account; only now our government has new, massive amounts of debt we all get to pay back.

Here’s a hint for Baker: There are other alternatives. A relatively straightforward comparison can be made between Ronald Reagan and Barack Obama. The policy differences between these presidents couldn’t be more stark, nor could the effects of their policies on the growth of the US economy.

Reagan began his presidential term with high unemployment (10.8 percent in 1982), double-digit inflation, a poverty rate that rose significantly (33 percent) through the late 1970s into the early 1980s, a 10 percent drop in real-median family income during that same period, and a Dow Industrial Average that was down 70 percent from 1968.

During the seven year Reagan recovery, the economy grew by nearly a third, private sector employment increased 20 percent, real per capita disposable income grew by 18 percent, the poverty rate declined every year from 1984 through 1989, and the stock market more than tripled from 1980 to 1990.

If we compare the first seven quarters of recovery under Obama with those of Reagan, here is what we find, from Peter Ferrara:

…While the Reagan recovery averaged 7.1% economic growth over the first seven quarters, the Obama recovery has produced less than half that at 2.8%, with the last quarter at a dismal 1.8%. After seven quarters of the Reagan recovery, unemployment had fallen 3.3 percentage points from its peak to 7.5%, with only 18% unemployed long-term for 27 weeks or more. After seven quarters of the Obama recovery, unemployment has fallen only 1.3 percentage points from its peak, with a postwar record 45% long-term unemployed.

One more illustration:

Feb 4 2010

Foreigners and Innovation

C.M. Phippen

Foreigners receiving PhDs have, in recent years, constituted nearly half of all such degrees awarded in science and engineering in the United States. In 1997, the percentage was fewer than one-third.

Because the majority of these students choose to stay in the US after receiving their education, this is a boon to our economy and enables us to continue to lead the way in the world in innovation, despite the state of our public schools in the arena of math and science. In 2000 these highly educated individuals made up 37.3% of our work force in their particular fields, a number that rose slightly over the first half of the decade.

Since the start of the recession in 2007, there are concerns that fewer students will be willing or able to stay after graduating. Of 1,203 skilled Indians and Chinese who had returned home after receiving their PhD in the US, 70% of the Chinese and 61% of the Indians said their opportunities for advancement were better in their home country. US companies are now increasingly outsourcing their sophisticated research and development, with over half having already incorporated initiatives to do so, up from 22% in 2005.

With rising taxes, fears of a double-dip recession, and ever-increasing burdens placed on businesses, the opportunities for these highly-educated foreigners become more and more bleak in the US. China and India are the two countries that not only supply us with our greatest numbers of these workers, but 92% of Chinese stay at least 5 years, as do 81% of Indians. As these countries continue to grow at a rapid pace, there becomes more of an incentive for natives to return home and a new type of brain drain could occur here.

Those workers we most need to move us forward as a society, the innovators, may choose to take advantage of our incredible educational opportunities and then, in greater numbers, take their skills back to their home countries. A new way forward or the end of an era for the United States of America?