The Bump in the Road is the American Worker

President Obama calls the abysmal unemployment problem, a bump in the road. I suppose running over the American worker is just a speed bump in Obama’s theoretical world view, but it has consequences for real America. The economy was growing at 7% during the Reagan recovery by this time. Of course, it wasn’t doing as well in theory, if you were to read the media of the time.

country roadThe Obama team rejected Reagan and evidently prefers to return to the Carter era policies. The fact is that we cannot “go back” to either. The Obama team has to recognize that they made some mistakes and had some successes, but their fundamental approach of massive debt is not sustainable. It doesn’t matter what their politics and interest groups want. Never in the history of the world has any government spent more; we have to spend less. It is simple, really, just not at all easy.

Government has grown by giving people other people’s money, which turns out is sometimes their own. We all gain from government programs, which we all pay for. The money gets moved around so much that we start to forget that we are the source of the money that the government is using to bribe us.

When this shell game is running well, we all think we need to thank big government for something. Politicians then can play on our fears of losing it. That is what some are doing now, with their "throw granny off the cliff" scare tactics.

Let's be clear. Nobody wants to cut back what they get. We all want more stuff and we all like to pay less to get more. But we have overspent. Our spending is unsustainable. It doesn't matter if cutting back is unpopular. Since when is paying back debts been popular? But we have to do it. We have to deal with reality as it is, not as we wish it would be or as our politicians tell us it should be.

Government has the legitimate function to help create the conditions where the people can make their own choices and prosper by their efforts. This includes protecting property rights, contracts, providing for security, conducting foreign affairs and undertaking infrastructure projects that no individual or firm could reasonably accomplish. We could afford to support a government that stuck to its legitimate role. Government has no business actually managing the prosperity process, deciding who deserves to prosper or generally to tell people what to do. The irony is that when government fails in its basic duties, it tries to convince us to expand its power and entice us into giving more to them by giving us favors and/or threatening to withdraw them. If you trust politicians more than you trust yourself, maybe you will want to give them the power. If not, maybe you want to build prosperity for yourself.

Posted by Christine & John at June 5, 2011 7:09 PM
Comments
Comment #324035

“Throwing granny off the cliff” is exactly what the Republicans have proposed for solving our long term deficit problem. Its really quite simple. To solve the deficit problem, Republicans have proposed transferring the unsustainable inflationary costs to seniors. The astounding thing is that Republicans think that this is entirely reasonable. Not a word on cutting the health care inflation driving the unsustainable deficit and preserving health care for seniors or, for that matter, all Americans. Yep, we just have to give up some health care to balance our budget. The fact that seniors, poor and disabled will bear the brunt of that solution is of little consequence.

To put this whole discussion of government spending and deficits in perspective, it is important to understand that extraordinary health care inflation is the driving factor. No other issue comes close in relation to the deficit. Take a moment to review the linked chart which shows the impact of health care inflation on the national deficit going forward. Take a few additional moments to plug in the costs of alternative health care systems and what our deficit would be if had similar systems. http://www.cepr.net/calculators/hc/hc-calculator.html

Posted by: Rich at June 5, 2011 8:40 PM
Comment #324040

Rich

Obama promised to address health care costs. Obama care did nothing but raise the future costs. This is the problem.

The Republican plan doesn’t affect any seniors today. It doesn’t affect anybody under the age of 55. That means we will all have a decade or more to plan and adapt.

We indeed need to cut costs. Health care cost have increased greatly in MOST health care.

But consider the places where costs didn’t rise and actually went down. LASIK improved and became cheaper. Why? Because it is not usually covered by insurance or government payments. We clearly need market mechanisms, not merely more third-party payers.

We do need to transfer some of the cost or responsibility to individuals, who can monitor the costs, such as happened with LASIK. Back 20 years ago, only the rich could afford LASIK. Today it has become common and within the means of most Americans who want to have it done.

There is no reason why health care should be any more free than other necessities, such as food. We should help those who need, but it is not a universal right to be supplied by government.

Posted by: C&J at June 5, 2011 9:55 PM
Comment #324042

LASIK surgery costs just under $4,000 for both eyes.

C&J,
Do you really believe that sum is “within the means of most Americans”?

Just out of curiousity, do you know what percentage of Americans are underwater on their mortgages? It’s about 23% of homeowners. In Nevada, about 2/3 of the mortgages are underwater. In Arizona, Florida, Michigan and California, up to 50% of the mortgages are underwater.

Housing prices have declined 57 straight months, and the increasing rate of foreclosures are making the matter worse. Perhaps it is dawning upon you why I say it will be 2017 or 2018 before the economy actually recovers.

This economic situation has nothing to do with the deficit or national debt or big government or health costs.

Posted by: phx8 at June 5, 2011 11:23 PM
Comment #324045

Two quick questions, to start off: What were the top rates for taxation during the Carter Administration, and are those those the rates Obama proposes to return to?

As for Mitt Romney’s view?

We’re talking the same guy who just got a pants on fire rating for saying we’re inches away from losing the free market economy?

The Obama people weren’t referring to workers as speed bumps. They were referring to the difficulties in the market as speedbumps. Why would the Obama administration rationally be thought to refer to them as speedbumps?

The Obama administration favors labor, and has actually done something constructive both to help out those on unemployment, and to help people get jobs.

Meanwhile, your people, in the last six months, seem to have gone on a job-killing spree, on the theory that government jobs take the place of private jobs.

Shock and Awe! All that job killing, and for some strange reason, job growth stalls! Help me figure this out, it’s a mystery! Who knew that cutting government spending during a weak recovery could have such an effect? Well, quite a lot of people, including Bruce Bartlett. But Republicans don’t listen to people who don’t say cut taxes for the rich and stick it to the poor. And they don’t listen to people who warn that current energy policy is going to kill jobs by raising the cost of transportation.

Now you want to push your medicare fix. Now, for some strange reason, your response to the unpopularity is to claim that it’s just not getting the right press. Except, really, even your own people are in the majority against changes to the benefits of the program when asked.

That is, the people to whom you’ve been selling Medicare reform for the longest time, and with the greatest concentration. When even the choir ain’t singing the tune, that’s when you know it’s not the political gospel you hoped it would be.

Our problem is not overspending or undertaxing, it’s a mismatch between what is spent and what is taxed, and in the case of Medicare, the lack of enthusiasm for reducing benefits reduces how much of your pound of flesh you can redeem from that program. So, in that case, you need more taxes.

Supply and demand. People want government, or need it at times, and it has a cost, and the cost helps to moderate the demand for it. The arbitrary cutting of federal, state, and local spending costs somebody something. If the economy can take it, then the spending can be brought down safely. But if private dollars aren’t going to so quickly replace public, then you’ve only tightened people’s belts for them, and compounded our economic problem.

We need to stop kicking our country in its own economic ass. We need a policy that stimulates the economy, that gets us growing in the right places so we can create new jobs worth keeping. We need to recognize that this isn’t 1981-1983, where the recession was caused by a deliberate tightening of the money supply, a deliberate rasing o interest rates.

Ironically, the inflation fighting tactics of the Republicans today are closer to Jimmy Carter’s economic plan than Obama’s. Obama at least recognizes that this is not your typical, run of the mill cycle.

Posted by: Stephen Daugherty at June 6, 2011 12:00 AM
Comment #324053

SD

Start To Entertain People Holding Everything Neutral.
Dull As Uncle George Has Especially Returned To You

Posted by: tom humes at June 6, 2011 12:43 PM
Comment #324054

stephen

“your people, in the last six months, seem to have gone on a job-killing spree, on the theory that government jobs take the place of private jobs.”


gov’t is not an economic engine. growing gov’t when the private sector isn’t, is unsustainable. trying to say laying off gov’t workers will hurt the economy is nonsense. the income they earn is bled from the private sector in the form of taxes. that money left in the hands of those who earned would be far more beneficial to the economy.

Posted by: dbs at June 6, 2011 12:48 PM
Comment #324055


Some forecasters are predicting that the new official full employment rate will be somewhere between 7% and 8% unemployment.

Posted by: jlw at June 6, 2011 12:54 PM
Comment #324056

dbs,

” trying to say laying off gov’t workers will hurt the economy is nonsense.”

Do you believe the income government workers earn exists in a vacuum?

Their money is spent the same way you spend yours. The taxes they pay are paid the same way you pay yours.

That corporations are sitting out there on huge profits and not hiring is beyond anything that the lay off of a few government workers can make up for.

Rocky

Posted by: Rocky Marks at June 6, 2011 1:01 PM
Comment #324059

tom humes-
Pardon me?

dbs-

gov’t is not an economic engine.

It takes in taxes, it employs people, it contracts out work to companies and individuals, it helps construct public works and fund research that has economic benefit.

These are plain facts. You cannot truthfully contradict them. And they all lead to the conclusion that government is an economic engine.

trying to say laying off gov’t workers will hurt the economy is nonsense.

Why? Do you, by any chance, have evidence to support this assertion?

Government workers pay for things just like everybody else, and end up on unemployment, or retiring early, like many other who feel the sting of a lost job. Unless you can demonstrate to me some reason why government workers should be treated like a special case, then they should be treated no different than anybody else who becomes unemployed.

the income they earn is bled from the private sector in the form of taxes. that money left in the hands of those who earned would be far more beneficial to the economy.

I can call your argument nonsense, but rather than just say so, I will explain what makes it nonsense.

The Federal government is running a deficit. That means that any reductions in spending first apply to paying down the shortfall. If we see federal employees home, people still need to pay the same taxes or else see the budget deficit rise.

So, you can’t really given anybody any relief from taxes from the spending. You could if you were breaking even, but you’re not. You’re running two mutually contradictory talking points at the same time, and that undercuts both of them.

Posted by: Stephen Daugherty at June 6, 2011 2:15 PM
Comment #324061

rocky

“Their money is spent the same way you spend yours. The taxes they pay are paid the same way you pay yours.”

the taxes they pay, come from the taxes i pay. that is a net loss. nothing is created.

“That corporations are sitting out there on huge profits and not hiring is beyond anything that the lay off of a few government workers can make up for.”

they’re sitting on capital. capital they choose not to risk because of the anti business climate created by the marxist currently occupying the white house. hell, he is trying to stop boeing from building a plant in the south. why? because it won’t be union. seems counter productive when you consider the unemployment rate, and the fact boeing could take those jobs overseas if choose to. do you think those folks down there would like to have those jobs, or watch them sail off to the other side of the world because barry doesn’t have a clue.

stephen

“I can call your argument nonsense, but rather than just say so, I will explain what makes it nonsense.”

that’s what i did. i just laid out my reason first, and then said it was nonsense. the fact you don’t like my argument doesn’t change anything.


“It takes in taxes, it employs people, it contracts out work to companies and individuals, it helps construct public works and fund research that has economic benefit.”

it produces nothing. it is a parasite. without the private sector creating wealth it would starve.

regardles of what or how gov’t spends tax revenue, the activities it engages in relies on private enterprise to fund it through taxation. no private enterprise, no tax money to fuel gov’t activity. like i said before it is a parasite. if the parasite is not kept under control it will eventually kill its host. in this case that is the american economic engine.

“The Federal government is running a deficit. That means that any reductions in spending first apply to paying down the shortfall. If we see federal employees home, people still need to pay the same taxes or else see the budget deficit rise.”

good…..send um home. cutting redundant, and un needed layers of beauracracy will leave more money to help close the deficit.

Posted by: dbs at June 6, 2011 2:57 PM
Comment #324064

“…he is trying to stop boeing from building a plant in the south. why? because it won’t be union. seems counter productive when you consider the unemployment rate, and the fact boeing could take those jobs overseas if choose to.”

dbs,

Boeing has already outsourced on a world wide basis a substantial part of the Dreamliner production. Boeing had already established a plant in South Carolina when it bought out a failing sub-contractor. The issue is whether a second production line for the Dreamliner would be in Washington as originally planed or moved to South Carolina due to union issues.

Posted by: Rich at June 6, 2011 5:00 PM
Comment #324067

rich

why should boeing not be free to choose which state they build that second line? it would be a shame to see those jobs leave the country because of politics.

Posted by: dbs at June 6, 2011 5:14 PM
Comment #324068


dbs, “more money to help close the deficit.”

Fewer taxpayers, more people on unemployment benefits and other government programs. The government will have to hire more workers to handle the increased case load.

I thought to conservatives, redundancy and unneeded layers of bureaucracy included all of government except defence.

Posted by: jlw at June 6, 2011 5:16 PM
Comment #324071

dbs,

“the taxes they pay, come from the taxes i pay. that is a net loss. nothing is created.”

Yeah, except the facts are that we lose twice.

1)We have more people on unemployment and
2)We lose the taxes they are paying.

Sorry, even the right isn’t going to reduce your taxes.

Rocky

Posted by: Rocky Marks at June 6, 2011 5:42 PM
Comment #324072

rocky

unemployment is payed into an account by the employer it doesn’t come out of general revenue, and it is subject to federal income tax.

Posted by: dbs at June 6, 2011 5:49 PM
Comment #324082

dbs,

“unemployment is payed into an account by the employer it doesn’t come out of general revenue, and it is subject to federal income tax.”

Yeah, I got that, but… have you ever collected unemployment?

I did for exactly two weeks, and it’s hardly a way to pay bills.

Oh, and BTW, when government workers collect unemployment, just who was the employer paying into the account?

Rocky

Posted by: Rocky Marks at June 6, 2011 6:59 PM
Comment #324088

rocky


“Oh, and BTW, when government workers collect unemployment, just who was the employer paying into the account?”


ya, but it’s less than what they would usually make. so it’s actually a savings.

Posted by: dbs at June 6, 2011 8:04 PM
Comment #324090

“they’re sitting on capital. capital they choose not to risk because of the anti business climate created by the marxist currently occupying the white house.”

dbs,

If that were true, then why have they been sitting on capital since 1982? This is a long term trend, not a new phenomena or something related to a “Marxist” in the White House. http://www.ritholtz.com/blog/2010/07/corporate-cash-has-been-piling-up-since-1982/

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