Robert Reich Should Be A Motivational Speaker For The Unemployed

Posted by Jason | Posted in Economics | Posted on 12-04-2010


After all the stimulus, bailing out Wall Street to save Main Street, devaluing the dollar with the printing press, and TARP, Robert Reich tells us we are looking at a horrible job market for the foreseeable future.

The U.S. economy added 162,000 jobs in March. That sounds impressive until you look more closely. At least a third of them were temporary government hires to take the census—better than no job but hardly worth writing home about.

Reich doesn’t tell you that almost every month previously was basically all government jobs. What do those jobs produce? They produce absolutely nothing, which means all they are doing is consuming what would have otherwise went towards other economic activities that would have produced something, and when there is production, there are real jobs. Every dollar spent by the government is taken out of the real job creating private sector. Considering the current regime, it’s no wonder Reich is so bleak.

Since the start of the Great Recession in December 2007, the economy has shed 8.4 million jobs and failed to create another 2.7 million required by an ever-larger pool of potential workers. That leaves us more than 11 million jobs behind. (The number is worse if you include everyone working part-time who’d rather it be full-time, those working full-time at fewer hours, and people who are overqualified for the jobs they’re in.) This means even if we enjoy a vigorous recovery that produces, say, 300,000 net new jobs a month, we could be looking at five to eight years before catching up to where we were before the recession began.

Lovely. Add ObamaCare on top of that, and what will we be looking at? Maybe Reich’s five to eight years is taking into account how long it will take for companies to adapt to the new costs of doing business. Of course, that ignores the countless businesses that will never form and jobs never created because of the cost of ObamaCare. No worries though! They’ll have free health care!

Given how many Americans are unemployed or underemployed, it’s hard to see where we get sufficient demand to support a vigorous recovery. Outlays from the federal stimulus have already passed their peak (Did I miss the peak? Man I wanted to see the peak. I bet it was amazing considering how much it cost.) , and the Federal Reserve won’t keep interest rates near zero for very long (let’s hope not). Although consumers are beginning to come out of their holes, it will be many years before they can return to their pre-recession levels of spending. Most households rely on two wage earners, of whom at least one is now likely to be unemployed, underemployed or in danger of losing a job. And even households whose incomes have returned are likely to be residing in houses whose values haven’t—which means they can’t turn their homes into cash machines as they did before the recession.

This to me sounds like an admission that Keynesian economics and it’s economic manipulating tools have lost effect. In the past, they would create a false boom that would eventually bust. This is what happened in the DotCom bubble and then the housing bubble. While the Keynesians probably stood around in delight to the boom they manufactured, eventually they came crashing down on us in progressively worse busts. Now it seems the bust is so big, that their tools can’t create the false booms they once did. While I’m glad the tools aren’t working, because maybe we can get back to real growth, I’m sure they’ll keep trying and we’ll keep paying.

What’s likely to slow the jobs recovery most, however, is the indubitable reality that many of the jobs that have been lost will never return.

The Great Recession has accelerated a structural shift in the economy that had been slowly building for years. Companies have used the downturn to aggressively trim payrolls, making cuts they’ve been reluctant to make before. Outsourcing abroad has increased dramatically. Companies have discovered that new software and computer technologies have made many workers in Asia and Latin America almost as productive as Americans, and that the Internet allows far more work to be efficiently moved to another country without loss of control.

Companies have also cut costs by substituting more computerized equipment for labor. They’ve made greater use of numerically controlled machine tools, robotics and a wide range of office software.

Where have I heard this before? Maybe we should just throw all the technologies out. Then maybe we can pay some people to dig holes, while others are paid to fill them. It’s amazing that such a famous economist is so ignorant about technology. Technology doesn’t cost us jobs and drive business overseas. Technology increases productivity, which leads to more wealth and a better standard of living. We’ve had increasing technology throughout mankind, and it has always led to a higher standard of living. There are always going to be people harmed by the changes though, but then they will adjust, and their standard of living will be better as well. Just think of those poor horse carriage builders who were put out of work with the introduction of the automobile.

The problem with driving business overseas is a self inflicted wound. Our government continually piles burdens on business and citizens, which ultimately drives up the cost of each US based employee to the point where the foreign employee is much more competitive.

These cost-cutting moves have allowed many companies to show profits notwithstanding relatively poor sales. Alcoa, for example, had $1.5 billion in cash at the end of last year, double what it had on hand at the end of 2008. It managed this largely by cutting 28,000 jobs, 32% of its work force. But for workers, there’s no return. Those who have lost their jobs to foreign outsourcing or labor-replacing technologies are unlikely ever to get them back. And they have little hope of finding new jobs that pay as well. More than 40% of today’s unemployed have been without work for over six months, a higher proportion than at any time in 60 years.

And guess what, we are all better off for it. Would we be better off if Alcoa didn’t layoff employees, and 80,000 employees lost their jobs when the company went bust? As crappy as layoffs are, they are in the economic interests of the company and the society as a whole. They allow companies to stay in business, to keep the remaining workers employed, and to fight another day.

I guess to a statist like Reich companies should run themselves into the ground, so they can then stand around telling us how the free market has failed and the government needs to take over.

The only way many of today’s jobless are likely to retain their jobs or get new ones is by settling for much lower wages and benefits. The official unemployment numbers hide the extent to which American workers are already on this downward path. But if you look at income data you’ll see the drop.

Among those with jobs, more and more have accepted lower pay and benefits as a condition for keeping them. Or they have lost higher-paying jobs and are now in new ones that pay less. Or new hires are paid far lower wages than the old. (In January, Ford Motor Co. announced that it would add 1,200 jobs at its Chicago assembly plant but didn’t trumpet that the new workers will be paid half of what current workers were paid when they began.) Or they have become consultants or temporary workers whose pay is unsteady and benefits nonexistent.

Americans will once again be employed, but they will also be back on the downward escalator of declining pay they rode before the Great Recession.

Robert Reich: The Jobs Picture Still Looks Bleak –

So Americans can look forward to declining pay with devalued dollars. Man, Reich is making me feel positive today. The reason you have declining pay in recessions is because the rise in pay during the previous boom wasn’t based on real productivity increases. It was based on false booms created by the Federal Reserve. People need to wake up and see the game that is played here. The government creates false booms and claims credit for it. It creates new government programs, because “In a wealthy nation, no one should go without ….”. Then when it all comes crashing down, government tells us the free market failed and we must implement  “insert deceiving name here”, because the “the government must save the free market from itself”

What Reich doesn’t tell you is Keynesian economics promotes declining wages in order to stimulate a recovery. It wants to devalue the currency, so that employees don’t realize they have taken a pay cut. While this might have worked in the past to trick workers, no one seems to be playing along anymore. Pay is still being devalued in real dollars, but companies are still cutting pay in nominal dollars.

With all this pessimism by Reich, can we at least get him to admit that the government can’t fix it, that is has made things worse, that the Fed needs to quit creating false booms, and finally that the government needs to stay the hell out of the economy? Ah, probably not.

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Meltdown by Thomas E. Woods Jr – The best explanation of our current financial crisis

Posted by Jason | Posted in Economics, Video | Posted on 28-01-2010


This is from a lecture Tom Woods gave about his book, Meltdown. Tom is an awesome presenter and makes boring topics entertaining. By the end of the lecture, you will understand exactly who caused the mortgage meltdown, the financial crisis and our current recession.

This is a Youtube playlist, so the next part will automatically start. It’s a little over an hour for the full lecture.


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The Stimulus Tracker on – Track the economic stimulus package in detail

Posted by Jason | Posted in Government | Posted on 27-01-2010


If you just ate lunch, do not look at this link. It will probably make you sick.

The Stimulus Tracker on – Track the economic stimulus package in detail.

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Captain Capitalism takes on GDP

Posted by Jason | Posted in Economics | Posted on 13-01-2010


Captain Capitalism has a great post today on the merits of GDP. GDP is just a formula of economic output, but it does not take into account actual prosperity. If a city is destroyed by a tornado and we rebuild the city, GDP will increase. The problem is you are no better off than you were before the tornado even though GDP tells you there has been economic growth. Actually, you are worse off because the resources that went into getting you back to square one would have been used otherwise to increase your standard of living.  If you’ve studied economics, this is known as the broken window fallacy. Stimulus and government programs are nothing but the broken window fallacy on steroids.

Here’s part of the Captains post. I highly recommend reading the entire article. Even the commentors have great comments. Read those too.

In the video I posted below about China essentially building a city that nobody is living in, the reporter kept emphasizing the importance of GDP. That the government wanted to boost “GDP.” However, given this “stimulus” plan of Ordos as well as the “stimulus plan” here in the US to boost GDP, I think it's high time we have a simple economics lesson in GDP.

Understand the goal of economics is NOT to increase GDP, but rather to increase standards of living. We simply USE GDP as a measure of all the goods and services produced within an economy, ASSUMING those goods and services when consumed help increase our standard of living. That by eating the grapes we produce and watching the movies we produce, we get utility from that, enjoyment from it, and therefore we enjoy our lives more, thus increased standards of living.

This is a logical assumption in that typically, TYPICALLY, we produce what we want to consume. We produce things that are only going to benefit us. Nobody produces ebola for consumption on account that why would we? Nobody produces styrafoam dogs. Nor do we make our roads out of cake. It not only would not benefit us, it just plain doesn't make sense.

However, this assumes an INCREDIBLY important assumption about how we go and produce things. We ASSUME that the free market is going to be in charge of what is produced. We assume that a free people, in control of their own money, is going to decide how many Big Macs we should make, how many I-Pods we should produce and how much sushi we should make. But what if this assumption is faulty?

The reason why it is faulty is the progressively less and less money is being spent by the people. A higher and higher percentage of our economy is being spent by the government. Going from essentially 3% of GDP in 1900 to 46% today.

Read the full article at  Captain Capitalism: There is No Merit to GDP Unto Itself.

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Keynesianism Delivers a Decade of Zero by Ron Paul

Posted by Jason | Posted in Economics | Posted on 05-01-2010


Here’s a great piece by Ron Paul.

This past week we celebrated the end of what most people agree was a decade best forgotten. New York Times columnist and leading Keynesian economist Paul Krugman called it the Big Zero in a recent column. He wrote that “there was a whole lot of nothing going on in measures of economic progress or success” which is true. However, Krugman continues to misleadingly blame the free market and supposed lack of regulation for the economic chaos.

It was encouraging that he admitted that blowing economic bubbles is a mistake, especially considering he himself advocated creating a housing bubble as a way to alleviate the hangover from the dotcom bust. But we can no longer afford to give prominent economists like Krugman a pass when they completely ignore the burden of taxation, monetary policy, and excessive regulation.

After all, Krugman is still scratching his head as to why “no” economists saw the housing bust coming. How in the world did they miss it? Actually many economists saw it coming a mile away, understood it perfectly, and explained it many times. Policy makers would have been wise to heed the warnings of the Austrian economists, and must start listening to their teachings if they want solid progress in the future. If not, the necessary correction is going to take a very long time.

The Austrian free-market economists use common sense principles. You cannot spend your way out of a recession. You cannot regulate the economy into oblivion and expect it to function. You cannot tax people and businesses to the point of near slavery and expect them to keep producing. You cannot create an abundance of money out of thin air without making all that paper worthless. The government cannot make up for rising unemployment by just hiring all the out-of-work people to be bureaucrats or send them unemployment checks forever. You cannot live beyond your means indefinitely. The economy must actually produce something others are willing to buy. Government growth is the opposite of all these things.

In this last paragraph, Ron Paul pretty much captures everything that is wrong with government.

Bureaucrats are loathe to face these unpleasant, but obvious realities. It is much more appealing to wave their magic wand of regulation and public spending and divert blame elsewhere. It is time to be honest about our problems.

The tragic reality is that this fatally flawed, but widely accepted, economic school of thought called Keynesianism has made our country more socialist than capitalist. While the private sector in the last ten years has experienced a roller coaster of booms and busts and ended up, nominally, about where we started in 2000, government has been steadily growing, because Keynesians told politicians they could get away with a tax, spend and inflate policy. They even encouraged it! But we cannot survive much longer if government is our only growth industry.

As for a lack of regulation, the last decade saw the enactment of the Sarbanes-Oxley Act, the largest piece of financial regulatory legislation in years. This act failed to prevent abuses like those perpetrated by Bernie Madoff, and it is widely acknowledged that the new regulations contributed heavily not only to the lack of real growth, but also to many businesses going overseas.

Americans have been working hard, and Krugman rightly points out that they are getting nowhere. Government is expanding steadily and keeping us at less than zero growth when inflation is factored in. Krugman seems pretty disappointed with zero, but if we continue to listen to Keynesians in the next decade instead of those who tell us the truth, zero will start to look pretty good. The end result of destroying the currency is the wiping out of the middle class. Preventing that from happening should be our top economic priority.

via Keynesianism Delivers a Decade of Zero by Ron Paul.

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Costly caulkers & crackpots – Ralph R. Reiland

Posted by Jason | Posted in Government | Posted on 04-01-2010


Here’s a great op-ed from the Pittsburgh Tribune-Review.

So Umar Farouk Abdulmutallab got within an inch of having hundreds of airline passengers fall from the sky over Detroit on Christmas day, thanks to the ongoing holes in government-run security — some eight years after the attacks of 9/11.

And then we discovered that taxpayers paid almost $2 million to caulk and seal just seven leaky houses in Texas, i.e., $286,000 per house, under the federal government’s go-green weatherization program.

And we're still supposed to believe that these amateurish and occasionally corrupt half-wits in government are up to the task of fixing something as complex and multifaceted as America’s health care system?

I thought cash for clunkers was nuts, but cash for caulkers might well have it topped on the craziness meter.

With the clunkers fiasco, promoted as a way to prop up the U.S. car industry, we ended up borrowing money from China to buy cars from Japan and South Korea.

By the time the cash ran out, we were an additional $3 billion in the hole, more than half a million turned-in trucks and cars had been unnecessarily smashed, and eight of the 10 top-selling new vehicles in the program were purchased from foreign manufacturers, thereby subsidizing Detroit’s key competitors.

At $286,000 per house, the cash-for-caulkers deal looks like it’ll have no trouble racking up even higher levels of irrationality, fraud and tax waste.

Texas got millions in federal tax dollars via the stimulus package to fix up the caulk-ready houses of the poor. Over the first four months, the state spent $1.8 million, and only the aforementioned seven houses had been weather-treated. A tube of the best caulking at Home Depot, enough to caulk approximately 50 feet, sells for about $7.

Rather than paying for caulking or putting jobless caulkers to work, nearly all of the $1.8 million ended up in the pockets of state employees, i.e., the planners, the green team.

President Obama, nonetheless, praised the caulking program as a triple delight: “You’re getting a three-fer. Not only are you immediately putting people back to work, but you’re also saving families on (their) energy bills and you’re laying the groundwork for long-term energy independence.”

Actually, he should have called it a four-fer. It also redistributes income by taking money from the top half of income earners (the top half of income earners pay 97 percent of total federal income taxes) to provide free weather-stripping to those at the bottom who disproportionately vote for Democrats. It’s like sticking up “the rich” with a caulking gun.

Read the full article here Costly caulkers & crackpots – Pittsburgh Tribune-Review.

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Alan S. Blinder has a new set of rose (keynesian) colored glasses

Posted by Jason | Posted in Economics | Posted on 16-12-2009


In the Wall Street Journal today, Alan Blinder, talks up the economy and show’s his optimism (naivete) of things to come.


The U.S. economy is digging itself out of a deep hole. You have probably heard a lot of doom and gloom lately, including talk of a jobless recovery, an L-shaped recovery (which means no recovery at all), or even a W—the feared double-dip recession. The Scrooges have a point: There are serious dangers to the nascent recovery. But you’ve heard all that many times. Let me offer instead, in deliberately one-sided fashion, the case for optimism. It is, after all, the holiday season.

The case begins with the “slingshot effect” I wrote about on this page last summer (“The Economy Has Hit Bottom,” July 24, 2009). When the growth rate of any component of GDP rises, it gives overall GDP growth a boost. And going from sharply negative growth to zero is a notable rise. In July, the slingshot scenario was hypothetical—though likely. In today’s economy, it’s a real phenomenon.

During the first half of this year, the investment component of GDP declined at a stunning 38% annual rate. Since the investment share of GDP was then about 14%, this implosion accounted for minus 5.4 percentage points of GDP growth. But since overall GDP declined “only” 3.6% in those two quarters, the rest of GDP (the 86%) actually rose. It was a small but real reason for optimism in a stormy sea.

Then came the third quarter. Like a woozy prizefighter lifting himself off the canvas, the battered investment component of GDP managed to rise (at an 11% annual rate), which added 1.3 points to GDP growth rather than subtracting 5.4 points. That 6.7 point swing was the start of the slingshot effect, which is not yet over.

Investment has three components: business investment, inventory stocking, and homebuilding. Inventory stocks were still declining at near-record rates in the third quarter; they simply must level off within a few quarters because sales are rising and firms will not want to deplete their stocks indefinitely. Business investment remains 20% below its 2008 peak; its likely course is up, not down, because plants and equipment wear out. And housing? Well, you know. Homebuilding is still in the doldrums—limping along at less than half the level of 1960. The only way to go is up.

This is where Keynesians think they have things right by using their assumptions to prove their assumptions. Blinder says while investment decreased, the other GPD components picked up the slack, so GPD didn’t decline as much as it would have otherwise. The problem is the slack was government spending. This is how they reinforce their own assumptions. They believe the government can boost the economy with stimulus, printing money, etc. Then they create a GDP calculation that includes government spending as one of it’s components. Then to increase GDP, they use that component to minupulate the calculation. The problem is that component does nothing to create wealth for our economy. It does not create real economic value. Gross Domestic Product is about production, but the government produces nothing. If this was the way to economic growth, why don’t we just focus on that component of GDP? Why not just quadruple the government spending? GDP would skyrocket!

Of course, the investment slingshot won’t last forever. Sometime in 2010, consumer spending must take over. And this is where the pessimists go into full throttle. Burdened by huge losses of both wealth and jobs, American households will start saving like mad, we are told. Sounds plausible, but it hasn’t really happened. True, the average personal saving rate has risen to 4.5% of disposable income so far this year from 2.7% in 2008. That’s higher, but a long way from the 8%-10% saving rates the doomsayers have foreseen. A saving rate near 5% is consistent with 3%-4% GDP growth in 2010.

Let’s hope consumers don’t listen to Blinder. Our country is badly in the need for savings. Savings are used for investment, which is what creates real economic growth. Yes, ultimately consumers need to spend, because we need to buy much of what we produce. If we don’t, it won’t be produced. The problem is when that consumption is heavily leveraged as it has been. I’m sure the Fed will eventually trick the public into going more in debt as things start to get back to normal.

The second major source of optimism is the amazing performance of productivity during the recession. To be sure, that performance had a downside: While real GDP was falling 3.7%, payroll employment dropped 5%, devastating many American families. But by definition, that discrepancy means that productivity—output per hour of work—rose substantially during the recession, which is pretty unusual.

The last two quarters were even more extreme: Productivity in the nonfarm business sector grew at a shocking 8.1% annual rate. There are two possible explanations. One: The last two quarters were among the most technologically innovative and entrepreneurial in the history of the United States. Two: Fearful businesses pared payrolls to the bone. If the second is closer to the truth, payrolls are extraordinarily lean right now. Which means that firms will need to hire more workers as their sales and production grow. Which means that employment may start growing sooner than the pessimists think.

I have been pointing this out for months, but until the last employment report, it was a hypothesis supported by no evidence. Not anymore. While payrolls continued to decline in November, it was by only a scant 11,000 jobs; and the job counts for September and October were revised upward. The data now show a clear trend that suggests that net job creation may be only a month or two away. We’ll see.

Here again, the problem is Blinder is counting the government as if all jobs are created equal. Jobs do the economy no good if they aren’t producing value to the economy, and government jobs do not produce value. The latest jobs report showed increases in government jobs and temporary employment. All other jobs, the ones we want, were down. More government jobs, used to distort the jobs report, is not a good thing.

There is more to the case for optimism. For one thing, less than 30% of February’s $787 billion fiscal stimulus has been spent to date; over 70% is still in the pipeline. Pessimists dote on the fact that the rate of increase of stimulus spending has probably peaked and will be lower in 2010. True. But the level of GDP will continue to get support from fiscal policy, and a second job-creation package (“Please don’t call it a stimulus!”) looks to be in the works.

Back to increasing the government component of GDP. See why government spending should be taken out of GDP?

Then there is the Federal Reserve’s stupendously expansionary monetary policy. It is well known that interest rates work on the economy with long lags. But the Fed’s last rate cut came a year ago. So isn’t the monetary policy pipeline empty? The answer is no, for at least three reasons. First, history suggests that the time lag is closer to two years than to one. So even the normal policy lags are not over.

But second, and more important, the lags are likely to be abnormally long this time around. As long as the economy’s credit-granting arteries were blocked, they could not carry the Fed’s lower-interest-rate medicine into the economy’s bloodstream. Sadly, some of these arteries remain blocked today—such as for small business lending. But the Fed, Treasury, FDIC and others have created a bewildering variety of stents and bypasses to get credit flowing again. The credit markets are now healing, though slower than we would like. Hence there is still monetary stimulus in the pipeline.

And third, the Fed continues to inject more medicine. Not by cutting interest rates, of course. Zero is as low as you can go, and the Fed arrived there a year ago. But “quantitative easing” is still in play. One example is the mortgage-backed securities (MBS) purchase program, which is adding MBS to the Fed’s balance sheet and providing vital support to the mortgage market. Yes, the Fed has begun to think about its exit strategy. But that is for the future, not for now.

The Fed’s “stupendously expansionary monetary policy” is what we should fear the most. The author may be right on the lag, and that would be the most devasting blow to the economy. Many are predicting massive inflation as the Fed’s stimulus finally leaves the reserves and enters the economy. I wouldn’t call that a case for optimism. As I highlighted in a previous blog, even the best case inflation scenario is not too comforting. If not severely contracted, we’ll have massive inflation. If severely contracted, we could be looking at a serious contraction in the economy. Pick your poison.

I warned at the outset that I would present a deliberately biased case. So let me admit, once again, that serious downside risks remain. The investment slingshot and the fiscal stimulus will both peter out in 2010. Consumer finances and confidence are shaky. Banks are still failing and commercial real estate is a mess. We cannot count on exports to pull us out of this slump. All true. And all reasons not to expect the kind of exuberant boom that typically follows a deep recession—such as the 7.7% growth spurt in the six quarters following the 1981-82 slump. No one expects that.

So my optimism is guarded. The 3%-4% growth rate that I anticipate for the rest of this year and for 2010 is a lot worse than 7.7%, to be sure. But compared to what we’ve been through, it will feel a whole lot better.

Mr. Blinder, a professor of economics and public affairs at Princeton University and vice chairman of the Promontory Interfinancial Network, is a former vice chairman of the Federal Reserve Board.

via Alan S. Blinder: The Case for Optimism on the Economy –

Blinder doesn’t even consider the effects of the health care takeover, national debt, etc. Then again why would he? Keynesians think government spending is as valuable as business investment. Why? Because GDP says so.

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Peter Schiff hands out an ass whoopin to David Epstein

Posted by Jason | Posted in Economics, Government, Video | Posted on 12-12-2009


I can’t remember how I found this video, but if you have the time, it’s a much watch. You want to know why we are heading for disaster? It’s because the government is filled with David Epsteins, when we need more Peter Schiffs. Hopefully, Schiff will defeat Dodd next year, and we’ll at least have one. Add Rand Paul into the equation, and we are heading into the right direction.

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Obama Pushes New Job Stimulus –

Posted by Jason | Posted in Government | Posted on 09-12-2009


When will this nightmare called the Obama administration end? They never question that fact that they got it wrong. They always believe they just didn’t do enough yet. We have close to a 1$1.5 trillion deficit this year, and these idiots can’t stop thinking of ways to spend more money.

In a speech at the Brookings Institution, Mr. Obama avoided calling his jobs push a new stimulus plan. But White House officials acknowledged that the president was taking stimulus components that he believed worked best and extending or amplifying them.

Has anyone seen any part of the stimulus that worked and continues to work? Cash for Clunkers might have give a blip on the GDP chart, but it’s obvious it was not sustainable. Government stimulus in the form of spending never is.

These include putting an additional $50 billion toward infrastructure spending, ramping up Treasury Department lending to small businesses through the Troubled Asset Relief Program, extending tax credits for business investment and offering state and local governments a fresh lifeline.

Other ideas that weren’t in the February stimulus legislation include a tax credit that rewards companies for hiring workers and tax rebates for individuals who make their homes more energy efficient.

Additional wealth must be created in our country for hiring to take place. Infrastructure does not create wealth. Are you wealthier when you trade in an older car for a newer one? No, you still have a car, just like you did before.

Increased lending to small business isn’t going to help either if the economy remains in shambles. Who will want to borrow money when the future is so uncertain?

Tax credits don’t work in the long term. Only long term tax cuts work for ongoing growth. Are you going to change your long term habits for a one time handout? Neither is business. They will change habits if it’s a lasting change such as reduced taxes, just as you would change your habits with a pay increase.

Don’t even get me started on more state bailouts. It’s stealing money from responsible states and giving it to irresponsible states such as California. The responsible states have to pay for the over-the-top government benefits in other states. Would Texas please secede already.

Mr. Obama’s push comes as a partisan debate over the stimulus plan’s effectiveness heats up and Democrats grow increasingly worried about the political price of a stagnant job market. With a midterm election looming in 2010, Friday’s relatively hopeful employment reports didn’t much relieve the pressure, senior Democrats said.

And we wonder why our country is going bankrupt. Politicians try buying their re-elections. It’s all politics, and has nothing to do with what is best for the country.

Democratic aides expect two bills. The first would top $100 billion and would extend unemployment insurance, temporary food-stamp payment increases and subsidies for health-care purchases by the unemployed. That would likely be attached to a spending bill in coming weeks. The second, a jobs bill estimated at about $70 billion, would contain many of Mr. Obama’s initiatives and likely wouldn’t reach his desk until early next year.

Get ready for all the job creating from incentivizing unemployment. It seems like we extend unemployment almost every week now. What’s it up to, half your life?

The hiring tax credit may generate the most controversy. Mr. Obama campaigned on the idea last year, but Democrats abandoned it amid the stimulus debate. Employers, they worried, could fire workers and rehire them to claim the credit, or divide a full-time job into two part-time jobs, cut the wages and hours of one worker, then hire a new, part-time worker to claim the credit.

Ralph Braun, chief executive of Braun Corp. in Winamac, Ind., said a tax credit is meaningless for a producer like him. “If you’re just going out to hire someone just for a tax credit, what kind of job will you put them in that has any longevity to it?” said Mr. Braun, whose 730-employee company produces wheelchair lifts and other equipment. “You have to have a customer for that employee to serve — so I’m confused how a tax credit would stimulate anything.”

Still, there are executives who see merit to the idea. Ronald DeFeo, chief executive of Terex Corp. in Westport, Conn., would like to see such a credit targeted at recent college graduates. “If we had a tax incentive that paid for a third of [a recent college graduate's] wage for two years, then 10% for the next two years, it would be a way to encourage companies like mine to hire,” he said.

via Obama Pushes New Job Stimulus –

I bet Ralph Braun’s company is much better ran than Ronald Defeo’s. Ralph is completely right. If there is no customer to serve, then there is no need for a new position. Ronald on the other hand thinks it makes good sense for the public to pay 1/3rd of two years wages and 10% for the third and forth year for new hires. Is he smoking crack? This is what he thinks is good for our country? I know he gets to save money for himself, but meanwhile that money has to come from somewhere. If that position doesn’t warrant paying the employee, then the position should not be created. It’s a sham, and only results in a lower standard of living for everyone else, well except for Ronald Defeo.

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Bye Bye Stimulus Jobs

Posted by Jason | Posted in Economics, Government | Posted on 01-12-2009


The Wall Street Journal had an article about how construction companies are going to be laying people off as the stimulus money projects run out.

WASHINGTON—Highway-construction companies around the country, having completed the mostly small projects paid for by the federal economic-stimulus package, are starting to see their business run aground, an ominous sign for the nation’s weak employment picture.

Tim Word, vice president of Dean Word Co., a heavy-construction company in New Braunfels, Texas, said his income is now coming mostly from projects that are winding up. He said that in normal times he has about $100 million of signed contracts in hand. But that number has fallen to $30 million, and the pipeline is empty.

via Job Cuts Loom As Stimulus Fades –

This is why stimulus does not create jobs. It does not create permanent jobs, because it does not create wealth. Where does the government get the money? It must take it from one area of the economy whether through taxes or borrowing, and it gives it temporarily to another area of the economy. This is temporary, and businesses aren’t stupid enough to fall for it. Yeah, the businesses who receive the money love it. They aren’t going to turn it down. But the other businesses that don’t receive it are either laying off or not hiring because of it. They either don’t have the money to hire because it was taxed away, or they are competing with the government to borrow money. The more money the government is borrowing, the harder it is for small businesses to borrow. After all, who is considered the safest bet when lending, and if the government keeps demanding more money in a slow economy, wouldn’t it be best to lend them the money?

This whole story highlights several things. The government cannot create jobs, create wealth, control the economy, fix economic problems, or help you in anyway that doesn’t hurt you more in other ways.

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