Ask a D.C. insider what’s the best way to solve the debt crisis. Nine times out of ten, they’ll recommend taking on more debt. That’s how things operate in the Potomac swamp. Up is down, right is left, digging yourself into more debt is the best way to get out of it. But it wasn’t always like this. In fact, there used to be common sense when it came to the economy. So where did it all go wrong?
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
Its acceptance is as widespread as its justification is important, for it provides the rationale for the Federal Reserve’s unprecedented monetary expansion since 2008. While critics may dispute the wealth effect’s magnitude, few have challenged its conceptual soundness. Such is the purpose of this article. The wealth effect is but a mantra without merit.
Baron Rothschild, the famous French financier, was once heard to say that he knew of only two men who really understood money -- an obscure clerk in the Bank of France and one of the directors of the Bank of England. “Unfortunately,” he added, “they disagree.”
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
Economic theories don’t lend themselves to laboratory testing, so the work of a national appraisal firm is especially enlightening. A new study lends support to the Austrian business cycle theory, which says that the less government is involved, the faster a market will recover.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
The European economy is turning from stagnation to contraction. Financial journalists are concluding that “austerity” is the reason.
They say that forced reduction in government services is sending not only the continent, but the U.K. into an economic tailspin and — heaven forbid — the same could happen to the United States. Look and panic: America’s various levels of governments are contracting, laying off workers and cutting services.
The whole civilized world is doomed, they say, by this reduction in government. To their minds, an expanding government leads to an expanding economy, as measured by gross domestic product (GDP). Cuts in government do the opposite.
But have there been actual cuts? Veronique de Rugy of Mercatus has looked at this claim government by government and finds throughout the U.K. and Europe mostly higher taxes, higher spending, more regulation, and a near absence of serious and substantial structural reform. The cuts that have taken place have been forced by economic reality.
If for one night a drunk can’t get to the slot machines, this does not amount to gambling austerity.
But here is a more-important question: Does government drive the economy? Look around at all the things you love, all the services that are most beneficial to your life, all your material aspirations and dreams. How many of them were or are produced by politicians and bureaucrats?
As Albert Jay Nock said, government has no resources or power of its own. Everything it has it has taken from us. It produces nothing, but exists only to the extent it can feed off its host — wealth creation aimed at serving customers in the private economy.
It seems like a simple and incontrovertible observation, but it must not be, because otherwise-intelligent people seem to miss it. The New York Times’ Eduardo Porter complains about Americans and their aversion to taxes. He was just in Italy, he says, with an economy in shambles, a government bloated with debt and corrupt bureaucracy, yet his son, who developed an untimely rash while vacationing, was served lickety-split by an Italian doctor, gratis.
Porter figures that’s government as it should be.
A good share of Italians may be unemployed and their economy may be shrinking, but their social safety net stretches farther than ours and supposedly their poverty rate is lower. Their free health care covers even tourists.
To believe Porter, the laws of economics have been repealed in Italy. Great food, great wine, free health care, and no one has to work in this paradise.
According to Porter, America has plenty to learn from Italy and countries like it that tax their citizens at an appropriate level, unlike the good old US of A that can’t seem to get its citizens to cotton to the idea of handing over more of their property to the state.
Porter doesn’t talk about individual tax rates. He focuses on the percentage of taxes collected to GDP. That percentage in the developed world averages 35%, while America is falling behind, at less than 25%. Only Mexico and Chile are less taxacious.
Of course, as Bill Bonner told the Agora Symposium crowd in Vancouver, GDP is just another phony government number. He wrote in Whiskey & Gunpowder in 2010:
GDP growth alone is a fraud. The gross number just doesn’t tell you anything worth knowing. It doesn’t really matter how fast an economy is growing. What counts is how fast it is growing per person… and whether that “growth” is real or phony. Growth is not the same as prosperity… Someday, we promise you, modern economists will be ranked below doctors who bled their patients to death and jungle tribes who threw maidens into volcanoes. They are quacks.
According to Porter, America is not only not taxing enough, it’s not taxing the right way. Consumption needs to be taxed, instead of taxing labor and capital “that damp people’s drive to work and invest, putting a drag on economic growth,” Porter writes. “And the tax code is riddled with preferences and loopholes that further distort people’s economic behavior.”
I agree with his point about distortions and disincentives to work and invest, but he’s implying that governments in the rest of the world are living off the VAT (value-added tax) exclusively and not taxing income and capital gains.
This, of course, isn’t true. Europe taxes everything. And despite taxing everything, their countries are broke, and getting more so.
As Margaret Thatcher once said, “The problem with socialism is that eventually you run out of someone else’s money.”
Here in the U.S., private business is adding workers, but as Shaila Dewan and Motoko Rich report in the Times, governments are handing out pink slips, and that is hurting the recovery. Some 706,000 government positions have been axed since April 2009:
“The unfortunate reality is our revenue streams have not rebounded,” said Timothy R. Hacker, the city manager of North Las Vegas, which has cut its workforce to 1,300 from 2,300 and is about to lay off 130 more. “Shaking this recession is becoming increasingly difficult”…
More than a quarter of municipal governments are planning layoffs this year, according to a survey by the Center for State and Local Government Excellence. They are being squeezed not only by declining federal and state support, but by their devastated property tax base.
The federal and state governments depend upon private-sector economic growth that can be taxed. In turn, local governments are dependent upon that same economic vitality — none of which is generated by the government. It’s backwards to think government jobs create economic growth when, in fact, government jobs can be supported only by economic activity in the private sector.
State and local governments expanded mightily with the housing boom. Mr. Hacker’s employer — the city of North Las Vegas — moved into lavish new digs during the bubble Each and every demand made by the public employee unions was accommodated because the city’s growth was thought to be endless.
When local housing markets crashed, so did local government finances.
But President Obama doesn’t understand economics or cause and effect any better than those writing for The New York Times. He thinks the public sector must grow to compensate for the private sector, not hiring. “Each time there was a recession with a Republican president,” Obama says, “we compensated by making sure that government didn’t see a drastic reduction in employment.”
The Wall Street Journal makes the same claim. Without increases in federal spending, the recovery doesn’t have a chance, write Ben Casselman and Conor Dougherty:
Recent economic data show that long before the fiscal cliff hits, federal spending already is falling — and taking a toll on the recovery. Federal spending and investment fell at an annual rate of 0.4% in the second quarter and has fallen 3.3% in the past year. Federal employment has fallen by more than 52,000 jobs in the past year and for the first time is lower than when the recovery began.
They even found an economist to provide a juicy quote to support their argument. “It’s unbelievable how much the economy is getting hurt already by the sharp drop in federal spending,” Deutsche Bank chief U.S. economist Joe LaVorgna said.
All of this implies that all jobs are homogeneous. If a worker isn’t needed in the private sector because consumers aren’t buying that particular good or service, then government can just replace that job with a job in government doing something that consumers in the private marketplace won’t pay for.
Politicians and Keynesians believe that swapping these two jobs will preserve economic growth. Life will go on as before.
This is nonsense. The worker had a job because he or she produced more than he or she cost the employer in the pursuit of satisfying customers. Fewer customers means fewer jobs are needed. Less economic activity means fewer tax dollars going to government. Fewer tax dollars means government doesn’t have the resources to hire more people.
The idea that hiring more government workers stimulates economic activity stands reason on its head.
Economics professor Tyler Watts makes the point in The Freeman online:
Perhaps we’ve been spoiled by hundreds of years of a generally prosperous and growing market economy into assuming that all workers necessarily add to economic output by exactly the value of their paychecks. There is a strong tendency toward this result in a strictly market-based competitive economy.
But professor Watts quickly makes the point that government workers don’t provide the same value. There is no market test to determine if government workers are generating value. Only political rules apply.
The fact that government employment is shrinking is only a signal that economies worldwide are attempting to recover from decades of debt and malinvestment, which includes too much government.
Government layoffs are a good thing. They put more resources into the private sector, which is the only real source of growth. Whether the GDP number is up or down doesn’t mean a thing. After all, since everyone believes China’s GDP number is inflated, why shouldn’t we assume governments deflate the number when it suits their purposes?
Government austerity is, in the long run, a blessing to the rest of the population.