Posts Tagged ‘Economy’

Solving Unemployment with Spoons

Tuesday, December 28th, 2010

The liberal assertion goes something like this, “If the government just increased taxes and spending, more people would be working, and everybody would be better off.” Of course, this misguided thinking is the result of a lack of understanding regarding how wealth is actually created. Consider this from Steven Horowitz:

Employing people to dig holes and fill them up again, or to build bombs that will blow up Iraqis, will certainly reduce unemployment and increase GDP, but it won’t increase wealth. The problem of economics is the problem of coordinating producers and consumers. This coordination happens when we produce what consumers want using the least valuable resources possible. That is why it is wealth-enhancing to dig a canal using earth-movers with a few drivers rather than millions of people using spoons, even though the latter would generate more jobs.

Then again, maybe we ought to listen to those advocating for the launch of a Spoon Renaissance.

Economic Woes a Thing of the Past

Wednesday, December 8th, 2010

Read or listen to the news, and you are going to walk away thinking the worst is behind us and that the economy is rebounding. There’s been talk about same store sales from McDonald’s to Tiffany’s increasing significantly over the previous year, and even the Land of Enchantment has had “nice” surprises announced:

Figures released by both the Department of Finance and Administration and the Legislative Finance Council say the states revenue is up for the current fiscal year by about $56 million and say next years budget shortfall is predicted to be nearly $40 million less that earlier estimates.

Lawmakers say the latest revenue numbers are reason enough for what they call cautious optimism although they say revenues aren’t enough to fix the state’s significant shortfall.

Okay, reality check here folks. All of this “good” news really depends on what you are using as a baseline comparison. If you are comparing this year’s losses to last year’s losses then yeah, we’re losing less, or in budget shortfall terms, our budget shortfall is less than it was. But, this is by no means cause for celebration. Don’t kid yourselves, not only is the economic picture not rosy, it continues to be downright scary:

States are reporting billions in midyear budget shortfalls, and the crunch is likely to continue for at least several more years, a new report says.

Fifteen states are facing combined budget gaps midway through their 2011 fiscal year totaling $26.7 billion, according to a National Conference of State Legislatures report to be released Wednesday. The other 35 states say they are on target with their budgets. At this time last year, 36 states reported a combined $28.2 billion shortfall.

State government spending has begun to rise after falling sharply during the recession, in part because tax revenues are slowly on the mend as the economy recovers. Even so, revenues remain far below pre-recession levels, and many states face pressure to cut programs and raise taxes to cover yawning gaps in their budgets.

Yes, the shortfall is $1.5 Billion less than last year, but that is still a $26.7 billion budget deficit at the state level. And yes, same store sales are better than last year, but unemployment also continues to rise:

The number of unemployed persons was 15.1 million in November. The unemployment rate edged up to 9.8 percent; it was 9.6 percent in each of the prior 3 months.

So, what’s the point here? Am I simply trying to be a downer during this holiday season? No, my concern is that those now tasked with cutting the size of government to bring it back in line with economic realities are going to listen to the hype and ignore the facts. By this I mean, they are going to think that we’re on the road to recovery, and therefore, we need to only make temporary cuts. When the truth is that we need to radically cut programs because this road to recovery is going to be paved with losses for a long time still.

Just ask our biggest backer:

The U.S. dollar will be a safe investment for the next six to 12 months because global markets are focused on the euro zone’s troubles but America’s fiscal health is worse than Europe’s, an adviser to the Chinese central bank said on Wednesday.

Economic woes are NOT a thing of the past.

Why Some Businesses Supports Indirect Taxes

Friday, April 16th, 2010

The day after we filed to pay our income tax (direct taxes) and in reflection of the “across the board” tax increases (indirect taxes) that were pushed and past this last legislative session, it is good to reflect on why some business groups might have pushed for these widespread tax increases.

After I wrote yesterday’s post, I read a selection from From Out of Step: The Autobiography of an Individualist, by Frank Chodorov; The Devin-Adair Company, New York, 1962, pp. 216-239 entitled Taxation is Robbery.  It is definitely worth reading, and I thought I would draw your attention to this piece in particular:

Tacit support for indirect taxation arises from another byproduct. Where a considerable outlay in taxes is a prerequisite for engaging in a business, large accumulations of capital have a distinct competitive advantage, and these capitalists could hardly be expected to advocate a lowering of the taxes. Any farmer can make whiskey, and many of them do; but the necessary investment in revenue stamps and various license fees makes the opening of a distillery and the organizing of distributive agencies a business only for large capital. Taxation has forced the individually-owned and congenial grog-shop to give way to the palatial bar under mortgage to the brewery or distillery. Likewise, the manufacture of cigarettes is concentrated in the hands of a few giant corporations by the help of our tax system; nearly three-quarters of the retail price of a package of cigarettes represents an outlay in taxes. It would be strange indeed if these interests were to voice opposition to such indirect taxes (which they never do) and the uninformed, inarticulate and unorganized consumer is forced to pay the higher price resulting from limited competition.

I know I’m on a big versus small kick that might seem to be getting old to some, but I think this theme deserves a lot more attention than the traditional partisan rhetoric. It is the shifting economic paradigm of our times.

The Big Against the Small Continued

Thursday, April 15th, 2010

I’ve noted time and time again that a change has occurred in America that is quite unsettling.  The dynamic shift that concerns me is the alignment of big business and big government interests against those of small businesses and individuals. Now, maybe this has always existed, but I don’t think so – at least not to the level that is currently evident.

It used to be that government interests (tax collection and regulation) were contrary to the majority of business and individual interests, but this has now changed.  What has emerged is a return to days of old (i.e. landed aristocracy and ruling monarchs indenturing the masses and suppressing entrepreneurship).  Consider that “too big to fail” businesses are now encouraging increased taxation and regulation that will:

  1. stifle competition from upstarts with regulatory barriers to entry
  2. burden potential challengers with profit draining regulation
  3. create new revenue streams by artificially increasing costs of individuals (think cap and trade)

The latest evidence of this trend is the new compliance focus of the IRS:

A new study by the Transactional Records Access Clearinghouse (TRAC) shows that despite a growing federal deficit, IRS audit efforts aimed at the nation’s largest corporations have precipitously declined in the last few years and now are at an all time low.

According to Dean Zerbe, alliantgroup National Managing Director and former Tax Counsel on the Senate Finance Committee, “As if April 15th isn’t frightening enough for small business owners, now comes news that the IRS has increased audit hours for small and medium businesses by 30% over the last five years, while at the same time decreasing the number of hours spent auditing large corporations by 33%.”

Keep in mind, that taxpayer bailouts went to the largest of corporations.  Those same corporations are now reaping the rewards of free money:

For 2009, the Fortune 500 lifted earnings 335%, to $391 billion, a $301 billion jump that’s the second largest in the list’s 56-year history, approaching the increase in the robust recovery of 2003. 

Yet, this taxpayer investment into corporate profits has nothing to do with creating jobs for Mr. and Mrs. Taxpaying America.  In fact, the opposite has held true:

The number of Americans filing for unemployment insurance for the first time jumped for the second week in a row, according to government data released Thursday.

There were 484,000 initial jobless claims filed in the week ended April 10, up 24,000 from an unrevised 460,000 the previous week, according to the Labor Department’s weekly report. 

 And, it’s not just jobs that continue to disappear. Those losing their homes also continues to increase:

In the first three months of 2010 foreclosure filings rose 7%, to more than 930,000, compared with the previous quarter, according to the online foreclosure marketing firm RealtyTrac. That is a 16% jump over the first three months of 2009.

Foreclosures started off the first quarter with modest gains but spiked in March to a record 367,000 filings. Plus, nearly 258,000 of those filings were for bank repossessions, the highest quarterly total RealtyTrac has ever reported.

This is not good for America.

Is the Worst Behind Us?

Monday, April 5th, 2010

On April Fools Day I received an email newsletter from David Murphy of Salestraq, which unfortunately wasn’t an April Fools joke. In it, he tells anecdotes of people he knows who have not paid their mortgage for 11 months and yet have not been foreclosed by their financial institutions. That’s pretty scary in that it means there is potentially a second shoe yet to fall.

And, the link he provides to the dynamic TransUnion Data Map seems to confirm that the worse is not yet behind us. It shows the national average 60-Day mortgage delinquency rate at 6.89%.  But, if you factor in many people are not being foreclosed that are significantly beyond this, it is not unreasonable to expect this to get much worse before it gets better.

The other thing that jumps out at anyone looking at the TransUnion map is that credit card defaults are much, much lower with the 90-Day Delinquency rate at 1.21%.  That really doesn’t make sense when you think about it. So, where does this leave us?

Well, we already know that the state, despite its recent special session to deal with budget shortfalls, is still in trouble:

Revenue collections for the current budget year are running $76 million below what had been anticipated, according to the Legislative Finance Committee.       

That spells potential trouble for public schools, colleges, courts and state agencies, although it could be July or August before it’s clear if weak revenues will force more budget reductions.   

If revenues fall short for the fiscal year ending in June, then New Mexico’s cash reserves must make up the difference to balance the budget.

Those reserves are the state’s financial safety net. 

Now, consider that mortgage foreclosures mean less property tax revenue collected, and if unsecured debt defaults increases it means less consumer spending and lower GRT. On top of all this consider that unemployment in the state continues to increase, and I hate be all doom  and gloom, but I don’t see how this means the worse is behind us.

Compliance Trumps Jobs as Governmental Priority

Monday, February 22nd, 2010

There is well reasoned analysis out there that the high unemployment numbers we are currently experiencing might be with us for some time:

The unemployment rate hit 10 percent in October, and there are good reasons to believe that by 2011, 2012, even 2014, it will have declined only a little. Late last year, the average duration of unemployment surpassed six months, the first time that has happened since 1948, when the Bureau of Labor Statistics began tracking that number. As of this writing, for every open job in the U.S., six people are actively looking for work.

All of these figures understate the magnitude of the jobs crisis. The broadest measure of unemployment and underemployment (which includes people who want to work but have stopped actively searching for a job, along with those who want full-time jobs but can find only part-time work) reached 17.4 percent in October, which appears to be the highest figure since the 1930s. And for large swaths of society—young adults, men, minorities—that figure was much higher (among teenagers, for instance, even the narrowest measure of unemployment stood at roughly 27 percent). One recent survey showed that 44 percent of families had experienced a job loss, a reduction in hours, or a pay cut in the past year.

So, it is kind of interesting that federal and some state governments are more interested in “catching” businesses in a worker misclassification game to fill government coffers than making sure that people can work and feed their families.

President Barack Obama‘s proposed 2011 budget suggests tough times ahead for employers who rely heavily on independent contractors in order to keep down labor costs.

If the budget is approved, the Internal Revenue Service will add 100 new enforcement personnel as part of a $25 million plan to crack down the misclassification of workers as independent contractors.

When you consider that 50 percent of jobs created during the economic recovery are contingent labor, you quickly see that a Catch-22 situation is unfolding.

Of course, many of the businesses that are able to survive the recession are also smart enough to quickly assess the forthcoming penalties and make employment decisions based on those pending government regulations.  Those decisions will be in the best interest of the business and its current employees, but will do nothing to put out of work Americans back to work:

And our associates voted to schedule 50-hour workweeks rather than hire new associates — even if it means working five 10-hour days or maybe even working on Saturdays when needed. We’re just not going to hire right now because we don’t know what’s coming next. We hope something will be made clearer in the next 90 days as our country focuses on what is necessary to create jobs in America. Then we can re-evaluate our decision.

Put yourselves in the shoes of the tens of millions of Americans struggling to keep their families fed and housed.  Now, think what this crackdown will mean to them.  Instead of earning a living, they will be forced to remain on the public dole or worse, so that tax collectors can go after those that are trying their hardest to survive.

Visual Depiction of Unemployment Reality

Tuesday, December 8th, 2009

A reader sent me a link to this visual depiction of our nation’s unemployment numbers since January 2007, and it eerily looks like a disease infecting the entire nation.


The Make-Believe Results of the Stimulus

Wednesday, November 4th, 2009

Republicans won in New Jersey and Virginia yesterday and not surprisingly the dismal state of the economy helped them earn their victories:

A plurality of voters in both states cited the economy as their top concern, according to exit polls. Majorities in both states said Obama’s job performance was not a factor in their vote.

So, what does this mean for New Mexico and the 2010 elections? Well, it looks promising that those serving in leadership positions in the current Administration will be shown the door. Keep in mind, that New Mexico has always lagged behind other states when it comes to experiencing economic downturns, and this truth has continued through the current crisis. But, inevitably the piper has to get paid.

Spaceport funding for billionaires and trains serving the geographically privileged continue to drain state coffers, while talk of raising “painful” taxes on the masses, turning prisoners loose on a scared public and breaking contracts with municipalities is the Administration’s agenda of the day. This set of priorities just won’t sit well with voters come Election Day 2010.

Now, for those of you who think the economy is getting better, and all will be well by that fateful November day, I say think again. Earlier this week, we looked at the economic deception of the Cash for Clunkers program. Now, let’s look at the reality of job creating/saving stimulus scam:

President Barack Obama’s economic recovery program saved 935 jobs at the Southwest Georgia Community Action Council, an impressive success story for the stimulus plan. Trouble is, only 508 people work there.

Of course, that’s only the tip of the proverbial iceberg the same article from which the excerpt above was taken also notes:

The latest stimulus report, released Friday, significantly overstates the number of jobs spared with money from programs serving families and children, mostly the Head Start preschool program. The report shows hundreds of the programs used nearly $323 million to provide pay raises and other benefits to their existing employees.

The raises themselves were appropriate — the stimulus law set aside money for Head Start salary increases — but converting that number into jobs proved difficult. The Obama administration told Head Start officials to consider a fraction of each employee as a job saved.

Nice. Turning pay raises for some government employees into make-believe new saved/created jobs. Now, you know why the phrase “stimulus scam” has entered the popular vernacular. Okay, so if jobs created/saved numbers are false, then what does that mean for our economy. It means we’re in trouble. It means that the unthinkable is starting to be thought about:

Governments of rich countries are borrowing so much that it’s conceivable that one day the twin assumptions underlying their burgeoning debt (that lenders will continue to lend and that governments will continue to pay) might collapse. What happens then?

Of course, that question is talking about governments on a national scale. The problem we’re facing is an economic collapse in state and municipal governments. You’ll recall that in the state of New Mexico government is the largest employer. Now factor in all of those in our relatively poor state that are living on the government dole and about to lose it. It’s not a pretty picture.

Government is spiraling out of control, and the lack of real leadership has never been more obvious. If those connected to the hip with Governor Richardson think they are going to fare well come November 2010, well there is a good chance they also believe that the stimulus package created/saved jobs, and the that tooth fairy leaves money under pillows.

The Changing Tide

Monday, September 14th, 2009

The Left has historically outperformed the Right in New Mexico when it comes to turning out crowds to rally behind political causes. However, it seems that the continued radical and extreme shift to the left of our federal government is beginning to change that.

Consider the turnouts of Tea Party demonstrations in recent months:

The Albuquerque Tea Party released its unofficial attendance count for the July 4 rally that drew thousands of supporters.

Now, compare that turnout to the pro-public option healthcare rally that occurred this past weekend:

More than 300 people from all over the state attended the rally, which was one of many held across the country on Sunday. The rally was organized by Grassroots4PublicOption, a nonpartisan New Mexico group.

Of course, the recent polling conducted for the Albuquerque Journal provides some insight as to why attendance at the government run healthcare rally was so weak:

While most members of New Mexico’s congressional delegation support a government-run public option for health care coverage, nearly half of the state’s registered voters don’t want one, a Journal Poll found.

Forty-nine percent of the voters surveyed statewide said they opposed a government-run insurance program that would compete with private industry.

Forty-two percent said they favored a government-run program, or public option. Nine percent said it would depend or they didn’t know.

Intensity also was apparent. Respondents who “strongly opposed” a public option outnumbered those who “strongly favored” such a plan by more than 3-to-2.

Registered Democrats outnumber registered Republicans in the state. However, the majority of voters in New Mexico, with the exception of this last presidential election, seem to vote center/center-right. Factor in the growing legions of independent voters, and those in office who blindly rubber stamp the ultra-left agenda will likely find themselves in serious trouble come Election Day.

Despite claims political claims to the contrary, the economic situation for everyday Americans is not improving. In fact, if you really listen to what is being reported, you’ll hear nonsense like

Speaking to reporters, White House press secretary Robert Gibbs pointed out that the most recent numbers from the U.S. Department of Labor indicate that “we continue to see a slowing of the pace of job loss.”

I’ve heard of putting a positive spin on something, but this is ridiculous. The White House actually wants the public to get excited about the fact that things are worsening, albeit at a slower pace. That’s the equivalent of telling a terminal patient to feel good that he doesn’t need a new pair of glasses.

Attempting to spin an economic reality does nothing to increase confidence in government. In fact, it has quite the opposite effect. People listen to our leaders saying things are getting better, yet those same people know that they’re struggling to pay their bills. In New Mexico, you can combine that growing reality with the ongoing corruption scandals, and failing government programs (i.e. education), and we may just be at a point where folks feel enough is enough.

A World Turned Upside Down

Friday, September 11th, 2009

Today marks the eighth anniversary of the attacks of 9/11. It is a day that should always serve as a reminder of two irrefutable facts:

  1. There are people in this world that hate America and the freedom it represents, and would do anything to destroy us.
  2. There are unsung heroes that everyday put their lives on the line to safeguard our communities.

Let me first acknowledge that second point by thanking the firefighters and police officers that step up everyday when no one is looking to protect and to serve. Thanks for what you do.

As to the first point, I can’t help but be concerned about the direction our country is heading. On 9/11, the terrorists failed to destroy America, but since that time, a greater and greater number of those elected to lead our country have made, and are making, decisions that might well accomplish what the terrorists failed to do those eight years ago.

On a state level, we’ve seen indictment after indictment against our elected officials. Yet, rather than outrage, the citizens of the state seem willing to accept this as just the way things are. Even the recent fleeing from the scene of an accident by the Governor and his staff is just seen as just another news story:

The state’s boating law says the operator of a vessel has 48 hours to provide information about an accident, and Condit complied with that, according to Jodi McGinnis Porter, spokeswoman for the energy and minerals agency.

Porter said Fay, the boat’s owner, stayed at the scene and provided information to investigators, while Richardson, Condit, Miller and the state police officers left. They were not required to remain there, she said.

What’s been largely missing from this discussion is not what is legal, but what is ethical. Legally, the perpetrators of the accident may not have been required to remain at the scene of the accident, but ethically, they should have remained.

Think about it.

There are only two reasons that the Governor and his staff fled. First, there was alcohol involved, and it would have been determined that a crime had been committed. Or second, they wanted to avoid the unfolding public relations nightmare that would have been made worse by having their pictures taken at the scene of the accident. I’m reasonably confident that if cell phone records were checked, one of the individuals in the party will be shown to have called for advice on whether or not they “had” to remain at the scene of the accident.

There is always a lot of gratuitous talk about the need to legislate ethics in this state. But, this is just another example of why you can’t legislate ethics. Unethical people will act in their own self-interests, and the shrewdly unethical will do it in within the letter of the law. You probably also noticed that not one Democrat running to lead our state in 2010 condemned the blatantly unethical act committed by Governor Richardson and his staff.

Speaking of speaking out, Representative Joe Wilson is in trouble for breaking with decorum by shouting out that the President of the United States was lying to the American people while giving his healthcare address. Yet, there was much truth to Representative Wilson’s accusations:

A GAO report finds that illegal immigrants constitute more than one-third of all Medicaid-funded pregnancies in California. Elsewhere in the country, the GAO found: “From 1992 to 1995 in Texas, the number of Medicaid-funded births to undocumented alien mothers more than doubled, while the total number of births remained fairly stable.” People respond to economic incentives. Even when the people and the incentives are illegal.

Missouri attorney general Chris Koster has estimated that one in ten Medicaid claims is fraudulent. How much of that fraud diverts money to illegal immigrants? Nobody knows for sure and don’t ask the state bureaucrats for help in finding out: When the federal government passed new rules demanding better documentation of legal residency for Medicaid recipients, the states resisted. In California, officials representing the state’s Medicaid program, Medi-Cal, wanted to use such lamentably inadequate documentation as insurance records and school report cards in place of passports and birth certificates. We are entitled to question their motives, and their prudence.

So, Representative Wilson could use a visit from Miss Manners. But he is telling the truth, and President Obama is not.

Of course, President Obama’s dishonesty on this topic is not limited to the question of whether or not illegal immigrants will benefit from the healthcare changes being proposed. There were numerous inaccuracies his speech. For example, take this:

OBAMA: “Nothing in this plan will require you or your employer to change the coverage or the doctor you have.”

THE FACTS: That’s correct, as far as it goes. But neither can the plan guarantee that people can keep their current coverage. Employers sponsor coverage for most families, and they’d be free to change their health plans in ways that workers may not like, or drop insurance altogether. The Congressional Budget Office analyzed the health care bill written by House Democrats and said that by 2016 some 3 million people who now have employer-based care would lose it because their employers would decide to stop offering it.

In the past Obama repeatedly said, “If you like your health care plan, you’ll be able to keep your health care plan, period.” Now he’s stopping short of that unconditional guarantee by saying nothing in the plan “requires” any change.

Considering how much effort goes into writing a presidential speech, these careful manipulations of the English language cannot be considered accidental. Again, we deal with a question of ethics. Is it ethical to put something forward as factually truthful that is actually intended to deceive?

Of course, these unethical manipulations of language are not limited to our elected officials. They are also being used by “community organizations” to confuse the issues. Consider this taken directly from the ACORN site:

The Association of Community Organizations for Reform Now does not apply for nor does it receive any federal grants.

ACORN has had contracts with other nonprofit organizations to perform work on projects which received federal grant support.

In illegal circles, what ACORN is describing is called money laundering. Organized crime has been doing this for years. In the case of organized crime, dollars from an illegal activity, take prostitution as an example, are flowed through a third party entity before making its way to a “legitimate” business. In this way, the business has deniability about the illegal source of the funds. Much the same way as ACORN has deniability about the federal source of its funding.

As long as we’re on the topic of federal funding, ACORN and prostitution, you might want to consider this:

Two staff members of the Baltimore office of ACORN were fired Thursday after they were captured on hidden camera appearing to give advice on evading tax laws to a man and woman posing as a pimp and a prostitute.

The video depicts a man and a scantily dressed female partner visiting the Charles Village office of the Association of Community Organizations for Reform Now, where they appear to ask two employees about how to shield their work from state and federal tax requirements. The supposed pimp also appears to ask the employees how to conceal underage girls from El Salvador brought into the country illegally to work for him.

“If they don’t have Social Security numbers, you don’t have to worry about them,” the employee says.

If you haven’t seen the videos, I strongly urge you to watch them. It’s like watching an SNL skit from when SNL was actually funny.



Of course, the only problem is that this isn’t a comedy skit. It’s actually real. Now, factor in the economy, our increasingly uncompetitive educational system, the ever-growing size of government, and the you’ll see why I’m so concerned that America may be doing to herself what the terrorists failed to do on 9/11.