by | ARTICLES, ECONOMY, OBAMA, POLITICS
During Bob Beckel’s recent appearance on “Cashin In”, Bob stated that “Wall Street investment bankers should be in jail because they nearly threw this country into depression”. This statement is quite ridiculous. Since when is the economic cycle grounds for throwing people in jail?
Bob Beckel has absolutely no information that anybody from Wall Street who committed any wrongdoing has not already been appropriately prosecuted. There is no more evidence that any of these people should be in jail than there is evidence that the economic recession was caused by Bob Beckel and his statements on television. Bob Beckel’s cluelessness was further demonstrated by his comment that implied that he did not believe that executive compensation is reduced even when companies were losing money! Does he have no contact whatsoever with the economic world?
It is quite clear that the major course of the recent meltdown was government activities creating an environment for making real estate loans that never should have been made. A short trip down memory lane through Youtube and the unconscionable congressional hearings moderated by Barney Frank, Maxine Waters, and Chris Dodd should be enough to remind Beckel of the real economic culprits.
It was all too obvious that when the Republicans tried to rein in this overextended lending policy of Fannie Mae and Freddie Mac they were viciously attacked as scare mongers and racists. For Bob Beckel to insist that unnamed Wall Street groups performed criminal activities in connection with this economic meltdown is incredibly irresponsible. From an evidentiary point of view, it is just as likely that Beckel committed criminal activities.
by | ARTICLES, ECONOMY, FREEDOM, GOVERNMENT, OBAMA, OBAMACARE
The recent revelation that the White House, congressional Democrats, and the CBO all now consider work to be a lifestyle choice reminds me of a scenario some years back with one of my clients.
There was a person who was getting a divorce, and the couple had 2 children. One of the discussions involved who was going to pay for the children’s college. The husband offered to pay 90% of the cost since he made substantially more money, leaving 10% as the wife’s portion to pay. This seemed to be a pretty fair offer.
The wife, on the other hand, did not agree that the offer was fair. Her rationale? If she ultimately got remarried down the road and decided to stay at home and not work, she would not be able to afford her 10% portion.
Understandably, the husband was taken aback. He said to her something along the lines of “you mean to tell me that you have a responsibility to take care of your children’s education, and because you have the chance not to work, then your children’s needs and your obligations somehow aren’t your responsibility anymore?”
The wife was understandably a little embarrassed, as she had never looked at it that way before.
Have you? We ought to have the moral compass not to insist that other people pay our bills for us.
This brings us back to Obamacare. It is not in any way morally acceptable, for those of us who are working, to subsidize people who prefer not to work and stay home and call it a “choice”.
Here’s the root of programs like Obamacare and welfare. A social safety net is supposed to be just that — a temporary hand-up, not a prolonged hand-out. A steady diet of benefits creates a disincentive to work. The decision not to work unfairly forces other people (who do work) to pay for the things that the benefit receipients should be paying for. With the expansion of programs such as food stamps, unemployment, and now healthcare, we are making it harder, if not impossible, to move out of that lower class rung.
by | ARTICLES, BUSINESS, ECONOMY, OBAMACARE, POLITICS
When Chuck Rocha, from the Center for National Policy, was a guest on Bulls and Bears last past weekend, he continued to spew out statistics that touted the economic benefits of Obamacare. His assertions were based on a Price Waterhouse report that indicated health care cost had come down 4%.
Of course, health care costs have not come down. If Mr. Rocha was referring to the fact that the rate of growth of health care spending has slowed (by a not really significant 4%), this trend started long before Obamacare. In fact, the Price Waterhouse Study lays out the reasons for the slowing growth, including individuals delaying treatments, individuals using the internet to find lower pricing, large employers finding ways to get cheaper alternatives for their employees – all specifically NOT RELATED to ObamaCare.
What’s worse, although Mr. Rocha acknowledges that this country does have a debt problem, he insists that it does not need to be dealt with currently. He espouses the clearly dangerous and uneducated view that unfunded costs of future promises are not a real liability.
He also claims that incentives to manufacturing are necessary to keep employment in this country, totally ignorant of its effect on free trade, which is really what is necessary to get the economy moving.
The frustrating part of the entire segment was that nobody on the show thought to contradict any of these assertions, which were patently and demonstrably false.
by | ARTICLES, BUSINESS, ECONOMY, OBAMACARE, POLITICS
Rick Ungar, the “Token Lefty”, usually comes very well prepared for his appearances on Forbes on Fox. But it is disappointing to watch when he regurgitates the same absolutely misleading statistics, despite the fact that he’s been corrected so many times before.
Mr. Ungar argues that the changes which President Obama continues to make to Obamacare are not a significantly harmful to the economy, since “the Obamacare mandate excludes 96% of businesses”.
One might ask: if Obamacare only affected 4% of businesses, how could it be such a major program? The answer is simple. Those 4% of businesses include the vast majority of employees in this country. Most businesses have zero to very few employees, with the total number of employees for all businesses that have 100 or fewer employees making up a relatively small number of the total employees in this country.
This statistic-fib is reminiscent of the exact same tactic that the Democrats were using when pushing to raise the income tax margins of the highest earners making above $250,000. Democrats continuously argued that “only 3% of all small businesses made above $250,000”, a seemingly low percentage.
What they purposely failed to disclose, however, is that that figure accounted for more than 50% of all small business income — most of which would be taxed at individual rates due to the structure of the company. So when the Democrats raised taxes on those upper income brackets, through the process of letting the tax cuts expire, they willfully and quietly were raising taxes on small businesses. Now, high earning non-corporate entities pay more in taxes (39.6%) than even their corporate counterparts (35%).
We have the same chicanery going on here. Nothing could be more intentionally misleading, for those who don’t know better, than Mr. Ungar’s statement that only 4% of businesses are affected by Obamacare. “It’s the number of employees, stupid”.
by | ARTICLES, BUSINESS, ECONOMY, POLITICS, TAXES
Democrat politicians and “economists” have found a wonderful populist issue for the the current election cycle – raising the minimum wage. The economists (including Krugman, Goolsbee, etc) make the argument that the most obvious, serious problem — loss of entry level jobs and non-hiring at new entry level positions — is not a significant factor, and they have even been able to marshal some studies to support this.
They then argue that the higher minimum wage puts more money into needy families and therefore strengthens the economy. This argument just happens to have a wonderful political effect for these Democrats: it makes them seem sensitive to the plight of the needy, while making Republicans look like shills for those greedy Republican businessmen who are only trying to squeeze every last dollar out of their poor employees.
Just one problem — the Democratic position is baloney, and the economists know it, because it is simple economics 101. No businessman would be willing to pay an employee more than the economic value of the employee.
Let’s assume that the rise in the minimum wage puts the cost of employee in excess of the value of that employee. The employer may then 1) terminate the employee (saving the excess of cost over productivity) or 2) buy equipment which, at that price, becomes cheaper than the employee.
But let’s say the employer keeps the employee, just paying him more for the same work he did before. The employer will then either a) earn a smaller return on his investment, reducing the amount he will be able to invest in the business in the future; b) he will raise his prices, which will maintain his profit margin, but will reduce his sales volume, or c) some combination of a) and b). In either case, economic growth of the economy will be hurt.
By citing narrow studies where short-term noise could easily hide the effects of small changes in the minimum wage, these political “faux-economists” are abusing economic appearances to serve a political end.
Furthermore having a national minimum wage when price and wage levels vary so markedly across the country is truly nonsensical.
The country will be better off when economists remain true to their profession.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, NEW YORK
The newest calls to raise the minimum wage in NYC to $11/hour are a frustrating reminder that the city’s own Comptroller, Scott Stringer, has a total lack of understanding about how economics work.
Scott Stringer makes the argument that raising the minimum wage to $11/hour would provide an additional $2 billion in annual income to working families. While that might sound good to taxpayers — to get more money in their pockets — he completely fails to explain the other side of the equation: from where does that $2 billion come?
Stringer seemingly takes that $2 billion figure out of thin air, as there is no documented basis from which he arrived at this number. If Stringer is not utterly incompetent, then he should certainly have available his complete analysis of the financial pluses and minuses that are likely to occur as the result of the minimum wage hike; after all, that is his job.
Here’s the problem. Minimum wage hikes mean that all employers in New York City – both in the government and in the private sector – will pay more for its labor than it currently does pay, in order to produce the exact same product or services. Looked at it another way, in order to keep to the operating budget, NYC will get less goods and services than it now receives. Or, to keep its present level of operations would result in a budget deficit — because of having to spend more overall to maintain the current goods and services.
Therefore, the thought that minimum wage increases — especially a substantial one — will not have a negative effect on the city economy, is ludicrous.
The standard justification goes that the higher minimum wage puts more money into needy families and therefore strengthens the economy. This argument just happens to have a wonderful political effect for Democrats: it makes them seem sensitive to the plight of the needy, while making Republicans look like shills for those greedy Republican businessmen who are only trying to squeeze every last dollar out of their poor employees.
Just one problem —the Democratic position is nonsense, and economists know it, because of simple Economics 101: no businessman would be willing to pay an employee more than the economic value of the employee for him to perform his work.
Let’s assume that the rise in the minimum wage puts the cost of employee in excess of the value of that employee. The employer may then 1) terminate the employee (saving the excess of cost over productivity) or 2) buy equipment which, at that price, becomes cheaper than the employee.
But let’s say the employer keeps the employee, just paying him more for the same work he did before. The employer will then either a) earn a smaller return on his investment, reducing the amount he will be able to invest in the business in the future; b) he will raise his prices, which will maintain his profit margin, but will reduce his sales via you, or c) some combination of a) and b). In either case, growth of the NY economy will be hurt.
Here in New York City, a minimum wage hike would mean that New York City will pay more for its labor than it currently has calculated to pay, in order to produce the exact same product or services. Looked at it another way, to then keep to the operating budget, NYC will get less goods and services for the taxes it receives. This would result in a budget deficit — because of having to spend more overall to maintain the current goods and services.
Therefore, the thought that minimum wage increases — especially a substantial one — will not have a negative effect on the city economy, is ludicrous.
What the city is demanding with the minimum wage increase will have two effects. First, businesses in the city will have to pay their labor more, thereby raising the price of their goods to cover the wage increase. This ultimately will render New York City businesses less competitive than other businesses not located in the city. The result? Our businesses will lose business to those outside of New York City. That is not positive for the economy.
Secondly, New York City is often required to buy from the lowest bidder for many of its goods and services. Therefore, the city would likely have end up buying from outside of the city in order to get those cheaper prices — thereby not supporting the city’s own businesses.
The net effect of a minimum wage hike from $8 to $11 (a 37.5% increase) will take its toll on businesses in New York City and the economy. Stringer has publicly admitted that “the budgetary path we are on is still not sustainable.” Instead of cutting spending, his solution is to make the businesses cough up extra funds via a wage increase so that those wages can subsequently be taxed for more revenue for the city and the city’s budget — even at the expense of NYC businesses. Taxpayers too, will be affected, because their tax dollars will have less purchasing power in the city.
The minimum wage is already set to rise incrementally through 2015 to $9.00 for New York. Pushing through a faster and higher minimum wage increase will handicap New York City businesses in an already sluggish economy, and punish those companies who already endure high taxes and unending bureaucracy under the heavy hand of government.
by | ARTICLES, BUSINESS, ECONOMY, FREEDOM, GOVERNMENT, NEW YORK, OBAMA, POLITICS, TAXES
What is Wall Street, anyway? I would be willing to bet that 90% of the protesters from Occupy Wall Street and of self-styled liberals have absolutely no idea what Wall Street is, what it does, and how important it is.
If not for Wall Street, there wouldn’t be any Main Street, certainly not as we know it today.
In order for any business to be successful, it must run on capital. Capital can be funded by an owner’s personal investment or through funds from outside investors. The ability to grow from the Mom and Pop store to the bigger corporation model is dependent upon the business owner’s ability to get risk capital.
This risk capital is necessary to rent the space, hire the employees, grow the inventory,and buy the equipment to get the business going. There is no guarantee that this money could ever be paid back. But the investors are willing to risk their hard-earned money in the hope that the venture is successful enough to 1) repay the money borrowed and 2) to give back a reasonable profit for the risk taken.
So where does that money typically come, that risk capital? Wall Street. Look around the house at what you have. Your lights? From the utility company. Where did that capital come from to build the utility plants, to lay the distribution networks, to expand them? Risk capital. Wall Street. Where did Macy’s get its start? Or Google, or IBM? Or any of the energy, pharmaceutical, or chemical companies? Or virtually any large corporation you can think of today — where did it get its funds to really get going and continue to grow? Wall Street.
And the people on Wall Street, people sometimes described (invariably by clueless politicians and populists who know nothing about what it takes to run a business or create jobs) as paper-pushers who make unconscionable amounts of money, what do they do?
They must be able to analyze how businesses (Main Street) work, and which ones (out of the many thousands out there all claiming to be worthy) are likely to be successful. They must develop the confidence of potential investors, and convince them to invest in these projects. They must bring the companies and investors together to agree on how much of the company the investors would get for the amount of capital that is being invested. Should the money invested be equity (ownership in the company) or bonds (loans to the company), and if bonds, what interest rate? Most importantly, more than in any other business, pay day never comes to Wall Street unless the capital is successfully raised. And if Main Street is not successful with its new capital, good luck for that Wall Street company in trying to raise money for its next project.
There have been abuses on Wall street, certainly. But there is absolutely no reason to believe that there are any more abuses than in any other business. And those abuses almost always are paid for with serious financial pain to those companies.
But none of these abuses can compare with the financial abuses and mismanagement that we endure daily from our government. Our government has us at the brink of bankruptcy, with a $17 trillion dollar debt (more than 100% of our GDP) which balloons to more than $100 trillion if our entitlement obligations are included.
We have President Obama and the Democratic leaders of the Senate (Harry Reid) and the House (Nancy Pelosi) saying that this is not a current problem (clearly not the truth) and spending money they don’t have to get votes for the next election. A short trip through YouTube (circa 2004-2005) clearly show that Barney Frank (Democratic House…), Chris Dodd (Democratic Senate ….) and Maxine Waters (Democratic House ….), among other Democrats, were principally responsible for the recent economic meltdown. The videos of Congressional Hearings demonstrate unquestionably that Fannie Mae and Freddie Mac were cooking their own books and lending to dangerously unqualified borrowers, but the Democrats prevented any remedial action to be taken.
And taxpayers and Main Street have borne the heavy burden of their negligence during this sluggish, anemic economic recovery.
Wall Street is an invisible backbone of our economy — providing the money and investments that are necessary to continue America’s upward mobility in all facets of our lives. Focusing only on trumped up Wall Street problems or buying into the class warfare hatred of the rich is misguided — especially while giving our government a free pass to use and abuse our taxpayer money each day.
by | ARTICLES, ECONOMY, OBAMA
It is really obvious to see that Ben Bernanke was not an independent Fed Chair, but just a lackey for President Obama. Though his responsibility was monetary policy, he was often asked why – despite the most stimulative monetary policy possible – the economy has shown the worst recovery, by far, since the Great Depression more than 80 years ago.
As a student of the Great Depression, Mr. Bernanke was fully aware of the disastrous policies of FDR that impeded the recovery – large tax increases, burdensome regulation, anti-business government programs, and overboard support of union labor- and that President Obama followed suit in every particular.
And yet not a word from Mr. Bernanke that these policies should be questioned. You might be able to say that the President didn’t know any better – you cannot say that about Mr. Bernanke.
I find Mr. Bernanke’s failure to address the exploding Obama regulatory excesses particularly inexcusable. The effect of new regulations from the EPA, NLRB, ObamaCare, Dodd Frank, etc., etc. clearly serves to curtail expansion plans, absorb capital that otherwise would have been used for growth, and increase the costs of starting a new business (clearly scuttling some). At least some meaningful portion of our scrawny recovery can be explained by this regulatory environment.
As Chair of the (supposedly) independent Federal Reserve, Mr. Bernanke owed it to the American people to speak out. This failure should be long-remembered.
by | ARTICLES, BUSINESS, ECONOMY, GOVERNMENT, NEW YORK, OBAMA, POLITICS
The new pre-school plan presented by Mayor de Blasio reveals just how politically disingenuous he really is.
In his effort to push the progressive agenda he put forth during his campaign, de Blasio has vowed to have universal pre-school in New York State to be paid for only by the wealthiest New Yorkers.
Here’s the logical inconsistancy: If universal pre-school is the all-important and necessary step for all children in their educational development (the merits of which is fodder for another article entirely), then the only logical conclusion is that the cost should also be borne by all taxpayers the way K-12 already is — not just a select few. If “everyone” is not willing to pay his or her fair share of this “necessary” project, then maybe that tells us that it should not be done.
This line of thinking clearly echoes the Obama Administration’s sentiment that the rich “pay just a little bit more”, and it is not welcome in New York.
by | ECONOMY, QUICKLY NOTED
AEI posted two fantastic cartoons by Henry Payne, which demonstrates well how illogical minimum wage law really is.
Click on the link to see the cartoons (reprinted at AEI with the author’s permission)
