Suppose that you decided that you wanted to reduce carbon emissions in the United States. The extreme climate change advocates (think Al Gore) say that this must be done, worldwde, within the next two decades. If that is the case, then there is simply no point in even trying since it is not possible (without widespread economic dislocation, worldwide, that would be far, far worse then the predicted climate change). But, imagine a more realistic goal: substantial reductions in carbon emissions over the next half century, perhaps reducing new carbon emissions to negligible levels by 2060. How would you do it?
Announce a "sliding scale carbon tax." In five years the tax would begin by putting on a carbon tax that would, over time, increase at an escalating rate. Suppose, for illustrative purposes, that it is only oil consumption that you wished to reduce (and ignore for a moment all other sources of carbon emission). Place a $ 10 per barrel tax on oil beginning five years from today. Every year, increase the tax by $ 2 in year six, $ 4 in year seven, $ 6 in year eight, and so forth. By year 20 the tax would be $ 120 per barrel and rising fast.
This type of tax would basically tax oil out of business over a twenty year period. The proceeds would be used to provide broad based tax cuts or used to reduce the deficit. (It is very important that it not be used by the government to subsidize alternative energy).
The numbers in this example are not critical. What is critical is that sufficient time is given between today and a serious level of tax that will allow for alternatives to be developed. The free market can produce the alternatives on its own because of the ever increasing price of oil. One hopes the tax never gets paid at all as alternatives to oil (or carbon, if you like) are developed and flourish.
There is a good chance for a bi-partisan agreement to a plan such as suggested here. Especially, if clean energy sources like nuclear energy are combined with delayed and escalating carbon tax. This kind of program would improve the economy, not damage it (as Obama's climate change agenda does) and it is difficult to see why any one (other than the Copenhagen crazies) would oppose it.
Saturday, January 30, 2010
Good, Not Great
Fourth quarter 2009 GDP growth figures released on Friday showed that the economy grew 5.7 % in real, annualized terms. (This number has to be divided by four to get the actual real growth in GDP since it represents a three month period). This is good news, not bad news, but it isn't anywhere near the usual growth rates of eight percent or better that typically accompany the early stages of economic recovery.
So, the good news is that we are experiencing economic recovery, but the recovery is, by historic standards, anemic. Final demand was up a meager two percent with inventory corrections providing 3.4 percent of the 5.7 percent number. This means the recovery is fragile, at best. The economy lost more than 200,000 jobs during the fourth quarter. Employers seem determined to avoid any significant hiring.
If there were no bad news coming from Washington (in other words, if Obama had no agenda), the economy could begin to get untracked. But, fear of the Obama agenda restricts the economy to slow-walking with the possibility that the economy could slip back into negative territory later in the year. The main problem looming in 2010 are the layoffs, sure to come, at the state and local government level.
We are, by no means, out of the woods. If Obama would change course, we could begin a normal economic recovery. It doesn't look like Obama has gotten the message, so look for the economy's future to be dicey.
So, the good news is that we are experiencing economic recovery, but the recovery is, by historic standards, anemic. Final demand was up a meager two percent with inventory corrections providing 3.4 percent of the 5.7 percent number. This means the recovery is fragile, at best. The economy lost more than 200,000 jobs during the fourth quarter. Employers seem determined to avoid any significant hiring.
If there were no bad news coming from Washington (in other words, if Obama had no agenda), the economy could begin to get untracked. But, fear of the Obama agenda restricts the economy to slow-walking with the possibility that the economy could slip back into negative territory later in the year. The main problem looming in 2010 are the layoffs, sure to come, at the state and local government level.
We are, by no means, out of the woods. If Obama would change course, we could begin a normal economic recovery. It doesn't look like Obama has gotten the message, so look for the economy's future to be dicey.
Thursday, January 28, 2010
Keep It Simple
Both Democrats and Republicans seem to think that making small changes to the tax code can do all sorts of wonderful things for the economy. It's not true. Most of what Obama proposed as favorable tax changes for the middle class don't really cost much because few people will understand them enough to take advantage of them. Who understands the tax code, anyway?
If you want to move the needle, you need simple and broad policies. Imagine you really wanted a jobs program. Instead of targetting this and that, a better approach is an across the board cut in taxes -- say a five percent cut in personal income tax rates, corporate income tax rates and payroll tax rates, effective for the next three years. Something like that is easy to understand, easy to implement, and doesn't discriminate between those who can afford tax advice and those who can't. You could add Obama's notion of a tax credit for new hires, but that is a fairly easy thing to game. It is also gimmicky and requires tax advice.
Simplicity is always better than complexity when it comes to major policy initiatives. That's one of the many reasons the Obama health care packages came to ruin. The health care bills are just far too complicated. Why does it have to be like that? The answer is that it doesn't.
The public is poorly served by proposals that are intricately patched together so that average folks have no idea what the proposal really is and how it really effects them. Having laws and regulations that no one understands is not much different than not having laws and regulations. Complicated rules mean arbitrary government with uncertainty at every step of the way. How can business plan anything and take on an expanded work force if there is no rule of law and set of regulations that are understandable? How many lawyers do we really need?
Give business simple, broad and understandable policies that will encourage them to hire people. Don't design some Rube Goldberg scheme that is mainly structured so that no one who makes over X dollars gets any benefit. What's the point here? -- to get the economy going? - or to engage in class warfare? Poor people and middle class workers do not hire people, businesses hire people. They hire people in order to make money and lots of it. Give them that chance in a simple understandable way and the economy may have a chance to recover.
If you want to move the needle, you need simple and broad policies. Imagine you really wanted a jobs program. Instead of targetting this and that, a better approach is an across the board cut in taxes -- say a five percent cut in personal income tax rates, corporate income tax rates and payroll tax rates, effective for the next three years. Something like that is easy to understand, easy to implement, and doesn't discriminate between those who can afford tax advice and those who can't. You could add Obama's notion of a tax credit for new hires, but that is a fairly easy thing to game. It is also gimmicky and requires tax advice.
Simplicity is always better than complexity when it comes to major policy initiatives. That's one of the many reasons the Obama health care packages came to ruin. The health care bills are just far too complicated. Why does it have to be like that? The answer is that it doesn't.
The public is poorly served by proposals that are intricately patched together so that average folks have no idea what the proposal really is and how it really effects them. Having laws and regulations that no one understands is not much different than not having laws and regulations. Complicated rules mean arbitrary government with uncertainty at every step of the way. How can business plan anything and take on an expanded work force if there is no rule of law and set of regulations that are understandable? How many lawyers do we really need?
Give business simple, broad and understandable policies that will encourage them to hire people. Don't design some Rube Goldberg scheme that is mainly structured so that no one who makes over X dollars gets any benefit. What's the point here? -- to get the economy going? - or to engage in class warfare? Poor people and middle class workers do not hire people, businesses hire people. They hire people in order to make money and lots of it. Give them that chance in a simple understandable way and the economy may have a chance to recover.
Same Ole, Same Ole
No news in the State of the Union last night, other than the President is now in campaign mode. A mild kneebend on nuclear energy and offshore drilling (with, as usual no real specifics) and an almost laughable set of gimmickry tax breaks for the "middle class." Otherwise, it was politics as usual from the President. Too bad if you are looking for a job, so is the President (or will be in three years).
The economy needs to be let alone. It doesn't require government to produce green jobs. The economy can do that by itself if Obama would just get out of the way. The message last night is that the President has learned nothing from the past twelve months and intends to pursue the same partisan, extreme left, grab bag of government take-overs of the economy that he has been pursuing since he took office.
It was the old "do as I say, not as I do." As one pundit noted, this was another of these "chin in the air speeches" with no substance. Agreed.
November cannot get here soon enough.
The economy needs to be let alone. It doesn't require government to produce green jobs. The economy can do that by itself if Obama would just get out of the way. The message last night is that the President has learned nothing from the past twelve months and intends to pursue the same partisan, extreme left, grab bag of government take-overs of the economy that he has been pursuing since he took office.
It was the old "do as I say, not as I do." As one pundit noted, this was another of these "chin in the air speeches" with no substance. Agreed.
November cannot get here soon enough.
Wednesday, January 27, 2010
Unemployment Just Doesn't Bother This President
The State of the Union speech tonight that has now been leaked in some detail to the press is mostly an effort to try to turn around the polls, which show that the public does not approve of a single part of the Administration's agenda and that the public thinks the stimulus package was just money wasted.
But, the real problem is the economy. While the President will pay lip service to the economy and will discuss a handful of incredibly tiny and narrow proposals that he says will create jobs, the overall thrust of the President's agenda is to hammer down hard on the economy, demonize business folks, discourage business activity, raise taxes, and prohibit the free market from doing what it does best -- recover.
The Administration is now forecasting 10 percent unemployment by year end! That forecast and no plan of action! One can only conclude that the President just doesn't understand the economy, doesn't think that unemployment is really an important issue, and that words mean more than actions.
The other important area where the polls show that voters are concerned is the enormous Obama-Pelosi-Reid spending spree. Unless there is some other plan, even the CBO admits that the nation is headed for bankruptcy (The CBO, the Democratically controlled Congressional Budget Office describes this as an "unsustainable budget path" -- code words for an impending national bankruptcy). What does Obama propose -- a commission! This is laughable. As if everyone on the planet (except the President, I suppose) is not already aware that unless you are going to tackle the entitlements, the country's fiscal situation is not fixable). Prohibiting bonuses to White House executives saves 0.00001 percent of the budget. Thanks, Mr. President. As the Wall Street Journal noted today, this is the "politics of gesture."
With the economy tanking and the country facing prospective bankruptcy, the President blissfully wanders along the left bank in a world of unreality. Not only is the President's agenda opposed by the American public, but many of his own supporters and the media that has supported the President are beginning to raise the competence issue. Does this President really understand or relate to the important economic issues that face the country?
Tonight looks more like politics as usual as opposed to anything presidential.
But, the real problem is the economy. While the President will pay lip service to the economy and will discuss a handful of incredibly tiny and narrow proposals that he says will create jobs, the overall thrust of the President's agenda is to hammer down hard on the economy, demonize business folks, discourage business activity, raise taxes, and prohibit the free market from doing what it does best -- recover.
The Administration is now forecasting 10 percent unemployment by year end! That forecast and no plan of action! One can only conclude that the President just doesn't understand the economy, doesn't think that unemployment is really an important issue, and that words mean more than actions.
The other important area where the polls show that voters are concerned is the enormous Obama-Pelosi-Reid spending spree. Unless there is some other plan, even the CBO admits that the nation is headed for bankruptcy (The CBO, the Democratically controlled Congressional Budget Office describes this as an "unsustainable budget path" -- code words for an impending national bankruptcy). What does Obama propose -- a commission! This is laughable. As if everyone on the planet (except the President, I suppose) is not already aware that unless you are going to tackle the entitlements, the country's fiscal situation is not fixable). Prohibiting bonuses to White House executives saves 0.00001 percent of the budget. Thanks, Mr. President. As the Wall Street Journal noted today, this is the "politics of gesture."
With the economy tanking and the country facing prospective bankruptcy, the President blissfully wanders along the left bank in a world of unreality. Not only is the President's agenda opposed by the American public, but many of his own supporters and the media that has supported the President are beginning to raise the competence issue. Does this President really understand or relate to the important economic issues that face the country?
Tonight looks more like politics as usual as opposed to anything presidential.
Tuesday, January 26, 2010
Here Comes Nothing
The preview of tomorrow night's State of the Union being leaked tonight by the White House suggests that the President has no intention of dealing with the battered US economy. Instead the President will defend his first year in office and provide a variety of meaningless morsels: "middle class tax incentives" and phony "spending freezes." The latter items demonstrate mostly that this President hasn't got a clue why voters are in revolt and has no real interest in dealing with the problems of a depressed economy and staggeringly high levels of unemployment.
The stunning results of the Massachusetts Senate race seems to have been interpreted by the President as support for his agenda. The President seems to think that all Massachusetts voters were really expressing was anger at Wall Street. It's a free country...believe what you want. But, don't expect everybody else to buy into this nonsense. Polls show that folks are opposed to the President's agenda...and not just in Massachusetts....nationwide. Independents, nationwide, are against the Obama agenda and not just against it, but strongly against it.
So, here comes nothing. The President has learned nothing. His real education will come in nine months. Then, I guess, he will blame George Bush for the Democratic Party losing control of Congress. I guess it makes sense....to Obama, anyway.
The stunning results of the Massachusetts Senate race seems to have been interpreted by the President as support for his agenda. The President seems to think that all Massachusetts voters were really expressing was anger at Wall Street. It's a free country...believe what you want. But, don't expect everybody else to buy into this nonsense. Polls show that folks are opposed to the President's agenda...and not just in Massachusetts....nationwide. Independents, nationwide, are against the Obama agenda and not just against it, but strongly against it.
So, here comes nothing. The President has learned nothing. His real education will come in nine months. Then, I guess, he will blame George Bush for the Democratic Party losing control of Congress. I guess it makes sense....to Obama, anyway.
Monday, January 25, 2010
Curbing the Deficit
In the next week there will be a lot of discussion about our rising national debt and the growing deficits projected over the next ten years. How to break the trend?
No matter what you hear, the real problem is the entitlements: social security and medicare. Medicare impacts not only federal deficit projections but imperils state fiscal survival as well because the states are also significant funding partners for medicare. Slowing any other spending items will not help. Even eliminating the military budget entirely will not help. Only a serious and realistic readjustment of social security and medicare has any hope of preventing a national bankruptcy.
The public is alarmed about the rise in the national debt. No honest politician would suggest that anything other than curbing entitlements has any hope at all of tackling this problem.
Obama will suggest Wednesday two solutions to the rising national debt: 1) a freeze on a minor part of the budget's discretionary spending component; 2) a bi-partisan commission that would recommend spending cuts and tax increases that would receive an up-or-down all-or-none vote in Congress. These are smokescreens and would actually divert the public's attention from the real issues regarding the national debt.
The reason we don't get anywhere on deficit reduction and slowing the growth of the national debt is an unwillingness on the part of politicians to face up to the real problem -- the entitlements. Obama shows that, in this regard as in others, he is an old style politician. He probably doesn't realize that the entitlements are a problem (how would he know?) and it is unlikely that he much cares what happens to the national debt. But the rest of us do.
In fairness to Obama, he is not alone. Neither Democrats nor Republicans are honest about what is driving our looming national debt disaster.
No matter what you hear, the real problem is the entitlements: social security and medicare. Medicare impacts not only federal deficit projections but imperils state fiscal survival as well because the states are also significant funding partners for medicare. Slowing any other spending items will not help. Even eliminating the military budget entirely will not help. Only a serious and realistic readjustment of social security and medicare has any hope of preventing a national bankruptcy.
The public is alarmed about the rise in the national debt. No honest politician would suggest that anything other than curbing entitlements has any hope at all of tackling this problem.
Obama will suggest Wednesday two solutions to the rising national debt: 1) a freeze on a minor part of the budget's discretionary spending component; 2) a bi-partisan commission that would recommend spending cuts and tax increases that would receive an up-or-down all-or-none vote in Congress. These are smokescreens and would actually divert the public's attention from the real issues regarding the national debt.
The reason we don't get anywhere on deficit reduction and slowing the growth of the national debt is an unwillingness on the part of politicians to face up to the real problem -- the entitlements. Obama shows that, in this regard as in others, he is an old style politician. He probably doesn't realize that the entitlements are a problem (how would he know?) and it is unlikely that he much cares what happens to the national debt. But the rest of us do.
In fairness to Obama, he is not alone. Neither Democrats nor Republicans are honest about what is driving our looming national debt disaster.
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