Thomas Sowell has studied and taught economics, intellectual history, and social policy at institutions that include Cornell University, UCLA, and Amherst College. Now a senior fellow at the Hoover Institution, Sowell has published more than a dozen books, the latest of which is a revised and updated edition of his classic volume, Basic Economics.
"Through its various editions," Sowell writes, "the fundamental idea behind Basic Economics remains the same: Learning economics should be as uncomplicated as it is informative." Here, Sowell seeks to uncomplicate some of the economic issues confronting the country today, from the financial crisis and the role of the Fed to the economics of health care and trade imbalances.
Breaking news: some of America’s largest corporations have begun to report declining profits. For those that are offended by highly profitable corporations, this should be really great news.
But nobody is celebrating. In fact, the sagging profits reports are thought to be such a bad thing that some believe they sent the Dow sliding downward last week, for fear that a global recession has arrived.
If profits are such a terrible thing, why aren’t we relieved by their decline?
For the record, I have no idea whether or not a recession is eminent. And to the extent that economic activity is nearly impossible to predict with precision, nobody else knows either.
But regardless of whether the economy is moving up or down, Americans need to grapple with this “love-hate” attitude towards profitable enterprise. And let’s start with a couple of philosophical questions: Are profits always a good thing for a company to produce? And is it okay for one company to be really, really, profitable, even when other companies are not?
In some spheres of life – collegiate and professional athletic competitions, for example –Americans have no problem accepting the fact that with each match-up, some will succeed while others fail. Yet when it comes to business, success in producing profits is often seen as merely a necessary evil – and only acceptable if the profits aren’t “excessive.”
Part of the dilemma may well be that far too many Americans assume economics to be, as the term goes, a ‘zero-sum game.” Just as it is the case in many sporting events that one team wins and the other loses, so also it is assumed that if one individual or group is profitable, it necessarily causes somebody else’s unprofitability.
That, of course, is a false assumption. In our competitive free market economy, success with one enterprise often creates new markets in which other companies can succeed.
An easily understood example of this is the coffee house industry. In the 1980’s, Starbucks took the concept of the local coffee house where people meet and spend time together and drink beverages, and turned it in to a global business phenomena. And since the earliest beginnings of Starbucks, several other coffee house chains have been launched - Moxie Java, Tully’s Coffee, and Caribou Coffee to name a few - as an effort to capitalize on the burgeoning coffee house market. While today Starbucks remains the largest chain of its kind, these other newer and smaller companies have nonetheless benefited from Starbucks’ success, in as much as Starbucks essentially created the market for the modern-day coffee house in the first place.
But economic realities are one thing, and people’s perceptions are something different. And at present America is surrounded by an ever-present hostility towards profitable businesses – much of which emanates from the highest levels of our government.
Some of us saw this era of hostility coming. Back in 2008 while he was campaigning for the presidency, Then-Senator Obama made it a point to chastise American businesses nearly every time a robust earnings report was published. In the summer of that year, as an example, speaking to a stadium full of adoring followers, the President-to-be made it clear his disdain for the petroleum industry:
“First of all,” candidate Obama stated, “you’ve got oil companies making record profits…no… no companies in history have made the kind of profits the oil companies are makin’ right now…They..they…….one company, Exxon Mobil, made eleven billion dollars…billion, with a “b” ….last quarter….they made eleven billion dollars the quarter before that…makin’ money hand-over-fist…makin’ out like bandits…”
Imagine that! “Makin’ out like bandits” – that’s an amazing assessment of a successful business enterprise, suggesting that posting profits is tantamount to thievery. Of course at that moment in time, the early signs of a recession were appearing, and it was politically viable to send the message that “if we can’t all prosper right now, then none of us should prosper right now,” and his vitriol over the profitability of the Exxon Mobil Corporation played well with the crowd.
Yet Mr. Obama’s disdain for business “profits” has continued throughout his presidency. Fast forward to February 7th of 2011 when the President addressed an audience of the U.S. Chamber of Commerce. Speaking of the improving balance sheets that were emerging within many American companies at that time, President Obama stated:
“The benefits can’t just translate into greater bonuses and profits for those at the top. They have to be shared by American workers, who need to know that expanding trade and opening markets will lift their standards of living, as well as your bottom line…”
Of course, we’re talking here about our Ivy League-graduate President. Surely he, of all people, understands that profits aren’t simply “shared” - they are “earned.” And surely he realizes that when a company is profitable, it’s not merely the C.E.O. that benefits (investors, employees, and customers benefit from profitability as well). Certainly the President of the United States understands these most basic concepts of free market enterprise.
But we never hear that from our President. Nor do we hear much praise at all for successful, profitable enterprise from anybody in our government. It’s usually anger and disgust when profits are good, and promises of intervention and “stimulus” when profits are bad.
It’s a very self-serving and destructive game that our politicians play. And they will keep on playing, until Americans come to terms with profits.
I never paid much attention to what Roger Ebert said about movies.
Given that I usually take-in only three or four films a year, Ebert’s analysis of any particular film or actor or “scene” just wasn’t going to be something that would capture my attention.
But the final seven years or so of Ebert’s life offer some seriously thoughtful and thought provoking lessons, for those who still care to learn. Whether you reside on the right or left side of the political and cultural aisle doesn’t much matter. Consider some of the facts of Ebert’s final years, and the implications of his actions.
First, Ebert suffered with multiple bouts of cancer for over a decade, yet he and his wife Chaz Hammelsmith Ebert remained married and supportive of each other. Initially diagnosed with cancer of the thyroid in 2002, Roger would discover cancer in his salivary gland a year later. After being in remission for periods of time, he eventually contracted cancer in his jaw bone (which necessitated the removal of his jaw), and he lost his voice. Through all of this, he and were seemingly inseparable.
The things that the Eberts said and wrote about each other during their roughly twenty years of marriage were sufficiently extraordinary, even for otherwise healthy spouses. Yet despite Roger’s immense health struggles, neither of them seemed to have been deterred. Even in the past few years as a voiceless Roger absolutely needed Chaz to speak on his behalf, both out in public and in television interviews, never once did you see either of them convey anything short of love and respect for the other, and neither of them ever seemed awkward or uncomfortable with Roger’s diminished functioning. In a country where the legal definition of marriage remains a widely contested public policy issue all the while more than half of the nation’s marriages end in divorce, the Eberts, whether they intended to or not, publicly emulated what a marriage should be about -both in sickness and in health.
Secondly, Roger’s determination to remain professionally and publicly active despite his debilitations says some extraordinary things – both about Roger’s character, and about the value of human life itself. Losing your voice and having your face become severely disfigured is undoubtedly awful for anybody, but for someone who makes their living in front of tv cameras, such circumstances could be a career killer.
But not for Roger Ebert. Despite the loss of his voice Roger could still write, and what couldn’t be written Chaz could say for him. That’s how things went for Roger over the last seven years or so. Do an online search and story after story emerges of the Eberts playfully appearing at film festivals and movie premiers, Roger offering his signature “two thumbs up” gestures with Chaz doing the talking.
An extraordinary example of the Eberts’ “grace under fire” appears in a video on Youtube. Roger and Chaz are sitting on the set in a remote studio being interviewed by a CNN Host at the Anchor desk. The Host, noticeably awkward with Roger’s appearance and inaudible gestures, thanks Roger for his courage to continue appearing on TV, noting that Roger had been such a handsome on-camera performer for so many years. Through hand signals, scrawling on a note pad, and some vocal help from Chaz, Roger shoots-back at the host and says “what do you mean I was handsome? I think I’m still looking pretty good!”
The fact is, Roger looked rather odd with his jaw removed, but that apparently didn’t matter to the confident and in-love couple known as Roger and Chaz. The value of one’s life transcends their immediate physical appearance and level of functioning, and Roger’s sustained presence in the public square was a testimony to that ultimate truth. Yet on this point, Roger’s final years were an anathema to those who are quick to advocate for rationed healthcare and euthanasia, believing that people as old and incapacitated as Roger quite naturally have a “duty to die.”
Tragically, during the same week that the courageous Roger Ebert left us, some horrific news broke about Medicare, the federal healthcare program for senior adults. Under the federal Obamacare law, funding for Medicare is being gradually cut to allow for increased expenditures on Medicaid, the federal healthcare program for the poor, and on the Obamacare program itself. As a result, a new trend has emerged: Medicare is increasingly denying treatment to elderly cancer patients (Is this the “change” you were “hoping” for?).
From a raw political standpoint, this makes sense. Sickly senior citizens are a less-viable voter-block than are younger and middle-aged citizens (those who can benefit from Obamacare and Medicaid). But from a moral standpoint this is an abomination. Is the life of every elderly cancer patient as valuable as Roger Ebert’s was? In political terms, the answer is “no.”
Thank you Roger and Chaz for some important lessons. Are Americans willing to learn from them?
Trifecta looks at David Stockman's new book "The Great Deformation: The Corruption of Capitalism in America". In the book, the former Reagan Budget Director warns that the United States economy has become little more than a ponzi scheme that is dependent on deficit spending, debt and Federal Reserve currency manipulation.
New York Times columnist Paul Krugman disagrees. Who is right? Find out.
As President Obama explains his economic policy (or explains away the consequences of that policy), City Journal's Andrew Klavan cuts through all the spin with this very, very important primer on both Obamanomics and the truth about capitalism.
If you raise taxes does it automatically follow that you'll raise more revenue? Is there a point at which tax rates become counterproductive? UCLA Economics professor, Tim Groseclose, answers these questions and poses some fascinating new ones. Even Liberals should be able to follow this clear and lucid explanation. Of course, Liberals feel that facts, logic and reason are elements of a right wing conspiracy, designed to confuse and dis-orient Liberals. RG
The words "happiness" and "free enterprise" don't usually appear in the same sentence. Arthur Brooks, President of the American Enterprise Institute, explains why they should.
If I’ve heard that phrase once, then I’ve heard it a few hundred times. It’s a common response among social conservatives during campaigns and election cycles.
And this year, as Washington compromises our nation’s future with profligate spending and economic turmoil threatens nations abroad, we need to add to that category called “moral issues.” It’s time to recognize that economic policy matters are, themselves, moral concerns, and America is currently on a very immoral economic path.
As a writer and talk show host I covered the last presidential election cycle in detail. Hosting daily talk radio in Washington, DC in 2008, it would become apparent when I was speaking with a socially conservative caller to my show - such callers would frequently express concerns over a specific set of issues. “I don’t think McCain is really pro-life” was a common concern. And “Obama says he opposes gay marriage, but I don’t believe him” was another.
To these types of statements about abortion and the definition of marriage, I would often respond with questions about economics, just to see where the discussion would go. “But what do you think of Senator Obama’s plan to raise taxes on rich people – is that a good idea?” I might ask. Or “Do you think John McCain is right about the stock market crash when he says that it’s all because of ‘greed on Wall Street?’”
Generally speaking, my economic questions would bring these brief talk show conversations to an abrupt end. “I only care about the moral issues” was the response I’d usually hear – as though economic issues are morally neutral or of no moral significance at all – and then the caller would say goodbye.
That was in 2008. Today, all Americans – social conservatives included - need to be resolute, and recognize that our government’s disposition towards private enterprise and wealth must change. Simply allowing politicians to control more of our economic resources is a formula for more trouble, and more trouble lies ahead if our current President – and his ideology – remain in power.
Given what has happened over the course of the Obama presidency thus far, it should be apparent that America is now in the midst of an economic policy revolution. Both by legislation from the Congress, and by executive orders from the White House, President Obama has in less than three years emerged as a de facto CEO over huge chunks of our economy.
Car companies, banks, energy and insurance companies – the President has the power to hire and fire CEO’s, determine their compensation rates, and decide which products and services these formerly private enterprises will create. When government wields this kind of power, individuals lose their freedoms. And while President Obama has perhaps fulfilled some of his own wishes, it has come at the cost of private people’s money, and the future solvency of our government.
The costs of the United States government’s “acquisition” of G.M, and portions of the Chrysler Corporation, have yet to be fully calculated. But the two companies – especially GM – have become high-priced tools with which the President has sought to carry out his agenda.
Unionized assembly workers at G.M. have gotten pay increases over the past couple of years – and they are a key voter block for the President and his party. And GM has led the charge with electric vehicles (the Chevy Volt) – the car has proven unsellable and has wasted future generations of American wealth, but no matter. The President fulfills his needs to create a so-called “green energy future.”
The President’s executive mandate for insurance companies to provide abortion and contraception coverage is indeed a violation of religious freedom, but it also must be viewed through the lenses of economic morality. As a result of this mandate, the President has now used the power of his office to require an entire industry (the insurance industry) to provide a service, without getting paid for it. This has dealt a crushing blow to personal economic liberty, and such heavy handedness creates a huge disincentive for would-be business owners to create new enterprises.
Empowering politicians to take-over more control of our private economic resources and choices is NOT a pathway to prosperity. Is America seeing the “moral issues” more clearly this time, and are we ready to make an economic “about face?”
Barack Obama will have ONE BILLION DOLLARS to spend on his re-election in 2012. Bill calls that chump change. Find out how the Big Government statists spent 22,000 times that amount on buying votes in 2011 alone!
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In a column for today’s Wall Street Journal, I elaborated on those concerns, explaining why a VAT is bad fiscal policy. I had three main points. First, I noted that the big spenders need a VAT in order to achieve a European-sized welfare state in America.
… the left needs a VAT. It is the only realistic way to collect the huge amount of revenue that will be necessary to finance the mountainous benefits promised by our entitlement programs. Which is exactly what happened in Europe, where welfare-state policies only became feasible after VATs were adopted, beginning in the late 1960s.
Second, I explained that the left favors this giant tax on the middle class because they want more money and soak-the-rich taxes don’t generate much revenue.
First, there aren’t enough wealthy people to finance big government. According to IRS data from before the recession, when we had the most rich people with the most income, there were about 321,000 households with income greater than $1 million, and they had aggregate taxable income of about $1 trillion. That’s a lot of money, but it wouldn’t balance the budget even if the government confiscated every penny—and if it did, how much income do you suppose would be available in year two? Second, higher tax rates don’t raise as much revenue as expected. Upper-income individuals are far more likely to rely on interest, dividends and capital gains—and it is much easier to control the timing, level and composition of capital income, so as to avoid exposing it to the tax man.
Third, I debunked the foolish notion that a VAT creates a “level playing field” for American exporters.
…some manufacturers are willing to overlook the VAT’s flaws because the tax is “border adjusted.” This means that there is no VAT on exports, while the tax is imposed on imports. For mercantilists worried about trade deficits, this is a positive feature that they claim will put America on a “level playing field.” But that misunderstands how a VAT works. Under our current tax system, American goods sold in America don’t pay a VAT—but neither do German-produced goods or Japanese-produced goods that are sold in America because their VAT tax is rebated on exports. Meanwhile, any American-produced goods sold in Germany or Japan are hit by a VAT, as are all other goods. In other words, there already is a level playing field. To be sure, there will also be a level playing field if America adopts a VAT. But it won’t make any difference to international trade. All that will happen is that the politicians in Washington will get more money whenever any products are sold.
But I didn’t limit myself to economic analysis. I also warned that Mitt Romney might be an even greater threat on this issue than Barack Obama.
Unsurprisingly, President Obama is favorably inclined toward a VAT, having recently claimed that it is “something that has worked for other countries.” And yet it’s unlikely that the president would propose a VAT, in large part because he is fixated on class-warfare tax hikes. If he did, almost every Republican in Congress would be opposed, even if only for partisan reasons. But what if a VAT sympathizer like Mr. Romney wins next November and decides that his plan for a lower corporate tax rate is only possible if accompanied by a VAT? There will be quite a few Republicans who like that idea because they want to do something nice for their lobbyist friends in the business community. And there will be many Democrats drawn to the plan because they realize that they need this new source of revenue to enable bigger government. That’s a win-win deal for politicians and a terrible deal for taxpayers.
This point deserves some elaboration. Why is the VAT a do-or-die issue?
This is why there is a desperate need to reform programs such as Medicare and Medicaid. But politicians almost certainly won’t adopt the needed reforms if they have the ability to instead confiscate more money from taxpayers – especially if they have a new tax like the VAT, which is a money machine for bigger government.
Ironically, it appears there’s more danger of that happening with Romney in the White House.
Dan J. Mitchell, Ph.D.
Dan J. Mitchell, Ph.D. is a Senior Fellow at the Cato Institute, Washington’s premier free-market think tank. Visit his Website at:http://danieljmitchell.wordpress.com/ NOTE: To share or email this 'Specific' article, you must click on the Title of the article.
Is our prosperity derived from a continual circular flow of spending? Is it impossible for a society to increase it's total savings? Can deficit spending by a government step in to replace private activity in order to maintain full employment and restore lasting economic growth? What is a liquidity trap and what does it mean for the economy? What did Keynes really mean by "in the long run, we're all dead"? The 'Fiscal Operating Doctrine' of the Barack Obama Administration was summed up by Barack Obama's hand picked 'Chosen' Vice President:
“We’re going to go bankrupt as a nation,” Biden said.
“Now, people when I say that look at me and say, ‘What are you talking about, Joe? You’re telling me we have to go spend money to keep from going bankrupt?’” Biden said. “The answer is yes, that's what I’m telling you.”
Over 2 Million have watched this video on YouTube
Fight of the Century: Keynes vs. Hayek Round Two
Barack Obama's Economic Record (Keynesian Spending).
1) First U.S. Debt Downgrade in American History, drops to AA-plus.
2) Highest Level of Federal Spending since WWII (25% of GDP).
3) Highest Budget Deficit since WWII (10% of GDP).
4) Lowest level of Employment since 1983 (58.1% of Adults Working).
5) Highest Long Term Unemployment Rates since the 1930's (45.9% of Total Unemployed for Six Months or Longer).
6) Median Income Is At Its Lowest Level Since 1997.
7) Number Of People (over 16) Who Didn’t Work At All Last Year Increased To 86.7 Million.
8) Number Of Americans Living In Poverty (46.2 Million) the Highest Level On Record.
9) Child poverty rose from 20.7 percent in 2009 to 22 percent last year.
10) Economy added no jobs in August the first time since February, 1945.
Largest wealth destruction in American history: Net Wealth Lost 2009-2011 --$8.7 Trillion
11) Highest sustained Unemployment in decades: 9.1%
12) Brutal Unemployment for minorities: Black Americans : 16.7%
13) Unprecedented Unemployment: Black Teenage Americans :46.5%
14) Historic jump in Number of people in U.S. on Foodstamps : 45.8 Million.
15) Quixotic investment in mythic Green Jobs : $80 billion.
Supposed Number of Green Jobs Created : 255,000.
Approximate Cost of each Green Job: $313,725.50.
16) Stimulus Program: TARP : $475 Billion
17) Stimulus Program: Shovel Ready projects : $787 Billion
18) Stimulus Programs: Cash for Clunkers : $3 billion
19) Stimulus Programs: Cash for Caulkers : $10 Billion
20) New Regulations 2009-2011 : 75 Major New Regulations, 1,827 Rules Amended
21) Cost of New Regulations : + $1.75 Trillion annually
22) Public Debt : $18.8 Trillion
23) 2012 Federal Budget Proposed by Obama : $3.73 Trillion
24) Percentage of Federal Spending required from borrowing: 40%
25) Obama wants to spend $475 billion more on 'Jobs Bill'. NOTE: To share or email this 'Specific' article, you must click on the Title of the article.
Trifecta looks at the failed theories of economist John Maynard Keynes, and his economic follower, President Obama. Does more government spending lead to prosperity, or does it result in more debt and a severely damaged economy?
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Excerpts from the speech "The Entrepreneur As American Hero," delivered by Dr. Walter E Williams, John M. Olin Distinguished Professor of Economics, George Mason University.
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Ronald Reagan and Bill Clinton both reduced the relative burden of government, largely because they were able to restrain the growth of domestic spending. The mini-documentary from the Center for Freedom and Prosperity uses data from the Historical Tables of the Budget to show how Reagan and Clinton succeeded and compares their record to the fiscal profligacy of the Bush-Obama years.
February, 2011
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As Congress continues to battle over this year’s budget, House Budget chairman Paul Ryan released a blueprint today to guide Republican fiscal policies for years to come. Ryan’s budget proposes spending cuts, tax reforms, and the restructuring of entitlement programs.
His plan will dominate budget discussions for the rest of the year, and it will help frame the fiscal debate for the 2012 presidential campaign. That’s why liberal pundits are already attacking it with gusto. In the Washington Post, E. J. Dionne called Ryan’s plan “radical,” “irresponsible,” and “extreme.” But serious fiscal experts know that the real extreme plan is President Obama’s “do nothing” budget, which would result in disastrous levels of debt and crushing tax burdens on families in coming years.
As a first step toward budget sanity, Ryan proposes further cuts to discretionary spending beyond those currently being debated. However, his main focus is on transforming the so-called entitlements. He would transition Medicare from the current Soviet-style system to one based on consumer choice. Instead of a system based on payments to health-care providers, new retirees would receive a “premium support” payment to buy a private insurance plan of their own choosing.
That reform would allow Congress to directly limit taxpayer costs, while encouraging providers and patients to reduce inefficiencies in the system. It would also improve the quality of care through more competition. Without such reforms, rising costs will likely compel Congress to start rationing care to seniors and making other cuts that would seriously distort the health-care system.
For Medicaid, food stamps, and other federal-state aid programs, the Ryan plan embraces block grants. The states would receive a fixed pot of money, but be given more flexibility on program design. That would end incentives for states to over-expand their programs with “free” federal dollars. Block granting was the successful approach of welfare reform in 1996, and it should be warmly received by today’s large group of conservative governors.
Over the first decade, Ryan’s reforms would reduce federal spending from 25 percent of gross domestic product to about 20 percent, although that level would still be higher than it was as recently as 2007. The big savings would come over the longer term. By 2040, the size of the federal government under Ryan’s plan would be half the size under a “do nothing” plan — roughly 20 percent of GDP vs. 40 percent. For young Americans, the resulting differences in tax burdens and prosperity between those alternative fiscal futures would be massive.
On taxes, Ryan would reduce rates and simplify the system. His previous plan collapsed individual income taxes to a simple structure of 10 and 25 percent, while ending most deductions and other special breaks. His new plan drops the top rate to 25 percent, but leaves most of the simplification details to the House tax-writing committee.
E. J. Dionne also attacked Ryan’s plan as “tax cuts for the rich,” but that’s nonsense. It’s easy to design a two-rate tax system that doesn’t change the current distribution of tax payments at all. I favor a system with a single flat rate, so Ryan’s plan is too “progressive” for me, but it would certainly simplify the tax code and help spur economic growth.
Ryan would cut the federal corporate-tax rate from 35 to 25 percent. That would still leave us with a higher rate than the average in Europe, but it would be a major spur to investment and job creation. To his credit, Ryan scrapped the idea from his prior plan of converting the corporate tax to a value-added tax, which would have been a money machine for the government.
In sum, Paul Ryan has proposed a fiscal reform structure that should win broad political support. Moderates can take comfort that the premium support idea for Medicare reform is endorsed by prominent Democratic economist, Alice Rivlin. Fiscal conservatives can take comfort that the Ryan plan is a step toward even larger spending and tax reforms. Block granting, for example, can be a step toward fully devolving programs such as food stamps to the states, and the Ryan tax plan can be a first step toward a flat tax.
Political leaders keep saying that we need an “adult conversation” on federal budget reforms. Republican Ryan has started that conversation, and now it is up to Democrats to put aside their childish rants about “extremism” and offer up their own plan to avert the coming fiscal disaster.
Chris Edwards
Chris Edwards is the director of tax policy studies at the Cato Institute and a top expert on federal and state tax and budget issues. Before joining Cato in 2001, Edwards was senior economist on the congressional Joint Economic Committee examining tax, budget, and entrepreneurship issues. Previously, he was a consultant and manager with PricewaterhouseCoopers and an economist with the Tax Foundation. Edwards' articles on tax and budget policies have appeared in the Washington Post, the Wall Street Journal, the Los Angeles Times, Investor's Business Daily, and other newspapers. He is the author of Downsizing the Federal Government and co-author of Global Tax Revolution. He holds a B.A. and M.A. in economics.
This past week President Barack Obama took additional steps towards the destruction of the very "Hope" and "Change" that he had promised in his campaign.
With the economy, as it relates to America's national security and the global struggle against terrorism, as it relates to the moral values that are distinctly American, and in his accountability to "We The People"--in each of these areas--President Obama has furthered himself from greatness, innovation, but most importantly--from finding solutions.
As the first pundit to predict that President Obama would rise to the office, I've seen it coming for more than four years. And now the challenges sit firmly before him. What will he do? Which direction will he lean? And will he finally begin to show some evidence of leadership?
Let's suspend partisan affiliation and political structures for the moment. Let's merely focus on a handful of ideas that could begin to move America in the right direction with.
Economically speaking: President Obama has to pass a budget. He must halt the rate of spending. And he must reduce the amount of burden placed upon the average small business in America.
The inability for Congress to get a budget passed his first two years in office, on many levels reflects his own ability to lead (or not), and the efforts by those that held power to conduct naked grabs at greater shares of it. Passing a budget is something that simply holds everyone to a measure of seriousness about the conduct of the government and whether or not goals will be met and fiscal priorities will reign in the inclination to go beyond that accountability.
In passing the budget the rate of what has already been promised through the over-reach of the Pelosi era has to not just be halted, but substantively reversed. Defunding Obamacare does help. (Especially this week after it was revealed that yet another $2 billion in set asides were uncovered in the bill.) But it doesn't get America all the way home economically. Deep cuts, significant reinvention, and looking to the private sector for services that can be provided competitively are going to have to be considered.
Most importantly President Obama must do those things that reverse the oppression that his administration has leveled against small businesses in the first two years. The fact that he was unwilling to reconsider his pledge to raise their taxes by default until the 59th minute of the 11th hour was an all too-telling sign of his general demeanor towards the sector of American business that is responsible for the growth in capital, production, and employment for the American future.
Obamacare, if left unattended, will likewise be the most oppressive assault on small businesses to come along in American history. And though it may be settled by the courts even before his re-election campaign, the President could demonstrate seriousness about our financial crisis in leading on the issue, instead of allowing the typical Congressional shell game to play itself out.
Deficit reduction is said to be a priority. But now is the time for President Obama to prove it. Building revenue to the treasury--even for his favorite safety net programs--will only be truly achieved by accelerating the growth of small businesses, not penalizing them.
The key to a healthy economy, is to fan the flame of small businesses--not public sector unions.
My just released book, "No He Can't: How Barack Obama is Dismantling Hope and Change," has been called a book of positive suggestions to move America to a truly better tomorrow. Governor Mike Huckabee, who penned the forward, called it "one of the most positive books to appear in a decade."
But it's ability to work good into the nation's reality will be determined first and foremost if President Obama will embrace the "bits of clarity" suggested at the end of each chapter.
The book itself is divided up into four sections of review of the President's stewardship these first two and half years. We look at his very different direction that he boldly has taken America in terms of foreign policy, and even our ability to defend ourselves. How sad it is that it wasn't until Libya that he finally decided that freedom is good, America is exceptional, and that our decisions matter vibrantly to the rest of the watching world. Additionally we examine the President's refusal to conduct his policies to the social and moral values that have always accompanied American greatness, and we put them into historical context. Finally we also deal with his true accountability to "We The People." And what we will be required to do about--HIM--should he choose to not change course.
But I begin with an in depth analysis of the economy, and I stock the pages full of suggestions to begin righting the ship.
Should he continue to choose to ignore such commonsense, it will cost him the Presidency.
More importantly should he continue choose such recklessness it will cost the American people much, much, more.
Kevin McCullough
Kevin McCullough is the nationally syndicated host of "The Kevin McCullough Show" weekdays (7-9am EST) & "Baldwin/McCullough Radio" Saturdays (9-11pm EST) on 215 stations & Sirius/XM . His new book from Thomas Nelson Publishers, "No He Can't" hits streets March 2011. NOTE: To share or email this 'Specific' article, you must click on the Title of the article.
"If a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be."
Thomas Jefferson
Citizens can’t be ignorant about the economy if they expect to remain a free people. A person’s right to use the fruits of their labor as they wish is a key tenant of liberty and a bedrock principle of the Framers. For they knew that without a right to one’s property there is no liberty. They also knew (see Madison’s Federalist #2, par. #2) that individual citizens must cede some liberty to government in order to have a functioning society. Jefferson cautioned citizens, who grant some of their liberty to government, that they must be informed and vigilant to ensure that their government remains constrained to its limited role.
Each day citizens lose more liberty because they don’t understand the impact of government economic interventions. Thomas Paine and Thomas Jefferson are both credited with saying “That government is best that governs least.” Nowhere is it more true than when applied to meddling in the commerce among free people.
What is an economy? There is general agreement that it is a system for the production, distribution, and consumption of goods. Under this definition socialism and capitalism are types of economies. In the socialist system the government owns the means of production and manages the economic activities of its citizens. In the capitalist system citizens own the means of production and exercise their free will as to how they will engage in economic activities.
So, what is a system? In the spirit of Russell Ackoff, a “purposeful system”, such as an economy, is one in which entities (people, their tools, and their organizations) interact with each to achieve a common goal. Participating in the US economic system are citizens, institutions, and government. Citizens participate to satisfy their needs; institutions participate to create wealth (business) or to help distribute wealth (social institutions); government participation is limited (or should be) to providing infrastructure that enables commerce and provides safety. In essence, therefore, an economy is a system that provides for the needs of a nation’s citizens and creates wealth for society.
Dr. W. Edwards Deming was a giant in the field of systems thinking, especially as it relates to quality. His teachings apply to an economic system quite well, and that is where we turn our attention.
Tampering with a system, according to Dr. Deming, is to change it without understanding the underlying sources, as well as amount, of variability. All systems have natural variability, which is sometimes called “The Voice of the System”. When natural variability is mistaken for a problem and a change made on that basis the system will become even more variable. For this reason, tampering with a system always causes more problems than it solves.
An archer, who shoots arrows at a target, provides a good illustration of this principle. The bow, archer, and arrow are the entities of the system. When shooting arrows outdoors, the environment in which the system must perform, such as a gusting wind, can impact the archer and arrow. When the wind blows the archer will have trouble remaining steady to sight on the target. The wind will buffet an arrow in flight, which may cause an otherwise good shot to miss the bullseye. Small differences in the manufacture of the bow and arrows cause some variability as well. Where the archer places the arrow in the bow will not be precisely the same each time and that will cause small differences in the results. Even more sources of variability in the archer’s performance, such as crowd pressure, time limits on a shot, or even the illness of the archer on a particular day, can be identified. So clearly there are a number of uncertainties in, and affecting, this system.
The archer can only follow a process of putting the arrow in precisely the same place each time, sighting the same way each time, and releasing the arrow consistently. The archer might be able to compensate for steady winds after a shot or two. Practically speaking some variables, such as changing wind directions or speeds, are random and for these the archer can apply no effective corrections. Indeed if the archer tries to correct for uncertainties that can’t be measured or are even unknown, the archer’s performance will be worse. This is the idea behind Dr Deming’s tampering -- do not compensate for variation that is not understood or is natural in the system.
To illustrate this point, Dr. Deming created The Funnel Experiment. This experiment, including a simulator, is explained: Click Here The experimental apparatus is a funnel, a stand, and a target on a table. The funnel is mounted on a stand and lined up as precisely as possible over a target. The goal of the experiment is to hit the target with the marble. The marble won’t always hit the target and so experimenter moves the funnel after each trial so that the marble hits as close to the target as possible every time. As it turns out every rule for moving the funnel makes matters worse and not better. This is because the deviations from hitting the target are caused by the system’s arrangement and no adjustment in targeting will improve the outcome. What is needed is a change to the system. One change would be to lower the funnel so that it is closer to the target.
This same concept applies to economic systems for which governments do not understand the variability or sources of variability. Any change they make to improve economic performance creates more variability in the system. Bubbles and busts that occur across the entire economy are caused by government tampering (e.g. moving the funnel) and not by the normal business cycles as is often asserted.
Moreover, when there are busts the government grabs more regulatory authority for itself or it passes more legislation to fix a problem that it created in the first place. As Jefferson said, “The natural progress of things is for liberty to yield and government to gain ground”. Clearly elected officials justify more government power to solve the problems that their tampering creates. Citizens who are not informed about economic systems fail to understand that they lose liberty in hopes of gaining economic security that government can not provide.
This is an admittedly technical piece, but as Jefferson says citizens can’t be ignorant and free. Informed citizens must demand that the government stop tampering with the economy in order to preserve their freedoms.
Elko Mike
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Dan J. Mitchell, Ph.D. is a Senior Fellow at the Cato Institute, Washington’s premier free-market think tank. Visit his Website at:http://danieljmitchell.wordpress.com/ NOTE: To share or email this 'Specific' article, you must click on the Title of the article.
Thomas Sowell has studied and taught economics, intellectual history, and social policy at institutions that include Cornell University, UCLA, and Amherst College. Now a senior fellow at the Hoover Institution, Sowell has published more than a dozen books, the latest of which is a revised and updated edition of his classic volume, Basic Economics.
