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Democratic economic policies deemed at least worthless

The bottom line is that all this focus on government actions through the lens of a Keynesian model has been basically worthless. Investors are better served when they follow free-market economic theories that focus on production, not demand-side models that focus on spending and debt. And this appears true in both the long, and the short, run.  Brian Westbury from his article today Keynesian Model Blew It Again

Oh no! The Sequester! Fiscal Cliff! Payroll tax rates going back to normal!

BERK:  First they told us that the Federal Government must continue spending at the crisis rate.  They told us that the dreaded fiscal cliff resolution and its payroll tax rate normalization would derail the economy.  Then the "sequester" was supposed to kill the economy...as I say around here the economy is doing ok because the government is cutting back...

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The myth of America’s stagnating middle class | AEIdeas

In today’s WSJ, Don Boudreaux and I address the myth that America’s middle class has stagnated in recent decades, here’s an excerpt:

No single measure of well-being is more informative or important than life expectancy. Happily, an American born today can expect to live approximately 79 years—a full five years longer than in 1980 and more than a decade longer than in 1950. These longer life spans aren’t just enjoyed by “privileged” Americans. As the New York Times reported this past June 7, “The gap in life expectancy between whites and blacks in America has narrowed, reaching the lowest point ever recorded.” This necessarily means that life expectancy for blacks has risen even more impressively than it has for whites.

Americans are also much better able to enjoy their longer lives. According to the Bureau of Economic Analysis, spending by households on many of modern life’s “basics”—food at home, automobiles, clothing and footwear, household furnishings and equipment, and housing and utilities—fell from 53% of disposable income in 1950 to 44% in 1970 to 32% today (see chart above).

Bottom Line: Despite assertions by progressives who complain about stagnant wages, inequality and the (always) disappearing middle class, middle-class Americans have more buying power than ever before. They live longer lives and have much greater access to the services and consumer products bought by billionaires.

via www.aei-ideas.org

Declining Economic Freedom Means Lower Expected Returns

Such bad policies and economics will have a drastic impact on our economic freedom, which is already in trouble after four years of the “Yes, We Can” Administration’s programs and spending. Since 2008, America’s economic freedom has been declining at alarming rates: America has fallen from fifth freest economy in the world to 10th freest. (continues below chart)

via blog.heritage.org

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Four threats to economic prosperity

Brian Westbury from First Trust Portfolios on the 4 threats to economic prosperity:  Summed up in two words -Government intervention.

1.   Deflationary Monetary Policy

2.  Tax Hikes

3.  Regulatory Overreach

4.   Protectionism

It's Been About the "Transformation" All Along

BERK: It's been about our lack of understanding which way government is going to go - the less regime uncertainty - the better the stock market anticipating the above trend turning around.

             From Investors.com

What small firms need is a low-tax, pro-market, stable regulatory regime.

But do that, Democrats would have to accept the idea of earned success, something the party in 2012 can't grasp.

 

 

The Moral Case for Free Enterprise

America's free enterprise system has created more prosperity and material wealth than any other political or economic system in the world. But that's not the reason it is the "best" system. In this short video, from Prager University, Arthur Brooks, president of the American Enterprise Institute, makes the moral case for capitalism in particular and for the whole free enterprise system in general. It turns out that the only way to be happy is to earn success, and the only way for citizens to pursue happiness is within a free enterprise system.

Wisconsin Represents a Sea Change in State & Local Government Operations

Mr. Rosenberg says his newfound optimism was crystallized by the votes last week in Wisconsin and California. He sees those representing a sea change in the way state and local governments are addressing their fiscal problems, and expects that attitude will sweep across statehouses and eventually filter up to the national level.

He said that those political events were an eye-opener, but the thoughts have been coalescing for some time. A few weeks ago, he published a note listing 10 “silver-linings” amid the dark clouds.

All of this leads him to believe the next 15 years or so won’t be like the past 12 or so. Anybody who tries to project the future based on the immediate past is making a mistake of “gargantuan” proportions, he says. “I think we may look back at the events of last week as a real inflection point,” he says.

One of the reasons a feared wave of municipal defaults never materialized, he says, is that pundits underestimated the resolve of mayors and governors to clean up their finances. It’s that mindset he expects will eventually work its way to Washington.

T.J. Hegarty

 Managing Director
 MKM Partners, LLC

Rising Regulation - The Cause of Regime Uncertainty

FROM THE WSJ: "Regualtion for Dummies"  We are the Dummies by the way for putting Leftists in charge of, first, the Congress in 2007 and then, the White House in 2009.

“The evidence is overwhelming that the Obama regulatory surge is one reason the current economic recovery has been so lackluster by historical standards. Rather than nurture an economy trying to rebuild confidence after a financial heart attack, the Administration pushed through its now-famous blitz of liberal policies on health care, financial services, energy, housing, education and student loans, telecom, labor relations, transportation and probably some other industries we’ve forgotten. Anyone who thinks this has only minimal impact on business has never been in business.” What should be added to the list is the real threat of significantly higher future tax burdens.

“One also has to take into consideration whether markets are being allowed to work and if the “regime” is certain; stable, predictable, and consistent with stated policy, and the policy is conducive to entrepreneurship and prudent risk taking. Policies that impede competition and impose excessive tax burdens—or that in any way simply add to costs, reduce expected returns, or increase the uncertainty of business activity—are seen as the most important factors in forestalling recovery and turning economic corrections into stagnation, stagflation or depression.” Historically, policies and actions that threaten property rights create “regime uncertainty” or “regime worsening,” and this delays recovery. Not mentioned, but also significant is any concerted verbal assault on economic freedom which implies a threat of “regime worsening” (Powell 2009) on a large scale which can only make matters worse.

 

Anti-Keynesian Supply Side Tax and Spending Cuts in Sweden, and the Finance Minister Behind It

Sweden permanently cuts taxes and cuts spending on Welfare at the same time the US, Spain, Portugal and Itlay spent stimulus dollars....Stimulus wasted-left with debt...but not in Sweden!

From the U.K. Spectator's report on the amazing success of supply-side economics in Sweden, and finance minister Anders Borg, the man behind it:

"When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg (pictured above) has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. "Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus," he says. "Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt." Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe.

"Everybody was told 'stimulus, stimulus, stimulus'," he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fueled spending splurge. Borg, an economist, couldn’t work out how this would help. "It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem." Non-economists, he says, "might have a tendency to fall for those kinds of messages."

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. "In most cases, the company would not have

via mjperry.blogspot.com