Wednesday, July 20, 2011

Who Said It?

One of the things I’ve learnt in my short life in politics is the ability to live in the conditions of capitalism while fighting it and defeating it.

Hint: Not Barack Obama. Answer here.

Tuesday, July 19, 2011

When Government Ventures Into Capital

This always happens.

The city of Salinas had invested more than half a million dollars in Green Vehicles, an electric car start-up company.

All of that money is now gone, according to Green Vehicles President and Co-Founder Mike Ryan.

The start-up company set up shop in Salinas in the summer of 2009, after the city gave Ryan a $300,000 community development grant.

When the company still ran into financial trouble last year, the city of Salinas handed Ryan an additional $240,000. Green Vehicles also received $187,000 from the California Energy Commission.

The city fathers were very excited, of course, about creating a "green" jobs-creating industry right in their own fair city. So much so that they "invested" over a half-million dollars of taxpayers' money.

It's another example of why politicians and bureaucrats should be forbidden from using the people's money to dabble in business. Their incentives are all wrong. The government in Salinas (all honest and honorable people, I'm sure) had the goal of creating jobs and tax revenue for the city, but the goal of a successful business is to avoid both of those to the extent possible.

They were also blinded by the "green" jobs fantasy that has gripped liberals. But, as we see over and over, so-called alternative energies are not yet developed enough or economical enough to be profitable. Government must stick to its core purposes of maintaining the public infrastructure and safety.

If it accomplishes those efficiently, business will locate there on its own.

Saturday, July 16, 2011

Why Obama Can't Allow Spending Cuts

GDP is an ugly animal. It's an equation designed specifically to support the Keynesian theory that consumer and government spending drive the economy -- that's why business-to-business spending (which is larger than consumer expenditures) is excluded. It's claimed that to include it would be "double-counting", which is false.

So, here's Mr. Obama a year and a half or so before the presidential election and the economy is showing all signs of sinking back into recession. Now, the President and his administration may not know much about economics, but they do know that increased government spending over the next year just might be enough to keep the GDP statistic above water.

It wouldn't be much to crow about, but it would save him the humiliation of an officially declared recession. Now, you and I understand full well that more government spending will not hire the unemployed and won't re-open closed businesses. But when you hear Obama and his apple-polishers screaming that cutting government will harm the economy, just substitute the word "GDP" for economy and you'll know why they're so desperate.

Saturday, July 9, 2011

Can Nancy Pelosi Possibly Be This Stupid?

Speaker Nancy Pelosi at the health summit: "It's about jobs. In it's life, it [the health bill] will create 4 million jobs -- 400,000 jobs almost immediately."
[Link added]

Despite the fact that I don't believe those numbers for a minute, what can she and her party possibly be thinking? Do they really believe that 400,000 jobs created by government edict and paid fully by the shrinking number of American workers in the private sector are really an answer?

Of course this is the woman who once proclaimed,

Every month that we do not have an economic recovery package 500 million Americans lose their jobs.

So, I guess I've answered my own question.

Friday, July 8, 2011

The 'Lump of Labor' Fallacy Revisited

There's a little newspaper up in Waterbury, Connecticut, the "Republican American" with a feisty, conservative editorial page that I generally enjoy. But this week, in an article on Medicare reforms that might include raising the eligibility age, the paper went off the rails.

But of greater concern are the unintended consequences attending a policy that would induce millions of Americans to continue working into their late 60s rather than retiring at 65. What would this mean in terms of workplace productivity and opportunity for younger workers? Nobody has given it much thought.

Nor should they. This is an example of the old "lump of labor" fallacy which holds that there is a fixed amount of work and, therefore, a fixed number of jobs to do it. It's false because, in normal times, the economy grows. Profits are saved and become the capital which is reinvested in the business improving productivity and profitability thus paving the way for new and expanded production requiring more workers.

Older workers contribute to that process of wealth creation and capital accumulation, too. In fact, with labor participation at its lowest since 1984, we need everyone working who wants to -- no matter their age.

Back in the seventies, I recall pundits worrying that there wouldn't be enough jobs for all the young Baby Boomers then entering the workforce (some were even concerned there weren't enough shares of stock for the young to invest in). They were speculating that the government might have to step in and make the older workers retire to provide room for the kids. And presumably be forced to sell their investment portfolios, too.

Of course, there was no problem. The economy grew and grew and, not only did it absorb the baby boomers, it made room for millions of women who had previously stayed at home to raise families. If we can get rid of the current administration in Washington, there's no reason to believe that it won't happen again either.

Otherwise, with current policies in place, we may have to start calling it the "lump of labor truism".