Economics

The Brexit is real and is going to happen.

JP Mac Civil Liberty, Economics, Politics, Statism , , , , ,

BREXITIt’s done.  The Brexit is real and is going to happen.  The intellectual elites were against it, the “establishment” of both Britain and Europe were against it.  The ordinary, working Briton thought otherwise.  Concerns over the flow of immigrants from other EU countries driving wages down, and open boarders that let Syrian refugees in insufficiently vetted were a major driving force behind the leave vote.  Also driving the leave vote was a sense that their country was being taken from them, their sovereignty handed over to bureaucrats in Brussels.  The British voted not just to exit the E.U., but for independence.

Because they were concerned with immigration, they were labeled bigots.  Because they were concerned with the failure of Muslim immigrants to assimilate into Western European culture and with the infiltration if ISIS terrorists among the horde of Syrian refugees, they were deemed Islamophobic.

Meanwhile, the ‘stay’ proponents felt secure they had the referendum wrapped up in their favor, and so bet heavily on stocks, running the market up.  Little did they know they were only setting themselves up for a farther fall.  The opponents of the Brexit mistook interdependence on Europe for dependence. They considered the taking in of refugees, however poorly vetted, a virtue.  Even after attack after attack rocked the continent, they refused to admit the obvious—even a minute percentage of Muslim refugees radicalized and loyal to the Islamic State, and protected by a sympathetic, unassimilated native Muslim population could wreak significant havoc. They also pressed the issue of free trade.  Without the rest of the E.U. behind them the intellectuals reasoned, Britain would surely lose out on trade deals.  Of course, many countries do just fine in trade without the clout of the E.U., some of those countries are even located in Europe.  The thing about trade is, that it has to be fair to both sides.  Trade deals that are not win-win do not last, and there is always another trading partner waiting to make a better offer.

Another concern of ordinary British citizens was the weight of overbearing regulation emanating from Brussels.  Common household appliances, including hair dryers, toasters, and tea warmers were deemed too energy hungry to be used in the E.U.  You can mess with Brit’s hair dryer, but threaten their toast and tea and you have a rebellion on your hands.  A majority of ordinary, working-class Britons had seen enough of this micro management from across the Channel and demanded out.

The establishment elite never seemed in the end to understand that those things that are fixtures of British life actually matter.  It was assumed that any sensible person would give up these ordinary things in the name of the greater good.  They ‘stay’ crowd vastly underestimated, or refused to acknowledge the resentment that had always been there and building over the decades.  Britain has always had a love/hate relationship with the continent, but the two forces had always managed to balance each other out, or so it was thought.  The immigration situation was possibly the feather that finally tipped the scale away from love.  Interference from President Obama did not help, the best way to get people to do one thing is for an outsider to tell them to do its opposite.  In the end, Britons probably simply felt like they were being taken for granted by powers that did not place value on a British identity, distinct and separate from that of continental Europe. Nationalism, so it seems is not dead in Europe, and globalism is not quite the suitable alternative governing philosophy that many make it out to be.  In the short-term, independence won’t be easy, but ought to prove worth it in the long run.  Britain lasted for centuries as an independent state before and can certainly make it as one once again.

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Socialism in America: Just a President Away

JP Mac Economics, Election 2016, Freedom, Politics, Progressivism, Statism , , ,

Socialism: “a way of organizing a society in which major industries are owned and controlled by the government rather than by individual people and companies”

-Merriam Webster Dictionary. 

Statist ControlBernie Sanders warns us up front, he calls himself a Democratic Socialist.  Hillary, not so much– she keeps her socialist leanings better hidden.  First things first, show me a Democratic Socialist and I’ll show you a socialist. And now that’s out of the way…

If Sanders were to become president, he would try to make America into a European-style socialist republic.  Could he really do it?  The answer unfortunately, is yes.  As a matter of fact, we’re already well on the way.  The fact is, most of the infrastructure needed to make the U.S. a socialist state is already in place and operational.  The rest would quickly be put in place.  What would it take?  Here then are the key components required to create to a Democratic Socialist Republic of America:

  • A compliant Supreme Court. Check– a Supreme Court that can rationalize forcing citizens to engage in commerce (Obamacare) can rationalize the legality of just about any socialist “reform”.  This has occurred with a strict Constitutionalist, Antonin Scalia, on the court.  Imagine what would be possible with three to four more liberal justices to legislate from the bench.
  • An Executive Branch virtually unchecked by Congress or the courts. Democrats have convinced Congressional Republicans deathly afraid of being blamed for a government shutdown not to use their power of the purse to defund several of the President’s unconstitutional executive orders.  The Supreme Court as already mentioned, would not much stand in the way of anything a President Sanders or President Clinton would want to do.
  • A huge regulatory state. This most critical piece necessary for creating and maintaining a socialist state already to a large extent exists.  When we picture a socialist country, we think of the hammer and sickle chiseled into the façade of every industrial headquarters.  A socialist America probably won’t have or require that.  All the buildings that need them already have an official state seal on them, and most of them are in Washington D.C.  The EPA, IRS, FDA and scores of other regulatory agencies already weld extraordinary power.  Through these agencies, the federal government can and would control in great detail all of this country’s major industries.  With that much control, the government would not actually need to own these industries for us to be effectively socialist.
  • Big national law enforcement. This already exists in the form of the FBI, the ATF, and various other agencies.  Of course, many of these agencies are required to enforce the law, socialist state or not.  They do a pretty good job keeping us safe in an ever more dangerous world.  Not needed in a free state, but helpful in a socialist one would be armed law enforcement wings of departments tasked not with fighting violent crime, but the restriction of commerce and business, agencies such as the FDA, Department of the Interior, as well as other departments not very likely at all to encounter armed opposition.

We consider ourselves to be free citizens of a capitalist country operating in a free-market economy.  How close we are to not being that much longer, to the extent we even still are, is enough to give one pause.  Most of the components of a socialist America are already in place.  Most of the rest can quickly be put in place.  Really the only thing standing in the way of American becoming a European-style socialist republic is an election later this year.

GOP Candidates Get a Second Chance to Debate Economic Policy

JP Mac Economics, Election 2016, Politics , , , , , , , , , , , , ,

GOP DebatesLast time, the moderators from CNBC made themselves the story.  They succeeded in uniting the GOP field against them.  It was a good night for those who were quick on their feet, those who excel at the debate format.  For those who wanted an opportunity to get their message on policy out to the public, they were largely denied much of a chance.  As a vehicle for getting substantive discussion out, the third debate fell way short.  Tuesday the Republicans get a redo of sorts in front of a panel of FBN and Wall Street Journal questioners.  Many of the questions that existed before the last debate still remain, and a few new ones present themselves.

Some of those questions to keep in mind as we watch will be:

Will John Kasich get a chance to actually explain how he can put his vast experience to work fixing the economy?

Can flat tax plans be defended to moderators who know the numbers as well as the candidates?

Will Donald Trump show patience and wait for an opponent attack him?

Will Jeb finally land a blow against Marco Rubio?

How will Chris Christie and Mike Huckabee who have been in the prime time debates up until now, fare against unfamiliar opponents during the 7:00 PM debate?

Will Carly Fiorina be able to improve upon past strong debate performances?

Will Bobby Jindal do better against stronger opponents?

How will Cruz and Carson do without biased moderators as foils?

Tuesday’s debate promises to be a far cry from the last one on CNBC. The moderators can be expected to ask tough, but fair questions on the nation’s finances and the economy.  They won’t make themselves the centers of attention as did the previous group.  With this debate, as the last one being on domestic affairs, it will serve as something of a redo for the candidates.  Will they take advantage of this second chance?  The prime time debate will have feature fewer candidates, allowing for more time to respond to questions.  Who will that hurt and who will it help?   The ‘undercard’ debate will have a different mix of characters, it could provide for a fresh start for some of the participants.  As usual this election cycle, expect the unexpected– at least from the Republican field.  The headlines on Wednesday morning will be anybody’s guess.

Societal Socialism

JP Mac Economics, Politics ,

SocialismSocialism is known mainly as an economic phenomenon, one that seeks to prevent the accumulation of wealth in favor of a needs-based economy.  In its extreme, it not just an economic system, but one that seeks to control every aspect of a person’s existence. Society and life in general to the socialist is a zero-sum game—for every winner there must be a loser.  Theirs is a mistaken notion and therefore they present a mistaken solution:  Eliminate losers by eliminating winners; everyone gets a trophy because everyone needs to feel like a winner, even if they aren’t.  Awards and honors are given out without any attempt to tying these to actual accomplishments.  Feeling good has become more important to the societal socialists than actually being good.

Think of the classic 20th century American immigrant story; a young couple comes here from a foreign land not knowing the language with only the clothes on their backs.  The husband gets a job doing whatever he can to earn money.  The wife raises the kids and runs the household. The couple scrimps, saves and sacrifices so that their kids can get an education.  They live only the lifestyle they can afford through honest, often hard work.  They followed the rules and over time, earned the right to become citizens.

Now fast forward to today, or the near future that the Socialists have in mind for us.  You don’t have to save—the rich will provide the funds to send your kids as well as their own to college.  And healthcare?  Why, ask those on the Left, should there be any correlation between who receives it, their needs, and who pays for it? It’s not even good socialism, as it’s not given according to the person’s need, but the insurance company’s.  The Left recognizes the need to compensate the providers for the inherent inequities in their scheme, but somehow, no one else.  As for citizenship…  It is to become a gift to be bestowed upon those assumed likely to show fealty to the socialist cause, rather than a precious status to be coveted and earned.

Slowly but surely we are being taught the fallacy that what you have in life need not have any relationship to what you are prepared to do to obtain it.  We are slowly but surely being homogenized, we are being sold that sameness is a virtue, and any attempt to improve your lot beyond that of your neighbor is a vice.  Even if you work harder or smarter, or are just luckier than those around you, having more to show for it than them is distasteful and thus should be avoided. If you are better-off than someone, then someone somewhere must have less in the zero-sum, equality of outcome world view of the Left.  They know that this mentality of societal socialism makes the economic kind more acceptable.

Societal and economic socialists both believe that by making it harder for those with an advantage in skill, strategy, resources, etc. to win they are “leveling the playing field.” Individuals with the hearts and minds of winners tend to figure out new ways and new strategies for overcoming the obstacles placed in their way.   Eventually they though innovation and sheer determination find a way to succeed in the new landscape.  The socialist then has to change the rules, but the innovators and the clever find ways to work around the rules, or better yet, make the rules their friend. At that point in order to preserve their “no one loses if no one wins” world, they must destroy the winners.  What cannot be taken by other means is then taken by force.  Such is always the way ultimately with socialism.

The same socialist that denies the individual the right to fail, that bestows the illusion of success where not earned, also seeks to give out money that has not been earned.  They seek to give education, healthcare, even citizenship in some cases, to those who have done little or nothing to obtain these things for themselves. All they ask for in return from those beholden to them is their vote.

Democrats’ plans to make college more affordable will do anything but.

JP Mac Economics, Politics , , ,

Featured Image -- 376Democratic candidates are tripping over themselves to provide subsidies for college tuition. Hillary Clinton’s idea is to wipe out student debt by sending states huge block grants for education.  The funds for the grants would be paid for by eliminating or limiting tax deductions for the wealthy.

According to the Wall Street Journal’s Laura Meckler:

“The Clinton plan would have the federal government send large grants to states, which would then ensure students can pay tuition without taking out loans. There are strings attached: States would be required to increase their allocations to higher education, and schools would face new constraints on spending. Families would have to contribute what they can afford, according to a financial analysis, and students would be required to work 10 hours per week.”

Hillary’s campaign figures the cost of her plan to be about 350 billion over ten years.  In other words, about $35 billion every year, plus inflation, forever.

The other Democratic candidates have similar plans, essentially tax the rich to provide less expensive or even free tuition to state colleges. In other words, taxpayer subsidies would go to state universities in exchange for lower tuition. There are two basic problems with this basic formula.  First, we have a $17 trillion debt, most of it due to existing entitlements.  Adding an additional education entitlement does not make much sense, even if taxes pay for it.  The real problem though, is that subsidizing anything tends to have an inflationary effect. The more people can afford to pay, the more universities will charge, as evidenced by the inflationary spiral that already exists in the area of higher education.

Economics 101:  The cost of anything depends on what the market will bear.  Whether though student loans or block grants, the price ceiling is never reached and prices continue to climb.  Remember in recent years when the price of gas just kept going up and up, until people started driving less?  Once that price was reached where consumption dropped, the price would level off.  Now, imagine if someone agreed to loan you money at a low-interest rate, or better yet gave it to you to help pay for your gas.  You probably would see no reason then to reduce your gas consumption, you wouldn’t take vacations closer to home or take the train to work. You’d continue to buy the same amount of gas, regardless of price as long as your friend was giving or loaning you the money.  With this artificially assured continued volume, the oil companies would have no reason to ever stop raising gas prices.  So it is with college tuition. colleges will continue to increase tuition as long as admissions remain steady and the subsidies continue to roll in.

It won’t matter where the universities get the money, whether its funneled through the parents and students via student loans or though the state, the results will be the same.  Colleges won’t stop raising prices as long as admission rates remain level. Colleges are well aware of the economics, hell, they taught the guy who wrote the textbook, as a result college degrees have been oversold.   You need college to become a doctor, a lawyer, any number of things, but you don’t necessarily need college to become a master machinist or mechanic.  Many other occupations only really require a two-year Associates degree and some specialized training.  Colleges, for some inexplicable reason though, are more than happy to give your son or daughter a degree in philosophy.  Whatever sells.

It’s funny how the Democrat’s will decry ‘corporate welfare’ when it comes to big business, and well they should, but then they openly advocate for ‘Academia Welfare’.  It’s time to stop all subsidies, however cleverly disguised and let the free market dictate the price of a college education.  Yes, give grants to the poorest of the poor, but stop the upward cost spiral caused by overriding economic forces. Only this will bring back the cost of higher education in line with inflation.  Stop lining the pockets of universities with taxpayer money.  Yes, it sounds harsh, but in the end economics will win out.

The Fall of Greece and Why it Matters Here.

JP Mac Economics, Election 2016, Politics , ,

Greek EuroThe rest of the world watches as Greece’s economy nears bankruptcy.  If the Greek economy flatlines, very few will mourn but many could pay the price.  The ripple effects will reach even the shores of America.  The Greeks have been living beyond their means for years; austerity is a bad word in that country.  While most of Europe has generous pension, health, and work benefits compared to the U.S., Greece has found it hard to keep up with the Joneses. Their economy is not the powerhouse of Germany, France, or even Italy.  They misrepresented their economic state to get into the Euro club and now their “fake it ’till you make it”  gambit has backfired on them.

Stock markets around the world, including Wall Street have reacted negatively to the situation in Greece.  The stock market likes stability, and Greece is less than stable at the moment.  Other counties in the eurozone such as Spain, Portugal, and Ireland are not far behind. If those countries get the feeling that no one gets kicked out of the club, no matter how bad they behave, they might lose their fear of the creditor countries such as Germany and France and continue to live beyond their means at the rest of the eurozone’s expense.

Perhaps the only thing worse than an unstable Greece staying in the eurozone, may be its departure.  If Greece attempts to make a go of it alone, they will pay off their debts with nearly worthless paper.  Again,the danger is that other countries might follow suit.  The stock market would not like that either, not knowing what the money of foreign trading partners will be worth from day-to-day.

The Greek debt crisis matters in America in an other way– politics.  The U.S. has a heavy debt load itself, and there is no option of leaving the “dollarzone”, only inflation.  That does not seem to matter to one man and his many followers, Bernie Sanders. Bernie Sanders (D) Vermont, happens to be a presidential candidate and happens to have a sizeable following of disaffected Democrats. As a self-described Democratic Socialist, one can assume that he would introduce many of the social welfare programs that are about to bankrupt Greece.  His many supporters, all to the Left of Hillary Clinton, fail to see any connection between lavish social programs and a country going bankrupt.  They think that soaking the rich will support whatever entitlement is waved in front of them, be it longer maternity leave, universal healthcare, gold-plated retirements, etc. The Greeks, no doubt believed that too.  The problem they fail to see with Socialism, is as Margaret Thatcher put it:  “…you eventually run out of other people’s money.”  They have only to turn on the evening news to see where that path leads, but they don’t.  They don’t or they remain in denial that what’s happening to Greece can happen here.  They fail to learn from an other country’s mistakes, and that could prove costly for the rest of us.