Category Archives: The State

Update III: Dollar Doubts

Business, Capitalism, Debt, Economy, Free Markets, Socialism, The State, Uncategorized

“[D]iscussion on the greenback is heating up,” notes Peter Schiff. “And while real insight on the topic is hard to find, the debate centers on the battle between two conventional opinions—both of which are wrong.”

“The first camp, which is generally supportive of government intervention in the economy, argues that dollar’s decline is a positive for both the economy and the stock market. The second camp, which tends to fall on the more conservative end of the political spectrum, views the dollar’s decline as a problem but feels that tough talk and slightly higher interest rates are all that is needed to restore ‘King Dollar’ to its throne.”

“First of all, a weak dollar is no better for Americans than a lower paying job is for a worker. And although I would prefer that the dollar remain strong, I know that currency values are a function of supply and demand, not wishful thinking. The past years of reckless monetary and fiscal policy have created conditions that must push the dollar down. Vastly expanded debt levels and monetary expansion have created a greater supply of dollars, while poor investment performance and diminished industrial capacity have lessened the demand for dollars.

The regrettable truth is that while the weak dollar will help rebalance the global economy, it is not a panacea for the U.S. The fall is no more worthy of celebration than a student celebrating falling grades on his report card. If the dollar does not recover eventually, Americans will suffer diminished living standards. To avoid this we must make difficult reforms now. If we continue our current policies, we run the risk of a complete dollar collapse. Far from helping to solve our problems, this would be a true nightmare scenario.”

More.

I am not as confident as Mr. Schiff that the dollar can be rehabilitated. The country is moving away from markets and toward the central control of the economy and the rearranging of the income curve. What with the daily growth of debt and unfunded liabilities, I hate to be cynical, but could Mr. Schiff’s optimism have anything to do with his political aspirations?

Update I (Oct. 26): Involvement in politics invariably means convincing the masses that there is a panacea to what are intractable problems. Politics are about peddling hope against all hope. Pollyanna sentiments notwithstanding—comments about waving the wand of liberty to dissolve $60 trillion in growing government liabilities are worse than useless.

If the trend in public and political sensibilities was toward liberty—decentralization and deregulation—I’d say hope is warranted.

On the theme of cynicism—and when all else fails—perhaps the Pollyannas among us can adopt the tack taken in this WSJ article; debt can hasten recovery:

“[H]ousehold debt, including mortgage debt, [is] at about $13.7 trillion, or 125% of annual after-tax income…. the U.S. government … is building up debt as fast as households are shedding it. Net U.S. government debt could reach 85% of annual economic output by 2014, up from about 58% now, according to the International Monetary Fund.”

The impetus is in the direction of serfdom.

Update II (Oct. 27): The Economist: “America needs a weak dollar to help revive its economy and reorient it towards exports and away from consumer spending.”

Would that it will. However, a weak dollar is a symptom of all these things it’s supposed to cure; it’s not a cause of over-consumption and under production.

Update III: À la Zimbabwe (and via Bloomberg): “Forty years ago, the U.S. government said the $100 bill would be the highest-denomination note. With the Federal Reserve now trying to print its way out of the financial crisis, it may be time to revisit that decision.

Reinstating $10,000 or $100,000 notes — which existed in limited fashion years ago — won’t cut it. In today’s, ‘Brother, can you spare a trillion dollars?’ economy, we need to think bigger — a $1 million bill may be in order.”

Fat Spells Foster Care

Britain, Criminal Injustice, Family, Fascism, Left-Liberalism And Progressivisim, Regulation, The State

I cannot imagine a more diabolic act than removing a newborn from its mother. Any woman who has given birth knows that after the awful ordeal, (normal) women crave one thing: to be with the child. Being apart from it is like losing a limb.

About such craven cruelty, Myron Pauli writes: “Expect this sort of egregious authoritarian behavior in America if we go to socialized medicine. I would have lost Anna (who is not genetically disposed to obesity whatsoever and is perfectly normal) because I was obese. What comes next – sterilizing adults with genetic defects?

The Mail Online:

An obese couple’s seven children are all to be taken into care after their newborn daughter was removed over fears she would become dangerously overweight.

Three children had already been removed by social services before the infant was taken from her mother within hours of her birth.
Now her ‘heartbroken’ parents have learned that their three other children will be taken away from them too.
They say the children of the so-called ‘fat family’ are being removed over fears they would also become clinically obese.

America: Long Lost To The Left

Government, IMMIGRATION, Labor, Left-Liberalism And Progressivisim, Multiculturalism, Political Correctness, The State

What motivates Middle America “to distrust its government, for it surely does”? Pat Buchanan packs a lot of pathos into the answer. I hope he is right, because not everyone agrees about what moves Middle—or is it “Meathead”?— America:

“…the alienation and radicalization of white America began long before Obama arrived. He acknowledged as much when he explained Middle Pennsylvanians to puzzled progressives in that closed-door meeting in San Francisco.”

“Referring to the white working-class voters in the industrial towns decimated by job losses, Obama said: ‘They get bitter, they cling to guns or religion or antipathy to people who aren’t like them or anti-immigrant sentiment or anti-trade sentiment as a way to explain their frustrations.'”

“Yet, we had seen these folks before. They were Perotistas in 1992, opposed NAFTA in 1993 and blocked the Bush-Kennedy McCain amnesty in 2007.”

“In their lifetimes, they have seen their Christian faith purged from schools their taxes paid for, and mocked in movies and on TV. They have seen their factories shuttered in the thousands and their jobs outsourced in the millions to Mexico and China. They have seen trillions of tax dollars go for Great Society programs, but have seen no Great Society, only rising crime, illegitimacy, drug use and dropout rates.”

“They watch on cable TV as illegal aliens walk into their country, are rewarded with free educations and health care and take jobs at lower pay than American families can live on – then carry Mexican flags in American cities and demand U.S. citizenship.”

“They see Wall Street banks bailed out as they sweat their next paycheck, then read that bank profits are soaring, and the big bonuses for the brilliant bankers are back. Neither they nor their kids ever benefited from affirmative action, unlike Barack and Michelle Obama.” [My emphasis]

“They see a government in Washington that cannot balance its books, win our wars or protect our borders. The government shovels out trillions to Fortune 500 corporations and banks to rescue the country from a crisis created by the government and Fortune 500 corporations and banks.”

“America was once their country. They sense they are losing it. And they are right.”

Mercer Citing On NYT’s Economix Blog

Economy, Government, Ilana Mercer, Left-Liberalism And Progressivisim, The State

Are Federal Workers Overpaid? asks Professor Nancy Folbre of Economix at the New York Times. Unfortunately, Ms. Folbre answers unsatisfactorily. However, she does cite me in her New-York Times’ Economix blog.

New York Times
Are Federal Workers Overpaid?
Nancy Folbre – 9 hours ago
“…They were dramatized by Ilana Mercer in World Net Daily in a feature entitled “Life in the Oink Sector” and echoed by the conservative columnist Jeff Jacoby” …

October 13, 2009, 7:11 am
Are Federal Workers Overpaid?
By Nancy Folbre

Today’s Economist

Nancy Folbre is an economics professor at the University of Massachusetts, Amherst.

It’s bad enough that the average federal worker is paid more than the average private-sector worker, especially taking into account the value of benefits like health insurance and pensions. But what’s really shocking is that the gulf between the total compensation (wages plus benefits) enjoyed by federal workers and private-sector workers has increased since 1990.

So argues Chris Edwards, the tax director at the Cato Institute, a libertarian research organization.

Similar arguments were featured in a full-page ad sponsored by The Free Enterprise Nation in The Wall Street Journal on Sept. 22.

They were dramatized by Ilana Mercer in World Net Daily in a feature entitled “Life in the Oink Sector” and echoed by the conservative columnist Jeff Jacoby in The Boston Globe.

None of the sources provided any details about the characteristics of federal workers or their jobs. But such details (easily extracted from the regular Current Population Survey) explain why federal workers are paid more and why their average compensation has risen higher. They also show that federal employment creates proportionately far more middle-class jobs than the private sector.

In 2008, only 14 percent of federal workers were on part-time schedules, compared to 26 percent in the private sector. Federal workers were far older on average: 55 percent were between the ages of 45 and 64, compared to 36 percent of private-sector workers. Furthermore, 45 percent of federal workers held a college degree or higher educational credential, compared to 29 percent of private-sector workers.

Federal workers are more likely to receive employer-paid health benefits than private sector workers — 77 percent compared to 56 percent. This is one reason our highest-paid federal employee, the president of the United States, is fighting for universal health insurance coverage.

Federal workers are also more likely than private sector workers to garner pension benefits (81 percent compared to 53 percent). Keep in mind, however, that for some federal employees, pension benefits come in lieu of Social Security payments.

Both health insurance and pension benefits are more expensive for older than for younger workers, and health insurance costs, in particular, have escalated rapidly since 1990. Also, age and educational attainment differences have widened considerably since 1991, when 20 percent of private sector and 31 percent of federal workers had a college degree or higher.

The biggest difference between private and federal employment, illustrated in the graph above, lies in the proportion of jobs paying less than $25,000 a year. In 2008 more than 43 percent of private-sector workers earned less than $25,000 a year. Most federal employees fell squarely in the middle earnings brackets, making $25,000 to $75,000 a year.

A larger share of federal than private-sector workers earned $75,000 to $150,000 a year. Beyond that level, private employees were overrepresented. The percentage earning more than $250,000 in 2008 (not shown in the graph above) was twice as high as the percentage of federal employees (1 percent compared to 0.5 percent).

In order to protect the confidentiality of its respondents, the Current Population Survey assigns all extremely high levels of earnings the same value or “topcode.” As a result, it’s impossible to accurately compare all private sector and federal workers in the long right-hand tail of the earnings distribution

But not all earnings are confidential. We, know, for instance, that the president of the United States earned $400,000 in 2008. He also enjoyed a $50,000 annual expense account and rent-free accomodations for himself and his family at the White House.

By comparison, the compensation of the chief executive officers of the 500 biggest companies of the United States in 2008 came out to an average of $11.4 million each.

Consistent with the overall picture described above, statistical analysis of the impact of individual education and experience on earnings in the United States by the Harvard economist George Borjas showed that federal employees are paid considerably less than comparable private workers at the top end.

As the conservative columnist Ross Douthat points out, earnings inequality is generally lower in public-sector employment, and countries with a larger public sector therefore experience less overall income inequality.

Some oinking can definitely be heard out there in the labor market, but anyone willing to follow the numbers can tell that the biggest piggies are not those employed by the federal government.