Category Archives: American Thought

Why Americans Hate Economics – WSJ.com

And why I like the WSJ…

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By STEPHEN MOORE
Christina Romer, the University of California at Berkeley economics professor and President Obama’s first chief economist, once relayed the old joke that “there are two kinds of students: those who hate economics and those who really hate economics.” She doesn’t believe that, but it’s true. I’m surprised how many students tell me economics is their least favorite subject. Why? Because too often economic theories defy common sense. Alas, the policies of this administration haven’t boosted the profession’s reputation.

Consider what happened last week when Laura Meckler of this newspaper dared to ask White House Press Secretary Jay Carney how increasing unemployment insurance “creates jobs.” She received this slap down: “I would expect a reporter from The Wall Street Journal would know this as part of the entrance exam just to get on the paper.”

Mr. Carney explained that unemployment insurance “is one of the most direct ways to infuse money into the economy because people who are unemployed and obviously aren’t earning a paycheck are going to spend the money that they get . . . and that creates growth and income for businesses that then lead them to making decisions about jobs—more hiring.”  [ Say what? ]

That’s a perfect Keynesian answer, and also perfectly nonsensical. What the White House is telling us is that the more unemployed people we can pay for not working, the more people will work. Only someone with a Ph.D. in economics from an elite university would believe this.

I have two teenage sons. One worked all summer and the other sat on his duff. To stimulate the economy, the White House wants to take more money from the son who works and give it to the one who doesn’t work. I can say with 100% certainty as a parent that in the Moore household this will lead to less work[In the Rossol household, too.]

Economic bimboism is rampant in Washington. The Center for American Progress held a forum earlier this summer arguing that raising the minimum wage would create more jobs. For this to be true, you have to believe that the more it costs a business to hire a worker, the more workers companies will want to hire.

A few months ago Mr. Obama blamed high unemployment on businesses becoming “more efficient with a lot fewer workers,” and he mentioned ATMs and airport kiosks. The Luddites are back raging against the machine. If Mr. Obama really wants to get to full employment, why not ban farm equipment?

Or consider the biggest whopper: Mr. Obama’s thoroughly discredited $830 billion stimulus bill. We were promised $1.50 or even up to $3 of economic benefit—the mythical “multiplier”—from every dollar the government spent. There was never any acknowledgment that for the government to spend a dollar, it has to take it from the private economy that is then supposed to create jobs. The multiplier theory only works if you believe there’s a fairy passing out free dollars.

How did modern economics fly off the rails? The answer is that the “invisible hand” of the free enterprise system, first explained in 1776 by Adam Smith, got tossed aside for the new “macroeconomics,” a witchcraft that began to flourish in the 1930s during the rise of Keynes. Macroeconomics simply took basic laws of economics we know to be true for the firm or family—i.e., that demand curves are downward sloping; that when you tax something, you get less of it; that debts have to be repaid—and turned them on their head as national policy.

As Donald Boudreaux, professor of economics at George Mason University and author of the invaluable blog Cafe Hayek, puts it: “Macroeconomics was nothing more than a dismissal of the rules of economics.” Over the years, this has led to some horrific blunders, such as the New Deal decision to pay farmers to burn crops and slaughter livestock to keep food prices high: To encourage food production, destroy it.

The grand pursuit of economics is to overcome scarcity and increase the production of goods and services. Keynesians believe that the economic problem is abundance: too much production and goods on the shelf and too few consumers. Consumers lined up for blocks to buy things in empty stores in communist Russia, but that never sparked production. In macroeconomics today, there is a fatal disregard for the heroes of the economy: the entrepreneur, the risk-taker, the one who innovates and creates the things we want to buy. “All economic problems are about removing impediments to supply, not demand,” Arthur Laffer reminds us.

So here we are, three years of mostly impotent stimulus experiments and the economy still hobbled. Keynesians would be expected to be second-guessing the wisdom of their theories. Instead, Prof. Romer recently complained that the political system will not allow Mr. Obama to “go back and ask for more” stimulus.

And that is why Americans hate economics.

Mr. Moore is a member of the Journal’s editorial board.

Stephen Moore: Why Americans Hate Economics – WSJ.com.

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Reversing the Moral Decay Behind the London Riots

I know people who have been saying the same for years. We, as Americans, if we are to stem the tide that we see in London, need to bring the religious dialog back into culture, into the workplace, into the market, into schools- yes, including public education.  (I look forward to the NEA’s comment on this article.)
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By JONATHAN SACKS

It was the same city but it might have been a different planet. At the end of April, the eyes of the world were on London as a dashing prince and a radiant princess, William and Kate, rode in a horse-drawn carriage through streets lined with cheering crowds sharing a mood of joyous celebration. Less than four months later, the world was watching London again as hooded youths ran riot down high streets, smashing windows, looting shops, setting fire to cars, attacking passersby and throwing rocks at the police.

It looked like a scene from Cairo, Tunis or Tripoli earlier in the year. But this was no political uprising. People were breaking into shops and making off with clothes, shoes, electronic gadgets and flat-screen televisions. It was, as someone later called it, shopping with violence, consumerism run rampage, an explosion of lawlessness made possible by mobile phones as gangs discovered that by text messaging they could bring crowds onto the streets where they became, for a while, impossible to control.

Let us be clear. The numbers involved were relatively small. The lawkeepers vastly outnumbered the lawbreakers. People stepped in to rescue those attacked. Crowds appeared each morning to clear up the wreckage of the night before. Britain remains a decent, good and gracious society.

But the damage was real. Businesses were destroyed. People lost their homes. A 68-year-old man, attacked by a mob while trying to put out a fire, died. Three young men in Birmingham were killed in a hit-and-run attack. While it lasted, it was very frightening.

It took everyone by surprise. It should not have.

Britain is the latest country to pay the price for what happened half a century ago in one of the most radical transformations in the history of the West. In virtually every Western society in the 1960s there was a moral revolution, an abandonment of its entire traditional ethic of self-restraint. All you need, sang the Beatles, is love. The Judeo-Christian moral code was jettisoned. In its place came: whatever works for you. The Ten Commandments were rewritten as the Ten Creative Suggestions. Or as Allan Bloom put it in “The Closing of the American Mind”: “I am the Lord Your God: Relax!”

You do not have to be a Victorian sentimentalist to realize that something has gone badly wrong since. In Britain today, more than 40% of children are born outside marriage. This has led to new forms of child poverty that serious government spending has failed to cure. In 2007, a Unicef report found that Britain’s children are the unhappiest in the world. The 2011 riots are one result. But there are others.

Whole communities are growing up without fathers or male role models. Bringing up a family in the best of circumstances is not easy. To try to do it by placing the entire burden on women—91% of single-parent families in Britain are headed by the mother, according to census data—is practically absurd and morally indefensible. By the time boys are in their early teens they are physically stronger than their mothers. Having no fathers, they are socialized in gangs. No one can control them: not parents, teachers or even the local police. There are areas in Britain’s major cities that have been no-go areas for years. Crime is rampant. So are drugs. It is a recipe for violence and despair.

That is the problem. At first it seemed as if the riots were almost random with no basis in class or race. As the perpetrators have come to court, a different picture has emerged. Of those charged, 60% had a previous criminal record, and 25% belonged to gangs.

This was the bursting of a dam of potential trouble that has been building for years. The collapse of families and communities leaves in its wake unsocialized young people, deprived of parental care, who on average—and yes, there are exceptions—do worse than their peers at school, are more susceptible to drug and alcohol abuse, less likely to find stable employment and more likely to land up in jail.

The truth is, it is not their fault. They are the victims of the tsunami of wishful thinking that washed across the West saying that you can have sex without the responsibility of marriage, children without the responsibility of parenthood, social order without the responsibility of citizenship, liberty without the responsibility of morality and self-esteem without the responsibility of work and earned achievement.

What has happened morally in the West is what has happened financially as well. Good and otherwise sensible people were persuaded that you could spend more than you earn, incur debt at unprecedented levels and consume the world’s resources without thinking about who will pay the bill and when. It has been the culture of the free lunch in a world where there are no free lunches.

We have been spending our moral capital with the same reckless abandon that we have been spending our financial capital. Freud was right. The precondition of civilization is the ability to defer the gratification of instinct. And even Freud, who disliked religion and called it the “obsessional neurosis” of humankind, realized that it was the Judeo-Christian ethic that trained people to control their appetites.

There are large parts of Britain, Europe and even the United States where religion is a thing of the past and there is no counter-voice to the culture of buy it, spend it, wear it, flaunt it, because you’re worth it. The message is that morality is passé, conscience is for wimps, and the single overriding command is “Thou shalt not be found out.”

Has this happened before, and is there a way back? The answer to both questions is in the affirmative. In the 1820s, in Britain and America, a similar phenomenon occurred. People were moving from villages to cities. Families were disrupted. Young people were separated from their parents and no longer under their control. Alcohol consumption rose dramatically. So did violence. In the 1820s it was unsafe to walk the streets of London because of pickpockets by day and “unruly ruffians” by night.

What happened over the next 30 years was a massive shift in public opinion. There was an unprecedented growth in charities, friendly societies, working men’s institutes, temperance groups, church and synagogue associations, Sunday schools, YMCA buildings and moral campaigns of every shape and size, fighting slavery or child labor or inhuman working conditions. The common factor was their focus on the building of moral character, self-discipline, willpower and personal responsibility. It worked. Within a single generation, crime rates came down and social order was restored. What was achieved was nothing less than the re-moralization of society—much of it driven by religion.

It was this that the young French aristocrat Alexis de Tocqueville saw on his visit to America in 1831. It astonished him. Tocqueville was expecting to see, in the land that had enacted the constitutional separation of church and state, a secular society. To his amazement he found something completely different: a secular state, to be sure, but also a society in which religion was, he said, the first of its political (we would now say “civil”) institutions. It did three things he saw as essential. It strengthened the family. It taught morality. And it encouraged active citizenship.

Nearly 200 years later, the Tocqueville of our time, Harvard sociologist Robert Putnam, made the same discovery. Mr. Putnam is famous for his diagnosis of the breakdown of social capital he called “bowling alone.” More people were going bowling, but fewer were joining teams. It was a symbol of the loss of community in an age of rampant individualism. That was the bad news.

At the end of 2010, he published the good news. Social capital, he wrote in “American Grace,” has not disappeared. It is alive and well and can be found in churches, synagogues and other places of worship. Religious people, he discovered, make better neighbors and citizens. They are more likely to give to charity, volunteer, assist a homeless person, donate blood, spend time with someone feeling depressed, offer a seat to a stranger, help someone find a job and take part in local civic life. Affiliation to a religious community is the best predictor of altruism and empathy: better than education, age, income, gender or race.

Much can and must be done by governments, but they cannot of themselves change lives. Governments cannot make marriages or turn feckless individuals into responsible citizens. That needs another kind of change agent. Alexis de Tocqueville saw it then, Robert Putnam is saying it now. It needs religion: not as doctrine but as a shaper of behavior, a tutor in morality, an ongoing seminar in self-restraint and pursuit of the common good.

One of our great British exports to America, Harvard historian Niall Ferguson, has a fascinating passage in his recent book “Civilization,” in which he asks whether the West can maintain its primacy on the world stage or if it is a civilization in decline.

He quotes a member of the Chinese Academy of Social Sciences, tasked with finding out what gave the West its dominance. He said: At first we thought it was your guns. Then we thought it was your political system, democracy. Then we said it was your economic system, capitalism. But for the last 20 years, we have known that it was your religion.

It was the Judeo-Christian heritage that gave the West its restless pursuit of a tomorrow that would be better than today. The Chinese have learned the lesson. Fifty years after Chairman Mao declared China a religion-free zone, there are now more Chinese Christians than there are members of the Communist Party.

China has learned the lesson. The question is: Will we?
—Lord Sacks is the chief rabbi of the United Hebrew Congregations of the Commonwealth.

Reversing the Moral Decay Behind the London Riots – WSJ.com.

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More Failed Government Investment Isn’t the Answer

Some letters to the WSJ.  Some great points!

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“How to Close the Skills Gap” by Sens. Mary L. Landrieu and Patty Murray (op-ed, Aug. 10) highlights the troubling misconception that skills are not present in the American work force.

The senators would score some high marks with roughly 40,000 literate, skilled, unemployed or under-employed ironworkers if they were to let us know exactly where these three million jobs are. Ironworkers are the recipients of “earn while you learn” programs. They are the product of three- and four-year apprenticeship programs that allow them to learn intricate welding techniques, understand the physics of 100-plus ton pieces of material and equipment that need to be safely moved or set, and how to build bridges to last 1,000 years. No student loans, Mom and Dad.

As CEO of Ben Hur Construction Company in St. Louis, Mo., and a member of Ironworkers Local 396, my entire business plan relies on literate and skilled ironworkers, and I must say, the “earn while you learn” model is alive and well. I learned highly sought-after skills as an ironworker from the ground up, and my experience mirrors that of 125,000 ironworkers who have worked to eliminate the “skills gap” that allegedly plagues the American economy.

If the senators can tell us which skills are missing, we can supply them. It will not cost the American public a dime, and we will see tax revenues increase as skilled workers garner good, fair wages.

William Brown –  St. Louis

 

As someone who has worked for and with small businesses for years, I know the reason most of the jobs the senators mention remain open is because the employer can’t find someone who is trustworthy, dependable, personable and willing to learn and work for the wage offered. In other words, the problem isn’t education, it’s attitude. As sad as the public schools are, most employers will gladly train anyone who displays both the intelligence and character traits needed to be successful. But those traits are increasingly hard to find in the “entitlement” culture that has been nurtured by the likes of these two “progressive” senators.

Greg Woods –  Rio Rancho, N.M.

 

If these two senators would get out and talk to small-business owners they would find that those owners do not want the government to teach job seekers how to weld or roof or plumb, but rather that they would prefer applicants who can read, write and perform math calculations. The employer would teach the job skills.

Jon Rush – Helena, Mont.

 

For years the basic cultural building blocks of a liberal education have been in decline in favor of a dumbed-down curriculum and grading system so that everyone could have a diploma, skilled or not. Is it surprising that many of our graduates cannot read and write effectively, handle abstract thought processes, have a woeful sense of history and are not disciplined enough to acquire useful engineering skills?

If we want a superior work force in the global economy, we need a fundamental cultural change in our educational system. The federal government is unlikely to accomplish this goal.

James F. Chambliss –   Evanston, Ill.

 

According to Rep. Paul Ryan’s “A Roadmap for America’s Future,” there are currently 49 federal job-training programs, including those created by the Workforce Investment Act that Sens. Landrieu and Murray want to reauthorize. Each of the 49 programs ought to be evaluated relative to comparable performance standards, then program supporters need to answer two basic questions: How did the program perform relative to standards? How much did it cost? Too often job-training programs are simply funding vehicles for community organizations, producing poor results per dollar spent, while keeping administrators employed.

America no longer has the cash to waste on well-intentioned but ineffective programs. Our public education “investments” have left us with the skills gap.No more blank checks for cliché causes.

Jim Fitzpatrick – Hampton, Va.

 

A more effective measure to address the low skill level of those entering the work force for the first time would be to offer students the option of a strong vocational educational system, starting in the second or third year of high school. This would reduce the drop-out rate and better prepare students who aren’t a good fit for college to be productive members of a skilled work force.

Other nations have recognized that college is not for all students and have developed robust, practical job training in industries that are both in demand and of interest to those students. It’s time for the U.S. to do the same.

Josh Bartel – Atlanta

 

More than anything, our government should be trying to encourage personal responsibility. But then again, it is not a very good role model, is it?

Rod Kelly – Spring, Texas

More Failed Government Investment Isn’t the Answer — Letters to the Editor – WSJ.com.

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Tax the super-rich or riots will rage in 2012

I don’t agree with Paul Farrell (MarketWatch) on every point, but I think his arguments warrant consideration.  I think I agree that the rich could pay more, but NOT if the revenues are used for more liberal, socialism, government solutions.  Spending MUST get under control as well.

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SAN LUIS OBISPO, Calif. (MarketWatch) — What a year. Rage in London, Egypt, Athens, Damascus. All real. Just a metaphor in the new “Planet of the Apes” film? No, much more. Warning: More rage is dead ahead. Across our planet a new generation is filled with rage. High unemployment. Raging inflation. Dreams lost. Hope gone. While the super -rich get richer and richer.

Listen to that hissing: The fuse is rapidly burning, warning us. Wake up before the rage explodes in your face. This firestorm is endangering America’s future. From forces outside, yes. But far more deadly, from deep within our collective psyche. We have lost our moral compass. We are self-destructing.

Crackpot warning? No. This warning comes from the elite International Monetary Fund. A recent IMF report looked at “the causes of the two major U.S. economic crises over the past 100 years, the Great Depression of 1929 and the Great Recession of 2007,” writes Rana Foroohar, an economics editor at Time magazine.

“There are two remarkable similarities in the eras that preceded these crises. Both saw a sharp increase in income inequality and household-debt-to-income ratios.” And in each case, “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.”

But the rich “got richer, by lending, and looked for more places to invest, bidding up securities that eventually exploded in everyone’s face. In both eras, financial deregulation and loose monetary policies played roles in creating the bubble. But inequality itself — and the political pressure not to reverse it, but to hide it — was a crucial factor in the meltdown. The shrinking middle isn’t a symptom of the downturn. It’s the source of it.” Today the consequences of the meltdown still haunt us — there’s more to come.
The next bubble

There’s a new bubble blowing. No one can stop it … soon it will explode.

Get it? There’s enormous “political pressure not to reverse” inequality till it “explodes in our faces.” We deny the inequality between rich and the other 99%. The rich are addicts. More is never enough. They thrive on greed, blind to the needs of others. Worse, they have no commitment to America as a nation. From Forbes billionaires and signers of “no new taxes” pledges, to Mitch McConnell’s un-American willingness to sabotage the economy to deliver on his main promise to make Obama a one-term president. Read about Obama’s support of Warren Buffett’s call to tax the rich.  [I think he’s on to it. The rich are addicted, and they have lost morals. ]

Yes folks, the new “Rise of the Planet of the Apes” film delivers a powerful warning paralleling the IMF red flags. Listen to reviewer Zaki Hasan in HuffPost. Here’s the scenario. What’s ahead for America as the inequality gap gets bigger, the job market stagnates, inflation rages, a double-dip recession nears. Hasan’s vision goes beyond metaphor. We see a psychological profile of America as an addict lost in an addiction. And like all addicts, we cannot see, nor stop, our self-destructive behavior:

“The Apes series has always been about self-inflicted wounds — the idea that man’s unquenchable hubris inevitably leads to catastrophic consequences both for himself and those around him, whether manifested through cruelty to animals or cruelty to himself.”

In the new film, our world is facing “the twin threats” of genetic engineering and a super-virus. But the central theme remains: “Man’s downfall comes as a result of his own actions.”

The original “Planet of the Apes” went deeper, speaking more to America’s fatally flawed mind: “Beware the beast Man, for he is the Devil’s pawn.” In this early scene, Dr. Cornelius, the anthropologist, an orangutan, is reading aloud from the ancient sacred scrolls of the Apes: “Alone among God’s primates, he kills for sport or lust or greed.” Yes, that reminds us of Goldman’s war to dominate the great Wall Street jungle.

He keeps reading from the scrolls: “Yea, he will murder his brother to possess his brother’s land. Let him not breed in great numbers, for he will make a desert of his home and yours. Shun him; drive him back into his jungle lair, for he is the harbinger of death.” [This describes amoral capitalists.]

Yes, evolution is reversing. Here a prophecy comes true. The Apes knew our brains were saboteurs, destroying our rightful place at the top of the jungle’s food chain: “Man is a nuisance. He eats up his food supply in the forest, then migrates to our green belts and ravages our crops. The sooner he is exterminated, the better.”

Warning: The rage is sweeping London, Damascus, Tripoli, the spreading Sahara desert. Is America next?  Tax the super-rich, or revolution will overrun America next

Yes, tax the super-rich. Tax them now, before the other 99% rise up, trigger a new American Revolution, another meltdown, a new Great Depression. Historically, revolutions build over long periods, bubbles growing to critical mass. Then, “something happens.” Suddenly. Unpredictably. A flashpoint triggers ignition. Nobody saw it coming in Egypt. A suicide in a remote village uploaded on a young Google executive’s Facebook page. Goes viral, raging out of control. Cannot be stopped. So think hard about these six warnings blowing a new mega-bubble that will soon explode in our collective faces:

1. Warning: High unemployment is a global ticking time bomb

An earlier special report in Time, “Poor vs. Rich: A New Global Conflict,” warns that a “conflict between two worlds — one rich, one poor — is developing, and the battlefield is the globe itself.”

Just 25 developed nations with 750 million citizens “consume most of the world’s resources … enjoy history’s highest standard of living.” But now they face 100 poor nations with 2 billion people, many living in poverty, all demanding “an ever larger share of that wealth.” A British leader calls this a “time bomb for the human race.”

2. Warning: Tax cuts for the rich increase youth unemployment

In a New York Times column, Matthew Klein, a 24-year-old Council on Foreign Relations researcher, saw the parallel between the 25% unemployment among Egypt’s young and the 21% for young Americans: “The young will bear the brunt of the pain” as governments rebalance budgets. “Taxes on workers will be raised, spending on education will be cut while mortgage subsidies and entitlements for the elderly are untouchable.” And more tax cuts for the rich.

3. Warning: Rich get richer on commodity inflation, poor get angrier

USAToday’s John Waggoner warned: “Soaring food prices send millions into poverty, hunger.” The “rise in food prices means a descent into extreme poverty and hunger, warns the World Bank.” One Pimco manager warns that commodity inflation exposes “the underlying inequalities and issues related to the standard of living that boil beneath the surface.”

4. Warning: The super-rich are blinded by their addiction to money

In “Free Lunch: How the Wealthiest American Enrich Themselves at Government Expense (And Stick You with the Bill),” David Cay Johnston warns that the rich are like addicts, and to “the addicted, money is like cocaine, too much is never enough.” Recent data: 300,000 Americans in “the top tenth of 1% of income had nearly as much income as all 150 million Americans who make up the economic lower half of our population.”

5. Warning: Politicians are corrupted by this super-rich addiction to greed

In “Washington’s Suicide Pact,” Newsweek’s Ezra Klein warns: “Congress is careening toward the worst of all worlds: massive job losses and an exploding deficit.” And the debt-ceiling drama just made things a lot worse. Millions of jobs were lost during Bush years, his wars, tax cuts for the rich. Yet, today the GOP is in total denial of that legacy, blinded by an obsession to destroy Obama’s presidency, no matter the consequences.

6. Warning: Soon the revolutionaries will rage, then dominate ‘Third World America’

Yes, we are ripe for a surprise revolution. In “Third World America” Arianna Huffington warns: “Washington rushed to the rescue of Wall Street but forgot about Main Street.” Now Bernanke’s promise of cheap money through 2013 is just one more “free lunch” to the richest 1%. Meanwhile, “one in five Americans unemployed or underemployed. One in nine families unable to make the minimum payment on their credit cards. One in eight mortgages in default or foreclosure. One in eight Americans on food stamps. Upward mobility has always been at the center of the American Dream … that promise has been broken… The American Dream is becoming a nightmare.”

Wake up folks. Super-rich addicts are destroying the American Dream for everyone. They’re destroying the American economy. They don’t care about you. Yes, they hear the ticking time bomb. They’re stockpiling cash. Don’t say you weren’t warned. The IMF sees a new collapse sweeping across the planet. Open your eyes. You’re not watching a film. This is not a metaphor. Plan now for the revolution, class warfare, market crash, economic collapse, plan for another depression.
Tax the super-rich or riots will rage in 2012 – MarketWatch.

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