The Economy is Doing Fine?

I know that there has been much to do about the following statement by President Obama and the following retraction walk back, but here’s one more take:

“The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government. Oftentimes cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.”

“It’s absolutely clear the economy is not doing fine.  That’s the reason I had a press conference. That’s why I spent yesterday, the day before yesterday, this past week, this past month and this past year talking about how we can make the economy stronger. The economy is not doing fine. There are too many people out of work. The housing market is still weak, too many homes underwater and that’s precisely why I asked Congress to start taking some steps that can make a difference.”

Other than the fact that there is an amateur running the country, we have yet another viewpoint of what President Obama’s vision is for the United States – The Federal Government Will Fix Everything.  You and I know that this is the farthest thing from the truth.  Government does not produce a product, and the only hiring it can do is to swell the size of government.  Otherwise, it takes tax dollars that it steals collects from it’s citizens and redistributes the money to different agencies to spend, and often, it isn’t wisely spent.  The recent scandal with the GSA is just the latest of idiocy of government gone wild with public funds.  We (and our politicians) have to realize that there is only so much money to be had to support the government’s spending spree before the bill comes due.  And the bill is coming due at the speed of an express train – just take a look at the Eurozone’s problem with collapsing banks and country’s going broke because of deficit spending (spending more than what the government collects in taxes).

But that doesn’t seem to matter with the current administration (or the Democratic Left).  Here’s a quote from an article detailing the plight of Detroit as it follows the Left’s policies to its doom:

The Left’s answer to the deficit: raise taxes to protect spending. The Left’s answer to the weak economy: raise taxes to enable new spending. The Left’s answer to the looming sovereign-debt crisis: raise taxes to pay off old spending. For the Left, every deficit is a revenue-side problem, not a spending-side problem, and the solution to every economic problem is more spending, necessitating more taxes. The problem with that way of looking at things is called Detroit, which looks to be running out of money in about one week. Detroit is what liberalism’s end-game looks like.

And from the same article, a statement about government:

The third lesson is moral. Detroit’s institutions have long been marked by corruption, venality, and self-serving. Healthy societies have high levels of trust. Who trusts Detroit? This is not angels-dancing-on-the-head-of-a-pin stuff. People do not invest in firms, industries, cities, or countries they do not trust. Corruption makes people poor.

What is true of Detroit is true of the country. Our national public sector not only is bloated and parasitic, it is less effective, less responsible, and less honest than that of many other developed countries, including New Zealand, Canada, Australia, and Germany.

Indeed, do you trust our government?  I don’t, not totally, especially with the events over the past three years.  Promises made, promises broken, and the state of the country is generally worse than it was three years ago.  Here in Michigan, the unemployment rate officially stands at 8.3%, but that does not take into account people who have dropped off the unemployment rolls and/or have quit looking for jobs.  Nationally, it stands at 8.2%, and that is under the same conditions.

My personal opinion is that the politicians of both political parties are out of touch with the common working person.  Once the politicians are elected to government, we (and companies) are seen as no more than revenue sources for whatever social program or political kickback is on the politician’s radar at the time.  Green companies are the latest political kickback scheme involving political talking points and fiscal irresponsibility (follow the money for who made out on Solyndra and you will understand), and definitely did not benefit the working man as promised.

Perhaps we should look at one country who pulled their collective s*** together and got themselves out of the same predicament that we are finding ourselves heading toward at breakneck speed:  Sweden.

Americans still think of Sweden as a tightly regulated social-welfare state, but in the last two decades the country has been reformed. Public spending has fallen by no less than one-fifth of gross domestic product, taxes have dropped and markets have opened up.

From 1970 until 1989, taxes rose exorbitantly, killing private initiative, while entitlements became excessive. Laws were often altered and became unpredictable. As a consequence, Sweden endured two decades of low growth. In 1991-93, the country suffered a severe crash in real estate and banking that reduced GDP by 6 percent. Public spending had surged to 71.7 percent of GDP in 1993, and the budget deficit reached 11 percent of GDP.

The combination of the crisis and the non-socialist government under Carl Bildt from 1991 to 1994 broke the trend and turned the country around. In 1994, the Social Democrats returned to power and stayed until 2006. Instead of revoking the changes, they completed the fiscal tightening. In 2006, a non- socialist government returned, and Finance Minister Anders Borg, with his trademark ponytail and earring, has led further reforms. Sweden successfully weathered the global financial crisis that started in 2008, and the Financial Times named Borg Europe’s best finance minister last year.

Sweden’s traditional scourge is taxes, which used to be the highest in the world. The current government has cut them every year and abolished wealth taxes. Inheritance and gift taxes are also gone. Until 1990, the maximum marginal income tax rate was 90 percent. Today, it is 56.5 percent. That is still one of the world’s highest, after Belgium’s 59.4 and there is strong public support for a cut to 50 percent.

The 26 percent tax on corporate profits may seem reasonable from an American perspective, but Swedish business leaders want to reduce it to 20 percent. Tax competition is fierce in some parts of Europe. Most East European countries, for example, have slashed corporate taxes to 15-19 percent.

In the bad old days, the annual centralized-wage bargaining between the Trade Union Confederation and the Swedish Employers’ Confederation was a prized custom. But in the 1970s, this system led to both inflation and strikes. Today, it is long gone. Wage bargaining is still collective, but it is decentralized. Wage inflation is no longer a concern and strikes are extremely rare. The employers have won, but real wages are rising with productivity, so the workers are benefiting, as well. As everywhere, trade unions are losing members, money and power.

Now I certainly do not want to have my taxes raised to Sweden’s level, but without corresponding cutbacks in governmental spending and more business-friendly policies, any tax increase is counter-productive and will be stifling to any economic recovery.  And I don’t think that the TEA party advocates would sit back and agree with this either, at least without major permanent reforms in the tax and spend structure that is currently in place.

So is the economy “doing fine”?  No, but it is getting better, and the chuckleheads in Congress have the opportunity to pass budgets, regulations, and policies that will encourage real business growth instead of promoting the “industry/political cause of the week”.  Now if they would only put aside their political ideologies and do what needs to be done for the good of the country instead of themselves…

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About Tom Roland

EE for 25 Years, Two Patents - now a certified PMP. Married twice, burned once. One son with Asperger's Syndrome. Two cats. Conservative leaning to the Right. NRA Life Member.
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One Response to The Economy is Doing Fine?

  1. The Griper says:

    you’re right, governments cannot produce a product but it can provide a service which benefis the people. what it cannot do, by the nature of its being and purpose in society, is produce a “profit”. that is what needs to be emphasized in a society where capitalism is the form of economics practiced. it is profits that make this form of economics self-sustaining. it is out of profits that gives the means of both the owner and labor to live in the style that they do.

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