Geniuses Get Tangled in Complex Theories Like A Horse in Barbed Wire.
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 09/06/23
Last time, we featured comments from several economists and noted political maneuvering in Washington to shed light on our situation. Here’s more.
HR 1 is a pro-growth, pro-energy development bill that needs to be passed, Michael Faulkender said. He is a University of Maryland professor, former Treasury economist and chief economist at the American First Policy Institute. He said that it wasn’t enough to just extend the 2017 tax cuts beyond their expiration in 2025. There needs to be further tax cuts, if we are to dig out of the spending and debt hole we’re in.
Right now, there is a subset of Republicans holding up HR1 because they are preoccupied with the SALT provision in the 2017 law.
SALT allowed taxpayers in high tax states to deduct up to $10,000 of state tax obligations from their federal tax. That figure was a compromise from much higher allowances but there are Republicans holding up HR1 because they want the SALT provision cut out entirely.
They feel that means the rest of the states that balance their budget, control spending and keep taxes lower are subsidizing high tax states like New York, California, Illinois and others. New York, for example, can levy as high as a 10.9 percent state income tax.
On another relevant subject, Gordon Chang, the well-known expert on China, was asked about the BRIC countries trying to replace the U.S. dollar as the globe’s reserve currency by establishing a gold standard-based currency. Chang’s answer: there is only one country that can dethrone the dollar -- the U.S. and Biden with spending.
What’s hard to understand is that economic demonstrations or models are abundant in U.S. and other countries’ history, whether one is talking about national systems of government or state government. The USSR, East Germany and Communist China are prime examples of centrally-planned economies not working. The first two imploded and China, having struggled for decades, had some success with market reforms. Now it is struggling mightily, having gone back to a centrally planned government-controlled economy.
Forbes publisher Steve Forbes pointed out that we have blue states and red states that are laboratories showing what does and doesn’t work.
We have demonstrations in just the last 15 years, with 1.8 percent growth under President Obama and 3-4 percent under Trump back to mostly under two with President Biden.
The slate of Republican presidential candidates need to talk more about those differences, Forbes said. Many people have complained the first debate featured a lot of bickering between candidates but not enough focus on the economic issues voters are dealing with. Beyond that, a vision of economic growth needs to be laid out.
While the CPI inflation numbers have come down year/year, they are set to rise again as the comparison to months with lower inflation a year ago begins to affect the comparison, plus rising gas prices. While we’re showing inflation in the mid-three percent range now, taken from the beginning of the Biden administration, the overall CPI has gone up 15+ percent and 20+ percent for food. Gasoline is nearing $4.00 vs. 2.37 under Trump. Few prices are going down.
Former Federal Reserve chairman, now Treasury Secretary JanetYellen reminded: “The Fed has a dual mandate and it is maximum employment and price stability.
We give the Fed a hard time. That’s because they do not do a very good job, they use poor economic reasoning and yet, they are the ones in charge of U.S. monetary policy.
For instance, the Fed still seems to believe in the Phillips curve when it comes to managing inflation. The problem is, the data have not supported the theory. Many economists have postulated various tweaks and excuses for it but time and again, it hasn’t explained the past and fails to predict the future. The Phillips curve holds that when unemployment is high enough, inflation will go down. So the Fed looks at low unemployment numbers and raises interest rates to harm the economy, in the belief that increased unemployment will bring inflation down.
A recent column points out the problem. The Fed isn’t the only central bank that believes this theory. But looking at 17 “rich” nations recently, the big drop in inflation happened earlier, when unemployment in half of them was falling or flat.
“In fact, declining inflation shows no correlation with rising unemployment across countries, neither before inflation peaked nor after,” (“Labor Is a Terrible Inflation Guide,” Wall Street Journal, 09/06/23).
In a search to find something that explained previously held dogma, economists have postulated the Phillips curve had flattened, that it had shifted or that it was correlated to the ratio of job openings to unemployed people.
We love this next quote, not only in this context, but it explains an awful lot of government today, especially the climate “emergency” or supposed Covid “science.”
“However, arguments that rely on an ever-mutating relationship between variables that can only be determined in hindsight are problematic. They can quickly become an unfalsifiable way to assume that a relationship exists.”
Are we the only ones who hear Fauci’s voice when we read those terrific lines? Do you see the “hockey stick” of planet earth’s temperatures limned on your eyelids?
We are supposed to be an educated society, heeding some semblance of fact-based logic. What happened? But we digress. Authoritarian government is another story.
The problem is, this is the kind of stuff central banks believe in, as the story points out, and that will govern their actions going forward.
Speaking of the causes of inflation, it was just announced that Biden evidently thinks gasoline prices are not high enough. The administration is going to cancel already sold leases in the Alaska wildlife refuge and block any new drilling in millions of acres there. The leases were sold during the Trump administration.
A friend of mine sent me Warren Buffet’s solution to our budget deficit problem. Just pass a bill that requires the deficit to be 3 percent or less of the GDP or else every sitting member of Congress is ineligible for re-election (“Warren Buffets Financial Plan to Tackle America’s Debt: `I Can End the Deficit in 5 minutes,’” gobankingrates.com, 08/06/23).
It would be hard to imagine Congress passing such a bill. But they did hammer out a sequester agreement to cut spending a few years ago. A phase-in might be doable, with a Congress re-populated with members elected by people really, really furious with America as it is currently trending.
Horrible inflation; a “judiciary” functioning like nothing the U.S. has ever seen; crime making cities more lawless than the Wild West ever was (where’s the Hanging Judge when you need him); no real border control at all and an unelected government bureaucracy taking over the country to rule by fiat, might accomplish it.
Edi. Note: the pic below looked so good, we had to keep it again, (courtesy beef Check off).