About That Recovery

Yesterday The Wall Street Journal posted an article illustrating the timeline of the economic growth our country is currently experiencing. The article deals with the recent claims by former President Obama that he is responsible for the current economic growth and that the growth began under his leadership. In February 2018 The Washington Times reminded us that Obama Democrats told us that what looked like long-term stagnation under President Obama’s economic policies, with growth stuck at 2 percent on average for his whole eight years in office, was the New Normal that the American people were going to have to get used to, the best we could do now.

The Wall Street Journal reports:

Milton Friedman was the first economist to notice a pattern in American economic history: The deeper the recession, the stronger the recovery. The economy has to grow even faster than normal for a while to catch up to where it would have been without the recession. The fundamentals of America’s world-leading economy are so strong that the pattern held throughout the country’s history.

Until the past decade. The 2008-09 recession was so bad, the economy should have come roaring back with a booming recovery—even stronger than Reagan’s boom in the 1980s. But Mr. Obama carefully, studiously pursued the opposite of every pro-growth policy Reagan had followed. What he got was the worst recovery from a recession since the Great Depression.

Before Mr. Obama, in the 11 previous recessions since the Depression, the economy recovered all jobs lost during the recession an average of 27 months after the recession began. In Mr. Obama’s recovery, dating from the summer of 2009, the recession’s job losses were not recovered until after 76 months—more than six years.

The article concludes:

Obama apologists argued America could no longer grow any faster than Mr. Obama’s 2% real growth averaged over eight years. Slow growth was the “new normal.” The American Dream was over. Get used to it. Hillary Clinton promised to continue Mr. Obama’s economic policies. America’s blue-collar voters rose up.

The recovery took off on Election Day 2016, as the stock market communicated. Mr. Trump’s tax cuts and sweeping deregulation—especially regarding energy—fundamentally changed course from Mr. Obama. These policies have driven today’s boom, increasing annual growth to more than 3% within six months and now to over 4%.

Will Democrats ever figure out what policies create jobs, economic growth and rising wages? If not, they’ll wake up some Wednesday morning to find they have been routed in a fundamental realignment election, in which they have permanently lost the blue-collar vote—once the backbone of their party.

The truth is in the numbers. All of us need to be aware that what former Presidents say about today’s economic growth may not be true. Economic policies make a difference, and President Trump has illustrated that.

What Happens When Expectations Are Raised Too High?

The Daily Caller posted an article today that illustrates the problem with teaching children to expect things they didn’t earn.

The article reports:

Nearly half of all America’s college students have deluded themselves into believing that the federal government will graciously forgive their student loans despite the fact that the federal government forgives only a very low percentage of student loans.

LendEDU, a student loan marketplace website, documented this startling disparity between belief and reality in a nationwide survey of 500 students currently attending America’s colleges and universities, reports the New York Post.

The survey shows that 49.8 percent of the students surveyed think they will be eligible for federal student loan forgiveness.

In reality, only about 10 percent of all college graduates will ever see any portion of their student loans forgiven under current loan forgiveness law.

Under President Obama, the government took over the student loan program in 2010.

Yesterday Fox Business reported:

According to the New York Federal Reserve, U.S. student loan debt has soared to $1.3 trillion becoming the second highest consumer debt category, more than both credit cards and auto loans.

In an exclusive interview with FOX Business’ Liz Claman, Washington College President and former Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair said the student loan debt crisis could spark next financial crisis, since it is a “tremendous drag” on the U.S. economy.

During the financial crisis of 2008–09, excessive mortgage debt collapsed consumer spending as more families opted to pay off debt. Bair said the same dynamic could be seen if the student debt bubble bursts.

When the housing bubble burst, there were assets that could be sold (although at a loss). There will be no assets to sell if the student debt bubble bursts–a lot of the people with the debt are living in their parent’s basements.

The Daily Caller reports:

Of the $1.31 trillion in outstanding student debt, some $31 billion, is “seriously delinquent,” meaning the debtors are at least 90 days past their payment dates.

Well known economist Milton Friedman is credited with saying, “If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” I think it’s time to get the government out of the student loan business and give that business to the banks. Banks are better judges of how to lend money and how to get paid back. I have a strong suspicion that the taxpayers may get stuck holding the bag on this one.

I’m From The Government And I’m Here To Help

“I’m from the government, and I’m here to help.” Those words should strike fear in the hearts of every American. As Milton Friedman one stated, “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” Someone equally knowledgeable in the ways of government amended that statement slightly–“Yes, but if you put Congress in charge from the start, they would start a federal sand reserve to store up most of the sand from the very beginning. Then the sand shortage would start in one year, but when glassmakers needed more, they could dole out the stored sand to their political contributors and claim they did it to ‘keep prices down’.”

Obviously, either way there is a problem. Where am I going with this? The Environmental Protection Agency (EPA) has just declared war on most of the cars in America. On Tuesday, Investor’s Business Daily posted an editorial about the latest move by the EPA.

The editorial explains:

The EPA’s proposal to increase the amount of ethanol that must be blended into gasoline is a trifecta of regulatory abuse. It will do nothing for the environment, it will do nothing for energy security, and it could wreck millions of car engines.

…The EPA’s proposal would require refineries to blend in almost 19 billion gallons of ethanol and other “biofuels” by 2017, which is 700,000 gallons more than they do now.

But there’s a problem. Americans aren’t consuming enough gasoline. In fact, consumption this year is well below the 2007 forecast, both because cars are more efficient and because people are driving less than expected.

So, if oil refiners are to pump 19 billion gallons of ethanol into their gasoline supplies, they won’t be able to keep ethanol ratio below 10%.

 Why does that matter? Because ethanol is corrosive and can degrade plastic, rubber and metal parts. And the more ethanol in gasoline, the most likely this damage will occur. So going above 10% can wreak havoc with car engines — as well as those in motorcycles, lawnmowers, power boats, you name it — that aren’t built to handle the higher ethanol levels.

The first thing to consider here is that the EPA is not legally entitled to make laws–only Congress can do that. The EPA is not elected and is therefore not accountable to the voters–therefore they do not have the right to enact laws.

The article also points out that increased use of ethanol drives up food prices, which actually hurts the poor. So why in the world isn’t Congress fighting back? If you were running for office in a farm state, would you want to tell the farmers in that state that the price of corn will be going down because ethanol has not been the wonderful thing you thought it was?

The editorial concludes:

So why is the EPA pushing ethanol? Does it help fight global warming? Does it help cities fight smog? Does it help the U.S. become more energy independent?

The answer is: None of the above.

A 2011 study by the National Research Council found that ethanol use could boost overall CO2 emissions. An earlier study published in Science also found that, when you consider the impact of converting forests and grasslands to cornfields, ethanol sharply increases carbon emissions.

Meanwhile, a 2007 study by a Stanford University environmental engineer found that increasing ethanol levels in gasoline can lead to more smog.

The idea that we need ethanol to become energy independent might have made sense in 2007. But the fracking boom since then has unleashed massive new domestic supplies of oil and natural gas, rendering this argument entirely moot.

Here’s an idea. Rather than requiring oil refiners to pump more of this dirty and expensive fuel into gasoline supplies, the federal government should abandon the ethanol requirement altogether.

Big Corn might not like it, but millions of car owners will be grateful.

When the government gets involved in what should be the free market, bad things happen.

Green Energy Isn’t Really Cutting Carbon Emissions

Yesterday The Daily Caller posted a story about the impact of green energy policies on carbon emissions in various states.

The article reports:

There’s no link between the pro-green energy policies of states and falling carbon dioxide (CO2) emissions, but there is a statistically significant link between falling CO2 and natural gas electricity, according to statistical analysis conducted by The Daily Caller News Foundation.

Statistical analysis and regressions run by TheDCNF found no statistically significant link existed between the amount a state’s CO2 emissions fell since 2005 and the number of policies supporting green energy implemented by the state. The analysis showed there is an 81 percent chance there’s no link between CO2 emissions and the number of pro-green energy policies, meaning a link between the two likely doesn’t exist. The very small correlation between CO2 emissions and policies was going in the opposite direction from environmentalist claims.

Think about this a minute. According to data from British Petroleum, America ranks fifth in the world for the largest natural gas reserves. We now have a link between lower CO2 emissions and the use of natural gas. We can easily convert our electric plants to natural gas. This would be a big step toward making America energy independent and providing jobs for Americans instead of sending money overseas.

Please follow the link to the article in The Daily Caller to look at the charts which illustrate that the states with fewer green energy policies were the ones that were more successful in cutting CO2 emissions.

The article notes:

The DCNF’s (Daily Caller News Foundation) analysis found states like New Hampshire, Maryland, Maine, Georgia, Nevada and Alaska cut higher percentages of CO2 since 2005 than any others. These states had a combined average of 39 pro-green energy policies. The national average of all states was 51 pro-green energy policies. This suggests the more pro-green energy policies a state has, the less likely it was to reduce CO2 emissions.

This is another example of how excessive government involvement and interference in the free market makes a problem worse instead of solving it. There is a quote, generally attributed to Milton Friedman, that applies to this situation–“If you put the federal government in charge of the Sahara Desert, in five years there’d be a shortage of sand.” I truly believe that.

The Answer To Social Security Is In South America

Investor’s Business Daily posted an article today about the success of private, personal retirement plans in Chile.

The article reports:

In 2012, the Chilean government invited a group of journalists to the South American country to show off its innovations — language programs, new uses for llama fur, greenie aquaculture, microfinance, quake-proof skyscrapers and the world’s most powerful telescope.

But there was one thing missing amid all these new ideas: recognition for Chile’s most spectacular innovation, the one that made the country’s development into a first-world country possible.

That concept? Chile’s 35-year old private pension program, which a new report confirms is working spectacularly well.

Sergio De Castro, the dean of Santiago’s Catholic University, became Finance Minister of Chile in 1976. He began a free market revolution in the Chile. Jose Pinera designed and implemented the profoundly innovative private pension system, which up until then had never been tried — and which was copiously praised Milton Friedman?

The article further reports:

Pinera, who was Chile’s labor minister in 1978, knew that the idea of private pensions would have to be sold to the public. Economic ignorance was widespread, and he utilized the most important media outlet of the day, radio broadcasting, to give five-minute talks for the citizens on savings, ownership, control, responsibility and wealth building — which are the pillars of the Chilean Model — and have as their ultimate reward a comfortable retirement, which Chileans now do.

His daily broadcasts led to sign-ups for the new private pension option that went well beyond expectations. At the time, Chile’s leaders had expected 4% of the population to sign up, but got 25% right off the bat.

I am somewhat convinced that the problem in America is not economic ignorance–it is people who are wrongly informed on the subject of economics.

So what were the results:

A Wharton professor, Olivia Mitchell, recently went down to Chile to sort the complaints out, and found that there was nothing to complain about — the system worked exactly as advertised, creating wealth and providing a dignified retirement for millions of people well beyond what the state could accomplish and, in fact, a much better one than Americans get with Social Security.

We need a leader with the courage to copy what has already proven successful rather than continue with the current ponzi scheme that we call Social Security.