The Economic System That Works

We have all heard the expression, “The proof is in the pudding.” In other words, you can judge the value of something by how well it works. Sounds like common sense, but somehow common sense occasionally takes a vacation from our political dialog. Recently, the left wing of the Democrat party has come out in support of socialism. Tom Steyer and George Soros have invested millions of dollars into Democrat candidates who support socialism while many Democrats are trying to play down the fact that the party is flirting with socialist ideas. Capitalism has dropped in approval among the public while socialism is popular in many circles. Yet when you compare the results of the two economic systems, capitalism helps many more people than socialism.

Yesterday Investor’s Business Daily posted an editorial titled, “The Coming Global Middle-Class Majority: Thank Capitalism, Not Socialism, For The Boom.”

Here are some highlights from the editorial:

…capitalism in the last few decades has had the most revolutionary impact on improving human lives in history.

And yes, that’s a fact, one reaffirmed in a new study by the liberal-leaning Brookings Institution think tank.

The study validates what some have known now for years: Capitalism makes everyone wealthier, even the poor. But it also magically turns hundreds of millions of poor people into the middle class. It’s the greatest economic transformation ever.

The Brookings study, by Homi Kharas, asserts that in just two years — 2020 — the majority of the world’s estimated 7.5 billion people will be “middle class.” Kharas defines middle class as anyone who can pay for food, shelter and clothing, with enough left to supply some luxuries, including TV, a motorbike or car, higher education, home improvements and better food.

The editorial notes the difference between perception and reality:

Put another way, thanks to the free-market revolution that is still reshaping the world, per person global output increased more in the 15 years after the fall of communism than it had in the previous 10,000 years of human civilization.

To say this is an underrecognized, underreported phenomenon is an understatement. Today, in our colleges and universities, our best students learn that the world is bifurcated sharply into haves and have-nots, a result of capitalism run amok. And that capitalism leaves a small handful of people richer but the rest of us poorer.

Simply not true. Indeed, most of the world is getting richer, largely due to free trade, more open investment, and the recognition by many countries that not all regulations are good. And among those who have benefited the most are those who are the poorest.

Socialism didn’t achieve these things. Capitalism, now a dirty word, did. Yet, as we’ve mentioned before, a recent Gallup Poll shows that among those aged 18 to 29, 51% have a positive view of socialism while just 45% have a positive view of capitalism. They’re sadly mistaken.

As left-leaning economist Robert Heilbroner so eloquently wrote in the pages of the New Yorker all the way back in 1989, “Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won … Capitalism organizes the material affairs of humankind more satisfactorily than socialism.”

The editorial concludes:

Yes, growth cycles go up, and they go down. But there is no question that the free market policies put in place in the early 1980s under U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher have had an enormous effect around the world. The ideas they fostered and that other governments picked up made the world a much wealthier place. They helped pull literally hundreds of millions out of poverty and misery.

Remember that the next time you hear Sen. Bernie Sanders, Sen. Elizabeth Warren or congresswoman wannabe Alexandria Ocasio-Cortez extol the wonders of socialism. Capitalism creates wealth. Socialism creates poverty. And the explosion in the global middle class proves it.

I guess those who support candidates espousing socialism need to study recent economics and history.

If The People Negotiating Are Not Being Honest With Americans, Who Can We Trust?

CNS News posted a story today about claims made by the Obama Administration about the interim agreement with Iran. During the State of the Union Address, the President stated, we have “halted the progress of its nuclear program.” President Obama repeated the claim in his National Security Strategy Report issued on Friday. I would love for that statement to be true, but it seems that I am not the only one with doubts.

The article reports:

The Washington Post’s Fact Checker column examined Obama’s SOTU claim, and determined that it earned him “three Pinocchios.” (On a scale of one to four Pinocchios, three are handed out for statements deemed to entail “significant factual error and/or obvious contradictions.”)

Obama claimed that progress in Iran’s program had been “halted” as a result of the JPOA. But Post columnist Glenn Kessler, citing non-proliferation experts, said that the amount of nuclear material in Iran’s possession that could eventually be converted for bomb-making had in fact continued to increase over the 2013-2014 period.

It gets worse.

The article reports:

Instead of his SOTU address claim that “we’ve halted the progress of its nuclear program and reduced its stockpile of nuclear material,” Kessler concluded that Obama could have said, “We’ve slowed the progress of its nuclear program and reduced its stockpile of the most dangerous nuclear material.”

“But instead he choose to make sweeping claims for which there is little basis. Thus he earns Three Pinocchios.”

Hours after the White House released the NSS on Friday, National Security Adviser Susan Rice repeated the claim in a speech at the Brookings Institution.

A little honesty would be nice.

Misplaced Anger

On Friday, CNS News posted a story quoting Black Entertainment Television (BET) founder Bob Johnson as saying that America would “never tolerate white unemployment at 14 or 15 percent” and yet unemployment for the black community has been double that of white Americans for over 50 years. That statement is true, and that fact is evidence of something wrong with our education and employment system as it currently exists. However, before we yell racism, let’s look at some of the things that surround black unemployment.

In 1962, Daniel Patrick Moynihan, a Senator from New York who was very concerned about how American welfare programs were impacting the black family, noticed that because of the changes made to the welfare system, the number of black households without fathers present was increasing dramatically (City Journal Summer 2005). Before then, welfare was provided to families below a certain income whether or not the husband and father was living in the house. Welfare was changed in the 1960’s so that it was financially advantageous for a husband and father not to be living in the home. At that point, the black culture changed from one of strong families to one of single mothers. (Just for the record, much of the white culture is following the same path). Single-parent families are statistically much more likely to live below the poverty level than two-parent families.

High unemployment rates for blacks are a problem. High unemployment rates for anyone are a problem. If Bob Johnson is truly concerned about black unemployment, he needs to move within the black culture to support families, family values, and good education from kindergarten through college. One attempt at this, the Head Start Program, has yielded unimpressive results. We can do better.

On July 11, 2007, Time reported:

It is now 45 years later. We spend more than $7 billion providing Head Start to nearly 1 million children each year. And finally there is indisputable evidence about the program’s effectiveness, provided by the Department of Health and Human Services: Head Start simply does not work.

According to the Head Start Impact Study, which was quite comprehensive, the positive effects of the program were minimal and vanished by the end of first grade. Head Start graduates performed about the same as students of similar income and social status who were not part of the program. These results were so shocking that the HHS team sat on them for several years, according to Russ Whitehurst of the Brookings Institution, who said, “I guess they were trying to rerun the data to see if they could come up with anything positive. They couldn’t.”

So how do we change the black unemployment numbers? Actually, the place to start is the government. First of all, Obamacare is having a negative impact on employment for everyone–repeal it. Second of all, we need to take a good look at welfare programs and how they impact the people who receive the money (and while we are at it, examine the administrative cost). Third, we need community leaders who support black families and encourage black children to speak proper English, get a good education, get married after they finish school, and have children after they get married–not before. We then need to revise our welfare programs so that they promote intact families, and do not promote dependence upon the government. We need workfare programs–first of all to make welfare less attractive, and secondly to provide the experience (and expectation) of getting out of bed every morning and going to work. Workfare also provides experience in doing some sort of work–whatever it is. We need to re-educate both the black and white communities on the free enterprise system to allow those who can be entrepreneurs to do so (we also need to modify our tax system so that it pays to be an entrepreneur).

We need black leaders who do not preach dependence. We need black leaders who do not preach hatred and blame. We need black leaders who want to bring the black community into equality with the white community in the areas of education, housing, opportunities, and success. That can be done by promoting responsibility, patriotism, cooperation with authority, and basic values. Racism, hatred, and blame will get us nowhere. We need a positive approach.

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The New Definition of Independent and Non-Partisan

Today’s Weekly Standard posted an article about President Obama’s recent claim that an independent, non-partisan organization ran all the numbers on Governor Romney’s plan and concluded that any revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers.

Well, everyone is entitled to their own opinion, but as Senator Moynihan used to say, ““Everyone is entitled to his own opinion, but not to his own facts.” Let’s take a look at this non-partisan, independent study. It was done by Samuel Brown, William Gale, and Adam Looney.

The article reports:

As Looney’s biography page at the Brookings Institution states, “Looney was the senior economist for public finance and tax policy with the President’s Council of Economic Advisers and has been an economist at the Federal Reserve Board.”

It gets even better. This is a copy of some of the White House visitor logs included in the article at the Weekly Standard showing William Gale visiting the White House twelve times:

If you believe that the study the President cited was an independent, non-partisan study, there’s a bridge I would like to sell you in Brooklyn.

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Why We All Need To Pay Attention Before The Next Election

Yesterday posted an article about a campaign ad the Obama campaign has created. The ad is total fiction, and the article explains why.

One of the claims in the ad is that the Obama Administration has decreased America’s dependence on foreign oil. The ad fails to mention that during a recession American oil consumption decreases and thus the amount of oil we import decreases. The article also fails to mention that gasoline consumption is down because the price of a gallon of gas has almost doubled under President Obama. The article includes a chart:

The article also deals with some of the other claims in the ad. President Obama claims that according to the Brookings Institution his administration has created 2.7 million clean energy jobs and is expanding rapidly. Again, that doesn’t line up with the facts. The article reports:

“Overall, today’s clean economy establishments added half a million jobs between 2003 and 2010, expanding at an annual rate of 3.4 %” — a half-million over eight years being a tiny gain. And that “this performance lagged the growth in the national economy, which grew by 4.2% annually over the period.”

We need to remember that Spain ended its government sponsored green energy program because for every job they created, two jobs were lost. We need to learn from the Spanish experience.

Overall the ad is a very nice-sounding group of lies. I am sure it is the first of many such ads. As voters, we need to learn to fact check all political ads from all candidates. Statistics can be twisted to say anything the person citing them wants them to say. Polls can be skewed according to who is polled. As voters, we really need to pay attention to what is said during the campaign and how much of what is said is actually true.

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