The Party of Income Inequality Is?

The Democratic Party!  For all of its huffing and puffing that it is the party of income equality, the Democratic Party has political control of by far the most areas of the US with high income inequality.  That party likes to claim that the middle class and low wage industry workers have been left behind in income growth over the years.  Let us look at a very interesting graph of the income growth in high wage, middle wage, and low wage industries since 2007:

The high wage industries wage growth over the years from 2007 into 2019 has been relatively steady.  The middle wage industries pay growth had some significant dips in 2010 and 2014 under Obama's administration.  The low wage industry wage growth rate hit lower rates of increase in 2010 and 2012 under Obama.  The Democrats will point out that after that low in 2012, the low wage industry wage growth began to get better until it was about the same rate of growth as that of the high wage industry wage growth rate in 2014.  By 2015, the wage growth rates were pretty close for all three industry groups.  However, in early 2018 wage growth for the low wage industries took off, achieving far faster rates of growth compared to the middle and high wage industry wage growth rates.  Apparently, the economic policies of the Trump administration are quite favorable to wage growth on the part of the low wage industries.

So, just as those areas of the country represented by Republicans in Congress tend to have less income inequality, Republican economic policies under Trump are enabling low wage earners to catch up with higher wage earners while in many of the years under Obama they were falling behind more and more.

Michael Strain of AEI notes that the median wages of all workers increased by 25% over the past 30 years corrected for inflation.  The wages of the poorest paid 20% of workers grew by more than one-third.  The poorest paid workers have actually been catching up in wage income therefore.  Income inequality has decreased.  Applying a broader income measure that takes into account income from fringe benefits, capital gains and dividends, Social Security, Medicaid and Medicare benefits, unemployment insurance, food stamps, and federal tax payments, this reduction of total income inequality remains substantial.  The median household income by this measure increased by 43% from 1990 to 2015.  In comparison, the households in the bottom 20% had an increase in income of 62%.  As the American economy has grown since 1990, the bottom 20% of households on the total income scale have benefited even more than the median household has.

The common claim of the Democrat Party that the poor and the middle class are falling behind and somehow suffering does not hold up.  It is true that they could have benefited more had government policies been different.  The economy overall could have grown more rapidly with policies more friendly to the free, voluntary private sector.  Had that extra growth path been chosen, median and poorer households would have had greater increases in income.  We see evidence of how that would have been the case in the recent surge in income of the low wage industries under the Trump administration with its decreased cost of regulations, its signalling of fewer arbitrary and expensive future regulations, and its tax cuts favoring business investments to increase business productivity.  The Obama regulatory chaos and extreme uncertainty with a will to wipe out entire industries extended the Great Recession period of slow economic growth, much like Franklin D. Roosevelt's capricious federal management of the economy that greatly prolonged the Great Depression and the later uncertainty caused by LBJ, Nixon, and Carter offer lessons in how to slow economic growth and with it to deny most of us the benefits of an improved standard of living relative to what the Democrats will generally allow us.

The free markets of a Capitalist society unleashed would benefit most Americans greatly and that would most definitely include most low wage Americans!

Historically Slow Jobs Recovery Trucks On Due to Determined Industry

The usually quoted unemployment rate went up from 7.8% to 7.9%, but this always quoted number is fairly meaningless in a very long recession, nearly never-ending recession. The unemployment rate went up because a few more people decided there might be hope of finding a job, so they renewed their effort to find a job.

American industry forced the economy slowly forward in October 2012 despite the full application of brakes by Obama and his henchmen.  Industry added 973,000 jobs in October, perhaps in anticipation of a win by Romney on 6 November.  If it was not that, then there are a lot of lunatics in American business, but history suggests otherwise.  Government added 20,000 jobs, despite all of Obama's moaning that government has been hurt most by the recession.  Government had hired madly in September.

Unincorporated self-employment in non-agricultural jobs fell by 172,000.  The decrease in unincorporated self-employed is almost certainly further indication that the huge rise in unincorporated self-employment over the last couple of years was an act of desperation on the part of Americans who could not find jobs otherwise.  Any self-respecting American creates his own job when he cannot get a job from someone else.  But in a bad, Obama economy with no capital to invest in your business, being self-employed is really rough.  Now that industry is hiring, these suffering Americans are shifting to the better jobs bigger companies can offer them.

Let us examine the household survey employment numbers:

The number of missing jobs is falling at a very slow rate.  In October 2010, the percentage of missing jobs was 13.73% and this October is down to 12.53%, or 1.20% over two years.  This is
an average rate of missing jobs recovery by the economy as abused by Obama of 0.60% a year.  At this rate, it will take us more than 14 more years to lower the missing job rate back to the 4.04% rate of January 2000.  Obama's new normal economy is one that takes a total of 18 years to recover from a recession.  His braked economy is actually mired in a GREAT DEPRESSION, that being the only historical precedent for an 18 year recovery period in American history.

One of Obama's favorite campaign claims is that he has created, note the hubris, 5,000,000 jobs.  Once again, employers did not do it.  No, the government did.  At least if it was good.  If it was bad, then businessmen did it.  This is a matter of big government definition.

Actually, there are 144,039,000 employed Americans now and there were 143,338,000 million employed in George W. Bush's last full month as President in December 2008.  So, there are only 701,000 more Americans employed now than at the start of the Obama presidency. This is only 14% of Obama's claim, but as he says, he cannot do 7th grade math.

Meanwhile there are 8,948,000 more working age civilians available for work now than there were in Bush's last month.  The added 701,000 jobs distributed among the 8,948,000 new potential workers is enough to provide a job for 7.83% of them.  Pathetic.  That is an employment rate which is lower even than Obama's super-high unemployment rate overall is.  But this is the new Obama Normal.

Taxes and Depression

Arthur B. Laffer wrote an excellent opinion piece for The Wall Street Journal on 22 September, which I have been meaning to summarize for some time now. He discusses some of the important causes of the Great Depression. He concentrates on the large tax increases that contributed so much to the depression and I want this as background for several other entries I will be making here. I have previously noted other important causes of the Great Depression, such as the terrible uncertainties the FDR anti-business and anti-capitalism regime caused for businesses with price controls, anti-trust, limits on production, fostering union violence, and regulations. I have also discussed the tax increases, though Laffer's account on taxes is more thorough.

He notes that the policy of the Federal Reserve played a role in the Great Depression, but it was a secondary role. The following tax increases were most important.

• Smoot-Hawley tariff of June 1930, the largest tax increase on trade in peacetime
  
• In 1930-31, slight increase in tax rates on personal income in lowest and highest brackets and the corporate tax rate was increased from 11% to 12%
• In 1932, the personal income tax lowest rate was raised from less than 0.5% to 4% and the highest rate was raised from 25% to 63%, the corporate rate was raised to 13.75%
• Also in 1932, many, many excise taxes were increased, the highest death tax rate was increased from 20% to 45%, and the gift tax was brought back with the highest rate set at 33.5%
• In 1934, the highest death tax was raised from 45% to 60% and the highest gift tax rate was raised from 33.5% to 45%
• In 1935, the highest death tax was raised from 60% to 70% and the highest gift tax rate was raised from 45% to 52.5%
• In 1936, the highest corporate tax rate was increased to 15% and a surtax of up to 27% was placed on undistributed profits; the highest personal income rate was raised from 63% to 79% (a 216% increase in just 4 years)
• In 1937, a 1% employer and a 1% employee tax was instituted on all wages up to $3,000.

State and local taxes were also greatly increased. In 1929, they summed to 7.2% of GDP, but from there they went up each year. In 1930, state and local taxes were 8.5% of GDP, in 1931 they were 9.7%, and in 1932 they were 12.3%. This was a walloping 71% increase in 4 years!

The federal government also forced everyone to sell them their gold at $20.67 an ounce, but then set the price of gold at $35 per ounce in Jaunary 1934 about a year after requiring everyone to turn in their gold. This was a devaluation of the dollar by 59%, which was a huge tax, though in the evilly cunning way of government, it was not called a tax.

Laffer then points out that this 1933-1934 devaluation of the dollar resulted in a 60% increase in the money supply from April 1933 to March 1937. The monetary base grew by more than 35% and adjusted reserves by about 100%. Despite very high unemployment, the consumer price index increased by 15% from early 1933 through mid-1937.

Now in light of this, we must give some thought to the many tax increases Obama has made or is planning to make. Of course many of these tax increases are also not identified as taxes, for Obama is no less cunningly evil than was FDR. We should also think about the many tax increases others will say we must make in order to pay down the huge deficits we already have and those which are coming. The main issue is the growth of the government sector and the stranglehold on the private sector, then and now.

Waxman-Markey Cap and Trade Compared to Smoot-Hawley Tariff

Tom McClintock, Republican Representative of California, gave a speech to the House of Representatives after it had just passed the Waxman-Markey Carbon Cap and Trade taxation scheme to limit CO2 emissions. The speech is posted at IBDeditorials.com. He says it is known what the effects of this law will be because California passed Assembly Bill 32 for the purpose of limiting CO2 emissions and we can examine its effects.

McClintock says they are:

• Before January 2007, CA's unemployment tracked the national average closely. Since, its unemployment has increased at a rate sufficient to cause an increasing divergence with the national unemployment rate. It is now 2% greater than the national rate, the highest it has been since 1941, this despite the fact that Gov. Schwarzenegger promised many new green jobs, just as Obama has.
• The city of Truckee, CA was about to sign a long-term power contract with a coal-fired power plant in Utah, but AB32 prevented it and their electricity costs doubled.

He says the cap and trade bill has

profound implications for agriculture, construction, cargo and passenger transportation, energy production, baking and brewing — all of which produce enormous quantities of this innocuous and ubiquitous compound. In fact, every human being produces 2.2 pounds of carbon dioxide every day — just by breathing.

Then he compares the Waxman-Markey bill to the infamous Smoot-Hawley Tariff that did so much to bring on the Great Depression:

When you discuss the folly of the Hoover administration — how it turned the recession of 1929 into the depression of the 1930s, the first thing that economists point to is the Smoot-Hawley Tariff Act that imposed new taxes on more than 20,000 imported products.

Waxman-Markey is our generation's Smoot-Hawley. In fact, it's worse, because it imposes new taxes on an infinitely larger number of domestic products on a scale that utterly dwarfs Smoot-Hawley.

Never forget that this nonsense constraining our lives has been brought to you by the Democrat Party in the name of socialism. The Republicans too often are willing to join in the destruction of the individual's sovereign rights, but they do not do it anywhere near as well as the Party of Mass Destruction.

The New Smoot-Hawley Tariff Coming

As though much tighter socialist control over the American economy were not bad enough in delaying any recovery from the current recession, Obama and the remainder of the Tripartite Axis Powers (TAP or the Administration, House, and Senate) will use punishing tariffs to keep Americans from importing goods made abroad in countries which do not have carbon taxes or cap-and-trade laws such as the TAP plans for us.

Along with the New New Deal of Socialism comes the New Smoot-Hawley Tariff Act. The Great Depression was greatly deepened and extended by the combination of the New Deal of Socialism and the Smoot-Hawley Tariff Act. The New Smoot-Hawley Act will put high tariffs on products imported which use high energy inputs in their manufacture, such as aluminum products, steel, glass, paper, cement, and fertilizer. These products will become very expensive in the U.S., so U.S. manufacturer's will try to produce more of them abroad instead of in the U.S. after the carbon cap-and-trade law goes into effect. But, both these U.S. multinationals and foreign firms in countries without tough carbon taxes will be kept out of the American market by the New Smoot-Hawley Tariff. This tariff or adjuncts to it will also be designed to punish imports from countries with minimum wage laws deemed too low by the Democrats, with other environmental policies they do not like, and with laws not sufficiently favorable to the unionization of workers. The net result should do a very efficient job of cutting off the import-export trade of the U.S. and greatly hurt the world economy. Of course, it will be the equivalent of shooting ourselves in the head, as government power mongers peculate the American people.

You can read more about a part of these plans in the Wall Street Journal article about the Secretary of Energy's comments about a new carbon tariff here.

Importing Japan's 1990s Miseries

Those who have not learned from history are doomed to relive the past, especially if they believe in some mythology about the past which imprints all the wrong lessons upon their minds.

One of the great examples of a mythology leading men astray is that of the Great Depression in which the demi-god Franklin D. Roosevelt gave Americans the confidence they lacked to rebuild the economy with his fireside chats and his determined pragmatic experimentation with social welfare programs. In fact, FDR greatly prolonged a recession and turned it into a deep depression and then when the economy began to improve, turned it into a second depression. The back to back depressions became the Great Depression and were not brought to an end until after the war, though wartime activity in some respects made it seem as though the depression ended when war production got well underway. FDR had an uncanny knack for creating maximal investment uncertainty and this kept private investors on the sidelines until after the war. The story is well told in The Forgotten Man: A New History of the Great Depression by Amity Shlaes and in Jim Powell's FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression.

There is a more recent case of history from which we could learn. In the entire decade of the 1990s, Japan suffered an economic meltdown due to a boom in stock prices and real estate prices brought on by a flood of easy money supplied by the Japanese government in the 1980s through 1990. Benjamin Powell has written an excellent commentary on this called Avoid Japan's Mistakes in the 8 March 2009 Washington Times. Powell points out that the Nikkei stock market index fell about 70% and real-estate prices fell by 80%. This was a significantly more severe downturn than our present travails are.

Between 1992 and 1995, the Japanese had six stimulus bills providing an average yearly stimulus equal to 3% of the Japanese GDP. In 1998, the Japanese stimulus programs were 8.5% of the GDP. Even this huge stimulus had little effect upon Japan's plight. Our present $787 billion stimulus bill is 6% of the American GDP. By the mid-1990s, Japan had a very low central bank interest rate like ours now. Japan turned to big bank bailouts and to nationalization of the banks in 1998 and 1999, only to make matters still worse. Japan also provided huge sums of government funds for construction projects to no effect.

The real-estate booms in both Japan and the U.S. caused too much money, too many capital goods, and too many people to enter the construction industry. Powell says, "Bank bailouts and fiscal stimulus bills don't work because they strive to maintain the status quo. But the status quo is the problem and exactly what needs to be corrected. ..... "Stimulus" bills that emphasize public works and infrastructure merely prop up the over-expanded construction industries."

Returning to my own viewpoint: This is true, but it is also the case that the financial industry itself was on a bubble and had too many people in it. The masses of people refinancing mortgages and dealing in the financial derivatives markets were excessive and now need to be pared back substantially. The market will take care of this and also of the bankruptcy of General Motors and perhaps Chrysler as well, if only the government will get out of the way. The huge sums of bailout monies are saddling our children and grandchildren with pointless debt. The derivatives financial institutions, many real estate firms, GM, some banks, and some construction companies are way beyond saving. Let them fail and let wiser heads take over their physical assets and hire and manage the people who used to work for these loser companies. There is surely no point in wasting more money on foolish bailout schemes.

Not only is the money being wasted, but the very uncertain and surprising ways in which the government is spending it is causing private investors to take their money out of the market and wait on the sidelines. Every time Obama sneers at the "investor class" he makes them more uneasy and more passive. Obama has frozen the energy of the most dynamic and creative economic forces. The ineffectiveness of the whole effort is causing people who had signed on as part of Obama's economic team to back away from government jobs in the Treasury Department so they will not be stained by association with such a losing effort. The banks and financial institutions who took the Federal money nearly forced upon them, marked themselves as losers. GM and Chrysler also put on targets as losers when they took bailout money. Interestingly, so did the United Auto Workers Union. The image of what they did to the American automotive companies in the competition with the Japanese, Korean, and European auto makers, may be enough to defeat the union card check bill killing secret ballots to decide the issue of union representation.

The concerted efforts of the Obama - Pelosi - Reid Axis Powers to do all of the following in a massive and rapid push designed to cripple the private sector and to build the socialist government-dominated society of their choice:

• the takeover of medical services with tighter controls and rationing of medical services by means of the newly created computer record system
• the move to control medical insurance
• the elimination of a doctor's right to refuse all Medicare funding, thereby making him completely subservient to the government
  
• the threat to force increased unionization upon small businesses
• the creation of massive government debt with crippling future interest payments
  
• the coming high inflation
• the meddling with the management of banking and other financial institutions, including forcing them to continue making risky, yet low interest rate loans
  
• the transfer of money from the private sector to the ever-obstructive and meddling government sector
• the promised higher taxes on investment profits
• the vendetta against the "investor class"
  
• the higher income and Social Security taxes on higher income families
• the ban against drilling for oil in the Gulf of Mexico and still more restrictions against drilling for oil and gas on the excessively extensive Federal lands
• the killing of funds to relocate spent nuclear fuel rods to Yucca Mountain thereby killing nuclear power in the near future
• the promised Federally orchestrated bankruptcy of the coal-fired electric power plants, which produce 50% of all U.S. electricity
• the punishing taxes or fees to be leveled on the oil and gas industries
• the restrictions of energy use and the greatly increased costs of energy use to fall on every American
• the huge stock market losses which will make many Baby Boomers more dependent upon government for retirement and health care
• the funding of more civil service organizations to remove workers from productive work in the private sector and make them cheap labor for the politicians
• the flooding of still more money into universities where most professors will use it to advocate more socialism in America and an ever-diminished role for the individual while college education costs continue to skyrocket
  
• masses of more government-chosen winners, who will be rewarded at the expense of hardworking and responsible taxpayers
• increased restrictions on trade with other countries
• increased submission to the so-called international law of the dictator and socialist government-dominated United Nations
• increased expenses for business mandated by governments as a way to keep bribes to voters off Federal and state expense accounts
  

All of which ought to cause a massive and sustained Second Great Depression. The Obama Axis Powers will be happy to use the continuing crisis as a means to push for still more government power as a means to solve the problems they have themselves caused. Of course, they will continue to blame everything on George Bush and perhaps Rush Limbaugh. Meanwhile, bewildered Americans will more and more frequently read Ayn Rand's Atlas Shrugged in order to really understand the root of all the evil which has overtaken them. Will the sign of the dollar and decals asking "Who is John Galt?" become commonplace on Depression era cars?

If you have any hope of thinking for yourself, choosing your own values, and managing your own life in accordance with those values, you are under a massive and brutal attack. It is way past time for every American who has any understanding of his right to life, liberty, property, and the pursuit of happiness to stand sure in his insistence upon preserving this essence of his individual life. Without it, there is no joy in living. We must stand united and individually in rebellion against this statist takeover of our lives.

This is much, much worse than anything King George III ever conceived of. In comparison to Obama, the king was a hero of freedom. Let us hope Americans can recover some measure of the concern they once had for individual freedoms before they lose everything.

No Banking Crisis Exists

Overall lending at U.S. commercial banks is up 5.7% in January from last year. It is at an all-time high of $9.85 trillion! This is just a bit below the average annualized monthly lending growth increase rate of 7.3% since 1990. This bit of a decrease is mostly due to reduced home mortgage lending, which is hardly a surprise given that people are not refinancing and that more people are out of work.

On the other hand, commercial and industrial loans were up 8.4% in January. Consumer loans were up 10.1%. This is a fairly robust lending market, not the crisis we are being told it is.

There are some financial institutions which have participated heavily in the bond market, hedge funds, and commercial paper markets who are in serious trouble, but the traditional banks generally are not. In fact, 90% of the traditional banks are well-capitalized and in pretty good shape.

We have to ask why the politicians and the media have tried so hard to imply that our banks are about to fail as many did in the Great Depression. One has to wonder if the politicians don't think that manufacturing a Great Depression would be good for them, however bad it might be for the rest of us.

Ethanol From Corn Government Mandates

The Federal Government wants to use hundreds of billions of dollars in so-called stimulus spending to counteract the housing and financial problems caused by governments and to bolster many weak companies, some over-paid union workers and their over-paid union bosses, and those state governments which were most irresponsible in their spending. Do you suppose that there will be an ounce of wisdom in how the tax money of the responsible and competent will be used? Or, will the decisions be made simply to support the political careers of our elected politicians?

The answer is clear and can be observed from many past experiences and the direction many politicians have already signaled that they are taking. Among the signs, we should note that it was just a short while ago when the politicians were convinced, or tried to convince us, that ethanol refined from corn was the answer to energy independence and to air pollution. Science has clearly since, and had already in part at the time, shown this claim to be false. All the ethanol mandates and subsidies have achieved is to increase our gasoline costs, increase our food bills, increase the tax bill and the deficit, cause farmland prices to go up, made bundles of money for ADM and some farmers, hurt ranchers and other meat producers, and left many poor people in the world more hungry. This being the clear case, should we not expect our politicians to en masse rush to pass new legislation to remove the gasoline mandates and to remove the offending subsidies, both of which are clearly contrary to the general welfare?

Of course, we should expect this, if we believed that the politicians actually cared for the general welfare, which they cite as the reason for almost every piece of legislation. We understand that the welfare of each and every one of us individuals is not high on their list of values, however. So it is no surprise that the absurd ethanol mandates and subsidies are still on the books and are still hurting all of us who are not corn farmers, owners of ADM, or politicians. Knowing this, why on earth do we stand by and not only not squawk about this ethanol scam, but we are allowing the Federal Government to create many new massive frauds in the name of a recession stimulus package.

The Federal Government under both Hoover and FDR provided many stimulus packages, which did not only not prevent the Great Depression, but actually greatly prolonged it. They created massive uncertainty for investors by trying to pick the winners and the losers with constantly changing rules, just as Bush and Obama have done or are about to do. Hoover and FDR spent massive amounts of tax money and gave it to the unproductive, the incompetent, and the lazy, while taking it from the productive, the competent, and the hard-working. This is a sure way to destroy an economy and market system which a recession has momentarily staggered. Bush and Obama wish to do the same thing Hoover and FDR did. This is a repeat of history, in which a pragmatic Republican starts a mess and a socialist Democrat comes to the "rescue", only to make the mess much worse, because socialism is a massive loser to capitalism, even when it is crippled by unprincipaled pragmatism.