Monday, September 24, 2012

November Election Issues:  The Economy in General.

First things first:  The US is NOT a free market economy.  The largest banks (Fannie Mae and Freddie Mac) are US Government institutions, while many of the utilities are effectively government enterprises.  GM now means Government Motors and what can we say of the airlines that are still in the air due to government intervention?  Then there are massive transfer payments going on which is the primary reason for the trillion dollar deficits.  The last element is systematic co-optation of the private sector for social engineering purposes.  This ranges from forcing companies to pay exorbitant insurance bills to mandating that a third of America's corn crop be turned into ethanol to Solyndra and on and on and on.  These three elements constitutes the leftist Economic Trinity:  Government Ownership, Transfer Payments and Co-opting the Private Sector.  Their common names are Communism, Socialism and Fascism.

Yes, we have some semi-free market enclaves which are keeping the economy humming, but things don't look so good overall.  At some point the Laffer curve implies that the size and interference of government reaches an unstable point and we start shrinking.  News outlets usually focus on the unemployment rate - which is nearly stable - but the thing to look at is the Labor Participation Rate.  This is the lowest since 1981 and still heading down at a fast clip.  Much of the decrease in labor participation is undoubtedly due to retirements, but  a huge amount is with the young.  Anyway, for three decades populist politicians were making wild statements and promises regarding pensions.  When Reagan was president, tax cuts certainly were an effective way to get the economy going again.  The taxes were cut, but the government spending kept growing.  Now cutting taxes can no longer help, while so much of society is conditioned to depend on the government for survival that cutting is unimaginable.  I don't think either Obama or Romney can do anything about this ... beyond making things worse.  Regardless, neither politician has made any suggestions about how to stop the government from strangling the economy.

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