economic recovery

Where’s the Austerity?

by Ryan Young on October 14, 2011

in Economy, International, Politics as Usual

Here’s a letter I recently sent to The Economist:

SIR – you write that the “collective obsession with short-term austerity across the rich world is hurting” the prospects for global economic recovery; be afraid.

May the data allay your fears. From 2000 to 2010, the UK’s government spending boomed from 36.6 percent of GDP to 51.0 percent. France’s spending went from 51.6 percent to 56.2 percent. Even sober Germany grew its government from 45.1 percent of GDP to 46.7 percent.

When Bill Clinton left office, total U.S. government spending was 33.9 percent of GDP. It has blossomed to 42.3 percent under Presidents Bush and Obama.

If the rich world is indeed austerity-obsessed, it is no more than talk. That’s why this writer is afraid.

RYAN YOUNG
Fellow in Regulatory Studies
Competitive Enterprise Institute
Washington

*All data from OECD, downloadable at http://dx.doi.org/10.1787/888932443396

My colleague Greg Conko pointed out that the letter might be more persuasive if it used data from 2008-2010, to isolate government growth since the Great Recession’s start.

It’s a good point, so I looked it up. And the song remains the same. France’s government grew from 52.9 to 56.2 percent; Germany’s grew from 43.8 to 46.7 percent; the UK’s grew from 47.4 to 51.0 percent; and the U.S. grew from 39.0 to 42.3 percent. All that in three short years.

How to Help Small Businesses

by Ryan Young on March 7, 2011 · 2 comments

in Deregulate to Stimulate, Economy, Regulation

Post image for How to Help Small Businesses

Politicians love small businesses. Almost every campaign stump speech gushes about how important they are for the economy. Never afraid to put our money where their mouth is, politicians even started a Small Business Administration in 1953 to transfer money from taxpayers to small businesses. Today, the SBA’s budget is nearing $1 billion.

Given how much taxpayer money politicians lavish on small businesses, most of elected officials are confident that they are helping, not hurting. They should listen more closely to the consituency they claim to love so much. The Bush-Obama era has been one of ever-increasing spending and regulation. And those hurt small businesses.

Paychex, Inc., a payroll service provider that works with many small businesses, recently commissioned a survey. They asked small business owners their thoughts on the economy, and what the biggest obstacles are to growing their businesses. The most common gripe? Regulation. 47 percent of small business owners say that regulations have “slowed or prevented” their business from growing.

The Rochester Business Journal reports that the types of regulations that most concern small business owners are “tax changes (56 percent), health care reform (39 percent) and state regulations in response to budgetary challenges (25 percent). The research found 61 percent of respondents have seen more government regulation over the past five years.”

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The Nobel Case for Immigration

by Ryan Young on October 26, 2010

in Deregulate to Stimulate, Economy, International, Labor

Over at The American Spectator, my colleague Alex Nowrasteh and I make the case for expanding skilled immigration. Our main points:

  • 1 in 8 Americans are foreign-born, but 1 in 4 American Nobel laureates since 1901 are foreign-born. Immigrants, it seems, are chronic overachievers. America would benefit by letting more in.
  • The H-1B visa for skilled immigrants is capped at 85,000. In non-recession years, those 85,000 spots are typically filled in a single day.
  • Genius-level intellects are missing out on the chance to flower at the world’s best universities. They’re also missing out on one of the world’s best entrepreneurial environments. And Americans are missing out on cutting-edge jobs in high-tech fields. Consumers lose out on products that are never invented.
  • The number of Nobel-caliber intellects who have lost their opportunity to do research in this country is unknown. What is known is that the U.S. government has kept out millions of the most inventive, brilliant, and entrepreneurial people in the world for no good reason.

Read the whole piece here.

“Nearly Two-Thirds of Americans Say the Stimulus Isn’t Working”

by Hans Bader on April 29, 2010

in Economy, Employment, Politics as Usual, Sanctimony, Stimulus to Nowhere

“Nearly two-thirds of Americans do not believe the $787 billion stimulus package the president passed last year has helped create jobs, according to a new Pew Research Center poll.”

As the Washington Examiner notes, “a recent survey of business economists showed they didn’t think the stimulus was creating jobs, either.”  President Obama falsely claimed that virtually all economists supported his stimulus package, but this was patently untrue at the time he made this claim, when at least 200 economists publicly opposed it, and it  is even more untrue now.

Obama falsely claimed that the $787 billion stimulus package was needed to prevent “irreversible decline,” but the Congressional Budget Office admitted that it would actually shrink the economy “in the long run”.  The stimulus package has since destroyed thousands of jobs in America’s export sector, and subsidized countless examples of government waste and corruption.

Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent . . . The reality is that it passed 10.3 percent.”

Nobel Prize-winning economist Gary Becker says that Obama’s policies are delaying economic recovery.

“How is stimulus money allocated? Unemployment isn’t a factor, but politics is,” found George Mason University researcher Veronique de Rugy in a recent study.

Districts where people are struggling and unemployment is high are not receiving any more money than those in which unemployment is low, even though a stated purpose of the $800 billion stimulus package was to help the unemployed.  But politics mattered in doling out federal funds.  And “Democratic districts also received two-and-a-half times more stimulus dollars than Republican districts.”

There are three trillion dollars in tax increases in Obama’s proposed budget, yet it would still borrow 42 cents on the dollar, resulting in colossal deficits.

Obama’s policies would raise the national debt by $9.7 trillion, noted the Congressional Budget Office.

Earlier, one of Obama’s own advisers worried that the “barrage of tax increases” in his budgets could harm the economy and prevent a “sustained” economic recovery.

In 2008, Obama promised a “net spending cut,” but as soon as he was elected, he proposed massive spending increases.

Nobel Prize Winning Economist Says Obama Policies Delaying Economic Recovery

by Hans Bader on January 8, 2010 · 3 comments

in Deregulate to Stimulate, Economy, Employment, Energy, Environment, Global Warming, Health and Illness, Healthcare, Insurance, International, Labor, Politics as Usual, Precaution & Risk, Regulation, Sanctimony, Stimulus to Nowhere, Trade

In the Wall Street Journal, Nobel Prize-winning economist Gary Becker and others explain how President Obama’s policies are delaying and retarding the inevitable economic recovery, keeping unemployment high even though the recession Obama inherited was similar to others in the past that gave way to rapid recoveries:

In terms of U.S. output contractions, the so-called Great Recession was not much more severe than the recessions in 1973-75 and 1981-82. Yet recovery from the latest recession has started out much more slowly. For example, real GDP expanded by 7.7% in 1983 after unemployment peaked at 10.8% in December 1982, whereas GDP grew at an unimpressive annual rate of 2.2% in the third quarter of 2009. Although the fourth quarter is likely to show better numbers–probably much better–there are no signs of an explosive take off from the recession. …

In terms of discouraging a rapid recovery, other government proposals created greater uncertainty and risk for businesses and investors. These include plans to increase greatly marginal tax rates for higher incomes. In addition, discussions at the Copenhagen conference and by the president to impose high taxes on carbon dioxide emissions must surely discourage investments in refineries, power plants, factories and other businesses that are big emitters of greenhouse gases.

Congressional ‘reforms’ of the American health delivery system have gone through dozens of versions. The separate bills passed by the House and Senate worry small businesses, in particular. They fear their labor costs will increase because of mandates to spend much more on health insurance for their employees. The resulting reluctance of small businesses to invest, expand and hire harms households as well, because it slows the creation of new jobs and the growth of labor incomes. …

Even though some of the proposed antibusiness policies might never be implemented, they generate considerable uncertainty for businesses and households. Faced with a highly uncertain policy environment, the prudent course is to set aside or delay costly commitments that are hard to reverse. The result is reluctance by banks to increase lending–despite their huge excess reserves–reluctance by businesses to undertake new capital expenditures or expand work forces, and decisions by households to postpone major purchases.

Several pieces of evidence point to extreme caution by businesses and households. A regular survey by the National Federation of Independent Businesses (NFIB) shows that recent capital expenditures and near-term plans for new capital investments remain stuck at 35-year lows. The same survey reveals that only 7% of small businesses see the next few months as a good time to expand. Only 8% of small businesses report job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007.

Obama’s $800 billion stimulus package, which failed to cut unemployment, is now pressuring states to raise taxes, thanks to costly requirements it imposed on states at the behest of powerful public-employee unions.

Obama claimed the stimulus package was needed to prevent the economy from suffering from “irreversible decline,” but the Congressional Budget Office admitted that the stimulus package actually would shrink the economy “in the long run.”  Unemployment has skyrocketed past European levels, as big-spending countries have fared worse than thrifty ones.  The Obama Administration claims credit for creating imaginary jobs in non-existent Congressional districts.

As the Examiner notes, “If his stimulus program was approved, Obama promised, unemployment would not go above 8 percent this year. The reality is that it passed 10.3 percent in October. So now the stimulus books are being cooked to mollify an anxious public worried that real-world jobs continue to disappear and angry that Obama has thrown almost $1 trillion down the stimulus rathole.”

The stimulus package actually destroyed thousands of real world jobs by triggering trade wars with Canada and Mexico that killed jobs in America’s export sector (the stimulus package barred a measley 97 Mexican truckers from U.S. roads, a minor NAFTA violation that led to massive Mexican retaliation against U.S. exports of 40 farm products and kitchen goods worth $2.4 billion).  It also is wiping out jobs by inflicting costly mandates on state governments (such as repealing welfare reform, and imposing costly “prevailing wage” regulations and expensive racial set-asides).

The stimulus package has since spawned countless examples of government waste and corruption.  Recently, Obama fired an inspector general, Gerald Walpin, who uncovered millions of dollars of waste and fraud in the AmeriCorps program, including by a prominent Obama supporter, endangering the Obama supporter’s ability to administer federal stimulus spending in Sacramento.  Obama’s alleged justification for firing the inspector general turned out to be false.

That G20 Communique

by Iain Murray on April 3, 2009 · 1 comment

in International, Regulation, Trade

Yesterday’s communiqué from the leaders of the G20 – a motley collection of democracies and dictatorships – has some good points, but in general it represents a new version of what economist Friedrich Hayek called “the fatal conceit.” It believes that government has all the answers, and demonstrates that the world’s leading governments recognize few boundaries. As such, not only does the communiqué promise far more than it can deliver – something the voters in G20 democracies should remember – but it may also impede global economic recovery.

The communiqué holds that, “We start from the belief that prosperity is indivisible; that growth, to be sustained, has to be shared” and to “do whatever is necessary.” In clause after clause, this pro-government rather than pro-prosperity declaration embraces new burdens on a limping financial sector in the form of expanded global regulation, and effectively requires that all look toward government before acting in the future. At no point does the communiqué recognize that government action can and does distort market action to the point of significant harm.

The only “growth” being sustained in today’s political environment – and further embraced here – is the open-ended stimulus culture that has already led to an orgy of “sharing” of citizens’ wealth; in a world increasingly at ease with the word “trillion,” we are not suffering from a lack of sharing. The “unprecedented fiscal expansion” is not, as British Prime Minister Gordon Brown said, an injection of new money (except for some sales of gold reserves) but mostly a redistribution of existing taxpayer money to politically-favored recipients.

An effective communiqué would have acknowledged that wealth is not automatic, that it must be created before it can grow and expand – or be shared. Individuals acting together in voluntary enterprise form the foundation of wealth creation and job growth, but that is nowhere articulated here. Leadership would require the G20 representatives to explain precisely how they plan to unravel tax and regulatory barriers to the creation of new wealth, infrastructure, jobs and new financial innovations. Instead, the document stands as yet another open-ended promise for redistribution of a shrinking pie, and aggressive new political dominance of economic life.

This is not to say that the communiqué is wholly bad. Even as they seek to increase the reach of government by a massive expansion of the International Monetary Fund (by its own figures, the IMF budget is now greater than the GDP of all but 16 countries), the G20 leaders had no choice but to recognize the harmful effects of protectionism. The sections lauding free trade are welcome, and stand as a rebuke to Congressional leaders who have introduced protectionist language in recent bills. If there is one glimmer of hope in the G20 communiqué, it is that the vitality of trade may counteract the dead hand of government control.

The Not So Good, the Bad, and the Really Ugly

by Jonathan Tolman on January 21, 2009 · 4 comments

in Bailout Watch, Deregulate to Stimulate, Economy, Features, Stimulus to Nowhere, Zeitgeist

Not all stimulus programs are created equal. If the goal of the latest economic bailout package that Congress is considering is as President Elect Obama has declared, job creation, there is a significant disparity between many of the programs.  While only 39 of the variously appropriated federal programs even attempt to quantify the number of jobs that they would create, there is a huge disparity in how effective various programs are at job creation — ranging from $1,000,000 per job created down to $16,000 per job created.

For a bill that is designed to stimulate job creation, it is disgraceful that Congress would appropriate any money for programs where the agency has not even attempted to estimated the number of jobs that the appropriation would generate. For the few programs that have estimated the number of jobs created there are obviously some that are economically more efficient than others. And Congress should certainly direct resources to those programs that would maximize the job benefit for the buck. At a minimum, Congress should focus on those programs that are more rather than less efficient. If a program cannot even estimate the number of jobs that if would create, that program certainly doesn’t qualify for emergency economic recovery legislation. Congress should insist on knowing how many jobs a program is estimated to generate before appropriating huge sums of American taxpayer dollars.

Here is a list of programs from the stimulus bill and  the estimated cost per job.

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