Ronald Reagan said: “If you want more of something, subsidize it" That Apparently Includes Unemployment!

 Eight years ago I wrote a post titled:  Can A Nation Built By Giants Survive Nanny State Paternalism? The Numbers Don't Look Good...  In it I wrote:

“ Were the Americans who carved a nation out of a continent, who crisscrossed that continent with railroads, telephone lines and highways and who won two world wars so different than Americans today… Not based on DNA they weren’t. But that doesn’t mean they were the same. While the DNA of the American people today is no different than that of the people who invented the elevator or the light bulb, the American people writ large certainly appear to be”.

The piece goes on to talk about the staggering changes in the makeup of the American workforce in terms of numbers of people actually working vs the number living off of government largesse.  I observed:  “If the record of the last 40 years were to be repeated over the next 40, in 2050 the country would have 260 million workers supporting 43 million people on disability and 450 million people on food stamps.”

It turns out that I was off by a few decades…

The last year saw what may turn out to be the most cataclysmic mutation of American society in our history.  Not only did the Democrats take Rahm Emanuel’s “Never let a crisis go to waste” maxim to heart, they put it on steroids.  They took a virus and turned into a catastrophe of epic proportions.

At the state level, from New York to Michigan to California, mini tyrants used the virus to strangle small business as the governors put their boots on the necks of their citizens.   At the national level Joe Biden has shifted government spending into overdrive. 

To put that spending into perspective, in March and April of 2020 when the pandemic was taking off and the United States lost 22 million jobs, president Trump signed a $2.2 trillion stimulus bill to keep the country on track.  He signed another $2 trillion over the next eight months as the economy found its footing and recovered 12 million of those jobs.  In his three months in office, when the nation added more than 1.5 million jobs, with demand spiking and prices surging, Joe Biden has signed into law or proposed $8 Trillion in new spending. 

Spending $4 trillion of dollars that the government doesn’t have when the economy is in freefall with more than 20 million Americans losing their jobs may be defensible, but spending $8 trillion when the economy is starting to overheat is simply ludicrous.

The proof of the folly is all around.  Across the country businesses are finding it almost impossible to hire staff, and those who can are doing so at much higher costs than they would normally pay.  Why?  Government, of course.  Businesses have to compete with supplemental unemployment payments that in Mississippi, the state with the lowest unemployment benefits in the union, equals $535 per week ($235 + $300 supplemental) which works out to the equivalent of $13.37 an hour in a state where the minimum wage is $7.25.(Within the last few days a dozen states – including Mississippi - have decided to leave the federal unemployment benefits program.)   In Massachusetts, where the minimum wage is $13.50 the total unemployment benefit works out to the equivalent of $28.20.  This spike in labor costs is even worse than it sounds because as businesses struggle to find workers, the higher wages necessary to attract them drive an increase in prices, which in turn tamps down demand for their offerings in the first place.

This tragedy is particularly difficult for small businesses who have taken the brunt of the damage in this economic meltdown with in excess of 2 million closing up shop and almost 10 million not sure they will survive.  Large companies like Amazon, Home Depot, Wal Mart and others have not only survived the pandemic, they’ve thrived from it.  Sadly, small businesses, who have traditionally been the life’s blood of the American economy, have not been so fortunate.  While large businesses often have the finances or flexibility to deal with surging labor costs, small businesses rarely do.  And labor typically makes up a much bigger cost of operations for small companies than it does for large firms who often can harness technology, scale and outsourcing to minimize labor costs.  For restaurants, karate classess, beauty shops and most small businesses, labor is often the biggest expense and the primary vehicle through which they deliver their services.

What we have in 2021 is a continuation of the Emanuel maxim. Last year Democrats used it to lay the groundwork for stealing the election and now they’re using it to drive their fundamental socialist goal:  The destruction of American small business. 

Small businesses represent solutions, opportunity and most of all, individual freedom, all things Democrats despise because they don’t look to government for direction.  Big business on the other hand, as Coke, Delta, Disney and myriad others have recently demonstrated, can be counted on to pick up the Democrat standard and run with it, much like Wal Mart and McDonalds did when they supported the passage of Obamacare.

Beyond the businesses themselves, small businessmen and women are a problem for Democrats.  By definition they are entrepreneurs, people who want to build something, want to be in control of their destinies and as such lean towards smaller government and the GOP.  Given that the Democrat Party is the party of government largesse, of government regulation and ultimately, government control, a crisis that disproportionately harms small businesses while growing the power and influence of the state is seen by them as a win-win proposition.  Look no further than their collusion with the teacher’s unions on the opening of schools to understand that it’s not what’s good for citizens that’s important, but rather, what’s good for the party and their donors. 

All of this came into stark view last week when the news that the economy added a mere 266,000 jobs in April when the expectation was for over 1 million.  That number, when combined with the tidal wave of help wanted signs across the country clearly demonstrates that Americans are indeed motivated not to work. Joe Biden scoffed at such notions:  “Americans want to work” he said.  Maybe not:  Bank of America estimates that anyone who earned $32,000 before the pandemic can now get more from a combination of state and federal unemployment benefits. They are also allowed to claim benefits for up to 39 weeks - nearly a full year - whereas before, it was capped at 26 weeks. The average US salary in 2019 was $31,133.

Which brings us back to the notion of a nation built by giants.  For most of our history, Americans very much had a “can do” spirit.  They carved a nation out of forest, rock and through deserts while fighting the elements, Indians, the English, Spanish, Mexicans and even one another.  Americans built the Transcontinental Railroad in six years, the Golden Gate Bridge in four and the Empire State Building in 410 days. Today however, Democrats have Americans cowering in their homes, requiring masks on the chance they’re given permission to emerge and looking to the government for their incomes. The virus provided Democrats with a perfect storm of opportunity to finish what they started half a century ago, turning a nation of giants into a nation of vassals where life, liberty and dollars are doled out in exchange for supplication to the Democrat Party. Never let a crisis go to waste, indeed.

A Simple Infographic to Understand the Choice in 2016... More Barack Obama or a Return to Reagan

One of the most difficult games to play in politics is the notion of what might have been… How might things have been different had JFK not been shot? How might have things have been different had Al Gore won in 2000? How might things have been different had Mitt Romney or John McCain not run inept campaigns against Barack Obama?

We’ll never know what the outcomes might have been because there really is no way to objectively measure that when it comes to policy. Would JFK have scaled up Vietnam the way LBJ did or, if he did, would the Camelot mystique have protected him from the vilification that LBJ endured? Had Al Gore been in office on September 11th would we have invaded Iraq as he was on record believing Saddam had WMDs? We can speculate, but we can’t know.

We can however play the game that compares real data between presidents. And now might be a good time for that given we’ve got a presidential election coming.  On the one side are candidates seeking to maintain and further the liberal "successes" of Barack Obama, while on the other are a plethora of candidates seeking to harness the spirit of Ronald Reagan, inspired by his less is more approach to government.

And of course the press provides little actionable information when it comes to whose policies really were / are superior.  Witness their crowing about the unemployment rate hitting a seven year low without explaining (or understanding for that matter) the cause, which is certainly not a strong economy, but rather because people are exiting the workforce at a rate not seen since the 1970's.

Given that, I've created a simple infographic that just might help. (Click here for a larger image and here to download a high res version)  It looks eight measures that shed light on whether a future that furthers the ideas of Obama or Reagan might a better choice.  Unlike notions of what might have been, it compares actual outcomes on those eight measures during the first six years of each administration.  From inflation to the LFPR to food stamps, hopefully this handy infographic will help make the decision as to who to pull the lever for in 2016 just a little bit easier.

What six years of Barack Obama's economic incompetence has wrought

Now that Barack Obama’s first six years are over it might be nice to see what he has wrought, and compare him to another iconic president, Ronald Reagan.

When Barack Obama took office in 2009 65.7% of Americans were participating in the laborforce. (This is called the Labor Force Participation Rate – LFPR – which includes those working and those looking for work.) Six years later that number was down to 62.8. When Ronald Reagan took office in 1981 63.9% of Americans were participating in the workforce and six years later that number had grown to 65.6%.

Unemployment is the measure of those in the laborforce looking for work but can’t find it. At first blush Obama seems to be doing well using that measure. In February 2009 unemployment sat at 8.3% and by November 2014 it had dropped to 5.8%. In February 1981 Ronald Reagan took office with an unemployment rate of 7.4%, which by November 1986 had only dropped to 6.9%. Using the unemployment measure seems to suggest Obama’s policies trump those of Reagan.

Upon closer inspection however… not so much. The LFPR tells the story – or really its inverse does. That is the number of those not working who must be supported by workers, unless they were independently wealthy. A 65% LFPR indicates that 35% of the population would be supported by workers. In the case of both Obama and Reagan the US population grew by approximately 11 million people over their first six years in office. Under Reagan, because job growth was so strong – 11 million new jobs – the total number of people who needed to be supported by those working (unemployed + those not in the workforce) remained steady at 93 million throughout those six years. Under Obama however, because job growth was so anemic – 3 million total new jobs – the number of people who needed to be supported by those working actually jumped 8 million from 121 million to 129 million. That means that under Reagan the number of workers in the US grew by 11 million while the number of non workers remained steady. Under Obama the number of workers grew by 3 million while the number not working grew by 8 million.

But some might argue that Obama faced a tougher economic situation than did Reagan. Not really.

When Ronald Reagan took office inflation was 10.1% and six years later it was 1.9% while under Barack Obama inflation started out near zero and has remained there throughout his terms. What’s ironic about this tame inflation is that it has much to do with dropping prices for things like big screen TV’s, mobile phones and oil, – the latter despite Obama’s best efforts – while core items that the poor spend most heavily on such as meats, poultry, fish, eggs and electricity, are hitting all time record highs.

When Reagan took office interest rates were 19.5% and by his sixth year they were down to 7.5%. When Barack Obama took office interest rates were at 3.25% and have essentially stayed in that area since. That extraordinarily low rate is in large part due to the Fed’s pumping of $4.5 trillion into the American economy since 2008, allowing the federal government to borrow like a drunken sailor.

Of course that pumping also has the impact of juicing the GDP numbers as there is more borrowing and investment going on than the fundamentals would otherwise support. And it’s in this easy money environment that Barack Obama’s biggest failure can be seen. In the six years he’s been president GDP grew by a total of 22%. Compare that to the same period under Reagan, where GDP grew by a whopping 42%. Of course Reagan did add substantially to the national debt, growing it by 6% of GDP during each of his first six years. But Obama borrowed even more, growing the national debt by 8% of GDP each of his first six years. Add to that the 5% the Fed kicked in each year with its Quantative Easing and it’s almost impossible understand how GDP could grow as slowly as it has under Obama.

The key however is hiding right in plain sight. Q4 GDP numbers give it away. The administration crows that the economy grew at a 5% clip in the last quarter of 2014. Not bad. What they don’t tell you is that fully half that uptick came specifically as a result of coerced Obamacare spending. Obamacare is a microcosm of what’s wrong with Obama and his administration. On the one hand it kills jobs, increases prices, eliminates choices and puts private practice doctors out of business. On the other hand, those very same regulations force Americans and companies to spend more on its mandates, which has the result of juicing GDP. So by regulatory fiat the government can remake the economy and claim Americans are better off in the process by juicing GDP numbers. Now imagine the same thing with hundreds of thousands of regulations over the last six years and you understand just how it’s the case that GDP seems to keep growing but Americans seem poorer.

To put the cherry on top of this indictment of Barack Obama’s economic incompetence is a quote from Ronald Reagan: “Welfare’s purpose should be to eliminate, as far as possible, the need for its own existence”. Barack Obama likely disagrees. When he took office there were 32 million Americans on food stamps. Today that number stands at 46 million. In six years Barack Obama’s economic policies have so damaged the country that 5% of Americans have been added to the food stamp rolls while fully one third of the country receives some form of welfare. All of this while the rich are paying more in taxes than ever and half the country pays no income taxes at all and the middle class try to keep their heads above water.  That's what happens when your policies bring about the slowest economic recovery in the last half century. 

Too bad no one saw this coming…

Obamacare - What good is health insurance if you lose the freedom to live your life as you choose?

One of the many reasons conservatives dislike government overreach is because government is so often wrong about so much. And what’s worse, regardless of the magnitude of the government’s failures, citizens are stuck with the consequences of those policies, in most cases forever.

This is not a new phenomenon. This has been going on for decades. Upon its establishment in 1965 the House Ways and Means Committee estimated that the cost of Medicare would rise to $12 billion by 1990. Unfortunately for American taxpayers that prediction was off by a power of nine, coming in at $110 billion. And things haven’t gotten any better since then. By 2011 Medicare costs ballooned to over $550 billion, having grown by 8.3% in a year when inflation was 3.2%.

But of course Medicare is but one example. Medicaid had a similar experience. The same House committee estimated that Medicaid’s first-year costs would be $238 million. Instead it came in more like $1 billion. It was projected to cost $9 billion by 1990 and, surprise, it came in at $67 billion. By 2011 the federal share of the program tipped the scales at $299 billion!

Tellingly, before government set its claws into healthcare it tracked very close to overall inflation. Since 1965 however, healthcare costs have increased by 2.3 times the rate of general inflation. To put that in perspective, inflation would have made something that cost $100 dollars in 1965 cost $718 dollars in 2012. That’s a pretty big jump, but if that $100 dollar item had increased at the rate of healthcare inflation since government got involved it would cost 2.3 times as much, or $1,651. At the same time, healthcare costs went from 5.1% of GDP in 1960 to approximately 18% today.

This record of financial incompetence (nevermind operational incompetence and malfeasance) could never survive for five decades in the private sector. But in government, no problem, and it’s not just healthcare. Think of Solyndra. Think of General Motors. Ethanol mandates. School lunches. The fact of the matter is, bureaucrats sitting in the otherworldly universe of Washington have a long history of making decisions about which they are unqualified and ill-informed, and more importantly, disconnected from the consequences of those decisions.

Now however we are about to embark on a journey that will make even the economic disaster of Medicare look like child’s play. Of course we’re talking about Obamacare. Although there were many warnings that Obamacare would be a disaster of epic proportions before it became law, today, less than a year from its true implementation, we are seeing the actual consequences begin to materialize.

Millions of jobs will be lost, one small company at a time. People will have a difficult time finding a full time job. Healthcare premiums will be going up. There will be a doctor shortage. Obamacare will become a regulatory anvil around the neck of American prosperity. Luckily though the Obama administration is on the job seeking to ensure that it doesn't become a "third world experience". Which, it's looking like it just might become. And to put a cherry on top, with our practically no existent GDP growth, apparently we can look forward to China overtaking the United States by 2016.

As bad as those things are, it actually gets worse. Your individual liberty is simply going to disappear. Many employees are now going to have to begin reveling to employers their weight, body fat measures, cholesterol levels and more. Pharmacy giant CVS states that all its employees will now have to either quit smoking or enroll in an addiction program by 2014. That is of course because smokers generally have higher healthcare costs than do nonsmokers, and since CVS is paying for that healthcare, they get to make the rules. Don’t like it? Then quit.

But then it’s not only smokers who cost more. Fat people generally cost more than thin people. Does that mean that a company can dictate that employees must be Oreo or Doritos or Coke free by the end of the year or enroll in an addiction program? How about motorcycle riders? They are 5 times more likely to be involved in a traffic accident than are car drivers. Does that mean that companies can tell you what you what kind of vehicle you can drive? How about unmarried women having sex out of wedlock, particularly minority women, where 77% of black births and 53% of Hispanic births are to unwed mothers? Given that sick children inflict an increased financial & healthcare burden on unwed mothers than they do on married mothers, can a company demand that unmarried female employees purchase and utilize birth control? (If so, how would they ensure compliance with usage?) Sure, all of this sounds farfetched, but so too once did the idea of schools telling moms what they can put in their children’s lunchboxes, cities banning Happy Meals and soft drinks and companies actually firing employees for being smokers.

At the end of the day, Obamacare may very well be the last stake in the coffin of individual liberty and American prosperity. Think of it this way… through the tax code the government already exercises a tremendous amount of influence on your life by deciding how much of your money you can keep. It’s pretty personal, but it’s largely financial, even if it impacts much of the rest of your life. Through the EPA the government influences your life, although thankfully for most of us it’s at an arm’s length, via regulation of the companies we work for and the firms we buy from. With Obamacare that scant remaining barrier between government and individual choice will disappear. Government is indirectly harnessing employers to expand its power over every aspect of your life, including the most intimate parts of it. And you can be sure it will stay indirect for only so long. Once government mandates can decide what you can eat, how much you have to exercise, the kind of transportation you choose and how you have sex, what is left of liberty? Not much… Add to that the evisceration of the greatest economic engine the world has ever known and you wonder how long before it all comes crumbling down. Now where does one go to get insurance to protect against that?

Ethanol Mandates - the poster child for zombie government prorgrams that never die - regardless of the damage they do

By definition humans are imperfect. Some are more imperfect than others however. Nature has provided us with a mechanism to reduce the most imperfect among us. That mechanism is sometimes chronicled in something called the Darwin Awards. My favorite Darwin award of all time involved a thrill seeking man who strapped a solid rocket booster to his car in an effort to see how fast he could go. He went quite fast, in excess of 300 miles per hour actually… but, shockingly, the brakes for his car eventually disintegrated and he met his end after crashing into the side of a cliff. Thankfully nature’s lessons do not always end so… drastically, usually the only injuries are a few broken bones, a smaller bank account and maybe some wounded pride.

And that is the beauty of humanity. We often learn from our mistakes. We often learn from our experiences in order to make adjustments or better decisions going forward. Unfortunately, although government is made up of humans, it does not share that same skillset.

There is possibly no better example of this than the debacle that is Uncle Sam’s ethanol obsession. Since the Carter administration the government has been diverting your dollars to put ethanol into your gas tank. Initially it was intended to be a tool to help the United States become energy independent, it then morphed into a tool to help increase gas mileage and later it became a critical element in fighting global warming. Now it doesn’t even do any of those dubious, but theoretically positive, things. It’s simply become another failed government wealth transfer program.

The Wall Street Journal states: Corn is also a key ingredient in the combine of political power and corporate welfare that is U.S. alternative energy policy. The food-to-fuel mandate is known as the Renewable Fuels Standard (RFS) and requires 13.2 billion gallons of ethanol to be blended into the gasoline supply this year and 36 billion gallons by 2022. These quotas are fulfilled almost entirely by corn ethanol.

Ethanol is an industry that enjoys no natural market. The only reason the ethanol market exists in the first place is because of government mandates. And who are the beneficiaries of this corporate welfare that is funded out of your pocket? Mainly members of the farm / finance / producers cabal in the form of the Renewable Fuels Association. This advocacy organization that is simply trying to save our planet is made up of an array good hearted companies that are just too fragile to survive without Uncle Sam’s largesse with your money. Among these are food processor ADM (Rev = $80 Billion, #28 on the FORTUNE 500), transportation company CSX ($11 Billion, #226) and energy companies Kinder Morgan ($8 Billion, #311) and Noble Group ($80 Billion, #139 on the Global FORTUNE 500). This ethanol boondoggle translates into a $45 billion industry… money that comes out of your pocket and could be spent elsewhere if it were not being, literally, set on fire.

The worst part of the entire ethanol fiasco is the fact that not only does it not achieve any of its stated – and oft changing – objectives; it actually causes a wide array of unintended consequences – none of which are good. Number one is the fact that it drives up the cost of one of the most important foodstuffs in the world, corn, the price for which is up almost 300% over the last decade. That in turn drives up the price of virtually every other thing in the economy, from food to transportation to plastics. Then there’s the fact that ethanol damages engines and that the patchwork of ethanol standards across the country causes unnecessary price spikes and shortages. If all of that weren’t enough, ethanol has even scared off much of – but not all – of the anti-capitalist environmental lobby because – among other things – it drives deforestation on a wide scale around the world.

Finally, and most heartbreakingly, the ethanol mandates have driven the prices of American crops to near record levels, resulting in greater hunger in developing nations. One way they do this is to encourage farmers to switch to more profitable corn, which results in less wheat, oats, etc. to meet demand. This in turn results in less food making it into the stomachs of poor children around the world. In a nutshell, the mandates make everything in our economy more expensive, do little to alleviate our energy conundrum, actually harm the environment and make dollars donated feed the hungry not go as far. That seems like a policy that screams to be abolished.

Which brings us back to the Darwin Awards. If government programs operated the same way that humans do, at some point they would die as a consequence of their abysmal failure. Unfortunately however, they are not. Instead they keep on trudging down the same path and, indeed in this case the EPA keeps setting increasingly high ethanol standards that will double the amount of food wasted over the next decade. Of course like a potential Darwin Award candidate who stands on the roof contemplating jumping off to test his plastic wings, the EPA does have the option of stepping back from the ledge. It has the power to issue waivers to the ethanol mandates in emergency situations. One might imagine that the litany of problems caused by the mandates, when combined with the worst drought since the Great Depression, would qualify as just such an emergency. But of course the EPA is government and thus you’d be wrong.

At the end of the day the tragedy of ethanol clearly demonstrates the folly of big government. More than anything the element of common sense is replaced by catastrophic regulations imposed by greedy politicians and enforced by power hungry bureaucrats. In a sane world the ethanol mandates would have been history two decades ago. In the insane world of government however they are not only surviving, they are thriving. One only wishes you could say the same of the average American taxpayer, or more consequentially, the children in Africa who are going to be hungrier as a result of another reckless government program that lives on like a zombie long after it should have been dead and buried.