Sunday, August 28, 2011

The Family and Retirement Health Investment Act of 2011

Consumer directed health-care facilitators such as Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA) are curtailed under ObamaCare. (1)
Rep. Erik Paulsen and Sen. Orin Hatch have introduced a bill entitled
The Family and Retirement Health Investment Act of 2011 which would reverse the ObamaCare curtailment of HSA and FSA and restore the original intent of promoting consumer directed health-care . (2) (3)



(2) Pro-Consumer Bill To Fight Obamacare Regulation On Spending Accounts, by
Kendall Antekeier,


Tuesday, August 23, 2011

Interest rates or the quantity of money?

"To Keynes and many of his contemporaries, this sequence of events seemed
a clear contradiction of the earlier theory and of the efficacy of monetary policy.
They tended then, as many still do, to regard monetary policy as operating via
interest rates.
Short-term interest rates in the United States had fallen drastically
during the contraction. In particular, the discount rate charged by the Federal
Reserve Banks on loans to banks that were members of the Federal Reserve
System was steadily reduced from 6 percent in 1929 to 1.5 percent by the fall
of 1931, though it was then abruptly increased to 3.5 percent in response to
Britain’s departure from gold in September 1931, and was still 2.5 percent in
early 1933. Judged in these terms, monetary policy was “easy,” yet it apparently
had been powerless to stem the contraction, giving rise to widespread
apprehension that monetary policy was like a string: you could pull on it, but
not push on it, i.e., monetary policy could check inflation but could not offset

From another, and I would argue far more significant, point of view, monetary
policy was anything but “easy.” That point of view regards monetary
policy as operating via the quantity of money. In terms of annual averages, the
quantity of money in the United States fell by one-third from 1929 to 1933—
by 2 percent from 1929 to 1930, just before the onset of the first banking
crisis, and by a further 32 percent from 1930 to 1933. Data on the quantity of
money were not published regularly at that time and were not readily available
even with some lag, whereas interest rates were readily and contemporarily
available—both effect and reinforcement of the tendency to interpret monetary
policy in terms of the interest rate rather than the quantity of money.” - Milton Friedman (1)

(1) John Maynard Keynes by Milton Friedman, Page 18,

Harvey Golub on Warren Buffett

"Governments have an obligation to spend our tax money on programs that work. They fail at this fundamental task. Do we really need dozens of retraining programs with no measure of performance or results? Do we really need to spend money on solar panels, windmills and battery-operated cars when we have ample energy supplies in this country? Do we really need all the regulations that put an estimated $2 trillion burden on our economy by raising the price of things we buy? Do we really need subsidies for domestic sugar farmers and ethanol producers?

Why do we require that public projects pay above-market labor costs? Why do we spend billions on trains that no one will ride? Why do we keep post offices open in places no one lives? Why do we subsidize small airports in communities close to larger ones? Why do we pay government workers above-market rates and outlandish benefits? Do we really need an energy department or an education department at all?

Here's my message: Before you "ask" for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money." -  Harvey Golub American Enterprise Institute

The entire Wall Street Journal op-ed is at the link below:

Friday, August 19, 2011

Why Does Keynesianism Drag On as a Zombie Branch of Economics?

Here is a question: why did Keynesianism not die in the late 1970’s? Stated alternatively, why does Keynesianism drag on as a zombie branch of economics?

Its likely important to point out that Keynes wrote the General Theory as merely his answer to the economic problems of the day. One might say the General Theory is not good or bad, its merely one man’s educated opinion.

Consider the following regarding “why” Keynesianism will not die and has become the zombie that roams the earth during full moons.

Many have pointed out the flaws in the General Theory e.g. Lucas and Sargent , After Keynesian Economics.(1) Many others have empirically pointed out the flaws. Hence the theory is flawed. Moreover, the results of applying the theory are flawed. That is,  results speak for themselves. However Keynesianism lives on in a persistent zombie like fashion.

Maybe the “why” regarding Keynesianism roaming the earth as zombie economics exists in the 1988 Milton Friedman essay entitled John Maynard Keynes. The essay was republished in the 1997 spring edition of the Richmond Federal Reserve Economic Quarterly. (2) The following appears in the essay on pages 20 and 21. Friedman wrote:

“Keynes was exceedingly effective in persuading a broad group—economists, policymakers, government officials, and interested citizens—of the two concepts implicit in his letter to Hayek: first, the public interest concept of government; second, the benevolent dictatorship concept that all will be well if only good men are in power. Clearly, Keynes’s agreement with “virtually the whole” of the Road to Serfdom did not extend to the chapter titled “Why the Worst Get on Top.”

Keynes believed that economists (and others) could best contribute to the
improvement of society by investigating how to manipulate the levers actually or potentially under control of the political authorities so as to achieve desirable ends, and then persuading benevolent civil servants and elected officials to follow their advice. The role of voters is to elect persons with the right moral values to office and then let them run the country.

From an alternative point of view, economists (and others) can best contribute to the improvement of society by investigating the framework of political institutions that will best assure that an individual government employee or elected official who, in Adam Smith’s words, “intends only his own gain . . .is . . . led by an invisible hand to promote an end that was no part of his intention,” and then persuading the voters that it is in their self-interest to adopt such a framework. The task, that is, is to do for the political market what Adam Smith so largely did for the economic market.

Keynes’s view has been enormously influential—if only by strongly reinforcing a pre-existing attitude. Many economists have devoted their efforts to social engineering of precisely the kind that Keynes engaged in and advised others to engage in. And it is far from clear that they have been wrong to do so. We must act within the system as it is. We may regret that government has the powers it does; we may try our best as citizens to persuade our fellow citizens to eliminate many of those powers; but so long as they exist, it is often, though by no means always, better that they be exercised efficiently than inefficiently. Moreover, given that the system is what it is, it is entirely proper for individuals to conform and promote their interests within it. An approach that takes for granted that government employees and officials are acting as benevolent dictators to promote in a disinterested way what they regard as the public’s conception of the “general interest” is bound to contribute to an expansion in governmental intervention in the economy—regardless of the economic theory employed. A monetarist no less than a Keynesian interpretation of economic fluctuations can lead to a fine-tuning approach to economic policy.”

The above statement reveals the social engineering aspect, the politico being engaged in manipulation of the economy for supposed beneficial ends, and even includes a role for the bureaucrat. Hence in the grand scheme of things, those that advocate social engineering [central planning to achieve specific results based on their particular vision], the politico who craves power, and the bureaucrat that craves security find Keynesianism a political perpetuation of their view, power, and security. That is to say, Keynesianism is no longer an economic concept it’s a pure political perpetuation vehicle.

Hence Keynesianism, in the long run, did in fact die, it merely roams the earth as a political zombie.


(1)A paper presented at a June 1978 conference sponsored by the Federal Reserve Bank of Boston and published in its After Keynesian Economics aka After the Phillips Curve: Persistence of High Inflation and high Unemployment. Conference Series No. 19.

(2) Milton Friedman, Richmond Federal Reserve Economic Quarterly, volume 83/2 Spring 1997.

Thursday, August 18, 2011

EPA Administrator Lisa P. Jackson vs. The West Virgina Underground

A "Some People" System?

"The fundamental principle of socialism is that its is appropriate to use force to organize society, to take from some and give to others. The government has nothing to give. The government is simply a mechanism which has the power to take from some to give to others. It is a way in which some people can spend other peoples' money for the benefit of a third party - and not so incidentally themselves". - Milton Friedman (1)

Hence "use force to organize society" is in essence the idea that freedom is put aside for the benefit of the state. That your free actions need removed as the state knows what is really in your best interest. The question arises in that "who" makes those decisions? The decisions are made by state: "...government is simply a mechanism which has the power to take from some to give to others". Who makes up this state that makes these decisions? Answer: "It is a way in which some people.....".

Who are these "some people"? Next, is the relinquishment of freedom of the masses to these "some people" a good idea? These "some people" are strictly benevolent? These "some people" are equipped to take from one group to give to another group? That these "some people" can mold a economic-politic that creates a "greater good"? Finally, are not these "some people" merely "the state"? In the final analysis is not the "state" merely a collection of these "some people"?

Who wants to become these "some people" and why? Are they better than James and Jane Goodfellow? Are they smarter than James and Jane Goodfellow? Do they hold some special power greater than James and Jane Goodfellow? -Or- do those who want to become these "some people" merely want the power, resources, and fame that accompany being "some people"?

Those who want to become these "some people", do they vilify the captains of industry, the champions of freedom, the philosophers of spontaneous order merely to switch places? Stated alternatively, do those who want to become these "some people", do they merely vilify the free enterprise system and the players within the system, as they in essence want to supplant the system and the players within the system? Stated in yet another alternative fashion, do these "some people" put forth an alternate system in order to gain the power previously held by others in another system [free enterprise system]?

Maybe a better view is this: did circa 1776, a free individual in a free enterprise system supplant a previous non-free individual in a "some people" system?


(1) The Invisible Hand in Economics and Politics, Milton Friedman, Institute of Southeast Asian Studies, 1981, p11.

Wednesday, August 17, 2011

68 Total Workers and 58 Million Dollars Later…..

“That would leave Evergreen with about 68 workers according to a head count listed in the bankruptcy filing“.

“Evergreen Solar Inc., the Massachusetts clean-energy company that received millions in state subsidies from the Patrick administration for an ill-fated Bay State factory, has filed for bankruptcy, listing $485.6 million in debt“.

“……….Patrick administration’s $58 million financial aid package, which supported Evergreen’s $450 million factory, a “waste” of money“.

“Shares of Evergreen, which are in danger of delisting from the Nasdaq Stock Market, plunged 57 percent today to 18 cents. The company launched in 1994 and went public in 2000.

The list of top creditors in today’s bankruptcy filing lists a $1.5 million debt to MassDevelopment, the quasi-public state economic development agency.”

The entire article appears in the link below: Evergreen Solar files for bankruptcy, plans asset sale -

Obama’s Folly: Why Taxing the Rich Is No Solution - Journal of the American Enterprise Institute‏

"Unfortunately, the choices faced by America are not that simple. An economic strategy founded on raising taxes on the rich is based on two false premises. The first is that tax increases on the rich are a solution to current budget deficits. The second is the argument often put forward that there is “no evidence” that tax increases on the rich hurt the economy."

"If you look carefully, President Obama has never explicitly stated that taxing the rich will bring in much revenue. Instead, the president has made sure to give voters the impression that the Republican refusal to tax the rich is the main cause of the deficit and thus the main obstacle to solving the fiscal crisis."

"But how much revenue are we really talking about? According to the New York Times, the president’s plan to abolish the Bush tax cuts for those making more than $250,000 is expected to bring in merely $0.7 trillion over the next decade, or about 0.4 percent of Gross Domestic Product per year. As a comparison, the Congressional Budget Office estimates that the deficit over the same period is going to be $13 trillion, more than 6 percent of GDP per year.

The rich in America obviously have lots of money, but there are simply not enough of them to fund the president´s preferred level of spending. For all the attention it has received, President Obama’s “taxing the rich” policy can best be described as symbolic in nature, a rounding error compared to the deficits in the president’s budget. Obama centers his speeches around tax hikes on the rich to lead voters into believing that hard choices on the economy can be avoided simply by taxing the rich at a higher rate."

"Although the proposed tax increases will barely make a dent in the deficit, raising the top tax rates is likely to harm economic output. Many are convinced that tax increases have little or no damaging impact on the economy. We hear over and over again that notions of damaging effects from higher taxes are merely based on “trickle down” theory, which has been proven false.

This is not true. There exists robust empirical evidence that taxes impede economic activity. In conventional economics, only the magnitude of the negative impact of taxes on economic output is debated, not the existence of such an effect."

Below is a link to the entire article:

Tuesday, August 16, 2011

Government Mysticism

"The bottom-line, fundamental reason I endorse markets over government direction of the economy – the essential reason I support extensive and vigorous private property rights and the consequent decentralization of decision-making that this institution brings – is that I cannot tolerate the mysticism that motivates too much reliance on government.

Too many people, including otherwise very smart people, believe in secular magic. They believe that words written on paper by people, each of whom receive a majority of votes on certain days of the year of adult citizens living in certain geographic areas, and who utter ritualistic pronouncements under marble domes in buildings conventionally called “capitols,” are somehow endowed with greater understanding of society’s complexities and with superhuman capacities to care about the welfare of strangers. These priests preach devotion, dedication, and sacrifice to the One True State (your own government), even while each recognizes that legitimate disputes about the details of the dogma divide various cliques of the secular clergy. When they speak and act in their official roles, they expect – usually correctly – that the laity pay their words special heed as if these words have extraordinary power." - Don Boudreaux, Cafe Hayek

Below is a link to the entire post by Don Boudreaux:

Government Spending Arguments based on 1937 and 1938?

In the last couple days you may have run into media reports and pundits making the following argument: "Reducing government spending will throw us in a double dip recession just like 1937 - 1938 (recession within the depression)".

Nay, nay! It was a monetary phenomena that caused the 1937-1938 recession aka recession within a depression. The Fed increased reserve requirement several times, engaged in other policy that caused treasury yields to rise, etc., etc.. Milton Friedman has explained the case plenty of times. Friedman explains the situatation in the book A Monetary History of the United States, 1867-1960 and again in chapter three of the book Capitalism and Freedom. (1) (2)

However, the debaters are putting forth a main debate point of the reduction in spending in 1937 as being the major trigger of the recession as they point to the government spending figures in 1937 vs. 1936. The debate point is used to defend current or even further government spending during the current recession.

In Jim Powell's book FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression he addressed this very debate point. Powell clearly points to Friedman's explanation of the recession within a depression (1937- 1938) being a Fed induced recession based on monetary policy. However, Powell examines and explains that in 1936 FDR and the Democrat party purposely increased spending over the 1935 level as a campaign strategy [buy votes with spending]. They won in a land slide. Go figure!  Hence they purposely ramped up 1936 spending over 1935 spending then purposely ramped down as the election was won. Hence the debaters purposely compare 1936 with 1937 yet leave out 1935 and the "why" regarding the spike in spending in 1936. (3)

Please see the link below and you will see the actual spending numbers [1936 being clearly a spike in spending].


(1)  A Monetary History of the United States, 1867-1960, Princeton University Press, Milton Friedman , Anna Jacobson Schwartz

(2) Capitalism and Freedom, University of Chicago Press, Milton Friedman

(3) FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression, Crown Publishing Group, Jim Powell

Sunday, August 14, 2011

Paul Krugman Calls for Space Aliens to Attack Earth Requiring Massive Defense Buildup to Stimulate Economy - Newsbusters

The full article appears in link below:

Saturday, August 13, 2011

And about that Debt Ceiling.....what if it had not been increased?

What then? Then what? Had the debt ceiling increase not occurred, what exactly would have been the outcome?!?

Luckily the Iowahawk has the answers! Here is a sample then follow the link below for the entire list of outcomes:

"New York devolves into a dystopian hellscape of sugared cola moonshiners, salty snackhouses and tobacco dens".

"Chevy Volt rebate checks bounce, stranded owners more than 50 miles from outlet".

"President Obama places tarp over Washington Monument to conceal from Chinese repo men".

Default, Dear Brutus, Is Not In Our Stars, But In Ourselves - Iowahawk

"Sitting on Cash" is not a strategy of firms

The "sitting on cash" tag line/talking point used by much of the media and many pundits is a notional statement attempting to blame the current economic malaise upon firms with cash on hand.

For a myriad of self-interest reasons, pundits and the media love to talk about firms "sitting on cash". However, sitting on cash is not a strategy. However, having cash on hand, at what ever level, is merely an indicator of an underlying strategy.

What we are likely not to hear from the same group of pundits and media is that the indicator of strategy aka cash on hand, appears to be the correct position given the U.S. credit downgrade and the Europian Union debt meltdown.

It is very likely that absolutely none of the media and none of the pundits that consistently lament over firms somehow "sitting on cash" will report on the positive aspect of being long cash and cash equivalents from a firms perspective given the current financial environment.Why? Because economic malaise always comes with the bogie man [blame the external/exogenous for the internal malaise]. It is the standard snake oil of charlatans.

Thursday, August 11, 2011

Rated BBB?

Public Policy and Shadow Public Policy?

When one considers recent public policy they think of TARP, the stimulus plan, ninety-nine weeks of extended unemployment benefits, Dodd-Frank banking regulation, cash for clunkers, etc.. One should not forget the present public policy and their architects present the entire cabal of recent public policy as in fact being times some multiplier of Keynesian foolishness.

One needs to further consider this statement by Michael Farr [paraphrasing]: "If you pump multiple trillions of dollars of stimulus into a dead horse, even the dead horse will get up and do a couple lapses  around the track". However, intuitive became the counter intuitive as the dead horse remained stone cold dead.

Plenty of factors are at work. Expectations set by anti-business rhetoric, the fact that Keynesian stimulus has never worked as advertised, mountains of federal, state, and local debt, etc., etc.. However, one factor that needs examined is a second public policy that exists known as shadow public policy. Shadow public policy are those separate and distinct policies put forth and enacted by non-elected officials, that is, bureaucrats of regulating agencies.

How can non-elected officials create public policy? The two major ways non-elected officials create public policy are when lawmakers create skeleton legislation leaving the bureaucrats to fill in the blanks or when bureaucrats interpret regulation given their own particular ideology or political pay backs to rent seekers [special interests].

What are some examples? Stealth gun control through firearm dealer having to report multiple sales, the justice department crafting rulings on gun rights, right to work rulings and the infamous Boeing's freedom to locate in South Carolina case orchestrated by the Nation Labor Relations Board. Other examples regard boarder enforcement, the EPA and Army Corps of Engineers attempting to preempt private property rights regarding water rights, and the EPA creating arbitrary rules such as those regarding coal mining. The list goes on and on.

The odd item is that public policy can find its aim being deflected by shadow public policy. For example, any attempt to jump start the economy through questionable Keynesian policy becomes cancelled out by over regulation of firms, the cost of over regulation to the firm, and the over regulation causing a negative expectation by firms. An ever odder item is that the politicos in power are in fact producing directly or indirectly the shadow public policy that cancels out the effects of their public policy. That is, politicos in power are creating both sets of policies and hence manage to cancel out the overt policy by the covert policy.

The Iceberg by Bill Whittle

"But Progressivism is not progressive – it’s ancient. Cyclical. It’s circular. It is, in fact, the symptom and the eventual cause of impending collapse.

In fact, in all of human history, there has been only one genuinely progressive, genuinely liberating idea: a lightning bolt across the pages of history – the why in 1776, the how in 1787 – the idea of limited government, god-given rights, personal liberty and rule by the vast collective wisdom and industry of the common man, and not by the bored, pampered and self-hating elites that have run everything before and since. This is a once-in-history idea. This is why we have to conserve it. We have to conserve this fundamentally liberal idea.

I said that what we today call Progressivism is in fact ancient and circular. Don’t believe me? Well, the great roman orator Cicero, speaking in defense of his friend Sestius, around 55 BC, said – quote:
“Gaius gracchus proposed a grain law. The people were delighted with it because it provided an abundance of food without work. The good men, however, fought against it because they thought the masses would be attracted away from hard work and toward idleness, and they saw the state treasury would be exhausted.”

When a society – after generations of hard work, sacrifice and hardship – reaches a certain level of prosperity, “Progressives” like Bill Maher, Janeane Garofolo, Rosie O’Donnell and Gaius Gracchus – that last Progressive died in 121 BC – assume that the prosperity is endless, and push for more and more people to get more and more goods and services for less and less work. Why? Because – as today, in America, as with the British Empire, the French Empire, the Spanish Empire, the Ottomans, the Mongols, Rome, Greece, Eqypt, Babylon… They do it for political power. They live for political power. This “Progressivism” is ancient, recurring, tyrannical and ruinous.

And we voted for it. Just like the Romans did."

The complete essay appears in the link below:

Sunday, August 7, 2011

U.S. enters PIG race -or- S&P Downgrades U.S. debt rating to AA+

The fastest pig in the race is told they are not really, in fact, all that fast. 

Yet the other pigs in the race are simultaneously slowing. Hence the newly proclaimed slower pig, is in fact, relatively speaking, the same fastest pig in the race with merely the pigs to choose from all shrinking in speed.

Hence its not a problem of pig, its a problem of pigs.

Which then leads to the question: does the acronym S&P mean slow and piggy?

Wednesday, August 3, 2011

A Sub Component of Persistent Long-term Unemployment: Negative Duration Dependence Unemployment

Negative duration dependence unemployment is a rather strange phrase and a rather strange and hidden concept, to most people, regarding unemployment. However, the concept is worth examination when an economy such as the U.S. is experiencing long term persistent unemployment.

Negative duration dependence unemployment is basically a statistic that shows that the longer James or Jane Goodfellow have been unemployed the less likely James or Jane will land a job. Stated alternatively, the longer a workers is unemployed, a lower probability is present regarding the worker exiting the ranks of the unemployed. (1) (2)

Why? Seems rather counter intuitive. One would think that the unemployed worker has had plenty of time to study job openings, apply for positions, and interview for such positions. Wouldn’t all this effort, over time, make the worker more probable to land a job rather than less probable?

Some of the possible explanations regarding negative duration dependence unemployment are:

(1) the longer the worker is unemployed the worker tends to lose job skills,

(2) with lower job skills the offer for employment likely comes with a lower wage offer,

(3) with a lower wage offer the unemployed worker may opt to continue receiving unemployment benefits rather than accepting the lower wage offer,

(4) the longer the duration of unemployment means the longer away from the work force. The detachment form the work force can erode employment/job networks the unemployed worker once relied upon to help in job seeking,

(5) the longer the duration of unemployment may cause prospective employers to question the abilities of the workers i.e. is the prospective worker being passed over as he or she is the marginal worker. (2)


(1) The Rise in Long-term Unemployment, 2010 Federal Reserve Bank of Richmond publications, Hornstein and Lubik.

(2) The Causes and Consequences of Longterm Unemployment in Europe, 1999, Machin and Manning.

(3) The European Unemployment Dilemma, 1998, Ljungqvist and Sargent

Monday, August 1, 2011

Promises and Base Line Promises: off the map where the monsters live.

“Base line budgeting” by Congress basically boils down to taking a current budget and increasing that budget by 5.5% every year. That is, built in budget escalators such as Social Security cost of living adjustments [COLA] , the increasing cost of health care paid by government, increases in inflation adjusted procurements, etc. cause the budget to be adjusted upward from a present level, to the next (future) budget level, then being reset at a 5.5% increase and so on.

Hence the base line budgeting concept leaves you with an ever increasing budget to account for ever increasing under lying budgetary items. The concept has several explicit and implicit assumptions:

(1) that Gross Domestic Product (GDP) increases,

(2) that tax revenue as a percentage of an increasing GDP also increase,

(3) therefore government spending baseline budgeting increases but the increases are matched by an increased tax revenue associated with a percentage of a growing GDP number.

The concept of baseline budgeting and an ever increasing revenue stream working in tandem sounds viable but the non-viable result is a $14 trillion dollar national debt and a current $1.5 trillion annual deficit. That is, the U.S. is current borrowing 41 cents of every dollar spent. In other words, the baseline budget and increasing revenue stream as a concept is one item, the result is yet another item. Why? Because its not a budget!

Budget defined:

1. an estimate, often itemized, of expected income and expense for a given period in the future.

2. a plan of operations based on such an estimate.

3. an itemized allotment of funds, time, etc., for a given period.

4. the total sum of money set aside or needed for a purpose: the construction budget.

5. a limited stock or supply of something: his budget of goodwill. (1)

Upon Further Review

One glaring point is that “budget” and “baseline budgeting” assume a budget is based on sound and known economic axioms. In other words, the entire concept is based on business and economic principles.

When is a budget not a budget? Stated alternatively, when, if ever, was a cabal of politico promises referred to as a budget? How can the U.S. federal budget even remotely be considered a budget? A collection of politico promises past, present and future is not a budget!

Hence the argument at the puzzle palace on the Potomac is not a budget battle rather it’s a politico promise battle. There is no “base line budgeting” its merely base line politico promises.

Politico promises is completely off the budget map.... where the monsters live.