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Posts Tagged ‘Great Recession’

The Covid Stimulus Isn’t Like Other Stimulus. It’s Much Bigger. | Mises Wire

Posted by M. C. on August 27, 2021

The US was running budget surpluses in the late forties and through much of the fifties. Americans were young, and there were far more workers producing than collecting government Social Security welfare checks.

Those days are gone, and although American workers continue to be highly productive, the burden each worker must bear to pay for the elderly and the unproductive continues to grow. 

What we have now is a country heavily dependent on ever-larger amounts of government spending and monetary expansion.

https://mises.org/wire/covid-stimulus-isnt-other-stimulus-its-much-bigger

Ryan McMaken

When it comes to policy debates, it’s now pretty clear that if you’d like to sound very quaint and old fashioned, be sure to express some concerns over the size of the federal budget and deficit spending.

Such concerns are now taken about as seriously by the average politician in Washington as is the constitutionality of the PATRIOT Act. Virtually no one cares.

Admittedly, the lack of interest in spending was already largely in place before the covid crisis began. During the Trump administration, reckless federal spending was the norm, and inflation-adjusted federal spending surged even past spending in 2009, when the federal government was panicking over the financial crisis and the Great Recession. In other words, the Trump administration gave us crisis-level spending when there wasn’t even a crisis.

Not surprisingly, deficit spending was also remarkably high under Trump—precovid—as well. By 2019, Trump had signed off on a trillion-dollar deficit, something many thought to be outlandish during a nonrecessionary period before that.

spe

But those numbers—including the numbers from the Great Recession bailout years—all look modest compared to the surge in spending that occurred with the covid panic of 2020 and 2021.

Let’s compare spending in the two periods. For example, from 2019 to 2020, federal spending rose 54 percent—from $4.5 trillion to $6.5 trillion, respectively—as Congress and the White House poured money into bailouts and stimulus. On the other hand, in the wake of the financial crisis, from 2008 to 2009, spending “only” increased 14 percent, from $3.6 trillion to $4.2 trillion.

spending

On a per capita basis, the numbers were similar. Per capital federal spending rose 13 percent from 2008 to 2009, rising from $12,000 to $13,700 for each American. But from 2019 to 2020, per capita spending rose 44 percent, from $13,600 to $19,700. (These numbers are all in constant 2020 dollars.)

Spending Levels Similar to World War II

At this point, defenders of runaway spending will often suggest that what really matters is spending compared to gross domestic product (GDP). 

So let’s look at that measure. In 2020, federal outlays as a percentage of the nation’s GDP surged to 31 percent, the highest number seen since 1945.

gdp

Similarly, the federal deficit as a percentage of GDP surged to nearly 15 percent in 2020. Again, this is the highest number seen of this measure since 1945.

gdp

(Proportional comparisons of this sort tend to understate the extent to which debt and spending is growing compared to the overall GDP. This is because government spending is itself a component of GDP, and since GDP is measured in dollars, monetary expansion—even without true growth in economic activity—can fuel GDP expansion as well.)

Also of political significance is the fact that while federal spending was taking off over the past eighteen months, growth in state and local spending nearly flatlined, dropping to 0.38 percent growth over the previous year. That’s the lowest growth rate in state and local spending since 2011, in the wake of the 2008 financial crisis. Yet, at the same time, federal spending increased by 25 percent—the largest year-over-year increase in federal spending since the Korean War.

All combined, this means federal spending surged to comprise more than two-thirds of all government spending in the US during 2020. We’d have to go back to the dark days of the Cold War and the Vietnam War to find the last time federal spending so dominated government spending in America.

fed

This all reflects the fact that state and local governments are actually affected by economic crises. That is, when incomes and economic activity fall, state and local revenues—and spending—fall. Not so with the federal government, which, thanks to the central bank’s willingness to buy up US debt, can much more easily engage in large amounts of deficit spending than can state and local governments.

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Ryan McMaken is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power&Market, but read article guidelines first. 

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End of empire | Spectator USA

Posted by M. C. on July 1, 2020

A massive reordering of national priorities is required. It goes without saying that Trump is incapable of presiding over any such reordering. Yet whether anyone else in mainstream politics is capable of doing so remains very much an open question.

https://spectator.us/end-american-empire-dominion/

This article is in The Spectator’s July 2020 US edition. Subscribe here to get yours.

The end of World War Two inaugurated the era of American dominion, with the United States politically, economically and militarily the most powerful nation on the planet. Yet throughout the subsequent period of American global ascendency, the American people endured a seemingly endless sequence of domestic crises, upheavals and disasters. Primacy abroad did not insulate them, convinced of their unique place in human history, from the trials and tribulations routinely befalling other, more ‘ordinary’ nations.

Yet neither did trials at home undermine the deep-seated belief that history had summoned the United States — and no one else — to lead the world. So even as presidents from Harry Truman to Barack Obama wrestled with pressing challenges at home (for Truman there was race and McCarthyism, for Obama race and the Great Recession), they all, without exception, testified to the nation’s indispensability. They deemed it their duty to do so. All, therefore, found ways to prevent domestic problems from encroaching upon America’s assertion of singularity among nations. Leading the world took precedence over addressing the contradictions and shortcomings affecting the American way of life. So from 1945 until the end of the 20th century, creating ‘a more perfect Union’ took a back seat to venturing ‘abroad, in search of monsters to destroy’.

Whatever the turmoil on the home front, this conviction that the United States was called upon to exercise global leadership remained unwavering. Even in 1968, when assassinations, racial unrest and widespread opposition to a deeply unpopular war brought the nation precariously close to unraveling, the conviction held. Two decades later, the fall of the Berlin Wall seemingly validated that conviction for all time. We were indeed, as presumably serious US officials proclaimed, the ‘indispensable nation’ and destined to remain so until the end of time. So we were led to believe.

Now, a mere three decades since the end of the Cold War delivered its seemingly decisive verdict, the barrier between what happens ‘out there’ and what happens ‘back here’ has been breached. Foreign policy and domestic matters are becoming intermingled. As a direct consequence, American global leadership appears noticeably rickety.

At a moment when media coverage suggests that Trump is everything and everything is Trump, it’s important to note that this intermingling dates from long before his presidency. It commenced on 9/11 when an event that was never supposed to happen — a devastating attack on the United States itself — did happen. Americans suddenly awakened to the fact that global leadership as practiced by the United States can produce painful blowback.

Reinforcing this shock to the system were other unpleasant surprises. First came wars in Afghanistan and Iraq that the world’s mightiest military was supposed to win but did not, despite sustaining terrible casualties and expending trillions of dollars. Second came episodes of stunning ineptitude by political authorities. Hurricane Katrina provided one example among many, showing that the people in charge were clueless about how to protect the population for which they were responsible. Hard on the heels of Katrina came the worst economic crisis since the Depression, suggesting that the people charged with managing the economy were incompetent, on the take, or both.

In 2016, the electorate responded by repudiating the establishment, voting into office a thoroughly unqualified presidential wannabe who promised to ‘drain the swamp’ and put ‘America First’. Donald Trump has kept neither of those promises. As the end of his first term approaches, the actual legacy of his presidency has now become clear: yet more ineptitude, cluelessness and incompetence, all reinforced by Trump’s trademark narcissism, vulgarity, blustering tough-guy posturing and casual dissembling.

History will doubtless judge Trump harshly. As US president, he has proven to be an abysmal flop. Trump has failed to end the wars he vowed to end. For all his self- touted skills as a dealmaker, his record consists chiefly of unfulfilled promises. He also failed to address effectively — or even acknowledge — the threat posed by COVID-19. As a direct consequence of his administration’s belated and bungling response to the pandemic, the death toll in the United States now exceeds a staggering 125,000. Trump, of course, accepts no responsibility for that outcome. Coming hard on the heels of the pandemic is the worst economic calamity since Herbert Hoover occupied the White House almost a century ago. Hoover ‘owned’ the Great Depression. So too Trump ‘owns’ the economic consequences of the Great Lockdown. Yet again he refuses accountability.

And finally, there is Trump’s typically callous and ham-handed response to the wave of civil unrest triggered by the police killing of George Floyd in Minneapolis.

Looking back on the nation’s recent past, baffled Americans are left to ponder two questions: how could this have happened? And what can we do to escape from the terrible straits in which we find ourselves?

 

A partial answer to the first question is this: for too long, ruling elites allowed the purported obligations of global leadership to take precedence over tending to the collective wellbeing of the American people. This was a conscious choice made by leaders of both political parties. We are now living with the consequences of that choice, with the persistence of racism offering just one example of what neglect has produced. Yet it deserves to be emphasized: the neglect was not Trump’s doing; he was merely its ironic beneficiary. We are its victims.

A preliminary answer to the second question must begin with this admission: the era of US dominion has now passed. So Americans can no longer afford to indulge in the fiction of their indispensability, cherished in elite circles. In fact, the sun has set on the American empire. Subordinating the wellbeing of the American people to ostensible imperatives of global leadership — thereby allowing racism, inequality, and other problems to fester at home — has become intolerable.

A massive reordering of national priorities is required. It goes without saying that Trump is incapable of presiding over any such reordering. Yet whether anyone else in mainstream politics is capable of doing so remains very much an open question.

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And They’re Gone! The Obscenity of Dr. Fauci’s Jobs-Mageddon – LewRockwell

Posted by M. C. on May 12, 2020

https://www.lewrockwell.com/2020/05/david-stockman/and-theyre-gone-the-obscenity-of-dr-faucis-jobs-mageddon/

By

David Stockman’s Contra Corner

Yes, they are…..gone.

We are referring, of course, to all of the jobs created not only since the Great Recession bottom, but during the entire 21st century to date!

That’s right. The 20.5 million jobs plunge reported for April essentially wiped out the “strong labor market” brouhaha of the 244 “Jobs Friday” reports since January 2000.

In fact, the 131.072 million nonfarm payroll jobs reported for April 2020 were actually below the 131.124 million jobs reported way back in February 2000 when Bill Clinton was still scurrying around the White House looking for some place to hide the blue dress.

Total Nonfarm Payrolls, 2000-2020

Needless to say, embedded in the above disastrous chart is the boot heel of Lockdown Nation at its most vicious. That is, it has brutally monkey-hammered those channels of daily economic life that are based on social congregation – bars, restaurants, hotels, malls, salons, gyms, movies, concerts etc.

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Something Is Wrong: The Fed Is Offering $100 Billion A Day In Loans To Unnamed Banks

Posted by M. C. on October 1, 2019

https://www.shtfplan.com/headline-news/something-is-wrong-the-fed-is-offering-100-billion-a-day-in-loans-to-unnamed-banks_09302019

Mac Slavo

The Federal Reserve is once again secretly shelling out trillions of dollars in the dark, while Congress willingly looks the other way.  In other words, the central bank has initiated a replay of the 2007-2010 financial crisis.

You can call it QE4 if you want, or don’t call it QE4.  What it’s labeled isn’t as important as what it’s doing. Arguing semantics is not going to change the outcome.  The central bank is injecting $100 billion per day into the financial markets.  Any label on that cannot hide the fact that if this economy was doing well or was “robust” than there wouldn’t be a need for any of this.

The Federal Reserve Bank of New York first initiated its emergency overnight loans to Wall Street this year on Tuesday, September 17, starting off at the rate of $75 billion daily. It then increased its loans by adding, in addition to the $75 billion daily, 14-day term loans in the amount of $30 billion to be offered three times this past week. But after the demand for the first 14-day loan was more than double the $30 billion offered, the New York Fed boosted the next term loans to $60 billion and increased its overnight loans to $100 billion. –Wall Street on Parade

This mirrors the Great Recession of a decade ago.  When the Fed is secretly handing out money to banks at low rates to bail them out, you’ve got a repeat of the previous crisis. It’s hard to say, however, if this crisis will be worse than the last one. And simple math tells you that something is very wrong…

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Wumo Collection: Something is Wrong Hard Cover 1 (Andrews ...

 

 

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Data Show That Poverty in the U.S. Was Plummeting—Until Lyndon Johnson Declared War On It – Foundation for Economic Education

Posted by M. C. on June 26, 2019

We were winning until the government turned it into (another) war.

https://fee.org/articles/poverty-in-the-us-was-plummeting-until-lyndon-johnson-declared-war-on-it/

Daniel J. Mitchell

One of the more elementary observations about economics is that a nation’s prosperity is determined in part by the quantity and quality of labor and capital. These “factors of production” are combined to generate national income.

I frequently grouse that punitive tax policies discourage capital. There’s less incentive to invest, after all, if the government imposes extra layers of tax on income that is saved and invested.

Bad tax laws also discourage labor. High marginal tax rates penalize people for being productive, and this can be especially counterproductive for entrepreneurship and innovation.

Still, we shouldn’t overlook how government discourages low-income people from being productively employed. But the problem is more on the spending side of the fiscal equation.

The Welfare State’s Effect on the Poor

In Thursday’s Wall Street Journal, John Early and Phil Gramm share some depressing numbers about growing dependency in the United States:

During the 20 years before the War on Poverty was funded, the portion of the nation living in poverty had dropped to 14.7% from 32.1%. Since 1966, the first year with a significant increase in antipoverty spending, the poverty rate reported by the Census Bureau has been virtually unchanged…Transfers targeted to low-income families increased in real dollars from an average of $3,070 per person in 1965 to $34,093 in 2016…Transfers now constitute 84.2% of the disposable income of the poorest quintile of American households and 57.8% of the disposable income of lower-middle-income households. These payments also make up 27.5% of America’s total disposable income.

This massive expansion of redistribution has negatively impacted incentives to work:

The stated goal of the War on Poverty is not just to raise living standards but also to make America’s poor more self-sufficient and to bring them into the mainstream of the economy. In that effort the war has been an abject failure, increasing dependency and largely severing the bottom fifth of earners from the rewards and responsibilities of work…The expanding availability of antipoverty transfers has devastated the work effort of poor and lower-middle income families. By 1975 the lowest-earning fifth of families had 24.8% more families with a prime-work age head and no one working than did their middle-income peers. By 2015 this differential had risen to 37.1%…The War on Poverty has increased dependency and failed in its primary effort to bring poor people into the mainstream of America’s economy and communal life. Government programs replaced deprivation with idleness, stifling human flourishing. It happened just as President Franklin Roosevelt said it would: “The lessons of history,” he said in 1935, “show conclusively that continued dependency upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber.”

In another WSJ column on the same topic, Peter Cove reached a similar conclusion:

America doesn’t have a worker shortage; it has a work shortage. The unemployment rate is at a 15-year low, but only 55% of Americans adults 18 to 64 have full-time jobs. Nearly 95 million people have removed themselves entirely from the job market. According to demographer Nicholas Eberstadt, the labor-force participation rate for men 25 to 54 is lower now than it was at the end of the Great Depression. The welfare state is largely to blame… insisting on work in exchange for social benefits would succeed in reducing dependency. We have the data: Within 10 years of the 1996 reform, the number of Americans in the Temporary Assistance for Needy Families program fell 60%. But no reform is permanent. Under President Obama, federal poverty programs ballooned.

Edward Glaeser produced a similar indictment in an article for City Journal:

In 1967, 95 percent of “prime-age” men between the ages of 25 and 54 worked. During the Great Recession, though, the share of jobless prime-age males rose above 20 percent. Even today, long after the recession officially ended, more than 15 percent of such men aren’t working… The rise of joblessness—especially among men—is the great American domestic crisis of the twenty-first century. It is a crisis of spirit more than of resources… Proposed solutions that focus solely on providing material benefits are a false path. Well-meaning social policies—from longer unemployment insurance to more generous disability diagnoses to higher minimum wages—have only worsened the problem; the futility of joblessness won’t be solved with a welfare check… various programs make joblessness more bearable, at least materially; they also reduce the incentives to find work… The past decade or so has seen a resurgent progressive focus on inequality—and little concern among progressives about the downsides of discouraging work… The decision to prioritize equality over employment is particularly puzzling, given that social scientists have repeatedly found that unemployment is the greater evil.

Encouraging Dependency

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