Critical Events dominating the News
My first July, 2009 blog will attempt to summarize the critical events that are dominating the news . The latest news on the deficit is that it widened and has increased to over $1 trillion for the first time ever. According to the A.P. the deficit could grow to nearly $2 trillion by this fall. There was an interesting article in the August 2009 edition of Life Extension magazine in regard to Argentina in the 1940’s. Argentina was the ninth wealthiest country in the world and at one point was richer than France and could claim a higher standard of living than Canada. However after an endless series of reckless governmental actions including uncontrolled borrowing and economic mismanagement, Argentina’s standard of living went to 46th. The government defaulted on its bonds and investors lost most of their principle. I hope Obama is listening to this disastrous scenario.
The argument of which approach provides the most stimulus to the economy; i.e. government spending or tax cuts was discussed in an economic letter from the Federal Reserve Bank of San Francisco JUNE 19,2009. There was some difference of opinions but the concensus was that a 1% increase in government spending would produce a mere 0.5% rise in output two years later. Regarding the impact of tax cuts on the level of real GDP one year after the change in taxes, three studies predict a multiplier of roughly 1.2%. There exists skepticism regarding these multipliers but it appears that tax cuts could be a potent stimulus. Many Democrat Senators dismiss tax cuts as a losing tactic.
On the question of jobs and the rising unemployment numbers, the Obama economic team is not creating any new jobs with the exception of perhaps government type positions. Most energy proposals like finding and drilling for oil in high probability areas, also coal, also adding nuclear plants are summarily defeated by the Democrat’s in the Senate and House.
In California where there is a tilt toward water for the Central Valley, again the liberal Democrats are opposing the potential jobs that are lost verses the fish. Where will the new jobs come from? The answer is that they will not and they did not come under FDR by throwing money al la Keynsism. Higher taxes and high trade tariffs are job killers but try and get the labor unions to agree -- they are along with liberal politicians.
Two job killers and economy destroyers are also on the Obama agenda:
Please study the states with Democrat governors and Houses and you will find high taxes and going higher, Unions with a stranglehold on wages, competition and retirement benefits that are causing possible state bankruptcies. These states simply do not get it and yet there are highly educated people going along with failed economic policies.
One ray of hope might be the mid-term elections that could dilute the out of control Democrat majorities.
An interesting last minute comment on climate change appeared in the July 27, 2009 edition of IBD referred to a study in the Journal of Geophysical research which stated that nature, not man has been the dominant force in climate change in the late 20th century. “The surge in global temperatures since 1977 can be attributed to a 1976 climate shift in the Pacific Ocean that made El Nino conditions more likely than they were over the previous 30 years and cooling less likely” says co-author Chris de Freitas of universities in Australia and New Zealand. “Internal global climate variation accounts for at least 80% of observed global climate variation over the past half century. Al Gore should read this study.
Gary E. Marsella