Paul Ryan (R-WI) on the foundations for growth on Squawk Box

The German Miracle: Another Look -- Germany has cut government spending and its economy is growing smartly.

Note the reference from article in this paragraph about Keynesian economics which German leaders started using in 1963 and with that the welfare state grew and economic growth stagnated and then fell. Obama appears to be a follower of Keynesian economics as he has tanked our economy and making it worse by the day. The economy Obama inherited had a much lower unemployment rate but his policies have managed to grow the unemployment rate while shrinking the economic growth by following the tax and spend approach.

Interest in Ordoliberal ideas waned in Germany after 1963, eclipsed by interest in Keynesian economics. The welfare state grew. The economy became clogged with interest-group policies. Not coincidentally, economic growth also waned. From 1960 to 1973 growth was about half as great as it had been in the 1950s, and during the period from 1973 to 1989 it was halved again to only 2% per year.

The Germans get it now as they have turned their backs on Keynesian economics, have refused to listen to Obama's ideas how to grow the economy by spend, spend, spend, and instead have cut government spending to grow the economy. The results: US economy is failing and the German economy is thriving.

Obama ideas to grow the economy by taking over free market companies/banks/insurance companies too big to fail putting them under government control plus spend, spend, spend and now tax, tax, tax has not helped revive the economy, but made it worse. All he wants to do is mortgage more of the future of this Country by spending more now along with taxing to get votes for Democrats with his latest boondoggle to fund infrastructure. Same infrastructure that was supposed to be funded by his stimulus right after he took office.

The first Obama stimulus can be labeled "Failure" as it has not spurred the economy and the cost for each job is well over $100,000. It has has failed to produce anything near what they promised except for more bloated state governments.

Bet most Germans are happy that their Government didn't follow the Obama plan that he was pushing on them.

The German Miracle: Another Look
Germany has cut government spending and its economy is growing smartly. It's not the first time that market-friendly policies have led the nation out of crisis.

By LAWRENCE H. WHITE
Sep 8, 2010

Earlier this summer George Soros and some leading Keynesian economists criticized what they regarded as Germany's overly strict fiscal discipline. Yet Germany's real output expanded at a robust 9% annual rate in the second quarter, while the U.S. economy grew at an anemic 1.6% rate. So is Germany now a role model for how to recover?

In a June op-ed, German Finance Minister Wolfgang Schäuble justified his government's decision to cut spending, citing "aversion to deficits and inflationary fears, which have their roots in German history in the past century." He was presumably making a reference to the destructive hyperinflation of the 1920s.

Yet Mr. Schäuble might have cited another relevant episode from his nation's history. Sixty-two years ago Germany became a role model for recovery from a very different crisis. In the aftermath of World War II, Germany's cities, factories and railroads lay in ruins. Severe shortages of food, fuel, water and housing posed challenges to sheer survival.

(snip)

Germany's new Social Democratic Party wanted to continue the controls and rationing, and some American advisers agreed, particularly John Kenneth Galbraith. Galbraith, an official of the U.S. State Department overseeing economic policy for occupied Germany and Japan, had been the U.S. price-control czar from 1941-1943; he completely dismissed the idea of reviving the German economy through decontrol.

A 1950s Volkswagen plant. Between 1950 and 1960 the
West German economy's real output more than doubled,
 growing at a compound annual rate of nearly 8% per year.

Fortunately for ordinary Germans, Erhard—who became director of the economic administration for the U.K.-U.S. occupation Bizone in April 1948—thought otherwise.... Gen. Lucius Clay, phoned him when he heard about the decree and said: "Professor Erhard, my advisers tell me that you are making a big mistake." Erhard replied, "So my advisers also tell me."

It was not a big mistake. In the following weeks Erhard removed most of the Bizone's remaining price controls, wage controls, allocation edicts and rationing directives. The effects of decontrol were dramatic.

The shortages ended, black markets disappeared, and Germany's recovery began. Buying and selling with Deutsche marks replaced barter. Observers remarked that almost overnight the factories began to belch smoke, delivery trucks crowded the streets, and the noise of construction crews clattered throughout the cities.

The remarkable success of the reforms made them irreversible. A few months later the French zone followed suit. The Allied authorities went on to lower tax rates substantially.

Between June and December of 1948, industrial production in the three Western zones increased by an astounding 50%. In May 1949 the three zones were merged to form the Federal Republic of Germany, commonly called West Germany, while East Germany remained under Soviet domination as the German Democratic Republic.

(snip)

If Mr. Schäuble is sincere when he says that, by comparison with U.S. policy makers, "we take the longer view and are, therefore, more preoccupied with the implications of excessive deficits and the dangers of high inflation," he can find a useful model in the policies of his predecessor 60 years ago.

Mr. White is professor of economics at George Mason University. This op-ed draws on his forthcoming book, "The Clash of Economic Ideas."

Excerpt: Read more at Wall Street Journal

By comparison to the Germans, Obama and his Administration have been a dismal failure as unemployment continues to grow and business owners refuse to add new employees not knowing what Obama plans to do next with the Bush Tax Cuts expiring. Obama wanting the Bush Tax Cuts to end on his version of wealthy will hurt the economy and slow down business owners hiring of new employees even more. If someone set out to intentionally wreck the American economy, they could not have done a better job than Obama and his economic advisors. Some of those advisors have quit because of his policies which is telling.

According to Fox News, the first book to come out about the early months of Obama by former Car Czar Steve Rattner contains some interesting details that were exposed by The Huffington Post after receiving an advance copy of the book:

-When Obama was told of the plan to pay GM CEO Rick Wagoner a $7.1 million severance package after Obama ordered that he be sacked, Rattner writes: "Suddenly I felt that I was indeed in the presence of a community organizer..."

-Rattner describes presidential political adviser David Axelrod coming to car meetings armed with poll data to support the takeover and Chief of Staff Rahm Emanuel identify Congressmen in whose districts large Chrysler facilities were located.

-"[Obama's economic team] veered dangerously close to having the government take control of the two most troubled banks, Bank of America and Citigroup."

-"If his team had linked arms with the outgoing administration, as President Bush's advisers had proposed, billions of dollars could well have been saved."

-Rattner says Chief of Staff Rahm Emanual dictated Treasury Secretary Tim Geithner's schedule, public appearances and staff selections.

-He says Obama economic advisers Larry Summers and Austan Goolsbee and FDIC Chair Sheila Bair as enemies who slowed down decision making with infighting

-Rattner said Obama was frustrated with the auto companies from the start: "Why can't they make a Corolla?" he has Obama asking.

Bottom Line is that Obama's economic plan is a dismal failure so now this week he attacks the Republican Minority Leader John Boehner when his attacks on President Bush were turning out to be a failure.  Now that is what you call another plan for failure.

Boehner on FOX: President’s Policies Are “Killing Job Creation In America, Killing Our Economy, And The American People Know It”

During an appearance on Fox News Sunday, Congressman John Boehner (R-West Chester) said that President Obama’s economic policies are “killing job creation in America, killing our economy, and the American people know it.” With the American people asking ‘where are the jobs?,’ Boehner emphasized that stopping Washington Democrats’ job-killing tax hike on families & small business is critical to reducing uncertainty in the economy and getting people working again.

Boehner also talked about how Republicans are listening to the American people through America Speaking Out and offering better solutions to cut wasteful Washington spending and help small businesses create jobs. Following are video and excerpts from Boehner’s appearance with Senate Republican Leader Mitch McConnell (R-KY):



Read more at: John Boehner

An Open Letter to Ezra Klein

For those of you who may be asking who is Ezra Klein, he writes a blog for the Washington Post that explores economic and domestic policy. We are more inclined to think he is a spokesman for Obama and his Administration on economic policy with some of his articles.

When has slowing productivity been good for the economy? That makes no sense at all, but we have a hard time remembering when we have seen a liberal write an article about the economy that made sense. From what we gather if a company lays off workers and the productivity goes down, they will want to hire more workers.

We see it differently. If an employer has less employees, they have less overhead to worry about so slower productivity doesn't mean that much to the overall bottom line. In fact, in most instances, remaining employees will pick up slack for those laid off and productivity will stay at or near the same. There are some situations where productivity will improve as a company gets rid of dead weight. Unions have been a big reason for the drop in productivity in our opinion as they have encouraged laziness in a lot of instances and loyalty to the union not their employer. The overhead companies pay to leadership of the union is outrageous since they get zero productivity out of them.

Only in a liberal socialist world would falling productivity be good for the economy.

An Open Letter to Ezra Klein
by Don Boudreaux on May 7, 2010

Dear Mr. Klein:

You allege that when unemployment is high, a slowing of productivity growth is “good news” for the economy (“When bad economic news is good news,” May 6). The reason, according to you, is that the greater the number of workers required to produce a given amount of output – everything from a Starbucks’ latte to a Boeing 747 – the higher is the is the demand for workers.

The relationship between productivity and demand for workers isn’t this simple. (If your employer, the Washington Post, suddenly lost access to the Internet and found itself stuck with vintage 1890 printing presses, are you sure that the Post would hire more workers to compensate for its drop in productivity?) But assuming your premise to be true, why rely only upon unguided forces to reduce worker productivity? Shouldn’t government help this beneficial process along – say, by requiring that each employee drink three martinis before reporting to work?

Not only are drunk workers less productive than are sober ones, they’re also more likely to damage equipment. So mandating employee intoxication promises a helpful double-whammy during these recessionary times: employers would hire more workers to produce any given amount of output, and employers would hire more workers to repair damaged equipment. Presto! Unemployment problem solved!

Shall we drink to this proposal, Mr. Klein?

Sincerely,

Donald J. Boudreaux

(HT to Andrew Moylan for alerting me to Klein’s celebration of falling worker productivity.)

Source: Cafe Hayek

Market Failure

This article by Arnold Kling should be mandatory reading. His definition of market failure in the first paragraph says it all. To use a southern term that people understand, it is the "good old boy system." This comment of King, "If incumbents have a self-reinforcing system that keeps out innovators, then we have market failure" is exactly what we see in many places where the "good old boy" system is not interested in new ideas but want to retain the status quo and power.

In all the articles we have read from the "experts" on the economy, this explains what is happening better then any of them. We have often wondered how someone in academia can be considered an "expert" on what business owners are facing when they have no practical experience.

Another term that makes no sense is "too big to fail." If a business is so bad that it needs to fail, let it fail and quit propping it up as they continue down the same path that led to failure. Chrysler should have failed years ago, and we wouldn't have had to bail them out for the 2nd time. Someone will always come along and pick up the slack and create more jobs from a failure.

We have always thought that everything works better with new and innovative ideas but liberals for the most part are for the status quo and instead want everything to remain the same with one exception -- they want to take over large chunks of the economy to consolidate their power. What liberals in this Country cannot seem to fathom is that is not what the vast majority of American people want from the Federal Government. They want smaller and less intrusive Government which is foreign to the so-called "experts" being touted by this Administration.

This country is known for entrepreneurship over the years and why we have been able to have the latest technology in many areas. Their reward from liberals is to be taxed even more on their money so they (liberals) can redistribute the money to those "less fortunate" who are Democrat voters. Why would anyone want to make more money when they will be taxed at a much higher rate by the current administration? The liberal democrats in power seem to have never met a tax hike they didn't like unless it is affects their union voters.

Raising taxes stiffles the economy while lowering taxes makes the economy grow which in turn creates more jobs. It is a huge difference between the liberal and conservative philosophy and why an article like this is so important.

Market Failure
Arnold Kling
Jan 14, 2010

I want to propose a new definition of market failure. For me, market failure exists to the extent that innovation is blocked by incumbents. If innovators can succeed by out-competing incumbents, then the market is working. If incumbents have a self-reinforcing system that keeps out innovators, then we have market failure.

This post ties together a couple of recent bitter themes. It is not intended in any way to persuade people who disagree with me (if you disagree with me, you may just want to skip the post). It is simply a grand unified theory of my bitterness.

First, why am I bitter about Jonathan Gruber? I am bitter because in my view he has received funding and accolades far out of proportion to his skills. He is being treated as a supreme authority. In theory, that is because his skills are exceptional. Instead, I suspect that, on the contrary, his success has less to do with how he uses his critical thinking functions than how well he has repressed them. In short, he is paid to tell progressives and politicians what they want to hear.

Suppose that we have a group that wants enormous political power. The group rewards people who justify its power by calling them "experts." It punishes those who question its power by dismissing them as "hacks." If you want money and status, you want to be labeled as an expert. In order to be labeled as an expert, you produce analysis that justifies concentrated political power for the elite group.

This process is self-reinforcing. It is like the Harvard-Goldman filter. That filter says that only "reliable" people are allowed to be bank CEO's or policymakers. A requirement for being "reliable" is sharing the views of other "reliable" people as to what constitutes reliability.

It is like the tenure system in academia. Who gets tenure? Above all, it is people who support the existing tenure system.

Incidentally, that is my explanation for why the Internet has failed to alter the academic journal system. People who go through the tenure process have an enormous stake in not changing the process. The process is self-reinforcing.

Of course, incumbents never want to change the process, but markets can force change. So far, all the phenomena that I have been talking about represent market failures, by my definition. There is a market failure in health care. Instead of innovation, what gets rewarded are ideas and policies that entrench the existing system. There is a market failure in finance. Bad firms and bad policies are not weeded out. Instead, what gets rewarded are bank CEO's and policy makers who promise to make the system "too regulated to fail" and who bail out their friends when that promise breaks down.

Excerpt: Read More at Library of Economics and Liberty