by Steven Horwitz • Foundation for Economic Education
Critics of liberalism and the market economy have made a long-standing habit of inventing terms we would never use to describe ourselves. The most common of these is “neo-liberal” or “neo-liberalism,” which appears to mean whatever the critics wish it to mean to describe ideas they don’t like. To the extent the terms have clear definitions, they certainly don’t align with the actual views of defenders of markets and liberal society.
Economists have never used that term to describe their views. Another related term is “trickle-down economics.” People who argue for tax cuts, less government spending, and more freedom for people to produce and trade what they think is valuable are often accused of supporting something called “trickle-down economics.” It’s hard to pin down exactly what that term means, but it seems to be something like the following: “those free market folks believe that if you give tax cuts or subsidies to rich people, the wealth they acquire will (somehow) ‘trickle down’ to the poor.” Continue reading
by Bill McMorris • Washington Free Beacon
Restaurants in the nation’s capital experienced their worst hiring period in 15 years, fueling speculation that wage hikes are reducing employment opportunities.
Employment in the food service industry fell in Washington, D.C. even as it continued to increase in the region. Restaurants shed 1,400 jobs in the first six months of 2016, a three percent decrease and the largest loss of jobs since the 2001 recession, according to an analysis from American Enterprise Institute scholar Mark Perry.
The steep drop was isolated to D.C. Neighboring suburbs in Virginia and Maryland added nearly 3,000 jobs over the same period, a 1.6 percent increase in hiring. Continue reading
37 percent of businesses say they would increase the price of goods
Thirty percent of businesses said they would eliminate jobs if the minimum wage were increased to $15 an hour, according to a survey from Express Employment Professionals.
The survey asked 390 businesses in the United States and Canada what effect the increase in the minimum wage would have on their operations.
Thirty-seven percent of businesses said they would increase the price of goods, 30 percent of businesses said they would eliminate positions, and 20 percent of businesses said they would increase other wages in the company.
A majority of the businesses surveyed, 82 percent, said they do not pay the current minimum wage for some positions while 18 percent of respondents said they do.
“A $15 minimum wage has certainly become a political hot topic,” said Bob Funk, CEO of Express Employment Professionals. “There’s no doubt it makes for a good talking point, but the real question is whether it makes good economic sense.”
“While some workers will see a raise, which is good news, this survey shows that there are clear negative consequences for raising the wage to $15,” said Funk, who was also a former chairman of the Federal Reserve Bank of Kansas City. “Policymakers should always keep in mind the unintended consequences of their actions.”
America dodged the Asian financial crisis of 1997-98, but much has changed. Today’s world economic slide is starting to hurt us.
by Ruchir Sharma • Wall Street Journal
Plunging stock prices and slowing economic growth in China have raised anew the question of how much events abroad really matter to the U.S. Many of the answers are quite placid, drawing on the precedents of the 1997-98 Asian financial crisis, when there was similar concern about impacts at home, which never came. The U.S. grew at a 4.5% annual pace during those two years. For much of 2015, when U.S. growth remained steady despite volatile and weak growth in the rest of the world, the optimists said it was like 1997-98 all over again.
That may be, but the world has changed a lot in two decades. After 1998, the U.S. share of global GDP topped out at 32% but has since fallen to 24%, based on my analysis of raw data from the International Monetary Fund, while the emerging-world share bottomed out at 20% but has since doubled to nearly 40%. In that time, China has supplanted the U.S. as the largest contributor to global growth. Continue reading
by Michael Pento • CNBC
The S&P 500 has begun 2016 with its worst performance ever. This has prompted Wall Street apologists to come out in full force and try to explain why the chaos in global currencies and equities will not be a repeat of 2008. Nor do they want investors to believe this environment is commensurate with the dot-com bubble bursting. They claim the current turmoil in China is not even comparable to the 1997 Asian debt crisis.
Indeed, the unscrupulous individuals that dominate financial institutions and governments seldom predict a down-tick on Wall Street, so don’t expect them to warn of the impending global recession and market mayhem.
But a recession has occurred in the U.S. about every five years, on average, since the end of WWII; and it has been seven years since the last one — we are overdue.
Most importantly, the average market drop during the peak to trough of the last 6 recessions has been 37 percent. That would take the S&P 500 down to 1,300; if this next recession were to be just of the average variety. Continue reading
We used to make sure all Americans could lead a pretty good life
by Jon Margolis • Pittsburgh Post Gazette
One day last winter, Tom Ashbrook and his guests on his “On Point” public radio call-in program were talking about jobs and wages when a caller from Omaha named Valerie asked a blunt but valuable question.
Half the people, Valerie said, have an IQ of less than 100. “What do we do with all the ‘dumb’ people?” she wondered.
That sounds heartless, but Valerie didn’t seem to be scorning anyone as much as sympathizing with the increasingly bleak prospects some people are facing.
Valerie’s was not an original insight. Years earlier, the late columnist Murray Kempton noted that ours was a “society which, more lavishly than any in history, has managed the care and feeding of incompetent white people.” Continue reading
by Meg Sullivan • UCLA Newsroom
Two UCLA economists say they have figured out why the Great Depression dragged on for almost 15 years, and they blame a suspect previously thought to be beyond reproach: President Franklin D. Roosevelt.
After scrutinizing Roosevelt’s record for four years, Harold L. Cole and Lee E. Ohanian conclude in a new study that New Deal policies signed into law 71 years ago thwarted economic recovery for seven long years.
“Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump,” said Ohanian, vice chair of UCLA’s Department of Economics. “We found that a relapse isn’t likely unless lawmakers gum up a recovery with ill-conceived stimulus policies.” Continue reading
By Philip Bump • Washington Post
During Tuesday night’s Republican debate, Gerard Baker, editor in chief of the Wall Street Journal, posed a question to Sen. Rand Paul (R-Ky.): “Does it matter at all that the gap between the rich and everyone else is widening?”
It does, Paul replied. And then he pointed a finger.
“I think that we ought to look where income inequality seems to be the worst. It seems to be worst in cities run by Democrats, … states run by Democrats and countries currently run by Democrats,” he said.
Data from the Census Bureau suggests that — at least on the states — he’s correct. (Since most large cities are run by Democrats and only one country has a Democratic leader, we’ll set those aside.) At right is a chart showing each state’s Gini coefficient in 2014, from the Census Bureau. Continue reading
by Kenneth Bloomquist
Standing before an audience of college students, President Obama remarked that “As Americans, we can and should be proud of the progress that our country has made over these past six years. This progress has been hard, but it has been steady and it has been real. And it’s the result of the American people’s drive and their determination and their resilience, and it’s also the result of sound decisions made by my administration.” These remarks sound more defensive than confident. The President asserted that Americans should feel proud of the modest economic gains his administration frequently cites, but given that over half of Americans still consider the economy to be meandering through a recession it seems they have overwhelmingly rejected his outlook and chosen to remain humble instead.
Perhaps they’re being overly pessimistic? In the President’s defense, the metrics commonly used to measure the duration of recessions do indeed place the end of the Great Recession in 2009. Since then, GDP has risen slowly, but steadily, at an adjusted rate of just over 2% per year. The unemployment rate has fallen from its 2009 high of just under 10% to just under 6%, and new jobs are being created at a pace which is improving with time. And yet despite the graphs and charts, Americans refuse to be optimistic no matter how often they are told to be. The economy as described in press conferences doesn’t seem to be same one which most Americans live and work in, where family and friends remain unemployed or underpaid, where they have been passed over for raises, and where there just isn’t enough income leftover to save. Americans may not all have advanced economics degrees, but they are intuitively aware when times are good and when times are bad, and they remain skeptical even when bombarded by a steady stream of rose-tinted statistics. Continue reading
You have to ignore many variables to think women are paid less than men. California is happy to try.
by Sarah Ketterer • Wall Street Journal
This bill, which the California senate unanimously passed in August, is a state version of the Paycheck Fairness Act that the U.S. Congress rejected in 2014. Like its national counterpart, it is an aggressive attempt to eradicate a wage gap between men and women that is allegedly due to discrimination in the workplace. But this wage gap is illusory, and the legislation will have unintended consequences, including for women.
The Fair Pay Act will prohibit employers from paying men and women different wages for “substantially similar work.” At first glance, this prohibition might appear reasonable: Government data for 2014 show that women in California earn, on average, 84 cents for every dollar earned by men. (Nationally, women earn about 79 cents for every dollar earned by men.) Continue reading
We’ve lived through this over and over during the Obama presidency. Every time we see a hopeful sign that the economy’s shifting into a higher gear (a bullish 3.9% GDP growth in the second quarter, for example, after a near-recessionary 0.6% in the first), hiring slips back again into its slow-growth ditch.
No wonder voters are seething with anger. Continue reading
The left blames economic woes on everything except its hero president.
by Stephen Moore • Weekly Standard
Two weekends ago, the Federal Reserve Bank of Kansas City held its annual monetary conference in Jackson Hole, Wyoming. The left flew in hundreds of protesters donning green T-shirts that demanded “Higher Wages for America” and chanting, “We’re Fed Up.” The crowd was an assortment of college kids on their summer break, disgruntled middle-aged teachers, senior citizens, and blue-collar union members. Think Occupy Wall Street.
I attended the Jackson Hole conference and chatted with protesters who came in from places as distant as New York and North Carolina and California. What was their beef? Two black men who appeared to be in their seventies explained the agenda: “We demand higher wages.” “We want an increase in the minimum wage.” “The Fed is intentionally holding down pay.” “Corrupt corporations have all the power.” “Unions need to be returned to power.” A social worker from Kansas City almost sobbingly told me of the plight of the poor who she cares for in her job, of the “women and minorities [who] are being left behind,” as she made an abstract plea for “social justice.” Continue reading
By PAUL BEDARD • Washington Examiner
The Fraser Institute’s annual report, Economic Freedom of the World, showed that the country’s drop started in 2010, the second year of the Obama administration.
The world-recognized report showed that the U.S. fell in several areas, including legal and property rights and regulation. Continue reading
2016: Presidential candidates, both announced and prospective, used Labor Day to fire off some pretty harsh criticisms of President Obama’s economy. That’s not news. What is news is who was doing the firing.
Just listen to some of the heated rhetoric about the results that seven long years of Obamanomics have produced:
“I am hot. I am mad, I am angry.”
“There is something profoundly wrong when … the average American is working longer hours for lower wages and we have shamefully the highest rate of child poverty of any major country on earth.” Continue reading
GAO finds Medicaid and housing assistance may cause lower labor force participation
by Ali Meyer • Washington Free Beacon
Government entitlement programs such as Medicaid and housing assistance may make their beneficiaries less likely to work, according to a Government Accountability Office (GAO) report.
According to the GAO, an increase in income could result in a loss of Medicaid benefits for an individual and thus cause them to be less likely to pursue employment.
The GAO found the same result when looking at the housing assistance program, especially in Chicago. GAO found that the Section 8 program had a negative effect on labor force participation and earnings. Continue reading