Economics

Happy Deficit Day, America!

Starting today, the Federal government will have to spend more money than it brings in. The next 110 days will be run entirely on credit.

From economists Antony Davies and James Harrigan in RCP:

Every year the Tax Foundation announces “Tax Freedom Day”-the date by which the average American has earned enough to pay his taxes for the year. This year Tax Freedom Day finally arrived on April 17th. That means that, if you are an average American, it will take every penny you earned from January 1st until April 17th to pay your taxes for the year. Only what you earn from April 18th on would be yours to keep. Today, the average American has to work 107 days, or almost 30 percent of the year, to pay for government.

As appalling as the late date of Tax Freedom Day is, and it is appalling, it only tells half the story. The 107 days of your labor that Washington claims for itself do not come close to paying for government. Most Americans know that the government spends more than it takes in, and a simple measurement along the lines of Tax Freedom Day would put this into sharp perspective.

We propose “Deficit Day”-the date at which federal tax revenues run dry and Uncle Sam begins racking up more debt. This year it falls on September 10th.

If the federal government were to spend the same amount of money each day starting on January 1st, it would run through all of its tax revenue by September 10th. Everything the government spent from then until the end of the year would be on credit.

If lawmakers produced a balanced budget, Deficit Day would occur on December 31st, when the government spent the last dollar of its annual tax receipts at the stroke of midnight on New Year’s Eve. But we haven’t seen a balanced budget since the Eisenhower administration.

Are Military Spending Cuts Good for the Economy?

military

Written by Christopher Preble, Vice President for Defense and Foreign Policy Studies at the Cato Institute. Posted with permission from Cato @ Liberty.

Yesterday, Cato released a new video pointing out that the military spending cuts specified under the Budget Control Act’s sequestration provision are not large relative to total spending, and would still have the U.S. government spending nearly $5.2 trillion on the Pentagon’s base budget over the next ten years. Under sequestration, the average annual total, $472 billion in constant, 2012 dollars, is well above the level spent during the 1990s (average $422 billion), and comparable even to what we spent during much of the Cold War. The video (building on my and Ben Friedman’s earlier writing, especially here) spells out the strategic rationale for even deeper cuts.

What about Barack Obama’s outsourcing?

We’ve been given a taste of President Barack Obama’s campaign against Mitt Romney over the last few weeks. It’s going to be brutal, folks. Granted, Obama can’t run on his own accomplishments, or lack thereof, so the attacks against Romney are to be expected.

One of the most frequent lines of attacks are against Romney’s time a Bain Capital. Team Obama alleges that Romney shipped thousands of jobs overseas, rather than keep in them in the United States. Whether the attacks are true or not is irrelevant. As Matthew Yglesias explains, what Bain Capital did — which is actually “off-shoring,” not “outsourcing” — is nothing of which to be ashamed.

But what about President Obama, who, by the way, has taken plenty of money from Bain Capital employees? Obama’s own economic policies are sending taxpayer dollars overseas to foreign firms and through selling off our mounting national debt, as Brian Darling explains:

Happy birthday, Adam Smith

On June 16, 1723, Adam Smith, whose book, The Wealth of Nations, became the foundation for capitalism, was born in Scotland. Smith’s book and philosophy brought us the basics for the free market and free trade and also laid the first moral case for these ideas.

Via a couple of videos from Learn Liberty, Prof. James Otteson briefly explains what Smith believed and how he viewed his economic theories as the best way to help lift the poor out of poverty:

And a brief explanation of the “invisible hand”:

Estonian president takes on Paul Krugman

Paul Krugman may have picked a fight with the wrong country. Desparately trying to show that austerity doesn’t work, Krugman posted a graph showing stale GDP growth in Estonia, a tiny Eastern European country, during the worldwide recession. This caught the eye of Estonian President Toomas Hendrik Ilves, who blasted Krugman on over four separate tweets earlier this week:

Let’s write about something we know nothing about & be smug, overbearing & patronizing: after all, they’re just wogs:

Guess a Nobel in trade means you can pontificate on fiscal matters & declare my country a “wasteland”. Must be a Princeton vs Columbia thing [Ilves went to Columbia for undergrad.]

But yes, what do we know? We’re just dumb & silly East Europeans. Unenlightened. Someday we too will understand. Nostra culpa.

Let’s sh*t on East Europeans: their English is bad, won’t respond & actually do what they’ve agreed to & reelect govts that are responsible.

The problem with Krugman’s conclusion is that Estonia is actually one of the few Eurozone countries that is doing quite well; a point that Dan Mitchell, an economist at the Cato Institute, noted yesterday:

Price controls and value

Carl Menger described value as “a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being.” He went on to say that “[i]t is, therefore, also quite erroneous to call a good that has value to economizing individuals a “value,” or for economists to speak of “values” as of independent real things, and to objectify value in this way.

For the entities that exist objectively are al­ways only particular things or quantities of things, and their value is something fundamentally different from the things themselves; it is a judgment made by economizing individuals about the importance their command of the things has for the maintenance of their lives and well-being. Objectification of the value of goods, which is entirely subjective in nature, has nevertheless contributed very greatly to confusion about the basic principles of our science.

Yet talk of objective,”reasonable,” and “fair” prices abound:

The Arkansas Supreme Court has issued a legal kick to the gut of the fee-happy folks at Ticketmaster and Live Nation, confirming that the ticket seller is bound by the same state laws that prevent scalpers from piling on fees and charging exorbitant prices.

Ticketmaster is the subject of a lawsuit brought by an Arkansas man who says the $49 in fees — on top of the $42.75/ticket — he paid for four tickets to a concert by country singer Jason Aldean violated the provision of the Arkansas Deceptive Trade Practices Act that forbids the sale of tickets above their face value plus reasonable credit card or handling fees.

Battle of the Economic Theories: Paul Krugman v. Ron Paul

On Monday evening, saw a battle of two schools of economic thought — Keynesianism and the Austrian school — in a brief battle between Paul Krugman and Rep. Ron Paul (R-TX).

While it wasn’t the educational videos put out by Econstories that have actors playing the parts of John Maynard Keynes and F.A. Hayek giving a defense of these schools of thought, it’s among the closest thing we’ll see to a real debate between the ideals of statism and economic liberty.

H/T: Club for Growth

Minimum wage laws hurt workers

In a great new video from Learn Liberty, Professor Antony Davies explains that, while minimum wage laws are passed with the best intentions, it generally hurts those that it’s intended to help because it forces employers to either cut hours or staff, leaving only the more productive workers with a job:

Pat Robertson: Marijuana should be treated like alcohol

Pat Robertson, the televangelist and host of The 700 Club, made waves last week when he said that marijuana should be legalized and treated like alcohol and also expressed his support for ballot measures in states that would decriminalize its usage:

[Robertson] first became a self-proclaimed “hero of the hippie culture” in 2010 when he called for ending mandatory prison sentences for marijuana possession convictions.

“I just think it’s shocking how many of these young people wind up in prison and they get turned into hardcore criminals because they had a possession of a very small amount of a controlled substance,” Robertson said on his show March 1. “The whole thing is crazy. We’ve said, ‘Well, we’re conservatives, we’re tough on crime.’ That’s baloney.”
[…]
“I really believe we should treat marijuana the way we treat beverage alcohol,” Robertson was quoted by the newspaper as saying. “If people can go into a liquor store and buy a bottle of alcohol and drink it at home legally, then why do we say that the use of this other substance is somehow criminal?”

Robertson said he “absolutely” supports ballot measures in Colorado and Washington state that would allow people older than 21 to possess a small amount of marijuana and allow for commercial pot sales. Both measures, if passed by voters, would place the states at odds with federal law, which bans marijuana use of all kinds.

A closer look at February jobs numbers

The jobs numbers for February were certainly good news. In case you missed it, the Bureau of Labor Statistics reported that, while the unemployment rate held steady at 8.3%, businesses created some 227,000 jobs last month.

Given that a Gallup survey released before the BLS numbers were made available showed unemployment at 9.1%, many are wondering why there is such a discrepancy. Over at the Washington Examiner, Tim Carney explains:

Both Gallup and the BLS use randomized surveys to produce estimates of the current state of the labor market. Gallup calls 30,000 people every month over the span of the entire month. BLS conducts 60,000 interviews a month (both face-to-face and over the phone), but conducts them all in one week. More importantly, however, the BLS uses a model to smooth their raw numbers out to account for seasonal swings in the labor market. Gallup does not.
[…]
[E]very January the U.S. economy sheds more than million a jobs as retailers let people go after the Christmas shopping season. There is another smaller drop off in the summer as kids leave their summer jobs and return to school.
[…]
The BLS does include a seasonally adjusted unemployment number in each report. For February it is 8.7 percent, which is still below Gallup’s 9.1 percent number. Why?

Every month reporters usually mention two numbers from the BLS: the number of jobs created/lost and the unemployment rate. Most people assume that the unemployment rate is a function of the jobs number. It’s not. The BLS creates both numbers from completely different surveys.


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