What Did My Parents Ever Do To The Federal Reserve?

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In September 1993, President Bill Clinton reassured his radio audience that “if you work hard and play by the rules, you’ll be rewarded with a good life for yourself and a better chance for your children.” Picking up that theme over 18 years later, President Barack Obama affirmed that “Americans who work hard and play by the rules every day deserve a government and a financial system that does the same.” The trouble is neither the government nor the financial system backed by the Federal Reserve rewards people like my parents, who have worked hard and played by the rules their entire lives–only to have their savings wither away.

Instead, Federal Reserve officials and the intelligentsia who support them are continuously working to make their lives more difficult, frightening the masses of what shoppers look for every day—lower prices. Price deflation, the cry, is disastrous for the economy. They worry that lower prices will reduce profits, leading to shutdowns and lay-offs, and that lower prices make it harder for people to pay their debts. Sound economic theory and history, however, both indicate that price deflation is nothing the social economy needs to fear. If prices fall because the economy is more productive, this is unambiguously positive. However, if prices fall because people spend less, their desire is for larger real cash balances. Falling prices help them achieve their goal, which precisely is the purpose of economic activity.

Lower prices and wages can make it harder to pay fixed debt. This, however, serves as an excellent incentive to stay out of debt in the first place, as my parents have done as a result of significant sacrifice. Before creating even more money out of thin air to ward off lower overall prices, we should at least consider some of the ethical issues involved.

Many men from my father’s generation are not unlike John Adams, who wrote to his wife that he “must study politics and war, that our sons may have liberty to study mathematics and philosophy.” My father embarked on 20 years of hard labor in a meat packing plant providing for his family until he lost his job due to his union pricing him and his fellow workers out of a job. When his plant closed in the mid-1980s, he embarked on a second successful career with my mother, operating their own barbecue business for another 20-plus years. I saw firsthand the challenges they faced trying to keep quality up and costs down, while producing top-drawer barbecue meat and sandwiches for a demand that was always uncertain. I saw the stress on my mother’s face one week in the early days when they netted a mere $15 before taxes. My father indeed “studied” meat packing and barbecue, in part, so I could go to college and become an economist and college professor.

Additionally, mom and dad had the foresight and character to make the sacrifices necessary to stay out of debt. Indeed, they are Paul Krugman’s worst nightmare—a family determined not to live beyond their means. Now retired, like many in their generation, they are enjoying life the best they can on an almost fixed income. Because they have no debt, they have been able to live without tremendous economic hardship thus far. The Federal Reserve’s inflationism, however, increasingly makes life for them more difficult as steady price inflation daily chips away at their livelihood. Since 2009, for example, the Consumer Price Index has increased over nine percent. This masks, however, significantly larger price increases for important necessities. Prices of dairy products are up almost 17 percent since 2009. Gasoline prices are up almost 11 percent despite the recent decline. Prices for meat, poultry, fish, and eggs have increased a whopping 26 percent since 2009. Higher overall prices do not help people like my parents at all. They instead act as a thief, snatching wealth away from them in the form of diminished purchasing power. What they long for is to see the value of their savings increase. Far from creating economic hardship for them, lower overall prices would be a boon.

Both sound economics and ethics, therefore, demand that we give up the anti-deflation rhetoric and the inflation it fuels. Charity demands that we cease striking fear into the hearts of the masses, softening them up for ever higher prices. The Federal Reserve should stop punishing people like my parents who have worked hard and played by the rules their whole lives. After all, what did they ever do to Greenspan, Bernanke, and Yellen?

Dr. Shawn Ritenour is a professor of economics at Grove City College, contributor to The Center for Vision & Values, and author of “Foundations of Economics: A Christian View.”

The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Jim Webb: The Traditional Full-Time Work Model No Longer Exists

ABC

Former Virginia Senator Jim Webb (D) is getting “a lot of support” to explore a run at the presidency in 2016. Mr. Webb told George Stephanopoulos on Sunday’s This Week on ABC that the focus should be on our dysfunctional economic system.

We’re listening. We’ve been around. We’ve got a lot of support through people coming across e-mails, Internet. And, you know, for me, we need to be focusing on the dysfunction that’s occurred in our economic system.

Webb said that young people who are just entering adulthood are in a different employment model than previous generations. The traditional full-time work model no longer exists because the manufacturing sector has collapsed over the last two decades.

They don’t have that model anymore. They are doing part-time jobs, consultancy jobs. They’ve got student loans to pay off. They’re wondering whether they’re even ever going to be able to own a home.

Webb said that the new economic model does not have the same security as it once did.

You’ve got to level the playing field in terms of how we take care of working people — full-time, good jobs. I think that the system is, in a way, becoming rigged against working people.

Webb cited his daughter’s work situation — she is a consultant who pays her own medical insurance and self-employment tax with none of the benefits of being an actual employee, like a retirement plan.

The former senator contrasted the new model of working people with that of corporate executives whose compensation is linked to the stock price of their company rather than the company’s earnings.

The people at the very top, clearly, have moved away from everyone else in our society, and the benefits that they are receiving, largely through stock options and executive compensation that would never have existed thirty years ago when they were measuring corporate compensation by the earnings of a corporation rather than the price of a stock.

h/t: Weekly Standard

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

Commonsense Economics

Twitter/The Stream

It’s too easy to label President Obama’s State of the Union as more tax-the-rich and redistribution. We know that. Rather than name-calling, Republicans must draw a clear line in the sand between their worldview and Obama’s. I’d call that line commonsense economics.

First, you can’t create a new business or sustain an existing one without the seed corn and nourishment of capital investment.

Second, only businesses create jobs. You can’t have a job without a business.

Third, jobs create all incomes, including middle-class incomes.

Fourth, incomes create family and consumer spending.

OK? This is not complicated. It’s common economic sense.

University of Chicago economist Casey Mulligan states this in a simpler way: Growth starts with investment and ends with consumer spending.

Regrettably, Obama doesn’t get this. That’s why he’s proposing the third capital-gains tax hike of his tenure. He started at 15 percent, went to 20, with Obamacare took it to 23.8, and now wants 28 percent. This damages business, jobs, and middle-class incomes.

Ironically, history shows that lower capital-gains tax rates produce higher revenues. Think Bill Clinton and George W. Bush. But a higher capital-gains tax produces lower revenues. Think late-Reagan, Papa Bush and now Obama.

Obama also proposes to raise the tax burden on capital by increasing inheritance and estate taxes. And he’s making another attempt to tax banks — only this time he is adding in asset managers and insurance companies. Ironically, a huge part of Obama’s base — police officers, firefighters, teachers — might suffer a serious depreciation of pension-fund stockholdings.

So, taxing capital will hurt the very middle-class workers and incomes Obama claims he wants to help. His so-called middle-class economics doesn’t work.

A related point: Obama’s SOTU made no mention of cutting corporate tax rates. Instead the president trashed the top 1 percent and slammed companies for keeping profits abroad and using unfair loopholes and deductions.

He’s right about loopholes and deductions. Let’s close them. But while we’re at it, let’s slash the corporate tax rate and make America more competitive worldwide.

Obama kinda forgot the lower-tax-rate part, didn’t he?

Also, nearly all studies show that middle-income wage earners are the biggest beneficiaries of corporate tax cuts.

And regarding those evil 1 percenters, according to the Tax Policy Center, the top 1 percent of Americans paid 33.4 percent of their expanded cash income in federal taxes in 2014. Meanwhile, Americans in the middle 20 percent paid only 13.7 percent of their income in federal taxes, while the poorest paid 3.1 percent.

You’d think a good class warrior such as Obama would like these numbers. Apparently not.

Why? He wants more money for government spending. A partial list includes more spending on childcare, sick leave, equal pay, lower mortgage premiums, a higher minimum wage, student-debt forgiveness, tax credits, and free community college. Some say this could wind up costing $500 billion.

So there’s a lesson here for congressional Republicans and some of my fellow conservatives: Do not get sucked into this class-war politics. You will never outbid the Democrats on middle-class benefits. And take a cue from Ronald Reagan, who rejected class politics and argued that his policies would increase prosperity for all Americans.

For instance, Obama’s child tax credits would be available for couples up to $210,000, tripling the max tax credit for childcare by up to $3,000. And that’s very close to what some of my conservative friends want. But there’s a better way.

Get rid of the 10 percent bracket and collapse the 25 and 28 percent brackets down to 15 percent. So if you’re making $100,000 a year and paying $25,000 at the 25 percent bracket, your tax cost drops to $15,000 at the 15 percent bracket. That’s a $10,000 savings. If you have two kids, with a $3,500 tax credit per kid, that’s only a $7,000 savings.

From the lower marginal tax rates, the middle class gets a much bigger tax savings. And, with marginal rates coming down, the incentive effect kicks in as people keep more of what they earn. And all middle-class folks are included — married with kids, single women without kids, millennials without kids, etc. And there’s still a big savings for the kids we love and cherish. But it’s done without class divisions or the targeted tax credits that Democrats love. (My only exception would be an expanded earned-income tax credit, which would have a longer phase-out period so as not to penalize folks moving from welfare to work.)

Former CEA chair Glenn Hubbard argues that “free community college, an enhanced tax credit for child care and higher taxes on high-income earners and large financial institutions” will not generate “growth, work and opportunity.”

Good advice, Republicans.

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The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

WATCH: Here’s The ‘Spirited’ Move Russia’s Putin Just Made To Try To Prevent Riots In The Streets

Putin

Russia is facing its worst economic crisis since 1998, with its economy now expected to slide into recession in 2015. And the emergency action just taken by Russian president Vladimir Putin shows he may be acknowledging the growing depth of the peoples’ despair.

With an economy threatened by international sanctions and falling oil prices, with the ruble crashing to dangerous lows, The Independent reports on Putin’s move to calm the deepening unrest in his troubled country — a proposal to freeze the price of Russians’ favorite intoxicant:

He stayed strong as the price of oil cratered, but Russian president Vladimir Putin has finally been forced to intervene on an even more critical commodity: vodka.

…Putin’s announcement, that high vodka prices encourage the production of potentially harmful bootleg spirits and should be capped by the government, is possibly the first sign that economic pressures are getting to him.

By clicking on the video above, you can watch a Euronews report on the move that could well have Russians toasting their president.

 

H/T breitbart.com

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom

WATCH: This Brilliant Video Perfectly Explains What Obama’s Presidency Has Done To America

Obama Economy Screen Shot

America has certainly changed since President Barack Obama entered the Oval Office.

That change he promised us? He certainly pulled through there.

But was it the change we were looking for?

You decide.

Do you like the direction our country is moving?

This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom