The greatest periods of American economic growth came when taxes were very low—such as in the 19th century—or being lowered and simplified, as in the 1920s, 60s, and 80s. Inescapably, to tax wealth creation is to discourage it. But there is a large and politically potent segment of the population that, because its interests are now aligned with those of the government, seek to promote dependency through entitlements. This segment favors ever higher taxes (although they disguise the fact by demanding that only “the rich” pay their “fair share.”) But, as with regulation, high taxes inevitably produce low growth—and low growth threatens entitlements in the long term. If the United States remains in the doldrums for several more years without hope of a real turnaround, Medicare as it is currently constituted will go bankrupt in 2019. Raising taxes to prevent that will only slow overall growth, and that will actually defeat the purpose of saving Medicare.

So there is really no alternative to pursuing policies that encourage economic growth through private action by liberating the forces of the free market. A presidential candidate who finds a way to ground his economic policies in this core truth—and harnesses the idea to a larger and more optimistic understanding of the United States, both past and future, and resists the take-your-medicine tone that dominates the conservative policy discussion of the present moment—will be able to draw a sharp and effective contrast with the failures of the Obama years.

from Growth:  The Only Way Out of this Mess – The American past offers the best guide to a prosperous future by John Steele Gordon in the July/ August, 2011 Commentary Magazine

It is ironic that the greenest president presides over the demise of the green industries while a new oil boom is making us more energy independent in spite of policies intended to stunt the growth and development of fossil fuels.  The jobs boom is not coming from the development of green energy, but it is coming from the ‘dying’ oil sector.  More and more countries are withdrawing from the Kyoto Accords and and more and more scientists have become skeptical of the absolutism of politically influenced science used to promote extravagant solutions to climate problems that may not exist, or at least may be beyond the cause or the control of human action..

Victor Davis Hanson writes in The National Review Online Obama 101, 11/30/11.

Excerpt:

“Green” will never be quite the same after Obama. When Solyndra and its affiliated scandals are at last fully brought into the light of day, we will see the logical reification of Climategate I & II, Al Gore’s hucksterism, and Van Jones’s lunacy. How ironic that the more Obama tried to stop drilling in the West, offshore, and in Alaska, as well as stopping the Canadian pipeline, the more the American private sector kept finding oil and gas despite rather than because of the U.S. government. How further ironic that the one area that Obama felt was unnecessary for, or indeed antithetical to, America’s economic recovery — vast new gas and oil finds — will soon turn out to be America’s greatest boon in the last 20 years. While Obama and Energy Secretary Chu still insist on subsidizing money-losing wind and solar concerns, we are in the midst of a revolution that, within 20 years, will reduce or even end the trade deficit, help pay off the national debt, create millions of new jobs, and turn the Western Hemisphere into the new Persian Gulf. The American petroleum revolution can be delayed by Obama, but it cannot be stopped.

HKO comment:

With all of the enormous political power at his disposal, the president is unable to fight true market forces.  The crony capitalists who see enormous campaign donations as the same kind of investment as capital equipment and technology are able to suck large sums from the public trough until the market reality that their product cannot survive in a true market becomes obvious.  It is one thing for an objective investor to place his fortune at risk to develop new technology; it is quite another for a public official to place taxpayer money at risk while making endless efforts to hobble competitive energy options.  Markets move at a much faster rate than government.  This is the reason that such government solutions are always fighting the last war and ignorant of the developments that refute their best and most corrupt efforts.

There is much not to like about Obama Care  (Patient Protection and Health Care Affordability Act) , but this post will focus on just one.

HSAs or Health Savings Accounts are actually a part of a health insurance option that includes a High Deductible Health Plan (HDHP) option.  Before Obama Care a plan was designed that allowed a consumer to buy a policy with a large deductible that also qualified for a tax deductible savings account (HSA). The idea was to bring consumer pressure to bear on the medical market place.  By allowing health insurance buyers to pay more out of pocket  they would become more cost conscious.

Accumulation of funds in the health care savings account could roll over and be used to pay future bills, but the crux of the intention was that the consumer would be spending his own health care dollars and saving insurance for major medical expenses.  This was one of the few reforms in health care that sought to increase consumerism.

But the higher deduction was also largely offset by much lower premiums because consumers were willing to pay more out of pocket. This is how insurance should work.

But Obama Care has mandated first dollar coverage on preventative care even for HSAs where consumers chose to pay first dollar costs themselves  in order to get lower premiums.  Preventative care is also being expanded to include more than just physicals; it now includes birth control pills and family counseling.  The wider interpretation  of ‘preventative’ has companies concerned about what else will now be similarly considered and thus forced to cover at 100%.

The result is that now HSAs are no longer a low cost option.  On our renewal this year our HSA  option is about the same cost as an HMO.   There is no room left to fund the tax deductible health savings account.  HSAs now appeal to either the very healthy who get their annual physicals covered at 100% or the very sick who will reach their maximum out of pocket anyway, and may actually have few copays in such a high deductible plan.

By mandating what they think we need rather than what we would freely choose, they have reduced our choices and increased our cost.

Now they this bill has passed, the more we get to see what is in it, the more we are not going to like it.  Using the word ‘affordability’ in the title of this bill is an Orwellian joke.

While our students perform poorly on standardized tests relative to other countries, we have the most desirable institutions of higher education in the world and have a disproportionate share of Nobel Prize winners.  How is this so and do we denigrate out school system too much?

One explanation is offer by Thomas Sowell in Success Concealing Failure.  This was published in the Jewish World Review on 10/29/99, and is included as a chapter in The Thomas Sowell Reader.

excerpt:

AMONG THE MANY clever and misleading defenses of our failing educational system is the assertion that our universities are among the highest rated in the world and Americans consistently win a disproportionate number of Nobel Prizes. Both these claims are accurate — and irrelevant.

While Americans won the lion’s share of Nobel Prizes again this year, not one of these winners was actually born in the United States. If people born and raised elsewhere choose to come here and use their talents, fine. But do not claim their achievements as some vindication of the American educational system.

On the contrary, the painful question must be faced: Why were a quarter of a billion native-born Americans unable to win a single Nobel Prize this year, when a relative handful of naturalized Americans won so many? This is not a vindication but an indictment of our educational system.

Even more revealing, there is a systematic relationship between the difficulty of the subject and the percentage of American doctorates which go to Americans.

HKO comments:

While Sowell’s comments may be accurate there are other factors that have accounted for American success stories such as Steve Jobs and Steven Spielberg.  There is an American spirit that combines impatience, a healthy disrespect for authority, personal freedom, and a can do attitude.  What is missing in this article is why so many groundbreaking technologies the product of American minds.  Mark Zuckerberg, Sergin Brin (Google) are a few others that come to mind.

While this is not to excuse the quality of our school system and its importance for those who are not the outliers of success,  perhaps there are other factors that have allowed us to overcome this problem.  Perhaps formal education has proven itself less relevant.  This is a product of their poor performance and breakthrough widely available technology made available by some very smart dropouts.

Perhaps the most destructive policy of this administration has been the dramatic extension of unemployment benefits to 99 weeks.

We have accumulated debt to give to the most unproductive act imaginable; paying people not to work.  Nancy Pelosi’s now famous idiotic statement that is the most productive way we can spend money because the poor and the unemployed will spend that money and thus stimulate the economy  is so wrongheaded that were it not for her stature it would be foolish to even reply.

It is not a debate of stimulating demand vs stimulating production.   Production is stifled not just by the impending higher taxes, but by the regulations which are approaching European Kafkaesque lunacy.  We have learned that short term stimulus does not stimulate long term growth, especially when we have experienced a dramatic retrenchment.

We would have been better off to stimulate the economy with a broad tax cut that would have stimulated demand and production.  We would have been better off creating public works projects rather than paying people to do nothing.

By paying 99 weeks of unemployment we have not only poured borrowed money down the least productive hole, we may have destroyed the work incentive for millions of Americans, and further created a stigma that will make the most chronically unemployed the hardest to hire.

Steady work is habit that once broken is hard to restore.  With such high unemployment there should not be a single piece of trash on the street, or a single public building in need of a paint job.  There should not be a single unwashed public vehicle.

It fascinates me that in spite of record high unemployment that so many employers seem to have a problem hiring at the low end of the wage spectrum.  Part of this is because of the 40% increase in the minimum wage just before the recessions, and part of this is because of the generous unemployment benefits.  This is not limited to the 99 weeks of unemployment;   it includes food stamps, subsidized health care and often subsidized housing.  A decent job threatens one to lose all of these benefits and it is hard to find a job that pays enough to replace all these benefits especially when computed in after tax dollars.

But the biggest damage is to the expectation and spirit of the worker who now discovers that he can no longer have he has come to expect.  99 weeks is no longer temporary- it becomes expected.  Employers are hesitant to hire those who have been out of work a long time.  As companies have cut back they laid of the least productive and have seen their profits grow on lower volume.  This is a not a reality they are unhappy with.

Work is more than a necessity, it is a habit.  For many Americans who have benefitted from our generous unemployment benefits it has become neither.