MARKET CURRENTS
real-time news and commentary for investors
- Wednesday, February 8, 7:55 PM GDP growth has been moderate, but the private sector is growing almost 5% a year, says economist Austan Goolsbee. It may seem ironic that these numbers are still showing growth being high, Goolsbee says, but the real reason the overall numbers don't show the economy growing much is actually because of the shrinkage of government. (video)
Other date
Latest Macro Articles
This news story has 42 comments:
Yeah, he wants to serve his country unless it means he doesn't have a cushy 250K per year job for life!!!
Typical elitist, wants to set up the rules for everyone else.
Besides what are you doing on this site if not to make money! Can't blame Austin for being a true blue American capitalist!!
I. Copi, "Introduction to Logic" (any edition).
He and his corrupt boss have inflicted pain on nearly every American.
CNBC thinks he's smart!
http://bit.ly/AtBiNZ
Maybe you could provide some data to back up your claim? Novel idea.
Me? Nope. Lay it on me.
"In absolute terms, government spending has been declining greatly under Obama - at the state and local levels as well."
O so its going down?
"Government spending only seems to be rising due to even stronger deleveraging by the private sector, hence the need for government assistance."
Wait, now its going up? Just drop the bong and walk away from the keyboard.
Like when Austin talks about "taxing the wealthy" and
taxing "those with the highest incomes..." which are two completely different groups.
But with the government education system, it's no surprise that
the masses think it's the same.
State governments have been furloughing and cutting staff, delaying capital purchases on a massive scale. This is fact. Of course also true is the main reason behind the cuts. Lack of revenue. And that is where the rubber meets the road politically speaking.
Your point that state government have been furloughing and cutting staff and delaying capital purchases is correct. Yet, it does NOT equate to cutting spening. Just look at their ever-growing pension contributions and you will understand where the money is going into.
You can't brush politics aside, because politics is what is getting us into this mess. Obama wants you to wage war on the top 1%, while he queitly continues to dole out $150+ thousand per year pension to every government union retiree. It is killing our economy and country.
" Obama wants you to wage war on the top 1%"
Where is the war? The top 1% has won. They effectively control gov't now. Surely must agree. I don't see, for example, community organizers down in Compton LA, CA running the show.
"while he queitly continues to dole out $150+ thousand per year pension to every government union retiree."
The terms of these pensions (we are talking only about federal employees right? And $150k for EVERY retiree?) came about long before Obama. There needs to be some rational limit to this spending, yes, certainly with new hires. Secondly, do non-union federal employees not deserve a pension? Does anyone deserve a pension? By "deserve" I mean the terms of employment that they signed up for and were promised.
"The terms of these pensions (we are talking only about federal employees right? And $150k for EVERY retiree?) came about long before Obama."
True enough. Yet Obama - who ran under the CHANGE slogan - has done nothing but continue the trend. So while the seeds were planted before him, he is now watching them germinate and rather than make the tough decision he is turning blind and using other people's money to throw at the problem.
And, NO, I am NOT just talking about Federal employees. The retired fire chief in my small city is pulling $180k pension annually. The retired city manager is above $200k. And that is considered 'low', believe it or not, as many cities and states have included automatic 5% annual CPI adjustments and some pensions are well into the $300k-$400k range. The sad part is that the taxpayers whose taxes go to pay for this largess are making on average $70,000 working and none have the guaranteed defined-benefit plans the retired city union employees are enjoying. So it isn't a small issue of 'some rational limit.' If you are signing up to be a public servant, you shouldn't be paid higher than the private sector (as the CBO recently concluded was the case) and receive benefits twice better than private sector, all the while being able to retire 5-10 years yearlier on a pension that is HIGHER than your wage! We are in a financial crisis. We are running huge and persistent budget deficits and have a debt burden we can not afford. If we were a company, by now we would be in Chapter 11, where all these burdensome union contracts for pensions, wages and benefits will be rejected as unsustainable. Our children shouldn't work 11 months of every year for the government, because some bought-out politician promised to pay union government employees unsustainable compensation.
"Where is the war? The top 1% has won"
Really? Chief Obama just submitted a budget that increases taxes to the 'Rich'. Because we are adicted to spending. Is that a 'win' in your book? Who know who is winning? All those companies and organizations that are funded from the national budget. There will be more of them every year, count on it.
Hardly a 'reckless abandon'. There is a lot more room there before we get to that point.
The facts are that while government may be shrinking in terms of actualy employees, it is growing in terms of spending, regulations, and soon to be more taxes.
It is not a matter of cutting spending on those who were hurt the most. And it's not even a matter of Medicare and fraud and waste.
The real issue is major structural change to get the economy functioning much more productively, efficiently, cost effectively, etc.
And the major beneficiaries of the current system (politicians, lobbyists, wall street, crony capitalists, the wealthy elite, the military industrial complex, government unions, healthcare industry, etc.) don't want any changes.
There are real reasons why income inequality in the US continues to accelerate, why healthcare costs continue to accelerate, why government deficits continue to accelerate, why educational results continue to detoriate, why taxation laws never get rationalized, etc.
And it's not advanced rocket science to understand why things don't get much better in spite of continued large government spending or even more government political rhetoric. Just look at a few examples:
1) healthcare - why is the US healthcare system the most expensive in the world (2-5x any other developed country), has worst outcomes on many measures of health, and has the worst population coverage rate in the developed world?
- And the answer is because those who benefit the most get excess rewards and benefits. They being health insurance companies, health employees, pharma, etc.
- The Dutch within the last 10 years converted to a national health system but virtually totally run by the private insurance industry. And have seen major improvements in cost, efficiency, overall satisfaction and service, etc.
- The US could save at least $1 trillion annually (7%) of GDP simply by moving to a much more efficient and cost effective system.
- But such will never happen because the primary beneficiaries of the current system would lose all those excess rents and benefits.
2) education - why does the US have one of the highest cost yet least productive educational systems in the developed world (K-12 system)?
- Comparative results show that the US system has dismal results and continues to get worse in spite of ever increasing spending.
- Yet a country like Denmark began radically reforming their entire educational system several decades ago. Today they consistently produce top 5 in the world results year after year. And at significantly better cost efficiency than the US.
3) income taxation - individuals vs. corporations - why is it that foreign source income and profits are taxed differently for individuals vs. corporations?
- corporations get to defer US taxation on foreign profits indefinitely until either they repatriate such profits or they pay them out in dividends (virtually indefinitely). Yet US individuals are essentially taxed on their worldwide incomes annually whether they repatriate them or not.
- An absurd difference, which corporations have paid for via political lobbying, donations, and buying of tax preference. And to this day corporations still lobby for tax holidays so they can bring back foreign profits at absurdly low tax rates thus avoiding most tax forever.
- Can you articulate any logical reason whatsoever why corporations should get mutli-trillion dollar tax breaks than individual citizens are never entitled to.
The only point of the above being that much or most of the continual increases in government spending are simply going towards maintaining a small status quo that are essentially "ripping off the system" for their own self benefit and wealth transfers to themselves.
The real solutions lie in major structural reforms to make the system more efficient not in sending ever increasing amounts of government spending to ever smaller vested interest groups.
Ask yourself a couple of questions
1) active mutual funds - how many active mutual funds would exist today if they were only paid for performance, instead of getting a fee based only on assets under management (regardless of performance)? Remember 85% of all active fund mangers under perform index benchmarks.
2) wars & military service - how many wars and military engagements do you think the US would have been involved in over say the last 50 years if:
a) politicians who voted for military engagements actually had to leave office and serve on the front lines in any military engagements,
b) politicians and their top 5 staffers who voted for military engagements had their on compensation and benefits (including pension build-up) reduced to say a nominal $1/year for the duration of the time the US was committed to major military expenditures and engagements?
God I hate politics. I just wish worthless partisans like you would provide some data and base a coherent argument off of it. Christ.
To simplify:
Fact: The number of STATE government employees are shrinking.
Fact: The FEDERAL deficit is growing.
Two entirely different points and metrics.
Now lets focus in on these two points.
Facts: Government employees out of work = less consumer spending, less tax revenue and higher unemployment figures.
Is that good or bad? Long term or short term?
Fact: Higher government spending is excellent for many big businesses. Think Haliburton and the few large health insurance companies. Windfall short term profits. How has this helped the job market? How has this impacted consumer spending?
Fact: Small businesses are suffering from bloated health care premiums from large PRIVATE insurers.
Just some food for thought...
Keep in mind he is talking about 3% worth of shrinkage ! That is huge and I do not see it where I live (MN) !
Let's make some money!
And "czars" didn't begin with President Obama --- it's like no one ever heard of this stuff until this administration. Ya think it's because it's being used against him as though real evil or stupid doings? Heck yeah! Our country's economy would be doing better if the GOP had bent a bit instead of holding firm to Norquist and his mighty petition. Oh no, don't get me started.
As bdarken says: let's make some money!