ThoughtRogue:  Considering America’s now rampant economic illiteracy and widespread ignorance of history and philosophy, I wonder whether we’re now past the tipping point and the American Dream is doomed?  You’ll notice that every policy decision that our beloved, alleged President makes is to further impoverish Americans – to make them wonderfully dependent, EQUALLY impoverished.

Two excellent books that lay a rock-solid foundation in economics is Henry Hazlitt’s famous Economics in One Lesson, and Basic Economics by Thomas Sowell.  Both explain economics to the layperson, without the use of formulas, with expert precision, allowing the reader to easily dissect for themselves the plethora of economic fallacies they are bombarded with daily.  These should be required reading of all students – not to mention of all politicians especially.

Turning the American economy around is really simple:

• Reduce the taxation monstrosity
• Reduce government spending even more
• Reduce onerous regulations and restrictions
• Reduce bloated, unconstitutional programs and bureaucracies
• Reduce the shackles on individual work and innovation

But, what has the Usurper-in-Chief accomplished and/or supported at every turn?

• Increased Taxes – net jobs killer and wealth destroyer.
• Gigantic Bailouts – net jobs killer and wealth destroyer.
• Increasing Federal Spending and Debt – net jobs killer and wealth destroyer.
• Repeal of Bush Tax Cuts – net jobs killer and wealth destroyer.
• More Money and Power to Unions, Lobbyists, and Government – net jobs killer and wealth destroyer.
• The ‘Cap and Trade’ Energy Bill Boondoggle – net jobs killer and wealth destroyer.
• Support for an Ever-Increasing Minimum Wage – net jobs killer and wealth destroyer.
• The Mass Amnesty of Tens of Millions of Illegal Aliens – net jobs killer and wealth destroyer.
• The Takeover of the Medical and Insurance Industries – net jobs killer and wealth destroyer.
• The National Socialization of Banking, GM, Mortgages, Education.. – net jobs killer and wealth destroyer.

Why Big Government Doesn’t Work

by DOCTOR ZERO, HotAir.com

A person living entirely on their own produces very little, beyond the bare minimum necessities of survival. He has no real “wealth” – no surplus production, to spend on discretionary endeavors. He has few real options in life, beyond daily survival. His moments of real choice come when he gets lucky. An exceptionally fortunate hunt might feed him for a few days, and give him some precious leisure time. Otherwise, he does what he must do, and rarely has time to think about what he could do. Some people enjoy living this way, but most do not.

The situation improves somewhat in a small, voluntary collective: a partnership with a trusted friend, or a small family living on its own. Their combined efforts produce more surplus food, and they can address the necessities of life with less individual effort. They may develop skills and talents that prove valuable to each other. Some people are content to live this way, with a small and isolated family that maintains very little contact with the rest of humanity – but, again, most are not.

When families begin cooperating with each other, production and wealth explode. Communities generate tremendous amounts of surplus production, and commerce allows people access to goods and services they could never produce themselves. The amount of time required to deal with personal survival dwindles away to virtually nothing. Doubtless the reader works hard at his or her job, but your job probably has very little to do with feeding or clothing yourself, or defending yourself from predators. Instead, you produce goods and services that would be unimaginable to a more primitive society – could you explain your job to someone from the tenth century A.D.? In exchange, you earn money, which you spend to purchase what you need – and, more importantly, what you want. Even the poorest member of an advanced society has options.

An advanced society requires a method for allocating its huge amount of surplus production, and meeting the basic needs of its members. There are two general mechanisms for doing this: commerce and government. Every society uses a mixture of these methods. Even the most totalitarian government has a black market, and even the most free-wheeling capitalist society will have a government. Attempts to artificially engineer a society without either commerce or government are doomed to failure, because they will form spontaneously, no matter how strictly they are forbidden.

Government and commerce don’t just co-exist in an uneasy truce. They need each other. Commerce, the free exchange of money for goods and services, produces wealth through choice. Remember the example of the man living alone: the poverty of his existence comes from his lack of choices. The value of money flows from the way it allows consumers to express their choices. For a simple illustration of this principle, compare a ten-dollar restaurant gift certificate to a ten-dollar bill. The ten dollar bill is more valuable than the gift certificate, because you have more choice in how to spend it. A government increases the wealth of its citizens by providing security – stable currency, secure borders, protection from criminals, respect for property rights, and legally enforceable contracts, to name a few of government’s duties. This has the effect of increasing the citizens’ wealth, by increasing the choices available to them. A ten-dollar bill has more value in a large, lawful city than on a tiny island where few goods are available, or a den of thieves where nothing can be bought with confidence.

Consider the example of the impoverished loner versus the citizen of a prosperous society again. The citizens’ money represents wealth, thanks to his many choices, but it represents something else of enormous value: extra time. The loner spends most of his waking hours staying alive, and seeing to his minimal needs. The wealthy citizen spends almost no time on these things – he uses it for economically productive work, self-improvement, and leisure. A ten-dollar bill will purchase you a shirt that you probably don’t know how to make yourself… and even if you had the knowledge, it would most likely take you longer to make the shirt than it takes you to earn ten dollars.

Government allocates wealth through top-down commands, imposed by force. There would be no need for massive tax and spending bills if everyone was freely choosing to spend their money the way the government wants them to. Capitalism has priorities, while government has imperatives. Capitalists fulfill their ambitions through competition, which increases the choices available to consumers. The ambitions of the working class lead them to work harder, and engage in increasingly valuable and productive labor, to earn a better living for themselves and their families. This system is not perfect – there will always be people who try hard but don’t get ahead, and people who don’t make a very productive contribution to society – but over the long run, and measured against a population of millions, free market commerce will tend to produce increased choices, improved technology, and greater value through competition.

Government fulfills its ambitions through compulsion, which reduces choice. Sometimes compulsion is necessary – you can’t fund national defense by passing around a collection plate. When government exceeds the minimal functions necessary to provide stability and security, and begins interfering in the economy for the benefit of certain constituencies, by definition it reduces the overall choices available to its citizens. It doesn’t matter if the government’s intentions are noble – every law it passes to redistribute wealth inevitably reduces wealth, because it reduces choice.

In an economy dominated by the government, the ruling class fulfills its ambitions by serving faithful constituencies at the expense of others. It tries to address its failures by increasing control, which reduces wealth even further, in a downward spiral. It’s not in the nature of government to abandon failed programs, because if government was intelligent and morally superior enough to assert control over a situation in the first place, it will not see the logic in surrendering that control to inferior free-willed citizens. Instead, it will redouble its efforts.

In this environment, the citizens can best fulfill their ambitions by joining favored constituencies if possible, and becoming adept at petitioning the government for greater benefits. This tends to be more successful than working hard, as there is little competition in a state-run economy for the most skilled and productive workers. There are always exceptions – people who give 100% effort out of compassion, personal drive, or a religious calling. There will be politicians who are truly selfless, and sincerely wish to act as wise stewards for the resources of society. Exceptional people cannot be relied upon to power a society of millions. In the long run, and projected over a vast population, the incentives of a government-dominated economy produce stagnation, and strife between warring groups of citizens, who can only gain more benefits at each others’ expense.

That is why Big Government never works. It can’t address conflicting priorities efficiently. The ambitions of its masters are best served by catering to the demands of small, energetic groups, or big corporations who wish to compromise its rightful duty to ensure free trade. Its citizens are not rewarded for exceptional effort, or taking great risks. Worst of all, every single action it takes destroys the very wealth needed to improve the lives of its citizens. Big Government pounds on every problem with a hammer that crumbles in its hands.

How Much is That Clunker in the Window?

The parable of the crushed clunker.

ThoughtRogue:  Jonah may have beat me to illustrating the “Broken Window Fallacy” lesson here, but man, did he nail this one on the head.  There’s so much nonsense and ignorance contained in the “wildly successful” Cash for Clunkers “stimulus” program that only a completely ignorant, out-of-touch, out-of-control arrogant Congress could trumpet this boondoggle as a “success” (and add 2 $Billion more as did our RINO Rep. Reichert).  Folks, on net, it is DESTROYING your wealth.  The Cash from Kleptocrats program creates a plethora of new broken windows.  The grand point of this famous economic parable, which eviscerates Obanomics, is that without the hoodlum breaking his window, the baker will buy whatever goods he was going to buy in the first place, AND he has an intact window (retains more wealth!).  But, of course, in C4C, the genius kicker is that the baker’s other out-dated windows (which still have value in a free market) are also broken for his added convenience – so he can replace them with more efficient “green” windows.

By Jonah Goldberg, National Review

Gilded Excrement Award Winner: Cash for Clunkers!

Ce qu’on voit et ce qu’on ne voit pas.

That may exhaust my French-phrase quota for the year, but it’s worth it. The saying is the title of an essay by 19th-century French economist Frédéric Bastiat and means “that which is seen, and that which is not seen.”

Bastiat’s essay is most famous for the “parable of the broken window,” in which a young boy shatters a shopkeeper’s window and, after some initial outrage, the villagers conclude that the rascal helped the local economy. Why?

Because if no one broke windows, window makers would be out of business, and if window makers were out of business, they wouldn’t buy any more bread or shoes, hurting the bakers and cobblers. So the six francs the shopkeeper must spend for a new window is really a boon to the community.

The problem with this argument can be gleaned from the title of Bastiat’s essay. By counting the money the shopkeeper spends to replace a perfectly good window (that which is seen), we ignore the money he might have spent on something else (that which is unseen). The shopkeeper might have instead dropped six francs on new shoes, a book, or a bonus for his assistant. Those who celebrate the broken window as a generator of growth take “no account of that which is not seen.”

Sorry for the long digression, but the parable of the broken window is worth keeping in mind, or perhaps even worth updating to the parable of the crushed clunker.

This parable is more convoluted, but the upshot is that Uncle Sam pays people to destroy their own cars as long as they use the money to buy a new, more expensive car.

As you’ve no doubt heard, the “cash for clunkers” program gives buyers up to $4,500 of taxpayer money toward the purchase of a new car if they trade in their old cars for vehicles with better gas mileage. The old cars, still roadworthy, are then destroyed just like the shopkeeper’s window.

The thinking behind the program is that the car companies need a boost, Michigan needs a boost, the environment needs a boost (through lower emissions), and Americans need help too.

Unsaid, but just as relevant, is that the authors of the government’s mammoth stimulus plan need some proof that something is being stimulated.

The program’s $1 billion funding evaporated in days rather than months as consumers, most of whom had been waiting to trade in their clunkers anyway, lined up for free cash. Washington is now agog with its successful effort to give out free money.

That Washington is shocked by the news that Americans like getting free money shows how thick the Beltway bubble really is.

Like the drunk who only looks for his car keys where the light is good, Washington can only see the economic activity it has created, not the activity it has destroyed.

For starters, who says the smartest thing for people with working cars is to buy new ones? Personal debt is supposed to be a problem, so why not look at this as bribing consumers into taking out car loans they don’t need? Even with the $4,500 subsidy, not all of these customers are going to be paying cash for their new cars. So they’ll be swapping serviceable-but-paid-for cars for nicer cars that are owned by banks.

Besides, maybe some people would be smarter to buy a savings bond or max out their kid’s college fund or — here’s a crazy thought — buy health insurance. But instead they’ve been seduced into spending the equivalent of their six francs on a car they don’t really need.

But, you might say, some buyers surely do need a new car. True. But if they needed a new car, they’d get one anyway, eventually. Indeed, they might already have gotten it, but rationally opted to wait for the program to kick in.

Or maybe they’d have needed to delay the purchase until next year, or buy a cheaper car, possibly even a used car, which will now become more difficult for poor people to find because we are taking all these cheap cars off the market.

But at least under these scenarios, they’d be spending their own money.

Under the government’s program, tax dollars are being diverted to people with cheap cars so they can buy expensive ones. That’s just really inefficient wealth distribution, not wealth creation. But government can see it, and that’s all that counts.

ThoughtRogue:  Folks, take a look at the unbelievably sobering graphs below (courtesy of The Wall Street Journal).  Note the following: (1) Obama’s deficit is larger than Bush’s largest by a factor of FOUR – and the Usurper still attempts to shift the blame to others, especially Bush. (2) For the first time EVER, the federal deficit exceeds $1,000,000,000,000.00 (that’s 1 $Trillion in overspending) – and the fiscal year is far from complete. (3) The federal “revenues” have significantly SHRUNK in comparison to last year’s – that’s because business profits are disappearing along with tens of millions of tax-paying jobs. (4) The insatiable federal spending, bars on the right, are displayed on the same scale – and include all the bailout schemes to date.

WARNING:  These audacious, skyrocketing federal deficits do not yet include: (1) The “Cap and Trade” massive tax scheme (largest in American history if it passes the Senate). (2) The Socialized Medicine extravaganza – destroying our superior private health care system, in favor of the rationed ObamaCare “Universal” health care scheme. (3) “Immigration Reform” – aka The Mother of all Amnesty schemes.  And now, Congress is even contemplating another colossal “stimulus” pork-laden spending scheme.

Also, likely to compound this Obama Nirvana, (1) another stock market crash in the next few months. (2) a crisis in commercial real estate. (3) a continually collapsing value of our Dollar, and (4) a debilitating rate of inflation when our economy finally does become able to recover.

Ah, the wonders of Hopenchange!!  Perhaps we should have elected someone who is actually Constitutionally eligible (not to mention competent) for POTUS instead?

Economic Nirvana

ThoughtRogue:  Hey, the Penny Guy’s back, and he’s got another brilliant economic illustration that even a Leftist might be able to understand…

TR:  Hey, State Media and Faux-bama, Get A Room!

TR:  Translation – The Honeymoon’s Ovah!! Now, it’s time to sit back and watch the Faux-bama Fireworks display as the economy continues to implode, the U.S. border is left wide open to tens of millions of invaders, and Islamo-fascism continues its global march against Western wussies..

Even a messiah loses his training wheels

By Wesley Pruden, Editor Emeritus of the Washington Times

Agent of Change

Disconnecting the training wheels is a scary prospect for every apprentice biker, even with Daddy standing close by. We can sympathize with Barack Obama’s fright as his moment approaches. It’s not easy suddenly being on your own, paying the price of falling with your own skinned knees and bruised elbows.

Nevertheless, the dreadful moment approacheth. Anticipating D-Day, Peter Orszag, the president’s budget director, said Monday that the scarier than expected economic news – the deficit out of control, tax receipts down and costs of bailouts and “stimulus” plans up – is all the fault of George W. Bush: “It’s an economic crisis President Obama inherited.”

But Mr. Obama has already been president for more than a hundred days, and passing the hundred-day mark, irrelevant milestone as it may be, was cited as dead-solid proof that the president is the messiah he told everyone he was. Reality, however, has begun to cast a shadow over the White House, still as faint as the bright golden haze on the meadow but visible enough. “Blaming George” still makes a tingle run up the legs of all the hymn-singing true believers, but outside the embrace of the cult, that tingle is beginning to sting instead. This is Mr. Obama’s government now.

The White House on Monday said the new estimate of the budget deficit would nearly reach $2 trillion – that’s trillion, with a “t” – and that’s nearly 13 percent of the entire gross domestic product. Pretty gross any way you spin it, and the president’s men (and women) are spinning it as best they can. Alas, the country’s predicament, if not yet the president’s, is probably worse than it looks.

The projected budget deficit is four times larger than the deficit record set last year. We can blame that one on George, but George, big spender that he was, turns out to have been a tightwad. Maybe this is the “change” Mr. Obama promised. Yes, he did.

The administration insisted Monday that by the end of this year the gross domestic product will be growing at a rate of 3.5 percent, which would be good news so good that it’s likely to be too good to be true, and it’s certainly more optimistic than any private economic forecast anyone has seen beyond the White House fence.

The White House flogged this news in a statement studded with more weasel words than usual: “Although the economic downturn so far in 2009 has been more severe than the administration expected when the forecast was finalized, if the financial system begins to function more normally, there is every reason to expect a somewhat stronger recovery, given the depth of the current recession.” Translation: “Don’t blame us, nothing is ever the fault of the messiah, maybe everything will get a little better if it actually does get better. We hope. But don’t count on it.”

What shines through the spinning, bright and bold, is that Mr. Obama no longer believes in the pie in the sky he promised. He has obviously learned a few things in his first hundred days. “Wow! So that’s where babies come from.” But he still can’t give up his teleprompter, his training wheels and good ol’ George. Good ol’ George is the president’s teddy bear. He can’t go to sleep without Teddy. George is his imaginary person, too, on whom he can blame everything. He feels very close to imaginary George.

George the imaginary person threatens everything Mr. Obama has in store for us – higher taxes (whether disguised as “user fees” or “investments”), Al Gore’s vast scheme to combat global warming whether the globe is warming or not, and a health-care plan guaranteed to eventually assure every American access to medical care equal to the quality health care now available in France, Canada, Britain and maybe even Lower Volta.

The good news, such as it is, is that the remaking of America in a way that a Chicago street “activist” of a generation ago hardly dared dream of may be of such potent poison that the body politic will reject it, as a healthy human body might reject a massive dose of arsenic (perhaps administered by someone in old lace). Several of the president’s Democratic allies in Congress are already balking at his scheme to extract killer taxes, such as curbing deductions for mortgage interest, gifts to churches and charities, and state and local taxes.

Soaking the rich, so-called, is OK, but marinating the rich may not be helpful. More than skinned knees and bruised elbows are in prospect as Barack Obama finally discovers that ready or not, he’s the president now.

By Christopher Ruddy, Newsmax

If Simon & Garfunkel were still recording today, they might pen a hit new song, to the beat of “Mrs. Robinson,” titled “Where Have You Gone, Milton Friedman?”

The Nobel Prize-winning, free-market economist died in 2006. But Friedman was not only a brilliant theoretician, he was an articulate advocate for our free-enterprise system. President Reagan awarded him the Presidential Medal of Freedom in 1988.

I remember as a high school student watching his TV program on PBS, “Free to Choose.” Friedman’s ideas became the underpinnings of the Reagan revolution, not to mention Margaret Thatcher’s privatization movement that helped leapfrog Britain’s economy.

Today capitalism is under attack as never before and Milton Friedman is not here to defend it.

President Barack Obama and congressional Democrats are blaming capitalist greed for the current economic crisis, seeking to make scapegoats out of the “rich,” banks, Wall Street – the entire capitalist system.

Their solution is more government, more spending, and higher taxes.

What would Milton Friedman say to that?

Well, I can share with you a video of a testy but amusing confrontation between Friedman and liberal TV talk-show host Phil Donahue that took place in 1979.

Acting like Barack Obama, Donahue asks the renowned economist, “When you see the greed and the concentration of power, did you ever have a moment of doubt about capitalism and whether greed is a good idea to run on?”

Friedman shot back: “Is there some society we know that doesn’t run on greed? What is greed? Of course none of us are greedy; it’s only the other fellow who’s greedy. [The audience chuckled.]”

Friedman continued: “The world runs on individuals pursuing their separate interests. The great achievements of civilization have not come from government bureaus . . .

“In the only cases in which the masses have escaped from the kind of grinding poverty you’re talking about, they have had capitalism and largely free trade . . .

“There is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”

Those words are so appropriate today. [You can watch the video of Friedman's exchange with Donahue at the top of this post.]

Friedman’s point is not that capitalism is perfect, but that it is better than all the other systems. Consider that the United States has just 5 percent of the world’s population, but its free-enterprise system produces 25 percent of the world’s GDP.

If Obama gets what he wants, attacking the rich and “spreading wealth around,” the U.S. will resemble the socialist economies of Europe – and it will also mirror their low rates of growth and economic activity. Obama’s plan will not just hurt the U.S. economy, it take the steam out of the world economy’s engine.

But Milton Friedman still has more to say about Obama.

Recently, Newsmax’s sister publication, Financial Intelligence Report, included an economic analysis from market expert David Skarica.

Skarica cited Friedman’s 1992 classic work “Money Mischief.” As Skarica notes, everything that is unfolding today, including our government’s response to the current crisis, is all laid out in Friedman’s prophetic book.

“Friedman argues that, during recessions, governments turn on the printing presses,” Skarica wrote. “Interest rates plummet as governments move to inflate the money supply in response to an ensuing economic meltdown,” and the initial effects seem good.

That is, governments use spending to cover up economic ills, but that leads to rampant inflation.

Amazingly, what Friedman described is exactly what is happening today. Obama and the Democrats are unwilling to cut spending and be fiscally responsible, and instead will massively increase the money supply – which inevitably leads to inflation.

Skarica writes, “We are seeing this phenomenon unfold right now before our very eyes.”

Federal Reserve Chairman Ben Bernanke has said there is no problem with inflation, declaring on March 10, “We do think inflation will be low over the next couple of years.”

And just this week, it was announced the Fed pumped another $1.2 trillion into the economy!

Bernanke surely knows what Friedman explained in “Money Mischief” – that it takes at least a year after the massive expansion of the money supply for inflation to rear its ugly head. And Bernanke is well aware, as Friedman so artfully explains, that inflation causes a brutal economic “hangover,” making things actually worse in the long run.

Sadly, our biggest problem today is not the economic one, but one of leadership and character. We do not have the Milton Friedmans to rise to the challenge.

Without Simon & Garfunkel’s new song, perhaps we can just change the lyrics in “Mrs. Robinson” to “Where have you gone, Milton Friedman? A nation turns its lonely eyes to you.”

By -ThoughtRogue

Peter Schiff, President of Euro Pacific Capital, absolutely nails what’s gone wrong with our economy and does not sugar-coat the effect that Pork-Zilla will have on your future standard of living.  Schiff is one of the very few who has been presciently ringing the alarm bell for years now, while he has accurately predicted the mess we now find ourselves in – well on our way to the next Depression.

Click the Image to Watch Peter Schiff explain:

Obanomics Explained