Calling John Galt

BoomerJeff pulls together a pile of steaming data on individual and corporate tax receipts to paint a very grim picture of the impact of Obamanomics on the US economy.

ObamaNomics is built on the assumption that politicians are better stewards of economic resources than the millions of individuals and business enterprises who created those resources.  The Democrats’ plan is to dramatically increase taxation to fund programs through which government can exert greater control over our lives.

But these data show that the private sector’s ability and willingness to generate wealth for government to seize through taxation is rapidly diminishing.  These data show that Obama’s own actions are are literally killing the goose that lays the golden eggs he needs to fund his agenda.

It’s really not all that surprising; take more money from the productive part of society and it has less capital left over to pay employees, invest for the future, and, yes, pay taxes.

Read the whole thing…

So it looks like the FHA, which guarantees lots and lots of home loans, is well on its way to needing a huge, Fannie-style bailout.  From the WSJ:

…Federal Housing Administration, the nation’s insurer of nearly $750 billion in outstanding mortgages. The agency acknowledged this month that a new but still undisclosed HUD audit has found that FHA’s cash reserve fund is rapidly depleting and may drop below its Congressionally mandated 2% of insurance liabilities by the end of the year.

At a 50 to 1 leverage ratio, the FHA will soon have a smaller capital cushion than did investment bank Bear Stearns on the eve of its crash.

The basic problem is that the FHA guarantees every dollar of a loan, leaving neither the borrower nor the originator at risk in case of a default.  Combine that with incredibly low down payment requirements for these loans and it’s a(nother) disaster waiting to happen.

One simple fix would be for the FHA guarantee to cover only 90% of the loan, in which case the lender would still have to care about the creditworthiness and default likelihood of the borrower, rather than dishing it all off to the taxpayers.

So the US minimum wage was increased to $7.25, to the cheers and adulations of the nice, but economically-illiterate, multitudes.  Of course, it’s never enough, so there are already calls for further significant increase; for example, a group of churches and religious leaders are calling for an increase to $10 an hour next year.

Look, I’m not a particularly mean guy, and I worked for less than $4 an hour at my first job back in the mid ’80’s — and I sure would have liked to have earned more!  But, the thing is, in our still-slightly-market-based economy, wages, like any other prices, are set by the combination of supply and demand for a product; in this case, a particular set of skills, experience, and capabilities.

My first job was as a cashier at a grocery store; it was an entry level job, requiring no experience and no skills beyond the ability to type numbers on a 10-key keypad and smile nicely at the customers.  There were lots of other high school kids who wanted — and were equally qualified for — the job, so the price (wage) was low.

At the other end of the scale, let’s think about neurosurgeons, the folks who do simple stuff like cut tumors out of your head, repair aneurysms, that sort of thing.  After 4 years of college, 4 years of medical school, an internship, and 5 – 7 years of residency, the small number of people who can actually do this job well can expect to make base salaries of about $400,000 a year; many make total compensation well above half a million.

John Stossel has a good piece on this topic:

Politicians have tried to defy the market process with minimum-wage and living-wage laws for years. The consequences are never good for the people they claim to want to help. When will we learn what workers need is not meddling politicians but free and competitive markets?

While the math of supply and demand can get complicated, the logic is really very simple.  If it’s worth it to me to pay the neighborhood kid $30 to mow my lawn, and he’s willing to do it for $20, then we’re going to be able to come to a mutually-beneficial deal.  If the town government says passes an ordinance that the minimum price for mowing a lawn is $50, then I’m not going to pay the kid to do it.  I’m worse off because I have to waste my Saturday afternoon, and he’s worse off because he doesn’t get to earn money.  The townspeople are worse off because they now have an “unemployed” kid running around making trouble and needed some sort of benefits program — leading to increased taxes.

From Reason:

The New York Times calls it “possibly the most complex legislation in modern history.” The health care “reform” currently being hammered out by the Democratic leadership of the House of Representatives already clocks in at $1 trillion and 1,000 pages—and it’s nowhere near done. But one thing is clear: the legislation attempts to substitute top-down mandates from a centralized bureaucracy for the distributed decisions made by millions of consumers, physicians, and insurers acting in a marketplace. This will fail.

While I agree that the legislation will fail — in the sense that it will ultimately produce worse health outcomes at higher cost than our current system — I am quite concerned that the legislation will not fail to pass.

It’s embarrassing — and should be offensive to anyone who has ever taken a civics or US History class — that a piece of legislation this big and complex, that affects a huge portion of our economy, could be rushed through without being read, in an attempt to create yet another “entitlement” that will be nearly impossible to take away.

Read the article for a great summary of what a true market in healthcare might look like…