More Silly Economic Thinking in the ‘Burgh

According to the Post- Gazette followers of Paul Krugman’s school of incoherent economics, the cause of our country’s slow economic growth is inadequate government spending and the unwillingness to levy higher taxes. Their silliness is encapsulated in the assertion that cutting spending will cost some Federal government workers their jobs, thereby worsening the nation’s jobs picture. Apparently, the geniuses who came up with that gem have never noticed that the bigger the Federal civilian payroll the weaker the nation’s private sector ability to create activity and new jobs.

Here is the sad truth. The U.S. has been under the whip hand of massive deficit spending for three years as well as the most "stimulative" monetary policy imaginable. And still the economy languishes with subpar growth and ongoing large layoff announcements. Granted, the housing collapse and the attendant financial crisis of 2008 meant recovery would take longer and be more difficult than a typical recession.

However, the President and the Democrat controlled House and Senate opted to begin piling huge new regulations on the economy through constitutionally questionable Obamacare, the EPA and the NLRB that, taken together, have acted as a massive anchor on the economy. The administration’s fealty to organized labor was demonstrated through the terms of the auto company bailouts, support for Card Check, refusal to denounce the goonish tactics of labor unions in Madison Wisconsin, and more recently the insanely destructive NLRB ruling on the Boeing Company’s plans to open a manufacturing facility in South Carolina. Regardless of how the courts eventually rule, this NLRB-and by definition Obama supported-action has cast a pall over the nation’s free enterprise system. Nothing can be more chilling to business investment than the prospect of government agencies telling companies they cannot locate legally in a state of their choosing.

The unwillingness of proponents of ever more spending and taxes to realize the damage already being done by that approach and their inability to link the heavy handedness of government regulators and burdensome regulations to the increasing caution of business people to invest or hire new workers or retain existing workers speaks to an ideological blindness of monumental proportions. Sadly, decades of programs that have made a large fraction of Americans dependent on government or the beneficiaries of government regulations, along with the fact that 50 percent of citizens pay no income tax, have created a huge voting bloc who are completely vested in keeping government growing in size and scope.

As noted in a blog last week, handout and entitlement programs can be sustained only by having a growing private sector economy capable of producing adequate tax revenues at low tax rates that do not threaten after tax rates of return on investment. Failure to recognize the need to strengthen and encourage the free enterprise system through a better set of tax and regulatory policies will inevitably be the nation’s undoing as a republic of free people.

Cutting Through the Fog of the Debt Ceiling Debate

Why can’t they just get along down in DC and solve this debt ceiling problem? The mournful cry of the folks who do not understand the watershed moment we have come to.

Democrats and the President want to raise taxes and revenues in order to protect the ruinous levels of current and future spending the government has promised or undertaken in the past couple of years. Republicans want to hold the line on revenues and even lower tax rates.

Who has the better argument? Democrats hold the position that it is necessary to make sure the promises made on Social Security, Medicare, Medicaid, veterans benefits, as well as education and other programs will be kept. In order to do that the President insists that tax revenues must be raised above current projections.

Here is the crux of the matter. In order to ensure the long run viability of these programs one thing is absolutely essential: We must have an economy that is growing sufficiently to throw off enough revenue to finance the promised benefits, now and in the future. The burdening of the economy with new regulations, the anti-business attitude of the administration and the rise in taxes that will occur because of the ending of the Bush tax cuts and the money needed for Obamacare are already being factored in by businesses. Little wonder job creation is so anemic. Talk of even more tax hikes as if they will automatically increase revenue is fatuous thinking at best. People are not machines; take away incentives or punish success and the economy stagnates. How long will it take to learn that lesson?

If Democrats are really concerned about the viability of the entitlement programs, they should be jumping at the Republican proposals to get the economy on a stronger growth path. Since they continue to play the class warfare game and side with strong arm union tactics, one must conclude they are not really concerned about the old and the infirm. Rather, they are concerned about remaking the USA into a socialist utopia. It would be nice if they could point to one.

Times are Tough, But, It’s State Money

We’ve written about the Redevelopment Capital Assistance Program (RCAP) before: it is one of many arrows in the state’s quiver aimed at eliminating blight and stimulating economic development. The General Assembly not long ago authorized increasing the cap on how much the state could borrow to fund projects through this program, and in July the Governor handed out $600 million through the Commonwealth.

Just yesterday City Council discussed entering into various cooperation agreements with the Urban Redevelopment Authority, who acts as the applicant for RCAP dollars.

Perhaps City, state, and URA officials are aware of some good economic news as several RCAP requests were amended to reflect increased dollar amounts:

  • A grant for Phipps Conservatory was increased from $250k to $500k
  • A grant for the Pittsburgh Ballet was increased from $750k to $1,250k
  • A grant for the Pittsburgh Zoo and Aquarium was increased from $875k to $2,000k
  • A grant for the Carnegie Library modernization project was increased from $7,500k to $8,500k

And although it was not specifically amended, a grant for the Connelly Tech project-which was announced as an $8 million project in July-is now up to $12 million.