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Cranky Ben Bernanke


Ben Bernanke debuted his new gig today, that of a writer on the “Ben Bernanke Blog”. Though he is not in charge of the Fed anymore, nevertheless he proved that he is still trying to stay relevant by continuing to be an old shill for the President.

The most ridiculous point Bernanke tried to defend was the strategy of keeping “rates low to encourage borrowing and spending and strengthen their economies.” But as Fed Chairman he knew that companies really weren’t borrowing at all and that banks were simultaneously reluctant to lend. However it was not because of the down economy — as he would have you think — but of other meddling, mitigating factors like stifling regulations, Dodd-Frank, unrelenting business bashing by President, and the constant threat of higher taxes. And because these circumstances are still widely pervasive, we have yet to see any real economic recovery.

The fact of the matter is during his tenure as the Fed Chairman, Ben Bernanke remained absolutely silent about the egregious anti-business environment. He was (and continues to be) a mouthpiece for this Administration instead of as a leader of an independent Fed.

Feds Tax Haul Tops $3 Trillion


moneystack
This Washington Times piece did a nice overview of FY2014:

The Treasury Department unveiled its Fiscal Year 2014 numbers, which showed that the government’s revenue, for the first time ever, hit the $3 trillion mark. However, the government still overspent its revenues, leaving a $483 billion deficit.

Supporters of President Obama are touting the “success” of a $483 billion deficit by pointing out its the lowest deficit since 2008. A “mere” $483 billion deficit is not something to be celebrated. It means that, despite record revenues, the government still engages in out-of-control spending.

By comparison:

“The government first hit the $1 trillion revenue mark in 1990, then hit the $2 trillion mark in 2000. But President George W. Bush’s tax cuts and the bursting of the 1990s Internet bubble cut into revenue, dropping it to $1.8 trillion in 2003, before it began the shaky climb to $3 trillion.

Just five years ago, in 2009, the trough of the recession, revenue was only $2.1 trillion. That means it’s leapt $900 billion in just five years.”

And here’s where the dichotomy lies. The Left sees high government revenue as something to be celebrated, while the Right understands that high government revenue means less money for the private sector. “Every one of those $3 trillion is sucked out of the private-sector economy and makes the private sector smaller,” said Chris Edwards, director of tax-policy studies at the Cato Institute. “The $3 trillion isn’t free. It comes out of our pockets and from the private economy.”

Contrast his analysis with Jack Lew’s, Treasury Secretary. “The president’s policies and a strengthening U.S. economy have resulted in a reduction of the U.S. budget deficit of approximately two-thirds — the fastest sustained deficit reduction since World War II,” Mr. Lew said.

What are those “president’s policies”? Successful tax hikes. The highest 2% earners saw their tax margins increase; all earners saw their payroll taxes go up. And don’t forget the Obamacare taxes. The full list of all of Obama’s tax increases can be found here.

Perhaps the most profound statement can be summed up here: “Spending, meanwhile, has remained relatively flat at about $3.5 trillion.”

When spending is “flat” at $3.5 trillion, we definitely have a problem. Each year since 2009, the Obama Administration has spent over $3 trillion, the only president to ever do so: From 2009 – 2013 respectively, here are the numbers of spending in per year: 2009: $3,517,677; 2010: 3,457,079; 2011: $3,603,059; 2012: $3,537,127; 2013: $3,454,605. For a full chart of historical federal spending per year, go here. Federal spending has remained consistent at around $3.5 trillion/year — consistently high. Over-budget. And adding deeply to the deficit each year.

It will be interesting to revisit this next year at the end of FY2015, when Obamacare, the crowning Obama policy achievement, really gets going. Remember how Obamacare was going to reduce deficits? About that. The Weekly Standard recently did a thorough analysis of Obamacare projections and found that:

“So, compared to the deficit surplus of $180 billion for 2015-24 that a straight extrapolation from the CBO’s 2012 scoring would yield, current projections now indicate that Obamacare’s decreased spending (in relation to prior expectations) will reduce deficits by another $83 billion (bringing the estimated surplus to $263 billion), but those projected surpluses will be more than offset by the projected $132 billion decrease in Medicare revenue and $262 billion decrease in tax revenue due to lower job growth.

In all, therefore, CBO projections indicate that Obamacare will increase deficit spending by $131 billion from 2015-24. That’s a $311 billion swing from the extrapolated 2012 numbers, a $240 billion swing from the actual 2012 numbers, and a $255 billion swing from what we were told when Obamacare was passed.

So, this fiscal year was more of the same. Government overspending, gleefully celebrated by record tax collections of your hard earned dollars. The rapacious government needs to be fed.

Yellin’ About Yellen’s Interest Rates

Janet Yellen, the new Fed Chairman, recently spoke about her decision to continue low interest rates, calling the policy “beneficial.” As the WSJ noted, Yellen described how she seeks to assure the markets:

“By keeping interest rates low, we are trying to make homes more affordable and revive the housing market,” she said. “We are trying to make it cheaper for businesses to build, expand and hire. We are trying to lower the costs of buying a car that can carry a worker to a new job and kids to school, and our policies are also spurring the revival of the auto industry.”

The problem with Yellen’s approach to the economy is that she completely misunderstands how interest rates affect the economy, an incredulous thing considering that she is the Fed Chairman.

When Yellen describes the benefits of low interest rates, she gives several reasons for them: homeownership, business growth, and car prices. However, the real estate market and auto industries are actually doing fine, and businesses are not using low interest rates to borrow to hire.

The crux of the problem is that all of Yellen’s examples analyze the economy from a consumption perspective. While consumption does affect the economy, it is not nearly a powerful a stimulant as investment. Any basic economics course will tell you that.
The real reason for the continued sluggishness is that investors are prevented from earning any real and considerable income when interest rates remain low. When investors don’t see a decent return on investment (ROI), they stop investing.

What else? Couple the investment problem with the administration’s policies that hurt growth such as burdensome regulations, minimum wage increases, food stamp usage, and Unemployment Insurance extensions, and you have a recovery that is best described as tepid.

Yellen should know better than to appeal to emotion rather than basic economics when making her Fed decisions. The choice to continue low interest rates for at least another year guarantees an anaemic economy for the foreseeable future.

Ben Bernanke Was a Lackey

US Obama
It is really obvious to see that Ben Bernanke was not an independent Fed Chair, but just a lackey for President Obama. Though his responsibility was monetary policy, he was often asked why – despite the most stimulative monetary policy possible – the economy has shown the worst recovery, by far, since the Great Depression more than 80 years ago.

As a student of the Great Depression, Mr. Bernanke was fully aware of the disastrous policies of FDR that impeded the recovery – large tax increases, burdensome regulation, anti-business government programs, and overboard support of union labor- and that President Obama followed suit in every particular.

And yet not a word from Mr. Bernanke that these policies should be questioned. You might be able to say that the President didn’t know any better – you cannot say that about Mr. Bernanke.

I find Mr. Bernanke’s failure to address the exploding Obama regulatory excesses particularly inexcusable. The effect of new regulations from the EPA, NLRB, ObamaCare, Dodd Frank, etc., etc. clearly serves to curtail expansion plans, absorb capital that otherwise would have been used for growth, and increase the costs of starting a new business (clearly scuttling some). At least some meaningful portion of our scrawny recovery can be explained by this regulatory environment.

As Chair of the (supposedly) independent Federal Reserve, Mr. Bernanke owed it to the American people to speak out. This failure should be long-remembered.