Monday, January 18, 2016

'Peddling Fiction' Or Repealing Math? - Clarice Feldman

by Clarice Feldman

Amid all the factors behind the tailspin of our and the world’s economies it is obvious that the grand progressive schemes based on ignoring reality play a critical part

No sooner had the president charged that those who claimed the economy is in trouble were “peddling fiction” than U.S. stocks posted their worst ten-day start to a year in history. Walmart announced it was closing 154 stores in the U.S. putting 10,000 U.S. jobs on the block. (It also was closing over one hundred of its stores in Brazil.) Macy’s announced it was closing 36 stores and 27 Kmart and Sears stores were also to be shuttered. True, some of this reflected the change in shopping habits with more consumers buying merchandise online, but from the barrage of emails I receive daily from retailers online cutting prices, I think it’s likely that the entire tranche -- retail sales -- suffered mightily last year, and I expect to see that big dip reflected in their fourth quarter reports. Consumers simply are running out of money to buy things.

To be sure, the global economy is shaky right now. China leads the way down and with it a glut of oil as Middle Eastern countries open the spigots just as demand is down. Countries in BRIC, the five emerging national economies (Brazil, Russia, India, China and South Africa), are also in a hard spot, meaning that the entire globe, not just the oil producers and the Western economies, are at risk and the global recession looks to be more severe than the last one.

As my friend “Ignatz Ratzkywatszky” notes:
The problems my untrained eye see that are worse than last time;
1. U.S. population may not be overextended but the middle class is in a weaker spot otherwise than 08, a lot of municipalities and states are already a lot more stressed than they were in 08 and U.S. gov[ernment] debt is much higher.
2. Every one of the BRICS is already either in a depression [Brazil], plunging who knows how far [China, South Africa] or getting set to plunge who knows how far [Russia, India]. That doesn't leave much of a wall and I have zero confidence in any of their abilities to weather the storm.
3. Most of the Eurozone never really recovered from 08.
4. Policy makers and central bankers seem even more clueless than ever after having embarked on an even larger worldwide binge to cure the hangover, or more correctly aneurysm, from their last binge.
Perhaps the only silver lining might be there is less distance to fall for most and those who have most profited from the free money binge of the last 7 years are those with the most to lose.
Amid all the factors behind the tailspin of our and the world’s economies it is obvious that the grand progressive schemes based -- as they certainly are -- on ignoring reality play a critical part. Returning to Walmart, for example: responding to demands to raise the minimum wage, in February of 2015 it raised wages above the minimum. Critics of raising the minimum wage argued that that would raise prices, negatively affect sales and reduce employment rolls. It seems that it did.

In economic terms, we are in the worst possible situation: politicians and bureaucrats with no respect for reality support programs which depend on an ever increasing supply of other peoples’ money at a time when there isn’t such money to be had because, in large part, they are also supporting programs which ignore supply/demand exigencies and choke commercial, industrial, and agricultural activity.

Reason sets out the dilemma succinctly:
Sanders has built his popularity almost exclusively on promises to spend more money not just on the poor but not on everybody, without even a hint that he understands why that would only exacerbate the "wealth inequality" he rails so often against.
Sanders hasn't been specific about where the money would come from, mentioning only one transaction tax on Wall Street. Such a tax, by itself, wouldn't come close to funding Sanders' promises --his plans require massive tax hikes not just on the rich but on the middle class, meaning his efforts at offering everyone an education could not only increase inequality (since richer people are, in general, more likely to take advantage of entitlements like a "free education") but also actually redistribute wealth upward.
There's a relevant Richard Feynman quote about big numbers. "There are 1011 stars in the galaxy," Feynman once said. "That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers." That was at least three decades ago -- the annual deficit is at about a trillion now.
Puerto Rico is this week’s U.S. basket case with $70 billion in debt for which they have no means of repaying. Other states with unfunded enormous pension liabilities look to be lining up behind Puerto Rico and will certainly be seeking some sort of bankruptcy relief, relief which may well hurt middle class bond holders as well as the pensioners and the poor who depend on functioning government services. On a national scale, People who could add warned that ObamaCare would collapse with expenditures quickly exceeding revenue, and there’s no doubt that the death spiral is well underway.

This week Humana joined the list of insurers reporting big problems with Obamacare. PJ Media’s Stephen Green Commented
As for the ObamaCare!!! cheaters -- well, it's not like the Democrats who authored this law weren't given plenty of warnings about the perverse incentives.
The net result is that more and more insurers can't afford to sell insurance to ObamaCare!!! customers -- the very people the law was ostensibly designed to help:
"Humana Inc. has added its name to the list of mega-medical insurers to report big problems under ObamaCare."
"The Louisville, Ky.-based company does not expect to make enough money this year in premiums from individual plans to cover what it will pay out in claims, according to a regulatory filing made last week with the U.S. Securities and Exchange Commission."
"Humana, which is being acquired by Aetna Inc., said it is still trying to figure out how big the gap will be. The company did say it has set aside a premium deficiency reserve -- meaning, it’s setting aside money to help make up the difference."
"Humana, which will provide a deeper dive into its 2016 outlook when it releases its fourth-quarter earnings on Feb. 10, said in the SEC filing that it expects membership to drop this year by 200,000 to 300,000. The decrease reflects plans sold under ObamaCare as well as older policies."
"'We expect Humana will exit Health Insurance Exchange marketplaces in 2017 in light of this data.'"
This thing is coming off the rails, and a LOT of people are going to get crushed when it does.
Mere glitches to the innumerate progressives. I don’t know what they are up to where you live, but in Washington D.C. they are proposing a massive new paid 16-week family leave program which it is estimated could cost over $700 million a year. Even though the plan would be based on a 1 percent tax on salaries to be paid by employers, it likely would entail a $200 million annual deficit, and -- if experience on the cost of government programs is any guide -- that shortfall estimate is probably an optimistic scenario. In any event, it is most likely that if this passes, employers will hire fewer people and pay them less to compensate for the cost. Once again the bottom of the economic pyramid would bear the burden of the virtue signaling of those at the top.

In fact, Walmart has just notified District officials that it was cancelling 2 planned new stores in depressed neighborhoods.
Walmart officials were more frank about the reasons the company was downsizing. He said the company cited the District’s rising minimum wage, now at $11.50 an hour and possibly going to $15 an hour if a proposed ballot measure is successful in November. He also said a proposal for legislation requiring D.C. employers to pay into a fund for family and medical leave for employees, and another effort to require a minimum amount of hours for hourly workers were compounding costs and concerns for the retailer.
“They were saying, ‘How are we going to run the three stores we have, let alone build two more?’ ” Evans said.
Restaurant employment is already down, likely due to the city's minimum wage law.
Math is so hard for progressives. I expect any day now some Democrat in Congress will introduce a bill repealing it.

Clarice Feldman


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