Wealth Creation


Salena Zito:

The Acosta Deep Mine in Somerset County marks a dramatic upturn for the area. And while President Trump cannot claim that he brought the industry back here personally (this new mine was already being developed before the election), he is an effective cheerleader for folks who’ve been discounted by the political elite.

Instead of trying to kill an industry under piles of regulations and poo-pooing any notions of its survival let along thriving, I think the government should lay off and let the people in the industry configure itself for the economy.

Maybe its smaller than in the past or maybe bigger, maybe more specialized, maybe more dispersed or stays concentrated in a geographic area. How do they compete and serve a customer base? What technologies can they use and invent, and what business processes can they use and invent? How do they attract capital?

These are questions for the people in the industry to figure out from the bottom-up, top-down, and inside-out, not from top-down impositions and elite opinion. And the people in this industry must do so in a free market environment.

A perfect example of how government programs get re-directed to the well-connected. From Politico:

San Francisco will get $19-a-person in community development block grants this year, while Allentown, with twice the poverty and less than half of the median income, will draw a per-capita allotment of $17.53….Community development block grants rely on outdated, 1970s formulas that have increasingly shuttled dollars to wealthy places like Newton, Mass., while other locales in need, such as Compton, Calif., go wanting.

As Chris Edwards notes, it gets worse:

The federal aid system generates no net value—it is simply a roundabout way of funding local activities. Taxpayers in San Francisco mail checks to the IRS to fund the CDBG program. Their money flows through the HUD bureaucracy, and then is dished out to bureaucracies in Harrisburg and Allentown, with some trickling down to local residents and businesses. Meanwhile, taxpayers in Allentown are also mailing checks to the IRS to fund the CDBG program. Their money flows through the HUD bureaucracy, and then is dished out to bureaucracies in Sacramento and San Francisco, with some trickling down to local residents and businesses.

The Finale:

“The federal aid system thrives not because it benefits the American people, but because it benefits governments and lobbyists.”

Here.

By CARL J. SCHRAMM:

Trump should set a goal: fix the business climate so a million Americans a year can start companies. . . .

More people have joined the ranks of the chronically unemployed, slipping into poverty at alarming rates as their skills decay and dependency on public assistance grows. Considering population growth, America needs at least 325,000 new jobs every month to stanch the growing numbers of discouraged workers. . . Merely bringing back factories from overseas will not solve this problem. Technology has made every factory more productive. Fewer workers make more goods no matter where they’re located. At the same time, fewer U.S. businesses are being started. . . .

New firms are the country’s principal generator of new jobs. Data from the Kauffman Foundation suggest companies less than five years old create more than 80% of new jobs every year. . . .

This absence accounts for an estimated seven to 10 million jobs that, had they existed, could have provided employment for every one of the nation’s discouraged workers. Simply put, the U.S. will never reach full employment without more startups. . . .

First, increase economic growth. More businesses start when GDP expands at 4% rather than 2%. Existing businesses look for new markets, often turning to young companies for innovative ideas. . . .

Mr. Trump should also focus less on Silicon Valley, which already receives disproportionate attention from Washington. . . .

Government must also widen the scope of innovation by stepping back and letting the market find the future. By promoting trendy ideas and subsidizing politically favored companies, government dampens diversity in creative business ideas. Why start an electric-car company when the federal government already has picked the winner?

The new president must also make it possible for local banks to get back in the business of financing startups. For 200 years, community lenders were the principal source of capital for startups. The application of complex Dodd-Frank provisions has led community banks to finance fewer and fewer promising businesses—despite their unique knowledge of local markets. . . .

Mr. Trump can also reverse regulatory sprawl and cut government-imposed requirements that add to every entrepreneurs’ costs and risks. Anti-growth policies like ObamaCare and minimum-wage increases make hiring workers prohibitively expensive. Municipal regulation is particularly onerous. Cities commonly use sanitation and building codes to protect incumbent businesses. Uber cannot operate in many cities because officials have chosen to protect local taxi cartels, denying their citizens the innovative efficiencies of the shared economy.

With these policies in mind, President Trump should set another goal: that his administration will create an environment that enables one million Americans to start companies every year.

 

Here

Is, in a word, government.

All the passionate talk about the personalities and potential crimes of the presidential candidates has obscured debate about what the federal government actually does. Both Trump and Clinton promise to spend us to oblivion taking care of various collectivist groups: vets, seniors, farmers, military contractors, teachers, etc.

But that spending (and inevitable taxing) serves one overriding purpose: to make the people in Washington D.C. ever richer and more powerful. Its a bipartisan bonanza. Yes, the money will trickle down to those constituents I listed above. But the politicians, lobbyists, regulators, and other government employees take their cut first. All that money requires programs and administration. Who does that? Why the people who work in government. And what is the result?

Kevin Williamson explains. I tease you with this: “But Washington builds no iPhones. It doesn’t really build much of anything, and it doesn’t create any wealth — it just takes it.

Here.

Pols and regulators should butt-the-hell out of corporate mergers and other actions that disrupt the status-quo. See Democrat primary loser and hypocrite for supporting corporate shill Hillary Clinton Bernie Sanders for example. Trump also said he opposes it.

Employees of the merging firms must figure out how best to serve their customers and shareholders.

Remember folks, firms have to work within the current regulatory and legal framework. If gov’t wants to do something useful it should deregulate telecom and scrap net neutrality. Those constrictions led the decision-makers in this deal to view a merger as a way to drive growth.

The interventionist fear is based on outdated definition of monopoly. Standard Oil’s so-called “monopoly” lowered kerosene prices “from 58 to 26 cents from 1865 to 1870. Competitors disliked the company’s business practices, but consumers liked the lower prices.” https://en.wikipedia.org/wiki/Standard_Oil.

Yet, some politicians and activists want to stop this merger because they are simply afraid of change.

You can let firms experiment and innovate to figure out how to serve customers and grow, or you can let politicians protect the status quo and continue with 1% GDP.

 

Global economic freedom increased slightly in this year’s report to 6.85. Hong Kong and Singapore retain the top two positions with a score of 9.03 and 8.71 out of 10, respectively. The rest of this year’s top scores are New Zealand, 8.35; Switzerland, 8.25; Canada, Georgia, Ireland, Mauritius, and the United Arab Emirates at 7.98; and Australia and the United Kingdom at 7.93.

The United States, once considered a bastion of economic freedom, ranks 16th for a second consecutive year with a score of 7.75. Due to a weakening rule of law, increasing regulation, and the ramifications of wars on terrorism and drugs, the United States has seen its economic freedom score plummet in recent years, compared to 2000 when it ranked second globally.

Here.

 

Stanford-trained economist John Hussman on the economy’s persistent weakness:

Instead, the true wealth of a nation is embodied in its capacity to produce, as measured by the stock of real investment (productive capital, stored resources, infrastructure, knowledge) it has accumulated as a result of prior saving.

. . .

One of the hallmarks of the bubble period since the late-1990’s is that the growth rate of real U.S. gross domestic investment has slowed to less than one-quarter of the rate it enjoyed in the preceding half-century.

. . .

Over the past 16 years, U.S. real gross domestic investment has crawled at a growth rate of just 1.0% annually, compared with a growth rate of 4.6% annually over the preceding half-century. There’s your trouble.

 

. . . The path forward:

Simply put, the only thing QE really does is to distort the financial side of the economy, enabling and encouraging yield-seeking speculation and massive sectoral imbalances that we observe as wealth disparities and bizarrely distorted securities markets. The proper course of economic policy is to expand productive investment at every level of the economy through the action of Congress (including infrastructure investment, corporate investment tax incentives, workforce development credits, and other measures ideally tied to the creation of new jobs). The Federal Reserve is not a source of prosperity. It is the single most dangerous and unregulated risk factor in the U.S. economy. We should have learned that during the yield-seeking mortgage bubble and the collapse that followed. We have not, so we now face the equivalent prospect again.

Here.

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