American Elephants

Warning Signs, Democrat Intransigence, Lost Hope. by The Elephant's Child

We all get overloaded with statistics. After a while they are just a mathematical muddle. I have only a limited ability to remember many  large numbers. We all have a quantity that we must retain in our heads, phone numbers, account numbers, passwords, bank accounts, last month’s utility bill, the list goes on and on. When the conversation turns to trillions, more of us get lost because a trillion dollars is so hard to envision. Everybody recognizes the difficulty, for there are all sorts of visual metaphors: just do a Google images search for “a trillion dollars.”

The important statistic, we are told, is debt as a percentage of GDP. A useful benchmark is 60 percent of GDP, the upper boundary that eurozone countries have pledged, vainly, not to cross. Greece’s debt crisis may force them out of the eurozone. Ours is currently about 71 percent of GDP— plus an additional 31 percent of GDP of “in-house” debt owed to the Social Security trust fund, and similar funds.  Our nation debt has increased by $1 trillion for the fifth year in a row.

Steven Hayward has written of the “Fed-Ex Indicator“— what package delivery traffic can tell us about the direction of the economy. It has, he says, been flashing yellow for months, with FedEx dropping plane flights and delaying new airplane purchases.

Now, he says, FedEx’s chief rival, UPS, is flashing the same warning signal, as reported in the Wall Street Journal:

United Parcel Service reported tepid growth for the second quarter and reduced its profit forecast for the full year, saying customer confidence has been rattled by the European debt crisis and the U.S. “fiscal cliff” looming early next year. …

The company said it is planning another 10% reduction in its air capacity out of Asia after cutting the network by a similar amount in October because of steeper-than-expected declines in exports from the region to the U.S. and Europe. Asian exports to the U.S. and Europe slumped by a double-digit percentage basis in the second quarter.

We wrote yesterday about the drought in the Midwest and the  potential for sharply rising food prices. The Journal also reports that the leading meat packer Smithfield Foods (pork) is importing corn from Brazil. The story suggests that Tyson Foods (chicken) is probably doing the same thing.  Brazil is having a bumper crop.  But America having to import Brazilian corn is like Saudi Arabia needing to import oil. It might be a good idea for Congress to stop mandating that half of our corn crop has to go into our gas tanks.

The Journal also noted that Steny Hoyer (D-MD), the minority whip, recently remarked that he talked to economists, and the two things that are most advantageous for the economy are unemployment checks and food stamps — because people spend them right away — thereby, I assume, that money flows out into the economy garnering that magical “multiplier effect” that somehow makes money grow as it passes from hand to hand and makes us all  rich again.  So if we can just get more people unemployed and on food stamps the economy will recover? We just don’t have enough people hurting?

Economists who have studied the “multiplier effect” believe the effect to  be approximately zero, but Democrats simply won’t give up on it. FDR believed that there  was a multiplier effect and the Great Depression finally ended sometime in the late 1940s or early 1950s, after a depression lasting nearly 15 years. Common sense should dissuade them, but they don’t bother to think it through. It’s a matter of religion.

It is also a matter of faith to them that the rich must be punished for being rich. They do know, I think, that if they raise taxes on “the rich” it won’t bring in enough revenue to even make a dent in the deficit or the debt. They sort of know the rule that you’re not supposed to raise taxes in a recession.

But they cannot get it through their heads that a very large percentage of those whose income tops $250,000 are mostly small businessmen, filing their business returns as individuals.  Raising their taxes means another obstacle to hiring, another obstacle to keep the economy from growing. The Democrat talking points are currently based on attacking the rich because Mitt Romney is rich, and Democrats want the public to hate Mitt Romney for that particular failing.

What is becoming increasingly clear is that Democrats are not going to get the economy going in the right direction. It just does not fit into their mindset.

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