Bankrupt California

It is depressing to think about California, my adopted home state.  Having spent my high school years there I fell in love with the state and the people I met there.  When I left to attend college in Tennessee I planned on returning, having experienced the hospitality and slower paced life of the south.

Then the economic crash of 2008 hit.  What few outside of California know is that California was headed down a recessionary path already.  High regulation, higher taxes, and some hair-brained elected officials believed they were on the right path (and they probably were in their own minds), but the recession accelerated the decline of the largest state in the Union.

Faced with this economic reality (unemployment numbers for my adopted home town’s county) and a girl I wanted to marry, I remained in Tennessee.  I think often of California and while I desire to return to the one of the world’s largest economic engines, I cannot return.  California is bankrupt.  Tax revenues are down, high income earners are fleeing, entrepreneurs, who can now start and grow profitable businesses anywhere, are fleeing or avoiding the state that boasts the likes of Apple, Google, Facebook, Twitter, and more.  California is pursuing ideas like a high speed rail that will surely lose as much money as the Amtrak line it mirrors, while destroying acres of profitable farmland in the process, revealing a bankrupt leadership unwilling to acknowledge simple realities, challenge the status quo, and lead.

Victor Davis Hanson reminded me of these thoughts today.  And I thought I would share them, and his work, with you today.


The Unemployment Rate

New broke in the middle of Friday morning that the unemployment rate had dropped from 8.1% to 7.8%, he lowest rate since President Obama took office.  Hooray!  Right?  It probably depends on which candidate you’re supporting for President.  Democrats are trumpeting this as proof that the President’s policies are working:  “We’ve made it back through the mess to where we started” has been the general refrain (James Taranto has one of my favorite tweets about this reaction).

I was surprised by the number.  I had heard through Twitter that economists expected the rate to remain at 8.1% or jump to 8.2% (less likely) and were not expecting a drop in the number.  So when it happened there was some immediate skepticism from the right about the legitimacy of the numbers.  Jack Welch, former CEO of General Electric, was one of the first to publicly express some doubts about the numbers.  He was promptly blasted by the MSM and praised by hard core government skeptic conservatives.  In order to give Jack Welch an opportunity to defend himself, please check out his interview with Chris Matthews, where he explains his opinion fully.

What then do we make of these numbers?  First, let us note that conservatives are skeptical of the government.  There are some who believe the government is evil, and liberals are quick to claim they represent the majority of those on the right in an effort to discredit them and the right’s attempts to contribute to media coverage.  Second, let us note that as President, President Obama has some power to influence things.  Jay Cost with The Weekly Standard went through a long list of past presidential election manipulation that is worth reading for the history lesson.  And the reminder that Presidents (and Congressmen) will do anything to preserve their jobs.  I point this out because we must remember the President, like any CEO, Congressman, salesperson or assembly line worker, is interested in keeping his job.  He may be more interested because his directly affects his public legacy unlike any other (think very quickly about your opinions of Jimmy Carter and George H. W. Bush, the last two presidents to lose their reelection campaign.  The public psyche assumes they were far lessor presidents that Reagan, Clinton, and George W. Bush because they failed to secure a second term).

Naturally, the Romney campaign has dived into the numbers and expressed skepticism in the validity of the numbers, stating simply “this is not what a real recovery looks like“.  The biggest surprise about the BLS report is the discrepancy between the two surveys they reference (and the reason the right is rolling their eyes at this).  Again, stated simply, The Household Survey showed a gain of 873,000 people employed in September – resulting in the surprise drop in the unemployment rate – while the Establishment Survey only showed a rise of 114,000 [people employed].” So one survey shows 114,000 new jobs added, and another showed 873,000 more people employed.  Throw in that this is the single largest drop in the unemployment rate in 29 years in a period of time when other economic indicators are showing stagnation across much of the economy, and you can queue the right’s head scratching and, honestly, I think it is completely legitimate.

The president will be trumpeting this for the next month, as he should, and Romney’s response is going to have to be strong.  He can state, simply and accurately, that the primary reason for this drop is workforce participation keeps dropping, and he is accurate.  How much of this is due to the retirement of elderly workers as the American workforce ages is up for debate (Federal Reserve Bank of Chicago says potentially as much as half).  Either way, Romney can argue the rate would be 8.5% is the same people were working now as in January of 2012, and that the rate would be around 10.7%.  It is a convincing counterargument if it is heeded, and only time will tell if it is.  The heat has been turned up.

Edit:  Just had this thought:  does this mean President Obama thinks he is vulnerable on the economy and unemployment rate?  I would argue yes.  Romney probably needs to keep the attacks up.

Moratorium Denied

A New Orleans federal judge, one Martin Feldman, has denied President Obama’s moratorium on deep water drilling today.  He is quoted as saying:  “The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium.  The blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger.”

Yes please.  The ridiculous nature of the moratorium is laid bare in the article above.  For starters, President Obama sidestepped a legally required “industry comment period” that is legally required before such an order.  Not only that, all deepwater rigs passed an immediate inspection after the explosion on the Deepwater Horizon oil rig and on two “minor violations” were reported.

Which leaves us pondering the more insidious nature and purpose behind President Obama’s moratorium.  One more far out thought that I have is that in order to create more government dependency President Obama was trying to economically cripple several southern states.  But maybe that is a little to conspiracy oriented.  Any way you want to spin it, it was a move that was poorly thought out ought to not be repeated.

The Future of Afghanistan

The future lies in the mines.  The copper, iron, lithium, and other rare earth metals mines to be precise, according to the Pentagon as reported in the New York Times.  Other minerals include cobalt, gold, and lithium, minerals which are critical to a modern industrial economy.  These deposits are so big that they are reportedly now considered they key to turning Afghanistan completely around.

Without delving into the history of the discovery of the mineral deposits (the Soviets knew about them in the 1980s and they were hidden from the Taliban) to much the United States is aggressively working to set the Afghan government with multinational accounting firms who specialize in mining and multinational corporations with expertise in mineral deposits because the Afghan Ministry of Mines is not up to the task.  Yet.  According to  US officials the goal is to get them there soon.

The reality is this could be the tipping point of the Afghan war.  Impoverished people who have nothing to live for will flee into the Taliban’s hands for protection and purpose.  A country with the ability to fend for itself via its own national resources stands a much better chance of turning itself around by providing for its people a living wage capable of bringing up their standard of living.  Not to mention that secure income will entice citizens to not flee into the hands of the Taliban.  This really could be the tipping point in Afghanistan.

National Debt

According to the latest releases of the nonpartisan Congressional Budget Office the policies pursued by President Obama will add more than $9.7 trillion to the Federal Government deficit by the year 2020.  The CBO is much less optimistic than the Obama administration about what President Obama’s policies will do to the debt the government currently owes.

Regardless of the policies of President Obama, we need to address the national debt.  We cannot continue forever so we must start thinking now about fiscal policies to bring down the debt.

Optimistic Economic News

If you want to see a slightly cheerier opinion of the US economy at the current time, then you should read this.  Alan Binder is a former Vice Chairman of the Federal Reserve Board and currently teaches at Princeton and offers some fairly easy to understand optimism.  Basically Binder says the economy is in good shape for some 4Q 2009 and 1Q and possibly 2Q 2010 numbers.  Whether that sticks in 2010 before 4Q 2010 is a different story Binder admits, but there is some optimism.

Especially when it comes to the job market.  His analysis points out there is a very good chance that employers have payroll “pared to the bone” and will need to hire workers as prospects improve in 2010.  Since I will be graduating in May I am glad to hear it.

On another note (pessimism creeping in), Congress still seems intent on spending lots and lots of money.

HDTV Regulation in CA

The California Energy Commission voted 5-0 today to place power regulations on TVs sold in California.  Why are we regulating which TV’s people can buy?  Why must government regulate what individuals can and can’t buy?