As The Wall Street Journal reports, we have about 14.9 million people unemployed.  There are 8.9 million involuntary part-time workers.  Right now, the unemployment rate is 9.6%.  If we include other people such as discouraged workers and part-time workers who can’t find full-time jobs, it jumps to almost 17%.  

Just imagine, one in seven Americans can’t find a full-time job!!!  That’s terrible for those suffering without a job and it’s awful for the economy as a whole.

The big question this week is will another tax credit plus another $50 Billion stimulus package change all this.  The answer from studying economics is NO!!!

The Wall Street Journal recounts some of the data …

Stimulus Package #1 increased Federal spending and offered temporary tax breaks.  The cost was $168 Billion.  Did it work?  The answer is NO!!!

Stimulus Package #2 was a combination of spending on social programs and one-time tax rebates for an incredible cost of about $800 Billion.  Did it work?  The answer is NO!!!

Stimulus Programs #3, #4, #5, #6, etc. including Cash-for-Clunkers, Home Buyer’s Tax Credits, Mortgage Payment Relief, Unemployment Benefits Extensions (now up to an astounding 99 weeks), etc.  Did they work?  It’s true that in places, they had some positive effects, but typically they were very minor or temporary effects.  Overall, did they work?  The answer is NO!!!

Keynesian economics has proven itself not to work year after year, in case after case, in country after country.  Why do we keep trying the failed policies of Keynesian economics?

The real answer to boost our economy rapidly and to dramatically increase the number of new jobs comes from pro-growth economics.  We need to cut taxes on economic growth.  We need to cut personal income taxes.  We need to cut corporate income taxes.  Plus, we need to cut capital gains taxes.  All tax cuts should be on a permanent basis.  Everyone needs to feel secure about the future.  We need to create a pro-growth economy based on economic freedom, not command-and-control and capricious big government policies.

By the way, allowing the Bush tax cuts to expire next year will tend to increase unemployment further.  It’s a recipe for further economic hardship. 

Choosing the Good Life Blog by Gerard Francis Lameiro, Ph.D.

And, we are warned by business leaders about the high costs of creating new jobs as well as their fear, uncertainty, and doubt about the economy.  Many citizens are downright worried about high government spending and high borrowing as well as astronomical deficits and skyrocketing debt.   Taxes appear to be headed upward with the upcoming repeal of the Bush tax cuts.  New health care taxes and regulations come with high price tags.  Are we really experiencing an economic recovery?  If not, when will we recover?  Let’s talk about it now.

In my view, we are in a very modest recovery phase that is most likely a part of a double-dip recession.  I also believe that if we continue down the road with the current fiscal (spending and taxing) policies and the current monetary (money supply and interest rate) policies, the American economy will slip into the second recessionary dip.

These policies are zapping the private sector of the capital and regulatory climate needed to create new businesses and new jobs.  In addition, the new health care law is driving America toward a complete restructuring of about 17% of the American economy with the depressing effect on the economy of socialized medicine.  Moreover, there are added costs associated with the new financial regulatory law and worries about potential new carbon taxes and cap-and-trade taxes and regulations.   It’s a recipe for another major recession.

When will the American economy recover?  The answer is simple.  When we cut government spending, cut taxes on economic growth (income, savings, and investment), and cut government borrowing, the economy will take off again – just as it has done in the past.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

The unemployment statistics are not good.  After 18 months and $862 Billion stimulus, unemployment is at 9.5%, there’s a 5-to-1 ratio of job seekers-to-job openings, 6.7 million Americans have been out of work for at least six months, 2.5 million American workers will run out of unemployment benefits, and about 2 million jobs have been lost.

What can we learn from economics?  Without question, economists know that if you subsidize something, you get more of it.  Of course, many of us have heard anecdotal evidence as well of unemployed people who only seriously look for work right before their benefits expire.  More rigourous economic studies confirm that when unemployment benefits are extended, actual average unemployment duration increases.

What can be done?  No one wants to see the truly needy and unemployed suffer.  But, adding another $30B of deficit spending on top of $1.4 Trillion of deficit spending isn’t a great recipe for economic success.

The answer to the problem is not more unemployment benefits and it’s not more deficit spending.  It’s to create a lot more jobs in the private sector.  How do we accomplish this task?

The answer is a change in fiscal policies.  America needs to lower taxes on economic growth.  We need to cut taxes on income, savings, and investment.  We also need to cut big government deficit spending.  We can’t tax and spend ourselves into prosperity.

America needs pro-growth fiscal policies that have a proven track record of creating new jobs.  They worked in the past.  They will work again.  Will Washington wake up in time – before we get into a double-dip recession or worse, a depression?

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

Investor’s Business Daily reported this week that economic optimism is down to a 17 month low, according to the IBD/TIPP Economic Optimism Index.  Separately, small business confidence is also declining with a lower sales outlook, according to the National Federation of Independent Business.  Why has economic optimism declined?  Are these results unexpected?  Let’s talk about this now.

The primary reason for the decline in economic optimism is the lack of jobs for those who are seeking work.  According to the IBD article, Raghaven Mayur, president of TIPP, a unit of TechnoMetrica Market Intelligence, believes the official unemployment rate of 9.5% “grossly underestimates” the jobs problem.  He thinks the true jobless rate might be as high as 22-25%.

These results are not unexpected if you follow the economy closely.  I think a double-dip recession continues to be a very real prospect, unless we change fiscal tax and spending policies.  2011 might see the next dip with the repeal of the Bush tax cuts.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

Here’s the bottom line.  Is wealth redistribution the best way to get excellent health care?  The answer is an emphatic NO!   Here are a few reasons why the answer is NO!

1.  Big government has a bad track record of running Medicare, Medicaid, and Social Security.  There is no reason to believe ObamaCare will be run any better.  We can expect higher costs for premiums and lower quality health care.  Look at the Massachusett’s universal health care program to see how costs have skyrocketed.

2.  Shortages and rationing are inevitable.  Look to Britain and Canada to see how poorly rationing works.  Look at all the examples of people denied the tests, treatments, and drugs that are vital to save lives.

3.  Redistribution of wealth means burdenly tax-paying Americans with more taxes.  Taxes are already too high and are killing jobs now.  More taxes mean more job losses.  Expect unemployment to increase dramatically as the Bush tax cuts expire in 2011 and many, new taxes kick in.

4.  Redistribution of wealth also means economic growth will be curtailed.  The whole economy will be hurt.  Within the health care industry expect fewer innovations in drugs, medical devices, tests, and treatments.

5.  ObamaCare is not needed.  The problems with our pre-ObamaCare, health care system centered largely around an intricate and complex set of regulations, subsidies, and tax policies that hurt the system.  About 50% of all health care expenditures were controlled by government and much of the rest was indirectly controlled by government.  Government was the problem with our health care industry.  More government control will only exacerbate the problems.

The list goes on.

Remember, it might take some time in some countries.  But, socialism always leads to moral and economic bankruptcy.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

The impetus for The Wall Street Journal column was the recent Supreme Court decision that found that the “honest services fraud” law was too vague, thereby helping former Enron CEO Jeff Skilling gain a partial victory in his attempt to overturn his conviction.

Indeed, vagueness in a law is an issue.  Justice George Sutherland in 1926 even went so far as to say that a vague law “… violates the first essential of due process of law.”  The point is simple: if people can’t understand a law because it is too vague, then how can the government hold people accountable to it.  It’s a matter of justice and fairness.

In addition, vagueness is vitally important today.  Congress continues to pass large and unwieldy laws that most Americans don’t have the time or energy to read.  Even our Senators and Representatives often skip reading the laws that they are voting on.  Two examples are the health care bill and the financial reform bill.  Because parts of the bills lack specificity, we might all have to wait months or even years to see what they really mean and how they will impact America.

Economic growth is predicated on investment in new businesses, new products and services, and new jobs.  But, vagueness - in current legislation passed (such as health care) and in potential new legislation (such as financial reform, cap-and-trade, and VAT taxes) – means uncertainty.  Investors can be very reluctant to invest in a climate of vagueness and uncertainty.

Vagueness impedes economic growth.  Investors and economic growth both require a climate of reasonable rules and regulations, enforced under the rule of law, and low to moderate investment taxes.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.

Yikes, a major depression.  Actually, I have been thinking the same thing for quite some time.  I think there exists a real chance we are in the beginning stage of another major depression, in many ways like the Great Depression and in some ways quite different.  Obviously, we are not close to a depression yet.  But, I think Krugman might still be right.  However, Krugman’s remedy of spending more is the WRONG answer.

Our economic recovery is currently very anemic.  But, I strongly believe the economy will be hit even harder in 2011 with an assortment of tax hikes and totally new taxes.  MORE taxes simply mean LESS money in the private sector to invest in new businesses, new products and services, and new jobs.  These new taxes and higher taxes will take their toll on unemployment numbers.

The current government policy we seem to be following is to increase taxes, increase spending, increase borrowing, and increase deficits.  There have been some notable exceptions.  But, in general, the government has a tax-and-spend mindset.  This is the precise opposite of a pro-economic growth policy which we desperately need now.

It is widely agreed that the various previous stimulus packages have failed to boost our economy.  Krugman’s policy answer will likely fail as well.  If our own economic history and data are not enough, just look at Japan’s record of attempting to stimulate their economy.  Keynesian economics didn’t work in Japan either.

Yes, we might be entering a depression.  If we do find ourselves in a depression, we can blame government policies.  But, the cause will not be too little stimulus spending.  It will be the lack of a pro-economic growth policy that emphasizes tax cuts for everyone.  Recall the Harding-Coolidge, post World War II, JFK, Ronald Reagan and Bush tax cuts.  In each case, unemployment was low and the economy soared.

Citizen Economics Blog – News, Analysis, Insight, Practical Knowledge by Gerard Francis Lameiro, Ph.D.  For more information, please visit: http://GerardLameiro.com .

Last week, Greeks were rioting and the NY stock exchange was crashing.  It’s certainly been a real roller-coaster on Wall Street and not for the faint of heart.  When the European Union decided to create a joint European Union and International Monetary Fund (IMF) bailout plan of 750 Billion Euro (equal to nearly $1 Trillion U.S. dollars), the bond markets in Europe calmed down and the Dow Jones rebounded.  What’s going on?

It’s actually quite straight forward if you study economics.  Europe in general, and certainly Greece in particular, practice welfare state socialism.  Public employees in Greece (40% of the entire workforce) are given generous salaries, lavish benefits and have been able to retire at age 53 with considerable pensions too.  That’s great, except for the fact that someone needs to pay for all these expenses.  We live in a world of scarce resources.  That’s where economics comes in.

It’s easy for politicians under welfare state socialism to PROMISE ever-increasing benefits to the poor and middle class, heaping new, more expensive benefits upon older, generous benefits.  Recall, for example, the recent call in Europe for government-paid vacations … that’s not paid time-off, but actually payment for the vacations themselves.  PROMISES are cheap.  But, WHO PAYS THE BILL.

From economics, we know that wealth is created in the private sector.  Governments only tax and spend.  Governments DON’T create wealth.  Plus, when governments tax money and take it away from the private sector, there is less money available for investment in new wealth creation.  Wealth creation and economic growth require investment in new businesses that in turn, create new products and services and, of course, in the process, create new jobs.

Why were there riots in Greece?  People used to lavish pay, benefits, perks and pensions, don’t like the idea of giving them up.  They are frustrated with their government’s inability to keep their promises.

Why the $1 Trillion bailout plan?  Simply, to forestall the potential economic bankruptcy of governments that refuse to stop spending lavishly and that refuse to stop stifling economic growth with high taxes and burdensome regulations.  But, the problem with the bailout plan as The Wall Street Journal points out is that there is a day of reckoning.  If governments continue to spend wildly and tax the private sector to the point of limiting economic growth, the $1 Trillion bailout or any bailout will only work for so long.  As I say in my book, America’s Economic War, socialism always leads to economic bankruptcy.

What might the day of reckoning look like?  Rioting in the streets, political instability, draconian austerity measures, monetizing debt, hyperinflation, and considerable citizen suffering (on a level similar to the Great Depression).

Should Americans care?  Yes!  America is on the fast-track to socialism with high (and increasing) spending, high (and increasing) taxes, and high (and increasing) borrowing.  America is not that far behind Greece in many ways.  America needs to cut government spending, taxes, and borrowing.

Rather than eliminate bailouts of companies that are “too big to fail,” the current bill being debated in the Senate gives vast new powers to the government to regulate whatever companies it chooses to regulate; to determine how to regulate those companies; to determine what companies to give bailouts to; to determine what companies to close down entirely; to determine what creditors to pay; and, to determine how to pay the favored creditors.  Talk about power!  Talk about control!

With the proposed, new Consumer Financial Protection Bureau, the government also would essentially gain control over credit allocation across the economy.  In effect, the government would control the terms and conditions of financial products and services.  It could also decide certain practices were “abusive” and shut them down.  That’s tremendous control.  That’s incredible power over companies and consumers.

Plus, if you are an entrepreneur attempting to create a new business or one of those “angels” who help start-up companies, you will find new company-killing and investment-killing regulations in your way.  It’s been estimated by the Angel Capital Association that this bill would disqualify about 77% of current accredited investors.  Remember that start-up companies account for most new jobs that are created.  Indeed, although start-up companies make up less than 1% of companies, they create 10% of all new jobs.  So, the government will also exercise considerable control over new business ventures.

It’s fair to say the financial overhaul bill being debated in the Senate gives the government vast new powers to control America’s financial sector.  Just as the health care bill essentially nationalizes the American health care industry, the financial overhaul bill essentially nationalizes the American financial sector.  This is one more battle in America’s Economic War, a war of ideas and economic philosophies.  Yet, a war that profounding and directly impacts our freedom, money and lives.

My recent book, America’s Economic War, continues to become more and more prophetic as each battle plays out.

While you can argue exactly how bleak the jobs picture is today, it is true that it’s a bad situation.  According to the Bureau of Labor Statistics, 9.7% of Americans were unemployed in March 2010.  In the more inclusive measure, the so-called U-6 metric that includes various categories of discouraged workers and part-time workers that settled for part-time work because they couldn’t find full-time employment, the rate is 16.9%.  Plus, these numbers are seasonally adjusted.  The non-seasonally adjusted numbers are worse.  They are 10.2% and 17.5% respectively.

Given the the expiration of the Bush tax cuts, the new Medicare Payroll Tax, and other new taxes proposed at the State levels, we can expect unemployment to increase.  I also believe the net/net impact of the new Health Care Law will be to increase unemployment further.  Consider, for example, the polling data on doctors who said they would consider leaving their practices if the Health Care Bill were passed.  Consider, also, the fact that the Health Care Law takes over the health care industry with incredibly burdensome regulations.  This is a de facto tax on the economy.

Economists know from many examples over decades of time, that taking money out of the private sector with taxes and spending it through various government programs, is less productive that allowing individuals and companies to invest it as they believe is best.  The private sector is simply more productive than the public sector.  The coming tax increases and possible new taxes such as a Value-Added Tax (VAT), Cap-and-Trade Taxes, Carbon Taxes, and even taxes on services such as health clubs, consultants, tax preparers, spas and a whole list of other services will only hurt unemployment further.

The government needs to stop spending wildly and stop taxing Americans so much.  Cutting taxes as I have said before will spur new investment, new businesses, new jobs, and even more revenue for the government.  One quick example.  The JFK taxes cuts in the 1960’s resulted in the LOWEST unemployment rate in 30 years.

The outlook for jobs might be very bleak today.  But, the probem can be fixed quickly with better tax policies.

Indeed, these battles over taxes are just another front in “America’s Economic War” between American Capitalism and socialism that is covered in my recently released book.