Freeing the Internet

For nearly two decades, the Internet has been capitalism’s engine, driving the creation of the country’s largest and most successful companies.

Amazon, Google, Uber, Airbnb, Facebook, Twitter, Pinterest, LinkedIn and thousands of other companies wouldn’t exist without it. In fact, pretty much all of the 176 companies on Fortune’s unicorn list of startups valued at $1 billion or more wouldn’t exist without the Internet.

The Internet has improved our quality of life, providing us with entertainment, online shopping, directions when we’re lost and the ability to communicate with anyone, anywhere at any time. It’s beginning to improve healthcare and should save lives and lower costs – if we let it.

Libertarians would point to the Internet as the most compelling example in history of how businesses can grow, create jobs, contribute to the economy and produce tax revenue when left practically untouched by government regulation.

Net Neutrality

But lovers of government regulation are protesting at the home of Ajit Pai, chair of the Federal Communication Commission, because he’s attempting to “destroy net neutrality” by overturning rules adopted by the FCC in 2015 under his predecessor, Tom Wheeler.

Net neutrality supporters have also crashed the FCC website with negative comments, and created organizations with noble-sounding names like Fight for the Future and Save the Internet.

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Pick One: More Government or Lower Taxes

What’s the best way to boost economic growth – more government spending or lower taxes?

Government spending is the Keynesian approach, which was taken over the past eight years. Build a road, start a war or buy lots of bonds and the spending allegedly will stimulate the economy. In addition to the government jobs created, the money spent will work its way through the economy and create additional jobs while the economy grows.

But the economy doesn’t necessarily work that way. Government spending has to be paid for with higher taxes or more debt. If taxes are higher, consumers have less to spend, which slows economic growth. If the government accumulates more debt without raising taxes, interest on the principal accumulates. Interest must be paid off regularly to keep the country’s credit rating high, so it can continue borrowing at low rates.

Ironically, the only way to keep interest from becoming overwhelming is to cut spending, raise taxes or both, which can stunt economic growth. So, long term, the impact of stimulus spending can be negative.

Another problem with government stimulus programs is that jobs created with government funding disappear if and when the funding expires. It rarely does; instead it becomes an added cost on an ongoing basis, increasing government spending permanently.

How Money Is Spent Matters

How the government spends your money also matters. The American Recovery and Reinvestment Act of 2009, passed to overcome the financial crisis, was the largest stimulus effort ever, but much of the money went to programs that may have had either no positive economic impact or hampered economic recovery.

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The Not-Working Class

In a capitalist country like ours, hard work is supposed to be rewarded and slothfulness is considered one of the seven deadly sins.

So what to make of the “quiet catastrophe,” which George Will describes as follows: “After 88 consecutive months of the economic expansion that began in June 2009, a smaller percentage of American males in the prime working years (ages 25 to 54) are working than were working near the end of the Great Depression in 1940, when the unemployment rate was above 14%. If the labor-force participation rate were as high today as it was as recently as 2000, nearly 10 million more Americans would have jobs.”Working

If even half of those 10 million men were working, the economy would be growing at a faster rate, productivity would increase and consumer spending would be higher. So why are they out of work when the economy is allegedly booming and the unemployment rate has fallen to just 4.8%?

Of the 23 affluent countries in the Organization for Economic Co-operation and Development, the United States ranks 22nd, ahead of only last-place Italy, in 25-to-54 year-old male labor-force participation.

Two plausible explanations exist—and neither one is complimentary to the economic policies of former President Obama or his predecessors.

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Good News: Fed Predicts Slow Economic Growth

We can now be assured of improved economic growth in the years to come.

Why?  Because the Federal Reserve Board is predicting slow growth.  And the Fed is always wrong.

That may seem harsh, but throughout the Obama administration, the Fed predicted stronger economic growth than the U.S. ultimately experienced.united-states-gdp-growth-forecast@2x

Consider the Fed’s record for the past five years. The Fed projected growth of 3.0% to 3.6% for 2011; actual growth turned out to be half that–just 1.6%. For 2012, the Fed projected growth of 2.5% to 2.9%; the actual rate was 2.3%. For 2013, the Fed projected 2.3% to 3% growth, but actual growth was 2.2%. For 2014, the Fed projected 2.8% to 3.2% growth, and the actual rate was 2.4%. Finally, for 2015, the Fed projected 2.6% to 3.0% growth and the actual rate was 2.4% again.

Are you seeing a pattern here? Five years of predictions, five years of overly optimistic projections. The Fed has been almost as incompetent about predicting growth as it’s been at producing growth.

Fed Goes Conservative

Now we have a new Republican administration, but it’s the Fed that’s gone conservative. The allegedly nonpartisan Fed is predicting that the economy will grow by just 1.9% in 2016, 2.1% in 2017, 2.0% in 2018 and 1.9% in 2019. Longer term, the growth rate is projected to be just 1.8%.

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You’re Breaking the Law

How many laws have you broken today?

It’s impossible to know for sure, given that regulations now affect just about every facet of our lives. That’s doubly true for businesses, which were not exactly coddled by the Obama Administration (although exceptions were made for generous Democratic donors, such as Goldman Sachs and Tom Steyer).Productivity

The federal tax code alone is now 74,608 pages long, or 187 times longer than it was a century ago. Depending on what you include and how you count the pages, the Affordable Care Act (ACA) has produced anywhere from 10,000 to 20,000 pages of new regulations, while the Dodd-Frank Wall Street Reform and Consumer Protection Act, developed to increase oversight of the financial industry and reduce risk, has produced more than 22,000 pages of regulations.

The regulatory state was taken to a new level by President Obama, who didn’t even bother getting support from Congress during his second term. He and the bureaucratic brethren (and sistren) he appointed to regulate worked overtime and broke all records for creating new laws to restrict our freedom, stifle economic growth, concentrate power in Washington and prevent the new Republican administration from doing its job.

That making America great again isn’t the goal of the Obama Administration is made clear by the volume of new regulations being approved. In August, we reported that he set a record by becoming the first president to approve 600 major rules (e.g., rules that each impose a cost of more $100 million). While George W. Bush was no slouch, having approved 496 major rules during his two terms as president, Obama blew past him and just kept going.

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Obama Sets Economic Record–For Failure

So did President Obama save us from the financial crisis and rebuild America’s economic strength?

Most media would have us believe that’s the case. As we previously noted, CNBC’s John W. Schoen reported that, “Obama’s biggest parting gift to Trump may be the economy,” since the unemployment rate has dropped to a nine-year low of 4.6%. AP’s Josh Boak repeated the statistic in an article, “Obama leaving behind much stronger economy.” And there are many, many other examples.gdp

Washington Post columnist Catherine Rampell wrote recently that the president-elect will be taking office with “among the most favorable economic conditions … imaginable.” She clearly does not have a very vivid imagination.

Yet other statistics bear out that Obamanomics has been an economic bust, not a boom. Consider the lack of economic growth. In the 85 years for which the U.S. Bureau of Economic Analysis has calculated the annual change in real gross domestic product (GDP), the period from 2006 through 2015 is the only 10-year period during which annual growth never reached 3%. Before now, the longest period during which the economy failed to grow by at least 3% was the four-year period from 1930 to 1933. That is, during the Great Depression.

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Our Christmas List

Christmas is coming and we’re just happy that, in today’s post-politically correct world, we feel safe using that word again.

“Happy Holidays” was such a blah, generic pronouncement, it was impossible to say it and sound sincere. So “Merry Christmas” to all, even if you’re offended by the mere mention of the most joyful holiday ever created.trump-santa-2

In the spirit of Christmas, I’ve made a list.  It’s a wish list, and I understand that it may takes years to deliver everything on it, but I’m patient. And I’ve waited a long time, so a little more waiting won’t hurt.

1. A Growing Economy. Throughout the Obama administration, we heard predictions of strong growth, but it never happened. It should be clear to anyone now, except maybe Paul Krugman, that Keynesian economics doesn’t work.

Hopefully, the Trump administration will not rely on stimulus spending and loose monetary policy as President Obama has, but we’re somewhat concerned that he’s bringing in talent from Goldman Sachs, which tends toward Keynesian thinking.

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Real News about Fake News

Don’t laugh, but the same journalists who have been writing about our booming economy, our amazing progress against ISIS (make that ISIL), Hillary’s dedication to her country and the coming end of the world due to climate change are now claiming that “alt-right” news sites are making things up.

Washington Post columnist Eugene Robinson, who has never written a negative word about any Democrat or a positive word about any Republican, says “cynics” writing on sites like Facebook, Reddit, Infowars and Inquisitr “concocted ‘news’ stories out of whole cloth during the campaign in an attempt to destroy Hillary Clinton and those closest to her.”pbuq0z6zz0yo9jd412f36q

As if Hillary didn’t do enough to destroy Hillary.

Conspiracy theorists came up with a crazy story about alleged sex trafficking out of a pizza parlor frequented by Clinton Campaign Manager John Podesta and it led to an attempted shooting. Now Robinson has come up with a conspiracy theory about the conspiracy theorists he criticizes. No doubt Hillary Clinton would have been elected president, if people just reported the truth (except about her, of course).

If Robinson’s column isn’t “fake news,” what is?

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Trump’s Not Reagan or Obama

Donald Trump is not Ronald Reagan. That should be obvious, but many optimistic conservatives are drawing parallels and predicting economic nirvana over the next four years.

That’s unlikely to happen, but, conversely, the incoming president is not Barack Obama, either. The Obama presidency has been disastrous on many fronts, creating economic stagnation, a doubling of the national debt, and foreign policy disasters, such as the lifting of sanctions against Iran and Cuba in return for pretty much nothing.trump

We’re not about to join the media in bashing the president elect for choosing cabinet members that do not share U.S. Senator Elizabeth Warren’s ideological views, but we’re also concerned that the stock market’s post-election surge is yet another case of irrational exuberance.

Stocks were already overpriced before the election, yet the market was up 5.4% for the month of November. That’s not going to continue for four more years.

Stephen Moore, a senior economic advisor to the Trump campaign, is not surprisingly among those comparing Trump with Reagan. As he wrote in RealClear Policy, “After the election of Ronald Reagan in 1981, the U.S. Economy experienced one of its greatest booms in history. The growth rate averaged nearly 4 percent for seven years 1982–89. And the stock market rose from less than 1,000 on the Dow to more than 10,000 over the next two decades. This was a period of wealth and job creation that the nation and middle class had seldom seen before. All the liberal critics wrongly said it could not and would not happen.

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Strength Isn’t Always Good

With the dollar strengthening rapidly relative to other currencies, in part as a result of Donald Trump’s election victory, consider this irony: The price of imports will fall, making them more attractive to consumers—just as the incoming president prepares to clamp down on imports.

Hopefully, he’ll put aside his protectionist instincts and be persuaded by his advisors to enable American consumers to enjoy a few bargains. Otherwise, we’ll be experiencing the downside of a strong dollar without enjoying the upside.dollar

The downside is that a strong dollar makes American goods more costly abroad. The weak dollar that prevailed through most of the Obama presidency enabled American companies to compete abroad, even though corporate America is taxed at the highest rate in the industrialized world.

But add on a stronger dollar and American exports will drop, increasing our trade deficit, reducing corporate profits and making it more difficult for the economy to grow. That would cause a drop in employment and American workers would, yet again, have to wait to see their salaries increase.

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