Sunday, March 18, 2012

One liberal article at a time, 03-18-2012

Sometimes I amuse myself by reading articles written by liberals. It's sheer fun to watch them start with a wrong premise, apply faulty logic and then arrive with an obviously mistaken conclusion - indeed so mistaken, that a  5 year old girl could immediately detect it if she were not busy playing with dolls. I believe it's my responsibility as an American citizen and a patriot to share this fun with the rest of the reading public. And thus, I created a new topic: "One liberal article at a time". I will try to publish a take down of one liberal article per day. There it goes, March 18, 2012.

"Economic pie grows, but workers' slice shrinks", Robert Reich
The content of this article is rather simple. Apparently, the US economy is growing. And yet, the working men and women are not doing any better. According to Reich, "most of the gains are distributed narrowly in the form of higher profits to owners and fat compensation packages to the "talent." That obviously cannot be good, because "If the trend continues, inequality will become ever more extreme." And if we don't get this inequality under control, then the economy will "face chronically insufficient demand for what the economy can now produce" and  our economy will collapse due to lack of "consumer demand". As a typical leftie, Reich believes there is only one true issue: "the real challenge ahead is to distribute those gains more widely".

What does he propose? His cure for inequality and perceived lack of demand is something that could have been written by Lenin in 1904:

...higher taxes on the rich, that go into wage subsidies for lower-income workers, combined with job sharing.
...better schools (from early childhood through young adulthood, followed by systems of lifelong learning) so everyone has a fair shot at a larger share of the gains.
...more abundant public goods - cleaner air and water, better parks and recreation, improved public health and better public transit.

Reality Check
It's best to start with looking at the actual numbers - and I will use the exact same base line year as Reich. In 2007, US nominal GDP was $13,580 billion. In 2011, it grew to $15,320 billion - an increase of $1,740 billion. On the other side, total government spending (federal, state and local) in 2007 was $4,923 billion. In 2011 it grew to $6,050 billion, an increase of $1,127 billion. This means that 65% of the nominal GDP growth from 2007 to 2011 was spent by the government.

If we re-do the calculation in real dollars, the result will be even more startling. The 2007 GDP in 2011 dollars was $14,666 billion, which makes the real GDP growth from 2007 to 2011 shrink to a paltry $656 billion. The same calculation for the growth of the government yields $733 billion in 2011 dollars. This means that 112% (!) of the GDP growth from 2007 to 2011 was spent by the federal, state and local government - or in other words, the increase in government spending was larger than the entire GDP growth!

 I think any attentive reader will be able to notice that these numbers prove conclusively that Robert's recipe for improving the lives on Americans was used with a vengeance during the last 4 years - and yet as Reich himself concedes, the working men saw nothing but misery. In short, we have already tried what Reich proposed - and it has already failed miserably.

This concludes my daily transmission.

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