June 3, 2010

Steaming Towards Statism

Filed under: Activism,Economy,Environment,Health Care,Taxes & Government — Tom @ 11:45 am

The decline in private-sector wages is just the tip of the iceberg.


Note: This column went up at Pajamas Media under a different title and was teased here at BizzyBlog on Monday.


On May 25, Dennis Cauchon at USA Today had an insightful take on an economic release from the government’s Bureau of Economic Analysis (BEA). Using BEA’s March 2010 Personal Income and Outlays report, he calculated that wages paid by private companies “shrank to their smallest share of personal income in U.S. history during the first quarter of this year.”

Cauchon then unfortunately went to the prevailing media template, the one requiring that the Bush 43 Era be dragged into everything, regardless of relevance:

A record-low 41.9% of the nation’s personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.

Cauchon’s convenient timing ignores the fact that as late as the fourth quarter of 2008, the same calculation using numbers in the same BEA report he cited came in at 44.0%. In other words, over three-quarters of the decline (2.1 percentage points divided by 2.7 points is 78%) occurred after everyone knew that Dear Leader would be in charge.

As important as what Cauchon cited is (after the reality-based context yours truly has provided), the shrinkage in private pay only partially unmasks the much more broadly important story of rapidly advancing statism. Federal intrusion into the private sector and federal confiscation from it are accelerating. A tipping point may be near.

For items one could put hard numbers to with sufficient research, let’s start with entities still classified as “private” which Uncle Sam actually or substantively controls.

First, there are the two vehicle-producing wards of the state known as General Motors and Chrysler. These companies emerged from bankruptcy in their current forms largely as a result of extralegal maneuvers that shortchanged disfavored creditors during their respective bankruptcies, followed by excessive infusions of post-bankruptcy cash to ensure their multiyear survival even if they are run poorly or rejected by a nationalization-averse car-buying public.

Though majority-owned by the government, GM characterizes itself as a “private company” in its financial and other reports. While the government only has a minority interest in Chrysler, no one can honestly believe that it isn’t overseeing operational moves there. BEA includes the payroll of both companies in its “private industries” figure. You can knock off at least $5 billion in wages from BEA’s figures for GM and Chrysler alone.

Then there are Fannie Mae and Freddie Mac, the two entities that brought us the housing and mortgage-lending fiascos after 15 years of deliberately misrepresenting the quality of mortgages they controlled and securitized. Fan and Fred are also considered private firms, even though they have thus far siphoned off $145 billion in taxpayer bailout money. With $8.1 trillion in combined outstanding debt and trillions in “assets” that are of questionable value, there is no end in sight.

The Federal Deposit Insurance Corporation has taken over and is obviously dictating what goes on at more than 70 failed banks just this year, on top of over 130 takeovers in 2009.

Moving into the less quantifiable but still obvious, who can doubt that the entire financial sector is virtually under the thumb of the government? What else would you call it when the country’s Treasury Secretary can pull bank CEOs into a meeting and figuratively “put a gun to their heads,” thereby forcing them to “accept” government investment regardless of whether they wanted or needed it? This sad turning point in capitalism occurred even before the current administration took charge, shortly after the elites of both parties defied overwhelming public opposition to pass the October 2008 financial bailout bill.

If what is being called “financial reform” in Washington becomes law, there will no longer be any real doubt as to who controls financial services. The owners of supposedly private financial institutions will live in 24-7 fear that the bill’s new “Financial Services Oversight Council” will unilaterally fabricate a reason to take them over. The legislation’s authors have deliberately drafted it to give the Council’s victims no meaningful legal recourse. The SEIU’s “purple people beaters” will then be able to move on to other targets, as their “services” in the cause of intimidating bankers with illegal, police-escorted “protests” will no longer be necessary.

On the horizon, barring repeal, there’s ObamaCare, the de facto government takeover of the health care sector’s one-sixth of the economy. Beyond that, if it becomes law, there’s the extreme government micromanagement inherent in cap-and-trade. If both of these aren’t stopped, we will soon be in a place where no one attempting to do anything productive will be able to ply his or her trade without the government dictating the terms under which he or she can do business.

It’s not only about business; it’s also about day-to-day life. It may not even matter if cap-and-trade is stopped, as the government’s Environmental Protection Agency sees its court-sanctioned authority to regulate carbon dioxide as a pollutant as carte blanche to impose lifestyle-affecting mandates on everyone in every energy-consuming decision, personal or professional.

With intrusion comes confiscation. What they can’t confiscate, they pass on to future generations, unless the Federal Reserve chooses to inflate its way out of the problem — an action I would not rule out.

On May 27, President Obama’s “bipartisan fiscal commission” informed the White House and Congress — as if it was news — that the nation’s debt load is near a growth-stifling 90% of gross domestic product. They’re not listening. Intense lobbying has apparently begun for yet another bailout, this time of financially insolvent multi-employer (read: union) pension plans.

Stopping and reversing the statist steamroller will take a lot more than voting in November 2010. It will require a level of consistent engagement and activism by the sensible, constitutional center-right never previously seen in American history. Whether we’re up to it is an open question.



  1. Doesn’t the Fed realize the massive harm and misery inflating themselves out of debt would cause? Or do they just not care? I thought the FR was supposed to be independent, not reflect the madness of the current administration.

    Comment by zf — June 3, 2010 @ 7:16 pm

  2. My friends, if the November elections don’t turn out the Dems in significant enough numbers to repeal or gut ObamaCare and repeal Cap & Trade IF it passes (if it doesn’t pass, remove the EPA authority to regulate CO2) then we have come to an impasse as to the future of this country. At that point we have to make a hard choice: stay and experience the downward spiral OR pack our bags to go to greener pastures. I don’t say this litely.

    Let’s hope it never comes to that but you know voting with one’s feet is the American way, our forefathers came here based on the same set of decisions. http://blog.heritage.org/2009/01/13/the-2009-index-of-economic-freedom/ and PPP comparisons https://www.cia.gov/library/publications/the-world-factbook/rankorder/2004rank.html

    It maybe reasonable to consider non English countries given their need of English speaking employees for world trade as English is the international language of business. The top 5 countries in the 2009 Freedom Index (ironically the US is not among them) have reasonably close PPP valuations for a comfortable lifestyle with the exception of New Zealand.

    Option 3 is off the table (violent bloody revolution) since I don’t believe this country is worth sacrificing my children or myself given that in a Republic we deserve the government we get. If the moderates and independents are too lazy to cast a critical eye on the BS spun by the left then quite frankly they deserve to let the left screw them over and over. If they want their country back, let them die for it because they had a chance to take it back peacefully from this corrupt political mafia they handed it to.

    Comment by dscott — June 3, 2010 @ 8:54 pm

  3. #1, there is a method to their madness: http://www.publiusforum.com/2010/04/13/the-inflationary-spiral/

    Comment by dscott — June 4, 2010 @ 7:22 am

  4. #1, some would argue that QE (“quantitative easing”) is already creating the conditions for an inflationary spiral. Beyond that, there’s only so much you can do with monetary policy when fiscal policy is out of control.

    Comment by TBlumer — June 4, 2010 @ 7:35 am

  5. “Hopefully at least one person reads this entire thing and gets some perspective out of it.”

    My apologies for an off-topic comment. That quote is from a very interesting comment on the ecomony and jobs:

    Some excerpts:
    “As of right now there is a 6 month moratorium on ALL drilling (not just new, all – so rigs that are currently drilling have to cap off and stop)….

    Seeing as how 30% of the national oil supply comes from the gulf, that means that next year and the following years, as current wells decline there will be a 6 month void of production, creating a fluctuation of supplies. Does anyone here remember how expensive gasoline got due to one supply pipeline being bombed 2 years ago? It increased exponential to the problem. that is because oil is a speculative market, and is prone to panic. It is not a stretch to state that the market price will influx sharply.

    Also – the small to mid size oil companies who operate primarily in the gulf will be hit the hardest, …I’m an employee of one of those midsize oil companies. We have one of the highest safety records in the gulf – but we are still sitting dead in the water. …Shutting down all drilling in the gulf over BP’s gross oversight is only going to magnify this problem and damage any recovery our economy has made in the past 2 years. …”

    Link to the full comment:

    Link to the Original article where the comment was made:

    Before reading this, I’d been ignoring the oil spill news coverage like it was natural disaster coverage. A tornado here, floods there, federal funds being spent and lotsa news coverage, … but not really feeling directly effected. After reading that comment, wow…

    “Only one of those disasters is mandatory for us to face – the clean-up. The moratorium on drilling creates these other scenarios. The rational response is to shut down BP’s drilling operations. …When one company fucks up – they should be held accountable – not the entire industry. If a plane crashes we investigate that airlines maintenance protocols and, if new, the production facility of the plane. If hundreds of cars have brake problems, we recall them. If Jack in the Box serves up e.coli infected burgers, we inspect the meat source. We have never shut down the air industry, the automotive industry, or the fast food industry in response ….”

    Comment by Cornfed — June 4, 2010 @ 12:32 pm

  6. #5, regarding the drilling ban OR in reality a man caused economic disaster of $6 gas: http://finance.yahoo.com/tech-ticker/6-to-8-gas-prices-will-%22skyrocket%22-if-u.s.-stops-drilling-says-former-shell-exec-499176.html;_ylt=AtKnmG33NByAiDyAnDySFrFk7ot4;_ylu=X3oDMTE2MG42OWYwBHBvcwMxBHNlYwNhcnRpY2xlTGlzdARzbGsDNnRvOGdhc3ByaWNl?tickers=bp,^gspc,^dji,uso,XOM,OIL,XLE

    Comment by dscott — June 4, 2010 @ 6:30 pm

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