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Jan 10, 2016 A look at the Employment Situation
Dec 30, 2015 Fed Funds Rate up 25 Basis points...so what?
Dec 15, 2015 Fed Funds on the rise? Has Yellen 'Fell-in'?
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Oct 6, 2015 Sept: Horrible Month for Labor
Sept 30, 2015 The FED: Interest Rate Angst
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July 20, 2015 Economic Growth?
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Apr 7, 2015 LFPR Doldrums on the Labor Front
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Dec 23, 2011 Revisionist History Depression
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Nov 8, 2011 Taxes Pt 1
Nov 1, 2011 Demographics
Oct 12, 2011 Fed-FOMC
Oct 6, 2011 Fed's Operation Twist
Sep 30, 2011 What Price Bailouts?!
Sep 9, 2011 Trade Deficit - States
Sept 3, 2011 Unemployment Ongoing Challenge
August 22, 2011 Restricting Oil Supply
August 11, 2011 Credit Rating-Taxes
August 8, 2011 QE3? What to do?
Aug 5, 2011 Employment Update
August 1, 2011 Competitive Free Mkt Capitalism
July 26, 2011 Cradle of Democracy
July 16, 2011 Capital Ratios
July 10, 2011 Unemployment Again
July 1, 2011 QE2 Over-Apres Moi, le Deluge
June 11, 2011 Unemployment
June 8, 2011 Net Worth Collapse
May 18 2011 Credit Collapse '08-'10
May 15, 2011 Fed Miracle-Mayhem
May 10, 2011 Unemployment
Mar 30, 2011 Puppet Show
Mar 18, 2011 Locked-in-Effect
Mar 10, 2011 Bummer Days
Feb 12 2011 Inflation by Decontenting
Feb 6 2011 Unemployment
Jan 14 2011 Money Supply
Jan 12 2011 Trade Deficit
Jan 6 2011 Printing Press Myth
Dec 18, 2010 College Pricing
Dec 7 2010 Debt & Deficits
Dec 2, 2010 J-Laffer Curve
Sep 24 2010 Competition
Sept 23 2010 Trade Deficit China
Introduction
About us
Links of Interest
Straw Poll
Definitions & Miscellaneous
 

Economic Newsletter for the New Millennium


August 1, 2011 

Editor
Donald R. Byrne, Ph.D.
dbyrne5628@aol.com  
 

Associate Editor
Edward T. Derbin, MA, MBA
edtitan@aol.com  

Download current blog


Free_Market_Competitive_Capitalism-a.pdf



Who should you trust for the good life, free market capitalism or creeping socialism?


                                        …ah, that is the question


A week or so ago the Charlie Rose Show  (the first 20 minutes) included commentators Gerald Seib from the Wall Street Journal, Al Hunt from Bloomberg News and the Dan Bolz from the Washington Post discussing the Debt Limit Talks.  The ‘conventionally wise’ Beltway message rang loud and clear.  Why go through the pain of fiscal restraint  in order to squeeze the Federal government to 19 or 20% of GDP when we can have spending levels at 22 or 23% with the current style of budget-less government spending.  So what the big deal?  There was almost a sense that this debt ceiling debate was strictly a political exercise, a ploy that had nothing to do with economic reality…odd, indeed.

Well first, the Current Federal Expenditures are in the 25% range of GDP, rising 23.3% since 2007, so the 19% vs. 21% level size of the federal government is a moot issue.  

The second point is that Current Federal Receipts as a percent of GDP went from 18.9% to 17.0%, falling 10.3% since 2007.  
 

The end result is that have the perfect storm: rising expenditures – increasing by around 30% from $2.9 trillion in the 2007 calendar year to $3.8 trillion in 2011; and falling revenues – decreasing around 5% from $2.7 trillion in 2007 to $2.5 trillion in 2011


















Current Federal Expenditures as a percent of Nominal GDP.jpg







Current Federal Receipts as a percent of Nominal GDP.jpg




 

US Federal Debt as a percent of Nominal GDP.jpg





US Federal Deficits per Monthly US Treasury Report as a percent of GDP.jpg


  
Let’s be blunt…


Is this economy to be oriented toward the people, by the people, and for the people and of the people?  Or is it to be run by a few and for few and their favored entourage?

Shrinking the private sector and growing the government sector is not a zero-sum game, where the gains and losses balance out (redistribution).  In the long run, in fact, it has proven to be a distinctly negative sum-game.  Witness the rising Gini Coefficient – measuring income distribution…since 1968 has moved from 38.6% [when the Great Society was being implemented] to above 46%, indicating worsening disparity. 

To the extent free market capitalism is guided by Adam Smith’s Invisible Hand of Competition, it brings society toward very desirable goals.  A free market capitalistic economy is ultimately one that serves the people and NOT simply the decisions of a few in the private sector and/or in the public sector (government).

The goals that competitive free market capitalism brings society toward are efficiency and equity on the microeconomic level and high employment and a reasonable degree of price level stability as well as a consensus driven rate of economic growth.  The decisions of the many, NOT the few, dictate what an economy will produce in the way of goods and services, in what manner those goods will be produced and in distribution of income (the reward of the goods and services produced) with maximum freedom to the people as consumers and productive resources.  It is an economic system that is based on the principle of subsidiarity, again, where the decision-making is driven down to the lowest level possible...after all, who knows/understands better than the individual (in most cases) what is best for them?