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Surviving the Government Super Storm ^ | January 23, 2013 | John Ransom

Posted on 01/23/2013 5:58:09 AM PST by Kaslin

There's a super storm raging over our economy that's been seeded and fueled by the federal government over a period of the past several decades. And it's literally costing the country trillions of dollars in GDP per year. It’s not merely garden-variety government waste that's the problem either. It's monumental stupidity by the government, combined with venial cupidity by voters who think they can get others to pay for their free lunch.

This government-created storm has, more than any other factor, contributed to the fiscal crisis; a crisis that is creating more expansive government programs, robbing us of more GDP, thus ensuring the political class will take more actions that punish the most productive and dynamic elements of our society.

You know? The people who create economic growth?

In order to understand how this storm is being fed, you need only consult some official government figures. The labor participation rates released recently by the Bureau of Labor Statistics now stands at 63.6, near Carter-recession levels.

According to policy scholar and historian, Professor Richard Vedder of Ohio University, that means as many as 14 million of people are officially out of the labor pool. And the professor from Ohio says it's the government's own unemployment program that's helping to reduce the number of bodies willing to work.

“If you give people money to not work,” says Vedder, “some people will say ‘Gee that’s a pretty good option.’… There have been a lot of studies over the years going back to the 1970s that show these programs on balance added a bit to the unemployment rate.”

Because unemployment compensation has lasted so long, however, unemployment rates have gone up “a couple of percentage points” from where it would otherwise be.

Vedder's back-of-the-envelope calculations that he shared with me says that those missing workers could be costing the economy as much as $800 billion in GDP per year. “That’s $2500 for every person, or $10,000 for every family” in GDP he says.

But that's not all: Multiplied and compounded over 10 years, that's not $8 trillion missing from the economy, but rather $9 trillion.

If you want to know why we have an entitlement crisis, why some cities, like Detroit, can't afford to pay for basic services or why teacher pension plans have to cut back benefits, it's not because tax rates are too low, or spending has been cut to the bone. It's because politicians have made off with $9 trillion from our GDP. That's not just missing GDP, you see; it's missing payroll taxes, income taxes, sales taxes and teacher pension contributions.

While our political and cultural elite like to pretend that there is a settled science that supports the notion that government creates "revenue” by Acts of Congress and the generosity of the Executive Office, once again they have it exactly backwards: All public revenues first start out as private money in the economy. When that money is missing from the private sector, it can never afterward make its way to the public sector.

Now here's the bad news: Labor participation rates, and the effect they have on GDP, are just long spring showers that someday will end compared to the storm created by the regulatory burden in the country. According to a report in 2011 by the Heritage Foundation, the government's own Small Business Administration estimates that compliance with various federal regulatory structures cost the economy another $1.75 trillion every year. And that's before we even account for the costs of Obamacare and Dodd-Frank financial "reform" - both of which appear to have higher price tags than originally touted.

While we will never have a regulation-free government- nor should we- it bears asking how long we can afford to pay 13 percent of our GDP to comply with federal mandates, over and above taxes that we pay to support basic services like the common defense.

Because doing my own back-of-the-envelope calculation says that by cutting regulatory costs to half of what they are currently means we can add another $9.8 trillion in GDP as well. If we combine that growth with policies that encourage employment, we can add $19 trillion to GDP over ten years.

$19 trillion could go very far toward righting our fiscal ship even as the fiscal storm continues.

Because the fiscal storm that we see happening in western, industrialized counties isn't just fiscal, it's also demographic. With aging populations and near zero internal birth rates, we can no longer rely, as we once did, on a riding tide of population to lift all boats in our economy.

We need to get back the private GDP that politicians today are so happily squandering through myriad government schemes like Sarbanes-Oxley or emergency unemployment benefits. Since it’s unrealistic to expect politicians to make meaningful cuts in government spending, we have to reduce the burden of government- over 40 percent of our GDP in 2013- by growing the private sector more rapidly.

Or we risk being swamped in the face of this man-caused, government sponsored super storm.

TOPICS: Business/Economy; Culture/Society; Editorial

1 posted on 01/23/2013 5:58:12 AM PST by Kaslin
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To: Kaslin

As long as “Cross border authority” is not mentioned this will be a victory for Hillary and Obama.

And it won’t be.

2 posted on 01/23/2013 6:01:57 AM PST by mrsmith (Dumb sluts: Lifeblood of the Media, Backbone of the Democrat Party!)
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To: Kaslin
The free lunchers have yet to figure out, nothing, nothing, in this world is free, there is always a price to pay, now, or later, a price.
3 posted on 01/23/2013 6:06:22 AM PST by exnavy (Fish or cut bait ...Got ammo, Godspeed!)
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To: Kaslin

This was all good talk - BEFORE the Titanic hit the iceberg. At this point I recommend fashioning some deck chairs into a makeshift lifeboat for you and your family.

4 posted on 01/23/2013 6:07:07 AM PST by cuban leaf (Were doomed! Details at eleven.)
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To: mrsmith
...punish the most productive and dynamic elements of our society. You know? The people who create economic growth?

C'mon, John. Everybody educated in the last 30 years KNOWS the real source of all wealth and prosperity in the USA is government. Public schools taught them that.

5 posted on 01/23/2013 6:08:02 AM PST by ProtectOurFreedom
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To: Kaslin

Title is “Surviving . . . “
The article has no tips for surviving. Saying that the government shouldn’t be doing the things that they are doing does not help. Our government will keep doing what they are doing until they fall into the abyss and literally cannot do it anymore. Personally sidestepping the abyss as much as possilbe is the critical move right now for everyone living in the US for the next several years.

We are witnessing the rush by the unprepared to buy rifles and ammo. Imagine this panic applied to everything you need. It will take years of planning to avoid some of the hardships and you better start now.

6 posted on 01/23/2013 8:17:20 AM PST by zagger
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To: exnavy

The sickest thing about it is that it is not only encouraging more home-grown slackards, but importing them from around the world.

7 posted on 01/23/2013 8:17:40 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Kaslin

Things will never improve with the guy in the White Hut. He just spent four years proving it. This country, assuming it survives in the form we know it, will take decades to repair the damage.

8 posted on 01/23/2013 8:21:59 AM PST by Cyber Liberty (Obama considers the Third World morally superior to the United States.)
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