American Shareholders Association

Unemployment Hits 5.7%: Good News and Bad News

In a good news/bad news thing, the Department of Labor today announced that the unemployment rate ticked up from 5.5% to 5.7%.

The bad news is that the higher rate (and the July shedding of 51,000 jobs) is a continuing sign of economic weakness.

The good news is that this is still an historically low rate (anything under 6% is considered good).  Also, the unemployment rate going up is usually a lagging indicator of economic weakness--meaning we might be almost out of the woods.

Obama Calls for Higher Taxes On Energy Company Shareholders

Obama today called for a tax increase on energy companies.  Since corporations don't pay income taxes--people do--this is actually a tax increase on shareholders and company employees.  A good rule of thumb is that 60% of every corporate tax hike results in lower wages, and 40% results in lower capital gains and dividends.

Also, how exactly does this help decrease gas prices?

Pearls of Wisdom from Milton Friedman

Milton Friedman passed away two years ago to the day.  He left behind a legacy of inspiration for economists and conservatives alike.  Central to his ideology was the belief that: "[the] greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government."

Death of Doha

Prior to Doha, the World Trade Organization (WTO) successfully conducted eight trade rounds.  The Doha round’s failure marks a monumental setback for arguably the most important key to economic growth: free trade.  The downfall of Doha will unquestionably lead to the downfall of global prosperity.  I can just hear the moans of David Ricardo as he rolls over in his grave and gets sodomized by isolationists.  The WSJ notes the dire effects of Doha’s failure:

In 1990, trade represented about 40% of world GDP, according to the World Bank. By 2004, trade exceeded 55% of world GDP, and the global economy had expanded by 50%. The five fastest-growing countries from 1990 to 2004 were Albania, Bosnia and Herzegovina, China, Ireland and Vietnam, and all of them had annual double-digit increases in trade. Meanwhile, the countries that traded the least -- Iran, many African countries -- have stagnated.

Doha's failure is a lost opportunity, but it could become much worse if it galvanizes even part of the world to resort to the tariffs and currency devaluations that led to and exacerbated the Great Depression. It was precisely the bitter memory of that era that led the world's postwar statesmen to build the GATT, the European Common Market, and the rest of free-trade system we now take for granted at our peril.

GDP Growth Up Again: Recession Still the Dog That Didn't Bark

GDP growth up 1.9% in the second quarter of 2008.  Still nowhere near two consecutive quarters of negative GDP growth (the rough definition of a recession).

However, in a bit of bad news, GDP growth for the fourth quarter of 2007 was revised down to slightly negative (minus 0.2%).  That ended a string of 24 consecutive quarters--six full years--in which the economy expanded.

Individual Investors Bullish on Equities

This from a new survey by Schroders:

The semiannual survey of investors from the asset management firm found that more individual investors (with at least $100,000 in investable assets) are investing in domestic and international equities...According to the results, more than half of the surveyed investors (62%) believe the U.S. economy is in a recession, but remain hopeful about their annual returns. Almost all surveyed investors (94%) expect a positive annual rate of return on their investments over the next 12 months, with more than half (55%) expecting an annual rate of return of at least 5%.

McCain Weakens Tax Promises

In a recent interview on ABC’s “This Week,” John McCain recanted from his once adamant anti-tax increases rhetoric. When faced with the question of whether or not he would consider payroll tax increases as a potential Social Security fix, McCain simply replied that “[there] is nothing that’s off the table.” The obvious implication is that McCain wants all parties to believe he is willing to negotiate. However, with conservatives already doubting McCain, he chose the wrong issue to “make nice” with liberals over. Cooperation and negotiation are fine, but tax increases and economic contraction should not be on the table.  Read more on this issue here.

More Pay for Bureaucrats?

The federal employee unions are pushing a public advocacy campaign to increase pay for bureaucrats.  Of course, the funding for this has to come from taxpayers.

You may not have heard they already have a better 401(k) plan than you.  Did you know that they also get paid 50% more than you?

Congress to Spend $500 Billion More Than It Steals in Taxes

The MSM is beside itself today that the White House Office of Management and Budget is projecting a deficit of nearly $500 billion.  A few thoughts:

1. The deficit is an uninteresting number which is the difference between two very interesting numbers: the tax burden, and the level of spending.  Considering that taxes are at historical levels, the problem is clearly spending
2. Would you rather have a balanced budget with spending at 40% of GDP, or a 3% of GDP deficit with spending at 20% of GDP?  Clearly the latter is better for the economy.  Again, it's spending
3. Expressed as a percentage of GDP (3.3 percent), the deficit is not very large

New Video on Obama's 50 Percent Plus Tax Rate