December Classes

We only have classes the first two weeks in December

After this week, we will start classes again on Wednesday, January 6.

No Economics Classes Until December

October 28 Class

We went back over the idea of Needs and Wants and we focused on the role of price, supply, and demand.

We read and discussed three articles from the Foundation for Economic Education: Competition, Profit: Not Just a Motive, and The "I Hate the Poor" Act of 2009...

Very good articles and very good discussions.

21 October Class

Our main topic of discussion today was "Profit": What is profit? Is it bad or good or neutral?

Sales - Expenses = Profit or Expenses - Sales = Loss.
The possible profit is the incentive for an entrepreneur to contribute money to a business.

We read and discussed "People Before Profits" from the November 2003 Ideas on Liberty (at www.fee.org); and the importance of PRICES in determining the actions of businesses.

We ended by taking a survey from www.fte.org on "Identifying Needs". The survey was followed by animated discussion on whether transportation, education, etc are needs or wants....

14 October Class

We discussed very briefly the vote yesterday in the Senate Finance Committee on the Baucus Health Care bill. It goes now to the Senate floor for discussion there.

Most of the class we spent discussing several handouts from the Foundation for Teaching Economics: An Economic Reasoning Quiz, "Incentives Unlock the Mysteries of Human Behavior", and Economic Reasoning Principles.

We discussed tradeoffs, economic choices, consequences of choices, incentives, prices, voluntary trade, markets, and individual freedoms.

Class on Oct 7?

Yes, we will be doing Economics on October 7, during "Fall Break" (We'll be taking the entire month of November off for Wednesday classes, so I figure we need to get them all in in October!)

Universal Health Care -- an Economic View of It

I’ve had a little more time to digest the talk we went to last night, where they were trying to explain to us how important it is to give everyone universal health care, and how cheap it would actually be.

My response can really all be summed up in a short Economics lesson: Everything we purchase has to be considered a scarcity. No matter how much of it there is, there is still a limited amount of it. (Do we have consensus on that?) In a system that is working, scarcities are taken care of with one tool – prices!

And yet, under the Universal Health Care System being pushed under the Conyers bill for example (H.R. 676) – prices are taken out of the economic equation. When price is no longer allowed to regulate demand, demand ALWAYS exceeds supply. There are no exceptions.

So the bottom line with universal health care is shortages, and shortages will lead to rationing. Doesn’t matter what they say!

30 September Class

We discussed whether the Olympics should be in Chicago in 2016; and the Post Office losing money and still paying workers to do nothing (thanks to Union Rules)

We spent most of the class discussing Health Care Reform:
Medicare/Medicaid (i.e. the govt) pays the least for services;
Insurance companies pay the middle amount;
Uninsured individuals pay the most.

What reforms could we consider without increasing the size/cost of Govt:
Mandating that individuals pay the same as insurance companies, not more
Allow insurance companies to compete across state lines
Give tax breaks to individuals buying insurance (not just employers)

Mixed feelings on this requirement:
Requiring companies to cover Pre-Existing Conditions.

Class -- September 23

We mostly discussed the role of Price in driving Demand;
"price gouging" during times of peril, and the co-importance of Price, Demand, and Supply.

We looked at various government interferences with the above, including rent ceilings, minimum wage, and Cash for Clunkers.

We also discussed "unintended consequences" when the Government intervenes. We should ask: (1) Is this the proper role of government? (2) Can we afford it?

16 Sept Class

In the morning, during Government Club we had discussed the March/Rally in D.C. last weekend. We continued the discussion of that into Economics class -- looking at the Economic reasons for the March. (The Rally was described as the largest gathering of Fiscal Conservtives ever!)

We connected it to Economics through:
Money/taxes
Bailouts/Stiumuls
Health Care

We also discussed Cap and Trade briefly. (We will cover that more in depth later.)

1st Class Notes

We discussed "Cash for Clunkers" -- I had a post from Newt Gingrich which said the 1st 250,000 cars (the planned amount) sold in 4 days.

This plan was supposed to make us "greener"; it increased the sale of new cars (at least briefly).

Much of our class was spent discussing the House Health Care bill. It is being claimed by its proponents that it will be "budget neutral". But it will increase taxes, increase government spending (up to 1 Trillion dollars over 10 years), and definitely lead to rationing. And regardless of what they claim, the Government doesn't compete on a level playing field.

We also passed out Gingrich's "Grading the Big Speech: A 10-point Citizens' Cheecklist on Health Reform" for students to use if they watched Wednesday evening's Health Care talk by the President (to a Joint Session of Congress).

November classes

Just a heads up, there will not be any Wednesday classes during the month of November. (We will be holding Mock Trial Scrimmages during the 1st 2 Wednesdays of November instead...More information later on those in case you want to watch those.)

Excellent Video: America Bailout Nation

Wow! This is a great video to show the fallacy of so many of the arguments/laws coming out of D.C. lately!

Ron Paul discussing Fannie/Freddie Issues

This is a great snippet on MSNBC interview with Ron Paul, where he discusses how we got the Fannie and Freddie mess, and why he understood it before the bubble burst...His answer: Understanding problem with Keynesian economics vs. how Austrian economics actually works.

(You have to get past the first 1 1/2 minutes where he's talking about the recent Pelosi/CIA issues.)

Energy Tax

The Energy Tax is yet another ploy by the Democrats in charge in D.C. to take money from Americans. But this tax is especially bad, because it will hit poor families and small businesses especially hard.


Sen Broun speaks about the Tax.

Why Govt Aid to Africa Doesn't Work

This interview, with a young lady from Africa, explains her view of why Govt Aid to Africa is not working. It is well worth listening to:

http://www.dambisamoyo.com/downloads/2009-05-07_CBC_Radio.mp3

She also did an interview on a Norway program -- and did a great job of explaining how Government to Government aid causes more problems than it erases:
http://www.youtube.com/watch?v=L5Pkk2sq9Cg

Economics Classes end for the Year

It was bittersweet to end the semester yesterday. I have so much to do right now, that I look forward to a little extra time to try to catch up on some of that. But I have enjoyed this year's classes very much.

The question was asked yesterday about whether I would keep putting things on the Economics blog over the summer. I believe I answered yes. But I want to change that to a maybe. If I run into any fantastic Economic resources over the next few months, or some topics that we need to be sure to cover next year, I'll jot them down here. But if I'm just running into "Economic News" -- that will be posted on the Civics Lessons blog instead (http://clccivicslessons.blogspot.com/), since that type of thing is generally Economics and Government related.

Take care, and I look forward to seeing most of you in next year's classes. (To my Seniors or other non-returners, "Take care, and keep in touch. I've enjoyed teaching you this year.")

Great Depression Quotes

"The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.” Milton Friedman

"Listening to the liberals, you'd think that the 1980s were the worst period since the Great Depression, filled with suffering and despair. I don't know about you, but I'm getting awfully tired of the whining voices from the White House these days. They're claiming there was a decade of greed and neglect, but you and I know better than that. We were there." Ronald Reagan

"Once upon a time my political opponents honored me as possessing the fabulous intellectual and economic power by which I created a worldwide depression all by myself." Herbert Hoover (which of course, he didn't do by himself -- but he certainly contributed to it!)

"Prosperity cannot be restored by raids upon the public Treasury." Herbert Hoover (though he behaved during the beginning of the Great Depression as if it could be).

"Blessed are the young for they shall inherit the national debt. " Herbert Hoover
(Some concepts are not so new after all.)

"Not only our future economic soundness but the very soundness of our democratic institutions depends on the determination of our government to give employment to idle men." Franklin D. Roosevelt (and where did the government get the money to employ those idle men...)

Much comparison is made between what's happening in today's Economy and the Great Depression. What were things like then: Production fell by more than 50%, disposable income was down 28% and stock prices were down 90%. We are not anywhere near Great Depression problems now! Unemployment rose to 25%, with almost 13 million unemployed in 1933 (up from less than 2 million in 1929).

Senator DeMint Speaks Out About Tea Parties and More

Senator DeMint spoke to the Senate about the Tea Parties, the need to shrink government, bankrupting our future generations. He continues to be one of the few in the Senate who seems to "get it"! Everyday folks went home from the tea parties to find that because they had a preference for freedom, and limited government, they had been labeled as terrorists by Homeland Security.

"Tea Parties are only the beginning."

"Freedom hasn't failed, the government has."

"We have it backwards as to what made America great..."

"Let's not blame the housing problem on the free market..."

People are telling us, "Don't give up on Freedom. Government does not work. Socialism does not work."

Great Depression

We only have 2 Economic classes left for this spring, and we will be discussing the Great Depression in both of them. For homework, before next week's class, please read over Great Myths of the Great Depression. If you don't have a copy of it, you can download it at FEE's website.

President Barack Obama's Remarks on the Economy

Remarks of President Barack Obama
A New Foundation
Tuesday, April 14th, 2009
Washington, DC

It has now been twelve weeks since my administration began. And I think even our critics would agree that at the very least, we’ve been busy. In just under three months, we have responded to an extraordinary set of economic challenges with extraordinary action – action that has been unprecedented in both its scale and its speed.

I know that some have accused us of taking on too much at once. Others believe we haven’t done enough. And many Americans are simply wondering how all of our different programs and policies fit together in a single, overarching strategy that will move this economy from recession to recovery and ultimately to prosperity.

So today, I want to step back for a moment and explain our strategy as clearly as I can. I want to talk about what we’ve done, why we’ve done it, and what we have left to do. I want to update you on the progress we’ve made, and be honest about the pitfalls that may lie ahead.

And most of all, I want every American to know that each action we take and each policy we pursue is driven by a larger vision of America’s future – a future where sustained economic growth creates good jobs and rising incomes; a future where prosperity is fueled not by excessive debt, reckless speculation, and fleeing profit, but is instead built by skilled, productive workers; by sound investments that will spread opportunity at home and allow this nation to lead the world in the technologies, innovations, and discoveries that will shape the 21st century. That is the America I see. That is the future I know we can have.

To understand how we get there, we first need to understand how we got here.

Recessions are not uncommon. Markets and economies naturally ebb and flow, as we have seen many times in our history. But this recession is different. This recession was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.

As has been widely reported, it started in the housing market. During the course of the decade, the formula for buying a house changed: instead of saving their pennies to buy their dream house, many Americans found they could take out loans that by traditional standards their incomes just could not support. Others were tricked into signing these subprime loans by lenders who were trying to make a quick profit. And the reason these loans were so readily available was that Wall Street saw big profits to be made. Investment banks would buy and package together these questionable mortgages into securities, arguing that by pooling the mortgages, the risks had been reduced. And credit agencies that are supposed to help investors determine the soundness of various investments stamped the securities with their safest rating when they should have been labeled “Buyer Beware.”

No one really knew what the actual value of these securities were, but since the housing market was booming and prices were rising, banks and investors kept buying and selling them, always passing off the risk to someone else for a greater profit without having to take any of the responsibility. Banks took on more debt than they could handle. The government-chartered companies Fannie Mae and Freddie Mac, whose traditional mandate was to help support traditional mortgages, decided to get in on the action by buying and holding billions of dollars of these securities. AIG, the biggest insurer in the world, decided to make profits by selling billions of dollars of complicated financial instruments that supposedly insured these securities. Everybody was making record profits – except the wealth created was real only on paper. And as the bubble grew, there was almost no accountability or oversight from anyone in Washington.

Then the housing bubble burst. Home prices fell. People began defaulting on their subprime mortgages. The value of all those loans and securities plummeted. Banks and investors couldn’t find anyone to buy them. Greed gave way to fear. Investors pulled their money out of the market. Large financial institutions that didn’t have enough money on hand to pay off all their obligations collapsed. Other banks held on tight to the money they did have and simply stopped lending.

This is when the crisis spread from Wall Street to Main Street. After all, the ability to get a loan is how you finance the purchase of everything from a home to a car to a college education. It’s how stores stock their shelves, farms buy equipment, and businesses make payroll. So when banks stopped lending money, businesses started laying off workers. When laid off workers had less money to spend, businesses were forced to lay off even more workers. When people couldn’t get car loans, a bad situation at the auto companies became even worse. When people couldn’t get home loans, the crisis in the housing market only deepened. Because the infected securities were being traded worldwide and other nations also had weak regulations, this recession soon became global. And when other nations can’t afford to buy our goods, it slows our economy even further.

This is the situation we confronted on the day we took office. And so our most urgent task has been to clear away the wreckage, repair the immediate damage to the economy, and do everything we can to prevent a larger collapse. And since the problems we face are all working off each other to feed a vicious economic downturn, we’ve had no choice but to attack all fronts of our economic crisis at once.

The first step was to fight a severe shortage of demand in the economy. The Federal Reserve did this by dramatically lowering interest rates last year in order to boost investment. And my administration and Congress boosted demand by passing the largest recovery plan in our nation’s history. It’s a plan that is already in the process of saving or creating 3.5 million jobs over the next two years. It is putting money directly in people’s pockets with a tax cut for 95% of working families that is now showing up in paychecks across America. And to cushion the blow of this recession, we also provided extended unemployment benefits and continued health care coverage to Americans who have lost their jobs through no fault of their own.

Now, some have argued that this recovery plan is a case of irresponsible government spending; that it is somehow to blame for our long-term deficit projections, and that the federal government should be cutting instead of increasing spending right now. So let me tackle this argument head on.

To begin with, economists on both the left and right agree that the last thing a government should do in the middle of a recession is to cut back on spending. You see, when this recession began, many families sat around their kitchen table and tried to figure out where they could cut back. So do many businesses. That is a completely responsible and understandable reaction. But if every family in America cuts back, then no one is spending any money, which means there are more layoffs, and the economy gets even worse. That’s why the government has to step in and temporarily boost spending in order to stimulate demand. And that’s exactly what we’re doing right now.

Second of all, I absolutely agree that our long-term deficit is a major problem that we have to fix. But the fact is that this recovery plan represents only a tiny fraction of that long-term deficit. As I will discuss in a moment, the key to dealing with our deficit and debt is to get a handle on out-of-control health care costs – not to stand idly by as the economy goes into free fall.

So the recovery plan has been the first step in confronting this economic crisis. The second step has been to heal our financial system so that credit is once again flowing to the businesses and families who rely on it.

The heart of this financial crisis is that too many banks and other financial institutions simply stopped lending money. In a climate of fear, banks were unable to replace their losses by raising new capital on their own, and they were unwilling to lend the money they did have because they were afraid that no one would pay it back. It is for this reason that the last administration used the Troubled Asset Relief Program, or TARP, to provide these banks with temporary financial assistance in order to get them lending again.

Now, I don’t agree with some of the ways the TARP program was managed, but I do agree with the broader rationale that we must provide banks with the capital and the confidence necessary to start lending again. That is the purpose of the stress tests that will soon tell us how much additional capital will be needed to support lending at our largest banks. Ideally, these needs will be met by private investors. But where this is not possible, and banks require substantial additional resources from the government, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.

Of course, there are some who argue that the government should stand back and simply let these banks fail – especially since in many cases it was their bad decisions that helped create the crisis in the first place. But whether we like it or not, history has repeatedly shown that when nations do not take early and aggressive action to get credit flowing again, they have crises that last years and years instead of months and months – years of low growth, low job creation, and low investment that cost those nations far more than a course of bold, upfront action. And although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – “where’s our bailout?,” they ask – the truth is that a dollar of capital in a bank can actually result in eight or ten dollars of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.

On the other hand, there have been some who don’t dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear – the reason we have not taken this step has nothing to do with any ideological or political judgment we’ve made about government involvement in banks, and it’s certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.

Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm. So rest assured – we will do whatever is necessary to get credit flowing again, but we will do so in ways that minimize risks to taxpayers and to the broader economy. To that end, in addition to the program to provide capital to the banks, we have launched a plan that will pair government resources with private investment in order to clear away the old loans and securities – the so-called toxic assets – that are also preventing our banks from lending money.

Now, what we’ve also learned during this crisis is that our banks aren’t the only institutions affected by these toxic assets that are clogging the financial system. A.I.G., for example, is not a bank. And yet because it chose to insure trillions of dollars worth of risky assets, its failure could threaten the entire financial system and freeze lending even further. This is why, as frustrating as it is – and I promise you, nobody is more frustrated than me – we’ve had to provide support for A.I.G. It’s also why we need new legal authority so that we have the power to intervene in such financial institutions, just like a bankruptcy court does with businesses that hit hard times, so that we can restructure these businesses in an orderly way that does not induce panic – and can restructure inappropriate bonus contracts without creating a perception that government can just change compensation rules on a whim.

This is also why we’re moving aggressively to unfreeze markets and jumpstart lending outside the banking system, where more than half of all lending in America actually takes place. To do this, we’ve started a program that will increase guarantees for small business loans and unlock the market for auto loans and student loans. And to stabilize the housing market, we’ve launched a plan that will save up to four million responsible homeowners from foreclosure and help many millions more re-finance.

In a few weeks, we will also reassess the state of Chrysler and General Motors, two companies with an important place in our history and a large footprint in our economy – but two companies that have also fallen on hard times.

Late last year, the companies were given transitional loans by the previous administration to tide them over as they worked to develop viable business plans. But the plans they developed fell short, and so we have given them some additional time to work these complex issues through. We owed that, not to the executives whose bad bets contributed to the weakening of their companies, but to the hundreds of thousands of workers whose livelihoods hang in the balance.

It is our fervent hope that in the coming weeks, Chrysler will find a viable business partner and that GM will develop a business plan that will put it on a path to profitability without endless support from the American taxpayer. In the meantime, we are taking steps to spur demand for American cars and provide relief to autoworkers and their communities. And we will continue to reaffirm this nation’s commitment to a 21st century American auto industry that creates new jobs and builds the fuel-efficient cars and trucks that will carry us toward a clean energy future.

Finally, to coordinate a global response to this global recession, I went to the meeting of the G20 nations in London the other week. Each nation has undertaken significant stimulus to spur demand. All agreed to pursue tougher regulatory reforms. We also agreed to triple the lending capacity of the International Monetary Fund, an international financial institution supported by all the major economies, and provide direct assistance to developing nations and vulnerable populations – because America’s success depends on whether other nations have the ability to buy what we sell. We pledged to avoid the trade barriers and protectionism that hurts us all in the end. And we decided to meet again in the fall to gauge our progress and take additional steps if necessary.

So all of these actions – the Recovery Act, the bank capitalization program, the housing plan, the strengthening of the non-bank credit market, the auto plan, and our work at the G20 – have been necessary pieces of the recovery puzzle. They have been designed to increase aggregate demand, get credit flowing again to families and businesses, and help them ride out the storm. And taken together, these actions are starting to generate signs of economic progress. Because of our recovery plan, schools and police departments have cancelled planned layoffs. Clean energy companies and construction companies are re-hiring workers to build everything from energy efficient windows to new roads and highways. Our housing plan has helped lead to a spike in the number of homeowners who are taking advantage of historically-low mortgage rates by refinancing, which is like putting a $2,000 tax cut in your in pocket. Our program to support the market for auto loans and student loans has started to unfreeze this market and securitize more of this lending in the last few weeks. And small businesses are seeing a jump in loan activity for the first time in months.

This is all welcome and encouraging news, but it does not mean that hard times are over. 2009 will continue to be a difficult year for America’s economy. The severity of this recession will cause more job loss, more foreclosures, and more pain before it ends. The market will continue to rise and fall. Credit is still not flowing nearly as easily as it should. The process for restructuring AIG and the auto companies will involve difficult and sometimes unpopular choices. All of this means that there is much more work to be done. And all of this means that you can continue to expect an unrelenting, unyielding, day-by-day effort from this administration to fight for economic recovery on all fronts.

But even as we continue to clear away the wreckage and address the immediate crisis, it is my firm belief that our next task is to make sure such a crisis never happens again. Even as we clean up balance sheets and get credit flowing; even as people start spending and business start hiring – we have to realize that we cannot go back to the bubble and bust economy that led us to this point.

It is simply not sustainable to have a 21st century financial system that is governed by 20th century rules and regulations that allowed the recklessness of a few to threaten the entire economy. It is not sustainable to have an economy where in one year, 40% of our corporate profits came from a financial sector that was based too much on inflated home prices, maxed out credit cards, overleveraged banks and overvalued assets; or an economy where the incomes of the top 1% have skyrocketed while the typical working household has seen their income decline by nearly $2,000.

For even as too many were chasing ever-bigger bonuses and short-term profits over the last decade, we continued to neglect the long-term threats to our prosperity: the crushing burden that the rising cost of health care is placing on families and businesses; the failure of our education system to prepare our workers for a new age; the progress that other nations are making on clean energy industries and technologies while we remain addicted to foreign oil; the growing debt that we’re passing on to our children. And even after we emerge from the current recession, these challenges will still represent major obstacles that stand in the way of our success in the 21st century.

There is a parable at the end of the Sermon on the Mount that tells the story of two men. The first built his house on a pile of sand, and it was destroyed as soon as the storm hit. But the second is known as the wise man, for when “…the rain descended, and the floods came, and the winds blew, and beat upon that house…it fell not: for it was founded upon a rock.”

We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock. We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.

It’s a foundation built upon five pillars that will grow our economy and make this new century another American century: new rules for Wall Street that will reward drive and innovation; new investments in education that will make our workforce more skilled and competitive; new investments in renewable energy and technology that will create new jobs and industries; new investments in health care that will cut costs for families and businesses; and new savings in our federal budget that will bring down the debt for future generations. That is the new foundation we must build. That must be our future – and my Administration’s policies are designed to achieve that future.
The first step we will take to build this foundation is to reform the outdated rules and regulations that allowed this crisis to happen in the first place. It is time to lay down tough new rules of the road for Wall Street to ensure that we never find ourselves here again. Rules that punish short-cuts and abuse. Rules that tie someone’s pay to their actual job performance. Rules that protect typical American families when they buy a home, get a credit card or invest in a 401k. We have already begun to work with Congress to shape this new regulatory framework – and I expect a bill to arrive on my desk for signature before the year is out.

The second pillar of this new foundation is an education system that finally prepares our workers for a 21st century economy. In the 20th century, the GI Bill sent a generation to college, and for decades, we led the world in education and economic growth. But in this new economy, we trail the world’s leaders in graduation rates and achievement. That is why we have set a goal that will greatly enhance our ability to compete for the high-wage, high-tech jobs of the 21st century: by 2020, America will once more have the highest proportion of college graduates in the world.

To meet that goal, we have already dramatically expanded early childhood education. We are investing in innovative programs that have proven to help schools meet high standards and close achievement gaps. We are creating new rewards tied to teacher performance and new pathways for advancement. I have asked every American to commit to at least one year or more of higher education or career training, and we have provided tax credits to make a college education more affordable for every American.

The third pillar of this new foundation is to harness the renewable energy that can create millions of new jobs and new industries. We all know that the country that harnesses this energy will lead the 21st century. Yet we have allowed other countries to outpace us on this race to the future.

Well, I do not accept a future where the jobs and industries of tomorrow take root beyond our borders. It is time for America to lead again.

The investments we made in the Recovery Act will double this nation’s supply of renewable energy in the next three years. And we are putting Americans to work making our homes and buildings more efficient so that we can save billions on our energy bills and grow our economy at the same time.

But the only way to truly spark this transformation is through a gradual, market-based cap on carbon pollution, so that clean energy is the profitable kind of energy. Some have argued that we shouldn’t attempt such a transition until the economy recovers, and they are right that we have to take the costs of transition into account. But we can no longer delay putting a framework for a clean energy economy in place. If businesses and entrepreneurs know today that we are closing this carbon pollution loophole, they will start investing in clean energy now. And pretty soon, we’ll see more companies constructing solar panels, and workers building wind turbines, and car companies manufacturing fuel-efficient cars. Investors will put some money into a new energy technology, and a small business will open to start selling it. That’s how we can grow this economy, enhance our security, and protect our planet at the same time.

The fourth pillar of the new foundation is a 21st century health care system where families, businesses, and government budgets aren’t dragged down by skyrocketing insurance premiums.

One and a half million Americans could lose their homes this year just because of a medical crisis. Major American corporations are struggling to compete with their foreign counterparts, and small businesses are closing their doors. We cannot allow the cost of health care to strangle our economy any longer.

That’s why our Recovery Act will invest in electronic health records with strict privacy standards that will save money and lives. We’ve also made the largest investment ever in preventive care, because that is one of the best ways to keep costs under control. And included in the budgets that just passed Congress is an historic commitment to reform that will finally make quality health care affordable for every American. So I look forward to working with both parties in Congress to make this reform a reality in the coming months.

Fixing our health care system will certainly require resources, but in my budget, we’ve made a commitment to fully pay for reform without increasing the deficit, and we’ve identified specific savings that will make the health care system more efficient and reduce costs for us all.

In fact, we have undertaken an unprecedented effort to find this kind of savings in every corner of the budget, because the final pillar in building our new foundation is restoring fiscal discipline once this economy recovers. Already, we have identified two trillion dollars in deficit-reductions over the next decade. We have announced procurement reform that will greatly reduce no-bid contracts and save the government $40 billion. Secretary Gates recently announced a courageous set of reforms that go right at the hundreds of billions of dollars in waste and cost overruns that have bloated our defense budget without making America safer. We will end education programs that don’t work, and root out waste, fraud, and abuse in our Medicare program.

Altogether, this budget will reduce discretionary spending for domestic programs as share of the economy by more than 10% over the next decade to the lowest level since we began keeping records nearly half a century ago. And as we continue to go through the federal budget line by line, we will be announcing additional savings, secured by eliminating and consolidating programs we don’t need so that we can make room for the things we do need.

Now, I realize that for some, this isn’t enough. I know there is a criticism out there that my administration has somehow been spending with reckless abandon, pushing a liberal social agenda while mortgaging our children’s future.

Well let me make three points.

First, as I said earlier, the worst thing that we could do in a recession this severe is to try to cut government spending at the same time as families and businesses around the world are cutting back on their spending. So as serious as our deficit and debt problems are – and they are very serious – major efforts to deal with them have to focus on the medium and long-term budget picture.

Second, in tackling the deficit issue, we simply cannot sacrifice the long-term investments that we so desperately need to generate long-term prosperity. Just as a cash-strapped family may cut back on luxuries but will insist on spending money to get their children through college, so we as a country have to make current choices with an eye on the future. If we don’t invest now in renewable energy or a skilled workforce or a more affordable health care system, this economy simply won’t grow at the pace it needs to in two or five or ten years down the road. If we don’t lay this new foundation, it won’t be long before we are right back where we are today. And I can assure you that chronically slow growth will not help our long-term budget situation.

Third, the problem with our deficit and debt is not new. It has been building dramatically over the past eight years, largely because big tax cuts combined with increased spending on two wars and the increased costs of government health care programs. This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as Baby Boomers age, and will in fact lead us down an unsustainable path. But let’s not kid ourselves and suggest that we can do it by trimming a few earmarks or cutting the budget for the National Endowment for the Arts. Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year. So if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform.

Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid. Make no mistake: health care reform is entitlement reform. That’s not just my opinion – that was the conclusion of a wide range of participants at the Fiscal Responsibility Summit we held at the White House in February, and that’s one of the reasons why I firmly believe we need to get health care reform done this year.

Once we tackle rising health care costs, we must also work to put Social Security on firmer footing. It is time for both parties to come together and find a way to keep the promise of a sound retirement for future generations. And we should restore a sense of fairness and balance to our tax code by shutting down corporate loopholes and ensuring that everyone pays what they owe.

All of these efforts will require tough choices and compromises. But the difficulties can’t serve as an excuse for inaction. Not anymore.

This brings up one final point I’d like to make today. I’ve talked a lot about the fundamental weakness in our economy that led us to this day of reckoning. But we also arrived here because of a fundamental weakness in our political system.

For too long, too many in Washington put off hard decisions for some other time on some other day. There’s been a tendency to score political points instead of rolling up sleeves to solve real problems. There is also an impatience that characterizes this town – an attention span that has only grown shorter with the twenty-four hour news cycle, and insists on instant gratification in the form of immediate results or higher poll numbers. When a crisis hits, there’s all too often a lurch from shock to trance, with everyone responding to the tempest of the moment until the furor has died away and the media coverage has moved on, instead of confronting the major challenges that will shape our future in a sustained and focused way.

This can’t be one of those times. The challenges are too great. The stakes are too high. I know how difficult it is for Members of Congress in both parties to grapple with some of the big decisions we face right now. It’s more than most congresses and most presidents have to deal with in a lifetime.

But we have been called to govern in extraordinary times. And that requires an extraordinary sense of responsibility – to ourselves, to the men and women who sent us here, and to the many generations whose lives will be affected for good or for ill because of what we do here.

There is no doubt that times are still tough. By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope. And beyond that, way off in the distance, we can see a vision of an America’s future that is far different than our troubled economic past. It’s an America teeming with new industry and commerce; humming with new energy and discoveries that light the world once more. A place where anyone from anywhere with a good idea or the will to work can live the dream they’ve heard so much about.

It is that house upon the rock. Proud, sturdy, and unwavering in the face of the greatest storm. We will not finish it in one year or even many, but if we use this moment to lay that new foundation; if we come together and begin the hard work of rebuilding; if we persist and persevere against the disappointments and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live on in our time. Thank you, God Bless you, and may God Bless the United States of America.

The Trillion Dollar Quote

Speaker last night from FEE.org: Is stealing a dollar right? Does doing it a trillion times somehow make it right?

The Founding Fathers' Economic Bailout

We need to look at the Founding Fathers and what they had to say about a National Bank, Bailouts, Taxes..."The Founding Fathers' Economic Bailout"

Special Webcast Tonight - Get Ready For TEA Party Day

In case you wanted something else to watch tonight related to Economics:

Special Webcast Tonight - Get Ready For TEA Party Day

With Donald E. Wildmon, Chairman, American Family Association

Tonight – Monday, April 13, at 8 p.m. Central

To watch, go to AFA.net and click on the "Get Ready for TEA Party Day" banner.

Webcast will be open for questions via phone, e-mail and live blog.

AFA sponsored TEA Party rallies are now scheduled in 1,983 cities across America.

Plus, a very important special guest - Thomas Paine!

Sincerely,

Don
Donald E. Wildmon,
Founder and Chairman
American Family Association

Quotes from the Webcast for Tea Party signs:
"Liberty, the only stimulus I need." or child holding sign "Pay your own bills."

Capitalism vs Socialism?

How would you vote in poll of whether Capitalism is a better system or Socialism is? Apparently, 1000 American adults polled last week had some interesting answers:

Adults 40 and older were strongly in favor of Capitalism, while those under 30 were fairly evenly divided between the two. (I think that would have to do with those of us 40 and over having a better understanding of the history of Socialism!)

Republicans favored Capitalism over Socialism more than 10 to 1...While Democrats split almost evenly (39% for Capitalism and 30% for Socialism...I guess 31% couldn't decide?)


I think I was most surprised to see that investors only favored Capitalism over Socialism 5 to 1. (I'm not sure how 20% of them think investments would work under Socialism...)

April 15 Tea Party

Reminder, if you're joining us for the Tea Party downtown, please be here by 11:30.

Otherwise, come 30 minutes late, one day only!, for Economics class.

See you at 11:30 or 1:30. (Or 10 if you're coming for Government Club!)

“Lessons From the Great Depression” Webcast Monday

I hope to discuss this in class on Wednesday afternoon. Recommend that anyone who is available Monday evening, watch this:

View a simulcast on Monday of Mackinac Center President Emeritus Lawrence W. Reed speaking at Central Michigan University on “Lessons From the Great Depression”

To view and listen, click:
http://www.michiganliveevents.com/?p=240

DATE:
Monday, April 13, 2009

TIME:
7:30 p.m. EST (6:30 p.m. for us)

Live Webcast Q&A Session to Follow

Lawrence Reed's Essay on the Great Depression can be read online or ordered from FEE.

Pres. Obama and the Auto Industry

Has President Obama gotten tougher with the Big 3?: "Frustrated Americans cheer Obama's tough auto moves"

"Experts called it potentially the most significant presidential intervention in the private sector since Harry Truman tried to seize the steel industry during the Korean War in 1952, only to be rebuffed by the Supreme Court." I agree with the tone of this article: This is nothing to cheer about! We are now nationalizing one of the biggest industries in the country. Our government is not doing a good job handling the portions of the economy it is already in charge of -- social security, the budget...Now they want to add Wall Street, the Auto Industry, energy...When will it ever end?

No, the Auto Industry is not too big to fail -- let's try bankruptcy and see how that works!

Geithner Seems to Endorse Dollar Alternative

“An unguarded comment by Treasury Secretary Timothy F. Geithner on Wednesday set off a sudden drop in the dollar and contributed to a chain of market-rocking events that included a setback in the stock market and a sharp uptick in interest rates. Mr. Geithner appeared to lend his support to a proposal by China’s central bank governor to replace the dollar as the world’s reserve currency with a basket of currencies that would be managed by the International Monetary Fund. In an appearance before the Council on Foreign Relations in New York on Wednesday morning, Mr. Geithner raised eyebrows by saying that ‘we’re actually quite open to that,’ only a day after both he and President Obama had vehemently rejected the idea and affirmed their strong support for the U.S. currency.” (Washington Times, Thursday, March 26)

Needless to say, the markets reacted badly to Geithner's comment....One step closer to a one-world government...

Notes from March 25 Class

We talked about Gambling today (see previous post) and A.I.G. bonuses (and the unconstitutional 90% tax that's been suggested for those). We should have looked at some great letters to the editor about the bonuses.

We also looked at what 1 trillion dollars really looks like. And where might we find a trillion dollars? From what we could find, Ft. Knox only has $110 Billion in gold. We missed the Federal Reserve Bank of New York -- which has over $203 Billion (mostly owned by other countries). Together those two places don't come close to a Trillion.

Gambling in Alabama

I received an interesting advertisement in the mail yesterday: "The only thing worse than losing jobs...is losing jobs to Mississippi." I was not entirely surprised to open it up and discover that it was a promotion of the "Sweet Home Alabama plan" I had just heard about on the radio (SB471).

It has such positive sounding statements as "It will limit, regulate and tax legal bingo and eliminate illegal gaming machines." and "...provide our state with the money we need to improve our education system and Medicaid by keeping our tourism dollars here at home." All in all, it very cleverly disguised whether it was for or against gambling in Alabama, ending with a plea for me to call my Senator and ask him to support the Sweet Home Alabama plan. After doing some research, I do plan to call my state Senator -- but I will be asking him to vote AGAINST the plan.

One of the first sites my research took me to was "The Alabama Citizens Action Program" where I found a video of Governor Riley discussing "electronic bingo". I hope to show the video in class today. It also lead me to a site to "Stop Predatory Gambling". There they make the very true statements: "Predatory gambling is the practice of using gambling to prey on human weakness for profit and it has become the preferred method for government to raise money for public services. The gambling trade and our government have been active partners in turning millions of Americans away from a nation of small savers into a nation of habitual bettors, trapping a majority in a cycle of debt and poverty."

Article 4, Section 65 of the Alabama Constitution:
"The legislature shall have no power to authorize lotteries or gift enterprises for any purposes, and shall pass laws to prohibit the sale in this state of lottery or gift enterprise tickets, or tickets in any scheme in the nature of a lottery."

There was a unanimous ruling by Alabama Court of Criminal Appeals (authored by now Chief Justice Sue Bell Cobb) ruling in Foster v. State (1997): "'Bingo' used in a local constitutional amendment means nothing more than the 'ordinary game of bingo' and as such are a narrow exception to the prohibition of lotteries in the Alabama Constitution."

Ruling in 2004 in State ex rel Tyson v Ted's Game Enterprises:
"We hold that Article 4, Section 65 means what it says, and prohibits the legislature from authorizing lotteries or gift enterprises that involve games or devices in which chance predominates the outcome of the game, even if 'some skill' is involved."

****

The website promoting gambling in Alabama: http://www.friendsofalabama.com

Field Trip Scheduled for April 15

If any of my Economic students and/or Government Club students would like to join us, we're heading downtown Huntsville for the Tax Day Tea Party.

The event is scheduled from 12 - 1 at the VBC parking lot (Lot K) across the street from the Post Office.

The plan for the day is to end Government Club 30 minutes early, and head downtown at 11:30. Unless the event runs really overtime, I think we should be back at CLC by 1:30, for the last hour of Economics class.

So...If you're only coming for Govt Club that day -- it will only run from 10 - 11:30.
If you're only coming for Economics -- it will be (hopefully) from 1:30 - 2:30 that day.

If you would like to join us for the trip downtown -- either come for Govt Club and then join us, or be at CLC by 11:30. I have room for 5 extra students in my van -- other parents are obviously welcome to join us as well. (So, please RSVP if you are joining us either way.)

Notes from March 18 Class

Well, class got canceled at the last minute today because of "spring break". Oh well, I found some neat resources that I'll have to save for upcoming weeks. There is an endless supply of great economics resources at www.fee.org

Last week some of my students and I attended a one-day FEE Seminar for Homeschool Students in Birmingham. It was fantastic. I highly recommend it if you get a chance to attend one. One of the movie clips that we saw there was an interview that John Stossel did on sweat shops. I found a link to it on FEE's website. It is excellent!

While looking over the resources there, I followed a link to John Stossel's website. He has even more economics resources available there -- both his own, and links to many others. I don't think I'll be running out of materials anytime soon!

Notes from March 11 Class

Last week we read and discussed the delightful economics story, I Pencil, downloaded from one of my favorite economics websites: Foundation for Economic Education. It is hard to believe the story was written 50 years ago; it could just as easily have been written today. It is the story of the making of a pencil -- and explains very well how none of us could even begin to understand all of the processes and all of the different efforts that go into making something as simple as a pencil. A great example of the free market at work!

We also discussed "The 7 Fallacies of Economics", also from the FEE website. Here Mr. Reed does a great job of explaining what economics isn't. He gives a great explanation of these 7 fallacies:
1. The fallacy of collective terms.
2. The fallacy of composition.
3. The fallacy of “money is wealth.”
4. The fallacy of production for its own sake.
5. The fallacy of the “free lunch.”
6. The fallacy of the short run.
7. The fallacy of economics by coercion.
We didn't spend as much time discussing the first 2, but the last 5 are evident all around us! I think we will be referring back to those regularly.

Introduction for Economics Blog

I've been looking for an efficient way to communicate with my Economics class students and parents -- an easy way to share what we've been covering in class, and links to some of the interesting articles and other resources we've used in class and/or talked about.

After 1 1/2 years of teaching economics, welcome to my first attempt at that. Anyone else is welcome to join us in this "economics discussion" here, but that will be my main focus -- at least as I see it now.

For my students, it should go without saying that I believe in the free market and limited government. I think much of the economic trouble we are in now has come from the intervention of the government, not from the failure of the free market. That position will, of course, be evident in the posts I put here, and in the resources I reference!