Apple growers in Washington State — who produce about half of the country's apples, about 15 billion — have a bumper crop this year, among the best in the state's history. Yet many of these apples may never make it to market, because growers cannot find enough workers to pick them.
Boy, but it was a Red October! Polls conducted throughout the month just ended confirm that Karl Marx has won the hearts and minds of the American people. Two of his biggest fans, the New York Times and CBS News, collaborated to find 66% of Americans agreeing that “the money and wealth in this country should be more evenly distributed.”
With yields on Italy’s 10-year government debt rising sharply higher and beyond the seven-percent ceiling deemed unsustainable, Italy is running out of options in finding buyers for its debt. It is also running out of options as a sovereign nation. Jan Randolph, head of sovereign debt risk at IHS Global Insight, said, “Italy will not be out of the heat of bond markets until a solid and stable government actually implements austerity and undertakes reforms with strong credible leadership.” That may be asking the impossible.
As with the constitutional struggle that was stirred up by the passage of ObamaCare, the President’s latest pet proposal is brightening the battle lines between friends of federal power and those who advocate the protection of the sovereignty of states. The American Jobs Act contains several key provisions that apparently push the boundary between state and federal power back, expanding Washington’s sphere of authority.
Only days after Freddie Mac sought a $6-billion cash lifeline from the Treasury Department, Fannie Mae is now chasing a $7.8-billion check in federal aid. Attributing its steep $5.1-billion third-quarter deficit to losses on derivatives and the persistent failings of the housing market, the government-controlled firm is furthering its heedless course to fiscal Armageddon — while draining the bank accounts of American taxpayers all along the way.
Fannie Mae and its cohort Freddie Mac were seized by the federal government during the financial crisis as company executives pleaded that severe losses on subprime mortgages were foreboding their insolvency. Considering their vast presence in housing finance, owning or guaranteeing roughly half of all outstanding mortgages (including other federal agencies, they have backed about 90 percent of new mortgages over the past year), the government has pledged an endless stream of funds to the two government-sponsored enterprises through the end of 2012, which has left taxpayers on the hook for a combined total of $169 billion.
The general functions of Fannie and Freddie are to purchase home loans from banks and lenders, package the loans with bonds — while guaranteeing them against default — and sell them to investors inside and outside of the United States. But between 2005 and 2008, Fannie and Freddie carelessly purchased a heap of bad mortgages, which nearly buried the two companies into foreclosure themselves.
The downward spiral of the Greek economy — and now likely that of Italy — has led to calls for the European Union to step in and prevent a total collapse. Portugal, Ireland, and Spain — the other three of the so-called PIIGS EU member-states — are enduring their own woes, such as downgrades of sovereign debt and corresponding jumps in the interest rates on government bonds. The cumulative effect — particularly if Italy does suffer a crisis serious enough to reduce its national credit rating to junk-bond status — will ripple throughout Europe and across the Atlantic.
Analysts have noted that continental Europeans would do well to copy the example of tiny Iceland, in how it weathered a financial crisis three years ago which stunned the placid island nation. In October 2008, its binge of bank speculation had reached a point at which the assets of the three largest Icelandic banks — Kaupthing Bank, Landsbanki, and Glitnir Bank — were 11 times greater than the entire $14 billion GDP of the nation. All three big banks defaulted on $62 billion of foreign debt, and then went belly up, not bailed out by Icelanders. Today the country's economists view that bankruptcy as a blessing in disguise. Icelandic bank analyst Jon Bjarki Bentsson put it this way:
The lesson that could be learned from Iceland's way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible. Even if our way of dealing with the crisis was not by choice but due to the inability of the government to support the banks back in 2008 due to their size relative to the economy, this has turned out relatively well for us.
Voters in Ohio defeated a law on Tuesday that would have reined in the collective bargaining privileges of government employees, granting a rare victory to “Big Labor” after a series of set-backs in states across the nation.
Union bosses celebrated the news, claiming the win represented a resurgence of organized labor and an important indicator for the 2012 elections. And Democrats, whose campaigns receive significant funding and volunteers from public-worker unions, applauded the outcome as well.
"Hopefully, state legislators and governors across the country will look to Ohio and see that they have galvanized us and we're an organized force that has to be dealt with," said Secretary-Treasurer Lee Saunders of the American Federation of State, County and Municipal Employees union. Big Labor, he added, plans to use the Ohio win "as a springboard to continue into 2012."
The Democratic National Committee — campaign coffers stuffed with government-employee-union dues — issued a statement filled with class-warfare rhetoric. It applauded Ohio’s rejection of a "blatantly partisan attempt to lay the blame for our economy on middle class Americans, while letting the wealthiest and special interests off the hook and not asking them to pay their fair share."
As the U.S. economy suspends in a prolonged, comatose state, high joblessness and uncertainty among young Americans have incited youth discontent with the federal government’s fiscal and economic blunders. A new poll conducted by Generation Opportunity, a non-profit organization that educates young Americans on the nation’s current political and economic affairs, surveyed individuals between the ages of 18 and 29 on issues such as government spending, national security, and Washington leadership.
The latest U.S. jobs report positioned October as the 32nd consecutive month that unemployment has hovered near or above the 9 percent mark. However, the current unemployment rate does not accurately reflect the percentage of young Americans still struggling to find work. For instance, at the end of August, the U.S. Bureau of Labor Statistics reported a youth unemployment rate (ages 16 to 24) of 18.1 percent, about twice as high as the overall unemployment rate.
"Every day, at a very personal level, young adults are being negatively impacted by the poor economy," said Paul Conway, Generation Opportunity president and former Chief of Staff of the U.S. Labor Department. "The unemployment numbers are particularly concerning when you consider that 43% of young adults are not satisfied with their current level of employment."
Many Wall Street occupiers are echoing the Communist Party USA's call to "Save the nation! Tax corporations! Tax the rich!" There are other Americans, on both the left and the right — for example, President Barack Obama and House Speaker John Boehner — who call for reductions in corporate taxes. But the University of California, Berkeley's pretend economist Robert Reich disagrees, saying, "The economy needs two whopping corporate tax cuts right now as much as someone with a serious heart condition needs Botox." Let's look at corporate taxes and ask, "Who pays them?"
Virginia has a car tax. Does the car pay the tax? In most political jurisdictions, there's a property tax. Does property pay the tax? You say: "Williams, that's lunacy. Neither a car nor property pays taxes. Only flesh-and-blood people pay taxes!" What about a corporation? As it turns out, a corporation is an artificial creation of the legal system and, as such, a legal fiction. A corporation is not a person and therefore cannot pay taxes. When tax is levied on a corporation, who pays it?
There's an entire subject area in economics, known as tax incidence, that investigates who bears the burden of a tax. It turns out that the burden of a tax is not necessarily borne by the party or entity upon whom it is levied. For example, if a sales tax is levied on a cigarette retailer, the retailer does not bear the full burden of the tax. Part of it will be shifted forward to customers in the form of higher product prices. The exact amount of the shifting depends upon market supply and demand conditions.
With Greece’s Prime Minister George Papandreou agreeing to step down in order to secure more bailout funds from the ECB, attention turned immediately to Italy’s financial problems that dwarf those of Greece’s. The Greek PM’s decision now clears the way for an interim government to agree formally to the new austerity measures demanded by the European Union as a condition of receiving additional financing by the end of the month. Those funds are needed to pay Greece’s bills through January 2012.
The bond market shifted its attention to Italy on Monday, driving interest rates on its 10-year bond to a record-high 6.66 percent, the highest since the country entered the union in 1999 and perilously close to the “bailout” levels reached before Ireland and Portugal were forced to ask for help from the European Central Bank. Said David Ader, head of government bond strategy at CRT Capital Group, “We’ve seen one European bank and one U.S. brokerage fail. We know there are strains for French banks. We [were] wondering how long it [would] be before Greek default worries spread to Italy and Spain. In a situation like that, money managers are going to decide simply to take their risk down.” The resulting sell-off in the bond market flowed over to the Euro as well, as it came down from its Greek-euphoria highs of last week by nearly 3 percent, and it could lose 6 percent by the end of the year according to the CEO of Intermarket Strategy in London, Ashraf Laidi.