Friday Observations

By Doug Magill

We thought we would share a few things with you to ponder for the weekend. 

That didn’t take long:  Last week the constitutionally-questionable head of the new Consumer Financial Protection Bureau, Richard Cordray, told Congress he plans to increase the agency’s budget by 26% next year to $448 million.  He didn’t bother to explain what the increase was for.  But, according to the way the Dodd-Frank bill was drafted he doesn’t have to.  He can just say, “give”, and the Federal Reserve (which the CFPB reports to) has to give him the money.  Life is good when you are an unaccountable czar for an agency with broad powers and cannot be removed for cause.  Members of Congress are less than thrilled.  Repeated searches of the Constitution did not turn up any such powers granted to the Executive branch.  But, such is the world of Obama where legality is not a consideration relative to his actions.

Bricks in the house:  In what surely must be an understatement, Tesla Motors describes one of its vehicles with the battery totally discharged as a “brick”.  As in, it can’t be started, can’t be pushed and can’t be recharged.  Oh, and it is not under warranty, not be covered by insurance, and costs about $40,000 (labor and parts) to be repaired.  Once you get it back to Tesla.  According to the folks at Jalopnik ( since the systems in the car always draw some load, the key question is: how long can an owner leave the car without charging it before it becomes a really cool-looking lawn ornament?  The owner’s manual claims about 11 weeks, and maybe one week if it is really drawn down.   Of course that gets worse as the battery pack ages.   Surely an incentive to take short vacations if you want to drive your Tesla to the airport.  For the Roadster it only takes a week to draw the battery down 50%.    Yep, this also applies to their newest model – the Model S.  More Obama green-energy lunacy.  We have invested $465 million in this company whose board members happen to be large contributors to Obama.  And, of course, it has not yet been profitable.

Those crazy numbers:  John Ransom, the Finance Editor for Townhall posted an article about the January unemployment numbers that have all of the liberals panting, pointing and going “see, it’s finally working!”  It seems that the wonks over at the Bureau of Labor Statistics have been tinkering with the statistics, and they don’t mean what you think they mean.  That 8.3 percent number in January doesn’t include some things – like the number of people that have dropped out of the labor force because they aren’t looking any more.  If one looks at the historical average labor participation rate (65.8 percent) versus the reported rate (63.7) and performs their own calculation, it looks like the BLS is missing about 5 million people. That gives us a real unemployment rate of 11.5 percent.  The difference between the two rates is at a 30-year high.   The labor participation rate has dropped precipitously since January, 2007- when the democrats took over Congress (you can’t make this stuff up, folks).  If the participation rate keeps dropping as it has been, we can magically have zero unemployment at around 58%.  We need to add 250,000 jobs per month just to cover changes due to demographics.  So, adding 243,000 in January doesn’t begin to start replacing the jobs that have been lost.  Not only does this reduce overall GDP, it hurts tax collection.  And whatever nonsense Obama comes up with about his definition of a fair share of taxation – it won’t cover this.  Ever.  And it works out to about $20 trillion of GDP over ten years.    Even a statistician knows that is a lot for the economy to lose.

But it’s easier to blame him: Those on the left love to come up with tortured economic theories to claim that the tax cuts enacted under President Bush are to blame for the current state of the economy.  But, both the Organization for Economic Co-operation and Development and the Congressional Budget Office have determined that the Bush tax cuts resulted in a more progressive tax code.  Economic inequality is a now time-worn excuse for not looking at the real issues: education, marriage,  regulation and the horrifying prospect of enormous tax increases due to Obamacare and out-of-control government spending.

 The snarl in the upper lip:  David Cameron took over as British Prime Minister with aggressive plans to cut spending and increase taxes to begin the painful process of putting the British budget into balance.  Unfortunately, the H.M.S. Britannia is now listing due to the unruly behavior of its upper classes.  They are responding – as people are wont to do – to negative incentives in rational ways.  The outgoing labor government put in place a 50% tax rate and Cameron’s boys kept it, expecting an increase in revenue.  The first annual reporting period under the new rates was in January and overall revenue was down about 5 percent compare to the old rate of 40 percent.  There were the same arguments as the current economic illiterates in the White House about fair share and bearing more of the burden, etc.  People with money generally don’t respond to rhetoric.  They respond to incentives.  And, negative incentives make people with enough money pay advisers to find loopholes, or shelters, or other countries to put their money into.   Public policy based on spite and envy causes problems and never leads to solutions.  It’s too bad the White House doesn’t pay attention to England.  They will soon relearn hard lessons about human behavior.

Doug Magill is a consultant, freelance writer and voice-over talent.  He can be reached at




  1. Bob Magill Jr. says:

    great economic examples of the tragic hubris and idiocy of the current adminiistration. I am printing out to show to others.

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