A list of factors that separate the American economy from anything resembling a free market. The article is titled, Obama’s Economy, the Excuses Begin:

The war on fossil fuels, which has limited job growth in energy-related industries and caused prices to be higher than they should be for everyone else.

Cronyism on steroids.

Trillion-dollar deficit spending.

New bureaucracies like Dodd-Frank’s Consumer Financial Bureau, which Congress can’t legally touch.

Sarbanes Oxley, a relic of the 2001 Enron debacle which the administration has done nothing to reform, and which has closed off the going-public option for many companies which would have done so before ‘Sarbox’ became law.

Unemployment and other government benefits which make remaining unemployed relatively attractive, or a least a more tolerable circumstance than it should be, and for a longer period of time than should be necessary.

Onerous labor laws and regulations. I’ve spoken with many entrepreneurs in the past year, some of whom have had employees in the past. A vast majority of them have told me that they won’t hire any new employees in the current regulatory environment, even if the economy improves. Most start-up entrepreneurs likely feel the same way.

Trade policy, a problem which spans the past four administrations but is being most acutely felt now.

Federal, state, and local tax increases.

Last but certainly not least, Obamacare, especially its career-killing definition of a full-time employee as anyone who works 30 or more hours per week, and the destructive impact it will have in slowing medical innovation and research to a crawl.

Even with all that stimulus, France is now totally bankrupt according to its labour minister. From The Telegraph in the UK via Instapundit:

Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.

‘There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.’

The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.

Why saying what he said is considered a “gaffe” is beyond me since unless there is a bit of reality added to the actions being taken there is no reason for anyone to accept the need for cuts to spending and the deficit. But Keynesian theory or not, this is what people are actually doing and it’s not as if the French economy were overheating.

Icebergs on the horizon. Full speed ahead. This is Niles Gardner looking at welfare spending in the US:

I have just read a staggering report written by my colleagues Patrick D. Tyrell and William W. Beach for the Heritage Foundation’s Center for Data Analysis (I direct the Margaret Thatcher Centre for Freedom at Heritage.) It is a real eye-opener for anyone who cares about America’s future as the world’s superpower, on either side of the Atlantic. Ironically, Britain, through the tremendous determination of Iain Duncan Smith and his team at the Department of Work and Pensions, is starting to roll back the welfare state, precisely at the same time the current US administration is expanding it.

The United States isn’t just gliding towards a continental European-style future of vast welfare systems, economic decline, and massive debts – it is accelerating towards it at full speed. Or as Acton Institute research director Samuel Gregg puts it in his excellent new book published today by Encounter, America is already ‘becoming Europe,’ with the United States moving far closer to a European-style welfare state than most Americans realize.

How they going to find out? From The New York Times? CBNBABSC? The Telegraph in London? Suppose they knew, would they know enough about what causes what to care? And suppose they did know and they do care, what would they do about it? Refuse to take the money they can get just for asking? It’s all lobster trap from here on in.

Except there was this to sort of remind us that there are some who know better and that good economics does work. Why it works no one can any longer tell you, but at least it does work. One day the theory will catch up with reality, but not just yet.

The state comptroller estimates that Texas will generate $96.2 billion in general revenue in 2014-2015, a major jump in tax collection from the last two-year budget cycle.

Republican Comptroller Susan Combs on Monday was releasing her biennial revenue estimate. The crucial number sets the limit on what lawmakers can spend for 2014 and 2015, when Democrats and teachers hope to reverse, or at least bandage, deep cuts in the current budget that included $5.4 billion slashed from public education.

Combs reported Monday that the state collected $8.8 billion more revenue during the current 2012-2013 revenue cycle than she initially forecast, giving lawmakers breathing room in settling a $5.2 billion deficit in the current budget. . . .

Texas’ economy is humming again after lawmakers in 2011 wrote a cut-to-the-bone budget as the nation lurched out of the Great Recession.

At the time, unemployment in the state was the highest in a decade and the Legislature faced a $27 billion shortfall. But unemployment now is at a four-year low of 6.2 percent, sales tax receipts are skyrocketing and money is pouring into state coffers behind a new energy boom.

Got that. Public spending went down and tax revenue from the private sector is booming. Can someone help me here? Any explanation? Must have a look at my copy of Mankiw to see what it has to say.

Fancy that, there really are people in high places who think Krugman would have made a fine Secretary of the Treasury, not just columnists at The Grauniad. But as he puts it, why should he take a lower less influential job than the one he has already, a pontificating guru with no responsibility and where everything he says comes out right because he tells you so. In his words quoted via The Weekly Standard:

‘Yes, I’ve heard about the notion that I should be nominated as Treasury Secretary. I’m flattered, but it really is a bad idea, writes Krugman.

The first reason Krugman lists is, he admits, that he’s ‘indeed the World’s Worst Administrator — and that does matter.’

The second reason: ‘Oh, and there’s not a chance that I would be confirmed.’

But the foremost reason, according to the guy who was never offered the job in the first place, ‘is that it would mean taking me out of a quasi-official job that I believe I’m good at and putting me into one I’d be bad at.’

And, by his own admission, Krugman’s better at playing the ‘outside’ game than the inside one. He writes, ‘The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?’

Working for Obama, rather than the Times, would be a step down. ‘By my reckoning, then, an administration job, no matter how senior, would actually reduce my influence, leaving me unable to say publicly what I really think and all too probably finding myself unable to make headway in internal debates,’ writes Krugman.

Krugman, a metonym for all that’s wrong with economics today, remains at his post. There really could not have been a better way to discredit Keynesian economics although, having observed the world for the past four years, there is nothing at all that could cause Y=C+I+G to disappear from our texts. Why people want to balance budgets in such uncertain times as ours if this little equation is valid is beyond me. But we see (a) that additional deficit financed public spending wrecks an economy and (b) that things get better as budgets are brought into line. How this equation helps to explain the way the world actually behaves no one really knows (they just show it by moving lines on a graph), but we will keep teaching it from now until the crack of doom.

Look Obama won. The fiscal cliff has been averted, taxes were upped a bit, some reductions in spending took place, the debt and deficits will keep on rising and everything can continue as before. And like I say, Obama won so the economy is all his. Whatever happens from now on in belongs to the Democrats. Good luck to them.

The front page story in The Australian is Global markets rocket on US fiscal cliff deal. Those in the know must all be really pleased with the outcome, something like a Neville Chamberlain peace-in-our-time moment. Of course there’s this:

While investors were happy to celebrate the compromise, many also expressed disappointment over the reduced scope of the deal, which props open the door for further rancor in the coming months.

Some investors already were turning their focus to looming congressional fights over the budget, pre-programmed spending cuts and the debt ceiling, which limits the US government’s ability to borrow.

So it’s not all beer and skittles, at least not if you’re a Democrat. It never was for the Republicans.

There are the spending cuts which are almost unambiguously a plus but amongst which will be cuts to defence that will take the US expenditure to the same proportion of GDP as it was in 1916 or so I understand. There is, of course, a much larger GDP for defence to be a proportion of, but it doesn’t seem part of an orderly international future, but that’s just me. But at least most of the Bush tax cuts are legislated in and can’t be so easily removed and there are some reductions in expenditure.

Meanwhile all of the problems that existed before continue. With Obamacare suddenly to enter everyone’s calculations, the US is rapidly heading for a kind of third world elites-and-serfs kind of future. You are in the government, good; you work for the government, good; you are on a direct feed from government, good. These are the new elite. Everyone else will struggle. Upwards mobility through one’s own hard work and effort, that will be the toughest road of all, when in the past it was the American way and many many took that route. It is a roadway that has, for the time being, been turned into a single lane pathway. When it will return to how it was is hard for me to say.

But the one moment of these fiscal cliff negotiations I most enjoyed was when the House Majority Leader, John Boehner, told the Senate Majority Leader, Harry Reid, to “go fxxx yourself”. For that alone, I would keep him as the House Majority Leader. There may be something there for Tony to think about the next time Julia calls him a misogynist or whatever.