I don't usually attack specific blogs, but it is rare to run across a post which gets absolutely everything wrong, so I feel the need to criticize. However, I do not like to criticize by name, so I will not direct readers to it. Let me just say that it is a post on Townhall, and that from his more recent posts, it appears he is an Obama fan.

The first paragraph, being just a statement of company losses from several large companies, is unobjectionable.

In case one missed the news of the week, it is as follows:  Magazine publishers sent reeling in first quarter; Wachovia posts $393 million loss; Blockbuster to buy Circuit City, and Delta and Northwest merge creating potential job losses; Retail chains caught in a wave of bankruptcies, and finally Citigroup posting a $5 Billion loss, declaring they will cut 9,000 jobs.

However, the second, which starts his analysis of events, begins to throw errors at us left and right:

Wall Street's response? They finished the week with a 524 point gain. Why not? Lost jobs improve a company’s P&L and balance sheet which investors love. That’s part of the dichotomy of a capitalist country no longer based on work, but wealth. A mere reminder a similar market increase occurred based on a Bear Stearns bailout which secured wealth.

I hear this so often that I often don't even bother to reply, but there is no such things as an economy based on "wealth not work". An economy which simply shuffled possessions back and forth without creating anything would be stagnant, there would be no gain or loss. So this is just an absurd assertion.

For that matter, if the companies are based on "wealth not work", then why do they need labor at all? The fact that the poster is discussing employment suggests that the economy is still based on productive labor, despite the later assertions.

Second, losing employees does not help a company, losing non-productive employees does. Of course, to those who make this complaint most often, there is no such thing as "nonproductive labor". They tend to have the interesting left-wing world view where labor is all noble and capitalists are all fat cats in top hats stomping on the backs of poor, noble workers.

But the truth is that there are laborers whose production does not match the cost of maintaining them and cutting that labor does improve a company's bottom line. And, more importantly, by freeing that labor for other work, it helps the economy as a whole too. If labor is costing more than it produces it needs to be reassigned to more productive use. Or else those laborers may need to be paid a little less. Perhaps their wages were too high for their productive ability. Whatever the case, they clearly were not being used efficiently in their former employment.

Now, the Bear Stearns bailout was a stupid move, and one with which I disagree, but then again I doubt the poster would take this to its logical conclusion and argue that the government should get out of the stock market entirely. I do, but I doubt he would. Instead he seems upset that, rather than simply crippling businesses with regulations, from time to time the government does something to help them out a bit. I too would rather the government not bail out companies, but I would also ask that the governemnt not burden them with regulations either. I am consistent in that regard.

The admonishment of working hard and saving money to become an investor no longer applies. Wages have stagnated and workers fear losing their job. Consumer confidence is disappearing. Costs haven’t stagnated, eating away at salaries and we are now bearing the burden of paying for baby boomers, our own social security in jeopardy. Firms, struggling to find a better balance sheet have terminated defined pension plans and workers now contribute more out of pocket funds towards their retirement, an add on cost.  We have a negative .5% savings rate, which means we officially survive on credit. What happens when that dries up?

What wages have stagnated? There has not yet been a quarter with even zero wage growth, much less negative growth. And even if there had been, it is not a crisis. Constant large wage growth could be the result of real investment and productivity growth, but it could also be the result of inflation. Fast growth is not always a good thing, though the bean counters believe it to be. Growth can be very slow while an economy is healthy, as it was throughout most of the late 19th century. In fact, we saw dropping prices with real economic growth during part of this period, which confuses some economists to no end. The Keynesian theories argue that such a thing is impossible. Yet we had it, and we survived, prospered even.

The numbers he tosses out may be accurate, or may not. I haven't concerned myself with them enough to care. The rate of savings is an aggregate with no real meaning, as some segments of the economy will save others won't. A simple change in income distribution can have massive impact on savings rates, without having any real impact on the economy. Companies can profit from investment, but they also profit from consumption.

Nor is personal savings a good measure. Some people may not save at a given moment as prices are low making it a relatively good time to buy. One example being the housing market until recently. Many people got rich by refusing to save and instead investing in real estate. I would hardly call the millionaires who did so paupers despite their "low savings rate." Personal savings is a statistical artifact which is both too broad and too strict. It is too broad because it lumps everyone together and too strict as it considers only traditional savings. Cash deposits, stocks and bonds are savings, holding gold or buying land is not. That alone should make us wary of putting too much credence in economic indicators.

Finally, social security is failing, and pensions are being cut, mainly as they were excessively generous in the past. But how does either get laid at the feet of Wall Street? Or even the corporations? Social security is a government boondoggle which was destined to fail eventually by its very design. And pensions were made excessively generous thanks to the strength of unions, companies are cutting now because they are facing bankruptcy that even the unions can't talk away.

The “greatest generation” purchased homes that were half of their final salary before retiring. Today if someone buys a modest home for $250,000 somewhere in Timbuktu and earns a salary of $80,000, they will never retire making the same, let alone double the original purchase price of their home.

Where does he get these numbers? That houses cost about 3 years wages seems to be the norm for most of our recent history. When my father earned $30,000 per year, houses were not running $15,000, but about $80,000-$100,000 so I don't get what he is saying here. Or is he upset that if you buy during a housing bubble you don't do as well as someone who bought a house during a price trough? Or that prices may fall before rising again? I don't quite understand his point, but it seems he is decrying the fact that there is a free market in housing and sometimes prices rise and sometimes fall.

Add to the problem the disparity that 90% of wealth is held by 5% of the population, and the fact we no longer produce (10% of workforce is in manufacturing – an all time low) but have become a service economy (easily shopped overseas) and Main Street is getting clobbered.

Again, where does he get these numbers. Wealth distribution is nowhere near what he says. 3/5 of all stock is held by the three middle quintiles of the public, which says that wealth is nowhere near as concentrated as he argues.

Also the wailing about leaving behind heavy industry in favor of technological jobs is as silly as decrying the death of the buggy industry or the fact that labor shifted from farming to industry. The economy changes, what we do most efficiently changes, that is the nature of a growing economy. I thought he wanted our economy to grow? Then why cry about the way that occurs, reallocating resources?

Something will need to be done or prepare for a lollapalooza of a recession, the kind that is a depression for those who lose their jobs.

Admittedly, this came out in late April, before the government admitted their prediction of a recession was premature, so I guess I have to give him a pass on that, but I will say that there were some of us back in April who were telling everyone the sky wasn't falling.

And so, what is his solution? Why, pretty much Barack Obama's solution! (There's a shocker.)

Possible solutions? Gear tax cuts towards those who need the money and will place it into service, keeping our economic wheel turning, rather than giving tax cuts to the wealthy to become wealthier.  This is not an assault on the wealthy, but rather a way for them to share their patriotism, the way low and middle income families do when they send their children to war.

Like the recent tax rebate to workers to stimulate the economy, money must be put in the hands of the masses who need to spend to survive.

Yes, because the poor have created so many jobs.
This is yet another bit of absurd Keyensianism, which I argued against over and over. It is the same theory which was behind the foolish "stimulus checks".

I like how being gouged by the government is way "to show patriotism". That is almost as good as calling taxes "dues" as some on the left have proposed.

Declare outsourcing of American jobs as unpatriotic as flag burning. Solve the healthcare crisis which accounts for 80% of all bankruptcy filings. Spend tax dollars on education as easily as we do on making war, otherwise our future will be catastrophic.

Global competition with no safe guards has resulted in the “dumbing down” of American standards to that of the third world countries we compete against.

So many errors, so little time.

How often do we need to tell people that America is a net INSOURCER of jobs? And that with American labor being so expensive it makes sense to send jobs like seamstress work and assembling tennis shoes overseas so we can concentrate on what we are good at, educated, capital intensive work? To argue otherwise is like saying a physicist would be better off hand stitching his clothes so he doesn't "outsource" the work, or that everyone should grow their own food so they don't "outsource" their own job. Division of labor is beneficial whether or not it crosses national borders.

Medicine is largely expensive BECAUSE of the government getting involved. The easiest fix is for government to get out, not involve itself more. Just look at Canada or England if you want proof.  Yes, insane standards in tort cases hurts as well, but the bigges tproblem is the involvement of the state.

And medical costs are not involve din 80% of bankruptcies, that is just a fabrication. (Unless you say 80% of all PERSONAL bankruptcies involve SOME medical bills, then I suppose it is true, but meaningless.)

Lastly, am I the only one who has noticed an inverse relationship between federal spending on education and educational output? I think better use of the money would be to let the individuals keep it, and let the localities increase taxes as they see fit for local education needs. There is no reason to think the federal government is any better at educating than local government, and every reason to believe the opposite.

Our current generation will be bailed out by the old money of our parents. What will become of our sons and daughters who are already being told they will not have the standard of living as past generations? How will they survive on shrinking income and rising costs for their basic needs?

We have isolated the two Americas  John Kerry spoke about. Perhaps we should  take a cue from Martin Sheen to his son Charlie in the movie "Wall Street" : Its time you learned to create things rather than live off the buying and selling of others hard work.

Do I even need to comment on this?

I would mention that it was John Edwards, not Kerry, who spoke of "two Americas", but the rest stands on its own, I think.

So, in conclusion, I guess I should say, yes things are a bit hard right now, though nowhere near as hard as many would believe. A slong as you wer enot a professional house flipper, or were not trying to beat the system with an adjustable mortgage, odds are good your house prices is not a matter of immense concern to you, and even if it is, the prices will recover shortly, this is but a short term adjustment.

Social security is a mess, but that is a government problem, not a problem with the economy. And I know of no one under 60 who ever expected to collect on it anyway, we all expected it would be bankrupt back int he 80's. We are almost all wise enough to plan for our retirement without including social security.

And yes, the economy is a bit off, but not terrible. And if we want improvement, the answer is less government, not more, fewer taxes for all, not just for those who don't earn much. We need to reduce the involvement of the government, not increase it.

So, why do so many posts I see have some "government solution" in them? Even from conservatives? Haven't we learned the government can solve only a very limited set of problems, and that the best solution is usually to do it ourselves?

POSTSCRIPT

Now some will criticize me and claim I am just pushing my "sacred cow" of the free market, but that is not true. I don't say the free market always produces the best solution or that problems don't occur under the free market. All I am saying is that overall, given time, the free market is the best solution we have. Some other solution may, by some measure, produce "better" results under some circumstances, but, provided our goal is to satisfy the wants of the participants in the economy, the free market does the best overall job of satisfying all those wants.

If you define your goals as something else, then obviously the free market may not be best. But I really see no other purpose to the economy than satisfying wants. Why else do we work, but to satisfy our wants and needs? So what other purpose could the economy have?

And if that is the purpose, the free market is the best solution we have. It does the best job overall of satisfying those wants.