On The Economy & Capitalism vs. Socialism
Halbert Wealth Management
By Gary Halbert
November 28, 2012
Today we look at a Pew Research Center survey that polled Americans for their feelings about capitalism versus socialism. The survey included all races, different ages and various income groups. I think it’s safe to say, this survey will SHOCK YOU!
But before that, let’s take a quick look at the latest economic reports and the consensus view for Thursday’s 3Q GDP report. There is also news that Americans are more optimistic about the economy now than they have been in a decade – but are they really?
And finally, did you know that the United Nations is planning to hijack the Internet? The UN wants to control the World Wide Web. And it could happen as early as next week. You need to know about this.
On the Economy & Thursday’s GDP Report
The government’s second estimate of 3Q Gross Domestic Product looks to be the highlight of this week in terms of economic reports. GDP is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
In the last week of October, the Commerce Department’s Bureau of Economic Analysis (BEA) released its “advance” estimate showing that 3Q GDP rose by a better than expected 2.0% (annual rate). That compared to growth of only 1.3% in the 2Q.
The pre-report consensus for the second estimate of 3Q GDP is for a jump from 2.0% to 2.8%. That would be a huge jump! The 2.8% consensus is the result of economist surveys by both Bloomberg and Yahoo Finance. The range of expectations is 2.4% to 3.0%, all of which are above the initial BEA report of 2.0% last month.
Some analysts now believe that inventory building in the 3Q was better than previously reported in the advance estimate. Others cite a better than expected net exports number than previously estimated.
Admittedly, these monthly estimates of the GDP can be volatile, especially from the advance estimate to the final number, but it remains to be seen if this week’s report shows a rise from 2.0% to 2.8%. The latest GDP report will be released by the BEA on Thursday at 8:30 AM Eastern Time.
The Conference Board reported this morning that the Consumer Confidence Index rose to 73.7 in October, a little better than expected, up from a revised 73.1% in September. While the latest report puts the confidence index at the highest level since the recession ended, it still has a long way to go to get back to pre-recession levels.
Also, the Commerce Department reported today that orders for durable goods were flat in October, a little better than expected. That followed a huge jump of 9.2% in September. Durable goods are bigger-ticket items that are expected to last at least three years.
Other economic reports this week include new home sales for October, which are expected to rise very modestly from 389,000 units sold in September. That report will be out tomorrow. The personal income report for October will be out on Friday morning, and it is expected to be unchanged or modestly higher.
More Americans Believe Economy Will Get Better
A new Bloomberg survey taken just after the election found that more Americans believe the US economy will improve than at any time in the past decade. The percentage of households projecting the economy will get better rose to 37% in November, the highest reading since March 2002, according to Bloomberg.
Of course, this finding was heavily influenced by a surge in Democrat respondents following the re-election of President Obama. Bloomberg noted that the jump in expectations this month was the largest among registered Democrats, with 63% indicating the economy will improve, up 12 percentage points from October. The survey results among Republicans and Independents were largely unchanged from the last Bloomberg survey in October. No surprise there.
“The gain is largely political in nature, occurring very disproportionately among Democrats,” said Gary Langer, president of Langer Research Associates in New York, which compiles the index for Bloomberg. “Gains in views the economy is improving, to be truly persuasive, will need to be more broadly based.”
Other than the election, Bloomberg notes that home prices appear to have bottomed and are rising modestly in several regions of the country; new-home construction climbed to a four-year high in October; gasoline prices are falling; and the economic recovery is gaining momentum (which may be confirmed in Thursday’s GDP report).
Separate surveys have recently shown that a majority of Americans believe that lawmakers will be successful in solving the “fiscal crisis” and largely avoid the $607 billion combination of spending cuts and tax hikes starting on January 1. I wish I were so sure! I still believe that the president and some Democrats in Washington are willing to let the economy go over the edge (see second link below in SPECIAL ARTICLES). I hope I’m wrong.
Speaking in New York last week, Fed Chairman Ben Bernanke shifted from focusing on how bad the fiscal cliff will be to how much better things will be next year if lawmakers reach a deal to avoid it:
“There’s important potential for the economy to strengthen significantly if there’s a greater level of security and confidence about where we’re going. A plan for resolving the nation’s longer-term budgetary issues without harming the recovery could help make the new year a very good one for the American economy.”
While focusing mainly on the positives for next year, Bernanke did repeat his warning that a failure to reach an agreement on the fiscal cliff would likely send the economy “toppling back into recession.”
One thing is for sure: if we go over the fiscal cliff and the economy sinks into recession next year, the Bloomberg survey on economic optimism will reverse, perhaps sharply lower.
Pew Research Survey - CAPITALISM vs. SOCIALISM
Since the re-election of President Obama by a comfortable margin, a great deal of energy has been focused on the changing American electorate and the role of minorities in particular. So much so that a Pew Research Center survey from late last year has resurfaced and is getting a lot of attention.
Pew asked Americans of all races and various age groups to give their views (positive or negative) on Capitalism and Socialism. Let me warn you in advance: The survey results shown in the table below may shock you. Take a few minutes to let the data shown below soak in.
While whites are firmly positive on capitalism and overwhelmingly negative on socialism, other categories are troublesome. Going down the list, a slim majority of blacks (51%) are negative on capitalism and 55% are positive on socialism. Hispanics are also negative on capitalism (55%) but are net negative on socialism too.
Perhaps most surprising, young people (18-29) are about even on capitalism but are net positive (49-43) on socialism. This is so sad! Those ages 30-65+ are all net positive for capitalism and comfortably net negative on socialism. Still, the negatives for capitalism were higher than I would have expected for this older group.
Not surprising, those with higher family income were decidedly positive on capitalism and negative on socialism. Those with family income of less than $30,000 were clearly negative on capitalism (47%) and too close for comfort on socialism (43-46).
These numbers are deeply disturbing to most conservatives. The reasons should be obvious, and the trends are not in our favor. On the day after the election, Rush Limbaugh said, “I went to bed last night thinking we’ve lost the country. I don’t know how else you look at this.”
I have a link to a good article that includes the chart above and some good analysis from several commentators on this subject in SPECIAL ARTICLES below.
The United Nations Wants Control of the Internet
The UN wants to control the Internet, and the first step in doing so could happen as early as next week when the UN meets in Dubai. The US needs to get serious about stopping this stealth attempt to hijack the World Wide Web. The following article on this threat was in The Wall Street Journal on Sunday:
The U.N.’s Internet Sneak Attack
Who runs the Internet? For now, the answer remains no one, or at least no government, which explains the Web's success as a new technology. But as of next week, unless the US gets serious, the answer could be the United Nations.
Many of the U.N.’s 193 member states oppose the open, uncontrolled nature of the Internet. Its interconnected global networks ignore national boundaries, making it hard for governments to censor or tax. And so, to send the freewheeling digital world back to the state control of the analog era, China, Russia, Iran and Arab countries are trying to hijack a U.N. agency that has nothing to do with the Internet.
For more than a year, these countries have lobbied an agency called the International Telecommunications Union to take over the rules and workings of the Internet. Created in 1865 as the International Telegraph Union, the ITU last drafted a treaty on communications in 1988, before the commercial Internet, when telecommunications meant voice telephone calls via national telephone monopolies.
Next week the ITU holds a negotiating conference in Dubai, and past months have brought many leaks of proposals for a new treaty. U.S. congressional resolutions and much of the commentary, including in this column, have focused on proposals by authoritarian governments to censor the Internet. Just as objectionable are proposals that ignore how the Internet works, threatening its smooth and open operations.
Having the Internet rewired by bureaucrats would be like handing a Stradivarius to a gorilla. The Internet is made up of 40,000 networks that interconnect among 425,000 global routes, cheaply and efficiently delivering messages and other digital content among more than two billion people around the world, with some 500,000 new users a day.
Many of the engineers and developers who built and operate these networks belong to virtual committees and task forces coordinated by an international nonprofit called the Internet Society. The society is home to the Internet Engineering Task Force (the main provider of global technical standards) and other volunteer groups such as the Internet Architecture Board and the Internet Research Task Force. Another key nongovernmental group is Icann, which assigns Internet addresses and domain names.
The self-regulating Internet means no one has to ask for permission to launch a website, and no government can tell network operators how to do their jobs. The arrangement has made the Internet a rare place of permissionless innovation. As former Federal Communications Commission Chairman William Kennard recently pointed out, 90% of cooperative "peering" agreements among networks are "made on a handshake," adjusting informally as needs change.
Proposals for the new ITU treaty run to more than 200 pages. One idea is to apply the ITU's long-distance telephone rules to the Internet by creating a "sender-party-pays" rule. International phone calls include a fee from the originating country to the local phone company at the receiving end. Under a sender-pays approach, U.S.-based websites would pay a local network for each visitor from overseas, effectively taxing firms such as Google GOOG -0.83% and Facebook FB +7.88%. The idea is technically impractical because unlike phone networks, the Internet doesn't recognize national borders. But authoritarians are pushing the tax, hoping their citizens will be cut off from U.S. websites that decide foreign visitors are too expensive to serve.
Regimes such as Russia and Iran also want an ITU rule letting them monitor Internet traffic routed through or to their countries, allowing them to eavesdrop or block access.
"The Internet is highly complex and highly technical," Sally Wentworth of the Internet Society told me recently, "yet governments are the only ones making decisions at the ITU, putting the Internet at their mercy." She says the developers and engineers who actually run the Internet find it "mind boggling" that governments would claim control. As the Internet Society warns, "Technology moves faster than any treaty process ever can."
Google has started an online petition for a "free and open Internet" saying: "Governments alone, working behind closed doors, should not direct its future." The State Department's top delegate to the Dubai conference, Terry Kramer, has pledged that the U.S. won't let the ITU expand its authority to the Internet. But he hedged his warning in a recent presentation in Washington: "We don't want to come across like we're preaching to others."
To the contrary, the top job for the U.S. delegation at the ITU conference is to preach the virtues of the open Internet as forcefully as possible. Billions of online users are counting on America to make sure that their Internet is never handed over to authoritarian governments or to the U.N.
We all need to be paying attention to this and hope our president stands up for free speech on the Internet!
Hoping you had a great Thanksgiving,
Gary D. Halbert
(c) Halbert Wealth Management