Archives: 02/2007

New Climate Change Report Out Today

The Intergovernmental Panel on Climate Change (IPCC) released a new climate change study today at a news conference in Paris. The study reports that global warming caused by human activities is now a virtual certainty, and paints a startling picture of the effects of global climate change. Still, not everyone is in complete agreement as to the severity of the threat. “Anyone who says that the planet is warming at an increasing rate is simply dead wrong,” says Cato scholar Patrick Michaels, author of Meltdown: The Predictable Distortion of Global Warming by Scientists, Politicians, and the Media. Dr. Michaels’ full comments are available here.

It Pays to Waste Money

Despite a long history of political advocacy and fiscal mismanagement, the Legal Services Corporation (LSC) will get a $22 million budget increase if a spending bill recently passed by the House becomes law.

You might recall that the LSC made the news last year when its inspector general revealed that LSC executives were living large on tax dollars — enjoying chauffer-driven limousine rides around D.C., expensive meals, foreign trips, and a posh office suite in Georgetown. And as retribution for exposing those excesses, the LSC almost fired its inspector general.

Now the agency, a target of fiscal conservatives for decades, is poised to receive a 6.3 percent budget increase — from $327 million in fiscal year 2006 to $349 million in FY 2007.

Though the practice of rewarding mismanagement with more funding is commonplace in Washington, Congress had promised to do things differently this year. The spending bill was supposed to simply continue funding the federal government at 2006 levels. 

Unfortunately, it appears that old spending habits are hard to break.

A French Global Warming Tax Against the U.S.?

Al Gore has a new ally in his fight for new taxes and regulations to limit carbon emissions. The New York Times reports that, for all intents and purposes, Jacques Chirac is blackmailing the United States: 

President Jacques Chirac has demanded that the United States sign both the Kyoto climate protocol and a future agreement that will take effect when the Kyoto accord runs out in 2012.

He warned that if the United States did not sign the agreements, a carbon tax across Europe on imports from nations that have not signed the Kyoto treaty could be imposed to try to force compliance.

Trade lawyers have been divided over the legality of a carbon tax, with some saying it would run counter to international trade rules. But Mr. Chirac said other European countries would back it. “I believe we will have all of the European Union,” he said.

A 95 Percent Tax Rate?

Brad DeLong says in the Miami Herald that confiscating and redistributing 95 percent of the wealth generated by entrepreneurs would create “more happiness and opportunity.” Does that mean he wants a 95 percent top rate for the income tax? A top rate of 95 percent for the death tax? Surely he does not really think tax rates should be that high, but his column certainly points in that direction: 

Within each country, the increase in inequality that we have seen in the past generation is predominantly a result of failures of social investment and changes in regulations and expectations. It has not been accompanied by any acceleration in the overall rate of economic growth. For the most part, it looks like these changes in economy and society have not resulted in more wealth, but only in an upward redistribution of wealth — a successful right-wing class war. This kind of inequality should be a source of concern. Bill Gates, Paul Allen, Steve Ballmer and the other millionaires and billionaires of Microsoft are brilliant, hardworking, entrepreneurial and justly wealthy. But only the first 5 percent of their wealth can be justified as an economic incentive to encourage entrepreneurship and enterprise. The next 95 percent would create much more happiness and opportunity if it were divided evenly among U.S. citizens or others than if they were to consume any portion of it. An unequal society cannot help but be an unjust society. The most important item that parents in any society try to buy is a head start for their children. And the wealthier they are, the bigger the head start. Societies that promise equality of opportunity thus cannot afford to allow inequality of outcomes to become too great.

Get Ahead of the News with Cato@Liberty

In Thursday’s Wall Street Journal, Fred Barnes makes a point (paid reg. req.) that I made here last week: Hard as it to believe, Sen. Hillary Clinton may campaign as the least statist of the Democratic presidential candidates. Barnes writes:

As surprising as this may sound, Mrs. Clinton starts her campaign as the Democratic candidate furthest to the right. The only two Democrats who might have gotten to her right — Sen. Evan Bayh of Indiana and former Gov. Mark Warner of Virginia — dropped out of the race. 

I had made that point. And I also noted that Sen. Russell Feingold would have criticized Hillary on civil liberties issues. With Feingold, Bayh, and Warner all out of the running, Hillary’s determination to constrain her big-government instincts during the campaign will be sorely tested as she fends off challengers like Sen. Barack Obama, former senator John Edwards, and maybe former vice president Al Gore.

A footnote: Barnes and I have both ignored New Mexico governor Bill Richardson, who has persuaded Larry Kudlow that he’s a “a pro-growth, tax cutting Democrat.” Maybe moderate Democrats will have a choice after all.

The Republican Future

In today’s Washington Examiner, I have a column on future directions for the Republican party. One point:

Republicans need to look to the future: Younger voters are more likely to be libertarian, more likely to accept gay marriage, and more likely to have voted Democratic in 2006.

Republicans need to reach them before the Democrats lock them in. They can do that with an optimistic, inclusive message of liberating people from the dead hand of the federal bureaucracy — a smaller and less intrusive federal government, encouragement of enterprise and economic growth, a government that respects but doesn’t embrace religion, and a de-escalation of the culture wars.

With Trade Advocates Like These…

My colleague Dan Griswold salutes President Bush for ditching the traditional script and touting the broader benefits of trade in a speech yesterday in New York City. I would like to emphasize how rare, refreshing, and late-in-coming the President’s comments were.

One explanation for the growing resistance to trade liberalization in the United States is that the Bush administration’s “pro-trade” message has been weak, even self-defeating. Typically, when the President or members of his administration take to the podium, the message on trade is monothematic: exports are great and our trade agreements promote them.

The following is an excerpt from a speech the President gave at the headquarters of Caterpillar, Inc. in Peoria, Illinois on Tuesday:

Last year we exported a record $1.4 trillion worth of goods and services. Now, in order to export something, somebody has to make it. In other words, when I talk about numbers, behind the numbers is [sic] people who are providing the service and/or making the product. So the more one exports, the more likely it is people are going to be working.

Not once in the speech did the President allude to the benefits of imports, which are also important to Caterpillar, as sources of components and raw materials. Certainly, the mention of $1.4 trillion worth of exports in the context of the relationship between exports and jobs might invite the slightly curious to scratch their heads and wonder whether last year’s record $2.2 trillion worth of imports had an adverse impact on jobs.

Indeed, that is the central premise of many of trade’s opponents: exports create jobs, thus imports destroy them. By not mentioning that our record level of imports last year occurred alongside economic growth of 3.4 percent, the creation of 2 million net new jobs, and an unemployment rate that ended at a slim 4.5 percent, the President sacrificed an opportunity to drive home the point that imports do not undermine economic growth or job creation.

In fact, Dan Griswold has written extensively on the strong positive relationship between import growth and the growth of U.S. manufacturing output. (Here’s one of his offerings.) Basically, U.S. businesses account for about half of all U.S. imports. If you want to curtail imports, all we need is a handsome recession.

Now consider Exhibit 2. In response to the President’s announcement that he will seek extension of trade promotion authority, which expires at the end of June, U.S. Trade Representative Susan Schwab, yesterday, offered: 

The agreements enacted under TPA have helped us dramatically increase exports, which are likely to be an engine that drives the American economy to continued strong growth this year. U.S. exports to the 10 countries with which we implemented free trade agreements between 2001 and 2006 grew twice as fast as U.S. exports to the rest of world.

Okay, perhaps U.S. exports to those countries have increased faster. But is that all there is to tout?  What about the fact that we can purchase fresh grapes and blueberries, imported from Chile, in the middle of winter, at about the same price we purchase the same fruit from U.S. growers in the summertime?  (Just check the origin labels at your local grocer). By focusing exclusively on export potential, our trade advocates reinforce the myth that trade is exclusively a boon to business (“BIG BUSINESS,” of course), which comes at the expense of ordinary, “middle class” Americans.

Still, worse than the failure of policymakers supportive of trade to articulate its full benefits is when policymakers betray their own ignorance in a way that gives fodder to those counseling retreat from the global economy. Ways and Means Committee Ranking Member Jim McCrery (R-LA) claimed yesterday that “Our free trade agreements since TPA went into effect have reduced our trade deficit by $5.5 billion.”  I’m not sure how that was calculated or what exactly the figure represents, but presumably the comment is intended to demonstrate that trade agreements are good. I think it backfires.

If the exclusive purpose of trade policy is to promote exports, then it’s pretty easy for trade’s detractors to point to the massive and growing trade deficit and conclude we are losing grievously at trade. Our $800+ billion trade deficit is larger today than when TPA was enacted in 2002.  Using McCrery’s logic, trade is thus a menacing plague. I don’t know, maybe this is just a naïve thought but if you base the thrust of the case for trade on the export side, then the massive and growing trade deficit is all of a sudden an albatross around the necks of liberalizers. But the truth is that the trade account has virtually nothing to do with trade policy and efforts to somehow connect the two cannot serve a pro-trade agenda.

It’s no wonder we are having a national debate on the merits of trade, despite the overwhelming evidence of the relationship between greater openness and economic growth. Policymakers who claim to favor trade liberalization have been incapable or unwilling to articulate the complete and proper argument. That will have to change soon.