Tag: Alan Reynolds

Wednesday Links

  • Alan Reynolds: Hey, leave Lieberman alone. “Human interest stories are sure to get readers’ sympathy. But emotion is no substitute for common sense.”
  • The money behind climate science.

Spending Our Way Into More Debt

Huge deficit spending, a supposed stimulus bill, and financial bailouts by the Bush administration failed to stave off a deep recession. President Obama continued his predecessor’s policies with an even bigger stimulus, which helped push the deficit over the unimaginable trillion dollar mark. Prosperity hasn’t returned, but the president is persistent in his interventionist beliefs. In his speech yesterday, he told the country that we must “spend our way out of this recession.”

While a dedicated segment of the intelligentsia continues to believe in simplistic Kindergarten Keynesianism, average Americans are increasingly leery. Businesses and entrepreneurs are hesitant to invest and hire because of the uncertainty surrounding the President’s agenda for higher taxes, higher energy costs, health care mandates, and greater regulation. The economy will eventually recover despite the government’s intervention, but as the debt mounts, today’s profligacy will more likely do long-term damage to the nation’s prosperity.

Some leaders in Congress want a new round of stimulus spending of $150 billion or more. The following are some of the ways that money might be spent from the president’s speech:

  • Extend unemployment insurance. When you subsidize something you get more it, so increasing unemployment benefits will push up the unemployment rate, as Alan Reynolds notes.”
  • “Cash for Caulkers.” This would be like Cash for Clunkers except people would get tax credits to make their homes more energy efficient. Any program modeled off “the dumbest government program ever” should be put back on the shelf. 

  • More Small Business Administration lending. A little noticed SBA program created by the stimulus bill offered banks an “unprecedented” 100 percent guarantee on loans to small businesses. The program has an anticipated default rate of 60 percent. Small businesses need lower taxes and fewer regulations, not a government program that perpetuates more moral hazard.

  • More aid to state and local governments. State and local government should be using the recession to implement reforms that will prevent them from going on another unsustainable spending spree when the economy recovers. Also, we need fewer state and local government employees – not more – as they’re becoming an increasing burden on taxpayers.

The president said his administration was “forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it to others to solve.” Mr. President, nobody has forced you to do anything. You’ve chosen to embrace – and expand upon – the big spending policies that were a hallmark of your predecessor’s administration.

Vikings and Pirates and Taxes, Oh My!

Today’s episode of “Hagar the Horrible” could be an epigraph for the new Fall 2009 issue of Cato Journal.

Hagar_The_HorribleThis issue includes Greek economists Michael Mitsopoulos and Theodore Pelagidis on “Vikings in Greece: Kleptocratic Interest Groups in a Closed, Rent-Seeking Economy” as well as Peter Leeson, author of The Invisible Hook: The Hidden Economics of Pirates, writing (with David Skarbek) on the effects of foreign aid. As for taxes, well, editor Jim Dorn has assembled a number of useful papers:

  • Andrew T. Young on taxing, spending, and “fiscal illusion”
  • Michael J. New on the “starve the beast” hypothesis
  • Alan Reynolds on Paul Krugman’s misunderstanding of the monetary and fiscal lessons of the Great Depression and Japan’s lost decade

And on the general rapaciousness of the state, don’t miss Jason Kuznicki’s careful review of government racial discrimination from the end of Reconstruction until the civil rights movement.

Tuesday Links

  • Paul Krugman claims a victory for Big Government, which he says “saved” the economy from an economic depression. Alan Reynolds debunks his claim and shows why bigger government  produces only bigger and longer recessions.
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Using ‘Cash For Clunkers’ Money to Buy a Muscle Car

chevelleABC News reports that the “Cash for Clunkers” scheme, a government program that offers a rebate to people who trade in vehicles with low gas mileage for more fuel efficient cars, is  gaining popularity:

The program is off to a fast start. In less than a week, 8,000 cars have been traded in for new ones – deals that might not have happened if Washington were not offering people $3,500 to $4,500 to get their aging gas guzzlers off the road.

In June, Cato senior fellow Alan Reynolds explained  how you can use that money to buy the muscle car or truck you always wanted:

Consider how easy it would be to game this giveaway program by using that $4,500 voucher to buy a big SUV or V-8 muscle car.

First of  all, with Chrysler and GM dealerships folding, it should be easy to buy a mediocre Chevy Cobalt or Dodge Caliber for about $10,000 more than the voucher.

What you do next is sell that boring econobox, even if you end up with $1,000 less than you paid — that still leaves you with $3,500 of free money, courtesy of taxpayers.

As this  process unfolds, the flood of resold small cars will make it even  harder for GM, Chrysler and Ford dealers to get a decent price for small cars, because of added competition from new cars being resold as used.

That’s their problem, not yours.

So, take the $9,000 net from reselling the crummy little car plus the $4,500 from Uncle Sam.  Then use that $13,500 to make a big down payment on a used Cadillac Escalade,  Toyota Tundra pickup or Corvette.

File this under “unintended consequences” (my own file is running out of space).