The Good News behind This Morning’s Trade Deficit Report

This morning the U.S. Commerce Department reported another record deficit in the America’s broadest trade account with the rest of the world. In the July-September quarter of 2006, the U.S. current account deficit reached $225 billion, another record. The current account is the broadest measure of America’s international commerce, comprising not only trade in goods and services but also income flows from foreign investment and unilateral transfers such as foreign aid worker remittances.

The report is bound to throw more fuel on the debate over U.S. trade policy. Here’s how the Associated Press described the political fallout from the latest trade numbers:

“Democrats, who took over control of the House and Senate in the November elections, attacked President Bush’s trade policies, charging that the administration has run up record deficits for five straight years by failing to protect U.S. workers from unfair foreign trade practices.” 

To all this hand-wringing about the trade deficit, I say, “Bah Humbug.” The trade deficit itself tells us very little about the success or failure of U.S. trade policy. It is largely driven by differing rates of savings and investment in the United States and our major trading partners. (Check out http://www.freetrade.org for the details.)

Obsession with the trade deficit also obscures the real story behind this morning’s trade numbers: Both our imports and exports are rising at a healthy rate.

Compared to the third quarter of last year, U.S. imports of goods and services from the rest of the world are up 12.7 percent while our exports are up an even steeper 14.1 percent. America’s total two-way trade with the world, including income from investments, is up a spectacular 16.4 percent from a year ago. Imports, exports and investment income have all reached record levels.

The bottom line: Despite the complaints of politicians, Americans have never earned or spent a higher share of their income in the global economy than we do today. We are voting with our dollars every day for more trade and globalization.

Do as We Say, Not as We Do (Enviro Edition)

If you want pure, unadulterated, gibbering environmental madness, you want to visit the Guardian or the Independent. Within those pages, you’ll find more over-the-top, doom-saying hysteria than in virtually any other collection of newspapers combined. And naturally, if you read the Guardian or Independent, you’re statistically quite likely to be among the most stone-cold envronmental extremists on planet Earth. 

What you won’t be, however, is someone who is statistically likely to live the life you propose to force others to live. In fact, you’re likely to be a far bigger environmental villain (at least, as Guardian readers would define the term) than those evil conservatives who read other U.K. newspapers and broadsheets. You’re less likely to invest in energy efficiency, less likely to economize on fuel, and, well, less likely to do just about anything that you want the government to force your fellow man to do. 

That, anyway, is the conclusion of a striking series of recently released studies reported, with some obvious chagrin, in the Guardian itself.

I’m not particularly surprised. A few years ago, I was in Aspen and had dinner with a friend and a large group of his acquaintances. One of them was quite exercised about the fate of the planet and quite proud of his solar-powered house … until my friend pointed out that his house was bigger than anything outside of a Third World palace and that the solar panels could scarcely keep his energy bills south of the annual GDP of half the counties in the United States. OK, I think that was an exaggeration, but after seeing the house from a distance, it probably wasn’t by much.

Global Warming — What Would Rawls Do?

If we accept the simplistic version of Rawls’ Theory of Justice — that we should measure the moral and ethical fiber of any society based upon the well-being of its worse off (and I’m sure Will Wilkinson will correct me if I screwed that up) — then what should we make of this story hot off the wires suggesting that global warming means more sex for weaker grey seals?

Whether we’re talking about John Rawls or Lou Rawls, I think you know the implications of this….

HHS Considering Nationwide System of Electronic Healthcare Records

The Department of Health and Human Services (HHS) has given notice in the Federal Register that it would like to receive comments on, among other things, a recommendation by the American Health Information Community (AHIC), a chartered federal advisory committee, to advance the development of electronic health records (EHR).

The recommendations suggest a nationwide approach to developing digital and interoperable health IT systems. (“Request for Information (RFI): Improving Health and Accelerating Personalized Health Care Through Health Information Technology and Genomic Information in Population — and Community — Based Health Care Delivery Systems.” 71 FR 64282 (Nov. 1, 2006). Comment period closes Jan. 2, 2007.)

There is no doubt that the sharing of healthcare information can be in a patient’s best interest and contribute to the facility and accuracy with which the healthcare system cares for patients. Nevertheless, healthcare information should remain as much as possible within a patient’s own control. Healthcare institutions may wish to establish shared databases, but the government should not mandate or suggest that the Joint Commission on Accreditation of Healthcare Organizations or states mandate integrated data networks.

The U.S. healthcare system is suffering from a serious trust crisis and mandating the collection of medical data may very well add to that crisis. Many people associate data collection with criminal data bases and fear the misuse of widely available data. The perception of possible misuse, regardless of how real or unreal that perception may be, is going to create mistrust and suspicion of everyone involved in the data collection process. 

In addition to the publicly perceived dangers of such a system, there is at least one just as efficient, but much less costly, alternative: Digital healthcare memory, or “data sticks,” could provide each patient with his or her own personal database. A patient’s memory stick could be plugged into any doctor’s or hospital’s computer, making the patient’s medical records available everywhere in the world, not just within a national network of hospitals. This simple and relatively inexpensive solution would leave a person’s medical records completely in his or her own control, allowing the person to decide when, where, and to whom to disclose such personal information.

At least one company, PinnacleCare, provides such data collection as part of its comprehensive range of patient support services. There is no reason why hospitals, as a customer service, couldn’t provide such data downloads as part of their services. Physicians and hospitals already photocopy records for patients, so why not simply provide digital downloading of such records instead? 

Digital records are easily updated and transported. Patients, if they chose to do so, could wear their medical data stick on a lanyard, carry it in their wallet, leave it at home, or lock it in a safe. The choice of what to do with a person’s personal medical data and how to protect it would rest with the patient. 

Such a solution would be simple, cheaper and make personal medical more readily available to a wider range of practitioners — all without risking further erosion of patient trust in the healthcare system.

What We Do Next Is Correct the “Powerful Perception”

Reihan Salam comments on Alan Reynolds’ important op-ed in yesterday’s Wall Street Journal:

Anyway, even if Reynolds is right and we haven’t actually seen as big an increase in inequality as most observers believe, we still have a powerful perception that is driving political outcomes, including the drift of centrist Democrats away from pro-market policies. Merely pointing out that the statistics are somehow misleading (an important and valuable contribution if it’s true) won’t change that. So even if Reynolds is right, the political question — what do we do next? — remains an open question.

I find this a puzzling statement. The “powerful perception” of outsized increases in inequality is driven in large measure by the drumbeat of media rhetoric played to the time of misread inequality stats. If correcting that mistake cannot change the false perception driving political outcomes, then what can?

If Reihan believes, as I do, that Reynolds is right, then he ought to use his voice as a political commentator to help try to correct the misperception. If the correct belief about inequality becomes more widespread, then inequality will be seen as less of a problem and demand for policies meant to “fix it” will start to dry up. Then, maybe, what we do next won’t be misguided or counterproductive.

More Special Rules for Fannie Mae?

A banner headline and photo in the Business section of the Washington Post show former Enron CEO Jeffrey Skilling reporting to prison to begin serving a 24-year term for fraud and conspiracy. (Note that federal sentences don’t allow for much parole; Skilling must serve at least 85 percent of his sentence.) Sidebars depict other jailed corporate executives: Bernard Ebbers of WorldCom, 25 years; Dennis Kozlowski of Tyco, 8 to 25 years; John Rigas of Adelphia, 15 years (being appealed).

On the same page, another story reports:

Three years ago, Fannie Mae assured lawmakers that it had the required capital to cope with a broad variety of business setbacks.

Since 1992, “Fannie Mae has met or exceeded our capital requirements in every year,” Franklin D. Raines, then its chief executive, testified in September 2003. “Indeed, we are one of the best-capitalized financial institutions in the world, when compared to the risk of our business.”

As it turns out, the assurance was false.

Will Raines and other executives face lengthy jail terms for their repeated and massive accounting misrepresentations, which resulted in multi-million-dollar bonuses for the executives? It doesn’t look likely. Criminal charges against the company itself have been ruled out. The government may seek to recover millions of dollars from executives who received massive bonuses on the basis of the manipulated earnings statements, but there seem to be no plans to pursue criminal prosecution of these sophisticated Washington insiders.

There may well be good legal reasons why Enron and WorldCom executives were guilty of crimes punishable by 25 years in jail, while Fannie Mae executives were guilty only of outrageous behavior. But one can’t help wondering if the difference is related to yet another tiny story in the Post’s Business section on the same day: “Fannie Breaks Record On Lobbying Outlay.”

Some background on the fundamental problems with Fannie Mae and other government-sponsored enterprises here.

Enlightenment Thinking on the Move: Economic Freedom of the World Report Now in Arabic

Thanks to the hard work of my colleagues Fadi Haddadin and Ghaleb Hijazi, who run Cato’s Arabic website Misbahalhurriyya.org, an elegant Arabic edition of the 2006 Economic Freedom of the World Report has now been released. The Arabic version was unveiled at a recent meeting in Beirut organized by the Fraser Institute of Canada and the Friedrich-Naumann Stiftung of Germany that we attended with our colleague Andrei Illarionov.

The printing of the Arabic edition was gorgeous, as were the cool brochures and other materials that Fadi and Ghaleb had produced in Jordan. The entire report in Arabic is available online now for downloading in PDF format. The availability of such thorough-going comparisons should, I hope, introduce a greater degree of cause-and-effect thinking into discussions of policy, which would be a great advance over the conspiracy theorizing that is unfortunately so common in the Middle East. (Besides all the data, it includes William Easterly’s hard-hitting critique of “foreign aid,” “Freedom vs. Collectivism in Foreign Aid.”)

The printed edition of the report was also delivered to the economics and politics editors at An Nahar, Al Hayat, and other papers (many more are in the mail) and will be distributed at the upcoming meeting of Arab economists in Kuwait this weekend. Congratulations to Fadi and Ghaleb and their team for such a success.

Our colleague Andrei Illarionov gave a remarkable presentation, based on statistical data, on the roots of economic stagnation in the Arab Middle East. A condensed version will appear in the Arabic press, and — if I can cajole him — in English, Spanish, Russian, and other languages.