A Monumental Tribute to Adam Smith

Kudos to the Adam Smith Institute of London, which has succeeded in remarkably short order in commissioning, funding, and erecting a statue of Adam Smith “on Edinburgh’s Royal Mile – right in the heart of Scotland’s capital city, where Adam Smith worked and died.” Appropriately enough, the statue stands on the site of an ancient marketplace.

Adam Smith’s importance as a founder of modern liberal society can hardly be overestimated. As Ludwig von Mises wrote in 1952,

The ideas that found their classical expression in the two books of Adam Smith demolished the traditional philosophy of mercantilism and opened the way for capitalist mass production for the needs of the masses. Under capitalism the common man is the much-talked-about customer who “is always right.” His buying makes efficient entrepreneurs rich, and his abstention from buying forces inefficient entrepreneurs to go out of business.

Smith’s wisdom might be especially useful in this election season when Republicans and Democrats compete to spend more taxpayer dollars:

“[Governments are] … without exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will.”

“Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct…. Those unproductive hands … may consume so great a share of their whole revenue … that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.”

For a lively and readable introduction to Adam Smith, read P. J. O’Rourke’s On the Wealth of Nations or watch him discuss the book here.

Fannie and Freddie

Paul Gigot has an outstanding piece on Fannie Mae and Freddie Mac today in the WSJ. “The abiding lesson here is what happens when you combine private profit with government power.” Exactly.

Here’s what I said about the twin-headed hydra in my 2005 Downsizing the Federal Government:

Federal taxpayers also face financial exposure from the mortgage giants Fannie Mae and Freddie Mac. These ‘government-sponsored enterprises’ are private firms, but taxpayers might become responsible for their debts because of their close ties to the government. The value of these ties created an implicit federal subsidy of $23 billion in 2003. The large size of GSEs threatens to create a major financial crisis should they run into trouble. Balance sheet liabilities of the housing GSEs grew from $374 billion in 1992 to $2.5 trillion by 2003.

A benefit of fully privatizing the GSEs would be to end the corrupting ties that these entities have with the federal establishment. Fannie Mae’s expansive executive suites are filled with political cronies receiving excessive salaries. They spend their time handing out campaign contributions to protect the agency’s subsidies.

Federal Reserve Chairman Alan Greenspan and others have argued that Fannie and Freddie need to be subject to more regulatory control because they pose a threat to financial market stability. But a better solution is to make these and other GSEs play by the same rules as other businesses, and to end the distortions caused by federal subsidies. The federal government should completely sever the ties with Fannie, Freddie, and the other GSEs.

My analysis sadly proved to be correct, and my policy solution is more needed than ever.

Senator Obama’s Tax Plan to Make America More Like France

The presumptive Democratic nominee is getting some negative attention for his plan to kill the 2003 tax rate reductions, which would boost the top tax rate by 4.6 percentage points. But a far more radical proposal is his scheme to extend Social Security payroll taxes so they apply to income above $250,000, a change that would increase the top marginal tax rate by about 12 percentage points. In a new video being distributed by the Center for Freedom and Prosperity, I explain why raising America’s top tax rate to French and German levels will undermine economic performance and reduce U.S. competitiveness.

As always, I look forward to feedback from Cato-at-Liberty readers. I already know that I mistakenly promoted Larry Lindsey by stating that he served as Vice Chairman of the Federal Reserve rather than “just” a member of the Board of Governors, and I’m also a bit disappointed with the sound quality, but I’m mostly looking for substantive comments. This topic was a bit of a challenge. I wanted to focus on the big increase in the top marginal tax rate, and the negative implications of European-style fiscal policy, but obviously needed to give some background on the workings of Social Security. So let me know whether I was too detailed or not detailed enough.

Censorship vs. Editorial Discretion

Via Ezra Klein, Tim Fernholz seems to be confused about the nature of censorship:

Conservatives argue (often with comparisons to communist states) that the doctrine, which hasn’t been in effect since 1987, forced the state to mandate speech. It really just provides for reasonable discussion of views, but the Right demagogues the issue to raise money and keep Rush Limbaugh on the air unopposed.

But now that McCain can’t get his stuff in the Times, it’s a terrible moment for American media! The FCC’s regulation wouldn’t affect a print newspaper, obviously, but it’s rank hypocrisy for McCain to complain that he’s not getting a fair shot, especially when he is co-sponsoring legislation to permanently ban the Fairness Doctrine. Apparently, equal time is only a bad idea when liberal views are being silenced.

This really isn’t complicated: The difference between advocates for bringing back the fairness doctrine and conservative critics of the New York Times is that the conservatives are not (as far as I know) advocating that the government force the New York Times to carry John McCain’s op-ed, or even to carry a certain quota of conservative columnists in order to ensure a “reasonable discussion of views.”

Fernholz dances around this issue, asserting that it’s not really censorship because the goal is simply to promote a “reasonable discussion of views.” And it’s true, I guess, that the Fairness Doctrine doesn’t involve giving the White House veto power over which stories get aired on NPR. But imagine if every five years the New York Times had to get its printing license renewed, and the Federal Press Commission reviewed the previous five year’s op-ed pages to ensure that they had represented a “reasonable discussion of views.” Fernholz can’t seriously claim that this would have no effect on the Times’s coverage—that it might not decide to scratch a few op-eds critical of the current administration or maybe hire an extra conservative (or liberal, depending on who was in power) columnist to make sure there weren’t any “reasonableness” problems during the license renewal process.

No, conservatives and liberals agree that the publishers of newspapers have a right to print whoever they please on their op-ed pages, “reasonable” or otherwise. The same principle applies to broadcast media, and for the same reasons.