The Proliferation of Ex-Im Banks

As I was reading my print copy of the Economist last week, an advertisement taken out by the African Export-Import Bank, in search of a new President and Chairperson of the Board of Directors, grabbed my attention.  No doubt the pay and perks are pretty good, but I wasn’t thinking of applying.  Rather, it made me wonder, just how many Ex-Im Banks are there in the world?  To get a sense of it, I checked out the official list compiled by the Organization for Economic Co-operation and Development (OECD) for agencies in OECD countries , as well as Wikipedia’s broader, global list

It’s quite a long list!  Which leads me to the following point.  These days, trade negotiations often seem to have veered away from their traditional focus, with a lot of time now spent on issues such as intellectual property protection and labor rights.  Subsidies were one of the original targets of trade talks, and it would be great to put them back in the mix.  How about negotiating an end to the proliferation of export subsidies by these kinds of institutions?

Obama Capital Gains Tax Proposal

President Obama’s economic policies always seem to be a zero-sum proposition with winners and losers. Usually the losers are all Americans, who suffer from slower economic growth.

The president’s new tax proposals are a case in point. One damaging item is a proposal to raise the top federal capital gains tax rate from 24 percent to 28 percent. That would come on top of his previous increase from 15 percent.

Despite what the president and his political advisors may think, low capital gains tax rates are not some sort of unjustified loophole. We’ve had reduced rates virtually the entire time we have had an income tax, and for very good reasons. Low capital gains tax rates are crucially important for spurring entrepreneurship, investment, and growth.

Recognizing that, nearly every other high-income nation has a reduced capital gains tax rate. The average top long-term rate in the 34 Organization for Economic Cooperation and Development nations is just 18 percent, according to Tax Foundation. By contrast, the U.S. rate (including state taxes) would jump to 32 percent under the Obama plan—far higher than the rate in most other nations.

For more, see my op-ed in Daily Caller today.

 

Wonk note: Data is from Tax Foundation and my Cato study. Unlike TF, I did not include the effect of the limitation of itemized deductions, which slightly increases the effective rate. 

North Korea: One Nation under Kim

In a comprehensive article on the comprehensive 1984-like propaganda efforts of North Korea, Anna Fifield reports on some underlying themes:

Tatiana Gabroussenko, an expert on North Korean literature who teaches at Korea University in Seoul, said that by not allowing people to form their own opinions, North Korea infantilizes its citizens.

“North Korea molds children socially,” Gabroussenko said. Books for different generations have different styles but the same message and characters, sometimes involving South Korean “stooges” or American “beasts.”

“In the children’s version, a child will be fighting Americans by throwing pepper in their eyes and making them sneeze and cough,” Gabroussenko said. In the adult version, weapons, rather than condiments, are used.

“The message ‘We are one nation’ implies that you can’t rebel against your father, you can’t rebel about your government, that it’s important to stick together,” she said.

North Korea’s totalitarianism may be unique, exceeding even that in the Soviet Union and Cuba, though perhaps reminiscent of Maoist China. So one must be careful not to draw too many analogies between the Kim cult and the efforts of political leaders anywhere else.

TONIGHT: Cato Scholars Live-Tweet the State of the Union

#CatoSOTU

Tonight at 9 p.m. EST, President Obama will lay out his plans for the upcoming year in his sixth annual State of the Union (SOTU) address. What will the President’s words mean for liberty? 

Find out tonight: Cato scholars will be live-tweeting their reactions to what the president says—and what he leaves out. Following the President’s address, stay tuned for commentary on the Republican and Tea Party responses. Featured scholars will include everyone from David Boaz to Mark Calabria, Walter Olson to Alex Nowrasteh….and many, many more.

This is your chance to ask the experts what to expect from the policy world in 2015—and to add your two cents to the discussion. Follow @CatoInstitute on Twitter and join the conversation using #CatoSOTU

What the Fed Should Say This Month

Information received since the Federal Open Market Committee met in December confirms that economic activity is expanding at a moderate pace. Inflation has continued to run below the Committee’s longer-run objective, primarily reflecting declines in energy prices. The decline in energy prices appears to be principally a consequence of improving technology in oil and natural gas production and is, thus, a change in relative prices that has no long-term implications for the aggregate rate of inflation.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. To support continued progress toward these goals, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate.

To minimize uncertainty over the course of policy, the Committee judges that the process of normalizing interest rates should begin in June. However, the exact timing is data dependent and might be adjusted as necessary.

The Committee also judges that it is now appropriate to begin the process of normalizing its open market portfolio. Effective immediately, the Federal Reserve will cease to reinvest interest on the portfolio and maturing principal.

This statement does away with statement bloat—the profusion of meaningless sentences and phrases that have made the FOMC statement increasingly long, obscure and difficult to interpret over the past few years. Every word in the statement ought to convey useful information to the markets.

Obama’s SOTU: Opportunity Lost

In tonight’s SOTU address, President Obama plans to push policies aimed at “helping middle-class Americans.”

Why is that a sensible goal for policy?  Where are goals like liberty or economic efficiency?

What about scaling back excessive regulation, simplifying our byzantine tax code, or slowing the growth of unsustainable entitlements?

What about the huge range of policies that might encourage economic growth?

The President’s proposals–increased taxes on the rich, more handouts for the middle class–are about redistributing the economic pie; and they will shrink rather than grow that pie by distorting economic incentives.

None of this is likely to matter, of course; the Republican Congress will presumably block most of the President’s proposals.

But it’s sad that a lame-duck president with nothing to lose will not endorse something valuable and historic, like legalizing drugs, vastly expanding legal immigration, or withdrawing all our troops from the Middle East.

Alas, the Republicans would presumably block these policies as well, since Republicans, like Democrats, worry more about pandering to their constituents than promoting freedom or economic growth.

But taking a stand for liberty is a first step; on this score the President’s approach fails miserably.

Pope Fallible on Climate Change

Most people think pretty highly of Pope Francis, and I am one of them.  His concern for the poor is exemplary.  His tilt towards gay issues has been widely lauded.  But I am afraid he has been very poorly informed on climate change.

That would be of little consequence, except he is taking the issue very seriously.  Flying to the Philippines on Wednesday, he told reporters  that he will be releasing an encyclical on ecology this coming summer.  According to the AP,

He said he wanted it out in plenty of time to be read and absorbed before the next round of climate change negotiations in Paris in November after the last round in Lima, Peru, failed to reach an agreement.

While he’s definitely right about what happened in Lima, he also is clearly trying to influence the UN process. I guess that’s well and good, after all, the Vatican is a state.  But what is troubling, very troubling, is that poorly informed views on global warming can lead to a tremendously expensive agreement that will do nothing about the climate, while taking away needed resources and exacerbating poverty around the world.

Saturday, in the Philippines, he met with survivors from 2013’s Typhoon Haiyan (also known as Yolanda in the Islands), certainly one of the most powerful storms in recent history. Haiyan reportedly killed 6,000. On the aircraft, Francis said that human activity, meaning emissions of greenhouse gases, was involved. 

A Pope who wants to be as influential as Francis lends great credence to the belief that tropical cyclones (like Haiyan) are being made worse by global warming. These storms are as iconic as polar bears (whose populations are growing) when it comes to generating the political will for a new treaty in Paris. 

It is very easy to see whether global warming is strengthening tropical cyclones.  Dr. Ryan Maue, of Weatherbell Analytics, has examined every storm back to the beginning of global satellite coverage,  for their winds and their duration, which together yield the energy associated with them.  Here’s his result, updated through December 2014:

 

Figure 1. Accumulated Tropical Cyclone Energy, 1972-2014, by Dr. Ryan Maue.  There is simply no relationship between storm activity and global temperature.

The  only way major emissions reductions—of the kind ultimately envisioned by Pope Frances—can be accomplished is to make carbon dioxide-emitting energy so expensive that people will use less, much less.  There’s really no viable energy-dense alternative out there that doesn’t emit CO2. Nuclear fission, which would qualify, is anathema to the same people who want big emissions cuts. His policies will therefore keep the underdeveloped world poor, precisely what he wants to change.

Wealthy societies are much less affected by bad weather than poorer ones. Very strong typhoons regularly strike affluent Hong Kong, with few, if any fatalities.  By making energy unaffordable, the policies Francis wants will impede economic development, so that, decades from now, when a repeat of Haiyan barrels through the Islands, many more will die.