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Cato Daily Dispatch for November 30, 2004

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(Links to outside sources were active as of the date of this dispatch; however, not all news sources maintain links to current stories indefinitely. Some links also may require registration.)

Bush in Canada to Repair Relations and Talk Trade

"President Bush sought Tuesday to patch up relations with Canada after years of bickering, flying to the capital for talks with Prime Minister Paul Martin on trade, security and a host of tough hemispheric and global issues," the Associated Press reports.

"On trade issues, the two nations are fighting over a tariff the United States has placed on imports of pine, spruce and other easy-to-saw softwood lumber logged in Canada. On average, the United States adds an extra 27 cents to every $1 worth of softwood lumber imported from four Canadian provinces. U.S. officials accuse Canada of subsidizing the lumber business, saying it does not charge companies enough to log on public lands."

In "Nailing the Homeowner: The Economic Impact of Trade Protection of the Softwood Lumber Industry," Cato vice president for research Brink Lindsey, former Cato research fellow Mark Groombridge, and International Monetary Fund economist Prakash Loungani write: "Advocates of protectionism claim that trade barriers are necessary to offset unfair subsidies enjoyed by Canadian lumber producers, but such claims do not withstand scrutiny. Neither do arguments that free trade in lumber would harm the environment. It is time for the United States to stop lining the pockets of a few producers here at the expense of U.S. homebuilders and families who dream of owning their own homes."

D.C. Ballpark Vote Expected Today

"The D.C. Council continues to debate a $440 million dollar baseball stadium financing plan, and a vote could take place sometime Tuesday," the Associated Press reports. "The council approved an amendment from council chair Linda Cropp preserving the District's option of pursuing private financing for a new ballpark. Under the amendment, the District would have until April to search for private financing as an alternative to a business tax and the city covering potential cost overruns."

The Cato study "Caught Stealing: Debunking the Economic Case for D.C. Baseball" shows that professional sports teams and government-subsidized stadiums are not engines of economic development and generally have little, if any, positive effect on a city's economy.

Professors Dennis Coates and Brad R. Humphreys of, respectively, the University of Maryland, Baltimore County, and the University of Illinois, write: "Rooting for the team might provide satisfaction to many local baseball fans. That is hardly a reason for the city government to subsidize the team. D.C. policymakers should not be mesmerized by faulty impact studies that claim that a baseball team and a new stadium can be an engine of economic growth."

Fannie Mae Ordered to Forfeit $6.5 Million

"Fannie Mae, eager to unload a batch of fraudulent loans it purchased from a North Carolina lender, knowingly allowed the lender to resell the loans to a government mortgage agency, according to federal law-enforcement officials," the Wall Street Journal reports. "A federal judge in Charlotte, N.C., has ordered Fannie Mae to forfeit $6.5 million for not informing the agency about the fraud."

In "Fannie Mae, Freddie Mac, and Housing Finance: Why True Privatization Is Good Public Policy," New York University economist Lawrence J. White, a former Freddie Mac board member, argues in favor of the privatization of Fannie Mae and its sister corporation Freddie Mac.

"The special governmental links that apply to Fannie Mae and Freddie Mac yield little that is socially beneficial, while creating significant potential social costs," White argues. The best way to cut down on those costs and risks is privatization, he adds. "This would imply that the two companies would no longer enjoy any special privileges, but would no longer be restricted to their current narrow slice of the financial world. How these companies and their owners would fare in that scenario would then be a matter for markets, and not the Congress or [the Office of Federal Housing Enterprise Oversight], to decide."

Wyatt Dubois, editor, wdubois@cato.org