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Cato Daily Dispatch for December 14, 2004

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Pentagon Seeks $80 Billion More for Iraq and Afghanistan
Another Record Trade Deficit
D.C. Council Likely to Approve Stadium Plan

Pentagon Seeks $80 Billion More for Iraq and Afghanistan

"Pentagon officials said they will ask the Bush administration for an additional $80 billion in emergency funding to help pay costs of the military presence in Iraq and Afghanistan, slightly higher than the $70 billion to $75 billion many on Capitol Hill had expected," the Wall Street Journal reports.

In "Iraq: Exit Rather Than Spend," Charles V. Peņa, Cato's director of defense policy studies, writes: "The United States must leave Iraq posthaste before the Iraqi mission becomes a sinkhole that swallows billions more of taxpayer dollars and all too many American lives. The best way to guarantee the safety of American troops is to bring them home."

In "Slash Domestic Spending to Pay for Rising War Cost," Peņa and Cato adjunct scholar Veronique de Rugy, argue that the president should reduce domestic spending if more must be spent in Iraq. "[President Bush] should think about cutting the $90 billion devoted to corporate welfare every year," they write. "He should also cut education spending, which has skyrocketed under his watch. ... The work of many government employees, among them NASA workers and air traffic controllers, can be privatized, along with federal assets such as land, mineral stockpiles and buildings. The National Endowments for the Humanities and for the Arts should be terminated. The federal government should also sell its defective business operations, including the Postal Service, Amtrak and electric utilities."

Another Record Trade Deficit

"America's trade deficit swelled to an all-time high of $55.5 billion in October as imports -- including those from China -- surged to the loftiest levels on record," the Associated Press reports. "The latest snapshot of trade activity, reported by the Commerce Department on Tuesday, showed the country's trade imbalance widening by a sizable 8.9 percent in October from the previous month -- despite the fact that U.S. exports registered their best month ever on record."

Dan Griswold, director of Cato's Center for Trade Policy Studies, says: "This morning's trade deficit report, far from being bad news, testifies to the continued expansion of the U.S. economy. Growing domestic demand stimulates both domestic production and the growth of imports from China and elsewhere. As usual, rising imports have been accompanied by rising GDP, industrial output, and employment. Meanwhile, import competition keeps inflation down and raises real living standards for American workers. ... America's growing volume of imports and exports reminds us that trade and prosperity are a package deal."

The Web site for Cato's Center for Trade Policy Studies sets the record straight on trade deficits: "America's trade deficit is not a cause for alarm. It is not caused by 'unfair' trade practices abroad or a lack of industrial competitiveness at home. The trade deficit results from a net inflow of foreign capital into the United States, capital drawn by America's vibrant and growing economy. Without this capital inflow, domestic interest rates would be higher, investment lower, and long-term growth rates slower."

D.C. Council Likely to Approve Stadium Plan

"District officials said yesterday that they have received new promises from Major League Baseball that improve a proposal to build a stadium with public money and will help persuade the D.C. Council to give final approval to the legislation today," the Washington Post reports.

In "Caught Stealing: Debunking the Economic Case for D.C. Baseball," Dennis Coates, professor at the University of Maryland, Baltimore County, and Brad R. Humphreys, associate professor at the University of Illinois, Urbana-Champaign, argue that the District should not use public funds to build the new stadium because professional sports teams "generally have little, if any, positive effect on a city's economy."

"A baseball team in D.C. might produce intangible benefits," they 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."

Wyatt DuBois, editor, wdubois@cato.org