Archives: 10/2008

What They Should Talk About

The Chicago Tribune quotes me this morning on issues the candidates aren’t talking about and may not anticipate. It’s true that issues are likely to arise in the next four years that no one anticipates today. But there are also some issues that are pretty easy to identify that the candidates aren’t being pressed to talk about. Some of those include:

  • The proper role and scope of the federal government. Both candidates have a laundry list of things they want the federal government to do, and maybe they could each mention something they don’t want it to do. But what’s the framework behind their policy choices? What should government do? What should be left to state and local governments, and what should be left to the non-coercive sectors of society? What’s the proper and/or constitutional role and scope of the federal government?
  • The looming entitlements crisis. Entitlements are already about 40 percent of the federal budget. In 20 years they may double as a share of national income. Can we afford that? Do we want a tax burden that high? Do we want that many people dependent on a check from the federal government? Do we have the nerve to say that transfer payments should be cut? Tough choices that nobody wants to confront, partly because each politician hopes that the problem won’t explode until he leaves the scene.
  • We now have 2.5 million people in prison. Isn’t that something to talk about? Should they all they be there? Some 400,000 of them are nonviolent drug offenders. A million arrests don’t stop people from using drugs, and meanwhile the war on drugs costs us some $40 billion a year, increases crime rates, destroys poor neighborhoods, makes criminals out of lots of peaceful people, engenders civil liberties abuses, and funds the Taliban and other nefarious groups abroad.

Paul Krugman’s Nobel Prize

Paul Krugman wrote some interesting essays in international economics theory (he is not noted for using facts), but began to put politics above economics ever since the 1992 presidential campaign –as shown in my 1994 review of his book, Peddling Prosperity.

Wiser choices for future Nobel prizes would be Arnold Harberger and Martin Feldstein for their innovative work in microeconomics and public finance.

If the Economy Is All About Confidence…

…then why are our so-called leaders in Washington doing so much fear-mongering and thrashing around?

Verizon’s CEO Ivan Seidenberg exhibits much better economic leadership than anything we’ve heard from congressional leaders, President Bush, or Treasury Secretary Paulson. He simply has confidence, and he hasn’t mistaken “investment banking” or “banking” for “the economy.”

From a WSJ Deal Journal post called “No Bailout For Me, Thanks”:

We have to retool the work force. We’re not going to do it by hunkering down,” Seidenberg told the attendees of the Dow Jones-Nielsen Media and Money conference. “We’re going to do it by reinvesting.…we can’t allow this period in which we feel bad about dislocations to take away from what America should be doing, which is creating competitive edge. If we ever lose our nerve to continue to take risk, then we’re in a lot of trouble.

While political leaders shivver in their boots and talk about confidence, here’s a genuine leader getting on with it.

The Biggest Economic Nonsense Since the Great Depression

An otherwise interesting Washington Post front-pager on “What Went Wrong” claims the current situation “has erupted into the biggest economic crisis since the Great Depression.”  On the contrary, that honor surely goes to 1980-82, with 1973-75 as a close runner-up.

This may indeed be the biggest postwar financial crisis, but that is a very different thing.

The biggest postwar financial crisis so far was the S&L collapse of the late 1980s, when nearly 3000 financial institutions were closed.  But the impact  of the S&L debacle on the real economy was minor at best (the economy grew by 2.9% a year during that “crisis”).  The stock market crash of 1987 inspired many hysterical predictions but no recession at all.

An economic crisis implies a deep and prolonged drop in real output and employment, not just another routine recession.  To describe current conditions as a worse economic crisis than 1980-82 is fanciful nonsense.

I’m from the Government, and I’m Here to Help You, Whether You Want It or Not

This story says a lot about who most wants bank bailout money, and why:

Community banking executives around the country responded with anger yesterday to the Bush administration’s strategy of investing $250 billion in financial firms, saying they don’t need the money, resent the intrusion and feel it’s unfair to rescue companies from their own mistakes.

But regulators said some banks will be pressed to take the taxpayer dollars anyway. Others banks judged too sick to save will be allowed to fail.

The government also said yesterday that it will guarantee up to $1.4 trillion of private investment in banks. The combination of public and private investment is intended to refill coffers emptied by losses on real estate lending. With the additional money, the government expects, banks would be able to start making additional loans, boosting the economy… .

Peter Fitzgerald, chairman of Chain Bridge Bank in McLean, said he was “much chagrined that we will be punished for behaving prudently by now having to face reckless competitors who all of a sudden are subsidized by the federal government.”

At Evergreen Federal Bank in Grants Pass, Ore., chief executive Brady Adams said he has more than 2,000 loans outstanding and only three borrowers behind on payments. “We don’t need a bailout, and if other banks had run their banks like we ran our bank, they wouldn’t have needed a bailout, either,” Adams said.

“Pressed” how, exactly? One wonders. But common sense suggests two strong indicators that money is being misallocated. The first is when it goes to an institution with a track record of failure. The second is when it’s being urged on a recipient who does not even want it. It seems that we’re faced with one or the other now.

Media Bias - Proven!

The other day, my colleague Michael Cannon published a fun little Briefing Paper entitled “Does Barack Obama Support Socialized Medicine?” In it, he gives the provocative label, “socialized medicine,” a sensible meaning and examines where some important people stand on it. Worth a read.

There were a couple of lines in it that I thought were particularly interesting:

In April 2008, the Urban Institute held a public forum titled “What Is Socialized Medicine and Is It Relevant to Health Care Reform?” where scholars dismissed claims that Obama’s and similar plans would move America toward socialized medicine. The New York Times, the Associated Press, and National Public Radio have all run ostensibly objective stories with the same purpose. Of those organizations, only the Associated Press bothered to solicit input from anyone who thinks such claims are valid.

Awwwwwwwww. Did Michael not get a call from reporters when we thought he was supposed to? Pooor baaaaby! And welcome to the club, bud!

But today I spent some more time reviewing Mr. Cannon’s work: to wit, this blog post about Paul Krugman.  His post links to this NPR story on the debate. I’m not all that big on reading, so I skipped down to the audio highlights and listened to a segment from each of six speakers chosen by NPR. And do you know what I heard?

Twenty-nine seconds from one advocate of socialized medicine. Forty-one seconds of a second advocate of socialized medicine. And twenty-four seconds from a third.

Not very much, you say? That’s our hyper-kinetic, media-saturated world. But get this:

The other side’s three advocates - Cannon among them - got fourteen seconds, twenty-one seconds, and fourteen seconds respectively.

The longest clip given to advocates of freedom is shorter than the shortest clip given to advocates of socialized medicine, and the total time given to socializers is just shy of double the time given to keepers of the flame of liberty.

Media bias! Proven! At least - according to the weakest possible standards of proof. …But still, ya gotta wonder.

Lots of Red Ink Looms for Chávez’s Venezuela

A study prepared by the Deutsche Bank estimates that Venezuela needs the price of oil to stay above $97 per barrel in order to pay for government expenditures. Yesterday, the barrel of West Texas Intermediate Crude Oil at Nymex closed at $81.19.

If the troubled global economy keeps pushing the price of oil downwards, Hugo Chávez’s Bolivarian revolution will be in serious trouble.