201109

September 24, 2011 3:14PM

Eight Questions for Protectionists

When asked to pick my most frustrating issue, I could list things from my policy field such as class warfare or income redistribution.


But based on all the speeches and media interviews I do, which periodically venture into other areas, I suspect protectionism vs. free trade is the biggest challenge.


So I want to ask the protectionists (though anybody is free to provide feedback) how they would answer these simple questions.


1. Do you think politicians and bureaucrats should be able to tell you what you’re allowed to buy?

As Walter Williams has explained, this is a simple matter of freedom and liberty. If you want to give the political elite the authority to tell you whether you can buy foreign‐​produced goods, you have opened the door to endless mischief.

2. If trade barriers between nations are good, then shouldn’t we have trade barriers between states? Or cities?

This is a very straightforward challenge. If protectionism is good, then it shouldn’t be limited to national borders.

3. Why is it bad that foreigners use the dollars they obtain to invest in the American economy instead of buying products?

Little green pieces of paper have little value to foreign companies. They only accept those dollars in exchange for products because they intend to use them, either to buy American products or to invest in the U.S. economy. Indeed, a “capital surplus” is the flip side of a “trade deficit.” This generally is a positive sign for the American economy (though I freely admit this argument is weakened if foreigners use dollars to “invest” in federal government debt).

4. Do you think protectionism would be necessary if America did pro‐​growth reforms such as a lower corporate tax rate, less wasteful spending, and reduced red tape?

There are thousands of hard‐​working Americans that have lost jobs because of foreign competition. At some level, this is natural in a dynamic economy, much as candle makers lost jobs when the light bulb was invented. But oftentimes American producers can’t meet the challenge of foreign competition because of bad policy from Washington. When I think of ordinary Americans that have lost jobs, I direct my anger at the politicians in DC, not a foreign company or foreign workers.

5. Do you think protectionism would help, in the long run, if we don’t implement pro‐​growth reforms?

If we travel down the path of protectionism, politicians will use that as an excuse not to implement pro‐​growth reforms. This condemns America to a toxic combination of two bad policies — big government and trade distortions. This will destroy far more jobs and opportunity that foreign competition.

6. Do you recognize that, by creating the ability to offer special favors to selected industries, protectionism creates enormous opportunities for corruption?

Most protectionism in America is the result of organized interest groups and powerful unions trying to prop up inefficient practices. And they only achieve their goals by getting in bed with the Washington crowd in a process that is good for the corrupt nexus of interest groups‐​lobbyists‐​politicians‐​bureaucrats.

7. If you don’t like taxes, why would you like taxes on imports?

A tariff is nothing but a tax that politicians impose on selected products. This presumably makes protectionism inconsistent with the principles of low taxes and limited government.

8. Can you point to nations that have prospered with protectionism, particularly when compared to similar nations with free trade?

Some people will be tempted to say that the United States was a successful economy in the 1800s when tariffs financed a significant share of the federal government. That’s largely true, but the nation’s rising prosperity surely was due to the fact that we had no income tax, a tiny federal government, and very little regulation. And I can’t resist pointing out that the 1930 Smoot‐​Hawley tariff didn’t exactly lead to good results.

We also had internal free trade, as explained in this excellent short video on the benefits of free trade, narrated by Don Boudreaux of George Mason University and produced by the Institute for Humane Studies.

My closing argument is that people who generally favor economic freedom should ask themselves whether it’s legitimate or logical to make an exception in the case of foreign trade.

September 23, 2011 4:15PM

Cops on Camera in Fullerton, Calif.

In large part because of social media and consumer‐​level video technology, two Fullteron, Calif. police officers likely involved in the death of Kelly Thomas have now been charged with murder, manslaughter and excessive use of force. Reason.tv’s Paul Detrick has produced an excellent video detailing the events that led to the charges. Be warned: Some of the images presented here are quite disturbing.

Still many jurisdictions claim that they can arrest and charge individuals when they use video technology to document police engaged in their public duties, even when those people are documenting police abuse. Further, police agencies are often reluctant to use video documentation to show what happens in high‐​stakes police encounters like SWAT raids. Cato’s “Cops on Camera” video last year provides some context about how technology can be used by individuals and should be used by police to help document how police do their jobs.

September 23, 2011 3:35PM

This Week in Government Failure

Over at Downsizing the Federal Government, we focused on the following issues this past week:

  • Interesting thoughts on reforming the U.S. Postal Service.
  • If our bloated federal government is ever to be reined in, a return to fiscal federalism is a must. And if the states are to get their financial houses in order, state policymakers can’t be allowed to believe that a federal policy of “too big to fail” applies to them.
  • Chris Edwards says that Warren Buffet’s tax story is bogus.
  • Unless spending and deficits are cut, the United States is headed for economic ruin as growth falls and rising debt threatens further financial crises.
  • There’s no point getting worked up about government waste if you’re also getting checks from the U.S. Treasury or demanding that the government solve society’s problems.

Follow Downsizing the Federal Government on Twitter (@DownsizeTheFeds) and connect with us on Facebook.

September 23, 2011 3:35PM

Elizabeth Warren, Fair Play, and Soaking the Rich

Elizabeth Warren’s recent remarks on class warfare, made during a campaign stop in her quest for a Massachusetts U.S. Senate seat, provide a nice microcosm of the broader philosophical views behind much contemporary political debate.

Here’s Warren:

The relevant bit that has her supporters so fired up goes like this:

I hear all this, oh this is class warfare, no! There is nobody in this country who got rich on his own. Nobody. You built a factory out there–good for you.

But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory.

Now look. You built a factory and it turned into something terrific or a great idea–God Bless! Keep a Big Hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Fully exploring the thinking behind Warren’s remarks would demand a book at least. We might point out that most of the rich got that way by creating value for others, meaning they gave back in the process of getting rich. Or we might wonder if her thinking implies that, because the state is responsible in part for the environment in which all of us earned what we have, the state is the actual owner of what we have.

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September 23, 2011 3:26PM

On Waste in the Justice Department

An audit released this week by the Department of Justice’s inspector general details wasteful and extravagant spending at DOJ conferences under both the Bush and Obama administrations. Stories about waste in government programs are as common as ants, but this one appears to have struck a nerve across the country — perhaps because the president is trying to convince us that Washington needs more money.


Yesterday I discussed the issue of $16 muffins at DOJ conferences on radio stations from California to New York, with points in between. The most common question I received was, “How can wasteful spending be stopped?” As I told listeners, the only way to stop it is to not give the offending agency or program any more money. Otherwise, government employees will continue wasting money for the simple reason that it isn’t their money. And because the government isn’t a business, politicians and government employees don’t have to be concerned with improving the bottom line. In short, there’s little incentive for the government not to waste money.


Politicians typically respond to stories about government waste by condemning the situation and promising to fix it. Government waste actually creates a good opportunity for politicians to feign concern for taxpayers. Reason’s Matt Welch explains:

The nation’s current and future deficit is driven overwhelmingly by health care, military and retirement spending, each of which involve ever‐​increasing promises that have proved politically career‐​threatening to scale back.


That’s why politicians prefer instead to talk about $16 muffins and $600 toilet seats — it’s the least expensive way to simulate fiscal responsibility. The boy who cries muffin while signing onto every new major entitlement and military adventure is not in any position to deliver lectures about tax‐​dollar stewardship. And never forget that the spending frenzy is distinctly bipartisan: Even alleged fiscal radical Rep. Paul Ryan, R‑Wisconsin, voted for the Troubled Assets Relief Program, the Iraq War and Medicare Part D.

Sadly, a lot of Americans buy it, which is why politicians keep selling it. As I’ve previously discussed, a majority of Americans erroneously believe that the federal budget’s imbalances can be fixed by just eliminating waste, fraud, and abuse. That’s why I made it a point to remind listeners that there’s no point getting worked up about government waste if they’re also getting checks from the U.S. Treasury or demanding that the government solve society’s problems. As Welch puts it, “As long as we believe that government is good at creating jobs and stimulating the economy, we’re going to be stuffed by much more than just $16 muffins.”

September 23, 2011 3:14PM

How Do You Get to the Supreme Court?

So you want to know how the case of Good v. Evil ends up at the Supreme Court, providing fodder for all us legal pundits to digest and expound upon? The Institute for Justice has come out with an entertaining video going through the basics of trial and appellate procedure — essentially a “How a Bill Becomes a Law” for the legal practice set.


It’s really the best way to procrastinate on a rainy Friday afternoon:

Look for the volume of the Cato Supreme Court Review that appears briefly as the narrator describes the various materials attorneys have to read to get a good grasp on their case.

September 23, 2011 1:49PM

The Solyndra Story Keeps Unfolding

Is the taxpayers' lost $535 million in the green-energy company Solyndra just an unfortunate business failure, or is there something more scandalous involved? You should read every word of this front-page New York Times article. Sure, it says that "no evidence has emerged that political favoritism played a role in what administration officials assert were merit-based decisions." But the story is full of smoking guns.

Here's the opening:

President Obama’s visit to the Solyndra solar panel factory in California last year was choreographed down to the last detail---the 20-by-30-foot American flags, the corporate banners hung just so, the special lighting, even coffee and doughnuts for the Secret Service detail.

“It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future,” the president declared in May 2010 to the assembled workers and executives. The start-up business had received a $535 million federal loan guarantee, offered in part to reassert American dominance in solar technology while generating thousands of jobs.

But behind the pomp and pageantry, Solyndra was rotting inside, hemorrhaging cash so quickly that within weeks of Mr. Obama’s visit, the company canceled plans to offer shares to the public. Barely a year later, Solyndra has become one of the administration’s most costly fumbles after the company declared bankruptcy, laid off 1,100 workers and was raided by F.B.I. agents seeking evidence of possible fraud.

Solyndra’s two top officers are to appear Friday before a House investigative committee where, their lawyers say, they will assert their Fifth Amendment right against self-incrimination.

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