April 28, 2009 5:04PM

The Global Economy Is Not Immune to Swine Flu

World governments should be careful not to play politics with the Mexican swine flu outbreak. The health consequences should of course be rigorously addressed — but without adding economic consequences, which is what several countries appear poised to do.


Public health scares have a history of seeping into trade policy without anything resembling sufficient consideration of the evidence. Governments in Russia and East Asia are already banning pork exports from Mexico, even though there is zero evidence that they pose a health hazard. It hearkens back to unfounded bans of U.S. beef in recent years by the European Union and South Korea.


If the U.S. government jumps on board, U.S. exports could be targeted for retaliatory trade actions. One quarter of U.S. pork production is exported, as well as billions of dollars of our soybeans used as feed by foreign hog farmers.


Exploiting this crisis could turn what is so far a manageable health problem into an unnecessary trade and diplomatic conflict. Obviously the global economy does not need the extra strain.

March 25, 2009 11:05AM

This Is Who’s Minding the Store?

There was a revealing colloquy during President Obama’s press conference last night.


I’ve edited it for brevity, leaving in the relevant sections. See if you can pick out the most interesting tidbit. The President called on ABC News’ Jake Tapper:

OBAMA: Jake?


QUESTION: Thank you, Mr. President.


Right now on Capitol Hill, Senate Democrats are writing a budget. And according to press accounts and their own statements, they’re not including the middle‐​class tax cut that you include in the stimulus, they’re talking about phasing that out, they’re not including the cap‐​and‐​trade that you have in your budget, and they’re not including other measures.


I know when you outlined your four priorities over the weekend, a number of these things were not in there. Will you sign a budget if it does not contain a middle‐​class tax cut, does not contain cap‐​and‐ trade?


OBAMA: Well, I’ve emphasized repeatedly what I expect out of this budget. I expect that there’s serious efforts at health care reform and that we are driving down costs for families and businesses, and ultimately for the federal and state governments that are going to be broke if we continue on the current path.


[President highlights other policy priorities]


Now, we never expected, when we printed out our budget, that they would simply Xerox it and vote on it. We assume that it has to go through the legislative process. I have not yet seen the final product coming out of the Senate or the House, and we’re in constant conversations with them.


[more on policy priorities]


Our point in the budget is: Let’s get started now. We can’t wait. And my expectation is that the Energy Committees or other relevant committees in both the House and the Senate are going to be moving forward a strong energy package. It will be authorized. We’ll get it done. And I will sign it.


OK?


QUESTION: (OFF-MIKE) willing to sign a budget that doesn’t have those two provisions?


OBAMA: No, I — what I said was that I haven’t seen yet what provisions are in there. The bottom line is, is that I want to see health care, energy, education, and serious efforts to reduce our budget deficit.


And there are going to be a lot of details that are still being worked out, but I have confidence that we’re going to be able to get a budget done that’s reflective of what needs to happen in order to make sure that America grows.

Hey, Jake? The President doesn’t sign the budget resolution. Here’s one of many budget process primers you can look over.


The Fourth Estate is pretty weak on budget process, which contributes to the poor results that come out of Congress. Since the passage of omnibus legislation completing spending for this fiscal year (2009), Wash​ing​ton​Watch​.com has begun to highlight how the administration and Congress are falling behind schedule for fiscal year 2010. I’ve not seen anything in the mainstream media about the impending collapse of the budget process for the coming fiscal year.


Update: Jake Tapper contacted me about this post to explain that he was using the term “budget” as a shorthand for the reconciliation legislation that Congress often produces in the budget process. It’s clear to me now that Jake Tapper knows the budget process — and that he handles criticism well.

March 23, 2009 11:05AM

Events This Week

By Cato Editors

kennedy-book

Monday, March 23, 2009

BOOK FORUM- The Tie Goes to Freedom: Justice Anthony M. Kennedy on Liberty
12:00 PM (Luncheon to Follow)
The Cato Institute

Author Helen Knowles examines how Kennedy's background as a law student and classroom teacher has influenced his judicial philosophy. The book begins by examining Kennedy's judicial thought in the context of libertarian thought. Knowles does not call the justice a libertarian. Instead, in a sympathetic but not uncritical analysis, she uses libertarian philosophy, focusing on privacy, race, and speech cases, to draw out Kennedy’s views about limited government and individual liberty. Please join us for a discussion of Justice Kennedy's "modest libertarianism," with comments by one of the nation's foremost constitutional scholars, Professor Randy Barnett.

Watch live online here.

CAPITOL HILL BRIEFING- Tax Havens Should Be Celebrated, Not Persecuted
12:00 PM (Lunch Included)
B-340 Rayburn House Office Building

Join Cato scholar Dan Mitchell and former member of the Cayman Islands Monetary Authority Richard Rahn to review the myths and realities about the role of tax havens in the global economy.


Tuesday, March 24, 2009

POLICY FORUM- Georgia's Liberal Institutions In the Wake of War and the Global Economic Crisis
12:00 PM (Luncheon to Follow)
The Cato Institute

Featuring David Bakradze, Speaker of the Georgian Parliament; Kakha Bendukidze, Former Minister of the Economy and Reform Coordination, Georgia; and Andrei Illarionov, Senior Fellow, Center for Global Liberty and Prosperity, Cato Institute.

Register to attend or watch live online here.
March 18, 2009 4:00PM

Too Much Hysteria about Trade

The World Bank issued a press release on Tuesday announcing the results of a study published March 2, which concludes that 17 of the 20 so-called G-20 countries have invoked at least some protectionist measures since pledging last November to avoid protectionism for at least one year.

Of course the Washington Post—which now specializes in printing run-of-the-mill stories about trade that rarely come close to justifying the sensational headlines, provocative subheads, or gripping leads — jumped all over the report as evidence that: "Trade Barriers Could Threaten Global Economy: World Bank Finds Protectionist Trend."

Well, we all know that trade barriers do threaten the global economy — in times of economic expansion and contraction. But most of the measures cited in the report are not particularly spectacular or unusual from a trade perspective. For better or worse, most WTO member countries do have some latitude to raise trade barriers — sometimes unconditionally. But also, in any given year, governments institute policies that happen to have adverse affects on trade (even if the measure wasn’t intended to be protectionist).

Sometimes aggrieved interests in affected countries prevail upon their governments to protest or otherwise seek resolution. And more often than not, under those circumstances, resolution is achieved. But sometimes, a protectionist measure doesn’t even provoke any kind of protest. So, quantifying protectionist measures is one thing, but qualifying them is quite another, more important exercise, if one is interested in making judgments about protectionist trends.

Read the rest of this post »
March 11, 2009 4:50PM

The Joys of Global Gridlock

The G‑20 Summit in London on April 2 will feature politicians from around the world jockeying to promote bad ideas. Thankfully, there is a silver lining to this dark cloud since the United States and Europe do not agree on which bad idea deserves the most prominence. As the Wall Street Journal explains, the United States wants more nations to squander money of Keynesian‐​style schemes (see here to understand why bigger government is not stimulus). The Europeans, meanwhile, want to persecute tax havens and give the Keystone Cops at the IMF more money:

The U.S. will press world leaders to boost emergency government spending to lift the global economy, risking a rift with European nations more concerned with revamping financial regulation. In President Barack Obama’s first foray into economic diplomacy, Washington will urge the shift at a summit next month in London, U.S. officials say, as markets look for a unified plan of action from the world’s most economically powerful nations. Washington’s focus is at odds with France, Germany and other European nations that want the Group of 20 summit on April 2 to focus on rewriting rules governing financial markets. … U.S. officials, who could receive support from China and other countries with big stimulus programs, contend additional government spending is needed to reduce the depth and length of the downturn. Britain also may have an easier time seeing eye‐​to‐​eye with the U.S. than other European countries because both London and Washington are concerned that tighter financial regulation could harm their financial centers. Administration officials also say the G‑20 isn’t ready to put new regulations in place, so focusing in that area would be counterproductive. … Even if the U.S. gets its way, the G‑20 won’t ignore financial regulation. The G‑20 has approved the concept of regulating the world’s largest financial institutions through international “colleges” of regulators.

The International Herald Tribune has more details on the misguided European proposals. At no point, though, is there any explanation of why the global economy would benefit from a bigger and more powerful IMF. The IMF certainly did not correctly predict the current financial turmoil. Nor has the IMF either correctly identified the government policy mistakes that caused the crisis or proposed policies that would help resuscitate the global economy. So why reward the bureaucrats with more money and power? The attack against tax havens is even more dubious. Desperate politicians like Gordon Brown are seeking scapegoats to distract voters, but it is unclear why tax havens should be blamed for asset bubbles caused by weak monetary policy and housing subsidies in “onshore” nations:

European finance ministers intend to push for a doubling of resources for the International Monetary fund to $500 billion, and to back the use of sweeping new sanctions against tax havens, according to a draft document. Confronted by a deepening global economic crisis, the top financial officials in the 27 European Union member countries are expected to agree in principle Tuesday to provide additional temporary funding for the IMF if necessary, and to support significant tightening of financial regulation. At a meeting in Brussels, the EU finance ministers are due to endorse a draft document, already approved by senior officials from national capitals, that will align the positions of European governments before the meeting of the heads of the Group of 20 developing and emerging economies in London next month. “It is essential,” the document says, “that the IMF has the appropriate financial means to assist countries particularly affected by the current crisis. EU member states support a doubling of IMF resources and are ready to contribute to a temporary increase if needed.” … The draft document…calls for the definition of a set of criteria by which to judge those that do not comply with international standards. “A tool box of sanctions” would be used to deal with such tax havens, the draft adds. These would include “the capacity to prohibit sales of financial products generated in these jurisdictions and the capacity to restrict companies’ operations into and from these jurisdictions.”

Gridlock generally is a good thing in Washington. If Republicans and Democrats are fighting, it slows the pace of legislation – which almost always protects liberty and prosperity. On the international level, where politicians scheme to set up cartels for the benefit of governments, gridlock is even more desirable.