New Video: Assessing Obama’s Speech to Schoolkids

In this new video, Cato scholars Neal McCluskey and Gene Healy weigh in on President Obama’s speech to schoolchildren on their first day of class.

Overall message: It’s not about the speech.

Watch:

Cato education policy experts were very vocal about the whole ordeal, and the implications of Obama’s speech. Cato’s Education and Child Policy tagged posts have more details.

Thomas Friedman’s New Math of Democracy

52237408AW011_Meet_The_PresThomas Friedman’s New York Times column today would be astonishing in its incoherence if only Friedman hadn’t long ago sapped us of our ability to be astonished by his incoherence. Like many capital-‘d’ Democrats, Friedman has soured on democracy for failing to deliver on his policy wish list.

Watching both the health care and climate/energy debates in Congress, it is hard not to draw the following conclusion: There is only one thing worse than one-party autocracy, and that is one-party democracy, which is what we have in America today.

Why does Friedman say the United States has one-party democracy? Because the Republican Party is effectively opposing the Democratic Party’s agenda! Not even kidding. Get this:

The fact is, on both the energy/climate legislation and health care legislation, only the Democrats are really playing. With a few notable exceptions, the Republican Party is standing, arms folded and saying “no.” Many of them just want President Obama to fail. Such a waste. Mr. Obama is not a socialist; he’s a centrist. But if he’s forced to depend entirely on his own party to pass legislation, he will be whipsawed by its different factions.

Only the Democrats are really playing! You might think that would mean they can do whatever they darn well please. But no! The Democrats can’t do anything! Because the other party’s opposition is so effective! So it’s exactly as if there’s just one party: nothing gets done!

My hunch is that the Times’ editors see Friedman aiming the gun at his foot, but watching a man stupid enough to actually pull the trigger is so fun they hate to intervene. That or they’re trying to explode the myth of American meritocracy.

So where were we? Oh, yes: one-party democracy is aggravating because sometimes one party can’t do what it wants because the other party gets in the way. Sooo frustrating!!! Why have democracy at all when all you end up with is a single party stymied by the other one! And so it is that Friedman comes to wax romantic about communist central planning:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power and wind power.

Nikita Kruschev, the enlightened leader of a now-defunct one-party autocracy, was also committed to overtaking the United States in technology and so much more. “We will bury you” is how he put it. At the time, more than a few left-leaning American opinionmakers suspected he was right. After all, how can inefficiently squabbling democracies possibly keep pace with undivided regimes wholly devoted to scientifically centrally planning their way into the brighter, better future? And that, children, is why we speak Russian today.

A Flat Tire for Low-Income Drivers?

Will the President raise taxes on new tires?

President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.
Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.
A central point of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,
Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …
Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.
We will see shortly if President Obama will punish low-income Americans who drive.

President Obama will need to decide any day now whether to impose tariffs on lower-end automobile tires imported from China. As my colleague Dan Ikenson has ably argued, the decision will tell us much about whether the president believes trade policy should serve the general interest of all Americans, or whether it is simply a political tool to satisfy key constituencies.

Neglected in the news coverage of the pending decision is the impact it could have on consumers. The imported tires targeted by this Section 421 case are of the cheaper variety, the kind that low-income Americans would buy to keep their cars on the road during a recession. If the president decides to impose tariffs, his union supporters will cheer, but “working families’ will find it more difficult to keep their cars running safely.

A central theme of my new Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization, is that import competition is a working family’s best friend, especially imports from China. As I write in an excerpt published in today’s Washington Examiner,

Imports from China have delivered lower prices on goods that matter most to the poor, helping to offset other forces in our economy that tend to widen income inequality. …

Imposing steep tariffs on imports from China would, of course, hurt producers and workers in China, but it would also punish millions of American consumers through higher prices for shoes, clothing, toys, sporting goods, bicycles, TVs, radios, stereos, and personal and laptop computers.

We will see shortly if President Obama will punish low-income Americans who drive.

No, the Fed Did Not Stabilize the Economy

Commenting on a recent article of mine in The Wall Street Journal, Peter Gartside claims that:

Prior to 1913, the U.S. annual gross domestic product changes oscillated between extremes of approximately plus or minus 15%.   After the establishment of the Federal Reserve Board, the limits of GDP oscillations narrowed to approximately plus or minus 6%.

You may well wonder where he got that idea, since there are no official estimates of gross domestic product (GDP) for years before 1929.  In the early 1960s, however, John Kendrick and Simon Kuznets bravely attempted to construct such estimates for gross national product (GNP).  That would be close enough to modern GDP data were it not for the primitive statistics and technology they had to work with.

The table (after the jump) shows these heroic old estimates for real GNP from 1889 to 1914.  In that period, there was only one year (1908) in which the drop in GNP exceeded 6% and none that remotely approaches the  “minus 15%” figure of Mr. Garstide’s imagination.

Real GNP
billions of 1958$

1889    49.1
1890    52.7
1891    55.1
1892    60.4
1893    57.5
1894    55.9
1895    62.6
1896    61.3
1897    67.1
1898    68.6
1899    74.8
1900    76.9
1901    85.7
1902    86.5
1903    90.8
1904    89.7
1905    96.3
1906    107.5
1907    109.2
1908    100.2
1909    116.8
1910    120.1
1911    123.2
1912    130.2
1913    131.4
1914    125.6

Historical Statistics of the U.S., Series F4

CEA chair Christina Romer’s research shows that these early estimates “exaggerate the size of cycles because they are based on the assumption that GNP moves approximately one for one with commodity output valued in producer prices.” If we tried to estimate recent GDP figures on the basis of commodity output and prices, then postwar cycles would look even wilder than they already do.  Consider, for example, using the recent gyrations in producer prices of oil and metals as a proxy for GNP.

Even if we relied on the ancient and flawed pre-Romer GNP estimates above, however, there were still no downturns before 1913 that were nearly as extreme as 1929-33 or even 1920-21.  And there was no recession between the 1870s and 1913 that lasted as long as the slump of 2008-2009.

Whether we’re talking about fiscal or monetary fine-tuning, all the technocrats efforts at taming the business cycle in the past 40 years appear no more successful than the pre-Fed policies of doing without a central bank and doing without deferred tax increases (debt-financed “fiscal stimulus” plans).

A Picture Is Worth $300 Billion

I blogged this morning that the research shows higher public school spending slows the economy, and explained that this is because spending more on public schools doesn’t increase students’ academic performance. Some readers no doubt find that hard to accept. With them in mind, I present the following chart:


Spending vs. Achievement

If public schools had merely maintained the level of productivity they exhibited in 1970, Americans would enjoy a permanent $300 billion annual tax cut. Now THAT would stimulate economic growth.

More Sense on the President’s Speech

I’m busy dealing with the fallout from the President’s address to students yesterday, especially the cheap-shot smearing as kooks or right-wing zealots anyone who dared question the propriety of the event. That has left me with little time to blog about the speech. Fortunately, I don’t have to: Over at Cafe Hayek, Cato Adjunct Scholar Donald Boudreaux has penned a terrific explanation of why very reasonable people could object to the president’s speech. Here’s the best part:

The idea that we should be ‘inspired’ by winners of political elections — the notion that successful politicians have some special wisdom to impart — the stupid consensus that high political office renders its holders unusually trustworthy when delivering clusters of cliches — is intolerable to men and women who value freedom and individuality.

A Harsh Climate for Trade

Although it has very much taken a back-seat to health care, and a press report [$] today say it could be bumped down yet another notch on the administration’s hierarchy of goals, climate change is shaping up to be a major battle if the others don’t prove to be prohibitively exhausting. So today I am weighing in on the debate by releasing my new paper on the dangers of using trade measures as a tool of climate policy.

The Democrats were keen to pass a climate change bill in advance of the December meeting in Copenhagen designed to agree on a successor regime to the Kyoto protocol, which expires in 2012.  However, opposition from a number of quarters and the fear of health-care-town-halls-mark-II has cooled their heels. Senate leaders have pushed back the deadline for passing bills out of committees a number of times.

The reason why climate change legislation has become so controversial is that businesses and consumers are, quite understandably, fearful about any policies that threaten to increase their costs. I’ll leave it to others to blog about the effect of emissions-reductions policies on jobs and profits, but even the fear of losses has led to calls for special deals for “vulnerable industries”, in the form of free emission permits and/or protection from imports that are sourced from countries that purportedly take insufficient steps to limit emissions.

H.R. 2454, the so called Waxman-Markey bill passed by the House in June, contains both free permits and provisions for carbon tariffs. I’ve blogged before about the efforts of trade-skeptic senators to introduce the same kinds of protections in the senate bill. To that end, Sen. Sherrod Brown (D, OH) is reportedly meeting with Sen. Barbara Boxer, Chairwoman of the Senate Environment and Public Works Committee next week about trade protections for manufacturing industries.  As my paper makes clear, I think these efforts are misguidedly ineffective at best, and harmful at worst.

I’m looking forward to discussing these issues in more detail tomorrow at a Hill briefing in Washington DC. Registration for the event was closed very early because of overwhelming demand, but you can watch the event when the video becomes available on the Cato website.