Juan Carlos Hidalgo posted recently about Uruguay’s proposed law legalizing the production and sale of marijuana. He points out that production will come only from a state-owned monopoly. As a trade policy person, what I took from this is: No imports, and someday maybe a trade dispute. Of course, as of today, no one else has legalized production, so there won’t be any (legal) trade. But imagine that, say, the Netherlands legalizes marijuana production in the coming years, and is less restrictive about who can produce it. If their producers decide they would like to export to Uruguay, they may lobby for a trade complaint against the ban on imports. Now, there are various defenses that Uruguay can invoke, and success on the complaint is far from certain. Nevertheless, the GATT and WTO have a long history of complaints about “sin” products, such as tobacco and alcohol, and perhaps marijuana will join that distinguished list someday.

With all eyes on the Supreme Court, whose ruling on ObamaCare’s individual mandate could come as early as today, almost no one noticed that last month the IRS imposed an illegal tax on employers of up to $3,000 per worker.

Jonathan Adler and I explain in today’s USA Today that this illegal tax is the indirect but very real result of the IRS offering ObamaCare’s tax credits and subsidies in health insurance “exchanges” created by the federal government, even though ObamaCare restricts those entitlements — explicitly, laboriously, and unambiguously — to Exchanges established by states.

That illegal action has the effect of imposing ObamaCare’s $2,000-$3,000 per worker tax (i.e., the “employer mandate”) on employers who otherwise would be exempt (i.e., employers in states that do not create an Exchange). Perhaps President Obama thought “taxation without representation” would be a winning campaign slogan.

If the Supreme Court fails to strike down ObamaCare’s employer mandate, Exchanges, and health insurance tax credits and subsidies, this thoroughly unconstitutional IRS rule will begin illegally taxing employers in 2014.

Reps. Scott DesJarlais (R‑TN) and Phil Roe (R‑TN) have introduced a resolution under the Congressional Review Act that would block the rule. Barring that, expect more angry employers to haul ObamaCare into federal court.

Adler discusses the IRS rule here:

She was one of my intellectual heroes, Anna was–together with Milton and Leland, David Laidler, Sir Alan Walters, and Dick Timberlake. Old monetarists all, come to think of it. Now only three are left; and, no, they do not make them like that any more.

I met Anna at NYU. Back then the NBER occupied the 8th floor of 269 Mercer Street. NYU’s economics department was on the 7th floor. Of course I went to meet her. She turned out to be very nice, so I got the bright idea to ask her to serve as an external member of my dissertation committee. I had the impression that I was one of very few NYU Ph.D. candidates to think of doing that, which struck me as odd. But then a lot of things about NYU, and about the economics business generally, struck me (and still strike me) as odd.

Anna gave me some good advice; indeed, apart from Larry White (who was my supervisor, and who I talked to almost daily) she was my most helpful adviser at NYU. Naturally I don’t remember much about the particular advice she gave me. But I do distinctly remember her telling me that, once I got into the business, I had better write about stuff besides free banking if wanted to survive. I took Anna’s advice, and still found it rough going. Had I not listened to her I’m sure I would have had to give up.

I’m also pretty sure that it was only thanks to Anna that some of the the free banking stuff that did make it into the better journals got through: she was one of the few persons who was both greatly respected by the editors of those journals and willing to give the free bankers a hearing. Indeed, Anna was more than sympathetic: she was, or she became, one of us. I am reasonably certain that she played a very large, if not crucial, part in encouraging Milton to revise his thinking on the topic, as he did when he and Anna published their 1986 JME paper “Has Government Any Role in Money?” That Anna’s views on the proper scope of government interference in banking became progressively more radical I have no doubt. For example, while in a 1995 Cato Journal article she and Mike Bordo took the conventional line that you couldn’t have a stable banking system without some sort of deposit insurance, when I questioned her about this stand a few years ago Anna claimed that she had since rejected that view, having come to believe instead that the moral hazard arising from deposit guarantees ultimately caused such guarantees to do more harm than good.

I was lucky to be able to talk to Anna at length on several occasions during the last few years, thanks to Walker Todd, who arranged for her to visit the American Institute for Economic Research while I was there as a summer fellow. What I remember most about those conversations was how very candid and uncompromising they were: Anna never held a punch, and when she threw one, it landed square on target. Not that Anna wasn’t generous with praise: it’s just that, whatever she thought, she always came right out with it. She’d lived long enough, I suppose, to earn that. In any event it meant that talking to her was really a blast. (If only I could repeat all that I heard!)

Now, with all the dominoes lined-up from Greece to Brussels and beyond, and ready to start toppling at any moment, how I wish that this tough and uncompromising monetarist was still among us! No one can say just what she’d have made of it all; but whatever she made you can bet she would have served it up straight.

The lead story in today’s Washington Post accuses Mitt Romney, while at Bain Capital, of investing in firms “that specialized in relocating” American jobs overseas. This gave cause to Obama political adviser David Axelrod to accuse Romney of “breathtaking hypocrisy,” which prompted Roger Pilon to spell out some differences between economics and “Solyndranomics” for the administration. Roger’s correct. But Romney—for running away from that record and playing to that same politically fertile economic ignorance that tempts devastating economic policies—is also worthy of his scorn. Romney should have written Roger’s words.

President Obama set the tone earlier this year during his SOTU address by demonizing companies that get tax breaks for shipping jobs overseas. By “tax breaks,” the president means merely that their un-patriated profits aren’t subject to double taxation. “Shipping jobs overseas” is a metaphor you’ll hear more frequently in the coming months, and Romney is more likely to deny any association with it than to defend it. That’s just the way he rolls.

Outsourcing has been portrayed as a betrayal of American workers by companies that only care about the bottom-line. Well, yes, caring about the bottom line is what companies are supposed to do. Corporate officers have a fiduciary duty to their shareholders to maximize profits. It is not the responsibility of corporations to tend to the national employment situation. It is, however, the responsibility of Congress and the administration to have policies in place that encourage investing and hiring or that at least don’t discourage investing and hiring. But for the specific financial inducements that politicians offer firms to invest and hire in particular chosen industries—Solyndranomics—this administration (and the 110th-112th Congresses) has produced too many reasons to forgo domestic investment. Let’s not blame companies for following the incentives and disincentives created by policy.

There’s also the economics. Contrary to the assertions of some anti-trade, anti-globalization interests, countries with low wages or lax labor and environmental standards rarely draw U.S. investment. Total production costs—from product conception to consumption—are what matter and locations with low wages or lax standards tend to be less productive and thus less appealing places to produce.

The vast majority of U.S. direct investment abroad (what the president calls “shipping jobs overseas”) goes to other rich countries (European countries and Canada), where the rule of law is clear and abided, and where there is a market to serve. The primary reason for U.S. corporations establishing foreign affiliates is to serve demand in those markets—not as a platform for exporting back to the United States. In fact, according to this study by Matt Slaughter, over 93 percent of the sales of U.S. foreign affiliates are made in the host or other foreign countries. Only about 7 percent of the sales are to U.S. customers.

Furthermore, the companies that are investing abroad tend to be the same ones that are doing well and investing and hiring at home. Their operations abroad complement rather than supplant their U.S. operations.

During his unsuccessful 2004 presidential campaign, candidate John Kerry denigrated “Benedict Arnold companies” that outsourced production and service functions to places like India. Earlier this month, Senator Kerry introduced a bill in the Senate that effectively acknowledges that anti-investment, anti-business policies may be responsible for deterring foreign investment in the United States and for chasing some U.S. companies away. Maybe he should talk to the president—and Romney.

There are not many scholars who at age 90 produce important books. But that is exactly what long-time Cato adjunct scholar Dick Timberlake has done with the forthcoming publication of his opus Constitutional Money, which examines Supreme Court monetary decisions and argues that the monetary clauses of the Constitution should be restored by ending fiat money and returning to convertibility. However, if practical politics prevents returning to a full-fledged commodity standard, Congress should at least end the Federal Reserve’s discretion and impose a monetary rule designed to produce long-run price stability—and stop pretending that the central bank can fine-tune the economy to bring about full employment (see Timberlake’s recent article in the Cato Journal).

Timberlake’s many contributions to monetary economics are outlined in the essay below by Kurt Schuler. Kurt notes that not only is Timberlake an accomplished scholar, he is a mentor to younger scholars and a person who practices what he preaches: hard work and honesty. Happy birthday Dick! May you have many more years to enjoy your productive work—keep flying high!

Cato Adjunct Scholar Richard H. Timberlake, Jr. turns 90 years old on June 24. His long and fruitful career as a scholar of money and banking began in 1957, when he published an article in the Review of Economics and Statistics. In 1959 he completed his Ph.D. dissertation at the University of Chicago under the guidance of Milton Friedman. His latest publication is in the current issue of the Cato Journal, and his book Constitutional Money: A Review of the U.S. Supreme Court’s Monetary Decisions is forthcoming from Cambridge University Press.

Dick’s best-known work is Monetary Policy in the United States: An Intellectual and Institutional History, published in 1993. It is a much expanded version of his 1978 book The Origins of Central Banking in the United States. Because others, notably Milton Friedman and Anna Schwartz, had focused on gathering and analyzing U.S. monetary statistics, Monetary Policy in the United States focuses on the question “What were policy-makers thinking?” It explains the ideas and experiences that influenced the choices that shaped U.S. monetary policy. It is especially useful for its emphasis on the thinking of members of Congress as they created the laws that underlie monetary policy.

Among scholars, Dick’s other most often cited work is “The Central Banking Role of Clearinghouse Associations,” a 1984 article in the Journal of Money, Credit, and Banking. It explains how in the era before the Federal Reserve System, banks across the United States banded together to provide certain services for their members and to act jointly in the face of common dangers during financial panics. In particular, during some panics, clearinghouse associations issued temporary currency that was widely accepted and acknowledged as beneficial despite being forbidden under the perverse restrictions imposed by the laws of the time. Dick incorporated the article as a chapter in Monetary Policy in the United States.

Since this is a brief appreciation of a still-active scholar rather than a full career retrospective, it suffices simply to mention a few other of Dick’s writings: Gold, Greenbacks and the Constitution, a 1991 monograph; “Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy,” a 2007 article that supplies an important piece of the puzzle about the Federal Reserve’s monetary policy during the Great Depression; and They Never Saw Me Then, a 2001 book recounting his experience as a bomber co-pilot during World War II. Dick received three Purple Hearts for his wartime service.

Dick’s style is “mild in manner, strong in argument.” He writes clearly and vigorously. He salts his writing and particularly his speaking with flashes of wit. He is, to boot, generous with his knowledge. Years ago, when I was preparing an encyclopedia article on William Gouge, an early 19th century American writer on banking, I went to ask him if he had any advice. He pulled out of his file cabinet a complete microfilm file he had had made of records on Gouge from the National Archives, for possible publication in an article, and let me keep it as long as I needed. It was like a veteran prospector telling a greenhorn, “Go ahead, here’s my gold vein, and while you’re at it, why don’t you borrow my pickaxe.”

Dick has for some years been retired from the University of Georgia, the last of several universities where he taught. He and his wife, Hildegard, an economist and artist, have five children. Happy birthday, Dick!

Kurt Schuler is Senior Fellow in Financial History at the Center for Financial Stability.

We’re saddened to note that William H. Peterson, a longtime friend of the Cato Institute, died this week at 91.

Bill was a student of Ludwig von Mises at New York University, where he received his Ph.D. in economics in 1952. He was later professor of economics in the Graduate School of Business Administration at NYU; Scott L. Probasco. Jr. Professor of Free Enterprise and director of the Center for Economic Education at the University of Tennessee at Chattanooga; and Lundy Professor of Business Philosophy at Campbell University in North Carolina. He also worked in business, consulted with governments around the world, and wrote a book review column for the Wall Street Journal. In 1982, he lectured on free-market economics in Romania, East Germany, Ireland, and Canada. He wrote an essay on Mises that appeared in the 1971 book Toward Liberty: Essays in Honor of Ludwig von Mises, edited by F. A. Hayek.

In recent years he reviewed books, including many Cato Institute books, for the Washington Times. I’m pleased to have published his article “Is Business ‘Administration’?” in Cato Policy Report in 1983, in which he made the case that business is “dynamic, competitive, synergistic, literally wealth-creating”—entrepreneurial, not merely administrative—and therefore the coveted MBA degree is misnamed and perhaps wrongly taught.

Bill’s wife of 62 years, Mary Bennett Peterson, died last year. She also studied with Mises at NYU. She worked as a stockbroker, a foundation officer, and a lobbyist for General Motors. She also wrote a book, The Regulated Consumer, that was ubiquitous among libertarians and conservatives in the 1970s. She criticized such agencies as the Interstate Commerce Commission and the Civil Aeronautics Board for harming consumers, helping to set in motion a policy agenda that resulted in deregulation of both airlines and trucking.

Every day brings more and more evidence that Obamanomics is failing in Europe. I wrote some “Observations on the European Farce” last week, but the news this morning is even more surreal.

The French Minister responsible for Parliamentary Relations, Alain Vidalies, has recently conceded that EUR10bn (USD12.7bn) is needed to balance the country’s budget this year, to be achieved notably by means of implementing a number of emergency tax measures. …The government plans to abolish the exemption from social contributions applicable to overtime hours, expected to yield a gain for the state of around EUR3.2bn, and to subject overtime hours to taxation, predicted to realize approximately EUR1.4bn in additional revenues. Other proposed measures include plans to reform the country’s solidarity tax on wealth (ISF), to cap tax breaks at EUR10,000, to impose a 3% tax on dividends and to increase the inheritance tax as well as the tax on donations. …French President Hollande announced plans during his election campaign to reform ISF. Holland intends to restore the wealth tax scale of between 0.55% and 1.8%, in place before the former government’s 2011 reform, to be applied on wealth in excess of EUR1.3m. Currently a 0.25% rate is imposed on net taxable wealth in excess of EUR1.3m and 0.5% on net taxable assets above EUR3m.

France already has the highest tax burden of any non-Scandinavian nation, so why not further squeeze the productive sector? That’s bound to boost jobs and competitiveness, right? And more revenue as well!

In reality, the Laffer Curve will kick in because France’s dwindling productive class isn’t going to passively submit as the political jackals start looking for a new meal.

But while France is driving into a fiscal cul-de-sac, Italian politicians have constructed a very impressive maze of red tape, intervention, and regulation. From the Wall Street Journal, here is just a sampling of the idiotic rules that paralyze job creators and entrepreneurs:

Once you hire employee 11, you must submit an annual self-assessment to the national authorities outlining every possible health and safety hazard to which your employees might be subject. These include work-related stress and stress caused by age, gender and racial differences. …Once you hire your 16th employee, national unions can set up shop, and workers may elect their own separate representatives. As your company grows, so does the number of required employee representatives, each of whom is entitled to eight hours of paid leave monthly to fulfill union or works-council duties. …Hire No. 16 also means that your next recruit must qualify as disabled. By the time your firm hires its 51st worker, 7% of the payroll must be handicapped in some way, or else your company owes fees in kind. …Once you hire your 101st employee, you must submit a report every two years on the gender-dynamics within the company. This must include a tabulation of the men and women employed in each production unit, their functions and level within the company, details of their compensation and benefits, and dates and reasons for recruitments, promotions and transfers, as well as the estimated revenue impact. …All of these protections and assurances, along with the bureaucracies that oversee them, subtract 47.6% from the average Italian wage, according to the OECD. …which may explain the temptation to stay small and keep as much of your business as possible off the books. This gray- and black-market accounts for more than a quarter of the Italian economy. It also helps account for unemployment at a 12-year high of 10%, and GDP forecast to contract 1.3% this year.

You won’t be surprised to learn that the unelected prime minister of Italy, Mr. Monti, isn’t really trying to fix any of this nonsense and instead is agitating for more bailouts from taxpayers in countries that aren’t quite as corrupt and strangled by red tape.

Monti also is a big supporter of eurobonds, whichs make a lot of sense if you’re the type of person who likes co-signing loans for your unemployed alcoholic cousin with a gambling addiction.

But let’s not forget our Greek friends, the ones from the country that subsidizes pedophiles and requires stool samples from entrepreneurs applying to set up online companies.

The recent elections resulted in a victory for the supposedly conservative party, so what did the new government announce? A flat tax to boost growth? Sweeping deregulation to get rid of the absurd rules that strangle entrepreneurship?

Nope. In addition to whining for further handouts from taxpayers in other nations, the Wall Street Journal reports that the new government has announced that it won’t be pruning any bureaucrats from the country’s bloated government workforce:

Greece’s new three-party coalition government on Thursday ruled out massive public-sector layoffs, a move that could help pacify restive trade unions… The new government’s refusal to slash public payrolls and its demands to renegotiate its loan deal comes just as euro-zone finance ministers meet in Luxembourg to discuss Greece’s troubled overhauls—and possibly weigh a two-year extension the new government is seeking in a bid to ease the terms of the austerity program that has accompanied the bailout. …Cutting the size of the public sector has been a top demand by Greece’s creditors—the European Union, European Central Bank and International Monetary Fund—to reduce costs and help Greece meet its budget-deficit targets needed for the country to get more financing. So far, Greece has laid off just a few hundred workers and failed to implement a so-called labor reserve last year, which foresaw slashing the public sector by 30,000 workers.

Gee, isn’t this just peachy? Best of all, thank to the IMF, the rest of us are helping to subsidize these Greek moochers.

And speaking of the IMF, it just released a report on problems in the eurozone that makes zero mention of excessive government spending or high tax burdens. The tax-free IMF bureaucrats do claim that “Important actions have been taken,” but they’re talking about bailouts and easy money:

The ECB has lowered policy rates and conducted special liquidity interventions to address immediate bank funding pressures and avert an even more rapid escalation of the crisis.

And even though the problems in Europe are solely the result of bad policies by member nations’ governments, the IMF says that “the crisis now calls for a stronger and more collective effort”:

Absent collective mechanisms to break these adverse feedback loops, the crisis has spilled across euro area countries. Contagion from further intensification of the crisis—including acute stress in funding markets and tensions involving systemically-important banks—would be sizeable globally. And spillovers to neighboring EU economies would be particularly large. A more determined and forceful collective response is needed.

Let’s translate this into plain English: The IMF wants more money from American taxpayers (and other victimized producers elsewhere in the world) to subsidize the types of statist policies that I described above in places such as France, Italy, and Greece.

I’ve previously explained why conspiracy theories are silly, but we’ve gotten to the point where I can forgive people for thinking that politicians and bureaucrats are deliberately trying to turn Europe into some sort of statist dystopia.