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Published: Sun, 23 Oct 2016 00:00:00 -0400

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Libertarian Optimism: Nick Gillespie Talks With Ben Kissel on Lincoln's Top Hat

Fri, 23 Sep 2016 10:44:00 -0400

Last week, I taped a conversation with Ben Kissel, who writes for Fox News' Red Eye with Tom Shillue and hosts a number of podcasts, including the thrilling, chilling, and wildly popular Last Podcast on the Left, which "covers all the horrors our world has to offer both imagined and real, from demons and slashers to cults and serial killers." Glad to say that I wasn't on that one (yet, at least).

The libertarianish millennial taped me for Abe Lincoln's Top Hat (that's an iTunes link), which is devoted to "Politics! We know you love them just as much as we do. Join comedian Ben Kissel and radio man Marcus Parks each week as they discus what's going on in politics and the world of social issues." In 45 minutes, we covered a lot of ground, including whether robots will take whatever jobs the Mexicans have left for Americans, why the Democrats and Republicans have rigged the presidential debates so nobody else gets on the stage with them, and if millennials really are getting screwed by ageing baby boomers. Throughout it all, I'm damned optimistic and try, mostly unsuccessfully, to cheer up Kissel and all listeners below the age of 60.

Here's a Soundcloud version. Just click to play.

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And go here to subscribe to The Fifth Column, the weekly podcast Matt Welch does with former Reason staffer (now at Vice) Michael Moynihan and FreeThink Media's Kmele Foster.

Trade Is a Labor-Saving Device

Sun, 18 Sep 2016 08:00:00 -0400

Democratic politics makes savvy people stupid, at least when they act politically. This has long been demonstrated, and it applies both to voters and policymakers. Several things account for it: the impotence of one vote, the consequent futility and hence wastefulness of acquiring information, the dispersal of the costs of government, and the resulting theatrical mood-setting farces called election campaigns. Outside politics life is rather different. Our actions have a reasonable chance of making a difference to ourselves and those we care about; the costs of our actions fall largely on ourselves; and acquiring information in order to act more intelligently is thus worthwhile. As a result, those who try to sell us goods and services have an incentive to behave responsively and responsibly, unlike candidates for political office. That's why, by and large, people act smarter in the personal realm than they do in political realm. To see the difference, think about the saving of labor. Normally we see this as a good thing. We buy electric toothbrushes, power lawnmowers, dishwashers, clothes washers and dryers, and self-cleaning ovens, among many other things, precisely to save labor. Why? Obviously because labor is work—exertion. Most of what we think of as work we would not do if we could have the expected fruits without it. (Of course we sometimes are paid to do things we'd do anyway, but then it is something more than mere work.) Saving labor through technology not only relieves us of particular exertion; it also frees us to obtain other things we want but would otherwise have to do without—including leisure. Thus labor-saving enables us to have more stuff for less exertion. Time and energy are scarce, but our ends are infinite. That's why no one in private life fails to see labor-saving as good. Frederic Bastiat captured this in a fable about Robinson Crusoe. Crusoe had a two-week project planned: making a plank. This would require many days of labor, cutting down a tree, trimming the trunk, and fashioning the plank just so. Next he would re-sharpen his tools and then replenish the provisions he would consume during the project. As he prepared to start the job, Friday excitedly delivered the news that a piece of wood, well suited as a plank, had just washed up on their island. Terrible news, Crusoe said. Friday didn't understand, so Crusoe explained: obtaining the plank without effort—that is, for free—would cost him weeks of labor. He said: Now, labor is wealth. It is clear that I shall only be hurting my own interests if I go down to the beach to pick up that piece of driftwood. It is vital for me to protect my personal labor, and, now that I think of it, I can even create additional labor for myself by going down and kicking that plank right back into the sea! The genius of Bastiat's fable is that people will readily spot Crusoe's foolishness. But it is equally certain that few will apply the lesson to the "national economy," which is nothing more than a lot of people, arbitrarily grouped into a "nation," who produce and trade, when permitted, with other people arbitrarily grouped into other "nations." When Bastiat's interlocutor calls Crusoe's reasoning "absurd," Bastiat replies: That may be. It is nonetheless the same line of reasoning that is adopted by every nation that protects itself by interdicting the entry of foreign goods. It kicks back the plank that is offered it in exchange for a little labor, in order to give itself more labor. There is no labor, even including that of the customs official, in which it does not see some profit. It is represented by the pains Robinson Crusoe took to return to the sea the present it was offering him. Consider the nation as a collective entity, and you will not find an iota of difference between its line of reasoning and that of Robinson Crusoe. People can easily see that the free "imported" plank gives Crusoe time to make something else or to relax, but they don't see that imports delivered at prices lower than domestic alternatives sim[...]

Economic Freedom in the World Is Increasing

Sat, 17 Sep 2016 10:00:00 -0400

(image) Economic freedom has been increasing around the world during the last 30 years according to the Fraser Institute's Economic Freedom of the World 2016 Annual Report. Using data from 2014, the Canadian free-market think tank creates its economic freedom index using a ten-point scale that measures the degree of economic freedom in five broad areas; (1) size of government: expenditures, taxes, and enterprises; (2) legal structure and security of property rights; (3) access to sound money; (4) freedom to trade internationally; and (5) regulation of credit, labor, and business.

The good news, according to the 2016 report is that "economic freedom has increased throughout the world during the past three decades. The average EFW rating of the 20 high-income countries was 0.8 units higher in 2014 than 1985 and that of the 89 developing economies, 1.7 units higher." Between 1985 and 2014, economic freedom among high-income countries rose from 6.9 to 7.7 points; among developing countries economic freedom increased from 5.0 to 6.7 points. To consider how bad things used to be, by 2014 only four developing countries remained below the 5.0 point average of 1985 - Argentina, Congo, Libya, and Venezuela.

The report notes that the top-ten countries are Hong Kong and Singapore, that once again, occupy the top two positions. The other nations in the top 10 are New Zealand, Switzerland, Canada, Georgia, Ireland, Mauritius, the United Arab Emirates, and Australia and the United Kingdom, tied for 10th. The researchers report the rankings of some other major countries: the United States (16th), Germany (30th), Japan (40th), South Korea (42nd), France (57th), Italy (69th), Mexico (88th), Russia (102nd), India (112th), China (113th) and Brazil (124th).

The bottom ten least economically-free (otherwise known as basket-cases) are Iran, Algeria, Chad, Guinea, Angola, the Central African Republic, Argentina, the Republic of the Congo, Libya and, lastly, Venezuela. Glancing at the map below will tell you that the folks a Fraser did not evaluate places like Sudan, South Sudan, Somalia, Afghanistan, Tajikistan, etc. - which suggests there is a level below basket-cases. Let's call that the hellhole level.

Additionally, the report notes that nations that are economically free out-perform non-free nations in indicators of well-being. Nations in the top quartile of economic freedom had an average per-capita GDP of $41,228 in 2014, compared to $5,471 for bottom quartile nations (PPP constant 2011 US$). In addition, life expectancy is 80.4 years in the top quartile compared to 64.0 years in the bottom quartile.


Don't Hate the Trans-Pacific Partnership Because It's Imperfect

Wed, 14 Sep 2016 14:50:00 -0400

"[The Trans-Pacific Partnership] is a mixed bag," says Daniel Ikenson, director of the Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies. Ikenson's latest analysis, Should Free Traders Support the Trans-Pacific Partnership? An Assessment of America's Largest Preferential Trade Agreement, offers an in-depth look at the most important trade agreement in decades.

"Our conclusion is that it's got some baked-in protectionism. There's a lot of liberalization. On par, it's net liberalizing. It will expand our economic freedoms. And my colleagues and I, my co-authors and I, support it."


Not since the election year of 1992 has an international trade agreement been such a hot-button issue. Twenty-four years ago, the prospect of ratifying of the North American Free Trade Agreement (NAFTA) during a national recession dominated the headlines. NAFTA galvanized the independent candidacy of the charismatic Texas billionaire Ross Perot, and put his protectionist platform squarely into the public consciousness.

On Election Day, Perot's candidacy failed. But the same anxieties that formed around his "giant sucking sound" siphoning away manufacturing jobs to Mexico, has lived on. Shorn of the characteristic Texas twang with which they were delivered, the trade-phobic arguments Perot offered the American public are being echoed by Donald Trump and Bernie Sanders, stirring up popular opposition to the Trans-Pacific Partnership.

So, what to make of the TPP? With thirty chapters and thirteen Pacific rim nations signed on, the scope of the agreement is wide, stretching from tariffs to labor policy to state-owned enterprises to environmental regulations. Ikenson's report details and grades every chapter of the agreement, turning dry legalese into legible language with clear recommendations.

In the end, Ikenson supports the TPP and advocates for its ratification. Its main selling point is that it opens up international markets and sets many tariffs to zero. Hs overall positive take comes with reservations about the treatment of intellectual property and the political compromises behind "managed trade".

Despite these issues, Ikenson's recommendation of the TPP comes with a dose of political realism. It's a familiar caveat in the world of modern trade agreements: Don't let the perfect be the enemy of the good.

Produced, edited, and hosted by Todd Krainin. Cameras by Joshua Swain and Austin Bragg.

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Of COURSE Donald Trump Hates Jeff Flake: The Senator Preferences Fiscal Conservatism Over Party Politics

Tue, 06 Sep 2016 17:30:00 -0400

This Sunday, on CNN's State of the Union, host Jake Tapper asked Sen. Jeff Flake (R-Ariz.) which presidential nominee he'd vote for if the election were held today: FLAKE: I would not vote for Hillary Clinton. And, as of now, I would still not vote for Donald Trump. TAPPER: So, if you—if you don't want to vote for either of them, would you vote for Gary Johnson, the Libertarian? FLAKE: You can always write somebody in. So, I just know that I would like to vote for Donald Trump. It's not comfortable to not support your nominee. But, given the positions that he has taken and the tone and tenor of his campaign, I simply can't. Later in the interview, Flake said "I think Republicans do need to distance themselves from Donald Trump," and blamed Trump's rhetoric for putting the reliably Republican state of Arizona into presidential play. Trump's response was not surprising. The Republican Party needs strong and committed leaders, not weak people such as @JeffFlake, if it is going to stop illegal immigration. — Donald J. Trump (@realDonaldTrump) September 4, 2016 The Great State of Arizona, where I just had a massive rally (amazing people), has a very weak and ineffective Senator, Jeff Flake. Sad! — Donald J. Trump (@realDonaldTrump) September 4, 2016 Flake has not been shy about his criticism of Trump, and Arizona Republicans have been equally non-reticent about throwing those comments back in the senator's face. Meanwhile, the headline over at Trumpbart News nearly wrote itself: "Jeff Flake Started the Fight With Trump, and Deserves It." None of this should be remotely surprising. In a long interview with Reason this January (in Cuba!), Flake sounded multiple alarm bells about the direction of his own political party. Some quotes: * "It is a very, very disturbing trend that we're seeing in the Republican Party against free trade. It's always been there but usually confined to a few isolated members, the Jeff Sessions of the world and others, but now it seems to be spreading." * "My sense on immigration is not just that Republicans risk alienating the largest-growing demographic, the Hispanic population, in the country, but that we're a serious national party and we need to have a serious policy. Simply saying we're going to build a wall and deport everybody who's here is not a serious policy." * "If you want to know what keeps me up at night more than anything—and there are plenty of threats out there—it's waking up some morning and having the markets already decided that we're not going to buy your debt anymore, or we're only going to buy it at a premium and interest rates are going to have to go up. When that happens, then virtually all of our discretionary or non-military discretionary spending goes just to service the debt and then we are Japan." * "I was in Congress between 2000 and 2006 when we had Republicans controlling both chambers and the White House. I can tell you that whenever entitlement spending or social security reform came up, you'd hear, 'We've got a midterm election just around the corner, we're not going to take that risk.'" On that latter note, Flake has been consistent over time. In the fall of 2006, a couple of fresh-faced Reason youngsters named Katherine Mangu-Ward and David Weigel asked a slew of libertarian-friendly types to answer the question "Who Deserves the Libertarian Vote?" Flake, then a congressman, gave this for an opening answer: Well, if they grade on a curve, we're still a better choice. (Laughs) If you believe in limited government, the Democrats don't offer you very much. I've yet to see a Democrat actually bring a proposal to the floor that spends less or is less intrusive. But having said that, there's nothing we've done as Republicans that ought to make libertarians excited about our record. The Arizonan was brutal in his assessment: "You look at any measure of spending—overall spending, mandatory, discretionary, non-defense discretionary, non-homeland se[...]

Hillary Forgets the Growth Lessons of Bill's Presidency

Mon, 29 Aug 2016 00:01:00 -0400

For the past year, the Republican Party has behaved as though it is determined to abandon its best principles and alienate voters for years to come. The derailment has been so spectacular that it's easy to miss that Democrats are also veering in a direction that is ominous for both themselves and the country. Though Bernie Sanders lost the presidential nomination to Hillary Clinton, her victory came through capitulation. On issue after issue, she did her best to defuse his appeal by embracing his ideas and his rhetoric. That strategy worked in the primaries and, thanks to the self-destructiveness of Donald Trump, probably won't keep her from winning in November. But it promises to be a burden on her presidency and her party's future. It also neglects the lessons taught by another Clinton, Bill. Partly because his administration was so successful, Democrats have won the popular vote in four of the five presidential elections since his 1996 re-election. The thriving economy of his era created nearly 23 million jobs, cut the unemployment rate below 4 percent, kept inflation low, rescued 6.3 million Americans from poverty and set a record for the longest peacetime expansion in U.S. history. Clinton knew that a booming economy is the closest thing to a cure-all. He pursued it with a combination of fiscal discipline, free trade and a light regulatory hand. Jimmy Carter, a Democratic president synonymous with economic chaos, had proved the folly of federal interference in wages and prices. A big part of Clinton's wisdom lay in what he didn't do. But Hillary Clinton, pushed leftward by Sanders, has forgotten what fueled that prosperity. Her husband signed NAFTA, reached free trade agreements with Israel and Jordan, induced Beijing to submit to the rules of the World Trade Organization, and rebuffed demands for new import restrictions. Hillary opposes the trans-Pacific free trade deal—but it was Bill who originated the idea, over objections from the leftists of his day. He thought global integration would foster global growth, and he was right. During his first term, Clinton resisted demands to increase the minimum wage. In 1996, he acceded to an increase of 21 percent—but when Democrats led by Sen. Edward Kennedy, D-Mass., proposed another 40 percent increase, the president helped scotch it. He feared that even with the economy humming, a boost of that size would destroy jobs. Hillary Clinton, however, is willing to sign a bill raising the minimum wage to $15, more than double the current $7.25—at a time when the economy is less robust than when her husband balked. She also shows no inclination to restore the balanced budget that Bill did so much to attain. It was an achievement that had not been realized in nearly three decades—and has not been duplicated since. Although her fiscal plans are much more restrained than her opponent's, she would raise the total federal debt by 50 percent over the next decade, according to the bipartisan Committee for a Responsible Federal Budget. (Trump would more than double it.) It's not just her specific policies that would hobble growth; it's also her broad approach and her eagerness to indulge the Sanderistas. The Progressive Policy Institute, a centrist Democratic think tank once known as "Bill Clinton's idea mill," has warned of the dangers of depicting "working Americans as pitiful victims of stock villains like Wall Street, giant corporations, China or illegal aliens." In a report published in March, PPI urged Democrats to "reject magical thinking," as well as European-style fixes. "A progressive government's job is not to direct the private economy or shield people from market competition—from which mass prosperity arises—but to equip them to manage economic change," it argued, in terms that echo Bill Clinton. This is a sound approach as economic policy. It's also good politics in a country that is dominated by Republicans at every level but[...]

These 2 Olympics Commercials Show Everything That’s Wrong With Democratic Economics

Wed, 17 Aug 2016 12:21:00 -0400

A couple of nights back, while watching the Olympics, I saw these two expensive-to-air commercials in rapid succession. The first is the brainchild of New York Gov. Andrew Cuomo, the second is a campaign ad for presidential nominee Hillary Clinton. This is your Democratic Party on economics: src="" allowfullscreen="allowfullscreen" width="560" height="340" frameborder="0"> Making our economy work for everyone starts by making sure those at the top pay their fair share in taxes. Making our economy work for everyone starts by making sure those at the top pay their fair share in taxes. — Hillary Clinton (@HillaryClinton) August 3, 2016 I can think of no better snapshot of major-party economics as practiced in 2016. We need incentives to reward companies for moving in, and penalties to punish them for moving away! Let's waive taxes for a decade on one politically acceptable category of businesses, while raising taxes permanently on a disfavored class right next door! And no matter what, it is government that will help your business grow, and create millions of new jobs. At least Clinton's intelligence-insulting ad was paid for by her own campaign. Cuomo, on the other hand, has poured more than $200 million of taxpayer money into promoting New York like this since 2012, including north of $50 million for Start-Up NY, a program that the governor promised would "supercharge" the Empire State economy. So how many jobs has Start-Up NY produced, in exchange for all this advertising, and an estimated $100 million in waived taxes? Uh, 408. Cuomo, meanwhile, insists that the many critics of the ad campaign's desultory return on investment are "wrong," because the advertising is generic. "Come to New York," and "We will help your business grow if you come to New York," and "New York is not the frightful place that you thought it was," "We're not a high-tax state — we'll eliminate taxes." So that's what the advertising did. We had a very anti-business reputation, and if you asked any company, we actually did — you ask companies around the country, "Would you ever move to New York?" They'd say, "Oh no no no — New York is anti-business. It's very high tax, it's very high regulations." So we had a bad reputation that we had to correct to even be considered. And the quote-unquote Start-Up ads are really generic. Start-Up means, "Come to New York and we will help you start up your business—no taxes, but usually we'll also give you a loan, we'll give you an incentive, we'll invest in your business and take an equity participation." But if a state wants to be competitive now, it's going to take more than just no taxes. That's sort of the opening bid. But most often you're going to have to put an additional investment package on the table to be competitive with what the other states are offering. What a godawful mess. And as for why New York has a bad enough business/regulatory reputation that it needs to spend eight figures counteracting that impression, look no further than Cuomo's own speech at the recent Democratic National Convention: [O]ur progressive government is working in New York. We raised the minimum wage to $15, the highest in the nation because we insist on economic justice! We enacted paid family leave because all workers deserve dignity! We are rebuilding our middle class and we're working hand in hand with organized labor because the middle class is the backbone of this society! We are protecting the environment by banning fracking because this is the only planet we have. There is a better way, one that both 19th-century political parties have long since abandoned. And that is this: Make the rules—including tax levels—few, simple, and fair, and then please get the hell out of the way. That's how "we make the economy work for everyone," or to translate out of t[...]

Trump and Clinton Pretend Protectionism Has No Price

Wed, 17 Aug 2016 00:01:00 -0400

Donald Trump talks about cutting taxes and regulation. Hillary Clinton, not so much. But their economic visions, laid out in dueling speeches last week, reflect a strikingly similar fear of what happens when people are free to engage in peaceful, consensual transactions without government interference. Those transactions would not happen if they were not mutually beneficial, and the same truism applies when the two parties happen to be on different sides of a political border. But Trump and Clinton fear the unpredictable consequences of free (or relatively free) markets, which reward consumers and businesses that serve them well while punishing those that can't compete. "All of our policies should be geared towards keeping jobs and wealth inside the United States," Trump says. Clinton promises to "stop any trade deal that kills jobs or holds down wages." Both candidates claim to appreciate the benefits of international trade. But those benefits come from specialization that generates the greatest value at the lowest cost, which cannot happen without shifts in employment. If you oppose trade that "kills jobs" or that fails to keep them within the United States, you oppose trade, period. "Let's go out and build the future!" Clinton exclaims. Trump says Clinton is "the candidate of the past," while "ours is the campaign of the future." The future they have in mind looks a lot like the past. If American prosperity was once based on manufacturing, they say, it must always be so. Trump, who thinks a reduction in manufacturing jobs is ipso facto evidence of economic decline, promises to "put our coal miners and steelworkers back to work" and "put new American metal into the spine of this nation." Clinton emphasizes "how important it is [to] build things," saying, "We are builders and we need to get back to building!" This manufacturing fetish is no more reasonable than pining for the days when most Americans were farmers. The share of the U.S. labor force employed in agriculture fell from nearly 80 percent in 1800 to 1.5 percent in 2012, mainly because of dramatic improvements in productivity. That trend involved a lot of "lost jobs," so according to Trump and Clinton it was a disaster. Two major causes of the decline in manufacturing's share of employment are rising productivity and competition from more-efficient producers in other countries, both of which are a boon to consumers—i.e., all of us. The government cannot prevent or reverse the loss of those jobs without sacrificing those gains. Trump recognizes that regulations represent "a hidden tax on American consumers," who pay more for products made by companies subject to the government's costly mandates. But he refuses to admit the same is true of restrictions on trade, which by design protect domestic producers from lower-cost foreign competitors. Clinton and Trump both want to punish American companies that take advantage of lower production costs in other countries to offer their customers more value for their money. Trump complains that such companies "ship products into the U.S. tax-free," while Clinton promises a "more patriotic tax code that puts American jobs first," including "a new exit tax" for companies that "move their headquarters overseas." As a businessman, Trump understands why making products in America does not always make sense. As Clinton points out, "He's made Trump ties in China and Trump suits in Mexico." Clinton's campaign created a web page listing U.S.-based alternatives to the foreign manufacturers of various Trump-branded products. It says these companies are "ready and able to produce the goods he makes overseas"—at a higher cost, of course. Clinton never mentions that part, because she does not want to admit that an arbitrary preference for domestic producers takes money out of American' pockets. Maybe she could defend the protectionism she and Tru[...]

How Globalization Saved the American Middle Class

Tue, 09 Aug 2016 12:00:00 -0400

The only point of consensus in this year's otherwise deeply polarized election seems to be that increased wage and job competition created by globalization has decimated the American middle class. Bernie Sanders, a socialist, proclaimed repeatedly during his failed Democratic presidential bid, "The global economy is not working for the majority of people in our country." Meanwhile, Donald Trump, a capitalist and the successful Republican presidential nominee, insists, "Globalization has wiped out our middle class." They are both wrong. The American middle class is still standing after economic shocks its absorbed over the last decade, and it is thanks to globalization. Globalization's two key elements are trade and immigration. Trade has buffeted the American middle class by letting it import riches from abroad, and immigration by generating them from within. French economist Thomas Piketty, in his 2013 magnum opus Capital in the Twenty-First Century, popularized the notion that the American middle class was hollowing out. His basic thesis was that the rich were getting richer and the poor poorer because the returns on capital, the factor of production that the rich owned, were outpacing the returns on labor, the factor of production that workers owned. So rising productivity wasn't translating into higher wages, widening the income gap. Although Pikkety had to somewhat retract his findings after a barrage of scrutiny debunked some of his data, pundits on both the left and the right have seized on his ideas to blame globalization for decimating working-class wages and jobs by increasing the returns on capital over labor. That's a plausible hypothesis—but ultimately false. For starters, notes Manhattan Institute's Scott Winship, the American working class is stable. (His four-part series in Forbes earlier this year dissecting the various arguments and data deployed by inequality-narrative peddlers is well worth a look.) He notes that the rate of increase of median wages of workers has certainly slowed since the 1970s. But that isn't because workers aren't being fairly compensated for their productivity contributions. Rather, he points out, the labor market entered a period of prolonged correction after powerful unions artificially bid up wages for several decades in the post-World War II era. There were other factors too, but realistic calculations show that today's wages, earnings and income—individual and household—are stuck at 2000 levels, he says. "That sounds bad, except that in 2000, the American middle class was richer than it had ever been, and essentially the richest middle class in global history," he maintains. That is not a bad place to be given how much this country has endured since 2000. The 9/11 attacks, for starters, triggered $7.6 trillion in war and homeland security spending, about $2 trillion on the Iraq and Afghanistan wars alone. The country was still reeling when it went into a financial meltdown that induced the housing crash and the Great Recession, wiping out about $16.5 trillion of household net worth from its peak in 2007. And this does not even count the trillions of dollars in wasteful government spending on unproductive projects to stimulate the economy. Nor have President Obama's grand social designs been cheap for America's middle class. Obamacare's cost to middle-class families without employer coverage or subsidies is over $10,000 annually in forced premiums, taxes, and other costs. That by itself is enough to offset at least part of the $18,000 annually that the Economic Policy Institute says inequality is costing middle-class households. (Read Winship for why that's a grossly exaggerated figure, by the way.) And then there is the cost of the unparalleled expansion of the regulatory state under this president. The Heritage Foundation estimates that President Obama'[...]

Hillary Clinton’s Protectionist Promises Would Do Serious Economic Damage

Mon, 08 Aug 2016 08:00:00 -0400

While Trump's belligerent mercantilism gathers support among voters and elected Republicans, it's easy for committed free traders to find themselves in support of Hillary Clinton. To be sure, Clinton has offered her own condemnations of trade and globalization, but beside Trump's near-total ignorance of the economics and institutions of trade, her stances seem more like typical campaign rhetoric. For fans of free trade and globalization, Clinton is a much more appealing candidate simply by not being horrible. Good trade policy always takes a back seat to populist finger-pointing during election season, and there's every indication that Clinton's tone will soften once she becomes president. However, during her primary fight against Bernie Sanders, Clinton took a number of concrete positions that may force her to pursue protectionist policies to the detriment of the U.S. economy. Clinton's most well-known trade policy promise has been her opposition to the Trans-Pacific Partnership (TPP). The conventional wisdom is that Clinton, who once supported the TPP as Secretary of State, will find a way to support it again after the election. Indeed, Clinton's main line about the TPP is that she won't support trade agreements unless they meet a list of incredibly vague criteria: they must "create American jobs, raise wages, and improve our national security." Since the TPP already accomplishes these goals in its current form, she may be able to support it after saving face with a few minimal changes. But, Clinton has also condemned some specific aspects of the TPP that will be very difficult to renegotiate. She has lamented the agreement's lack of enforceable rules on currency manipulation and its relatively liberal rules of origin—complaints meant to appeal to the Detroit auto industry. The TPP's rules of origin were the result of complex trade-offs between the United States and other members. The rules for autos were an especially important part of U.S. negotiations with Japan and will not be easily reformed. Perhaps Clinton can find a way to renegotiate those rules, but doing so will reduce the agreement's effectiveness at integrating regional supply chains—the biggest motivation to negotiate the TPP in the first place. Clinton's hawkishness on currency manipulation is even more troubling. Crafting rules on currency that don't also condemn the monetary policies of the U.S. Federal Reserve is difficult, and all other members of the TPP are dead set against having any enforceable currency rules. Insisting on strong currency provisions in the TPP is a great way to prevent the agreement from coming into force. Clinton has also signaled support for unilateral tariffs as a response to foreign currency practices, especially on imports from China. Putting aside the significant difficulty of determining the proper value of China's currency, the impact of manipulation on trade, and how to impose duties without violating global trade rules, Clinton's policy would amount to a sizeable tax on basic goods purchased by American consumers. Nevertheless, the idea of imposing such duties is popular in Congress, and the Obama administration's opposition has been instrumental in preventing their adoption so far. Protectionist wanting to use currency manipulation as an excuse to impose tariffs may find a more cooperative response from a Hillary Clinton administration. Another way Clinton has promised to impose high tariffs is by vowing to continue the use of nonmarket economy treatment in antidumping cases against China. After December 2016, this practice—which artificially inflates duties on imports from China for purely protectionist reasons—will be illegal under WTO rules. By flatly promising to break the rules, Clinton is compromising America's integrity and authority within the global trading sys[...]

Protectionism Runs Rampant at DNC. And, Sadly, at RNC.

Mon, 25 Jul 2016 21:26:00 -0400

So here's Sen. Bob Casey (D-Pa.) tweet after speaking at the Democratic National Convention in Philadelphia. It sums up a lot of what's wrong with the way politicians think about jobs and economic growth: Where are his "tremendous" Trump products made? Bangladesh, Turkey, India, Slovenia, China. #DemsInPhilly — Bob Casey Jr. (@Bob_Casey) July 26, 2016 Grant Casey a bit of gotcha here. Trump has talked constantly about how he will shut down trade with countries that don't buy more from us than we do from them, how he will renegotiate trade deals to screw over countries that he says are screwing us now, how he will refuse to militarily defend countries with whom we have a trade deficit, how he will slap tariffs on Chinese goods, and more. So good on him for slamming The Donald for hypocrisy. All of Trump's positions violate the basics of free trade and, more importantly, free-er trade. We'll never have truly free trade among nations for all sorts of reasons. The question is always one of direction—are we heading toward more, less cumbersome trade or not? NAFTA wasn't perfect, but it was better than what it replaced. That's likely true of the Trans-Pacific Partnership too, though the details are still not fully clear. Trade with foreign countries—or more precisely, with sellers and customers in foreign countries—is a good thing that grows the economy here and abroad. Contrary to what Trump (and Hillary Clinton) say, NAFTA has been good for American workers and our economy, creating 25 million jobs on net through 2008. But we already know that Trump and Clinton, whose trade positions are indistinguishable from his, are all wrong on trade. What I'm more interested in here is Casey's general complaint during his remarks that Trump chose to locate his production facilities overseas rather than in various cities in Pennsylvania. Apart from the politics of the current moment, we're right to ask a couple of questions. First, why should anybody not source stuff where it's cheapest, assuming that the quality is high enough for whatever they and their customers want? And second, what are you, Mr. or Ms. Politician, going to do about it? That's the real question lingering over the current mood of protectionism. On the first question, of course producers are going to move to where stuff goods and services can be made more cheaply and efficiently. They move around the United States and sometimes they leave the country together. Do any of us force ourselves to buy more-expensive, lower-quality stuff simply because it's local? Maybe, for a time, out a sense of patriotism or whatever, but that always gives way to economic reality and it should. Pennsylvania, like a lot of states in the broadly defined Northeast or industrial Midwest, has taken it on the chin when it comes to old-style manufacturing jobs because it has a cost structure that is relatively high for whatever is being produced. It's not up to purchasers of labor and things to pay more for something they can get more cheaply elsewhere. It's up to the people whose jobs are on the line to figure out how to add more value to whatever they're doing so they still have jobs. This happens all the time, by the way, and there's any number of production jobs and services that have been brought back to the United States from overseas because American workers do a better job than cheaper producers elsewhere. But Casey's general idea that somehow it's an affront to American workers that they wouldn't automatically be chosen over cheaper alternatives is exactly the problem with residents and pols in places like Rust Belt Pennsylvania and elsewhere. Which leads to the second question: What are politicians planning to do about companies that outsource jobs? Well, we know what and on this sc[...]

Clinton, Trump Embrace Zero-Sum Thinking While Regular Dems & Reps Do Not

Mon, 25 Jul 2016 15:32:00 -0400

One of the most unfortunate turns of this election cycle is a bipartisan embrace of trade protectionism and, on the part of the Republicans at least, a rejection of pro-immigration policies. Donald Trump thunders again trade deficits with the same brio he displays when talking about illegal immigrants, at one point declaring that we should only have military obligations with countries with which we have trade surpluses. "Why would we spend the money on troops if we are running trade deficits with these kind of countries," he told The New York Times. Hillary Clinton may be slightly less bombastic but is equally against free trade deals these days. Despite a history of supporting free-trade deals such as NAFTA and the Trans-Pacific Partnership, she now opposes the latter and has been trashing the former for almost 10 years. Odder still is the fact that most voters support free trade. According to a recent Wall Street Journal poll, for instance, 55 percent of Americans believe that "free trade with other countries is good," compared with just 38 percent who do not. The same survey finds that nearly 60 percent of us believe immigration "helps more than it hurts," or nearly twice as many think immigration is a drain on the economy. Writing in the Journal, Greg Ip argues that the success of Bernie Sanders' insurgency caused the shift to anti-trade rhetoric for the Democrats, especially after years of slow or no economic growth. Democrats have always been preoccupied with income distribution and poverty. Nonetheless, under President Bill Clinton they came to accept that growth was the most effective stimulant for middle-class incomes. "Only a thriving economy, a strong manufacturing base, and growth in creative new enterprise can … meet the nation's pressing human and social needs," its 1992 platform declared. Maybe, but the fact that Clinton called NAFTA "a mistake" back in 2007 suggests something longer-term is driving the focus on splitting up a shrinking pie rather than growing it. On the Republican side, it seems as if the party's anti-immigrant animus has infected its general acceptance of trade too. Trump, writes Ip, has brought a Democratic-style belief in zero-sum economics from the way he does business: Mr. Trump, however, brings a perspective forged by a business career in which success often came at the expense of suppliers, lenders or partners. Mr. Trump sees economics much the same way: If you're not winning, you're losing. Last month he said of trade expansion with other countries: "They get the expansion, we get the joblessness." Whatever the actual origins of zero-sum economic thinking, it's nothing short of amazing that both parties now are led by trade protectionists who are at odds with the majority of regular Americans. As Ip notes, less trade and immigration will ultimately hurt economic growth, but Clinton and Trump aren't on board. "In a year when both parties are rallying their partisans by portraying the economy as a win-lose proposition," he argues, "most Americans still think it's win-win." Full story here. Steve Chapman recently pointed out how much richer we've become due to NAFTA and other trade deals. Read all about it here.[...]

Ted Cruz Defines Freedom As Its Opposite

Thu, 21 Jul 2016 06:30:00 -0400

Ted Cruz was booed at the Republican National Convention last night for failing to endorse his party's nominee. He should have been booed for philosophical incoherence. "America is more than just a land mass between two oceans," the Texas senator declared. "America is an idea, a simple yet powerful idea: freedom matters....Our nation is exceptional because it was built on the five most powerful words in the English language: I want to be free." What does freedom mean to Ted Cruz? It means "religious freedom, whether you are Christian or Jew, Muslim or atheist." It means "the right to keep and bear arms, and protect your family." It means "your freedom to choose your own doctor, without Obamacare." It means "free speech, not politically correct safe spaces." So far, so good, assuming Cruz is defending freedom of contract in the context of health care and attacking government-enforced "safe spaces" (on the campuses of public universities, for instance). But according to Cruz, freedom also means "your freedom to choose your child's education, even if you aren't as rich as Hillary Clinton or Barack Obama," which implies a right to subsidies forcibly extracted from your fellow citizens. While I agree that letting tax dollars follow students to the schools their parents choose is better than forcing their kids to attend government-run schools, that policy is not as straightforward an example of "freedom" as Cruz implies. The putative right to government-subsidized tuition, which asserts a claim on other people's resources, is qualitatively different from the right to practice one's religion or speak one's mind, which requires only that other people refrain from interfering. Cruz's conflation of negative and positive freedom is only the beginning of his confusion. He cites his father's experience as a Cuban refugee to illustrate his concept of freedom yet claims freedom also means building a wall to keep other immigrants out, restricting trade for the sake of special interests, and banning marriage between people of the same sex. Cruz doesn't bother to explain why prohibiting peaceful, consensual, mutually beneficial exchanges, whether they involve goods or labor, should be counted as a victory for freedom. But he does take a stab at framing gay marriage bans in terms of freedom. "Freedom means recognizing that our Constitution allows states to choose policies that reflect local values," he says. While there is a constitutional case to be made for leaving the definition of marriage to the states, federalism is by no means synonymous with freedom. Federalism can facilitate freedom, as illustrated by the ongoing collapse of marijuana prohibition. But federalism also can facilitate local tyranny, as illustrated by the criminalization of consensual adult sexual activities. Even if you do not think the 14th Amendment requires states to treat gay and straight couples equally under the law, you might still think states should do so in the interest of basic fairness, whether that means expanding the definition of marriage or getting out of the marriage-certifying business altogether. In any event, Cruz's take on this issue is puzzling. For him, the ability to marry the person you love is not freedom, but the ability to stop that marriage is. Although Cruz could not bring himself to endorse the man he condemned as "utterly amoral," a "narcissist," and a "pathological liar" just two and a half months ago, there is considerable overlap between his vision and Donald Trump's. Cruz, always keen to restrict immigration and condemn political correctness, even seems to be moving toward Trump-style protectionism on trade. But Trump should not be blamed for Cruz's incoherence, which is endemic to modern American c[...]

Why Libertarians Should Be Wary of Brexit 'Victory'

Tue, 12 Jul 2016 10:00:00 -0400

Many American libertarians have lauded British voters' decision to leave the European Union. After all, any blow to such a federal structure must be good for liberty, right? Not so fast. Many European libertarians, like myself, view Brexit as a dangerous blow to openness and free trade that removes one of the strongest voices against E.U. centralization from the negotiating table in Brussels. The disconnect between libertarian views on Brexit lies in many Americans' overly simplistic comparison of the E.U. to the U.S. federal government. However, while many of the criticisms leveled against the E.U. for being too big, too costly, and intervening where it shouldn't may sound like familiar gripes in the United States, the E.U. and the U.S. federal government are in no way equal. The E.U. commission has 33,000 employees—half the number employed by the U.S. Social Security Administration alone. The E.U. has no right to tax, and its budget is around 1 percent of the GDP of the E.U. countries, compared to around 20 percent in the U.S. More importantly, the E.U. only has the powers member states give it. Decisions are taken by consensus or a qualified majority. Every member—including Britain, until now—has a veto against new powers. So when states complain of the E.U.'s tyranny, it is often because they play a little game—they want X done, but don't know how to tell the voters, so they consent to X in Brussels and then go home and tell voters that they are now forced to do X. (This is also, obviously, one of the reasons why voters think that the E.U. is power grabbing and out of control.) Most often, nationalists complain that Brussels is promoting a "neo-liberal" agenda that stops them from protecting their markets with tariffs and technical trade barriers and from subsidizing national champions and local industry. This is part of what the E.U. does, and it is consistent with F.A. Hayek's 1939 vision of a European Federation that guaranteed free trade and openness between the member states, to make peace and cooperation possible. Since it allows local experiments and guarantees that capital and labor can move freely between markets, to those that are the most welcoming, it makes institutional competition possible. A Timbro study by Alexander Fritz Englund showed that E.U. membership for the 28 countries resulted in a statistically significant increase in economic freedom in all of the sub-categories in The Economic Freedom of the World index. The biggest improvement comes in the year of membership, but it increases afterwards as well. This must come as a surprise to everyone who has ever read about all the silly regulations emanating from Brussels. But most often, these are attempts to streamline national regulations, so that, for example, 28 different sets of rules for vacuum cleaners (which often are designed for local producers to keep competitors out) can be replaced with a common set of rules that allow free trade across borders. Personally, I would prefer a system where countries automatically accept unrestricted imports of all goods that have passed the regulatory hurdles in the exporting country, but that's not an option that interests any E.U. country, including Britain. Unfortunately, their alternative to E.U. rules is not laissez-faire, but national rules, which would block much of the trade that goes on unhindered today. Even though the E.U. sets too many rules and intervenes too much, most of the policy is still made back home. There is sufficient room for national maneuvering so that one E.U. member, Ireland, can implement policies that make it the eighth economically freest country in the world, and another, Greece, the 85th economically freest, according [...]

Transgender Bathroom Panic Will Help Shape Republican Party Platform

Mon, 11 Jul 2016 16:35:00 -0400

Delegates to the Republican National Convention will be spending the week hammering out the wording for the party's official platform. And the debate has gone into the toilet, purposefully. At hand among delegates in a platform subcommittee is whether the national party should oppose the current administration's efforts to mandate public schools accommodate transgender students in the bathroom and other gender-specific facilities. While there appears to be a push by some Republicans to get the party to ease off on LGBT social issues, they were unsuccessful in their effort to try to get them to stay out of this fight. Via Yahoo News: Annie Dickerson, a delegate from New York and an adviser to GOP billionaire donor Paul Singer, urged her colleagues to strike language that condemns the Obama administration for telling schools to allow students to use the bathrooms and locker rooms of their gender identity. (Singer has funded pro-gay marriage efforts around the country.) The RNC draft platform says the guidance is "illegal and dangerous" and "alien to America's history and traditions." Dickerson urged her colleagues not to get distracted by the issue, which she said would alienate LGBT Republicans and pull the convention into a contentious issue. "Bathrooms takes us down a rabbit hole," Dickerson said. But down the rabbit hole they've gone, at least for now. Social conservatives convinced the delegates to keep this new position. One said it was a "safety issue." To be fair, the decisions by the Department of Justice and the Department of Education have turned public school transgender accommodation into a federal concern. It's perhaps not possible for the party to completely avoid the issue, because the next administration will be controlling the direction of the federal activity here. Liz Goodwin also noted that attempts to strip the platform from defining marriage as between a man and a woman or from declaring that every child deserves a "married mom or dad" failed. The platform as it stands will call for a constitutional amendment to allow for states to decide whether to legally recognize same-sex marriage. The delegates also voted, unanimously, to declare that pornography is "a public health crisis" that was destroying lives. Goodwin notes that this position is actually even more conservative than the party's platform from 2012, which focused on child porn and enforcing existing obscenity laws. I'm not sure I agree that this new take is more socially conservative. The two are originating from the same mind set and both are significantly devoted to using the power of the federal government to wipe out pornography. But then, it's not clear whether the Republican Party's formal position on anything actually matters when they're probably going to end up nominating the mercurial Donald Trump. On social issues, he has probably at one point or another held every single possible position on each subject of controversy. Trump has said that he will accept the party's platform and is keeping out of the debate. Whether anything on the platform actually influences Trump's positions in any way is a whole different question. But even without Trump's participation, it looks like the party is keeping him in mind when drafting the platform. The Republican delegates have decided to strip out entirely all language either endorsing or opposing the Trans-Pacific Partnership (TPP) trade agreement. Instead, according to Politico, they'll have a broader statement in opposition to "massive trade deficits," which is putting a stamp of approval on economic ignorance in trade. Trade deficits are not the same as budget deficits. Having a trade deficit with another coun[...]