Published: Mon, 05 Dec 2016 00:00:00 -0500
Last Build Date: Mon, 05 Dec 2016 11:29:58 -0500
Thu, 24 Nov 2016 00:01:00 -0500Was this a "change election"? Donald Trump's victory is widely attributed to the public's thirst for something new, which he represented and Hillary Clinton didn't. It would be more accurate to say the outcome stemmed from too much change—which has discombobulated conservatives, as well as liberals. Trump would be very different from past presidents, and that quality appealed to voters fed up with the status quo. But his supporters were voting for something old. "Make America Great Again" is a cry of nostalgia. Clinton stood for stability, predictability and caution. So the choice boiled down to "undo all the changes I don't like" vs. "don't change a thing." The problem is that change, however disruptive, is a defining achievement of our age. The modern capitalist economy is continually adapting to serve the demands of the populace. Material progress and more choices come about through the creation of new methods and new products that make old ones obsolete. The 20th-century economist Joseph Schumpeter called this phenomenon "creative destruction," which he argued is "the essential fact about capitalism." It has become the essential fact about modern life, indispensable to the rising living standards that Americans expect. But it carries a price: No one is guaranteed that life will forever remain as it is. Trump ran well, we are told, among working-class whites who have seen the industries that once employed them shrink or vanish. Both he and Clinton, as well as Democratic insurgent Bernie Sanders, cultivated these voters by turning against international trade. But most of the upheaval in our industrial landscape has not been caused by foreign competition. By one measure, total employment, American manufacturing has wasted away. Since 2000, 5 million jobs have disappeared. But U.S. manufacturing output is 15 percent higher now than it was then and nearly double what it was in 1987. A lot of automaking jobs have moved not to Mexico but to Tennessee and South Carolina. A lot of coal mining jobs in Appalachia have been lost to natural gas fracking operations in Texas. But politicians act as though well-paying jobs should be tenured perches. That can't be the case in a healthy, dynamic economy—not with blue-collar jobs and not with white-collar ones. Law was once a lifetime ticket to a high income. Not anymore. Law firms are shedding partners, and the Bureau of Labor Statistics says lawyers can expect to see more price competition, more tasks going to paralegals and some work being outsourced overseas. The number of people working at newspapers has been slashed by 38 percent in the past decade. A century ago, 1 in 3 Americans worked on farms. Today, it's 1 in 50. Change is something to navigate, not something to obstruct. Our lives are easier, better and longer than those of generations past, and those achievements have been built on the ruins of defunct businesses and occupations. I would prefer that people get their news on printed pages, but my preferences hold no sway with readers who like electronic transmission. Remember video stores? Economist Mark J. Perry of the conservative American Enterprise Institute notes that in 1999, they employed 170,000 people. Good luck finding one now. But the ubiquity and familiarity of change don't make it less a source of anxiety. And the endless transformation extends to the realms of culture, religion and family life, where it's also often unwelcome. The resistance comes in different forms among different people. Conservative whites feel besieged by immigrants, whose language and customs are sometimes jarringly alien. Liberals and minorities in places such as San Francisco and Brooklyn resent gentrification and rising housing prices, which remake the neighborhoods they call home. Nostalgia for the 1950s and '60s is common across the political spectrum. Working-class whites remember them as an era when high-wage factory jobs were plentiful and the culture was less open to exotic influences. Liberals fondly recall that inequality was moderate, unions thrived and people still believ[...]
Tue, 22 Nov 2016 07:00:00 -0500
Remember the good life during the 1970s? If you do, your experience is not likely to have been a typical one. In fact, the economic liberalization and globalization that started in the late 1970s and accelerated in the 1980s, has led to a massive and historically unprecedented decline in global poverty. Contrary to much of the public perception, liberalization and globalization have not led to an increase in U.S. poverty rates, which continue to fluctuate within a comparatively narrow and, by historical standards, low, band.
Let us look at the global picture first. In 1981, the year Ronald Reagan became America's 40th President, 44.3 percent of the world lived in extreme poverty (i.e., less than $1.90 per person per day). Last year, it was 9.6 percent. That's a decline of 78 percent. In East Asia, a region of the world that includes China, 80.6 percent of people lived in extreme poverty. Today, 4.1 percent do—a 95 percent reduction. Even in sub-Saharan Africa, a relatively under-performing region, the share of the population living on less than $1.9 per day dropped by 38 percent.
Have those advances come at the expense of the American worker? They have certainly led to economic dislocation, but America's poverty rate has remained relatively steady. When talking about U.S. poverty rates, it is important to keep in mind that extreme poverty in America is vanishingly rare. Instead, our poverty rate is determined by the U.S. Census Bureau "by comparing pre-tax cash income against a threshold that is set at three times the cost of a minimum food diet in 1963, updated annually for inflation using the Consumer Price Index. It's also adjusted for family size, composition, and age of householder."
According to both the Nobel Prize-winning economist Angus Deaton and Cato's Michael Tanner (who relied on U.S. Census Bureau data), the American poverty rate has moved between 15.2 and 11.3 percent over the last four decades. On three occasions (1983, 1993 and 2010) it reached over 15 percent of the population. Those were post-recession peaks that disappeared as soon as the economy recovered.
In fact, America experienced her lowest poverty rate since 1974 in 2000, when openness of the American economy, as measured by the Fraser Institute's Economic Freedom of the World index, was at its highest. Since then, America's economy has become less free. Could that be the reason why the American recovery from the Great Recession was so sluggish and why America's poverty rate has not retreated as fast as it did on previous occasions?
Mon, 21 Nov 2016 17:30:00 -0500
"Canada, Mexico, and China are the top three customers for U.S. exports," says Dan Griswold, a senior research fellow at the Mercatus Center at George Mason University. So what are the top three countries President-elect Donald Trump wants to pick a trade fight with? "Canada, Mexico, and China."
Griswold, who's also the co-director of Mercatus' Program on the American Economy and Globalization, says he's "cautiously pessimistic" about what Trump will mean for U.S. trade policy. In a new Reason podcast with Nick Gillespie, he dispels some of the classic myths about free trade, such as that it's a major job killer (technological progress is the real culprit), and that trade deals such as NAFTA, CAFTA, and TPP establish systems of "managed trade" and thus should be opposed by "real" libertarians.
"These trade agreements have left us freer," he says, "and I think libertarians should support that."
Click below to listen to that conversation—or subscribe to our podcast at iTunes.
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Thu, 10 Nov 2016 00:01:00 -0500"Democracy is the theory that the common people know what they want, and deserve to get it good and hard." So wrote H.L. Mencken a century ago. In our form of democracy, though, the people often don't get what they want. But with the election of Donald Trump, that is about to change. Among the central elements of the U.S. Constitution are checks and balances, achieved through separation of powers. The idea, James Madison wrote, is that "ambition must be made to counteract ambition." By design, Congress is a restraint on the president. The president has tools to contain Congress. The Supreme Court, whose members are chosen by the other two branches, has the last word on what they do. "In framing a government which is to be administered by men over men," explained Madison, "the great difficulty lies in this: you must first enable the government to control the governed; and in the next place oblige it to control itself." The scheme is the source of chronic frustration born of stalemate. Presidents fail to keep their promises because Congress rebels. Congress can't enact its agenda because it lacks the votes to override vetoes. And even if they can agree on what to do, their plans may die in the Supreme Court. The beauty of a parliamentary system is efficiency. If you elect a party that promises to take some action, you can bet the action will be taken. The prospect of getting what you vote for concentrates the mind on what you really want. Our system encourages voters to be less careful, because winning candidates often fall short of their proclaimed intentions. Barack Obama's 2009 stimulus package had to be smaller than liberal economists urged so it could pass. He got health care reform, only to see the Supreme Court invalidate significant portions. In 2008, his supporters voted for "hope and change," but the ensuing change was glacial and dispiriting. Things will be different for President Trump. His party controls both houses of Congress, and he will get to restore the Supreme Court's Republican-appointed majority. The constitutional checks will be largely irrelevant. Trump and his party will be free to do what they campaigned on. Voters who didn't take their plans literally may be surprised when they come to pass. A trade war is imminent because Trump has vowed to scrap the Trans-Pacific Partnership, signed by Obama, while threatening to levy a 45 percent tariff on Chinese goods and abandon NAFTA. Obamacare will be history. The nuclear deal with Iran is a dead letter. Construction will start on a border wall with Mexico, and the government will step up efforts to deport undocumented immigrants. Tax cuts to boost economic growth will become law. His supporters may cheer each achievement. But they may not be so pleased when they go to Wal-Mart or Home Depot and find that Trump's tariffs have raised the price of everything from clothing to power tools. He tweeted that instead of Obamacare, "we will have MUCH less expensive and MUCH better healthcare." Some of his supporters may miss the Affordable Care Act when they lose their coverage. What will they think when they have to pay more for something they like less? How will Trump's followers feel when Iran resumes the nuclear weapons program that Obama's deal halted—or if the United States and Israel launch a war against Iran in response? What will they say when Mexico refuses to pay for that wall? Or when it turns out that, as an editorial in The Wall Street Journal noted, deporting all the undocumented foreigners "would demand the departure, on average, of 84 buses and 47 chartered flights every day for two years"—which isn't going to happen? Trump can promise 4 percent annual GDP growth year in and year out, but he has no clue how to produce it. Trump supporters dismayed by the huge increase in the federal debt since 2008 should brace for an even bigger one under him. If Trump's plans lead to failure or disaster, he and the Republican Party will own the results. And the voters who put t[...]
Thu, 27 Oct 2016 00:01:00 -0400In November 1999, presidential candidate George W. Bush sat down for a radio interview. A reporter asked him to name the leaders of Chechnya, Taiwan, India and Pakistan, all of which had been in the news. He could come up with only one. This was an embarrassing failure. Newspapers editorialized tartly about Bush's grasp of international affairs. His rivals took him to task, with Vice President Al Gore saying that a president needs "the basic foreign policy knowledge necessary to protect America's interests and security around the world." Reform Party candidate Pat Buchanan offered to "give Mr. Bush a few maps and geography lessons." It's hard to recall that we once lived in an age of giants who were expected to know the names of foreign leaders. Donald Trump is proof of how much our standards have slipped. He couldn't find India if you dropped him at the Taj Mahal. It is almost impossible to underestimate his knowledge about issues, including the ones he talks most about in his campaign. On Tuesday, he addressed Obamacare and promptly buried himself in misstatements that showed off his pristine ignorance. "I can say, all of my employees are having a tremendous problem with Obamacare," he declared, standing in front of workers at a Trump resort in Florida. "You look at what they're going through with their health care is horrible because of Obamacare." He then proceeded to contradict himself, portraying his employees as supremely fortunate. "They're not worried about their health care," he insisted, "because we take great care of people." That may be true, because they generally get coverage through their employer, sparing them from buying polices through the insurance exchanges set up under the Affordable Care Act. The general manager of the resort later acknowledged that "very few" of these employees would need to obtain policies on their own. So they are not having "a tremendous problem with Obamacare" after all. Trump was not done advertising his confusion. "I don't much use Obamacare, I must be honest with you, because it is so bad for the people and they can't afford it," he said. All he had to do was dip one toe in the water to find himself in over his head. But why should this topic be different from any other? Trump regularly denounces NAFTA and the Trans-Pacific Partnership as though he is thoroughly familiar with them, but he plainly has no clue. His critique of TPP is a content-free tirade: "The TPP is a horrible deal. It is a deal that is going to lead to nothing but trouble. It's a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone. It's 5,600 pages long -- so complex that nobody's read it. It's like Obamacare; nobody ever read it. They passed it; nobody read it. ... But this is one of the worst trade deals." He may not be aware that China is not part of the TPP. Would anyone expect him to know how many nations have signed on -- or to be able to name half of them? Or to name three provisions in NAFTA? Lapses and blunders that would have torpedoed other candidates have done no harm to Trump. He said Vladimir Putin would not go into Ukraine, long after Putin had occupied part of it. He thinks Supreme Court justices sign bills. He doesn't understand why we have nuclear weapons if we don't use them. He favors "closing parts of the internet" to stop the Islamic State. He claimed he got the endorsement of Immigration and Customs Enforcement, a federal agency that doesn't endorse candidates. He promised to close down the "Department of Environmental," which doesn't exist. He claimed his skill in using the tax laws "brilliantly" allowed him to avoid paying taxes. His accountant disagreed: "I did all the tax preparation. He never saw the product until it was presented to him for signature." No presidential candidate can know everything about all the issues that will come before him or her. Trump is unusual in lacking the most basic know[...]
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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Sun, 18 Sep 2016 08:00:00 -0400Democratic 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 [...]
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.
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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Tue, 06 Sep 2016 17:30:00 -0400This 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 a[...]
Mon, 29 Aug 2016 00:01:00 -0400For 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 Clint[...]
Wed, 17 Aug 2016 12:21:00 -0400A 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="https://www.youtube.com/embed/uC7WVvmHUTE" 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.https://t.co/uDdkrzKL9O Making our economy work for everyone starts by making sure those at the top pay their fair share in taxes.https://t.co/uDdkrzKL9O — 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, si[...]
Wed, 17 Aug 2016 00:01:00 -0400Donald 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 a[...]
Tue, 09 Aug 2016 12:00:00 -0400The 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 [...]
Mon, 08 Aug 2016 08:00:00 -0400While 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 W[...]