Tag Archives: government

Déjà Vu All Over Again

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This post is taken from “Economic Strategy for the Reagan Administration,” a memo summarizing studies commissioned by candidate Ronald Reagan and delivered to President-elect Reagan on mid-November 1980, as summarized in The Wall Street Journal.  The memo began

Sharp change in present economic policy is an absolute necessity.  The problems of inflation and slow growth, of falling standards of living and declining productivity, of high government spending but an inadequate flow of funds for defense, of an almost endless litany of economic ills, large and small, are severe, they are not intractable.  Having been produced by government policy, they can be redressed by a change in policy.

Aside from the high inflation of 1980, that could have been written today.  Besides, the actual inflation then is a threatened inflation today, with the Fed’s policy of deliberately depressed interest rates and rapid printing of money coupled with the administration’s prolific spending.

You have identified in the campaign the key issues and lines of policy necessary to restore hope and confidence in a better economic future:

  • Reestablish stability in the purchasing power of the dollar.
  • Achieve a widely-shared prosperity through real growth in jobs, investment, and productivity.
  • Devote the resources needed for a strong defense, and accomplish the goal of releasing the creative forces of entrepreneurship, management, and labor by:
  • Restraining government spending.
  • Reducing the burden of taxation and regulation.
  • Conducting monetary policy in a steady manner, directed toward eliminating inflation.

This amounts to emphasis on fundamentals for the full four years, as the key to a flourishing economy.

Sound like what’s needed today?

The need for a long-term point of view is essential to allow for the time, the coherence, and the predictability so necessary for success. This long-term view is as important for day-to-day problem solving as for the making of large policy decisions.

This was true then, 50 years after the start of the New Deal, a 50-year period of spendthrift policies and high taxes, and it’s even truer today, 30 years farther down that road, with this administration’s effort to raise taxes on top of its already explosive spending and debt accumulation.  It’ll take a long time, and a long-term strategy is critical, to repair the damage.

The memo went on with sound advice concerning budgeting, tax policy, regulation, energy, and monetary policy—it could have been written for delivery to President-elect Mitt Romney in mid-November 2012.  And we can certainly hope both for President-elect Mitt Romney, and that he takes this advice to heart.  The incumbent certainly has already eschewed it.

I’ll more on the Reagan memo in the coming days.

China Trade Wars and the US

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The US recently imposed a 31% antidumping tariff on Chinese solar-panel makers (“green” energy devotees object to the tariff’s impact on American “green” energy prices, but those objections are irrelevant here), and of course the Chinese demur.

But we have to keep in mind the context within which the People’s Republic of China is engaging in the behaviors that required the tariff imposition, a context in which the PRC is moving aggressively and deliberately against American interests and security concerns.

The PRC already is actively prosecuting a cyberwar against us, routinely attempting to penetrate (and succeeding at an alarming rate) American companies’ information networks to gain access to and to steal those companies’ proprietary engineering data and, especially within our financial industry, to steal our companies’ fiscal data.  Even more threateningly, the PRC routinely attacks, and too often penetrates, our Defense and State information networks, obtaining critical defense and political information.  In conjunction with these cyber-attacks, the PRC, the primary global producer of rare-earth minerals, has implemented export quotas on those minerals—minerals that are at the heart of the computing and memory chips that our companies and our government use in their information networks, and on which our weapon systems depend.

Additionally, the PRC is actively looking to block efforts to inhibit Iran’s access to nuclear weapons—weapons which the Iranians will use against Israel and us, and which they will pass on to terrorist groups for use against Europe and us.  Where impediments are implemented, anyway, the PRC actively sabotages them.  This is what is behind their continued purchase of Iranian oil, rather than satisfying their needs elsewhere in the global market, and their purchase of Iranian minerals and organic chemicals.  This is what is behind the PRC’s steady shipment of nuclear reactor parts to Iran.  This also is what is behind their decision to inhibit efforts to curb northern Korea’s expansion of its own nuclear weapon establishment.

Moreover, the PRC is actively moving against American security and economic interests in the South China Sea, claiming that body for its own right up to the border waters of the Socialist Republic of Vietnam, the Republic of the Philippines, and the other nations that border on the Sea.  This is where the PRC militarily engages the Philippine Navy as the latter moves to protect its own interests, and where the PRC militarily threatens Vietnam for objecting to Chinese grasping.  Yet these moves are not aimed at those nations, but at the US, whose interest in open seas in that body (which contains a significant fraction of the world’s commercial shipping lanes) is made manifest by our global trade imperatives (and by those of all of our allies), and so must respond or see our influence shrink further.

Against this backdrop, the PRC is threatening a trade war if we don’t withdraw our newly implemented tariff.

We fear that if these tariffs are levied in full, Chinese companies may have no choice but to exit the US market[.]

We are “urged” to

…review the facts and make the right decision without being influenced by U.S. elections….

And:

This action by the US has hurt cooperation between China and the US in the renewable energy sector, and hurt the US itself.  We hope the US will appropriately resolve this issue.

The tariff must be an opening move, and the US must respond more aggressively and with greater initiative to the Chinese conflict.

Another Musing on Immigration

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Juliana Gruenwald, in a National Journal piece, reports that Senators Mark Warner (D, VA), Chris Coons (D, DE), Jerry Moran (R, KS) and Marco Rubio (R, FL) are proposing an immigration bill—Start-up Act 2.0—that would create two new visas.

One visa would make it easier for foreign students who’ve gained American schools’ post-graduate STEM degrees to remain in the US after graduation.  These folks also would be eligible for permanent residency if they then remained employed in a STEM field for the next five years (and presumably eligible for citizenship, but this visa is separate from that).

The other visa would be for the roughly 75,000 skilled legal immigrants per year who start a business in the US, employ Americans, and invest or raise capital in the US.  This entrepreneur visa would provide another pathway to permanent residence and eventually to citizenship.

This is a step in the right direction; however, it isn’t enough by itself, and it’s muddled by inclusions that, while important in their own right, have nothing to do with immigration.

It isn’t enough because it only addresses one narrow aspect of one part of a three-part immigration problem.  I wrote earlier about those three parts; some of that is quoted here for convenience:

Most modern Conservatives agree that our borders need to be secured, including against illegal immigration.  This need is based on…the right of any nation—the right of any society in their social compact—to determine for themselves who they will allow into their nation: no foreign entity has an inherent right to enter another nation without that nation’s permission….

There are two additional aspects to immigration, and if these are not also solved, the immigration matter will continue to be a serious risk to our national security.  These two aspects are what to do about the population of illegal aliens currently present in the United States, and what to do about legal entry for immigrants into our country.

[W]e need to remove the impediments to legal immigration, we need to eliminate the quotas that put an upper bound on the number of talented who want to work here, on the number of foreign-born who are educated in our Universities and want to stay past their college days. … It simply shouldn’t be that hard to enter the United States legally.  There should be border crossing stations every mile along our border….

These visas are, as I said, a step in the right direction, but the idea falls short on two fronts: it adds to the breadth and complexity of the visa bureaucracy without addressing the overall problem of legal entry for all immigrants, and it doesn’t address at all the other two aspects of our immigration problem.

The muddle consists of tax and regulation clauses that the Senators consider politically necessary to get the bill passed—or at least publicly debated in Senator Harry Reid’s (D, NV) Senate.  Among these extraneous items are:

  • a tax credit intended to encourage start-ups to engage in R&D,
  • a tax exemption that would eliminate capital gains taxes on investments in start-ups held for at least five years, and
  • a requirement that any new regulation with an impact of $100 million or more be subject to a cost-benefit analysis prior to approval.

These are important in their own right, and the need to include these things, which are irrelevant to an immigration bill, in an immigration bill is a testament to the partisan, obstructionist nature of the Democrats’ hold on the Senate.

The tax questions are better handled in a tax reform bill that moves to a flat tax and maintains that flatness by eliminating subsidies of all types.  The isolated regulation item is better handled in a separate regulatory reform bill that eliminates most of the existing regulations (much of which are mutually conflicting, much more of which are obsolete) and that returns regulation generation to the Congress as the most direct means of forcing that body actively to satisfy in its regulatory oversight responsibility.

The Senators’ immigration bill is well worth supporting, but only if it’s made clear that this is only an opening salvo in the struggle seriously to reform our immigration process.

Some Thoughts on Freedom

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The Archdiocese of New York, headed by Cardinal Timothy Dolan; the Archdiocese of Washington, DC, headed by Cardinal Donald Wuerl; the University of Notre Dame; and 40 other Catholic dioceses and organizations around the country announced on Monday that they are suing the Obama administration for violating their freedom of religion, which is guaranteed by the First Amendment to the Constitution.  The problem, as described on the DC Archdiocese’s new Web site PreserveReligiousFreedom.org, is this:

It is not about whether people have access to certain services; it is about whether the government may force religious institutions and individuals to facilitate and fund services which violate their religious beliefs.

President Obama’s Health and Human Service’s mandate, which is intended to facilitate his Patient Protection and Affordable Care Act and is the proximate object of the suit, forces religious organizations, against their most fundamental beliefs, to provide access to, or to make access available through their insurance programs, contraceptives, abortifacients, and sterilization procedures.

These drugs and services, and many of the behaviors that “need” these drugs and services, are held by a host of religions (Catholicism and Baptist congregations are only the most well-known) to be sinful.  It is, then, not only morally wrong for a religious entity holding these beliefs to provide these things, it is impossible for that entity that is true to its beliefs to do so, or to wink at their insurance programs that do so.

Take careful note: this problem is not about whether such things are, in fact, sinful.  This problem is not about whether Catholic women, by regularly going to Mass and then to their neighborhood pharmacy for contraceptives, seemingly give the lie to Catholicism’s position.  (Indeed, the existence of sin is a raison d’être for churches of all types—to help those sinners.)  This problem is not about “free” access to these services. (In fact, they are not free: by the government’s mandate, if the recipient isn’t paying for them, you and I are—whether it violates our religious teachings or not—through higher prices to us to pay for the subsidy.)

No, this problem is about whether government can define for religious entities what is sin.  It is about whether government can dictate to a religious entity what its religious tenets are.  It is about whether government can dictate to a religious entity what its practices in furtherance of its fundamental tenets are.  It is about whether government can dictate to us individually what our beliefs, what our private decisions, must be, and whether we must sin at government’s behest.

As a practical matter, which patients are being “protected” under the Act of that name?  Plainly only those of whom Obama approves.  Certainly not those with beliefs with which he disagrees.

As a matter of freedom, what is being protected by this government diktat?  Certainly not the fundamental freedom of conscience that Christian religions teach.  Certainly not the fundamental freedom of religion—a part of our Creator’s endowment—that is codified in our Constitution.

A False Premise

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It’s being widely reported that a continued, or accelerated, EU economic crisis could threaten President Obama’s reelection.

It’s certainly true that, in this increasingly globalized world (!?), the European crisis could impact the American economy, and through that, President Obama’s reelection.

But that’s an outcome, not a cause.  The cause is Obama’s mishandling of our economy in the first place, to the point that it’s so enormously vulnerable to the European downturn.

That mishandling is a…misunderstanding…of the type of growth that’s needed.  What President Obama and many of his EU counterparts pushed for at the just-concluded G-8 summit is growth in government spending and borrowing—and in Obama’s case, growth in tax rates—under the rubric of stimulating an economy.

On the other hand, we have Christina Romer (that Christima Romer) and David Romer demonstrating in a 2010 American Economic Review article (login required; sorry) the powerful effect of increasing tax rates on economic growth: an increase in taxes of 1% of GDP lowers GDP by nearly 3%.

And we have Swedish economists Andreas Bergh and Magnus Henrekson in a 2011 Journal of Economic Surveys article (again, login required; sorry again) concluding that a 10% increase in government size (relative to GDP) is associated with a 0.5%-1.0% lower annual growth rate in the economy.

Plainly, the answer, as I’ve been arguing lately, is smaller government and lower tax rates, to produce economic growth.

Economic, not government, growth.  Now that’s growth we can believe in.