International Business Machines Inc. is celebrating its 100th anniversary as a company today. In this time of economic worry and uncertainty, it’s worth taking a moment to consider a few policy lessons we might glean from its longevity.

Unlike government agencies and programs, private-sector companies competing in a free market come and go. In an essay posted on the IBM web site, company officials noted:

Of the top 25 industrial corporations in the United States in 1900, only two remained on that list at the start of the 1960s. And of the top 25 companies on the Fortune 500 in 1961, only six remain there today.

How did IBM not only survive but thrive during a century that took us from horses and buggies to FaceBook and iPhones? In a word, adaptability. IBM’s management has been willing to change to meet the evolving demands of a competitive and open marketplace.

When I was researching a speech last year to retired IBM employees, I was struck by how the company has transformed itself. As I shared with the audience, IBM stands as a metaphor for the positive changes under way in our more high-tech and globalized economy:

As you all know, [IBM] has re-engineered itself from a hardware company to a provider of software and services. Today, nearly 60 percent of the company’s revenue comes from services compared to 38 percent a decade ago. Revenue from hardware has been cut in half, to 17 percent.

IBM’s gone global in a big way, too. Almost two-thirds of its revenue now comes from outside the United States. That compares to an S&P average of 47 percent. Emerging markets now account for 50 percent of its revenue growth. IBM is the biggest IT services company in India. For $100 million, it’s helping the northeast China city of Shenyang—one of its most polluted—clean up its air and reduce carbon emissions.

Politicians nostalgic for an America where the dominant companies were unionized, heavy-industry behemoths producing mostly for the domestic market should take note. As I argued at length in my 2009 book Mad about Trade (see chapters 3 and 4) and more concisely in an essay for Barron’s Weekly, America has become a globalized, middle-class service economy. As the success of IBM demonstrates, this is not something we should fear, or try to resist with trade barriers and industrial policy.

IBM as a Metaphor for Economic Success is a post from Cato @ Liberty - Cato Institute Blog

Paul Waldie at Toronto’s Globe and Mail reports on the case of Mike Reilly, who (unsuccessfully so far) has sought to write off as tax expenses the costs of campaigning for local office in a suburb of Vancouver. Reilly told a tax court that there was nothing idealistic about his quest for government office: he wanted “to earn a good salary and promote his business,” raising the visibility of his development company. Lawyers for the Canada Revenue Agency insisted that Reilly wouldn’t have gone to the trouble of running unless he had cared about at least some public issues, but he disputed that:

“You know, I don’t recall being passionate about any issues other than seizing an opportunity to step in and develop a better profile for myself,” Mr. Reilly replied. “No. It was strictly business for me.”

The tax judge ruled against Reilly based on accounting issues but accepted his general contention that he “was not passionate about any issue except increasing his own profile and earning the salary of mayor,” noting that the candidate “did not listen to the citizens of Delta and did not appear to have much interest in their concerns.” If all politicians had to tell the truth, how many similar confessions might we hear?

“Either the Most Honest Politician in the World or the Most Opportunistic” is a post from Cato @ Liberty - Cato Institute Blog

Paul Krugman dismisses concerns that the Obama administration’s fiscal and regulatory policies are fostering uncertainty in the business community, and thus inhibiting job growth and an economic recovery.

My Cato colleagues and I have been citing this “regime uncertainty” for a while now, and it is gaining mainstream acceptance as evidenced by a recent Washington Post editorial.

I have pointed to surveys of small businesses conducted by the National Federation of Independent Business. The businesses surveyed continually cite the combination of government taxes and regulations as their “single most important problem.”

However, Krugman looks at the NFIB’s most recent survey and comes away with a different conclusion:

Or read through the latest survey of small business trends by the National Federation for Independent Business, an advocacy group. The commentary at the front of the report is largely a diatribe against government — “Washington is applying leeches and performing blood-letting as a cure” — and you might naïvely imagine that this diatribe reflects what the surveyed businesses said. But while a few businesses declared that the political climate was deterring expansion, they were vastly outnumbered by those citing a poor economy.

This is the chart from the survey that Krugman is referencing:

Considering the depth and length of the recession, the fact that “economic condition” is the runaway leader isn’t surprising. But I wonder how many of the businesses citing “economic conditions” are happy with the “political climate.” I doubt very many. Notice that zero respondents said that the political climate was a “good time” to expand. Couple that with the plurality who said this isn’t a good time to expand due to economic conditions and you get an indictment of the administration’s interventionist policies that Krugman has supported.

Krugman continues:

The charts at the back of the report, showing trends in business perceptions of their “most important problem,” are even more revealing. It turns out that business is less concerned about taxes and regulation than during the 1990s, an era of booming investment. Concerns about poor sales, on the other hand, have surged. The weak economy, not fear about government actions, is what’s holding investment down.

Interestingly, Krugman ignores the chart that immediately precedes the trends in business perceptions: the “single most important problem” respondents currently face. It is definitely more revealing:

Thirty percent of respondents said their single most important problem is “Poor Sales.” “Taxes” and “Government Regulations and Red Tape” come in second and third place at 22 percent and 13 percent respectively. Combining the two, the biggest problem facing small businesses according to respondents is government.

Krugman waves the government problem away by pointing out that taxes and regulations ranked higher in the 1990s when the economy was strong. However, he ignores the trend. Concern about taxes and regulations trended lower as the 1990s moved into the 2000s, but have been trending higher in the last couple of years.

Take a look at the trend chart that includes taxes:

The tax outlook improved as the Clinton and Bush administrations cut taxes and the federal budget was brought under control. Rising tax concerns could be explained by future expectations of higher taxes to pay for Bush and Obama’s profligacy. Additionally, states have been raising taxes during the recession to make up for budget shortfalls. Future expectations of higher taxes to pay for the unfunded liabilities of state and local employee benefits could also be a consideration.

Also note how much higher taxes rank than financing. Yet, it seems that most media outlets believe credit unavailability is the chief problem facing businesses. Indeed, the president has been pushing a $30 billion package to increase lending to small businesses. But businesses don’t need more subsidized credit backed by taxpayers — they need relief from the president’s agenda.

Paul Krugman and Regime Uncertainty is a post from Cato @ Liberty - Cato Institute Blog

Tom Palmer, Johan Norberg, and I are among the guests tonight on Stossel on the Fox Business Network. John Stossel interviews us all about the work and impact of Milton Friedman, especially his book Free to Choose, published 30 years ago. Political theorist Benjamin Barber provides the anti-Friedman counterpoint.

Watch Stossel Thursdays at 8 p.m. and 12 midnight, Saturdays at 8 p.m. and 11 p.m., and Sundays at 10 p.m. (all times eastern).

Stossel Tonight! is a post from Cato @ Liberty - Cato Institute Blog

As recent posts in this space indicate, advocates of individual liberty have a variety of views on the proper policy response to illegal immigration. Whatever the disagreements, I suspect there’s some degree of consensus that certain proposed remedies are entirely too Draconian. From the California Labor and Employment Law Blog:

The U.S. Attorneys Office in San Diego has recently criminally prosecuted a French bakery for allegedly engaging in an intentional pattern and practice of hiring unauthorized workers. As part of the indictment, the Government is seeking hefty monetary fines, prison time for the owner and management, and asset forfeiture of the entire business to the Government. While the Government does not have experience running a French bakery, they are getting very serious about enforcing I-9 regulations.

More details on the French Gourmet prosecution can be found at the San Diego Union-Tribune and Restaurant Hospitality.

When government began pushing for asset forfeiture powers, some imagined that the formidable power would remain mostly confined to use in, say, illegal drug or money laundering prosecutions. But that’s not how it has worked. And immigration is hardly the only area in which employers should be worried about the expanding bounds of criminalization. Bills pending in Congress would criminalize “misclassification” of employees — which commonly consists of disagreeing with the government or with labor unions as to whether particular employees should count as independent contractors not covered by overtime and similar federal labor laws. Are we far from the day when prosecutors will start proposing forfeitures against employers over such infractions?

Feds Propose Forfeiture as Immigration Employer Sanction is a post from Cato @ Liberty - Cato Institute Blog

The U.S.-China Business Council has performed a valuable public service by marshalling state-by-state figures on exports to China. In its annual survey, released this morning, the USCBC documents that 19 states exported $1 billion or more in 2009 to China, which is now the third largest market for U.S. exports.

In a statement accompanying the report, the USCBC noted that exports to China declined only slightly in 2009, compared to a 20 percent plunge in exports to the rest of the world. Top U.S. exports to China last year were computers and electronics, agricultural products, chemicals, and transportation equipment.

The USCBC figures tend to undercut complaints that China’s currency policies have stymied U.S. exports to that country. In fact, as I argued in an op-ed in the Los Angeles Times last week, since 2005, U.S. exports to China have been growing three times faster than our exports to the rest of the world.

There is agreement across the spectrum that the Chinese government should continue to move toward a more flexible, market-priced currency. But the export numbers do not give any support to the critics who want to threaten sanctions against China. In fact, as I concluded in my op-ed:

If the Obama administration hopes to double U.S. exports in the next five years, as the president announced in his State of the Union address, it should praise China for its growing appetite for U.S. goods and services, not threaten it with trade sanctions. Any company hoping to double its sales in the next five years would be foolish to pick a needless fight with one of its best customers.

19 U.S. States Sold $1 Billion or More in China in 2009 is a post from Cato @ Liberty - Cato Institute Blog

• Too bad no one saw this coming: Social Security is now in the red.

• Now that the health care bill is law, you should know exactly how it’s going to affect you, your premiums, and your coverage over the next few years. Here’s a helpful breakdown.

• As the health care overhaul crosses home plate, global warming legislation steps up to bat.

• Appreciate this: Chinese currency rise will have a negligible effect on the trade deficit. For more, read the whole paper.

• Podcast:  “A Plea for Divided Government” featuring John Samples, author of the forthcoming book The Struggle to Limit Government.

Thursday Links is a post from Cato @ Liberty - Cato Institute Blog

Moody’s has announced that it will change its methods for rating debt issued by state and local governments.  Politicians have argued that its current ratings ignore the historically low default rate of municipal bonds, resulting in higher interest rates being paid on muni debt, or so argue the politicians.

First this argument ignores that the market determines the cost of borrowing, not the rating.  And while ratings are considered by market participants, one can easily find similarly rated bonds that trade at different yields.

Second, while ratings should give some weight to historical performance, far more weight should be given to expected future performance.  Regardless of how say California-issued debt has performed in the past, does anyone doubt that California, or many other municipalities, are in fiscal straights right now?

Last and not least, politicians have no business telling rating agencies how to handle different types of investments.  We’ve been down this road before with Fannie Mae and Freddie Mac.  During drafting of GSE reform bills in the past, politicians put constant pressure on the rating agencies to maintain Fannie and Freddie’s AAA status.

The gaming over muni ratings illustrates all the more why we need to end the rating agencies govt created monopoly.  As long as govt has imposed a system protecting the rating agencies from market pressures, those agencies will bend to the will of politicians in order to protect that status.  As Fannie and Freddie have demonstrated, it ends up being the taxpayers and the investors who ultimately pay for this political meddling.

Moody’s Caves In to Political Pressure on Municipal Bonds is a post from Cato @ Liberty - Cato Institute Blog

1. Additional federal spending transfers resources from the more productive private sector to the less productive public sector of the economy. The bulk of federal spending goes toward subsidies and benefit payments, which generally do not enhance economic productivity. With lower productivity, average American incomes will fall.

2. As federal spending rises, it creates pressure to raise taxes now and in the future. Higher taxes reduce incentives for productive activities such as working, saving, investing, and starting businesses. Higher taxes also increase incentives to engage in unproductive activities such as tax avoidance.

3. Much federal spending is wasteful and many federal programs are mismanaged. Cost overruns, fraud and abuse, and other bureaucratic failures are endemic in many agencies. It’s true that failures also occur in the private sector, but they are weeded out by competition, bankruptcy, and other market forces. We need to similarly weed out government failures.

4. Federal programs often benefit special interest groups while harming the broader interests of the general public. How is that possible in a democracy? The answer is that logrolling or horse-trading in Congress allows programs to be enacted even though they are only favored by minorities of legislators and voters. One solution is to impose a legal or constitutional cap on the overall federal budget to force politicians to make spending trade-offs.

5. Many federal programs cause active damage to society, in addition to the damage caused by the higher taxes needed to fund them. Programs usually distort markets and they sometimes cause social and environmental damage. Some examples are housing subsidies that helped to cause the financial crises, welfare programs that have created dependency, and farm subsidies that have harmed the environment.

6. The expansion of the federal government in recent decades runs counter to the American tradition of federalism. Federal functions should be “few and defined” in James Madison’s words, with most government activities left to the states. The explosion in federal aid to the states since the 1960s has strangled diversity and innovation in state governments because aid has been accompanied by a mass of one-size-fits-all regulations.

For more, see DownsizingGovernment.org.

Six Reasons to Downsize the Federal Government is a post from Cato @ Liberty - Cato Institute Blog

Tomorrow night at 8:00pm, Fox Business News will air a John Stossel special on the failures of state-run schooling and the merits of parental choice and competition in education. I make an appearance, as do Jeanne Allen and James Tooley.

News of the show is already making the rounds, and over at DemocraticUnderground.com, one poster is very upset about it, writing:

When will these TRAITORS stop trying to ruin this country?

HOW can AMERICANS be AGAINST public education?

Stossel is throwing out every right-wing argument possible in his namby pamby singsong way while he “interviews” a “panel” of people (who I suspect are plants) saying things like preschool is a waste of money and why invest in an already-failing system….

I hate Stossel and I hate all of those who think the way he does.

This poster goes by the screen name “Live Love Laugh.” I guess there wasn’t enough space to tack “Hate” onto the end.

What this poster–and many good people on the American left–have yet to grasp is that critics of state monopoly schooling are NOT against public education. On the contrary, it is our commitment to the ideals of public education that compels us to pursue them by the most effective means possible, and to abandon the system that has proven itself, over many many generations, incapable of fulfilling them. I wrote about this crucial point more than a decade ago in Education Week, in a piece titled: “Are Public Schools Hazardous to Public Education.”

Fortunately, a small but steadily growing number of American liberals have already grasped this pivotal difference between means and ends, as the growing Democratic support for Florida’s school choice tax credit program evinces. Giving all families, particularly low income families, an easier choice between state-run and independent schools is the best way to advance the ideals of public education.

A Severe Irony Deficiency is a post from Cato @ Liberty - Cato Institute Blog

President Obama has announced his intention to use $30 billion in TARP funds to create a new small business lending fund.  In all likelihood, this is $30 billion the taxpayers will never see returned.

First of all, the problem facing small business, outside of the massive uncertainty being created by Washington, is one of credit availability, not cost.  For those who can get credit, its quite cheap, arguably too cheap.  So if the president doesn’t intend to lower the cost of credit, the plan must be to lower the quality; using the $30 billion to cover expected credit losses.  Of course, we tried throwing lots of taxpayer money at unsustainable homeownership, is there any reason to believe throwing taxpayer money at unsustainable businesses is going to work any better?

Using TARP funds for this program is also somewhat disingenuous.  This program adds $30 billion to the deficit regardless of whether it’s funded by TARP or by Congressional appropriations.  Taking from the TARP only allows the President to keep treating the TARP as his personal slush fund.  Nowhere in the TARP legislation can you find language authorizing the use of funds to cover credit losses on new loans.  Being a constitutional scholar, the President should know very well that the spending power rests with Congress, not the President.  If we are to have a new small business lending program, it should be designed and funded by Congress, not bureaucrats at the Treasury Department.

Historically the two main sources of small business start-up funding have been home equity and credit cards.  Clearly the availability of home equity has declined.  Sadly as well, with the passing of credit card “reform” the availability of credit card lending has also declined.  If the President truly wants to help small business, then the first thing to do is ask Congress to repeal the credit card bill and then just get out of the way.

Obama Small Business Lending Fund Likely A Bust is a post from Cato @ Liberty - Cato Institute Blog

During his SOTU address last week, the president declared it a national goal to double our exports over the next five years.  As my colleague Dan Griswold argues (a point that is echoed by others in this NYT article), such growth is probably unrealistic. But with incomes rising in China, India and throughout the developing world, and with huge amounts of savings accumulated in Asia, strong U.S. export growth in the years ahead should be a given—unless we screw it up with a provocative enforcement regime.

The president said:

If America sits on the sidelines while other nations sign trade deals, we will lose the chance to create jobs on our shores. But realizing those benefits also means enforcing those agreements so our trading partners play by the rules.

Ah, the enforcement canard!

One of the more persistent myths about trade is that we don’t adequately enforce our trade agreements, which has given our trade partners license to cheat.  And that chronic cheating—dumping, subsidization, currency manipulation, opaque market barriers, and other underhanded practices—the argument goes, explains our trade deficit and anemic job growth.

But lack of enforcement is a myth that was concocted by congressional Democrats (Sander Levin chief among them) as a fig leaf behind which they could abide Big Labor’s wish to terminate the trade agenda.  As the Democrats prepared to assume control of Congress in January 2007, better enforcement—along with demands for actionable labor and environmental standards—was used to cast their opposition to trade as conditional, even vaguely appealing to moderate sensibilities.  But as is evident in Congress’s enduring refusal to consider the three completed bilateral agreements with Colombia, Panama, and South Korea (which all exceed Democratic demands with respect to labor and the environment), Democratic opposition to trade is not conditional, but systemic.

The president’s mention of enforcement at the SOTU (and his related comments to Republicans the following day that Americans need to see that trade is a two way street — starts at the 4:30 mark) indicates that Democrats believe the fig leaf still hangs.  It’s time to lose it.

According to what metric are we failing to enforce trade agreements?  The number of WTO complaints lodged? Well, the United States has been complainant in 93 out of the 403 official disputes registered with the WTO over its 15-year history, making it the biggest user of the dispute settlement system. (The European Communities comes in second with 81 cases as complainant.)  On top of that, the United States was a third party to a complaint on 73 occasions, which means that 42 percent of all WTO dispute settlement activity has been directed toward enforcement concerns of the United States, which is just one out of 153 members.

Maybe the enforcement metric should be the number of trade remedies measures imposed?  Well, over the years the United States has been the single largest user of the antidumping and countervailing duty laws.  More than any other country, the United States has restricted imports that were determined (according to a processes that can hardly be described as objective) to be “dumped” by foreign companies or subsidized by foreign governments. As of 2009, there are 325 active antidumping and countervailing duty measures in place in the United States, which trails only India’s 386 active measures.

Throughout 2009, a new antidumping or countervailing duty petition was filed in the United States on average once every 10 days.  That means that throughout 2010, as the authorities issue final determinations in those cases every few weeks, the world will be reminded of America’s fetish for imposing trade barriers, as the president (pursuing his “National Export Initiative”) goes on imploring other countries to open their markets to our goods.

Rather than go into the argument more deeply here, Scott Lincicome and I devoted a few pages to the enforcement myth in this overly-audaciously optimistic paper last year, some of which is cited along with some fresh analysis in this Lincicome post.

Sure, the USTR can bring even more cases to try to force greater compliance through the WTO or through our bilateral agreements.  But rest assured that the slam dunk cases have already been filed or simply resolved informally through diplomatic channels.  Any other potential cases need study from the lawyers at USTR because the presumed violations that our politicians frequently and carelessly imply are not necessarily violations when considered in the context of the actual rules.  Of course, there’s also the embarrassing hypocrisy of continuing to bring cases before the WTO dispute settlement system when the United States refuses to comply with the findings of that body on several different matters now.  And let’s not forget the history of U.S. intransigence toward the NAFTA dispute settlement system with Canada over lumber and Mexico over trucks.  Enforcement, like trade, is a two-way street.

And sure, more antidumping and countervailing duty petitions can be filed and cases initiated, but that is really the prerogative of industry, not the administration or Congress.  Industry brings cases when the evidence can support findings of ”unfair trade” and domestic injury.  The process is on statutory auto-pilot and requires nothing further from the Congress or president. Thus, assertions by industry and members of Congress about a lack of enforcement in the trade remedies area are simply attempts to drum up support for making the laws even more restrictive.  It has nothing to do with a lack of enforcement of the current rules.  They simply want to change the rules.

In closing, I’m happy the president thinks export growth is a good idea.  But I would implore him to recognize that import growth is much more closely correlated with export growth than is heightened enforcement.  The nearby chart confirms the extremely tight, positive relationship between export and imports, both of which track similarly closely to economic growth.

U.S. producers (who happen also to be our exporters) account for more than half of all U.S. import value.  Without imports of raw materials, components, and other intermediate goods, the cost of production in the United States would be much higher, and export prices less competitive.  If the president wants to promote exports, he must welcome, and not hinder, imports.

Time to Lose the Trade Enforcement Fig Leaf is a post from Cato @ Liberty - Cato Institute Blog

Yesterday, Cato released a new study, “The Massachusetts Health Plan: Much Pain, Little Gain,” which showed that official estimates overstate the gains in health insurance coverage resulting from a 2006 Massachusetts law by at least 45 percent.  The study also finds: supporters understate the law’s cost by nearly 60 percent; government programs are crowding out private insurance; self-reported health improved for some but fell for others; and young adults are responding to the law by avoiding Massachusetts.

Given that the Massachusetts health plan bears a “remarkable resemblance” to the Obama plan, the study should serve as a warning sign to members of Congress, says Michael Cannon, director of health policy studies.

The study has received coverage in Investor’s Business Daily, The Wall Street Journal, The Washington Post, Detroit News, The Washington Times, the Reason Foundation and the Pioneer Institute.

Trouble in Massachusetts is a post from Cato @ Liberty - Cato Institute Blog

• Nat Hentoff: If you’re looking for reform in Cuba, don’t rest your hopes on Raul Castro.

• Tim Carney, author of Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses gives the inside scoop on why big government is good for big business.

• The Patriot Act: What should go, and what should stay?

• Dear Poor People- “Please remain poor.” Sincerely, Obamacare.

• Podcast: “Obamanomics in Health Care” featuring Tim Carney.

Thursday Links is a post from Cato @ Liberty - Cato Institute Blog

In a post at the Enterprise Blog two days ago, economist Mark Perry deftly parodies a typical mainstream media account of trade protectionism by editing the story in redline to contrast its original presentation with its true significance. I recommend reading the whole thing, but here’s the first paragraph:

WASHINGTON POST (Reuters) – A U.S. trade panel gave final approval on Wednesday to duties taxes ranging from 10 to 16 percent on cost-conscious firms in the U.S. who purchase low-priced Chinese-made steel pipe rather than high-price domestic pipe, in the biggest U.S. trade case to date against China American companies (and their shareholders, employees, and customers) who shop globally for their inputs and find the best value in China.

Perry’s point—and I share his frustration—is that the mainstream media typically fail to convey even a sense of the costs of U.S. protectionism to U.S. interests even though Americans (and non-Americans living in the U.S.) bear the greatest burden of that protectionism. When the U.S. government imposes duties on Chinese steel, it is imposing taxes on U.S. consuming industries, their employees, their shareholders, and their customers.

Considering that more than half of the value of all U.S. imports in a typical year is raw materials and intermediate goods (i.e., inputs for producers operating in the United States, who employ people, transact with other businesses, and pay taxes in the United States), the number of U.S. victims of U.S. import taxes is much larger than one can ever glean from a typical media account. Taxes on Chinese-made ”Oil Country Tubular Goods” or OCTG (the subject in the article Perry edits), which are used for oil exploration and transport, will raise costs in the energy industry, which are likely to be passed onto consumers in the form of higher energy prices.

As described in this paper, trade is no longer a competition between “Us and Them.” There is competition between entities that—because of the proliferation of cross-border investment and transnational production and supply chains—often defy any meaningful national identification. But that competition is preceded by collaboration and cooperation between entities in different countries. The factory floor has broken through its walls and now spans borders and oceans—a fact that renders U.S. workers and workers in other countries complementary in more and more cases, and a fact that amplifies the cost of trade barriers.

But media—chained to the false “Us versus Them” paradigm—describe protectionist policies as actions taken by one national monolith against another, and convey the impression that American readers should be cheering for Team America. It is a worldview that conflates the well-being of “our producers” with some homogenized conception of “the national interest.” It is the same misguided scoreboard mentality that colors reporting of the trade account, where exports are deemed “good” and imports “bad.”  And, it is this simplistic, misleading characterization that, in my opinion, is most responsible for withering public opinion about trade and globalization over the past decade.

I look forward to more of Dr. Perry’s editing projects.

Mainstream Media’s Trade Gap is a post from Cato @ Liberty - Cato Institute Blog

• Whether you’re insured, uninsured, get health insurance on your own or through an employer, own a small business or work for someone else,  this is what the health care bill means for you.

• An update on the hidden taxes in the health care bill.

• Why Obama should order the DEA to make more pot available for medical research.

• The U.S. Constitution mentions only three federal crimes (treason, piracy, and counterfeiting). Today, there are more than 4,000.

• Podcast: “Myths of Health Care Reform.”

Tuesday Links is a post from Cato @ Liberty - Cato Institute Blog

As described in the current Cato Policy Report, one of the “Hard Lessons from the Auto Bailout” is that management at GM is likely to be “highly erratic, as the president and Congress wrestle for decisionmaking primacy at this majority taxpayer-owned entity.”  The “dealerships” issue is Exhibit A.

One of GM’s first decisions upon emerging from bankruptcy was to announce closures of a number of dealerships to help reduce costs. Then-nominal-CEO Fritz Henderson explained that the planned closings would save GM about $100 in distribution costs per vehicle–a few hundred million dollars per year when factoring in the millions of units GM expects to produce.

But many of GM’s congressional CEOs cried foul, demanding reconsideration from a company that had taken public funds.  The House of Representatives even passed a bill requiring companies that received federal funds to reestablish terminated dealership agreements, though no action was taken in the Senate.

However, as reported in The Hill today, Congress is fast-tracking legislation to restrict GM’s (and Chrysler’s) closings, by subjecting each decision to an arbitrator, who will “balance the economic interests of the terminated dealership, the car companies and the general public.”  A Senate aide is cited as saying legislators intend to pass this measure before Christmas.

Well, look, EVERY decision GM makes will produce winners and losers in terms of real and opportunity costs.   Hence, EVERY decision is just as worthy of legislative or executive scrutiny, if the dealership issue is the litmus test. 

With 537 CEOs, all but one of whom have bigger priorities than GM’s bottom line, GM’s future will be dictated by splitting differences, political logrolling, and managing by consensus–tactics that will assure GM’s demise.

How to Kill a Company: A Beginner’s Guide (Chapter 1, P. 1.) is a post from Cato @ Liberty - Cato Institute Blog

Today’s Politico Arena asks:

The WH Jobs Summit: “A little less conversation? A little more action? ( please)”

My response:

Today’s White House ‘Jobs Summit’ is a post from Cato @ Liberty - Cato Institute Blog

John Kay’s column in yesterday’s Financial Times criticizes government guarantees to banks because they involve hidden but large costs. According to Kay:

• Such guarantees distort competition: sheltered banks outperform rivals not because of greater efficiency, but because capital becomes cheaper to obtain.
• Sheltered banks gain too-big-to-fail status, which creates barriers to entry for smaller, more efficient banks.
• Relief from business risk leads to more risk taking, AKA moral hazard.
• Cheaper private risk management incentives are reduced within and outside the bank.

Other kinds of government guarantees, such as social insurance, also involve large hidden costs. Social Security and Medicare’s guarantee of a paid holiday with medical care for the rest of retirees’ lives generates the same types of costs:

• Labor competition is reduced because the programs induce early worker retirements, which leads to higher wage costs, on average, and lower national output.
• Workers who believe they will receive Social Security and Medicare will engage in lower personal saving, which means less capital formation and lower economic efficiency.
• Retirement income guarantees induce riskier personal savings portfolios, AKA moral hazard.
• Guaranteed retirement income means poorer financial knowledge and poorer risk management.

And now, retiree political power is too big to fail as well!

How come when Kay writes about market distortions from government guarantees for banks, he gets published; but when I do the same about government guarantees for people, I get the cold shoulder from editorial page editors?

The Cost of Government Guarantees is a post from Cato @ Liberty - Cato Institute Blog

On the weekend that next year’s Rhodes Scholars are announced, Elliot Gerson, American secretary of the Rhodes Trust and executive vice president of the Aspen Institute, writes in the Washington Post that he is greatly disappointed that a few Rhodes Scholars have gone into business.

Yes, you read that right. He’s disappointed that even a few Rhodes Scholars have chosen to go into business:

For more than a century Rhodes scholars have left Oxford with virtually any job available to them. For much of this time, they have overwhelmingly chosen paths in scholarship, teaching, writing, medicine, scientific research, law, the military and public service. They have reached the highest levels in virtually all fields.

In the 1980s, however, the pattern of career choices began to change. Until then, even though business ambitions and management degrees have not been disfavored in our competition, business careers attracted relatively few Rhodes scholars. No one suggested this was an unfit domain; it was simply the rare scholar who went to Wall Street, finance and general business management. Only three American Rhodes scholars in the 1970s (out of 320) went directly into business from Oxford; by the late 1980s the number grew to that many in a year. Recently, more than twice as many went into business in just one year than did in the entire 1970s.

Apparently Gerson believes that our best and brightest can accomplish more good for the world in such fields as writing, law, and bureaucracy than they can by creating, innovating, and improving lives in the world of business — the arena that not only provides all of us with more comfortable, more interesting lives, and has lifted billions of people out of the back-breaking labor and short lives that were the human condition for millennia, but also makes possible the luxuries of the Aspen Institute, which was founded by Walter Paepcke (1896-1960), chairman of the Container Corporation of America, and is supported by successful businesspeople and their heirs today.

Of course, it’s not clear that business needs Rhodes Scholars. Think of the businesspeople who have revolutionized our world in recent decades: Bill Gates and Paul Allen, Steve Jobs and Steve Wozniak, Larry Ellison, David Geffen, Ted Turner, and Malcom McLean, among others, either never attended or never finished college. Sam Walton, Bill McGowan, and Fred Smith did finish college but weren’t Rhodes Scholars. In the Washington Post Jay Mathews notes that the chief executives of the top 10 U.S.-based Fortune 500 companies attended Pittsburg (Kan.) State, Texas at Austin, University College Dublin, Texas Tech, Texas at Austin, Dartmouth, Kansas, Gannon, Georgia State and Central Oklahoma, not the usual sources of Rhodes Scholars.

But the elite hostility to business — a holdover from Europe, perhaps, where aristocrats looked down on “trade,” or an unconscious echo of Marxism — is unseemly and harmful to both general prosperity and the individuals who are influenced by it to avoid productive enterprise. It crops up in President Obama’s commencement addresses sneering at students who want to “take your diploma, walk off this stage, and chase only after the big house and the nice suits and all the other things that our money culture says you should buy” and in Michelle Obama’s urging hard-pressed women in Ohio, “Don’t go into corporate America.” It’s nice that some people, like senators’ wives, can make $300,000 a year in “the helping industry,” but it’s business that produces the wealth that allows such nonprofit generosity.

Gerson and the Obamas are disparaging the people who built America – the traders and entrepreneurs and manufacturers who gave us railroads and airplanes, housing and appliances, steam engines, electricity, telephones, computers and Starbucks. Ignored here is the work most Americans do, the work that gives us food, clothing, shelter and increasing comfort. That work deserves at least as much respect as “scholarship, teaching, writing, medicine, scientific research, law, the military and public service.”

Rhodes Scholars and the Business World is a post from Cato @ Liberty - Cato Institute Blog