Feds Giveth Jobs & Cars, Then Taketh Away Again
The bad news this morning on the impact of both the federal stimulus and the Cash for Clunkers program should not come as a surprise to anyone who has paid attention to the history of government intervention in the economy.
New data that the jobs created by the stimulus have been overstated by thousands is compelling, but it’s really a secondary issue. The primary issue is that the government cannot “create” anything without hurting something else. To “create” jobs, the government must first extract wealth from the economy via taxation, or raise the money by issuing debt. Regardless of whether the burden is borne by present or future taxpayers, the result is the same: job creation and economic growth are inhibited.
At the same time the government is taking undeserved credit for “creating jobs,” a new analysis of the Cash for Clunkers program by Edmunds.com shows that most cars bought with taxpayer help would have been purchased anyhow. The same analysis finds the post-Clunker car sales would have been higher in the absence of the program, which proves that the program merely altered the timing of auto purchases.
Once again, the government claims to have “created” economic growth, but the reality is that Cash for Clunkers had no positive long-term effect and actually destroyed wealth in the process.
Right now businesses and entrepreneurs are hesitant to make investments or add new workers because they’re worried about what Washington’s interventions could mean for their bottom lines. The potential for higher taxes, health care mandates, and costly climate change legislation are all being cited by businesspeople as reasons why further investment or hiring is on hold. Unless this “regime uncertainty” subsides, the U.S. economy could be in for sluggish growth for a long time to come.
For more on the topic of regime uncertainty and economic growth, please see the Downsizing Government blog.
Want to Know Why the U.K. Tory Party Is Revamping its Development Policy?
If so, just pick up a copy of James Tooley’s The Beautiful Tree: A Personal Journey into How the World’s Poorest People Are Educating Themselves.
The Tories have looked at the evidence amassed by James and his colleagues (see p. 36 of their new report) and concluded that the best way to advance education in developing countries is to encourage and support existing entrepreneurial schools that are already serving the poor. And if the polls are any guide, that will likely be official government policy in the U.K. before too long.
Congratulations to James, Pauline Dixon, and their wonderful team for bringing sanity to the development policy debate.
Filed under: Education and Child Policy; International Economics and Development
“Sweet” Victory in Oregon
As a follow-up to Jason Kuznicki’s post from January, I am pleased to report that yesterday Oregon Governor Ted Kulongoski signed HB 2817—a bill that eliminates the cartelization of the moving business in the Beaver state.
The old law required the Oregon Department of Transportation to notify existing moving companies of businesses that wanted to enter into their market. What’s more, those companies were given a veto over the would-be market entrants thereby locking out all competition to maintain artificially high prices—all with the government’s help.
The owner of a new moving company, Adam Sweet, enlisted the help of Pacific Legal Foundation lawyer and Cato adjunct scholar Tim Sandefur to litigate against the old law. That lawsuit, once it cleared challenges for dismissal, prompted several pieces of legislation that culminated into the bill that the governor signed yesterday.
Congratulations to Mr. Sweet, Tim, and PLF for their well-fought victory for economic liberty for the entrepreneurs and consumers of Oregon!
More details from PLF here.
Canada and Jefferson’s Natural Progress
Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co-authored op-ed in the Washington Post yesterday showed, Canada has:
- Cut government spending
- Cut government debt
- Balanced its budget consistently
- Pre-funded its version of Social Security to make it solvent
- Decentralized power within its federation of provinces
- Cut taxes, particularly corporate taxes
Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:
- Canada has more liberal immigration policies for highly skilled workers than does the United States, which has added greatly to the entrepreneurial vibrancy of Canada’s economy.
- Canada has long had a stable, efficient, and competitive financial sector, which avoided the government-assisted meltdown that occurred in the United States.
- Canada has a home ownership rate as high as the United States, yet it does not have a distortionary mortgage interest tax deduction.
- Canada recently implemented large Roth IRA style savings accounts, which are much more flexible than the U.S. version.
- The Canadian federal capital gains tax rate is 14.5 percent, which compares to the current 15 percent in the United States and 20 percent under Obama’s tax plan.
- Canada has no federal ministry or department of education. The K-12 schools are the sole responsibility of the provinces, yet Canadian kids generally do better than American kids on international tests.
- In recent years, Canada has probably been more supportive of NAFTA, and free trade in general, than its main trading partner, the United States.
Major pro-market reforms are possible in advanced welfare states — Jefferson can be proven wrong, as Canada illustrates. U.S policymakers can prove Jefferson wrong as well. They can start by cutting spending, decentralizing power out of Washington, and making pro-growth tax reforms in response to globalization, as Canada has, rather than imposing self-defeating “Buy America” provisions and making childish rants about “corporations moving jobs offshore.”
Filed under: International Economics and Development; Tax and Budget Policy
Cleveland Park Embraces Free Markets
Cleveland Park, an upscale neighborhood here in the District of Columbia, might be the last place you would expect appeals to the principles of the free market. It is, after all, the home of what David Brooks once called ”Ward Three Morality,” an outlook that celebrates government control of the economy. But not always.
Recently an entrepreneur proposed opening a new wine store in Cleveland Park. He sought the support of the advisory neighborhood commission, a local government board, before making his case for a liquor license to DC’s Alcohol Beverage Control Board. The most serious opposition to the entrepreneur’s plans seems to have come from an existing wine store nearby. According to its attorney, the existing wine store was “a beloved extension of the community.” More candidly he noted the new store would offer competition to the existing business. At this point, you might think: the Cleveland Park commission blocked opening of the new business while congratulating themselves on protecting the town from a ruthless “capitalist logic.”
Well, not quite. Peter Fonseca, the lawyer for the entrepreneur, reportedly “urged the commissioners to consider free-market principles when making their decision. ‘This is America.’” And they did: “Commissioner Richard Rothblum agreed, saying commissioners should not get in the way of free enterprise. ‘I don’t think we have any place telling people what their business plan should be.’” The commission then voted 8-0 to support the entrepreneur’s effort at the Alcohol Control Board. The appeal to “free market principles” seems to have carried the day in Cleveland Park!
Perhaps this is only the beginning. If the free market is desirable for fine wines, why not the auto industry and the banks?
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