Last week I blogged about Sen. Dianne Feinstein’s (D-CA) proposal to devote $20 billion of the Export-Import Bank’s funds to promoting manufacturing exports, and why that was a bad idea.

But I realize that my recent call to “X Out the Ex-Im Bank” will be facing some very entrenched interests in Washington, and some well-funded lobby groups. The Bank has historically attracted bipartisan support, and a renewal of its charter sailed through the House Committee on Financial Services earlier this year. The Washington establishment loves this program.

My friend and long-time Ex-Im Bank supporter Gary Hufbauer of the Peterson Institute for International Economics published a critique a few weeks ago of my analysis, and calls for a doubling of Ex-Im’s authorization cap (from $100 billion to $200 billion). His piece is a fair characterization of my arguments, and at least Gary tries to counter them with actual facts and analysis (not always a given in an increasingly poisonous trade policy environment).  But it seems to me that Gary focuses his critique on my assessment of the effectiveness of the Bank. That’s fair enough, of course, but I tried in my paper to make the point that the efficiency or efficacy of the Ex-Im Bank’s activities is kind of irrelevant. The important point, which Gary did not address, is that it is simply not the proper role of the federal government to be in this business at all, even if they can operate “efficiently” (which I do not concede in any case). Where in the Constitution is the federal government authorized to be involved in the export credit business (a business, by the way, that benefits mainly large, profitable companies)?

My opposition to the Bank, in other words, is at a more fundamental level.  On an empirical level—and this is where Gary’s critique is focused—can markets work well enough in trade finance, and if not, can government intervention work better? Gary points to the Bank’s low default rate as evidence that private markets are missing good opportunities:

These figures suggest that the Ex-Im Bank plays a large role in facilitating exports to countries that encounter reluctance from private banks but nonetheless are not ‘bad risks.” Judging by its low default rate, the Ex-Im Bank’s risk assessment seems more correct than the private market.

But I would argue that its low default rate suggests the Ex-Im Bank’s backing is unnecessary. We don’t know that private credit wasn’t available to finance those exports. And even if it wasn’t, private credit not always being available on terms that the trading partners would like does not necessarily signify market failure. So a finance company missed an opportunity that may have paid out. So what? Maybe they had even better opportunities available to them that we (and bureaucratic Washington) don’t know about, or they simply wanted to hold on to their capital for future investment or to meet new reserve standards. The would-be exporter might miss out, but government intervention to direct that private capital (either through mandates, or siphoning it through the Ex-Im Bank) would come at another producer’s or bank shareholders’ expense.

Gary argues that:

Ex-Im’s capability should be strengthened so that the United States can respond when official finance offered by other countries violates the principles of fair competition…Successful multilateral negotiations…are certainly a superior option to tit-for-tat retaliation…[but]…without sufficient leverage…it is difficult to see what will bring China and India to the negotiating table.

But will China and India (and others) see higher Ex-Im funding as “leverage” to bring them to the table, or will it be seen as just the next step in the escalating arms race of subsidized export credit? I suspect, and fear, the latter.

Gary rejects my call to dismantle the Ex-Im Bank, and in fact suggests the government increase the scope of Ex-Im financing to cover 5 percent (rather than the current 2 percent) of total U.S.exports. That seems pretty arbitrary to me. Why stop at 5 percent? Heck, with the Ex-Im Bank being “self-financing” and all, why not go for 100 percent?

Lastly, Gary repudiates my “orthodox free-market reasoning” and the suggestion, attributed to me, that “… the dollar exchange rate alone determines the volume of U.S. exports or the size of the U.S. trade deficit.”  Exchange rates do not equilibrate to keep trade balances at zero, but to keep them in line with the savings and investment balance. The United States has been running persistent deficits because savings has fallen short of investment for many years.

Similarly, Gary takes issue with my analysis on the net effect of Ex-Im financing on jobs:

 …nor do we agree that free markets are sufficiently self- regulating to ensure a constant and low rate of unemployment…If [that proposition] described the American economy, the United States [unemployment would not be stuck at 9 percent-plus.

Here Gary seems to ignore the many interventions in labor markets that can keep unemployment high, no matter what the exchange rate. I’m certainly not under any illusions that the U.S. economy would be totally free market were it not for the existence of the Ex-Im Bank, and I don’t think my paper implied that, either.

Gary and I, not to mention others who study the Ex-Im Bank, will no doubt continue to debate these issues as the Ex-Im Bank’s charter expiry date comes closer.

More on the Ex-Im Bank is a post from Cato @ Liberty - Cato Institute Blog

President Obama has been saying that if the United States government can find and eliminate Osama bin Laden after ten years of searching, it can do anything:

Already, in several appearances since the raid, Obama has described it as a reminder that “as a nation there is nothing that we can’t do,” as he put it during an unrelated White House ceremony Monday. On Sunday night, during his first comments about the operation, he linked it to American values, saying the country is “once again reminded that America can do whatever we set our mind to.”

This is, of course, nonsense. Finding bin Laden, difficult as it proved to be, was an incomparably simple task compared to using coercion and central planning to bring about desired results in defiance of economic reality. You can’t deliver better health care to more people for less money by reducing the role of incentives and markets, even if you set your mind to it. As Russell Roberts said about a similar concept, “If we can put a man on the moon, then…”:

Putting a man on the moon is an engineering problem. It yields to a sufficient application of reason and resources. Eliminating poverty is an economic problem (and by the word “economic” I do not mean financial or related to money), a challenge that involves emergent results. In such a setting, money alone—in the amounts that a non-economic approach might suggest, one that ignores the impact of incentives and markets—is unlikely to be successful.

Obama should listen to Bill Clinton, who last fall seemed to be channeling Hayek:

Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”

Clinton, Obama, and Hayek is a post from Cato @ Liberty - Cato Institute Blog

Postal Vision 2020 is a conference scheduled for June in Arlington, VA, that will discuss the U.S. Postal Service’s long-term prospects in our increasingly digitized world. Here’s how the Washington Post’s Ed O’Keefe frames the gathering:

As mail volume continues to plummet and more Americans use the Internet to pay bills and keep in touch, Google executives, social media experts and some of the most passionate tech evangelists are planning to meet in Crystal City in mid-June to sort out how to save and remake the nation’s mail delivery service.

That sounds like a good group for discussing ideas on how to “remake the nation’s mail delivery service” given that the USPS is the antithesis of companies like Google. Creative, innovative, entrepreneurial, and competitive are words that one would associate with Google—not the government’s mail monopoly. However, should these folks be getting together to discuss saving the USPS? That notion strikes me as akin to having Henry Ford come up with ideas on saving the horse and buggy.

As I discuss in a Cato essay on the USPS, the socialist mail enterprise cannot survive in its current form—at least not without a reintroduction of taxpayer subsidies. The USPS’s revenue base has been irrevocably undermined by the growth in digital communications, and congressional micromanagement makes sufficient cost-cutting extremely difficult. Thus, I would argue that the goal should be to create a market for postal services rather than to “save” the USPS:

Policymakers resistant to reform often depict the USPS as a “national asset” that “binds the nation together.” But these days, it’s the Internet and our telecommunications networks that bind families and businesses together across the nation. It’s time to let go of the nostalgia for the USPS and bring America’s postal services into the 21st century with privatization, open competition, and entrepreneurial innovation.

Unfortunately, the sclerosis at the USPS is a reflection of the sclerosis in Congress. As Chris Edwards and I have repeatedly discussed with each other, it is incredibly difficult for Congress to think outside the box on policy. One reason is that because the federal government has become so massive, policymakers have little time to devote to big ideas like transforming the USPS. That, of course, assumes that policymakers are interested in such big ideas. For many members of Congress, interest in the USPS doesn’t go much further than franking privileges and naming post offices.

Postal Vision 2020 is a post from Cato @ Liberty - Cato Institute Blog

So there I was, checking e-mail this morning on my JooJoo when I came across this editorial about how the private sector lacks accountability unless the government provides it through regulation! This naturally caused me to expectorate New Coke all over over myself and my Apple III, forcing me to toss my Levi’s Type 1 jeans in the wash and hop back in the shower. (You know, that Touch of Yogurt shampoo by Clairol is really… uh… something).

Twenty minutes later I was still so preoccupied about responding to the editorial that I backed over my neighbor’s Segway as I pulled the Edsel out of the garage. Oops. Sorry Dean.

Anyway, once I got into the office I popped a couple of Ben Gay Aspirin to ease my now ferocious headache, but realized as I did so that I’d left my Colgate Kitchen Entree frozen dinner at home. Argh!

You get the idea, yes?

The fact that consumers have demands, and that they can go elsewhere if you fail to meet them, makes producers accountable. We see this in every sector of the economy. Provide a product or service that people don’t want, take away one that they do want, or charge more than they are willing to pay, and they will kick you right in the bottom line.

The result is the same in education as in other fields: the least regulated, most market-like education systems consistently outperform highly regulated state-run school systems such as we have in this country—across every measure people care about.

Regulations are an attempt, crude and usually unsuccessful, to imitate the accountability inherent in competitive markets. So as long as you allow market forces to work in education, and you allow people to allocate their own money rather than taxing it and spending it through the state, regulations are not only unnecessary they are generally counterproductive. (Milton and Rose Friedman had a good chapter on this in Free to Choose.)

Note that this is true under both personal use education tax credits (for parents’ own education costs) and scholarship donation tax credits (in which taxpayers donate to non-profit organizations that subsidize education for the poor). If a scholarship organization becomes corrupt or inefficient, taxpayers can easily redirect their donations to better-run competing organizations. The accountability is built into the system’s design. No other private school choice program has this feature, and certainly public schools do not.

There is no evidence that layering government regulations on top of this market accountability system improves outcomes, and ample evidence that heavily regulated school systems perform badly. Unless those facts change, there is good reason to fight off attempts to regulate private schools under education tax credit programs.

The Private Sector Lacks What?!? is a post from Cato @ Liberty - Cato Institute Blog

In the final push before Election Day, President Obama has been traveling the country criticizing Republicans for favoring tax breaks for U.S. companies that supposedly ship U.S. jobs overseas. It’s a bogus charge that I dismantle in an op-ed in this morning’s New York Post:

The charge sounds logical: Under the US corporate tax code, US-based companies aren’t taxed on profits that their affiliates abroad earn until those profits are returned here. Supposedly, this “tax break” gives firms an incentive to create jobs overseas rather than at home, so any candidate who doesn’t want to impose higher taxes on those foreign operations is guilty of “shipping jobs overseas.”

In fact, American companies have quite valid reasons beyond any tax advantage to establish overseas affiliates: That’s how they reach foreign customers with US-branded goods and services.

Those affiliates allow US companies to sell services that can only be delivered where the customer lives (such as fast food and retail) or to customize their products, such as automobiles, to better reflect the taste of customers in foreign markets.

I go on to point out that close to 90 percent of what U.S.-owned affiliates produce abroad is sold abroad; that those foreign affiliates are now the primary way U.S. companies reach global consumers with U.S.-branded goods and services; and that the more jobs they create in their affiliates abroad, the more they create in their parent operations in the United States. If Congress raises taxes on those foreign operations, it will only force U.S. companies to cede market share to their German and Japanese (and French and Korean) competitors.

I unpack the issue at greater length in a Free Trade Bulletin published last year, and on pages 99-104 of my recent Cato book, Mad about Trade: Why Main Street America Should Embrace Globalization.

The Bogus Charge of ‘Shipping Jobs Overseas’ is a post from Cato @ Liberty - Cato Institute Blog

Michael Crowley, late of the New Republic and now with Time magazine, writes thoughtfully about Ron Paul, Rand Paul, and libertarianism. Crowley notes that Rand Paul, “more politically flexible than his father,” has plenty of unlibertarian positions. But both of them are tapping into a real strain in contemporary politics:

But he, like his father, also knows well that a genuine libertarian impulse is astir in America…. polls show an uptick in both social permissiveness and skepticism of government intervention….[Ron Paul] has already waited a long time — and it appears the country is moving his way.

This is a current trend, but it’s also deeply rooted in the American political culture. As David Kirby and I wrote in “The Libertarian Vote“:

It’s no surprise that many Americans hold libertarian attitudes since America is, after all, a country fundamentally shaped by libertarian values and attitudes. In their book It Didn’t Happen Here: Why Socialism Failed in the United States, Seymour Martin Lipset and Gary Marx write, “The American ideology, stemming from the [American] Revolution, can be subsumed in five words: antistatism, laissez-faire, individualism, populism, and egalitarianism.”… Richard Hofstadter wrote: “The fierceness of the political struggles in American history has often been misleading; for the range of vision embraced by the primary contestants in the major parties has always been bounded by the horizons of property and enterprise. However much at odds on specific issues, the major political traditions have shared a belief in the rights of property, the philosophy of economic individualism, the values of competition; they have accepted the economic virtues of capitalist culture.”… McClosky and Zaller sum up a key theme of the American ethos in classic libertarian language: “The principle here is that every person is free to act as he pleases, so long as his exercise of freedom does not violate the equal rights of others.”…

Some people recognize but bemoan our libertarian ethos. Professors Cass Sunstein and Stephen Holmes complain that libertarian ideas are “astonishingly widespread in American culture.”

Much political change in America occurs within those guiding principles. Even our radicals, Lipset and Marks note, have tended to be libertarian rather than collectivist. America is a “country of classical liberalism, antistatism, libertarianism, and loose class structure,” which helps to explain the failure of class-conscious politics in the United States. McClosky and Zaller argue that many of the changes of the 1960s involved “efforts to extend certain values of the traditionalethos to new groups and new contexts”—such as equal rights for women, blacks, and gays; anti-war and free speech protests; and the “do your own thing” ethosof the so-called counterculture, which may in fact have had more in common with the individualist American culture than was recognized at the time.

In a broadly libertarian country most voters and movements have agreed on the fundamentals of classical liberalism or libertarianism: free speech, religious freedom, equality before the law, private property, free markets, limited government, and individual rights. The broad acceptance of those values means that American liberals and conservatives are fighting within a libertarian consensus. We sometimes forget just how libertarian the American political culture is.

And of course American politics and policy deviate a great deal from those fundamental principles, which leaves libertarians feeling frustrated, even angry, and seeming extreme or radical to journalists and others. But as Conor Friedersdorf just wrote in Time‘s longtime rival, Newsweek, the media have a bias toward the status quo and establishment politicians, even when current policies and the proposals of elected officials are at least as extreme as libertarian ideas:

If returning to the gold standard is unthinkable, is it not just as extreme that President Obama claims an unchecked power to assassinate, without due process, any American living abroad whom he designates as an enemy combatant? Or that Joe Lieberman wants to strip Americans of their citizenship not when they are convicted of terrorist activities, but upon their being accused and designated as enemy combatants? In domestic politics, policy experts scoff at ethanol subsidies, the home-mortgage-interest tax deduction, and rent control, but the mainstream politicians who advocate those policies are treated as perfectly serious people.

And Fareed Zakaria, the editor of Newsweek International, made the point a dozen years ago in a review of Charles Murray’s book What It Means to Be a Libertarian (in the Public Interest, not online)

The reason that libertarians seem extreme and odd is not that they are a furious minority, angry at a world that seems to have passed them by, but rather the opposite. They are heirs to a tradition that has changed the world. Consider what classical liberalism stood for in the beginning of the nineteenth century. It was against the power of the church and for the power of the market; it was against the privileges of kings and aristocracies and for dignity of the middle class; it was against a society dominated by status and land and in favor of one based on markets and merit; it was opposed to religion and custom and in favor of science and secularism; it was for national self-determination and against empires; it was for freedom of speech and against censorship; it was for free trade and against mercantilism. Above all, it was for the rights of the individual and against the power of the church and the state….

The reason that libertarianism seems narrow and naive is that having won 80 percent of the struggles it has fought over the last two centuries, it is now forced to define itself wholly in terms of the last 20 percent. Extremism in the defense of liberty is no vice if you were in Prussia in the 1850s, but in America in the 1960s? Libertarianism has become extreme because the world has left it no recourse.

Now, I don’t feel furious, angry, or extreme. I think that libertarianism is the philosophy of the American revolution, the basic ideology of America, and indeed the foundation of Western civilization. The concept of personal and economic freedom — giving people more power to pursue happiness in their own way by restricting the size, scope, and power of government — is not extreme. Nor is it reactionary. In fact, it is the direction in which civilization has been heading, with many digressions and blind alleys, since the liberal revolution of the 17th century. I am a progressive. I believe that the simple, timeless principles of the American Revolution — individual liberty, limited government, and free markets – are even more powerful and more important in the world of instant communication, global markets, and unprecedented access to information than Jefferson or Madison could have imagined.  Libertarianism is not just a framework for utopia, it is the indispensable framework for the future.

Libertarianism Hits the Big Time is a post from Cato @ Liberty - Cato Institute Blog

The Consumerist relates the story of a potential Verizon customer who grew frustrated with his inability to get its high-speed FiOS Internet service. After resorting to emailing the CEO of the company, his service was promptly installed.

“Verizon is a corporation who cares about their customers and not only about the bottom line,” wrote the newly happy customer.

Now ask yourself: Just how separable are “caring for customers” and “the bottom line”?

It’s interesting that many people’s ideological grooves have these concepts in opposition. But business owners know how much time they spend slavishly trying to please customers—because that affects their bottom lines. When big businesses do it badly, that affects their bottom lines and invites competition.

(Needless to say, the telecommunications area needs more competition, to bring customer service and bottom lines closer together).

See also: Well-Worn Ideological Grooves I

Well-Worn Ideological Grooves II is a post from Cato @ Liberty - Cato Institute Blog

Recently I wrote an article arguing that there never was a golden age of liberty and that in particular libertarians should not hail 19th-century America as a small-government paradise, at least not without grappling with the massive problem of slavery. Jacob Hornberger, author of an article that I criticized, responded in Reason, and I then responded here. Meanwhile, an interesting discussion took place on a email list of libertarian scholars, and I’m pleased to have gotten the permission of several participants to include some of that discussion here:

Aeon J. Skoble: The ideals of freedom which led to the tangible improvements [Boaz] mentions – I’m concerned that those ideals are eroding/have eroded.  Example: say you have a robust theory of rights, but your society denies rights to women.  That’s a contradiction, and the strength of your rights theory contains the foundation for protesting the injustice and remedying it.  But if you don’t even have a robust rights theory in the first place, there’s no foundation for complaining about lost liberty.  So my concern is that, all the good progress notwithstanding, liberty as an ideal is weaker than it once was.  One thing that’s widespread, e.g., is the constant conflation of positive rights and negative rights.  And at the same time that positive rights are being accorded the status of negative rights, negative rights are increasingly being viewed as encroachable.

David Mayer: In terms of economic liberty and property rights, Americans today are certainly far less free than they were a century ago, or even two centuries ago.  What was once a vast realm of human activity that American law left to individuals’ freedom of contract (the whole realm of business activity as well as personal life, in terms of what substances individuals may choose to ingest in their own bodies, the wages and hours they can work, whom they can hire or fire, to whom they can sell their property or refuse to sell their property, etc., etc.), has now been almost wholly subjected to the dictates of government, thanks to the rise of the 20th century regulatory / welfare state.  Business owners today (to pick one obvious category of Americans – arguably, the most important category, if as I do, you agree with Calvin Cooolidge’s maxim, “The business of America is business”) are certainly far less free today than they were 100 years ago (before the “Progressive” era), or 70 years ago (before the “New Deal revolution”), or 50 years ago (before the “Civil Rights movement” and the various federal anti-discrimination laws), or 20 years ago (before, say, enactment of the Americans with Disabilities Act) – or even a year ago (before enactment of the Democrats’ health insurance nationalization law).

Glenn Reynolds: I think that David’s piece is useful in another way:  If your narrative is one in which freedoms are always shrinking, and government always growing, it may tend to discourage people from working to make things better.  I see a lot of that kind of thing from people on the Right, and it irritates me no end.  I remember when the passage of the assault weapons ban was presented as just another downward ratchet in freedom, and yet now the gun issue is such that even lefty Dems are for the most part unwilling to touch it.  That, it seems to me, is an example of how freedom can expand even in the comparatively short term.

Steve Horwitz: The way I see this is that we’re trying to answer the question “Are we more free?”  To do so, we need to address both the “we” and the “free” pieces.  I read David as making two points:  1) We need to think carefully about the “we” and recognize, as we all have noted, the major gains in freedom for non-white, non-males (and maybe non-Christians too).  2) But he was also saying there are more freedoms in the calculus than the economic.  Even white men are freer along a number of dimensions than they were in the 19th century, when one takes the social realm seriously.  Some folks have noted those.

My own view is that one can look at this in the economist’s old tool:  the 2 x 2 matrix:

economic freedoms        social freedoms

White men           notable losses            good-sized gains

Others                       huge gains                    huge gains

I think by any accounting, the NW quadrant is smaller than the sum of the others.  We can debate over how much smaller, but if we could somehow aggregate these freedoms, I think there’s no question the total amount of freedom per capita is bigger today than “before.”

Mark LeBar: Speaking for myself, I don’t think it’s a matter of economic vs. other freedoms. If I were to put my finger on what I would say seems to me most significant in thinking the losses in NW swamp whatever gains there are elsewhere, I would say it has to do with the loss of respect for contract. That’s not to say there are no gains: as others have pointed out, 2 centuries ago I could not have contracted with women, or Africans, and to the extent non-whites and non-males have been accepted to the relevant moral community, that is indeed an expansion of my liberty as well as theirs. But, as I noted earlier, my authority to bind myself in ways that are not subject to veto by the state is a shadow of what it once was. I won’t enumerate the list again. But not only is that list much smaller, the rightfulness of the state to determine just how much smaller it may be continues to expand virtually without pause, as those on this list will need no reminder. I would say there has been a sea-change from the idea (however imperfectly implemented) that the flow of authority goes from individuals to the state, to just about exactly the opposite. And that is simply a catastrophic loss to liberty, not just for white males, but for everybody. It’s hard for me to see that there can be good reasons for rejecting either the claim that the authority relation is now generally seen as running the other way, or that that amounts to a massive loss of liberty. And I don’t see imminent prospects for broad change in those attitudes. Hence the pessimism.

David Olson: I think that perhaps I am missing something. In reading today’s exchange, I thought that people were working toward a consensus that had largely been reached and summarized by Steven’s email. But now Mark writes that liberty gains to everyone but straight white Christian males are swamped by the liberty losses to white males (and to hypothetical non-whites and females compared to the liberty they might have enjoyed if they’d had full equality 200 + years ago).

I’m very surprised by this statement. The logic of this would seem to lead to the proposition that it would be better if things were still as they were 200 years ago. Would anyone actually make that statement? If not, is there some value in addition to freedom that people are focusing on in deciding the question? (And let’s take medical and dental care advances out of the question to avoid skewing the answer.)

John Hasnas: I suspect that no one on the list would disagree with the assertion that between the time of the adoption of the Constitution and the present, the political and legal commitment to a government of limited, enumerated powers has greatly declined. I also suspect that no one on the list would disagree with the assertion that a vastly greater proportion of the population enjoys freedom from illegitimate political and legal restrictions and disabilities than was the case at the time of the adoption of the Constitution. Out of this universal agreement, we have managed to manufacture disagreement by asking a vague question that equivocates on the meaning of the word freedom; to wit, “Are we more free?”

It seems pretty obvious that to the extent that we are free, that freedom is much more widely distributed than in the past. It also seems pretty obvious that to the extent that there is less legal protection against the interference of the federal government with our activities, there is less freedom. Beyond this, the value of determining whether we are more “free” in some unspecified sense escapes me.

Aeon Skoble: Actually, I wasn’t asking “Are we more free?” – I conceded David’s claim that we were.  I was expressing some concern over whether the trend will continue positively or negatively, given that the positive and negative senses of freedom are so frequently conflated (not by members of this list, but in general, both in the academy and among the general public), and that in many quarters the very concept of freedom is in disfavor, and the idea that all rights are subject to encroachment by the state, which is more and more thought of as having limitless power.

Steve Horwitz: I agree with Aeon’s concerns.  One way to put it is, as I think Mark LeBar did earlier, even if it’s true that we are collectively (per capita) more free, those gains have come at the weakening of the sacredness of certain principles that affect everyone’s freedom, especially in the long run.  I too share the concern that the last two years have accelerated that process in very problematic ways.

Stephen Davies: There’s actually general agreement here with the broad argument David made but some mild disagreement over the (probably unanswerable) question of whether the aggregate of total freedom is greater or larger. That wasn’t the main thrust of David’s piece as I read it though, he was talking about the implications and consequences of the (clearly wrong imho) line that for liberty it’s been downhill all the way since the later 18th century. This is a common line as we all know and I think its really problematic. As David says it means you come over as indifferent to the undoubted gains made in some areas by various groups and so as only concerned with the position of one subgroup. This may well be wrong but impressions matter. This line also shows a deeply conservative sensibility and mindset. If you are libertarian in the sense of not liking large or expansive government but deeply conservative in other ways (e.g on questions of social hierarchy or relations between the sexes or family organisation) then you will feel that it’s been downhill for a long time. …

I think the real problem though with the approach David criticises is the way it leads you to behave with regard to current events. Basically you are going to see yourself as playing defence all the time and probably as fighting a losing battle against an inexorable tide of rising coercive statism. This means you will come over as angry, negative, and despondent, which are not attractive qualities. Also you will let the other side set the agenda and then respond to them rather than taking the initiative. This means you spend all your time criticising and attacking proposals that are liberty hostile instead of spending most of your time advocating positive liberty enhancing changes. …

Finally, if I could put my historian’s hat on for a minute. We need to distinguish between two different measurements – the size of government (as shown by its share of GDP) and it’s extent or range (as shown by the number of activities or areas of life that are considered to be its concern). In the first case there’s a clear growth (we’ve all seen the graph). Even there there’s Tyler Cowen’s argument that a 40% share of a really big GDP is less bad than a 15% share of a much smaller pie. In the second case there’s been considerable gains as well as losses. Religious belief, observance etc was once seen as the central concern of government. Now it’s a private matter. Governments used to concern themselves with things such as dress, diet and public interactions (under sumptuary laws) and intimate details of people’s sexual behaviour (through both church and secular courts). This is no longer true. OTOH there are clearly areas where there’s been a shift in the wrong direction such as mood altering substances and firearms or where there’s a danger of a bad movement (diet for example).

The following comments are prompted by Jacob Hornberger’s response in Reason.

Brad Smith: Hornberger notes that the concept of what it meant to be free was much broader in the 19th century (something Aeon also touched on).  True, some people were not free – but for those who were, the concept had much more meaning.  That’s why I think one can agree with both perspectives, that freedom has both gained and lost ground in important ways.

Implicitly, Hornberger notes the extent to which government was simply not a presence in the lives of most people.  The average free man could go days, weeks, or even months with no direct contact whatsoever with the government. Hornberger might also have noted that a free man didn’t need a passport to travel, or an operator’s license to drive his wagon, or a license plate for his horse.  In most cases, he didn’t need a building permit to add to his home.   Even laws that might be on the books (but were perhaps not so ubiquitous as many think) laid lightly on people – laws against prostitution, sodomy, polygamy and such.  A gay man in the 19th century might fear great social sanction if his predilections or activities became known, but the idea that the government would interfere with his activities was not really an issue at all, whatever the state code might say.  In the 19th century, one certainly didn’t need to license one’s pets, and one was never harangued by government sponsored advertising to properly cook your eggs or spend time with your children.  Today, for white men and for women and minorities, government permeates every aspect of our lives, essentially 24/7/365.

Even as we have expanded the blessings of freedom to more people, society’s concept of freedom seems to have narrowed tremendously, to where even many self described libertarians seem to think a 39% income tax bracket is pretty darn acceptable.  The boundaries of what it means to be free seem to have retreated, and to have retreated enormously.  Thus, even as more people have benefited from freedom, the long term outlook for freedom seems in many ways much more grim.

Keith E. Whittington: The overseer or master exercised lawful, violent coercive force over the slave on a daily basis and did so with the full support and backing, if necessary, of the government.  Moreover, “the government” (such as slave patrols) often consisted precisely of ad hoc groupings of armed civilians operating under the titular direction of a government official.  And the government wasn’t always willing to stand ready protect people from coercive private groups who wanted to enforce social conformity.  So, on the one hand, some prostitutes might be tolerated if they kept to themselves in the wrong part of town, but on the other hand abolitionist newspapers editors could have their houses burned down and Catholics and Protestants could find themselves becoming armed gangs and rioting to secure their respective neighborhoods.  No level of government had an expansive police force in the 19th century, but that just means that social order was generally maintained by other mechanisms.  It doesn’t necessarily mean that people were free from social order.

Mark LeBar: David is certainly right that slavery and the legal subordination of women are blights on the very institutions that were modeling liberty, and especially for those directly affected it is a gross mistake not to recognize what those changes in law and society mean in gains in liberty. But that is an observation that pretty much any decent person, libertarian or not, can be expected to make. There is a distinctiveness to the point of insisting, as Hornberger and Brad do, that the very liberty that is reaching to more people is radically constrained in many ways. We can grant, it seems to me, that many people are freer in significant ways than they once were, while insisting that the point of liberty itself is in danger of getting lost in the process. That, it seems to me, is a case that libertarians are uniquely in position to make.

Eugene Volokh: Prof. LeBar writes, that “what it means to be free is a shadow of its former self.”  But is that right, even as to white males?  Economic regulation, including of a sort that libertarians much oppose, is not a novel matter.  Neither is taxation (which, to be sure, is at a much higher rate than in the past, but I’m not sure that the precise rate is that much a part of “what it means to be free”).  Neither is regulation of trade.  Neither is restriction on freedom of association.  Neither is regulation of guns.  Neither is regulation of personal behavior; alcohol prohibition first emerged in the U.S., for instance, in the mid-1800s, and of course the regulation of sexual behavior was far greater in the past tan today.

What’s more, all these were favored, I think, by people who believed in freedom, which meant to them (as it does to many lovers of freedom today) freedom subject to at least some constraints aimed at protecting the freedom of others and at protecting the well-being of society.  Liberty has long been respected and fought for by Americans; but that the late 1700s and late 1800s were liberty-loving times doesn’t mean that the legal systems of that era were particularly libertarian as we libertarians would want them to be.  “We all declare for liberty; but in using the same word we do not all mean the same thing.”  I don’t think there’s been a past Golden Age of Liberty, in which freedom was generally accepted as meaning something far deeper and broader than what it means today, even for white men.

Steve Horwitz: I do think part of what’s going on here are two cross-cutting conversations.  Or at least two distinct claims.

1.  “Americans, on the whole, are freer than they were, say, 150 years ago.”

2.  “Government is more obtrusive in a moment-to-moment or day-to-day way than 150 years ago.”

I actually think both of these are true.  The enormous restrictions on the freedom of blacks and women (and others) of 150 years ago, though ultimately backed by the force of the state, did not require the state to be, as it were, “in their faces” on a moment-to-moment basis, as slavery and the second-class status of women were simply part of the institutional furniture (and often policed “privately” as Keith noted and as I noted about domestic violence in my earlier comments).

So it seems to me 1 and 2 are both true if one accepts that slavery and patriarchy don’t require the kind of constant and widespread, if small on each margin, government intervention we have in our own time.

We are collectively more free, I would argue, even though the underlying principles that assured the freedom of those who had such freedom 150 years ago have broken down significantly.

Keith Whittington: There is no doubt that you can run through statutes, court decisions and executive actions in the mid-19th century and compare the total to the mid-20th century and conclude that there is more overall government regulation in the latter than the former.  The latter is more voluminous and more detailed.  My only qualification/concern on this would be to note that while the 19th century regulation is less detailed it could be extremely intrusive (Sunday laws literally shut down all commercial, social and transportation activity in large parts of several states during parts of the 19th century) and that formal government activity was supplemented with informal private activity that was equally stultifying.  Without a robust vision of individual self-ownership, to borrow from Mark, that combination of social and governmental regulation could be extremely restrictive of anything we would want to recognize as individual liberty.  The battle for the idea of individual liberty, as well as the legal and social reality of it, was an on-going one throughout the 19th and 20th centuries, and I’m not confident how you net out the debits and credits.

Glen Whitman: Might it be helpful to ask why so many libertarians and conservatives want to say that America used to be more free than it is now?

Aside from sheer misplaced patriotism (which I’m sure is a big piece of the story), I think it comes from the desire to have an answer to the question, so often posed by statists, “When has a laissez-faire system ever worked?”  Rather than saying, “I’m advocating an untested idea,” we’d like to be able to say, “Yes, laissez-faire has indeed worked.”

And is that really wrong to say?  I think that with respect to specific issues, we can say that (a) the U.S. was freer before, and (b) somehow the country didn’t go to hell in a handbasket.  We can say, for instance, that drugs used to be largely legal and we didn’t become a nation of useless addicts.  We can say that labor markets functioned without extensive regulation.  (Of course, blacks and women were often excluded from those markets — but I’d say the markets functioned *despite* their exclusion, not because of it.)  We can say that there wasn’t a welfare state, and private charities and mutual aid societies did a fine job of helping those who fell on hard times.

None of which refutes David’s point.  Some groups were markedly less free, and everyone was less free in certain ways.  But that doesn’t mean we can’t sometimes point to history as a guide, which I suspect is what we really want.

Stephen Davies: I think Glen makes an important point here. Quite apart from the argument about how to quantify or compare different restrictions on liberty at different times and in different areas of lie is the question of rhetoric. Why present the story of liberty in the US as one of a decline from a golden age rather than as a story of slow growth in a positive direction or (my own favourite) one of decline in some areas and growth in others? Apart from the reason he gives I think one reason is the dominance of the jeremiad as a form of political argument. This isn’t confined to libertarians of course, in fact it seems sometimes that every political persuasion thinks things are going to the dogs. I think it’s a bad strategy however as well as being questionable.

I do think Mark and Aeon are on to something however in saying that there’s been a decline in the ideal of self-government or at least in the degree to which it’s articulated and the extent to which it’s understood as a complex idea rather than just a matter of doing your own thing. It was a much thicker concept in times past partly because it was associated with lots of other ideas of psychology (the notion of character) and sociology for example – there was a strongly held idea that you couldn’t be fully self-governing or independent if you were not economically self supporting and so the idea of freedom was tied in with all sorts of other ideas.

If you look outside the US, Dicey made the argument towards the end of the nineteenth century that there’d actually been a movement away from intrusive paternalistic regulation in the earlier nineteenth century followed by the growth of a new kind of intrusive state action after the later 1880s. He ralated this to public opinion which for him meant widely held but often unarticulated notions, beliefs and understandings on the part of the population at large or at least the politically active part of it. This kind of account makes more sense to me, particularly if you combine it with an approach that says that while freedom may have increased for some groups it declined for others and that at any one time it was growing in some areas of life while being in recession elsewhere. Complicated and messy but that’s history for you.

Loren Lomasky: To the extent that a consensus emerges in preceding comments it’s that the losses of liberty to white males over the past century or two are juxtaposed against liberty gains for people of color, women, some marginalized others.  Enjoying somewhat less than a genuinely full consensus is the proposition that on the liberty ledger the minuses of the former class are outweighed by the pluses of the latter.

Because the balance seemed so patent to me, I’ve said nothing previously.  I now wish to add, though, that it is far from obvious that even establishment white males suffered a liberty deficit over this period, and that not just because of gains with regard to social freedom but even with regard to core economic liberty.  Each of the following is an enormous gain for liberty:

1) The capacity to pursue one’s ends with willing others by forming corporations without any need of special legislative grants;

2) Rights of workers to associate freely with each other in pursuit of economic advancement  (unions, etc.)

3) Military services now performed by paid professionals who volunteer for the job rather than via a draft.

I could go on, but these themselves are not trivial.  Each is orders of magnitude more significant on the plus side than, say, Obamacare is on the negative.  An enormous number of state actions piss me off, but not to the extent that they blind me to the evident truth that the history of the United States since 1776 is a history of liberty in ascendance.

David Mayer: Albert Venn Dicey’s Law and Public Opinion in England in the Nineteenth Century does indeed identify a “golden age” for liberty, in (roughly) the middle third of the 19th century, when (according to Dicey’s analysis) classical liberal ideas were the dominant opinion (in terms of public policy).  That was a “golden age,” in Britain, because it was sandwiched in between (again, according to Dicey’s analysis) a period of “Old Tory” paternalism (the early 19th-century, continuing from the 18th century) and a period of “collectivism,” or socialism (with the rise of the late-Victorian-era welfare state in Britain, in the last third of the 19th century and continuing into the 20th century).

U.S. history is quite different.  We were founded as, essentially, a classical liberal nation:  the American Revolution was based on “radical Whig” ideas – the same ideas that so influenced British public policy during its classical liberal reform period (for example, many of the mid-18th-century radical Whigs who were friends of American independence – men like John Cartwright – were also leaders in the Parliamentary reform movement, culminating in the Reform Act of 1832).  But, as I have written elsewhere (see my essay on “Completing the American Revolution” (my Atlas Shrugged 50th anniversary essay) in Journal of Ayn Rand Studies, Spring 2008) the American “liberal” revolution of 1776 was far from complete.  Sure, we founded government explicitly on the protection of individual rights, and we instituted written constitutions to help limit the power of government (a huge advance in the history of world “political science”).  But, of course, as David and other participants in this discussion have noted, we did not consistently implement the “new science of politics” implied by the principles of 1776:  not only did we retain the institution of slavery and denied full legal equality to women but, in many ways, we retained in the law (mostly in the English common law as received and only slightly modified in American law) much of the older, paternalistic role of government that England had had for centuries and that had been brought over to the English colonies in America.  (One simple example:  the notion that government may regulate prices of businesses “affected with a public interest” – a concept from English law (one that in the early 17th century was used by apologists for royal absolutism to justify various kinds of economic regulations by the King’s government) not only survived in early American law but was used by the U.S. Supreme Court, in its 1877 decision in Munn v. Illinois, to justify government fixing of maximum rates for certain businesses – and ultimately, in the 20th century, to justify all sorts of needless government licensing and other restrictions on businesses.)

So, it’s quite true (as several participants in the discussion have noted) that there’s not been really any single “golden age” for liberty in the history of the United States.  Depending on how you measure it (by the size of government, the magnitude of taxes and spending, or the variety of forms of “legal paternalism,” for example), or what aspect you’re focused on (“economic” liberty versus “personal” liberty, for example, notwithstanding the artificiality of that distinction), or whose liberty you’re focusing on (business owners versus workers and/or consumers, men vs. women, whites vs. blacks, native-born Americans vs. immigrants, etc.), there’s no clear pattern:  liberty (as a whole) is at once on the ascendance, on the decline, and staying about even, in the American “mixed bag” of freedom/paternalism.  But (if I might be permitted to return to the main point of my original post) there’s little doubt that government regulation of business – government interference with the free market – at all levels, and especially at the national level, has been steeply rising, and thus a very important aspect of liberty (economic freedom) has been steeply falling, since the rise of the “progressive” regulatory/ welfare state in the early 20th century.  That part of American history (the past century or so) most closely resembles the age of “collectivism,” or socialism, that Dicey identified in Britain in the latter third of the 19th century.

Was There a Libertarian Golden Age? is a post from Cato @ Liberty - Cato Institute Blog

At least when it comes to economic matters, a way of framing the question whether market regulation or government regulation should predominate is to ask which system—markets or government—can better allocate resources.

Many people assume that elected officials, their staffs, and bureaucracies in the executive branch have superior information and thus better capability of organizing society’s affairs. There are many smart, well-informed people in government doing their best at just that task.

But evidence of their fallibility is sometimes made available. Such is in the video that follows, in which a member of Congress worries—in apparent seriousness—whether the island of Guam might capsize.

If it seems cruel to tout, or unfair to generalize from this to the weakness of government generally, fine. But think of the cruelties large and small in government officials’ dominion over the lives of others.

Perhaps some will recognize in this video that governments are run by imperfect people just like businesses are. This is part of the reason why the promises that issue from Capitol Hill so often go unfulfilled while people acting on their own behalfs generally organize their affairs well.

The Threat that Guam Will Capsize is a post from Cato @ Liberty - Cato Institute Blog

When I was a kid in the 1960s and we came back from a visit to my grandmother’s, my mother used to call my grandmother, let the phone ring twice, and then hang up. It was important for my grandmother to know that we’d arrived home safely, but long-distance telephone calls were too expensive to indulge in unnecessarily. When I entered Vanderbilt University in 1971, my parents had to decide whether to pay for a telephone in my dorm room. They decided to do so, but most of the thoroughly upper-middle-class students on my floor did not have phones. Phones cost real money back then. Then came the breakup of the AT&T monopoly in 1984. Phone technology and competitive service provision exploded. In 1982, Motorola produced the first portable mobile phone. It weighed about 2 pounds and cost $3995. Within a very few years they were much smaller, much cheaper, and selling like hotcakes.

Today there are some 4.6 billion mobile phones in the world, and counting, or about 67 per every 100 people in the world. The newer ones allow you to carry in your hand more computing power than the computers that put Apollo 11 on the moon.  You can cruise the internet, find your location with GPS, read books, send texts, pay bills, process credit cards, watch video, record video, stream video to the web, take and send photos — oh, and make phone calls from just about anywhere. Unimaginable just a few years ago.

And to celebrate this incredible achievement, Slate and the New America Foundation are holding a forum titled “Can You Hear Me Now? Why Your Cell Phone is So Terrible.”

This is an old story. Markets, property rights, and the rule of law provide a framework in which technology and prosperity soar, and some people can only complain. I was reading some of Deirdre McCloskey’s forthcoming book Bourgeois Dignity this week. She points out that the average person lived on the equivalent of $3 a day in 1800. Today there are six and a half times as many people, but the average person earns and consumes 10 times as much, far more than that in the most capitalist countries. And yet some people, most leftist intellectuals, continue to ignore what McCloskey calls “the gigantic gains from bourgeois dignity and liberty” and to denounce the markets, economic liberalization, and globalization that have liberated billions of people from eons of back-breaking labor.

Now don’t get me wrong. I’m a big fan of consumer reporting and analysis, which is an important part of a robust marketplace. Competition and consumer reporting both help to keep prices low and quality improving. And there’s plenty of room for criticism of cell phone pricing, contracting, and service. But when a discussion like this is held by a public policy research organization and a public-affairs magazine as part of a program on public policy, then it’s not just consumer advice. It is presumably a discussion of what the sluggish, coercive institution of government can do to improve — or more likely impede — a fabulously dynamic, constantly improving consumer-directed industry. And that usually ends in tears.

Maybe we should hold a forum titled “Can You Hear Me Now? And Watch Me on Video? And Read My Book on Your Handheld Device? And Check Your Blood Pressure and Glucose? How Markets, Innovation, and Entrepreneurs Have Taken Cell Phone Technology from Clunker to Computer in Barely a Generation.”

Cell Phones and Ingratitude is a post from Cato @ Liberty - Cato Institute Blog

I suspect I may be falling into a publicity trap here, but nonetheless I am unable to resist blogging about an email I received this morning from the Global Development and Environment Institute at Tufts University.  The email contained this teaser:

How does cheap food contribute to global hunger?  GDAE’s Timothy A. Wise, in this recent article in Resurgence magazine, explains the contradictory nature of food and agriculture under globalization. He refers to globalization as “the cheapening of everything” and concludes:

“Some things just shouldn’t be cheapened. The market is very good at establishing the value of many things but it is not a good substitute for human values. Societies need to determine their own human values, not let the market do it for them. There are some essential things, such as our land and the life-sustaining foods it can produce, that should not be cheapened.”

This sort of stuff could only be written by someone on full academic tenure and who has never had to worry about feeding his family.

It would take many hours to rebut all of the idiocies contained in the full article, but for now I will just say: Yes, it is true that U.S. government subsidies for corn, for example, cause environmental damage in the Gulf of Mexico (Cato scholars have in fact covered this before as part of our ongoing campaign to eliminate farm subsidies). And yes, poor farmers abroad have suffered because of government intervention in food markets. But those are problems stemming from government intervention, not the free market.

Tufts Academic Gives Two Thumbs Down to Cheap Food is a post from Cato @ Liberty - Cato Institute Blog

In response to the large recalls affecting several Toyota models, Transportation Secretary Ray LaHood yesterday advised Americans to “stop driving” their Toyotas. In testimony before the House Appropriations subcommittee on transportation, LaHood said:

My advice to anyone who owns one of these vehicles is stop driving it, and take it to the Toyota dealership because they believe they have the fix for it.

Later in the day, he elaborated:

I want to encourage owners of any recalled Toyota models to contact their local dealer and get their vehicles fixed as soon as possible. NHTSA will continue to hold Toyota’s feet to the fire to make sure that they are doing everything they have promised to make their vehicles safe. We will continue to investigate all possible causes of these safety issues.

As Transportation Secretary in an administration that is politically vested in the success of General Motors (recall how taxpayers were forced to take a 60% stake in GM for $50 billion+), was LaHood exploiting an opportunity to tip the scales further in GM’s favor? I guess we’ll never know for sure, but as long as GM remains nationalized, any comments by administration officials on matters affecting the auto industry should be viewed skeptically and through this prism, as they can irresponsibly move markets.

Raising an Eyebrow at LaHood’s Toyota Remarks 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

Three items in the news this week remind us why we should be glad we live in a more global economy. While American consumers remain cautious, American companies and workers are finding increasing opportunities in markets abroad:

• Sales of General Motors vehicles continue to slump in the United States, but they are surging in China. The company announced this week that sales in China of GM-branded cars and trucks were up 67 percent in 2009, to 1.8 million vehicles. If current trends continue, within a year or two GM will be selling more vehicles in China than in the United States.
• James Cameron’s 3-D movie spectacular “Avatar” just surpassed $1 billion in global box-office sales. Two-thirds of its revenue has come from abroad, with France, Germany, and Russia the leading markets. This has been a growing pattern for U.S. films. Hollywood—which loves to skewer business and capitalism—is thriving in a global market.
• Since 2003, the middle class in Brazil has grown by 32 million. As the Washington Post reports, “Once hobbled with high inflation and perennially susceptible to worldwide crises, Brazil now has a vibrant consumer market …” Brazil’s overall economy is bigger than either India or Russia, and its per-capita GDP is nearly double that of China.

As I note in my Cato book Mad about Trade, American companies and workers will find their best opportunities in the future by selling to the emerging global middle class in Brazil, China, India and elsewhere. Without access to more robust markets abroad, the Great Recession of 2008-09 would have been more like the Great Depression.

Global Markets Keep U.S. Economy Afloat is a post from Cato @ Liberty - Cato Institute Blog

Huge deficit spending, a supposed stimulus bill, and financial bailouts by the Bush administration failed to stave off a deep recession. President Obama continued his predecessor’s policies with an even bigger stimulus, which helped push the deficit over the unimaginable trillion dollar mark. Prosperity hasn’t returned, but the president is persistent in his interventionist beliefs. In his speech yesterday, he told the country that we must “spend our way out of this recession.”

While a dedicated segment of the intelligentsia continues to believe in simplistic Kindergarten Keynesianism, average Americans are increasingly leery. Businesses and entrepreneurs are hesitant to invest and hire because of the uncertainty surrounding the President’s agenda for higher taxes, higher energy costs, health care mandates, and greater regulation. The economy will eventually recover despite the government’s intervention, but as the debt mounts, today’s profligacy will more likely do long-term damage to the nation’s prosperity.

Some leaders in Congress want a new round of stimulus spending of $150 billion or more. The following are some of the ways that money might be spent from the president’s speech:

• Extend unemployment insurance. When you subsidize something you get more it, so increasing unemployment benefits will push up the unemployment rate, as Alan Reynolds notes.”

• More infrastructure spending. This will lead to misallocation of resources since only markets can allocate resources efficiently. Governments allocate capital on the basis of politics instead of economics.

• “Cash for Caulkers.” This would be like Cash for Clunkers except people would get tax credits to make their homes more energy efficient. Any program modeled off “the dumbest government program ever” should be put back on the shelf. 

• More Small Business Administration lending. A little noticed SBA program created by the stimulus bill offered banks an “unprecedented” 100 percent guarantee on loans to small businesses. The program has an anticipated default rate of 60 percent. Small businesses need lower taxes and fewer regulations, not a government program that perpetuates more moral hazard.

• More aid to state and local governments. State and local government should be using the recession to implement reforms that will prevent them from going on another unsustainable spending spree when the economy recovers. Also, we need fewer state and local government employees – not more – as they’re becoming an increasing burden on taxpayers.

The president said his administration was “forced to take those steps largely without the help of an opposition party which, unfortunately, after having presided over the decision-making that led to the crisis, decided to hand it to others to solve.” Mr. President, nobody has forced you to do anything. You’ve chosen to embrace – and expand upon – the big spending policies that were a hallmark of your predecessor’s administration.

Spending Our Way Into More Debt is a post from Cato @ Liberty - Cato Institute Blog

I’m surprised anyone was surprised by the recent flat-lining of scores on the NAEP 4th grade math test. The rate of improvement in NAEP scores has been declining since No Child Left Behind was passed, and the recent results are consistent with that trend.

But what really amazes me is that so many people think the solution is just to tweak NCLB! The unstated assumption here is that federal policy is a key determinant of educational achievement. That’s rubbish.

We’ve spent $1.8 trillion on hundreds of different federal education programs since 1965, and guess what: at the end of high school, test scores are flat in both reading and math since 1970, and have actually declined slightly in science. (Charted for your viewing pleasure here).

If we’ve proved anything in the past 40 years, it is that federal involvement in education is a staggering waste of money.

Meanwhile, education economists have spent the last several decades finding out what actually does work in education. They’ve compared different kinds of school systems and it turns out that parent-driven, competitive education markets consistently outperform state monopoly school systems like ours. I tabulated the results in a recent peer-reviewed paper and they favor education markets over monopolies by a margin of 15 to 1.

So policymakers who actually care about improving educational outcomes should be spending their time and resources enacting laws that will bring free and competitive education markets within reach of all families. And they should be ignoring the education technocrats who — like Soviet central planners — just want to keep spending other people’s money tweaking their fruitless five year plans.

NAEP Math Scores, NCLB, and the Federal Government is a post from Cato @ Liberty - Cato Institute Blog

In the latest example of “We had to burn the village to save it” logic, Sen. Sherrod Brown (D-OH) argues in a letter in the Washington Post this morning that the way to “support more trade” in the future is to raise barriers to trade today.

Brown criticizes Post columnist George Will for criticizing President Obama for imposing new tariffs on imported tires from China. Like President Obama himself, Brown claims that by invoking the Section 421 safeguard, the president was merely “enforcing” the trade laws that China agreed to but has failed to follow. He scolds advocates of trade for talking about the “rule of law” but failing to enforce it when it comes to trade agreements. Brown concludes, “If America is ever to support more trade, its people need to know that the rules will be enforced. And Mr. Obama did exactly that.”

Nothing in U.S. trade law required President Obama to impose tariffs on imported Chinese tires. As my colleague Dan Ikenson explained in a recent Free Trade Bulletin, Section 421 allows private parties to petition the U.S. government for protection if rising imports from China have caused or just threaten to cause “market disruption” to domestic producers. If the U.S. International Trade Commission recommends tariff relief, the president can decide to impose tariffs, or not.

The law allows the president to refrain from imposing tariffs if he finds they are “not in the national economic interest of the United States or … would cause serious harm to the national security of the United States.”

As I argue at length in my new Cato book Mad about Trade, trade barriers invariably damage our national economic interests and weaken our national security, and the tire tariffs are no exception. If the president had followed the letter and spirit of the law, he would have rejected the tariff.

And since when is causing “market disruption” something to be punished by law? Isn’t that what capitalism and market competition are all about? New competitors and new products are constantly disrupting markets, to the discomfort of entrenched producers but to the great benefit of the general public and the economy as a whole.

Human beings once widely practiced an economic system that minimized market disruption. It was called feudalism.

C/P Mad About Trade

Curbing Free Trade to Save It is a post from Cato @ Liberty - Cato Institute Blog

Was it just me, or did there seem to be a whole lot of applause during Obama’s Wall Street speech?  Remember this was a room full of Wall Street executives.  The President even started by thanking the Wall Street execs for their “warm welcome.”

While of course, there was the obligatory slap on the wrist, that “we will not go back to the days of reckless behavior and unchecked excess,” but there was no mention that the bailouts were a thing of the past.  Indeed, there is nothing in Obama’s financial plan that would prevent future bailouts, which is why I believe there was such applause.  The message to the Goldman’s of the world, was, you better behave, but even if you don’t, you, and your debtholders will be bailed out.

The president also repeatedly called for “clear rules” and “transparency” – but where exactly in his plan is the clear line dividing who will or will not be bailed out?  That’s the part Wall Street loves the most; they can all say we’ve “learned the lesson of Lehman:  Wall Street firms cannot be allowed to fail.”  At least that’s the lesson that Obama, Geithner and Bernanke have taken away.  The truth is we’ve been down this road before with Fannie and Freddie.  Politicians always called for them to do their part, and that their misdeeds would not be tolerated.  Remember all the tough talk after the 2003 and 2004 accounting scandals at Freddie and Fannie?  But still they got bailed out, and what new regulations were imposed were weak and ineffective.

As if the applause wasn’t enough, as Charles Gaspario points out, financial stocks rallied after the president’s speech.  Clearly the markets don’t see his plan as bad for the financial industry.

It would seem the best investment Goldman has made in recent years was in its employees deciding to become the largest single corporate contributor to the Obama Presidential campaign.  That’s an investment that continues to yield massive dividends.

Why Wall Street Loves Obama is a post from Cato @ Liberty - Cato Institute Blog

When Treasury Secretary Hank Paul proposed the bailout of Wall Street banks last September, I objected in part because the TARP meant that government connections, not economic merit, would come to determine how capital gets allocated in the economy. That prediction now looks dead on:

As financial firms navigate a life more closely connected to government aid and oversight than ever before, they increasingly turn to Washington, closing a chasm that was previously far greater than the 228 miles separating the nation’s political and financial capitals.

In the year since the investment bank Lehman Brothers collapsed, paralyzing global markets and triggering one of the biggest government forays into the economy in U.S. history, Wall Street has looked south to forge new business strategies, hew to new federal policies and find new talent.

“In the old days, Washington was refereeing from the sideline,” said Mohamed A. el-Erian, chief executive officer of Pimco. “In the new world we’re going toward, not only is Washington refereeing from the field, but it is also in some respects a player as well. . . . And that changes the dynamics significantly.”

Read the rest of the article; it is truly frightening. We have taken a huge leap toward crony capitalism, to our peril.

The Legacy of TARP: Crony Capitalism is a post from Cato @ Liberty - Cato Institute Blog

My former colleague Dave Weigel makes the excellent point that the supposed explosion of “Czars” under this administration is, in significant part, a function of journalists trying to make the same old “deputy undersecretary” sound sexier. Which is a shame, since it means that the pernicious and the benign get lumped together under the same sensationalist label — one whose public effect is to normalize the idea of unaccountable individuals within the executive branch given sweeping powers to solve specific problems, whether or not that picture is accurate.

I don’t know how much it can be attributed to the Czarmania, but I’m especially puzzled by the apparent emergence of legal scholar and prospective OIRA Adminstrator Cass Sunstein as the new hot bogeyman for conservatives. The Office of Information and Regulatory Affairs, which Sunstein’s been tapped to head, was created in 1980 and is precisely the sort of agency conservatives should love — tasked with catching inefficient and excessively burdensome regulations before they go into effect. It has, unsurprisingly, been most active under conservative presidents, and is one of the few offices where fans of limited government should want a vigorous, influential, and intellectually formidable director at the helm.

Now, Cass Sunstein is not somebody I agree with on a great number of things. On the day he’s tapped for a seat on the Supreme Court bench, I’ll break out in hives. But it’s awfully hard to imagine any realistic alternative — anyone Obama might actually have appointed — who would be better in the OIRA post from a limited government perspective. (I considered some of the specific concerns being raised about Sunstein back in the spring and found that they ranged from exaggerated to simply mendacious.) That’s one reason hardcore progressives have, in fact, been freaking out over his nomination. They must be pinching themselves  now that it seems Glenn Beck is out to do their work for them. Say what you will about the tenets of “libertarian paternalism,” but at least it’s an ethos that would demand a far lighter touch on markets than the unreconstructed technocracy of your average regulator.

We’re Terribly Czarry is a post from Cato @ Liberty - Cato Institute Blog