Vikings and Pirates and Taxes, Oh My!
Today’s episode of “Hagar the Horrible” could be an epigraph for the new Fall 2009 issue of Cato Journal.
This issue includes Greek economists Michael Mitsopoulos and Theodore Pelagidis on “Vikings in Greece: Kleptocratic Interest Groups in a Closed, Rent-Seeking Economy” as well as Peter Leeson, author of The Invisible Hook: The Hidden Economics of Pirates, writing (with David Skarbek) on the effects of foreign aid. As for taxes, well, editor Jim Dorn has assembled a number of useful papers:
- Andrew T. Young on taxing, spending, and “fiscal illusion”
- Michael J. New on the “starve the beast” hypothesis
- Alan Reynolds on Paul Krugman’s misunderstanding of the monetary and fiscal lessons of the Great Depression and Japan’s lost decade
And on the general rapaciousness of the state, don’t miss Jason Kuznicki’s careful review of government racial discrimination from the end of Reconstruction until the civil rights movement.
Filed under: Cato Publications; General; Tax and Budget Policy
Weekend Links
- Cato v. Heritage on the Patriot Act, Round II. Today’s topic: “Where are the demonstrated examples of abuses of liberties because of the Patriot Act? Are there any provisions of the law that civil libertarians would find acceptable?”
- Comparing the Great Depression to the current recession: Did we not learn anything?
- Re-examining the U.S. alliance with Japan: “The current relationship remains trapped in a world that no longer exists.”
- The human cost of delayed economic reform in India: “With earlier reform, 14.5 million more children would have survived, 261 million more Indians would have become literate, and 109 million more people would have risen above the poverty line.”
- Podcast: What we should have learned from our experience in Somalia. Background reading: Somalia, Redux: A More Hands-Off Approach
Learning from Trade Wars Past
David Rockefeller, the former chairman and CEO of Chase Manhattan Bank, makes a compelling historical case in today’s New York Times for pursing free trade policies. Rockefeller has been around long enough to remember the Smoot-Hawley tariff bill of 1930 and the Great Depression that followed. In an op-ed piece titled, “Present at the Trade Wars,” he writes:
I lived through the stock market crash of 1929 and the Great Depression that followed it, and I saw that there was no direct cause and effect relationship. Rather, there were specific governmental actions and equally important failures to act, often driven by political expediency, that brought on the Depression and determined its severity and longevity.
One critical mistake was America’s retreat from international trade. This not only helped to turn the 1929 stock market decline into a depression, it also chipped away at trust between nations, paving the way for World War II.
On the eve of the G-20 summit in Pittsburgh this week, Rockefeller offers a timely warning to President Obama not to repeat the mistakes of the past.
How Protectionism Crashed the World Economy…and How to Stop It This Time Around
A coalition of more than 70 groups around the world, from Canada to Brazil to Kyrgyzstan to Germany to China to Japan to Kenya, has joined together to stop the dangerous stirrings of protectionism. The FreedomToTrade.org coalition (coordinated internationally by the Atlas Economic Research Foundation and the International Policy Network) has circulated a petition (signed by over 1,000 economists and thousands of others) and is now producing documentaries to alert the public to the dangers posed by protectionism. This one is on the role the Smoot-Hawley Tariff played in turning a serious recession into the Great Depression.
The mini-documentary is also being made available in 12 other languages. The Spanish version will be available on Cato’s Spanish-language project, ElCato.org. Others are available on YouTube.
This information is important and needs to be widely shared. Pass it on…
Filed under: International Economics and Development; Trade and Immigration
Week in Review: No End to Spending and Regulation in Sight
Geithner to Propose Unprecedented Restrictions on Financial System
The Washington Post reports, “Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system… The administration also will seek to impose uniform standards on all large financial firms, including banks, an unprecedented step that would place significant limits on the scope and risk of their activities.”
Calling Geithner’s plan another “jihad against the market,” Cato senior fellow Jerry Taylor blasts the administration’s proposal:
What President Obama is selling is the idea that government must be the final arbiter regarding how much risk-taking is appropriate in this allegedly free market economy. It is unclear, however, whether anybody short of God is in the position to intelligently make that call for every single actor in the market.
Cato senior fellow Gerald P. O’Driscoll reveals the real reason behind the proposal:
Federal agencies have long had extensive regulatory powers over commercial banks, but allowed the banking crisis to develop despite those powers. It was a failure of will, not an absence of authority. If the authority is extended over more institutions, there is no reason to believe we will have a different outcome. This power grab is designed to divert attention away from the manifest failure of, first, the Bush Administration, and now the Obama Administration to devise a credible plan to deal with the crisis.
A new paper from Cato scholar Jagadeesh Gokhale explains the roots of the current global financial crisis and critically examines the reasoning behind the U.S. Treasury and Federal Reserve’s actions to prop up the financial sector. Gokhale argues that recovery is likely to be slow with or without the government’s bailout actions.
In the new issue of the Cato Policy Report, Cato chairman emeritus William A. Niskanen explains how President Obama is taking classic steps toward turning this recession into a depression:
Four federal economic policies transformed the Hoover recession into the Great Depression: higher tariffs, stronger unions, higher marginal tax rates, and a lower money supply. President Obama, unfortunately, has endorsed some variant of the first three of these policies, and he will face a critical choice on monetary policy in a year or so.
Obama Defends His Massive Spending Plan
President Obama visited Capitol Hill on Wednesday to lobby Democratic lawmakers on his $3.6 trillion budget proposal. Both the House and Senate are expected to vote on the plan next week.
In a new bulletin, Cato scholar Chris Edwards argues, “Sadly, Obama’s first budget sets a course for more government bloat, more economic distortions, and ultimately lower standards of living for everyone who is not living off of federal hand-outs.”
On Cato’s blog, Edwards discusses Obama’s misguided theory on government spending:
Obama’s budget would drive government health care costs up, not down. But aside from that technicality, the economics of Obama’s theory don’t make any sense.
Obama’s budget calls for a massive influx of government jobs. Writing in National Review, Cato senior fellow Jim Powell explains why government jobs don’t cure depression:
If government jobs were the secret of success, then the Soviet Union wouldn’t have collapsed, because it had nothing but government jobs. Communist China, glutted with government jobs, would have generated more income per capita than Hong Kong where, at least before the Communist takeover, there were hardly any government jobs, but Hong Kong’s per capita income was about 20 times higher than that on the mainland.
Multiplying the number of government jobs did nothing then and does nothing now to revive the private sector that pays all the bills, in large part because of the depressing effect of taxes required to pay for government jobs.
Cato on YouTube
Cato Institute is reaching out to new audiences with our message of individual liberty, free markets and peace. Last year, we launched our first YouTube channel, which has garnered thousands of views and subscriptions. Here are a few highlights:
- Cato scholars offer ways to downsize the federal government
- The Supreme Court takes a massive step backward on private property rights
- Jim Powell explains the adverse effects of the New Deal on C-SPAN
- Juan Carlos Hidalgo discusses drug war violence in Mexico on BBC
Filed under: Cato Publications; Finance, Banking & Monetary Policy; General
Oh C’mon, NYT!
C@L readers know that I’m a fan of the NY Times’s news and business reporting. If you want depth and detail (especially today, when papers increasingly read like Tweets), the NYT’s news coverage is about as good as it gets.
The opinion page, sadly, is another matter.
Case in point, last Friday’s lead editorial chastising Japan and Europe for not adopting large fiscal stimulus plans. The lede:
The world economy has plunged into what is likely to be the most brutal recession since the 1930s, yet policy makers in Europe and Japan seem to believe there are more important things for them to do than to try to dig the world, including themselves, out.
That’s actually OK — the editorial board is free to believe (and espouse) that massive fiscal stimulus is the best policy for dealing with the current recession. But to use an old saying, they’re entitled to their own opinion, but not their own facts. Ignoring that admonition, the ed led off its final graf with this howler:
In a recent speech, Christina Romer, another of President Obama’s economic advisers, pointed out some lessons [sic] from the Great Depression: fiscal stimulus works.
If you follow the economic history literature, this is a stunner; some of Romer’s most important academic work demonstrates the opposite, namely that fiscal stimulus did little to get the United States out of the Depression [$] and subsequent U.S. recessions [$]. Has she rejected her own findings?
I tracked down the speech transcript and found out that, nope, she hasn’t; in fact, she was explicit that “fiscal policy was not the key engine of recovery in the Depression.”
Did the New Deal ‘Help’?
While Barack Obama’s economics team hammers out its $800 billion fiscal stimulus plan, the commentariat is battling over the effectiveness of what some consider the prototype stimulus package, the New Deal.* The suppressed (and problematic) conclusion to all this punditry seems to be: Because government spending under the New Deal helped/didn’t help to end the Great Depression, the Obama stimulus plan will/won’t help to end the current recession.
One of the opening salvos was this exchange between George Will (anti-New Deal) and Paul Krugman (pro). More recently, New York Times editorial board member Adam Cohen (pro) wrote this column, responding to an op-ed by former Business Week bureau chief Andrew Wilson (anti) in the Wall Street Journal.
So who’s right? Did New Deal government spending “help,” as Cohen puts it?
To answer that, we first have to define Cohen’s term — what would it mean to say that government spending under the New Deal “helped”? Two possibilities come to mind:
- New Deal spending boosted consumption, thereby increasing production, reducing unemployment, and ending the Depression.
- New Deal spending aided people who would have otherwise been destitute during the Depression.
The first sense considers the New Deal as a stimulus program to revive the economy; the second considers it as a welfare program to aid the poor. The two notions are far from equivalent. My reading of the literature suggests that the New Deal did little as an economic stimulus, but it did provide welfare benefits.
Read the rest of this post »
Cato on Facebook
Cato on Twitter
Cato on YouTube
Cato Tweets