Category Archives: Economics

The Economic Ignorance

…of Pat Buchanan. Some thoughts:

True, the United States imports a lot of stuff, particularly stuff made by low-wage, low-skilled workers. Everybody’s got a comparative advantage, and sweatshops aren’t ours. I can live with that. But here’s a shocker: The majority of the stuff we import is not consumer goods. The majority of what we import is stuff we use for manufacturing. As Daniel Ikenson reports, as recently as 2006, 55 percent of our imports were industrial components, i.e. stuff that goes into our factories as inputs and comes out as products. Ikenson: “Meanwhile, U.S. factories remain the world’s most prolific, accounting for more than 20 percent of the world’s added manufacturing value. By comparison, Chinese plants account for about 8 percent. And manufacturing is thriving in large measure because of international trade. Manufacturing exports and imports hit records in 2006.”

These kinds of arguments aren’t academic. When implemented as policy, protectionism can destroy, or prevent the creation of, trillions of dollars worth of wealth. It was one of the few areas of policy that Bill Clinton got right.

Just In Case The House Dems Are Stupid Enough To Believe Harry Reid…

The Senate Republicans have the votes to prevent “fixes” via reconciliation.

What’s important for people to understand (including the wavering House Democrats) is that once the Senate bill passes the House, Obama can simply sign it, and the war is over. They have no incentive to keep their promises. Or at least not enough to do so. And even if they want to, as noted above, they won’t be able to. So it has to be stopped now.

[Update a few minutes later]

For those who comment without following the link (far too many), let me provide a couple quotes to make it clear:

“There are a lot of things they want to see fixed that are going to be subject to parliamentary point of order in the Senate,” Kyl said during an interview on Fox News. “And we believe we have the votes to sustain those points of order, which means that those things will come out of the legislation.”

“…It is a very risky proposition for those Democrats in the House who are nervous about their reelection, and are banking on the Senate banking [sic — I assume he means “bailing” — rs] them out,” he said. “It’s probably not going to happen.”

That’s the way I’d bet. But maybe they think that “transforming America” is more important than keeping their seats. I hope not.

[Thursday morning update]

Michael Barone says that the Dems have put themselves in a no-win situation. Well, since their victory is the Republic’s defeat, good.

It’s beginning to look like the goal of health-care legislation was a bridge too far. There’s a reason it’s hard to pass unpopular legislation on party-line votes. It’s not the Senate rules. It’s called democracy.

Unfortunately, the misnamed Democrats don’t appear to believe in that.

The Coming Fiscal Disaster

The latest CBO report:

According to CBO, the Obama budget plan would run up much larger budget deficits and pile up even more debt than the administration reported in February.

Over the period 2010 to 2020, CBO expects the Obama budget would run a cumulative deficit of $11.3 trillion — $1.2 trillion more than the administration predicted. By 2020, total federal debt would reach an astonishing $20.3 trillion — up from $5.8 trillion at the end of 2008.

The president likes to say he inherited a mess. He did in fact enter office during a deep recession that sent deficits soaring on a temporary basis. But his policies have unquestionably made an already difficult medium- and long-term budget outlook much, much worse. The problem is that President Obama is a world-class spender. He wants to pile massive new commitments on top of a bloated and unreformed government. He is willing to raise taxes to pay for some of his wish list, but far from all of it. For the rest, he plans to run up the nation’s debt with reckless abandon.

Fortunately, the people are finally on to him.

[Mid-morning update]

More from Veronique de Rugy. Look at the graph.

Uh Oh

Walmart’s customers are running out of money.

That’s both a symptom of and a bad portent for the economy.

[Update a few minutes later]

Somehow, I can’t help but think that this is related: consumer confidence in the economy’s future is at the lowest point yet in the Obama presidency. And it wasn’t high when it started.

I suspect that won’t change before November. And even then, we’ll be stuck with him for another two years, though at least he’ll be defanged. As Glenn often says, another Jimmy Carter is a best-case scenario.

[Update a couple minutes later]

This was particularly disturbing:

Forty-six percent (46%) of all adults now say it is at least somewhat likely the United States will enter an economic depression similar to the 1930s within the next few years, showing little change in this view over the past two months. That number includes 21% who say it’s very likely. Another 46% see a 1930s-like Depression as not likely, but just nine percent (9%) say it’s not at all likely.

I think that the probability of that depends on the voters, this cycle and next. If they keep reelecting people who enact policies that, for whatever reasons, continue to sicken the economy, as they did in the thirties, it could get really bad. I hope that the voters are smarter this time around. It’s possible to learn from history, at least in theory.

An Open Letter To Two NPR Reporters

Worth reposting here:

Ms. Chana Joffe-Walt and Mr. David Kestenbaum
All Things Considered
National Public Radio

Dear Ms. Joffe-Walt and Mr. Kestenbaum:

Your excellent February 26, 2010, report on the history of how government officials chose the different methods that Medicare has used over the years to determine doctors’ pay is frightening because…

… in your report, Joe Califano, a chief architect of Medicare, admits that the first method of determining doctors’ pay was chosen for political reasons, namely, to buy doctors’ support for Medicare.

… you report that Mr. Califano, LBJ, and Congress were genuinely surprised by the rapid cost increases sparked by this first method.

… you reveal that much of the treatment that Medicare paid for was previously provided free by physicians; that is, Medicare crowded out a sizable chunk of private-sector philanthropy.

… you tell how attempts to change this first method of paying doctors were deeply influenced by skilled lobbyists working on behalf of doctors.

… in describing the development of the method currently used for determining doctors’ pay, you (perhaps without realizing it) reveal that this current method is the product of a comically childish labor-theory-of-value analysis – the same sort of analysis that is at the foundation of Marxian economics.

… your report ends with the admission that, because the current method isn’t working so well, Uncle Sam – 45 years after Medicare was launched – is still searching for a sound method for determining physicians’ pay.

Given this history, what reason is there to suppose that Obamacare is a good idea?

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

Because this time, it will be different.