Category: free trade & free markets

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free trade & free markets too much government

What Not to Blame

You’ve heard the calumny: The current economic debacle is the result of free markets.

This charge — often made with lip-smacking glee — makes no sense.

I’ve discussed some specifics, before. Here are three more points:

1. We haven’t had a free market. We live in a heavily regulated, subsidized, coddled-and-attacked, over-taxed society. If the current debacle proves any system unfeasible, then the one proven wrong is the one we have. It’s the mixed economy that has proven to have worse than mixed results.

2. Many on the left as well as on the right like to pretend that Republican talk of free markets has been effective. Both sides lie. The alleged party of “small-government” and “free markets” pigged out at the government trough, increasing the size and scope of government. To not see growth of regulation and spending and government debt under Republican governance is to not see the corpulent elephant in the room.

3. Blaming free markets is especially galling to actual proponents of free markets for a historical reason, too: Our idea grew up in reaction not to socialism, but to a system of government interference much like what we have today. Adam Smith called it “mercantilism.” Thomas Jefferson called it “Parasite Institutions.”

And it’s the parasite institutions that caused the current mess.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Our Fairy-Tale Economy

Everybody seems to hanker to get something for nothing. Because of that universal desire, and our inability to satisfy it, we have all these fairy tales about the tragic costs of magic.

Yes, the cost of something-for-nothing can be shockingly high. In some savvy tales, audacious hopefuls wind up giving away first-born children to pay for their something-for-nothing.

For half a year, our leaders have gone on a something-for-nothing binge, throwing money at a downturned economy. Lots of money. Trillions.

Where does it come from?

Magic?

Not exactly. Politicians and financiers use complicated tricky maneuvers to gain money they don’t have.

With the help of the Federal Reserve, they can sorta create money. But that creation has costs. It makes the money less valuable. We don’t always see this right away. Right now people are switching away from spending, so a lot of new money goes into savings. When people start spending again, though, prices will rise and money’s value will plunge. Gold into lead.

Politicians also get money by borrowing. But that also comes at a cost: It must be paid back. Here, politicians play an old fairy tale game, not exactly giving up their first-born, but saddling our children and grandchildren with debt. It’s a mean, wicked stepmother kind of policy.

Maybe we should be reading more fairy tales these days. For the realism.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Doctoring on the Installment Plan

How does a successful doctor deal with patients lacking insurance? Dr. John Muney decided to offer a deal. For $79 each month he would service patients with unlimited office visits, some tests, and even in-office surgeries — at all his AMG Medical Group centers.

Now, the deal’s not for me. I have insurance through work, and I also have a family, so that $79 would have to be multiplied by four. Real money. But for some people, I bet, this makes perfect sense.

Yet, if government gets its way, no patient of New York’s five boroughs — where Muney’s clinics are located — need ever consider the good doctor’s innovation. Why? Because the state Insurance Department has declared his service a form of insurance and says it requires a license from the state.

What were you thinking, Dr. Muney? This is a free country, and . . . you can’t just do what you want, you know.

Dr. Muney is fighting back. The application form for this contract has THIS IS NOT INSURANCE emblazoned on every page. He is challenging the bureaucracy’s ruling.

Once upon a time, doctors regularly engaged in this kind of pricing. Many doctors — perhaps most — engaged in pro bono work for the poor. Other had special rates, etc. But the American Medical Association pressured politicians to put an end to such competitive practices.

Thanks, AMA.

As for Dr. Muney, my thanks to you is not sarcastic. Hang in there.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

The Next Market To Melt

“During melting markets, all pension funds come under siege.”

I’m quoting from a February article by John Entine. This Reason magazine cover story is entitled “The Next Catastrophe,” and, like so many things these days, it’s scary. Entine explains how fragile pension funds can become when markets collapse.

Regular listeners know that I’ve been worried about what we might call the Ultimate Catastrophe. Increasing demands on Social Security and other entitlement programs, like Medicare, added to never-ending deficit spending, threaten to bankrupt the nation.

But Entine looks at a different economic crisis. He points out that all pension funds can become unhinged in chaotic markets. Old news. What’s new? Well, many government and union pension funds began taking riskier stances regarding stock investing a few decades ago. And with greater risk comes You Know What.

Worse yet, many funds have been hijacked by well-meaning do-gooders, investing in “socially responsible” causes rather than reasonably run profitable companies. These funds are worth over $2 trillion. That is, they are until their fundamentals prove weak or worse, and they go down, down, down.

As with the mortgage markets, it seems that pension management has undergone a huge paradigm shift, away from security and savvy, towards . . . nonsense.

Things are not looking up, up, up.

This is Common Sense. I’m Paul Jacob.

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Accountability free trade & free markets too much government

Able to Raise Keynes

Recently on This American Life, economists told NPR listeners how the then-upcoming stimulus bill would amount to the very first legitimate and full test ever of Keynesian ideas.

Sure, politicians have been using John Maynard Keynes’s notions as an excuse to deficit spend ever since the Great Depression. But then, Lord Keynes had wanted politicians to spend even more, more than they dared.

Now, President Obama and our Democratic Congress have decided to spend enough billions, or trillions, to really do the trick.

Switch to Larry King’s latest interview with Bill Clinton. Our former prez assured us that the stimulus bill “would do what it is supposed to,” and he mentioned three things, only one of them vaguely about stimulus. He said the bill was better seen as a “bridge over troubled waters.”

Clinton said the real issue was declining asset values, which Congress would address later.

At Mises.org, Stephan Kinsella asked how this could amount to Keynesianism. Clinton used a different lingo entirely.

Here’s how: It’s not that the bill will give us Keynesian stimulus. It’s that it has stimulated politicians in the old, old Keynesian way.

Congressional Democrats know that the stimulus won’t work. So they are preparing the spin now. From them we heard the official excuse for the bill. From Clinton, the future excuse.

Politicians know zip about the economy. They just know how to spend our money. And our great, great, great grandchildren’s.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies term limits too much government

Ears Burning

At the recent World Economic Forum, Russian Prime Minister Vladimir Putin warned of our government’s flirtations with socialism, that is, a state-run economy.

Trying not to “gloat,” Putin told the U.S. that “Excessive intervention in economic activity and blind faith in the state’s omnipotence” is a “mistake.” He reminded listeners that state control of the old Soviet economy made the nation “totally uncompetitive.”

Putin then lectured us not to “turn a blind eye to the spirit of free enterprise.”

But why isn’t Putin lecturing Venezuela? That Latin American state’s president, Hugo Chavez, is a classic strong-arm socialist, marshaling the power of the state, as well as gangs of supporters, to threaten and intimidate his political opponents.

As with any wannabe dictator, Chavez has sought to dismantle term limits. Just 14 months ago, voters rejected his first attempt. But Chavez, having consolidated his hold on the media and other institutions, came right back with another vote to end the limits. This time he won. He can now serve for life.

Only in South America? No. New York City Mayor Michael Bloomberg recently voided his own term limits. And he didn’t even bother to allow a public vote on the issue. So, who’s the more anti-democratic, Chavez or Bloomberg?

When foreign tin-horn dictators start making as much or more sense than our own politicians, well . . . it’s long past time for us citizens to make serious changes.

This is Common Sense. I’m Paul Jacob.

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First Amendment rights free trade & free markets too much government

Absurdity Then, Absurdity Now

There’s a famous quip by one English intellectual about another. “Oh, you know what so-and-so’s idea of a tragedy is: A beautiful theory killed by an ugly fact.”

Well, don’t I know it.

I wrote a column, recently, for Townhall.com, entitled “The Buxom Bailout Babes of the Umpteenth Brumaire.” In it I noted that while the Great Depression was a tragedy, today’s economic debacle, though a repeat of it, is more farce. To demonstrate its farcical nature I noted that some people are seriously talking about bailing out the newspapers, which have hit hard times.

And nothing, I assured my readers, could be more absurd than that. The point of having newspapers is to be critical of government. To have government support them would turn them into worse propaganda rags than they now are.

The trouble with this? Well, FDR, way back in the tragedy, also subsidized newspapers. Well, at least one.

Bailouts weren’t exactly the main thrust of the New Deal, but they happened. And, like most political acts, they were politically motivated. FDR was worried about Philadelphia, which was solidly Republican. The Democratic newspaper was failing.

So he bailed it out.

Simultaneously he set the IRS on the publisher of the Republican newspaper. In the next election, the area turned Democrat.

Here’s one theory that won’t be disproven: In government, it’s politics that matters.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

A Cato Alert

President Obama suggests that all economists agree that the best way to dig the economy out of its giant hole is to dig that hole faster and harder. Too much debt? Pile on more. Consumers not “buying enough”? Tax and borrow more to spend more to subsidize more buying.

I don’t get it. Were I Robinson Crusoe on a desert island I sure would want to consume. Berries and bananas, fish, maybe deer.

But I’d also want to produce. I’d make tools to help me to gather and hunt, and to prepare and store food. Desiring shelter, I’d realize that I can’t live in a hut unless I first build the hut.

On Crusoe’s island, there would be no politicians around to tax me to death before I could finish the hut. But here in our mixed economy, there sure is.

The Cato Institute, a D.C.-based think tank, has been spreading the word that not all economists believe that the best way to improve the economy is to nuke taxpayers and producers. At Cato.org I’ve heard economists insist that bailouts have NEVER worked to stimulate the economy. Further, Cato has taken out a full-page ad in major newspapers, like the Washington Post and the New York Times, disputing the notion that the solution to the recession is a massive government spending spree.

The Cato statement is signed by hundreds of economists. Many more signed it after the ad was published.

Will it help? I have the audacity to hope.

This is Common Sense. I’m Paul Jacob.

Categories
Accountability Common Sense free trade & free markets too much government

New Prez Pleads for Common Sense

I like a president who pleads for common sense.

Here’s the story, headlined in the New York Times: “Obama Calls for ’Common Sense’ on Executive Pay.”

The president announced a salary cap for top executives working for companies garnering the greatest gobs of booty under the most recent federal bailout. The cap? Half a million bucks.

President Obama allayed a few qualms, right away. He said that “This is America, we don’t disparage wealth. . . .” And he said, “we certainly believe that success should be rewarded.”

But he does talk about the “height of irresponsibility” in Bush administration bailouts, with execs taking huge bonuses after running their companies into the ground. Who wasn’t sickened by this? Obama sees it as common sense to make sure we don’t reward massive failure with the usual rewards of success.

Still, America is also about respecting contracts. Those corporations had negotiated very explicit contracts with their execs regarding the big bucks. And — surprise, surprise — Congress wrote up the law on the gargantuan bailouts without requiring those contracts be renegotiated.

And consider: Do we really want our politicians setting non-government salaries?

This is all a side issue, though. Take the bailouts themselves. Where’s the common sense there? They do reward failure. They will not help the economy. If our leaders had acted according to common sense, the whole salary issue wouldn’t even have come up.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Is More Regulation the Answer?

Regulation. We’re told that it would have saved us from this and that event associated with the current economic downturn.

Well, probably not.

First off, remember that we have had regulation during this period. Clinton upped regulatory oversight of businesses; so did Bush.

Next, the mere fact that there are regulations doesn’t make them effective. Take Bernard Madoff. What Madoff engaged in was a swindle — not a hard-to-control best-intentions-turned-wrong investment fiasco but an actual, intentional fraud.

But as columnist Steve Chapman recently observed, the federal bureaucrats whose job it was to regulate investment businesses investigated Madoff “at least eight times in 16 years,” never, ever “coming close” to the fraud.

”So what,” Chapman asks, “makes you think that future bureaucrats, no matter how vast their authority, will be able to do better?”

Another thing about regulation is that there are several kinds.

When the founding fathers talked about regulating trade, they didn’t mean micromanaging trade to get specific outcomes. The founders meant “to make regular,” as in establishing standards . . . like what is the difference between sound investments and elaborate frauds.

That’s hard enough. Micromanaging a million businesses, to prevent certain unfortunate outcomes, is pretty much impossible.

Past performance is a good indicator of future performance. Just adding a bunch of regulators? That’s no help, since we haven’t discovered any new magic since the last batch failed.

This is Common Sense. I’m Paul Jacob.