Redstate

Posted at 5:25pm on May 8, 2008 The GOP--On The Right Side Of The Trade Issue

And That's Not Just A Pun

By Pejman Yousefzadeh

In the event that people think the debate over free trade is smallball in this election cycle, let me note that in fact, the issue is attracting a whole lot of attention--and for all of the correct reasons; what we do in terms of formulating and implementing trade policy will have a tremendous impact on our economic growth, or lack thereof.

To that end, I want to direct reader attention to this and this, both of which show that trade policy is going to be a special focus of attention for the GOP come this fall. This is a good thing; Republicans are not backing down in the face of protectionist demagoguery. Quite the contrary, a pro-growth, pro-free market, pro-opportunity message is being spread that is in the best traditions of the Republican Party.

I don't feel like being reminded of Smoot-Hawley. I know that you don't either. And if we work hard enough in this upcoming election cycle, we won't be.

Posted in Economy | Free Trade | Protectionism — Comments (9)/ Email this page » / Read More »

Posted at 1:38pm on May 8, 2008 Naked Free Markets

A Little Moral Hazard Goes a long, long, way

By blackhedd

Global financial markets have been in disorder for nine months now. (The birthday of the crisis is August 8.) There are widespread indications that the most fearsome disruptions, in the credit and interbank lending markets, are now abating around the world, thanks to aggressive and unprecedented actions by monetary authorities. Of these, the Bernanke/Geithner Federal Reserve deserves the lion's share of the credit.

It's entirely true to say that the world of finance has been fundamentally changed by the Fed's response. But for good or for ill? And what should happen next? As it turns out, this is an incredibly important question that carries an extraordinary amount of political risk. And it needs to be fully aired in the current political campaign.

Milton Friedman repeated the observation that change only happens at moments of real or perceived crisis. He astutely added that when change comes, it's based on whatever ideas happen to be lying around at the time. Today, those ideas are overwhelmingly on the side of massive new regulation of not only financial markets, but also of the real economy.

Is there an alternative? Read on...

Posted in bailouts | Economy | financial markets | naked markets | regulation — Comments (41)/ Email this page » / Read More »

Posted at 12:31am on May 7, 2008 If Pandering Is The Game . . .

By Pejman Yousefzadeh

It is generally agreed by those who are actually in the know when it comes to the specifics of trade policy and how free trade genuinely benefits America that both Barack Obama and Hillary Clinton are moving Heaven and Earth to pander to protectionists for votes. But as Daniel Ikenson points out, in the runup to tonight's primaries in Indiana and North Carolina, both pandering to free traders is the smart thing to do:

According to the U.S. Department of Commerce, Indiana's producers shipped $26 billion worth of goods to foreign customers in 2007 -- 14 percent more than the year before, and 80 percent more than in 2001. In fact, since 2001, the state's exports have grown at a rate one-third faster than U.S. exports overall. In North Carolina, producers shipped $23 billion worth of goods to foreign customers in 2007 -- 10 percent more than the year before, and 59 percent more than five years ago.

In 2007, exports accounted for 20 percent of U.S. manufacturers' total sales revenues -- the highest percentage in modern history. And nowhere in America is manufacturing more important to the economy than in Indiana, where the sector accounts for over 30 percent of the state's gross domestic product. Manufacturing is also more important to North Carolina's economy than it is to most other states, accounting for 22 percent of the state's gross domestic product, ranking it fifth among states in that measure.

In China, Canada, and Mexico -- the primary villains in the candidates' anti-trade narratives -- Indiana's producers are building relationships that are yielding extraordinary returns. Exports from Indiana to China increased by a whopping 36 percent between 2006 and 2007 -- twice the rate of total U.S. export growth to China, and nearly four times Indiana's exports to China in 2001.

Likewise, Indiana's exports to Canada and Mexico have grown 9 percent from 2006 and 67 percent from 2001, eclipsing overall U.S. export growth to the NAFTA countries in both periods. North Carolina's exports to NAFTA have grown 46 percent over the past five years -- to $7.4 billion.

Read on . . .

Posted in Barack Obama | Economy | Free Trade | Hillary Clinton | John McCain | Protectionism — Comments (2)/ Email this page » / Read More »

Posted at 3:07pm on May 6, 2008 "The FairTax Cult"

By Jeff Emanuel

That's the title of Chris Farris's outstanding piece on the "FairTax," posted over at my Georgia blogging home, Peach Pundit.

In his post (and please do read the whole thing), Farris addresses the publicize-at-all-costs tactics used by the program's supporters, and lays out the problems that can, and likely will, occur if and when the FairTax proposal leaves the Ivory Tower and becomes a seriously-debated policy prescription.

More below the fold.

Posted in Congress | Economy | Elections | FairTax | taxes — Comments (26) / Email this page » / Read More »

Posted at 1:12pm on May 6, 2008 Shorter Paul Krugman

By Pejman Yousefzadeh

"Don't worry too much about Hillary Clinton getting things completely and utterly wrong on the gas tax since economists are the only ones who are really obsessed about this issue."

I had no idea, of course, that we were supposed to excuse a policy error of tremendous proportions merely because if we failed to do so, we would be paying undue attention to the pet peeves of economists. Alarm bells should go off when a lousy gas tax policy is forwarded by a major Presidential candidate and when said Presidential candidate also says that she won't listen to the economics community and its consensus opinion that said Presidential candidate's gas tax policy is almost cataclysmically wrong.

Then again, perhaps Krugman just feels the need to get back into Senator Clinton's graces. She thinks he is The Enemy now:

She peddled her sham gas-tax holiday and repeated her attempt to blame Indiana's job losses on outsourcing and Nafta. Stephanopoulos asked her to name a single economist who thinks a tax-holiday plan would work, and the daughter of Wellesley and Yale took the chance to shove the geeks into their lockers: "I'm not going to put my lot in with economists."

When Stephanopoulos pointed out that Paul Krugman, a Times columnist, has raised doubts about the plan, Clinton lumped Krugman in with the Bush administration and said she wasn't going to listen to the people responsible for the last seven years.

Insert your own joke here.

Posted in Economic Antediluvianism | Economy | Hillary Clinton — Comments (19)/ Email this page » / Read More »

Posted at 12:33pm on May 6, 2008 Unions Kill Trade Agreement - Real Improvement Unrewarded

By Warner Todd Huston

The powerful union lobbies in the US have cornered their lapdogs in the Democrat Party and succeeded in killing the free trade agreement that we had brokered with Colombia. The main reason that unions twisted the arms of their Dem representatives is supposed to be because of Colombia's admittedly horrid history of violence against unions and workers.

John Sweeney, president of the largest US federation of unions, the AFL-CIO, detailed the allegations in a Washington Post op-ed April 14: "In Colombia, joining a union or advocating for workers' rights can be a de facto death sentence," he said. "The human-rights atrocities against union activists and supporters are not isolated, rogue events; they are committed largely by the armed forces and paramilitary organizations with ties to elected officials close to President [Alvaro] Uribe."

Posted in Economy — Comments (5) / Email this page » / Read More »

Posted at 12:24pm on May 6, 2008 Cutting the leg off the one-legged stool

By Jeff Emanuel

The Atlantic features an analysis of the HillObama split in the Democratic party (link here; h/t Ben Domenech via email).

Certainly it wasn't the author's intent, but with one sentence fragment in the post's first paragraph, the writer inadvertently throws away the only leg on which the Democrats' lass warfare, poor-are-getting poorer, your life sucks, Michelle-Obama-things-are-getting-worse-every-day meme was standing:

the white working class - the core of Clinton's support in Pennsylvania and in the Democratic electorate writ large - is shrinking as a share of the U.S. population, while the mass upper middle class, a crucially important of Obama's base (and one that enjoys outsized cultural and political influence), is expanding at a rapid clip

Finally, some truth...it hurts, doesn't it -- especially when your whole rationale for running for office is based around class warfare, and reinforcing the admittedly untrue claim that quality of life in America is declining and the middle class are quickly becoming The Poor, due to the unapologetic greed of The Rich.

Posted at 12:54am on May 6, 2008 J'accuse

By Pejman Yousefzadeh

In the event that we see a price hike in sugar and sugar-based products, I offer you an object of ire.

Mark Rep. Peterson well, electorally speaking. Both he and those who support his position owe you an explanation for their stance on sugar price supports. And if that explanation isn't good enough--and one suspects that it won't be--you can make sure that Rep. Peterson and his supporters will be collecting their paychecks from a source other than the United States Treasury come January 2009.

Posted in Economy | Food Prices | Market Distortion | Price Supports — Comments (2)/ Email this page » / Read More »

Posted at 12:47am on May 6, 2008 Reality-Based!

By Pejman Yousefzadeh

I suppose that one of the reasons why Hillary Clinton finds herself unexpectedly playing the role of underdog in the fight for the Democratic Presidential nomination is that she strikes people as one of the most arrogant know-it-alls imaginable (strange, I know, since she is the one trying to tag Barack Obama as the "elitist," but still . . .). She showed her tendency towards know-it-allism yet again just over the weekend:

This morning, George Stephanopoulos began his televised interview with Senator Hillary Rodham Clinton by asking if she could name a single economist who supported her plan for a gas-tax suspension.

Mrs. Clinton did not. "I'm not going to put in my lot with economists," she said on the ABC program "This Week." A few moments later, she added, "Elite opinion is always on the side of doing things that really disadvantages the vast majority of Americans."

She also said that despite the doubts of actual economists, she was sure that if her Administration got her tax plans "right," then "it would be implemented effectively." The haughtiness is breathtaking. Clinton actually thinks that the paltry savings from a gas tax holiday will be enough to (a) overcome the increase in demand, which will drive prices back up and (b) will overcome the costs that will be passed on to the consumer thanks to her foolhardy plan of imposing a windfall profits tax on the oil companies. Indeed, she doesn't even acknowledge that the oil companies would naturally pass along the costs to the consumer in order to protect their bottom line--which is entirely what one would expect as a result of misguided tax policy that ends up punishing business. As far as Hillary Clinton is concerned, there really is such a thing as a free lunch and her tax plan provides it. If it is ever implemented, consumers will find out that free lunches have gone the way of the dinosaur. And yes, John McCain is also wrong to think that a gas tax holiday would work but at least he doesn't compound his error by opting for the Clintonian windfall profits tax.

Posted in Economic Antediluvianism | Economy | Hillary Clinton — Comments (1)/ Email this page » / Read More »

Posted at 1:09am on May 4, 2008 Bad News For Price Control Advocates, Windfall Profits Tax Fans And Price Gouging Conspiracy-Mongers

By Pejman Yousefzadeh

All found here. The free market has an amusing tendency to get in the way of the formulation of shoddy economic policy, doesn't it?

Posted at 9:13am on May 3, 2008 The Economy: Bad for Democrats - Good for Republicans

By Wubbies World

This past week, the economic numbers have come out. The staccato drum beet of doom and that we are in a recession has been non stop in the news. Blackhedd, put out a post to let us all know that the situation is still not good. I love reading his posts. It gives me a perspective I would not have otherwise. I appreciate him posting this economic information here. It is very good stuff to know for us uneducated about economics and Wall Street matters.

Posted in Economy — Comments (1) / Email this page » / Read More »

Posted at 9:08am on May 3, 2008 Gasoline-Tax Demagogy

Three Presidential Candidates, Three Weird Approaches to Economic Policy

By blackhedd

I’m going to let you in on a secret you may not have heard yet: The price of gasoline has been rising.

And since it’s a Presidential election, this is populist gold. Each of the candidates has proposed something to do about it. Of course, the high price of fuel is a complex phenomenon with a lot of causes, very few of which are responsive to policy. So the candidates are stuck talking about the thing that government actually can affect: the level of Federal taxation.

Their responses are distinct, and illuminating.

Let’s start with Senator McCain, who kicked off the gas-tax derby a few weeks ago in Pittsburgh, with his proposal for a Federal gas-tax “holiday” over the summer months. Sounds great, feels good, doesn’t do a whole lot of anything permanent, and certainly does nothing to alter the underlying market dynamics.

More…

Posted in demagogy | Economy | Gasoline-tax | Refinery capacity — Comments (42)/ Email this page » / Read More »

Posted at 2:06am on May 3, 2008 A Specter Is Haunting Tax Policy . . .

By Pejman Yousefzadeh

Barack Obama has come out against the "gas tax holiday" that is being pushed by Senators McCain and Clinton. Obama's reasoning is defensible; he believes that a temporary lowering of gas prices will increase demand--especially now that we are heading into the peak summer driving period--thus eventually further reducing supply and causing the price to spike. At the end of the day, Obama argues that a gas tax holiday is hardly a short term solution to the problem of high gas prices, let alone a long term solution.

Let's grant that for a moment. What then to make of this?

Democratic presidential candidate Barack Obama's proposal for a windfall profits tax on oil companies could cost $15 billion a year at last year's profit levels, a campaign adviser said.

The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can't afford their energy bills.

``The profits right now are so remarkable that one could trim them 10 percent or so, which would turn out to be somewhere in the $15 billion range,'' said Jason Grumet, an adviser to the Obama campaign.

This plan is ridiculous. As I have pointed out before--in incorporating the arguments of others--oil companies don't make as large of a profit as people think and they must contend with an exceedingly volatile pricing structure. What's more; the tax will be self-defeating. Surely, Obama must know that oil companies will only try to find ways to pass the costs of a windfall profits tax on to the consumer. With their lower-than-thought profit margins, this almost becomes a necessity.

Obama has gotten a lot of praise regarding his stance on gas tax and the proposed gas tax holiday. But where is the recognition that his plan for a windfall profits tax will in fact make things a lot worse for people when they have to purchase gas?

Posted in Barack Obama | Economy | Gas Prices | Windfall Profits Tax — Comments (16)/ Email this page » / Read More »

Posted at 1:51am on May 3, 2008 The Return Of Optimism?

By Pejman Yousefzadeh

Since so much of the recent economic news has been poor, it is easy to make too much of anything that might slightly resemble good news. But perhaps, at long last, we finally have some good news to cheer us.

First, there is the fact that Wall Street is feeling more confident these days:

Despite a drumbeat of bad economic news, the stock market is up -- almost 11 percent in the last few weeks. Junk bonds, those risky corporate IOUs, are rallying. The value of financial shares, bank loans, tricky credit derivatives -- up, up, up. Many on Wall Street, the epicenter of the credit mess, seems to think that the worst is over. For the first time in months, analysts and executives sound upbeat again. Many of them see a broad, sustained recovery in both the economy and the financial markets coming in second half of this year, a prediction some market strategists call hopeful at best.

For now, policy makers are echoing the mood on Wall Street. Treasury Secretary Henry Paulson Jr. said in an interview with Bloomberg Television on Thursday that "we are closer to the end of this problem than we are to the beginning." A report from the Bank of England, meantime, concluded that mortgage securities, which have been at the heart of the financial troubles, probably have fallen too far. The central bank said prices of such securities should "improve gradually in the coming months."

Financial stocks and the broader market surged on Thursday as the dollar strengthened and oil prices fell for the third day in a row. The Standard & Poor's 500 index closed up 1.7 percent, to 1,409.34; the Dow Jones industrial average notched a 89.87-point gain, to 13,010; and the Nasdaq composite jumped 2.8 percent. Another day or two like that, and those market benchmarks will be in the black for the year.

It is a remarkable reversal in attitudes from just a few months ago, when the broader economy seemed relatively healthy but Wall Street was traumatized by billions of dollars in mortgage-related losses. Now, bankers and investors appear ready to look past the crisis to more profitable times, while consumers find themselves in a more precarious position as the job market weakens and banks make it harder to borrow money.

Read on . . .

Posted in Economy | Reviving The Economy — Comments (3)/ Email this page » / Read More »