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Re: George Bush, Protectionist

In response to this article by Pat Buchanan, I sent the following email:

Dear Pat,
In supporting the Bush Administration's bailout money for Detroit automakers, basically you're saying that since GM and Chrysler can't get me to give them my money voluntarily, the government should take it from me by force and give it to them.  How is that just?

Interesting that you raise the specter of Herbert Hoover to criticize Republican senators who opposed the bailout, as Hoover actually followed the prescription you and other protectionists support:  Hoover implemented the Smoot-Hawley Tariff Act, which raised tariffs on imported goods, ostensibly to "protect American businesses".  We see the result of that act over the next several years.

One common tactic used when fighting a war is to blockade a country, thus disallowing imports and forcing a country to produce all of its own goods and services.  Interestingly, the protectionists wish us to do the same thing to ourselves.

Protectionist tariffs and bailouts of poorly performing companies are acts of government intervention that reward failure and raise prices for consumers, while impeding innovation and choice.  Government intervention is not the best solution to economic problems, especially those that are basically caused by ill-advised government intervention.

Sincerely,
Dave Smith
Houston, TX
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Stop Annoying Me... In the Name of the Law

If there were ever a poster-child for intrusive government and politicians who obviously have too much time on their hands, this new Brighton, Michigan city ordinance is it.  Brighton residents now have a new commandment:  Thou Shalt Not Be Annoying.  This includes annoying acts that take place "by word of mouth, sign or motions."

Well then.  At first blush, one could be tempted to think this isn't such a bad idea.  Who wants to be annoyed?  Whether it is the guy at the gas station asking for money for gasoline (always, of course, because he's trying to get to a job interview) or the loud motorcycles outside my window on Sunday nights, to the guy driving slowly in the left lane, there are plenty of people whom I find annoying during the course of the week.  Casting a wider net, I could find even more:  AIG, GM, and Chrysler executives trying to get at my paycheck (and apparently succeeding), the head of the UAW, Illinois Gov. Rod Blagojevich, New York Times columnist Paul Krugman, and Alaska Sen. Ted Stevens; gimme more time and I'm sure I can think of even more.  Why shouldn't I have some recourse?

Seriously, though, who decides what's "annoying"?  The purpose of government is to protect our life, liberty, and pursuit of happiness, not our attainment thereof.  Perhaps the government decides that my blog is "annoying" (based on a couple of the comments and emails I've received over the past 16 months or so, there are certainly those that do), or my protest against a new tax, or my remarks on a radio talk show.  Perhaps someone is annoyed by a particular association, holiday, newspaper article, or religious service.  Or perhaps I'm scratching my nose while pumping gas and the guy in the next car thinks I'm flipping him off (hey, it happened on Seinfeld, so it's certainly possible).

Instead of wasting time worrying about someone being annoyed, instead of investing the government with broad new powers to censor speech and intrude on individual liberty, the busybodies could be more gainfully employed looking for cost savings by their government, lowering taxes, and creating a more free, open society in their community.  Or, better yet, contributing to community by starting a business or tutoring kids (obviously not in American Government class) or baking cookies for the kids down the street.  As much as I'd like to go through each day not being annoyed, it's not the government's business.
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Inheriting the Government

In 2000, Hillary Clinton was elected to the United States Senate by the citizens of the state of New York.  Arguably her main qualification was her name -- she was, of course, the sitting second-term First Lady of the United States; one can't imagine a person born and raised in Illinois and largely making her name as a lawyer in Arkansas being elected to the Senate from New York under normal circumstances.

With Senator Clinton now assuming the title of Secretary-designate of State, New York Governor David Patterson is tasked with naming a new Senator should Sen. Clinton, as expected, be confirmed by the Senate for the cabinet position.  The candidates are lining up, lobbying behind the scenes with Patterson and other "power brokers" and in public via the press.  Some of the names are familiar ones, both in New York politics and nationwide.  Among them:  Andrew Cuomo and Caroline Kennedy.

Cuomo is the son of former NY Gov. Mario Cuomo, perhaps best known for rousing speeches at the Democratic National Convention in 1984 but who famously declined to run for the presidency in 1988 and 1992, much to the chagrin of liberal Democrats.  Andrew Cuomo served in the cabinet of President Clinton as Secretary of Housing and Urban Development, and is currently the NY Attorney General.  He's been discussed as a potential candidate for NY Governor, following in the footsteps of his father; for this reason, Cuomo could be politically a good choice for Patterson, as it could take a potential opponent out of the way.

Kennedy is, of course, daughter of the former President, and niece to two US Senators:  former NY Senator Robert Kennedy and current Massachusetts Senator Edward Kennedy.  Her candidacy is based largely on her maiden name:  her political resume prior to 2008 is basically nonexistent.  She has been in the public eye as an author, fundraiser for New York City schools, and the subject of celebrity tabloid-esque stories in magazines like People.  America can never seem to get enough about the Kennedys.

The main criticism about Kennedy's self-induced candidacy seems to be her lack of political experience.  Such a notion presupposes that "experience" in politics is a positive, that it endows a candidate with some sort of expertise.  One should remember that a long record of experience in politics denotes talent at exactly one thing:  getting people to vote for you.  A candidate who wins elections is skilled at winning elections; no particular expertise can be inferred.  Regardless of where one sits on the political ideological spectrum, there are plenty of examples of incompetence available who were especially adept at retaining office.

Moreover, such a criticism implies that holding political office is a benefit to seeking other political office.  I would contend that just the opposite is often the case -- that we need more diversity of experience in the government, particularly in terms of the private sector.  Rather than near-lifetime politicians divorced for long periods of time from having to live and work under the laws they've helped create or administer, and many, perhaps most, from a background in the legal profession, wouldn't we be better served by people from a wide swath of society -- small business owners, teachers, engineers, accountants, physicians, etc. ?  I would think so.

All that said, I don't particularly like the dynastic sense that pervades American politics.  Our outgoing President is the son of a President, Vice President, and Congressman, grandson of  a Senator, brother of a Governor.  When then-Senator Frank Murkowski was elected Governor of Alaska, he named his daughter to fill out his seat; Vice President-elect Joe Biden's son Beau is mentioned as the likely successor to his own seat; the untimely deaths of Sonny Bono of California and Mel Carnahan of Missouri resulted in their respective widows being named to replace them.  Politics is often a family business, going back to John, Sam, and John Quincy Adams -- 2 of whom were elected President.  The Kennedys didn't invent the game, they are just the current (and long-running) favorites.

So it would seem that Caroline has a mark in her favor -- diversity of background -- to balance her family name.  Of course, the best case scenario in my mind would be for Gov. Patterson to appoint a free market capitalist to the Senate seat (Larry Kudlow comes to mind), but given his past proclivities for interventionist government I'm not holding my breath.  So rather than let the seat be "inherited" by a Kennedy or a Cuomo, or by a career politician of a less patrician surname, I would recommend he appoint someone completely off the radar.  How about a university president, business owner, or corporate CEO (although preferably not of AIG or other beneficiary of "bailout" largess)?  Patterson could surely find someone who represents New York who brings some diversity of background to Congress.
Tags: Politics  
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Not A Good Idea

In this article on Townhall, Michael Reagan advocates a different kind of economic stimulus:  allowing tax deductibility of interest on the purchase of cars, second homes, and other purchases.  I wrote the following letter in response to this wrong-headed idea:

Mr. Reagan,
Your idea to spur economic growth through selective tax inducements is not the right approach.  We do not need more taxpayer deduction of interest.  That's simply more government intrusion — government rewarding behavior it considers "good" at the expense of the rest of taxpayers.  Any behavior that government incentivizes, whether through a "tax credit" or through a direct payment, is thus subsidized by the rest of us, with no choice on our part.  Your idea involves a transfer of wealth from those who choose not to buy houses, cars, or boats to those who do.

Further, when government promotes one activity at the expense of another, it distorts the market.  The collapse of the subprime mortgage market and the housing bubble are demonstrations of the unintended consequences of government-subsidized behavior and intrusion on the free market.

Rather than providing tax code incentives for one behavior versus another, the real goal should be a flat, fair, simple tax code that neither encourages nor discourages individual behavior.  Whether I rent or buy a home, or whether I buy a car or a bicycle for transportation should be no business of the government.

One final reason your idea is the wrong approach is that it encourages people to assume more debt.  Surely the recent housing foreclosure debacle has shown you that when you encourage people to buy on credit, they come looking for a bailout when the bill can't be paid.

Sincerely,
Dave Smith
Houston, TX
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The "Fairness Doctrine" -- Illinois Style

The big headliner in the shocking saga of the indictment against Illinois Governor Rod Blagojevich is his attempting auctioning of the Senate seat of President-elect Barack Obama for personal favors.  However, there's a less hyped (but no less chilling) charge in the indictment:
[Blagojevich] corruptly solicited and demanded ...the firing of certain Chicago Tribune editorial members responsible for widely-circulated editorials critical of ROD R. BLAGOJEVICH, intending to be influenced and rewarded in connection with business and transactions of the State of Illinois ...the provision of millions of dollars in financial assistance ...to the Tribune Company involving the Wrigley Field baseball stadium
Basically, the Chicago Tribune had some writers who were critical of the governor.  The Tribune Company owns the Chicago Cubs and Wrigley Field, and wanted some public money for stadium upgrades.  The governor brazenly attempted to use the power and treasury of the government to regulate free speech and silence political dissent.

A similar, though more subtle, movement against political dissent is possible in the coming months.  House Speaker Nancy Pelosi has stated that she's in favor of at least considering re-implementation of the so-called "Fairness Doctrine" regulation of radio.  Under this program, the government would have the power to compel radio stations to offer "equal time" for consenting viewpoints on "controversial" issues.  Of course, the government would have the power to decide what issues are "controversial", and what exactly would constitute the opposing viewpoint (most issues have many viewpoints) and what would constitute equal time. 

The possibilities for government regulation of speech are endless under a "Fairness Doctrine", and would potentially bring forth a bureaucratic nightmare for radio station managers; it is likely that many stations currently engaged in news and talk would change to a less regulated format rather than face potential fines.  And, of course, politicians in power would be likely to attempt to influence the FCC to go after stations that happened to be critical of them; that's the nature of power.

Rather than wait on Congress or the Obama Administration to implement the "Fairness Doctrine", Governor Blagojevich decided to take matters into his own hands.  Apparently, the Chicago political machine has its own methods of enforcing "fairness" in the sphere of political discourse.
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Obama and Job Creation

In response to this story in the news, I sent the following letter to the Chronicle:

President-elect Obama says that he and his team are putting together an "economic stimulus" plan he claims will "save or create 2.5 million new jobs by 2011".  If he's so sure of his ability to create jobs, why stop there?  Why not 3 million, 5 million, or even 10 million new jobs?  And, if job creation simply requires the right legislation, why didn't he sponsor legislation during his time in the Senate that would have prevented the current job losses from happening in the first place?

True job creation does not come from government spending, but rather from businesses and industries.  Instead of writing checks and depleting the treasury, the incoming Administration should consider cutting taxes on businesses, investors, and individuals -- the engines of economic growth.

Sincerely,
Dave Smith
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A True "Jolt" For The Economy

As he chooses his cabinet and prepares to take office, President-elect Obama and several of his advisers have discussed yet another so-called "economic stimulus" package, to be prepared in the interregnum and ready to sign when he takes office.  While declining to engage in discussion of the details of such a stimulus, numbers in the range of $500-700 billion have been floated, with the usual government demand-side ideas:  "infrastructure" and "public works" projects, bailouts for domestic automakers, tax credits for "alternative energy", and so on.  What's new was once old:  most of the ideas are variations of programs initiated by Presidents Hoover and Roosevelt to combat the Great Depression.

The main problem with such public spending projects is simple:  they've never been shown to turn around the economy.  Hoover and FDR found that out the hard way, as the Great Depression was still in full swing 10 years and billions of dollars after it started, with nary a dent in unemployment and little economic growth to show for it.  The key to this is also fairly simple:  when the government funds a project, it is merely moving dollars (forcibly) from one party to another; nothing is created, no new value is created.  Obviously, sometimes roads and other public infrastructure is a good thing:  the interstate highway system has, in many respects, been a boon to trade and commerce.  But where highways and other investments have been successful in promoting economic activity, they were built in response to (or perhaps in advance of) an economic need, not as make-work for workers on the government paycheck.

When the government starts funding public works for their own sake, it simply gives politicians the chance to buy off votes back home, or to provide goodies for favored industries.  Consider an extreme example:  what if, to spur employment, the government spent billions of taxpayers funds to hire workers to build wagon wheels?  At the end of the project, yes, people would have been employed, and yes, there would be a product to show for their endeavors.  But of what economic value would billions of wagon wheels be in 2008?  Meanwhile, money that could have been put to more efficient, effective use was taken from taxpayers and spent on worthless items.  Likewise, a $250 million bridge to an island of 50 people would put people to work, but at little or no economic growth benefit.  Politicians have an incentive to choose spending projects that promote their own re-election, not that provide the best long-term solutions.

So if massive public spending isn't the key, what is the best "stimulus" the government could undertake to "jolt" the economy into recovery?  How about, instead of the government deciding where the best investments are, instead of spending more money in a (vain) attempt to stimulate the economy, it took less of a role.  There's a simple rule in economics:  if you want more of something, subsidize it; if you want less of something, tax it.  So instead of trying to find the best alternatives to subsidize activity, the government could tax economic activity less, letting businesses and individuals keep more of their own money to spend as they see fit, on investments or consumption that fits their own needs.

Based on this central premise, the first step would be to slash (or better yet, end) the capital gains tax.  An individual or business that wants to invest does so knowing that if it makes a profit, even a profit that doesn't keep up with inflation, he will be taxed on that gain.  Thus, there's a disincentive for an individual or company to invest in new capital -- to build or renovate a house or office building, or maybe to invest in new equipment, or even to buy stock in a company or provide venture capital.  Unleashing the capital investment market would pump cash into the economy, cash that would tend to flow towards ventures that are doing a good job of providing goods and services people want to buy; it would reward success, not failure (as is the case with the government bailouts).

A next step would be to slash (or better yet, end) the corporate income tax.  Instead of sending money to the government to be spread around by corrupt politicians, businesses would have more money to invest in capital improvements, more workers, higher wages and benefits, innovation, new computers, or perhaps even just more dividends for stockholders (putting more money back in the hands of potential consumers and investors).  Better still, the lower tax rate would make America a more competitive place to move businesses currently located in other countries with higher tax rates, or to start a new business; this would create even more jobs.  Rather than rewarding only those businesses favored by the government, an across-the-board cut in the corporate tax rate would mean that ALL businesses would benefit -- and thus all workers and investors would likewise benefit.

A final step would be to cut the personal income tax rates -- all of them.  The best case would be to implement a flat tax system that removes complexity in favor of fairness and simplicity; however a 50% decrease in each tax rate (reducing the lowest rate from 10% to 5% and the highest rate from 35% to 17.5%) would be a great start.  The result would again be more money in the hands of consumers and investors, producing an instant demand-side effect as people saw more money in their next paycheck.  In addition, however, there would be a supply-side effect:  rather than a one-time rebate check, a cut in tax rates would be a gift that keeps on giving, giving more incentives for people to save (providing nest eggs for retirement as well as providing more cash into the banking system) and invest.  Knowing their tax bill would be cut in half, people would know their purchasing power had increased over the long-term, lessening the worry over making big-ticket purchases like houses are automobiles.

Each one of these steps would be expensive; yet the government has already spent over a trillion dollars in "stimulus" and is talking about $500-700 billion more -- at least.  Experience has shown that cuts in the capital gains, corporate, and personal income tax rates tend to provide economic growth that actually results in a net increase in government revenue; certainly the countries that have implemented a flat tax have seen that happen.  Obviously, a complete dissolution of the capital gains or corporate tax would not provide an increase in revenue collected by those rates; however, the money would still filter through the system in economic growth, higher personal incomes, and more investment.

President-elect Obama has said that all ideas are on the table, that he wants to be bold, and that he wants to do whatever works.  He could have a unique ability to get such a plan passed, a "Nixon goes to China"-type ability -- Republicans and other free market capitalists would support such a plan on principle, and Democrats and other leftists would go along with their newly-elected hero.  The resulting economic growth could cement his place in American history as a bold leader who fired the jolt heard 'round the world.
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