Nation’s Libertarian Roots

Where better than Philadelphia on Presidents’ Day to talk about liberty and reviving the American tradition of freedom and limited government.
Thomas Jefferson said that when he wrote the Declaration of Independence in June of 1776, he had no book or pamphlet at hand but simply set down “an expression of the American mind.” With its foundation on the equal and inalienable rights of all people, including life, liberty, and the pursuit of happiness, the Declaration also reflects the libertarian mind.
Indeed, the principles of the Declaration are so closely associated with libertarianism that the Chinese edition of my previous book, Libertarianism: A Primer, features a cover photograph of the famous room in Independence Hall, complete with Windsor chairs and green tablecloths.

The Legacy of Laura Ingalls Wilder, One of America’s First Libertarians

Laura Ingalls Wilder is a bestselling author again, 83 years after she began publishing herLittle House on the Prairie books and 58 years after her death at age 90. Pioneer Girl: The Annotated Autobiography is a 472-page edition of Wilder’s original memoir, for which she couldn’t find a publisher in 1930.

Descended from a Mayflower passenger and other early Americans, Wilder was born just after the Civil War in the Big Woods region of Wisconsin. Life was hard on the frontier, and with her parents and then her husband she moved to Kansas, Minnesota, Iowa, South Dakota, Florida, and eventually Mansfield, Missouri. She also became, unexpectedly, a sort of libertarian matriarch.

Imports Are Why We Want More Trade

Sen. Orrin Hatch, R–Utah, author of the recently passed Trade Promotion Authority bill, makes the usual case for trade agreements and TPA:
“We need to get this bill passed. We need to pass it for the American workers who want good, high-paying jobs. We need to pass it for our farmers, ranchers, manufacturers, and entrepreneurs who need access to foreign markets in order to compete.”
Hatch is as confused as most Washingtonians about the actual case for free trade.

By David Boaz

Sigh. Alan Wolfe is writing about libertarianism again. In June he complained that libertarianism was “rigid” and obsessed with “purity,” under the ridiculous headline “Why libertarianism is closer to Stalinism than you think.” Now he’s claiming that “libertarianism embodies Max Weber’s nightmare of an iron cage,” whatever that means. The article is obsessed with ideological infighting, and this time he actually does manage to accuse Ayn Rand of a “Stalinesque purge” of Nathaniel Branden, her former lover and ideological partner. Thing is, she didn’t have Branden killed, which is pretty much the essence of Stalinesque purges.

The Divide between Pro-Market and Pro-Business

For the U.S. Chamber of Commerce, the Tea Party is no picnic. And the long conflict between pro-market and pro-business forces may lead to some divisive Republican primaries next year.
Years ago I helped to create an organization for business people who opposed crony capitalism and other forms of government help for business. We considered the clear and blunt name Business Leaders Against Subsidies and Tariffs, or BLAST, but eventually we settled on the more elegant Council for a Competitive Economy.

What Socialism Requires

We’ve heard a lot about democratic socialism lately, as the self-described socialist Sen. Bernie Sanders poses an ever-bigger threat to Hillary Clinton. But what is democratic socialism?
Wikipedia defines it as “a political ideology advocating a democratic political system alongside a socialist economic system, involving a combination of political democracy with social ownership of the means of production.” The Democratic Socialists of America explain that “democratic socialists believe that both the economy and society should be run democratically.” That doesn’t sound so bad — running things “democratically.” But what it means is that the government would run the entire economy and society, and all decisions would be made by the political process.

How Liberal Courts Help Conservative States Stay Free

A new study says that New Hampshire is the freest state in the country, followed by Alaska, Oklahoma, Indiana, and South Dakota.
New York is the least free state by a large margin, followed by California, Hawaii, New Jersey, and Maryland.
For some readers, the immediate reaction will be that conservative states get the highest ratings and liberal states the lowest. That’s not quite true: New Hampshire and Alaska are generally regarded as libertarian-leaning more than conservative, and very conservative states such as Alabama and Mississippi score pretty far down.

Why Tech Companies Are Getting Political

President Donald Trump has tried to court executives of technology companies. Before he even took office, he hosted the heads of such companies as Google, Amazon, Microsoft, Facebook and Tesla at Trump Tower.
But now his policies on trade and immigration are generating strong pushback from the tech industry. Silicon Valley executives sharply criticized Trump’s executive order temporarily barring entry from nationals of seven Muslim-majority countries. Under public pressure, Uber founder Travis Kalanick left Trump’s business advisory council, and competitor Lyft has reportedly pulled its ads from Breitbart, a website formerly led by Trump strategist Steve Bannon. Several firms and executives also announced millions of dollars in donations to the ACLU to fight the order and to immigrant aid organizations.

Monetary Stimulus Creates Only Pseudo Wealth

The European Central Bank’s decision to follow the Federal Reserve’s footsteps and embark on a massive program of quantitative easing to lower interest rates, encourage risk and inflate asset prices seems to be working for the moment.
New wealth appears to be created even though simple economic logic tells us that monetary stimulus cannot permanently increase a nation’s productive capacity or real income. Central bankers are engaged in pseudo, not true, wealth creation.
With ultra-low rates, savers have little incentive to postpone current consumption. There will be less saving, less capital accumulation and slower growth of real income.

The Trap Set by Financial Markets

Monetary policy has become a slave to boosting asset prices. Sound money has given way to speculative impulses as major central banks suppress interest rates and investors search for yield by taking on more risk. The disconnect between the real economy and financial markets is evident not only in China but in the United States, Japan and Europe.
Unconventional monetary policy since the 2008 financial crisis has ignored the reality that financial stability flows from monetary stability and that when central banks engage in financial repression asset bubbles are sure to develop. Negative real interest rates are unnatural: they harm savers, spur speculation, and misallocate capital.

Markets Will Rule in the Long Run

The Federal Reserve’s unconventional monetary policy has pumped up asset prices by suppressing interest rates and has misallocated capital. It’s time to end the mispricing of assets and let markets determine rates without interference from the Fed. Waiting to normalize monetary policy will further inflate asset bubbles and make the ultimate normalization of rates more costly.
The Fed has not increased its benchmark short-term interest rate since 2006 and has held the Fed funds target rate near zero since 2008. More important, there has been little interest in reducing the size of the Fed’s massive balance sheet by selling off longer-term Treasuries and mortgage-backed securities, because doing so would sharply depress bloated asset prices as interest rates returned to more normal levels.

Let’s Not Start a War on Cash

Some prominent economists are now advocating getting rid of most cash payments. Kiss $100, $50 and $20 bills goodbye if they get their way. The most visible proponent is Kenneth Rogoff, former chief economist at the International Monetary Fund and currently a chaired professor at Harvard. In his just published book, “The Curse of Cash” (Princeton University Press), he argues that the U.S. economy would benefit if the government withdrew larger denomination bills from circulation, further restricted cash withdrawals and deposits, and limited the size of cash payments in retail trade.
Launching a war on cash, however, would further empower government, violate private property rights and undermine individual freedom. Expropriating cash regardless of whether it was obtained legitimately or not smacks of socialism. There is an implicit assumption made by Rogoff that it is only criminals that want higher denomination notes.

Corporate Welfare and Corruption

Chris Edwards

President-elect Donald Trump says that he will cut wasteful spending and “drain the swamp” in Washington. The first thing he should target is business subsidies in the federal budget. Such “corporate welfare” spending attracts corruption like garbage dumps attract rats.

A Cato study estimated that there is $100 billion of corporate welfare in the budget. That spending harms the economy, but the incoming administration should be aware that such spending also spawns damaging scandals. That pattern goes all the way back to the 19th century. Federal subsidies for the first transcontinental railroad led to the Credit Mobilier scandal of the 1870s, which involved dozens of members of Congress.

More recently, corporate welfare has spawned these scandals:

Removing Barriers to Infrastructure Investment

Chris Edwards

As Obama administration officials head for the door at the Department of the Treasury, they have released a new study on infrastructure. The study—completed by outside consultants—profiles 40 large transportation and water projects that the authors believe would generate economic growth.
For each project, the study gives the estimated benefits, costs, and benefit-cost ratio. Many of the 40 projects appear to be worthwhile, such as an $8 billion Hampton Roads highway project with a benefit-cost ratio of 4.0. The report is silent on who should fund each project, but such high returns suggest that the states have a strong incentive to invest by themselves without aid from Washington.
What the states need from Washington is not money but to get out of the way. The Treasury report suggests that some “major challenges to completion” of projects are imposed by governments.
One challenge is “significantly increased capital costs:”

International Trade Administration

Chris Edwards and Tad DeHaven

International trade plays a crucial role in the growth and prosperity of the United States. Just as open trading between the fifty states creates widespread benefits, so does open trading on a global scale. Trade generates competition, promotes transfers of technology, and allows consumers and businesses access to the best products worldwide. The result is innovation, higher productivity, and rising incomes all around.
Economists have long understood these benefits, but governments have often interfered with open trading by restricting imports and promoting exports. The International Trade Administration (ITA) engages in both of those activities. It develops "national export strategies" and assists companies selling their products abroad in various ways. The ITA is also tasked with restricting imports under the rubric of ensuring "fair trade." The ITA administers antidumping and countervailing duty laws, which have no economic grounding and are driven by politics.

Tad DeHaven

1789: The U.S. Constitution goes into effect and the young nation goes on to become a great economic power. The rise in prosperity is fueled by entrepreneurship and the vast investment of private capital unhindered by the small and distant federal government.
1789: The ninth law passed by Congress transfers lighthouse operations from the states to the federal government.¹ When the Department of Commerce was created in the early 20th century, lighthouses were the department’s largest activity.
1790: The first national census is taken. The Constitution requires an enumeration of citizens every 10 years to apportion seats in the House of Representatives. Today, the Bureau of Census within Commerce collects a vast array of information beyond the basic decennial population data.

Bureaucratic Failure in the Federal Government

Chris Edwards

The federal government spends almost $4 trillion a year. It has hundreds of agencies and runs more than 2,300 subsidy programs.¹ It employs 2.1 million civilian workers, 1.4 million uniformed military personnel, and 560,000 postal workers.² It is a huge organization.
Most Americans think that the federal government does a poor job.³ Only one-third of people believe that it gives competent service, and people think that more than half of the tax dollars sent to Washington are wasted.⁴ The public's "customer satisfaction" with federal services is lower than their satisfaction with nearly all private services.⁵ After studying polling data, Yale University law professor Peter Schuck concluded, "the public views the federal government as a chronically clumsy, ineffectual, bloated giant that cannot be counted upon to do the right thing, much less do it well."⁶
This poor view of the federal government is not surprising given its many high-profile failures. In recent years, scandals have erupted at the Department of Veteran's Affairs, Internal Revenue Service, Secret Service, and other agencies. Federal auditors regularly uncover waste, fraud, and abuse in many departments, and federal projects often have large cost overruns.

Corporate Tax Cut and Border Adjustment

By Chris Edwards

The House Republican tax plan would cut the federal corporate tax rate from 35 percent to 20 percent, but it would broaden the tax base in a misguided way. It would deny businesses a deduction for their imported inputs to production, but exempt exports from their taxable income.
This base change would raise tax revenues by about $100 billion a year, which is causing major blowback in the business community. It would be a radical change in the structure of business taxes and cause large disruptions in the supply chains and tax liabilities of many firms. No other nation that I am aware of structures their income tax base that way.

Cut Corporate Taxes and Corporate Welfare

President Donald Trump is prioritizing major tax reforms, including a large corporate tax rate cut. The cut has broad support and promises to spur growth, but it will face political opposition if it widens the already rising budget deficit. As such, President Trump would do well to pair his corporate tax cut with a cut in “corporate welfare” spending.
Trump promised to “drain the swamp” of Washington special interests, and a great way to do that would be to cut government hand-outs to businesses. We can make American corporations great again by cutting their tax burdens and weaning them off subsidies.

China Needs a Free Market for Ideas

In his much acclaimed speech at the Davos World Economic Forum, Chinese President Xi Jinping proclaimed the importance of globalization and free trade for lifting people out of poverty. China is a prime example: Since the reform movement began in 1978, living standards have increased dramatically and China has become the world’s largest trading nation and second-largest economy.
President Xi told world leaders, “We must remain committed to developing global free trade … and say no to protectionism,” which he likened to “locking oneself in a dark room.” While Mr. Xi should be applauded for promoting the benefits of globalization and free trade, his rhetoric does not match the reality in China. It is true that the Middle Kingdom has come a long way in liberalizing its economy and opening to the outside world since the dismal days of Mao Zedong, but that progress should not divert attention from the fact that socialism, not market liberalism, is at the core of the Chinese Communist Party.

Monday, February 6, 2017