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"Buy American" Provisions Mean the Opposite In Practice
Tweet Share on Facebook September 16, 2009 Comment (1)There is a long list of political slogans that were originated to create a certain frame in the mind of the public, but ended up being associated with the exact opposite effect that was intended by the sloganeers. "No Child Left Behind" is probably the best recent example.
Maybe we can add "Buy American" to that list. You'll recall that when the stimulus package was passed earlier this year, Congress inserted a provision that required many of the materials used in stimulus-funded projects to be purchased from American companies only. Supporters cheered that the "Buy American" provision would stimulate domestic employment at a time when it was needed most.
But what actually happened?
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Financial Reformers Remember: Market Flaws Can Be Government Flaws
Tweet Share on Facebook September 14, 2009 CommentIn the Times yesterday, economist Robert Frank explains that the flaws in free markets that led to the financial crisis and recession are ultimately flaws in human nature. From there, it's an argument about why we need more government intervention to correct these flaws.
But there's one thing that needs to be added: Government is made up of humans, too. That's not an argument for inaction, but it is a reason to make sure that any "fixes" we implement don't just compound the problem.
Indeed, the flaws in markets are usually just as present in government action. Let me go through the flaws Frank discusses and give some examples of how they show up in government (also note that government has many flaws that are unique to it alone. I won't mention those here because there are too many to list in one post).
1. Relative performance matters more than absolute performance
Frank actually gives the best example of how governments, like markets, can get caught in races-to-the-bottoms that might help individual players but leave the group worse off: weapons proliferation and arms races.
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Can Democrats Retake Cap And Trade Debate?
Tweet Share on Facebook September 10, 2009 Comment (3)Earlier this week I posted about the reasons cap-and-trade isn't appealing to the American electorate. What I didn't go into were the possibilities that could change the game for cap-and-trade and its mostly Democratic supporters.
A new report from the Union of Concerned Scientists shows the kind of arguments they need to emphasize. It's full of concrete examples of costs Americans may have to pay for if nothing is done about climate change. Lexi Schultz, deputy director of the Climate Program at UCS, says "if we don't address global warming, you can imagine a cash register going 'ka-ching' all across the country." But the report also shows some of the difficulties with making economic appeals to voters to support climate-change legislation.
What are some examples of the "ka-ching" in the report?
California: Annual heat-related health costs could reach an estimated $14 billion by 2100, while rising ground-level ozone levels would boost medical bills by another $10 billion. The cost of protecting low-lying coastal property from sea level rise and the resulting storm surges, particularly around San Francisco Bay, would range from $6 billion to $30 billion annually by 2100.
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Wal-Mart To Destroy Small Businesses, Time Magazine Reports
Tweet Share on Facebook September 9, 2009 Comment (22)Here's the lead from a Time magazine story on Wal-Mart from yesterday:
Walmart loves to shock and awe. City-size stores, absurdly low prices ($8 jeans!) and everything from milk to Matchbox toys on its shelves. And with the recession forcing legions of stores into bankruptcy, the world's largest retailer now apparently wants to take out the remaining survivors.
It is certainly true that Wal-Mart has a tendency to "crush competitors," as the headline says. But is it true that, as that last sentence presumes, the more successful Wal-Mart is, the more there will be bankruptcies of smaller businesses?
There's actually some pretty compelling evidence that Wal-Mart could help smaller businesses overall. You can't just look at businesses that directly compete with Wal-Mart. There are also many businesses that do not compete with the retail giant but have customers with more money to spend thanks to Wal-Mart's dampening effect on prices of everyday goods.
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Cap And Trade In Trouble
Tweet Share on Facebook September 9, 2009 Comment (2)Jimmy P has three reasons why cap-and-trade might be doomed to fail. Here's reason number two:
Most people won’t see an immediate benefit. Proposed changes in the U.S. healthcare system wouldn’t immediately change the current insurance coverage of most Americans, despite new government spending and higher taxes. Likewise, cutting carbon emissions will likely incur big costs today with any tangible benefits coming later this century. During a recession, neither provides the sort of cost-benefit analysis that strapped Americans are likely to find compelling.
I would add, more than just that voters don't see the benefits, they probably see the costs. There is strong evidence that when their pockets are being squeezed, consumers look to cut environmentally-friendly spending. Being green, in that sense, is another form of luxury spending—you won't buy the gold plating when you need to cut costs, and you're likely to not buy (or at least, less frequently buy) the luxury of feeling like you're helping the earth as well.
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Obama-Brooks Bromance: It's OK To Look Past Ideological Differences
Tweet Share on Facebook September 8, 2009 CommentIn the Examiner today, Douglas McKinnon calls New York Times columnist David Brooks a "useful idiot" for being all buddy-buddy with the Obama administration:
Brooks has unabashedly become a cheerleader for Obama. Again, that is his right. What is not his right is to color the facts, nor to arbitrarily assign intelligence and station in life to others. With regard to the Obama White House, Brooks says, "I feel like I can call anybody. With Bush, there were months when I was in favor, and months when I was out of favor. Here, you can write whatever you want; you don't notice any diminution. If I call Rahm or Orszag or Axelrod, they're happy to talk."
I take it McKinnon means that, like the leftist Soviet sympathizers of America and Western Europe during the Cold War, Brooks is cozying up to a political entity that is doing harm to the ideals Brooks himself actually supports.
But his friendly relationship with the administration has not stopped Brooks from decrying the policy mistakes he thinks Obama is making. From a recent Brooks column:
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On Toy Makers And The Financial Crisis
Tweet Share on Facebook September 4, 2009 Comment (5)The Washington Examiner's Tim Carney has a column on the CPSIA regulations that require makers of children's products to submit to expensive chemical testing (see previous posts here and here.) But guess who doesn't have to submit?
Recently, the Consumer Product Safety Commission (CPSC) voted unanimously to grant Mattel an exemption from the CPSIA's third-party testing requirement. The law provided for such exemptions if a company can demonstrate it has its own testing facilities that meet a certain standard.
Mattel in 2007 and 2008 lobbied for this provision, and lobbied for the overall bill, prompting the usual cries of "wow, even industry is on board!" Of course, Mattel was already completing its own in-house testing operation as a reaction to the bad publicity and litigation resulting from a handful of recalls of its toys containing unsafe levels of lead.
So while little mom-and-pop toy makers have to pay thousands of dollars to test their products, Mattel is off the hook.
This might seem like a regrettable, but minor issue. How much harm can come from some extra costs imposed on a few select small businesses?
But I think there's more worth pointing out here. The Mattel case is an example of a pattern in regulation that has proven to have dire consequences for the economy as a whole.
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Tax Cuts For The Poor Becoming Political Liability For Obama
Tweet Share on Facebook September 3, 2009 Comment (5)The president wants to extend two tax credits for lower-income families that were supposed to be temporary products of his stimulus. Normally tax cuts for the poor would be the perfect bipartisan policy. But as further evidence that, contra Dick Cheney, deficits do matter politically, Obama's move is getting bipartisan criticism. The Post reports:
Deficit hawks are appalled. Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, called the move "outrageous" at a time when the nation is facing record budget deficits and the national debt is soaring toward a 50-year high. In addition to breaking Obama's pledge to pay for his policies, she said, it undermines confidence in Democrats' claim that the $787 billion stimulus package was truly a temporary measure aimed solely at reviving the slumping economy.
My thoughts:
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John Galt Not Hiding From The Public Eye
Tweet Share on Facebook September 2, 2009 Comment (9)One of the strangest—but perhaps, predictable—trends that has accompanied the recession is a resurgence of interest in the writings of Ayn Rand and especially, the book Atlas Shrugged. Sales of the book have apparently soared over the last year. The book's hero, John Galt, has become a rallying figure for anti-big-government activists.
You might have seen the latest appropriation of Randian thought in your newspaper: one of the ads used by the Employment Policies Institute (started by famous lobbyist Rick Berman) as part of a new campaign called Defeat The Debt. Check out the ad here.
I'm guessing the ad mentions Galt in the context of high tax rates on wealthy individuals to remind us of the main conceit of the book: that the most productive individuals will withdraw from society when they feel the government has screwed things up too badly and exploited them. Obviously that won't really happen, but the campaign's implication is that we can't tax the wealthy much more in order to really make an impact on the national debt.
The problem is, it seems like among policy wonks, the debate is already settled that the wealthiest can't be the only targets if we want to make meaningful fiscal reform. Honest people from right to left know that broad-based tax increases are on the way. That's why, as I've mentioned, a value-added tax is likely to be the talk of Washington over the next few years.
To me, the VAT is the issue we should be debating—not whether or not the most productive of us will be fleeing to Galt's Gulch.
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Unemployment Won't Be Falling Anytime Soon
Tweet Share on Facebook September 2, 2009 Comment (3)The new ADP report shows a bigger than expected drop in private sector employment for August. The Journal reports that most economists predict the official unemployment will tick back up to 9.5 percent, after a slight decline to 9.4 percent in July.
The numbers on private sector employment are probably worse than they sound because what they suggest for discouraged workers and other "marginally affected" workers. As I recently wrote about, the unemployment rate doesn't capture just how bad labor markets are because they don't count workers who gave up looking for work or those who were forced to go part-time. When private sector employment is dropping, it's a safe bet that more people will have to give up looking for work for lack of opportunity, and that more people will have to take part-time positions for lack of full-time work. So the unemployment rate plus the number of "marginally affected" workers is likely to stay above the levels of the early 80s recession.
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