Stossel on deficit spending

John Stossel writes eloquently on the danger and injustice of deficit spending:

Obama must realize that government has no wealth of its own and that commandeering scarce resources from the private sector only stifles the economy. Deficit spending does this two ways. When the Treasury borrows money, it outbids private borrowers who would have put the money to productive use. When the Fed creates money, it depreciates the dollar, shifts purchasing power from the people to special interests, and — by tampering with the price signals — creates an unsustainable recovery that will collapse and throw people out of work when the inflation stops.

Read the whole article here.

The Krugman Recipe for Depression

Amity Shlaes in the Wall Street Journal:

Massive government spending is no solution to unemployment.

Paul Krugman of the New York Times has been on the attack lately in regard to the New Deal. His new book “The Return of Depression Economics,” emphasizes the importance of New Deal-style spending. He has said the trouble with the New Deal was that it didn’t spend enough.

He’s also arguing that some writers and economists have been misrepresenting the 1930s to make the effect of FDR’s overall policy look worse than it was. I’m interested in part because Mr. Krugman has mentioned me by name. He recently said that I am the one “whose misleading statistics have been widely disseminated on the right.”

Mr. Krugman is a new Nobel Laureate, teaches at Princeton University and writes a column for a nationally prominent newspaper. So what he says is believed to be objective by many people, even when it isn’t.

Read the rest here.  See also the work of Robert Higgs linked to this recent podcast.

(via David Harsanyi)

Support tax-funded schools? Then donate your own money.

The Rocky Mountain News published my letter to the editor last week:

Amendment 59 backers should send refunds to schools

Let the “begathon” begin! That’s what educators would need to raise school funding because Amendment 59 failed, said Colorado Association of School Boards director Jane Urschel (“Despite defeat, Ritter aims for budget fix,” Nov. 6).

But fundraising should be easy – if 59′s supporters simply put their money where their vote is. Since 59 failed, taxpayers will receive a refund when the state collects excess taxes. Why not donate it to schools?

Amendment 59 would have sent about $50 million in annual tax surpluses to government schools. Since almost a million Coloradans voted for it, that’s a $50 donation each. As a tax-deductible donation, it’s even less. Just forgo dinner and a movie one weekend.

Surely voters who want government to spend their own tax refund – and everyone else’s – on government schools would donate voluntarily, right? Or would they prefer to support a school of their choice, a scholarship fund, or other causes they deem worthwhile?

In a previous essay I addressed a common argument against the above point of view:

Another common argument in support of [taxing people to pay for schools] is that “we all benefit from it.”… In any case, just because you benefit from something does not mean you must pay for it.  We benefit if others have food, shelter, clothing, and good hygiene, but this doesn’t mean government should force us to buy food, shelter, clothing, and soap for others.

(What does this have to do with Barbara Streisand?  She supports tax-funded schools. (Photo credit.))

Honda opens new U.S. plant as Detroit seeks bailout

From Reuters, November 17:

GREENSBURG, Indiana (Reuters) – The rest of the country may have been debating the possible bankruptcy of America’s iconic automakers on Monday, but in southeast Indiana more than 1,000 U.S. workers were cheering the opening of Honda’s newest assembly plant. …

The rise of Honda’s mammoth new car plant in America’s farming heartland is a stark contrast to the layoffs and plant closings announced in recent months by General Motors Corp, Ford Motor Co and Chrysler LLC.

But for the Honda workers here, their jobs — with a starting wage of $18.41 an hour — are just as much part of the U.S. auto industry as those at their imperiled Detroit competitors. They just don’t get as noticed.

“GM has laid off and cut back how many people and Honda is building a plant. What is Honda doing right? Maybe they should look at this model and learn something instead of getting a bailout,” shrugged new Honda worker Larry Giles, 41.

According to 2007 figures compiled by the Center for Automotive Research, foreign automakers including Honda, Toyota and Nissan employed some 113,000 workers in the United States, about half of the 239,000 employed by Detroit’s Big Three.

Read the whole article here.

Why would politicians bail them out?  Diffuse costs and concentrated benefits.

Stop the bailouts please. Try freedom.

My piece published in Saturday’s Daily Camera:

It’s wrong for government to bail out failing businesses, financial institutions, and irresponsible home “owners” who cannot pay back loans. This just rewards people for making poor decisions. This punishes both financially responsible taxpayers and successful businesses that profit by producing what consumers want.

If anything cripples prosperity, it’s rewarding those who squander wealth at the expense of those who create it. The best way to bolster financial markets is to respect the rights of consumers and producers to trade voluntarily according to their own best judgment. But Treasury Secretary Henry Paulson wants to replace such free-market transactions with tax-funded government policies that encourage borrowing. But aren’t such policies the problem in the first place?

As economist Stan Liebowitz summarizes in his “Anatomy of a Train Wreck,” a long history of pro-borrowing policies have contributed to the mortgage mess. Low interest rates, regulations that promote risky lending implicitly backed by Fannie and Freddie, and other policies advanced the politically popular goal of home ownership, or home “borrowership” to be accurate, by those who cannot afford it.

We should not further empower government officials to treat taxpayers like pawns in the world they see as a chessboard. This invites special interests to feed at the government trough at politicians’ benefit and taxpayers’ expense.

Instead, as Harvard economist Jeffrey Miron suggests, legislators should “eliminate those policies that generated the current mess.”

Print edition (pdf).

Other references on this issue:

Jeffrey Miron, Ph.D.,  Don’t blame free markets for the current panic.

Arnold Kling, Ph.D. (former Senior Economist at Freddie Mac), Fantasy Testimony, and History of Mortgage Securitization.

The Unfree Market Has Failed – Yaron Brook

A press release by the Ayn Rand Center for Invidual Rights:

“Everyone is blaming ‘the free market’ for today’s financial crisis,” observed Yaron Brook, executive director of the Ayn Rand Institute. “But we should be blaming the unfree market. The mortgage and financial markets have been thoroughly controlled by government–and that is why they failed.

“It was the government’s hand in the creation of Fannie Mae and Freddie Mac, the Federal Reserve Board’s inflationary policy of keeping interest rates artificially low, the irrational lending standards forced on lenders by the federal Community Reinvestment Act, and the quasi-official policy of bailing out large financial institutions deemed too big to fail, that contributed to creating a situation in which millions of people were buying homes they could not afford, in which the participants experienced the illusion of prosperity, in which billions upon billions of dollars were going into bad investments.

“We do not need more regulation or economic ‘supervision.’ What we need to do is remove the government’s power to coerce, bribe, reward and bail out irrational decisions. The unfree market has failed. It’s time for a truly free market.”

The Investors Business Daily has also mentioned the Community Reinvestment Act.

(via Ari Armtrong)

Should the president “manage the economy”?

No.  And it’s not possible, anyway. But apparently people think that’s part of the job.

On McCain’s Battery Prize

From Reason.tv:

Paying $4 for a gallon of gas is a drag, but what may be worse is listening to White House wannabes who promise to rescue us from our misery.

Take Senator McCain’s recent proposal to offer a $300 million cash prize to the inventor of a car battery that can out-green 100-mpg plug-in hybrids. Is McCain’s money pile really necessary to spur our nation’s geniuses to get it together and invent an ultra-efficient car? reason.tv’s Ted Balaker thinks not.

Crashing Gore’s Global Warming Party

An amusing video from Americans for Prosperity:

Via Reason.tv.

If only all politicians were so honest

U.S. House Democrat Maxine Waters during a hearing concerning gas prices.

I suggest she read the Constitution she swore to uphold, think a bit about property rights, and watch this video by John Stossel. My favorite part is the graph showing that tax revenue from the tax on gasoline exceeds oil company profits.