RSS FEEDSJANUARY 21, 2010
Brief History of the Great Depression
Investor's Business Daily has an excerpt from Thomas Sowell's new book Intellectuals and Society, which outlines the policies which cause the great depression. For instance, Sowell notes that unemployment never reached 10% in the 12 month following the 1929 stock market crash - but never dropped below 20% in 35 months following government interventions.
Sowell highlights how
- The federal reserve mistakenly raised interest rates and shrunk the money supply while banks were failing.
- How Congress passed the Smoot Hawley tariffs to "save" American jobs...after which unemployment jumped from 6% to 25% in two years.
- How Hoover and later FDR increased taxes on upper income brackets, and tried to force companies not to cut wage
It is well worth the read.
posted by NATHAN BENEFIELD | 08:29 AM | 0 comment
JUNE 14, 2009
"Stimulus" Kills Pennsylvania Steel Jobs
Redstate notes how the "buy American" provision of the so-called stimulus bill is already putting some Pennsylvania's out of of work. See the original Canadian Press article here.
Stateside, the sting is also being felt. As many as 600 steelworkers in Pennsylvania, whose union lobbied for the Buy America law, are slated to lose their jobs at Duferco Farrell after the company lost orders from its biggest customer because some of its goods are partly produced abroad.
posted by NATHAN BENEFIELD | 06:24 PM | 0 comment
DECEMBER 16, 2008
Buchanan: GOP should embrace xenophobia, not economics
Pat Buchanan on Townhall.com calls for an automakers bailout based on xenophobia and on repeating the mistakes of the past, rather than sound economic policy.
Is the Republican Party so fanatic in its ideology that, rather than sin against a commandment of Milton Friedman, it is willing to see America written forever out of this fantastic market, let millions of jobs vanish and write off the industrial Midwest?
And, unlike Mitsubishi, General Motors didn't bomb Pearl Harbor.
The use of "xenophobia" here is akin to the misapplication of the word "homophobia" by homosexuals in their debate with those who oppose same-sex marriage, et al. One can support tariffs or bailouts without being a xenophobe. That being said, I am against the bailout; however Buchanan raises two interesting realities about the GOP's view of the current role of government in the economy and the fairness of trade:
1) How does the GOP go from approving a $700 billion bailout for bankers to drawing a line in the sand over a $14 billion bailout for the automakers? Can you say "erratic"?
2) Yes, the "foreign" plants operate more efficiently, but no one seems to mention they are getting their fair share of taxpayer subsidies to be here. In fact I didn't know that, and it angers me. If we shut down the bailout for the Big Three then we ought to cease the subsidies to foreign competitors, too.
One more thought on "free trade." Adam Smith offered free trade as ONE leg in a stool that presupposed many other legs being in place, i.e. equalized labor and wage laws and regulatory environment. To take all the legs out from under the stool but one and assume that one leg (free trade) will hold up the stool is foolhardy.
My response:
All of these are weak points -- Buchanan is attempting to justify a bad policy by using other bad policies as a historical reference.
1) Some argued that the financial sector was different. We disagreed, but regardless, there has to be a line drawn in the sand somewhere. The financial bailout was a bad policy, but even those who think it was good agree than endless bailouts are a bad policy. Two wrongs don't make a right.
2) "Domestic" manufacturers also get subsidies/incentives from state and local governments when building plants and such — as we have shown these are poor economic policy. So stop doing it. Don't give GM/UAW more money.
You are not entirely correct about equalized wages and regulations. Free Trade is good for our economy regardless of the wage laws in Mexico and China. And as Don Boudreaux points out, that logic would imply Pennsylvania would be better off with high tariffs on products from other states - right-to-work states, states with lower taxes, and states with lower minimum wage laws, which is of course preposterous.
Yes, our wage laws, tax climate, and regulations hurt our economic competitiveness (both PA and the US), so change them. This does not justify protectionism, which make us all poorer.
posted by NATHAN BENEFIELD | 02:13 PM | 0 comment
OCTOBER 7, 2008
Pennsylvania's Business Tax Climate below average
The Tax Foundation has released its latest State Business Tax Climate Index. Pennsylvania ranks a middling 28th on the index, which takes into account five factors (listed in order of rating):
- Individual Income Tax Index - PA Ranks 12th
- Sales Tax Index - PA ranks 25th
- Corporate Tax Index - PA Ranks 41st
- Property Tax Index (includes Capital Stock and Franchise Tax) - PA Ranks 47th
- Unemployment Insurance Tax Index - PA Ranks 26th
More state economic rankings can be found here.
posted by NATHAN BENEFIELD | 07:43 AM | 0 comment
AUGUST 27, 2008
How Do You Define "American-Made"?
Mark Perry poses the question about how you define "American-made" cars. Does it depend on where the car was assembled? Where the corporate headquarters is? What percentage of the parts are made in the US?
Indeed, even my Dad, a mechanic who despises "cotton-picking foreign junk" (though he has equally disparaging remarks about Ford and Chrysler, and pretty much anything made after 1970), has come to realize that the lines are blurred. Many Toyota and Honda cars are as much "American made"today, in terms of where the assembly happens and parts come from, as are GM and Ford.
Of course, the same principles come into play when we are talking about leasing the Pennsylvania Turnpike to a "foreign company". What is the defintion of "foreign" - where the investors live, where the employees work, or where the corporate headquarters is?
Abertis - the lead partner in Pennsylvania Transportation Partners - is headquartered in Spain (though Citi Group, with a 40% stake is NY based). Would those who oppose "foreign ownership" change their views if Abertis moved its offices to New York or Philadelphia?
Abertis is a publicly traded company, with investors from all over the world. The $12.8 billion upfront payment for the Turnpike lease will be partly financed by US lenders.
And the new subsidiary, Pennsylvania Transportation Partners, will be operating solely in Pennsylvania - hiring Pennsylvania workers (including all current Turnpike employees under collective bargaining), contracting with PA construction firms, and paying Pennsylvania taxes.
posted by NATHAN BENEFIELD | 03:22 PM | 0 comment
JUNE 27, 2008
Mexicans and Machines
The latest Drew Carey video on Reason TV tackles NAFTA, robots stealing jobs, and the benefits of creative descrution. I don't know whether I laughed harder at the machines taking over the world (with clips from Terminator and othe movies), or the "yes we can" robot that will replace politicians.
posted by NATHAN BENEFIELD | 08:09 AM | 0 comment
JUNE 19, 2008
Obama: NAFTA not so bad after all
Barack Obama tells Fortune magazine that NAFTA hasn't been as bad as he said it was.
It may have been that he was pandering during the campaign, or it may have been that he is reading our blog and website and learning a thing or two.
posted by NATHAN BENEFIELD | 10:56 AM | 0 comment
JUNE 16, 2008
Economic Benefits of NAFTA
National Center for Policy Analysis has a new analysis on the economic benefits of NAFTA. NAFTA critics most frequently point to the "lost jobs" but here are some facts:
- U.S. employment rose from 110.8 million in 1993 to 137.6 million in 2007, an increase of 24 percent.
- The U.S. unemployment rate averaged 5.1 percent for the first 13 years after NAFTA, compared to 7.1 percent during the 13 years prior to the agreement.
posted by NATHAN BENEFIELD | 10:20 AM | 0 comment
APRIL 3, 2008
Hoover's Heirs
Wall Street Journal editorial on what not to do facing a possible recession, i.e. follow the lead of Herbert Hoover:
In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression.I have to admit I wasn't aware of either Hoover's tax increases or tariffs, either, but I will pass the blame onto my high school, college, and graduate schools. Here is what Wikipedia says on Smoot-Hawley:
Economists have now generally regarded this Tariff Act (i.e., tax increase on imported goods) as the greatest policy blunder in American economic history ...{sarcasm}What? A greater blunder than NAFTA? {end sarcasm}
posted by NATHAN BENEFIELD | 05:05 PM | 0 comment
MARCH 25, 2008
Trade and National Defense
Don Boudreaux has an interesting discussion over at Cafe Hayek about the controversy over foreign companies contracting with the US Department of Defense (i.e. Airbus).
His dismisses most of the concerns raised, but opens the door for the complaint that,
He does not mention how that might be a positive, as it discourages going to war with countries we trade with. This is the "Golden Arches Theory of Conflict Prevention" which posits that no two countries with a McDonald's have gone to war with each other. Or, in simpler terms, free trade prevents war.if "we" go to war, "our" military might no longer have access to some materials and outputs necessary for fighting a war.
posted by NATHAN BENEFIELD | 02:27 PM | 0 comment
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