The beer industry is cheering a recently introduced bill that would roll back the excise tax on brewers in the Washington, DC area to pre-1991 levels. The industry sees the bill as a wise measure to relieve the economic pressures on small and large brewers alike. H.R. 836 the Brewers Excise and Economic Relief (BEER) Act was introduced by the bipartisan duo of Reps. Earl Pomeroy (D-ND) and Tom Latham (R-IA). And given that the prices of ingredients for beer are on the rise it does seem that this is a smart way to help out an industry that contributes more than 1.7 million jobs with wages and benefits of nearly $55 billion to the American economy.
However, this type of action is what congress should be doing across the board in order to deal with the current economic crisis. Instead of doling out tax payer money to prop up favored businesses and muddle competition, they should be working on ways to to get out of the way of economic progress, innovation, and small businesses; repealing cumbersome regulations and taxation is a very good start. This will save brewers millions of dollars and prevent innumerable layoffs, bankruptcies and the inevitable request for stimulus money. Reducing taxes on productive achievement is a win-win strategy for industry, consumers, and even government itself.
Great point by Carter Wood over at the excellent Shopfloor blog of the National Association of Manufacturers. Building on my point at NRO about the tension between infrastructure projects and existing regulation, Carter says:
There is good reason to fear that any significant project that promotes both quick economic investment and long-term competitiveness — say, modernizing and expanding the nation’s electrical grid — will immediately be hit by litigation lasting years and years and years. In which case the only thing being stimulated is the fundraising drives of alarmist, anti-growth environmental groups.
The plain fact is that any so-called stimulus that relies on infrastructure projects has to contain a significant deregulatory element. Of course, environmental groups will be able to raise money whatever happens, whether because “polluting” projects are given the go-ahead or because regulations they have fought tooth-and-nail for are lifted. It should be apparent, therefore, that if the President-elect wants to avoid conflict with environmental groups that he has so far rewarded with at least 5 major appointments, he should choose another route for the stimulus than the Keynesian infrastructure route, such as individual and corporate tax cuts. In the end, however, if he wants infrastructure improvement – whether initiated by government or the private sector – deregulation is almost a necessary price to pay.
Or he could attempt to live with government funding and regulatory delay, and hope the taxpayer will be willing – and able – to bear the cost…
Yesterday’s NYTimes had a good article on the city of Pittsburgh and its surprising resurgence.
A generation ago, the steel industry that built Pittsburgh and still dominated its economy entered its death throes. In the early 1980s, the city was being talked about the way Detroit is now. Its very survival was in question.
…
Entrepreneurship bloomed in computer software and biotechnology. Two of the biggest sectors are education and health care, among the most resistant to downturns. Prominent companies are doing well. Westinghouse Electric, a builder of nuclear reactors, expects to hire 350 new employees a year for the foreseeable future. And commercial construction, plunging in most places, is still thriving partly because of big projects like a casino and an arena for the Penguins hockey team.
With the recent debates on whether or not to bailout Detroit’s automakers, who’s industry-much like the old steel industry-is in need of major reform, Pittsburgh should serve as an example. Places like Detroit and other cities once buoyed by old line manufacturing industries must adapt and reform to survive what is inevitable. No one is guaranteed a job for life, but if folks are motivated and encouraged to to adapt to an ever-changing world economy, making themselves employable for life–things would work out a lot better.
Today at noon Eastern time, I will enter the lion’s den.
I will be live in the New York City studios of liberal network Air America having a friendly discussion about deregulation on The Thom Hartmann Program. Hartmann, author of books such as “”Screwed: The Undeclared War Against the Middle Class,” usually broadcasts form Oregon, and when I’m guest I have joined him by phone. But today, he’s broadcasting form the home office and I will be joining him live and in person.
Hartmann is tough but friendly, and the last couple times I’ve been on his show, we’ve actually sort of agreed on the issues. The civil libertarian in him and me both strongly objected to the mandatory fingerprint registry in this summer’s housing bill for a broad swath of the mortgage industry. We also both opposed the Wall Street bailout when it was before Congress this fall, though I think his main objection was the “Wall Street” part and mine was the “bailout” aspect.
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Like many of us at CEI, it looks like my former boss Phil Gramm isn’t interested in helping anybody pretend that today’s financial crisis was caused by “deregulation.”
Money and credit in the U.S. have, of course, been tweaked, folded, sqeezed and re-tweaked by a central bank—the Federal Reserve—for almost a century. On top of that, if cable news and talk radio are any indication, few seem to be forgetting that the collapse is largely rooted in a failure of welfare-statism—the artificial stimulation of housing markets over and above what free markets could, in reality, sustain.
The article is called “A Deregulator Looks Back, Unswayed.” It’s written in the faint-praise mode, with references to childhood in Georgia offset with an air of condescension and looky-here come-uppance, with quotes by detractors conveying to the reader that, gee, successful deregulation efforts like Gramm-Leach-Bliley kinda backfired and were largely this guy’s fault. But, no. All capitalism is meant to do is help facilitate wealth creation among strangers; we still have a long way to go—especially now with the collapse of investment banking in America. Along with it’s evolution of wealth-creating instruments, the private sector must evolve disciplinary ones as well (See Friedrich Hayek’s New Confusion About Planning” sorry, no link–hit the library, folks!).
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At the hearing being held today by the House Oversight and Government Reform Committee, in which former Lehman Brothers CEO Dick Fuld is now testifying, an earlier panel attempted to look at the causes of Lehman’s collapse and the broader credit cirisis. And this gave an opportunity to committee members to ride their various hobby horses.
Rep. Carolyn Maloney’s horse and “whipping boy” was deregulation. She blamed the entire crisis on deregulation, and specifically the repeal of the Depression-era Glass-Steagall law that separated commercial and investment banking. The repeal was done through the Gramm-Leach-Bliley Act, which Maloney neglected to say was passed on an overwhelmingly bipartisan vote and signed by President Bill Clinton in 1999. Clinton, in fact, recently defended the law, saying it didn’t contribute much to the current crisis, and has even alleviated it by allowing banks to save failing brokerages. (Clinton is right, as a Wall Street Journal editorial points out).
But if Maloney wants to know a more proximate cause of the systemic risk from bad mortgages, she should look no further than her own attacks on Competitive Enterprise Institute President Fred Smith when he testified before the House Financial Services Committee in 2000. Maloney was one of many lawmakers who enabled Fannie Mae and Freddie Mac to take excessive risks by ridiculing longtime critics of he government-sponsored enterprises (GSEs) such as Smith. As Smith recalled in a recent op-ed in Investor’s Business Daily, Maloney poo-poohed his argument that Fannie and Freddie’s government privileges could result in a bailout.
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Today — five days after a courageous independent vote against Treasury Secretary Hank Paulson’s $700 billion bailout for Wall Street — the U.S. House of Representatives disappointingly approved the same basic measure. Many of the bill’s other “sweeteners”, such as earmarks and a regressive increase in deposit insurance for upper income bank customers –will also cost taxpayer hundreds of billions of dollars.
All this week I and my colleagues have pointed out ways this bailout could, in addition to being costly, be counterproductive for the economy. Wall Street may have been feeling this “buyers’ remorse” today as the Dow Jones Industrial Average pared back ealier gains to end the day down by 150 points. As Yahoo Finance noted, “financial stocks, which had traded sharply higher on the promise the bill would be passed, fell after the House vote on profit-taking and as the market focused on the tough road that still lies ahead for the U.S. economy.”
As I had noted previously, despite the scare tactics from Paulson to Pelosi of economic Armageddon if no bailout was passed, the volatility of the past few weeks was in siginifcant part due to fear about what goverment was going to do as well as fear of market conditions.
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