The Economic Change We Need
I have an article on that very subject over at NRO today. Check it out!
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U.S.-Colombia Free Trade Agreement Stirs in Its Sleep
The stalled U.S.-Colombia free trade agreement has become a campaign issue in Florida’s 25th District, which is home to a substantial Colombian-American population. Rep. Mario Diaz-Balart is using his support of the agreement as a club with which to beat his challenger.
That challenger, Joe Garcia, doth protest. He says he is “for fair trade and getting it done in a way that protects American jobs and American commerce.” That’s another way of saying that he thinks consumers are paying too little for goods and services.
Here at CEI, we believe that trade cannot be fair unless it is free. For more on how the U.S.-Colombia free trade agreement promotes both fairness and freedom, see this study that Fran Smith and I co-authored in July.
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CEI Partners with NTU to Launch BeyondBailouts.org
Did the free market cause the financial crisis? Was it unbridled capitalism?
The Competitive Enterprise Institute and the National Taxpayers Union don’t believe for a minute that capitalism caused the financial crisis. How can we be so confident? Because capitalism doesn’t exist in the United States, especially in the financial sector.
Nearly every industry in the U.S. finds itself making regular pilgrimages to Washington to seek special favors—subsidies for this or that, regulations that harm competitors or smaller firms, or trade deals that benefit their industry while hurting the American consumer. No, America doesn’t have a capitalist system, we have a system of special favors, handouts, and perversion of the free market.
That’s why we’ve launched BeyondBailouts.org. The financial system should be a free market one, not one controlled by the government, because government control and influence over the financial system is to blame for much of the current crisis.
Freddie Mac and Fannie Mae bought up bad loans, pushing the industry to make more of them. The Fed played fast and loose with monetary policy by making money so cheap that financiers used it recklessly. Our tax policies and myriad Federal programs are geared toward pushing people into homes they can’t afford. Many of these policies were put into place by corrupt politicians bankrolled by those who sought to make a fast buck while distorting the free market.
Tell Congress enough is enough. Write your Member of Congress and sign our petition at BeyondBailouts.org.
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Kling hits secondary market — misses benefits
Arnold Kling hits the creation of the secondary market for mortgage loans as the major factor — 50 percent – causing the current financial crisis. As Kling wrote:
In hindsight, I think that the crisis was caused by
a) creation of the secondary mortgage market (50 percent)
b) low down payment mortgages (30 percent)
c) the “suits vs. geeks” divide (15 percent)
d) other (5 percent)The more I think about the secondary mortgage market, the less I like it. Any widespread benefits, such as lower mortgage interest rates, are microscopic. On the other hand, several times (not just recently), the market has been used to create or enhance regulatory loopholes that undermined the safety of the financial system as a whole.
I am surprised that Kling so lightly dismisses the benefits as “microscopic” of one of the most positive innovations in the mortgage market. Just think about it. Financial institutions – primarily savings and loans — prior to the creation of the secondary market, took in short-term deposits and made long-term, fixed-rate loans (30 years). Until the early 1980s, Regulation Q set the limit on the interest rates that could be paid on deposits.
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Life’s two certainties (being sold out by the Swiss may be one of them)
As yesterday’s New York Times reports. Lost in the universal focus on the credit crisis, we have seen a somewhat troubling change taking place in Switzerland’s longtime bank secrecy laws.
Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department, two people briefed on the matter said Tuesday.
The move would represent a significant shift in Switzerland’s banking secrecy laws, whose tradition dates to the Middle Ages.
Swiss neutrality (which is irritable to some) and stability has enabled its banking sector to become a source of prosperity for the nation. Reasonable exceptions to their secrecy laws for actual criminal activity should be allowed, but forcing banks to share private information on its clients merely for ’suspicion’ of tax evasion (something often disputable due to folks scrounging through the complicated tax code to reduce liability) seems quite dangerous. Especially since Swiss tax law has a different view of tax evasion than the U.S.
Swiss law makes disclosure of client data or names a crime unless the Swiss authorities think that the client has committed a serious crime, like money laundering or tax fraud. Unlike in the United States, Switzerland does not consider tax evasion to be a crime, though both countries have largely similar definitions of tax fraud.
And the Swiss are capitulating! In direct contradiction to their own legal view of tax evasion. Even though some may argue that this is moot because the U.S. does not consider a financial transaction as something beholden to privacy rights, the Swiss do–and besides, the U.S. view is wrong. A person’s financial records should be considered as sacred as their medical records.
Every citizen should maintain a healthy distrust of its government, after all, we have seen federal bureaucracies used to abuse the rights of citizens in many ways by many different regimes. If the government has the power to search through someone’s private financial dealings in another country solely on suspicion, where does our right to privacy stand? In terms of what constitutes law-breaking in one country as opposed to another, can the U.S. impose its view of a crime on another sovereign nation? Here, the U.S. Justice Department wants to see foreign bank records of thousands for the suspicion of committing an act NOT considered a crime in the country in which those records are held (I know, it happens).
Under pressure in recent months from the Justice Department, Switzerland’s justice ministry, taxing authority and banking regulator have adopted the view that some American clients of UBS may have committed tax fraud.
Note what this says, “Under pressure…[from the DOJ],” Swiss officials “have adopted the view…” that sees, contrary to their own law, these folks as criminals–because the DOJ ’suspects’ that they are.
So where does this lead? If the DOJ can pressure a foreign authority into ignoring its own legal views, where does this leave the U.S. on other issues, namely environmental and other laws that seek to usurp national sovereignty (there are a few)? What’s worse, under U.S. tax law, a U.S. citizen can still be taxed on income he earns outside of its borders and cannot renounce his citizenship solely to avoid taxes (how they’d find out who knows)–which is in my opinion just wrong–leaving you with the IRS and DOJ chasing down every red cent of your money they feel entitled to. Add to that some of the invasive banking provisions of the PATRIOT Act, and you have further intrusion into people’s lives and business by a government that knows no boundary. This is not a “pro-rich” or pro-tax cheat view, but a pro-civil rights and sovereignty view.
-GH
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Carney on AIG’s big government ways
In his Examiner column today, former CEI Brookes Fellow Tim Carney explodes the myth of AIG as a stalwart defender of free markets that caved in at the sight of federal dollars coming its way:
AIG in 2007 joined the U.S. Climate Action Partnership (US-CAP), a group whose purpose is to lobby for federal restrictions on greenhouse gases. Specifically, US-CAP lobbies for a scheme of mandatory federal caps on greenhouse gas emissions with tradable emission allowances—a “cap-and-trade” policy pushed hard by Enron before that firm’s collapse in 2001.
As part of its climate change strategy, AIG also joined the Investor Network on Climate Risk, which AIG describes as “focused on the financial risks and investment opportunities posed by climate change.” But this network is not, precisely speaking, focused on how climate change might create new risks or opportunities. Rather, it addresses risks and opportunities created by legislation passed in the name of addressing climate change.
Sadly, AIG is not alone. We’ve seen this before.
For more on the Climate Action Partnership, see here.
For more on the Investor Network on Climate Risk, see here.
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No Gas in North Carolina Thanks to Anti-Gouging Laws
Berky reports that:
Even with the higher prices, [CITGO station owner Bipin] Ganhdi ran out of gas by mid-afternoon Friday. He is hoping his next shipment will come Friday night, and he has no idea what it will cost when it gets to his pumps.
He goes on to note a suggestion from AAA: Continue reading this post »
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Economics is the Science of Happiness
Will Wilkinson had a very nice comment on NPR’s Marketplace Morning. I once had an economics professor who started off his course by explaining that economics is the science of happiness, how to maximize happiness, and this comment reminded me of this.
I also thought about the argument from Vaclav Klaus at the 2008 International Conference on Climate Change where he said:
“I am afraid there are people who want to stop the economic growth, the rise in the standard of living (though not their own) and the ability of man to use the expanding wealth, science and technology for solving the actual pressing problems of mankind, especially of the developing countries. This ambition goes very much against the past human experience which has always been connected with a strong motivation to go ahead and to better human conditions.”
But back to Wilkinson, here is an excerpt from his speech, but spend the five minutes to listen to his entire commentary. It will be a feel good moment worth 5 minutes of your day.
“Now, if you’re forced to choose between a rewarding job and a lot of money, choose the rewarding job. Happiness research doesn’t say you should aim to be wealthier. What it says is that, if you hold everything else constant — the richness of your relationships, the joy of your work — a little more money tends to makes us feel a little bit better.
But the corollary for politics is that economic growth and public happiness tend to move in the same direction. The political choice to put a brake on growth is not the social equivalent of choosing a lower-paying, but more meaningful job. It’s the choice to make tens of millions of people slightly less happy than they otherwise might have been.
Maybe something is worth that cost. I just can’t imagine what it might be.”
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