losing america

i really should have a direct link to walter williams' home page. once again, he is exactly right, this time on the moral authority of the US government.

That question is not part of the debate. The American people, along with our elected representatives, whether they’re Republicans or Democrats, care less about what is and what is not permissible under our Constitution. They think Congress has the right to do anything upon which they can secure a majority vote, whether they have the constitutional or moral authority to do so or not. What Congress does have is the brute force to enforce compliance with their unconstitutional acts.

for full article:
http://economics.gmu.edu/wew/articles/09/AmericanIdea.htm

losing the war on trade

Politics aside, President Obama’s heavy tariff on Chinese tires was a bad move. Although tariffs temporarily increase domestic sales and production, establishing trade restrictions cuts jobs. Obama’s decision to enforce a high tariff was an effort to curb the flow of Chinese tires into the U.S. as tire imports from China have tripled over the past five years. The Steelworkers Union claims that this increase has led to the loss of 5000 jobs in the tire industry in the United States. Yet the tariff could cause a trade battle that would hurt employment more than help it.

A tariff is a tax on an imported good. In this particular case it raised the price of tires imported from China by an additional 35% the first year, on top of the 4% tariff on all tires that is already in place. The new tariff takes effect starting September 26 and will last three years, declining by 5 percent each year. A tariff is intended to discourage the purchase of foreign goods, boosting demand for domestic goods and therefore domestic production. And indeed it does. Firms can sell at a higher price, so less-effective domestic producers can stay in the market. This increases domestic production allowing American firms in the tire industry to prosper.

However, with this new tariff there are winners like the tire industry—but there are also losers. A tariff raises the price of tires because consumers can no longer choose between internationally competitive, purchasing tires at the world price. Thus, prices increase, and those who cannot afford the increase will be “squeezed out” of the market, and so American consumers lose. This is called a dead-weight loss, or a loss of surplus that could have been avoided. However, it doesn’t just end with those who no longer buy tires. Higher prices mean consumers do not get as much satisfaction out of their purchase, so even Americans who still buy tires suffer under the trade restriction.

Not only do domestic consumers lose but domestic producers as well. China retaliated a few days after to the tire tariff by announcing an investigation of alleged dumping by the United States of auto parts and chicken parts. Dumping is when a country sells a good to another country at a price lower than the domestic price. A cut back of those exports would decrease domestic production in those industries. In addition to the direct impact from retaliation there is also an indirect impact on production: as our demand for imports declines our demand for net exports rise. This affects the exchange rate, driving it up. This makes the goods the U.S. produces more expensive relative to foreign goods, so our exports fall, causing domestic demand to decrease.

Ironically enough, the cost of saving employment is unemployment. It runs deeper than that, though, because tariffs support inefficient at the expense of more efficient ones. In other words, Obama is making it more costly for our consumers to protect an industry that is more costly to run. In fact, simple geometry shows that the amount gained by the consumers in free trade exceeds the amount producers gain under the tariff to the point where we could compensate workers who lose and still be better off than under a tariff. This is due to the absence of dead-weight losses under free trade, which maximizes welfare.

The worst part is, if China retaliates by imposing a trade restriction rather than hurt it would help them. Because they have a fixed exchange rate they would not suffer the loss of exports from a higher exchange rate, but their exports would increase. Although the United States cannot afford to engage in a trade war, China can. We must end it before it escalates.

If curbing unemployment is really the goal then President Obama missed the mark. Instead of preventing the loss of thousands of jobs he has forced unemployment with trade restrictions. In addition, the tariff is forcing consumers to support inefficient firms with higher prices, reducing the benefit they get from the purchase and squeezing some consumers out of the market entirely. The economic losses from this tariff fall exceed the economic gains. However we must not forget that in a time of economic uncertainty, free trade will expand both production and consumption, boosting our economy more than any stimulus could.

laws vs moral values

walter williams is spot on again.

A civilized society's first line of defense is not the law, police and courts but customs, traditions and moral values. Behavioral norms, mostly transmitted by example, word of mouth and religious teachings, represent a body of wisdom distilled over the ages through experience and trial and error. They include important thou-shalt-nots such as shalt not murder, shalt not steal, shalt not lie and cheat, but they also include all those courtesies one might call ladylike and gentlemanly conduct. The failure to fully transmit values and traditions to subsequent generations represents one of the failings of the so-called greatest generation.

Behavior accepted as the norm today would have been seen as despicable yesteryear. There are television debt relief advertisements that promise to help debtors to pay back only half of what they owe. Foul language is spoken by children in front of and sometimes to teachers and other adults. When I was a youngster, it was unthinkable to use foul language to an adult; it would have meant a smack across the face. Back then, parents and teachers didn't have child-raising "experts" to tell them that "time out" is a means of discipline. Baby showers are held for unwed mothers. Yesteryear, such an acceptance of illegitimacy would have been unthinkable.

To see men sitting whilst a woman or elderly person was standing on a crowded bus or trolley car used to be unthinkable. It was common decency for a man to give up his seat. Today, in some cities there are ordinances requiring public conveyances to set aside seats posted "Senior Citizen Seating." Laws have replaced common decency. Years ago, a young lady who allowed a guy to have his hand in her rear pocket as they strolled down the street would have been seen as a slut. Children addressing adults by first names was unacceptable.

You might be tempted to charge, "Williams, you're a prude!" I'd ask you whether high rates of illegitimacy make a positive contribution to a civilized society. If not, how would you propose that illegitimacy be controlled? In years past, it was controlled through social sanctions like disgrace and shunning. Is foul language to or in the presence of teachers conducive to an atmosphere of discipline and respect necessary for effective education? If not, how would you propose it be controlled? Years ago, simply sassing a teacher would have meant a trip to the vice principal's office for an attitude adjustment administered with a paddle. Years ago, the lowest of lowdown men would not say the kind of things often said to or in front of women today. Gentlemanly behavior protected women from coarse behavior. Today, we expect sexual harassment laws to restrain coarse behavior.

During the 1940s, my family lived in North Philadelphia's Richard Allen housing project. Many families didn't lock doors until late at night, if ever. No one ever thought of installing bars on their windows. Hot, humid summer nights found many people sleeping outside on balconies or lawn chairs. Starting in the '60s and '70s, doing the same in some neighborhoods would have been tantamount to committing suicide. Keep in mind that the 1940s and '50s were a time of gross racial discrimination, high black poverty and few opportunities compared to today. The fact that black neighborhoods were far more civilized at that time should give pause to the excuses of today that blames today's pathology on poverty and discrimination.

Policemen and laws can never replace customs, traditions and moral values as a means for regulating human behavior. At best, the police and criminal justice system are the last desperate line of defense for a civilized society. Our increased reliance on laws to regulate behavior is a measure of how uncivilized we've become.

Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.

john cochrane on the fiscal stimulus

with the recession being declared "nearly over" it would be good to take a look back at what economists said before. john cochrane write a great article on the aftermath of the fiscal stimulus. he notes that as the economy improves banks with stop sitting on their reserves which will shoot up the money supply even more than the $1 trillion stimulus package. we'll have to to wait and see what happens when that occurs.

the real cost of healthcare

Lawmakers are currently attempting to pass legislation that will lower costs. A simple lesson in economics will show how their reform will actually increase costs. There are three main reasons why healthcare costs are increasing: the care is getting better, we are getting richer, and the patients are getting unhealthier. The reform, rather than fixing each of these, actually exaggerates these reasons.

If you compare the miracle of modern medicine to its grandfather of decades ago you will notice the drastic improvement due to technology and innovation. Better coverage comes at higher costs; to think that hospitals should be able to operate at the same cost today as they did even ten years ago, with all the technological advances and high-tech equipment they have access to now, is madness. Better care comes at a higher cost. Cutting costs would stifle innovation in the field of medicine. It inherently implies lowering the rate of return on investment of pharmaceuticals and machinery, meaning that people would not get much back for medical breakthroughs. This lack of incentive is enough kill innovation, decreasing the quality of our healthcare for all. The same goes for not just capital but also those in the profession, as salaries are slashed in an attempt to cut costs. Attempting to cut costs through this reform can only lead to decreased quality.

Healthcare has an income elasticity of 1.6, classifying it as a luxury good. This means that as people’s incomes increase they will spend a higher percentage of their income on healthcare. As I’m sure you have noticed America is continuing to get richer with GDP, and thus income, increasing about 3.3 percent a year. Thus, as our incomes grow over time the demand for quality healthcare is going to increase as well, driving up the price. This is not the fault of greedy insurance companies, but merely the work of the invisible hand. The reform would force every American to have insurance. Mandating that all citizens buy insurance would drive up the price of private insurance because of increased demand, crowding out those who could have afforded it but no longer can. This squeezes more people out of private insurance into the public option. There is no “choice” or “competition” in that.

We as Americans do not live healthy lifestyles. Obesity alone accounts for ten percent of healthcare costs directly, and a much larger portion of it indirectly. We fail to eat our fruits and vegetables that contain the nutrition we need to prevent cancer and other diseases. Poor lifestyle choices equates to a higher demand for healthcare, and once again higher costs. The Wall Street Journal wrote, “The prevalence of obesity rose 37% between 1998 and 2006....Obese people spent 42% more than people of normal weight on medical costs in 2006.” In encouraging people to choose healthier lifestyles we must provide the right incentives. Insurance companies can do this by offering discounts to those who exercise and eat their fruits and vegetables. On the other hand, by the government establishing a public option in which one can receive coverage at minimal cost to himself would incentivize continued unhealthy living, which only increases the cost.

Healthcare must be reformed, but we must do it the correct way. If cutting costs and providing healthcare for all is the goal then we must look at ending employer-based insurance. This would allow employees to have an open market and choose their own insurance, establishing real choice and competition. Creating Health Savings Accounts in which people could roll a percent of their paycheck into a fund used only for healthcare would provide portability and security that we desperately need, without the $1 trillion expense of a public option. Tort reform will decrease costs significantly. None of these are in the current bills.

how stupid can you be?!

We have recently finished the Bush era, the man known as the dumbest president ever. Now we have entered the era of the One who will save the economy and the nation. How does he propose to do that? With a $3.6 trillion budget and a $1.75 trillion deficit for the year 2009. How stupid can you be?! That’s precisely the change we can believe in. Anyone with any sense knows this will not help. To pay for this he is going to heavily increase taxes on the wealthy, something we all knew was going to happen, and continue to give “tax cuts” (which are really just tax credits, don’t get me started) to the middle class. So instead of having John Edward’s “two Americas” we will be left with one America, an America in which everyone is poor. If you don’t know why this is, take any class in economics. I will try to explain briefly.
Taxes have a negative effect on welfare. Duh. It works two ways, though. When a tax is put in place it raises the price artificially for the consumer, but for the producer the revenue received is lower. So on one hand someone is getting less money for someone paying money. Some of that money goes toward government revenue, but a large portion of welfare is lost. This is called a deadweight loss. The bigger the tax, the bigger the deadweight loss. Also, because the tax jacks up the price it decreases consumption because less people are willing to buy it at the higher price.
The second way in which it cripples the economy is by production. Because businesses receive less revenue for the same product they lose incentive to produce. When there is no incentive to produce, production will cease because people respond to incentives. Not only that, but business will be unable to get enough revenue to continue production, and will be forced out of the market. The way to create jobs in America during a time of economic crisis is not to destroy businesses with heavy taxes. Businesses, not government, supply jobs. And so the downward spiral continues, preventing the economy from recovering and sending this nation into the abyss of poverty.
So here we are, the president of our nation whom we the people elected, extending the current recession with not only Keynesian policies, but socialist Keynesian policies. I have explained how this is bad and how it destroys the economy. If you are still not convinced, please do some research, take a class, anything to get you out of your ignorance! How stupid can you be?!
To those of you who are convinced, my main concern is simply that no one cares. We look around and see what is going on, making note that the $827 billion “stimulus” package (which won’t work. Keynes died decades ago) was signed into law, but doing nothing more than sitting back and complaining about it. How stupid can you be?! So you may ask, “What can we do?” My initial response is to take the “democratic” approach and write to your congressmen, but we say how well that worked for the bailout bill last year. Do you honestly think that anything short of a revolution will really accomplish what we need? Washington has become a place where self-proclaimed heroes sit around and determine how to spend our money. What right do they have to my money? Nothing is going to change that until we show them they don’t have that right. Thoreau was thrown into prison for refuses to pay taxes which supported slave trade. How much different is that today? They don’t have nearly enough cells to contain every citizen who feels the way I feel. The fact of the matter is we must act. We must do something to show that we are still in power. “People should not fear their government, government should fear its people.” Now is the time to strike fear into the heart of Washington, to rise up against the tyranny that is, and is to be! What we need is another Boston Tea Party, a revolution!

the price of liberty

The words “Give me liberty or give me death” once rang in the hearts of Americans, commemorating the price that their forbearers placed on liberty: their own life. Liberty was so valuable to them that an actually price could not describe it. They fought against all odds to establish a nation in which individual rights were protected, in which the government existed for them and not in which they existed for the government. They lived in an age of tyranny, and their sole desire was to take back their God-given inalienable rights which had been usurped by the throne.

Times have changed. Washington has been able to put a price on liberty: 7.4 trillion dollars. At least, that is the price they are willing to pay at the expense of our liberty. And the number is increasing daily. For those who cannot fathom the magnitude of this number, $7.4 trillion equates to half the GDP of this great country. If distributed evenly is comes out to $25,000 per person, man, woman and child. So the question is raised. Are you willing to sell your liberty for $25,000?

Here’s the catch: along with giving up your liberty, you also give up the $25,000. Instead of selling your liberty to get money, you sell your liberty to GIVE money. That is the dilemma in which our tyrannical democracy has placed us. Washington has trampled all over the will of the people and extended its authority where it doesn’t belong. The government is using us, sacrificing our liberty to satisfy the demands of lobbyists. No longer do we live in a society in which we must earn our money, but it can easily be looted by the government. The days of Robin Hood, of stealing from the rich to give to the poor, have ended. We have entered the days of stealing from the poor and industrious to support the incompetent; when mediocrity is celebrated and prosperity punished. Trust me, it won’t stop at $7.4 trillion, and it won’t end with financial groups and the auto industry. And what are you doing about it? Do you even care?

Many of us have heard, and were outraged, about a $700 billion bail-out, writing or calling our representatives. When the bill passed, however, the calls ended. Despite the fact that they acted not only against the will of the majority but also against the founding principles of this nation, we the people became complacent. Where was the outrage AFTER the bill had been passed? when Congress sent a blank check to the Secretary of the Treasury?

The price of getting our liberty for our founders was their life. The price of giving up our liberty for us is our apathy. Because of our lack of concern regarding the infringements of the government into our lives and our wallet, the liberty that was hard-earned and prized is slipping through our fingers, and shackles are being slipped onto our wrists. No longer do we live in an age in which one can rise from the shambles of poverty into the halls of prosperity on account of his mind. Washington is damning us. No longer do we live in an age in which one controls his own destiny. Government power and autonomy cannot coexist. So as Washington expands its financial authority our liberty diminishes.

What price do you put on liberty? What are you willing to pay? Do you stand with the patriots at the time of the War for Independence and value liberty as an inalienable right; that it would be better to die for freedom than to live in bondage? Or do you stand with the “patriots” of today, when paying higher taxes is a “duty” to help those in “need” so that government spending can be wasted on putting the economy on artificial life support? Where is the outrage, the same outrage that carried us through the Revolution against a tyrant?! The problem we the people face today is not much different than the problem this nation faced at its birth.

We must take a stand while we still have a chance! They may take away our money, but they cannot take away our voice! Rise up and be heard! Do not let your apathy be the price of your liberty!