Don Boudreaux

Guess who else thinks Social Security is a Ponzi scheme?

The bruhaha over Rick Perry’s comments that Social Security is a Ponzi scheme have taken a backseat to the remembrance of 9/11 and the Redskins’ first win in about 90 years, but let’s fan the flames a bit. Thanks to the erudite Don Boudreaux over at Cafe Hayek, it has come to my attention that a highly visible economist at one of the nation’s largest papers agrees with Gov. Perry’s assertion:

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan: what you get out depends on what you put in. So it does not look like a redistributionist scheme. In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in. Well, the Ponzi game will soon be over, thanks to changing demographics, so that the typical recipient henceforth will get only about as much as he or she put in (and today’s young may well get less than they put in).

And yes, you’ve probably guessed it: it’s Paul Krugman. And yes, you’ve probably guessed it, but the above emphasis is mine.

The essay was written in the December 1996/January 1997 edition of the Boston Review, as a response to Richard Freeman’s suggestions on fixing inequality. I profess to not having read Freeman’s work entirely, though mostly it was more of the same “we need to take the wealth from the top 20% and give it to the bottom 20%” nonsense.

Scholars seek to reclaim the term “liberal” from governmentalists

laissez-faire

There is a push in libertarian circles to reclaim the term “liberal,” a word that once represented a hands off approach to government, from those who advocate for the “governmentalization of social affairs.”

Through Liberalism Unrelinquished, an effort spearheaded by Kevin Frei, a number of scholars are declaring that they will not surrender use of “liberal” to describe their views. The organizers of the statement hope to attract 500 or more signers.

The statement explains that “liberal” once represented the views of Enlightenment era, perhaps best identified through the work of Adam Smith, an 18th Century moral philosopher and the father of modern economics.

Smith laid the foundation for the moral case for capitalism in The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776). The statement also points to Richard Cobden, William Gladstone, and John Bright — 19th Century British liberals who advanced laissez-faire economic views.

The American founders enshrined the liberal concepts of the Enlightenment era into the Declaration of Independence and, later, the United States Constitution.

“Especially from 1880 there began an undoing of the meaning of the central terms, among them the word liberal,” the statement reads. “The tendency of the trends of the past 130 years has been toward the governmentalization of social affairs. The tendency exploded during the First World War, the Interwar Years, and the Second World War.”

Economists speak out against minimum wage increase

More than 500 economists, including three Nobel laureates, have signed a letter warning lawmakers of the “serious consequences” of raising the federal minimum wage to $10.10 an hour, a policy being pushed by President Barack Obama and most congressional Democrats.

“One of the serious consequences of raising the minimum wage is that business owners saddled with a higher cost of labor will need to cut costs, or pass the increase to their consumers in order to make ends meet,” the letter states (PDF). “Many of the businesses that pay their workers minimum wage operate on extremely tight profit margins, with any increase in the cost of labor threatening this delicate balance.”

The economists point to the recent Congressional Budget Office (CBO) report on the $10.10 minimum wage proposal. The CBO estimated that such a significant increase in the minimum wage would cost the economy 500,000 jobs, perhaps as many as 1 million, over the next two years. “Many of these jobs,” the letter notes, “are held by entry-level workers with limited experience or vocational skills, the very employees meant to be helped.”

The economists explain that the minimum wage is “a poorly targeted anti-poverty measure,” noting that [e]xtra earnings generated by such an increase in the minimum wage would not substantially help the poor,” again pointing to the findings of the CBO report.

More blame, no solutions for high gas prices

Even with Americans still struggling to keep with high gas prices, President Barack Obama yesterday targeted the oil industry with more proposed regulations — once again offering nothing in the way of real solutions to increase oil supply. The Los Angeles Times notes that Obama wants more money for regulators and more penalties for what “manipulation” of the oil market:

Facing heat for high gasoline prices, President Obama tried to shift the focus to Congress, Republicans and energy traders, calling for legislation that he said would “put more cops on the beat” to crack down on potential manipulation of the oil market.

Obama called on Congress to provide more money for regulators and increase penalties for market manipulators. The president, flanked by Treasury Secretary Timothy F. Geithner and Atty. Gen. Eric H. Holder Jr., suggested that traders and speculators are affecting the price of oil and digging into Americans’ pocketbooks.

“We can’t afford a situation where some speculators can reap millions while millions of American families get the short end of the stick,” Obama said in brief remarks in the Rose Garden on Tuesday. “That’s not the way the market should work.”

Obama’s proposal would add $52 million to the budget for the Commodity Futures Trading Commission, which oversees oil futures markets, to pay for improved technology and additional employees. The president also proposed increasing the maximum civil and criminal penalties for manipulative activity in oil futures markets and beefing up data collection.

Cronyism in America

See Video

The latest video on from our friends at Economic Freedom, featuring Don Boudreaux (George Mason University), Susan Dudley (George Washington University) and Bradley Schiller (University of Nevada-Reno.

Don Boudreaux debunks Joe Biden

In this new video from the Cato Institute, Don Boudreaux takes apart Vice President Joe Biden’s claim that “[e]very single great idea that has marked the 21st century, the 20th century and the 19th century has required government vision and government incentive.” Biden used government-subsized railroads as his example.

Boudreaux notes that three of the four transcontinental railroad received subsidies from the government. They all failed. The one that didn’t take subsidies is still running.

Here is the video:

Cafe Hayek questions George Will

Over at Cafe Hayek, Don Boudreaux has posted an open letter to George Will criticizing his column on Arizona’s immigration bill:

Instead of excusing Arizona’s current statute – one that only further tightens the very sorts of restrictions that cause such troubles – why not instead propose that Arizona’s government take a more direct and sure route to solving such problems?

Why not suggest that that state open its borders to the same degree that America’s borders were open until as recently as the mid-1920s?

With such openness, there would be no need for immigrants to stealthily steal in to Arizona in the dark of night.  There would be no massive wasting of taxpayer resources on the surrealistically counterproductive task of preventing these alleged welfare-seeking, public-goods-destroying sponges from working legally and paying taxes.  (More than half of Arizona’s new statute is aimed at stopping “illegal” immigrants from finding jobs in that state.  What does this fact tell you?)  Crime rates would fall as immigrants would come out of the shadows and have greater access to legal, gainful employment.

To expand on this, it’s sad to see some of the myths still going around about illegals, and immigrants in general. As I mentioned earlier this week, one of those myths is about the drain on state economies.

A 2006 study from the Kenan Institute of Private Enterprise at the University of North Carolina shows that hispanics, both legal and illegal, have a significant positive impact on that state’s economy:

Cafe Hayek takes on Bernanke’s WaPo editorial

Over at Cafe Hayek, Don Boudreaux responds to Ben Bernanke’s editorial from the Washington Post:

I had to down an extra mug of coffee this morning to be certain that I read your op-ed in today’s Washington Post correctly.  Sure enough, you claim to be worried about a recent House-committee vote to, as you say, “repeal a 1978 provision that was intended to protect monetary policy from short-term political influence.”

Ummm….  What guided Fed “policy” over the past couple of years if not short-term political influence?

Working hand-in-glove with the political branches, you now have the Fed performing activities – such as direct lending to what, in an April 2009 speech, you called “ultimate borrowers and major investors” – that are utterly outside of the Fed’s traditional role.

As my colleague and celebrated monetary historian Larry White wrote earlier this year, “The Fed’s new activities deserve to be called a bailout program because they seek to channel credit selectively at below-market interest rates, or purchase assets at above-market prices, in hopes of rescuing, or enhancing profits for, favored sets of financial institutions.  The Fed’s new lending facilities are not parts of a central bank’s traditional ‘lender of last resort’ role.”

Sorry, Mr. Bernanke, any independence that the Fed might have once had from “short-term political influence” has already been trampled to death – chiefly by you.


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