Friedrich Hayek, The Fatal Conceit: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
Bill Clinton, 9/21: “Do you know how many political and economic decisions are made in this world by people who don’t know what in the living daylights they are talking about?”
Next thing you know, Clinton will be jamming to “Fear the Boom and Bust”:
H/T: Greg Mankiw
A day after they launched a new website aimed at Blue Dog Democrats, the Club for Growth is continuing to expose these fiscal frauds by shining sunlight on their record on free trade:
Blue Dog Democrats claim to be fiscal conservatives, but to them, that means holding the line on just taxes and spending. Nowhere in their agenda do they profess to be supporters of free trade, which is something you would expect from a true fiscal conservative.
There’s a reason for that. The Blue Dogs, by and large, are huge protectionists.
Worse still, twenty-three of them have sponsored the TRADE Act, which is the ultimate protectionist bill to sign up for. It would reopen all of our previous free trade agreements and essentially gut them. It’s no wonder that the labor unions love it.
Supporting free trade is good for the middle class, despite the outright lies from populists like Lou Dobbs and President Barack Obama. Even Rep. Gene Taylor (D-MS), who often goes against party on fiscal matters, has fallen into trap of blaming free trade for the many of nation’s problems.
As I noted on Tuesday, 60% of economists support extension of all of the Bush tax cuts. To drive the point home comes a letter from the National Taxpayers Union signed by 313 economists expressing concern that if Democrats and President Barack Obama if fail to do the right thing that they will kill jobs:
Failing to extend the reduced tax rates implemented in 2001 and 2003 would constitute a profound and damaging “anti-stimulus” that would harm our prospects for expansion in the near future. The 10 percent bracket would disappear, and the three middle tax brackets would rise by three percentage points, heaping heavier burdens on the working class and wealthy alike. The top marginal income tax rate would rise from 35 percent to 39.6 percent, leading to higher tax bills not just for wealthy individuals but for many small businesses that file their taxes through the individual income tax system. Capital gains and dividend taxes would rise from top rates of 15 percent each to 20 percent and 39.6 percent, respectively, penalizing entrepreneurship and potentially leading to a harmful sell-off of assets in December of this year. Americans would also see the return of the now-defunct estate tax at a top rate of 55 percent, jeopardizing the ability of family businesses to remain intact as they pass to the next generation.
Despite a new report claiming that the recession ended in June of last year, a new survey shows that 60% of economists support extending all of the tax cuts passed under the Bush Administration:
[A] majority of a panel of leading economists surveyed by CNNMoney.com said that the tax cuts should be renewed for everyone.
The first in a series of economic surveys revealed that extending the tax cuts for all taxpayers is the most important thing Congress can do to help the economy. Of the 31 economists surveyed, 18 chose that from a list of options now being debated on Capitol Hill.
“Extend tax cuts for all income levels and do nothing else,” said Sean Snaith, economics professor at the University of Central Florida. “More of the same piecemeal, patchwork policies put forth by this administration will undermine confidence and do little to change the path the economy is on.”
The concern is that these looming tax hikes will hurt job creation in what are still volatile, and all you need to do is look around to see that things are still tough. And as Sen. Joe Lieberman (I-CT) said yesterday, extending the cuts is about keeping the economy moving:
The fight between Keynesians and free-marketers over the best way to handle the economy in a recession is decades old. Keynesians say that government spending will drive demand, thus stimulating the economy while also creating large deficits.
Alberto Alesina, an economics professor at Harvard, writes at the Wall Street Journal that the empirical evidence shows that cuts in government spending and tax rates are what boosts an economy (not Keynesian economics) by analyzing 200 fiscal adjustments in 21 countries over the last 40 years:
Politicians argue for increased stimulus spending, as opposed to spending cuts, on the grounds that it would speed up economic recovery. This argument might have it exactly backward. Indeed, history shows that cutting spending in order to reduce deficits may be the key to promoting economic recovery.
In Europe today, the risk of a renewed recession comes not from the spending cuts that some governments have enacted, but from a sovereign debt overhang and multiple bank failures. July’s stress tests were not reassuring because they didn’t test the exposure of European banks to sovereign debt; had they done so, many banks would have failed. Those banks remain a threat to the European economy.
In the U.S., meanwhile, recent stimulus packages have proven that the “multiplier”—the effect on GDP per one dollar of increased government spending—is small. Stimulus spending also means that tax increases are coming in the future; such increases will further threaten economic growth.
We’ve noted here recently that Jon Stewart, host of The Daily Show on Comedy Central, has become increasingly skeptical of the Obama Administration and Democrats. Back in June, Stewart slammed the administration on civil liberties and abuse of executive power and the rhetoric surrounding energy independence. In July, he took the administration to task on transparency and Afghanistan. Last month, he had some fun with both parties on the rhetoric from both sides on the Ground Zero Mosque. And just a couple of days ago, he called Democrats out on ObamaCare in a conversation with DNC Chair Tim Kaine.
Stewart’s latest rant is directed at the administration and Democrats’ claims of a “Summer of Recovery,” saying, “‘Summer of Recovery’ is quickly sliding into the ‘Autumn of Nothing but Ramen Noodles for Dinner.” Here is the video:
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” - John Maynard Keynes
In case you haven’t heard, President Barack Obama replaced Christina Romer, who recently resigned her position as an economic advisor in the administration, with Austan Goolsbee, an economist from the University of Chicago.
Don’t expect him to recommend any big tax cuts. Goolsbee is extremely skeptical of supply-side tax arguments, calling the Laffer Curve a “fleeting figment of economic imagination.” Indeed, he may have influenced Obama himself, who in his 2008 book, “The Audacity of Hope,” says he doesn’t buy the theory that the Reagan tax cuts changed investment or labor incentives. He does, however, think it would not be a bad idea to lower corporate tax rates if there were also fewer credits and deductions.
Our friends at the Cato Institute has made Downsizing the Federal Government by Chris Edwards available for download for free. In the book, Edwards make the case for shrinking the size and scope of government by scaling back agencies and departments and propose eliminating or privatizing more than 100 federal programs to protect taxpayers.
It’s in PDF form below, or you can download it direct here.
In a farewell speech given yesterday, Christina Romer said that the United States averted a depression thanks to actions taken by the Obama Administration:
Christina Romer, the departing chairman of President Obama’s Council of Economic Advisers, is to say in a farewell speech today that the administration’s responses to the economic crisis it inherited averted “a second Great Depression” and kindled a slow recovery, according to excerpts released on Wednesday morning by the White House.
Ms. Romer’s last day as a member of Mr. Obama’s economic team, and its only leading woman, is Friday, which coincides with the release of unemployment figures for August that are expected to show joblessness still hovering above 9 percent. And she returns to California in a campaign season in which Republicans insist, and many voters believe, that administration policies have failed, despite nonpartisan analyses to the contrary.
“I am proud of the recovery actions we have taken. I believe they have made the difference between a second Great Depression and a slow but genuine recovery,” Ms. Romer will say, according to her speech draft. “And the passage of health care reform and financial regulatory reform are accomplishments that will be with us long after the recession is over.”
As the Wall Street Journal noted back in July, there is no way to know what would have happened without the bilions upon billions of “stimulus” dollars pumped into the economy, which haven’t done much other than drive up budget deficits:
As was predicted last year, Cash for Clunkers, the government sponsored program that gave consumers a credit for their trade in when they bought a new car, has distorted the used car market by driving up the price:
Car buyers on average paid $1,800 more for a used vehicle in July than they paid a year ago at this time, according to Edmunds.com data. That’s a 10.3 percent increase, bringing the average cost of a 3-year-old vehicle to $19,248. The price of a Cadillac Escalade spiked nearly 36 percent. “A lack of confidence in the economy is driving more people to used cars, putting upward pricing pressure on a limited supply of vehicles,” said Joe Spina, a senior analyst for Edmunds.
There’s a tricky aspect to this analysis, because last summer was marked by a used-car buying frenzy spawned by the Cash for Clunkers program. Spina said the effects of that program are hard to isolate precisely. “So many economic factors affect automobile sales and prices. It’s believed that the program delayed purchases prior to the program and also pulled sales forward while in place,” he said. “The program also eliminated inventory of older vehicles that were traded and then scrapped.” After the jump, take a look at the vehicles whose prices moved the most this July. The model years have been averaged. You can also get some advice on how to proceed in a (relatively) pricey used-car market.