Cato Daily Dispatch for November 15, 2005
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Bush Fosters Strategic Relations with JapanBernanke Goes Before Senate
Era of Big Government Revisited
Bush Fosters Strategic Relations with Japan
"President Bush arrived in Japan aboard Air Force One on Tuesday, with no public appearances scheduled until Wednesday morning local time Tuesday evening in Washington. He was to tour the Golden Temple, meet with youth leaders and sit down with Japanese Prime Minister Junichiro Koizumi before delivering remarks on the power of democracy," the Associated Press reports.
"The two leaders meet Wednesday amid apparent progress toward ending the two-year-old Japanese ban on U.S. beef imports that has irritated the Americans. And the two countries just announced an agreement to realign and reduce U.S. military forces in Japan, resolving an issue that had caused concern in Tokyo."
In "America's New Strategic Relationship with Japan," Christopher Preble, director of foreign policy studies at the Cato Institute, writes: "With the U.S. facing numerous other military commitments abroad, and with Japan increasingly asserting military autonomy, the Bush administration is to be commended for shaping a new policy that will more equitably distribute security burdens between the two countries. A new strategic relationship should provide a more durable and credible foundation for addressing the most pressing security challenges facing both countries in East Asia and beyond."
Bernanke Goes Before Senate
"Ben Bernanke, who once thought himself an 'academic lifer,' is poised to take his biggest step yet away from the classroom and toward becoming the most influential economist in the world," the Associated Press reports. "President Bush's choice to head the Federal Reserve after Alan Greenspan retires goes before the Senate Banking Committee today."
William Niskanen, chairman of the Cato Institute, comments: "The confirmation hearings on the appointment of Ben Bernanke to be chairman of the Federal Reserve Board should focus on four issues: [First,] What is his interpretation of 'the inflation rule?' Specifically, should the Fed increase the fed funds rate in response to an increase in inflation that is the result of a temporary reduction in supply, as is now the case. [Second,] How should the Fed respond to a financial crisis? What are the criteria for deciding whether to respond? [Third,] Bernanke has previously stated that the Fed should not tighten in response to a rapid increase in prices in a specific sector, such as the equity bubble of 1998-2000, or the current housing bubble. But what if these 'bubbles' have been partially financed by a rapid increase in total demand? [And fourth,] How does he interpret current economic conditions? Specifically, should the Fed tighten in response to the recent increase in the inflation rate?"
Era of Big Government Revisited
"Has the American voter's ardor for cutting taxes and shrinking government cooled? Voters in California, Colorado and Washington State rejected ballot measures this month that would have rolled back tax increases or limited state spending. Some say the votes could mark a turning point in a decades-old revolt against high taxes that got its symbolic start in California in 1978 with Proposition 13, which sharply limited property tax increases for homeowners and cut deeply into state services," The New York Times reports.
"It may be, some analysts suggested, that after the terrorist attacks of Sept. 11, 2001, and this year's Gulf Coast hurricanes, Americans saw the value of government investment in infrastructure, public safety and other services and are now more willing to pay for it."
In "Catastrophe in Big Easy Demonstrates Big Government's Failure," David Boaz, executive vice president of the Cato Institute, writes: "You've got to hand it to the advocates of big government. They're never embarrassed by the failures of government. On the contrary, the state's every malfunction is declared a reason to give government more money and more power.
"Before and after Hurricane Katrina, businesses and charities responded effectively. Government failed at even its most basic task of protecting lives and property from criminals. When massive and bloated governments at all levels disappoint, the solution is not to give them more money. Rather, the solution lies in a government limited in scope and ambition, and focused on its essential functions."
Kristen Kestner, editor, kkestner@cato.org