“US manufacturing grows for 13th straight month” is the headline of an AP newswire story posted around noon today. This statistic doesn’t surprise me, since I’ve been following developments in U.S. manufacturing for many years now, and have published analyses of public data that refute the myth of deindustrialization and manufacturing decline. 

With the exception of the recession of 08–09, when all U.S. economic sectors took a hit, U.S. manufacturing has been breaking its own record, year after year, with respect to output, value-added, profits, returns on investment, exports, and imports. U.S. factories are the world’s most prolific, accounting for 21.4% of global manufacturing value added in 2008 (China accounted for 13.4%).

But I bring the AP headline to your attention for one reason: so that you can judge for yourself who has any credibility on Capitol Hill, within the executive branch, in the media, among organized labor, in industry, in the think tank world, and within the international trade bar, as Nancy Pelosi tries to stuff a ruinous anti-China trade bill down our throats in the name of supporting our floundering manufacturing base. Look for the columns, the op-eds, the press releases, and the floor statements between next week and November.

Who among them will continue to cite our suffering manufacturing sector as the justification for protectionism? They should never again have any credibility.

The biggest long-term threat to fiscal responsibility is a value-added tax, as I’ve explained here, here, here, here, and here. So I’m delighted to see a growing amount of research showing that a VAT is bad news. Jim Powell has an excellent column at Investor’s Business Daily that makes a rather obvious point about the wisdom (or lack thereof) of copying the tax policy of nations that are teetering on the edge of fiscal collapse (this cartoon has the same message in a more amusing fashion).

Drums are beating in Washington for a value-added tax in addition to the “stimulus” taxes, health care taxes, energy taxes and other taxes President Obama has imposed and wants to impose on hard-pressed taxpayers. Supposedly a value-added tax is a magic elixir for curing budget deficits and excessive debt. Quack remedy would be more like it. If it worked, you’d observe that countries with a VAT had budget surpluses and no debt problems. But almost every country that has a VAT is plagued with budget deficits and excessive debt. … No surprise that the worst financial basket cases all have a VAT. Iceland has the highest VAT rates, but this didn’t prevent its financial crisis and the near bankruptcy of its government. Italy’s VAT rates are almost as high, and its debt exceeds its GDP. Financial crises are looming in Spain and Portugal, and of course they have a VAT. Greece has a VAT, too, and when politicians ran out of money to pay government employees for more than a year’s worth of work every year, they rioted in the streets. Great Britain has a VAT, and its government finances are in the worst shape since World War II — its budget deficit is expected to be bigger than that of Greece. Moreover, the OECD has acknowledged that “(VAT) tax and transfer wedges have discouraged firms from offering employment and individuals from taking it, reduced employment and increased inequality.”

And a new study by Douglas Holtz-Eakin and Cameron Smith finds evidence that a VAT would lead to bigger government.

VATs provide a significant amount of revenue. …But do these significant revenues cause government spending to grow larger? Or is it the case that adoption of a VAT is evidence of the desire for a larger government so that the causal arrow runs from a taste for Leviathan to a VAT, and not the reverse? …we find a statistically significant dynamic relationship between the rate of VAT taxation and the size of government. Although no single study is definitive, this is the first rigorous evidence that a VAT causes government to grow larger. …countries that adopted a VAT did in fact experience, on average, a 29 percent increase in the size of government. …The estimated coefficient of 0.262 indicates that adopting a VAT is associated with larger government. This estimate is statistically significant. …our results shift the burden of proof to those who deny that VATs fuel increases in the size of the public sector.

This study jumps into a long-running chicken-or-egg debate in the academic literature about whether higher taxes lead to higher spending or whether higher spending leads to higher taxes. This causality debate is interesting, but I’m not sure it really matters. A VAT is a terrible idea if it triggers bigger government, and a VAT is a bad idea if it merely finances bigger government. But I suspect this study is correct. The key thing to remember is that Milton Friedman was right when he warned that “In the long run government will spend whatever the tax system will raise, plus as much more as it can get away with.” This means that a VAT will allow more government spending and no reduction in deficits and debt, which is exactly what we see in Europe (and as Jim Powell noted in his column). Last but not least, this video summarizes the best arguments against a VAT.

Since President Obama announced his plan to address the nation on Iraq, the news media and pundits have been buzzing about the “Iraq War” — the lives lost and the money spent over the past seven years. Seven? Wouldn’t it be more accurate to note that the Iraq War has been closer to 20 years? After all, combat operations have been pretty continuous.

The first phase of the War might be called the Kuwait or Gulf Operation. Wiki says Operation Desert Shield “began on 7 August 1990 when U.S. troops were sent to Saudi Arabia.” What if one started counting expenditures from 7 August 1990?

The second phase of the Iraq War might be called the No-Fly Zone Operations. Wiki says: “American and British aircraft continuously maintained the integrity of the NFZ, receiving anti-aircraft fire from Iraqi forces almost daily.” Here’s a snippet from when President Bill Clinton addressed the country from the oval office in December of 1998:

Earlier today, I ordered America’ s armed forces to strike military and security targets in Iraq. They are joined by British forces. Their mission is to attack Iraq’s nuclear, chemical and biological weapons programs and its military capacity to threaten its neighbors.

Read the whole thing. Clearly there was no peaceful interlude during the Clinton years.

The third phase might be called the 2003 invasion.

It would be interesting to find out how much money has been expended over the course of the twenty year war. And then, of course, consider the lives lost and the number of persons injured. Wouldn’t that be a more fair-minded way of assessing the wisdom of American policy toward Iraq?

More here and here.

Today POLITICO Arena asks:

Is Joe Miller’s win in Alaska a sign of the tea party’s potency as a national political force?

My response:

Joe Miller’s win in Alaska isn’t simply a sign, but one more in a long string of signs of the Tea Party’s potency as a national political force. From Virginia, New Jersey, and Massachusetts to the massive Beck rally on the National Mall on Saturday, forces are stirring in the nation as they haven’t for years. And as that rally showed, they aren’t entirely or even mainly political forces. Nor are they mainly religious in any narrow sense, as the mainstream media seem to be saying, once again missing the point.

Rather, the Tea Party movement, like the original Tea Party over two centuries ago, is a rebellion against overweening government and a call for the restoration of individual liberty, individual responsibility, and limited constitutional government. That there should be a religious element in this should not surprise. After all, America’s three great revolutions — the first whereby we declared ourselves free and independent, the second that ended slavery, and the third that ended legal segregation — were all supported and inspired by religious beliefs and institutions.

And for good reason: In America, at least, religion is a private affair, free from government coercion, a domain where individuals can and must assume responsibility for themselves — the very virtue that is crippled by dependence on government. Alaskans and Americans more broadly are increasingly rejecting the Murkowski view that government is instituted to provide goods and services. It’s instituted to ensure our freedom, including freedom from forced dependence on government.

In the sumer of 1992, I lived and studied in Prague. I was keen on seeing life in Eastern Europe after the end of Soviet domination.

It was invigorating to think that my local law professor headed over the Vltava River in the afternoons to work on the new constitution in the Prague Castle. It was fascinating to learn of the “lustration” process by which participants in Soviet-era wrongs were penalized but not ostracized. Out of habit, no Czechs ever talked on the subway. Americans did.

There were other reminders of the old order. My overnight train to Katowice, Poland, from which I planned a connection to Krakow, stopped in the middle of nowhere. In the pitch black night, the sound of border guards throwing open train compartments and making demands in a foreign tongue brought forth fearsome movie-memories of life under totalitarianism.

They pulled a young man from my compartment and took him off the train. I don’t remember if it was a Central or South American passport, but it was one that doesn’t afford its bearer the luxury of easy international travel that Americans enjoy.

I honestly don’t remember if he was allowed back on the train. I’m just glad that era is over.

So U.S. Secretary of Education Arne Duncan invited every Education Department employee to attend Rev. Al Sharpton’s Glenn Beck counter-rally. As David Boaz explained in the Examiner, it was a “highly inappropriate” thing to do, pushing people who are supposed to serve all Americans to support one side of a “political debate.” But that’s just the most obvious problem with Duncan’s weekend doings.

Perhaps just as troubling as his rally-prodding is that Duncan declared education “the civil rights issue of our generation” at Sharpton’s event. This only about a year after helping to kill an education program widely supported by many of the people he and Sharpton insist they want to empower. I’m talking, of course, about Washington, DC’s, Opportunity Scholarship Program, a voucher program that was proven effective. But the heck with success — Duncan and President Obama let the union-hated program die.

The cause for concern, though, doesn’t end there. According to the Examiner, an Education Department spokeswoman tried to gloss over the boss’s out-of-bounds play by suggesting that Sharpton’s rally was but a mere “back-to-school event.” Sound familiar?

That’s right! As I just blogged about, last year the Obama administration scared parents and taxpayers across the country by sending politically charged material to all public schools to prepare them for the president’s planned address to the nation’s children. Only after it took serious heat for that did the administration have the most alarming material changed. And then what did it do? Declared that the address would obviously be but a simple back-to-school speech, and tried to make everyone who knew what had actually transpired seem like a partisan attack dog.

As long as politicians run education, education will be hopelessly politicized. Unfortunately, that’s the simple back-to-school lesson for today.

Nikki Haley promises to be a star governor if–most likely when–she’s elected this fall by South Carolina voters. Word is she’s a committed fiscal conservative, and her background is steeped in a successful family business, not large corporations, so she should have an intuitive grasp of what makes our economy grow.

And Haley has a long, solid record of supporting school choice through education tax credits in South Carolina. As recently as August 19^th, Haley was reported as saying, “like Sanford, she would veto a bill to expand public education options unless it included help with private tuition. She agreed with Sanford that it must be all or nothing, saying otherwise the Legislature won’t return to the debate.”

Now that’s the stuff.

But Haley has recently put out some concerning and confusing statements on school choice. “Haley said approving private-school choice, which would provide tax credits or vouchers to pay private-school tuition, was not a priority. ‘That is not my focus; my focus is the school funding formula,’ Haley said.”

Changing the funding formula is all well and good. It might save some money. But it will NOT improve education in South Carolina. Education tax credits will improve performance and save much more than any public school reform. School choice should be Haley’s only education issue.

Why is she backing away all of a sudden? Sure, the primary is over, but Haley is leading comfortably in the polls. Education tax credits pull down serious majority support across nearly every single demographic in South Carolina. White voters, black voters, old and young, Republicans and even Democrats. This is a great issue. And backtracking on a signature issue could tarnish her fresh, reformer image.

Most important, school choice is the right policy. Haley always seemed to have a deep understanding that only an education tax credit program can substantively improve education in South Carolina.

Senator Jim DeMint has a great short video plug for school choice out … let’s hope Haley takes a look at this, remembers what reform really matters, and does the right thing in office.