On Saturday, Chris Edwards spent three-quarters of an hour discussing Cato’s Downsizing Government project on C‑SPAN’S Washington Journal program. Click here to watch the video.
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President Obama, Overreacher-in-Chief
At the Britannica blog, some thoughts on President Obama, the overreacher-in-chief, at the halfway point of his administration:
In a way, you have to give President Obama credit. In the face of manifest public opposition to most of his high-profile policies — the health-care bill, the automobile company takeovers, cap-and-trade, higher government spending — he pressed on and passed much of his ambitious, unpopular agenda. He said he’d rather be a “really good one-term president” than a “mediocre two-term president.” He may still escape that choice. But he certainly demonstrated that he was willing to sacrifice dozens of Democratic congressional seats in order to get a permanently larger federal government.…
As David Paul Kuhn wrote at RealClearPolitics, Obama’s activist agenda “has revived the enduring American challenge to the state.” Some of us hope that that revival of the small-government impulse in American politics — after the desert of the Bush years — will be President Obama’s most lasting legacy.
More Britannica bloggers on the first two years here.
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The ‘Consumer Spending’ Myth
Journalists talk endlessly these days about the need for more consumer spending to revive the economy, and for government programs to juice consumer spending. Economist Steven Horwitz takes on the assumption that spending is the key to economic activity:
One of the most pernicious and widespread economic fallacies is the belief that consumption is the key to a healthy economy. We hear this idea all the time in the popular press and casual conversation, particularly during economic downturns. People say things like, “Well, if folks would just start buying things again, the economy would pick up” or “If we could only get more money in the hands of consumers, we’d get out of this recession.” This belief in the power of consumption is also what has guided much of economic policy in the last couple of years, with its endless stream of stimulus packages.
This belief is an inheritance of misguided Keynesian thinking. Production, not consumption, is the source of wealth. If we want a healthy economy, we need to create the conditions under which producers can get on with the process of creating wealth for others to consume, and under which households and firms can engage in thesaving necessary to finance that production.…
Putting more resources in the hands of consumers through a government stimulus package fails precisely because the wealth so transferred ultimately has to come from producers. This is obvious when the spending is financed by taxation, but it’s equally true for deficit spending and inflation. With deficit spending the wealth comes from producers’ purchases of government bonds. With inflation it comes proportionately from holders of dollars (obtained through acts of production) whose purchasing power is weakened by the excess supply of money. In neither case does government create wealth. Nor does consumption. The new ability to consume still originates in prior acts of production. If we want real stimulus, we need to free up producers by creating a more hospitable environment for production and not penalize the saving that finances them.
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The Smoking Police Go after Obama and Boehner
Tom Brokaw, former NBC News anchor and advocate of tolerance and cross-cultural appreciation, lowers the boom on President Obama and Speaker-to-be John Boehner:
In Washington and across the country there’s understandably a great deal of speculation on whether President Obama and the incoming speaker of the House, John Boehner, can work together and on what issues.
Here’s a suggestion on where to start.
Stop.
Stop smoking.
Yeah, that’s what the country needs to achieve cooperation in Washington and peace in the world: tense and jittery leaders with a jones for a smoke.
Really, why is it any of Tom Brokaw’s business if the president has a cigarette?
Brokaw goes on to quote the dubious recent claims of Surgeon General Regina Benjamin:
“Tobacco smoke damages almost every organ in your body. One cigarette can cause a heart attack” in smokers with underlying heart disease.
Maybe it can. But if Boehner smokes a pack a day, I calculate he’s smoked 292,000 cigarettes in the past 40 years. I guess he hasn’t smoked that one bad one. Brokaw also mentions a study on the costs to society of smoking, a claim that other studies have rejected.
There are plenty of reasons to criticize Obama and Boehner. But can’t we leave their private habits alone? And then maybe in return they could stop nagging and legislating about our private habits.
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Is Ron Paul Good for Monetary Policy?
Now that Ron Paul has gained the chairmanship of the Subcommittee on Domestic Monetary Policy, the spin has begun that this victory will be an empty one. Some even suggest that libertarians should be, and are, opposed to Paul.
I have to admit I was a bit surprised when Dave Weigel of Slate placed me in that category. While I expressed concern regarding Paul’s communications skills, the fact is that while he isn’t the best choice in Congress to take on the Fed, he is the only choice. Any other Congressman would simply continue to ignore the long history of failure associated with the Fed. Had Dave presented a fuller picture of our conversation, that would have been clear.
Back to the question at hand, Paul will ultimately be good for monetary policy because he will actually bring some oversight to the Fed, which has been sorely lacking. Under the current Democrat Chair Mel Watt, this subcommittee has held a total of five hearings all Congress, and none of them were actually on monetary policy. Two of these hearings weren’t even on areas under the jurisdiction of the Federal Reserve. Republicans have not done much better when they were previously in charge.
Much has been made of a recent Bloomberg poll showing that a majority of Americans want the Fed either abolished or reined in. While that poll offers hope, those of us who ultimately want to end the Fed, should remember that only 16 % wanted the Fed abolished. While 39% want the Fed to be more accountable, that does not constitute ending the Fed. What Ron Paul can most accomplish over the next two years is helping to educate that 39% on why minor tweaks will not make the Fed accountable.
Some have suggested that Ron Paul does not present the right face for taking on the Fed. But the fact remains that if not Paul, who? Given that Paul is about the only one in Congress willing to fight this fight, he merits support, even if that support is occasionally critical.
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Encouraging Polling Data on Spending Restraint vs. Deficit Reduction
When big-spending politicians in Washington pontificate about “deficit reduction,” taxpayers should be very wary. Crocodile tears about red ink almost always are a tactic that the political class uses to make tax increases more palatable. The way it works is that the crowd in DC increases spending, which leads to more red ink, which allows them to say we have a deficit crisis, which gives them an excuse to raise taxes, which then gives them more money to spend. This additional spending then leads to more debt, which provides a rationale for higher taxes, and the pattern continues — sort of a lather-rinse-repeat cycle of big government.
Fortunately, it looks like the American people have figured out this scam. By a 57–34 margin, they say that reducing federal spending should be the number-one goal of fiscal policy rather than deficit reduction. And since red ink is just a symptom of the real problem of too much spending, this data is very encouraging.
Here are some of the details from a new Rasmussen poll, which Mark Tapscott labels, “evidence of a yawning divide between the nation’s Political Class and the rest of the country on what to do about the federal government’s fiscal crisis.”
A new Rasmussen Reports national telephone survey finds that 57% of Likely U.S. Voters think reducing federal government spending is more important than reducing the deficit. Thirty-four percent (34%) put reducing the deficit first. It’s telling to note that while 65% of Mainstream voters believe cutting spending is more important, 72% of the Political Class say the primary emphasis should be on deficit reduction. …Seventy-four percent (74%) of Republicans and 50% of voters not affiliated with either of the major parties say cutting spending is more important than reducing the deficit. Democrats are more narrowly divided on the question. Most conservatives and moderates say spending cuts should come first, but most liberals say deficit reduction is paramount. Voters have consistently said in surveys for years that increased government spending hurts the economy, while decreased spending has a positive effect on the economy.
I wouldn’t read too much into the comparative data, since the “political class” in Rasmussen’s polls apparently refers to respondents with a certain set of establishment preferences rather than those living in the DC area and/or those mooching off the federal government, but the overall results are very encouraging.
Oh, and for those who naively trust politicians and want to cling to the idea that deficit reduction should be the first priority, let’s not forget that spending restraint is the right policy anyhow. As I noted in this blog post, even economists at institutions such as Harvard and the IMF are finding that nations are far more successful in reducing red ink if they focus on controlling the growth of government spending.
In other words, the right policy is always spending restraint — regardless of your goal…unless you’re a member of the political class and you want to make government bigger by taking more money from taxpayers.
So we know what to do. The only question is whether we can get the folks in Washington to do what’s right. Unfortunately, the American people are not very optimistic. Here’s one more finding from Rasmussen.
Most voters are still not convinced, even with a new Republican majority in the House, that Congress will actually cut government spending substantially over the next year. GOP voters are among the most doubtful.
Moral Decline or Moral Progress?
People worry a lot about declining moral values in our modern world. Commenter Evan at econlog offers a different perspective on that, in a vigorous debate about Bryan Caplan’s claim that average people today have more material comforts than George Vanderbilt, the builder of Biltmore, had:
One thing I haven’t heard anyone address yet is moral progress. The values of earlier time periods were sickeningly depraved. One reason I’d never want to have been born in the past, rather than today, even if my past status would have been higher, is that I enjoy being the kind of person who doesn’t burn witches, own slaves, participate in pogroms, or bash gays. I think if you asked most poor people if they’d rather be a wealthy slaveowner in the past, they’d all look at you with horror.