My estimable colleague, Clive Crook is digging deeper into that which concerns me about Barack Obama. The good senator is now proposing an "Economic Patriot Act" which attempts to prevent outsourcing by giving tax subsidies to companies who don't employ a lot of workers overseas, while levying taxes more heavily on firms with a lot of foreign profits. This is, as Mr Crook notes, "radical--and, on its economic merits, remarkably stupid." It is basically unenforceable--all you will succeed in doing is encouraging companies to divest foreign subsidiaries and do business at arm's length, thus sacrificing whatever residual influence you had over them. America's corporate income tax is, to the great surprise of the majority of people who think of us as the "pro-business" society, one of the highest in the developed world. We also, strangely, try to collect taxes on foreign earnings from workers and companies alike, which strikes the rest of the developed world as thoroughly ridiculous. Hence, companies and people are going to work hard not to have any foreign earnings subject to tax.
Does Obama mean it? It's hard to tell. We're going to be seeing a lot of this at least through March, because rusty old Ohio is where Hillary Clinton is trying to reverse her campaign's decline with a major win. As Daniel Drezner remarked to me yesterday, the sad fact is that a lot of swing states are in the rust belt, which means that you can expect to see protectionism on the agenda over and over again through November. It's very possible--given who his advisors are, and what they say--that Obama is just proposing these never-never policies to shore up his political base in the old industrial states.
But does that even matter? After all, one might argue, if he runs on protectionism, he'll have to deliver in office. Well, actually it does. George Bush promised to protect the steel industry when he ran in 2000, for the same reason Obama may be sounding so anti-trade; he needed the swing states. In office, he delivered--but in a particularly stupid way that was thoroughly unlikely to withstanding a WTO challenge. Looked at that way, the very stupidity of Obama's plan may be a feature, not a bug; it signals voters that he cares, but signals policymakers that he's not really going to do much.
Of course, "I support my candidate because I'm sure he's lying" is hardly a stirring rallying cry. And there remains the disturbing possibility that he's serious about all this.
Again this is what is ironic about your colleague Matthew's frequent ridicule of McCain's admission of economic ignorance. The candidates from Matthew's preferred party are putting forth such idiotic proposals that an admission of ignorance sounds comforting.
Permanent occupation of Iraq makes great economic sense.
The good senator is now proposing an "Economic Patriot Act" which attempts to prevent outsourcing by giving tax subsidies to companies who don't employ a lot of workers overseas, while levying taxes more heavily on firms with a lot of foreign profits.
I'm not sure if it answers the "does he mean it?" question, but it may be worth noting, as I did over at Clive Crook's page, that this is not a new proposal. Sen. Obama actually co-sponsored and introduced the act along with Sens. Durbin and Sherrod Brown in August 2007 as a Senate bill. It's not just a recent campaign proposal. Of course, perhaps even then he was moving to shore up parts of the Democratic base in preparation for the campaign, but I don't think that this can be put entirely towards campaigning in the Rust Belt. In my mind, that he introduced it in August 2007 as an actual bill increases somewhat the chance that he's serious about it.
The fact that he's publicly mentioning it so much in his stump speeches, OTOH, are likely related to where he's campaigning.
Of course, it's still not clear that this would have much chance of passing. The delightfully named "Employee Free Choice Act has a much greater chance of passing, since it already passed the House and had 51 votes in the Senate. (All Dems including Obama plus Independents plus Specter, minus one person absent.) EFCA is notable for removing the employer right to ask for a secret ballot for a union vote; instead, a union may organize and get 120 days minimum to negotiate a contract simply by getting 50% of workers to sign cards or petitions. Considering the number of Republican Senators up for re-election, a strong Dem landslide led by Obama is not out of the question and would likely lead to passage of the act.
Well, jay, I'd be interested in hearing which other countries you would pull the US military out of since it's such a drag on growth. After all, we've pretty much permanently occupied Japan, Germany, the Philippines, Kuwait - that's just off the top of my head. I'm no McCain fan, but he clearly said that it wouldn't bother him to have troops in Iraq 100 years from now in a situation akin to the above. This is the left-wing equivalent of "Barack HUSSEIN O(s)bama". You have made us all dumber by your idiotic trolling. Thanks.
The candidates from Matthew's preferred party are putting forth such idiotic proposals that an admission of ignorance sounds comforting.
Yeah, 'cause Huckabee's Fair Tax, Paul's return to the gold standard, and Giuliani's devotion to the Laugher(wink) curve make the republicans look, you know, really smart.
And here are these ace economics types in the Obama camp that you speak of, Ms. McArdle?
Brilliant, Donavan. Did you also write this for Him?
BUSH: A clear lesson I learned in the museum was that outside forces tend to divide people up inside their country and are unbelievably counterproductive.
The museum was the Rwandan genocide museum.
PS -- What about "interest rates should be zero" "don't know much about economics" McCain?
DMonteith, apparently you are unable to discern the difference between "an admission of economic ignorance" and advocacy for a national sales tax, or a gold standard, or a ridiculous interpretation of the Laffer curve. Look, I have no problem with the ridiule of stupid ideas. I just thought it ironic that one would ridicule a candidate for admitting econoimc ignorance, while one would remain silent about one's party's candidates putting forth astoundingly stupid proposals. I guess my point is that to be strongly aligned with a political party is to embrace intellectual bankruptcy.
For those fellow libertarians that would like to read some of their own policy preferences into Obama's rhetoric, I suggest reading Mickey Kaus's series on "How is Obama not an unreconstructed lefty" (part III is at http://www.slate.com/id/2184672/#obamanea).
I am no big fan of John McCain either, but it is likely an act of self-deception to believe that Obama would be better (judged on libertarian criteria) than McCain on domestic policy.
Obama's speech (October, 2002):
Good afternoon. Let me begin by saying that although this has been billed as an anti-war rally, I stand before you as someone who is not opposed to war in all circumstances.
The Civil War was one of the bloodiest in history, and yet it was only through the crucible of the sword, the sacrifice of multitudes, that we could begin to perfect this union, and drive the scourge of slavery from our soil. I don't oppose all wars.
My grandfather signed up for a war the day after Pearl Harbor was bombed, fought in Patton's army. He saw the dead and dying across the fields of Europe; he heard the stories of fellow troops who first entered Auschwitz and Treblinka. He fought in the name of a larger freedom, part of that arsenal of democracy that triumphed over evil, and he did not fight in vain.
I don't oppose all wars.
After September 11th, after witnessing the carnage and destruction, the dust and the tears, I supported this Administration's pledge to hunt down and root out those who would slaughter innocents in the name of intolerance, and I would willingly take up arms myself to prevent such a tragedy from happening again.
I don't oppose all wars. And I know that in this crowd today, there is no shortage of patriots, or of patriotism. What I am opposed to is a dumb war. What I am opposed to is a rash war. What I am opposed to is the cynical attempt by Richard Perle and Paul Wolfowitz and other arm-chair, weekend warriors in this Administration to shove their own ideological agendas down our throats, irrespective of the costs in lives lost and in hardships borne.
What I am opposed to is the attempt by political hacks like Karl Rove to distract us from a rise in the uninsured, a rise in the poverty rate, a drop in the median income - to distract us from corporate scandals and a stock market that has just gone through the worst month since the Great Depression.
That's what I'm opposed to. A dumb war. A rash war. A war based not on reason but on passion, not on principle but on politics.
Now let me be clear - I suffer no illusions about Saddam Hussein. He is a brutal man. A ruthless man. A man who butchers his own people to secure his own power. He has repeatedly defied UN resolutions, thwarted UN inspection teams, developed chemical and biological weapons, and coveted nuclear capacity.
He's a bad guy. The world, and the Iraqi people, would be better off without him.
But I also know that Saddam poses no imminent and direct threat to the United States, or to his neighbors, that the Iraqi economy is in shambles, that the Iraqi military a fraction of its former strength, and that in concert with the international community he can be contained until, in the way of all petty dictators, he falls away into the dustbin of history.
I know that even a successful war against Iraq will require a US occupation of undetermined length, at undetermined cost, with undetermined consequences. I know that an invasion of Iraq without a clear rationale and without strong international support will only fan the flames of the Middle East, and encourage the worst, rather than best, impulses of the Arab world, and strengthen the recruitment arm of al-Qaeda.
I am not opposed to all wars. I'm opposed to dumb wars.
So for those of us who seek a more just and secure world for our children, let us send a clear message to the president today. You want a fight, President Bush? Let's finish the fight with Bin Laden and al-Qaeda, through effective, coordinated intelligence, and a shutting down of the financial networks that support terrorism, and a homeland security program that involves more than color-coded warnings.
You want a fight, President Bush? Let's fight to make sure that the UN inspectors can do their work, and that we vigorously enforce a non-proliferation treaty, and that former enemies and current allies like Russia safeguard and ultimately eliminate their stores of nuclear material, and that nations like Pakistan and India never use the terrible weapons already in their possession, and that the arms merchants in our own country stop feeding the countless wars that rage across the globe.
You want a fight, President Bush? Let's fight to make sure our so-called allies in the Middle East, the Saudis and the Egyptians, stop oppressing their own people, and suppressing dissent, and tolerating corruption and inequality, and mismanaging their economies so that their youth grow up without education, without prospects, without hope, the ready recruits of terrorist cells.
You want a fight, President Bush? Let's fight to wean ourselves off Middle East oil, through an energy policy that doesn't simply serve the interests of Exxon and Mobil.
Those are the battles that we need to fight. Those are the battles that we willingly join. The battles against ignorance and intolerance. Corruption and greed. Poverty and despair.
The consequences of war are dire, the sacrifices immeasurable. We may have occasion in our lifetime to once again rise up in defense of our freedom, and pay the wages of war. But we ought not - we will not - travel down that hellish path blindly. Nor should we allow those who would march off and pay the ultimate sacrifice, who would prove the full measure of devotion with their blood, to make such an awful sacrifice in vain.
Let's turn the page,
VOTE OBAMA FOR PRESIDENT!
We're going to be seeing a lot of this at least through March, because rusty old Ohio is where Hillary Clinton is trying to reverse her campaign's decline with a major win. As Daniel Drezner remarked to me yesterday, the sad fact is that a lot of swing states are in the rust belt, which means that you can expect to see protectionism on the agenda over and over again through November.
Why should Ohio not embrace protectionism? Ohio has been on the destruction side of "creative destruction" for decades now. The free market is content to drop us off a cliff, so why should we support it?
"The free market is content to drop us off a cliff, so why should we support it?"
Posted by BP Beckley | February 20, 2008 11:23 AM
BP B,
it's hardly the doing of 'the Free Market', but, seeing how you don't even know what's "destroying" you, no wonder you're getting the Tusk..
it's hardly the doing of 'the Free Market', but, seeing how you don't even know what's "destroying" you, no wonder you're getting the Tusk..
Well, by all means, illuminate me.
If Democrats really wanted to increase private employment in America they would support policies that would encourage more companies to hire employees in here. Those policies would include lowering the corporate income tax, reducing the threat of jackpot litigation against companies, and phasing out regulations that increase employment costs (e.g., applying OSHA regs to office jobs instead of the factory jobs for which they were intended, etc.). Instead, the instincts of liberal Democrats like Obama are all in the opposite direction.
So according to Barack Obama, we went into Iraq as part of a plot by Karl Rove to distract the public from poverty and people without health insurance. I used to think that Ron Paul was the biggest nutter still in the presidential race but Barack Obama may have just edged him out for that distinction.
BP Beckley doesn't understand. The United States has never employed protectionism in its history and look at the results. Similary no well developed country has ever devoped via protected industry.
These are just stone cold historical facts. Economic ignorance indeed.
"Why should Ohio not embrace protectionism? Ohio has been on the destruction side of "creative destruction" for decades now."--BP B
this, from Stefan Karlsson: "What drives trade/current account balances are not, as protectionists would suggest, trade policy or wage levels but rather the level of national savings as well as a country's attractiveness for investments. A higher level of savings will, other things being equal, increase surpluses or decrease deficits, while increased attractiveness for investment will increase investments which in turn will lower surpluses or increase deficits.
If it were really the case that deficits arise as a consequence of free trade and high wages, then not only the United States but all other rich countries would experience current account surpluses. But in fact, there is a current account surplus in almost all northwest European countries except for Britain, and it is also true in the case of Canada and relatively rich East Asian countries like Japan, South Korea, Taiwan, Hong Kong, and Singapore.
Of particular interest are the huge current account surpluses of Hong Kong and Singapore. They are two countries with an income level at a West European level, are geographically close to the much maligned countries of China and India, they are 100% committed to free trade and have no trade—or capital movement restrictions whatsoever. If any countries should have deficits due to competition from low wage counties like China and India, then Hong Kong and Singapore should be the ones..."
should help shine some light on the idea..
http://www.mises.org/story/1460
and, further: "And while Americans are saving less and less, Asians are still very thrifty. The national savings rate of Hong Kong was 33% for the latest year, while the savings rate in Singapore was 55%. While the investment rate was higher in Hong Kong and Singapore than in the United States, the difference in investment opportunities between Asia and the United States is lower than the massive difference in savings, causing a huge net flow of Asian capital to the United States. At the same time, the weakness of the dollar created by low interest rates is causing many Asian central banks to try to prevent a sharp appreciation of their currencies by buying U.S. treasuries at great cost to themselves.
Current account deficits are not necessarily a bad thing if they reflect greater investment opportunities. But the current American current account deficit reflects a very low savings rate depressed by negative real interest rates and massive deficit spending by the federal government. Aside from the negative direct effects that a low savings rate have, it has indirect consequences in the form of aiding protectionists who mistakenly believe that free trade is what causes job losses, the current account deficit, and the low savings rate.
We can here see yet another example of Ludwig von Mises's theory of how interventionist policies produce unintended problems, which are then used as an excuse for yet more interventionism. In this case, inflation and deficit spending produce low savings rates and a current account deficit which in turn are used as an argument for protectionism."
should help brighten the picture..
"BP Beckley doesn't understand. The United States has never employed protectionism in its history and look at the results. Similary no well developed country has ever devoped via protected industry."
Mark,
I'm for free trade, but what you've written isn't entirely true. We've employed protectionism (as recently as Bush's steel tariffs) and so have other well-developed countries (for example, Japan was very protectionist for decades after the Second World War).
MEH,
Singapore and Hong Kong have a few things going for them. One is that they both have high-IQ populations, that are well-suited to high-margin, high-wage, sophisticated industries (e.g., finance). Another is that they both have pro-business tax and regulatory policies. Also, their high savings rates are to a large extent driven by (at least in Singapore) government-mandated social security systems that are centered on private accounts.
The pro-growth policies of HK and Singapore would be great to enact here but are easier to establish in enlightened autocracies that aren't swayed by populist urges like democracies are.
Obama's foreign policy speech posted above illuminates the primary problem with the thinking of many who opposed ending Baathist rule in Iraq by force. It ignores the undeniable fact that the people of the United States will be in a war with significant elements of the population of the Persian Gulf, as long as the primary facet of the U.S. population's relationship with the Persian Gulf population is sending money to whatever entities control the mineral wealth in that region, without consent of the Persian Gulf population. Until the population of the Persian Gulf controls the mineral resources it lives over, and freely decides to sell it to others for the benefit of the Persian Gulf population, there is no choice available between war and no war. There is only a choice of what kind of war.
If Obama had been honest, or assuming he was honest, if he had diagnosed the situation accurately, while still opposing the forced end to Baathist rule in Iraq, he would have said something along the lines of, "Our economic dependence on the uniterrupted flow of Persian Gulf oil into world energy market cannot be ended, except through a muti decade process, and the way in which the Persian Gulf is governed means our dependence will inevitably mean a state of war will exist between the U.S. population and the significant elements of the Persian Gulf populations for those multiple decades. The only way this may not happen is if the population of the Persian Gulf becomes self governing, and decides to freely sell the oil. This, however, given the current political culture of the Persian Gulf, is also very unlikely to happen in any time frame of less that multiple decades. Thus, we are consigned to war for decades, since the forced removal of regimes such as the Iraqi Baathists' will not accelerate the process by which the various polulations in the Persian Gulf become self governing, thus allowing them to freely sell the oil. We will simply have to take our chances that over a multi decade period the ubiquity of technology of mass destruction will not increase to the point that the manichean
elements with which we will inevitably be at war do not obtain the means to inflame the conflict in a manner which will cause the United States to wage total war against them, thus bringing a level of violence not seen since the middle of the 20th century. That's the best we can do."
Um... we had been doing that stuff. So how long should we have kept it up? Saddam wasn't cooperating with the inspectors. He had been refusing to cooperate from day one. Our "allies" like Russia weren't helping. All of the things he says would be nice, but he doesn't say how they would be accomplished.
One nice side effect of the Iraq War was that Syria gave up its nuclear arms program.
How about this proposal... I propose that mean people stop being mean and we fight to make sure that everyone is nice to each other.
How do we fight these things? Sanctions? Military action? What does he think would work to get these regimes to stop oppressing their people? What's he going to do? Go over and lecture the Saudis on "hope" and tell them to be nice? Or what?
Obama sure does want a lot of wonderful things to happen. Does he really believe that previous Presidents just didn't care about any of that stuff?
And he repeats the usual about terrorists being poor and without prospect when the reality is that many terrorists are well educated and have plenty of prospects.
As far as the "Economic Patriot Act" goes, the thought of the govenrment certifying certain companies as "patriotic" gives me the willies. Sure, the criteria may be related to outsourcing or local employment, but just using the term means that we're heading into "thought police" territory. Who is going to define what it means to be a "patriotic" company and how will that definition change over time? It gives a creepy overtone to the well-known tactic of using taxes to encourage and discourage behavior. Do we really want to cloak economic incentives like this in terms of patriotism?
As far as I can tell, Obama is naive, ignorant, and shallow. But he's smooth and charismatic, I guess.
"It gives a creepy overtone to the well-known tactic of using taxes to encourage and discourage behavior. Do we really want to cloak economic incentives like this in terms of patriotism?"
The name is unfortunate, and reminds me of the Patriot Act. I really hate legislation that the name is what makes it hard to vote against, not it's merit.
Fred,
for starters, see: http://www.amazon.com/phrase/Cincinnati-Stock-Exchange
this: "...but are easier to establish in enlightened autocracies that aren't swayed by populist urges like democracies are."
sounds like a different twist on the 'Immaturity Defense', or, 'We be just a Bunch of Bumpkins' Excusefulness, seriously, if we, in any consensus, cannot exhibit understanding of basic Economic tenets, we're not going to have much of an Economy..
e·con·o·my (-kn-m)
n. pl. e·con·o·mies
1.
a. Careful, thrifty management of resources, such as money, materials, or labor: learned to practice economy in making out the household budget.
b. An example or result of such management; a saving.
2.
a. The system or range of economic activity in a country, region, or community: Effects of inflation were felt at every level of the economy.
b. A specific type of economic system: an industrial economy; a planned economy.
3. An orderly, functional arrangement of parts; an organized system: "the sense that there is a moral economy in the world, that good is rewarded and evil is punished" George F. Will.
4. Efficient, sparing, or conservative use: wrote with an economy of language.
5. The least expensive class of accommodations, especially on an airplane.
6. Theology The method of God's government of and activity within the world.
adj.
Economical or inexpensive to buy or use: an economy car; an economy motel.
--------------------------------------------------------------------------------
[Middle English yconomye, management of a household, from Latin oeconomia, from Greek oikonomi, from oikonomos, manager of a household : oikos, house; see weik-1 in Indo-European roots + nemein, to allot, manage; see nem- in Indo-European roots.]
Word History: Managing an economy has at least an etymological justification. The word economy can be traced back to the Greek word oikonomos, "one who manages a household," derived from oikos, "house," and nemein, "to manage." From oikonomos was derived oikonom, which had not only the sense "management of a houseold or family" but also senses such as "thrift," "direction," "administration," "arrangement," and "public revenue of a state." The first recorded sense of our word economy, found in a work possibly composed in 1440, is "the management of economic affairs," in this case, of a monastery. Economy is later recorded in other senses shared by oikonomi in Greek, including "thrift" and "administration." What is probably our most frequently used current sense, "the economic system of a country or an area," seems not to have developed until the 19th or 20th century.
The American Heritage® Dictionary of the English Language, Fourth Edition copyright ©2000 by Houghton Mifflin Company. Updated in 2003. Published by Houghton Mifflin Company. All rights reserved.
con·sen·sus (kn-snss)
n.
1. An opinion or position reached by a group as a whole: "Among political women . . . there is a clear consensus about the problems women candidates have traditionally faced" Wendy Kaminer. See Usage Note at redundancy.
2. General agreement or accord: government by consensus.
--------------------------------------------------------------------------------
[Latin cnsnsus, from past participle of cnsentre, to agree; see consent.]
Ibid.
MEH:
We can here see yet another example of Ludwig von Mises's theory of how interventionist policies produce unintended problems, which are then used as an excuse for yet more interventionism. In this case, inflation and deficit spending produce low savings rates and a current account deficit which in turn are used as an argument for protectionism."
should help brighten the picture..
Sounds nice, but you don't mention how we're going to get there and who's going to get hurt in the process.
Official figures from the Bureau of Labor Statistics show a loss of 257,600 manufacturing jobs and 193,900 nonfarm jobs in Ohio from Jan. 2000 through Dec. 2007. (I didn't pick Jan. 2000 randomly, but the decline in manufacturing jobs has been pretty much constant since then.)
In the past 5 years, I and all the other Ohioans have been hearing plenty about the economic boom and housing bubble even though neither are very visible here, and about ever increasing globalization and ever increasing imports of manufactured goods from China and other places.
And we have seen that Ohio hasn't done very well out of the deal, although the country as a whole apparently has.
So, it doesn't seem like much of a leap to believe that globalization and free trade have been bad for Ohio, and for Ohio manufacturing in particular. You can debate whether it's true, but, boy, it seems true from here. You can also debate whether we really have free trade or not, but, again, from Ohio, it's pretty evident that an ever increasing quantity of goods are being made in China and an ever decreasing quantity of goods are being made here. If that's not free trade and globalization, then what is it exactly?
It's not really much more of a leap for Ohioans to favor increased protectionism. Everybody (yourself included) lectures us that protectionism is a bad thing, but everybody also says that we had an economic boom for five years.
I'm not asking what the best course of action is, I'm asking whether it's reasonable to expect a large mass of people to support continuation and expansion of policies that as far as anyone can tell have already made things worse rather than better for themselves, their families, and most of the people and places that they know.
MEH again, from a previous post:
it's hardly the doing of 'the Free Market', but, seeing how you don't even know what's "destroying" you, no wonder you're getting the Tusk..
Thanks for the sympathy. But why would you not be sympathetic, we're all in this together, right, no them and us, right?
you can also send your love in
http://www.sendyourloveto.com/
its very romantic
Megan,
I understand that it's comforting to pretend that Obama is what you'd like him to be. But, there's overwhelming evidence that he isn't.
And, I understand that Goolsbee is smart and nice and all; but Obama is just a politician and he'll only accept the advice that he chooses.
And, it seems clear that much of what he'll choose will be really, really bad.
There's no law that says you must endorse any of these clowns.
You can praise good policies and criticize bad ones without pretending that, overall, the candidate will make things better.
I think that's what your writing does best, anyway.
"...from Ohio, it's pretty evident that an ever increasing quantity of goods are being made in China and an ever decreasing quantity of goods are being made here. If that's not free trade and globalization, then what is it exactly?"
--BP B
BP,
the drift of what Karlsson is saying is that: it matters what a region does, with the Assets it has, whether it is, or not, attracting Capital to itself, including that arising from its own Spending & Investing decisions..
also, this: "If that's not free trade and globalization, then what is it...?"
shorter: http://www.sice.oas.org/trade/nafta/naftatce.asp
NAFTA, and its kinfolk, Parade a 'free trade' banner, but that doesn't make them so..
I'm backing Obama, but I love the title of this post.