On the evening of June 3rd, former Sen. Phil Gramm and I will be at AEI’s Washington headquarters to discuss our new book, The Triumph of Economic Freedom. Please attend if you can.
My intrepid Mercatus Center colleague, Veronique de Rugy, reflects on the downgrade of U.S. government debt. Two slices:
America’s debt-addicted government just lost its triple-A credit rating from Moody’s, as it previously had from fellow rating agencies S&P and Fitch. Many in Washington shrugged the move off as minor or as unfair treatment of the Trump administration. The truth is more sobering: a flashing red signal that the United States is no longer seen as a “perfect” credit risk and that politicians should stop pretending economic growth alone can bail us out.
…..
The lesson from Moody’s, and from history, is that America cannot borrow its way to prosperity. That was former Treasury Secretary Andrew Mellon’s view in the 1920s, and it remains true today. Mellon quietly prepared for debt defaults by building budget surpluses, knowing that while international repayments might fail, American citizens still had to be paid. That was back when Treasury secretaries respected taxpayers.
National Review‘s Charles Cooke disabuses those conservatives who fancy that Trump differs from any of the countless other reckless-spending and economically clueless politicians who have had a hand (unfortunately) in crafting American economic policy. A slice:
To those who point out these shortcomings, an exasperated rejoinder is offered. “But,” the bill’s apologists will say, “given the nature of the party’s coalition, and the narrow majorities that it enjoys in Congress, this is really all that the GOP could do.”
This, in part, is true. But it is also extremely annoying to hear, given that, for nearly a decade now, Donald Trump’s takeover of the GOP has been explained and defended on the grounds that only he could put an end to the “failure” of the “establishment” to “fight.” Ask any MAGA-splainer for an account of the pre-Trump Republican Party, and you will be told some variation of the same tale: That, for decades, the GOP was run by a bunch of lily-livered, cocktail-party-loving moderates, who, despite saying all the right things come election season, invariably refused to make good on their promises. Sure, those people talked about cutting spending and repealing Obamacare and reforming welfare and limiting the ability of the progressive-run blue states to use the Treasury to prop up their failed models. But, when it came to it, they never actually delivered — and, worse still, they reserved the worst of their opprobrium for the right-wing hardliners who were trying to engender change. This being so, they ask, can it really be any surprise that Donald Trump was selected as a corrective?
I have never found this narrative persuasive. But now? Now, I think it’s a bad joke. Throughout the process that led to the House’s passage of the BBB, the Trump-led GOP has behaved in precisely the same manner as did the old guard that it claims to disdain. In his recent address to Congress, Trump promised that, “in the near future, I want to do what has not been done in 24 years: balance the federal budget.” And yet, just two months later, Trump did exactly the opposite, demanding the passage of a bill that massively increases our annual budget deficits, instructing Congress not to “f*** around with” Obamacare’s Medicaid expansion, proposing all manner of arbitrary and frivolous giveaways, and publicly attacking the handful of concerned Republicans who are serious about fiscal discipline.
Reason‘s Jack Nicastro is rightfully harsh in his criticism of Trump-appointed FTC commissioner Mark Meador. A slice:
Meador wondered aloud whether nonprofit employees and academics who advocate “for the interests of certain corporations or mergers in their white papers and their op-eds without ever disclosing that they’re being paid to do so” may also be guilty of deceptive practices. He did not state that the FTC would bring enforcement actions against academics but said it’s “worth investigating.”
While Meador may think “it’s an interesting question” whether he may prosecute his ideological opponents, the Supreme Court has already provided an answer. Eugene Volokh, professor emeritus at the University of California, Los Angeles School of Law, understands the ruling in NAACP v. Alabama (1958) as holding that, “when it comes to speech that is neither commercial advertising for a product…nor specifically election-related, broader First Amendment precedents would indeed preclude such disclosure requirements.”
Speaking of Mark Meador, my GMU and Mercatus Center colleague Tyler Cowen describes Meador – quite rightly – as “just flat out terrible.”
Zach Weissmueller and Liz Wolfe talk with Middlebury College economist Gary Winslett about the movement of U.S. manufacturing to the American south.
“Farmers need free markets, not tariffs and welfare.”
Who’d a-thunk it: “Rare earth” materials are found in places outside of China. (HT Scott Lincicome)
Wall Street Journal columnist Jason Riley is correct: “Maryland Gov. Wes Moore did fellow Democrats a favor last week when he vetoed a bill creating a commission to study slavery reparations. He’s taking flak from the left, but the party ought to be thanking him.” Another slice:
Following passage of the 1965 Voting Rights Act, black leaders became increasingly convinced that political power was the key to upward mobility. Beginning in the late 1960s, black mayors were elected in big cities with large black populations—Cleveland, Detroit, Philadelphia, Washington—yet political integration didn’t improve outcomes for the black poor.
Sharpe James, the former mayor of Newark, N.J., who died on May 11, was a typical beneficiary of this strategy. James was first elected in 1986, and when he left office in 2006 after a record five terms, heavily black Newark’s unemployment rate was twice the national average, while the median household income was half of the statewide figure.
The three largest cities in the country—New York, Los Angeles and Chicago—have black mayors. If the black underclass has uniquely benefited from this arrangement, it isn’t obvious. Black people in all three cities continue to lag academically and economically and remain the primary victims of violent crime. Racial disparities have persisted under white politicians as well, so the takeaway isn’t that black people should steer clear of politics. This history, however, does highlight the pitfalls of electing black officials who are committed to racial favoritism, which is divisive and counterproductive.
Politicians who fund a certain technology steer resources away from the innovation and industry that would otherwise have happened. And why would they know better than millions of financiers, companies, researchers, and consumers what will work?
China’s politburo must be laughing at their good luck that their main adversary is hamstringing itself — first with tariffs that make its firms less competitive, and now with an assault on immigrant talent.
U.S. manufacturing is going through the same kind of labor-saving technological innovation as agriculture. In 1790, farmers were 90 percent of the U.S. labor force. By 1900, only about 41 percent of our labor force was employed in agriculture. By 2008, less than 3 percent of Americans were employed in agriculture. What would you have had Congress do in the face of this precipitous loss of agricultural jobs? Should Congress have outlawed all of the technological advances and machinery that cost millions of agricultural jobs and made our farmers the world’s most productive? Also, had Congress done something to save those agricultural jobs, where would we have gotten the workers to produce the millions of things we enjoy that weren’t even around in 1790? We would have been poorer.
The reason economists came to view industrial policy with such scepticism from the 1980s onwards was not that they were neoliberal but that they were disappointed. The policy had been tested on a large scale and the result turned out to have no similarities with their hopes.
