I’ve written before that the importance of Paul Ryan’s brand of conservative reform is that it puts federal policy on a fundamentally different trend line than its current course under President Barack Obama.
From Ryan’s perspective, the American future post-reform looks like one where there’s more money in everyone’s pocket, less going to the government, and a fiscally sustainable social safety net.
As for President Obama, all you need to know is contained in his campaign’s “Life of Julia” web ad.
If Ryan is true to form, then during his time as Mitt Romney’s running mate he’ll accentuate the choice facing voters this fall of an American future that is either growing thanks to a resurgent capitalism or declining under the weight of a galloping socialism. Perhaps he’ll do so along the lines described by Harvard economist Robert Barro in the Wall Street Journal:
Drawing correct policy implications is hard because one naturally focuses on the jobs and production that are directly saved or lost when the government bails out GM or when Chinese imports expand. In contrast, it is impossible to detail where U.S. jobs and production would have been created or destroyed if GM had been allowed to fail or if trade with China were curtailed.
What is feasible is to look at the overall impact of a set of policies. For example, a general increase in socialistic policies tends to lower economic growth. And, more specifically, the Obama administration’s weakening of individual incentives to work and produce by its sharp expansion of transfer payments can be reasonably viewed as retarding the U.S. economic recovery since the end of the recession in 2009.
With the addition of conservative thinker and budget expert Rep. Paul Ryan to the Republican presidential ticket, we can hope that the economic dialogue will become more serious. And perhaps this added substance will extend beyond the important issue of long-term fiscal reform to encompass the enduring but still crucial debate about socialism versus capitalism.
We’ve heard this rap before. It sounds suspiciously like Elizabeth Warren’s pep talk to a room full of agitated Boston liberals. But, if anything, Obama’s remarks are actually worse. Warren didn’t go so far as to denigrate hard work and intelligence, which the president seems to consider middling factors when it comes to being successful in life (note to the president: I’d absolutely love to meet these armies of workaholic geniuses who wouldn’t be succeeding without the federal government).
The asininity per square inch of this speech is pretty daunting, but here are a few corrective notes:
Notice the examples Obama uses — teachers, firefighters, and infrastructure. These are all (by relatively expansive definitions, anyway) public goods. If there were a caucus of conservatives out there advocating boarding up schools, abolishing fire departments, and moving to a system of rope bridges, the president would have a point, but these are generally uncontroversial examples of public expenditures. Moreover, they’re not areas that are primarily financed by the federal government. Left unsaid is why taxes should increase to fund green-energy boondoggles like Solyndra, PR efforts for the stimulus package, or six-figure salaries for the Interior Department’s Twitter monkey.
The constant liberal assertion that the economic growth of the 1990s — coming on the heels of Bill Clinton’s tax increases — shows that taxes don’t effect the broader economy confuses correlation with causation and ignores the effects of NAFTA, the IT revolution, welfare reform, etc. In truth, the 90s likely boomed less than they would have without Clinton’s tax hikes, something that the work of Obama’s own economic advisers suggests.
Liberals love to trot out the example of the internet as government innovation that works, but it’s worth noting that the internet wasn’t designed with commercial purposes in mind, but rather as a communications tool for the military. And, in fact, many of the lingering inefficiencies of the internet stem from its government paternity, and a whole host of the improvements that have been made to it owe to market forces.
Over at the Wall Street Journal, James Grant, editor of Grant’s Interest Rate Observer has a perceptive review of the new book, “White House Burning: The Founding Fathers, our National Debt, and Why it Matters to You,” by former IMF Chief Economist Simon Johnson and University of Connecticut law professor James Kwak. Two passages deserve special attention.
On the banking system, Grant writes:
Here’s an idea: Let’s try capitalism for a change.
Rather than the bureaucratic monstrosity called the Dodd-Frank Act, for instance, why not hold the bankers personally accountable for the solvency of the institutions that employ them? Until 1935, bank stockholders would get a capital call if the company in which they had invested became impaired or insolvent. It was their problem, not the government’s. In the same spirit, suggests the New York investor Paul J. Isaac, let the bankers forfeit a portion of their past compensation—say, that in excess of 10 times the average manufacturing wage—if they steer their employer on the rocks. And let them surrender not just one year’s worth but rather seven year’s worth—after all, big banks don’t go broke all at once. Proceeds would be distributed to the creditors, as in days of yore. Bankers should not only take risks. They should also bear them.
And on the endless invocation of the Great Depression as the sole object lesson in how to respond to a severe economic downturn:
Messrs. Johnson and Kwak, who draw the usual conclusions from 1929-33, fail to mention the depression of 1920-21. Yet this cyclical downturn was as instructively brief as it was ugly. Peak to trough, nominal GDP plunged by 23.9%, wholesale prices by 40.8% and the CPI by 8.3%. Unemployment, as it was then inexactly measured, soared to 14% from a boomtime low of 2%. And how did the successive administrations of Woodrow Wilson and Warren G. Harding, along with the Federal Reserve, meet this national disaster? Why, they balanced the budget and raised interest rates. Yet for reasons never examined in the pages of this book, that depression promptly ended and the 1920s roared.
Grant’s theme? Responsibility, both personal and collective. That has the great virtue of being the right thing to do. It also has one even greater virtue: it works.
Last week, President Obama made the surprising announcement that Dartmouth University President Jim Yong Kim — a relatively obscure figure — was his nominee to become the next President of the World Bank, the international organization that works to spur economic development throughout the world. Thanks to some careful digging by the NYU Development Research Institute, we’re now learning a bit more about Jim’s views — and the details are a little startling. The Ivy League executive seems to think of economic growth as a zero-sum game — and one in which the developed world has been consistently sticking it to the little guys. A few excerpts from his writing:
… the quest for growth in GDP and corporate profits has in fact worsened the lives of millions of women and men.
Using Cuba as an example, Chapter Thirteen makes the case that when leaders prioritize social equity and the fundamental right of all citizens to health care, even economically strapped governments can achieve improved and more equitable health outcomes.
… [G]rowth – the market-led economic growth sought by governments, the growth in profits celebrated by businesses, and the growth in power and influence of transnational financial and corporate interests – often comes at the expense of the disenfranchised and vulnerable… As the imperatives of growth at any cost increasingly determine economic and social policy and the behavior of global corporations, more people join the ranks of the poor and greater numbers suffer and die.
And if this isn’t bad enough, the final passage cited by the NYU group finds Jim quoting Noam Chomsky.
Dinesh D’Souza caught a lot of flak for positing in his book, “The Roots of Obama’s Rage,” that the president’s ideology could be traced largely to the Kenyan anti-colonialism of his father. While I think that D’Souza overstated the case rather severely, instances like this one remind us of the germ of truth to his argument.
Whether Obama is decrying a world where international negotiations were “just Roosevelt and Churchill sitting in a room with a brandy” or picking a new World Bank President who seems to find the very practice of capitalism predatory, there seems to be a consistent suspicion that someone somewhere is being victimized. Should Jim Yong Kim become the head of the World Bank, it will be the people of the developing world — caught in the downward economic spiral that always accompanies attempts at implementing “social justice” — who will be the victims.
Will someone please tell the Wall Street Journal editorial page that Mitt Romney is not Rick Santorum?
Over the past week there’s been a raft of handwringing at the conservative publication over Romney’s inability to make “the moral case” for all kinds of economic activity, such as private equity and capitalism’s risk and reward system. Yet since Romney hasn’t risen to the challenge of defending the free market, surrogates have stepped forward in droves. Two recent examples include a guest column that ran yesterday headlined “Newt’s Bain Opportunism is Mitt’s Opportunity,” calling on Romney to “make a moral case for free market capitalism.” One of today’s editorials, “Mitt Romney’s 15%,” thinks the candidate’s disclosure of his tax rate gives him “the opportunity to make the moral and practical case for lower rates and fewer loopholes.”
The Journal and other economics-only conservatives are demanding too much from Romney. He’s not a moralist. As this revealing bio-piece makes clear, those who know him consider Romney a relativist. Members of his church came to a similar conclusion when he challenged Ted Kennedy in 1994. Remember, the defining characteristic of a relativist is that he doesn’t believe in absolutes. For example, the idea that government should never force its citizens to purchase a product against their will…
Simply put, the reason Romney won’t make the moral case for capitalism is because he can’t make it. It’s just not the way he approaches decisions in business or politics. Like other New England Republicans, he sounds like a fiscal conservative, but he’s always willing to increase spending, and pass more regulations. (See RomneyCare, the Salt Lake City Olympic Games bailout, etc.) His history shows that he opts for what works instead of what’s right.
If the Wall Street Journal and its guest columnists are chagrined that Romney is unable or unwilling to defend beliefs they hold dear, then maybe it’s time they lower the temperature on the rest of the conservative movement who have been expressing the same disappointment with Romney since 2008.
I’m glad to see the Wall Street Journal’s editorial page echoing Troy’s advice to Mitt Romney to get out in front of the Bain-bashing and make a full-throated defense of free market capitalism. But as both Troy and the Journal seem to allude to, Romney doesn’t appear capable or willing to make the case for democratic capitalism; the kind of market economy that emphasizes equal access and opportunities instead of guaranteed outcomes.
The way I’m using the term, democratic capitalism disdains the unfairness many perceive in the crony capitalism of Obama’s Solyndra deal, and in the bailouts of companies deemed too big to fail. Americans don’t like it when public employee unions get tenure protections and better benefits than the private sector. People feel cheated when General Electric pays no federal income taxes thanks to loopholes only the wealthy like Warren Buffet can exploit. For the free market to work, people have to trust it, and right now Wall Street, the White House, and many other entrenched special interests from unions to rent-seeking businesses are making everyday Americans think the capitalistic system they’ve been sold is far from democratic.
In a sense, democratic capitalism is at the heart of Sarah Palin’s appeal. Her entire career in Alaska was built around taking down entrenched interests enriching themselves at the expense of a fair system. She exposed a corrupt state oil and gas commission; disrupted the state GOP’s patrician good old boys club by defeating an incumbent governor; and won a fight with a major oil company over its ability to exploit Alaska’s natural wealth without sharing some of it with residents. These were the accomplishments that made her a maverick and put her on John McCain’s vice presidential radar. When Palin was toying with a presidential run this time around, she gave a major speech blasting distortions of the economy that make the market less fair, and ultimately, less free. Better than anyone to date, Palin communicates the Tea Party’s angst over Big Government into a larger narrative about the dangers posed by any segments of society that threaten the democratic element in America’s form of capitalism.
Now, I’m not saying that Mitt Romney is a foe of democratic capitalism. What I’m saying is that he doesn’t appear comfortable articulating his understanding of the free market in a message that applies equally to executives and frontline workers. That’s probably because he’s never been a frontline worker. Of course, he’s worked hard – graduating with honors from Harvard law and business schools demands it – but as the son of an auto executive and governor whose first job out of graduate school was telling CEO’s how to fix their companies, Mitt Romney has never experienced capitalism from the factory floor. That means he will have a hard time explaining the virtues of capitalism to people near the destructive end of capitalism’s creativity.
Fairly or not, if Romney is the nominee liberals will savage him as a member of the 1% who made millions replacing people with technology and exporting many of the remaining jobs overseas. Conservatives who favor the free market should hope that Romney discovers how to articulate the democratic element of capitalism soon and well. He could start by reading Troy’s excellent remarks as soon as possible.
It’s as clear a statement of what works (and what doesn’t) in providing economic growth and well-being as you’ll find. It’s a guide to not only the rightness but the utility of freedom. And it can be viewed in the time it takes to wait for a stoplight to change. It’s the new video from the good folks (yes, we’re not afraid to say it) at the Charles Koch Foundation. The only thing wrong with this project? That there aren’t more videos like this one:
Here’s another proof that the most insightful thinking on the Right usually comes from those outside the political establishment. Fr. James Schall, a political science professor at Georgetown University, draws out an important lesson from a familiar story in the Gospel of Matthew. Known as “The Workers in the Vineyard,” this narrative of Jesus’s shows the owner of the vineyard paying the same daily wage to laborers who worked different amounts of hours. When the workers who had labored the longest complained to the owner – a symbol of God – he asks the grumblers why they think he shouldn’t be generous. Per Schall:
Modern theories of society hesitate to allow room for generosity. The owner’s property does not belong to him; it belongs to the community. Here, everyone gets only what is just. No room for generosity is allowed. All ownership that would allow for generosity is unjust. The early workers were deprived of what was rightfully theirs, even if they agreed on a set wage for the day.
In a state built on “rights” and “justice,” we find little room for generosity and abundance. Everything is controlled by the state. No one receives more than others. Envy rules. The capitalist parable, as I call it, when spelled out, deals with God’s ways with us. We can save our souls to the very end, even the worst of us. What is it to me, who have borne the heat of the day? In the divine owner’s contract with us, we must accept one condition, namely, His generosity. Many a just man refuses it. He will work forever only on his own terms.
Conservatives often intone the superior virtue of the private sector in healing the ills of society. How refreshing to read an interpretation of Scripture that evidences the claim’s truth.
As the Austrian economist Joseph Schumpeter memorably put it, the free market is about “creative destruction” – rank, privilege, and status mean nothing if you can’t compete in the marketplace. Bad companies and products wilt under competition from more capable rivals.
Applying these kinds of first principles to policy debates can be unwieldy at times, however, if they don’t exactly square with your political coalition. Republicans have been wed to the business establishment for decades on the notion that those who philosophically support the free market and those who actually grind the gears of commerce on a daily basis are natural allies. Not necessarily, says Wisconsin Congressman Paul Ryan in an interview with RealClearPolitics. When asked about the current state of the economy:
Republicans messed this up too. We have to remember that we’re also to blame for having practiced crony capitalism. But where we are right now — it’s a systematic expansion of this doctrine. For us, it’s easier to fix because we just have to rededicate ourselves to our principles. For Democrats, they would have to repudiate theirs, because crony capitalism sits nicely with their philosophy. You can sort of see an alignment here where big business and big government find a common agreement and that is a very big danger to our free market system. So we need to go back to being pro-market, instead of just pro-business. And there is a difference.
Ryan is one of the brightest members of Congress around (his comprehensive plan for restoring America’s economic health is referenced extensively in the interview and can be found here) and it’s nice to see an elected official finally making this too-oft ignored distinction.
Obama’s misguided proposal contradicts his own stated goal of encouraging bank lending in this choppy economy, because the new tax will undercut banks’ ability to create new loans. Further, the tax will merely be passed on to strapped American consumers, as all corporate taxes ultimately are. It’s such a terrible idea that even Democrat Senator Kristen Gillibrand voiced opposition, saying it “could disproportionately affect New York City’s economic recovery, which relies on a growing financial services industry.”
Disregarding this reality, Obama was undeterred, sanctimoniously thundering, “we want our money back, and we’re going to get it.”
We feel the same way, Mr. President. In just the first year of your administration, we have seen you squander our hard-earned dollars on failed “stimulus” behemoths and bureaucratic boondoggles on behalf of labor unions and other favored special interests. We have seen you triple the budget deficit after telling us duirng your campaign that you were going to reduce it by scouring the budget “line by line.”
The Small Business & Entrepreneurship (SBE) Council this week released its annual ranking of individual states by business friendliness, and the results aren’t surprising to anyone who understands the importance of lower taxes, less regulation and fewer labor burdens.
After noting the inhospitable business environment cultivated by the Obama White House and the Pelosi-Reid Congress at the national level, SBE Council chief economist Raymond Keating highlights the critical role played by individual states in fostering small business growth. As Mr. Keating notes, “small businesses, of course, drive innovation, economic growth and job creation. If we want to get our economy back on a solid, robust growth track, then we need pro-entrepreneur policies at the federal, state and local levels.”
The study incorporates some 36 government-related factors, including tax rates, regulatory costs, state government spending, property rights and energy costs. And the results are not shocking. Pro-growth states like Texas, Florida and South Dakota lead, whereas notoriously basket-case states like California and New York sink toward the bottom.
It’s often said that the states serve as policy test laboratories in our federal system, so here’s hoping that someone directing our national levels of government learn the simple lessons offered by the SBE Council’s latest report.
It’s sad when American leaders must look to “Old Europe” for economic wisdom, but that’s where we stand with this Obama White House.
Speaking this week to media, German Chancellor Angela Merkel stated that the worldwide recession demands tax cuts, not higher taxes and redistribution, to jump-start economic growth. Impressively, she’s standing firm even in the face of fierce opposition, saying, “the government has opted for growth. I indeed face very critical treatment, as does the whole government, regarding the course that we have chosen.” A spokesman for Merkel’s partner Free Democrats added, “this is the right path. This will create jobs and this is the condition for healthy public finances.” Meanwhile, Obama, Harry Reid and Nancy Pelosi offer more government, higher taxes and more regulation to somehow “stimulate” America out of recession.
Hmmm… Perhaps this recent trend of economic sense out of Germany helps explain why Obama was so reluctant to visit Berlin to celebrate the fall of the Berlin Wall this month?
During a week in which Nancy Pelosi force-fed her job-killing healthcare bill to America, it was timely that the Kauffman Foundation released a report on how jobs are created in this country.
According to their study released last week, two-thirds of jobs created as recently as 2007 came from enterprises less than five years old. Indeed, according to the U.S. Census Bureau, almost all of America’s net job creation since 1980 came from new businesses. This stands to reason in our dynamic economy, where giant firms tend to become complacent and wither, whereas new innovators with novel ideas rapidly expand and create new jobs. Think of General Motors and Microsoft, for instance. Before that, the horse-and-buggy industry lost employees to the auto makers. This is the nature of our economic system.
With this in mind, what are Barack Obama, Nancy Pelosi and Harry Reid doing to create jobs? We’re not referring to temporary work funded by dollars borrowed from future generations or wrenched from more productive uses via taxation – actual jobs? Stated differently, what entrepreneur in his or her right mind would consider this a promising moment to take risks and hire new employees? From healthcare “reform” to carbon cap-and-tax legislation to higher taxes to financial regulation, Obama, Pelosi and Reid see employers as mere scapegoats who should be saddled with even higher costs of employment. They bail out dinosaurs like GM and Chrysler, but leave smaller entrepreneurs to suddenly subsidize ObamaCare and the ever-expanding federal government.
The unemployment rate just jumped to 10.2% despite Obama’s promise that it wouldn’t exceed 8% if we swallowed his “stimulus” medicine. At what point does he wake up and smell the real-world coffee? Will he ever?
When Ford abstained from accepting federal bailout dollars, observers rightfully worried that it would suffer a competitive disadvantage compared to its new Obama-favored counterparts General Motors (GM) and Chrysler.
But so far, a funny thing has happened thanks to American consumers. Ford has actually gained in its share of American market sales, whereas GM and Chrysler have declined. According to CNW Marketing Research, Ford jumped from approximately 12% of domestic auto sales in the third quarter of 2008 to approximately 17% in the third quarter of 2009. In contrast, GM fell from approximately 27% to 22%, and Chrysler fell from approximately 8% to 6% during that span. The only other major automaker to gain in market share over the past year was Toyota, but its increase isn’t nearly as dramatic as Ford’s.
Several factors may have contributed to Ford’s improvement, but Americans have sent a clear signal in rewarding it for righting its course the old-fashioned way, while rebuking GM and Chrysler for jumping onto the Obama bailout bandwagon.
Strangely, this piece comes from the Huffington Post but it’s authored by Dylan Ratigan of MSNBC, who seems to be more open-minded.
His point? Democrats so often claim that the “market” is broken because health care is expensive and too many people lack health coverage. Well, one reason that health care is too expensive is because the government helps to create health care monopolies in the states and even prevents consumers from shopping across state lines for cheaper/better insurance.
There is no true “market” for health care if you live in North Dakota where Blue Cross controls 90% of the market. There is little choice in Maine where Wellpoint controls 71% of the market. Capitalism works best when consumers have choices between companies. Health care companies should beg and compete for our business, not the other way around.
According to CNN, capitalism, the original inventor of fantasy sports, steel, smiles, ice cream, and prosperity has reinvented itself in the shadowy realm of fantasy football.
For those who follow the pigskin, you’ll remember that the quarterback for the New England Patriots (Tom … something) tore several ligaments in his knee last year. Fantasy owners who drafted him were left with a huge loss in point production, and had to settle with an inferior quarterback, likely one from New York or Philly.
In response to this suffering, some intrepid entrepreneurs decided to essentially offer insurance for the fantasy sports market. Fantasy “players” can now buy insurance for players, in the event they are lost to injury. As a result of such genius innovations in the market, fantasy sports are now an $800 million industry. Regrettably, the number of relationships and marriages that fantasy sports has destroyed is incalculable at this moment, but I wouldn’t put it past the market to give everyone an estimate.
Of course, fantasy football was already a nice product of capitalism before people started making money off of it. For millions of over-enthusiastic beer-drinking football junkies across the nation, fantasy sports provide plenty of psychic income. Thankfully, the IRS has not yet begun to tax this potential revenue stream.