Monday, August 20, 2007

Trade Balanced

Don Boudreaux:

Here's advice for your readers: ignore anyone who complains that trade is "imbalanced." I have never encountered any such complaint that makes even a whiff of economic sense.

Exhibit A is today's letter from United Auto Workers' President Ron Gettelfinger. Mr. Gettelfinger grumbles that "the U.S. and South Korea have a huge imbalance in auto trade." Well, duh - that's an inevitable consequence of specialization. Although we cook in our household, my family still has a huge "imbalance" in the prepared-food trade with McDonald's. But we would make ourselves only poorer if my family and I refused to buy from restaurants that do not buy equal amounts of prepared meals from us. In this case, what is true for each household is true for the collection of households that we call the United States.

If trade (exchange) is voluntary (freely engaged in) each party to the exchange is better off. How can trade ever be "imbalanced" if each and every exchange means each party to the exchange is better off?

Monday, August 13, 2007

Protectionism is . . . .

Don Boudreaux:
"Protectionism" ultimately rests upon the threat to use violence against innocent persons engaged in peaceful commerce. Most of the time the coercive nature of protectionism is concealed -- out of view -- because consumers and producers harmed by it are deterred by the threat of violence from freely trading: the coercive nature of protectionism remains largely hidden. The thieves persuade the state to perform the threats; it all looks so clean and antiseptic and 'policy-ish.'

Congressional Corruption

One of my students writes in response to my recent post about Congress and corruption:

I share your sentiments Prof. Eubanks, the Actions of Congress can be quite discouraging. However, I do not quite agree that the assumption of rational ignorance is such a final word in the matter. While people’s tastes and preferences are quite consistent, they do have the habit of changing. Take for example people’s taste in sporting events.

In the first half of the twentieth century baseball was the sporting event of choice in the United States. In the years after though, football began to gain prominence until it has become the dominant sport in America. So what does this have to do with the Federal government (beyond monopoly rulings)? I suggest that this is a good example that peoples’ interests can shift and change in intensity. Could it be that Congress takes so much of American’s income because citizens no longer have the same intensity of interest in knowing what Congress spends it on?

Of course this could simply be a consequence of the increasing population; that people have less at stake that they use to. While I don’t deny this probably has an effect, I think that at the margin, the increase in population has little effect. For example if your vote one of five million instead of being one vote in one million would a person’s decision change all that much. I suggest that by the time one’s share in matters reaches the minute size of one millionth other incentives than their control of matters is at issue.

Or let us look at this in another way. We have allocated some of our scarce time in debating the actions of Congress. Have we done this because we believe that Congress will change their ways because they have read what we have to say? As much as I would like to think that our representatives listen to what a few of their constituents have to say, I doubt they do, and am very skeptical that and change would result. I think I can safely say our interest in politics extends beyond swaying political policy. It is this interest that gives me hope that we may one day have a Congress reigned in by the people.

When I hear about the latest spending by Congress I am discouraged, and when I hear others complain about Congress I share their feeling, but when I hear people speak that they will not forget the actions of Congress I am encouraged. We here are debating the actions of Congress, bringing to light those actions that they would rather us not think of come Election Day. We are taking more interest in the actions of the government simply, in my humble opinion, for the satisfaction knowing that Congress is listening to, and following, the will of the people. In this we are not alone, and that gives me courage the Lincoln’s remarks, “of the people, for the people, and by the people” may one day hold true again.

Best Wishes,
DeEon Warner

Friday, August 10, 2007

Congressional Earmark Corruption Continued

Congressional election politics last time around included "promises" to reform the practice of budget earmarking by members of Congress. While the issue and the "promises" seemed prominent in news and commentary then, one wonders what Congress has been up to in delivering on the "promises" to reform. There have actually been efforts to deliver on the promises, and the Club for Growth has been watching and keeping a scorecard. In the House there have apparently been 50 amendments offered that would strip earmark pork from appropriations bills. Unfortunately, 49 of those amendments FAILED. The Club for Growth's scorecard, along with notes of interest, can be found here. Two of the interesting notes are:
Sixteen congressmen scored a perfect 100%, voting for all 50 anti-pork amendments. They are all Republicans.

105 congressmen scored an embarrassing 0%, voting against every single amendment. The Pork Hall of Shame includes 81 Democrats and 24 Republicans.

Only 16 members of Congress voted in favor of all 50 anti-pork amendments, while 105 members of Congress voted against all the amendments aimed at removing the pork.

Let's consider some of the pork projects:
$300,000 for the On Location Entertainment Industry Craft and Technician Training project

$150,000 for the South Carolina Aquarium

$200,000 for the Corporation for Jefferson's Popular Forest

$2,000,000 for the Charles B. Rangel Center for Public Service (Hmmm, guess we know who requested this one)

$628,843 for grape genetics research

$400,000 for the alternative uses of a tobacco grant

$489,000 for Ruminant Nutrition Consortium

$6,371,000 for the wood utilization grant
I think a list like this is troubling enough (just try to figure out which enumerated power in Article 1, Section 8 of the Constitution these spending projects fit under). But, a list may not help you understand why all this seems like corruption to me. So, consider this note by the Club for Growth:
$1 million to the Center for Instrumented Critical Infrastructure in Johnstown, Pennsylvania, requested by Rep. John Murtha (D-PA). No congressional member could confirm the existence of the alleged Center. Amendment failed, 98-326.
What is a voter to think when 326 members of Congress vote to spend $1 million on something they don't know exists?

Oh, let's not forget, one of the 50 amendments to remove the pork did actually pass:
$129,000 for the "perfect Christmas tree" project.
I guess we can't look forward to a future with perfect Christmas trees. Well, good, this is probably as it should be.

The corruption in all of this is not that Congress spends money on such projects. It is inherent in the characteristics of legislatures to supply the rent seekers with such projects. The corruption in all this is that these projects become part of appropriations bills because individual members of Congress are allowed to put them there, and often the individual requests for such spending projects are made secretly because the members making the requests are not identified. It has even been the case in the past that such earmarks do not appear in the written language of the appropriations bills being passed by Congress.

I would certainly like to see our corrupt Congress reformed, but alas, I do not think this is very likely. I would certainly like to see Congress and the federal government in general significantly constrained in the powers it is allowed to exercise. Unfortunately, the Supreme Court doesn't seem to have the heart for this either (although there was a time back in history when it did).

Maybe, though, people can come to see government as it is, and to see it's nature as James Madison (and his compatriots) told us long ago. But, given that I suggest to my students that they assume voters are rationally ignorant, there is not much hope for this idea either.

I'm kind of bummed now. Maybe I should think about joining the rationally ignorant.

[via Instapundit]

Surf and Tax

Don Surber:

Come next January when the top is up on my Mustang and I am shoveling my driveway, I will be warm in the knowledge that at least some of my federal tax dollars will be used to allow members of anti-alcohol groups to sun themselves at the Bahia Resort hotel in Mission Bay, Calif.

Anger always makes me warm.

Using a federal grant, the California Council on Alcohol Policy will hold a nice seminar for officials from tax-exempt groups that lobby the California legislature.

Ah, government, isn't it wonderful? Guess I feeling kind of warm myself.

Thursday, August 09, 2007

Democratic Debate Spawns Weird Economics

James Pethokoukis notes several illustrations of weird economics. Here is one illustration:
"For every $1 billion we spend [on infrastructure], 40,000 jobs can be created in the United States of America." -- Sen. Christopher Dodd. I have no doubt that jobs can be created through government spending. But those billions must be taken from the private sector. Will those billions be used more wisely and efficiently and productively by federal bureaucrats than by private managers? If so, maybe the feds should guarantee a job for everyone who wants one. Using the Dodd formula, it would cost a mere $175 billion a year to employ all 7 million unemployed Americans.
Isn't this classic? It happens all the time with politicians and others in government. Apparently when a person enters, or is thinking of entering, government, it is normal to begin thinking that money grows on trees (and even that those trees don't have to be fed or watered). Just pluck the bills off the trees and spend that money and jobs will result. Of course, the trees with those bills are productive people who earn incomes. When those productive people spend their earned incomes, well, jobs are part of that equation as well. Of course, there is an opportunity cost in "lost jobs" that would be associated with those earned incomes being spent by the people who earned those incomes. This is just classic folk economics and nothing good results from believing it.

It is worth the time to look at the other illustrations as well.

Thursday, August 02, 2007

Health Care Emerges?

Web Golinkin writes about the emergence of convenient care ($$$) health clinics:
"Convenient care clinics are small health-care facilities with new brand names like RediClinic, MinuteClinic, and Take Care Health Clinics. Most are located in high-traffic retail outlets with pharmacies, such as Wal-Mart, CVS and Walgreen stores. Regional health-care systems have also opened retail-based clinics in their service areas, either directly or in partnerships with independent operators. These clinics generally are staffed by certified nurse practitioners who diagnose, treat and prescribe medications for a limited set of common ailments, such as strep throat and ear infections. They also administer health screenings, medical tests, immunizations, basic physical exams and other preventive care.

Convenient care clinics have been embraced by consumers, who give them consistently high marks for patient satisfaction: 97% of the more than 4,000 RediClinic patients surveyed this year said they would recommend RediClinic to their relatives and friends. This is because the clinics are delivering something that is all too rare in our system -- convenient and affordable health care.

The quality of care at convenient care clinics stems from their use of nationally certified nurse practitioners, who are registered nurses with master's degrees or comparable advanced training. Research over the past 30 years has consistently shown that the primary care provided by nurse practitioners is comparable in quality to that provided by physicians, though nurse practitioners are still required to collaborate with local physicians in most states."

This is very interesting because it seems that it may be an illustration of how people who are free to bear risk discover entrepreneurial opportunities to make a profit by supplying services others need. I suppose some might say this is "the market at work." Certainly it suggests to me that those who want to try to fix the problems many associate with our health care system today by turning to the government and its coercion may be looking in the wrong direction.

Are these convenient care clinics a good idea? One way to judge this question is simply to wait and see if they are sufficiently profitable to continue to be viable businesses.

But, is there a way to get some idea about the answer to this question without having to wait and see? Consider:
"There are about 400 such clinics today and could be several thousand more in the next few years, but their growth is being threatened by burdensome regulations in some states and opposition from some corners of organized medicine."
And, also:
"Some physician organizations, however, including ones in Illinois and Massachusetts, are pushing for new regulations that would impede the growth of convenient care clinics through expensive permitting requirements (which physician practices do not have to face), further limitations on the number of nurse practitioners that an individual physician can supervise, and prohibitions against advertising that compares the fees of convenient care clinics with those of physicians. This is exactly the kind of price transparency our health-care system needs. In addition, the American Medical Association passed resolutions at its recent annual meeting that push for government intervention, legislation and other measures that could curtail the expansion of convenient care clinics.

Opposition to convenient care from some parts of the medical community is made under the pretext of wanting to ensure quality and continuity of care, which is a legitimate but thus far unfounded concern. But the opposition is also about wanting to maintain the status quo even in the face of rapidly escalating costs and a growing shortage of primary-care physicians."
Ah, yes, this is familiar to me. Some people in the health care industry perceive these convenient care clinics as threats, and they are choosing to turn to government in order to use it's coercion and power maintain the status quo to their advantage. Instead of competing to supply a service to customers, they turn to the use of force which is found in government policy. This looks like yet another classic illustration of rent seeking, and it suggests to me that these emerging new clinics are likely to be a good idea.

Wednesday, August 01, 2007

More Earmark Corruption

Remember that not long ago one political party made heavy use of budget earmarks. If you haven't heard of this term yet an earmark means that one Senator or Congressman is allowed to decide specifically how to spend millions of taxpayer dollars. Often, in the past at least, such spending decisions of specific members of Congress were made secretly because the specific member of Congress making the earmark was not identified, and it was even quite frequently the case that the earmark was not even written into the language of the spending bill that the public could read and that all members of Congress voted on. Such a practice seems to me to clearly indicate there is signficant corruption in our Congress.

Remember also that not long ago the opposite political party made heavy use of being against earmarks in the rhetoric of a political campaign. This political party promised to significantly reform the practice of earmarks. While I personally don't see much to support in a campaign promise to reform Congressional corruption from being a lot of corruption to being less corruption, it is my sense that it was this promise that was a significant reason for this party being elected to control Congress at this time.

I have chosen not to use the names of the two political parties because it seems both parties act the same with respect to earmarks. It is not the case that one party or the other party is corrupt, but rather that Congress itself has become a government agency that is infected by the corruption we call budget earmarks. A WSJ commentary today (subscription required) makes this clear.
"As for Members restraining themselves, they once promised more transparency and limits for the pork-barrel projects known as "earmarks." These secret spending handouts have proliferated in recent years and in 2005 alone cost taxpayers some $27 billion. Worse, they are a kind of gateway drug used to buy votes for even greater spending. As the last unlamented Republican Congress showed all too well, earmarks are also major opportunities for corruption. The current investigation into Mr. Stevens, the long-time head of the Senate Appropriations Committee, centers on whether he may have directed millions in earmarks to benefit family, friends and business partners. (He says he has nothing to hide.)

Voters loathe this way of doing business, and Democrats did well last year campaigning to end the earmark status quo. The public embarrassment also allowed Republican Senators Jim DeMint and Tom Coburn to shame Majority Leader Harry Reid into agreeing to meaningful reform in January. Yet when the final reform emerged from Congressional backrooms last week, any serious reform had vanished. Mr. Reid and House Speaker Nancy Pelosi proceeded to bring the bill to the floor in a fast-track procedure that has avoided most public scrutiny and limited the ability of reformers to offer amendments to restore the cuts."

Perhaps there are several things to emphasize in these paragraphs, but let me just point out two. First, note that the party leaders in each house "proceeded to bring the bill to the floor in a fast-track procedure that has avoided most public scrutiny and limited the ability of reformers to offer amendments to restore the cuts." Should we suggest that not only does Congress seem characterized by corruption these days, but in addition, at least the leadership (if not the Congressional membership in general) seems to have contempt for the public and perhaps for the basic principles that many people would say are the foundation of our republican form of government. Second, consider the figure for total earmarks in 2005, i.e., $27 billion. Since there are 535 members of Congress, this figure suggests that on average each member of Congress was allowed in 2005 to secretly spend about $50.5 million on projects and on people of their own personal choosing. Of course, that is an average and that means while many members of Congress were not participating in the practice of earmarks, perhaps by choice or perhaps because the Congressional leadership did not allow participation by each Congressional member, there are members of Congress who secretly spent much more than $50 million on their own personal pet projects. Of course, to me, all this seems quite corrupt, and that is just in terms of thinking members of Congress buy support for reelection by paying back people who give dollars to their Congressional reelection campaigns. It is often the case that the corruption is worse than this because often the earmarked monies are spent in ways that provide income for members of the family of the Congressman secretly spending the taxpayer's money.

What else can we learn from this WSJ commentary? Well things like:
"What remains is a sham of a reform. A prohibition on allowing Members to trade earmarks for votes? Gone. A restriction on allowing Members and their staff from promoting earmarks from which they or their families would receive a direct financial benefit? All but gone. The original reform required earmarks to be listed on the Internet and searchable 48 hours before consideration of legislation; the new bill says this is only required if it is "technically feasible." Here's betting Congress finds other urgent uses for its tech staff during Appropriations season.

Our favorite switcheroo: Under the previous Senate reform, the Senate parliamentarian would have determined whether a bill complied with earmark disclosure rules. Under Mr. Reid's new version, the current Majority Leader, that is Mr. Reid himself, will decide if a bill is in compliance. When was the last time a Majority Party Leader declared one of his own bills out of order?"

So, regardless of party, our Congress seems simply to be a corrupt political institution these days. But, perhaps there is another way of looking at all of this. Perhaps this "corruption" is just inherent in the very nature of any legislative body. Perhaps we can't expect members of Congress to behave differently in general because this is just the way legislatures act. If so, then perhaps this reality can't be changed; can't be "reformed."

Perhaps the best answer then to actions such as these that seem to clearly abuse political power is simply to make greater efforts to constrain Congress to a much smaller realm of power. Our Constitution was framed on the concept of enumerated powers which made explicit just those things Congress was supposed to have the power to do. Over the decades the Supreme Court has allowed this idea of enumerated powers to be so significantly eroded that, for the most part, Congress is now allowed the power to intervene in nearly every aspect of our system of political economy, and this means there are few significant meaningful constraints on Congressional action. It seems to me difficult to constrain members of Congress from abusing the legislative power when there are few real constaints on Congressional actions at all. Perhaps the only possible way to reduce government's abuse of power is to have a judicial branch of government that recognizes it's role is to constrain and limit government; not to facilitate and enable government to extend it's powers beyond those specifically enumerated in the Constitution.