Redstate

Posted at 10:07pm on Jun. 30, 2008 More Evidence That Protectionists Are All Wet

By Pejman Yousefzadeh

Think that the current economic conditions are bad? Just remember that they could have been worse and that there are plenty of people who appear to be bound and determined to make them worse.

In other words, read this and note the following passage:

. . . Over the past two quarters, the US has recorded positive growth at an annual rate of 0.8 per cent (in spite of the pronouncements of many observers that recession had already set in). Its "net exports of goods and services", the gross domestic product equivalent of the current account balance, have strengthened at an annual rate of almost 1 per cent of GDP during that period. Hence the totality of recent US expansion has been provided by the strengthening of its trade balance. Domestic demand has been falling but the US has been saved from recession by the rest of the world.

And despite this, there are people who have no problem making noises about wanting to curtail free trade. One of them happens to be running for President of the United States.

Posted in Economic Ignorance | Economy | Free Trade | Protectionism — Comments (1)/ Email this page » / Read More »

Posted at 12:51am on Jun. 25, 2008 Speculating About Speculators

By Pejman Yousefzadeh

There has been a lot of talk concerning the influence of speculative activity on the price of oil. All of the sudden, we are hearing that "speculators" are responsible for oil prices going up and for the fact that we have to pay more at the pump. Of course, this all fits in with the need of certain portions of the political class to find a narrative that identifies and excoriates certain human villains for the increase in the price of oil--thus making us feel better about having found and excoriated those villains and causing us to believe that if only we punish the villains, we will be able to solve the problem of high oil prices at the same time, or at least be well on the way towards solving the problem of high oil prices.

Well, it just ain't so. Read the whole thing, but here's the key passage:

. . . there's nothing about futures or options that makes it any more attractive to bet that commodity prices will go up than to bet they'll go down. Guess wrong on the direction, and you lose money.

And that's basically all you need to know about speculation. When you speculate on the price of a commodity, what you are doing is betting on whether that price will rise or whether it will fall. Not whether you wish it would rise or fall. Not whether you hope it would rise or fall. And your money will do nothing to cause the price of oil to rise or fall. It will do so based on--wait for it!--the laws of supply and demand.

Right now, we don't have that much in terms of supply. We have huge demand--especially from the Chinese and the Indians. We have precious little refining capacity as well. This raises the price of oil and causes us to pay more at the pump. Speculators understand this and that is why they are currently betting that the price of oil will go up. But their bets don't cause the price of oil to go up and if any speculator bet on oil prices to go up during the 1980s--back when oil prices were actually crashing through the floor--that speculator would have lost his or her shirt.

It's amazing how much you begin to understand about economics when you realize that economic forces are significantly beyond the control of human beings to influence and that they are significantly more under the influence of the laws of supply and demand. Once that knowledge becomes widespread, we won't waste our time blaming people like speculators for the fluctuations in the price of oil.

Posted in Economic Ignorance | Economy | Oil Prices | speculation — Comments (26)/ Email this page » / Read More »

Posted at 12:59am on Jun. 24, 2008 I Have Found Sisyphus

By Pejman Yousefzadeh

He lives 90 miles off of the coast of Florida and is working to run a country into the ground:

At the recent metal workers' union congress in Havana little seemed to have changed since Fidel Castro, former Cuban president, became ill almost two years ago, temporarily handing power to his brother Raúl before resigning and leaving the country's leadership to him last February.

There was no jockeying among cadres for a piece of privatised industry pie. There was no talk of competition, markets, strikes or other action against management, or turning state-owned businesses into co-operatives. Speeches calling on members to work harder for Cuba, Fidel, Raúl and revolution resounded through the hall as they have for decades.

"The key is in perfeccionamiento empresarial" - perfecting the state company system - read the banner headline in Workers, the trade union federation's weekly newspaper.

The union meeting was the latest evidence that a debate fostered by Raúl Castro has for now been settled in favour of those who want to improve one of the world's most statist economies - not dismantle it - using a business model developed when the president was defence minister to improve the performance of armed forces suppliers.

I would say that you have to admire the persistence of the Cuban communists. But the reality is that you don't and you shouldn't.

Posted in Cuba | Economic Ignorance | Foreign Affairs | The Castros — Comments (1)/ Email this page » / Read More »

Posted at 12:29am on Jun. 24, 2008 Way To Go San Francisco!

By Pejman Yousefzadeh

You're actually giving some credence to that "war on the middle class" rhetoric!

Posted at 6:53pm on Jun. 21, 2008 The Schooling Of David Sirota

By Pejman Yousefzadeh

Found here. Whether the schooling actually works depends, of course, on whether the likes of David Sirota are willing to be educated on subjects they plainly don't know anything about. On that latter point, I am not optimistic. (Via Don Boudreaux.)

Posted at 10:00pm on Jun. 20, 2008 Reality-Based Economics

By Pejman Yousefzadeh

Larry Lindsey takes the Obama Social Security tax plan to the woodshed. A taste:

Sen. Barack Obama has a bad idea for "extending the life of Social Security." He has proposed applying the Social Security tax to incomes above $250,000, in addition to the current tax on incomes up to $102,000. It's unfair, he explained, for middle-class earners to pay Social Security tax on "every dime they make" while the very rich pay on "only a very small percentage of their income."

Reporters cited the Obama statement without asking for the logic behind having someone making $100,000 pay on every dime and someone making $250,000 pay on just 41% of income, while someone making $10,000,000 would pay on 98.5% of income. There is no economic principle or theory of tax law that would endorse such a result.

Sen. Obama's logic is fairly obvious, although it hardly makes him an exemplar of the "new politics." The $100,000 to $250,000 group is a targeted voter demographic, and he really didn't want to sock them with a 12.4 percentage point hike in their tax rate. But, as Sen. Obama himself noted in his June 13 announcement, just 3% of workers make more than a quarter-million.

Neither Franklin Roosevelt, who started Social Security, nor the intervening three dozen Congresses thought they were imposing an "unfair" system on the middle class. There is a very good and principled reason why Social Security taxes are paid on just $102,000 of income: Benefits are calculated based on that same $102,000 of income.

Read it all.

Posted in Barack Obama | Economic Ignorance | Economy — Comments (3)/ Email this page » / Read More »

Posted at 9:51pm on Jun. 20, 2008 I Can't Keep Track Of The Flip-Flops

By Pejman Yousefzadeh

John McCain criticized Barack Obama's winks and nods towards protectionists today in a speech. The substance is notable, of course, and readers know that trade policy is very interesting indeed, as far as I am concerned, so the substance alone is enough to grab my attention.

But for this post, I want to focus my attention on the Obama campaign's response:

In a teleconference on Friday, the Obama campaign said "absolutely ... Barack Obama will reopen negotiations on NAFTA" to add tougher environmental and labor rules.

Otherwise, said Senator Sherrod Brown, an Obama administration "could" withdraw the United States from NAFTA.

"I have been assured by him and his economic advisor," said Brown. "There is no question, his position is constant and will stay that way on the North American free trade (pact) and on trade generally," he said.

So, this sounds as if Obama will act unilaterally to renegotiate terms and if necessary, pull the United States out of NAFTA. Which of course causes one to look back at this from yesterday. Remember these words?

In an interview with Fortune to be featured in the magazine's upcoming issue, the presumptive Democratic nominee backed off his harshest attacks on the free trade agreement and indicated he didn't want to unilaterally reopen negotiations on NAFTA.

"Sometimes during campaigns the rhetoric gets overheated and amplified," he conceded, after I reminded him that he had called NAFTA "devastating" and "a big mistake," despite nonpartisan studies concluding that the trade zone has had a mild, positive effect on the U.S. economy.

Does that mean his rhetoric was overheated and amplified? "Politicians are always guilty of that, and I don't exempt myself," he answered.

So which is it? Is Obama going to reopen negotiations unilaterally and potentially pull the United States out of NAFTA unilaterally as well? Or does the "my rhetoric was overheated and amplified so you really shouldn't pay attention to it" excuse stand?

Either way, this is a sorry display. Obama veers wildly from giving comfort to protectionists to trying to convince free traders that he really is on their side. I know that there is pandering in politics but usually, the pandering is carried off in a more . . . how to phrase this? . . . professional manner.

Then again, maybe this isn't pandering. Maybe Obama and his campaign genuinely don't have a clue as to what their policy is or is going to be when it comes to free trade. And if so, that's even scarier than finding that they are pandering.

Posted in Barack Obama | Economic Ignorance | Economy | Free Trade | Protectionism — Comments (6)/ Email this page » / Read More »

Posted at 10:28pm on Jun. 19, 2008 Obamanomics

By Pejman Yousefzadeh

Dan Drezner is not a fan. I guess the Obama campaign is back to demagoguing globalization and trade, after having initially sought to soothe us by saying that earlier condemnations of globalization and trade merely constituted "overheated and amplified" rhetoric.

Posted at 3:11pm on Jun. 19, 2008 F's All Around

By Pejman Yousefzadeh

Both Barack Obama and John McCain have a lot to answer for concerning the economic illiteracy that each of their campaigns have demonstrated on multiple occasions. Good on Karl Rove for taking each candidate to task.

Posted at 10:25pm on Jun. 18, 2008 Quote Of The Day

By Pejman Yousefzadeh

Commenting on Obama's tax raising plans, Paul Krugman writes: "[I]t would push tax rates on some high-income Americans back to the levels of the 1970s." For those of you unfamiliar with Krugman, he meant that as a compliment.

--Conn Carroll.

Posted at 1:54am on Jun. 14, 2008 The Obama Tax Platform

By Pejman Yousefzadeh

Summarized quite effectively by Chris Edwards:

In sum, Obama's tax proposals are pretty awful. It is true that many Republicans and Democrats have proposed similarly bad tax ideas over the years. But Obama can be contrasted with candidate McCain, who thus far has avoided narrow favoritism in his tax proposals, and favors broad-based tax reductions designed to spur economic growth.

Read the whole thing to see why it is that Edwards has a point.

Posted in Barack Obama | Economic Ignorance | Economy — Comments (0)/ Email this page » / Read More »

Posted at 3:51pm on Jun. 13, 2008 Scapegoating The Stock Market And Insulting The Intelligence Of The Electorate

By Pejman Yousefzadeh

It happens all the time; a Republican makes the suggestion that perhaps some Americans would like to be able to take some of their Social Security money and invest it in the stock market and their Democratic opponent(s) come(s) out and beats up on the stock market itself as a way of pouring cold water on the plan. It happened again in the Presidential race, as this story points out:

Obama also criticized McCain for being open to letting taxpayers invest part of their Social Security payments in private investment accounts.

"Imagine if your security now was tied up with the Dow Jones," he said, alluding to the recent slide in stock prices. "You wouldn't feel very confident about the security of your nest egg."

McCain, campaigning Friday in New Jersey, said Obama was misrepresenting his position.

"I will not privatize Social Security," he said. "But I would like for younger workers, younger workers only, to have an opportunity to take a few of their tax dollars, a few of theirs, and maybe put it into an account with their name on it. That's their money."

Indeed it is. What's more: The stock market never fails to bring in big returns over a long term period. And that is precisely what a stock market investment is supposed to be; a long term investment. As such, it is more than a little ridiculous to pick out a discrete period when the stock market may not be doing well and then proclaim that that period serves as a sufficient case study for how Social Security investments in the stock market would do in the long term.

What we are increasingly seeing during the course of this election cycle is that McCain would offer you the freedom to do what you want with what is rightfully yours--in this case, your money. The Obama campaign is implicitly telling you that you need to be protected by government from the stock market and from the ability to make your own investments. For your own good and because government is ever so much smarter than you according to the Obama campaign.

If that doesn't outrage or offend you, what will?

Posted in Barack Obama | Economic Ignorance | Economy | John McCain | Social Security — Comments (18)/ Email this page » / Read More »

Posted at 1:49am on Jun. 13, 2008 Ramesh Ponnuru Reads Thomas Frank So That The Rest Of Us Don't Have To

By Pejman Yousefzadeh

And he delivers one heck of a smackdown. Frank, of course, is yet another soul who wouldn't have dared to debate Milton Friedman while the great man was still alive.

Posted at 1:32am on Jun. 13, 2008 A "Destructive Path" Indeed

By Pejman Yousefzadeh

Good on the Vice President for raising the alarm concerning America's increased and worrisome slide towards protectionism. I continue to be befuddled over the fact that we are not embracing free trade more fully as a way of enhancing prosperity for lower and middle income individuals and families and as a way of diminishing the power and intensity of recessions when the business cycle goes south. If ever there was a case of shooting oneself in the foot, the embrace of protectionism would constitute it.

It is, by the way, incumbent on McCain to push the free trade message as much as possible during the election campaign and to find a way to do it that will make clear the harm that will come to the United States if it continues to go down the protectionist path--not to mention the many benefits that we would enjoy if we actually embraced free trade. Elections have consequences and we have to choose whether we want to face the consequences of educating ourselves about the benefits of free trade and being in a better position to make the right policy choices as a consequence, or whether we will countenance having free traders avoid making the arguments against protectionism altogether, thus letting the protectionists own the debate and sabotage good policymaking in the process.

Posted in Democrats | Economic Ignorance | Economy | Free Trade | Protectionism — Comments (0)/ Email this page » / Read More »