No And Yes

This appeared on our Facebook feed recently:

Everyone OK with using socialism to clean up after Harvey?  Or should we use the free market.  Just asking for a friend.

The obvious answers are no to the first question and yes to the second.  Here is the funny thing: The quote comes from the US Democratic Socialists page!  Does anyone really think that socialism is effective or could be effective with these kinds of problems?  The WSJ has a nice story on self-organized volunteers.  Does anyone think that capitalism or free markets will not be effective?  We are sure that Mark Perry has something on how folks will try to blunt the market’s ability to get the necessary items to Texas by fixing prices.  Ah, here is one.  If you want effective solutions you need markets.

Or is it that the socialists what Texas to suffer?

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Free Trade

George Will is at his best on NRO touting the benefits of free trade.  And it gives him time for his favorite pastime of skewering The Donald.  We agree with George on this  one that The Donald is absolutely wrong on trade.  The MWG position is unilateral free trade.  The USA should eliminate all tariffs.  We would be willing to phase them out rather than require that they be eliminated immediately.

Do read it all but here are some juicy quotes.

Paul Samuelson, a leading 20th-century economist, cited this doctrine [free trade] when challenged to name a social-science proposition that is both true and not obvious.

We might argue that it is obvious that raising taxes is a bad idea but the behavior of individuals seems to argue for Paul’s position.

Foreigners, however, have their uses. After [The Donald] trumpeted that the Dow surpassing the 22,000 mark was evidence of America’s resurgent greatness, the Wall Street Journal rather impertinently noted this: Boeing, whose shares have gained 50 percent this year and which accounted for 563 of the more than 2,000 points the Dow had gained this year en route to 22,000, makes about 60 percent of its sales overseas. Boeing has a backlog of orders for 5,705 planes, 75 percent going outside North America. For Apple, the second-biggest contributor (283 points) to this year’s Dow gain at that point, foreign sales are two-thirds of its total sales. Foreign sales are also two-thirds of the sales of McDonald’s, the third-biggest contributor (239 points).

What serious folks should be thinking about is how do we cut tariffs and how do we facilitate the market so that the small percentage of folks that suffer can adjust to the changes.  The political problem is that the benefits are widespread while the costs are not.  One part of this solution might be to tax the large percentage of folks that benefit from trade.  Another part would be incentives to change.  A third part would be encouragement.  In addition to “Made In America” events at the White House there could be “Change In America” events.  The government should be part, perhaps only a small part, of the solution so we can capture the large benefits of free trade and absorb the small costs.

 

Too Slow And Too Good

We are too slow and Elliot Kaufman and Mike Rowe are too good.  Elliot discusses a NYT article while Mike shows that you can fight the mob and still maintain your independence.  Elliot quotes the NYT article gushes:

[A] surprising group of Americans is testing its moral voice more forcefully than ever: C.E.O.s.

Next Elliot tells us about the young adult site:

Vox upped the ante, explaining: “After Charlottesville, CEOs have become our public conscience.”

Of course, this is just appeasement.  The CEOs are hoping that the leftist crocodile eats them last.  Elliot explains:

The New York Times was right, in a sense. “The C.E.O.s had found their voice,” concluded their fawning article. But top-flight executives are not pre-teen girls who have finally mustered up the confidence to speak; they are savvy representatives of their shareholders’ interests. ESPN, like all the Fortune 500 companies that leapt to boycott or threaten Indiana and North Carolina over their religious-liberty and transgender-bathroom laws, knew that the safest thing they could do was to get out ahead of a left-wing mob.

Do read all of it.

It is the opposite of courage to give into the mob.  Business folk, particularly CEOs, are working for their shareholders.  It is a reasonable business judgment that it is in their shareholders’ interest to submit to the mob and is a moral judgment in the sense of serving their shareholders but VOX is exactly wrong to call the CEOs public conscience.   This is a private and perhaps profitable choice like paying protection to a different mob.

Sidebar: It is an interesting aspect of politics that the left supports CEOs when they do exactly the opposite of what the left wants.  The left wants CEOs, somehow, to work for the public rather than profits of their company.  In this case the CEOs are working to increase their profits but the left is happy.  The left is not the only side to confuse short-term gains with principles.  End Sidebar.

Mike, on the other hand, wants to combat the mob without taking political sides.  We agree.  We would describe it as the fight against violent socialism.  It doesn’t matter if it is the national socialists (Nazis) or world socialists, often, without intentional irony, called Antifa.  The important word is violent.  Here is how Mike takes issue with a commenter that calls him anti-intellectual and tries to associate him with the Nazis.  He does this without (entirely) taking a political side:

mikeroweWORKS is a PR campaign for the skilled trades. For the last nine years, we’ve partnered with numerous trade schools, raised millions of dollars for work-ethic scholarships, and called attention to millions of jobs that don’t require a four-year degree. But that doesn’t mean we’re “anti-intellectual.” We’re not even “anti-college.” We simply reject the popular notion that a four-year degree is the best path for the most people. And we’re hardly alone.

Millions of reasonable people – Republicans and Democrats alike – are worried that our universities are doing a poor job of preparing students for the real world. They’re worried about activist professors [R], safe spaces [R], the rising cost of tuition [R&D], a growing contempt for history [R], and a simmering disregard of the first amendment [R]. These people are concerned that our universities – once beacons of free speech – now pander to a relatively small percentage of students who can’t tolerate any political opinion that challenges their own. And they’re concerned – deeply concerned – that millions of good jobs are currently vacant that don’t require a four-year degree, or any of the catastrophic debt that comes with it. [R & D added]

We’ve put R for Republican and D for Democrat on Mike’s list of what reasonable people think.  Of course, Mike’s response is being lapped up by conservative sites like TheBlaze, The Daily Caller, and Fox News because conservatives like the list above, are generally pro-capitalism, and and are anti-violence.  As Mike shows, the CEOs could have done better.

Venezuela Clarity

Rich Lowery is on point in discussing Venezuela at NRO.  He has a great way of summarizing how bad things are there:

The result is a sharp, years-long recession, runaway inflation, and unsustainable debt. The suffering of ordinary people is staggering, while the thieves and killers who are Chávezista officials have made off with hundreds of billions of dollars. At this rate — The Economist calls the country’s economic decline “the steepest in modern Latin American history” — there will be nothing left to steal.

The situation leaves The Donald with limited options as Rich discusses.  Read his whole analysis.  What he doesn’t remind us of is the policy of The Donald’s predecessor.  To him Chavez was mi amigo.  As Patrick Cooper at USA Today had a quote from AP back in 2009:

“President Barack Obama has gone abroad and gored an ox — the deeply held belief that the United States does not make mistakes in dealings with either friends or foes. And in the process, he’s taking a huge gamble both at home and abroad, for a payoff that could be a long time coming, if ever.”

Read all of Patrick’s column to remind yourself how controversial the predecessors actions toward Venezuela were.  The Donald’s predecessor always seemed willing to gamble with our future.  If we were at the track we would say he wasn’t an astute improver of the breed.

Recently we cited David Horowitz at PowerLine on why the Middle East is a disaster.  The Middle East is not the only disaster left for The Donald to work out.  We wish him greater insight than his predecessor.  The problem is he has less degrees of freedom because of the actions that were taken.

Venezuela Confusion

Brandon Morse at The Blaze informs us that World of Warcraft currency is worth more than Venezuelan currency.  Brandon gives credit to others and then says:

According to sites that track the value of both currencies, KalebPrime’s math is outdated, and WoW gold is now worth even more than the bolivar.

According to the site dolartoday.com, which actively tracks the worth of the bolivar on the black market, the bolivar has dropped to 11,185.95 per dollar since KalebPrime posted .

Meanwhile, according to mmobux.com, which tracks the value of WoW’s in-game currency for sales outside of the game, the lowest sale of 10,000 gold in a real life exchange will get you $1.21 [or 8,264 per USD].

So when did this come about?  Brandon tells us:

This drop in the worth of the bolivar is stark compared to its worth just a few months ago. In May, 279 bolivars would net $1, according to CNN Money. In June, the worth dropped to 408 bolivars for every dollar.

What is the cause of it?  Brandon gives the party line:

The Venezuelan economy has suffered greatly under President Nicolas Maduro’s socialist regime. The drop in oil prices, combined with the Venezuelan government’s mismanagement of the economy has resulted in a shortage of everything from food to everyday items.

So the drop in oil prices is listed as the first cause.  What was the oil price at the beginning of May when things were less terrible?

Sidebar: We use the Brent price per barrel from Oil.Com.  There are several different benchmarks.  All will show that the price has jumped up and down but has been relatively stable in the last few months.  We use WTI for a longer view because that is the data we could find.  The benchmarks have different prices but they move together.  We are more nervous about Brandon’s measurements of the Bolivar.  It could be that CNN Money and dolartoday. com are not comparable because the Bolivar has an official rate and a real or black market rate.  End Sidebar

Brent crude was just above $52.  What was it at the beginning of June?  It was just below $52.  What is it today.  It must be like $1.43 to cause all this turmoil.  It is $52.72.  That’s right, the oil price has moved up slightly.  Now oil prices did plunge.  It plunged from about $100 a barrel to, roughly, the current price in the second half of 2014 as this chart shows (alert: it is a different benchmark (WTI) so the price today is a couple of dollars different).  Since the beginning of 2015 the price has jumped around on both sides of $50 but is is hard to discern a trend.  So oil prices dropped three years ago.  It is a problem for Venezuela but it is hard to connect what happened three years ago to its current woes.  The government needs to take at least 99 percent of the responsibility for the current problems.

Compare what is happening in Venezuela to the more capitalistic USA.  USA produces (2014 =8,764) over times as much oil as Venezuela (2014 = 2,500) but it is a smaller part of our economy.  The USA and its oil industry is recovering nicely in 2017 while Venezuela in chaos.  The different economic systems are why.

If that is how The Blaze presents Maduro’s problems then you know what to expect from the legacy media.  Venezuela is socialism.

 

 

 

Consumer Friendly

We’re bad with names so we forget who at NRO makes this point over and over again.  We’re pretty sure Mark Perry is on this case too.  We’re also late reading The National Review.  In the latest edition, Dan McLaughlin says [third paragraph], “Since 1978 the Republicans have built their economic message around tax cuts and business-friendly regulations …” [emphasis added]

Dan is right about tax cuts but absolutely wrong on the bold part.  The GOP’s message is about consumer or market friendly regulations.  Of course, the GOP is responsible or partially responsible for a number of business-friendly regulations like Dodd-Frank, tariffs, and many restrictions on economic freedom created by the federal government.  Those regulations are business-friendly because they protect existing businesses.  But the GOP message is about economic freedom which means consumer friendly or market friendly regulations like eliminating requirements for opening businesses.  The GOP is not perfect but its message is economic freedom.  That is the opposite of business friendly.

Venezuela And US Taxes

OK, it is a bit of a stretch but there is a comparison between the debacle in Venezuela and reforming US taxes.  It comes from Larry Kudlow’s discussion with Art Laffer and Steve Forbes posted on NRO.  They are talking about how to restore prosperity:

Incentives matter: If you reward an activity, then people do more of it. If you punish an activity, people do less of it.”

But for the tax side of “one big idea,” Laffer would like to see corporate tax reform. I agree. Reagan used to say, “Give me half a loaf now, and I’ll get the other half later.” Well, I’d take the half loaf of corporate tax cuts right now. And that would work for Forbes, who can see income-tax reform following corporate-tax reform. “Even if we get to this two years down the road,” he said, “I think [Trump would] be amenable to doing something radical like a flat tax.”

Socialism and the lack of incentives to produce are part of what is killing Venezuela. The other part is the incentives and abilities socialism gives to those in power.

Incentives are a big problem because the US corporate tax is just about the highest in the world and it is one of the few that is world-wide rather than territorial.

Sidebar One: A more nuanced explanation from the Christian Science Monitor says that most systems are hybrids of territorial and world-wide.  The issue is still the same: Do we (the US) want to tax US corporations that want to invest international funds in the US.  The incentives are really far wrong when we penalize US companies for investing in the US.  End Sidebar One.

Sidebar Two: Most of the problems with writing US tax rules and enforcing them relate to the high US rates.  If the US rates were equal to or lower than most other countries then corporations would not try to use legal and sometimes illegal means to move income out of the US.  The Congress would not need to worry about all the fine print on transfer prices and the like.  The IRS would not need to spend so much time enforcing the fine print.  Lower corporate tax rates are win–win-win.  End Sidebar Two.

We are happy to see Larry, Art, and Steve endorsing changes in the corporate tax system first.  We wish they did it with more conviction.  We wish they would leave out first.  The choices about what to do about Venezuela are complicated and difficult but relate to getting incentives better.  The choices about US tax legislation are easy.  Do corporate taxes by lowering rates and making it easy to invest in the US.  We don’t care if the solution is territorial or hybrid as long as it fixes the problem.  It is the biggest opportunity to improve incentives the most.