Thursday, July 28, 2005

CAFTA passed

Just barely: 217-215 in the House.

I'm mainly happy for more free trade, but I couldn't help but be distracted by this paragraph in the Washington Post article reminding me how laws are made:
The last-minute negotiations for Republican votes resembled the wheeling and dealing on a car lot. Republicans who were opposed or undecided were courted during hurried meetings in Capitol hallways, on the House floor and at the White House. GOP leaders told their rank and file that if they wanted anything, now was the time to ask, lawmakers said, and members took advantage of the opportunity by requesting such things as fundraising appearances by Cheney and the restoration of money the White House has tried to cut from agriculture programs. Lawmakers also said many of the favors bestowed in exchange for votes will be tucked into the huge energy and highway bills that Congress is scheduled to pass this week before leaving for the August recess.
Don't you just love huge energy and highway bills?

For judicial candidness

I find it ironic that many conservatives want to know more about John Roberts' judicial philosophy, and yet their best hope for learning more in the near future is questioning by Senate Democrats. I believe Roberts should answer most of their questions, given how powerful the Supreme Court is. (Ramesh Ponnuru also makes a great argument for this position in the current issue NR, but it isn't free online.) Alas, I doubt Roberts will be very forthcoming.

Of course, as a matter of politics, Republicans and conservatives gain nothing by learning more about Roberts after Bush appointed him. Still, I oppose judicial nominee opaqueness as a matter of principle. Also, though this is pretty wishful thinking, a norm of candidness for nominees would be nice to have the next time a Democrat is President.

Wednesday, July 27, 2005

Dave's filter

TNR series (1 2 3 4 5) on Darfur and the case for NATO troops.

Medicare quality disincentives

Most non-Mexicans caught illegally crossing the border from Mexico to the U.S. are merely asked to show up for deportation hearings months later. 85% decline.

Wednesday, July 20, 2005

Should conservatives be worried about John Roberts' lack of a paper trail? Ann Coulter writes that we know nothing about how Roberts will judge. In response, Ramesh Ponnuru points out two clues increasing the likelihood that Roberts would vote to overturn Roe. Ponnuru also claims that "In the cases of O'Connor, Kennedy, and Souter, we didn't have these pro-life clues, and indeed in some cases we had some clues that went the other way--strong ones in the case of O'Connor." First clue: Roberts' representation of the first Bush adminstration, including its opposition to Roe, in Rust v. Sullivan. I don't find this clue helpful at all. It proves only that Roberts isn't so extremely pro-choice that he'd refuse to make a pro-life argument for a client, which was never in doubt. Second clue: Roberts' wife is very pro-life. This is a more relavent clue.

More generally, Roberts' background looks pretty conservative: Federalist Society (see update), Rehnquist clerk, Reagan administration, Bush I administration, etc. Another factor is that Bush may have sources who know Roberts' private views, as argued here. Bottom line: I remain optimistic about Roberts, although, like Randy Barnett, I would have preferred a publicly originalist nominee.

Update: Actually, Roberts is not a member of the Federalist Society.

Monday, July 18, 2005

How not to criticize free trade

William Greider has an Op-Ed piece in the NYT today. It's one of those pieces that gives me mixed feelings about the Times' plan to stop freely offering its Op-Eds online this fall. On the one hand, there won't so be many links to this kind of tripe; on the other hand, there won't be so many fiskings of it either.

Greider begins with that ever-so-persuasive claim that his opponents know he's right; they just won't admit it:
DURING the cold war, as the Soviet economic system slowly unraveled, internal reform was impossible because highly placed officials who recognized the systemic disorders could not talk about them honestly. The United States is now in an equivalent predicament. Its weakening position in the global trading system is obvious and ominous, yet leaders in politics, business, finance and the news media are not willing to discuss candidly what is happening and why. Instead, they recycle the usual bromides about the benefits of free trade and assurances that everything will work out for the best.
So, these leaders know the "truth" about globalization. All this time I thought they were just innocent dupes of those sinister economists. How naive I was.
Much like Soviet leaders, the American establishment is enthralled by utopian convictions - the market orthodoxy of free trade globalization.
Yeah, that free-market stuff, totally utopian. I mean, just look what happens when it's actually tried.
The United States is heading for yet another record trade deficit in 2005, possibly 25 percent larger than last year's. Our economy's international debt position - accumulated from many years of tolerating larger and larger trade deficits - began compounding ferociously in the last five years. Our net foreign indebtedness is now more than 25 percent of gross domestic product and at the current pace will reach 50 percent in four or five years.

For years, elite opinion dismissed the buildup of foreign indebtedness as a trivial issue. Now that it is too large to deny, they concede the trend is "unsustainable." That's an economist's euphemism which means: things cannot go on like this, not without ugly consequences for American living standards. But why alarm the public? The authorities assure us timely policy adjustments will fix the matter.
Indeed, the current ratio of trade deficit to GDP is unsustainable. There's a lot of arguments about what is causing this. I suspect the prime culprit is that Americans are saving a lot less. (Second place goes to oil prices.) Among my suggested policy adjustments is changing the tax code to encourage more savings. However, it is quite possible that things will correct themselves without any policy adjustments or economic calamities. While there are no guarantees, I think saying "the sky is falling" is just as irresponsible as saying "not a problem on the horizon."

Okay, so what does Greider think we should do about the trade deficit?
Reporters and editors typically take cues from the same influential sources and learned experts in business, finance and government. If the news media decided to cast these facts as the story of the world's only superpower losing ground in global competition and becoming financially dependent on strategic rivals like China, the public would take greater notice. But governing elites would regard such clarity as inflammatory. America's awesome trade problem is instead portrayed as something else - an esoteric technical dispute about currency values, the dollar versus the Chinese yuan. The context is guaranteed to baffle and benumb citizens.
Oh, sorry. Greider wasn't done conspiracy-mongering.
The possibility that the United States can no longer afford globalization, at least not as it now functions, is what opinion leaders do not wish to discuss. A few brave dissenters have stated the matter plainly and called for significant policy shifts to stop the hemorrhaging. Warren Buffett, the legendary investor, says the United States is destined to become not an "ownership society," but a "sharecropper society." But his analysis, and others like it, are brushed aside.

An authentic debate might start by asking heretical questions: Why is the United States one of the few advanced economies that suffers from perennial trade deficits? Why do new trade agreements, despite official promises, always leave the United States with a deeper deficit hole, with another wave of jobs moving overseas? How do the authorities explain the 30-year stagnation of working-class wages that is peculiar to America? Are we supposed to believe that everyone else is simply more competitive or slyly breaking the rules? In the last three decades, American policymakers have succeeded in closing the trade gap with only one event - a recession.
Why, why, why? Something to do with American economic mobility, waves of new jobs replacing the jobs going overseas, immigration, foreigners wanting to invest in the U.S. (recall that net foreign investment equals net exports)? No, no, no. It's all because we're not sufficiently protectionist like the Europeans and Japanese:
The American predicament is shaped by operating dynamics grounded in the global system, singularly embraced by Washington because Washington originated most of them. At the outset, these practices were both virtuous and self-interested for the United States - encouraging industrialization in poor countries, binding cold war allies together with trade and investment, furthering the global advance of American business and finance. With its wide-open market, America played - and still plays - buyer of last resort for world exports. Its leading companies and banks gained access to developing new markets, often by sharing jobs, production and technology with others. American policymakers also got to run the world.

The utopian expectations behind this arrangement turned out to be wrong, judging by empirical evidence rather than theory.
Encouraging industrialization in poor countries? Nope, countries South Korea and Taiwan would have industrialized even faster if they weren't able to export to the U.S. Binding cold war allies together with trade and investment? NATO and the precursors to the EU actually held Europe back. Furthering the global advance of American business and finance? Come on, those American-owned multinational corporations never amounted to anything. I mean, who drinks Coca-cola outside the U.S.?
But why wrong? American political debate is enveloped by the ideology of free trade, but "free trade" does not actually describe the global economic system. A more accurate description would be "managed trade" - a dense web of bargaining and deal-making among governments and multinational corporations, all with self-interested objectives that the marketplace doesn't determine or deliver.
In other words, why should free trade be a goal to strive for when trade is currently as restricted as it is?
Every sovereign nation, the United States included, uses its vast arsenal of policies to pursue its national interest.

But on the crucial question of how policy makers define "national interest," Washington stands alone. Western Europe, whatever its problems, manages economic policy to maintain modest trade surpluses.
Whatever its problems, like higher unemployment rates, lower per capita income, lower economic growth rate, less economic mobility, less economic freedom....
Japan manages to insure far larger surpluses in recessions (its export income subsidizes inefficient domestic employers). China strives to acquire a larger, more advanced industrial base at the expense of worker incomes and bank profits. Germany and Japan, despite vast differences, both manage to keep advanced manufacturing sectors anchored at home and to defend domestic wage levels and social guarantees. When they do disperse production and jobs overseas, as they must, they do so strategically.
If only America would learn from her neighbors and unleash the strategic business savvy of her bureaucrats. Just look at the wonderful effects of our steel tariffs on our automakers, and of our farm subsidies on our taxpayers.
By contrast, Washington defines "national interest" primarily in terms of advancing the global reach of our multinational enterprises. Elites are persuaded by the reigning orthodoxy that subsidiary domestic interests will ultimately benefit too. The distinctive power of America's globalized companies is reflected in trade patterns. Nearly half of American exports and imports are not traded in open markets - the price auction idealized by neoclassical economics - but within the companies themselves, moving materials and components back and forth among their far-flung factories. A trade deficit does not show on the company's balance sheet, only on the nation's. In recent years, much of the trade deficit has reflected the value-added production and jobs that companies moved elsewhere.

The United States is thus especially vulnerable to the downward pressures on working-class wages that exist on both ends of the global system. American producers are generally free - and even encouraged by Washington - to shift production to low-wage locations. Companies regularly use this cost-cutting technique as a competitive weapon without regard to the domestic consequences. The practice works for companies and investors, but not so well for a nation.

INDEED, the cumulative effects of retarding labor incomes worldwide repeatedly threatens stagnation or worse for the entire system. Workers, to put it crudely, cannot buy what the world can make. Too much capital leads to the speculative "bubbles" that bounce around the world, visiting financial crisis on rich and poor alike.
I guess supply doesn't equal demand after all.
At a different moment in history, American leadership might have stepped up to these disorders and led the way to solutions. If globalization is to continue without encountering more crisis and random destruction, governments must together shift the balance of power so labor incomes can rise in step with rising productivity and profits. If the United States is to avert its own reckoning, it must take decisive action to draw firm limits on its exposure to trade deficits, that is, resign its position as the open-armed buyer of last resort. In effect, Washington would also reform its own national interest imperatives so that they more closely resemble what other nations already embrace. Ultimately, American remedial action may protect the global system from its own crisis - the moment when trading partners discover they have just lost their best customer.
So, to avert the crisis of the foreign producers losing their best customer, foreign producers must lose their best customer.
But to describe plausible remedies is to explain why none are likely. The webs of mutual interests connecting government, corporate boardrooms and Wall Street are too deeply woven, as are habits of thought among policy makers and politicians. So I do not expect anything fundamental will be altered in time. We are going to find out if the dissenters are right.
I too await the reckoning where the few wise dissenters are separated from the many cranks.

In all seriousness, Greider is right about one thing: the difference between future prosperity and another Great Depression just may be whether we pass a modern version of the Smoot-Hawley Tariff Act.

Sunday, July 17, 2005

Taking responsibility

At Reason, Julian Sanchez concludes that
Classical liberals have become good at explaining how the market order they favor promotes freedom and happiness. They have been less adept at explaining why—at least past a certain point—people ought to want that freedom, which when genuine is always at least a little frightening. In the face of the parentalist impulse, we may need to develop the case that our bad choices, the choices that make us unhappy, are as vital and precious as the ones that bring us joy.
I think that if you have to explain this, then you've lost at least half the battle. What's at issue is more attitude than opinion. The first "argument" that popped into my head to support the above quote was "Be a man." I'm not sure a more rational argument would be any more persuasive.

Tuesday, July 12, 2005

I didn't accompany this link from two days ago with any commentary, but I mostly agreed with the article, as some of you may have guessed. However, after reading this, I'm having second thoughts. Given the opportunity costs of making it hard for illegal immigrants to do things like get a job, get a checking account, take out a mortage, pay taxes, etc., I wonder if a more cost-effective way to reduce illegal immigration would be to take control of our southern border, as expensive as that would be.

Update: I should add that the costs to liberty also weigh in favor of border control.

Sunday, July 10, 2005

SCOTUS campaign strategy

Regarding campaign strategy for the upcoming Supreme Court confirmation(s), Patrick Ruffini advises focusing on the more unpopular leftist outcomes of recent Court decisions. In my own arguments, I prefer to stay focused on the procedural merits of originalism and the procedural demerits of a "living constitution," but I recognize that the majority of citizens are horribly ignorant about this issue, and that the Left's campaign will be very focused on outcomes too.

Here's a more academic curiousity. All the examples of unpopular leftist outcomes Ruffini cites are from judicial decisions no older than 2000. If Republicans had decided to fight Clinton's Supreme court nominations tooth and nail (which I think they should have), then could they have assembled a comparable list of unpopular leftist outcomes, or did leftist judicial overreach only recently become suffeciently egregious for it to be a winning issue for the Right in a confirmation campaign?

Friday, July 08, 2005

Katie at A Constrained Vision demonstrates that although "the G8 finance ministers are likely to agree to cancel the debt of 18 highly-indebted poor countries (HIPC)," the debt is already de facto cancelled. The benefits of a de jure cancellation are purely symbolic.

Another economics blog I like

I've recently discovered this blog by economics professor James Hamilton and heartily recommend it (at least for those of you who like economics). There are many interesting posts, so I'll just mention a few. Here Hamilton does some rough calculations that indicate the increase in the current account deficit since 1998 is mainly due to higher oil prices and a lower personal savings rate in the U.S.; here is some commentary on Romney's health care proposal; from here I found this color map of 2004 unemployment by county (and noticed that Dane county is doing pretty well).

Monday, July 04, 2005

SCOTUS nominations according to Tradesports. (If you're wondering who all those people are, then you could do worse than turn to Slate's short guide.)
Pavel Kohout makes a counterintuitive argument regarding pro-natalist tax policies:
What happens if the tax burden for families with children is cut at the expense of the childless? We can expect only a small increase in the fertility rate among families with children. If you already have two children, would you be likely to have another just because of a tax advantage? Maybe, but generally, tax stimuli are not a significant factor in family planning. The marginal increase in the birthrate as a result of tax advantages would be nearly negligible.

However, there would be a more significant impact on the fertility rate within the group of people who do not yet have children. An increased tax burden would make it more expensive to form a family. People normally marry and procreate only after they have achieved a certain level of financial strength and independence. This rule has been an ages-old norm for human behavior with the exception of welfare state-dependent classes for whom child benefits constitute a major part of their income. Imposing tax penalties for the unmarried might delay procreation by several years, thus cutting the marginal fertility rate. Some of these people would remain unmarried forever. The total impact of "pro-family" tax policies would certainly be negative.
Unfortunately, the Kahout's only gives one piece of empirical evidence: the failure of such policies in Italy under Mussolini before World War II. Therefore, I can't draw any firm conclusions. Speculating though, I would think that if the tax burden on singles causes them to delay marriage by years, then a similar tax burden on the married couples would similarly delay birth of their Nth child. Kahout seems to be confusing an average couple he supposes content with an average of two children with a marginal couple indifferent between whether or not to try to conceive another child now. For Kahout's claims to hold, I would think the an additional hypothesis is necessary: when measured in terms of percentage of income, the tax burden on singles would have to be higher than it is for married couples.
I can only echo this praise of Justice Thomas' unflinching originalism. If we set aside foreign policy for the moment, then I can think of no better reason for a conservative or a libertarian to have voted for Bush in 2000 or in 2004 than Bush's promise to appoint a justice like Thomas or Scalia. Update: see also Randy Barnett's comments.