Let’s start with everyone’s favorite conservative, President George W. Bush. Here’s what the President had to say when he raised tariffs on steel from other countries: http://www.whitehouse.gov/news/releases/2002/03/20020305-7.html
The purpose was To Facilitate Positive Adjustment to Competition From Imports of Certain Steel Products
“Positive Adjustment”??? What the hell is that? It’s explained a little better at paragraph 14: I have further determined that these safeguard measures will facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.
Okay, not much better, but now it will provide greater economic and social benefits than costs. That makes me feel a lot better. Not.
You can see one discussion of the steel tariffs at: http://www.pbs.org/newshour/extra/features/july-dec03/steel_11-17.html
I know. PBS. Liberals. Ugh. Then again, they do quote the Wall Street Journal. Anyway, the economic effect of the tariffs was far from wonderful. For those who think we should still manufacture things in the US, it may surprise you to hear that many manufactured products include steel. Cars, for example, have a fair amount of steel in them. The steel tariffs had the odd effect of raising the price of steel. This raised costs for manufacturers, making it harder for them to compete with producers in other countries.
As one observer noted (http://www.trilla.com/washington_time_aug_15.htm), workers in steel-consuming industries outnumber steelworkers 55 to 1. An economist was quoted in that piece saying that the tariffs will kill 8 times as many jobs in the steel consuming industries as they’ll save in the steel industry itself. And we haven’t even gotten to the consumers yet.
While liberals tend to get caught up in soft touchy-feely approaches like fair trade, conservatives are more into the hard approaches like bashing and competition. I touched on bashing in the last post, so I’ll go more toward the competitive approach.
Some conservatives believe the US is in economic competition with other countries like China. The peak of this concept probably was Michael Porter’s book, The Competitive Advantage of Nations. Sounds great, but it’s still crap.
Nations do not compete economically. Companies do. Dell and HP compete. Toyota and GM compete. Well, okay, not really. GM is losing that one so badly it’s not really a competition. But you say “Aha!” Toyota and GM, that’s Japan vs. the US. Well, actually most Toyotas sold here were built here. And many GM cars are not built here. So it’s not that simple.
Economics includes the concept of “comparative advantage.” For various reasons, some countries are better at producing certain products (or providing certain services). The French make good wine. Maybe it’s in the soil. India provides good call center services and other services – they speak English, are well educated, and they’re available in the middle of the night here because that’s daytime for them. The US is actually quite good at some things. Software is probably our biggest strength at the moment, but we’re also very good at a variety of professional services and we export these quite a bit.
In the theory of comparative advantage, since country A is relatively better at making widgets, and country B is relatively better at making gidgets, A makes the widgets, B makes the gidgets, they trade with each other, and both are better off. It’s actually quite a bit more complicated than this, but that’s the really simple version.
Anyway, you’ll often see the conservatives talking about how we’re competing with China, so we have to force them to revalue their currency, or put barriers up so they don’t take over this or that industry.
Throughout our history there are examples of those opposed to trade. Today both liberals and conservatives call for restrictions on trade for their own reasons.
Liberals now talk about fair trade. The word “fair” is so overused it has lost any meaning it ever had. That makes it a great word for liberals because they can use it for whatever they want. It doesn’t have to mean anything and that fits well with most of what liberals rant about. Don’t worry – I’ll get to the conservatives in a little while.
Since it has no meaning, it is mainly used to impose restrictions on trade from other countries. These countries are almost always poorer than we are. Apparently liberals in American want to protect poor people in other countries from the dangers of working to earn money.
But let’s get more into it. I searched Google for “fair trade” and came up with this site: http://www.fairtradefederation.org/
There are some great bits on this site. For example:
FAIR WAGES: … workers are paid at least that country’s minimum wage. Since the minimum wage is often not enough for basic survival, whenever feasible, workers are paid a living wage, which enables them to cover basic needs, including food, shelter, education and health care for their families. Paying fair wages does not necessarily mean that products cost the consumer more. Since Fair Trade Organizations bypass exploitative middlemen and work directly with producers, they are able to cut costs and return a greater percentage of the retail price to the producers.
So the first part of fair trade is that workers are paid fair wages. And fair wages are “at least” the minimum wage. This doesn’t even make sense. If there is a minimum wage, workers can’t be paid less than that amount anyway. So that one’s meaningless. But now we’re not satisfied with minimum wage anymore, so “whenever feasible” they get a “living wage.”
Um, who decides when it’s feasible? And what’s “living wage” anyway? if the wage they’re getting is not a living wage, then presumably the workers die. That’s not good business for an employer, so the employer will always pay a living wage. What the liberals are really saying is that they want the workers to get more than a living wage, but they use the term “living wage” because it sounds better. Now I’m sure the workers all want to get paid a better wage, but they do have to eat. So if they’re not getting any wage because these liberals love them so much they want to cut off any trade to protect them from earning enough to eat. You gotta love the do-gooder liberal methods.
My favorite part is the reference to the “exploitative middlemen.” Isn’t that a common attack on Jews? And I thought there were a lot of liberal Jews. This is a complete denial of a whole segment of the world economy – those rotten middlemen. I wonder why these liberals don’t save defendants from having to deal with those exploitative criminal defense lawyers who dare to charge a fee to try to keep them from jail.
And before I move on, I like the fact that this does not necessarily mean it will cost the consumer more. Right. Not necessarily. It will cost more in almost every case, but there will be one or two cases where it costs the same. Liberals are uninterested in consumers. It’s all about the poor workers (who never consume anything).
Cooperatives and producer associations provide a healthy alternative to large-scale manufacturing and sweatshops conditions, where unprotected workers earn below minimum wage and most of the profits flow to foreign investors and local elites who have little interest in ensuring the long term health of the communities in which they work. Fair Trade Organizations work primarily with small businesses, worker owned and democratically run cooperatives and associations which bring significant benefits to workers and their communities. By banding together, workers are able to access credit, reduce raw material costs and establish higher and more just prices for their products. Workers earn a greater return on their labor, and profits are distributed more equitably and often reinvested in community projects such as health clinics, child care, education and literacy training. Workers learn important leadership and organizing skills, enabling self-reliant grassroots-driven development. Safe and healthy working conditions are maintained and producers gain greater control and decision making power over the use of their local resources.
Remember before where it won’t raise the cost to consumers? Now it says the workers can “establish higher and more just prices for their products.” And who gets to decide what makes the price “just.” If the price is higher, isn’t the consumer going to think that’s unjust?
Read that paragraph with a cynical eye and you will see communism leaping out at you. This is also a complete denial of the benefits entrepreneurs bring to society. Bill Gates doesn’t run his company democratically, but strangely you rarely hear all those starving Microsoft millionaires complaining about how they were exploited. The computer industry is a shining example of what happens when entrepreneurs are not shackled by excessive regulation. The combination of freedom and opportunity creates wealth beyond anything cooperative institutions could ever create.
But wait, there’s more …
Fair Trade Organizations educate consumers about the importance of purchasing fairly traded products which support living wages and healthy working conditions. By defining fair trade and conducting business in a manner that respects workers’ rights and the environment, the fair trade movement strives to educate consumers about the often hidden human costs of their “bargains.” By providing information about producers’ history, culture and living conditions, Fair Trade Organizations enhance cross-cultural understanding and respect between consumers and communities in the developing world. They also educate consumers and policy makers about inequities in the global trading system.
You see, all those Walmart, Target and Home Depot shoppers don’t really want lower prices. They want to pay more. I can see the circulars in next Sunday’s paper: “Sale – everything in our store is now 25% more expensive, to make sure Apu in Bangladesh can buy an extra serving of rice for his family next week.” Yeah, that store’s going to do well.
That’s enough. I’m sick of that pablum.
Meanwhile a more traditional liberal attack on free trade appeared in Wednesday’s Wall Street Journal. Democratic Senator Byron Dorgan wrote a letter defending his anti-trade book. As he puts it, his “book takes on the $800 billion-a-year, out-of-control trade deficits … [and] pulls back the curtain on incompetent trade agreements that sell our country short by paving the way for outsourcing American jobs and running up crushing trade deficits.” Dorgan says that these trade deficits will have significant and dangerous consequences to our economy and our future.
So trade deficits are both out-of-control and crushing. For a bit of history on trade deficits, see http://economics.about.com/od/foreigntrade/a/trade_deficit_h.htm. Wikipedia also has a good summary at: http://en.wikipedia.org/wiki/Balance_of_trade#United_States_trade_deficit
In short, our last trade surplus was in 1975, about $12 billion. By 1987 our trade deficit had “swelled” to $155 billion. And in the last five years our trade deficit has exploded to nearly $800 billion. For those of us old enough to remember, trade deficits in the 1980s were used to support Japan-bashing rhetoric. The trade deficit was destroying America. Let’s think about this a bit. Hmm. What was life like in 1975, 1987, and how does that compare to today? Since we actually had a trade surplus, life must have been much better in 1975 than
it is today, right? And since the trade deficit is now four times as large as 1987, we must be doing much worse now.
Let’s talk about jobs in this context. I used http://data.bls.gov/PDQ/servlet/SurveyOutputServlet for some statistics. In the golden year of 1975, unemployment was at 8% and rising. In 1987 it was below 7% and declining. Now it’s below 5% and declining. To quote Johnnie Cochrane: “If it doesn’t fit – you must acquit.” The trade deficit is not guilty. On most measures of the economy, we are much better off today than we were 30 and 20 years ago. My brother has a great quip on trade deficits. “They give us stuff. We give them paper.” Hey, if those suckers want to give us stuff for paper, let’s keep that ball rolling.
But you do have to give Dorgan credit for consistency. I did a search and found this from the Times Union on December 21, 1994:
These statistics paint a very ugly picture of a trade strategy that is weakening this country. We are seeing a trade deficit that is nearly running out of control, especially with Japan and China.” said Sen. Byron Dorgan, D-N.D., who fought unsuccessfully earlier this month to block congressional passage of GATT.
Twelve years later and Dorgan is still beating the same drum. You’d think after 12 solid years of these out-of-control trade deficits we’d really have crashed by now. Meanwhile his home state of North Dakota is struggling under the pressure of these trade deficits with its unemployment rate now down to 2.4%. Poor North Dakota. Wait a minute. Low unemployment is a good thing. Hmm. I wonder what New York’s trade deficit is with North Dakota. Maybe we need some Dakota bashing here.
As for the current fun of China bashing. In the 80s it was Japan bashing. In the 90s it was NAFTA and Mexico bashing — remember the giant sucking sound? The Mexicans are still wondering where their jobs are. Now there’s a blend of bashing China for manufacturing and India for services. With all the liberals concern for the poor, where’s their concern for the poor in those countries? All of this trade is very good for the people in those countries who are really poor. I’m sick of people whining about the poor in our country. One of poverty’s biggest problems here now is obesity. Please. I have poor clients. They’ve got running water, cable TV, cell phones, etc. Their problems are primarily social, not economic. I want to know how come the Canadians keep getting off without any Canada bashing.
I’ll get to the so-called conservatives and their trade idiocy in the next post.
A few days ago Milton Friedman passed away. He was one of the great thinkers in modern Economics. I studied Economics for several years. I majored in Mathematical Economics at Rice University, and spent three years at Stanford’s Graduate School of Business studying quite a bit more in the field.
Friedman was fantastic. He is perhaps better known in the world outside the field because he made an effort to communicate to the outside world, and because he was good at that. His 30+ year attack on the drug war earned him a special place in my heart.
My personal favorite in Economics is Kenneth Arrow. Arrow also won the Nobel. For me his best work includes General Equilibrium Theory (sometimes referred to as the Arrow-Debreu model), and especially the Impossibility Theorem, which is one of the great examples of an economist taking the tools of the field and moving them into other fields, in this case Political Science.
While I am extremely fond of Arrow’s work, I am less fond of his views on economic policy. I don’t think he really translates the field into the real world as well as Friedman did. Fortunately he’s usually quiet on this area.
A couple of my other favorite works in the field include George Akerlof’s Market for Lemons paper and Michael Spence’s paper on Job Market Signalling. These are brilliant stabs at the problem of asymmetric information.
Libertarians tend to oppose any government intervention. I’m sympathetic to this, but those who truly understand Economics understand the concept of market failure. While I love markets and believe they are generally the best approach, they have certain vulnerabilities. Market failures are the rare good reason for supporting government intervention.
Asymmetric information is one of the biggest causes of market failure. Akerlof’s paper describes a simplified version of the used car market, showing how the sellers’ better knowledge of the car can completely destroy the market. Spence showed how employers and job seekers can use schools to signal information about the quality of the job applicant, something where the applicant knows more about themselves than the employer can know. The Principal-Agent model of organizations is also insightful. The most substantial problems involving asymmetric information involve insurance, known as adverse selection and moral hazard.
Other notable causes of market failure include monopoly and other situations of market power, and externalities such as pollution.
All of these situations, where the resulting market failure is significant, can lead reasonable people to support some government regulation. Getting to the theme of this blog, liberals will use overly simplistic versions of these problems to support massive government interventions. Some conservatives ignore the problems, while others use them to support their own forms of government intervention, usually involving some kind of manufactured but non-existent social problem.
I’m a member of the Schenectady Torch Club. The other night one of our members spoke about the conflict between Evolution and Intelligent Design. I’m about to criticize the liberal elite for their attitudes, but I should start by saying that I fully side with Evolution in this debate.
In defense of their position on this issue, liberals quickly accuse the other side of being uneducated, and in particular of lacking the ability to engage in “critical thinking,” and of failing to understand what “science” is. Now I do wholeheartedly agree that the proponents of Intelligent Design are wrong, and that their approach is unscientific and weak in the area of critical thinking.
However, many of the proponents and believers of Intelligent Design and/or Creationism are educated. I might disagree with the way in which they were educated, but they attended lots of schools and many of them have advanced degrees. So it’s not that they’re uneducated, but that we disagree with that education.
The real stinker here is how educated liberals turn off their own critical thinking when it comes to other issues. Our entire country seems to have lost the ability to analyze the US role in world affairs. Our self-appointed position as world cop seems to be beyond question. My view on this was called “naive” by the highly educated editorial staff of our local newspaper, the Times Union (Albany, New York).
But my favorite liberal nonsense is the issue of minimum wage. I did a post criticizing minimum wage some time ago. That post attracted more comments than any other post on this blog, or any of my other blogs.
Minimum wage is an utterly bankrupt concept from any educated point of view. The arguments for it always fall back on the underlying premise of “because I say so.” It is completely unscientific. When confronted with an opponent of minimum wage, the liberal response is either to call that person “heartless”, or to attempt to educate the poor, uninformed person as to why minimum wage is the right thing to do.
The liberal supporter of minimum wage will call upon a variety of arguments: $5.15 an hour is not enough for a family of four; CEOs make too much money and it’s not fair; 80% of the people support a higher minimum wage; and so on.
Let’s start with debunking this nonsense. I agree that $5.15 an hour is not enough for a family of four. However, most minimum wage earners are not supporting a family of four on that minimum wage, and some that are get government benefits to supplement their income. Often the minimum wage earner is a young person who lives at home with his or her parents. When I was 18 I somehow managed to get by on the $2/hour I got working at a camp, and the $3 plus I got at Dairy Queen and Burger King. Despite the criminally low rate of pay, I kept going back to work alongside my fellow high school students. Obviously I didn’t realize how badly I was being exploited by The Man.
As for CEO pay, I agree that many of them make too much money. I have no idea what this has to do with minimum wage. It has a lot more to do with corporate governance, but liberal elites hate “greedy” corporations and are uninterested in boring topics like governance unless it involves the government taking over corporations and creating a socialist utopia. My favorite response to the CEO argument is to ask if they mean Bill Gates. Gates never received much salary at Microsoft. He earned (note my use of that word) most of his wealth by owning stock in the company he created. As the company grew, the value of the company grew and so did his wealth. Instead of keeping all of this wealth to himself, he encouraged his employees early on to hold stock in the company. By this approach he has pretty clearly been the greatest employer in all of history. Anyone who worked at his company from the 1980s to the mid-90s and who held onto their job for a couple years and acquired stock along the way became a millionaire. Many are worth tens of millions. Quite a few are worth hundreds of millions and three or four are billionaires.
80% of people support a higher minimum wage. So what? The same liberals will snuff at the high percentage of people who don’t believe in evolution. This argument is even dumberer than the rest.
The only scientific, or quasi-scientific, field that deals with issues like minimum wage is economics. At heart, economics supports free markets. That means the government should not intervene in things like setting a minimum wage. Some jobs do not create enough value to warrant high wages, so if you set a minimum wage those jobs will not exist. If you wonder why everything is made in China, it’s because labor-intensive work gets done in places where labor is cheaper. Those items would still be made in China because few people here want to work for wages as low as that, but there are some jobs that might be done here if it weren’t for the minimum wage.
In economics, government intervention is sometimes warranted when there are market failures, such as pollution, asymmetric information, and monopolies. Pollution involves externalities – when I burn gasoline I create pollution that affects me and others, but I only value the cost it imposes on me so those other costs are imposed on others. Gas taxes are an excellent way to address these externalities, dating back in economics to Professor AC Pigou in the 1920s or so.
Asymmetric information creates problems in insurance markets, where people who know they are prone to sickness are more eager to buy insurance (known as adverse selection) and people who have insurance are more likely to take risks (moral hazard). Adverse selection in particular leads many economists to support regulation of insurance markets, while co-pays and deductibles are attempts to deal with moral hazard.
Let’s get back to minimum wage. Where’s the market failure that requires government intervention? It isn’t there. The best that the liberal elites can do when challenged on the economics of minimum wage is that it doesn’t cause that much harm. It doesn’t raise prices much. It doesn’t destroy that many jobs. If that’s all you’ve got, you’re in trouble. The market’s answer to your wage being too low is to get a better job. Maybe you have to improve your skills, get a better education, or choose a different field.
Most of all, the liberals cannot answer this fundamental question: How do you determine the correct level for minimum wage? There’s no economic model to answer this question. When I confront liberals with this question they run. They divert. They cower in fear (okay, I’m exaggerating now). They have no answer.
If minimum wage is wonderful, and causes no harm, why not make it $50 per hour? Will the liberals concede that at some point a higher minimum wage can cause harm? These questions demonstrate where liberals have abandoned critical thinking.
You see, people advance critical thinking as an issue for addressing other people’s positions. Liberals will never subject minimum wage, trade barriers, or union issues to critical thinking. Analysis of liberal economic views destroys them. Since they cherish their do-gooder fantasies about economic policy, they won’t dare surrender them to the horrors of scientific reasoning.
Gee, that was fun. I wonder what liberal or conservative bugaboo I’ll turn to next. I don’t know the answer myself yet, but it’s coming soon.
As the Stop Wasting Money blog goes forward from here, I will be focusing on certain issues that I deal with on a daily basis as they relate to the goal of better government policy to stop wasting money (there’s that theme again), and also attack liberals and conservatives for their idiotic policies, especially in the area of economics.
I’ll talk about tort reform – changing how government deals with personal injury cases. I know a lot about the subject because of my work, so I expect to discuss that quite a bit. I will also post on other topics I deal with, such as drunk driving, speeding tickets, and the criminal justice system. Other topics will include minimum wage, trade policy, immigration and so on.
See the link below for a statement by a real Republican about how our party has forgotten about the 1994 revolution and fiscal conservatism – i.e. stop wasting money.
I was right about the low turnout. In 2004 there were over 300,000 votes (311,854 to be exact) in the 21st congressional district. In this 2006 election for the 21st district, there appears to be a total of just over 203,000 votes.
Going county by county, total # of votes was: (2006 are rough, 2004 are exact)
Albany: 99,000 148,225
Montg: 11,100 21,430
Schdy: 46,000 70,344
Schoh: 10,200 14,672
Fulton: 6,500 11,730
Renss: 27,000 41,196
Sarat: 2,900 4,257
The last three are parts of the counties; first four are the whole counties — that’s how the district is made up.
Notice that Albany’s turnout is down 50% while the turnout in Montgomery and Fulton is down more than that. Not sure if this means anything, but just noticed it.
Well, the results are in, partially at least. Looks like we got less than 25% of the vote. Not too good considering last time we got close to 30%. From what I can tell, turnout was much lower than I expected. I figured there’d be 250,000 votes in this district, and it looks like about 130,000 votes after 70% of the precincts are in. If that plays out there’ll be less than 200,000 votes.
I’d like to thank everyone who read this blog, posted comments, etc. My biggest disappointment is how few visitors there were to the campaign website, less than 10,000. The site is out there for all to see, easy to find, etc. Yet very few of the voters thought it was worth the time to see what this candidate had to say. This is a problem for all challengers. The media doesn’t talk about us, and the voters don’t look for us.
Most of all I’d like to thank my family. My wife puts up with me despite my endless diversions from our regular life. My mother and brother are constant supporters, and even though they support me, they are not afraid to criticize me privately. That’s a great family.
Now I guess it’s back to life as a traffic ticket, DWI, and personal injury lawyer in Albany, New York and the surrounding area.
This got the most laughs during the Stop Wasting Money campaign:
There’s 535 people in Congress who pretend to be normal.
There’s room for one nut like me.
We’re in the homestretch of the Stop Wasting Money campaign. I’d like to recap the issues that are the center of this campaign, with links back to those posts.
Obviously the theme is Stop Wasting Money. The first area within this theme, and the biggest waste of money, is how much we waste overseas.
This is about the $200 billion we spend defending rich countries. We’ve been defending Europe, Japan and South Korea for 60, 60, and 50 years. They are wealthy countries and are perfectly capable of taking care of themselves. We should focus on defending our borders, and spending a lot less money doing so since that’s such an easy thing to do.
During the campaign, North Korea tested an atomic bomb. That prompted another post about how we waste money defending rich countries from lesser countries. North Korea is a great example, surrounded by China, Russia, Japan and South Korea, the smallest of the four with a high-tech economy 40 times the size of its northern neighbor. I also discuss this in the post on South Korean Pork.
The general issue is a great contrast between myself and my opponent. You can see us debating this and the other issues in Redlich – McNulty 1 and Redlich – McNulty 2. He insists on a timetable for withdrawal from Iraq, but refuses to set any timetable for Europe, Japan and South Korea. I say we get out of all of them as soon as possible. My opponent is really in the Washington mindset, and my disagreement isn’t just with him, but with all of Washington.
Pork barrel spending is a great example of wasted money. There are posts on farm subsidy pork, the reasons for pork, the magnitude of pork, Homeland Security waste, Congress’ sneaky earmark process, and how my opponent Mike McNulty supports pork consistently.
I also talked about how we waste money on the War on Drugs, in the way we approach drunk driving, and immigration.
I’ve discussed several other issues in the campaign, but the wasting money theme is the big one and the above posts cover it. You can also see comments on a variety of other topics by searching this blog (see the very top of the blog) or by looking at the list of topics on the right side.
One last issue, to be clear about the contrast between myself and my opponent: He voted for the war in Iraq. He continued to support it for a long time. Recently he’s said it was a mistake and that we should get out soon. But he’s never apologized for his vote, and he voted just a few weeks ago to continue funding the war he supposedly wants us to withdraw from.
I opposed the war in Iraq from the beginning. We should have finished Afghanistan before getting involved anywhere else. The Iraq distraction sucked the wind out of our effort in Afghanistan, and has greatly damaged our prospects there. Iraq was never a serious threat to the US. Several other countries were bigger threats both in WMD and in supporting terrorism. Pakistan was and is near the top of both lists, yet we call them an ally.
As a side note, McNulty referred to Pakistan as a stable government in one of our debates and defended that statement. This kind of misperception is quite dangerous, but is commonplace in Washington. Pakistan is a hotbed of Islamic fundamentalism and there have been at least two assassination attempts on Pervez Musharraf. He is holding it together for now, but who knows how long he’ll hold out. Meanwhile many suspect his government has aided Osama bin Laden and Al Qaeda. The discussion started with his reference to North Korea’s supposedly unstable government. While I agree that country is in a tough situation, its government has been stable for many decades and as far as I know there are no threats to its stability.