Category archives: Economics

Watch Our Interview with Jay Richards

by Carrie Russell

December 10, 2010

On December 1, 2010, Jay Richards, author of “Money, Greed, and God: Why Capitalism Is the Solution and Not the Problem” talked about his book and how capitalism is not a problem in dealing with the current state of the economy.

Watch the Recap from FRC’s Family Policy Lecture

by Carrie Russell

November 18, 2010

Yesterday, FRC had a family policy lecture called, “The Puritan Gift: Reclaiming the American Dream Amidst Global Financial Crisis.” We had the opportunity to sit down with William Hopper to discuss “The Puritan Gift.”

To learn more about our upcoming Family Policy Lectures, click here.

Vote Yes on Slots? Here are some Why Nots

by Robert Morrison

October 13, 2010

The billboard promised me Better Schools if I voted for Question A. Who doesnt want better schools? Im ready to vote YES on Question A as soon as I get to the voting booth.

But, wait a minute: if Question A is really for better schools, a little homework might be helpful. Ah, so it turns out that Question A will allow the State of Maryland to put slot machines in the Arundel Mills shopping center.

Hmmm. Whats that got to do with better schools? Will the kids be able to play the slots at lunchtime and learn more about probability to improve their math scores? If they really learn about probability, theyll learn that gambling is a tax for people who didnt study math. Maybe the teachers will be able to supplement their income with some one-armed banditry after school hours. That might ease the pressure on the state budget. But well have to lay out more money for police.

This billboard ad is another of the dishonest tactics used to push state-sponsored gambling. I go back a long way with this issue. When I lived in Connecticut 25 years ago, I used to get my coffee in a little town that had a state-run Off-Track Betting (OTB) Parlor. As I ran into the coffee shop for a cuppa, Id be amazed at all the people in the parking lot who were busy trading little slips of paper. The OTB parlor wasnt open before 9 am, but here was a vigorous market in what used to be called the numbers racket. Illegal gambling was proceeding right outside the still-locked doors of the state-run OTB. Does that seem illogical? Werent we told that legalizing gambling would drive the Mob out? Think of it this way: If the state installs a porto-potty, its sure to draw flies.

Connecticut, of course, later became home to Foxwoods, a tribal casino. Thought youd seen the last of the Mohicans? Once the casino was announced, those claiming descent from the famous tribe came out of the woodwork. They promised jobs then, too, but one of the main jobs they hired for was that of seat-cushion changer. It seems that middle-aged ladies got so powerfully addicted to those slots, they would wet themselves. And so, you can work changing their seat cushions for the minimum wage. Nice work if you can get it.

Coming to work in Washington, I used to run down to a Korean-owned deli to get a coke in the late afternoons. But on Fridays, it was a chore to get into the place. Thats when folks lined up to buy their Mega-Millions Lotto tickets. One especially tall fellow standing in front of me had a fistful of slips with numbers and names on them.

Readers of The Autobiography of Malcolm X would recognize this tall fellow as a numbers runner. Malcolm X boasted of a friend so smart he could memorize hundreds of names and their matching numbers. The police vice squad could never get any evidence on this guy.

But here was the tall Mr. Numbers Runner himself, fistful of dollars and all. We were assured that legalizing the Lottery would put the numbers runners out of business. My tall line-standerduring what must still have been the federal work daywas wearing a baseball cap: U.S. Department of Justice Motor Pool was the cap device.

So not only did we not run the runner out of business, he was now working for the government. And if Main Justice needed to get a car quick to run out and arrest someone, theyd have to wait for Mr. Numbers Runner to get back from his other assignment.

I remember catching flak on gambling one time in Grand Rapids, Michigan, of all places.

I was then working for my church body, The Lutheran ChurchMissouri Synod. I was briefing an audience of our pastors on the work of the LCMS Washington office. In an aside comment, I knocked state-sponsored gambling.

Instantly, a pastor in the front row shot up his hand. Youre a crypto-Calvinist! he said accusingly. Not being a theologian, I wasnt sure what that meant, but I gathered from the pastors vehemence that it wasnt good. (At least, not good for a Lutheran layman.)

He proceeded to tell me that Scripture said nothing about gambling, that this was exactly what his fellow pastors were opposed to in a Washington office. I was about to go off-script just as badly on the right as so many Washington religious types go off on the left.

I was stung and felt really ignorant. I mumbled something about the love of money being the root of many evils, about In the sweat of thy face shalt thou eat bread, but I could tell that pastor was unconvinced.

Reflecting on that experience, I remembered what I might have said, with due respect:

Pastor: Do you think when Scripture tells us about the Roman soldiers who cast lots for our Lords garments at the foot of the Cross, that that was a positive reference to gambling? Maybe its just as well that I didnt have the presence of mind to engage in a nasty putdown of a sincere Christian minister.

I appeal to him now, and to all Christians who might be in doubt about state-run gambling. Last week saw the arrest of five Alabama legislators on charges of corruptionin league with gambling interests. Its not new. It happens every day. Gambling breeds such conduct.

Think of it this way: You may have a white rat as a pet. You may let your children play with your pet rat. They may even come to the dinner table, forgetting to wash their hands, and will probably not die.

But if you find a rat in its natural habitat, say, rattus rattus norvegicus, you can be sure that the rat does not carry bubonic plague. It does, however, invariably carry fleasand the fleas are the vector for plague.

Gambling is like rattus rattus. Even when its legal—especially when its legal, it brings corruption, extortion, drugs, prostitution, and violence, just as surely as rats carry the fleas that bring plague.

Ill vote NO on Question A. They say its for better schools. But after doing a little homework, Ive gotten smarter about state-sponsored gambling.

Is There a War Between Social and Economic Conservatives?

by Jared Bridges

September 24, 2010

Below is video for panel held today at FRC headquarters with Ross Douthat, Lawrence Reed, and Bob Patterson:

Below is the lowdown, and you can find embed code for the video and an audio download here:

Are social and economic conservatism at odds? According to political journalists Jonathan Martin and Ben Smith, … the battles over morality-based cultural issues such as gay rights, abortion and illegal drugs that did so much to drive the conservative movement and dominated the political conversation for more than 30 years have abated, giving way not just to broad economic anxiety but to a new set of emotionally charged issues. (Politico, August 20, 2010 )

Are they right? To answer that question, Family Research Council is hosting an important symposium on the relationship between economic and social conservatism featuring three of the nation’s leading observers of the political scene.

New York Times columnist Ross Douthat, formerly a senior editor at The Atlantic, has written extensively about religion, family, and public life. Douthat is the co-author, with Reihan Salam, of Grand New Party: How Republicans Can Win the Working Class and Save the American Dream (Doubleday, 2008).

Lawrence Reed is president of the Foundation for Economic Education and formerly led the Mackinac Center for Public Policy. Under his leadership, the Mackinac Center emerged as the largest and one of the most effective and prolific of over 40 state-based free market-oriented think tanks in the country.

Bob Patterson is a adjunct research fellow at the Howard Center for Family, Religion & Society of Rockford, Ill. and editor of The Family in America, which recently published his important article, “Fiscal Conservatism is Not Enough: What Social Conservatives Offer the Party of Lincoln.”

Reich Redux

by Rob Schwarzwalder

September 10, 2010

Readers of my occasional contributions to this site realize I have written several times about the going economic commentary of former Clinton Labor Secretary Robert Reich.

I do this out of no personal animus: By all accounts, Mr. Reich is a lively, warm, and indisputably intelligent man. However, he is a man whose economic misunderstandings border on the fabulous fabulous in the literal sense, the sense in which Gullivers Travels was fabulous. Absurd, gigantic, the stuff of satire. And just plain wrong.

Last evening, during his weekly Marketplace Radio commentary, Mr. Reich commented on the Presidents plan to provide tax reduction for businesses. Mr. Reich was intellectually apoplectic, reduced to explaining his understanding of the rudiments of the American economy:

The reason businesses aren’t investing in new plants and equipment has nothing to do with the cost of capital. It’s because they don’t need the additional capacity.

Well, Ill grant him this: capacity is related to productivity. However, capacity exists because capital is inaccessible (see below). And then, Mr. Reich persists:

Obama’s proposed corporate tax cuts won’t generate more jobs, because they won’t put any more money in worker’s pockets … Obama’s whopping proposed corporate tax cuts help legitimize the supply-side dogma that the economy’s biggest obstacle to growth is the cost of capital, rather than the plight of ordinary working people.

Two broad observations:

(1) Mr. Reich argues that we should put more money in workers pockets so they will spend more and thereby foster greater demand and thus stimulate corporate output, which means new hires and more jobs.

As usual, Mr. Reich is wrong. Most of the workers to whom he refers already pay, at best, modest taxes. Although I strongly support tax reductions for virtually everyone who pays them, the fractional amount of money a tax cut for the working lower-income (not quite the same ring as tax cuts for the rich, but more accurate) would put in their pockets would do little to induce economic growth.

Or perhaps Mr. Reich is thinking of some kind of direct federal payment to workers, of having the Treasury Department fabricate yet more money and dispense an arbitrary but politically potent amount of it to a favored group. Naturally, this would create more federal debt and serve as an at-best temporary infusion of capital into the economy. Sort of like a fiscal heroin injection.

Heres a better idea: If we lower taxes on corporations and provide incentives (e.g., making the R&D tax credit permanent, as Republicans have long advocated and which the President now suggests) to enhance innovation and improve Americas global competitiveness, companies will begin to hire more employees (i.e., workers, in Mr. Reichs parlance). These people will then start paying taxes, buying things of all types (from new cars to groceries) and thereby stimulate the market through wonder of wonders the private sector itself!

(2) Mr. Reich asserts that President Obama wants corporate tax reductions to lower the cost of capital.

This is part right, but misses the larger point. Corporate tax reduction encourages investment, productivity improvements, and frees up capital itself. A business that is not growing cannot access capital. A business that is growing and private sector growth happens, in large part, when the tax burden is not excessive creates jobs, eases the plight of those in the lower income brackets, and builds a stronger America.

Robert Reich has a marvelously mellifluous voice which is a delight to the ear. His obvious passion for people on the down-side of advantage is compelling. But he is wrong, in fact, philosophy, and policy. Thats what makes him, and his compeers in the American Left, so dangerous.

Miracle at the New York Times, Trouble for America

by Rob Schwarzwalder

June 18, 2010

We live in a world where the extraordinary has become commonplace.

A laptop computer in a coffee shop in Tulsa can link to a climber on Mt. Everest. We walk into a typical suburban supermarket and are faced with an overwhelming variety of every imaginable foodstuff, from 300 types of ice cream to 15 varieties of mozzarella cheese. Intricate surgery can be performed remotely through electronic “arms.” Finely-crafted telescopes can take us into the far reaches of a previously unexplored universe.

These things are amazing. But this morning I am deeply gratified that I have lived to see the day when the front page printed-edition of The New York Times carries a headline that more generally would befit Rush Limbaugh’s website than the cover of the Gray Lady: “Strong Steps or Oversteps? BP Is Latest Example of Tactic by Obama.”

Do wonders never cease?

The Times cites the President’s successful effort to get BP to commit to a $20 billion compensation fund as a “display of raw armtwisting” through which Mr. Obama “has reinvigorated a debate about the renewed reach of government power, or, alternatively, the power of government overreach.” The article concludes with this: “(Mr. Obama should) avoid painting with such a broad brush that foreign and domestic investors come to view the United States as a too risky place to do business, a country where big mistakes can lead to vilification and, perhaps, bankruptcy.”

This is only the latest episode in which the President has used the pretext of a crisis to seize power. No one excuses whatever legal or ethical lapses BP committed in the Gulf. Eleven men are dead, and countless gallons of crude oil continue to spew into the water around the Gulf Coast.

Yet what would Mr. Obama have done if BP had declined setting up such a massive fund and, instead, stuck to the $75 million mandated by law? Outlawed the firms presence on our shores? Filed a massive, punitive, bankrupting lawsuit?

Mr. Obama used American concerns with our medical insurance system to ram-through an unconstitutional mandate that all citizens possess health insurance, and included in his legislation provisions that provide federal subsidies to abortion providers. Additionally, the impenetrable measure is almost incalculably expensive.

He used a recession to ram through a “stimulus” package that places the federal government in the role of doling out hundreds of billions of dollars to private industry, thereby becoming a principal source of industrial growth. This growth will collapse, however, once the paper on which it is running crumbles in the fiscal wind. Then what?

He leveraged a crisis in the auto industry to make two of the three largest American auto companies fiefs of the federal government, to the point of forcing one of their boards to fire its CEO.

He eliminated private-source education loans, making college students dependent on Uncle Sam for their post-secondary education.

He is seeking to push homosexuals into the military, diminish religious liberty, skewer the public understanding of abortion (by saying we must reduce the need for abortion his Administrations term of art he insinuates that such need sometimes exists), consolidate the private financial system into a federally-run bureaucracy, and make homosexuality culturally normative.

His Treasury Department is pumping out money at an obviously unsustainable rate, placing us on the path to hyper-inflation and, thus, federal seizure of private assets to avert complete default.

Just wait until America faces a serious military emergency - say, another 9-11 style attack. How will this President use it to advance his vision of an America where “solidarity” trumps liberty?

When America’s liberal paper of record wonders about Mr. Obama’s overreach, it’s clear something is registering with even the elites: This is a different kind of presidency, a giant step down the road to serfdom described in the 1940s by Friederich Hayek.

In 1781, Thomas Jefferson - as much a prophet as a future President - wrote in his Notes on Virginia, “Dependence begets subservience and venality, suffocates the germ of virtue, and prepares fit tools for the designs of ambition.” From entitlements to stimulus packages to assorted federal power-grabs, we are at grave risk of becoming a subservient people, intellectually anesthetized by the superficial veneer of government-induced prosperity and security at the cost of our liberty, prosperity, self-reliance and, most essentially, virtue.

The Bible warns us not to place our trust in princes (Psalm 146:3), and for a reason: Our confidence must be in God and, as citizens, in the pathway for public life laid out in the Constitution.

Is it? And if it is, shall we oppose the collapse of the America we have known and love? The answer seems clear, if only we will act on it.

Obama Health Care Ignores Private Sector Realities

by Rob Schwarzwalder

March 26, 2010

According to Reuters, White House Secretary Robert Gibbs is unconcerned with the reports today by two leading American manufacturers that the newly enacted Democratic health system legislation will hit them hard financially.

John Deere and Caterpillar report a combined anticipated earnings loss of $250 million given the new tax provisions of President Obama’s just-imposed regime of federal health care management. This will affect their ability to hire, promote and provide benefits. It will affect the cost of the goods they sell and their ability to compete in domestic and international markets. It will hurt their ability to work with subcontractors and pay for retirement benefits.

In fact, Business Week notes the business consultancy of Towers Watson estimates a loss of $14 billion in corporate profits due to the Obama health regime-change (“Obama Taxs $14 Billion Charge Starts at Caterpillar,” March 25, 2010).

But, hey - to Robert Gibbs, all of this is worth one modest shrugging of his shoulders. Here’s what he said on Air Force One when asked about the hit Deere and Cat will have to take due to his boss’s new medical system overhaul:

So basically, they get a subsidy and what amounts to two deductions. They get the subsidy that’s not counted as income, then they get to write off the spending. This bill, our bill, simply closes the loophole.

Similarly, Commerce Secretary Gary Locke responded, “The rules…and a lot of the regulations on how this will affect large businesses haven’t even been published yet. So for them to come out, I think, is premature and irresponsible.”

I see: The Obama people are just closing tax “loopholes,” but it’s irresponsible for companies to estimate what the de facto taxes will cost them. How silly - a company ponders the affects of a tax hike and it’s irresponsible for letting its investors know its cost estimates. Guess I missed that lucid economic principle somewhere along the way.

Ask the families of people who are about to lose their jobs because President Obama and his congressional allies couldn’t care less about the private sector. Many of the President’s senior aides and appointees (including Mr. Gibbs) have never held jobs in the open market. They have never actually created a job, met a payroll, worried about opening a new store or burned the midnight oil experimenting with a new product.

In showing contempt for individual and corporate taxpayers, Robert Gibbs and Gary Locke reveal the true heart of the current Administration: Elitist, dismissive, arrogant and fundamentally ignorant of the American system of entrepreneurship, enterprise and market-based competition.

Physician, Heal Thyself!

by Robert Morrison

March 4, 2010

President Obama was surrounded by doctors and nurses in white coats for the second time this week. Yesterday, he was on national television, pumping for his health care plan. But before that video performance, he was at the National Naval Medical Center in Bethesda. He went there for his first physical as President.

I sure have to hand it to him: Hes practicing what hes preaching. Bethesda is government health care. I should know: my life was saved there by a top-notch Navy doctor in 1985. I had been stricken with viral meningitis, an often fatal illness.

My heart went out to the President when the report on his physical exam came back. He is having a hard time quitting smoking. This is a hard addiction to shake. I quit in 1977. Cold turkey. Havent had a cigarette since. Or a cigar. Or a pipe. (I found through many attempts to quit that going to a cigar or pipe just whetted the appetite and sent me right back to cigarettes.)

John McCain also quit smoking. He was teased during the ‘08 campaign about needing a smoke. He replied he hadnt had a cigarette in 28 yearsand still wanted one. Same here.

So millions of us ex-smoking Americans can sympathize with the President on this one. Its kind of funny, in a way, that his smoking habit may have contributed to one of his best qualities.

President Obama has a famously strong, sonorous speaking voice. So did the dean of all radio commentators, Edward R. Murrow. The great CBS reporter held Americans spell-bound with his reports from London during the Blitz. Old documentaries of the Second World War would be incomplete without the fashionable Murrows booming baritone and his trademark titleHear it Now. He was almost never depicted without a cigarette in hand.

The same goes for our wartime President, Franklin D. Roosevelt. Roosevelts fireside chats were a soothing, reassuring feature of wartime America. He was elected four times by the American people, the only President so favored. His voice was instantly identifiable in those pre-TV days. Millions of Americans heard that deep, masculine voice and felt safer with him in charge.

FDR was almost never seen without a lit cigarette. He would clasp his cigarette holder between his teeth and hold it at a jaunty angle. Throughout the war, FDR probably smoked two packs a day.

And it killed him. We now know that Roosevelt died of a massive cerebral hemorrhage. But he also had congestive heart failure. His paper-thin heart was overstressed every day by the strain of having to carry around 10 pounds of heavy metal braces on his legs. His two-pack a day habit could only have exacerbated his condition.

President Obamas powerful speaking voice enables him to get away with sayingwith a straight facethings that are wildly untrue, laughably untrue.

I am an ardent believer in free markets, he told members of the Business Roundtable. The Emperor was surely streaking on this one. Could not one of those pet business leaders invited to that Presidential lunch stand up and say: Where?

Have you ever seen an ardent believer in free markets who is so determined to exercise government control over so many of what his top economic advisers call the commanding heights of the U.S. economy? Do they even know that phrase is from that other famous ardent believer, Karl Marx? The list includes banks, insurance giants, GM and Chrysler. On top of this, the Obama administration will nationalize all college loans.

His cap and trade legislation may be stalled, but his Environmental Protection Agency has recently issued an endangerment ruling. If allowed to stand, this ruling could effectively bring every industry, every business in America under federal control. (And they did this even after they persuaded their Communist green jobs czar to resign.)

Consider this: Our ardent believer in free markets wants you to be dependent on the federal government for home mortgages, autos and auto loans, and college student loans.

Now, add health care to this mix, and what is left of the free market to supply? The Presidents addiction to taxing and spending is the one that is threatening our economic health. So, my advice to Dr. Obama, this ardent believer in free markets, is the same as Jesus: Physician, heal thyself!

Does “FTC” Mean “Clueless” ??

by Chris Gacek

December 18, 2009

With all the big health care news going on this week one could not be blamed for missing the news that the U.S. Federal Trade Commission has filed suit against Intel, the computer chip maker, for anti-competitive practices. This news left me scratching my head. Of course, it is possible that Intel is crushing its competitors with horrible business practices, but, as the Wall Street Journal notes, it isn’t so obvious. Chip prices decrease now at staggering rates, and it is not clear that Intel is selling their chips below cost, the lodestar of anti-competitive behavior.

More to the point is this: has anyone at the FTC noticed that we are in a crushing recession and that Intel is one of the very few bright spots in the American economy? I guess not. To an outsider Intel appears to be engaged in fierce competition while fighting off regulators using antiquated anti-trust tools.

The Europeans have recently fined Intel a massive amount, but this strikes me as being part of a emerging trade pattern in which EU authorities use their trade laws to cripple America’s leading tech companies. Of course, the U.S. government appears oblivious to this strategm. Microsoft has been the most visible punching bag for the Euros.

Bottom line: perhaps, our government would do better laying off our job creating industries and firms until the unemployment rate — the “U-6” rate which is the broadest — goes from 17% to half that amount. How’s that for a deal?

The Fatuous Job Summit

by Rob Schwarzwalder

December 4, 2009

The fact that President Obama will hold a jobs summit to figure out how jobs are created is perhaps the saddest commentary of all on the farce that is about to begin. It seems like good timing as our unemployment rate is over 10 percent, and well into the double-digits in some parts of the country.

Yet having a job creation debate at the White House is disheartening. Shouldnt an American President have some sense of how our market-based, competitive economy works?

More pointedly, the summit will produce no noticeable change in the policies of an Administration woefully and aggressively against the essential principles of the greatest jobs engine every designed or implemented, a free enterprise system based on property rights and capital formation.

Among the attendees will be Paul Krugman, the hard-Left columnist for the New York Times and near-pathological hater of all things conservative; Krugman wrote this week that the budget-cracking stimulus plan the White House enacted earlier this year was too small.

Also included will be a group of union leaders (by the way, what does the head of a teachers union know about employment policy?); Clinton Administration economists Joe Stiglitz and Alan Blinder; and the head of the Center for Budget and Policy Priorities, a left-liberal group whose Board members include (you guess it) George Soros and his buddies in that paradigm of union corruption, the Service Employees International Union.

Sundry business leaders will be thrown in to add a veneer of credibility, but the major business groups are absent from the current public list, as are members of the academic community who oppose statist economic policies. Sadly, business leaders are also absent from the Obama administration as well, as none of his top people worked in business or industry creating profit driven businesses and jobs.

According to the Associated Press, a Treasury Department report issued last month states that the federal deficit hit a record for October as the new budget year began where the old one ended: with the government awash in red ink. Treasury also warned that the deficit for October totaled $176.4 billion, even higher than the $150 billion imbalance that economists expected. Note: this is the deficit for a single month - not a calendar year.

Well, at the risk of sounding pretentious (I am not, like President Obama or Dr. Krugman, a Nobel Prize winner), here are five ideas distilled from leading economists dating from Adam Smith through the current day: If the President and his allies want to create jobs, they should:

(1) Quit spending the country into economic oblivion, farming out our debt to foreign creditors who will someday soon call in their loans and damaging our nations economy. If you stop overspending, you will also ameliorate the growing fear of many investors that we are on the verge of monetizing the debt, simply printing worthless bills that will hyper-inflate our currency. Fiscal discipline, if dramatic and real, will energize the markets.

(2) Cut taxes - on individuals and families, on major firms and S-corporations. Cut the dividend tax. Cut the income tax. Cut capital gains taxes. Cut, and cut some more. The private sector creates wealth, and lower taxes foster growth in the private sector, which in turn generates tax revenue for the federal government.

(3) Reduce and simplify a vast federal regulatory apparatus that confuses and cripples business expansion. Corporate America, from the multi-thousand international company employers to the Mom-and-Pop linoleum shops in the strip malls, are encumbered by regulations. We all know it. Bring rationality to this area, Mr. President, and you both demonstrate true courage and the enduring thanks of business people everywhere.

(4) End the government-mandated health care reform madness, which will further impose on our companies and employees growing fiscal, legal and regulatory burdens. Target those things in our system that dont work and offer market-based incentives and tax reforms that will enable insurance providers to better serve the underserved.

(5) Reform entitlements: Social Security and Medicare are economic Grim Reapers, standing athwart Americas future and intoning, Were waiting. Mr. Obama, want to make (good) history? Tackle entitlements, bring market-based reforms to them and then devise and implement a plan to devolve them back to the states.

Of course, nothing I have recommended will likely be put into effect while Barack Obama is in the White House, or at least while Democrats hold both Houses of Congress.

But no argument is ever won unless you make it. And, today perhaps more than any time in our history, conservatives need to be making these arguments.

The jobs lost and not created are creating a strain on the American family, and more and more men and women struggle to put food on the table. The Obama jobs summit is, then, not just about macro-economic policy, philosophical pedantry or whatever. Its about families, real people in economic crisis. And thats everyones business.

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