Economic Policy

AT&T and T-Mobile withdrew their merger application from the Federal Communications Commission Nov. 29 after it became clear that rigid ideologues at the FCC with no idea how to promote economic growth were determined to create as much trouble as possible. The companies will continue to battle the U.S. Department of Justice on behalf of their deal. They can contend with the FCC later, perhaps after the next election. The conflict with DOJ will take place in a court of law, where usually there is scrupulous regard for facts, law and procedure. By comparison, the FCC is a playground for politicians, bureaucrats and lobbyists that tends to do whatever it wants. In an unusual move, the agency released an analysis Read More ›

From George Gilder’s column in today’s Wall Street Journal, Meanwhile, Secretary of State Hillary Clinton and the president’s friends at Google are hectoring China on Internet policy. Although commanding twice as many Internet users as we do, China originates fewer viruses and scams than does the U.S. and with Taiwan produces comparable amounts of Internet gear. As an authoritarian regime, it obviously will not be amenable to an open and anonymous net regime. Protecting information on the Internet is a responsibility of U.S. corporations and their security tools, not the State Department. The full column is here.

Thomas L. Friedman has a particularly good editorial in today’s New York Times. While the subprime mortgage mess involved a huge ethical breakdown on Wall Street, it coincided with an education breakdown on Main Street — precisely when technology and open borders were enabling so many more people to compete with Americans for middle-class jobs. He cites Harvard University labor expert Lawrence Katz who explains: If you think about the labor market today, the top half of the college market, those with the high-end analytical and problem-solving skills who can compete on the world market or game the financial system or deal with new government regulations, have done great. But the bottom half of the top, those engineers and programmers Read More ›

Originally featured in The Claremont Review: In the current financial and political circus, with Fabian fantasists and climate cranks in control of economic policy, the mainstream media join Ivy League sages in condemning Adam Smith’s invisible hand. Free market ideology has blinded conservatives, say many sophisticates, to a crime wave on Wall Street, as Adam Smith gives way to Bernie Madoff as the epitome of capitalism. For perspective on what is going on, however, we should contemplate the view of Richard Armey, the crusty cowboy who long served as Republican majority leader and economic guru in the House, who pointed out to me more years ago than I want to recall, that economics has more hands and feet, visible and Read More ›

What we’ve got with this worsening recession is a political failure, not a market failure. A clueless partial truth from the one man who can do more than anyone to restore faith in the economy or bankrupt the nation: “You know, the stock market is sort of like a tracking poll in politics. It bobs up and down day to day, and if you spend all your time worrying about that, then you’re probably going to get the long-term strategy wrong.” Jim Cramer sums it up: …Obama has undeniably made things worse by creating an atmosphere of fear and panic rather than an atmosphere of calm and hope. He’s done it by pushing a huge amount of change at a Read More ›

Naturally, now that government plans to intervene in the economy with a massive stimulus package, everyone wants their “fair” share. Robert D. Atkinson, president of the Information Technology and Innovation Foundation, is arguing for digitized health records, a smart power grid and faster broadband connections: While creating jobs by upgrading the nation’s physical infrastructure may help in the short term, Mr. Atkinson says, “there’s another category of stimulus you could call innovation or digital stimulus — ‘stimovation,’ as a colleague has referred to it.” Although many economists believe that a stimulus package must be timely, targeted and temporary, Mr. Atkinson’s organization argues that a fourth adjective — transformative — may be the most important. Transformative stimulus investments, he said, lead Read More ›

I think McCain and Palin will win. I was in the Nixon campaign in 1968 and watched him try to coast to victory. If the election had been held a day or two later Humphrey would have won. Obama is already coasting even sooner than Nixon did. His idea that deregulation caused the crash is delusional. Hedge funds are actually outperforming banks and more regulated entities. Fanny and Freddy were pure political tools, regulated to the hilt to promote and mandate come-and-get-it EZchump mortgages, and the Democrats loved them both to death.

The Glass-Steagall Act of 1933 separated the investment and the deposit banking businesses. A bipartisan majority repealed it and President Clinton signed it into law in 1999. Is the repeal an example of deregulation leading to catastrophe? According to “A Mortgage Fable” in today’s Wall Street Journal, Washington is as deeply implicated in this meltdown as anyone on Wall Street or at Countrywide Financial. Going back decades, but especially in the past 15 or so years, our politicians have promoted housing and easy credit with a variety of subsidies and policies that helped to create and feed the mania. The editorial lists several contributing factors besides the “original sin of this crisis” — easy money — and “mark-to-market” accounting. Fannie Read More ›

I am not sure which is worse, Rep. Barney Frank’s proposal to limit executive compensation, or Treasury Secretary Henry Paulson’s reported justification for opposing it: Rep. Frank’s draft would mandate that any company selling assets into the program ‘meet appropriate standards for executive compensation,’ including limits on what could be deemed excessive or inappropriate, according to a copy seen by The Wall Street Journal. The government would also have the ability to ‘claw back’ incentive pay that was based on ‘earnings, gains, or other criteria that are later proven to be inaccurate.’* * * *Mr. Paulson is resisting efforts to limit the pay of executives whose firms participate in the program and plans to fight it “hard,” according to a Read More ›

No, cut the marginal tax rates more and the deficits will go away. Raise the rates enough and the deficit will grow even if spending is cut. Then spending will have to be further retrenched, ultimately reaching the point where the country will not be able to defend itself. In general, around the world, the countries with low or declining tax rates increase their government spending more than countries with high or rising tax rates. That’s because the low tax countries grow six times faster than the high tax countries do. What matters is not the deficit, but the rate of economic growth, which depends on low tax rates, secure property rights, open trade, and stable money.