Economic Policy

Memorable comments

On deregulation: “It is ironic that cellphone service is widely available at low cost [in India] because it was regarded as a luxury and therefore left to the market, while electricity is hard to obtain because it has been regarded as a necessity and therefore managed by the government.” –Former Council of Economic Advisors Chairman Martin Feldstein, writing in the Wall Street Journal, Feb. 16, 2006. * * * On net neutrality: “with or without a new law, the FCC will affect the future in a major way by its approach to the question of broadband’s openness. Sometimes called net neutrality, the question of openness is multidimensional. It is hard to define and harder to answer. Chairman Martin and his Read More ›

Junk Finance

Don’t get cocky. This week’s news that your cellphone won’t give you brain cancer isn’t cause for relief or rejoice. You see, it’s really 1933 all over again: “Americans’ personal savings rate dipped into negative territory in something that hasn’t happened since the Great Depression. Consumers depleted their savings to finance the purchases of cars and other big-ticket items.” Although the definition of “deplete” is “to use up” or “to empty out,” it’s hard to see how consumers have “depleted” their savings when U.S. households have a record $51 trillion in net worth and a near record $27 trillion in financial net worth (excluding homes). By all means, let’s employ policies that encourage more savings and investment, but let’s not Read More ›

Gilder on Earmarks

Our colleague George Gilder yesterday in The Wall Street Journal explained the real source of egregious earmarks: How McCain-Feingold Favors ‘Earmarking’ January 26, 2006; Page A11 Your Jan. 17 editorial “The Keepers of K Street” ignored the most crucial source of “earmarks” in the congressional process — a campaign finance system that favors the bribery of interest groups over the contributions of citizens. Under McCain-Feingold, a citizen with diverse interests in the future of the nation is permitted to contribute $2,000. A political action committee representing a single interest group is permitted essentially unlimited contributions. In other words, a PAC is a monomaniac with a single legislative goal. Until ordinary taxpayers with diverse interests and common sense — perhaps kids Read More ›

Even more venture regulation?

My colleague Hance Haney mentions below a new IRS regulation that kicks in this month that will subject small start-up companies to specific accounting rules for stock options that could reduce the use of these important employee incentives. We should also call attention to new SEC regulations, initially meant for hedge funds, that could impose new reporting requirements and potentially even onerous investment clamps on venture capital and private equity. John Berlau of CEI has the story here… -Bret Swanson

Bernanke’s Gaps

Ben Bernanke, President Bush’s nominee to succeed Alan Greenspan as chairman of the Fed, is the John Roberts of monetary policy. He is intelligent, erudite, apolitical, pleasant, and prepared. Credentialed at the best schools and immersed in the theory and practice of monetary policy for the last several decades, Bernanke, says supply-sider Arthur Laffer, is “the right person at the right time.” It’s true President Bush could have done far worse. But I worry. You see, Bernanke is worried about gaps. He’s worried about trade gaps — he thinks the U.S. trade gap is caused by a global savings glut. And he worries about something called the output gap — a variant of the Phillips Curve, which supposes a trade-off Read More ›

Consolation Prize

Well, our favorite for Fed chair David Malpass of Bear Stearns didn’t get the top central banking job. But congratulations are still in order. Institutional Investor Magazine (sub. req.) has named Malpass the number two economist on its 2005 All-American Research Team. Ed Hyman of ISI was number one for the 87th year in a row (or something like that). -Bret Swanson

Hu’s the Supply-sider Now?

U.S. Treasury Secretary John Snow is in China for a nine day visit. But which nation’s leader is offering supply-side economic advice? If you guessed Chinese President Hu Jintao, you are correct. Citing evanescent “imbalances,” Snow continues his calls for de-linkage of the yuan from the dollar and subtly still pushes for a major yuan appreciation. The U.S. thus inexplicably continues its weak dollar currency policy. Hu, on the other hand, believes that “All countries, major economies in particular, should keep major currencies reasonably stable and prevent trade protectionism.” Bingo. Over the past decade, the dollar-yuan link has been a key source of growth and stability not only for the U.S. and China but also across the global economy. China’s Read More ›

Coast to Coast

Ten Days of Quantum Science and Supply-side Economics With our annual Telecosm conference in Lake Tahoe sandwiched by two trips to Washington, D.C., it was a whirlwind two weeks. Seeing old friends and meeting new ones from the Telecosm Lounge ( is always a great part of Telecosm. It was no different this year, as we had enough EZchip (LNOP) owners to convene a significant shareholders meeting with CEO Eli Fruchter at lunch on Wednesday even though the company’s official annual meeting was taking place that very day in Israel. “No one comes to our official meeting,” Eli said. He was amazed that Glen had memorized every word of every press release of the last five years and that West Read More ›

Malpass or Manny?

The Wall Street Journal reports this morning that the White House may be looking beyond the presumed “list of four” (Lindsey, Bernanke, G. Hubbard, Feldstein) to fill Alan Greenspan’s chair at the Fed. This is great news, as it may open the door for monetary stalwarts like David Malpass of Bear Stearns, or, as Cesar Conda suggests on the Journal’s editorial page, Manuel Johnson, who in 1996 wrote one of the very best books on monetary policy. Malpass and Johnson are supply-siders who favor a price-rule to maintain a stable value of the dollar and who deeply understand the global nature of all economic policy. Columbia’s Glenn Hubbard, who was President Bush’s CEA chair in charge of the excellent 2003 Read More ›

The Other Gulf Green Zone

President Bush has proposed another Green Zone for the Gulf. This one is not a fortress in Baghdad, however, but a greenlined “opportunity zone” in Louisiana, Mississippi, and Alabama. Although I share concerns that Washington will shovel money South indiscriminately, the free zone portion of the proposal is just the right strategic approach. Not just because of what it might do for New Orleans and the Gulf region but for its potential follow-on effects across the nation. China has already shown us the way. In the late 1970s, Deng Xiaoping established four Special Economic Zones in Shenzhen, Fujian, and Shanghai, where tax rates and regulations were low or non-existent. Financial and human capital poured into the zones, and they became Read More ›