Monday, January 21, 2008

Death and taxes

How much of a role should government play in the management of the American economy? An article in the NYT suggests Hillary Clinton thinks it should be substantial.

Senator Hillary Rodham Clinton said that if she became president, the federal government would take a more active role in the economy to address what she called the excesses of the market and of the Bush administration. ...

Reflecting what her aides said were very different conditions today, Mrs. Clinton put her emphasis on issues like inequality and the role of institutions like government, rather than market forces, in addressing them. ... “If you go back and look at our history, we were most successful when we had that balance between an effective, vigorous government and a dynamic, appropriately regulated market,” Mrs. Clinton said. “And we have systematically diminished the role and the responsibility of our government, and we have watched our market become imbalanced.”

These remarks are certain to be compared with Mitt Romney's remarks at the Detroit Economic Club, which were reported in the National Review Corner.



The biggest news was his call for $20 billion per year of “investment in energy research, fuel technology, materials science, and automotive technology,” presented both as a way to help the auto industry, and as an alternative to the whole panoply of global warming-related measures that McCain supports. Romney made the sensible point that a unilateral U.S. cap-and-trade regime instituted as a feel-good “statement” that will cost hundreds of billions of dollars and hundreds of thousands of jobs, while not really solving a problem of very uncertain size without global participation, might not be so smart. This issue will move many votes from McCain to Romney today, and it should.

The risk, of course, is that most of this “investment” will be nothing but corporate welfare that props up a decaying auto industry structure, and wastes other people’s money in delaying further necessary restructuring.

But comparing the remarks of both Presidential candidates requires a framework against which to assess their proposals. Romney begins from the premise that government policy already affects the workings of industry. The challenge, given that existing intervention, is to make the correct intervention.

Hillary Clinton similarly recognizes the existing effect of government on the economy. She says, "economic excesses — including executive-pay packages she characterized as often 'offensive' and 'wrong' and a tax code that had become 'so far out of whack' in favoring the wealthy — were holding down middle-class living standards" But beyond the specifics of any particular tax proposal she appeared to claim the economy could benefit from more regulation. In other words, that the market could not be relied on to make rational decisions. Politicians could make better decisions than the market, especially if they 'cared'. "Reflecting what her aides said were very different conditions today, Mrs. Clinton put her emphasis on issues like inequality and the role of institutions like government, rather than market forces, in addressing them. ..."

“If you go back and look at our history, we were most successful when we had that balance between an effective, vigorous government and a dynamic, appropriately regulated market,” Mrs. Clinton said. “And we have systematically diminished the role and the responsibility of our government, and we have watched our market become imbalanced.”

When Hillary added: “I want to get back to the appropriate balance of power between government and the market,” it could only possibly have meant that she felt the market had grown too big for its britches, and that to restore the "balance" government had to increase its share in the decision making.

Framing the debate as an issue of how much power government should have over the economy automatically transforms business issues into political ones. At every stage business must consider the redistributive effects of its efforts, its effect on the environment. In other words, managing a business and earning a livelihood become as much a political endeavor as an economic one.

The electorate will decide which approach they prefer: more government or less government, though its unclear whether, in the blizzard of talking points that now blankets the airwaves, the choice will be framed in clear and definite terms. More likely the choice will be embedded in the sloganeering, in the fine print of the political process. But it's an issue important to separate out and consider on its own. Otherwise some people may find that Change is what is left after taxes. And Hope is what you rely on to get to the next payday.

21 Comments:

Blogger Peter Grynch said...

It may be a coincidence, but world stock markets plunged after the Hillary article:
On Monday, Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

In Canada, the S&P/TSX composite index on the Toronto Stock Exchange fell 4.8 percent. Brazilian stocks plunged 6.6 percent on the main index of Sao Paulo's Bovespa exchange, and Argentina's benchmark Merval index fell 6.3 percent to close under 1,900 for the first time since August 2006.

Just last Wednesday, the Hang Seng index sank 5.4 percent.

Japan's benchmark Nikkei 225 index slid 3.9 percent to close at 13,325.94 points, its lowest close in more than two years. China's Shanghai Composite index plunged 5.1 percent.

http://biz.yahoo.com/ap/080121/world_markets.html

1/21/2008 04:13:00 PM  
Blogger sbw said...

There is no more important book to read to defend yourself against Hillary's overdrawn account than P. J. O'Rourke's "On the Wealth of Nations" which, recalling Adam's Smith's fact-based missive, reminds us that all Hillary offers has been tried before and found wanting.

1/21/2008 04:39:00 PM  
Blogger John Lynch said...

Ack! I already lived through the 70s! Now they want to bring them back through military defeat and stupid economic management!

1/21/2008 04:45:00 PM  
Blogger Peter Grynch said...

All socialists are convinced that Socialism WILL work- if only THEY were put in charge.

Interesting factoid: Dick and Lynne Cheney (who the Left consider greedy and evil) typicall give over 75% of their incomes to Charity. During the 2000 election it came out that the Gores had contributed a total of less than $400 to charity.

Liberals are exceedingly generous with other peoples money.

"Tax not you and tax not me, tax that man behind the tree"

PT Barnum should get a posthumous Nobel in economics for saying "There's a sucker born every minute!"

Happy MLK day! Ther will never be another like him.

1/21/2008 04:47:00 PM  
Blogger hdgreene said...

Sounds like Hillary believes in Ying and Yang economics. The Tao of Taxes!

She said she would stop houses from being repossessed. That means rather than working with debtors, creditors need to hustle them out on to the streets in a hurry, before Hillary expropriates the property. That means more property on the market, and home values tank. A lot of foreign capital is tied up in these investments so look for fire sales (and maybe arson , too) and capital flight. That will tank the dollar. That will cause higher interest rates to defend the dollar. Higher unemployment quickly follows and a deep recession.

This will all start on Bushes watch. Hillary needs to cause a depression before she can be the New FDR.

I would like to think she is doing this cynically to help her win the election but I don't think so. I believe she is an economic imbecilic. She's far from stupid but no matter how many times basic economic laws are explained to her, and no matter how many times she sees them in action, she just will not understand them. The basic laws of economics are not something you fudge any more than you fudge the laws of physics. Driving a car at 100 mph into a bridge abutment will not produce a favorable result just because you refuse to believe the laws of motion.

Even the business press will miss this, I think. The quality of reporting on the economy is generally pretty low. And most of them probably want the Democrats to win and if that requires a recession, well, we need one anyway. If I'm right about Hill, what they are going to get will blow their socks off.

1/21/2008 05:17:00 PM  
Blogger Wretchard said...

Here's a Reuters article that examines Romney's economic management record. Does "industrial policy" make a difference?

Right now a lot of people are worried about economic trends because they don't know where the bottom is. It's interesting to note that back in 2005, economists were shaking their heads over a country with an undervalued currency, nonperforming bank loans, growing income disparities and corporate welfare. The country? China. But the interesting part is that China found its way out of the wilderness by allowing values to fall. Ironically, that might be an easier trick to pull off in an authoritarian country.

1/21/2008 05:20:00 PM  
Blogger paul said...

Hillary's all for cutting executive pay as excessive. How about the income of big time Democratic party donors like George Soros or Peter Lewis, will their income be cut? Will she also cut pay for big time movie stars, entertainers, and sports stars? How about cutting the excessive $10 million/year + that Bill is pulling in giving speeches? How about Al Gore's haul from his global warming medicine show? Some how I don't think any of that's going to happen even though none of them make anything of value or create wealth.

1/21/2008 06:39:00 PM  
Blogger Tamquam Leo Rugiens said...

“I want to get back to the appropriate balance of power between government and the market,”
I seem to recall that the government had a great deal to say about regulating the market during the halcyon days of of the first two terms of the Roosevelt administration. During the second two terms they concentrated on beating Germany and Japan instead, which led to the awful markets we had at that time. Or am I missing something?

1/21/2008 06:39:00 PM  
Blogger paul said...

Hillary's all for cutting executive pay as excessive. How about the income of big time Democratic party donors like George Soros or Peter Lewis, will their income be cut? Will she also cut pay for big time movie stars, entertainers, and sports stars? How about cutting the excessive $10 million/year + that Bill is pulling in giving speeches? How about Al Gore's haul from his global warming medicine show? Some how I don't think any of that's going to happen even though none of them make anything of value or create wealth.

1/21/2008 06:41:00 PM  
Blogger TmjUtah said...

I second the observation that once was enough for the seventies.

I've got a banner for the networks:

Election 2008: PANDERMONIUM!!!

1/21/2008 07:42:00 PM  
Blogger hdgreene said...

A little of topic, but relates to a post about ten days ago.

tpmelectioncentral.com has a video of the Democratic Debate. They are going at each other pretty good. At the end of the clip Hillary attacked Obama, saying she was fighting bad Republican ideas while Obama was "practicing law and defending his campaign contributor Resko and his slum landlord business in inner city Chicago."

I think she may have over reached there. That's the sort of attack you have the next person on your campaign you're going to fire make, if you need to make it at all. The statement she made has overtones of race traitor and corrupt political hack.

Also, Republicans can now go there if Obama wins the nomination.

If Obama is anything like the principled idealist he pretends to be the Democrats could be in trouble. Personally, I'd be furious.

1/21/2008 08:07:00 PM  
Blogger Fat Man said...

Here is the bad news Hillary is a Hard Core Socialist. But we always knew that.

Here is the good news, such a it is. The Clintons are extraordinarily corrupt, so much so that they can and will be bought off of any real attempt to impose socialism.

More good news. If the American people get to see enough of her over the next 10 months, they may be so sick of her that they will not vote for her.

1/21/2008 08:08:00 PM  
Blogger jj mollo said...

Is there any reason to think that HRC's economic policies would deviate much from the DLC philosophy. WJC was certainly not a socialist. He supported free trade pretty vigorously.

Personally, I'd like to see a federal government capable of keeping corporations in check to this extent -- enforcement of: truth in advertising, truth in lending, truth in corporate financial representations, insider trading laws, fair competition, anti-trust laws. I also like to see a government with the teeth -- and the brains -- to act against stock bubbles, real estate bubbles, S&L scandals, Enron style speculation and market manipulations, et bloody al.

The most important thing that any administration should do, however, is keep their hands off the Federal Reserve. Just stand back and let it do what it has to do. It would please me to hear a pledge from the candidates on that score.

1/21/2008 08:55:00 PM  
Blogger Peter Grynch said...

Bill Clinton owes all the credit for his "accomplishments" to the fact that he had a Republican Congress. Clinton actually shut down the Government when Congress refused to spend too much money on his pet programs. In his first two years he had a Democrat Congress and he not only jacked up taxes, he almost succeeded in grabbing the entire healthcare industry and putting it under direct government control.

Hillary, if elected, will inherit a big Democrat majority in Congress and Harry Reid and Nancy Pelosi as the Congressional leaders.

1/22/2008 04:48:00 AM  
Blogger Charles said...

I seem to recall that the government had a great deal to say about regulating the market during the halcyon days of of the first two terms of the Roosevelt administration.
///////////
they were not halcyon days. rather the period from 1928-1942 was a period of great change.

We have entered into the first 2-3 years of a similiar period.

1/22/2008 05:10:00 AM  
Blogger JimMtnViewCa said...

I'm one of those who still is not sure. Is it her world view? Or is it that the Dem Party is dependent on the votes of people in unions with gov't jobs and people who are out of work?
Could be both, I guess.
In any case, destroying the US economy would be an important first step in implementing her policies and coincidentally reducing the power of her opponents.

1/22/2008 08:59:00 AM  
Blogger Dan said...

"I second the observation that once was enough for the seventies."

Thirded here. Anybody else cringe the first time they saw these ridiculous "flare" jeans, which are pretty much bellbottoms by another name? Lipstick on a pig, or what?

Hippies are also thriving, we're in a period of environmental sensitivity even more insane than the one that gave us the crying indian, and it may just be my imagination but I swear that even car styling is swinging back to the 70s.

It's not just political or economic. It's CULTURAL.

If we were going to go back to a previous decade, it should have been the 80s. Or the 50s...I wasn't alive then but I really dig the music and love the cars.

1/22/2008 09:52:00 AM  
Blogger Jamie said...

Hang on there, Dan, those flare jeans at least help balance the silhouette of those of us with "womanly" hips. Up to a point. (When the flare exceeds the actual length of the foot, well, that's one toke over the line, I think.) But that's ALL I want back from that horrid time.

peter grynch - considering how the markets respond to commentary alone(remember how circumspect Greenspan always was, since he knew his words would be interpreted to death and cause potentially wild swings?), I find it amazing that Clinton (and the rest of her party) seem really to believe that actual "feather touches" from the government would actually have a good effect. Crazy.

1/22/2008 11:54:00 AM  
Blogger Marzouq the Redneck Muslim said...

Any of us who remember life during Jimmy Carter's 70's can easily imagine Obama's or Clinton's end of the first decade of the 21st century. Failing economic policy will be the norm again.

Regarding Iran, a precursor of Democrat/Socialist attitude/policy can be seen in the way Holland reacts to Iran's recent demand. Iran threatened massive protests in Holland if the Dutch government does not censor a movie depicting Islam in a bad light according to the Mad Mullahs. Will Holland's government be sensitive to the Mad Mullahs' taste? Will Social Marxism win in Socialist Europe?

If the Democrats take the executive and hold the legislative branches, it shall be a loooooooong 4 years!

Salaam eleikum Y'all!

1/22/2008 04:17:00 PM  
Blogger Donald Sensing said...

Have you watched American Idol this season? Several times Simon has told an auditioner, "You're not as good a singer as you think you are."

And that's Hillary's problem. She mahy be smart, but she's not nearly as smart as she thinks she is.

She strikes me as someone who has no synoptic or integrative ability. She knows facts and she has an ideology, but she has no understanding, no insights. Her ideals, such as they are, trump knowledge about economics. But I am not sure she really even knows what her ideals are. She wants the government to have more ppwer and more control over people's lives, but she doesn't know what for.

Like her husband, there's no there, there. She has no depth even though she can recite legions of facts.

She is just chasing power, but like the dog chasing a car, she doesn't know what to do with it once she gets it.

1/22/2008 07:34:00 PM  
Blogger Mad Fiddler said...

I seem to recall that there was a serious attempt by the Democratic congress under Clinton to pass laws that would have allowed them to impose a new tax on retirement accounts. The justification offered was that such monies were redundant anyhow, not doing anything to help the individual, and besides, the nation NEEDED the funds to reduce the national debt...

1/25/2008 09:17:00 AM  

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