Stimulus Now, Restraint Later? by David Boaz

Journalists have been repeating lately that "economists say" that we need yet more government spending now to keep on goosing the economy, even though -- to be sure -- we will need to cut back on spending at some point in the undefined future, to avoid the fate of Greece. Well, maybe some economists. But I'm sure this "economists agree" claim is no more true today than it was a year ago. Here's one example, from NYU economist Mario J. Rizzo, coauthor with Cato senior fellow Gerald P. O'Driscoll Jr. of The Economics of  Time and Ignorance:
But let’s look at the arguments made by the opponents of fiscal stimulus. Some have argued that, as deficits increase, people now offset the putative stimulus by increasing their savings in anticipation of future tax increases. So there is no stimulus now. Others have argued that, for example, extending unemployment insurance (again) to those unemployed for more than six months will increase the length of unemploymentnow (by subsidizing it) while failing to stimulate. The stimulus failure is due to the relatively small increase in spending induced by non-permanent increases in income (as unemployment insurance is certainly not permanent source of income). Even more, producers know that the spending is non-permanent so it is unlikely to result in increased employment of labor. Thus, there is no stimulus now; in fact if unemployment continues there is a kind of anti-stimulus now. Austrians have argued that failing to allow the housing market to adjust by both fiscal and monetary propping-up measures, worsens the situation now by prolonging the inevitable adjustment to a bubble sector. As the adjustment is dragged out and the rest of the economy suffers the dampening effectsnow. This must include the uncertainty as to when (in calendar time) the market will be allowed to adjust. In empirical work, John Taylor finds that to the extent there was some effect of the fiscal stimulus it was very small and lasted only a matter of two or three months for each major injection. So I guess the long run is four or five months by this reckoning:
Compared with the 2008 stimulus, the 2009 stimulus was larger, but the amount paid in checks was smaller and more drawn out. Nevertheless, there is still no noticeable effect on consumption. I also show the timing of the “Cash for Clunkers” program in Figure 7; it did encourage some consumption, but did not last and cannot be considered an effective method to stimulate the economy. In addition, my analysis of the government spending part of the stimulus is that it too had little positive impact.
Even frameworks that stress future consequences of current stimulus need not be long-run theories in the calendar sense. For example, if the anticipated taxes required to pay off or service current deficits consist of rises in marginal income tax rates, output will be considerably lower and the real interest rates higher in a matter of a couple of years than without stimulus. The upshot of all of this is that the anti-stimulus economists are not claiming we must trade off benefits now for some long-term pie-in-the-sky benefits. Most are saying: The stimulus route leads to (almost) no benefits now as well as costs later.

Posted on June 29, 2010  Posted to Cato@Liberty

Robert Byrd and the Constitution by David Boaz

Senator Robert C. Byrd, who died today at age 92, had a long and varied career. Unlike most senators, Senator Byrd remembered that the Constitution delegates the power to make law and the power to make war to Congress, not the president. He often held up the Cato Institute's pocket edition of the Constitution as he made that vital point in Senate debate. I have several emails from colleagues over the years reading "Senator Byrd is waving the Cato Constitution on the Senate floor right now." Alas, if he really took the Constitution seriously, he would have realized that the limited powers it gives the federal government wouldn't include many of the New Deal and Great Society programs that opened up whole new vistas for pork in West Virginia. Justin has already used the photo of Senator Byrd wielding the Cato Constitution to make a point on Meet the Press in 2004. At right, at a Capitol Hill press conference in 1998 after the Supreme Court rejected the line-item veto, Sens. Carl Levin (D-MI) and Byrd cite their pocket Constitutions as Sen. Pat Moynihan (D-NY) looks on. For more examples of senators and other public figures displaying the Cato pocket Constitution, see this Cato Policy Report (pdf) article. To purchase copies of the Cato pocket edition of the Constitution, which also includes the Declaration of Independence and an introduction by Roger Pilon, click here. Let us hope that some other senator takes up Senator Byrd's vigilance about the powers of Congress and the imperial presidency.

Posted on June 28, 2010  Posted to Cato@Liberty

Technology vs. Tyranny by David Boaz

The Wall Street Journal reports Saturday that Turkey and Pakistan are blocking, monitoring, and threatening such websites as Google, YouTube, Facebook, Yahoo, and Amazon. At least you've got to give them credit for going after the big guys! The Journal notes, "A number of countries in the Islamic world, including Iran and Saudi Arabia, have banned Internet content in the past for being sacrilegious. But those countries have authoritarian governments that closely monitor the Internet and the media." Of course, it's not just Islamic countries that try to protect their citizens -- or subjects -- from dissenting thoughts. China has been involved in well-publicized battles with Google, Rupert Murdoch's Star TV, and other media companies. But it's hard to make your country a part of the world economy and keep it closed to outside thoughts and images. North Korea may be able to do it -- though recent stories suggest that even the benighted people of the world's most closed society know more about the world than we have previously thought. Countries that don't want to be North Korea have a harder time. The latest example: Thomas Erdbrink reports in the Washington Post that Murdoch's Farsi1 satellite station is
pulling in Iranian viewers with sizzling soaps and sitcoms but has incensed the Islamic republic's clerics and state television executives. Unlike dozens of other foreign-based satellite channels here, Farsi1 broadcasts popular Korean, Colombian and U.S. shows and also dubs them in Iran's national language, Farsi, rather than using subtitles, making them more broadly accessible. Its popularity has soared since its launch in August.... Satellite receivers are illegal in Iran but widely available. Officials acknowledge that they jam many foreign channels using radio waves, but Farsi1, which operates out of the Hong Kong-based headquarters of Star TV, a subsidiary of Murdoch's News Corp., is still on the air in Tehran. Viewers are increasingly deserting the six channels operated by Iranian state television, with its political, ideological and religious constraints, for Farsi1's more daring fare, including the U.S. series "Prison Break," "24" and "Dharma and Greg."
Those who want to build a wall around the minds of the Iranian people denounce Murdoch and his temptations:
Some critics here hold Murdoch responsible for what they see as this new infestation of corrupt Western culture. The prominent hard-line magazine Panjereh, or Window, devoted its most recent issue to Farsi1, featuring on the cover a digitally altered version of an evil-looking Murdoch sporting a button in the channel's signature pink and white colors. "Murdoch is a secret Jew trying to control the world's media, and [he] promotes Farsi1," the magazine declared. "Farsi1's shows might be accepted in Western culture . . . but this is the first time that such things are being shown and offered so directly, completely and with ulterior motives to Iranian society. Does anybody hear alarm bells?" wrote Morteza Najafi, a regular Panjereh contributor.
The Iranian state -- Akbar Ganji calls it a "sultanate" in Weberian terms -- has tried to block access to Farsi1. It jams foreign channels, it sends police out to confiscate satellite dishes, but it can't seem to prevent many citizens from tuning in to officially banned broadcasts. Way back in 1979, David Ramsay Steele of the Libertarian Alliance in Great Britain wrote about the changes beginning in China. He quoted authors in the official Beijing Review who were explaining that China would adopt the good aspects of the West -- technology, innovation, entrepreneurship -- without adopting its liberal values. “We should do better than the Japanese,” the authors wrote. “They have learnt from the United States not only computer science but also strip-tease. For us it is a matter of acquiring the best of the developed capitalist countries while rejecting their philosophy.” But, Steele replied, countries like China have a choice. “You play the game of catallaxy, or you do not play it. If you do not play it, you remain wretched. But if you play it, you must play it. You want computer science? Then you have to put up with striptease.”  North Korea and Burma choose to "remain wretched." That's not the future Iran's leaders want. But they too will find it difficult to keep their citizens in an information straitjacket while participating in a global economy.  Footnote: In all this discussion of how authoritarian governments try to protect their citizens from offensive images, alternative ideas, and what's going on in the rest of the world, I am for some reason reminded of the "30 Rock" episode in which NBC executive Jack Donaghy (Alec Baldwin) is trying to figure out how to deal with a high-strung performer. Another actress tells him, "You've got to lie to her, coddle her, protect her from the real world." Jack replies,"I get it -- treat her like the New York Times treats its readers."

Posted on June 26, 2010  Posted to Cato@Liberty

1940: The Birth Year of Liberal Anti-Communism? by David Boaz

We sometimes talk about 1943 as the year that the libertarian movement really started, with the publication of three passionate books by Ayn Rand, Rose Wilder Lane, and Isabel Paterson. In his review of a new biography of Arthur Koestler, Paul Berman makes 1940 sound like a crucial year for books of liberal anti-communism (that is, of course, anti-communism by modern liberals, not classical liberals, who were always opposed to socialism). Perhaps it took 20 years for liberals and anarchists to realize what was happening in Russia and organize their thoughts about it. Libertarians got there a bit sooner, from Mises's theoretical critique in Socialism in 1922 to Rand's firsthand experiences that led to the publication of We the Living in 1936.  Koestler's book Darkness at Noon was completed in 1940, then smuggled out of Vichy France and published the next year. Also in 1940:
A talented little group of intellectuals in the 1930s was keen on Promethean myths, and the center of that impulse was the United States, where the talented group pictured the Communist movement in the light of Prometheus and his struggles. Edmund Wilson devoted his masterwork To the Finland Station to the Promethean theme—it, too, came out in 1940, by the way.... 
By the time Wilson completed his own manuscript, he knew very well that, in Russia, Marxism had pretty much failed. And he attributed this failure largely to a philosophical error on Marx’s part, back in the nineteenth century. Marx had thoughtlessly incorporated into his own doctrine a whiff of mysticism, drawn from Hegel. The mystical whiff had transformed Marx’s movement from a sober, progressive-minded, social-science action campaign into a movement of religious inebriates. A religious frenzy had produced a hubris. Under Lenin and the Bolsheviks, hubris led to despotism. And to crime—to the deliberate setting aside of moral considerations. To the dehumanization of humanism.
Such was Wilson’s argument in To the Finland Station. Here was the Promethean myth, twisted into tragedy: a story of rebellion and counter-rebellion. Freedom and its betrayal. Fire and self-immolation. Wilson’s philosophical mentors were Max Eastman and Sidney Hook, and in that same year each of those redoubtable thinkers came out with his own variation on the same interpretation—Eastman in an essay in Reader’s Digest (which later appeared in his book Reflections on the Failure of Socialism) and Hook in a volume called Reason, Social Myths, and Democracy. In the United States in 1940, tragic Prometheanism was more than an argument. It was a school of thought.
And somehow Koestler, composing his novel under European circumstances inconceivably more difficult than anything his American colleagues would ever experience, arrived at roughly the same interpretation.
Read more...

Posted on June 25, 2010  Posted to Cato@Liberty

Creating Stimulus Jobs, One at a Time by David Boaz

From ArtsAndScience, the magazine of Vanderbilt University's College of Arts and Science:
Assistant Professor of Chemistry John McLean has been awarded a $2.7 million Grant Opportunity grant from the National Institutes of Health as part of the American Recovery and Reinvestment Act of 2009.

Posted on June 24, 2010  Posted to Cato@Liberty

Stossel: New Topic, New Time by David Boaz

John Stossel's weekly show has a new time: 9 p.m. and midnight every Thursday on the Fox Business Network, plus Fridays at 10 p.m., Saturdays at 9 p.m. and 12 midnight, and Sundays at 10 p.m. (Don't get Fox Business? Tell your cable company you want Stossel!) On this week's show Stossel will interview 76-year-old Otis McDonald about his lawsuit seeking the right to protect himself with a gun, which is now before the Supreme Court. He'll also talk to John Lott about the new edition of his book More Guns, Less Crime. While you're waiting for Thursday night, check out Stossel's show on Milton Friedman, which featured interviews with Johan Norberg, Tom Palmer, and me. Or indeed his classic ABC special on politics and limited government, where I got even more air time!

Posted on June 23, 2010  Posted to Cato@Liberty

Where Are the Libertarians? by David Boaz

Jason Sorens, political scientist and founder of the Free State Project, has a series of posts at Pileus trying to estimate  the size of the “liberty constituency” in each state. Using statistical techniques well beyond my high-school algebra, he first calculated the support for Ron Paul's presidential campaign in each state if conditions were equal. It may not be terribly surprising that by those calculations Ron Paul's best states -- and therefore, putatively, the states with the largest "liberty constituency" -- were New Hampshire, Idaho, South Dakota, and Washington. In fifth place, presumably reflecting those dreaded "Beltway libertarians," was the District of Columbia. In part 2 Sorens used principal component analysis (PCA) to see whether a libertarian constituency exists as a concept and is distinct from mere liberalism-conservatism. Using eight variables drawn from election results and opinion surveys, he combines four of them to estimate “size of libertarian constituency,” and four others to estimate “size of liberal constituency," the inverse of which would be the size of the state's conservative constituency. That gives him this chart: Sorens points out, "Idaho, Utah, Wyoming, Nebraska, Oklahoma, and Alaska are the most conservative states, while Vermont, Rhode Island, Massachusetts, Hawaii, Connecticut, and New York are the most liberal states. The states with the most libertarians are Montana, Alaska, New Hampshire, and Idaho, with Nevada, Indiana, Georgia, Wyoming, Washington, Oregon, Utah, California, and Colorado following." The most liberal states don't seem to have many libertarians. Of the conservative states, Idaho and Alaska have a lot of libertarians, Oklahoma and Nebraska not so much. (I suspect that a more mainstream libertarian-leaning candidate, a small-government, free-trade, skeptical-of-foreign-intervention candidate like Nebraska's own Chuck Hagel, might have more appeal to the sober burghers of the Cornhusker State than the more provocative candidacies of Ron Paul and the Libertarian Party.) Read more...

Posted on June 22, 2010  Posted to Cato@Liberty

Somebody Tell Serena Williams by David Boaz

Americans don't curtsy to foreign monarchs.
Serena, who earned her third title by beating her sister in last year's final, has tweaked her tournament preparation in anticipation of a visit Thursday to Wimbledon by Queen Elizabeth II. "I've been working on my curtsy," Serena said. "It's a little extreme, so I'm going to have to tone it down. I was practicing it this morning."
This is a republic. We do not recognize distinctions among individuals based on class or birth. We are not subjects of the queen of the England, the queen of the Netherlands, the emperor of Japan, or the king of Saudi Arabia. Therefore we don't bow or curtsy to foreign heads of state.

Posted on June 21, 2010  Posted to Cato@Liberty

Our Fellows in the News by David Boaz

Cato fellows Nat Hentoff and Penn Jillette have just been profiled in major publications -- Hentoff in the New York Times and Penn in Vanity Fair. Warning: the Hentoff profile is mostly about jazz, and the Penn interview contains lots of four-letter words, obscene imagery, and harsh language about religion. So if you have a low tolerance for jazz or for obscenity and blasphemy, be forewarned. But it's no surprise that both of them talk a lot about the importance of free speech.

Posted on June 20, 2010  Posted to Cato@Liberty

Crime Dropping in Arizona — You Read It Here First by David Boaz

Despite the claims of immigration opponents such as Arizona Gov. Jan Brewer, the rate of violent crime at the border and across Arizona has been dropping in the past few years, the New York Times reports -- a fact you could have read here at Cato@Liberty back on April 27 and May 25.

Posted on June 20, 2010  Posted to Cato@Liberty

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