Recently in Economy Category

I promised to respond to reader Diane's comments here.

The idea of the government "competing" with private business is kind of nonsensical. It's not a "fair fight" so to speak, and utterly pulls the rug out from under the private business owner.

Your example, of higher education, does NOT work quite well at all! (And I hardly think it is the only American asset the rest of the world still envies, but that's another discussion.) First of all, the most elite universities and colleges in this country are private and attended by (basically) only the very wealthy and/or (smaller numbers) the very bright. Damn few public universities/colleges can compete for those most elite students. Those of you who have your shorts tied in a knot about class warfare should not like this system at all. What's more, the government being in the education business "ups" the price for everyone. Your tax dollars subsidizing UCLA means that tuition at USC is going to have to be way higher. I agree that this is a good example, but it's a good example of why government "competition" is a bad idea.

You overstate the demographics of elite schools, But still, those with their "shorts in a knot" are fine with the issue you raise about private school enrollment, because they feel that the great mass of non-wealthy and non-genius students are still getting a chance to go to good colleges, thanks to the taxes that reflect a society's shared commitment.

True free-market people don't seem to fear being "undercut" by the public sector. They like competing with each other and especially with the public sector, since they believe entrepreneurs with a profit motive will always find ways to do things better and cheaper than bloated government bureaucracies who lack a profit motive.

Thus, I'm puzzled by this statement you make: "Your tax dollars subsidizing UCLA means that tuition at USC is going to have to be way higher."

Huh? You're saying that, if a public school uses tax money to keep tuition low enough to allow large numbers of average Joes and Janes to attend, then a private school will have to charge more than it would otherwise...? Wouldn't a private school instead have to be entrepreneurial in providing better service than publics, at the most affordable tuition rate possible?

If there were no publics, and no shared national commitment to higher education, Stanford could easily become a for-profit corporation and bleed the world's wealthiest families to the tune of $200,000 a year, while scholarshipping a few geniuses of lesser means, and letting everyone else go to rot. But if UC Berkeley offers a high-quality, state-supported educational experience without any need to turn a profit, and Cal State Northridge offers an affordable and solid education to tens of thousands, Stanford has to maintain a realistic price in order to keep the right mix of market share. That works for everyone's interests, in education, health, etc. It reflects a great American belief that it's crucial for our nation to keep the market from pricing essential resources out of the reach of the common man.

Life in America isn't about being totally Social Darwinist or totally communist. In America, it's about having a free market with some limited, smart public oversight that reflects collective commitments -- with some of those major commitments being provided directly by Uncle Sam. Even Ronald Reagan believed that. When he said, "Government is the problem," he indicated that it needed to be reformed, not discarded. That's what his progeny don't get.

Finally, for now, one of the reasons that we can't un-do public K-12 education is because they point out, plausibly, that private schools would be quicker to boot out the laggards. Our great nation's promise to provide universal education would fall by the wayside (how do you and our free-marketers here really feel about that promise, by the way....?)

In the ongoing travails of a recovering libertarian, I'm, uh, digesting some analyses of how the food industry quite intentionally drums up profits by feeding you the seeds of your own destruction. There's this piece in BusinessWeek, for starters, then this entree stuffed with MSG.

A pure free-market person would say that private industry should be free to find whatever way they can to kill you, and that a free press should be equally free to expose them, and that an informed citizenry should vote with their dollars.

I've believed that in the past. But I wonder if it's not a bit too pollyannaish about cynical corporate managers.

I don't much like the idea of over-regulation either. But I do increasingly like the idea of some public vs. private competition. Public institutions are more necessarily bound by the public interest, after all. Though free-marketeers despise the notion of public-sector competition within the healthcare marketplace, I think it's a boon to have someone competing who isn't willing to cut every last corner en route to a profit. That keeps the private sector more honest. The public-private competition works quite well in higher education, which is famous as being the last American asset that the rest of the world still envies.

It's viral videos like this, that are simply long-play versions of the rhetoric of Fox News' own reporters and various other "mainstream" conservative pundits

Conservatives need an intellectual revival. But the angry appeal of the more radical stuff cited above may linger through at least one more election cycle.

...from the AP that Wall Street is never plugged much into reality:

Stocks surged Wednesday, lifting the Dow Jones industrials more than 200 points, even after the government said the economy as measured by the G.D.P. contracted at an annual rate of 6.1 percent during the first three months of the year.

As part of his ongoing effort to portray Obama as the source of all evil, seemingly oblivious to the economic meltdown of 2008, my good friend John Galt complains about how it's a crime that April 13 has been calculated by one group as the first day you can stop working for the government and start working for yourself.

If John were being fair, he'd point out that this April 13 "tax freedom day" comes earlier than many recent years, thanks in part to Obama's efforts.

If John were being objective, he'd look at some other numbers that show that the "tax freedom day" is a bit overhyped, as revealed by our own CBO's numbers.

# Estimates from the Congressional Budget Office (CBO) show that middle- and even upper-middle-income Americans pay less of their income in federal taxes than the "average" tax burden reported in the Tax Foundation's "Tax Freedom Day" report.
# In fact, the CBO estimates indicate that some 80 percent of U.S. households pay federal tax at rates lower than the Tax Foundation's reported average.

And if John wanted to see the silver lining, he could see that America has consistently been ranked by the Heritage Foundation and other conservative and libertarian groups as one of the most economically free nations in the world. Will Obama's outrageous tax cuts to most Americans and mild increase to the wealthy drop us out of the top 10? I doubt it.

The real concern with Obama is that he's gambling that his costly long-term investments will give us the infrastructure that we need to grow faster than our debt. Since Bush supporters say that he'll need a generation before his efforts can be judged, how about at least, oh, a year or two for Obama....? Instead, we get this talk about "tyranny," which somehow wasn't a problem when Eisenhower and Reagan were overseeing higher rates of taxes, or when Bush was pushing through Patriot Acts. That's why I think John's constant lamenting about Bill Ayers and Jeremiah Wright shows a generalized annoyance at Democrats rather than a focused, valid concern.

Me, I prefer coffee. But here are the surprising results from a tax debate at the website of my favorite wags, those relatively libertarian, tea-loving Brits from the Economist.

This week's tea party protests seem to have been a mildly successful grassroots effort to show popular sentiment against bailouts and higher taxes.

I'm sympathetic, to a degree. The Bush administration blamed its overspending on its predecessors and its political rivals. The Obama administration is doing the same. And the national debt mounts.

I personally wish that the nation's best economic minds had a more free-market, fiscally conservative approach to stimulus and bailout programs. But they don't. The pols who posture about posterity's unbearable debt load are too cowardly to present real solutions -- solutions that would involve political accountability. John McCain promised to "go after pork" -- even though pork is not much more of an issue in the federal deficit than it is in a Jewish deli. No one seems serious about tackling debt.

And yet we have to pull the nation out of a ditch, and that seems to cost money. We have to get the nation's engine running again, and the best minds claim a laissez-faire approach won't get that baby humming anytime soon. I don't believe that, if a Republican had won instead of Obama, we'd be somehow lowering our debt over its current levels.

I wish there were a better way, but no one has stepped forward to show that way. And the tea-party crowd seems painfully naive in going after the new administration as the partisan source of all our collective irresponsibilities.

Funny, my mom, your mom and all the experts swore real estate is the only sure way to financial stability. Not today. For those like me who've never owned, I shrug, smirk, and move on.

Unlike Sarah Palin and today's "tea party" revolters, I believe it's patriotic to pay my share of taxes -- and even a higher proportion of taxes than those who make less than me. That reflects my willing participation in the world's greatest nation, a free democracy built on consensus. I may not be taxed enough, based on the large and growing debt that has characterized our habits since the advent of Reagan. But since I don't have kids, I suppose I'll be willing to pass the debt along to John Galt's kids.

For the Tea Party folks, I'd want to pose some questions:

* Many of you complain that "hard-working" people don't have enough of a chance to get ahead when taxes exceed, oh, 3 or 4%. But is there real, demonstrable evidence that hard-working people work less hard with 5-10% fluctuations in their tax rates?

* If some Americans came into sudden wealth through mere speculation on margin, should they be protected from higher taxes as much as "hard-working" people?

* Have you ever demanded that a small-government politician put forth publicly a balanced budget, rather than merely complaining vaguely about overspending?

* If other people in India work harder than you -- and four times cheaper than you -- in the same job that you have, what does the global economy owe to you? Don't those people deserve a level playing field that means you'd be making far less than what you do currently?

I guess I'm getting at a larger question: Is it really about "What we deserve economically as hard-working people"? Or is it about "What we can get away with in the short-term as the world's top economy"? The Bush years seem to have shown that "what we can get away with" is less and less. So what comes next? Responsibility. And gratitude for what we do have. Many religious people, who taught the need to be grateful for even tyrannical governments in years past, now preach ingratitude in the world's greatest nation.

I find that odd.

Obama's administration may well be a concentrated version of the Jimmy Carter presidency. He may well be looked back upon as the worst leader in the history of the republic. He may well turn the United States into a blown-out shell of its former self. Citizens may well resort to anarchy, or worse yet, veganism. He may well fail so badly that future citizens will reinstitute slavery in a knee-jerk reaction against him. He may well turn us into the Soviet Union Part Deux.

Then again, he may succeed, and may turn the United States into the sort of nation it needs to become to succeed in a new day that is dramatically different from the one on which the sun has already set.

It will come down to whether Obama and his administration are mainly a learning organism or an ideological organism. Learning leaders survive and ultimately thrive; ideological ones flounder over the long haul. Bush and Carter attempted mainly ideology. Obama seems to be more of an ideologue than I'd have guessed three months ago, but he and his people still seem to be learners. Are they sufficiently interested in learning. I hope so.

Ideologues would have crowed that today's 500 point Dow jump vindicated their economic prescriptions. The embattled Geithner shows some maturity here in not needing to make that case. Obama's team may well be learners, playing for the long haul. Their ideological opponents, who need to imagine themselves as superior even if it requires them to light candles and pray that the economy fails over the next four years, will detest this and will look for the next opportunity to resuscitate their argument that short-term stock movements are exposing America's contempt for Obama's leadership. Fair enough. But Obama's administration appears to be playing for the long haul, and may be playing wisely. Let's hope they are indeed more interested in learning than in ideological battles.