Category Archives: Cato Institute

Myth:Conservative Herbert Hoover responsible for Depression?

June 20, 2012 – 12:50 am

Myth:Conservative Herbert Hoover responsible for Depression

When I grew up I always heard that the conservative Herbert Hoover was responsible for the depression. Is that true?

The Hoover Myth Marches On

Posted by David Boaz

In the New York Times today,  columnist Joseph Nocera quotes a book published in 1940 on Herbert Hoover and the Great Depression:

Herbert Hoover was “leery of any direct governmental offensive against the Depression,” writes Allen. “So he stood aside and waited for the healing process to assert itself, as according to the hallowed principles of laissez-faire economics it should.”

OK, let’s go to the tape. In a new Cato study economist Steve Horwitz notes what Hoover really did:

  • He almost doubled federal spending from 1929 to 1933.
  • He expanded public works projects to “create jobs.”
  • He pressured businesses not to cut wages, even in the face of deflation.
  • He signed the Davis-Bacon Act and the Norris-LaGuardia acts to prop up unions.
  • He signed the Smoot-Hawley tariff.
  • He created the Reconstruction Finance Corporation.
  • He proposed and signed the largest peacetime tax increase in
    American history.

And that’s why FDR brains-trusters Rexford Guy Tugwell and Raymond Moley acknowledged later that Hoover “really invented” all the devices of the New Deal. Frederick Lewis Allen might not have recognized that in 1940, but Joseph Nocera should. And if we don’t want to relive the Great Depression, as Nocera worries, then we’d better learn what didn’t work in 1929-33 any better than it worked in 1933-39.

Milton Friedman’s Free to Choose (1980), episode 3 – Anatomy of a Crisis. part 1

FREE TO CHOOSE: Anatomy of Crisis
Friedman Delancy Street in New York’s lower east side, hardly one of the city’s best known sites, yet what happened in this street nearly 50 years ago continues to effect all of us today. Wall Street. Most of us know what happened here 50 years ago. Inside the Stock Exchange on October 29, 1929, the market collapsed. It came to be known as Black Thursday. The Wall Street crash was followed by the worst depression in American history. That depression has been blamed on the failure of capitalism. It was no such thing but the myth lives on. What really happened was very different.
Although things looked healthy on the surface, business had begun to turn down in mid 1929. The crash intensified the recession. So did continuing bank failures in the south and Midwest. But the recession only became a crisis when these failures spread to New York and in particular to this building, then the headquarters of the Bank of United States. The failure of this bank had far reaching effects and need never have happened.
It was something of a historical accident that this particular bank played the role it did. Why did it fail? It was a perfectly good bank. Banks that were in far worse financial shape had come under difficulties before it did and had, through the cooperation of other banks, been saved. The reason why it wasn’t saved has to do with its rather special character. First its name, Bank of United States, a name that made immigrants believe it was an official governmental bank although in fact it was an ordinary commercial bank. Second its ownership, Jewish, both its name and the character of its ownership which had so much to do with attracting the large number of depositors from the many Jewish businessmen in the city of New York. Both of them also had the effect of alienating other bankers who did not like the special advantage of the name and did not like the character of the ownership. As a result, other banks were all too ready to spread rumors, to help promote an atmosphere in which runs got started on the bank and which it came into difficulty. And they were less then usually willing to cooperate in the efforts that were made to save it.
Only a few blocks away is the Federal Reserve Bank of New York. It was here that the Bank of United States could have been saved. Indeed, the Federal Reserve System had been set up 17 years earlier precisely to prevent the worst consequences of bank failures.
The Federal Reserve Bank of New York, whose directors today meet in this room, devised a plan in cooperation with the superintendent of banking of the State of New York to save the Bank of United States. Their plan called for merging the Bank of United States with several other banks and also providing a guarantee fund to be subscribed to by still other bankers to assure the depositors that the assets of the Bank of United States were safe and sound. The Reserve Bank called meeting after meeting to try to put the plan into effect. It was on again, off again. But finally, after an all night meeting on December 10, 1930, the other bankers, including in particular John Pierpont Morgan, refused to subscribe to the guarantee fund and the plan was off. The next day the Bank of United States closed its doors, never again to open for business. For its depositors who saw their savings tied up and their businesses destroyed, the closing was tragic. Yet when the bank was finally liquidated, in the worst years of the depression, it paid back 92.5 cents on the dollar. Had the other banks cooperated to save it, no one would have lost a penny.
For the other New York banks, they thought closing the Bank of United States would have purely local effects. They were wrong. Partly because it had so many depositors, partly because so many of the depositors were small businessmen, partly because it was the largest bank that had ever been permitted to fail in the United States up to this time, the effects were far reaching. Depositors all over the country were frightened about the safety of their funds and rushed to withdraw them. There were runs. There were failures of banks by the droves. And all the time the Federal Reserve System stood idly by when it had the power and the duty and the responsibility to provide the cash that would have enabled the banks to meet the insistent demands of their depositors without closing their doors.
The way runs on banks can spread and can be stopped is a consequence of the way our bank system works. You may think that when you take some cash to a bank and deposit it, the bank takes that money and sticks it in a vault somewhere to wait until you need it again to turn it back over to you.
Bank teller: Okay, how would you like this? Two tens, one five and five ones. Okay.
Friedman: The bank does no such thing with it. It immediately takes a large part of what you put in and lends it out to somebody else. How do you suppose it earns interest, to pay its expenses, or pay you something for the use of your money? The result is that if all depositors in all the banks tried all at once to convert their deposits into cash, there wouldn’t be anything like enough cash in the banks of the country to meet their demands. In order to prevent such an outcome, in order to cut short a run, it is necessary to have some way either to stop people from asking for it, or to have some additional source from which cash can be obtained. That was intended to be the purpose of the Federal Reserve System. It was to provide the additional cash to meet the demands of the depositors when a run arose.
A classic example of how this system could and did work properly can be found over 2,000 miles from New York near the great Salt Lake in Utah.
In the early 30’s some banks in Salt Lake City and surrounding towns began to get into difficulties. The owners of one them were smart enough to see what had to be done to keep their banks open and courageous enough to do it. When fearful depositors began to clamor to withdraw all their money, one of George Eccles jobs was to brief his cashiers on how to handle the run.
By Everette Hatcher III | Also posted in Milton Friedman | Tagged , , , , | Comments (0)

Obama going to win in November or will economy sink him?

June 19, 2012 – 7:48 am

I wonder what is going to happen in November with Obama?

At the start of the year, I predicted Obama would be reelected, largely because of my assumption that the unemployment rate would drop below 8 percent.

But my prediction on jobs is looking quite shaky, so this discussion about the economy and the election with Fox Business News is very timely.

I argued, unsurprisingly, that the economy is anemic because Obama’s been pursuing an agenda of wasteful spending and class warfare.

So if he loses, he has nobody to blame but himself.

That doesn’t mean Romney would be an improvement, especially if the warning signs are correct and he saddles the country with a value-added tax, so the American people may be tossed from one frying pan to another.

P.S. Hadley Heath may look familiar because she narrated this video about the damaging impact of welfare programs for the Center for Freedom and Prosperity.

P.P.S. On the completely separate topic of the Greek elections, I am more peeved than ever that the idiots in the media are reporting the results as a victory for the pro-bailout parties over the anti-bailout parties. That is nonsense. All the parties favored bailouts. As I wrote earlier this year, the election was a fight between parties that want no-strings bailout money and parties that at least pretend they are willing to implement reforms as a condition of getting bailout money.

By Everette Hatcher III | Also posted in President Obama | Tagged | Comments (0)

President Obama a socialist?

June 18, 2012 – 6:55 am

Uploaded by on Dec 14, 2008

Thomas Sowell discusses his concerns with the unconstrained vision of Barack Obama. http://www.LibertyPen.com

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Government does not have the answer to all of our problems. I wish people would stop looking to it for every answer.

A couple of years ago, Newt Gingrich accused Obama of being a socialist, causing some squawking and grousing about incivility from the more sensitive types in Washington.

I jumped to the President’s defense, pointing out that Obama is a different type of statist.

I’m gratified that Thomas Sowell of Stanford University’s Hoover Institution agrees with me.

It bothers me a little when conservatives call Barack Obama a “socialist.” He certainly is an enemy of the free market, and wants politicians and bureaucrats to make the fundamental decisions about the economy. But that does not mean that he wants government ownership of the means of production, which has long been a standard definition of socialism. What President Obama has been pushing for, and moving toward, is more insidious: government control of the economy, while leaving ownership in private hands. That way, politicians get to call the shots but, when their bright ideas lead to disaster, they can always blame those who own businesses in the private sector. Politically, it is heads-I-win when things go right, and tails-you-lose when things go wrong. This is far preferable, from Obama’s point of view, since it gives him a variety of scapegoats for all his failed policies… Thus the Obama administration can arbitrarily force insurance companies to cover the children of their customers until the children are 26 years old. Obviously, this creates favorable publicity for President Obama. But if this and other government edicts cause insurance premiums to rise, then that is something that can be blamed on the “greed” of the insurance companies.

So what is the right technical description of what Obama is proposing? Well, if you allow nominal private property, but impose government control, it’s called fascism. Sowell agrees, and also adds some history for the unenlightened.

One of the reasons why both pro-Obama and anti-Obama observers may be reluctant to see him as fascist is that both tend to accept the prevailing notion that fascism is on the political right, while it is obvious that Obama is on the political left. Back in the 1920s, however, when fascism was a new political development, it was widely — and correctly — regarded as being on the political left. Jonah Goldberg’s great book “Liberal Fascism” cites overwhelming evidence of the fascists’ consistent pursuit of the goals of the left, and of the left’s embrace of the fascists as one of their own during the 1920s.Mussolini, the originator of fascism, was lionized by the left, both in Europe and in America, during the 1920s. Even Hitler, who adopted fascist ideas in the 1920s, was seen by some, including W.E.B. Du Bois, as a man of the left. …What socialism, fascism and other ideologies of the left have in common is an assumption that some very wise people — like themselves — need to take decisions out of the hands of lesser people, like the rest of us, and impose those decisions by government fiat. …Only our own awareness of the huge stakes involved can save us from the rampaging presumptions of our betters, whether they are called socialists or fascists. So long as we buy their heady rhetoric, we are selling our birthright of freedom.

All this being said, I want to reiterate something else that I wrote back in 2010. It is counterproductive to call Obama a fascist because that term is now linked to the specific form of evil produced by Hitler and the National Socialist Party.

So if you disapprove of Obama’s policies, call him a statist or a corporatist. Heck, you can say he believes in cronyism or maybe even collectivism. Those terms get across that he wants more government without causing needless controversy that distracts from the main message.

But make sure you apply the same term to Republicans who impose the same types of policies, such as Bush and Nixon.

By Everette Hatcher III | Tagged | Comments (0)

If we don’t tackle entitlements we will end up in Greece

June 18, 2012 – 6:39 am

If we don’t cut spending then we will end up at Greece. We have to tackle entitlement reforms.

Will America Face a Greek-Style Fiscal Crisis?

June 14, 2012 by Dan Mitchell

Since I’ve written several times that the United States will face a fiscal crisis if entitlement programs aren’t reformed, you won’t be surprised to see that I repeat those points in this CNBC debate.

But I’m not happy with my performance.

Not because my leftist opponent grabbed more air time (mostly because the host started challenging him, which also happens periodically when I’m on Kudlow’s show), but because he gave me a giant opening to completely destroy his arguments and I failed to seize the opportunity.

He kept arguing that America is more dynamic and innovative than Europe, which generally is true, but then he argued that we should copy Europe’s fiscal policy by increasing the burden of government spending.

I think the points I made to wrap up the debate were fine, but I would be much happier with my performance if I had pointed out this huge hole in his position.

As shown in this amusing and clever poster, you don’t solve the problems created by government with more government.

By Everette Hatcher III | Tagged | Comments (0)

Michael Tanner: “Time for Republicans to live up to the hype and get truly serious about cutting spending.”

June 15, 2012 – 7:18 am

Keynesian Economics Is Wrong: Bigger Gov’t Is Not Stimulus

Uploaded by on Dec 15, 2008

Based on a theory known as Keynesianism, politicians are resuscitating the notion that more government spending can stimulate an economy. This mini-documentary produced by the Center for Freedom and Prosperity Foundation examines both theory and evidence and finds that allowing politicians to spend more money is not a recipe for better economic performance.

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I have a lot of respect for Tea Party heroes like Tim Huelskamp , Idaho First District Congressman Raúl R. Labrador, and Justin Amash who are willing to vote against proposals that increase our spending,  and they want to pass the Balanced Budget Amendment.    

It is a fact that we must balance the budget soon. I do not believe that we can wait to balance the budget at some distant time in the future. The financial markets will not allow us a long time to get our house in order. Look at how things have been going the last four years and no matter how anyone tries to spin it, we are going down the financial drain fast and headed to Greece!!!

Baby Budget Hawks of the GOP

by Michael D. Tanner

Michael Tanner is a senior fellow at the Cato Institute and author of Leviathan on the Right: How Big-Government Conservatism Brought Down the Republican Revolution.

Added to cato.org on May 23, 2012

This article appeared in National Review (Online) on May 23, 2012

The conventional wisdom, pushed for very different reasons by both Republicans and Democrats, is that Republicans in Congress, controlled by radical tea-partiers, have been slashing government spending. Thus it becomes a little hard to understand how, in the few short months since last year’s debt-ceiling deal, the federal debt has increased by more than $1.5 trillion, roughly $13,000 per household. If Republicans are such great budget cutters, how come we continue to spend more, run more deficits, and accumulate more debt?

The latest evidence suggests that it is because, contrary to conventional wisdom, Republicans still aren’t such radical budget hawks after all.

For example, the latest Club for Growth scorecard suggests that, on the whole, Republicans in this congress have actually been less fiscally responsible than those in past congresses. For 2011, the average Republican received a weighted score of 69.5 out of 100. That’s far short of the 86.3 average score in 2010, and it hardly suggests a tea-party-led wave of austerity.

Forty Republicans received scores of 90 or higher, and nine — Representatives Amash (Mich.), Chaffetz (Utah), Flake (Ariz.), Franks (Ariz.), Graves (Ga.), Huelskamp (Kan.), Jordan (Ohio), Labrador (Idaho), and Lamborn (Colo.) — received perfect scores of 100 percent. However, 25 Republicans had scores below 50. In fact six Republicans – Ros-Lehtinen (Fla.), Diaz-Balart (Fla.), McKinley (W.Va.), Smith (N.J.), Young (Alaska), and LoBiando (N.J.) — had scores worse than those of some Democrats, such as Dan Boren (Okla.). Interestingly, for all the attention paid to freshmen representatives who are supposedly in hock to the Tea Party, only three freshmen — Amash, Huelskamp, and Labrador — received perfect scores, while three other freshmen — Representatives Dold (Ill.), Meehan (Pa.), and McKinley — were among the worst-performing Republicans. Compare this with 2010, when 28 Republicans received a perfect score from the Club for Growth and only two had scores below 50.

Republicans still seem unwilling to make the tough choices when it comes to spending cuts.

Of course one could be argue that scorecards that focus on specific votes are not a particularly good measure of a lawmaker’s overall record. Perhaps the votes were tougher this year, or the Club for Growth stopped scoring on a curve. Let’s take a look, then, at a slightly different measure of fiscal responsibility, the National Taxpayer Union’s latest measure of proposed spending increases and cuts by members of Congress. By this measure, there has also been an improvement by Republicans in this congress, but not an overwhelming one.

On an annualized basis, Republicans in the House proposed spending increases of $5.3 billion and cuts of $135 billion. Thus, if every one of their proposals had passed, total federal spending would have been reduced by $130.2 billion, which is 3.6 percent of this year’s projected spending. That would still have left us with a budget deficit this year of $1.17 trillion.

That’s an improvement over last year, when Republicans proposed a net spending reduction of only $45 billion. So it’s a baby step in the right direction — but far from what we need to keep us from falling off the debt-and-deficit cliff.

Moreover, the actual Republican record is not quite as good as even this baby step looks, because nearly all Republicans backed the repeal of Obamacare, which accounts for $40.3 billion of the annualized savings. Supporting repeal was easy, and it had no actual chance of passing. If we take that away, then Republicans called for only $95.3 billion in other cuts, which is roughly 2.6 percent of federal spending. Overall, Republicans still seem unwilling to make the tough choices when it comes to spending cuts.

Those Republicans proposing the biggest net reductions in spending are Representatives Jason Chaffetz (Utah), Trent Franks (Ariz.), and Jeff Duncan (S.C.). Among the freshmen class in the House, Representatives Duncan, Huelskamp, Labrador, and Guinta proposed the largest net reductions, with the first three also receiving near-perfect Club for Growth scores.

On the other side, ten House Republicans actually proposed net spending increases, among them Representatives Chris Smith (N.J.), Chris Gibson (N.Y.) and Patrick Meehan (Pa.). Notably, Representatives Gibson and Meehan were also among those with the worst voting records, according to the Club for Growth.

Let’s look at one more measure of Republican seriousness when it comes to debt and deficit reduction: the most recent budget votes. Nearly all House Republicans, of course, voted in favor of the Ryan budget. While certainly not perfect — it would take more than 20 years to achieve balance — the Ryan budget nonetheless laid down an important marker on entitlement reform and spending restraint. Among the ten House Republicans who voted against the Ryan budget were both those who thought it spent too much money (Representatives Amash and Huelskamp) and those who thought it didn’t spend enough (Representatives Gibson and McKinley, of course).

In the Senate, Republicans were less likely to support the Ryan budget, in part because Senate rules allowed them more alternatives. Still, the results from a fiscal-responsibility perspective were mixed. Only 16 Republicans supported the most fiscally conservative alternative, proposed by Senator Rand Paul of Kentucky. They picked up one more vote for a proposed budget by Senator Mike Lee of Utah. A third proposal by Pennsylvania’s Senator Pat Toomey garnered 32 votes, and the original Ryan budget received 41. Four Republican senators voted against all four alternatives: Brown (Mass.), Collins (Maine), Heller (Nev.), and Snowe (Maine).

Recent weeks have also seen Republicans in the House vote to reauthorize the Export-Import Bank, an example of corporate welfare if there ever was one, and abandon the sequester for cuts in military spending. Senate Republicans also agreed on a highway bill that hikes the deficit in the long run.

None of this suggests that Republicans were not generally more fiscally conservative than Democrats. The average Democrat score on the Club for Growth Scorecard was only 10.95 out of 100. All but three Democrats in the House scored below every Republican, and six Democrats received a score of 0. The average Democrat proposed net spending increases of $496 billion — almost half a trillion dollars in new net spending. Not a single Democrat voted for the Ryan budget, or for any of the lower-spending alternatives.

But better is not good enough.

Unless Washington gets spending under control, we are headed toward a debt crisis of Greek proportions, and time is running out. It’s time for Republicans to live up to the hype and get truly serious about cutting spending.

By Everette Hatcher III | Also posted in spending out of control | Comments (0)

Dan Mitchell of the Cato Institute takes on entitlement reform

June 13, 2012 – 6:51 am

It is the elephant in the room that nobody wants to talk about. Here Dan Mitchell takes it on.

Most people have a vague understanding that America has a huge long-run fiscal problem.

They’re right, though they probably don’t realize the seriousness of that looming crisis.

Here’s what you need to know: America’s fiscal crisis is actually a spending crisis, and that spending crisis is driven by entitlements.

More specifically, the vast majority of the problem is the result of Medicaid, Medicare, and Social Security, programs that are poorly designed and unsustainable.

America needs to fix these programs…or eventually become another Greece.

Fortunately, all of the problems can be solved, as these three videos demonstrate.

The first video explains how to fix Medicaid.

Promote Federalism and Replicate the Success of Welfare Reform with Medicaid Block Grants

Uploaded by on Jun 26, 2011

The Medicaid program imposes high costs while generating poor results. This Center for Freedom and Prosperity Foundation video explains how block grants, such as the one proposed by Congressman Paul Ryan, will save money and improve healthcare by giving states the freedom to innovate and compete.

The second video shows how to fix Medicare.

Saving Medicare: Free Market Reforms Are Better than Bureaucratic Rationing

Uploaded by on May 17, 2011

This Center for Freedom and Prosperity Foundation video explains how a “premium-support” plan would solve Medicare’s fiscal crisis and improve the overall healthcare system. This voucher-based system also would protect seniors from bureaucratic rationing. http://www.freedomandprosperity.org

And the final video shows how to fix Social Security.

Saving Social Security with Personal Retirement Accounts

Uploaded by on Jan 10, 2011

There are two crises facing Social Security. First the program has a gigantic unfunded liability, largely thanks to demographics. Second, the program is a very bad deal for younger workers, making them pay record amounts of tax in exchange for comparatively meager benefits. This video explains how personal accounts can solve both problems, and also notes that nations as varied as Australia, Chile, Sweden, and Hong Kong have implemented this pro-growth reform. www.freedomandprosperity.org

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Regular readers know I’m fairly gloomy about the future of liberty, but this is one area where there is a glimmer of hope.

The Chairman of the House Budget Committee actually put together a plan that addresses the two biggest problems (Medicare and Medicaid) and the House of Representatives actually adopted the proposal.

The Senate didn’t act, of course, and Obama would veto any good legislation anyhow, so I don’t want to be crazy optimistic. Depending on how things play out politically in the next six years, I’ll say there’s actually a 20 percent chance to save America.

By Everette Hatcher III | Also posted in Healthcare, President Obama, Social Security, spending out of control, Taxes | Tagged | Comments (0)

We got to control spending or we will end up like Europe

June 13, 2012 – 12:41 am

Great article below:

Europe’s Disaster Is Headed Our Way

Nov 14, 2011 12:00 AM EST

 

 
 

As an author who has just published a book on the crisis of Western civilization, I couldn’t really have asked for more: simultaneous crises in Athens and Rome, the cradles of the West’s law, languages, politics, and philosophy.

So why should Americans care about any of this? The first reason is that, with American consumers still in the doldrums of deleveraging, the United States badly needs buoyant exports if its economy is to grow at anything other than a miserably low rate. And despite all the hype about trade with the Chinese, U.S. exports to the European Union are nearly three times larger than to China.

Until March, it seemed as if exports to Europe were on an upward trajectory. But the euro-zone crisis has stopped that. Governments that ran up excessive debts have seen their borrowing costs explode. Unable to devalue their currencies, they’ve been forced to adopt austerity measures—cutting spending or hiking taxes—in a vain effort to reduce their deficits. The result has been Depression economics: shrinking economies and unemployment rates approaching 20 percent.

As a result, according to the new president of the European Central Bank, Mario Draghi, a “double dip” recession in Europe is now all but inevitable. And that’s lousy news for U.S. exporters targeting the EU market.

But there’s more. Europe’s problem is not just that governments are overborrowed. There are an unknown number of European banks that are effectively insolvent if their holdings of government bonds are “marked to market”—in other words, valued at their current rock-bottom market prices. In our interconnected financial world, it would be very odd indeed if no U.S. institutions were affected by this. Just as European institutions once loaded up on assets backed with subprime U.S. mortgages, so most big U.S. banks have at least some exposure to euro-zone bonds or banks. One institution—MF Global, run by former Goldman Sachs CEO Jon Corzine—just blew up because of its highly levered euro bets. Others are biting their fingernails because it is suddenly far from clear that the credit-default swaps they have bought as insurance against, say, a Greek default are worth the paper they are written on.

But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.

Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of … higher rates.

Athens, Rome, Washington … The shortest route from imperial capital to tourist destination is precisely this death spiral of debt.

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Niall Ferguson is a professor of history at Harvard University and a professor of business administration at Harvard Business School. He is also a senior research fellow at Jesus College, Oxford University, and a senior fellow at the Hoover Institution, Stanford University. His Latest book, Civilization: The West and the Rest, will be published in November.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.

By Everette Hatcher III | Also posted in spending out of control, Taxes | Comments (0)

Dan Mitchell of the Cato Institute:Unemployment check or a job

June 12, 2012 – 6:49 am

The private sector does such a better job than the public sector at everything. We need to seriously consider looking at every aspect of the philosophy of our government. It is my view that we can no longer have programs that give incentives to people not to work.

The continuing weakness in the job market, which I wrote about this morning, means that the debate over unemployment benefits will get more heated.

I’ve already noted that even left-wing academics like Paul Krugman and Larry Summers have admitted that you get more unemployment when you subsidize joblessness.

And I’ve cited some good research on the topic from the San Francisco Federal Reserve Bank, as well as other studies by academic economists.

But none of this evidence seems to matter, as I discovered in this debate with a former Obama Labor Department official.

Published on Jun 1, 2012 by

No description available.

To better understand the points I was making, here are two good anecdotes from Ohio and Michigan.

Last but not least, this cartoon does a very good who of teaching about the economics of unemployment insurance. And if you want to understand the absurdity of the left, this post shows Nancy Pelosi is a train wreck of economic illiteracy.

By Everette Hatcher III | Also posted in President Obama, spending out of control | Comments (0)

Too many riding in the wagon and not enough pulling

June 12, 2012 – 12:40 am

Too many riding in the wagon and not enough pulling the wagon. Is the USA heading down the same path as Greece?

U.S. Should Learn from Europe’s Welfare State Mistakes

by Daniel J. Mitchell

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.

Added to cato.org on November 8, 2011

This article appeared in US News and World Report on November 7, 2011.

Our long-run outlook is grim, but at least we still have time to reform the entitlement programs and save America from Greek-style fiscal collapse.

The conventional wisdom among economists is that a nation gets in deep trouble when government debt reaches 90 percent of GDP. That’s generally true, but it would be much more accurate to say that a nation gets in deep trouble when debt approaches 90 percent of GDP and the fiscal outlook shows even more red ink.

But this distinction doesn’t really matter much for the United States and Europe. Thanks to a combination of entitlement programs and aging populations, both face a bleak fiscal future. A 2010 study from the Bank for International Settlement shows that government debt in most industrialized nations will soar above 200 percent of GDP (in some cases, much higher) within the next few decades.

At some point, investors are going to realize that the United States is on an unsustainable path.

The only major difference is that European nations are farther down the path to fiscal collapse. The welfare state was adopted earlier in Europe and government spending among euro nations now consumes a staggering 49 percent of economic output. This heavy fiscal burden, especially when combined with onerous tax systems, helps explain why growth is anemic.

But the United States is only a couple of decades behind. According to long-run forecasts from the Congressional Budget Office, the burden of federal spending will reach European levels as the baby boom generation retires.

At some point, investors are going to realize that the United States is on an unsustainable path. Whether that’s 10 years from now or 20 years from now is anybody’s guess.

Daniel J. Mitchell is a top expert on tax reform and supply-side tax policy at the Cato Institute.

More by Daniel J. Mitchell

What we do know, however, is that Greece, Portugal, and Ireland already have stuck their snouts in the bailout trough, and it’s probably just a matter of time before Italy, Spain, and Belgium are in the same category. Heck, they’re already receiving indirect bailouts from the European Central Bank, which is buying up their dodgy debt in hopes of postponing the day of reckoning.

The one silver lining to this dark cloud is that the United States still can turn things around. Greece, Italy, and other welfare states have probably passed the point of no return, but it’s still possible for American lawmakers to fix the entitlement crisis by turning Medicaid over to the states , modernizing Medicare into a premium-support system, and transitioning to a system of personal retirement accounts for younger workers.

If those reforms don’t take place, the consequences won’t be pleasant. To be blunt, there won’t be an IMF to bail out the United States.

By Everette Hatcher III | Also posted in spending out of control | Tagged , , , | Comments (0)

The real truth about Che Guevara from Nat Hentoff (Part 2)

June 11, 2012 – 7:40 am

Uploaded by on Jun 9, 2011

Nat Hentoff is a Senior Fellow at the Cato Institute. http://www.cato.org/people/nat-hentoff

In this clip, Hentoff describes the telling encounter he had when he met Ernesto “Che” Guevara in the late 1950s. Video produced by Caleb O. Brown and Austin Bragg.

Nat Hentoff
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Nat Hentoff is one of the foremost authorities on the First Amendment. While his books and articles regularly defend the rights of Americans to think and speak freely, he also explores our freedoms under the rest of the Bill of Rights and the 14th Amendment by showing how Supreme Court and local legislative decisions affect the lives of ordinary Americans. Hentoff’s column, Sweet Land of Liberty, has been distributed by the United Feature Syndicate since 1992.

Hentoff has earned numerous awards and is a widely acknowledged defender of civil liberties. In 1980, he was awarded an American Bar Association Silver Gavel Award for his coverage of the law and criminal justice in his columns. In 1983, the American Library Association awarded him the Imroth Award for Intellectual Freedom. In 1995, he received the National Press Foundation Award for Distinguished Contributions to Journalism, and in 1999, he was a Pulitzer finalist for commentary.

Hentoff was a columnist and staff writer with The Village Voice for 51 years, from 1957 until 2008. A jazz expert, Hentoff writes on music for The Wall Street Journal and Jazz Times.

Hentoff has lectured at many colleges, universities, law schools, elementary, middle and high schools, and has taught courses in journalism and the Constitution at Princeton University and New York University. Mr. Hentoff serves on the Board of Advisors of the Foundation for Individual Rights in Education (F.I.R.E.) and is on the steering committee of the Reporters’ Committee for the Freedom of the Press. A native of Boston, he was awarded a Guggenheim Fellowship in education and was a Fulbright Fellow at the Sorbonne in Paris in 1950. He did graduate work at Harvard University, received his B.A. with highest honors from Northeastern University and was awarded an honorary doctorate of law from Northeastern in 1985.

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The real truth about Che Guevara from Nat Hentoff (Part 2)

Uploaded by catoinstitutevideo on Jun 9, 2011 Nat Hentoff is a Senior Fellow at the Cato Institute. http://www.cato.org/people/nat-hentoff In this clip, Hentoff describes the telling encounter he had when he met Ernesto “Che” Guevara in the late 1950s. Video produced by Caleb O. Brown and Austin Bragg. View hi-res version Get the latest from Nat […]

The real truth about Che Guevara (Part 1)

  Humberto Fontova on Che Guevara part 2 Francis Schaeffer said about Communism: Communism, you know, is not basically an economic theory. It’s materialistic communism, which means that at the very heart of the Marx, Engels, Lenin kind of communism (because you have to put all three together to really understand) is the materialistic concept […]

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