Thursday's interesting reads

"The Shock Doctrine" by Amity Shlaes, a book review of American-Made: The Enduring Legacy of the WPA: When FDR Put the Nation to Work (HT: Club for Growth):

"[T]he positive reputation of the New Deal tends to obscure some problems as fundamental as WPA concrete...

The second [premise] is that these same programs [such as the WPA] may actually have stalled recovery. One of the private-sector industries that had the capacity to jump-start recovery was the most exciting sector of the era: the electricity industry. The internet of its day, electric power produced by private companies was in demand even during a downturn...

The New Deal conveyed the message that only government could do "big" — that the private sector was simply incapable of marshalling the financial resources to build serious infrastructure. Today we know that that is not true — the Internet offers a powerful counterexample. But in those years, sandwiched between wars as the country was, the argument sounded plausible, especially given the New Dealers' propaganda. In his second inaugural address of January 1937, Roosevelt told listeners that his administration was "fashioning an instrument of unimagined power" to bring about a more morally responsible nation. It is hard to imagine even John Edwards making this statement today."

I'm reading Ms. Shlaes' book The Forgotten Man right now that talks about Hoover's policies that helped create the Depression and Roosevelt's policies that perpetuated it. Lately I've been a little skeptical of all Roosevelt is puported to have done to pull us out of the Depression, despite how long it actually took do it. As dynamic as our economy is, I never could figure out why the thing lasted all the way from 1930 until the start of WWII. Roosevelt's weilding of his "instrument of unimagined power" had a lot to do with it.

On a related note, a WSJ editorial discusses some of the comparisons of Bush/McCain to Hoover in "Hoover's Heirs":

"To hear Mr. Schumer and his fellow-traveling columnists tell it, Hoover's great policy blunder was to do nothing, all the while insisting that everything was fine. But the problem with Hoover's economic policy isn't that it was passive but that it was actively destructive.

In 1930, he signed the Smoot-Hawley Tariff Act, setting off a wave of protectionist retaliation that undid the globalization of the preceding decades and did far more harm to the world economy than the stock-market crash ever did. Two years later, amid a bad recession, he undid the Calvin Coolidge-Andrew Mellon tax cuts, raising the top marginal income-tax rate to 63% from 25%. The recession became a Depression.

Now, since we're talking Hoover, which Presidential candidate has a similar agenda of protectionism and tax increases? Hmmm."

"Free-Market Prescription" by David Freddoso with National Review Online (HT: Club for Growth)

"A Wal-Mart spokeswoman insisted that the $4 program is not an exercise in public relations or an attempt to lure consumers into their stores by selling drugs below cost. “We’re in the business to make money,” said E. R. Anderson. “I assure you that we’re making money on the 361 drugs on the $4 list.”...

Free markets still work in the few areas of health care where they are allowed to exist — drug prices being one of them. Our current health-care system lacks consumer choice, transparent pricing, and free-market competition. Maybe — just maybe — the solution is to restore these elements, not to eliminate them altogether with a government takeover. What has worked well in the field of prescription drugs can work in other areas of health care as well."

"Making Americans Poorer" Don Boudreaux at Cafe Hayek:

"Because firms 'outsource' jobs only when doing so lowers firms' costs of production, Mrs. Clinton's proposal amounts to bribing American firms not to lower production costs whenever possible. She wants to encourage American firms to produce inefficiently, which is to say wastefully. In short, she wants us to be poorer than we would otherwise be."

He wrote this in response to this article in Newsweek about Hillary Clinton's plan (imitating a similar plan by Barack Obama's quoted and discussed here) to provide tax incentives to keep companies from shipping jobs overseas. Inefficiency supported by the American taxpayer.

(By the way, embedded in the Newsweek article is a list of videos. One was called the "Backyard Border", as you probably guessed, about the border with Mexico. I thought it was kind of insulting. Why is Mexico the backyard, implying Canada is the frontyard? I think it simply reflects the xenophobia of American citizens toward latinos as well as a recognition of Canadians being pretty much just like us.)

"Housing Accord Puts Builders First" Washington Post (HT: Arnold Kling):

"Both parties wanted to help home builders and other businesses. Under the agreement, corporations that lose money in 2008 and 2009 would be permitted to apply their losses to tax returns from as far back as 2004, making them eligible, according to a bill summary, to 'receive any applicable refunds.' "

This is crazy! Why give money to companies retroactively? All this does is reward businesses that over-invested. Why didn't we do the same thing for telecom companies in 2001? Because they didn't deserve it! Arnold Kling had this to say:

"1. Homebuilders lost money by speculating on rising home prices. So did other people. After all of the talk about bailouts, this is the first big policy move enacted that is a pure bailout.

2. Of all the forms of tax breaks, the ones least likely to stimulate any economic activity are those that are retroactive."

"The KISS Rule for Markets" WSJ op-ed by Lawrence Lindsay from yesterday:

"In thinking through the various proposals [to reform financial regulation], we should always keep in mind that existing political and regulatory regimes contributed to our current problems – even as they, in turn, were attempts to address the perceived problems of the times in which they were enacted.

This is not an assignment of blame. Rather, it is a reminder that, in these days of soaring rhetoric about a "culture of corporate greed," the political class does not have moral standing to be casting the first stone."

I just don't see how anyone could possibly think that government, with all of its well-documented shortcomings, is the right body to fix this or any other mess. Until government can reform government, it should stay away from anything else.

"Rep. Barney Frank (D., Mass.) is the only politician I know who has argued that we needed tighter rules that intentionally produce fewer homeowners and more renters. Politicians usually believe that homeownership rates should – must – go ever higher. The rarity of Mr. Frank's contrarian thinking is a reminder that when markets are committing excesses, we certainly should not expect Washington to act as a check on them."

He makes a good point that we shouldn't count on politicians to keep us from committing excesses. I also wanted to make the point that I can't understand why people are so sure that the goal of having everyone in a home of their own is actually a good idea for everyone. We've subsidized homeownership like crazy, so there are all kinds of incentives to buy. But why? I refuse to believe that the "American Dream" is to buy a home. Homeownership obviously has its advantages, such as equity that appreciates in value as well as stability. But it also has its disadvantages, such as equity that could depreciate in value as well as lack of flexibility. We see both of these in play now as people have seen their homes decrease in value which has created problems moving to other locations where job prospects could be better. (Don Boudreaux discussed this here.)