Browsing the blog archives for December, 2012.

Outlook for 2013

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2012 was a disappointing year for those of us committed to promoting the ideas of personal and economic liberty. As the year comes to a close, I am offering a few predictions for 2013. I’m not suggesting that I have any special insight here; I’ll let you be the judge.

1. The “fiscal cliff” will be avoided, but real deficit projections will remain roughly the same and the national debt will continue to skyrocket. After a brief false sense of political accomplishment, we will return to the cycle of concerns over the EU (especially Greece, Italy, Spain, and Portugal) and a lackluster global economy in general.

2. There will be some positive signs in the economy, but the overall predicament will remain stagnant. While our fiscal situation is dire, the rest of the world is doing worse. The dollar remains the preferred world currency for the time being. This is beginning to change, however, and when it does all bets are off. In the interim, however, many Americans will continue to believe that things aren’t really that bad and that centralized economic control can work in the long term. Things will have to get worse before they can get better.

3. President Obama’s personal popularity will remain moderately high. There is no official Republican leader right now, except for Boehner. As long as he is the counter to Obama, many will continue to view the President–through the media, or course–in a somewhat positive light.

4. There will be increased pressure to (further) purge the Republican party of moderates and RINOs, and more talk of a third party. I know the latter is controversial, but the Republican party still doesn’t seem to stand firm on much these days. Numerous policy opportunities exist, from massive tax overhauls like a fair tax or flat tax to specific entitlement reforms. Given the current “fiscal cliff” discussions these proposals should be front and center, but the leadership continues to nibble at the edges. The party still holds a majority in Congress because Americans do not wholeheartedly support the direction Obama wants to take with this country, particularly with regard to the economy. But if the Republicans don’t respond in 2013, they could set the stage for losing the majority in 2014.

I’ll stop with 4 predictions this year. My lack of optimism is apparent, but the battle continues.

I’d also like to wish everyone a Merry Christmas and a Happy New Year! This includes best wishes to my Jewish friends who celebrate Hanukkah and to others who are just enjoying the time of year. I hope you and yours enjoy a peaceful season and a prosperous 2013!

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The bottom line on RIGHT-TO-WORK

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The outrage over the right-to-work legislation in Michigan is easy to understand from a political perspective, but it makes little sense philosophically.

Companies should be permitted to establish wage rates and working conditions, and individuals should be free to accept or reject what companies offer. A “market wage” occurs when companies raise wages and benefits enough to attract a sufficient number of workers. Collusion on either side of the negotiation distorts this process. But why do some think it is wrong for employers to conspire to keep wages below a certain level, but not for workers to conspire to force employers to pay above a certain level? The truth is that collective bargaining gives workers some collusion rights that employers don’t have.

Although it distorts the market is some ways, I do not oppose collective bargaining rights, as I believe individuals have the right to voluntarily submit to the collective–the union–instead of negotiating their own terms of employment. Doing so has its costs, however, as collective bargaining reduces individual incentive and tends to treat all of the individual workers like average workers. Nonetheless, this is a choice that workers can make to their benefit or detriment.

But this choice must work in both directions. Right-to-work legislation prohibits collective bargaining agreements that force workers to join a union–and pay union dues–as a condition of employment. Those who oppose right-to-work laws are restricting a fundamental individual right. They argue that non-union workers should not enjoy higher wages and benefits from a union contract without paying the dues. While this argument is plausible on the surface, it fails to recognize the fact that free societies create numerous benefits for individuals who do not pay for them. Non-voters benefit from the efforts of voters to hold politicians accountable every election. Lawful gun owners create security benefits for non-owners who choose not to carry a firearm. Anyone can watch NFL games in HDTV every Sunday afternoon without ever purchasing a game ticket or supporting a sponsors. Everyone benefits from this byproduct of individual liberty, and it is a proper role of government to ensure that individual employment decisions not be restricted on this basis.

As with most arguments from the left, the real issue is not fairness, but class warfare and wealth redistribution. Ironically, the most strident opponents of right-to-work laws–the Democrats–are clamoring for even higher tax rates on top wage earners while 47% of the population enjoys the benefits of government services without paying income taxes.

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Rodney King & the Fiscal Cliff

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Princeton economist and former Fed vice chairman Alan Blinder posted an op ed in today’s Wall Street Journal. Blinder is a quintessential Keynesian. He always presents a smooth “all economists agree” type of argument in favor of more government intervention and tax-and-spend policies. Today’s piece is entitled, How to Get a Budget Deal Instead of a Cliff, but it reads more like an ode to the infamous Rodney King, the central figure in an LAPD beating video back in 1991 who later asked, “Why can’t we all get along?” Just as King’s mile-long rap sheet was forgotten by many when he seemed to ask such an innocent and insightful question, Blinder and others on the left make light of our nation’s fiscal problems by boiling them down to tax rates for the top 2% of wage earners that amount to a drop in the fiscal bucket.

Blinder’s assessment is very simple. The “fiscal cliff” is going to destroy the economy and everyone’s Christmas season if there is no “deal” between the President and Congress. His solution?

1. “Avoid the cliff by setting on the broad outlines of a budget agreement…Specifics can come later.”

2. “Join hands and enact something Republicans dislike and something Democrats dislike” to demonstrate serious good will.

3. Extend the debt limit.

I really don’t understand how anyone can take Blinder’s proposal seriously. The so-called fiscal cliff is here today because Obama and Congress cannot agree on a course of action. The idea that they should reach some sort of broad agreement, raise taxes on top wage earners, extend the debt limit, and return to solve the problem later is laughable, naive, or both. Broad agreements are meaningless, but tax and debt limit increases hit immediately and open the flood gates for even more of what got us to a $16 trillion (and growing) national debt. Should such a course be pursued, it is certain that Obama will approach next year’s bargain with the same claim that “the rich” still need to pay more.

The President is simply substituting emotion and class warfare for sound economics. Blinder is not a politician and should know better.

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