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Radicalism Breeds Radicalism

From Ian Tuttle from National Review, America Needs a Sane Left:

Take all of that (and more) together and there is the distinct sense that the Left’s response to this election is going to be one not of introspection but of finger-pointing. The culprit for its shellacking at every level was not decades of labeling cultural conservatives “racists” and immigration restrictionists “xenophobes” and abortion opponents “misogynists”; it wasn’t the foolish decision to dismiss the white working class not as simply unwinnable but as not worth winning — moral reprobates with backward views; it wasn’t the choice to clear the way for a presidential candidate with longstanding issues of corruption and untrustworthiness; it was “white supremacy” and “sexism” and “fake news.” On Thursday, in a forum at Harvard’s Kennedy School of Government, Clinton campaign manager Robby Mook blamed his candidate’s loss on FBI director James Comey.

The Left has been relentless in giving to every partisan dispute the moral urgency of warfare. It’s the Left that turned Supreme Court nominations into nasty affairs. It’s the Left that co-opted America’s health-care industry on a party-line vote. It’s the Left that scrapped the filibuster. It’s the Left that forced nuns to purchase contraception. If the Right was willing to countenance a great deal of heterodoxy in 2016, it’s in part because they perceive a Left that has become unconscionably radical.

That is not to say the Right does not have serious problems of its own creation. Trump’s success would not have been possible without a real, and alarming, moral and intellectual vacuity. Opportunism in right-wing media trades on the emotivism of talk-radio listeners eager to have their worst fears about the country confirmed, and ideological zealotry has made the necessary task of compromise more difficult.

But radicalism breeds radicalism, and the Left, in the aftermath of a massive defeat, should recognize that. A Left that ensconces itself in a sanctimonious refusal to consider the world from the perspectives of its detractors is a Left destined to become more politically impotent and nastier. That may work to Republicans’ short-term gain. But a nastier Left means a nastier Right.

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The Consequences of Jawboning

Jawboning American industries to comply with political wishes has been with us at least as long as Teddy Roosevelt negotiated an end  to the Pennsylvania coal strikes.  John F Kennedy pressured the steel industry to settle a labor strike. Bailouts and tax payer funded bribes to attract and keep industry is used by every state and most nations.  But just as Trump threatens consequences to those who will leave, there are consequences to his method which are beyond his control.

To be fare to the president elect, there are signs that his policy will rely more on carrots than sticks; that his preferred method is to reduce corporate taxes and friction costs and make the American economic environment more desirable for commercial activity.  The incentives and the jawboning to keep and least a portion of the Carrier employee base in Indiana is a clear victory for the workers and clear political victory for Trump.

But it is also an example of Bastiat’s broken window fallacy that should teach us to examine the entire cost and all the consequences of an economic decision.  The rejection of ideology for immediate pragmatic results is a hall mark of progressivism, as is the use of central government power to drive local decision making. If this is only a short term pragmatic solution with an eye to creating an environment more amenable to bottom up economic growth then the harm will be limited.

The use of threats from a central authority, however, can become  a slippery slope.

Kevin Williamson in National Review writes The Economic Stupidity of the Carrier Bailout:

The ethical question is more complicated than the pop-cons let on, too. Our government runs deficits, which means that a federal tax credit of $1 million given to Smith is $1 million in taxes that eventually will have to be paid — by Jones, and Wilson, and Humperdink — with interest. Carrier is a division of United Technologies (the Otis elevator and Pratt & Whitney engines people), which is first and foremost a government contractor, a firm that derives at least a quarter of its revenue from government contracts, and 10 percent of it from Pentagon contracts alone. It is a company that has competitors — competitors who employ Americans and pay taxes, just as Carrier does. These firms and their employees are put at an economic disadvantage by the subsidies paid to Carrier thanks to Trump and Pence. That means that some of these companies probably will be less profitable, and that they will not hire people they otherwise would have hired. But you’ll see no Trump press conference celebrating that. This is a case of Frédéric Bastiat’s problem of the seen vs. the unseen. The benefits are easy to see, all those sympathetic workers in Indiana. The costs are born by sympathetic workers, too, around the country, and by their families and by their neighbors. But those are widely dispersed, so they are harder to see and do not hit with the same dramatic impact.

From Don Boudreaux at Cafe Hayek, An Open Letter to Generalissimo Trump:

How do you anticipate business executives will respond to your bullying threats?  Are you truly so stupid as not to understand that among the results of your intimidation is that fewer firms will open in America?  That fewer businesses here will expand?  That those that do open or expand will use a higher ratio of capital to labor because they fear that the greater the number of workers they employ the more likely they are to be victimized by your arbitrary diktats?  That no matter how much you cut the monetary taxes they pay, the uncertainty and absurdity of your promised autocratic rule drastically raises firms’ costs of starting and growing on U.S. soil?  And that each of these inevitable responses to your imperious fulminations will be slower job and wage growth for Americans?

From the Wall Street Journal Editors, Trump’s Carrier Shakedown:

The company is also betting that Mr. Trump will fulfill his promise for tax and regulatory reform to make U.S. manufacturing more competitive. United Technologies does about 61% of its sales outside the U.S., and it has some $6 billion in cash overseas that would be taxed at a 35% rate if it brought the money home today. Carrier currently pays a 28% effective tax rate, so a tax reform that cut the corporate rate to 20% and only taxed earnings in the country where they are earned would more than make up for the Indianapolis concession.

From The Editors of National Review, The Winners and Losers of the Carrier Deal

We are not very enthusiastic about government-run economic-development programs that rely on industry-specific — or firm-specific — tax breaks, grants, or other concessions. In the long run (and generally in the short run, too), these programs are almost always corrupt in themselves and a source of corruption in others, with the benefits going mainly to politically influential and well-connected companies, whether that means Solyndra during the Obama administration or Carrier in the Trump administration. Inevitably, what happens is this: The government creates a set of incentives to encourage certain kinds of business activity, from “green” energy to manufacturing, and then, after a few years pass, complains mightily that companies are responding to the incentives that the government created. Consider those periodic journalistic spasms over General Electric’s low corporate-tax bill or the criticism that Starbucks encountered for taking advantage of manufacturing credits in its manufacturing operations: Those deductions and carve-outs didn’t happen by accident — they happened exactly the way the Carrier deal is happening.

 

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Political Thoughts 2016 12 01

HKO_A

The Democrats are in denial.

The first indication is that their loss was about poor messaging; even though Hillary outspent Trump by huge amounts, and even though every outlet but Fox was in her camp, to an embarrassing degree. The best ad will not sell a bad product.  It wasn’t the messaging, it was the message.  (To some great degree it was also the messenger.)

The second indication is the vote to keep Nancy Pelosi as minority leader. She was largely responsible for the huge loss of the Democratic party in the House in 2010 and its consistent deterioration ever since.  This vote, the upset that it was, was the continuation of a trend she put in place.  This is like keeping your money manager that lost half of your money because of his experience.

The more that the media makes Elizabeth Warren and Nancy Pelosi the face of the party the more they lose.  Making Keith Ellison the head of the party will only dig the grave deeper.

The left has made such a case for Trump being a disaster, that they have no back up plan if he is not.

The recent book Relic by William Howell and Terry Moe advocates a more powerful presidency.  The authors propose a  legislative fast track authority like the president already enjoys for trade deals.  The president would initiate legislation and the Congress would have 60 days to vote it up or down with no amendments. I wonder if the authors maintain their enthusiasm for their idea with Trump in the White House and a compliant party in both Houses of Congress

Those who are so afraid of a Trump presidency should review the Constitution and its origins.  The same progressive voters who have subverted constitutional restraints and  pushed for more centralization and executive power, must now accept this power in the hands of the opposition.  Parties in power seem to be very short sighted.

Identity politics ignores the successes in the area of civil rights.  America is not more racist; the voters have largely moved on and this issue is just far less important now than the economy.  Without identity the left must address their record.

 

 

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Better Economic Policy Trumps Grandstanding Deals

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Trump’s political victory in keeping Carrier and Ford plants from moving out of the country should not be confused with an economic victory.

Trade is a critical component of any economy, but we are addressing the location of a plant.  If Toyota builds a plant in Mexico there is nothing Trump can do about it.  If there is some economic advantage to that location, then when he strong arms or otherwise bribes an American plant not to seek that competitive advantage then he is directly harming that company. He may compensate that company with tax breaks but that is just more of the crony capitalism which is already problematic.

There are many reasons one would build a plant overseas, and lower wage costs are only one.  They may desire to be closer to their customers, or they may be trying to circumvent trade barriers in that country.  They could be saving transportation costs or responding to incentives from the host country. The host may have lower energy costs or other non-labor cost advantages.

Threatening higher tariffs is reprehensible. Is he going to charge Toyota a higher tariff as well or does this punitive objective only apply to American companies? Will the threat of such intimidation cause foreign companies to think twice about building plants in this country? Threats to the free flow of capital can create serious disincentives to investment.

While we relish the benefits that the workers received, there are consequences to the means deployed to accomplish this change in the companies’ plans.

There are indications that Trump and his team may lean more toward the carrot than the stick.  There are better ways to encourage American companies to expand at home:  lower tax rates, reasonable regulations, a productive workforce, and respect.  Telling entrepreneurs that “you did not build that” is not the voice of respect; neither are direct threats.

Where plants locate is dependent on many factors.  To think that these interrelated decisions can be accurately assessed by any central planner is to make the mistake that the progressives have made since FDR.  To address specific issues like Carrier’s with bribes and tax breaks is consistent with Trump’s penchant for making deals, but it encourages cronyism  and inequality before the law.

A trade policy is very different from trade deals.  A broad based low tax policy will serve America’s companies, workers and customers very well.  Trump should use his bully pulpit to restore the respect for American industry that the radical leftists like Elizabeth Warren so casually squandered.

With better policy, we will need fewer deals.

Don Boudreaux at Cafe Hayek makes a similar case:

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A Political Vacation

HKO_A

I was less than enthusiastic about a Trump victory.  The best part for me was that is ensured a Hillary Clinton loss.  Yet I feel some sense of relief, not just that the slimy slugfest is over, but there are some things I no longer worry about, for a while anyway.

I do not worry about the erosion of Second Amendment rights even though that was not as critical to me as it was to so many others on the right.  I also do not worry about the First Amendment rights which is very critical to me.  Citizen’s United’s protection of free speech seems safe for a while.  We are safe for awhile from the lame attempts of Democrats in Congress to define and thus limit what a journalist is and thus whether they have free speech rights.

I no longer worry about tax increases, especially the ridiculous 6 step capital gain brackets of Hillary.  This is not because of how it would affect me personally but because it would lock up capital allocation decisions for years.  Just six months ago all estate planning assumed higher taxes in the future.  How quickly that changes.

I no longer worry about her power to select justices who will in effect write legislation so the progressives can dismiss the pain of negotiating in a divided Congress.  I worry less that progressive justices will not protect individual liberty from majoritarian democracy.

The concern about Trump rolling back social progress and empowering the Alternate Right always seemed foolish.  The Alternate Left seems to be a larger threat.

I remain concerned about his temperament, foreign policy (whenever he gets one), and trade.  Can we improve our trade position without triggering a Smoot Hawley style reaction? I expect many of his grandiose promises to be tempered by political realities.

And for my friends on the right outraged by the tone of the protests, I do recall some pretty nasty things said about the Obamas with equally thin pretenses.  They wasted enormous efforts on his gaffes and associations, not to mention that birther nonsense.  This only distracted attention from the policies which have been so thoroughly repudiated.  As it turns out he and Michelle proved quite classy in the white House, even if I remain opposed to just about all of his policies.  He was smart enough to leave the dirty work to the Congressional leaders.  Pelosi and Reid, and others like Elizabeth Warren became the face of the party rejected at the polls.

But while the Trump protesters get over their loss and fears, I feel relieved that many of my fears are allayed for a few years.