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The Threat of Economic Nationalism

From National Review, Jonah Goldberg, Down with the Administrative State:

Rich Lowry and I have been going back and forth on nationalism vs. patriotism quite a bit. I’m not going to revisit all of that because it’s already gotten way too theoretical. But what I do want to say is that when nationalism gets translated into public policy, particularly economic policy, it is almost invariably an enemy of individual liberty and free markets. This should be most obvious when it comes to trade. The Trumpian case for economic nationalism is inseparable from the claim that politicians can second guess businesses about how best to allocate resources.

Bannon is desperate to launch a multi-trillion-dollar infrastructure program in the name of economic nationalism. He thinks it will be as “exciting as the 1930s.”

Well, “exciting” is one word for the 1930s, but it’s not the one I would use and it’s not one that conservatives — until five minutes ago — would have used. FDR was a proud economic nationalist. The National Recovery Administration (NRA) was slathered in nationalism. It was run by Hugh Johnson, the man who ran the draft during the First World War and who tried to literally militarize the economy. Under the NRA, a dry cleaner, Jacob Maged, was sent to jail for charging a nickel under the mandated price for pressing a suit. Under the NRA, big businesses created a guild-style corporatist political economy.

Economic nationalism taken to its logical conclusion is socialism, with pit stops at corporatism, crony capitalism, and the like. When you socialize something, you nationalize it and vice versa.

Now I don’t think that Trump and Bannon want to go nearly that far. Many of their proposed tax and economic policies will help the free market. But nationalism has no inherent limiting principle. The alt-right nationalists despise the Constitution precisely because it is a check on nationalism. For the unalloyed nationalist mind, it’s us over them, now and forever — and the definitions of “us” and “them” can get dismayingly elastic. (“This is the core claim of populism,” writes Jan-Wener Muller in What is Populism, “only some of the people are really the people.”)


A fascinating thought on the distinction between nationalism, patriotism and socialism.

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The New Normal is the Same as the Old Normal

From Marc Levinson at The Wall Street Journal, Why the Economy Doesn’t Roar Anymore:

Historically, boom times are the exception, not the norm. That isn’t true just in America. Over the past two centuries, per capita incomes in all advanced economies, from Sweden to Japan, have grown at compound rates of around 1.5% to 2% a year. Some memorable years were much better, of course, and many forgettable years were much worse. But these distinctly non-euphoric averages mean that most of the time, over the long sweep of history, people’s incomes typically take about 40 years to double.

Today, that is no longer good enough. Americans expect the economy to be buoyant, not boring. Yet this expectation is shaped not by prosaic economic realities but by a most unusual period in history: the quarter-century that began in the ashes of World War II, when the world economy performed better than at any time before or since.

What explains the global downshift in productivity growth? Some of the factors are obvious. Once tens of millions of workers had moved from the farm to the city, they could not do so again. After the drive for universal education in the 1950s and ’60s made it possible for almost everyone in wealthy countries to attend high school and for many to go to university, further improvements in education levels were marginal. Projects to widen and extend expressways didn’t deliver nearly the productivity pop of the initial construction of those roads.

But there is more to the story. Productivity, in historical context, grows in fits and starts. Innovation surely has something to do with it, but we have precious little idea how to stimulate innovation—and no way at all to predict which innovations will lead to higher productivity.

Here is the lesson: What some economists now call “secular stagnation” might better be termed “ordinary performance.” Most of the time, in most economies, incomes increase slowly, and living standards rise bit by bit. The extraordinary experience of the Golden Age left us with the unfortunate legacy of unrealistic expectations about our governments’ ability to deliver jobs, pay raises and steady growth.


A sobering thought- but what if the tepid growth in productivity and wages is tempered by a sharp drop in consumer prices? Then the  slower growth would be virtually pain free.  If tepid growth is the norm, then we will have to face a great reckoning with government expenses and pension liabilities.


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The Protectionist Fallacy

from National Review, Who Will Protect Americans from the Protectionists? by George Will

The tiny print on the back of iPhones accurately says they are “assembled,” not manufactured, in China. The American Enterprise Institute’s James Pethokoukis notes that parts come from South Korea, Japan, Italy, Taiwan, Germany, and the United States. Components of Boeing airliners’ wings come from Japan, South Korea, and Australia; horizontal stabilizers and center fuselages from Italy; cargo-access doors from Sweden; passenger-entry doors from France; landing-gear doors from Canada; engines and landing gear from Britain.

Navarro’s “unwinding and repatriating” is, to say no more, part of an improbable project: making American greater by making Apple, Boeing, and many other corporations much less efficient and less competitive. This will further slow economic growth, making even more unattainable the 4 percent (more than double the economy’s average growth this century) or higher growth that the administration says will enable it to spend $1 trillion on infrastructure (including a $15 billion or so wall on the Mexican border, begun after nearly a decade of net-negative immigration from Mexico), while substantially increasing military spending, leaving entitlements unreformed, and delivering enormous tax cuts. Cuts that, according to the Committee for a Responsible Federal Budget (co-chaired by Republican Mitch Daniels and Democrat Leon Panetta, both former directors of the Office of Management and Budget), will reduce revenues by $5.8 trillion over ten years. This, as the Congressional Budget Office projects that even without any of the administration’s proposed spending spree and tax cuts, under current law the national debt would increase by $9.4 trillion.


Trade is my biggest concern of Trump. It is a minor part of the employment issue if it has any effect at all.  It can be especially onerous if handled with the utter lack of diplomacy that he has shown so far.



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The Original Sins of Health Care

from John Cochrane at The Hill, Here’s what healthcare looks like in a perfect world:

It’s wiser to start with a vision of the destination. In an ideal America, health insurance is individual, portable, and guaranteed renewable. It includes the right to continue coverage, with no increase in cost. It even includes the right to transfer to a comparable plan at any other insurer.

Big cost control comes from the only reliable source — rigorous supply competition. The minute someone tries to charge too much, new doctors, clinics, hospitals, and models of care spring up competing for the customer’s dollar. Access to health care comes like anything else, from your checkbook and intensely competitive businesses jockeying for it.

he original sin of American health insurance is the tax deduction for employer-provided group plans — but not, to this day, for employer contributions to portable individual insurance. Insurance then became a payment plan to maximize the tax deduction. It became horrendously inefficient as people were no longer spending their own money.

Worse, nobody who hopes to get a job with benefits then buys long-term individual insurance. This provision alone pretty much created the preexisting conditions problem.

Cross-subsidies are a second original sin. Our government doesn’t like taxing and spending on budget where we can see it. So it forces others to pay — it makes employers to provide health insurance. It forces hospitals to provide free care. It low-balls Medicare and Medicaid reimbursement.

The big problem is that these patches and cross-subsidies cannot stand competition. Yet, without supply competition, costs increase, the number of people needing subsidized care rises, and around we go.


The illusion that market forces do not work in health care is nonsense,  We have spent decades subverting market forces and then declare that it does not work. The problem with our health care is that market forces only work too well, and the system has responded to the adverse incentives created by poorly analyzed and poorly executed solutions.  If you pour money into a market, mandate an increase in demand, restrict the supply and reduce competition, then you will get the mess we have.

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Benign and Intolerable Job Destruction

from National Review, Who Will Protect Americans from the Protectionists? by George Will

Today’s Republican administration promises protection against the destruction of American jobs by the Chinese, Mexicans, and other foreigners. The really prolific destroyers are: Americans. As Reason’s John Tamny says, Americans streaming movies from Netflix (based in Los Gatos, Calif.) erase American jobs in movie theaters and DVD-rental stores. Americans buying books from Seattle-based Amazon have caused many American bookstores to do what Borders (400 stores, 11,000 employees) did: disappear. Americans using San Francisco–based Uber are destroying many taxi drivers’ jobs.

Evidently our protectors in the administration must believe this: The destruction of American jobs because Americans buy goods or services of some American companies rather than those of other American companies is benign. But the destruction of American jobs because Americans buy goods or services of foreign companies is intolerable.

As today’s Republicans celebrate a protectionist administration that is confident that Washington’s superior wisdom can improve upon the market’s allocation of economic resources, Democrats must resent Republican plagiarism. Who will protect Americans from their protectors?