Fredenomics

The day after the GOP presidential hopefuls minus one debated in a horrid format (limited to short sound bite answers) and over some ridiculous questions ("Do you personally believe in evolution?" Who cares?), the minus one spoke. Fred Thompson spoke last night at a function in California. It was carried on C-span. The speech touched on a lot of issues, but the gravitas was on economic, trade and tax policy. And I have to tell you, when a presidential candidate discussing those isues starts referring to Adam Smith, author of The Wealth of Nations penned the same year as The Declaration of Independence, that is a very good thing. Here are some of Mr. Thompson's remarks

A lot of Americans . . . are concerned about the way things are going in our country right now. Some fear we may be in the first stages of decline. We've heard this malaise talk before.

Of course Iraq is a large part of it. Not only is it tough going, but the effort is besieged on all sides. From those playing the most crass kind of politics with it at home to criticism from around the world.

Even at home, as we enjoy the benefits from one of the best economies we've ever had, people seem uncertain; they raise concerns about global competition or a growing economic disparity among our citizens.

These are challenges. But how we react to them is more important than the challenges themselves. Some want us, to the extent possible, to withdraw from the world that presents us with so many problems, in the hope they will go away. Some would push us towards protectionist trade policies. Others see a solution in raising taxes and redistributing the income among our citizens.

Wrong on all counts. These are defensive, defeatist policies that have consistently been proven wrong. They are not what America is all about.

Let's talk about the issues here at home, first. A lot of folks in Washington suffer from a big misconception about our economy. They confuse the well-being of our government with the wealth of our nation. Adam Smith pointed out the same problem in his day, when many governments mixed up how much money the king had with how well-off the country was.

Taxes are necessary. But they don't make the country any better off. At best they simply move money from the private sector to the government. But taxes are also a burden on production, because they discourage people from working, saving, investing, and taking risks. Some economists have calculated that today each additional dollar collected by the government, by raising income-tax rates, makes the private sector as much as two dollars worse off.

To me this means one simple thing: tax rates should be as low as possible. This isn't anything ideological, and it really isn't some great insight. It's common sense arithmetic.

That's why the economy booms when taxes are cut. When the Kennedy tax cuts were passed in the 1960s, the economy boomed. When Reagan cut taxes in 1981, we went from economic malaise to a new morning in America. And when George Bush cut taxes in 2001, he took a declining economy he inherited to an economic expansion -- despite 9-11, the NASDAQ bubble and corporate scandals.

The Democrats, of course, want to raise taxes. They only want to target the rich, they say. A word of advice to anyone in the middle class -- don't stand anywhere near that target. Wouldn't it be great if, instead of worrying so much about how to divide the pie, we could work together on how to make the pie bigger?

On globalization -- we're not afraid of it. It works to our benefit. We innovate more and invest in that innovation better than anywhere else in the world. Same thing goes for services, which are increasingly driving our economy. Free trade and market economies have done more for freedom and prosperity than a central planner could ever dream and we're the world's best example of that. So, why do we want to take investment dollars out of growth, and invest it in government?

I'd say cash flow to the government is already going quite well. Over the past year our current tax structure generated record levels of revenue for Washington. In fact it's time to seriously consider what we're getting for our "investment" in government.

For many years, several functions of the federal government have been descending into a sorry state of mismanagement and lack of accountability. I published a 68-page report on government's waste, duplication and inability to carry out some of its basic responsibilities. That was back in 2001 before 9-11, and it got little attention. Now the government's shortcomings are affecting our national security and are getting a lot of attention.

The growth of government is not solving these problems; it's causing a lot of them. Every level of new bureaucracy that is created develops a level of bureaucracy beneath it, which creates another one. Pretty soon there is no accountability in the system. A new head of a department or agency comes in from out of town and, after a protracted confirmation fight, wants to spend his or her few years in Washington making great policy and solving national problems, not fighting with their own bureaucrats. So they just let well enough alone. Then you start seeing the results. Departments that can't pass an audit, computer systems that don't work, intelligence breakdowns, people in over their heads.

Yet people in both parties continue to try to federalize and regulate at the national level more and more aspects of American society -- things that have traditionally been handled at the state and local level. We must remember that we have states to serve as policy laboratories for innovation and competition. That's how we got welfare reform. Our system also allows for the diversity of our large country. Our attitude should be, let the federal government do what it is supposed to be doing -- competently. Then maybe we will give it something else to do.

The government could start by securing our nation's borders. A sovereign nation that can't do that is not a sovereign nation. This is secondarily an immigration issue. It's primarily a national security issue. . . .

Speaking of reforms and our economy, there is nothing more urgent than the fate that is awaiting our Social Security and Medicare programs. The good news is that we are living longer. However, we don't have enough young working people to finance these programs from their taxes.

People say the programs are going bankrupt. They won't go bankrupt. Even as these programs sap every dime of the government's revenue, the folks in Washington will raise the taxes necessary to cover the problem. At this rate the federal government is going to wind up as nothing more than a transfer agent -- transferring wealth from one generation to another. It will devastate our economy.

. . . So the entitlement problem gets kicked a little further down the road. This action is based on the premise that our generation is too greedy to help the next generation. I believe just the opposite is true. If grandmom and granddad think that a little sacrifice will help their grandchildren when they get married, try to buy a home or have children, they will respond to a credible call to make that sacrifice -- if they don't think that the sacrifice is going down some government black hole.

. . . It's clear with close numbers in the House and the Senate we need bipartisanship to have any chance at real reform in any of these areas. And there are many responsible people who are willing to try to make it happen. But the level of bipartisanship needed for real progress can only be achieved when politicians perceive that the American people are demanding it. That's why leaders of reform and hopefully our next President, will have a mandate to go directly to the American people with truth and clarity.

These days in Washington, there's an awful lot of talk about the need for conversation -- that we should talk more to our nation's enemies; that we should speak "truth to power." However the speakers are usually turned in the wrong direction. Instead of talking to each other, leaders need to be speaking more to the American people.

The message would be simple: "My friends we have entered a new era. We are going to be tested in many ways, possibly under attack and for a long time. It's time to take stock and be honest with ourselves. We're going to have to do a lot of things better. Here's what we need to do and here's why. I know that, now that you're being called upon, you will do whatever is necessary for the sake of our country and for future generations. You always have."

When the American people respond to that, as I know they will, you will have your bipartisanship.

Read the entire remarks here. As to the report Fred Thompson cited on waste in government that he published in 2001, find Volume 1 here and Volume 2 here.

e-Run, Fred, e-Run.

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Anti-Business Democrats

Business is the engine that drives the United States and the world. It goes beyond saying that the creation of wealth . . . (1) funds the tax base; (2) grows the economy; (3) creates jobs; (4) provides the US with the highest standard of living in the word; (5) allows for creation and deployment of a military in our self defese; (6) allows for the government to hand out the goodies . . . and on and on and on. And the opposite is equally true. One reduces the creation of wealth by (1) taxation; (2) regulations that require businesses to expend wealth, time and effort to comply; (3) limiting trade; . . . and on and on an on.

Thus I am always amazed when I see the left wingers of the United States decrying the inate evil of corporations, global trade and capitalism. It is insanity to a high degree and makes for incredibly cynical politic theatre. The compliment to that is protectionism and modifying trade laws to benefit special interests. It is not like it is still in question whether such actions are, as a rule, generally ill advised. Adam Smith penned his famous economic treatise, The Wealth of Nations, in 1776. His vision has proven incrdibly accurate, and indeed, those who have not heeded his words either have moribund economies or have seen their economic model fall by the wayside of history. I think we need to send a copy of this work to the Democrats in Congress if this WSJ article is correct:

. . . [T[his week House Democrats issued their new policy statement on trade that reads like a protectionist wish list. Among its lowlights: rewriting the Peru deal to require, among other things, that the Andean nation "adopt and enforce laws on logging Mahogany"; immediate action against "China and Japan currency manipulation"; adding global warming commitments to future trade agreements; and creating a new U.S. "Trade Enforcer" to file more trade cases in the World Trade Organization.

Democrats are even raising their demands for labor standards as part of trade deals. They used to insist that U.S. trading partners agree to adopt International Labor Organization (ILO) standards in principle. The U.S. had a "safe harbor" in the deals because American labor protections are both strict and well enforced. But now Democrats are saying they want any trade deal to require that the U.S. also meet specific ILO labor standards.

That's a backdoor way of rewriting U.S. labor law without having to assemble a majority in Congress. It's also a way of guaranteeing that trade deals won't pass in Congress, because few Republicans will go along with rules that make it easier for unions to organize and trump domestic sovereignty. Trade deals in recent years have required a House coalition of most Republicans and a smaller group of pro-business Democrats.

This all bears the fingerprints of Sander Levin, the Michigan Democrat who runs the trade subcommittee on Ways and Means and is well known as the Congressman from Big Labor. The AFL-CIO opposes any free-trade deals of the kind that Bill Clinton promoted, and this "new" Democratic policy has all the earmarks of a poison pill. Mr. Levin is thought to have the backing of Speaker Nancy Pelosi, and if that's true then Mr. Rangel may well be rolled in his own committee.

All of this reflects a surge left among Democrats on trade since the Clinton Presidency, and for reasons that have little to do with the economic evidence. U.S. job and wage growth has been healthy, even as more of the economy is trade dependent. A February study for the Business Roundtable found that one in five U.S. jobs now depends on exports or imports, compared with one in 10 in 1992. It also found that trade has a net positive impact on U.S. manufacturing jobs--far from the "giant sucking sound" of myth.

Read the artice here. I maintain that the '06 election was a vote against Republicans who had strayed from their small government roots, who failed to take decisive action in Iraq, and who completely lost the communications war. It was not a vote for Democrats, with their ridiculous arguments for leaving Iraq and their anti-business stance. Who could possibly vote for a party that would seek to hurt trade and enable failing labor unions to the detriment of the economy and simply to support special interests?

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The EU Disgraces Itself - There Must Be Consequences

Yesterday's acts by the EU will reverberate long into the future and with consequences that likely cannot be seen at this point. The UK asked for assistance from EU members in bringing pressure to bear on Iran to return the kidnapped 15 sailors and marines late of the HMS Cornwall. The EU placed their economic ties with Iran above the moral imperative of assisting Britain -- and even had the gall to lecture to the UK that this matter should not be taken to the point of confrontation -- no doubt because it would endanger their trade with Iran.

European foreign ministers failed last night to back Britain in a threat to freeze the €14 billion trade in exports to Iran, as the hostage crisis descended into a propaganda circus.

Tony Blair could only issue a new statement of disgust as Iran tormented him with another sailor’s video confession and a fresh letter from the young mother detainee.

A first written message from the Tehran Government offered some hope of a deal, but time is running out before the Iranian new year holiday ends and militant students and politicians return to business.

EU foreign ministers meeting in Germany called for the sailors to be freed but ruled out any tightening of lucrative export credit rules. The EU is Iran’s biggest trading partner. British officials are understood to have taken soundings on economic sanctions before the meeting but found few takers.

France, Iran’s second-largest EU trading partner, cautioned that further confrontation should be avoided. The Dutch said it was important not to risk a breakdown in dialogue.

Read the entire article here. One can make several observations from these acts. Indeed, one can even do so with relative calm and without the use of expletives -- but only after a long walk and a couple of glasses of 30 proof mead. The EU is beneath contempt.

1. The EU places their individual pecuniary interests above the interests of EU solidarity. There can be no future expectation of support by the EU for any particular member in any given scenario.

2. There is likely a huge element of anti-Americanism playing into the EU decision to rebuff the UK and it is motivated in part to punish the UK for allying with America. Anti-Americanism has been a hallmark of leftist politics throughout Old Europe, and the constant drumbeat of negativity has had its effect. For example, in Germany, more people consider the U.S. to be a greater threat to world peace then Iran and radical Islam.

3. The EU, which faces the same existential threat from Iran and radical Islam that the US and the UK face, is unwilling or unable to put its national security interests ahead of its short term pecuniary interests so long as the EU member nations feel safe under the umbrella of U.S. and U.K. protection.

4. The EU is willing to rely on the United States and the UK to provide and pay for their security while they feel free to reap economic benefit wherever possible, including trading with the the very nation that threatens their security.

5. The EU itself is wholly amoral with no sense of institutional loyalty. To motivate EU countries, one must offer them lucre or threaten their trade.

6. The EU member states cannot be counted upon as allies as a group.

7. In the wake of this rebuff, the UK will never go along with agreeing to an EU constitution. That is dead and buried.

8. In the wake of this rebuff, Angela Merkel's call for the melding of member state armies into a single EU military is beyond ridiculous.

9. It is unlikely that the UK will leave the EU over this incident - which is too bad really. However, there will be loud calls to consider it in the UK in the coming months and it will be an outside possibility.

10. The greed of the EU is blinding them to the ramifications of their refusal to support the UK. Their decision will embolden Iran and make the liklihood of this whole matter ending without the use of brute force far less likely. I seriously doubt that the UK will sit through a show trial of their troops without issuing an ultimatum on a date certain. George Bush is loyal. When Tony Blair asks, I have no doubt whatsoever that Bush will pull the trigger on the air craft carriers in the Gulf.

Having said all of that, the US can and should take actions to motivate Britain's fellow EU member states. A law on the books since the Clinton administration and recently revised under the rubric of The Iran Freedom Support Act allows for sanctions against companies, foreign and domestic, who trade in certain matters with Iran. No one has ever been sanctioned under it. Given the incredible greed and shortsightedness of the EU actions in rebuffing the UK, the U.S. should dust off this law immediately and announce its intentions to enforce the sanctions. It is likely the only coercive act the craven and despicalbe EU members could understand. There can be no more free rides when it comes to their own defense for the EU members.

Further, the U.S. should give serious consideration to whether it wishes to continue to be a member of NATO. We can certainly engage in treaties with those nations such as Britain and the members of new Europe who are willing to be loyal allies and pay for their share of their own defense. America's next military threat is coming from China, not Europe. Leaving NATO would allow us to free up significant military and command capability and refocus it to the true threats that we face in the future.

Hat Tip: Dinah Lord

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IS THAT APPLE CIRCUMCISED?

How does one check for the stain of Judaism on apples? I don't know, but the answer is apparently important to Syria. They just purchased 7,000 tons of apples from Israel.

In Syria, officials stated they were only interested apples grown by Druze farmers and not in Jewish towns. However the ministry of foreign affairs was hopeful that soon Israel will being exporting its cherries from the a kibbutz in the Golan Heights.

Read the whole story here.

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