Ask Economists

A friend of mine started a new website designed to be an Economics centered question and answer forum. I should stress that it is very new and still in the development stages, but if any of you would like to check it out and say what you think, he would greatly appreciate the input. The website is called ask-economists.com.

Oil Prices (Whose Fault?)

Democrats were quick to blame Bush (and the Republicans) on the high prices at the pump? Does that mean that Bush is now responsible for the low prices at the pump?

(Sorry for the long stream of "anti-Democrat" posts, I will be sure to get some "anti-Republican" posts on here soon so as not to appear partisan.)

Obama's View on Free Trade

Obama during Wednesday night's debate:

“I believe in free trade... And when it comes to South Korea, we've got a trade agreement up right now, they are sending hundreds of thousands of South Korean cars into the United States. That's all good. We can only get 4,000 to 5,000 into South Korea. That is not free trade."

Methinks Obama does not know what "free trade" means.

Equality Under the Law

One of the main components of a liberal democracy is rule of law. A government must be able to enforce the law in order to maintain order within its borders. However, a more controversial but extremely important concept of rule of law is the notion of "equality under the law," or legal egalitarianism. America and France were the birthplace of this concept. As this goes, a free society cannot truly be free if the law is used to coerce people into material equality; thus, they must be allowed legal equality, even though this will inevitably lead to material inequality.

One of the places where equality under law is absent would be tax law. Based on your income (or other forms of wealth), you can be taxed more than someone less "well off" than you. Why are taxes an acceptable area to have inequality under the law? Should free speech not be the same for the rich? Should the rich not have a right to a fair trial? Why do laws against theft count for others trying to steal from the rich (unless of course that other is the government)?

The main questions that need to be answered are a.) Does redistribution of income create a net benefit to society? and b.) Regardless of the benefits, should redistribution of income be a legitimate facet of a free society?

Congratulations Paul Krugman

The Nobel Prize in Economics has been awarded to Paul Krugman this year. Krugman has become a very outspoken Liberal during the Bush administration, but his academic career has been full of hits, mainly dealing with trade theory. His macroeconomics book was the one I used for my Intro to Macro class. It was well written and nonpartisan.

More info on Krugman here and here is his blog.

Economists Don't Like Obama's Economic Plan

A recent petition signed by 100 economists, including some big names, finds much fault with Barack Obama's economic plan. Here is the full text:

Barack Obama argues that his proposals to raise tax rates and halt international trade agreements would benefit the American economy. They would do nothing of the sort. Economic analysis and historical experience show that they would do the opposite. They would reduce economic growth and decrease the number of jobs in America. Moreover, with the credit crunch, the housing slump, and high energy prices weakening the U.S. economy, his proposals run a high risk of throwing the economy into a deep recession (emphasis mine). It was exactly such misguided tax hikes and protectionism, enacted when the U.S. economy was weak in the early 1930s, that greatly increased the severity of the Great Depression.

We are very concerned with Barack Obama's opposition to trade agreements such as the pending one with Colombia, the new one with Central America, or the established one with Canada and Mexico. Exports from the United States to other countries create jobs for Americans. Imports make goods available to Americans at lower prices and are a particular benefit to families and individuals with low incomes. International trade is also a powerful source of strength in a weak economy. In the second quarter of this year, for example, increased international trade did far more to stimulate the U.S. economy than the federal government's "stimulus" package.

Ironically, rather than supporting international trade, Barack Obama is now proposing yet another so-called stimulus package, which would do very little to grow the economy. And his proposal to finance the package with higher taxes on oil would raise oil prices directly and by reducing exploration and production.

We are equally concerned with his proposals to increase tax rates on labor income and investment. His dividend and capital gains tax increases would reduce investment and cut into the savings of millions of Americans. His proposals to increase income and payroll tax rates would discourage the formation and expansion of small businesses and reduce employment and take-home pay, as would his mandates on firms to provide expensive health insurance.

After hearing such economic criticism of his proposals, Barack Obama has apparently suggested to some people that he might postpone his tax increases, perhaps to 2010. But it is a mistake to think that postponing such tax increases would prevent their harmful effect on the economy today. The prospect of such tax rate increases in 2010 is already a drag on the economy. Businesses considering whether to hire workers today and expand their operations have time horizons longer than a year or two, so the prospect of higher taxes starting in 2009 or 2010 reduces hiring and investment in 2008.

In sum, Barack Obama's economic proposals are wrong for the American economy. They defy both economic reason and economic experience.

What are your thoughts on the damaging potential of Obama's economic policy? How come there was no endorsement of the McCain economic plan in this letter?

Bailout Bill Passes House

The revised Bailout Bill has passed the House today by a vote of 263 to 171. Thoughts?