Before speculating on why our economy is in the pits lately, I feel a need to respond to an accusation made in a recent comment to my Birdfeeder post, i.e., that The World According to Opa is itself a source of viral disinformation.
I have been assured by more empathetic readers that my blog is not a source of viral disinformation. They say, and I choose to believe, that it is just the opposite; it is an open blog inviting input and dialogue from all quarters. It is dedicated to those of us who enjoy safe opportunities to express ourselves on controversial issues of the day. While I would hope to one day win over the minds of those who disagree with me (that is after all the purpose of debate), this is not the essential reason for the blog’s existence. Furthermore, I leave open the possibility of being won over to others’ interpretation of the facts from time to time. I encourage all my readers to comment publically and I respond to all comments, even the hateful ones (although these I choose to answer offline). The blog might be considered to be “infotainment” by some, but only if they choose to receive (or ignore) the ideas presented unidirectionally. It’s their choice.
To prove my point, in response to a recent comment to the Birdfeeder post, I concede… sort-of. There are other countries that are rated as having more economic freedom than the United States. According to assessments made by “conservative” think tanks like the Cato Institute and the Heritage Foundation, there are a few nations that rank higher on the Economic Freedom of the World (EFW) index than the United States does, but only a few, not “a number,” implying several as one of my readers has claimed. Hong Kong has consistently ranked most economically free over the years. But (and I guess it matters what parameters are measured and how), the United States isn’t far behind. The more “liberal” camp of think tanks, like the Pew Charitable Trusts, concern themselves with issues like social justice, collective welfare, human rights, and the environment — more so than “individual” rights and “economic” freedom, but I respect what the conservative think camp does too. Most Americans would agree that economic freedom is a good thing. But, I wonder, can too much of a good thing be a bad thing?
According to a Cato Institute report that’s four years old now, at the end of the Clinton administration, the United States was tied for third place with New Zealand, Switzerland, and Great Britain for having economic freedom. The factors considered in Cato’s EFW are: the degree to which property rights are safe guarded (I can’t imagine that Hong Kong, being a province of China, gets a high score on this, but perhaps); the level of contract enforcement; whether or not and to what degree free trade is allowed; the maintenance of low marginal tax rates, and; the degree to which the nation’s money holds its value against foreign currencies. Hong Kong, according to this report, had a score of 8.7 on a scale of 10, whereas Singapore had an 8.6. The third place countries all had an 8.2. Today, however, the United States is ranked fifth according to a recent Heritage Foundation report, even with more free trade and lower marginal tax rates. We may have slipped owing to less government oversight of business transactions, especially in the financial sector, to enforce contract agreements and because we’ve allowed the dollar to loose much of it’s value… just a guess. So, if anything, the point my reader raised only serves to illustrate how we’ve lost ground economically under the two Bush/Cheney administrations and a Congress that was dominated most of this time by Republicans.
Wait a minute! Wait a minute! According to the CIA Factbook, Hong Kong is a Special Administrative District of China, not a country (a soverign nation-state). And when you look at Singapore on a map, it becomes obvious that it is city-state not a nation-state. These two economically bustling, populated places in Asia should not be directly compared with nation-states, which have more complicated and dynamic political landscapes. Take away these two, the U.S. then was really tied for first place with two other “real” countries four years ago, and now still ranks third despite the devaluation of the dollar to pay for our military adventurism of recent years. So I take my concession back.
This teacher of economics suspects, based on various studies done as far back as 2001 that I have read (and Alan Greenspan’s book since) on the likely (now historical) long-term effects of Bush’s tax cuts, even with the lower marginal tax rates involved, that output (GDP) would be (and now obviously has been) constrained because of them. Expansion has slowed and we are now actually experiencing a recession because spending was not reduced by the Government commensurate with reduced revenues after the tax cuts were enacted. Also, government spending in the public sector, as a percentage of total spending, has declined with billions leaking from our economy into the hands of Afghan and Pakistani warlords and to reconstruction efforts in Iraq. Leakage from our economy has also resulted from our growing trade deficit thanks to more free trade. We have expanded the money supply to fund the wars in Afghanistan and Iraq with the sale of government securities primarily to China and Japan, which is largely the reason for the declining value of the dollar; world demand for the dollar is down because we have flooded the market.
Another reason we are in recession today, I firmly believe, is because more and more middle class American jobs have been lost through off-shoring, another consequence of free trade. More and more Americans are earning less and less and, therefore, have less to spend. Finally, we are in recession today because the ultra wealthy, for whom Bush’s tax cuts overwhelmingly favored, have saved much of their increased disposable income. Rather than plowing it back into the economy through consumption or investment to stimulate the economy, they have bought treasury bonds with their savings or stashed it away in off-shore accounts and other such tax havens. The rich know best how to do this.
Yes, I must conclude that it is possible to have too much of a good thing.
On yet another of my readers points in his most recent comment, no, I do not agree that we are “all” free thinkers. I know many who won’t even consider much less listen to others’ opinions and some, fundamental Christians among them, who reject scientific theory (facts) because they cling to already-held dogma. These people cannot be considered free thinkers.
President Bush, in my humble opinion, is a good example of someone who is not a free thinker. He once said, as reported in Susan Jacoby’s book, The Age of American Unreason, that he never reads newspapers as that would expose him to public opinion. This revalation, according to Jacoby’s account, was reported to a Fox news correspondent during an interview with the President back in 2003. Now I admit that this is secondary information, but it rings true with my opinion of the man.
Please feel free to post a comment, pro or con. Everyone’s opinion matters.