Local Currency Is Like a Car That Can’t Leave Town

By George Selgin

How’s this for a great idea: we build a small fleet of cars, and market them to people in the local community. How do we compete with Ford, G.M., Toyota, and all those other huge car companies? Easy.
You see, our cars will have special octane requirements that will prevent them from refilling at ordinary gas stations. Instead, we’ll set up a few local stations that will be the only ones equipped with the right fuel. To top it off (so to speak), our cars will also have small gas tanks to prevent them from reaching the next town on a single tank. (Should we decide to go electric, we can instead equip them with special plugs and voltage requirements to accomplish the same result.)

By Ike Brannon

Denizens of Washington DC have been having a field day speculating about what sorts of action Donald Trump may take on the first day of his presidency. One possible Obama-era executive order some of his supporters have urged him to repeal is the Deferred Action for Childhood Arrivals, or DACA, which allows children of illegal immigrants brought to this country by their parents to receive temporary protection from deportation, work permits, and a path to citizenship if they have not committed any crimes.

By Christopher A. Preble

President-elect Donald Trump has made cutting wasteful defense spending a top priority, specifically targeting federal defense contracts. He called defense industry leaders to the proverbial woodshed to protest costly projects, including threatening on Twitter to cancel Lockheed Martin’s F-35 Joint Strike Fighter and Boeing’s contract to build two new Air Force Ones.
These tweets send a strong message, and both Boeing and Lockheed have said they intend to work with Trump to reduce program costs. But significantly reducing bloat in the defense budget will require much more than tweets.

By Alex Nowrasteh

President Obama just ended a decades old policy that allowed escapees from Communist Cuba to enter the United States without a visa. Known as “wet feet, dry feet,” it allowed Cubans who showed up at America’s borders to enter lawfully and earn an expedited green card. Cuba’s brutal Communist dictatorship, proximity to the United States, and history were the reasons for this relative openness. Now he sends a clear message to Cubans seeking freedom: stay away.
And everybody thought Donald Trump was going to be the anti-immigrant president.

By Ilya Shapiro

The Obama administration has been the most lawless in U.S. history. I don’t mean that in the Nixonian sense of personal corruption, whereby the president is personally above the law, although the idea that Barack Obama’s tenure has been ethically pure is laughable.
No, my accusation rests on the 44th president’s seeing himself as professionally above the law, ignoring the executive branch’s legal limits and disrespecting constitutional bounds like federalism and the separation of powers.

By Daniel J. Mitchell

The hot new term in the world of tax reform is “border adjustability,” which refers to when governments have systems that tax imports and exempt exports.
This approach is widely associated with European-style credit-invoice, value-added taxes (VATs), and Republicans appear poised to bring something similar to our shores.
As part of their “Better Way” tax plan, House Republicans are proposing to change the corporate income tax into a destination-based, cash-flow tax (DBCFT), which in itself is a kind of border-adjustable tax.

By Christine Guluzian

Chinese President Xi Jinping’s address at the World Economic Forum in Davos, Switzerland Tuesday may have sent the strongest signal yet that China is more willing than the United States to champion free trade and globalization, thanks to President Donald Trump’s protectionist and anti-trade leanings.
At the commencement of the WEF’s annual summit, Xi — the first Chinese head of state to participate in Davos — spoke of the importance of globalization for global economic growth, whereas President Trump’s representative at Davos, Anthony Scaramucci, spoke of America’s centrality as indispensable for globalization.

By Emily Ekins

The news cycle Saturday was dominated with coverage of the hundreds of thousands of women, many donning pink hats, gathering in major cities for “women’s marches” to protest Donald Trump. Anyone watching the news would have gained the distinct impression that these marches purported to speak for women across the country, with headlines like: “Women’s Marches Protest Trump Election & Agenda,” and organizers emphasizing that “we represent half of this country.”
But could we be honest about what this really is? This isn’t a “women’s march” but a liberal women’s march. Despite the organizers’ promises to the contrary, these marches were by no means inclusive and failed to represent the diverse array of priorities that many women across the country have. Some were even actively discounted.

Inauguration Speech Wrongly Demonized Free Trade

Picking up where he left off during the presidential campaign, President Trump made economic nationalism a central theme of his inauguration speech. Using dark language and imagery, he referred to shuttered factories and workers left behind, and asserted that from now on it will be “America First.”
To this end, he vowed to “protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs,” and claimed that “[p]rotection will lead to great prosperity and strength.” And he set out two simple rules to accomplish all this: “Buy American and hire American.”

What Republicans Miss About Healthcare Reform

Tho Bishop

Healthcare reform is back in the news as the Republican House and Senate have begun the process of repealing the Affordable Care Act. While Republicans have been able to consistently communicate the obvious problems with Obamacare, few have been able to articulate ways in which to improve what was already a broken healthcare system.
Senator Rand Paul is one of the few exceptions. He recently outlined an approach that would seek to lower the cost of health insurance by eliminating insurance mandates, allowing consumers to purchase insurance across state lines, allow smaller organizations to pool their insurance together for greater leverage, and eliminate limits on health savings accounts.

Inequality Doesn't Create Poverty

Ryan McMaken

Oxfam, the leftwing NGO devoted to poverty relief has released a new report blaming poverty in wealth inequality. In other words, its central claim is that the existence of very wealthy people creates poverty.
The report is largely just an extended op-ed that asserts that the existence of some very wealthy people is the cause of poverty in the world. Notable buzzwords and phrases include "trickle down," "obscene levels of inequality," and "neoliberalism."
The "solution" to the alleged problem, which should surprise no one, is a list of taxes that should be either introduced or raised significantly, including higher income taxes, "a tax on financial transactions," a "global wealth tax," and a so-called "anonymous wealth tax."
These taxes, we are told, will put an end to the poverty-causing inequality that now is a global crisis.
But there's a problem for Oxfam in this data. The report never actually demonstrates that inequality causes poverty, or how it does it. It does claim that many wealthy people are getting richer faster than poor people. As Marketwatch sums up:

The Failures of Obama's Foreign Policy

David Gordon

As Murray Rothbard often emphasized, the free market and a peaceful foreign policy are indispensable partners. We cannot maintain a free market if the government engages in a bellicose foreign policy. A powerful and aggressive state constantly engaged in war requires vast resources to sustain it, and “military socialism” is an all-too-present reality.
From this perspective, a recent interview of Andrew Bacevich and John Mearsheimer on Obama’s Legacy is disheartening. Both Bacevich and Mearsheimer are leading foreign policy scholars: Bacevich, a retired Army lieutenant- colonel, has been a trenchant critic of the militarization of American foreign policy, and Mearsheimer is the leading theorist of “realism,” a view that challenges ideological crusading and favors strictly limiting foreign policy goals to the national interest.

What Trump Could Do

Jeff Deist

Today Donald Trump becomes the 45th president of the United States. American voters rejected the devil they know so well — Hillary Clinton — for the devil they don’t. Why they did so, and how Trump prevailed, is the biggest political story of our age. But the rejection of progressive hubris, what Friedrich Hayek called the “fatal conceit” of those who would presume to plan our lives, is at the heart of that story.
The Left views Trump’s election as an absolute calamity, despite his support for unions and protectionist trade policies, despite his identity as a New York elite rather than some despised red state politician, and despite his ambivalence toward the social issues that animate Christian conservatives. One would think Democrats would be relieved not to suffer an ideologue like Santorum or Cruz in the White House. Yet their hysteria and lack of self-awareness prompt them to attack the Electoral College, of all things.

The Bank of England and the ECB Have a Credibility Problem

Gordon Kerr

Mainstream media are worried about 2017 shocks. So they should be. If you had gambled a pound (or euro) this time last year on a triple accumulator; Leicester City to be English football champions, Brexit, and then Trump, you would have redeemed your betting slip for a million. Bookmakers are not offering odds anywhere like that on a ‘quad’ bet now popular; i) Geert Wilders (Netherlands, March 15th), presently polling at 20%, ii) Marine Le Pen, (France, April 23rd), 25%; iii) Frauke Petry and Jorg Meuthen (Germany, August 27th), 13.5%; iv) Beppe Grillo of 5 Star (Italy, date uncertain, perhaps October), 28%.
For the ECB and Bank of England, already struggling with separate credibility problems discussed below, any such shocks might prove rather welcome. How so, you may ask, given that they lobbied for ‘Remain’ and obviously would have been delighted with Clinton?

Spanish Courts Don’t Have Any Respect for Freedom of Contract

Enrique Clari

The Spanish banking sector is getting used to judicial setbacks. Unfortunately, they’re not the sorts of setbacks we’d like to see. This could have been an article on the elimination of the legal privileges — e.g., the existence of a state-owned central bank in charge of bailing out its (equally) irresponsible fellows — that financial businesses are nowadays granted worldwide. Eliminating those privileges would have been a setback for the banking sector, but good for everyone else. Unfortunately, that’s not what’s been happening: no liberalization of that sort whatsoever has taken place.

The DEA: A Good Place to Cut the Federal Budget

Alice Salles

The US government’s efforts against illicit drugs have finally run their course. With over one trillion dollars wasted over the past several decades and nothing to show but failure, taxpayers are beginning to ask a simple yet pertinent question: Is it time to end the bottomless funding of this utterly ineffective anti-drug crusade?
With a $29 billion budget for the 2017 fiscal year, the Department of Justice (DOJ) has secured vast resources to the Drug Enforcement Administration (DEA). With a sizeable budget — $2.8 billion in 2015 — the agency tasked with the chore of enforcing “the controlled substances laws and regulations … and [bringing] to the criminal and civil justice system … organizations and principal members of organizations involved in the growing, manufacture, or distribution of controlled substances appearing in or destined for illicit traffic in the United States” has continued to be the number one drug warrior within the federal government. But the DOJ’s Criminal Division, which is tasked with overseeing multiple offices, also houses the Organized Crime and Gang Section (OCGS), an agency that specializes in “developing and implementing strategies to disrupt and dismantle” gangs and organized crime, including drug trafficking. The 2017 budget for the Criminal Division alone is $198.7 million, which represents a “9.3 percent increase over 2016.”

Free Trade versus "Free Trade"

Peter G. Klein

NPR featured an unintentionally funny piece this morning on Donald Trump's views toward the EU and free trade. The guest, former US ambassador to the EU Anthony Gardner, rightfully criticized the president's view that "protection will lead to great prosperity and strength," and called for continued global engagement by US companies and consumers. But he revealed, perhaps inadvertently, what political actors mean by "free trade."
Specifically, Gardner expressed great skepticism towards the prospect of the US striking a bilateral free-trade deal with the UK, supposedly one of Trump's top objectives in his upcoming meeting with new Prime Minister Theresa May. Free-trade agreements are complex, Gardner informed us, and negotiating one will be neither easy nor quick.

The Fed Passes the Buck: Blame Oil and China

C. Jay Engel

There are a handful of themes out there on recent market action that are either totally wrong or otherwise highly misleading. For instance, regarding the recent calamity in the capital markets, one especially apparent dichotomy has presented itself as offering two choices as to what, exactly, is causing the painful turbulence.
There are some who, in a complete echo of the news headlines, are quick to point the finger at both oil and China. And yet there are others who point the finger at the Fed for “raising rates too early.” Along with the second is the observation that “inflation is totally MIA” and therefore it was ludicrous that the Fed felt the need to “raise interest rates.” Both of these tend to express anguish over the “strong dollar.”

The Market Doesn't Solve Problems; People Do

January 28, 2016Louis Rouanet

It is wrongly accepted by many liberals (i.e., libertarians) that most, if not all, social problems can be “solved by the market.” But clearly, the “market” cannot magically solve our problems. Let it be clear that there is no doubt that the best way to have social progress is to have a free market economy. However, free markets are not solutions to problems, per se, but are rather what gives us the opportunity to find our own solutions to our own problems by finding the most valuable way to serve one another. For example, Frédéric Bastiat famously wrote in The Law that: “At whatever point of the scientific horizon I start from, I invariably come to the same thing — the solution of the social problem is in liberty.”

The Cozy Relationship between the Treasury and the Fed

David Howden

Last year was a tough one for investors. Gold was down 10 percent. The Dow Industrials fell 2.5 percent, and most bond indexes finished down by at least that much.
One institution that performed remarkably well in 2015 was the Federal Reserve. It just finished its most profitable year on record. The $100 billion in net income earned last year was a slight improvement over the previous year. That total was also roughly three times higher than the Fed’s income from 2007, the last year before it initiated its Quantitative Easing programs in the wake of the financial crisis.

Three Reasons to Be Worried About the Economy

Yonathan Amselem

On January 12, America’s central planner-in-chief gave his State of the Union address. The president promised nothing less than to feed the hungry, create jobs, shape the earth’s climate, and make everyone a college graduate. There’s nothing new here, though. We’ve heard variations of this silly song and dance every year under both Democrats and Republicans. The president lambasted naysayers as fear-mongers that were too partisan to admit we have a booming economy. The fact that the Dow Jones cratered roughly 9 percent in the same thirty-day period President Obama gave his address did nothing to quell Obama's optimism about America’s future. In fact, he labeled the US economy “the strongest and most durable in the world.”

2016's Economy Begins with a Whimper

David Haggith

January was the winter of our discontented stock market. It was the worst January since 2008, when the Great Recession officially began. It was, in fact, the worst January in the history of the New York Stock Exchange. According to Citigroup, Inc., it was also the worst January ever for credit markets.
During many Fed tightenings, the stock market and overall economy improved for years afterward because the Fed stimulus had actually brought a temporary form of economic recovery. But rarely, if ever, has the mood turned dark so fast after the Fed officially announced that the recovery is sound and the life support can be removed.

Why I Have Hope

Ron Paul

[This article appears in the January-February 2016 issue of The Austrian.]
I think the most exciting message for me today is that things are changing.
Often, when I come to these events, people ask me, “isn’t this grueling, isn’t this very tough?” It’s not, though, and it’s actually a little bit selfish on my part, because I get energized when I meet all the young people here. It’s true there is a spread of ages here, but there are a lot of young people and some of them even come up to me and say “you introduced me to these ideas when I was in high school a few years ago.”

By Doug Bandow

The Obama administration has continued its effort to expand contact between the U.S. and Cuba by easing restrictions on travel, exports, and export financing. Commerce Secretary Penny Pritzker spoke of “building a more open and mutually beneficial relationship.”
However, the administration expressed concern over Havana’s dismal human rights practices. Although Raul Castro’s government has continued economic reforms, it has maintained the Communist Party’s political stranglehold. Indeed, despite the warm reception given Pope Francis last fall, the regime has been on the attack against Cubans of faith.

By Richard W. Rahn

A major reason for the growing distrust of government is the double standard whereby government officials and employees often suffer no consequences from incompetence, misbehavior and even criminal violations of the law. In the common law, there is a general principle that if a person is damaged by the actions of others through negligence or illegal behavior, he or she has a right to redress.

By David Boaz

Sen. Rand Paul’s presidential campaign has ended, like most presidential campaigns, short of the White House. The Republican debate will be poorer without him.
Polls show substantial support for libertarian ideas in the Republican Party. Gallup found that libertarian strength in the GOP had risen from 15% in 2002 to 34% in 2012. In two surveys in 2012 and 2013, David Kirby, then at FreedomWorks, found libertarians were 35% or 41% of the party.

By Ted Galen Carpenter

Just a few years ago, drug-related violence in Mexico had reached such alarming levels that some experts worried the country was on the brink of becoming a failed state. The decision by President Felipe Calder&oacuten (2006-2012) to launch a full-scale military offensive against the drug cartels backfired badly. Violence soared, and in portions of Mexico, one or more drug cartels challenged the legal government for preeminence. By the time Calder&oacuten left office, more than 60,000 Mexicans were dead from the fighting and another 25,000 were missing.

By Richard W. Rahn

What does a “progressive” stand for? How does this differ from what a liberal, conservative or libertarian stands for? More so than in most years, the presidential candidates are debating about labels. Hillary Clinton and Bernie Sanders got into an argument last week about what a progressive is, and Mrs. Clinton enlightened everyone by telling us “the root of that word, progressive is progress.”

By David Boaz

As he moved from evangelical Iowa to fiscally conservative New Hampshire, Sen. Ted Cruz didn’t waste a minute in changing his tune.
In his Iowa victory speech Cruz gave a shout-out to libertarians, who are thick on the ground in New Hampshire. He declared, “That old Reagan coalition is coming back together, … conservatives and evangelicals and libertarian and Reagan Democrats all coming together as one, and that terrifies Washington, D.C.”

By Daniel J. Mitchell

Taxpayers don’t like coughing up big amounts of money so other people can choose not to work. And they really get upset when welfare payments are so generous that newcomers are encouraged to climb in the wagon of government dependency.
This has an effect on the immigration debate in the United States. Most Americans presumably are sympathetic to migrants who will boost per-capita GDP, but there is legitimate concern about those who might become wards of the state.
Welfare migration also has become a big issue in Europe.

By William Poole

The Bank of Japan recently announced that it would follow the European Central Bank’s lead and implement a “negative interest rate” policy. Reducing interest rates is supposed to increase spending and investment, spurring growth.
It won’t work. Negative central-bank interest rates will not create growth any more than the Federal Reserve’s near-zero interest rates did in the U.S. And it will divert attention from the structural problems that have plagued growth here, as well as in Europe and Japan, and how these problems can be solved.

By Michael D. Tanner

Less than three decades after the fall of the Berlin Wall, socialism seems to be undergoing something of a revival.
A self-professed “democratic socialist” is running for the Democratic presidential nomination, and he is running neck and neck with a party icon. Polls show that more than a quarter of Americans have a favorable opinion of socialism, which might not sound so bad until you learn that that includes 43 percent of those under age 30, and 42 percent of Democrats. Meanwhile, barely half of Americans have a favorable view of capitalism. Democrats, in fact, are as likely to view socialism positively as they are capitalism.

The Simple Solution to America’s Deteriorating Fiscal Outlook

By Daniel J. Mitchell

The Congressional Budget Office has just released its new 10-year fiscal forecast and the numbers are getting worse.
Most people are focusing on the fact that the deficit is rising rather than falling and that annual government borrowing will again climb above $1 trillion by 2022.
This isn’t good news, of course, but it’s a mistake to focus on the symptom of red ink rather than the underlying disease of excessive spending.
So here’s the really bad news in the report.

Tuesday, January 24, 2017

By George Selgin

By Ike Brannon

By Christopher A. Preble

By Alex Nowrasteh

By Ilya Shapiro

By Daniel J. Mitchell

By Christine Guluzian

By Emily Ekins

Inauguration Speech Wrongly Demonized Free Trade

Monday, January 23, 2017

What Republicans Miss About Healthcare Reform

Inequality Doesn't Create Poverty

The Failures of Obama's Foreign Policy

What Trump Could Do

The Bank of England and the ECB Have a Credibility Problem

Spanish Courts Don’t Have Any Respect for Freedom of Contract

Free Trade versus "Free Trade"

The Fed Passes the Buck: Blame Oil and China

The Market Doesn't Solve Problems; People Do

The Cozy Relationship between the Treasury and the Fed

Three Reasons to Be Worried About the Economy

2016's Economy Begins with a Whimper

Why I Have Hope

By Doug Bandow

By Richard W. Rahn

By David Boaz

By Ted Galen Carpenter

By Richard W. Rahn

By David Boaz

By Daniel J. Mitchell

By William Poole

By Michael D. Tanner

Wednesday, January 27, 2016

The Simple Solution to America’s Deteriorating Fiscal Outlook

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