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Volume 13, Issue 9: March 1, 2011
- Private Sectors Doubts Hamper Economic Recovery
- As Goes Wisconsin, So Goes the United States?
- The Matchmakers of Predatory Politics
- The Civilian and the Military
- New Blog Posts
1) Private Sectors Doubts Hamper Economic Recovery
The U.S. economy is growing at a snails pace, but consumer spendingwhat consumers spend collectively on toothpaste, haircuts, shoes, cars, and other goods and servicesis at an all-time high. A paradox? Not at all. The real fuel of economic growth isnt consumer spending, its private net investmentwhat the private sector spends on materials, equipment, and other capital goods (beyond the amount necessary to make up for depreciation).
Private net investment plunged drastically in late 2008 and is still less than one third of its 2007 peak. It grew at an annual rate of only $144 billion in the fourth quarter of 2010, compared to $463 billion in the third quarter of 2007. For the entire year 2010, it was down 60% from its peak, writes Independent Institute Senior Fellow Robert Higgs in his latest op-ed for Investors Business Daily.
Economic growthand the outlook for more jobswont improve much until private net investment recovers. But decision-makers in the private sector will continue to lack the confidence to make major new investments until the fog created by policymakers in Washington, DC, has dissipated, Higgs concludes: Although ObamaCare and the Dodd-Frank financial reforms were approved by Congress and signed into law last year, these massive statutes leave scores of important details awaiting determination by administrative agencies and courts. This doesnt create a climate conducive to aggressive investment.
Why Boom Is a No-Show: A Lack of Net Investment, by Robert Higgs (Investors Business Daily, 2/25/11)
Whats Holding Back the Recovery? by Robert Higgs (The Beacon, 2/21/11)
Private Business Net Investment Remains in a Deep Ditch, by Robert Higgs (The Beacon, 2/20/11)
Depression, War, and Cold War, by Robert Higgs
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2) As Goes Wisconsin, So Goes the United States?
Wisconsin Governor Scott Walkers proposal to end collective bargaining for public employees has the potential to spread like wildfire across the United States, as states and municipalities search for ways to avoid defaulting on their bonds. If other jurisdictions follow Walkers lead, we might see a surge in momentum for real fiscal reform at the federal level, according to Independent Institute Senior Fellow Alvaro Vargas Llosa.
Real fiscal reformaimed at pulling the United States out of the black hole of mounting debt and cultivating a climate for sustainable economic growthis long overdue. If the dollar were not the worlds reserve currency, a major debt crisis would have exploded by now, Vargas Llosa writes.
How large is Americas fiscal shortfall? At $14.1 trillion, federal debt is almost equal to annual GDP. And the U.S. budget deficit projected for 2011 exceeds $1.6 trillion. This, Vargas Llosa continues, represents almost 11 percent of the nations gross domestic productwhich compares pitifully even with Greece, whose deficit in 2010 amounted to 8 percent of that countrys economy.
Wisconsin Matters to the World, by Alvaro Vargas Llosa (2/23/11) Spanish Translation
Lessons from the Poor: Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa
Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa
The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa
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3) The Matchmakers of Predatory Politics
Politics makes strange bedfellowsincluding alliances of idealists and opportunists who lobby for the same regulations, but for vastly different reasons. The classic example is that of bootleggers and Baptists, both of whom supported local laws to stop the sale of alcohol on Sundays, but scholars have found similarities with other coalitions, including lobbies that promoted NAFTA, tobacco restrictions, and the Clean Air Act.
Typically, unholy alliances are formed by an outsidera political entrepreneur who is alert to political opportunities and plays matchmaker to moralists and profiteersargue Randy Simmons, Ryan Yonk, and Diana Thomas (all of Utah State University) in the Winter 2011 issue of The Independent Review.
Heres one maxim the authors discuss that predatory political entrepreneurs embrace: Support noble-sounding goals that cant possibly be achieved, then position yourself to collect a payoff. Heres one example: In 1998, Shell Oil, Mobil Oil, and other groups that had opposed the Kyoto Protocol began to support it. Why? An amendment to the Clean Air Act would have compensated them for voluntarily reducing their carbon emissions early on. Mobil alone stood to gain $300 million in relief.
Bootleggers, Baptists, and Political Entrepreneurs, by Randy Simmons, Ryan Yonk, and Diana Thomas (The Independent Review, Winter 2011)
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4) The Civilian and the Military
As conflicts continue to intensify in North Africa and the Middle East, it is important to remember the rich antimilitarist tradition that once dictated U.S. foreign policy decisions. Arthur A. Ekirch, Jr. in his book The Civilian and the Military recounts the important American tradition of isolationist pacifism and its eventual decline into interventionism and war.
In a time of uncertainty and unrest, Ekirch's analysis shows why the growing power of the armed forces in national and international policy should alarm thoughtful citizens and policymakers.
As libertarian historian Ralph Raico explains in his foreword to the book, The Civilian and the Military is important for tracing the portentous transformation of the United States from a republic leery of maintaining its own standing army to the worlds greatest military machine and sole imperial power.
Purchase The Civilian and the Military.
Read a detailed book summary.
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5) New Blog Posts
From The Beacon:
From MyGovCost News & Blog:
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