Category Archives: fiscal policy

Taiwan and Chinese Relations

Taiwanese and Chinese relations are growing closer.  This is an exciting international piece of news!

Since 2008, and the election of Taiwanese President Ma Ying-jeou, there have been increasing closeness with regards to transport and trade.  For years, there were tensions, even high tensions, between the China (sometimes called the “mainland”) and Taiwan.  I recall a cruise missile incident about fifteen years ago which seemed scary.  Taiwanese presidents would provoke mainland Chinese anger by intimating that they were independent of mainland China, or that they would like to be so.  The People’s Republic of China has long been bristling at such notions.  President Ma has more of a “building on common beliefs” philosophy with respect to China-Taiwan relations, and it seems to be working well.  He works with the mainland on issues of mutual interest in a way that is innocuous or at least inoffensive to mainland China.

How have the countries grown closer?  Consider trade, for one.

Since 2000, direct trade between the countries was $31 billion.  In 2008, it was $100 billion.  Even with this increase, Taiwanese businesses and entrepreneurs would like even more trade barriers removed.  At this juncture, Taiwan and China are working on a trade agreement (called Economic Cooperation Framework Agreement) which would enable even closer ties with fewer trade restrictions and tariffs.

Another difference would be travel.  In 2000, individuals desiring to travel from Taiwan to mainland China had to go through Hong Kong (and vice versa).  This restriction was recently lifted, and direct flights to the mainland are now commonplace.

In a world where the West (Europe and North America) seems increasingly statist and bent on cluelessly spending itself into oblivion, those in the East, especially China and India, seem to be moving in the other direction, at least in some aspects.  These are to be applauded.

I look forward to the day when the doors of the Gospel will be opened in mainland China.  Increasing closeness with Taiwan can only help in this regard.

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Filed under Christianity, fiscal policy, foreign policy, Libertarian, role of government, War

William Ewart Gladstone

William Ewart Gladstone was a British politician and true classical liberal.  He was an ardent supporter of free markets, fiscal discipline, low taxes, and peaceful relations between nations.

His political career spanned many decades, starting in Parliament, serving as Chancellor of the Exchequer (roughly equivalent to Secretary of the Treasury) twice for a total of roughly ten years, and serving as Prime Minister four times for a total of roughly thirteen years.  (Having a career public servant serve as Secretary of the Treasury is certainly not the pattern the United States has followed for the last few decades, as these are in general picked from the financial world, rather than the public sector.)

One of his early aims as Prime Minister was to abolish the income tax.  An early strategy to this end was to expand the income tax to lower income brackets, thinking that this would provoke such a popular uproar that the income tax would no doubt be abolished.  Unfortunately, in this naive perspective he was disappointed, as though it was an unpopular move, it never lead to a complete abolishment of the income tax.  In fact, during times of crisis or military conflict, he temporarily raised the income tax in the name of fiscal discipline and balancing the budget.  One of his great statements, uttered during the Crimean conflict in the 1850s is this: “The expenses of a war are the moral check which it has pleased the Almighty to impose on the ambition and the lust of conquest that are inherent in so many nations.”  Note, for one, the direct and shameless reference to God.  Also note the emphasis on fiscal discipline; at approximately the same time, the United States of America inflated and borrowed to finance the Civil War.

He was a powerful orator, an impressive communicator, even when discussing tame subjects such as the budget.  His career had many small accomplishments such as outlawing a centuries-long practice of flogging citizens during times of peace, as well as large and significant moves which aimed at improving relations between the British Empire and other countries such as Ireland and France.

Late in life, while serving as Prime Minister, he stood in opposition to the members of the Cabinet, all of whom favored an increase in Navy expenses.  He believed that this ran counter to his entire career, and more importantly, the principles of freedom.  In January 1894 Gladstone wrote that he would not “break to pieces the continuous action of my political life, nor trample on the tradition received from every colleague who has ever been my teacher” by supporting naval rearmament.

Like John Lilburne and many others, William Ewart Gladstone is a titanic historical liberal figure that modern-day liberals (and conservatives and libertarians and those of all stripes) would do well to look to.

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GDP and a Culture of Consumption

Many have the misconception that a true advocate of the free market (a condition where individuals are free to exchange, invest, and economize without coercion) is necessarily an advocate of our consumer culture.  Nothing could be further from the truth.

Gross Domestic Product, or GDP, as it is commonly known, measures three indicators: consumption, investment, and government spending.  GDP is the most commonly used indicator of economic strength among the mainstream.  As consumption is a presumed sign of economic strength, governments around the world perpetually create schemes and concoct incentives to try and boost consumption, for according to this measurement system (which I strongly disagree with), as consumption increases, so does the overall economic health of the nation.

Our culture of consumption is not a product of the unfettered free market, but is largely a result of state interventionism, including unholy alliances between governments and businesses of all stripes.  This is nothing new: the Austrian School of Economics has been preaching this for decades.  Economists of various flavors have been preaching this for centuries, if not millenia.

I clearly do not support increased government spending as a measure of economic strength.  Quite the opposite.  Investment alone (this would include what we call “saving”) is the prime indicator of economic health, in my mind.  As the government can do nothing constructive to assist this (except to protect individuals from acts of aggression), there is really no constructive purpose to measuring GDP.

One argument against measuring investment alone is that investment is bad for the economy in the short-term.  In a sense, this is true.  A consumption-oriented culture and economic system has a capital structure centered around perpetual consumption.  When that ceases, it is true that jobs are lost and companies go under as the capital structure is modified.

As opposed to consumption, investment is a long-term, rather than a short-term objective.  In the long-term, investment leads to stable growth.

Money saved now (and not consumed) will one day be invested in some capital expenditure of value and benefit to society: a car, a house, an education, etc.  Unfortunately, our consumption-oriented corporatist culture diverts resources from where they are most useful (i.e. investment) and puts them in an area where they have short-term gains at the cost of long-term rewards.  That money is diverted from its proper use to purchase some expendable and often non-essential good.  (When such purchases are made on credit, the consequences are even worse.)

Would consumption exist in a country with a small government and no measurement of GDP?  Of course: people still need to eat, shower, brush their teeth, and enjoy recreation.  But there would be less frequent frivolous purchases and more long-term planning and saving.

In short, capitalism gets a bad rap for our government-encouraged corporatist, consumer-driven culture.  My advice: stop measuring GDP, get government out of the business of business, and let the market go to work. In other words, stop interfering with every transaction between individuals: and let them economize and exchange freely, rather than being bound and fettered by onerous regulation, heavy taxation, and myopic incentives.

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Filed under Austrian Economics, fiscal policy, Libertarian, Personal, politics, recession, role of government, Social Commentary

Bold Automotive Predictions

With President Obama’s proposed upgrade of car fuel efficiency standards (government-mandated standards, of course), I have a few bold predictions to make:

1. The administration’s estimate of an average increase of $1,400 per vehicle is far too low.  A more accurate estimate would be an extra $4,000 or $5,000, what one would pay extra (at least) for a hybrid car.

2. Materials in cars would move increasingly towards polymers (plastics) and aluminum and away from steel and cast iron.  Conventional illumination systems will be increasingly replaced by high-end, expensive LED systems.  This could be good news for some small companies in the South, West, and Northeast, but will probably hurt even more the rust belt, which still has a fair share of iron and steel plants which primarily serve the auto industry by producing low-cost, high-quality, ultra-reliable parts.  They will be driven out in a hurry.  Too swift a movement towards these lighter materials will likely mean a safety problem and almost certainly a quality compromise.

3. The value of some used cars will increase as their demand will as well.  A reliable gas guzzling vehicle purchased in 2014 may depreciate lower than one purchased in 2002.

Let it always be remembered that, as Henry Hazlitt would say, a good economist looks for all effects of a certain policy, and a poor economist looks at a narrow window of scope, ignoring the complete picture.  Sadly we have neglected wisdom and we continually look to our tunnel-vision minded political machine to set our course for us.

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Filed under Austrian Economics, fiscal policy, Paleoconservatism, politics, recession, role of government

Recession and the Austrian School

All is vanity. -Ecclesiastes 1:2

Who is right about the current recession?

Most economists from the Austrian School of Economics have been saying since the beginning (before most mainstream economists admitted we were even in a recession) that this economic downturn would be long and prolonged, likely a depression.  They are still saying this.  None of the failed Keynesian economic policies will change this for the better.  They will only prolong the agony, as Hoover and FDR’s interventions created and prolonged The Great Depression.

The Cold War taught us this: governments are not only unjust stewards of resources, but they are tragically inefficient as well.  Tens of millions died, for instance, due to Communist failures to allocate food properly.  If governments cannot even allocate food properly, the most basic of necessities, what makes us believe they are able to allocate capital, education, the environment, and health care (to name just four examples) more effectively than we as individuals are?

Mainstream economists have said, and some still say, that the recession will start to end this year.  This is tom-foolery.  We are already starting to see some mainstream shift in opinion (i.e. this news article).  This shift will only continue, validating the conclusions of the Austrian School of Economics.

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300,000 Pounds and Ducks

I sometimes listen to Radio 2 Morning on CBC in the morning commute.  It’s the most entertaining radio show I have ever heard, both musically and in prose.  The songs are pure, simple, subtle, and sincere, both musically and lyrically, not overly sugary, forced, or over-the-top as I find some American music to be.

Prose is frequently entertaining.  Yesterday, radio host Tom Allen told about a scientific study, conducted by English scientists from the prestigious University of Oxford, which cost British taxpayers 300,000 pounds.  The study aimed to ascertain whether ducks preferred water in troughs, ponds, or rain.  The study pointed out that ducks preferred rain.

Many farmers in England, as you might imagine, have a difficult time with so much British taxpayer money being appropriated for such a silly purpose.  English farmers have known, colloquially, that ducks love the rain, for hundreds of years.  They did not need 300,000 pounds to tell them this.  They are understandably frustrated.

This is a silly story which brings up some important questions which are never discussed, but which should be:

Is it just to appropriate taxpayer money for scientific research?  Where in the U.S. Constitution is such explicity justified?  Did our Founding Fathers support such spending?  Why do taxpayers not have a say in where their money goes and how it gets spent?

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Responsibility Problems

We have a responsibility problem in this country.  It is everywhere, from the voters that voted for President Obama because he would pay their mortgage and utility bills for them (I do not recall him refuting this oft-repeated argument, by the way) to the auto bailouts to local and state governments clamoring for federal stimulus money.

I recently read this interesting and insightful statement in an article regarding record deficits and federal borrowing: “The deficits … are driven in large part by the economic crisis inherited by this administration,” budget director Peter Orszag wrote in a blog entry on Monday.

This follows the pattern: no responsibility.  The deficits are driven by government spending, pure and simple.  It may be true that such spending was seen as necessary by some.  However, to blame the economic crisis for irresponsible and reckless government spending is at least irresponsible and sounds nearly reckless.

Yesterday on the radio, I heard a story about how the Postal Service was needing to increase stamp rates (probably annually) to make up for lost revenue (over $1 billion this quarter alone).  At the end of the story, the reporter mentioned how that people who use email and make purchases online are largely to blame for this rate increase, but that such individuals will likely persist in their behavior.  Again, this sounds completely irresponsible.  Blame is shifted from who is truly responsible (the U.S. Postal Service for not providing a service whose costs are covered by individuals who will voluntarily pay) to those who are not (individuals acting freely, economizing to save money in hard times, or increase convenience in good times).

Lest you be concerned that I am pounding on democrats alone, I find that the GOP blame games which we have seen repeatedly over the years show a similar trend: the mainstream associated with both major parties shows major irresponsibility.

Contrast this with us, with you and I.  In a time of frozen credit and economic hardship, none of us can afford to make reckless personal economic decisions.  We can blame whoever we choose, but ultimately, it is our own individual responsibility to make sure that we are economically healthy.  None of us have the political clout and lobbying power to bend Washington to our will, nor should we.  Instead, we are to rely on tried and true principles of budgeting, economizing, and hopefully saving, consistent with provident living.

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