Wednesday, January 26, 2011

SOTU Round-up

There's far too much good commentary on last night's Go America Pep RallyState of the Union Address for me to list it all here, but these are the ones that I liked the best (other than mine, of course):
  • Cato's Sallie James briefly explains why the President's "competitiveness" theme is misguided and dangerous.  She even channels the Sane Paul Krugman of Yesteryear ("SPKY"): "When it became clear that President Obama would make 'competitiveness' a theme of his SOTU address, I looked forward to seeing Paul Krugman’s statement pointing out how much nonsense that is. Here he is, after all, in his excellent 1997 book, Pop Internationalism (MIT Press): 'International trade, unlike competition among businesses for a limited market, is not a zero-sum game in which one nation’s gain is another’s loss. It is [a] positive-sum game, which is why the word 'competitiveness' can be dangerously misleading when applied to international trade.' Sure enough, President Obama’s speech last night was peppered with references to 'the competition for jobs,' 'new jobs and industries take root in this country, or somewhere else,' 'the competition for jobs is real,' etc. And of course there was a healthy dose of the usual mercantalist obsession with exports."  I'd only add that this type of "adversary economics" - i.e., discussing the global economy as a war to be won against our trading partners - is nothing new for this President, and I've critiqued it many times on this blog.  No need to do it again tonight, but I'm sure I'll be hitting it again soon.
  • Cafe Hayek's Don Boudreaux provides some must-read clarity for those poor, misguided soles out there who thought that Obama's "pro-business" and jibberjabber would be warmly welcomed by those who believe in and support free markets.  My favorite lines: 
"In a free market, businesses profit only by pleasing consumers. But a business that obtains special favors from government can profit without pleasing consumers. And it’s here that trouble starts. Consider Obama’s commitment to make America more 'competitive.' (He used variations of the word 'compete' nine times in his address as part of his argument that American firms and workers are threatened by their foreign counterparts.) 'Competition' sounds good. But businesses don’t like competition; they like protection from competition – along with subsidies, special tax breaks, and other government favors that relieve them from the need to cater energetically to consumer demands. So a pro-business president is prone to curry favor with businesses by shielding them from competition."
"Did you know that in the decade from 2000 through 2009, the total amount of foreign direct investment (FDI) received by China was $686 billion, while the total amount of FDI received by the U.S. was $1.8 trillion – by far the largest inflow of capital from foreigners received by any country on earth? America’s receipt of FDI dollars exceeded China’s by 162 percent. On a per-capita basis, the figure is even greater: The amount of FDI America received per person from 2000 through 2009 was ten times (!) greater than was received by China. So when Obama said in his speech on Tuesday night that 'We need to out-innovate, out-educate, and out-build the rest of the world,' he wrongly implied that America currently doesn’t do so well in the international economy. But it does – which is not to say that there isn’t a lot of room for improvement. The president is correct that tax and regulatory reforms – along with reining in Uncle Sam’s deficit spending – are in order. Especially welcome is his call to lower corporate tax rates. And if calling such reforms 'competitiveness policies' improves their chances of being implemented, I’m all for it. But let’s not be fooled into thinking that America’s current economic troubles are caused by America’s open participation in global trade."
  • AEI's Phil Levy succinctly labels it A Disappointing Speech and - gasp! - also channels SPKY: "In advance of the president’s State of the Union speech, I wrote about the need for difficult choices and serious stances on trade and the deficit. I didn’t hear any of that in the address. On trade, the president’s positive agenda was largely limited to endorsing his minor reworking of the three-year-old free trade agreement with Korea. He also mentioned vague plans to rework the Colombia and Panama agreements (after only two years of inaction!). I heard no mention of seeking trade negotiating authority, despite the recent efforts of Senator Rob Portman (R-Ohio) to get it for him. Nor was there any initiative to advance the global trade talks that the president has repeatedly pledged to conclude. Instead, there was an unhelpful jingoistic refrain about international competitiveness and economic threats from abroad (see Paul Krugman for why this is misguided)."
  • And speaking of SPKY, since all the cool kids seem to be quoting him, I guess I will too: "The view that nations compete against each other like big corporations has become pervasive among Western elites, many of whom are in the Clinton administration. As a practical matter, however, the doctrine of "competitiveness" is flatly wrong. The world's leading nations are not, to any important degree, in economic competition with each other. Nor can their major economic woes be attributed to "losing" on world markets. This is particularly true in the case of the United States. Yet Clinton's theorists of competitiveness, from Laura D. Andrea Tyson to Robert Reich to Ira Magaziner, make seemingly sophisticated arguments, most of which are supported by careless arithmetic and sloppy research. Competitiveness is a seductive idea, promising easy answers to complex problems. But the result of this obsession is misallocated resources, trade frictions and bad domestic economic policies."  Sadly, that was written in 1994, and SPKY is today little more than a collection of words on the InterTubes.  And even more sadly, our current President, despite all his talk of "winning the future" and dominating the 21st century, is, as deftly pointed out by the AmSpec's Phil Klein sounding a lot like his Democratic predecessor back in 1994.
  • Finally, Judy Shelton of the Atlas Economic Research Foundation has an excellent op-ed on the problems with the President's approach to doubling exports and "investing" in the future.  She wisely notes: "The only way to increase real wealth is through productive activity that generates true gains in economic output leading to higher future living standards; if wages are going up while purchasing power is going down due to inflation caused by government deficit spending, the gains are illusory.  If you have faith that America can compete in the global marketplace without resorting to monetary artifice, you will not be quick to embrace a strategy that elevates government industrial policy over private sector decision-making and free-market outcomes."  Exactly.

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