Will we survive Obamanomics?

From the Gilroy Dispatch

Officially, President Obama’s $3.6 trillion budget is titled “A New Era of Responsibility.”

That’s false on two counts. It’s an era – not of responsibility, but of big-government taxation, spending, and regulation. And it’s not new. History is full of attempts to inflate the state to grow the economy. Virtually all have ended badly. As the recent sell-off reminds us, Wall Street’s verdict on Obamanomics has been quick and sharp.

The president’s budget is right in castigating the “troubled past” of the Bush administration, which spent money like a drunken sailor on education, healthcare, bailouts, and two seemingly endless wars in the greater Middle East, with virtually no regard for how to pay for a rapidly growing national debt.

But now we must confront the troubled future. Obama has adopted the big-spending policies of George W. Bush, with trillions more proposed for education, bailouts, and healthcare. He wants to sharply reduce (but not end) the American presence in Iraq. At the same time, he plans to deploy an additional 17,000 troops to Afghanistan, which may lead to an expanded quagmire there.

Hasn’t Obama read the bestseller “Three Cups of Tea: One Man’s Mission to Promote Peace … One School at a Time,” by Greg Mortenson and David Oliver Relin? A Pakistani general who talked with Mr. Mortenson aptly identified the real problem in Afghanistan: “The enemy is ignorance. The only way to defeat it is to build relationships with these people, to draw them into the modern world with education and business. Otherwise the fight will go on forever.”

In some ways, Obama’s plans are more grandiose than Bush’s. He wants to encourage green technology and energy independence, and move toward national healthcare. The cost is enormous. The deficit for this year alone is expected to reach $1.7 trillion.

To help pay for this, Obama proposes the largest tax increase in history. Some of this, such as new taxes on oil and gas companies, is explicit. Some of it, such as the new cap and trade program, is quite subtle. And some of it will “merely” repeal the Bush tax rates on high incomes. But all of it represents a tremendous muzzle on the economy at a time when it needs to be unleashed.

Even these huge tax hikes won’t be nearly sufficient to pay for the outlays. In fact, to pay for it in full, The Wall Street Journal pointed out, Uncle Sam would have to confiscate every penny earned by Americans making at least $75,000 a year.

What’s the future for Obamanomics? The stock market’s reaction doesn’t bode well. The Dow has fallen more than 18 percent since the last trading day of Bush’s term. Clearly, Wall Street thinks that Obama’s tax, spend, and regulate policies will be a disaster.

Despite the dire headlines, the world is not coming to an end, we are not headed into another Great Depression, and free-market capitalism has not breathed its last breath.

In my book, “The Big Three in Economics,” I found that the press has frequently and prematurely written the obituary of Adam Smith and his free-market philosophy, only to see a new and more vibrant global marketplace reemerge after being savagely attacked by Keynesians, Marxists, and assorted socialists. Market capitalism survived and prospered after the boom-bust industrial revolution of the 19th century, and the Great Depression and world wars of the 20th century. It will recover from the financial panic of 2008-09 and Obamanomics.

Adam Smith, the supreme defender of market capitalism, expressed this optimism well in 1776 when he wrote in “The Wealth of Nations”:

“The uniform, constant, and uninterrupted effort of every man to better his condition … is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration.”

The ideas of Adam Smith and his modern followers will make a comeback. Already, pro-market forces are gathering in Congress to defeat Obama’s ambitious and highly socialistic agenda. Charities and nonprofits are already up in arms about the proposed limits on tax deductions for wealthy donations for good causes.

I’m doing my part by holding the world’s largest gathering of free minds at FreedomFest, July 9-11, 2009, in Las Vegas.

Details: www.freedomfest.com.

The World Map of Economic Freedom

Personal Snapshots
Forecasts & Strategies
June 2002

“Economic repression breeds intolerance, fanaticism and terrorism.”

— Gerald P. O’Driscoll, Jr., Heritage Foundation

I couldn’t believe my eyes when I saw this unusual map of the world. “The World Map of Economic Freedom” was published by the Heritage Foundation and The Wall Street Journal before the terrorist attacks on September 11, 2001. This incredible map—reproduced in full in the May issue of Ideas on Liberty—predicted in living color a war between America and the Middle East, and reveals in unmistakable clarity why Islamic extremists attacked New York and Washington.

Since September 11, we’ve heard all kinds of reasons why the terrorists struck America—in retaliation for the United States’ supporting Israel, for America’s meddling in the Middle East, Arab’s envy of America’s superpower status and their hatred of America’s lifestyle. This map gives the real reason.

World Economic Freedom Map from the Fraser Institute

World Economic Freedom Map from the Fraser Institute

In this “world map of economic freedom,” each nation is ranked according to its degree of economic freedom, based on 10 factors, such as level of taxation, trade restrictions, labor regulations, inflation, property rights and government intervention in the economy. Countries in blue, like the United States and Britain, are ranked “free.” Countries in green, like Canada and France, are considered “mostly free.” Nations in yellow, like Russia and Brazil, are labeled “mostly unfree.” Finally, nations in red are ranked “repressed.”

This world map is an eye-opener. It shows that few nations are truly free. Countries colored in blue include the United States, Britain, Australia, New Zealand and Hong Kong. Clearly, freedom is a delicate and rare flower. Canada and Europe are “mostly free.” Third World nations are “mostly unfree.” Countries painted yellow include Russia, China, India, Brazil and most of Africa. In fact, of the 155 nations surveyed, over half (81) received a negative grade (yellow or red).

The Biggest Shock: Where Is the Red?

But the most shocking fact is that almost all of the red nations are located in the Middle East. It is clearly the area of the world with the highest concentration of “repressed” freedom. This area of the world has been crippled from constant war, corruption, inflation, black markets, protectionism and government intervention on a grand scale. Most of the Arab world continues to suffer from economic dislocation, political turmoil and military conflict. It is not surprising that for most Arabs the standard of living is low, despite an abundance of oil.

The Most Important Lesson in the War on Terrorism

What is the most important lesson we can learn from this map? Simply this: Economic repression leads to intolerance, fanaticism and terrorism. It is not surprising that the Middle East is a major source of radicalism and chaos. A closed society breeds intolerance and fanaticism. Interestingly, most of the Middle East is also famous for its lack of political democracy and religious tolerance. Most are ruled by dictators or kings. Religious proselyting is prohibited in Arab nations and even in Israel.

But there is another important lesson to learn from this map. Liberalized trade and open markets break down cultural and social monotheism, and destroy fanaticism and intolerance. Business encourages people to become educated, industrious and self-disciplined. Commerce encourages trade, travel and exchange between nations and cultures.

What then is the real solution to the War on Terrorism? Sending troops and fighting war in faraway lands may offer a short-term solution to terrorism, but the only real permanent peace can be achieved through expanding trade and business, and establishing a legal system conducing to a civil society and prosperous economy. In short, a good dose of open markets and competition in all walks of life could go a long way toward bringing peace, prosperity and goodwill in this dangerous part of the world. Until that happens, however, many will shout “peace, peace, when there is no peace.” (Jeremiah 8:11)

Our Goal at FEE: Color the World Blue!

This world map also gives us the opportunity to explain our mission here at FEE in simple terms that everyone can see: Freedom in our time for all peoples. Our goal is to color the world blue. I do think that we are making progress. If you saw this world map of economic freedom in 1985, when the Soviet Union and China were closed communist nations, over half the world’s population would have been colored “red.” With the collapse of the Berlin Wall and the downfall of Soviet communism, many nations have moved from “red” to “yellow” and from “yellow” to “green.” Will they eventually move to “blue”? Through our books, monthly magazines and seminars, FEE will do everything in its power to achieve this lofty goal.

Action to Take: To receive a copy of “The Map That Predicted the Terrorist Attacks,” subscribe now to Ideas on Liberty, only $39 for 12 issues. We’ll send you, free, the map and a four-page commentary. Make your payment to Foundation for Economic Education, 30 South Broadway, Irvington, New York 10533. Or www.fee.org or call 800/960-4FEE, ext. 209, for credit-card orders.

FEE Fest 2002: Special Report

“I’ve attended many conferences, but yours is the best of the best. Thank you!”

—Attendee, FEE National Convention

Last month, FEE held its first ever FEE National Convention, and it was a huge success. With only four months of planning, we were able to register nearly 900 attendees. Nathaniel Branden, a keynote speaker at the Saturday night banquet, described the atmosphere well when he said, “I feel an electricity here that I haven’t sensed at libertarian meetings for a long time.” Actor Ben Stein wrote a poem just for FEE (to be published in the June issue of Ideas on Liberty), and C-SPAN Book TV videotaped six book authors (check the schedule on www.booktv.com or www.FEEnews.org).

The FEE Fest was packed with workshops, panels and debates on philosophy, history, economics, finance, education, art and public policy.

Audiotapes/Videos Now Available

If you missed the FEE Fest, I have good news. Audio and videotapes are available for almost all the sessions at the FEE National Convention. Audiotapes cost only $5 per session, ($275 for all) and videotapes are available for only $15 ($110 for all). Go to www.FEEnationalconvention.org for the complete list of tape recordings available and how to order or call Harold Skousen, 800/254-2057.

SKOUSEN’S PUZZLER FOR JUNE:

1883 is a very important year in economics. Name one economist who died in 1883, and two economists who were born in that same year. They say that it took two economists to make up for the mischief of the one who died. Who are these three economists? (Hint: You can find the answer in my book, The Making of Modern Economics, available from FEE, 800-960-4FEE, ext. 209).

The first 10 winners with the correct answer will receive a copy of my book, Economic Logic. Drawing will be on July 31, 2002. Send answer to Quarterly Puzzler, c/o Phillips Investment Resources, LLC, 7811 Montrose Rd., Potomac, Maryland 20854, or e-mail your answer to msfs_cs@investor-place.com.

Can Money Buy Happiness?

Personal Snapshots
Forecasts & Strategies
April 2002

“I’m tired of Love: I’m still more tired of Rhyme. But Money gives me pleasure all the time.” —Hilaire Belloc

I came across a very interesting book the other day called Happiness and Economics: How the Economy and Institutions Affect Human Well-Being (Princeton University Press, 2002), by Bruno S. Frey and Alois Stutzer. It’s a very academic book, with lots of graphs and mathematical regressions, but the conclusions are pretty clear: “The general result seems to be that happiness and income are indeed positively related.” In other words, money can provide many benefits—more opportunities, higher status in society, the ability to travel, enjoy better food, housing, health care and entertainment, etc.

I remember the day I discovered that I would be financially independent. It was a summer day in the 1970s when I came home and presented my wife with more than a dozen checks from a mail-order business I had started. Within a year, we had bought our first home, with 20% down, and by 1984, we had become successful enough that we could move our entire family (with four children) to the Bahamas to “retire.” The experience of becoming financially secure gave Jo Ann and me an incredible feeling of satisfaction.

The graph shows the relationship between income and happiness across nations. In general, people in poor countries are less satisfied than people in rich countries. One reason is that poor nations are often more subject to violence and uncertainty. “Countries with higher per capita incomes tend to have more stable democracies than poor countries have…. The higher the income, then the more secure human rights are, the better average health is, and the more equal the distribution of income is. Thus, human rights, health and distributional equality may seemingly make happiness rise with income.”

But the graph also indicates that more money provides diminishing returns in happiness. Subjective well-being rises with income, but once beyond a certain threshold, income has little or no effect on happiness. That’s why many wealthy people are not any happier than middle-class people. In fact, some wealthy people are downright unhappy.

Four Elements of Happiness

I once read a sermon by a church leader on the “Four Sources of Happiness.” He spoke of work, recreation, love and worship. I think he’s right. You have to find rewarding and honest employment to be happy. Unemployed people, not contributing to society or themselves, are generally unhappy. At the same time, people who spend too much time at the office and can’t relax with their family or friends at home need to learn the joy of recreation with a hobby, sports, travel or other avocation. Some of my most memorable times have been at a county softball game or a pick-up game of basketball with my kids or friends.

Love and friendship are also key elements of happiness. Everyone needs someone to confide in, to spend time with, to learn from, to reminisce with, to love and be loved. For most people, love and friendship take time and effort. You have to work at developing friendships, but the rewards are never-ending.

Finally, worship. Developing one’s spiritual side is essential to happiness. Some of my friends say they don’t need religion, but they are missing out on one of the joys of life—listening to a great sermon, singing hymns, meditating on the word of God and praying for God’s help.

In short, there’s more to life than doubling your money on a hot stock (although that, too, gives a lot of pleasure).