Through The Fog

Starting a Sunday morning with a fresh cup of coffee and a couple of stimulating editorials on economics is probably not anybody’s idea of a good time. But, if you can’t take the self-flagellation of wading through what’s behind the links I’ve grabbed some worthwhile quotes for you.

Dr. No Offers Truths

If McCain is elected, the Wall Street Journal speculates that former Sen. Phil Gramm could be a first-round draft choice for Sec. of the Treasury. He’s got some clear, rational thoughts on the economy and what works as well as some bitterness about what doesn’t.

I’ve got a long time acquaintance who routinely rants about highly compensated corporate CEOs. He spouts the talking-points rhetoric of “fairness” and the “injustice” of someone making several thousands of times the wage of Joe Six-Pack on the assembly line. Suggestions that it isn’t government’s business to restrict what a private corporation and their stock-holders choose to pay their management generally fall on deaf ears. Here’s Gramm’s take on it:

"It's simple," he lectures, sounding very much like the Texas A&M economics professor that he was in the 1970s: "In economics, we define labor exploitation as paying people less than their marginal value product. I recently told Ed Whitacre [former CEO of AT&T, who retired with a $158 million pay package] he was probably the most exploited worker in American history because he took Southwestern Bell, which was the smallest of the former Bell companies, and he turned it into the dominant phone company on earth. His severance package should have been billions."

Now that’s “straight talk” and right to the point of market value concepts. How about this analysis of why companies go off-shore with jobs and factories?

“Gramm fingers the U.S. corporate income tax as another competitiveness killer: "We can't possibly compete with a 35% corporate tax rate that is so punitive that if a company opens a plant in Ireland it costs them a billion dollars less than in the U.S. over 10 years because of the difference in corporate taxes."

Why golly gee, Mr. Wizard, you mean if I grab a third of your revenue to hand out on government programs and another country wouldn’t do that you would be so un-American as to take your company over there? Have you no compassion for your less-fortunate fellow-man?

Or how about this on whether it is better to minimize government regulation and taxes or to let free enterprise invest and thrive:

"Why is America the richest country in the world?" he asks. "It's not because our people are more brilliant; it's because we have a better free-market system. Why has Texas created 1.6 million jobs in the last 10 years whereas Michigan has lost 300,000 jobs and Ohio has lost 100,000 jobs? Because governance matters, taxes matter, regulation matters. Our opponents in this campaign are so dogmatic in their goal of having more government because they love the power it brings to them that they're willing to let it impose costs on the working people that they say they want to help.”

How could that be? So, we can actually look at the individual state policies like Petri dishes in a lab and compare the effect of those policies on business, jobs, and more?

But, what would poor President McCain be able to do when he will probably be saddled with a big spending, welfare oriented, centrally planned economy sort of Democrat controlled Congress? The solution is refreshingly simple:

“To Mr. Gramm, the silver bullet is the veto pen. Here's his explanation: "If McCain is elected, he's going to have one thing Democrats in Congress desperately want: control of the money. And his ability to promote his agenda – the tax cuts, his foreign policy – will depend on his willingness to say no. Bush simply signed everything. They could blackmail Reagan by threatening to cut defense. But there is nothing John McCain wants from Congress. He wants to cut defense. There's no place they can take him in cutting spending that he's not willing to go."

That sounds like the old fashioned kind of traditional conservatism a lot of voters on the right say that they want.

For evidence on one of those Petri dishes Gramm mentioned, try this on for size:

It Could Happen Here

The writer notes that in Ohio the situation looks like this:

“And that may actually be a plus for Barack Obama. His party is finding that lofty, vague promises of change combined with high-spending, high-tax, welfare state-ish policies are a political winner in the state.”

Except the numbers then reveal this:

“But as a formula for economic revival, it is madness. Ohio already has the fifth-heaviest state and local tax burden in the country (up from 30th in 1990) and finds itself stagnating. Its unemployment rate, 6.3%, is above the national rate of 5.5%, even as the state's work force shrinks as people emigrate. Ohio's median household income is also falling – in 2006 it was $44,500, down 0.5% from the previous year – while the national figure ($48,500) was up 1.6%. During the closing decades of the 20th century, incomes rose twice as fast across the country as in Ohio.”

Can it really be that simple to understand? Even over Sunday morning coffee and economics editorials? I think so.