Faulty Economics
13 November 2008
Editor, The Baltimore Sun
Dear Editor:
Peter Morici alleges that Americans have engaged in "excessive borrowing to finance a huge trade deficit" ("First order of business," November 13). This allegation reflects misunderstanding. First, a higher trade deficit does not necessarily mean higher borrowing. If Mr. Morici pays $25,000 cash for a new Camry, and then Toyota squirrels those dollars away in a safe, the U.S. trade deficit rises by $25,000 but Americans' debt hasn't risen as a result.
Second, the largest portion of the U.S. trade deficit that today BECOMES debt consists of loans by foreigners to Uncle Sam. Contrary to Mr. Morici's claim, this rising American indebtedness does not reflect too much American freedom to trade; instead it reflects too much irresponsible spending by the same agency - Uncle Sam - that Mr. Morici mysteriously trusts to restrict our trade and fix the economy.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Stunning News!
12 November 2008
Editor, The New York Times
229 West 43rd St.
New York, NY 10036
To the Editor:
One of your front-page headlines today reads "Lobbyists Swarm the Treasury for a Helping of the Bailout Pie" (November 12).
This fact must be told, but it's regrettable that it is news. Suppose that a thief disguised as a humanitarian shows up in Times Square and announces that he's got billions of dollars to give to people who "need" it. Surely no one would be surprised when a throng of "needy" worthies - a throng larger than that venue sees on New Year's Eve - immediately assembles, driven by the greedy and destructive itch to get something for nothing.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
El Hombre
11 November 2008
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
Anne Applebaum rightly cautions us against the messiah-nization of Barack Obama ("More Than a Rock Star," November 11) - but her skepticism is insufficiently audacious. As for me, I'm with H.L. Mencken who warned that "The Democratic tendency to make gods of successful politicians makes it all the more necessary to oppose them vigorously."*
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
* H.L. Mencken, Minority Report (Baltimore: The Johns Hopkins Press, 1997 [1956]), p. 174.
Wrong
10 November 2008
Editor, The Wonk Room
Dear Editor:
Re your most recent post boasting the faux-reasonable title "If It Happens, The Auto Industry Bailout Needs To Be Done Right" (November 10): Piffle.
While it's true that some ways of bailing out this industry would be less harmful than other ways, there is absolutely no "right" way to do it. To advise government to do the auto industry bailout "right" makes as much sense as advising a burglar to burgle the neighborhood houses "right."
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
How Ironic. How Odd.
10 November 2008
Editor, The Wall Street Journal
200 Liberty Street
New York, NY 10281
To the Editor:
Re "Nationalizing Detroit" (November 10): How ironic is it that the gaggle of politicians now ascendant in Washington croak especially loudly about their 'courage' in standing up to corporate interests while they seek to force taxpayers to hand over $50 billion to private corporations? And how odd is their belief that the same businesses that these politicians are sure don't respond negatively to being taxed will respond positively to being subsidized?
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Profit AND Loss System
9 November 2008
Editor, Washington Post
1150 15th St., NW
Washington, DC 20071
Dear Editor:
AIG Senior V-P Nicholas Ashooh isn't afraid of special pleading. He writes: “It's hard to understand why anyone would suggest that it would have been better for American International Group (AIG) to file for bankruptcy court protection than to receive help from the Federal Reserve. Bankruptcy filings almost always result in no return to shareholders because creditors get paid first. And a bankruptcy filing for a financial services company such as AIG would have destroyed, not preserved, value for our shareholders" (Letters, Nov. 9).
Indeed so. But contrary to Mr. Ashooh's self-serving claim, the fact that shareholders suffer from bankruptcy is an argument FOR bankruptcy, not against it. Business owners who make poor choices should bear the consequences of those choices - both to reduce the likelihood of poor choices being made in the first place and, when such choices are made, to reallocate the resources of unprofitable firms to more productive pursuits. Free enterprise is a profit AND LOSS system. AIG went after profits unprofitably; its owners should pay the price.
Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
