Market Correction

14 January 2009

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Reporting on the recent fall in America's trade deficit, you quote Barclay's Capital economist Julia Coronado's claim that "It's still a pretty sizable trade deficit, but it's going in the right direction" ("Sharp Drop in Oil Price Helps Shrink Trade Deficit," January 14).

Doubtful, especially because this trade-deficit decline was caused, not by a rise in American exports, but by a disproportionately large fall in American imports. Given that in recent decades foreigners consistently pumped significant portions of their dollar earnings back into the U.S. economy as investment funds - and given that fewer American imports means reduced dollar earnings by foreigners - this fall in America's trade deficit is a movement in the WRONG direction, for it signals reduced investment in the American economy.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

13 January 2009

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Bob Herbert endorses a tax on financial transactions because, in his view, that's where the money is ("Where the Money Is," January 13). And he even credits Willie Sutton for inspiring this idea.

How refreshingly frank. Mr. Herbert doesn't hide the fact that his ethics are those of a bank robber.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

13 January 2009

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Bob Herbert endorses a tax on financial transactions ("Where the Money Is," January 13). Specifically, he wants a very small tax ("say 0.25 percent") on each of the hundreds of millions of such transactions that occur daily. Surely, reasons Mr. Herbert, such a tiny tax on each transaction would do nothing to discourage legitimate financial transactions, while at the same time - because the number of such transactions is so huge - this tax would rake in immense amounts of revenue for Uncle Sam.

Brilliant! But why stop there? Our economy is full of similar revenue-raising opportunities. For example, what about a very small tax - say, 0.25 percent - on each word written by reporters and columnists in newspapers and magazines? Being so small, this tax would not discourage writers from publishing legitimate ideas. And yet, because so very many words are printed each and every day in these publications, government's haul of total revenue from such a tax would be enormous.

What say you, Mr. Herbert?

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

12 January 2009

Editor, Washington Post Book World
1150 15th St., NW
Washington, DC 20071

Dear Editor:

In his superb review of Duncan Wu's new biography of William Hazlitt, Michael Dirda writes that "the essayist's signature theme must be the gloomy one of a disappointed life" (January 11). Indeed, in contrast to H.L. Mencken - a writer like him in so many ways - Hazlitt seems never to have experienced joie de vivre.

Hazlitt's personal gloominess, however, ought not be mistaken for incorrigible pessimism. Perhaps more presciently than anyone of his era, he challenged Malthus's dreary prediction that population growth will cause mass starvation. Here's Hazlitt: "A grain of corn will multiply and propagate itself much faster even than the human species. A bushel of wheat will sow a field; that field will furnish seed for 20 others." Hazlitt even predicted "green revolutions."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

* William Hazlitt, The Spirit of the Age (1824), p. 276.

11 January 2009

Editor, The Washington Times

Dear Editor:

Joseph Carrigan is understandably disturbed that President-elect Obama predicts doom if a new "stimulus" plan isn't enacted (Letters, January 11). Alas, Mr. Obama is simply following his profession's code of conduct. What H.L. Mencken astutely observed back in 1918 is no less real in 2009: "Civilization, in fact, grows more maudlin and hysterical; especially under democracy it tends to degenerate into a mere combat of crazes; the whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by an endless series of hobgoblins, most of them imaginary."*

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University

* H.L. Mencken, In Defense of Women (New York: Knopf, 1918), p. 53.

9 January 2009

Editor, The New York Times
229 West 43rd St.
New York, NY 10036

To the Editor:

Paul Krugman faults Barack Obama's $775 billion "stimulus" plan for being too small ("The Obama Gap," January 9). I fault this plan for being about $775 billion too big.

If raising government demand for private-sector output were a sound recipe for economic health, then all that the government of, say, Zimbabwe must do to elevate that country to first-world status is to spend, spend, spend. Of course, such spending would do nothing to help Zimbabwe's economy because the problem lies in that country's poor institutions that discourage investments and prevent prices from being determined by market forces.

While America's institutions are more pro-growth than are those of many other countries, today's economic downturn will be reversed not by artificially raising demands for assets but, instead, by ridding the economy of institutional obstacles that discourage productive investment - obstacles such as high capital-gains taxes, inflationary monetary growth, and poisonous uncertainty about how Uncle Sam will next intervene into the economy.

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University