Market Correction

29 January 2009

Editor, The Washington Times

Dear Editor:

Citibank will now reject delivery of a corporate jet. As you report, "Pressure to cancel the deal came from the Obama administration and amid a chorus of concerns from politicians who are worried about how banks that have received federal funds are spending the money" ("Citigroup won't accept new jet," January 28).

Overlook the sad fact that bailout money is being used to exponentially expand the scope of market activities over which government exercises direct control, and instead ask: Does no one see the sick hypocrisy here? A man who flies in a private jet paid for exclusively with taxpayer funds (Air Force One) scolds other persons for flying in private jets paid for only in part with taxpayer funds.

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

28 January 2009

Editor, The Baltimore Sun

Dear Editor:

C. Paul Mendez wants to protect American workers from competition with a moratorium on immigration (Letters, Jan. 28). Why stop there? Why not also impose moratoria on worker training and on technological advances? After all, improved worker skills and more highly developed production techniques increase worker productivity. The result is that any given amount of output is produced using fewer workers. So worker training and technological advances, no less than immigrants, also compete with many existing workers.

In truth, any such moratoria are moratoria on sources of economic growth - never wise moves at any time, but especially not during times such as these when investors are especially leery of committing funds to long-term projects.

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

27 January 2009

Editor, The New Yorker

Dear Editor:

Ben McGrath's report on modern-day doomsayers is a masterpiece ("The Dystopians," Jan. 26). But he missed an opportunity to poke even more fun at gloomster Dmitry Orlov. This opportunity arose when Mr. Orlov listed "a worsening foreign-trade deficit" as evidence of America's coming collapse.

Mr. McGrath could have explained that another name for "worsening foreign-trade deficit" is "improving foreign-investment surplus" - meaning, larger inflows of foreign investment funds to America. While more foreign investments in the U.S. might in part reflect Uncle Sam's reckless fiscal policies, foreigners' continued willingness to lend so much means that they voluntarily shoulder a good deal of the risks created by these policies. This fact both makes America stronger than it would be without "a worsening foreign-trade deficit" and it signals that foreign lenders emphatically reject Mr. Orlov's belief that the United States' economic destruction is imminent.

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

26 January 2009

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

To the Editor:

Paul Krugman claims to "debunk some of the major antistimulus arguments" ("Bad Faith Economics," January 26). Alas, he ignores the most compelling arguments against the "stimulus" - such as the one that recognizes that massive increases in government spending are too likely to be laden with pork and infected with political viruses to do much good.

More important is the argument built on the understanding that the fundamental problem isn't a lack of aggregate demand but, rather, resource misallocation caused by prices being out-of-whack relative to each other. The only way to solve this problem is to let these relative prices adjust over time so that resource allocation becomes more sustainable. "Stimulus" spending will only thwart these adjustments. The economic turmoil may be masked in the short-run, but only by ensuring longer-term harm.*

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

* See, for example, Mario Rizzo's blog post here:

http://thinkmarkets.wordpress.com/2009/01/21/the-macroeconomic-knowledge-problem/

26 January 2009

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

Dear Editor:

In "Three Crises In One," Robert Samuelson double-counts by identifying "the collapse of consumer spending" and "a trade crisis" caused by Americans now spending less on imports as two separate problems with today's economy (January 26). When consumers reduce their spending they do so for imports as well as for domestically produced goods and services. It makes no more sense to distinguish reduced consumer demand for American-made outputs from reduced demand for foreign-made outputs than it does to distinguish reduced consumer demand for Ohio-made outputs from reduced demand for Oregon-made outputs.

Also, if - as Mr. Samuelson has long contended - Americans earlier saved too little and spent too much on imports, why is it now a problem that Americans are saving more and buying fewer imports? Despite the adjustment costs that such a shift entails, shouldn't we applaud this end to what Mr. Samuelson (and so many other pundits) regard as American consumers' excessive profligacy?

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

25 January 2009

News Editor, WTOP Radio
Washington, DC

Dear Sir or Madam:

You report today that "President Barack Obama's ban on earmarks in the $825 billion economic stimulus bill doesn't mean interest groups, lobbyists and lawmakers won't be able to funnel money to pet projects. They're just working around it."

This news is as surprising as January snow in Buffalo. As my colleague Russ Roberts points out, pork is as inseparable from government spending as it is from ham sandwiches.

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

25 January 2009

Editor, Baltimore Sun

Dear Editor:

Dan Rodricks wants "national service," and he believes that the nation's current infatuation with Barack Obama provides an ideal opportunity to implement it ("Americans poised to heed Obama's call to service," January 25).

Put aside the mistaken premise that each of us "serves" only when working in government programs, and ask: how will Uncle Sam know how best to use all the conscripted labor at his disposal? And what earthly reason is there to suppose that he will deploy such labor according to reasonably objective criteria rather than according to political fads, partisan emotions, and interest-group influences?

Sadly, Mr. Rodricks utterly ignores practical questions such as these. His essay is evidence of the truth of what Thomas Sowell observes in his column appearing in today's Washington Times: "politics is about evoking emotions, not examining specifics."

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