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At least in Serbia, people know that politicians’ promises are ridiculous. NPR reports on a satirical candidate named Ljubisa Beli Preletacevic, or just Beli for short:

A new politician is here to save you. I’m pure and clean. Whatever the other politicians promise you, I will promise you three times more.

I’ll give jobs to everyone and big pensions to everyone. I’m going to move the sea here because we need a beach.

Satire it may be, but his new party won 12 council seats in his home town, and most of his party’s candidates are seriously seeking election. Reporter Joanna Kakissis continues:

There will be no corruption, excluding my own of course, he declares to one crowd. Please send all money directly to my pockets. Drama student Danka Svetilova laughs and asks for a selfie. She says mainstream politicians have lied to Serbs for years….

So that’s why she and her schoolteacher mom are voting for Beli in this Sunday’s presidential election. Better a fake candidate who tells the truth about lying, she says, than a real one who lies about telling the truth.

The Cato Institute recently released Monetary Alternatives: Rethinking Government Fiat Money, a collection of essays 30 years in the making. As George Selgin explains in the foreword,

The complacency wrought by the Great Moderation, not to mention the limited interest in fundamental monetary reform before then, resulted in a dearth of serious inquiries into potentially superior arrangements….Cato kept the subject alive, offering a safe haven, in the shape of its Annual Monetary Conference, for the minority of experts that continued to stress the need for fundamental monetary reform. Although fundamental reform has been a consistent theme of Cato’s monetary conferences, those conferences have never been dominated by one approach to reform. The articles in this book present a variety of ideas for improving the monetary regime — including proposals for a formal “monetary constitution,” various monetary rules, competing currencies, and establishing a new gold standard.

In sum, Monetary Alternatives explores fundamental and controversial ideas that would move our monetary system and economy beyond repeated crises to sustainable stability and prosperity. The contributors to the volume energetically question the status quo and provide compelling arguments for moving to a monetary system based on freedom and the rule of law.

A limited constitutional government calls for a rules-based, free-market monetary system, not the topsy-turvy fiat dollar that now exists under central banking. When the Federal Reserve was created in 1913, its powers were strictly limited and the United States was still on the gold standard. Today the Fed has virtually unlimited power and the dollar is a pure fiat money.

Central banking, like any sort of central planning, is not a panacea.  Concentrating monetary power in the hands of a few individuals within a government bureaucracy, even if those individuals are well intentioned and well educated, does not guarantee sound money. The world’s most important central bank, the Federal Reserve, is not bound by any strict rules, although Congress requires that it achieve maximum employment and price stability. The failure of the Fed to prevent the Great Recession of 2009, the stagflation of the late 1970s and early 1980s, and the Great Depression of the 1930s, raises the question, can we do better?

In questioning the status quo and widening the scope of debate over monetary reform, the fundamental issue is to contrast a monetary regime that is self-regulating, spontaneous, and independent of government meddling versus one that is centralized, discretionary, politicized, and has a monopoly on fiat money. Free-market money within a trusted network of private contracts differs fundamentally from an inconvertible fiat money supplied by a discretionary central bank that has the power to create money out of thin air and to regulate both banks and nonbank financial institutions.

There are many types of monetary regimes and many monetary rules. The classical gold standard was a rules-based monetary system, in which the supply of money was determined by market demand — not by central bankers. Cryptocurrencies, like bitcoin, offer the possibility of a private non-commodity monetary base and the potential to realize F. A. Hayek’s vision of competitive free-market currencies. Ongoing experimentation and technological advances may pave the way for the end of central banking — or at least the emergence of new parallel currencies.

In making the case for monetary reform and thinking about rules versus discretion in the conduct of monetary policy, it is important to take a constitutional perspective. As early as 1988, James M. Buchanan argued, at an international monetary conference hosted by the Progress Foundation in Lugano, Switzerland:

The dollar has absolutely no basis in any commodity base, no convertibility. What we have now is a monetary authority [the Fed] that essentially has a monopoly on the issue of fiat money, with no guidelines that amount to anything; an authority that never would have been legislatively approved, that never would have been constitutionally approved, on any kind of rational calculus [“Comment by Dr. Buchanan,” Economic Education Bulletin 28, no. 6: 32–35].

In 1980, just after Ronald Reagan’s election, Buchanan recommended that a presidential commission be established to discuss the Fed’s legitimacy. There was some support within the Reagan camp, but Arthur Burns, a former chairman of the Federal Reserve Board, nixed it. As Buchanan explained at the Lugano conference, Burns “would not have anything to do with any proposal that would challenge the authority of the central banking structure.”

Buchanan’s aim was “to get a dialogue going … about the basic fundamental rules of the game, the constitutional structure.”  There is, he said, “a moral obligation to think that we can improve things.” That is the spirit of this volume and Cato’s recently established Center for Monetary and Financial Alternatives.

This year marks Cato’s 40th anniversary and the 35th anniversary of the Annual Monetary Conference, making it an appropriate time to bring out this collection of articles devoted to rethinking government fiat money and to offer alternatives consistent with limited government, the rule of law, and free markets.

________________

Contributors to Monetary Alternatives include: Claudio Borio, Jeffrey Lacker, John Allison, Bennett McCallum, James Buchanan, George Selgin, Peter Bernholz, Charles Plosser, Leland Yeager, John Taylor, Scott Sumner, James Dorn, Edwin Vieira, Lawrence White, Richard Timberlake, Roland Vaubel, and Kevin Dowd.

[Cross-posted from Alt-M.org]

The North Carolina legislature has passed and sent to Democratic Gov. Roy Cooper H.B. 142, unveiled last night as a compromise intended to end the state’s acrimonious year-long battle over discrimination laws and transgender persons’ access to bathrooms and changing rooms. From what I can see, it’s a basically sound measure that gives both sides much of what they legitimately asked.

HB2, the bill passed last March, was a response to a successful push in the city of Charlotte to enact anti-discrimination laws going well beyond state law in numerous areas, including making LGBT persons a protected class and regulating private actors in various ways (including bathroom policies) through employment and public accommodations laws. Opponents went to the state legislature and – as has happened in other states lately as well – proposed yanking back those portions of home rule that allowed for local ordinances to go beyond state law. (How you feel about yanking back home rule powers probably has a lot to do with how you feel about the substantive laws involved, since neither libertarians nor most other thinkers hold to a rigid always-or-never view of municipal home rule powers. Should towns in your state have the power to jail people for using alcohol or medical marijuana? Enact rent control? Ban the construction of any residence worth less than $1 million?)  

One part of HB2, then, eliminated towns’ and cities’ power to go beyond state law in some areas of employment and public accommodations law. But HB2 went a fateful step further by enacting into law the idea of some organized social conservatives that transgender persons should use the bathroom of their sex at birth, unless they succeed in jumping over the legal hurdles needed to get a changed certificate. There are all sorts of things wrong with that approach, and I said some of them in a Wall Street Journal letter last year

[The relevant section] of the bill imposes affirmative, uniform new duties of exclusion on North Carolina government entities such as schools, town halls, courthouses, state agencies and the state university system, taking away what had generally been local discretion. This not only will inflict needless burdens on a small and vulnerable sector of the public, but presumes to micromanage local governments and districts in an area where they had not been shown to be misusing their discretion. Whatever the merits of the rest of the bill, the provisions on state-furnished bathrooms are a good example of how legislation in haste from the top down can create new problems of its own.

The new HB142 compromise retreats, and rightly so, from this worst portion of HB2, but it does not retreat (or at least not very much) from the other elements, including those that are not so bad. By repealing HB2, it abandons the wretched aim of trying to prohibit transgender-friendly bathrooms. But it also takes away, for a time, local governments’ power to mandate them in the private sector. It provides that “State agencies, boards, offices, departments, institutions, branches of government, including The University of North Carolina and the North Carolina Community College System, and political subdivisions of the State, including local boards of education, are preempted from regulation of access to multiple occupancy restrooms, showers, or changing facilities, except in accordance with an act of the General Assembly.” (The pre-emption expires in 2020.)

“Regulation of access to” is not an entirely clear phrase in this context. Clearly, cities like Charlotte need to go on carrying on the “regulation of access to” their own city-run facilities. The debate in the legislature today, according to several sources, emphasized sound local discretion – Charlotte can run bathrooms in municipal buildings the way it sees fit. 

The new compromise is being met with peals of outrage from some of the predictable ultras on both sides. But it looks to me like a more careful attempt to respect the legitimate rights of both sides than we’ve seen in this controversy up to now.

I sometimes feel like a broken record about entitlement programs. How many times, after all, can I point out that America is on a path to become a decrepit European-style welfare state because of a combination of demographic changes and poorly designed entitlement programs?

But I can’t help myself. I feel like I’m watching a surreal version of Titanic where the captain and crew know in advance that the ship will hit the iceberg, yet they’re still allowing passengers to board and still planning the same route. And in this dystopian version of the movie, the tickets actually warn the passengers that tragedy will strike, but most of them don’t bother to read the fine print because they are distracted by the promise of fancy buffets and free drinks.

We now have the book version of this grim movie. It’s called The 2017 Long-Term Budget Outlook and it was just released today by the Congressional Budget Office.

If you’re a fiscal policy wonk, it’s an exciting publication. If you’re a normal human being, it’s a turgid collection of depressing data.

But maybe, just maybe, the data is so depressing that both the electorate and politicians will wake up and realize something needs to change.

I’ve selected six charts and images from the new CBO report, all of which highlight America’s grim fiscal future.

The first chart simply shows where we are right now and where we will be in 30 years if policy is left on autopilot. The most important takeaway is that the burden of government spending is going to increase significantly.

Interestingly, even CBO openly acknowledges that rising levels of red ink are caused solely by the fact that spending is projected to increase faster than revenue.

And it’s also worth noting that revenues are going up, even without any additional tax increases.

The bottom part of this chart shows that revenues from the income tax will climb by about 2 percent of GDP. In other words, more than 100 percent of our long-run fiscal mess is due to higher levels of government spending. So it’s absurd to think the solution should involve higher taxes.

This next image digs into the details. We can see that the spending burden is rising because of Social Security and the health entitlements. By the way, the top middle column on “other noninterest spending” shows one thing that is real, which is that defense spending has fallen as a share of GDP since the mid-1960s, and one thing that may not be real, which is that politicians somehow will limit domestic discretionary spending over the next three decades.

This bottom left part of the image also gives the details on built-in growth in revenues from the income tax, further underscoring that we don’t have a problem of inadequate revenue.

Here’s a chart that shows that our main problem is Medicare, Medicaid, and Obamacare.

Last but not least, here’s a graphic that shows the amount of fiscal policy changes that would be needed to either reduce or stabilize government debt.

I think that’s the wrong goal, and that instead the focus should be on reducing or stabilizing the burden of government spending, but I’m sharing this chart because it shows that spending would have to be lowered by 3.1 percent of GDP to put the nation on a good fiscal path.

Some folks think that might be impossible, but I’ll simply point out that the five-year de facto spending freeze that we achieved from 2009-2014 actually reduced the burden of government spending by a greater amount. In other words, the payoff from genuine spending restraint is enormous.

The bottom line is very simple.

We need to invoke my Golden Rule so that government grows slower than the private sector. In the long run, that will require genuine entitlement reform.

Or we can let America become Greece.

The Wall Street Journal reports: “Mr. Trump’s nominee for U.S. Trade Representative singled out Mexico and South Korea during his Senate confirmation hearing as sparking American trade deficits. ‘In some cases, the rules don’t seem to be working as well as others,’ Robert Lighthizer said. Critics say the deal has led to a flood of South Korean cars, auto parts, memory chips, motors and pumps into the U.S., weighing on American competitors and jobs. A U.S. Trade Representative report this month said the pact… doubled the U.S. trade deficit in goods with South Korea.”

National Trade Council boss Peter Navarro has likewise claimed “We lost 100,000 jobs because of that South Korean deal. Our trade deficit has doubled, and, more importantly, 75 percent of the damage that has been caused by that deal has been to the auto industry itself, which, of course, is based in Michigan.”

Navarro, Lighthizer and the Journal’s unnamed critics are entirely wrong about the March 15, 2012 Korea/U.S. Free Trade Agreement (KORUS).  

KORUS could not possibly have “led to a flood of South Korean… memory chips, motors and pumps into the U.S.” because memory chips were already duty-free before that FTA, and so were motors (HS code 8501) and pumps (8413).

KORUS could not possibly explain the post-recession 2010-2015 rise in U.S. imports from South Korea because most U.S. tariffs were scheduled to be reduced from 2016 to 2021not from 2010 to 2015. 

KORUS had precisely zero effect on U.S. imports of Hyundai and Kia vehicles before 2016 because the U.S. tariff on Korean cars (HS code 8703) was 2.5% before KORUS and remained at 2.5% through 2015.  Ironically, when U.S. tariffs on autos and other products finally did come down in 2016, total U.S. imports from South Korea fell 2.6% (by $1.9 billion).

 The Korean tariff on imports of U.S. cars was cut from 8% in 2012 to 4% in 2015 and zero in 2016 and a 10% Korean tariff on U.S. trucks was eliminated.  Even before Korea cut its tariff on U.S. cars to zero in 2016, U.S. exports of cars to So. Korea tripled from $418 million in 2011 to $1.3 billion in 2015, according to the USTR.  Incidentally the USTR also notes that “Korea is currently our fifth-largest market for agricultural exports thanks to KORUS,” with farm exports up 208% from 2011 to 2015.

What has been most changed about the auto industry since KORUS is that South Korea exported a sizable share of its auto industry to the United States, displacing previous Korean imports and adding to U.S. auto exports. More than half the Hyundais sold in the U.S. are now assembled in Alabama, and more than 40% of Kias in Georgia (contrary to Peter Navarro,  82.5% of U.S. auto industry jobs are not in Michigan). The Hyundai Santa Fe and Kia Sorento have 67% domestic content. Hyundai has invested $2.8 billion in the U.S. and plans to add $3.1 billion more. 

As the Graph shows, U.S. routinely ran sizable trade deficits with South Korea long before the FTA (and the U.S. routinely runs surpluses with other FTA countries, Australia and Singapore).  The U.S. trade deficit with South Korea and other countries came way down in 2009-2011 because deep recessions always slash U.S. imports, particularly industrial imports.

The graph includes services which, like farm products, were an important part of the deal.  The U.S. trade surplus in services with Korea rose from $6.9 billion in 2011 to $10.7 billion in 2016.  With services included, U.S. imports from South Korea did not rise at all from 2014 to 2016 ($81.4 billion in both years), and goods imports fell in 2016.

South Korea’s imports of goods from the U.S. rose from $29.7 billion in 2009 to $46.3 billion by 2014 before falling 8.4%to $42.4 billion in 2016.  Even with services included, South Korea’s imports from the U.S. fell from $66.5 billion to $63.9 billion since 2014.

KORUS could not possibly have had anything to do with the 2014-2016 drop in Korean imports from the U.S. because that agreement lowered rather than raised Korean tariffs.

South Korea’s demand for imports weakened because annual growth of industrial GDP fell to 2.5% from 2012 to 2015 – down sharply from a 6% pace from 2000 to 2011. One reason for Korea’s post-2014 import slump is that China’s imports from South Korea fell from more than $20 billion in October 2014 to $10-12 billion recently.  

The Trump Administration’s top trade advisers are entirely wrong about what happened when with respect to trade between the U.S. and South Korea.  KORUS had no effect at all on U.S. imports of auto, chips, motors or pumps between 2009 and 2015, because the U.S. auto tariff was unchanged until 2016 (when overall U.S. imports fell) and most other industrial products were already tariff-free before KORUS.

The Korea-U.S. trade deficit in goods did not rise from 2011 to 2015 (or fall in 2016) because of U.S. auto tariff cuts in 2016, but because the U.S. economy strengthened after 2010 and the Korean economy weakened after 2014.  

In numerous states and cities, taxi interests – notably unions representing taxi drivers – have come up with creative legislation to hobble the rise of ridesharing apps like Lyft and Uber. In Nevada, the taxi union recently proposed a package of measures to slam the apps good and hard, of which perhaps the most startling was this: drivers getting a rideshare booking would be required by law to wait to ensure that their fare was not picked up in less than ten minutes.  

What a great idea – all must be brought down to the level of the least able! Echoing Vonnegut’s funny-dystopian short story Harrison Bergeron, the speediest would have to sit out in artificial penalty time to ensure that they did not arrive before the poky. “In a brief interview, [union president T. Ruthie] Jones said the union only wanted a level playing field,” reports the Nevada Independent.

And it gets even better. When legislators got a look at the union’s wish list of requests, whoever was in charge of drafting apparently decided that a 10 minute wait time didn’t go far enough. So Senate Bill 485, introduced on Monday, instead upped the handicap delay to 15 minutes. Per the Nevada Independent, “Taxi companies — long an influential Nevada industry — gave to 50 legislators throughout the 2016 campaign cycle for a total of $476,200.” 

But the bill’s introduction stirred immediate and searching news coverage Tuesday. An Uber representative termed the 15 minute obligatory wait time “really absurd, frankly, on its face,” and said the service would pull out of the state if it were enacted. (That was the idea, right?) And by yesterday, Sen. Kelvin Atkinson (D-North Las Vegas), who chairs the committee on Commerce, Labor and Energy, said the bill was “bad policy,” dead and wouldn’t get a hearing. One of his opposite numbers had already commented critically:

Republican Assembly Leader Paul Anderson said in an earlier interview that the proposed restrictions were “atrocious” and said the measure was a blatant attempt to kneecap the industry.

“All it does is stifle an industry that is significantly providing a better service,” he said in a Tuesday interview.

My favorite comment came on Twitter: “I dunno, maybe the lawmakers should be forced to wait a while before they can drop this proposal…”

Imagine how many proposals of this sort would quietly slip through were it not for the vigilant, independent, and free press we are used to having in America.

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