WSJ.com - Foreign Aid and Bad Government

WSJ.com - Opinion: Foreign Aid and Bad Government

Entrepreneurship, not aid, is essential to rejuvenate markets in the developing world and, in turn, help America prosper.

During the Cold War, the U.S. instituted a policy of sending money to governments in poor countries to buy their political loyalty. While studies show that sending aid to foreign governments creates allegiance, it does not lead to economic progress. Instead, it makes governments in poor countries dependent on the U.S. rather than their citizens' taxes. 

Tragically, the Cold War aid approach actually preserves suffering in poor countries. Aid empowers bureaucracies, promotes statism, and weakens government incentives to boost tax revenues through growth. Economic assets are often kept in the hands of the state, leading to monopolies, stagnation and extortion. All of this hurts entrepreneurs, who have the potential to create wealth and promote governmental accountability.

The history of Western economic and political advancement illustrates that it is the economic strength of citizens -- not governments -- that gives rise to checks and balances. 

WSJ.com - Look at the Time

WSJ.com - Opinion: Look at the Time

 

In Congress and the boardroom, failure to recognize a new era.

 

The party-line vote in favor of the stimulus package could have been more, could have produced not only a more promising bill but marked the beginning of something new, not a postpartisan era (there will never be such a thing and never should be; the parties exist to fight through great political questions) but a more bipartisan one forced by crisis and marked by—well, let's call it seriousness.

The final bill was privately agreed by most and publicly conceded by many to be a big, messy, largely off-point and philosophically chaotic piece of legislation. The Congressional Budget Office says only 25% of the money will even go out in the first year. This newspaper, in its analysis, argues that only 12 cents of every dollar is for something that could plausibly be called stimulus.

What was needed? Not pork, not payoffs, not eccentric base-pleasing, group-greasing forays into birth control as stimulus, as the speaker of the House dizzily put it before being told to remove it.

"Business as usual." "That's Washington." But in 2008 the public rejected business as usual. That rejection is part of what got Obama elected.

 

WSJ.com - How Modern Law Makes Us Powerless

WSJ.com - Opinion: How Modern Law Makes Us Powerless

Americans don't feel free to reach inside themselves and make a difference. The growth of litigation and regulation has injected a paralyzing uncertainty into everyday choices. All around us are warnings and legal risks. The modern credo is not "Yes We Can" but "No You Can't." Our sense of powerlessness is pervasive. Those who deal with the public are the most discouraged. Most doctors say they wouldn't advise their children to go into medicine. Government service is seen as a bureaucratic morass, not a noble calling. Make a difference? You can't even show basic human kindness for fear of legal action. Teachers across America are instructed never to put an arm around a crying child.

The idea of freedom as personal power got pushed aside in recent decades by a new idea of freedom -- where the focus is on the rights of whoever might disagree. Daily life in America has been transformed. Ordinary choices -- by teachers, doctors, officials, managers, even volunteers -- are paralyzed by legal self-consciousness. Did you check the rules?  

All this law, we're told, is just the price of making sure society is in working order. But society is not working. 

WSJ.com - Beware of the Big-Government Tipping Point

WSJ.com - Opinion: Beware of the Big-Government Tipping Point

Socialized health care fundamentally changes the relationship between citizens and state.

For most of our nation's history, our approach to economics has favored enterprise, self-reliance and the free market. While the American economy has never been entirely laissez-faire, we have historically cared more about equality of opportunity than equality of results. And while Americans have embraced elements of the New Deal, the Great Society and progressive taxation, we have traditionally viewed welfare as a way to help those in dire need, not as a way of life for the middle class. We have grasped, perhaps more than any other nation, that there is a long-run cost to dependency on the state, including an aversion to risk that eventually enervates the entrepreneurial spirit necessary for innovation and prosperity.

This outlook, once assumed, is now under attack due to a recent series of political and economic events. 

...if we do not succeed in resisting greater state involvement in the economy -- and health care is meant to be the beachhead of this effort -- we will move from a limited welfare state into a full-blown one. This will reshape, in deep and enduring ways, our nation's historic sensibilities. It will lead here, as it has elsewhere, to passivity and dependence on the state. Such habits, once acquired, are hard to shake. 

WSJ.com - Suspend Your Disbelief

WSJ.com - Opinion: Suspend Your Disbelief

What is required for full enjoyment of an inauguration, from opening prayers to speeches to marching bands is, in the great 19th-century phrase, the willing suspension of disbelief. If you don't put your skepticism aside, you will not fully absorb and experience the drama. You must allow it to be real for you.... 

To believe, suspend disbelief. We have been through this before, the flags and fine speeches, the brass donkey paperweight, the glass elephant, the rise and fall of administrations, the coming and going of figures great and small. It's good to put that aside for a few days, to remove yourself from politics, partisanship and faction, to suspend your disbelief, to be grateful that the signs and symbols endure, as does the republic, and raise a toast: "To the president of the United States."

WSJ.com - Theodore Roosevelt Was No Conservative

WSJ.com - Opinion: Theodore Roosevelt Was No Conservative

Progressives of both parties, including Roosevelt, were the original big-government liberals. They understood full well that the greatest obstacle to their schemes of social justice and equality of material condition was the U.S. Constitution as it was originally written and understood: as creating a national government of limited, enumerated powers that was dedicated to securing the individual natural rights of its citizens, especially liberty of contract and private property.

Looking ahead, conservatives hardly need to look back to progressives for inspiration. If there is a desire to "conserve" or restore something about our political tradition that has been lost with the rise of modern liberalism, how about the American founding as a model? It is with the founders that we can find the patriotic promotion of America as an exceptionally great nation -- a notion that attracts some conservatives to TR.

WSJ.com - Cutting Monthly Bills? Turn to the Web

WSJ.com - Cutting Monthly Bills? Turn to the Web

At first blush, the individual savings seem too small to bother with.

They're not.

Ask yourself if it's worth changing cable or home Internet providers, say, or cellphone providers, in order to save just $10 a month.

Many people couldn't be bothered. It's no surprise. Ten bucks doesn't sound like much.

But one of the key themes of this column is that combining recurrent savings with compound interest has explosive power. It's the atomic fission of finance.

Slashing just $10 from each month's costs and investing it, instead, adds up to quite a bundle over the course of an adult lifetime. Someone who did that over fifty years would have an extra $54,000 when they retired. Not bad.

WSJ.com - Six Lessons for Investors

WSJ.com - Opinion: Six Lessons for Investors

There is almost no limit to the ability of investors to ignore the lessons of the past. This cost them dearly last year. Here are six of the most important of these lessons:

1) Beware of market forecasts, even by experts. 

2) Never underrate the importance of asset allocation.

3) Mutual funds with superior performance records often falter.

4) Owning the market remains the strategy of choice.

5) Look before you leap into alternative asset classes.

6) Beware of financial innovation.

 

WSJ.com - Freedom Is Still the Winning Formula

WSJ.com - Opinion: Freedom Is Still the Winning Formula

 

For 15 years, The Wall Street Journal and The Heritage Foundation have been measuring countries' commitment to free-market capitalism in the "Index of Economic Freedom." The 2009 Index, published this week, provides strong evidence that the countries that maintain the freest economies do the best job of promoting prosperity for all citizens.

The positive correlation between economic freedom and national income is confirmed yet again by this year's data. The freest countries enjoy per capita incomes over 10 times higher than those in countries ranked as "repressed." This year, for the first time, the Index also correlates economic freedom with important societal values like poverty reduction, human development, political freedom and environmental protection. The linkages are robust, with economically freer countries performing significantly better on every indicator of well-being.

It would be ironic indeed if the world's advanced economies, in seeking to address current woes, abandoned the system that has brought them and others around the world the amazing levels of prosperity experienced over the last half century.

WSJ.com - Researchers Link Better Sleep to Cold Prevention

WSJ.com - Researchers Link Better Sleep to Cold Prevention

 

Preventing the common cold may be as easy as getting more sleep.

Researchers paid healthy adults $800 to have cold viruses sprayed up their noses, then wait five days in a hotel to see if they got sick. Habitual eight-hour sleepers were much less likely to get sick than those who slept less than seven hours or slept fitfully.

"The longer you sleep, the better off you are, the less susceptible you are to colds," said lead author Sheldon Cohen, who studies the effects of stress on health at Pittsburgh's Carnegie Mellon University.

WSJ.com - 'Atlas Shrugged': From Fiction to Fact in 52 Years

WSJ.com - Opinion: 'Atlas Shrugged': From Fiction to Fact in 52 Years

Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant hit. 

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in their lives, behind only the Bible.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls."

 

WSJ.com - There's No Pain-Free Cure for Recession

WSJ.com - Opinion: There's No Pain-Free Cure for Recession

 

Individuals, companies or cities with heavy debt and shrinking revenues instinctively know that they must reduce spending, tighten their belts, pay down debt and live within their means. But it is axiomatic in Keynesianism that national governments can create and sustain economic activity by injecting printed money into the financial system...  

 

On a gut level, we have a hard time with this concept. There is a vague sense of smoke and mirrors, of something being magically created out of nothing. But economics, we are told, is complicated. 

It would be irresponsible in the extreme for an individual to forestall a personal recession by taking out newer, bigger loans when the old loans can't be repaid. However, this is precisely what we are planning on a national level.

When the government spends, the money has to come from somewhere. If the government doesn't have a surplus, then it must come from taxes. If taxes don't go up, then it must come from increased borrowing. If lenders won't lend, then it must come from the printing press, which is where all these bailouts are headed. But each additional dollar printed diminishes the value those already in circulation. Something cannot be effortlessly created from nothing.

The good news is that economics is not all that complicated. The bad news is that our economy is broken and there is nothing the government can do to fix it. However, the free market does have a cure: it's called a recession, and it's not fun, easy or quick. But if we put our faith in the power of government to make the pain go away, we will live with the consequences for generations. 

WSJ.com - Barack Obama-san

WSJ.com - Opinion: Barack Obama-san

 

The latest leak puts the "stimulus" at $1 trillion over a couple of years, and the political class is embracing it as a miracle cure. 

Not to spoil the party, but this is not a new idea. Keynesian "pump-priming" in a recession has often been tried, and as an economic stimulus it is overrated. The money that the government spends has to come from somewhere, which means from the private economy in higher taxes or borrowing. The public works are usually less productive than the foregone private investment.

In the Age of Obama, we seem fated to re-explain these eternal lessons. So for today we thought we'd recount the history of the last major country that tried to spend its way to "stimulus" -- Japan during its "lost decade" of the 1990s. In 1992, Japanese Prime Minister Kiichi Miyazawa faced falling property prices and a stock market that had sunk 60% in three years. Mr. Miyazawa's Liberal Democratic Party won re-election promising that Japan would spend its way to becoming a "lifestyle superpower." The country embarked on a great Keynesian experiment:

 

WSJ.com - Cooling on Global Warming

WSJ.com - Opinion: Cooling on Global Warming

 

Germany and the rest of Europe are getting more rational on climate change. 

Participants at last week's United Nations climate conference in Poznan, Poland, were taken aback by a world seemingly turned upside-down. The traditional villains and heroes of the international climate narrative, the wicked U.S. and the noble European Union, had unexpectedly swapped roles. For once, it was the EU that was criticized for backpedalling on its CO2 targets while Europe's climate nemesis, the U.S., found itself commended for electing an environmental champion as president.

The Brussels summit symbolizes a turning point. The watered-down climate deal epitomizes the onset of a cooling period in Europe's hitherto overheated climate debate. It may lead eventually to the complete abandonment of the unilateral climate agenda that has shaped Europe's green philosophy for nearly 20 years. 

WSJ.com - The 'Certified' Teacher Myth

WSJ.com - Opinion: The 'Certified' Teacher Myth

Like all unions, teachers unions have a vested interest in restricting the labor supply to reduce job competition. Traditional state certification rules help to limit the supply of "certified" teachers. But a new study suggests that such requirements also hinder student learning.

Unions claim that traditional certification serves the interests of students. But it's clear that students would be better served if the teaching profession were open to more college graduates. Teachers learn by teaching, not by mastering the required "education" courses associated with state certification.

Far from regulating teacher quality, forcing prospective teachers to take a specific set of education-related courses merely deters college graduates who might otherwise consider teaching. That outcome may serve the goals of labor unions, but it's hard to see how it helps the kids. If we want better teachers and more of them, relaxing certification standards would be a good place to start.

WSJ.com - Bankruptcy Doesn't Equal Death

WSJ.com - Opinion: Bankruptcy Doesn't Equal Death

 

This myth begins with the idea that GM, Ford and Chrysler are so huge that if they go belly-up, the livelihoods of a disproportionately large number of workers and suppliers would be affected. At once, the market for their services and products would close. Therefore, the argument concludes, government must prevent any such failures.

Nonsense.

Bankruptcy doesn't make assets -- such as factories, machines, contractual options to buy raw materials, workers' skills -- disappear. If markets still exist for products produced by these firms, Chapter 11 is the best way to discover this. Some workers might lose their jobs and some suppliers might lose their markets, but there would be no industry-wide collapse of the sort portrayed by the bailout's cheerleaders. 

A government bailout of the Big Three keeps huge amounts of productive inputs in firms that can't use them efficiently. Forcing taxpayers to subsidize the continued employment of gargantuan quantities of raw materials, labor and capital goods in unproductive pursuits is a recipe for economic stagnation. 

WSJ.com - Some Carbon Candor

WSJ.com - Opinion: Some Carbon Candor

 

A climate guru rebukes his mates on cap and trade. 

 

...Mr. Hansen also had the honesty to follow his convictions to their logical conclusion, while reproaching his followers -- President-elect Obama among them -- for not doing the same. To wit, Mr. Hansen endorses a straight carbon tax as the only "honest, clear and effective" way to reduce emissions, with the revenues rebated in their entirety to consumers on a per-capita basis. "Not one dime should go to Washington for politicians to pick winners," he writes. 

The risks of fossil fuels remain speculative, but if they really are the apocalypse of Mr. Hansen's prophecies, then the cleanest remedy is a tax. That would raise energy and all other prices as the incentive for new technologies and investments. But a tax would be neutral, eliminating the market distortions caused by subsidies and regulation, and the proceeds could be used to offset other taxes. The transition to a world in which growth is not tied to carbon would still be long and extremely expensive, but a tax would be the least painful way to get there. 

WSJ.com - Economists Have Abandoned Principle

WSJ.com - Opinion: Economists Have Abandoned Principle

Practically every day the government launches a massively expensive new initiative to solve the problems that the last day's initiative did not. It is hard to discern any principles behind these actions. The lack of a coherent strategy has increased uncertainty and undermined the public's perception of the government's competence and trustworthiness.

The Obama administration, with its highly able team of economists, has a golden opportunity to put the country on a better path. We believe that the way forward is for the government to adopt two key principles. The first is that it should intervene only when there is a clearly identified market failure. The second is that government intervention should be carried out at minimum cost to taxpayers.

WSJ.com - Lessons From 40 Years of Education 'Reform'

WSJ.com - Opinion: Lessons From 40 Years of Education 'Reform'

 

We must start with the recognition that, despite decade after decade of reform efforts, our public K-12 schools have not improved. We can point to individual schools and some entire districts that have advanced, but the system as a whole is still failing.  

 

This is a complex problem, but countless experiments and analyses have clearly indicated we need to do four straightforward things to bring fundamental changes to K-12 education:

1) Set high academic standards for all of our kids, supported by a rigorous curriculum.

2) Greatly improve the quality of teaching in our classrooms, supported by substantially higher compensation for our best teachers.

3) Measure student and teacher performance on a systematic basis, supported by tests and assessments.

4) Increase "time on task" for all students; this means more time in school each day, and a longer school year.

Everything else either does not matter (e.g., smaller class sizes) or is supportive of these four steps (e.g., vastly improve schools of education).

[Note: The recommendations in this article are different from the normal call for "school choice" that is often heard these days.  As always, I'd be interested in your opinions; comment on any of my posts at http://wsj-articles.blogspot.com/ ]  

 

 

WSJ.com - Change Our Public Schools Need

WSJ.com - Change Our Public Schools Need

Democrats are fervent supporters of public education, and the party genuinely wants to help disadvantaged kids stuck in bad schools. But it resists bold action. It is immobilized. Impotent. The explanation lies in its longstanding alliance with the teachers' unions...

Democrats favor educational "change" -- as long as it doesn't affect anyone's job, reallocate resources, or otherwise threaten the occupational interests of the adults running the system. Most changes of real consequence are therefore off the table....

What should the Democrats be doing? Above all, they should be guided by a single overarching principle: Do what is best for children.  

It all boils down to a simple question. Will President Obama have the courage to unite with the rebels inside his party, champion the interests of children over the interests of adults, and be a true leader who really means it when he talks about change? We can only stay tuned. And have the audacity of hope.

WSJ.com - Obama Should Look Into Putin's Record, Not His Eyes

WSJ.com - Opinion: Obama Should Look Into Putin's Record, Not His Eyes

 

How should Mr. Obama deal with Russia's official president, Dmitry Medvedev, and Russia's real leader, Vladimir Putin? The choice is straightforward: Mr. Obama can treat them like fellow democratic leaders or like the would-be dictators that they are. 

 

There is little doubt the most recent elections in Russia had even less value than those in Venezuela and Iran. Russia's own "supreme leader" cannot be treated as a true democratic representative if the new U.S. administration wishes to maintain any credibility on matters of human rights and freedom abroad.

WSJ.com - Let's Have a Real Middle-Class Tax Cut

WSJ.com - Let's Have a Real Middle-Class Tax Cut

[Obama's plan for] tax credits will do little or nothing to promote economic growth because they do not reduce marginal tax rates -- the rate on the next dollar of income -- to provide powerful, meaningful incentives for productive activities such as investment, entrepreneurship and work. A tax credit is effectively a cash grant that can only affect incentives up to the amount of the grant. Indeed, such tax credits would likely reduce economic growth because the credits are phased out as income rises, and so effectively impose higher marginal tax rates over those income levels.

Marginal tax rates for middle-income families in the 25% tax bracket are too high....  Reducing the marginal tax rates for these middle-income earners would lead to income increases for middle-income workers, just as reducing excessive marginal tax rates for higher-income workers did, going all the way back to the Kennedy tax cuts of the 1960s. 

[A] 40% cut in middle-class income tax rates would provide a powerful boost to the economy, greatly expanding incentives for savings, investment and work. This would be much more effective than Mr. Obama's tax plan with it's $1.3 trillion in redistributive tax credits, as well as yet another so-called stimulus package based on another $300 billion or more in increased government spending.

WSJ.com - Why Spending Stimulus Plans Fail

WSJ.com - Opinion: Why Spending Stimulus Plans Fail

 

What Congress gives to some it takes away from others. 

Government stimulus bills are based on the idea that feeding new money into the economy will increase demand, and thus production. But where does government get this money? Congress doesn't have its own stash. Every dollar it injects into the economy must first be taxed or borrowed out of the economy. No new spending power is created. It's merely redistributed from one group of people to another.

Governments don't create new purchasing power out of thin air. If Congress funds new spending with taxes, it is redistributing existing income. If the money is borrowed from American investors, those investors will have that much less to invest or to spend in the private economy.  

 

In reality, economic growth -- the act of producing more goods and services -- can be accomplished only by making American workers more productive.

WSJ.com - Just Say No to Detroit

WSJ.com - Just Say No to Detroit

 

Today, our government is being asked to put tens of billions of dollars in GM, Ford and Chrysler, but we would be much better off if Washington allowed these companies to go bankrupt and disappear.

 

...when a company makes money-losing investments, the cost falls upon all of society. Investment capital represents our limited stock of national savings, and when companies spend it badly, our future well-being is compromised.

 

If the government wants to spend $25 billion to protect auto workers, it would do better to transfer the money to them directly (perhaps by cutting each worker a check for $10,000) rather than by keeping their unproductive employer in business.

WSJ.com - Martian Triumph

WSJ.com - Opinion: Martian Triumph

 

Between August 4, 2007 and this past Monday, the Dow fell by more than 4,000 points, John McCain resurrected his primary campaign from the political ashes, the surge succeeded in Iraq, Russia invaded Georgia and Barack Obama was elected President of the United States.

Oh, and the presence of frozen water was discovered on the surface of Mars, thanks to a 770-pound spacecraft named Phoenix.

Time will tell which of these events proves the most consequential. But surely the 420 million mile voyage of the little Phoenix lander and its five-month sojourn near Mars's north pole deserves a mention.

[Note: For those who didn't know, Phoenix was built by Lockheed Martin at our Denver Waterton Campus.]