Category Archives: Economics

Tradeoffs Are Everywhere, Even in Recording Studios

Posted on March 4, 2022 | Comments Off on Tradeoffs Are Everywhere, Even in Recording Studios

Early in his career as a mixing engineer, Dave Pensado discovered a version of Nobel laureate economist Kenneth Arrow’s impossibility theorem. As he puts it in his co-authored book with his Pensado’s Place co-host Herb Trawick, The Pensado Papers: The Rise of the Visionary Sensation:

“I learned very early on, even before I came to L.A., that no one ever hired me again because I did something cheap or fast. That doesn’t happen in my profession. The triangle has cheap at the top, fast on one corner, and good on the other. pick two. That’s pretty much what you have to do.”

Yet another example that good economic thinking doesn’t always come from economists.

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Posted in Books, Economics, Music, The Arts

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U.S. Economy Adds 678,000 Jobs in February, but Inflation, Russia, Government Mandates Remain a Problem

Posted on March 4, 2022 | Comments Off on U.S. Economy Adds 678,000 Jobs in February, but Inflation, Russia, Government Mandates Remain a Problem

This press statement was originally posted on cei.org.

The U.S. economy added 678,000 jobs in February, according to newly released government figures. CEI economic and labor policy experts praised the good news and cautioned against government spending and regulations that will hinder the recovery.

Ryan Young, CEI Senior Fellow:

“Once again, economic news has moved in step with the virus. Case counts and severity have been going down for weeks, so people are opening up more. And now authorities are loosening mask mandates and other measures. No wonder more people are going back to work. The virus is now on the edge of no longer being the most important economic indicator, barring any new variants.

“There are challenges ahead from inflation and from Russia’s invasion of Ukraine.

“The Fed will likely soon raise the federal funds rate and end its bond-buying program in order to fight inflation. Employers might react to this by decreasing hiring and investment somewhat until things stabilize. But the long-run benefits of stable prices will be more than worth it. 

“Vladimir Putin’s hubris will cause oil prices to rise for some time, but Congress and President Biden can help by repealing the Jones Act, which raises domestic shipping prices so much that it is often cheaper for refiners near coasts to turn to foreign oil instead, often Russian.”

Sean Higgins, CEI Research Fellow:

 “The continued decline in the employment rate, which fell to 3.8 percent in February, is further proof that the best remedy is to roll back the Covid pandemic restrictions and allow the economy to heal itself. The Labor Department reported Friday that only 4.2 million people were unable to work in February because their employer was closed or lost business due to the pandemic. That was down from 6 million who faced the same problem in January. That 1.8 million worker shift more than accounts for February’s overall gains of 678,000 jobs.

“New federal spending programs, minimum wage regulations, other government mandates aren’t needed to get us the rest of the way back to where we were in February 2020. We just need to put the pandemic behind us.”

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Posted in Economics, labor, Monetary Theory

One Way to Block Reforms: Capture the Lawyers

Posted on February 25, 2022 | Comments Off on One Way to Block Reforms: Capture the Lawyers

From p. 23 of Richard McGregor’s 2010 book The Party: The Secret World of China’s Communist Rulers:

“About one-third, or 45,000, of the 150,000 registered lawyers in China as of May 2009, were party members. Nearly all law firms, about 95 percent, had party committees, which assessed lawyers’ pay not just according to their legal work, but to their party loyalty as well. Far from being a weakness, the Party considers its penetration of the legal system to be a core strength.”

Economists often write of regulatory capture, in which regulated industries capture the agencies that regulate them, and use that relationship to feather their each other’s nests. It turns out this can also happen in the opposite direction, and governments can capture industries.

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Posted in Books, International, Law, Public Choice, Uncategorized

On the Radio: Inflation

Posted on February 15, 2022 | Comments Off on On the Radio: Inflation

On Monday morning I appeared on Mike Ferguson’s American Viewpoints show on NewsTalkSTL in St. Louis. We talked about inflation.

Later that morning I appeared on Paul Molloy’s FreedomWorks show in Tampa, FL, also to talk about inflation.

I’ll add links to audio if I find them.

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Posted in Economics, Media Appearances, Monetary Theory

In the News: Inflation

Posted on February 15, 2022 | Comments Off on In the News: Inflation

I’m quoted in a Washington Times article about today’s Producer Price Index release:

Ryan Young, a senior fellow at the libertarian Competitive Enterprise Institute, said the Fed should consider acting even sooner than March.

“The Fed is waiting too long to act,” Mr. Young said. “It has said it will wind down its bond-buying program and raise the federal funds rate starting in March. These are the right things to do, but they should have started months ago.”

With the producer price index rising at an annualized 9.7%, well above inflation’s annualized 7.5% pace, he added that “things are likely to get worse before they get better.”

“The Producer Price Index is a leading indicator, which means it is a sign of things to come,” Mr. Young said. “While we are unlikely to reach Carter-era stagflation territory, we are getting uncomfortably close.”

Read the whole article here.

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Posted in Economics, Media Appearances, Monetary Theory

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New Export-Import Bank President Has Opportunities for Reform

Posted on February 10, 2022 | Comments Off on New Export-Import Bank President Has Opportunities for Reform

Reta Jo Lewis is about to become the next president of the Export-Import Bank. The Senate confirmed her nomination yesterday. Called Ex-Im for short, the bank seeks to boost U.S. exports by guaranteeing loans for buyers of U.S. aircraft and other goods. In many years, Boeing has been the beneficiary of as much as half of Ex-Im’s business. Around Washington, Ex-Im is informally known as the Bank of Boeing.

Unlike most other agencies, Ex-Im’s charter expires every so often. If Congress does not reauthorize it, it will close. The last two reauthorization rounds were contentious, with members of both parties calling out Ex-Im on grounds of corporate welfare and ineffectiveness. Ex-Im’s charter lapsed for a good part of 2014 and 2015, mostly closing the agency. It was only allowed to administer its existing portfolio, and was unable to take on new projects. These can exceed $20 billion per year when the agency is at full strength.

During Ex-Im’s shutdown, Boeing, the company most heavily affected, was easily able to find other financing options for its foreign buyers, and posted record profits. Ex-Im has remained open since, survived another reauthorization battle in 2019, and is due for its next reauthorization in 2027.

CEI has a long track record of favoring Ex-Im’s closure. See, for example, my 2014 paper giving 10 reasons to close Ex-Im, and op-eds for American Banker, the Washington Examiner, and Inside Sources, among other outlets.

Since 2027 is a ways off, incoming Ex-Im President Lewis may be interested instead in my paper about ways to reform Ex-Im. There are several ideas she can pursue during her term as Ex-Im’s president and board chairman:

  • Ex-Im should be required to use the same accounting standards as other federal agencies. This would prevent funny business that Ex-Im has used in the past to show a profit while actually losing money.
  • Ex-Im should have a 10 percent cap on how much of its business can benefit a single firm. This would prevent its capture by companies such as Boeing.
  • Ex-Im should remove its quota for green projects so it can choose projects on the merits.
  • Finally, Ex-Im’s in-house definition of “small business” includes companies with up to 1,500 employees. This definition needs to be made more realistic, so its quota of small business projects actually goes to small businesses.

The best Ex-Im reform is to end it. But that will have to wait until 2027.

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Posted in Economics, Export-Import Bank, Trade

On the Radio: Economic Recovery

Posted on February 10, 2022 | Comments Off on On the Radio: Economic Recovery

Earlier this week I appeared on the Vermont-based Common Sense Radio with Bill Sayre. We talked about the latest economic indicators, the economic recovery from COVID, and other issues. If I see a link to the audio, I’ll post it here.

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Posted in Business Cycles, Economics, Media Appearances

Inflation Rise Should Trigger Response by Fed, Congress, President

Posted on February 10, 2022 | Comments Off on Inflation Rise Should Trigger Response by Fed, Congress, President

This press statement was originally posted on cei.org.

Inflation is on the rise again, hitting the highest mark in 40 years, according to government figures. CEI Senior Fellow Ryan Young says the Fed, Congress, and President Biden have specific action items that would help get inflation in check:

“Inflation is up yet again, now to a 7.5 percent annual pace. That means the money supply grew 7.5 percent faster than did goods and services over the last year. The Fed can get them back in sync if Congress and President Biden let it. That means keeping political activists off the Fed’s board and not pressuring the Fed to keep money loose during an election year. That is one bipartisan tradition that must stop.

“While Congress is mostly powerless over the money supply—or should be—there is still plenty it can do. Cutting it out with the trillion-dollar spending deficits would be a good start. So would enabling more economic production by removing tariffs and other trade barriers that are clogging supply networks and loosening labor, permit, and licensing regulations that block people from pursuing better opportunities.”

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Posted in Economics, Monetary Theory

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Steel Tariffs against Japan Lifted, Kind of

Posted on February 9, 2022 | Comments Off on Steel Tariffs against Japan Lifted, Kind of

President Biden is taking a small step toward tariff relief. Japan’s first 1.25 million metric tons per year of steel exports to the U.S. will now be tariff-free. This amount is roughly equal to its average steel exports to America over the last several years. Exports beyond that will still face tariffs of 25 percent.

On one hand, tariff reductions are good, and this week’s action mostly does away with tariffs on Japanese steel. On the other hand, good policy is simple, and this adds complexity. Regulators, producers, and buyers will have to spend resources tracking tonnage to avoid potential tariffs. The tariff on growth hurts steel-using industries still dealing with supply shortages and price increases. Steel tariffs against most of the world will also remain in place, including against allies. One of President Trump’s most harmful policies remains mostly intact. His tariffs, which are now also Biden’s tariffs, cost the average household more than $1,000 per year.

President Trump initially enacted 25 percent steel tariffs allegedly for national security reasons. Allies such as Canada, Europe, and Japan took issue with being labeled national security threats, which is still a source of diplomatic friction. But the national security justification is pretty obviously a fig leaf.

In order to raise tariffs without congressional authorization, President Trump cited Section 232 of the 1962 Trade Expansion Act, which requires the president to justify tariff increases on national security. But saying doesn’t make it so.

While President Biden deserves praise for this week’s minor tariff relief, it isn’t enough. He should lift all remaining Section 232 tariffs. But even that isn’t enough. The long-term fix is structural. Congress needs to repeal Section 232 outright, so neither Biden nor any future president can abuse his or her powers ever again. The 1974 Trade Act contains similar clauses in its Sections 201 and 301, which Trump used to unilaterally raise tariffs against Europe and China. Those should also be repealed. Taxing power properly belongs to Congress. The separation of powers is an important principle. While it is important for long-lasting trade reform, it is important to many other issues as well.

For more on institution-level trade reform, see my paper, “Repeal #NeverNeeded Trade Barriers.”

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Posted in Economics, Trade

U.S. Economy Added 467,000 Jobs in January 2022, Signaling No Need for Govt Meddling

Posted on February 4, 2022 | Comments Off on U.S. Economy Added 467,000 Jobs in January 2022, Signaling No Need for Govt Meddling

This press statement was originally posted on cei.org.

The good news jobs gain in January gives President Biden and Congress ample reason to step back and let businesses and workers chart a path to recovery, say CEI experts.

Statement by Ryan Young, CEI Senior Fellow:

“The latest job numbers give another reason why the America COMPETES Act is unnecessary. Even without the massive corporate subsidies in the bill, employers added 476,000 jobs to their payrolls. The fact that the jobless rate edged up from 3.9 percent to 4.0 percent is actually good news. That number only includes workers who are actively searching for jobs. So if it goes up even as the economy adds 476,000 jobs, that means labor force participation, which has been depressed for most of the pandemic, is going up. Congress did the right thing in scuttling the never-needed Build Back Better bill. With the national debt now over $30 trillion, the America COMPETES Act should also be scrapped.”

Statement by Sean Higgins, CEI Research Fellow:

“The Labor Department’s report Friday that U.S. employers added 467,000 jobs in January is further proof that the economy can recover if it is simply allowed to do so. Despite the gains, the unemployment rate remained stuck at 4 percent due mainly to the lingering consequences of the Covid-19 pandemic and its restrictions. The number of people who reported that they had been unable to work because their employer closed or lost business due to the pandemic was 6 million, nearly double the number for December, and 1.8 million people said the pandemic prevented them from looking for work, up from 1.1 million who reported that last month. Nothing more sophisticated than getting past the pandemic and removing the related restrictions is needed to get the economy back to full health.”

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Posted in Economics, labor