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First, Do No Harm

February 05, 2009

By Diana Furchtgott-Roth

WASHINGTON --The saying “First, do no harm” is the cardinal rule of medicine. It applies equally to economic policy.

At the very time that the Senate is debating whether to spend $800 billion or $900 billion to stimulate the economy, the government is considering other legislative and regulatory initiatives that would impede economic recovery.

Buy American. By inserting protectionist provisions that require some goods (such as steel, cement, and textiles) financed by the stimulus bill to be made in America, Congress is risking a trade war with important trading partners. It would reduce exports, potentially destroying millions of well-paid American jobs.

Although President Obama said on February 3, “I think we need to make sure that any provisions that are in there are not going to trigger a trade war,” he did not categorically rule out all Buy American provisions.

Cuts in Defense Spending. At the same time Congress is trying to revive the economy by expanding domestic spending, the Pentagon is reportedly facing budget cuts next year. But with President Obama promising to deploy more troops to Afghanistan, America needs more defense spending, not less.

America needs to purchase more weapons, ordnance, vehicles, and body armor so that our troops have the best equipment possible—and enough of it. Defense supplies are generally made in America, and production employs Americans with a wide range of skills. Moreover, America should increase regular forces by 100,000 and hire 100,000 more civilians to support them. This would enable the Pentagon to bring home reserve and National Guard troops, some of whom have been deployed for six to nine months or longer.

Nationalizing the health system. With little debate and no hearings, Congress is expanding state reimbursement for some government health insurance originally designed to help low-income Americans to those who are middle- or upper-income. That would make government a competitor to private insurance plans, threatening their existence, according to Grace Marie Turner of the widely-respected Galen Institute. It would also expand entitlements and raise future spending.

The Children’s Health Insurance Program, signed into law on February 4 by President Obama, changes eligibility from 200% of the poverty line, or about $44,000 for a family of four, to 300% ($66,000), or even 400% ($88,000), well above household median income of $50,000. In addition, under the stimulus bill, all unemployed workers, regardless of income or wealth, would qualify for Medicaid payments from states, fully reimbursed by the federal government.

Allowing states to set emissions standards. As though a 27-year low in auto sales wasn’t enough, under a new directive from President Obama states will be free to set their own auto emissions and fuel efficiency standards. California and 13 other states are interested in adopting standards that are stricter than federal law. This would complicate engineering and production, raise costs, and send the industry into an even greater decline.

Since California is America’s largest car market, companies will have to make lighter, more fuel-efficient cars that consumers might not want to purchase. Domestic companies will be particularly hard-hit because they make larger cars. At the same time as Congress is bailing out Detroit with loans and considering tax deductions for purchases of new cars and trucks, the Big Three will be forced to make small cars, which is not their comparative advantage. More red ink for the auto industry, and more layoffs across America.

Employee Free Choice Act. This bill, which passed the House in the 110th Congress and which congressional leaders may bring up again this week, has nothing to do with employee free choice other than to deprive workers of it. This misnamed bill would change the law to allow workplaces to be unionized without secret ballots. A workplace could be unionized if a majority of workers sign an open card in favor of unionization — a process known as "card check," exposing workers to union intimidation.

One of the bill’s House sponsors was House Committee on Education and Labor Chairman George Miller. In 2001 he and five colleagues wrote to the state arbitration board of Puebla, Mexico, saying, "we feel that the secret ballot is absolutely necessary in order to ensure that workers are not intimidated into voting for a union they might not otherwise choose." If Mexicans deserve a secret ballot, so do Americans.

States where employees do not have to join a union in order to work have lower average unemployment rates than other states, so it would not be surprising if increased unionization would raise unemployment rates.

As well as protectionism, cuts in defense spending, nationalization of key industries, unionization by intimidation, and arbitrary environmental standards, the economic stimulus bill would open the floodgates of deficit spending. The ensuing debt would burden Americans far into the future.

No wonder consumers are scared, financial markets are tumbling, and unemployment continues to rise. Democrats, who control the White House and Congress, would be wise to avoid further economic damage.

Original Source: http://www.realclearmarkets.com/articles/2009/02/first_do_no_harm.html

 

 
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