Laffer Curve vs. Phillips Curve

There’s one thing about economic guru Larry Kudlow. You could never accuse him of pessimism. And, he points out, there’s every reason not to give in to the MSM drumbeat of bad news. You know the story. There’s

the insurgent-ridden reconstruction effort in Iraq, the looming Iran threat, the failed Dubai ports deal, the twin deficits, the president’s sagging poll numbers, the Jack Abrahamoff scandal, and on and on — there’s one thing they just can’t taint: This U.S. economy remains very healthy.

Now why would that be? To Kudlow, it is a tale of two curves. There’s the Laffer Curve, the notion that the economy does best when marginal tax rates are low and uniform. Then there’s the Phillips Curve, the notion that there is a tradeoff between inflation and unemployment. Senator! A question! Which one is a notion and which one is a practical guide to policymaking?

No contest. We tried an economic policy based on the Phillips Curve back in the 1970s. What was the result? We got both inflation and unemployment. But then Ronald Reagan came to power and applied the Laffer Curve. He lowered marginal tax rates—in the teeth of mocking criticism from liberals—and the result has been twenty years of prosperity.

In the months ahead... President Bush will continue to embrace the pro-growth Laffer curve. And the anti-worker Phillips curve will be pushed into the dustbin of history. In other words, economic growth principles will keep American capitalism on the prosperity path.

You can’t say fairer than that.

Labor Shortage Reported in China

Here is astonishing news from China. In Shenzhen in south China, they have got themselves a labor shortage, according to Jane Macartney of the London Times.

There are only nine workers available for every ten jobs on offer in Guangdong and the situation is getting worse.

And it is not just that workers are scarce. They are also choosy about where they work.

The days of sweatshop labour may be numbered. Workers have mobile phones and word soon goes round of any mistreatment. Mr Chen said: “If you are a profitable company then you must offer good working conditions. The business environment is very different now, and a factory owner can’t expect to earn profits out of the mouths of his workers.”

Cell-phones, eh. Who knew?

The same thing is happening in India. I talked with an Delhi architect in the fall of 2004 and he said that Indian companies are finding that they can’t find enough labor when they open factories near Delhi. So they have to build further out from the big cities.

It seems that in East and South Asia the same cycle that Europe and America experienced is repeating itself, although on a blisteringly fast track. Initially, when industrialization starts, workers are frequently abused and exploited. But after a time, they no longer have to take whatever is on offer, and the exploitation fades away.

How exactly does that work, and how can we adjust institutions to mitigate and minimize the problem? Two hundred and fifty years after the start of the industrial revolution, we still don’t really know.

Do labor unions, wage and hour laws, child labor laws really help? We really don’t know.

What we do know is that after a period of initial exploitation the workers emerge into prosperity.

Dangerous Crime Family Uncovered in Britain

Enough of the frivolity, this is serious. Columnist Simon Heffer has uncovered a vast underground crime network in Britain. It all began innocently enough when an 82 year-old woman walked into a pub wearing a hat. The pub staff naturally enough wanted her to remove the hat, for security reasons, you understand.

[S]he could then be easily identified on security cameras when she started to break bottles and smash the place up - as old ladies like her inevitably tend to do.

The old lady in question, of course, feigned ignorance about her obvious breach of the peace, saying

that she always wears a hat, and that her late mother "wouldn't have set foot outside the house" without wearing one. So what they say about criminal dynasties is clearly true, then.

You can see in this incident the power of the conservative “broken windows” policing policy. It is casual law-breakers who inevitably turn out to have a rap sheet as long as your arm. Thank goodness that this crime family has finally been exposed.

Read the whole thing.

Reproductive Rights for Men

OK girls, what price Roe v. Wade now? A father has just sued to avoid paying child support on the grounds that he never wanted the child and shouldn’t have to pay for that unwanted child.

In other words, he is pro-choice in the sense of NARAL Pro-Choice America and he is demanding his right to choice. Just as a woman can make the choice after conception whether to take her baby to term, so this young plaintiff is demanding his pro-choice rights too. According to CNN:

The gist of the argument: If a pregnant woman can choose among abortion, adoption or raising a child, a man involved in an unintended pregnancy should have the choice of declining the financial responsibilities of fatherhood.

Well, that’s not the point, Jennifer Brown of the pro-abortion Legal Momentum insists, according to CBS 11 in Dallas:

"Roe is based on an extreme intrusion by the government — literally to force a woman to continue a pregnancy she doesn't want," Brown said. "There's nothing equivalent for men. They have the same ability as women to use contraception, to get sterilized."

Well, that’s up to the Supreme Court to decide, according to the concept of the Living Constitution. After all, things have changed since the 1973 Roe decision and the Constitution must change with it.

But conservative Mona Charen isn’t impressed.

The point (and it is not one the feminists will find in their quiver) is that sexuality requires responsibility — and that doesn't just mean using birth control. It means that if you engage in sex you have an automatic obligation to any child that may result. Pro-choice women have been vociferously rejecting this responsibility for decades. It should come as no surprise that men are inclined to do the same.

Now that’s a thought.

The Sensible Man's Global Warming Policy

Now that Kyoto is dead and the president’s “so-called ‘Asia-Pacific partnership on clean development and climate’, a counter-Kyoto grouping of the United States, China, India, Australia, Japan and South Korea,” is starting to look like the coming thing, it’s a good time to take a serious look at global warming. Here is a well-staffed take from Britain’s Lord Lawson, Chancellor of the Exchequer under Margaret Thatcher.

It is well established that since about 1860 there has been a significant warming in global temperature, around 0.6 deg Celsius—which coincided with the start of reliable temperature records.

But the earth has experienced warming before.

It is well established, for example, that a thousand years ago, well before industrialisation, there was what has become known as the mediaeval warm period, when temperatures were probably almost as high as, if not higher than, they are today. Going back even further, during the Roman empire, it was even warmer — so much so that the Romans were able to produce drinkable wine in the north of England. More recently, during the 17th and early 18th centuries, there was what has become known as the little ice age, when the Thames was regularly frozen over in winter, and substantial ice fairs held on the frozen river became a popular attraction.

And, of course, we don’t know why it was warm in Roman times and cold in the Little Ice Age.

So what should we do about global warming, if there is global warming, and if it has harmful consequences.

Far and away the most cost-effective policy for the world to adopt is to identify the most harmful consequences that may flow from global warming and, if they start to occur, to take action to counter them.

In other words, if the ocean really does start threatening low lying areas with inundation, we take action to mitigate the inundation.

That, coincidentally, is what the president’s policy is designed to do.

The Real Issue on Aborted Dubai Deal

The awful spectacle of the Republican Party scuttling to the right of the Democrats on national security over the Dubai ports deal obscures the real issue.

That Democrats are clueless, wrong on national security and wrong on economic policy. Again.

When President Bush infuriated the compassionate classes with his warning to the world that “you are with us or you are against us” he was articulating the overarching strategy of the United States.

That strategy is to invite the world to join us in our commonwealth of trust and good faith. We will trust those who are trustworthy, and we will fight those who are not.

The aborted Dubai port deal symbolizes this policy in spades. Dubai Ports World is, as Robert M. Green reminds us, probably the “global best practice” company in container port operations. They are right in the middle of the huge effort to upgrade the security and the efficiency of global trade.

Carved from the Dubai Ports Authority, the company's reputation for technological implementation dates back to its project to automate many of its processes in the 1990s. At that time, Dubai became one of the first ports in the world to implement so-called e-shipping, digitizing most of its planning, scheduling and operations while "building out" a CRM (customer relations management)/Web portal system that was one of the first of its kind used by a port.



According to American e-commerce experts who followed the UAE technology implementation as it has evolved, it was Dubai's willingness to invest in IT that allowed it to offer container shipping and related services at lowered costs for its customers. Last year, a Homeland Security official called the two-terminal Dubai facility "modern and extremely efficient ports."

This sort of story indicates that DB World is clearly showing, by its actions, that it belongs on the side that is “with us” rather than against us.

But you can see where the Democrats are coming from. If DB World represents global best practice in the ports business it is a threat to their union paymasters moving the cargo and driving the cranes and trying to continue as pencil-and-paper clerks in the face of a massive adoption of e-commerce practices. And it is also a threat to the monopolistic stevedoring companies that have comfortably extracted rent from the cosy port management trade for decades.

For ordinary Americans, DB World could be thought of as the Wal-Mart of the ports business. But for the port unions and companies, DB World is the grim reaper.

Well, after a week or so of political firestorm the Democrats have got their way, for the moment. No Wal-Marts in our ports! And no terrorist foreigners!

But we forget, as we obsess about terrorists and golden temples, that underneath all the froth and the confected rage of the well-educated Islamicist terrorists out for their bit of fun —just as European anarchists had their fun in Europe a century ago — a monster is stirring. That monster is what Marx called the productive forces. In the end, the monster will not be denied.

You can rail if you like at the Wal-Marts and the DB Worlds just as the fashionably radical railed against Standard Oil and U.S. Steel a century ago. But when these companies are bringing down the cost of doing business, you are railing against a force of nature.

One way or another, the world has to adapt to the new facts on the ground. When John D. Rockefeller reduced the price of oil by 90 percent and Andrew Carnegie reduced the price of steel by two thirds, the world changed. When Wal-Mart changes the face of retail with its relentless cost-cutting, and DB World galvanizes the freight forwarding business with its early adoption of web-based information management, then you’d better get with the program.

But for the progressive soul of the Democratic Party, that is inconceivable.

In Britain, Forget About the Social Safety Net

The big idea of the welfare state is its safety net. In the old days, we all know, people lived in fear of sickness, knowing that a single visit to the hospital could wipe them out.

Thank goodness that is over. In compassionate Britain for instance, with “free at the point of service” national health care you can never lose your house from paying your medical bills.

Or can you?

According to James Bartholomew, author of The Welfare State We’re In, you can lose your house and everything.

In Britain, the National Health Service will indeed pay for all your medical costs. But if you end up disabled, or needing long-term care, they will kick you out of hospital, by reclassifying you. They will say that you don’t need “medical” care but “social” care. So there.

And when you are in social care, in a private nursing home, they can come for your house.

Bartholomew tells of horror stories televised on Britain’s Panorama program. Lots of people thought they would get their cradle-to-grave protection from the NHS.

But then they had got severe Alzheimer's Disease or had endured disabling strokes or had been knocked down by a car and become totally paralysed. They were treated, for a while, as patients in NHS beds - for free. But then they were shunted out into private nursing homes and told that they would have to sell their homes and pay for their care.

The TV program showed a clip of

a fresh-faced Tony Blair boldly declaring in 1997 that he did not want a Britain in which old people needing care had to sell their homes. Well, that is precisely what, after nine years of his rule, we have got. It was all blather and lies.

So in reality, Britain is just as mean and Wild West a country as the United States, where you have to spend down your assets before you can have your nursing home care paid by Medicaid.