Richard J Grant

Published in The Tennessean , Sunday, August 29, 2010 Stimulus packages failed to ignite the economy by Richard J. Grant Perhaps the worst effect of the recent recession and financial crisis is the political response and the establishment of new precedents for government intervention. Although the crisis was itself a political creation, this is not yet widely understood. And as long as the most important lessons remain unlearned, we are in danger of prolonged stagnation and future repetitions. More optimistically, and perhaps naively, we might believe that the severity of the crisis and the almost unambiguous failure of the Keynesian-style “stimulus” packages would make most people skeptical of the value of government interventions. Clearly, the government’s response has failed to remove the symptoms of recession. The various stimulus tricks did little more than to give the economic equivalent of a sugar buzz. Now, we see signs of the economy slumping again. The Federal Reserve continu...

Published in The Tennessean , Sunday, August 22, 2010 Government thinks we’re helpless, makes us so By Richard J. Grant Are we helpless? Apparently our government officials believe we are. They seem less and less able to imagine that we could ever do anything for ourselves. It becomes a problem when they act on that belief, regularly rushing to our aid even when we don’t need it. There are few things that politicians won’t do to curry our favor and to make them seem indispensible to our lives. After years of repetition and progressive encroachment, it seems normal and to be expected. We increasingly prove them correct. It no longer seems natural to buy a house without a government-sponsored agency to guarantee our mortgage. We now also expect some kind of home-buyer’s credit as an incentive. And if we still can’t make the payments, the government will find a way to help us shift that burden. “Energy efficiency” and “green energy” sources are of such importance that we cannot be expecte...

Published in The Tennessean , Sunday, August 15, 2010 Less government control helps China’s economy by Richard J. Grant “That which gets measured, gets managed,” is a common aphorism taught to managers. It certainly does help in many cases to be able to gauge one’s progress toward a goal and to compare that to what is done. Perceiving a link between one’s actions and the results is a positive guide and motivator. A dark corollary to this aphorism might be stated, “That which gets measured, gets managed even when you don’t want it to be.” This often happens in corporations and administrative bureaucracies but is particularly glaring in the use of macroeconomic data. Data, such as Gross Domestic Product (GDP) and unemployment rates, are arbitrary in their construction and never better than estimates of amorphous concepts. But their real problem arises when they are politicized and married with the dubious theories of wannabe economic planners. When politicians imagine that consumption is...

Published in The Tennessean , Sunday, August 8, 2010 Higher taxes mean less production by Richard J. Grant When we want to discourage an activity, we might do so by raising the cost associated with doing it. Depending on the activity and the circumstances, that cost increase could take the form of a higher price, a tax increase, a fine, or a disparaging public-relations campaign. This is the idea behind “sin taxes,” such as those often placed on tobacco and alcohol. The same deterrent is directed toward activities deemed to produce excessive pollution. Governments use taxes primarily to raise revenue for their operations, not to discourage the activity that is taxed. But the discouragement comes with the imposition. The higher the tax rate, particularly the marginal tax rate, the greater is the disincentive to produce one more dollar of taxable income or profit. Just as taxation reduces the value of undertaking the activities that are taxed, it also reduces the values of assets. An inc...

Published in The Tennessean , Sunday, August 1, 2010 Numbers, facts don’t add up for economic adviser by Richard J. Grant There are many economist jokes out there, most of which end in, “you still wouldn’t reach a conclusion.” These jokes are funny because most laymen don’t know what economics is. Nevertheless, there is room for healthy disagreement within any science. Sometimes we suspect disagreement within the same person. Since becoming the Chair of the Council of Economic Advisers, Christina Romer has been ridiculed for seeming to forget her past as an economist in order to embrace the agenda of the Obama administration. This has come up again recently with the publication in the American Economic Review of an article co-written with her husband, David, who, like her, is a professor at UC Berkeley. The article is an impressive exercise in economic history in which the authors estimate that a “tax increase of one percent of GDP lowers real GDP by almost three percent.” They focused...