Richard J Grant

Published at Forbes . A shorter version published in The Tennessean , Sunday, January 29, 2012 . One good thing about President Barack Obama's State of the Union address this week was that he refrained from describing China as a currency manipulator. He did note the need to protect intellectual property rights, though the protection of property rights was not at all central to the theme of the president's speech. The president's thinking on trade matters is better represented in his announcement of the “creation of a Trade Enforcement Unit that will be charged with investigating unfair trading practices in countries like China.” One task of this new unit will be to push China to increase the value of its currency. This is not a new task, but it might be helpful that the unit is focused also on the encouragement of greater trade freedom and protection of property rights. Nevertheless, the whole effort is confused by allegations of currency manipulation. As China emerged from...

Published in The Tennessean , Sunday, January 22, 2012 and Forbes by Richard J. Grant Those who argue that construction of the Keystone XL pipeline should be approved by the president because it would support tens of thousands of jobs get the story backwards. The jobs should be created because the product delivered by the pipeline is highly valued by potential customers. There is no problem with demand. No one doubts that American and other customers would willingly pay enough to cover the cost of the project, which would pipe oil south from the Alberta tar sands. Politicization of the “jobs” issue is understandable. With many people currently unemployed or underemployed, there are many potential voters looking for a sign that help is on the way. This creates a market for politicians who are too quick to put the cart before the horse. “Job creation” becomes an end in itself; the purpose of the job is secondary. The goods or services that are produced are relegated to the role of means...

Published in The Tennessean , Sunday, January 15, 2012 by Richard J. Grant We know that federal budget deficits tend to rise during and immediately after recessions. This is not because they should or must according to any moral or inexorable law of nature. It is merely programmed into the current fiscal structure: unemployment rises and incomes fall along with production. This automatically increases government spending and reduces tax revenues. These effects are usually compounded by a predictable political reaction, which most recently included the extension of unemployment benefits, increased government “stimulus” spending, and the reduction of payroll tax rates. The political payoff from these reactions will certainly be greater than the real economic payoff. Extending unemployment benefits sounds compassionate, but it draws resources away from other uses and reduces both the incentive to work at finding a job and the likelihood that such job opportunities will be created. So-call...

Published in The Tennessean , Sunday, January 8, 2012 and at Forbes . by Richard J. Grant When Nobel laureate Paul Krugman began a recent New York Times column by showing concern about “disastrously high unemployment,” we could sympathize with his assertion that too much attention is focused on “the allegedly urgent issue of reducing the budget deficit.” After all, there are many other factors that prevent us from employing our resources in the most productive uses. We are overregulated, overtaxed, overinflated, and the government spends wastefully and too much. If we were to prioritize any of those policies, such as cutting tax rates, then we could justify tolerating high deficits a little longer. The brighter prospects for higher growth and improved resource employment would increase our future debt-service capacity. But this is not what Professor Krugman is talking about. He believes that we need more government spending, not less. Drawing inspiration from John Maynard Keynes, he r...

Published in The Tennessean , Sunday, January 1, 2012 by Richard J. Grant Where there’s a front, there’s a back; and so it is with demand and supply. For over three years, we have been told repeatedly that our sluggish economic recovery is due to an insufficiency of demand. We were urged to get out and spend — to stimulate the economy, we were told. First, the Bush administration sent us all $600 checks; then the Obama administration pushed a $700 billion “stimulus” package. When we got our $600 checks, in a time of recession, many of us thought it prudent to save as much cash as possible. In our eyes it was prudent, but not in the eyes of government planners. They wanted us to spend — spend on anything. If we preferred to save and provide for the future, then the government would do an end run around us. The stimulus package did not give us a choice: the government would spend for us — or despite us. In times of recession or economic uncertainty, it makes sense for individuals to redu...