Who Won the First Presidential Debate?

 

I want to be as clear as possible that I have not yet endorsed either Hillary Clinton or Donald Trump for President and I am not doing so now. Each of them has strengths and weaknesses which I am still weighing:

  • Mrs. Clinton has extensive experience and a steady temperament but her policy prescriptions are unlikely to lead to the faster economic growth needed to boost prosperity.

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  • Mr. Trump lacks government experience and has a volatile temperament.   However many of his policy proposals make very good sense.

Pre-debate expectations were very low for Mr. Trump, based on his assumed lack of familiarity with many important issues. Nevertheless he showed that he does have a solid understanding of both national and international affairs.  On the three general debate topics:

  • Achieving Prosperity. Mr. Trump was very clear in stating what needs to be done to create more jobs and better paying jobs. He advocates individual tax reform to stimulate more business investment as well as corporate tax reform to encourage multinational companies to bring their foreign earnings back home for reinvestment.
  • America’s Direction. Mr. Trump made several references to our massive national debt of $20 trillion even though he didn’t say what he’ll do about it. He also stated very strongly that he is opposed to the Trans-Pacific Partnership and the North American Free Trade Agreement as well. Let’s hope that Mr. Trump’s bluster is just a ploy to improve his bargaining position with other countries.  Otherwise he could set off a major new recession.
  • Securing America. Mr. Trump is very clear on the need to destroy ISIS and to do so as quickly as possible. He believes that our 27 NATO allies should be contributing more towards our mutual defense. He also supports “stop and frisk” police policy as the best way to cut down on crime and violence in our inner cities.

Conclusion. Mr. Trump’s clearly stated views on these major national issues in last night’s debate were very impressive. By establishing so well his qualifications to be president, he won the debate.

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Rising Prosperity around the World

 

My last post responds to a reader who is pessimistic about the future of our country and in fact of the whole world.  He thinks that the environment is deteriorating, that rapid economic growth is unsustainable and that there is too much income inequality between high and low wage earners.
My response to him is to refer to the recent book, “The Rational Optimist: how prosperity evolves” by Matt Ridley.  Mr. Ridley persuasively argues that not only has the human race made huge strides in recent times but that this progress is intrinsic to evolved human nature and is likely to continue indefinitely:

  • Since 1800 the population of the world has multiplied six times, yet average life expectancy has more than doubled and real income has risen more than nine times.
  • Between 1955 and 2005, the average human on earth earned nearly three times as much money (adjusted for inflation), ate one-third more calories of food, and could expect to live one-third longer, all this while world population doubled.
  • The rich have got richer but the poor have done even better. For example, the Chinese are ten times as rich, one-third as fecund, and 28 years longer-lived than fifty years ago. (Also see the above chart).
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  • The spread of IQ scores has been shrinking steadily – because the low scores have been catching up with the high ones. This is known as the Flynn effect.
  • The four most basic human needs – food, clothing, fuel and shelter – have grown markedly cheaper during the past two centuries.
  • The most notorious robber barons of the late 19th century: Cornelius Vanderbilt, John D. Rockefeller, and Andrew Carnegie, got rich by making things cheaper.
  • Exchange and specialization, not self-sufficiency, is the route to prosperity.

Conclusion. As long as human beings are free to engage in exchange (trade) and specialization (acquisition of skills), prosperity will continue to evolve and human life will become better and better.

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Optimism or Pessimism for the Future: Which Is More Justified?

Comments from a blog reader:

I also am concerned about consumption and waste/pollution – plastic in oceans getting into the food chain, CO2 affecting climate with animals not adapting quickly enough so that we are in the 6th great extinction. Is there a non-debt based economy, or conservation/conserve (vs consumption encouraged) economy that we can transition to?

I am a financial conservative, but have lost faith in the business community and financial sector because of the obscene multiples of pay for upper management vs worker pay. Government is not efficient but there needs to be a counter weight to multinationals and the concentration of wealth. Service and products lose value when they are given to people so a monetary incentive is needed, but the current capitalist model trajectory is not sustainable.

This is why I disagree with your desire to replicate post WWII production increases and growth. The context has changed since we do not have to rebuild from the destruction and disruption of WWII. The continued push for people to consume and take on debt makes one a slave to debt.                                                                                                                             

My response to these thoughtful comments will be divided into two parts. First of all I refer to the book, “The Rational Optimist: how prosperity evolves” by Matt Ridley. Mr. Ridley makes a powerful argument that life all over the world is getting better all the time. The two evolved habits of exchange and specialization, starting thousands of years ago, have created a collective brain that sets human living standards on a rising trend.
Capture31For example, referring to the first paragraph above:

  • Emissions from U.S. air pollutants such as carbon monoxide, nitrogen oxides and sulphur dioxide have been cut in half since 1980.
  • Species extinctions are at most 2.7% per century.
  • Suppose that temperatures rise by the IPCC’s most likely scenario of 3 degrees C by 2100. This means that the sea level will rise by one foot, the Greenland ice cap will melt by 1%, fresh water will increase because of more evaporation, and in a warmer, wetter world habitat lost to cultivation will shrink from 11.6% today to 5% in 2100.
  • A revenue neutral carbon tax is by far the best way to sort out the optimal response to global warming.

Conclusion: The environment is likely to be much improved by 2100. The world will also be much more prosperous in 2100 as I will discuss in my next post.

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Inequality Does Not Reduce Prosperity

 

In the national elections this year four states: Alaska, Arkansas, Nebraska and South Dakota raised their state minimum wage rates above the national rate of $7.25 per hour and, at the same time, elected Republicans to the U.S. Senate, in three cases replacing Democratic incumbents.  Does this represent contradictory behavior by the voters?
CaptureThe American Enterprise Institute’s James Pethokoukis recently reported (see above) that the U.S. has the third highest rate of billionaire entrepreneurs behind only Hong Kong and Israel, as well as by far the most billionaires over all.  These are the high-impact innovators like Bill Gates, Steve Jobs and Mark Zuckerberg and the Google Guys.
These observations are put in context by the Manhattan Institute’s Scott Winship who recently reported that “Inequality Does Not Reduce Prosperity.” Here is a summary of his findings:

  • Across the developed world, countries with more inequality tend to have higher living standards.
  • Larger increases in inequality correspond with sharper rises in living standards for the middle class and poor alike.
  • In developed nations, greater inequality tends to accompany stronger economic growth.
  • American income inequality below the top 1 percent is of the same magnitude as that of our rich-country peers in continental Europe and the Anglosphere.
  • In the English-speaking world, income concentration at the top is higher than in most of continental Europe; in the U.S., income concentration is higher than in the rest of the Anglosphere.
  • With the exception of a few small countries with special situations, America’s middle class enjoys living standards as high as, or higher than, any other nation.
  • America’s poor have higher living standards than their counterparts across much of Europe and the Anglosphere.

Conclusion: Americans are fair-minded and would like to help the working poor do better.   But Americans also appreciate the value of innovation and entrepreneurship.  When there is a tradeoff between increasing prosperity and reducing inequality, greater prosperity comes first.

Freedom and Equality

 

The Wall Street Journal published its first issue on July 8, 1889 and today it is appropriately celebrating its 125th anniversary.  The lead editorial refers to its consistent editorial policy over the years as well as admitting several mistakes along the way. “These columns emphasize liberty, but on occasion those who prize equality can provide a necessary corrective.  The best example is the civil rights movement … Yet those who promote freedom typically do better by equality than the progressives who elevate equality do by freedom.”
CaptureToday’s WSJ Op Ed page is devoted to “Ideas for Renewing American Prosperity” provided by many different luminaries (who were asked to propose one change in American policy, society or culture to revive prosperity and self-confidence), such as:

  • George Shultz, Return to Constitutional Government, meaning that “the president governs through people who are confirmed by the Senate and can be called upon to testify by the House or the Senate at any time. They are accountable people,” as opposed to unaccountable White House aids.
  • Heather MacDonald, Encourage Two-Parent Families. “Children raised by single mothers fail in school and commit crime at much higher rates than children raised by both parents. Single-parent households are far more likely to be poor and dependent on government assistance. But far more consequential is the cultural pathology of regarding fathers as an optional appendage for child rearing.”
  • George Gilder, Listen to Peter Drucker on Regulations. “At least half the bureaus and agencies in government regulate what no longer needs regulation.” We need “a new principle of effective administration under which every act, every agency, and every program of government is conceived as temporary and as expiring automatically after a fixed number of years.”
  • Sheila Bair, Find a Better Way to Tax the Rich. “By eliminating corporate income taxes, we would ease pressure on U.S. wages, bring back jobs and repatriate an estimated $2 trillion in profits stashed elsewhere. … It would be smarter to tax corporate profits once, at the shareholder level, and apply the same, higher rates to capital gains and dividends that apply to us working stiffs.”

These sentiments are really just non-ideological common sense.  They might seem to be overly idealistic but are, nevertheless, quite doable if enough of our national leaders would just make them a priority.  This is why we so badly need independent-minded non-partisans in national office!