DisneylandForward for the Entire Economy

 by Ray Keating

The Keating Files – March 26, 2021

 

Whenever a large company pitches government on a proposal that’s supposed to help that firm and the economy in general, this economist’s free-market radar goes up. After all, most of the time, such proposals involve a business looking for taxpayer handouts, but trying to dress up such welfare as being great for everybody, including the taxpayers footing the bill.

That’s why the Walt Disney Company’s new pitch to the City of Anaheim – called DisneylandForward – to expand, well, Disneyland is so refreshing. It also should serve as a template for policymaking related to entrepreneurs, businesses, their employees, and investors, as we all work to climb out of this pandemic mess.

 

Disney is not looking for any kind of government aid, subsidies, or handouts in this proposal. In fact, in its various materials on the undertaking, the company explicitly declared: “To be clear, Disney is not seeking any public funding for DisneylandForward, nor are we seeking additional square footage or hotel rooms beyond what is currently approved and allowed.”

 

This is music to the ears of this economist. Please, tell me more!

 

Instead of seeking handouts, Disney is looking for Anaheim to be more flexible in terms of how it regulates the company. Specifically, Disney is looking for flexibility in terms of zoning regulations so that the company can move ahead and make investments in expansion that will serve new and current customers, boost the region’s economy, and create jobs. Disney is beginning a process of explaining and illustrating to Anaheim that a shift in its zoning from traditional, specific-use approval to zoning that allows for increased flexibility and integration in terms of uses – such as allowing a hotel, restaurants, attractions and entertainment in one area or facility, as opposed to just one of those options – not only makes sense for Disney and its business, but how the House of Mouse ties in with the rest of the regional economy and beyond.

 

Disney pointed out, “While Disney has the development rights and the desire to continue investing in Anaheim, the space to develop integrated offerings is severely limited. Without broadening the uses allowed within each district or demolishing and replacing many beloved theme park attractions, further integrated development and theme park investment are not possible.”

 

I’m always frustrated when government stakes out overtly hostile stances against entrepreneurs, businesses and investors. Such misguided actions spring from failures to grasp how the economy and business work; and how growth, wealth and jobs are created; as well as political philosophies rooted in fantasy, and/or politics built on cynicism and special-interest favors. And then there are businesses that seek government handouts, which only serves to gin up further hostility toward business. So, I wonder if the vast costs of the pandemic might change things, at least somewhat. 

 

Disney put its DisneylandForward effort in the proper context of what we have been suffering through for the past year-plus:

 

“While no one could have predicted just how far-reaching the job loss and economic impacts would be as a result of the COVID-19 pandemic, we know this past year has been incredibly difficult. It has taken a major toll on our cast, The Anaheim Resort, Anaheim residents and families, Orange County, and California. But, with time, we will recover, and we’ll do it together. We believe in the future of this great city, and we are ready to join hands as even stronger partners. With continued investment, we can make an even larger impact on short-term recovery, enhance long-term growth, and help address some of Anaheim’s more difficult problems in the future.”

 

Again, how will we recover and grow? Not via government subsidies. Not by some big governmental undertakings with commensurate tax and regulatory costs. Not thanks to the us-vs.-them mentality that dominates too much of our public discourse and manifests itself in public policies. Instead, it will be accomplished by government thinking clearly and providing flexibility – dare I say: providing relief? – from burdens that make no sense, and only serve to raise the costs of or block productive, private-sector investment. In turn, entrepreneurs and businesses, including Disney, will be better able to make growth-generating investments.

 

Let’s call it the DisneylandForward agenda for Anaheim, for California, for other states and for the nation: No subsidies. Provide flexibility and relief from government regulations and other actions that make no sense. And thereby, free up the private sector to invest, innovate and drive economic, income and job growth.

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  Keating has two new books out. Vatican Shadows: A Pastor Stephen Grant Novel is the 13ththriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com. Past Lives: A Pastor Stephen Grant Short Story is the 14th book in the series. Get the paperback or Kindle edition at Amazon, or signed book at www.raykeatingonline.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. 

 

One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

Catch Up on Some Sound Economics: Pandemic Economy, Short-Selling, Innovation vs. Regulation, Reagan Economy, and Poet John Donne

 by Ray Keating

The Keating Files – February 15, 2021

 

We’re in need of some sound economics, so why not catch up on the latest episodes of the “Free Enterprise in Three Minutes” podcast right now? After all, each one only takes about three minutes!

Free Enterprise in Three Minutes with Ray Keating – Episode #93: John Donne, Adam Smith, Trade, and No Man is an Island – What can English poet and Anglican cleric John Donne teach us about economics? Tune in to find out. Listen at https://www.buzzsprout.com/155969/7825834-episode-93-john-donne-adam-smith-trade-and-no-man-is-an-island

 

Free Enterprise in Three Minutes with Ray Keating – Episode #92: Economic History – The Reagan Economy – With President Reagan’s birthday being Feb 6^th, Ray Keating explains the dramatic and positive improvements experienced in the economy during the Reagan years thanks to a sound economic policy agenda. Listen at https://www.buzzsprout.com/155969/7702660-episode-92-economic-history-the-reagan-economy

 

Free Enterprise in Three Minutes with Ray Keating – Episode #91: Innovation vs. Regulation – Ray Keating explains the difference between innovation and regulation. As amazing as it might seem, there are people, especially politicians, who have a tough time differentiating between the two. Listen at  https://www.buzzsprout.com/155969/7655593-episode-91-innovation-vs-regulation

 

Free Enterprise in Three Minutes with Ray Keating – Episode #90: What’s the Real Deal with Shorting a Stock? – Keating explains what shorting a stock really is about as opposed to what you might otherwise read or hear online or via cable TV. Listen at https://www.buzzsprout.com/155969/7562239-episode-90-what-s-the-real-deal-with-shorting-a-stock

 

Free Enterprise in Three Minutes with Ray Keating – Episode 89: Climbing Out of the Pandemic Economic Hole – Ray Keating considers how deep our pandemic economic hole is, and how long it might take to climb out – also noting that the right policy mix is vital. Listen at 

https://www.buzzsprout.com/155969/7544323-episode-89-climbing-out-of-the-pandemic-economic-hole

 

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Ray Keating is a columnist, novelist, economist, podcaster and entrepreneur.  His new book Vatican Shadows: A Pastor Stephen Grant Novel is the 13th thriller/mystery in the Pastor Stephen Grant series. Get the paperback or Kindle edition at Amazon, or signed books at www.raykeatingonline.com.

 

The views expressed here are his own – after all, no one else should be held responsible for this stuff, right?

 

You also can order his book Behind Enemy Lines: Conservative Communiques from Left-Wing New York  from Amazon or signed books  at RayKeatingOnline.com. His other recent nonfiction book is Free Trade Rocks! 10 Points on International Trade Everyone Should Know. 

 

One of the best ways to enjoy Ray Keating’s Pastor Stephen Grant thrillers and mysteries is to join the Pastor Stephen Grant Fellowship! For the BEST VALUE, consider the Book of the Month Club.  Check it all out at https://www.patreon.com/pastorstephengrantfellowship

 

Also, tune in to Ray Keating’s podcasts – the PRESS CLUB C Podcast  and the Free Enterprise in Three Minutes Podcast  

 

Check out Ray Keating’s Disney news and entertainment site at www.DisneyBizJournal.com.

Free Enterprise in Three Minutes with Ray Keating – Episode #84: What Government Needs to Get Right to Help the Economy

 Ray Keating explains what limited government needs to do so that the economy functions properly.

Free Enterprise in Three Minutes with Ray Keating – Episode #60: 5 Policy Promises Needed for Post-Coronavirus Economy

Ray Keating considers what the economy will need once we have the coronavirus at a manageable stage in terms of economic policymaking.

Tune in here, or click the graphic above.

This Economist’s 4 Top Coronavirus Concerns

by Ray Keating

The Keating Files – March 31, 2020

Coronavirus concerns continue to mount in terms of illnesses, deaths, and the economy. And unfortunately, it promises to get much worse, before it gets better.

As for those who have been touting this as not a big deal – you know, saying it’s not as bad as the flu, and/or asserting that U.S. businesses and the economy will get back to work in a couple of weeks – they’ve proven to be more grossly ill-informed than the rest of us who are trying to navigate these uncharted waters.

Some of the politics have reached new depths of, well, stupidity – and that’s saying something. It’s been sad to see so many people peddling the idea that the warnings about the coronavirus had nothing to do with science and the track record of the virus in other nations, but instead, claimed that it was some kind of political conspiracy. By the way, one almost has to admire the steadfastness among some of them, as they continue to make such bizarre claims even as the cases mount in the United States. (Geez, just how deep does this conspiracy run?)

Looking ahead, here are my 4 top concerns as an economist and a human being:

1) The top concern and priority – and the reason that so much of the economy has been shut down – remains working to limit and stop the spread of the coronavirus, and its impact in terms of those infected, the numbers needing hospitalization, and of course, the tragic deaths. If you’re not operating from that as a first principle, then there’s something wrong with you. Unfortunately, even as the virus continues to spread in the U.S., an assortment of commentators callously emphasize the need for businesses to re-open now and for people to get back to work immediately, with some even questioning why state and local government officials have taken the actions they have. Yes, there are concerns about what the government is doing, but those are legitimate worries over the longer haul – as I will note in a moment – not in terms of the largely necessary steps that have been taken so far in the name of saving lives.

2) As the coronavirus continues to spread across the globe, the broader move into developing countries could turn into something far worse than what’s been seen in assorted developed nations, given how weak – or nearly nonexistent – health care systems and services are in those countries. The work for all of us will not stop when matters are brought down to manageable levels in the U.S.

3) The immediate drop in the U.S. economy promises to be historic. The government’s call to shut down large swathes of economic activity was the right one, and the massive aid bill (CARES Act) that was passed by Congress and signed into law by President Trump was necessary (though certainly not everything in it was needed or even related to what’s going on) to limit some of the short-term pain. But the downturn in the economy that started in March promises to be historic, and likely will last at least into the third quarter of this year – no matter the short-run aid doled out by the government.

4) The same short-run aid provided by government will serve as a longer run negative for the economy. Anytime government drains resources from the private sector (as is the case with this massive federal package), whether via borrowing or taxes, it will serve as an economic negative. So, while the CARES Act will help many in the short run (assuming government executes matters quickly – a big assumption), the same measure promises to restrain on any economic recovery. 

And the economic recovery/expansion that hopefully starts late this year or early next will be further hampered if the current expansion of government controls are not rolled back fully. The surest path to a slow recovery – or even a double-dip recession – would involve politicians feeling empowered to spend, regulate, borrow and tax more, along with the Fed continuing to believe in its nonexistent ability to manage the economy. That’s a recipe for long-run economic decline. Indeed, this very phenomenon coming out of the late-2007-to-mid-2009 recession meant that the subsequent recovery/expansion period turned out to be grossly under-performing in terms of economic growth.

Our focus currently needs to be on saving lives, and when things are under control at home, helping those in other countries. This is what the United States does. That’s all vital from a love-our-fellow-man perspective, as well as, secondarily so, an economic viewpoint. Looking a bit further down the road, our humanitarian and economic concerns further coalesce in that we need government to then step back, and allow the private sector to invest, recover and grow, and trade to flourish – thereby creating businesses and jobs, driving up incomes, and creating the wealth that will allow us to aid others around the world and be better prepared for future crises.

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Ray Keating is a columnist, an economist, a novelist (his latest novels are The Traitor: A Pastor Stephen Grant Novel, which is the 12^thbook in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction), a nonfiction author (among his recent works is Free Trade Rocks! 10 Points on International Trade Everyone Should Know), a podcaster, and an entrepreneur. You can also order his forthcoming book Behind Enemy Lines: Conservative Communiques from Left-Wing New York– signed books or for the Kindle. The views expressed here are his own.

An Uncomfortable Shave from Antitrust Zealots

Republicans and Democrats Want Big Government to Stop “Big Razor,” “Big Cereal,” “Big Pharma,” “Big Tech” – Do You See a Pattern Here?

by Ray Keating

The Keating Files – February 12, 2020

Wow, that was a close shave. But thank goodness that the Federal Trade Commission (FTC) has saved us all from the power and abuse of the razor monopoly. What would we do without government stepping in to stop “Big Razor” in its tracks? We can all rest easier while shaving each morning.

That’s right, the FTC sued to stop Edgewell Personal Care Co., maker of Schick razors, from buying razor rival Harry’s Inc. The deal was announced in May 2019. The FTC got around to opposing it early this month, and subsequently, the proposed purchase was cancelled by Edgewell.

What’s the deal? In general, this is another glaring example of stepped-up antitrust regulation based on bad economics, blind ideology and/or shortsighted politics.

On the shaving issue, the FTC decided to define the relevant market as the “wet shave market,” and asserted that it has been dominated by “two main suppliers.” The FTC’s decision was to simply ignore other kinds of razors that consumers use. Well, that’s convenient if one is looking for an excuse for government antitrust action. 

Daniel Francis is the deputy director of the FTC’s Bureau of Competition. Yes, there’s a governmental entity called the “Bureau of Competition.” Anyway, Mr. Francis said, “Harry’s is a uniquely disruptive competitor in the wet shave market, and it has forced its rivals to offer lower prices, and more options, to consumers across the country. The Harry’s and Flamingo brands represent a significant and growing competitive threat to the two firms that have dominated the wet shaving market for decades. Edgewell’s effort to short-circuit competition by buying up its newer rival promises serious harm to consumers.”

Besides the ridiculously narrow market definition, there are all kinds of absurdities at work here. The most glaring is that these bureaucrats assert that consumers would be harmed. How? Well, that’s not clear. After all, the opportunities in the free market that were open to Harry’s being created in 2013 still exist for other potential competitors. Plus, the FTC bureaucrats fail to recognize efficiencies that might be gained through this kind of merger, thereby creating further savings for consumers. 

No one should be surprised that the government’s Bureau of Competition doesn’t grasp how competition works.

This action by the FTC follows on others that are equally farcical. For example, in December 2019, the FTC announced that it was challenging Post Holdings, Inc.’s proposed acquisition of TreeHouse Foods, Inc.’s “private label ready-to-eat cereal business.” Private label products are made by one company and offered for sale by a different firm under its brand. The FTC argues for government action to stop a merger in a small portion of the breakfast foods market because, as stated by another FTC bureaucrat, it “would likely lead to higher prices and reduced quality of the store-brand cereals that consumers enjoy today.” Such notions again spring from failing to understand how markets work, including the realities of competitive dynamism and efficiency gains.

The Post-Treehouse merger was called off in January due to the FTC’s opposition.

Apparently, FTC bureaucrats are very concerned about morning activities – in terms of both shaving and eating cereal.

And then there’s the recent all-out political attacks against a variety of large tech firms. The FTC is looking for antitrust abuses by Amazon, Apple, Facebook, Alphabet (Google’s parent company), and Microsoft, including issuing an order this week for the companies to fork over information on small tech deals occurring over the past decade. Can you say “fishing expedition”?

The Justice Department, Congress and state attorneys general also are looking into the undertakings of large technology firms. 

The problem with all of this is that it has everything to do with politics and vague laws, and little to do with actual economics. This has been the case since antitrust legislation was passed in the late 19^thand early 20^thcenturies. The Sherman Act (1890), the Clayton Act (1914), and the Federal Trade Commission Act (1914), in effect, granted the federal government the power to break up monopolies, prevent monopolies and cartels, and stop mergers that could substantially reduce competition. And this is all supposedly focused on protecting consumers. 

Unfortunately, these laws are pretty vague, and assume that politicians and their appointees can figure out how industries operate, will develop and change; and what new ideas, products and services entrepreneurs will offer. Those are heady assumptions regarding petty politicians.

In reality, monopolies in private, competitive markets rarely, if ever, occur, and firms that do gain significant market share can only do so by better serving consumers. For good measure, even those businesses earning large market share must be aware of emerging and future competitors. That’s the economic reality of markets. 

Given that antitrust regulation is directed at monopolies it’s critical to actually understand what a monopoly is. Properly understood, a monopoly means that a market is served by only one seller. Also, there must be no close substitutes for the product and high barriers to enter the market. Again, economics tells us that a true monopoly emerging from the competitive market is truly rare. Instead, monopolies occur when government acts to create, grant or protect a monopoly.

And rather than seeing current and future markets with near-perfect clarity, politicians and their appointees often ignore economics, the definition of a monopoly, and assorted market realities. After all, the antitrust legislation passed in the late 1800s and early 1900s emerged from complaints by competitors, not consumers (and that remains the case today), and from anti-big-business ideologies within both the Progressive and populist movements. Interestingly, in 2020, the same coalescence of Progressivism and populism has spurred the current re-energizing of government antitrust regulation.

Progressives via the Democratic Party never gave up on an anti-business agenda, including antitrust activism. Meanwhile, though he veers for and against large businesses on seemingly a day-to-day basis, President Trump’s populism often rails against large businesses when it fits his political agenda, or when he feels slighted. 

Much of the rest of the Republican Party has followed Trump’s lead, including his own Justice Department and FTC. While Republicans generally had been far less enthralled with antitrust regulatory intrusions in the recent past – especially from Ronald Reagan to George W. Bush – that seems to have changed, with assorted GOP voices in Congress joining Trump in attacking large businesses. 

This has been particularly the case with Republicans feeling frustrated by real and perceived anti-Republican biases lurking among various large technology firms. While anger among conservatives (including myself) is justified at assorted actions taken by some tech companies, in particular, Google, against conservative voices, the proper response is to encourage and create alternatives in the marketplace. However, various Republicans prefer tossing aside free market principles, and instead, embracing big government to do their bidding against certain businesses – doing the same thing that they used to criticize the Left for doing. Senator Josh Hawley, a populist Republican from Missouri, leads the way against “Big Tech,” ranting against social media, supporting price controls on prescription drugs, and looking to use big government to fight big business.

Golly, what could go wrong?

What’s most striking about Hawley is how this Republican falls in line with Democrats who fail to grasp the dynamism and staggering benefits of the market. He cannot see beyond a very narrow, biased view of a current moment in time, and apparently lacks the ability to understand that even the biggest of companies remains at the mercy of consumers, and therefore of competitors now and to come. 

To drive home this point about the dynamism of the market, a few years ago, AEI scholar Mark Perry pointed out: “Comparing the Fortune 500 companies in 1955 to the Fortune 500 in 2014, there are only 61 companies that appear in both lists. In other words, only 12.2% of the Fortune 500 companies in 1955 were still on the list 59 years later in 2014, and almost 88% of the companies from 1955 have either gone bankrupt, merged, or still exist but have fallen from the top Fortune 500 companies (ranked by total revenues). Most of the companies on the list in 1955 are unrecognizable, forgotten companies today (e.g. Armstrong Rubber, Cone Mills, Hines Lumber, Pacific Vegetable Oil, and Riegel Textile).” 

Now we have both Democrats and Republicans basically saying, “Oh, don’t bother us with such inconvenient facts about how business and the market actually work.”

Yes, a quick study of economics and history would reveal such realities. But it’s hard for populist politicians, even one often labeled as an “intellectual,” as is the case with Hawley, to get by ideology and plain old politics to clearly view the lessons of economics and history.

For those craving bipartisanship today, well, here it is. Just look to assorted Republicans joining Democrats in an ideologically-driven anti-big-business crusade pushing for more big government antitrust regulation.

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Ray Keating is a columnist, an economist, a novelist (his latest novels are The Traitor: A Pastor Stephen Grant Novel, which is the 12^thbook in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction), a nonfiction author (among his recent works is Free Trade Rocks! 10 Points on International Trade Everyone Should Know), a podcaster, and an entrepreneur. The views expressed here are his own.

Free Enterprise in Three Minutes: The Big 5 Policies for Growth

Episode #6: The Big 5 Policies for Growth - What are the policies that allow economic growth to flourish? Ray Keating highlights the “Big 5” policy or institutional requirements that are essential to allowing economic growth to flourish.

Listen at iTunes at https://itunes.apple.com/us/podcast/free-enterprise-in-three-minutes-podcast-with-ray-keating/id1349576104

Or at Buzzsprout at http://www.buzzsprout.com/155969/666862-episode-6-the-big-5-polices-for-growth

Throwback Thursday: Elections Do Not Repeal Laws of Economics

by Ray Keating

As we watch the carnage of the 2016 presidential election process, it pays to keep in mind that policy matters, and that so-called smart people frequently make bad economic policy decisions. The following column, which originally ran in Long Island Business News in November 2008, debunked the idea served up by many at the time that Barack Obama was just too smart to actually carry through on the policies he supported during the campaign. We, unfortunately, have learned that Obama actually meant what he said, as I argued at the time…

Politics and elections do not repeal the laws of economics.

This fact of life tends to irritate many politicians. On the campaign trail, they pander for votes, and put forth the idea that government can do just about anything. It can tax, regulate, and spend with impunity.

Of course, it’s a complete myth that fundamental economics can be repealed by political rhetoric or legislation. And that is the harsh reality that confronts President-elect Barack Obama and his fellow Democrats who will have larger majorities in both the U.S. House of Representatives and the Senate come January.

During his time in the U.S. Senate and on the presidential campaign trail, Obama had very little use for sound economics. For example, he put forth an agenda featuring higher taxes on successful entrepreneurs and investors, as well as on energy companies. Obama also revealed protectionist leanings on the trade front. And he exhibited few qualms about embracing more government spending or an activist regulatory agenda.

Economics 101 tells us that all of this would mean higher costs for businesses and consumers, and bad news for an already-reeling economy.

But in the days leading up to and following the election, assorted experts and talking heads on television have assured everyone not to worry. After all, as we have been told over and over again, Obama is a smart fellow, and he will surround himself with other smart people.

The point, or hope, seems to be that Obama and his aides are just too intelligent to actually try to put his campaign agenda into law. After all, these smart people are not going to do anything that would jeopardize Obama getting re-elected in four years.

There are two major problems with this line of reasoning.

First, history is rich with so-called smart people who made – to put it less than delicately – dumb decisions. That list includes a variety of U.S. presidents. Let’s recall that Herbert Hoover was very smart. In fact, so were Richard Nixon and Jimmy Carter. Yet, these smarty-pants made some of the worst economic policy decisions in our nation’s history; decisions that rattled the nation and the globe. Hoover and Carter also wanted to be reelected, but were booted out of office by big numbers.

Second, the unsavory implication is that Obama did not really believe all of those things he declared and proposed during the campaign. It was just what had to be said to get the Democratic nomination, and then to win the White House.

I don’t believe that. I take the president-elect at his word. If you look at Obama’s short voting record in the Senate and his campaign proposals, they reveal a consistent liberal philosophy that favors bigger government, more regulation, and higher taxes, along with skepticism of free trade.

In the real political world, smart people make bad decisions all of the time. Political ideology, poll watching and/or simple emotion often overwhelm or blind elected officials to sound economic thinking.

Where then is the hope for the economy? Well, at least on the policy front, there isn’t a heck of a lot. We’re in a bad economy right now, and most of the policy proposals offered by President-elect Obama will, at best, do nothing to help, or at worst, make matters worse.

One hope is that President-elect Obama and his staff will quickly learn through on-the-job training what policies make for sound economics, and which ones do not.

But our best hope comes from the private sector – from the innovative entrepreneurs, the risk-taking investors, the courageous small business owners, and their hard-working employees. These are the people who will have to find ways to survive and thrive in what is likely to be an increasingly hostile policy climate. Through their ingenuity, they must find avenues around governmental obstacles in order to move ahead, in order to grow the economy, in order to create new jobs. Unfortunately, this already difficult task looks like it will only grow harder in the immediate future.

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Mr. Keating is an economist and novelist who writes on a wide range of topics. His Pastor Stephen Grant novels have received considerable acclaim, including The River: A Pastor Stephen Grant Novel being a finalist for KFUO radio’s Book of the Year 2014, and Murderer’s Row: A Pastor Stephen Grant Novel winning for Book of the Year 2015.

The Pastor Stephen Grant Novels are available at Amazon…

Murderer’s Row: A Pastor Stephen Grant Novel

The River: A Pastor Stephen Grant Novel

An Advent for Religious Liberty: A Pastor Stephen Grant Novel

Root of All Evil? A Pastor Stephen Grant Novel

Warrior Monk: A Pastor Stephen Grant Novel

Throwback Thursday: Nailed It on Our Long Economic Mess

by Ray Keating

I was watching CNBC early one morning this week, and a prominent Wall Street analyst was assessing the ills of our economy, declaring that no one saw how bad this was going to be. Really?

Quite frankly, the only way anyone could have misdiagnosed the poor economy of the past eight-plus years was if the actual causes of these troubles were ignored. But many so-called experts have done just that. They’ve ignored that our lengthy economic woes are rooted in public policies that have increased both costs and uncertainties for entrepreneurs, businesses and investors.

I’m no genius (as most of my family and friends will attest), but on this Throwback Thursday consider the following points I made in columns in late 2008 and early 2009, amidst the height and frenzy of the credit and economic meltdown.

Consider a September 26, 2008, Long Island Business News column in which I observed:

But before it gets etched in history that this was a case of government coming to the rescue of a market gone awry, the government’s role in helping to create this mess must be noted. Consider, for example, the following points:

• When the government set up Fannie and Freddie as public-private entities, problems were inevitable. Stockholders would reap rewards, while taxpayer got stuck with the losses. And while politicians could deny responsibility for Fannie and Freddie problems, they also could use the two mortgage giants to push their affordable housing agendas, and as a source of patronage opportunities. Not exactly a situation in which politicians have incentives to keep a close eye on things.

• The Federal Reserve ran a monetary policy that was far too easy. This kept interest rates too low, created a bias in favor of debt and fueled over-leveraging.

• After the Enron mess, new accounting rules imposed, with approval from the Securities and Exchange Commission, mark-to-market asset valuation. In the current housing debacle, financial institutions have been forced to revalue assets, even when the value of those assets may not be currently known, when price declines are temporary for assets that could be held to maturity, and/or when a mortgage, for example, is not in default. The write-downs require larger reserves, and hence financial firms get sucked down.

So, maybe it’s not just about greedy people on Wall Street, as so many politicians keep chattering on about these days. Perhaps it’s also about politicians and their appointees who fail to fully grasp the consequences of their policies.

Unfortunately, word out of the halls of Congress is that more government regulation is on its way. That’s typical. Troubles bubble up in the market, and no matter what the actual causes, politicians decide that something, anything, must be done – whether it makes economic sense or not…

Even if some folks on Wall Street have temporarily given up on sound economics, that doesn’t mean the rest of us have to go along. Jeez, does anyone honestly think more government will fix things?

In a November 8, 2008, column, I offered the following outlook (bold added):

What’s ahead? Well, the current recession only promises to deepen in the current quarter. And given the many problems on the credit, confidence and public policy fronts, it’s unfortunately too easy to envision a longer-than-usual recession followed by a very sluggish recovery.

In fact, the economy is unlikely to get back on a robust growth path until entrepreneurs and investors see clearly that higher taxes, trade protectionism, increased regulation and bigger government in general are off the policy table, replaced by clear commitments to tax and regulatory relief, free trade and restraint in the size and reach of government. When the nation might return to that kind of agenda, however, is anyone’s guess.

And on February 3, 2009, I wrote:

More federal government spending is being offered as the right tonic for the economy. On top of already staggering levels of federal government outlays, the plan is for politicians to throw around another $600-billion-plus to jumpstart the U.S. economy.

The Congressional Budget Office released an analysis of this “American Recovery and Reinvestment Act” on Jan. 26. It turns out that only $92 billion of the spending would occur during the current fiscal year. Another $225 billion would wait for fiscal year 2010, and $159 billion for 2011. So much for the idea that quick government spending on “shovel ready” projects is the path to reviving our economy.

But even if most of this government spending were doled out over the next few months, it would not be a positive for the economy. Instead, it would be a negative in both the short run and over the longer haul.

Shifting resources out of the private sector in order expand the size of government is not the road to economic revitalization. Instead, it is the path to economic stagnation and relative decline.

Nailed it! All of it!

Okay, am I guilty of patting myself on the back? Perhaps. But if you understand free enterprise, markets, and the impact of public policy, this should have been quite obvious. And yes, we continue to pay the price today, and will for the foreseeable future without a dramatic change in policy direction.

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Mr. Keating is an economist and novelist who writes on a wide range of topics. His Pastor Stephen Grant novels have received considerable acclaim, including The River: A Pastor Stephen Grant Novel being a finalist for KFUO radio’s Book of the Year 2014, and Murderer’s Row: A Pastor Stephen Grant Novel nominated for Book of the Year 2015.

The Pastor Stephen Grant Novels are available at Amazon…

Murderer’s Row: A Pastor Stephen Grant Novel

The River: A Pastor Stephen Grant Novel

An Advent for Religious Liberty: A Pastor Stephen Grant Novel

Root of All Evil? A Pastor Stephen Grant Novel

Warrior Monk: A Pastor Stephen Grant Novel