David R. Henderson  

Me on New Hampshire TV

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You Will Know the Disgrace... These Sound Interesting...

Last Wednesday, I did a 23:00 minute interview on MCAM TV23 in New Hampshire. I can't tell the ideology of these two interviewers, which I find refreshing because at the same time they do have strong views. We talked about AIG, the "stimulus" package, the U.S. government's abrogation of its trade treaty with Mexico, the problems with central planning, the ex post facto tax on income for employees of AIG, the price of housing, and California's economy being in bad shape

Some highlights:
1:30: Nothing is too big to fail.
3:00: The bailout of AIG is really a bailout of AIG's customers, including Goldman Sachs.
4:15: The AIG bonuses are rounding error on the cost of the AIG bailout.
5:20: The AIG bailout was probably not due to campaign contributions to various politicians, given that Paulsen had a huge role in the decision. Also people misuse language when they say that corporations give money to politicians because at the federal level, that has been illegal since the early 1900s.
8:00: Geithner is a lousy central planner, but everybody is, as Hayek pointed out.
9:20: The AIG bonuses should be paid because it's a matter of contract. The right move was not to bail out AIG.
10:40: Ex post facto taxes on bonuses are a bad idea.
11:30: Part of the AIG bailout is a wealth loss to foreigners. It's not like sending money abroad and getting a car back.
12:30: It's upsetting to see Congress violate a treaty with Mexico and to see Obama not have the courage to do what he can to stop this violation.
16:30: There are tremendous forces in a free economy, or even a somewhat-free economy like ours, getting us out of a bad spot; Obama's "stimulus" package, although it will probably slow the adjustment, will probably not prevent it.
19:00: What's unseen in the housing market, to use Frederic Bastiat's language, is the millions of people on the sidelines who've saved their money and waited until prices fall.
21:30: California's economy sucks. Whereas the U.S. government can raise taxes and not lose a lot of productive people to other countries, that's not true of a state government. My best line: "Nevada's government is saying, 'Give me your rich, your huddled masses yearning to make tax-free income.'"
22:40: The California state government could have been balanced without tax increases if it had reversed the last two years of nominal budget growth.


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CATEGORIES: Fiscal Policy , Regulation



COMMENTS (6 to date)
Ed Hanson writes:

David

I thought it was a good interview with you graciously declining to rant on the the emotional issues, instead directing the questions to economic and legal impact.

My only surprise was your compliments aimed toward Christina Romer and her interview this Sunday morning. Essentially, you said, that although the Obama is "rolling the dice" and you are "very critical of the Obama plan" she was right when she said the economy will begin to grow in the 3rd or 4th quarter. It seems to me you should have said she gets no credit for her prediction, even if true, because it is despite the Obama plan and this time the government did not have the power to make it worse.

David R. Henderson writes:

Thanks, Ed. I thought I did say that. I said that I thought the economy would recover despite the "stimulus" package. I don't know that she gets no credit for her prediction. I don't know what she's basing her prediction on.
Best,
David

Ed Hanson writes:

David

My use of the word compliment was wrong, I should have said polite, and I expect that in these days of anger and rancor, politeness shown by you was a good thing.

Ed

Maniel writes:

David,

I agree with your assessment that our economy will recover in spite of the stimulus package and other government actions because the consumer has begun to adjust. An increase in private savings and a decrease in private debt should underlie a slow, sustainable recovery toward an equity-based economy. Of course, even Secretariat would have had a hard time carrying a one-ton (government) jockey.

Devil's Advocate writes:

David,

I agree that contract law should be honored with regard to the AIG bonuses. I think, however, that although the 90% tax would be ex post facto in theory (and based on a literal translation in latin), the prohibition on ex post facto laws has been limited to criminal laws (sorry I don't recall the case citation).

Unfortunately, other potential avenues of challenge to the tax seem similarly limited. The contracts clause only applies against the states. Bill of attainder claims are practically never upheld, and might only apply to criminal penalties. There is a due process claim due to the retroactivity of the tax, but tax laws are the most likely to be allowed to be applied retroactively.

I would love to see someone bring a unique takings claim, using video clips of all of the blustering by the politicians to show that the purpose of the "tax" was confiscation and not revenue. Maybe the folks at the Institute for Justice will take the case.

Paul eich writes:

David, I was glad to see your prediction of recovery. Thanks for making this available! Paul

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