David R. Henderson  

Debate with Ian Fletcher, Part Deux

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Budget Arithmetic... Invoking Irving Fisher...

I appreciate a number of the comments people made on my previous post on my debate with Ian Fletcher, both the tone and the content. On tone, I want to highlight Tom West, whose tone I always appreciate. On content, I thought Brandon Berg made the most important point and it's where I was planning to go with the next step in the debate.

To recap, I argued that people should be free to make their own decisions even if that means that they consume more and save less than Ian Fletcher would like them to. Ian Fletcher argued that they shouldn't be free to do that. You might think, "Big deal; we knew all along that Fletcher doesn't think people should be free to make their own decisions." I thought I knew it too. But if you read the original article in HuffPo that I was commenting on, he never comes out and says it. Now he has. I asked, "Which choices of people that are causing it [the "wrong," in his mind, ratio of saving to consumption] to happen would you not allow?" He answered, "I propose to manipulate matters at the systemic level through tariffs, not intervene in specific individual choices."

In my opinion, getting him to reveal what he hides in the HuffPo article--that he wants the government to interfere in people's lives at what he calls "a systemic level"--is a victory.

Now to my next two points and, to their credit, commenters made them both. Brandon Berg made this first point; here's how I put it in my article in The Freeman:

But Fletcher doesn't want to take this low rate of saving as given. He wants a higher rate. Fine. There are two ways to accomplish this. The first is to reduce the budget deficits of the U.S. federal, state, and local governments. In 2009 they totaled a whopping $1.272 trillion, which exceeded net private saving (personal and corporate) of $945 billion. The result: a negative saving rate for the economy as a whole. Have the government spend less, and the net saving rate would probably increase. It's still not clear, though, that we would manufacture more.

Fletcher's solution, tariffs, by contrast, would reduce U.S. wealth. So this person who holds himself up as someone who doesn't want economic decline, is actually advocating that, Americans be, on average, poorer than they would otherwise choose to be.

Second, Ian Fletcher seems to think that "systemic" solutions don't imply intervention in specific individual choices. I was going to challenge this but commenter Curtis put it better than I would have. Curtis wrote:

I never understood this sort of logic. Systematic tariffs do intervene in individual choices: Slapping everybody in the face means I get slapped in the face individually.


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CATEGORIES: International Trade



COMMENTS (5 to date)
Shayne Cook writes:

I wonder ... Does Fletcher vociferously endorse the across-the-board corporate tax reductions being discussed as a measure to incentivize more U.S. manufacturing? Or is he only proposing tariffs as a "better, broader" tax, to de-incentivize consumption?

Tahtweasel writes:

I agree with Mr. Fletcher that the US should be saving more - I would argue that elected government officials have incentives to increase short-term consumption at the expense of saving, beyond what their individual constituents would think of as the ideal.

The government has several distortionary policies to discourage saving, including taxes on capital gains and corporate income. The government itself also deficit spends.

Guy in the veal calf office writes:

Tahtweasel is correct, to promote saving you eliminate tax on savings and labor and replace it with a progressive tax on consumption. But that makes savers richer and I suspect Fletcher couldn't abide the inequality between the prudent and thrifty and imprudent and spendy.

Brandon Berg writes:

It's worth noting that Fletcher works for an industry group. Not because this discredits his ideas, necessarily, but because it's yet another illustration of how a free-market agenda doesn't always align with established corporate interests.

Van writes:

Lets see: Medical care - free, Pension - free, Education - free, Home mortgage - free. What have I got to save for?

Want more saving, investment and business? - get the government out of the way.

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