Cotton is just one of many markets where U.S. and European governments intervene to give domestic producers an unfair advantage. In addition to agricultural subsidies, which amount to more than $12 billion a year in the United States, producers in poor countries face tariffs and quotas that make it difficult, if not impossible, for them to compete.
While a war with Iraq won't much affect overall growth and investment, at least directly, it will breed more uncertainty about the future, which usually drives businesses and consumers to delay some large investments and purchases. This would mean slightly slower growth in the short run that could offset the modest stimulus from the higher military spending. Once we win—and assuming the victory comes fairly easily—a brief surge of investment and purchasing could follow. But much of this effect could be offset, too, by tighter credit conditions from higher budget deficits. Like most wars, this one could also affect exchange rates, and here we're likely to benefit. The United States is the No. 1 safe haven for foreign capital. Trouble anywhere draws funds to our markets, strengthening the dollar and pushing down our interest rates.Of course, ex-Clintonite Shapiro sees the real problem:
Even if the war on Saddam and terrorism costs $300 billion—double the higher estimates—that will still be less than one-fifth of the 10-year cost of the president's tax cut and barely one-third the cost of the president's other defense spending increases.Tax cuts, i.e., allowing people to keep their own money, are "costs"?
But it's starting to look as if the interest rate cuts weren't enough. I don't need to tell you about the stock market. Economic indicators strongly suggest that the economy is either sliding into a double-dip, "W-shaped" recession — bet you thought I was talking about the guy in the White House — or close enough as makes no difference. Bond markets are clearly predicting that the Fed will have to cut interest rates again. What if the Fed, like the Bank of Japan, goes all the way to zero and finds that it still hasn't turned the economy around?I still don't buy the notion that we are at risk for a Japan-style stagnation. Japan's economy is so rigid compared to ours that if you believe the standard neo-Keynesian explanation for business cycles of sticky prices/sitcky wages, you don't need any mysterious economic malady to explain Japan's problems.
1. Is the cost of college really going up?Many more topics than can be easily listed here were discussed as well. All in all, The Superintendent was a very interesting conversation partner.
2. Is the federal interstate highway system more or less socialistic than light rail?
3. Just how smart is Deirdre N. McCloskey?