February 28, 2008 by Tom Armstrong.

This excellent article in the City Journal tells us what some ordinary people think about mortgage bailout plans. Notable:

But Times readers aren’t biting. More than 400 online responses to the article ran 20 to one against any taxpayer rescue, citing principles of fairness and basic economics. Some readers pointed out that able-minded people are responsible for their own financial decisions, or that a bailout would punish people who behaved rationally during the housing boom. “I’ll be darned if my tax dollars have to go save some folks who couldn’t understand what ‘variable rate’ meant, or who bought beyond their means,” wrote one. “I have excellent credit and did not overextend myself. Any one who studies history could see the pattern and should not have gotten caught up with this recent cycle,” wrote another. “The changing housing market meant that I, a lifelong renter, would finally have a chance to purchase a home now that prices are being lowered,” noted a third.

A bailout will also encourage reckless behavior down the road, argued one correspondent: “Any so-called government ‘rescue’ will simply serve to encourage such irresponsible actions sometime again in the future.” And though disguised as compassion, a bailout would benefit a powerful special interest at the expense of the taxpayer: “Why should government reduce exposures these banks have?” another response asked. “They lent these dollars.”

My thoughts: Progressives are always advocating policies to create more affordable housing, but now that we’re getting it, they want less affordable housing. As a home owner, I don’t like having less to borrow against or having to accept less at closing. But it’s not a total loss. I must accept 10% less for my house at closing, but the housing I’m looking at is also down 10%. No loss. In fact, when transactions costs are considered, I may come out ahead, since many of the related fees are based on the home’s cost. I have less to borrow against, but perhaps that will just encourage me to be more disciplined in my saving.

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February 28, 2008 by Tom Armstrong.

From the NY Times. Notable:

Now come Mr. Obama and Mrs. Clinton, campaigning across Ohio with a similar kind of tough talk about foreign trade. Based on what they’re saying, you’d have to conclude that they believe that Nafta and other trade agreements have caused Ohio’s huge economic problems.

“She says speeches don’t put food on the table,” Mr. Obama said in Youngstown. “You know what? Nafta didn’t put food on the table, either.” Later, he went further, claiming that Ohio’s workers have “watched job after job after job disappear because of bad trade deals like Nafta.”

Mrs. Clinton’s advisers, meanwhile, have been putting out the word that she tried to persuade her husband not to support Nafta — which liberalized trade with Mexico and Canada — when he was running for president. (He did support it, aggressively, and signed it into law in 1993.) “I’m not just going to talk about what’s wrong with Nafta,” she said in Youngstown, the day after Mr. Obama had been there. “I’m going to fix it and I have a four-point plan to do exactly that.”

But when you read this plan, or Mr. Obama’s trade agenda, you discover none of it is particularly radical. Neither candidate calls for a repeal of Nafta, or anything close to it. Both instead want to tinker with the bureaucratic innards of the agreement. They want stronger “labor and environmental standards” and better “enforcement mechanisms.”

It’s a bit of an odd situation. They call the country’s trade policy a disaster, and yet their plan to fix it starts with, um, cracking down on Mexican pollution.

The question this raises is what Mr. Obama or Mrs. Clinton would really do about Ohio’s troubles if one of them became president — and whether it would make a difference.

There is no doubt that trade has hurt many people in Ohio. In just the last few months, Alcatel-Lucent has announced plans to close a telecommunications equipment factory in Columbus and move some of the jobs to China, while a steel-door plant near Youngstown shut its doors and shipped some of its equipment to Mexico.

Back in 2000, the typical Ohio family was still making more money than the typical American family, according to Moody’s Economy.com. But over the last eight years, real median income in Ohio has dropped almost 10 percent, to about $47,000, leaving it $2,300 below the national median.

“Trade has winners and losers,” said Alan Blinder, a former vice chairman of the Federal Reserve and a Democrat, “and there have been a lot of losers in Ohio.”

The first problem with what the candidates have been saying is that Ohio’s troubles haven’t really been caused by trade agreements. When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today.

It’s hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed.

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February 28, 2008 by Tom Armstrong.

WSJ Opinion. Notable:

One lesson of the inflationary 1970s: A country that will not accept the possibility of a small recession will end up having a big one when the politicians at last respond to the public’s complaints about inflation. Instead of paying the relatively small cost of a possible recession, the public pays the much larger cost of sustained inflation and a deeper recession. And enduring the deeper recession is the only way to convince the public that the Fed has at last decided to slow inflation….

The Fed’s recent behavior is in sharp contrast to the European Central Bank. The ECB keeps its eye on both objectives, growth and low inflation. It doesn’t shift back and forth from one to the other. The Fed should do the same. In the 1970s, because the Fed shifted from one goal to the other and back again, it achieved neither. Both inflation and unemployment rose on average, then fell together in the 1980s — after the Fed controlled inflation.

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February 28, 2008 by Tom Armstrong.

From today’s WSJ. Notable:

Democrats claim the world hates America because President Bush has behaved like a global bully. But we don’t recall him ever ordering an ally to rewrite an existing agreement on American terms — or else.

Yet that’s exactly what both Hillary Clinton and Barack Obama are now promising to do to our closest neighbors, Mexico and Canada. At their Ohio debate on Tuesday, first Mrs. Clinton, followed ever so quickly by Mr. Obama, pledged to pull America out of the North American Free Trade Agreement if the two countries don’t agree to rewrite it on Yankee terms. How’s that for global “unilateralism”?

Democrats sure have come a long way from the 1990s, when Bill Clinton pushed Nafta through a Democratic Congress. And the truth is that both Mrs. Clinton and Mr. Obama have spoken favorably about Nafta in the past. Yet now they are sounding the loudest protectionist notes by a potential President in decades. More dangerous, neither is telling the truth about the role of trade in the U.S. economy. If either one makes it to the White House, he or she will carry the weight of this campaign protectionism while trying to lead the global economy….

In the first 10 years of the deal, the U.S. economy added 18 million jobs and the jobless rate sank to record lows….

But the Illinois Senator is less than honest about his own Nafta history. In his race for his Senate seat in 2004, he told Illinois farmers that the U.S. benefits from exports under the World Trade Organization and Nafta, and he recommended that the U.S. go after more deals like it. He also discouraged protectionism, warning that “as an exporting state, Illinois would be hurt by a trade war sparked by tariffs. This would be particularly devastating to our agricultural economy.”

But that was when he was trying to appeal to farmers who rely on exports. Now that he’s battling for union endorsements, Mr. Obama says he “would immediately call the president of Mexico, the president of Canada [we presume he meant the prime minister], to try to amend Nafta, because I think that we can get labor agreements in that agreement right now.”

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