Economy & Trade

Some surprisingly good economic news recently released suggests that the gloom-and-doom crowd might have to wait a little longer for the economy to go in the tank. Unemployment reached a five year low at 4.4%, and 180,000 jobs were created in March [link] despite widespread concern about the impact that the mortgage market financial woes and housing struggles might inflict. January-February job creation was adjusted upward by 32,000 as well, yielding a solid if not spectacular average of 152,000 new monthly jobs for the first quarter of 2007. Almost ignored by the media, worker’s wages also showed respectable growth to $17.22 averaging 4% over the last twelve months.

For the optimistically inclined, there is also some very encouraging economic news around the planet. Unemployment rates have plagued other major economies for several years, but recent reports [link - subscription required] indicate much improvement in Europe, Japan, China, India, Brazil and others. Some would ask, "Who cares?" Well, simply put, if the adage "a rising tide raises all ships" is true anywhere, it surely applies to the world economy we find ourselves in. More capital, more wages, more disposable income, and more demand will create more opportunity for American workers and companies alike.

That is if something – such as government – doesn't mess it up. Reacting to the recent economic reports, Lawrence Kudlow of Kudlow & Co. called the news "blockbuster," and predicted continued economic expansion assuming "the absence of major policy blunders" like big tax increases, protectionist measures, or over regulation.

Well, look out Mr. Kudlow, major policy blunders are brewing on Capitol Hill.

A Line of Sight opined in March [link] about errant economic policies of Democrats in Washington and our state capitol where tax increases are flying around like pigeons in spring. Unfortunately, these tax increases leave behind a mess like pigeons, too.

In most circles, "If it ain't broke, don't fix it" usually carries the day, and with economy churning along pretty well, you'd think policy makers would stay the course. But in government, "Fix it until it's broken" is too often standard operating procedure.

Democrat Senators Carl Levin from Michigan and Byron Dorgan of North Dakota enter the economic stage to apply their magic. Both Senators are apparently distressed that other nations have lower, and thus more favorable, tax rates than the good old USA. As such, some of these nations have found themselves to be attractive places for investment and economic expansion. Some of us understand that competition in free-market societies tend to work that way, but the Senators see it differently.

Rather than apply a little economics 101, these pillars of public policy have decided not to offer legislation that would improve America's own competitive environment for jobs and business, but to black-list dozens of nations like Hong Kong and Singapore, and impose exorbitant new taxes on any American doing business within their borders. This kind of protectionist thinking is popular among some of the welfare dependant nations of the European Union, but has drawn the wrath of at least 45 representatives of free-market organizations in the U.S.

In a letter [link] to Secretary of the Treasury Henry Paulson, these defenders of the free-market economy argue that by discriminating against American investment and entrepreneurs, the Senators would be creating an advantage for other nations to take our place. The demand is still there, and someone will most certainly fill it. Interestingly, the large majority of the nations targeted by Sens. Levin and Dorgan are still developing and intentionally adopt low-tax policy to encourage economic expansion and lift themselves up. That’s something America has always believed in supporting – but maybe not these two Senators. Further, the letter explains that this proposed action likely violates the most-favored nation obligations of our World Trade Organization membership – something for which we just filed a complaint against China.

If you want to get out of a hole, the first step is to stop digging. Somebody ought to take the shovels away from Senators Levin and Dorgan before they get us stuck in a hole they created.