CATO: The Economics of Bad Ideas

This 5-point news brief by the CATO Institute is a must read. Excerpts below to whet your appetite.

1. “We are a sovereign currency, we can print all the money we want to serve the people whom we serve.” By Former House Budget Committee chair John Yarmuth (D‑KY), testifying to Congress on October 19, 2023

CATO: Ignoring the threats posed by our ever-increasing debt will only exacerbate problems for future generations, burdening them with slower economic growth, runaway inflation, and higher interest rates.

Panos: for a decade now, China and Russia are trying to dethrone the US$ as the main world currency, with some limited success. This will be huge help to them. Recall that up to WWII the British sterling was the leading currency.

2. “It is time to scrap the cap, expand benefits, and fully fund Social Security.” By Senator Bernie Sanders (I‑VT)

CATO: Despite the dismal outlook, leaders on both the left and right have failed to offer realistic solutions, while some lawmakers, such as Sen. Bernie Sanders (I‑VT), want to expand benefits by uncapping payroll taxes for high earners.

Panos: There is no end to economic stupidity from Bernie. A cut to SS benefits is all but unavoidable. At the very least, Congress will remove its COLA.

3. “ A wealth tax is popular among voters on both sides for good reason: because they understand the system is rigged to benefit the wealthy and large corporations.” By Senator Elizabeth Warren (D‑MA)

CATO: The idea that taxing the wealthy can single-handedly cover budget deficits and fund ambitious government spending initiatives is a fiscal fairy tale. For one thing, data from the Congressional Budget Office show that the top one-fifth of US households already pay about three-quarters of all federal taxes. There simply isn’t enough untaxed income at the top to foot the bill for our ever-expanding budget deficits.

Panos: Some Democrats will never stop salivating about other people's money. Europe taxes the wealthy much more than the US. Their rich entrepreneurs flee to the US. Compared to the US, the rate of innovation and job creation is abysmal in Europe.

4. “ Trade wars are good, and easy to win.” By Donald Trump in 2018, after announcing his first round of tariffs on Chinese goods

CATO: Bipartisan support for such harmful policies has been motivated by fear over the rise of China, lingering concern from the pandemic era’s supply-chain problems, and the belief that decades of trade liberalization harmed many lower- and middle-income Americans. But recent events and reams of scholarship reveal that these concerns are more about politics, not policy. And the proposed solutions are doing far more harm than good.

Panos: In case you didn't know, China does not pay a dime of Trump's tariffs. You do. For example, a British citizen can buy a Chinese MG car for $25,000. The same exact car in the US costs $50,000. If you bought it, then the US Treasury pocketed it. So you are smart and didn't buy it, and China lost a sale. But today there's a myriad of products that you buy at Walmart, etc., and components used in US manufacturing that are subject to tariffs, and you pay the tariff for all of them.

5. “There’s no way around it: to realize the full benefit of the nation’s goal of 100% clean electricity by 2035, we need to more than double our grid capacity.” By Biden's Secretary of Energy Jennifer Granholm

CATO: According to many environmental activists, the goal of 100% clean electricity by 2035 is one of the easier pieces of the decarbonization puzzle. However, it requires remaking the power grid as we know it, and it is unlikely to happen under current policies (even after accounting for trillions of dollars in federal subsidies).

Panos: In 2023, renewable energy accounted for 21.4% of electricity production in the US, about half of what natural gas turbines generated, for a total of 4.18 trillion kWh. Closing all the traditional power plants and replacing them with wind turbines, solar panels and batteries in ten years is impractical, and unaffordable. Utility scale battery technology is not where it needs to be for affordable mass storage.