William Nordhaus coined the term “Political Business Cycle” a half-century ago. The idea was that government authorities, particularly the central bank, would manipulate the economy to correspond with election cycles, a practice that continues to this day.
People like to believe that national defense is outside of economic analysis, but the reality is that laws of economics are immutable and universal. A case in point is the development of the F-35 Lightning II fighter jet.
Although he has temporarily suspended his threatened tariffs, President Trump‘s demands for “fair trade” make no sense economically speaking. Trump‘s demands of Vietnam alone are beyond head-scratching.
American history classes typically teach that the original transcontinental railroad was a major triumph. What they don‘t say is that it was a product of corporate welfare that created economic problems later on.
President Andrew Johnson, who is best known for being the first president to be impeached, vetoed protectionist legislation that looked to raise tariffs on imported copper. Congress overrode his veto, but his free-trade message is just as relevant today as it was in 1869.
Since the financial crisis, industrial policy has experienced a renaissance in the Western world. Government programs are launched, then large pools of subsidies, targeted R&D funds, and cheap loans are made available for corporations, opening opportunities for cronyism.
President Trump claims that tariffs built American wealth. The truth is that tariffs cannot build wealth at all, only destroy it.
State taxpayer dollars are used to keep several money-losing nuclear plants operating. Each nuclear plant should be viewed as a stranded asset, not needing a state subsidy.
President Trump has announced his intentions for the government to set up a sovereign wealth fund. However popular the idea might be, it runs headlong into the realities of economic calculation and would soon deteriorate another government slush fund.
How can we determine if a private company is a true partner of the state—truly benefiting from state power—or if the private company is really a victim of the state?
