Tag Archives: free markets

New Arizona Governor Echoes Jack Kemp In Inaugural Speech

Can Doug Ducey tout cuts and compassion

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Kemp: Thanks, hope and optimism

By Jack Kemp

December 22, 2003 for Townhall.com

The year 2003 will be remembered as a year of war and conflict, and it will be measured as a turning point in the war on terrorism. The year began with a great debate about whether to go to war in Iraq and culminated with the capture of Saddam Hussein cowering like a rat in the corner of an 8-foot hole in the ground. Between those two bookends much has happened, and as the year comes to a close, we continue to fight remnants of the Baathist regime, the fedayeen and other international jihadists trying to use Iraq and our friendship with Israel as the tinder to ignite a new worldwide conflagration.

Afghanistan continues its struggle to stabilize after U.S. military surgery cut out the Taliban cancer. But it is still too soon to know whether the cancer was fully excised or whether the patient remains in only temporary remission. Meanwhile, we remain in a standoff with Iran and North Korea over development of nuclear programs and proliferation of weapons of mass destruction. And the threat of terrorism continues to percolate with bombings in the Saudi kingdom, in the streets of Turkey and with those Iraqis associated with the coalition. Despite all of the uncertainty and challenging problems, there is still much to be thankful for here at the dawn of the 21st century.

As Americans, during this holy season of Christmas and Hanukkah thanksgiving begins with our young men and women at arms who voluntarily, when called upon by their commander in chief to fight, made the sacrifice, and some the ultimate sacrifice of life itself, to defend the free world against a regime believed to be a threat to world peace. Our thanks continue for those soldiers who remain steadfast in a low-intensity war zone now that major hostilities are over. They persist against enormous odds attempting to help people of another land achieve the kind of freedom that we Americans too often take for granted – our God-given right to life, liberty, property and the pursuit of happiness.

This is also the time of year to remember loved ones lost. In just the last few weeks, America lost two towering figures on the American political stage, and I lost two close personal friends – Robert Bartley and Sen. Bill Roth – both of whom played critical roles in the Reagan Revolution. From the editorial pages of The Wall Street Journal, Bartley led a one-man army with little more than a pen with a singular yet profound mission: “free men, free markets.”

Similarly, Roth, a champion for the taxpayer and a guardian against government waste, fraud and abuse, played a critical role in passing the Roth/Kemp/Reagan tax rate reductions in 1981. Roth also succeeded in enacting his signature legislation, the Roth Individual Retirement Accounts, and guaranteeing an enduring legacy among tax reformers. It is not an exaggeration to say that there would not have been a Reagan Revolution without two field generals named Roth and Bartley.

This year’s end also gives us time for introspection, to put things into perspective and to plan for things to come. Gazing backward, I find great reason for optimism. Looking at the global condition during the last 100, 50 or even 30 years, there is much reason for hope and optimism. In 1900 the average life expectancy was only 30 years; today it’s 67. Global poverty rates have declined more in the last 50 years than in the previous 500 years combined. The global economic pie has expanded from $4.98 trillion in 1950 to more than $33 trillion dollars by 2001. And, according to Freedom House, the number of free countries has doubled from only 43 in 1973 to 89 countries today. Furthermore, the report states, “The evidence of the ebb and flow of democracy during this 30-year period indicates dramatic changes in the global political landscape in the expansion of freedom.” And, according to journalist Gregg Easterbrook, the air, water and landscape is cleaner and greener than ever.

Staring forward into the future, I believe freedom and democracy ultimately will encompass the world, or at least be taking solid root, hopefully by the end of this decade. That is not to suggest that there will not be troubles along the way. Our future is not preordained, which is why men and women of good will must act on their beliefs and why we must remain ever vigilant in the pursuit of our ideals of liberal democracy uber alles. And it is also why we must be willing to live and trade freely with all the risks and dangers that entails.

The most urgent issues currently facing the global community are international terrorism, which destroys the spirit; protectionism, which stunts trade and destroys opportunity; and unnecessary, man-made abject poverty, which persists in far too many nations. As Secretary of State Colin Powell, for whose rapid recovery from surgery we all are praying, stated many times, “Lifting humanity out of poverty is one of the greatest moral challenges of the 21st century.” By continuing to champion global democracy, peace and prosperity, we can further freedom for all and bring hope to those who presently have none.

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Kemp: Governments create calamity, markets get the blame

By Jack Kemp

December 27, 2001 for Townhall.com

When democratic governments create economic calamity, free markets get the blame. In today’s world that means the International Monetary Fund, with U.S. backing, bails out lenders on the condition that creditor governments agree to poison their citizens with fiscal austerity, causing the people to rebel and turn to socialism. If you want to know where the next riots will break out, follow the IMF “candy man” around the world.

It’s happening in Argentina today. The economy is melting down, there have been deadly riots in the streets, President George W. Bush insists that Argentina stay with the IMF program of fiscal austerity, the government has fallen and Peronist governor Adolfo Rodriguez Saa has been sworn in as president.

Economic collapse in Argentina began with a failure of U.S. monetary policy that created worldwide dollar deflation and led to a global recession. Because Argentina’s peso is linked one-to-one to the dollar through its currency board, the government was forced to sit idly by since 1997 while its currency appreciated 30 percent in tandem with the dollar against gold, other commodities and other currencies around the world.

The result was a dearth of peso liquidity that resulted in falling prices and economic contraction. Today wholesale prices are falling at an annual rate of 7 percent, and consumer prices are declining at a 1.5 percent annual rate. The money supply continues to shrink at double-digit rates.

Ironically, the IMF, usually obsessed with the shibboleth of “overvalued” currencies, failed to recognize the effects of dollar deflation and instead mistook effect for cause and blamed Argentina’s economic woes on budget deficits and unmanageable debt. While it is true that the former government of Fernando de la Rua mismanaged the nation’s fiscal affairs and allowed spending to get out of hand, these mistakes were by no means the prime cause of Argentina’s meltdown.

Argentina’s debt has become “unmanageable” because its economy hasn’t grown in three years. De la Rua’s biggest mistake was to succumb to the fatal attraction of bailout loans once the economic slide began and join in dangerous liaison with the IMF to increase taxes, impose salary reductions on public employees and slap on financial controls that threatened to seize up the financial system.

Think of Argentina’s one-to-one exchange rate between the dollar and the peso as an aircraft carrier (the United States) and a motorboat (Argentina) afloat on the high seas. If the motorboat economy floats freely, an economic squall can swamp and sink it, but if it tethers itself to the aircraft carrier, the resulting stability allows it to weather most storms.

A currency anchor, however, won’t prevent the political crew of the motorboat economy from making policy mistakes like raising tax rates and increasing regulations, which can create an economic crisis. When that happens, the IMF typically comes around with cash in hand insisting on more tax hikes to reduce deficits and demanding that the small economic craft cut itself loose from its currency anchor in the hope that a free-floating currency has a better chance of righting itself.

Bad advice. Small currencies invariably sink in high economic seas as speculators make runs on the currency, capital flees the country and wealth is destroyed.

What happens, though, if the motorboat is shipshape but the aircraft carrier for some reason, say deflationary monetary policy, begins to take on water and ride lower in the sea? An aircraft-carrier economy may not be much affected by the additional monetary ballast of a heavier currency, perhaps experiencing little more than a slight slowdown in speed. But small changes to how high the motorboat’s anchor ship floats can have catastrophic consequences for the smaller vessel. If the anchor ship sinks low enough and the point at which the two vessels are tethered cannot be adjusted higher up on the hull of the anchor ship, it can drag the motorboat under water.

Argentina’s economy will not recover as long as it lies prostrate between the hammer of dollar deflation and the anvil of IMF austerity. With 80 percent of Argentina’s debt in dollars and workers’ and businesses’ income in pesos, allowing the peso to float freely would impoverish the country and increase the debt burden.

A new government cannot be established on the foundation of debt repudiation. The new government’s default on Argentina’s $155 billion debt must be followed up by debt rescheduling and a plan to reliquify the economy, cut tax rates and reduce regulations. One approach would be to allow the central bank to print sufficient pesos to buy up enough debt to reverse the currency’s unwarranted appreciation. Alternatively, the United States could alleviate the deflationary squeeze by having the Fed purchase sufficient new peso bonds to inject adequate dollar liquidity into the economy to relieve the deflation without breaching the currency board.

Time is short. Unless America lends a hand, the socialists and the IMF will only wreak more havoc in Argentina.

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