Advertisements
Advertisements

Ignore the shutdown

Market Monetarists have a tendency not to get all worked up about fiscal issues. I guess the same goes for the discussion about a possible US government shutdown.

But what is history telling us? Well, it would not be the first time we would have a US government shutdown. Last time it happened was in 1995.

I stole this from Wikipedia:

The United States federal government shutdown of 1995 and 1996 was the result of conflicts between Democratic President Bill Clinton and the Republican Congress over funding for Medicare, education, the environment, and public health in the 1996 federal budget.

The government shut down after Clinton vetoed the spending bill the Republican Party-controlled Congress sent him. The federal government of the United States put non-essential government workers on furlough and suspended non-essential services from November 14 through November 19, 1995 and from December 16, 1995 to January 6, 1996, for a total of 28 days. The major players were President Clinton and Speaker of the U.S. House of Representatives Newt Gingrich.

…A 2010 Congressional Research Service report summarized other details of the 1995-1996 government shutdowns, indicating the shutdown impacted all sectors of the economy. Health and welfare services for military veterans were curtailed; the Centers for Disease Control and Prevention stopped disease surveillance; new clinical research patients were not accepted at the National Institutes of Health; and toxic waste clean-up work at 609 sites was halted. Other impacts included: the closure of 368 National Park sites resulted in the loss of some seven million visitors; 200,000 applications for passports and 20,000 to 30,000 applications for visas by foreigners went unprocessed each day; U.S. tourism and airline industries incurred millions of dollars in losses; more than 20% of federal contracts, representing $3.7 billion in spending, were affected adversely.

It sounds pretty horrible doesn’t it? But now look at how the US stock market performed ahead of, during and after the 1995 government shutdown.

govt shutdown

Are you scared? I am not. If the stock market is up it is normally a pretty good indication that no permanent damage has been done to the economy.

PS If you do not get why I am not scared about this you should take a look at what I said about the “fiscal cliff” a year ago – See for example here. It is all about a rule based monetary policy and the Sumner Critique.

Advertisements

Cato Institute says Denmark is more economically free than the US

The Cato Institute and Fraser Institute have published their annual report on Economic Freedom of the World. As always it is interesting stuff. One can of course always debate the methods used to rank different countries in Economic Freedom ranking, but I nonetheless think it gives a pretty fair description of the overall tendencies.

One thing I always like to look at is the relative ranking of the Nordic countries versus the US. Interestingly enough all of the Nordic countries tend to rank as very economically free in both the Cato/Fraser rankings and in the similar ranking from the Heritage Foundation. This is despite the fact that the Nordic countries have very large public sectors and a high level of taxation. However, that is generally more than “compensated” by low levels product and labour market regulation and very open economies with free movement of capital and goods.

This is the 2013-ranking for the US and the Nordic countries:

(7) Finland

(14) Denmark

(17) United States

(29) Sweden

(31) Norway

(41) Iceland

So there you go – both Denmark and Finland are more economically free than the US at least according to Cato/Fraser.

I sure that a lot of Danish libertarians and conservatives would object to Denmark high ranking and they would undoubtedly stress that it is impossible to argue Denmark is more “economically free” than the US due to the fact that the Danish public sector is among the largest public sectors in the world and level of taxation is very high in Denmark. However, looking in all other areas Denmark is indeed a very free economy.

I am looking forward to comments from both Danes and Americans. Is Fraser and Cato right?

%d bloggers like this: