The intent of this economic policy book is to promote the formation of great public policy through a Renaissance in modern economic thought. The work supports the historically successful key elements of free trade, stable currency and private property rights. These philosophies have been espoused by philosophers  such as Plato, Aristotle, Adam Smith, David Ricardo, Ludwig von Mises, Fredrich Hayek and Milton Friedman. Unfortunately, this wisdom has been replaced by econometric modeling and ignorance.

New research in this book on free trade illustrates a  direct relationship between the stock market’s performance and America’s trade policies. The under performance of the US equity markets from 2002 to 2004 was actually due to America’s poor trade policies with its neighbors,  not the dot com bust, as most people have been led to believe.

Many of the nation’s problems are self-imposed by the government doing both  too much and too little at the same time.  The government should provide for common defense, keep the currency stable and promote domestic tranquility.   It should not favor one industry over another. Why subsidize farming while manufacturing fails?  Government cannot pick winners and losers in the economy. It is too far removed from critical  information to make an informed decision.

The first sentence of the United States Constitution begins with, “We the people.” Citizens must become actively involved in the formation of public policy. Jefferson stated, “the greatest threat to democracy is ignorance.”  After reading  the book, visit and educate your Member of Congress: demand reform.

1.  Buy it

2.  Read it

3.  Act on it

A recent program that meets this definition is Cash for Clunkers. After taking a majority stake in two of the three major automobile companies in the United States, the government has now paid individuals to buy cars from these companies.

This program replaced an asset that was owned by the driver (an old car) with a  liability (a new car) that carries with it 60 payments for five years. The net effect is additional taxation in the form of higher annual license fees and automobile insurance.
The intent of the $3 billion program was to help domestic auto manufacturers, but the Ford Focus was the only domestic car ranking in the top ten of all cars purchased under this program.

• Sales of General Motors and Chrysler vehicles continued to decrease.
• Total sales were equivalent to only three weeks worth of annual U.S. cars sold.
• Total fuel savings between the vehicles turned in and those replacing them were roughly 22 seconds of annual U.S. consumption.
• The government either borrowed or artificially created the money to finance this program. This ultimately results in inflation and a weak currency.

Cash for Clunkers ignored the basic function of markets by redirecting consumers’ limited resources away from their most highly valued use. Consumers purchased cars they didn’t need instead of paying down their debt.  Apparently members of Congress ignored the lessons of “everyone should own a home.”

For more on Cash for Clunkers, watch a presentation by the author

In April 2008, the Bush Administration attempted to stimulate the economy with their own $150 billion  plan – a strategy that resulted in no additional jobs created, a higher national debt and a weaker currency.

The Obama Administration’s  $787 billion stimulus package is evidence that the government thinks more is better. Educate your Members of Congress and Senators that repeating the same behavior will not result in a different outcome.