Forbes probes China’s currency devaluation

Steve Forbes‘ latest Forbes magazine column focuses on the impact of China’s recent currency policies.

CHINA’S DEVALUATION of the yuan underscores the ongoing, dangerous, growth-retarding mess of U.S. monetary policy and, indeed, the fundamental deficiency of modern economic thinking. This intellectual bankruptcy threatens the ability of economies to grow and will consequently breed more political turmoil here and around the world.

Long term, it means the dollar’s days as king of all currencies will be over unless the next President knows enough to reverse the greenback’s decades-old slide in value.

Some key points:

China’s move isn’t your traditional devaluation. Rather, it’s a response to the dollar’s recent (but temporary) surge in value. Dollar instability wreaks havoc whether it’s strengthening or weakening. A watch that can’t keep accurate time is useless, whether it’s too fast or too slow. On a trade-weighted basis the yuan had surged 22%, since mid-2012, before Beijing took action.

The dollar’s strength will likely continue. Unless the Federal Reserve changes policy on interest rates and bank regulation, bank lending won’t be strong for consumers or small and new businesses. The Fed has effectively frozen bank reserves, which means that the very thing it and every other central bank ostensibly fears–deflation–will continue. The yuan, despite Beijing’s reassurances, will likely experience small, continuing devaluations–the opposite of the crawling revaluation that began in the middle of the last decade. Commodities, such as oil, gold and copper, will experience more downward pressure.

Despite trying to compensate for the strong dollar, China’s move won’t be without consequences. A number of Chinese companies and local governments in recent years have taken on dollar-denominated debt, having forgotten what happened to similar borrowers during Asia’s 1997-98 economic crisis. The current upheaval will spur even more capital outflows from worried, well-to-do Chinese. The uncertainty will hurt domestic investment by internal entrepreneurs and will cause foreign direct investment to slow. Political tensions with the U.S.–already heating up (both Democrats and Republicans are increasingly angry and upset with Beijing’s growing assertiveness in claiming disputed waters and ocean real estate)–will be exacerbated.

None of this bodes well, short term, for a vigorous resumption of growth.

This weekend on Carolina Journal Radio

Democrats have not yet rallied around a single challenger to incumbent Republican Richard Burr in the 2016 U.S. Senate race. Rick Henderson analyzes potential candidates and Burr’s bid for a third Senate term during the next edition of Carolina Journal Radio.

Terry Stoops assesses the work of a review commission studying the impact of Common Core standards in N.C. public schools. Western Carolina University economist Edward Lopez discusses the late economist Milton Friedman’s ongoing legacy, especially the key ideas from his 1962 masterpiece, Capitalism And Freedom.

Plus you’ll hear highlights from a news conference promoting certificate-of-need reform in North Carolina, along with legislative discussion of proposals for state government to sell unused property.

New Carolina Journal Online features

Dan Way reports for Carolina Journal Online on a new Tax Foundation study that highlights recent improvements in North Carolina’s business tax climate.

Sarah Curry’s Daily Journal explains how support for federalism can help preserve freedom.

Sometimes Congress Gets Something Right

In a recent Washington Post article, Cyberlaw expert David Post explains “how two members of Congress helped create a trillion or so dollars of value” by adding “a rather remarkable provision of the U.S. Code.” The members of Congress are Rep. Christopher Cox (R-Calif.) and Rep. (now Sen.) Ron Wyden (D-Ore.), and the provision they added is Section 230 of the Communications Decency Act. Enacted as part of the Telecommunications Reform Act of 1996, Section 230 states:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

In Post’s view:

No other sentence in the U.S. Code … has been responsible for the creation of more value than that one….

It immunizes all online “content intermediaries” from a vast range of legal liability that could have been imposed upon them, under pre-1996 law, for unlawful or tortious content provided by their users — liability for libel, defamation, infliction of emotional distress, commercial disparagement, distribution of sexually explicit material, threats or any other causes of action that impose liability on those who, though not the source themselves of the offending content, act to “publish” or “distribute” it. …

It is impossible to imagine what the Internet ecosystem would look like today without it. Virtually every successful online venture that emerged after 1996 — including all the usual suspects, viz. Google, Facebook, Tumblr, Twitter, Reddit, Craigslist, YouTube, Instagram, eBay, Amazon — relies in large part (or entirely) on content provided by their users, who number in the hundreds of millions, or billions. (Disclosure: Amazon’s chief executive, Jeff Bezos, owns The Post.) I fail to see how any of these companies, or the thousands more like them, would exist without Section 230. The potential liability that would arise from allowing users to freely exchange information with one another, at this scale, would have been astronomical, and it is impossible for me to imagine, say, an investor providing funds for any of these ventures in a world without Section 230. [And it is not a coincidence, in my view, that these companies are all U.S.-based, no 230-like immunity being provided in most other legal systems around the world.]

So here’s to Messrs. Cox and Wyden. Members of Congress get a lot of things wrong — the other 50,000 or so sentences in the 1996 Telecom Act, to take one example close at hand, are a mess — but deserve a shout out or two when they get it right.

NC needs to tell the federal government, “Thanks, but NO THANKS!”

Many of us know that Washington bureaucrats are out of control, but what many of us don’t think about are the impacts this has on states.

For example, lets take a look at North Carolina’s budget.  The total budget is around $50 billion, yet the General Fund is around $21 billion.  The Highway and Highway Trust Funds make up an additional $5 billion, so where does the other money come from?  For the fiscal year ending June 30, 2013, North Carolina spent $20.8 billion in federal grants, which was a 47 percent increase in inflation-adjusted dollars over the precious 10 years.  In addition to a large portion of the state’s overall budget consisting of federal grants, the federal government also ties the state’s purse strings with unfunded mandates across multiple agencies and departments.

Reliance on federal aid can cause lasting problems for state budgets and lawmakers. Federal funding incentives often cause the state to engage in programs or projects it might otherwise choose to avoid. After years of reliance on federal aid, North Carolina lawmakers find that federal edicts drive up the cost of government services. Even contractors who work with state agencies are vulnerable to these onerous federal requirements, which often increase the cost of their work to the state.

There is a way to push back against Washington, and that is through federalism efforts.  Federalism concerns the division of power between states and the federal government. The federal government has outgrown its constitutional authority, and the mandates and regulations that it passes down to states and citizens have shackled our economy and limited North Carolina’s ability to effectively and efficiently serve its citizens.

Every state in the nation relies on the federal government for some portion of its budget, and North Carolina is no exception.  North Carolina has become too dependent on federal aid, which leaves the state vulnerable when Washington cuts federal funding to the state in the future. Whether it’s due to sequester, shutdown, or unsustainable spending, North Carolina needs to reduce its dependence and develop a plan to operate when this funding goes away. The question is not if the federal aid will go away, but when.

North Carolina has set a powerful precedent by not accepting federal funding to expand Medicaid as well as rejecting the federal government’s extension of unemployment benefits.  The state needs to continue down the path of sovereignty and continue to push back against Washington’s power grab.

To read more about this, check out my newsletter from this week here.

Another budget extension….

Guess what?! Another budget extension.  Another extension gives lawmakers until September 18th to complete work on the state’s two-year spending plan.  The Senate had quite a few give their opinion about the dragging budget talks, but the bill to extend funding passed the Senate 37-6.  A short fifteen minutes later, the House passed the legislation with no debate, 108-5.

Here are some quotes from lawmakers about the budget extension:

  • “We understand that a lot of people are frustrated. Believe me, when you’re an Appropriations chair, it gets very frustrating as well.”  – Sen. Harry Brown (R-Jones, Onslow)
  • “We ought to have those who are going to do the negotiating go ahead and get behind closed doors, open doors, wherever they’re going to do it and get this thing done. It’s time to bring an end to this thing.”  – Sen. Dan Blue (D-Wake)
  • “I’m happy to stand here today and tell you that in the last 48 hours, we’ve had more movement than we’ve had in the last six months.” – Sen. Tom Apodaca (R-Henderson)

Sin taxes make up 2.7% of NC’s total tax collections

According to a Governing article,

State sin tax collections exceeded $32 billion in fiscal year 2014, representing roughly 3.8 percent of total tax revenues. While they’re not a major source of revenue in most states, some do rely on them much more than others. Sin taxes account for the largest share of tax revenues in Rhode Island,  Nevada, West Virginia, New Hampshire and Delaware.

Definitions on what constitutes a sin tax vay. Data shown here reflect alcohol, tobacco, casino, racino, video gaming and pari-mutuel revenues that states collected in fiscal year 2014.

Here is how North Carolina adds up when it comes to sin taxes:

Screen Shot 2015-08-27 at 2.26.46 PM

About the murders in Virginia….

Law professor Elizabeth Price Foley nails it on Instapundit:

“We have all encountered angry, entitled individuals like this. They aren’t just toxic to work with; they’re potentially dangerous. We typically give them wide berth, just to avoid the hurling of hurtful “racism!” accusations and potential violence that simmers just below the surface. Individuals like this may get reprimanded or bounced around (for the sanity of coworkers) but they rarely get fired, for fear of lawsuits.  This television station was frankly brave to fire the guy.

On a broader level, Flanagan is a sad but ineluctable product of the progressive left’s incessant race-baiting and claims of minority entitlement. He is, essentially, the love child of Al Sharpton and President Obama (with Elizabeth Warren as the surrogate).”