As unemployment rose to 9 percent on Friday, some scratched their heads and looked to Washington for answers.
However, on Thursday night’s “America’s Nightly Scoreboard” on the Fox Business Network, economist Thomas Sowell, the Rose and Milton Friedman senior fellow on public policy at Stanford University’s Hoover Institution and author of “Economic Facts and Fallacies,” explained why Washington doesn’t have the answer. FBN host David Asman listed symptoms of the sluggish economy, and Sowell explained why government intervention wasn’t the solution in each case.
On how government intervention in housing has messed up the market:
“A couple of ways. One in lots of localities of which northern California is just one, local government intervention has prevented housing from being built. Obviously when you cut back on the supply while the demand is growing, prices go up through the roof. Then the national politicians seen that these little pockets of extremely high prices here and there decide it’s a national problem and therefore they must intervene,” Sowell said.
“Now, the hard data say the very opposite of what the politicians are showing. What the market shows is that where the government has very little intervention, places like Houston and Dallas, the housing prices are a fraction of what they are for exactly the same kind of house in a place like San Francisco where there’s massive government intervention. So, the government is not necessary to bring down the housing costs – government are what drive up the housing costs.”
On taxing the rich to achieve economic prosperity:
“No. They’re rich are really a distraction and a red herring. And looking back at the actual taxes actually paid by people in high income brackets, it makes much less difference to them than it does to the economy because when the tax rates go very high, they simply put their money into the tax-exempt securities while they send the money overseas where it’ll create jobs in other countries. So that’s what hurts the economy. The rich themselves are seldom hurt by that and often when you bring down the tax rate — the start of 1920s, also under Kennedy and Reagan, and then later, George W. Bush — as we bring down the tax rate, they take their money out of the tax shelters, they bring their money home, back home from abroad and you create more jobs. But of course, and it’s not that the liberals don’t understand this, at least some of them, is that they understand that talking about tax cuts for the rich brings in votes for the politicians, even if it doesn’t bring in any revenue for the government,” Sowell said.
On whether or not government could bring down health-care costs:
“Theoretically it could. I’ve never seen a case where it did. What they call bringing down the cost of health care is refusing to pay the price of health care. You know, you can always bring down the cost of anything by not paying it, but of course, there are repercussions for that and you see this in countries where the government has taken over health care, you see deterioration. For example, the waiting time for an operation in most countries that have government-controlled health care can go on for months. You know, I can remember going to doctor here, he says, ‘You needed operation.’ I mean, like a week later I had already had the operation. If I lived in Canada or Britain and some of these other countries were the government controls the health care, I’d just have to suffer for months and maybe I would or would not still be alive when time came for them to do the operation.”
On how a so-called windfalls profits tax on oil companies would raise energy prices:
“This talk about how they’re not going to tax people with incomes under $250,000 is such absolute nonsense. When you put huge taxes on electric utility companies, when you put taxes on everything that people buy, yes, they won’t be pay their higher taxes, they’ll be paying someone else’s higher taxes and the higher prices that they pay for everything from food to electricity to gasoline and so forth.”
And that leads to price controls, which is the gateway to failed centrally planned economies:
“Absolutely. You know, it’s one thing for conservatives to say the things like central planning, things like that don’t work, but when government’s controlled by communist and socialist, changed to a freer market. I mean, do you realize that the last study of free markets found that the number one free market in the world was in Hong Kong, in a communist country? So they’ve learned the lesson the hard way. We’re going back. We’re going to insist on learning the lesson the hard way for ourselves,” Sowell said.