James Pethokoukis

Politics and policy from inside Washington

Popping the China Bubble

Oct 23, 2009 19:27 UTC

Good sense from Michael Auslin in The American:

Just like today with China, pundits, investors, and the media largely proclaimed that the Japanese party would go on forever. Today, the sophisticated management of the Chinese government is offered as proof that China will always experience growth (or if contraction, a soft landing). Back in the 1980s, Japanese companies were assumed to have discovered the secret to hyper-efficient production and thus endless profits, while the country’s bureaucrats were lauded as perfect macro-planners. Inefficiencies, protected industries, poor management, and a sclerotic bureaucracy were all ignored by those who wanted to believe the hype. Yet such weaknesses were exacerbated by a culture of excess that destroyed consumer reality. Once it took root in Japan, expectations changed permanently and traditional restraint was abandoned. The savings rate dropped, and people paid exorbitant amounts for new houses and cars. I remember watching as whole parties in Tokyo restaurants walked away from tables full of food that was ordered and then left to be thrown away. The economics fed and then followed the social disease. Eventually, the asset bubble burst and the whole edifice came crashing down.


Funny how when the Japanese are observed to be wasteful it gets some ink. Here in the states, we’ve been disgracefully wasteful for decades and every system in place encourages it. Never mind those old folk who actually remember the rationing of the 40s and the hunger of the depression. Those are the true conservatives,,not those money mad asses who claim the label these days.

Posted by Not Unemployed anymore | Report as abusive

Is another ‘Perot Moment’ on its way?

Oct 23, 2009 18:57 UTC

I found this to be a very interesting quote from Even Bayh (in the WaPo):

People understand that we’re stealing from future generations …We’re setting the stage for another Perot moment.

Although the common wisdom is that voters don’t care about deficits, I think the word “trillion” changes the political calculus. As do charts like this one (via Megan McArdle):



I certainly hope people have the idea that the deficit is out of control. Most in congress appear totally oblivious to the amount of debt they are racking up. There must be some rules,limits, and definition: on public debt, on current accounts deficits, and of the free market concept. I do intend to vote to try to correct these problems.

Posted by Tom Paquette | Report as abusive

Net neutrality creates systemic risk for US economy

Oct 23, 2009 18:30 UTC

The Federal Communications Commission decision to begin the process of imposing an Internet neutrality rule — network operators such as AT&T would be barred from charging variable prices for different kinds of traffic from content providers such as Google or Amazon — is curious as well as wrongheaded.

The financial crisis that has convulsed the global economy for the past two years should be a potent reminder to communications regulators that the best of government intentions can create horrible, though unintended, consequences. Easy monetary policy by the Federal Reserve, for instance, intended to counter a recession in 2001, helped create a dangerous housing bubble.

Like physicians and Fed governors, the first goal of regulators should be to do no harm. And that is especially true when they are trying to impose a solution in search of a problem. Broadband prices, for one thing, are on the decline. The average cost of consumer broadband has dropped from to less than $20 a month from $50 a month in 2001. And more people have access. As late of 2004, 70 percent of households still used dial-up modems for web access. Today, just 10 percent do with broadband speeds doubling over that period. Tough to find a market failure here.

Of course, the Internet has hardly reached its potential. But future network upgrades by telecom firms to handle high bandwidth applications will be costly. One way to pay for them would be to charge higher rates to Google, Amazon and other corporate users who generate huge volumes of traffic.

Not surprisingly, content providers are in favor of net neutrality and the de facto government-created subsidy it would create at the expense of telecommunications companies. Net neutrality is merely another form of rent-seeking that seeks to manipulate regulators for private gain. The goal: Use the FCC to turn telecoms into highly-regulated utilities that would absorb the cost of future network buildouts — before passing it along to consumers, of course.

The Washington-based Open Internet Coalition, which represents Google, Amazon and eBay, sees things differently, saying the FCC decision advances a regulatory framework that “promotes innovation and consumer choice on the Internet.”

But not only do more and more consumers have access to ever-faster broadband, they have more choices. In addition to the telecoms, America has four nationwide 3G wireless providers and fifth,Clearwire, readying a nationwide launch of a 4G WiMax service.

But the FCC — with the full encouragement of the Obama administration — nonetheless intends to push forward with seeming little concern about the unintended consequences of intervening into a well-functioning sector vital to the American economy. At the very least, the FCC will likely face years of court battles over the rule that could serve to paralyze the sector. Now there’s your systemic risk.


you keep saying we should make the companies bear (not bare) the cost of upgrading, and not the public. How does that not just come right back at the consumers? The ISP’s will of course raise their rates. I’m not sure where I stand on this issue yet, there are compelling arguments on both sides. I am principally against government regulation, but there are areas where it is necessary. This could be one, I don’t like the corporations to hold all the power, so just saying “no regulation is better for the public” is not a convincing argument either. But restraining those corporations who employ millions and advance technology is not a road to go down without a very good map.

Posted by Dave | Report as abusive