Judgement Call

Gold? Why not bitcoins or conch shells?

A return to a gold standard makes perfect sense if your contempt for government runs so extreme that it trumps any consideration of consequences. As a practical matter, though, the idea of reinstating the gold standard lies somewhere between silly and perverse.

Yet passionate Republican stalwarts – including David A. Stockman, budget director under President Ronald Reagan, former presidential candidate Steve Forbes and former Representative Ron Paul of Texas – call for junking our dollar standard in favor of returning to a gold standard. The Republican Party’s national platform last year called for a commission to study a conversion to gold.

There’s also a new, fun money in town: a virtual currency known as bitcoins. Or consider conch shells: Societies from Africa to the South Pacific used seashells as money until well into the 19th century – though they wouldn’t fit well in modern pants pockets.

The common feature of using gold, bitcoins or seashells as money is that market forces – not government – would determine the amount in circulation. In the modern economy, the supply of money – the number of dollar bills chasing after goods and services – affects inflation and recession. If money pours into an economy, sellers will see higher demand for their goods. Expect them to raise prices and production in varying proportions.

Under our current dollar standard, our central bank, the Federal Reserve, controls how much money sloshes through the economy. Under a gold standard, the central bank loses control.

Few economists preach spending cuts as a cure for high unemployment. Yet that’s exactly what Congress decided when it imposed, starting March 1, across-the-board spending cuts (the “sequester”). Despite Friday’s mildly upbeat jobs numbers, the economy remains limp, with 15 million or so unemployed individuals who want to work. Federal spending cuts won’t make their plight any better.

Congress has known for quite some time that the federal budget will turn sour in 10 to 15 years, with expected outlays far outstripping expected revenue. For complicated, if not odd, reasons, Congress now feels compelled to do what it ordinarily shuns: cut federal programs and raise taxes. That might seem politically brave and responsible. But brushed up against facts, the case for Congress taking swift action wobbles, hitting wrong targets at the wrong time.

Of the many reasons politicians offer for cutting federal spending during economically straitened times, two cry out for attention. First, many liberals and conservatives say, Congress needs to stanch soaring federal spending. Second, conservatives say, federal programs are growing ever more intrusive, ever more threatening to private initiative.

“Now is the time to [reform immigration laws] so we can strengthen our economy.” So said President Barack Obama on Tuesday as he challenged Congress to give 11 million illegal residents of the United States a road map to citizenship.

“When you legalize those who are in the country illegally, it costs taxpayers millions of dollars, costs American workers thousands of jobs.” So said Representative Lamar Smith (R-Texas), senior member of the Judiciary Committee, earlier this week.

These statements contradict one another. One must be wrong.

Actually, both are.

There are powerful reasons to change the nation’s immigration rules, but economic necessity is not one of them. Yes, immigrants make a positive economic impact.  But little of the benefit, according to careful research, spills over to non-immigrant workers. The overall economy barely notices. Besides, there’s no evidence to suggest that illegal immigrants’ effect on the economy differs from that of legal immigrants.