Carolina Journal Radio No. 763: Year-end special revisits intriguing 2017 topics

From charity to Currituck from the largest city to the smallest and from the statehouse into the schoolhouse Carolina Journal radio your weekly news magazine discussing North Carolina's most public policy events and issues welcome to this year and the addition of Carolina Journal radio why Muskoka I during the next hour, Donna Martinez and I will look back at some of our most interesting topics of 2017 so people worry about American trade deficits. During a visit to Raleigh this year. Economist Donald Boudreaux explained why those worries are unfounded. At least one professor at the UNC school of government believes North Carolina should completely rewrite its criminal code to learn why. Thanks to a popular Broadway play. We know more about Alexander Hamilton than many other American founders but I do professor tells us that many people get Hamilton's politics wrong and will hear an expert economist concerns about a study that suggests the North Carolina economy gets better when people get sick. Those topics are just ahead. First, Donna Martinez joins us with the Carolina Journal headline when CEOs choose to publicly engage in political debates can their shareholders take them to court that CEOs action hurt the value of the stock that is a key question addressed in a Wall Street Journal piece co-authored by the John Locke foundation's senior vice president John Pritchett, John joins us now to talk about this interesting subject, back to the show, first of all congratulations you co-authored this with Ed Terry Aachen who is a Duke University economics professor on quite an honor to be published in the Wall Street Journal.

First of all check off my bucket will be 30 years. Nice to see her own name there to why the world did you decide to start writing about this issue of politics and shareholder value.

Well I like to look at the liberty and freedom and free markets and the lens of my experience like anyone else on my experience been in business and I'm also investor and also shareholder value is an important part of business and the same time also very interested in horticulture warfare that's going on, and so Ed and I have been talking about the subject. In our view, it can do some of the other things that we've talked about and written about. Like for example how the left is trying to use porch as a weapon and sort of a CEOs social activism is along the same lines, so it just so happens that we been working on a story for little while and then last week we had all the resignations from the White House counsel manufacturing. Was it you know what, that's a pretty good time for us to tighten up the story and then submitted to the Journal and they in your PC, make an interesting point about one of the CEOs in particular who resigned from that business Council those councils. By the way present trumpets is shut down. But this CEO had an opportunity to be face-to-face with the president of the United States and one would think that that would be something valuable for that organization.

Even if that CEO disagreed completely with the president either what he said or didn't say about Charlottesville or any other policy, think CL would want to keep that seat yet so that that's particularly agitating for me.

If you think about the Godfather some personal business when you're the CEO of a publicly traded company and and to be clear and make the distinction difference between a CEO of a private company and the CEO of a publicly traded company.

There is a fiduciary responsibility. There something called shareholder primacy where your your your job as CEO in your pay well for it is, is to take care long-term shareholder value is to increase market share is to create profits. That is your job and by the way, that's a really good job. An important job because we think about it. That's how the market works and so you know that should be enough.

Sort of.

Right. Your your you have the opportunity to create opportunity for employment jobs and wealth creation and then people can decide what they want to do with that wealth creation when all of a sudden becomes a personal issue and you see people resign from. In this case you time to Ken Fraser at Merck who is the head of one of the largest companies in the farming industry. He is sitting amongst the leaders of the government to regulate an industry and industry.

By the way, which is been my view, overly regulated and is in need of some sort of serious regular reform which could be helpful to the business which can be helpful to the. The economy should be helpful to all of us and to resign from that opportunity to be setting the agenda to be with policymakers and with the door close. Having these sorts of conversations that we all know, many times how you are able to get your ideas across to those who regulate industry seems to me if you had a personal problem with that either one. Put on your big boy pants and get over that issue because you doing something greater than representing yourself, you're representing your company and therefore shareholders and to make it personal. Perhaps it's a personal conviction and the CEO. In this case may be, can Fraser felt so it was so important for him that he could not be in these meetings.

Then my suggestion would be okay.

Have your CFO go have your CO logo have a General Counsel go you want the company Pfizer in the middle of this regulatory debate heat. He took the company out of my view that such an overreaction to this media hysteria and and so again back to the Godfather right it's business is not personal. What is a shareholder to do if they take a look at their investment and say hey, wait a second. This activist, CEO made this public decision, and it appears that the stock price is falling because of that you have recourse so that Terry Aachen and I looked at this issue and we said what is history say about recourse for shareholders and there is a lot of legal history. One of the landmark cases we reference in the article 1919 case, which was Dodge the Fort Henry Ford had created a very valuable company was generating lots of money and decided at a certain point that rather than dividends to shareholders he was going to give money away for good causes. As you might imagine some the shareholders had a different idea about that admirable and I believe is my billionaire shareholders. They were saying basically let us decide if we want to give away the money shareholders right that should be your personal decision in the courts upheld now. What a lot of legal scholars will say in their correct is that there is a business judgment rule. There is latitude and even in that case there was latitude given to the chief executive about the rationale of making decisions, but that is not to say is without limits, you still have this primacy of shareholder you still have this process you go through you get information you deliberate is this in the best long interest long-term interest of company in the shareholders and that's where we suggest when shareholders board will hold CEOs accountable for the sort of CEO social activism, then there is the ability to go to court and it's not as difficult as one might think to keep your small shareholder lots of people say well all these companies have institutional shareholders and those are big companies but there made up of small retirees, teachers, and other folks who have pension and retirement programs where they may own several shares of the stock and therefore they have standing to sue and in our view, when we can't get an answer to the something through the governance of corporate governance and have to turn to the courts. Some of those people you mentioned may not even realize all the different stocks that they own through mutual funds and things like that just average folks who are investing a little bit in the market for retirement and this could be happening and they would know in our final minutes with you Janet like to talk to you briefly about the situation with target, which you reference in the Wall Street Journal piece we know in North Carolina we went through the situation with House Bill two target CEO strongly opposed. House Bill two, which is since been repealed, but he came out with the what he termed a an inclusive bathroom policy. Tell us what happened after that. Yes, so the interview again.

This is a social activism piece that from a shareholder standpoint you get upset about because you realize that you talk about Brian Cornell when he made the decision to issue this program really always he didn't consider. This is the business rationale process were talking I didn't really consider the implications of customers.

For example, and made the decision because he felt for whatever reason, this was something he was interested in my view, is to be better off doing that was own personal money if that's what his interests and not necessarily target because as you know a lot of the customers of target decided to boycott and as result we saw $20 billion drop in market John Pritchett who is a senior vice president at with the John Locke foundation. He cowrote this with Terry Aachen who is at Duke University.

You can read this piece@johnlocke.org and also of course at the Wall Street Journal's website I saw is much more Carolina general radio to come just a moment government plays a key role in your life affecting your paycheck the way you educate your kids the way you do business. How can you tell if government is doing a good job making the right choices. Spending tax dollars wisely. Carolina journal.com tackles those questions every day. The John Locke foundation publishes Carolina journal in print each month and on the web each day@carolinajournal.com you'll find exclusive investigative reports on topics. No one else is covering what else a rundown of the best new stories, editorials and opinion columns in North Carolina. John Hood's daily Journal news stories and important public events@carolinajournal.tv and the voices of the newsmakers themselves. Carolina journal radio in print on the air and on the web.

You can find the information you need@carolinajournal.com look back Carolina journal radio. I mixed co-guy United States has a trade deficit is that bad doesn't matter much at all, which warning us to help answer that question is one of the most astute observers of the public policy arena and economics issues. Prof. Donald Boudreaux of George Mason University. Thanks for joining us back so we do have this trade deficit.

A lot of people safe.

This is terrible. We need to do something about it. Do we need to do anything about the trade that we've had a trade deficit for straight down going on almost 4 years. If you look at most of US history going back to 1607, when the English subtle Jamestown. The vast majority of those uses and trade deficits trade up just a fancy name for foreigners investing a lot in your country. That's a bad that's good because more capital comes into America that creates jobs that expands businesses that create products that raises wages that increases the capital value of people's homes and assets.

You can tell us you can tell a story in which trade deficits are a symptom of something bad but it's kind of a strained story, but in the case of United States we want to trade deficit because compared to other countries we remain an attractive investment destination property rights is still reasonably secure the still rule of law is still largely have a market oriented economy a lot of dynamism to Lord a large market. All of those factors attract capital here. People want to invest the money here. So when they sell us things conform to sell us things rather than cash out all of their dollars immediately buying American exports.

Some of those dollars and they invest them in United States. The dollars come back to the US to just come back differently than they would come back if they were all for exports. And that's the difference in how they come back at least to this artifact accounting artifact called the trade deficit but it sounds bad and and Ms. outside talk talk about this issue now for 20 years pretty solidly and I followed very closely. I Garrett is not an over.

This is not a exaggeration I would say that 90% of the news reporters. The editorial writers of news media.

Even some of the better business journals with the Wall Street Journal. 90% don't know what the trade deficit is registered trade deficit deficit sounds bad. Therefore, the trade deficit must be bad for equated with increasing debt. Sounds like the government budget deficit is enough is not the same thing at all. So because it has been sounding name and people keep repeating over and over again that it spells are doing more as a symptom of our bed practices that it must be that it's not bad. By and large, I think it's a good healthy sign and also promotes economic health better than in health would be in the absence of the freedoms that is the voice of Donald Boudreaux, Prof. of economics at George Mason University. You mentioned that trade deficit does the term sounds bad deficit but are there other factors also contribute to why so many people think it actually is bad.

Some of the old Park intelligent view of the economy system or its mercantilist concept that dates back to sentries won't be long before the Industrial Revolution.

I like what Adam Smith said about the whole balance of trade doctrine. Trade deficits part of this whole balance of trade issue and I quote Adam Smith quote nothing, however, can be as absurd as this whole doctrine of the balance of trade" is a completely absurd doctrine of its premised on the notion, which is the mercantilist notion that countries like business that is a big businesses and the country succeeds in trade, the more it exports. And the less it imports with the difference being made up by receipt of of of money is out. Smith pointed out people to meet Monica can house themselves money money as a medium of exchange money is valuable only in so far as ordinary men and women can use that money to buy the goods and services that make their lives better off than raise their standards of living and so is not contrary to the mercantilist notion, contrary to the trade deficit. Fear is not a bad thing. When Americans import it's a good thing import to the benefit we get from trading. Unfortunately we have to pay for those imports and exports of the price we pay. This is the complete opposite of the mercantilist myth that sees exports as a benefit while we get the stuff later. Foreigners and imports as a cost we have to pay wind and in exchange for getting all his consumer electronics and cars and petroleum on clothing how terrible we have minimize that this is the notion that the truck people have and it is completely wrong, but in fairness to the drum people. They are just more open and consistent in their mercantilist more blatant about their embrace of this myth than most of the politicians you. There are exceptions, but you shall be a politician. I'll scratch that politician will find mercantilist not too far beneath the surface not to get overly longish but does some people look at a particular statistical gross domestic product is one of the greatest things that you should be focusing on in terms economy and if you do focus on GDP. One of its components is exports over imports so you would think we need to have more exports and imports. Why is that wrong 12 is wrong for a couple of different reasons and it's it's hard not to get too terribly walk held out. I'll try to do it. I don't know about all succeed good.

The went fashion in its national income form income equals consumption plus investment plus government spending, minus exports minus imports the consumption spending is already the dollars in consumption already counted in C and I to the extent that investors spend is so just to make the accounting work just just honestly, we have to the international Council had to subtract those expenditures that that are made on imports.

If you if we didn't count twice. So if if if I buy what I think giving good example. Now without getting too longish so one level is it's it's just an accounting measure that's necessary to avoid double counting of somewhat different reason. That's complementary to that is when foreigners as I said when we were in trade deficit with that means is foreigners are investing in America and then when foreigners invest in America that increases the size of our capital stock. We have more factories we have improve give more worker R&D over time. That increases the productivity of the economy which raises if it's measured properly GDP.

There lots of problems with using GDP as a measure of economic welfare. Putting those I think it's okay putting those aside.

Over time, the trade deficit should result in higher GDP because it increases the productivity of the economy in general has it been true that when our economy is operating well operating as well is it can were operating operating with trade deficits and even larger trade deficits. As things get better. Absolutely all the trade deficit means is that foreigners are especially eager, especially eager to invest in America something wrong with that.

Just nothing at all but to invest in America.

Foreigners need dollars and they get dollars by selling the stuff so we gain.

We each American voluntarily chooses or not to buy something from a foreigner form voluntarily chooses not how then to spend or to invest those monies. If all all along the way.

Each party gains from these many series of individual bilateral voluntary trades. How can it be that the overall result is negative.

Well, if you have the wrong idea about trade deficits don't blame Donald Boudreaux, Prof. of economics, George Mason University, thanks much for doing what you think you will have more on Carolina journal radio just if you love freedom we got great news to share with you now. You can find the latest news, views, and research from conservative groups all across the state. All in one place North Carolina conservative.com one-stop shopping for North Carolina St. movement had North Carolina conservative.com. You'll find links to John Locke foundation blocks on the days news Carolina journal.com reporting and quick takes Carolina journal radio interviews TV interviews featuring CJ reporters and Locke foundation analyst plus opinion pieces and reports on higher education. All of that from the Pope Center for higher education policy commentary and polling data from the Cintas Institute and news and views from the North Carolina family policy Council.

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Welcome back to Carolina journal radio amateur coca mentioned the name Alexander Hamilton today and you're likely to encounter at least some measure of recognition we see his face on the $10 bill and many people have heard of a Broadway musical devoted to this American founder. What do people know about Hamilton's actual record or his approach to public policy. Our next guest says many people on both the political left and right get Hamilton wrong Richard Salzman is assistant professor of political economy at Duke University. He recently addressed the John Locke foundation's Shaftesbury society on the topic. Hamilton's liberalism facts and myths. Thanks for joining us and it's good to be your thinking to before we get into what Alexander Hamilton really believed Howdy people on both the left and right. Get them wrong on the left which today are called liberal there actually advocates of heavy government. Eventually the economy and they interpret Hamilton as their supporter on the right. If you want to go far to the rights of libertarians who some of them being more anarchist. Also think he's a statist also think that Hamilton's status and then tend to endorse Jeffersonian principles. I use liberal in the classical sense of the Lockean Montesquieu insensitive liberal meaning pro-liberty and classical liberalism. The term itself was required to distinguish modern liberalism and to go back inside one of the liver classical oppose mashing what it comes to saving the government � he wanted a free economy that's Hamilton that's in my scene is bent that is Hamilton through and through.

He is not statist, so he can't be criticized by the rights about your claimed by the left. He occupies his position of being a true classical liberal. He believed in equal rights for all it was against racism and slavery, possibly the most important beyond that the constitutional limitations on government antifederalists were largely Jeffersonian opposed initially opposed the forming of the Constitution. I wanted the 13 states to remain separate and will effectively put you in the USA is a constitutionally easy for customers to limited government as well and then lastly, I also talk about political economy and foreign policy and political economies procapitalist in the following sentence he believes all sectors of the economy are productive just agriculture but also manufacturing and finance and trade, whereas the Jeffersonians literally adopting what was allowed to visit Dr. see from France, believed only agriculture was productively said even that only virtuous weekly application and all the other sectors were in some ways parasitical. So the whole class warfare that we see today between Main Street and Wall Street and no real workers versus these paper shufflers is totally Jeffersonian type distinction unless they know we can talk about it before policy surrealist people's national interest first 2000 think we should make the world safe for democracy because ultimately he doesn't trust democracy doesn't trust unlimited majority rule thinks it can become tyranny as the Jeffersonians are largely for unlimited where speaking with Richard Salzman, assistant professor of political economy at Duke University were talking of course about Alexander Hamilton, who many of you have heard of at least is the subject of a Broadway musical and, perhaps, is that the person who's face is on the $10 bill. There was some discussion about taking Hamilton, plus the tool with Ehrenberg VP killed, as is right, there was some discussion about taking Hamilton space off the $10 he was rescued and I suspect that someone who's talking about him is the consummate classical liberal you're glad he's got stale that I am glad and I wrote at the time that he should remain on the bill, but they wanted a more democratic choice. And so it couldn't have been more curious because here is Hamilton basically said that democracy can be very dangerous. He can actually lead to physical profligacy and bankruptcy of the state severely beat because of unlimited majority desire for spending without taxing the site of built-in bias toward deficit spending is another myth about him is he seen sometimes as well since he wanted to pay the national daddy must've been one of these proto-Keynesians wanted national data or thought government that was somehow stimulative that none of that's true.

So yes, I wanted him to stay on the 10,000 nestling people know more about Hamilton but to get them off the currency to me seemed unjust and proper. Why do people have the wrong idea about Alexander.

I think some of it is Jefferson and the Jeffersonians tend to be more lyrical, poetic and flowery in their writings and speeches.

Hamilton is more lawyerly, more dry, more logical or prolix actually using words and so that's part of it, but I think part of it also is the when people look back to the founders they want to see them as condoning or supporting their current position announcement was like almost like an appeal to authority and since Jefferson, Hamilton disagreed on so much that I'm saying legitimately disagree. There were big differences between their the kind I just mentioned. If you're at all Jeffersonian you think Hamilton is the devil, because Jefferson did and Jeffersonian biographers and scholars think so. We have this kind of judge Everson as Dudley do right now you know Hamilton is snidely whiplash our guns and so some of it is just your caricature in the sense also that if you look back at these debates between Jefferson and Hamilton. Jefferson obviously wrote great things had great ideas. Hamilton sometimes seems to come across as the person who had a better grip on how the world actually works you. Would you agree with you when you say actually work sectors back to my point about realism yes is Hamilton's basic view was let's take humanity as it is good and the bad people have free will to choose to do good or ill. Let's not become idealistic or idyllic about what's possible. Specifically, he said let's not become that way about the populace in general. The check Jefferson. The Jeffersonians generally thought Russo type way that the more you capture what was called the general will or majority opinion. They literally thought that was more accurate they had and so the distrust for elites.

The distrust for expert opinion. We see this even to the distrust of establishment.

These are clearly these are debates we have even today the suspicion is the elites and the establishment have have have only their own self-aggrandizement at heart Jeffersonians think that's always checked by the popular will. Hamilton of the Federalist side of the popular will is easily demagogue easily exploited by those who take people's prejudices in ignorance and so he was much more suspicious of politicians that flight. Jefferson, frankly, who would use flowery language and appeal to the people as a kind of flattering of the people.

So in the remaining time that we have a people want to learn more about Hamilton what he actually stood for why he is an important founder why he should stay on the $10 bill.

What's the best thing for them to do. Also met a couple pieces by me if you just google Salzman defense of Hamilton you'll get one or two pieces specifically on him on the bill couple years ago but I would net. I would name a couple of books one Chernow's biography Roger Hamilton in 2004 is very good and was actually the basis for the musical's of those viewers musical in its origins, it basically comes from Chernow's wonderful bar more philosophically visible by Federici, Michael Federici called the political philosophy about Hamilton. That's a little more scholarly and more in depth test was actual views. That's a very good will Alexander Hamilton more than just the face on the $10 bill and more than just the subject of a musical and a person who says that we should recognize him as the consummate classical liberal is Richard Salzman, assistant professor of political economy at Duke University. Thanks much for joining us a lot more on Carolina journal radio just full color throughout every issue more visual storytelling. We've revamped Carolina journal to make it easier to read a new look and a new feel. But one thing hasn't changed and it never will. That is our commitment to truth and transparency in government, you can still count on Carolina journal for investigations into government spending revelations about boondoggles and vetting of corruption.

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Welcome back to Carolina journal radio I'm Donna Martinez. Flawed economics that is the conclusion of the John Locke foundation Senior economist Dr. Roy Coronado after he analyzed a report that concludes North Carolina's hospitals and healthcare systems boost the states economy Dr. Coronado joins us now to explain why getting sick really isn't that big goose that some people say it is quite welcome back to the program. Good to be back. Donna tell us why you decided to write about this issue. Healthcare economics essentially well when you look at this study I was glancing at it and I realize the what they were telling us beyond initially what they're saying which is well you know hospital spend this money and invest in equipment and and doctors and nurses and so on. Therefore, that money ripples through the economy increases GDP. What is unstated is what initially generates that spending is people getting sick, which I usually don't want the idea.

If you think about this study carefully. They say this, spending on the part hospitals boost the economy. But what boost that spending on the part of the economy. Well, people getting sick and needing medical treatment and the implication of the study is the more people are sick, the more costs that are associated with them hospital costs. In particular, and therefore, the better it is for the economy.

That's that's crazy. And the problem is that they don't they don't consider the fact that people would be spending this money otherwise. If they were getting sick, and the real benefit of this government spending. Sorry of this hospital spending isn't that the hiring more doctors and nurses at the cost of benefit is in mail talk about this at all is okay. Well, God benefits life saved medical conditions avoided, and so on, but they don't even discuss any of those which are the true benefits of that spending would and industry come up with a conclusion like this that you really got to deep into the analysis of how they went about determining what is a cost and what is a benefit yes it's about is very slippery. This study is very slippery because they start out by saying over going to look at all these hospital expenditures on capital equipment on doctors and nurses and so on.

And they never identify the most cost, but the fact is that all these things are are healthcare costs and if you look in the literature. No one views increased healthcare costs is a good thing. They all see it as a burden on economic growth and it's a thing to be minimized and something that we devote a lot of policy.

They both state and federal to try to minimize those costs right but they never call them because, first they call them expenditures and then in the study. They say this is actually a benefits analysis so they suddenly start calling them benefits, avoiding the whole notion that really what they're talking about and it healthcare costs essentially being good for the economy which flies in the face of all economic analysis of of healthcare costs.

Why would someone produce a report like that. Well it's it's special-interest timing. This was put out by the North Carolina Hospital Association. They are trade association that wants everyone to think that that you know what they do is has this great benefit for the economy and's and its study is done by research triangle listed to which is paid for by North Carolina Hospital Association so they basically being paid to give a result of the Hospital Association wants to see and they use and an economic impact model called in plan, which is really designed to show how great an impact a particular industry is having.

There is no such thing within the context that model of of actually any industry having a negative impact. I've written about that elsewhere. Interesting that you point out economics aside, I don't think there's anyone listening to our voices that would disagree that the positive impact of hospitals and doctors and nurses and radiologists in cancer specialists is that they're saving lives there serving saving lives. And then, of course, if there are benefits, but the fact is that everything they identify is the cost of generating that benefit. They are not the benefits really.

These healthcare costs are not getting to GDP their absorbing GDP. They're not getting to the job they are absent actually absorbing part of the labor force to what to do these things if those if the if that part of the GDP was liberated to do other things by either reducing healthcare costs, making them more efficient or or having no you were sick people, we'd all be better off, but any Derek crazy it if you think about the implications this is really crazy you know if smoking causes more cancer. That means more people going hospital hospitals with them or not think we CDP. I mean that's actually the if you think about the absurdity of this study, that's where it takes you now.

I have known you for a number of years and I know that this happens to be what I would call one of your pet peeves is no absolutely epic impact study so this is not the first time that you take a look at a study like this and often Roy I we see this sometimes at the local government level right where you will have a proposal on the table to say a county commissioners group that they want time to use taxpayer money to build hotel and convention center you get the same kind of thing right. They act like there's no cost that the what these things do are examine expenditures and always assuming that if that money didn't go to whatever it is the stadium where the convention center wasn't to go it somewhere else so they don't take into consideration the fact possibility that any of that money or the jobs or whatever would go elsewhere if it wasn't being channeled by the government expenditure into building.

Whatever it is.

The project is Roy Sam is scribing is pretty fundamental economics, basic why then is it that these types of economic impact studies, not just in North Carolina but everywhere they exist everywhere and when you hear a proposal to build something or do something. What is it that deaf folks like you can be doing is it just talking more about this to try to get people to understand what I think we do have to get legislators to understand to look at these things very critically because look up the real reason these think a trade association or something puts a lot of money into these is that they expect to affect legislation one way or another and you right now. For example, there is a certificate in the loss will Hospital Association. That's are very much against those and and they want to look we are doing all these great things you should do anything there hospital lookout. How good this is becoming so we want to do is try to make legislators especially understand that they need to look at these studies with a very very critical. I understand what they are saying or what they are not saying what about for those of us who are taxpayers. If you're living in a city or county and and you hear that there's a proposal to spend more tax dollars on building something. What could just an average taxpayer do what should they know in order to perhaps go to that city Council meeting and start asking questions. Well, absolutely. I think with this you do go to city Council meeting.

Armed with our research dialogue.org.

I was seriously happy.

We done a lot on this site in the last few months I've written some written several papers on this issue and say hey look.

This was done and and here are the problems because look all have the same problems.

No matter what what the source.

What the issue is the models that they use have all the same problems or commercial models are met to generate big numbers and in the key is to make sure that costs as well as benefits are identified. That's right. And costs are almost never identified. In fact what they do is that they may identify cost but then they call them benefits. Coronado has been writing about this and of course you can find his analysis of this particular economic impact study John Locke.org, along with all of his other writing.

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