Category Archives: political economy

The IRS Is Going Broke?

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The IRS is in front of Congress, saying the $60 billion with which Congress plussed up its money pot last year—an addition that was supposed to last for 10 years—already is used up, and Commissioner Danny Werfel is in, pleading for an additional $104 billion. The Wall Street Journal editors are correct to wave a big, red BS flag on that, saying Congress should demand (and conduct, I say) an audit of the IRS and its spending instead.

I agree. But I also say there’s an alternative path to controlling the IRS, and its spendthrift ways, and that alternative would benefit all of us average Americans and our businesses. It’s a proposal I’ve offered before.

Congress should pass, and the President should sign, legislation that would vastly simplify our tax code. The new tax code should have no income tax levied on our businesses—which don’t pay much in the way of income tax, anyway; business customers pay most of it—and the new personal income tax should be a single flat rate on all income, regardless of source, and with no credits, deductions, subsidies, or other frou-frou gerrymanders on income.

A rate in the range of 10% to 15% would raise all the revenues for the Federal government it needs to provide for the only three Constitutionally mandated spending types: providing for our national defense, paying our Federal government debts, and providing for the Article I, Section 8-enumerated items of the general Welfare of the United States.

A vastly reduced IRS, consisting primarily of receiving clerks, would be all that’s necessary to manage the resulting tax code. It’d be hard for such a reduced agency, even a Federal government one, to waste $60 billion.

US EVs and Critical Supply Chain Inputs

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Stephen Wilmot’s lede in his Wall Street Journal piece lays out a major outcome of the tariffs proposed by Progressive-Democratic President Joe Biden on a variety of EV inputs sourced from the People’s Republic of China.

Making cheap electric vehicles in America is getting even tougher.

And

Based on a crude calculation, the tariff increase could theoretically add roughly $1,000 to costs per standard-range Model 3—not unaffordable, but inconvenient when Tesla is desperate to remove costs wherever possible.

There are moves afoot that seek to alter that sourcing.

A response more in the spirit of US government policy would be to bring LFP [Lithium-Iron-Phosphate] battery production onshore.

And

One of the strings attached to the $7,500 tax credit available for EV purchases as part of the Inflation Reduction Act is now that no battery materials can come from a “foreign entity of concern,” a designation that includes China.

The problem with those kinds of moves, though, is that they’re woefully incomplete. The original input to those products is lithium, and the vast majority of that is mined in the PRC, and the vast majority of the lithium that is mined is refined in the PRC—including being shipped from non-PRC mines to the PRC for refining. It’s functionally the same for nickel, another major component of EV batteries (LFP batteries aren’t yet ready for prime time), the only difference is that most of the nickel is mined in PRC-owned mines in Africa.

Leave aside the idea of whether battery cars are anything other than another form of personal transportation, like the various external combustion engine-powered cars we’ve tried out over the years, or the original battery cars of a bit over 100 years ago.

The situation extends far beyond some battery inputs. Leaving ourselves dependent on an enemy nation for any of the Critical Item inputs to our economy is far more than an inconvenience, and far more expensive than just dollars spent on alternative sources. Our national security, our national freedom, depend on eliminating that dependence.

Trading with the Enemy

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A letter writer in The Wall Street Journal‘s Sunday Letters section put it succinctly regarding free global trade:

I support free global trade except with countries that cheat and steal and use slave labor.

He wrote that in the context of his decrial of the People’s Republic of China as attempting to rule all of Asia and the global economy.

The PRC’s goal is broader than that; PRC President Xi Jinping has said in so many words that his goal for the PRC is to supplant the US as the world’s sole superpower, which would give the PRC the political, economic, and military power to control our own national actions.

From that, I would add to the letter-writer’s criteria for free global trade: no trade, free or otherwise (beyond, perhaps, non-critical commodity goods), with enemy nations. That would include Russia, Iran, and northern Korea, as well as the PRC.

An aside (but not too far over): it’s common to decry northern Korea’s use of slave labor, but I submit that that is something of a misnomer. Using slave labor implies that other laborers aren’t slaves, holding their jobs—or not—voluntarily. In northern Korea, though, all of the unfortunates resident there—every single one of them—are slaves of the thugs that rule over that gang territory.

A Legislative Proposal

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Congresswoman and House Energy and Commerce Committee Chairman Cathy McMorris Rodgers (R, WA) and Committee Ranking Member Frank Pallone Jr (D, NJ) described a bill they’re proposing that would purport to reform Internet controls and Big Tech’s control over those controls.

Our measure…would require Big Tech and others to work with Congress over 18 months to evaluate and enact a new legal framework that will allow for free speech and innovation while also encouraging these companies to be good stewards of their platforms. Our bill gives Big Tech a choice: work with Congress to ensure the internet is a safe, healthy place for good, or lose Section 230 protections entirely.

18 months is far too long, with far too much time and opportunity for Big Tech to weasel-word saccharine pseudo-reform.

Better would be to give them 6 months, with a hard deadline written into this legislation: satisfactory reform of 230, or 230 is rescinded. A Critical Item that must be included in this proposed legislation is a concrete, publicly measurable definition of “satisfactory reform.”

Another, Highly Useful Item, that could be beneficially included in the bill’s Purpose paragraph, would be a clear and blunt statement that the bill is intended to supplement parental responsibility for their children’s time and activity on the Internet; it does not replace that responsibility.

Coddling Scofflaws

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Alysia Finley has another of her cogent opinion pieces, this one centered on the failure of Progressives in the several government levels and at our colleges and universities to punish miscreants and how widespread those Leftist protections of misbehaviors are. One set of consequences of the coddling jumped out at me.

If they forget to pay other bills, the government has their backs. The Consumer Financial Protection Bureau has effectively capped all credit-card late fees at $8. The CFPB also plans to cap bank overdraft fees at a nominal amount, meaning spendthrifts needn’t worry about getting penalized for overdrawing their checking accounts. And if they don’t want to pay rent, cities including New York and Los Angeles have imposed regulations that make it prohibitively difficult to evict tenants.

Finley was writing specifically about…misbehaving…students at Columbia, but the failures generalize, as do the consequences of excusing the failures.

“Forgetting” to pay bills will have consequences with the local merchants, including the major chains, all of whose establishments are locally run.

Being “late” paying off credit card debt will lead to difficulty getting a credit card renewed and in getting another credit card: getting access to credit will be harder and more expensive. The availability for scofflaws of cards other than prepaid, and at higher rates, will become emphasized. Credit difficulty goes beyond the card, too; it’ll expand to access to mortgages and access to rent (landlords run their own credit checks), among other credit needs.

Overdrawing checking accounts as a matter of routine will lead to closed checking accounts, difficulty opening any other checking accounts, and more trouble with local merchants who will start refusing to accept checks from folks who routinely bounce them. And this: banks and merchants heretofore would treat a bounced check as a mistake rather than the kiting felony that it is, charge the fee, and everyone moved on. No more. Those who frequently bounce checks will find themselves more likely to be charged with the felony.

Making tenant eviction over nonpayment of rent will make it more difficult for renters to rent in the first place, greatly increase the initial deposits required, and reduce the amount of houses and apartments available to rent at all.

All of that, too, will increase the cost of credit and of housing for the rest of us.