Tag Archives: economics

The Next Step

Posted on by
Reply

It’s becoming necessary. I wrote yesterday about the need for tariffs on a variety of tech-oriented goods that the People’s Republic of China is heavily subsidizing for production and export.

It’s rapidly becoming necessary—if it hasn’t been for some time already—to take the next step vis-à-vis trade with the PRC.

Trade routes snaking through former Soviet republics Kazakhstan and Kyrgyzstan are among the many paths into Russia for so-called dual-use goods—singled out by the US and its allies because they can be used on the battlefield.
Despite their efforts, Central Asia is a growing pipeline for Russia, made possible by thousands of miles of open borders, opaque trade practices and opportunistic middlemen. The goods often originate in China, where they are manufactured in some cases by major US companies, which say the items are being imported by Russia without their permission.

Such goods include war-relevant items like computer chips, routers, and ball bearings used in tanks. These items are important for, if not critical to, the barbarian’s war machine and his war against Ukraine. A lot of these items are US products produced in the PRC for delivery to Western and other Asian customers. The PRC is redirecting much of that output to its “friend forever,” Russia.

It’s become time to take the next step: bar American companies that produce such dual-capable goods from producing them in the PRC or exporting them from other sources into the PRC market. The transition away to other production sources and supply chain pathways will be expensive, but not nearly so expensive as the barbarian overrunning and enslaving Ukraine, with sights on targets further west, and the PRC’s subsequent invasion of the Republic of China and closing off the East China Sea commerce lanes to Korea, Japan, and the US.

Subscriptions

Posted on by
Reply

A Wall Street Journal Finance writer wrote an article bragging about how all the subscriptions he had that he canceled pays for his lease on a Tesla Model Y. The key takeaway for me was the vast number of subscriptions this Finance writer had accumulated. This screen shot shows the large number of subscriptions that he canceled (or in the case of SiriusXM, the price cut that he negotiated):

And he still has all of these sucking money.

We still have Disney+, Hulu, Max, the language-learning service Duolingo and, of course, Spotify. We get three print newspapers delivered and many more digital news subscriptions.

It’s certainly true that a finance writer could easily need all those news outlet subscriptions, but who has that many extraneous subscriptions? Especially subscriptions to which, as this writer freely admitted in his article, they don’t even listen to or watch for weeks, months, on end.

My wife and I have an online subscription to the WSJ, a two-line subscription to Verizon for our cell phones, and a Spectrum cable subscription that provides us with our TV (no premium cable channels; it’s not quite the most basic bundle, but it’s pretty bare bones), Internet, and landline. There is a double potful of online news outlets to which we can link, for free, through our browser, and there are libraries in the nearby, also. And books. We read those for entertainment, edification, and straight up education. We read them in print version: those libraries, brick-and-mortar bookstores, and online booksellers.

We’ve thought about cutting the landline out of our cable subscription, but it’s proved too useful as a honeytrap for all the spam calls that come rolling in. As it happens, we have an answering machine capability on our landline phone that plays any messages being left as they’re being left. On those rare occasions when we recognize the voice and are interested in talking to the person, we can go ahead and pick up.

Oh, and he had this in his brag about having saved enough to cover the cost of his car:

…the cost [of his Model Y] dropped to $53 for a car we desperately needed.

He might have desperately needed a car, but he only desperately wanted the Tesla.

Tariffs

Posted on by
Reply

When considering the utility of tariffs, it’s useful to keep in mind that foreign trade has very little to do with economics and very much to do with foreign policy. Tariffs, within that framework, can be either good or bad, although as with any tools used in any conflict, they won’t come without cost.

Tariffs imposed solely to protect domestic industry are strictly protectionist, and they result in a less efficient economy with higher costs for domestic consumers. However they might seem justified at their outset—to give a nascent industry (not a nascent company) a chance to get established, for instance—they don’t get canceled once the need for the protection is gone. After that, protectionist tariffs just become a drag on the domestic economy. A canonical example of this is the LBJ-era chicken tax on German light pickup trucks, still in place to the point that we import no German light pickups at all.

On the other hand, tariffs to influence foreign nations to change their ways are matters of foreign policy more than they are of protection, for all that their impact is economic. Such tariffs impose the same domestic costs as protectionist tariffs, but the long-term gain, if they’re done carefully, will outweigh those short-term costs—just as is the case with any set of tools used in other sorts of conflicts.

This is the case, for instance, when a foreign nation government subsidizes its own output to gain an advantage in an otherwise free market international trade environment. It’s especially the case when those subsidies effectively close off that nation’s own domestic market to nations that would otherwise compete in the subsidizing nation’s domestic market with their own exports into it.

This is especially the case when the foreign nation is an enemy nation using its subsidies as its own foreign policy tool to dominate our economy with a view to…influencing…our own international—and domestic—actions.

That brings me to the People’s Republic of China in particular.

[The PRC] is competing with advanced economies in cars, computer chips, and complex machinery—higher-value industries that are viewed as more central to technological leadership.

And

Beijing…plowing money into factories, especially for semiconductors, aerospace, cars, and renewable-energy equipment, and selling the resulting surplus abroad.

That money is cheap, state-directed loans, and from those subsidies, PRC companies are glutting foreign markets.

To be sure, the PRC is rationalizing this—as are many non-PRC economists—as a need to revive its domestic economy, one that, at 5.2% GDP growth year-on-year, is outgrowing our own. It does seem that the PRC economy is slowing, but it’s slowing from a very high growth rate to a high growth rate. The outcome remains one of potential dominance of our economy, especially in national security-critical technologies and energy production. This is coupled with the PRC’s nakedly acquisitive moves in the South China Sea and to a growing extent in the East China Sea, and with its increasingly overt and threatening behavior toward the Republic of China.

That brings me to tariffs as a foreign policy tool.

We should be answering the PRC’s behavior with tariffs of our own, and we should be working to get our friends and allies to apply tariffs, also. To be sure, they will be unlikely to go along with us, but they certainly won’t if we don’t make the effort to persuade.

Such tariffs ordinarily would only be high enough to offset the subsidy advantage the PRC is looking to achieve and return those markets to free competition. However, the PRC’s overall behavior makes these tariffs important foreign policy tools rather than merely protectionist. The tariffs to be imposed should be designed to strongly influence the PRC’s overall international behavior, especially in its current, apparently shrinking, economic position.

The tariffs we impose should begin at least twice the value of the PRC subsidies, and increase—rapidly, don’t give time for the PRC to adjust—from there until the PRC’s international behavior has been suitably altered.

Empty Promises

Posted on by
Reply

The Left and their Progressive-Democratic Party politicians have been promising “good paying” jobs in green energy as they try to push our nation off hydrocarbon-based energy onto their “green” energy sources. Here’s an example, in Moapa, NV, of how well kept those promises are.

A coal power plant that once employed as many as 300 people closed near this small town about an hour outside of Las Vegas in 2017. Nevada’s public utility has since transformed the site into a home for batteries that store energy captured by nearby solar panels. The $257 million project received roughly $100 million in federal tax credits because of President Biden’s Inflation Reduction Act.
… Construction of the site and installation of the batteries required roughly 200 workers over a year. Maintaining and operating the batteries will require about five.

Never fear, tough.

NV Energy [that Nevada public utility] executives said the federal money will enable the utility to make new investments while keeping energy costs low for consumers across the state. “We can pass that benefit directly onto our customers in a time-efficient way,” NV Energy Chief Executive Doug Cannon said.

Right. And I might know of some beachfront property north of Santa Fe that these folks might be interested in.

Not only is Party doing its best to push us onto expensive, unreliable energy sources, it’s also reducing the number of jobs available in our energy production industry, and farther as the ripples from the sort of failure here spreads.

This is why we’ll never have nice things as long as the Progressive-Democratic Party reigns.

Speaker Johnson’s Job

Posted on by
Reply

House Speaker Mike Johnson (R, LA) has a job to do, and The Wall Street Journal tried to characterize it this way:

…Johnson has to decide whether to cut a government funding deal with Democrats that risks costing him his job.

No. The House’s job, and so Speaker Johnson’s job, is to control the Federal government’s spending. That job, that spending control, most assuredly does not include cutting deals with a Progressive-Democratic Party that is bent on profligate spending. That he’s confronted with so many timid Republicans desperate for the comfort of loyal opposition rather than the hard reality of governing only makes his own job harder. That timidity, no more than spendthriftiness, alters his job not a whit.

If the government partially shuts down, that’s on those obstructionist Progressive-Democrats, even as they’re aided and abetted by timid Republicans.