Tag Archives: markets

Stop Treating These in Isolation

Posted on by
Reply

Richard Rubin thinks he has an approach to Republicans’ desire to cut taxes:

To pass a bill without Democrats, GOP lawmakers seek agreement on the deficit number

That’s the subheadline for his article. He then opens his piece with this:

As Republicans prepare the party-line tax bill at the core of their 2025 agenda, the key to everything is, simply, “The Number.”
The Number is the maximum budget deficit increase that Republicans are willing to tolerate as they extend tax cuts scheduled to expire after 2025 and advance the rest of President-elect Donald Trump’s plans. To unlock the gate to the legislative fast track that lets them sidestep Democratic objections, Republicans must agree, with virtually no defections, on The Number.

But that’s only part of the matter, and as long as Republicans—either party, come to that—insist on treating taxes in isolation, they’ll continue to fail. The plain fact is that Republicans don’t have to agree on any deficit Number; what they need to agree on instead is a Number that represents any value in the interval from zero to budget surplus.

That, of course, also would require them to agree on spending cuts that bring that overall spending down to within the expected (dynamically projected) revenues realized from the tax cuts.

There are two ways those revenues will grow on net from the from this sort of budget move. One is the well-known increase in overall economic activity that results simply from tax rate cuts. These leave more money in the hands of private economy players—individuals, households, and the businesses they own and operate. It’s been repeatedly demonstrated that those players allocate their spending far more efficiently than anything a government can achieve.

The other way revenues increase, though, is less frequently discussed, even as it’s closely related to tax cuts. This is that, with less government spending, there is less competition for the resources—labor, raw materials, finished and semi-finished products—that private enterprises need for their own operation. With that resource competition from Government greatly reduced, the prices for those resources come down, and private businesses can more easily and cheaply acquire what they need. Private enterprise competition then increases and overall economic activity increases, overlaying the increase from simply reducing taxes, and a positive feedback loop develops among increasing production, lowering prices, increasing private demand, increasing employment, and increasing innovation. And net increasing revenues to Government.

Those two outcomes achieve one other item of critical economic, and political, and security importance. It provides an opportunity to commit those budget surpluses to paying down our national debt.

Of course, the Progressive-Democratic Party is going to quibble over any spending cut and tax cut, all the while objecting to either altogether, so to get these done even temporarily, Republicans will have to do them through legislative reconciliation.

That, in turn—both the taxing and the spending reductions—will require the Republicans’ Chaos Caucus to leave off their ego-driven their-way-or-nothing-at-all obstructionism and agree to compromises that move things in their direction, even if not everything all at once.

And get Republicans like Senator James Lankford (R, OK) to shape up or at least stay out of the way. According to him:

We’re not going to have something that’s going to have zero deficit impact. That’s not going to happen[.]

On that score, the Chaos Caucus is right. There need to be spending cuts to achieve outright deficit elimination and actual surplus.

Gaslighting and Misapprehension

Posted on by
Reply

The People’s Republic of China’s solar panel production industry is running into a glut problem that is seriously depressing prices, to the point that in the current shakeout, many of the PRC-domiciled companies may not survive.

One place where panel prices remain elevated is the United States (thank you, Federal regulations and continued dependence on overseas component supplies), and one PRC-domiciled company that’s likely to survive is LONGi Green Energy Technology Co, Ltd, headquartered in Xi’an, the provincial capital of Shaanxi. In an effort to get around US strictures on PRC companies, LONGi has become a 49% owner of the joint venture (with Invenergy, headquartered in Chicago) of Illuminate USA, and the venture has opened a factory in Pataskala, OH.

The good folks of Pataskala are concerned about LONGi’s connections with the Chinese Communist Party, and Congresswoman Carol Miller (R, WV) has proposed more general legislation that would seek to prevent PRC companies from getting clean-energy subsidies.

Naturally, Zhong Baoshen, LONGi’s Chairman, objects, and herein lies the gaslighting. He insists that LONGi is a private company, and he then tries to distract by pointing out that Illuminate USA is a private company.

That fact is, there is no such thing as a private company in the PRC. Under that nation’s 2017 National Intelligence law, all PRC-domiciled companies are at the beck of the government’s intelligence community to use all of a company’s resources to conduct espionage whenever and targeting whatever the intelligence community decides it wants.

That leads to the misapprehension: too many entities—private companies in the US, politicians at all of the several US governmental hierarchies—actually believe that blandishment that private PRC companies really are private and have no connection whatsoever with any arm of the PRC government.

Government Investment Nanny

Posted on by
Reply

The Federal government regulates who it will permit to invest in private investments—startups, pre-IPO opportunities, loans to private companies, and the like. These are highly risky investments, and they have high payoff possibilities, even if those possibilities are low. The Feds limit those who it permits into these private opportunities to folks with $1 million in net assets, not including their primary home residence, or at least $200,000 in yearly income, or $300,000 for a joint household.

Now there’s a move afoot to add a government-regulated glorified intelligence test as an alternative path for investors to make these investments.

A group of lawmakers has proposed legislation that would allow any investor capable of passing an exam to buy private securities—an array of investments like shares in pre-IPO startups or loans to private companies that are considered riskier because they have looser disclosure rules than public securities and can be harder, and sometimes impossible, to sell in a pinch.

Passing an exam as a prerequisite to being allowed to invest in a class of securities—passing an exam as a prerequisite to being allowed to vote in an election. That Jim Crow era requirement has long since been done away with. Except now Congressmen want to revive the practice for investing.

Private securities—meaning outside the scope of government regulation. This is something far too many politicians can’t stand; it limits their power to dictate to us; it limits their power, period.

The idea is that the ability to make these high-risk, high-reward bets should be open to all sophisticated investors, not just those with the biggest bank accounts.

Of course the definition of who’s sufficiently sophisticated, the definition of “sophisticated” itself is carefully left to government personages.

Patrick Woodall, Americans for Financial Reform‘s Managing Director for Policy (AFR is vehemently pushing for even more government regulation of our financial decisions):

Knowledge cannot protect people from the potential losses if they invest in risky, opaque, and illiquid, private offerings[.]

Neither can government. Nor should government try. The decision to run those risks are ours alone.

This is nanny-state-ism intruding into us private citizens’ own affairs far beyond regulation of public company-related investments. Companies are private rather than publicly owned explicitly to get out from under the government’s thumb, and citizens invest here—or would if we could—explicitly to stay out from under the government’s thumb—especially when that thumb operates, according to government, for our own good.

No.

We average Americans do not need government protections from ourselves. We are fully capable of making our own decisions, and we are fully capable of handling, and fully and responsible for, the outcomes of our decisions. We are not wards of the state, much as one of our major political parties is bent on reducing us to that condition.

The Professors Have a Thought

Posted on by
Reply

Charles Silver, Civil Procedure Professor at University of Texas Austin’s School of Law, and David Hyman, Professor of Health Law & Policy at Georgetown Law, have an idea on how to improve Medicare, and it doesn’t even include cutting Medicare or raising taxes. Here’s their straightforward solution:

Rather than pay providers, Congress should give Medicare money directly to enrollees, as it does with Social Security. The government should deposit each enrollee’s subsidy into a health savings account, letting seniors decide what they need and how much they are willing to pay. By reducing the government’s role, this reform would eliminate most forms of healthcare fraud, waste, and abuse immediately, saving hundreds of billions of dollars.
The reform would also significantly improve healthcare. When patients pay for it directly—as they do for cosmetic surgery, Lasik, over-the-counter medications, and other elective procedures not covered by insurance—things work well.

Such a move likely would increase the number and range of doctors available to seniors, also. Large numbers of doctors, for a variety of reasons, currently won’t take patients who are on Medicare. Among those reasons are Medicare’s reimbursements to doctors being so low that many doctors lose money on Medicare patients, and Medicare’s slow rate of payments. With patients paying their doctors directly, albeit with Medicare dollars, those doctors would be paid promptly and wouldn’t have to worry about taking a loss on the appointment.

Letting people be responsible for their own decisions. What a concept.

The professors’ thought is a very good one.

Wrong Mindset

Posted on by
Reply

As self-driving cars, misnomerly termed AI-driven cars, become more common, or at least less uncommon, there is growing concern about the ethics of the AIs involved. It’s a valid question, but it aims at the wrong target.

What will the roadway scruples of AI look like?

What to do about avoiding collisions vs the consequences of an avoidance maneuver? Relatedly, dodge the large animal but don’t bother about the small animal? Which property is more legitimate to avoid if any avoidance maneuver means collision with something or damage to the maneuvering car—into the ditch or into the tree to avoid another collision.

There are easier questions, too, whose answers left to the AI are just examples of laziness.

Is taking the fastest route the core metric that should guide autonomous vehicles, or are other factors just as relevant? Focusing on getting to the destination quickly would allow self-driving ride-share vehicles to make more trips and more profit, but might result in more danger. Giving priority to safety alone could slow and snarl traffic. And what about choosing routes that let passengers enjoy the journey?

After all,

The trade-off between safety and speed is “the one thing that really affects 99% of the moral questions around autonomous vehicles,” says Shai Shalev-Shwartz, chief technology officer at Mobileye…. Shifting parameters between these two poles, he says, can result in a range of AI driving, from too reckless to too cautious, to something that seems “natural” and humanlike.
The software can also be calibrated to allow different driving styles, he says. So, for example, an autonomous sports car might drive more aggressively to enhance a sense of performance, an autonomous minivan might put the biggest emphasis on safety and an off-road vehicle might default to taking a scenic route.

There’s no need to leave those factors solely in the software. It’s just not that hard to break them out into separate routines, with the human car driver selecting one when he gets in and boots up his car. Planning a trip is what humans do now, whether a trip across town or to another city or the short trip to the grocery store, even if the latter is planned sub rosa. That needs to be in the hands of the human.

Even if we decide to turn driving over to the AI system running the autonomous vehicle, only the driving itself should be turned over—while maintaining human oversight and real-time overruling capability and responsibility during the driving. It’s hard enough for a human to make the value judgment call regarding a broad variety of collision scenarios, especially regarding those outlined at the start of this post. It’s impossible, at least for the foreseeable future, for humans to write code to wire those judgments into the software running a car.

Autonomous vehicles cannot be only AI operated. The human must be responsible for the decisions he makes in validating the car’s real-time decisions, or overruling them. Or flipping a switch and taking over the task of driving because the software has gotten over its code.