Tag Archives: markets

More Government Intervention

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Shades of FDR, and a betrayal from the putative right of center.  Senator Marco Rubio (R, FL) wants Government to dictate to private enterprises what they must do with company profit.

The plan backed by Rubio encourages domestic investment by making full and immediate expensing permanent “as a way to discourage companies from pursuing share repurchases.”

Right move, wrong reason.  Immediate expensing ought to be a permanent item in tax code reform on its own right.  Delaying expensing or stringing it out is just another aspect of using our tax code for social engineering, which bastardizes our tax collections and distorts our market away from the most efficient use of our money—whether business money or personal.  And that most efficient use might well include stock buybacks; that’s a business decision with which Government has no business interfering.

“Discourage” companies?  That’s a fiction.  What Government starts as “discouraging,” it very quickly converts to barring.  Senate Minority Leader Chuck Schumer (D, NY) and Senator Bernie Sanders (I, VT) are pushing for precisely this sort barring of legislation,

to curtail the ability of companies to purchase stock buybacks[,]

and Rubio is just as enthusiastically joining with them on this.  A report released by Rubio’s Small Business and Entrepreneurship Committee had this in it:

Cash spent on share repurchases is not cash spent on capital investment, though the degree to which a relationship exists may vary by sector and firm type[.]

That’s not strictly true.  Money spent on buybacks is money not spent on that business‘ capital investment.  But do Rubio, Schumer, and Sanders really think that money goes under the mattresses of those now ex-shareholders?

Of course that money does not. It goes into one of three places, each beneficial to our economy. One is investments in other companies, facilitating those companies’ capital investments.

Another is spending on consumer and business goods, which enhances market demand, which increases cash flow into those producers’ coffers—which facilitates their capital investments.

The third is savings.  As anyone who didn’t sleep through their high school econ course knows, savings are banks’ and other lenders’ source of funds which they loan out—to businesses so they can carry out their capital investments.

Hence the need to let businesses make their own decisions without Government diktat.  It’s disappointing that a nominally Republican Senator doesn’t understand any of this.

German Intransigence

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Last Tuesday, the British Parliament voted to send Prime Minister Theresa May back to Brussels to renegotiate the status of Great Britain’s Northern Ireland border with the Republic of Ireland, which is part of the Brit-EU exit agreement that the Parliament had earlier rejected.  The same day, the Parliament also rejected an attempt by Labour to delay by nine months the actual departure of Great Britain from the EU, leaving the date set at 29 March.

European Council President Donald Tusk said through his spokesman

The backstop is part of the Withdrawal Agreement, and the Withdrawal Agreement is not open for renegotiation.

That’s standard fare for the EU, which never has negotiated in good faith and which has all along faced a negotiator, in May, whose heart never has been in leaving the EU.

It’s Germany, though, that not only refuses outright to renegotiate a small aspect of that failed departure agreement, now is directly interfering in the domestic affairs of Great Britain.  The nature of the current “agreement” would

keep Northern Ireland (and by extension the UK) in the EU customs union in order to avoid a hard border on the island of Ireland.

A hard departure would take all of Great Britain (and by extension Northern Ireland) out of the EU and its internal free trade/free movement of goods and people zone altogether.  That might necessitate customs checks and border entry stations.

Germany’s Foreign Minister Heiko Mass:

We will not allow Ireland to be isolated on this issue.

Never mind that the only ones isolating the Republic of Ireland on this issue are Germany and the EU.  It gets worse, though.  Jürgen Trittin, Co-Chairman of Germany’s Green Party’:

It’s clear that we won’t accept a militarized border in Ireland[.]

Leaving aside the cynically constructed straw man nature of this claim—no one is talking about militarizing any border, only of the possibility of setting up customs stations—whether Great Britain chooses to “militarize” any of its borders is strictly a domestic matter for the Brits to decide.  They cannot, after all, station troops anywhere along any of their borders except on their side of them.  Trittin knows this.  (Beyond that, this ban also is a blatant interference in the internal affairs of the Republic of Ireland for the same reason.)

Aside from that, Trittin’s bar would result in…what, exactly?  What does Germany, or the EU, propose to do were the Brits to decide to “militarize” its border with the Republic of Ireland?  What concrete steps is Germany implying it, or the EU, would take to enforce its bar on the “militarization?”

Plainly, it’s an empty threat, intended only to intimidate and, worse, to meddle in the internal affairs of a sovereign nation—and so vindicating that nation’s decision to leave such an entity as the EU.

Germany’s Cost of Going “Green”

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Germany is moving decisively to eliminate coal-fired plants as a source for its economy’s energy.

Germany has already banned nuclear power, which was a singularly stupid thing to do—that source of energy already had no CO2 emissions. Nevertheless, the destruction of that industry already is ongoingly expensive.

Merkel’s decision in 2011 to dump nuclear energy by 2022 and to accelerate the build-out of renewable sources such as wind and solar power is already costing them €27 billion [$31.8 billion] each year in the form of a renewable-energy tax.

Despite that, Germany’s Commission on Growth, Structural Change and Employment has laid out the requirement, and the Merkel government seems willing to take it up.

[T]he coal commission advised the government to pay around €50 billion [$57 billion] to the three regions hit by the shutdown of lignite mines to make sure new jobs are created. It also recommended that the government should pay €32 billion [$36.5 billon] to compensate consumers and business for higher electricity prices [annually] and an unspecified amount to indemnify coal power plant operators for the lost value of their assets.

That’s just the inner bound of the cost of “green.”  With black coal mining already shut down—at a cost of €240 billion ($273.7 billion)—this will put coal-fired energy plants out of business.  It’s not just the immediate coal-based energy industry that will suffer.

Biblis, in the Hesse State, used to have a nuclear power plant.  The closure of that plant cost the city 50% of its corporate tax base.  That cascades up the political jurisdiction hierarchy and across the nation.  The increased cost of energy also is hammering German industries that are users, not producers, of energy.

Manufacturing companies, from chemicals maker BASF to carbon fiber producer SGL Carbon, have shifted investments abroad, where energy costs are often a fraction of Germany’s.

Consumers have to pay the higher energy prices, too, and that’s money they can’t spend on other goods and services—which hurts producers of those other goods and services.  All of that is lost revenue for Government, and it’s lost jobs and German prosperity.

What’s the value of changing energy sources if the energy becomes prohibitively expensive and so stunts economic growth and development?

Hysteria

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Some Congressmen are working on bills that, in their aggregate, would bar sales of critical computer components to the People’s Republic of China’s communications companies Huawei, ZTE, and other PRC companies caught violating our export laws or sanctions on those companies or companies with which these do business.

The PRC is upset.

Foreign Ministry spokeswoman Hua Chunying said it was all “hysteria,” and

I believe the action of these few representatives are an expression of extreme arrogance and an extreme lack of self-confidence[.]

The PRC’s insults and hysterical response, whether individual or taken together, are sufficient evidence that we’re on the right track.

We cannot allow PRC insults to influence our domestic matters (or our international matters, come to that), particularly including moves to hold those doing business in our nation accountable for their illegal activities.

PRC hysteria should simply be disregarded where it’s not ridiculed.

A Judge’s Error

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The Trump administration had expanded rules allowing employers to opt out of being required to provide birth control coverage to their employees at no cost to the employees, so long as the opting out was convincingly based on religious or moral grounds.  Federal District Judge Haywood Gilliam of the Northern District of California has issued an injunction blocking enforcement of the expansion while an underlying lawsuit against the expansion is underway.

Ordinarily, blocking an enforcement while the underlying case proceeds is no big deal, but this one is just plain wrong.  Gilliam based his ruling in significant part on the premise that

the [expansion] would result in a “substantial number” of women losing birth control coverage, which would be a “massive policy shift.”

For one thing, given how cheap birth control drugs and devices are and how easily obtained prescriptions for them are, it’s not at all clear that a “substantial number” of women would be unable to obtain birth control drugs or devices.

But the larger, vastly more important matter is this.  As Gilliam himself noted, the expansion would be a policy shift (massive or not, that’s irrelevant here).  Policy matters are political matters, and so they clearly are outside the purview of the courts.  Policy—political—matters are the exclusive province of the political arms of our government and of We the People.  A judge who intrudes, from his bench, into political matters clearly violates his oath to uphold the law.  Making policy has no place in his oath.