Tag Archives: political economy

The European Union and its Wuhan Virus Situation

Posted on by
Reply

In an article about the European Union governance authorities’ effort to use its Wuhan Virus situation to fundamentally transform the bloc, Laurence Norman wrote that the European Commission

set out a $2 trillion coronavirus response plan, including a massive pooling of national financial resources that, if approved, would deepen the bloc’s economic union in a way that even the eurozone debt crisis failed to achieve.
Wednesday’s proposal, composed of a €750 billion ($824 billion) recovery plan and €1.1 trillion budget over the next seven years, aims to lift the region from its economic slump, but must overcome infighting dividing the bloc.
If backed by all 27 member states, the plan would represent a historic step in knitting together national finances across the bloc. The proposal from the European Commission, the EU’s executive arm, follows a similar Franco-German plan set out last week and would establish significant new transfers of wealth among members, funded by commonly issued debt.

In justification of this recasting of European society, German Finance Minister Olaf Scholz was cited by Norman as saying

the proposed assumption of debts across EU borders to Alexander Hamilton’s move in 1790 for the new US government to assume states’ debts from the Revolutionary War. But unlike the US under the Constitution, the EU remains a club of sovereign states, many of which oppose sharing financial burdens.

Missed here is the Critical Item that, before our “new US government,” the US under the Articles of Confederation also was just such a conclave of nations.

Missed by Scholz is the fact that the American States also were, and still are, far more homogeneous—in culture, ideology, views of the purpose of money, views of the role of government in the lives of men collectively and individually—than Europe ever has been or is now.

That homogeneity of political and economic principles is absolutely critical to holding together any sort of polity.

Another Study in Contrasts

Posted on by
Reply

I last week about the difference in performance between Republican-run Florida and Progressive-Democrat-run New York.

Here are some more contrasts.

Notice that California, Illinois, New Jersey, and New York all are Progressive-Democrat governed. And there’s that Republican-governed Florida.

This is the degree of economic dysfunction we can expect from a Progressive-Democrat-run nation.

Notice another thing. Employment by government, of either party, has been remarkably stable. This is the sinecure of jobs in government, the remarkably deep entrenchment of the bureaucrats in the Bureaucrat State.

A “Careful” Economy

Posted on by
Reply

In a Wall Street Journal op-ed about the dangers we’re facing because we’re reopening our economy much too soon to suit him, John Cochrane had this remark:

…the most important thing government can give us is accurate and timely information on how widespread the virus is in each community—how dangerous it really is to go out—something we don’t have now.

The truly Critical Item on how dangerous it might be to go out is the mortality rate, and that’s down around 1% for Americans younger than 60-ish, which includes children and working age Americans, and it’s not much higher for those older.

That mortality rate is going down further as we learn more about the components of the denominator.

Of course, getting sick can be more than an inconvenience, but even hospitalization rates are falling, both in absolute terms and as we learn more about those denominator components.

Mortality rate information, contra Cochrane, in fact is well known to those of us who seek it out—which we have to work too hard to do because the press and Progressive-Democrat State governments studiously ignore it.

In the end, the medical dangers of restarting are overblown and the economic dangers of not restarting are underestimated if not ignored outright.

There’s nothing uncareful about reopening now or of pushing the pace of reopening.

Do This In Parallel

Posted on by
Reply

There’s a movement afoot in Congress to subsidize employees, lost employees, and prospective employees through employers and prospective employers.

The House plan would give employers enough money to cover up to 80% of their wages and benefits, up to $45,000 per worker, plus a credit for fixed expenses like rent. Eligible companies would simply keep taxes withheld from employees’ paychecks. If that isn’t enough to equal the credit, they could get additional money from the Internal Revenue Service.
Smaller businesses would get the subsidy for all workers, while larger ones would get it only for furloughed workers still receiving wages or benefits. The break would be scaled to each employer’s revenue loss during the coronavirus pandemic.

There are a couple of tweaks needed, stipulating purely arguendo that this is a useful idea:

Don’t make the thing a one-size-fits-all arrangement. Weight the $45k by the regional- or MSA-based cost of living.

Put a milestone-based (not calendar-based) automatic expiration on the subsidy and credit, something along the lines of the unemployment rate in the region/MSA falling below a specified threshold that’s consistent with the region’s/MSA’s [5-yr pre-Wuhan Virus average] unemployment rate multiplied by a greater-than-one factor or a return of the region’s/MSA’s GDP to [80%] of its pre-Wuhan Virus level.

Such a move, reducing revenue flowing into government as it would, should come with a parallel: a reduction of government spending commensurately. After all, the only Constitutional purposes for Federal spending are three: to pay the Debts and provide for the common Defence and general Welfare of the United States.

The long pole in that is defense spending—an especially important pole in an environment of aggressively acquisitive Russia and the People’s Republic of China and of a nuclear and nuclear wannabe northern Korea and Iran.

General Welfare spending, limited as it is (for all that the limit has been winked at for too long) to the 16 purposes enumerated in Art I, Sect 8, doesn’t take many dollars.

Our Debts will become much more manageable and repayable with spending held within revenues.

Encourage employers to hire—with, of course, that caveat of an automatic expiry to the incentive—but spending cuts must be done in parallel with the revenue reduction.

Long Overdue

Posted on by
Reply

The People’s Republic of China has been able to raise billions of dollars for its various business outlets by listing them on American stock exchanges—all while being exempt from the same public visibility and auditing requirements that other nations’ companies and our domestic ones must satisfy on our exchanges.

Maybe that’s changing.

Legislation passed by the Senate—and now introduced in the House—would kick Chinese companies off US stock exchanges unless their audits are inspected by US regulators.

And

The Senate legislation requires the Chinese companies with shares traded here to disclose to the Securities and Exchange Commission whether they are owned or controlled by state authorities.

This, though, would mean that all of them would have to admit disclose that they are controlled by state authorities. A 2017 intelligence law enacted by the PRC government requires all PRC companies to “cooperate” with intelligence requests of agencies of that government.

Now we have:

China says sharing audit work papers would violate its sovereignty and risk leaking state secrets.

There’s an effect of that 2017 law.

Michaels and Otani, at the first link, think that

economic tension between the two global superpowers, amplified by political outrage in the US over China’s role in the spread of the new coronavirus

are pushing this new emphasis. Emphasis maybe, but neither the economic war (now relabeled Cold War by the PRC) that the PRC has been inflicting on us for years nor the current Wuhan Virus situation and the PRC’s perfidy in the virus’ spread have anything to do with the substance of this. The secretiveness of the PRC’s outlets listed on our exchanges has been extant since they first were listed, and that’s what needs correction.

It’s enough that we gave the PRC Most Favored Nation status (mistakenly, in 20-20 hindsight). There’s nothing that warrants PRC companies on our exchanges being treated any differently than any other company—domestic or foreign—on our exchanges.

PRC companies need, badly, to be audited, and tossed from our exchanges at the slightest hesitation to be audited and for the same violations, should they be audited and any violations found, as any other company whose violations warrant expulsion.

This is especially important given that the PRC isn’t just any foreign nation; it’s an enemy of the United States. American dollars shouldn’t be involved in funding PRC companies.