Tag Archives: political economy

Virtue-Signaling in the Credit Card Market

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Progressive-Democrat President Joe Biden is at it again, attempting to buy votes with another of his sham attempts to save us ordinary Americans money.

The Biden administration on Tuesday finalized a new rule to cap all credit card late fees at $8, a move that is expected to elicit fierce pushback from industry giants.

His Consumer Finance Protection Bureau

estimates the new regulation will save American families more than $10 billion in late fees annually by reducing the typical late fee of about $32. That amounts to an average saving of roughly $220 per year for the 45 million people who are charged late fees.

Stipulate for the moment that the CFPB actually has an accurate, fact-supported basis for its cost claims. Those fees help the banks recoup a significant fraction of the costs they incur when credit card holders are late on their payments. This restriction on cost recovery is only going to lead to tighter bank restrictions on who they’re willing to issue credit cards to.

How much money does Biden think will be saved by those who no longer can get credit cards, or by those whose cards are not renewed on the renewal date?

Biden really thinks we’re stupid enough to not see through his bread and circus shenanigans.

The Next Step

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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.

Tariffs

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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

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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.

Another Reason to Rescind Chevron Defense

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As The Wall Street Journal‘s editors put it in their editorial last Tuesday, nothing is stopping the

Securities and Exchange Commission and prosecutors from finding [regulatory] meaning in statutory penumbras.

Now the SEC is manufacturing a rule based on nothing but the æther in SEC Chairman Gary Gensler’s mind. Gensler has hailed into court a pharmaceutical company employee for the “insider trading” crime of trading in options on the stock shares of another pharmaceutical company, a company about which the man had no insider information at all. Not a whit.

Gensler, however, in plumbing the depths of his shadowy æther, has claimed to have found something in a penumbra of Federal law and Court decisions regarding insider trading. The man he’s charging knew from an employee-broadcast email from his company’s CEO that his company might be about to be acquired by another company—not the company in which our man did his trading.

Poof—Gensler has waved his hands and conjured an insider trading beef centered on no insider trading information at all. As the WSJ noted,

Federal law doesn’t explicitly ban trading on confidential information. But courts have said that insiders defraud companies by “misappropriating” private information for personal gain.

It’s in the phantasmal penumbra of “private information” that Gensler has conjured his offense: private information in one company (not even that private, it was a company-wide email that revealed the potential for an acquisition of the employee’s company) casts a shadow over other, Gensler-unspecified, companies, and so brings those other companies into the reach of one company’s allegedly private information.

And this, regarding those chimeric penumbras[1] of which too many of our courts still claim to see:

If something is in a penumbral region, it is not in the text.  If it is not in the text, it does not exist ….  If it does not exist, a judge cannot rule on it.  If in the end, all a judge can do after carefully reading the text is go more than a toe’s dip into its shadows for meaning, then he must not go in: he must rule a lack of governing statute or strike the statute for vagueness, and in either event return the matter to the political branches.

And this, from Justices Antonin Scalia and Clarence Thomas, in denying a 2014 cert petition in Whitman v US [emphasis in the original]:

Only the legislature may define crimes and fix punishments. Congress cannot, through ambiguity, effectively leave that function to the courts—much less to the administrative bureaucracy[.]

Now the Supreme Court must overrule the SEC outright, which would be much easier to do were it to also—or already have by the time this case reaches it—rescinded the Chevron Defense foolishness which subordinates, by Constitutional design, the coequal Judiciary not just to the Executive, but to Executive subordinate branches led by political appointees and peopled by unknown and faceless bureaucrats.

[1] Hines, Eric, A Conservative’s View of the American Concept of Law