Tag Archives: political economy

Activist Judges

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There are three of them on the 4th Circuit, those who unanimously ruled that construction on the Mountain Valley Pipeline must stop pending those judges’ personal review of the Interior Department’s record of decision for permitting pipeline construction in the national forest.

These judges don’t care that the 4th Circuit has no jurisdiction over the pipeline or cases related to it. The recently concluded debt ceiling law explicitly stripped the 4th Circuit of jurisdiction, limited questions about the pipeline to constitutional questions, and placed those questions solely within the jurisdiction of the DC Circuit.

The Wall Street Journal‘s editors concluded their editorial with this:

Three willful judges have improperly usurped the power of Congress and the executive branch. Judges who refuse to honor proper orders from the political branches are begging to have the political branches ignore their rulings.

These three judges also have violated their oaths of office and have thereby rendered themselves vulnerable to impeachment and removal from the bench.

“Undemocratic”

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Wisconsin Governor Tony Evers (D) used his “line-item” veto power to veto part of a legislatively-passed law regarding public school funding. His veto authority actually is less a line-item veto authority than it is a words and phrases veto authority.

Evers, a Democrat, used his veto pen Wednesday to strike out text intended to increase funding for the 2024-25 school years, crossing out the “20” and the hyphen. The updated language allows K-12 schools to raise their revenue per student by $325 a year until 2425.

Lucas Vebber, Deputy Counsel for the Wisconsin Institute of Law & Liberty, says his organization is considering suing the State over the governor’s inherently undemocratic move.

Evers’ move was assuredly undemocratic, but existing law allows the move. Vebber expanded on his beef, and with that expansion, he has a case—and with that case, he may be able to get the law struck down as unconstitutionally (under Wisconsin’s constitution) vague.

Here you have the people who elected the legislature and are represented here in Wisconsin, in the Senate Assembly to write laws, have written a law they intended. The governor’s veto makes it something completely different.

In Wisconsin, as in each of our States and at the Federal level, it’s the legislature that writes the law(s). A governor’s authority, in this context, begins and ends with signing the legislature’s bill into law or vetoing it. Or, as is the case in a few States, a governor’s authority can include vetoing specific parts of the bill and signing the rest into law. Wisconsin allows a governor to veto words and phrases. However, in no State is a governor allowed to rewrite the bill before signing it.

That’s what Evers has done with his carefully chosen words and phrases veto: he’s rewritten a one-year funding law into a 400 year funding law, and that is plainly unconstitutional. Evers’ move also illustrates how flexible is a Wisconsin governor’s words and phrases veto authority: it’s so flexible as to be too vague to pass muster.

The matter likely will end up in front of the Wisconsin Supreme Court. Unfortunately, that court has an activist liberal Justice majority.

Useful, but Insufficient

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The Biden administration is looking to restrict—but not block—Peoples Republic of China companies from accessing American cloud-computing services.

That’s a useful move, to the extent it actually comes to fruition and to any meaningful extent, but it’s not enough by itself, or even against the backdrop of existing restrictions on technology exports to the PRC.

Some are concerned, though, that this could further strain relations between the world’s economic superpowers.

[The Peoples Republic of China] set export restrictions on two minerals the US says are critical to the production of semiconductors, missile systems and solar cells….
The minerals—gallium and germanium—and more than three dozen related metals and other materials will be subject to unspecified export controls starting August 1, Beijing’s Ministry of Commerce said Monday.

The particular PRC response just shows the importance of us moving our supply chains completely out of the PRC, and it emphasizes the shamefulness of American company managers for their slowness in making the necessary adjustments in their businesses.

Beyond that, we need to stop this foolish call and response method of restrictions on technology exports to the PRC. We need to apply the restrictions faster and deeper than they can respond. Simply doing tit-for-tat moves lets the PRC adapt and respond, especially to respond with more pain inflicted on us than would be the case if we stayed solidly inside their Do Loop.

The PRC’s response looks more like escalation than tit-for-tat. They’re already moving to get inside our Do Loop while the Biden administration tiptoes around.

Those concerned need to identify the war—and the PRC is inflicting war on us, even if it’s not, yet, kinetic—in which one side suffers no consequences during the war. Of course friendly-side damage needs to be minimized, but wars are won by inflicting more pain on the other side than that other side is willing to suffer than that other side can inflict on the one compared to the one’s pain tolerance.

Nor is it enough simply to restrict our technology exports/transfers to the PRC to tech that’s our second tier/prior generation technology. Our exports/transfers—to the extent we make any at all—needs to limited to what would constitute the PRC’s second tier/prior generation technology. If our own such tech is ahead of the PRC’s, those exports still would enable the PRC’s catchup and gaining superiority.

A Thought on Moore v US

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Moore v US is a tax case that the Supreme Court has agreed to hear in its next term, beginning 2 October. The case asks whether mere asset value increases—wealth increases—can be taxed as income, just because of that increase, but before it has been realized—before the asset actually has been disposed of for more than the cost of its acquisition, with that value increase turned into actual dollars on the barrelhead.

The proximate subject concerns a provision in the 2017 tax reform that levied a one-time mandatory repatriation tax on foreign companies.

But the tax applied to American shareholders, even passive investors like Charles and Kathleen Moore of Washington state. They were hit by a surprise $14,729 tax bill, though they had never seen a dime of income from their investment in a friend’s company in rural India. They were taxed instead on the unrealized income of the foreign company.

The Moores sued for a refund—because with this IRS, of course they had to—but

the Ninth Circuit ruled that “realization of income is not a constitutional requirement.”

The Wall Street Journal‘s editors argue that

This defies the traditional understanding in US tax law, and in Supreme Court doctrine, that income must be realized before it can be taxed.

I go the editors one further. A homeowner can’t take an increase in his home value (for instance) down to the corner grocer and buy food, or even pay off credit card debt. That last, in particular, requires floating a new loan, even if in the form of refinancing the old. Neither can the Moores take any increase in their investment value on down to their auto dealership and buy an automobile: they must first convert the increase into a loan or into hard cash: they must realize that value increase.

If an increase in value is unrealized—if it hasn’t been converted to actual spendable value—it isn’t income in the first place; it doesn’t exist in any form except as wisps in the æther.

There’s nothing in the æther that’s taxable.

Stockpiling Workers?

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Hiring is up, apparently, and hours worked by employee is down.

[E]ven as employers cut hours, they are also adding workers—something they don’t usually do when contraction looms. Payrolls rose by 339,000 in May and by nearly 1.6 million for the year to date. Layoffs were nearly 13% lower in April than in the average month in 2019, according to the Labor Department.

How does that work, exactly? This is how.

The expense and trauma of hiring have left employers unusually eager to avoid shedding staff they will need when business picks up again, according to [Managing Director and Senior Economist at Nomura, Aichi] Amemiya.

Companies this time around are stockpiling workers against the turnaround and rise of the underlying economy. This is an expense more and more employers are willing to bear during the current slowdown and potential recession in order to be ahead of the curve on the other side, rather than chasing the recovery as has been the case in past slowdowns/recessions.