Tag Archives: political economy

Windfall Taxes

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With rising (finally) interest rates in Europe, European governments are starting to hatch what they’re pleased to call windfall tax plans.

European banks have started to reap higher profits from rising interest rates—and governments are already starting to clamp down on them.
In Spain, the government has laid out plans to tax lenders on their rising income and use the money to alleviate higher living costs for the population. Hungary has imposed a similar measure, and the Czech Republic, where inflation is above 17%, is also considering such a move. In Poland, where mortgages carry variable rates that are quickly rising, the government placed a moratorium on repayments to help borrowers.

Nor is this tax hatch limited to banks.

In other areas too, European governments are acting quickly when judging companies to be earning abnormally large profits. The UK has said it would introduce a windfall tax on energy companies, and Spain is imposing a similar levy as well as the new tax on banks.

Usw.

As usual, I have questions.

Define “windfall.” No glittering generalities, what constitutes a windfall profit, and based on what economic theory?

When does a windfall profit stop being windfall and becomes the normal level of profit? Again, no glittering generalities; be specific.

Related to that: discriminate between the new, reasonably steady state level of profit and “excess profit.” To do this discrimination it is, of course, necessary to define “excess profit,” with that definition devoid of glittering generalities and supported by clearly identified economic theory.

Back to windfall profit becoming the normal profit level. Does that recognition necessarily mean the prior “windfall” assessment was mistaken? If so, would that mean that the money collected as windfall taxes were mistakenly collected and a refund owed?

And finally, how many politicians will confront those questions? How many of those actually will offer concrete, measurable answers?

Will the West Proceed?

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In the face of the Group of Seven Club’s moves to impose a price cap on Russian crude exports globally, Russian President Vladimir Putin now threatens

to curtail the export of grain from Ukraine and said Moscow was ready to extend its rationing of natural-gas exports and cut off oil and refined products if the West went ahead….

And

Mr Putin said Wednesday that Russia had contractual obligations on energy deliveries but would reconsider them if a price cap were imposed.
“We simply will not fulfill [our contracts]. In general, we will not deliver anything if it contradicts our interests,” he told an audience of officials and business leaders. “We will not deliver gas, nor oil, nor coal, nor heating fuel. We will not deliver anything.”

This would result in temporary near-term pain for the West, to be sure, with winter a few months away. But it would result in permanent and disastrous pain for Russia.

Near-term for the West: that winter (which so far looks to be relatively mild, but weather forecasts…), and tight supplies of natural gas being squirreled away, along with iffy potentials for bringing recently shut down nuclear power plants back on line and keeping others scheduled for closure on line.

Temporary: Europe can find other sources of natural gas, oil, and coal (including, regarding the first two, plussing up North Sea production and building additional pipelines) for their power production plants and move away from Russian sources altogether and permanently. Especially if the West can get President Joe Biden (D) out of the way of American oil and natural gas production and export.

Long-term pain for Putin: he needs a minimum of $70-$80 oil in order to pay for his war against Ukraine—replacing equipment combat losses, providing food, fuel, ammunition, and other consumables for his surviving forces—along with the rest of his economy, which is almost entirely extractive, which potentiates his long-term vulnerability.

Permanent: he’ll have lost permanently his Western markets, leaving him with selling into the People’s Republic of China—and President Xi Jining will be forcing his own purchase price on Putin, a price made the firmer by the PRC’s own current economic strait. Further, those sales will require PRC assistance to develop: new Siberian oil and natural gas wells and pipelines (presently nearly non-existent) to deliver well output to the PRC. All of which will exacerbate Russia’s subordination to the PRC.

Aside: it’s true that Putin has markets in India and Turkey, but with Turkey, drastic as that nation’s needs are, its economy is too small to take up much of Putin’s oil. India has too ready access to too many alternative markets to be taken for much of a ride by Putin.

The salient question is whether the West has the stomach for what it takes to achieve victory. The jury is still out on that. Especially given who’s the nominal leader of the West.

One Simple Fix

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Nearly $2 trillion were appropriated and allocated in early 2021 to the States by the Progressive-Democratic Party-controlled Congress and the Progressive-Democrat President. Those trillions were intended to help the States mitigate the outcomes from the Federal and State governments’ response to the Wuhan Virus situation then in full bore.

Most of that money remains unspent by the States, and much of what was spent went to programs wholly unrelated to digging out from under the governments’ responses.

What do an armored SWAT vehicle in Pittsburgh, “restorative justice” educational discipline in New York City, racial healing pop-ups in Minneapolis, and school vape detectors in Montgomery, Ala., have in common? They’re all funded by federal taxpayers through the hastily-passed American Rescue Plan Act (ARPA)….

And

Just 12% of the money earmarked for elementary and secondary schools has been spent so far, according to federal statistics. And according to Treasury Department figures, as of the end of March 2022 only about $70 billion of the $350 billion allocated for state and local governments had been spent. Just over $100 billion of that money was contractually committed to be spent.
A Treasury spokesperson told Fox News Digital that 67% of the money available to state and local governments through March was budgeted—and likely more, due to smaller jurisdictions not reporting. The total funding available through that point was just under $225 billion. That means likely about half of the overall $350 billion had been budgeted for future use by late March.

It gets…better. Manhattan Institute Senior Fellow Brian Riedl told Fox News Digital:

Washington allocated $350 billion to state and local governments to close budget deficits that did not even exist. These states are totally awash in more money than they know what to do with, so it’s no surprise they haven’t allocated yet—they’re going to be sitting on this money for years.

There’s a straightforward fix to this, even if perhaps politically difficult to do.

Let Congress appropriate the money for a particular purpose (illustrated by, but far from limited to, the ARPA purpose) with a string attached, but then hang onto the money. The string is this: if the States don’t become eligible to receive the money within a time-frame—say, within 12 months or by the end of the then-current Congressional session, whichever comes first—the money remains unallocated and is removed from the Federal appropriations and cannot be spent.

For a State to become eligible for the funds transfer, it must begin the project(s) that satisfy the purpose, have contracts let, “ground broken,” and concrete, measurable, and significant progress made on the projects for [six months]. At that point, the States would become eligible for six months-worth of the funds Congressionally allocated on unanimous agreement by the Speaker of the House, the House Minority Leader, and the Senate Majority and Minority Leaders. At similar subsequent intervals, with similar demonstrable progress, the States would become eligible for subsequent backfills of the State’s expenditures until the allocation is consumed or the project(s) completed. If the project(s) are incomplete when the money runs out, the State becomes ineligible for any further Federal transfers for future retries or for related project(s).

Require the States to demonstrate need, rather than just throwing down piles of dollars with the instruction to “use these up.”

Regardless of what we might think about this or that purpose for transferring Federal (our taxpayer) money to the States, or of Federal transfers to the States generally, this simple fix would at least greatly increase the likelihood of the transferred money actually being used for the claimed purpose.

“Putin Will Adapt”

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In Holman Jenkins’ opinion piece in Tuesday’s Wall Street Journal concerning Russian President Vladimir Putin’s energy war against Europe (as a secondary front in his war against Ukraine), he offered this regarding Europe’s stick-to-it-iveness vs Putin’s:

Mr Putin will quickly adapt once it’s proven to him Europe’s governing parties can’t knuckle under to Russian blackmail and retain their democratic viability.

If Europe doesn’t surrender in the face of Putin’s energy war, it will be the Russian people who feel the resulting economic, and other, pain.

Jenkins is incredibly naive to think Putin cares about that. He’ll persist until he is militarily driven out of Ukraine. And he’ll persist elsewhere for as long as he’s in power. The situation is all about Putin and his angst over the “greatest geopolitical disaster of the 20th century” and his obsession with redressing that.

Europe needs to defeat Putin in his energy war, not only to save themselves (and Ukraine) in the near term, but also to greatly mitigate the costs of Putin’s aggressively pushed obsession in the longer term.

Fascism

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President Joe Biden (D) infamously called half of Americans semi-fascists a few days ago.

Now California is creating a State government board that will dictate the wages that fast food companies in the State must pay.

California’s Legislature passed a bill Monday to create a government panel that would set wages for an estimated half-million fast food workers in the state….
The bill, known as the Fast Act, would establish a panel with members appointed by the governor and legislative leaders composed of workers, union representatives, employers and business advocates. They would set hourly wages of up to $22 for fast food workers starting next year and can increase them annually by the same rate as the consumer-price index, up to a maximum of 3.5%.

This is what true fascism is.

In a real dictionary, viz., American Heritage Dictionary or Merriam-Webster, socialism is a political-economic system in which Government directly owns the means of production—directly owns the businesses operating in an economy. Fascism is a subset of socialism wherein Government is pleased to allow businesses to be privately owned, but Government dictates to those businesses how they will operate: the products they will produce and in what quantity, and/or the prices they will charge for their products, and/or as in the present California case, what wages they will pay their employees—all to serve the State’s ends, not the business owners’ or investors’, who are us Americans. This government control, further, is paired with active, often violent, suppression of opposition to such controls.

In addition to that, Merriam-Webster also notes that in fascism, race often is “exalted” above the individual; American Heritage terms it belligerent racism. Much like the Progressive-Party adherents and supporters do today with their enthusiastic proselytizing of identity politics.

In the Newspeak dictionary of the Progressive-Democratic Party, though, “fascist” and “semi-fascist” are just shibboleths, personal smears, with which Party adherents and supporters insult all of us Americans rude enough to disagree with them. These tools of denigration are trotted out whenever Party adherents and supporters are unable to make coherent, reasoned arguments for their own policies and policy proposals or against anyone else’s policies or policy proposals.

Readers easily can discern which of these definitions are in play by Party adherents and supporters.