Category Archives: Economics

Miscellaneous economy stuff

That, too

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Progressive-Democrats are keeping the government shut down over their demand to extend—permanently, no negotiations—the Obamacare subsidies that the Progressive-Democrats during the Biden reign had scheduled to expire in November of this year, pretending at the time that the subsidies were just temporary, to tide people over during the Wuhan Virus situation. Their core claim on this aspect is that Obamacare premiums, as paid by the policy holder (carefully excluding, per those same Progressive-Democrats, the premium costs paid for by us taxpayers via those subsidies), will explode.

What the press, with equal care, ignores is that the purported need for those subsidies is a direct result of the cost of the government-run health care coverage program that is the Affordable Care Act. Government-run because these are coverage policies whose coverage suites are mandated by government, including the worst mandate of them all: the requirement to charge premiums (within narrow government set bands) for ailments and potential ailments without regard for the risk of the ailment being covered, and for some of those ailments at no cost to the policy holder at all.

The Wall Street Journal has pointed out an additional price to us average Americans:

If Republicans don’t extend the turbocharged subsidies, she [Minnesota Progressive-Democrat Senator Amy Klobuchar] warned, “early retirees like Bill & Shelly [who live in Meridian, ID] will see their health insurance premiums increase nearly 300%—from $442 to $1,700.”

And [emphasis added]

This is a tacit admission that ObamaCare encourages Americans to stop working. The Biden subsidies turbocharged that incentive by making subsidies larger and available even to those with incomes above 400% of the poverty line. The couple in Ms Klobuchar’s example had north of $130,000 of income in 2024….

This demand for permanentizing the ObamaCare subsidies is just one more aspect of big government taking over our lives, reducing individual liberties (the health coverage industry does not exist in a free, competitive market where individuals can make their own choices of what coverages they want, at prices that competition would make possible) and taking the flip side of individual liberties, individual responsibilities, away from the individual and, instead, spreading them across all of us together, as brokered by Government.

The editors offer some solutions that would be a good beginning toward correcting the failure that is the ObamaCare essay into socialized medicine.

  • codifying association health plans that let small businesses join up to form a larger risk pool to improve the economics of offering insurance
  • continuing to expand plans that can be paired with tax-preferred health-savings accounts
  • fix[ing] some ObamaCare regulations like the medical-loss ratio that obliges insurers to spend 80% of premiums on claims, which in practice is a profit cap

Also needed, I claim:

  • allowing health coverage plan providers to sell policies that cover preexisting conditions at premiums consistent with the risk involved. The risk here is not certainty since the preexisting conditions will not all flare up and require medical intervention simultaneously; the risks can be amortized across time, if government only got out of the way
  • allowing individuals to choose from, and insurers to offer, tailored coverages: only primary care—annual exams, for instance, and the occasional flu or broken bone
  • coverages only for catastrophic health potentialities
  • reducing the regulatory burden on doctors who want to eschew being reimbursed via health coverage providers by doing cash reimbursements, perhaps by annual subscriptions

But to do any of that, it’s necessary for the Progressive-Democrats to end their extortionate demand on subsidies as a condition or reopening, so those discussions can begin; it’s necessary for the Progressive-Democrats to release from their basements us American people, especially the poor and their children, whom they’ve taken hostage against their demand.

Monetary Misconception

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Judy Shelton, a Senior Fellow at the Independent Institute, has this one. She wants the Federal government to issue a gold-backed bond would strike a blow for sound money.

Mr Trump has criticized currency manipulation in global trade relations. Challenging other nations to emulate the US [gold-backed bond] by guaranteeing some portion of their sovereign debt in gold would demonstrate America’s vision for stable money as the proper foundation for fair trade.

This is naïve. “Other countries” will continue to manipulate their currencies, just as they do now; this move only would add a new tool for manipulation—varying the value of the metal backing their own debt instrument(s).

Governments have been debasing their metal backed currencies ever since money was invented, doing so by shaving coins minted in the metal; by replacing some of the money-backing metal with other, cheaper metals; outright announcing a differing, lower values for a unit of the metal.

The most infamous recent example of the latter was during our own Great Depression when then-President Franklin Roosevelt (D) seized all privately held gold and then promptly devalued the gold in US dollar terms.

All currency is fiat currency, whether it’s minted in the metal or it’s printed on paper formally backed by the metal (at a rate the issuing government has announced for the time being), or it’s printed on paper and allowed to float in the markets for goods and services—and currencies. That currency has the value, in legal terms, that government says it has from time to time.

Backing a bond with a precious metal has no material meaning. What makes a money sound is the stability of the issuing government; the economy it oversees with a light hand; and that government’s ability to protect its people from invasion, whether physical, economic, or political. Nothing else does.

New Sanctions and some Thoughts

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President Donald Trump (R) has implemented new sanctions on Russia in response to the barbarian’s continued intransigence in its invasion of Ukraine—blacklisting Russia’s two biggest oil producers and a plethora of their subsidiaries. As The Wall Street Journal notes, how much the sanctions will impact Russia depends on three major factors:

  • how well they are enforced
  • the reaction of major markets in India and China
  • whether Moscow can circumvent the measures

Regarding the first, that depends on Europe, India, and the People’s Republic of China. In the short term, Europe will give a strong indication of how serious those nations are in supporting Ukraine and how serious they are in beefing up their defense establishments and industries so as to be able to face down the confrontation with Russia that will follow as the night does the day if Russia succeeds in conquering Ukraine. Carrots can be offered those nations, and a primary one would be tariff relief in exchange for strictly enforcing the sanctions. There even are ready to hand alternative sources for oil and natural gas to supply their current and buildup energy needs.

Tariff relief and improved mutual investment agreements, along with those readily available alternative oil and gas sources, would go a long way to weaning India off Russian oil.

Another carrot is essentially self-referential. By taking themselves completely off Russian energy, they would be proofing themselves against Russian economic blackmail.

The Indian markets can be drawn off Russian energy with tariff relief and mutual investment agreements centered on other matters important to India, Europe, and the US.

The PRC, though, is going to buy Russian oil and gas regardless. The two nations already have an economic arrangement in place that allows the PRC to develop Siberian hydrocarbon resources in return for first pick on the output of that development. When those distributing pipelines are built from Siberia into the PRC, the latter will get the former’s oil and gas functionally at no cost.

There’s more to this, though than just the blacklists. What’s also needed is better enforcement and strengthening of the existing bars against technology transfers and against equipment and maintenance supply transfers that are needed to develop wells and to maintain delivery pipelines to refineries, to (re)build and maintain refineries, and to build and maintain refined output pipelines delivering to end users.

The third factor centers on the black market, the Russian shadow fleet of oil tankers serving that black market, and the buyers’ shadow fleet of tankers as ships meeting the Russian ships for at-sea transfers. This is, perhaps, the most straightforward factor to handle, if the most difficult for the politically timid national managers. The shadow fleet ships could be—have been in the main—easily identified and seized, their cargo transferred to the seizing nation for its use (not resale) and the ships sent to the breakers for recouping the scrap metal and such other items as might be useful. Those shadow fleet ships whose captains resist seizure should simply have their ships sunk on the spot, without wasting much time arguing the matter: “Prepare to be boarded.” “No.” Sink the ship.

All of that is straightforward, only that first factor of widespread enforcement will take some political maneuverings among the relevant nations.

A Misconception

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The headline and subheadline say it all.

Funding Freeze Threatens an Economic Lifeline in Chicago
Washington’s move halts plan to extend a train line into a depressed pocket of the city

Except that Washington’s move needn’t halt anything. Chicago could reallocate its spending priorities and fund the extension itself.

There’s no political will to do so, though; too many politicians in the city are addicted to Federal dollars, and apart from that, they benefit personally politically from bringing in the pork rather than spending city money.

Too, relying on Federal dollars—the taxes paid in by citizens from elsewhere in the State and especially by citizens of other States—lets city politicians avoid the drudgery of worrying about, and doing something about, the costs of such a project. And that benefits the politicians’ union employers donors.

A major factor in those costs is labor, which is driven by Federal construction dollar strings mandating union wage rates whether the builders are union shops or not. Allowing non-union wages would greatly reduce the cost of any construction project, including this train line extension.

One small example of the city officials’ shortsightedness on the revenue side is this from Wendy Jones, who runs a nonprofit that mentors young men:

The Red Line would have been a huge improvement, and it probably would have increased the property value here[.]

That increase in property value would have increased property tax revenues for the city. There would be sequelae, too, were the city managers ever to get serious about solving its crime problem: an influx of businesses, with attendant jobs, into the area fed by the train line extension, with an associated increase in income and business tax revenue to the city.

All of that would be in addition to all the construction jobs that building the extension would entail, and would still be available were the city to spend its own money on the construction.

As a bonus, the city spending its own money on the project would reduce the city’s dependency on the Federal government and reduce the latter’s leverage over the former.

That it’s a widespread and longstanding misconception that halting Federal construction funds transfers must perforce halt construction projects only demonstrates the knee-jerk response to and dependency on Federal funding that too many on both sides—politicians and citizens—have settled into.

The Federal government isn’t the only level of governing where spending discipline and reallocations are necessary.

Yet Another Reason

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People’s Republic of China President Xi Jinping’s moves to further restrict access to and shipments of rare earths, processed rare earths, and components that use rare earths, an access restriction amounting to virtual cutoff aimed specifically against us, is just one more reason for American businesses to stop doing business with PRC-domiciled companies or inside the PRC. The lede:

With rare-earths export restrictions and a string of actions targeting the US chip industry, Beijing is mounting a full-scale offensive on Washington ahead of an expected meeting between President Trump and Chinese leader Xi Jinping.

This, too:

On Thursday, China announced new restrictions on rare-earth materials, specifically noting that licenses related to certain types of chips will be granted on a case-by-case basis. Also Thursday, Beijing added roughly a dozen organizations to its “unreliable entity list,” including TechInsights, a Canada-based semiconductor technology research firm that had released reports on chip-development efforts by China’s Huawei Technologies.
China went beyond semiconductors. On Thursday, Beijing also said it would require licenses for exports of certain lithium batteries and some equipment and materials used to make them.

Included in those restrictions are limits on exporting any goods that include as few rare earths as 0.1% of the product’s value in their makeup. That amounts to an outright block on anything that even touches rare earths. It’s a direct attack on our economy and our defense industries, and so on our sovereignty.

It’s long past time for American businesses to shift their business arrangements and their supply chains completely away from the PRC. The patriotic nature of the move as well as the move’s economic optimization, along with the urgency of making it, should be obvious even to the most remote, ivory tower cloistered American business manager.

That shift must include stopping all technology transfers to the PRC, whether the transfer is in the form of goods (viz., chips, chip fabrication equipment, computer equipment, technologically oriented consumer goods, software, and so on) or in intellectual property agreements.

For example:

China’s top market regulator said Friday that it had launched an investigation into Qualcomm for suspected violation of the country’s antimonopoly law. The probe is tied to Qualcomm’s acquisition of Autotalks, an Israeli startup, the regulator said.

If Qualcomm were not operating inside the PRC, the PRC’s regulators would have nothing to say regarding the acquisition.

More broadly, if we as a nation did no business in or with the PRC, Xi would have no levers to swing against us. The changeover will be disruptive and expensive, but only in the short term, if American businesses get off the dime (including literally) and make the shifts. After all, how disruptive is it already to not be making the shifts apace? It’ll also be far more expensive for far longer, if not permanently, for American businesses to remain dependent on an enemy nation for critical items.

That dependency, too, is a direct threat to our independence of action as a sovereign nation, ceding as it does critical parts of our national economy and of our defense establishment to that enemy nation.