Category Archives: Economics

Miscellaneous economy stuff

Wuhan Virus and Higher Education

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Our colleges and universities are being confronted with “hard choices” as a result of the Wuhan Virus situation.

Every source of funding is in doubt. Schools face tuition shortfalls because of unpredictable enrollment and market-driven endowment losses. Public institutions are digesting steep budget cuts, while families are questioning whether it’s worth paying for a private school if students will have to take classes online, from home.
To brace for the pain, colleges and universities are cutting spending, freezing staff salaries, and halting plans for campus building.

But in bracing for that pain, colleges and universities don’t seem to be considering their curricula. They don’t seem to be considering cutting out the fluff and froo-froo courses that have proliferated—courses like women’s studies, gender studies, sexuality studies. Courses like intersectionality.

Colleges and universities don’t seem to be considering deemphasizing intercollegiate sports—most programs of which lose money and all programs of which have lost the student athlete aspect and, with NCAA approval, have codified their semi-pro athlete aspect.

Colleges and universities don’t seem to be considering focusing their instructional programs on things that will prepare their students for making their way in the real world of post graduation: skills like critical thinking, skills like doing the work the businesses in our economy need done, whether building or programming computers, building or programming or operating factory equipment, business skills associated with operating farms and businesses.

Colleges and universities are failing the challenge.

Bail Out the States?

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A letter writer in The Wall Street Journal‘s Wednesday Letters section had a thought about Illinois’ fiscal situation and how to resolve it.

Why a bailout? How about a low-interest loan from the Treasury with fixed payments due on specific dates?

Illinois has chosen to renege on its promises to its public pension facilities. Why would anyone with two neurons to bump together into a ganglion believe Illinois would keep any promise to repay a loan to the Feds?

Aside from that, what would be the enforcement mechanism for a welched-on fixed payment or sequence of such welches? Would Treasury send Revenooers to seize State government bank accounts? To seize physical assets and sell them at auction? Fat chance.

No, there should be bailout in any form, no Federal money at all for Illinois. The State’s government must correct its profligate spending misbehavior and honor the commitments it already has on its books. That those requirements exist in some opposition to each other is a problem of Illinois’ creation, and it’s on Illinois to fix it without other taxpayers’ money.

New Jersey Wants Federal Dollars

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But it’s not a bailout, Governor Phil Murphy (D) insists.

“I wouldn’t call it a bailout. I would just say this is a war, we’re at the front lines,” Murphy said, stressing that his state does not want federal help at this time for “legacy” budget issues that predate the pandemic.
“We know what we got to do with the old legacy stuff, we need help with the here and now: educators, police, fire, EMS, the front-line stuff.”

Of course…. To the extent that any Federal dollars should go to States, New Jersey for instance, those dollars should go directly to the educators, police, fire, EMS, the front-line stuff; they should not pass through the State government on the way.

And: to mitigate the fungibility of money, those Federal dollars should be matched by State dollars. A State government should not be able simply to reallocate the funds it would already have been sending to “the front-line stuff” to other purposes on the premise that Uncle Sugar is picking up the front-line tab.

…if we do not get significant direct and flexible financial support from the federal government, we will be forced to make many difficult decisions about programs we all rely upon and which we will lean on in the months ahead.

What decisions to make vis-à-vis excessive public pension commitments and payouts, for instance. Regarding excessive and overwrought regulations that cost tremendous amounts to enforce and tremendous amounts for businesses and individuals to satisfy, and so that divert monies from their more efficient allocations and thereby restrain economic activity and reduce revenues to the State’s government.

Difficult decisions, indeed.

A Supreme Court Error

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No, I’m not talking about the Court’s cowardice on gun rights. This one concerns the Court’s nearly unanimous decision regarding any Congress’ ability to undo what a prior Congress has done and the Executive Branch’s obligation to spend money that hasn’t been appropriated.

The Court upheld health coverage providers’ demand, under Maine Community Health Options v US for

payments to health insurers for so-called risk corridors in ObamaCare’s first three years[.]

Never mind that the 112th Congress, in 2010, undid what the prior 111th Congress had done and both refused to appropriate funds for those “risk corridors” and explicitly forbade the Executive Branch from making any risk corridor payments from other funds.

Never mind that money must actually be appropriated before it can be spent. Article I, Section 9 of our Constitution makes that clear.

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law….

At least it used to be clear.

Now none of that matters. In addition to the “implied rights” that the Supremes are wont to manufacture, now it has manufactured out of whole cloth an implied obligation.  The health coverage providers are owed the money because a prior, overridden, Congress wanted the money paid out.

And We the People are the ones who’ll be left paying for this egregious error of the Court. Pay up, suckas.

A Taxing Error

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The European Union is making one. Again.

Of the EU-27, France, Poland, and Denmark have so far proposed barring companies that are based, or have subsidiaries, in tax havens from receiving coronavirus-linked bailouts. Italy may soon join them after Foreign Minister Luigi Di Maio added his voice to calls to tackle tax havens.
Meanwhile, the European Commission confirmed on April 24 that its existing rules allow individual EU countries to block coronavirus aid from going to companies based in tax havens.

Whether such companies should be eligible for Wuhan Virus-related bailouts is a separate question. Whether there should be Wuhan Virus-related bailouts at all is yet another separate question.

What’s of particular interest to me is this claim by so-called “tax experts:”

[S]uch national measures could help boost transparency and moves toward a level playing field in global corporate taxation.

It’s inconceivable to these folks that another way to achieve a level playing field in global corporate taxation is for high-tax nations to lower their tax rates rather than trying to compel low-tax nations—those putative tax havens—to raise their own tax rates.

After all, these personages, seem to insist, competition is all well and good, except when it’s inconvenient to Government. The convenience, the outright benefits, to the citizenry of competitive outcomes—lower prices, better quality products, a broader array of them—is immaterial to these personages. As is leaving more money in the hands of those unwashed citizens by inflicting lower tax rates on them.