Category Archives: Economics

Miscellaneous economy stuff

The Question is a Non Sequitur

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John McKinnon and Brent Kendall, in their Wall Street Journal piece, asked Is FTC Up to the Task of Internet Regulation?

His piece is about the split between what the FCC (the erstwhile “regulator” of the Internet, courtesy of the Obama administration) and the FTC are qualified to regulate.

The question is a bit of a non sequitur, though. The Internet is merely a transport medium, and it needs very little regulation. The FTC is fully up to the task of regulating (ideally with a similarly light touch) trade, which is independent of the medium—highway, railroad, snail mail, or electronic—over which the traded products are transported.

And: lightly regulated commerce is highly conducive to innovation.  Just look at our communications system since the breakup and deregulation of Ma Bell.  And the Internet between its inception and the Obama FCC-imposed impediment.

“SALT and School Taxes”

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That’s the title of a recent Wall Street Journal Notable and Quotable.  The excerpt cited a Bloomberg piece (link in the N&Q) in which that piece’s author, Sahil Kapur, went on at length about how the tax reform and rate reduction bill currently on offer in the Congress will hurt the poor, over-taxed citizens of New Jersey and the State’s education capacity.  Because for the children.

How cynical.

If Kapur and others of his ilk don’t like New Jersey’s high taxes (or New York’s, or California’s, or Illinois’) or how those revenues are allocated, they should stop looking for Federal handouts and get to work on their State governments. After all, it’s Kapur and his fellows, and the rest of the citizens in those States, who’ve been busily electing those overtax and misspend governments.

It’s also true enough that some of those States send more of their citizens’ tax money to the Feds for redistribution than they get back from the Feds, but that just emphasizes the need to put an end to such redistribution of OPM.  It has nothing to do with whether the SALT tax distorting deduction should be preserved.

Disappearing Insurance

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First it was health insurance, dysfunctional as it was, being replaced by the health coverage plan welfare program known as Obamacare.  Now auto insurance is under attack.

New York financial regulators have banned the use of education and occupation as factors in setting auto-insurance premiums….

Never mind that these are useful, if imperfect by themselves, correlates with driving skill and so of insurance risk. The companies accepting the risk transfer by selling a policy don’t get to know that information, they don’t get to assess the level of risk being accepted.  They can’t charge an accurate premium.  That hurts the driver as much or more than it does the insurer.

When insurers are not allowed to learn all the factors that go into the level of risk an insuree is seeking to transfer to an insurer, the policy being agreed ceases to be insurance.  New York’s auto “insurance” program isn’t yet approaching State welfare status, but it is ceasing to be insurance.

The Complexity of the Fed’s Interest Rate Angst

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A Wall Street Journal piece on how Amazon (and online comparison shopping in general) is making life difficult for the Federal Reserve had this remark early on:

Web-driven comparison shopping complicates Fed decisions on how much and how fast to raise interest rates.

No, it doesn’t. Only the bureaucrats at the Fed and reporters in the NLMSM think this is complicated. The Fed wants inflation stable at 2%. The Fed knows that interest rates—the cost of money—are inherently inflationary. The Fed knows what benchmark rates historically are consistent with 2% inflation.

The Fed should set its benchmark rates at those levels consistent with 2% inflation, and then it should sit down and be quiet. Neither its bureaucrats nor its inherently bureaucratic political appointees need to manufacture busywork by artificially complexifying a simple function in order to preserve their jobs. Reporters don’t need to complexify this matter, either; their interns can find lots of other things about which they can write.

Easy peasy.

Of Course They Are

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Universities and businesses are objecting to losing the tax-exempt status of tuition assistance, tuition that the universities receive in exchange for pretending to educate our youth and that businesses provide as an employment perk.  The House version of the tax bills currently in the offing eliminates this exemption status.

Hewlett Packard Enterprise Co, Starbucks Corp, and others say offering tax-free tuition assistance makes it easier for them to keep and train employees.

Schools say they could lose thousands of students if the tuition program is taxed. The nation’s economic development would be stunted if employees shy away from pricey training programs, they say.

Both groups are being disingenuous.  If everyone loses the exemption, no business gains an advantage, and so there is no hit to competition in keeping and training employees.  The businesses just have to make their decisions in this arena based on what’s truly good for the business and not on what works based on Government involvement—those taxes.

The schools won’t lose much either, other than students for whom college isn’t the best choice, anyway.  If their training programs are pricey, too, well, the answer to that is both obvious and wholly within the purview and capability of the schools to effect.  The exemption of tuition assistance from taxation, after all, is nothing but a subsidy, and so it contributes to inflating the price (not the cost) of the programs involved.

Tuition assistance is income; of course it should be taxed, as should all income regardless of source.  The questions here are whether income will be taxed at a low rate—as it should be—and whether our tax code, including tuition assistance being exempt, should be used for social engineering—as it should not be.