Category Archives: Economics

Miscellaneous economy stuff

EU, Taxes, and Competition

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European Union regulators delayed decisions on whether four multinational companies including Apple Inc and Amazon.com Inc may have benefited from illegal tax sweeteners, citing difficulties in obtaining information to make their case.

The difficulty isn’t just from the companies: the nations involved also are reluctant to give up the data.

There’s this, too:

At a time of austerity in many countries, governments across the continent are seeking to shore up their finances and demonstrate to taxpayers that wealthy multinationals are paying their fair share of tax.

And

Brussels cannot impose tax policy on the bloc’s 28 governments, but regulators are using an EU-wide ban on selective state aid to companies to crack down on individual tax deals that they deem to have given an unfair advantage to certain enterprises.

And

The aim of the investigations, Ms [EU’s European Commissioner for Competition Margrethe] Vestager added, is to set a precedent that would “inspire” national governments to change legislation to ensure their tax systems are in line with EU rules. That has already happened in Ireland, where the government has announced it would phase out the controversial double-Irish tax loophole, she said.

Of course, all of this would go by the boards if the EU and its member nations could understand their governments don’t need the money; they need to reduce their government spending. The money in the nations’ citizens’ hands would be far more efficiently used—and provide the competition Vestager’s office claims to want.

Even accepting the fiction that each nation’s tax code should look like every other nation’s tax code, because all the nations are carbon copies of each other.  After all, suppressing competition among the nations is a core task of Vestager’s office.

A Thought on the TPP

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Japanese Prime Minister Shinzo Abe spoke one out loud while addressing our Congress a bit ago. The Trans-Pacific Partnership agreement is more than just a trade agreement, he said.

What the TPP is all about [is an opportunity to] spread our shared values and have them take root: the rule of law, democracy, and freedom.

What he said.

The SEC’s Abuse of Authority

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Actually, it’s Dodd-Frank’s abuse, and the SEC is only implementing the abuser’s requirement, but still….

At issue here is an SEC proposed rule that purports

to give investors greater clarity about the link between what corporate executives are paid each year compared to total shareholder return—the annual change in stock price plus reinvested dividends, according to people familiar with the measure.

There are a couple of things wrong with this. One, minor on the scale of this…rule’s…transgression is the idea that stock price and dividend handling are the measure of a business’ management. No, these are the outcomes; the actual measures are on the business’ financial sheets. Those P&L, Cash Flow, and Balance Sheets, among a host of other performance reporting documents, are freely available to shareholders—and to prospective shareholders: they’re public documents.

The larger problem, though, is this: the executives’ performance is the business of the shareholders, not the government. This is just a backdoor effort to insinuate government deeper into the management of private businesses.

Dodd-Frank needs to be repealed, and D-F-related SEC (and others’) rules rescinded as soon as this administration can be replaced.

Choices

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The Air Force says that if an amendment to the defense funding bill that extends the operational life of the A-10 makes it into the final budget, it’ll have to mothball a bunch of F-16s or maybe delay deployment of the F-35.

The F-35 is overpriced and undercapabled. I vote for delaying that—or cancelling it altogether.

Or a choice not currently on the table: the F-22 is even more overpriced than the F-35, and it’s even less capable; albeit it’s less capable in an air-to-air environment rather than the A-10’s or F-35’s air-to-mud milieu. Cancel that albatross, too.

Venture Capital

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The Department of Energy’s Loan Guarantee Program—its green energy loan program—is a money loser, according to the GAO.

The Government Accountability Office says the DOE’s oft-touted $28 billion loan program will cost taxpayers $2.21 billion over the lifetime of the loans. Not only that, the costs to taxpayers for green loans has risen about $500 million as “the result of loan guarantee defaults” from companies like Solyndra and Abound Solar.

That’s not bad by itself; the sorts of projects and companies being loaned to via this, essentially, venture funding program are high risk, losses are normal, and for a venture capital effort to lose money overall isn’t at all unusual.

What makes this particular program and its losses bad, however, is that it’s a government program. True venture capital entities, whether they fund through lending or any other method, are private companies. The participants in a private venture capital enterprise are voluntary participants who know, or have the opportunity to learn, beforehand the risks entailed in such a thing and who commit their own money to the effort.

When government gets involved in venture capitalism, the participants—the taxpayers—are not voluntary, they’re dragooned into the effort by the government’s commitment of those taxpayers’ money; the taxpayers have no opportunity to evaluate, before their money is irrevocably committed, the risks being run; and government is committing OPM to the enterprise, not its own money (indeed, the government has no money of its own to commit; it has only those taxpayers’ money).

Government has no legitimate role in the venture capital market.