Category Archives: Economics

Miscellaneous economy stuff

Change We Can Hope For

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A post-World War II-era program that forces raisin producers to give part of their annual crop to the government could soon be a relic of history.

Several Supreme Court justices expressed doubts Wednesday that federal officials can legally take raisins away from farmers without full payment even if the goal is to help boost overall market prices.

An immediately post-war New Deal law allows the Federal government to manipulate the market’s raisin supply by seizing a significant fraction of a raisin farmer’s crop and thereby prop up raisin prices—for the benefit of that farmer, you see.

Raisin farmers, over the specific period at issue (because law suits, quite properly, have to be specific in their allegations), were required to give up 47% (!) of their crop to the Feds. Marvin and Laura Horne were among the farmers so afflicted, and they demurred, refusing to give up their property, their raisins. For their effrontery, the Feds have fined them almost $700,000.

The law in question, though, is a follow-on from the Supreme Court’s earlier Wickard v Filburn case that gutted the Commerce Clause by allowing the Federal government to dictate to farmers how much wheat they could grow—and therewith to manipulate market prices. Wickard made possible all of the subsequent market interferences and farm diktats that the government has inflicted on the nation.

This case, Horne v Department of Agriculture, is an opportunity for the Supremes to begin correcting that original mistake.

Wages

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Democratic Party Presidential candidate Hillary Clinton has been making a big deal about what she claims is the outrageous pay of company CEOs compared to their employees. Here’s a graph, via AEIdeas‘ Carpe Diem and Mark Perry that indicates how well she’s walking that talk.ClintonWage

Or is this fact just another of campaign season distraction and attack from the Hillary Truth?

Hmm….

Embarrassingly Dysfunctional

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To coin a phrase, this is embarrassing, a Department like this.

Ignored claims, manipulated records, cost overruns and even one facility infested with insects and rodents are among the latest issues uncovered by a blistering VA Inspector General’s report. The auditor’s probe found that more than 31,000 inquiries placed by veterans to the Philadelphia Regional VA office call center went ignored for more than 312 days, even though they were supposed to be answered in five. Perhaps even worse, claim dates were manipulated to hide delays, $2.2 million in improper payments were made because of duplicate records, 22,000 pieces of returned mail went ignored, and some 16,600 documents involving patient records and dating back to 2011 were never scanned into the system.

This is a year after the Veterans Administration promised, to Congress and to us, that they were cleaning up their act.

Disband the Veterans Administration; it’s an affront to our veterans and an embarrassment to our nation. Use the VA budget for vouchers for vets. No more delay. Our vets can’t wait.

Wrong Answer

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Electricity producers in several states are asking for hundreds of millions of dollars in financial support to keep costly nuclear power plants in business[.]

For instance,

New York and federal regulators are weighing whether to make customers subsidize the Ginna nuclear station in Ontario, NY, 20 miles northeast of Rochester.

And

Illinois is considering financial assistance for three Exelon nuclear plants that the company says are suffering from low power prices. State officials are considering several forms of aid, including legislation that would require utilities to support carbon-free generators like nuclear and renewable energy.

And

FirstEnergy’s proposal would obligate three regulated Ohio utilities it owns—Ohio Edison, Toledo Edison and Cleveland Electric Illuminating—to buy kilowatts from Davis-Besse and other company-owned plants even when cheaper electricity is available on the open market.
Consumers would pay an extra $400 million in the first three years of a 15-year contract….

These are the wrong answers.

There’s no question that users of electricity from nuclear power plants should be the ones to bear the costs of electricity generated by them. However, those costs are artificially high, hugely high. Permitting, licensing, and government regulation add billions (yes, that’s with a ‘b’) to the cost of building a new plant (which would be more efficient and generate at lower cost than existing nuclear plants) and of operating plants, whether old or new. Those impediments don’t need to be anywhere near so extensive to achieve their legitimate purpose: to ensure the plant builders know what they’re doing and to ensure the plant operators know what they’re doing.

Another artificial cost of nuclear plant existence (much less operation) is storage of spent fuel. Nuclear plant operators have been charged a fee to support building, transportation to, and storage at a nuclear spent fuel repository in Yucca Mountain. Even after that facility was prevented from opening and the nuclear plants forced to store their fuel on their own sites, that fee has continued to be charged, and it’s added up to additional billions of dollars of cost, held essentially in escrow in Uncle Sugar’s hot, grimy, little hands. It’s time to open the Harry Reid Nuclear Fuel Repository in Yucca with no further delay. Or to build a facility somewhere else (Nevada and New Mexico have several other useable sites) and in the meantime return those billions in collected and unspent fees to the plant operators for their use in on-site storage.

More on the Minimum Wage

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Ronald Bailey at Reason had this iteration of “more.” He brought this item up, even though it’s been described before:

In the absence of the higher minimum wage, employers would generally hire more workers to meet an increased demand for fast food. Boosting the minimum wage means that the revenues that would have otherwise been used to hire new workers is not available. The end result: fewer jobs created and more folks unemployed.

But then he cited some actual research:

…published in the December 2014 issue of the Journal of Labor Research, Andrew Hanson of Marquette University and Zack Hawley of Texas Christian University analyzed how low-wage employment would be affected in each state by the imposition of the national $10.10 per hour minimum wage supported by President Obama. The Hanson/Hawley study takes into account how wages relate to the varying cost-of-living levels among the states. First they report the number of workers in a state who earn less than $10.10 per hour. Next they apply the widely agreed upon formula that for every 10% increase in wages there is a corresponding 1 to 2 percent decrease in demand for labor. They then straightforwardly estimate that boosting the federal minimum wage from $7.25 per hour to $10.10 per hour would result in the loss of between 550,000 and 1.5 million jobs.

And this study, by Jeffrey Clemens and Michael Wither of the University of California, San Diego and published by the National Bureau of Economic Research in December, which used different methodology and reached a similar result.

[J]ob losses were considerably higher in states where unskilled workers had been earning less than the new minimum and employers were now forced to pay more. Overall, the authors estimate that the minimum wage increase “reduced the employment-to-population ratio of working age adults by 0.7 percentage points.” Stated otherwise, not raising the minimum wage would have boosted the 2012 employment-to-population ratio from 58.6 to 59.3, which implies that we actually had 1.4 million fewer jobs than we otherwise would have had.

Thus: on the one hand, raising the minimum wage will cost a million people, more or less, their jobs, and on the other hand, an additional 1.4 million jobs weren’t created in the first place.

Beyond that, there’s this. Raising wages raises prices, as even the Left acknowledges. What gets ignored in this is that those higher prices are paid by those who got the pay raise. Those who got the pay raise, also, are those who work low-skill jobs. Those low-skill jobs exist almost exclusively in commodity industries: food service, extraction, and so on. The goods produced in those commodity industries are the ones most susceptible to production costs like labor, yet those costs are most completely reflected in prices despite price competition. These are the goods with whose higher prices those low-skill workers will be confronted. Wage increase leading to price rise equals no net improvement for the low-skilled. That, though, also represents net harm for everyone else in our economy, who also are faced with those same higher prices.

It’s hard to believe those who claim to be so much smarter than us don’t get this. Which makes me wonder about their motive. Against the backdrop of why minimum wage laws were made national laws in the first place, back in the mid-30s.

 

Hanson and Hawley’s paper can be read here, and Clemens and Wither’s paper can be read here (paywall alert).