Category Archives: Economics

Miscellaneous economy stuff

That’s the Point

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In a recent Wall Street Journal op-ed concerning the California state government’s response to a state court finding that the state’s high-speed rail authority had violated the 2008 ballot initiative authorizing $10 billion in bonds for the 500-mile train’s initial construction, thereby hamstringing (temporarily) this white bullet train, Allysia Finley quoted Governor Jerry Brown (D) as saying,

It’s not a setback.  As we speak we’re spending money, we’re moving ahead.

Indeed. Isn’t that the point of this project that only a Democrat could love?  To spend money?

Wondering Why?

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…your gas prices are as high as they are?  It isn’t only the summer driving season.  It isn’t only limits on gasoline production at our refineries.  It isn’t even that ethanol-laced gasoline doesn’t even store well so that inventories can be built to smooth out the ebbs and flows of supply and demand.  Here’s another reason, alluded to in a Wednesday op-ed by Kimberly Strassel on a related topic.

Last week, the Environmental Protection Agency issued its annual renewable-fuels mandate, telling refineries how much ethanol they must blend into the nation’s gas supply.  This quota, which grows each year, is becoming a horrific financial burden on the industry, forcing many refineries to buy federal ethanol “credits” to satisfy the rules.  The skyrocketing price of those credits is adding hundreds of millions of dollars to refineries’ annual costs.

Those costs are passed on.  To gasoline-buying customers like our neighborhood filling stations—and you and me.

Refiners say that, with declining demand for gasoline, next year (2014—oddly, a mid-term election year), the existing quota for ethanol use will force them to blend in more than 10% of ethanol into their gasoline production, which both adds to gasoline costs and isn’t safe for many of the engines that use gasoline—like some cars that are optimized only for 10% blends, and smaller engines such as those used in our lawnmowers.

Even at that, the mandated ethanol use quotas simply aren’t possible to get to.  The 2013 mandated quota is 6 million gallons (down, incidentally, from the EPA’s original laughable requirement of 1 billion (that’s with a “b”) gallons to be used this year); the nation’s total ethanol production for this year will top out below 50 thousand gallons.  The quota stands, though, so the refiners are required to go onto the EPA’s ethanol credit market that Strassel mentioned, and buy up enough credits to make up for their collective failure to use 950,000 gallons of ethanol.

Costs.

Responsibility

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The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt.  People must again learn to work instead of living on public assistance.

Cicero understood this in 55 BC.  Rome failed to recover her sense of responsibility—personal and individual, as communities, as a nation—at all levels.  Tyranny arrived shortly after Cicero published his realization.

Short-of-Death Panels

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Power Line received an email the other day from a gentleman who is…how shall I put it—unimpressed…with Obamacare.  It’s a long email, but you should read it all.  It recounts his experiences following a pair of strokes—one of them massive—he suffered a bit under two years ago at the ripe old age of 30.  The man spent three months in the hospital, much of that time on life support, and his doctors tell him that had he survived (his chances were about 1%—as he notes, a new meaning for a Democrat mantra), he should have been a vegetable.  But he had a Cadillac insurance policy—one of those openly attacked by Obamacare, and he had very much good fortune that Obamacare would have obviated.

There’s much in the man’s email that recounts his good fortune at not—yet—having to wear the yoke of Obamacare; I want to excerpt just a bit [emphasis added].

Had I been an elderly patient responsible for my own care, or not had the extraordinary family connections that I have at my disposal, I would have been in serious trouble and undoubtedly come out of this much worse.
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I saw the cost-cutting is much more tangible.  A major factor in my recovery has been physical, occupational, and speech therapy.  Without those things I wouldn’t be able to roll over, put on my socks, or eat, among other things.  In fact, before my therapy began I was scheduled to enter assisted living.  Because my therapy was so effective….
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One of the things Obamacare is doing is forcing Medicare’s CMS to cut back on quite a lot of rehabilitation services.
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One of the things that changed for “new” stroke patients was limiting reimbursable therapy visits of all kinds for stroke patients to ten total (because my stokes had happened before the change I was grandfathered in, so to speak).  Ten!

I have had well north of 200 visits.  At upwards of $250/visit for most therapy not many folks could sustain that for long without insurance (and remember, jobs go away when you’re in the hospital as long as I was).  Had I been restricted to ten visits my best case scenario would have involved a home nurse.  I wouldn’t have been able to find work.  And had I been single (as many stroke patients are because they’re elderly and their spouse has passed) I would have become destitute, thus likely landing in the Medicaid system, eventually.

That’s an incredible and frightening amount of power to be put in the hands of DC bureaucrats.  My therapy was at one of my hospitals (I had four) and every day I heard Medicaid patients being told their therapy visits were being cut off.  Those CMS decisions are consigning people to wheelchairs, or worse.
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Granted, my case was exceptionally bad but being limited to 10 visits almost would have been a death sentence.  I’ve experienced some of the most awful things imaginable and to think that a bureaucratic decision made in Washington…could have consigned me to that forever….

It’s August and our Representatives and Senators are in town hall season—those of them with the courage to face us up close and in public, and to listen to us.  Go there, and go there often.  Tell our Congressmen to put an end to Obamacare—no more argument, no more “debate,” no more dithering.  Tell both Democrats and Republicans.  Tell the Progressives and Conservatives, too.

Remember, in the primaries and elections of 2014, who follows your instructions this season.  Also remember who didn’t even have the courage to face you in an open town hall.

Objections to Cancelling Fannie, Freddie

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Are coming out; here are two.  The existence of these objections demonstrates the disaster that government involvement in the market, together with the resulting dependence on government, generate.

Kelly Powers, Vice President for Advocacy at the Arizona Mortgage Lenders Association:

[She insists that] there isn’t enough private capital to step in and take over, and the results on lending could be damaging.

“It would make it much more difficult for people to borrow.  There would be less liquidity and less players in the game.  The requirements would go up and people won’t be able to qualify for loans.”

She added that she “doesn’t want to operate without a government safety net.”

Of course there isn’t enough private capital today: Uncle Sugar has been providing taxpayer money, either directly, or indirectly through “guaranties.”  Liquidity will develop as the market develops and wants it, based on actual demand and supply, not on the availability of the public trough funded by private tax money—which is our money, not government’s and not yours.

With regard to loan “requirements” and “borrowing difficulty,” once the liquidity aspect is sorted out through the transition period (both President Barack Obama and a bipartisan bill in progress—that also excludes future government participation—posit five-six years for getting rid of Fannie and Freddie) lending and borrowing…difficulty…will more closely be based on actual credit worthiness.  See a nearby post.

In the end, a business whose leadership is unable to function without its collective hand in the taxpayer’s pocket isn’t ready for prime time.  No, if you’re unable to take a risk and suffer the consequences without assurance of government bailout, then you’re a failure as a businessman already.

Independent Bankers of America President and CEO Cam Fine also wants his association’s hands in our pockets, and he added a different objection.

It is extremely complex and it would be a delicate venture to get all of the moving parts in place.  It would take a great deal of coordination and cooperation among private investors, mortgage producers, properly funded and established and all of that would have to be done simultaneously.

Again, this is malarkey.  If it’s hard to do, that just emphasizes the importance of getting started.  More importantly, over the posited transition period, a free market will evolve the needed “moving parts” just fine.  If a business(man) is unable to develop in an evolving market place, if a business(man) is unable to take the first step on a business path without the last step—which never arrives in a human endeavor; the last step is itself constantly changing—being planned out to a gnat’s patootie, if a business(man) is unable to function except in a centrally planned economy, there’s no place for that business(man) here.