Category Archives: Economics

Miscellaneous economy stuff

In Which I Agree with Obama

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…to a point.

Currently, many companies that do business with the Federal government can get Uncle Sugar to pick up as much as $763,000 of their executives’ pay—a cap that, in today’s world of the Evil Sequester, is going to go up to $950,000 at the start of the new fiscal year this October.  And it will be retroactive for all of the current fiscal year of 2012.  That’s your and my money going into a paycheck that companies in the private world cover entirely out of their own revenue flows.  President Barack Obama wants the cap lowered to $400,000.

I agree.  Cord Sterling, Vice President of the Aerospace Industries Association, does, too:

Arbitrary caps are not the best approach and do not account for competition among all hi-tech industries in the market for talent.

Indeed, and to that point: why are we taxpayers subsidizing any part of these guys’ pay?  This is a subsidy that needs to be eliminated altogether.

Some Just Can’t Be Helped

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California is on the verge of a new gold rush. Expanded hydraulic fracturing—or “fracking”—at the Monterey Shale formation is sparking estimates that 15 billion barrels of oil could be accessed, along with millions of jobs and huge contributions to the domestic energy supply.

Even the state’s green-friendly Democratic governor, Jerry Brown, says “the potential is extraordinary.”

But standing in the way is a flurry of anti-fracking bills.  At last count, 10 were on the table, all introduced by Democrats seeking tighter controls over the controversial technology.

Never mind that there’s nothing controversial about fracking, except in the minds of “journalists” looking to peddle their stories and in the minds of “environmentalists” who would rather trash our economy—and so our environment—than do anything serious vis-à-vis our environment, or our economy.

Indeed, as Tupper Hull, Vice President of Strategic Communications with the Western States Petroleum Association notes,

Why would you want to curtail energy production, with a technology that has proved to be safe, and (deny) the folks in the regions of the state where those benefits are going to accrue?  That just doesn’t make any sense[.]

Aside from the general stupidity of this, my concern is that when California goes bust, they’ll come a-runnin’, demanding help, trying to con the Federal government into bailing them out.  With the tax dollars paid by the citizens of functionally bankrupt Illinois, paid by the citizens of nearly bankrupt New York, paid by the citizens of fiscally responsible Texas, paid by the citizens of….

The Logic of the Left

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The UK’s antitrust watchdog Thursday said Ryanair Holdings PLC should reduce its 29.8% stake in Aer Lingus

because Ryanair’s stake

obstructs Aer Lingus’ ability to merge or combine with another airline to build scale and achieve synergies to remain competitive.

Never mind that the present Aer Lingus-Ryanair combination helps Aer Lingus “build scale and achieve synergies.”

Hmm….

Obamacare Fail

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…again.

Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.

Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country.

This, of course, is backwards.  The coverages here should be paid out of pocket.  The better policy would cover only catastrophic events—like hospitalization.

Then there’s this:

[E]mployers and benefits experts have understood the rules to require robust insurance, covering a list of “essential” benefits such as mental-health services and a high percentage of workers’ overall costs….

But a close reading of the rules makes it clear that those mandates affect only plans sponsored by insurers that are sold to small businesses and individuals, federal officials confirm.

The money-saving bare bones policies are only available to large companies.  The jobs producers remain stuck with the expensive, overwrought mandated policies that they cannot afford.  Nor can they afford the penalties Obamacare exacts for not affording them.

And this from Kansas Insurance Department Special Counsel Linda Sheppard:

The whole idea is to get healthy people in and not-so-healthy people in.

Never mind that healthy people don’t need to be in, since they don’t need the coverage, and so they shouldn’t be being forced in.

Let’s Try That Again

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Joe Rosenberg, Loews Corp Chief Investment Strategist, has suggested that large, rich corporations should bailout a spendthrift, debt-ridden Federal government.  After all, he says, since the Federal government had bailed out some big businesses in the Panic of 2008, it’s only proper to return the favor.  As if two wrongs would make a right.

Rosenberg’s proposal is this in its essence:

Companies like Apple, J&J, Microsoft, and other US multinationals are major vendors to the federal government.  Instead of the deficit-ridden government borrowing money to buy their products, let the companies offer the government long-term, no-interest financing in lieu of cash.

In return for this no-interest loan, the companies—which would be required to source the government-purchased products in the US—would be allowed to repatriate 75 cents of every dollar they lend without incurring income tax.  The repatriated cash would pay US workers and US suppliers, increasing employment in this country.

Sadly, no.  The present problem is government spending too much, not being short of money to spend.  Moreover, the demanded vig—paying a 25% tax on the repatriated funds instead of the current 35%, and that only if the money is turned over to the government, anyway—is a money loser for the companies.  On top of which, requiring the government to buy only from American sources means denying the government the lowest prices available for the goods and services it thinks it needs—more wasteful government spending.

Here’s my proposal: companies like Apple, J&J, Microsoft, and other US multinationals should stop being major vendors to the federal government.  Since the government is so addicted to spending it can’t control itself, it’s time for an intervention: stop selling to the government and thereby force it to reduce spending.  These companies will take a hit to their bottom lines from the loss of revenue, but a) the government is paying them with soon to be depreciated—heavily—dollars (that Bernanke Inflation that’s just around the corner from all of his money printing), and b) the hit will be temporary as the companies find other buyers with which to replace the government.