Category Archives: Economics

Miscellaneous economy stuff

Reapportionment

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There is a flurry of domestic migration from Blue States to other States, usually Red. That could prove costly to the Blue States’ representation in the US House of Representatives.

The left-leaning Brennan Center has taken a look at the Census and finds Democratic-controlled states are likely to lose at least 10 House seats.
If recent trends in population growth and migration continue, the Brennan Center projects that Texas would gain four seats, Florida three, and Georgia, Arizona, Utah, North Carolina, and Idaho one each in the reapportionment after the 2030 Census. California would lose four, and New York two. Oregon, Minnesota, Wisconsin, Illinois, Pennsylvania, and Rhode Island would give up one apiece.
This would give Southern states 164 House seats, which is 19 more than in the 2000s. The Northeast would have 81 seats, down from 92.

That representation reallocation isn’t all. That’s also a shift of Electoral College votes from Blue States to Red to the tune of 30 votes shifting right.

Which is why the Progressive-Democrats are so shrilly against requiring US citizenship as a criterion for voting in Federal elections, requiring proof of US citizenship in order to get a ballot for Federal elections, and—especially—against excluding non-citizens present in their States from the census count that’s used for apportionment. It’s also why Progressive-Democrats so shrilly push for open US borders and welcoming all comers, including illegal aliens, into their jurisdictions. If they succeed in keeping non-citizens in the apportionment count and blocking Voter ID, that would strongly favor apportionment toward them, even with the ongoing domestic outmigration from those States.

Progressive-Democrats are more interested in their political power than they are in free and fair elections.

Electricity Price Controls

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New Jersey’s newly elected Progressive-Democratic Governor, Mikie Sherrill wants them.

Ms Sherrill used her maiden speech to lay out her plans to ease electric rates. “In short, you are sick of the status quo,” she said, “Well, guess what, guys, so am I.” Guess what: Her proposals are more of the same progressive policies that have fueled higher prices: Subsidies, mandates, and price controls.

Especially those price controls.

Her worst idea is a pause on utility “rate increases or cost recoveries to the extent permitted by law.” This is a price control that will reduce grid investment, including in new supply. ….
If utilities can’t pass on their costs, they will skimp on maintenance. It’s that simple.

Of course, those rate increases or cost recoveries permissions are specified by State laws, and Sherrill and her legislature can alter those laws at will. Her “extent permitted” is disingenuous.

Maintenance skimping is well-known to renters in rent-controlled apartments.

If the provider—landlord or utility (or any other)—can’t recoup his costs as those increase, whether they’re supply costs, regulatory compliance costs, or taxes, he has less money to spend on procuring the items he needs to produce electricity or rental housing or… and especially critically, he has less to spend on simply maintaining what he has. Rental homes/apartments and power generators deteriorate, those residences become badly substandard to the point of uninhabitable, and power generation becomes unreliable. That last is bad in a hot summer, and it’s deadly in a cold winter.

With unreliable power generation, we get rolling blackouts where broad areas in succession see the lights go out; oil, natural gas, and coal generators, all of which depend at bottom on electricity, stop; and electric heating (or cooling) systems stop. On-off cycling from those rolling blackouts, even if in longer intervals than shorter, adds to the wear and tear on the generators, and on the heating and cooling systems, requiring increased maintenance for which those price controls, and rent controls, severely limit the money available to pay.

But never mind. Progressive-Democrats want those price controls because that’s their exercise of political power.

Housing Affordability

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A letter-writer in The Wall Street Journal‘s Wednesday Letters section offered a number of ways to break the housing cost problem for folks on the lower end of our economic ladder, folks that include established families and newly graduated young adults. The most cogent way IMNSHO is this one:

The market badly needs deregulation to unlock capital. Tax regulations have frozen large swaths of our existing housing stock. And state and local land use regulations lock millions of acres of land out of higher and better uses by making it illegal to build starter homes on smaller lots.

Especially those starter homes on those smaller lots. Tax regulations, mostly on existing homes up for inheriting, can be handled directly and immediately by the Federal government. The land use regulations consist primarily of State and land use laws and local zoning ordinances, and those are the primary responsibility of the State and local governments. Still, the Federal government has considerable influence that it can bring to bear, from jawboning to financial carrots and sticks.

These starter homes and smaller lots are reminiscent of the Levittowns that were built right after WWII to open up housing for returning white GIs, and their rapid take-up both fired up the housing market and contributed heavily to the nation’s economic reconversion from war to peace and the associated private economic revival. The first Levittown house sold for $7,900, about $80,000-$85,000 in today’s money.

Today’s analog would be shorn of the racial bars and should be shorn, also, of ethnic and religious bars. But that larger target market would only enhance the salability and thereby contribute heavily to breaking the existing cost barrier.

Call them TrumpTowns.

Looks Like an Opportunity

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The People’s Republic of China looks like it’s facing a serious economic problem.

[The PRC’s] relentless pursuit of growth through manufacturing has also created a lopsided economy, with much of it stuck in a deflationary spiral. China’s GDP deflator, a broad price gauge, has been negative since 2023, a sign of inadequate demand at home.

And

The risk is that China could get stuck in a prolonged period of stagnation similar to what Japan experienced during the 1990s and early 2000s—a mindset that becomes ingrained over time and even harder to shift.

The subheadline summarized the problem well:

Exports drive growth while race-to-the-bottom competition from overproduction hits prices, profits, wages, and sales

That economic problem looks like an opportunity for us. The Soviet Union, faced with a stagnating economy and a burgeoning technology deficit relative to us that was epitomized by our ballistic defense system under development and then deployment, folded and disappeared.

The PRC has many technology and military advantages over us, but it’s faced with a similarly stagnating economy, even one threatened with sustained deflation, and with an obvious and worsening demographic condition. The PRC’s critical deficit isn’t technological or military; it’s its economic dependency on exports.

If the US and the West generally were to stop importing from the PRC, that would turn the PRC’s economic war against us to our advantage. We should be able to gain quite a number of concessions in return for resuming buying their output, even including the PLA’s withdrawal from the South China Sea, an end to the PRC’s constant, if low key, threats against Japan in the East China Sea, and a cessation of the PRC’s threats against the Republic of China.

Of course, to achieve that—and it would be best done were it done sharply rather than in dribs and drabs, the Trump administration would need to stop trying to work deals with the PRC and to stop coddling American businesses who bleat about the centrality of the PRC to their profits. The administration and American businesses would need to step up the pace of moving supply chains out of the PRC, even in some cases to begin that reorientation.

It would also be necessary to stop our tariff moves against Europe and to stop trying to obtain control of Greenland so we can persuade Europe to join us in no longer importing from the PRC and to move faster at reorienting its supply chains away from the PRC.

Governments around the world are complaining about an influx of cheap Chinese goods that could hurt local industries.

They just need a push and the removal of economic barriers within the West.

The potential gains, though, are enormous, not just economically, but for the order and the safety of all of us, for all the difficulty of taking either of those two steps.

Wrong Answer

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House and auto insurers’ profits and the rate increases they charge policy holders are coming under political scrutiny, but politicians’ proposed solutions are badly counterproductive.

New York Governor Kathy Hochul (D) this month became the latest state lawmaker to advocate profits caps on insurers, to tackle escalating home- and “crushingly expensive” auto-insurance rates.
Her plan would require home insurers with “outsized profit margins” to lower or justify their rates, and review the profits threshold at which auto-insurers are required to refund customers.
Also this month, lawmakers in states including Oklahoma proposed profit caps targeting insurance.

No.

Government definitions of “outsized profit margins” have nothing to do with business imperatives or what happens in a free market. Those definitions serve only the personal political ambitions of the politicians doing the defining, and they’ll vary across politicians and their political parties.

Beyond that, all price caps do is limit the availability of the product being capped—whether oil and natural gas and gasoline, rental housing availability and quality…or insurance policies. The limit on supply, too, hurts those on the lower economic rungs of our economy first and hardest.

Requiring insurers to justify their rates and the profit levels at which policy holder refunds are paid is a good idea, but government is the wrong crowd that must be satisfied.

Better simply to require insurers to disclose their profit margins and the basis on which they arrive at their definitions of profit. Their policy rates already are publicly available; making both sides of that process public would let the public more effectively shop for policies that suit their individual needs.

Doing that within an increasingly deregulated (not unregulated) insurance market environment would move the industry closer to a truly competitive market within which insurers would reap fair profits and insurees would pay fair premium amounts for the policies they want. And the Critical Item: “fair” would be defined within that competitive market by those market participants, not by any government.