Category Archives: Economics

Miscellaneous economy stuff

Globalism

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New York City Mayor-elect and Progressive-Democrat and Socialist Zohran Mamdani has laid it out quite clearly. In his renewed statement that he would uphold an International Criminal Court (to which the US is not signatory) arrest warrant for Israel’s Prime Minister Benjamin Netanyahu, Mamdani said this:

I’ve said time and again that I believe this is a city of international law, and being a city of international law means looking to uphold international law[.]

No. New York City is an American city, and so it is bound by American law. And that means that at the city level (at the State level, come to that), international law is irrelevant. In the case of the ICC, this is doubly so. With the US not being a part of the ICC or the treaty that created it, neither the ICC nor any of its warrants or rulings have any standing in the US.

Whatever one thinks of globalism, this is globalism run amok. This is how far to the left the Progressive-Democratic Party has gone.

If They Depend on Subsidies…

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…then they shouldn’t be in business. The subheadline laid it out:

Republicans want to shift subsidies away from some of the frailest companies in the industry

In this context, “the industry” is the health care coverage industry, and the subsidies are those paid health coverage providers in the Affordable Care Act. I claim, though, that “private” companies that require government handouts are neither all that private nor deserving of staying in business. If they cannot survive without taxpayer money as anything more than a shortish-term loan to survive a catastrophe, they should be left to go out of business.

The news writer at the link made a big deal out of the need for the subsidies to those coverage providers in order to hold down the prices—the premiums—the customers pay for the policies, jerking tears especially for the lower income customers. What he does not address, though, is the deductibles and the out-of-pocket caps those Obamacare policies have. The deductibles and caps each separately represent significant fractions of those lower income customers’ income. They, especially, had better not get sick. If they do, their strait is not much different from that of those folks who are uninsured at all.

The subsidies paid into their hands directly would at least give them a little relief, but that’s only a stop gap. The real solution is to eliminate the ACA altogether and free up the health care coverage industry, restoring it to a health insurance industry in a free market with policies marketable nationwide, rather than limiting them to intrastate sales with the permissions and regulations of fifty different States.

Companies providing health care coverage or insurance should see their prosperity in how well they treat their customers and how well they serve them. Their prosperity should not come from government handouts—transfers from us taxpayers who don’t use their services.

Affordability

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What is this thing, “affordability?” Greg Ip, in his Sunday Wall Street Journal piece, correctly noted that it’s more than just the inflation spike of the Biden administration or an outcome of that spike.

What started as a serious but short-lived spike in inflation from 2021 to 2023 has evolved into something broader and more amorphous. Like the climate crisis or the crisis of democratic legitimacy, the affordability crisis has become an umbrella term for countless loosely connected phenomena.

As a campaign issue, such amorphosity is useful. For us average Americans, though, and for those charged specifically to solve the problem, that’s a useless characterization. A problem needs a specific definition, or its constituent pieces each need a specific definition. That’s where Ip made his own error. He was suitably specific, but in the wrong way.

Strictly speaking, affordability means having the resources to pay for goods and services at current prices. By that standard, the simplest metric is real (i.e., after-inflation) incomes. Real incomes fell behind when inflation shot up, then recovered as inflation receded and wages caught up. Real personal income was up 2.3% in the year through August, and real hourly wages climbed 0.8% in the year through September, both in line with the 19-year average.

None of us spend these mythical “real” dollars, though; they only exist in overall measures of economic questions. “Real” dollars also exist, especially in Ip’s (and my) context, only as a nationwide calculation. All of us, wherever we are in the real (not “real”) world, spend the dollars in our pockets—nominal dollars, the dollars we receive in our paychecks or welfare payments. That’s a fairly steady level for employees of national companies, but it varies widely from region to region for the smaller employers that fit into the “mid-sized” company category; the mom-and-pop wages vary from locale to locale.

Neither do any of us face the nationwide price level that is the outcome of inflation (or deflation); we pay the nominal prices that occur in the specific area where each of us lives. That’s true even for the goods and services that are sold nationwide rather than regionally. California’s prices for energy, for instance, isn’t the same as New York’s, or Texas’, or Nebraska’s, or….

What each of us does do is pay those local or regional nominal prices with the nominal dollars we have. Thus: affordability—usefully specific and accurately defined affordability—is regional and nominal: the relationship between the dollars each of us has and the prices each of us faces in the locale or region in which we live. The military gets at this with the Cost of Living Allowances it adds to members’ paychecks: that’s an addendum intended to cover some of the gap between the nominal dollars servicemen and women receive and the nominal prices they actually face where they’re stationed. Social Security payments get annual adjustments related to the “cost of living,” but those adjustments are nationwide, based on the national inflation rate; they are not adjusted according to where any of us live. Some make out like bandits in their local market places and prices, others are still left well short, most see only most of the gap filled.

Until that is understood, what to do about affordability—if anything—cannot be determined. When real affordability gets addressed, any solutions will have to be at least as finely done as regional. “Affordability” is another area where one-size-fits-all doesn’t fit any.

The Problem with Obamacare Subsidies

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Tony LoSasso, DePaul University Professor of Economics, and Kosali Simon, Indiana University Distinguished Professor of Economics, think the problem with Obamacare subsidies is their structure and not their size, and they want a shift to a Centrally Planned scheme akin to the government-approved form of competition that is the Federal Employees Health Benefits Program, wherein Government decides (still) what is a suitable subsidy and peg[s it] to a lower-cost, benchmark plan. Under this, the coverage who selects a higher-cost plan must pay the cost increment himself. That this is all too similar to Obamacare and its Bronze plan subsidization, with consumers choosing pricier options paying the difference isn’t particularly relevant here.

LoSasso and Simon are missing the beam in one eye for the mote in the other. The problem with Obamacare subsidies isn’t their size, nor is it to whom they should be sent, as some on the right are starting to propose.

The problem with Obamacare subsidies is their existence. This broad government coverage scheme of Obamacare, advertised—still!—as the Affordable Care Act, is not, never has been, and never was intended to be affordable. The Act was intended from the outset to nationalize our nation’s health care coverage industry.

The only real solution, the only one with long-term durability, is to move our health care coverage industry back to its actual health insurance roots, and then to go a few steps further. Make insurance plans entirely salable across State boundaries. What began that century or more ago in a nascent health provision and health insurance process as wholly local and completely intrastate has long since grown to nation-wide production and market facilities, and that’s readily regulable under our Constitution’s Commerce Clause. Make health insurance policies available in one State available to prospective insurees in all States. That alone will let policy costs to the insuree (premiums, co-pays/out-of-pocket caps, deductibles) go down since the insurer will have only one set of rules with which to comply rather than 51 (the States plus the Feds).

In addition, it’s necessary to take the shackles off what insurers (not government coverage purveyors) are allowed to sell and what customers, insurees, are allowed to buy. These salable policies would range, under true, unfettered by Government, competition, from the full-up policies of pre-Obamacare that covered a broad range of ails and potential ails to policies that would cover only specific or closely related ails and potential ails to everything in between, including the sale and purchase of customer-selected bundles of policies covering specific closely related ails and potential ails.

A freely competitive market with far more limited government involvement is what will drive health insurance costs down and policy quality up. And that will have an important sequela: doctor availability, even for those on the bottom economic rungs, will go up.

All of that will take taxpayers out of the business of paying for coverages that don’t apply to them, especially including those taxpayers who otherwise would eschew health insurance altogether.

It’s Really Pretty Straightforward

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The House Select Committee on China has laid out the breadth and complexity of the People’s Republic of China’s cornering of the rare earth production, refining, and manufacturing markets. The report allegedly

provides a roadmap on how the US can stop—or at least slow—the effort by its biggest global economic competitor to prevent the US from breaking into the market.

A road map? It’s really quite straightforward, if politically difficult.

The US has vast supplies of rare earths within our own borders. Canada, who would be better for us (and themselves) as a trading partner than as a State, has similarly vast supplies. We’ve just concluded a trade deal with Australia to export rare earth to us from its vast supplies. African nations have similarly vast supplies, although doing deals there would have more value in denying those earths to the PRC than in getting exports to us, vast as that value would be.

What’s needed, and this is the straightforward but politically difficult part—though the difficulty lies in timid politicians not those determined to do what’s best for our nation—is getting regulations, environmentistas, and climatistas out of the way of each of the mining, processing, and manufacturing phases of getting to the products of rare earths: primarily, but not exclusively, magnets and chips.

The report recommends a variety of market-manipulating measures, and those might be near-term effective, but the problems with government market interventions center on two things: the “government” part, and government interventions are open-ended; they don’t die. The best way for our government to manipulate our economy, our market, is to get out and stay out of the way.

And there’s be nothing at all that the PRC could do to stop us from doing any of that.