Category Archives: markets

Hysteria or Hypocrisy?

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You pick ’em.  The latest example of irrationality (which is a superset of both hysteria and hypocrisy) comes via V the K at GayPatriot.

Recall that the Progressive-Democratic Party that runs Philadelphia passed a massive sugar tax to be levied against soft drinks sold in the city.  Recall, too, the high school economics teaching that if you raise the price of something, demand for that something falls off.  Finally, recall that applying a tax to that something is the same as raising its price.

The [soda] tax is huge, amounting to a 45% to 100% increase in the final consumer cost of typically affected beverage products.

Last week the other shoe dropped.

Two months into the city’s sweetened-beverage tax, supermarkets and distributors are reporting a 30% to 50% drop in beverage sales and are planning for layoffs.

And

One of the city’s largest distributors says it will cut 20% of its workforce in March, and an owner of six ShopRite stores in Philadelphia says he expects to shed 300 workers this spring.

“People are seeing sales decline larger than anything they’ve seen up to this point in the city,” said Alex Baloga, vice president of external relations at the Pennsylvania Food Merchants Association.

And

Sources with Teamsters Local 830 say that layoffs are “imminent” and that some workers have seen their take-home pay drop by 50 to 75% because they’re moving less product.

Restaurants are feeling the pinch, too. Josh Kim, owner of Spot Gourmet Burger, says sugary drink sales at his shop have gone down about 10 to 15%.

Naturally, the Progressive-Democrats, unable to confess to their economic illiteracy (I don’t think they’re economically illiterate, either; these are the party of Know Betters; economics is one of the things they Know Better than us petty commoners), are calling the supermarket and distributor management greedy liars.

We have no way of knowing if their sales figures and predicted job losses are anything more than fear-mongering to prevent this from happening in other cities,” said city spokesman Mike Dunn.
…
“I didn’t think it was possible for the soda industry to be any greedier,” [Philadelphia Mayor Jim] Kenney said in an emailed statement. “… They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.”

Go figure.

Call Them on Their Obstructionism

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Heather Higgins, CEO of Independent Women’s Voice, says go big or go home regarding Obamacare.  Republicans in Congress should quit dithering, should not play reconciliation games, and should simply put an Obamacare repeal and replace package up for vote.  This would force the Democrat obstructionists—especially those #NeverTrumpNoHow and #NeverRepublicanNotEver Progressive-Democrats in the Senate on the record as by-name blocking reform of the Obama program that is in its death spiral, the endpoint of which will leave millions of Americans without health coverage and without even coverage providers to which to appeal.  Especially put those 10 Progressive-Democrats pretending to moderacy in order to protect their precarious reelection chances in 2018 on the spot.

Now that insurers are acknowledging the death spiral, there’s an opportunity for bolder action. The House could use regular order, not reconciliation, to pass a bill that not only fully repeals ObamaCare—returning control of the private market to the states—but simultaneously puts into effect at least the core components of reform while including grandfathering and other provisions to smooth the transition to lower-priced options on the free market.

Such a bill could easily pass the House, putting pressure on the Senate. Would Minority Leader Chuck Schumer allow proper consideration of much-needed health-care reform? And with all the evidence that ObamaCare has been a disaster and—untouched by Republicans—is quickly unraveling, would Democrats, 25 of whom are up for re-election next year, vote to defend the status quo?

And

There would be two Senate filibuster points—the first, to allow consideration; the second, to allow a vote. Thinking through what would happen, the American public and Trump administration would be well served by this exercise of transparent democracy.
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If Democrats blocked consideration of the bill, they would do President Trump a favor by showing the public the parliamentary shenanigans of the anti-deliberation filibuster—call it the “Senatorial Full Employment Through Avoiding Tough Votes” maneuver.

And

If Democrats refuse to allow debate, Republicans should kill the filibuster against deliberation (as distinct from the filibuster to end debate and hold a vote). They can do so by simple majority vote, as Harry Reid showed when he ended the filibuster against most nominations in 2013. Either way, the Senate can actually have a vote on repealing the Affordable Care Act and reforming health care.

Republicans should heed this advice, and go for it.  If it fails, Republicans can always go the reconciliation route.

Domestic Protectionism

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Illinois State Congressman Michael Zalewski (D), after consulting heavily with General Motors, wants car makers to be able to operate self-driving taxis—which, of course, those same car makers would make.

However.

His bill, introduced February 8, would limit access to the business to companies that make their own vehicles. That means GM would be eligible, but not tech companies like Uber Technologies Inc that are developing their own self-driving cars and don’t make their own vehicles.

Nor would Google be allowed in.  Or Lyft, were they to want to get into the business.  Or an IBM, should it want to build a Watsonmobile.  Or….

After falling behind in self-driving cars, GM has unleashed its powerful lobbying team to cultivate relationships with statehouses. The largest US vehicle maker by sales has a long history of backing legislation to preserve its interests, including a bill in Indiana last year that would stop electric-vehicle maker Tesla Inc from operating its own stores there.

What a surprise.

Of course, GM is denying ulterior motives, but this is just internal protectionism—anti-competitive and monopolistic.  Rather than competition pushing car companies to produce better cars, including self-driving ones, the fearful ones like GM are pushing to squelch competition.

It’s no wonder that a bare nine years ago GM was facing bankruptcy up close and personal.

Immigration—Whose Rights?

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Here’s Mexican Secretary of Economy, Ildefonso Guajardo, on the question of whether NAFTA should be renegotiated:

Logically, there wouldn’t be incentives to continue collaborating on the issues most important to national security in North America, such as the issue of migration[.]

And this:

[T]he Trump administration’s effort to step up deportations have already prompted an aggressive campaign by some Mexican officials, governors and public figures to fight the policy by jamming up US immigration courts.

That particular bit of business has been noted earlier.

Because foreign individuals or those who are part of a flow of migrants have their own right to enter another country, or to be in another country, just because they want to or are on the move?

This is, in many respects, the obverse of my piece yesterday: does a foreign national retain his home country’s rights when he’s inside the US (for instance, Mexico has made it illegal to prevent a Mexican citizen from leaving Mexico)?  Does a foreign national have an intrinsic right to be in our country, independently of our wishes, even our law?

Note to Self: Delete notes to self before publishing a piece.

A Thought on a Thought on Bank Reserves

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Neel Kashkari, President of the Federal Reserve Bank of Minneapolis and active member of the Federal Open Market Committee, had the thought that’s the object of my thought in a recent op-ed in The Wall Street Journal.

…increase capital requirements on the biggest banks—those with assets over $250 billion—to at least 23.5%. It would reduce the risk of a taxpayer bailout to less than 10% over the next century.

No.  Have the banks publish their reserve holdings and the total of the loans outstanding in their portfolio together with the per centages of the latter that are current, late, or in default.  Let each bank’s creditors—depositors and other lenders—and investors make their own assessments of the bank’s viability.  Government need not be involved.

Beyond that, we have a bankruptcy court system that’s entirely adequate to the problem; there’s no need to excuse banks from the system.  Moreover, by doing this much, we would eliminate the too-big-to-fail monstrosity of Dodd-Frank, and we would reduce the risk of a taxpayer bailout by far more than Kashkari’s timid 10%: that risk would be reduced by 100%.

Beyonder than that, we have this seeming conflict.  Bank of America CEO Brian Moynihan recently asked,

Do we have [to hold] an extra $20 billion in capital? Which doesn’t sound like a lot, but that’s $200 billion in loans we could make.

To which Kashkari quite legitimately replied,

Borrowing costs for homeowners and businesses are near record lows. If loans were scarce, borrowers would be competing for them, driving up costs. That isn’t happening.

However, leaving aside the regulatory state that’s holding back our economy and with that depressing demand for big ticket items and so demand for loans (and interfering with the process of loan making, as described by Kashkari in his piece), the loan rates/demands vs freeing up those loanable funds is a chicken and egg thing.

I vote for the egg: free up those restricted funds in the private sector instead of freeing up funds via the Federal printing press.