Category Archives: markets

The Problem with a Law

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In 2012, the Labor Department threatened to seize the blueberry crops of a couple of Oregon farmers until they settled a Labor complaint and signed away their right to appeal the settlement. With crops at risk of rotting away, the farmers settled, agreeing to pay Labor more than $240,000. The alleged “crimes” were Labor’s claims the farmers had violated minimum wage requirements under the 1938 Fair Labor Standards Act. Labor used the threat of seizure of these perishable crops to extort the settlement.

After signing and getting their crops back, the two farmers sued.

The courts were unimpressed with Labor’s behavior.

By using the threat of rotting crops as coercion, the feds trampled due process. In January, Magistrate Judge Thomas Coffin ruled Labor had prevented defendants from having “their day in court.”

In February, Labor asked US District Judge Michael McShane to review Judge Coffin’s decision. Judge McShane agreed with the original ruling, noting the growers had challenged “unique circumstances” involving “a highly perishable product at peak harvest.”

Yew betcha. Hence the extortionate nature of Labor’s behavior. “Nice crop you got there….”

Congressman Kurt Schrader (D, OR) has been equally unimpressed with Labor’s behavior. He’s now writing a bill that would “exempt certain perishable agricultural commodities” from this sort of action.

Schrader doesn’t go far enough, though. The law should be rescinded altogether. The Federal government has demonstrated conclusively that it can’t be trusted with it.

Economic Gains

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President [Barack] Obama used Labor Day to tout the country’s economic gains under his leadership….

Let’s look at those gains.

  • he’s increased the national debt in his six years by 70%—it stood at $10 trillion at the end of 2008; it’s now over $17 trillion
  • median income has fallen—it stands now at $53,900 compared with $56,700 in December 2007 at the start of the current economic dislocation
  • job creation is only just back to pre-Panic levels, 6 years into his administration, compared with normal economic recovery needing only 2-3 years to get to this point
  • unemployment rate now stands at 6.2%, dropping 1.1 points over the past year—still 20% above full employment, and again years behind schedule
  • labor force participation rate is at an historic low
  • GDP growth remains anemic at 1.5%-2.5% year on year (with this year’s growth rate projected to be in the 2.5% range) compared to a normal economic recovery growth rate in the 4.5%-6.5% range.

And this graph sums it all up:RecoveryComparison_Cox

Obama, in the same appearance, also claimed that “higher wages and other progress for workers can only be achieved through a Democrat-controlled Congress.”

Really? Can our country afford more of this Progressive progress?

Obamacare and ObamaMart Strike Again

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In the continuing story of ObamaMart’s still incomplete (!) backend, the part of the Web site that takes the citizen’s input and sorts it, collates it with other government information, and then passes it on to other relevant parties—the health plan providers, for instance, and the IRS—there’s this:

Because of complicated connections between the new health care law and income taxes, the Department of Health and Human Services must send out millions of new tax forms next year.

The forms are called 1095-As, and list who in each household has health coverage, and how much the government paid each month to subsidize those insurance premiums. Nearly 5 million people have gotten subsidies through HealthCare.gov.

If the forms are delayed past their Jan 31 deadline, some people may have to wait to file tax returns—and collect their refunds.

A delay of a week or two may not sound like much, but many people depend on their tax refunds to plug holes in family finances.

That folks should better plan their withholding (where possible) and not extend Uncle Sugar a year-long interest-free loan is a separate story. Such planning is typical, and the folks who do this the most are the poorest among us—the very folks President Barack Obama and his ilk claim to be trying to help.

And there’s the coming collapse of employer-provided health plans.

Analysts predict that as ObamaCare takes hold, it will mean the end of employer-provided insurance….

The Wall Street research firm S&P IQ went even further, predicting 90% of such plans will disappear.

Now, I don’t see such an eventuality as necessarily a bad thing. Employer-supplied health plans should be what employer-supplied insurance plans used to be, when the practice began: a matter of employment compensation negotiation between employer and (prospective) employee. What interests me here is the hypocrisy of the thing.

President Barack Obama promised, repeatedly, that

you can keep your plan and your doctor, no matter what[.]

If you lose your employer-supplied health plan, you lose with that “your plan and your doctor” bit. Which, of course, Obama knew at the time he was making those promises. He even bragged about it to then Majority Leader Eric Cantor at the infamous health summit.

Also, when Presidential Candidate Barack Obama was debating Presidential Candidate John McCain in 2008, he decried McCain’s health insurance industry reform proposal as being destructive of employer-supplied health insurance.

[T]his would lead to the unraveling of the employer-based health care system. That, I don’t think, is the kind of change that we need.

Hmm….

More Regulatory…Foolishness

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Gordon Crovitz identified some.

The Obama administration’s standard reaction to technological innovation has been to block change via regulation….

Federal regulators are also putting the brakes on self-driving cars, which are closely related to the Uber innovation—enabling riders to order a car service using their smartphone app. If fast-moving technology hadn’t collided with slow-moving regulators, this might have been the last summer you’d have to drive your own car.

And

US regulators won’t let car manufacturers go much beyond what Mercedes now offers [active cruise control, automatic braking and lane-keeping technologies]. That means car makers can’t roll out technologies they already have, and auto makers in Europe, which has fewer regulations limiting technology, have surpassed their US competitors.

The National Highway Traffic Safety Administration has warned states not to allow fully self-driving cars, like the one Google is developing, except for testing purposes. The agency says it’s working on a study that will take at least until 2017. Regulators say they’ll release performance metrics for self-driving features, then run the tests, then issue regulations, and only then permit sales. Meanwhile, the agency has delayed a plan by Tesla to replace traditional side mirrors with more effective cameras.

In the end, it doesn’t matter whether or not this technology works as well as advertised. Existing liability law will deal with failures. This is Big Government regulating for no other reason than that it can. This produces the opposite of what government is required to do; one aspect of this requirement being clearly laid out in Art I, Sect 8, of our Constitution: To promote the Progress of Science and useful Arts….

Because, Big Government. Now shut up, and quit arguing.

Another Look at Tax Inversion Mergers

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Burger King Worldwide Inc is in talks to buy Canadian coffee-and-doughnut chain Tim Hortons Inc, a deal that would be structured as a so-called tax inversion and move the hamburger seller’s base to Canada.

After all, Canada’s corporate tax rate is competitive even with Ireland’s 12.5% rate, at least from the lofty perspective of our own 35% top corporate rate: Canada’s rate is 15%. This inversion isn’t just the fiscally sound thing to do, it satisfies the company management’s fiduciary duty to control costs and maximize profits for the company’s owners.

BK isn’t alone in moving to Canada:

Valeant Pharmaceuticals International Inc, which had been based in California, combined with Canada’s Biovail Corp in 2010 and redomiciled in Canada. The company now has a tax rate less than 5%.

And there are others.

Naturally, the Progressives in Congress and the White House—and no few captured Republicans—are demanding a stop to the inversions. Not in any sensible way, though. Treasury, for instance, is looking at a range of “options to deter or prevent” inversions.

No, BK’s pursuit of an inversion deal only illustrates the distorting, anti-competitive nature of our current tax code, and Treasury’s “options” will only make the thing worse. The right answer is to lower US corporate tax rates to competitive levels. When it becomes more attractive to be in the United States, to invest in the United States, to have a chance actually to turn a profit in the United States, not only will the BKs, the Valeants, and the AbbVies and Covidiens, et al., stay, foreign companies will look to come to the United States, bringing their ideas, their money, and their jobs here.

Even Canada, right next door (the convenience…), is becoming host to these things. But (even) Canada has been improving its tax structure for some years, lowering its corporate tax rate since 2005 from over 22% (still lower than the US’ then) to just 15%. Indeed, here’s a hint:

Tim Hortons [originally a Canadian company until its acquisition by Wendy’s] initially kept its headquarters in Delaware after it was spun off by Wendy’s in 2006. The chain moved back to Canada in 2009, shortly after the Conservative government in Canada lowered the nation’s corporate tax rate.