Category Archives: political economy

A Fiduciary Rule

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The Obama Labor Department, under the suzerainty of Tom Perez who is now the Progressive-Democratic National Committee Chairman, enacted a rule that allowed individuals to hale into court principals of employer or union retirement plans for the crime of charging commissions for their actions.  The rule also redefined “investment advice fiduciaries” to include broker-dealers and financial-insurance agents whose activities are limited to selling financial products.

The 5th Circuit struck the rule as illegal.  That’s good news for all of us.

However.

The Trump Labor Department has said it won’t enforce the rule and is working with the SEC on a new one….

The first part of that is good (and to be expected, since it’s unsavory to enforce an illegal rule).  However, with respect to the second part, it would be better if the Labor Department just sat down and shut up on this. This matter has nothing to do with Labor or with labor.

Banking Reform

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The Senate has passed a bill that greatly diminishes Dodd-Frank’s interference with our banking industry by easing the regulatory burden on financial institutions lesser than the half-dozen or so that have been (mistakenly, IMNSHO) designated systemically important.

There’s concern about the willingness of the Progressive-Democrats who voted for it (including voting to get it past cloture) to vote for it again were it to come back from the House changed in any way.  Republican Senators, as a result, want the House to pass the bill as it is, without alteration or delay.

Many in the House, and The Wall Street Journal, whose op-ed prompted this post, demur and want more reforms added.

Republican Senators’ concerns about the timidity of the Progressive-Democrats and their willingness to vote favorably again is valid, though, and the House altering the bill and forcing that second vote in the Senate is unnecessarily risky. It might cost the entire bill.

Another path is for the House to take the bird in hand and pass it, preserving the partial reforms. Then they should pass their own bill containing the remaining items of interest. At that point Majority Leader Mitch McConnell (R, KY) and his banking committee Senators should force a vote on the House bill, putting all the Progressive-Democrat Senators on the voting record as favoring or disfavoring banking reform.  In an election year.

The PRC and Intellectual Property Theft

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In the absence of any serious legal protections against intellectual property theft in the People’s Republic of China, businesses operating there are engaging more and more in sweeping conference rooms there for bugs and equipping personnel with sanitary burner phones for use while in the PRC.

That’s a start for those willing to put their proprietary information at risk through a business venture inside the PRC or with a PRC-based business anywhere, but it’s inadequate by itself, as illustrated by this bit of naivete by the linked-to piece’s author:

Mr Trump wants China to unwind policies that require auto makers, cloud service providers and others to share technology with Chinese partners for the right to operate here. …for example, operate in 50-50 joint ventures with Chinese partners.
Those technology transfers, however, are distinct from the outright theft some companies say they face.

The distinction is little different from the distinction between extortion and robbery.  President Donald Trump needs to take concrete action to encourage the PRC to eliminate those policies.

Where national security information would be at risk, CFIUS needs to get more active.

Congress needs to take complementary action: perhaps barring companies from sharing their proprietary information, perhaps requiring companies wanting to do business with PRC-based companies or within the PRC to retain a controlling share of any partnership, perhaps other steps, also.

I am Shocked, Shocked

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Recall Amazon.com’s playing off of several cities against each other in order to maximize the tax breaks and other returns that company might get for building its second headquarters in the “winning” city.  Now we discover this in the offing:

US cities vying for Amazon.com Inc’s second headquarters risk facing an unexpected consequence to victory: other companies will demand the same hefty tax breaks conferred on the online retail giant.

How amazing is that?  Other companies want in on the goodies.

I’m not shocked at that; I’m shocked that those cities’ managers didn’t see this coming.  Their lack of anticipation speaks poorly of their ability to respond to those demands.

It also speaks poorly of the competence of those cities’ managers.

Energy “Subsidies”

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The Federal government is continuing its ethanol mandates in its misguided effort to clean up the fuel our cars burn as we get about our business.  In an op-ed earlier this week, The Wall Street Journal rightly decried the artificial, government-created and -propped up market in RINs, which oil refineries can trade around in order to get credit for ethanol that they’re unable to obtain and blend into the fuel they produce.  As the WSJ noted, one of several outcomes of this artificial market is this.

The core problem is that the federal government has distorted the energy market by using subsidies and mandates to support biofuels.

The Federal government has distorted far more than that. By diverting so much corn to ethanol production, the Feds have very greatly driven up the price of food—corn and corn products, meat animals fed on corn, other food crops that are corn substitutes—wheat, beans, etc—and on and on.

The solution is to end this political favoritism.

The favoritism here is in acceding to the wishes three Senators from corn-producing States: Chuck Grassley and Joni Ernst (both R, IA) and Deb Fischer (R, NE).

The more direct solution is for the Feds to end the ethanol mandates and to get out of the energy and food markets altogether (the latter which also requires eliminating farm support subsidies, a much more politically difficult proposition even though the subsidies also markedly drive up the cost of food). A large side effect of that would be to strike a blow against political favoritism.