Tag Archives: economics

That’s the Point

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Recall that one of New York City’s Progressive-Democrat Mayor Zohran Mamdani’s goal was a plethora of city government-run grocery stores to sell groceries at “affordable prices”—which, for Mamdani, meant “cheaper than what existing grocery stores were selling.” He could mean only that, else he’d be conceding that those prices already were affordable.

The outcome of such a move is laid out in the subheadline:

His socialist supermarkets could put New York’s little grocers out of business.

That’s the point.

Like any good socialist, Mamdani wants government to control the producers. Especially if it’s the particular socialist’s government. Getting rid of the little businesses demonstrates to the larger stores and the chains—whose individual stores generally are franchises run by moms and pops or collections of them run by small- or mid-sized businesses—that they’d better kowtow to the socialist government or leave. In either case, that would increase government’s control over the remains.

Driverless Trucks and Good Paying Union Jobs

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Keith Hernandez, of Teamsters Local 727, doesn’t like driverless trucks.

Driverless trucks endanger good-paying jobs and the communities that rely on them… he says. And

Automation would remove the real-world, first-hand experience and knowledge drivers gain on the road.

No, they wouldn’t and don’t. All that “real-world, first-hand experience and knowledge” is contained in the computers that operate the autonomous vehicles. Delivery drivers are my friends and sales people, as Hernandez also claims? They may well be friendly, even friends, but that’s wholly outside of and separate from their role as drivers. And, no, neither the UPS driver, nor the FedEx, nor Amazon—nor even the Door Dash driver nor the pizza delivery guy are salesmen and women. They don’t pitch me, and I wouldn’t be interested if they did.

Driverless trucks, though, to the extent they succeed in safe, efficient, speedy delivery actually will reduce costs to consumers by taking the labor cost out of the picture. And if they don’t succeed, the truck drivers will continue to thrive in their own right.

No, leave it to a union man to take this tack. Your money belongs to the union. If it can’t get your money by forcing dues payments, it’ll try to get it by featherbedding into unneeded jobs, driving up your costs.

A Reformed Fed

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David Malpass, Undersecretary of the Treasury during Trump I and World Bank President during the reign of ex-President Joe Biden (D), correctly noted that the Federal Reserve Bank as currently constituted is using the wrong economic models and, as a result, has been a singular failure in controlling inflation and that it has been a failure all of this century.

He proposed some remedies.

  • Current models…need to be replaced with economic models that welcome strong investment, innovation, and job growth and recognize dollar stability as a prerequisite for price stability.
  • shrink its balance sheet to allow private-sector liquidity markets to rebuild
  • reduce staff and buildings
  • include the dollar in its inflation models
  • disentangle the Fed from fiscal policy
  • extract itself from the climate regulatory morass
  • allow regulatory innovations in banking and liquidity markets

A capitalist Federal Reserve Bank—what a concept.

There’s another reform, though, that’s an even more critical Critical Item, but this one is firmly on us citizens; it’s the responsibility of We the People. That is to reform Congress by firing those Representatives and Senators who disdain or are indifferent to the imperatives—and the intrinsic morality—of capitalism, and replace them with those who actively support capitalism.

As a man once said, that’s what elections are for. We the People are the electors.

Driving out the Successful

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In the race to see who can tax the rich the most, Rhode Island is contesting for the lead, courtesy of the State’s Progressive-Democratic governor, Dan McKee, and his legislature. The legislature has just passed and McKee just signed a bill that, among other items on Progressives’ wish list, raises the top income tax rate from 5.99% to 8.99%.

All races have winners and losers, and the losers in this race to tax are the citizens of those States whose governments keep raising taxes. It’s not just the Evil Rich who are losers in this race, though. The losers include all those whose portfolios—including 401(k)s and IRAs—benefit from the investments those rich folks make. The losers include the citizens of those high and higher tax-competing States who work, or would like to work, but the jobs aren’t expanding as much or aren’t being created at all because the Rich are constrained in how much they can grow their businesses or innovate from inside them. The losers include the small mom-and-pop businesses who fall into the Evil Rich category via the income pass-through nature of their businesses.

McKee’s tax on the rich in particular, will, as the editors at The Wall Street Journal noted, very heavily impact pass-through small businesses. What can those folks do? A glance at a map suggests a response, at least for the State over which McKee reigns. Rhode Island is 45 miles long, north to south, and its east-west width varies from 20 miles in the north to 35 miles in the south, with some detours to get to bridges across various fingers of Narragansett Bay and Mt Hope Bay. Those business owners easily could relocate to next door Massachusetts or Connecticut and still ably serve their existing customers. Those two States have high taxes, also, but not as destructively so as what McKee is inflicting.

For this Texan, for most of us in the Midwest and Pennsylvania, that’s an easy daily commute.

I Wonder

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The ECB raised its baseline interest rate earlier this week, doing so, it said, in response to the jump in energy prices, which has driven inflation above 3% in the eurozone. Inflation in the rest of the economy—and it’s the same in the US and in the rest of the OECD-esque economies—remains largely muted and under control except to the extent energy costs percolate through them, impacting personal and commercial transportation and shipping, food production, manufacturing, and so on. It’s energy inflation that’s at the core of inflation in today’s overall economy, not a broad excess demand or supply deficiency.

So, I wonder.

When a central bank raises its baseline interest rate, it’s using, if not a cudgel, at least a two-handed sword to address a problem. That’s appropriate, when the problem is broad. But if the problem is narrow, a dagger would seem more appropriate (to continue the metaphor, or perhaps a scalpel, to soften the imagery a little).

Today’s inflationary problem seems narrow, for all its broad effect. It’s energy that’s causing the overall inflation. If raising interest rates is the way to combat inflation, what if a central bank were to raise interest rates only on basic energy production—oil, natural gas, and coal at their input stage, and solar and wind facilities at their component manufacture stage—while leaving its otherwise baseline interest rate unchanged for the rest of the economy?

Clearly that would take some restructuring of its baseline interest control, separating out energy from the rest of an economy. That might demand legislative support. But there’s no reason a farmer should have to pay a higher interest to borrow to get his seed for next year, when it’s core energy that is impacting the cost of his money and not a shortage of seed or a flood of farmers into the market for that seed. It’s the same for folks borrowing to buy a house or car and for those building houses and factories. It’s underlying energy, not a shortage of labor or a spike in buyers, that’s inflating the cost of their money.

On the other hand, raising interest rates on basic energy production would reduce the amount of energy produced. That would lead to reductions in the supply of all the things to which energy is central in their production. The demand for energy is pretty inelastic in a modern economy—it’s going to be produced, within broad limits, regardless of price, and that price increase still is going to percolate through an economy.

So I wonder (still I wonder). It seems to me that targeting the inputs to energy production—crude oil, natural gas coming out of the well, coal leaving the mine, metals arriving at the solar panel or windmill factory while leaving rates on the rest of an economy alone would reduce inflation growth in the rest of the economy while limiting supply deficiencies more than does raising interest rates all across an economy.