Tag Archives: economics

It’s No Choice

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President Donald Trump (R) has put on the table a piece agreement between Ukraine and Russia that, if it’s being accurately described, amounts to abject surrender by Ukraine to the barbarian. The arrangement calls for Ukraine to cede to the barbarian occupied Crimea and all of the Donbas, including both the currently occupied and the unconquered parts. Ukraine also would be forced to at least partially disarm and cap its standing army at two-thirds of its current complement, and Ukraine would be forever barred from entering into any sort of defensive alliance.

Even the US would lose in this. Trump and Ukraine’s President Volodymyr Zelenskyy had agreed a deal wherein the US would develop Ukraine’s mineral deposits, including significant rare earths, in return for which the US would get a significant fraction of the outputs. Under the arrangement on offer now, we would lose access to those minerals and rare earths since the vast bulk of them are in the Donbas.

Zelenskyy addressed his people when presented with the peace “deal,” whatever it is in fact, and said that his nation, his people must choose between “dignity, or the risk of losing a key partner.”

If this “peace” thing is being described accurately in the press, Ukraine already has lost a key partner.

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.

Be Still, my Heart

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Visa and Mastercard, two of the largest credit card issuers, may be reaching a deal with merchants over fees charged merchants. This could settle a dispute that’s gone on for two decades.

Under terms being discussed, Visa and Mastercard would lower credit-card interchange fees, which are often between 2% and 2.5%, by an average of around 0.1 percentage point over several years[.]

A whole tenth of a percentage point. That miniscule fraction adds up, some, over many years, for the card issuers, but it does nothing for the individual merchant—or the merchant chain.

To put that magnanimity in perspective, imagine an investor—one of those merchants, perhaps—investing in an instrument that grows at 0.1% per year.

Were he to start with a $10,000 investment, after 10 years, his pile will have grown to $10,100.451.001. After 20 years, the duration of the current dispute, he would have a $10,201.91 golden egg.

Be still, my heart. With friends like this in the merchants’ world, I’ll continue to do business, as much as possible and especially with local mom-and-pops, in cash, which lets the merchant keep all of the money I’m paying for his good or service.

Some Thoughts on Tariffs

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The Wall Street Journal‘s editors have twisted their panties on tariffs, again, this time showing their lack of understanding of tariff rebates to us low- and middle-income American citizens (in addition to their lack of understanding of tariffs as foreign policy tools. That President Donald Trump (R) has muddled that use is not an excuse for the editors’ failure).

Begin with a couple of things the editors have elided.

President Donald Trump (R) early on said tariffs would let him reduce income taxes—something the editors completed ignored in their present missive. Trump wants to give a $2,000 tariff rebate to us American citizens. While this isn’t a direct reduction of our income taxes, it certainly offsets that much of each of our income tax bills. As a first step in reducing income taxes, it’s not bad.

Then there’s this:

In arguing [before the Supreme Court] that tariffs aren’t really taxes and are mainly a tool of foreign policy, Mr Sauer said “these tariffs, these policies, it is clear that these policies are most effective if nobody ever pays the tariff. If it never raises a dime of revenue, these are the most effective use of these—of this particular policy.”

Sauer went on to say that these foreign policy tariffs do, in fact, generate revenue, but that’s deeply secondary to their purpose, which is to persuade the tariffed nation to change its ways. The editors acknowledged that in an earlier editorial, though only by deeply burying it near the end of that piece. This time, the editors completed elided it.

Then there’s this bit of illogic, even as the editors deride the Trump administration’s logic.

If tariffs are most effective if no one ever pays them [as Sauer also argued], then how are they going to raise the revenue Mr Trump needs to pay those rebates?

Here the editors are exposing the fantasy of their world. “No one” ever pays tariffs because they work perfectly, nations are persuaded, and Hallelujah. No. The world isn’t an ideal place, no foreign policy measure ever works perfectly, friction occurs, and nations adapt according to their own imperatives. Foreign policy tariffs will still raise revenue, even as they do move nations to change, if not completely so, in desired directions.

Finally, this bit of editorial foolishness.

This is a teaching moment for a high school logic class. Start with the contradiction that Mr Trump can both pay a tariff rebate and pay down the national debt. The annual federal budget deficit is roughly $1.8 trillion even with tariff revenue, so paying a rebate would add to the national debt, not reduce it.

Start with the derision of Trump both paying a tariff rebate and paying down the national debt. Of course, both can be done. The rebate won’t, of necessity, absorb all of the current tariff revenue raised, and there’s no reason to expect it to do so in the future. Tariff revenue easily can be committed to, and split between, both goals.

And this: paying a rebate would add to the debt? The editors announce this as received wisdom, declining to provide any facts or logic to support their announcement. That’s because they cannot. The debt arises from spending more of individual and business taxpayer money than the government receives in individual and business taxpayer money. Tariff money is outside of that path. Even if foreign policy tariff revenue were taxes, their expenditure is outside the citizen and business tax revenues the government receives, and spending that revenue adds nothing to our national debt, even if all of the foreign policy tariff revenue were committed to rebates.

And this, straight from the horse’s mouth (which postdates the editors’ missive):

All money left over from the $2000 payments made to low and middle income USA Citizens, from the massive Tariff Income pouring into our Country from foreign countries, which will be substantial, will be used to SUBSTANTIALLY PAY DOWN NATIONAL DEBT. Thank you for your attention to this matter! President DJT