Tag Archives: economics

Big Government vs Free Market

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An economist says Apple isn’t paying its fair share of taxes. There is many things about which to criticize Apple, but this isn’t one of them.

Davos lights insist that companies are responsible to and for their employees, their suppliers, and their communities. Indeed. And the way to execute that responsibility is to be responsible first to companies’ owners. That’s what helps companies thrive so they can have, and have more, employees and suppliers—which money rotation funds those local communities.

What is Apple’s “fair share?” This economist declined to say—just that it ought to pay more.

The economist insists, instead,

the first step to being a good corporate citizen is to pay tax….

But how much? There’s that carefully undefined “fair share” bit, again. And: why should a business pay any tax at all? After all, the business might sign the tax payment check, but it’s the business’ customers who pay the tax, in the form of higher prices to cover the tax cost. Again, this is carefully unaddressed.

Instead, the economist and the lights of Davos insist that it’s somehow wrong for businesses to minimizes its costs and that it’s somehow wrong for nations to compete on tax rates in order to draw business investment so their citizens can have jobs and prosper.

This is Big Government ideology.

In a free market environment, though, nations do compete on tax rates for the benefit of their citizens. Businesses do work hard to minimize all costs so as to compete effectively on pricing, which directly benefits their customers and which indirectly benefits their communities from localities up through their nations.

In a free market environment, a good corporate citizen works to compete and so to thrive and so to take care of its employees, its suppliers, and its community.

“An Explanation of Modern Monetary Theory”

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A Tuesday Wall Street Journal Letters to the Editor writer offered one.

[I]nflation is the only reason to limit budget deficits. The national debt is never a valid reason in countries with their own currencies; they can always make payments as they come due and can never be forced to default.

In particular,

The debt can always be paid by creating money.

Here are a couple more thoughts on the matter.

Printing money is, in and of itself, inflationary if production doesn’t rise in a way that substantially keeps pace with the increase in dollars chasing those goods and services. Using printed money to pay a national debt doesn’t cut it. Otherwise, Treasury could simply declare our national debt paid off, deeming the dollars printed.

Alternatively, Treasury could execute that middle step; the money printed to pay the debt still must go somewhere after the debt instruments are retired, it won’t simply disappear into the æther—it’ll enter the economy and inflate prices.

And this claim:

Treasurys are completely marketable. If a wealthy bondholder wants to buy something, she will sell bonds.

To whom will this wealthy bondholder sell the bonds (I’ll elide questions about the per centage of outstanding bonds this “wealthy” class holds)? There must be a buyer. If the idea is that Government will use the money to buy its own debt, we’re back to the above. Failing that, it’d be interesting to see this wealthy person take one of his bonds to his grocery store to buy food. Or use one to pay his cab driver—and tip well or ask for change.

This isn’t a theoretical disagreement, either; we have the example of Zimbabwe, courtesy of another writer in his Letter:

Zimbabwe’s government, which printed so much currency that it became worthless and had to be abandoned in favor of US currency.

This writer is the proud owner of a Zimbabwe Z$100 Trillion (yes, with a “T”) note that he picked up for two bucks, US—and he says he overpaid.

Trade Dispute

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Deutsche Welle is worried about President Donald Trump reignit[ing a] trade battle with Europe.

US President Donald Trump vowed on Wednesday to make good on threats to impose high tariffs on European cars if the bloc doesn’t agree to a long-delayed trade deal with Washington.
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The US leader said that the tariffs, which would Germany’s car industry especially hard, could amount to 25%.

This is a misplaced emphasis. The EU has been dealing in bad faith with us, if not openly prosecuting its trade war against us, for some time. The latest example is the EU’s plan to impose a “digital tax” on our tech companies. The EU claims that its new tax would be imposed globally, on all international tech companies, but the largest are American, and the EU tax is explicitly structured to go after ours.

The longer-standing bad faith includes the question of automobile tariffs.  Trump, years ago, offered a no-tariff on cars trade regime as part of a no tariffs at all trade regime between the EU and the US. The German auto industry immediately agreed with the no auto tariffs offer and tried to get the German government to go along with it and work to get EU agreement.  Then-EU President Jean-Claude Juncker agreed to take discuss the no auto tariff question, but then…silence.

The EU (and Germany) have completely ignored the offer of eliminating tariffs on some or all of EU-US trade.

Trump isn’t reigniting anything; he’s just responding to the EU’s trade war.

Tariffs and Fairness

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In a Wall Street Journal article centered on the way tariffs involved in the People’s Republic of China/US trade “dispute” and the simmering EU/US trade dispute impact a Scottish town, Alistair MacDonald posed a question.

Is it fair for the US, in its pursuit of trade concessions, to hurt smaller businesses that make iconic products in nations such as Scotland?

The question is a non sequitur.  The correction is, “Is it fair to single out particular subgroups for special treatment when addressing the rest of the group or the group as a whole?”

No, of course not.

Or MacDonald’s question is not a non sequitur (other than the business about iconic products, which is irrelevant in any case): the group that, at this stage, should be being addressed is the group known as Great Britain. In that light, it would be both fair and politically sound to exempt Scottish industries from tariffs applied in response to EU trade abuses. Scotland, after all, is first a part of Great Britain, and only through Great Britain a part of the EU.

Losing our Free Market?

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And not just through Progressive-Democrats’ Big Government demands and planned impositions.  Now it’s fund MFWICs with bugs up their noses about their currently favored special interest, exemplified by BlackRock’s Larry Fink.

BlackRock, along with Vanguard and State Street, are the three most powerful investment funds, holding as they do roughly 20% of the S&P 500 through funds they run for investors.  And now Fink is starting to dictate to the companies his company owns shares in what they must do vis-à-vis climate change, Fink’s issue du jour.

Mr Fink is surely right that investors should worry about climate risks leading to big shifts of capital, and therefore big price moves.

No, Fink isn’t “surely” right, for all that he might be. More likely, the climate-related risks are political, as politicians extend their pandering, rather than empirical.

Regardless, though, Fink’s rightness or wrongness isn’t relevant. What’s important here is that Fink shouldn’t be allowed to dictate to those investors that they must invest according to his diktat rather than in accordance with their own imperatives or read of the factors relevant to their own investing.