Tag Archives: economics

Medicare-for-All and Middle Class Taxes

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Even Stephen Colbert wants to know: under Progressive-Democratic Party Presidential candidate and Senator Elizabeth Warren’s (D, MA) payment scheme for her Medicare-for-All scheme, will middle class Americans’ taxes go up? He put the question to her in so many words:

You keep being asked in the debates how are you going to pay for it, are you going to be raising the middle-class taxes…. How are you going to pay for it? Are you going to be raising the middle-class taxes?

Warren’s answer:

So, here’s how we’re going to do this. Costs are going to go up for the wealthiest Americans, for big corporations…. and hard-working middle-class families are going to see their costs going down.

Colbert tried again:

But will their taxes go up?

Warren evaded again:

Health care is a basic human right. We fight for basic human rights, and that’s Medicare-for-all.

The plain and simple meaning of Warren’s evasive answers is yes, middle class taxes will go up as part of her payment scheme. Their taxes will go up a lot.

Continued Intransigence

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European Commission President Jean-Claude Juncker makes it clear.

Britain has still not proposed any workable alternatives to the Northern Ireland “backstop” within the Brexit withdrawal agreement, the EU said on Monday.

And

President Juncker underlined the commission’s continued willingness and openness to examine whether such proposals meet the objectives of the backstop. Such proposals have not yet been made[.]

Juncker knows full well that the “backstop” is not just a deal-breaker, it’s a non-starter for the British. It demands that a core feature of the Brexit vote three years ago was so that Great Britain gets control of its own borders back, yet the “backstop” requires Great Britain to surrender its Irish border to the EU.  That can only be taken as a first step to dismantling Great Britain.

What demonstrates the cynicism of the EU and of Juncker is that they, and he, have steadfastly refused even to offer their own “workable alternatives.”  It’s the EU’s backstop.  Full stop.

In place of counter-offers, Juncker is offering only vapid, uselessly rhetorical pretense and empty willingness to “discuss the next steps.”

He plainly wants Great Britain to drop its Brexit plans and meekly beg for forgiveness for its effrontery. Despicably, so do Labour and too many so-called Tories.

A UAW Strike

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The United Autoworkers Union sent 49,000 members and employees of GM out the door and on strike Sunday night.  The strike will hammer GM plants in Michigan, Ohio, Tennessee, Kentucky, New York, and Texas among other areas.

Here is another case of a union saying it won’t let a business operate at all, unless and until that business’ managers surrender completely and give the union everything it wants.

Strikes are legalized extortion and a refusal to negotiate in good faith.  It’s impossible to reach an honest deal with a gun in management’s ear.

Oil Strikes and our Economy

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“Economists” cited by The Wall Street Journal say that the Iranian/Houthi strikes against a couple of major Saudi Arabian oil production facilities are unlikely to do much to our economy. Despite their anonymity, those…sources’…assessment is accurate.

Among other things, we’ve made ourselves essentially self-sufficient in oil and natural gas production, have become the world’s leading producer, and we’re a net exporter of oil and natural gas.  That last, especially, means we’ll easily be able fill any shortfall from the Saudis’ damage.  (Production cuts from that damage are likely to be short-lived in any event.)

In addition,

Today, energy accounts for about 2.5% of household consumption, down from around 8% in the 1970s

The Federal Reserve still has its misconception regarding the proper execution of its role, though:

The Saudi oil-field attack adds a new factor to consider for Federal Reserve officials, who have been weighing how a variety of geopolitical risks will influence the economic outlook, including the US-China trade war, unrest in Hong Kong, and Britain’s impending departure from the European Union.

Those things are irrelevant to the Fed’s task, which is to maintain stable pricing and full employment. The optimal way to achieve this is simply to set its benchmark interest rates at levels consistent with its inflation rate goal, and then—rather than chasing market responses to this or that “geopolitical risk,” or trying to anticipate and preempt them—sit down and be quiet.  The resulting sound economy will produce full employment.

The Fed’s inconstancy is a bigger problem for our economy than hits, even major ones, on another nation’s energy production capability.

On the other hand, the People’s Republic of China burns through three times the oil that it produces; it badly needs oil imports, much of which it got from Saudi Arabia.

Japan imports nearly all of the oil and natural gas that it consumes.  That’s a shortfall we easily can, and should, fill.

Interest Rate Foolishness

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Mario Draghi, in his last act as European Central Bank MFWIC, has lowered ECB benchmark interest rates and set the central bank on a long-term campaign of bond-buying.  His…idea…is to stimulate inflation and push the inflation rate to more normal levels.

Couple things about this.  The Wall Street Journal thinks this commits Draghi’s successor to this foolishness for the long term.  Of course, it does not.  His successor can undo this business when he takes office.  The difficulty will be solely within that successor’s political courage.

The larger problem though, is this. Interest rates are inherently inflationary.  While lowering the cost of money—especially to the point of negative interest rates—encourages borrowing and spending the borrowed money, it does little to nothing to inflation.  This is the case especially for a polity as dependent on international trade—whether within the EU or with nations outside the EU—as is the EU and its member nations.

Lower interest rates devalue the euro relative to non-EU nations, which drives up the cost of importing goods and services necessary to domestic production and sales.  Domestic prices won’t rise as much, even with the increased demand represented by the spending increases encouraged the lower (domestic) cost of money.

The ECB’s pre-emptive move was aimed at insulating the eurozone’s wobbling economy from a global slowdown and trade tensions.

The move won’t work any better today than similar moves have the last several years. Just as would be optimal in the US, if the ECB wants a stable, healthy, growing economy in the EU, it needs to set its benchmark interest rates at levels historically consistent with the inflation rate that has been optimal for the EU economy, and then sit down and be quiet.

Unfortunately, European bureaucrats and politicians are even more addicted to doing something than are our own.

Especially when the best something to do is nothing.