Tag Archives: economics

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.

An Unintended Consequence

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The health coverage plan providers, companies like Humana, Aetna, Anthem, et al., are gaming the Medicare system to keep their Medicare bonuses coming in.  Surprise.

It seems that when Obamacare was passed, it included a system of paying bonuses from Medicare to those plan providers that got sufficiently high ratings on the quality of their plans.

But wait….

Medicare ranks privately managed plans…on a five-star quality scale and provides financial bonuses to providers of top-ranked plans. [A plan-holder’s] plan was set to be downgraded, which would have cost Humana its bonus. So the company merged plans covering [the plan-holder] and more than a million others into different contracts with higher scores. That preserved the bonuses.

That’s called cross-walking, and it’s entirely legal, if maybe a tad shady.

This is the sort of thing that happens, though, when Government intrudes itself too far into a marketplace.  Private enterprise is more agile than government bureaucracies can ever hope to be, and they can move much faster than any government bureaucracy can hope to do.

It’s also why black markets flourish in centrally planned economies.

The existence of this ability to cross-walk is a function of our Federal government’s intervention in what should be a free, competitive market.  The question wouldn’t even exist if we had an actual health insurance industry that operated free of Government fetters in an actual freely competitive market.

Biofuel Mandates

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The Wall Street Journal had a piece titled Biofuel Mandates Are a Bad Idea Whose Time May Be Up that centered on the possibility that these might get watered down, or even eliminated, sometime “soon.”

The Renewable Fuel Standard, which forces oil refiners to mix corn-based fuel into gasoline, is one of history’s great policy boondoggles.

Well, NSS.  The only things it’s done of practical consequence have been to serve as a backdoor subsidy for farmers and to drive up the cost of corn, corn substitutes, and food that eats corn.  And to drive up the cost of gasoline and to create ethanol fuel-related automobile engine maintenance costs.

But that’s the problem with Government mandates in general when they’re intended to create a market for a particular product.

As a mandate, the time for this one on biofuels never was.

Federal Student Loans and State Regulators

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The Trump administration has told States to stop regulating companies that service Federal student loans; that’s the Federal government’s job.  The States have demurred.

The whole thing could—and should—be made moot by the Federal government getting out of the student loan business altogether.  The Feds have no business here; it’s a private enterprise arena, and the States should be free to regulate, or not, to their hearts’ contents on intrastate student lending.  The Feds’ only role here should be to regulate Commerce…among the several States and not to compete in that commerce.