Tag Archives: economics

Another Example

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…of government regulatory failure.  The Financial Industry Regulatory Authority, which regulates, among other financial institutions, brokerage houses, has its own investment portfolio.  FINRA charges fees from those it regulates for their privilege of being regulated.  And

In years when FINRA’s fee revenue exceeds forecasts and investment gains are strong, the regulator can rebate fees paid by firms it regulates.

Investment gains are strong.  However, FINRA turns out to be a crappy investor, getting just two-thirds of the return since 2004, when the regulatory body’s investment portfolio was created, that a simple-minded standard portfolio mix of 50% each of bonds and stocks would have gotten in the same period.  Its return shortfall, 3.4% vs that standard portfolio’s 6%, is a real money shortfall: $440 million for a portfolio of $1.6 billion.

And that has real impact on the regulatees that are so privileged: not only have there been no fee rebates since 2014, FINRA is raising fees on its regulatees to make up for its failure as an investor.

Go figure.

Some Early Thoughts on the Tax Reform Proposal

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…triggered by Laura Saunders’ piece in Wednesday’s Wall Street Journal.

Beginning with the headline and thesis of her piece: Winners and Losers Under the Trump Tax Plan. Because Government should be about picking winners and losers instead of just protecting a level free market for all.  Sure.

Now a couple of specifics.

People with large medical or disaster deductions. Each of these write-offs on Schedule A has significant hurdles and is only available to taxpayers with large unreimbursed expenses

This one isn’t particularly relevant to tax reform. It just means that four Republican Senators who prefer preserving Obamacare intact over even a first step toward repealing/replacing it need themselves to be replaced with Republican Senators who are serious about getting rid of Obamacare and its destructiveness.

Losing the State tax deduction? That only impacts a couple of States with enormous spending habits; those citizens need to correct their State government errors.  The citizens of the other States don’t need to be dragooned into indemnifying the foolishness of those couple of States.

The mortgage deduction loses value under tax reform? Yeah, and? Punish those who don’t itemize by taxing them more (vis., not raising the standard deduction) so others can have a deduction? Beyond the cynicism of this special interest nonsense, our tax code shouldn’t be in the business of social engineering in the first place.

This proposal is a good first step in tax reform.

Now we just need to disabuse politicians that every bill is the last word on a subject rather than an interim as we move toward our goal: a flat tax in the neighborhood of 10% on all income, regardless of source, and the elimination of all deductions, credits, and other froo-froo.

Hacks and Hack Disclosures

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Equifax took six weeks to get around to bothering to tell us about it so we individual consumers could begin to take our own corrective and defensive action.  That’s unconscionable, Equifax isn’t alone in delaying telling us about hacks into personal information those companies are holding for us, and it’s giving impetus to legislation that would force companies to disclose such hacks much sooner.  One such proposed bill is Congressman Jim Langevin’s (D,RI) reintroduction of the Obama era’s Personal Data Notification and Protection Act.

I don’t like regulations, but one here is necessary. The hacks aren’t exposing company property; they’re exposing individual personal property entrusted to the company. Companies have an obligation to safeguard that personal property, and that obligation is strongly expanded by a company’s demand for that personal property as a condition of doing business with it.

Companies don’t want to be embarrassed…[by] having to disclose when people’s data is leaked….

People don’t want to be harmed by those leaks or by delays in finding out their data have been leaked. I’m trying to weight the one against the other in my balance. Oh, wait….

Under this proposed legislation, Equifax would have had to disclose its breach within 30 days….

No, there’s no need for any delay, indeed, delay simply compounds the damage that can be done to us individuals.  As Christopher Mims put it at the end of his piece at the link,

When Equifax was breached, hackers got birthdates, Social Security numbers, and other hard facts about most of us. This data has the power to ruin our financial lives….

Any delay, let alone 30 days, is far too long to be held defenseless against that.  The legislation’s proposed 30 days are forever in today’s information and financial world, an entire month within which hackers could work their nefarious ends without our being able to defend against those ends.  Equifax, et al., should be required to disclose on the day the hack is discovered and then to keep us current on developments with frequent updates that, at the least, explain what’s being done about the hack to reduce the likelihood of a subsequent hack, what’s being done to mitigate the damage to us of the present hack, why the hack wasn’t discovered sooner, and what’s being done to speed discovery for next times.

We need to be able to act in our defense, too.

And contra the attitudes of those who defend delay, we Americans are not too stupid to understand what we’re being told—so long as it’s prompt and truthful—and we can make good use of the information which, aside from our being better able to defend ourselves, would let us see quickly what companies develop a history of exposing our personal information and so are unworthy of our business.

The Not Good Enough Legacy

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Here are some stats regarding Obamacare’s impact on our poor, courtesy of The Wall Street Journal.

More than one in three of taxed [via the individual mandate penalty] households earned less than $25,000, which is roughly the federal poverty line for a family of four.

And

More than 75% of penalized households made less than $50,000 and nine in 10 earned less than $75,000.

And

Fewer families paid the tax in 2015 than in 2014, yet government revenues increased to more than $3 billion from about $1.7 billion, as the financial punishment for lacking coverage increased.

Never mind that these honest Americans can’t afford what Obamacare has on offer, they still have to pay the tax.  Never mind that what is on offer is so bad they won’t buy it; they’d rather pay a tax they can ill afford.

This is what Senator John McCain (R, AZ) has said he prefers to Graham-Cassidy, never minding that the Arizona governor (for whom McCain claims great admiration) has strongly endorsed the bill.  This is what Senator Rand Paul (R, KY) has said is better than a bill that repeals much of the funding for Obamacare and sends it instead to the States so they can set up their own health insurance/health coverage plan markets—including State-level Obamacare, if that’s their preference—never minding that States’ Rights has been part of his mantra since his first Senate election campaign.  This is what Senator Lisa Murkowski (R, AK) seems to want to preserve over Graham-Cassidy‘s elimination of her State’s exploding premiums and imploding plan provider participation.  This is what Senator Susan Collins seems to want to preserve, never minding Maine’s governor endorsement of the bill.

The WSJ pointed out that

…the point of this coercion was to substitute the government’s political preferences for individual judgment….

Just as these four Senators are substituting their own political preferences for the individual judgments of their constituents—whom the four are betraying with their support for Obamacare over Graham-Cassidy.

Remember this for the coming primary election season.

Some Thoughts on Graham-Cassidy

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These are…triggered…by Thursday’s Wall Street Journal piece on how the Graham-Cassidy Plan Would Change Health Coverage.

The Congressional Budget Office has said that, without a rule requiring insurers to charge all customers comparable premiums, health plans could become prohibitively expensive for some people with pre-existing conditions.

The plans wouldn’t be insurance plans, either, since the premiums wouldn’t have anything to do with the risk being transferred.  The plans would be welfare plans.

Separately, states could also waive a requirement that insurers provide a set of medical benefits like mental-health services and prescription-drug coverage. If those benefits aren’t required, people with costly medical conditions could have difficulty buying insurance with the relevant services or medications.

Certainly a possibility. However, that’s a matter between a State’s citizens and their State government. The Federal government has no legitimate role to play in this.

The bill seeks to distribute funding roughly equally among states. But under the ACA, 31 states expanded Medicaid, and some states had considerably higher enrollment in subsidized plans. Because that funding would go away to be replaced by block grants, some states would see a net funding gain and others would see a loss.

This is the only problem I have with Graham-Cassidy, albeit not for the reasons the WSJ cites others as having.  With roughly equal funding across States, low-population States will get more per capita money than those with larger population without regard to the relative health of the populations.  The block grants should be sized to each State’s population of citizens and legal immigrants, so that the per capita funding is roughly equal, not the per-State funding.  The biggest “losers” would still tend to be States with Progressive-Democratic Party-led governments, but these also are the States with the most profligately wasteful spending, and on a host of programs, not only on Medicaid.  There’s no valid reasons other States should be forced to continue to subsidize these wastrels with continued taxpayer dollar redistributions.

The bill rescinds the ACA’s Medicaid expansion, which for the first time extended coverage to childless, low-income adults. So states couldn’t use their block grants to cover these low-income adults under Medicaid.

Money is fungible, though, and Medicaid is a State program, even if it is heavily subsidized with Federal (i.e., your and my tax) dollars.  If a State thinks covering childless, low-income adults, et al., is a good idea, it certainly can reallocate monies from other spending to its Medicaid program for the purpose.

[T]he bill also for the first time places funding caps on traditional Medicaid and shrinks spending on the program significantly over time. Analysts say the reduced federal spending could blow a hole in state budgets….

It’s a start.  The Federal block grants should be put on an annually declining basis so that over 10 years (say), the grants disappear, and the States would be free to—and responsible for—designing and funding their own Medicaid programs without Federal strings, without subsidization with the tax dollars of other States’ citizens, and without having to send their own citizens’ tax dollars to subsidize other States.

Too, the analysts are wrong on this, and they demonstrate a breathtaking lack of understanding of responsibility.  Reducing Federal transfers to the States won’t blow a hole in any State budget.  The only thing capable of blowing holes in State budgets are those States’ governments via their spending decisions.  State governments just will have to spend their own citizens’ money, with less OPM coming in.

Unfortunately, guys like Senators John McCain (R, AZ) and Rand Paul (R, KY) prefer Obamacare to even this much compromise-y progress, and so they’re going to betray their constituents by voting to preserve Obamacare rather than replace it with Graham-Cassidy.  Their reasons for preferring Obamacare?  In McCain’s case, it’s all about ego and his precious Maverick status.  Nothing will ever be pure enough to suit Paul, so he’ll just vote “No,” no matter what.

If this bill fails, that’ll be these two Senators’ legacy–voting to keep Obamacare intact.  Senate Majority Leader Mitch McConnell (R, KY) should bring the bill to a vote this week regardless of his vote count.  He needs to put those Republicans who prefer Obamacare on the voting record for the coming Republican primaries.