Tag Archives: economics

Government’s Market Interference

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I wrote about this matter just a bit ago.  Now DoJ has gone ahead and filed its lawsuits seeking to block the mergers between Anthem Inc and Cigna Corp and between Aetna Inc and Humana Inc.  Attorney General Loretta Lynch’s rationale for this is this:

If these mergers were to take place, the competition among these insurers that has pushed them to provide lower premiums, higher quality care and better benefits would be eliminated[.]

And

They would leave much of the multi-trillion dollar health insurance industry in the hands of three mammoth insurance companies, and restricting companies, and restricting competition in key markets[.]

The one is mere speculation, and the other is prior restraint.  It’s certainly true that the mergers would create very large companies and leave fewer of them in the market.  But to say that this must reduce competition is just a guessing game, especially since Lynch declined to say—as her predecessors have declined to say, and as economists cannot say—what the minimum number of enterprises must be in any industry for there to be competition.  Indeed, absent collusion, which is illegal, two companies are driven to compete with each other by the economic forces extant in a free market.

Never mind, either, that as Lynch knows full well, that what’s illegal in America, what’s illegal under our antitrust laws—and all that’s necessary to be illegal—is abuse of monopoly power, not the existence of it.  As with the rest of our laws in a free country, these companies must actually commit the misbehavior before they can be sanctioned for it.

On the other hand, Government does allow protected monopolies—Ma Bell before its court-ordered breakup is one example.  A protected monopoly is a monopoly that is explicitly protected by Government: the monopoly is allowed to exist, and it is overtly protected from competition, in return for which the monopoly agrees to be heavily regulated by Government, including the prices it’ll be allowed to charge and the services it’ll be allowed to provide.  Indeed, protected monopolies are textbook examples of regulatory capture—only two-sided: the monopoly and the regulators have captured each other.

Lynch’s action, though, is an abuse of our antitrust laws; it’s nothing more than the Democrats’ campaign of lawfare.  Given the nature of Obamacare, though, maybe this protected monopoly/regulatory mutual capture is this administration’s final goal for health insurance companies.  That would be both a further effort to nationalize our private companies and an example of this administration’s view that it can control the capture.

This sort of behavior, too, emphasizes that the coming election will have consequences, not only for the White House, Congress, and the Supreme Court, it’ll have consequences for the nation’s Department of Justice and the other Executive Branch Cabinets and Agencies (and for our lower courts).

All of this, in the end, is motivated in part by individual Progressive-Democrats’ grasping for personal gain.

It is, though, even more strongly motivated by Progressive-Democrats’ collective contempt for their Lessers, us poor, dumb, plebeian Americans.

[T]he average American individual is morally and intellectually inadequate to serious and consistent conception of his responsibilities as a democrat.

Because More of the Same

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…will correct the failures of that same.

[T]he International Monetary Fund on Thursday issued an “urgent” call for the world’s largest economies to roll out more growth-boosting policies.

Those growth-boosting policies already in place these last eight years since the Panic of 2008 have worked so well.  The easy money from the various central banks have done so well to spur growth.  Regulation from the center has done so well to spark national economies.

Yeah, that’s why there’s this “urgent need” for more.

With experts like these, who needs the amateurs of free markets?

But That’s The Point

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Bill Baer, Assistant Attorney General for the United States Department of Justice Antitrust Division, on the proposed mergers between Anthem Inc and Cigna Corp and between Aetna Inc and Humana Inc, called them “game-changers” and added that it was necessary for Government to interfere with the mergers

to make sure we aren’t making a mistake in which shareholders benefit and the consumers pay the cost.

It’s certainly true that consumers should be protected from fraudulent behaviors and from price gouging.  However, it is those consumers who, as customers, pay for the goods and services companies provide—which ultimately pays those shareholders, too—else the companies don’t survive, and the consumer/customer has no good or service available to buy.

And that’s true whether consumers operate in a free market or in a corporate fascist or any other socialist market.  Consumers either pay directly, based on their own choice (including their choice not to buy at all), or every consumer pays (with no choice at all) for the one, in the form of taxes which government uses to prop up the companies it’s found suitable to exist.

In a free market, too, the company’s owners should be the ones who benefit; indeed, our laws recognize that: a company’s managers owe their fiduciary duty to their employers—those shareholders.

But with this administration, Government Knows Better.

At Least He’s Consistent

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Recall that President Barack Obama (D) touts his Stimulus Bill, with its explosion in national debt (which is still growing these 7+ years later), as good for our economy.  That it’s an economy still mired, these 7+ years later, in a pseudo-recovery that’s the slowest since WWII and that has a smaller per centage of Americans in the labor force than at any time since the Jimmie Carter (D) years is lost on, or ignored by, him.

Now he’s making the same claim about our nation’s exploding student debt, a pile of markers reaching $1.3 trillion, a pile that has doubled in total size, and a pile that has seen a doubling of per-graduated student debt, all over these same 7+ years of Obama and his administration.  This growing pile is good for our economy, he says.

Maybe not.  That growing debt represents a number of drags on our economy beyond the broader national debt.

It drives up the cost of borrowing for the rest of us by competing for the supply of loanable funds, whether from government or from banks.

That’s fairly minor.  More importantly, money spent on debt repayment is money not spent on

  • consumption or on saving for the borrower’s emergency money needs (at least one such emergency is virtually inevitable over the course of a lifetime)
  • future retirement (which results in an increased reliance on a bankrupt, or nearly so, Social Security and Medicare public retirement system)
  • big ticket items like housing and cars (certainly these are routinely borrowed for, but added debt?)

And there’s this: money not spent on student debt repayment because the student (now adult) borrower has defaulted on his debt represents two more drags on our economy: increased general borrowing costs in order to cover the lenders’ costs of absorbing those bad loans, and increased taxes (which, among other drags, is money withdrawn from the private economy) to cover government-guaranteed privately extended student loans.

All of those drags represent reduced overall private demand and so lower business prosperity and so fewer jobs.  All those drags also represent higher taxes tomorrow or increased (yet again) borrowing tomorrow—and so higher taxes the day after tomorrow.

This is the level of understanding of basic economics held by Obama and the Democratic Party.

EU, Great Britain, and Taxes

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Some…suggestions…from continental leaders regarding Great Britain’s departure from the EU and the Exchequer’s suggestions of British corporate tax rate reductions, via The Wall Street Journal:

  • German Finance Minister Wolfgang Schäuble: we can’t have a “race to the bottom, now can we?”

Why not, I ask—what are you so terrified might result from letting those who earned the money keep more of it?

  • Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs: let’s not have any of this “exacerbated(?) fiscal competition between ourselves” nonsense.

I ask—why not?  What’s so terrible about competition, which spurs innovation, holds down costs for the citizenry, limits government power.  Oh, wait….

  • French Finance Minister Michel Sapin: “Whether you’re in the union or yo’’re out, we should all adopt a friendly attitude.” Or else.

So I ask—when are you going to adopt that friendly attitude, M Sapin?

Cut the taxes, guys.  If the continent want to run, screaming, away from the terror of competition, you’ll still have the Irish and the Icelanders with whom to play.  And a whole, wide world outside the European continent and its special snowflakes.