Tag Archives: economics

Too Big to Handle

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I’ve written before about the morality of government welfare as a first resort.  Here’s a practical reason for cutting back: it’s too big to manage effectively.  Here are some failures from that too big to handle:

A postal worker who ran marathons found her race times improved after she began drawing federal disability checks for an alleged back injury.

Another disabled federal employee went scuba diving, skied in Switzerland and did flips on a trapeze.  She spent part of her $193,000 in disability payments on a boat named “Free Ride” before she was caught.

A Justice Department lawyer collected $90,000 in annual disability checks after claiming the stress of his job kept him off the job.  Apparently the cable TV show he began hosting while drawing disability pay wasn’t so stressful.

And

15,000 recipients are 66 or older.  Six of them are over the age of 100—well past retirement age.

The Federal government compounds this by being disinterested in controlling the failures and the resulting waste of taxpayer wealth being redistributed.

funding for all agencies—about $3 billion per year—is automatically appropriated and run through the Department of Labor.

And

the federal [disability] program does not require employing agencies to order a second opinion. The claimant can pick his own doctor.

If his claim is rejected, he can file for a different disability, as often as he likes.

And

The Department of Labor, which administers FECA for 70 federal entities, doesn’t track fraud referrals and convictions[.]

The program is too large to be properly controlled, and it needs drastic paring back for economic and legal reasons as well as moral.

Farm Bill Fail

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One of the more controversial provisions the Senate bill [a farm bill that will cost $955 billion if passed] covers is crop insurance.  In the past, farmers have been able to purchase an insurance safety net if their crops fail.  Under the bill, the government would kick in another $5 billion of insurance per year—bringing the total to $12 billion a year—which would cover the deductibles and cushion the blow farmers would have to pay.

And

The House version spends more money on crop insurance, but less for food stamps and conservation efforts.

No, the farm bill needs to eliminate the crop insurance aspect altogether (I’m ignoring here the food stamp wastage), not increase it or even maintain it.  Government has no business interfering with the private market, or protecting any business—including farmers—from the consequences of their decisions.  If the farmers want a safety net against crop failure—an eminently reasonable desire—they should be free to buy it on the open market from crop insurers competing for their business.

Americans, either as taxpayers or as farm customers, should not be forced to pay for farmers’ decisions except through market effects.

Continued Government Interference in our Markets

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…most recently in our financial markets.  Now the Feds are expanding their hectoring of our financial institutions over their fees.  The Federal government already has chosen to prevent them from making money the old fashion way—through lending—with its artificially suppressed interest rates.  It’s already inveighed against them over one set of fees which they charge as a means of earning a profit for their owners—our fellow Americans.

Now the government is going after another set of fees, with their objection centered on the fact that these Know Betters just don’t like the fees.

The Consumer Financial Protection Bureau, a creature of Dodd-Frank that is responsible and responsive to no one, has begun the process of obstructing the collection of overdraft fees—the fees charged when folks write checks with insufficient funds to cover them, so the bank covers the bad checks or transfers funds from the check-writers’ savings accounts (with the check writers’ prior permission) to cover the bad checks.

Usually, such bad checks result from a moment of carelessness.  More than occasionally, though, those bad checks are written by serial offenders, who rely on those overdraft processes to make their bad checks good.

Of course, the CFPB has said

it has no immediate plans to issue or recommend new overdraft-fee rules.

This is disingenuous, though: the criticism by a government agency has its own intimidative effect.  For instance,

In 2011, Bank of America Corp, the second-largest US bank by assets, quickly abandoned plans for a monthly debit-card charge of $5 after it was denounced by lawmakers….

Nevertheless, the CFPB is bellyaching that

heavy users of overdraft coverage pay about $900 a year more than consumers who don’t incur overdraft fees.

This is bad how, exactly?  Why should responsible customers have to subsidize the careless ones for their carelessness?  After all, the costs of making good on those bad checks have to be covered somehow—if not through fees paid by the bad check writers, then by spreading those costs across all the bank’s customers, responsible and…careless…alike.

The best way to hold down the annual costs of writing bad checks is for government to stay out of the market place and for the writers to stop writing bad checks.

The Jack Daniel Employees’ Credit Union charges $10 when a customer overdraws on an account.  Pam Case, manager of the Lynchburg, TN, credit union, said keeping the fee low helps lure customers.  “They like that we don’t have a lot of fees,” she said.

Which demonstrates how well the competition of a free market regulates fees.

Social Engineering with Taxes

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Dr Alan Blinder, Princeton University Professor of Economics and Public Affairs, is at it again.

First, some side issues which he raises:

Since the economy as a whole created 5.41 million net new jobs over the past three years, you might expect that about 4.51 million of them were in the private sector and about 900,000 were in the public sector.  In fact, the private sector created 6.56 million net new jobs over the past three years while about 1.14 million net government jobs were eliminated via layoffs and spending cutbacks.

Never before in postwar history has government employment declined during a recovery. Compared with historic norms, we’re down over two million government jobs.

Never mind that the private sector’s performance is about 2/3 of what President Barack Obama promised with his 2009 stimulus and less than that compared to other recoveries, held back by his interfering policies.

Separately, the reduction in government employment is a good start.  Government remains far too big, and it’s not a jobs welfare program: further cuts in Federal employment are warranted.

Then,

Real GDP growth has averaged a paltry 2% per annum over the past three years.  But growth of GDP excluding government purchases—the things governments buy, including hiring workers—has averaged 3%.

But this just confirms how much government interference is inhibiting recovery.

Next, he offers a partial solution:

So Congress could make a good start on faster job creation simply by ending what it’s doing—destroying government jobs.

There’s that employment security welfare claptrap made explicit.  Government actually has a few very specific tasks, named by the Constitution, and no other thing to do at all.  It doesn’t need to employ lots of workers, outside of soldiers, sailors, marines, and airmen, in order to do those few tasks.

Now, he comes to his tax policy as social engineering tool:

Virtually since the Great Recession began, many economists have suggested offering businesses a tax credit for creating new jobs.  While details matter, the basic idea is straightforward: Offer tax breaks to firms that boost their payrolls.

For example, companies might be offered a tax credit equal to 10% of the increase in their wage bills over the previous year.  No increase, no reward.

You might imagine that Republicans would embrace an idea like that.  After all, it’s a business tax cut….

Here’s that foolishness of using taxes to drive our economy to a government goal.  No.  The ways to help our businesses and spur hiring include reducing—or even eliminating—taxes on businesses, canceling the additive costs and outright taxes Obamacare imposes on businesses for hiring, and stopping paying the unemployed for not working.

And no, the “tax credit” isn’t at tax cut at all.  It’s an increase in spending.

Blinder also had this idea:

Suppose Congress enacted a partial tax holiday that allowed companies to repatriate profits held abroad at some bargain-basement tax rate like 10%.  The catch: the maximum amount each company could bring home at that low tax rate would equal the increase in its wage payments as measured by Social Security records.

Again, no.  Eliding the social engineering claptrap of the suggestion, temporary tax moves have no effect.  We’d be better off moving to a territorial tax scheme at the new reduced overall business tax rate.  Or eliminating the business tax altogether.

Blinder concludes with this:

My general point is that the fiscal cupboard is not bare.  There are things we could be doing to boost employment right now.  That we are not doing anything constitutes malign neglect of the nation’s worst economic problem.

Indeed.  Let’s reduce/eliminate business taxes, get Obamacare off the backs of businesses, and restore unemployment payments to the status quo Harding right now.

National Wealth

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John Hinderaker, of Power Line, suggests that

we have an utterly inept government, which, on top of its incompetence, places little value on economic growth.

President Barack Obama is on record as believing

I do think at a certain point you’ve made enough money.

Whether Hinderaker is right about the ineptness is a separate question.  What is clear, though, from Obama’s policies and his continued proselytizing of them in the face of their utter failure from a free market perspective is this: when Obama made that remark (the 2010 mid-term election campaign season), he was talking about our country as a whole, not just a few of his evil Fat Cat Wall Streeters.