Tag Archives: economics

“Shouldn’t We Care?”

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A MarketWatch op-ed writer is worried about grown, adult American citizens having more retirement funds in our IRAs than in our 401(k)s.

The shift from 401(k)s to IRAs moves employees’ money to a different regulatory environment. The Employee Retirement Income Security Act of 1974, which covers 401(k) plans, requires plan sponsors to operate as fiduciaries who always act in the best interest of plan participants.
In contrast, the standards of conduct for broker-dealers selling IRA investments are much less protective than the ERISA fiduciary duties of loyalty and prudence, which have consistently been characterized by the courts as “the highest known to the law.”
In addition, in the 401(k) environment, much greater emphasis is placed on the disclosure of fees in an understandable format than is the case for IRAs. And most important, 401(k)s place much more emphasis than IRAs on keeping the funds in the plan until retirement.

Those are, no doubt, useful items and anyone investing for his own retirement should care about them. The problem arises, though, when the system—here employer 401(k)s—uses these to interfere with an employee-investor’s decisions regarding what is supposed to be his own money.

As the opinion writer notes in her piece, withdrawals from either program that are made prematurely or outside of a very few exceptions (there are fewer in 401(k)s than in IRAs), are subject to a 10% tax penalty in addition to Federal and State income tax assessments. Those guardrails and limits are well-known to us Americans, and they’re all we need to make our own decisions regarding our money. If our decisions are ill-informed, that’s on us, or should be.

The opinion-writer closed her piece closed with this:

Shouldn’t we care that only 45% of assets in the private sector are protected by ERISA? And what should we do about it?

No, we should not care. We do not need Big Brother constantly looking over our shoulders, constantly using that perch to interfere with our decisions.

Americans are too dumb to manage our own fiscal affairs? One way to try to push that on us is to keep interfering with our decisions instead of letting us make our own mistakes and—critically importantly—learn from them.

That leads into what we should do about it. TL;DR: nothing. Complete answer: nothing at all. Stay out of our way.

A Couple of Regulatory Environments

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These need to be dealt with along with the EPA’s effort to deregulate energy production. “These” are the FAA’s regulation of rocket launches—the conservative right blames the FAA’s climate impact concerns, but those are not the only ones—and the FCC’s regulation of satellite deployment. Here, Progressive-Democrats are letting their hatred of all things Evil Rich get in the way of intelligent decision making.

The Federal Aviation Administration separately evaluates the environmental impact of rocket launches in the US, which has in the past delayed satellite launches.

And

Maria Cantwell objected because the bill [that would streamline and accelerate FCC satellite approvals] would help Mr Musk’s AI space ambition.

As The Wall Street Journal‘s editors closed their piece,

Permitting difficulties are America’s economic Achilles’ heel. Let’s hope they don’t get in the way of US space innovation.

Reapportionment

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There is a flurry of domestic migration from Blue States to other States, usually Red. That could prove costly to the Blue States’ representation in the US House of Representatives.

The left-leaning Brennan Center has taken a look at the Census and finds Democratic-controlled states are likely to lose at least 10 House seats.
If recent trends in population growth and migration continue, the Brennan Center projects that Texas would gain four seats, Florida three, and Georgia, Arizona, Utah, North Carolina, and Idaho one each in the reapportionment after the 2030 Census. California would lose four, and New York two. Oregon, Minnesota, Wisconsin, Illinois, Pennsylvania, and Rhode Island would give up one apiece.
This would give Southern states 164 House seats, which is 19 more than in the 2000s. The Northeast would have 81 seats, down from 92.

That representation reallocation isn’t all. That’s also a shift of Electoral College votes from Blue States to Red to the tune of 30 votes shifting right.

Which is why the Progressive-Democrats are so shrilly against requiring US citizenship as a criterion for voting in Federal elections, requiring proof of US citizenship in order to get a ballot for Federal elections, and—especially—against excluding non-citizens present in their States from the census count that’s used for apportionment. It’s also why Progressive-Democrats so shrilly push for open US borders and welcoming all comers, including illegal aliens, into their jurisdictions. If they succeed in keeping non-citizens in the apportionment count and blocking Voter ID, that would strongly favor apportionment toward them, even with the ongoing domestic outmigration from those States.

Progressive-Democrats are more interested in their political power than they are in free and fair elections.

Electricity Price Controls

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New Jersey’s newly elected Progressive-Democratic Governor, Mikie Sherrill wants them.

Ms Sherrill used her maiden speech to lay out her plans to ease electric rates. “In short, you are sick of the status quo,” she said, “Well, guess what, guys, so am I.” Guess what: Her proposals are more of the same progressive policies that have fueled higher prices: Subsidies, mandates, and price controls.

Especially those price controls.

Her worst idea is a pause on utility “rate increases or cost recoveries to the extent permitted by law.” This is a price control that will reduce grid investment, including in new supply. ….
If utilities can’t pass on their costs, they will skimp on maintenance. It’s that simple.

Of course, those rate increases or cost recoveries permissions are specified by State laws, and Sherrill and her legislature can alter those laws at will. Her “extent permitted” is disingenuous.

Maintenance skimping is well-known to renters in rent-controlled apartments.

If the provider—landlord or utility (or any other)—can’t recoup his costs as those increase, whether they’re supply costs, regulatory compliance costs, or taxes, he has less money to spend on procuring the items he needs to produce electricity or rental housing or… and especially critically, he has less to spend on simply maintaining what he has. Rental homes/apartments and power generators deteriorate, those residences become badly substandard to the point of uninhabitable, and power generation becomes unreliable. That last is bad in a hot summer, and it’s deadly in a cold winter.

With unreliable power generation, we get rolling blackouts where broad areas in succession see the lights go out; oil, natural gas, and coal generators, all of which depend at bottom on electricity, stop; and electric heating (or cooling) systems stop. On-off cycling from those rolling blackouts, even if in longer intervals than shorter, adds to the wear and tear on the generators, and on the heating and cooling systems, requiring increased maintenance for which those price controls, and rent controls, severely limit the money available to pay.

But never mind. Progressive-Democrats want those price controls because that’s their exercise of political power.

Housing Affordability

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A letter-writer in The Wall Street Journal‘s Wednesday Letters section offered a number of ways to break the housing cost problem for folks on the lower end of our economic ladder, folks that include established families and newly graduated young adults. The most cogent way IMNSHO is this one:

The market badly needs deregulation to unlock capital. Tax regulations have frozen large swaths of our existing housing stock. And state and local land use regulations lock millions of acres of land out of higher and better uses by making it illegal to build starter homes on smaller lots.

Especially those starter homes on those smaller lots. Tax regulations, mostly on existing homes up for inheriting, can be handled directly and immediately by the Federal government. The land use regulations consist primarily of State and land use laws and local zoning ordinances, and those are the primary responsibility of the State and local governments. Still, the Federal government has considerable influence that it can bring to bear, from jawboning to financial carrots and sticks.

These starter homes and smaller lots are reminiscent of the Levittowns that were built right after WWII to open up housing for returning white GIs, and their rapid take-up both fired up the housing market and contributed heavily to the nation’s economic reconversion from war to peace and the associated private economic revival. The first Levittown house sold for $7,900, about $80,000-$85,000 in today’s money.

Today’s analog would be shorn of the racial bars and should be shorn, also, of ethnic and religious bars. But that larger target market would only enhance the salability and thereby contribute heavily to breaking the existing cost barrier.

Call them TrumpTowns.