Tag Archives: markets

A Trade War

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Russia has announced that it won’t buy certain goods from certain of the nations that are sanctioning Russia over its invasion of Ukraine and its fomenting of rebellion in eastern Ukraine. This is a trade war that Russia shouldn’t be expected to win.

For one thing, Russia’s economy is the size of Italy’s and more moribund, so any trade war can only hurt Russia relatively more than it can hurt the far larger economies of the US, the EU, Australia, Canada, even Norway, who are the targets of the Russian boycott.

For another thing, here are some facts related to this boycott.

[Russia has] banned imports of meat, fish, milk and milk products, and fruit and vegetables….  The ban has been introduced for one year

[Russia] may also introduce restrictions regarding imports of planes, navy vessels, and cars…

And

Russia depends heavily on imported foodstuffs—most of it from the West—particularly in the largest and most prosperous cities such as Moscow, where imported food fills an estimated 60-70% of the market. Food and agricultural imports from the US amounted to $1.3 billion last year, according to the US Department of Agriculture, and in 2013 the EU’s agricultural exports to Russia totaled €11.8 billion ($15.8 billion). [This is against GDPs of $17.3 trillion and €13.1 trillion for the US and the EU and ₱75.8 trillion ($2.1 trillion) for Russia.]

A year, though, is plenty of time for the banned sellers to find new markets, which reduces the long-term need to sell to Russia at all. This, in turn, produces a capacity functionally to embargo Russia with respect to those goods—not by explicitly and legally refusing to sell to Russia, but by voluntarily and economically selling elsewhere instead.

A year also is plenty of time for Russia to find other sellers: Latin America, Turkey, other ex-Soviet nations, and so on. Russians won’t starve. However, the reason these other sources aren’t current suppliers is because the boycotted nations can sell into Russia at lower prices than those alternatives. These alternative sellers will, almost necessarily then, cause higher prices in Russian stores.

Entitlements and Taxes

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Dr Ben Carson had a couple thoughts a while ago; they’re still valid.

On taxes:

What we need to do is come up with something simple. And when I pick up my Bible, you know what I see? I see the fairest individual in the universe, God, and he’s given us a system. It’s called a tithe.

We don’t necessarily have to do 10% but it’s the principle. He didn’t say if your crops fail, don’t give me any tithe, or if you have a bumper crop, give me triple tithe. So there must be something inherently fair about proportionality. You make $10 billion, you put in a billion. You make $10 you put in one. Of course you’ve got to get rid of the loopholes.

On health care:

Here’s my solution: when a person is born, give him a birth certificate, an electronic medical record, and a health savings account to which money can be contributed—pretax—from the time you’re born ’til the time you die. If you die, you can pass it on to your family members, and there’s nobody talking about death panels. We can make contributions for people who are indigent. Instead of sending all this money to some bureaucracy, let’s put it in their HSAs. Now they have some control over their own health care. And very quickly they’re going to learn how to be responsible.

The only place I disagree with him is on the degree of heritability of the HSA. Given the slowness of growth of the relevant supply (of health-related services) compared with the rapidity of growth of its demand, accumulating wealth in an HSA would over just a couple of generations create too much money earmarked for health services; this money would rapidly increase health services prices. And that would price those just starting out—newborns, new immigrants, and so on—out of the health services market, just as the present system and its immediate precursor have done. Instead, let the dearly departed’s remaining HSA be passed into his estate as an ordinary asset of the estate, and let each new entrant—those newborns, new immigrants, and so on—start their own HSAs anew.

Nonetheless, The Wall Street Journal titled their article about these thoughts “Ben Carson for President.” We could do worse.

Appellate Court En Banc Hearings

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The DC Circuit a short time ago held in Halbig v Burwell that Federal regulations regarding Federal health plan exchanges violate Obamacare’s plain language: Federal subsidies, contrary to those regulations, are available only to health plan holders who got their plans through State-run health plan exchanges.

Adam White, in a recent Wall Street Journal piece in the context of that ruling and the Federal government’s subsequent appeal to the DC Circuit to rehear the case en banc, noted a couple of things.

One is how rare en banc (re)hearings are, especially for the DC Circuit:

The DC Circuit rehears virtually none of its cases. Each year the court’s three-judge panels make roughly 500 rulings, but the court averages roughly one en banc rehearing. This year has produced a bumper crop: two. The previous year: zero.

Then he got into why this is so.

…the court’s high standard, found in the Federal Rules of Appellate Procedure: en banc rehearing “is not favored and ordinarily will not be ordered” unless the case satisfies one of two standards. First, an en banc rehearing may be needed to “secure or maintain uniformity of the court’s decisions.” A three-judge panel is not allowed to overrule old precedents, even when precedents are in conflict; only the full court can do so, en banc.

Second, en banc rehearing is appropriate for what the federal appellate rules call cases of “exceptional importance.” For the DC Circuit, this standard has been met almost exclusively by cases raising serious constitutional issues. Over the past decade seven of the nine cases reheard en banc raised difficult questions of constitutional law, such as the rights of Guantanamo detainees or of terminally ill patients.

Cases that will substantially affect the court’s own workings also can be deemed of “exceptional importance.” In 2011, the court sat en banc to decide whether taxpayers could file lawsuits challenging IRS procedures for obtaining tax refunds.

Halbig was a straightforward application of the Obamacare law as it was written. That the 4th Circuit saw this differently isn’t relevant; the DC Circuit can only rehear its own cases, not those of sister appellate courts. There’s no precedent conflict here. Some might argue that the question has Constitutional significance, and I’d agree with them. However, neither set of litigants raised any sort of Constitutional question, and the case and the ruling turned on the law itself. There’s no Constitutional controversy here, either.

What about the case’s “exceptional importance?” Judge Harry Edwards, who dissented in Halbig, wrote this in a 1987 case [Edwards’ emphasis]:

[N]o judge agrees with all of the decisions handed down in the circuit….” But if each judge called for en banc rehearing simply to overturn a panel decision with which he personally disagrees, it would do “substantial violence to the collegiality that is indispensable to judicial decision-making.” Rather, en banc review must be reserved for “the rarest of circumstances… [with] real significance to the legal process.”

In the context ofHalbig, it’ll be instructive to see whether the DC Circuit’s newly appointed judges are appellate judges who happen to be Democrats or whether they are Democrats who happen to be appellate judges.

Another Government Overreach

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In a recent op-ed piece, The Wall Street Journal correctly decried the Financial Industry Regulatory Authority’s CARDS program. This program, cynically named “Comprehensive Automated Risk Data System,” is a program that wants to require all of our brokerage houses to report to FINRA massive amounts of data concerning our investment accounts, including what we’re doing in (with?) those accounts.

The op-ed correctly objected to CARDS’ massive collection of data, saying

FINRA says the ocean of data will help it spot a problem almost in real time, far earlier than if it showed up during a regular examination. …

But the financial crisis showed that more data doesn’t guarantee that regulators will know what to do with the information, and it’s as likely the data flood will overwhelm FINRA.

 

But the WSJ missed a far larger problem with CARDS (and with FINRA generally). The piece cited FINRA’s Chairman and CEO Richard Ketchum’s statement about CARDS’ purpose:

CARDS will allow us to collect and manage data from firms in such a way that we can quickly identify trends and product concentrations that are harmful to investors and take swift, responsive action.

Whose definition of “product concentrations that are harmful?” Why, Big Government’s, of course. This is the real danger of this sort of program: government usurping the free market’s role—and so, deprecating the market—in determining what is harmful. This simply makes the definition of “harmful” a political one, rather than a legitimate one.

Define “Fair”

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Some think the mortgage interest deduction from our income taxes is unfair. After all, says one such,

I can easily construct a situation in which a taxpayer essentially enjoys no [mortgage related] tax benefits whatsoever. How about the single individual or possibly a married couple without children, who make just enough to make ends meet but still cannot save to buy a house? Or possibly, they prefer renting to the onerous commitment of home ownership. There doesn’t appear to be any tax breaks for them.

Although this person offers no definition of “fair” whatsoever, she seems to think that “fair” means everyone gets the same benefit, even though by her own construction, they’re not in the same situation as those who’ve “earned” that benefit. Because, equal outcomes.

One gets this grade on an assignment, another gets that grade, that’s unfair? One gets a first place prize in a contest and another doesn’t, that’s unfair? One earns more money than another, that’s unfair? One has a more fortunate endowment of work ethic, talent, luck, than another, that’s unfair? One made better use of his equal opportunity and so becomes better off than another, that’s unfair? How, exactly?

Of course, this particular question easily could be begged with a proper reform of our tax code, a reform that brings us to a single flat rate with no deductions, credits, etc. What is truly unfair is using our tax code for social and economic engineering and thereby picking winners and losers by government fiat rather than by actual performance and merit.

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Keep in mind that the sole purpose of taxes under our Constitution is to fund the government, not to control how free men interact with each other in a free market, not to say, “This is a worthy enterprise, but that is not.”