Tag Archives: political economy

Misguided Categorizations

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The Wall Street Journal has them in its article concerning some outcomes of the just-passed House version of the budget reconciliation bill. The headline reads

The Biggest Losers in Trump’s Megabill

Some Medicaid users are categorized as losers. House-passed work requirements would mean some few millions would lose Medicaid coverage unless they show they’re working part time or are actively seeking work or they are volunteering. Separately, nearly a million and a half illegal aliens would lose coverage. It’s hard to see how these are losers. Those going back to work rather than coasting on our taxpayer handouts stand to gain morally and in the medium- and longer-term economically by having jobs and being able thereby to move up the economic ladder. Those volunteering will do much good for their community while gaining—if they volunteer seriously—valuable work experience. The illegal aliens being denied coverage can’t be losers, since it’s not a loss to no longer receive that to which they were never entitled in the first place.

Older food-aid recipients are categorized as losers from those same work requirements, here being extended to age 64. This is an especially wrong categorization since these folks actually gain in two ways. The first and immediate way is from the same gains as just above, for all that the longer-term part is absent. The second way these folks actually gain, though, directly addresses that longer term: by working those added years, they’re plussing up the Social Security payments they’ll receive when they actually retire.

Clean-energy projects are categorized as losers. The House-passed bill cancels these projects’ tax credits on an accelerated (relative to the originally proposed glacial) schedule. This time, the projects really are losers, but our economy gains enormously by cutting off those money wasters and by reducing the energy production and market distortions such credits have created.

Some student-loan borrowers are categorized as losers. The House-passed bill would put them on one of two offered repayment plans. This actually makes the borrowers winners, since it makes it possible for them actually to repay their loans and get those yokes off their necks.

EV/hybrid car owners and buyers are categorized as losers. Here, as with clean energy, the battery car buyers will lose out on subsidies, but our economy as a whole—and ultimately those battery car buyers—will gain sharply. These wastes of our taxpayer money will stop, and those subsidies’ production and market distortions will disappear.

While it’s true enough that the House-passed bill has much for which to be criticized—it doesn’t reduce tax rates enough, and it doesn’t cut spending nearly enough—these five items aren’t on that list.

Not the Right Answer

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Nvdia’s honcho, Jensen Huang, thinks the administration’s export controls on chips is a failure. He claims all the controls have done is to galvanize[] Beijing to push ahead faster with its own artificial-intelligence technologies.

The local companies are very talented and very determined, and the export controls give them the spirit, energy and the government support to accelerate their development[.]

No doubt. That’s not the whole story, though. Forcing the PRC to spend its own resources on those developments rather than importing the latest and greatest, and then reverse engineering them, copying them, skipping development steps—freeloading off our expenditures—is good for us.

Aside from that, ever since the beginning of the Industrial Age, Western political, economic, and intellectual freedoms have powered Western innovation far ahead of anything dictatorships have been able to achieve, from Russia, the USSR, mainland China, pre-WWII Japan. That’s why they were at such pains to copy Western developments rather than developing their own. The copying was, for a long time, a major component of post-WWII Japan, too.

Rather than giving up on chip export control, we need to tighten them further to the point of cutting off chip exports to the PRC altogether, and we need to get Europe to do the same. There’s no reason to doubt the fundamental innovative superiority of the West so long as we preserve those political, economic, and intellectual freedoms and expand them by getting our governments out of the regulatory way. Free markets always will do better at enhancing our innovative prowess than centrally planned markets in the long run, and in the intermediate run, as well.

No, It Isn’t

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Clean Energy Is Under Attack Even Where It’s Booming goes the Wall Street Journal headline. There’s a hint regarding that buried in the middle of the article:

The hit to the power sector could prove significant. More than three-fourths of the proposed solar projects and more than one-third of the wind farms in long queues to connect to the power grid needed tax incentives to be economically viable as of January, said Corianna Mah, analyst at Enverus Intelligence Research.

No, clean energy is not under attack. Market-distorting, vote-buying subsidies and tax credits are under attack—as they should be. Clean energy will do fine when the market—us consumers—want it. If clean energy projects cannot succeed without those handouts, they aren’t economically—or technologically—viable.

See, for instance, natural gas. Oil, even cleaned-up coal, too, once the costs of regulatory impediments designed as actual attacks on hydrocarbon energy are subtracted off. But wait—oil subsidies…. Those are a tiny fraction of all those clean energy subsidies and tax credits. But yes, oil subsidies need to go away, also.

“The best path to peace”

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The august editors at The Wall Street Journal ended their piece decrying Russian President Vladimir Putin’s decision to not show up for peace discussions with Ukraine President Volodymyr Zelenskyy (while trying to claim President Donald Trump (R) should be embarrassed by Putin’s absence) with this bit:

The best path to peace is to increase the pressure on Moscow. Mr Trump can start with secondary sanctions on countries that buy Russian energy. Former US Treasury chief economist Eric Van Nostrand wrote on these pages this week that removing a quarter of Russia’s oil exports from the market would cut the Kremlin’s oil revenue by 20%. Global oil production is high enough that it wouldn’t raise gas prices in the US by much.
Mr Trump could also announce his support for more military aid for Ukraine.

Sanctions hurt Russia, and increasing sanctions would hurt more. But the empirically demonstrated fact is that the pain is greater in western—and news opinionators—eyes than it is actually experienced by Putin. That’s because both Putin’s pain threshold is so much higher than that in the West and Putin’s give-a-hoot regarding pain suffered by his Russian subjects is so much lower than in the West.

Increase pressure on Putin? The only pressure he’s ever felt since he sent his barbarian hordes into Ukraine is the initial defeat at the gates of Kyiv and the mechanics of getting supplies of weapons and bodies to heave into the ensuing maelstrom. Those mechanics have long since been improved.

No, the best path to peace remains what it has always been: drive the barbarian hordes back out of Ukraine entirely.

That, however, requires more than empty words of “more military aid for Ukraine;” it requires actually providing more military aid, and rather than continuing the dribs and drabs and slow-walking of deliveries, that aid must be delivered in the types of weapons systems, ammunition, and logistic support needed by Ukraine; in the numbers needed by Ukraine; and at the rate needed by Ukraine—all as defined by Ukraine.

Full stop.

Another Reason Why

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The People’s Republic of China is demonstrating yet another reason why the United States—and Western Civilization nations generally—must revamp our supply chains to remove them entirely from the PRC. The PRC has resumed shipments of certain rare earth-based components critical to national defense and to the weapons systems implementing our defense capabilities. That resumption, though, comes with the PRC government’s strict control over the licensing requirements for export of those components.

Neha Mukherjee, a rare-earths analyst at Benchmark Mineral Intelligence:

It’s basically like a tap. They can decide when to export and when to not, and the control is in their hands, completely[.]

The control is in their hands, completely, not just through that absolute control of the required licenses, but more importantly because the PRC

mines around two-thirds of global rare-earth minerals and processes about 90% of the world’s supply.

That’s what needs to change. We need to develop our own sources of rare earth ores (we have lots, as do most western nations), develop our own processing capabilities, and develop our own alternatives to rare earth centric magnets for our systems along with alternative forms of magnets, even alternatives to magnets altogether.

The news writers of the WSJ article at the link profess a lack of understanding of the PRC’s shift.

The reason for the recent granting of export licenses couldn’t be determined.

The reason is self-evident. It’s nothing more than the PRC telling us and the rest of the West, in no uncertain terms, that they can cut us off entirely, or they can export these things freely—depending on how “friendly” we are to it, how much we comport our activities to its wishes.

The rearrangement of our supply chains will cost us several pretty pennies, but even at that, it will be far cheaper than being controlled by an enemy nation because we cannot defend ourselves.