Tag Archives: political economy

Equal Outcomes

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New York has them.

A 7-yr-old in New York tried to sell lemonade from his stand last week, and he was shut down by the State’s Health Department.  He didn’t have the required business license, you see.

Up stepped Governor Andrew Cuomo (D), who offered to pony up for the boy’s license next year.  As if a child needs one.  However, as the WSJ put it regarding this Progressive-Democrat version of largesse,

will [Cuomo] pay for every child in New York caught up in illicit lemonade sales?

And

New York can’t keep the subways from breaking down, its public housing has a lead-poisoning scandal, and Mr Cuomo’s crony capitalists who received state subsidies were recently convicted of corruption. But the Health Department is crackerjack at treating a 7-year-old selling lemonade like he’s dumping waste in our drinking water.

New York: an equal opportunity failure inducer.

Paying for Health Care

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John Cochrane correctly decried the costs of health care in today’s economy, but he has the wrong solution.

Why is paying for health care such a mess in America? Why is it so hard to fix? Cross-subsidies are the original sin.

No, cross-subsidies, “sinful” as they are, are not the original sin.  The original sin is government involvement at all in the form of any sort of subsidy.  Far from the subheadline’s claim that “honest subsidies” (eliding the oxymoronic nature of that label) would encourage competition and innovation, they’d do the opposite, as all subsidies do: they’d suppress competition and innovation by giving the government-favored recipients a government-mandated advantage over their government disfavored competitors, freeing the one from competition’s pressures to innovate and reducing the other’s access to resources needed to innovate—and stifling competition’s engine, the need to innovate to stay ahead of rivals.

Are Tariffs Protectionist?

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Certainly, they can be.  And tariffs, for a long time, were intended to protect domestic industry from foreign competition as well as being a major source of income for a nation.  Our own nation was a skilled practitioner of the tariff arts for our first 125+ years and again during the Great Depression and the aftermath.

And that’s the line the Koch brothers are taking with regard to President Donald Trump’s tariff impositions.

The urge to protect ourselves from change has doomed many countries throughout history.  This protectionist mind-set has destroyed countless businesses.

That’s also the line Trump says out loud, often, when he talks about tariffs.  As the old saw goes, though, actions speak louder than words, and it’s useful also to consult the actions Trump has taken vis-à-vis tariffs.  Those actions include the following:

  • offering markedly lower tariffs on all goods and services to Mexico as part of NAFTA renegotiations
  • offering a zero-tariff regime to the G-7
  • offering a zero-tariff, zero-subsidy, zero-non-trade barrier regime to the G-20
  • agreeing in principle to a zero-auto tariff arrangement with the German auto companies, the latter which are pushing their government to push the matter with the EU
  • despite the G-7’s and G-20’s craven refusal even to discuss the matter, getting agreement with European Commission President Jean-Claude Juncker to work toward a zero-tariff, zero-subsidy, zero-non-trade barrier agreement between the EU and the US

Tariffs also are a tool of national policy and have little necessarily to do with protectionism.

Stop Tiptoeing

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Most Federal Reserve officials agree on the path for interest rates over roughly the next year: proceed with gradual increases until borrowing costs reach a level that neither slows nor spurs growth.

You bet.

The big question, however, is what to do after getting to that so-called neutral setting. The answer will largely depend on how inflation behaves as unemployment falls, and they are poring over recent research for clues.

The Fed should stop agonizing and being namby-pamby.  If it wants a 2% basic inflation rate, the rate it says is consistent with growth neutrality, as its existing goal stands, the Fed should set its benchmark rates at levels historically consistent with that rate of inflation, accept that inflation will fluctuate around that level, and then sit down and be quiet.

Those historically consistent rates are the Goldilocks level—or more accurately, the Goldilocks band.

Serious or Not?

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European Commission President Jean-Claude Juncker came to DC Wednesday, allegedly to talk about trade.  Juncker came with no offers, or even ideas, to propose concerning the European Union’s trade status with the US , and he was proud of that lack.  Apparently, he just came for some idle chit-chat and to see the sights.  EU Trade Commissioner Cecilia Malmstrom, though, had some concrete things to say before Juncker left to come over.

If the tariff dispute were to include cars that would be a “disaster,”

Deutsche Welle cited her as saying.  And this, as paraphrased by DW:

trade is between companies and people, not between states. The citizens, she says, would end up paying the price for the quarrel.

President Donald Trump has already proposed, both to the G-7 and to the G-20, a completely tariff-free trade regime.  There is already an offer on the table, agreed in principle between the US and German auto companies, to have completely tariff-free auto and auto parts trade between the US and the EU.

The EU, the other six members of the G-7, and the other nineteen members of the G-20 refuse even to acknowledge, much less discuss, those no-tariff offers.

If Malmstrom is serious, why will she not discuss these things in Brussels, especially the removal of tariffs from the auto and auto parts trade?  If Malmstrom is serious, why is she not working to get the EU’s governance out of the way so companies and people can conduct their trade without EU interference?

In the event, Trump and Juncker did reach an agreement to discuss a deal–and to work toward realization of Trump’s offer of a no-tariff trade regime, and to include in that discussion talks with a view to working toward a no-subsidy and no-trade non-tariff barrier regime.

We’ll see what comes to fruition–any EU agreement requires unanimity across all 28 wildly philosophically disparate nations, any one of which can veto an agreement.