Tag Archives: political economy

Banking Reform

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The Senate has passed a bill that greatly diminishes Dodd-Frank’s interference with our banking industry by easing the regulatory burden on financial institutions lesser than the half-dozen or so that have been (mistakenly, IMNSHO) designated systemically important.

There’s concern about the willingness of the Progressive-Democrats who voted for it (including voting to get it past cloture) to vote for it again were it to come back from the House changed in any way.  Republican Senators, as a result, want the House to pass the bill as it is, without alteration or delay.

Many in the House, and The Wall Street Journal, whose op-ed prompted this post, demur and want more reforms added.

Republican Senators’ concerns about the timidity of the Progressive-Democrats and their willingness to vote favorably again is valid, though, and the House altering the bill and forcing that second vote in the Senate is unnecessarily risky. It might cost the entire bill.

Another path is for the House to take the bird in hand and pass it, preserving the partial reforms. Then they should pass their own bill containing the remaining items of interest. At that point Majority Leader Mitch McConnell (R, KY) and his banking committee Senators should force a vote on the House bill, putting all the Progressive-Democrat Senators on the voting record as favoring or disfavoring banking reform.  In an election year.

The PRC and Intellectual Property Theft

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In the absence of any serious legal protections against intellectual property theft in the People’s Republic of China, businesses operating there are engaging more and more in sweeping conference rooms there for bugs and equipping personnel with sanitary burner phones for use while in the PRC.

That’s a start for those willing to put their proprietary information at risk through a business venture inside the PRC or with a PRC-based business anywhere, but it’s inadequate by itself, as illustrated by this bit of naivete by the linked-to piece’s author:

Mr Trump wants China to unwind policies that require auto makers, cloud service providers and others to share technology with Chinese partners for the right to operate here. …for example, operate in 50-50 joint ventures with Chinese partners.
Those technology transfers, however, are distinct from the outright theft some companies say they face.

The distinction is little different from the distinction between extortion and robbery.  President Donald Trump needs to take concrete action to encourage the PRC to eliminate those policies.

Where national security information would be at risk, CFIUS needs to get more active.

Congress needs to take complementary action: perhaps barring companies from sharing their proprietary information, perhaps requiring companies wanting to do business with PRC-based companies or within the PRC to retain a controlling share of any partnership, perhaps other steps, also.

I am Shocked, Shocked

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Recall Amazon.com’s playing off of several cities against each other in order to maximize the tax breaks and other returns that company might get for building its second headquarters in the “winning” city.  Now we discover this in the offing:

US cities vying for Amazon.com Inc’s second headquarters risk facing an unexpected consequence to victory: other companies will demand the same hefty tax breaks conferred on the online retail giant.

How amazing is that?  Other companies want in on the goodies.

I’m not shocked at that; I’m shocked that those cities’ managers didn’t see this coming.  Their lack of anticipation speaks poorly of their ability to respond to those demands.

It also speaks poorly of the competence of those cities’ managers.

Energy “Subsidies”

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The Federal government is continuing its ethanol mandates in its misguided effort to clean up the fuel our cars burn as we get about our business.  In an op-ed earlier this week, The Wall Street Journal rightly decried the artificial, government-created and -propped up market in RINs, which oil refineries can trade around in order to get credit for ethanol that they’re unable to obtain and blend into the fuel they produce.  As the WSJ noted, one of several outcomes of this artificial market is this.

The core problem is that the federal government has distorted the energy market by using subsidies and mandates to support biofuels.

The Federal government has distorted far more than that. By diverting so much corn to ethanol production, the Feds have very greatly driven up the price of food—corn and corn products, meat animals fed on corn, other food crops that are corn substitutes—wheat, beans, etc—and on and on.

The solution is to end this political favoritism.

The favoritism here is in acceding to the wishes three Senators from corn-producing States: Chuck Grassley and Joni Ernst (both R, IA) and Deb Fischer (R, NE).

The more direct solution is for the Feds to end the ethanol mandates and to get out of the energy and food markets altogether (the latter which also requires eliminating farm support subsidies, a much more politically difficult proposition even though the subsidies also markedly drive up the cost of food). A large side effect of that would be to strike a blow against political favoritism.

An Unintended Consequence

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The health coverage plan providers, companies like Humana, Aetna, Anthem, et al., are gaming the Medicare system to keep their Medicare bonuses coming in.  Surprise.

It seems that when Obamacare was passed, it included a system of paying bonuses from Medicare to those plan providers that got sufficiently high ratings on the quality of their plans.

But wait….

Medicare ranks privately managed plans…on a five-star quality scale and provides financial bonuses to providers of top-ranked plans. [A plan-holder’s] plan was set to be downgraded, which would have cost Humana its bonus. So the company merged plans covering [the plan-holder] and more than a million others into different contracts with higher scores. That preserved the bonuses.

That’s called cross-walking, and it’s entirely legal, if maybe a tad shady.

This is the sort of thing that happens, though, when Government intrudes itself too far into a marketplace.  Private enterprise is more agile than government bureaucracies can ever hope to be, and they can move much faster than any government bureaucracy can hope to do.

It’s also why black markets flourish in centrally planned economies.

The existence of this ability to cross-walk is a function of our Federal government’s intervention in what should be a free, competitive market.  The question wouldn’t even exist if we had an actual health insurance industry that operated free of Government fetters in an actual freely competitive market.