Tag Archives: political economy

Sanctuary Cities and Federal Funding

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San Francisco asked a federal judge Wednesday to block President Trump’s order threatening to strip federal funds from so-called sanctuary cities that bar police from enforcing immigration laws.

This suit has a good chance of succeeding.  In 1987’s South Dakota v Dole, the Supreme Court ruled (in a dispute over the State’s minimum drinking age and Federal highway funds transfers to the State) that the Federal government cannot withhold already agreed Federal funds from a State in order to coerce State acquiescence with Federal wishes.  Funds can be withheld to “persuade,” but the withheld funds must be related to the question at hand rather than a blanket withholding, and the amount withheld cannot be coercive in its size, but only persuasive.  Without naming a threshold for the amount, the Court held that the 5% withholding imposed by the Federal government was not coercive.

Right or wrong, that’s the law of the land as things stand.  Congress and the President will have to statutorily overrule the Supreme Court to enable such a broad withholding of Federal funds from San Francisco.

On the other hand, stopping sending all Federal funds to all cities altogether would bypass the Court’s ruling (although legislation still would be necessary to stop completely the funds transfers).  In the end, we have to ask why the citizens of Illinois, for instance, should have to pay any part of, let’s say, San Francisco’s expenses at all.

It’s true enough that we’re all in this republican democracy nation of ours together, and so we support each other.  But that mutual support includes cities like San Francisco not creating themselves as burdens on the rest of our nation with its irresponsible, profligate spending while demanding OPM to pay for that spending.

Misguided

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In light of whose DoJ it’s been doing this most recently, it’s easy to say it was nefarious.  But the whole thing could be eliminated with either of a couple of steps and a change in underlying procedure.

What is “it?”  It’s a secret (or merely secretive) slush fund fed by settlement proceeds from DoJ civil suits against large banks.

When big banks are sued by the government for discrimination or mortgage abuse, they can settle the cases by donating to third-party non-victims. The settlements do not specify how these third-party groups could use the windfall.

So far, investigators have accounted for $3 billion paid to “non-victim entities.”

Those third-party non-victims, under the Obama administration, were grassroots activist organizations favored by the Obama crowd.  These organizations consisted of the National Council of La Raza, the National Community Reinvestment Coalition, the National Urban League, and the like.

That arouses suspicion.  As Ted Frank, Competitive Enterprise Institute’s Director of the Center for Class Action Fairness, put it,

The underlying problem with the slush funds is we don’t know exactly where the money is going. Using enforcement authority to go after corporate defendants, DoJ bureaucrats are taking billions away from taxpayers to fund their pet projects overriding congressional preferences.

It’s bad enough that the money is going to those favored groups—directly to them and not going through DoJ or Treasury enroute—but as Frank noted, it’s taxpayer monies once the banks have paid the settlements, whether these were legitimate settlements or coerced ones.

It also turns out that much of the funding of the slush funds are “voluntary” extra payments, “encouraged” by DoJ.  Except that when DoJ is holding a lawsuit over the banks’ heads, there’s very little voluntary about acceding to “encouragement.”

The better solution is one of two: pay the money exclusively to the Treasury Department for the use of the Federal government.  That, though, leaves in place incentives for DoJ to browbeat the banks rather than seek justice for those the banks have been alleged to be cheating.  The better alternative, then, is for the banks to pay the money directly to the alleged victims.

The change in underlying procedure—the best solution—is for DoJ to stop being spring-loaded to settling.  If they have a case, bring it to court, and push the pace on it (the banks should do this, too; neither side should be allowed to stall the other).  If DoJ isn’t ready to bring the case, it should drop it altogether.  The settlements, even well-intended ones, just look like lawfare extortion.

Who Should Control American Foreign Policy?

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One answer is indicated by the Trump administration’s de-emphasis of the World Trade Organization as the primary arbiter of our international trade policy.  A draft policy document, if the leak of it is a legitimate one, and if it’s being accurately described in the NLMSM might represent a promising start.

The Trump administration is developing a national trade policy that would seek to diminish the influence of the World Trade Organization in the US and champion American law as a way to take on trading partners it blames for unfair practices, according to a draft document reviewed by The Wall Street Journal.

The policy…represents a dramatic departure from the Obama administration, which emphasized international economic rules and the authority of the WTO, a body that regulates trade and resolves disputes among its members.

A welcome departure it is, too.  The WTO, and other international organizations, have important roles in our foreign policy, but those roles have been badly overemphasized over the last too many years.  American foreign policy, American national policy, must be our national policy and no one else’s.

The Trump administration just has to be careful not to go too far in the other direction.

A Bank Gets One Right

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The city of Seattle, WA, is upset with Wells Fargo because the bank is a lender to the Dakota Access Pipeline project.  They’re so upset, in fact, that they’ve advised Wells that Seattle won’t renew its financial services contract with the bank when it expires at the end of next year.

Phillip Smith, Executive Vice President and Head of Government and Institutional Banking at Wells Fargo, isn’t worried, though.  He responded to the city via letter, saying that

if the city really wants out, the bank will sever its contract with the city immediately, with no penalty, and will help the city find a replacement[.]

I agree with Wells.  Seattle shouldn’t let the door hit it in the fanny on the way out.

The outcome likely will be more expensive for Seattle, though: Wells won the financing contract (nearly 20 years ago; what won’t be renewed is the latest 6-yr installment) by competitive bid.  That means any replacement bank probably will cost the city, which is to say the good residents of the city, more.

Hysteria or Hypocrisy?

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You pick ’em.  The latest example of irrationality (which is a superset of both hysteria and hypocrisy) comes via V the K at GayPatriot.

Recall that the Progressive-Democratic Party that runs Philadelphia passed a massive sugar tax to be levied against soft drinks sold in the city.  Recall, too, the high school economics teaching that if you raise the price of something, demand for that something falls off.  Finally, recall that applying a tax to that something is the same as raising its price.

The [soda] tax is huge, amounting to a 45% to 100% increase in the final consumer cost of typically affected beverage products.

Last week the other shoe dropped.

Two months into the city’s sweetened-beverage tax, supermarkets and distributors are reporting a 30% to 50% drop in beverage sales and are planning for layoffs.

And

One of the city’s largest distributors says it will cut 20% of its workforce in March, and an owner of six ShopRite stores in Philadelphia says he expects to shed 300 workers this spring.

“People are seeing sales decline larger than anything they’ve seen up to this point in the city,” said Alex Baloga, vice president of external relations at the Pennsylvania Food Merchants Association.

And

Sources with Teamsters Local 830 say that layoffs are “imminent” and that some workers have seen their take-home pay drop by 50 to 75% because they’re moving less product.

Restaurants are feeling the pinch, too. Josh Kim, owner of Spot Gourmet Burger, says sugary drink sales at his shop have gone down about 10 to 15%.

Naturally, the Progressive-Democrats, unable to confess to their economic illiteracy (I don’t think they’re economically illiterate, either; these are the party of Know Betters; economics is one of the things they Know Better than us petty commoners), are calling the supermarket and distributor management greedy liars.

We have no way of knowing if their sales figures and predicted job losses are anything more than fear-mongering to prevent this from happening in other cities,” said city spokesman Mike Dunn.
…
“I didn’t think it was possible for the soda industry to be any greedier,” [Philadelphia Mayor Jim] Kenney said in an emailed statement. “… They are so committed to stopping this tax from spreading to other cities, that they are not only passing the tax they should be paying onto their customer, they are actually willing to threaten working men and women’s jobs rather than marginally reduce their seven figure bonuses.”

Go figure.