Tag Archives: political economy

An Excess Profits Tax

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In 1917, Progressive icon Woodrow Wilson instigated an excess profits tax running from 20%-60% because, of course, the Progressive knew better how American business owners should spend their money than did the Americans who’d actually earned it through their businesses.

During the Great Depression, Democrat (and Progressive) icon Franklin Roosevelt instigated two excess profits taxes while openly slandering American businessmen as being on a capital strike: Roosevelt actually accused businesses of refusing to spend—at rates satisfactory to the Democrat (and Progressive)—the profits they’d earned.

Now we get the proud early 20th Century Progressive, Hillary Clinton, with her proposal for a “tax credit…to encourage more businesses to offer profit-sharing to their workers.”

Progressives still claim to Know Better what American business owners should do with their money than those business owners who did the work to earn that money. Progressives now also claim to Know Better what labor agreements are fit to be negotiated between employee and employer than those employees and employers—American citizens.

Now, the Progressive wants to foist tax credit onto us, to “encourage” businesses to spend their excess profits—her definition—because, of course, she Knows Better.

She also knows full well that with a tax credit, she’s intends to force all of us to pay a tax on a business’ “excess profits.” She knows full well where the money must come from in order to pay that “credit:” from higher taxes or more borrowing.

She closed her proposal with this bit:

I really think our corporations are missing a big bet. Because credible studies prove that profit-sharing with your employees is good for the employees, good for the businesses, good for the economy. I want to incentivize more companies to do just that.

Never mind that businesses are in the business to make money, not to serve as privately funded, government mandated jobs welfare programs. Never mind that in a competitive—that is to say, a free—market economy, businesses have to compete for employees as well as for customers. Never mind that the incentives are present in a free market economy for businesses to get the most out of their employees.

And so never mind that to the extent “credible studies” are right about the efficacy of profit sharing, in a competitive, free market economy businesses already would have profit-sharing plans.

Oh, wait, they’re just not set up in a way that suits this Progressive. The businesses are missing her bet. And so she demands that we all pay.

As an aside, some homework: crunch some numbers, and see whether a $750 credit for a $5,000 profit-sharing payout makes any sort of sense for a company laboring under the US’ highest corporate tax rate in the world—35%—on all profit, “excess” or not. See whether Clinton has any clue at all.

There’s Science

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…and there’s…science.

The Environmental Protection Agency for years has issued costly clean air rules based, in part, on two ’90s-era studies linking air pollution with death.

But, critics say, the same agency has stymied efforts to access the data behind them.

EPA Administrator Gina McCarthy thinks that suppression is entirely jake [emphasis added in the summary of her position].

For its part, the EPA has argued that releasing the data could compromise confidential personal information, and that it didn’t have access to all the research anyway, among other issues. The agency made an effort to contact the original institutions behind the studies in 2013, but Republicans say they again would not hand over everything.

There’s so much wrong with that, so much that’s wholly dishonest. For starters, what rule-making data has personal information among them? The data clearly were aggregated and stripped of personal information, since they were gathered by responsible researchers. The data clearly were aggregated and stripped of personal information, also, because such information is completely irrelevant to the studies for which they were collected and would only have cluttered the data.

Then, on what basis is EPA making rules when they don’t have all the underlying data? Is this another case of We Know Best, we don’t need no stinkin’ data?

To add insult to her disingenuosity, McCarthy added this to her testimony in front of the House Science Committee:

The EPA totally supports both transparency as well as a strong peer-reviewed independent science process, but the bill I’m afraid I don’t think will get us there. I don’t actually need the raw data in order to develop science, that’s not how it’s done. … I do not know of what value raw data is to the general public.

Wow. “I don’t actually need raw data….” We don’t need no stinkin’ data. And the transparency bit that McCarthy so fatuously claimed: she’ll be transparent, but only with her chosen few.

She doesn’t know the value of the data to the general public? Here’s all she needs to know about the value of raw data to the general public: her boss—that general public—wants it.

Artificial Demand

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Nearly two weeks ago, with Chinese stocks tumbling, Beijing let loose its strongest effort yet to boost the market, including extracting a pledge from 21 brokers to buy shares as long as the Shanghai Composite Index was below 4500.

With its push, the government halted the plunge and engineered a modest rebound.

What happens when that artificial demand goes away? Or its effects peter out?

Hmm….

More Government Interference

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The Federal Energy Regulatory Commission is suing BP (of Gulf oil spill fame) for allegedly manipulating Texas energy markets seven years ago. There are two rationales for the case: one is the $48 million fine FERC hopes to collect on trades that produced the magnificent profit of $250 thousand—because, hey we want the money.

The other reason is the government’s use of the Panic of 2008 that began shortly thereafter as a handy excuse for increasing government regulation, ostensibly for “transparency” [emphasis added]

The case represents one facet of a broader push toward greater oversight of physical and financial commodities markets in the wake of the 2008 financial crisis and scandals like the 2001 collapse of Enron Corp. The raft of new regulations brought in to increase transparency and prevent market abuse has turned up the pressure on commodities traders, including BP, one of the world’s largest traders of oil and gas. Several Wall Street banks have abandoned or significantly reduced their commodity-trading activities as a result of the increased oversight.

What’s the value of transparency regulation when it destroys the very thing government claims it wants us to be able to watch?

Another Misunderstanding

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Paul De Grauwe, John Paulson Professor in European Political Economy at the London School of Economics and Political Science, was quoted in Thursday’s Wall Street Journal as saying

They in fact triggered the banking crisis. They’ve failed in their duty to ensure financial stability.

De Grauwe was asserting that the ECB’s decision to not increase the amount the central bank already had loaned to Greek banks for liquidity purposes was a mistake.

This criticism is nonsense. The ECB triggered no crisis; the Greek crisis already was in full swing, and had been for a number of years and two bailouts wasted by Greek profligacy. The ECB simply said, rightly, that enough was enough. Far from “ensuring financial stability,” the ECB protected their constituent members by ceasing to pour more of their money into a bottomless dry well. Financial stability was, and is, solely in Greek hands to achieve.

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