Tag Archives: political economy

Security Guarantees

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Several Arab states, members of the Gulf Security Council, are looking for

major new weapons systems and security guarantees from the White House in exchange for backing a nuclear agreement with Iran, according to US and Arab officials.

There are a lot of valid arguments on both sides of that question in The Wall Street Journal article at the link (RTWT), but one thing jumps out at me, and it wasn’t addressed in the article.

Suppose the GSC nations get those security guarantees and promises of delivery of those weapons systems. On what basis do they think this administration would deliver on those commitments?

This administration pulled the rug out from under Poland and Czech Republic on missile defense systems. This administration pulled the rug out from under Ukraine, refusing to send them the equipment they need to defend themselves. This administration refused to take meaningful action against the Assad régime in Syria after painting a bright red line around the use of chemical weapons. This administration pulled the rug out from under Israel in the PA’s terror war against Israel just last summer. This administration currently is pulling the rug out from under Israel in agreeing to a framework that lets Iran obtain nuclear weapons.

A commitment to those Arab nations regarding security and weapons would be just another line this administration would shy away from in the moment of truth.

The SEC’s Abuse of Authority

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Actually, it’s Dodd-Frank’s abuse, and the SEC is only implementing the abuser’s requirement, but still….

At issue here is an SEC proposed rule that purports

to give investors greater clarity about the link between what corporate executives are paid each year compared to total shareholder return—the annual change in stock price plus reinvested dividends, according to people familiar with the measure.

There are a couple of things wrong with this. One, minor on the scale of this…rule’s…transgression is the idea that stock price and dividend handling are the measure of a business’ management. No, these are the outcomes; the actual measures are on the business’ financial sheets. Those P&L, Cash Flow, and Balance Sheets, among a host of other performance reporting documents, are freely available to shareholders—and to prospective shareholders: they’re public documents.

The larger problem, though, is this: the executives’ performance is the business of the shareholders, not the government. This is just a backdoor effort to insinuate government deeper into the management of private businesses.

Dodd-Frank needs to be repealed, and D-F-related SEC (and others’) rules rescinded as soon as this administration can be replaced.

Choices

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The Air Force says that if an amendment to the defense funding bill that extends the operational life of the A-10 makes it into the final budget, it’ll have to mothball a bunch of F-16s or maybe delay deployment of the F-35.

The F-35 is overpriced and undercapabled. I vote for delaying that—or cancelling it altogether.

Or a choice not currently on the table: the F-22 is even more overpriced than the F-35, and it’s even less capable; albeit it’s less capable in an air-to-air environment rather than the A-10’s or F-35’s air-to-mud milieu. Cancel that albatross, too.

Venture Capital

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The Department of Energy’s Loan Guarantee Program—its green energy loan program—is a money loser, according to the GAO.

The Government Accountability Office says the DOE’s oft-touted $28 billion loan program will cost taxpayers $2.21 billion over the lifetime of the loans. Not only that, the costs to taxpayers for green loans has risen about $500 million as “the result of loan guarantee defaults” from companies like Solyndra and Abound Solar.

That’s not bad by itself; the sorts of projects and companies being loaned to via this, essentially, venture funding program are high risk, losses are normal, and for a venture capital effort to lose money overall isn’t at all unusual.

What makes this particular program and its losses bad, however, is that it’s a government program. True venture capital entities, whether they fund through lending or any other method, are private companies. The participants in a private venture capital enterprise are voluntary participants who know, or have the opportunity to learn, beforehand the risks entailed in such a thing and who commit their own money to the effort.

When government gets involved in venture capitalism, the participants—the taxpayers—are not voluntary, they’re dragooned into the effort by the government’s commitment of those taxpayers’ money; the taxpayers have no opportunity to evaluate, before their money is irrevocably committed, the risks being run; and government is committing OPM to the enterprise, not its own money (indeed, the government has no money of its own to commit; it has only those taxpayers’ money).

Government has no legitimate role in the venture capital market.