Tag Archives: political economy

Bailouts

Posted on by
Reply

The Inspector General for the Federal Housing Finance Agency (FHFA) recently reported that Fannie Mae and Freddie Mac might need more government bailouts if housing markets decline. The problem: lack of capital reserves to serve as a buffer against future losses.

That lack of capital, says Fannie Mae boss, Tim Mayopoulos,

increases the likelihood that Fannie Mae will need additional capital from Treasury at some point.

William Isaac, FTI Consulting Senior Managing Director (and former FDIC Chairman), and author of the piece at the link, has a solution: Treasury should stop sweeping Fannie’s and Freddie’s profits into the Federal government’s piggy bank. He’s right that this is illegal, but it’s the wrong solution.

The correct answer to the problems with Fannie Mae and Freddie Mac is not to bail them out in any way shape or form. The correct answer is to disband them completely, erase them from government, and replace them with…nothing. Full stop.

Liberals and Unions

Posted on by
Reply

In December 2014, the NLRB passed a final rule on a partisan 3-2 vote that greatly shortens the time for a workplace union-organizing election. … Mr. Obama issued a “memorandum of disapproval”—essentially a veto—to kill the Congressional measure [to overturn the rule] and preserve the NLRB rule.

From now on unions will have unlimited time to prepare their campaigns to organize a workplace, springing the election paperwork on an employer when they figure they have the best chance to prevail. By reducing the time before an election to as little as two weeks from the current average of 38 days, unions will be able to lobby workers and make their case before a company can counter with its own argument.

Because with Liberals and unions, there’s only one side to a story. No need to hear from anyone else.

Projecting

Posted on by
4

The Texas House last Wednesday passed its version of the State’s spending budget. In the course of that, there was debate over Congressman Stuart Spitzer’s (R, Kaufman) amendment to reallocate $3 million from Texas’ HIV and STD prevention programs to its abstinence sex education programs. That amendment debate included this…foolishness:

Congressman Harold Dutton, Jr (D, Houston), asked Spitzer—a surgeon—whether abstinence had worked for him personally.

“It did,” Spitzer replied. “I’ve had sex with one woman in my life, and that’s my wife.”

Not content with his embarrassment (or simply unable to recognize it), Dutton pressed the matter.

Is that the first woman you asked?

Even at the State level, Democrats shamelessly assume their own shortcomings are held by everyone else, too. Psychologists call that (absent the qualifier) projecting. I add the qualifier because I don’t assume these highly educated and intelligent Democratic Party men and women really are that stupid or insensitive.

Economic Growth

Posted on by
Reply

…over last year, the 6th under the Obama administration. Which is several years late in occurring under the Obama promises, but that’s another story. See the graph. EconomicGrowth

First, the overall GDP: disregard the shrinking in the first quarter of 2014; that appears to be an aberration compared to the nearby trend.

What’s interesting are the components of the GDP growth and of Business Fixed Investment in particular.

Imports remain in negative territory: we’re importing less and less (and possibly at an accelerating rate) over the last couple of years. There are a number of reasons for this, including the increasing competitiveness of domestically produced products on one hand and the continued doldrums of the our economy leaving too little discretionary funds in the hands of consumers and of businesses to buy imported goods on another. An implication of this, though, is that importation is tomorrow’s consumer and business spending.

Consumer spending is up (and possibly at an accelerating rate), but look for that to fall off if imports continue to decrease: many of those imports are for incorporation into business products for consumer purchase; that puts a lag into many of the imports’ impact on consumer spending.

Look at Business Fixed Investment, though. That never has gotten very high, peaking a bit over a year ago at just over a 1% year-on-year increase, and it’s been falling off since. Decreasing imports being used less and less by businesses.

This is especially telling in those BFI components. R&D may be accelerating, but it’s still at a pathetic rate. R&D is critical to business survival: it’s not just about how to market existing product better, though that’s important. It’s primarily developing new product, market research to guide that development, and so on. If a business’ products become obsolete, so does the business.

The tale is told in spades in Structures and Industrial Equipment. Businesses aren’t expanding their physical plant, especially in manufacturing. That means these guys don’t see any future growth in demand, either, and they don’t have the disposable funds in this still-stagnant economy to expand where they do see some glimmers.

It’s going to be a long two years on the domestic front.

Texas Education

Posted on by
Reply

Lawmakers in Austin are now debating SB 276, a bill that would provide school choice and educational freedom to all Texas students. It would allow parents who opt out of public schools to take with them 60% of the money the state would otherwise spend on their child—about $5,200—to pay private-school tuition. The rest of the money, roughly $3,000 per student, would go back into the state treasury.

There are a couple of alternative uses for those $3,000 than just dumping them back into the general pot.

Texas’ schooling, as elsewhere, is generally paid for with personal property taxes. Several years ago, Texas decided to consolidate those taxes, though, and redistribute them state-wide, rather than leaving them in the local community whose members had paid the taxes.

Thus: rather than sending the money to the general pot, leave the money with the school whose student(s) just left. This will increase the money available to be spent on the remaining students’ education. Of course, I’m naively assuming those $3k will be spent efficiently and for the benefit of the students….

Alternatively, the money could be earmarked, in keeping with the intent of that earlier property tax consolidation move, for the poorest of our school districts, giving them an increased opportunity to teach their students. Here, too, I’m making that same naïve assumption.

There is an alternative use for those $5,200, too. Don’t limit them to private-school tuition. Let the money be used for voucher payments/tuition at any school with room that the parents might prefer: parochial, charter, better performing public schools. Let the money be used, too, to defray parents’ costs of homeschooling.

Sending the $3k to the state’s general treasury, though, ought not at all be a deal breaker for this move, neither should the proposed commitment of the $5k to private-school tuition: SB 276 still is a major move forward. There’s plenty of time to come back again in the next legislative session to improve the move and to go farther. We’ll even have two school years of data to mull over as we consider the next move.

Now, there’s a thought.