Tag Archives: political economy

Tax Reform

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…with a Republican Congress and a Democrat President.

[W]ith Barack Obama in the White House and enough Democrats in the Senate to uphold a filibuster, Republican lawmakers are quietly playing down any hope of comprehensive tax reform and instead have set their sights on just the corporate portion of the tax code.

The GOP favors a simplified tax code with a lower, but broader, tax base.

That proposal is a nonstarter with Democrats because while it would reduce taxes overall, it would draw tax revenue from more people on the lower end of the income spectrum.

Never mind that with skin in the game, “people on the lower end of the income spectrum” would take their political responsibilities more seriously, which, far from leaving them their current Democrat rubber stamps, would work to the good of the nation.

The tax cut deal Congress passed “doesn’t have the shelf life of a carton of eggs,” [Senator Ron, D-OR] Wyden lamented before the Senate adjourned.

Wyden is right to lament this, though perhaps not for the reason he thinks: temporary fiscal measures do not have any effect on businesses or the economy other than suppressing both as the businesses await the uncertain outcome of the end of temporary measures.

Congressional Republicans have come to realize that even though they will control both the House and Senate in 2015, they won’t get far on tax reform unless they do so in concert with the president.

In other words, the GOP isn’t planning on passing its own bill for Obama to reject.

Said one top GOP aide close to the Senate talks, “There is only so much that can be done without the White House involved.”

Simply giving up, though, would be a mistake, and it would play into the hands of critics who say the Republican Party has gotten too used to losing and no longer knows how to win in Congress. “Needing” the President’s cooperation and that of enough Democrats to pass a cloture vote, though, actually is good for Republicans: it would help them emphasize the differences between them and Democrats, and it (re)identify the Republican Party as the party of low taxes and the Democratic Party as the party of big spending, the party of you can’t have anything if I can’t have my big taxes, the party of No.

“Only so much that can be done” is true, and passing lesser reform is a fine fallback. However, Republicans need to force votes—even if they’re failed cloture votes in the Senate—on full, wide-ranging, complete tax reform in order to put the Democrats, individually and collectively, on the voting record: either those Democrat Senators are for reform, or they’re for the Party of No. Either Obama signs, or he vetoes as a leading member of the Party of No.

In fine: pass the broad reform bills, anyway: force the votes, and if it gets far enough, force Obama to veto. Then bring the failed bills up again the next year, and force and force the votes and the veto again—in an election year. Some Republican staffers worry that this year is it because in an election year, too many politicians will be worrying about their election campaigns. These staffers corroborate the criticism regarding not knowing how to win. Election years, especially the one coming up, is when the Republicans will have the most leverage—if they can find the courage to apply the pressure.

Good Medicine for Bad Bankers

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That’s the title of an Alan Blinder op-ed in The Wall Street Journal. It’s subtitled One way to keep bankers from behaving badly is to hit them in their pocketbooks with penalties that affect bonuses.

Blinder cited remarks by New York Federal Reserve Bank President William Dudley:

Mr Dudley highlighted the “ongoing occurrences of serious professional misbehavior, ethical lapses and compliance failures” at giant financial institutions. And he warned the audience, which included a number of the world’s leading bankers, that unless the epidemic of bad behavior stops, “the inevitable conclusion will be reached that your firms are too big and complex to manage,” in which case “your firms need to be dramatically downsized and simplified.”

You bet. However, Blinder wants more government interference, even after government’s proven failure to manage economies of any sort. He wants a points system for bank(er)s’ misbehavior, with a sufficient accumulation of points leading to an offending bank’s loss of its banking license. And he wants government to dictate where in a bank its losses should be allocated. Because businessmen and their accountants can’t be trusted with this judgment. But government can be.

No, the best way to achieve “hitting them in their pocketbooks” is to have the bankers’ jobs at risk through free market sanctions on their banks’ continued viability—let those banks fail and enter bankruptcy. And the best way to achieve that would be to eliminate the too-big-too-fail sewage of Dodd-Frank.

Sorry I’m late with this today.  Ate up with dumb and with lazy.

A Misunderstanding of Economics and Human Nature

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Plainly, too many have never read Adam Smith, whose Wealth of Nations showed that allowing individual self interest—personal greed—to operate in unfettered in a free market was the fastest, most efficient way to broad prosperity for the entire population of economic actors. Apparently we don’t teach basic economics in school, anymore.

In a Wall Street Journal op-ed about the failure of Vermont’s overt move toward a single-payer health system, the paper noted that Harvard’s William Hsiao and MIT’s Jonathan Gruber, architects of that state’s plan, had assured all concerned of the following:

The promise of single payer is that governments can save money by eliminating the profit motive and administrative costs.

But that could be true (but not certainly so) only if there were only one player in the market.

It’s that profit motive, after all—that individual self interest—that saves money. It’s that profit motive—that personal greed—that drives down costs.

The economically illiterate—not just Hsiao and Gruber—miss (or, a cynic might suggest that a Liberal ignores, for political gain) the competition factor: the fact that there is more than one player in the market, and every one of them—competing suppliers and competing buyers—want profit.

Suppliers (of health insurance and health provision services, for instance) compete for the buyers’ dollars, so they work hard to drive down costs so they can lower their prices farther than can their competitors. Buyers want those cheap services so they compete with each other to pay as little as possible for them, but to pay a skosh more than their competing buyers so that they succeed in closing the purchase.

The result is what those in the trade call a market clearing price: the price at which all the service sellers sell their product, with nothing left over and no seller left out, and all the buyers get what they want, with no buyer left out. That price is fair, too, because no one was forced to sell or buy at a price they didn’t want or couldn’t afford.

It’s also the lowest price, with the lowest “administrative costs” (there is a non-zero floor to those costs because the workers doing the actual production get to be paid, and the producers of the services being bought for assembly into that final service get to be paid), available in order for the service to be saleable—available to interested buyers—at all.

And it’s a more accurately set price than even well-intentioned government politicians can achieve through mandate.

Obama and Economics

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In the question and answer period following President Barack Obama’s end-of-year Friday press conference, Obama offered this regarding the Keystone XL pipeline, gas prices in the US, and global markets [emphasis added]:

So there’s no—I won’t say ‘no’—there is very little impact, nominal impact, on US gas prices—what the average American consumer cares about—by having this pipeline come through. And sometimes the way this gets sold is, let’s get this oil and it’s going to come here. And the implication is, is that’s going to lower gas prices here in the United States. It’s not. There’s a global oil market. It’s very good for Canadian oil companies, and it’s good for the Canadian oil industry, but it’s not going to be a huge benefit to US consumers. It’s not even going to be a nominal benefit to US consumers.

Pick one, Mr Obama. It’s either a global market or a Canadian one. If it’s global—which includes US consumers buying gas—the large increase in supply, especially if it’s more cheaply delivered to the global market via Keystone and Gulf Coast ports than via truck and train to British Columbia ports, most assuredly will have a salubrious effect on the prices US consumers pay for our gas.

And that ignores the fact that a lot of that Canadian oil going to the Gulf Coast via Keystone will be sent to US refineries there, and a lot of the refined product will be sold in the US—a prompt and nearby increase in supply.

Misunderstanding

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…by Howard Kurtz in his recent Fox News piece.

Sony’s unforgivable blunder was in making this misbegotten movie in the first place. I mean, an assassination “comedy” that includes Kim Jong Un’s head being blown up, with an internal debate over how much his hair should be on fire? As Greta Van Susteren tweeted, “Anyone who has been to NK knows how dangerous it is and would not have been so stupid to make that movie.” Sony Pictures and Seth Rogen didn’t even have the wit to make it about a fictional regime with a short leader.

No. Sony and Rogen had plenty of wit—they had the wit to skewer a living, breathing thug who’s starving his own people.

Kurtz misunderstands completely. The quality of the movie, the degree of its comedy, are wholly irrelevant. Folks like Kim “Bébé Doc” Jong-un are exactly the ones who need to be called out, satirized, ridiculed, caviled, and by name.

The point of free speech, the reason it’s at the center of liberty, is to allow men to speak their minds on any subject—especially including calling out, to facilitate their removal, political thugs.

Sony’s unforgivable blunder was not in making a movie but in collapsing into their fetal ball in the face of some threats.