Tag Archives: political economy

Interstate Commerce and Chicken Eggs

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A federal judge has dismissed a lawsuit challenging a California law that requires all eggs sold in the Golden State to come from hens housed in roomier cages.

State Attorneys General from Missouri, Iowa, Nebraska, Kentucky, Oklahoma, and Alabama had sued to block implementation of the law on the grounds that it unconstitutionally interfered with interstate commerce under the Commerce Clause.

They said farmers would have to spend hundreds of millions of dollars overhauling farms to ensure they would have access to the California market….

US District Judge Kimberly Mueller of the Eastern District of California disagreed.

The only citizens who may have to spend $120 million to comply with California’s legislation are the egg farmers who intend to participate in California’s egg market[.]

Intend to participate. Not required to participate. That raises a question in my pea brain: which will cost those farmers more, modifying their enclosures or not selling their eggs in California?

Taxes and Expiring Tax Breaks

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Time is running out for Congress to extend more than 50 tax breaks worth nearly $85 billion, including popular ones for college expenses and energy-efficient appliances.

There are other costs to these tax breaks:

The [House of Representative’s Joint Committee on Taxation has identified 79 expired or expiring federal tax provisions from 2013 to 2023.

And

…the so-called “breaks” result in less revenue for the Treasury Department and an increase to the deficit—like the projected $84.1 billion the Senate bill would add if passed in full.

However, to get onto one of my hobby horses, we wouldn’t need these tax breaks if we had a single, low flat rate. Moreover, as the above quotes illustrate, there’s a large cost to government social engineering and to government interference in a free market’s operation.

Taxes, though, aren’t for government-directed social engineering. All the social engineering government is allowed to do is named in the Constitution and the Declaration of Independence—the founding documents of our social compact. Actual social engineering is up to We the People, and no one else, no entity else.

And the kicker: with a low, flat rate, and with everyone with an income required to pay, there would be no loss of revenue to the government, breaks or not. Note, too, that this kicker ignores the question of whether such a tax reform should be revenue neutral. (Hint: it need not be, except perhaps initially for the political reason of getting the thing passed.)

Jobs Numbers

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The headline numbers are in, and they seem favorable enough: unemployment has dropped to 5.9%, and 248,000 new jobs were created in September.

However.

Counting the 142,000 new jobs created in August, new jobs were created at a monthly average of 195,000 jobs per month over the total interval. Using, instead, Labor’s revised August number of 180,000 new jobs (I’d be curious to learn how President Barack Obama’s Labor Department could make such a large estimation error—a 20% error), that still works out to a pretty anemic 214,000 new jobs per month over the period.

The labor force participation rate, at 62.7%, remains at historic lows. If this rate were at 2007’s level of 66.2% (a rough average for the year), the unemployment would be nearly 11%.

Even taking the 5.9% unemployment rate as legitimate, we’re still years behind schedule—not just behind the rate extant at this point in a normal recovery, but behind Obama’s promised unemployment rate which he used to sell his Stimulus package, as this graph illustrates.ObamaPromisedEmploymentRate

In particular, we’re still not at the 5% Obama promised we’d reach by last year. Oh, and that peak unemployment of 8% worked out to over 10%, which was worse than the No-Stimulus situation which he projected.

Additionally, median income remains down sharply from pre-Panic levels—7.9% sharply.

Additionally, new jobs created since the Panic officially ended in 2009 has only just, this past summer, matched the number of jobs extant in 2007, some three or more years later than prior recoveries. And that…milestone…ignores the fact that there are, today, 16 million more Americans in the civilian noninstitutional population (able-bodied Americans, capable of working) than there were just prior to the Panic.

What’s different between this recovery and the recoveries from prior recessions? Only Obama’s policies, actively aided and abetted by his pet, Senate Majority Leader Harry Reid (D, NV) and the latter’s Senate cohorts. All the prior recoveries proceeded much faster, and those paces occurred under both Republican and Democrat administrations.

Ireland, Luxembourg, UK, and EU Commitments

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In a letter to the Irish government published Tuesday, the European Commission, the 28-member bloc’s central antitrust authority, said it had reached the “preliminary view” that tax deals struck in Ireland in 1991 and 2007 in favor of Apple constituted state aid.

1991! No statute of limitations here. That’s a small matter, though. The larger matter is the degree of freedom that sovereign nations have to govern their internal affairs while remaining a part of the European Union.

The beef here, and it’s a similar one involving Fiat in Luxembourg, and Starbucks and others in other constituent nations of the EU (the details vary from case to case), is this. Ireland didn’t impose a high enough tax on Apple’s Irish-earned income to suit the Authorities of the EU. That letter, in the form of a “report,” complained:

The main question in the present case is whether the rulings confer a selective advantage upon Apple insofar as it results in a lowering of its tax liability in Ireland….

The EU long has objected to the low Irish tax rates, insisting that these are somehow unfair to the other member nations, nations that have much higher tax rates. And no, don’t expect those nations to lower their taxes to compete; Ireland must raise its taxes so as to be less competitive.

The EU complained further:

[There were] several inconsistencies in the application of the transfer pricing method chosen when determining profit allocation [and costs had been] reverse engineered so as to arrive at a taxable income.

Because it’s shameful for a company—or a nation—to work to protect the company’s (and so the company owners’) money. It’s not their money, after all, it belongs to the EU. To paraphrase a man from the other side of the Pond, they didn’t earn that. Somebody else made that happen.

As James Stewart, a tax expert at Trinity College Dublin, noted,

There’s no doubt that this is damaging to Ireland. There’s a deeply held belief that our low corporate tax regime is central to Ireland’s industrial policy. The commission letter gives notice that these types of tax rates are under scrutiny. It will be much more difficult for Ireland to give similar deals to other multinational companies.

But that doesn’t matter. Ireland didn’t earn that, either.

The UK needs to watch this situation in Ireland very carefully and to think long and hard about the value of an EU commitment and the cost of EU insistence on intruding into the domestic affairs of its member nations. The importance of the occurrence of the UK’s EU membership referendum has gained immeasurably from this EU behavior, and the outcome of that referendum now is even more important to the vitality of the UK.

Ireland, Luxembourg, and the others, also need to think very carefully about the value they’re gaining from EU membership, and the costs they’re bearing from that membership. What is the EU’s commitment to its members, if it reserves the right to intrude?

The European Commission’s allegations can be seen here.