Tag Archives: political economy

More Big Government

Posted on by
Reply

Here’s another impact of Big Government regulations on local communities—this time not so local—and the regulations are long-standing Big Government interference.

The US has four—count ’em, four (New York/New Jersey, Baltimore, Norfolk, and Miami)—deep water ports on the east coast (by deep water, I mean ports that can handle, regardless of tide levels, ships with a draft of 46 feet to 48 feet).  Charleston Port, in Charleston, SC, would like to join that short list, especially with alterations to the Panama Canal due to be completed in the next two years, so that modern ships of that draft can get quickly to a west coast port, if they can’t deliver their stuff via the east coast.  Indeed, the Canal is being altered to handle “Post-Panamax” ships that can handle cargo loads of 8,000 containers of the size you see on flatbed trucks or on freight trains, if you drive around the countryside very much.  That’s up from a current shipping capacity of 3,000 such containers, and that’s the capacity that drives the draft.

But government regulations are in the way.  If Charleston is lucky, they’ll get the red tape worked through and be able to begin deepening its port in 10 years.  It won’t be cheap, either: it cost Charleston $4.2 million just to get started on the tape.  At an additional cost of $20 million and 8 years, the Army Corps of Engineers must

meticulously study all the possible implications of port deepening: the environmental impact of digging up the channel bottom, shoreline and channel dynamics, saltwater intrusion up the rivers, oxygen content of the water and its effect on fish and a cost/benefit analysis of deepening versus leaving it as is.

And then it has to be “peer-reviewed” for another two years.  Some of this stuff makes no sense, either.  How would deepening the channel bottom move more seawater further inland, up the rivers (except, possibly, from disturbances while dredging is in progress)?  How would any of this impact O2 content (again, except during the dredging)?  The cost/benefit seems self-evident.  But what do I know; I’m just a poor, dumb redneck Texan.

Oh, yeah, one more little fillip: Charleston just did this.  They completed a (14-year) project to deepen their port (not enough, it turns out) in 2004.  They just need to update that study, right?  Nah.  Gotta do the whole thing all over again, from scratch.

Meantime, here’s the economic benefit that Charleston will be missing out on because of this red tape, courtesy of the South Carolina State Ports Authority, via the link above.  Every inch [sic] of added draft in the shipping allows this:

• 358,000 pounds of coffee, worth more than $500,000
• 36 John Deere tractors, worth more than $2.4 million
• 58,000 pairs of Adidas shoes, valued at $5 million
• 9,600 laptop computers, valued at $8.5 million
• 1,540 55-inch TVs, worth approximately $3 million

Charleston wants to deepen its port by 5 feet to 50 feet.  Here’s what those 60 more inches would mean for the city.  Per boatload

• $30 million worth of coffee
• $144 million worth of tractors
• $300 million worth of running shoes
• $510 million worth of laptops
• $180 million worth of TVs.

Government regulations are worth more than that, though; they must be.

Here’s another item, loosely related.  Coast Guard safety regulations limit the capacity of ferry boats.  Because the CDC says the average adult American’s weight has ballooned from 160 lbs to 185, the Washington state ferry service has had to reduce its per ferry passenger capacity from 2,000 to 1,750.

But, really, it’s not like we’re wasting all that regulatory money.  Government helps out, too.  Think about Chevrolet’s much hyped and little appreciated electric car, the Volt, which Chevrolet can’t sell at its sticker price of $40,000 per each.  Wrapped up in that little bundle of batteries are government subsidies (both Federal and state) of $250 thousand, per each.  That’s a lot of help.

Hmm….

Obamacare’s Year in Review

Posted on by
Reply

The Daily Caller had a summary of the wonderful year that Obamacare had in 2011.  Here are some…highlights…of that year.

Jan. 26: Pharmaceutical company Abbott Labs cuts 1,900 jobs “in response to changes in the health-care industry, including U.S. health-care reform and the challenging regulatory environment.”

Feb. 16: Health and Human Services Secretary Kathleen Sebelius testifies before the Senate Finance Committee and admits that the CLASS Act, a key portion of the law that was touted as a $70 billion savings, is “totally unsustainable.” Sebelius says her department has the authority to rework the legislation to make CLASS tenable.

Hold that thought.

March 23: [T]he House Committee on Energy and Commerce finds that the temporary Early Retirement Reinsurance Program will spend its allotted $5 billion far earlier than its 1 Jan 2014 expiration date.

March 30: The CBO estimates that health care reform will cost $1.1 trillion, an increase of $90 billion from its February estimate.

May 17: The Daily Caller reports that 20 percent of new waivers from Obamacare have gone to gourmet restaurants, nightclubs, and fancy hotels in former House Speaker and current House Minority Leader (D, CA) Nancy Pelosi’s district.  These waivers are to a provision of Obamacare that requires companies annually to increase the amount of coverage they provide their employees.

Hold that thought, too.

June 8: A McKinsey & Company survey of over 1,300 private sector employers found that 30 per cent of them definitely or probably would stop offering insurance to their employees after the law is implemented in 2014.

June 18: HHS decides that it will accept no more new or renewal waiver applications (for those exemptions from requirements annually to increase the amount of coverage provided) after Sep 22 of this year.

So much for the Pelosi Preferred waivers.

June 21: Middle-class Americans eligible for subsidized health care allegedly intended for poor people, a feature discovered after Obama signed Obamacare into law.  Medicare’s chief actuary says the policy “doesn’t make sense.”

Well, NSS.  On the other hand, no one needed to know about this before the bill was passed.

July 18: An Employment Policies Institute report finds that the Affordable Care Act would incentivize employees to switch to a government-subsidized insurance exchange even if employers were to continue their health care coverage, costing taxpayers “significant[ly].”

Oct. 13: A federal inspector general finds that the IRS is having trouble collecting the 10-percent federal tanning tax established by the law.

Oct. 14: HHS completes its review of the CLASS Act, determining that “we do not have a path to move forward,” Sebelius says.  CLASS remains on the books, but the administration essentially gives up on it.

So much for “rework the legislation to make CLASS tenable.”

Nov. 9: The National Federation of Independent Business releases a report saying that in 2012 the law’s new health insurance tax will reduce private sector jobs by between 125,000 and 249,000.

Nov. 14: The Supreme Court agrees to hear arguments on the Affordable Care Act.

Dec. 18: Health care experts doubt that the federal insurance exchange program will be fully operational by the Jan. 1, 2014 deadline, since many states have refused to implement the state exchange program, the Washington Post reports.

This was the bill that was so wonderful that all of us—including our representatives who were hell-bent on passing it—could simply wait until it was passed before we found out what was in it.

Big Government’s Taxes

Posted on by
Reply

Progressives like to assert that their tax and spend programs are good for job creation and good for jobs, generally.  This actually is a testable claim, and we have an ongoing experiment of the thesis in Illinois.  How’s this working out for the Illini?  The Wall Street Journal has in interim report.

At the start of this year, the Progressives in control of the Illinois state government rammed through a $2 billion tax increase: the corporate tax rate exploded by 30% (the personal income tax was worse, a 67% increase, but that’s for another time).  Naturally this has no effect on jobs or job creation goes the Progressive hypothesis.  It’s almost true for the Big Businesses favored by Illinois’ Big Government.  The Chicago Board of Trade and the Chicago Mercantile Exchange have received from Uncle Patty Quinn’s generosity $85 million in tax breaks if only they’ll keep their jobs in Chicago and not relocate to another state.  Sears Holdings Corp. is the beneficiary of $15 million in tax credits for the same reason.  Santa Quinn has, in rough total, handed out $500 million in goodies to some 80 Big Businesses if only they’ll keep their jobs in Illinois.  That’s actually a relatively small sum, only a bit over six-tenths of one per cent of that $2 billion tax hike.  But it’s not chump change for the companies getting this special dispensation.

And it’s not chump change for all the mom and pops and other small and medium businesses who have to pay all of that tax hike because they can’t afford the Progressives’ vig.  The solution for them?  Hit the bricks.  Or see their friendly neighborhood community organizer.

Did this job-creating and budget-fixing tax rise achieve its purpose?  The Illinois Policy Institute says that over the next 15 years, the revenue lost from all these special corporate tax deals, along with the revenue lost from companies (big and small) departing, will exceed the monies raised from the increase.  And the budget deficit hasn’t gotten any smaller.

On another note, we have this, from Lawrence Lindsey in his 1990 The Growth Experiment: How the New Tax Policy Is Transforming the U.S. Economy:

Politicians who assert their role in directing funds to the “industries of the future” want to play entrepreneur with someone else’s money. They are ill suited to the role. The politician who takes over the direction of capital is quickly revealed as this year’s amateur following last year’s experts.

Hmm….

Hypocrisy

Posted on by
Reply

For some time, President Obama has been demanding that the payroll tax cut, due to expire at the end of this year, be extended for another year—the whole year, together with a blanket extension of the unemployment subsidy.  Leaving aside the wisdom of defunding Social Security as a means of providing a tax cut, or of paying the unemployed for not working, let’s explore what’s happened with Obama’s demand.

Obama and Senate Majority Leader Harry Reid have refused to pay for a one-year payroll tax cut and the unemployment subsidy extension with any means that doesn’t include a parallel tax increase elsewhere, as they demand a continuation of their class war programs.  Failing to get agreement for that for a complete year’s extension, the Senate passed a two month extension of the tax cut and subsidy—with, I’m embarrassed to say, the complicity of Senate RINOs who lack the character or courage required to fight this class war.  Certainly, at the end of those two months, the Progressive demand for tax increases on Americans of whom they disapprove will resume, even more loudly.

The House had passed, some time prior, a bill that would have extended the payroll tax cut for the entire year, extended the unemployment subsidy on a gradually decreasing schedule, and paid for all of it without tax increases anywhere else, but with spending cuts only.

When the Senate passed their two-month bill, they ran for the exits to start their precious month-long vacation, their personal welfare being more important to these Senators than the welfare of us Americans.  On the way out the door, they ordered the House to pass the Senate bill with no further argument.

The House rejected the Senate’s failure and voted, instead, to send the two bills to a House-Senate conference committee to resolve the differences, as is the normal way of doing business in the Congress.  “Let’s get this done today,” House Speaker John Boehner told Obama in an effort to enlist the President’s help to get the bill which Obama has been demanding passed.  However.

Reid is actively refusing to negotiate.  He’s actively refusing to bring the Senate back—or to send any Senators back to take part in the conference committee.  He demands that his two-month bill be passed by the House as a precondition to any negotiations.  And he’s castigated those evil Republicans for holding out for Obama’s year-long extension.

Obama is actively refusing to negotiate on the passage of his own bill.  He says:

Now let’s be clear.  The bipartisan compromise that was reached on Saturday is the only viable way to prevent a tax hike on January 1. The only one.

So, Obama, who has been demanding a year-long extension of the payroll tax cut for Americans, doesn’t really mean it.  The only bill he wants is his pet Harry Reid’s two-month extension.  And an opportunity to fight again for divisive tax increases on Americans whom he doesn’t like.

The Euro and the Economists

Posted on by
Reply

Spiegel Online International interviewed two German economists on the future of the euro.  One has an (incomplete) approach to a solution, the other still can’t see the problem.  The split between the two mirrors the split among politicians (although along different dimensions than the politicians), and the existence of the split is a demonstration of the lack of coherence in reaching a solution.  Which bodes ill for the euro and for the European Union.

The interview opens with this; I’ll cite one economist’s response, as the other is saying substantially the same thing I’ve been writing, and so he’s to a large extent preaching to the choir.

SPIEGEL: Mr. [Joachim] Starbatty, Mr. [Peter] Bofinger, can the euro still be saved?

Bofinger: …The highly indebted countries must be able to borrow at moderate interest rates so they don’t go bankrupt. This could be achieved with euro bonds. And if they can’t be implemented that quickly, the ECB has to stabilize the system. In doing so, it would not create inflation but would in fact avoid deflation.

Mr Bofinger is wrong on two counts, and his first error demonstrates his plain lack of understanding of the nature of the problem.  Disastrously indebted countries do not need to “be able to borrow at moderate interest rates.”  They’ll never be able to borrow their way out of a debt-based bankruptcy.  Disastrously indebted nations instead must stop borrowing altogether and reduce their debt through annual budget surpluses.  Moreover, budget surpluses achieved by taking money away from their citizens and so out of their economies in the form of higher taxes will only guarantee continued economic failure.  The borrowing must stop and the debt reduced through reduced government spending.  Secondly, throwing money at the problem via the ECB certainly will avoid deflation—by leading to explosive inflation from too much money chasing too few goods from too little production.

Bofinger goes on in response to another question:

German politicians have not acknowledged that these countries have already reduced their deficits significantly. Compared to 2009, deficits have declined in all of the crisis-ridden countries…. The markets haven’t even noticed this.

It’s true that the deficits have shrunk.  What the markets have noticed, though, is that reduced deficits means continued deficits which means still increasing debt for nations with too much debt already.

On Spiegel‘s question of EU-wide increasing yields on sovereign debt (which means it’s getting ever more expensive for governments to borrow), the two economists had this:

Starbatty: Because the trouble spots in the euro zone are not being isolated, the sparks are jumping over to the healthy countries. Everyone knows that if the weaker countries are to be rescued, two countries — Germany and France — will ultimately be doing all the heavy lifting. So the most important question is: How long are the Germans willing to pay? And how long are the French in a position to pay?

Bofinger: You correctly describe how the euro zone behaves today, with 17 different countries trying to address the problems individually. In fact, the real question is whether Germany can be everyone’s guarantor in the end. That’s why we have to turn things around and say: We will now act as a unit. If Italy can go into debt through euro bonds, it will always be able to raise money, even it has to refinance €300 billion ($400 billion) in debt next year.

Mr. Starbatty exposes the false premise of the fiscal union on offer: that the “weaker countries” should be rescued at all, and if so, by whom.  The German citizens are tired of being everyone else’s piggy bank, and the French, while slower to the realization, are rapidly losing their capacity, even as they remain (sort of) willing.  Bofinger, on the other hand, misses the problem altogether: the fiscal union both allows an Italy (or a Spain, or a…) to continue to borrow profligately, rather than bringing its debt under control, and it traps Germany (and France) into being the union’s piggy banks.

Here’s this exchange, also:

SPIEGEL: So are the euro countries too different to be welded together in a single currency, as euro critics have claimed from the start?

Bofinger: There are also big differences in productive capacity in the United States. The problem is that we in Germany have tried to become even stronger by holding back wages….

Starbatty: The mistake lies in the fact that the weak countries in the monetary union have not changed their policies. They have used the low interest rates to have a party….  …which is why we now have a large divide in the monetary union. Some are overly competitive, while others can’t keep up anymore.

Both economists have it wrong.  The variability in productive capacity isn’t the problem for cohesiveness.  The lack of common social and philosophical imperatives and the vastly differing views of the purpose of money are what make a cohesive fiscal union of all 17 nations impossible and that are pulling the 27-nation EU apart.  Separately, “overly competitive!?”  Only in the fantasy world of too big to fail does this contradiction make sense.

The interview goes on in this vein.  Without even an understanding of the nature of the problem, there can be no hope of a solution.  But let’s expand government (here in the form of more power to the ECB and a fiscal union layered on top of national governments), as one economist and a gaggle of politicians insist, anyway.

Read the whole thing.