Tag Archives: regulation

Two Short Steps

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The IRS has moved to cancel its “experimental” Direct File program. This is the Progressive-Democratic Party’s…exceedingly pleasurable fantasy…of the IRS online platform that lets filers prepare their taxes for free and submit them through the state.

Aside from the program’s cost ($138 per tax return, which is more than many tax software sellers charge) the editors of The Wall Street Journal noted,

The bigger problem with the program is its threat to the norm of taxpayer autonomy. The push to cut out the tax “middle man,” meaning private services, would have resulted in millions of filers letting the IRS make both the first and final determination of their tax liability and connect to their checking accounts.

Notice that: the IRS gets to connect to our private checking accounts. With Direct File, that’s a deeper connection than simply allowing the IRS to direct deposit a refund. With Direct File, the IRS has been able to extract the tax due from a tax payer’s bank account.

With the cancelation of Direct File, us tax payers, us average Americans, avoided a two-step sequence of events. The first step would have been making Direct File no longer a trial being tested in 24 of our nation’s States, but instead rolling it out nation-wide.

The second step would have been mandating Direct File for all of us.

It wouldn’t have stopped there, though. It wouldn’t be even a short step, more like a small shuffle, after that to alter Direct File to have employers “Direct File” all employees’ pay checks to the IRS instead of sending them to the employees. With that, the IRS would extract the taxes it deemed appropriate and remit to the putative employee the remainder—the amount the IRS would deem appropriate for each tax payer to have.

We dodged a terrible pas-de-deux—that dance for the two performers of tax payer and Government—for the time being, but the Progressive-Democratic Party will return to power eventually, and dangerously sooner than us average Americans want.

It’s Really Pretty Straightforward

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The House Select Committee on China has laid out the breadth and complexity of the People’s Republic of China’s cornering of the rare earth production, refining, and manufacturing markets. The report allegedly

provides a roadmap on how the US can stop—or at least slow—the effort by its biggest global economic competitor to prevent the US from breaking into the market.

A road map? It’s really quite straightforward, if politically difficult.

The US has vast supplies of rare earths within our own borders. Canada, who would be better for us (and themselves) as a trading partner than as a State, has similarly vast supplies. We’ve just concluded a trade deal with Australia to export rare earth to us from its vast supplies. African nations have similarly vast supplies, although doing deals there would have more value in denying those earths to the PRC than in getting exports to us, vast as that value would be.

What’s needed, and this is the straightforward but politically difficult part—though the difficulty lies in timid politicians not those determined to do what’s best for our nation—is getting regulations, environmentistas, and climatistas out of the way of each of the mining, processing, and manufacturing phases of getting to the products of rare earths: primarily, but not exclusively, magnets and chips.

The report recommends a variety of market-manipulating measures, and those might be near-term effective, but the problems with government market interventions center on two things: the “government” part, and government interventions are open-ended; they don’t die. The best way for our government to manipulate our economy, our market, is to get out and stay out of the way.

And there’s be nothing at all that the PRC could do to stop us from doing any of that.

An Iron Curtain Descends on Seattle

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Seattle’s newly elected mayor, Socialist Katie Wilson, has announced that she

will not allow private grocery stores to close….

She also wants city government-run grocery stores to operate. Shades of the Soviet Union’s Iron Curtain that was erected—physically on the boundary between then-East and West Berlin and functionally in its travel document issuance and withholding—to keep people from leaving that communist paradise. Not being allowed to close a store is the same as saying to the store’s operator that “you’re not allowed to leave.”

Those government stores also are reminiscent of the USSR’s government establishments and its nominally independent icon of Soviet socialism, GUM, best known for its ubiquitous presence around the nation and its equally ubiquitous empty shelves, except for those with access exclusively for the Soviet elite.

It’s likely that Federal courts (and it will likely end up in front of the Supreme Court) will not allow any bar to a private entity deciding to close an outlet or to cease operation altogether. However, the uncertainty that will occur and build over the years until that final judgment will wreak havoc on Seattle’s economy and its unemployment rate.

Seattle voters have done this to themselves. They’re the ones who elected the woman. They’re welcome to their enforced stay in the meantime.

A Mixed Message

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President Donald Trump’s (R) tariff program is before the Supreme Court (oral arguments were heard last Wednesday), it appears to be in trouble, and I claim it’s due to his mixed messaging to us in the public.

I have long argued, especially during Trump II’s tariff implementations, that there are two purposes for tariffs, and so two kinds of tariffs. One kind is protectionist tariffs, tariffs implemented to protect domestic industries, especially those in their nascent stages and those that are national security critical. Protectionist tariffs are, in the main, badly mistaken for a variety of reasons; although, an argument can be made that protectionism related to national security is a cost of national security that must be paid if we’re to remain free as a nation.

The other kind of tariff is that used as a foreign policy tool, tariffs applied in order to persuade another nation or bloc of nations to desist from their unfair trade practices, viz., dumping product at below cost, unfair subsidies of their own domestic industries, withholding export of products critical to the importing nation’s economy or national security, or other policies to which the tariffing nation might object.

Trump has been busily touting both the revenue raised by all of his tariffs, of both kinds, while also insisting that they’re necessary foreign policy tools intended to get other nations to leave off their unfair trade practices, to “stop ripping off America,” and to mend their ways on other matters.

Which brings me to the present article by The Wall Street Journal‘s Greg Ip.

Lawyers often stretch the facts to make their case, but even so, this was quite the howler from US Solicitor General John Sauer in defense of President Trump’s tariffs at the Supreme Court on Wednesday: “They are not revenue-raising tariffs.”

Ip, with that lede, stripped his Sauer sentence of its context. The rest of what Sauer was saying is that their purpose, as a foreign policy tool, is to persuade the targeted nations to change their ways. That these foreign policy tools also happen to produce money is deeply secondary. Ip later acknowledged that, but not until deep into his piece. Sauer again, originally:

“The fact that they raise revenue is only incidental. The tariffs would be most effective, so to speak, if no person ever paid them,” because they would have achieved their goal of changing another country’s behavior, or diverting all American purchases away from imports to domestic goods[.]

And that’s the problem with Trump’s rhetoric here. He’s made no distinction in his program between tariffs as protectionism and revenue-raising, the latter which is a Congressional prerogative and not Executive, and tariffs as foreign tools, which is an Executive prerogative and not Congressional.

This is a milieu where Trump’s studied vagueness in his rhetoric may well backfire. Keeping adversaries suitably confused as to our intentions through ambiguity can be highly useful. However, American law, and so our courts—especially our Supreme Court—deal in clearly stated specifics within each case that comes before them. Vague, especially, internally conflicting, speech is properly disdained by judges and Justices.

Trump’s contaminating his use of tariffs as foreign policy tools with his use of tariffs as protectionist policy may well produce the elimination of his tariff program in toto. That would be to our nation’s economic ill, and to our nation’s national security detriment.

Wrong Answer

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Senator Bill Hagerty (R, TN) and Treasury Scott Bessent disagree with The Wall Street Journal‘s editorial How to Make Banks Less Safe, an editorial with which I also disagreed. However, Hagerty and Bessent are wrong in their proposed solution.

They insist that the recent intermediate-sized bank “failures” (my euphemism quotes) stemmed from an intrinsic imbalance in protection for banks.

What explained the flight? A competitive imbalance: the biggest banks benefit from a perceived government guarantee that smaller institutions lack.

That protection imbalance is the Dodd-Frank entrench[ment of] the biggest banks as “too big to fail,” as Hagerty and Bessent correctly identified. Their solution is wrong, though.

…fortify our community banks against existential headwinds by raising the Federal Deposit Insurance Corp. limit. This would put community banks on a more even playing field with their larger competitors, and provide small businesses more certainty to maintain their payroll and other operating accounts with community banks in times of stress.

The correct answer is to take the “too big to fail” protection away from the allegedly systemically important banks and put them on the level of play on which their smaller competitors operate. There is no such thing as too big to fail in a competitive free market. Instead, hold all banks, regardless of size, to the quality of their management teams and those teams’ risk decisions. Do this further in large part by leaving the FDIC’s insurance cap at $250,000. The big players using the big banks will do a better job of moving among banks that are better led than others.

The market, which is individuals, small business, and international behemoths, will in its aggregate do a far better job of identifying well- and poorly-run banks, and imposing performance discipline on all of them, than can any government decision-making, which by design, is rife with political input rather than limited to economic input.