Category Archives: Economics

Animal’s Daily Bad Deal News

Congressional Democrats are pushing back against the Trump Administration with something called a “Better Deal”, which apparently is NewSpeak for “more government.”  Excerpt:

Fittingly, top Democrats were back in D.C. this week to offer more detail on “A Better Deal.” At a Wednesday press conference in front of the Capitol, they outlined plans for an “independent trade prosecutor” to investigate businesses that shift jobs overseas, and an unelected “American Jobs Council” to investigate foreign investments in American businesses.

The American Jobs Council, Schumer said, will “slam the door shut on foreign companies who want to buy-up American businesses and harm our workers.” The council appears to be the centerpiece of a seven-point plan that includes penalties for federal contractors who outsource jobs, guarantees that taxpayer-funded subsidies flow only to American-based companies, and creates a public “shame list” for companies that move jobs offshore, according to The Washington Post’s Dave Weigel, who reported on some of the details of the Better Deal plan this week.

In other words, more bureaucracy and more regulations aimed at trying to freeze a dynamic economy and halt the flow of capital and goods around the world.

Maybe this is, as Slate has suggested, the basis of a plan “to campaign against cable companies, airlines, and other things everyone hates,” but I’m not seeing it. It seems more like the basis for a campaign that says government bureaucrats know what’s best for a country, or one that promises to centralize more rulemaking at the expense of businesses and workers.

The focus on preventing outsourcing—something Trump and the Democrats have in common—ignores the benefits of being able to produce goods in places where labor is more inexpensive. That makes it possible for Americans to buy products that would otherwise be unaffordable, but it also allows global supply chains to lower the cost of living for everyone. Government controls over trade drive up costs and raise prices for the very low- and middle-income workers the Democrats (and Trump) claim to be trying to help.

As a purely political matter, if Democrats are trying to turn Trump’s economic populism their direction, this seems like a misguided effort.

Out on a limb.

Democrats have never seen a government regulation or tax on the business world that they weren’t in favor of.

Granted, at the moment this is pure political theater.  There isn’t the slightest chance Congressional Dems will even get this bill/bills out of committee, much less on the President’s desk to be vetoed.  But there are two things the Democrats have always been good at; two things the GOP could stand to take a few pointers on:

  1. Solidarity.  The Dems hang together.
  2. Persistence.  The Dems never give up.

The Gang That Couldn’t Shoot Straight needs to buy a vowel and get together on a few things, like tax reform; instead, it looks like they are going to wander around some more.  To paraphrase an old gag:  “I don’t belong to an organized political party.  I’m a Republican.”

Goodbye, Blue Monday

Goodbye, Blue Monday!

Thanks as always to Pirate’s Cove for the Rule Five links!

One of my favorite free-range, largely unedited and uncontrolled libertarian web sites is Glibertarians.com.  Over the weekend one of the regular Glib posters discussed the first round of the Trump tax wars.  Excerpt:

Now that Team Red has demonstrated their utter hackery by suddenly changing their minds about dismantling the government-controlled health insurance system and demonstrating their deep and abiding love for expansive government, the next ripe target is so-called “tax reform.” Team Blue is already manning the ramparts in the certain fear that any adjustments in the tax code will be away from their moneybags and toward the Team Red moneybags (we know for certain that actually cutting taxes and pushing all the moneybags away from the trough is as likely as the sudden heat death of the Universe).

So it was with that thought in mind that I approached a Vox article written by the reliably mendacious Matt Yglesias as a general hit-piece on Trump. The article doesn’t disappoint, it was the expected (and at this point yawn-inducing) brew. The section on taxes drew my attention: as expected, the well-past-damn-lies use of statistics, cherry-picked quotes, emotional appeals, and the Diana Moon Glampers view of the purpose of economic manipulation.

Back on the policy front, Trump says of his tax plan that “if you add what the people are going to save in the middle income brackets, if you add that to what they’re saving with health care, this is like a windfall for the country, for the people.”

Trump’s actual tax plan would raise taxes on millions of Americans while delivering a windfall to the rich…

But here’s the real kicker, right at the end of the article:

It was the very next several paragraphs which floored me:

TPC could not model an actual Trump tax plan since far too many critical details are unknown. For instance, the Administration has been sending mixed signals about whether it wants a tax bill to raise as much revenue as current law or whether it prefers a version that reduces overall taxes and add to the deficit.

Beyond those threshold questions, the White House outline left out many critical details. For instance, during the campaign, candidate Trump said he’d increase the standard deduction but eliminate both the personal exemption and head of household filing status. The April outline repeated the promise to boost the standard deduction but was silent on the two revenue-raisers.

In other words, “We have no idea of what the plan we’re criticizing actually is.” But it gets better:

As a result, TPC created a stylized version of what the key elements of a Trump plan might look like. It first analyzed the tax cuts that the White House outlined in April, adding key assumptions to fill in unspecified details. For instance, TPC assigned income ranges to the proposed tax brackets, which the Administration did not.

In other words, WE JUST MADE THIS SHIT UP OURSELVES. And THAT was what got cited, and Yglesias still had to apply the usual lying sack of shit spin and misquotation to it.

Ladies and Gentlemen, Journalism Circa 2017.

This is the pass we have come to, True Believers, when “journalist” has pretty much become a synonym for “lying sack of shit.”

Which is also a synonym for “Congressman.”

Seriously, though – are there any thinking people at all who can’t see through this “tax cuts for the rich” horseshit?  Of course the higher-income earners will see more of a tax reduction in any tax reform plan; they pay most of the goddamn taxes.  When most pols yap about a “tax cut for working people” they really mean “handing out more Free Shit.”

And what the hell does “working people” mean, anyway?  I’m not a 1%-er but I sure as hell am a 10%-er, mostly through dint of a lot of hard work and nearly 30 years in an industry sucking up every little bit of knowledge I found lying around, to the point where now I have a reputation in the industry and people will pay me to come in to their businesses to fix things.

Are these politics-of-envy assholes implying I don’t work?  Because it sure feels to me like I’ve been working my ass off for quite a long while now.  And considering that I lose somewhere between a third and half my income in taxes every year, yeah, I’d like to have some kind of a fucking break.

With that said, I’ll just state that Matt Yglesias is a dishonest shitbag and a stupid prick, and leave it at that before I end up any more pissed off about the whole thing.

Rule Five Economic Infringement Friday

Here’s an important point to remember:  When pols talk about regulating “the economy” they are talking about regulating people.  Excerpt:

Strictly speaking, it’s not markets that can and should be free—it’s people. The term free market merely describes one political-legal context in which people conduct themselves. It’s shorthand for a subset of human action—the exchange of goods and services, usually for money. (The logic of human action, the study of which Ludwig von Mises called praxeology, applies to all purposeful conduct, not just market exchange.)

It follows, then, that when politicians and activists call on the government to regulate the economy, they mean to regulate us. There’s no economy to regulate. It’s not a machine or a vehicle. It’s an unending series of purposeful activities the logic of which gives rise to a process characterized by regularities. Hence, for example, the law of supply and demand. We can talk about this orderly process—the market—as though it were a thing, but we have to keep its metaphorical nature in mind. It’s still only people cooperating with each other.

When market critics demand government regulation, they imply that markets are by nature unregulated. But we’ve just seen that this is nonsense. An unregulated market is a logical contradiction. That we call it a market indicates the regularities, or laws, just mentioned. No regularity—no market. There could no more be an unregulated market than there could be a grammarless language or a perpetually disorderly society. We would not call a population a society if it did not display a general order expressed by rules (written and unwritten), customs, and mores. Without such things, a population would be not a society but a Hobbesian state of nature.

What this article omits when writing of free markets is the appending of the term “capitalism”:

Free market capitalism.

There are damn few pols of any political stripe who actually support honest free market capitalism.  (Rand Paul comes closest.)  But here’s the thing about capitalism:  There is no real “ism” there.  In true free market capitalism, there is no underlying ideology, no central dogma, except liberty.  Free market capitalism consists only of free people engaging in free trade with one another, using their own skills, talents, abilities and assets to trade with others for their skills, talents, abilities and assets to the mutual advantage of all parties.

How could anyone be against that?

Ronald Reagan once pointed out that liberals “aren’t always wrong – it’s just that they believe so many things that aren’t so.”  Would-be market regulators are much the same.  The problem – no, not the problem, the really scary thing about politicians that want to regulate markets your economic freedom is that not only do they believe things that aren’t so, they are willing to use force – men with guns – to compel you to comply with their beliefs.

You can have regulated markets or you can have liberty.

You cannot have both.

The market in microcosm takes essentially this form:

Producer:  “I have produced Item A.  I would like to sell Item A for $5.”

Consumer:  “I would like to have Item A.  Here is $5.”

Producer:  “Thank you.”  Producer then uses the $5 to purchase more raw materials to make more Item As.

Both parties gain value.  This is the only legitimate way for economic transactions to take place; if they take place by coercion, that is theft, and if they take place by deception, that is fraud.

That’s how economies grow, True Believers, because we are the economy.  And if we are free – truly free – then unless theft or fraud has taken place, there’s no damn room for government regulators to stick their noses in.

Rule Five Seattle Surprise Friday

Well-meaning as they may be, advocates of ever-increasing minimum wages can’t overturn the laws of economics by wishing them away.  Seattle is learning that lesson now, and their new minimum wage law hasn’t even topped out yet.  Excerpt:

Three years ago, the city of Seattle voted to raise its minimum wage to $15 per hour, in the name of human decency and basic fairness. The minimum wage went from $9.47 to $11 per hour in 2015, and then to $13 per hour in 2016. Similar policies have been enacted or considered in countless other cities.

Critics argued that boosting wages by bureaucratic diktat rather than increases in worker productivity or market demand would lead to fewer hours and fewer jobs for low-income and low-skill workers.

Now what The Washington Post calls a “very credible” study from researchers at the University of Washington’s School of Public Policy and Governance finds that the critics were right.
Specifically, the study, published as a working paper by the National Bureau of Economic Research, concludes

…the second wage increase to $13 reduced hours worked in low-wage jobs by around 9 percent, while hourly wages in such jobs increased by around 3 percent…. The minimum wage ordinance lowered low-wage employees’ earnings by an average of $125 per month in 2016.

All told, that’s the equivalent of 6,317 full-time jobs eliminated because of the latest hike.

Over the past few years, a lot of people—including Sen. Bernie Sanders (I-Vt.)—have argued that labor costs are different than other costs and that elasticity of demand isn’t that great when it comes to low-wage workers. But many of the studies that downplay the effect of minimum-wage hikes focus only on teenagers or fast-food workers. The University of Washington study looks at low-skilled, low-wage workers “spanning all industries and worker demographics.”

Seattle liberals are undoubtedly shocked – shocked, I tell you – to discover that pricing the low-skilled out of the market results in fewer jobs for the low-skilled!

But there’s an issue beyond the economic one involved here; there is one of principle, and it is this:

Why a voluntary employment contract between employer and employee any business of any level of government?

The first employment contract I ever entered into was negotiated when I was ten years old.  The parties to that negotiation were me and my grandfather.  I had a brand new pellet gun, and Grandpa offered my ten cents for every dead rat I could produce from the area around his corncrib.  I spent much of that weekend sitting on the hulk of an old tractor near the corncrib, and I earned about a dollar and a half – not a bad weekend’s haul for a ten year old boy in 1971.

I wonder how many laws that arrangement would be breaking now, forty-five years later?

Animal’s Daily Immigrant Welfare News

President Trump is on record as proposing a five-year moratorium on welfare benefits for new immigrants to the US.  Excerpt:

President Trump announced Wednesday night that he will soon ask Congress to pass legislation banning immigrants from accessing public assistance within five years of entering the U.S.

“The time has come for new immigration rules that say … those seeking immigration into our country must be able to support themselves financially and should not use welfare for a period of at least five years,” Trump told a campaign-style rally in Cedar Rapids, Iowa.

Trump’s proposal would build on the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, which allows federal authorities to deport immigrants who become public dependents within five years of their arrival. Many of that law’s provisions were rolled back during the George W. Bush and Barack Obama administrations, but Trump’s proposal would make more categories of federal benefits off-limits to immigrants.

Here’s the thing on welfare and immigrants:  You can either have a welfare state, or you can have a liberal immigration policy.  You can’t have both.  Unfortunately, both is what we have right now, and while plenty of immigrants come to the U.S. seeking opportunity and work, plenty more come seeking Uncle Sam’s Gravy Train of Free Shit, and that just is not acceptable.

The linked story cites this study by the Center for Immigration Studies, maintaining that 51% of households headed by an immigrant receive some welfare benefits, as opposed to 30% of native households.  That number, if it can be verified, is revealing.  (I did a cursory search but have been unable to find said verification.)  If this is the case, then it seems 51% of immigrant families are on the aforementioned gravy train, at least to some extent.

We aren’t so desperate for more immigrants that we need to offer free handouts to all and sundry.

Animal’s Daily Air Traffic News

President Trump is proposing to privatize the nation’s air-traffic control system.  Not a bad idea.  Excerpt:

President Trump, in a speech Monday, promised to replace the current government-owned and operated air traffic control system with a private “self-financing, non-profit organization” relying on user fees, not taxes, to fund itself.

The idea is not new. Canada, the U.K. and Germany are among the roughly 50 countries that privatized air traffic control.

It has been a long-fought goal of libertarians like Bob Poole, senior transportation analyst for the Reason Foundation (the non-profit that publishes this website). Poole has argued since the 1970’s the “high-tech 24/7 service business” that is air traffic control “is a poor fit for a tax-funded bureaucracy housed within a safety regulatory agency.”

Poole proposed what Trump is now embracing, dumping the Federal Aviation Administration-run system with a non-profit air traffic control entity less bureaucratic, more cost-effective, and ultimately more responsive to consumer needs.

As a 2016 Office of the Inspector General (OIG) report found, the FAA has done a pretty terrible job managing and modernizing a system upon which some two million air travelers every day rely.

Despite repeated attempts by Congress to reform the FAA’s management, personnel, and organizational practices, its “costs continue to rise while operational productivity has declined,” the report concluded.

Canada thought this was a good idea, and it turns out they were right.  Here’s the solution.

The airlines are for this.  The pilot’s union is for it.  Canada did it with considerable success.  So did the UK.  Ditto Germany and France.  New Zealand did it in the 1980s, and as the linked Reason article points out, they saw their “...air traffic control system go from losing $5.5 million a year to turning a $2.3 million profit in just a year after privatization.”

There are no good reasons not to do this; we can modernize, we can increase efficiency, we can reduce cost.   Who could be against this?

Well, the loony old bat from Frisco, Nancy Pelosi, for one; she said privatization would “hand control of one of our nation’s most important public assets to special interests and the big airlines.”

For the political Left – and Pelosi is so far to the left, she needs inserts in her left shoe to stand straight – government is always the answer.  In this case the history of privatization speaks pretty eloquently.  Hopefully Congressional Republicans will grow a pair and push this through; let Queen Nancy howl.  Success speaks for itself.

Climate Hysteria

Today President Trump pulled the United States out of the Paris climate agreement, producing predictable howls of outrage from all quarters but most of all from the political Left and the leaders of other nations who will now be denied billions of dollars in income transfers from Uncle Sam.

Some respected scientists weighed in:

This was a bad deal, True Believers.  I’m not a climate change denier; the Earth’s climate has been changing for 4.55 billion years now, and through most of that time it’s been warmer than it is now.  I also don’t doubt that human activity has some effect, although it isn’t worth crippling the economy over.

This was just a bad deal.  The main feature was transferring billions of U.S. dollars to developing nations who were exempt from any requirement to reduce carbon emissions for decades.

The United States has already led the way in reducing carbon emissions.  As a nation, our carbon footprint is lower than it was in 1992.  We don’t need to give away billions of dollars from our already-broke Imperial government to keep moving ahead on this.

Also:  If this was such a great deal, as former President Obama would have us believe, why did he not present it to the Senate and have it ratified as a binding treaty?

Animal’s Broke Californey News

California is considering a single-payer health care plan.  All California residents, regardless of legal status, would be entitled to a free health care ride; no treatment denied, no deductibles, no nothing, no kidding.  Only catch:  It will cost more money than the Golden State has.  Excerpt:

California has been considering a single-payer healthcare plan. S.B. 562, the “Healthy California Act,” is currently in committee, and today the numbers came out on what it would cost to actually make this plan a reality.

Spoiler alert: it’s not pretty.

According to analysis of the bill, it would cost a cool $400 billion to provide for the healthcare of all California residents. S.B. 562 would cover residents in California regardless of their legal status. If the bill were enacted, healthcare would be entirely free and there would be no deductibles, co-pays, or premiums–entirely free care.

One tiny, insignificant detail: there’s no way the state can afford this. California would have to raise an additional $200 billion in tax revenue just to pay for the Healthy California Act, although there’s nothing in the bill that would create a tax that to actually raise the money to pay for the care. It was suggested that a 15 percent payroll tax would provide revenue for the bill.

Perhaps unsurprisingly, the cost is being labeled as the “biggest hurdle” to universal healthcare coming to California.

California is already circling the fiscal drain.  There’s an old saying:  “When you’re in a hole, the first thing you should do is stop digging.”  California seems determined to trade in the shovel for a big damn Armageddon-style drilling machine.

If the California GOP has any brains – and mind you this is an organization that has managed to utterly marginalize themselves in a state that went overwhelmingly for Ronald Reagan in 1984, and for George H. W. Bush in 1988 – (well, those seem recent to me, anyway) they’ll grab on to this bigly.  If this bill passes – and I wouldn’t be surprised if it does, the California Legislature doesn’t appear to have any grasp of fiscal reality – it’s only a matter of time before their new entitlement explodes.

That’s when the California GOP better damn well have a plan ready, something fiscally responsible to pitch to the voters, something that will save the Golden State from fiscal ruin.

You know – something like the House GOP in the Imperial City were busy preparing in the seven years since Obamacare passed.  Remember that plan?  The one they had seven years to prepare?

You know, True Believers, I think we may be fucked.

Rule Five Labour Lunacy Friday

Jeremy Corbyn, the leader of the UK’s left-wing Labour Party, has just released a bat-guano nutty manifesto that, if enacted, would take the United Kingdom straight back to the lackluster Seventies.  Excerpt:

Jeremy Corbyn will take Britain back to the 1970s by nationalising industries, forcing wage caps on businesses and giving huge power to the unions if he gets into power, a leaked copy of Labour’s draft manifesto reveals.

The 43-page document, obtained by the Daily Telegraph, shows that Mr Corbyn plans to nationalise energy, rail and mail and will introduce a 20:1 pay cap for businesses. 

The manifesto says Mr Corbyn is committed to achieving a “nuclear free world” and is “extremely cautious” about using Britain’s nuclear deterrent.

The Labour leader will only send the armed forces into combat if “all other options have been exhausted”, the copy of the manifesto states.

It also says that Labour will rule out a “no deal” Brexit and refuse to set a migration target, in a move that is likely to drive away its traditional supporters who voted Leave in the EU referendum.

The party will also create a Ministry of Labour to hand more power to trade unions, stating: “We are stronger when we stand together”.

Pay bargaining and increased unionisation across the workforce will also be introduced according to the draft plan.

The party will fund its socialist agenda though a huge programme of increased tax and £250billion of borrowing over the next decade with more spending on education and health and big levies on business and industry.

Here are some of the crazier aspects of his tax plan:

  • Income tax hikes for those earning more than £80,000 a year
  • Ensuring 60 per cent of the UK’s energy comes from renewable sources by 2030
  • Fines for businesses that pay their staff high wages and a business levy on profits
  • Companies with government contracts would only be allowed to pay their highest earner 20 times more than the lowest

These far-left policies (and let’s describe them in a whisper, lest the cabal of nutbars running California overhear us and think these proposals are a good idea) would send the productive and a whopping big chunk of Britain’s successful businesses (read that: employers) running for the hills, or for Ireland, or wherever the grass is greener and the politicians less greedy.

Fortunately for Britain, it looks like the Tories have a pretty good grip on Parliament for the moment.  But read these looney-tunes policies and remember them, True Believers, because we have plenty of our own nutty pols who would love to make these things the law of the land here.

Animal’s Daily Unfunded Liabilities News

Out on a limb.

Puerto Rico, America’s own little Caribbean paradise, is broke.  But plenty of the fifty states aren’t far behind.  Excerpt:

The study by Hoover Institution Senior Fellow Joshua Rauh, “Hidden Debt, Hidden Deficits,” is an update of a report issued last year. It should sound an alarm across the U.S. about the growing crisis of underfunded pensions at the state and local level. Instead, sadly, it will likely be ignored.

To put it bluntly, America’s pension systems are being mismanaged, which is hitting state and local budgets hard.

The Hoover study looked at 649 pension systems as of 2015. What it found was alarming. The average investment return for pensions was 2.87% for the year, while the discount rate — essentially, the expected investment return — was 7.36%. That means returns are 61% below expectations, a dismal performance to say the least.

This means that pension systems across the U.S. will have to do one of two things: Find more money to fund the expected payouts, or slash pension spending on future retirees — or some combination of the two. None of the choices is appealing.

Meanwhile these pension gaps pose a major threat to state and local fiscal health.

“While state and local governments across the U.S. largely claimed they ran balanced budgets, in fact, they ran deficits though their pension systems of $167 billion,” Rauh noted. “This deficit equals 18.2% of all state and local government tax revenue. … The deficits are large and the study reveals the fact that state and local government budgets are far from balanced when one considers pension promises.”

Here is the real money (hah!) quote, from this report:

State public pension plans are now underfunded by nearly $5.6 trillion – an increase of almost $900 billion from State Budget Solutions’ (SBS) last comprehensive report in 2014. When state pension funds are examined through the lens of a more realistic valuation, pension funding gaps are revealed to be much larger than reported in official state financial documents. This report totals state-administered plans’ assets and liabilities and finds nationwide total unfunded liabilities to be $5.59 trillion. The nationwide funding level is a mere 35 percent, which is one percentage point lower than two years ago. Combined across all states, the price tag for unfunded pension liabilities is now $17,427 for every man, woman and child in the United States.

Now, keep this in mind:  These pensions are paid with taxpayer dollars, paid to government employees who enjoy defined-benefit pensions and retained benefits far, far in excess of what almost anyone in the in the private sector can hope for today.

 We are in a situation in this country where the ever-decreasing percentage of the productive are paying for ever-increasing coin and benefits for the unproductive.  Granted, the government has to employ a certain number of people – but is there any reason that city, state and Imperial employees should enjoy such generous benefits when their employers make do with 401ks?

There is a principle in economics called Stein’s Law, postulated by economist Herb Stein:  “If something cannot go on forever, it will stop.”  The current state of government employee pensions can’t go on forever.  It will stop.

Question is, how far in debt will it drag us before it does?