Category Archives: Economics

Animal’s Daily Canada Trade War News, Eh

A reliable Canadian news broadcast.

President Trump may be starting a trade war with one of our neighbors – over trees.  Excerpt:

Speaking during a first of its kind meeting dedicated only to members of the U.S. conservative media, including Breitbart News, OANN and Daily Caller, President Trump told reporters to expect a 20% tariff on softwood lumber coming into Canada.

“We’re going to be putting a 20 per cent tax on softwood lumber coming in — tariff on softwood coming into the United States from Canada,”  tweeted Charlie Spiering of Breitbart Media.

Trey Yingst of OANN tweeted that according to Trump “Canada has treated us very unfairly” and also threatened a tax on Canada’s dairy industry.

According to the WSJ, Wilbur Ross said the tariff will be applied retroactively and imposed on Canadian exports to the U.S. of about $5 billion a year. He said the dispute centers on Canadian provinces that have been allegedly allowing loggers to cut down trees at reduced rates and sell them at low prices. “The determination that Canada improperly subsidizes its exports is preliminary, and the Commerce Department will need to make a final decision. In addition, the U.S. International Trade Commission will need to find that the U.S. industry has suffered injury. But even a preliminary decision has immediate real-world consequences, by discouraging importers from buying lumber from Canada.”

I’m not sure this is such a good idea.

Whenever you restrict the supply of a commodity, whether by regulation, tariff or any other method – you raise the price of that commodity.  Now, think of one thing, one product, that almost everyone needs, and think of what they are largely made of.

The answer to that:  Houses, and wood.

Raising the price of wood will raise the price of housing.  Real estate prices have always been up and down, but lately, across most the U.S., they have been up.  That’s great if you already own a home; the added equity is money in your pocket.  But if you’re a young couple starting out, it puts that first starter home a little farther out of reach.

It’s too bad we can’t deal with purveyors of bad economic policy by simply casting them adrift.

Animal’s Hump Day News

Happy Hump Day!

Today we have another minimum-wage tidbit and another hypocritical big-city politician!  (I know, big surprise, right?)  Baltimore Mayor Supported $15 Minimum Wage Until She Learned What It Would Do to City’s Economy.  Excerpt:

During the 2016 campaign, Catherine Pugh was one of dozens of Democratic politicians calling for the implementation of a $15 per hour minimum wage.

Since being elected mayor of Baltimore in November, though, Pugh has changed her mind about the merits of forcing employers to pay such a high hourly rate. Last week, Pugh announced she would veto a $15 minimum wage bill passed by city council, citing concerns about how it would hurt the city’s economy, nonprofits and charities working in the city, and the city government’s bottom line.

After doing “some research,” Pugh said at a press conference on March 24, “it is not appropriate at this time that I will sign this bill, so I am vetoing this bill.”

Pugh said the bill would not be in the best interest of Baltimore’s 76,000 unemployed workers and would drive businesses out of the city to the surrounding counties.

Pugh obviously had what we used to refer to as a sudden rush of brains to the head.  (I may be being a little too generous.)   I’m pretty damn sure Mayor Pugh was considering the sudden increase in cost of the city’s union-scale employees; union contracts are frequently tied to a percentage over the prevailing minimum wage.

The really amazing thing here is finding a politician that realizes that the laws of economics (supply and demand, anyone?) can’t be overridden by good intentions and a sense of what’s “fair.”

But there’s a twist:  Pugh has been a business owner.  Unlike a lot of big-city pols, she has had to produce product and make payroll; she owned a public relations firm and a TV station.

Maybe this will be another nail in the coffin of minimum wage laws.  There is no real economic or moral justification for a law that freezes low-skilled workers out of the market – which is precisely what a wage floor does.

Rule Five Death and Taxes Friday

Holy shit!  It’s now costing taxpayers 6.1 billion hours and $234 billion a year in tax compliance!  Excerpt:

Taxpayers spend 6.1 billion hours a year just to comply with the federal tax code, according to experts at a Tax Foundation event on Monday.

Pete Sepp, president of the National Taxpayers Union, said that tax compliance costs taxpayers $234 billion per year in direct costs and lost productivity.

“The problem is the status quo—thinking that, well, if we don’t do tax reform this year it will just be that bad,” Sepp said. “No, the status quo is not the static quo—it’s going to get worse.”

“The paperwork burden inventory at the Office of Management and Budget related to Treasury is expected to rise by another 2 billion hours in the next few years,” he said. “One-third added to that, we’re looking at tax compliance costs of north of $400 billion a year.”

Sepp admitted that the failure of the Republican health care reform bill, with its projected deficit reductions, will make it more difficult for Republicans to pass a tax reform bill.

“This is the important point right now, it’s an especially important one in this current post-Obamacare repeal environment,” Sepp said. “We now have about a trillion dollars of baseline problem now that we didn’t think we would have before assuming Obamacare was going to be repealed.”

“That’s going to make tax reform a much tougher task,” he said. “It also means we’re going to have to find other ways of making every single simplification measure count, more so than it ever would have needed to count in the past.”

House Republican leadership withdrew the American Health Care Act on Friday ahead of a scheduled vote, following President Trump’s request that the legislation be pulled. Trump said tax reform would be the next item on the agenda.

A number of words come to mind; “obscene” is one, “insane” another, along with several less pleasant pejoratives.

So, what is the GOP leadership planning for tax reform, and how will it help this utter disaster?  Well, here’s the plan put out by Republicans on the key Ways and Means committee.  Some key items include:

  • Save time and money by making it so that most Americans can do their taxes on a form as simple as a postcard.
  • Consolidate the system down to three tax brackets, and lower the top individual income tax rate to 33 percent.
  • Simplify tax filing for families by creating a larger standard deduction and a larger child and dependent tax credit.
  • Cut taxes on small businesses by creating a separate, low tax rate of 25 percent for many on Main Street.
  • Cut taxes on savings and investment by allowing families and  individuals to deduct 50 percent of the dividends, capital gains, and interest received from stocks and mutual funds.
  • Provide a tax-free return on new investment by allowing, for the first time ever, full and immediate write-offs.
  • Restore American competitiveness by lowering our corporate tax rate from the highest in the industrialized world to 20 percent and shifting to a “territorial” system with more competitive rates.
  • Create more certainty by eliminating the death tax, which can take up to 40 percent of a family business’s assets if the owner passes away.

House Democrats are calling this cruel, unusual, mean-spirited, draconian, and lots of other things.  Here at the Casa de Animal we call it falling short of the mark.

Seriously, Republicans; you’ve been handed a historic opportunity.  Screw this up and you’ll likely receive the same sort of shellacking in 2018 that the Democrats got in 2010 and 2014.

Don’t blow it.  This isn’t the time for half measures.  Fix the damn tax code once and for all.  The entire damn tax code shouldn’t be more than twenty or thirty pages long.

Fix.  The.  Damn.  Thing.  Now.

Goodbye, Blue Monday

Goodbye, Blue Monday!

Our usual Monday thanks go out to Pirate’s Cove for the Rule Five links!

Moving along:  How do you make a car out of corn?

Trade.  Excerpt:

The purpose of an automobile factory is not to “create jobs,” as the politicians like to say. Its function is not to add to the employment rolls with good wages and UAW benefits, adding to the local tax base and helping to sustain the community — as desirable as all those things are. The purpose of an automobile factory is not to create jobs — it is to create automobiles. Jobs are a means, not an end. Human labor is valuable to the extent that it contributes to human prosperity and human flourishing, not in and of itself as a matter of abstraction.

There are cases in which this is so obvious that practically everybody understands it. When we talk about building new pipelines (and good on the Trump administration for getting out of the way of getting that done), our progressive friends sometimes sniff that many of the new jobs associated with that work are “temporary.” (“Temporary jobs” is a phrase usually delivered with a distinct sniff.) Here is a little something to consider: Unless you are building the Second Avenue Subway in New York City, all construction jobs are temporary — buildings get built. Projects come to completion, and work gets finished. It is in the nature of construction jobs to come to an end. And it is not only construction: A technology-industry friend attending the recent National Review Ideas Summit in Washington bluntly shared the view from Silicon Valley: “All jobs are temporary.”

Here’s the real money (hah) line:

Consider another kind of machine, a more limited one: Bryan Caplan’s magical idea for a machine that turns corn into cars: “Lo and behold — corn goes in, and cars come out.” It will not ruin Professor Caplan’s M. Night Shyamalan moment to reveal the twist ending to his story: There is such a machine, and it is called trade. “What difference does it make what’s inside the factory?” Professor Caplan asks. “For all intents and purposes, trade is a kind of technology, a creative way to reduce our cost of living and thereby raise our standard of living.” Trade — and capitalism — is in fact a machine of a different sort: a social machine.

Here’s the thing; as I’ve said many times in these virtual pages, “capitalism” is a misnomer.  There really is no “-ism”  in capitalism.  It’s just what people do with their own wealth, their own resources, their own skills, talents and abilities when they are left unchecked to make their own choices and enjoy and employ the fruits of their own labors.

In other words, liberty.

President Trump isn’t perfect on this score, as this article points out.  But he’s better than the alternative we had last November, not just on taxes and trade, but on plenty of other issues; Her Imperial Majesty would have been the most damaging President liberty-wise since…  well, ever.

Sometimes the choice between good and bad is far less stark than the difference between bad and worse.

Animal’s Daily Heath Care Rights News

This just in from the folks at Reason magazine:  What Does It Mean to Have a Right To Health Care?  Excerpt:

Despite the popular misconception, health care is not beyond economic law; it is not a free good that falls like manna from heaven. It has to be produced, which means people must mix their scarce labor with scarce resources to produce the things used to perform the medical services we want. It would be foolish to expect them to donate their labor and resources because other people need them. They have their own lives to live and livelihoods to earn. It would be wrong to compel them. They are not slaves.

In other words, no one can have a right to medical care or insurance, that is, to the labor services and resources of other people—including the taxpayers. We hear a great deal about the need to respect all people; well, respecting people must include respecting their liberty and justly acquired possessions. Without that, “respect” is hollow.

Politicians, of course, can declare a right to medical care, but those are mere words. What counts is what happens after the declaration. Since a system in which everyone could have, on demand, all the medical care they wanted at no cost would be unsustainable, the so-called right to medical care necessarily translates into the power of politicians and bureaucrats to set the terms under which medical services and products may be provided and received. This is crucial: a government-declared “right” (that does not reflect natural rights) is no right at all; it is rather a declared government power to allocate goods and services.

Natural rights—which boil down to the single right not to be aggressed against—require only that one abstain from aggression. Thus all can exercise their rights at once without conflict. On the other hand, government-invented “rights”—such as the right to medical care—cannot be exercised at the same time; the potential for conflict is built in. For example, a person cannot use his own money as he wishes if the government health care system takes it by force through taxation to pay for other people’s services.

It’s difficult to add anything to that, but I’ll give it a shot.

Taxpayer-funded health care can’t be a right.  It is an indulgence, an exercise in charity on the part of government.  But most importantly, it is a fundamentally an infringement on liberty.  If one has a government-guaranteed taxpayer-funded health care, that requires someone else (a taxpayer) to surrender a portion of their own wealth, their own property, to pay for it.  That means that the taxpayer is required to labor for a portion of the year with no recompense.

There are several words for that; indenture is probably the most polite one.

I’m a minimal-government libertarian, but I’m not an anarchist.  There are legitimate distributed interests that are best handled by government:  Defense, for example.  But defense is not subject to market forces the way health care is.  Here’s the key excerpt form the Reason article:

The market method of deciding what is produced solves this complex problem. How? Through the price system. When people are free to trade goods and services in the market, they generate prices that inform others (even if anyone is aware of this) about the relative supply of and demand for things. Those prices then guide producers and consumers. While their objective is not to create a grand and complex process that encourages the coordination countless plans, economizes on resources and labor, and enables people to achieve their well-being in an unrivaled manner, that is in effect what they do. This is what Adam Smith meant with his “invisible hand” trope. Prices guide people to do “the right thing.”

But politicians don’t understand price theory – or if they do, they ignore it, to garner votes.  I don’t know which is worse.

Rule Five Energy Finds Friday

Our economy, like it or not, runs on oil, and it looks like two oil companies have just found a metric shitload of it (for the record, that’s 1.14 standard shitloads) in Alaska.  And there’s more.  Excerpt:

Spanish oil giant Repsol (REPYY) has revealed the largest U.S. onshore oil discovery in 30 years, located in Alaska’s North Slope.

Repsol and joint venture partner Armstrong Energy claim to have found a massive conventional oil play that holds up to 1.2 billion barrels of recoverable light crude. The discovery was confirmed after Repsol drilled two test wells during the 2016-2017 winter season. According to the company, the area was previously considered to be a mature oil basin. Oil is expected to flow beginning in 2021, with a potential rate approaching 120,000 barrels per day.

Denver-based Armstrong, a privately held exploration company, operates the North Slope project and holds a 75% working interest in the Horseshoe discovery. The Repsol discovery follows the revelation of what geologists believe is the largest shale oil play in the country.

In November, the U.S. Geological Survey said the Midland Basin, which is part of the oil-rich Permian shale play, is estimated to contain 20 billion barrels of oil and 1.6 billion barrels of natural gas. The new figures would make the Midland Basin about three times bigger than North Dakota’s Bakken formation.

Exxon is betting on these finds – betting big.

President Trump has already opened the door his predecessor closed on the Dakota Access and Keystone pipelines.  Opening that door will being another shitload (metric or standard, you choose) of Canadian crude into American refineries, and protests from environmentalist radicals aside, that’s manifestly a Good Thing for President Trump’s stated goal of kick-starting the American economy.

Why?  That’s simple.  As stated, our economy runs on oil and natural gas.  More domestic sources mean less energy we have to purchase from other countries.  A significant amount of those other countries don’t like us very much, and at present we’re sending them a lot of American petrodollars.

But more to the point, the laws of supply and demand obtain here.  A find this size, once developed – and it looks like the North Slope finds will be coming online pretty quickly – will reduce the price of oil (which, I remind you, is a fungible commodity with a global market) significantly.

Want to kick-start the economy?  Cheap energy is the best way to do that.  It doesn’t matter what your company does, what product they build, what service they provide, they need energy to do it.  Solar and wind power don’t produce enough for a modern industrial economy.

And there’s more.  Take a look at your computer, or your tablet, or your cellular phone; whatever you are using to read these virtual pages.  A good part of it’s material, whatever it is, derives from petroleum.  Take a look at your car; if it’s a recent model a good part of it’s high-tech, modernly engineered structure is plastic; plastics derived from petroleum.

Our modern technological economy runs on oil and gas.  Repsol and Armstrong have just changed the oil and gas game with this discovery.  President Trump may take the credit for the boom that should result (and in the case of the pipelines, he does deserve a bit of the credit) but Repsol and Armstrong are the names to watch for the next couple of years.

Animal’s Daily NutBallery News

Just when you thought California (where I am temporarily hanging my hat) couldn’t get any more harebrained ideas than they already had, they are now thinking of making teachers exempt from state income taxes.

And here I thought the Left never saw a tax they didn’t like.  Excerpt:

A bill moving through the state Legislature seeks to give California teachers a big tax break to entice them to enter the profession and stay — a nationally unprecedented approach to boosting salaries amid a shortage in the field.

Senate Bill 807 would exempt veteran teachers from paying state income tax for 10 years and help new teachers pay for their education and certification costs. Teachers with at least five years’ experience who earn a $75,000 salary would gain the equivalent of a 5 percent raise, saving nearly $4,000 on their annual tax bill.

About 300,000 teachers would benefit from the tax cut in the first year. The measure’s sponsors believe the financial support would increase the number of people entering the field and retain more educators who are already in classrooms.

A statewide teacher shortage has hit many districts hard, with more than 7,000 classrooms staffed by teachers operating under some type of emergency credential or waiver. The San Francisco Unified School District started the school year with 38 teacher vacancies.

Californians being economically illiterate (with a few notable exceptions) is nothing new.  But this just beats all.  The labor market is like any other market; supply and demand obtains.  Any market will only pay a certain value for any commodity or service; when demand falls, so does the price.

But San Francisco, that home-base of nutballery that lies about 40 miles north of me as I type these words, has a different problem.  Decades of restrictive zoning laws and NIMBY building restrictions have raised Bay Area property values through the roof and on into the stratosphere.  Nice if you already own a home in the area (and have since the late Seventies) but lousy if you are trying to start a career there.  I know the malady; my own Denver is seeing much the same thing on a smaller scale.

If young teachers were able to afford homes in the Bay Area, maybe they wouldn’t have trouble filling teacher positions.  The solution is obvious – deregulate land use –  but here in looney old Californey, it just ain’t gonna happen.

Goodbye Blue Monday

Goodbye, Blue Monday!

Thanks once again to Pirate’s Cove and The Other McCain for the Rule Five linkery!

Ever ridden in an Uber car?  I do this rather a lot, in fact will be using an Uber service provider later today to take me from San Francisco airport down to Silicon Valley.  I use Uber frequently, and have always been very happy with the service.

But some government regulators don’t like Uber.  They are trying to crack down on Uber, and Uber is fighting back.  Good for them.  Excerpt:

As Uber faces some public relations problems right now connected to complaints of sexual harrassment and mistreatment of its drivers, The New York Times has what it apparently thinks is an expose of sorts. It doesn’t. Or at least it doesn’t from the perspective of the lives of ordinary people.

The way journalist Mike Isaac has approached this story betrays a type of media bias that seems to naturally assume that government regulators are in charge of us all, and those who are trying to find ways to work around them are up to no good.

To wit, Uber uses a tool called “Greyball” to circumvent officials. It’s a tool that Uber says is designed to help it deny ride requests to people who violate their terms of service, disrupt the system, or threaten their drivers. They also have been using it to operate in places where government officials have been trying to shut them down.

The story of the technology itself is genuinely fascinating, but it’s caught up in this concept that Uber’s behavior is villainous, possibly even illegal, though the expert Isaac consulted, a fellow Times contributor, could only make vague claims.

This tool essentially creates a fake ghost version of Uber. People who are “greyballed” could order cars via Uber’s map and could watch them travel around. But the Uber drivers always canceled when the customer ordered a pickup. The cars were not actually real. They were fabricated by the app to trick the user into wasting time, without the user realizing they had been secretly been banned and maybe starting a new account.

Uber used this tool to operate in Portland, Oregon, as regulators attempted to use sting operations to catch them and shut them down.

The nerve of Uber!  Assuming that people should have the ability to enter into a completely voluntary transaction with another person for a ride to the airport, or to dinner, or home from a bar – without government permission!

In most places it’s not just overbearing bureaucrats trying to shut Uber down; it’s the taxicab companies, who are using the Aristocracy of Pull to try to preserve their outmoded business model.  I’ve ridden in plenty of taxis as well; they tend strongly towards dirty, smelly cars and rude drivers.  Uber cars are clean – why?  Because their drivers own them.

This is cronyism of the worst sort.  Good on Uber for defying these overreaching bureaucrats.  I will continue to throw them my business in support.

Rule Five Dissolving EU Friday

Is the EU coming apart at the seams?  Yes, and it should.  Excerpt:

At its core, what is the EU? And why, despite its vast resources, does it seem perpetually unable to make sense of the world and meet its objectives? The two answers lie hidden in the EU’s very DNA.

First, there’s the EU’s primary internal contradiction: EU federalism is an ideology that propagates post-ideologism; a culturally amorphous post-ideological world.

A cosmopolitan easy going agnostic world, in which the single market and currency have made nationalism obsolete. Indeed, a world where the European Parliament invites a long haired bearded shemale to perform in front of its building and announces him/her as “The voice of Europe” singing for equality, without anyone batting an eye.

The EU’s core problem, however, is that in its way of viewing and engaging the world beyond Brussels’ boundaries, it is acting as if the world has already arrived at this so badly coveted post-cultural/ideological end station.

This is why the EU’s foreign minister is convinced political Islam should be part of the solution for Europe’s bicultural malaise. It is why for almost a decade now, the EU is maintaining it is reasonable to expect a German fiscal discipline from Greece ― a country in which tax evasion has been a central pillar of its culture ever since it was conquered by the Ottoman Empire some 600 years ago. It is why the EU fails to grasp the fact it’s deepening the migration crisis by acting as a ferry service for human traffickers. It is why the EU refuses to acknowledge an inherently expansionist religion like Islam views Europe’s open borders as an invitation to conquest. And it is why it was caught off guard by the mass rapes in Cologne etc. Because in the EU’s world, man in its natural state never existed and the Rape of the Sabine Women was never told.

In short, the EU is treating the world as if it’s already an earthly EUtopia in which everything can be solved through dialogue and the right subsidies. And that’s why it will keep on chasing facts until its imminent demise.

You should read also author Jillian Becker’s comments on the situation here.  Excerpt:

Why was the corrupt and undemocratic European Union (EU) brought into existence?

The Germans wanted to dissolve their guilt  – for starting two world wars and perpetrating the Holocaust – in the sea of a European superstate. Which they knew they could dominate through their economic strength.

The French wanted to be part of an entity that was more populous, more prosperous, and more powerful than the United States of America, even though it meant sharing power.

The ambitious politicians of Western Europe wanted a bigger stage to strut on. As well as a perpetual ride on a gravy train.

That last sentence is key.  The EU was doomed to fail from the very beginning.  Nations like the United Kingdom, Germany and France have very little in common, culturally and economically, with the PIGS nations – Portugal, Italy, Greece and Spain.  The former have been tasked with supporting the easy living and generous retirements of the latter for a couple of generations now.

Asking these nations to share a common currency and economy is too much to expect from any body politic.  One has to expect the industrious Germans are growing as rapidly tired of supporting the PIGS as they are of Frau Merkel’s unlimited acceptance of Middle Eastern refugees.

The backlash has already begun in Europe.  The last time a sudden rise of European nationalism happened, it resulted in a world war.  This time, it may just result in the saving of Europe from the ash heap of history.

Death and Taxes?

The GOP – well, at least one Congressman, Rep. Devin Nunes (R-CA) – is proposing to overhaul our onerous tax structure with a plan that actually ain’t half bad.  Excerpt:

“We’re trying to fundamentally change the code,” Nunes told host Stuart Varney. “We’re getting rid of the income tax. We’re doing something that hasn’t been done in 100 years.”

“We’re moving to a consumption system — to a cash flow system,” Nunes said. He explained what that would look like in practice: “You take your income minus your expenses, and whatever’s left over, you pay a tax on that.”

He added that “this is a very simple system, yet it’s a dramatic departure from the confusing tax code that we have now.”

Nunes argued that the changes would increase economic growth and bring jobs back to America so we can be “the most transparent, business-friendly nation state in the world.”

He said that under the new system, the biggest winners would be wage earners and small businesses because “they will be on the same playing field as other businesses in this country.”

Speaking as one of those small businesses, I like the idea.  It might not be my ideal plan, but it would be a good start.  Like lots of small businesses, ours operates as an LLC, meaning the business income is in effect our personal income – so we pay personal taxes on the proceeds of our business.  This bill would eliminate that distinction, simplifying the tax code for everyone and accomplishing one of the GOP’s stated goals – broadening and simplifying the tax code.

Hopefully it will result in every working adult having some skin in the game, but I doubt that will be the case.  I’d like to see everyone having some skin in the game, but in today’s environment, that may be too much to hope for.