Category Archives: Economics

Animal’s Daily News

Thoughtful-BearThanks once again to The Other McCain for the New Year’s Rule Five links!

A recent discussion in these pages got me thinking about student loans; specifically, how those loans are approved and sourced, and how risk of possible default comes into the equation (clue:  it doesn’t.)  So, for the purposes of discussion, let’s consider two students applying for student loans.  This being the Utopia of the Animalverse, there are no Imperially subsidized student loans, and so the prospective students have to go to a lending institution and apply for their money, just as they would when buying a house or car.

Student One enters the lending institution with a packet of papers and takes a seat in front of the loan officer.  “I just graduated high school with a 3.8 grade average.  Here are my SAT scores.  I’ve been accepted to Cal Tech, and I’m going to major in software engineering.”

Student Two enters the lending institution with a similar packet of papers, and likewise sits down in front of a loan officer.  “I graduated high school with a 3.8 grade average.  Here are my SAT scores.  I’ve been accepted to Oberlin College, and I’m going to major in Gender Studies.”

Now, consider these two students.  Their grades from high school are identical, and for the purposes of this argument we will postulate that their SAT scores were likewise identical.  Here’s the question:  Which student represents a greater risk of default on their student loans?

If you said Student One, go back to the end of the line and start again.

Student Two, assuming a successful completion of the stated goal, will attain a degree in Gender Studies – and be effectively unemployable.  On the other hand, Student One will be very likely to find gainful employment.  Student Two will be an near-certain default on their student loans.  Student One will be very likely to be able to repay those loans.

Sad-BearIn a free market for educational loans, it is inconceivable that Student Two’s nitwittery in pursuing a useless bullshit degree should be subsidized by the far more prudent Student A by an arbitrary leveling of student loan interest rates – which is precisely the situation forced on borrowers by the Imperial subsidy of student loans.  In any sane world, the dunderheaded Student Two, who is pursuing a useless, bullshit degree, should bear the greatly increased risk of default by paying a higher interest rate.

But where the financing of higher education is concerned, we live in a world that is anything but sane.

Animal’s Daily Christmas Eve News

Sleepy-BearOne more substantive post before the Christmas holiday, this one on tax policy.  Here, from the Wall Street Journal, is John Cochrane on   What Genuine Tax Reform Looks Like.  Excerpt:

The first goal of taxation is to raise needed government revenue with minimum economic damage. That means lower marginal rates—the additional tax people pay for each extra dollar earned—and a broader base of income subject to tax. It also means a massively simpler tax code.

In my view, simplification is more important than rates. A simple code would allow people and businesses to spend more time and resources on productive activities and less on attorneys and accountants, or on lobbyists seeking special deals and subsidies. And a simple code is much more clearly fair. Americans now suspect that people with clever lawyers are avoiding much taxation, which is corrosive to compliance and driving populist outrage across the political spectrum.

What would a minimally damaging, simple, fair tax code look like?

What the tax code should look like is simple, and the plan laid out here encompasses most of it:

  • Tax consumption, not income or wealth.
  • Eliminate corporate taxes
  • Eliminate deductions, credits and deductions

But Mr. Cochrane gets one thing wrong, and that is “decoupling” the massive Imperial subsidies from the tax code.  Elimination of subsidies can, should and indeed must be a part of any substantive tax reform.  The massive Imperial web of subsidies is intrinsically linked to the tax code.  Everything from corn to solar panels has been the benefit of some kind of Imperial subsidy or another for decades now; a real, comprehensive reform has to address the spending side as well as the revenue side, and let markets, not governments, choose winners and losers in the economy.

Sad-BearAfter all, Citibank, WalMart or ADM can’t send men with guns out to force me to do business with them.  The Imperial Federal government can.

But, let’s be honest – this is all speculation, and will never be anything else.  Not one pol in the Imperial City will actually vote to deprive themselves of all the power they currently enjoy over the citizenry’s economic choices.

All that aside – Merry Christmas, True Believers!  Tomorrow’s post will feature some totally gratuitous Christmas totty, the Saturday Gingermageddon will happen as usual, and we’ll return Monday.

We Need More Of This From Carly Fiorina.

This is her greatest strength; this is one of the reasons I like Carly Fiorina.  If she doesn’t get the nomination, how about Carly for SecTreas?  Excerpt:

Smiling BearThere can be no doubt now: The U.S. economy is struggling, inequality is on the rise and too many Americans feel uncertain about their future.

On the campaign trail, I have met many of these men and women, who sit at the kitchen table each week, straining to stretch their dollars from shrinking paychecks. Families who can’t save for retirement with near-zero interest rates. Young parents who are being crushed by their student debt. Shop owners who can’t get a loan because their community bank went out of business.

We’ve had more than six years to watch the left’s prescriptions in action and the verdict is in: They don’t work. Under President Obama, the economy has been hobbled. The 73,000-page tax code is too complex to navigate without an army of accountants. The administration has added $7 trillion in new federal debt, and has doubled down on environmental regulations that crush business owners and farmers while raising energy prices.

I would so love to see her debate Her Majesty Hillary I.  Hillary’s blood would be knee-deep on the studio floor before thirty minutes had passed.

Rule Five Friday

2015_10_23_Rule Five Friday (1)From the Ludwig Von Mises Institute:  Employment Is Nothing Like Slavery.  Frankly, to yr. obdt. that rates a huge “no shit,” but apparently some people need reminding.  Excerpt:

What is necessary to take away a man’s freedom? For many progressives, nothing more then a bad workplace. Amazon takes ongoing heat for its work environment, with opponents like Business Insider calling it a “slave camp.”

But this comparison mistakes the fundamental nature of coercion.

2015_10_23_Rule Five Friday (2)Many leftists, such as left-libertarian Susan Webber at Naked Capitalism, argue that we must work in order to live, and that therefore work is coercive. If you must do X to live, then surely whoever controls your ability to do X is coercing you.

The problem with this argument is that the state of nature is not a Rousseauian paradise, but a brutal place where most die. The state of nature involves poverty and endless drudgery to catch, kill, and cook whatever food one can to stay alive. The workday is every waking moment, and the pay is little more than an occasional meal.

There’s nothing stopping people from living this way in the modern world — say, off the grid — but the beauty of capitalism is that it offers us a way out of this wretched existence. When a company offers a man a job, they are 2015_10_23_Rule Five Friday (3)not saying, “work or die!” the way a slaver does; they are promising him that, if he helps them to succeed, they will give him money to improve his life.

In other words, the employment relationship is like any other market transaction:  A voluntary exchange, in which both parties receive a gain in value.  The employer hires because the employee’s efforts are provide more value than his/her cost of employment.  The employee accepts employment because the pay and benefits are worth more than any other use to which the employee could put his/her effort.

The comparison to slavery is pernicious twaddle; corral litter of the first order.  A slave is never free to leave his/her master; the employee in a free employment market is always free to leave their employment.

2015_10_23_Rule Five Friday (4)The real irony here is that this phony comparison is generally made by advocates of socialism, a system that necessarily involves coercion by government – enforced by men with guns.  In fact, you can argue that increasing trends towards socialism is actually enforcing a form of slavery:  The forceful removal of the fruits of one’s labor, involuntarily, to the gain of others who did nothing to earn it.

That’s what redistributive social policies do.  The productive are required, with the implied threat of force, to surrender a portion of their earned wealth to the unearned enrichment of others.  That may not be slavery – but it is theft.

2015_10_23_Rule Five Friday (5)The article concludes:  In any market-based relationship, one party can leave and the other party can do them no harm. This is a freedom that is noticeably lacking in our interactions with government.

All too true; employers can hire and fire, and expect performance in return for recompense.  But they can’t coerce.  An employee is always free to seek other opportunities.  Only government can coerce.

That’s a key distinction; one that those on the political Left all too often miss.

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Goodbye, Blue Monday

Goodbye, Blue Monday!
Goodbye, Blue Monday!

Thanks once again to The Other McCain for the Rule Five links!

Food stamp enrollment in Maine is down 22%.  Why?  Because food stamp applicants now have to work for their taxpayer largesse.  Excerpt:

(Maine Governor Paul) LePage’s administration re-implemented a work requirement for able-bodied adults without dependents enrolled in the program.

According to Maine’s DHHS, “[t]he rule required simply that those adults work for 20 hours per week, volunteer for about one hour per day, or attend a class in order to maintain food stamps beyond three months.”

Rachel Sheffield, a policy analyst at The Heritage Foundation, said, “Work requirements serve to ensure that assistance is going to those most in need.”

“They act as a gatekeeper,” Sheffield said. “Welfare is available to those who truly need it, but people are directed first towards work. Able-bodied adults should be required to work, prepare for work, or look for work in exchange for receiving assistance. Maine is a strong example of promoting work and reciprocal obligation.”

Well, whattya know – Maine is following an idea put forth in the Manifesto, and it’s working.  Why?

Incentives, True Believers.  Incentives.

Excellent BearIf government makes Free Shit easier to get and more comfortable to live on, more people will rely on Free Shit.  If they have to work for their Free Shit, then (according to the Maine example) more of them will decide that if they have to work anyway, they may well want to work for more than the government Free Shit provides.

That isn’t stopping the current crop of Democrat Presidential candidates, led by her Royal Highness Hillary I, from promising ever-more Free Shit.  But maybe – just maybe – it’s the beginning of some semblance of sanity creeping back into public discourse.  After all, it makes much more sense to measure the success of poverty-reducing programs not by how much Free Shit is handed out, but instead by the number of people who are no longer needing Free Shit.

Rule Five Friday

2015_09_25_Rule Five Friday (1)Well, here’s a shocker (not):  Newsflash! Bernie Sanders Fans: All That “Free Stuff” Will Break the Middle Class.  Excerpt:

Science fiction writer Arthur C. Clarke once said, “Any sufficiently advanced technology is indistinguishable from magic.” Similarly, it could be said that for liberals, how the real world works is indistinguishable from magic.

They want “free” birth control, health care, college, “Cash for Clunkers,” free housing for the poor and paid time off for women who are having a child. They want welfare with no preconditions for anyone who wants it, a $15 minimum wage and they want to open our borders to anyone who wants to come here illegally, have a child and live off the American people for the next 18 years.

2015_09_25_Rule Five Friday (2)Unfortunately, as Thomas Sowell has often said, “There are no solutions; there are only trade-offs.” Put another way, giving away “free” stuff may seem appealing, but it often has terrible consequences.

First and foremost among them, if you give too much away, you can go bankrupt. It’s not the least bit controversial to say that even with our current level of spending, we’re on pace to become Greece. You don’t have to take my word for it because even a diehard liberal socialist like Bernie Sanders admits that we can’t keep piling on debt.

“Everyone agrees that over the long-term we have got to reduce the record-breaking $13.7 trillion national debt and unsustainable federal deficit.”

Incidentally, our record-breaking debt is now up to almost $18.4 trillion 2015_09_25_Rule Five Friday (3)and Bernie Sanders is proposing another $18 trillion in spending over the next decade on NEW programs. That’s in addition to the deficit spending we’re already doing, all of which is theoretical because at some point in the next decade or two, no one will be willing to loan us any more money and our economy will splatter like a bug on a windshield.

Let’s interject a moment of realism here:  Bernie Sanders is not going to be the Democrat nominee, and he’ll never be President.  And that, True Believers, is manifestly a Good Thing.

Bernie Sanders repeatedly reveals his economic illiteracy, but his entire economic plan – such as it is – reveals the single most glaring flaw in his reasoning:  He has no idea, none whatsoever, how wealth is 2015_09_25_Rule Five Friday (4)created in a free society.  Even more, he is sadly ignorant of one important principle:  Wealth is not “distributed.”  It is created and earned.

Bernie Sanders thinks “wealth inequality” – an inescapable fact of the human condition – can be addressed by taking resources away from people who have earned them, and giving them to people who have not.

The article concludes:  You lose your job because the company you work for can’t make it with a $15 minimum wage, because of Obamacare costs, or if the company goes overseas because we already have the highest corporate tax rate in the free world – well, that’s too bad! Don’t worry about it though, here’s some “free” stuff for you. Sure, you’ll have to downsize your lifestyle, swallow your pride and cut back on your dreams, but at least it’s “free,” right?

2015_09_25_Rule Five Friday (5)We don’t need more “free” stuff in America; we need more opportunity! We also need to start putting the interests of the people who work hard, play by the rules and pay their taxes ahead of illegal aliens, refugees and the people who want something for “free.”

As the late, great Robert Heinlein said, “There’s no such thing as a free lunch.” When someone starts promising you one, smart people put their hands over their wallets and start looking for the catch.

Every single policy Bernie Sanders has advocated is anti-growth and anti-opportunity.  That’s no way to get out of our fiscal mess; it’s how we got into it in the first place.

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Rule Five Friday

2015_07_31_Rule Five Friday (1)What’s wrong with Her Majesty Queen Hillary I’s proposed energy policy?  Well, her solar panel idea is well to the left of stupid.  Excerpt:

In a YouTube video released over the weekend, the leading Democratic candidate for president, Hillary Clinton, announced that “on day one as president,” she would set “two ambitious national goals that will test our capacities.” Said Clinton, “First, I will ensure we hit a target of having more than half a billion solar panels installed across the country by the end of my first term.” You don’t even have to wait for “ambitious national goal” number two to slap your forehead and roll your eyes at this example of top-down central planning at its worst.

2015_07_31_Rule Five Friday (1)Clinton assumes that man-made climate change is a risk serious enough to try to mitigate, and that America should try to mitigate it by reducing its carbon emissions. These are big “ifs,” but ones I will grant for argument’s sake. Even granting those assumptions, there is a humongous logical leap to the conclusion that the appropriate policy response is setting a national target for the number of solar panels installed.

For one thing, it’s a classic error of measuring inputs rather than outputs. If the goal is the reduction of dangerous emissions, why not set a goal for that, and support any energy method—solar, wind, algae, hydroelectric, nuclear, hydrofracturing—that gets America closer to that goal? Why privilege solar over all the other technologies, including some that may not even be invented yet?

Because it’s a reasonable talking point, if you’re trying to appeal to irrational lefties.  Half a billion solar panels?  Seriously?  At whose expense?

2015_07_31_Rule Five Friday (2)Oh, that’s right – the taxpayers.

So where will this subsidy come from?  A tax on coal, oil and natural gas?  Her Highness has a history of adhering to the First Law of Big Government:  If it moves, tax it.  If it keeps moving, regulate it.  If it stops moving, subsidize it.   Solar isn’t moving at the moment (remember Solyndra?) so Her Highness proposes, after her coronation, to force it.

A more reasonable person would anticipate that the markets would work better; if the technology in solar power ever proves economically viable, then it will be adopted by people freely.  There’s no good argument for government to force the decision.

Reason concludes:

Samantha_Tannehill_WilhelminaFailure is part of free enterprise, of course. But where’s the justice in taxing some scientist working on some other energy technology to subsidize the solar competition? If Clinton really wants to fight climate change or cut carbon emissions, there are plenty of ways to go about it. She could fund research and development for battery storage. She could set emissions goals and let utilities or states decide the cheapest and best ways to meet them. She could allow more hydrofracturing that replaces coal-fired plants with cleaner oil and natural gas. But counting solar panels? Come on, Clinton. Get serious.

Serious?  In a political campaign?  Surely you jest.

2015_07_31_Rule Five Friday (4)Seriously, though:  Reason somewhat misses the point.  Her Highness knows better than you do how to run your affairs – including how you get your electricity.

Look for similar liberty-crushing proposals across the economic spectrum.   The big concern is this:  Hillary Clinton is far from the only pol (in either party, for that matter) to think that she knows better than you, and that she should make economic decisions for you.  After all, it’s for your own good!

Few more chilling words were ever spoken by a politician.

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Animal’s Hump Day News

Happy Hump Day!
Happy Hump Day!

Here’s a surprise:  Hillary Clinton really doesn’t like independent contract-based business models – like Uber.  Excerpt:

Grandmothers may know best, as Hillary Clinton has put it in tweets, but judging by her latest economic speech, they don’t necessarily get or like Uber.

The ride-sharing service is synonymous with the new efficiency and convenience enabled by information technology, and is anathema to regulators and entrenched interests everywhere. Add to the list of its critics the presumptive Democratic presidential nominee.

Hillary Clinton didn’t mention Uber by name but warned about the disruption caused by it and other companies in the so-called sharing economy. Her husband wanted to build a bridge to the 21st century; Hillary worries about the downsides of “advances in technology and expanding global trade.” 

Republicans would be foolish not to welcome a contrast with Hillary over some of the hottest companies in the world. The Bush campaign let it be known that Jeb will order an Uber ride in San Francisco during a campaign swing there. If he really wants to stick it to Hillary, he will find someone handy to do minor repair work at his Miami headquarters through TaskRabbit, or borrow a wrench during his next trip to Des Moines through NeighborGoods.

Full disclosure:  I’ve used Uber on business trips, and it’s great.  But think about the implications of Her Majesty’s stance on this issue:  She thinks that you – you and I, actually – aren’t capable of making our own employment decisions.

Did you get that?  Queen Hillary I thinks we need the help of government to make arrangements for our employment.  We shouldn’t be allowed to work, say, on a contract basis, what hours we please, accepting (voluntarily!) a plainly stated contract arrangement to work a certain time for a certain amount.

It is a source of infinite pleasure to me that my own employment arrangements are precisely the type government paternalists (or maternalists, if you prefer) hate:

  • I’m self-employed.
  • I take only set contracts, project based.
  • I make pretty good money, only because I have a reputation in the industry for experience, reliability and quality of work.
  • I arrange my own health insurance, disability insurance, and so on.
  • I’m making arrangements for my own retirement (assuming zero from Social Security.)
  • I may not bother with the retirement plans at all, because I get to travel all over the world doing work I love, and I make a damn good living at it.

Derp BearSo screw that.  Uber is a great service, and nobody is forced to work for them.  They aren’t “exploiting” anyone.  They are exchanging in an economic exchange of the purest sort – a free and open transaction, voluntary on the part of both parties, in which both parties realize a gain in value.

And once again Queen Hillary I has revealed that she doesn’t know her ass from her face about economics.

Animal’s Daily News

Facepalm-bearSo, it seems Queen Hillary I finally laid out some of her proposed economic policies, and the reaction was “so what?” Excerpt:

Hillary Clinton gave a big economics speech here on Monday and the snap reaction among Wall Street investors, economists and ardent financial reformers who thrill to the soak-the-rich rhetoric of Bernie Sanders was a collective: “Meh. What’s next?”

Clinton laid out the soft contours of a “growth and fairness economy” in a speech designed to appeal to struggling middle-class workers with promises of higher pay and more generous federal policies.

But she left out many hard specifics on tougher tax policy toward the rich and corporate America. And she offered limited pledges to crack down on big Wall Street banks while hitting her strongest notes promising to toss rogue bankers in prison while ripping recent worker productivity comments from Jeb Bush.

There is a long, long list of reasons that Her Highness is the worst possible candidate the Democrats could choose for 2016.  In addition to her having all the charm and charisma of a painful anal obstruction, in addition to her having alienated most of the legacy media (who should have been her strongest allies) and in addition to her Brobdingnagian sense of entitlement, now she is finally releasing some policy positions – positions calculated to double down on seven years of Obama economic failure – and the collective response BearLaughing1is “meh.”

Seriously, Democrats, is this the best you’ve got?  This is a  candidate whose entire campaign strategy is apparently “it’s my turn, peasants.”

The very thought of a Hillary Clinton Administration is downright unsettling.

Rule Five Greek Tragedy Friday

2015_07_10_Rule Five Friday (1)Greece is probably hosed, and the Euro with it.  Here are a few pieces of commentary (each one briefly excerpted) that, between them, sum the situation up pretty well:

Greek FM Arrives Empty Handed at EU SummitGreece’s new finance minister, Euclid Tsakalotos, was expected to enter the summit meeting of EU finance ministers on Tuesday with new proposals for reforms that would unlock bailout money the country desperately needs to stay in the eurozone.

2015_07_10_Rule Five Friday (2)Incredibly, Tsakalotos read from a few notes scribbled on hotel stationery that offered absolutely nothing new that would form the basis for a re-opening of negotiations.

Greece Prepares New Bailout Bid Ahead of E.U. SummitThe dwindling cash is sucking the life out of everything from coffee shops to taxis, as anxious Greeks economize amid fears for the future. Greek leaders also banned transfers of money abroad, meaning that very little can be imported.

Printing plants are warning that they may run out of paper for 2015_07_10_Rule Five Friday (4)newspapers by the end of the week. Butchers say stocks of imported meat are dwindling.

European Leaders: Greece’s Final Deadline is This WeekFollowing the heads of state meeting, European leaders drew a line in the sand: Greece has to come up with a proposal they consider workable in the next few days, and everyone needs to be on board with it by Sunday, or the EU and the euro zone will have to start looking at the (still unspoken) Plan B.

So, about that Plan B.  Here’s an idea:

2015_07_10_Rule Five Friday (3)Let Greece sink.  Toss them out of the Eurozone, let them sink or swim on the drachma.  Let them renegotiate their debts with anyone who may actually be willing to take them on.  Democracy is the theory that people know what kind of government they want, and deserve to get it good and hard.  The Greek people have chosen their government, and now they are getting it – good and hard.  They chose socialist insanity, their country has run out of other people’s money, and now the piper is demanding payment.

Let them cut their madly generous benefits.  Let them adjust their insanely early retirement ages.  Let them sell a few of those gorgeous islands.  But in no sane world should the Greeks get a 2015_07_10_Rule Five Friday (6)bailout; in no moral world should the Greeks be rewarded for their economic foolishness.

Fortunately the Germans don’t seem inclined to bail the Greeks out again, nor should they; the Germans seem to be the only people in the Eurozone who are actually producing anything any more, and the Deutschemark is still a good possibility if the other Eurozone nations piss and moan about it.

Greece is not to big to fail, Europe; not too big to fail.

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