Category: Economics

Oxymoron of the Day

Commenting on Ezra Klein’s post about Charles Murray’s book In Our Hands is well past its timeliness, but I enjoyed this bit:

I do, however, want to use my blog’s blissfully unlimited space to go into some added detail on Murray’s policy mistakes. The base assumption of his plan is that he can halt the growth of health spending — the primary driver of budgetary inflation — by restoring all power to the individual, who will then bargain with private insurers and demand better care, lower cost, and snappier service. His basic premise is that given the trillions floating around our government, the concept that we have any problems at all is absurd, and it must mean that government waste is subverting America’s abundance.

The problem is, our country’s entitlement programs are models of bureaucratic efficiency. Social Security spends less than one percent of its budget on administration; for Medicare, it’s two percent. Compare that to the private health insurers, who blow about 14 percent on administration. Indeed, if you imposed the Plan immediately, it would cost staggering $355 billion more than the government currently spends. Some efficiency.

Perhaps Mr. Klein’s summary of Mr. Murray’s plan is correct; I haven’t read the book, so I can’t comment on the details. Its details aren’t essential to understand that Mr. Murray is probably not talking about overhead. It doesn’t matter how efficient the bureaucracy is at administering entitlements, if it’s paying too much for unnecessary procedures, there is waste that should eliminated. If the public wants its unnecessary procedures, they should pay for those procedures themselves. So, if you spend 14% on overhead to keep prices in line, you may be able to save more than if you efficiently overpay.

Link from a Balloon Juice discussion on minimum wage proposals.

More than what you need is too much

Do I need to read beyond this drivel from yesterday’s Washington Post?

Wages are rising more than twice as fast for highly paid workers in the Washington area as they are for low-paid workers, an analysis of federal data by The Washington Post shows.

That means the spoils of the region’s economic expansion are going disproportionately to workers who are already well-paid, widening a gap between rich and poor in a place where it is already wider than in most of the country.

Businesspeople cite shifts in the world economy that give educated workers leverage to negotiate for higher wages but make low-paid workers replaceable — a disparity that is especially pronounced in a service economy like Washington’s.

Spoils. Disproportionately. Already well-paid. Capitalism sure is evil, what with the rewards that go to people who make themselves economically attractive to the marketplace. It’s not fair. There should be a law against that.

I won’t be reading beyond those opening paragraphs.

Digital Lefts Management in France

Two things interest me in this story explaining Apple’s possible response to French legislation requiring that songs purchased online be playable on any mp3 player. Personally, I think the choice is simple: Apple should close shop in France. When citizens in France are still walking around with the latest iPod every time Apple releases a new product, the government will have its answer on which the French consumer values more. Capitulation to the French central planners would only encourage other central planners in Europe. I suspect Apple pulling out of France would lead to the same nonsense surrounding region-encoded DVD players, preventing online purchases of non-compliant players. Permit central planners to invade on the small things and they’ll control the big things, too. So Apple should leave France.

More intriguing is this:

Members of the activist group Free Software Foundation have staged protests this summer outside of Apple stores across the country, with members dressed in colorful toxic waste suits and carrying signs that rate digital rights management software such as Apple’s as “Defective by Design,” the name of the group’s campaign.

Henri Poole, a Free Software Foundation board member, said that such software restrictions infringe on consumer rights and are designed to protect “antiquated business models.”

“We purchase [songs] and we think we have the same rights we had two years ago, but those rights are being eroded and the [digital rights management] rules can even be changed after you’ve purchased,” he said.

I agree that excessive DRM is indeed “defective by design.” However, as I’ve said before, I’ve come to accept that with the iPod and iTunes. I knew going into the deal exactly what Apple expects, what it will license to me. As such, I won’t argue that my rights are being eroded. Perhaps they are, but if I value something else more (convenience, functionality), that’s my choice. I don’t need a central planner to tell me how I’m supposed to enjoy my iPod. I want it to have Sirius functionality, but I’m not going to ask Congress to require it.

Of course, economically, I’m still discussing the French, so I leave open the possibility that French consumers believe it’s better to have nothing than something if that something is “exploitative”. If so, c’est la vie. I’m not the boss of them.

I can read your lip service

I don’t know which passage to laugh at more:

For the past 15 years, progressive free-market politicians have offered an appealing mantra …

After reading a new oxymoron such as “progressive free-market politicians,” I knew I didn’t need to read on for any serious discussion of capitalism. The usual drivel about how the author supports capitalism, but every fair person understands that it’s not perfect and needs a little help, is sure to follow. I’ve heard it before and I know it’s still code for more government intrusion. It’s never possible that government interference in capitalism is causing the problems. Never.

The other laughable part is that supposedly logical conclusion.

Historically, voters turn away from conservative free-market politicians after they conclude that capitalism needs help in living up to its commitment to create widely shared abundance. After World War II, voters in rich countries entered a social democratic bargain in which capitalism became the bedrock of the economy but was tempered by a large public sector and a unionized industrial sector that provided social insurance, education, pensions and health care.

Capitalism has a commitment to create “widely shared abundance”, which conservative free-market politicians ignore. Setting aside government interference as a cause, if you don’t get some of that guarantee of widely shared, for whatever reason (luck, laziness, …), progressive free market politicians will hand you some widely redistributed. In this view, how can anything be a tempered bedrock, especially when adding so many socialist guarantees?

I’d continue, but uncontrollable laughter makes typing impossible.

Investing while ignorant can be risky

Like most Vonage customers, I received a letter recently inviting me to participate in the company’s then-pending IPO. Unlike many customers, I declined to participate.

Vonage Holdings Inc. hoped to show its Internet telephone customers how much it valued them by making many eligible to buy shares in the company’s public offering last week. The idea backfired: Customers who lined up to buy those first public shares got burned, as the price of the stock has fallen 26 percent.

Now many are outraged, not only by the stock’s poor performance but also by what they say were glitches in Vonage’s unusual effort to include customers in its IPO.

I’d like to claim some prophetic understanding that the stock price would drop, but alas, I’m not that smart. I thought about the risk for a few moments, coupled that with my complete lack of knowledge about Vonage’s financials, and decided that I’d be a sucker to take the offer. While other customers logged on with dreams of sudden riches because they could get in on an IPO, I used the letter from Vonage as scrap paper where I wrote down directions to a car dealership. At least I’ve researched the car, which is more than most customers probably did with the Vonage prospectus.

The six years and many thousands of dollars I spent on a Finance education finally paid off.

How to win friends alienate fans and influence people

If there ever existed proof that government-imposed monopolies harm customers, the current cage match between Comcast, Peter Angelos, the Washington Nationals, and MASN is the shining example. (It also touches on a stupid business practice by Major League Baseball.) Comcast refuses to carry MASN, which has television broadcast rights to the Washington Nationals. I have no problem with the business decision by Comcast, though I despise it as a customer. Not because I want to watch the Nationals. I don’t, except when they’re playing the Phillies. The Nationals are currently in Philadelphia for a three-game series, of which all three games will be blacked out for all non-MASN outlets.

Last night, for example, Major League Baseball would not allow INHD to broadcast the game to my cable system, nor did it allow MLB Extra Innings to broadcast the game to me. It’s important to note that I’ve paid MLB for the games, yet they funnel me to MASN. This is where the problem culminates. Without MASN, I missed the game.

This could be easily resolved by Comcast or Major League Baseball putting customers first, but I’ve come to expect little from either. I tolerate Major League Baseball’s policy with my business only because I love the Phillies and watching the majority of their games not blacked out. I do write a letter every year, however. With Comcast, I only have the option to switch to satellite. That’s a fine form of competition, but it’s not feasible for my house and needs. The solution is simple, of course, but government won’t get out of the regulation business. Instead, I’m presented with idiotic symbolism:

Mayor Anthony A. Williams (D) [last week] signed into law a bill requiring Comcast, which is the District’s main cable provider, to begin broadcasting Washington Nationals games or face the possibility of losing its license to operate in the city.

The bill, which was passed unanimously by the D.C. Council earlier this month, says that unless the games are on the air beginning [last week], the District and Comcast must enter into negotiations to discuss the franchise agreement and explore ways of getting the games on the air.

So, rather than open the city to competition and allow the invisible hand to do the work of providing MASN, the City Council and mayor would prefer city residents (theoretically) be without cable television service completely. This is reasonable how, other than to prove that politicians want to be central planners masquerading as heroes? Remove legal barriers to entry and let the market decide; instead of just voicing an opinion, customers could then vote with their most powerful weapon possible. If the City Council and Mayor Williams did that, MASN would be on Comcast tonight.

And I’d get to watch the Phillies.

Allowing is not the same as encouraging

This should surprise everyone no one, but North Dakota’s public smoking ban is causing harm in what I hope are unintended ways.

Ron Gibbens said there’s a “very strong likelihood” two charitable bingo halls will close because of a statewide anti-smoking law, yet he is not asking legislators for an exemption to the law.

Gibbens, who founded the North Dakota Association for the Disabled 30 years ago with his wife, Faye, has dismissed the idea of asking for a smoking exemption because of the nature of the organization.

“As an organization that provides for the health of citizens, we don’t want the NDADto be portrayed as being pro-smoking,” Gibbens said.

What about pro-property rights? Also, it seems reasonable to assume that the NDAD allowed smoking in its bingo halls before the ban. Were they pro-smoking then? Money-grubbing philanthropists? Questions worth asking.

Never mind, though, because the more interesting aspect to this story is how North Dakota residents work around the law.

The eastern bingo halls are more susceptible to closure because customers cross the border to Minnesota, where they can smoke in bingo halls there, Gibbens said.

Holy crap, someone needs to do something. Those poor bingo players are subjected to cigarette smoke. No matter what, North Dakota’s leadership must resist the urge to acknowledge that the smoke they’re being subjected to is the smoke rising from their own cigarettes. But don’t resist it because it’ll lead to the common sense acceptance that property rights and individual liberty matter. No, that would be too ambitious. Resist that urge because it will lead to more intrusive violations aimed at protecting people from themselves. It isn’t working now. How much further will politicians push to achieve compliance with “for your own good”?

One other consequence, which I’m sure smoking ban supporters ignored, was also foreseeable.

Gibbens estimated that the state would lose about $1 million a year if either one of those [charitable organization tax relief] proposals passes but that the state risks even more losses if two bingo halls in eastern North Dakota – one operated by the NDADin [sic] Grand Forks and another by the Plains Art Museum in Fargo – close.

Tax receipts decline when artificial barriers are imposed to protect people from themselves? Who knew? I’m sure a good general tax increase will follow, since all government actions must meet a revenue-neutral minimum standard. The smoking ban supporters will feel awful about it, I’m sure. Unless that was an end-goal all along.

For more amusement, I enjoyed a few of the comments posted to the story.

Al Gee wrote on May 25, 2006 8:03 AM:”Whaaaaa! Whaaaa! Our customers can’t smoke some heaters and daub some paper at the same time so we need a tax exemption. How about trying to improve your product and or marketing instead of blaming the law for your financial difficulties.”

The product was fine before the state imposed a restriction on what private property owners could do within their walls. And the marketing “problem” is that the NDAD can no longer sell the same product. But those are just facts, which are justifiably irrelevant.

Stop Whining wrote on May 25, 2006 8:32 AM:”I get tired of businesses complaining because of no-smoking changes. My grandmother plays bingo in these halls and is very happy to go and play bingo and plays more now that the bin is in effect. I realize that many smoking customers may have left, but that is the nature of the beast. No matter how you look at it, this is gambling. There should not be any changes made to the tax structure of these businesses.”

The beast. Finally, an honest assessment of government infringement on property rights. I disagree with the commenter’s approval of the beast, as if you didn’t know.

Not up to business wrote on May 25, 2006 10:33 AM:”It should NOT be up to businesses to decide whether or not they allow smoking. That would be the same as allowing businesses to decide whether or not they will allow vulgar profanity, nudity, or drunken behavior in their place of business; yet in many places, with a few exceptions, each is against the law. Simply put, the majority of people have determined that certain behaviors which infringe on others rights are no longer allowable. Smoke all you want, when you want, and where you want; as long as you don’t pollute anyone elses [sic] clean air in doing so. “

It would be the same, wouldn’t? Heaven forbid someone should smoke while saying “fuck” and drinking naked . We can’t allow that person to infringe on everyone else’s right to not witness it. It’s in the Constitution. Look it up. It follows the “free puppy” clause.

I wonder if Not up to businesses would accept the conclusion of the qualifier in the final sentence. That logic would allow the state to ban smoking in private homes with at least one non-smoker. The only way to enforce that would be require learning the wrong lesson from 1984. Mob rule has such pleasant outcomes.

It would be very ironical

Is it wrong that I hope there’s some serious embezzling occurring at this bank branch? Just to teach them a valuable lesson early on…

There’s a bank in Nate Folger’s Fairfax elementary school. A real one. Never mind that the teller is a fifth-grader and many deposits come from tooth fairy funds — it’s one way a nation of non-savers and big spenders is trying to teach the next generation to do better at finances.

It might be working: Nate, 10, recently plunked a rumpled $5 bill onto the counter of the new Sunrise Savings Bank and walked away with a deposit slip.

He earns about $4 a week in allowance — for setting the table and putting his clothes away — but he has a plan.

“It’s pretty tempting to spend,” Nate said. “But every week I’m going to deposit $2 and keep $2 so I can watch it grow and grow and grow.”

I’m not serious, naturally, but it would be funny. Not HAHA funny. Okay, actually, it would be HAHA funny, because then we could combine the lesson on personal finance with the lesson on how Congress treats taxes. Two birds with one bazooka.

Should police ticket under-inflated tires?

I’ve already said I won’t vote for Sen. Clinton when if she runs for president in 2008, so this entry is really just piling on. However, it’s important to highlight examples of why she’s every other hack politician, except she had the good fortune to be First Lady before entering public office. She gets more acceptance than she should. Her new energy plan proves it.

Sen. Hillary Rodham Clinton (D-N.Y.) said yesterday that the United States should cut its consumption of foreign oil in half by 2025, and outlined a national strategy of tax incentives, an oil-profits tax and more funds for research aimed at spurring conservation and development of alternative sources of energy.
…

“Our present system of energy is weakening our national security, hurting our pocketbooks, violating our common values and threatening our children’s future,” Clinton said in a speech at the National Press Club. “Right now, instead of national security dictating our energy policy, our failed energy policy dictates our national security.”

How creative. She managed to include fear of death, poverty, and morality, with a nod to the children. Classy leadership. At least she’s learned her trade well, no matter how despicable its current tradesmen may be.

Clinton said she plans to introduce legislation to create a strategic energy fund, largely paid for by an excess profits tax on big oil companies, who she noted earned a combined $113 billion in profits last year.

She estimated that the profits tax and a repeal of other tax breaks for the oil industry could pump $50 billion into the energy fund over two years and pay for an array of tax incentives and for $9 billion in new research initiatives for wind, solar and other alternative energy resources. Oil companies could escape the tax if they reinvested profits into similar programs.

Theft, redistribution, and bribery are admirable public policy goals. And what will the good senator say to the investors whose stock portfolios get hammered because the major oil companies will no longer earn windfall average profits? Take one for the team, maybe? It’s for the children?

Or economic decline could be her goal. If we’re all a little bit poorer, we can’t afford so many vacations and wasteful trips in our gas guzzlers. (Don’t tell House Speaker Hastert.) Hence, we’ll use fewer barrels of oil. Conservation works, she’ll say. And we’ll all be thankful that she’s in charge.

Maybe, but it’ll be without my vote.

This will inspire faith in the market

Who knew that muddying the political waters could also include muddying the financial waters?

President George W. Bush has bestowed on his intelligence czar, John Negroponte, broad authority, in the name of national security, to excuse publicly traded companies from their usual accounting and securities-disclosure obligations. Notice of the development came in a brief entry in the Federal Register, dated May 5, 2006, that was opaque to the untrained eye.

Unbeknownst to almost all of Washington and the financial world, Bush and every other President since Jimmy Carter have had the authority to exempt companies working on certain top-secret defense projects from portions of the 1934 Securities Exchange Act. Administration officials told BusinessWeek that they believe this is the first time a President has ever delegated the authority to someone outside the Oval Office. It couldn’t be immediately determined whether any company has received a waiver under this provision.

I’m (not really) sure there is some logical national security reason for this provision, but why am I not surprised that the current president would be all too comfortable delegating such a decision to a subordinate? Lying Misinformation seems to be the only consistent m.o. for the decider in chief. It’s not surprising he’d use his unlimited wartime powers to encourage more of it.