Category: Government

This is a bogus trade.

Sebastian Mallaby uncorked a doozy today on the intersection of trade and tax policy. He seems to grudgingly concede that free trade is inevitable, so governments shouldn’t get in the way. Right conclusion, poor reasoning. For example:

Paradoxically, the changes that have made globalization less popular have rendered resistance to it less fruitful. Back in the 1980s, trade put pressure on big, vertically integrated industries: cars, electronics. In the new world of outsourcing and global supply chains, vertically integrated enterprises have been sliced into discreet processes; trade now puts pressure on tasks rather than on industries. Back-office administration and phone-based customer support may shift to India, and this shift may affect industries from banking to medical services. The manufacturing and assembly of components may be outsourced to Mexico or Asia, and this change may affect everything from toys to telephones.

The reasonable question is how much longer such a shift took as government interfered in the process. If your output is protected from competition, you’re also protected from pressure to cut expenses as far as they can be cut. The only problem is that the need to innovate doesn’t change, only the damage from not doing so. Compare the lobster tossed into boiling water and the lobster brought to a gradual boil. Which one fights back while he still can?

So trade now threatens workers in more industries. Even if it still causes less dislocation than technological change, we shouldn’t be surprised that anti-globalization sentiment has sharpened. But the advent of competition in tasks also renders protectionist remedies less sensible than ever.

Preposterous. Companies now better focus on their true business. This is beneficial. The reality that some will perform better does not constitute a flaw in the trade process.

At least Mr. Mallaby comes to the right conclusion. The same can’t be said of his tax analysis:

Consider the work of Peter Lindert of the University of California at Davis. In a magisterial work published three years ago, Lindert analyzed tax-financed transfers across rich economies and found no correlation with the rate of growth or with gross domestic product per person. This, Lindert continued, should not be surprising. What matters for growth is less the quantity of tax and spending programs than their quality.

We know who gets to decide what constitutes quality. That same central planner also decides the quantity, which reduces the incentive to tie the two together. It’s most frustrating that the trade policies mentioned above are the perfect example of such incentive disconnect.

Lindert is no party-line liberal. He argues that high taxes in Europe don’t damage growth because they hit consumption and labor rather than savings and capital: This is an uncomfortable point for those who want the tax system to be progressive. But Lindert also argues that high taxes are compatible with growth if the revenue is spent well. Investments in education and public infrastructure boost a country’s growth rate. Programs that break the link between employment and health insurance enhance the flexibility of workers. Subsidized child care keeps women in the workforce, encouraging employers to invest in training them.

How is a belief that high taxes don’t damage growth not party-line liberal? But that’s less the point here than the notion that high taxes are “compatible” with growth if the revenue is well spent. Again, we know who gets to determine how to spend tax receipts. It’s fine to say that investment in education and public infrastructure boost a country’s growth rate. I’m not going to argue against that. I just find it absurd that the possibility that the private sector might provide even better quality than the public sector is never considered. Any honest look at our public education system would demonstrate that we could improve, to be kind, and money is not the lacking aspect.

Basically, Mr. Mallaby says he’ll give us economic freedom if we’ll agree to give up economic freedom. No thanks.

Violent attacks on liberty will be censored.

I haven’t seen the report mentioned in this story, but I don’t need to read it to know that any recommendation it makes is unconstitutional. The First Amendment says what it says, without exceptions for violence or protecting children from potential harm. This is classic government overreach permitted by populist ramblings.

Television networks are free to sprinkle their programs with shootings, slashings, torture and other gore because the government has no regulatory authority over violent programming. But a draft report being circulated at the Federal Communications Commission says Congress can change that, without violating the First Amendment.

Networks are free to sprinkle such things into their programs because we have a previously recognized right to free speech expression. Cable has even more freedom, yet it’s hard to argue that those networks are showing more than the broadcast networks. Any viewing of a commercial for 24 should be enough to counter such silly complaints. (Also important, we’re more upset about fake torture on television than real torture by our government? That’s majoritarianism at its most hypocritical.)

The long-overdue report suggests Congress could craft a law that would let the agency regulate violent programming much like it regulates sexual content and profanity _ by barring it from being aired during hours when children may be watching, for example.

Take one wrong idea and perpetuate it. This is what we’ve come to. Every decision made by every person should be filtered through whether or not it’s appropriate for children. We really are marching along to ever-more statism while the majority stands by and cheers.

I have a better idea: parents. Shocking, I know, but it seems to work when applied. It’s easier to pass time-consuming parenting decisions to someone else, I suppose. I don’t have kids, so maybe I’m missing the point. I thought it was to experience raising a child from dependence to independence. Is it really just a task designed to pass a child from one dependence to another? Maybe it’s a scam to have free labor for household chores.

Dan Isett, director of corporate and government affairs for the Parents Television Council, said the industry’s campaign to make parents the violence police is “purely designed to convince the Congress that they (programmers) are being responsible.”

The parental blocking technologies are insufficient due to a flawed television rating system, he said. As for the argument that cable is pressuring broadcasters to be edgier, Isett believes that’s nonsense.

Umm, if the ratings system is flawed, presumably letting inappropriate violent content senak into a lighter rating when parents might expect otherwise, parents should block shows with the offending rating. If that means you block everything but G-rated content on the Disney channel, so be it. That’s simple, and technology most certainly can handle that. Instead, the Parents Television Council wants government to do the job for parents. No effort needed. This would be bad enough if it applied to PTC members, but the PTC obviously wants all children shielded from what it deems inappropriate. Start with majoritarian nonsense and swirl in a batch of authoritarian goodness.

Enjoy this most laughable claim in the article:

The issue is bipartisan. Martin, a Republican, gave a joint interview to The Associated Press with Democratic Commissioner Michael Copps.

Getting a proud censor like Commissioner Copps on board for more FCC regulations is about as compelling as stating that scientists believe our planet revolves around the sun. Duh. I’d rather hear from someone who believes the Constitution is still enough justification to restrain American government. That would involve principles rather than politics, though, so I don’t expect to hear it from anyone in office.

Treat adults like adults.

I looked into a few policy recommendations coming from the Center for Responsible Lending, based on yesterday’s post. My initial hunch proved correct. Consider its stance on “Debit Card Danger”:

Banks stand back as debits and ATM withdrawals cause high-cost overdrafts for their customers

Rather than linking their customers’ checking accounts to their savings or other resources to cover overdrafts, many banks and credit unions are automatically covering their customers’ shortfalls with expensive short-term loans.

More overdrafts are happening when customers swipe their debit card or make an ATM withdrawal than when they write a check. In these cases, banks can warn customers or merchants when they have insufficient funds—but most do not. They can also decline the transaction and save the customer the overdraft fee—but most do not.

See, we should blame the banks because people don’t manage their money. Someone should be looking out for the customer who can’t keep track of his checking account. Someone should look out for him, even though he signed up for the account with “expensive” short-term loans. Remember, banks are in the business of giving away money to customers. That’s the purpose of banks. They have money. They give it to people who don’t have it.

I never use my bank card as a debit card, instead opting for the credit card feature. Perhaps I just have better credit than most Americans, but I doubt it. My brother got it on his card when he opened a checking account at 18-years-old. As you could expect, the Center for Responsible Lending’s stance doesn’t get any better when looking at credit cards:

While some cardholders use their credit for occasional purchases, working families have come to rely on plastic to weather economic downturns or to make essential purchases: groceries, medical expenses, home repairs. Even though most households pay more than the minimum each month, more and more people find themselves perpetually indebted to the credit card industry. College students and other minors have also become attractive targets for the marketing of cards that contain hidden transfer charges, exorbitant late fees and exploding interest rates.

Any public policy that starts with the premise of “working families” and “weathering economic downturns” will most likely be garbage. I suffered through years of credit card debt that I brought upon myself. I ended up using my cards to make essential purchases like groceries. This was my fault. I’m not saying that people are to blame for every bad incident in their life, but placing this at the feet of credit card companies is silly. They offer a service. People can buy that service or not.

It’s just as possible to say that people use credit cards to manage economic downturns so that they don’t have to rely on others, including the government, to bail them out. They know that their situation will change, and they’ll repay the debt. Again, tighter regulation, which is what I suspect is the ultimate policy recommendation, cuts both ways. Consumers will suffer. The ability to manage their present and future is limited as much as their opportunity to screw it up. This is about who knows best, individuals or central planners.

Naturally the Center has an opinion on Tax Refund Anticipation Loans.

Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer’s anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR. Also, they speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts. There were over 12 million RAL borrowers in 2003.

Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a 2005 study by the National Consumer Law Center.

There are few worthwhile angles here. Taxpayers shouldn’t be getting refunds hefty enough to justify such fees. Teach people to adjust their withholding exemptions to come much closer to their tax liability. They’ll have more cash throughout the year. (By extension, that might also impact the debit and credit card “problems”.)

The last sentence is the real kicker here. Tax preparers and lenders strip these dollars in fees. Why not just say that they rape customers if you’re going to implicitly accuse them of thievery? Teach people to manage their money, if that’s the problem. Teach them to read their contracts, if that’s the problem. Teach them to …

You get the drift. The Center for Responsible Lending seems more interested in being the Center for Lending Regulation, with a healthy disrespect for the abilities of “working families” to manage their money. Whatever evidence exists to support such a belief is not sufficient justification to punish with more regulation those who can do what the Center for Responsible Lending believes is impossible, or worse, unnecessary.

People should be free to act against their best interest.

Those newfangled mortgages from 2005, they’re threatening to negatively impact some individuals. But don’t worry, government wants to save everyone.

… But as mortgage defaults rise, the new Congress and several state legislatures are contemplating enactments that would require mortgage brokers and lenders to make sure a loan is “suitable” for a borrower–just as stock brokers have to make sure an investment is suitable for a client. Your loan officer would be required to ask a series of detailed questions about things like your financial goals and your tax status. And if the loan was inappropriate, the lender would be open to a lawsuit–and even a prison term.

That should work wonders on the mortgage (and by extension, the housing) market. Screw up according to some bureaucrat’s unclear standards and whammo, prison bars for you. Wonderful.

I’m all for fair disclosure requirements, but I also understand that that’s what contracts are for. I understand enough finance from my education that I could walk my way through buying my first house with little trouble on the specific terms. Adjustable versus fixed rates, interest only, whatever. I faced all of those questions. The answers were obvious enough to me because I did my homework. But I also hired an attorney to work through everything and verify that the contracts matched expectations.

I don’t pretend like everyone has that knowledge, or even that every mortgage broker has any scruples. I can’t believe that those require this level of anti-market glee:

The mortgage industry doesn’t object to the congressional intrusion, since a federal law might be preferable to a patchwork of state laws (though the industry would have preferred a Republican-run Congress). Consumer advocates are now happily taking their case to a Democratic Congress, and they don’t deny that what they propose could crimp profits of lenders and of investment banks that securitize home loans. “It would eat into returns and presumably investors’ appetites, too,” says Keith Ernst of the Center for Responsible Lending in Durham, N.C.

Presumably.

The ramifications are simple, really. Reduce the profitability, and the providers will disappear. Then that low-income family that could just barely afford a house will be stuck renting. That middle class family looking to trade up? Maybe next year. Even if they can properly assess their risk and potential to repay the loan(s), they won’t be able to do so because the government cares so much.

Remember, of course, that the logic works the other way. Lend without common sense and your borrowers will go kaput. If the lack of judgment is large enough, the company will go kaput. This is how the market works to achieve balance. Lenders and borrowers alike have a built-in incentive to behave responsibly, even if they ignore that incentive. Beyond the basics of honest disclosure, handcuffing the market is just meddlesome misbehavior that will fail to protect people from themselves.

This is not an argument for more secrecy.

Give it to the Department of Homeland Security, it carries it implements its stupid ideas with a blazing gusto.

New York City is about to become a laboratory to test ways of strengthening the nation’s defenses against a terror attack by a nuclear device or a radioactive “dirty bomb.”

Starting this spring, the Bush administration will assess new detection machines at a Staten Island port terminal that are designed to screen cargo and automatically distinguish between naturally occurring radiation and critical bomb-building ingredients.

And later this year, the federal government plans to begin setting up an elaborate network of radiation alarms at some bridges, tunnels, roadways and waterways into New York, creating a 50-mile circle around the city.

If a terrorist’s goal is to create as much destruction as possible, this might help prevent that. If a terrorist’s goal is to create destruction and fear, this will do nothing. How much difference is there if a Staten Island port terminal blows up instead of a building in New York? The Bush administration has already shown it’s willing to embrace that fear of fear to a great extent. This won’t change that.

In the end, which logic do we want to embrace?

“This is just total baloney,” said Tara O’Toole, a former assistant secretary at the Department of Energy during the Clinton administration, where she oversaw nuclear weapons safety efforts. “They are forgetting that no matter what type of engineering solution they try in good faith to come up with, this is a thinking enemy and they will look for a way around it.”

Or…

Benn H. Tannenbaum, a physicist and nuclear terrorism expert at the American Association for the Advancement of Science in Washington, said the system would never create anything close to an impenetrable barrier, particularly for a nuclear bomb, since the required ingredients have low levels of radioactivity and can easily be shielded. But the project still might be worthwhile, he said. “If nothing else, it makes the terrorist think twice before they do something like this,” he said.

We can assume they’ll just do something else, or we can assume they’ll think twice and presumably decide against trying. Terrorists are deranged but they’re not stupid. I choose the former logic.

Subsidize¹ my broken TV remote.

Following up on an issue I wrote about more than a year ago, this entry from Technology Liberation Front mentions an interesting argument by those who favor helping Americans negatively impacted by the looming mandatory switch from analog to digital broadcasts. I haven’t seen this angle in this context, but it’s quite instructive of the nonsense politicians use to sell us every more government intrusion and control.

Commerce has been under pressure from — among other places — Congress to include these forgotten basement televisions in the program. In particular, a November letter from John Dingell and 19 other members positively waxed poetic about the issue: stating that millions of consumers would be “disenfranchised” and that the original Commerce plan “disadvantages the poor, the elderly, minority groups, and those with multiple television sets in their home.”

More on disenfranchisement and multiple televisions in a moment, but I want to challenge Congressman Dingell’s initial claim first. It’s a bit presumptuous and insulting to lump the elderly and minority groups into the poor, no? There are no elderly Americans who can afford new televisions, or at least new converters for existing televisions? There are no minorities who can afford the same? This isn’t about helping anyone in need. It’s creating an artificial requirement and then satisfying that requirement with public funds. It’s a political ploy. While that’s obvious to everyone, it’s still shameful. If we need to talk about “the poor,” let’s do that. But don’t make assumptions just to get key constituents invested in a plan they probably don’t need.

Now, to the other claims. This says it as well as I could hope, so I’ll quote the entry:

Maybe it’s just me, but I had never thought of “those with multiple television sets in their home,” as an oppressed minority. And “disenfranchise”? This isn’t voting rights, it’s television. In fact, its not even that — its the right to a third TV in your basement. In fact, its the right not to have to pay $50 (the expected price of a converter box) to get that third TV in your basement to work.

Is there any burden left that Congress expects us to shoulder ourselves? I fear the answer.

¹ Yes, I’m kidding.

Fiscal Denial

The Wall Street Journal’s blatant partisan blinders never stops driving me nuts amusing me. From today:

Politicians are typically late in picking up trends, so it will be interesting to see how long it takes Washington to acknowledge the big story in the Fiscal 2008 budget that President Bush unveiled yesterday: To wit, with a little spending restraint, Congress could balance the budget in no time.

Or President Bush could stop signing the spending increases. I’ve read that it can work as a constitutionally-provided strategy.

The news Mr. [Kent] Conrad won’t broadcast is that over the past three years the federal deficit has shrunk by 58%. The Congressional Budget Office–not the White House–is estimating that the current year’s deficit (for fiscal 2007) will fall to $172 billion. That’s not bad given continuing Katrina relief spending, $30 billion for homeland security, and a couple hundred billion or so to fight the war on terror.

Only a partisan would offer the White House credit for (not really) proposing to (partially) clean up a mess it created. But the best bit arrives in the conclusion:

The best news in yesterday’s budget may be that Mr. Bush seems to be rediscovering some fiscal nerve. His proposals won’t raise taxes, while using the power of the market to combat problems in health care, and putting a tight leash on domestic discretionary programs. Defense gets the bulk of spending increases, as it should in a time of war. Maybe we’ll finally get a debate over national spending priorities.

A tight leash on discretionary spending? Not so much, when analyzing the numbers honestly. Holding on tightly when the leash is fully extended is not what the Journal’s editors are saying, but it’s much closer to the truth. And about that war… America has expressed how it feels about the war and the current “extra more of the same” strategy. It’s logical to infer that it wants to fund that with a budget increase? How?

It makes a great spread for toast, too.

Via Kip comes the disturbing but unsurprising news that Texas Gov. Rick Perry signed¹ an executive order that has no coherent public policy justification:

By issuing an executive order, Perry apparently sidesteps opposition in the Legislature from conservatives and parents’ rights groups who fear such a requirement would condone premarital sex and interfere with the way parents raise their children.

Beginning in September 2008, girls entering the sixth grade — meaning, generally, girls ages 11 and 12 — will have to get Gardasil, Merck & Co.’s new vaccine against strains of the human papillomavirus, or HPV.
…

“The HPV vaccine provides us with an incredible opportunity to effectively target and prevent cervical cancer,” Perry said in announcing the order.

“If there are diseases in our society that are going to cost us large amounts of money, it just makes good economic sense, not to mention the health and well-being of these individuals to have those vaccines available,” he said.

As Kip pointed out, becoming infected with HPV does not guarantee cervical cancer. All this will do for public health is prevent a few cases of HPV infection. His grandiose rhetoric to the contrary, Gov. Perry has done nothing quite as dramatic as he claims. Or rather, the dramatic result is not what he now claims.

Kip also pointed out that the key factor in this debate and whether it makes sense to make vaccination mandatory is that “HPV is not casually contagious.” There is no reason to mandate such an action. Boys are not going to enter the doors of George W. Bush Middle School, sneeze, and infect every any girls with HPV. This is over-reaction with no reasonable basis.

The obvious parallel, of course, is infant male circumcision, which has been justified because it appears to have an impact on HPV transmission. Whether or not that prevention is substantial is irrelevant. The core principle when making a permanent change to someone’s body is medical need. Medical need rarely exists in infant male circumcision; likewise, there is no medical need here to force such an action on young girls. There is no public health basis and a highly subjective personal health basis. Behavior can be taught, and like boys with the behavioral negatives that circumcision supposedly cures, some understanding of the individual affected should influence the decision.

This is naked rent-seeking for Merck poorly disguised as social engineering by Gov. Perry. He delivers millions of customers to Merck. What is he getting in return? Gov. Perry should be ashamed.

¹ Note the wonderful headline to the AP story: Texas Gov. orders anti-cancer vaccine. Gardasil is an anti-HPV vaccine. There is an important difference. Gov. Perry is not mandating an anti-cancer vaccine, no matter how well-intentioned he believes his action to be. It’s being sold with that exaggeration to make it more marketable. Unfortunately, there are individuals involved who can’t consent to such politically warm and fuzzy experimentation on their bodies.

Dude, Where’s My Gas Tax?

Charles Krauthammer starts off with a great premise from his Friday column:

Is there anything more depressing than yet another promise of energy independence in yet another State of the Union address? By my count, 24 of the 34 State of the Union addresses since the oil embargo of 1973 have proposed solutions to our energy problem.

The result? In 1973 we imported 34.8 percent of our oil. Today we import 60.3 percent.

Most everything else in his essay is worth reading. The bit about ethanol, in particular, is useful because we’re not getting the full picture. There are unintended consequences, as the cost to feed livestock increases (not necessarily a bad unintended consequence for vegans). More farmland must go to grow corn. And few in power will acknowledge how government protections irrationally impact decisions regarding ethanol since sugarcane can be used to make ethanol at a significantly more efficient, effective cost in dollars and energy expended. But we must prop up our sugar industry from foreign trade. As Mr. Krauthammer says, we’re not really serious about tackling the issue of oil dependence as much as we’re interested in making the politically correct choices that appear responsible.

As good as it is, I’m still left with questions from Mr. Krauthammer’s essay. Particularly, from this:

First, tax gas. The president ostentatiously rolled out his 20-in-10 plan: reducing gasoline consumption by 20 percent in 10 years. This with Rube Goldberg regulation — fuel-efficiency standards, artificially mandated levels of “renewable and alternative fuels in 2017” and various bribes (er, incentives) for government-favored technologies — of the kind we have been trying for three decades.

Good grief. I can give you 20-in-2: Tax gas to $4 a gallon. With oil prices having fallen to $55 a barrel, now is the time. The effect of a gas-tax hike will be seen in less than two years, and you don’t even have to go back to the 1970s and the subsequent radical reduction in consumption to see how. Just look at last summer. Gas prices spike to $3 — with the premium going to Vladimir Putin, Hugo Chávez and assorted sheiks rather than the U.S. Treasury — and, presto, SUV sales plunge, the Prius is cool and car ads once again begin featuring miles-per-gallon ratings.

No regulator, no fuel-efficiency standards, no presidential exhortations, no grand experiments with switch grass. Raise the price, and people change their habits. It’s the essence of capitalism.

I’d quibble that the essence of price increases mandated by the government is not capitalism, but that’s not really my point. I haven’t refueled my car in several weeks¹, so I can’t really say what the current average is. Also, I’m too lazy to look it up on The Internets. I’m just going to assume $2.50, since it’s an easy number to work with. My assumption means that, to reach Mr. Krauthammer’s suggestion, the government must increase the current gas tax by $1.50 per gallon. Done. And then?

Where does the money go? When the actual, untaxed price of oil fluctuates higher the next time some crisis arises, will the government adjust the extra tax down to keep the price stable at $4? The goal is to reduce consumption, not bankrupt the economy, I assume. So what do we do when capitalism interferes with the essence of capitalism? I don’t trust politicians to be noble with that extra $1.50 per gallon, if nothing else. (Don’t tell me that $1.50 per gallon would go to “energy independence” programs or whatever. Two words: Social Security.)

I agree that this would have at least the effect that Mr. Krauthammer and other supporters suggest. But I’m skeptical. There will be unintended economic consequences, as well as waste by politicians. I don’t like artificially unleashing these demons to make us do what we “should” do.

¹ Public transit is great, except when it leaves me stranded in the cold for an hour, as it did Friday morning.

Forgive me if I can’t find my outrage.

I will not be upset by this story:

Citing the controversy surrounding the Dakota Fanning film Hounddog, the leader of the state Senate Republicans says he wants the government to review scripts before cameras start rolling in North Carolina.

I’m serious when I say I will not be upset. The headline – “Republican Scripts need reviewing” – is designed to outrage. Look at the First Amendment violation! I can buy into that. Except, I can’t.

That system, said state Sen. Phil Berger, R-Rockingham, would apply only to films seeking the state’s lucrative filmmaker incentive, which refunds as much as 15 percent of what productions spend in North Carolina from the state treasury.

“Why should North Carolina taxpayers pay for something they find objectionable?” said Berger, who is having proposed legislation drafted.

State Sen. Berger is correct. Why should North Carolina taxpayers pay for something they (might) find objectionable? I’d take him a step further, though, and ask why should North Carolina, or any taxpayer, pay for film production?

Berger pointed to South Carolina, which requires up-front applications from producers, who must attach a copy of their script.

Even so, said Jeff Monks, South Carolina’s film commissioner, the state does not assess the content of a proposed movie.

“Censorship is not part of our activity,” he said. The purpose of asking for the script is to see whether it conforms to the budget and schedule information producers are required to provide.

“We want to see if this film is doable and a good investment for the people of the state,” he said.

It’s not a legitimate government expense. Film producers will find cheap, quality locations without government help through competition. Movies are their investment. Taxpayer money spent to benefit producers is not an investment to the taxpayers. I’m sure North Carolina residents will not be sharing in the profits of Hounddog. This should be obvious.

With this story, the familiar refrain is always that he who pays gets to decide. This is true whether it’s customers buying vegan cookies instead of non-vegan cookies or a government buying film production instead of commissioning paintings. If you don’t want censorship, don’t take someone else’s money. The First Amendment protection against censorship only applies to your own dime.

(Source: Fark)