Category: Economy

The wrong way

Bernie Sanders, the “democratic” socialist, is now proposing the BEZOS act (a not-so-subtle jab at Amazon’s Jeff Bezos). This act aims to tax businesses for those  in their employ who also receive government subsidies. However, I see a couple of issues with this law:

  1. Amazon and others, as well as their employees, are already taxed so as to provide these benefits. How about instead of adding more government overhead and taxes, we provide Amazon with tax credits for employing people at levels where they no longer require public assistance? For everyone an employer removes from public assistance, we should give them a credit equal to the gross savings (including the government overhead associated with administering the benefits).
  2. The idea for this law is potentially based on reports that many Amazon workers also depend on public assistance. For instance, this article claims that 10% of Amazon employees in Pennsylvania also depend on government assistance. Coincidentally, this same article notes that 90% of Amazon employees are full-time, leaving the 10% noted as potentially part-time employees who would be much more likely to receive government benefits.
  3. People may be working part-time for reason unrelated to their employer. If Amazon is penalized for hiring these part-time workers then it is likely they will hire full-time workers in their place, leaving these former part-time employees relying solely on government assistance at possibly higher levels than before.

Socialism is not the answer, people. Lower taxes and less government overhead leave more resources for truly productive work that will benefit all. Let’s work on that instead of new punitive taxes, regulations, and government overhead.

Think we started this “trade war”?

Think again.

I’m really tired of people telling me that our “protectionist” tariffs are just Trump picking fights and pushing his “selfish” America First agenda. The fact is that we have unfair trade agreements with many nations, and it has to stop. I’ve previously discussed how American dairy producers are locked out of the Canadian marketplace by a strict government-sanctioned protectionist quota system; here’s another example that calls out the automobile import tariff inequities between the EU and America. From a Fox Business article:

“German automakers are said to be urging the Trump administration and the EU to set car tariffs to 0%. The U.S. currently charges a 2.5% tariff on EU cars, while the EU’s tariff on American vehicles is 10%.”

Let’s see if I’ve got this right: the EU wants us to lower (our already low) tariff on EU-produced cars, from 2.5% to 0%, when all the while they’ve been demanding a 10% tariff on American vehicles? Trump is right – these countries are taking advantage of us, and it needs to stop. Trump should match tariffs dollar for dollar; if these countries want tariff-free access to our markets, then they can give us tariff-free access to theirs.

Free trade means just that.

What’s good for the goose…

… is good for the gander. Or something like that.

President Trump has issued tariffs on some products from foreign countries, ostensibly as a long-overdue response to tariffs against U.S. goods. Such existing tariffs are designed to protect domestic production in those countries – for example, to protect the dairy industry in Canada, which operates under a strict government-protected quota system.

With this understanding – that some countries issue tariffs to protect their own industries – it seems hypocritical that Canada’s Justin Trudeau is upset with Trump for doing the same to protect U.S. interests. It is particularly hypocritical after Mr. Trudeau gave the following quote regarding Trump’s new tariffs:

“I will always protect Canadian workers and Canadian interests.”

In any event, Mr. Trudeau can eliminate U.S. tariffs against his country by leveling the playing field and removing tariffs against the United States. Whining about the U.S. utilizing the same protectionist tariffs in response to Canadian tariffs is only going to expose his duplicity.

I have to agree with President Trump on this one: if you want free access to U.S. markets, then give the U.S. free access to yours.

You know the end is near when…

Restaurateurs in New York City are up in arms over what seem like continuous  hikes in the minimum wage. They want to deal with these increases by applying a separate surcharge on each bill of ~ 5%, but they need city approval to do so which has not been forthcoming.

The obvious question is this: Why in the world should a retailer need government approval to set their own rates in any fashion they desire? Does anyone else understand the significance of government control on prices? I understand why the government might not want the surcharge (it would expose the cost of their wage meddling efforts), but why doesn’t such an action fall within the free-speech rights of the restaurateurs? I find it hard to believe that the inhabitants of NYC would be so gullible as to fall for this slow devolution into socialism.

A second obvious question also arises: Why haven’t people figured out that increasing the minimum wage really does nothing, and is just a false panacea – good only for vote pandering? Think of it: things like rent are expensive in NYC because apartments are a scarce resource. What do you think happens when the same people vying for the same apartments now have more money to compete in the marketplace? That’s right – the number of apartments remains unchanged, but the price of apartments increase to account for the additional money available for rent expenses. Only the politicians (through votes bought by pretending to help workers) and landlords (through greater competition for their apartments, and thus higher rents) make out in this scenario. Minimum wage earners are left exactly where they were before – broke and in an (even more) expensive apartment.

Anyway, back to the meaning of our title for this blog enty:

“…when you see that in order to produce, you need to obtain permission from men who produce nothing … you may know that your society is doomed.”

An excerpt from a speech by fictional character Francisco d’Anconia in Ayn Rand’s novel, “Atlas Shrugged”

Given that these restaurateurs (producers) need government approval (produce nothing) for their pricing structure, this quote seems appropriate. Do you think that the voters will ever catch on? After all, the politicians have…

Government run amok

Having not learned their lessen from the ride-share fiasco a couple of years ago [Aman Betheja, Texas Tribune] [Alex Samuels, Texas Tribune], the Austin city council is at it again – this time to regulate dockless bike and scooter rentals [Ben Wear, Austin-American Statesman]. Why the city of Austin feels the need to regulate everything is beyond me. The consumers of Austin can decide the level of service they need all by themselves, and voting with their pocketbooks will be much faster and more effective than the slow-moving busy-body nature of the city council.

Still, it’s interesting to note that one of the city council’s first thoughts are on what fees to charge the companies for each bike/scooter. Unfortunately, companies don’t pay such fees – the consumer does. So all this fee will do is add more bureaucratic overhead and costs to doing business in Austin, with higher rental rates for the consumer. It’s also interesting to note that some of these incoming services will be competing against B-Cycle, a dock-based bike rental system that has been partially built with federal funds and already has the support of city officials. Can you say “favoritism”?

The city can address its concerns regarding how/where these rental bikes are left using existing laws. If they are left where they shouldn’t be, impound them; the renters and rental companies will understand the rules soon enough. However, adding another layer of bureaucracy in a city system already plagued by high costs and slow response due to over-regulation just isn’t the answer.

You’d think that the city government’s most important role would be to make it easier to do business in Austin… not harder!

Quota system vs. Capitalism

Vermont milk farmers are crying that milk prices are too low and thus causing some farms to go under. Their solution: we should regulate milk sales like they do in Canada, which has a quota system to control production.

Nonsense, I say! Several (very good) reasons:

1) The market will control production all on its own. If prices are too low due to excess supply then some farms will be forced out of milk production, resulting in lower supply and higher prices.

2) Quotas only serve to inflate prices for the consumer; even the article cited notes that milk prices are 70% higher in Canada. Why should mothers trying to feed their children be subject to a higher-than-market prices simply to benefit farmers?

3) Such quota systems close the market to competition (you must have a quota assigned to produce), reducing the competitive forces that result in innovation.

4) These quotas, once assigned, are owned by the farmer but are also transferable. This results in the assignment of a high dollar value to the quotas – a value provided to the farmer solely as a result of the government’s protectionist activities. Of what benefit is this to the consumer/taxpayer?

5) All government systems have overhead, whether paid for by the farmer or the taxpayer. The management of these quota systems is not free; someone must pay in the end. These costs serve to reduce the overall material productivity of the economy.

Capitalism works just fine. It drives production, manpower and capital to where it is needed most. If the Vermont dairy farms are not making enough money, that is a sign that some of these productive resources would be better utilized producing something else. It is not a sign that a government-mandated protectionist racket should be initiated at the expense of consumers and taxpayers.

Bring on the robots!

An article on NPR decries the Trump tax plan, claiming that it adds incentive for businesses to increase their use of robots. While they quote some economists who see this as good for American businesses, some also claim that it is bad when it encourages robots at the expense of people. I disagree.

The replacement of workers with robots is always good. Why? Because it allows continued or enhanced production while freeing people to do other work. In short: it increases the potential productivity of the work force. The only difficulty this creates in that new businesses and products have to be developed to put that freed work force productivity to use.

The use of robots would be detrimental in the current tax environment, since new businesses that might use this newly-freed labor are unlikely to be developed in our country. Our 35% corporate tax rate (the highest statutory rate in the free world, according to Politifact) has provided a lot of encouragement for businesses to develop elsewhere. However, Trump’s plan to cut corporate taxes – no matter what the liberal tax-and-spend crowd claims – will provide some incentive for countries to develop businesses here that might employ the labor freed as a result of robot use.

Bring on the tax cuts, bring on the robots, and let’s get productive!

Spend, spend, spend… oh, and tax!

The CBO says our debt will continue to grow over the next decade, leading to “serious negative consequences”. Really, you think so?

OK, let me put the U.S. budget crisis in terms you might understand. In the following comparison, “income” is proportional to tax revenue, “credit card debt” is proportional to national debt,

You have an immature sibling who can’t seem to handle their money. They make a cool $100K per year, but have almost  $430K in credit card (unsecured) debt (more than four times their gross income). Worse, they expect their credit card debt to increase by $18K this year alone. By 2026, their income will rise to over $150K/year, but their credit card debt will increase to $700K – and will be increasing at a rate of almost $38K per year. In other words, even if their earnings rise as projected their debt will rise at an even faster rate. You’ve been brought up with strong family bonds, and you know that you and the rest of the family will need to bail your sibling out if they get too far in debt. What kind of talk would you be having with your sibling under these circumstances? Maybe you would discuss the”serious negative consequences” of their actions…?

Now, let’s look at this from another angle: You work for your sibling’s company, where you are paid at a higher rate (and with better benefits) than market because of your familial ties. It also turns out your sibling is on the hook for any shortfall in your retirement account, so you plan on “spiking” your last year income to increase your retirement payout. You could (and should) have been replaced years ago by someone with a better work ethic, higher skills, and a lower cost, but you don’t want to give up your meal ticket. Instead, you unduly influence your sibling directly and through like-minded family members (guilt is, after all, a powerful tool). What kind of talk do you have with your sibling under these conditions? Yeah, I thought so.

Notice that that the government likes to state the national debt as a percent of GDP. Since when is your debt calculated based on the productivity of the company for which you work? Seems like some sneaky accounting trick, doesn’t it (it is)?

Welcome to the Welfare States of America, where your wealth and well being is the responsibility of the state. God save the sucker who actually works for a living (or, more correctly, for your living).

And don’t forget: It’s your own fault. You put them in office, and they’ve done exactly what you told them to do. You want something for free, and they give it to you while billing the minority of voters who didn’t contribute to their campaign coffers. Well, watch out: someday it might be you who gets stuck with the bill.