Category: free trade & free markets

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free trade & free markets too much government

D.C. Protectionism

Some things are a bit hard to grasp. One of them is intra-national protectionism.

Most forms of protectionism try to shield businesses within a country from competition outside, using tariffs or price controls to “even the playing field,” so to speak. What these laws do is make goods more costly for consumers within the protected country, in effect taking wealth from consumers and awarding it to the protected businesses.

In the United States’ capital district, politicians are in the process of pushing through a “living wage” bill that would apply only to big box stores like Costco and Walmart. While Costco and Walmart will be required to pay their employees a minimum of $12.50 an hour, other companies in the district could still pay wages as low as $8.25.

Doesn’t seem exactly fair, does it? The bill has been pushed by organized labor to supposedly help smaller retailers, but — surprise, surprise — exempts unionized grocery chains such as Giant and Safeway.

On the one hand, the Washington, D.C. city council is punishing Walmart, forcing it to pay more than its competitors for labor. On the other hand, the city has spent $40 million in direct subsidies to the company and another $28 million to advance projects that involve building six new Walmarts.

“I can’t imagine that they will proceed on any of the unbuilt stores if this bill passes,” says Grant Ehat, the principal of the company building the two Walmart projects already underway.

Mayor Vincent Gray expressed his hope to “find a way to, say, thread the needle” between the company and the council.

Or our nation’s capital might experiment with common sense laws, equally applied.

Yes, Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Texas vs. No-Growth Coasts

Governments must rely upon profitable businesses. Without them, government has next to nothing.

And yet “next to nothing” is what governments can do to best help businesses succeed.

Thank Texas Governor Rick Perry for these thoughts . . . and Matthew Yglesias, who commented on Perry’s recent “nuclear-strength” video promotion, inviting businesses to leave places like New York and locate themselves in Texas, which has fewer regulations and no income tax. The ad claims Texas is “big for business.” Yglesias quibbles:

If New York was a terrible place to live, work, and do business, then it would be cheap to live in New York. But New York is not cheap. It’s not Detroit. It’s not even average. It’s, in fact, hellishly expensive. If New York emulated Texas and eliminated its income tax, rich people would bid up the finite supply of New York City land at an even more furious rate—the city wouldn’t see Houston or Dallas growth rates.

I’m no economist, but I have quibbles with Yglesias’s critique. New York is expensive, yes. But the cause of the expense isn’t just that people bid up housing and services. It’s expensive in no small part as a result of all those regulations, especially courtesy of one regulation in particular: rent control. Get rid of rent control and the city income tax? Watch housing grow.

And growth, Yglesias rightly points out, is what’s really in Texas’s favor. Texan low-impact government policies favor growth, while “the residents and politicians” of blue-state/beach-front states, though “liberal,” have, in fact, “become exceptionally small-c conservative and change averse.” Because they do too much, allegedly to “help.” But mostly to gentrify.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Biting the Apple

Apple is on trial for refusing to pretend that the company has done something wrong.

In 2009, Apple invited five major publishers to sell e-books through the forthcoming iPad, on the basis of the “agency model.” The publishers would set the prices, Apple would take a 30% cut. Apple also required that the e-books not be sold more cheaply elsewhere.

The publishers were happy to agree because Amazon had been buying new e-books wholesale and steeply discounting them, sometimes at a loss to itself, in order to sell them at $9.99. In the eyes of the publishers, this price seemed too low a benchmark. Apple’s deal gave them new clout in negotiating with Amazon.

The government says average book prices rose in the wake of this “conspiracy.” Apple says prices declined. It’s irrelevant.

To charge a price that some persons dislike violates nobody’s rights. Nor does stipulating terms of contract that a prospective partner dislikes and may reject. Anti-trust law has nothing to do with justice. It’s a bludgeon that some businesses — in conspiracy with the government — use to thwack competitors.

No violation of anyone’s rights has even been claimed in this case, let alone established. Yet five innocent parties have been forced to pay tens of millions to the government and accede to curtailment of their right to contract. And Apple, having refused to be bullied, must defend itself in court.

That’s the crime, and government officials are the ones committing it.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Fed Up

No one is really fit to “run the economy.” The pretense of the ability can be fun to watch, amongst economists as well as pundits. But because they’re doing the impossible, what they say can lurch from wisdom to utter folly in the space of a paragraph.

Neil Irwin, at the Washington Post, admits that the Federal Reserve’s current policy of pumping more and more money into the economy may finally be working, “but that may not be a good thing.”

I suspect he’s right.

But not for the right reason.

Irwin notes that the Fed “in September introduced a policy meant to boost housing and stock prices, and now, nine months later, housing prices and stock prices have risen quite a bit. Enough, indeed, to (so far) offset the impact of higher taxes that went into effect Jan. 1 and federal spending cuts that took effect March 1.” But the problem, he goes on, “is that these channels through which monetary policy affects the economy tend to offer the most direct benefits to those who already have high incomes and high levels of wealth.”

Irwin sees the problem as inequality: the policy helps the rich get richer and does little for the poor. His solution is fiscal policy that throws more money directly at the poor.

Yet there’s not much reason to believe his preferred giveaway would actually “stimulate” the economy. The Fed’s current policy, on the other hand, may stimulate, a bit, but will lead to a new boom-bust cycle.

The poor need jobs; the rich need to invest. But all this requires a degree of stability and trust and sustainable prices — not government-knows-best tinkering with the money supply. Or yet more deficit spending.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Doctoring, Priced

Any number of economists will tell you that medicine just has to be different from other goods and services provided on the market. They will offer elaborate theories to explain, for instance, why competitive markets won’t work for health care, and why more government is necessary, and why, in fact, today’s hospitals don’t publish their prices.

I see this mainstream “explanation” as mere apologetics, designed to justify evermore government. The truth is that medicine is “different” because legislation — at local, state, and federal levels — has made the industry different. It’s an accident of history, not something “natural” to this particular market.

But, as Obamacare further consolidates medicine under the government rubric, there appear some daring examples of non-compliance. The latest is from Dr. Michael Ciampi, of South Portland, Maine, whose family practice group has stopped accepting insurance payments of any kind, public or private.

Posting its prices on the Web, Ciampi Family Practice claims to offer substantial savings over other providers. And other benefits, too, including house calls:

Because we no longer contract with insurance companies, Medicare or Medicaid, we can be more flexible and innovative. We use technology when it helps us take better care of patients, but we refuse to use it for technology’s sake. We will not spend our visit staring at a computer screen instead of looking at you. We can also spend more time with patients than the typical provider in a “big box” medical practice. . . . We do not have physician assistants or nurse practitioners.

Ciampi is not the only (or biggest) provider to do this.

Could competition just erupt without a government-provided “solution”? Could “the market” provide the leadership medicine needs now?

This is Common Sense. I’m Paul Jacob.

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First Amendment rights free trade & free markets government transparency national politics & policies

Your Taxes, in Small Type

The business of business is to profit by helping others. The business of government is to make sure that businesses don’t profit by cheating others.

Unfortunately, sometimes it’s the governments that cheat.

Take the airline industry. Though substantially deregulated by the early 1980s, government has not treated it in an exactly laissez faire manner since. First there are the taxes, quite heavy. And recently the Department of Transportation decided that it must regulate the way in which airlines may advertise their prices . . . and the taxes. That is, the DOT insists that the “total price” — by which it means the price-plus-tax — must be shown prominently, with the tax portion “presented in significantly smaller type than the listing of the total price.”

Talk about regulatory micromanagement!

Now, this rule isn’t something Congress cooked up. It’s the result of a bureaucracy gone wild.

And the rule has one obvious effect: It shields government from consumer criticism, showing bureaucrats at their most self-serving. About one fifth of every airline ticket goes to the government, and folks in government don’t want you to know that.

This being the case, you might think — as George Will does — that the First Amendment would apply, especially since the First Amendment is now routinely held as protecting political speech more strictly than commercial speech. But, so far, courts have ruled for the taxing and regulating bureaucrats, not the competitive airlines. Or consumers.

Frequent fliers (I’m one) should hope the Supreme Court justices take up the case, which shows why economic and political freedom go best together.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets tax policy

Denmark to Citizens: Drop Dead!

That might as well have been the headline of the Spiegel Online article. What else could Der Spiegel mean by the words “Health Be Damned: Denmark Hopes Cheaper Soda Will Boost Economy” except that Denmark’s government is endangering the lives of citizens merely to promote their prosperity and to respect their rights to life, liberty and the pursuit of happiness?

Letting individuals again govern their own beverage intake, unimpeded! How is that not tantamount to shoving them over a cliff?

On the other hand, if you live in Denmark, enjoy soda, and dislike being harassed for doing so — thank goodness for tax competition.

Steep new taxes on drinks like beer and soda have been sending Danes across the border for these items. They have long shopped in Germany anyway, but the “sinful drink” taxes have inspired an increase in the international jaunts. Research by a Danish grocers’ association suggests that over the past year, members of some 57 percent of Danish households have zipped over to Germany to buy beverages onerously taxed at home. Denmark officials therefore plan to phase out the new taxes.

The government has already abandoned a notorious “fat tax” on foods with saturated fats. It seemed that Danes disliked the higher prices and unemployment caused by the tubby tax.

At least for now, then, Denmark officials have declared defeat on key fronts in the paternalistic war on soda, fats and liberty.

So, take heart, victims of America’s nanny state! The incursions are reversible.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets national politics & policies too much government

Slow Times for a Fast Car

How economical are electric cars? It’s hard to know. We don’t have a free market setting in which to judge the question.

Their obvious advantage? They don’t pollute.

But, skeptics remind us, their electricity does have to be first produced, and the most likely additional source? Coal. Dirty coal.

In any case, electric tech’s progress (or lack thereof) remains fascinating. When I wrote about the Tesla Motors electric sports car back in 2006, I was enthusiastic. But since then the car has not exactly “taken off,” and the company has received a huge, huge hunk of money in the form of loans from the Department of Energy in 2009, so it looks like just another Solyndra-like boondoggle.

But wait: It turns out that the company has faced an uphill battle: government.

The states heavily regulate auto dealerships. You know, “for the consumer” (read: for a few privileged dealers). Indeed, this regulation at the state level has plagued America’s auto industry for years. And dealers, privileged by these protectionist laws, really, really hate Tesla Motors’ marketing model: direct-to-customer.

In Colorado, car dealers got the law changed to prohibit direct-to-customer auto sales.

I hope Tesla sues to overturn the state dealership laws as illegal under the Constitution — after all, they do precisely what the interstate commerce clause was designed to prevent.

More likely, though, Tesla will seek and get an exemption from the Energy Department. And American mercantilism will continue.

This is Common Sense. I’m Paul Jacob.

Note: Image is anachronistic, and later appeared no this site to illustrate a very different Tesla story.

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free trade & free markets

Good Pogue, Bad Pogue

Reviewer David Pogue knows technology but often botches business ethics. Writing about T-Mobile’s decision to liberalize its cellular contact, he asserts that “the two-year contract” to which T-Mobile is offering an alternative “is an anti-competitive, anti-innovation greed machine.” He gets his dander up:

The Great Cellphone Subsidy Con is indefensible no matter how you slice it — why should you keep paying the carrier for the price of a phone you’ve fully repaid? . . . Those practices should stomp right across your outrage threshold.

Maybe outrage is called for . . . by Pogue’s demand for outrage. It’s outrageous.

Companies need not compete on every level, to every aspect of a service, in order to offer customers a real alternative. And no particular voluntary market arrangement is inherently “anticompetitive,” for it cannot in itself prevent anybody from offering costumers something different. (Only government force, a major factor not discussed by Pogue, can block competitors from competing in particular ways.) Nothing about multi-year cell contracts prevented Tracfone and others from offering prepaid plans. Or prevented T-Mobile from offering its new plan.

Or a different alternate.

Pogue’s accusations of greedy “anti-competitiveness” can be and are made with equal injustice against any successful business. But there is no set amount of revenue greater than a company’s costs beyond which profits suddenly change colors, from moral to immoral.

And nothing is wrong with pursuit of profit per se, just as there is nothing wrong with pursuing an expected benefit by purchasing products and services, popular or un-.

People expect gains when they trade. If they see no benefit, they can just say no.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets tax policy

The “Fair” Tax That Wasn’t

Talk of tax “fairness” may be all the rage today, but it takes me back to 1980 and Jimmy Carter’s “windfall profits tax.”

In the previous year, then-President Carter had delivered his infamous “Malaise Speech,” in which he had addressed concerns about the energy crisis, going on and on about this program and that, and the need for “energy independence,” but not mentioning the one good thing done during his administration regarding energy: the beginning of energy market deregulation.

Carter’s Democratic Party was, like today’s Democrats, concerned about “fairness.” Because of the deregulation, they expected energy companies to reap “windfall profits.” Which those businesses somehow didn’t “deserve.”

Arguable, that.

But skip morality for a moment, and look at it from an economic point of view. The new, extra profits from a deregulated market would have enticed more investment into the areas where the “windfalls” were being made, thus increasing production, reducing prices. To the benefit of all.

Instead, Congress enacted the tax, and Carter signed it 33 years ago yesterday. And for six years, domestic production of oil produced “negative” profits. All Congress really did was delay and diminish the economic recovery to be expected from deregulation.

Congress also got much less revenue from the tax than projected.

The Crude Oil Windfall Profits Tax was repealed in 1988, and we experienced great growth in the 1990s.

A word of caution, I think, to those who bandy about “fairness” to the exclusion of sense, or worry overmuch about energy company profits, today.

This is Common Sense. I’m Paul Jacob.