Category: free trade & free markets

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

Water’s Value — in a Desert

It’s a dam shame.

There are plenty of private sector dams in the U.S., but the biggest are federal government projects, like those on the Columbia and Colorado rivers. These government-run outfits aren’t “free,” though. Indeed, they often prove to be good examples of typical government operations, providing special favors to some people at the expense of others.

Take the Hoover Dam, cherished as the nation’s highest symbol by MSNBC’s Rachel Maddow. The dam supplies water and electricity to Las Vegas, Nevada — at cut rate prices. A typical family in Las Vegas pays half for water what the same family would pay in Atlanta, Georgia, despite the fact that Atlanta gets 13 times more precipitation. These cheap rates have predictable consequences — overuse, for one. Which then leads local water authorities to foist on consumers some heavily intrusive conservation rules.

Andrew Wilson, in a report for the Property & Environment Research Center, writes that “A market-ready solution for Las Vegas water,” though not often talked about, would have far fewer negative consequences. And it’s not a difficult idea as such: “discard the historic cost-based pricing model and move instead to a pricing system that recognizes the scarcity value of water.”

Raising the prices for water and electricity to Las Vegas (and, for that matter, electricity to favored Bonneville Power Administration customers in the Pacific Northwest — along with many other federal government “business” products) would not only help forestall shortages and draconian lawmaking, it would be equitable. There’s no reason for the rest of the country to be, in effect, subsidizing Sin City.

Or any other city.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Pacé Richard Dreyfuss

In Suffolk County, Massachusetts, a new wrinkle on the old Producers-like scam hit the spotlight as a grand jury indicted Daniel Adams, a film impresario with several films under his belt, on ten counts larceny and false claims to the state in the financing of two movies set in the Cape Cod area, The Golden Boys (2008) and The Lightkeepers (2009).

According to Boston.com, Adams is charged with taking “advantage of a state incentive that allows film makers to apply for a tax credit equal to 25 percent of eligible production expenses. But prosecutors said he deceived the state about his expenses, claiming, for instance, that he paid [actor Richard] Dreyfuss $2.5 million, when in fact he paid him only $400,000.”

Adams has pleaded not guilty, and his legal standing is for a jury to decide.

More important is the general policy — funding movies is just not a legitimate use of tax money.

The only possibly legitimate argument for taxation is that the forcibly extracted money serves all the people it’s extracted from, by fulfilling very general, truly public interests. Making movies is not that.

One wag notes that “[t]he real crime is that a movie starring Richard Dreyfuss ever qualified for taxpayer funds in the first place.” That sounds almost like a criticism of Dreyfuss. Hey, I like the actor.

The point is that no film, either starring the greatest of greats or the least of unknowns, should be financed with conscripted money.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Video: Rating Agency Madness

The seeds of disaster can often be found in good intentions — a simple regulatory requirement designed to avoid disaster — as explained by economist Lawrence White:

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folly free trade & free markets insider corruption national politics & policies

A $13 Billion Reward

The Federal Reserve, our central bank, hit the news big last week.

Beginning in August 2007 and continuing for the next two and a half years, the Fed lent the world’s biggest banks something like $7.77 trillion dollars at the barely perceptible interest rate of 0.01 percent. With that money, the banks bought Treasury bonds (federal debt) and made $13 billion in profit.

I reported on this multi-trillion-dollar loan figure in December 2008, a few weeks after the biggest day ever of Fed bailout fever. For some reason this information didn’t become widespread or understood until this December, when Judge Andrew Napolitano and Jon Stewart made a big deal of it on their respective TV shows, after Bloomberg reported the profits banks made off all that bailout money.

What does this figure represent? To me, it represents the outrageous amount of magic money a sick and corrupt fiat-dollar/bailout-based system of moral hazard requires when it implodes.

I think we can all justifiably roll our eyes, now, when some rah-rah boy for big government tells us how absolutely necessary it is to have a central bank. The old gold standard never fell apart this badly. The gold requirement itself placed a huge check on out-of-control banking.

But a $13 billion reward for the biggest financial mess in world history? That’s the very opposite of a check or balance on risk-taking, greed, or downright stupidity.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

Trash Heap Economics

Andy Stern, writing in the Wall Street Journal, covers familiar ground. They do things better elsewhere. Give up, America: adopt a foreign ideology. His title/subtitle combo — “China’s Superior Economic Model: The free-market fundamentalist economic model is being thrown onto the trash heap of history” — provides a grand example of passive voice construction allowing evasion of the crucial elements: Who throws what away?

First, the what: “The conservative-preferred, free-market fundamentalist, shareholder-only model” described as “so successful in the 20th century” . . . with no discussion, absolutely none, as to what extent our business life is actually run by this “model.”

“Shareholder only”? Some of the biggest businesses in the U.S. are privately held, not publicly traded. Not a few huge and influential enterprises, like the absurdly mismanaged postal service, the disruptive Fannie and Freddie, and the morally bankrupt Federal Reserve are government-created and not public in the shareholder-model sense. Add in taxes, regulation, and a perpetual deficit government budget, backed by the inflationist Fed, and the truth pops up exactly opposed to Stern’s: America’s a very mixed “mixed economy.”

In this context, who holds to “free-market fundamentalism”? A number of people, almost exclusively on the outs. The richest and most powerful insiders work against free markets, no matter what they say. Hence bailouts, subsidies, and a whole lot of “planning.”

China may be “blessed” with a huge population aiming to get ahead and with a government that runs budget surpluses, while we are cursed, primarily, with continuous deficit financing of the federal government, and everything that entails.

The solution? Reassert the model Stern wants to chuck.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture too much government

Lies and Denials

Politics is often the art of lying about the effects of policy, and Hugo Chavez, Venezuela’s Prevaricator-in-Chief, is a master politician. As consumer-price inflation hits a 27 percent per annum rate, he blames capitalism.

One report summarizes his position: “Mr. Chavez said the market had become a perverse mechanism where the big monopolies, the big trans-nationals, and the bourgeoisie, dominate and ransack the people.”

So he’s extended price controls from staples to all sorts of goods, with some prices being immediately subjected to a rate freeze. Big firms will have to report costs to the government, so bureaucrats can determine a “fair price.”

Were it not a ratcheting up of oppression and hardship, I’d say this is all getting rather funny. Price controls notoriously fail to achieve what they aim. In the United States, Nixon-era wage and price controls set stagflation into overdrive. Long lines at the gas pumps, shortages in supermarkets, and rising prices. What a mess.

There’s good theory to explain why price floors and price ceilings cause major problems. But according to the head of the country’s price control board, “The law of supply and demand is a lie.”

Hugo and his cronies deny the relevance of the central bank’s doubling the volume of money in circulation since late 2007. Supply of money increases? No possible effect on skyrocketing prices, supply and demand being a lie, you see.

Meanwhile, people have begun to hoard products. It’s now almost impossible to even find coffee in Venezuelan stores.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Locovore Law

America’s agricultural policies are notoriously crazy. The federal government subsidizes one crop while discouraging its use at the consumer end. The old New Deal program of paying farmers not to grow crops is still in place. The high tariff on sugar artificially increases prices far above the world price.

To compensate, the federal government helped develop a refined sugar substitute, high fructose corn syrup — an even more “sugary” sugar — and then infected nearly the whole food supply with it.

So, some sympathy for the “locavore” movement, the folks who believe we should eat foods grown in the areas we live. It seems more natural. Less goofy.

But it’s also a lot more costly, considering that buying locally tends to forsake gains from trade.

So a law to prop up locavore production and consumption, like the legislation introduced early in November by Sen. Sherrod Brown (D-OH) and Rep. Chellie Pingree (D-ME), cannot help but shuffle two steps back for every misstep forward. Basically, it’s about more subsidy, including $30 million for “Value-Added Producer Grants,” $15 million for “farmer food safety training,” $90 million for something called a “Specialty Crop Block Program.” The least obviously bad part would direct the “USDA Research, Education, and Extension Office to coordinate classical plant and animal breeding research activities,” though I don’t see why farmers can’t manage this on their own. This is the Age of the Internet, after all, of Information.

Congress: Forget it; repeal current agribusiness subsidy and protectionism, instead.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets general freedom national politics & policies too much government video

Video: Milton Friedman on Drug Legalization

Nobel Laureate economist explaining why drug prohibition makes no sense:

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free trade & free markets too much government

Keeping Parks Open

“It is not necessary for park budgets to be threatened during state fiscal crises.”

Good news. The vast majority of states now endure tightened budgets and panicked scurrying to rescue their finances from frighteningly bloody conditions of red.

In this financial environment, cutting non-essential services sometimes seems like a no-brainer. Park funding tends to get hit hard.

A PERC Case Study by Holly L. Fretwell, Funding Parks: Political versus Private Choice — quoted above — looks into a solution that most politicians rarely consider: private management.

Not full privatization, mind you. That’s too tough for most people to take.

Private management of publicly owned parks, on the other hand, makes a kind of obvious sense.

Fretwell looks at Recreation Resource Management, the largest park management operation in the country. The company leases rights to run state and federal recreation sites, managing more than 175 such units in twelve states. In arrangements such as RRM’s, lessees pay “an annual lease, or rental fee, in addition to a percentage of the total fees earned.”

When run by businesses, parks “are not subject to the same political appropriations process” as government-run parks. By leveraging the profit motive — and its associated economies — parks can serve the public without over-taxing us at a time when we are sorely pressed for money. Contracts with private firms can avoid at least some of the problems of bureaucratic incentives.

The bottom line advantage, she insists, is “consistent, quality stewardship.”

Which is surely what we all want.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government U.S. Constitution

The Post Office’s Future?

At some point approaching catastrophe, one has to stop offering googly sounds of uplift and hope, and just speak the truth.

Postmaster General Patrick Donahoe may understand that. The U.S. Post Office, he recently told the National Press Club, is “in a deep financial crisis because we have a business model that is tied to the past.” Deep ties to the past, indeed. Setting up a postal system was written into the Constitution.

Early in the system’s history, postal positions served as rewards to friends of successful politicians. This put a lot of bad apples into the cider; the business soured. Postage skyrocketed.

This sorry situation brought entrepreneurs into the market, delivering letters at a fraction of the government system’s prices. The politicians fought back, took the competitors to court, and won — on dubious Constitutional grounds.

But they did overhaul the system, reducing prices.

That was a long time ago. Today’s situation may be worse. As Donahoe put it, “We are expected to operate like a business but we do not have the flexibility to do so. Our business model is fundamentally inflexible.”

No surprise, Congress is inflexible. But there are competing bills rumbling around to allegedly fix the financial woes of the institution Donahoe calls “a national treasure.”

Well, if it’s a treasure, sell it off: The federal government could use the money. (Though likely not well.)

And the people could use a good privatized mail service. Or two. Or more.

This is Common Sense. I’m Paul Jacob.